The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
BOARD O F G O V E R N O R S
O F THE
FEDERAL RESERVE SYSTEM
R-498
WASHINGTON
A D D R E S S OFFICIAL O O R I I U P D N D E N C I
TO THE BOARD
July 1, 1959.
Dear Sir:
In accordance with the customary proce'V
dure, there is transmitted herewith, for your
information, a copy of the certificate of the
*
auditor of the Federal Reserve Bank of Chicago
in connection with his audit of the accounts and
records of the Board1s Fiscal Agent for the period January 1 to May 31, 1939.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
R-498-a
FEDERAL RESERVE BANK OF CHICAGO
I, John J. Endres, hereby certify:
(a)
That a complete audit has been made of all entries in the
accounts, "Board of Governors of the Federal Reserve SystemSpecial Fund", "Board of Governors of the Federal Reserve
System-Fiscal Agent", and "Board of Governors of the Federal
Reserve System-General Fund", for the period January 1, 1939,
to May 31, 1939.
(b)
That all cash received by the Board as shown by the cash
receipts book has been deposited by the Fiscal Agent and
properly credited by the Federal Reserve Bank of Richmond.
(c)
That all remittances made direct to the Federal Reserve
Bank of Richmond by the Federal Reserve Banks in compliance
with the Board's instructions have been properly placed to
the credit of the Board of Governors of the Federal Reserve
System.
(d)
That each expenditure made by the Fiscal Agent was
properly authorized by an administrative officer of the
Board.
(e)
That the items of receipts and expenditures shown by
the books of the Fiscal Agent have been reconciled with
the items shown in the statements of the Board of Governors
of the Federal Reserve System's accounts prepared by the
Federal Reserve Bank of Richmond.
(f)
That the balances as shown by the books of the Fiscal
Agent have been reconciled with the balances standing to
the credit of the Board of Governors of the Federal Reserve
System on the books of the Federal Reserve Bank of Richmond
as certified by the auditor of that bank.
Respectfully submitted,
(Signed)
John J. Endres
Auditor
June 27, 1939
^
R
BOARD O F G O V E R N O R S
~499
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
July 10, 1939.
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:
NUBHEX - Treasury bills to
be dated July 12, 1939, and
to mature October 11, 1939,
ery truly yours
J. C. Noell,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS,
R-600 ^
BOARD O F G O V E R N O R S
O F THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R f l l OFFICIAL C O R H 1 P O N O I N C I
TO THE BOARD
********
July 12, 1939
„ Dear Sir:
By the end of July the Board expects delivery of
an additional supply of paper bound copies of the booklet
entitled "The Federal Reserve Eiy stem: Its Purposes and
Functions".
It will be appreciated if you will let us know
whether your bank desires to supplement its existing stock
of this booklet for free distribution to schools and colleges, students, and others requesting information on the
Federal Reserve System. If so, please indicate the number
of copies which in your opinion will be needed for this
purpose.
ery truly yours
J. C. Noell,
Assistant Secretary
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-501
BOARD O F G O V E R N O R S
*<3 <rtrt>x\
O F THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R C S I OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
********
July 14, 1939
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:
*
y
TYMEW - Treasury Bills to be
dated July 19, 195,9, and to
mature October 18, 1939.
The above code word is the word which
will also apply when the new code book goes into
effect.
ery truly yours
J. 0. No e.1.1,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-502
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DPriOIAL CORRESPONDENCE
TO THE BOARD
July 17, 1939
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, 1959.
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 Interdistrict 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,
Josephine E. Lally,
Deputy Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
R-502-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF JUNE. 1959
Words Sent
by K. Y.
Chargeable
to Other
F.R. Banks
Total
Words
Chargeable
Pro Rata
Share of
Total Expenses (1)
Expenses
Paid
by Banks
and
Board (2)
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
25,039
68,712
19,145
50,905
664
671
Richmond
Atlanta
Chicago
St. Louis
26,095
42,425
62,597
43,128
672
663
1,079
662
26,767
43,088
63,676
45,790
566.04
911.18
1,546.56
926.03
195.75
256.72
1,551.60
250.91
Minneapolis
Kansas City
Dallas
San Francisco
20,095
50,399
38,247
50,448
662
662
716
775
20,755
51,061
58,963
51,223
438.91
1,079.79
825.95
1,085.21
187.27
259.21
275.37
569.50
278,596
5,891.48
11,244.08
Board of
Governors
278,596
Total
755,829
664
-
—
7,890
Payable
to
Board
of Governors
25,703 $
545.54 |
275.63 $ 267.91
68,712
1,455.05
1,054.14
418.91
19,809
418.90
243.82
175.08
51,576
667.74
226.58
441.16
370.29
674.46
5.04(a)
675.12
251.64
820.58
548.58
715.91
—
763,719 $16,150.38 #16,150.38 $5,557.64
5.04(a)
$5,352.60
(1) Based on cost per word ($.021147019) 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 (&1,579.60) and wire rental ($9,664.48).
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.
(a) Credit - reimbursable to Chicago.
R-505
8
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
July 18, 1959
Dear Sir:
There are enclosed herewith copies of statement rendered by the Bureau of
Engraving and Printing, covering the cost
of preparing Federal Reserve notes for the
month of June, 1939.
Very truly yours,
d.
Josephine E. Lally,
Deputy Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-503-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
June 1 to June 9, 1939.
Federal Reserve Notes. Series 1954.
S10
Boston
66,000
New York
90,000
$20
Total
Sheets
Amount
66,000
$ 6,072.00
* 20,000
110,000
10,120.00
Philadelphia
-
20,000
20,000
1,840.00
Cleveland
-
19,000
19,000
1,748.00
Richmond
-
9,000
9,000
828.00
24,000
2,208.00
40,000
3,680.00
288,000
$26,496.00
Atlanta
24,000
Chicago
40,000
.220,000
-
-
68,000
288,000 sheets @ &92.00 per M
$26,496.00
10
R-504
BOARD OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
July 19, 1939
Dear Sirs
The Board of Governors of the Federal Reserve
System is advised that the following holidays will be
observed by offices of the Federal Reserve banks during
the month of August;
r
Tuesday,
August 1
Denver- Branch
Colorado Day
Wednesday,
August 30
New Orleans
Branch
Birthday of
Huey Long
On the dates mentioned the offices affected •
will not participate in the transit clearing through
the Interdlstrict Settlement Fund. Please include
transit clearing credits for the office mentioned on
each Of the holidays with your credits for the next
business day.
Please notify branches.
Very truly yours
J• C. Noell,
Assistant Secretary
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
11
R-505
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Statement for the Press
For Immediate Release
July 19, 1939
Statement by Marriner S. Eccles, Chairman of the Board of
Governors of the Federal Reserve System, and Member of the Advisory
Board on Fiscal and Monetary Policy before the Banking and Currency
Committee of the United States Senate.
12
R-505
STATEMENT OF M. S. SOCLES BEFORE THE SENATE COMMITTEE
ON BANKING AND CUREMCY S-2759
In appearing here this morning I wish to make it clear that I
testify not in my capacity as Chairman of the Board of Governors of the
Federal Reserve System, but as a member of the Fiscal and Monetary Advisory
Board which was consulted by the President when the program underlying this
bill was formulated.
I should like to state very briefly my views as to the nature of
our economic difficulties that make it necessary to undertake a program
along the lines proposed in this bill at this time.
I am convinced on the basis of observation and a great deal of
study that has been given to the problem that the present unsatisfactory
economic condition of the country, with its large volume of unemployment,
is not a passing stage in the so-called business cycle but has fundamental
underlying causes that need to be remedied before we can hope to achieve a
sustained adequate volume of employment, a reasonably satisfactory national
income, and a reasonably stable degree of prosperity. The fundamental adjustment in our economic mechanism that is required is the establishment of
a better equilibrium between the capacity of the country to consume goods
and services and its capacity to produce them. In the 1920's we had a fair
degree of adjustment between consumption and production, but this adjustment was achieved through the existence of many outlets for investment which
no longer exist at present. The automobile industry was rapidly expanding;
States and municipalities were expending nearly a billion a year, in excess
R-505
-2-
of tax receipts, much of it on roads, highways, and schools. There was
a billion spent a year on commercial buildings, stores, offices, and hotels.
Universities, hospitals, country clubs and other non-profit institutions
were spending between one-half billion and a billion a year. A similar
amount was annually lent abroad. There was a rapid growth of installment
selling which increased the annual spending of the people in later Twenties
by nearly a billion a year. And, in addition to all this, we had a
tremendous bull market in securities, which resulted in a large volume of
luxury spending of profits made in the market.
Many of these factors, which helped to produce a consumer demand
for goods that was sufficient to consume the products of industry, are not
at present at work or in prospect. The rate of population growth is about
one-half now of what it was in the Twenties. This drastic slowing up in
population growth, together with declines of property values, have resulted
in a decline in State and municipal expenditures so that tax revenues have,
since 1932, exceeded expenditures, thus resulting in an addition to funds
available for investment instead of providing an outlet for such funds.
There is no disposition to make private foreign loans at this time.
Commercial and office buildings are still available in excess of the demand.
Churches, clubs, and universities have reduced their capital outlays to a
small figure. The automobile industry is no longer in the stage of rapid
expansion. There is no prospect of the kind of source of spending power as
grew out of the stock market boom. And even residential construction, notwithstanding indispensable help from the Government, is below the level of
the Twenties.
R-505
14
^
-3The magnitude of the problem facing us is clear. From 1923 to
1989, outlays of the type that absorb capital funds averaged more than $15
billions a year. Allowing for the increase in population as well as for
technological advances that have taken place in the last decade, it would
appear that comparable outlays today to insure reasonably full employment
would have to be more than $18 billions a year, provided there is no
material change in the present division of the national income between consumption and new investment.
In view of our changed conditions one of three alternatives faces
the country;
(1) either an unforeseen and unforeseeable very large out-
let for investment must develop in new or in old industries, or (2) a very
considerable increase must be brought about in the proportion of the national
income that goes into consumption, or (3) the Government must provide an
outlet for idle funds through deficit financing of work relief, public works,
armaments, etc., or, as far as possible, through a program such as proposed
in this bill for socially and economically desirable, non-profit making but
"largely self-liquidating investments. Unless some or all of these developments take place, we cannot escape continuous depression with its accompanying great unemployment. We can remove all the so-called deterrents to business and provide all the stimulus to business that we can contrive, and yet
we shall still fall far short of the objective of full production and employment. It is only as adequate outlets are provided for our savings that
the national income can rise to a satisfactory level, and it is only as the
national income increases that tax revenue adequate to balance the budget
can be achieved.
*
R-505
-4Of the solutions just indicated - the first is unpredictable,
and we cannot wait in the hope that it will materialize sometime, somehow,
although much more can and should be done to stimulate private activity in
the field of housing to reach a much larger percentage of our population.
The second, - a larger proportion of the national income going into consumption - should be a major part of public policy, but it appears to be
a slow process, and in the meantime, as an immediate approach, increased
investment operations of the Government are the only direct, immediate, and
feasible plan at our disposal for the achievement of badly needed improvement .
The present bill constitutes in part an attempt to develop a
program of public investment of a self-liquidating nature. It is, I think,
indispensable, in view of the proposed greatly reduced employment in WPA
and FWA. I am, however, forced to say that the annual expenditures that
can be achieved under this program will- make only a small contribution
toward the solution of our basic problem. My own personal view is that
the self-liquidating program, excellent as it is so far as it goes, should
be supplemented by a continuing public works program.
Even more basic, however, is the necessity of increasing the proportion of the national income that goes into consumption. The line of
progress in this field is clear. It has been traveled ahead of us by many
of the older countries. Old-age security provisions in European countries
have been so designed as to increase consumption relative to income. In
England only sixty per cent of the cost of a national old-age pension scheme
R-505 1 6
-5is met by payroll taxes; in Sweden only twenty-two per cent. In our
country, however, we will have, in the three years ending next December,
taken out of consumption in the form of payroll taxes $1.7 billion more
than has been returned in old-age benefit payments. Payments under the
old-age assistance part of the program have constituted only a minor offset to this withdrawal. In addition, we have increased national saving
and decreased consumption through the operation of our unemployment insurance program. The changes in our old-age security program now pending
will alleviate this situation slightly. Even if pending amendments are
passed, however, we will collect some three to four hundred million dollars
more than we pay out in benefits next year. These provisions will have to
be further revised. We shall also have to reconsider our entire tax
structure, with a view to decreasing taxes on consumption and increasing
taxes on income that would otherwise add to unused investment funds.
It is idle money, hoarded money in cash or in deposits, that obstructs the flow of the national income. Money that is saved and invested
continues to function, and we must find means both of increasing the proportion of the national income that is consumed and of providing investment
outlets for the money that is saved. There is no other way to keep the
economy going in a satisfactory manner.
This, then, is the situation in which the present bill must be
viewed. If the various items in the bill are approved, and if the resulting programs are prosecuted with vigor, investment outlets for an additional
portion of the mounting savings of the community will have been provided in
17
R-505
-6-
useful self-liquidating projects which will not entail any charge on the
budget nor any increase in the public debt. There is little financial
risk Involved as compared with the social and economic gain. The present
extremely low level of interest rates makes it possible to utilize a part
of our vast volume of idle funds, to make some of them available to
borrowers who could not afford to use them if the rates were higher, and
thus to diminish the number of idle men.
The provision of certain transportation facilities on a toll
basis will permit the construction of certain by-passes, tunnels, bridges,
etc., whose cost should properly be borne by the user. The rural security
loans will enable hundreds of thousands of farmers who now cannot support
themselves and are a continuing charge on relief funds to become selfsupporting. Such an investment is one of the most desirable our country
could possibly undertake. The rural electrification loans will bring the
benefits of electricity to thousands of farmers and will provide markets
for the private power companies and for the makers of appliances.
It is, however, of the section relating to railway equipment that
I wish to speak particularly. I think the Committee will be interested in
the considerations that led to its inclusion in this program. We have, on
the one hand, in the railroad equipment industry, one of the most depressed
of all our capital goods industries. On the other hand, we have the railroads, with the supply of rolling stock rapidly declining in quantity and
deteriorating in quality. Our supply of freight cars is back to the level of
1905. Well over 40 per cent of the freight cars are twenty years of age or
H-505
18
-7older. Over 70 per cent of the locomotives are SO years of age or older
and only 5 per cent are under ten years of age. Some 13,000 steam locomotives of American railroads were built before 1910. Most of the
machine shop equipment of American railroads is universally acknowledged
to be obsolete and in poor condition. Consequently, repair costs arc high,
both because of the age of the rolling stock and because of the character
of the equipment of the machine shops. In no field, I believe, from the
point of view of economy, recovery or national defense, could the Government's credit be better used than in enabling the roads to modernize their
equipment.
The success of this program depends upon low interest rates,
long maturities and no down payments so that railroads can acquire new
equipment at annual costs no greater and in some cases less than those
arising out of the operation and maintenance of some of the present aged
and obsolete equipment. The bill contemplates that the interest charged
will be no higher than the cost of the money to the RFC on like maturities
and in no case more than the highest rate on long term Government obligations.
The present bill proposes that to the existing loaning powers of
the RFC which have been used to a relatively small extent by the railroads
for new equipment, the railroads should be permitted to acquire equipment
on a leasing basis. The Government will then be in a position to meet the
needs of every type of railroad for every type of equipment. Many railroads
will doubtless prefer to acquire equipment through the customary form of
equipment trust certificates. Others, however, who are reluctant to increase their debt, will prefer to acquire equipment on the very favorable
R-505
-8-
terms that will be possible through a leasing arrangement.
In fact, in certain cases, the leasing arrangement will make expenditures possible that would otherwise not be undertaken. Thus it will
now become possible for the Government to finance a major rebuilding
program, should this prove the economical thing for any railroad to undertake. The RFC will be in a position to contract to purchase older equipment , to have it rebuilt in the shops of the railroad in question, and
lease this equipment back to the railroad. Again, the purchase of machine
shop equipment can be facilitated through a leasing arrangement, and the
cash resources of railroads can be saved for urgently needed improvements
on way and structures. Finally, the scrappage of obsolete equipment and
the sale of used rolling stock to certain foreign countries that are badly
in need of cheap equipment can be facilitated.
I have found in discussing this proposal with various men in the
industry in recent days that a good deal of confusion and misunderstanding
exists as to the nature of the leasing arrangement. Since it is proposed
that the leasing arrangement should be used merely as a means of enabling
railroads to acquire equipment, and that the RFC should not purchase any
equipment except upon the agreement to lease and upon the specifications
of individual roads, I suggest that this be made perfectly clear through a
re-phrasing of paragraphs (b) and (c), under Section 8.
I should also favor making this additional #500 million available
for loans as well as leases, as the existing loaning power of the RFC for
railroad equipment is limited. Paragraph (a) could well be deleted, pro-
R-505
-9vicling the specifications submitted by individual roads for rolling stock
to be constructed and leased to them should be subject to the approval of
the RFC. If these changes were made, they would meet the only objections
that 1, personally, have heard raised to this part of the Self-Liquidating
Bill.
R-506
BOARD O F G O V E R N O R S
21
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
*******
July 19, 1959.
Dear Sir:
There is enclosed for your information
a summary of the bank relations reports submitted
by the Federal Reserve banks for the month of
June 1939 in response to the Board's letter of
August 25, 1956 (X-9680).
You will find that the present summary
is much shorter than those that have been sent
to you in former months. It will be appreciated
if you will inform the Board whether you consider
the summaries of sufficient value to warrant
their continuance, and, if so, whether you would
rather have them shortened to the present length
or made more inclusive, or otherwise modified.
Very truly yours,
V7f
S. iij Carpenter
Assistant Secretary.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-506-a
July 15, 1959.
TO
The Board of Governors
FROM
Mr. Hammond, Division
of Bank Operations
SUBJECT: Summary of Bank
Relations Reports
Reports of bank relations as requested in the Board1s letter
of August 25, 1956 (X-9680) have been received for the month of June.
Excerpts therefrom will be found on the following pages, at the end of
which is a table showing the number of visits made, meetings attended,
and addresses delivered. The following are a few of the items of interest included in the reports:
Boston reports that in practically every one of 40 country
member banks in New Hampshire and Connecticut visited during June loans
were in somewhat greater volume than a year ago and that earnings for
the first six months were above those for the same period last year.
Other Federal Reserve banks also report an improved demand for loans
in some parts of their districts.
Though the demand for credit is slack, there are numerous
complaints by bankers that the attitude of examiners is officious, unreasonable, and unfair. Philadelphia mentions reports of cases where,
when payment of a loan criticized by examiners was requested, the borrower transferred the loan to a Government agency.
Richmond and Minneapolis report that many farmers who receive
substantial Conservation and AAA payments do not know why they are receiving them.
On the whole, the reports give the impression that, though
much dissatisfaction exists, the business situation has improved.
BOSTON
During June visits were made to forty member banks located
in the smaller towns and cities of New Hampshire, and to six country
banks in Connecticut.
At practically every bank visited loans were in greater
volume than a year ago and earnings for the first six months of the
current year above those for the corresponding period of 1938. In
most cases the loan expansion was said to be from 10 per cent to 15
per cent and made up largely of small loans to individuals, and mortgages on residential and farm properties. Financing in connection
with the salvaging of the timber blown down by the hurricane of last
-2-
R—506—a
fall accounted for some of the increase in loans shown ty New Hampshire
banks.
Lending rates range from 6 per cent downward, the majority
of loans carrying the 6 per cent rate. Loans made to towns in anticipation of tax receipts, where the towns are borrowing locally, carry
rates of 3 per cent and 4 per cent. In New Hampshire the smaller
country banks complain quite generally of outside competition for town
loans and there was some complaint that this competition extends to
other classes of loans.
NEW YORK
During the month of June, our officers and representatives
visited 226 banks, of which 161 are ntember and 65 nonmember institutions. This total comprises banks located in different sections of
the district — one county in New Jersey and twenty-one counties in
New York State.
Monmouth County. New Jersey
The continual shrinkage in loan portfolios and the lack of
a profitable outlet for funds is having an adverse effect upon income,
and some banks are showing rather modest earnings after paying dividends on their preferred capital issues. Several bank executives
point out that they have many bonds which will be called within the
next few months, and say they will be unable to invest the money except at a greatly decreased yield.
Clinton. Essex. Franklin. Jefferson. Lewis and St. Lawrence Counties.
New York
The demand for loans in this territory is in general reported to be light, although the present total of $37,700,000 shows
an increase of nearly $900,000 in the last six months. Most of the
increase is accounted for by three of the larger banks, which have
been able to expand their loan accounts as a result of increased
financing of automobile sales, development of personal loan departments, and otherwise going after business more aggressively. A majority of the smaller banks show a decrease, due largely to a lessened
demand from farmers who constitute the bulk of their clientele, and
to a closer scrutiny of credit risks. These banks are in general
holding to a 6 per cent rate on loans. Several bankers complained
of the competition from the Production Credit Corporation which has
granted loans at rates as low as 5-1/2 per cent, and also of an
Albany bank which is said to be soliciting loans from school districts
and villages at 5 per cent. One nonmember banker expressed hesitancy
-3-
R-506-a
over making loans because of examiners' criticisms and mentioned a
case where the examiner Urged the collection of a loan made to the
owners of a local paper mill and thereafter suggested that a personal
loan department be established, the principal field for which would
be among the employees of the mill.
Summary of Preferred Capital Issues
In the twenty-two counties visited, there are 185 commercial
banks, 114 of which issued preferred stock, capital notes or debentures
aggregating $19,384,780 par value. Up to the present time twenty-eight
have paid off their entire issues amounting to $6,405,000 and sixty-two
have made partial redemptions aggregating $>2,754,120 and twenty-four
have not retired any —leaving eighty-six banks with a total still
outstanding of $10,225,660 par value, retirable at #14,515,092, reflecting a redemption premium of $4,289,432.
PHILADELPHIA
East Central Pennsylvania
Conditions in the area visited vary from fair to good.
While they are not exceptionally good in any particular spot neither
are they very bad. Much of the territory covered lies within the
anthracite region where seasonal fluctuations result in a low level
of activity during the summer months.
Total deposits of all banks visited are about $500,000
greater than a year ago. A majority of the investment accounts still
contain depreciation, but, as a rule, the quality of the investments
appears to be improved. An increasing number of bankers report an
improved credit demand, but there still appears to be a shortage of
commercial loans. However, a substantial volume of personal and
consumer loans has been developed by the banks. Interest rates vary
but usually range from 5 per cent to 6 per cent, although in one
section mortgage money is available at 4 per cent and 4-1/2 per cent.
Several bankers commented upon the classification of loans
by examiners from another supervisoiy authority, stating that they
were too severe and that their insistence that loans be called was
unfair. Instances were cited where, as a result of criticism by the
examiners, payments were requested resulting in customers obtaining
from a Government lending agency money with which to repay the loan
to the bank. These officers are quite incensed about this condition,
some even inferring that it is planned to bring about this result.
One banker stated that his institution had lost a loan for #8,000,
which he would consider of sufficient quality for a personal investment. It is conceded by these officials that the loans are slow but
-4-
R-506-a
thqy appear to believe that their soundness is proved by the ease
with which the customers can borrow from the Government agencies.
CLEVELAND
Some expressions of complaint are coming from member banks
with respect to small charges generally associated with collection
items which have been levied against member banks. Comment most frequently heard is that correspondent banks usually absorb such charges.
If the assessment of small items of cost is to be a source of irritation to member banks, some consideration might be given to the question whether the absorption of such charges by Reserve banks would be
justified.
In some of the smaller industrial communities in southwestern Ohio conditions are showing some evidence of improvement. A
number of banks are reporting a more active demand for funds, particularly in the rural sections.
Nervousness amounting in some cases almost to apprehension
concerning the future of bond prices is causing some banks to take
profits in their investments, but they experience difficulty in placing funds obtained through bond sales.
RICHMOND
Southwestern Virginia
In the course of the last several months more than $50,000
in Conservation checks have been paid out to 1,500 Franklin County
farmers, while Floyd County farmers received about |50,000 and those
of Patrick County, $42,000. These payments have contributed materially to the welfare of the farmer, but it seems that some of the
recipients do not know why they receive the payments.
Most banks report an increase in both loans and deposits
as compared with the same period in 1958. The great bulk of the
loans are made locally and the rate is generally 6 per cent. However, one bank has been buying "outside" commercial paper on a 1 per
cent basis, with occasional competition from local manufacturing
concerns. Another bank holds $250,000 in certificates of deposit
of other banks upon which interest is paid at 1 and 2 per cent.
There is a disposition on the part of banks to compete
actively for new loans, especially where they have idle funds, and
the opinion prevails that no good loans are rejected. It is said
-5-
R-506-a
that Federal lending agencies are fairly active and that they take
• some desirable business away from the banks. On the other hand, they
make loans that banks will not consider and it is held that these are
of material assistance to the community.
At Martinsville (Henry County) there is strong competition
from northern lenders, one Boston broker having recently made a sixmonths loan for $50,000 at 1-1/8 per cent.
Northeastern West Virginia
Most banks report an excellent demand for loans. In a few
instances banks have been able to place all of their funds in local
loans and thus have escaped the problem of investing in bonds. Borrowers are usually charged 6 per cent and it is thought that this
rate does not deprive banks of desirable business. It is realized
that certain Government agencies, particularly Production Credit
Associations, are in competition with banks, but the impression prevails that loans made by them are not bankable.
ATLANTA
Central Louisiana
The banks visited in this section, located at Alexandria,
Lecompte, and Bunkie, serve a veiy fertile agricultural territory
principally devoted to production of cotton and feed crops. During
recent years, much progress has also been made in the development
of a very profitable cattle raising industry in this section.
It was reported that, although business conditions throughout this section have been comparatively good during recent years,
considerable improvement has been noted in all activities during the
past twelve months. Retail trade has been favorable and considerable
building, both commercial and residential, is in progress.
Officers of the banks visited consider banking activities
in the section favorable. Demand for agricultural and commercial
loans has been good since the first of the year, and earnings for the
period have been satisfactory. Deposits continue to increase and
some concern was expressed by bankers at the inability to invest excess idle funds profitably. The banks, especially in Alexandria,
are encouraging personal loans as well as the financing of sales of
automobiles and farm machineiy, which business they are finding
profitable.
—6—
R-50b-a
CHICAGO
Bankers in Wisconsin blame the Government spending program
for the low returns on investments and feel that a serious condition
is impending. With returns on investments diminishing, they feel
more keenly the competition of Postal Savings. The Federal Savings
and Loan Associations, whose advertisements indicate that they are
paying 3-1/2 per cent on deposits insured by a Federal agency, are
becoming more popular with the public. In practically all of the
smaller agricultural centers, savings deposits constitute from 60
to 80 per cent of total deposits. This condition does not permit
very much income from service charges and adds a burden due to the
interest paid on deposits. In order to meet this condition, the
smaller banks are developing personal loans secured by chattels,
automobiles, or equities on life insurance policies. The competition of the Production Credit Corporation in making chattel loans
is evident in many sections of the State. On the whole, the banks
are just marking time, but consider it an injustice for the Government to pay 2 per cent on a demand loan at the Post Office and 5/4
of 1 per cent on a five-year Treasury note.
The discrimination between member and nonmember banks in
the establishment of branches or paying stations is also noticeable.
One bank cited a case where a paying station was opened within three
miles of their office by a nonmember State bank twenty miles distant.
Interviews with bankers in both Illinois and Wisconsin
disclosed considerable criticism of the attitude on the part of
bank examiners of another supervisory authority with particular
reference to chattel mortgages.
ST. LOUIS
Southeastern Missouri
At a majority of banks visited, it was reported deposits
were up slightly, as compared with a year ago, and demand for loans
is a little better. Several banks indicated they were planning to
reduce the rate of interest paid on time deposits.
Very few of the nonmember banks in southeastern Missouri
are on the par list. In every instance where such nonmembers were
approached regarding membership, the answer was the advantages of
membership would not offset the loss of revenue which would result
from giving up exchange on checks received through the mail. The
conversations regarding the practice of charging exchange developed
28
-7-
R-506-a
that few banks tried to justify what they are doing, but look upon it
as "easy money" income. Several bankers stated that they were surprised that something has not been done to stop the practice. One
informed us that he was ready to come back on the par list when others
in his vicinity did so.
As a rule, earnings have been substantially buttressed by
service charges. Interest paid on savings deposits ranges from 1 per
cent to the maximum rate of 2-1/2 per cent, but some banks will not
take interest bearing deposits. A number of banks have lowered their
rate, and blame interest on deposits as partly responsible for low
earnings. There were also complaints of increased and still mounting
taxes. Rates charged on loans range from 4 to 8 per cent and it appears that rates charged are in inverse ratio to the size of the towns
in which the banks are located. Reports relative to earnings disclosed a broad range of results; from coming out just about even to
20 per cent on paid-in capital in 1958.
MINNEAPOLIS
When we received recently a letter from the State Bank of
Rockville, Rockville, Minnesota, asking us questions relative to
Federal Reserve membership, it was felt that under no circumstances
would this bank give serious consideration to membership because,
if they did, they would be deprived of an income in an amount equal
to about 10 per cent of their capital through loss of exchange revenue. A meeting with their board of directors was arranged, however,
at which time they passed a resolution applying for membership and
the completed application has since been received.
This bank has always been off our par list. It is a small
bank with deposits of approximately $200,000. It reopened without
any restriction of deposits after the banking holiday.
In discussing membership with their board, it was discovered that the cashier and one of the directors had a very thorough
understanding of the Federal Reserve System, and that it was unnecessary to explain its functions and purposes and the benefits they
would receive if they became a member. When asked how it happened
they had such a thorough knowledge of these matters, they replied
that they had received from the Board of Governors at Washington &
book entitled "The Federal Reserve System, Its Purposes and Functions",
which they had very thoroughly read and digested. They said that
before reading it they had no knowledge whatsoever of what the Federal Reserve System really was, and that after reading it they were
so impressed they concluded that as a small independent bank they
could not afford to be out of the System even though their income
-8-
R-S06-a
would be materially reduced because of loss of exchange. There is no
doubt that the membership application was a direct result of the
preparation and distribution of the book.
Southern Montana
A number of bankers expressed the opinion that the Government's AAA program is all wrong—not workable—and said that many of
the farmers and ranchers feel the same way. They stated that the
creation of an activity by the Federal Government often has an adverse effect elsewhere. It was reported in one town that there was
much talk among farmers who received AAA checks this spring and
didn't know what they had done to earn them. The checks were cashed,
however, and they were glad to get their share of AAA funds that
are being distributed.
KANSAS CITY
Bankers in all parts of the Tenth District report the physical condition of their localities to be the best in years.
Bankers in Wyoming appear generally satisfied with livestock
and wool prices, and seem much less concerned about the livestock industry than they did a few years ago.
Banks in Colorado are giving a good deal of attention to
service charges. Outside of the cities there appears to be a reasonable demand for loans. With respect to banker complaint of Government
competition in making loans, there is a good deal of variation. In
some communities little complaint is heard, while in others it is exceedingly bitter. Apparently much depends upon the persons in charge
of these Government agencies.
Many bankers complain that the Government wants to run banks
instead of supervise them. Last month attention was called to the
bitter complaint regarding examiners from another supervisory authority. Even more cases were found in June of this same thing, especially
in certain sections of southwestern Missouri. Bankers complain that
these examiners have no knowledge of the communities in which they are
working and that they are highly officious. One banker reported that
these examiners requested him to rearrange his cages and cut a hallway through one side of the banking room to connect the lobby with
the back part of the bank. This examiner also ordered him to stay
away from the windows and limit his dealings with customers to his
desk in the back part of the bank. In the case of some small banks,
many bankers think the Government is determined to close their institutions in one way or another.
-9-
fi-506-a
One bank complained that the reserve requirements are too
high. This single case is reported as complaint-of this kind is
heard much less frequently than formerly.
DALLAS
Central West Texas
General economic conditions in this section of Texas were
found to be fairly satisfactory, although ranges and crops are beginning to suffer from an incipient drouth, which has delayed cotton
planting, necessitated replanting in certain areas, and threatens to
curtail feed crops.
Deposits show a general increase over those of 1938 and
loans a sizable decline.
The exodus of tenant farmers to towns and cities, which
has been in progress for the past two or three years as the result
of curtailment of cotton acreage allotments and the steady expansion
in the use of tractors, has continued unabated and is adding considerably to the unemployment problem of the larger towns, although
it has not materially affected agricultural production.
Southern New Mexico
The fourteen banks visited in our portion of New Mexico
reported that there had been a decided change for the worse in the
physical condition of the territory. A mild winter and spring with
more than the usual amount of moisture had put livestock ranges in
excellent condition, but during the past two months the southern
half of the State has received practically no moisture. Intense
heat waves, accompanied by strong hot winds, have burned the ranges
so severely that producers have been forced to begin feeding cattle,
and unless rains occur soon, the necessity for feeding will become
general.
Despite the recession in business activity, the banks are
showing satisfactory earnings and mazy of them feel that their profits this year will exceed those of any recent year.
SAN FRANCISCO
Salt Lake City Branch Territory
Generally speaking, crops are a little below average due
to the late spring and lack of seasonal rainfall. However, there is
-10-
R-506-a
sufficient water in storage to supply adequately all the more important
irrigated lands. Livestock ranges are drying, but not seriously as yet.
Residence building has been fairly active in the larger cities and towns,
and the volume of retail trade is reported as running slightly in excess
of last year.
Clearwater District of Idaho
The Clearwater District of Idaho produces wheat, beans, peas,
and livestock and has large lumber mills producing pine lumber. The
agricultural outlook is very fine. The pea crop is practically made.
Because there has never been a crop failure, the normal bean crop is
expected.
Cattle and hog producers will turn out the usual production
in their lines this year. The cherry crop matured nicely, but at
picking time the rains created a damage of approximately 40 per cent.
Mining continues to be quite active.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
June - 1939
Federal
Reserve
Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Member
Visits to Banks
Nonmember | Total
Meetings Attended
Number
|| Attendance
Add resses Made
Number | Attendance
49
161
75
66
65
25
21
49
226
100
87
2/ 5
1,490
!/
48
5
54
47
17
3
40
150
65
8
94
197
4
1
5
4
1,085
300
4,324
1,662
3/ 3
1
3/ 3
3
112
39
30
42
86
36
3
24
198
75
33
66
5
4
2
11
5,370
481
1,400
1,056
1
2
1
3
4
12
— —
_1/ Not reported.
2/ Attendance not reported for one meeting.
3/ One radio broadcast.
1/
3,490
— —
1
— —
400
— —
— —
1/
203
350
1,100
120
40
85
100.
4-64
33
BOARD O F G O V E R N O R S
OF THE
ri-DUf
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
July 20, 1959
Dear Sir:
There is being forwarded to you, under
separate cover, a supply of the Board1s Regulation
T, which has been reprinted to incorporate amendments to the regulation which have been approved
to date—Amendment No. 1, effective March 21, 1958,
and Amendment No. 2, effective May 22, 1939.
The Board will be prepared to supply
additional copies of the regulation in case you
require them.
Very truly yours,
S. R, Carpenter,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD O F G O V E R N O R S
R-508
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
July 2iJ°1939OAR°
Dear Sir:
There are being forwarded to you under separate
cover
copies of pages 27, 33# 34> 34a, 121e and 121f
of the "Manual of Instructions Governing the Preparation of
Functional Expense Reports (Form E)", revised as of July 1,
1939. An additional copy of each of these pages is enclosed
for your information.
Page 27 has been revised so as tb permit the accumulation in the "Sick Relief and Extended Leave" unit of any
costs occasioned because of employees absent as a result of
jury duty or military service, in addition to those absent on
account of illness* Changes in pages 33, 34 and 34a were
necessary because of the revised leased wire procedure which
became effective July 1, 1939. The new pages, 121e and 121f,
are necessary in order to provide for expenses which may be
incurred by Federal Reserve banks for the Federal Crop Insurance
Corporation and the United States Maritime Commission.
Pages 7 and 22b of Form E are being reprinted to conform
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,
E. L, Smead, Chief,
Division of Bank Operations.
Enclosures.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-508
35
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Monday, July 24, 1939
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.
Output of factories and mines increased in June reflecting
chiefly sharp expansion at steel mills and bituminous coal mines.
In the first half of July industrial activity was generally maintained.
Production
The Board's seasonally adjusted index of industrial production advanced to 97 in June as compared with 92 in April and May.
At steel mills output increased from a rate of 45 per cent
of capacity in the third week of May to 54 at the end of June and to
56 in the third week of July. Automobile production, which had declined in May, showed some increase in June when a decline is customary. In the first three weeks of July automobile output was at a
lower rate, reflecting in part curtailment preparatory to the changeover to new models. Plate glass production rose considerably in June.
Output of lumber, which usually shows some increase over May, was unchanged. Among nondurable goods industries woolen mills showed
increased activity in June, and activity at cotton and silk mills
-2-
R-5Q9
was maintained though declines are ueual at this season. Meatpacking was lower than in May.
Mineral production increased considerably in June reflecting a sharp rise in output at bituminous coal mines which had been
closed during April and the first half of May. Production of anthracite declined from May to June and there was some reduction in output
of petroleum.
Value of construction contracts awarded declined in June,
according to F. W. Dodge Corporation figures, reflecting chiefly a
greater than seasonal decrease in private residential building.
Contracts awarded for public residential construction, principally
for United States Housing Authority projects, were maintained at
the advanced level reached in May, while public construction other
than residential showed a small decline.
Employment
Factory employment and pay rolls increased somewhat from
the middle of May to the middle of June according to reports from a .
number of important industrial States. There was a sharp expansion
in employment at bituminous coal mines following the reopening of
t&te mines in the middle of May, and the number employed on the railroads increased more than seasonally from May to June.
Distribution
Department store sales showed a less than seasonal decline
from May to June and the Board's adjusted index advanced from 85 to
86, which compares with a level of 88 during the first four months
37
-3of the year.
R-509
Sales at variety stores and -by mail order houses showed
little change.
Freight-car loadings increased more than seasonally in June
reflecting a sharp rise in shipments of coal and smaller increases in
shipments of grain and miscellaneous freight.
Commodity prices
Prices of hides, silk, steel scrap, copper, and some other
industrial materials advanced from the middle of June to the third
week of July, while some farm products, particularly grains, declined.
Prices of most other commodities showed little change.
Agriculture
A total wheat crop of 716,655,000 bushels was indicated
on the basis of July 1 conditions, according to the Department of
Agriculture.
This would be much smaller than last year's large crop
and somewhat below the 1928-1937 average. Cotton acreage in cultivation was estimated to be about the same as last year but one-third
less than the 10-year average. A record tobacco crop is indicated.
Most other major crops are expected to approximate last year's harvests and are generally larger than average.
Bank credit
Total loans and investments of member banks in 101 leading
cities continued to increase during the four weeks ending July 1%,
reflecting largely purchases of United States Government securities.
Commercial loans, which had shown little change in recent months, increased slightly. Deposits and reserves at these banks rose to new
-4-
R-509
high levels in July, reflecting continued gold imports and Treasury
disbursements from its balances at the Reserve banks.
Money rates
Prices of United States Government securities, which had
declined somewhat during June, recovered part of the loss in July.
The longest-term Treasury bond outstanding showed a yield of 2.31
per cent on July 20, as compared with a record low of 2.26 on June 5.
Open-market money rates showed little change.
39
R-510
BOARD OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
*******
July 24, 1939
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:
TYMOG - Treasury Bills to be
dated July 26, 1939, and to
mature October 25, 1939.
The above code word is the word which will
also apply when the new code book goes into effect.
The new Federal Reserve Telegraph Code, which becomes
effective on August 1, 1939, provides for the assignment of code words for new issues of securities, and
therefore this will be the last letter to the Federal
Reserve banks in which such assignments are made.
Very truly yours
J. C. Noell,
Assistant Secretaiy
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-511
40
BOARD OF G O V E R N O R S
OF THE
6
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
July 24, 1939
Dear Sir:
There Is enclosed a copy of a letter,
dated July 18, which the Board has received from
the Treasuiy Department transmitting a copy of
Report No. 1066 of the House of Representatives
dated July 10, 1939, with respect to the destruction of the fiscal agency and depositary records
referred to in the Board's letter of December 14,
1938, R-359, and enclosure. The fiscal agency
and depositary records are listed on page 4 of
the report.
Any questions regarding the disposal of
the useless papers should be taken up with the
Treasury Department.
Very truly youys+..
S. R. '• Carpenter,
Assistant Secretary
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R—511—8.
TREASURY DEPARTMENT
Washington
July 18, 1939
The Board of Governors
of the Federal Reserve System,
Washington, D. C.
Attention: Division of Bank Operations
Gentlemen:
Agreeably to authority contained in House Report No. 1066,
76th Congress, 1st Session, covering the disposition of useless papers
in the Treasury Department, a copy of which report is transmitted herewith, you are requested to proceed with the elimination from your files
of the "useless papers" heretofore reported by you for destruction as
listed in said report.
Particular attention is invited to the following recommendation
made by the Joint Committee in its report:
"We would, however suggest to the Department of the Treasury, that any request from universities, public libraries,
historical societies, or other non-Federal organizations relative to these papers, be honored and that the Department of
the Treasury cooperate with such organizations to the extent
that it deems reasonable and advisable."
Such useless papers as can be sold for waste paper should be
placed in special sacks and kept separate from the ordinary accumulations of waste paper in the building in which the useless papers are
housed and when the papers have been disposed of a report should be
made to the Chief Clerk of the weight and the proceeds received therefrom.
This information is necessary to enable the Secretary to make
a report to Congress showing (l) the action taken under the House Document mentioned and (2) the amount of proceeds received from sales.
It is especially desired that the report be in the office of
the Chief Clerk not later than August 15, 1939.
Very truly yours,
(Signed) W. N. Thompson
Acting Administrative
Assistant to the Secretary
Enclosure
R-512
42
BOARD OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E B I OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
July 24, 1939
Dear Sir:
It has come to the attention of the Board of Governors recently that some of the Federal Reserve banks, in the
shipment of Government securities by express, are declaring
such securities in certain instances at their nominal value
and that, as a result, such Federal Reserve banks may be
failing to comply with tariff regulations of the Interstate
Commerce Commission with respect to express shipments. For
your information in this connection, there is enclosed a copy
of a memorandum with respect to this matter which has been
prepared in the Legal Division of the Board.
Very truly yours,
Chester Morrill
Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-512~a
July 19, 1939
DECLARATION OF VALUE ON EXPRESS
SHIPMENTS OF SECURITIES
The attention of the Board has recently been called to the
fact that some of the Federal Reserve banks may be failing to comply
with the law or with tariffs relating to the valuation of Government
securities shipped by express. It is understood that in some instances nominal values are placed upon such securities and that,
consequently, lower rates are obtained. The securities are insured,
presumably at their full value; and, accordingly, it is unnecessary,
for purposes of protection, to declare their actual value.
It appears, however, that the tariff regulations of the
Interstate Commerce Commission require that the actual value be declared on securities shipped by railway express. Tariffs relating
to shipments by air express, filed with the Civil Aeronautics
Authority, are not clear as to whether property shipped must be
declared at actual or market value.
Tariff Regulation No. 1400, filed with the Interstate
Commerce Commission, which covers railway express shipments, provides as follows:
"A. Receiving shipment.
*
*
*
*
*
"(2) Except as otherwise provided herein, shipment
must not be received for transportation at rates named in
the Money Classification unless the actual or market value
is declared by shipper and marked by him upon the package.
*
*
*
*
*
"E. Securities.
"(1) Marking - Rates on Securities are based upon
the market value and shippers must be required to mark
on all packages of securities the character and market
value of the contents thereof. *•*•** «
It seems clear that the above provisions expressly require
that securities shipped by railway express be declared at their market value. According to informal advice received from the Bureau of
Traffic of the Interstate Commerce Commission, there is no means by
which an express company may lawfully authorize railway shipments of
securities at less than their market value.
R-512-a
-2-
Under section 10 of the Interstate Commerce Act (U. S. Code,
Title 49, Sec. 10(3)) any shipper who, by means of false representation as to cost, value, etc., knowingly attempts to obtain any allowance whereby the compensation of the carrier is, in fact, less than
the regular established rates, is subject for each offense to a fine
of not exceeding #5,000.
With respect to shipments by air express, the latest tariff
regulation filed with the Civil Aeronautics Authority contains the
following provisions;
"2-A.
Shipments acceptable for air express transportation.
"All articles of merchandise, * * * securities, bank
checks, etc. which are marked and packed suitable for rail
express transportation, will be accepted for transportation by Air Express, not including packages valued in
excess of $>25,000 each, * * *
"3. Receiving shipments.
"(b) The value of the property must be declared by
the shipper and inserted in the receipt. The shipper's
declaration of such value may be made by inserting 'not
exceeding $50.00' or 'not exceeding 50 cents per pound,
actual weight,' as the case may be, in the blank space
in that portion of the receipt reading 'value herein
declared by shipper to be
.
dollars.'
"(c) When the value so declared exceeds $>50.00 as
to shipments weighing 100 pounds or less, or exceeds 50
cents per pound as to shipments weighing over 100 pounds
the value must be marked by the shipper upon the shipment.
"(d) The nature of contents of shipment should be
shown on the receipt.
"(e) Packages with declared value in excess of
$25,000 will not be accepted and no more than $250,000
aggregate declared value will be carried in any one airplane .
*
*
*
*
*
R-512-a
"12. Excess value charge (insurance).
"The charges shown herein provide for full Common
Carrier liability for a valuation not exceeding $50.00
for packages weighing less than 100 pounds or 50 cents
per pound, actual weight, for packages weighing over 100
pounds. When the declared value exceeds $50.00 for any
Shipment of a 100 pounds or less, or exceeds 50 cents
per pound actual weight for any shipment in excess of
100 pounds an additional charge of 10 cents will be assessed for each $100.00 or fraction thereof in excess
of the value stated above and such additional charges
provide full Common.Carrier liability for the value so
declared."
It is to be noted that under the above provisions the
"value" of the property is required to be declared by the shipper.
While the word "value" may be construed as not meaning actual or
market value, it is understood that the word has not been interpreted by the Civil Aeronautics Authority.
R-513
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Saturday, July £9, 1939
The following ruling will appear in the Federal Reserve
Bulletin:
Whether Regulation T Permits Domestic Broker to
Borrow from Foreign Broker
Regulation T provides in section 5(c)^ that:
"A creditor may borrow from another creditor in the
ordinary course of business as a broker or dealer on any
registered security to the extent and subject to the terms
upon which the latter may extend credit to him in accordance with the provisions of this regulation, and subject
to any other applicable provisions of law."
-'The permission granted by the Board in section 5(c) of Regulation
T is based upon section 8(a) of the Securities Exchange Act of 1954
which provides in part that:
"It shall be unlawful for any member of a national securities exchange, or any broker or dealer who transacts a
business in securities through the medium of any such member,
dllfffl&Ly or ind&pectly (a) To bor## in the ordinary course of business as a
broker or dealer on any security (other than an exempted security) registered on a national securities exchange except
(1) fro* or through a member bank of the FedtotBl Reserve
System, (2) from any non®ember bank wblth shall have filed
with the Board of Governors of the Federal Reserve System
an agreement, which is still in force and which is in the
form prescribed ty the Board,.... or (3) in accordance with
such rules and regulations as the Board of Governors of the
Federal Reserve System may prescribe to permit loans between
such members and/or brokers and/or dealers, or to permit
loans to meet emergency needs."
47
_2
R-513
The term "creditor" as used in section 5(c) is defined in
section 2(b) of the regulation as follows:
"The terra 1 creditor1 means any member of a national
securities exchange or any broker or dealer who transacts
a business in securities through the medium of any such
member."
The Board recently has been asked whether section 5(c) authorizes a "creditor", as defined in section 2(b), to borrow in this
country in the ordinary course of business as a broker or dealer on
registered nonexempted securities from a foreign broker. The foreign
broker maintains no place of business in the United States, but "transacts a business in securities through the medium of .a member of a
national securities exchange" and hence appears to fall within the
definition of the term "creditor".
It is the view of the Board that section 5(c) in its present form grants permission for the domestic broker thus to borrow
from the foreign broker who "transacts a business in securities
through the medium of a member", but that it grants the permission
only on condition that the loan so obtained by the domestic broker
meets the requirements of section 5(c) that it be "in accordance with
the provisions of this regulation".
This means that in obtaining the loan the domestic broker
must not be receiving more credit on given securities than he could
get on those securities, in the case of a loan of the same description, from a domestic "broker or dealer who transacts a business in
R-513
securities through the medium of a member", and must not otherwise
be obtaining any benefits that such a domestic broker or dealer could
not lawfully grant under the regulation. One result of this requirement is that the loan may not be obtained on the basis of the special
loan value prescribed for the special omnibus account, because section 4(b) of the regulation limits such loans to cases in which the
lender is a member of a national securities exchange.
It is, of
course, unnecessary fdr present purposes to determine whether, or
to what extent, the foreign broker would be required to comply with
Regulation T, since the domestic broker is not granted permission
to borrow unless the loan complies with the requirements of Regulation T to the same extent as if the lender were a domestic "creditor!1.
49
R
BOARD OF G O V E R N O R S
*******
~514
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D U C S e OFFICIAL C O R R E S P O N D E N C E
TO T H I BOARD
*******
August 1, 1939
Dear Sir:
There is enclosed a copy of the press
statement, referred to in the Board's wire of this
date# which will be released when the Board is
informed that all Reserve banks are ready to mail
the revised Regulation J, check collection circulars and time schedules to all member banks.
A supply of revised Regulation J will be
mailed you as soon as received from printer.
Very truly yours,
Chester Morrill,
Secretary.
Enclosure 1
TO ALL PRESIDENTS OF FEDERAL RESERVE BANKS
R-514-a
Statement to be released to press on date to be fixed
by Board of Governors
The Board of Governors of the Federal Reserve System
announced today that the Federal Reserve banks will put into effect on September 1, 1939 certain changes in their check collection procedure designed to give member banks more prompt credit
for checks deposited with the Federal Reserve banks for collection and to reduce the amount of work required in preparing the
checks for deposit with the Federal Reserve banks;
Heretofore member banks have beon given credit for checks
deposited with the Federal Reserve banks in accordance with time
schedules which wore based on the actual time required to collect
the checks.
After September 1 the Federal Reserve banks will
credit member banks within three days or less for all checks deposited with them for collection.
Immediate credit or credit
within one or two days will continue to be given for most checks.
The Board's Regulation J relating to the clearance and
collection of checks and the check collection circulars and time
schedules of the Federal Reserve banks have been revised.
Copies
are being sent by the Federal Reserve banks to all member banks
and to all other banks which maintain deposit accounts with the
Federal Reserve banks.
51
R-515
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For immediate release
August 1, 1959
The Board of Governors of the Federal Reserve
System has amended subsections 3(a) and 3(e) of its Regulation L, relating to interlocking bank directorates
under the Clayton Act, effective immediately, so as to
extend until February 1, 1940, the time during which certain persons who have been serving member banks may continue to serve a member bank and not more than one other
bank.
52
BOARD OF GOVERNORS
******
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R C B I OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
August 7, 1939
R-516
Dear Sir:
Referring to the Board's letter R-380 of January 6,
1939, following is a statement of changes during July 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
Ohio
Youngstown
The City Trust & Savings Bank
The City Trust & Savings Bank should be added with
the following note to the list (R-380b) of banks which had
in force agreements with the Board pursuant to the provisions
of Section 8(a) of the Securities Exchange Act of 1934, but
which are no longer in operation as nonmember banks:
TO PRESIDENTS
(Admitted to Federal Reserve membership on July 18, 1939)
Very truly yours
L. P. Bethea,
Assistant Secretary.
OF ALL FEDERAL RESERVE BAMS.
53
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
h
R- 517
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
********
August 8, 1939
Dear Sir:
In our letter dated June 15# 1959# (R-W5)
it was stated that a review was being made of the allocation of service charges by the Federal Reserve banks
to the units of the Fiscal Agency# Custodianship# and
Depositary function on Form E, and you were requested
to furnish this office with certain additional figures.
The figures requested have now been received from all
Federal Reserve banks and the attached statement has
been prepared showing a classification of the expenses
of the various units of the Fiscal Agency# Custodianship, and Depositary function for the first and second
halves of 1938# as to "Direct" expenses and "Service"
charges.
Very truly yours,
y R . Van Fossen, Assistant Chief
Division of Bank Operations.
Enclosure
(B-12l|2)
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BAMS
54
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-518
WASHINGTON
A D D R C I I OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
*******
August 8, 1939.
Dear Sir:
For the Board1s information, it will be appreciated
if you will furnish it with the following:
1. Two photostats of each insurance policy and
fidelity bond, including all riders, now carried by your bank (head office and branches,
if any) unless copies have been previously
furnished to Board,
2. A statement showing by years from 1914 to date
for each item of insurance carried, (a) type
of insurance, (b) risk covered, (c) the amount
of the policy, (d) net premium, (e) losses incurred, and (f) claims paid to bank by insurance
companies.
3. A brief summary of laws, if any, which require
your bank to carry any insurance and of any
laws which specify with whom such insurance
must be carried,
Very truly yours,
lyJoU^f
Chester Morrill,
Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
55
BOARD OF GOVERNORS
R-519
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
August 9, 1939
Dear Sir:
There are enclosed herewith copies of statement rendered by the Bureau of
Engraving and Printing, covering the cost
of preparing Federal Reserve notes from
July 5 to July 31, 1939.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
56
R-519-fl
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
July 5 to July 31, 1939.
Federal Reserve Notes. Series 1934.
S10
&20
$50
8100
Total
Sheets
Amount
68,000
$6,256.00
292,000
26,864.00
-
98,000
9,016.00
-
115,000
10,580.00
5,000
86,000
7,912.00
3,000
3,000
15,000
1,380.00
36,000
16,000
9,000
115,000
10,580.00
22,000
11,000
2,000
5,000
40,000
3,680.00
Minneapolis
23,000
15,000
-
38,000
3,496.00
Kansas City
32,000
8,000
-
42,000
3,864.00
Dallas
32,000
6,000
-
38,000
3,496.00
San Francisco
42.000
14.000
5.000
61.000
5.612.00
672,000
198,000
95,000
40,000
28,000
200,000
26,000
45,000
21,000
Philadelphia
79,000
5,000
14,000
Cleveland
97,000
18,000
—
Richmond
50,000
23,000
8,000
Atlanta
1,000
8,000
Chicago
54,000
St. Louis
Boston
New York
—
-
2,000
—
•
43,000
1,008,000 $92,736.00
1,008,000 sheets 9 $92.00 per M . . . . $92,736.00
R-520
BOARD OF GOVERNORS
57
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D O R E I B OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
*******
August 10, 1959
Dear Sirs
Referring to the Board's letter S-170 of
August 4, 1939, there are enclosed ten additional
proof copies of the condensed form of State bank
member call report (form F. R. 105) which is to be
used on spring and autumn calls. It is suggested
that the banking department of each State in your
district be advised of the Board's adoption of the
condensed form, and that a copy of the form be furnished to it. In this connection, there is enclosed
a copy of a letter sent today to Mr. William R.
White, Superintendent of Banks of the State of New
York, who is also Secretary of, the Executive Committee of the National Association of State Bank
Supervisors.
Very truly yours,
L» P. Bethea,
Assistant Secretary.
Enclosures - 11
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
58
R-520-a
August 10, 1959
Mr. William R. White, Secretary,
Executive Committee of the National
Association of State Bank Supervisors,
c/o Mew York State Banking Department,
80 Centre Street,
New York, New York.
Dear Mr. White:
Referring to your letter of August 7 and pursuant to a
subsequent telephone conversation with you, we are asking the Federal Reserve banks to advise the State banking departments of the
States in their respective Federal Reserve districts of the adoption of the condensed form of State bank member call report. We
are also requesting them to furnish a copy of the condensed form
to each such banking department.
It is suggested that you bring the condensed form to
the attention of the Executive Committee of the National Association of State Bank Supervisors, and 20 proof copies of the condensed form are enclosed for your use in that connection. As
explained in our letter to you dated August 4, existing arrangements for the single publication of condition reports rendered
by State bank members to Federal Reserve banks and State banking
departments, respectively, are not affected.
in response to your inquiiy, the proposed adoption of
the condensed form was informally brought to the attention of
Mr. Thompson, Chief of the Division of Research and Statistics
of the Federal Deposit Insurance Corporation. Inasmuch, however,
as the Federal Deposit Insurance Corporation calls for condition
reports only as of the June and December call dates, the forms
which it usee will not be affected by the use of the condensed
form for the spring and autumn calls.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
R-521
BOARD OF GOVERNORS
59
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R U P O N D I N C t
TO THE BOARD
August 15, 1939
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, 1939.
Please credit the amount payable ty
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 Interdistrict 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.
Enclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
60
R-5 21—SL
REPORT OF EXPENSES OF MAIM LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF JULY. 1959
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Total
Pro Rata
Paid
Payable
to
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
23,379
62,533
18,610
43,236
423
423
23,802 $
539.53 1 277.82 |j! 261.71
62,533
1,417.45 1,048.63
368.82
19,033
431.43
242.70
188.73
43,659
989.63
360.12
629.51
Richmond
Atlanta
Chicago
St. Louis
29,133
42,030
62,262
46,440
433
420
823
432
29,566
42,450
63,085
46,872
670.18
962.22
1,429.96
1,062.46
191.79
238.90
1,367.85
296.36
478.39
723.32
62.11
766.10
Minneapolis
Kansas City
Dallas
San Francisco
20,615
49,470
39,824
46,370
420
432
458
449
21,035
49,902
40,282
• 46,819
476.80
1,131.14
913.08
1,061.26
187.13
259.21
271.77
369.34
289.67
871.93
641.31
691.92
235,120
5,329.52
11,303.04
Board of
Governors
235,120
Total
719,022
423
—
—
5,136
Words
charep
ablf
share of
Total Fx
penses(l)"
Expenses
Federal
Reserve
Bank
by Banks
^
Board (2)
Board
of Governors
—
724,158 $16,414.66 $16,414.66 $5,973.52
(1) Based on cost per word ($.022667236) 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 ($1,579.52) and wire rental ($9,723.52).
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.
61
R-522
BOARD OF GOVERNORS
OF THE
*******
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R C I I OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
August 16, 1939
Dear Sir:
On Monday, September 4, 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
also will be observed by Federal Reserve banks and branches
during September:
September 9
(Saturday)
San Francisco
Los Angeles
Admission Day
in California
September 12
(Tuesday)
Baltimore
Defenders' Day
in Maryland
On the dates given the offices concerned will not
participate in either the transit or the Federal Reserve
note cltaring through the Interdistrict Settlement Fund.
Please include transit clearing credits for the offices
mentioned on each of the holidays with your credits for the
next business day.
Please notify branches.
Very truly yours,
iVpenter,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-523
BOARD OP GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
62
STATEMENT FOR THE PRESS
For release in morning papers,
Friday, August 18, 1939,
The following summary of general
business and financial conditions
in the United States, based upon
statistics for July and the first
half of August, will appear in the
September issue of the Federal Reserve Bulletin and in the monthly
reviews of the Federal Reserve
banks.
In July industrial activity, seasonally adjusted, rose
sharply and was close to the level reached last December. Prices
of some industrial materials increased in recent weeks while those
for agricultural products continued to decline.
Production
The Board's index of industrial production, according to
preliminary returns, advanced to 102 percent of the 1923-1925 average in July as compared with 98 in June and 92 in April and May.
The advance in July reflected chiefly a considerable further increase in output of iron and steel, which usually declines at this
season. Steel ingot production rose from an average rate of 52 percent of capacity in June to 57 percent in July and in the first
three weeks of August was maintained around 60 percent which for
the month would represent about the usual seasonal increase. Lumber production showed little change in July, although a decline is
usual.
In the automobile industry output showed a sharp seasonal"
curtailment during July and the first half of August, reflecting
-2-
R-5S3
preparations for the shift to new model production which will be
made about a month earlier this year than in other recent years.
Retail sales of new cars continued in excess of production and
dealers* stocks were greatly reduced. Plate glass production declined sharply in July, following a substantial increase in June.
Changes in output of nondurable manufactures in July
were largely of a seasonal nature. At cotton textile mills and
meat-packing establishments activity showed somewhat less than
the usual declines and at sugar refineries output increased from
the low level reached in June. Flour production continued in substantial volume.
Mineral production expanded further in July as output of
bituminous coal continued to increase and petroleum production,
which had been reduced in June, rose sharply. On August 14 the
Texas Railroad Commission ordered a shutdown of most Texas oil
wells for 15 days, beginning August 15, and subsequently similar
shutdowns were ordered in several other important oil producing
States.
Value of construction contracts, as reported by the F. W.
Dodge Corporation, increased somewhat in July, owing principally
to a small rise in contracts for public project#. Awards for residential work, both public and private, were practically unchanged
from the June total.
Employment
Factory employment, which usually declines in July, was
R-523
maintained this year at about the June level and payrolls showed
a less than seasonal decrease, according to reports from a number
of leading industrial States.
Distribution
Sales at department and variety stores in July showed
about the customary seasonal decline. In the first half of August
department store sales increased.
Freight-car loadings increased further from June to July.
Loadings of coal continued to expand and shipments of miscellaneous
freight, which usually decline at this season, showed little change.
Commodity prices
Prices of most farm products and foods declined from the
beginning of July to the middle of August. Some industrial materials, principally steel scrap, nonferroue metals, and textile fabrics, showed advances in this period, while crude petroleum prices
were reduced.
Agriculture
On August 1 prospects for major crops were about the
same as a month earlier, according to the Department of Agriculture.
The first official estimate on cotton indicated a crop of 11,400,000
bales, somewhat smaller than last year's crop and 2,400,000 bales
less than the 1928-1957 average. World carryover of American cotton, however, was estimated to have been somewhat larger on August
1 than the record volume of a year ago.
65
-4-
R-523
Bank credit
Total loans and investments of member banks in 101 leading cities increased substantially during the four weeks ending
August 9, reflecting chiefly increases in holdings of United States
Government obligations and the purchase by New York banks of a
large share of a new issue of New York State short-term notes. Commercial loans continued to increase at New York banks but declined
at banks in 100 other leading cities as corn and cotton loans that
were approaching maturity were taken over by the Commodity Credit Corporation in accordance with a standing agreement. Deposits at reporting banks remained at high levels.
Excess reserves of member banks increased further to new
high levels in the latter part of July and the first half of August,
owing principally to gold imports and net Treasury disbursements,
partly offset by a reduction in Federal Reserve bank holdings of
Treasury bills.
Money rates
The average rate on new issues of 90-day Treasury bills
has increased slightly in recent weeks and on August 10 was 0.032
percent. Prices of Treasury bonds showed little change from the
middle of July to the middle of August.
#
66
BOARD OF GOVERNORS
R
OF THE
********
-
5 2 4
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R C a i OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
*******
August 18, 1939.
Bear Sir:
There is enclosed for your information a summary
of the bank relations reports submitted by the Federal Reserve banks for the month of July 1939 in response to the
Board's letter of August 25, 1936 (X-9680).
In reply to the Board's inquiry made last month
as to whether the banks considered the summaries of sufficient value to warrant their continuance and, if so,whether
they would prefer them in shortened form or not, letters
have been received from ten of the Federal Reserve banks.
All but one express the desire to have the reports continued. One bank doubts their value and suggests that they
be discontinued. - at least temporarily until a need of them
becomes apparent. A majority of the banks seemed to prefer
having the summary in brief form, though it was pointed out
by others that shortening the summary tended to make it
lose much of its value.
In view of the foregoing, it has been decided to
continue the preparation and distribution of the summaries.
Very t:
mrs,
L. P. Bethea,
Assistant Secretary.
Enclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-524-a
August 16, 1939.
To:
The Board of Governors
Subject: Summary of Bank Relations
From: Mr. Hammond, Division of
Bank Operations.
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. Excerpts therefrom will be found on the following pages, at
the end of which is a table showing the number of visits made, meetings attended, and addresses delivered.
It should be borne in mind that the reports submitted by
the Federal Reserve banks ordinarily do not include the whole of the
bank's district, but only a certain portion or portions thereof covered by current visits. The following are a few of the items of interest included in the reports:
New York speaks of the situation of banks which have disposed of sizable blocks of Governments within the last few weeks,
largely because of the desire to take profits on issues which were
selling at near peak prices.
A small number of rural banks in the Mew York district
are now borrowing to meet the local demand for credit.
Chicago reports that a number of groups in the Chicago
area are interested in organizing banks.
While there is frequent complaint of bank examiners, Kansas
City reports that many bankers say they find examinations genuinely
helpful.
The Arizona legislature at its 1939 session completely revised the State's code of banking laws.
BOSTON
During the latter part of July visits were made to eighteen
member banks and one nonmember bank. Only two industrial cities were
Included in the July itineraries, the other points visited being
mostly small towns situated along Cape Cod and in the vicinity thereof.
The summer resort and tourist business, upon which this
section of the State is largely dependent, was reported to have been
adversely affected by unseasonal weather conditions during the first
68
-2-
R-524-a
few weeks of the season. At the time the section was visited trade
was said to be in good volume and indications were favorable to its
continuance throughout the remaining few weeks of the season. The
only general complaint heard among the banks in this resort section
is that they are unable to employ the seasonal deposit increase,
which in the cases of some banks is as much as 50 per cent of the
normal deposit line.
In the two industrial cities visited, a noticeably better
business tone prevailed, and bankers interviewed reported that employment and payrolls had recently begun to show increasing tendencies. Retail trade in these cities was said to be good.
NEW YORK
Fairfield County, Connecticut
Most of the commercial banks now have some appreciation in
their security lists which total approximately $44,950,000. United
States Government obligations represent about 65 per cent of the aggregate bond holdings as compared with 71 per cent last February.
Ten institutions have disposed of sizable blocks of Governments within the last few weeks largely because of the desire to take profits
on issues which were selling at near peak prices. The executives of
most of these banks say they have realized enough profits on bond
sales to justify holding the funds uninvested for a period of one
and a half to two years if necessary, but one reports that income
has fallen off to such an extent that his bank is now operating in
the red and is waiting for the opportunity to repurchase some of the
issues sold. The president of a bank which has only $51,000 in bonds
and which has been carrying more than one half of its deposits
($2,200,000) in cash and bank balances for the past several years
says that in spite of the examiner's criticism of the large amount
of uninvested funds, he still feels that security prices are too high
and therefore refuses to make any investments in the bond market.
Delaware, Otsego, Orange, Rockland, and Sullivan Counties. New York
Deposits of the commercial banks aggregate $116,272,000, of
which $73,020,000, or approximately 65 per cent, are savings accounts.
Deposits of the five savings institutions total $41,389,000. The trend
of interest rates paid by the commercial banks on savings accounts continues downward, but several bankers who are paying the higher rate
indicate that their institutions will probably not make any reduction
as long as the savings banks continue to pay 2 per cent. Some are
hopeful that the State Banking Board will take some action to lower
the legal maximum from the 2 per cent limit now in effect.
69
-3-
R-524-a
Herkimer. Madison. Oneida, and Onondaga Counties. New York
The pressure of unemployed funds is not so great in the
rural areas as it is in the larger centers, and four banks in agricultural sections were borrowing money at the time of our visit in
order to meet the demand for credit by farmers and the local municipality, school district, etc.
Most of the savings banks are now charging 5 per cent on
their mortgages, some having reduced automatically from a former
rate of 5-1/2 or 6 per cent and others agreeing to the reduction if
mortgagors amortize their loans at least 5 per cent a year. These
institutions are finding it difficult to, obtain new mortgage loans
as there has been very little building going on in this central
New York area. In order to invest idle funds and to maintain their
mortgage portfolios at a fairly stable amount, two of the largest
savings banks have purchased Title II Federal Housing Administration insured mortgages amounting to $1,800,000 and #1,600,000 respectively.
Summary of Preferred Capital Issues
In the ten counties visited, there are 150 commercial banks,
104 of which have issued preferred stock, capital notes, or debentures
aggregating $18,490,844 par value. Up to the present time seventeen
have paid off.their entire issues amounting to $1,167,500, sixty-five
have made partial redemptions aggregating $2,250,787, and twenty-two
have not retired any - leaving eighty-seven banks with a total still
outstanding of $15,072,557 par value, retirable at $24,586,032, reflecting a redemption premium of $9,513,475.
PHILADELPHIA
Total resources of banks in this area are approximately
$6,200,000 or 3 per cent greater than they were a year ago. A somewhat better credit demand was reported in certain sections, while
elsewhere the total of loans shows little, if any, increase. A
greater number of banks are extending consumer and personal credit
than heretofore and report satisfactory experience to date. In many
cases, however, the volume which can be extended is not of great moment. Another outlet for funds is the granting of loans secured by
assignment of life insurance policies with sufficient cash surrender
value. Much of this, however, is merely shifting loans from insurance companies to banks.
Low returns on investments and scarcity of loans has resulted in further reductions of interest rates on deposits, although
-4-
R-524-a
the banks in this area are paying higher rates than prevail in manyother parts of our district. The present schedule of rates is as
follows: 14 banks pay 1-1/2 per cent; 47 banks pay 2 per cent; and
12 banks pay 2-1/2 per cent.
Banks issuing time certificates of deposit pay 1/2 per cent
more on 12 month certificates than the rate paid for savings deposits, except where such deposits earn the maximum rate.
The desirability of investment in securities of good local
companies was referred to by officers of two banks. One, a vice
president of a national bank, believes that the Securities Exchange
Commission should relax its regulations to permit small issues to
be floated without so much expense and difficulty and contends that
many such issues are prime investments and generally of more interest
to local investors than issues of non-local concerns.
The other officer (who referred to this subject) is vice
president of a member trust company. In his opinion, one of the
things necessary for a return of stability is a better market for
good local issues, which he considers to be the best investment for
individuals today.
CLEVELAND
Bank visitation work was suspended for the months of July
and August; and in consequence, no contacts have been made in the
field.
There is quoted below, for the information of the Board, a
copy of a resolution adopted by the West Virginia Bankers Association
at their convention held at White Sulphur Springs on May 25-27, last:
"The independent operation of the Federal Reserve
Banks is a matter of paramount importance. We
believe the operation and control of policies of
the Federal Reserve Banks should rest and remain
with the stockholder member banks, independent of
Treasury Department direction, and free from Governmental and political influence involving fundamental banking principles. The System, with its
strength, influence, prestige, and efficient organization can easily provide, through its membership, the. necessary and legitimate credit required
by industry."
-5-
R-524-a
RICHMOND
Baltimore, Anne Arundel, and Howard Counties. Maryland
The economic organization in these counties is in a process
of transition from a purely agricultural to a combination of suburban and agricultural. There has been a rapid growth of population
accompanied by a fairly proportionate growth of housing. Along with
this growth have come a number of new community centers with shopping facilities. The residents are employed chiefly in Baltimore,
Washington, and Annapolis.
As a consequence of these developments the income of these
counties now depends in a large measure upon employment in the munic
ipal areas from which workers commute to their homes in the outlying
suburbs. Income from this source is still supplemented by farm income, which is now predominantly from dairying and poultry husbandry
Thus the position of banks has been altered in that they
no longer depend almost wholly upon farm loans, both short and long
term, but rather upon personal loans and real estate mortgage loans.
This change has not only altered the character of banking, but it
also made for greater stability in the volume of business, for farm
loans were subject to much fluctuation.
The significance of the change may be brought out by reference to one bank which has negotiated more than $3,000,000 in FHA
loans. The bulk of these loans were made against residential property constructed because of the movement of residents of adjacent
cities to suburban communities. Practically all of these loans have
been sold, the bank retaining their servicing. Buyers of these
loans have bid as high as 103-1/4 and there has been no difficulty
in disposing of those made under Title II of the Housing Act, since
they have been selected with great care.
However, the impression should not be given that banks in
general have gone in for FHA loans, for the contrary is nearer the
truth. Most banks have strong cash positions and carry a considerable volume of Treasury bonds, which they regard as secondary reserve and, therefore, desirable notwithstanding their low yields.
ATLANTA
North Central Florida
The banks visited are located in a very fine general agricultural citrus growing area. General business conditions may be
73
- 6-
R-524-a
described as fairly good. As a whole, the trend of bank deposits
is upward; demand for loans is fair, and several of the banks visited have substantially increased their loans during the year ended
June 30, 1939.
South Georgia
During the latter part of July our representative visited
a number of banks in the tobacco belt in South Georgia. The tobacco
markets were opened and the crop was being sold at prices considerably lower than those in effect last year. Some of the bankers interviewed shared the disappointment of the fanners at the comparatively
low level of tobacco prices although they realized that the grade of
this year's crop was somewhat inferior.
The banks in the area visited are dependent to a large extent on agriculture. Cotton, corn, and peanuts, as well as tobacco,
are important crops. The raising of livestock is also growing in
importance. The banks generally report an increased volume of deposits, as compared with a year ago, and the volume of loans also
compares favorably with that of last year.
Crop prospects generally were reported as satisfactory, and
our representative was advised at several banks that the farmers were
in better condition than for several years past.
One member banker stated that since 1931 - when he was assured by officers of the Reserve bank that the Reserve bank would
discount his paper - he had not refused a loan to any of his cusomers who were entitled to the credit applied for, except that in
Jackson, Mississippi
iiSSliBlf
E r
™ - s ss
-7-
R-524-a
CHICAGO
Many banks have received payment for their corn loans,
these payments, of course, adding to the present total of funds
seeking employment. However, some of the smaller banks report an
increased loan demand, some of this being in their usual lines of
credit. A number of them are participating with the larger banks
in term loans, and there is an increasing amount of FHA loans in
the banks. Some complaint is heard concerning the recent reduction by the FHA in its rate from 5 per cent to 4-1/2 per cent,
the banks stating that this not only makes it more difficult for
them to maintain their rate on their regular uninsured mortgages,
but is causing some dissatisfaction among their customers who have
outstanding mortgages at a slightly higher rate. A number of
loans to canners will have to be carried over because of the large
inventory which has not been moved. One interesting phase in connection with the slightly increased demand is the frequent assertion of bankers that they do not intend to borrow when they have
loaned their available funds.
Numerous inquiries are received from banks with respect
to the procedure to be followed in surrendering trust powers, this
because of the dangers or risks involved in acting as trustee.
A number of groups in the Chicago area* are interested in
organizing banks. However, the public is very cautious and quite
lukewarm when it comes to subscribing for stock at a premium.
ST. LOUIS
During the month our officers visited 112 banks, of which
59 are in Kentucky, 27 in Illinois, 14 in Indiana, and 12 in Missouri
Southwestern Illinois
In that section of Southern Illinois visited in July, agriculture of a fairly diversified character is the main source of
livelihood to the inhabitants. Since the discovery of oil about
two years ago, however, the area has undergone notable development.
Incomes have been augmented by leases, royalties, production, and
sale of petroleum and natural gas. A business boom of fair proportions is in progress, which is likely to continue for a considerable
while.
Deposits have increased steadily and substantially since
the oil boom started and at present are measurably higher than a
year ago. Credit demand is reported fair for small loans, but
74
-8-
R-524-a
commitments of large size are in relatively small volume. Interest
rates range from 4 to 6-1/2 per cent and from 1-1/2 per cent to 2-1/2
is paid on time deposits. Banks in the typical oil towns are handling a very large volume of checks and require heavy currency shipments, the cost of which is extremely irksome to nonmembers. A
number of banks visited complained of scant income from loans, and
these are making strenuous efforts to replace the loss by increased
service charges and other expedients. All but a very few banks
in the area are on the par list. Reports relative to earnings vary
rather broadly. Quite generally bankers are endeavoring to improve
farming conditions in their several communities.
The president of a Missouri nonmember when approached regarding membership, stated he was more favorably inclined in that
direction by reason of the repeal of the law making membership compulsory for certain size banks if they were to retain deposit insurance. He indicated that he had given further consideration to
membership, referring particularly to the booklet recently received
from the Board of Governors, but stated there was nothing he could
do at this time to further the matter. This is the third time the
same officers of our bank have visited officers of this nonmember
and not until this visit have they seemed to be interested even
mildly in membership.
Officers of a Missouri State member again referred to the
non-par situation and inquired what was being done about it. They
called particular attention to the difficult situation of a bank
like theirs, with so many non-par banks in the vicinity. They
charge exchange on all non-par points but have difficulty in explaining and justifying such charges. They indicated that non-par
banks make similar charges on checks drawn on their tank, notwithstanding the fact that they are paid at par. Reference was also
made to the fact that carrying the required reserve with us made
balances with other correspondents less attractive, thus giving the
nonmember non-par banks a distinct advantage over their bank.
MINNEAPOLIS
East Central Minnesota and Northwestern Wisconsin
At Stillwater, Minnesota, a member banker stated that they
had been advised by one of the large Milwaukee banks that the latter
institution was willing to par all cash items on Wisconsin banks
whether or not such items were drawn on banks on the Federal Reserve
System par list.
The feeling on the part of bankers visited relative to the
Production Credit Corporation is somewhat mixed. In many instances,
-9-
R-524-a
the bankers did not feel that competition from this source was a
matter of much concern to them, although there were several cases
where the bankers were very much disturbed over competition of
this nature.
Northwestern South Dakota and Western North Dakota
One banker said that he would be afraid of membership because he believed that the Board of Governors wished to acquire complete control of the nation's credit, and he was afraid of the
consequences. He said further that he believed that the ambitions
of the Board of Governors would not stop at the control of credit,
but thought that the Board wanted to be in a position to tell all
of the bankers in the country how to run their banks. He was asked
whether he had read "The Federal Reserve System - Its Purposes and
Functions". He said that he had not read it, but he went to his
desk, took out the book, and said that he would take it home and
read it carefully. The national banks and the one State member bank
visited have nothing but good things to say for our services to them.
One or two bank officers said they did not like the idea
of group banking, but admitted that group bankers were keeping their
banks in excellent shape. Several of the small member banks would
have difficulty in justifying their existence if it were not for the
fact that distances between banks in North Dakota are now very great.
To illustrate: One bank in a town of 450 persons has #25,000 in
capital, #3,000 in surplus, #38,000 in deposits, and $14,000 in loans.
Another bank in a town of 450 has a capital of #15,000, surplus of
#10,000, deposits of #76,000, and loans of #8,000,
Northern Michigan and Northern Wisconsin
Deposits in the banks in this section are slightly down in
total which, due to prevailing conditions, is to be expected. Banks
on the whole are increasing their loans. In no case, did any banker
say that they were not operating in the black. In many Cases, bank
earnings for 1938 were the largest in their history. Just recently
a great many of the banks in this territory have gone into FHA mortgages and automobile paper.
Northeastern South Dakota. Southeastern North Dakota." and Western
Minnesota
Loaning rates have been shaded since one year ago. It is
also becoming more evident to country bankers that a healthy local
demand is something to be grateful for. This is further impressed
on these bankers by letters received from Eastern and Southern banks,
—10—
R-524-a
Mutual Savings banks, and individuals offering to place time funds
up to $5,000 at 2 per cent. As far as known, none of these offers
are being accepted.
KANSAS CITY
In July in addition to other bank contacts an unusually
large number of Nebraska banks were visited. In that State more
than half of the nonmember banks are not on the par list and these
nonpar Nebraska banks constitute the only serious problem of this
kind in the Tenth District,
Without exception, these nonpar banks are very friendly to
the Federal Reserve System. Generally banks are apologetic, the
common excuse given for exchange charges being the need of revenue.
That such charges are profitable may be seen from the case of a
bank with a capital of $25,000 where exchange charges run from $5
to $20 a day and average more than $10. In another case earnings
from this source were said to equal 1 per cent of deposits. Some
of these banks freely admitted that service charges would be preferable as a source of earnings were it not for the fear that service charges would cause them to lose deposits. In a good many
nonpar banks, however, the management appeared content to rest too
heavily on exchange charges and lacked aggressiveness in developing new sources of revenue. There is considerable criticism of
exchange charges on the part of the par banks.
Nearly all banks in eastern Nebraska hold sizeable amounts
of CCC corn loans. In Burt County 2,000,000 bushels of corn were
sealed and in Richardson County 3,325,000. In both counties another good crop is virtually made and bankers are beginning to
wonder what corn is really worth. Many banks have passed on to
city banks substantial amounts of corn loans. However, one bank
reported they made no CCC corn loans. They said they tried it in
1937 but the farmers fed the com. A few other cases were found
where banks do not like, as they said, to fool with these loans.
In the two previous months the representative of this bank
found bitter complaint of examinations from banks in southwestern
Missouri. It is rather interesting to note that an almost exactly
opposite situation was uncovered in eastern Nebraska. In the latter
State many complimentary reports were heard. Many bankers said that
examinations were found genuinely helpful.
DALLAS.
Southwestern New Mexico and Southeastern Arizona
Mining and cattle raising are the principal industries of
this section of our district. Copper mines and smelters are running
77
-11-
R-524-a
on a full time basis. In some areas, particularly those in the
vicinity of Silver City, New Mexico, the silver content of copper
ore is high and the price now being paid by the Government is adding considerably to the profits of the copper mines.
Cattle prices continue high, but this fact means little
to the cattle growers of this region just now, because continued
dry weather has damaged ranges to such an extent that cattle are
in poor condition and very few contracts are being made for fall
deliveries.
Generally speaking business activity is at a low ebb and
no substantial revival of trade is expected in the near future.
At Tucson, Arizona, however, the business situation and outlook
are exceptionally satisfactory, due to a large inflow of tourists
last winter, heavy spending for Government projects this year, and
a large prospective production of long-staple cotton on the irrigated farms in the town's trade territory.
Bankers had but few comments to offer in regard to banking
laws, regulations and pending legislation. The 1939 session of the
Arizona Legislature completely revised the State's code of banking
laws, and adopted many statutory reforms which the bankers of the
State had been seeking for a number of years.
SAN FRANCISCO
Utah
Drouth conditions have prevailed generally over the State
of Utah, broken only by a few local showers since spring and more
general and heavier rains within the past few days.
Generally speaking, there is sufficient water in storage
for irrigation of the better agricultural districts, and it is expected that average crops will be harvested from irrigated lands.
The hay crop, however, is below normal, as the first cutting was
quite light.
Dry land crops are considerably below normal, a few counties reporting one-fourth to one-third of noiroal production.
Rainfall is needed on the livestock ranges extending through
Utah to the West slopes of the State of Colorado, the situation in
some areas being reported as very near an acute stage.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
July, 1959
Federal
Reserve
Bank
Member Nonmember
Total
18
101
45
15
1
33
29
10
19
134
74
25
Richmond
Atlanta
Chicago
St. Louis
15
16
8
34
13
11
11
78
Minneapolis
Kansas CityDallas
San Francisco
94
24
7
147
Boston
New York
Philadelphia
Cleveland
Meetings Attended
Visits to Banks
12
23
1
9
dumber
Attendance
2
-
340
-
8
1,097
28
27
19
112
4
932
1
170
241
47
"8
21
1
2
50
105
—
—
-
—
—
7
1/ Not reported
2/ Broadcast
-
417
Addresses Made
Number
Attendance
1/
1/
-
—
1/
1/
—
—
1
1/
35
1/
—
—
—
—
1
2/
79
R-525
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers
of Monday, August 21, 1939.
August 19, 1959.
The Board of Governors of the Federal Reserve System announced
today that the Federal Reserve banks will put into effect on September 1,
1939 certain changes in their check collection procedure designed to give
member banks more prompt credit for checks deposited with the Federal
Reserve banks for collection and to reduce the amount of work required
in preparing the checks for deposit with the Federal Reserve banks.
Heretofore member banks have been given credit for checks deposited with the Federal Reserve banks in accordance with time schedules
which were based on the actual time required to collect the checks.
After September 1 the Federal Reserve banks will credit member banks
within three days or less for all checks deposited with them for collection. Immediate credit or credit within one or two days will continue to be given for most checks.
The Board's Regulation J relating to the clearance and collection of checks and the check collection circulars and time schedules
of the Federal Reserve banks have been revised. Copies are being sent
by the Federal Reserve banks to all member banks and to all other banks
which maintain deposit accounts with the Federal Reserve banks.
80
BOARD OF GOVERNORS
R-526
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
^ 5 ^
August 19, 1939
Dear Sir:
For your information and assistance in replying to
inquiries which may be received from your member banks, there
is enclosed a copy of the Social Security Act Amendments of
1939 (Pub. No. 379, 76th Cong.), approved by the President on
August 10, 1939.
It will be noted that all national banks and State
member banks will become subject to the Social Security Act
as of January 1, 1940, as the result of amendments made to
the definition of the term "employment" contained in section
209(b) of that Act, and in sections 1426(b) and 1607(b) of
the Internal Revenue Code.
S. R. Carpenter,
Assistant Secretary
Enclosure
TO PRESIDENTS
OF ALL FEDERAL RESERVE BANKS
R-527 . 8 1 .
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Tuesday, August 22, 1939.
The following ruling will appear in the Federal Reserve
Bulletin:
Capital Contribution Loans Between Members of a
National Securities Exchange
Section 4(f)(2) of Regulation T, as added to the regulation effective May 22, 1959, provides as follows:
"In a special miscellaneous account, a creditor may
"(2) Make loans, and may maintain loans, to or for
any partner of a firm which is a member of a national securities exchange to enable such partner to make a contribution of capital to such firm provided (A) the lender
as well as the borrower is a partner in such firm, or (B)
the lender as well as the borrower is a member of such
exchange, the loan has the approval of an appropriate
committee of the exchange, and the committee, in addition to being satisfied that the loan is not in contravention of any rule of the exchange, is satisfied that
the loan is outside the ordinary course of the lender's
business, and that, if the borrower's firm does any
dealing in securities for its own account, the loan is
not for the purpose of enabling the firm to increase
the amount of such dealing;"
The Board recently considered a case in which such a capital contribution lpan was originally made between partners in the
same firm, and thus qualified under clause (A) of the provision, but
the lender later proposed to withdraw from the partnership.
The
-2-
R-527
Board was asked whether the loan, because of its one-time status
under clause (A), might be continued after the lender's withdrawal
from the partnership, or whether the loan must then be terminated
if it is not authorized by some other provision of the regulation.
It is the view of the Board that the permission granted
by clause (A) continues only while the conditions specified therein are met.
Accordingly, such a loan between partners in the same
firm may not be continued after the lender withdraws from the partnership unless the loan can qualify under some other provision of
the regulation.
In the particular case presented, the lender after withdrawal from the partnership was to continue to be a member of the
national securities exchange of which the borrower was a member.
Therefore, if the loan is approved by an appropriate committee of
the exchange pursuant to clause (B) of section 4(f)(2), it could,
of course, be continued pursuant to that provision.
For the sake of completing the answer to the question
presented, however, it is necessary to consider one other possible
alternative,' that is, the possibility that the loan could qualify
under section 4(f)(8) of the regulation, which provides for loans
that are "for any purpose other than purchasing or carrying or
trading in securities 11.
The reason section 4(f)(8) may be relevant to the question presented in this case is that while the exact relation of
R-527
-3-
the instant loan to the business of the borrower's firm was not
entirely clear, it appeared that the borrower's firm was engaged
not only in the securities business but also, and to a very considerable extent, in the commodity business.
There would, there-
fore, be at least some possibility that the loan in question could
qualify as a loan for a "purpose other than purchasing or carrying
or trading in securities".
Whether the loan could in fact so qualify would depend,
of course, upon the facts of the particular case, and instances
where capital contribution loans could so qualify would be rather
rare.
In certain cases, of which the present case involving a
considerable amount of commodity business might turn out to be
an example, it might be possible for a loan to be made under such
conditions that it could actually be identified as being for a
"purpose other than purchasing or carrying or trading in securities".
It is evident, however, that it would be rather unusual
for a capital contribution loan to be thus identifiable.
The
business of the average securities brokerage firm is so bound up
with purchasing, carrying or trading in securities - either for
its own account or for the account of customers - that a loan to
a partner in such a firm to enable him to make a contribution of
capital to the firm usually could not qualify as being for a "purpose other than purchasing or carrying or trading in securities".
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For immediate release
August 22, 1939.
The Board of Governors of the Federal Reserve
System today announced the appointment of Mr. Charles P.
McCormick, President, McCormick & Co., Inc., Importers,
Exporters and Packers, Baltimore, Maryland, as a class
"C" director of the Federal Reserve Bank of Richmond for
the unexpired portion of the term ending December 31,
1941.
R-529
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For immediate release.
September 1, 19
The Board of Governors of the Federal Reserve
System announces that in view of current developments in
the international situation, the Federal Reserve banks
are prepared at this time to make advances to member and
non-member banks on Government obligations at par at the
rates prevailing for member banks.
86
BOARD OF GOVERNORS
R _ 530
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 2, 1939•
Dear Sir:
In connection with a research project on the
subject "Changes in the Financial Requirements of American
Business, Trends in Commercial Borrowing, and the Demand
for Short-Term Capital Loans", the National Bureau of
Economic Research has indicated to the Board that it would
like to obtain from the Federal Reserve banks certain information from the industrial loan application blanks
received under Section 13b. It is our understanding that
the information desired covers data from the financial
statements of the applicants and that it does not entail
revealing to representatives of the National Bureau the
identity of individual applicants. You may make such
arrangements as you -desire to safeguard the confidential
nature of the information. You will receive a request
from the National Bureau setting forth in detail the in-fomation desired.
This letter is to inform you that the Board of
Governors has no objection to your supplying the National
Bureau of Economic Research with information of this
character.
Very truly yours,
Chester Morrill,
Secretary.
LETTER TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
87
BOARD OF GOVERNORS
OF THE
R
FEDERAL RESERVE SYSTEM
-^ x
WASHINGTON
A D D R C I I OFFICIAL C O R R E B F O N O E N C E
TO THE BOARD
September 11, 1939
Dear Sir:
There have been forwarded to you today under separate cover
the indicated number of copies of the six forms attached hereto# for
the use of State bank members and their affiliates in submitting
reports as of the next call date:
Number of
copies .
Form
Form F. R# 105 (Short form), Report of condition of State
bank member.
Form F. R. 105b (Schedule "0"), Loans and advances to
affiliates and investments in and loans secured by
obligations of affiliates.
Form F. R. 105e# Publisher's copy of report of condition
of State bank member.
Form F. R. 220, Rcort of affiliate or holding company
affiliate.
Form F. R. 220a, Publisher's copy of report of affiliate
or holding company affiliate.
Form F. R« 220b, Instructions for preparation of reports
of affiliates and holding company affiliates.
The first form listed above is the condensed form of State
bank member call report which, as stated in the Board's letter S-170
of August U, 1939, has been adopted for use on spring and autumn calls.
Ploaso advise State bank members that it will be the Board's policy to
use the condensed form hereafter on such calls. As in the case of the
complete form, however, minor changes may be necessary in the condensed
88
- 2 -
form from time to timg. Please call the State "bank members' special
attention to the fact that the face side of the condensed form is
identical with the face side of the regular form# except that the
references to the related schedules are omitted; that, accordingly,
existing arrangements for the single# joint publication of condition
reports rendered by State bank members to Federal Reserve banks and
State banking departments, respectively, are not affected} and that,
since the condensed form is basically the same as the regular form,
no separate instructions have been printed covering the preparation
of reports on the condensed form, and the regular instructions, form
F, R. 105a, should be used in preparing reports on the condensed form,
in so far as they are applicable.
A minor change has been made in form F. R. 105b (Schedule
"0"), by changing the specific reference to Schedule FF in the block
appearing in the upper left-hand corner to a general reference to the
affiliate schedule. This was done because Schedule FF of the regular
form has been designated as Schedule E in the condensed form. No
change has been made in any of the other forms listed above.
Very truly yours
L. P. Bethea,
Assistant Secretary.
Enclosures 6.
TO TTTL PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
89
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-532
WASHINGTON
A D D R E S S OFFICIAL C O R R E B P O N D E N C E
TO THE BOARD
September 11, 1839
Dear Sir;
Referring to our letter of July 24, 1939
(R-512), with regard to the declaration of value in
the shipment of Government securities by express,
there is enclosed herewith merely for your information a copy of a letter received from the Vice President of the Federal Reserve Bank of St. Louis, together
with a copy of a letter received by that bank from the
St. Louis Division of the Railway Express Agency with
regard to this subject.
Very truly yours,
L. P. Bethea,
Assistant Secretary
Enclosures 2.
TO PRESIDENTS OF ALL FEDERAL.RESERVE BANKS EXCEPT ST. LOUIS.
ri—552—a
COPY
FEDERAL RESERVE BANK
OF
ST LOUIS
August 29, 1959.
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Attention:
Mr. Morrill.
Gentlemen:
The Board of Governors letter R-512 dated July 24,
1939, indicates that some of the Reserve banks in shipping
securities by express are declaring such securities in certain instances at a nominal value and that by so doing Reserve banks may be failing to comply with the tariff regulations
of the Interstate Commerce Commission.
At the request of member banks in other districts
this bank has made some air express shipments of securities
and declared them at a nominal or stated value rather than
the par or market value. Since the question of proper declaration has been raised we contacted the local office of the
Railway Express Agency requesting an opinion as to whether
our practice in this connection would in any way be in violation of the tariff regulations. We have received an opinion
on the subject and, believing that you may be interested, are
enclosing a copy of it.
While we have not had any shipments of securities by
rail express it would be our practice to declare as nearly as
possible the actual value of the contents.
Very truly yours,
(Signed) 0. M. Attebery
0. M. Attebery,
Vice President.
R-532-b
COPY
RAILWAY EXPRESS AGENCY
ST. LOUIS DIVISION
August 28th, 1959
Federal Reserve Bank
St. Louis, Missouri
Attention;
Gentlemen:
5-A-2
Mr. Gilmore
Shipments of Bonds and Securities In
Air Express Service
In connection with the discussion we had some time
ago concerning the acceptance of bonds and securities for
air express service via Railway Express Agency lines, I
have the following interpretation from our General Traffic
Manager Wheeler in New York City;
"Our Air Express Tariff No. 6 is all-inclusive;
in other words, this tariff is not governed by
our Official Express Classification, and any instructions in the Classification applying to a
shipment of bonds and securities have no effect
when such bonds or securities are forwarded exclusively in Air Express service; consequently
there is no law violation or violation of our
Classification when bonds and securities are forwarded exclusively by Air Express with less than
the actual or market value declared by the shipper. However, any such shipments which may move
part rail and partly by air would then come within the provisions of our Classification and actual
or market value must necessarily be declared."
Yours truly,
(Signed) J. G. MARSTON
Superintendent
92
R-535
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R C I I OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 12, 1939
Dear Sir:
There are enclosed herewith copies of statement rendered by the Bureau of
Engraving and Printing, covering the cost
of preparing Federal Reserve notes from
August 1 to August 50, 1939.
Very truly yours,
0. E. ioulk,
Fiscal Agent
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
93
R-553-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
August 1 to August 50, 1939.
Federal Reserve Notes. Series 1954.
#10
S20
$50
197,000
18,124.00
38,000
3,496.00
-
65,000
5,980.00
-
-
52,000
2,944.00
-
-
10,000
920.00
-
200,000
18,400.00
-
25,000
2,116.00
2,000
19,000
1,748.00
-
3,000
20,000
1,840.00
—
3,000
16,000
1,472.00
6.000
141.000
12.972.00
23.000
816.000
S75.072.00
158,000
39,000
-
Philadelphia
20,000
10,000
-
Cleveland
55,000
12,000
-
Richmond
20,000
12,000
Atlanta
4,000
6,000
Chicago
145,000
54,000
St. Louis
19,000
4,000
—
Minneapolis
13,000
4,000
-
Kansas City
11,000
6,000
Dallas
10,000
3,000
San Francisco
96.000
39.000
596.000
196.000
1,000
1,000
816,000 sheets @ $92.00 per M
Amount
$ 5,060.00
7,000
New York
Total
Sheets
55,000
1,000
47,000
Boston
4100
8,000
$75,072.00
94
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-55U
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 13> 1939
Dear Sirs
There is enclosed for your information a copy of
the Board's Functional Expense Exhibit for the first half of
1939# which has been compiled from the semi-annual functional
expense reports (Form E) received from the Federal Reserve
banks and branches•
Additional copies are being forwarded
under separate cover.
It will be noted that columns have been added to
the Provision of Space function to show the square foot cost
of maintenance of floor space and the rates charged the
Treasury Department and Government agencies.
Very truly yours,
B* L# Smead, Chief,
Division of Bank Operations
Enclosure
TO TEE
PRESIDENTS OF ALL FEDERAL RESERVE BANKS
95
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-535
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE SOARO
>
September 13# 1939
Dear Sir:
There is enclosed for your information a
copy of the Board's Functional Expense Exhibit for the
first half of 1939# which has been compiled from the
semi-annual functional expense reports (Form E) received from the Federal Reserve banks and branches.
•>
Very truly yours,
>-
E. L. Smead# Chief,
Division of Bank Operations.
Enclosure
TO TFE CHAIRMEN OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
D
R - 5 v 6
OF THE
96
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R C I I OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 15, 1939
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
1959.
,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 Interdistrict Settlement Fund for the account of
the Board of Governors of the Federal Reserve System.
In the past you have been requested to
send wire advice of this credit to the Federal Reserve Bank of Richmond, but hereafter it will be satisfactory if mail advice is sent.
Very truly yours,
O^qxajLI
0. E. Foulk,
Fiscal Agent.
Enclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS EXCEPT RICHMOND
97
R-556-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST. 1959
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Expenses Payable
Paid
to
by banks
Board
and
of GovBoard(2) ernors
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
26,282
69,099
19,519
39,488
520
529
26,802 $
589.68
69,099
1,520.26
20,039
440.88
40,017
880.42
Richmond
Atlanta
Chicago
St. Louis
28,202
46,205
68,319
48,522
519
525
900
519
28,721
46,730
69,219
49,041
651.90
1,028.12
1,522.90
1,078.96
212.59
242.50
1,285.53
296.26
419.51
785.82
257.57
782.70
Minneapolis
Kansas City
Dallas
San Francisco
21,905
49,258
41,833
48,747
517
525
608
611
22,420
49,783
42,441
49,358
495.27
1,095.29
955.75
1,085.95
196.91
259.21
269.65
569.54
296.56
856.08
664.12
716.59
257,415
5,225.42
11,401.54
Board of
Governors
237,415
Total
744,792
520
— —
mmmm
6,295
Total
Words
Chargeable
Pro Rata
Share of
Total Expenses(l)
751,085 $16,524.78
$
525.72 $ 265.96
1,055.16
467.10
241.60
199.28
575.59
507.05
$16,524.78 !$6,177.92
(1) Based on cost per word ($.022001212) 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 ($1,567.59) and wire rental ($9,835.75).
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
OF THE
FEDERAL RESERVE SYSTEM
R-537
98
STATEMENT FOR THE PRESS
For release in morning papers,
Monday, September 18, 1939.
The following summary of general business
and financial conditions in the United
States, based upon statistics for August
and the first half 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, which had increased substantially during the
summer, showed a sharp advance in the first half of September after the outbreak of war in Europe. Prices of basic commodities and equity securities
rose sharply while prices of high-grade bonds declined.
Production
In August, the Board's seasonally adjusted index of industrial production was at 102 per cent of the 1923-1925 average as compared with 101 per
cent reached in July. Volume of manufacturing production increased further,
but mineral production declined, owing to a temporary curtailment in output
of crude petroleum. In the iron and steel industry output increased somewhat
further in August and rose sharply in the first half of September, steel ingot
production reaching a rate of 70 per cent of capacity in the week ending September 16 as compared with about 63 per cent at the beginning of the month.
Automobile production showed about the usual sharp seasonal changes in this
period as the shift to new model production was being made. Output of plate
glass increased sharply. Production of nondurable manufactures advanced in
August, reflecting chiefly increased activity at cotton and woolen textile
mills. At meat-packing establishments activity declined less than seasonally,
while at flour mills, where output has been at a high rate in recent months,
-2-
R-537
99
there was not the usual large seasonal increase. Shoe production advanced
seasonally. At coal mines output increased by about the usual seasonal amount
and shipments of iron ore were at the highest rate of this season. Petroleum
production declined sharply during the latter half of August, reflecting shutdowns of wells in most of the principal oil producing states, but increased
rapidly in the first half of September when the wells were reopened.
Value of construction contracts, as reported by the F. W. Dodge
Corporation, Increased somewhat in August, owing to larger awards for publiclyfinanced projects, including several large dams and an increased volume of
United States Housing Administration projects. Private residential building
showed little change, although there is usually some seasonal decline. Other
private construction, which in July had been the highest for any month in two
years, declined in August.
Distribution
Department store sales increased more than seasonally from July to
August. The Board's adjusted index advanced from 86 to 89 per cent of the
1923-1925 average and was at about the level reached in the latter part of
last year.
Sales at variety stores showed little change in August.
Freight-car loadings rose somewhat further in August, reflecting
chiefly continued increases in shipments of coal and miscellaneous freight.
Commodity prices
Prices of moat basic foodstuffs and industrial materials advanced
Sharply in the first half of September. Prices of wheat, corn, sugar, cocoa,
and vegetable oils as well as of hides, rubber, wool, zinc, apd tin showed the
largest increases. The general level of wholesale commodity prices as
measured by the Bureau of Labor Statistics index rose 3.1 points and in the
-5-
R-537
1 0 Q
week ending September 9 was at 78.4 per cent of the 1926 average, about the
same level as a year ago.
Agriculture
Crop prospects showed some improvement on September 1 over a month
earlier, according to the Department of Agriculture. Indications are that
production of all leading crops except cotton will be average or above average in volume. A cotton crop of 12,380,000 bales, about 10 per cent below
the 1928-1937 average, is forecast. This compares with a crop of 11,940,000
bales in 1938 and an estimated world consumption of 11,265,000 bales of
American
cotton during the past season.
Government security market
Average yields on long-term Treasury bonds, which had advanced
fractionally since last June, increased sharply by about 1/2 of 1 per cent in
the latter half of August and early September. In pursuance of the System's
policy of endeavoring to maintain orderly conditions in the money market, the
Federal Reserve banks during the first half of September increased their holdings of Government securities by about $400,000,000. On September 1 the Board
of Governors of the Federal Reserve System announced that the Federal Reserve
banks are prepared at this time to make advances on Government obligations to
member and nonmember banks at par and at the same rate of discount.
Bank credit
Total investments held by reporting member banks in 3 01 leading
cities declined during the first half of September. At New York City banks
the decline represented the redemption at maturity of Federal Farm Mortgage
Corporation bonds and at banks in other leading cities it represented the sale
of Treasury bills and bonds. Commercial loans of city banks showed a substantial growth during August and the first half of September.
BOARD OF GOVERNORS
101
OF THE
FEDERAL RESERVE SYSTEM
R-538
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 18, 1939.
Dear Sir:
There is enclosed for your information a summary of the bank relations reports
submitted by the Federal Reserve banks for the
month of August, 1939 in response to the Board's
letter of August 25, 1936 (X-9680).
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
103
R-538-a
September 13, 1939.
Subject: Summary of Bank
To: Board of Governors
Relations Reports.
From: Mr. Hammond, Division
of Bank Operations
, Reports of bank relations as requested in the Board's letter of
August 25, 1956 (X-9680) have been received for the month of August. Excerpts therefrom will be found on the following pages, at the end of which
is a table showing the number of visits made, meetings attended, and addresses delivered.
It should be borne in mind that the reports submitted by the
Federal Reserve banks ordinarily do not include the whole of the bank's
district, but only a certain portion or portions thereof covered by current visits. The following are a few of the items of Interest included
in the reports:
a
A subject of general interest perhaps more frequently mentioned
than any other is improved bank earnings. These are commented upon by
fully half of the Reserve banks.
Improved business conditions are also the subject of rather general comment.
Chicago reports a more active market in farm lands, though with
no advance in prices.
Some of the reports include reference to the European war and its
effect upon agricultural prices and bond portfolios.
BOSTON
t
During August visits were made to fifty-eight member banks, seven
branches of member banks and eleven norimember banks. No large industrial
city was included in the itinerary, most points visited being principally
summer resorts and small trading centers in Maine, Massachusetts, and Vermont. Scattered throughout the sections visited are a number of cotton,
woolen, and paper mills, shoe factories and wood-working plants, all, at
the time, reported to be gradually increasing both working hours and employment.
In the agricultural sections, along the Connecticut River in
Massachusetts and in central and northern Maine, crops were reported to
be adversely affected due to unfavorable weather conditions during the
early growing season.
,
There was no general complaint on the part of the banks visited,
and at no bank was any criticism heard of the operations and policies of
the Federal Reserve System or of this bank. The banks generally referred
103
-2-
R-538-a
to a lack of sufficient volume of loans and satisfactory investment outlets, but practically at all banks visited deposits and loans had increased
within the last six months and earnings for that period were greater than
for the corresponding period of last year. Concern as to possible unfavorable trends in the Government bond market was evident from conversation
with a number of bankers. This became increasingly apparent during the
last week in August and the position of the Board of Governors and this
bank in relation to the member banks holdings of Government securities,
as recently announced, answers directly the question often asked by member bankers as to the support the member banks might expect through the
loaning facilities of the System.
NEW YORK
Allegany, Livingston» and Wyoming Counties (Buffalo Branch Territory),
At the present time thirteen banks are paying 1-1/2 per cent on
their time deposits, and twenty-two institutions pay 2 per cent. The seventeen banks of Allegany County are included with those institutions paying the higher rate., bub the Allegany County Bankers1 Association is giving
consideration to a rate red--ct ion to take effect October 1. It is not believed, however, that concerted action will be taken, as the managements of
four of the banks are not in favor of any change. The officers of these
banks express the opinion that earnings in their particular institutions
justify continuance of the 2 per cent rate. One is paying dividends to
common stockholders at the rate of 8 per cent per annum, another is paying
a 7 per cent dividend, and officers of these institutions say they feel it
would be unjust to penalize depositors when they can afford to pay large
dividends to stockholders.
Suffolk County.
Several of the investment portfolios consist almost entirely of
Government securities and for this reason most of these banks have eliminated their bond supervisory services and now depend chiefly on their New
York correspondent banks and brokerage houses for bond information. More
than half of the banks in the county have some appreciation in their list
and only two have a depreciation which is causing concern*
Hunterdon, Somerset» Sussex, and Warren Counties, New Jersey.
Interest on savings deposits is being paid at the rate of 1 per
cent in conformity with the order issued by the Commissioner of Banking
and Insurance of New Jersey on June 15. Although a majority of these
banks heretofore paid interest at 1-1/2 per cent, the officers of all but
a few banks express dissatisfaction with the reduction ordered by the supervisory authorities. The chief comment is that it falls on the depositor
who is least able to bear it and will work a hardship on many old and retired persons who have depended upon the income from their savings to meet
living expenses. A number of bankers express the opinion that this low
rate will tend to destroy the incentive for saving, and some believe it
will divert savings into speculative securities. Several assert that the
R-538State Banking Department initiated the reduction to save weak state institutions which should not have been allowed to reopen after the banking
holiday. One banker remarked that it is paradoxical for the supervisoryauthorities to say that banks cannot pay more than 1 per cent on savings
while the Government pays 2.90 per cent on United States Savings Bonds,
and that it appears to him the reduction was a move to drive savings out
of the banks. It is reported that few withdrawals of deposits resulted
from the reduction in rate, but that sales of United States Savings Bonds
in the State showed a large increase durisg July. It is expected that the
lowering of the interest rate will bring about a decrease in expense, and
several bankers state that they now can afford to buy better grade bonds.
An officer of a nonmember bank, which owns considerable other real estate,
has noticed an increase in the number of inquiries for properties recently,
and believes savings will gradually be invested in real estate which will
be of material benefit to many banks.
Summary of Preferred Capital Issues.
In the eight counties covered by this report, there are 114 commercial banks, 71 of which have issued preferred stock, capital notes, or
debentures aggregating $7,693,570 par value. Up to the present time twentythree have paid off their entire issues amounting to $1,678,000, thirtyseven have made partial redemptions aggregating $1,741,310> and eleven have
not retired any - leaving forty-eight banks with a total still outstanding
of $4,274,260 par value, retirable at $5,824,528, reflecting a redemption
premium of $1,550,268.
PHILADELPHIA
East-central and Southern Pennsylvania.
Conditions in the area covered by this report show an improvement
over those of a year ago. Textile plants in several towns are operating
extra shifts end, except for the iron and steel industry, industrial activity presages a much brighter future. The American Car and Foundry Company
has had its engineers working 24 hours a day for the past several months,
experimenting with electric welding. This company was said to have a large
order for tank cars to be used in the transport of wine, but operations
thereon will not be started until the electric welding method has been perfected. A nationally known radio company has increased its force from 400
to 1,000 persons within the past yearfend,according to reports, will employ
about 1,800 within the next twelve months.
The anthracite industry experienced good business last winter and
in several sections operations have been fairly well maintained throughout
the summer. The stock of coal usually carried above ground at this season
of the year has been depleted because of extra orders resulting from the
bituminous coal strike and it will, therefore, be necessary to increase
production as the season of heaviest demand is approaching. The principal
cause of concern in this industry at present appears to be the lack of
stabilization of prices. The smaller coal companies, generally, are
-4-
R-538-
operating on a very limited capital and, in order to get money for pay rolls,
many sell stocks of coal for whatever price can bo obtained.
Conditions in the agricultural sections are fairly satisfactory.
Although early crops were disappointing because of dry weather, recent rains
have improved conditions to the extent that late crops have produced very
well. The chief complaint of the farmers was said to be low milk prices.
The real estate market is quiet. Houses are well rented at satisfactory figures, but few sales are being effected. Several communities
report a shortage of houses but the need has not as yet resulted in any
appreciable amount of new construction.
There is only a fair demand for credit and the lack of earning
opportunities is a serious problem at many banks. In an effort to increase
income, several banks are purchasing SHA mortgages and their experience to
date has been most satisfactory.
Bond accounts in most instances are worth less than book value.
Several bankers reported that they are making every effort to strengthen
their holdings and have confined recent purchases chiefly to Government
obligations.
The cashier of a national bank, having about $10,000,000 in deposits
complained about the insistence of examiners that greater reductions be
obtained on slow loans. He contends that, as a result of the bank's efforts
to comply with the examiners' recommendations, many borrowers will cease to
do business with the institution as soon as their current loans are repaid.
This banker stated that he is of the opinion the Federal Reserve banks
should examine all member banks within their districts as he believes their
examiners to be better qualified than other bank examiners.
The president of a national bank, with deposits of about $1,400,000,
contends that examiners are entirely too critical regarding loan liquidation.
He stated that, because of constant criticism, his directors have adopted a
loaning policy which he considers to be unnecessarily rigid.
CLEVELAND
Our regular bank visitation program was suspended during vacation
season and will be resumed about the middle of September, following five
group meetings in the State of Ohio.
During the month of August, six Ohio State banks were admitted to
membership in the System. Total resources of these institutions are
$5,490,000. Ten additional applications for membership have been received,
and nine of these banks have already been examined.
During the month, twenty-two visits were made to noamember banks
for conferences with bank officers or directors, looking to membership.
Fc-538-a
106
RICHMOND
Prince Georges and Montgomery Counties, Maryland.
These two counties, bordering on the District of Columbia, have
become increasingly suburban communities, and with this development agriculture has become relatively less significant. The same may be said of
Arlington and Fairfax Counties on the Virginia side of the District.
There has been a marked growth of residential and personal loans,
both on an amortization basis. The volume has been so good that banks have
had little need to invest in bonds, although some Treasury issues have been
purchased for what is referred to as "secondary reserves". There is still
some credit extension for agriculture, but the volume has declined and is
relatively small.
It is reported that the present trend towards real estate loans is
considered much safer than that which developed prior to 1929. For one
thing, there is an avoidance of concentration and a better distribution of
risk. Moreover, it is believed that Government employees are far less
likely to default or fall in arrears of payment, because they are not so
subject to cyclical business fluctuations as are members of agricultural and
industrial groups.
Southwestern Virginia.
Generally speaking, the volume of loans has been well maintained,
largely because of the greater interest on the part of bankers in personal
income loans and in a more aggressive attitude with respect to new business.
Most banks charge 6 per cent on loans, but lower rates are made for especially attractive loans. Here, too, some banks maintain that they should
pay as high a rate as possible on time deposits because their depositors
"stuck by them" during the banking troubles. Hence the incentive to charge
6 per cent on loans.
For the augmentation of earnings there is a growing tendency to
install service charges, but there is no great uniformity of practice and
a reluctance to adhere rigidly to any schedule that may be proposed. There
is evidence of adjustment to changed economic conditions, but there is
hesitation and even resistance to change, particularly with respect to the
6 per cent rate on local loans. Nevertheless, most banks have experienced
a profitable half year of operations and so long as this continues they are
not disposed to change their methods.
Southwestern West Virginia.
In addition, an increasing number of banks are availing themselves
of service charges, though the methods employed are not uniform. It is
reported that the West Virginia banking authorities favor a uniform schedule
of service charges and that, in some manner, it has been rumored that the
Board of Governors favor a similar plan for member banks.
-6-
E-538-a
107
"Western North Carolina.
There has been a fair demand for loans and this has been stimulated
by aggressive action of banks that have encouraged customers to borrow from
them rather than from trade creditors and others. The bulk of all loans
are made at 6 per cent, a smaller volume at 5 per cent, and a few at U per
cent. There is competition from outside banks for the business of the
larger and better known manufacturing concerns, but this has not been sufficent to induce a lowering of the lending rates.
As for earnings, it may be said that banks in this region will
show better earnings for the first half of 1939 than for the corresponding
period in 1938. In this respect member banks are handicapped relative to
nonmember banks, because the latter derive considerable earnings from exchange
charges. This is a factor which often makes for lukewarmness on the part of
member banks towards membership in the Federal Reserve System and it is the
chief obstacle to encouragement of membership among nonmember banks.
ATLANTA
North Alabama.
All of the banks visited are in towns located in farming sections.
Gadsden and Huntsville serve agricultural trade areas and, in addition,
possess a number of manufacturing concerns. These two cities are very prosperous and optimism prevails. Practically all the plants in Gadsden are
operating on full schedule. A number of textile mills are located in
Huntsville and it was reported that, with the settlement of labor difficulties, three large mills are now on a full time basis.
The crops in the section visited are in excellent condition. This
is especially true of the cotton crop and it is expected that the yield will
be at least as large as that of last year.
Southeastern Alabama and Southwestern Georgia.
The bankers in the towns of Newnan, LaGrange, and West Point,
Georgia, and Opelika and Montgomery, Alabama, all reported that the textile
mills in their localities were operating on a full time basis. The employment situation is satisfactory, and the mercantile establishments are doing
well. Crop conditions in the section northeast of Montgomery, Alabama, are
good.
Several of the bankers visited stated that their experience with
FHA loans had not been altogether satisfactory, due to the time required
to service the loans properly and to keep in touch with the physical con- >
dition of the properties. Several of the banks have disposed of their FIIA !
loans, with the exception of a number of selected risks.
Very favorable comment was heard from a number of bankers with
regard to the statement of operating ratios prepared by the Federal Reserve
-7-
R-538-a
Bank of Atlanta covering member bank operations for the year 1938. The
bankers stated that such information was helpful in comparing the results
of operation of their own bank with those of other banks in their group,
and several of the bankers stated that such comparisons had been brought
to the attention of the directors of their banks.
Northeastern Georgia.
As a general rule, the present condition of the cotton crop in the
section visited is good, although the corn crop is only fair. With few exceptions, deposits are up and loans little changed. While most of the
bankers stated that they were looking for good loans and investments, all
reported nevertheless that earnings were more or less satisfactory and that
dividends were being paid.
Middle Tennessee.
Present and prospective banking conditions in a wide area surrounding Nashville are extremely favorable. All of the banks visited are
anticipating good profits for the year.
The agricultural outlook for the section visited, which is devoted
largely to Burley tobacco, is extremely favorable at the present time and
unless there is an unusual amount of rainfall the tobacco crop should be of
excellent quality and demand a good price. It is expected that a large
amount of money will come to this section this fall from the sale of live
stock. The bankers are very much encouraged by the increase in demand for
loans. Sentiment toward the Federal Reserve System continued to be favorable.
CHICAGO
Bankers from Aurora, Springfield, Decatur, and Bloomington, Illinois,
and Fort Wayne, Indiana, report earnings for the six months of 1939 ranging from 12 to 22 per cent in excess of earnings for the corresponding period
last year. Recent reports from numerous other banks indicate improvement
in investment accounts, and a great many have eliminated their sub-standard
bonds. A majority of banks that have had non-recurring bond profits have
conserved these profits in various forms of reserve in order to take care of
anticipated bond depreciation. Some banks are enjoying moderate gains in
loans, largely attributable to FHA. loans. Country banks continue to show a
larger percentage of excess reserves than other classes of banks.
Two national banks in the Seventh District made application for conversion into State institutions, and one nonmember State bank applied for a
National charter. Three applications for membership in the System were
received by this bank during the month.
Crop prospects are excellent. Favorable weather conditions the
last week in August benefited com by hastening maturity of the crop.
-8-
R-538-a
In some parts of the district, more interest has been displayed
recently in farm lands. While prices have not increased, there is a more
active market with considerable land moving.
Sales of Seventh District department stores in August exceeded
those of the corresponding month a year ago, and in the first eight months
of the year were larger than in the same 1938 period.
Some increase in employment has been shown in the district during
August. Pay rolls for manufacturing industries in Illinois, Indiana, and
Wisconsin are up slightly, while there is practically no unemployment in
rural districts, where a great deal of activity is reported by lumber
companies, some of this due to building granaries and to residential building which has increased sharply.
ST. LOUIS
Taken as a whole, demand for bank loans in the Kentucky area was
somewhat better than a year ago, reflecting moderate expansion in general
business. Reports relative to profits varied widely, but nowhere were
results superlative. Rates paid on time deposits range from one per cent to
the legal maximum. There is a disposition in some communities to abolish
interest-bearing deposits; a number of banks have already discontinued the
practice. Rates received by the banks on customer loans range from 4 to 8
per cent. As elsewhere in the district there is general complaint of Government competition on loans, agricultural and building chiefly. Likewise
there was outspoken dissatisfaction with the attitude of bank examiners and
the close supervision of banks by the Government agencies. Rising taxes and
scant demand for loans cut into profits. The sale of real estate loans by
banks to their customers is not an uncommon practice.
One bank reported a good demand for small loans and because of
limited funds available to meet such demand, the bank accepted three deposits
of $5,000 each for six months at a rate of 2-1/2 per cent. One of the
deposits was made by another bank. This prompted inquiry by examiners, who
apparently questioned the advisability of such deposits.
In the four Illinois counties, bank earnings, so far this year, are
as good or better than for similar period in 1938. All the way from 1 per
cent to the maximum allowed is paid on time and savings deposits, there
being no uniformity in at least two of the cities visited. A number of
banks that were paying 2 per cent or higher, stated they were giving serious
consideration to reducing the rate paid on such deposits.
Six nonmember banks, believed to be eligible for membership, were
visited, two of which displayed mild interest in membership, but leaned
toward taking out national charters to get away from the double liability
on stock. The president of one other bank stated he wanted to defer membership because of being afraid of too much domination by Washington.
110
-9-
R-538-a
. More complaint was voiced, regarding what was termed the drastic
policy of examination followed by the State and Federal bank authorities,
than ever before.
The cashier of an Arkansas national bank made the comment that
the State nonmember located in his town had taken some good business from
his bank by establishing a branch in a nearby town. He felt that the discrimination against national banks in this connection should be corrected
and that a State bank operating a branch should be under more strict supervision of supervising authorities.
MINNEAPOLIS
Northwestern Wisconsin.
Bank earnings in this area were universally reported to be satisfactory and there were a number of banks whose earnings are outstanding.
The earnings have been wisely used to complete the clean-up of bond depreciation and other undesirable items before dividend payments are resumed.
The demand for loans is increasing although most loans are of the monthly
pay-off, dairy type and repayments nearly offset the new loans. A few
banks have increased the size of their lending territory by encouraging the
drivers for creamery companies to bring in loan applications from distant
customers.
Only three nonmember banks in this area are eligible for Federal
Reserve membership, i.e., have sufficient capital and no branches and are
on the par list. None of the three expressed an interest in membership at
this time. One of these banks would probably find its operations somewhat
curtailed by Federal Reserve membership, for its largest borrowing customer
is the President of the bank who operates a factory in the community.
There was no interest in the revision of Regulation J and the time
schedule of our check collection department. Banks in this area send their
checks to Milwaukee and object to sorting the par items and nonpar items
separately. One banker stated that if we would take all items, whether par
or nonpar, he would be glad to send all of his out-of-town checks to us for
collection. Many of the nonmember State banks in this area operate stations
which range all the way from a teller's booth in a butcher shop to banks
which have enough deposits and enough activity to support an independently
owned State bank. One or two of the stations are self-supporting on the
basis of the volume of loans and deposits drawn from the community which
would not flow to the parent bank without the existence of the station.
Some of the stations are not self-supporting and tho managers operate some
other business, such as insurance to eke out a living wage. One station
was stated to be operated entirely as a service to the store and other
interests of the community which are owned by the principal stockholders of
the parent bank.
There was much talk of the possibility of a European war and the
effect of such a development on banking. None of the bankers seemed
Ill
-lo-
R-538-0.
apprehensive, for it was the general opinion that agricultural prices would
rise in case of war and the farmers would have a period of prosperity.
Northeastern Minnesota and Northwestern Wisconsin.
Banking comment was almost entirely of a cheerful nature, especially
in the strictly country banks where borrowing rates are never materially
lowered, irrespective of the rates on deposits. There were not many banks
where the local demand was sufficient to absorb available funds, but the
broadened scope for charges now in effect at most banks has brought profits,
in some cases, greater than in previous good years. One National bank paid
20 per cent last year, mainly because of a big insurance business. Automobile paper is giving many banks an important addition to revenues and the
desire to get such paper has resulted in some lowering of rates. Housing
paper is generally acceptable. Most paper being taken is on a fixed payment plan and a high percentage of loans at practically every bank require
monthly payments.
Northwestern Minnesota.
Earnings at a large percentage of the banks visited are good. With
a reasonably strong demand for loans at 8 per cent whereas rates on time
deposits are only 2 - 2-1/2 per cent with the standard service charges in
effect and with rather substantial earnings from other sources (insurance,
auctions, occasional land sales, etc.) some banks are making money in this
section of the State that would be running behind if they were located in the
southern half. Both banks in one town of a 1,000 population claim to be
making "excellent profits" even though their combined deposits are only
three-quarters of a million! Their loans, however, are a half million,
mostly at 8 per cent. In one county, all banks (except one national bank)
charge $1 semi-annually on all active checking accounts.
KANSAS CITY
During August visits were made to fifty-six Nebraska banks. A special
effort was made to call on banks that might be interested in membership.
Virtually all of these state banks were found to be friendly to the Federal
Reserve System and a surprising number showed interest in becoming members.
But for many of these institutions membership is a long way off. A great
deal of house-cleaning would be necessary in many cases and existing capital
structure would eliminate others. One bank was found where present reserve
requirements would make membership out of the question.
While there are exceptions, many of these Nebraska banks have
suffered a loss of deposits in the last year. That state has not had a
normal corn crop since 1933 and this long period of adverse farm conditions
is reflected in bank deposits and sentiment. These adverse conditions,
coupled with increased competition of Government agencies of various kinds,
are resulting in a considerable number of bank consolidations and quite a
little talk of liquidation in individual cases.
-11-
R-558
A good many bankers in August were wondering whether they should
not dispose of some of their Government securities at the very attractive
prices then obtaining. One Nebraska bank was found with substantial investments yet holding no Federal Government securities.
Increasingly Nebraska farmers are cooperating with the agricultural program and most bankers appear to be advising farmers to do this.
While there is difference of opinion regarding the wisdom and soundness of
the agricultural program, bankers and farmers more and more are taking the
position that the individual farmer should do what seems advantageous to
him at the moment and let the future take care of itself.
In Nebraska a great deal of experimentation appears to be going
on with different varieties of hybrid corn. In one community it is said
that over twenty varieties had been tested in an attempt to get the one most
suitable to that locality. Bankers say that farmers by planting hybrid com
can comply with the farm program and raise more corn on the smaller acreage
than they formerly did with no acreage restrictions.
Visits to Kansas banks in August found many bankers and farmers
expecting war in Europe and greatly interested in what would happen to
farm prices in that event. It was generally expected that the price of
wheat would rise. The opinion was expressed that even though a war should
cause wheat prices to go above Government loan values many farmers would
nevertheless leave their wheat under seal while making up their' minds about
selling.
DALLAS
South Texas.
Lean operating results are widely mentioned. Acceptable local
credit outlets have all but vanished. This, along with low yields on investment securities, has kept income at low levels, barely sufficient to
permit reduced or nominal dividend rates.
Fear over the future of bond prices was widely expressed. Reluctance to accept bond profits was generally voiced on account of the
necessity for current income and the difficulty of making replacements.
The limit of Savings bonds is being acquired by a wide list of banks in
this section on account of the comparatively good return and elimination
of market risk.
Only isolated complaints were registered against competition
of Government lending agencies. On the whole, the bankers visited feel
that the Government agencies are supplementary in that they supply credit
to non-banking risks.
One nonmember bank, having deposits in excess of $1,000,000, expressed a lively interest in membership, but stated that it desired to make
certain improvements in its assets before filing an application. Another
r 113
-12-
R-5£8-a
nonmember, which pursues a rather aggressive loaning policy, declared
that the System's present high reserve requirements make membership unattractive from its own point of view. Still another explained that
membership had no attractions because its city correspondents duplicated the services offered by the Federal Reserve.
SAN FRANCISCO
Santa Barbara County. California.
Business in Santa Barbara is described as better than it has
been for some time, owing to the fact that the tourist trade has picked
up very materially in volume. The reason assigned for this is the
European situation and the San Francisco Fair.
No particular interest in thss FHA has ever been evidenced in
Santa Barbara, in spite of quite extensive advertising by the banks.
There is a feeling that there is too much delay in closing loans through
the FHA, and this has worked to the benefit of the building and loan associations which finance practically all residence building there is.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
August - 1939
Federal
Reserve
Bank
Member
Visits to Banks
1 Nonmember 1 Total
67
149
84
27
12
56
24
2
79
205
108
29
Richmond
Atlanta
Chicago
St. Louis
83
68
22
26
44
47
13
70
127
115
35
96
Minneapolis
Kansas City
Dallas
San Francisco
96
24
12
10
140
41 •
10
7
236
65
22
17
Boston
New York
Philadelphia
Cleveland
1/ Not reported.
2/ One broadcast
3/ Two broadcasts.
Meetings Attended
Number J Attendance
1/
2
— —
V
195
1
2/
1/
1/
— —
1/
1/
1
125
2/ 5
470
100
85
• 65
5
330
1
1
4
342
1
—•—
*
"
Addresses Made
Number 1 Attendance
— —
— —
"
10
—
1,228
—
5/5
170
BOARD OF GOVERNORS
******
R-539
OF THE
115
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 18, 1939.
Deer Sir:
Attached is a copy of a letter which the Board, under
date of August 28, 1939, sent to all banks in the United States
following the distribution to them in June of the booklet ''The
Federal Reserve System—Its Purposes and Functions"-.
The Board has received, and is still receiving, a considerable number of letters in reply to this circular. Some of
the letters received from nonmembers evidence an interest in
membership: others from both member and nonmember banks express
a desire for information in addition to that contained in the
booklet or indicate a favorable or unfavorable attitude toward the
System. It is believed that such replies will be of interest to
the Federal Reserve banks, end therefore copies of these communications from within your District will be forwarded to you from
time to time as received without covering letter.
Replies indicating an interest in membership or requesting information regarding matters falling within the field of Federal Reserve bank relations with banks in their Districts are being
acknowledged with a statement that the inquiry has been referred to
the appropriate Federal Reserve bank for attention.
Other replies which require no special consideration but
which it is thought you would like to see will also be forwarded to
you. Where a letter is particularly cordial or appreciative and no
other factors are involved, it will, as a matter of courtesy, be
acknowledged here prior to filing.
Very truly yours,
jyl irVuZf
Enclosure.
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
116
BOARD OF GOVERNORS
OF THE
*******
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
August 28, 1939
Gentlemen:
In June of this year the Board sent you a copy of
a booklet just published by it entitled The Federal Reserve
System - Its Purposes and Functions. This publication was
sent you, with the Board's compliments, in the belief that
you would naturally be interested in a presentation of facts
and a description of functions which are of importance to
all persons engaged in banking.
Since it is the purpose of the publication to be
useful and informative, the Board would appreciate very much
your frankly expressed opinion of its interest and value to
you. The Board would be glad to know what points you may feel
are not clearly or sufficiently explained, and what, if any,
should also be included. We shall be glad to answer requests
for further information and to have suggestions which may be
helpful in the preparation of future material.
If you should like to have copies of this book sent
to any of your directors or officers, or to others who might
be interested, please do not hesitate to ask for them.
Very truly yours,
-(b&jnzx, hOtnA^-^
Chester Morrill,
Secretary.
117
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-540
WASHINGTON
A B D K t H OFFICIAL O O K R H F O N D I N C I
TO THE BOARD
********
September 18, 1939
Dear Sir:
On Thursday, October 12, Columbus Day, 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
on that day:
Nashville
St. Louis
Little Rock
Memphis
Detroit
Minneapolis
Charlotte
Kansas City
Oklahoma City
Please notify branches
ry truly yours
J*• C. Noell,
Assistant Secretary
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
118
R-541
CANCELLED
119
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-542
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE I D A H O
September 19, 1939.
Dear Sirs
'
For your information there is enclosed a recapitulation of
an audit submitted to the Secretary of the Treasury by Mr. M« R. Loafman,
Chief, Division of Public Debt Accounts and Audits, showing the stock
of incomplete face printed Federal Reserve notes, Series of 1928 and
Series of 193''# 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 $0, 1939*
In his letter transmitting the report to the Secretary of the
Treasury, Mr. Loafman stated that: "The audit extended from June 29
to July 5# 1939* inclusive, and consisted of a piece count of the stocks
of faces, Series 193U, (except part of the stock of $5 denomination),
and a package count of the uniform backs allocated to Federal Reserve
notes. All stocks of Federal Reserve notes, Series 1928, .and the stocks
of the $5 denomination# Series 193^, with the exception of those retained
by the Bureau for specimen purposes and lj.,000 notes of the $5 denomination,
Series 193b* retained by the Surface Printing Division for reference
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.
"In view of the fact that a recent piooe 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.
-
2
-
R-542
"The total sheets of all denominations on the whole of
Federal Reserve notes, faces and backs were found to be in excess
of the total required reserve of 1|.,2^0,000 sheets."
Very truly yours,
J. R. Van Fossen, Assistant Chief,
Division of Bank Operations.
Enclosure
TO ALL FEDERAL RESERVE AGENTS
RECAPITULATION
R-542-a
FEDERAL RESERVE NOTES AND UNIFORM BACKS ALLOCATED TO FEDERAL RESERVE NOTES, SHEETS OF 12 SUBJECTS EACH
AS AT THE CLOSE OF BUSINESS JUNE 50, 1939
Series of 1928
Federal Reserve Bank
Faces:
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total Faces
$5
$10
68,660-2/3
$20
6,663-2/3
•
1
76,711-3/3
54,658-2/5
8,000
61,858-1/3
28,01+0-2/3
208,052-1/3
27,871
27,872
Faces:
78,115-1/3
Boston
12,8/41-1/3
213,143
Hew York
II4U,966-2/3
Philadelphia
116,339-1/3
76,633-1/3
110,301
Cleveland
7,966-%/3
Richmond
71,366-2/3
7,766-2/3
Atlanta
11,166-2/3
31,675
Chicago
128,066-2/3
172,757-2/3
St. L0uis
50,157-1/3
57,3-';2-2/3
4i,ooo
Minneapolis
26,133-1/3
Kansas City
Ja,i33-3/3
8,366-2/3
Dallas
27,166-2/3
40,033-3/3
San Francisco
35,100
85,433-1/3
Total Faces
564,025-2/3 1,030,947
Backs:
Uniform
Backs allocated to
the various denominations
http://fraser.stlouisfed.org/
656,500
ofReserve
Federal
Resorvfi
Federal
Bank of
St. Louis WnfefiS 568,500
$50
23,712-1/3
92,731-1/3
186,303
30,105-1/3
24,026
15JA8-2/3
3,713
36,341-2/3
5,423
4, 5^6
4,465
2,989-2/3
8,922
1/42,674
$100
$500
11,3'>3-i/3
*•* —
9,974
1,535
300
399
5,851-1/3
200
12,306
8,124
30,660
3,982-1/3
5,02h-V3
30
170
698
474
245
$1,000 $5,000
293
345
100
252
224
402
300
$10,000
15
24
50
24
34
79
25
11
68
88,535-3/3
645
40,578-1/3
113,401-1/3
58,706-3/3
17,862-1/3
130,072
77
34
32
7,582-1/3
3,ooi
12,251
152
60
200
102
250
226
4o
13
7
48
110,099-2/3
4,463
2,562
262
260
200
200
1,190
100
100
250
50
51
50
lil
25
98
90
90
90
25
50
46
99
90
100
783
48
45
46
490
Total
10,179-3/3
9,863-1/3
4o,366
57,900 ,
114,418-1/3
682,548
Series of 1934
2,876
1,528
52,535-3/3
44,88/,-1/3
2,146-2/3
2,502
833-1/3
1,380
80
100
4oo
4oo
11,032-2/3
1,945-1/3
3,657-3/3
5
,852
29,i66-r2/3
937 ,
4,150
29,033-1/3 3,474-1/3
1,687-1/3
710-1/3
2/,817
20,266-2/3
2,853-3/3
3,919
'572780-273" 97,397-2/3 82,188
4oo
200
4oo
4oo
4oo
3,892
4O,778-I/3
156,263 ,
49,160-2/3
53,318-2/3
44,633-3/3
28,566-2/3
69,''07
,
27,233-1/3
630,500
9 , ' a 0-2/3
4,744-1/3
94,100
1,961-1/3
4,464
45,4oo
412
500
450
230
100
500
200
500
5,802
156, 639 ,
613, 486-1/5
253, 685-1/3
174, 816-1/5
128,626-2/5
81,554-2/5
594, 495
l 4 l , 105
101,589
87, 004-2/5
95, i49-%/5
148, 418-1/5
2,556,370
h9
— 1.993,000
122
BOARD OF GOVERNORS
r-543
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R f l f OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 20, 1939
Dear Sirs
It will be appreciated if you will advise the Board the number
of copies of the forms listed bolow that will be required by your bank
(including branches, if any) during the calendar year 19U0s
Form
F. R.
3h
F. R.
38
F i Ri 95
Fi Ri 96
F» Ri 96a
F. R. 160
160A
16CB
16 OC
B
Title
Daily balance sheet# (Please state the number required for the head office and each branch separately,
and indicate any special punching that may be
desired.)
Classification of discounted and purchased bills held
at the end of the month.
Monthly report of current earnings;
Monthly report of current expenses.
Monthly report of reimbursable expenses.
Monthly report of receipts and payments of paper
currency.
Semiannual functional expense report.
Please show separately the number of copies of each form; except
Form F. R. 3l|.# required if revised and the number if not revised.
Very truly yours,
J. R. Van Fossen, Assistant Chief,
Division of Bank Operations.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
123
BOARD OF GOVERNORS
R-544
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R t l l OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
September 20, 1959
Dear Sir:
It will be appreciated if you will advise the Board the
number of copies of the forms listed b'elow that will be required
at your bank (including branches, if any) during the calendar
year 19U0:
Form
F. R.
Title
5
Federal Reserve notes - Daily statement of
Federal Reserve Agent.
* F. R. bb
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.
http://fraser.stlouisfed.org/
TO ALL FEDERAL
Federal Reserve Bank of St. Louis
Very truly yours,
/f ]/a^^
v-/
RESERVE AGENTS
(tV
J# R. Van Fossen, Assistant Chief,
Division of Bank Operations.
124
BOARD O F G O V E R N O R S
R-545
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D N U I OFFICIAL C O R R E S P O N D E N C E
TO THE B O A R D
October 9, 1959
Dear Sir:
There are enclosed herewith copies of statement rendered by the Bureau of
Engraving and Printing, covering the cost
of preparing Federal Reserve notes from
September 1 to September 29, 1939.
Very truly yours,
0. E. Foulk,
Fiscal Agent
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
I <3
to vH
•
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
September 1 to September 29, 1939.
Federal Reserve Motes, Series 1934.
$10
$20
Boston
47,000
7,000
New York
90,000
39,000
Philadelphia
20,000
10,000
Cleveland
55,000
12,000
—
Richmond •
20,000
12,000
—
Atlanta
4,000
6,000
Chicago
72,000
27,000
7,000
4,000
—
—
Minneapolis
13,000
4,000
—
—
—
Kansas City
11,000
6,000
—
—
—
Dallas
10,000
3,000
—
—
— —
San Francisco
46.000
24.000
395,000
154,000
St. Louis
$50
$100
— —
60,000
30,000
—
$500
—
6,000
—
- —
5,200
—
60,000
50,000
9,200
#1,000
&5.000
&10.000
Amount
54,000 $ 4,968.00
—
4,000
Total
Sheets
200
50
229,250
21,091.00
30,000
2,760.00
—
—
—
—
65,000
5,980.00
—
—
52,000
2,944.00
— —
—
10,000
920.00
105,900
9,558.80
11,000
1,012.00
17,000
1,564.00
17,000
1,564.00
13,000
1,196.00
70.000
6.440.00
1,700
5,700
— *
—
200
652,150 sheets @ #92.00 per M . . . . $59,997.80
50
652,150 $59,997.80
126
R--546
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRfll OFFICIAL DORRIIFDNOINCE
TO THE IOARD
********
October 17, 1959
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 September 1939.
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 Interdistrict Settlement
Fund for the account of the Board of Governors
of the Federal Reserve System, and advise the
Federal Reserve Bank of Richmond by mail the
amount and purpose of the credit.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
127
R-546-a
REPORT OF EXPENSES OF MAIN LINES Of FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF SEPTEMBER. 1959
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Total
Words
Chargeable
R s ud
q
fPr»n
i u ricL
Expenses
Paid
by Banks
and
Board I:2),
Payable
to
Board
of Governors
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
25,325
76,760
19,851
38,204
932
913
Richmond
Atlanta
Chicago
St. Louis
25,697
42,247
65,672
44,162
892
887
1,255
888
26,589
43,134
66,927
45,050
582.27
944.59
1,465.64
986.55
198.52
241.39
1,285.98
298.90
383.75
703.20
179.66
687.65
Minneapolis
Kansas City
Dallas
San Francisco
21,242
46,554
35,669
47,475
883
890
920
900
22,125
47,444
36,589
48,375
484.52
1,038.98
801.26
1,059.37
190.55
273.06
272.95
369.34
293.97
765.92
528.31
690.03
226,487
4,959.85
10,870.21
Board of
Governors
226,487
Total
715,345
896
-
-
10,256
Share of
Total Expenses (2)
26,221 $
574.22 $
280.63 1| 293.59
76,760
1,680.97
1,042.75
638.22
20,783
455.13
244.69
210.44
39,117
856.63
321.01
535.62
725,601 $15,889.98
—
$15,889.98 $5,910.36
(1) Based on cost per word ($.02189906) 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 ($1,711.19) and wire rental ($9,159.02).
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-547
128
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Friday, October 20, 1959,
The following summary of general
business and. financial conditions
in the United States, based upon
statistics for September and the
first half of October, will appear
in the November issue of the Federal Reserve Bulletin and in the
monthly reviews of the Federal Reserve banks.
Volume of industrial production, which had turned up sharply
last summer, advanced still more Rapidly in the six weeks after the outbreak of war.
Employment also increased but at a less rapid rate.
Con-
sumption of goods by industry and by individuals has not expanded so rapidly
as production and orders.
Buying of basic commodities, after a burst of ac-
tivity in early September, has slackened considerably, but orders for many
semi-finished goods and for finished products, particularly machinery and
railroad equipment, have continued in large volume. Most orders have come
from domestic sources. Prices of basic commodities advanced sharply in the
early part of September, but in recent weeks prices of foodstuffs have declined while prices of industrial materials in most instances have been
maintained. Prices of finished goods have shown a much smaller advance.
Production
In September the Board'a seasonally end justed index of industrial
production advanced to 110 per cent of the 1923-1925 average as compared
with 103 in August and 92 last spring.
Increases in output of iron and
steel, flour, sugar, meat products, and petroleum were particularly marked
in September.
In the steel industry ingot production rose from an average
•2-
rate of 61 per cent of capacity in August to 71 in September.
R-547
129
In the first
three weeks of October the rate advanced further to 90 per cent and actual
volume of output was at the highest level, on record. Flour production rose
to near record levels and at meat-packing establishments activity was at
the highest rate reached in several years. The sharp increase in output of
crude petroleum followed a considerable reduction in the previous month and
currently production is at about the high rate prevailing before wells were
closed in the latter half of August.
In other industries increases in activity, though quite general,
were not so marked. Automobile production showed a sharp seasonal rise as
volume production of new model cars was begun at most plants, and in related
lines, such as plate glass, activity also increased. Textile production increased somewhat further from the high level reached earlier. Shoe production, however, which had been in large volume in the first eight months of
the year, decreased in September. Mineral production advanced generally
and iron ore shipment schedules were expanded to build up stocks at lower
lake porta before the close of the shipping season.
Value of construction contracts> as reported by the F. W. Dodge
Corporation, rose- further in September, reflecting a contraseasonal increase
in private residential building. Other private construction showed little
change end there was #o## reduction in the volume of new public projects,
both residential and nonresidential.
Distribution
In September and the early part of October department store sales
increased considerably. Freight-car loadings also advanced sharply, with
130
-3-
R-547
the most marked increases reported in shipments of coal and of miscellaneous freight, which includes most manufactured products.
Commodity prices
.Wholesale prices of foodstuffs declined after the middle of September, following sharp advances earlier in the month. Prices of industrial
commodities, which rose considerably until the third week in September, subsequently were generally maintained, although prices of some materials, such
as steel scrap, hides, and rubber, declined from earlier peak levels.
Bank credit
Following reductions during the early part of September, Government security holdings by member banks in 101 leading cities increased
somewhat during the three weeks ending October 11, reflecting largely the
purchase of Treasury bills.
Commercial loans continued to increase, but
at a less rapid rate than in late August and early September.
The volume
of demand deposits at city banks also increased further.
Excess reserves, which had increased sharply at member banks during $he first half of September, showed further moderate increases during
the four weeks ending October 11.
Money rates and bond yields
Prices of United States Government securities increased in the
latter part of September aad the first half of October, following sha*$> declines early in September. Average yields on long-term Treasury bonds declined from 2.79 per cent on September 21 to 2.62 per cent on October 16,
Yields on Treasury notes declined to 0.78 per cent from 1.30 per cent early
in September.
131
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-548
A D D R I I I OFFICIAL C O R R E B P O N D C N C C
TO THE B O A R D
October 19, 1959
Dear Sir:
There is enclosed for your information a summary of the bank relations reports
submitted by the Federal Reserve banks for the
month of September 1939 in response to the
Board's letter of August 25, 1956 (X-9680).
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-548'-a
October 17, 1959
To:
The Board of Governors
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 September. Excerpts therefrom will be found on the following pages, at
the end of which is a table showing the number of visits made, meetings attended, and addresses delivered.
It should be borne in mind that the reports submitted by the
Federal Reserve banks ordinarily do not include the whole of the bank's
district, but only a certain portion or portions thereof covered try
current visits. The following are a few of the items of interest included in the reports:
Several of the Reserve banks discuss the attitude of bankers
toward the present bond market. Many bankers apparently have commended the Federal Reserve banks for their offer to lend at par on
Government securities at a low rate, and have also commended the Open
Market Committee for its support of the bond market. There appears
to be, however, some apprehension as to whether supervisory authorities will require a write-down of bond portfolios in line with recent
declines.
The reports reflect widespread improvement in business activity and in many quarters an increased demand for credit.
BOSTON
During the early part of September, bank visitations were
suspended with, the result that only twenty-three member banks were
visited during the month, all visits being made during the last two
weeks of the month.
The towns and cities visited are all small manufacturing communities located within a radius of fifty miles of Boston. In all
lines of manufacture - wool, shoes, hats, leather, furniture, and various specialties - both employment and pay rolls were reported to be
on the increase.
Loans and deposits, as well as earnings, were above those of
a year ago at all the banks visited. A number of banks had recently
133
R-548-a
sold a portion of their Government bond holdings, and in most instances
the policy of the Federal Reserve System as indicated by its recent
buying of bonds was commented upon favorably as a means of enabling
the banks to adjust their Government bond accounts in an orderly manner. At a number of banks inquiries were made as to the future policy
of the System in relation to the Government bond market and as to
probable rates to be paid try the Treasury on future borrowings.
NEW YORK
Bronx. Kings. Queens, and Richmond Counties. New York
The majority of banks continue to hold substantial blocks
of United States Government securities and many are faced with a net
depreciation in their portfolios as a result of the decline in prices
of United States Governments and other high grade bonds subsequent to
the outbreak of the European War. Several bankers remarked that the
decline in market values of high grade securities is having a bad
psychological effect, and that institutions with funds to invest are
hesitant to purchase long-term high grade issues at present prices as
they believe purchases can be made at still lower levels if there is
to,be a prolongation of the war. Two banks which sold large amounts
of long-term United States Government bonds when prices first began
to decrease now hold substantial amounts of cash (amounting to nearly
40 per cent of their deposit liabilities), and are planning to reinvest in short-term United States Government securities as they believe
these will be less likely to depreciate. A number of bankers state
that, although there has been a sizable increase in the market values
of their second grade railroad and other substandard bonds, they are
hesitant to sell at this time
they expect higher prices may prevail .
Although this is normally the season when bank loans to
commerce and industry usually expand, the majority of bankers report
a light demand for credit and indicate that their loan portfolios
continue to decrease. The officers of several smaller banks state
that it is becoming more difficult to meet the competition of the
larger banks for installment and life insurance loans.
Essex County. New Jersey
The security accounts of the commercial banks total approximately #201,000,000 and continue to show a high proportion of United
States Government issues, direct or fully guaranteed, amounting to
about $125,000,000, or 62 per cent of total holdings. During the
134
—£>—
R—548--£i
past few months, there has been some shifting around of United States
Government issues in order to take profits or prevent further losses,
and in some cases to shorten maturities. A number of bankers have
preferred to hold their United States Governments for income despite
the recent downward trend in market values, but are concerned that
the supervisory authorities may require writedowns if this shrinkage
in values continues. Many investment accounts which previously showed
some appreciation now have depreciation because of the current market
prices of United States Government issues. Municipal obligations form
an important part of the investments of the banks in Essex County and
many are constantly adding issues of this type to their security portfolios. Few bankers care to increase their holdings of corporate
issues at this time, most of them apparently preferring to continue
liquidation of such investments as rapidly as favorable opportunities
are presented. The reported improvement in railroad activities which
is reflected in somewhat higher market values of railroad securities,
is raising the hopes of many bankers that they may, in the near future,
be able to dispose of such bonds at around present book values, and
thereby reduce some of their previously estimated losses.
PHILADELPHIA
South Central Pennsylvania
The area covered by this report depends upon diversified
manufacturing and agricultural activities. Much of this section escaped the extreme dry weather experienced elsewhere this year and
as a result of favorable growing conditions crops yielded heavily.
Prices were disappointing, however, and it was said that the farmers did not make money this year. Milk prices are considered satisfactory in all but York County, where the complaint was made that
sanitary and other requirements force expenditures upon daiiymen
beyond their ability to recover under present prices.
Factory activity at all but a few establishments is considerably higher than a year ago. The increased business of some of the
larger concerns results from Government orders, principally for war
materials, and several bankers express concern about what will happen
after these orders are filled. However, the firms chiefly concerned
have been developing new products and no doubt will be able to maintain operations at a fair level. Some of the concerns which are now
experiencing a decline in activity expect improvement within the next
few months.
Banking resources are $2,797,000 greater than a year ago,
an increase of 2-1/4 per cent. A majority of the bankers interviewed
135
-4-
R-548-a
reported an increased demand for credit. Various means of credit
extension, such as FHA, personal, automobile, equipment, and cattle
loans, are being used and in most cases are proving satisfactory,
only one banker reporting otherwise.
The great majority of the bankers reported net depreciation in investment accounts but the amount was of serious moment in
but a few cases. Many of the officers interviewed stated that the
recent decline in prices wiped out appreciation which accounted for
the present small depreciation.
Real estate conditions are fairly satisfactory, although
the market is quiet. Houses rent readily at satisfactory figures
and in those communities where there is demand for new homes there
is considerable new construction under way.
CLEVELAND
The active campaign for membership on the part of Ohio
State banks has continued, and during the month of September four
banks having total resources of $5,459,524 were admitted to membership. Contacts are now being established with banks in Pennsylvania
and Kentucky looking to round-table discussions with boards of directors or committees thereof to discuss and consider membership in
the Sjystem.
On balance, member banks, particularly those in the
smaller centers, have sold Government securities. In a few instances this has been occasioned by the demand for loans. In a
, majority of instances it appears to reflect the view of the bankers that better buying opportunities will present themselves at
some future time. Many banks have commented favorably upon the
action of the Federal Reserve System in supporting the Government
bond market, and are appreciative of the offer on the part of Reserve banks to accept as collateral security Government obligations
at par.
In one instance a substantial block of Governments was
sold in a community where individuals ordinarily favor Government
bonds as investments, and the bank feels it necessary to increase
its cash position now in anticipation of individual withdrawals
should the Government bond market reach lower levels. At this particular bank the loan account is also reported to be the highest
in ten years.
136
-5-
R—548—a
In the southwestern portion of the State of Ohio a strong
demand for loans has developed. This is true both of agricultural
and industrial regions. A number of banks report loans at all time
peaks. Some farmers are borrowing to buy livestock in anticipation
of higher livestock prices; other farmers are reported as borrowing
to carry grain in anticipation of a more favorable market. One bank
reports earning assets practically equal to deposits.
RICHMOND
Southwestern Virginia
Many banks reported an increase in deposits and a few reported deposits at their peak. Most banks are paying 2-1/2 per cent
on deposits, but the rate has been reduced to 2 per cent in those
communities where the bankers have been able to agree. Moreover,
the major portion of deposits are time deposits. There is, therefore, a general tendency to charge 6 per cent on loans, though it
is apparent that banks make some loans at 4 or 4-1/2 per cent. So
far as obtainable banks prefer good local loans to business concerns,
but where these are not available there is a tendency to go in for
real estate loans, including FHA insured loans. Some banks report
losses of business to Federal lending agencies because of the lower
rates of interest charged by them.
Banks have not been much disturbed about the effects of
the war upon the prices of Treasury issues and they seem quite unconcerned about the disappearance of appreciation on their bonds.
However, they are much interested in the question of the future
trend of bond prices, since many of them want to buy Treasury
issues when it is believed that the time is ripe. There.seems to
be some feeling that Treasury bonds are "a good buy" at par, but
there is a preference for the shorter maturities.
Central West Virginia
As for banking conditions, most banks report an increase
in deposits and also in loans. Here, as elsewhere in West Virginia,
the prevailing rate on loans is 6 per cent, but the rate on time deposits is somewhat lower, being only 2 per cent. A few banks have
FHA loans, but the bulk of all loans are local loans to tradesmen
and farmers, with an increasing volume of personal income loans, especially to miners. In some communities mining concerns supply housing for their workers and there is no demand for real estate loans.
But, in others, banks have been able to place substantial amounts
in loans of this type.
137
—fa—
R—648—a
In certain communities substantial amounts have been deposited with the Postal Savings System and.United States Savings bonds
have been popular. Even so, most banks have a plethora of idle funds
which they are quite unwilling to lend at a rate lower than 6 per cent.
These idle funds flow into investments to some extent, the preference
being for Treasury bonds, since they are regarded as highly liquid.
It is evident that most banks still prefer to be highly liquid and
desire to avoid any possible situation which might compel them to
borrow or rediscount. The better informed banks look with distinct
approval upon the service of the Federal Open Market Committee following the outbreak of war.
South Central West Virginia
As for the investment position of banks, in a few instances
nothing but Treasury issues are held and in practically all cases
these predominate. It may be said that nearly all bankers have been
quite undisturbed by recent declines in the prices of Treasury issues, since they maintain that these bonds have been purchased for
income rather than for profit. A few bankers feel that prices of
Treasury issues will recover somewhat, but that they will not regain
their former high levels. It is apparent that bankers generally hope
for higher interest rates and a few have restricted loans with the
hope of benefiting by the anticipated increase.
ATLANTA
Florida
Visits were made to 12 nonmember banks and 1? member banks
in Florida. Most of the banks visited have experienced more activity
this summer than in the last two or three summers. In many cases increases in loans and deposits were reported, as compared with the
corresponding dates last year. General business conditions in the
territory visited were reported good.
Bankers in the West Coast resort towns and bankers at
Daytona Beach and St. Augustine are hopeful, for a good tourist season. What effect world conditions will have on travel in this country is a matter of conjecture. Opinion was expressed, however, that
some increase might be expected in the number of tourists since
European travel has practically ceased. The consensus is that war
conditions will have a decided bearing on the volume of tourist business in Florida this winter.
138
-7-
R-548-a
Our representative reports that many of the banks visited use
the facilities of their city correspondents for check clearing purposes
and that they will continue to do so in order to avoid the keeping of
records covering items of deferred availability. The bankers feel that
where they can include all items in one letter to a city correspondent
for sorting and collecting it is to their advantage to do so.
The questions foremost in the minds of the bankers interviewed seemed to be what the Government bond market will do and how to
lend money with a feeling of security. In this connection our representative called attention to the fact that the Federal Reserve Bank is
prepared to make advances on Government securities at par, as announced
recently in our circular letters,
Several bankers made mention of the noncash collection service
of the Federal Reserve Bank and spoke of recent questionnaires which had
been received relative to a proposal made by certain city banks to the
effect that the Federal Reserve Bank of Atlanta and its branches discontinue the handling of noncash items payable at Atlanta and our branch
cities. The member banks at Sarasota and Winter Haven seem particularly
interested in this service and would dislike any change since they forward numerous fruit and vegetable drafts to Federal Reserve banks and
branches over a wide territory for collection at par. The bankers at
these points contend that any change in our practice of handling noncash
items would necessitate the opening of correspondent accounts in Federal
Reserve cities or the payment of collection charges and would be costly
to their banks.
Louisiana
The executive officers of the three nonmember banks located in
Plaquemine and Bonaldsonville are somewhat perturbed over the recent decline in price of high grade bonds but, because of the extremely liquid
condition of their institutions, do not anticipate that they will be
forced to borrow funds. The officers of the three banks spoke in complimentary terms of the action of the Reserve System in making it possible
for both member and nonmember banks to avail themselves of advances on
direct obligations of the United States at par and at a low rate of interest.
CHICAGO
Very little change is shown in the loan portfolios of the
country banks, although the adjustments that have been made in interest
paid on deposits and the continuous readjustment of service charges are
enabling the banks generally to operate on a profitable basis. Many of
139
-8-
R-548-a
the smaller banks continue to rely upon F.H.A. loans as an outlet for
their funds. Of the bankers visited during the month, only one indicated that it might be necessary for his bank to borrow from the Federal Reserve bank.
At the various group meetings, the topic of Wages and Hours
seems to have attracted more attention than any other one subject.
Compliance with this act appears to be increasingly irksome to the
small banks.
The sentiment of banks toward Government bonds is favorable.
While they have shown some concern over the trend of prices, generally
speaking they do not seem to be particularly disturbed and practically
without exception banks, both small and large, have expressed themselves as being pleased with the manner in which the Open Market Committee has handled the Government bond situation. Good short time
municipals still sell on a very favorable basis; for example, Milwaukee
County, Wisconsin, has recently awarded a new issue of $3,700,000 Poor
Relief obligations due April 1, 1940, on a bid of 100.0062 for an interest rate of .50 per cent.
We are advised by one of the banks in Detroit that some of
the financial minds there are concerned with the present wave of prosperity, as it may affect the activity of the finance companies which
are furnishing consumers' credit in a large way. They feel that these
companies may use readily available cheap money and encourage abnormal
credit buying on the part of the workers of all classes. Those concerned think that the big banks and even the Federal Reserve banks should
sound a warning note and should perhaps even condition their loans to
finance companies by a provision that those companies would reduce the
terms of their loans and possibly increase the cost of money for the
purpose of discouraging over-expansion of consumers' credit. It is understood that one of the larger automobile companies has expressed keen
interest in this subject and will probably make its views known in some
manner before long.
ST. LOUIS
Interviews with bankers reflect somewhat spotty conditions,
but on the whole a fair degree of prosperity. Approval was expressed
by a number of bankers of the Federal Reserve Bank announcement that
it will make advances at par on U. S. Government obligations. This action has served to relieve anxiety of certain country banks whose investment portfolios contain large holdings of long-term Government
securities,
There were a number of complaints of small profit margins,
more, in fact, than small volume. One bank reported uninvested funds
140
-9—
R-o48-a
equal to 65 per cent of deposits. Liquidation was reported in satisfactory volume, including paper classed as slow. Five to six per cent,
mainly the latter figure, is charged on customer loans. On time deposits 2 per cent to the maximum is allowed. Some banks are not taking
interest bearing deposits.
The executive officer of a Missouri State member, which
entered the System this spring, seemed pleased with membership and
said relations were entirely satisfactory. He stated the large reserves required made it difficult to carry adequate balances with
correspondents but he nevertheless appreciated the benefits of membership.
The vice president of an Illinois National bank, who is a
booster for the System, remarked that reserve requirements were a bit
high. He and officers of several other member and nonmember banks in
Illinois, Indiana, and Kentucky, stated that the adoption by our bank
of the 1 per cent rate on advances to banks, secured by U. S. Government obligations, would go a long way toward increasing their confidence in long-term Government bonds. Some of the banks visited are
making additional purchases of Governments with the thought in mind
that they can be used to advantage as collateral if necessary.
MINNEAPOLIS
South Central Minnesota
The forty-two banks visited are all located within an area
forty miles wide and forty-five miles long. Many bankers complain
that there is an over-population of banks in this community. Distances between banking points are from three to fifteen miles.
Well established banks with sufficient volume of business
report adequate to excellent earnings. There are a few banks in this
locality, however, which are severely handicapped because of extremely small volume of loans and deposits, and because they are located
in highly competitive territory they complain of their inability to
make adequate earnings.
The demand for local loans is spotted. In a few instances
a heavy demand was reported, although in most instances the demand
was reported as light.
Income from service charges has become an important item
from earnings standpoint in many of the banks, while in most of the
smaller outlying banks this source of revenue has not been developed
•
141
—10—
R—548—8.
at all. The smaller banks are fearful that by assessing such charges
their customers will gradually move their business to the larger trading centers.
Although all of the officers of nonmember banks who were
approached on the subject stated that exchange charges could be eliminated and service charges substituted, they preferred to cling to the
income from exchange charges because such charges are easy to collect.
As a general rule, the banks in this territory are opening
later and closing earlier in order to comply with the Wages and Hours
Act.
East Central South Dakota
The two principal topics in which most of the bankers are
interested at this time are the war situation and wheat loans which
many of the banks have been making in volume. Bankers generally are
very much interested in the possible effect of war on bond prices as
well as the attitude of the Treasury Department and the Federal Reserve System in supporting the market on government issues.
Banks are competing to some extent for the privilege of
handling wheat loans. In some cases, smaller banks are turning over
to their correspondent or affiliated banks in the larger centers the
wheat loans made at their offices. In virtually all of these instances, the banks originally handling the loans receive .4 of 1 per
cent for their work, and the remainder of the 2-1/2 per cent allowed
the banks by the Commodity Credit Corporation on such loans goes to
the banks carrying the loans until paid.
Deposits quite generally are showing an increase at this
season of the year, and funds resulting from wheat loans are given
in a number of instances as being the reason for the increase. There
are but very few cases where banks do not have sufficient funds to
meet the local demand for money. Many of the bankers reported an
improvement in their earnings. Chattel mortgage loans are usually
made on a very conservative basis, one bank having adopted the practice of lending not to exceed $20 on a cow or $3 on a sheep. Most
banks receive 8 per cent on chattel mortgage loans, although there
are a few instances where the return is only 7 per cent.
Some of the bankers recently had seen articles in newspapers
stating that the Federal Reserve banks would lend both to member and
nonmember banks at par on Government securities regardless of market
value, and they felt this was a wise and timely move on the part of
the Federal Reserve System.
142
—IX—
R-548-a
KANSAS CITY
In September most of the visits made by this bank were concentrated in Nebraska and Kansas. Early in the month the war was the
principal topic of conversation, although in a few weeks attention was
turned to other matters. Banks were interested especially in what the
war would do to the price of their Government securities and how it
will affect grain and livestock prices.
Everyone was remarkably calm. A few bankers were found who
had sold Government securities in the summer when prices were near
their peak and they expressed the wish that they had sold more. Some
also were found who had been doing some selling since the outbreak of
war and a number of these individuals expressed the wish they had not
sold. A few banks, in order to employ idle funds, would like to biyr
more Government securities but are afraid to do so. There seems to be
a tendency to ignore paper profits and take an investment position in
regard to Government security holdings. A few banks were found in
drouth stricken sections of Nebraska where it was said either bonds
must be sold or loans on them secured. Virtually without exception,
the opinion was expressed that the Federal Reserve Sty stem had been
wise and skillful in its support of the Government bond market. Also
without exception, appreciation was expressed of the offer of this
bank to lend at par and at a low rate of interest on Government securities.
Next to the war and its probable effect on bond, grain, and
livestock prices, the most important item of interest to bankers is
the continuation of the unprecedented fall drouth. In many parts of
the District the highest temperatures of the year were registered in
the early part of September and the almost complete lack of rainfall
on top of the summer shortage created a highly critical condition.
The Hard Winter Wheat Belt lies almost wholly within the boundaries
of this Federal Reserve District and in almost every State there is
no moisture to germinate the seed. Some farmers have planted their
wheat in the dust and there are reports that in some sections the
sown grain has been injured by insects.
A striking example of how banking has changed in the last
decade or so was found in the case of a bank with $54,000 of deposits,
which has an income of $900 from exchange charges and $1,100 from
service charges.
City banks report that their loans are beginning to show
some evidence of war influence. Loans for handling grain have increased sharply in individual cases and it is said that wholesalers,
especially in food lines, are borrowing increased funds to buy merchandise.
143
-12-
R—548—3
DALLAS
East Texas
The area visited includes the great East Texas oil field,
the largest in the nation, containing 27,000 producing wells, and extending through four counties of East Texas.
The visited bankers reported that notwithstanding the slowing down of oil field activities, business and agricultural conditions
in this section of Texas are quite satisfactory. The cotton crop,
which has been somewhat curtailed this year by drought, is being sold
by the farmers as fast as it is ginned, and, strange to say, the prevailing price of about nine cents a pound is considered amply sufficient to enable the producers to liquidate their seasonal borrowings
and other current debts.
Bankers throughout this area are practically unanimous in
opposing a Government loan on cotton this year. They hope the Government will not make a loan on the 1939 crop, because, they say, the
present price is adequate to move it into consumption channels without
detriment to the producers' interest, and they fear that a continuance
of Government loans will tend to destroy what little world market the
American cotton crop now has, by holding the crop out of world consumption channels.
Unanimous opposition to the Patman and Brown Bills was
voiced by the visited bankers. Several banks complained of the present assessment rates charged by the FDIC, saying that in their opinion the Corporation has accumulated a sufficient reserve to take care
of normal future losses and that Congress could well afford to reduce
the assessment rate and thus afford some relief to the banks that are
hard-pressed to make expenses under present conditions.
Widespread interest in the Government bond market is in
evidence among the banks of East Texas. There has been comparatively
little selling since the outbreak of war. A few banks had sold off
some of their Governments during the summer for profit-taking purposes, but the general tendency is to hold present portfolios intact.
Several of the banks interviewed in this region declared that they
intend to make substantial purchases of certain issues if and when
they reach par or near-par levels. The indications are that this
attitude may be more or less universal throughout the State, and if
so it would seem probable that any further declines in the Government
bond market will be followed by a general bv^ying movement among banks,
particularly those whose outlet for loans is still restricted and
those whose holdings of Governments have been depleted by earlier
profit-taking operations.
144
—3.3™
R—548—a
SAN FRANCISCO"
Washington
While the bankers visited in the Yakima Valley during the
latter part of August and the first part of September were looking
forward to a satisfactory marketing of this year's apple crop, war
conditions in Europe have changed the picture completely. In normal
years approximately 25 per cent of apples grown in the Northwest are
exported to European and Scandinavian markets, of which about 75 per
cent are exported to nations now engaged in war. This market has
been completely cut off, with the result that the growers are now
facing a serious marketing problem. We understand that the Federal
Surplus Commodities Corporation, within the past two weeks, has
placed apples on the surplus commodity list and is now assisting in
moving the excess stocks.
Crops of other agricultural products, such as hay, potatoes,
and sugar beets, were satisfactory this year and brought good prices.
Bankers reported good demand for loans, and, with the exception of conditions as noted above, business was considered very
satisfactory.
Banks located in the lumber and logging sections which were
visited during the month were very optimistic over the increased demands for logs and lumber products. The lumber mills report very
satisfactory conditions, and in the most part are refusing to book
orders for longer than sixty days in advance. Prices for lumber
products have been advancing, and some mills have increased their
output by an addition of one or two shifts.
In other sections agricultural conditions are reported to
be veiy satisfactory, particularly in the dairying, poultry raising,
and seed growing industries.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BAMS
September - 1959
Federal
Reserve
Bank
Visits to Banks
J
1 Member
Meetings Attended
Nonmember
Total
Number I Attendance
Addresses Made
Number
Attendance
Boston
Eew York
Philadelphia
Cleveland
25
77
45
99
27
16
50
25
104
61
129
1
10
4
11
1/
2,080
5,075
2,297
if
if
2
90
Richmond
Atlanta
Chicago
St. Louis
66
21
65
69
51
15
52
88
97
56
97
157
4
1
15
15
675
2
550
5,659
%J 1,785
1
2
75
2/ 66
Minneapolis
Kansas CityDallas
San Francisco
57
20
17
55
105
56
1
16
160
56
18
71
7
7
5
11
5,720
5,268
2,375
5,208
1
1
20
200
1/
1/ Not reported.
2/ Attendance for one not reported.
1
85
- • •
• " mm
» » • • !•
__
— — -
146
BOARD O F G O V E R N O R S
+***
OF THE
"
FEDERAL RESERVE SYSTEM
R 549
"
WASHINGTON
A D D R I l l OFFICIAL C O R R C S P O N D E N C K
TO T H E B O A R D
*******
October 19, 1939
Dear Sir:
The Board of Governors regrets that the
pressure of other matters during recent weeks has
made it impossible for it to arrange for. a conference of the Chairmen of the Federal Reserve banks
during the early fall.
It has now been suggested that the conference be held on Monday, December 4, 1939, at
10:00 a.m., and I have been requested to inquire
whether that date would be a convenient one for
you.
Very truly yours,
Chester Morrill,
Secretary.
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS
147
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-550
WASHINGTON
A D D R I I I OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
October 24, 1959
Dear Sir:
On Saturday, November 11, Armistice 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 also will
be observed by Federal Reserve banks and branches during November:
November 1
(Wednesday)
New Orleans
All Saints Day
November 7
(Tuesday)
New York
Buffalo
Philadelphia
Pittsburgh
Richmond
San Francisco
Los Angeles
Election Day
On November 1 and 7 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 of November 1 and 7 for such offices with your credits for
the following business days. No debits covering shipments of Federal Reserve notes for account of the head offices mentioned should
be included in your note settlement of November 7.
The Federal Reserve Bank of Cleveland and its Cincinnati
Branch will be open for business on November 7 until 1:00 p.m. Debits covering shipments of Federal Reserve notes for account of the
head office and transit clearing credits for both offices should be
included in the settlements of that day.
-2-
R-o50
Since the President has not as yet issued his Thanksgiving
proclamation, advice with respect to that holiday is held in abeyance
awaiting the proclamation and action by the authorities of the respective States.
Please notify branches.
Very truly yours
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BAMS
148
149
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-551
A O D R C a a OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
October ?.7, 1959
Dear Sir:
Referring to the Board's letter of September 5, 1937 (S-29), there is enclosed a copy of
Form F. R. 296, which has been revised in view of
the recent changes in discount rate schedules of
the Federal Reserve banks.
A supply of the revised form is being
sent to your bank under separate cover.
Very truly yours
L. P. Bethea,
Assistant Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
150
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R 5g2
WASHINGTON
A D D R f l l OFFICIAL C O R H C a P O N O E N C E
TO THE B O A R D
November 15, 1959
Dear Sir:
Referring to the Board's letter R-38O of January 6, 1939*
following is a statement of changes during October 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 1931'•
Switzerland
Basle
Additi on*
Swiss Bank Corporation
(including agency at New York
City)
•Add to list of Nonmember Banks with Principal Places of
Business in Territories, Insular Possessions, or Foreign
Countries (Page 5> R-380a).
Deletion
Mew York
New York
Bronx County Trust Company
The Bronx County Trust Company should be added with the
following note to the list (P-^BOb) of banks which had in force agreements with the Board pursuant to the provisions of Section 8j(a) of the
Securities Exchange Act of 193^!* but which are no longer in operation
as nonmember banks:
(Admitted to Federal Reserve membership on
October 10, 1939.)
Very truly yours
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
151
BOARD O F G O V E R N O R S
* * * £ • -
*
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R
_ 5
5 3
a d d r e s s official c o n m i P O N D t N O i
TO T H E B O A R D
November 15, 1939.
Dear Sir:
In the Board's letter of June 20, 1939, S-165, you were
advised that the Board believed sufficient time had elapsed to warrant asking for Congressional authority to destroy certain records,
not including bank examination reports, accumulated by the Federal
Reserve agents from the date of the organization of the Federal Reserve banks to the date of the transfer of the nonstatutory duties
of the agents to the banks, and you were requested to furnish the
Board with a list of any records not included in the June 11, 1936
report of the committee on destruction of records which you felt
should be destroyed at this time.
Replies to the above mentioned letter have now been received from all Federal Reserve agents and the attached statement
lists the records recommended for destruction in the Committee's report, together with the additional records recommended for destruction by the several Federal Reserve agents. It will be appreciated
if you will furnish the Board with any suggestions you may care to
make with respect to the destruction of the records listed in this
statement and, if any additional records are recommended for destruction, it would be helpful if information were supplied with respect
thereto along the lines indicated in the next to last paragraph of
Board's letter S-165.
While it is intended to request Congressional authority
to destroy certain records of the Federal Reserve agents, not including bank examination reports, from the date of the organization of
the Federal Reserve banks to the date of the transfer of the nonstatutory duties of the agents to the banks, no records should, of
course, be destroyed until after they have been held for the minimum
retention period recommended in the Committee's report, and until
their destruction has been authorized by the Board,
Ver
L. P. Bethea,
Assistant Secretary,
Enclosure,
TO ALL FEDERAL
yours,
RESERVE AGENTS
152
R-553-a
RECORDS OF FEDERAL RESERVE AGENTS RECOMMENDED FOR DESTRUCTION IN REPORT
OF COMMITTEE ON THE DESTRUCTION OF RECORDS BATED JUNE 11, 1936; ALSO,
ADDITIONAL RECORDS RECOMMENDED FOR DESTRUCTION BY FEDERAL RESERVE AGENTS
IN RESPONSE TO BOARD'S LETTER, S-165, DATED JUNE 20, 1939.
Recommended for Destruction
Form No,
Title or Description
From
To
FR 107
Report of Earnings and Dividends
of State member bank,
1914
1937
TREAS
2129
Report of Earnings and Dividends
of National bank.
1914
1937
FR 105
Report of Condition of State Member bank,
1914
1937
TREAS
2130
Report•of Condition of National
bank,
1914
1937
FR 105b
Schedule O-Loans and Advances to
Affiliates of State member bank
and investments in and loans secured 'by obligations of affiliates.
1933
1937
Schedule 0—Loans and Advances to
Affiliates of National bank and
investments in and loans secured
by obligations of affiliates,
1933
1937
Inter-office communications regarding applications under Section 8
of the Clayton Act and Section 32
of Banking Act of 1933.
1916
1937
Report of Affiliate of State member
bank.
1933
1937
I933
1937
Work sheets and printer's proofs of
text of annual report of Federal
Reserve agents to Federal Reserve
Board.
I9I5
1937
Member banks' weekly condition reports
1917
1937
Monthly Review - copies of text sent
to Federal Reserve Board.
1915
1937
TREAS
2131
FR 220
TREAS
2130e
Report of Affiliate of National
bank.
R-553-a
~2—
Form No.
FR 45
FR 44
FR 194
TREAS
TREAS
TREAS
TREAS
TREAS
TREAS
Title or Description
Recommended for Destruction
From
To
Monthly Review mailing list
requests,
1915
1937
Inter-office communications regarding the issuance and retirement of Federal Reserve
notes and Federal Reserve Bank
notes.
1914
" 1937
Requisition by Federal Reserve
Agent to Federal Reserve Board
for Federal Reserve notes and
Federal Reserve Bank notes.
1914
1937
Report to Federal Reserve Board
of Federal Reserve notes (or
bank notes) received, issued
to bank, returned to Comptroller
and on hand by denomination and
aggregate amount.
1914
1937
Report to Federal Reserve Board of
receipts and issues of Federal Reserve notes (or bank notes) and
amounts of Federal Reserve notes,
etc. on hand,
1914
1937
1914
1937
Vault deposit and withdrawal tickets
used in Federal Reserve Agent's
function in connection with currency
transactions.
' 1914.
1937
Weekly reports of bank debits made by
clearing house associations.
1918
1937
Letters from Comptroller of Currency
to Federal Reserve Agent advising
that, by direction of Bdard, Bureau
of Engraving and Printing had been
requested to ship a specified amount
of Federal Reserve notes or bank
notes.
1914
1937
2328 )
2329 )
2330 )
2328a)
2329c)
2330a)
Advice to Comptroller of the Currency of issue, return or re-issue
of Federal Reserve Notes and bank
notes.
1 5 3
R-553-a
-3Title or Description
Form No.
TREAS
957
TREAS
8070
TREAS
8509
TREAS
8510
Recommended for Destruction
To
From
Form letters from Bureau of Engraving and Printing to Federal
Reserve Agent advising that a
specified amount of Federal Reserve notes is being forwarded
and requesting that receipts be
executed.
1917
1923
Form letters from Bureau of Engraving and Printing to Federal
Reserve Agent advising that a
specified amount of Federal Reserve notes or bank notes is being forwarded and requesting that
receipts be executed (Superseded
Treas. form 957).
1923
1937
Form letters from Custodian of Federal Reserve Vault, Bureau of Engraving and Printing, to Federal
Reserve Agent giving following
data with respect to Federal Reserve note shipments - nyraber of
pouches, number of packages, denominations, and rotary lock numbers .
1917
1927
Form letters from Custodian of Federal
' Reserve Vault, Bureau of Engraving and
Printing, to Federal Reserve Agent,
giving following data with respect
to Federal Reserve note and bank note
shipments - number of pouches, number
of packages, denominations, rotary lock
numbers. (Superseded form letters
mentioned in preceding paragraph)
1927
1937
Pouch invoice from Bureau of Engraving
and Printing enclosed in each mail
pouch containing shipments of Federal
Reserve notes showing number of packages, denominations, and rotary lock
numbers.
1922
1929
Pouch invoice from Bureau of Engraving
and Printing enclosed in each mail
pouch containing shipments of Federal
Reserve notes showing number of packages, denominations and rotary lock
numbers* (Superseded pouch invoices
mentioned in preceding paragraph.) 1930
1937
154
155
R-553-a
Form No*
Title or Description
Recommended for Destruction
From
To
Letters and telegrams from Comptroller of Currency to Federal
Reserve Agent advising of the
receipt of unfit Federal Reserve
notes for destruction*
1915
1916
Form letters from Treasurer's Office
countersigned by National Bank Redemption Agency to Federal Reserve
Agent advising that Federal Reserve
notes redeemed have been charged
against deposits made by the Agent
for the exclusive purpose of redeeming such notes*
1916
1919
Form letters from Treasurer's Office
countersigned by National Bank Redemption Agency to Federal Reserve
Agent advising of the receipt of
upper and lower halves of unfit Federal Reserve notes forwarded for redemption.
1916
1919
Form letters from Treasurer's Office
countersigned by National Bank Redemption Agency to Federal Reserve
Agent advising that upper and lower
halves of unfit Federal Reserve notes
forwarded for redemption and held for
Agent's account, as previously advised,
have been delivered to Comptroller of
the Currency for credit of Federal
Reserve Agent*
1916
1919
Form letters from Comptroller of Currency countersigned by Federal Reserve Issue and Redemption Division
to Federal Reserve Agent advising
number and denomination of unfit
Federal Reserve notes, redeemed by
Treasurer, received for destruction
and credit to Agent's account*
1916
1918
TREAS 6232 ReA*
) Advice of Federal Reserve notes
TREAS 6232 B, ReA*) (bank notes) redeemed and delivered
TREAS 6239 A, R.A*) for destruction*
1918
1937
.
R-553-a
156
—5—
Form No.
Title or Description
RocarEeridou for destruction
From
To
Form letters from Treasurer's
Office countersigned by National Bank Redemption Agency
to Federal Reserve Agent advising of the receipt of unfit
Federal Reserve notes forwarded
for redemption.
1916
1918
Letters from Treasurer's Office
countersigned by National Bank
Redemption Agency to Federal Reserve Agent advising of the receipt
of deposits for the redemption of
Federal Reserve notes.
1916
1918
TREAS
6233A, R.A. Advice of Federal Reserve notes received for redemption - settlement
in gold redemption fund.
1919
1929
TREAS
6234A,R.A. Advice of Federal Reserve notes received for redemption - settlement
by Federal Reserve Agent.
Jay.
1913
Dec.
TREAS
6231, R.A*
TREAS
5373
1918
Telegrams from Comptroller of Currency
to Federal Reserve Agent advising of
the receipt of unfit Federal Reserve
notes shipped by Federal Reserve banks
and branches. (Code DUSTBRITE)
I929
1937
Telegrams from Comptroller of Currency
to Federal Reserve Agent advising of
the receipt of unfit Federal Reserve
notes from sources other than Federal
Reserve banks. (Code DKOPTIBE)
I929
1937
Statement of account - Gold Redemption
Fund.
1919
1929
Advice of remittance
1927
1929
Statement from the Chief, Federal Reserve
Issue and Redemption Division, showing
amount of Federal Reserve notes on hand,
amount being printed, and amount shipped
1915
1937
157
R-553-a
-6-
Form No.
St. 772
31-B
Title or Description
Recommended for Destruction
From
To
Federal Reserve notes: Weekly report of Federal Reserve Agent to
Federal Reserve Board.
1919
1920
Weekly telegrams to Board of Governors
giving condition statement of Federal
Reserve Agent and Federal Reserve bank* 1914
1937
172
172a
(And superseded 381 and 381a) Interdistrict movement of Federal Reserve
notes.
1919
1922
FR 206
(And superseded form) Confirmation of
balance in Federal Reserve Agent's
gold certificate fund.
1926
1937
Weekly gold coin telegram to Board gold coin held by bank and Agent at
close of business on Wednesday,
June
1932
July
1932
Daily gold coin telegram to Board gold coin held by bank and Agent,
1933
1934
Weekly report to Board's Division of
Research and Statistics of gold sold
for use in industry and correspondence
in connection therewith.
1928
1933
Inter-office communications and telegrams
in connection with transfers affecting
the Agent's gold and gold certificate
funds.
1919
1933
Government securities held at New York
as collateral against Federal Reserve
notes and Federal Reserve bank notes;
also, correspondence in connection
therewith.
1933
1934
Report of member firm of a National
Securities Exchange
1935
1937
Annual budgets for the Statistical
and Analytical function and letters
transmitting them to Board of
Governors
1925
1937
F.R.A. 8
FR 240
R-5'53- 7 -
Form ifo.
Title or Description
Recommended for Destruction
From
To
Correspondence with Board of
Governors with respect to that
portion of the functional
expense report vfoich relates to
the functions under the
supervision of the Federal
Reserve Agent
1922
1937
Interoffice communications regarding the allocation in the
Board's functional expense
report of the time of employees
under the supervision of the
Federal Reserve Agent
1922
1937
159
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-554
WASHINGTON
a d d d i i i offioial oohiiebfond«ncb
t o the b o a r d
November 16, 1939
Dear Sir:
Regulation H, Membership Of State Banking Institutions In
The Federal Reserve System, has been amended in minor respects effective November 20, 1939, and the regulation has been reprinted to
incorporate such amendments and one previously adopted. A supply
of copies of the regulation is being forwarded to you under separate
cover.
The amendment of Regulation H has been prompted primarily
by the repeal of the requirement in subsection (y) of section 12B
of the Federal Reserve Act that State banks having deposits of
#1,000,000 or more become members of the Federal Reserve System.
References to such statutory provisions and the related provisions
of section 9 of the Federal Reserve Act concerning the waiver of
membership requirements have been eliminated.
Standard condition of membership numbered 4 and the footnote appended thereto have been amended to conform the requirements
of the condition to comparable requirements contained in Regulation
F relating to trust powers of national banks. Standard condition
of membership numbered 5 was previously revised for the same reason and the revised condition has been inserted in this print of
the regulation.
Numerous other amendments, not specifically mentioned in
this letter, are all of a perfecting nature and do not involve any
change in policies or practices already in effect.
Very truly yours
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
160
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-55C
a d d r e s s official c o r r e s p o n d e n c e
to the s o a r o
November 16, 1939
Dear Sir:
Regulation F, Trust Powers of National Banks, has been
amended effective November 20, 1939, and a supply of copies of the
amended regulation is being forwarded to you under separate cover.
The only substantive amendment to the regulation relates
to the requirements of section 11. Inquiries received from time to
time have indicated that in some instances the best interests of
trusts might be better served if the requirements were somewhat more
flexible. Accordingly, transactions have been excepted from such
requirements where specifically authorized by court order. This exception has been incorporated in the regulation by substituting for
the last sentence of footnote 12 the following footnote applicable
to the entire section:
"The requirements of this section shall
not be deemed to prohibit the making of any
investments or the carrying out of any transactions which are expressly required by the
instrument creating the trust or are specifically authorized by court order."
For the purpose of clarification, the first sentence of
footnote 12 has been revised and incorporated as a footnote appended
to the word "interests" in subsections (a) and (b) of section 11.
Certain technical amendments to section 17 and the appendix have been adopted in order to conform with amendments to the
Internal Revenue laws.
Sf A Caiyenter,
Assistant Secretary
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-556
STATEMENT FOR THE PRESS
For release in morning papers,
Saturday, November 18, 1959.
The following summary of general
business and financial conditions
in the United States, based upon
statistics for October and the
first half of November, will appear in the December issue of the
Federal Reserve Bulletin and in
the monthly reviews of the Federal
Reserve banks.
Rapid expansion of industrial output continued in October,
and employment and pay rolls increased considerably.
Distribution of
commodities to consumers, which had increased in September, was maintained at the higher level in October.
In the first half of November
industrial activity increased further but, with production in many industries approaching capacity, the advance was less rapid than in earlier months.
Commodity prices generally showed little change during
October and the first half of November, following the sharp rise in
September.
Production
Volume of industrial production showed a further sharp rise
in October and the Board's seasonally adjusted index advanced from 111
to 120 per cent of the 1923-1925 average.
Marked increases in activity
were reported in the steel and.steel-consuming industries and at mines.
In the steel industry ingot production in October was at a rate of SO
per cent of capacity and actual volume of output was the greatest for
any month on record.
Some further increase in the rate of output was
-2reported in the first half of November.
R-556
163
Pig iron production also advanced
sharply and lake shipments of iron ore, which had increased considerably
in September, continued in exceptionally large volume.
Activity in the
machinery and shipbuilding industries and in most other steel-consuming
lines rose in October but by a considerably smaller amount than output of
steel.
In the automobile industry, however, output showed less than the
marked rise usual at this season.
This was due to the fact that plants
of one large producer were closed during most of the month by an industrial dispute. Mineral production in October was at record levels owing
chiefly to a high rate of crude petroleum output.
In the nondurable goods industries activity was generally maintained at the high levels reached in August and September.
Flour produc- •
tion declined sharply, however, following an exceptionally large volume
of output in September.
Value of construction contracts, as reported try the F. W. Dodge
Corporation, decreased considerably in October, reflecting principally a
reduction in awards for public construction.
Private residential con-
tracts continued in substantial volume while awards for commercial and
industrial building declined somewhat following increases in the previous
month.
Employment
Reports from leading industrial States indicate that factory
employment and pay rolls increased sharply between the middle of September
and the middle of October.
Increases were particularly large at steel
mills and in related industries. There was also a considerable increase
163
-3-
R-556
in employment on the railroads in October.
Distribution
Retail distribution of general merchandise in October showed
about the usual seasonal rise from the advanced September level.
In the
early part of November department store sales increased considerably.
Freight-car loadings rose further from September to October,
reflecting a large increase in shipments of miscellaneous freight, which
includes most manufactured products, and smaller increases in loadings
of coal, forest products, and ore.
Commodity prices
Price changes that have occurred since the general sharp rise in
September have reflected largely particular developments in individual
commodities.
From the middle of October to the middle of November prices
of a number of foodstuffs continued to decline and there were also decreases in some industrial materials, such as print cloths, wool, tin, and
steel scrap.
Wheat, cotton, and burlap advanced somewhat while prices of
most other commodities, including finished industrial products, showed
little change.
Government security prices
Following a sharp recovery from the low of September 21, prices
of United States Government bonds showed irregular changes during the period
from October 24 through the first half of November.
On November 15 yields
on long-term Treasury bonds were at 2.47 per cent as compared with 2.79 per
cent on September 21.
164
-4-
R-556
Bank credit
Total loans and investments at reporting member banks in 101
leading cities increased substantially during the six weeks ending
November 8, reflecting largely purchases of Treasury bills by New York
City banks. Commercial loans continued to show moderate increases.
Deposits at these banks rose to new high levels.
165
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-557
WASHINGTON
I
a d d r e s s official c o r r e s p o n d e n c e
to the 6 0 a r 0
********
November 17, 1939
Dear Sir;
There are enclosed herewith copies of statement rendered by the Bureau of
Engraving and Printing , covering the cost
of preparing Federal Reserve notes from
October 2 to October 51, 1939.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-557-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
October 2 to October 31, 1939.
Federal Reserve Notes. Series 1954.
$10
$20
Total Sheets
Amount
47,000
7,000
54,000
$ 4,968.00
226,000
39,000
265,000
24,380.00
Philadelphia
20,000
10,000
30,000
2,760.00
Cleveland
53,000
12,000
65,000
5,980.00
Richmond
20,000
12,000
32,000
2,944.00
Atlanta
4,000
6,000
10,000
920.00
Chicago
72,000
27,000
99,000
9,108.00
8,000
4,000
12,000
1,104.00
Minneapolis
13,000
4,000
17,000
1,564.00
Kansas City-
11,000
6,000
17,000
1,564.00
Dallas
10,000
4,000
14,000
1,288.00
San Francisco
46,000
24,000
70,000
6,440.00
530.000
155.000
685.000
$63,020.00
Boston
New York
St. Louis
685,000 sheets @ $92.00 per M -
$63,020.00
167
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-558
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
November 17, 1939
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 October 1939.
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 Interdistrict Settlement
Fund for the account of the Board of Governors
of the Federal Reserve System, and advise the
Federal Reserve Bank of Richmond by mail the
amount and purpose of the credit.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
168
R-558-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASAD WIRE SYSTEM FOR THE MONTH OF OCTOBER. 1959
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Total
Words
Chargeable
Pro Rata
Share of
Total P'.xpenses (1)
Expenses
Paid
by Banks
and
Board(2)
Payable
to
Board
of Governors
543
549
549
26,934
82,695
18,966
59,280
554.40
1,640.70
576.50
779.55
274.10
1,028.36
246.56
252.86
260.30
612.34
129.94
546.49
28,544
44,620
69,855
44,995
542
541
773
541
29,086
45,161
70,628
45,554
577.09
896.04
1,401.32
905.44
236.35
244.53
1,264.25
290.49
340.74
651.51
137.07
612.95
21.584
47,708
36,706
46,248
541
541
541
548
22,225
48,2.49
57,247
46,796
440.96
957.30
759.01
928.48
203.13
275.06
282.95
359.34
257.85
684.24
456.08
559.14
257,140
5,101.89
10,530.52
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
26,591
82,693
18,417
58,731
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Board of
Governors
257,140
Total
765,750
—*
6,209
769,959 #15,276.28 $15,276.28
—
#5,228.65
(1) Based on cost per word (#.019840896) 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 (#1,601.72) and wire rental ($8,728.80).
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.
169
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-559
a d d r c i i official c o r r e s p o n d e n c e
to t h e b o a r d
November 22, 1939
Dear Sir:
There is enclosed for your information a statement containing excerpts from
the bank relations reports submitted by the
Federal Reserve banks for the month of October 1939 in response to the Board's letter
of August 25, 1936 (X-9680).
Verf truly yours
L. P. Bethea,
Assistant Secretary
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R~559-u-a—
November 2E, 1959.
Not for publication.
EXCERPTS FROM BANK RELATIONS REPORTS FOR THE
MONTH OF OCTOBER 1939.
BOSTON
During October visits were made to twenty-two member
banks and one nonmember bank.
Mills and factories located in the communities visited
were said to be working full time in all lines. In some communities pay rolls had increased recently from 10 to 20 per cent.
Retail trade at all points was reported to be satisfactory.
The one general complaint among the banks visited was
that of an insufficient volume of loans and unsatisfactory yields
on short-term securities. In the several instances where bank
loans had shown a tendency to increase during the last several
months, the increase was confined almost entirely to loans to
small borrowers.
At no bank was there any criticism of the policies and
operations of the Federal Reserve System or of the services rendered by this bank.
NEW YORK
During the month of October our officers and representa
tives visited 225 banks, of which 171 are member and 54 nonmember
institutions. This total comprises banks located in different
sections of the district - two counties in New Jersey and twelve
counties in New York State.
Bergen County. New Jersey.
In general, the disposition to liquidate holdings of
corporate issues, especially railroad bonds, continues although
some bankers have lately been following a "watchful waiting" policy since the recent market improvement in some of their rails,
and now seem inclined to hold on to those issues in the expectation that they may yet be able to sell them without any further
substantial losses. Several bankers who have been confining new
investments exclusively to United States Government, State, and
municipal issues, say they are being pressed by some of their directors to invest in higher yield securities in order to increase
-2-
R-559-6
income, and that it is becoming increasingly difficult to resist this
pressure in view of the limited earning power of their banks.
The attitude of bankers visited is friendly toward the Federal Reserve System. Several commented favorably on the action recently taken to stabilize values in the Government bond market, but a
few were critical of the temporary requirement that the names be reported to the Federal Reserve banks of those offering United States
Government securities for sale to us, the opinion being expressed that
this practice operated against a free market and did more harm than
good.
Hudson County, New Jersey
The four mutual savings banks showed a good increase in deposits (now totaling #77,175,000) for the first six months of this
year, but all have suffered quite heavy withdrawals since July 1 when
the rate paid on savings deposits by all banks in the State was reduced to a maximum of 1 per cent under the mandatory regulation issued
by the Commissioner of Banking and Insurance. Officers of these institutions also report that the amounts of new funds being deposited
are less than normal, and they fear that there will be further heavy
withdrawals of deposits, after the next semi-annual interest payment
on January 1, 1940, when more people become aware of the rate reduction. The president of one savings bank (deposits 111,000,000) regards the drop in interest rate from 2 to 1 per cent as too drastic
and believes there would have been a better feeling if .the rate had
been fixed at 1-1/2 per cent. He is also opposed to the action taken
by the Federal Housing Administration in reducing the rate on insured
mortgage loans to 4-1/2 per cent, as he contends that this is too low
for loans of such long maturity. The president of another savings bank
(deposits $35,000,000) characterises the mandatory interest rate reduction as an "outrage", saying that his institution as well as some others
in the State could well afford to continue the 2 per cent rate which is
being paid by savings banks in New York. He also criticizes Congress
for not enacting the proposed legislation to increase the insurance coverage by the Federal Deposit Insurance Corporation from $5,000 to $10,000
for any one account, as he claims his bank has lost a substantial amount
of deposits on account of customers reducing their balances to the insurable limit.
Columbia, Dutchess, -Putnam. Saratoga. Warren, and Washington Counties,
New York
Only a few of the commercial banks sold any substantial
amounts of their United States Government obligations or other high
grade securities during the September market reaction. Two institutions
-3-
R-559-a
172
sold large blocks as a part of a previously determined program whereby certain substandard bonds are being eliminated and the losses
thereon offset by profits realized from sales of United States Governments. Another sold $500,000 United States Governments in anticipation of withdrawals of public funds. There was also some switching
from long-term to short-term Governments, a number of bank officers
stating that this was done upon the suggestion of their investment advisory services. One executive remarked that he made no changes in
September as he "did not care to sell the Government short"; another
stated that he watched a very substantial appreciation disappear but
had the satisfaction of knowing that he "had not contributed to rocking the boat". A few banks took advantage of early September prices
to add to their Government security holdings and placed additional
orders on a downward scale of prices in the hope of obtaining still
more. Two institutions hold no United States Government obligations.
A considerable number, however, are confining all new purchases to
Governments and a few are carrying out a program whereby their portfolios in the future will consist almost entirely of United States
and high grade State and municipal issues.
PHILADELPHIA
„
t
*
The area covered 'by this report includes ten counties in
the southwestern part of that portion of Pennsylvania, assigned to this
district. It contains 7,564 square miles and has a population of
704,000. Total banking resources approximate $185,000,000, having increased about 4 per cent since the time of the last previous visit.
There has been widespread improvement in local business and
employment conditions during the past year. The principal sources of
industrial income in much of this area, bituminous coal mining, steel
and brick manufacturing, and railroad operations, are susceptible to
the same influence, thus producing the practical effect of dependence
upon one industry - steel. The steel mills use coke, which is produced from soft coal, for fuel, and also need firebrick for furnace
linings. Consequently increases in steel mill activity cause proportionate increases in mine and refractory operations. The transport of
coal, firebrick, and steel causes a big upturn in rail operations.
The steel mills are busy at present and are employing between
12,000 and 13,000 men. All of the brick yards have materially increased
operations, while the coal mines are working five and six days a week.
Some bankers report that there is a shortage of mine workers in their
respective communities, which in some cases could be met if man experienced in this work but now on WPA rolls would return to the mines.
Other bankers, however, stated that in their counties the number of
-4-
R-559-a
173
workers re-employed by the mines had reduced WPA rolls to a point that
there were not enough men available to complete projects already under
way.
Increased activity by both the Pennsylvania Railroad and the
Baltimore and Ohio Railroad has resulted in the re-employment of workers laid off for as long as two years.
The various other industries, while of local importance, are
considerably smaller than those referred to, but are operating at a
satisfactory level.
In shipping coal to Canada, old cars are being used and the
cars are then sold at their destination for scrap. A continuance of
this practice will result in a shortage of cars and require replacements, thus increasing activity at the various car shops. Additional
stimulus is expected to be provided by the necessity of re-equipping
several closed coal mines in the event that the demand for coal makes
it profitable to reopen them.
Agricultural conditions are fairly good. The greater portion
of this area escaped drought damage and produced abundant crops. Prices
for most of them, however, were low and only small profits were made.
The exceptions to this were peaches, cherries, berries, and potatoes.
Grain prices, which had been low were said to be increasing*
Milk prices have improved and dairying is now providing a satisfactory year-round income. Poultry and poultry products also are netting a good return.
Credit demand is somewhat stronger than in recent years and
loan liquidation is considered satisfactory. An upturn 'in the realty
market would be most welcome to many of the bankers, as holdings of
other real estate are substantial and the several years of hard times
have impaired the protection of many loans. To date, there has been
little activity in this market, although rentals in general are good.
There is but a limited amount of new building and that is confined to
a few communities.
At most of the institutions visited it was learned that credit
could be obtained at rates less than 6 per cent where the collateral or
risk warranted. Savings and time deposit rates, however, tended higher
than those prevailing in many other sections of the District.
CLEVELAND
During the month of October six additional State banks were
admitted to membership having resources totaling in excess of $8,100,000.
-5-
R-559-a
(It is interesting to note that one of these is a bank which a number
of years ago brought suit against Federal Reserve Bank of Cleveland
in connection with presentation of checks at the counter for collection.)
A number of banks in addition to those mentioned last month
are reporting loans at all-time peaksi This is especially true in the
tobacco sections in Kentucky, and is partly seasonal since loans usually reach a seasonal high during October and November. A substantial
liquidation ordinarily follows the opening of tobacco markets in early
December. It is believed that the tobacco markets may not open until
approximately a month beyond the customary day*
Efforts to interest Kentucky State banks in membership are
not particularly fruitful* The principal objections seem to center
around the idea that membership in the System constitutes a step away
from the dual banking system; that reports by the Federal Reserve constitute an undue and unnecessary burden. An additional obstacle is
that reserve requirements would be substantially increased since the
Kentucky law provides for reserves equal to those required by the Federal Reserve System prior to the passage of the Banking Act of 1935,
and permits cash in vault to be counted as part of such reserve, .
The president of a large city National bank raises the question as to the future of the one to ten ratio in view of rapidly increasing deposits at all banks.
RICHMOND
Many banks in the District reveal a growing interest in membership. Senior officers and other representatives of this bank have
contributed to this by numerous visits to nonmember banks. In consequence, some of them have applied for membership and others have taken
steps to that end. In a few instances banks now ineligible are considering the advisability of making adjustments essential to membership,
and certain eligible banks, hitherto uninterested, are carefully considering membership. In carrying on the work of adding to the number
of member banks, this bank for the first time has the helpful cooperation of several large and influential correspondent banks.
Maryland and West Virginia banks visited in October manifest
a growing optimism, with deposits firm or increasing and renewed activity in the loan field, particularly from individuals and farmers.
The interest in loans is believed to be the result of increased industrial pay rolls and better prices received for livestock.
-6-
-
i
r
Northern West Virginia
Most banks report an increased demand for loans following the
outbreak of war. Six per cent is the going rate for loans, while 2 and
2-1/2 per cent are paid on deposits.
Personal income loans are being pushed vigorously in some communities, while in others this type of loan is about the only kind that
can be made. Personal loans, while not any important proportion of the
total, have proved to be the most profitable assets in portfolios.
Some banks, feeling an urgency for income and having insufficient loans to produce it, have recently purchased some Governments.
Many other banks have surplus funds to invest and would be interested
in a level of 3 per cent for long-term bonds and 2-1/2 per cent for intermediate-term. In fact, expressions indicated a substantial demand
for long-term bonds at a 3 per cent level,
A number of favorable comments were expressed in regard to the
Reserve System's support of the Government bond market.
Bank earnings have improved in those banks where loans have
risen, with a good prospect of further increase in earnings from loan
expansion.
North Central Virginia
Bank loans and deposits have been expanding. Indeed, some
banks report an all-time high for deposits. As deposits have grown, the
problem of the rate paid on time deposits has been aggravated, for these
deposits expand faster than demand deposits and usually constitute the
major portion of the total. Where agreements can be perfected among
bankers the rate is generally reduced to 2 per cent, but otherwise it remains at 2-1/8.
It then becomes both possible and necessary for the banker to
hold out for 6 per cent on loans. The result is that some communities
are paying more for money than would be necessary and to that extent
borrowers other than time depositors are penalized. One of the impressive facts that comes out from a study of country banking is the tendency to rigidity in the rate charged on loans. When local banks have
been subjected to outside pressure resulting from competition with banks
in metropolitan centers-, loan rates have been reduced and gradually this
sort of competition is becoming more effective, but only gradually.
A few banks have found it necessary to borrow for seasonal purposes and now and then one meets with a banker who no longer contends
that it is unsafe to show notes payable in his published statement.
a
-7-
V
R-559-a
176
ATLANTA
t
,
A representative of the Federal Reserve Bank made visits to
thirteen member and twelve nonmeznber banks, all situated-on the Florida
east coast, south of Daytona Beach. The banks visited have enjoyed a
very satisfactory period during the past few months. Business this summer has been good; deposits in many of the banks have increased considerably in comparison with a year ago; likewise, loans in many banks have
increased, particularly in the smaller towns. Several of the banks report that earnings have been quite satisfactory. Some of the banks in
the smaller towns, where the ratio of earning assets to deposits is
greater than in the larger cities, contend that the profitable employment of funds is more or less a question of going after the business
and that loans can be made if a banker is willing to keep on the alert.
Little mention was made of the European situation by bankers
with whom our representative talked, and fewer comments on the market
for Government securities were heard than while visiting banks in southwest Florida in the first half of September. However, a topic quite
frequently broached was that of the requirements of the Wages and Hours
Law and how to keep within the 42 hour work week effective October 24.
Louisiana
x
y
The officers of banks visited in southwestern Louisiana reported some improvement in banking activities since the first of the
year, and, due to recent advances in commodity prices, view with considerable optimism the outlook for the immediate future. Although the
banks in this area continue to be confronted with the general problem
of excess funds, there has been a notable increase in demand for both
agricultural and commercial loans. Several bankers reported that in
order to meet advancing commodity and merchandise prices, a number of
their customers, including rice millers, sugar mill operators, and merchants had already applied for increased lines of credit. During recent years, loans to farmers for purchase of cattle and improvement of
herds have greatly assisted in building up a thriving industry and at
the same time have proved a valuable source of revenue to the banks.
Personal and installment loan departments, which are being actively promoted by all banks visited, are also found to be an important source of
earnings. Without exception, bankers in this section report satisfactory earnings for the current year,
>
Banks in this area pay from 1-1/2 per cent to 2-1/2 per cent
on savings accounts, while the average rate charged for commercial, personal, and installment loans is 6 per cent and for agricultural loans 8
per cent.
R-559-a
177
Tennessee
;
>
Our representative visited thirteen member and eleven nomriember banks in Knoxville and. in the northern part of Tennessee between
Knoxville and Nashville. In the Cartliage-Cookeville section, ana in
Knoxville and its vicinity, most of the banks reported a surplus of
loanable funds, the profitable employment of which continues to be one
of the main problems confronting the managements of the institutions
visited. One member bank reported an increase in loans in the last
twelve months from §240,000 to $>420,000, this being attributed to advertising the fact that the bank wanted loans. In spite of a generally existing surplus of loanable funds, a majority of the bankers visited
stated that earnings for the year would be fairly satisfactory. Forage
crops were hurt severely by the dry weather during the latter part of
the summer and in September, as was the upland com crop. However, lowland corn will apparently make a good yield. In Morgan County potatoes
are the main cash crop and are now being harvested with a satisfactory
yield per acre, and with the grower receiving around |l per bushel.
CHICAGO
Banks continued during the early part of October to manifest
considerable interest in the Government bond market. The general tendency, however, was to make no change in their present holdings. Some
bankers indicated that they would increase their Government bond portfolios should the market reach what they consider a more favorable
level, Bank earnings continued reasonably good, the prospect being
that, contrary to the earlier impressions, the earnings for the last
six months of 1939 will equal those for the first half of the year.
Many of the bankers expressed regret over the fact that the
Commodity Credit Corporation did not permit the banks to carry the renewed corn loans rather than to pay off such loans by selling 5/8 per
cent debentures largely to the eastern banks.
Throughout the corn belts in Iowa and Illinois, the corn yield
has been exceptionally good. While rainfall has been lacking in certain
sections of the Seventh District, the drouth has not materially impaired
the quality of corn, and it is said that it has facilitated the harvesting of the soy bean crop. On the other hand, the drouth has adversely
affected alfalfa and the prospects for winter wheat. In some quarters,
continued drouth has resulted in the drying of wells, and concern is felt
over the ability to water livestock. The favorable yield of com has
led to substantial purchases of feeder stock at prices around eight cents
per pound and upward, particularly in Iowa. A large volume of the feeders
purchased comes from Texas and other western points.
178
-9-
V
R-559-a
Industrial activity in the District continued to rise,
The steel operating rate has approached capacity levels» Delivery
problems are acute, one of the heaviest pressure spots being the
railroad car building shops. The volume of automobile production
has shown a rapid seasonal expansion. In industrial centers visited
it was stated that employment is at the high levels with a scarcity
of skilled labor being experienced and a noticeable reduction in relief rolls at some points *
ST. LOUIS
>
During the month our officers and field representatives
Visited 173 banks, of which 65 were in Indiana, 30 in Arkansas, 30
in Missouri, 26 in Kentucky, 19 in Tennessee, and 5 in Illinois.
Those portions of Indiana visited in October are principally agricultural but contain numerous industrial plants, and are
important in production of bituminous coal.
The season to September 1 was very decidedly favorable
from the standpoint of agricultural production and farmers for the
most part have made some money.
>
>
Trends in banking in the area follow rather closely those
in general business. Apparently demand for credit has been good in
most communities during the year, but much Improved since late spring.
Reports of expansion in demand for small, personal loans were numerous. Liquidation at country banks of agricultural loans of all descriptions is in the main satisfactory, with some notes of long
standing being paid in full or reduced.
Among a number of country banks much uncertainty seems to be
felt relative to the future of Government bonds, because of steadily
increasing National debt, unbalanced budget, the European war, prospects of our entering the conflict with incident colossal bond issues,
and other causes. Many of dubious bankers sought advice as to what
to do, buy, sell, hold, or what. Naturally no suggestions were vouchsafed.
The cashier of a Missouri nonmember admitted that his board
was more favorable and enthusiastic about membership than he was. He
finally stated that his main reason for not applying was that he had
a large number of correspondent accounts, some for business purposes,
others due to friendships, but if he could determine a satisfactory
-10-
R-559-a
way to consolidate these accounts, he might apply for membership.
He further stated that he had heard much favorable comment about what
he termed "the changed attitude of the Reserve System" in attempting
to promote goodwill among commercial banks by being of real service.
The cashier of a Missouri State member was very bitter in
his criticisms of the Production Credit Association activities which
he said were taking many of his good customers away from him. He was
also worried about ways and means to be used in operating the bank so
as to conform to the Wages and Hours Law.
The cashier of a Missouri National bank stated that he was
not bothered by competition from the Production Credit Association
since his bank did not like to make loans of the type made by the
Association. A few of his customers had left and gone to the Association only to return after one experience with the Association.
MINNEAPOLIS
South Dakota
One of the principal speakers at the South Dakota group
meetings was William C. Rempfer, Cashier of the First National Bank,
Parkston, South Dakota, and President of the South Dakota Bankers'
Association. His topic was "Adequate Earnings" and in connection
with it he presented a number of schedules showing comparative statistics of South Dakota banks covering earnings and expenses, earning rates, gross income ratios, average rate of interest paid on time
money, salaries record, gross income per employee, bank activity
charges, operating statements, etc.
One point that he stressed was the necessity for making adequate service charges. In his talk he outlined the practice of his
bank in charging 1/2 of 1 per cent for the denominational exchange of
currency and coin. The latter proposal was new to many of the bankers,
and it was evident that some of them were not favorably inclined toward the adoption of such a service charge.
Due to lack of moisture, general conditions in western South
Dakota were considered to be only fair. There was a shortage of feed
in this territory, and hay was being shipped in at the time of our
visit. It was reported in some sections that it would be necessary
to reduce the amount of livestock as a result. Throughout the central
section of South Dakota, conditions were somewhat spotted, it being reported that where local showers had been received, crops in some cases
180
-11-
R-559-a
had been good, while 111 other sections they ranged from poor to fair.
Conditions generally were more satisfactory in the eastern part of
the State, which comprises most of the better diversified farming
area of South Dakota. Bankers generally were somewhat optimistic and
some of them reported' that their earnings to date were good. In other
instances, the banks admitted prospects for the coming year were not
particularly encouraging, although due to Governmental expenditures,
they did not anticipate acute suffering by the farmers in their territories.
Southern Minnesota
Generally the banks in this territory were enjoying a good
demand for loans and most of them had a very good total of loans and
discounts as compared to their deposits.
With the exception of Rochester where one member bank pays
1-1/2 per cent on time deposits, banks in this vicinity pay 2 or 2-1/2
per cent. While some of the banks paying 2-1/2 per cent were debating whether to reduce to 2 per cent, the general feeling was that with
the increased lines of loans and discounts on which 6 per cent and 7
per cent and sometimes 8 per cent was realized, probably the rates
paid were not out of line.
Generally speaking, the banks were pleased with their situation as to earnings, which it was indicated would be better this year
than for some years back. One bank with $15,000 capital reported earnings of #8,000 last year and expected greater earnings this year.
KANSAS CITY
* In October a large number of banks in western Nebraska were
visited and nine group meetings in Kansas were attended. In Colorado
twenty member and seventeen nonmember banks were called on. There
were a few exceptions but generally bankers were very friendly. Not
many good prospects for new members were found. At the same time
there was more discussion of the advantages of membership than formerly and in a number of institutions adjustments are in process that
may clear the way for membership.
In September the almost universal subject of conversation
among bankers had been the war and its probable effect on the price of
farm products and Government bonds. In October there was little talk
of war and apparently little concern about the price of Government
bonds. Most bankers took the position that the Federal Reserve System
would not let the Government bond market get out of hand and some instances were found of regret that bonds had been sold.
—X2~*
R-559-a
The continuation of the unprecedented fall drouth is the
thing about which everyone is talking. In Kansas and Oklahoma rainfall in September was only 10 per cent of normal and in Missouri and
Nebraska only 20 per cent. October was unusually dry also, rainfall
averaging appreciably less than half of normal throughout the District. Some farmers were drilling wheat in the dry soil while others
were waiting for rain. It is said that nearly all of this wheat that
is being dusted in, as the farmers call it, is covered by crop insurance.
In Nebraska, outside of irrigated regions, and in many
parts of western Kansas, a feeling of discouragement and resignation
because of the drouth is very noticeable. In some parts of Nebraska
it has been seven or eight years since a crop was produced and many'
farmers are moving out, some going to Wyoming. It is said that more
than a third of the farmers in Custer County, Nebraska, have been financed by the FSA and that this agency is now selling out many farmers.
In nearly all cases, according to reports, the FSA is taking a loss.
In the irrigated regions of western Nebraska conditions are
unusually good. The beet crop got a poor start, but later came out
unexpectedly well. It appears that yields and sugar content will be
normal. The potato crop is also the best in years, the average yield
being around 300 bushels per acre and yields of 500 and 600 bushels
occasionally being reported. The bean crop is both good and profitable.
Banks in irrigated regions of Nebraska report considerable
demand for loans. Farmers generally are holding for higher prices
and quite a number of banks are rediscounting. There is also some
demand for loans for feeding purposes but cattle prices are considered
high and banks are loath to make loans to feeders except in cases
where those persons can afford to take a loss.
Next to the drouth, the most important topic of conversation
at group meetings of bankers was the Wages and Hours Act. There is a
great deal of resentment against the application of this law to banks
as it is universally agreed that many tasks around a bank, such as a
teller's job,are of such a nature that it is almost impossible for a
substitute to finish the day's work. It is the opinion of many bankers that it would be better to go to a 40-hour-week at once in order
that bank operations can get adjusted to those hours and thus obviate
the necessity of bank customers having to go through a process of successive adjustments to new schedules of hours. Apparently Saturday
afternoon closing will take care of most cases. . Some banks are also
planning to open later and others to close earlier. Considerable study
is being made of Saturday afternoon business. It appears that there is
-13-
R-559-a* .. 1 8 2
less activity in country banks at that time than is ordinarily supposed. In small country places nearly everyone goes to the county
seat town Saturday afternoon, and even in the larger places few banks
work credit lines on Saturday and most of their business consists of
cashing checks. However, it is customary for merchants to cash checks
for farmers so there is less need of banks being open Saturday afternoon than might be expected.
DALLAS
West Texas
All member banks and three nonmembers located in eleven
counties of the South -Plains region in west Texas were visited by our
representatives.
The livestock industry continues to be the bright spot in
the economic picture of this section of Texas. The low estate to which
the cotton farmers have fallen in recent years by reason of low prices,
loss of markets and restricted production has caused a steadily increasing number of them to turn to raising cattle, hogs, and sheep,
particularly in the so-called shallow well water terrain that extends
over several counties and affords an ample supply of water for livestock and irrigation for feed crops. Livestock prices continue high
in relation to the cost of feeds, and thousands of calves, hogs, and
sheep are being profitably raised and fattened for market. The everincreasing construction of trench silos for the storage of reserve
supplies of feed in the form of ensilage is gradually reinforcing the
position of livestock producers against the hazards of winter drouths.
The competition among banks and other lending agencies, both
public and private, for loans to stockmen is exceedingly keen.
In some localities cotton is being held in anticipation of a
Government loan; in others it is being sold as rapidly as it is ginned.
Many bankers expressed the hope that the Government will not make a
loan on cotton this year. They feel that previous loans have been
largely responsible for the loss of this country's foreign cotton markets and. that the cotton impounded in the Government's warehouse stocks
is a constant bearish menace to the domestic market.
Whatever may be the position of the cotton farmers in other
sections of the South, those in west Texas are able, it is claimed, to
produce cotton profitably on the basis of a market price ranging from
six to nine cents a pound, due to the highly mechanized methods of cultivation and harvesting employed in the large-scale farming system
peculiar to the plains country of west Texas.
-14-
R-559-a
I*®®
In the larger centers of this highly diversified agricultural
region, deposits are steadily increasing despite the deterrent effects
of drouths and the restricted crop control program. Loans are also
showing an upward trend and bank earnings, as a rule, are regarded as
healthy and satisfactory.
As a general rule the interviewed bankers were about evenly
divided in their sentiments regarding the AAA farm program, some of
them being in favor of its continuance and about an equal number being
of the opinion that all forms of subsidies and crop controls should be
discarded and a free rein given to farmers to fall back on their own
financial and managerial resources.
SAN FRANCISCO
Fresno and Kern Counties, California
General conditions in Fresno and Kern Counties are quite satisfactory. Agricultural production has provided reasonably good crops
and returns have been somewhat better than expected. Some difficulty
is being experienced in the cotton areas, where a portion of the pickers are on strike. Sales of cotton this season are reported to have
been made at from 8 to 9 cents per pound. Grape production was smaller
than anticipated earlier in the season, and while the price paid to
growers was somewhat less than received last year, it was considerably
better than the outlook appeared at the beginning of this year's operations, Prices have been from $10 to $12 per ton and wineries have
paid as high as $17 per ton for the muscat variety. There appears to
be considerable activity in the building of small homes at Fresno, Inquiry, however, did not disclose the basis for this building activity.
Wenatchee and Okanogan Valleys. Washington
The apple situation in the Wenatchee and Okanogan valleys,
with particular reference to the lack of an export market, has been
giving the growers considerable concern. The bankers, however, have
not financed the apple growers to the same extent as in previous years,
and they feel that, while there may be some losses in the industry,
the banks will not be materially affected.
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
October - 1939
Federal
Reserve
Bank
Boston
New York
Philadelphia
Cleveland
23
171
97
140
2
54
32
64
25
225
129
204
Richmond
Atlanta,
Chicago
St. Louis
114
48
43
68
59
57
59
105
29
32
18
36
44
34
5
7
Minneapolis
Kansas City
Dallas
San Francisco
1
Addresses Made
1
Meetings Attended
!
Number
Attendance
Number I Attendance
Visits to Banks
Member
Nonmember i Total
2
4
— — *
„
1/
565
. —
—•—»
15
3,262
173
85
82
173
7
8
12
5
2,256
865
2,437
830
73
66
21
43
7
13
2
20
1,304
4,051
200
2,212
3
3
170
230
1
150
— —
——*
— —
5
635
8
1
1,174
40
2
175
—
1/ Not reported
A
1
\
>-
A
185
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-560
a d d r e s s official c o r r e s p o n d e n c e
t o the s o a r d
November 27, 1939
Dear Sir:
Recently It became necessary to replenish the supply of Regulation Q, Payment of Interest
on Deposits, and in reprinting the regulation there
was included the amendment which became effective
on February 11, 1937, which is the only amendment
made to the regulation since the previous print. .
There are being sent to you today under
separate cover 100 copies of the reprint.
Very truly yours
S. R. Carpenter,
Assistant Secretary
TO PRESIDENTS Of ALL FEDERAL RESERVE BANKS
186
BOARD O F G O V E R N O R S
xSS££
OF THE
FEDERAL RESERVE SYSTEM
R-5S1
WASHINGTON
a d d r c s i official c o r r e 1 p o n d c n o c
to the b o a r d
+****»»»
November 28, 1959
"T
Dear Sir:
In accordance with its practice in recent
years, the Board of Governors of the Federal Reserve
System will send to State bank examiners upon request
a complimentary copy of each issue of the Federal Reserve Bulletin published in 1940.
In this connection,
it will be appreciated if you will submit as soon as
possible the names and addresses of all State bank
examiners in your district who desire to avail themselves of this service.
iry truly yours,
'J.
J. C. No
Noell,
ell
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT CHICAGO
187
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-562
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
t o the b o a r d
November 29, 1939
Dear Sir:
On Monday, December 25, the offices
of the Board of Governors of the Federal Reserve System and all Federal Reserve banks
and branches will be closed.
Very truly yours
J. C. Noell,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
•4 Q Q
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-563
a d d r e i i official c o r r e i p o n d c n o i
to the b o a r d
December 1, 1939
Dear Sir:
There are being forwarded to you today under separate
cover the number indicated of the following forms for use by
your bank during I9I4.O:
Number of
copies
Form
E
Functional Expense report
F, R, 38
Classification of discounted and
purchased bills held at end of
month
F, R. 160
l60A
160B
160C
) Receipts and Paymorts of Paper
) Currency - Monthly Report
)
)
Other forias required for use in I9I4.O will be
furnished at a later date.
TO THE
Very truly yours,
(
( / P
T
J. R. Van Fossen, Assistant Chief,
Division of Bank Operations.
PRESIDENTS OF ALL FEDERAL RESERVE BANKS
'
189
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
|
R-56I.
WASHINGTON
*
4
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 1, 1939
Dear Sir:
There are being forwarded to you today under separate
cover the number indicated of the following forms for use by
your office during I9I4.O:
Number of
copies
Form
F. R. 5
Federal Reserve Notes - Daily Statement of Federal Reserve Agent
F. R. Ui
Federal Reserve Notes received,
issued.to bank and returned to
Comptroller of the Currency Monthly report.
Very truly yours,
Cypn //—-
rr~
J« R. Van Fossen Assistant Chief,
Division of Bank Operations.
TO THE FEDERAL RESERVE AGENTS OF EACH FEDERAL RESERVE BANK
R-565
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For immediate release
December 4, 1939
The Board of Governors of the Federal Reserve System
today announced the appointment of Warren F. Whittier, farmer,
dairyman and cattle breeder, Douglassville, Pennsylvania, as a
class MC" director of the Federal Reserve Bank of Philadelphia
for the unexpired portion of the term ending December 51, 1940.
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
td the s o a r d
December 4, 1959
Dear Sir:
There is enclosed for your information
a copy of the Board's letter of December
1939,
to President Harrison, and an attached proposed
circular letter concerning separation allowances
and special contributions to the Retirement System, in which it is requested that this subject
be placed on the program for discussion at the
forthcoming Presidents' Conference.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosures 2
TO PRESIDENTS OF ALL FEDERAL RESERVE M S
EXCEPT NEW YORK
192
:R-566-a
December 4, 1939
Mr. C-. L. Harrison, Chairman,
Presidents' Conference,
C/o Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Harrison:
Now that the Retirement System has been in operation for a period of nearly six years, the Board is of the
opinion that some changes should be made in the authorizations contained in its letter, 8-7, of June 24, 1937 with
respect to separation allowances and special contributions
to the Retirement System for the purpose of supplementing
retirement allowances, and in its letter, X-979&, of January 21, 1937 with respect to the retention of officers and
employees in service after the attainment of age 65.
Accordingly, trio Board's staff has prepared the
attached proposed circular letter to all Federal Reserve
banks which is intended to supersede the above mentioned
letters.
Before reaching any decision in regard to the proposed circular letter, the Board would appreciate receiving
the opinion of the Presidents on the suggested changes. It
will be appreciated, therefore, if this subject is placed on
the program for discussion at the forthcoming Presidents'
Conference. Owing to the limited time before the next Presidents' Conference, December 12, a copy of this letter and
its enclosure is being sent to tho President of each of the
other Federal Reserve banks.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
Enclosure
»
193
R-566-b
Dear Sirs
The Board has reviewed its policy with respect to the
retirement of officers and employees upon attainment of age 65#
and the authorization heretofore given to the Federal Reserve
banks to pay separation allowances, and to make special contributions to the Retirement System, and is of the opinion that some
changes therein are desirable. Accordingly, the Board's letters
X-9798 of January 21, 1937# and S-7 of June 2l|., 1937# are hereby
rescinded, effective July 1, 19^0, and beginning with that date
the Board's policy on the above mentioned matters will be as
follows;
Retirement of officers and employees upon attainment of age 65«
The Rules and Regulations of the Retirement System provide that any member in active service who has attained age 65
shall be retired on a date not more than ninety days next following the date on which such age is attained, except that during
the five years next following attainment of age 65 any member,
on the request of the employing bank# may be retained in service
for a period of one year as the result of each such request during the five year period.
While the retention of employees in service after attaining age 65 was justified, in many instances, when the Retirement
System was first established, it is thought that the necessity
for such extensions now rarely exists. Furthermore, it has now
been nearly 6 years since the Retirement System was set up and
employees have had sufficient notice that the Rules and Regulations provide for retirement at age 65 to enable them to take the
steps necessary to accommodate themselves to the change from
ancsemployed to a retired status. Accordingly, the Board is of
V
- 2 -
R-566-b
the opinion that officers and employees should be retired promptlyafter attainment of age 65* in the absence of exceptional circumstances which would justify retention in service beyond that age.
In case, therefore, a federal Reserve bank wishes to retain an
officer (other than the President or First Vice President) or employee in service for more than 90 days after he attains age 65,
the Board should be furnished with a full statement of the exceptional circumstances which, in the judgment of the board of
directors of the bank, justify such retention, and beginning with
January 1, 19^1, the Board's advance approval should be obtained
for the payment of salary for any service rendered after the
expiration of such ninety day period.
Special contributions to the Retirement System for benefit of
officers and employees retired at or^after"Ifge 65*
On retirement of an officer or employee at or after attaining age 65 and after at least five years of service, your bank is
authorized, with the approval of the Board of Directors, to pay to
the Retirement System such amount as may be necessary to increase his
retirement allowance by an amount not exceeding $1,00 for each month
of service, provided that the retirement allowance as thus supplemented shall in no case exceed one-half of his average annual salary
during the last five years of service or ^1,200, whichever is loss.
In the case of medium and higher salaried officers and employees, this represents a substantial reduction from the maximum
payment, six months1 salary, that can be made under existing authorizations# In order that this change* may not be too abrupt, your bank
is authorized in lieu of the above to pay to the Retirement System
for the benefit of an officer or employee retired prior to January 1
19^42, an amount not to exceed 25 per cent of the salary that the
officer or employee would have received at the current rate from the
date of his retirement to January 1, 19''2, if he had remained in
service to that date.
Contributions to the Retirement System for the benefit of employees
on leave of absence on part pay or without"pay.
In the case of officers or employees on leave of absence
on part pay, contributions by the bank may be continued at the full
rate, provided that deductions arc also made at the full rate from
salary paid. Contributions in order to continue in effect eligibility
for death and disability benefits may be made by the bank in the
case of an officer or employee on leave of absence without pay,
R-566-b
- 3 -
whether or not he makes his contributions also, but such contributions by the bank should not be made for a period in excess of two
months without obtaining the prior approval of the Board of
Governors, unless the absence is due to illness or to temporary service in a civilian capacity with a department or agency of the
Federal Government.
Separation allowances
If an officer or employee of your bank is separated from
service with the bank prior to attainment of age 65 under such circumstances as in the opinion of your directors warrants the payment
to such officer or employee of a separation allowance, your bank
may pay to the officer or employee, or to the Retirement System for
his benefit, an amount equal to not more than one-half of one month1s
salary for each six months' service or fraction thereof, with a
maximum of six months' salary. It is assumed that no separation
allowance will be paid to an officer or employee who voluntarily
resigns to accept other employment.
In applying the above any salary in excess of $12,000 per
annum shall be treated as a salary of $12,000, and in computing
length of service for the purpose of determining the maximum
separation allowance or special contribution to the Retirement
System all service to date of retirement may be counted, even though
a portion of such service may not be creditable service, as defined
in Section 1 of the Rules and Regulations of the Retirement System,
Retirement allowances as referred to above are the regular cash refund allowances or their actuarial equivalent under any of the
optional plans.
This letter is not to be construed as indicating the contribution, if any, that should be made in a given case. It merely
sets forth what in the opinion of the Board appear to be the maximum
payments that should be made either as separation allowances or to
supplement retirement allowances.
Very truly yours,
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF G O V E R N O R S
R
196
^6?
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
^
,
_ a d d r t » e official c o r r e s p o n d e n c e
to the b o a r d
December y9 1939
Dear Sir:
It will be appreciated if. you will furnish us, not later
than January 15, 19Uo, with the following data for use in the Board's
forthcoming annual reports
1# Statement showing the number of member banks in
each State (or part of State in the district)
accommodated through the discount of paper during
each month of the calendar year 1939 and during
the year as a whole#
2# Statement showing the following information as of
December 30, 1939:
Number of member banks in operation
National banks
State bank members
Number of nonmembor banks on the par list
Nonmember State banks (exclusive of mutual
savings banks)
Private banks under State supervision
Private banks not under State supervision
Number of nonmember banks not on the par list
Nonmembor State banks (exclusive of mutual
savings banks)
Private banks under State supervision
Private banks not under State supervision
3* Statement showing the names and locations of banks
(including private banks) not on the par list on
December 31* 1938, which during 1939*
(1) went out of existence (other than through conversion into or succession by national banks)
(2) wore converted into or succeeded by national banks
(3) were admitted to Federal Reserve membership
(h) were added to par list (other than through :
membership)
R-56?
197
- 2 -
1
it* Statement showing the names and. locations of banks
(including private banks) which became non-par banks
during 1939 through
(1) primary organization of non-par banks
(2) conversion of national banks into or succession
by nonmembcr non-par banks
(3) withdrawal of State banks from Federal Reserve
membership
(U) withdrawal of nonmembcr banks from par list
v
"
The figures of banks on the par list and not on the par list
on December 30, 1939> 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 reconciled with the latest State banking department abstract
of condition reports and the Board advised of the names and locations
of the banks which account for any differences between the number of
banks shown in your statement and in the State banking department
abstract. A copy of the reconcilement should accompany the statement
showing the number of nonmembcr banks on par 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 anynecessary
changes
furnished.
in the statement at the time the reconcilement is
Very truly yours,
gL
^
E* .L, Smead, Chief,
Division of Bank Operations.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
198
BOARD O F G O V E R N O R S
OF THE
*******
FEDERAL RESERVE SYSTEM
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 6, 1939
R-568
Dear Sir:
Referring to the Board's letter R-380 of January 6,
1939t following is a statement of changes 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
Ohio
Sandusky
The Citizens Banking Company
The Citizens Banking Company should be added with the
following note to the list (R-380b) of banks which had in
force agreements with the Board pursuant to the provisions
of Section 8(a) of the Securities Exchange Act of 1934, but
which are no longer in operation as nonmember banks:
(Admitted to Federal Reserve membership on November 17, 1939)
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
199
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-569
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 6, 1939
Dear Sir:
Pursuant to the Board's letter R-I1.3I of March 22 the
Federal Reserve banks filled in and returned to the Board copies of
form F.R. I4.56. showing, for the year 1938, operating ratios and a few
balance sheet figures for each of their member banks. Data from
these forms were recorded on punched cards, from which various
special distributions and averages were derived. Owing to unexpected
difficulties in reconciling the reported figures and to the experimental character of this year's work, delays have been unavoidable
and no report showing the results of the undertaking has been issued.
However, some of the new averages and percentage distributions are
summarized in a series of 50 condensed tables, three copies of which
are enclosed. Analyses of these tables are under way.
It is believed that further work along the linos of this
year's undertaking is justified. Accordingly, a combination work
sheet and reporting form, copy enclosed, has been prepared which provides space for all the ratios recommended by the Presidents' Conference Committee on Member Bank Operating Ratios as a result of a
meeting of the Committee held at the Board's offices on November 1$,
1939* Space is also provided on the form for several "optional"
ratios for the use of such Reserve banks as may wish to compute them.
A supply of the new forms (F.R. I1.56* revised) is being forwarded to you. It will be appreciated if, when your tabulations have
been made, you will return the completed forms to the Board, by registered mail, for its temporary use. All of the ratios provided for on
the work shoet are desired for the Board's tabulations except those
marked "optional", which need not be computed unless your bank plans
to use them. In case it is not convenient for your bank to use the
form for work sheet purposes, no entries need be made in the first
five columns of section A or the first two columns of section B, If
it will not be practicable for your bank to lend the completed forms
to the Board for a limited time early next spring, additional copies
of the form will be provided in order that the data in section C and
the last column of sections A and B may be entered and transmitted to
the Board.
R-5&9
. 200
It is likely that machine tabulations and distributions
will be made of the 1939 data, In that event, aggregates and averages of the individual ratios for the member banks in your district,
by size groups, and by States if desired, could be furnished your
bank within a reasonably short time after receipt of the individual
reports in Washington, thereby making it unnecessary for your bank
to calculate such averages. Please advise the Board if your bank
will compute its own averages, or if you would like to have such,
averages computed here.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosures 1+
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
201
BOARD O F G O V E R N O R S
OF THE
*******
FEDERAL RESERVE SYSTEM
WASHINGTON
R- 570
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 7, 1939
Dear Sir:
There have been forwarded to you today
under separate cover
copies of Form F, R. 107
to be used by State bank members in submitting their
reports of earnings and dividends for the six months
ending December 31, 1939*
The form is unchanged from
the one used in submitting reports for the six months
ended June 30, 1939.
Very truly yours
L. P f Bethea,
Assistant Secretary*
TO TEE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
202
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R 5?1
WASHINGTON
a d o r e b b official c o r r e s p o n d e n c e
to the b o a r d
December 7, 1939
Dear Sir:
There are enclosed herewith six copies of a
tentative draft (L-653) of an amendment to the Board's
Regulation L, Interlocking Bank Directorates under the
Clayton Act, which would exempt relationships between
a trust company which does not accept deposits and a
bank which does not exercise trust powers. It will be
appreciated if you will furnish the Board with your
recommendation as to the desirability of adopting this
amendment, together with any comments or suggestions
which you may have regarding its form.
In view of the fact that the amendment may
affect some relationships which are nov; existing by
virtue of the permission granted in subsection 3(e) of
Regulation L and which, therefore, will have to terminate on February 1, 1940 unless the enclosed amendment is adopted, it is requested that your reply to
this letter be made at your earliest convenience.
Very truly yours,
Chester Morrill,
Secretary.
Enclosures 6
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
203
L-653
RESOLVED, That section 3 of Regulation L, Interlocking Bank
Directorates under the Clayton Act, be amended, effective immediately,
by striking out paragraph (c) thereof and substituting the following:
(c) Any director, officer, or employee of a member
bank of the Federal Reserve System which does not maintain
a trust department and which is not authorized to exercise
trust powers may be at the same time a director, officer, or
employee of not more than one trust company which does not
receive or hold deposits*; end any director, officer, or
employee of a trust company which is a member of the Federal
Reserve System and which does not receive or hold deposits*
may be at the some time a director, officer, or employee of
not more than one bank, banking association, or savings bank
which does not maintain a trust department and which is not
authorized to exorcise trust powers.
*The term "deposits" shall not include funds received and held
in a fiduciary capacity.
204
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-572
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
Docembor 7# 1939
Dear Sir:
There is enclosed for your information
a proof copy of Form F. R. 3U as revised for use
during 19^-0. It is hoped that shipment of the
forms can be made about December 15.
Very truly yours,
v*
i;>
i
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
305
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-573
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 8, 1939
Dear Sir:
Reference is made to the Board's letter of
November 29, 1959, R-562, concerning holidays during
the month of December. Pursuant to an Executive Order
of the President, dated November 30, 1939, the offices
of the Board of Governors will be closed all day on
Saturday, December 23 and Saturday, December 30, with
the exception of the telegraph office, which will
operate as usual on both days.
Please notify branches
Very truly yours
J. C. Noell,
Noell
Assistant Secretary
I
TO
PRESIDENTS OF ALL FEDERAL RESERVE BANKS
306
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-574
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 11, 1939
Dear Sir:
There are enclosed herewith copies of statement rendered by the Bureau of
Engraving and Printing, covering the cost
of preparing Federal Reserve notes from
November 1 to November 29, 1959.
Very truly yours,
o.
Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-574-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes,
November 1 to November 29, 1959.
Federal Reserve Notes. Series 1954
Sip
Boston
$520
Total Sheets
Amount
47,000
7,000
54,000
$ 4,968.00
158,000
59,000
197,000
18,124,00
Philadelphia
20,000
10,000
30,000
2,760.00
Cleveland
53,000
12,000
65,000
5,980.00
Richmond
20,000
12,000
52,000
2,944.00
Atlanta
4,000
6,000
10,000
920.00
Chicago
72,000
27,000
99,000
9,108.00
8,000
4,000
12,000
1,104.00
Minneapolis
15,000
4,000
17,000
1,564.00
Kansas City-
11,000
6,000
17,000
1,564.00
Dallas
10,000
4,000
14,000
1,288.00
San Francisco
46.000
24.000
70.000
6.440.00
462,000
155,000
617,000
$56,764.00
New York
St. Louis
617,000 sheets tsi ijp92.00 per M, . . . $56,764.00
208
BOARD OF GOVERNORS
•
OF THE
FEDERAL RESERVE SYSTEM
R-575
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the s o a r d
December 11, 1939
Dear Sir:
In accordance with the usual practice, please
furnish the Board with a summary statement showing the number
gind salaries of, officers and employees of your bank (includr
ing branches, if any) as of December 31# 1939$ made out in
accordance with the attached form. The figures, which should
not include any changes in either the number or salaries of
officers or employees that become effective on January 1, I9I1O,
will be published in the Board*s 1939 Annual Report.
Very truly yours,
Division of Bank Operations
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
» 209
R-575*
NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF THE
FEDERAL RESERVE BANK OF
(INCLUDING BRANCHES)
December 31» 1939
Total officers
and employees
including those
whose salaries
are reimbursed
to the bank in
whole or in part
Officers and
employees (included in column
l) whose salaries
arc reimbursed to
the bank in whole
or in part(a)
Annual salary of President
Other officers:
Number .
Annual salaries
Employees, both permanent and
temporary:
Number (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 per cent of tho salary of an employee receiving
$1,200 a. year is reimbursed to the bank, .25 should be included in
.the computation of the "number" of employees, and the amount of
salary reimbursed, $300, should be included in the computation of
the annual salaries.
(b) In the case of part-time employees, i.e., employees who are regularly
engaged for less than a full day, the "number" reported should
represent the portion of the full day worked. For example, if any
employee is regularly engaged for one-half of tho usual working day,
.50 should be included in the computation of the "number" of
employees.
210
BOARD O F G O V E R N O R S
a*******
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-$?6
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 1J, 1939
********
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
by your bank for its head office and each of its branches, if any,
and for the head office and branches combined, for the calendar
year 19L.0.
It will also be appreciated if the 19h0 budgets furnished
to the Board are prepared along functional lines in accordance
with the sample form, R~5?6a, attached, totals for each function
being shown as in the functional expense report, Form E.
Please also submit statements on Form Rw5?6b and Rw5?6c
showing the itemization of the budgets of the statistical and
analytical and bank examination functions.
In addition kindly 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 19b0
as compared with actual expenses during 1939*
A supply of forms R-576&, R-57&b, and R-57&C is enclosed.
Very truly yours
L* P. Bethea,
Assistant Secretary.
Enclosures
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
SUMMARY OF BUDGET ESTIMATES, 191+0
Federal Reserve Bank of
Function
General overhead - Controllable
General overhead - Noncontrollable
Provision of space (less income and
distribution)
Furniture and equipment
Provision of personnel
General service
Postage
Insurance
Failed banks
Loans, rediscounts, and acceptances
Securities
Currency and coin
Check collection
Noncash collection
Accounting
Legal
Bank and public relations
Auditing
Bank examination
Federal Reserve note issues
Statistical and analytical
Securities exchange
fiscal agency, custodianship, and
depositary:
Reimbursable expense
Expense not reimbursable
foreign
TOTAL (column 1 must agree
with Form E)
V
•!'
'i1-
*>
-r-
'•:>
• •
flndicate whether head "office,
branch or "combined" report)
Expenses,
Year 1959
Budget,
Year I9I1O
212
R-5?6b
STATISTICAL M P ANALYTICAL BUDGET, I9I1.O
Federal Reserve Bank of
Expense Unit
^Indicate •whether head office,
branch or "combined" report)
Expenses,
Year 1939
Budget,
Year 19l'0
1. Statistical;
a. Salaries - Officers*
b. Salaries - Employees
c. Retirement system contributions
for current service
d. Traveling expenses
e. Printing, stationery, and supplies
f. Telephone and telegraph
g; Postage and expressage
h« All other
TOTAL
2. Monthly letter:
a. Printing and stationery
b. Postage and expressage
TOTAL
3. Library;
a. salaries - Officers*
b. Salaries - Employees
c. Retirement system contributions
for current service
d. Traveling expenses
e. Printing, stationery, and supplies
f. Telephone and telegraph
g. Newspapers, periodicals, books,
binding, clipping service, etc.
h. All other
TOTAL
TOTAL, STATISTICAL AND
ANALYTICAL
Number of copies of Monthly Letter
printed for month of December 1939
*Indicate in a footnote the complete allocation of the time and salary
of each officer whose salary is charged in whole or in part to this
unit.
R-57&C
213
BANK EXAMINATION BUDGET, I9I4O
Federal Reserve Bank of
Bank Examination Function
{"indicate whether head office,
branch or "combined" report)
Expenses,
Year 1959
Budget,
Year 19&0
a. Salaries - Officers*
b, Salaries - Employees
o. Retirement system contributions
for current service
d. Traveling expenses
e. Printing, stationery, and supplies
f. Telephone and telegraph
g. Copies of bank examination reports
h. All other
TOTAL
DEDUCT - EXPENSES CHARGED AGAINST
BANKS EXAMINED
NET TOTAL, BANK EXAMINATION
*Indicate in a footnote the complete allocation of the time and
salary of each officer whose salary is charged in whole or in
part to this function.
214
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-577
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December II4., 1939
Dear Sir:
There have been forwarded to you today undc-r 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 F.R. 105* Report of condition of State bank member.
Form F.R, 105b (Schedule "0"), Loans and advances to
affiliates and investments in and loans secured by
obligations of affiliates.
Form F.R, 105-i (Schedule "A.l"), Retail installment
paper.
Form F.R. lO^e, Publisher's copy of report of condition of State bank member.
Form F.R. 220, Report of affiliate or holding company
affiliate.
Form F.R, 220a, Publisher's copy of report of affiliate or holding company affiliate.
Form F.R, 220b, Instructions for preparation of
reports of affiliates and holding company affiliates.
Form F.R, 105-i (Schedule "A.l") is a supplement to
Schedule A, Loans and Discounts. As indicated on the new form, it
calls for the banks' holdings of installment loans arising from the
215
R-577
- 2 -
retail sale of, and secured by, automobiles, household appliances,
furniture, clothing, jewelry, etc. Three copies of form F.R. lO^-i
should be furnished to each State bank member. Two copies of the
completed report should be returned to the Federal Reserve bank,
and one of these in turn should be forwarded by the Federal Reserve
bank to the Board.' No change has been made in any of the six other
forms listed above.
Very truly yours,
L. P* Bethea
Assistant Secretary
Enclosures 7•
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
216
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-578
WASHINGTON
a d d r e b b official c o r h e b p o n d e n o e
to the b o a r d
*******
December 14, 1959
Dear Sir:
The Board's letter of December 25, 1958 (R-368) requested
the Federal Reserve banks to obtain annual reports from holding company affiliates having general voting permits, and transmitted a form
(Form F. R. 437) for use in obtaining such reports. The letter indicated that regular annual reports would be requested as of the end of
each calendar year, or the holding company affiliate's fiscal year.
Accordingly, it is now requested that an annual report for the year
ending December 30, 1939, or for the holding company affiliate's latest fiscal year if it differs from the calendar year, be obtained
from each holding company affiliate which has its principal executive
office in your district and which holds a general voting permit. As
soon as practicable, please deliver to each such holding company affiliate three copies of Form F. R. 437, with the request that the
annual report be filed in duplicate with your bank not later than
F ebruary 1, 1940.
It has not been deemed necessary to revise Form F. R. 437,
and the form used a year ago should be used again in obtaining the
annual reports. Inasmuch as a surplus stock of Form F. R. 437 was
sent to each Federal Reserve bank last year, most of the banks presumably have enough copies of the form on hand to supply the holding
company affiliates in their respective districts with the required
number of copies. However, if your bank does not have a sufficient
number of copies of Form F. R. 437, please inform us immediately as
to the number of additional copies needed, and these will be supplied
to you promptly from the stock available in the Board's offices.
The instructions contained in R-568 and its enclosure (R-568-a)
are applicable to the reports now requested, with the exception, of
course, of certain dates mentioned in such instructions. It is therefore requested that reference be made to R-368 and R-368-a for information as to the procedure to be followed in obtaining the reports.
TO THE PRESIDENTS OF ALL
FEDERAL RESERVE BANKS
Very
y yours,
L. P. Bethea,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-579
217
STATEMENT FOR THE PRESS
For release in morning papers,
Tuesday, December 19, 1939.
The following summary of general
business and financial conditions
in the United States, based upon
statistics for November and the
first half of December, will appear in the January issue of the
Federal Reserve Bulletin and in
the monthly reviews of the Federal Reserve banks.
Following a rapid rise after the outbreak of the European war
industrial activity continued at a high level in November and the first
half of December.
There was a considerable increase in distribution of
commodities to consumers while prices of basic commodities, which had
been steady during November, rose somewhat in the first two weeks of
December.
Production
The Board's seasonally adjusted index of industrial production
advanced from 121 to 124 per cent in November, reflecting sustained activity at a period of the year when a decline is usual. Production of durable goods, which had advanced rapidly for several months, showed a further
expansion.
Record production of steel ingots continued in November and
was followed by a less than seasonal decline in the first half of December.
Automobile production increased in November, notwithstanding the fact that
plants of one important company remained closed pending settlement of an
industrial dispute.
After this was settled at the end of November assem-
blies rose sharply. Retail sales of new automobiles were in large volume
— *dw
U—V / V
in November and at the end of the month dealers' stocks of new cars ap-
218
parently were smaller than at the corresponding time in other recent years.
Lumber production declined less than seasonally in November but plate glass
production, which had reached a high level in October, showed a reduction.
Output of nondurable goods continued at a high level in November.
At cotton and woolen mills activity increased somewhat further and was
close to the record levels reached three years ago.
Rayon production ad-
vanced to new high levels but at silk mills there was a sharp decline following substantial increases earlier this fall.
Output of flour and sugar
declined further from the levels reached in September while changes in
activity at shoe factories and meat-packing establishments were largely
seasonal in character.
Coal production in November declined somewhat from the high level
reached in October.
Output of crude petroleum increased further and iron
ore shipments continued in exceptionally large volume until the Great Lakes'
shipping season closed in the latter part of the month.
Value of construction contracts, as reported by the F. W. Dodge
Corporation, increased in November following a sharp decline in October.
In both months changes in total awards reflected principally fluctuations
in the volume of contracts for public construction.
Private residential
awards declined somewhat less than seasonally in November, while awards
for other private projects showed little change.
Contracts for private
work, both residential and nonresidential, were larger than a year ago,
while those for public projects were below the high level of that time
when contracts under the Public Works Administration program were being
awarded in large volume.
-3-
R-579
2 1 9
Employment
Factory employment and pay rolls continued to increase in
November, reflecting chiefly' further sharp advances in industries producing steel, machinery, and other durable goods.
Distribution
In November distribution of commodities to consumers increased
considerably.
The Board's seasonally adjusted index of department store
sales, which had been around 90 in the three preceding months, advanced
to 94, a level about the same as at the peak in 1957 when prices of commodities sold at department stores were generally somewhat higher than at
present.
Freight-car loadings showed less than the usual seasonal decrease from October to November and the Board's adjusted index increased
from 80 to 82, which was only slightly under the recovery peak reached in
the early part of 1957.
Shipments of ore and miscellaneous freight de-
clined less than is usual in November, while loadings of coal decreased
more than seasonally from the relatively high October level.
Commodity prices
Prices of both industrial materials and foodstuffs advanced
from the latter part of November to the middle of December. Wheat and
silk prices rose considerably and there were smaller increases in cotton
and hides.
Prices of steel scrap and nonferrous metals, on the other
hand, showed declines.
Government security market
Prices of United States Treasury bonds advanced sharply during
the last half of November to a level not far below the all-time high point
-4.
R-S79
220
of last June and remained steady during the first half of December.
Bank credit
Total loans and investments at reporting member banks in 101
leading cities rose substantially during November and the first half of
December, reflecting largely purchases of new United States Government
securities.
Commercial loans, which had been increasing since August,
continued to rise until the third week in November.
further.
Deposits increased
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-580
WASHINGTON
a d d r e s s official c o r r c i ^ d n o k n d b
to the b o a r d
December 16, 1959
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 November 1939.
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 Interdistrict Settlement
Fund for the account of the Board of Governors
of the Federal Reserve System, and advise the
Federal Reserve Bank of Richmond by mail the
amount and purpose of the credit.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
EXCEPT RICHMOND
222
R-580-a
REPORT OF EXPENSES OF MAIN LINES OF FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF NOVEMBER. 1959
'
Words Sent
by N. Y.
Chargeable
to Other
F.R. Banks
Pro Rata
Sh.8X6 of
Total Expensesi(U
Total
Words
Chargeable
Expenses
Paid
by Banks
and
Board (2)
Payable
to
Board
of Governors
Federal
Reserve
Bank
Number
of Words
Sent
Boston
New York
Philadelphia
Cleveland
25,561
78,798
17,422
36,486
906
914
915
26,467
78,798
18,336
37,401
Richmond
Atlanta
Chicago
St. Louis
28,991
45,542
62,687
43,685
894
892
951
906
29,885
44,254
65,638
44,589
627.28
928.46
1,355.74
935.91
213.93
242.84
1,253.32
292.13
415.35
685.62
82.42
643.78
Minneapolis
Kansas City
Dallas
San Francisco
19,486
43,701
34,510
44,495
888
892
921
914
20,574
44,593
35,451
45,409
427.64
935.99
743.69
953.12
189..50
273.06
270.15
344.57
238.14
662.93
475.54
608.75
228,873
98
10,146.05
228,875
Total
708,055
—
9,995
718,028
$
555.54 $
332.73
1,653.95
1,034.60
584.87
245.89
785.04
232.66
00
o
c<?
Board of
Governors
-
$
222.81
619.35
138.98
552.38
—
#15,071.21 $15,071.21 $5,342.05
(1) Based on cost per word ($.020989725) 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 ($1,745.41) and wire rental ($8,400.62).
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.
223
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
R-581
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
December 19, 1939
Dear Sir:
On Monday, January 1, 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 January:
January 8 (Monday)
Anniversary of the
Battle of New Orleans
January 19 (Friday)
Anniversary of the
birthday of Robert
E • Lee
New Orleans
Richmond
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
Louisville
Memphis
Dallas
El Paso
Houston
San Antonio
On January 8 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 8 and 19 with your credits for the following
business days. No debits covering shipments of Federal Reserve notes
for account of the head offices concerned should be included in your
note clearing of January 19, It is understood that the telegraph office at Atlanta will be open on January 19 to handle business to and
from the New Orleans Branch. The Board's telegraph office has direct
connection with the Baltimore Branch.
Please notify branches.
TO THE PRESIDENTS
Very truly yours
J. C. Noell,
Assistant Secretary.
OF ALL FEDERAL RESERVE BANKS
BOARD O F G O V E R N O R S
„««***»
""
"
224
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-582
ADDRfll OFFICIAL OORWEBFONDENOE
TO THE BOARD
*******
December 20, 1939.
Dear Sir:
There is enclosed for your information
a statement containing excerpts from the bank
relations reports submitted by the Federal Reserve banks for the month of November 1939 in
response to the Board's letter of August 25,
1936 (X-9680),
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosure,
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
225
R—58.2—3.
December ?<0, 1939
Not for publication
EXCERPTS FROM BANK RELATIONS REPORTS FOR THE
MONTH OF NOVEMBER 1959
BOSTON
Thirty-two member banks and one nonmember bank were visited
during the month of November. While the section visited is the national center of the brass industry, manufacturing on the whole is
widely diversified.
In practically all lines, most manufacturing plants were
operating more than one shift. Pay rolls' had increased substantially
over a twelve-months period and the greater part of the increase was
said to have taken place within the previous forty-five days. Plant
operations in all lines were reported to be confined largely to domestic orders — no substantial amount of foreign business was
reported anywhere.
Low investment yields, lack of strong demand for commercial
loans and increasing reserves were often referred to and at one or
two banks there was some discussion of the narrowing effect upon the
capital ratio of increasing deposits. Apparently the purpose of these
discussions was to ascertain the probable attitude of Federal Reserve
and other authorities, should the ratio be forced below 10 to 1 at a
time when a bank is in a strong liquid position.
No banker visited was critical in any way of the policies
or operations of the Federal Reserve System or of this bank.
NEW YORK
During the month of November, the officers and representatives visited 208 banks of which 151 are member and 57 nonmember
institutions.
Clinton. Essex, and Franklin Counties. New York
An increased demand for loans is reported by most of the
banks but they are experiencing difficulty in maintaining loan totals
due to the rapidity of repayments.
The summer resort business and farming are the principal
sources of income in these counties. The volume of vacationists'
-2-
R—582—a
trade during the past summer throughout the Adirondack region and
along Lake Champlain was the most satisfactory in several years, and
in one instance it was reported as the best in ten years.
Dairying is of chief importance in the northern parts of
Clinton and Franklin counties.
Industrial activity throughout the territory has increased
substantially during the last several months.
Erie and Niagara Counties (Buffalo Branch Territory). New York
The demand for loans continues light, and total loans of
commercial banks, which amount to $140,049,000, are somewhat lower
than at the first of the year. Quite a number of institutions have
bolstered their loan accounts through Federal Housing Administration
mortgage lending, either by originating or purchasing such mortgages.
A number of bankers mentioned that, in view of the 4§ per cent rate,
these Federal Housing Administration mortgages are less attractive
and for this reason they do not intend to add to their present holdings. Several bank officers commented on the severity of examining
authorities, and one nonmember banker in particular said that he
felt the examiners were unduly critical of certain lines, which had
precluded him from granting credit to concerns which he felt were
desirable risks.
The subject of membership was brought up by the president
of one nonmember bank, who mentioned that he is subject to so much
regulation and has so many reports to make at present that he is
unwilling to subject himself to further regulations and restrictions. The executive officer of one member bank said he felt Federal should give immediate credit on all checks, and, if necessary,
raise reserve requirements to offset the float we would thereby be
required to carry. This banker stated that he is receiving such
service from his correspondent bank, and that the time thus saved
through eliminating the sorting of checks and the running of a deferred account is a helpful factor in keeping within the present
42-hour week.
Business conditions in the Buffalo area reflect a very
encouraging improvement.
Conditions throughout the agricultural areas of these two
counties were reported to be moderately good in some sections and
rather poor in others.
Westchester County. New York
General business conditions in this area are said to have
improved considerably in the last two months, largely as a result of
the increased activity in the industrial plants.
—i>~
R—582—a
227
Middlesex and Union Counties. New Jersey
A number of banks have already taken advantage of the increase in market prices of lower grade securities and have liquidated
sizable blocks of railroad and other substandard bonds, and are awaiting an opportunity to make further sales if market prices continue to
advance. New purchases are still confined largely to United States
Government securities and to some extent to municipal, State, and
county obligations, the short and medium term maturities being most
favored.
The officers of several banks remarked that although their
institutions have substantial amounts of idle funds, they have hesitated to purchase more Government bonds. They contend that the yield
at present prices is satisfactory as long as the interest paid on
savings accounts continues at 1 per cent, but point out that if there
should be a general firming up of money rates so that banks have to
increase their interest payments, it would be hard to obtain earnings
sufficient to pay any higher rate if Government bonds were purchased
at present levels.
Some banks have recently installed the "Vee Bee System" of
personal loans which is a plan being sponsored by the American Surety
Company. Under this method employed people may obtain loans on their
signatures without having to obtain endorsers or co-makers. Loansare made in amounts of $75 to $1,000 with repayments over as long a
period as twelve months. The plan permits the borrower to "rent"
collateral in the form of a surety bond which procedure eliminates
the necessity for the borrower to suffer delay and the embarrassment
of having to ask friends to become co-signers. The cost of the surety bond is $5 per $100 of loan for as long as twelve months, in addition to which the banks charge a rate of 5 or 6 per cent on a discount
basis. The banks remit every month to the surety company #2 of the
$5 collected for each #100 of loans granted during that period, and
the remaining $3 is set up in a Vee Bee System account until the reserve fund so established and maintained is equivalent to 10 per
cent of the aggregate of such loans outstanding, and thereafter the
full amount of 5 per cent is paid to the surety company.
Passaic County. New Jersey
The subject of membership in the Federal Reserve System
appears to be receiving little attention by nonmember bankers in
this county at the present time.
Bankers, both member and nonmember, appear friendly to the
Federal Reserve System and no complaint was made regarding the services rendered by the Federal Reserve Bank.
-4-
R-582-a
PHILADELPHIA
During November representatives of this Bank visited 67
member and. 29 nonmember banks,
Clinton County, Pennsylvania
One officer stated that he was desirous of increasing his
bank's holdings of Government issues, but will not buy at present
levels. He expects to be able to purchase such issues below par in
the not too distant future, at which time he will convert some of
the bank's corporate holdings to Governments.
All banks in the county pay 2 per cent on time and savings deposits, but three banks, including the two largest, are reducing the rate to 1-1/2 per cent, as of December 1st, and no doubt
this will cause similar action at some of the other institutions.
McKean County. Pennsylvania
The factories are all working full time, with several of
those employing female labor reporting a shortage of workers.
There is a good demand for credit at banks located in the
center of the oil fields but at all other institutions the demand
is poor. Bankers at those institutions active in extending EHA
credit report a good experience with these loans. The 6 per cent
loaning rate prevails on all but IHA loans.
Ocean County. New Jersey
Credit demand,while light, has been satisfactory. The
large majority of extensions are for small amounts and several banks
in this county have utilized the provisions of Titles I and II of
the National Housing Act to expand loan totals. There has been considerable new construction in many seashore communities and most of
it is being financed in this manner.
The problem for the majority of the banks in this county
is bond depreciation. While there has been some improvement generally since last March, railroad issues continue to cause most of the
depreciation. As a result of their experience with corporation issues, several bankers said they were desirous of disposing of those
issues and reinvesting the funds in Government holdings as rapidly
as possible with a minimum amount of loss.
All banks in the county pay 1 per cent on savings accounts,
which is the maximum rate allowed by the Commissioner of Banking and
Insurance,
-5-
R-582-a
Mercer County. New Jersey
This is an important industrial county and. is the site of
plants of many nationally known concerns. Industrial activity has
increased considerably since last winter and is now at a high level.
In commenting on industrial conditions a banker of Trenton, the State
capital and chief city of the county, stated that some manufacturers
had advised him that cancellations of orders were becoming frequent
and bid fair to force a curtailment of the present rate of activity.
However, other bankers in that city stated that to their knowledge
such a condition did not exist with their customers. One officer
said a representative of a large steel company had visited the city
recently to ascertain whether steel orders received from local concerns were for current needs or placed in anticipation of higher
prices. While this officer seemed to feel that this indicated that
steel companies were tryihg to discourage forward buying or excess
inventories, it quite obviously could be considered to mean that that
company is trying to prevent possible cancellations*
Bankers are much disturbed by present low earnings. With
a lessened volume of loans and the experience of losses in the bond
market, bankers feel forced into the purchase of Government issues
and, while there were no doubts expressed as to payment at maturity,
considerable comment was made relative to present high prices and
the possibility of a severe decline in the future. While it is known
that the reserve banks at present will lend par on Governments, a majority of the bankers do not appear to believe that this policy will,
or should, be continued in the event of a general decline to sub-par
levels.
Summary
In commenting upon the services several member bankers reported that they preferred to collect checks' through their correspondent banks because faster collection was obtained on a large number
of items than if the checks were deposited in the reserve bank. This
saving of time was said to be effected by the correspondent bank through
a greater use of air mail and the sending of items in other districts
direct to the town in which the drawee banks are located.
CLEVELAND
During the month of November 199 banks were visited, of which
147 are members and 52 are nonmembers.
The sharp increase of industrial activity in this territory,
particularly in steel, coal mining, and glass operations, has resulted
230
-6-
R-583-a
in a considerable reduction in unemployment and in increase in pay
rolls. This is especially true of western Pennsylvania. Despite
these facts, however, merchants are complaining that they are not
getting the increased business which the increase in pay rolls might
logically be expected to bring about. A few banks have reported
that their time deposit totals are showing increases.
There appears to be a revival of interest in JHA mortgages.
Banks which for long periods of time have had substantial balances
with correspondents and which do not consider favorably the opening
of personal or chattel loan departments are purchasing EHA mortgage
loans.
Some banks in Kentucky are feeling the competition of insurance companies which are making loans on the security of real estate at four per cent. The going rate on loans of that type in
Kentucky ranges from six per cent upward and bankers are extremely
reluctant to reduce loan rates.
Ohio bankers who entered the small installment loan field
four years ago met for the first time last week in Columbus to discuss consumer credit. It was found that more than 250 of Ohio's 700
banks have installed small loan departments since they received State
permission by statute in 1935. Some 50 more are considering entering the field. Interest rates on such loans are a to 6 per cent
and losses have been less than one per cent.
RICHMOND
During the month of November 59 banks were visited, of which
39 were member banks and 20 nonmember banks.
Nottoway and Spotsylvania Counties. Virginia
Banks in Nottoway County, like most others in this region,
report increases in deposits much in excess of the increases in loans.
Most banks pay 2-1/2 per cent on time deposits, although a few pay
that rate only on certificates of deposits with a rate of 2 per cent
on regular savings deposits. Where a rate of 2-1/2 per cent is paid,
it is contended that a lower rate is impossible so long as competing
banks pay 2-1/2 per cent. As a rule, 6 per cent is the lending rate
and it follows that banks with time deposits growing at a greater
rate than loans are subjected to pressure on their earnings.
There is complaint because of loans made by Federal agencies,
for occasionally it corned to the bankers' attention that bankable loans
231
-7-
E-582-a
are lost to these agencies. While some banks are content to stop
with mere complaint, others are more aggressive in obtaining business. It does not seem to occur to country bankers that these Federal lending agencies are maintained because of the demand for
cheaper credit.
These borrowers have no ill-will towards the banks, but
they seem quite unwilling to pay higher rates of interest while
lower rates are available. There is a considerable difference of
opinion as to lending rates, for bankers seem, to feel that the traditional rate of 6 per cent should somehow be made to prevail, while
borrowers do not. The hiatus between the bank lending rate and borrowers* opinion makes room for the Federal agencies.
ATLANTA
During the month of November, 1939, 104 banks were visited,
of which 68 were members and 36 nonmembers.
Alabama
Some of the bankers are making special efforts to point
out to the farmers the advantages of hog raising, dairying, and
cattle feeding, and the number of points at which hog and cattle
auctions are held is increasing.
In industrial towns, such as Anniston, Alexander City and
Talladega, wherein are located numerous textile mills, soil pipe
plants, chemical plants and lumber mills, business is reported as
being very satisfactory. Most of these industries are operating on
a full-time basis and their well-sustained pay rolls contribute materially to the trade activity of the communities.
Georgia
Increasing interest is being shown in several communities
in the raising of livestock.
Louisiana
The officers of the four banks visited stated that they
have had a reasonably good demand for loans during the current year
and that all legitimate requests are being granted. Without exception, it is anticipated that this year's earnings will equal, or exceed, those for 1938.
-8-
R-582-a
CHICAGO
During the month of November 15 banks were visited, of
which 5 are member banks and 10 are nonmember banks.
Very little change is reported in the demand for credit
in this district. Some of the banks are expecting increases in deposits and liquidation of loans as the old corn loans are paid off.
Many banks are evidencing their desire to handle the 1939 c o m loans
regardless of the lower return. A number of the city banks are canvassing their smaller correspondent banks and offering to take excess corn loans, allowing the originating bank 1/4 to 1/2 of one per
cent.
The question of the amount of interest to be paid on time
deposits continues to be a matter of considerable interest. The
large down-town banks in Chicago have recently reduced the rate from
1-1/2 to 1-1/4 per cent.
ST. LOUIS
During the month officers and field representatives visited
193 banks, of which 85 are member and 108 nonmember banks.
The officers of one bank are seriously considering closing
one' afternoon weekly, and employing that time to visit farmer customers with the view of inducing those who patronize Production Credit
Corporation to use the facilities of the home bank. These officers
think their loan account can be substantially increased through these
contacts. Banks where livestock is extensively raised and fattened
have plentiful supplies of paper from feeders. This fall certain
banks have found it necessary to place part of this collateral with
city correspondents.
The president of a national bank mentioned the matter of
call reports and expressed pungent views relative to these and other
reports. He indicated that nonmember banks in Indiana have been required to publish only two reports during the period when his bank
published four. This banker feels strongly that there is need for
greater uniformity in rules and regulations of the various supervising authorities.
Upon entering a Kentucky national bank, a representative
first met the executive vice president, who immediately began to berate him for alleged shortcomings of the System in general. He stated
233
4
-9-
R-582-a
that, even though he was a stockholder, in his opinion, no suggestion
of his would be beneficial as he had absolutely no voice in the management or the policy of the System because the Reserve banks were
now politically dominated. The bank's president, however, seems to
have a much more friendly attitude toward the System. The representative endeavored to assure both officers that every effort was being
made to improve the services and relations between the Federal Reserve bank and its member banks.
The vice president of a Mississippi nonmember was rather
outspoken in criticizing the economic theory of paying our way out
of the depression. He felt that the moral fibre of the people had
been lowered and that many borrowers now make little effort to pay
their just debts. Government interference in business, in the opinion of the president of another Mississippi nonmember, is more of a
hindrance than a help and he feels that if banks and business were
let alone, our economic troubles would adjust themselves.
MINNEAPOLIS
During the month of November 84 banks were visited, of
which 43 were members and 41 nonmembers.
This fall a number of the banks have been active in taking
wheat loans and many are taking them up to the limit of their reserves. One member bank contemplates borrowing from this bank on a
bills payable basis secured by Governments in order to expand and
carry these loans*.
Several of the small member banks operating with very limited earnings spoke of their inability to obtain exchange income under
national charters. One national bank has applied for a State charter
in order to obtain the income which in that instance is estimated to
be upwards of $1,000 per year. A few officers of nonmember banks
stated that their banks would be members if it wore not for the exchange income problem.
KANSAS C H Y
In November, 74 banks were visited, 25 of which are member
banks and 49 nonmembers.
The most optimistic parts of Nebraska were found in the irrigated regions where crops have been very good. In the Loup River
district new irrigation projects are being opened and bankers are
234
-10-
E-582-a
quite optimistic about the possibilities of the sugar-beet industry.
While they recognize that growers make little or nothing from raising beets, they feel it will bring in outside capital and increase
employment and population. In the western part of Nebraska it is
reported that hybrid c o m produced from two to four times as much
as the old varieties, A few bankers were found who have South
American bonds that were charged off long ago. These bankers are
hopeful that the war will help these bonds and that there will be
some nice recoveries. In southwestern Nebraska some bankers reported
that they make loans to only those farmers who use horses. One banker
said that the FSA was loaning money a few years ago to farmers in this
dry land farming territory, for the purchase of tractors and machinery,
but experience has shown that it is not good business. Therefore, it
is now lending only to farmers who use horses or mules for farm power.
The wages and hours question continues as a live matter of
discussion among bankers. This is especially true of small banks in
Kansas. In small towns the banker sees the stores, filling stations,
and other types of local activities untouched by the law and wonders
why his little bank is essentially different. A few cases were found
where bankers* sons are graduating from the university and these boys
would like to work in the bank for a time without compensation while
learning the banking business. Bankers are irritated when they find
that such a mutually satisfactory arrangement is not permitted.
Some banks are going to refuse to help farmers make out their
applications for c o m loans, while others are expecting to make a
charge for this service. Until recently these loans were made at 4 per
cent, the bank carrying the loan getting 8-1/2 per cent, but effective
November 1 the CCC renewal rate to farmers is 3 per cent and the bank
will get 2 per cent. Most bankers feel that this rate is unprofitable
as the loans are small and a great many of them must be made in order
to get any volume. Because banks feel that the 2 per cent rate is unprofitable, they expect either to refuse to help farmers or to make a
charge for the service,
DALLAS
During the month of November 19 banks were visited, of which
16 were member banks and 3 nonmember banks.
.
All member banks and three nonmember institutions in North
Louisiana were visited by the officers,
Interest in the subject of membership in the System is almost
nil among the nonmember banks in this section. Exchange charge revenues
-11-
R-582-a
account for this situation. ' Out of a total of fifty-five nonmember
banks in North Louisiana, only two are on the par list. The president of one non-par bank, however, expressed the wish that Congress
would enact a law requiring all commercial banks in the United States
to become members of the Federal Reserve System.
SAN FRANCISCO
In November 61 banks were visited, of which 48 were members and 13 nonmember banks.
Ventura County. California
Construction activity so far this year has been maintained
on very satisfactory levels, with total building permits for the
principal cities of the county continuing to reflect the general increase in building which had its inception in 1934.
Citrus growers generally will receive less net returns for
their fruit this year than last, with but few operators realizing
profits from operations.
Southwestern Idaho
Fall collections from agricultural operators are generally
considered favorable with a relatively small amount of carry-over in
prospect. Farm production is reported normal, except seed tonnage in
the Twin Falls area, which is under average on account of pest invasion.
236
12-
R-582~a
PUBLIC RELATIONS ACTIVITIES OF FEDERAL RESERVE BANKS
November - 1939
Federal
Reserve
Bank
Visits to Banks
Member Nonmember
Boston
New York
Philadelphia
Cleveland
Total
Meetings Attended
Addresses Made
Number Attendance
Number Attendance
32
151
67
147
1
57
29
52
33
208
96
199
4
13
2
2
Richmond
Atlanta
Chicago
St. Louis
39
68
5
85
20
36
10
108
59
104
15
193
Minneapolis
Kansas CityDallas
San Francisco
43
25
16
48
41
49
3
13
84
74
19
61
1/
2,900
850
690
1/
1
1
3
1/
62
50
120
5
7
4
9
1,007
1,305
2,290
1,102
3
3
2
257
900
375
6
2
1,096
487
2
1
1
4
331
120
125
496
-
22
1/ Not reported.
2,530
237
BOARD O F G O V E R N O R S
„««**»»»
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-585
ADDRCII OFFICIAL COKRtlPONDCNOI
TO THE BOARD
December 21, 1939
Dear Sir:
There is attached a copy of a resolution
adopted fcy the Board of Governors of the Federal
Reserve System levying an assessment upon the various Federal Reserve banks in an amount equal to
twenty-five hundredths of one per cent (.0025) of
the total paid-in capital stock and surplus (Section 7 and Section 13b) of the Federal Reserve
banks as of the close of business December 31, 1959,
to defray the estimated expenses and salaries of the
members and employees of the Board from January 1
to June 30, 1940.
The resolution also contains instructions
with regard to the mapner in which the payments on
the assessment shall be deposited with the Federal
Reserve Bank of Richmond.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
238
R-583-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 preceding 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, 1940, it is necessary that a fund equal to twenty-five hundredths of one per cent
(.0025) of the total paid-in capital stock and surplus (Section 7
and Section 13b) 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 RESOLVED BY THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYSTEM, THAT:
(1) There is hereby levied upon the
banks an assessment in an amount equal to
one per cent (.0025) of the total paid-in
tion 7 and Section 13b) of each such bank
December 31, 1939.
several Federal Reserve
twenty-five hundredths of
capital and surplus (Secat the close of business
(2) Such assessment shall be paid by each Federal Reserve
bank in two equal installments on January 2, 1940, and March 1,
1940, 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 provided through the Interdistrict Settlement Fund to the Federal Reserve Bank of Richmond
for credit to the account of the Board of Governors of the Federal
Reserve System on the books of that bank, with telegraphic advice
to Richmond of the purpose and amount of the credit, and the Federal Reserve Bank of Richmond shall pay its assessment by crediting the amount thereof on its books to the Board of Governors of
the Federal Reserve System on the dates as above provided.
239
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-584
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 22, 1939
i
Dear Sir:
In accordance with the practice of holding periodic conferences of representatives of the bank examination departments of
the Federal Reserve banks, it is planned to hold such a conference
in Washington some time in the first part of the coming year, probably early in February. The exact date will be announced later.
As in the past, the conference will partake largely of
the nature of a round table discussion and an effort will be made
to consider at the conference any subjects or problems of general
interest which the representatives of the Reserve banks may wish
to discuss. Members of the Board's staff will also be glad, of
course, to discuss with representatives of the Reserve banks any
other matters of less general interest which are not brought up at
the conference.
The Board's Division of Examinations has suggested that
it might be more helpful if, instead of having many topics on the
program, the program were planned with the idea of rather full discussion of a relatively few topics. The Division has suggested
that the following topics be included:
1.
Classification of loans, particularly Classification II.
2.
Type of comments and suggestions with respect to individual loans and general loaning and credit policies.
3.
Real estate and real estate loans.
a.
b.
Treatment of land contracts — as other real
estate or real estate loans.
Treatment of "assets indirectly representing
other real estate".
R-584
4.
Securities.
a.
b.
c.
Amortization of premium on exempted .securities.
Requirements with respect to use of profits from
sale of securities.
General supervisory policies and practices.
It will be appreciated if the officers in charge of the
examination departments of the Federal Reserve banks will forward
to Mr. Paulger before January 10 their comments and suggestions as
to the general type of program and as to specific subjects. It
will also be helpful in planning for the conference if the Reserve
banks will indicate both the most convenient and the most inconvenient times for holding the conference during the period from
the latter part of January to the first part of March.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
241
R-585
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers
of Friday, December 29, 1939
December 28, 1959
The Board of Governors of the Federal Reserve System announced today the adoption of a regulation, effective February 1,
1940, governing the collection by Federal Reserve banks of notes
and bills and other "noncash items" for member banks and nonmember
clearing banks.
This regulation has been issued by the Board in
order that the principal terms and conditions relating to the collection of noncash items may be published in the Federal Register
and requires no change in the existing practices of the Federal
Reserve banks.
Other provisions regarding the collection of non-
cash items will be contained, as heretofore, in the circulars of
the individual Federal Reserve banks.
R-586
242
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning newspapers
of Saturday, December 50, 1959
December 29, 1939
The Board of Governors of the Federal Reserve System today
announced the following designations and appointments of chairmen and
deputy chairmen of the Federal Reserve banks for the year 1940, and
directors of Federal Reserve banks and branches for the terms specified. All positions not preceded by an asterisk were filled by reappointment of the present incumbents.
FEDERAL RESERVE BANK OF BOSTON
CHAIRMAN AMD FEDERAL RESERVE AGENT: Mr. F. H. Curtiss of Boston
DEPUTY CHAIRMAN: Mr. Henry S. Dennison of Framingham Centre,
Massachusetts
CLASS VC» DIRECTOR;
For three-year terra beginning 1-1-40: Mr. Henry S. Dennison
FEDERAL PKo?:R7E BANIC 07 NEW YORK
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Owen D. Young of New
York, New York
DEPUTY CHAIRMAN: Mr. Beardsley Rural of New York, New York
CLASS "C" DIRECTOR:
• For three-year term beginning 1-1-40: Mr. Edmund E. Day
of Ithaca, New York
Buffalo Branch of the Federal Reserve Bank of New York
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. Gilbert A. Prole
of Ba+uvia, New York
FEDERAL RESERVE BANK OF PHILADELPHIA
CHAIRMAN aND FEDERAL RESERVE AGENT: Mr. Thomas B. McCabe of
uwarthmore, Pennsylvania
^DEPUTY CHAIRMAN: Mr. Alfred H. Williams of Wallingford, Pennsylvania
CLASS "C" DIRECTOR:
For three-year term beginning 1-1-40: Mr. Thomas B. McCabe
-2-
R-586
FEDERAL RESERVE BANK OF CLEVELAND
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Geo. C. Brainard of
Youngstown, Ohio
DEPUTY CHAIRMAN: Mr. R. E. Klages of Columbus, Ohio
CLASS "C" DIRECTOR:
For three-year term beginning 1-1-40: Mr. R, E. Klages
Cincinnati Branch of the Federal Reserve Bank of Cleveland
BRANCH DIRECTOR:
For two-year term beginning 1-1-40: Mr. Stuart B. Sutphin
of Cincinnati
*For unexpired portion of two-year term ending 12-51-40: Mr.
Frank A. Brown of Clarksburg, Ohio
Pittsburgh Branch of the Federal Reserve Bank of Cleveland
BRANCH DIRECTOR:
For two-year term beginning 1-1-40: Mr. H. S. Wherrett of
Pittsburgh
FEDERAL RESERVE BANK OF RICHMOND
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Robert Lassiter of
Charlotte, North Carolina
DEPUTY CHAIRMAN: Mr. W. G. Wysor of Richmond
CLASS "C" DIRECTOR:
For three-year term beginning 1-1-40: Mr. W. G. Wysor
Baltimore Branch of the Federal Reserve Bank of Richmond
BRANCH DIRECTOR:
*For three-year term beginning 1-1-40: Mr. Joseph D. Baker,
Jr., of Monkton, Maryland.
Charlotte Branch of the Federal Reserve Bank of Richmond
BRANCH DIRECTOR:
*For three-year term beginning 1-1-40: Mr. D. W. F/atkins of
Clemson, South Carolina
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 1-1-40: Mr. J. F. Porter
244
R-586
Birmingham Branch of the Federal Reserve Bank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. Howard Gray of
New Market, Alabama
Jacksonville Branch of the Federal Reserve Bank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: |flr. Howard Phillips of
Orlando, Florida
Nashville Branch of the Federal Reserve ^ank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. W. E. McEwen of
Williamsport, Tennessee
New Orleans Branch of the Federal Reserve Bank of Atlanta
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. H. G. Chalkley,
Jr., of Lake Charles, Louisiana
FEDERAL RESERVE BANK OF CHICAGO
^CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Robert E. Wood of Chicago
*DEPUTI CHAIRMAN: Mr. Frank J. Lewis of Chicago
CLASS "C" DIRECTOR:
*For three-year term beginning 1-1-40: Mr. Clifford V, Gregory
of Des Moines, Iowa
Detroit Branch of the Federal Reserve Bank of Chicago
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. H> L. Pierson of
Detroit
FEDERAL RESERVE BANK OF ST. LOUIS
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. Win. T. Nardin of St. Louis
'DEPUTY CHAIRMAN: Mr. Oscar Johnston of Scott, Mississippi
CLASS "C" DIRECTOR;
For three-year term beginning 1-1-40: Mr. Wm. T. Nardin
*For unexpired portion of three-year term ending 12-31-41: Mr.
Douglas W. Brooks of Memphis, Tennessee
-4-
R-586
245
Little Hock Branch of the Federal Reserve Bank of St. Louis
BRANCH DIRECTOR:
•For three-year term beginning 1-1-40: Mr. R. E. Short of
Brinkley, Arkansas
Memphis Branch of the Federal Reserve Bank of St. Louis
BRANCH DIRECTOR:
•For three-year terra beginning 1-1-40: Mr. J. P. Norfleet of
Memphis
FEDERAL RESERVE BANK OF MINNEAPOLIS
•CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. W. C. Coffey of St. Paul,
Minnesota
CLASS "C" DIRECTOR:
For three-year terra beginning 1-1-40: Mr. W. C. Coffey
•For unexpired portion of three-year term ending 12-31-41:
Mr. Roger B. Shepard of St. Paul, • Minnesota
Helena Branch of the Federal Reserve Bank of Minneapolis
BRANCH DIRECTOR:
For two-year term beginning 1-1-40: Mr. H. D. Myrick of
Square Butte, Montana
FEDERAL RESERVE BANK OF KANSAS CITY
CHAIRMAN AND FEDERAL RESERVE AGENT: Mr. R. B. Caldwell of Kansas
City
DEPUTY CHAIRMAN: Mr. J. J. Thomas of Seward, Nebraska
CLASS "C" DIRECTOR:
•For three-year term beginning 1-1-40: Mr. Clarence Roberts
of Oklahoma City, Oklahoma
Denver Branch of the Federal Reserve Bank of Kansas City
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. Wilson McCarthy
of Denver
Oklahoma City Branch of the Federal Reserve Bank of Kansas Citv
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. T. S. Hanna of
Oklahoma City
•For unexpired portion of three-year term ending 12-31-41:
Mr. Neil R. Johnson of Norman, Oklahoma
—5—
*
R-586
2 4 6
Omaha Branch of the Federal Reserve Bank of Kansas City
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. H. L. Dempster
of Beatrice, Nebraska
FEDERAL RESERVE BANK OF DALLAS
CHAIRMAN 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 1-1-40: Mr. Jay Taylor
El Paso Branch of the Federal Reserve Bank of Dallas
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. R. E. Sherman of
El Paso
Houston Branch of the Federal Reserve Bank of Dallas
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. Sam Taub of Houston
San Antonio Branch of the Federal Reserve Bank of Dallas
BRANCH DIRECTOR:
For three-year term beginning 1-1-40: Mr. Edwin F. Flato of
Corpus Christi, Texas
FEDERAL RESERVE BANK OF SAN FRANCISCO
DEPUTY CHAIRMAN: Mr. St. George Holden of San Francisco
CLASS "C" DIRECTOR:
For three-year term beginning 1-1-40: Mr. Carlyle Thorpe of
Los Angeles, California
Los Angeles Branch of the Federal Reserve Bank of San Francisco
BRANCH DIRECTOR:
For two-year tarm beginning 1-1-40: Mr. Carl V. Newman of
'Ins tin, California
Portland Branch of the Federal Reserve Bank of San Francisco
BRANCH DIRECTOR:
For two-year tsrm beginning 1-1-40: Mr. Geo. T. Gerlinger
of Portland
247
R-586
Salt Lake City Branch of the Federal Reserve Bank of San Francisco
BRANCH DIRECTOR;
For two-year term beginning 1-1-40: Mr. Herbert S. Auerbach
of Salt Lake City
Seattle Branch of the Federal Reserveffankof San Francisco
BRANCH DIRECTORS
For two-year term beginning 1-1-40: Mr. Charles F. Larrabee
of South Beliingham, Washington
v
k
» 248
S-167
Reg. R-2
INTERPRETATION OF LAW QR REGULATION
(Copies to be sent to all Federal Reserve banks)
July 12, 1939.
Mr.
. Vice President,
Federal Reserve Bank of
Dear Mr.
:
Consideration has been given to your letter of June 26,
1939, with further reference to the question whether Mr. (A) of
,
, a dealer in securities, may serve as Secretary to the Board of Directors of The
National Bank of
The question presented is whether Mr. (A) would be an
"officer, director, or employee" of the bank within the,meaning of
section 32 of the Banking Act of 1933, as amended. In this connection you state:
"The bank informs us that, as Secretary, Mr. (A)
would be without vote, voice, or official status and
that his only duties would be to attend the meetings
of the Board for the purpose of recording and reading
the minutes of all meetings, regular or call, and to
furnish certified copies of the minutes of such meetings when necessary." s
The purpose of this somewhat unusual arrangement would
be (as stated by Mr. (B), Executive Vice President of the bank, in
his letter of May 22, 1939) to "identify him with" the bank, although Mr. (B) makes it clear that it is the desire of the bank "to
comply strictly with the spirit as well as the letter of the law."
Generally speaking, the term "employee" includes everyone
performing services for a corporation except an officer or director
of the corporation or an independent contractor. Furthermore, a
person may be an employee even though he does not receive money
compensation for his services.
In furnishing certified copies of the minutes of the
meetings of the board of directors, Mr. (A) would be performing a
function usually performed by the secretary of a corporation or
249
-2-
S-167
Reg. R-2
his assistant. In recording and reading the minutes of meetings,
Mr. (A) would be performing the duties usually performed try one of
the directors, or the secretary of the corporation, or a clerk.
Therefore, it appears that Mr. (A) would be rendering services to the bank and its board of directors similar to those usually
performed by an officer or a clerical assistant to an officer, and
since it seems clear that the purpose of the statute, in using the
words "officer, director, or employee" i,s to include everyone who.
has a position with the bank, the Board is of the opinion that the
proposed arrangement would be within the prohibition of the statute.
Very truly yours,
•
(Signed) S. R. Carpenter
S. R. Carpenter,
Assistant Secretary.
250
S-168
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
*******
July 19, 1959
Dear Sir:
There is enclosed for your information a copy
of the Board's letter of July 19, 1959, in response to
an inquiry from one of the Federal Reserve banks, advising that the Board will offer no objection to the
discontinuance of the pledging of eligible paper with
the Federal Reserve Agent whenever the amount of gold
certificates pledged with the Federal Reserve Agent as
collateral security for outstanding Federal Reserve notes
is in excess of the amount of such notes outstanding.
Very truly yours,
^ 5 ) Q e & Z l ) Y)<HAdZ$
Chester Morrill,
Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
S-168-a
July 19, 1939
Mr.
, Cashier, ,
Federal Reserve Bank of
,
;
>
Dear Mr.
•
:
Reference is made to your letters of June 1 and
June 19 in regard to the question as to whether under present conditions the pledging of eligible paper with the
Federal Reserve Agent as security for outstanding Federal
Reserve notes might be discontinued.
You state in your letter that you now have gold
pledged with the Federal Reserve Agent in excess of the
amount of outstanding Federal Reserve notes, and that the
discontinuance of the pledging of eligible paper with the
Federal Reserve Agent would eliminate work and expense.
The Board will offer no objection to the discontinuance of the pledging of eligible paper with the Federal
Reserve Agent whenever the amount of gold certificates
pledged with the Federal Reserve Agent as collateral security for outstanding Federal Reserve notes is in excess
of the amount of such notes outstanding.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
252
S-169
Reg• T-84
BOARD O F G O V E R N O R S
OF THE
.£SiKt
FEDERAL RESERVE SYSTEM
WASHINGTON
AODMCII OFFICIAL DORMIPONDINCt
TO THE BOARD
July 26, 1939
Dear Sir:
There is attached a copy of a ruling which
will be published in the Federal Reserve Bulletin regarding "Whether Regulation T Permits Domestic Broker
to Borrow from Foreign Broker".
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, /-)
Assistant Secretary
Enclosure
4
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
253
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers,
Saturday, July 29, 1939
The following ruling will appear in the Federal Reserve
Bulletin:
Whether Regulation T Permits Domestic Broker to
Borrow from Foreign Broker
Regulation T provides in section 5(c)i/ that:
"A creditor may borrow from another creditor in the
ordinary course of business as a broker or dealer on any
registered security to the extent and subject to the terms
upon which the latter may extend credit to him in accordance with the provisions of this regulation, and subject
to any other applicable provisions of law."
-JThe permission granted by the Board in section 5(c) of Regulation
T is based upon section 8(a) of the Securities Exchange Act of 1934
which provides in part that:
"It shall be unlawful for any member of a national securities exchange, or any broker or dealer who transacts a
business in securities through the medium of any such member,
directly or indirectly (a) To borrow in the ordinary course of business as a
broker or dealer on any security (other than an exempted security) registered on a national securities exchange except
(l) from or through a member bank of the Federal Reserve
System, (2) from any nonmember bank which shall have filed
with the Board of Governors of the Federal Reserve System
an agreement, which is still in force and which is in the
form prescribed by the Board,.... or (3) in accordance with
such rules and regulations as the Board of Governors of the
Federal Reserve System may prescribe to permit loans between
such members and/or brokers and/or dealers, or to permit
loans to meet emergency needs."
The term "creditor" as used in section 5(c) is defined in
section 2(b) of the regulation as follows:
"The term 'creditor' means any member of a national
securities exchange or any broker or dealer who transacts
a business in securities through the medium of any such
member."
The Board recently has been asked whether section 5(c) authorizes a "creditor", as defined in section 2(b), to borrow in this
country in the ordinary course of business as a broker or dealer on
registered nonexempted securities from a foreign broker.
The foreign
broker maintains no place of business in the United States, but "transacts a business in securities through the medium of a member of a
national securities exchange" and hence appears to fall within the
definition of the term "creditor".
It is the view of the Board that section 5(c) in its present form grants permission for the domestic broker thus to borrow
from the foreign broker who "transacts a business in securities
through the medium of a member", but that it grants the permission
only on condition that the loan so obtained by the domestic broker
meets the requirements of section 5(c) that it be "in accordance with
the provisions of this regulation".
This means that in obtaining the loan the domestic broker
must not be receiving more credit on given securities than he could
get on those securities, in the case of a loan of the same description, from a domestic "broker or dealer who transacts a business in
255
-5securities through the medium of a member", and must not otherwise
be obtaining any benefits that such a domestic broker or dealer could
not lawfully grant under the regulation. One result of this requirement is that the loan may not be obtained on the basis of the special
loan value prescribed for the special omnibus account, because section 4(b) of the regulation limits such loans to cases in which the
lender is a member of a national securities exchange.
r
It is, of
course, unnecessary for present purposes to determine whether, or
to what extent, the foreign broker would be required to comply with
Regulation T, since the domestic broker is not granted permission
to borrow unless the loan complies with the requirements of Regulation T to the same extent as if the lender were a domestic "creditor".
256
********
BOARD OF G O V E R N O R S
OF T
HE
g_17Q
FEDERAL RESERVE SYSTEM
WASHINGTON
ADORES* OFFICIAL CORRESPONDENCE
TO THE BOARD
August 4> 1939
Dear Sir:
The Board has adopted a condensed form of State bank member
call report (Form F. R. 105) for use on spring and autumn calls. The
face side of the condensed form (the only part required to be published) is identical with the face side of the regular form F. R. 105
except that references to the related schedules are omitted. Accordingly, existing arrangements for a single publication of condition
reports rendered by State bank members to Federal Reserve banks and
State banking departments, respectively, are not affected. A copy of
the condensed form, which it is expected will be used on the next
call, is enclosed.
A copy of the condensed form has been sent to Mr. William
R. White, Superintendent of Banks of the State of New York, so that
in his capacity as Secretary of the Executive Committee of the National Association of State Bank Supervisors he may advise all State banking departments of the adoption of such a form by the Board. A copy
of our letter to Mr. White is enclosed. No advice need be given State
bank members of the adoption of the condensed form until blanks are
distributed at the usual time for the autumn call. If, however, any
such bank learns of the form through its State banking department or
otherwise, there will be no objection to advising it of the difference between the regular form and the condensed form.
For your own information, the condensed State bank member
call report is similar to a corresponding condensed form which we
understand the Comptroller's office expects to use in obtaining national bank reports. The only difference between the reverse sides
of the two forms is that the Comptroller's form will include schedules corresponding to Schedules AA and BB on the regular form, which
call respectively for the amounts of officers' and directors' liabilities, etc., and for loans and balances exceeding legal limits.
It is understood that the Comptroller's office is not planning to
make a public announcement of the adoption of the condensed form
257
-<£-
but that it plans to distribute the blank forms to national banks as
soon as practicable during this month.
The adoption of the condensed form will make it somewhat
inconvenient to compare the amounts of demand and time deposits, as
shown in reports of deposits for reserve computation purposes, with
deposits as shown in the spring and autumn call reports. Accordingly,
and since it is understood that in recent years the number of substantial discrepancies has been reduced considerably, the suggestion
made in the Board's letter St. 6064 of January 21, 1929 is modified
to the effect that such comparisons need be made hereafter only as
of the June and December call dates.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Enclosures 2
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
S-170a
258
COPY
August U, 1939
Mr. William R. White, Secretary,
Executive Committee of the National Association
of State Bank Supervisors,
c/o New York State Banking Department,
80 Centre Street,
New York, New York.
Dear Mr. White;
As you doubtless know, I called your office about ten
days ago, and in your absence discussed with Mr. Ludemann a condensed form of State bank member call report for use on the
spring and autumn calls. I understood Mr. Ludemann to say that
he knew of no reason to think that any State banking department
would be inconvenienced by our adopting such a form. Since the
Board of Governors has adopted the condensed form of State bank
member call report, it is expected that this form will be used on •
the next call. A copy of the condensed form of report is enclosed.
You will note that the face side of the condensed report form (the only part required to be published) is identical
with the face side of the regular form except that references to
the related schedules are omitted. Accordingly, existing arrangements for the single publication of condition reports rendered by
State bank members to Federal Reserve banks and State banking departments, respectively, ixre not affected. Nevertheless, in your
capacity as Secretary of the Executive Committee of the National
Association of State Bank Supervisors, you may wish to advise all
State banking departments of the adoption of the condensed form
by the Board. Additional copies of the form will be furnished to
you upon request.
The Federal Reserve banks are being advised of the adoption of the condensed form, but no public announcement thereof
will be made at this time and it is not planned to advise individual
State bank members of the adoption of the condensed form until
blanks are distributed at the usual time for the autumn call.
Enclosure
Very truly yours,
(Signed) E. L. Smead
E. L. Smead, Chief,
Division of Bank Operations.
259
S-171
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
August 9, 1939
Dear Sir:
There is attached, for your information, a copy of a letter addressed to the First
Vice President of & Federal Reserve bank, under
date of August 5, 1939, with regard to the reporting, in condition reports and in reports of
deposits submitted for reserve computation purposes, of outstanding drafts drawn upon member
bank reserve accounts.
Very truly yours,
'jujrftZ/
S.ft.Carpenter,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
260
S-171-a
August 5, 1939
Mr.
, First Vice President,
Federal Reserve Bank of
,
Dear Mr.
:
This refers to your letter of June 30, regarding the reporting, in condition reports and in reports of deposits submitted for
reserve computation purposes, of outstanding drafts drawn upon member
bank reserve accounts.
l.
As indicated in the Board's letter R-488 of June 16, 1939,
transmitting blank forms for the mid-year call for condition reports
upon State bank members, the definition of "Reserve with Federal Reserve bank", item 7 in Schedule D of form F.R. 106, was amended in
view of the Board's letter S-161 of April 26, 1939. That letter
merely gives member banks permission to exclude from "Cash items in
process of collection" as shown in condition reports and in reports
of deposits submitted for reserve computation purposes, any cash
items in process of collection which are included in "Reserve with
Federal Reserve bank" on the member banks' books. Banks which take
advantage of such permission are required to carry higher reserves
than they otherwise would have to carry, because they do not deduct
from gross demand deposits cash items in process of collection with
Federal Reserve banks. Moreover, in determining whether or not a
member bank has adequate reserves the Federal Reserve bank uses the
balance shown by its books (which, of course, does not include cash
items for which the member bank has been given deferred credit)
rather than the balance shown ty the member bank's books.
In contrast with the above situation, if a member bank
should omit outstanding drafts upon its reserve account from deposits as reported for reserve purposes, it would be excluding a class
of liabilities which Regulation D specifically defines as deposit
liabilities, with the result that its computed reserve requirements
would be understated. This understatement of reserve requirements
would not be offset by the member bank's charging the outstanding
drafts to its reserve account because its reserve balance as shown
by the Federal Reserve bank's books, which is the figure used in determining whether reserves are equal to requirements, is not charged
until the drafts reach the Federal Reserve bank. Member banks
should, therefore, continue to include outstanding drafts on their
reserve accounts in demand deposits as shown in reports submitted
for reserve computation purposes. Since, however, member bank
1
361
-2-
S-171-a
condition reports are prepared from their general books a bank may in
condition reports show deposits as reflected by its books, but any
difference between deposits as shown in condition reports and in reports of deposits for reserve purposes should be explained by the
member bank.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
8-172
Reg. T
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
August 10, 1959.
Mr.
.
Division of
,
Federal Reserve Bank of
Dear Mr.
,
:
Reference is made to your letter of August 2, 1939, regarding the question whether a member of a national securities exchange
may, under section 6(d) of Regulation T, accept the transfer of an
account, the adjusted debit balance of which exceeds the maximum loan
value of the securities in the account, from a foreign broker who
"transacts a business in securities through the medium of a member".
Section 6(d) provides in part that:
"In the event of the transfer of a general account
from one creditor to another, such account may be treated
for the purposes of this regulation as if it had been
maintained by the transferee from the date of its origin:
Provided. That the transferee accepts in good faith the
signed statement of the transferor that no cash or securities need be deposited in the account in connection with
any transaction that has been effected in the account or,
in case he finds that it is not practicable to obtain such
a statement from the transferor, accepts in good faith
such a signed statement from the customer."
The tern creditor is defined in section 2(b) to mean "any
member of a national securities exchange or any broker or dealer who
transacts a business in securities through the medium of any such
member".
As your letter points out, the Board recently ruled (S-169,
Reg. T-84) that a foreign broker who "transacts a business in securities through the medium of a member" comes within the meaning of the
term "creditor" so far as to qualify under section 5(c) as a person
from whom a domestic broker may borrow, subject to certain requirements, in the ordinary course of business on registered securities.
The Board is of the view that a foreign broker who "transacts a business in securities through the medium of a member" also
comes within the meaning of the term "creditor" so far as to qualify
2-
S-172
Reg, T-
as a person from whom a member of a national securities exchange
may accept the transfer of an account pursuant to section 6(d).
It is the Board's view further that, if margin was obtained in
amounts that would have met the requirements of Regulation T and
the account was otherwise maintained in such a way that it would
have satisfied these requirements, it may properly be said that
"no cash or securities need be deposited in the account in connection with any transaction that has been effected in the account" .
Accordingly, the Board agrees with the suggestion in
your letter that the transfer from such a foreign broker of an
account meeting these requirements would be permissible under
section 6(d),
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
S-173
Reg. P-13
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
June 16, 1939
TELEGRAM
(Addressed to a Federal Reserve bank)
Relet June 13 concerning
(a holding company affiliate).
Corporation,
,
Board is of the opinion
that a holding company affiliate may satisfy the requirements
of subsections (b) and (c) of section 5144 ty acquiring immediately acceptable assets in the maximum amount ultimately required, subject, however, to the possibility that changes in
the facts (for example, decline in value of such assets or
acquisition of additional bank stocks) may make it necessary
for the holding company affiliate to acquire additional assets
in order to continue to comply with such requirements. We
will communicate with you further regarding the other questions contained in your letter as soon as possible.
(Signed) L. P. Bethea
Assistant Secretary.
S-174
Reg P U
' " 265
INTERPRETATION Of LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
August 5, 1939
Mr.
' . ,
First Vice President,
Federal ResferVe Bank of
,
Dear Mr.
This refers further to your letter of June 15, 1939, requesting advice upon a specific inquiry submitted ty
Corporation,
...
(a holding company affiliate), which
was answered in the Board's telegram of June 16, 1939, and also requesting the Board's views at its convenience with respect to certain
assumptions relating to the requirements of subsections (b) and (c)
of section 5144 of the Revised Statutes.
With respect to the first assumption, the Board will not
object to the computation of earnings upon the basis of calendar or
fiscal years, rather than upon the basis of years ending on June 16,
in connection with the requirements concerning the investment of
"excess" net earnings of holding company affiliates in readily marketable assets after June 16, 1938, if there is substantial compliance with the statutory requirements and a holding company affiliate
desires to follow this practice as a matter of convenience.
With respect to the second and third assumptions, the
Board concurs in che view that the 2 per cent per annum increase in
readily marketable assets required by clause numbered (1) of subsection (b) may be accomplished through the investment of earnings
required to be used for this purpose by clause numbered (2) of such
subsection and that the maximum amount of readily marketable assets
ultimately required by such subsection is 25 per cent, not 50 per
cent, of the aggregate par value of the bank,stocks having double
liability.
In addition to the matters mentioned in your letter, it
is believed that it should be pointed out that the requirements concerning the investment of "excess" net earnings relate to the investment of net earnings in excess of 6 per cent per annum on the
book value, not jmr or stated value, of a holding company affiliate1 s own shares outstanding.
Very truly yours,
(Signed) L« P. Bethea
L. P. Bethea,.
Assistant Secretary.
266
S-175
Reg. T-86
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
August 11, 1939
Mr.
,
Assistant Vice President,
Federal Reserve Bank of
Dear Mr.
,
:
Reference is made to your letter of July 29, 1939, requesting a ruling with respect to section 6(c) of the Board's Regulation
T, which section relates to guaranteed accounts.
Section 3(b) of Regulation T provides that when all of the
transactions on any day in a customer's general account, combined,
have the effect of creating or increasing an excess of the adjusted
debit balance of the account over the maximum loan value of the securities in the account, the creditor must obtain the deposit of a
certain amount of cash or securities. Section 6(c) permits certain
deductions in the calculation of the adjusted debit balance of a
general account that is guaranteed by another customer, so that
transactions may be effected therein without creating or increasing
such an excess.
The pertinent provisions of section 6(c) are as follows;
"In case a general account maintained by a creditor
for one customer is guaranteed in writing by another customer for whom the creditor maintains a general account,
the adjusted debit balance of the guaranteed account may,
at the option of the creditor, be computed by deducting
from the sum of the items specified in section 3(d) an
amount not greater than the excess of the maximum loan
value of the securities in the guarantor's general account over the adjusted debit balance of such guarantor's account calculated without the addition thereto
prescribed by the following paragraph, provided (l) the
guarantor is not a creditor, (2) a duplicate original
of the guarantee has been filed with the secretary of a
national securities exchange of which the creditor is a
member or through which his transactions are effected,
and (3) the guarantee permits the creditor to use funds
-2-
8-175
Reg. T-86
267
and securities in the guarantor's account to carry the
guaranteed account without restriction, except that the
guarantee may be limited to a specified amount and in
that event the deduction shall not exceed such amount.
"In case a guarantee has served to permit in the
guaranteed account any transaction which could not otherwise have been effected in accordance with this regulation: (A) the adjusted debit balance of the guarantor's
account shall be computed try adding to the sum of the
items specified in section 5(d) an amount equal to the
deduction made pursuant to the preceding paragraph;
* * * „ ii
The question which you have presented relates to the following set of circumstances: Customer A, not a creditor, has executed a guarantee of the general account of Customer B and a duplicate
original of the guarantee is properly on file with the secretary of
a national securities exchange. Customer B, also not a creditor, has
executed a guarantee of the general account of Customer C and a duplicate original of the guarantee is likewise filed with the secretary
of a national securities exchange. Neither of the guarantees is restricted as to amount.
The maximum loan value of the securities in the general
account of Customer A exceeds the adjusted debit balance of the account by an amount greater than #400. The maximum loan value of
the securities in the general account of Customer B just equals the
adjusted debit balance of the account. The maximum loan value of
the securities in the general account of C is less than the adjusted
debit balance of the accoufit.
The question is whether the creditor may utilize the excess loan value in the general account of Customer A in effecting
for the general account of Customer C a purchase of registered nonexempted securities at a total cost of $1,000.
While the use of such indirect guarantees is rather unusual, the Board is of the opinion that the answer to the question
is in the affirmative provided the terms of the guarantee executed
by Customer A are such that, as a matter of general law and without
regard to Regulation T, the guarantee clearly covers Customer C's
account and provided, of course, that all other requirements of
section 6(c) are met. The question whether Customer A's guarantee
extends, as a matter of general law, to Customer C's account would,
of course, depend upon the terms of the particular guarantee.
-3-
S-175
Reg. T—
If the necessary requirements are met, the creditor mayfirst deduct $400 from the sum of the other items used in computing the adjusted debit balance of Customer B's general account and
then make the same deduction in Customer C's general account.
Under the present provisions of the supplement to Regulation T
the $1,000 of securities purchased would have a maximum loan value
of $>600, and there would be no increase in the excess of the adjusted debit balance of Customer C's general account over the
maximum loan value of the securities in the account. After these
transactions, the adjusted debit balances in the general accounts
of both Customer A and Customer B would be computed by adding
$400 to the sum of the other items included, although in the case
of Customer B's account the #400 addition would be offset by the
equal deduction resulting, as indicated above, from Customer A's
guarantee.
Veiy truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
S-176
269
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
a d d r e s s official c o r r e b p o n d e n o e
to t h e b o a r d
August 18, 1959
Dear Sir:
The Board does not appear to be receiving copies of
all circulars and form letters issued by the Federal Reserve
banks, as requested in its letters of August 4, 1921, X-3180,
November 26, 1923, X-5897, February 7, 1925, X-4264, and May
17, 1953, B-894.
In reviewing this matter, it appears that the occasional nonreceipt of certain circulars and form letters by the
Board may bo due perhaps to the fact that addressograph or
other mailing lists prepared for member banks, nonmember banks,
etc. do not include the Board, because of the fact that more
than ono copy has been requested, and that copies for the Board
are handled, therefore, in a special manner.
In order to assure receipt by the Board of each circular and form letter issued by the Federal Reserve banks, it
will be appreciated if your bank will have plates or stencils
made as indicated in the attached statement and include them
with your regular mailing lists for member banks, nonmember
banks, etc.
This letter supersedes all previous requests with
rsspect to furnishing the Board with copies of circulars and
form letters.
Very truly yours,
S. R. Carpenter
Assistant Secretary.
Enclosure
http://fraser.stlouisfed.org/
TO THE PRESIDENTS
Federal Reserve Bank of St. Louis
OF ALL FEDERAL RESERVE BANKS
270
S—176—9.
ADDRESSES TO BE ADDED TO FEDERAL RESERVE
BANKS' MAILING LISTS FOR MEMBER BANKS.
NONMEMBER BANKS. ETC.
Board of Governors of the Federal Reserve System,
Files Section 1,
Washington, D. C.
Board of Governors of the Federal Reserve System,
Files Section 2,
Washington, D. C.
Board of Governors of the Federal Reserve System,
Files Section 3,
Washington, D. C.
Chief, Division of Bank Operations,
Board of Governors of the Federal Reserve System,
Washington, D. C.
271
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
S-177
Reg. T-87
WASHINGTON
A O D R E i a official c o r r e s p o n d e n c e
to the board
August 13, 1959
Dear Sir:
There is attached a copy of a ruling
which will be published in the Federal Reserve
Bulletin regarding "Capital Contribution Loans
Between Members of a National Securities Exchange".
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.
truly yours
L. P. Bethea,
Assistant Secretaiy
Enclosure
TO
PRESIDENTS OF ALL FEDERAL RESERVE BANKS
272
BOARD OF GOVERNORS
otm
FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For* release in morning papers,
Tuesday, August 22, 1939.
The following ruling will appear in the Federal Reserve
Bulletin:
Capital Contribution Loans Between Members of a
National Securities Exchange
Section 4(f)(2) of Regulation T, as added to the regulation effective May 22, 1939, provides as follows:
"In a special miscellaneous account, a creditor may
"(2) Make loans, and may maintain loans, to or for
any partner of a firm which is a member of a national securities exchange to enable such partner to make a contribution of capital to such firm provided (A) the lender
as well as the borrower is a partner in such firm, or (B)
the lender as well as th6 borrower is a member of such
exchange, the loan has the approval of an appropriate
committee of the exchange, and the committee, in addition to being satisfied that the loan is not in contravention of any rule of the exchange, is satisfied that
the loan is outside the ordinary course of the lender's
business, and that, if the borrower's firm does any
dealing in securities for its own account, the loan is
not for the purpose of enabling the firm to increase
the amount of audi dealing;"
The Board recently considered a esse in which such a capital contribution loan was originally made between partners in the
same firm, and thus qualified under clause (A) of the provision, but
the lender later proposed to withdraw from the partnership.
The
273
-2-
Board was asked whether the loan, because of its one-time status
under clause (A), might be continued after the lender's withdrawal
from the partnership, or whether the loan must then be terminated
if it is not authorized by some other provision of the regulation.
It is the view of the Board that the permission granted
by clause (A) continues only while the conditions specified therein are met. Accordingly, such a loan between partners in the same
firm may not be continued after the lender withdraws from the partnership unless the loan can qualify under some other provision of
the regulation.
In the particular case presented, the lender after withdrawal from the partnership was to continue to be a member of the
national securities exchange of which the borrower was a member.
Therefore, if the loan is approved by an appropriate committee of
the exchange pursuant to clause (B) of section 4(f)(2), it could,
of course, be continued pursuant to that provision.
For the sake of completing the answer to the question
presented, however, it is necessary to consider one other possible
alternative,1 that ijs* the possibility that the loan could qualify
under section 4<t)(6> of the regulation, # # # $####*# for loan#
that art "for augr pi#|mm other than
or carrying or
trading in securities11.
The reason section 4(f)(8) may be relevant to the question presented in this case is that while the exact relation of
the instant loan to the business ef the borrower's firm was not
entirely clear, it appeared that the borrower'9 firm was engaged
not only in the securities business but also, and to a very considerable extent, in the commodity business.
There would, there-
fore, be at least some possibility that the loan in question could
qualify as a loan for a "purpose other than purchasing or carrying
or trading in securities".
Whether the loan could in fact so qualify would depend,
of course, upon the facts of the particular case, and instances
where capital contribution loans could so qualify would be rather
rare. In certain cases, of which the present case involving a
considerable amount of commodity business might turn out to be
an example* it might be possible for a loan to be made under such
conditions that it could actually be identified as being for a
"purpose other than purchasing or carrying or trading in securities". It is evident, however, that it would be rather uzrti»ual
for a capital contribution loan to be thus identifiable.
The
business »f the average securities brokerage firm is so bound up
with jnrcasing, carrying or trading in securities - either for
iia o m m m m A ## f W # # account of
*
Is m #
# tim
to enable
» th»t a loan to
te mice *
of
capital to the f i m usually maid not qualify ae being for a "purpose other than purchasing or carrying or trading in securities".
BOARD O F G O V E R N O R S
g
_
275
m
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
a d d r t s e official c o r r e s p o n d e n c e
t o the b o a r d
August 25, 1939.
Dear Sir:
In view of its responsibility in passing upon the selection of examiners at the Federal Reserve banks, the Board in
its letter of September 20, 1933 (X-7595), set forth the procedure to be followed in submitting information to the Board regarding applicants for positions on the examining staffs. In
some instances the information called for by the foregoing letter has been submitted either in very meager form or in such a
manner as not to be particularly informative. Therefore, letter
X-7595 is superseded by this letter, and it will be appreciated
if, in submitting proposed appointments in the future, the procedure herein set out will be observed.
Whenever a new examiner or assistant examiner is to
be added to the examining staff, it is assumed that the field
of possible appointees will be carefully canvassed in order to
obtain the services of the one best fitted for the position.
In considering men for such positions, it is desirable to select individuals who, judged by their education, experience,
initiative, and personality, give reasonable promise of developing into capable senior examiners. Qualifications being equal,
preference may be given to present employees of other departments,
but in such selections the qualifications necessary for an assistant examiner or an examiner should be the yardstick rather than
the qualifications for some other position in the Reserve bank
which the individual may be filling creditably. In this connection it seems appropriate to call attention to the desirability
of commercial bank experience as one of the qualifications of
major importance in the selection of examining personnel, other
than trust examiners whose qualifications were outlined in the
enclosure to the Board's letter of November 17, 1933 (X-7688).
When a decision has been reached as to the individual
best fittfed for the position, and in order that the Board may
be advised fully, it is suggested that the information submitted
-2-
S-178
cover the following with respect to the proposed appointee:
1. Name, date of birth, place of birth and citizenship, marital status, number of dependents, condition of health, and physical defects, if any.
2.
Education, including names of schools and colleges
attended, periods of attendance, degrees obtained,
other training, special examinations and results
thereof, and diplomas or certificates received.
3. Previous employment, names and addresses of employers , periods of employment, positions held
and nature of work, salary received in each case,
reasons for leaving previous positions, and information obtained from previous employers as to
quality of applicant's work. In this connection,
care should be exercised to ascertain independently of the proposed appointee the attitude of
previous employers with respect to his services
and reasons for termination thereof.
4. All other experience which would have a bearing
on the proposed appointee's qualifications as an
examiner or assistant examiner.
5.
Information as to proposed appointee's indebtedness, if any; whether indebted to banks, their
subsidiaries or affiliates; when indebtedness was
contracted; its original amount, progress being
made in liquidation; and whether, if tendered appointment by the Federal Reserve bank as an examiner or assistant examiner, he will resign any
official connections he may have with other business concerns and discontinue any other existing
relationship which may affect his service as an
employee of the Federal Reserve bank.
6, Any other information, including any comments of
either an adverse or favorable character, which
will be of assistance in the consideration of the
recommendation.
It will be appreciated if you will submit a copy of
the application (unless the proposed appointee has been in the
employ of the Reserve bank for some time and the application is
therefore uncurrent), a recent photograph of the proposed appointee (not over 4 x 6 inches in size), a copy of any memorandum prepared for any officer or committee of the Reserve bank
276
S-1V8
-3-
in connection with the consideration of the application, and, if
not fully covered in such memorandum, a further memorandum summarizing the data developed in the bank's investigation and setting forth the reasons for regarding the proposed appointee as
the best man available for the position. To the extent that the
information contained in the application and these memoranda
supplies information requested in the numbered paragraphs above,
it will not be necessary to duplicate such information in any
special memorandum or report to the Board.
Upon receipt of a recommendation accompanied by the
information requested above, the Board will consider the proposed appointment and the Federal Reserve bank will be advised
promptly of the action taken. In some cases, however, recommendations have been submitted with requests for immediate action, and it will be appreciated if, whenever possible,
recommendations and information are submitted sufficiently in
advance to permit of the matter being handled in the regular
course.
In the Board's letter of April 3, 1937 (X-9858), reference was made to the designation of officers and employees of
other departments as examiners or assistant examiners, in order
that their services may be available to assist your regular
examining staff when necessary. In order that there may be uniformity in the designations of such employees, it is requested
that all such persons who are not members of the regular examining staff be designated as "Special Assistant Examiner" or
"Special Examiner", as the case may be, for examination purposes.
In this connection it is assumed, of course, that each such person participating in an examination will be provided with an appropriate commission or identification certificate before the
examination begins.
Very trul;
iurs,
L. P. Bethea,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
S-179
Reg. 0,-39.
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
August 31, 1939.
Mr.
. Assistant Vice President,
Federal Reserve Bank of
,
Dear Mr.
:
Further reference is made to your letter of August 18, 1939,
with respect to the question submitted to you by the ________________ National Bank and Trust Company,
.
as to whether
transfers may be made from the savings accounts of certain depositors
to so-called FHA mortgage accounts in their names, pursuant to the
written orders of the depositors but without the presentation, at the
time the transfers are made, of the pass books evidencing such savings accounts.
It is understood that the national bank is servicing a large
number of mortgage loans which are insured by the Federal Housing Administration; that in connection with the making of such loans the
mortgagors open savings accounts with the bank and deliver to it written authorizations to charge their respective savings accounts for the
amounts due monthly in respect of their mortgages. The amounts thus
charged to their savings accounts are credited to so-called FHA mortgage accounts in their names, and amounts so credited are used to pay
the monthly installments due on the mortgages for principal, interest,
premiums for mortgages, insurance, service charges, taxes, ground
rents and assessments. The savings accounts pass books are not presented to the bank, but the bank sends monthly advices to the mortgagors of the amounts charged to their savings accounts and the mortgagors send their savings deposits pass books to the bank quarterly for
the entry therein of the debits to their savings accounts.
Although the amounts charged to the savings account are
credited to the so-called FHA mortgage account of the mortgagor, the
transaction is essentially a payment by the bank out of the savings
account to a third party, because under the agreement between the mortgagor-depositor and the bank, the amounts thus debited to the savings
accounts and credited to the FHA mortgage accounts are no longer under
the control of the mortgagor-depositor but are merely in transit to
the ultimate recipients of the amounts constituting the monthly payments due under the mortgage.
In view of the facts stated above, it is clear that the payment is not made "upon presentation of the pass book", and the question
279
S-179
Reg. Q.-37
-2-
is presented whether the transaction complies with the provision of
section 1(e)(2) of Regulation Q, with respect to savings deposits that
"Withdrawals are permitted in only two ways, either
• (i) upon presentation of the pass book, through payment to
the person presenting the pass book, or (ii) without presentation of the pass book, through payment to the depositor himself but not to any other person whether or not
acting for the depositor."
You refer to the ruling contained in the Board's letter of
June 22, 1936 (X-9627) to the effect that a transfer may properly be
made by a member bank from th6 savings account of a depositor to his
checking account upon the written order of the depositor but without
the presentation of the savings deposit pass book. In the present
case you point out that the mortgagor-^depositor could accomplish the
same result as is accomplished by the existing arrangement by following the procedure described in X-9627 and by giving the bank a further
order to pay the required amount out of his checking account; but you
suggest that it would not be desirable to require a member bank to
make these additional entries on its books merely in order to achieve
technical compliance with the requirements of the definition of "savings deposit" in Regulation Q.
It seems proper in a case like the present one to consider
the essential nature and purpose of the transaction as well as its
form. One of the typical purposes for which savings accounts are
maintained is the accumulation of funds with which to pay off a mortgage. In the present case the savings accounts are maintained for
that purpose, and each depositor gives the bank a written order to
pay off his mortgage out of his savings account at the time when his
savings account is opened and as a part of the same transaction. As
stated in the Board's letter of February 8, 1936 (X-9489), the requirement that the savings pass book must accompany a check payable
to a third party is designed to prevent the drawing of more than one
check at a time against a savings account and the use of a savings account as an ordinary checking account; but it does not appear that
any such abuse is involved in the present arrangement. . While the
order given by the depositor provides for several transfers at regular periodic intervals, it appears that all of the transfers are for
the same purpose and are made in pursuance of the same order.
Accordingly, the Board is of the opinion that the handling
of the periodic payments in the manner described above is not in violation of Regulation Q.
-3-
8-179
Reg. Q-37
It is hardly necessary to point out that the present ruling
is based upon the facts of this particular case, and that a different
result might be reached in another case with facts bearing a superficial resemblance to those discussed herein.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
280
281
BOARD O F G O V E R N O R S
S-380
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADORfll OFFICIAL CORRESPONDENCE
TO THE BOARD
September 8, 1939.
Dear Sir:
In its letter of January 24, 19.38, S-70, the
Board set forth reasons why it was believed to be undesirable for a member of the board of directors of a Federal Reserve bank to serve at the same time as a director
of a branch of the bank. The amendment to the Board's
regulation with respect to the appointment of directors
of branches of Federal Reserve banks, to which reference
was made in that letter, provided that no director of a
Federal Reserve bank should be appointed to serve as a
director of a branch during the period of his service as
a director of the Federal Reserve bank. It will be noted
that this provision does not cover the case where a director of a branch is appointed to serve as a director of
the Federal Reserve bank and in order to give full effect
to the policy of the Board in this matter the last sentence of the second paragraph of the regulation has been
amended to read as follows:
"No director of a Federal Reserve bank
shall serve as a director of a branch
of the bank during the period of his
service as a director of the Federal
Reserve bank."
A copy of the amended regulation is attached to
this letter..
Very truly yours,
)Y)oVU£?
Chester Morrill,
Secretary.
Enclosure.
http://fraser.stlouisfed.org/ TO CHAIRMEN
Federal Reserve Bank of St. Louis
OF ALL FEDERAL RESERVE BANKS.
282
S-180-a
1. The board of directors of each branch of a Federal Reserve
bank shall consist either of seven members or of five members, as may be
determined by the Federal Reserve bank, subject to the approval of the
Board of Governors of the Federal Reserve System. Where the board of directors of the branch consists of seven members, four shall be appointed
by the Federal Reserve bank and three by the Board of Governors, and,
where the board consists of five members, three shall be appointed by
the Federal Reserve bank and two by the Board of Governors.
2. All directors shall be persons of high character and standing who have established reputations and ability to meet their financial
obligations. They shall be persons whose business and financial interests are primarily within and representative of the branch territory
rather than of interests controlled or owned outside the territory. The
directors appointed by the Federal Reserve banks shall be persons who
are either well qualified and experienced in banking or actively engaged
in agriculture, industry or commerce. The directors appointed by the
Board of Governors shall be persons who are actively engaged in agriculture, industry or commerce and who are not primarily engaged in banking
(although they may be stockholders or directors of banks). No director
of a Federal Reserve bank shall serve as a director of a branch of the
bank during the period of his service as a director of the Federal Reserve bank.
3. All directors shall be citizens of the district and shall
reside within the territory served by the branch, but at least one of
the directors appointed by the banK shall reside outside of the city in
which the branch is located.
,
?• 0 n e o f the directors appointed by the Reserve bank shall
be the active manager of the branch and shall have the title "Managing
Director".
^
^ke term of office for the director chosen by the Reserve
bank to act as Managing Director of the branch shall be one year, subject to reappointment from year to year, if such action be desirable,
full term for other directors shall be three years where
he brancn board consists of seven members and two years where the branch
board consists of five members. In order to make practicable an orderly
rotation of branch directorships, the terms of directors, other than the
Managing Director, shall be so arranged that the term of a director apB ard of
°
S e n i o r s m i d the term of a director appointed by
the federal Reserve bank shall expire at the end of each year. No director, other than the Managing Director, who has had six or more years of
continuous service, shall be reappointed as a director to take effect before uhe expiration of a period, immediately following such service, of
-2-
S-180-a
283
at least two years at any branch having five directors or three years at
any branch having seven directors.
7. The board of directors of each branch shall annually elect
as chairman of the board the member appointed by the Board of Governors
whose term of office expires with the current year.
8. In
tors of a branch
vacancy shall be
such appointment
the event of a vacancy occurring in the board of direcof a Federal Reserve bank, the appointment to fill such
made by the body making the original appointment and
shall be for the unexpired term,
9. As provided in Section 3 of the Federal Reserve Act, directors of branches of Federal Reserve banks hold office at the pleasure
of the Board of Governors,
. 284
S-181
Reg. Q-58
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
September 8, 1959.
Mr.
, President,
National Bank of
t
,
•
Dear Sir:
A copy of your letter of August 9, 1939, addressed to the
Chief National Bank Examiner of your district, regarding the question whether certificates of deposit maturing on Sunday may be renewed or paid on the previous day, has been referred to the Board
of Governors of the Federal Reserve System by the office of the
Comptroller of the Currency.
The Board of Governors, in a ruling published at page 809
of the 1934 Federal Reserve Bulletin, declared that there is no
provision of law which would preclude the renewal of a time certificate of deposit prior to the date of its maturity, dating the new
certificate as of the date of maturity of the original certificate.
When the maturity of a certificate of deposit falls on a
Sunday, the date on which it is due and payable is to be determined
by State law. It is our understanding that, under the statutes of
(Name of State), negotiable paper maturing on a Sunday or on a holiday becomes due on the succeeding secular or business day and, accordingly, if this is correct, under section 4 of the Board's
Regulation Q, a copy of which is enclosed, a member bank of the Federal Reserve System located in (Name of State) may not pay a time
certificate of deposit having such a maturity until the next succeeding secular or business day, except in the circumstances specified
in the regulation.
If you have any further questions regarding this matter, or
any similar matter, it is suggested that you communicate with the
Federal Reserve Bank of
.
Very truly yours,
(Signed) L. P» Bethea,
L. P. Bethea,
Assistant Secretary.
285
S-182
BOARD O F G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
addrcii official c o r r e s p o n d e n c e
to the board
September 15, 1959.
<•<>#»»»»
Dear Sir:
With its letter of May 3, 1939, R-456, the Board submitted a
draft of a proposed regulation governing the collection of noncash items.
This draft of the regulation has been revised in some particulars in the
light of suggestions received from the Federal Reserve banks pursuant to
the Board's letter and there is enclosed herewith a copy of the revised
form of the regulation. The regulation in the form enclosed will be
adopted by the Board when drafts of the noncash collection circulars of
the Federal Reserve banks have been received and reviewed so that an effective date for the revised regulation may be fixed. The new regulation
will be known as Regulation G.
In this connection it is noted that the report of the Standing
Committee on Collections dated April 22, 1939, states (Paragraph 60) that:
"Revised uniform paragraphs for circulars to be issued by the Federal Reserve banks, relating to the collection of noncash items, will be submitted
by the Standing Committee on Collections when the text of the new regulation has been determined." It is understood, accordingly, that the Standing Committee on Collections will give further consideration to this subject
before changes are made in the noncash collection circulars of the Federal
Reserve banks designed to bring them into conformity with the new regulation.
Copies of letters which the Board addressed yesterday and today to the
Chairman of the Presidents' Conference regarding this matter are enclosed
herewith for your information.
You are also advised that the Board of Governors has approved
recommendation No. 18 contained in the report of the Standing Committee on
Collections dated January 14, 1939, and concurred in by the Presidents'
Conference "that each Federal Reserve bank, whenever possible, should endorse or stamp all municipal warrants handled by it as noncash items in
such manner as to indicate the agency status of the Federal Reserve bank,
or should attach to such municipal warrants notices indicating such status".
Action upon this particular recommendation has heretofore been deferred
pending consideration of the new regulation governing the collection of
noncash items.
Very truly yours,
Enclosures 3
http://fraser.stlouisfed.org/
TO PRESIDENTS
Federal Reserve
Bank of St. LouisOF
^ ^rt4" rv 1\ ft - t 1
Chester
Morrill,
Secretary.
ALL FEDERAL RESERVE BANKS.
S-182-a
288
REGULATION G
Effective
, 1939.
COLLECTION OF NONCASH ITEMS
AUTHORITY FOR REGULATION
This regulation is based upon and issued pursuant to
the provisions of subsection (i) of section 11, the first paragraph of section 13, and the 14th and 15th paragraphs of section
16, and other relevant provisions of the Federal Reserve Act.
SECTION 1.
DEFINITION OF NONCASH ITEMS
As used in this regulation, the term "noncash items"
means any items of the following classes when payable within the
continental United. States:
(1) Maturing notes, acceptances, bankers' acceptances,
certificates of deposit, bills of exchange, and drafts with
or without securities, bills of lading or other documents
attached;
(2) Drafts and orders on savings deposits with pass
books attached;
(3) Checks, drafts and other cash items which have
previously been dishonored or on which special advice of
payment or dishonor is required
(4) Maturing bonds and coupons (other than obligations
of the United States and its agencies which are redeemed, by
Federal Reserve banks as fiscal agents);
1.
Any check, draft, or other item which is normally handled as
a cash item will not be handled as a noncash item unless special
conditions require that this be done, and the Federal Reserve
bank will decide whether such special conditions exist.
8-182
(5) State and municipal warrants, including both
orders to pay addressed to officers of States and political
subdivisions thereof and any special or general obligations
of States and political subdivisions thereof;
(6) All other evidences of indebtedness and orders to
pay, except checks and bank drafts handled under the provisions of Regulation J-*- and checks and bank drafts drawn on
or payable by a nonmember bank which cannot be collected at
par in funds acceptable to the Federal Reserve bank of the
district in which such nonmember bank is located.2
SECTION 2. RECEIPT OF ITEMS FOR COLLECTION
Each Federal Reserve bank may receive for collection noncash items from member and nonmember clearing banks in its district,
from other Federal Reserve banks, and from all member and nonmember
clearing banks in other Federal Reserve districts which are authorized to route direct for the credit of their respective Federal Reserve banks, subject to the terms and conditions of this regulation.
SECTION 5. TERMS OF COLLECTION
(1) Agreement of sending bank. - Each member and nonmember
clearing bank which sends noncash items to any Federal Reserve bank
for collection shall by such action be deemed: (a) to authorize the
Federal Reserve banks to handle such items subject to the terms and
conditions of this regulation; (b) to warrant its own authority to
give the Federal Reserve banks such 'authority; (c) to agree to indemnify any Federal Reserve bank for any loss or expense sustained
(including but not limited to attorneys' fees and expenses of litigation) resulting from the failure of such sending bank to have such
authority, or resulting from such Federal Reserve bank's guaranty of
prior endorsements, or resulting from any action taken by the Federal
1.
(See Footnote 1 on preceding page,)
2,
Chocks and bank drafts drawn on or payable by a nonmember bank
which cannot be collected at par in funds acceptable to the
Federal Reserve bank of the district in which such nonmember
bank is located, and which may not be received under the terms
of Regulation J, likewise may not be received as noncash items
under the terms of this regulation.
S-182-a
2 8 8
-o-
Reserve bank within the scope of its authority for the purpose of
collecting such noncash items; and (d) to guarantee all prior endorsements on such items whether or not a specific guaranty is incorporated in an endorsement of the sending bank.
(2) Federal Reserve bank as agent. - A Federal Reserve
bank will act only as agent of the bank from which it receives
such noncash items and will assume no liability except for its
own negligence and its guaranty of prior endorsements.
(3) Presentation of items by Federal Reserve bank. A Federal Reserve bank may present such noncash items with any accompanying documents for payment direct to the person, firm or corporation on which they are drawn or by or through which they are
payable or collectible, or may present them for payment or forward
them for collection direct to the bank on which they are drawn, at
which they are payable, or through which they are payable or collectible; or, in its discretion, may forward them to another agent
with similar authority to present them for payment or forward them
for collection. The bank upon which any such noncash item may be
drawn, or at which the same may be payable or through which the same
may be payable or collectible shall be deemed to be a proper agent
for collection within the meaning of this regulation.
(4-) Items payable in other districts. - Noncash items
received by a Federal Reserve bank payable in other districts will
be forwarded for collection to the Federal Reserve bank of the district in which such items arc payable; except that, when in the
judgment of the Federal Reserve bank the size or character of the
items or other special circumstances justify such action, any such
items, in the discretion of the Federal Reserve bank, may be forwarded for collection direct to the bank on which they are drawn,
at which they are payable, or through which they are payable or
collectible, or nay be forwarded for collection to another agent
with authority to present them for payment direct to the person,
firm, or corporation on which they arc drawn or by or through which
they arc payable or collectible or to present them for payment direct
to the bank on which they are drawn, at which they are payable qr
through which they are payable or collectible.
(5) Forms of payment accepted by Federal Reserve bank. A Federal Reserve bank may, in its discretion and at its option,
accept from any bank in payment of or from any collecting agent in
remittance for such noncash items, cash, checks, bank drafts, transfers of funds or bank credits, or ether forms of payment or remittance,
acceptable to the collecting Federal Reserve bank. The Federal Reserve
S-182-a
289
bank shall not be liable for the failure of any bank or any agent
to collect, or to pay, or to remit for, such noncash items, nor for
any loss resulting from the acceptance from any bank or any agent,
in lieu of cash, of any other form of payment or remittance authorized herein, nor for the nonpayment of, or failure to realize upon,
any bank draft or other medium of payment or remittance which may
be accepted from any bank or any collecting agent.
(6) Collection of remittances for noncash items. Bank drafts and other forms of payment or remittance received by a
Federal Reserve bank in payment of or in remittance for noncash items
handled under the terms of this regulation will be collected, at the
option of the Federal Reserve bank, either under the terms and conditions of this regulation or under the terms and conditions of Regulation J of the Board of Governors of the Federal Reserve System.
(7) Suspension or closing of paying or remitting bank. - .
No draft, authorization to charge, or other order, upon any reserve
balance, clearing account, deposit account, or other funds of a paying, remitting, or collecting bank in the possession of a Federal
Reserve bank, issued for the purpose of settling items handled under
the terms of this regulation will be paid, acted upon, or honored
after receipt by such Federal Reserve bank of notice of suspension
or closing of such paying, remitting, or collecting bank.
(8) Items sent direct to Federal Reserve bank in another
district. - With respect to any noncash item sent direct by a member
or nonmember clearing bank in one district to a Federal Reserve bank
in another district, the relationships and the rights and liabilities
existing between the member or nonmember clearing bank, the Federal
Reserve bank of its district and the Federal Reserve bank to which
the noncash item is sent will be the same, and the relevant provisions
of this regulation will apply, as though the member or nonmember clearing bank had sent such noncash item to the Federal Reserve bank of
its district with its endorsement and guaranty of prior endorsements
and such Federal Reserve bank had sent the noncash item to the other
Federal Reserve bank with its endorsement and guaranty of prior endorsements.
SECTION 4. OTHER RULES
Each Federal Reserve bank may also promulgate rules not
inconsistent with the terms of the law or of this regulation, governing the details of its noncash collection operations. Such rules
may be set forth by each Federal Reserve bank in circulars to its
member and nonmember clearing banks and shall be binding upon any
member or nonmember clearing bank which sends any noncash item to
such Federal Reserve bank for collection or to any other Federal
Reserve bank for the account of such Federal Reserve bank for collection.
290
S-182-b
COPY
September 14, 1939.
Mr. G. L. Harrison,
Chairman of the Presidents' Conference,
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Chairman:
With its letter of May 3, 1939, R-456, the Board submitted to the Federal Reserve banks a draft of a proposed regulation governing the collection of noncash items. This draft of
the regulation has been revised in some particulars in the light
of suggestions received from the Federal Reserve banks, and the
revised draft is now before the Board for action.
In this connection it is noted that the report of the
Standing Committee on Collections dated April 22, 1939, states
(Paragraph 60) that: "Revised uniform paragraphs for circulars to
be issued by the Federal Reserve banks, relating to the collection
of noncash items, will be submitted by the Standing Committee on
Collections when the text of the new regulation has been determined." It is understood, accordingly, that the Standing Committee on Collections will give consideration to the uniform paragraphs
of the noncash collection circulars before changes are made in the
circulars designed to bring them into conformity with the new regulation.
The Board feels that it is desirable that arrangements
be made for consideration at the same time of the non-uniform provisions of the noncash collection circulars, with a view to producing as much uniformity as practicable. It will be appreciated,
therefore, if you will bring this matter to the attention of the
Presidents' Conference on September 18, 1939, in order that it may
be referred to an appropriate committee for consideration as soon
as practicable after action by the Board on the text of the new
regulation.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
r
COPY
September 15, 1939.
Mr. G. L. Harrison,
Chairman of the Presidents' Conference,
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Chairman:
Referring to the letter which the Board addressed to you on yesterday regarding the regulation
governing the collection of noncash items, there is
enclosed herewith for your information a letter which
the Board is today addressing to the Federal Reserve
banks with respect to this subject.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
Enclosure.
S-183 "
Reg. 0,-39
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
September 15, 1939.
Mr.
. President,
National Bank,
Dear Sir:
Your letter of August 11, 1939, addressed to the Comptroller of the Currency has been referred to the Board of Governors
of the Federal Reserve System for reply. You request information
as to whether your bank may pay interest on a savings account after
the death of the depositor.
Under the definition of the term "savings deposit" contained in subsection 1(e) of the Board's Regulation Q,, a copy of
which is enclosed herewith, such a deposit may consist of funds,
the entire beneficial interest in which is held by one or more
individuals or by a corporation, association, or other organization
operated primarily for religious, philanthropic, charitable, educational , fraternal, or other similar purposes and not operated for
profit. Accordingly, a savings deposit may continue to be classified as such after the death of the depositor if the entire beneficial interest is then held by individuals or organizations of
the kinds mentioned in the regulation. Likewise, a deposit in the
name of an executor or administrator may be classified as a savings
deposit if it meets the other requirements of the definition of
savings deposits in the regulation and the entire beneficial interest is held by individuals or organizations of the kinds mentioned.
Even where it is not known whether the entire beneficial interest
is held by individuals or organizations of the kinds described, the
Board of Governors will offer no objection, for a reasonable time
after the death of the depositor, to the continued classification
as a savings deposit of a deposit which has theretofore been properly
classified as such.
If you have any further questions regarding this matter,
or any similar matter, it is suggested that you communicate with the
Federal Reserve Bank of
.
Very truly yours,
• (Signed) L. P. Bethea
L, P. Bethea,
Assistant Secretary.
293
S-184
Reg. T-88
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
September 15, 1959.
Mr.
. Vice President
Federal Reserve Bank of
Dear Mr.
Reference is made to your letters of August 7, 1939 and
'
Company,
August 31, 1939, regarding the question raised by
,
, as to whether it "transacts a business in securities through the medium of a member of a national securities exchange"
within the meaning of Regulation T.
As indicated in the Board's letter (X-9880; Reg. T-54) of
April 26, 1957, and the ruling which accompanied the Board's letter
(8-123; Reg. T-80) of October 27, 1938, to which you refer, the question here presented necessarily must turn upon all the relevant facts
involved in the particular case.
The facts presented by
Company, however, apparently raise for interpretation the question whether a broker or dealer
would be prevented from being one who "transacts a business in securities through the medium of a member" if the business so transacted is
not the major business of the firm, the business so transacted in this
particular case being said by the firm to constitute approximately 10
per cent of its total business.
It is to be noted that the phrase does not require that a
majority of the broker's business be transacted through the medium of
a member, or that the business be "principally" or "chiefly" so conducted. The omission of any such requirement indicates an intention
to exclude such questions of degree from present consideration and to
narrow the problem down to the simple question whether "a business"
in securities is so transacted. It seems clear that a firm could be
transacting "a business" in securities through the medium of a member
even though such business constituted no more than 10 per cent of the
total securities business of the firm.
S-184
2 9 4
Reg. T-88
-2-
Accordingly, it is the view of the Board in the present
case that the facts presented do not exempt the firm from the
application of the phrase in question, and hence do not exempt
it from Regulation T.
Very truly yours,
(Signed) L. P. Bethea
'L. P. Bethea,
Assistant Secretary.
295
S-185
Reg. A-7.
BOARD O F G O V E R N O R S
OF THE
federal reserve system
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
September 25, 1939.
Dear Sir:
For your information there is enclosed herewith
a copy of a letter received from the Financial Adviser to
the Federal Home Loan Bank Board, together with a copy of
the reply of the Board of Governors, with reference to advances by Federal Reserve banks to Federal Home Loan banks
on the security of Government obligations.
Very truly yours,
%(L<lZu> jj l
Chester Morrill,
Secretary.
Enclosures 2
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
296
S-185-a
Reg. A-7.
COPY
FEDERAL HOME LOAN BANK BOARD
Washington
September 2, 1939
Mr. Lawrence Clayton,
Assistant to the Chairman,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Dear Mr. Clayton:
Regarding our telephone conversation today in
connection with the Federal Home Loan Banks requesting
advances from the Federal Reserve Banks on Government
obligations at par.
Will you be so kind as to ask the Board of Governors of the Federal Reserve System for a ruling as to
whether these advances may be made at the rates prevailing for member banks.
Yours very truly,
(Signed) Francis X. Pavesich
Francis X. Pavesich,
Financial Adviser to the Board
COPY
September 25, 1939.
Mr. Francis X. Pavesich,
Financial Adviser to the Board,
Federal Home Loan Bank Board,
Washington, D. C.
Dear Mr. Pavesich:
This refers to your letter of September 2, 1939,
in which you request a ruling as to whether advances may
be made to the Federal Home Loan banks by the Federal Reserve banks on Government obligations at par "at the rates
prevailing for member banks".
In reply you are advised that it is the view of
the Board of Governors that Federal Home Loan banks are in
eluded in the term nonmember banks as used in the Board's
announcement of September 1, 1939, regarding advances by
Federal Reserve banks on the security of Government obliga
tions.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
298
BOARD O F G O V E R N O R S
S-186
OF THE
federal reserve system
WASHINGTON
a d d r e s s official c o r r e s p o n d e n c e
to the b o a r d
October 4, 1959
Dear Sir:
For your information there is enclosed a
copy of a letter which the Board recently addressed
to the President of one of the Federal Reserve banks
with regard to the policy of the bank ss to the holding in safekeeping of securities pledged by member
banks to secure deposits of public funds.
Very truly your,
L. P. Bethea,
Assistant Secretary
Enclosure.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS EXCEPT DALLAS
S-186-a
September 29, 1959.
Mr. R. it. Gilbert, President,
federal heserve Bank of Dallas,
Dallas, Texas.
Dear Mr. Gilbert:
This refers to your letter of September 15, 1939, advising
that the
National Bank of
New Mexico, has requested
that your bank reconsider its policy of declining to hold for safekeeping securities pledged to secure deposits of public funds. It
is noted that this matter has been taken up with your board of directors and that it was the unanimous feeling of the members of your
board and of your officers that the service"should be extended to
your member banks, if it could properly be done, and that your board
by a unanimous resolution instructed that the question be submitted
to the Board of Governors.
In this connection you advise that all of the Federal Reserve banks except four now extend this service to their member banks
and that the Federal Reserve Bank of Kansas City performs this function for member banks in the part of New Mexico which is in the Kansas
City district, whereas member banks in the part of New Mexico which
is in the Dallas district are not accorded the service.
The question whether Federal Reserve banks have authority
under the law to receive and hold in safekeeping securities pledged
by member banks to secure deposits of public funds is one which has
been under consideration by the Board and its Counsel on several occasions in the past, and it is noted that the question has also been
considered from time to time by Counsel for the Federal Reserve Bank
of Dallas. However, a number of Federal Reserve banks have been
performing this service for some years past, and it appears that
the practice received the approval of the Conference of Governors
in December 19E9 and of the Conference of Presidents in October 1957.
The Board of Governors agrees with the directors and officers of
your bank that this is a valuable service, both to the member banks
and to public officials. In the circumstances if the Federal Reserve
Bank of Dallas should decide to undertake to do so, the Board of
Governors will offer no objection to its rendering the service to
its member banks under such safeguards as your Counsel may deem
advisable.
Very truly yours,
(Signod) Chester Morrill
Chester Morrill,
Secretary.
300
BOARD O F G O V E R N O R S
S-187
OF THE
federal reserve system
WASHINGTON
a d d r c i i official c o r r e s p o n d e n c e
t o the b o a r d
October 17, 1939
*******
Dear Sir:
During recent weeks there has been an increase in certain
types of business activity and if present trends continue it is quite
likely that some business enterprises may find themselves in need of
additional working capital to finance expanding operations, while
others affected less favorably by current developments may be in urgent
need of additional funds to keep their personnel employed and meet
current financial obligations.
The Board of Governors believes that the entire System should
be keenly alive to the changed conditions and be ready to render prompt
and efficient service wherever practicable. With this in mind the Board
hopes that the Federal Reserve banks will make special efforts to expedite the handling of all applications for advances for working capital
purposes, whether received direct or through financing institutions.
It is important, especially at this time, that applications for working
capital advances be considered sympathetically and that sincere efforts
be made to grant the credit applied for whenever it can be done on a
reasonable and sound basis, as required by statute. In acting upon applications it is important that substance, rather than technicalities
be given paramount consideration.
In order that the Board may be kept informed as to developments in this field, it will be appreciated if you will furnish it with
a brief statement with respect to each industrial loan application filed
with your bank as soon as final action has been taken thereon. It would
be helpful if this statement would include the date the application is
filed, the name, address, and type of business of the applicant, the
date the application was considered by (a) the Industrial Advisory Committee, and (b) the Federal Reserve bank, and if the application was
declined, the reasons therefor.
TO THE PRESIDENTS
Very truly yours,
/bO
Chester Morrill,
Secretary.
OF ALL FEDERAL RESERVE BANKS
8-188
Sec. 4 F.R.A.
INTERPRETATION OF LAW Oft REGULATION
(Copies to be sent to all Federal Reserve banks)
October 18, 1959
(First Vice President of a
Federal Reserve bank)
Your letter October 13. On basis of considerations mentioned in X-4573, holding that a person whose sole
occupation is that of an officer of a life insurance company
is not eligible for election as a Class B director, Board
of Governors feels that a person whose sole occupation is
that of president of a Federal savings and loan association
and who has been serving as a Class A director is not now
eligible for election and service as a Class B director.
(Signed) Chester Morrill
MORRILL
302
BOARD O F G O V E R N O R S
OF! T H E
federal reserve
s y s t rc-M
em
o
-i p q
Reg. L-8
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 s o a r d
*******
October 27, 1959
»
Dear Sir:
There is attached, for your information,
a copy of a letter addressed by the Board under
date of October 19, 1959, to the Chairman of a
Morris Plan Company with respect to the question
whether the company is a "bank" within the meaning of Section 8 of the Clayton Act.
Very truly yours,
bf)inA^
Chester Morrill,
Secretary.
Enclosure
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
S-189-a
Reg. L-8
October 19, 1939
Dear
:
Following receipt of your letter of October 9, 1939, further consideration has been given to the question whether The Morris
Plan Company of
is a "bank" within the meaning of section
8 of the Clayton Act. As you know, if the Company is not a "bank",
the statute is not applicable to directors of the Company who are.
serving as officers or directors of member banks of the Federal Reserve System.
It is understood that the Company was organized under a
statute (
) which relates to "loan and investment companies" and which defines the powers of such companies. It
is also understood that, since it was organized under that Chapter,
section 4 of Chapter 144 of those Laws makes it unlawful for the
Company to call itself a "bank", "savings bank" or "trust company",
or receive "deposits", or "transact business in the way or manner
of a bank, savings bank or trust company".
You have furnished us with a copy of the letter from the
Chief of the Division of Banking and Insurance of the State of
in which he says, consistently with the above statutory
provisions, that the Company "is in no sense a banking institution".
You have also advised us that the Federal Deposit Insurance Corporation ruled that the Company was not eligible for membership in
the Temporary Federal Deposit Insurance Fund because it did not
accept "deposits", and that the Federal Bureau of Internal Revenue
refused to grant the Company exemption from surtaxes under section
104(a) of the Revenue Act of 1956 on the ground that it was not a
"bank".
It is understood that the Company sells fully paid investment certificates but only in denominations of fifty dollars
or multiples thereof} that, although it may, and does in practice,
redeem such certificates on demand, it requires the registered
owner thereof to sign a receipt therefor on the back of such certificate with the practical result that there is no effective
method of negotiating such certificate except by presenting it at
the office of issue which holds the stub originally attached to
-<c-
S-189-a
Reg. L-8
such certificate and which stub bears the owner's signature; that
the Company issues what are termed installment investment certificates representing accounts opened for the purpose of purchasing
fully paid investment certificates on an installment basis; that,
although it permits withdrawals from such installment investment
certificate accounts, the customer may not draw on such account by
check but must (except in extreme cases such as illness, etc.,
where he may sign a receipt which is returned to the Company1s
office accompanied by the installment investment account book and
receive the Company's check for the amount withdrawn) present his
installment certificate account book at the Company's office and
sign a receipt reading "Received of The Morris Plan Co. of
the sum of
as part payment of Instal. Invest. Cert. #
"
which is imprinted by rubber stamp on the Company's card record of
the particular account at the time of withdrawal; that the Company
makes no use whatever of counter checks or other checks, to effect
withdrawals; that, although the Company pays interest on both full
paid and installment investment certificates, the interest on full
paid investment certificates is paid by check mailed to the customer's registered address, and interest on installment investment
certificate accounts (which does not begin to run until the balance
thereon amounts to $85) is not paid or credited at regular intervals, but is paid to the customer by cash, check, or credit to the
customer's installment certificate account when called for by the
customer; that the major portion of the Company's transactions,
which are estimated at an average of approximately six hundred a
day, involve the making of loans or receipt of payments on loans;
that payments on or withdrawals from installment certificates
average about ten a day; that the daily cash on hand carried in
the Company's main office amounts to about $10,000, of which
amount about $400 to #500 is set aside for payments on both full
paid and installment investment certificates and the remainder is
set aside for lending transactions; that the receipt and payment
of funds in connection with investment certificates probably does
not require much more than a half hour a day of the one investmentteller' s time; that withdrawals on investment certificates probably average about three weekly; that the Company does not issue
cashier's checks or drafts, such checks as it issues being drawn
on the banks where it has deposit accounts in the city of
;
that the Company does not maintain any form of so-called checking
account service (other than the limited withdrawal service on installment investment certificate accounts above described); that
the Company is prohibited by law from transacting and does not
transact a trust business; that it does not offer safety deposit
facilities to the public; that it transacts no escrow or agency
business for the public; that, except for the occasional sale of
securities held as collateral to loans, it does not buy or sell
-S-
S-189-a
Reg. L-8
securities for customers; that it is not a member of the
Clearing House Association; that its hour of closing extends one
hour beyond the closing hour of banks in
; that, although
it is subject to the supervision of and examination ty the Chief of
the Division of Banking and Insurance of
,
, so also
are building and loan associations, credit unions and small finance
companies in the State; and that, although it is required to submit
reports of condition to the Chief of the Division of Banking and
Insurance twice a year, it is not required to publish such reports,
which banks and trust companies in the State are required to do.
It is understood also that the general public regards the Company
as a lending corporation or finance company operating primarily in
the installment .lending field and not as a bank of deposit.
The question whether or not a particular institution is
a "bank" within the meaning of section 8 of the Clayton Act is
often a perplexing one, and in view of the great variety of financial institutions in this country there must necessarily be cases
where even slight variations in the facts will produce different
results. It is for this reason that the facts upon which the present ruling is based have been set forth in detail in this letter,
and on the basis of these facts the Board is now of the opinion
that the Company is not a "bank" within the meaning of section 8
of the Clayton Act.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
306
BOARD O F G O V E R N O R S
OF THE
federal reserve system
WASHINGTON
s _ 190
Reg.
F-22
a d d r c b b official o d r r i i p o n d i n c t
to the b o a r d
November 8, 1939
Dear Sir:
In response to inquiries received by it, the
Board has expressed the opinion that United States Savings Bonds may be used to satisfy the requirement contained in Section ll(k) of the Federal Reserve Act and
Section 9(b) of Regulation F, Trust Powers of National
Banks, that national banks deliver to their trust departments securities of specified kinds as collateral
security for trust funds used ty them in the conduct of
their business.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
307
8-191
Reg. T-89
INTERPRETATION OF LAW OR REGULATION
(Copies to be sent to all Federal Reserve banks)
November 10, 1939,
Mr.
,
Assistant Vice President,
Federal Reserve Bank of
Dear Mr.
:
Reference is made to your letter of October 13, 1939, regarding section 4(f)(5) of Regulation T which provides that:
"In a special miscellaneous account, a creditor may —
"(5) Effect transactions for and finance any joint
adventure or group in which the creditor participates and
in which all participants are dealers (whether such participants be acting jointly or severally), or any member
thereof or participant therein, for the purpose of facilitating the underwriting or distributing of all or part of
an issue of securities (A) not through the medium of a
national securities exchange, or (B) the distribution of
which has been approved by the appropriate committee of a
national securities exchange;"
The question whether a particular transaction may properly
be effected under section 4(f)(5) is necessarily a question of fact
that depends upon all the relevant facts involved in the particular
case. As indicated in the letter which you forwarded from the
Stock Exchange, however, the qualification of a transaction under the
section requires more than merely the existence of a joint-venture or
compliance with the conditions specified in clause (A) or (B), The
transaction must in any event be "for the purpose of facilitating the
underwriting or distributing of all or part of an issue of securities..."
Since it appears that the transactions referred to in your
letter do not relate to "underwriting", the question arises whether
they are for the purpose of facilitating the "distributing" of securities. It is necessary, therefore, to consider the meaning of the word
"distributing" as used in this provision.
The use of this word in addition to the word "underwriting"
naturally makes it reasonable to assume that the two words were not
308
8-191
Reg. T-89
r
-2
v
intended to have identical meanings. On the other hand, however, the
word "distributing" necessarily must be read in its context. Its
meaning cannot be understood without considering the general meaning
and purpose of the provision in which it is used.
It seems clear, therefore, that the distributing here referred to is something similar to underwriting. In other words, it
must involve the distribution of a relatively large block of securities from one owner, or a comparatively few owners, to a much larger
number of holders.
No exact requirements can be stated with respect to the
minimum size of the block of securities, the maximum number of the
original owners, or the minimum number of ultimate holders. In general, there must be what is usually considered in the trade to be a
distribution as distinguished from position trading.
The typical case would, of course, be the distribution of a
new issue of securities. Securities might in some instances be the
subject of a distribution even though they had been issued a long time
before, and the widespread sale of a large block of securities which
had been left as a part of the estate of a deceased person might be an
example of such a distribution. On the other hand, however, if a
quantity of old securities was accumulated from a large number of individuals long after the securities had been issued, and the securities were then resold to a large number of persons, this would not
constitute "distributing" within the meaning of section 4(f)(5). It
will be recalled that the ruling at page 549 of the July 1936 Federal
Reserve Bulletin indicated similar limitations on the meaning of the
term "distribution" as used in a similar provision of Regulation U,
It is hoped that this general discussion will be of assistance to your Bank and to the __________ Stock Exchange, and if there
should be any further questions of interpretation regarding the provision, tne Board will, of course, be glad to give them consideration.
Very truly yours,
(Signed) L. P, Bethea
L. P. Bethea,
Assistant Secretary.
\
INTERPRETATION OF LAW OR REGULATION
S-192
Reg. P-15
(Copies to be sent to all Federal Reserve banks)
November 15, 1959
Mr.
, Vice President,
Federal Reserve Bank of
,
Dear Mr.
This refers to your letter of September 13, 1959, relating
to a request from Mr.
, Secretary-Comptroller,
,
, that the Board define the terms "net earnings"
t
and "actual net earnings" used in subsections (c) and (e)(4), respectively, of section 5144 of the Revised Statutes of the United States.
The Board believes that it is not feasible for it to furnish comprehensive definitions of these terms which would cover ai1 of the specific questions which may arise in various cases and circumstances.
It is believed, however, that the following views on the matter will
furnish the information which Mr.
desires regarding undistributed earnings of subsidiary banks.
Subsection (e)(4) requires that a holding company affiliate
shall agree, in its application for a voting permit, that thenceforth
it will declare dividends only out of actual net earnings. The Board
feels that the amount of the "actual net earnings" of a holding company affiliate, within the meaning of such subsection, should be arrived at on the basis of the most conservative accounting principles.
Accordingly, it is felt that the actual net earnings of a holding
company affiliate generally should not be construed to include earnings of subsidiary banks which have not been distributed to the
holding company affiliate in the form of dividends.
With respect to the provisions of subsection (c) regarding
the establishment and maintenance by a holding company affiliate of
a reserve of readily marketable assets out of net earnings over and
above 6 per centum per annum on the book value of its own shares outstanding, it is felt that "net earnings" should not be construed to
include undistributed earnings of subsidiary banks which, in accordance with the comments in the preceding paragraph, are not regarded
as "actual net earnings" of the holding company affiliate.
Very truly yours,
(Signed) L. P. Bethea
L, P. Bethea,
Assistant Secretary.
310
BOARD O F G O V E R N O R S
OF THE
federal reserve system
WASHINGTON
S-195
a d d r e s s official c o r r e s p o n d e n c e
to the s o a r d
December 14, 1939
Bear Sir:
The Board concurs in the action of the Conference of
Presidents, held December 12, 1959, in approving, with certain
modifications, the recommendations contained in the report of
the Standing Committee on Collections, dated November 8, 1959,
with respect to the inclusion of certain uniform paragraphs in
the noncash collection circulars of the Reserve banks and the
insertion of additional paragraphs in the cash collection circulars when the occasion arises for the reprinting of such
circulars.
As stated in the Board's letter, S-182, of September
15, 1959, Regulation G, "Collection of Noncash Items", in the
form enclosed with that letter, will be adopted by the Board
when drafts of the revised noncash collection circulars of the
Federal Reserve banks have been received and reviewed so that
an effective date for the regulation may be fixed. The effective date will be sufficiently far in advance to allow for the
printing of the regulation, and the noncash collection circulars, and their simultaneous release by all Federal Reserve
banks about two weeks in advance of the effective date.
It will be appreciated if you will forward to the
Board as soon as practicable two copies of your revised noncash collection circular. It is requested that no Federal
Reserve bank make public the revised circular until the effective date has been established and the regulation released by
the Board.
Very truly yours,
L. P• Be thea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
311
BOARD O F G O V E R N O R S
OF THE
federal reserve system
S-194
WASHINGTON
a d d r e i i official c o r r e s p o n d e n c e
to the b o a r d
*******
December 20, 1939.
Dear Sir:
Following a review of the by-laws governing the branches of
Federal Reserve banks and also of the Board's regulations relating to
directors of such branches, the Board of Governors is considering the
adoption of regulations in the form enclosed herewith governing the
operations of the branches of the Federal Reserve banks. These regulations include most of the provisions which are now contained in the
regulations of the. Board regarding directors of branch Federal Reserve
banks and also certain other provisions that are largely of a formal
character, but they do not contemplate any important changes in operating procedure.
The regulations provide that each Federal Reserve bank may
adopt by-laws or issue instructions, not inconsistent with the law
or the regulations, containing such further provisions with regard
to the operation of its branches as it may deem advisable. Under the
proposed regulations it will not be necessary for a Federal Reserve
bank to obtain the approval of the Board of Governors of such by-laws
or instructions, but it will be expected that copies of any such bylaws or general instructions regarding the operation of branches, as
well as copies of any future amendments thereof, will be furnished
promptly to the Board of Governors for its information. In this connection, it will also be expected that, before the regulations become
effective or as soon thereafter as practicable, each Federal Reserve
bank will review the existing by-laws of its branches and make such
modifications as may be appropriate in the light of the new regulations.
The Board will be pleased to receive any comments you may
care to make with respect to the proposals outlined above, and it is
requested that you submit them in time to reach the Board not later
than January 10, 1940.
Very truly yours,
Enclosure
TO PRESIDENTS
Chester Morrill,
Secretary.
OF ALL FEDERAL RESERVE BANKS
312
S-194-a
IIMULATIOMS
REI.Ar:iBa TO
BRANCHES OF FEDERAL RESERVE BANKS
(Effective
,
, 1940)
These regulations, governing the operations of all branches
of Federal Reserve banks, are prescribed by the Board of Governors of
the Federal Reserve System (hereinafter referred to as the Board of
Governors) under authority of the provisions of section 3 of the Federal Reserve Act.
Section 1. Names of Branches and Territory Served
(a) Names of branches. - Each branch shall include in its
title the name of the city in which it is situated and the name of the
Federal Reserve bank of which it is a branch, as "Detroit Branch of
the Federal Reserve Bank of Chicago".
(b) Branch territory. - No change shall be made by any Federal Reserve bank in the territory included within the district served
by any of its branches, except with the approval or upon the direction
of the Board of Governors.
Section £. Authority and Functions
No substantial change shall be made by any Federal Reserve
bank in the authority of or functions performed by any of its branches,
except with the approval or upon the direction of the Board of Governors.
' 313
—£•—
Section 5»
S-194-a
Directors
(a) Number of directors. - The Board of directors of each
branch of a Federal Reserve bank shall consist either of seven members or of five members, as may be determined by the Federal Reserve
bank, subject to the approval of the Board of Governors. Where the
board .of directors of the branch consists of seven members, four shall
be appointed by the Federal Reserve bank and three by the Board of Governors, and, where the board consists of five members, three shall be
appointed by the Federal Reserve bank and two by the Board of Governors.
(b) Qualifications of directors. - All directors shall be
persons of high character and standing who have established reputations
and ability to meet their financial obligations. They shall be persons
whose business and financial interests are primarily within and representative of the branch territory rather than of interests controlled
or owned outside the territory.
The directors appointed by the Federal
Reserve banks shall be persons who are either,well qualified and experienced in banking or actively engaged in agriculture, industry or commerce. The directors appointed by the Board of Governors shall be persons
who are actively engaged in agriculture, industry or commerce and who are
not primarily engaged in banking (although they may be stockholders or
directors of banks). No director of a Federal Reserve bank shall serve
as a director of a branch of the bank during the period of his service
as a director of the Federal Reserve bank. All directors shall be citizens of the United States and shall reside within the territory served
314
<'
-3-
S-194-a
by the branch, but at least one of the directors appointed by the Federal Reserve bank shall reside outside of the city in which the branch
V
is located.
(c) Managing Director. - One of the directors appointed by
the Federal Reserve bank shall be the active manager of the branch. He
V
shall have the title "Managing Director" and perform such duties as may
be prescribed by the Federal Reserve bank.
(d) Terms of other directors. - The term of office of directors, other than the Managing Director, shall be three years where the
branch board consists of seven members and two years where the branch
^
board consists of five members.
In order to make practicable an orderly
rotation of branch directorships, the terms of directors, other than the
Managing Director, shall be so arranged that the term of a director appointed by the Board of Governors and the term of a director appointed
by the Federal Reserve bank shall expire at the end of each year,
(6)
Directors with six or more years of continuous service. -
No director, other than the Managing Director, shall be reappointed as a
director if such reappointment is to become effective within a period of
two years immediately following six or more years of continuous service
at any branch having five directors or within a period of three years immediately following such service at any branch having seven directors.
(f) Chairman. - The Federal Reserve bank shall annually designate as chairman of the board of directors of each branch one of the
members appointed by the Board of Governors.
* 315
-4-
S-194-a
(g) Vacancies. - In the event of a vacancy occurring in the
board of directors of a branch of a Federal Reserve bank, the appointment to fill such vacancy shall be made by the body making the original
appointment and such appointment shall be for the unexpired term,
(h) Removal of directors. - As provided in section 3 of the
Federal Reserve Act, directors of branches of Federal Reserve banks hold
office during the pleasure of the Board of Governors.
(i) Meetings. - The board of directors of each branch shall
meet once a month during at least ten months in each calendar year. A
special meeting may be called at any time in accordance with such procedure as the Federal Reserve bank may prescribe,
(j) Quorum. - A majority of the board of directors of the
branch shall constitute a quorum for the transaction of business, but
less than a majority may adjourn from day to day until a quorum is in
attendance,
(k) Fees and allowances. - The fees and allowances to be
paid to directors of the branch for attendance at meetings of the board
of directors of the branch or any committees of the branch shall be
fixed by the Federal Reserve bank subject to the approval of the Board
of Governors,
(1) Powers. - The board of directors of the branch shall supervise the operations of the branch subject to the direction and control
of the Federal Reserve bank of the district and the regulations of the
Board of Governors,
*• 316
-5Section 4.
S-194-a
Officers
The Federal Reserve bank shall appoint such officers for each
branch, in addition to the Managing Director, as the bank from time to
time deems necessary.
Such officers shall perform such duties as may
be prescribed by the Federal Reserve bank or by the Managing Director.
In accordance with the provisions of the Federal Reserve Act, all officers of a branch shall be subject to removal by the Board of Governors
and any compensation provided for officers or employees of any branch
shall be subject to the approval of the Board of Governors.
Section 5.
Supplemental Instructions
Each Federal Reserve bank may issue instructions or adopt bylaws, not inconsistent with the law or these regulations, containing
such further provisions with regard to the operation of its branches as
it may deem advisable.
@FedFRASER