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BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
*******
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
July 1, 1938.
R-273
Dear Sir:
The statement issued by the Treasury regarding the
revision of procedure in bank examinations as agreed to by
the Secretary of the Treasury, the Board of Governors, the
directors of the Federal Deposit Insurance Corporation, and
the Comptroller of the Currency, will be published in the
forthcoming issue of the Federal Reserve Bulletin. For your
use in the meantime, however, a number of copies of the press
release as issued by the Treasury are being forwarded to you
under separate cover.
Veiy truly yours,
Leo H. Paulger
Chief, Division of Examinations.
TO VICE PRESIDENTS IN CHARGE OF EXAMINATIONS AT ALL
FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
OF THE
R-274
g
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
*********
July 9, 1938.
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:
NOZTOP - Treasury Bills to
be dated July 13, 1938, and
to mature October 13, 1938.
Very truly your
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
R-275
July 12, 1938
SUBJECT:
Audit of Stock of Unissued Federal Reserve
Notes and Federal Reserve Bank 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. Loafman, Chief, Division of Public Debt Accounts and Audits,
Treasury Department, advising the Secretary of the Treasury that an
audit of the stock of campletod 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 Juno 29 and completed on June JO,
1938, as of the close of business June 28, 1938. Mr. Loafman states
that the amounts on hand,
813,100,000 of 1928 Series and
$2,997,1+60,000 of 193U Series Fedoral Reserve notes and 5^50,800,000 of
Federal Reserve bank notes, were in agreement with the records of the
Federal Reserve Issue and Redemption Division of the Comptroller's
Office.
Copies of detailed statements "A", "B" and "C" which accompanied
Mr. Loafman's letter are also inclosed.
Very truly yours,
.
Inclosure
TO ALL FEDERAL
RESERVE AGENTS.
^ \
orJ. R. Van Fossen, Asst. Chief,
Division of Bank Operations.
R-275-a
4
July 6# 1938
The Honorable
The Secretary of t1 e Treasury
Sir:
An audit has been made of the completed stocks of
unissued
Federal Reserve notes and Federal Reserve Bank notes charged to the Federal
Reserve Vault in the Bureau of Engraving and Printing.
The audit was
begun June 29 and completed June 50# 1938# as of the close of business
June 28# 1938*
The following tabulation reflects the amounts as disclosed by
the audit:
Under auditor's seal in Vault No. 1# Treasury Building
Federal Reserve notes (Series 1928) ........ ..i* $2#813#100#000
Federal Reserve Bank notes (Series 1929) •
1|50#800#000
On hand in Federal Reserve Vault, Bureau of
Engraving and Printing
Federal Reserve notes (Series 193^)
Total
2#997*^60#000
&6,26l#360#000
The above balance# comprising 92#505 packages# was in agreement
with the records of the Federal Reserve Vault and those of the Division of
Public Debt Accounts and Audit 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 classes
of currency is reflected in the attached statements "A"# "B" and "C"*
respectively.
d
-
R-275-a
The entire balance of Federal Reserve notes (Series 1928) and
Federal Reserve Bank notes (Series 1929) have been under the auditor's
seal since 1937 at which tire they were package counted and the seals
inspected and no further inspection was made in connection with this audit
except to inspect the seal on the compartment in Vault No. 1.
The entire stock of Federal Reserve notes (Series 193^) consists
of scaled packages bearing the seal of the Bureau of Engraving and Printing
and is under the joint custody 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 on
the packages in making the verification but the brief on each package was
examined with respect to the package number, serial numbers of the notes,
bank and denomination#
The packages were found in orderly arrangement and
grouped in such manner as to permit the auditors to accomplish the
verification without delay.
Prior to beginning the audit, the Chief of the Secret Service
was notified and a representative of bis office was present on June 29 and
30, 1938.
Appreciation is extended to the officials of tho Bureau of
Engraving and Printing and th . 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.
(0
STATEMENT "A"
FEDERAL RESERVE NOTES (SERIES 1928) Oil HAND IN THE FEDERAL RESERVE VAULT
IN THE BUREAU OF ENGRAVING AKD PRINTING*, AS DISCLOSED BY AUDIT
AS OF JTJFE 2F, 193^
(IN THOUSANDS OF DOLLARS)
BANK
5's
10»s
$
Sew York
. > »
Philadelphia
87,560
1 0 , 0 0 0 's
02, 000
5
0^6,560
050,400
050,400
$30,000
030,000
25,200
30,000
87,600
64,800
54,4oo
6,000
TOTAL
0257,240
• 355,560
50,400
.....
347,660
107,4140
41,400
28,400
39,300
31,600
6,000
310,300
41,600
27,200
28,500
21,000
9,000
10,000
149,640
36,720
23,200
20,000
19,600
16,400
4,000
9,320
145,520
114,000
88,200
96,800
108,900
135,200
16,000
20, 000
644,38o
.....
8,480
19,200
24,800
18,400
16,200
87,080
2,200
34,080
12,000
22,400
13,300
13,000
104,160
26,720
22,600
26,000
25,500
23,600
152,060
22,640
22,600
20,000
24,600
23,400
1,000
2,000
133,240
12,260
13,440
11,800
26,400
21,600
17,200
3,720
9,840
116,260
. $358,1,80
055,21*0 0485,600
0438,000
22,340
• •••«
9,520
...
Minneapolis
. .
Kansas City
. . .
7,180
27,61+0
9,2l}0
8
£508,000 0436,500
I
42,000
. • .
5,000's
78,000
Richmond
....
1,000's
75,000
19,120
TOTAL
500's
50,320
37,o4o
.
100's
15,160
• . . .
San Francisco
50's
36,780
. .
Cleveland
St. Louis
20»s
R-27n-b
£41,720 057,160 5 2 , 8 1 3 , 1 0 0
•Entire stock of Federal Reserve notes (Series 1928) is under auditor's seal in
Vault No. 1, Treasury Building.
STATEMENT "B"
FEDERAL RESERVE NOTES (SERIES 193b) ON HAND IN THE FEDERAL RESERVE VAULT
IN THE BUREAU OF ENGlCWING^AlTD PRINTING, AS DISCLOSED BY AUDIT
AS OF JUNE 23,"1955
(IN THOUSANDS OF DOLLARS)
5«s
BANK
10's
20<s
0118,200
064,64o
100's
500's
025,000
054,4oo
50's
R-275-c
1,000's
5,000's
10,000's
TOTAL
05,200
04,400
56,000
06,ooo
0309,040
2,000
8,000
692,060
• ••••
259,320
Boston . * . . .
525,200
New York . . . .
35,780
IPO,44o
i75,84o
59,000
130,800
40,400
59,800
Philadelphia • •
27,600
82,000
64,320
31,000
36,000
6,1400
12,000
Cleveland
. . .
11,000
44,360
99,36o
31,800
16,800
2,600
3,800
4,000
8,000
221,720
Richmond • . . •
16,960
37,120
62,960
10,1400
18,000
8,700
9,loo
5,000
2,000
170,540
Atlanta
....
8,260
53,920
35,520
10,1,00
20,800
7,800
18,600
5,000
4,000
164,300
Chicago
....
39,660
139,960
104,000
12,200
12,800
10,400
8,200
6,000
6, 000
339,220
...
34,140
37,040
1,8,560
7,800
23,b00
6,600
9,200
4,000
4,000
174,940
*e**#
129,020
St. Louis
Minneapolis
. .
19,600
38,280
47,o4o
3,800
12,800
3,700
3,800
Kansas City
. .
11,700
36,440
142,880
5,800
19,600
5,900
15,800
6,000
6,000
150,200
4,000
i3,84o
9,360
3,200
6,800
8,000
8, 000
6,000
6,000
65,200
37,420
73,320
93,040
18,800
54,800
11,400
18,200
9,000
6,000
321,980
0271,320
£854,920
0847,520
$219,200 0407,200 ('117,100
O171,200
053,000
056,000
02,997,460
Dallas
....
San Francisco
TOTAL
.
....
00
STATEMENT "C"
FEDERAL RESERVE B A M MOTES (SERIES 1929) ON HAND IN THE FEDERAL RESERVE VAULT
IN TKE BUREAU OF ENGRAVING AND PRINTING*, AS DISCLOSED BY AUDIT
AS OF JUNE 28, 1938
(IN THOUSANDS OF DOLLARS)
5»s
BANK
. . . . •
Now York
£5*020
, ,
. . . . .
Philadelphia
Ji.ioo
10*s
20's
05#000
05,o4o
27,320
18,000
3,800
13,8140
10,080
1,520
10,81*0
21,600
5,880
15,520
23,440
5o»s
100*8
TOTAL
•A
6,6oo
&15.060
22,800
75*580
21*740
23,600
69,020
15,600
148,01+0
###*»#
••••••
26,1+14 0
2lt,720
15,ooo
10,800
93,31+0
23,800
7,160
. • * # # f •
•••••
2,120
5,o4o
#*#**
Minneapolis
# # # # # #
•••••
1,880
11,280
6,6oo
l4,400
34,160
Kansas City
*
2,81+0
7,120
12,800
8,1+00
1*0,180
#*##»»
1,680
1,200
1,200
4,080
, . , . • •
San Francisco
TOTAL
# #
• # # # #
•••••
•••••
• • #.# • • • • • V$3,440
4,800
098,000
•••••
0125,360
11,200
077,200
•Entire stock of Federal Reserve Bank notes (Series 1929)
Vault No. 1, Treasury Building.
'
>
*
A
«••••
096,800
11
Dallas
9,020
co
St# Louis
R-275-d
7
16,000
0450,800
auditor's seal :
BOARD OF GOVERNORS
OF THE
R-276 Q
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
July 13, 1938.
Dear Sir:
There are inclosed herewith copies
of statement rendered by the Bureau of
Engraving and Printing, covering the
cost of preparing Federal reserve notes
from June 16 to June 28, 1938.
Very truly yours,
Fiscal Agent.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
June 16 to 28, 1938.
New York
Total Sheets
Amount
33,000
33,000
| 3,168.00
25,000
93,000
8,928.00
to
o
#10
«=
Federal Reserve Notes. Series 1934.
Philadelphia
68,000
Cleveland
52,000
-
52,000
4,992.00
Ri chmond
35,000
-
35,000
3,360.00
Atlanta
45,000
-
45,000
4,320.00
Chicago
107,000
-
107,000
10,272.00
St. Louis
25,000
9,000
34,000
3,264.00
Minneapolis
30,000
16,000
46,000
4,416.00
Kansas City
18,000
20.000
38.000
3.648.00
380.000
103,000
483.000
$46,368.00
483,000 sheets @ $96.00 per M...#46,368.00
R P77
BOARD OF GOVERNORS
DFTHE
FEDERAL RESERVE SYSTEM
11
WASHINGTON
ADDRESS
Si"
July 15, 1958.
Dear Sir:
There is attached a copy of the report of expenses of the main lines of the
Federal Reserve Leased Wire System for the
month of June, 1938.
Please credit the amount payable by
your bank to the Board, as shown in the last
column of the statement, to the Federal Reserve Bank of Richmond in your daily statement of credits through the Inter-district
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.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
12
R-277-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF JUNE. 1958
Number
of Words
Sent
Federal
Reserve
Bank
Total
Words
Chargeable
Pro Rata
Share of
Total Expenses (1)
$
Payable
to
Board
of Governors
297.32
1,076.68
256.35
267.73
$ 289.89
500.81
239.09
467.22
1,890
1,918
1,943
44,694
120,067
37,709
55,939
Richmond
Atlanta
Chicago
St. Louis
48,529
68,767
92,229
75,229
1,892
1,850
2,137
1,867
50,421
70,617
94,366
77,096
662.45
927.80
1,239.82
1,012.92
198.57
345.99
1,194.33
247.61
463.88
581.81
45.49
765.31
Minneapolis
Kansas City
Dallas
San Francisco
34,304
69,983
63,220
90,118
1,839
1,869
1,848
2,056
36,143
71,852
65,068
92,174
474.86
944.02
854.89
1,211.02
178.82
259.18
279.72
385.26
296.04
684.84
575.17
825.76
521,734
6,854.76
12,590.07
1,337,880
$17,577.63
$17,577.63
Board of
Governors
Total
(1)
521,734
1,316,771
*
• •• •
21,109
5I
Expenses
Paid
lay Banks
and
Board(2)
42,804
120,067
35,791
53,996
Boston
New York
Philadelphia
Cleveland
"
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
587.21
1,577.49
495.44
734.95
— *
$5,735.31
Based on cost per word ($.01313842) for business handled during the month.
(2) Payments fcy banks are for personal services and supplies and payments by
Board are for personal services and supplies ($1,581.38) and wire rental
($11,008.69). Personal services include salaries of main line operators
and of clerical help engaged in work on main line business, such as counting the number of words in messages; also, overtime and supper money and
Retirement System contributions at the current service rate.
R-278
BOARD OF GOVERNORS
13
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
July 16, 1938
SUBJECT:
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
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:
NOZTUN - Treasury Bills to
be dated July 20, 1938, and
to mature October 19, 1938.
ery truly yours
J\ C. Noell,
Noell
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD
GOVERNORS
R-279
1 4
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
July 16, 1938.
SUBJECT:
Code Word Covering Issue of Reconstruction Finance Corporation Notes.
Dear Sir:
In connection with telegraphic transactions between Federal reserve banks, the following code word has been designated to cover an
issue of Reconstruction Finance Corporation notes:
NOWMAND - 7/8% Reconstruction Finance
Corporation notes of Series N,
to be dated July 20, 1938,
and to mature July 20, 1941.
J#ery truly yours
'* J. C. Noell,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-280
BOARD OF GOVERNORS
OF THE
j [ 5
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
July 18, 1938.
SUBJECT:
Monthly Report of Bank and
Public Relations Activities.
Dear Sir:
There is inclosed for your information a summary of the bank relations reports
submitted ty the Federal Reserve banks for
the month of June in response to the Board's
letter of August 25, 1936 (X-9680).
Very truly yours,
Chester Morrill,
Secretaiy.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
R-280-a
To:
The Board of Governors
From:
Mr. Hammond, Division of
Bank Operations.
J.6
July 14, 1958.
Subject:
Summary of Bank Relations
Reports.
Reports of bank relations as requested in the Board's letter of
August 25, 1936 (X-9680) have been received for the month of June and
excerpts therefrom will be found on the following pages. A table showing for all twelve banks the number of visits made, meetings attended,
and addresses delivered has also been prepared and follows the quotations.
Several of the Reserve banks mention member bank comments upon
the recent revision of examination rules. The comments indicate a skeptical attitude on the part of member banks. Although there is disposition to find fault with the judgment of examiners, it does not appear to
follow that liberalization of the examination rules is welcomed nor that
bankers feel tempted by it to change their lending policy. Their attitude is apt to be that they are already meeting every legitimate credit
demand. In this connection, the report from St. Louis includes comment
of a member banker - not quoted in the excerpts from the St. Louis report to the effect that every time there is publicity from Washington in favor
of easy credit, bankers receive fresh requests for loans that are without
a sound credit basis.
The reports indicate a continuance of good crop prospects in agricultural regions, and reflect a much better feeling in many places regarding business. Comment upon the dearth of demand for commercial loans,
the difficulty of pursuing a profitable investment policy, and governmental programs in the field of relief, crop control, soil conservation, etc.,
is about the same as in previous reports.
Excerpts from the reports follow:
attached to the original hereof.)
(The reports themselves are
Boston
During June this bank was represented at the annual meetings of
the Connecticut Bankers Association, the Vermont Bankers Association and
the Maine Bankers Association, and forty-four member and ten nonmember
banks in Vermont and New Hampshire were visited. In addition visits were
had with the officers of a number of savings banks affiliated with and occupying banking quarters jointly with certain member banks in New Hampshire.
The communities served by the banks visited are mostly small retail trade centers in a section of the district devoted mainly to farming, dairying, lumbering and catering to the summer vacationist. Here
and there throughout the section are small textile and knitting mills,
shoe factories, machine shops, woodworking plants and pulp mills, all
-2-
R-280-a
of which are operating part time and several of which (woolen and knitting mills) are about to shut down permanently. No large money crops
are raised and with the shrinkage of factory payrolls, the principal
source of new money is the summer tourist and camp trade. The feeling
generally is that this trade will not measure up to the past two seasons.
The banks as a whole report the seasonal demand for loans to be
only fair, but as great as the demand a year ago, A few member banks
were obliged to borrow during the spring, loans being placed about equally
with the Federal Reserve Bank and Boston correspondents; correspondents
lending at the prevailing Federal Reserve Bank rate. In most cases the
borrowing was brought about by towns coming in for their seasonal requirements. The prevailing rate to individual borrowers is 6 percent with some
well collateraled loans made at 5 percent. Loans made to municipalities
carry rates from 2-g percent to 4 percent.
Among the banks visited the depreciation in bond lists ranged from
5 percent to 25 percent and averaged around 10 percent.
While there was disposition at some banks to comment unfavorably
upon the policies of certain governmental agencies, no direct criticism
was made of the administration of the Federal Reserve System or of this
bank. At the banks visited during the last few days of the month interest was manifested in newspaper accounts of the new examining rules.
While certain features - notably the change in the method of appraising
bond values - were commented upon favorably, the view was expressed by
practically every banker who had anything to say on the subject that
greater liberalization of authority to loan and invest commercial bank
funds would not influence him to change the prevailing lending policy of
his bank. Bankers express the view that all those in their communities
entitled to and applying for commercial bank credit have been taken care
of and deplore the fact that the demand upon them is not greater than it
is •
New York
Albany. Fulton, Hamilton. Montgomery, Rensselaer, Schenectady, and
Schoharie Counties. New York.
Business activity in these seven counties, except in the cities
of Albany and Canajoharie, has decreased more than usual at this season
of the year chiefly because of lower industrial operations, and the closing down of a large carpet mill and several glove manufacturing plants
and tanneries due to labor troubles. Bankers report that the retail merchants are complaining and that some have gone out of business. Conditions
in Albany remain fairly stable because of the large number of people steadily employed by the State of New York in its various departments and bureaus. In Canajoharie, the Beechnut Corporation is operating at normal
capacity, having 1,100 people on its payroll.
18
-3-
R-280-a
Erie and Niagara Counties (Buffalo Branch Territory)
Security accounts of the banks have increased in total about 4
percent during the past year and now aggregate $163,594,000 while holdings of United States governments now amounting to $85,522,000 have increased almost 20 per cent. Depreciation which is confined chiefly- to
railroad securities ranges up to a high of 15 per cent.
Demand for commercial credit is very limited and loan portfolios
continue to decrease. Considerable amounts of funds have been placed in
mortgages originating under the provisions of the National Housing Act.
One nonmember banker stated that his bank has developed $500,000 of this
type of mortgage and is at present receiving a return of 3/4 of 1 per
cent as a service charge on $350,000 of these mortgages sold to other
financial institutions. In order to partially offset the Federal Deposit
Insurance Corporation assessment on deposits, increasing amounts of idle
cash are being placed on the call money market although the return is at
a minimum. The recent reduction in reserve requirements was favorably received but in almost all instances no material beneficial effects will be
noticed at this time as loanable funds are at a maximum with but little
demand,
A further downward movement in factory employment and payrolls
occurred in the Buffalo area during the month of May 1938. Very recently
evidences of a broadening demand for steel have been received by local
steel mills and plans for a further cut in production have been abruptly
abandoned.
Herkimer, Madison, and Oneida Counties. New York.
The majority of commercial banks have a depreciation in their security portfolios ranging from nominal amounts to as high as 20 percent
in the case of one small institution, while the officers of seven banks
report some appreciation. The institutions which have smaller depreciation and those reporting an appreciation are for the most part banks with
substantial blocks of United States government obligations. A number of
bankers remarked that the activity in their bond accounts during the last
several months has been in the direction of selling long term corporate
bonds (and governments in some instances) and reinvesting in short term
United States government securities and municipal issues. The cashier of
one national bank gave as his opinion that when the Government floats
large blocks of bonds this fall, which he thinks will be necessary on account of the contemplated spending program, it will affect adversely the
price of all outstanding long term government bonds and he believes that
the drop in prices will not be brought about by any firming up of money
rates.
A number of banks in the rural sections have been experiencing quite
a good demand for seasonal loans for farming purposes and several also report that there has been some demand for funds by local and neighboring
-4-
R-280-a
villages and school districts. In addition to the increased demand for
credit, it is said that the State Comptroller has withdrawn funds on deposit with banks throughout the State in preparation for payment of obligations maturing in early July and also some of the villages have reduced
their bank balances on account of funds being used for relief and other
purposes. These circumstances have reduced the amount of previously idle
funds in some of the smaller banks and four of them have found it necessary to borrow on bills payable.
Loans, in general, command a 6 percent rate with the exception of
those granted to municipalities and other public units where the rate in
the majority of cases is fixed at 5 percent, or lower, in order to meet
competition. The president of one bank complained that he recently lost
the opportunity of making a loan to a neighboring village, which territory is served by his institution, because one of the Utica banks agreed
to take the paper at 3^ percent whereas he could not go below 4 percent.
Summary of Preferred Capital Issues
In the twenty counties visited (in New York and New Jersey) there
are 190 commercial banks, of which 136 issued preferred stock, capital
notes, or debentures aggregating $45,280,000 par value. Up to the present time 33 institutions have redeemed their entire issues amounting to
$15,112,500, 70 have paid off a part aggregating #4,428,787 and 34 have
not retired any - leaving 104 banks with a total retirable at $26,013,713.
Philadelphia
The area visited (Eastern Pennsylvania and Southeastern New
Jersey) reflects a lower level of business activity than that existing a
year ago. There are, however, some communities where the decline in payrolls has been as much as 50 percent or more. The removal of industry
from Pennsylvania to other states to take advantage of a more favorable
tax or labor situation is still in progress.
Bank deposits have declined during the year. In agricultural sections this is seasonal, reflecting the farmers' need for funds to finance
spring planting and in the urban communities it reflects the need for
funds by corporations and individuals as a result of lessened business
activity. Credit demand is not good, although some banks report that they
appear to have reached their mean, as the total of loans is no longer declining. One banker stated that with the normal loan level known he is
now in a position to determine income fairly accurately and fix expenses
accordingly. The banks appear to be utilizing all means to extend sound
credit and it is believed that the credit needs of the several communities
are receiving proper attention.
The prevailing rate of interest paid on deposits is 2 percent, although a few banks still pay 2-|- percent. There are, however, a greater
number paying a rate lower than 2 percent than there are paying a higher
rate. There are also many graduated scales where the rate paid is less
-5-
R-280-a
on the larger balances than on the small ones.
Collateraled loans and good mortgage loans in most cases command
a lower rate than 6 percent but that rate prevails on most other credit
extended.
Numerous complaints were received as regards examinations and
examiners. Several National bank officers state that efforts to comply
with the examiners' insistence upon financial statements have resulted
in loans, which they consider highly desirable, being paid off.
The executive officers of two National banks criticized National
bank examiners for allegedly advising bankers as to changes in their investment accounts. One of these officers attributes the present heavy
depreciation in securities at his institution to his having yielded to
the examiner's criticism of a concentration in utility issues as compared
to a relatively small investment in railroad bonds.
Certain bankers in a county which had several institutions closed
or restricted during the banking crisis, stated that there was still some
evidence of hoarding and that some depositors were inclined to doubt the
ability of the F.D.I.C. to stand the strain of a severe and prolonged
crisis such as was experienced from 1929 to 1933. There has been some
amelioration of public feeling toward banks in one part of this county as
the result of a prompt "pay off" by the F.D.I.C. of deposits in a nonmember institution recently closed.
Recent information shows that a greater number of inquiries for
iron and steel products have been received from consuming industries,
but actual orders have not yet materialized in any considerable volume.
While the market for building materials has broadened somewhat in late
months, new business has not measured up to expectations and is much
smaller than a year ago.
The decrease since last year in contemplated construction, as indicated by the value of permits issued for new building, repairs and alterations, is due in large part to the depressed industrial situation.
Demand for commercial and manufacturing space continues quiet and the
market for dwellings has not expanded as much as it usually does during
spring and early summer.
Cleveland
Generally speaking there appears to be a rising tide of confidence
which seems to center around increased activity and higher quotations in
the securities markets. A substantial number of bankers visited during
the past month appear more optimistic than at any time within the past
year. Many report substantially increased earnings for the first six
months of 1938. In many cases it is reported that earnings for the period
-6-
R-280-a
2 1
are higher than they have been for similar periods in any recent year.
In a number1 of instances dividends have been increased.
There is evidence of a substantially increased demand for real
estate mortgage loans, and many banks are granting substantial lines of
credit on IHA insured mortgages. A number of institutions have inaugurated small loan departments, or have extended their operations in this
particular field. This has been an important factor in the increased
earnings of many institutions.
Practically ho comment has been heard concerning the change in
regulations governing the purchase and holding of investment securities,
and such statements as have been made were generally to the effect that
no change in present policies and practices would likely be made.
Many banks continue to maintain a high cash position rather than
to invest in securities, in sections where there is no local demand for
loans.
The plan of accepting for collection par checks sent by member
banks on a two-way sort basis has been in operation long enough to appraise some of the results. Approximately twenty banks hitherto not using
our check collection facilities are now collecting checks through us.
Thirty-four banks using photographic equipment are now sending items to
us under an agreement which provides that the film need not be sent to
us but that a description of any item will be furnished upon request, or
the film covering a specific letter will be sent to us on request. The
daily average increase in items, exclusive of government checks, has been
in the neighborhood of twenty thousand.
Richmond
Western Maryland and Mineral County. West Virginia.
Crop conditions in western Maryland are in general veiy good.
Conditions in Allegany County, Maryland, and Mineral County, West Virginia,
have been adversely affected by the decline of lumber, coal mining, and
the activity of railway shops. On the other hand, this region has been
favored by the development of paper and rayon industries. Thus, the
plant of a large pulp and paper company is reported to be working on a
full-time basis and employing about 1,700 persons. Carroll County,
Maryland, has a highly developed agriculture which is fairly prosperous.
Crops are quite diversified and this has lessened the impact of the depression.
Manufacturing centers in western West Virginia experienced a decline in production and this has been accompanied by a growth of unemployment. Unemployment also prevails throughout the coal-mining regions in
the state, and the banks in these regions report a decline in loans and
discounts, with some tendency for deposits to decline.
-7-
R-280-a
Westmoreland. Richmond, and Lancaster Counties. (Northern Neck) Virginia.
Mixed farming prevails in this region and, generally speaking, the
farmers have not felt the ill effects of the depression. Farming activities are somewhat supplemented by fisheries and the canning of fruits and
vegetables.
Southwestern Virginia
Wise County is quite dependent upon the coal-mining industry, and
this industry is relatively inactive at this time, Practically all mines
are operating only one or two days in the week. As a result business is
also very inactive. Banks in Wise County are in general charging 6 percent on local loans and are paying 2^ percent on time deposits. Some 4
percent loans have been made, and certain banks graduate the rate on time
deposits from Ej- percent downward.
Lee, Russell, Scott, and Tazewell counties are largely dependent
on agriculture and live stock for their prosperity. General speaking,
these counties are in a rich agricultural region with rather well-developed mixed farming, supplemented by the live stock industry. In consequence , conditions are relatively good, though the purchasing power of
farmers has declined considerably within the past year.
Lee. Kershaw. Williamsburg. Georgetown, and Florence Counties South
Carolina.
In general, crop conditions have been favorable, though some allowance must be made for injury to cotton crops, because of the boll weevil and root lice. These conditions have been stimulated by wet weather
and cool nights. The cotton mill and cotton-seed mill at Kershaw (Kershaw
County) have been operating on a full-time basis. Lynchburg (Lee County)
reports too much rain and injury to cotton crops. Kingstree (Williamsburg
County) also complains of boll weevil injury to cotton. On the other hand,
the tobacco crop in Florence County seems to have been injured somewhat by
drought.
In general, banks in the regions visited charge 6 percent on loans
and pay 2^ percent o$ deposits.
Atlanta
Southeast Georgia.
Our representative visited a number of banks in a territory devoted principally to the raising of cotton, c o m , and other Agricultural
products. Prospects appear to be excellent. The condition of the corn
crop was reported as- unusually good.
-8-
R-280-a
At the banks visited deposits were uniformly less than last year.
The demand for loans was reported generally as satisfactory. No complaints
were made concerning the Federal Reserve System, nor was there any criticism of the activities of Governmental loan agencies.
Louisiana
Visits were made to a number of banks located on the west side of
the Mississippi River, between New Orleans and Donaldsonville, This section is ariohagricultural area, devoted principally to growing sugar cane,
corn, Irish potatoes and truck crops. The bankers interviewed were in
good spirits and appeared optimistic. Their institutions are enjoying a
good volume of business, with deposits, loans and earnings comparing favorably with the same period of 1937. Collections are reported as being unusually good. The bankers in this territory were to a remarkable extent
free from any disposition to complain about conditions over which they
have no control.
Visits were made also to a group of banks located on the east side
of the River, between New Orleans and Baton Rouge. The banks in this section reported that their volume of loans is somewhat less than it was at
the same time in 1937, although earnings are somewhat better, due to
revenue now being derived from service charges which were not in effect
during the first six months of last year. The handling of finance paper
of local dealers in automobiles and household equipment has been a source
of considerable profit to the banks. A number of sugar refineries are
located in this section, which give employment to large numbers of people,
and whose payrolls serve to stimulate trade. The banks in Baton Rouge are
reported to be enjoying excellent business. Retail trade is holding up
remarkably well and the general recession in business has scarcely been
felt.
No complaints were made concerning the services rendered by the New
Orleans Branch. At the nonmember banks visited our representative was advised that the collection of exchange on incoming cash letters was an important source of revenue, with the result that membership in the System
could not be seriously considered.
Mississippi Gulf Coast
Banks located on the Mississippi Gulf Coast are experiencing a
seasonal decline in business. The plants that can oysters and shrimp have
discontinued operations until August. The resort hotels and rooming houses
are reported to be enjoying a very good tourist season.
Deposits and loans show a seasonal decline.
pare favorably with last year.
Earnings, however, com-
-9-
R-280-a
Chicago
During June calls were made on 186 member and 74 nonmember banks,
principally in Indiana, Iowa, and Michigan.
The general feeling, particularly among rural banks, is optimistic,
as the prospects are favorable for big yields in wheat, oats, and hay, although some doubt is expressed regarding the price. While in some sections
the c o m crop is backward due to excessive rains, generally it is well advanced and clear of weeds.
In most communities retail trade is reported as having been satisfactory, but having shown a falling off during the month of June. Other
reports indicate a reduction of from 10 to 25 percent compared with 1937.
Demand for credit continues light. Most banks report no F.H.A.
loans, although at some points, such as Fort Wayne and South Bend, Indiana,
there is considerable activity in this type of loan.
Some residential construction is being undertaken, but practically
no large building activity is reported.
No improvement is indicated in the employment or relief situation.
In one industrial town, one out of every three people formerly employed
is either on direct or work relief.
Nonmember banks visited with few exceptions express a friendly
feeling toward the System, Some evidence interest in membership, and while
various reasons are offered for not joining, one important one given by
banks otherwise eligible is the fact that they now have branches or anticipate establishing them.
St. Louis
Conversations with business men and bankers during the month of
June indicated no decided change in mercantile lines. The trend toward
reduction in stocks of goods continues, there being an increase in special
retail sales. These have resulted in maintenance of volume of sales, although profits as well as inventories have been sharply reduced.
Communities most adversely affected are those in the industrial
class, with no increase in employment noted. Coal mining suffered a considerable decline in production during the past year, resulting in reduced earnings and employment. No disposition is manifested by manufacturing lines to operate beyond the filling of actual orders received.
A member bank officer continues to be quite irritated about the
numerous non-par items which originate in the immediate vicinity of his
town, and made the statement that some means should be found to compel
state banks that are F.D.I.C. members to remit at par.
-10-
R-280-a
25
Officers of a member bank are again considering placing funds on
deposit with other banks in interest bearing c/d's, which was the practice adopted a few years ago, but was abandoned when they thought investment opportunities presented themselves. The bonds purchased, however,
now show a depreciation.
The cashier of a nonmember bank reported that profits for the
first six months of this year were the best in a number of years due primarily to the making of loans which they had previously declined or did
not look for. Our officer was shown the bank's files on several real estate loans which appeared to be made on a conservative basis.
Reference to comments in the press regarding the controversy between supervisory agencies with respect to bank examinations was made by
a nonmember banker who expressed the view that he had declined making some
loans for fear of comments on the part of examiners. A nonmember cashier
stated that at the time the bank was licensed for membership in the F.D,
I.C., the examiner compelled him to collect a number of loans aggregating
a substantial amount, which loans were quite desirable. They had run for
some length of time but when demand was made the makers had no trouble in
getting the money elsewhere. They were 6 percent loans and would be of
great value to the bank now.
Conversation with a nonmember cashier disclosed the fact that there
was more demand for loans than he could supply, and that he had to turn
over some very fine feeder loans to the Production Credit Corporation.
When inquiry was made as to the reason why the bank did not rediscount
temporarily to take care of such loans he stated that the examiners criticised him for showing any bills payable. It was quite apparent that this
cashier does not want to borrow money and is disposed to charge the responsibility for not taking these loans to the bank examiners.
Minneapolis
Northern Half of Montana
The majority of the banks visited had most of their excess funds
invested in United States Government bonds and high grade municipals; consequently, the matter of depreciation was not mentioned except at two
points. Through the advice of a bond service company, one bank disposed
of its government bonds two years ago and purchased a considerable amount
of railroad bonds, with the result that after the slump in those bonds
the bank shows a heavy bond oepreciation^at the present time.
A state member bank at another point, which opened for business in
1936 with a capital of #25,000, now shows a depreciation of $9,000 in its
bond list. Its managing officer was formerly a national bank examiner
and induced several businessmen to provide capital for a bank.
-11-
R-380-a
26
The price of government bonds is naturally the main topic of conversation. Although the bankers are, of course, greatly elated over the
increase in the price of government bonds, nevertheless they feel that
some day in the not too distant future, they will go the other direction.
A number of bankers stated they felt the price of United States Government
bonds was at, or near, its peak, and were frank in admitting they thought
it would be a good policy on their part to take their profit at once
even though they had to "sit on the cash". Some of the bankers felt that
their investment in government bonds was part of their investment program,
and, therefore, ignored any fluctuations in bond prices. These same
bankers usually keep their bonds until maturity and subscribe to new issues.
The exchange situation in Montana is more or less unimportant except in the northeastern section of Montana, where no crops have been
raised for years and where exchange is more or less vital to the bank's
existence. One bank in the northeastern section of the state showed $8,000
of net profit in 1937, and admitted that $7,300 of that amount came from
exchange. However, a number of bankers (some of whom resided quite a distance from this particular point) said that although the bank in question
was following unfair practices in connection with exchange charges, and expressed the opinion that it was gouging its customers, nevertheless if they
did not make these excessive charges, the bank could not exist. Naturally
the business houses in that town felt they had to take it and like it.
East Central South Dakota
Very few of the smaller member banks route their cash collection
items through us. Most of the bankers interviewed stated that they sent
their items to their correspondents in order to avoid the additional clerical work required when sending them to us. Some of them said, "Why should
we bother to sort our items when our correspondent is willing to do it for
us?"
It became evident during the interviews that "immediate credit"
was important under present circumstances only because of greater ease in
making reconcilements at the end of each month.
The pressing need of some of the country banks for additional earnings was sharply indicated by the avidity with which some of them stepped
out of what might be termed a "purely banking" field. So many bankers were
devoting every spare moment of the day and evening to writing hail insurance that it was quite difficult for them to find time for even a brief
visit. One banker asked to be excused from a five o'clock appointment
Friday afternoon and said he would rather make the appointment for Sunday
morning. Another banker had set a quota of $50 per day from hail commissions and when he was invited to dinner shortly after six o'clock he
begged off, saying that he still had to make $19 in hail commissions that
evening.
-12-
R-280-a
2 7
*
While both float and exchange charges are usual in this section,
a few bankers have established reputations for making excessive exchange
charges and other bankers are showing some concern over the complaints
being made. One small town banker has doubled his income from exchange
in the last few years by convincing his customers that it is to their advantage to use checks in place of currency. His campaign has been so
successful that he now carries less than half as much currency in his
vault as he did just a few years ago. One of the bankers with n rather
large bond account reported earnings of $27,000 from trading and selling
municipals last year and 1938 earnings from the same source at only a
little lower rate.
On the whole, bankers reported that earnings were as good as, or
better than, in the first five and one-half months last year. A few stated
that their earnings were well above the 1937 level and expected them to
continue to show an increase.
Southern Montana
With almost no exception loans and discounts are higher than a year
ago. There are very few real estate loans, but on those held, the bank receives 5$ to 6%. The great bulk of loans are on livestock, sheep, and
beets. This is a borrowing season. Beet growers whose allotment checks
have been delayed have borrowed heavily to pay for hand labor. In most of
the banks there exists a condition where loans are up in about the same percentage that deposits are down. In a few banks both loans and deposits are
definitely up, and in one or two banks loans and deposits are down. Agricultural paper draws between 8% and 10%, 8% being the lowest rate charged
by practically all of the banks, with exception granted to large borrowers
at rjo.
Some of the larger banks are working into personal loan business
with rates from 8% to 11%, or at a slightly lower rate on a discount basis.
The Montana banks carry very little automobile paper.
Kansas City
During the month of June, representatives of this bank made calls
on numerous banks—especially in Colorado and Wyoming—and attended a number of important bankers' conventions.
In general the agricultural situation is the best in years. With
the exception of New Mexico, the heavy rains continued throughout June.
In some parts of the District excessive moisture damaged wheat and delayed
corn. At the beginning of the month it appeared that Kansas might raise
200 million bushels of wheat. Harvest, however, has shown that the heavy
freeze in early April did more damage than was anticipated. Excessive
rains, rust damage, and hail will also reduce materially the Kansas crop.
-13-
R-280-a
28
For a time there was much anxiety about Nebraska wheat because of the
danger of rust. But latest reports are that, while the early June estimate of more than 70 million bushels was too high, an unusually good crop
will be harvested.
Both Colorado and Wyoming have good lamb crops and producers are
hoping for 5^. to 6 cents a pound. The ranges of Wyoming are in the best
condition in years and cattlemen are talking of 8 or 9 cents a pound for
fat steers off the grass, although such prices are regarded as somewhat
optimistic. With present feed supplies Wyoming is short of cattle but
this is regarded as not unfavorable in that it will give the ranges an opportunity to recuperate from the preceding years of drought.
The sugar-beet crop of Colorado is in good condition although there
has been considerable hail damage in the northeastern part of the state.
Colorado bankers report a tendency of loans to expand and it appears there
may be some rediscounting. Conditions in New Mexico are least favorable.
In sharp contrast to the rest of the District, this state lacks moisture
and large areas in the northeastern part are badly infested with grasshoppers.
In northeast Nebraska where a fair corn crop was produced last year
bankers report an increase in the number of cattle and hogs on the farm.
Deposits are said to be on the increase and the demand for loans is a little
more active. About half of the farmers in that region are cooperating with
the Government crop program, but there is much criticism of the severity of
the acreage reduction feature. Farmers who are cooperating are doing so
more as a hedge against lower prices than from a desire to cooperate.
The question of personal loans is receiving growing attention. In
the same bank there is often a sharp difference of opinion among officers,
but there appears to be an increasing number of bankers who are convinced
that times have changed and that banks must cultivate this type of business. In some cases banks are sending officers to the larger city banks
to study their experience with these loans.
In regard to membership in the Federal Reserve System, it appears
that capital requirements are a deterrent to some banks. Few banks are
willing to increase their capital under present conditions in order to become members. Some nonmember banks also express the opinion that member
banks in the not too distant future may be required to purchase Government
securities on a quota basis.
There is little sentiment among banks for any relaxation in bankexamination standards. Banks are sympathetic with the endeavor of the Government to loosen credit and make capital available to worthy borrowers.
But at the same time they take the position that the banker is the best
judge of credit risks and that every incentive now urges him to make sound
29
-14-
R-280-a
loans. The proposal to permit banks to deal in local investments even
though these securities are not listed on well-known exchanges is commented on favorably. The feeling is expressed that the classification of
so-called slow paper is a matter of opinion and that some such classification has much to be said for it as it gives the banker the outside
judgment of the bank examiner.
Sentiment in this region is better, but operating results are little changed. Retail sales in recent weeks have been erratic due probably
to weather conditions. Wholesale and retail inventories are down sharply
from a year ago. Rather drastic proration agreements are holding down the
production of oil, a condition that is limiting the capacity of this industry to consume steel. The outlook for construction is, on balance,
probably bettor.
Dallas
Northwest Texas
Fifteen member banks and three nonmembers were visited in the tier
of ten counties extending along the northern boundary of Texas and into
the Texas Panhandle. Cotton, wheat, cattle and oil are the important
economic mainstays of this region.
Suffering from the most destructive invasion of grasshoppers that
this section of Texas has experienced in thirty-seven years, agricultural
producers are faced with the double task of saving their own crops (already
curtailed by voluntary acreage reduction under the government's farm program for 1958) and of preventing the grasshoppers from migrating to other
sections of the State which have not yet been attacked. Poisoning on a
huge scale has been resorted to with fair success as a means of halting
their depredations in this area, and in this war of extermination the farmers have had the benefit of liberal assistance both from local banks and
from, the federal government.,
Complaints
ing all crops with
well as cotton and
with fully matured
were heard that the grasshoppers this year are attackequal voracity - including wheat and other grains as
row crops. In many wheat fields the ground is strewn
wheat heads, mowed off, as with a knife.
The demand for agricultural credit in the section covered by this
report is about the same as, or slightly greater than, a year ago. Calamities like floods, storms and insect infestations usually augment the demand, and these influences may account for the sustained flow of loans in
this territory where otherwise such factors as reduced plantings, government payments and the like would be expected to cause a diminution in the
need for bank credit.
Investment policies of the banks in the visited area showed wide
divergences, ranging from the policy of purchasing no investment securities
-15-
R-880-a 3 0
whatever to that of employing equal amounts of funds in bonds and loans.
Generally, however, the smaller banks carry only nominal investments in
securities, finding it necessary to keep employable funds loaned out in
order to maintain their earnings at the required levels. As a group the
banks covered by this report show a substantial appreciation in their
bond accounts. A few of them are selling a portion of their holdings,
partly for profit-taking purposes but principally in order to switch from
long maturities.
Fewer complaints than usual were heard in regard to bank earnings.
New fields of revenue are being developed in some communities, such as
automobile loans and other types of installment paper, FHA title II loans,
tractor notes, etc. In other cases the demand for agricultural credit has
increased, and not a few banks were found to be carrying large investments
in cotton producers' notes eligible for purchase by the Commodity Credit
Corporation.
North Louisiana
Banks report that they are reluctant to make further investments
at this time in high-priced government bonds. There is a general tendency
to switch from the long-term issues to the shorter maturities, due to a
feeling that current market prices of the former are too high to justify
their retention.
Southwest Texas
The only complaint heard was a mild one in regard to reserve requirements. Considerable interest was manifested in the revised examination procedure recently adopted by the various supervisory agencies - particularly with respect to the treatment of assets heretofore classified as
slow. Every banker who discussed the subject felt that quality should be
the determining factor in appraising and classifying loans.
A heavy per-acre yield of cotton is in prospect. Weather conditions have been ideal for the growth of the plant and parasitic attacks
have been light. Producers are uncertain and confused as to the method
to be used by the government in collecting penalties for excess production. They are also uninformed and apprehensive as to the government's
plan for making loans against the new cotton crop.
San Francisco
Puyallup Valley. Washington
Conditions in the Puyallup Valley, which is an area devoted principally to berry raising, small fruits, hops, and dairying, are not entirely satisfactory. It was reported that, while a normal crop of cherries, raspberries, and blackberries is anticipated, prices are expected
-16-
R-280-a
to be poor owing to the fact that there was a large carry-over of canned
berries from last season. A normal crop of hops is expected in the valley, but owing to the unsatisfactory prices offered for contracts many
of the growers, hoping that later in the season better prices may obtain,
have refused to sign up. The dairymen are somewhat discouraged by the
low prices for butter fat. A few industries which are operating at
Puyallup and Sumner, such as a large yeast plant, box factories, and
small mills, are in a satisfactory condition, and their payrolls have been
steady, adding to the prosperity of these communities.
Snoqualmie Valley. Washington
Conditions in the Snoqualmie Valley, which includes Buvall,
Carnation, and Issaquah, are not entirely satisfactory. Logging operations are continuing on a small scale. Most of the timber in the valley
has been logged, and payrolls have consequently been materially reduced.
Otherwise, dairying is the principal industry and is at present in an unsatisfactory condition owing to the poor price of butter fat.
Utah and Southern Idaho
General business conditions in the area visited are less satisfactory than they were one year ago, particularly due to lower prices prevail
ing for agricultural crops in general (except sugar beets and green peas),
wool, butter fat, and eggs, and to the outlook for definitely lower prices
for lambs from the ranges next fall. Metal mining is relatively inactive,
with some of the important producers completely shut down, and in the coal
mining region of Central Utah the activity is estimated at 80% of the
usual activity at this season of the year.
Retail sales are said to have been showing a material decline recently over the same period one year ago, with the exception of sales of
foodstuffs, the volume of which, though under last year, has been fairly
well maintained.
The outlook for agricultural production is very favorable for maxi
mum. yields. The growing season has been favorable for satisfactory growth
with above average frequency of rainfall, and supplies of water in storage
for irrigation purposes are adequate, in fact better than for some years.
The production of berries and soft fruits has been above normal, and the
outlook is for large crops of the later maturing fruits, also.
Livestock ranges are in excellent.condition, and there has been a
fairly substantial increase in the number of cattle, both dairy and range,
during the past two years, largely in refilling herds depleted during the
preceding drouth period. Last estimates are that an average lamb crop
will be marketed next fall, and some beef, carried over from last winter's
feed lots, will be marketed early commencing in the month of August.
BAM. RELATIONS ACTIVITIES OF FEDERAL RESERVE BASKS
JUNE, 1938
Federal
Reserve
Bank
Visiibs to Banks
NonTotal
Member
member
Meetings Attended
Number
Attendance
*
Addresses Made
Number
Boston
New York
Philadelphia
Cleveland
44
146
82
62
10
69
26
12
54
215
108
74
3
10
1
8
Richmond
Atlanta
Chicago
St. Louis
33
23
186
97
33
16
74
120
66
59
260
217
6
None
4
5
4,974
2,025
2
None
1
5
Minneapolis
Kansas City
Dallas
San Francisco
125
27
87
36
146
17
13
18
271
44
100
54
8
5
2
20
3,715
1,509
260
5,074
1
1
None
None
^Attendance not reported
^Attendance at one not reported
3,560
1,500
3,054#
1,675
— —
None
3
1
1
Attendance
—
955
50
59
515
— —
27
1,400
500
1,000
— —
— —
R-281
BOARD OF GOVERNORS
QQ
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
*******
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
July 20, 1958.
SUBJECT:
Holidays during August, 1938.
Dear Sir:
The Board of Governors of the Federal Reserve System is advised
that the following holidays will be observed by Federal Reserve banks
and branches during the month of August:
Monday, August 1
Denver
Colorado Day
St. Louis
Kansas City
Primaiy Election Day
Thursday, August 4
Nashville
Memphis
Primaiy Election Day
Friday, August 12
Havana Agency
Anniversary of Fall of
Machado Government
Tuesday, August 2
Saturday, August 27
Tuesday, August 50
Dallas
El Paso
Houston
San Antonio
Second Primary Election
Day
New Orleans
Anniversary of Birth
of Huey P. Long
San Francisco
Los Angeles
Primaiy Election Day
On the dates given the offices affected will not participate in
either the transit or the Federal Reserve note clearing through the
Interdistrict 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
-2-
R-281
Reserve notes for account of the head offices mentioned should be included in your note clearings of August 2, 4, 27 or 30.
Please notify branches.
Veiy truly yours,
J.% G. Noell,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Monday, July 25, 1938.
The following summary of general
business and financial conditions
in the United States, based upon
statistics for June and the first
three weeks of July, will appear
in the August issue of the Federal
Reserve Bulletin and in the monthly reviews of the Federal Reserve
banks.
Industrial activity showed little change in June and increased
in the first three weeks of July, although there is usually a considerable decline at this season.
Prices of most staple commodities advanced
sharply in the latter part of Juno and early July and there were substantial increases in prices of stocks and lower grade bonds.
Production
Volume of industrial production, as measured by the Board's seasonally adjusted index, was at 77 percent of the 1923-1925 average in June
as compared with 76 in May and an average of 79 in the first quarter of
the year.
Available data indicate that in July the index will show a
considerable rise.
In June activity in the textile industry increased, reflecting
chiefly a further rise at woolen mills.
Output at cotton and silk mills,
which usually declines at this season, showed little change.
Shoe pro-
duction declined, following a considerable increase earlier in the year.
Automobile output decreased further in June; sales of new cars
continued in excess of production, however, and stocks were further
-2reduced.
R-282
Steel production declined seasonally in June, and lumber produc-
tion showed little change, although some increase is usual.
plate glass rose sharply from an exceptionally low level.
Output of
Coal production
remained in small volume in June, while output of crude petroleum, which
had been sharply reduced in May, declined somewhat further.
In the first three weeks of July activity at steel mills increased,
although there is usually a decline in that period, and in the third week
of the month ingot production was estimated at 36 percent of capacity as
compared with an average rate of 28 percent in June.
Crude petroleum
output also rose sharply, reflecting chiefly a return to production on
a six-day week basis in Texas.
Automobile production declined seasonally.
Value of construction contracts awarded, as reported by the F. W.
Dodge Corporation, showed a decline in June, following a considerable
increase in May.
Changes in both months reflected chiefly fluctuations
in awards for publicly-financed construction.
Awards for private resi-
dential building were maintained in June at about the same daily rate as
in May, although there is usually some decline at this season, and were
in slightly larger volume than a year ago.
Other private construction
work remained at recent low levels.
Employment
Factory employment and payrolls decreased further from the middle
of May to the middle of June.
Employment in the automobile, steel,
machinery, and clothing industries continued to decline, while at
woolen mills there was an increase and in most other manufacturing lines
changes were small.
In trade employment was reduced, while in other non-
manufacturing industries changes in the number employed were largely
seasonal.
37
R-282
-3-
Agriculture
A total wheat crop of 967,000,000 bushels was indicated by July 1
conditions, according to the Department of Agriculture.
A crop of this
size would be considerably larger than average and a Government program
was announced for loans at close to current market prices.
Cotton acre-
age on July 1 was estimated at 26,900,000 acres as compared with
34,500,000 acres last year when, with exceptionally high yield per acre,
a record crop was harvested.
Production estimates for most other major
crops were slightly under the large harvests of last season.
Distribution
Distribution of commodities to consumers was maintained in June at
about the May level, although a decline is usual at this season.
Sales
at department and variety stores showed little change and mail order
sales increased.
In the first half of July department store sales de-
creased less than seasonally.
Freight-car loadings showed little change from May to June and
were slightly above the low level of April.
Commodity prices
Prices of industrial materials, particularly rubber, hides, nonferrous metals, and steel scrap, showed advances from the middle of June
to the third week of July, and there were also increases in prices of
livestock and products.
in June.
Wheat prices declined, following a rise early
Prices of iron and steel were reduced and there were also de-
clines in uome other industrial products.
Bank credit
Excess reserves of member banks increased substantially in June and
R-282
the first half of July, rising to above &3,000,000,000, as compared
with $1,750,000,000 just prior to the reduction in reserve requirements
the middle of April.
The largest gain in excess reserves occurred at
city banks through the retirement of Treasury bills and the continued
growth of bankers' balances.
Total loans and investments of reporting member banks in 101 leading cities, which had increased sharply in the first week of June, declined during the remainder of June, reflecting largely redemption of
Treasury bills held by Now York City banks and a decrease in loans to
security brokers and dealers.
During the first three weeks of July
total loans and investments at reporting banks showed little net change.
Money rates
Rates on Treasury bills and notes were slightly firmer in July
but continued at exceedingly low levels.
showed little change.
Yields on Treasury bonds
BOARD OF
GOVERNORS
DFTHE
FEDERAL RESERVE SYSTEM
39
WASHINGTON
ADDRESS
July 25, 1938.
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:
NOZTYS - Treasury Bills to
be dated July 27, 1938, and
to mature October 26, 1958.
Very truly yours
J. C. Noell,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
40
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R—284
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE
BOARD
*********
July 26, 1938.
SUBJECT*
Audit of Incomplete Federal Reserve notes.
Dear Siri
For your information there is inclosed a recapitulation of an audit
submitted to the Secretary of the Treasury by Mr* H, M. Pearson, Acting
Chief, Division of Public Debt Accounts and Audits, shovdng the stock of
incomplete face printed Federal Reserve notes, Series of 1928 and Series
of 193^ combined, and of uniform backs allocated to Federal Reserve notes,
on hand at the Bureau of Engraving and Printing at Washington as at the
close of business June 30, 1938*
In his letter transmitting the report to the Secretary of the Treasury, Mr. Pearson stated that#
"The audit extended from June 28 to July 6,
1938, inclusive, and consisted of a piece count of the entire stock of
faces, Series 193^> and a package count of the uniform backs allocated to
Federal Reserve notes*
All stocks of Federal Reserve notes, Series of
1928, with the exception of those retained by the Bureau for specimen purposes were piece counted and placed under the Auditor*s seal prior to the
audit.
An inspection was made of the seals on the various bins containing
these stocks and the seals were found to be intact*
Due to the inactivity
of $5 Federal Reserve notes it was deemed advisable to place the stocks of
this denomination under seal*
Accordingly, after a piece count was made,
41
- 2
all stocks of $5 Federal Reserve notes, Series of 193-4, with the exception
of those retained by the Bureau for specimen purposes, were placed under
seal in locked compartments in the Examining and Surface Printing Division's
vaults.
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
hand in the Bureau, a package count and an inspection for denominations of
the uniform backs allocated to Federal Reserve notes was deemed sufficient
at this 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 Undersecretary of the Treasury, dated December 2, 1929*"
Of the total of 3,093,594 sheets of faces covered by the audit,
682,548 sheets are of the Series of 1928,
Very truly yours,
J. R. Van Fossen, Asst. Chief,
Division of Bank Operations#
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
ir.fr
Federal Reserve Bank
Faces*
Boston
Hewlto*
•5
81,502
St. Louts
Total Faees
772/378
•50
147,649-2/3
245,620
41,911-3/3
168,929-2/3
11,9*9-2/3
M,035-1/3
a,886-1/3
26,17a-V3
43,366-5/3
37,433-1/3
166,294
50,140
37,200
24,966-2/3
61,240-1/3
66,220.
" # m Ifcenctseo
B m T m w a
#20
75,501
128,067-2/3
nr
#20
iM^as
42^05-1/3
S » W
n r m
1,060,229-2/3
"
f
-i<wg
$340
•500
000 #5,000 *10,000
794,616
246,462-1/3
65
493
1,735
695
51
501
— «•
200
479
19^-3/3
75
130
352
1343M/3
454
122
570
14,504
600
124
402
8,972-1/3
169
2,924 2,202
47,061
90
874
530
6.
168
445
402
110
552
9,334-1/3
460
99
450
3,929-1/3
140
600
526
9,870 6,874 1,045
201,669
630,500
149,000
120,500
63^33>m
54^^/3
31,599
130,625
22,53>*/3
^tg3-0
20,866-^3
37,566*1/3
Mj8.96<-g/3
w
51,lS7-2&
6,932-2/5
5,5a
5,655-3/3
3,700
74
4l
50
127
80
122
49
TOTAL
299,766-1/3
647,808-1/3
311,010-1/3
281,984-1/3
180,186-1/3
118,273
528,622-1/3
144^7
61
52
94
750
99,700
98,355-1/3
134,663-^/3
248.627
3,093,594
--
--
2,125,000
9,870 6,874 1,045
750
5*218,594
Bade##
Ctaifor* Backs allocated
to the various denoainatiens
of Federal Reserve
Botes
Total Faces and
Bade*
568,500
1.340,578
BOARD CF OOVBRHOR0
OF THR FEDERAL RESERVE SIBTBI
DIVISION OF BASK OPERATIONS
656,500
1,716,729-2/3 1,425,116
395,462-1/3 322,169
--
R-285
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
43
WASHINGTON
ADDRESS
July 30, 1938
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:
HOZ'JAN - Treasury Bills to be
dated August 5, 1958, and to
mature November 2, 1358.
Very truly yours
Assistant Secretary
TO PRESIDENTS OF ALL'FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
BOARD OF GOVERNORS
44
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
R-286
August 5, 1958.
Dear Sir:
The revision of the form of report of examination which has
been under consideration, as you know, for some time, has been completed.
Changes in certain schedules in order to conform to the
recent agreement regarding examination procedure have been incorporated
in the revised form.
In the interest of uniformity throughout the
System and to reduce the cost of supplies, it has been decided to have
the forms printed in Washington and distributed to the Reserve banks.
It is expected that the supplies will be in your hands before the end
of the month, and it is contemplated that the new form will be used
beginning September 1.
Very truly yours,
Leo H. Paulger,
Chief, Division of Examinations.
TO ALL VICE PRESIDENTS IN CHARGE OF EXAMINATIONS
BOARD OF GOVERNORS
R-287
DFTHE
'
FEDERAL RESERVE SYSTEM
45
WASHINGTON
ADDRESS
********
August 6, IS58.
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:
NOZUER - Treasury Bills to be
dated August 10, 1958, and to
mature November 9, 1958.
Very truly yours,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
46
BOARD OF GOVERNORS
R-283
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
August 8, 1958
Dear Sir:
There are inclosed herewith copies
of statement rendered try the Bureau of
Engraving and Printing, covering the
cost of preparing Federal reserve notes
from July 1 to July 28, 1938.
Very truly yours
Josephine E. Lally,
Deputy Fiscal Agent.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
47
R-288-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
July 1 to 28, 1938.
Federal Reserve Notes. Series 1954.
&10
&20
$50
Boston
45,000
12,000
8,000
New York
84,000
21,000
27,000
Philadelphia
51,000
21,000
20,000
Cleveland
51,000
18,000
—
Richmond
32,000
23,000
14,000
Atlanta
25,000
7,000
Chicago
53,000
St. Louis
$100
8500
$1000
Total
Sheets
Amount
-
-
65,000
$ 5,980.00
41,000
-
-
175,000
15,916.00
7,000
-
-
99,000
9,108.00
-
-
69,000
6,548.00
5,000
-
-
74,000
6,808.00
2,000
5,000
—
-
57,000
5,404.00
35,000
54,000
54,000
158,850
14,614.20
34,000
8,000
4,000
5,000
-
—
51,000
4,692.00
Minneapolis
20,000
7,000
1,000
1,000
-
—
29,000
2,668.00
Kansas City
25,000
9,000
1,000
5,000
-
-
40,000
3,680.00
Dallas
22,000
7,000
3,000
-
-
52,000
2,944,00
San Francisco
51.000
17.000
3.000
4.000
75.000
6.900.00
493,000
185.000
114,000
108,000
902,850
#85,062.20
-
902,850 sheets, @ #92,00 per M
-
1,600
1,600
1,250
1,250
#83,062.20
R-289
BOARD OF GOVERNORS
OF THE
48
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
August 8, 1958
SUBJECT:
Discontinuance of Havana Agency
Dear Sir:
There is inclosed herewith a copy of a resolution
adopted by the Board of Governors of the Federal Reserve
System authorizing and directing the discontinuance of the
operations of the Havana agency of the Federal Reserve Bank
of Atlanta as soon as practicable and in no event later than
December SI, 1938.
This is submitted to you for your confi-
dential information, since any statement to the press that
may be necessary regarding the matter will be made by the
Federal Reserve Bank of Atlanta.
Copies of correspondence with the Department of
State regarding this matter are also inclosed for your confidential information.
Very truly yours,
Chester Morrill
Secretary.
Inclosures.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS EXCEPT ATLANTA
R-289RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM DIRECTING THE DISCONTINUANCE
OF THE HAVANA AGENCY OF THE FEDERAL RESERVE
BANK OF ATLANTA
August 3, 1938.
WHEREAS the Federal Reserve Bank of Atlanta has maintained and operated an agency in Havana, Cuba, for a number of
years past and is now operating the said agency pursuant to a
resolution of the Federal Reserve Board (now the Board of Governors of the Federal Reserve System) adopted January 27, 1927, as
modified py subsequent action of the said Board, and under the
terms of an agreement between the Federal Reserve Bank of Atlanta
and the other eleven Federal Reserve banks which became effective
on June 1, 1955; and
WHEREAS the Board of Governors of the Federal Reserve
System, in the light of the volume of business, operating expenses, and other factors involved in the maintenance of such
agency, has determined that the necessity and desirability for
the continuance of the agency no longer exists; and
WHEREAS the board of directors of the Federal Reserve
Bank of Atlanta adopted resolutions under dates of June 8, 1934,
February 14, 1936, and September 11, 1936, requesting that the
bank be authorized to discontinue the operation of the agency at
Havana, Cuba; and
WHEREAS it is the opinion of the Board of Governors
that the operation of such agency should be discontinued and
that the request of the board of directors of the Federal Reserve
Bank of Atlanta should be granted;
NOW, THEREFORE, BE IT RESOLVED:
(1) That the Federal Reserve Bank of Atlanta be and
said bank hereby is authorized and directed to discontinue the
maintenance and operation of the said agency at Havana, Cuba,
as soon as practicable and in no event later than the close of
business December 31, 1938, except to the extent necessary to
wind up- and liquidate any business or commitments theretofore
acquired or entered into;
(2) Upon the discontinuance of the operation of the
said agency pursuant to the terms of this resolution, the Federal
-2-
R-289-a
Reserve Bank of Atlanta shall no longer be authorized to exercise
through the said agency any of the powers which it has heretofore
been authorized to exercise try- the Board of Governors of the Federal Reserve System, except that it shall have and retain all
such powers as may be necessary and appropriate to wind up and
liquidate the business and affairs of the said agency as provided
in the preceding paragraph of this resolution;
(3) That the Federal Reserve Bank of Atlanta is directed to proceed diligently with the liquidation and winding up
of the outstanding business and commitments of the said agency
to the end that the affairs of the said agency may be finally
concluded at the earliest practicable date.
R-289-b
DEPARTMENT OF STATE
Washington
July 30, 1938.
My dear Mr. Morrill:
I have received your recent telephone message indicating that
the Board is again considering the closing of the Habana agency of
the Federal Reserve Bank of Atlanta.
While I understand the Board's attitude in this connection
and am therefore somewhat reluctant to suggest the further maintenance
of the agency, nevertheless, it seems to me that from the point of
view of our general relations with Cuba it might be desirable again
to postpone withdrawal.
As you are aware, the Cuban Government has
been contemplating a rather extensive modification of its banking
structure in relation to which it sent an official mission to the
United States in the summer of 1937.
These officials drafted with
the assistance of experts of the Treasury Department and other agencies of this Government a number of important measures on government
finance and agricultural credit which are now receiving study by the
Cuban Government.
Should these bills be enacted, it is not improbable
that the Cuban Government may seek further assistance from our Treasury Department in setting up the now machinery, and pending the time
when that machinery is functioning, it seems to me that the Board
might well consider whether the continued presence of the Habana
agency would not be useful and desirable.
Cuba as you know is one of our most important foreign customers.
The investments of American citizens there total approximately
R-289-b
seven hundred million dollars, and the commercial interchange, which
is facilitated because of the presence of an Agency of the Federal
Reserve Bank in the Cuban capital, runs into many millions of dollars
per year.
I feel sure that any legitimate arrangement which assists
the citizens of the United States to maintain the position of American
business in the island should not be discouraged, and it is accordingly my belief that the maintenance of the present Habana agency,
at least until the proposed changes in the Cuban financial structure
have been perfected, would be in harmony with the policy of cooperation which this Government has followed in respect to its special
relationship with Cuba, since the establishment of that republic.
Having all of the foregoing circumstances in mind, I venture
to express the hope that the closing of the Habana agency may be deferred for the time being.
Sincerely yours,
(Signed)
Sumner Welles
Under Secretaiy.
Mr. Chester Morrill,
Secretary of the Board of Governors,
Federal Reserve System,
Washington, D. C.
R-289-c
DEPARTMENT OF STATE
Washington
August 2, 1958.
Dear Marriner:
I enclose a copy of a letter which I wrote on July 50, 1958 to
Mr. Chester Morrill with regard to the consideration that the Board
has been giving to the closing of the Habana agency of the Federal
Reserve Bank of Atlanta.
This letter was delivered yesterday to Mr.
Morrill by Mr. Duggan of this Department.
As a result of the considerations set forth by Mr. Morrill on
that occasion, I desire to state my deep appreciation of the generous attitude that the Board has taken many times in the past by
continuing the Habana agency of the Federal Reserve Bank of Atlanta.
Although I had been aware that the maintenance of the agency was an
expense to the Federal Reserve Bank of Atlanta, I admit to having
been surprised to learn the extent of that cost and likewise the
unimportant role which the Bank has been playing in facilitating
commercial interchange.
Nevertheless, from this Department's point of view, I continue
to believe that it would be desirable that the agency be continued
until such time as the Cuban Government has made the proposed changes
in its financial structure which were elaborated by officials of the
Cuban Government in consultation with officers of this Government.
It may be that as a result of Cuban action there will be even less
~2—
R-289-c
of a role for the agency to perform than at present; but the contrary
might be true, in which case it would be far easier for the United
States to lend its effective cooperation if the agency were still to
be operating.
Moreover, although it is unquestionably true that conditions in
Cuba today are more stable than in recent years, public opinion in
Cuba is highly sensitive to action affecting Cuba taken by this
Government.
There is a possibility that the termination of the agency
at the present moment might give rise to unfortunate speculation and
misunderstanding.
I realize, of course, that the Board cannot be expected to continue indefinitely the agency if it does not perform a more vital and
useful function than at present.
It seems probable that the Cuban
Congress at its next session will act upon the financial measures designed to improve the banking and currency structure, and I strongly
hope that the Board will reconsider its decision to close the agency
and will permit it to continue until the Congress has acted.
If no
action has been taken by the Congress fcy December 31, 1939, I would
agree that the desirability of continuing the agency in anticipation
of action by the Congress at a later date would be very questionable.
Sincerely yours,
(Signed)
Sumner Welles
The Honorable
Marriner S. Eccles,
Chairman of the Board of Governors,
Federal Reserve System,
Washington, D. C.
R-289-d
August 6, 1958.
Honorable Sumner Welles,
Under Secretary of State,
Washington, D. C.
%
dear Mr. Welles:
This refers to your letter of July 30, 1938, and to your letter of August 2, 1938, to Chairman Eccles, with regard to the advisability of the discontinuance of the agency of the Federal Reserve Bank
of Atlanta in Havana, Cuba. Careful thought has been given by the
Board to the various considerations which are mentioned in these letters and the subject has been reexamined and discussed in the light
of the suggestions you have made.
As you know, the discontinuance of the Havana agency of the
Federal Reserve Bank of Atlanta is a subject which has been under
consideration for several years past. In June, 1934, the board of
directors of the Federal Reserve Bank of Atlanta adopted a resolution
formally requesting that the bank be permitted to discontinue the
Havana agency. This request to the Board of Governors was repeated
in a resolution adopted by the board of directors of the Federal
Reserve Bank of Atlanta in February, 1936, and again in September,
1936. However, due in large measure to representations of the State
Department as to conditions existing in Cuba, the Board has on each
occasion deferred the discontinuance of the agency.
The Board has now again reviewed the matter in the light of
all the factors involved in the continued operation of the agency,
including the fact that the activities of the agency have declined
to the point where it performs no important role in financing or
maintaining the flow of commerce between this country and Cuba or
in the financial structure of the island itself. During the period
from January 1 to May 11, 1938, the agency arranged a total of only
twenty-two cable transfers and made one currency exchange. The majority of these transactions were very small, fourteen involving
loss than $10,000.00 each. During five weeks in this period there
were no transactions of any kind. Of the twenty-three transactions
only two were with banks whose home offices are in the United States.
One of these was the sale of a cable transfer in the amount of
$12,150.00 and the other a currency exchange in the amount of
08,000.00
This limited volume of transactions resulted in total earnings of only $1,959.03 during the first six months of this year
against total current expenses during the same period of $16,883.76.
-2-
R-289-d
It is apparent therefore that the agency is being operated at a substantial out-of-pocket cost to the Federal Reserve System, and there
is no reason to believe that this condition would be changed at any
time in the near future.
The contents of your letters with respect to continuing the
agency ponding the enactment fcy the Cuban Congress of pending financial measures designed to improve the banking and currency structure
of the country have been carefully weighed. However, in view of the
statement in your letter to Chairman Eccles that conditions in Cuba
today are more stable than in recent years and since the agency is
not filling any need which can not be met adequately by other arrangements which it is believed can be made without difficulty, it
would seem that the discontinuance of the agency should not have any
adverse effect upon the adoption of the proposed improvements in the
banking and currency structure of Cuba.
In view of these circumstanccs, and the requests of the Federal Reserve Bank of Atlanta, the Board of Governors has concluded
that further continuance of the Havana agency is not justified and
therefore has authorized and directed the Federal Reserve Bank of
Atlanta to discontinue the agency. A copy of the resolution adopted
by the Board in this connection is inclosed for your information.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
BOARD OF GOVERNORS
R-290 5 7
D F T H E
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
August 10, 1938.
Dear Sir:
Having considered a suggestion that it amend Regulation L so as to permit, in so far as it may under section
8 of the Clayton Act, the continuance for a further period
after February 1, 1959, of relationships which were lawfully in existence on the date of the enactment of the
Banking Act of 1935, you are advised that the Board sees
no reason for extending the time fixed ty Congress for the
termination of such relationships.
It will be appreciated if you will advise all member banks in your district that may be interested in this
matter.
Very truly yours,
Chester Morrill,
Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
~291 -
58
0
WASHINGTON
ADDRESS
*******
August 12, 1958.
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:
NOZUO - Treasury Bills to be
dated August 17, 1958, and to
mature November 16, 1958.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
R-292
BOARD OF GOVERNORS
DF
„
THE
FEDERAL RESERVE SYSTEM
5 9
WASHINGTON
ADDRESS
August 16, 1938.
Dear Sir:
There is attached a copy of the report of expenses of the main lines of the
Federal Reserve Leased Wire System for the
month of July, 1938.
Please credit the amount payable by
your bank to the Board, as shown in the last
column of the statement, to the Federal Reserve Bank of Richmond in your daily statement of credits through the Inter-district
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,
# jO/Kl/nJiy
(o.
Josephine E. Lally,
Deputy Fiscal Agent.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
60
R-292-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF JULY. 1958
Words Sent
ty N. Y.
Chargeable
to Other
F.R. Banks
Total
Words
Chargeable
Expenses
Paid
t?y Banks
and
Board(2)
Pro Rata
Share of
Total Expenses (l)
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
33,197
87,080
28,792
41,919
1,587
1,597
1,419
34,584 f
512.27
87,080
1,289.86
50,189
447.17
45,338
641.94
Richmond
Atlanta
Chicago
St. Louis
42,368
65,055
76,742
65,805
1,585
1.550
1,518
1,569
43,755
66,585
78,260
65,174
648.08
985.29
1,159.21
965.58
259.82
314.21
1,255.08
255.68
Minneapolis
Kansas City
Dallas
San Francisco
27,970
62,605
59,465
76,271
1.551
1,579
1,402
1,400
29,521
65,984
60,867
77,671
454.51
947.75
901.58
1,150.49
125.55
284.05
279.15
586.51
448,769
6,647.32
11,651.86
1,129,575
16,728.65
16,728.65
Board of
Governors
Total
448,769
1,114,016
15,557
#
506.23
1,041.27
251.48
343.78
Payable
to
Board
of Governors
$
206.04
248.59
195.69
298.16
588.26
669.08
95.87(a)
711.70
510.76
665.72
622.45
765.98
—
5,078.41
93.87(a)
4.984.54
(1) /'Based on cost per word
j>.014812334) for business handled during the month.
(2) Payments by banks are for personal services and supplies and payments by
Board are for personal services and supplies ($1,625.51) and wire rental
($10,006.55). Personal services include salaries of main line operators
and of clerical help engaged in work on main line business, such as counting the number of words in messagesj also overtime and supper money and
Retirement System contributions at the current service rate.
(a)
Credit - reimbursable to Chicago.
R-293
BOARD OF GOVERNORS
a**?****.
61
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
August 18, 1938.
Dear Sir:
On Monday, September 5, Labor 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
be observed by Federal Reserve banks and branches during
September:
Friday, September 9,
San Francisco
Los Angeles
Admission Day
in California
Monday, September 12,
Baltimore
Defenders' Day
in Maryland
On the dates given the offices concerned will not participate in either the transit or the Federal Reserve note
clearing through the Interdistrict 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 Federal Reserve Bank of San Francisco
should be included in your note clearing of September 9.
Please notify branches.
ery truly yours
* J. C. Noell,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
R-294
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
August 19, 1938.
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:
NOZVAN - Treasury Bills to bo
dated August 24, 1938, and to
mature November 23, 1958.
Vegv truly yours
J. C. Noeli,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
63
BOARD OF GOVERNORS
OF THE
R-295
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
August £0, 1958.
Dear Sir:
A conference of the heads of the bank examination
departments of the Federal reserve banks in Washington is
planned for this fall, probably about the second week in
October but the exact dates will be announced later. It
is suggested that each reserve bank be represented at the
conferonce by the vice president in charge of the bank examination department and the chief examiner or a senior
examiner. Other representatives, of course, may also be
sent if a reserve bank so desires. It is not planned,
however, to hold a conference of trust examiners at this
time or to devote much of the time of the conference to
questions relating to the examination of trust departments.
The major questions for consideration and discussion, it is anticipated, will relate to the agreement regarding the revised examination procedure as announced by
the Secretary of the Treasury, measures necessary to make
the agreement effective, and experience 'with the revised
form of report of examination which is to be put into use
September 1. It is requested that specific questions regarding such matters and any other suggested topics for
discussion at the conference be forwarded by September 17
to Mr. Paulger.
Very truly yours,
. Carpenter
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-296
BOARD OF GOVERNORS
OF THE
64
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
August Z2, 1958
Dear Sir:
There is inclosed for your information a summary of the bank relations reports
submitted by the Federal Reserve banks for
the month of July in response to the Board's
letter of August 25, 1936 (X-9680).
Very truly yours
Chester Morrill,
Secretary.
Inclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
R-296-a
August 18, 1958
To:
The Board
Subject:
From:
Mr. Hammond, Division
of Bank Operations
Summary of Bank
Relations Reports
Reports of bank relations as requested in the Board's letter of
August 25, 1936 (X-9680) have been received for the month of July and
excerpts therefrom will be found on the following pages. A table
showing for all twelve banks the number of visits made, meetings
attended, and addresses delivered has also been prepared and follows
the quotations.
Reports from the East reflect improved business activity to a
greater extent than reports from the West. Wheat yields have been
disappointing in parts of the West and there is complaint of agricultural prices.
There is comment in the reports upon the new rules for classification of loans and what the tankers understand to be the Government's attitude toward lending, particularly as expressed in letters
from the Reconstruction Finance Corporation. Disapproval is expressed
on both scores, but especially with respect to liberalized lending.
The contention of bankers is that they are already making all the
loans that it is proper for them to make.
The subject of par collection and of collection services in
general continues to receive frequent mention. In the East the complaint usually is that correspondent banks are offering much better
collection service than Federal Reserve Banks, largely because they
give prompter credit and are less exacting as to listing, etc. In
the West and in the South the feeling over par collection appears
to be growing more intense, banks that are on the par list being
resentful toward banks that are not on the par list and insisting
that Federal Reserve Banks do something about it.
Excerpts from the reports follow:
attached to the original hereof.)
(The reports themselves are
Boston
Forty-six member banks and nine nonmsmber banks in Connecticut,
Massachusetts and New Hampshire were visited during the month of
July.
In the communities served ty these banks there are a number of
cotton and woolen mills, shoe and garment factories, machine shops.
66
-2-
R-296-a
and woodworking plants and a few paper mills. With the exception of
the builders of heavy-duty machinery, all factories in the section
visited were reported to have recently increased operating time and
payrolls, though only in one or two instances was any increase in
the number of employees said to have taken place. The bankers report that there is a much better feeling in their communities, particularly on the part of the merchants who are rebuilding their
inventories in certain lines. Sales representatives of manufacturers and distributors report increased buyer interest and more and
larger orders.
The few bankers who had inquired into the matter gave it as the
view of factory operators in their communities that orders on hand
and in sight indicated a gradually increasing output for the next
three to six months.
The tourist trade throughout the section is well under that of
a year ago.
Loans have not increased to any extent among the banks visited
and rates remain at from 5% to 6% in rural districts and from
to
6% in the cities. New business is mostly small personal loans and
some household equipment paper. Loans to towns carry rates of from
1^% to 5%. While investment lists have been strengthening recently,
they showed a depreciation at most banks of from 3% to 15% with the
average somewhat under 10%.
The average small bank had, roughly, a third of its funds in
loans, a third in bonds and a third in cash and on balance. A number of these bankers are reconciled to the belief that their loans
are not likely to increase very much at any time in the future and
they are not comfortable in being forced into the investment market
for earnings, an operation which some of them feel requires too much
activity of trading and the placing of too much reliance upon the
judgment and advice of outside agencies.
New York
Fairfield County. Connecticut
Officers of a majority of the commercial banks indicate that
their security policies remain unchanged and that new investments
are being limited to short term and high grade bonds. Securities
owned by the commercial banks now amount to $49,000,000 of which
$32,000,000 are United States government issues. The portfolios of
eleven banks still have some appreciation and the other sixteen
show a depreciation which varies from 1 to 18 per cent, six banks
—3—
R-296-a
reporting depreciation in excess of 5 per cent. Since the first of
the year the investment accounts have decreased in the aggregate by
$3,200,000, almost half of the decline being in United States government issues.
Loans and discounts of the commercial banks now aggregate
$56,600,000, reflecting little change in the total since January 1.
Nine banks have granted $2,960,000 in Federal Housing Title II mortgage loans, 84 per cent of which has been handled by two banks. A
member bank in Greenwich, which continues its relationship with an
insurance company in arranging mortgage loans, reports having taken
about $500,000 of these mortgages during the first half of 1938 as
compared with $1,000,000 for the same period in 1937, the decrease
being due to the curtailment in building of homes in the village of
Greenwich. Thirteen banks now have $900,000 in personal loans. In
commenting upon the recent letter of Chairman Jesse H. Jones of the
Reconstruction Finance Corporation with respect to more liberal
granting of loans, a number of the bankers state that they are
anxious to make additional loans but that there is no real demand
for accommodation from applicants deserving credit although they
have had an increase in inquiries from borrowers with whom they
have had unfavorable experience on previous loans, some of which
were severely criticized by the examiners.
Monroe County. New York (Buffalo Branch Territory)
Investment portfolios in the aggregate are 12 per cent lower
than a year ago. A considerable portion of this decrease is due to
the recent sale of $7,000,000 United States government securities
by one state member bank at a profit equivalent to sixteen months'
earnings on this investment, the proceeds of which are held as excess cash awaiting a more propitious time for investment. Three
bankers claim to have small appreciations in the security holdings
of their banks, while executives of the other banks report depreciations in their lists ranging up to a high of 9 per cent.
An officer of one nomnember bank states that for the last three
consecutive weeks the demand for loans from local industrial concerns
for the purchase of materials has shown a marked increase. Others
report a continued lack of demand from deserving customers, although
a concerted effort to place good sound loans is being made. Increasing amounts of idle funds are being placed on the New York call
money market.
One nonmember trust company located in Rochester withdrew its
application for membership in the Federal Reserve System early this
year due to the restrictions of the Clayton Act relative to interlocking directorates. One state member bank (deposits $70,000,000)
67
-4-
R-296-a
has just entered into an agreement with a bank in Philadelphia, Pennsylvania, whereby it will receive twenty-four hour service seven days a
week on the collection of checks in the eastern part of the country.
The president of this bank stated that while he has always believed in
the Federal Reserve Siystem, for some years several of his directors
have questioned why his bank should continue as a member, and that if
the Federal Reserve bank does not adequately meet the prompter collection services rendered by the larger commercial banks, it would not be
at all improbable that his bank might withdraw from the System, particularly if reserve requirements remain unreduced in times of more
active business demands. Further comments along these lines were expressed by the president of another member bank (deposits $15,700,000),
who stated that if, and when, his bank becomes loaned up to capacity,
and reserve requirements remain substantially greater than state requirements, he would give serious consideration to withdrawing from
the System.
Rockland County. New York
The majority of bank officers report a continued light demand for
credit on the part of deserving borrowers, but several banks have been
able to increase their loans somewhat during the past year. Three of
these have been active in their efforts to obtain personal, automobile,
and Federal Housing modernization and insured mortgage loans, while
other institutions located in communities where the demand for housing
loans is limited have added materially to their portfolios by purchasing insured mortgages from outside sources. Three banks have not made
any loans under the National Housing Act, and executive officers of
these institutions attribute their failure to do so either to lack of
demand or to the fact that worthy applicants have been taken care of
through the banks' ordinary lending channels. Six per cent continues
to be the prevailing interest rate on ordinary loans and discounts, but
this is generally reduced to 5^ or 5 per cent on well-secured loans, especially mortgages, and still lower rates are granted to municipalities.
In the three counties visited there are 49 commercial banks of
which 32 issued preferred stock, capital notes, or debentures aggregating #14,685,000 par value. Up to the present time only one institution
has paid off its entire issue of $>50,000, 27 have made partial redemptions aggregating $4,557,175 and 4 have not retired any - leaving 51
banks with a total of $10,077,825 par value still outstanding. Included
in these latter figures is one bank which has $41,425 par value of preferred stock outstanding, redeemable at $124,275, or at a premium of
$82,850.
Philadelphia
During July representatives of this institution visited 109 banks,
mostly in the northeastern part of Pennsylvania.
-5-
R-296-a
In the anthracite mining sections it was learned that there
had been a somewhat better activity this summer than last, although in the section around Scranton the improvement is not so
noticeable and in a few instances operations were smaller than a
year ago. This may be partly due to the fact that the mines in
the Scranton area are said to be nearly worked out and are, as a
result, more costly to operate.
Industrial activity is fair. During the past ten years many
communities have seen the industries upon which they depended shrink
in size or disappear altogether, either because of financial or
labor trouble, or removal to other locations. While the capacity
remaining is not being utilized to its full extent, most of the
smaller industries are operating at a fairly satisfactory rate, the
greatest inactivity being experienced at larger plants. However,
one silk company with three large plants in this area has been operating steadily at capacity and it is expected that it will increase
its activity here by transferring work from a plant located in another state, which work was taken away from its Pennsylvania plants
a few years ago as the result of labor trouble. Two other large
silk mills are working only at about one-third of capacity. A large
carpet and rug mill and a steel products company, which jointly employ about 5,000 or 6,000 persons, expect to increase activity considerably within the next two or three months, and the same was said
to be true of a large lace factory. The various trade organizations
have endeavored to bring new industries to their respective communi.ties with but little success to date.
Agriculture is important in much of this area and satisfactory
conditions exist with regard to crop yields and quality but some
misgivings are felt that low prices will prevail again this year,
thus repeating the farmers' experience of last year. The low price
of wheat, 60 cents a bushel, is a loss figure and is taken as an
indication of low prices for other crops. This level of wheat
prices is about the figure at which Government agencies will lend
on this grain.
The bankers visited do not take kindly to statements by public
officials that proper credit is being withheld by banks and several
commented upon letters received from the R. F. C. agency asking them
to participate in certain loan applications received by the agency.
In many instances the applicants are not considered good risks by
these bankers and they view these requests with some suspicion. One
prominent banker who received such a letter stated that he was going
to be very careful in answering it.
The president of one National bank referred to the statement
about creating industrial banks as "ridiculous", stating that worthy
businesses and individuals in his community had always been taken
care of.
-6-
R-296-a
One non-member banker said he did not think the new method of
classification is sound - that it is an "out" to save banks in distress.
The cashier of a National bank also expressed the opinion that
these regulations were "a terrible mistake" stating that to his
mind current valuations should always be considered, that solvency
is the most important factor in banking. He said he fails to see
how these regulations can aid banking.
An outstanding banker of the district, president of a National
bank, criticized the revision in bank examination procedure as a
deviation from sound bank management. Since the banking holiday,
he said banks have followed the middle of the road - as far from
the ditch as possible - but that the Board seems to want to "push
them close to the ditch again".
Other bankers were more friendly to the new regulations as
being an effort to help some of the banks. Of the two subjects, the
new regulations and the R. F. C. letters and utterances, the latter
aroused the greater comment.
Complaints are still being received about activities of Federal
Savings and Loan Associations. The cashier of a member bank located
in a city of 36,000 population said that it had been necessary forcibly to eject a representative of the local association, who persisted in soliciting accounts in the lobby of his bank. The representatives are said to be engaged on a commission basis which probably accounts for their over-zealousness, although the officials of
this particular association have been criticized as being incompetent. One method used by the association in getting business is to
offer coin banks to help people to save. These banks sell for $2.00,
$1.00 of which is credited to the subscriber and $1.00 is paid to
the solicitor as commission. The treasurer of another member bank
in the same city said that he did not consider this association competitive. In fact, he said, he favors it as it took over several
mortgage loans which he no longer wished to carry in the bank.
Cleveland
The program of visits to member banks by the junior staff was
discontinued at the end of June and will not be resumed until the
early part of September. It is contemplated that a few calls will
be made upon State nonmember banks in the interest of System membership.
Informal discussions were had with member bankers looking to the
possibility of developing a market for the issuance of local securities within the confines of the Fourth Federal Reserve District. It
-7-
E-296-a
71
is a recognized fact that a substantial amount of financing of small
or moderate-sized issues could be effected advantageously in the
fourth district, provided certain legislative restrictions were removed or modified. The idea has been enthusiastically received in
all places whore it has been informally discussed.
Businesswise, there is some improvement, but sentiment appears
to have outrun conclusive, tangible evidence to support it,
Richmond
Eastern Shore of Maryland
In the six northern counties mixed farming prevails, with a considerable acreage devoted to wheat, while truck farming predominates
in the remaining three. Maryland will probably produce a somewhat
larger wheat crop than in 1937 and it will also exceed the average
for the years 1927-36. Prices to farmers were around 62 cents in the
middle of July, a figure that compares unfavorably with the average
of about $1.00 a year ago. Dorchester and Kent Counties' late tomato
crop is showing some damage from recent heavy rains. Worcester County
has an unusually good potato crop, both white and sweet, with the
former bringing from #1.00 to $1.25 a barrel, a price that affords
the grower a small profit. The Wicomico County strawberry crop has
contributed materially to farmers' incomes this year. Eastern Shore
banks report a fair demand for loans, with rates running from 4 per
cent to 6 per cent. Most banks are paying 2 per cent on time deposits, and service charges have become fairly general.
Northern Virginia.
Frederick, Clarke, Loudoun, Fauquier, Prince William and Fairfax
Counties are in a region adjacent to Washington. Apple growing predominates in Frederick and Clarke Counties, while dairying, cattle
raising, and mixed farming are more or lass characteristic of the
others. The apple crop for 1938 will run considerably under that for
1937 in volume, and it will also be somewhat less than the average
for the years 1927-36. Prices, as of July 15th, for the State were
65 cents a bushel, but packed apples in the Winchester market are
bringing from 70 cents to 90 cents in less than carload lots, and
from 90 cents to $1.10 in carload shipments. If these prices are maintained growers will be able to realize a small profit this year. Dairying in counties adjacent to Washington depends to a large extent upon
the consumer demand in that city. There appears to be some danger of
over-expansion of the industry. At the present time it is an important
source of farm income in Loudoun, Fauquier, Prince William, and Fairfax
Counties. Taking this region as a whole farmers are in a fairly good
position, even though prices, except for apples, are somewhat lower
than in 1937. Bank loans have held up relatively well with rates
-8-
R-296-a
around 6 per cent. Most banks complain of difficulty in making
satisfactory earnings and are relying more upon service charges
than investments for earnings. There appears to be little interest in FHA loans.
Northern West Virginia
The West Virginia hay crop for 1938 promises to be better than
in 1937 and considerably better than average, the oat crop about
the same as last year but not so good as average, and corn will produce a somewhat better than average crop. Production in the coal
counties is still at a low level, averaging about half-time, but
rentals for oil land in the oil-producing counties appear to have
been fairly well maintained. Factories at Eichwood (Nicholas County)
have been operating nearly a full labor quota, but mill activities
in other regions have suffered more acutely from the depression.
The demand for loans has been rather light, with interest at 6 per
cent. From 2 to 2-g- per cent is paid on time deposits, but in spite
of adverse earnings conditions service charges have not been employed.
Eastern South Carolina
In Charleston County truck farming is the predominant type of
agriculture, with early Irish potatoes and cabbage as leading crops.
The former comes onto the market just after the Florida crop. The
indicated production of early potatoes in South Carolina for 1938
is somewhat better than the ten-year average, 1987-36, but much less
than the 1937 crop. On the other hand, the sweet potato crop will
run much ahead of 1937 and the ten-year average. The average price
for Irish potatoes was, on July 15, 1938, about 80 cents a bushel,
and for sweet potatoes about 85 cents. Jobbing and manufacturing
activities in Charleston clearly reflect the effects of the depression, but conditions have been made somewhat better by increased
activity at the Charleston Navy Yard. In addition, residential construction has been rather dormant and there appears to be little
interest in FHA loans. Conditions upstate appear to be rather favorable. The tobacco crop in Williamsburg and Sumter Counties will
probably produce better than an average yield (1927-36 average),
though somewhat less than in 1937. Sumter County manufacturing industries - furniture, hosiery, veneer, Venetian blinds, flour, and
fertilizer - have been able to employ approximately three-fourths
the normal amount of labor, and home building continues fairly
active. The demand for bank loans has been fair, with rates varying from 6 per cent to 7 per cent.
Atlanta
Northeast Florida
Visits were paid during the month to the three member banks in
Jacksonville, Florida. It was stated that the Jacksonville section
and the State of Florida generally have not been nearly so much affected by recent adverse conditions as appears to have been true in
other parts of the country. The tourist trade during the season
was fair and, while the citrus crop will not be as large as the crop
last year, better prices are anticipated.
The bankers seem to feel that recent general criticism of the
lending policies of commercial banks was not justified. It was felt
that the demand for all legitimate loans had been met, and the bankers were extremely anxious to increase their volume of loans. The
statement was made that, in so far as the Jacksonville banks were concerned, a liberalization of lending policies would simply mean unsound
banking, and that there had been and was no disposition to reject a
loan merely because its liquidation might not be accomplished within
a relatively short period.
Northwest Georgia
This territory is primarily agricultural, with cotton the principal money crop. In several of the towns, however, there are located
textile mills, stove foundries, etc. Handmade bed spreads are shipped
from the vicinity of Dalton, Georgia, in large volume, the total dollar value being approximately $5,000,000 a year. The stove foundries
are operating on a much reduced schedule, due to the fact that heavy
inventories were accumulated during the early part of last year.
The acreage planted to cotton is approximately 25 per cent less
than that of last year, and yields are expected to be from 25 per
cent to 33-1/3 per cent lower. The condition of the cotton crop is
reported "fair" to "good". There is some infestation of boll weevil,
end recent rains have increased the likelihood of damage from this
source. Corn and other feed crops are reported good.
The banks report little change in deposits and loans, as compared to a year ago. VJith one or two exceptions, the bankers interviewed offered no criticism of the activities of Governmental loan
agencies. A number of the banks are making F.H.A. Title II loans
for resale.
The nonmember bankers, with a single exception, stated that the
importance of exchange on cash letters as an item of income prevented
their giving serious consideration to becoming members of the System.
One par remitting nonmember bank objected to the reports which would
be required in the event the bank should join the System.
No criticisms or suggestions wore made concerning the services
rendered by the Federal Reserve Bank, except that one banker thinks
there is too much "red tape" connected with borrowing from the Reserve Bank. The officers of one member bank stated, in confidence,
-10-
R-296-a
that in their opinion the revised examination procedure would have
little effect on the loan and investment policies of well managed
banks. An officer of another member bank expressed dissatisfaction with the current reserve requirements.
Southern Louisiana
i
Visits were made to a group of banks located in an exceptionally fine agricultural section, commonly referred to as the
"Evangeline Country". The principal crops are sugar cane, rice,
cotton, and corn. The crops now under cultivation are reported to
be better than for a number of years, having had an unusually good
growing season.
The farmers of this section are beginning to take more interest in raising cattle and the improvement of the herds.
All of the bankers except one stated that the Governmental lending agencies are beneficial to their respective communities and as
a general rule make loans that they would not care to handle.
Southern Mississippi
Bankers stated that business is rather quiet,
expected at this season, but that with the present
an excellent harvest they are looking forward to a
and better earnings during the latter half of this
same period of 1937.
which is to be
prospects for
good fall season
year than in the
Without exception the bankers interviewed were not critical of
Governmental lending agencies. The general opinion seems to be that
these agencies make a few loans that the banks would like to have,
but that most of the loans are made to individuals who are not considered good risks for banks. It is believed that the funds loaned
by these agencies help the banks indirectly.
Chicago
During the month of July, 193 calls were made on member and
nonmember banks, the majority being located in the northern part of
Iowa with a few in Illinois, Indiana, and southern Michigan.
There are some indications of a slightly increased demand for
loans in agricultural sections. The amount of live stock loans will
depend to some extent upon the price at which feeders may be purchased. The abundant forage crops will have a tendency to hold
these prices up.
Crop prospects continue good, although in the southern part of
Iowa rain is needed; in the northwestern part of the State it is
7 4
-11-
R-296~a
believed there is already sufficient moisture to insure the corn
crop.
There have been few sales of farm lands and noticeably little
recovery in land values, the top prices in Iowa and Indiana being
given as ranging from $100 to $125 per acre, while in Illinois the
prices are quoted as slightly higher. In three counties visited
in southern Michigan, the average given was $50 to $60 an acre.
Retail trade has been only fair and sales show a reduction of
from 10 to 33-1/3 per cent, depending on the locality. In East
Chicago, Indiana, payrolls of the principal industries have decreased from $2,500,000 in January to $2,100,000 in July. Very
little building is reported with the exception of some residential
construction in a number of the smaller towns.
There are 110 non-par banks in the State of Iowa, a number of
which were called upon. While most of these were cordial enough in
their attitude toward our representatives, they frankly stated that
they do not feel they can afford to give up the revenue from their
exchange charges. There is apparently a growing sentiment on the
part of parring banks against those banks which do not remit at par,
and the feeling was expressed that in all probability some legislation will be enacted with a view to correcting this situation.
In Iowa, 141 branches are operated by 109 banks. Calls were
made on a number of these, and while in some instances the banks
state that the branches are not profitable, they feel that the localities served by the branches need some banking facilities and
for this reason they are not willing to dispose of them. In one
case it was pointed out that the branch was located in a heavy cattle feeding district and many of the feeders have loans as high as
$20,000. These could not be taken care of by the establishment of
a unit bank at that point, as a bank of $25,000 to $50,000 of capital would not have sufficient loaning power to accommodate borrowers
of this type. Most of these banks think that the law should be amended to permit a bank with ample capital to operate branches and at the
same time be a member of the Federal Reserve System.
Banks visited expressed themselves as being satisfied with the
services rendered by the Federal Reserve bank. However, one State
member bank said that it is giving consideration to withdrawing from
the Federal Deposit Insurance Corporation, as it feels that the value
of membership in that corporation is not worth what it costs. This
action would, of course, make it necessary for the bank to give up
its Federal Reserve membership.
St. Louis
During the month our officers and field representatives visited
-12-
R-296-a
197 banks of which 113 were in Illinois, 36 in Missouri, 31 in
Indiana, 13 in Kentucky, and 4 in Tennessee.
Business, Trade and Industry
The decline in mercantile business that has been in evidence in
the more important industrial centers has n#r reached the agricultural communities. This can be attributed chiefly to the decrease
in cash income of those engaged in farm work on account of lower
prices now current for practically all grain crops.
Wheat harvest in the Eighth District was considerably smaller
than last season. The price now offered is about 60 cents per bushel
as compared with $1.10 to $1.15 last summer at the close of threshing. A plentiful supply of corn (which also brings a low price) has
enabled farmers to increase their feeding of hogs for market although
the scarcity of feeder stock has placed a decided limitation upon
such activities.
Industrial conditions remain unchanged with no present indication that any worthwhile expansion is contemplated, except in scattered communities in Southern Illinois where oil has been discovered
within the past year. Even in some of these localities the "boom"
is now subsiding because no additional producing wells have been
brought in.
Commercial Banking
With an ever increasing volume of idle funds due to lack of a
normal demand for loans, country banks are seeking methods of increasing their earnings and a good many of them are acquiring F.H.A.
and Federal Farm Mortgage paper. A surprisingly large number of the
rural banks are subscribing for the recent offering placed on the
market by the R. F. C., which is an indication of the present trend
of thought as to what constitutes desirable securities. Comparatively few bankers who have been interviewed are giving any consideration whatever to securities that have the slightest speculative
tinge. Almost all the banks visited show less funds involved in
outstanding loans than at this period in 1937.
Officers of a State member complained of the number of nonpar
points in their territory and intimated that we ought to do something about it. When asked for suggestions, they suggested that we
strong-arm them.
Officers of a small nonmember, located in the vicinity of St.
Louis, inquired about what steps should be taken to get off the par
list. Conversation developed that they had discussed the matter of
making their checks immediately available with officers of a St.
-15-
R-£96-a
Louis member bank and were advised that they would be subject to a charge
when depositing in clearing house banks. Our officers outlined how their
checks cou^d be made immediately available by clearing through our bank
and forms in this connection will be forwarded. The same subject was
discussed at some length with officers of another nonmember, one of whom
made the statement that the number of banks off the par list was resulting in less use of checks and greater use of currency, as salesmen are
requesting currency in settlement of accounts to avoid cost of collecting checks.
The cashier of an Indiana nonmember, located in a city of 6,000
inhabitants, has been alert to all lending opportunities and has taken
loans of all types, particularly those with amortization provisions.
He has thus aroused the skepticism of some of the examiners but stated
that actual liquidation has convinced the supervising authorities that
the loans are sound. About three years ago he made some bus loans,
representing purchases of buses fcy various school districts. Vigorous
objection was made at the time by some of the examiners but the loans
have since been paid. His bank's earnings are especially good, having
earned #51.00 per share net in 1957. He stated that earnings for the
first half of 1958 were extremely good. Membership as a State bank
was discussed at some length, but he stated that he is not ready for
it at this time.
Minneapolis
Northern Michigan and Wisconsin
In the copper mining country conditions were not very bright, due
to the fact that the mines are only operating on a part time basis. It
is believed that the copper veins are diminishing and that in a short
time the mines will be closed entirely. However, the Calumet and Hecla
Mining Company is testing locations where there are copper mining possibilities, which provide a brighter outlook. Because of the prevailing low price on copper, it is difficult for the mining company to make
any profit. This situation is viewed with discouragement by the citizens of the mining community as their livelihood is almost entirely
dependent on this industry. The same condition prevails in the iron
mining territory and the outlook apparently is no brighter.
The lumbering business also is suffering. In fact, one hardwood
lumber mill, which nas been running at full capacity, has now shut down
entirely on account of labor conditions with no immediate prospects of
reopening; others have closed down or are merely operating on a three
day a week'basis.
Potato crops seem to constitute the major agricultural industry,
and t? ere is promise of a reasonable yield of hay. The dairying business
contributes to the farming activity in a small degree.
-14-
R-296-a
Minnesota Valley Clearing House Association Meeting
The bankers expressed strong disapproval of the Government's order
for restriction in the 1959 acreage of spring wheat. In this they
seemed to reflect the attitude of their farmer customers, but they appeared to have no basis of facts as to carry-over and possible sale
outlets for the wheat crop. Their attitude was merely that hard spring
wheat is a splendid crop and the spring wheat farmers should be allowed
to grow as much of it as they cared to plant.
Northeastern Minnesota and northwestern Wisconsin
In these sections of Minnesota and Wisconsin (excluding Duluth
and Superior) loans are made principally to dairymen, with chattel mortgages on their cows and sires, and to berry and fruitgrowers, and small
timber growers. Loans are generally small. Real estate loans on rural
property are small due to the fact that in this forested territory farmers are putting only small parcels of land under the plow. Loans on
urban dwellings are almost exclusively on an amortized basis and this
type of loan constitutes the great bulk of real estate paper held ty
the banks. Loans in Duluth and Superior are generally of the kind
made by large city banks. Chattel mortgages in all of the banks carry
a rate of seven to eight percent. The smaller institutions as well as
the larger are rapidly acquiring automobile and appliance contracts.
Their experience with installment financing has been excellent and interest rates are high. Few, if any, banks handle this paper exclusively on a recourse or nonrecourse basis; some of both kinds are
handled by nearly all of the banks. Very few of the banks are yet
interested in wholesaling or floor-plan loans. Most of them handle
used car contracts to a limited extent and only where the owner has
a large equity. The bankers said in substance, "We have been asleep
for all these years and the scarcity of other loans has opened our
eyes to a type of paper that is profitable and safe if closely watched."
Where bankers were willing to commit themselves on the condition
of their bond portfolios, about one-half reported some depreciation
and the other half an appreciation. Most of the depreciation appears
to be in rails and utilities. Two of the better managed banks sold
almost all of their governments this spring and do not intend to get
into the market again until fall.
Kansas City
The movement of wheat is influencing bank deposits and bank loans
much less than last year. The crop a year ago was generally of better
quality and almost equal in amount to the present one, and prices were
much higher. The result is the present crop is coming to market much
slower and the greatly lower prices are affecting bank deposits. It
-15-
R-296-a
appears that Government wheat loans will, for the time being, tend to
keep wheat off the market. But these loans are slow in getting under
way and whether the bulk of the wheat will be stored on the farm or
elsewhere and just how the "wheat money" resulting from these loans
will affsct local business is not yet clear.
Bankers report that many farmers bought too much machinery early
in the season when it appeared that there would be an unusually large
wheat crop. The crop has turned out to be much poorer than anticipated and the quality of much of it is such that the price is disastrous. It is reported that these conditions have created a serious
situation in financing this over-purchase of machinery.
City banks report there are a.goodly number of country banks
that are about to the place where they must borrow. It is said that
to a greater degree than usual these country banks want to negotiate
paper to their correspondents without recourse in order not to show
borrowing.
During July numerous visits were made to banks in Colorado. A
good many eligible state banks showed interest in membership. Almost
universally banks complained of the difficulty of securing satisfactory employment of funds and in nearly all cases outspoken criticism
was heard of the competition of the Production Credit Corporation.
There appears to be difficulty in securing cooperation in maintaining satisfactory service charges. A good many banks are paying
percent for time money.
Bankers are emphatic in their statement that recent action in
the direction of credit liberalization will have little effect. It
is their belief that worthy borrowers are now being taken care of.
It is said that every installment of publicity for loosening credit
that appears in the newspapers brings a new crop of impossible requests for loans. One banker cited the example of a tenant farmer
who has been on relief and now has a Government loan of $1,800 on
property worth #400 or ^500. This man recently called at hia bank
and asked for a loan.
Loans of reserve city banks are appreciably lower than in March
and much below a year ago. These banks have also reduced rather
sharply their holdings of Government securities, the greatest reductions having taken place in Treasury notes. Quite a different situation is found in the case of country banks in this District. These
bunks have increased their loans appreciably—especially their real
estate loans. The country banks have also reduced their holdings of
Government securities, but to a much less extent than in the case of
reserve city banks.
-16-
R-296-a
Dallas
Owing to the interruptions incident to the vacation season, our
officers visited only sixteen banks during the month. These visits
were of a routine nature and developed no information of general interest to the System.
San Francisco
Northern Utah
General business conditions in the area visited, while less
satisfactory than they were one year ago, due to lower prices prevailing for agricultural crops in general, show some recent improvement due to strengthening in prices. Metal mining shows prospects
for some renewed activity, one important producer reopening operations on August 1st.
borne stimulation is felt because of prospective development of
irrigation project involving large cash expenditures. Agricultural
production outlook continues favorable with maximum yields quite generally expected.
Washington. Bremerton District
On account of the fact that considerable governmental work has
been in progress at the Navy Yard for some time, conditions in
Bremerton and the surrounding country are very satisfactory. A new
logging development has occurred in the vicinity of Poulsbo, which
has contributed additional funds to that community on account of a
new payroll.
Seattle Valley
The valley immediately south of Seattle is largely agricultural
and dairying. The growing of peas in the valley has replaced lettuce
growing to a great extent and has resulted in the development of additional industries for the freezing of fresh fruits and vegetables.
Agricultural conditions appear to be satisfactory and new herds of
dairy cattle have been introduced.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
JULY. 1958
Federal
Reserve
Bank
Visits to banrCS
NonTotal
Member
member
Meeting s attended
Number
46
62
81
None
9
40
28
None
55
102
109
Richmond
Atlanta
Chicago
St. Louis
48
50
87
80
25
15
106
117
71
45
195
197
5
None
None
4
500
Minneapolis
Kansas CityDallas
San Francisco
54
26
10
18
50
16
6
9
104
42
16
27
5
1
None
5
912
75
Boston
New York
Philadelphia
Cleveland
None
None
None
5
Attendance
— —
—
549
—
— —
540
— —
1,259
Addresses made
Number
None
1
None
None
Attendance
— -
40
— —
1
None
None
None
150
2
None
None
None
102
— —
— ~
— —
R-297
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Thursday, August 25, 1938.
The following summary of general
business and financial conditions
in the United States, based upon
statistics for July and the first
three weeks of August, will appear
in the September issue of the Federal Reserve Bulletin and in the
monthly reviews of the Federal
Reserve banks.
Industrial activity increased in July, when there is usually a
considerable decline, and rose somewhat further in the first three weeks
of August.
Production
Volume of industrial production increased from 77 percent of the
1925-1925 average in June to 85 percent in July, according to the Board's
index which is adjusted for changes in the number of working days and for
usual seasonal variations.
Steel output rose sharply, lumber production
also increased, and output of cement and glass was maintained.
bile production declined somewhat further.
Automo-
In the first three weeits of
August activity at steel mills was at a rate of around 40 percent of
capacity as compared with an average of 55 percent in July, while in the
automobile industry there was more than the usual seasonal reduction in
output as producers closed plants somewhat earlier than in other recent
years to prepare for the shift to new model production.
At textile mills activity in July showed -a further rise, marked
increases being reported in mill consumption of cotton and wool and in
-2shipments of rayon yarn.
R-297
Shoe production also increased substantially,
following a decline in June.
Bituminous coal production advanced somewhat in July, and output of crude petroleum was at a much higher rate, reflecting chiefly a
return to production on a six-day week basis in Texas.
Anthracite pro-
duction decreased sharply following a considerable volume of output
during May and June.
Value of construction contracts awarded in 37 eastern States
showed little change from June to July, according to figures of the
E. W. Dodge Corporation.
Contracts for residential building continued
to increase, and there was an increase also in commercial building, reflecting the award of a contract for a large office building.
Factory
construction remained at a low level and declines were reported in most
other types of construction.
Employment
Factory employment and payrolls, which usually decline at this
season, increased somewhat from the middle of June to the middle of
July.
There were substantial increases in the number employed at tex-
tile mills, clothing establishments, and shoe factories, and at railroad repair shops there was a slight increase.
In the machinery and
automobile industries employment declined somewhat further.
In non-
manufacturing industries the principal changes in employment were a
decrease at mines and an increase on the railroads.
Agriculture
A domestic cotton crop of 12,000,000 bales was indicated on
August 1, according to the Department of Agriculture.
Last season the
R-297
-3-
crop was 19,000,000 bales and, with world consumption of American cotton
about 11,000,000 bales, the carryover increased sharply to 13,500,000
bales.
The wheat crop was forecast at 956,000*000 bushels, as compared
with 874,000,000 bushels harvested last year and usual domestic consumption of about 670,000,000 bushels.
Production estimates for most other
major crops were slightly under the large harvests of a year ago.
Pre-
liminary estimates ty the Department of Agriculture indicate that cash
farm income, including Government payments, will total $7,500,000,000
for the calendar year 1958, a decline of 12 percent from last year,
which was the highest since 1929.
Distribution
In July department store sales declined by less than the usual
seasonal amount, while sales at variety stores and mail-order houses
decreased seasonally.
Retail sales of automobiles increased somewhat,
although there is ordinarily a decline in July.
In the first half of
August sales at department stores showed less than the usual seasonal
rise.
•Freight-car loadings increased from June to July, reflecting
chiefly larger shipments of grain, coal, and miscellaneous freight.
Commodity prices
Prices of grains, cotton, livestock, and meats were lower in
the third week of August than in the middle of July, while prices of
most industrial commodities were unchanged.
Steel scrap advanced fur-
ther in July, then declined somewhat in the first half of August.
Cotton grey goods also declined in the early part of August, while
-4-
R-297
prices of copper and rubber were maintained, following increases in
the latter part of July.
Bank credit
Excess reserves of member banks declined by about $230,000,000
in the five weeks ending August 17 to a total of $2,950,000,000, following a steady growth from the middle of April to a peak on July 15.
The
decline in reserves was largely the result of an increase in Treasury
deposits with the Reserve banks, reflecting receipts from weekly Treasuiy bill offerings in excess of maturities and a sale of Reconstruction
Finance Corporation notes.
Most of the decrease in excess reserves was
at city banks.
Following substantial declines since the autumn of last year,
commercial loans and brokers' loans at reporting member banks in 101
leading cities increased somewhat during the first half of August.
Member banks in leading cities added about $170,000,000 to their holdings of investments in the middle of July, mainly United States Government guaranteed obligations, but thereafter their holdings showed little
change.
R-298
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning newspapers
of Thursday, August 25, 1938.
August 24, 1938
The Board of Governors of the Federal Reserve System
today announced the appointment of Mr. R. B. Caldwell, member of the law firm of McCune, Caldwell & Downing, Kansas
City, Missouri, as deputy chairman of the Federal Reserve
Bank of Kansas City for the remainder of the current year.
BOARD OF GOVERNORS
87
OF THE
FEDERAL RESERVE SYSTEM
R-299
WASHINGTON
ADDRESS
August 27, 1958.
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:
NOZVEL - Treasury Bills to be
dated August 51, 1958, and to
mature November 50, .1958.
ery truly yours
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
R-300
BOARD OF GOVERNORS
OF THE
88
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
September 1, 1958.
Dear Sirs
The Board of Governors has carefully considered the
replies received from the Federal Reserve banks to its letter (R-125) regarding the question whether the words "Morris
Plan bank" should be eliminated from section 3(a) of Regulation L, dealing with interlocking bank directorates under
the Clayton Act. After a review of the question and of the
information submitted by the Federal Reserve banks the Board
concurs in the opinion expressed by a majority of the Reserve
banks that these words should be eliminated and has decided
that Regulation L should be amended accordingly.
Therefore, you are advised that section 3(a) of
Regulation L is amended, effective February 1, 1939, to read
as follows:
"(a) Any private banker or any director, officer, or employee of a member bank of the Federal
Reserve System may be at the same time a director,
officer, or employee of not more than one cooperative bank, credit union or other similar institution; "
Advice of the Board's action should be mailed to all
member banks in your district as promptly as possible.
Veiy truly yours,
hT)<ruiJL(?
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-301
89
WASHINGTON
ADDRESS
September 2, 1938.
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:
NOZVIM - Treasury Bills to be
dated September 7, 1938, and
to mature December 7, 1938.
Very truly yours,
J. 0. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-302
Q n
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
September 2, 1938
SUBJECTt
Functional Expense Exhibit
First Half 1938
Dear Sir:
There is inclosed a copy of the Board1 s Functional Expense Exhibit for the first half of 193S, which has been compiled
from the semi—annual functional expense reports (Form E) received
from the Federal Reserve banks and branches. Additional copies of
the exhibit are being forwarded under separate cover#
The form of the exhibit has been revised so as to show
approximately the same detail for each function and expense unit as
is contained in the functional expense reports themselves* This
change conforms to a recommendation made by the Presidents* Conference Committee, which recently reviewed proposed changes in the
functional expense report and in the manual of instructions governing
its preparation# It is hoped that the exhibit in revised form will
prove much more valuable to the banks than have previous exhibits.
We shall appreciate receiving any comments and suggestions
you may have with respect to the revised form of exhibit. In future
exhibits it is contemplated that unit totals only will be shown in the
branch section where the amounts reported are negligible* This will
result in some reduction in the number of pages in the exhibit.
Very truly yours,
E, L. Smead, Chief,
Division of Bank Operations,
Inclosure.
TO THE PRESIDENTS
OF ALL FEDERAL RESERVE BANKS
91
BOARD OF GOVERNORS
OF THE
R-503
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
*******
September 5, 1938.
Dear Sir;
From time to time since the adoption of Regulation 0, Loans
to Executive Officers of Member Banks, the Board of Governors has
been asked to modify the regulation in so far as it applies to officers of member banks who do not participate in the executive management or lending activities of the banks except in their capacity
as directors. Usually the situation presented has been that of a
prominent individual in the community who holds an office such as
that of president or vice president of the bank but who is entirely
inactive in the management of the institution. The Board has uniformly taken the position, for reasons with which you are familiar,
that the definition of executive officer as contained in Regulation
0 applies to inactive as well as active officers of the banks.
The Board is considering suggestions as to solutions of the
problem which would, on the one hand, meet as far as practicable
the criticisms that have been made of the Regulation and, on the
other hand, not contravene the general purpose of the provisions of
the law relating to loans to executive officers. Therefore, the
Board would like to be informed as to the extent or importance of
the problem in your Federal reserve district, whether in your judgment it would be desirable to modify the Regulation, and if in your
opinion the problem is one of a character which makes it desirable
to amend the Regulation, your suggestions as to the change that
should be made.
In tiiis connection, the Board has before it suggestions
that there be exempted from the definition of "executive officer"
as contained in subsection 1(b) of the Regulation (1) any person
who does not actually participate in the management of the bank
and who is denied authority to do so ty express provisions in the
bank's by-laws or by resolution of the board of directors or (2)
any person who does not actually participate in the management of
the bank and who is denied authority to do so by express provision
R-303
-2-
in the bank's by-laws or by resolution of the board of directors,
provided that the title by which his position is described includes
the word "honorary" or the word "inactive". Drafts of amendments
which would carry out these suggestions are attached.
There may be other suggestions which in your opinion would
be preferable. It will be appreciated if you will advise the Board
as to your views on this subject before the end of September.
Very truly yours,
Chester Morrill
Secretary.
Inclosures
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-503-a
POSSIBLE AMENDMENT TO SECTION 1 OF REGULATION 0
(Alternate 1)
Resolved, that effective
, sub-
section (b) of section 1 of Regulation 0 is amended ty changing the part of the subsection which follows the semicolon
therein to read as follows:
"but such term does not include (1) a director or
member of a committee who is not also an executive
officer within the foregoing definition, or (2) any
person who does not actually participate in the management of the bamc and who is denied authority to
do so by express provisions in the bank's by-laws
or by a resolution of the board of directors."
R-305-b
POSSIBLE AMENDMENT TO SECTION 1 OF REGULATION 0
(Alternate 2)
Resolved, that effective
subsection (b) of section 1 of Regulation 0 is amended by
changing the part of the subsection which follows the semicolon therein to read as follows:
"but such term does not include (l) a director or
member of a committee who is not also an executive
officer within the foregoing definition, or (2)
any person who does not actually participate in
the management of the bank and who is denied authority to do so by express provisions in the
bank's by-laws or by a resolution of the board of
directors, provided that the title by which his
position is described includec the word
or the word 'inactive'."
1
honorary1
BOARD OF GOVERNORS
R-304
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
15
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
September 8, 1938.
Dear Sir:
Reference is made to the Board's letter of August 20,
1958 (R-295), calling a conference in Washington this fall, on
a date to be subsequently announced, of the heads of the bank
examination departments of the Federal reserve banks.
You are accordingly notified that the conference will be
held beginning Monday, October 17, 1958, at 10:00 a.m., in the
Conference Room of the Board's Division of Examinations.
A tentative draft of the program for the conference
will be formulated as soon as the suggestions of the various
Federal reserve banks have been received.
You will recall that
our letter of August 20 indicated the major questions to be
discussed and requested that specific questions relating thereto
and any other suggested topics for consideration at the conference be forwarded to Mr. Paulger by September 17.
L. P. Bethea,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
95
R-305
BOARD OF GOVERNORS
96
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
September 9, 1958
¥
Dear Sir:
There are inclosed herewith
copies of statement rendered by the Bureau
of Engraving and Printing, covering the
cost of preparing Federal reserve notes
from August 1 to August 30, 1938.
Very truly yours,
0. E. Foulk,
Fiscal Agent»
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
97
R-305-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
August 1 to 30, 1938.
Federal Reserve Notes, Series 1954.
$10
Boston
$20
Total Sheets
Amount
72,000
14,000
86,000
190,000
25,000
215,000
19,730.00
Philadelphia
81,000
25,000
104,000
9,568.00
Cleveland
59,000
27,000
86,000
7,912.00
Richmond
45,000
26,000
71,000
6,532.00
Atlanta
50,000
14,000
44,000
4,048.00
Chicago
127,000
55,000
162,000
14,904.00
St. Louis
55,000
10,000
45,000
4,140.00
Minneapolis
24,000
9,000
55,000
5,056.00
Kansas City
51,000
18,000
49,000
4,508.00
Dallas
50,000
8,000
58,000
5,496.00
San Francisco
52,000
25,000
77,000
7,084.00
776,000
254,000
1,010,000
$92,920.00
New York
#
7,912.00
1,010,000 sheets @ $92.00 per M . . . $92,920.00
98
BOARD OF GOVERNORS
R-5 6
FEDERAL RESERVE SYSTEM
°
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E
September 9, 1938
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 Bonds:
NOWELF - 2 1/2% Treasury Bonds of 1950-52
to be dated September 15, 1938, and to
mature on September 15, 1952.
Very truly yours
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD
99
BOARD OF GOVERNORS
• F the
R-307
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
September 10, 1938.
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:
NQZYOT - Treasury Bills to be
dated September 14, 1938, and
mature December 14, 1938.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO PHESir-ENTP °F ALL FEDERAL RFSEHVE BANKS
BOARD OF GOVERNORS
OF THE
%
is
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
September 16, 1938
SUBJECTi
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 seven 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 FR 105, Report of condition of State bank member;
Form FR 105b (Schedule "0"), Loans and advances to
affiliates and investments in and loans secured
by obligations of affiliates.
Form FR 10 5e, Publisher's copy of report of condition
of State bank member.
Form FR 105g, Alternate Schedule E, Loans and Discounts.
Form FR 220, Report of affiliate or holding company
affiliate.
Form FR 220a, Publisher's copy of report of affiliate
or holding company affiliate.
Form FR 220b, Instructions for preparation of reports
of affiliates and holding company affiliates.
No change has been made in any of the forms since the last
call for reports^ except for the omission of the two memorandum
items on agricultural loans and farm real estate owned at the
bottom of page A of Form FR 105, which are called for only twice
a year.
101
-
2 -
R--308
The sane procedure should be followed as on the last call for
condition reports in mailing blank forms to State bank members, examining
the reports, and forwarding copies thereof to the Board* The usual
summary statement should be mailed to the Board showing the classifications of loans and investments, by classes of banks, in time to reach
the Board within three weeks after the date on which the call is made,
if practicable*
Very truly yours,
L, P. Bethea,
Assistant Secretary.
Inclosures.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-309
BOARD OF GOVERNORS
102
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
September 16, 1938
Dear Sir:
On Wednesday, October 12, there will be
neither transit nor Federal Reserve note clearing
and the books of the Board's Interdistrict 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:
Nashville
St. Louis
Little Rock
Memphis
Detroit
Minneapolis
Charlotte
Kansas CityOklahoma City
Please notify branches
I Very truly yours,
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
R-310
OF THE
FEDERAL RESERVE SYSTEM
103
WASHINGTON
ADDRESS
September 16, 1938.
Dear Sir:
There is attached a copy of the
report of expenses of the main lines of
the Federal Reserve Leased Wire System
for the month of August, 1938.
Please credit the amount payable
by your bank to the Board, as shown in
the last column of the statement, to the
Federal Reserve Bank of Richmond in your
daily statement of credits through the
Inter-district 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.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
104
R-310-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST. 1958.
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Payable
to
Board
of Governors
Expenses
Paid
by Banks
and
Board(2)
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
20,659
65,571
19,534
28,583
615
615
21,269 51 512.63
1,552.20
65,571
19,947
480.77
29,196
705.69
Richmond
Atlanta
Chicago
St. Louis
24,502
41,049
54,668
57,190
610
610
862
611
25,112
41,659
55,550
57,801
605.25
1,004.07
1,358.39
911.09
223.59
500.08
1,218.40
254.74
381.66
705.99
119.99
676.35
Minneapolis
Kansas City
Dallas
San Francisco
16,504
58,556
52,608
46,685
611
611
611
611
17,115
58,967
55,219
47,196
412.51
959.19
800.65
1,157.55
206.47
264.56
267.85
385.45
206.04
674.83
532.80
752.10
242,498
5,844.73
11,141.47
673,080 $16,222.70
$16,222.70
Board of
Governors
242,498
Total
666,107
610
-
—
6,975
Total
Words
Chargeable
Pro Rata
Share of
Total Expenses (l)
$
553.29
1,028.54
288.24
310.44
$
159.54
505.86
192.55
595.25
—
$ 5,296.74
(l) Based on cost per word ($.024102187) for business handled during the month.
*
(2) Payments by banks are for personal services and supplies and payments by Board
are for personal services and supplies ($1,587.11) and wire rental ($9,554.36).
Personal services include salaries of main line operators and of clerical help
engaged in work on main line business, such as counting the number of words in
messages; also overtime and supper money and Retirement System contributions at
the current service rate.
BOARD OF GOVERNORS
R-311
OF THE
- 105
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
September 17, 1938.
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:
NUBACS - Treasury Bills to be
dated September 21, 1938, and
to mature December 21, 1938.
Very truly yours
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
BOARD OF GOVERNORS
R-312
OF THE
FEDERAL RESERVE SYSTEM
106
WASHINGTON
ADDRESS
September 20, 1938
Dear Sir:
There is inclosed for your information
a summary of the bank relations reports submitted by the Federal Reserve banks for the
month of August in response to the Board*s
letter of August 25, 1936 (X-9680).
Very truly yours,
L. P. Bethea,
Assistant Secretary
Inclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
R-312-a
September 17, 1938.
The Board
From:
Subject:
107
Summary of Bank
Relations Reports.
Mr. Hammond, Division of Bank
Operations.
Reports of bank relations as requested in the Board's letter of August
25, 1936 (X-9680) have been received for the month of August and excerpts
therefrom will be found on the following pages. A table showing for all
twelve banks the number of visits made, meetings attended, and addresses delivered has also been prepared and follows the quotations.
Several of the Reserve banks mention again the comment which bankers
make upon the Reconstruction Finance Corporation's recent suggestion that
lending policy be made more liberal. The reports reflect considerable resentment at the suggestion. Bankers also complain that loans which they
have already made and which they feel are sound are subject to unreasonable
criticism by examiners.
There is frequent mention of the slack demand for loans and the difficulty of determining upon a proper investment policy. The question of membership seems to have received more attention recently than heretofore and
a number of nonmember banks appear to be giving more thought to the choice
that will have to be made by them in 1948 of becoming members of the Federal
Reserve System or discontinuing their deposit insurance.
The reports indicate considerable disappointment in agricultural regions
over low prices, as in the case of wheat, or reduced yields, as in the case
of cotton, especially in view of the optimistic expectations of last spring.
In general, however, they appear to reflect a real improvement over conditions a year ago, taking the country as a whole.
Excerpts from the reports follow:
to the original hereof),
(The reports themselves are attached
Boston
Forty member banks and branches and nine nonmember banks, all located in
Maine, were visited during August.
In those communities where the textile, shoe and paper industries are
represented by one or more mills, employment, payrolls and general retail
trade were reported to have shown improvement within the past sixty days. In
those communities catering largely to the summer vacationist, the season
business was estimated to be running between sixty and seventy percent of last
year's volume. In Aroostook County, where the growing of potatoes is the principal industry, there had been a slight cut in acreage (169,009 to 164,000)
and a production of 47,560,000 bushels was estimated. No advances over last
108
-2-
R-312-a
year's prices were looked for and in some quarters the view was expressed
that the average price over the marketing season might fall somewhat below
that obtained for the 1937 crop. Weather conditions over a part of the growing season increased the cost of cultivation somewhat and the growers in
some sections have borrowed more to make their crops than was the case last
year.
,
*
The banks visited were loaned up to from thirty to fifty percent of
their available funds,including purchased paper, and the total loans of individual banks showed little or no increase over the totals of a year ago.
The complaint that good loans were in insufficient volume was heard at a
number of banks. Bond portfolios at most of the banks shewed some appreciation. Lending rates in the rural districts are from 5% to 6$ and from 2y0o
to 6% in the cities. Loans to towns carry rates of from 2% to 5%.
No complaints were directed against the Federal Reserve System or this
bank. A few bankers complained of conflicting rulings of various governmental
agencies, and of the burden placed upon them by the requirements for numerous
reports to these agencies. Expressions of doubt as to the advisability of
banks liberalizing their lending policies as urged in letters from the Reconstruction Finance Corporation were heard frequently. One or two bankers inquired as to the possibility of the so-called "Pntman Bill" being enacted
into law in its present form, and also inquiry was made at several banks as
to the possibility of the Federal Reserve Banks discontinuing certain of their
free services to member banks.
New York
Bronx, Kings. Queens, and Richmond Counties, New York
Bankers for the most part report a light demand for credit, some commenting that no more than 10 to 20 percent of their total loans represents strictly
business accommodation. Commercial banks generally in the metropolitan area
have made few direct mortgage loans insured under Title II of the National
Housing Act. Many of the banks have installed personal loan departments and
report satisfactory experience in this comparatively new field. One bank
located in the thickly populated section of Flatbush, Brooklyn, is now making
a drive for loans secured up to 90 percent of the cash surrender value of life
insurance, and expects by mid-September to have on its books at least $100,000
of this class of business. Rates charged will vary according to the amount of
the loan - 5 percent on loans up to $500, 4^ percent on loans from $500 to
$5,000, and 4 percent or even less on amounts in excess of $5,000. Officers
interviewed at a large bank in Brooklyn say there has been quite a shrinkage
in demand for credit, mentioning that the large nationally known finance companies have been reducing their lines within the last few months, which accounts for a substantial reduction in the loan portfolio now as compared with
last October.
The savings banks in the four counties were also visited. Most of these
institutions now charge 5j=r percent on old mortgages, and 5 percent or even
4
109
-3-
R-312-a
lower rates in cases where regular amortization payments are being made and
the principal amount of the mortgage is not too high. Although, under the
State moratorium law, no pressure can be brought to bear against mortgagors
to make amortization payments if taxes and interest are up to date, several
bankers say that they have interviewed many of the mortgagors explaining to
them that their mortgages are past due and are being carried along as open
obligations but that if they will agree to make stipulated payments on the
principal an extension of maturity will be given, usually for a period of
twenty years, and in this way these particular mortgages are taken out of
the moratorium class. Practically all banks charge a rate of 5 percent on
the new mortgages granted in recent years but require regular stipulated payments on principal, which payments, together with the interest, are usually
made either on a monthly or quarterly basis.
Greene. Orange, and Ulster Counties, New York
Demand for accommodation generally continues light and loan and discount
totals of $26,232,000 are only slightly higher than they were approximately a
year ago. Quite a number of bank officers introduced the subject of the recent letter written by Chairman Jesse Jones of the R. F. C. urging banks to
be more liberal in their lending policy, but all of these maintained that
they are only too anxious to increase loan lists and are refusing no application which presents a reasonable prospect of repayment. Opinion, however,
seems to be uniformly opposed to the idea of taking undue risks with depositors' money even though a few borrowers might be benefited thereby.
Reports received upon business conditions were, as a rule, not very favorable. Muck land farmers in Orange County have so far had a very disastrous
year dur to the heavy rains and high water during July, causing damage which
it is thought will result in a loss of 50 to 60 percent of their crops. Fruit
growers in the Hudson River Valley have so far had little to compensate them
for the poor season of 1937. Some of the early fruits and berries were also
hurt by wet weather, and the prices received have been considered generally
unsatisfactory. It is hoped, however, that apples will bring a better price
this fall in view of the shorter crop throughout the country as a whole. Industrial establishments in this territory are for the most part small, and
little or no improvement in activity has been shown during recent months,
working forces and hours of employment generally being considerably less than
a year ago. Summer vacation trade in the Catskill Mountain area has been substantially less than last season, the reasons advanced for this bei% the
rainy weather and poor business conditions in the garment and needlework trades
whose employees usually patronize the boarding-houses and small hotels located
here.
Hudson County. New Jersey
The North Bergen Trust Company whose deposit insurance status was terminated by the Federal Deposit Insurance Corporation effective May 1, 1937,
has continued to operate without insurance of any of the funds which have been
deposited subsequent to that date.
110
-4-
R-312-a
One banker remarked that a number of institutions are abandoning manyproperties located in the poorer sections of Jersey City and allowing the
city to acquire them through nonpayment of taxes. Officers of savings banks
indicated strong opposition to making any mortgage loans on properties in
Jersey City or elsewhere in Hudson County and stated that new mortgages
granted have been mostly on properties located in Essex, Union, and Bergen
counties.
In the fourteen counties visited there are 227 incorporated commercial
banks of which 141 issued preferred stock, capital notes or debentures aggregating $45,903,894 par value. Up to the present time only 20 institutions
have paid off their entire issues amounting to $2,395,000, 82 have made partial redemptions aggregating $8,319,974 and 39 have not retired any - leaving
121 banks with a total of $35,188,920 par value still outstanding.
Philadelphia
During August representatives of this bank made 126 regular visits, 119
of which were to institutions located in the east central part of that portion
of Pennsylvania assigned to the Third District and seven to banks located in
southern New Jersey, along the Atlantic seaboard. In addition, 14 special
visits were made regarding currency services.
In all but a few communities conditions in the areas covered by this report are worse than those which existed a year ago. In several of the industrial towns business receded to a very low level but is increasing. The iron
and steel industry appears to have suffered most as the only plants of this
kind operating with any degree of regularity and with sufficient business to
keep them busy for several months are those engaged in the manufacture of
products for the Russian Government. Textile plants in several towns are
working steadily and operating extra shifts, while in other towns they have
been closed or are on greatly reduced schedules.
The anthracite industry experienced poor business last winter on account
of mild weather, and is being hampered in several sections at present because
of strikes. Production at the mines is expected to be increased shortly, but
many companies have large quantities of coal already above the ground on sidings ready for immediate delivery. Upon the insistence of the unions, the
collieries of the large companies are operated on an equalization plan designed
to benefit the majority. This places the companies at a distinct disadvantage,
as the production of coal at some collieries is more costly than at others.
In an effort to regain lost markets, coal companies are advertising the use
of stokers. The bootlegging of coal is greater in these, the southern anthracite fields, than anywhere else in the coal regions.
Conditions in the agricultural sections were promising earlier this year,
as good crops were in the offing. However, the heavy rains during July affected the quality of the wheat which had been cut and not threshed, and
caused the late potato crop to become blighted. Other crops harvested were
-5good and ^he corn crop is expected to be the best in a long time.
pears to be abundant.
R-312-a
Ill
Fruit ap-
Much of the wheat which ordinarily would have been sold will now be fed
to cattle. In the final analysis, farmers figure that more profit can be obtained in this manner than by selling wheat at 45 to 60 cents a bushel.
Potato growers will sustain losses on the late crop because of the blight.
Some growers are dumping these potatoes on the markets at any price they will
bring, which is having a depressing effect on the price of good potatoes
grown elsewhere.
Dairying and cattle feeding continue to be successful farm activities.
Milk prices are considered fair and small profits were realized last spring
from the sale of beef cattle fattened during the winter.
Comments are still being heard regarding recent utterances of the
Honorable Jesse Jones, Chairman of the R. F. C., most of which are to the effect that his criticisms were unjust.
An executive whose bank was requested to participate in an advance being
considered by the R. F. C. said that his bank agreed to assist only because
the management did not wish to have it said that their institution was not
aiding industry. This executive remarked that the present administration's
attitude toward banks which, it is claimed, are restricting credit, had much
to do with the approval of the participation and that it is cited in the
minutes of his bank that the participation was approved only because the
Federal Government advocates liberal lending policies. If the loan is eventually placed on the books, chargeoffs on account of it will begin immediately,
as the officers and directors question whether it will ever be repaid. Because of this the amount advanced is being treated more or less as a gift, it
being the hope that some new employment may be created.
Several bankers criticized the office of the Comptroller of the Currency
for requesting better loan liquidation in lines which the officers and directors consider good and contend that, should these lines be repaid, the funds
could not be re-invested to the same advantage.
Cleveland
Bank visitation work has been limited almost entirely to calls upon banks
presumed to be eligible for membership in the Federal Reserve System, and having deposits in excess of one million dollars. This is part of a fairly wolldefined program looking to interesting such banks in membership, which
contemplates that every bank in this classification within the district will
be visited by members of the bank examination staff, or by officers, as the
developments seem to warrant.
In conversation with active officers of the institutions visited, while
the attitude in practically every instance was apparently distinctly friendly,
there was in the majority of cases a decided lack of interest evidenced in the
-6-
R-312-a <|>|g
Regerve System membership at the present time. The view frequently was expressed that correspondent banks could do and were doing substantially everything for a nonmember that a Reserve bank could do for a member bank; that
under present conditions the Federal Reserve System has nothing to sell, and
that, therefore, they could see no substantial reason for considering membership at this time.
In a number of instances membership under present conditions would be
impossible because of inadequacy of capital - in some cases because the
capital structure is below the statutory minimum, and In others because of
potential impairment of capital by reason of depreciation in loan or investment accounts. In other instances membership cannot be considered at this
time because of insufficient capital based upon the fact that branches are
operated in other cities.
In recent years Ohio banking laws have been amended to conform closely
to national banking laws, and in scattered instances conversion from State
to National banks and automatic membership in the System has been discussed.
There is also evidenced a desire to escape dual examination; that is, by
both State and F. D. I. 0. authorities.
Other objections voiced were based upon antagonisms due to various misconceptions of the reserve banking system, sometimes dating back to the period
immediately preceding and immediately following the banking holiday.
Although high pressure tactics have not been employed, the effort to date
has netted one application for membership, and six or eight prospects which
are considered "live".
Richmond
North Central North Carolina
Most banks show a slight decline in deposits as compared with June, 1937,
while in most instances loans and discounts are higher and investments somewhat lower. The rate on loans varies from 3% to 6%, with a tendency to
adhere to a 6% rate, and the present demand is somewhat stronger than during
the past several months. With few exceptions, banks are paying Z$> on savings deposits, and member banks are reluctant to impose a full schedule of
service charges when such charges are not made by competing non-par banks.
The general opinion among bankers with respect to Production Credit Corporation loans is not unfavorable. In some instances the latter have been the
means of assisting farmers to become bankable customers. Such loans are considered mostly of a non-bankable character. Practically all bankers maintain
their willingness to expand credit wherever it can safely be done. According
to present indications most banks in this region will be able to realize
satisfactory earnings.
Southwestern North Carolina
In this region live stock and dairying predominate.
Although most farms
113
-7-
R-312-a
devote a small acreage to fruit and vegetables, burley tobacco is the leading cash crop. Estimates indicate production about 13% below the average
for 1932-36. About 15,000 head of beef cattle are sold yearly, mostly to
finishing markets, and prices will range from 6 cents to 8 cents. The apple
crop is comparatively inferior and marketing facilities are inadequate.
Prices have ranged from 30 cents to 75 cents per bushel. Grain crops are
consumed almost wholly on the farms.
It is probable that tourist traffic provides more money income than all
the crops combined, and it will probably increase as the Great Smoky Mountain
Parkway is developed. Building construction, with the exception of public
structures, has been comparatively inactive. A new cigarette paper factory
under construction at Brevard (Transylvania County), involving an outlay of
about five million dollars, will probably encourage farmers to produce flax.
The rayon plant at Inka (Buncombe County) and the paper factory at Canton
(Buncombe County) have resumed full operations.
Bank deposits have remained fairly stable throughout the depression,
with interest at
on savings. Loans have shown a recent tendency to expand, with rates from 5% to 6fo. Investments are confined for the most part
to municipal, State, and Federal issues. There appears to be no well-defined
policy with respect to service charges, partly because exchange charges are
relied upon by non-par banks, and little interest in FHA loans.
Southeastern South Carolina
Bank deposits are in general lower than a year ago, with a tendency for
loans and investments to maintain their position or to increase somewhat.
Rates on time deposits are 2fo on the first $1,000.and 1% on the balance. Interest rates on loans vary from 3% to 7%, with 6% on the bulk. Some competition from Production Credit Associations is reported but appears not to be
resented, since their loans are mostly nonbankable. Investments consist
almost exclusively of municipal, State, and Federal issues. A few banks are
taking FHA Title II loans. With loans diminished by the decline in business
and relatively unfavorable farm crops and prices, banks in this region are
likely to experience only fair profits from operations in 1938.
Atlanta
Mobile, Alabama
The level of business activity in Mobile has been well sustained during
the current year. Local industries are operating on schedules which compare
favorably with those in effect in other cities of comparable size. The only
disturbing feature at this time is the weevil infestation in cotton in the
Mobile trade area. An officer of one of the Mobile banks who had recently
made a trip through south Alabama was of the opinion that the weevil had
damaged the crop in approximately one-third of the acreage estimated on July 8.
Crops other than cotton are good and it is believed that retail trade will be
-8*
114
R-312-a
active this fall, provided satisfactory prices for crops are obtained.
With non-recurring bond profits excluded, earnings of the Mobile banks
in the current year to date are better than in the corresponding period of
1937. The volume of loans and deposits compares favorably with that of last
year. An officer of one of the Mobile banks stated that there were in sight
new loans aggregating about $1,300,000 which would be made within the next
30 days.
South Georgia
Our representative visited 17 banks located in south Georgia in a territory in which cotton, corn, peanuts, and tobacco are the principal crops. It
is estimated that the cotton crop will be smaller than last year by from
thirty to forty percent on account of reduced acreage allotments and boll
weevil damage. It was feared that excessive rain fall would damage the peanut
crop considerably.
The tobacco markets were open during the period covered by these visits
and it was reported that the crop was of good quality and that the growers
were receiving satisfactory prices. Considerable dissatisfaction with acreage
and poundage allotments on the part of the growers was reported. However, in
spite of this dissatisfaction reports indicated that the section as a whole
would realize from the tobacco crop as much as was received last year, i.e.,
approximately $20,000,000, if not more.
Our representative reported that, in several of the towns visited, increasing interest was being shown in the raising of live stock, particularly
hogs. The location of a packing plant in Albany, which provides a year-round
market for cattle and hogs, has encouraged the development of the live stock
industry.
No complaints or criticisms regarding the Federal Reserve System or the
activities of Governmental loan agencies were encountered, except that some
resentment was shown at the statement of an official of the R. F. C. to the
effect that banks were not meeting satisfactorily the requirements of borrowers in their communities. Some of the smaller banks visited reported the
demand for loans as satisfactory. Banks in the larger centers expressed
disappointment in their current earnings.
Lower Mississippi Delta
Visits were made to 4 member banks and 1 nonmember bank located in the
lower Mississippi delta. This territory is very largely devoted to the growing
of cotton and corn. Corn prospects were reported to be better than for
several years past. Weevil infestation is a cause of concern to the cotton
planters and frequent rains have increased the possibility of damage from
this source. The acreage allotment of the large scale cotton planters of
this area was substantially reduced this year, and unless satisfactory prices
prevail this fall it is believed that the planters will not look with favor
upon entering into acreage allotment agreements next year.
-9-
R-312-a 1
±
Zone meeting
The Federal Reserve Bank was represented at a meeting of members of the
Georgia Bankers Association, Zone M, held on August 10. The principal topics
under discussion at this meeting were service and exchange charges.
Several of the larger nonmember banks represented at the meeting were
concerned over the possibility of their being forced into membership in the
Federal Reserve System in .1948, and the suggestion was made that committees
be appointed to begin a campaign for the repeal of the law which at present
requires certain nonmember banks to become members of the System.
Chicago
In August 171 calls were made on member and nonmember banks, the majority
being in the northern part of Iowa and southern Michigan with a few in Illinois
and Wisconsin.
Those interviewed generally were optimistic as to the outlook for future
business. Small grain crops have been good with the exception of oats, which
in some localities have been of an inferior quality and light in weight.
Barring,an early frost, the prospect for the corn crop is excellent. In
southern Michigan as the result of a freeze late in May it is estimated that
the peach crop will be 60 to 70 percent of normal, apples 60 percent, and the
grape crop almost a total failure. The celery crop is the largest in history.
In one town it was stated that the U. S. Surplus Commodity Corporation had
contracted for twelve carloads of celery in order to take care of the surplus
and to stimulate prices. The celery will be given to those on relief.
Very little change was reported in the employment situation. A number
of small factories are running full time, but the majority of the reports indicate operations of from 33-1/3 to 75 percent of normal.
There has been no substantial change in the aggregate of loans. However,
several of the smaller nonmember banks located in live stock feeding sections
have increased their loans materially and are being forced to borrow from
their correspondents. Automobile loans have been reduced appreciably since
January 1. There has been a tendency on the part of large institutions with
large cash reserves and good earning power to make so-called "intermediate
loans" having maturities from 18 months to three years. These loans range
in amounts from $100,000 to $3,000,000. Banks seem to be displaying more interest in F.H.A. mortgage loans. In some instances the demand for these exceeds the supply. In addition to making such loans, some of the banks are
buying them from other banks or from qualified mortgage companies.
The policy to be pursued in their investment program continues to be a
question of importance with the banks. Representatives of two large institutions state that their boards are giving consideration to the following propositions;
Continue in the general bond market, which would necessitate
the employment of high-priced investment counsel.
5
-10-
R-312-a
1 1 6
Confine their investments to U. S. Government obligations
and short term high-grade municipals.
Purchase investment services, such as Moodys or Standard
Statistics, and have periodic checks of their bonds by
Chicago correspondents.
Many of the banks appear to be in favor of confining their activities for
the next six months solely to U. S. Governments.
Comment indicates approval of the agreement entered into by the Board
of Governors, Comptroller of the Currency, and the Federal Deposit Insurance Corporation - especially is this true in regard to the classification
of loans and the prohibition against using bond profits for any purpose
other than to cover losses until such time as adequate reserves have been
established.
Vigorous criticism of the Federal Savings and Loan Associations continues to be expressed by the banks: also criticism regarding currency exchanges. We have reported possible violations of the provisions of Section 21
of the Banking Act of 1955 on the part of various currency exchanges operating throughout the State of Illinois.
We called upon 75 nonmember banks. Of these, 18 are operating branches.
A number of the others, however, are good prospects for membership. One bank
ineligible for membership because of its branch agreed to have its name
added to the par list. Three State banks were admitted to membership during
the month.
St. Louis
Mercantile business in sections of the States visited has been affected
by unemployment in the industrial centers a%d curtailed income from sale of
various farm commodities raised this year. However, there has been some disposition on the part of retailers to replenish depleted inventories, and
there is a noticeable improvement in sentiment.
Keen disappointment resulted from disposal of the 1958 wheat crop, as
prices were about one-half those which prevailed for the 1957 harvest, total
yield being approximately the same. In the event present forecasts are borne
out, the price of corn will inevitably decline, as indications point to a
yield in excess of last season.
Only a comparatively small percentage of the banks visited recently report any considerable increase in demand for local loans. The exceptions
were in those localities where livestock feeding for market has necessitated
the financing of purchases of feeder stock to replace both cattle and hogs
that have been finished for market or where farmers have surpluses of feed
which they wish to dispose of by feeding stock in order that storage room
117
—11—
R — 6112—a
for the new corn may be available when needed. Because of the low price
received for wheat, the efforts of some banks to effect liquidation of old
loans have not been as successful as last year.
Interest rates on time deposits are being quite generally lowered
throughout Illinois and Missouri and it is now the exception to find any
bank paying in excess of 2% on time money. Many institutions now allow
only 1% on such deposits. An increasing number pay no interest whatever,
this course having been found advisable because of the lack of earnings
from loans and lessened yield from high grade investment securities.
The.banks are keenly anxious to place their idle funds profitably,
advances in many instances being made to customers at lower rates of interest, rather than suffer the loss of this business to the larger centers.
Officers of several member banks, visited since the receipt of our
circular of August 19, 1938, regarding additional safekeeping facilities,
spoke very highly of the additional service and of the advantages which
will accrue to their banks.
Illinois banks under State supervision are keenly interested in the
fate of the constitutional amendment abolishing double liability to bank
stockholders, which is to be voted on this fall. Officers of a number of
nonmembers have stated that should the amendment fail to pass, thus making
membership as State banks unattrative, their banks will nationalize.
Minneapolis
Northwestern Minnesota
None of the mines on the Vermilion, Mesabi or Cayuna iron ranges were
producing ore in important volumes, but, nevertheless, mining company payrolls were playing an important part in the economy of most of the towns
on the ranges.
While agriculture is only of minor economic importance in this section
of the state, the agricultural population of these counties is steadily increasing. The territory north of the iron range appears to be particularly
well adapted to the production of leguminous seed crops (especially alsike
clover and alfalfa). Certified seed potatoes are another specialized crop.
West central Minnesota
The people in a good deal of this territory are German Catholics and
good farmers. Business in the counties visited is largely dairying and
dairy products. Apart from some rye and barley, the grain raised is practically all used for feeding of dairy animals and hogs. Crops of this season are not as good as one year ago, although there are sections where the
quality is exceptionally good and the quantity is large. Oats and wheat
118
-12-
•>
R-312-a
show considerable fluctuation in fields only a few miles apart, and this is
also true of corn. The oats threshed range from 15 to 65 bushels per acre;
wheat 12 to 25 bushels. Corn has not yet matured, but the recent heat and
wind has caused deterioration. Complaint is heard that the corn kernel is
not denting and the leaves withering. Some corn on higher ground has already
been cut to prevent further deterioration. No great concern is voiced,
because there will be ample feed. The first cutting of alfalfa was excellent,
but the later crop has been harmed at many points by grasshoppers. Throughout this district farmers are buying oats from other farmers. Bankers state
that they are encouraging farmers to buy oats and will readily lend all the
funds necessary for purchasing at a price up to 20 cents per bushel. They
feel there will be a good profit if the buyers desire to hold and that the
price justifies buying for feeding purposes. Those selling oats are mostly
tenant farmers needing cash, with sales also made by State owned farms.
Business in the towns has not been good, the merchants complaining that
the farmers are more conservative in their buying than last year. Lake resort
bookings were light in July, but increased somewhat during the hotter weather
of August. Deposits at most banks are lower than one year ago and the banks
are not making any effort towards building up a volume which forces them to
seek outside investments. Interest rates on deposits will average a little
higher than -at more southerly points, and there is a tendency for the percentage of time deposits to increase which also -indicates the inclination
of farmers to spend less freely.
Several, bankers commented on the freer credit advocated by Jesse Jones
in the face of continued criticism from F.D.I.C. examiners. One official
said that practically every contract they had was the subject of criticism at
the last examination, although the bank had had no losses. The average
small bank does not want to be bothered with servicing the few Federal Housing loans available.
Eastern Minnesota and Northwestern Wisconsin
The banks located in Wisconsin are enjoying a substantial income from
service, float and exchange charges. Several stated that if it were not
for the important income from exchange charges, they would consider applying for membership in the System. In two instances, however, the bankers
spoke quite forcibly in favor of par exchange; one was a national bank and
the other a nonmember bank on the par list. It was interesting to note
that while the Wisconsin banks are obtaining substantial income from service
charges, the Minnesota banks visited are not charging for that service. In
Wisconsin the customers expect to be charged and do not object. The Minnesota banks do not make such charges for fear of the loss of business.
There was quite a difference of opinion as to whether the operation of
stations or offices in smaller towns of a bank's trade area is profitable.
One banker stated that stations did not develop the business desired because
farmers are not favorable to offices governed by remote control. In other
instances, however, the stations do a substantial business and provide up to
50 percent of the deposit liability of their main offices. Some are limited
-13-
H-312-a
119
to just paying and receiving stations and keep no records, while others
carry complete records and make loans.
Kansas City
Representatives of this bank made a large number of visits to Kansas
banks in August. A special effort was made to discuss membership v;ith
eligible state banks and these conversations developed rather interesting
aspects of the membership problem in that state. At this time the greatest
barrier to membership is deposit insurance. Nearly one-half of the nonmember banks in Kansas are not insured and most of them will not insure their
deposits until compelled to do so. This feeling is, of course, a hang-over
from the days of the old Kansas deposit insurance law. A few instances were
found where an insured bank was exploiting its FDIC membership to the disadvantage of a non-insured competitor and the feeling between these rival
institutions was quite unfriendly. In contrast to this, a larger number of
cases were found where banks in a competitive region have a gentlemen's
agreement not to insure their deposits until they have talked the matter
over among themselves.
After deposit insurance, the next greatest obstacle to membership is
the changes in capital structure that would be required in many cases. For
instance, a bank in a town of 8,000 population is a good prospect but the
officers do not want to increase the capital to $100,000 and then be forced
under the Kansas laws to increase surplus out of earnings to $100,000 when
it is not expected that deposits will be much more than a million dolliirs.
It can hardly be disputed that the bank has an adequate capital structure
for its present deposits. If the Federal Reserve Act were amended to permit
membership on the basis of an adequate capital structure instead of a population basis only, this bank no doubt would consider favorably making application for membership.
Other factors bearing on the membership question are reserve requirements and the quality of service given by correspondent banks. One bank
that should be a member said that with present reserve requirements it
would be necessary for them to reduce their balances with correspondent
banks and in a few cases to close them entirely and they did not want to do
this. State banks also report that city banks are fighting for business
as never before and that city banks will do as much for them, if not more,
than the Federal Reserve Bank. Occasionally the objection to membership
given by eligible banks is the possibility of the passage of the Patraan
Bill. These banks say they do not want to be members if the Federal Reserve banks are to be owned by the Government.
Many bankers, especially in rural communities, are extremely pessimistic. In general the wheat crop was highly disappointing. The acreage
was large but the yield and the quality in many cases were extremely poor
and with present prices, cash outlays, let alone costs of production, were
often not recovered. The result is that farmers have made little or no
-14-
R-512-a
1 2 0
progress in getting out of debt and many existing loans need strengthening.
Bankers say it will take from three to five years of good crops and good
prices for farmers, as a class, to get on their feet.
A sprinkling of banks are making automobile loans and report them as
profitable and satisfactory when carefully watched. To a less extent banks
appear to be making farm implement loans. In northeast Kansas, where there
will be a good corn crop, bankers say they expect to finance some feeding
operations this fall in small amounts to the younger farmers who have shown
some ability. It is said that feeders of other years are out of business
and so badly involved it would be impossible to finance most of them. There
will be much more corn in this District than last year but there is little
livestock to be fed. Eastern corn states had an unusually large crop last
year and another big one is assured. Bankers express concern that the demand
for feeder cattle from eastern c o m states will keep feeder prices high but
that later the inevitable pressure of fat cattle may make feeding operations
unprofitable.
Dallas
Central West Texas
Torrential rains which fell in McCulloch, Menard, Concho, Mason and
San Saba Counties, Texas, during the month of July flooded the watersheds
of the Colorado, San Saba and Llano Rivers and inflicted such heavy flood
damages that "a visit was made by one of our officers to the floodstricken
area during the month of August.
Crops throughout the flooded area suffered both directly and indirectly
from the rains and floods. The grain crop in McCulloch County was badly
damaged and much of it completely destroyed. Cotton suffered from widespread insect infestation resulting from the rains. Highways, lateral roads,
bridges and dams throughout the lowlands of the five affected counties were
washed out or seriously damaged. WPA funds will be sought to repair these
damages.
Banks in this area reported that while the flood will not cause any losses
of consequence in their existing loans, it will necessitate some additional
extension of credit, which they are willing and well prepared to grant. They
were informed that they were welcome to use the rediscount facilities of our
bank if needed in connection with the emergency.
Flood damages in Menard County were largely offset by the beneficial
effects of the rainfall on ranges and pastures, which had begun to suffer
from lack of moisture. Livestock will benefit from the renewed growth of
grass and weeds.
West Texas
Range conditions in the sheep country of West Texas are generally good
as a result of recent rains. In the South Plains, where grain and cotton are
-15-
R-312-a
the principal products, conditions are less propitious. Although a bountiful small grain crop has been harvested, prices are disappointing, maize
heads being quoted at only $5.50 to $4,00 per ton. Cotton in this area has
deteriorated sharply during the past month. Excessive rains in the early
stages of the plant's growth, followed by a prolonged period of dry weather
and high temperatures, resulted in an immature root system. This has cut
down the prospective yield, which had already been greatly reduced by the
allotment restrictions of the government's farm program for 1938.
San Francisco
Lower Willamette Valley. Oregon
All crops in the lower Willamette Valley, which is also true of the
valley as a whole, have suffered severely by reason of an unusually long,
dry summer. There has been no effective rainfall since May. A considerable portion of the grain crops are spring sown and these, particularly,
have suffered so that only about one-third of normal production of these
crops will be harvested, and in some places spring oats are not being harvested at all. Fall grain and hay crops are somewhat better altho harvest
will fall below normal production. This situation, coupled with general price
decline in agricultural products, will materially affect farm income this
year.
Hot weather during the height of the strawberry and raspberry season was
so severe that only small crops were produced. The marketing of cherries was
adversely influenced by the heavy carry-over of barrel cherries from last
year, with 1938 prices around 3 cents against 7 and 8 cents in 1937.
While the Hop Growers Allocation Committee, functioning under the recently
concluded Federal Hop Marketing Agreement, has not announced final crop estimates for 1938, some growers are estimating the crop between 40 and 45 million
pounds, of which the Hop Control Board has announced only 28,500,000 pounds
can be marketed this season. Recent reports indicate that the Control Board
is recommending that the growers who are now harvesting leave 20 percent of
their crop on the vines. Growers are anticipating a price around 20 cents
per pound. This year's crop is being financed only to a very limited extent
by banks, which apparently prefer to await the outcome of this year's operations under the marketing agreement.
Walnut and filbert production is estimated to be normal, and, in fact,
it is expected that walnut production will exceed last year, with the market
reasonably stable. The nut production is practically the only bright spot
in the picture.
Lumber operations have recently shown some improvement, with increased
order files and somewhat better prices.
Short crops and low prices for agricultural products in this area will
naturally be reflected in decreased volume of trade and lower bank deposits
this fall.
0)
•H f
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
AUGUST, 1958
T
Visits to banks
NonMember member Total
Federal
Reserve
Bank
Boston
New York
Philadelphia
Cleveland
40
135
*
—
9
91
*
—
Meetings
Number
49
226
126
None
None
None
None
1
attended
Attendance
— -
25
Addresses made
Number
None
1
None
None
Richmond
Atlanta
Chicago
St. Louis
27
20
96
47
29
5
75
161
56
25
171
208
2
1
None
3
570
1
None
2
1
Minneapolis
Kansas City
Dallas
San Francisco
70
29
21
56
121
61
2
24
191
90
23
60
3
1
1
5
675
28
70
632
None
None
None
None
* Number not reported.
•4-
312
32
Attendance
300
• '•
237
—
80
100
—
—
—
B3
l23
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Monday, September 26, 1938.
The following summary of general businesa and financial conditions in the
United States, based upon statistics
for August and the first three weeks
of September, will appear in the
October issue of the Federal Reserve
Bulletin and in the monthly reviews
of the Federal Reserve banks.
Industrial activity increased considerably in August and advanced
further in September.
Factory employment and payrolls also showed a
substantial rise in August, and distribution of commodities to consumers
increased seasonally.
Production
Volume of industrial production showed a further considerable increase in August, and the Board's seasonally adjusted index rose from
83 to 88 percent of the 1923-1925 average.
In manufacturing, increases
in output were general except in the automobile industry where there was
a sharp seasonal decline as plants were closed for inventory taking and
for preparation for the shift to new model production.
At steel mills,
where activity had risen considerably in July, there was a further advance in August and production was at an average rate of 42 percent of
capacity as compared with 35 percent in the previous month.
lumber and plate glass also increased.
Output of
In the textile industry the sharp
advance that had been under mey since early summer continued.
Mill con-
sumption of wool and cotton increased further, and deliveries of rayon
124
B-313
-2-
were maintained at the high level reached in July.
Shoe production
showed a further increase and activity at meat-packing establishments
showed less than the usual seasonal decline,
Production of bituminous
coal and crude petroleum increased somewhat further.
In the first three weeks of September steel ingot production continued to increase, while automobile production remained at the low
level reached in August.
>
Output of crude petroleum was reduced, as
wells in Texas were closed on both Saturdays and Sundays, whereas in
August only Sunday closings had been required.
Value of construction contracts awarded in 37 Eastern States increased considerably in August, according to figures of the F. W. Dodge
Corporation.
The increase was in publicly-financed projects and reflected
partly the expansion of the Public Works Administration program and the
award of the first contract for the slum clearance projects of the United
States Housing Authority.
Awards for private residential building con-
tinued at about the same rate as in July and were close to the level
reached in the spring of 1937.
Commercial building, which had increased
in July owing to the award of a contract for a large office building,
*
declined in August to about the level of other recent months.
Employment
Factory employment and payrolls showed a marked rise from the middle
of July to the middle of August, while in nonmanufacturing industries
employment showed little change.
The number employed at factories pro-
ducing durable goods increased for the first time since the summer of
>
125
R-313
-3-
1937 and in the nondurable goods industries, where employment had increased in July, there was a further rise. Most leading industries
reported increases in the number of workers.
Distribution
Distribution of commodities to consumers increased seasonally from
July to August.
Department store sales showed about the usual rise
and mail order sales increased, while variety store sales declined.
In
the first half of September sales at department stores increased more
than seasonally.
Freight-car loadings increased somewhat further in August, reflecting chiefly larger shipments of miscellaneous freight.
Commodity prices
Prices of silk and rubber showed some advance from the middle of
August to the third week of September and there were also increases at
the end of the period in nonferrous metals.
Wheat prices fluctuated con-
siderably but showed little net change in this period.
Prices of cotton
and wool declined somewhat, and there were further decreases in prices
of some finished industrial products.
Bank credit
A heavy inflow of gold from abroad during the five weeks ending September 21 resulted in an increase of over $500,000,000 in the monetary
gold stock.
Member bank reserves were increased by Treasury payments
for gold acquired but were sharply reduced in the last week of the period
by payments to the Treasury for cash purchases of new securities and
quarterly income tax collections.
As a consequypce of these transactions,
-4-
R-313
excess reserves, which had increased to $5,130,000,000, were reduced
to $2,740,000,000 on September SI.
Total loans and investments of reporting'member banks in leading
cities increased sharply during August and the first three weeks of
September, reflecting chiefly an increase in holdings of United States
Government obligations.
Balances held in New York City for foreign
banks showed a substantial increase.
Money rates and bond yields
The average yield on long-term Treasury bonds increased in September from the low point reached at the end of August.
The average rate
on new issues of Treasury bills increased to 0.11 percent, compared with
0.05 percent.
Yields on high-grade corporate bonds increased slightly.
137
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
September 2k*
SUBJECT:
R-314
S B OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
Daily condensed condition report
of Federal Reserve banks
Dear Sir*
Under separate cover we are forwarding today a supply of
revised Form FR-J4O7 (Formerly Form B-l), "Condensed statement of
condition of Federal Reserve bank", for use in wiring condition
figures of your bank to the Board*
The following data wired in connection with the daily condensed condition report, in accordance with the Board's letters of
March 21, 1932, B-721, and of August 1, 193^j B-1009* may be discontinued:
Holdings of paper acquired under Section 10-A
New loans made under Section 10-a
Payments of loans made under Section 10-a
Code MANE
Code MARL
6ode MAST
Holdings of paper acquired under Section 10-b
New loans made under Section 10-b
Payments of loans made under Section 10-b
Renewals during week of Section 10(b) loans
Code
Code
Code
Code
Bills discounted during week for individuals,
partnerships and corporations under Section 13
Payments during week of bills discounted for
individuals, partnerships and corporations
under Section 13
TO PRESIDENTS
MIKD
M IiiE
MIST
MAZE
Code MART
Code MOSS
Vory truly yours#
ad, Chief
Division of Bank Operations
OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
-f O O
OF THE
FEDERAL RESERVE SYSTEM
li^O
R 315
"
WASHINGTON
ADDRESS
September 24, 1938.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal reserve banks, the following code word
has been designated to cover a hew issue of
Treasury Bills:
NUBADY - Treasury Bills to be
dated September 28, 1938, and
to mature December 28, 1938.
Very truly yours,
S. R. Carpenter,
Assistant Carpenter.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
129
R-516
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
For release in morning newspapers
of Saturday, October 1, 1938.
September 30, 1958.
FOR THE PRESS
The Board of Governors has accepted, effective as of October
1, 1938, the resignation of A. 0. Stewart as a Class C Director and
as Chairman of the Board and Federal Reserve Agent of the Federal
Reserve Bank of San Francisco.
In submitting his resignation to
Chairman Eccles, who transmitted it to the Board and recommended
approval, Mr. Stewart stated that by reason of an acquisition of
bank stock by dividend he was no longer technically qualified under
the law to continue to serve.
BOARD OF GOVERNORS
R-317
OF' THE
130
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS Cf"I'"ICIAL CCRAESPCNDENCE
TC THE BCAAD
October 1, 1938.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal reserve banks, the follovTing code word
has been designated to cover a new i.ssue of
Treasury Bills:
NUBAFT - Treasury Bills to be
dated October 5, 1938, and to
mature January 4, 1939.
J~"Olll'S,
~.c. :Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDErtAL RESERVE BJ\N'".t{S
/
...
R-318
BOARD OF GOVERNORS
OF" THE
131
FEDERAL RESERVE SYSTEM
WASHINI3TON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
October 4, 1938.
Dear Sir:
Referring to the Board's letter R-164 of January 13, 1938,
following is a statement of changes reported during Septembel' in the
list of nonmember banks that have in force agreements with the Board
pursuant to the provisions of Section 8(a) of t~e Securities Exchange
Act of 1931,:
IJeletion
New York
New York
Huth & Co.
Huth & Co., New York, New York, should be added with the
following note to the list (R-164-b) of banks which filed agreements
with the Board of Governors of the Federal Reserve System pursuant
to the provisions of Section 8(a) of tl1e Securities Exchange Act of
1934, but which are no longer in operation as nonmember banks:
(Placed in voluntary liquidation on
September 8, 1938.)
L. P. Bethea,
Assistant Secretary.
TO PhESil..IENTS OF ALL
FEDBlill RESERVE
BANKS.
BOARD OF' GOVERNORS
R-319132
CF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF'F'ICIAL CORRESPONDENCE
TO THE SOARD
October ?, 1938.
Dear Sir:
It is noted from the minutes of the Conference of Presidents
held in washington on ;I'uesday, September 20, 1938, that Mr. Schaller
referred to the existing arrangement between the Detroit Branch and
member banks situated in Detroit whereby currency deposits of such
member banks with the Detroit Branch are confined to fit currency
not needed by the banks in their current operations and mutilated
currency, and stated that the Federal Reserve Bank of' Chicago feels
that unless similar arrangements are made throughout the Federal
Reserve System the present practice of the Detroit Branch should be
modified.
The report of the above mentioned Conference states that it
was the sense of the Conference that through the efforts of the individual Federal Reserve banks any undue abuse of their currency
sorting facilities has already been minimized and that each bar~
should continue to solicit the cooperation of its member banks in
eliminating or modifying such practices as result in unreasonable
demands upon, or unwarranted expense to, the Federal Reserve banks.
It also appears from the Comnlittee's report that a majority of those
present at the Conference expressed the opinion, based upon the experi.ence of' their banks in negotiating with member banks respecting
this problem, that the adoption of any arbitrary rule, such as that
discussed at the meeting, would be inadvisable, as tending to antagonize member banks, and would be unnecessary in view of the progress
already made and the further progress that might reasonably be expected to be made through the efforts of the various Federal Reserve
banks.
It 1~.; understood that, if the Detroit Branch resorts to the
former practice, it will be necessary for it to at least double the
number of its currency counters and that if the Chicago office resorts to its former practice it will necessitate a very substantial
increase in its expenses. Somewhat similar conditions, it is assumed,
exist in greater or lesser degr(;e at some of the other• Federal Reserve
banks.
133
R-519
-2-
In the report of' the Committee on Free Services, dated June
8, 1938, it is stated on page 39 that "Replies to this item show that
in four Reserve districts there are tllirty-one member banks that make
a practice of depositing currency in the afternoon and drawing out
currency the next morning, while in the other eight Reserve districts
this practice does not exist."
In the circumstances it will be appreciated if you will advise the Board in advance of the next Conference of Presidents as to
the progress your bank has made in its efforts to induce member ba.nks
to confine their deposits of fit currency with the Reserve bank to
currency in excess of their current requirements; whether your bank
anticipates that it will, within a reasonable period, be able to
achieve approximately the same resultD that have been accomplished
by the Detroit Branch; also if you will furnish the Board with the
nrun0s and locations of the banks in your Federal Reserve bank and
Branch cities that make a practice of depositing unassorted currency
. at night which includes a substantial amount of fit currency needed
by them for current use, e.nd what the approximate annual saving to
your bank v.rould be if such practice were discontinued. It will also
be appreciated if you will advise the Board of the number of banks
that have discontinued this practice since J·anuary 193?, and the approximate reduction in expense of the Federal Reserve bank resulting
therefrom.
Very truly yours,
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAI, RESERVE BANKS
H-320
BOARD OF GOVERNORS
. . 134
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
October 7, 1938.
Dear Sir:
There are inclosed herewith
copies of statement rendered by the Bureau
of Engraving and Printing, coverj_ng the
cost of preparing Federal reserve notes
from September l to September 29, 1938.
Very truly yours,
~~
Fiscal Agent.
Inclosure.
TO PREbiDJi::l'iTb OF' ALL FEDERAL HEGE.R.VE BANiili
135
R-320-a
Statement of Bureau of Engravir~ and Printing
for furnishing Federal Reserve Notes,
September 1 to 29, 1938.
Federal Reserve Notes, Series 1934.
'j<,.
$10
$20
'rotal
Sheets
66,000
12,000
78,000
$ 7,176.00
188,000
20,000
208,000
19,136.00
Philadelphia
74,000
20,000
94,000
8,648.00
Cleveland
50,000
19,000
69,000
6,348.00
Richmond
44,000
22,000
66,000
6,072.00
Atlanta
24,000
6,000
30,000
2,760,00
Chicago
124,000
35,000
159,000
14,628.00
34,000
7,000
41,000
3,772.00
Minneapolis
19,000
6,000
25,000
2,300.00
Kansas City
24,000
8,000
32,000
2,944.00
Dallas
21,000
6,000
27,000
2,484.00
San Francisco
50,000
16,000
66,000
6,072.00
718,000
1?7,000
895,000
$82,340.00
Boston
New York
~t.
I.ou:i.s
895,000 sheets @ $92.00 per M •
..•
Amount
:~82,340.00
BOARD OF GOVERNORS
..
R-321
OF THE
FEDERAL RESERVE SYSTEM
.. 136
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE
TC THE SCARO
October 8, 1938.
Dear Sir:
In connection
~dth
telegraphic trans-
actions in Government securities between Federal reserve banks, the following code word
has been designated to cover a new issue of
Treasury Bills:
ITQBAGE - Treasury Bills to be
da~ed October 13, 1938, and to
mature January 11, 1939.
Very truly yours,
,;::A
~~~~z..f
..
..
J.
..-
r7?)p-?
c. Noell,
~~ ~~
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
,.
BOARD OF GOVERNORS
Or THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
October 14, 1958.
>.
Dear Sir:
Inclosed is a copy of the program for the conference
of representatives of the examination departments of the reserve banks, which will be held in Washington commencing
Monday, October ~1, 1908.
It is contemplated that the conference will be largely in the nature of a round table discussion of the various
matters which have been or may be brought up for consideration, and it is believed that the program is broad enough to
cover the various suggestions as to topics which have been
received from the Federal reserve banks. It is req_uested
that the representatives of each roserv(~ bank bo prepared
to discuss the various subjects which they have submitted
for consideration at the conference.
Included in the replies received from the reserve
banks were requests for information or interpretations as
distinguished from suggestions for discussion at the conference. It will be the endeavor to answer such questions
specifically at the conference.
----
..
L. P. Bethea,
Assistant Secretary.
Inclosure.
TO THE PRESIDEN'l'S OJ!' ALL ltEDERAL RESERVE BANKS.
138
H-322-a
TOPICS FOR CONSIDEr.1ATION AT CONFERENCE 01!' REPRE.SE.NTA'riVEc OJ!'
'l'HE BANK EXAMINATION DEPAR'I'lv1ENTS OF THE FEDERAL REGERVE BANKCi
OCTOBER 31, 1938, AT 10 A.M.
ROOM 2245, FEDERAL RESERVE BUILDING, WASHINGTON, D. C.
I.
The uniform agreement regarding examination procedure announ<;ed
lust June.
(l) General discusBion regarding the agreement, its spirit and
purpose, and the circumstances leading to its adoption.
II.
Investment securities.
(1) General discus::;ion of the treatment of investment porlifollos, the approach which should be taken by the examining
and supervisory authorities, and the nature of the comments which should be made by examiners regarding quality,
diversification and maturity distribution of a bank's
investment account.
(2}
~uestions
regarding appraisal of securities.
(3) The classification of income bonds received in a reorgan-
ization or created through an agreement between obligor
nnd bondholder which are either paying no interest or paying at a rate lesn than tho maximum required, if earned,
by thE:: indenture or agreement.
(4) .i!"actors to be considered in determining the adequacy of
reserves and the position to be taken with respect to the
treatment of recoveries on, and profits from sale of',
necurities. A specific request has been received f'or discussion as to the consideration in this connection which
should be given to depreciation in the security account.
(5) Treatment of amortization of premiums on bonds, both as to
bonds which r1re exempted securities under th8 Comptroller's
regulation and those to which the provisions of the Comptroller's regulation regarding amortization are applicable.
(6) It has been suggested that since the use of valuation reserves permlts in effect the allov.rance of net appreciation
in Groups 3 and 4 against depreclation in Group 2 securit)e3, such appreciation should bo allowed as an offset
when the bank has actually written securities down instead of setting up a valuation reserve. The same argument has been advanced to support the allovmnce of net
appreciation in Group 2 against net depreciation in
Groups 3 and 4.
139
-2III.
H-322-a
Loans
(1) General discussion regarding classification of loans
under the uniform agreement.
(2) Suggestions have been received requesting specific discussion of:
a. Principles to be used in appraising short collateral loans, particularly those which are
being regularly reduced by the borrowers in
amounts so small in relation to the deficiency
in collateral value as to require several years
for liquidation of the obligations.
b. Appropriate classification to be accorded loans
dependent for liquidation upon life insurance
upon which the lending bank is paying premiums.
IV.
"Other real estate" and fixed assets.
(1) General discussion of the treatment of "other real
estate" account with specific reference to the basis
for classification of individual properties and the
entire account.
(2) Should member banks be required to depreciate the carrying value of "other real estate" annually at rates not
less than those allowed for tax purposes?
( 5) Gfmeral discussion with respect to treatment and classification of banking house and furniture and fixtures,
with particular reference to the factors which should
be considered in determining the amount, if any, regarded as excessive c..nd classified as II.
(4) Should depreciation ut rates allowed for tux purposes
be considered a current expense by the examiner and
classified as IV if not already eliminated by the bunk?
(5) In what manner and on what basis should banking house
and "other real estate", (a) held in the names of ~.tf
filiated or asso.ciated organizations, (b) held by nominees for the bank, or (c) otherwise carried in loans or
investments, be reflected in reports of examination and
reports of condition?
•
(6) Under what circumstances should real estate sold by a
bank under contract be shown in reports of examination
and reports of condition us (a) loans, (b) "other real
estate"?
140
-3-
V.
1-l-522-a
General suoervision.
(1) General discussion of possibilities and policy regarding work-out of banking situations where there is
pressing need for rehabilitation.
(2) General discussion of factors to be considered by exuminers and the reserve banks in reviewing:
a. A bank's divioend policy.
b. A bank's ~)olicy with respect to the creation
and maintenance of adequate reserves.
c. Applications for permission to reduce
ca~itcd.
(3) General d:Lscussion of use of section 50 regarding re-
iiloval of bank officers and directors.
( 4) 1iesponsibili ty of examiners for the F'ccieral reserve bllnks
regarding verification of assets, etc., in cases of joint
examinations.
VI.
Revised form of report of examination.
(1) General discussion regarding details and use of the revised form of I'eport of examination.
(2) General discussion regarding the use of valuation reserves
and their treatment in reports of examination.
(5) Discussion regarding the desirability of furnishing
a. Worlc sheets (pencil copy form) for use in preparing reports of exruninations,
b. Examiner's questionnaire to supplement reports of
examination.
(4) Revision of Form 212.
VII. Banki.11g laws and regulations.
(l) Responsibility of the examiners for the Federal reserve
r:anks in observing c:;.nd reporting on the lJractical opero.tion of laws ana regulations relating to member banke
in order that the reserve bs.nks and the Board may have
the benefit of such ooserva tions and suggc stions busc3d
thereon in considering possible amendments •
•
141
-4-
VII.
R-522-a
Banking laws and regllldtioDJ? (Cont 1 d)
(2) Examination problems and procedure~!ilh respect to
determination of compliance or noncompliance with
regulations regarding payment of interest on demand
and time deposits •
..
(3) Examination problems and procedure under Regulation U.
(4) Examination problems and procedure with respect to the
Clayton Act and Regulation 1.
VIII.
Possibilities of making examination and supervisory activities
of Federal reserve banks more constructive and helpful to member banks.
IX.
Miscellaneous.
(1) Answers to certain specific questions which have been
received and discussion of various matters which may
be brought up.
142
BOARD OF' GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
R-323
WASHINGTON
ADDRESS DF"F"ICIAL CORRESPONDENCE
TC THE &CARD
October 15, 1958.
>
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 iseue of
Treasury Bills:
NUBAIR - Trt::asury Bills to be
dated October 19, 1938, and to
mature January 18, 1939 •
..,
.. e
'
Assistant Secretary •
.,.
TO PRESIDENTS OF ALL FEDEEA.L RESEHVE BANKS
BOARD OF" GOVERNORS
R-324
OF' THE
1 43
FEDERAL RESERVE SYSTEM
WASHINI3TON
ACCREBB CF'FICIAL CDRREBPDNCENCE
TD THE BDARC
October 18, 1938 •
.lo,
Dear Sir:
There is attached a copy of the report of expenses of ~he main lines of the
Federal Reserve Leased Wire ~stem for the
month of September, 1938.
...
Please credit the amount payable by
your bank to the Board, as shown in the last
column of the statement, to the Federal Reserve Bank of Richmond in your daily statement of credits through the Inter-district
Settlement Fund for the account of the Board
of Governors of the Federal R~serve bystem,
and advise the Federal Reserve Bank of
Richmond by wire the amount and purpose of
the credit.
Ver.y truly yours,
~~
O. E. Foulk,
Fiscal Agent.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
144
R-524-a
REPORT OE' EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF SEPTEMBER, 1958.
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Total
Words
Chargeable
Pro Rata
Share of
Total 1xpenses (1)
Expenses
Paid
by Banks
and
Board(2)
Payable
to
Board
of Governors
285.50
1,026.90
246.60
516.51
$ 286.59
Federal
Reserve
Bank
Number
of ~ords
Sent
Boston
New York
Philadelphia
Cleveland
26,576
78,982
24,165
56,981
1,179
1,190
1,191
27,755 $ 569.89
78,982
1,621. 75
25,555
520.57
58,172
783.78
Richmond
Atlanta
Chicago
St. Louis
31,485
48,716
62,498
43,808
1,172
1,171
1,529
1,171
52,655
49,887
64,027
44,979
670.50
1,024.55
1,314.66
925.55
224.82
506.41
1,217.15
235.58
445.68
717.92
97.51
688.17
Minneapolis
Kansas City
Dallas
San Francisco
. 19,072
45,778
36,756
52,496
1,171
1,199
1,205
1,255
20,243
44,977
57,961
53,751
415.65
923.51
779.45
1,103.66
198.11
259.21
281.90
578.55
217.54
664.30
497.55
725.11
Board of
Governors
299,843
299,845
6,156.65
11,835.29
Total
805,152
818,585
$16,807.93
13,453
$
594.85
275.97
467.47
$16,807.95 $5,676.64
(1)
Based on cost per word ($.020552907) for business handled during the month.
(2)
Payments by banks are for personal services and supplies and payments qy
Board are for personal services and supplies ($1,717.92) and wire rental
($10,115.57). Personal services include salaries of main line operators
and of clerical help engaged in work on main line business, such as counting the number of words in messages; also overtime and supper money and
Retirement qystem contributions at the current service rate.
R-525
,. 1_45
BOARD Of" GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 18, 1958.
Dear Sir:
The Board of Governors of the Federal Reserve System is
advised that on Tuesday, November 1, the New Orleans branch of
the Federal Reserve Bank of Atlanta will be closed in observance
of All Saints Day. Please include transit clearing credits of
November 1 for the New Orleans branch with your credits of the
following day.
On Tuesday, November 8, General Election Day, there will
be neither transit nor Federal Reserve note clearing through the
Interdistrict Settlement Fund. The Board is advised, however,
that the following Federal Reserve banks and branches will be
open for business on that date:
Boston
Little Rock
Louisville
Cleveland (until 1 p.m.)
Cinclnnati (until 1 p.m.)
Omaha
Atlanta
Birmingham
New Orleans
Salt Lake City
On Friday, November 11, Armistice Day, and Thursday,
November 24, Thanksgiving Day, the offices of the Board of Governors and all Federal Reserve banks and branches will be closed.
Please notify branches.
J. C. Noell,
Assistant SecretarJ.
TO THE PRESIDENTS OF ALL FEDERAL REStRVE BANKS
BOARD OF GOVERNORS
DF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-326
AI)CIIIEBB OFFICIAL CDRREBPDNCENCE
TD THE BDARC
October 19, 1938
Dear Sirt
It ho.s been brought to our attention that the figures for
salaries of officers and employees on pages 1-4 of the Board's
functional expense exhibit for the first half of 1938 include certain duplications. The figures shown represent the aggregate of
the salary items of all units without deduction for duplications
resulting from the distribution of expenses from certain service
units to other units, particularly to the fiscal agency, custodianship and depositary units. We are unable from the Form E reports,
as submitted, to determine definitely in all cases the amounts of
salaries without duplications, and, accordingly, it will be appreciated if you will have someone indicate on the copies of the
functional expense report exhibit for the first half of 1938, foxwarded to your bank, that the salary figures on pages 1-4 include
duplications and should, therefore, not be used.
In this connection please advise us at your early' convenience of the amount of salaries at your head office and branches,
if any, corresponding to the total average number of officers and
the total average number of employees as reported on page 1 of
Form E for the first half of 1938.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO THE PRESIDENT OF EACH FEDERAL RFBERVE BANK EXCEPT MINNEAPOLIS
14?
BOARD OF GOVERNORS
OF' THE
R-527
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDREBB OFFICIAL CORREBPONDENCE
TO THE BOARD
October 21, 1938.
Dear Sir:
There is inclosed for your information a summary of the bank relations reports
submitted by the Federal Reserve banks for
the month of September in rc;sponse to the
Boa1·d' s letter of August 25, 19:55 (X-9680).
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO
PRE~IDENTb
OF ALL Fl!:DERAL m;SERVE BAN!CS
148'
R-527-a
October 18, 1938
.,.
To:
The Board
From:
Mr. Hammond, Division
of Bank Operations
Subject:
Summary of Bank
Relations Reports •
Reports of bank relations as requested in the Board's letter of August 25, 1936 (X-9680) have been received for the month of
~eptember and excerpts therefrom will be found on the following
pages. A table showing for all twelve banks the number of visits
made, meetings attended, and addresses delivered has also been prepared and follows the quotations.
The Kansas City and Dallas reports mention the reaction of
bankers to the recent threat of war, great interest being roused
umong them as to the effect it would have upon their bond portfolios
and upoz1 the price of cotton. In New England the subject of concern
was the loss caused by the hurricane, - particularly the loss in
standing timber.
Philadelphia reports that country banks will be in need of
FederD.l Reserve Bank credit in the coming months. Kansas City also
mentions the prospect that a good many banks will have to borrow
and that correspondent banks are actively soliciting business.
Cleveland reports that member banks are borrowing from their correspondents at rates as low as the F'ederal Reserve discount rates or
lower and find that borrowing from their correspondents is simpler
for them - the 15 day limitation on loans being complained of especially.
Cleveland, Chicago and Kansas City report an increased demand for mortgage loans, and Philadelphia notes some improvement in
the real estate situation.
As usual, the problem of exchange, particularly as between
members and nonmembers, is frequently mentioned.
Atlanta, Minneapolis, Kansas Cit,y, and San Francisco men.tion the tendency toward decreased cultivation of wheat and cotton
· in fC;.vor of live stock.
Excerpts from the reports follow:
are attached to the original hereof).
(The reports themselves
149
-2-
R-527-a
Boston
During the period September 1st to October 6th visits were made
to 44 member banks and seven nonmember banks. Of the total, 54 visits
were made subsequent to September 21st to banks located in the storm
and flood stricken areas.
...
In so far as it could be determined there will be no bank strain
as a result of the storm and floods. Property damage along the seashore,
other than that suffered b,y communication and transportation companies,
w.:~s mostly to small pleasure boats and beach cottages.
A few banks,
mostly savings banks, in small communities adjacent to the beaches will
doubtless have to refinance some mortgages made on beach properties and
perhaps take some loss. Member banks hold very few mortgages of this
type. The damage to factory properties in the sections visited, except
in north-central Massachusetts, is not great and p~rolls were only
temporarily affected and in most cases because of lack of power or inabilit,y to move materials and finished goods in and out of the plants
due to interruption of transportation facilities. Plant damage was
more noticeablu in north-central Massachusetts. Here there was considerable flood damage to buildings, equipment and stock. However
only a few small plants have suspended all operations indefinitely most plants were operating one or more departments and contemplating
early resumption of full operations.
The agricultural section in the Connecticut River Valley and
the timber lands extending from northern Massachusetts up into New
Hampshire and Vermont were more Seriously affected by the storm and
floods. In some sections along the river fifty per cent or more of
the 1958 tobacco crop and about half the tobacco sheds were destroyed.
Much of the onion crop, which had been sacked ~~d stored on the fields,
was washed away, and the potato crop, still in the ground, is believed
to be a loss. It is not the practice of the banks in this section to
make crop loans and no bank visited felt that its portfolio would suffer directly, though loans made to retailers and others dependent upon
farm trade might be affected. Crop financing in this section is largely in the hands of the government agencies.
The most seriously affected areas visited and where there is
an urgent need for funds are in the timber lands. Experienced lumbermen have estimated that the amount of timber down is something over a
billion feet and that from fift,y to seventy-five percent can be salvagGd. The need. for prompt action is imperative as much of the work
of salvaging must be undertaken before a heavy snow-fall, and the
timber cut, square-edged and stored or floated in the ponds and lakes
within tho naxt six months. The fire hazard created by fallen timber
must be r~moved to avoid further destruction in the spring and summer.
Many farmers throughout the section have suffered heavily by
the destruction of their wood lots. In many cases the only money
150
-5-
R-527-a
source they have had is from the sale of timber from these lots, and
for many of them the wood lot takes the place of the savings account,
its ultimate sale being contemplated to provide funds for their old
age.
Bankers and others are expressing the view that the salvaging
of the timber presents problems of organization and finance too big to
be handled except by the Federal government. A tentative plan that is
being talked throughout the section provides for the formation of a
corporation qy all of the New England ~tates, the sale of certificates
to the general public of New England, and employment of funds received
from this source together with the proceeds of a substantial Federal
loan in buying up the timber for cash, processing and marketing it in
an orderly manner.
Practically eve~ bank visited has advertised in the newspapers
and otherwise of its readiness to make so-called "catastrophe loans" to
homo owners and others. Surprisingly few inquiries have been received
and the bankers advise that in many cases temporary repairs have been
made and that the owners intend to apply for Federal aid.
New York
During the month of ~eptember, our representatives visited 111
banks of which 85 are member and 26 nonmember instltutions.
Saratoga., Viarren
~:md
Washington Counties, New York
Market value of securities owned by the majority of banks is
substantiaJ.ly lower than boo:.C value, depreciation varying generally between 2 and 5 per cent. In the case of one nonmember state bank, se-curity depreciation is almost 20 per cent. ~ix member banks, however,
claim an appreci.":ttion in their portfolios which in two cases is quite
substantial, amounting to 12 and 14 per cent respectively. Although
investments in securities have decreased during the past year, the
proportion of United &tates government obligations owned has increased
nnd now comprises approximately 50 per cent of the security lists.
With few exceptions, bank officers in this territory continue
to comment on the lack of demand for accommodation on the part of good
borrowers. Loan li~ts remain practically stationary, the volume of new
loans being about sufficient to offset the payments on the old. Several b~nks have made an effort to take care of the demand for Federal
Houslng Administration loans.
Business conditions in this area, in the op~n1on of bank officers, have improved very little since last April when these banks were
'. 1.51
-4-
R-327-a
visited. Industrial activity is centered chiefly in Glens Falls and
Hudson Falls in which cities the manufacturing concerns, chiefly
paper and pulp mills, are fairly busy. Bankers in other smaller
manufacturing centers report that mills are operating with greatly
reduced forces and only as orders for goods are received.
Milk prices for some time past have been too low to afford
the dair.y farmer any margin of profit.
The volume of summer resort trade in Warren County, along
Lake George and in the Adirondacks, is estimated to have been about
25 per cent less than last year. The 1938 season in Saratoga Springs
is also said to have been considerably less profitable than that of
19D7.
Hunterdon, Somerset and Union Counties, New Jersgy
.
The demand for loans continues ver,y light. Officers of banks
in the industrial centers state that there has been no increase to
speak of in the demand for business loans, and as a consequence the,y
express doubt as to the prospects of genuine business recovery this
autumn. Some bankers remark that they have found it necessar.y to
change with the times and that efforts are being made to stimulate
an interest in other ~pes of accommodation such as personal loans,
automobile financing, and loans under Titles I and II of the National
Housing Act, in order to offset the lack of demand for industrial and
commercial credits.
Several bankers comment that net earnings this year will not
be as large as last year because loans are gradually decreasing and
there is no great demand for new loans, and that earnings are being
adversely affected by the increase of idle cash or by making investments in short term securities at low yields, while deposits on which
interest is being paid are holding steady or showing a slight increase.
An officer of one bank in Elizabeth referred to the fact that his institution (deposits $7,000,000) has carried over ~1,000,000 idle
money for the past several months and indicated that he is now looking with more enthusiasm than formerly toward investing a part of his
excess funds in Title II Federal Housing Administration mortgages.
The president of another bank in ~lizabeth reports practically no
demand for loans locally and says that his bank (deposits $15,000,000)
has held over $3,500,000 idle funds for several months. He mentioned
that his institution formerly invested as high as $1,000,000 in commercial paper, but stated that most of it has run off without replacement as he would rather have the mone,y remain idle than invested in
paper at such low rates as 5/8 to B/4 per cent because he feels that
the risk involved is hardly worth the low income obtained.
152
-5-
R-327-a
There are quite a nwnber of large industrial concerns in
Union and Somerset counties, and factory employment and payrolls reflect considerable increase in activi~ as compared with a few months
ago.
Hunterdon County is primarily agricultural. Dairying and
poultry raising are the principal agricultural pursuits and farmers
in general are enjoying a satisfactory income this season as a result of favorable prices for their products and lower costs for feed
and grain than previously. The daii~ farmers receive a better net
return for milk than elsewhere because of their proximit,y to the
metropolitan markets; and in one section they are so well organized
th&t production is controlled which is resulting in a price of $3 to
$5.50 per hlmdredweight, or nearly 100 per cent greater than is being
received in other sections. The establishment of an auction market
within the county has been of great benefit to the chicken farmers
as they now have not only a ready cash market for their products but
are receiving a higher level of prices than they were able to obtain
formerly. The fact that a cash income is received monthly by the
farmers is a stabilizing factor to retail trade and the view was
expressed by several bankers in this area that, although the merchants receive no great benefit from periods of general business
prosperi cy, they do not suffer much from depressions.
Philadelphia
Fairly satisfactory industrial activity prevails in the areas
visited, though in some communities it is declining and in others it
has been slack. Retail trr.,de was reported to show a decline in nearly every important community with a consequent slowing of collections.
~bile this condition has not yet affected loan liquidation noticeably,
bankers anticipate that it will.
Agricultural conditions aro poor. The farmers of Delaware
appear to be in a worse condition than those in Pennsylvania, probably because their crops suff€!red greater weather damage. The greatly reduced farm income is L<.ff0cting liquidation of loans and will no
doubt be reflected in retail trade and in the purchase of, and payment for, farm equipment in these areas. It is probable that there
will be heavier demands made upon the banks by the farmers during
.the coming month and unless there is an improvement in the investment market it is believed that several banks in the farming sections
will need reserve bank credit to enable them to .meet these demands.
153
-6-
R-527-a
The real estate situation in the majority of the communities
appears to be improving. Housing shortages have caused an advance
in rents as well as considerable new construction. Sales of old
properties are not numerous, although they are expected to increase
as the investment opportunities in this market become better known
and some of the public's apparent aversion to owning real estate
passes.
The president of a strong national bank having deposits of
about $10,500,000 said that he considered the regulations of the
Comptroller restricting securities investments to be a mistake as
the,y narrow the market for ineligible securities and cause unnecessary losses to banks which are holding securities of this type, and
also hasten the sale of securities whose ratings decline to near the
borderline, upsetting the market and increasing losses. He contends
that insurance companies, corporations, and other large investors
follow the lead of banks in this respect.
The president of a national bank with deposits of about
criticized the national bank examiners for what he said
was a failure to consider that the executive officer of a bank knows
what he is talking about when discussing lines of credit. He also
stated that it appeared to him as though each examiner was anxious
to criticize all items critiaized by the previous examiner and in
addition to find some new criticism. He said that he had discussed
two items of criticism with the Deputy Comptroller, who dismissed
the criticisms, notwithstanding which they continue to appear in
the subsequent reports.
~2,000,000
It has been the practice of our representatives when calling
at nonmember banks to tr.t to interest the officers in membership,
but it is difficult to do so to the extent that they are willing to
discuss the ability of their respective institutions to meet requirements. Many of them listen to the discussion but claim that membership does not offer sufficient advantages to offset the necessity
of keeping higher reserves. Many officers claim that their correspondent banks meet all their needs, eliminating any necessity for
reserve bank services. Other bankers, who it is believed would like
to be associated with the ~stem, state that they wish to feel certain that banking legislation is in a more settled state than during
·recent years.
In general, nonmember bankers appear to believe that the provisions of the Banking Act of 1955 which require that banks with deposits of ~1,000,000 or more be members of the System by 1942 in
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order to retain deposit insurance, will be modified or eliminated by
the effective date.
T-··
Cleveland
Most of the banks visited during the month are located in
agricultural communities. The decline in prices of agricultural
products has been somewhat of a depressing influence. Many bankers
are advising farmers to borrow money and bey feeder cE<-ttle and hogs
because of the low prices for grains and the relati.vel;y higher prices
for live stock.
Much concern was expressed by bankers over growing relief
rolls and the administration of relief and old age pensions. It
was sometimes impossible to keep the conversation in other channels.
In the State of Kentucky there has developed a strong demand
for funds, mostly seasonal, in connection with the movement of the
tobacco crop, which is large and of unusually good quality. There
is a marked increase in the demand for mortgage loans, and ma.ny banks
are gradually shifting investments into mortgage loan channels.
Numerous banks in this and other sections of the district are reducing their holdings of governments, and in some cases high grade
corporates. In one instance (a $3,700,000 bank) the entire investment account consists of $60,000 in Canadian governments. Other
banKs are converting United States government long-term issues into
short-term notes or bonds.
A few Kentucky member banks are borrowing from correspondent
banxs in Louisville at or below our discount rate. The lowest rate
reported to date is 1-1/4%. A feature of such borrowing is their
objection to the fifteen-day limitation on member bank notes, gov-ernment secured, and they would welcome an extension of this period
to ninety days, which ordinarily would carry them through the period
of borrowing required to finance the movement of the tobacco crop.
In Pennsylvania as well as in Kentucky there is developing a
demand for real estate loans. At least one bank has indicated that
'it has appllcations for such loans in excess of its legal limit.
Other banks are purchasing insured mortgages, in some cases to the
maximum permitted.
.. 155
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R-32?-a
A visit t.o a new State nonmember bank (formerly a national
bank) elicited the information that the only reason for surrendering
a national charter was to permit an outright retirement of ~25,000
of preferred stock.
Richmond
Northwestern West Virginia
With some exceptions their banks report an increase of loans
u.nd deposits as compared to .£4'ebruary and March of 1938. Practically
all leans carry a rhl.te of 6% and mo~t banks are paying 2~% on time
deposits. Notwithstanding this . high rate, service charges are but
slightly developed, the most common explanation being the unwillingness of some competing bank to come to an understanding. There is
little intc:rest in investments and banks are disposed to build up
local loans and some go so far as to solicit such loans.
Virginia
Loans and deposits have increased somewhat since the first
of the year and all funds not emplqyed in local loans and invested
in Federal, state, and municipal bonds are held as cash or balances
due from banks. There is little interest in corporate issues. Six
per cent is cha~ged on most loans, with a lower rate very infrequently made to preferred borrowers. Two and one-half per cent is
paid on time deposits and service charges are fairly well developed.
...
There appears to be no serious interest in the new examination poli~r nor in the revised investment regulations of the Comptroller. It is contended that every sound application for credit
is warmly welcomed and the demand for non-bankable credit is small.
lienee, there is no need for consideration of relaxed standards.
·Officers and di:cectors ure activ~ in their efforts to discover new,
;;;afe loans. Production C:redit Association loans have taken little
business from banks thst they could accept.
West Central Norvh Carolina
The bulk of the time deposits of most bunks receive 2% inter. est, but there is a tendency to reduca the rate on large balances.
Higher rates are paid on deposits where competition is strong. There
is resentment among bankers because of the criticism that they do not
make enough loans. It i.s felt that no actually safe loans are rejected. As for relations with the F,ederal Reserve Bank of Richmond,
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one banker said, 11 - - - in view of the revenue derived from exchange
charges, which reprusent approximately the net earnings of (this)
banl<:, membership in the Federal Reserve System would be considered
only when made mandatory by law. 11 Another banker expressed the
opinion that member banks should be permitted 11 - - - to deposit checks
for collection without assortment as to availability dates, giving
the member bank credit on a fixed average availability." Banks do
not give much weight to the new examination procedure, holding that
credit policies of banks cannot be safely relaxed beyond present
practice even if permissible under the new method of classification.
...
This region has a fortunate combination of a fairly good
agricultural industry plus many manufacturing establishments of
various sorts. Cotton acreage has been reduced and the yields have
been poor, but loss of farm income from this source is partly offJet by corn and sweet potato crops that are better than average,
though prices for both are somewhat lower than last year. Farmers
in some localities complain of cotton acreage allotments by aerial
survey. Livestock is an important industry in some counties and
could be made so in others, much to the advantage of the farmers.
Furniture and hosiery plants are operating at or near a fulltime basis, but few cotton textile mills are doing better than three
eight-hour shifts, five days per week, while some are operating only
one. There appears to be a certain hope that business will improve
in the near future, but the feeling does not amount to optimism and
the long-run view is not considered encouraging. Conditions among
manufacturing industries havo improved within the last few months
but full production has not yet been attained.
poutheastern North Carolina
Bank relations are complicated by the competition of non-par
banks which profit from exchange charges. These are not defended as
ethical, but are deemed necessar,y and in one case it was contended
that branches needed in certain communities could not be maintained
without them. It was pointed out that a lone bank cannot become a
member unless its competitors are also brought in so that competitive
conditions will be uniform for all.
Northeastern South Carolina
Recently bank deposits have been greatly increased because
of the sales of tobacco, but the demand for loans has not altered
mat:::rially. Crop production loans during the current season have
been rathor loss than usual, with rates varying from 2% to 7%.
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Two per cent is paid on time deposits, although in some cases
this rate is confined to old deposits and a lower rate or none is
paid on new. In other cases the rate is graduated downward. The relations among banks and the ability to cooperate seems to be the controlling factor in interest on time deposits.
Atlanta
Southwest Alabama
Our representative visited 20 member banks and 4 nonmember
banks located in the southwestern part of Alabama. The territor.y
covered is an agricultural s~ction, the principal commodity being
cotton. This year's cotton crop suffered considerable damage from
excessive rainfall and the boll weevil. The crop is a short one,
the yield being from 40% to 60% below that of last year.
With the price of cotton at around 8¢ a pound and the ComCredit Corporation's loan value approximating this figure,
most of the bankers in the territory visited are frank to state that
business among the local merchants cannot be other than bad. The
majori~ of these countr.y bankers anticipate slow collections and
more than a normal extension of their farm paper, with possib~ some
charge-offs. After the average farmer pays his debts he will have
little money to spend, except for the bare necessities of life.
modi~
One encouraging development is the increasing interest shown
in the raising of live stock. The raising of beef cattle is growing
in importance each year, especially in the Counties of Greene, Sumter,
Marengo, Hale, Perr,y and Dallas.
A number of saw mills are located in and around York and
Demopolis. The largest mill is in York, employs 300 to 400 men, and
has operated throughout tha depression. Lumber production is ahead
of sales. This condition is presently accentuated because of the
fact that the small mills are sawing and stacking lumber while labor
is cheap, before the wages and hours law becomes effective and
forces them to increase wages. Our representative was told that
small mills contend the.y cannot remain in business and pay the minimum wage required under this law.
Louisiana
Bankers in the city of Lake Charles and vicinity report that
business at their institutions is better than that of a year ago,
and considerable further improvement is expected during the remainder
/
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of the year. Retail sales for the year to date are slightly under
the figures for the same period of last year, but it is expected
that figures for the full year 1938 will equal or exceed those of
1937.
The location of a packing plant in Lake Charles qy Swift &
Company has provided a market for beef cattle. This plant, which at
thEJ present time employs over 200 men, has a capacity of 1,000 head
per day and is now operating at approximately 60% of capacity. It
was stated thut cattle are received at the plant in Lake Charles
from points several hundred miles distant. '!'he farmers are taking
greater interest in their cattle, by improving breeds and by feeding for a time prior tv marketing.
The principal crop in the territory surrounding Lake Charles
is rice. This crop has beem damaged somewhat due to a combination
of wind and heavy rains. It is predicted that the rice crop will
not be as large as last year, and that in all likelihood the grade
will not be as good.
Exploro.tion for oil is very active in south Louisiana.
In the vicinity of Alexandria cotton is the principal crop.
Our representative was advised that due to acreage reduction and excessive rain during the growing season this year's crop will be much
smaller than that of last year.
The bar1ks in Alexandria report that they are giving more and
more attention to personal loans, which are rapidly becoming an important source of earnings. These banks have recently made loans
to saw mills manufacturing hardwood lumber for inventory in anticipation of the effective date of the wages and hours law. The
raising of cattle and hogs in the territory surrounding Alexandria
is increasing in importance each year.
Visits were made to 4 banks located in a section where the
principal crop is sugar cane. It was stated that this year's crop
of cane appears to be the finest in ten years. If the growers obtain anything like a fair price it is anticipated that local business
conditions will be unusually good this fall.
Chicago
1be banks visited in northern Michigan report retail trade
as fair, although affected somewhat by the resort business, which
is estimated at from 75 to 80 per cent of last year.
. 159
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Part of the territory visited is in the fruit section. The
quality of the fruit this year is poor and the price unsatisfactory.
Cherries are three cE:nts a pound compared with four cents last year.
In some sections, the grape crop is only five per cent of normaL
As a consequence of these conditions, many of the farmers are
giving up fruit growing and turning to dairying.
Some residential building is reported, as well as several
public institutions under conotruction, with more repairing and
painting than in many yea.rs.
Banks report very little change in the loan situation except
t..ha t there seems to be a fair demand for mortgage loans.
The question of offices or so-called "branches" continues to
be an obstacle to membership. Some of the nonmember banks visited
either ha.vo branches or are contemplating the establishment of one
or more; one member ba1~ is arranging to open three or four branches
and will withdraw from the System, and another is considering similar
action.
Very little chango has been noted in conditions in Illinois
since previous reports. One banker expressed the thought that some
hoarding of funds is going on and referred to instances that had
come w1dor his personal observation.
Group meetings were attended in Illinois, Indiana, and
Wisconsin.
At the Illinois meetings, the principal subject of concern
seemed to be the forthcoming referendum on an amendment to the State
constitution, which would, if approved, relieve State bank stockholders of double liability. One speaker pointed out that under
~ection lOb of the Federal Reserve Act it is now possible for the
, reserve banks to loan on municipal bonds, corporate bonds, or any
other type of sound asset. He stressed the 'ralue of this and stated:
"If for no other reason, the abilit;y of a bank to secure aid in an
emergency under this provision should be a sufficient inducement
for every ne>nmember bank to join the System. 11
::it. Louis
Coincident with the change from summer to fall, there has
been a perceptible, though small, improvement in business in the
smaller communities and agricultural centers.
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In the South, cotton picking is proceeding, and while the tot:l.l
number of bales produced will be considerably b~-,low the 1957 record,
results promise to be satisfactory, particularly in cases v1here compliance has been made with the provisions of the Soil Conservation pro-gram.
Prospects for the tobacco crop are very favorable and the op~m.on
prevails that prices will nt least be as high as those of last season.
Farmers in sections of Indiana and Kentucky where burley tobkLCCo is gro~m
are worried as to the effect of too much moisture on their crop.
It is reported that there is a spl~mdid crop of rice in Ar!mnsas,
but the price, which opened at 50¢ per bushel, is too low for farmers
to do more than pay off their borrowed money.
Valuable oil development work continues in various counties in
southern Illinois, where in less than two years more than one thou~and
producing wells have been drilled, with a monthly production of J:~ million barrels. Numerous communities in the area affected are experiencing the greatest "boom" in their history.
Coal production shows soMe improvement, although the summer output was much below normal.
A member bank president reiterated his concern about the nonpar situation and expressed the opinion that the future of the F. n.
System from the standpoint of country members depended upon some acti•::m
being taken to overcome the inequalities between members and nonmembers
resulting from the latter being allowed to ch2rge exchange on chec1:s r·eceived through the mail. He was particularly interested in the ac Li vities of the National Association of Credit ll/.en .i..n endeavoring to develop
a universal par list and felt they should be encouraged. He t8lieved
that the passing back to depo:..dtors of any exchange cost on non-p~r
items, whether or not such expense was absorbed by correspondent bGnks,
should tend to cause banks to G:.iscm1tinue charging exchange.
The cashier of an Arko.ns:,s member bD.nk was ver;r outspoken in
his appreciation of membership in the System. HB mentioned the handicap incident to the handling of checks on non-r;ar banks, and how it had
been solved in connection with orw Arkansas nonmember, by presenting
a large volumo for payment in currency.
The cashier of a Missouri nonmember bc:,nk inquired as to the date
his bank would be obligod to become a member of the F. E. System. He
indicated that regardless of the ethics of cnarging exchange on ch~)cks
received through the mails, he will be reluctn.nt to give up the income
derived therefrom until obliged to do so. He fec.ls it is not exnctly
proper for a bcnk to charge exchange and would welcome sonie outside
action which would compel him to par. He feels that the National Association of Credit Men will be successful in their campaign for a universal
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R-527-a
par list and stated that his customers were constantly inquiring about
charges the bank was making for paying their checks, which charges
were brought to their attention by the firms from which they were buying goods.
Our visiting officer was somewhat surprised to find the door
of a small. Indiana nonmember securely locked during banking hours.
Following an inquiry through a speaking tube at one side of the door,
tmd a satisfactory reply, the door was opened by electricity and our
ot'flcer was admitted. The bank was using this means of protection follO'.·dng a recent robbery.
Minneapoli~
Y{estern North Dakota
The territory covered was first developed as a cattle country
later turned into wheat, especially during the World War. It is
now in process of transition back to cattle and sheep, although there
is some dairying being developed west of Bismarck, and there are a few
areas where wheat seems to have done reasonably well or where the population insists on raising wheat wlth government assistance. 'l'he government program of paying bounties for soil conservation und for reduction
in wheat acreage has u.ided materially in the return of this country to
livestock growlng, and most of th(~ bankers are thoroughly in accord
"With this trend. Several bankers stated that the government would bo
eVen more far-sighted if it completely discontinued seed loans and VIheat
allotment~., and used the same money to finance restocking of the ranges
a.:nd the purchase of land for inclusion in government. range areas.
r~d
This territory suffered a serious disaster in its cash crops
this ~'.rear and, as a result, the entire area seemed to be "shell-shocked",
not knowing how the population can get through the winter and hardly
realizing the extent of the damage. Moisture conditions had been excellent during the growing season, averaging twice as much precipitation
as in eastern North Dakota and, in many places, more rainfall than in
any other year during the past thirty to fifty years. Shortly before
harvest, rust attacked all of the wheat, except Thatcher wheat, and
then u. pla.g1.1e of grasshoppers descended, moving from southeast to northW>Jst and taking all of the crops. Wheat, which promised to Jield 20-50
buf:hcls per acre, was unfit to cut or, if threshed, yielded from 1/2
bushel to 1-1/2 bushels per acre.
The letter to all banks urging them to make more loans and
threatening government lending activities as an ulternc..tive had made
a deep impression on the bankers of this region, although the reactions
were very diverse. One banker was quite amused b;y the letter, for he
said that in his area he had taken on all the loans that his bank could
stand. Several bankers were puzzled. They discussed their loan situation
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527-a
in some detail, describing the position of farmer customers in the light
of the many years of drouth, rust, and low prices, and asked whether
it was thought that they should try to make loans to these farmers who
had mortgaged everything they possessed to Federal agencies. A few bankers seemed to have very definite ideas of the maximum amount which they
should allow their loan portfolios to reach in view of the hazards of
farming and banking in this dry country! A number of bankers in southern
North Dakota stated very frankly that they were over-loaned at the present time and that their banks were filled with frozen paper to a point
which indicated that some of these banks would not live through the
winter. Two nonmember banks which are in excellent condition and on tho
par list gave tho letter as sufficient reason for not joining the Federal Reserve S,i'Stem, stating that if political coercion is going to tc,ke
this form, they thought the farther away from the Federal banking system
they were able to stay, the better off they would be.
The Bank of North Dakota was very active. More than half of
its staff is employed in handling farm loans for the North Dakota Rural
Credits Board and the state-mvned farms which have been taken over t:tu~ough
foreclosure b<J that organization. The principal lending activity is on
school warrants to assist the school dil:ltricts in paying salaries. The
deposits are chiefly public deposits of county and State officials. The
bank has $800,000 of private deposits, principally coming from comJnunities which have no banks. The auditor stated that these private deposits
are more of a nuisance, and required more clerical labor, than the
$20,000,000 of public deposits required.
The North Dakota Moratorium laws were a decided hindrance to some
bankers but not to others. One National banker stated that it was almost
impossible for him to make loans in his community on account of the various moratorium provisions behind which borrowers could hide. Several
other bankers stated that they were continuing their lending operations
on a somewhat more conservativ-e basis than would be necessary without
the moratorium laws, but that they have had no customers who had invoked
these laws. Tho bankers merely found it necessary to use more diplomacy
in handling collections. In areas where the bankers claL:1ed to have been
conservative there was no radicalism and very little trouble with collections. In the areas where banks were badly frozen on account of liberal
lending policies, the bankers cornpJ..ained of a discouraged and generally
recalcitrant attitude on the po.rt of their borrowers.
Kansas City
Representatives of this bank called on about 100 banks during
September. The effect of the war scare on bankers' feelings toward their
holdings of Government securities was marked. During the time the situation was acute, invariably the first question asked was "What's this
Government bond market going to do?" or "Don't you think we had better
163
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unload some of our Governments?" After the cr~s~s had passed, this
nervousness regarding their Government investments subsided appreciably.
Real estate loans on small tracts of land are especially
favored in some places. These loans are made for comparatively short
periods on 5, 10, 25, 40, or 80-acre tracts. The loan is amortized.
If payments are satisfactory, a new loan is made at maturity. Government lending agencies such as the land banks have no machinery for
loans on these small pieces of land and commercial banks report a rather brisk demand for such loans.
A banker in a small town found his loans had dwindled to less
than $50,000 in February and he decided to drum up some business. He
specialized in automobile, tractor, ~~d other implement installment
notes. Since the first of the year he has made more than 700 loans
out of a total of more than 1,000 applications. His experience to date
with these loans is said to be entirely satisfactory and very profitable.
In only one case has it been necessary to take over the security - an
automobile that was re-sold at a profit. The activities of this small
bank in the solicitation of this type of loan have caused a great deal
of criticism from many b~nkers in surrounding towns.
Bankers express concern at the number of people moving from
the land to to~n. Buildings are being moved off the land or torn down
in order to reduce taxes. The farms are operated from town with machinery and hired help. One banker gave his own experience. For many
years he has ormed 16 farms in his community. Formerly there was a
family on each farm. These farmers made a good living, raised and
educated their families, and he made a profit on his share of the crop.
Today there are no families on any of his farms and he does all the
work with tractors and three hired men. He now gets all the crop but
makes less money than formerly when he received only the landlord's
share.
In the last few weeks many bunks report a decline in deposits.
Quite a number of small banks are getting into a position where they
must soon borrow.
There is a vast amount of grumbling among farmers over the
acreage reduction features of the triple A. But, curiously enough,
farmers would probably reduce wheat acreage nearly to the requirement
even though there were no compulsion. In eastern Kansas, where the
reductions are most sweeping~ farmers are much in the mood of going
back to corn and livestock. There is a large amount of wheat on the
farm. In some sections of Kansas it is said from 75 to 80 per cent
of the crop is being held. Banks are making some loans on this wheat,
the amount ranging all the way from 30 to 45 cents a bushel.
Banks report that city banks are very active in soliciting
country bcnk accounts. One of the important obstacles to membership
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R-327-a
is the attempt of correspondent banks to give the same service now
performed by Federal Reserve banks.
Dallas
Northeast Texas
In this section of the state, where cotton dominates the fortunes of both the urban and I~ral population, the cotton growers, merchants and banks are beginning to feel the pinch of the sharply curtailed volume and low market value of this year's cotton crop, which
is now in process of being harvested.
With the staple quoted at around 8 cents a pound, the government's offer to lend 8.30 cents is having the effect of taking practically the entire production of these counties off of the market.
European war clouds, which in some quarters were interpreted as presaging a possible expansion of the foreign market for American cotton, have
also tended to encourage the producers to take advantage of the government's 1938 loan plan. As a result of these conditions the portion of
the new crop that is being sold in this area is extremely small, representing, in most cases, distress sales by farmers who need funds badly
and can wait no longer for the arrival of the government's new loan
forms or its subsidy checks covering last year's farming operations.
Discontent among farmers is widespread and bitter as a result
of the dilatory manner in which the government has administered its
cotton crop program this year. When planting time arrived last spring
the federal and local authorities were not ready to announce individual
acreage allotments. Farmers went ahead and guessed at their allowances,
their guess work proved too optimistic, and as a result much fine. cotton had to be plowed up when ready to be picked. Then again when the
crop was ready to be gathered and stored, the government did not have
the new loan forms ready for distribution, and the bunks were powerless
to make any advances under the Commodity Credit Corporation plan.
r
These delays naturally increased the anger of the harassed producers, and in one East Texas community their resentment of the situ~
tion culminated in violence when a group of disappointed farmers rioted
in the county agent's office and gave vent to their displeasure bJ
smashing his furniture and office equipment. Although this was an extreme case it was significant as an indication of the spirit of dissatisfaction that is widespread in the Texas cotton belt at this time.
Farmers who originally accepted the government's acreage reduction plan as the only visible means of forestalling ruinous overproduction are now in such an ugly mood as a result of the way it has
worked out this year that if an immediate vote were taken on renewing
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the program for another year it would in all probability be voted dovm.
It is possible that their attitude will change after they receive their
subsidies for last year's operations. There is a growing belief, however, that the producers aro becoming strongly in favor of doing away
entirely with the present scheme of acreage control and taking their
chances on a return to unrestricted production.
The president of a well managed bank having deposits of $500,000
advanced a suggestion regarding officers' borrowings. He said that the
present system of inter-bank accommodations under which member bank officers are forced to use their correspondent banks as a means of supplying their personal credit needs is unsatisfactory and in many cases gives
rise to unwholesome reciprocal borrowings, city and country banks exchanging accommodations and allowing them to "ride" until they become solidly
frozen. His suggested remedy for this situation is an amendment to the
Federal Reserve Act that would authorize Federal Reserve banks to make
direct loans to executive officers of their member banks under such rules
and regulations as would insure the soundness of such advances.
San Francisco
South Central Idaho
The 22 banks and branch banks visited during the period September 21 to 30, inclusive, are all of the banking offices located in the
south central part of the State of Idaho, most of them in highly diversified, irrigated agricultural districts, the remainder being in or very
near mountainous regions where the livestock industry, both sheep and
cattle, is the more important.
The season has been favorable for the growing of all agricultural crops and average to above-average yields have been or are now
being harvested. Total farm income will, however, be less than last
year because of lower market prices now prevailing, particularly for
grains, beans, and butter fat. Ranges have been above average condition
all summer and livestock, the movement of which from the mountain summer ranges is beginning, are in better than average flesh condition.
The proportion of range lambs ready for the market without additional
feeding is said to be larger than usual and the market price has declined
a little during recent weeks. Although feed is relatively cheap, pro~
spective lamb feeders, we were informed, are proceeding with caution in
view of losses experienced in the business last winter and their thought
that the margin of profit in feeding operations during the coming winter
is apt to be narrow.
During the past 18 months, a number of people who were located
on farms in the Dakotas, Kansas, and Nebraska, have moved into south
central Idaho. Most of them have arrived with limited means and a few
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H-527--a
have undertaken to buy s;nall irrigated farms on contracts; some have
taken raw land for which wate.r for irrigation is available on a tract
being opened north of Shoshone under the Resettlement program, while
others have sought whatever employment was available, resulting in
material improvement of the farm labor situation in that region.
Walla Walla district, Washington
The wheat crop in the Walla Walla district had been harvested,
and for the acreage planted normal results were obtained. The banks
were very much interested in the question of loans to be made by the
Commodity Credit Corporation through the Reconstro1ction Finance Corporation. Only one or two loans had been made. Wheat prices i'l'ere consider-ably below the price at which C. C. C. loans were to be made, that is,
on a basis of 67¢ for No. l wheat at Portland and Seattle. On account
of the reduction of wheat acreage under the Goifernr::ent allotment pl:m,
farmers were turning to cover c1·ops, v;hich are being used for the feeding of livestock. In this latter connection, it was reported that t:1ere
has been a substantial increas8 in the breeding of cattle and horses.
Yakima Valley and Upper Wenatchee
V~tlley,
Washington
The Yakima Valley is well diversified agriculturally, but conditions have not been particularly good. Influenced by the fact that
there wc..s a large cn.rry-over of conned p0n.ches in California lnet year,
packs of this fruit were largely curto.iled and prices were abnormally
low for the fru.i"t delivered to the canneries. Prices for pears and
prunes were also unsatisfactory, the former being approximately $8.00
a ton, and prices offered for prunes were so low that the growers in
many instances left the fruit on the trees. The month of September
has been unusually warm, which has had a disastrous effect on the growing apples. Where the grower would oro.inaril;y- be required to spray fi vc
or six times, the warm weather has increased the menace of the codling
moth and growers have had to resort to spraying an additional three or
four times. Apple production was e:..'..rlier estimated to be lo.rgely in
excess of last year's production, but for the above reasons estim::lt€s
have had to be revised and it is difficult at this time to stat.o the
approximate damage caused by the unseasonable weather.
Hay production and prices in the Yakima Valley hr1ve been good.
This is largely accounted for by the fact that pastures in western W3.shington dried up dur.ing the rainless summer months and dairJ' cattle had
to be fed.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
September - 1958
Visits to Banks
Federal
Reserve
Bank
0
I
(;\2
I
Member
Meetings Attended
I Non-member j Total
Number
I Attendance
1
8
5
10
1,455
646
2,620
None
None
2
None
55
5,197
550
None
None
2
None
44
85
7
26
#
#
25
51
111
127
105
Richmond
Atlanta
Chicago
St. Louis
28
55
52
47
19
22
18
199
47
55
50
246
None
2
20
2
Minneapolis
Kansas City
Dallas
San Francisco
58
26**
56
86
150
75*
5
15
208
99
59
99
4
7
None
10
Boston
New York
Philadelphia
Cleveland
*
82
Addresses Made
#
790
872
1
5
None
None
455
Includes 6 calls made in August.
1 call made in August.
Number not reported •
** Includes
#
..
Number
.
I Attendance
62
600
55
655
.168
BOARD OF GOVERNORS
CF' THE
F"EDERAL RESERVE SYSTEM
WASHINGTON
R-.328
ADDRESS DF'F'ICIAL CDRREBPDNDENCE
TD THE BDARD
October 21, 19.38.
SUBJECT 1 Forms for use during 19.39.
Dear Sirt
'
It will be appreciated if you will advise the Board the
number of copies of the forms listed below that w.i.ll be required
at your bank (including branches, i f any) during the calendar
year 19391
Title
F. R.
5
F. Re 44
Federal Reserve notes - Daily statement
of Federal Reserve Agent.
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.
Very truly yours,
E., L. Smead, Chief,
Division of Bank Operations.
TO ALL FEDERAL RESERVE AGENTS
169
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-.)29
ADDRESS OF"F"ICIAL CORRESPONDENCE
October 21, 19.)8.
TO THE SOARD
SUBJECT 1 Forms for use during 19.39.
Dear Sir1
It will be appreciated if you will udvise the Board the number of
copies of the forms listed below that will be required by your bank
(including branches, if any) during the calendar year 19.391
Title
Daily balance sheet. (Please state the number required for the head office and each branch separately, and indicate any special punching tho.t mo.y be
desired.)
F. R.
.38
Clo.ssificatta.11 of discounted and purchased bills held
at the end of the month.
F. R.
95
Monthly report of current earnings.
F. R.
96
Monthly report of current expenses.
F. R.
96a
Monthly report of reimbursable expenses.
F. R. 160
E
Monthly report of receipts and payments of paper
currency.
Semiannual functional expense report.
Please show separately the number or copies of each form,·except
form F.R. .)4, required if revised and the number if not revised.
/[OM,_
Veey trtlly
E. L. Smead, Chief,
Division of Bank Operations.
TO THE PRFBIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
R-550
OF" THE
170
FEDERAL RESERVE SYSTEM
WASHINI3TON
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE SOARD
October 22, 1958.
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:
NUBALB - Treasury Bills to be
dated October 26, 1958, and to
mature January 25, 1939.
Very truly yours,
'
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
171
R-351
BOARD OF GOVERNORS
OF TH.Ji;
FED1RAL RE5ERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Thursday, October 27, 1938.
The following summary of general
business and financial conditions
in the United States, based upon
statistics for September and the
fir~t three weeks of October, will
appear in the November issue of
the Federal Reserve Bulletin and
in the monthly reviews of the
Federal Reserve banks.
In September industrial production and employment continued to advance, and there was also an increase in the volume of retail trade.
Building activity continued at the increased level reached in August,
reflecting a large volume of awards for publicly-fim:mced projects.
Proc.uction
Volunie of industrial production increased further in September and
the Board's seasonally adjusted index advanced to 90 percent of the
1925-1925 average as compar•3d with 88 percent in August.
There was a
substantial rise in pig iron production and output of steel ingots contirmed to increase,
r::~.veraging
45 percent of capacity.
three weeks of' October activity at steel mills
s~owed
and was at a rate of about 50 percent of capacity.
tion continued to advance rapidly in September.
In the first
a further increase
Plate glass produc-
Output of lumber and
cement was maintained, although at this season activity in these industries usually declines.
Automobile production in September remained
at about the samt:: low rate as in August; in October, however, output
172
-2-
R-531
increased rapidly as most manufacturers began the assembly of new model
cars.
In the nondurable goods industries there were substantial in-
creases in activity at meat-packing establishments, sugar refineries,
and tire factories.
Output of shoes declined somewhat.
Textile pro-
duction, which had been rising sharply since spring, showed little change
in September, although an increase is usual.
Activity increased further
at silk mills but at woolen mills there was a decline, and at cotton
mills output did not show the usual seasonal rise.
At mines, coal production increased considerably in September and
there was also an increase in output of copper.
Crude petroleum output
declined as wells in Texas were shut down on both Saturdays and Sundays
whereas in August only Sunday shutdowns had been in effect.
Value of construction contracts awarded, which had increased considerably in August, showed little change in September, according to
figures of the F. W. Dodge Corporation.
Awards for private
residenti~l
building continued at the advanced level prevailing since early summer
and contracts for public residential projects were also maintained following a rise in the previous month.
Other public projects continued in
substantj.al volume.
·Employment
Employment and payrolls increased further between the middle of
August and the middle of September, reflecting principally increases at
manufacturing concerns.
Bmployment rose sharply at automobile factories
and increased moderately in other durable goods industries.
At factories
R-331 r
-3-
producing nondurable goods there was slightly more than the usual sea·sonal rise in the number employed.
Distribution
Distribution of commodities to consumers showed a more than seasonal rise in September.
There were increases in sales at department
and varit:ty stores and mail order sales also increased.
Department
store sales for the first three weeks of October showed somewhat less
than the
u~ual
seasonal rise.
Freight-car loadings continued to increase in September and the
first half of October, reflecting chiefly a further rise in shipments
of coal and miscellar1eous freight.
Commodity prices
Prices of a number of industrial raw materials, particul..srly hides
and copper, advanced from the middle of September to the third week of
october.
duced.
Crude oil and gasoline prices, on the other hand, were reLivestock and meat prices showed large seasonal declines in
this period.
In the first half of October there were sales of many
finished steel products at prices below those announced for the fourth
quarter, but in the third week of the month it was reported that prices
had been restored to former levels.
Bank cradit
During the four weeks ended October 19 there were further substantial increases in the gold stock of this country.
As a
re~ult
largely
of these gold acquisitions and of net expenditures by the Treasury from
its deposits with the Reserve banks, excess reserves of member banks
increas·8d to a total of $3,270,000,000 on October 19.
173
,•
R-531
-4-
Demand deposits at reporting member banks in 101 leading cities
were also increased by the inward gold movement and on October 19
amom1ted to
bD.nks.
~15,750,000,ooo,
the largest
vol~~e
ever reported by these
Following substantial increases during .September, reflecting
purchases of new issues of United .States Government obligations, total
loans and investments at reporting banks showed little change during
October.
Money· rates and bond yields
The avcrat;e yield on long-term Treasury bonds declined from 2.48
percent on September 27 to 2.28 on October 21.
Yields on Treasury
notes and 'l'reusury bills also declined in the period.
174
BOARD OF' GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CDRRESPCNDENCE
TC THE BCARD
October 25, 1938.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
d0signated to cover an issue of Reconstruction
Finance Corporation notes:
NOWMETS - 7/8% Reconstruction Finance
Corporation notes of Series P, to be
dated November 1, 1938, and to mature
November 1, 1941.
J. C. Noell,
Assistant Secr~:;to.ry.
TO PRESID.F!.;NTS OF ALL FbDERAL RESERVE BANKS
1_76
R-553
BOARD OF GOVERNORS
OF THE
FEDERAL RESJmV~~ SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Tuesday, November 1, 1938.
The following ruling will appear in the Federal Reserve
Bulletin.
Withdrawal from Gene?al Account Foll9wed by
Other Transactions on Same Day
The second paragraph of section 3(b) of Regulation T
provides, in part, as follows:
"A transaction consisting of a withdrawal of
cash or registered or exempted securities from a general account shall be permissible only on condition
that * * * the transactlons (tncluding such withdrawal)
on the day of such withdrawal would not create an excess of the adjusted debH balance of the account over
the maximum loan value ot' the securities 1n the account
or increase any such excess."
In order to insure compliance with this provision many
brokers make it a practice to permit no withdrawals from the account without being assured that trading in the account has been
concluded for the day.
The Board, however, recently received
inquiries regarding two situations in which a broker, having
failed to take this precaution, permitted a withdrawal that was
followed by transactions which, in combination with the withdrawal, would create or increase an excess of the adjusted debit
balance of the account unless margin was deposited in the account
-2-
R-555
177
on the same day.
For simplicity of exposition these cases may be assumed
to be alike in that at the beginning of the day the adjusted
debit balance of the account exactly equalled the maximum loan
value of the securities in the account, and that early in the
day $2500 of registered nonexempted securities were sold.
present
lo~m
Under
values of 60 per cent, this released margin in the
complernent:uy percentage of 40 per cent, i.e., $1000.
The cred-
itor permitted the customer to withdraw this $1000 in cash.
Later in the day other securities were purchased in the
account.
In one case
~2000
of registered nonexempted securities
were purchased, requiring $800 of margin, i.e., $200 less than
the $;1000 withdrawn.
In the other case :;:4000 of such socuri ties were purchased, requiring $1600 of margin, i.e., $600 more than the
amount withdrawn.
The question in each
casr3
related to tho time within
which the required margin must be obt'lined from the customer.
'l'hc provisions of section 3(b) quoted above clearly forbid a v,ri thdr'lwal of cash or sccuri ties if' the withdrawal, in combination with the other transactions on the same day, would create
or increase an excess of the adjusted debit balnnce of the account.
Accordingly, in the case of the subsequent transaction requiring
~:soo margin it would be necessary for the creditor to obtain the
R-555
-3-
full amount of such margin before the end of' the day on which
the withdrawal took place.
In the other case, in which the subseq_uent transaction
req_uired $1600 nargin or $600 more than that originally withdrawn,
it would be necessary to obtain, on the date of the transactions
in question, the $1000 which had been withdrawn.
The remaining
$;600 required could be obtained, as provided for ordinary transactions by the first paragraph of section 3(b), "as promptly as
possible and in any event before the expiration of three full
business days following the date of such transaction."
178
·-
. 179
.
R-5:34
BOARD OF GOVERNORS
OF· THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Tuesday, November 1, 1938.
The following ruling will appear in the Federal Reserve
Bulletin.
Broker or Dealer Who Transacts a Business in Securities
Through the Medium of a Member
Under section 7(c) of the Securities Exchange Act of 1934
"any member of a national securities exchange or any broker or
dealer who transacts a
busine~;s
in securities through the medium
of any such member" is subject to the Board's Regulation T, which
relates to the extension and maintenance of credit by such persons.
In this connectton the Board has had occasion to consider
certain questions as to what brokers or dealers "transact a business in securities through the medium of a member".
The general question of whether or not
~
particular broker
or dealer "transacts a business in securities through the medium
of a member" must turn upon all the relev(lnt facts involved in the
business of that broker or deale!'.
It hils not seemed feasible to
attempt to specify any conditions or factual situations which
would prevent a broker or dealer· from coming within the description.
The Board has, however, expressed the view that the mere
failure to handle any business in registered securities would not,
'.··· .....
R-334
-2-
in itself, be sufficient to keep a broker or dealer from being
one who transacts a business in securities through the medium of
a member.
This is because the relevant language does not refer
to transacting a business in registered securities but to trans·
acting a business 1n securities.
Similarly, it has expressed the opinion that the fact
that a firm does not carry any so-called margin accounts would
not, in itself, be sufficient to keep the firm from being a broker
or dealer who transacts a business in securities through the medium of a member, because the Act refers to transacting a business
in securities rather than to transacting a margin business in securities.
A "broker or dealer who transacts a. business in securities
through tho medium" of any member of a national securities exchango is subject to Regulation T to thG same extent as a member.
Accordingly, if a broker or dealer is one who transacts a business
in securities through tho medium of a member, he is subject to the
regulation even as to a particular transaction which is not effected through a member.
180
R-335
BOARD OF GOVERNORS
181
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL. CORRESPONDENCE
TO THE BOARD
October 29, 1938.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal reserve banl:s, the
follot~~ling
code word
has been designated to cover a new issue of
rrreasury Bills:
- Treasury Bills to be
dated November 2, 1938, and to
mature F'ebruary l, 1939.
~~
Very truly yours,
P1..A2-e~
·J. C. Noell,
As·Jistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE
/
·
~KS
R-556
BOARD OF GOVERNORS
182
CF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
November 3, 1958.
Dear Sir:
In connection with telegraphic transactions in Government securities between F'ederal reserve banks, the following code word
has been designated to cover a new issue of
Treasury Bills:
NUBANO ·- Treasury Bills to be
dated November 9, 1938, and to
mature February 8, 1939.
Ver;1 truly yours,
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
R-3~7.
OF' THE
183
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
November 4, 1958.
Dear Sir:
Enclosed for your comments and suggestions are several
copies of two proposed amendmm1ts to Regtuation T, Extension and
Maintenance of Credit by Brokers, Dealers, and Members of National
Securities Exchanges, wh~ch have been pr8pared by tbe staff but
not yet passed upon by the Board. Your comments should reach the
Board of Governors if possible by Saturday, November 19, 1958.
You should feel at liberty to consult confidentially with respect
to these amendments anyone whom you may choose to consult, including any representatives of national securities exchanges or
securi~ dealers' associations.
The principal purpose of the proposed amendments is to fur-ther clarify and liberalize certain provisions of the regulation
which relate to transactions other than margin transactioriS. They
would am8nd sections 4(c) Special cash account and 4(f) Special
miscellaneous account.
Changes in section 4(c) -- This section providus for handling without margin, on certain conditions, certain transactions
which are defined as bona fide cash transactions. By the proposed
amendment to this section, the broker who has sold securities for
a customer (or the dealer who has bought securities from a customer)
in a special cash account would no longer be required by the reguln.tion to obtain the s,9curi ties within a prescribed period. This
change is coupled with the inclusion of a provision which makes it
clear that to effect short sales for customers in the special cash
accour1t, instead of in a margin account, is not permissible.
In addition, the broker who has bought securities for (or
the dealer who has sold securities to) a bank, insw·ance company or
other customer on t(~rms such as are common in thG tradG with respec:t
to bona fide cash transactions for or with institutional customers -11prompt delivery and payment on delivery 11 -- would be exempted from
the requirement that he shall get payment, and consequently make
184
-2-
delivery, within a prescribed period. The safeguard with respect
to such transactions, in lieu of a prescribed time limit, would be
the proposed description of the transactions, which has been de-signed, after considerable study, to exclude all transactions which
are not readily identifiable as "bona fide cash transactions" in
the fullest sense of the term.
After these two changes, the specific time limit prescribed
by section 4(c) would apply only to cases in which the customer is
buying securities, and only to a limited class of th0se cases, with
the consequence that many firms which do most of their business with
institutions, carry no margin accounts, and extend very little
credit, would no longer be much uffected by Regulation T.
Another change in section 4(c) would require that the understanding or agreement for prompt payment that must underly any purchase by the customer that is to be made in the special cash account
shall contain a roasonable safeguard against the customer's reselling the securi~ without his first having paid for it, and still
another would make it clear that the prescribed time limit does not
apply to transactions in exempted securities.
Changes in section 4(f) -- One of the proposed new clauses
to be added to section 4(f) would permit, under certain safeguards
and with the approval of an appropriate committee of a national securities exchange, so-called "capital contribution loans". The
other new clause would permit without restriction cash transactions,
and certain other transactions of similar nature, between one 'broker
(or dealer) and another. This would assume that such transactions
need not be subjected, as they may be under the existing regulation,
to the same restrictions as relations between each broker or dealer
and his ordinary customers: for example, in case broker A (acting
for one customer) makes a sale to broker B (acting for another customer), and B must obtain an extension of time within which to
settle with his customer, A should not be required to get in addition an authorized extension of time for settling wlth B.
You will understand th&t the foregoing explanations, although
available for use b,y you in consulting with others, are not for publication.
Very truly yours,
Enclosure.
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
185
R-357-a
CONFIDENTIAL
Proposed amendment to section ·1:( c) of
Regulation T
Subsection (c) of section 4 of Regulation T is amended to read as follows:
(c) Special cash account.. - In a special cash account a creditor
may effect for or with any customer bona fide cash transactions in which
(1) The creditor sells any security for, or purchases any
security from, any customer, provided the security is already
held in the account or the purch<J.se or sale is in reliance upon
an agreement which the creditor shall have accepted in good
faith that the security is then o~med qy the customer or his
principal and is to be promptly deposited in the account;
( 2) The creditor purchases any security for, or sells any·
to, any customer, pruvided fm1ds sufficient for the
purpose are alren~ held in the account;
securi~
(3) The creditor purchases any security for, or sells any
security to, any bank, insurance compru1y or other customer
whose usual practice in purchasing securities is to make full
cash payment therefor ag2inst deli very of the securi ti(~S to
him and to make such payment without in the meantime selling
the securities or securing his obligation to the creditor by
any collateral in addition to tho securities being so purchased, proYided the creditor effects the purchase or sale
pursuant to a bona fide understanding by the creditor that
he is to make delivery of the security to the customer as
promptly as practicable in accordance with the ordinary usage
of the trade and that the customer will make full cash payment for the security in accordance with his usual practice;
( 4) The credi to.c effects any other purchase of any se·curi ~ for, or any other sale of any security to, any cust~:>Iner, provided the creditor effects th~::1 purchas(~ or sale
in reliance upon an agreement which the creditor shall have
accepted in gooci faith that the custom~;r will promptly make
full cash puymont for tho security and that tho customer does
not contl)mplato selling tho sacuri ty prior to making such
payment.
F..xcept as otherwise provided in th:Ls section 4(c), in case a
customer does not make full cc:..sh payment for a security (other than an
exempted security) purchased by hirn pursuant to clause (4) of this section 4(c) within seven days t~.fter the date on which the security w&s
purchased, the creditor shnll promptly cancel or otherwise liquidate
the transaction or· the unset tied portion the:reof.
. 186
-2If 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, is satlsfied that the creditor is acting in good faith in making the application, that the application
relates to a bona fide cash transaction, and t."'lat exceptional circumstances warrant such action, such colllini ttce, on application of
the creditor, may (A) extend the period specified :in the proceding
paragraph for one or more limited periods commensurate with the circumstances, or (B) in the case of the purchase of a registered or
exempted security which has been effected by the customer in the
account, authorize the transfer of the transaction to & general
account or special omnibus account and the completion of the transDction pursuant to the provisions of this regulation rel1:1ting to
such accounts.
The days 1:1pecified in this sectio:1 4(c) are calendo.r days,
but if the last day of the periud specified herein is a Saturday,
Sunday, or holiday, such period shall be considered to end on the
next full business day. For the purposes of this section 4(c), a
creditor may, at his option, disregE<rd any sum due by the customer
not exceeding $50.
187
R-557-b
CONFIDENTIAL
Proposed amen&nent to section 4(f) of
Regulation T
Subsection (f) of section 4 of Regulation T is amended by inserting th·3 following clauses after clause (1) of said subsection
and renumbering tbe succeeding clauses accordingly:
(2) With the approval o.f any regularly constituted
committee of a national securities exchange having jurisdiction over the business conduct of its members, make
and maint~dn loans to or for any pc.a.rtner of a firm which
is a member of such exchange to enable such partner to
make a contribution of capital to such firm, provided
the committee is satisfied in each instance (A) that the
loan is not in the ordinary course of the lender's business and that neither the borrower nor his firm would be
considered to be a customer of the lender or his firm
according to the ordinary usage of the trade, and (B)
that in view of the terms of the loan and other attendant circumstances it will not be detrimental either to
the soundness of the securities busintlSS or to the best
interGsts of persons having financial relations with
the firm for the firm to be supplitJd with such capital
in such manner;
(5) Purchase any security from any broker or dealer,
or sell any security to any broker or dealer, provided
the creditor acting in good faith purchases or sells the
security for delivery, against full paym8nt of the purchase price, as promptly as practicable in accordance
with the ordinary usage of the trade;
188
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
R-338
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
November 7, 1938.
Dear Sir:
There are inclosed herewith copies
of statement rendered by the Bureau of
Engraving and Printing, covering the
cost of preparing Federal reserve notes
from October 3 to October 51, 1958.
Very truly yours,
ad~
0. E. Foulk,
Fiscal Agent.
Inclosure.
TO PRESIDENTS OF ALL FEDEH.AL RESERVE BANKS.
. 189
R-538-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
October 5 to 51, 1958.
Federal Reserve Notes, Series 1954.
&10
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
66,000
188,000
74,000
50,000
44,000
24,000
124,000
34,000
19,000
24,000
21,000
50,000.
718.000
$20
Total Sheets
Amount
12,000
20,000
20,000
19,000
22,000
6,000
35,000
7,000
6,000
8,000
6,000
16,000
78,000
208,000
94,000
69,000
66,000
50,000
159,000
41,000
25,000
32,000
27,000
_§§_1 00Q.
$ 7,176.00
177!000
895!000
~340.00
19,156.00
8,648.00
6,348.00
6,072.00
2,760.00
14,628.00
3,772.00
2,500.00
2,944.00
2,4El4.00
6,072.00
895,000 sheets, @ $92.00 per M • • • • • • • $82,340.00
190
R-339
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Wednesday, November 9, 1958.
The following ruling will appear in the Federal Reserve Bulletin.
Guarantee of Account by Special Partner of Member Firm
Section 6(c) of Regulation T provides that a guarantee of a general account may not be given effect for the purposes of the regulation if the guarantor is a "creditor".
It was pointed out at page 90 of th,Fl February 1938 Federal Reserve
Bulletin that the term "creditor" is defined in section 2(b) of the
regulation to include, among others, every member of a national securities exchange, and the term "member" is defined in section 3(a)(3)
of the Securities Exchange Act of 1934 to include, among others, "any
firm transacting a business as broker or dealer of which a member is
a partner, and any partner of any such firm."
It was stated there,
accordingly, that a partner of such a member firm is a creditor within
the meaning of the provision regardless of whether or not he holds an
exchange membership, and that a guarantee executud by such a partner
may not be given effect under section 6(c) of the regulation.
In reply to a recent inquiry, the Board stated that this restriction applies to a guarantee executed by a. special partner of such a
firm as well as to a guarantee executed by a general partner.
R-340191
BOARD OF GOVERlWRS
OF THE
FEDERAL RESERVE SYSTEM
Statement for the Press
For release in morning newspapers
of Thursday, November 10, 1938.
November 9, 1938.
The Board believes that the principles of Section 8 of the
Clayton Act, which relate to interlocking bank directorates, are
in the public interest and should be applied to all classes of
banks.
The law is now discriminatory in that it applies only to
cases involving member banks of the Federal Reserve System or
private banks.
The Board does not believe that there should be
discrimination in any respect among classes of banks subject to
Federal authority.
In view of the fact that less than a month will elapse between the convening of the new Congress and February 1, 1939, on
which date certain existing
relt:~tionships
would terminate, the
Board has exercised its discretion under the law, as to such relationships involving not more than two banks, to extend this time
to August 1, 1939.
This action was taken for the purpose of calling
the matter to the attention of Congress when it convenes, with a
recommendo.ti:)n that the existing dincrimination between member
bunks and :r...on-member bnnking institutions be removed so that the
provisions of the law will apply alike to all banks under Federal
authority.
BOARD OF GOVERNORS
R-541
OF" THE
:192
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 14, 1938.
Dear Sir:
In cormection 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:
NUBARK - Treasur~ Bills to be
dated November 16, 1958, and to
mature February 15, 1959.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
R-342
OF" THE
193
FEDERAL RESERVE SYSTEM
WASHINGTON
ACCRESB OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
November 17, 1938.
Dear Sir:
There is attached a copy of the report of expenses of the main lines of the
Jt'ederl'll Reserve Leased Wire System for the
month of October, 1938.
Please credit the amount payable by
your bank to the Board, as shown in the last
column of the statement, to the Federal Reserve Bank of Richmond in your daily statement of credits through the Inter-district
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
tho credit.
Very truly yours,
o.
E. Foulk,
Fiscal Agent.
Inclosure.
TO PRESIDE!:JTS OF ALI. FEDERAL. RESERVE BAl'JKS
ExCEPT RICBM:OND ·
194
R-342-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESER'VJld
LEASED WIRE SYSTEM FOR THE MONTI-I OF OCTOBER, 1938.
Federal
Reserve
Bank
Number
of Words
Sent
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Total
Words
Chargeable
Pro Rata
Share of
Total Expenses(l)
$
EXpenses
Paid
by Banks
and
Board(2)
Payable
to
Board
of Governors
28?.81
1,018.92
245.80
244.58
$ 224.33
Boston
New York
Philadelphia
Cleveland
22,385
65,864
18,515
30,371
583
590
592
512.14
23,968 $
1,468.65
65,864
426.01
19,105
690.42
30,963
Richmond
Atlanta
Chicago
St. Louis
24,109
41,460
57,889
41,200
582
582
891
582
24,691
42,042
58,780
41,782
550.56
937.46
1,310.69
931.66
201.66
303.71
1,216.74
240.81
348.90
633.75
93.95
690.85
Minneapolis
Kansas City
Dallas
San Francisco
18,495
45,026
34,57?
43,785
580
582
582
735
19,075
45,608
35,159
44,520
425.34
1,016.9'7
783.98
992.71
157.32
274.01
26?.85
3?6.41
268.02
742.96
516.13
616.30
Board of
Governors
269,110
269,110
6,000.66
11,211.63
Total
712,786
719,667
$16,047.25
$16,047.25
6,881
449.73
180.21
445.84
$5,210.97
(l)
Based on cost per word ($.02229816) for business handled during the month •
.· (2)
Payments by banks are for personal services and supplies and payments by
Board are for personal services and supplies ($1,632.29) and wire rental
($9,579.34). Personal services include salaries of main line operators
and of clerical help engaged in work on matn line business, such as counting the number of words in messages; aJ.so overtime ~md supper money and
Retirement System contributions at the current service rate.
BOARD OF GOVERNORS
R-343
OF' THE
::1_95
FEDERAL RESERVE SYSTEM
WASHINGTON
ACCREEIS Cf"f"ICIAL CORREBPDNCENCE
TO THE BOARD
November 18, 1938.
Dear Sir:
There is inclosed for your infermation a summary of the bank relations
reports submitted by the Federal Reserve
banks for tho month of October in response
to the Board's letter of August 25, 1936
(X-9680).
VBry
tr~ly
yours,
Chester Morrill,
Secretary.
Inclosure,
'!'0
PRESID:B.:t~T8
OF ALL
FEDI!:P.AL RE2ERVE BANKS
R-545-a
196
November 15, 1958.
To:
The Board of Governors
From:
Mr. Hammond, Division
of Bank Operations
Subject:
Summar,y of Bank
Relations Reports
Reports of bank relations as requested in the Board's letter of
August 25, 1956 (X-9680) have been received for the month of October
and excerpts therefrom will be fouud on the following pages. A table
showing for all twelve banks the number of visits made, meetings attended, and addresses delivered has also been prepared and follows the
quotations.
The reports reflect the difficult operating conditions with
which large numbers of banks are faced - es~ecially the small ones.
Uncertainties as to the proper investment polic.y, slack demand for
loans, and competition of government lending agencies are perhaps most
frequently mentioned. The prassure to augment income ~ charging exchange is commented upon~ several Reserve banks, and it is indicated
that a very considerable number of banks feel driven to it rather than
desiring it. Feeling between par and non-par banks appears to be
rather strong in the St. Louio district. There is considerable interest in repealing the requirement that all insured banks with deposits
of $1,000,000 or more become members of the Federal Reserve System by
1942. In certain agricultural regions both in the east and in the
west there seems to be an increased demand for loans and in the west
particularly a good many banks are expecting to have to rediscount
this winter. In urban and industrial regions interest in mortgages
appears to be growing and banks situated where desirable mortgages
are not available locally are buying them elsewhere.
There is frequent mention in the reports of abundant crops and
relatively unsatisfactory prices and of the extent to which farmers
are relying on government loans against their products.
Excerpts from the reports follow:
attached to the original hereof).
(The reports themselves are
BOSTON
Twenty-one member 'banks and ono nonmember bank, all located in
small communities in Massachusetts and northern Vermont and New Hampshire
were visited during the latter part of October.
Most of the towns visited are retail trading centers in communities devoted principally to farming and dairying. In a few of the towns
one or two small factories or mills aro located manufacturing shoes, woolens or paper, and operating from four to six days a week. Retail trade
was reported to be only fair.
-2-
R-543-a
197
System policies and operations were not discussed at any of the
banks and the only general complaintheard was that there is not sufficient demand for bank funds. Few of the banks visited had more than
fifty per cent of available funds in loans. In every case the investment account showed appreciation. The lending rate is generallysix per
cent with a few well collateralled loans made at from 4-l/2 to 5%.
Loans to towns range from one to four per c., the rJajority of loans
carrying the latter rate.
NEW YORK
Allegany, Livingston and Wyoming Counties
Deposits reflect a decrease of 5.5 per cent as compared to a
year ago, and now aggregate $35,880,000, of which 66 per cent are time
accounts. This decline in deposits is attribute~ by some bankers to the
economic condition of the farmers, and other bank officers mention that
the lower ratG which some institutions are paying on interest accounts
has been responsible for some shifting of deposits to banks paying a
higher rate. The managements of several banks are giving consideration
to lowering the rate in the near future, but at the present time only
seven banks in this group are paying 1~ per cent, twenty-eight are paying 2, per cent, and a small pl•ivate bank pays no interest on deposits.
The demand for loans for commercial and agricultural purposes
continues light, although several banks located in communities where various state institutions are situated have made a number of loans pursuant
to Title II of the National Housing Act to employe8S of these institutions. Total loans, including mortgages, for all banks now amount to
$14,662,000. The officers of several banks say they have considered
opening personal loan departments, but owing to the lack of diversification of industries in th0ir particular communities they have hesitated
to 8mbark on this phase of loaning. Only one bank in the three counties
is making personal loans, this being a small institution situated near
a moderate-sized industrial center. The officers of this bank report a
demand for loans larger than th0ir resources will permit them to satisfy.
Collections are said to be fair, although at the low prices prevailing
for farm products it is not expectad any material reductions can be mado
on slow loans this fall.
Sullivan County
Officers of six banks report a very light demand for accommodation, while three characterize it as fair or improving, and only two us
being good. Loan and discol.lllt totals are about 8 per cent higher tha.n
they were a year ago but this is due, in some measure at least, to the
poor summer season which has beon reflected in failure to obtain loan
payments. The prevailing rate is 6 per cent, exceptions being made b;y
:198
-3-
R-343 -a
some batiks only in the case of loans to municipalities or school districts. The field for loans under the National Housing Act is somewhat
limited in this county since the income of a large part of its population is confined to a two month, or even a six week, period. Nevertheless, eight banks have negotiated some of these loans and those not
participating say that all good applicants for this type of accomodation have been taken care of through their ordinary lending channels.
Westchester County
A number of bankers commented on the improved earning power of
their banks due largely to granting life insurance, personal and Federal
Housing Administration loans. Loans and discounts now aggregate
$55,700,000 reflecting an increase of $4,800,000 since January 1. A
number of banks have taken on fairly large amounts of loans secured by
life insurance policies, at a ~} to 4 per cent rate. Personal loans
total $1,500,000. The banks in the county have made over $1,000,000 in
home repair loans under the new provisions of Title I of the National
Housing Act and about twenty-four institutions have granted or purchased
Title II Federal Housing Administration mortgages. A member bank in
Bronxville has granted and sold over $1,000,000 of insured mortgages,
many of these applicat~ons having been referred to it by other banks in
the county which are not interested in handling Title II mortgages. A
member in Tarrytown (deposits now $5,000,000} continues to lead all other
banks in the district in making Federal Housing Administration mortgage
loans. Since the first of the year it has more than doubled the amount
granted, the total being over $12,000,000, most of which has been sold to
life insurance companies, the Comptroller of the State of New York, and
other banks. Auaost all of the mortgages taken b,y this bank since January are on a 90 per cent basis. The treasurer of this bank estimates
that earnings this year will increase to an amount about equal to its
$100,000 common capital. In an endeavor to increase its earning power,
a national bank with deposits of $570,000 lent $280,000 on Title II
mortgages through an arrangement with a broker, but because of the de·lay in selling them to an insurance company has had to borrow $170,000
until the sale is complettld.
Business conditions in this area have improved this fall largely
as a result of the increased employment and payrolls in the industrial
plants, most of which are centered in the section along the Hudson River.
Bergen County. New Jersqy
The B~ge~ County Chamber of Commerco reports that business in
general, both manufacturing and merchandising, in this area is showing
a slight upward trend. The principal industrial arcasin Bergen County
are in the southern part along the Hudson P~ver around Edgewater and
in the Passaic Valley at Garfield and Lodi.
199
-4-
R-343-a
iwionmouth County, aew Jersey
The summer season along the shore was on the whole a rather poor
one on account of the long rairzy spell during the last three weeks in
July, although some sections fared much better than others.
In the agricultural sections the prices being obtained for potatoes are discouraging. The crop yield is said to be high, many farmers
obtaining as much as 200 to 220 hundred pound sacks to the acre •. The
price now being obtained is 95 centsper hundredweight although it was
as low as 65 cents for early potatoes during most of the month of August.
Because of current low prices many farmers are storing their poratods
as it is anticipated that prices will be higher later on, due to a short
crop said to exist in other potato growing areas, including the Stato of
Maine. Some bank officers are endeavoring to induce their farmer borrowers to sell now rather than gamble on the prospect of higher prices.
It is pointed out that a good deal of shrinkage takes place in potatoes
which are stored. In the north central part of the county where there
is considerable raising of garden truck and fruit, the truckers did
fairly well with their early vegetables but the September hurricane
practically destroyed tho tomatoes, peppurs, and other late crops. The
peach crop was nearly picked bt::fore the storm but quite heavy damage was
done to apples.
PHILADELPHIA
The area visited contains some of the most fertile farm lanJ in
Pennsylvania as well as some mountainous regions where a high degree of
cultivation is not possible. Dair-.ring is the chiof' agricultural activity,
while wheat, corn, and fruit are tho chi0f crops. Yields of all crops
were good this year but prices for wheat and corn wero insufficient to
net the farmer a profit. Prices paid for raw milk were reduced recently
leaving fruit and poultry as about tho only sources from which the farmer
may be able to make a profit. Because of the good fruit yield in this
area in the face of a shortage elsewhere, good prices were received for
that sold. Many growers, however, are storing apples in anticipation of
even better prices. Canners are not buying so heavily this year as they
still have large inventories from last year. A plentiful supply of grain
at a low price wHl benefit the farmers who fatten cattle for slaughter
by enabling them to meet lower beef prices.
Industrial activity, while considerably below the level of a
year ago, has shown improvement during recent months and is expected
to show continued improvement·. Bankers base this assumption upon increased orders from abroad for machinery, greater activity in the airplane and automotive industries, and the enlargement of existing plants
or the establishment of new concerns within the area. Railroad operations have increased, causing an increase in employment. The movement
-5 ....
200
R-M3--a
of coal which occurs during the fall and winter months should cause a
continuance of this upward trend in railroad activity.
The maximum allowable rate of 2·~ per cent is paid at 78 banks,
56 pay but 2 per cent and one of these institutions pays but 1! per
cent on amounts in excess of $5,000. Loaning rates vary. While the
majority of the banks maintain the 6 per cent rate, a number will grant
a rate as low .as 5 per cent on good loans secured by mortgages or marketable collateral. The amount of the loan also is a factor in determining the rate. Small loans, because of the cost of handling them,
bear the 6 per cent rate but those above a certain fixed amount, usually
$500 or $1,000, will command a 5~ per cent or even a 5 per cent rate at
many institutions.
The real estate market continuos to offer a large number of good
properties at attractive prices but there is a dearth of buyers. New
houses appear to sell more rapidly than old houses and many banks have a
real problem in the amount of other real estate owned.
vVhilc the great majority of the banks report adepreciation in investments, they also report a marked improvement during recent months.
The quality of some of the accounts is poor, and appears not to have been
improved materially in recent years but it is believed that most of the
banks are giving this matter close attention.
Credit demand is light but shows some evidence of improvement.
The majority of the farmers in this section are self sustaining, but the
poor returns this year may result in a somewhat stronger demand for credit during the coming months, and some banks may have need for reserve
bank credit.
Deposits have increased at nearly ~11 of the banks visited. In
a number of instances, however, this increase followed declines reported
at the time of the previous visit.
Only limited use is being made of F. H. A. facilities as the
residents of many communities are unable to qualify. Some banks, however, are purchasing mortgages created elsewhere.
w. P. A. and other relief projects have increased somewhat during the past year because of increased unemployment and have become very
important sources of income in several of the counties visited. Because
of the volume of checks created by these expenditures, one banker bas instituted a charge for cashing checks for non-customers regardless of
whether or not the checks are issued by feder~l or State departments.
CLEVELAND
There is continued complaint of the shortage of desirable borrowers
201
-6-
R-343-a
notwithstanding that there is evidenced a disposition on the part of
many bankers to permit bond portfolios to run off and to concentrate
more on local loans. Generally speaking, banks are increasing holdings of F. H. A. mortgages, and many institutions not hitherto interested in this type of loan are now making them -- in some cases in
substantial amounts. On the occasion of a recent visit to a member
national bank the remark was made that on the previous day the bank
had completed a real estate loan -- the first one in the history of a
fifty year old bank.
The Wages and Hour Law is causing some concern, based upon the
working-hour provisions rather than the wage provisions. Some banks
are adopting earlier closing hours, and in some of the smaller banks
official titles are being given to certain employees to place them in
the excepted classes.
RICHMOND
Virginia (Shenandoah Valley)
Of the counties included in this report all but Rappahannock are
members of a regional clearing house association which has been instrumental in establishing service charges, though it is not clear that all
banks have carried out the schedule agreed upon. With few exceptions
time deposits exceed demand deposits and carry a rate of 2~ per cent.
Bankers appear to feel that this rate is j~tified so long as they charge
6 per cent for the bulk of their local loans. Rates as low as 4~ per
cent are made on real estate and there appears to be a favorable attit~e towards FHA loans on a 5 per cent basis.
The majority of banks
show an increase of loans relative to the first half of 1958 and one year
ago, and, with some exceptions, deposits have expanded slightly. Investments show very little ch.'mge, increases in some banks being about equal
to the decreases of others.
Agriculture in these counties is well diversified. Beef cattle
and dairying contribute materially to the farm income, but this is supplemented b,y apple production, poultry growing, and wheat farming. Beef
cattle are bringing around
cents, a price somewhat lower than that of
1957, but eggs are bringing about 30 cents, which is 20 per cent higher
than last year's price. The apple crop will equal the long-run average
but the superior quality has meant higher prices than in 1937 by as much
as 55 per cent for certain varieties. The abundant hay and grain crops
have proved favorable to the livestock industry.
4t
A large viscose plant at Front Royal (Warren County) should be
completed by the spring of 1939. Tha first unit is expected to employ
from 5,500 to 6,000. Construction has given employment to workers within a radius of 50 miles. Concentration of labor at the plant will be
202
-7 ....
R-345-a
discouraged and workers will be encouraged to commute. When the
$10,000,000 plant recently started at fearisburg, Virginia, is completed,
there will be ten large rayon yarn plants in the Fifth District. The
tourist traffic stimulated by the Skyline Drive has contributed much to
local business throughout much of this region. Small factories, mills,
and canneries have prospered and contributed materially to what appears
to be a generally prosperous condition.
Virginia (Peninsula Counties)
In the region between the York and the James, the counties of
James Ci~, York, Elizabeth City, and Warwick give every indication of
favorable business conditions. Loans and deposits of banks show small
variation seasonally and are now approximately at the levels of one year
ago. Banks arc making most of their local loans at 6 per cent, with a
rate of 5 per cent in some instances. Real estate loans form an important part of earning assets. Time deposits generally exceed demand deposits by a considerable margin and most banks are paying 2~ per cent on
the former. This rate seems to be regarded as excessive, but competitive
conditions appear to make a reduction impossible. Notwithstanding this
situation, service charges are not well developed.
The chief business in James City and York Counties is the tourist
traffic. At Williamsburg (James City County) the Hockefeller Foundation
has expended about $18,000,000 in restoration work. In addition, the
College of William and Mary and the State Hospital h:we brought considerable business to banks and others. Yorktown (York County) also enjoys a
large tourist business. Elizabeth City County has benefitted materially
from the activity of shipyards at Newport News and by construction at
nearby military posts. Warwick County has profited most from shipbuilding at Newport News, where accumulated orders amount to about $55,000,000.
About 5,500 are now employed on a full-time basis and 700 additional on
a four-day basis. The number employed will probably increase to 7,000
as work progresses. Payrolls of the yards now come to about $170,000
weekly.
The combination of tourist business, shipbuilding, goverrunent
posts, fisheries, and truck farming has made this region relatively prosperous and most banks will realize fair net profits for the year.
North Carolina (Eastern Central)
Banks in this region (Cumberland, Harnett, Johnston, Wayne, and
Sampson Counties} show some expansion of deposits since the first half of
the year, but the volume is still materially lower than for the same time
last year. Demand deposits exceed time deposits in volume and from 1 per
cent to 2~ per cent is paid on the latter. The actual rate depends upon
the nature and intensity of competition among local banks. The demand
for crop loans has been somewhat less than "normal" due to the diminished
203
-8-
R-545-a
volume and value of the cotton crop. Rates hovor around 6 per cent
but are as low as 5 per cent on some business paper. There is some
competition from outside banks which offer money at 4 per cent, and
an occasional sharp complaint of PCA competition. Banks contend that
no safe loans are rejected ru1d they resent implications that bank
credit should be made more available, since, it is held, that cannot
be done without adopting lax standards. Investments change but little
in volume and there is a definite tendency to concentrate on Federal,
State, and municipal bonds and to move out of corporate issues.
Nonmember banks in this region show a reluctance to consider
membership in the Federal Raserve System. They contend that they enjoy F.D.I.C. protection and have exchange revenues in addition; that
exchange revenues make it possible for banks to operate where, otherwise, there could be none; that exchange revenues may come to as much
as 15 to 20 per cent on the capital; that they constitute the "margin
of net profit 11 for many banks; that there is no need of borrowing and,
hence, no need of rediscount facilities; that they have large holdings
of Federal bonds upon which they can borrow from correspondents; that
if all banks were made compulsory members, they would, if not permitted
to receive interest on balances with correspondents to offset loss of
exchange revenues, become mere "feeders" of city banks, which have a
much larger opportunity to employ funds; that North Carolina law permits
loans of 20 per cent of capital and surplus to one interest as against
10 per cent for member banks; that compulsory membership for country nonmember banks is improbable because of the political influence which they
enjoy.
Cotton and tobacco are the chief money crops in this region,
though the livestock industry appears to be growing in importance. Both
the yield and acreage of cotton are below 1937 levels, while prices are
somewhat lower. Type 12, Eastern North Carolina Flue-Cured, sales averaged $25.58 per hundred pounds to October 29, which is somewhat lower
than the 1957 average of $29.73 for October. There has been much complaint among farmers respecting crop control and marketing quotas, and
in some of these counties a majority of the farmers would not again
favor these methods. They feel that prices have not been raised co~nen
surately with the restrictions.
ATLANTA
Northwest Alabama
The principal cash crop in this territory is cotton. In the
western portion of the territory mentioned, the crop was found to be running from 55% to 50% of last year's yield on account of damage in the
early Spring by rains and boll weevil, there being spots where replanting was necessary and where there was excess foliage. In one county it
204
-9-
R-343-a
is claimed tr.a.t some of the farmers hardly made 60% of their allotment.
Even with the short crop there were no reports that an excessive number of loans would have to be carried over.
Further upstate in the Tennessee Valley region a better trade
activity is apparent, the cotton crop seemingly having suffered less.
The cotton in the whole territory mentioned is extra white, of high
grade and comparatively long staple for this region.
With a cash price of nearly 9¢ for the high grade crop that has
been made in this section, plus subsidies, the cotton loan is apparently
not attractive and most of the banks report slow movement of the cotton
into the loan, the aggregate of their loans to cotton producers not having come up to expectations, although quite a bit of cotton is as yet to
be handled.
Georgia
The Federal Reserve Bank was represented at the October meetings
of seven zones of the Georgia Bankers Association.
Visits were made to seventeen member and eleven non-member banks
located in these zones. At each of these zone meetings emphasis was
laid on banker - farmer cooperation and the profitable production of
pork. The importance of exchange charges on incoming cash letters as a
source of revenue to the small country bank was another subject which
was discussed at each of the meetings, and it is felt that the continued
discussion of this Gubject may tend to dissatisfaction on tho part of
some of the smaller banks with their membership in the Federal Reserve
System. Such discussion makes it difficult to interest nonmember banks
in membership. At one of the meetings, the President of the Georgia
Bankers Association stated that a committee of the Association had been
appointed to work for the repeal of the law which would require membership in the System of certain State banks in 1942.
The level of deposits of the banks visited compares favorably
with that of a year ago. The yield of this year's cotton crop was reported as being between 50% and 60% of normal. Yields of tobacco and
peanuts were very good and satisfactory prices were obtained.
Mississippi Gulf Coast
At Biloxi the condition of business is considered normal for thia
season of' the year. This resort city enjoyed a good tourist trade during
the aunmter and it was stated that the hotels are receiving a satisfacto~
number of requests for the winter season. The banks at Biloxi have made
a large number of F. H. A. loans and are enthusiastic over this type of
asset. The shrimp catches havG been good so far this season and the
packing plants have been operating at capacity.
205
-10-
R-543-a
An unusually good tourist season is expected at Gulfport dur--
ing the coming winter.
North Central Tennessee
Due to unusually heavy rainfall in the summer tobacco has suffered from what is known as "fire" or "rust" and while the actual
damage due to rust has not been great it has forced the farmer to cut
his tobacco green in order to lessen the damage, as a consequence of
which the tobacco was of inferior grade •. ~This section has had a bumper
crop of hay, corn and other small grains. Conditions for growing livestock have also been favorable. r
In the section around Portland an excellent strawberry crop last
season sold for approximately $500,COO.OO, and the prospect for next
season's crop is good.
l'Jlembers of the Nashville Clearing House Association have recently
begun to charge their country correspondent banks on a per item basis for
handling their. clearings. As a Nsult of the imposition of this charge
several of the member banks in the Nashville Zone have begun to send their
cash items to the Nashville Branch to a greater extent than heretofore,
and certain nonmember banks are showing an interest in membership in the
System.
CHICAGO
Several group meetings were attended in Indiana and Michigan,
the principal topics discussed being Federal banking laws, bank investments, and local taxation.
Banks show a tendency to dispose of the corporate bonds held in
their portfolios and to substitute municipals and Governments. There
is some slight increase in loans in the agricultural section, due to
feeder demand. During the first fifteen days of October, one bank made
81 loans, aggregating $114,000, of the type usually handled by tha Production Credit Corporation. One institution that has been very successful in making receivers' loans to closed banks is now exploring other
means of augmenting its income, as this source has been exhausted. The
demand for installment loans and mortgage loans has improved materially.
Bankers are apparently taking more interest in Federal Housing Administration loans. Indiana, Illinois, and Iowa will have a large corn crop
in 1938, and it is expected that much of this will be sealed under
Government loans and that tho bank~ throughout the district will carry
many of these loans under a repurchase agreement with the Commodity
Credit Corporation. The return on such loans in the past has been
approximately 2-1/2 per cent. The amount to be loaned on the 1938 crop
206
-11-
R-543-a
has not been definitely fixed, but it is anticipated that it will be
between 57 and 61 cents per bushel.
The Government is in the process of resealing the 1957 corn
crop remaining on the farms. The handling of a.ll 1937 corn loans in
the various Federal Reserve districts has now been concentrated at the
Federal Reserve Bank of Chicago. It is estimated that some 30,000,000
bushels of the 1957 crop will be released to the Commodity Credit
Corporation to satisfy outstanding lo~1s and that approximately
15,000,000 bushels will be resealed, the grower who reseals his corn
receiving the differ<mce between 50 and 57 cents per bushel. The corn
released to the Commodity Credit Corporation is being stored principally in terminal warehouses along the Missouri and Mississippi rivers
and in Chicago. In some localitit.:s wht~re the quantity involved is
small, tho Corporation is selling on the local market.
Considerable progress has been made in the furniture industry.
Figures recently obtained show that since June there has been a continuous impi'ovement with eu.ch succeeding month, and th[it shipments, payrolls, and number of employees ln September exceeded those in August.
The outlook appears to be favorable for the next several months in viaw
of the f>resent building situation.
Reports from Detroit indicate considGrable optimism in rogard
to the automobile industry, particularly for the near future. There
is apparently u more hopeful attitud~.> about the labor situation, one
manufacturer stating that his company is getting much better efficiency
from labor than for some years. Building in this area is exceed:i.ng
that of any of the past four or five years. Summing up the situation
in Detroit, the statements of those interviewed were optimistic concez'ning the near future, but were tempered with an element of conservatism and caution.
One nonmember bank with deposits of 4f850,000 is converting :i.ts
assets into cash and has gone into liquidation, stating th~::t in view
of the difficulty of making earnings it would pr8fer to pay off its
depositors.
Several bankers have been invited to talk on banking subjects
over local radio hookups, and in these instances the Federal Reserve
System has received favorable comment.
ST. LOUIS
During the monti1 our officers and field representatives visited
317 banks, of which 211 were in Missouri, 31 in Kentucky, 51 in
Mississippi, 16 in Arkansas, and 2 in Tennessee.
With fall shipments of feeder livestock arriving in many rural
communities, an increased demand for local loans is reported. In most
207
-12-
R-543-a
cases advances for agricultural purposes are made with an interest
rate of 5% to 8%. Demand and time deposits show further increases in
many instances. The common rate of interest on time deposits continues to be 1 to 2 per cent per annum.
Stockholders of member and nonmember State banks in Illinois
are greatly concerned about possible failure to ratify the proposed
Constitutional Amendment to remove the double liability of stockholders of State banks at the November 0lection. Conversion from State to
national banks will be the ultimate outcome in many instances if this
amendment fails to carry.
From all indications, it appears that one State member is
going to withdraw from membership. This decision is based on two
factors: one a bill for $400 received from a national bank correspondent covering the handling of the State member's account for the
last three months; the other, the loss of revenue from exchange
charges. It seems that the local credit association carries its
account with this State mGmber and whilE:: a large percentage of the
$400 carrying charge was made on checks deposited b,y this association, it refuses absolutely to pay any service charge. The association's account has been solicited by other banks in the country and
the member bank does not want to give it up because of the loss of
deposits during the summer months and the loss of prestige. The
president of the bank estimates a revenue from exchange loss of $5,000
per year and states thht under present conditions, the bank could not
afford to sacrifice this income.
The cashier of a small Missouri nonmember is opposed to barllis
going off the par list as he feels that they are obtaining revenue
from the wrong source. He further believes all banks should be compelled to join the System and that they should be examined by only one
authority. Officers of anoth(::r small Nli ssouri nonmember stated that
they had been encouraged to go off the par list. They appeared to
have a deep conviction, however, that their customers' checks should
be circulated at par.
A nonmember bank officer complained of the practice followed
by banks in ~ nearby town, which is on the par list, whereby customers
of his bank are not subjected to service charges when doing business
with the par banks. He feels that all banks should be compelled to
adopt a uniform schedule of charges. He is aware that the condition
mentioned might not exist if his bank were on the par list.
Officers of one nonmember feel that their bank should make all
loans in the community which can be made on a proper basis, particularly sound loans on real estate, even though not amortized, provided
that the payments which would normally amortize a loan are put back
into improvements as such expenditures improve the business of those
208
-15-
R-545-a
providing materials. The bank has a good cash position, large holdings of Governments and no past due loans. It has insufficient capital to become a member and in discussing membership, the officers
stated that the red tape caused qy additional reports would be
troublesome, which impressions were of course corrected. Another
nonmember officer was of the same opinion and our representatives
endeavored to correct his erroneous impressions. The.y asked him to
discuss membership with officers of the State members, which he expects to visit in the near future.
Benefits of membership were fully discussed with a Missouri
nonmember cashier who was pleased to learn that charges were no longer
being made for examinations by Federal Reserve examiners.
Numerous requests for loans are being received b,y the cashier
of a Missouri nonmember bank but he is reluctant to make these advances
for fear of criticism~' examiners. Various lines were criticized at
a recent examination and this cashier is not inclined to change his
policy regarding loans. He further feels that agricultural lending
agencies are in direct competition with country banKs, but he declines
to meet the interest rates available through these agencies. The
cashier of another Missouri nonmember which depends primarily on service charges for its income is reluctant to make loans, fearing criticism by examiners. He was evidently carrying a number of past due
loans.
The president of a small Mississippi nonmember mentioned his
experience in buying some Treasury Bills. He ordered ~50,000 very
short-term bills from a bond house in Memphis. Figuring the commission on buying and selling and the expense of a trip to Memphis, the
net result of the transaction was a loss of $52. He has lost interest
in short-term Governments and now invests in longer term bonds which
he expects to hold until maturity.
MINNEAPOLIS
No detailed reports of visits during October have been received
from Minneapolis.
KANSAS CI'IY
Among state banks that are eligible for membership, a surprisingly large number seem interested but certain obst&cles stand in the
way. A number of such banks find it necessary to improve their condition before membership can be considered. Until the law is changed, a
capital requirement based upon population will keep many good prospects
permanently out of the ~stem. In a few cases, bankers in Nebraska
209
-14-
R-543-a
that stay out of the System in order to make exchange charges were free
.to admit that exchange charges not only may be but possibly have been
carried too far.
A number of cases were found where country banks had sold Government securities rather freely during th~ war scare. This nervousness, however, has virtually disappeared.
In addition to thu cases reported last month, more instances
wero found of bankers' concern about the rural population moving off
tho land. A Kansas banker stated that one-third of tho population of
his county had left the county in the past five years and that 60 per
cent of those remaining are either on relief, working on WPA projects,
or have been re-financed through the Farm becuri~ Administration.
From Oklahoma come also many reports of tenant farmers moving off the
land.
The comment is well nigh universal that livestock prices are
the bright spot in the farm situation. Those who were fortunate enough
to have livestock are in the best condition among the z~ral population.
High livestock prices, however, are complicating feeding operations as
few bankers are advising their customers to b~ feeder cattle at present prices.
Bankers in many parts of the District are greatly concerned
about the limited number of livestock in their communities. It is
the general belief that there is only about one-third the number that
is needed. The feeling is growing rapidly that, in certain sections
of the District especially, farm conditions cannot become satisfacto~J
until corn and livestock return to somewhat near their pre-drouth conditions. A great deal of thought is being given to this problem qy
many other people as well as bankers. In eastern Nebraska and Kansas,
where the hog population is little more than 30 per cent of what it
was four years ago, there is some discussion of the feasibility of
cooperative movements to stimulate hog production. Farmers without
hogs are willing and anxious to build up their numbers but need money
to buy brood sows.
In the case of many country banks there is a definite decrease
in deposits and a tendenc.y for loans to increase. Banks in some communities have all the loans they wish while in other regions it is said
there is little demand for funds. In some places especially, there a?pears to be an active demand for mon~ to purchase cows and heifers and
hogs and sheep. Some banks report a satisfactory experience with automobile and implement paper, while in other cases it is said this paper
is not liquidating well and that it is necessary to force farmers to
sell wheat to meet automobile and implement payments.
A good many banks expect to rediscount before another harvest.
Few country banks appear to be making Commodity Credit Corporation
210
-15-
R-345-a.
wheat loans and there is a tendency to send the ones the,y do make to
their city correspondents.
In irrigated regions of Colorado, the beet crop is said to
average about sixteen tons to the acre which is regarded as satisfactory. In some cases the sugar content is reported as normal but in
a good many instances it is said to be low. The potato crop in irrigated regions is only fair but the alfalfa hay crop is good. In fact,
bankers from nearly every part of the Tenth District report an abundance of feed but complain bitterly that there is little to feed it to.
DALLAS
Central Texas
Generally speaking the banks in this section are well satisfied with their relations with the Federal Reserve Bru1k and with existing laws, regulations and policies. A few renewed previous
complaints in regard to Production Credit Associations. The president
of one bank whose earnings have been rather seriously affected by
competition from these agencies expressed the view that the government
should either require them to confine their advances to people who are
unable to obtain accommodations from banks, or should take over the
small member banks and make satisfactory adjustments with their stockholders covering their capital investments.
Another member banker complained that the local P. C. A., in
an effort to win desirable borrowing accounts away from the bank, had
gone to the length of staging big barbecues and inviting the best customers of the bank to attend them, using those occasions for the purpose of soliciting their accounts.
Further evidences were found of widespread discontent among
farmers in connection with the results of the government's acreage
control program this year. However, the recent distribution of government subsidy checks has tended to allay their grumbling to some
extent.
The cotton crop in this area is at least one-third smaller thru1
last year's production, due partly to unfavorable growing conditions
and partly to the curtailment of acreage. In· those communities which
have adequate storage facilities from 75 per cent to 90 per cent of the
crop has been placed in the loan. Elsewhere the bulk of the crop has
been marketed. On the whole, despite t~e di~tribution of subsidies,
farm income in Central Texas for the year 1958 will show a severe de-cline by comparison with last year, and the producers appear to be in
for a hard winter from a financial point of view.
211
-16-
R-545-a
South Texas
Much the same conditions exist in the territory served by the
fourteen South Texas banks visited by our representative as are pictured above with respect to Central Texas. Continued criticism of
the 1938 farm program is being made b,y the farmers, and many of them
are turning to livestock as a source of revenue in lieu of cotton.
Some of the banks interviewed are gradually getting away from the
practice of financing cotton farmers who do not diversify their productive efforts.
A recent survey made in this section of Texas covering 4,500
farmers showed that approximately ten per cent of them are on local
or federal government payrolls. Tne group produced 17,000 bales of
cotton this year, or an average of about four bales each. Our representative was told that the ten per cent who are receiving salaries
from government sources are influencing the other ninety per cent to
go along with the government's acreage control program for another
year.
SAN FRANCISCO
Siskiyou County, California
For the most part, conditions in the lumber, stock raising,
dairying, und agricultural interests are satisfactory in so far as
production is concerned. Feed conditions have been good, and large
crops of hay, wheat, and potatoes are being harvested, but prices are
low, resulting in little or no profit.
There has been considerable development in placer mining,
with dredgers working over both old diggings and unworked land. In
the latter case, much of the land has been used for agricultural purposes and is being left b.Y the dredgers in a condition which will
make it useless for any purpose hereafter.
Eastern Washington
Several banks between Spokane and Pullman were visited and in
all instances the unsatisfactory price for wheat was the topic of conversation. Many farmers who have qualified for Government loans on
wheat are taking advantage of borrowing from the Commodity Credit Corporation through the Reconstruction Finance Corporation. We understand
that the Spokane Agency has alreaqy handled approximately two thousand
individual applications for wheat loans.
at the time of our visit, it was difficult to obtain definite
inform.!ition with respect to the production of commercial apples in the
212
-17-
R-345-a
Wenatchee-Okanogan district. Early this year it was estimated that
the district would produce 16,000 cars of apples, but owing to the
unseasonable weather, these estimates have had to be revised downward.
From the best information obtainable, it now appears that the production will not exceed 12,000 to 14,000 cars on account of cullage.
Opening prices, however, are reported to have been satisfactory and
it is hoped that the shortage of production of apples elsewhere in
the United States will have a tendency to increase prices. The United
States Department of Agriculture estimated that the loss from cullage
would be approximate~ 25%.
Eastern and Southwestern Idaho, Eastern Nevada, and Southwestern Utah
The industries of particular importance in the Idaho regions
are diversified agriculture, livestock, and dairying; in Nevada, mining
and livestock; in Southwestern Utah, almost exclusively livestock.
Idaho agricultural crops, except hay, the first cutting of
which was badly damaged b,y rainfall, were above average in tonnage and
quality. This is particularly true in the Eastern part of the state,
where the main cash crops are potatoes, sugar beets, and grain. The
lower prices for wheat, beans, seed crops, etc., are but partially
offset by increased yields. Two reclamation projects under way in
Southwestern Idaho, expected to be completed in 1940 and 1941, will
bring 77,000 acres of what is now waste land under irrigation and
adaptable to the growing of diversified crops.
Measured b,y its diversification and production of agricultural
products, the Boise Valley is particularly prosperous. This year there
have been heavy yields of hay, potatoes, and dairy products. Present
outlook is for a surplus of these commodities in the face of a relatively low market and inactive demand. The surplus low priced feed
situation is attracting additional livestock to the area for feeding
purposes.
The new sugar beet plant at Nyssa just put into operation this
fall has expanded valley acreage in sugar beets and is providing growers with a cash crop at a profit. According to factory officials, a
superior quali~ of sugar beet is grown in the irrigated sections of
Idaho and Oregon.
Production of lettuce (which is reported very satisfactory) and
various seed grains provide additional cash income to farmers.
The completion of the I. 0. N. (Idaho~Oregon-Nevada) Highway
which runs thru the southeastern corner of Oregon, and which has about
40 miles to complete in Oregon, will greatly facilitate the movement
of crops from this area b,y bringing it closer to the California markets.
-18-
R-345-a •·
~- 213
The cattle men generally are said to have made a little profit
from the season's operation~ while wool growers with few exceptions will
show losses up to 75¢ per head. There will be considerably less livestock feeding for market in this region than there was last·year and
the year's sales have practically been completed.
Recent improvement in metal prices has resulted in increased
mining activity and shipments to smelters.
It is reported that thirteen National Park and Forest Highway
Construction projects in Idaho and Utah, involving expenditures of more
than $1,500,000.00 are already in progress or are to be opened for bids
this month. On contracts ~lready let ~525,000.00 will be expended in
Utah and $246,000.00 in Idaho.
Ontario-Vale-Nyssa, Oregon
This is a section in northeastern Malheur County, forming a
trigngle on the Idaho border. These towns serve an irrigated area of
more than 100,000 acres under two government projects, the Vale Irrigation District and the Owyhee Irrigation District, both of which are
comparatively new, water having been placed on the last of the land
under the Owyhee District in 1958. This area is growing rapidly and it
is reported thet between 80 and 90 per cent of the available lands
under these irrigation districts heve been settled, mostly by people
from the middle west.
The Amalgamated Sugar Company has just completed cmd put into
operation this year e $2,500,000 sugar beet refinery which will handle
during the 1958 season r.bout 220,000 tons of sugsr beets grown on the
land in the irrigated districts of Idaho e.nd Oregon. In addition to
the ebundsnce of hay and other feeds grown in this orea this year, the
sugar beet tops will supply cheap feed for feeder cattle and sheep.
The factory provides a seasonal pay roll for between 350 8nd 400 men
in addition to about 1200 field agents. The area is very fertile
wherever reached by weter end grows a diversification of crops.
Baker Valley, Oregon
While egriculture and livestock prices have been comparatively
low, the Boker V&lley hes produced an abundance of feed which has reduced the cost of operation E~nd livestock operators hove h8.d & reesonably good season. There has been an abundance of moisture and good
ranges, end both cattle end sheep are going into the winter in very
good condition. By renson of the fe.ct thnt feed has been plentiful
e.nd relatively cheap, producers of deiry products have also been reasonably successful this seeson.
The lumber mills, of which there are two fdrly large plants
operating in pine, are running on a one-shift basis on a rat~er discouraging market.
Considerable gold is produced in the Cornucopia end Blue Mountains,
which surround Baker, and c number of these operations heve proved profit
able.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
October - 1938
Visits to Banks
Federal
Reserve
Member
Bank
I
m
I
Non-member
I Total
Number
I
Addresses Made
Attendance
Number
#
1
None
2
None
I
Attendance
175
21
172
86
171
1
56
30
29
22
228
116
200
1
9
6
6
1,691
1,674
1,373
Rich.'Ilond
.b..tlanta
Chicago
St. Louis
47
41
55
49
1
272
82
90
7
317
8
9
10
14
1,420
550
1,565
1,325
None
None
3
525
Minneapolis
Kansas City
Dallas
San Francisco
75
57
28
64
10
41
85
98
55
88
5
19
None
18
2,150
5,563
1.,
114
45
1,909
None
None
Boston
New York
Philadelphia
Cleveland
,-1
l
Meetings Attended
6
45
# Number not reported.
5
24
4
..L
85
480
215
R-544
BOARD OF GOVEP.NOHS
0]' THE
F'EDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
1uesday, November 22, 1938.
The following ruling will appear in the Federal Reserve
Bulletin:
Paying for Purchase iD; Special Cash Account
by Selling Another Security
Section 4(c} of Regulation T provides in part as follows:
"In a special cash account, a creditor may effect
for or with any customer ~ ~ cash transactions
in securities in which the creditor may --
..
(1) purchase any security for, or sell
any security to, any customer, provided* *
the purchase or sale is in reliance upon an
agreement accepted by the creditor in good
faith that the customer will promptly make
full cash payment for such security;
...
**************
*
"Except as otherwise provided in this section
4(c), in ease a customer does not make full cash payment for a security purchased by him in the account
* * * within seven days after the date on which the
security was purchased or sold, the creditor shall
promptly cancel, cover, or otherwise liquidate, the
transaction or the unsettled portion thereof."
The Board recently had occasion to consider two questions regarding transactions in the special cash account.
The first question arose from a case in which a customer proposed to purchase a security in the special cash account and then to
,
216
R-344
make the necessary prompt payment by selling in the account another
security of sufficient value and using the proceeds of sale for the
purpose.
The.question was whether such a proposal for making pay-
ment disqualified the purchase for inclusion in the special cash account ..
The exact answer to this question would depend upon the
circumstances of the particular case.
In some circumstances, such
a combination of transactions might be evidence of an attempt to
evade or circumvent the regulation, and if the purchase was part of
such an attempt its inclusion in the special cash account would, of
course, be forbidden, because section 4(a) of the
reG~lation
pro-
vides in part that:
"A special account established pursuant to this
section shall not be used in any way for the purpose
of evading or circumventing any of the provisions of
this regulation."
It is the view of the Board, however, thqt, while a proposal
to effect such a combination of transactions should be
~arefully
scrutinized, the effecting of the proposed purchase in the special
cash account would not necessarily be prohibited if the purchase
complied in other respects with the requirements of the regulation
and there was in fact no attempt .to evade or
tion.
circQ~vent
the regula-
This would require, among other things, that the proposed pur-
cnase be i11 f11ct a "bona fide cash
tr~mt:~action."
as that term is
ordinarily used in the trade .•md that the proposed sole be one that
is to be made and settled promptly.
217
R-344
-3-
The second question arose from a permissible instance of
the type described above in which the security to be sold was deposited with the creditor and sold promptly, well within seven
days after the date of the purchase, and the creditor was to receive the proceeds of sale promptly in the usual course of business but not until more than seven days after the date of the
purchase.
This presented the question whether in such circumstances
it might be considered that the security purchased by the customer
had been paid for by him within seven days after the purchase.
Assuming that the purchase
w~s
one which, as indicated
above, could properly be effected in the special cash account, the
"
question whether it might be considered that payment had been made
within seven days should be answered in the affirmative.
When a
customer has sold a security in a special cash account, section 4(c)
permits the broker to make the proceeds of the sale of the security
available to the customer upon the receipt of the security in the
special cash account even though this be prior to the date on which
the broker is to receive the proceeds of the sale.
Accordingly, in
the instant case the creditor could have paid the cuotomer the proceeds of sale within the seven-day period and the customer could in
turn have used such proceeds to make full cash payment to the creditor for the security purchased.
In the circumstances, such payment
could properly be treated as having been made by the cltstomer without the necessity for the mechanical passage of funds from the creditor to the customer and back again to the creditor.
218
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-345
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
November 18, 1938
SUBJErTa
Data for 1938 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 151 1939, with the following data for use in the Board's
forthcoming annual report:
1. Statement showing the number of member banks in each
State (or part of State in the district) accommodated
throu;;h the discount of paper during each month of the
calendar year 1938 and during thG year as a whole.
2. Statement showing the following information as of December
31, 19381
Number of member banks in operation
Natione.l banks
State bank members
Number of nonmember banks on the par list
Nonmember State banks (exclusive of mutual savings banks)
Private banks
Number of nonmember banks not on the par list
Nornnember State banks (exclusive of mutual savings b<nks)
Private banks
3. Statement shovring the names and locations of banks (including
private banks) not on tho par list on December 31, 1937,
which during 1938,
(1) went out of existence (oth.Jr than through conversion
into or succession by natio:1'; 1 banks)
(2) wore converted int.o or succoodod by national banks
(3) wore admitted to Federal Rosorve membership
(4) wore added to par list (other than through membership)
219
-
4.
2
Statement showing the names and locations of banks (including
private banks) which became non-par banks during 1938 through
(1) primary organization of non-par banks
(2) conversion of national baru<s into or succession by
nonmember non-par banks
(3) withdrawal of State banks from Federal Reserve membership
(4) withdrawal of nonmambor banks from par list
The figures of banks on tho par list and not on the par list on
December 31, 1938, should include all banks on which checks are drawn.
Statement No. 2 should show separate figures for each State or part of
State in the territory assigned to the head office and to each branch, if
any.
The total figures for each State or part of State should be recon-
oiled with the latest State banking department abstract of condition
reports and the Board advised of the
n~es
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 abstract.
A copy of
the reconcilement should accompany the statement showing the number of
nonmambor banks on pnr list and not on par list, unless the reconcilement
would delay the furnishing of the statement beyond January 15, in which
case the statement should be forwarded before the reconcilement is effected
and the Board advised of any necessary changes in the statement at the
ttme tho reconcilement is furnished.
E. L. Smead, Chief,
Division of Bank Operations.
TO TBE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF" GOVERNORS
R-346
OF' THE
220
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
November 19, 1938.
Dear Sir:
)
On Monday, December 26, itl observance of
Christmas Day, the offices of the Board of Governors and all Fedoral Raserve banks and branches
will be closed.
Incident to the Christmas and New Year's
holidays the offices of Government departments
and independent establisruaents in Waslrlngton will
be closed on Saturday, December 24 and Saturday,
December 31. The Board's telegraph office will
be open on both those days, however, and the
transit clearings through the Interdistrict Settlement Fund will be conducted as usual.
Please notify branches.
J ..
~~
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL F..ESERVE BANKS
R-34?
BOARD OF GOVERNORS
221
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF'F'ICIAL. CORRESPONDENCE
November 19, 1938.
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 ot
Treasury Bills:
NUBASM - Treasury Bills to be
dated November 23, 1938, and to
mature February 23, 1939.
Very truly yours,
· J. c. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
TO THE SOARD
R-548
222
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHIN13TON
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE SOARD
November 22, 1958.
t
Dear Sir:
On page one of the c-:ummary of Bank Relations Reports dated November 15, 1958 (R-543-a) there is a sentence
which, through an inadvertence, impl1.es that under existing
legislation all insured banks must become members of the
Federal RGserve System by 1942.
You will find attached a corrected copy of this
page on which the necessary qualification,
of
~1,000,000
question.
11
wi th dt:::posi ts
or more", is incorporated in the sentence in
It is requested that this corrected page be
substituted for
th~
page originally sent you.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO PRESIDENTS OF ALL FEDEI\AL RESERVE BA..liJKS
R-543-a
223
November 15, 1958.
To:
The Board of Governors
From:
Mr. Hammond, Division
of Bank Operations
Subject:
Summar.y of Bank
Relations Reports
Reports of bank relations as requested in the Board's letter of
August 25, 1936 (X-9680) have been received for the month of October
and excerpts therefrom will be found on the following pages. A table
showing for all twelve banks the number of visits made, meetings attended, and addresses delivered has also been prepared and follows the
quotations.
The reports reflect the difficult operating conditions with
which large numbers of banks are faced - especially the small ones.
Uncertainties as to the proper investment policy, slack demand for
loans, and competition of government lending agencies are perhaps most
frequently mentioned. The pressure to augment income qy charging exchange is commented upon qy several Reserve banks, and it is indicated
that a very considerable number of banks 'feel driven to it rather than
desiring it. Feeling between par and non-par banks appears to be
rather strong in the St. Louis district. There is considerable interest in repealing the requirement that all insured banks with deposits
of $1,000,000 or more become members of the Federal Reserve S,ystem by
1942. In certain agricultural regions both in the east and in the
west there seems to be an increased demand for loans and in the west
particularly a good many banks are expecting to have to rediscount
this winter. In urban and industrial regions interest in mortgages
appears to be growing and banks situated where desirable mortgages
are not available locally are b~ing them elsewhere.
There is frequent mention in the reports of abundant crops and
relatively unsatisfactory prices ~1d of the extent to which farmers
are relying on government loans against their products.
Excerpts from the reports follow:
attached to the original hereof).
(The reports themselves are
BOSTON
t
Twenty-one member banks and one nonmember bank, all located in
small communities in Massachusetts and northern Vermont and New Hampshire
were visited during the latter part of October.
Most of the towns visited are retail trading centers in communities devoted principally to fa.rming and dairying. In a few of the towns
one or two small factories or mills arc located manufacturing shoes, woolens or paper, and operating from four to six days a week. Retail trade
was reported to be only fair.
R-549
...
224
BOARD OF GOVEffi~ORS
OF THE
FEDERAL RESERVE SYST&~
STATEMENT FOR THE PRESS
For release in morning papers,
Saturday, November 26, 1958.
The following summary of general
business and financial conditions
in the United States, based upon
statistics for October and the
first three weeks of November,
will appear in the December issue
of the Federal Reserve Bulletin
and in the monthly reviews of the
Federal Reserve banks.
Industrial production continued to increase sharply in October and
the first three weeks of November, reflecting principally larger output
of steel and automobiles.
change in this period.
Wholesale commodity prices showed little
Voluma of employment and national income in-
creased in October.
Production
In October the Board's seasonally adjusted index of industrial production was at 96 percent of the 19:C5-1925 average, as compared with 90
percent in September.
Steel ingot production increased considerably,
averaging 55 pl;)rcent of capacity in October, and in the first three
weeks of November there was a. further substantial advance.
In the auto-
mobile industry output was increased rapidly during October and tho
first three weeks of November both to stock dealers with new model cars
and to meet the increased volume of retail demand accompanying the intraduction of new models.
Production, which in the first nine months of
1958 had been at a considerably lower level, was at nearly the sume rate
R-549
-2as in the corresponding period in other recent years.
glass also increased sharply .further in october.
225
Output of plate
Cement production
showed a considerable increase, while lumber production declined
slightly.
Activity at textile millo, which had risen sharply during the
summer, continued at about the August and Sep+Jember rate, although usually there is an increase at this time of the year.
Shoe production
declined somewhat further in October, and there was a decrease in output of tobacco products, while in most other industries manufacturing
nondurable goods changes in output were largely seasonal in character.
Mineral production show0d a further moder.:tte rise, reflecting in large
part increased output of crude petroleum and nonferrous metals.
Lake
shipments of iron oro also were in larger volume, although a decrease
is usual in October.
Coal production increased seasonally.
Value of construction contracts awarded in 57 Eastern States increased considerably in October, according to figures of the F. W.
Dodge Corporation, re.fl0cting chiefly a sharp rise in awards for public
pToj ects.
Cont.racts for hospital, educt" tional, and other public build-
ings included in the Public Works Administration program were in large
volume, c..nd t.he:re was a furthor increase in contracts awarded for slum
clearance projects of the Unit<:'d States Housing Authority.
Elllployment
Employment and payrolls increased somewhat further between the
middle of September and the middle of October.
At automobila factories
employment continued to rise sharply and there were further moderate
-3-
R-349
increases in most other durable goods industries.
226
The number employed
at canning establishments declined and in other nondurable goods in-·
dustries showed little change.
Employment increased somewhat at mines,
on the railroads, and in the construction industry, while in trude the
rise was less than seasonal.
Distribution
Sales at department and variety stores und by mail order h:mses
showed less than the usual seasonal increase in Octob:.:r, partly because
•
consumer buying of winter mcrchundise 1vas retarded by unseasonably
warm weather during most of thE:: month.
In thG f.irst two vweks of
November department store sale::. increased moderately.
Freight-car loadings rose considerL:.bly further in October, owing
largely to increased shipments of grains, coal, and miscellaneous
')
freight.
In the first half of November loadings showed a Seasonal
decline.
Commodivr prices
iiholesale commodity prices generally showed little change from the
middle of October to the third week of November.
and leather advanced.
Prices of steel scrap
Tin plate prices, on the other hand, were reduced,
and there were also decreases in zinc, hides, and rubber.
Prices of
farm products and foods showed small fluctuations in this period.
Bank credit
Tott:~.l
loans t:llld investments at reporting member banks in 101 lead-
ing cities declined by about
~150,000,000
during the first half of
November following a substantial increase during October.
The decline
227
.
-4-
R-549
in November was almost c.;ntirely at Neil'; York City banks and reflected
the retirement of State and local government obligations held by these
banks.
Adjusted demand deposits, which reached an all-time peak of
~ls,ooo,ooo,ooo
at rGporting banks in the last week in October, also
decreased somewhat in the first half of
Novemb~r.
Member bank reserves
in the middle of November wore at about the high level reached a month
e&.rlier.
Money rates and bond yields
The prevailing rate on open-market commercial paper declined
slightly in November to 5/8 of 1 percent, a new low level.
short-term open-market rntos wore unchanged.
Other
Yields on U. S. Govern-
ment securities and on hlgh-gr.:;.de corporate bonds showed only small
ch::..ngss during Novumbor, continuing clos8 to the low levels reached
in Oct.ober.
-·
R-550
BOARD OF GOVERNORS
228
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
November 28, 1958.
+
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal r·eserve banks, the following code word
has been designated to cover a new issue of
Treasury Bills:
NUBATH - Treasury Bills to be
dated Nov8mber jQ, 1938, and
to matur~J March 1, 1959.
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
229
BOARD OF' GOVERNORS
OF" THE
.
FEDERAL RESERVE SYSTEM
R-35J.
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December
2~
1938
+
tear Sirt
There is inclosed for your information a proof
copy of Fbrm F. R. 34 as revised for use during 1939.
is hoped that shipment of the forms can be made about
.
December 15•
1
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
Inclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
It
230
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 5, 1938
R-352
Dear Sir:
Heferring to the Board's letter R-164 of January 13, 1938,
following is a statement of changes reported during November in the
list of nonmember banks that have in force agreements with the Board
pursuant to the provisions of Section 8(a) of the Securities Exchange
Act of 1934:
Deletion
New Jersey
Clayton
Clayton Title end Trust Company
The Clayton ':'itle and Trust 0ompany should be added with the
following note to the li8t (R-164--b) of banks which filed agreements
with the Board of Governors of the Foderel Reserve System pursuo.nt to
the provisions of Section 8(a) of the i.Jecurities .bxchange Act of 1934,
but which are no longer in operation as nonmember- banks:
(PlDced in voluntary liquidation on August 19, 1938)
Very truly yourf:,
L. P. B0th•;;a,
Assistant Secretary.
TO
Pf-i..t;SIDEiriS
OF ALL FEDERAL
RESERVH..
B/J·JKS.
231
BOARD OF' GOVERNORS
CF' THE
FEDERAL RESERVE SYSTEM
f~-355
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
December 5, 1958.
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
•rreasury Bills:
NUBCAB - Treasury Bills to be
dated December 7, 1958, and to
mature r~iarch a, 1959.
J. C. Noell,
Assistant Secretary.
TO PRESIDE,'NTS OF ALL FEDERAL RESERVE BANKS
232
BOARD OF GOVERNORS
OF' THE
F"EDERAL RESERVE SYSTEM
WASHINGTON
AOOREBB CF'F'ICIAL CDRREBPCNDENCE
TC THE &CARD
December 5, 1938.
Dear Sira
There is inclosed, for your information, a copy
or our reply to a letter received from a Federal Reserve
bank regarding the method of handling reimbursable expenses
for overtime incurred in connection with fiscal agency
activities.
Very truly yours,
E. L. Smead, Chief,
Division of Brulk Operations •
...
Inclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
.
L-1.'
R-37'1'A
c 0
p
y
December
J, 1938
Mr.
, --=:----Federal Reserve Bank of - - - - - '
Dear Mr.
-----Reference is made to your letter of November 25
regarding the method of
hondli1~
reimbursable expense
incurred for overtime in connection with fiscal agency
activities.
It seems to us that if the unit for which the
overtime was incurred can be definitely determined it
would be preferable to charge any expense arising in
this com1ection direct to such unit.
Very truly yours,
(Signed) E. L. Smead
r
E. L. Smead, Chief,
Division of Bank Operations.
'
233
BOARD OF GOVERNORS
R-355
OF THE
,
234
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 6, 1938.
Dear Sir:
In connection with telegraphic transactions
between Federal reserve banks covering Government
securities, the following code words have been designated to cover new issues of Treasury Notes and
..,
Treasury Bonds:
NOWMIXT - 1 1/a% Treasury Notes of Series
B-1943, to be dated December 15, 1938, and
to mature on December 15, 1943.
NOWFIN - 2 3/4% Treasury Bonds of 1960-65,
to be dated December 15, 1938, and to mature
on December 15, 1965.
NOWGAT - 2% Treasury Bonds of 1947, to be
dated December 15, 1938, and to mature on
December 15, 1947.
yours,
J. c. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
235
BOARD OF' GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
R-556
WASHINGTON
ADDRESS OF"FICIAL CORRESPONDENCE
TO THE SOARD
December 9, 1958.
Dear Sir:
There are inclosed herewith copi.es
of statement rendered by the Bureau of
Eng.raving and Printing, covering the
cost of preparing Federal reserve notes
from November 1 to November 29, 1958.
Very truly yours,
o. E.
Foulk,
Fiscal Agent.
Inclosure.
TO
PRESIDD~TS
OF ALL
F'EDEf~L
RESERVE BANKS.
236
R-356-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
November 1 to 29, 1958.
Federal Reserve Notes, Series 1934.
,.
$10
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
"'20
'If
Total Sheets
12,000
20,000
20,000
19,000
22,000
6,000
55,000
7,000
6,000
'7,176.00
19,156.00
8,648.00
6,348.00
6,072.00
2,760.00
14,628.00
5,772.00
2,300.00
2,944.00
2,484.00
6,072.00
~822540.00
66,000
188,000
74,000
50,000
44,000
24,000
124,000
54,000
19,000
24,000
21,000
50,000
6,000
16,000
78,000
208,000
94,000
69,000
66,000
50,000
159,000
41,000
25,000
52,000
27,000
66,000
718 1 000
177,000
895,000
a,ooo
Amount
895,000 sheets,@ $92.00 per M••••••••••••••••• $82 1 540.00
R-35'1
BOARD OF GOVERNORS
237
OF" THE
I'
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
December 12, 1938.
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:
NUBCEW - Treasury Bills to be
dated December 14, 1938, and to
mature March 15, 1959.
Very truly yours,
Assistant
/
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-558
238
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ACOREISS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 15, 1958.
Dear Sir:
There is attached a cogy of the report
of' expenses of the main lines of the Federal
Reserve Leased Wire System for the month of
November, 1958.
Please credit the amount payable qy
your bank to the Board, as shown in the last
colunm of' the statement, to the Federal Reserve
Bank of F.ichmond in your daily statement of
credits through the Interdistrict Settlement
Fund for the account of the Board of Governors
of the Federal Reserve System, and advise the
Federal Reserve Bank of Ricrunond by wire the
amount and purposo of the credit.
Very tru.ly yours,
0. E. Foulk,
Fiscal Agent.
r
Inclosure.
TO PiffiSIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
239
R-358-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF NOVEMBER, 1838.
Words Sent
~·
..
<i
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
21,965
60,401
16,440
26,668
420
Richmond
Atlanta
Chicago
St. Louis
23,307
36,972
54,550
56,850
412
Minneapolis
Kansas City
Dallas
San Francisco
15,667
39,877
30,484
42,405
403
403
403
Board of
Governors
218,856
Total
624,242
by N. y •
Chargeable
to Other
F.R. Banks
413
415
,;~:o5
701
405
466
4,842
Total
viords
Chargeable
Pro Rata
Share of
Total Expenses (1)
554.40
22,585 $
60,401
1,495.92
16,853
417.59
27,085
670.75
$
Expenses
Paid
by Banks
and
Board{2}
Payable
to
Board
of Governors
332.65
1,035.05
246.68
210.03
$ 221.75
462.87
170.71
460.72
25,719
57,575
55,051
57,253
587.43
925.64
1,363.42
922.62
200.51
299.32
1,234.71
255.86
387.12
626.32
128.71
666.76
16,070
40,280
30,887
42,871
398.00
997.59
764.96
1,061. 76
158.08
205.77
278.00
573.25
239.92
791.82
486.96
688.51
218,856
5,420.28
10,752.45
629,084
~15,580.16
$15,580.16
$5,332.17
(1)
Based on cost per word ($.0247-66422) for business handled during the month.
(2)
Payments by banks are for personal services and supplies and payments by
Board are for personal services and supplies ($1,596.55) and wire rental
(~9,155.90).
Personal services include salaries of main line operators and
of clerical help engaged in work on main line business, such as counting
the number of words in messages; also overtime and supper money and
Retirement System contributions at the current service rate.
R-359
.. 240
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL. CORRESPONDENCE
TO THE SOARD
December 14, 1938 •
.,
Dear Sir:
There is inclosed, for your information, a
copY' of a letter which the Board today is sending to
Mr. G. L. Harrison, President, Federal Reserve Bank
•
of New York, with respect to the destruction of certain fiscal agency and depositary records, as recom-
..
mended in the report of the Committee on Destruction
of Records maintained
qy
the Federal Reserve banks
which was approved by the Conference of Presidents,
at the meeting held in Washington November 18, 1956.
Very truly yours,
Chester Morrill,
Secr·3tary.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS EXCEPT
NEW YORK
R-559-a ..
December 14, 1958.
Mr. G. L. Harrison, President,
Federal Reserve Bank of New York,
New York, N. Y.
Dear Mr. Harrison:
The report of the Committee on Destruction of Re.cords dated
ll, 1936, which was approved by th~ Conference of Pr~sidents at
the meeting held in Washington on November 18, 1956; contained a recommendation that the Board seek continuing authority from the joint
Congressional Committee for the destruction of certain fiscal agency
and depositar,y records.
J~~e
I
In our letter of March 15, 1957 you were advised that the
Board had requested the Secretary of the Treasury to obtain continu'
ing authority
for the destruction of the above-mentioned records and
that after a reply had been received you would be advised in regard
thereto. The Board received a letter from the Treasury Department
some time ago stating that the Secretary would request continuing
authority to destroy the specified records, and recently was advised
informally that while such request had been made through the Archivist
of the United States, no action had as yet been taken by the joint
Congressional Committee. Discussions with the Treasury Department,
however, indicate that it will be agreeable to th0 Department for the
Reserve banks to request authority to destroy such records in the
following manner:
1. One Federal Reserve bank should list on Treasury Department Form A the forms which accumulate regularly year after year. It
is assumed that such forms at the present time will consist of those
fiscal ~gency and depositary records in Schedules D, G, H and I of
the Committee's report recommended for destruction, subject to
Treasury Department approval.
2. The original and four copies of this list, together with
a sample of each i·tem marked with the appropriate i tern number, should
be submitted to the Board. The Board will then forward the original
and three copies of this list to the Treasuiy Department. Form A
should be compiled as indicated on the reverse side of the form, all
columns being filled in except colmm1s 1 and 7, and should be headed
as indicated on the attached sample which was furnished the Board by·
the Treasucy Archivist. It will be noted that the caption "Federal
Reserve Banks as Fiscal Agents" should b& substituted for the caption
"Bureau" and that the location of the records should be shown as
"Various Federal Reserve Banks". No particular Federal Reserve bank
241
R-559-a
-2-
242
should be mentioned in the heading. The Treasury Archivist did not
have available information as to the kind of copy (original, or duplicate, printed, or processed) and could not, therefore, fill in column
5 on the attached sample. This colurrill, however, should be filled in
by the Federal Reserve bank.
5. After the destruction of the forms listed on Form A has
been approved on the recommendation of the Archivist of the United
States, the Treasury Department plans to list such forms on a 11 Standard list of forms to be destroyed periodically". Once having been
compiled, the "Standard list of forms to be destroyt::d periodically"
will be duplicated by the Treasury Department and used each YE)ar by
the Department in making recommendations for the disposition of useless papers. I.t will be necessary for the Department to recci ve
advice from the Federal Reserve bank annually only as regards to the
elimination of forms that have become obsolete and to the addition of
new forms. The fonns included on this list should not, however, be
destroyed by the Federal Reserve ba.r..ks until the printed report of
the joint Congressional Con®ittee recommending that the records be
destroyed has been received.
)
It will be appreciated if your bank will compile on Form A
(supply inclosed) a list of fiscal agency and depositary records recommended for destruction, as outlined above, and submit it to the
Board for transmission to the Treasury Department. It is suggested
that the "Inclusive Dates" shown in column 6 cover the period from
the time the forms were first used by the Reserve banks up to and
including the most recent year covered by the minimum retention
schedule in the Committee's report. After advice is received that
the destruction of the forms has been approved, the Board will notlfy
your bank and all other Federal Reserve banks and the forms may then
be destroyed.
It is quite possible that other fiscal agency and depositary
forms and papers have been accumulated Qy tho Reserve banks since the
date of the Committee's report which they may wish to receive authority to destroy. Whlle it is thought preferable to confine the request
at this time to the forms listed in the Committee's report, a CO.P'J of
which has been furnished the Treasury D8partment, once the procedure
has been established there would appear to be no objection to requesting authority to destroy other material and it may be desirable to
have a Committee of the President's Conference appointed to review
such material and make recommendations with regard thereto so that
the practice of all Reserve banks will be uniform in this connection.
Very truly yours,
(Signed)
Inclosures.
Chester Morrill
Chester Morrill,
Secretar-y.
BOARD OF GOVERNORS
R-360
243
IJF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE SOARD
December 16, 1938.
SUBJECT 1 Sur:u:w.ry Stater.1ent of Federo.l Reserve
Ba.nk Personnel.
Dear Sirt
In accordance with the usual practice, please furnish
the Board with a sunr:ary statenent shotling the n'll.rlber and solaries of officers and enployees of your bank (including branches,
if any) us of Decenber 31, 1938, nade out in accordance with the
attached forn.
The figures, nhich should not ixlude any changes
in either the number or salaries of officers or (mployees that
bocone cffoctive on January 1, 1939, will be published in the
Board's 1938 Annual Report.
Vcry truly yours,
.,.
E~ Lo Smead, Chief,
Division of Btlnk upero.tions.
Inclosure
TO PRESIDE!ITS OF ALL FEDERAL RESERVE BANKS
R-560-a
244
HUMBER AND SALARIES OF OFFICERS AIID mPLOYEES OF THE
FEDERAL RESERVE BANK OF
(I!JCLUDING BRAIJCHES)
December 31, 1938
Total officers
and employees
including those
whose salaries
are reimbursed
to the bank in
uhole or in part
Annual salary of President
Officers and
employees (in--e
eluded in column
1) whose salaries
are reimbursed to
the bank in v.rhole
or in part (a)
------
$
Other officers:
!Jumber
Annual salaries
Employees, both permanent a.'ld
temporary a
Humber (b)
.Annual salaries
(a) Should represent aggregate of fractional amounts in the case of
employees Whose salaries are only partly reimbursed to the bank.
For example, if 25% of the salary of an employee receiving $1,200
a year is reimbursed to the bank, .25 should be included in the
computation of the "numbern of employees, and the amount of salary reimbursed, $300, should be included in the computation of
the annual salaries.
(b) In the case of part-time employees, i.e., employees who are regularly engaged for less than a f'ull day, the "number" reported
should represent the portion of the full day >vorked. For ~
ample, if any employee is regularly engaged for one-half of the
usual '!irorking day, .50 should be included in the computation of
the 11 number11 of employees.
.
R-561
245
BOARD OF' GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDREBB QF"F"ICIAL CQRREBPQNDENDE
TQ THE BOARD
December 17, 1958.
Dear Sir:
It will be appreciated if you will mail to the Board as
soon as practicable after January 1 a copy of the budget approved
b,y your bank for its head office an~ each of its branches, if any,
and for the head office and branches combined, for the calendar
year 1939.
"'
Since detailed figures of operating costs are compiled along
functional lines by all Federal Reserve banks and since a better comparison can be made between expenses and budgets when the budgets
are prepared in the same form in which expenses are reported, it
will be appreciated if the 1959 budgets furnished to the Board are
prepared along functional lines in accordance with the sample form,
R-561-a, attached. The statements should show totals for each function in the functional expense report, Form E.
In addition, it is requested that budget statements be submitted on Form R-361-b and R-561-c showing the itemization of the
budgets of the statistical and analytical and bank examination
functions.
It will also be appreciated if you will prepare and submit
with the budget statements memoranda setting forth in general the
reasons for the principal increases and decreases in the budget estimates for 1939 as compared with actual expenses during 1958.
A supply of forms R-361-a, R-361-b, and R-361-c is inclosed.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-&31-a
StJIIABI OF BtJI)Qjil' i9TIJWP, 19J9
Federal Reserve Bank of - - - - - - -
246
----~----~·-----(Indicate whether head office,
branch or •combined" report)
Function
I
I
I
E!Reqsep,
Year 19.38
•
I
t
Budget,
Year 19)9
General dverhead - Controllable
General overhead - Noncontrollable
Provision ot space (lees income and
distribution}
Furniture an(l equipment
Provision of personnel
General service
... Postage
Insurance
• Failed banks
Loans, rediscounts, and ncceptnnces
Seaurities
Currency and coin
Check
collection
Noncnsh collection
Accounting
Legal
-.
Bank and public relations
Auditing
Bank
examination
Federal Reserve note issues
'" Statistical and o.nal1tioal
· Securities
oxo~
Fiscal agency, cu.stodianship, and
depositary&
Reimbursable expense
Expense not reimbursable
Foreign
.
'IDTAL (Column 1 must agree
· with Form E)
\
.. 247
R-561-b
Federal .Reserve Bank of - - - - - - - - -
-
~
. branch or ttoamb:lnecf' report)
t
Expense Unit
-
... (Indicnte
- - ·- - -whether
....... - - .. -.head office,
•
•
Expenses,
I
Budget, ·
~----------------------------------------~·~Y=e=!£~l~~~·~~~--~~=e=tr~l~9l=9~
1. Sto.tisticaJ.t
~
b~
c.
·
de
e•
i'•
g•
h.
Salaries - Officers*
Salaries - !mpl019es
Retirement s,.tem contributions
for current service
Traveli.ng expenses
Printing, statione17, and supplies
1'elephone and telegraph
Postage and expressage
JJJ. other
TOTAL
2. Monthl.Y f.et;ta.er•
1
at.
b.
Printing and stationeey
Postage and expressage
~ .3. Libr~•
~
alar.les - Oi'ti........
be Sal.aries - Emplotees
o. · Retirement s71tem contributions
for current service
de Traveling expenses
e. Print:lnc, stationeJ.7, and supplies
f•
g.
h.
Telephone and telegraph
Newspapers, periodioala, books, ·
binding, clipping ael"'V'ice, etc.
All other
TOTAL
TOTAL, STATISTIC~~
.ANALlTICAL
...
Number or copies of Konthly 4atter
printed for month of December, 19)8
.
*Indicate in a footnote the complete all..ooation
of the time and aala.ry of each officer whose
salary is charged in whole or in part to this
unit.
248
R-361-c
~ Federal Reserve Bank of ---------......,;. - - - - - - - - - - - - - - (I.ndioate 11hether head office,
branch or "COJllbined" report)
I
1
t
•
I
Expenses,
J!¥ ·lm2J8
1
1
a • Salaries - Of'f'icers*
b. Salaries - Employees
c.
Retiretlent system contributions
for current service
d,
Traveling expenses
e.
Printing, stationery, and supplies
r.
Telephone and
g.
Copies of bank examination reports
,.,
I
t~graph
h. .All other
'
TarAt
DEDUCT - EXPEUSBS CHARGED AO.AIUS'l'
BANKS Ex:.Al4IID
NEl' TOTAL, BANK EX.AMDtATIOU
..,
*Indicate in a footnote the complete allocation or the time and
salary or each officer whose sa.J.ary is charged in whole or in
pa.rt to this f'unction.
249
BOARD OF GOVERNORS
R-362
CF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF'F'ICIAL CORRESPONDENCE
TO THE SOARD
December 1?, 1938.
Dear Sir:
In connection with telegraphic transactions in Government securities between F'ederal reserve banks, the following code word
•
has been designated to cover a new issue of
'l'reasury Bills:
NUBCIV - Treasury Bills to be
dated December 21, 1938, and to
rna ture hiarch 22 , 1939.
J. c. Noell,
Assistant Secretary.
TO
PRESIDF~S
OF'
AJ~L
FEDERAL RESERVE
lliU~KS
250
. BOARD OF' GOVERNORS
R-563
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDREBB arrJCIAL CDRREBPDNDENCE
TD THE BOARD
December 19, 1938.
Dear Sir:
There is inclosed for your information a swmnary of the bank relations
reports submitted by the Federal Reserve
banks for the month of November in response to the Board's letter of August 25,
1936 (X-9680).
Very truly yours,
)
.,
Chester Morrill,
Secretary.
Inclosure.
TO PRESIDlt"NTS OF ALL FEDJt::HAL RESERVE BANKS.
_..~·.
R-365-a
December 14, 1938,
To:
The Board of Governors
From:
Mr. Han@ond, Division of
Bank Operations.
Subject:
S~~ary
of Bank Relations
Reports.
Reports of bank relations as requested in the Board's letter
of August 25, 1936 (X-9680) have been received for the month of
November and excerpts therefrom will be found on the following
pages. A table showing for all twelve banks the nunilier of visits
made, meetings attended, and addresses delivered has also been prepared and follows the quotations,
The reports as usual give evidence of the uncertainties that
banks are feeling with respect to bond portfolios and the efforts
they arc makir..g to enlarge their field of londlng. In various districts, there is increasing interest in mortgages, installment
loans, and personal loann. New York mentions the activities of certain banks in Wiking life insurance loans.
The lending activities of Production Credit Corporations and
other government agencies are frequently mentioned. In some regions the lending operations of these agencies are reported to be
competitive and the banks are highly resentful of it. In other
regions, bankers appe:1r to be well disposed toward the agencies,
particularly on tho ground that they handle a type of loan which
the banks themselv•3S would not choose to handle.
MinneB.polis and K,msns City both report thnt country banks are
much interested in the bearing of the wage and hour law upon their
busi.ness,
Jt~xcerpts from the reports follows:
attached to the original hereof) •
('rhe reports themselves nre
.,
BOSTON
The Sixteenth Annual'Meeting of the Stockholders of the Federal
Reserve Bank of Boston was held on November 3, 1938, with over 337
representatives of member banks in attendance.
Mr. Henry J. Nichols, Chairm~n of the Stockholders' Advisory
Comrni ttoe, and Vi"co President of The thtional Shavimut B::1.nk of Boston,
presided. A short address of wolcome was made by Mr. Roy A. Young,
President of the Fedor~l Reserve Bank of Boston. The speakers were
M1•. Frederick A. Carroll, Vice President of ·The Nation~l Shawmut Bank
of Boston, who spoke on "Pension l)lnns or Retirement Plans," and
251
252
-2-
R-363-a
Dr. W. Randolph Burgess, Vice Chairman of the National Gi ty Bank
of New York, whose subject was "Monetary Policy and World Trade."
The proceedings of the meeting are in process of publication nnd
copies will be sent to the Board .of Governors of the Federal Reserve System and our member banks,
During November visits were made to ten member banks and three
nonmember banks in Vermont and Massachusetts.
At those places where factory pay rolls exist, they wore reported to be on tho increase. Retail trade, however, was reported
to be unsatisfactory at all points due to unseasonable weather
conditions.
The only complaint heard was that of insufficient demand for
bank loans. Two of the member banks and one savings bank havo invested heavily in FHA Title II mortgages on out-of'-state properties.
In each instance the banks sent committees of directors to inspect
the properties before buying the mortgages, and the policy was to
keep the average of the notes under ~~5, 000. The mortgages held by
both member banks are being serviced by the out-of-st!lte banking
institutions from which they were purchased, The saYings bank is
attempting to service its own paper.
N1"W YORK
Cattaraugus County (Buffalo Branch Territory)
y
Total security investments held by the banks visited aggreg~te
$14,154,000, of which $4,975,000, or 35 per cent, ~reUnited States
government issues, 'rhree institutions rE>port some appreciation in
their lists, but the remaining b'1nks show depreciation ranging to
as high as 13 per cent,
The demand for credit for commercial and agricultur"ll purposes
in general continues light, although several officers of the smaller
banks mentioned that they are experiencing a somewhat better demand
for loans. As a general rule, 6 per cent is charged by these banks
on 311 loans. One bank in the colmty recently opened e personal
loan department and several banks arc discounting finance p'lper for
local automobile dealers and electrical appliance coneerns, which
has affordod some outlet for funds, Both 'l'i tle I and Title II F'ederal Housing Administration loans are being granted in communities
where there is a demand for this type of accommodation.
Executives of the five nonmember banks, while friendly towards
the System, have, with one exception, given little consider~tion to
253
-3-
R-·363-a
membership, and in most instances their condition would not appear
to enable them to qualify. The president of one nonmember bank
(deposits $1,403,000) previously expressed the desire to file an
application, but states that he has decided to do nothing at this
time due to the provision of the law which requires a minimum capital of $500,000 if they desire to operate branches beyond the city
limits. This bank is apparently in good condition and its president keeps in close touch with the affairs of banks in neighboring
communities, having in mlnd that some time in th0 ncar futuro he
m'lY have an opportunity to absorb one or more of them as branches,
He believes some of these banks will be forced to suspend operations because of l~ck of earning power. As branch banks, however,
he feels they can be operated profitably. It is his opinion that
the Federal Reserve capital requirements in this connection are too
rigid.
Herkimer, Madison, Oneida, and Onondaga Counties
7
The majority of banks continue to have a net depreciation in
their security portfolios amounting to a rather sizable figure in
some instances. 'l'he comparatively few inst.i tutions which have a
net current appreciation (or a very small depreciation) are principally those located in the smaller or rur~l communities, whose investments consist of a larger proportionate amount of United States
government, municipal and other public issues, and a relatively
small amount of railroad obligations.
Officers of banks in the industrial and larger centers report
that there has been little seasonal expansion in loans this fall,
and that any substantial increase in the demand for old-type commercial loans appears remote. In order to improve their earnings, many
banks have broadened their loan policies and h'lve entered the field
of granting personal loans, handling automobile and other installment financing, purchasing Federal Housing Administration mortgages,
etc. One national bank in Syracuse (deposits $21,000,000) has
granted within the past year about $1,000,000 of loans secured by
cash surrender value of life insurance policies, charging a rate of
4 per cent on loans up to $5,000 and 3 per cent on amounts over
$5,000. In many instances the borrowers have transferred their loans
from insurance companies in order to take advantage of the lower rate
of interest charged by the bnnk.
Recent developments in tho industrial cities in this Central
New York area have generally been of an encouraging character. The
trend of business in Syracuse has been up~~rd throughout the fall
season. Improvement in the automobile industry has brightened the
business outlook there because of the numerous local manufacturing
254
-4-
R-:365-a
plants, large and small, which are engaged in pr~ducing materials
and parts for motor cars. Some of the shops proaucing special machinery, tools, and dies are very busy, which is loo~ed upon as a
good sign, indicating that manufacturers are re-toollng and.preparing for new and larger production. The monthly publicahon of
the Syracuse Chamber of Commerce shows that in the weel~ ending November 5, ·the total pay rolls of twenty-two industrial concerns
representing diversified lines of production amounted to $30?,000.
This is a new high to date for 1938 and is a gain of 22.5 per cent
over the week ending September 3, but a decroasu of 24.8 per cent
from the comparable week a year ago.
Jefferson, Lewis, and St. Lawrence Counties
. 1
Loans have shown little fluctuations throughout this area. Three
banks, howev·er, located in villages where industrial plants are active, have been able to expand their volume substantially through
personal loans and one, in addition, has developed a satisfactory
amount of Federal Housing Administration 'ri tle I loans, 'l'he total
of farmers' loans has remained almost stationary because no substantial volume of new loans is being made and payments on old loans
are sm~ll in tunount due to the low farm income. It is said that
the legitimate demands of the dairy farmers in this area have been
taken care of, but in general they are now operating without the extensive borrowing which was customtuy in the past. It is expected
that the demand for o.ccom."llod·:ttion will incre~se early in th.1a year
when taxes become due and milk production is low. The ff:lcilities
of the Production Credit Association have not heretofore been wittely
used in this t<::rri tory, i t is said, due to the schedules of repayments being considered too heavy, but tho b'lnks are not unfriendly
to the Association and will doubtless refer applications to it if
they cannot meet the demands for credit.
Nassau County
Investment portfolios now amount to $56,900,000 reflecting an
increase of about $1,300,000 since March, almost all of the increase
being in United States government issues which now totql $25,900,000.
A number of bankers indicate that they are limitinc new purchases of
securities to ·united States governments and that their holdings of
these securities are largely in maturities of ten ye'lrs or less.
Fourteen banks report that their bond accounts still have some appreciation while the others have t:t depreciation which in some cases is
large enough to cause an impairment in the common capital,
Lo11ns and discounts now aggregate $43,250,000 showing an increase
of $3,300,000 since the fir:Jt of the year, \fany b8.nkers speak of the
255
-5-
R-363-a
improvement in earning power of their institutions resultJ.ng from
granting personal and Federal Housi.ng Administration. loans. Thirtytwo institutions now have approximately $1,300,000 outstanding in
personal loans as compared with $1,100,000 in March. Thirty banks
have placed a total of $1,700,000 in home repair loans under the
new ))rovisions of Title I of the National Housing Act and twentysix have granted $20,500,000 in Federal Housing Administration Title
II mortgages of which $15,500,000 have been sold to insurance companics, other banks, or the State Comptroller. A number of banks
are granting lon.ns to loc:1l borrowers against life insurance policies and two institutions are taking on loans of this type through
New York brokers who have been canvassing the country,
Morris, Sussex, and Warren Counties, New Jersey
In the eighteen counties visited, there are 237 commercial banks
of which 164 have issued preferred stock, capital notes or debentures
aggregating $27,715,114 par value. Up to the present time only nineteen institutions have paid off their entire issues amounting to
$2,367,f;OO, one hundred have made partial redemptions aggregating
$3,3?8,864.50 and forty-five have not retired any - leaving one
hundred forty-five banks with a total of $21,968,749.50 par value
still outstanding. The latter amount is retirable at $33,265,959.50
reflecting a redemption premium of $11,297,210.
f'HILADELPHIA
The a.rea covered by this report is for the most pa.rt in the
mountalnous reg.ions o.f Pennsylvania. Agricultural activities are
confined chiefly to dairy farml.ng, and the raising o.f grains, potatoes and poultr-y. Prices for all but poultry products are considered entirely too low. ~j1wat is selling at prices varying from 50
to 60 cents a bushel and potatoes are selling for 60 cents or less
a bushel, 20 c,mts being quoted at one bank as the lowest price.
In some sectione the blight ruined the pou:.to crop and some farmers
failed to harvect enough for noxt year's planting. Milk prices have
been low. In some communities milk has been selling for less than
~l a hundred pounds.
Recently, however, there has been an adjustment in the prices and the new schedule was said to call for a base
of $2.05 a hundred pounds.
Industrial conditions, except in the oil and gas fields, present a brighter picture than when these countL:s wore visited la::;t
spring. Nearly ovory community ruports a dt:cided improvement in pay
rolls and omploymont. Some towns which had lost industries either
through failure or transfer have had new concerns loca.t~) there as a
result of efforts by citizens' committees or the local boards of trade.
256
-6-
E-363-a
In one county the establishment ot' new industries has resulted
in the employment of about 500 additional workers, in another
175, and in a third about 200.
Oil production is at a low level and many operations are
shut down entirely. The price has declined from $2.05 to $1.68
a barrel. Many gas wells have beon exhausted and thero is little drilling for new wells, although some is expected in the
future.
Deposits of the banks in this area have increased about
$375,000 since last visited in the spring but there has been no
appreciable general strengthening of credit demand. The 6 por
cent rate prevails on loons, but at several institutions the
rate varies according to tho collateral offered or risk involved.
F. H. A. mortgages are gaining in popularity among these
bankers and, while many are without opportunity for creating
them in their respective corrununi ties, they qre purchasing those
secured by properties in the larger eastern cities. The majority of the banks report depreciation in investments but only in
a few cases is it sufficient to imlYlir the capital. This matter
appears to be receiving the attention of the banl(s' officers and
directors,
Business activity has increased substantially since
early summer, showing a trend of industrial operations that has
been in sharp contract with that prevailing in the same period
last year. F'tct0ry employment and wage payments have expanded
almost steadily as has be:.m the case in the entire district.
Agricul turnl income also rns increased, and sales of' new passenger automobiles turned up slir,htly 1n October from the excoptionally low point reached the month before. The marked
improvement in building and construction reflects principally
a large increase in the volume of operations partly financed
by public funds.
CLEVELAND
There has been some criticism of charge-off requirements in
connection with bond depreciation under the new ext.mination program. This is occusioned largely by the fact that charge-offs are
requirGd (of necessity) at vary·ing price levels of securities, and
the greatest criticism naturally comes from institutions which
257
-7-
R-363-a
were required to make such charge-offs when investment securities
wore at the lowest levels. The majority of banks, however, have
accepted charge--off requirements as part of a sound banking policy.
There is much criticism of the activities of Federal savings
and loan associations in connection with thoir advertising programs,
as well as the competitive factor which develops as a result of
higher rates paid by savings and loans as compared with member and
insured nonmember banks. Despite the prohibition in regulations
ugainst Federal savings and loan associations representing themselves as deposit institutions, there is no doubt that much of their
advertising is misleading the public. There is one such institution in Cleveland which has prominently displayed in its front
window, a sign to the effect that 11 d.3posits made up to the 5th of
the month will draw interest from the first of such month."
Tha~ greater use is not made of the two principal service
facilities of the Reserve banks by member banks - check collection,
and money services - appears to be due to the fact that Reserve
bank requirements in connection with the collection of checks,
despite the relaxation in certain respects, arc still more stringent than those of correspondent commercial banks in the principal
cities. Use of Federal reserve banks as agencies for furnishing
coin is limited because of the fact that most correspondent banks
will furnish wrapped coin upon request of a correspondent bank.
Suggestions made by member bankers to visiting representatives
during the month inclu<ie one that the Reserve System might consider bringing to the attention of member bar~s the desirability
of budgeting their expenses. One large bank in a principal city
is highly pleased with the results they have attained through a
budget system, and believes that an educational campaign on the
part of Reserve banks would be a great service to member banks not
now familiar with budgeting. Another banker has suggested the de-·
sirability of Reserve banks keeping member banks informed with
respect to called bond issues.
'fhe tobacco markets will open in Kentucky on December 7.
Immediately following these sales loans tend to run off sharply.
The excess funds which cannot now be profitably employed will be
greatly increased.
RICHMOND
During the month representatives of this bank had an opportunity to attend 7 bankers' meetings and visit 89 banks.
258
-8-
R-363-a
There has been an increased interest in membership during
the past three months, which is doubtless due in part to bank
relations activities. One nonmember bank has been admitted to
mE:rnbership, three formal applications are now on file, and several other nonmember banks are giving serious consideration to
th~ matter.
While there is much dissatisf!.l.ction in this district as to
exchange charges on checks, there have been few voluntary changes
in the par list during the past few years. Since January 1, 1936,
one State member has withdrawn from the System to become a nonpar
bank, one national bank has converted into a nonpar State bank,
and one branch office of a nonmember bank has withdrawn from the
pa.r list. During the same period five nonpar banks and one nonpar branch agreed to remit at par, and one new nonmember bank and
one new branch of a nonmember bank were added to the par list when
they opened.
i
Service charges continue to be a live question and the subject was discussed at length at several of the group meetings attended by our representatives. Committees were appointed by some
of the groups in Maryland to prepare schedules. A number of regional clearing house associations have been organized in Virginia,
and the officers of the State association are actively engaged in
promoting others.
In West Virginia movements of coal recently have been rather
active, resulting in increased employment for train and maintenance crevfs, as well as miners. Some mines are operating two
eight-hour shifts five days a week. In Greenbrier County a large
lumber company handling htird woods exclusively is operating on a
much improved schedule over last year and now has approximately
50,000,000 feet of lumber in their yards in process of seasoning.
A number of glass factories in the north middle portion are closed
for lack of orders, which is attributed for the most part to foreign competition.
In the six counties nearest the District of Columbia there
few manufacturing plants except those in and adjacent to
Alexandria and Fredericksburg. In each of these two localities
the bankers report that industries are operating on full schedules
and that renovating and new home building ure above average. This
is particularly true of Alexandria and a large portion of Arlington
County.
ar~
1be average price of tobacco in Southside Virginia has been from
3 to
4k
cents per pound below last year.
The tendency has been for the
259
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R-363-a
finer grades to bring substantially lower prices, while the com;noner
grades have been bringing much higher prices than last year. The
cheaper grades on the early markets were approximately 50% higher than
last year, but as November progressed prices dropped about 25% from
the high. 'l'here was an acreage curtailment of a~)proximately 20% this
year, and, as a result of unfavorable weather conditious, the crop
averaged about 12% less per acre.
In recent years there has been a shifting in Southwest Virginia
from heavy-weight to lighter-weight cattle and to the development of
dairy herds. In many communities it was statt.::d that prices for beof
cattle this season had been unfavorable and that many cattle grov:ers
had not covered actual costs of operation. In n<.:tO.ition to agrict;..lture
and live stock there art:: many manufacturing ph.nts scattered throughout the numerous small uities anci towns. Many ccmp~..;.ratively new
hosiery mills are operating at full time and c, number of otht:rs are in
process of organization. These plants, usually located in enall communities, are equipped to employ fron, 200 to 600, according to the
labor suppl:;r available in the immediate section. The large rayon pli.1.Y1t
to be constructed near Pearisburg, however, is exp<Jcted to omplr,y from
15,000 to 20,000 - considerably more than the present population of the
entire county.
It is estimctted that approximately 14,000,000 pounds of burley·
tobacco will oe sold at the warehouses in Washington County, wh0r0 the
markets will open on December 7.
ATLANTA
Alabama
In November visits were made to 8 member and 3 nonmember banks in
the Counties of Jackson, DeKalb 3 Etowah and Calhoun, a section of nortb.east Alabama. The yield of cotton was reported to be between fort;y
and sixty per cent of tbat of lust year. In a few instances the fur:ners
had an almost total crop failure and loans ·t::J such fa:r·mers ·11ill have to
be carried over until next year. In this section there is .Less dlsposition on the part of the farmer to borrow on his crop frcm the Commodity Credit Corporation than was the case last y~ar. The banks visited
reported that collections generally were good.
The steoJ.. mills at Gadsden are operatin~; at about seventy per· cont
of capacity. These mills o.nd other plant~~ mo.nufacturing durable goods
have combined pay rolls t.>stimateci at around ~J300,000 pE:r month. Cotton
textile mills and the plr:1nt of the Goodyear Tlre & Rubter Company aro
operating with sizeable pay rolls also.
260
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R-365-a
Visits were made also to banks located in eight counties in central und east Alabama. The tovms of Anniston, Alexander City, Sylacauga
and Bessemer are primarily industrial centers. Textile mills, wood
planing mills, large saw mills, iron pipe factories, iron ore mines,
chmr.i.c&l plants, stone quarries, and other industrial plants located
in the towns named are operating with substantial pay rolls and a spirit
of op-t,imism is prevalent. Our representative was informed that inventories of the local merchants arc low.
Bank,§> located in towns which serve agricultural sections report that
collections are good. The chief money crop is cotton and farmers have
been faced 'Ni th a short crop and a low price. In this section also it
is reported that most of' the cotton crop has been sold, with a relatively smaU part being placed in the Government loan •
..,..
The banks in one of the tovms visited are considering a reduction
in the rate of interest paid on time deposits from two to one and onehalf per cent.
The iron ore mines located in the vicinity of Bessemer are operating practically on a full time basis. Steel mills in the Birmingham
district are running at approximately seventy-five per cent of capacity.
One small member state bank estimated its loss from exchange by reason of membership in the System at approximately $7,000 per annum.
CHICAGO
Notwithstanding the difficulty in employing funds, banks will have
sufficient earnings to make necessary charge-off's and other year-end
adjustments which will improve their condition. In view of the approaching semi-annual interest period, some banks are considering and some
have already agreed on a further reduction of savings and time certificate interest rates. There appears to be a better market for tank stock,
and a number of banks will increase their capital by selling stock
locally with the thought in mind that the time i.s drawing near when
they '.vill be able to pay dividends.
As a result of the failure to pass the banking amendment at the
November elections in Illinois removing the double liability on bank
stock, there will doubtless be a number of banks changing from State
to National charters. As a matter of fact, two banks are now being examined for this purpose. In Iowa, where no double liability is imposed,
tho situation is reversed, as several banks are contemplating giving
up their National charters and operating as State banks in order to establish branches. Three banks in Iowa have already taken this step or
are in the process of doing so. (Branch banking is prohibited in Illinois•)
There is a tendency on the part of banks that have conducted a savings
261
-11-
R-565-a
and trust business largely, to expand their commercial business.
Better sentiment is reported among business men generally. I'Vi th
respect to the consumer demand for automobiles, reports from Detroit
indicate that the public has received the new models enthusiastically
and that retail sales have been much better than were anticipated at
any time up to the middle of November. Dealer sales in October were
25 per cent under 1957. Early in November the figures were still under
those of 1957, but it is believed that the total for the month will be
greater than last year.
Prospects in some lines of furniture continue good. One manufacturer of kitchen equipment, including cabinets for refrigerators, reports that his company has already received orders for twice the amount
of its total output last season, and that it expects to make some enlargement in its plant capacity.
The activity in corn loans referred to in last month's report continues. ~nile some farmers are resealing their 1957 crop, a large percentage of the maturing notes is being paid by the delivery of corn.
Loans on the 1958 crop became available December 1. It has now developed
that many farmers eligible under the A.A.A. are sealing their corn and
buying enough to meet their own requirements from neighbors who are ineligible for loans qy reason of non-compliance with the farm program,
the result being that the market for home consumption has been raised ns
much as five cents per bushel over the price obtainable if the corn tvere
shipped to terminals.
Farmers are well pleased with the sustained market for hogs, cattle,
and sheep. The real marketing season has not yet arrived, but if present prices are maintained, a large spending power ·Nill be placed in the
hands of the farmers in this district.
ST. LOUIS
7
fr~ring the month our officers and field representatives visited
227 banks, of which 120 were in Missouri, 41 in Kentucky, 57 in Indiana,
20 in Mississippi, and 9 in Illinois.
Business conditions show improvement in the rural sections visited,
although there has been no marked increase in the prices of farm commodities. Industrial employment has increased in the smaller manufacturing cities where labor difficulties have not affected operations.
Agricultural sections visited are primarily interested in feeding livestock. It is estimated that feeding operations this winter will be
larger than those of recent years. The low price of corn is one of the
principal reasons.
262
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R-363-a
Officers of six Kentucky banks reported that while considerable
of the dark fired tobacco crop was damaged by wild fire, a good price
was anticipated for the remainder of the crop. One entire crop was
sold in the barn for 12¢ per pound.
In northwest Missouri there are prospects of a new oil field. It
is known as the Forest City Basin, and embraces ten counties. A number
of companies are in the field obtaining oil leases, and the activity
has aroused considerable interest. While no wells have yet been drilled,
one has been started at Milan. Officers of three member banks and one
nonmember bank located in different Indiana cities also reported leasing of property for oil exploration. Some wells have been drilled, which
h'.lve been productive.
In many communities local demand for credit was reported as good.
Loan rates range from 4~% to 8%. Some of the larger banks have establi~;hcd personal loan departments with encouraging success.
Becausr.:J of liquldation of livestock holdings, deposits of country
banks continue to rise. T·1vo and one-half per cent is paid on time money
with few exceptions. One bank which is not a member of the FDIC continues to pay 4% per annum on savings accounts. This rate is confined
to old deposits.
Special comments were made· by the president of c Mississippi member bank on his visit to our Memphis Branch to attend the luncheon given
in connection with the conference of the boards of directors of the
parent bank and the branch. Two members of the Board of Governors,
Messrs. s~ymczak and Davis, attended the conference and the bank president's corr~ents were directed particularly to remarks made by Governor
Davis at the luncheon. The banker stated that this was the first meeting he had attended where -there was a note of optimism expressed instead
of a warning. Another member bank president. has sensed an effort on the
part of the Federal Heserve System as a whole to render greater service.
Although his bank does not accept interest bearing deposits, the
assistant cashier of a small Missouri nonmember bank complained about
the sum of $40,000 on deposit at the local post office. The bank's deposits are listed as $94,000. Earnings of the bank are unsatisfactory
&nd it was indicated that the bunk might withdraw from the p3.r list in
order to correct this situation. No action will be taken on the matter
for the present. Another nonpar Missouri bank has experienced a number
of losses on real estate loans which it is evidently endeavoring to eliminate out of earnings. The bank's cashier believes the practice of charging exchange is wrong but stated unsatisfactory conditions made it necessary. It appears that unless other banks in the adjacent territory with::draw from the par list, officers of this bank will again par its items \
as soon as the losses have been eliminated.
263
-13-
R-363-a
The cashier of an Indiana nonmember bank located in a city of 5900
population, expressed the opinion that Federal Statutes should permit
branch banking, provided the capital structure of the parent bank is
10% of the total deposits of the parent bank and branch. It was mentioned by our visiting officer that officials of the Indiana bankers'
Association and of the State Banking Department were among the strongest
opponents of branch banking.
As our visiting officer entered a small Kentucky nonmember bank,
he noticed an elderly gentleman seated at a work bench on one side of
the lobby, 'ousy repairing trinkets of sevoral kinds. Not associating
him or his work with the bank, our officer proceeded to a teller's window where he mE•t the lady cc.shier, who explained to him that the elderly
gentleman was the bank's president. The president, who was 85 years
old, then explained that the trinket w-ork was a pet hobby at which he
loved to work when time permitted. Conversation with him left no doubt
as to his general soundness and the liquidity of his institution.
MINNEAPOLIS
Southwest Minnesota
Generally ::peaking, the banks with excesG funds have been active
in making 1957-8 corn loans and taking loans secured by resealed 1937-8
corn cmd will take 1938-9 loans secured by corn. Banks with exrJanded
local lmms prefer to limit their holdings of corn loans in order to
obtain more earnings and meet local demand. A few of the banks state
that there is too much "red tape" connected with these loans and they
refuse to handle them.
Ban}:s are becoming active in taking car and farm implement paper
on an amorth,ed basis endorsed by responsible debtors or otherwise secured. Apparently their experience has been satisfactory. A substantial number of tractors and power equipment is being sold in the territory, influenceci somewhat, it seems, by the loss of horses from sleeping
sickness.
Live stock feeder lo<ms have been popular investments, induced by
low corn fJrices, abundant roughage and tempting prices of feeder stock.
This business ie gradually tapering off nmv, following a gradual rise
in feeder stock prices to a point where the investrHent becomes more
speculative.
Open House, Kanabec S,tate Bonk, Mora,
JV!innesot~::.
Mr. Frank Powc;rs, President of the Bank, is one of the foremost
bankers of the State, both as to the earning power of his bank and as
264
-14-
.i
R-363-a
to his relationships with his customers. Each year, he holds a stockholders meeting at which he outlines the problems of the bank and asks
the stockholders to defend the bank in the community. At this particular meeting, he discussed the new Federal Wages and Hours Law, which
he said was going to compel the Bank to open an hour later each morning and to close on Saturday afternoons. He asked the stockholders to
explain the reasons for this change and to assure the public that the
bank was desirous of giving as good service as before, but that the
new Law made it impossible. He announced that, while business conditions were not quite as good as last year, the net profits of the Bru1k
would equal those of last year and would permit payment of the usual
dividend.
Group Meetings in North Dakota
Some consideration was given to suggesting legislation designated
to nullify the "moratorium laws" now in effect in North Dakota. There
seemed to be some support to a movement to influence legislation along
this line until a legislator, who is also a North Dakota banker, made
the statement that bankers as a group are not very well regarded politically and that as a voting group their members will not influence any
legislation. He followed by saying that the borrowers who had taken advantage of these laws were in so deep financially that they were satisfied to continue to obtain protection from such legislation and until
such time as a new generation grows up and demands credit and is unable
to obtain assistance because banks are not protected such statutes will
not be eliminated and no organized effort by a minority group will materialize.
KANSAS CITY
..
The outstanding topic of discussion among bankers in November was
the wages and hours law. A greatly confused condition exists. Most
small banks do not believe they are engaged in interstate co~nerce and
yet they realize that an obligation may be accumulating. The hope is
universally expressed that an official ruling may be had in the uear
future that will clarify the situation. Opening an hour later or closing an hour earlier is the usual solution.
Among smaller banks, especially in agricultural regions, deposits
appear to be slowly decreasing. At the same time a good many such banks
report an increase in demand for loans. There is said to be a demand
for money to buy cattle and sheep in Colorado and in sections of Kansas
where there are large supplies of feed. Because of the relatively high
prices of livestock, however, bankers appear quite uncertain as to how
far it is safe to go with livestock loans. There appears to be a ruther
heavy demand for certain types of impossible loans. For instance, a
number of banks report that farmers are try:lng to borrow money to pay
interest to the Federal Land Bank.
265
-15-
R-363-a
Resentment against the aggressive tactics of certain government
lending agencies shows no sign of abating. In particular, bankers
in Oklahoma are outspoken on this subject. Apparently considerable
effort is 'oeing made to meet this competition, especially as regards
rates. It is generally appreciated, however, that this is not a wholesorr.e competitive situation. The belief is prevalent that some of the
govarnment agencies aru accepting many subnormal risks.
From all indications most communities are becoming accustomed
to service charges. Banks report that there is virtually no complaint
of such charges and tha~ they are a substantial source of income. For
LnstD..nce, a banKer whose institution has deposits of $800,000 says
their earningr from service charges are equal to $8,000 a year.
There appears to be considerable concern a1:10ng banks regarding
the governmont bond situation. A good many cases ·11ere found where
these securities have been sold. Banks are holding large amounts of
local municipal obligationo, the return on such investments being about
3 per ccmt. In fr:i.ct, sor.l8 banks hole more municipals than Federal securities. Real eBtute loons o.ppear to be on the increase. Some of
these loans aro umortiz•3d while others are not.
Il<.Jnkurs in sr1all comrmni ties almost invariably inquire as to the
future of a sm<tll country br:.nk. Fev: of those institutions appear to
be i11aking any money ~:md a nwnbo:r. of cases were found where there are
d8fh"..i.te plc.ns for liquidation. Even in larger places many instances
are found of an overbanked condition and further consolidations and
liquida·t.:L::ms aplJear probo.ble.
'I'h(:~re is generai se.tisfaction with tho price of livestock.
The
bc::lir.:;f is alec.; exprcss ..:;d that bettor busindss conditions in the east
will be helpful to lj_vestor~k prices. The winter wheat si0untion appeors ~1nusually spotted. Rain is needed almost everywhere in the
Di::trict but in many places thero is a good st.and of 'Nheat and a fair
l:l.Llctmt of subsoil moisture.
In other localities, however, wheat is
in a "!ery poor condition. Banks repc•rt that eovernment crop insurance
is not po~Jular in western Kansas as many farmt::rs feel the premiums
a;ce .far too hlgh. There appGn.rs to be a good deal of speculation as
to the future of whe:1t Dnd especially what the recent tracie pact.s may
do for this corr.modit;;/. In general, however, there seens tc be little
expectation of substantially higher wheat prices.
Our officers visi tod thirty-three member· tnnks and three nonJ!lei.Jbers
located in f01..~rteen cf the fel'tile "bLu.cklc.nd" counties of North Texo.s.
-16-
266
In this urea, where agriculture is the predominant activity, .farm
income this year has curved steeply dovmward by reason of the combined
and successful efforts ·of nature and the AAA program to curtail the
production of cotton. Moisture deficiency reduced the per-acre yield
and the drastic cut in acreage allo·;vance further accentuated the decline.
The shrinkage in 19:38 .farm earnings, however, was offset in part by
the distribution of a large aggregate of subsidies on last year's operations and by· the appearance, for the first time in this section of the
State, of a decided trend toward the adoption of a. more diversified and
intelligent program of agricultural production. The new program has
four caraina.l objectives: The furtherance of rsclamation and floodcontrol projects, the planting of long-staple varieties of cotton, increased production of other "money crops,"· including cattle, hogs, poultry and dairy products, and the promotion of "dry lot" cattle-feeding
fucili ties through the increased usc of silos. On the whole it may be
said that agriculture in these fourteen CQunties stands to gain rather
than lose as the net result of the disrepute into which its chief product, cotton, has fallen as a source of re-.renue.
...
..,_
Member banks in this "blackland" region were found to be reasonably
prosperous. A majority of these banks regard the farmer as being a less
desirable credit ri.sk than he was in former years. Although government
aid has tended to make his debts somewhat more certain as to repayment,
it has also undermlned to some extent his thrift, lndustry and sense of
personal responsibility for his own fortunes, according to the testimony
of his local bankers •
The interviewed ba~k officers in the visited area professed general
satisfaction with their F'edercl. Reserve relationships and with the course
being pursued by the Board of Governors with respt:ct to monetar.t and
banking matters. A few criticism3 wvre voiced with respect to other
governmental agencies and organizations. The most common of these related to the manner in which the triple-A program is being administered particularly by county agents and other local officials, whose gross
inefficiency in some cases has been the target of wide-spread and sevnre
condemnation.
.
The question of reviving our former practice of holding annual
meetings of ou~ stockholders was discussed. The preponderance of opinion
was adverse. It was pointed out that the member banks in this district
have no problems or grievances to discuss so far as their Federal Reserve
relations are concerned,and that the holding of stockholders' meetings,
as such, for discussion of other subjocts would entail an unwarranted
and rather expensive duplication of the opportunities ulready afforded
for such discussions a.t the annual conventions and "group meetings" conducted qy the Texas Bankers Association.
Those who expressed approval of such meetings pointed out that the
members of Congress and the Board of Governors do not now have ad(~quate
267
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R-363-a
contact with the problems and views of the member b&nks, particularly
the country member banks, which, on a numerical basis, constitute the
bulk of the System's membership. They complained that legislation and
regulations vi tally affecting thous~::tnds of small banks are comJtantly
being adopted without giving such banks a re".sonable chance to be heard.
It was asser·ced that the governing and supervisory authorities rely
almost solely upon information and advice given them about rural ·oa.::."lk
problems by city bankers who happen to be bettor known but who do not
always know the true situation in the agricultural cor;mrunitios. These
complainants are inclined to beliGVo that if annual conventions W<::ore
held by the member banks they would afford a mediw~: tr.rough which thtir
views would become more articulate and effectiVE:.
SAN FRANCISCO
San Joaquin Valley, California
The crops which are currently being harvested have in genera.1 been
large. Prices, however, have been disapvointine; to grotNers, and thoro
has been a tendorJ.cy to hold off sales, particularly of gr·ain, hay and
cotton. There has also been c. late season for raisins, as the weath~"r
has not boen suitable for drying. This has slowed up the liquid'lt:ion
of some seasonal loc-ms, but on the whole bankers expectr~d that liquidation of' their seasonal loans would be complete by the e:1d of Nov;:,mb,:;r.
Orange County, California_
With one of the largest valencia crops on record harveotA<i at
prices about the lowest ever received, the gro;·;ers will either aljout
break even or will lose money, deyending upon the type of grower, s.~>~e
of his fruit, and the yield per acre. As a consequence, the grm·1ers
are in none too good a fralllo of mind. The 1939 val<:mcia crop promises
to be the largest on record, but its size will probably te reduced considerably by drop-rings and scarred f:::'ll.it caused by recent windstorms.
Bean growers have also fared poorly, with very ~.ow prices received.
On the other hand, beet and chili pepper gruwers received fair prj_ces
and should make some money. In spite of the low ;:1rice.s recei Vt:d for
agricultural products, retail business in the County has held up well,
and in one localit;,- at least is aheaJ of last 2ear. This is ~1ttribut
able to the increased expenditures required to harvest the Lum.per orange
crop. There will be many carry over citrus loans this fall, and an increased demand for funds during the coming sen.son. The b'lnks, hm~',3V0;r,
generally finance only tho Elorc substontial gnYiwrs, the ::nlance teiug
taken care of by the Production Credit AssJciution, sv that they are
not at all disturbed.
268
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R-36~~-a
Deposits have held u;' reir,arkably well, but it is a question
whether they will not be O.ravm (:,own considerably later on. Housing
ac"t1.vities show a moderate increase in some localities; in others
·tb.r:;1• ara c..t a standstill.
f:.s.lt
:;:uver
VCA.lley,
Ari:~ona
The cl trua crop is somewhat larger than that Clf last year. :t!;stiruatos for gr:lpE:frui.t for the 1938-39 season are placed at 2,800,000
boxes, and oranges at 5C0,000 boxes. The crop is moYing to market,
but there is little as;:;urnnce of increased :;>riCbS for the fruit.
'I'he win tel' lcttue.::> crop is developing
;3atisfact~)rily,
tions g0ne:r-ally indicate prieos to the grower should
b~;;
and condi-
r.;vod.
Arizona's 0ct.ton crop is estimo.ted a~ 197,000 bales, a3 cc..mpured
·iflth the 195'1 pr:-;ductior• of 513,000 brJ.les.
Although cattle a.tld Ghe·JP havo ho1d up remarkably we::ll, they nevertheless reflect the unsutisf~.:.ctory condition of the ranges, whi(.!h c..re
spt. "tt-Eid. It i~' !'t)portcO. that gr·~mnd. foed is scatterGd, but browse ls
still good ond \Jill no C.oubt be un irtrpvrtunt foctcr in keeping dmm
lcsscs during thr' cord.ng wintt::r. Many outfits v7iLi. ha\·e to feed some
c~.:nc&ntrE<t:.os bcf•)re s;y::·ing, ,;vcn if a milr1 winter is experienced.
Tho
cost of fead is cou;;;idGral;ly :Le;:;s than a year ago. There is some movemont c•f e:1ttle a.ud cheep tc sou'tht~l'n V'llle:;s for the winter. Although
;uany cattle are being corr(•l fed in this ~section, the eperaticn is less
th~.tn it was last year.
'l'ourist. ;·,ravel uffcrds on h1p~)rtant scurce of incc:me and e?1ployrncnt in t.he s·::.r.tte, tUHl, t..::>gethor •~ith the minos, which &r~::: employing
J;x:re r,:evple £:.ncJ ;;'roducing r~.;vr-3 copper them hus been the cuse fo:c over
~ ;;- ... ar, cond.i t.Llll5 are now better· thnn they havo bGon fer S<Jme time
past.
Bu::.lding activit;/ has lncr::;ased material:i.y c:iuring the yf.-ar, espE:"cin.lly resid.e:ncc:;;s, a.ll.d there ts n. progran: fer public school l>uilci.ings
under way :i.r1 the Salt River V<:.llo:r which is estim:::>.t<~d to involve a cost
of clos~'J to ~6,·JOO,OOO.
The 'J&rketing of turke)' s for the l'hanJ~sg.i ving trade had been compte tee. and the retuJ.~ns 1-:erc! considered quite satisfactory. All but a
ver:y ~mall percf"nt..a.gc.:: of the birds car1•ieu a prlrne grade and based upon.·
thE: NE-:;w York marl-:fJt of 29¢ p8r pound brought 24¢ per pound FOB shipping
point.
269
-.LPBids were opened a few uays ago for the cons-c.ructior;. of two tunn.o.L;:;
in connect,ion with the Sa.Lt I.ake Aqueciuct m.vision of the P.;.·o;,·o H.Gser··.roir Pr·oj ect and it is an tici.pated that •r:ork Hill be co1ru~.enced w1. r.hin
a f~w we13ks with greater f.;.Cti vi ty concer,:dng the proj ec !:, as a ribole fGllo;fing the ·,::in tor month.s. Clt:;nring of the dnu: ~.i.. tc~ ln F'r0 ·lc Cr~n.)tC•n,
constrnc.:tion of the dum r:md ne;¥ roud gr9.d.t:•s have; bt:Gn uncer Wt·<'J slnco
f-Jic.;y 1958 under a contract totaling :~i2,13~,ouo.oo which c~--11;:, for the
cvmpletioa of this phase of the work. in 1942. Estimates of t.h(: fbit•Jd
States Bureau of Recl<.:.rnation or the• c~.:.st •:..f thr: Aqueduct Ltvision alon~
is ~i:.5,500,000.JO and. t.he tot~d C•.Jst o~~ th(,~ ultlifta't,e vrojec!i c.·~ fLfte8n
and a half ~illion dollars.
ro
I
tf)
•.o
t0
I
PUBLIC RELli.TIO.liS ACTIVITIES OF FEDERAL RES&11VE BLNKS
p::
November - 19:38
Federal
Reserve
Bank
Visits to Banks
I
I!leetings Att.ended
Non-member!
Tot[<l
17
166
54
182
3
57
24
20
225
78
202
67
26
20
22
89
7
9
35
21
227
3
4
5
77
114
45
8
72
3
15
64
Member
Number
i
I
0
C\:2
Boston
New York
Philadelphia
Clevele.nd
20
7
10
~
11
I
Addresses Made
Attendance
Number
#
None
5,592
3,075
21200
1
None
6,280
205
5,775
567
1
None
None
l
1,030
5,370
4,000
846
None
None
1
':(
v
I
Attendance
80
140
I
Richmond
Atlanta
Chicago
St. Louis
46
Minneapolis
Kansas City
Dallas
San Francisco
45
42
42
49
# Number not reported.
1
181
54
3
3
12
6
140
50
628
50
R-564
BOARD OF GOVERNORS
271
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
December 19, 1958.
Dear Sir:
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 two hundred and sixty-two thousandths of on~
per cent (.00262) of the total paid-in capital
stock and surplus (Section 7 and Section 13b)
of the F'E::deral reservo banks as of the close of
business December 31, 1938, to defray the e::;timated expenses and salaries of the members and
employees of the Board from January 1 to Junr.~ 30,
1959.
The resoluti.on also contains instructions
vii th regard to the mE. .nner in which the payments
on the assessment shall be doposi ted with the
Federal Reserve Bank of Richmond.
Very truly yours,
.
0. E. Foulk,
Fiscal .Agent.
Inclosure.
'1'0 PRESIDENTS OF ALL FEDERAL RESERVE BAJ.~KS
272
R-564-a
RESOLUTION LEVYING ASSESSMENT
WHEREAS, Section 10 of the Federal Reserve Act, as amended,
provides, among other things, that 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 P.receding half year, and
WHEREAS, it appears from a consideration of the estimated expenses of the Board of Governors of the Federal Reserve System that
for the six months' period beginning January 1, 1959, it is necessary that a fund equal to two hundred and sixty-two thousandths of
one per cent (.00262) 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 printing,
issuing and redeeming Federal reserve notes;
NOW, THEREFORE, BE IT FESOLVED BY THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYS'IElY!, '!'HAT:
(1) There is hereby levied upon the several Federal reserve
banks an assessment in an amount equal to two hundred and sixtytwo thouuandths of one per cent (.00262) of tho total paid-in capital and surplus (Section 7 and Section 15b) of each such bank at
the close of business December 51, 1958.
(2) Such assessment shall be paid by each Federal reserve
bank in two equal installments on January 5, 1939, and March 1,
1959, respectively.
(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 provldecl 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 telegraph advice to
Richmond of the purpose and amo~~t o~ the credit, and the Federal
Reserve Bank of Richmond shall pay its assessment b,y crediting the
amount thereof' on its books to the Doa.rd of Governors of the
Federal Reserve ~stem on the dates as above provided.
R-365
273
BOARD OF' GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
December 20, 1938.
Dear Sir:
On Monday, Januar.y 2, 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 also will
be observed by Federal Reserve banks and branches during the month
of J a.nuary:
January· 9 (Monday) In observance
of the anniversary of the Battle
of New Orleans (which falls on
Sunday)
New Orleans
January 19 (Thursday) Anniversary
of the birthday of Robert E. Lee
Louisville
Memphis
Dallas
El Paso
Houston
San Antonio
Richmond
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
On January 9 and 19 the offices affected will not participate in either the transit or the Federal Reserve note clearing
through the Interdistrict Settlement Fund. Please include transit
clearing credits for such offices on January 9 and 19 with your
credits for the following business days. No debits covering shipments of Federal Reserve notes for account of the head offices conaerned should be included in your note clearing of Janu~u:y 19.
Please notify branches.
truly yours,
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS
OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
R-366
Dr THE
274
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 22, 1958.
Dear Sir:
There have been forwarded to you today under separate cover
copies of Form FR 107 to be used by State bank members in submitting their reports of earnings and dividends for the six months
{mding December 51, 1958.
The form has been revised by eliminating three interest items,
and by rearranging tho reserve items in sections 2 and 5 so as to conform to the revised form of condition report, FR 105.
The arnount of 11 ReserVt3S for contingencies" reported against
i tern 16 (d) of revised .Form E'R 107 should agree with the amount of the
corresponding item in Schedule G of the r<:>vised form of condition report. If the amount heretofore reported as 11 ReserVE3S for contingencies"
in earnings and dividends reports has included any valuation allowances
which in the condition reports have been deducted from assets, an appropriate adjustment should be made in the next report on Form FR 107.
The adju;Jtment may be reported under item 6 (d) of Form FR 107 against
such a caption as "Valuatton allowances heretofore included in reserves
for contingencies". If, however, tl1e amount is substantial and the
bank so desires, the adjustment may be effected by interlining a new
item following item 9 reading "Deduction on account of valuationallowances heretofore included in reserves for contingencies". In
either case the amou.11t wl thdra~m from "Reserves for contingencies"
should be included in item lO(d). Definitions of the terms "Reserves
for contl.ngencies" and "Valuation allowances" are contained in the
parnphle".::, of instructions, Form F'R 105a, governing the preparation of
reports of condition of State bank members, copies of which are being
sent to you for uoe in connection with the next call for condition
rC:ports.
TO PRESIDENTS
L. P. Bethea,
Assir.::tant Secretary.
OF ALL FEDERAL RLSEHVE BAL\IKS
R-367
BOARD OF
275
GOVEfu~ORS
OF THE
FEDERAL RESERVE SYSTEM
Statement for the Press
For roloase in morning newspapers of
:vionday, December 26, 1938
Attacheu is a copy of a letter sent to
Senator Byrd of Virginia by Chairman Eccles in
answer to the Senator's address in Boston of
December 10.
December 23, 1938
276
R-567
December 22, 1938.
My dear Senator:
In the course of your speech attacking the Government which
you delivered in Boston on December 10, you so grossly misrepresented
my own views that I feel compelled to address this letter to you in
order to keep the record straight. You professed to quote from my
speech before the New York Chapter of the American Institute of Banking on December 1, but it would appear from your misquotations that
you had not dono me the justico of reading my speech before you assailed
it..
I cannot leave uncorrected tho impression conveyed by your
speech that I am an advocate of reckless, wastoful, ever increasing
spending by the Government. As a bonker and busines:3 m.:1n for more
than twenty years before I camo to Washington, I have a vital interest
in the maintenance of our economic system and of our democratic institutions. I am quite as concerned as you are to maintain the solvency
of the Government and to avoid the evils of inflation. However, I am
oqus.lly in favor of avoiding the ev:Us of' deflatic.m. I think I may be
forgiven for feGling some impatience \Yhen a responoible public official
liktJ youruolf so misconstrues my viewpoint as to l'l~:ke it appear that my
advocacy of properly directed and properly timed Federal expenditures,
for the primary purpose of stimulating privc:te ontl~rprise, ;is based on
any other principle or purpose thnn to c.id in brin~Y,ing about the greatest
possible degree of sustbined employment <Hld production of re&l v:enlth
by priv~o.te activity and enterprise, which, in turn, is the surest safeguard of our democrr.cy as it is of the solvency of our Government.
Only in this way, by restor:1tion of nrltionttl income, can we reach and
maintain the balanced budget i~hich I wn as desirous as you are of achieving.
You have every right to disagree as tu the efficacy of fiscal, rr.onctary
and other policy in efi'octing stimulation in dtJpression or retardation
in [.i p:::ri::Jd .Jf unsound expcnsion. I, of course, reserve the right to
present the other side of the case. But I am convinced that it deserves
consideration on its merits, without rancor ur misrepresentatiun.
It is evident from the program you presented in your Boston
address that you and I have a fundamentally different conception 0f the
responsibility :)£' Government and of the functionins of the economic
system. Your prof,,Tam 1:1akes only five ::>pecific recummcndt..tiuns, all
c&lling for ir:unecliate and drastic curtailEJent of government expenditures.
277
- 2 -
R-567
You appear to believe that a large part of the Government's
expenditure is "waste". You are fearful about the Government's
credit and alarmed about the "burden" put upon the country by the
public debt. There is not space within a letter adequately to discuss
these matters, but in view of your program and since you saw fit to
make a personal attack upon me, I feel that it is in order to raise
e. number of qu0stions with respect to each of the foregoing considerations.
As to the "burden" of debt: The pertinent facts are the
volume of total debt in the country, the inter<~st on that debt, and
tho income out of which interest may be paid. You failed to mention
any of these pertinent facts. Are you aware of studies made by a
distinguiBhed group of scholars, under the uuspices of the Twentieth
Century Fund, indict:.ting that the total of all domestic debts, both
public and private, is no g:reat..er tod~ty than it was in 1929? That
being so, does it not eive a one-sided and olarming picture of the
country's debt situation to concentrate attention solely upon the incrense in the public debt without regard to tho contraction of private
debt, and without regard to the increase in population and in the
materio.l wea.lth of the country since 19!~9? Is it of no significance
that, owing to the decline in the rate of interest, the total of
interest payments today is frr less than in 1929? Is it of no significance that while the burden of interest payments has been lessened,
national income, out of which debt::> are serviced, increased since the
low point of 1932 until in 1937 it wa.s $50,000,000,000 more than in
1932? Is it of no significance that the interest on the Federal debt
amounts to only a litL.-le morG than 1 per cent of our national income?
Finally, is it of no significance that as a nation we owe our debts to
ourselves &nd not tu a foreign countr.r?
As to your concern about the burden of taxation, have you not
overlooked the fact that as national income increases, tax revvnucs increase, even without a rise in tax rates? National income increased
from less than $40 billions in 1932 to approximately ~70 billions in
1937. Tax receipts of th:J F0deral Government increased from $2,0BO,OOO,OOO
for the fiscal year ending June 30, 1933, to ~6,242,000,000 for thu fisca:)..
year ending June 30, 1938, Tha country paid about $4 billions more in
taxes but it had $30 billions more of income a year out of which to make
these payments. Would you have tho public believe that the country was
better off in 1952 with lower ta:xes and a. lower public debt than it was
in 1957 with higher taxes and a higher pl.lblic debt'/
278
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R-567
Since 1957, national income has temporHrily contracted due
to a combination of factors, one of which was a too sharp and too
rapid reduction, amounting to more than ~5,ooo,ooo,ooo, in the Government's net contribution to community buying power in 1937 as compared with 1956. The Government's net contribution to purchasing
power is the amount that the Government expends ovor and above tho
amount it collects. On this basis, the Government not only
drastically withdrew its stimulus to consumption in 1957, but contrary to your apparent belief, actually had a oo.lanced cash budget
and a cash surplus of about $100,000,000 for the period from June
50, 1957, to March 50, 1958.
So much for the debt "burden". Turning to the question of
what is to be entered upon the credit side of the ledger as an offset to the increase of the public debt, you evidently contend that
nothing is to bE-) entered; that the Government's expenditures, for
which the debt was incurred, represented "waste".
Is it "waste", as you seem to think, to have the Government
borrow and put to use otherwise idle funds of individuals and
corporations? Is it "waste" to have the Government, by borrowing
from the corrunercial banks, replenish the supply of bank deposits
which contracted by one-third because of debt liquidation during the
deflation, and put this newly created money to work providing employment and tpus utilizing man power and productive facilities that
otherwise would have remained idle? Is it "waste" for the Government
to expend these newly created and these otherwise idle funds for r~ads,
slum clearance, bridges, school houses, hospitals, and a host of other
useful and necessary things that are needed by the community but are
not supplied by private enterprise? Are those additions t·,) our
national wealth, additions resulting from public expenditures that are
based upon increase of public debt, more 11 W[<Stoful" than the expenditures
in the late twenties, based upon private debt, whereby billions of
dollars were diverted to uncollectable foreign loans ~md to build at
inflated prices huge skyscrapers, ()fftce buildings and apartment houses,
many of which never have been sufficiently occupied to maintain the investment?
D·;) you think it was "natural forces" that produced the recovery after 1955? Do you think that the restoration of the national
income from less than $40 billions to approximat~ly $70 billions came
about in spite of and not as a result of Government expenditures? If.
so, why was it that for more thun three years after 1929, when we did
not have the legislation or expenditures to which you so strenuouszy
object, there was no recovery, but instead, a continuing deflation until
279
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R-567
the Government intervened on a comprehensive scale, replenished bank
deposits and put these funds, together with stagnant fm1ds held b.Y
individuals and corporations, to work? This, of course, increased the
public debt after private debt had rapidly contracted. Doubtless had
the Government be_-m adequately prepared, it could have spent money
more efficiently and moro productively. Yet, in the light of all of
the foregoing considerations, how can it justly be Sb.id that the Government's expenditures were "waste"? What to my mind is the real and
irreparable waste, which the nation can least afford, is that which
results from failure to use our human and material resources productively.
As to the Government's credit: Why do you suppose it was that
in 1952, when the Governmen~'s debt was about half of what it is now,
5% government bonds sold down as low as 85? If the C'.JOvcrnment' s credit
is as procarlous as you told your Boston audience, why is it that 2~%
government bonds today are sellingat a premium of more than 102? How
does it happen that sincu 1935 foreign capital has stea.dily flowed into
the country from &.broad, if the credit of the country is in j eopar·dy,
as you contend?
Early in your speech you extolled "those time-old virtues of
thrift, frugality, self-reliance and industry". Somewhat later, however, you expressed alarm at the increase in debt of the lc:1.st five
years. I am at e loss to understund how you reconcile these two ideas.
Certainly if it is good for people to save, i.e., practice the virtues
of thrift and frugality, it must eLl so be good that someone should borrow
money and put it to productive uses. Private enterpris~ has in the
years since the depression bogan been in no position to employ profitably
anywhere near the tot<:,l of the country's savings, bocc.use there was not
sufficient buying powor in the hands of the public to purchase the output of existing facilities of production.
In coru'lection with the question of debt, you also ;nake the
curious statement that some day the whole amount must be repaid. Such
a statement reflects a misunderstanding of the fundamental nature of
our capitalist economy. Debts and obligations of various kinds are but
the other side of investment, and if we ever tried to liquidate the
whole amount of them, or even any substanti~l fraction, we would precipitate a crisis so severe that general economic paralysis would result. When there is contraction of total debt, private end public, we
have deflation.
We have never had prosperous conditions without an
accompanying expansion of debt, either private or public, or both.
280
- 5 -
R-567
Do you think, as your speech seemed to indicate, that in u
democracy the Government has no responsibility for creatir1g debt in
order to give employment at times when private indebtedness is contracting and privute enterprise is unable to do so? Do you consider,
as your speech implies, that government debt is evil, whereas private
debt is not'? One would gather from your attitude that if a private
contr[LCtor, for example, borrows money to build houses you would commend
him for "raising capital for private enterprise", \ihereas, if a government housing authority borrovlS money for the scme purpose, you w·ould denounce it for "incurring debt".
Do not the same genoral economic considerations apply to both
private and public debt? Is it not true th!>t the creation of too much
debt relative to the creation of real wealth is inflationary and,
therefore, bad, whether that debt be created by public or private activity,
or both? Can it be said that the creation of debt, either public or
private, that utilizes productively otherwise unused hwnan and mater:i.al
resources, that creates real wealth, that adds both to existing real
wealth and to national income, is an evil? Is not the exact opposite
trae?
While you say that everyone in need should be provided for, I
find this statement hard to reconcile with your broadside attack on the
organization that has carried most of the task of seeing to it that
those in need are kept from want and starvation. You assert that "millions
of able-bodied citizens rely upon the Government for support and have
ceased to exert their efforts for self-help to obtain private employment".
So far as I know, there is not the slightest evidence to support such a
sweeping assertion. Any honest American citizen must resent the insult
thLs implies to millions of self-respecting men and women.
You stated that you are concerned about "the character of the
individual citizen" und "the dignity and the rights of the individual".
So c.m I. I believe, however, that the most basic right of all is the
1·ight to live and next to that, the right to work. I do not think empty
stomachs build character, nur do I think the substitution of idleness and
a dole for useful work relief will improve either the dignity or the
character of the people affected. We cannot expect to preserve our free
institutions in this country if we condemn a substantial proportion c•f
our people to prolonged idleness on a bare subsistenco level of existence.
Further than the right to eat and the ri[~ht to a position, I think the
individual, whether rich or poor, ha$ a right to a decent place to livi:J.
I think he has a right to security in old age and to protection against
temporary unemployment. I think ho has a right to adequate medical
281
R-367
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attention and to equal educational opportunities ;dth the re:'lt of his
countrymen. The government expenditures which you condemn have in
large part been the means of translating these basic rights into
realities. Anyone who is genuinely sincere in his concern about the
rights, the dignity, and the character of the individual citizen, far
from seeking to tear down what has already been done, will want to have
a hand in expanding and improving this work for the future.
There are many other questions which it seems to me your
address and your attitude leave unanswered. I do not profess to know
all the answers to the many complex and difficult economic problems
confronting the nation, but I am convinced that if your program of
sudden, drastic retrenchment were followed, we would witm3SS unother
sharp reversal and renewed deflation. And I, for one, am not prepared
to believe that this nation is doomed to sta~1ation, to a low level of
national income, to a wholly unsatisfactory standard of living instead
of the high stc..ndards, the achievement of· which depends only upon our
correct undcrst<::.nding of the operati..ms of our econ':;mic system. I am
convinced th&t your program is not only a defeatist ~me, a program of
retrogression and not of progress, but that it would jeopardize the
salvation of our democracy which I know you are as sincerely desirous
of preserving as I am.
We disagree fundamentally and c:.nnpletely on how best to
accomplish that end, but of one other thing I am also persuaded, thct
we will not find the answers by indulgence in narnc-CcJlling, such as
marred your Boston address. We will find the answers by recognidng
clearly what the problems are, by understanding how our econJmy
functions, and by working out practical solutions in an atmosphi)re of
calm reason instead of intemperate denunciu.tion.
Very truly yours,
(signed)
M. S. Eccles.
Chairman.
Honorable Harry F. Byrd,
United States Senate,
Washington, D. C.
R-368
BOARD OF GOVERNORS
282
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
December 25, 1958.
Dear Sir:
The Board's letter of june 23, 1958 (R-267) transmitted
copies of a form for use in obtaining reports as of June 50, 1938,
from all holding company affiliates having general voting permits,
and stated that consideration was being given to requesting such
holding company affiliates to submit annual reports, beginning
with a report for the year ending December 51, 1938. After further consideration of the matter, and on the basis of experience
with the reports as of June 30, 1938, it ha~ been decided to obtain such annual reports for the year ending December 51, 1938,
or for the holding company affiliate's fiscal year if it differs
from the calendar year.
There is inclosed a copy of a form for such reports (Form
.B'. R. 457), add:!. tional copies of which are being forwarded to your
bank under separate cover. It will be noted that the form is oirn·ilar to that used in obtaining the reports of holding company affiliates as of June 30, 1938. It has, however, been revised in
certain respects, after careful consideration of the comments and
suggestions received.
Please deliver immediately to each holding company affili-ate, which has its principal executive office in your district and
which now holds a general voting permit, three copies of Form F. I\.
437, with the request that the report be filed in du~)lica te with
your bank not later than February 1, 1969. As in the case of the
reports as of June 30, HH)8, one complete copy of each report filed
with your bank should be forwarded promptly to the Board. It will
be appreciated if you will forward to the Board any further information, comments, or suggestions which you may have regarding each
case after you have had an opportunity to review the reports filed
and to obtain from the respective holding compar.y affiliates such
additional data and explanations as you may deem necessary to complete the reports.
283
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R.-368
The Board's letter of June ~:3, 1938, contained certain
other instructions regarding the procedure to be followed in obtaining the reports which are substantially applicable to the
handling of the annual reports now requested. Accordingly, such
instructions are reproduced for ready reference in the attached
memorandum, with certain changes and additions.
Although it was considered necessary to obtain reports,
in the form provid~d, as of June 30, 1938 and December 51, 1938,
it is not now contemplated that such reports will be requested
regularly as of June ~0. However, it is contemplated that regular annual reports as of the end of the calendar year, or the
holding company affiliate's fiscal year, and such other reports
as are necessary in the light of facts and circumstances, will
be requested.
We shall be glad to have the benefit of any comments,
criticisms, and suggestions regarding Form F. R. 437 which may
occur to you or to the examination department of your bank in
obtaining and reviewing the annual reports of the various holding
company affiliates.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosures.
TO THE PRESIDENTS O.F' ALL .FEDERAL RESERVE BANKS
R-368-a
284
MEMORANDUM fiEGii.RDING PROCEDURE TO BE FOLLOWED IH OBTAINii'lG ANNUAL
REPORTS OF HOLDING COiVJPANY AFFILIATES Ol'l FOEM F .R. 457
The report of each holding company affiliate should be for the year
ending December 51, 1958, except that, in case the holding company affiliate's fiscal year differs from the calendar year, it is desired that tts
report cover the first fiscal year ended after June 30, 1938.
Heports for
the fiscal year rather than the calendar year are requested in such cases
becaus~
of the fact that the reports on Form F.R. 457 should be more satts-
factory, and the preparation thereof more convenient, if such reports cover
the same periods as those covered by annual audits and annual reports to
shareholders.
Vvhen delivering Form lt'.R. 457 to any member or nonmember insured banks
in your district which are holding company affiliates and which hold general
voting permits, please advise such banks that they may omit the following
data requested in the form:
Page
Page
Page
Page
2
5
3
5
-
Page 4 Page
Page
Page
Page
6
6
7
9
-
Balance Sheet
Statement of Iuco:ne
Analysis of Earned Surplus
Analysis of I~ach Other Surplus Account and of
Each Reserve Account
Schedule A - Securities (Other than securities
of affiliatGd organizations)
Schedule E - Notes Payable
Schedule F - Accounts Payable
Capital Stock (Of holding company affiliate)
Supplemental Information - Items 1, 2, and 6.
In any group in which there are two holding company affiliates, detailed information need not be duplicated in the annual reports filed by
the holding company affiliates, but such of the det&iled information submitted
qy one holding company affiliate as is applicable to the other may
be included by reference in the report submitted by the latter.
R-568-a
-2-
285
In obtaining these annual reports, it is desired to avoid placing any
unnecessary burden upon holding company affiliates.
.Accordingly, Form
F.H. 457 has been drafted to provide a convenient means for furnishing the
information which is desired.
However, if in the ordinary course of itf\
affairs or in preparing other similar reports a holding company affiliate
prepares financial or statistical data which contain the information requested in Form F.R. 437, copies of such data may be submitted in lieu of
the form or portions thereof covered by such data.
It is, nevertheless,
ess6ntial that all details of the information requested in Form F.R. 437
be clearly covered in the data submitted by the holding company affiliate
as of the end of its fiscal year.
Regardless of whether the information
furnished by the hclding company affiliate is supplied on Form F.R. 437 or
in some other manner, it is desired that an officer of the holding company
affiliate certify that the report (including all accompanying schedules,
statements, and other data) has been examined by him and is, to the best
of his knowledge and belief, a true, correct and complete report.
Particular attention is directerl to the fact that the holding compo.ny
affiliate is requested to submit tho financial statements, as of the end
of its fiscal year, of each of its subsidiaries and each other affiliated
organization, as described and with the exceptions indicated in item 8 on
page 9 of Form F.R. 437.
It ·::ill be noted that, pursuant to item 8 on pa.ge 9 of Form F .R. 437,
the holding company affiliate should submit for each nonmember uninsured
bank copies of reports of condition and of earnings and dividends filed
with the State supervisory authorities.
Such reports are requested in
286
R-368-a
-·3-
order that sul>stantially similar information may be available 'Hi th respect
to all banks in the group.
In this connection, it is also requested th·1t
the Federal Reserve banks obtain copies of the
late~t
reports of exa;nina-
tion by the rt:spective State supervisory authorities of nonmember uninsm·ed
banl<s which are subsidiaries of the holding compan/ affiliates filing reportr3 on Form :B'.R. 437.
One copy of euch such report of examination should
be for-,varded to the Board by tho Federal He serve bank with the re:9ort submitted by the holding company aff:iliate on Form F.R. 457.
287
R-·569
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PHESS
For release in morning papers,
Sunday, December 25, 1958.
The following suminary of general
business and financial conditions
in the United States, based upon
statistics for November and the
first three weeks of December,
will appoar in the January issue
of the Federal Reserve Bullotin
and in the monthly reviews of the
Federal R8sorve banks.
The sharp rise in industrial production, which began early last
summer, continued in November.
Preliminary reports for the first
three weeks of December indicate 2ome slowing down in the advance.
Employment also increased in November and payrolls showed little
change, although a decline is usual at this season.
Distribution of
commodities to consumers increased considerably.
Production
The Board's seasonally adjusted index of industrial production
in November rose to 105 percent of the 1923-1925 average from 96 percent in October.
Output of steel continued to increase, contrary to
the seasonal trend, and there was a further sharp rise in automobile
production.
In the first three weeks of December activity at steel
mills declined somewhat more than seasonally, while output of automobiles continued at the high level reached at the end of November.
Lumber production in November decreased by more than the usual seasonal
amount.
In the nondurable goods industries, shoe production declined
288
R-369
-2-
seasonally, while output of textiles showed a considerable expansion,
with increased activity at cotton, wool, and silk mills.
At mines,
bituminous coal output increased further and production of anthracite
showed less than the usual seasonal decline.
Output of petroleum
showed little change.
Value of construction contracts awarded in November showed a decline from the high level reached in October, according to F. W. Dodge
figures for 37 Eastern States.
Private and public projects both de-
clined, following increases in October.
The decline in contracts for
private residential building was less than seasonal.
Employment
Employment increased somewhat further and payrolls showed little
change between the middle of October and the middle of November, although declines are usual at this time of year.
In manufacturing the
number employed continued to rise, reflecting principally a further
sharp increase at automobile factories and substantial increases in
the machiner,y, steel, and textile industries.
Employment declined
seasonally at establishments producing clothing and shoes; in most
other industries employment increased somewhat.
In lines other than
manufacturing, employment showed some increase, when allowance is
made for usual seasonal changes.
Distribution
Distribution of commodities to consumers showed a considerable
increase in November.
Department store sales and mail order sales,
289
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R-369
which had been retarded in October by unseasonably warm weather, rose
sharply, and sales at variety stores also increased in November.
SalE:S of automobiles to consumers expanded sharply following the introduction of new models and in November were larger than a· year
ear Her.
Freight-car loadings, which had increased considerably in previous
months, showed a slightly less than seasonal decline in November.
Commodity prices
Prices of some industrial materials, such as nonferrous metals,
hides, and cotton goods, decreased somewhat from the middle of November
to the third week of December.
grains advanced somewhat.
Sugar prices also declined, while
Prices of most other agricultural and in-
dustrial commodities continued to show little change.
Bank credit
In connection with pre-holiday trade, there was a sharp increase
in money in circulation and as the result of this increase in the dem::md for currency,
togeth~~r
with Treasury operations around December
15, there wo.s a temporary decline in member bank reserves.
Following declines during November, total loans and investments
of reporting member banks in 101 leading cities increased during the
first three weeks of' December, largely reflecting operations of the
TreasurJ.
Loans to security dealers by New York banks increased
sharply, reflecting temporary borrowing for the purpose of carrying
Government securities exchangeable for new issues on December 15.
Adjusted demand deposits rose to a new high level in the first half
of December.
R-570
290
BOARD OF" GOVERNORS
Dr THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS CFFICIAL CCRREBPCNDENCE
TC THE BDARD
December 25, 1938.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal reserve banks,
th~
.following code word
has been designated to cover a new issue of
Treasury Bills:
NUBCOX - Treasury Bills to be
dated December 28, 1958, and to
mature March 29, 1959.
Very truly yours,
J. C. Noell,
Assistant Secretary.
/
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
291
BOARD OF GOVERNORS
CF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
AOORESI!I CI"FICIAL CCRREEIPCNOENCE
TC THE EICARO
R-371
December 27, 1938.
Dear Sir:
There are inclosed six copies of revised Form F.R.
414~
"Computation of Reserve to be Carried with the Federal Reserve
Bank by Member Banks".
The form has been revised so that the
references to the call report will correspond with the revised
call report form to be used by member banks in submitting
condition reports as of the next call date.
Inclosures
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
292
BilU!PYNM
(For definitions ot the teas gross demand deposits, deductions
allowed in computing neervea, cash items in J)l'Qoeea ot colJ.eo-··
tion, net demand de))Oai ta and time depoaits, see Regulation D
ot the Board ot Governors ot tlie Federal ReaerYe System)
4 OIJJSS DDUND DBPOSITS, including u. S. Goverment
depoai ts and demand balances ot other bank:a • • .• • • • .• • • • • • • $.,_ __
..
(See Schedule E ot the quarterJ.7 condition report tor
items conetituting deaand deposits)
2. DEDUCTIONS ALLOIPD IN
~ING
RESERVP.St
(a) Cash items in process ·ot collection, except
to the e:x:t•nt included in 1 tem ~ (including checks w1th Federal Reserve bonks
in process ot collection and checks on
hand which will be presented tor payment
or forwarded tor collect ion on the
follow:tng business dq) • • • • • • • • • •
(Corresponds to item 1 in Schedule D of
the quarterl.7 condition report)
(b) Balances subject to imm6diate withdravml.
due tror:l other banltslf', (except balances
due trom Federal Reserve banks, t:ron
foreign banks or branches thereof, trom
foreign branches of domestic ·banks; or ·
trom private banks) • • • • • • • • • • •
... -·----
••••
(Corresponds to item 2 in Schedule D ot
the qu.arterl.T oondi tion report)
.3• .NET DDUND DIPOSITS (item 1 minue item 2)
........ • •
• •
4. TillE DEPOSITS .•• • • • •••• • • •• • • • • • • • • • • • •
{See Schedule F ot the quarterl1 condition report
• • • • ::::::=:=:=:==
.... --==-
tor items constituting time deposits)
· 3. RESERVE REQUIRED**t
(a) On net demand deposits (item 3 above)t
Banks in central reserve citie•, 13 percent J
Banks in reserve cities, lO percent;
Bonks located elsewhere, 7 percent • • • • •
(b) On time deposita (ita 4 above)t 3 percent • • •
(c)
. . . .. . . .--• • . . . . . . --• • • . .. ==-=--
Total reserve to be maintained w1th Federal
Be·~· baQk • • • • • • • • • • • • • • •
•
iltnoluding cash 1 tems tol"VV8.rded to a correspondent bank for collection and
credit and obarged to item "DUe trom banks"•
-asic statutory requirements. For actual cui-rent reserve percentages, see
latest issue of Federal Reserve Bulletin.
R-372
BOARD OF GOVERNORS
293
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDREBB CI'"I'"ICIAL. CCRREBPCNDENCE
TC THE BCARD
December 28, 1938.
Dear Sirr
There are being forwarded to you today under separate
cover, the number indicated of the following forms for use at
your bank during 1939 t
Number
of copies
Form F.R.
n'UJ!lber
38
95
96a
160
160a
160b
160c
Very
truly
yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO THE PRESIDENI'S
OF ALL FEDERAL :RESERVE BANKS
294
R-373
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
li'or release in morning newspapers of
Saturday, December 31, 1958.
December 50, 19_58.
The Board of Governors of the Federal Reserve System today announced the following designations and appointments of chairmen and
deputy chairmen of th~ Federa._l reserve banks for the year 1959, and
directors of Federal res~rve banks and branches for the terms specified:
FEDERAL RESERVE BANK OF BOSTON
CHAirutAN AND FEDERAL RESERVE AGENT: Mr. F. H. Curtiss of Boston
DEPUTY CHAIRMAN: Mr. H. S. Dennison of Framingham, Massachusetts.
CLASS "C" DIRECTOR:
For three-year term beginning January 1, 1939: Mr. F. H.
Curtiss of Boston.
FEDERAL RESERVE BANK OF NEW YORK
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Owen D. Young of New
York, New York.
DEPUTY CHAIRMAN: Mr. Beardsley Ruml of New York, New York.
CLASS "C" DIRECTOR:
For three-year term beginning January 1, 1959: Mr. Beardsley
Ruml of New York, New York.
Buffalo Branch of the Federal Reserve Bank of New York
BRANCH DIRECTOR:
For three-year term beginning January 1, 1939:
Folsom of Rochester, New York.
Mr. M. B.
FEDERAL RESERVE BANK OF PHILADELPHIA
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Thomas B. McCabe of
bwarthmore, Pennsylvania.
DEPUTY CHAIRMAN: Mr. Fruncis Biddle of Philadelphia, Pennsylvania.
FEDERAL RESERVE BANK OF CLEVELAND
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. George C. Brainar~ of
Youngstown, Ohio.
DEPUTY CHAilli~: Mr. R. E. Kluges of Columbus, Ohio.
CLASS "C" DIRECTOR:
For three-year term beginning January 1, 1939: Mr. James C.
Stone of Lexington, Kentucky.
\
295
R-575
-2..-
Cincinnati Branch of the Foderal Reserve Bank of Cleveland
BRANCH DIRECTOR:
For two-year term beginning January 1, 1959:
Thomson of Cincinnati.
Mr. Alexander
Pittsburgh Branch of the Federal Reserve Bank of Cleveland
BRANCH DIRECTOR:
For two-year term beginning January 1, 1959:
Ladd of Pittsburgh.
Mr. George T.
FEDERAL RESERVE BANK OF RICHMOND
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Robert Lassiter of
Charlotte, North Carolina.
DEPUTY CHAIRMAN: Mr. W. G. W,ysor of Richmond.
Baltimore Branch of the
Feder~l
Reserve Bank of Richmond
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Thomas of Westminster, Maryland.
Mr.
w.
Frank
Charlotte Branch of the Federal Reserve Bank of Richmond
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Harris of Charlotte.
Mr. George S.
FEDERAL RESERVE BANK OF ATLANTA
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Frank H. Neely of Atlanta.
DEPUTY CHAIRMAN: Mr. J. F. Porter of Williamsport, Tennessee.
CLASS "C" DIRECTOR:
For three-year term beginning January 1, 1959: Mr. Frank H.
Neely of Atlanta.
Birmingham Branch of the Federal Reserve Bank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Comer of Birmingham.
Mr. Donald
Jacksonville Branch of the Federal Reserve Bank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Gamble of Jacksonville.
Mr. Robert H.
296
-5-
R-575
Nashville Branch of th§ Fecieral Reserve Bank of AUanta
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
B. Austin of Greeneville, Tennessee.
Mr. Clyde
New Orleans Branch of the Federal Reserve Bank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959: Mr. Alexander
Fitz-Hugh of Vicksburg, Mississippi.
For unexpired portion of term ending December 51, 1940: Mr.
E. F. Billington of Meridian, Mississippi.
FEDERAL RESERVE BANK OF CHICAGO
DEPUTY CHAIRMAN: Mr. R. E. Wood of Chicago
CLASS 11 C11 DIRECTOR:
For three-year term beginning January 1, 1959:
of Chicago.
Mr. R. E. Wood
Detroit Branch of the Federal Reserve Bank of Chicago
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Watkins of Manchester, Michigan.
Mr. L. W.
FEDERAL RESERVE BANK OF ST. LOUIS
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. W. T. Nardin of St. Louis.
DEPUTY CHAIRMAN: Mr. Oscar Johnston of Scott, Mississippi.
Louisville Branch. of the Federal Reserve Bank of St. Louis
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Hill of Louisville.
Mr. J. B.
Little Rock Branch of the Federal Reserve Bank of St. Louis
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
of Little Rock.
Mr. H. H. Tucker
Memphis Branch of the Federal Reserve Bank of St. Louis
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Sherard of Sherard, Mississippi.
Mr. J. Holmes
.I
-4-
R-373
297
FEDERAL RESERVE BANK OF MINNEAPOLIS
DEPUTY CHAIRMAN:
Mr. W. C. Coffey of St. Paul, Minnesota.
Helena Branch of the Federal Reserve Bank of Minneapolis
BRANCH DIRECTOR:
For two-year term beginning January 1, 1859:
Cunningham of Helena.
Mr. Alex
FEDERAL RESERVE BANK OF KANSAS CITY
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Robert B. Caldwell of
Kansas City, Missouri.
DEPUTY CHAIRMM~: Mr. J. J. Thomas of Seward, Nebraska.
CLASS "C" DIRECTOR:
For three-year term beginning January 1, 1959: Mr. J. J. Thomas
of Seward, Nebraska.
Denver Branch of the Federal Reserve Bank of Kansas City
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
of Denver.
Mr. J. B. Grant
Oklahoma City Branch of the Federal Reserve Bank of Kansas City
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
Roberts of Oklahoma City.
Mr. Clarence
Omaha Branch of the Federal Reserve Bank of Kansas City
BRANCH DIRECTOR:
For three year term beginning January 1, 1939:
Campbell of Lincoln, Nebraska.
Mr. R. E.
FEDERAL RESERVE BANK OF DALLAS
AND FEDERAL RESERVE AGENT: Mr. J. H. Merritt of McKinney,
Texas.
DEPUTY CHAIRMAN: Mr. Jay Taylor of Amarillo, Texas.
CLASS "C" DIRECTOR:
For three-year term beginning January 1, 1939: Mr. J. H.
Morri tt of il'lcKinney, Texas.
CHAIRMM~
El Paso Branch of the Federal Reserve Bank of Dallas
BRANCH DIRECTOR:
For three-year term beginning January 1,
of Las Cruces, New Mexico.
19~9:
Mr. F. M. Hayner
298
R-373
-5-
Houston Branch of 'the Federal Reserve Bank of Dallas
BRANCH DIRECTOR:
For three-year term beginning January 1, 1959:
of Galveston, Texas.
Mr. H. Renfert
FEDERAL RESERVE BANK OF SAN FRANCISCO
DEPUTY
CHAIRMAN~
Mr. St. George Holden of San Francisco
Los Angeles Branch of the Federal Reserve Bank of San Francisco
BRANCH DIRECTOR:
For two-year term beginning January 1, 1939:
of Hermosa Beach, California.
Mr. W. S. Rosecrans
Portland Branch of the Federal fieserve Bank of San Francisco
BRANCH DIRECTOR:
For two-year term beginning January 1, 1939:
Engbretsen of Astoria, Oregon.
Salt Lake City Branch of the
Fed~ral
Reserve Bank of San
BRANCH DIRECTOR:
For two-year term beginning January 1, 1959:
of Gooding, Idaho.
Seattle
Br~nch
Francis~o
Mr. John Thomas
of the Fgderal Reserve Bapk of San Francisco
BRANCH DIRECTOR:
For two-year term beginning January 1, 1959:
of Seattle.
Mr. A. E.
Mr. Fred Nelsen
R-374
BOARD OF GOVERNORS
299
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
December 30, 1938.
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:
NUBCUA - Treasury Bills to be
dated January 4, 1959, and to
mature April 5, 1939.
Very truly yours,
J. C. Noell,
Assistant ~ecret4ry.
TO PRESIDENTS OF ALL FEDERAL lillSERVE BANKS
. 300
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R•375
ADDRESS OF'F"ICIAL CORRESPONDENCE
TO THE BOARD
December 30, 1938
Dear Sir:
Referring to our telegrwm of December 9, there are being
forwarded to you under separate cover copies of each of the pages shown
below of the '~anual of Instructions Governing the Preparation of
Functional Expense Reports (For.m E)", which have been revised as of
July 1, 1938. An additional set of pages is inclosed for your infor.mation.
Page
n
'II
"
II
II
1
13
28
33-34a
48
53
,,
Page
It
It
"
92
97
100-107
12la-12ld
124-125
Table of Contents (cont 1d)
Page 126 should be eliminated from the Manual.
As mentioned in our telegram, the changes which have been made
in the above~entioned pages of the Manual are largely in order to pr~
vide for new fiscal agency units which have been established since the
date of the last revision of the Manual. Nearly all of the Federal Reserve banks were in favor of combining the Treasury Department - Current
Issues and Uncurrent Issues units into one unit "Treasury Issues" and of
establishing a new unit, "United States Savings Bonds", and these changes
have, therefore, also been made. In the case of both of these units the
wmount reported in the "Reimbursable expense" column will in general
represent the expense incurred in connection with "Current Issues" and
the wmount re.ported in the "Expense not reimbursable" column will represent the expense incurred in connection with 11Uncurrent Issues" under
the present arrangement with the Treasury Department relating to reim•
bursable expenses.
301
-
2
...
The revised instructions have been made effective as of July 1,
19381 since it is understood that the only figures that are not readily
available are those relating to the segregation of the nonreimbursable
uncurront issues expense between tho now "Treasury Issues" and "u.• s.
Savings Bonds" units and it will be entirely satisfactory in the case of
reports for the last half of 1938 to estimate the portion of tho total
nonreimbursable expenses in these two units which are attributable to
each unit.
Certain pages of Form E are being reprinted to conform with the
revised pages of the Manual and a supply thereof will be forwarded to
you as soon as received from the printer.
Very truly yours 1
E. L. Smead, Chief,
Division of Bank Operations.
Inclosures.
TO THE PRESIDENTS OF ALL FEDERAL
RESER\~
BANKS
BOARD OF' GOVERNORS
302
OF THE
FEDERAL RESERVE SYSTEM
R-376
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
December 50, 1938.
Dear Sir:
As you know, the form of balance sheet to be used by member banks in
submitting condition reports will hereafter show interestsof stockholders
under the caption 11 Ca.pita.l Account", instead of under the caption 11 Lia.bili ..
ties" as heretofore. The reasons which prompted a. change in this form apply
as well to the form of condition statement used by the Federal Reserve banks
and, accordingly, beginning with the statement as of January 4, 1939 the
Board's weekly statement of condition of the Federal Reserve banks will show
the capital accounts of tho banks separately from their liabilities.
Attached is a. revision of Form FR 408 which, with the omission of tho
code words, corresponds to page 2 of the Board's weekly statement. ·Similar
changes will, of course, be made in pa.go 4 of tho Board's statement.
It will be noted that the title of this statement has been changed to
"Statement of Condition of the Twelve Federal Reserve Banks Combined"; that
the item "All other assets" has been changed to "Other assets"; that the item
"All other liabilities" has been chant>;ed to "Other liabilities including
accrued dividends"; and that tho item "Reserve for contingencies" has boon
changed to "Other capital accounts". Tho last mentioned item will represent
the sum of amounts reported against code items 11 T00Kn and "TFIG" on Form 34.
Thoro is also attached a statomont showing figures for all Federal
Reserve banks combined for each wcokly statement date in 1938 for items
"Other liabilities including accrued dh·idonds" 1 "Total liabilities" o.nd
"Other capital accounts", also revised figures for certain other items due
to corrections rocei~:ed from tho Federal Reserve banks too late to be reflected in tho second column of page 2 of the Board's statement for the
following week. Tho figures shown in this statement will be used during 1939
in obtaining changes from tho corresponding date of the preceding year appearing in column 3 of page 2 of tho Board's vrookly statement of condition.
Vory truly
Chester Morrill,
Secretary.
Inclosures
TID~ PRESIDENTS
Digitized TO
for FRASER
yours~
OF ALL FEDERAL RESERVE BANKS
her
1 9 3 ·a
ltaM u. t1• iraclllll'lac
acorued
~al .
0t1aer
oaptt&f
11ab!.U.tt.ea MaOUnt
·
41v1d81Jd8
.IPeb.
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2 ·
9
3
lO
17
16
24
~
3l
8ept.7
14
a
28.
..,.
4
ll
1S
25
lune 1
8
l5
22
29
7.
.-11ec. 14
2l
28
i"BW'El •·
we
!8
other cull·
Ool4 oert1tioatee on hand mt due
rrc.
U,I.TNMU:l7'
44o 664
9,117!895
r.m:nez:r a
Uncollected items
) Bank prad.see
. AwU
:rr
Biila ct1ao0taftte4t ·
hcnrred
bJ V. .. ODY't
~-~
Otbqo bill,a di8oouDte<l
obligatiOM direct en.
'
Nr a>
· . B11la 41aco-.teda.
1ecu:N4 b7 U.
.
a. ·Qoytt obltgati.ona 4ireot cn-
Nll.J~ed
.
Other billa dieoouatecJ.
:""
.
~·
304
Released tor publioat.4.on Fr'i4t:q morning, _ _ _ _, 19-' not eo.rliert.
I!~ Of CONDITION
OF TH1 TIILVI ft:DJIW, RliBmvE B.AID CICIIBINED
(In thousands ot dollnr8)
OOND - - - - - - - - - - _____....._
Oold certifiot1tes on. hand and due
from u. S. Trellll.ll'1 •. • • ., • • • • •
BIOE - - - - - - - - - - - - - - - -
Ited•ption ftmd ·-·F. R. n6tes • • • •
Other cash • • • • • • • • • • • • •
BIL'l' - - - - - - - - - - - - - - - -
Total ;esemg • • • • • • • • • •
'1.'E.AI - - - - - - - - - - - - - - - -
BOAT
=======-= =-=====• ===-====--
Bil.l.e disoounteda
Secured by u.s.aov•t obllga.tions,direot
or tuJ..J..y guaranteed .. ~ • • • • • •
BO'IL - - - - - - - - - - - - - - - Other bills discounted • • • • • • •
BORN
===== ===== ======
TotAJ: b'-JJ s Q;LIOQ!iHltJSl • • • • • •
Bills bought in open ma.rket · • • • • •
Ii1dustrial a.d.vanoes • • • •· • • • • •
u. s.
Government securities•
Bcmds • • • • • • • • • • • • • • •
Treo.aury notes • • • • • • • • • • •
Treo.sury bills • • • • • • • • • • •
TotQJ. U1 S, ,Qov;el"JJJUQt se9Ja.11t~u •
other seour:i.tios • • • • • • • • • • •
Tos;!, bilJ.s gng S§ow.j.~eg • • • •
DUe from foreign banks • • • • • • •
F. R. notes of other btltlka • • • • •
Uncollected items ~ • • • • • • • •
):lank premises· • • • • • • • • • • •
Other a.ssots • • • • • • ~ ~ • • • •
..
•
•
•
TDm: - - - - - - - - - - - - - - - BU!UC - - - - - - - - - - - - - - - -
TURX - - - - - - - - - - - - - - - BLW - - - - - - - - - - - - - - - -
BEOK - - - - - - - - - - - - - - - BANE =======::::::::::~;~•
======== ========-==-=
TALL - - - - - - - - - - - - - -
TENT - - - - - - - - - - - - - - - TILL - - - - - - - - - - - - - - - -
TAJ'r
T.ANN - - - - - - - - - - ____.......,_
•
BU'DA - - - - - - - - - - - - - - - -
•
TOUR - - - - - - - - - - - - - - - -
•
TARE
.. .....
=-=====-=-• •-=====-=• =-==-=.,.--
'IOI'E - - - - - - - - - - - - - - - -
LIABILITIJI
F. ·lt. notes in actual ciroul.ation • •
Depositst
Member bonk - reserve t.LOoount • • • •
U.S.Trea.surer ._ General account • • •
TRIM----------------
Foreign bonk , • • • • , • • • • • • •
Other depositS'· • • • • • • • • • • •
oou _____ -----·-----
Totq;;t dQpo&$1 • • • • • • • •
De.terred mftlij abUitT items • ~ • • •
Other lia.bilitiea :tnolu.d:l.n& llCCI"WM!
'rln - - - - - - - - - - - - - - - -
dividends
• • • • • • • • • • • • •
TOTAL LI.&BILITD:S • , , • , • •
OW - - - - - .,._ _ _ _ - - - - - 0.&11 - - - - - - - - - - _____..._
ODIO - - - - - - - - - - - - - - - -
TUBB - - - - - - - - - - - - - - - -
TltlC - - - - - - - - - · · - - - - -
'l'R.III - - - - - - - - - - """..---......,...,.
o AE I a: AIt ·A aP PI Ill·',
Capital Pf,d.4 in • • • • • • • • • t
Surplus (leotlon 7) •· • • • • • • • •
~ue
(leotion 13 b) • • • • • • •
Other capttal
aeoot~ttiJ
MIL Ll&BZLITS AID
Ratio or total reael'Ve•
F. a. note l1ab1lit1es
Contingent l.iabili\7 on
• • • • • • ,
TAlC ---~- _____ ..,._..._ _ _.,..
TRAP - - - - •
Oint& .IC~Uil'l ·tiD
•-=--• ·----··"•''·,'
;
·,1
t> clepotd.t an4
eotddne4 • •
b1.118 J)Ui'ObaMCl
tor toreign oo~a • • • • •
Oomnitnenta to make industrlal ad:VancM
TCIII - - - - · - - - - • ......,_ _ _.,....
TORI - - - - - .......- .......... _..........,.......,_ __
JIIIJ) -·- - - - _ _ _..,..... - - - -......--·~
all'_......,_....,..._-----------::
S-104.
Reg. T-77
BOARD OF GOVERNORS
305
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS
OFFICIAL CORRESPONDENCE
TO THE BOARD
July 14, 1958.
SUBJECT:
Securities Exchange Act Exemption
of Securities Issued by Federal
National iiJ!ortgage Association.
Dear Sir:
For your information there is attached a
co~J
of
an excerpt from the Federal Register for Wednesday, June
15, 1938, 3 F.R. 1419, indicating that the Secretary of
the Treasur-.r has designated "sccuri ties issued by the
Federal National Mortgage Association under the authority of section 502 of the National Housing Act, as
amended" for exemption pursuant to the provisions of
section 5(a)l2 of the Securities Exchange Act of 1954
regarding "exempted securities."
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosure.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
306
S-104-a
Reg. '1'-77
EXCERPT FROM FEDERAL REGISTER JUNE 15, 1938
3 F. R. 1419
Designation of Federal National Mortgage Association
Securities for Exemption Under Securities Exchange Act of 1954
June 10, 1958.
SECu1tiTIES AND EXCHANGE
CO~AISSION,
1778 Pennsylvania Avenue, N.
Washington, D. C.
w.,
Gentlemen:
Paragraph 12 of Section 5(a) of the Securities Exchange
Act of 1954 provides in part that the term "exempted security"
or "exempted securities" as used in such act shall include "such
securities issued or guaranteed ~J corporations in which the
United States has a direct or indirect interest as shall be designated for exemption by the Secretary of the Treasury as necessary or appropriate in tho public interest or for the protection
of investors."
In accordance with the provisions of this paragraph, I
am designating for exemption securities issued by the Federal
National Mortgage Association under the authori~3 of section
502 of the National Housing Act, as amended. This designation
for exemption may be revoked, modified, or amended at any time
with respect to securities not issued prior to such time.
Very truly yours,
WAYUE C. TAYLOR,
Acting Secretary of the Treasury.
(F.R.Doc. 58-1687; Filed, June 14, 1958; 10:01 a.m.)
S-105
Reg. T-78
307
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
July 15, 1958
Mr.
, Vice President,
Federal Reserve Bank of ------------'
------'
Dear Mr.
----
Reference is made to your letter of June 16, 1938 with respect
to four cases submitted by the
Stock Exchange involving
questions under the Board's Regulation T.
Case l· It is understood that a member of a national securities exchange sells short on the exchange for his own account certain
securities at a price of $1,000. The buying member later agrees to
accept a due bill for the securities and a check for $1,000. Pursuant
to the rules of the clearing house, the selling member delivers the due
bill and the check to the clearing house, and the transaction is settled.
As a part of the settlement, the selling member receives payment for the
sa.le in the usual manner.
The first question is whether the selling member is required by
Regulation T to deposit $500 with the buying member as margin on the
short sale. The second question is whether such a deposit of margin
would be required if the short sale had been for the account of a customer.
It seems that the transaction in question may properly be considered to consist of two parts, first, a sale of securities and its
completion b.y delivery of the securities, and second, a borrowing of
securities for the purpose of effecting the delivery. It appears that
the method of settlement is such that the acceptance b,y the buying member of the due bill is in effect a loan of the securities for the purpose of completing delivery. It is understood that, as a practical matter, the buying member's books often would not differentiate bet~een
such a receipt of the due bill and the m~~ing of an ordinary loan of
securities.
Section 6(h) of Regulation T provides that creditors may borrow
and lend S8curities for tho purpose of making delivery in the case of
short sales without regard to the other provisions of the regulation.
The Board is of the opinion, therefore, that, in the case cited, the
selling member need not deposit margin with the buying member and that
it is immaterial whether the sale is for the member's own account or
for the account of a customer.
-2-
S-105
Reg. T-78
308
Case _g. It is understood that A and B are partners of a firm
which is a member firm of a national securities exchange. Transactions in the a.cc6unt of C, a customer of the firm, on a given day create an excess of the adjusted debit balance of the account over the
loan value of the securities in the account. The question is whether
Regulation T permits A, in his individual capacity, to make an advance
of cash to C in the amount of the excess. If the advance were made by
A, neither. his nor B1 s capital or drawing account would be reduced.
The Board is of the opinion that Partner A, who is a "creditor"
within the meaning of that term as usadin Regulation T, may not make
the advance to the customer without obtaining the deposit of margin prescribed by the regulation.
Case ~· This relates to a broker who conducts a regular security brokerage business in Canada, acquires membership in a national securities exchange in the United States, and buys and sells both registered
and unregistered securities for Canadian nnd American customers. It
involves interpretations of the Act and questions of the extraterritorial
effect of ste.tutes, and would depend in each instance upon the particular facts of the case. In the circumstances, the Board feels that it
should not attempt to generalize upon the subject.
Case .1• It is understood that customer A and her sons B and C
each has an account with a member of a national securities exchange.
Each account is operated separately although the mother furnishes all
capital. Profits on the sons' transactions are taken by them, but if
there is any loss, the mother absorbs it. A guarantees the accounts of
Band C. On May 27, 1958, Band C mado purchases requiring under Regulation T the deposit of $1,400 and $1,200, respectively, as margin. On
May 51, 1958, A made a purchase requiring a margin deposit of ~1,700.
On June 1, 1958, A deposited in her account registered securities having a current market value of $5,250, and B liquidated securities in his account having a current market value of $2,700. The broker,
acting in good faith, considered thct the deposit and liqui&~tion satisfied the requirements of Regulation T for the deposit of ~argin in all
three accounts, with the exception of $70. On June 2, 1938, A purchased
registered securities having a current mark8t value of $1,400. At this
time, the maximum loan value of the securities in all three accounts
combined exceeded the combined adjusted debit balance by $2,500, after
deducting the $70 not yet deposited in connection with the previous transactions. The $70 was deposited in cash on June 5, 1958. The question
presented is ..-ihether P..ny deposit of margin must be obtained in connection
with the $1,400 purchase .Jn June 2, 1938.
From the facts as stated, it would appear that in this case there
were three separate accounts, the accounts of B a.nd C, und the account
of A which guaranteed the first two. If this is the case, a deposit of
309
-5-
S-105
Reg. T-78
margin in the guarantor's account could not serve the same purpose as
a deposit of margin in the guaranteed account or a liquidation in su~h
account.
In order for a guarantee to be effective under section 6(c) the
guarantor's account must contain the necessary· excess margin for the
transactions in the guaranteed account at the time such transactions are
effected, and the necessary adjustments must be made pursu~nt to section
6(c) r,t that time, because when the need for a deposit of margin has
arisen in an account sections 5(b) and 5(e) of the regulation require
that there be either a deposit of margin in the account where the transaction was effected or a liquidation therein. The obtaining of a guarantee, or a deposit of margin or liquidation in a guarantor's account, is
of no avail in such circumstances.
It is understood that at the time of the transo.ctions in the guaranteed accounts of B and C the maximum loan value of the securities in
the account of guarantor A did not exceed the adjusted debit balance of
the account. Therefore, the margin required by the regulation should have
been deposited in the guaranteed accounts, or the appropriate liquidation
effected th0rein.
Actually, however, securities having a loan value of only $2700
were liquidated in the account of B. This transaction released margin
of $1,060 leaving $320 still to be deposited. In the account of c, no
deposit or liquidation was effected.
The deposit in the account of A on June 1, 1958 of registered
securities having a current market vnlue of $5,250 moro than satisfied
the requirements of the regulation in connection with the purchase in her
account on May 31, 1938.
The facts stated do not clearly indicate whether the maximum loan
value of the securities in A's account exceeded the adjusted debit balance
of the account by $560 or more on June 2, 1958 when the $1,400 purchase
was made. Such, however, is to be assumed from the fact that when the
$5,250 market value of registered securities was deposited in the account
on June 1, 1958 only $2,834 was required in connection with the previous
transaction. If this assumption is correct, no deposit of mrn·gin 'vas required in connection with the purchase on June 2, 1958; but, as indicated
above, this would depend upon the status of A's account (including adjustments for the guarantees) rather than upon the combined loan value of the
securities in all three accounts.
~~ile the foregoing opinions regarding the accounts of A, B and
C appear to be corr0ct, given the facts as stated, it may be that other
circumstances not revealed would lead to diff0rent results. In the first
place, the actual arrangements between tho broker and A, B, and C may
310
-4-
S-105
Reg. T-78
have constituted one single account with A, divided into three parts
for convenience. In that case, the requirements of thE:: rcgul.':l.tion would
seem to have been satisfied. Secondly, any failure by the broker to
comply with the regulation may have resulted from such a mistake made
in good f::\.1 th as is referred to in section 6(k) of the regulation. In
that case, the broker should take whatever action may be practicable in
the circumstances to remedy tho mistake.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
S-106
Reg. 0-56
311
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
July 20, 1958.
___,
Mr.
, Vice President,
Federal Reserve Bank of
___, __.
Dear Mr.
This refers to y·our letter of June 22, 1958, inquiring
under what circumstances, if any, a member bt~nk may lawfully make
a loan secured by n collateral note for a sum in excess of ~·2,500
on which an executive officer of such bank is liable us maker or
indorser. Regulation 0 defines the term "loan" and the term "extension of credit" as including any transaction as a result of
which an executive officer becomes obligated to a bru1k, directly
or indirectly by any means whatsoever, by reason of an indorsement
on an obligation or otherwise, to pay money or its equivalent; m1t
thes0 terms do not include the acquisition of any evidence of indebtedness through foreclosure on collateral or similar proceeding for the protection of the bank.
it is believed that the question presented in your letter is one upon wrrlch it is not feasible to attempt to give a definite answer which would be applicable to all cases which may arise,
but in each case the answer must depend upon the particular facts.
It turns largely on the mattclr of good faith and on whether or not
the real intention of the partios is to evade the provisions of the
law or the regulation.
If the circumstances are such that it appears that the
tvking of the note of the executive officer as collateral to the
loan was merely for the purpose of evading the provisions of the
law or the regulation, or i f the facts indicate that the loan was
made for the accommodation of the executive officer or was in effect an indirect extension of credit to him, it seems clear that
the acceptance of the note of the executive officer would be contrary tc the intGnt of the statute and would not be permissible.
It is probable that this is true in any case in which the note of
the executive officer and the note given by the third party are
made simultcneously. On the other hand, if till individual to whom
an executive officer has previously become indebted offers the note
of the officer to a member b:mk as collateral to a loan which he
desires to obtain o.nd the transaction is entered into by all parties
in good faith, the trru1saction would appear not to be inconsistent
312
-2-
S-106
H.eg. 0-36
with the purposes of the law and there is believed to be no sufficient reason for regarding it as prohibited by the statute or the
regulation. If it was not contemplated by the parties at the time
of the making of the locn by the bm1k that the note of the executive
officer would be used as collaten. . l security, and his note, because
of subsequent developments, is delivered to the bank as collateral,
tlH:: tr~<.nsaction would r~ppoar to be ono for the protection of the bank
El.nd not within the prohibition of tho law or regulation.
WE.: regret that we can not make 1:~ more definite reply to
you:r inquiry on the basis of the fr.:t.cts at hand but we hope that vii th
the stutement of principles above expressed your bank will be able
to pctss upon the particulL~r transaction referred to in your letter.
If in the consideration of the mat1:.er any question should develop
upon 7hich you fed thc.t it is desirable to hnvu an expression from
the board, we would, of course, be glad to consider it upon presentation of all of the; psrtinont facts.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Betheo.,
Assiste.nt Secretary.
S-107
Reg. F-16
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
July 19, 1938.
Mr.
, Vice President,
Federal Reserve Bank o f - - - - - '
------'
Dear Mr.
This refers to your letter of June 15, 1958,
inclosing a letter from Mr.
, Assistant
Trust Officer,
Trust Company of
,
,
~--~-' presenting a question which arises in connection with a common trust fund operated by his institution
and which involves an interpretation of the following provisions of section 17(e)(5) of the Board's Regulation F:
"No funds of any trust shall be invested in a participation in a Common Trust
Fund if such investment would result in
such trust having an interest in the Common Trust Fund in excess of 10 per cent of
the value of the assets of the Common Trust
Fund, as determined by the trust investment
committee, or the sum of $25,000, whichever
is less at the time of investment."
The Board is of the opinion that in the si tuati.on
outlined by Mr.
, wherE.: the present value of the units
of participation in a common trust fund which are held by a
trust is $25,000 or more, the regulation does not permit the
investment of additional funds of the trust in the common
trust fund, although the amount of funds of the trust previously invested therein is less than $25,000.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
313
S-108
BOARD OF GOVERNORS
314
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
August 4, 1938.
Dear Sir:
There is inclosed for the information of
your bank a
co~-
of a letter addressed by the Board
to the first vice president. of a F'cderal Reserve
bank relating to the conclusion of the Board that
effective August 16, 1958, the salary of any officer or employee of a Federal Reserve bank dying
while in the service of the bank should be paid
only to and including tho date of his death.
Very truly yours,
s. R. C1::.r9entor,
Assistant Secretary.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
http://fraser.stlouisfed.org/
.,
Federal Reserve Bank of St. Louis
S-108-a
315
August 3, 1938.
Mr.
,
First Vice President,
Federal Reserve Bank of _ _ _,
Dear Mr.
Reference is made to your letter of July 21, 1958 requesting the Board
to consider changing its ruling of June 19, 1951 (X-6915} which now reads
as follows:
In the event of the death of an officer or employee of a
Federal Reserve bank, the salary of such officer or employee
should be paid only up to the next succeeding pay day. 11
11
The tBoard has considered the suggestion t.~a t it authorize the payment
of 15 days 1 salary after date of death regardless of the time of month at
which death occurs and in so doing has taken occasion to review the circumstances surrounding the adoption of the rule in the first instance and the
effect of its application in the present changed circumstances.
Briefly recounting the same, it will be recalled that under date of
April 13, 1951 (X-6859} the Board, for reasons therein stated, submitted
the following topic for the consideration of the Governors at their next
ensuing conference:
"Compensation for officers and emPloyees of Federal reserve
banks after death and during periods of incapacitation and extended illness. On one or two occasions in the past, upon the
death of an officer of a Federal reserve bank, the directors
have voted to make a payment to tho widow or estate of the deceased officer equal to several months salary. The Federal
Reserve Board has been advised by its Counsel that in his opinion such payments are ultra vires, but that the question is a
close and doubtful one as there is ~o specific provision of law
covering the matter. A question of policy is also involved inasmuch as all of the Federal reserve bnnks are carrying life
insurance policies covering their officers and employees. The
Board considers it important that some definite understanding
should be arrived at concerning this matter and, if possible,
also regarding the matter of salary payments to officers and
employeus absent on account of illness or injury not received
in the line of official duty. 11
This resulted in tbe following recommendation from the Governors' Conference to the Board:
"Careful consideration vms given to the matters referred
to in the board's letter X-6859, particularly the legal questions involved, and also the desirability of arriving at a
S-108-a
-2-
316
definite·understanding as to a general policy to be followed by
each of the Federal Reserve banks. After a general discussion,
in which the members of the Federal Reserve Board participated,
it was
VOTED
that it is the sense of the conference:
1.
That in the event of the death of an officer or
employee of a Federal Reserve bank, his salary
should be paid up to the next succeeding pay day;
2.
That the question whether any further increase in
life insurance for officers and employees of a
Federal reserve bank is desirable is a matter for
the determination of the Board of Directors of
that bank subject, if necessary, to the approval
of the Federal Reserve Board.
3.
That this whole question inevitably raises the
propriety of further consideration of a pension
plan, and that because of the difficulties and
delays attached to the consummation of a group
pension plan, the Federal Reserve Board should
be asked whether it would approve of a reasonable
retirement annuity or insurance plan for individual reserve banks along lines that are now considered appropriate and proper for large
corporations in this country employing large
numbers of workers."
Fallowing the receipt of t:b.i s recommendation,
ruling of June 19, 1931.
t.~e
Board issued its
It is to be observed that at that time it was recognized that the
question being considered was closely related to the broader question of
the propriety of establishing a retirement annuity or insurance plan for
officers and employees. Vmen it is considered that now a comprehensive
plan, which, among other things, makes provision for a payment equal to
a salary for a year from the date of death to the estate or beneficiary
of each mernbur of the retiroment system in the service of a bank at the
timo of his death, has been established and is in operation, the Board is
impressed with the fact that to continue the practice authorized in its
ruling of June 19, 1931, would unjustifiably duplicate the payments being
made by the banks for the benefit of the individual officers and employees.
Accordingly, the Board has concluded that effective August 16, 1938,
salary of any officer or employee dying while in the service of a Federal
Reserve bank should be paid only to and including tho date of his death.
The other Federal Reserve banks arc being advised to this effect.
Vory truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
S-109
Reg.
BOARD OF" GOVERNORS
:~'-17
OF' THE
317
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CCAAEI!IPCNDENCE
TC THE BOARD
August 9, 1958.
Dear Sir:
For your information there is inclosed
herewith a copy of the text of a ruling of the
Board of Governors which will be printed in the
Federal Reserve Bulletin with regard to the
approval of the acceptance of trusts by a national bank under the provisions of section
6(b) of the Board's Regulation F.
Very truly yours,
s.
penter,
Assistant Secretar,y.
Inclosure.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
318
S-109-a
Reg. F-17
Approval of Acceptance of Trusts
gv National Bank
The Board recently considered an inquiry relating to the ruling published at page 440 of the Federal Reserve Bulletin for June 1938
to the effect that tho directors or the appropriate committee of a national bank must approve'the acceptance of trusts by the bank prior to
their acceptance rather than subsequent thereto in order to
comp~
with
the following provision of section 6(b) of the Board's Regulation F:
11 -ll- * * The acceptance of all trusts shall be
approved by the board of directors or a committee
appointed by such board, and the closing out or relinquishment of all trusts shall be approved or
ratified by the board of directors or a committee
appointed by such board; and such committee or committees shall be composed of capable and experienced
officers or directors of the bank. Any such approval or ratification shall be recorded in the
minutes of the board of directors or of such committee as the case may be."
In commenting upon the considerations which prompted the
in~
corporation of the above-quoted provision in the regulation, the Board
noted that such provision conforms to the principle contained in the
"S;tatement of Principles of Trust Institutions", approved by the Executive Council of the American Bankers Association in 1935, to the effect
that the responsibility for the investment of trust funds should not be
reposed in an individual officer or employee, but all investments should
be made, retained, or sold
on~r
upon the authority of a committee corn-
posed of capable and experienced officers or directors of the institution.
The Board stated that the question whether or not a particular
trust should be accepted by a bank is a matter of such importance that
319
-2-
S-109-a
Reg. F-17
it felt that this principle of collective judgment should be applied
in such a case as well as in the case of investment of trust funds, and
that if such collective judgment should not be exercised until after a
new trust has been accepted it might be embarrassing and in some instances impracticable for the bank to relinquish the trust.
As a matter of practical operation, attention was called to
the fact that the board of directors of a bank, if it so desires, may
designate a special committee for the purpose of passing on the acceptance of new trusts and it is not necessary that such committee be composed of directors of the bank.
In fact, under the regulation, the
committee may be composed exclusively of capable and experienced
officers.
The Board stated that it considered it to be consistent with
the provisions of the regulation for a new trust to be accepted qy a
bank upon the written approval of a majority of the members of the uppropriate committee without a meeting of the committee, provided such
action is promptly reported to the committee and the report incorporated
in its minutes.
It was stated that it was understood, of course, that
at the time the accepUlnce is approved in writing all of the available
members o·f the committee will be given an opportunity to pass on the
acceptance.
It was noted that the Board's position in this matter was
similar to that taken in a ruling published at page 391 of the Federal
Reserve Bulletin for May, 1957, with reference to the actions of the
trust investment committee provided for in section 6(c) of the regulation.
320
-5-
S-109-a
Reg. F-17
It was also noted that the Board had ruled that alternates
might be appointed for members of the
t~ust
investment committee and
that when the regulation was amended effective December 51, 1957, a
footnote containing the following statement was included:
"* * *
alternates appointed b,y tho board of directors may serve in place of
regular members of the committee who arc unable to serve on account of
vacations, illness, or other good and sufficient reasons if the minutes
of the committee show the reason for the service of such alternate in
place of the regular member".
the
appoin~~ent
The Board expressed the opinion that
of alternates may properly be made for the committee
provided for in section 6(b) in the circumstances described in the
language just quoted.
S-110
Reg. F-18.
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
August 11, 1938.
Mr.
~----~~-' President,
-----Bank and Trust Co.,
Dear Sir:
This refers to your letter of August 1, 1938, to Mr.
, requesting a ruling with respect to a question which
~h-a_s__
a_r~i-s-en in connection with the operation of a common trust
fund by your bank.
You state that the assets of the."common trust fund are
valued monthly and that among the assets are a number of Federal
Housing Administration insured mortgage loans which provide for
monthly payments. You inquire whether, in order to comply with
the Board's Regulation F, it is necessary to segregate, on each
valuation date, any of such loans on which payments due on the
first day of the month have not been paid during the month.
Regulation F does not require the segregation of assets
except as it may be necessary in order to permit new investments
in participations in the fund or the withdrawal of participations
in cash in compliance with the requirements hereinafter described.
Section 17(c)(2) of Regulation F provides that funds of a trust
shall not be invested in a participation in a common trust fund
if the trust investment committee finds that any of the investments comprising the common trust fund is "one in which funds of
such trust might not lawfully be invested at that time." Section
17(c)(6), in dealing with the withdrawal of participations, provides that, if the trust investment committee determines that any
investment remaining in the common trust fund "would be unlawful
for one or more participating trusts if funds of such trusts were
being invested at that time", no distribution shall be made in
cash unti.l any such unlawful investment shall have been eliminated
from the common trust fund.
Therefore, it is not necessary to segregate assets on
a valuation date unless additional funds are being invested in
participations in the conm1on trust fund or participations are being
withdrawn in cash and it is not then necessary unless, on the one
hand, such assets would be unlawful investments for funds of the
321
S-110
~~~
Reg. F-18.
-2-
trusts acqu1r1ng participations or, on the other hand, would be
unlawful investments for funds of trustswhich then hold participations. The question whether a particular loan or class of loans
would be an unla~~ul investment for funds of a particular trust is
one which must be decided in the light of the terms of the trust
and the applicable State law and upon which the Board cannot undertake to rule.
Copies of this correspondence are being furnished to the
Federal Reserve Bank of
and, if you have any further
question~, it will be appreciated if you will take them up with
that institution in order that it may answer them if it is in a
position to do so or refer them to the Board with such information
as may be needed by it.
Very truly yours,
(Signed)
s. R.
Carpenter
s. R. Carpenter,
Assistant Secretary.
S-111
Reg. U-25
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
August 16, 1938
Mr.
, Vice President,
Federal Reserve Bank of __________ ,
__________,
Dear Mr.
Reference is made to your letter of August 6, 1938, regarding
two questions upder Regulation U.
The first question relates to a situation in which a bank
makes a loan to a broker or dealer who is a member of a national securities exchange, or who transacts business through the medium of
such a member, for the purpose of enabling such broker or dealer to
purchase certain registered stocks directly from individual or
other investors. It is understood that such securities would be
purchased directly from the owners, who are neither members of a
national securities exchange nor brokers or dealers who transact
a business in securities through the medilli~ of any such member.
In other words, such sellers are of the general public and there
is no question of their having any direct or indirect connection
with any member, broker or dealer.
It is the view of the Board that a loan by a bank to enable
the borrower to purchase stocks in ti1e circumstances described would
be exempt from Regulation U under section 2(e) of the regulation
which exempts:
"Any loan for the purpose of purchasing a stock from
or through a person who is not a member of a national securities exchange and is not a broker or dealer who transacts a business in securities through the medium of any
such member, or for the purpose of carr,ying a stock so
purchased;"
·
For your confidential information it should be added that the
Board recognizes that this exemption, like certain other provisions
of the regulation, ~ontains possibilities of abuse which might in
time require appropriate amendments; and any information of this
nature that may develop from time to time ~turally is of interest
to the Board.
While the answer to the first question would not depend upon
whether or not the security purchased had been called for retirement,
323
'
S-111
Reg. U-25
-2-
324
in the second case this is an important consideration. In this case
a broker ar dealer purchases certain shares of a registered preferred
stock after the stock has been called for retirement. A bank, acting
for the broker or dealer, takes up the stocks, pays for them, e.nd
delivers them to the issuer for retirement. The question is whether
an advance made for the broker or dealer qy the bank in taking up the
securities would be covered b,y section 2(f) which exempts:
"Any temporary advance to finance the purchase or sale
of securities for prompt delivery which is to be repaid in
the ordinary course of business upon completion of the transaction;"
The Board is of the opinion that if the call for retirement
has alreaqy been issued when the securities are purchased, and in
addition the securities are prompt.4r delivered to the issuer for
such retirement, a loan of the type described would come within the
exemption. On the other hand, if the stocks have not been called
for retirement when they are purchased, or if they are not promptly
delivered to the issuer for retirement, the exemption would not apply, unless, of course, the transaction qualifies as an ordinary
cash purchase under the conditions described in section 2(f).
It does not appear that any other exception ~pacified in section 2 would apply to the facts stated in your letter although, as
you indicate, the loans detailed on the page accompanying your letter
may have involved a "mistake mad~ in good faith" as described in section 5(h).
It is to be noted that in connection with the exemptions mentioned above, as at other points in the regulation, it is necessary
to distinguish between the purpose of a loan and the collateral for
a loan. The exceptions in section 2{e) and 2{f) relate to purpose.
Thus they exempt loans of the types described, but they do not increase the loan value to which securities of the type described are
entitled when the.y are collateral for a loan that is subject to the
regulation.
Very truly yours,
(Signed)
S. R. Carpenter
s. R. Carpenter,
Assistant Secretary.
j
http://fraser.stlouisfed.org/
/
Federal Reserve Bank of St. Louis
/
S-112
325
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS CFFICIAL CORRESPONDENCE
TO THE BOARD
August 24, 1958.
Dear Sir:
Inclosed are two copies of the revised form of r<;port of examination which thd Board has approved for use, effective StJptember 1.
A supply of the forms sufficient to provide for examinations during
the next few months is being forwarded by expr~ss. Additional supplies may be obtained from the Board's Divislon of Examinations upon
request. Advice of the cost of the forms will be sent to you as soon
as possible.
In revising the form of report an effort has been made to
conform strictly with the splri t, as v1ell as with the letter, of the
recent agreement regarding bank examination procedure as announced
qy the Secretary of tl1e Treasury and published in the July Bulletin.
The agreement refers specifically to the classification only of lonns
and depreciation in securities, and the definitions of the loan classifications as set forth in the agreement have been copied verbatim
at the head of the schedule on page 11. On page 5 of the report,
however, brief general definitions of the classifications applica-·
ble to all V/pes of assets have been given. The definitions of
classifications I, III, and IV as shown on page 5 are identical
with the definitions incorporated in the revised forms of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The definition of classification II on page 5 is similar to
that in the Comptroller's report but differs from the definition in
the Federal Deposit Insurance Corporation report in that it contains
no specific reference to securities, while the Federal Deposit Insurance Corporation definition includes "securities which lack rec-·
ognized investment merit" among the assets to be classified as II.
It will be expected that the classifications of assets by
examiners for the Federal reserve banks will be in accordance with
the definitions set forth in the report and that the examlnations
will be conducted in strict conformity with the terms, spirit, and
purposes of the agreement. In this connection, it is requested that,
especially at first until the use of the rt~vised form is well established, the officers in charge of the bank examination departments
S-112
t)
-,;.-
review the reports carefully, particularly the classifications of
assets, in order to insure that the examinations are being made in
conformit,y with the agreement.
Included in the supplies furnished are some pages without
headings but ruled for columns and some blank pages to be used for
such supplemental schedules or comments as may be considered necessary or advisable, thus providing flexibility in the form of report.
One of the purposes of having the forms printed in Washington, however, is to attain uniformity in the form of reports used b,y the
twelve Federal reserve banks and it is requested, therefore, that
no schedules be incorporattid in a report of examination which would
be inconsistent with the schedules as printed in the forms furnished •
.Attached is a memorandum prepared by the Board's Division of
Examinations with respect to some details in connection with the new
form. A separate letter will deal with the appraisal of securities
and the classification of depreciation in securities.
A sup~ly of the forms for use in the examination of trust
departments will be forwarded as soon as they are available, which,
it is anticipated, will be within the next two weeks.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO TH1 PRESIDENTS OF ALL FEDERAL RES1RVE BANKS
326
327
S-112-a
Exam 150
August 24, 1938
Memorandum With respect to the revised form
of report of examination (F. R. 410-58)
In the interest of uniformity the following comments, explanations, and suggestions are offered with respect to certain details of
the revised form of report of examination which has just been sent to
the Federal reserve banKs for use effective September 1, 1958.
Binding
The forms have not been punched, as it is anticipated that in
most cases the reports will be of a size which will permit of their
being stapled. In this connection it is understood that there are
hand machines which will staple reports up to approximately one-half
inch in thickness. Larger reports may be tied with string somewhat
in the fashion of the old shoestring binders. Included with the forms
sent out was a supply of bookbinders' linen adhesive tape, which needs
only to be moistened before application and does not require the use
of a press. The tape has beon furnished in two widths, 2 inches and
2i inches. A 5 inch width can be obtained if necessary.
Transit Number
The transit number at the upper right hand corner of the pages
is merely for identification purposes in assembling the reports and
ordinarily the number will not be visible in a bound report.
Index
Schedules to be omitted. It will be noted that under the
captions "Affiliated organizations" and "Loans and discounts" certain
schedules are listed followed by the parenthetical phrase "if any".
Pages 2l(a), ll(a), ll(b), and ll(c) are to be inserted in a report
only if a schedule on the page is to be filled out. If any schedule
on such pages is not used, the fact should be noted b,y the insertion
of the word "none" in the index.
Trust Department.
be made as applicable -
The following notations on the index should
"None" - If bank hus no trust department or if it is
not exercising trust powers
..;.2-
328
S-112-a
"Green Section" - If report of the trust department
is attached
"Separate report"
If a separate report is submitted
"Not examined" - If such be the case.
Page l
Other Cash Items in Process of Collection. This should include only items which conform to the definition of "Cash items in
process of collection", as given in Regulation D.
Valuation Reserves. Reserves should be treated as valuaation reserves, i.e., deducted from the respective asset accounts,
only if the bank treats them in such manner in its published reports,
and all reserves so treated by the bank should be regarded as valuation reserves for the purpose of the report of examination.
Reserve for Amortization of Bond Premium. If the required
provision for amortization of bond premiums is made through credits
to a reserve account rather than through charge off, such reserve
should be treated in the report of examination as a valuation reserve
if so treated by the bank. If the bank, however, does not deduct
such reserve from the asset account, the reserve should not be included with reserves for contingencies or with other segregations
of capital account but should be shown as a separate item among
"Other liabilities".
Page 1-A
Page 1-A should not be included in the reports forwarded to
the banks examined but should be included in the reports forwarded
to the Board.
Page 2
Page E
The signature line has been omitted from these pages in order
that the signature of the examiner may come at the conclusion of his
remarks, whether on these pages or on continuation sheets.
Page 12
It will be noted that page 12 is furnished in alternative form.
The regular page 12 headed "Real estate loans subject to spe-'
· cial comment" is to be used where all loans subject to classification
329
-5-
S-112-a
as II, III, or IV are listed on page 11, and page 12 will be used, as
it has been in the past, as a memorandum of (1) loans which should be
carried as other real estate; (2) loans which are considered as potential other real estate; and (3) loans which have been taken or are
held in violation of statutory provisions. This is expected to be
the regular procedure and to be used where practicable.
The alternative page, 12-X, headed "Real estate loans subject
to special comment or classification" is furnished, however, for use
in cases where, because of the nature of the bank's business, the seriousness of the real estate loan problem, or other good reason, it is
considered advisable to list real estate loans subject to classification in a separate schedule. In such cases, of course, the totals of
thtJ classifications of the real estate loans should be transferred to
page 11 and then included in the grand total of all loans classified
as II, III, and IV.
Continuation Sheets
Continuation sheets should be designated as 11-(1), 11-(2),
etc., as combinations of numbers .and letters such as ll(a) have been
used for designation of supplemental schedules.
Page C
It will be noted that the answers to questions '1, 8, and 9 on
page C of the confidential section will summarize all violations of
the Federal statutes, the Board's regulations, or the conditions of
membership as disclosed by the examination. This is in accordance
with suggestions received that a complete list of any such violations
be shown in ont,; place in the report.
Reorders
The forms have been printed by multilith process in the
Board's duplicating department and, as stated in the Board's letter,
S-112, additional supplies may be obtained from the Board's Division
of Examinations. It is requested that needs for additional supplies
be anticipated and th<.,t orders be sent in sufficiently in advance of
requirements to permit their being h~:~.ndled in the ordinarJ course of
business rather than as rush orders which might interfere with other
work.
Orders should refer to the form number which appears in the
·· . upper left hand corner of the page.
BOARD OF GOVERNORS
S-115
OF' THE
330
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CDRRESPDNDENCE
TO THE BOARD
~eptember
5, 1938.
Dear Sir:
This supersedes previous letters regarding the classification, in reports of examination, of depreciation in securities.
The division of securities into four groups for examination purposes was recognized in the agreement regarding examination procedure announced b,y the &ecretary of the Treasury and
published in the July Bulletin. The definitions of the four
groups as given on page 8 of the revised form of report of examination, recently sent out to the Federal reserve bar~s, are
in conformit.y with the agreement and are not here repeated in
detail.
All issues of bonds in default, either as to principal
or interest, are to be included in Group 3.
tilth respect to ot.l-ter general market obligations, the
agreement provides that issues in the four highest grades are to
be included in Group 1 and that issues below the four highest
grades are to be included in Group 2. In case of doubt as to
the classification of a particular rated issue, the examiners
should, before final determination of classification, take into
consideration the available credit data as well as the ratings
of more than one investment service.
The agreement specifically recognizes that 1.mr~ted securities (not in default) shall be classed as Group 1 or Group 2
in accordance with the quality of the respective issues. In determining whether or not an unrated security is distinctly or
predominantly speculative, consideration should be given to the
record of the issue, other credit data available, and the comparative classification of rated issues of similar quality.
As stated in the agreement and us indicated in the revised form of ~oJXamination report, Group 1 securities are not to
be priced in the report either individually or in total, and no
-2-
·S-115
appreciation or depreciation in such securities is to be shown in
the report.
Group 2 securitiGs are to be valued at the average market
price for the 18 months preceding the examination. It is expected
that average prices for 18 month periods will be shown in the publications of the various investment services and will appear about
the middle of each month beginning with September. In the interest of uniformi~, average prices as so published should be the
basis for the valuation of Group 2 securities, and the figures
published in one month should be us~d until publication of the
averages in the following month. Pending th~ first publication
of such averages, averages obtained from other sources believed
to be reliable m~ be used. If not otherwise available, the averages should be computed by the Federal reserve bank by taking the
simple average of the high price and low price for the period.
The. net depreciation in Group 2 securities, based on the
average prices, should be included in Classification III in the
recapitulation of classified assets on page 5 of the report of
examination. Inasmuch as 50 per cent of Classification III is
deducted in arriving at the total of adjusted capital, such classification will conform to the provisions of the agreement that
50 per cent of the depreciation in Group 2 securities, based on
the 18 month average, be deducted in arriving at the net capital
position.
Group 3 and Group 4 securities, i.e., defaulted bonds
and stocks, are to be priced on the basis of current market quotations and the net depreciation in the two groups combined is to
be classified as IV. In other words, for the purpose of computing
depreciation to be classified as estimated loss, Groups 3 and 4
are to be regarded as one group.
In the case a bank has established a valuat:i.on reserve or
made an unallocated charge-off against the total account rather
than against specific issues, such valuation reserve or unallocated charge-off should be considered as applying first to Groups
3 and 4 securities und then to Group 2 securities, thus reducing,
to the extent of such reserves or unallocated charge-off, the
amount of depreciation subject to clasoification as IV or III.
The agreement also refers to the establishment and maintenance of adequate reserves. If analysis of the list of securities indicates that a bank is faced with serious problems and
probable future losses in its investment account, comment should
be made as to the situation and the ad~quac.y of the reserves to
331
S-113
-5-
provide for the write-off of depreciation should impending defaults
materialize and to take care of losses realized in making shifts in
the portfolio as opportunity permits in order to achieve a better
balance and stronger position.
The agreement recoenizes that profits from the sale of securities should not be regarded as ordinar,y or recurring income and
that, until losses have been written off and adequate reserves established, such profits should not be used for any purpose other
than to provide for charge-offs or reserves. Accordingly it is
suggested that the answer to question 4 on page 6 of the examination report include a statement as to the amount of net profits
from the sale of securities since previous examination and th~ disposition of such profits.
Very truly yours,
Chester Morrill,
Secretary.
TO THE
PREbiD&.~TS
OF ALL FEDERAL llliSERVE BANKS
332
BOARD OF GOVERNORS
S-114
Df THE
FEDERAL RESERVE SYSTEM
333
WASHINGTON
ADDRESS DF"F"ICIAL CDRREBPDNDENCE
TD THE BOARD
September?, 1938.
Dear Sir:
Inclosed are triTee copies of the revised form of report of
examination of trust departments, and three copies of a special
form (Page T~l-(S)), referred to in the Board's letter of August 24,
1958 (S-112). These forms have been approved by the Board for use
by the Reserve banks in the examination of trust departments of
State member banks. A supply of the forms is being forwarded by
express. Additional supplies may be obtaj.ned from the Board's
Division of Examinations upon request.
In revising the form of report, consideration was given to
the many valuable suggestions received from the vari.ous Reserve
banks in connection with the draft forwarded on October 9, 1957,
which was based largely upon the form previously developed by the
committee of trust examiners. The form is designed to obtain as
high a degree of uniformity as practicable tn reports of examinations made by examiners for the various Reserve banks and at the
same time be adaptable to the widely varying sizes of trust departments, types of fiduciary bu.sinoss, and laws involved in the different
States. Hence, with the exception of statements of individual and
corporute trusts and of earnings and expenses, no ~ttempt has been
made to provide formal schedules. It is expected that examiners, in
preparing their reports, will include such supporting schedules, with
appropriate references thereto in the questionnail~e, and such additional comments as may be found desirabl~ in each examination. A
quantity of blank green pages has been fo~Narded for that purpose.
A short form of report has been approved for use in examinations of institutions havi.ng a very limited volume of fiduciary
accounts and activities, in connection vd th which many of the comments and answers to questions provided for in the regular or long
for:rr. would not be applicable. It is contEmplated th.1.t in each such
examination the trust department section of th(~ rr:port will consist
of the short form of questionnaire and comments (Page T-1-(S)), the
regular statement of individual trusts (Pagf. T-2), the regular
334
-2-
S-114
statement of corporaie trusts (Page T-3), if applicable, and the
confidential section (Page T-A), if applic11ble, and such additional
follow sheets as may be necessury for the examiner's comrrtents and
conclusions and signature, as in the case of the other forms of
report.
Very truly yours,
L. P. Bethea,
Assistant S8cretary.
Inclosures.
TO PRESIDENTS OF ALL lmDERAI, RESEI?VE BANKS
335
BOARD OF GOVERNORS
S-115
Sec. 5136 R.S.-13
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAl. CORRESPONDENCE
September 8, 1938.
TO THE BOARD
Dear Sir:
The Board of Governors recently received from a State member bank a req_uest for an interpretation of section II(6) of the
Investment Securities Regulation issued by the Comptroller of the
Currency. This section reads as follows:
"Purchase of securities covertible into stock at
the option of the holder or with stock purchase warrants attached is prohibited if the price paid for such
security is in excess of the investment value of the
security itself, considered independently of the stock
purchase warrants or conversion feature. If it is apparent that the price paid for an otherwise eligible
security f':lirly reflects the investment value of the
security itself and does not include any speculative
value based upon the presence of a stock _purchr1se warrant or conversion option the purchase of such a security is not prohibited."
The pertinent portion of the letter from the State member
bank reads as follows:
"Paragraph 6 of Section 2 states in part, 'If it is
apparent that the price ~aid for an otherwise eligible
security fairly reflects the investment value of the seCUl•ity itself and does not include any speculative value
b~sed upon the presence of B stock purchaso w~rr~nt or
conversion option, thE purchase of such n security is not
prohibited.' We will first assume, therefore, that r:my
convertible bond to be eligible for purch.:J.se mu3t be one
in whi.ch the investment char'lcteri.stics :lre not 'distinctly or predominantly speculative'. In short, the obligor's
credit status must be such that its security cannot be
said to be one in which the speculative ch~rncteristics
are predominant. We presum0 that this is an interpretation on which you would ngree?
S-115
336
Sec. 5136 R.s. -1~)
-2-
"The poiut on which we would like to have clarification as to your intention.s in examining procedure concerns
that clause in Paragraph 6, Section 2, which states that
the purchase of convertible or warrant bonds is prohibited
'if the price paid for such socurity is in excess of the
investment value of the security itBelf, considered independently of the stock purchase warrants or conversion
feA.ture.' 'l'o bo still more specific, what will be your
procedure in determining whether tho price of a security
is in excess of the investment V'llue of the security itself, considered independently of the stock purchase warrants or conversion feature? Which of the following
proc8durcs or which other procedures will you adopt?
"1. Will the price paid for a convertibl8 bond be
deemed to reflect tho presence of q conversion option when,
and only when, tho security (generally common stock) into
which the bond is convertible h'lS P''lSsed in market price
the figure at which ths bond is convertible (the parity
figure)?
"By way of illustration, if o. bond is convertible
into common stock at 25 and the bond is purchased
when the stock io selling at 24 7/8 or less, will
the bone. be eligible under this particular paragraph, assuming always, of' course, that it is
'otherwise eligible'?
"2. If a company has two issues of bonds outstanding
under the same mortgage, one issue of which is convertible
and one issue of v·rhich is not, will the convertible issue
be deemed to be reflecting the presence of t~e conversion
privilege if it sell~:; to yield any smaller percentage return (that is, at a higher price) than the issue which is
not convertible, however remote thE: conversion parity may
be.
"Assume Series A and Series B bonds ~1re issued under
the same mortgage of' a company whose obligations
are 'otherwise eligible'. Assume Sories B bonds
are convertible in to the stock at 50; ~1ssume Series
A bonds are not con-vertible. Assume that the I!k'l.turi ty datos and the coupon rates of both series are
identical, both being 4% bonds, say, due 1946. If
Series B, the convertible bond, sells at 80 and
Series A sells at 75, and the common stock into
which they are convertible is at 17 (3:3 points away
from the conversion parity), will Series B bonds be
r:ligiblo?
S-115
Sec. 5136
337
R.S.-1~
-3-
"3. Assume a somewhat similar situation as exists in
2 above, but further assume that there is no comparable
mortgage bond with which one can compare in order to ascertain what is the true investment merit. What will be the
procedure for determinine whether a bond does reflect the
existence of a conversion privilege? In short, assume that
there was a Series B bond but no Series A bond, what procedure would you use for determining whether the Series B
bond reflected the existence of a conversion privilege?"
Since the matter involved an interpretation of a regulation
issued by the Comptroller of the Currency, a copy of the letter from
the State member bank was furnished to the Acting Comptroller with a
request for an expression of his views regarding the questions presented therein. Under date of August 29, 1938, the Board of Governors
received from the Acting Comptroller a letter which stated the following (the references to paragraphs "1", "2", and "3" are to the abovequoted numbered paragraphs of tho letter from the State member bank):
·"Mr.
is correct tn assuming that any convertible bond or bond with stock puz·chase warrants attached
to be eligible for purchase must be one in which the investment characteristics ure not distinctly or predominantly
speculative; in short, the obligor's credit status, i.e.,
the credit status of the particular bond issue in question,
must be such that the security cannot be said to be one in
which the speculative characteristics are predominant.
"It is not believed that the illustration recited by
in his paragraph "1" at the top of page
Mr.
2 of his letter could b·'l used as the sole tost in determining whether a bank h~1.d. p~dd a price for such a security
which was in excess of the lnvestmont v~lue of the security
itself, considered independently of the st'Jck purchase warrants or conversion feature. If, with all the av'lilable
facts before him, the Examiner deemed that a bank ha w.1s
examining h"ld paid a .9ri0e for such a securi.ty which was in
excess of the investment value of the security itself, considered independently of' the stock purchn.se warrnnts or
conversion feature, he would report the security as having
been illegally purchased by tho bank.
"It would appear to be clear that in the illustration
recited by .Mr.
in his paragraph "2" on page
2 of his letter that tho '3erios B' bond would not bE., eligible as it would appear to be clear that the bank would
h:we paid $5 a hundred i'or the stock purch'lse warrants or
conversion privilege.
338
S-115
Sec. 5136 R.S.-13
-4-
"In answer to Mr.
's paragraph "3" on
page 2, it can only be repeated that whon :m Examiner, with
all the available facts before him, deems that the bank he
is examining paid a price for such a security which was in
excess of the investment v~lue of the security itself, considered independently of the stock purch~se warrants or conversion feature, he would report the security as having been
illegally purchased by the bank."
Very truly yours,
R. Car enter,
Assistant Secretary.
TO
PRESIDID~TS
OF ALL FEDERAL RESERVE BANKS
339
BOARD OF GOVERNORS
OF" THE
S-116
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF"F"ICIAL. CORRESPONDENCE
TD THE SOARD
September 9, 1938
Dear Sir:
Analysis Form 212 does not conform in a number of
respects to the revised form of examination report recently
adopted and it is proposed to discuss at the forthcoming
Examiners' Conference a revision of Form 212 which would
represent a material simplification as compared with the
present form.
Pending issuance of the revised Analysis Form 212,
the use of the present Form 212 in connection with reports
of examination prepared b,y examiners for the Federal reserve
banks on the new examination report form may be discontinued.
It is requested, however, that in connection with each such
report of examination there be forwarded a memorandum containing the comments as called for on the last page of the
analysis (Form 212-c),
Pending revision of Form 212, analyses of reports of
independent examinations made by State authorities should be
forwarded on the present form.
L, P, Bethea,
Assistant Secretary.
TO THE PRESIDENTS 'OF ALL FEDERAL RESE."R.VE BANKS
S-117
, 340
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE SOARD
September 26, 1938.
Dear Sir:
In compliance with the request contained in the Board's
letter of February 4, 1933 (B-876), all Federal Reserve banks
now forward to the Board, not later than the fifteenth of each
month, a list of all holidays scheduled to be observed by banks
in the several districts in the following calendar month.
It is requested that the official opening and closing
hours of the Federal Reserve bank and each branch, if any, be
given in connection with the above mentioned report for the
month of November and that each subsequent monthly report contain advice either to the effect that there has been no change
in opening and closing hours or that specified changes have
been made or are in contemplation.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
S-118
OF" THE
341
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE SOARD
October 11, 1.958
Dear Sir:
In the Board's letter of August 24, S-112, transmitting copies of
the revised examination report form and advising that a few months'
supply of the forms was being forwarded for use, it was said that advice as to the cost of the form would be forwarded later. ·rhis letter
is to furnish that information and to explain the method of prorating
the costs of the form among the various Reserve banks.
As you may know, the Board has inst~lled multilith equipment and
the report forms were printed on that equipment by the Board's employees.
The cost of the new form, including the trust form, is as follows:
Composition:
Printer's proofs (these were furnished by
a firm of compositors and
from the proofs the multilith plates were made)
$555.20
Multilith plates
195.00
Printing covers for tho report
40.00
~588.20
Paper and miscellaneous supplies:
Paper
Cover stock
Binding tape
$1,572.56
105.90
50.50
Total co:::t
$2,117.16
At the time we were not prepared to make the multilith plates and
thesE' were obtained from outsidc.sources. Had we been pre-pared, as we
now are, the cost for this item would have been muterially less.
The following statement shows the distribution of the costs among
the various Federal Reserve banks:
342
-2..;.
Pupe...r_a.nd supplies
Percent
Amount
Boston
5
New York
20
Philadelphia 10
Cleveland
10
Richmond
5
Atlanta
5
Chicago
15
St. Louis
5
Minneapolis
5
Kansas City
5
Dallas
5
San Francisco lQ
Totals 100
$ 76.45
505.78
152.90
152.90
76.45
76.45
229.55
76.4-5
76.45
76.45
76.45
152.90
$1,528.96
S-118
Composition, etc.
4l
·rota1
49.02
49.00
49.02
49.02
49.02
49.02
49.00
49.02
·19.02
49.02
49.02
$125.47
554.78
201.92
201.92
125.47
125.47
278.55
125.4?
125.47
125.47
125.47
4~.02
___&_Ql.&g
"588. 20
$2,117.16
'II'
Every Federal reserve bank except the Federal Reserve Bank of Richmond.
should pay this assessment by transferring the amount sho~n in the last
column of the statement through the Inter-district Settlement Fund to the
Federal Reserve B~.nk 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 should pay its assessment by
crediting the amount thereof on its books to the Board of Governors of
the Federal Reserve System •
.ti.s will be noted, the costs of composition have been prorated equally
the Reserve banks, inasmuch as each bank would have had to incur composition costs if each hank had arranged for the printing of its own forms.
The costs of the paper and supplies heve been distributed on the basis of
an estimate of the amount which will be used by each Federal reserve bn.nk,
the est~~ate being based on the number and size of the State member banks
in the v~rious districts.
a~ong
An estimated year's supply of paper was purchased .. Only a portion of
the stock has been used and additional supplies from such stock will be
furnished without further cost to the Reserve banks. Costs of future purchaseEZ of puper will be prorated among the various hanks on the basis
scheduled above and forms printed from such supplies will be furnished
without additional costs, e:::cept that in the case of substantial revision
of the form composition costs will b<;: pror<:~ ted.
The Board is interested in comparing t;he cost of the form prepared
here with an estimate of what it would have cost the Reserve banks to prepare their own forms indlviduaJ.ly. It l";ilJ. be apprcci?..ted, therefore, if
each Reserve bank v:ill determine c..nd advise the Board as to 'Nhat the approximate cost would have been to the bsnk of prepari.ng the new forms.
343
S-118
-5-
It is requested that this estimate be not only for the first prlnt:ing,
but to cover, say, a five-year period. The latter estimate would no
doubt involve some cost of composition for reprints, whereas under
the present procedure no such expense should be incurred except in
connection with revisions.
L. P. Bethea,
Assistant Secretary.
TO THE
PRESIDENTS OF ALL FEDEr'1AL RESERVE
BANKS.
S-119
Reg. H-13
BOARD OF GOVERNORS
OF' THE
344
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF"F"ICIAL CORRESPONDENCE
TO THE BOARD
October 14, 1938.
Dear Sir:
There is inclosed for your information copy
of a letter which is today
beir~
sent to Mr. Fleming,
President of the Federal Reserve Bank of Cleveland,
advising him that a State member bank which desires
to engage in the small loan business will not be required to obtain the permission of the Board under
the general condition of membership.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO 'l'liE PRESIDENTS OF ALL IfEDERAL RESERVE BANKS
345
S-119-a
Reg. H-13
October 14, 1938.
Mr. M. J. Fleming, President,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Dear Mr. Fleming:
Reference is made to Mr..
's letter of September 30, l9j8,
advising that The
Savings & Trust Company,
,
, :proposes to amend its articles of incorporation so as to perrr1it the bank to
engage in "special plan banking" and recommending that the Board approve
the proposal under the provisions of the general condition of membership
to which the bank is subject, which provides that, except with the permission of the Board, the bank shall not cause or permit any change to
be made in the general character of its business or in the scope of the
corporate powers exorcised by it at the time of admission to membership.
According to Mr.
's letter "special plan banking" is the term used
by the (State) Statutes for small loan business and it is noted that the
banking laws of that State permit banks upon suitable amendments to their
articles of incorporation to establish departments for the transaction
of business of this type.
The Banking Act of 1933 made Morris Plan banks and other incorporated banking institutions engaged in similar businuss eligible for
membership in the Syst~m and during recent years commercial banks to a
noticeable extent have broadened their activities to include the making
of small or personal type loans, and have established separate departments to facilitate the functioning of such business. While m1ch ~x
tension of activities may to some extent constitute a change in the
general character of the bank's business and in some cases, at least,
involve a change in the scope of the corporate powers exercised by the
baclt, the change is not felt to be such as would come within the intent
of the genera~ condition of membership.
Accordingly, banks desiring to engage in flUCh activity· ·will
not. be required to obtain the permission of the Board under the general
condition of membership. It is assumed, of course, that in such cases
any necessary approval of tho State authorities will be obtained and
that the business 'V'dll be conducted in strict accordance with the applicable State laws.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secreta~J.
346
S-120
Sec. 5136 R.S.-14
INTBRPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
October 17, 1958.
Mr.
, Executive 5ecretar,y,
Municipal Housing Authority,
City Hall,
~--. . .
____,
This refers to your letter of October 12, 1958, requesting
advice as to whether a &tate member bank of the Federal Reserve
System may underwrite bonds issued qy the (name of cit,y) Municipal
Housing Authority for the erection of a slum-clearance project in
the City of
under the regulations of the United States
Housing Authority.
Under tho provisions of sectiun 9 of the Federal Reserve
Act, State member banks of the Federal Reserve System are subject
to the same limitations and conditions with respect to the purchasing, selling, m1derwriting, and holding of investment securities
and stock as are applicable in the case of national banks under
section 5156 of the Revised Statutes. This section of the Revised
Statutes forbids the underwriting of all kinds of securities except those specifically exempted from the provisions of the section. It is our understanding that bonds issued qy a municipal
housing authorit.Y are not general obligations of a State or political subdivision thereof and, accordingly, that these bonds do
not fall within the class of obligations exempted by the statute.
It follows, therefore, that State member banks may not underwrite
such bonds.
Al tl'.ough your, question was whether a State member ban..'lc may
underwrite these bonds, it seems probable that you also desire information upon the question whether a State member bank may purchase such bonds for purposes crf investment. The office of the
Comptroller of the Currency has ruled that the bonds, notes, or
debentures issued qy public housing agencies and representing the
10 per cent local participation in the cost of low-rent housing
or slum-clearance projects under the United States Housing Act of
1937 are investment securities which are eligible for purchase by
a national bank within the limitations as to amount prescribed by
section 5156 of the Revised Statutes. It is our view that State
member banks of the Federal Reserve System also have authorit,y to
347
-2-
S-120
Sec. 5156 R.S.-14
purchase, for purposes of investment and subject to the limitations
stated above, the bonds, notes, or debentures issued by such public
housing agencies.
There is inclosed herewith for your information a cop,y of the
Investment Securities Regulation of the Comptroller of tho Currency
which contains at page 5 the provisions of section 5156 of the Revised Stututes and section 9 of the Federal Reserve Act.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
BOARD OF GOVERNORS
348
CF" THE
FEDERAL RESERVE SYSTEM
S-121
WASHINGTON
ADDRESS DP'F'ICIAL CCRRESPCNDENCE
TC THE &CARD
October 25, 1958.
Dear Sir:
The Board understands that, at their meeting in September,
the Presidents of the twelve Federal Reserve banks expressed the
view that, as a matter of poliqy, all of the Federal Reserve banks,
for the time being at least, should conform to the standards established b,y the Fair L~bor Standards Act of 1958, regardless of whether
or not the provisions of the act may later be held to be inapplicable
to the Federal Reserve banks. The Board concurs in the view that
this is a desirable and proper policy for the Federal Reserve banks
to pursue at this time.
The considerations which led to the adoption of this poliqy
support the view that the Federal Reserve banks should apply the
standards established by the act to all classes of employees except
classes specifically exempted b.Y the act and that, whenever any doubt
exists as to the applicability of the act to a particular employee
or class of employees, the doubt should be resolved in favor of its
applicability, at least until the situation is clarified by administrative rulings or otherwise. Practical considerations as well as
considerations of policy support this view. The act is drawn in very
broad and sweeping terms; many doubts exist as to its correct interpretation as applied to particular situations; violations of the act
are punishable b,y fine or imprisonment; and, under the provisions of
section 16(b) of the act, any employer who violates the provisions
of sections 6 or 7 is liable to the employee or employees affected
in double the amount of their unpaid minimum wages or their unpaid
overtime compensation, as the case may be, and such liability may
be enforced in suits brought by individual employees.
The Board understands that, while the policy of complying
with the standards established by the act may entail some minor ·
changes, the Federal Reserve banks have generally maintained working
conditions more favorable to their employees than the minimum standards required b,y the act and that the adoption of this policy will
not involve any major changes, either in hours of employment or in
salaries paid.
S-121
-2-
In this connection, attention is invited to the provision of
section 18 of the act to the effect that, 11 No provision of this act
shall justify any employer in reducing a wage paid qy him which is in
excess of the applicable minimum wage of this act or justify any employer in increasing hours of employment maintained by him which are
shorter than the maximum hours applicable under this act 11 •
On the other hand, it is believed that every reasonable effort
should be made through careful management to avoid increasing the expenses of the Federal Reserve banks any more than is reasonably necessary in order to comply with the standards established by the act. To
this end, it is expected that the Federal Reserve banks will carefully
canvass the extent to which overtime work may be avoided and the taking
on of more employees may be kept to a minimum, by lending employees
between departments, b,y reducing the number of hours worked on one or
more days of a week as an offset to overtime worked on other days in
the same week, and qy making other operating and administrative
adjustments.
Inasmuch as it would seem desirable for all of the Federal
Reserve banks to pursue uniform policies in conforming to the standards
established qy the act, the Board has considered questions raised b,y
various Federal Reserve banks and its views as to the manner in which
certain of these questions should be answered are set forth in a memorandum inclosed herewith. However, it should be understood that no
expression of the Board's views would afford the Reserve banks any
legal defense in any criminal proceeding for a violation of the act
or in any suit brought by an employee to recover double the amount of
any overtime compensation alleged to be due him under the act, if it
should be held that the Federal Reserve banks were subject to the act.
It is not believed to be desirable at the present time for the
Federal Reserve bunks or the Board acting on their behalf to attempt
to obtain any rulings or determinations from the Administrator. However, it is anticipated that from time to time the Administrator will
issue regulations and will make determinations and rulings at the request of others, which will aid in deciding how best to conform to the
standards prescribed by the act; and every effort will be made to obtain copies of such regulations, rulings and determinations, and to
forward them to the Federal Reserve banks as promptly as possible.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
349
S-121-a
350
COMMENTS RELATIVE TO THE
FAIR LABOR STANDARDS ACT OF 1938
(The following statements are for the information of the
Federal Reserve banks and do not represent final legal
conclusions.
All of such statements are, of course, sub-
ject to the possibility that different positions may be
taken by the Administrator or by the courts.)
Maximum Hours of Work.
The Act does not forbid requiring employees to work more than
the maximum number of hours specified in the statute if they are paid
for work in excess of such maximum hours at a rate not less than one
and one-half times the regular hourly rate of compensation.
For the
purposes of the Act the controlling factor is the total number of hours
actually worked during any one workweek, regardless of any leave taken
during such week.
Must Workweek be Same as Calendar Vveek?
The regulations of the Wage and Hour Division apparently contemplate that the workweek of an employee may be different frcm the
calendar week and different from the workweek of other employees of the
same employer, provided tho.t the workweek is not changed tor the purpose
of evasion of provisions of the Act or any regulations proscribed pursuant thereto.
Maximum Hours in Workweek during Which Holiday Occurs.
~bero
an employee does not work on a holiday, thoro appears
s-121-a
- 2 -
to be nothing in the Act to prevent him being required to work a maximum of forty-four hours during the other days of the workweek in which
the holiday occurs without any portion of such time being classed as
overtime.
Allowance of Compensating Time in Lieu of Paying Overtime.
Payment for overtime work may be minimized by reducing time
worked on one or more days to offset overtime worked on other days of
the same workweek.
Luncheon Periods.
Periods allowed for meals during any particular workweek should
not be counted in determining the number of hours actually worked during
such week.
Payment for Overtime where Hours Worked do not exceed Forty-four Hours
per Workweek.
The Act apparently does not require payment of time and one-half
for overtime above the established number of hours in the bank's workweek but meruly requires payment of time and one-half for overtime when
tho hours worked during any one
wor~ok
exceed forty-four hours and in
such case requires the payment of time and one-half only for tho overtime hours in excess of
for~-four.
Overtime Work Resulting from Examinations, Audits, or Causes Beyond the
Bank's Control.
There is no provision in the Act excluding overtime resulting
from causes beyond the control of the employer.
Therefore, it is be-
lieved that the fact that overtime results from audits or examinations
351
- 3 -
3-121-n
~·
352
of the bank or fram causes beyond the control of the bank does not justify
noncompliance with the terms of the Act.
Method of Computing Hourly Wage of Employees Receiving Monthly or Yearly
Salary-.
The method of oomputing an employee's hourly wage is provided
in the regulations of the Administrator of the Wage and Hour Division regarding records to be kept by employers pursuant to section ll(c) of the
Fair Labor Standards Act.
Copies of these regulations were forwarded to
Counsel for the Federal Reserve banks on October 22, 1938.
It is be-
lieved that, in making any division of annual or monthly salaries for
the purpose of arriving at an hourly rate of pay, no deduction should
be made for time allowed for annual leave or sick leave.
For instance,
in dividing the annual salary by a number of weeks, it should be divided
by fifty-two and not by fifty-two minus the number of weeks allowed as
annual leave or sick leave. Where the previously established workweek
of an employee is less than forty-four hours a week, it is not believed
advisable arbitrarily to divide his weekly salary by forty-four in order
to determine his hourly wage, especially in view of the provisions of
the last sentence of section 18 of the Act.
Building Maintenance Employees.
The question has been raised as to whether the wage and hour
provisions of the Act apply to building maintenance employees, such as
janitors, elevator operators, restaurant employees, watchmen, and guards.
Although there are strong grounds for the view that the Act should not
be construed as applying to such employees of Federal Reserve banks, it
S-121-a
- 4 -
353
is understood that the Wage and Hour Division of the Department of
Labor regards this as a very close question and has not reached a decision thereon.
Accordingly, until this point is clarified, it is be-
lieved that it would be advisable for the Federal Reserve banks to
apply the minimum wage and maximum hour provisions of the Act to building maintenance employees as well as to all other classes of employees
not specifically exempted from the Act.
Exemptions of Executive, Administrative, and Professional Employees.
Regulations defining executive, administrative,and professional employees were issued by the Administrator on October 19, 1938,
and copies were sent to C•unsel for each Federal Reserve bank under date
of October 20.
It will be observed that, under the terms of the regula-
tion, the question whether a particular employee is exempted depends
upon the facts in each individual case.
Each Federal Reserve bank
should determine which of its employees fall within these exemptions
in the light of the regulations of the Administrator.
Employees of the Fiscal Agengy Departments.
Employees in the fiscal agency departments of the Federal Reserve banks are not employees of the United States and, therefore, are
not exempted under the provisions of seotion
3(~)
of the Act.
Applicability of Child Labor Provisions.
In view of the provisions of the Act on this subject, it is
believed that no Federal Reserve bank should employ or continue in its
employ any person under sixteen years of age.
Time Spent in Traveling.
There is nothing in the Act or in any of the administrative
- 5 -
S-121-a
354
rulings to furnish any guide as to the proper treatment of time spent
by a nonexempted employee in traveling on the business of his employer
in determining the number of hours worked during a workweek,
Therefore,
the Board is not in a position to express any opinion on this subject,
It is suggested, however, that a careful record be kept of the total
time· spent by nonexempted employees while in a travel status and of the
portion of such time spent actually working (excluding the time spent sololy in traveling) and other pertinent data, in order that appropriate adjustments may be made when the solution of this problem has been determined.
Records.
The Act requires an employer to keep such records as the Administrator shall prescribe by regulation or order,
Regulations on this
subject were published in the Federal Register for October 22, 1938,
copies of which were sent to Counsel for the Federal Reserve banks on
that date,
355
S-122
Reg. T-79
BOARD OF GOVERNORS
CF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDREISB OFFICIAL CORRESPONDENCE
TO THE BOARD
October 27,
1938~
Dear Sir:
There is attached a copy of a ruling which
will be published in the Federal Reserve Bulletin
regarding "Withdrawal from General Account Followed
by Other Transactions on Same Day".
It will be noted that the attached ruling
is in the form of a statement for the press which,
however, is not to be released until the time specified on the statement.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
356
BOARD OF GOVERNORS
OF mE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Tuesday, November 1, 1938.
The following ruling will appear in the Federal Reserve
Bulletin.
Withdrawal from General Account Follqwed by
Other Transactions on Same Day
The second paragraph of section 3(b) of Regulation T
provides, in part, as follows:
"A transaction consisting of a withdrawal of
cush or registered or exempted securities from a general account ahal.l be permissible only on condition
that * * * the transactions (including such withdrawal)
on the day of such withdrawal would not create an excess of the adjusted deM. t balance of the account over
the maximum loan value of the securities 1n the account
or increase any such excess."
In order to insure compliance with this provision many
brokers make it a practice to permit no withdrawals from the account without being assured that trading in the account h9.s been
concluded for the day.
'rhe Board, however, recently received
inquiries regarding two situations in which a broker, having
failed to take this precaution, permitted a withdrawal that was
followed by transqctions which, in combination with the withdrawnl, would create or increase an excess
c>f
the adjusted debit
balance of the account unless margin was deposited in the 8.ccount
35?
-2-
on the same day.
For simplicity of exposition these cases may be assumed
to be alike in that at the beginning of the day the adjusted
debit balance of the account exactly equalled the maximum loan
value of the securities in the account, and that early in the
d~y $2500
of registered nonexempted securities were sold.
Under
present loan values of 60 per cent, this released margin in the
complement'lry percentage of 40 per cent, i.e., $1000.
The cred-
itor pormitted thG customer to withdraw this $1000 in cash.
Later in the day other securities were purchased in the
account.
In one case
t2ooo
of registered nonexempted securities
were purchased, requiring $800 of margin, i.e. , $;200 less than
the $·1000 wi tlldrai'm.
In the other case *'4000 of such socu:r·i ties were purchased, requiring $1600 of margin, i.e. , $600 more than the
amount withdrawn.
The question in erich c"lsc related to thEJ time within
which the required margin must be obt'1ined from the customer.
The provisions of section 3(b) quoted above clearly forhid a 1si thdr'1wal of cash or sccuri ties if tho withdrawal, in combination with the other transactions on the same day, would create
or increase an excess of the adjusted debit balance of the account.
Accordingly, in the case of the subsequent transaction requiring
$'800 margin it would be necessary for the creditor to obtain the
358
-3-
full amount of' such margin before the end of the day on which
the withdrawal took place.
In the other case, in which the subsequent transaction
required $1600 margin or $600 more than that originally withdrawn,
it would be necessary to obtain, on the date of the transactions
in question, the $1000 which had been withdrawn.
The remaining
$600 required could be obtained, as provided for ordinary transactions by the first paragraph of section 3(b), "as promptly as
possible and in any event before the expiration of three full
business
d~ys
following the date of such transaction."
S-123
Reg. T-83 59
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF"F"ICIAL CORRESPONDENCE
TO THE SOARD
October 27, 1958.
Dear Sir:
There is attached a copy of a ruling which will be
published in the Federal Reserve Bulletin regarding "Broker
or Dealer Who Transacts a Business in Securities Through
the Medium of a Member".
It will be noted that the second and third paragraphs of the ruling are based upon the Board's letter of
April Z8, 1937 (X-9880; Reg. T-54).
It will also be noted that the attached ruling is
in the form of a statement for the press which, however,
is not to bo released until the time specified on the
statement.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosure.
TO PHESIDENTS OF ALL FEDERAL RESERVE BANKS
360
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STAT:EMENT FOR THE PRESS
For release in morning papers,
Tuesday, November 1, 1938.
The following ruling will appear in the Federal Reserve
Bulletin.
Broker or Dealer Who Transacts a Business in Securities
Through the Medium of a Member
Under section ?(c) of the Securities Exchange Act of 1934
"any member of a national securities exchange or any broker or
dealer who transacts a business in securities through the medium
or any such member" is subject to the Board's Regulation T, which
relates to the extension and maintenance of credit by such persons.
In this connection the Board has had occasion to consider
certain questions as to what brokers or dealers ''transact a business in securities through the medium of
11.
member".
The general question of whether or not
or dealer
"tr~nsacts
~
particular broker
a business in securities through the medium
of a member" must turn upon all the relev11nt facts involved in the
business of that broker or dealer.
It h'ls not seemed feasible to
attempt to specify any conditions or factual situations which
would prevent a broker or dealer· from coming within the description.
The Board has, however, expressed the view that the mere
failure to handle any business in registered securities would not,
361
-2-
in itself, be sufficient to keep a broker or dealer from being
one who transacts a business in securities through the medium of
a member.
This is because the relevant language does not refer
to transacting a business in registered securities but to transacting a business in securities.
Similarly, it has exprossad the opinion that the fact
that a firm does not carry any so-called margin accounts would
not, in itself, be sufficient to keep the firm from being a broker
or dealer who transacts a business in securities through the medium of a member, because the Act refers to transacting a business
in securities rather than to transacting a margin business in securities.
A "broker or dealer who transacts
'1
business in securities
through tho medium" of any member of a national securities exchango is subject to Regulation T to tho same extent as a member.
Accordingly, if a broker or do9.ler is one who transacts a business
in securities through the medium of a member, he is subject to the
regulation even as to a particular transaction which is not effected through a member.
S-124
Reg. H-14
BOARD OF GOVERNORS
OF THE
362
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
October 29, 1938.
Dear Sir:
The question has recently been raised as to whether the
principles set forth in the uniform agreement regarding revision
of examination procedure (as published in the July 1958 Bulletin),
particularly with respect to the appraisal of securities and the
requirements for charge-offs, are applicable to banks applying
for m<:~mbership as well as to banks which are already members of
the System.
The Board feels that in accordance with the spirit and
purpose of the agreement depreciation in securities of' banks applying for membership should be treated in the same manner as in
the ca~;e of banks that are within the System. Accordingly the
instructions in letters X-7581 and X-7705 dated September 11,
1933, and December 9, 1933, respectively, regarding the treat·ment of securities depreciat:Lon in connection with banks applying for membership in the Sy::;t.em are cancelled. The provisions
of letter S-115 dated September 3, 1958, ap;Jly to examinations
made in connection with applications for membership as well as
to examinations of State member banks and the technical question
of whether a bank's capital is unimpaired will be determined by
the deduction of the total of classification IV.
While to be legally eligible for membership a bank must
have an unimpaired capital, the acceptability of a bank for membership, of course, dof31S not rest solely upon the determination
of its legal eligibility.
·
Very truly yours,
Chester Morrill,
Secrotary.
TO PRESIDENTS OF ALL E'EDERAL RESERVE BANKS.
S-125
BOARD OF GOVERNORS
Reg. T-81
OF" THE
363
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL. CORRESPONDENCE
TO THE BOARD
November 5, 1938.
Dear Sir:
There is attached a copy of a ruling which
will be published in the Federal Reserve Bulletin
regarding "Guarante;e of Account by Special Partner
of !Viember Firm".
It will be noted that the attached ruling
is in the form of a statement for the press which,
however, is not to be released until the time specified on the statement.
'Jery truly yours,
L. F. Bethea,
Assistant S0cr8tary.
Inclosure.
TO PRESIDENTS OF ALL FBDE:B.AL HECiERVE BANKS
364
BOARD OF GOVERNOHS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Wednesday, November 9, 1958.
The following ruling will appear in the :b'ederal Reserve Bulletin.
Guarantee of Account by Special Partner of Member Firm
Section 6(c) of Regulation T provides that a guarantee of a general account may not be given effect for the purposes of the regulation if tho guarantor is a ":::redi tor".
It was pointed out at page 90 of the February 1938 Federal Reserve
Bulletin that the term "croditor" is defined in section 2(b) of the
regulation to include, among others, every member of a national securities exchange, and the term "member" is defined in section 3(a)(3)
of the Securities Exchange Act of 1934 to include, among others, "any
firm transacting a business as broker or dealer of which a member is
a partner, and any partner of any such firm."
It was stated there,
accordingly, that a partner of such a member firm is a creditor within
the meaning of the provision regardless of whether or not he holds an
exchange membership, and that a guarantee executed by such a partner
may not be given effect under section 6(c) of the regulation.
In reply to a recent inquiry, the Board stated that this restriction applies to a guarantee executed by a special partner of such a
firm as well as to a guarantee executed by a general partner.
S-126
Reg. U-26
INTERPRETATION Of LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
November 5, 1938.
Mr.
, Vice President,
Federal Reserve Bank of ----Dear Mr.
Reference is made to your letter of October 27, 1958 r~
garding the proper maximum loan value under Regulation U for colla t1}ral other than stocks.
The Board agrees with your views on the question and also
agrees that it would be advisable to publish a ruling on the point.
Accordingly, the ruling sot forth below will be published in tho
Federal Rc:serve Bulletin.
Maximum Loan Value of Bonds under Regulation U
Section l of Regulation U provides in part that for
the purposes of that regulation the maximum loan value
of stocks shall be as specified in the supplement to the
regulation and the maximum loan value of arzy collateral
other than stocks shall be "as determined by the bank in
good faith".
This means, in effect, that for such purposes the
maximum loan value of collateral oth:;r than stocks should
be the amount which the bank would customarily lend on
such collateral if that were the only collateral for the
loan. Consequently, a bank may not determine that such
other collateral, as for example a bond, has a maxim-u.m
loan value equal to its current market value unless the
bank would customarily lend such amotm t on the collateral
without any additional collateral.
It is believed that the regulation is clear on this
point, but since it has developed that there may have
been some confusion regurding the matter, it has seemed
desirable to publish the foregoing to remove any misunderstanding that may have existed in thin connection.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistunt Secret.';lr'J.
365
366
S-127
Reg. F-19
INTERPilliTATION OF LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
November 8, 1958.
Honorable Preston Delano,
Comptroller of the Curren~7,
WasM.ngton, D. C.
Dear Mr. Delano:
This refers to Mr. Gough's letter of May 9, 1938 (CC-7-LD) requesting an expression of the Board's views with respect to cert~in
questions relating to the deposit of trust funds by a national bank
in its savings department. The questions are quoted and commented
upon below:
11 (1)
May a national bank with trust powers, acting
in a fiduciar,y capacity, deposit trust funds in its own
savings department 'as an investment', and would the answer be different in a State where state banks are permitted to invest trust funds in their own savings
departments? 11
Section ll(a) of the Board's Regulation F provides that "funds
received or held by a national bank a.s fiduciar,y shall not be invested in*** obligations of *** the bank", and a footnote appended
thert.!to provides that such requirement "shall not be deemed to prohibit investments which are expressly required by the instrument
creating the trust or by court order". Accordingly, the Board is
of the opinion that a national bank is not permitted to invest trust
funds by depositing them in its own savings department unless such
investment is express~ required by the instrument creating the
trust or by court order. In this light, it is believed that it is
immaterial whether State banks are permitted to invest trust funds
by so depositing them.
"(2) If trust funds are deposited in its savings
department 'as an investment' are such funds required
to be secured by assets of the bank segregated in the
trust department?"
bection ll(k) of the Federal Reserve Act and section 9(b) of
Regulation F require that trust funds awaiting investment or distribution which are used by a national bank in the conduct of its business be secured by the deposit of securities in the trust department
of the bank. However, the Board is of the opinion th~t trust funds
367
-2-
S-127
Reg. F-19
invested b,y a national bank qy deposit in its own savings department are not required to be secured because they are not funds
awaiting investment or distribution. In this connection, it may
be suggested that trust funds deposited by a national bank in its
own savings department ordinarily should be assumed to be funds
awaiting investment or distribution if they cannot properly be invested in obligations of the bank under the provisions of section
ll(a) of Regulation F referred to above.
11 (3)
Where the provisions of the trust instrument
require legal investments, may a national bank deposit
funds 'awaiting investment or distribution' in its own
savings department under the provisions of ll(k) of the
Federal Reserve Act and of Regulation F, if savings accounts 'as an investment' cannot be considered as
conforming to local statutes?"
Section ll(k) of the Federal Reserve Act and the Board's Regulation E' do not prohibit a national bank from depositing in its own
savings department trust funds administered by it and awaiting investment or distribution, but it should be borne in mind that section 9(a} of Regulation F provides that trust funds shall not be
held uninvested or undistributed by a national bank "any longer
than is reasonably necessary". Of course, as indicated in Mr.
Gough's letter, any such deposit must conform to the requirements
of the Board's Regulation Q relating to "savings deposits". The
question whether, under the laws of a particular State in which a
national bank may be located or under the provisions of a particular trust instrument, a national bank may properly carry trust funds
awaiting distribution or investment in a savings deposit is one
depending upon all the facts in the particular case and the proper
construction of the State law, upon which it is understood you do
not desire a ruling by the Board.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
BOARD OF GOVERNORS
S-128·
Reg. T-82
OF" THE
FEDERAL RESERVE SYSTEM
368
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE SOARD
November 1?, 1938.
Dear Sir:
There is attached a copy of a ruling which
will be published in the Federal Reserve Bulletin
regarding "Paying for Purchase in Special Cash Account by Selling Another Security".
It will be noted that the attached ruling is
in the form of a statement for the press which, however, is not to be released until the time specified
on the statement.
Very truly yours,
L. P. Bethea,
Assistant Secretory.
Inclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
369
BOARD OF GOVERNORS
0]' THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Tuesday, November 22, 1938.
'l'he following ruling will appear in the Federal Reserve
Bulletin:
Paying for Purchase in Special Cash Account
by Selling Another Security
Section 4(c) of Regulation T provides in part as follows:
"In a special cash account, a creditor rr'.ay effect
for or with any customer ~ !.!.£.£ cash transactions
in secllri ties in which the crcdi tor ma:,' -(1) purchase any security for, or sell
any security to, any customer, provided* *
the purchase or sale is in reliance upon an
agreement accepted by the creditor in good
faith that tha customer wil1 promptly ma.ke
full cash paym~nt for such security;
*
**************
"Except as otherwise provided in this section
4(c), in ease a customer does not make full cash payment for a security purchased by him in the account
* * * within seven days after the date on which the
security was purchased or sold, the creditor shall
promptly cancel, cover, or otherwise liquidate, the
transaction or the unsettled portion thereof."
The Bor-trd recently had occasion to consider two questions regarding transactions in the special cash account.
'I'he first question nrose from a ca:.:::e in which
ri
customer pro-
posed to purch'lse a security in the s pecb.l cash account and then to
370
-2make the necessary prompt payment by selling in the account another
security of sufficient value and using the proceeds of sale for the
purpose.
The question was whether such a proposal for making pay-
ment disqualified the purchase for inclusion in the special cash account.
The exact answer to this question would depend upon the
circumstances of the particular case.
In some circumstances, such
a combination of transactions might be evidence of an attempt to
evade or circumvent the regulation, and if the purchase was part of
such an attempt its inclusion in the special cash account would, of
course, be forbidden, because section 4(a) of the regulation provides in part that:
"A special account established pursuant to this
section shall not be used in any way for the purpose
of evading or circumventing any of tho provisions of
this regulation."
It is the view of the Board, however, th'-lt, while a proposal
to effect such a combination of tr'lnsactions should be carefully
scrutinized, the effecting of tho proposed purchase in the special
.cash account would not necessarily be prohibited i f the purchase
complied in other respects with the requirements of the regulation
and there was in fact no attempt to evade or circumvent the regulation.
'rhis would require, among other things, that the proposed pur-
chase be in fact a
"~ ~
cash trans'lction" as that term ia
ordinarily used in the trade and that the proposed sale be one that
is to be made and settled promptly.
371
-3-
The second question arose from a permissible instance of
the type described above in which the security to be sold was deposited with the creditor and sold promptly, well within seven
days after the date of the purchase, and the creditor was to receive the proceeds of sale promptly in the usual course of business but not until more than seven days after the date of the
purchase.
This presented the question whether
i~
such circumstances
it might be considered that the security purchased by the customer
had been paid for by him within seven days nftor the purchase.
Assuming that the purchase w•1s one which, as indicated
above, could properly be effected in the special cash account, the
question whether it might be considered that payment had been made
withi~
seven days should be answered in the affirmative.
When a
customer bas sold a security in a special cash account, section 4(c)
permits the broker to make the proceeds of the sale of the security
availablt:; to the customer upon the receipt of the security in the
special cash account even though this be prior to the date on which
the broker is to receive the proceeds of the sale.
Accordingly, in
the instant case the creditor could have paid the customer the proceeds of sale within the seven-day period and tho customer could in
turn have used such proceeds to make full cash payment to the creditor for the security purchased.
In the circumstances, such payment
could properly be treated as having been made by the customer without the necessity for the mechanical passage of funds from the creditor to the customer and back again to the creditor.
S-129
Sec. 9, F.R.A.-4
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal reserve banks)
November 21, 1938.
Mr.
, Vice President,
Federal Reserve Bank of --------D8ar Mr.
Receipt is acknowledged of your letter of October 28, 1938,
forwarding the request of The Bank of
,
,
, for permission to purchase certain additional stock of
the
Agricultural Credit Corporat:i.on. It is noted that
the
Agricultural Credit Corporation was organized under
the laws of the State of
and that all of its capital stock
is now ovmod by The Bank of - - - - - - - -
------
The Board, in its ruling published on page 449 of the Federal Reserve Bulletin for 1933, to which reference has been made by
your counsel, and :i.n other instances, has ruled that, inasmuch as
section 9 of the Feder~l Reserve Act, as amended by the B~nking Act
of 1933, subjects State member banks to the same limitations and conditions with respect to the purchase of stock of other corporations
as are applicable to national banks under paragraph seventh of soction 5136 of the Revised Statutes of the United States, State men~bor
banks are not permitted to invest in any stocks except stock of the
limited types of' corporations in which national banks are allowed. to
invest. A contrary view would result in a discrimination between
State member banks and national banks in this regard and would thus
be inconsistent with the intention of Congress in enacting the provision of' section 9 relating to the purchase of stock by State member
banks. With reference to the suggestion of your counsel that sectlon
23A of the :B'edoral Reserve Act may be considered as 11uthori ty for the
purchase of the stock in question, it may be stated that the Board
has taken the position that this section does not authorize a State
member bank to purchase stock of an affiliate, and for your information and that of your counsel there is inclosed herewith a copy of
the ruling which the Board made some time ago on this subject.
The Board, however, has given careful consideration to the
request of The Bank of
and to the views of your counsel
expressed in connection therewith, but, since there is no authority
in the Fedoral law for n national bank to invest in the stock of an
agricultural credit corporation incorporated under State law, it is
the view of' the Board that Th13 Br-mk of
, a State momber
bank, may not lawfully purchase additional stock in the
Agricultural Credit Corporation.
------------
372
373
S-129
Sec. 9, F.R,A.-4
-2-
In communicating the Board's views in this matter to the
member bank, it is requested that you advise the bank that the Board
recognizes that the purpose of its request is to serve the agricultural credit needs of its community and that legal considerations
require the position which is taken above. It isass'W!led that you
will also assure the member bank of the desire of the Federal Reserve bank to assist it as far as possible in making credit a.v'iilable to the community~
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secret3.ry.
Inclosure.
S-129-a
Sec. 9, F.R.A.-4
374
21, 1934.
~luly
Mr.
Federal Reserve Agent,
Federal Reserve Bank of
-----
Dear Mr.
It is understood that the - - - - - - - Company - - - - Pennsylvania, has requested the Board to reconsider its
r~ling
that
the exercise by the-------- Company of its preemptive right to acquire its pro rata share of the newly authorized capital stock of it0
affiliate, the - - - - - - - - B a n k , - - - - - - - - ' Pennsylvania,
would be in violation of Section 9 of the Federal Reserve Act, as
amended by Section 5(c) of the Banking Act of 1933.
Before making
such ruling the Board gave careful consideration to the effect of Section 23A of the Federal Reserve Act, as enacted by
s~ction
13 of the
Banking Act of 1933, but as requested by the -------Company, the
entire subject has now been reviewed with particular attention to that
Section.
After such reconsideration the Board is of the opinion that
its prior ruling was correct.
The Board has heretofore ruled that inasmuch as Section 9 of
the Federal Reserve Act,as amended by Section 5(c) of the Banking Act
of 1933, subjects State member banks to the same limitations and conditions with respect to the purchase of stock of other
corpor~tions
as
are applicable to national banks under paragrf.l.ph Seventh of Section
5136 of the Revised Statutes, State member banks aro not permitted to
invest in stocks except in the stock of the limited types of corporationa in which national banks are allowed to invest.
Such ruling
WGS
S-129-a
Sec. 9, F.R.A.-4
3?5
made w1 th respect to the stock of a corporation which was p..ot a
fd-
filiate at the member bank in question and .. betore aiViaS to the _ __
Com~
the ruling now under reconsideration 1t was tber&tore necessary
tor the Board to detel"'line whether allY' proviaton ot law pemitted a
meaber bank to invest in the stock ot an affiliated corporation altboush
it would not have been allowed to do so bad the eorporatio:a not been an
affiliate.
It is urged on behalf of t h e - - - - - COIIJ.}Min7 that See-
tion 23A, b,y fixing limitations beyond Wbieh s member bank may not
invest in the stock ot an affiliate, iapl.t.edl7 authorizes such investment up to the limits prescribed and the Boarcl recoaa.izes that rules
ot atatutor;r construction would justify thU iDterpretation in the absence or
e~4ence
ill41oattng leaialat1Ye intatioa to the eoatrary.
With respect to the provisions of Section B3A wbich relate to
iaftsilments in stocks, however, the above mentioned provision ot Section 9 ot the Federal RefiH!trYe Act which subjects State !Wiber banks to
the same limitations as are applicable to national banks is an t.portant
additional factor to be considered.
Prior to tbe Banking Act
the Comptroller of the Currency had ruled that national
banQ
o~
1933
did not
have the corporate power to invest in stocks ot any corporations except
in a few clearly defined eases and the aaendment -.'le to Paroe:raph SeY...
eath of Section 5136 of the Revise4 Statutes by the Bankins Act ot 1933
was a definite recognition by the legislature ot the non-existence of
such power.
It seems extremely unlikely that Congress 1nteu484 by an-
other proYision of the same Aot to
tnc~eaae
the corporate powers ot all
S-129-a
Sec. 9, F.R.A.-4
-3-
national banks in so indefinite a manner as by the implied permission
which may be inferred from the language of Section 23A.
Furthermore,
there is no apparent reason why Congress should have prohibited State
member banks from investing in the stock of non-affiliated corporations
but should have permitted them to invest up to the prescribed limits
in the stock of corporations which were already affiliates.
The fact
that in certain cases an affiliation arises from circumstances such as
the existence of common directors suggests no reason why the law should
have permitted an investment by the member bank in the stock of its affiliated company and in other cases, such as a holding company affiliate, an investment would appear to be more objectionable than an
investment in the stock of a non-affiliated company.
Accordingly the Board is of the opinion that in view of other
provisions of law Section 23A is not to be construed in the manner suggested by the --------------- Company and the Board is therefore unwilling to reverse or modify its previous ruling.
You are requested to
notify the -------------- Company accordingly.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
BOARD DF
8-l~
See. lS ,F.R.A.-'
[IIZJYI:ANDRS
CF~H~.
3'n
FEDERAL' RESERVE
SYSTEM
..
'''
--
-
WASHINaTCIN
A~DRJtllll.
Novanber 2S,.
Dear
1~.
Of'p;t91AL CIDJIItl:llf'DI!IDitHCI:
'tb 1'Hll: GAllO
.
atr;
Board
X. rtlaponse to. an iJJtluil"y rr•. a f$der~4 ~~~ 'bank, the
or Qove.rnorerreoent.tt advi.- 'tJhe Mf.lk· •• P6Um:
' '
-'
~
~1
ttReference is made to JOUtr letter ot(~t 24, 1938,
requesting a4rice ... to tfbether, in View ot tllo
letter of S.,tember .30 1 1956~ x..,9709, yo,_ bfmk ialloUJA
maintain .two accounts ;re~a-Ung .the 4ep<Htit.ot Uninvested.truat ttuads by tne
~t Co~, _ __
~""'!--:.--' a ••bot !wititutioo wld.Ch tnmttacta no coJIIIler""
cis.l bankinl bwdnesa" ·· lt is Ul1~tooa thelt tbe two
accountS operaed on your booka.ro~aent a.ecreption
ot unS..vested e<>urt and p;rtftte tl"Ut f-.da 1 ae required
.bJ the laws or . . .. ' ~ it 1• ~pectetl tbat '*e ac-:
counts will not h ctf • tellpol'&J'1' Jlllliture.
.. . ·
"In view ot t.be l'eP1'9Setlta'tl~a.• me.de l"~ the
aoooun WI of tbe . .. . . h-uet dott~ •. the situa tJ,OD ot
a number or aember ~~ wbioh t1N .f1ibject to a COJM11 tion
or membership requirin& the · . pledp ot··· securities to CoYer
t&-ust tunda deposited in their own c~retal l;)ank!ns
de~ts but are not permitted •bJ· Statf; law to ...U ·
auob a plecJaei a.nd. the poseible 'tellp0%"&17 Mel! <>.f', other
mem\)er beaks ope~ting ~t 4ep(ll"t11Mmte Wbicb was t.be
. baaia for the 8oaj:l•s letter ot.Se.pteltber ~. 1916,
X-9709, the BoarjrwUl offer no. o'bJe~tiol1 to the rece~Pt
ot depoJits of ug...'nvested tru.s~ hnda in Jpeclial acoounte
eo...ra••
by the l'edert.l.l Bjlel'Ye banka from; .
... ·
(l) ar17 ...beJ ~ tor a ,te!llpO~ per~od
when,
in the j~t or th,, Federal• l\4t~l"'l'& ·~,
circumstan9e ~der ~11 . .ervtce to 1;he :pUticula.r . )llrabk. dea'-ra.ble,. ,
..
(2) any State •tll:le~•bank 8\lbJf>Ct to the .cond1tion
ot
. . . · rslq..
p....·.·.that.
true
..· oepar
·.·tQU·d&l·
· ·.. t ehall
s. .i.. ted·.
the.Jile$be
bank
1D·. lta
bankin&
......
t..
·.de·······..P Q .
b.1
be
securae by pledge or eol1ate.ralvdtb the trust
S-150
Sec. 13 li'.R.A.-4
-2-
department and located in &. State whose laws
do not permit the pledge of collateral tor the
purpose, and
(3) any member trust coapa.n;y which transacts no
savines or coiiiDercial banking blsinoas.
"As indicated in the Board's letter or SeptemhEfr 30,
1936, deposits or run<1s received by a member bank in a
fiduciary capaci -cy &nd · deposited in a Federal Reserve
bank in a special account •Y not be counted as a part
of the member bank's reserve balnnce with the Federal
Reserve bank.
"While the Board feels that tbe matter of requiring
an agreoment, as suggested in its letter ot September
30, 1936, as well as the question of ~$tr1Ctions upon
the source and disposition of truet ~da t8ce1ved on
deposit under the authority contained in 1:411s letter,
are for the dete~t.t.on or each Fed~l ReaervEt bank
in consideration ot the laws and court decisions in
the States·· incl~ed ill it.~.· district, it is asaUIIled
that, in 9.l\Y caee in Wllich ..Un•••ted trust f\Ulda are.·
received by a Federal Reserve ba.nlf, 1 t will take such
steps in consultation with its counsel as may be deemed
necessary to elillinate or Jld.n,ia1ze ·.fU\Y possibility or
litigation or loss to the Federal Reserve bank."
Very truly yours,
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
378
,
8•131
BOARD OF' GOVERNORS
FEQ-ERAL
ll" THE
RES~RVE
379
SYSTEM
WASHINGTON
'
"bOitl£88 OI"P'ICIAt,. CQJ!!~I:SPONOI:NCIE
TO· THI: 8CIARD
Deoeaber '1, 1938.
Dear Sir:
In aoool'dance with the recOJBea-tlon ot.tJie.-.C~ttee _on
Free Serrices of the Pres1tlents• Contereuce a~~· ...... aB4 approved
by the' Presidents• Oobference at its mee'tiJIC. a W.~DC'oa. Oil October 24-2!5, 1938, the_~ approves· the . act<teptane•· llaCl•· h0141Dc in
sateteepiag ot eeour1 ties pletlged as ooUatel'fll to· 4fpoei ts ot btmk•
rupt ·eatatea under the provisions ot otaapter VII ot tbe Qll.ellclecl
Bankruptq Act, w1 th the uaderiJtandiDS that
!r: ::a,::::tt~::e~ =:t~n.;-~•.:=,
1.
the J'e48.-1 Reae:rre ballks wtU. • • rU:r ea.a:rse
tor their tJ&rviou in connection thel.'W'fttJ.,
2. When suoll aecur1 ties are pla"' in aate~teePiDS
wttll ta• Federal ReserYe baDlca ·by nom•ltter banks,
inolucU.ns no..aber cleartnc ban1ts,. the Fecle.ral
Rese:rre bonks will charge tor their Rrftcea at
the rate ot l/40th of one per C. ot tb,e f'fkce
value ot such securities, provideci, bOwe't'er, that
the miniJun. · charge shall l:Je ta. 50 ud the MXilaull
charp t250.oo tor each tweln saonth period, or
portion thereof, during which se~r1t1es are t.eld
in safet$epiag, and
3.
The Federal ReserYe banks will be reillliN.reed by
depolliti!).S -.bor _and nODIII-.ber·bwa to~ . ahit>P1D&
· expenses inciact to reoebi.M eAd cleU.,.l"1lls
seouritlea pledged as collateral. to depoattil of
bankrupt estates under the. P*n'isiona or Chapter VII
ot the amended Bankruptcy Act. .
Very truly yours •
.
......
Cheater lloft'ill,
Secrete.r:r.
~---··.·.·_,~--_
.r>'
. -' ...-- > ··_··_·' ....
'
'
··.·.·._.m_
'
.
~
'
'
-·,
'
..· · . ·
380
.BOARD OF' GOVERNORS
OF THE
F"EOERAL RESERVE SYSTEM
&.152
WASHINGTON.
ADDIIIII:aa DFF'ICIAL CDIIIIIIItaPGNDIENDII:
TO THII: aGAIIID
December 17, 1958.
Dear Sir:
The Board approves, effective JanUV7 1, 19Z9, the chanps
set forth below in the uniform parapoapba of the noncash collection
circulars of the Federal Reserve btmlts :rec~ bJ the Standinc
Committee on Collections in its reportcs dated Jleeeraber 17, 1957 and
September 20, 1958, as approved by tbe Contorence of Presidents at
ita meetin&s on February 28-Mareh 1, 1938, 1$d October 24-26, 1958,
and in the Committee's report dated ·uay 26, 19M, as revised and
approved by the Conference ot Presidents at 1~ eeettnc on October
24-26, 1938.
Pa
( 4)
Ma turin&
bondcs and coupons (other than obl1gat1ona of the
United States and of Gov~ntal a;enciea, which are redeeaed by l'cderal reserve banks as fiscal acenta separa.te]J hom this collection service).
_(f) '1\dtt capY,gn "i•£11 ot QQ4~tcW.sm"a u nvJrPK· (See
report of C~ttee dated Decesaber 17, 19&7 and lliautes of Presidents• Conference dated February 28-.Marcb 1, 19&8.)
ParumRh
( S)
A Federal reserve bELnk will forward such 1 tellS pqable
in anothe'l' district for collection to the Federal reserve
bank (or branch) of nch other district; proVlcled, however, tba~ a Federal reserve bank, in 1tcs discretion,
'f.ftll3 route direct to the. place of payment ln. another
Federal reserve district any item the size or character
of which, or -uae c1rcUII.8tanees in connec.tion 1d tb Which,
would seem, in the Jucipent ot the Federal reserve bank,
to justity such direct routing.
Pft:lW!pbl YRSlK .918il91 "QgJaleoY:sm GIJAtaA" • . Y rev&•ld• (See report of Co.tt.tee 4ated . ··~~q ·2a, 1958 and. minutes ·or Presidents' ·
Collt'erence dated October 24-26, 1958.)
The Federal reserve banks ID&tke no charge for their services in collecting non-cash items (except as pronded below)
381
-2-
S-152
and, therefore, any item payable in a cicy where there is a
Federal reserve bank or branch, the collection of which is
not restricted, will be collected at par. If any such item
is payable through or collectible by a specified bank or
other collecting agent, any charge made b.Y such agent will
be deducted and the net proceeds of the item credited.
With respect to the collection of non-cash items payable
outaido of Federal reserve bank and branch cities·, it is reco~lized that any bank selected b,y a Federal reserve bank as
agent to collect any such item (except checks and bank drafts)
renders a service, in presenting, collecting and remitting,
for which a reasonable charge may be made if it cares to do
so, and when such a charge is made,· it will be deducted and
credit given for the net proceeds.
Items sent to the Federal reserve banks for collection
are subject to the following charges:·
(1) Charges made by collecting banks or agents,
referred to above.
(2)
Charges made in the discretion of the Federal
reserve banks for handling or collecting securities.
(5)
A service charge of 15¢ per item on all collection items returned unpaid and unprotested.
This charge will not apply to items that are
protestad.
( 4)
Expanses incurred for postage and insurance or
express in forwarding items by registered mail
or express.
(5)
All telephone and telegraph costs.
(See
paragraph below, "TELEGRAPHIC ADVICE".)
Member banks may be permitted to route collection items
payable in other F'ederal reserve districts direct to the Federal reserve bank~ and branches of the districts in which the
items are payable for the account of the Federal Reserve Bank
. 382
-5-
S-152
of
'· and are encouraged to apply for permission to
exercise this privilege since it is of distinct advantage to
them.
The Federal Reserve Bank of
reserves the right
to require member banks to route collection items ~able in
other districts direct to the other Federal reserve banks and
branches, when, in our judpent, in any }Jlrticular case the
number, amount or nature of collections handled would appear
to justif.y such procedure.
Very truly yours,
Chester Morrill,
Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANtS
a-JM
SOARD OF' BOVERNORS
OF' "''M£
FEDERAL. RESERVE SYSTEM
383
WASHINGTON
AOOit&ee OP'P'ICUAI. COitltCeiOONOtNGC
TO. THC ei:JAitO
Dear Sir:
'lhe Boai'Cl CODCurB in tile actJ.oa ot tbe Cotat...-oe ot Presidents held October 2'-26 1 liS$ 1a appJ'IO'I1q the. tol.l.ewi.al ......._
tiona, or parts ot reo0188rlda tiOUt ot the StancllDI
ttee oa
Collect1one, contaiQed 1n ita report dated September 20• 1918•
c..-
ITDIS PAYABLI Dl 011 FIDIIAL. BliDY& lWJI Oft 8lWIQl CIT!
That eaCh .Pecleal. re_,..,.·beak Ud .._•. Cl'ff ~
ate crMi t tor 1 tMI ptpble in owa e1 v 1.t recei'ftKl 1D t i •
tor cl8&J"inc, p&"OYiclecl, however, tllat IIW' n._... -... •
sive s...dia te Cl'edl t tor 1 teas pa.yable ~ om eft¥ lllb8ll ·receivecl throup tbe maile too late tor claariD& tJroa ita o•
COUlltry meaber baftke."
"(&)
Rt.tlilia»AP tt kiM lit''
~taw
ta u: .,..,. IIIU
'l'ba t each Fecie.ral reee.rve beak. etacl bnaoh e.ocept OQh
1teu w1 tbout deecr1pt1on ae to dnlae···. ...._ • ._.. letten
troa 1ta liMber baalte l.n4 dil"&Ct ........._. • • • • ._., of. otllet
districts, pro'l'ide4 t&at eacll ••...,.. ·. -..· ·~ • •.U
1 tlelt ot tbie prl•lece be requUetl to - . • pllo~c
reeor<i ot· toe race ot eac1a uadeaoribed l.tee Milt to·•tu·r*
eral. reserve b&Dk or breach, or .dUect \0 aoo-. r~ ,....
SIJ'Ve bank 01' bftftebt .·to ~ t 1tae ,U.· eoatalaJac
photocraphl ot all .auch 1~ 1D ..-caa~t.lottel' to ttae
Federal :rea\:lrve baU or braaell t;o lhlcll ··tbe. letter wu teat
with the uadera~ac tAaat . IUCil r..-.. ..... or ...._1d.U
return 8'QCh tila to the 1111.,.. bank· attar a.. lapae of aot
IDOI'e tban two weeks, it the • • - - ·bank citdru to have the
tUm returaect. The Co.l't'- '"' DO Qblecttoa "'> a ledenl
reserve beak• a pet'llittlai lta ~- . . _ banta to J"(ttain tbe
tiaa c011tain1111 pbotoplphl ot tile . _ . eent to 1t; prov1de4
384
-2each such member bank agrees to furnish the reserve bank upon
its request with a description of all such items and ~o indemnif,y the reserve bank in case of aqy loss resulting from its
failure to do so."
"(4)
Closing Hours of Federtl Bgservv Ban!§ for the Acceptance
of Casa Itgm§
·
That each Federal reserve bank and branch make a careful
study of incoming and outgoing mail .and express schedules in
relation to the ~dditional volume of items that might be received and cleared or dispatched if its closing hours were extended, with a view to adopting later closing hours for the
acceptance of cash items if b,y doing so an appreciable volume
of items could be received and CQllected a day earlier than
at present and its expenses would. not be increased to an extent incommensurate w1 th the additional service rendered to
member banks.
That the established closing hours of each Federal reserve bank and branch for the acceptance ot cash 1 tems be
applicable to items received from other Federal reserve banks
and branches and thei;r direct routing member banks as well
as to items received from its own member banks."
I
With reference to the remainder of reco11111endation numbered (1),
which was disapproved by the Conference, and recommendation numbered
{2), it is noted that the Conference approved in principle the modified plan suggested by the Committee as an alternative to its recommendations regarding availabili-cy of cash items payableoutside of
own Federal Reserve bank or branch ci tv', including direct sendings,
but requested the Committee to give further stuqy to the matter.
Ver.y truly yours,
~~
Chester Morrill,
Secretaey.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE Blu1KS
a-1M
BCAND OF BCVERNORS
.
.
DF:
1'H~
385
.
. FE;[)ERAL RESERVE SYSTEM
WASHINGTON
ADDitC.a. Of'P'ICIAL.. CD.ItltCaiiDNDCNOC
· TD
THill: acAtto
Decellber 19, 1918.
·~ear
S1r1
In the
letter S....Uft dateci;H&ept[a. . . 9, 1958, atteotbe tact tllat. ..._ W &· 001 ~· ill a ..,..
of reapeota to tae reViaed fora of ..-J:ttattoa · r~J. MJd tllat. a ·re'ft•
ate lfOQlct be ..u toUowS.Dg tta.e Zraa'Jaera•
t1aer1 seWed
at whlu tt •• proposed to dlecwsa the •tter.
\101J
BoaNt8
wu .U..tt to
caat.,...._
ID.oloeed an two coptea of the re'fieecl fOIII ftlob tbe ·Board !las
a.ppro'fed., .S • a~pplJ'. of the foru :le beiD& a11el to .-.of tile ·Rft.....,~ baake tmder separate co-.er. 1441t1cmal 8UJIP]J.e1., be.obt.alaed
t.tpaD request.
.s.•
PoJ"'D 212 is t.o be ueed oal7 1a CQII:aecUon
eafdl}&~ons acle ·
b7 8alda~s tor the Federal reserve ballka Mld· tbe to~, as a
reawal practice, of llll&l.pea of repOIW ot iad......t ....t•tto.ta
.
aade bf State autlaorit.tea ~be di-.ts..a.a. It SA--.. tlst> report ·
ot ·aucll • iadepea4eat •••haat10D d180loees •· •tta~ wblcb .tlr:Nld be
11roMiat to tile at.tctloDot tbe ·Board or ooa.ktu lld'CIIIIIIitl• Wleil
~ be t--.rded, t1ae Wormatloa should be. pn•atect S.a tae fol'fl
beat edaptal t.o tile particular att\I&Uon.
It wUl be notecl tllat tbe ~aed fora .at•· ·provtatoa tw. ·.lhow-.
- 1oc. tile Ol.uettleauoa ot useta b7 tAe Skte ....mae:r:, aad a1110 tor ·
•••• ridac the. cotTectlYe _._... iaatJ.t\attll. bJ •·· State ~u.
U' ·u.. helrk Sawlftd tt in •· uuatl,,_.tol'J' OfllldiU..,. Ja W.. -.. 11.0~-- 1t 1a requee'-1· tt:aat. 1t *" w-.tt.. ,......
f.Ut.i&or1Uea 1d.U aot be a.U.ltle tOr 801ie ua., .~'oft l1f be
... "- . . . . . ··~ npp11e4l.a'e.
Incloeure.
s••
~Utl*lttecl ~
.
orGQVtt,.Ntsflta
THE ..
. SOARD
. . .DF
FEDERAL RES.ftVE SYST~:M
·s-1..,.·
WAI$H1NGTON
. ADDii&•• D"I'IGIAI. ®litt&a-NDtlti'Rtll:
TD THC HM.O
.
.Dear Sir:
It is rioted from the rd.nutes of tbe meettiac r;,f tal6. Contereace ot Presidents on October 24-25, 19:58, that ·•• tlijorivor
tboae present acreed that the Con.terenc:e eb0u:l4 .ahere to tbe posi. tibn taken by· it at 1ts meetiDc Oil Septe!llber 20 1 .~, on prrQposed
. steps. to prevent tbe abuse by member baU.a of
ot.tn'enq 110rting
.tacU1 ties of the Fedezoal Reserve backs. 'the action ot :the Presidents 1 CQI'lferonce, a.t 1 ta ~~eetinl on ·September 20, ·•• reCorded in
the minutes o.t the meeting was ae follows:
tbe
nrt was the sense of the Conference that through the d'torts
of the individual Fedt:ral reserve baaka AnT ~ abuse
of their currency sorting facilities has beenalreacV"
minimized and that each bank should coAtiAue to ~iS.cit
the cooperatiOI.l of its IM!Iber banks in eUIIWiatiD& or
BlOdit)'ing such pactices as reaul t in ~ble demands upon, or 1.mwvranted e:xpese to, the~~ reserve banks~ 'lhe -.Joriv ot those preseat ex~
the opinion, .buecl upon the experionce ot ;tl,teir banks
~negotiating witA ~~eillber banks respectJ.nc'.~Wa·p!\obltJ~~, ·.
that the adopticm o.t an,y arbitr&17 rulo, ~;- tha.t
contemplated in the JjlOtion otfered to the ~~t«Jetilsf, would
be inadvisable, aa tending to anta&Oftiae .-lMtr ,~e,
and would be wmecessar.y !n view of. the pJ"otre•• al.re&d7
made and the rurther progresa wbich 1111pt. ~ably be
expected to be made through tbe etforta ot the vario\ls
Federal reserve banks. It was also tile ,opi.n101l ot 1101te
ot those present tb&t there IILibt be v&1-14 ob.fectlone,
on legal grounds to a rule which . prob!bi tect ~ b~Wcs
from depoai ting currency. ill their discretion, wl th
Feder~l reserve banks."
The Board hae carefull.T roviewed this sul)J.-,ct an4 .tile progress tbat bas been made so .tar af set tol"th ·l:v·· tho Co-.ttee on Free
Services in its report dated June 8, 1938• It appee.r·s tro11 the date
38?
-2-
shown in the Committee's report and in the letters received from the
Federal Reserve banks in response to the Board's let~er R-319 of October 7, 1938, that some Federal Reserve banks have been much more
successful than others in reducing to a minimum the existing abuse
by individual member banks of the currency facilities of the Federal
Reserve banks, and particularly the practice resorted to b,y some member banks of depositing currency in the evening and drawing out currency needed the next morning, thus using the Federal Reserve bank
as a.sorting agency for their currency•
The Board feels that the Federal Reserve banks should continue
their efforts toward an elimination of abuses of their currency facilities by individual member banks. The results of the currency studies
made by the Committee on Free Services appear to have been very helpful,
and the Board would appreciate it if the Committee ~ould again review
this subject not later than the spring of 1940,
Very truly yours,
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF AU. FEDERAL RESERVE BANKS.
S-lS&
.BOARD OF'.GDVERNDRS
C'IP' THE·
388
F'EDERAL RESERVE SYSTEM
WASHINGTON
ADDRK • • Qf'f'ICIAI- liiDRRK.I"DNOKNDK
TO THC .QAitP
Dear Sir:
There have been to~ to you t..oQay under eepaftlte cover
ladicated :nUIIlber ot copies of the. aeYen. ·tol'tlt att.cbed bereto,.
tor the uae of State 'b8.llk members and their attiliatee 111 alDiitting
reporta as of the next call date:
.
~·
~
Form FR 105, Report ot condition
or State
bank 1181Dber.
Form FilOSa, Instructions tor preparation ot reports
ot conti tion by ·State lank members.
Form FR l05b (Schedule "0"), Loana and adva.t1ces to
affiliates and investments in and loana aecured b7
obligation.& or affiliates.
I
Form FR lOSe, Publisher's cow or report or condition
ot State bank member.
Form FR 220, Report or affiliate or boldine compall1'
affUiate.
Form FR 220a, Publlsber 1 s copy of report of affiliate
or holding COilparq' affiliate.
Form FR .220b, Instruc~f. ons for prepare..·.
· tion ot reports
or af.tiliatea and bol~ng co..,_..· atfUiatea.
Fo:nn FR 105 has beea complptel.y revised. Siltilar tol"'lS bave
been adopted by the Comptrplier of the Currency and the Federal Deposit
Insw:-ance Corporation, ancl the Executive Committ«te of the Association
ot State Bank Supervisors bas reco•ended •to State baDting departaents
that, in so tar aa practicable, they uae the sa• toru as adopted by
the three Federal bank superviSOJY agencies.
389
S-136
-2-
The
with page 1
publication
provided on
publisher's
face side of Form FR l05e has.been reYised to correspond
of revised Form FR 105. In addition, a certificate of
to be signed b,y an officer of the member bank bas been
the reverse side of the revised form, in lieu of the
certificate required heretofore.
Detailed instructions (Form FR l05a) have been provided for
the preparation of condition reports by State bank members. Similar
instructions are b~ing issued by the Comptroller of the Currenc.y and
the Federal Deposit Insurance Corporation. It is sugg~sted that
State bank members' attention be called particular~ to the instructions governing publication, which are intended to facilitate the
joint publication of reports ot condition rendered to the State banking departments and the Federal Reserve banks, respectively; to the
provision that all valuation allowances and resefves for bond premiums be deducted from the appropriate asset and schedule items; nnd to
the omission of the affidavit heretofore required.
In Form FR 105b (Schedule "0") the instructions following
the form number have been changed to provide that Schedule "0" need
not be submitted if no affiliates are reported in Schedule FF of the
condition report. Form FR 220a has been revised b,y providing a certificate of publication to be signed b,y an officer of the affiliated
State bank member, in lieu of the publisher's certificate required
heretofore. No change has been made in Forms FR 220 and 220b.
There is inclosed a memorandum of suggestions in connection
with the handling and examination by Federal Reserve banks of condition reports rendered hereafter by State bank members.
Ver1 truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
SUGGESTIONS IN CONNECTION WITH HANDLING AND ~IINATION OF STATE
BANK Mn4BER CONDITION REPOR'rS BY FEDERAL RESERVE BANKS
December 22, 1938.
Unless otherwise advised the blank forms should be distributed to the State bank members promptly upon receipt thereof
from the Board of Governors, with advice to the effect that they
should be held pending receipt of a call for reports thereon.
The following number of copies of the forms should be furnished to each State bank member:
Form
]~
105 - 4 copies {1 for use as a work sheet, 2 to
be completed and returned to the Federal
Reserve bank, and 1 to be completed and
retained by the member bank)
Form FR 105e - 3 copies (1 for the printer, 1 to be re..;
turned to the Federal Reserve bank with
certificate of publication, and 1 to be
retained by the member bank)
Forms FR 105b, 220 and 220a - none if the bank reported
no affiliates on the last preceding call
date; otherwise the same number of copies
as on the preceding call date.
Form FR 220b - none if the bank reported no affiliates on
the last preceding call; otherwise one
copy.
Banks to which no copies of Forms FR 105b, 220, 220a and
220b are supplied should be advised that, if one or more affiliates are reported in Schedule FF of the current condition report
on Form ]~ 105, the Federal Reserve bank should be requested
promptly for a supply of Forms FR 105b, 220, 220a and 220b.
1~e letter transmitting blank forms to State bank members
should make reference to any important changes in any of the forms
since the preceding call*. If no changes were made a statement to
that effect should be included in the Federal Reserve bank's letter. The letter should also remind the banks to be guided by the
instructions (Form FR 105a) furnished governing the preparation of
condition reports and should call attention to any changes in such
instructions.
* In
the present instance attention should be called to the fact
that Form 105 has been completely revised,
I
391
-2-
S-156-a
A copy of the Federal Reserve bank's letter to State bank
members transmitting the blank forms should be furnished to the
Board of Governors as soon as practicable, and a copy of the let•
ter and accompanying forms should be sent to the banking department of each State Which lies in the Federal Reserve district,
Upon receipt of notice from the Board of Governors fixing
the call date, the Federal Reserve bank should immediately call
for the required reports. A copy of the Federal Reserve bank's
call letter, together with a list of the banks to which it ~~s
sent, should be forwarded to the Board promptly• A copy of the
letter should also be sent to the banking department of each State
which lies in the Federal Reserve distr!ct6 As soon as practicable after the issuance of the call, the Board should be informed,
with respect to each State whose capital city lies in the Federal
Reserve district, whether or not the State authorities issued a
call for condition reports as of the same date and, if not, the.
date of the State call nearest thereto.
Upon receipt at the Federal Reserve banks the condition
reports on Form FR 105 should be examined and any necessary corrections obtained, if practicable, before they are forwarded to
the Board of Governors. Corrections should be clearly.shovm on
the copies of reports forwarded to the Board, with an indication
of the authority for the correction, including the initials of the
person at the Federal Reserve bank who makes them. When necessary
to clarity the corrections, a copy of the pertinent correspondence
should be furnished the Board. If the obtaining of corrections is
likely to delay the transmittal of any reports to the Board beyond
three weeks from the date on which the call is announced, such reports, together with copies of pertinent correspondence or memoranda
of outstanding correspondence, should be forwarded to the Board, to
be followed later by appropriate advice of corrections.
In examining the reports the following points among others
should be observed: That the heading of the report and required signatures and attestation are complete; that all totals and subtotals
are correct; that the amounts ot all items in schedules which are
related to items of assets and liabilities agree therewith; that the
items listed in the sohedulea of "Other assets", "Other liabilities"
and"Contingent liabilities" appear to belong there rather than in one
of the specific items of assets and liabilities; and that the amounts
of the various items in the schedules,· particularly securities as
shown in Schedule B, do not appear to be obviously inconsistent with
the amounts of the corresponding items in the inunediately preceding
report,
The published statement (Form FR 105e) should be checked,
before being transmitted to the Board of Governors, to see that it
392
-3-
S-156-a
agrees with the official report on Form FR 105, and that the member bank's certificate of publication on the reverse side has been
completed. If any differences are noted, other than of a minor
character, they should be called to the attention of the member
bank for its guidance in publishing fUture statements. Unless
otherwise advised by the Board of Governors, however, republication should not be required. A copy of the letter to the member
bank should accompany the published statement sent to the Board
of Governors, to assist in determining the nature of the differences and whether or not they are of sufficient importance to
warrant republication of the statement.
The original copies of the reports on Forms FR 105, 105b
and 220 should be retained in the files of the Federal Reserve
bank, and the duplicate copies should be forwarded to the Board
of Governors. The copies of the published statements of State
bank members and their affiliates, attached to Form FR 105e and
220a, should be sent to the Board of Governors.
S-137
BOARD OF GOVERNORS
OP' THE
FEDERAL RESERVE SYSTEM
393
WASHINGTON
ACIOitl:ee OP'P'ICIAL COitltJ:ePCNOI:HCI:
Tl:l THE eaARD
December 28, 1938.
Dear Sir:
Recently, the Board had occasion to review again the subject of Federal Reserve bank participation in, and support of, the
Graduate School of Banking at Rutgers Univerai~.
The Board still feels that the. officers and employees of
the Federal Reserve banks should be encouraged to participate in
the educa,tional acth1.ties of the Graduate School of Ba.nkini and
to this end that the FedeNl Reserve banke should follow a uniform
eystem policy in so far as may be practicable.
.
Under the procedure set forth in the statement attached to
the Board's letter of October 30, 1936, X-9729, the System's contributions toward expenses of officers and employees in attending
the Graduate SChool are limited to transportation expenses and
leave with pay for the time necessary to take the course. Upon
further consideration of this subject in the light of the recommendations made by a number of the Federal Reserve banks the Board
has modified the first paragraph on page 3 of the statement attached to the Board' a letter of October 30, 1936, X-9729, to read
as follows:
·
Each Federal reserve bank may assume the transportation
expenses to and from the Univerai~ of officers and
employees selected to attead the Graduate SCtlool or
Baakinl at Ru tger$, pay the Recistra tion GAd Resident
and Extenaion tuition fees, and m~ crant them leave
. of absence with P&¥ of such duration aa mq be necessary to enable them to at tend the two w..U' session
ot the school, in addition to thei.r repl.u annual
vacation. As it is felt that the student should bave
a personal financial stake in the attabwent or the
objective, and aceordinalY that the Federal Reserve
banks should not bear the entire expense, it appears
\
\
394
S-157
-2-
to the Board most reasonable that the student should
be expected to pay his living expenses. Therefore,
it is the view or the Board that no reimbursements
should be made for dormitory and dining hall charges
and incidental expense.
Very truly yours,
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDI&L RESERVE BANKS
BOARD
D~F
8-158
GOV£RN:ORS
395
DF" TH&
F"EDERAL RESE,RVE SYSTEM
WA8HttilttJTON
ADORC•• DP'P'IDIAl. CORRIEafiDNOCNOC
TO TNIE .DAIID
December 28, 1958.
Dear Sir:
At its meetina on .December £1, 1938, the Board of .Governors
discussed the inforuaal advlces that ha4 been received troa F~ral
Reserve banks of propoaed changes in official ealaries for the year
1939. The Board has felt for sou tiu that 1t labors under o. considerable handicap in endea.vo.ri.D&, dvin& a short ,p«U"iod eaoh yeat-,
to pass on proposals for ~s in salariee of officers of the twelve
l'e(ieral Reserve banks which, with few exceptions, rep;re8ent increases
and wbicb, in accordance with the practice prevailing heretofore, are
subai tted annus.lly to become effective on the first of Januaey.
The Board believes that it has met the problem
w1 th respect
to 1ts own staff by terminating the practice of considerinc a list
of salary changes annually as a part· of the bud&et 8!)d by substi tuting the practice of dealing only with seritorioua cases on an indiTidual basis when it appears that an t.4juatsent is due becawse of a
substantial change in duties or responsibilities or other exceptional
circuutances pertaining to the ,P8rticular person or his job. It is
convinced that such a change in practice bas a salu~ effect on
the submission of proposals to ine~ea.- salaries because or the realiation that theJ will undergo an individual review llbeu there is
sutticient time to 'consider them ialtead of a neceaaarily more hasty
consideration when there is great pressure at the end of the year.
With these points in mind, .the Board has decided to adopt a
policy with respect to the conside~tion of future changes in sala.ries of officers of tbe Federal Reserve banks similar to that which
is in effect with respect to 1 ts own staff' ano to defer at this time
coalideration of tbe pencU.ac changes until it has ha4 an oppoa-turtiv
d~in& 1939 f'or a tull di1cusion of the question of l&lariee with
the Presidents of the Federal Reserve banks.
Accordingly, as early in 1939 as circumstances will pend t,
tbe Board will invite the President Gf each Federal Rese;ve bank to
come to washington at a convenient time for the pul'pose of reviewing
thoroughly the salary situation at his bank.
S-158
-2,-
With this procedt~e in mind, the Board will approve the
salaries of the officers of your bank at the rates in effect on
December 51, 1958, if fixed by the board of directors at those
rates.
Very truly yours,
Chester Morrill,
Secretary.
TO THE CHAIRi\1EN OF ALL FEDERAL RESERVE BANKS
396
"- <
~ .,
8-15
BDARO
OF
GOVERNORS
. .
c::tFTHE
.,
:'' 39'i'
F"EDERAI- RE.SERVE SYSTEM.
WASH tNG'I"CCN
ADDitliaa DP'FtCtAL. ODaRh..DNDI:NOIE
TD THIE .DARD
Dear Sir:
It see~t,a desir'&ble that tbe c~hi~ 01' s.•t~t1cat10Jl
certifiCft.tea iaewtd by the· PEKie,al Retene -..u to tbetq ··ea~
ers and &tJaistuJ.t exuinera be Ullitoa tbft~t t.he
'l'b.eretore, it is requeated that the followJ.ac.ton lMt u.ee4:
a,.-..
- - - -..........-~- 19...;_•
Tbia ia to certit)r tbat
. . . · .· · ,, J ;
,
Whose aipat~· appears below,. baa •.....,.. a~Jitett,
with the approval or the Soar<l ot OoYUI&Orl ot tlht
Federal Reserve Syatea, an
tor t.M
,,ederal Reaene Bank or
•
This certittc.ate expirea
Deceab&r &1,
19_.
EJut.Jidner' s Siena ture
The aaove form providN blw apace tor:. ypllac S.• "Euld.n.er•
"Aaaiatant !txaminer", aa the caae ·JIB¥· be, tlllt, ~t. __... it _,
bank prefers one. aet or oal"da J11¥ bl prin\$l ttW: __._..._ aad an- .
otbes" tor aas1atant exa•S.aera. It will also be •tl•t.'tol7 to have
the holder' a sip&~ appear on the a14e ot the o.WJ,.cate inatead.
ot at the bottoa; it ncb a.r~.-t is pret~. ·ta .eucb ca..,
ot course., appropriate chatlp should be 1184e 1ft the nterace to the
place ot the holderta as.pature.
·
~r
•cb
;year.
cal..., ,...,., ._,ttl
The eert1t1cate• eliOuld btl 1•$l.IICI tc.·· '*Pln a; ... eacl ot
MW ~tUioatU
,._... tw _. 1ta0...Urc
@FedFRASER