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FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE T O T H E FEDERAL RESERVE BOARD X-6066 June 13, 1928. SUBJECT: Eecommendations of Governors' Conference. Dear Sir: There i s enclosed herewith for your information copy of a l e t t e r addressed hy the Governor of the Board to the Secretary of the Governors' Conference, advising of the action taken "by the Board on the various actions and recommendations which were referred to the Board by the recent Governors' Conference. Very truly yours, J. C. Noell, A s s i s t a n t Secretary. GOVERNORS OF ALL FEDERAL RESERVE BANKS. COPY X-6066-a ^ June 12, 1928. Dear Mr. Harrison: Your l e t t e r of May 22nd, c a l l i n g particular attention to the action of the recent Governors Conference on matters referred to i t "by the Board or which the Conference submitted to the Board- for i t s advicG or approval, was given special consideration at the meeting of the Board today. As you may know, the several questions referred to the Conference by the Board, relating to p o s s i b l e changes under the present law a f f e c t i n g the reserve requirements of member banks and p o s s i b l e amendments to Section 19, have also been discussed by the Board with the Federal Advisory Council. I t i s not probable that any action on these questions w i l l be taken by the Board in the near future, but i t i s hoped that during the summer some program can be worked out by the Board and gotten in shape for submission to the Conference of Governors and Federal Reserve Agents which w i l l be held in the .fall* The Board w i l l , I think, undoubtedly communicate with the Federal Reserve Banks regarding these matters from time to time. Upon consideration of the action of the Governors ! Conference relating to the amendment of Regulation J, the Board i s of the opinion that the s l i g h t change recommended would not result in s u f f i c i e n t improvement in the l e g a l s i t u a t i o n to which a t t e n t i o n was called by the Conference of Counsel to j u s t i f y an amendment to the Regulation. The Board voted, therefore, that this topic should be placed on the program for the next Governors1 Conference with a request that the Conference advise the Board d e f i n i t e l y whether: (a) In order to eliminate the legal d i f f i c u l t i e s pointed out by the Conference of Counsel, the authority for Federal reserve banks to reserve the right to charge checks to the reserve account of member banks should be eliminated e n t i r e l y ; or (b) whether this authority i s of s u f f i c i e n t p r a c t i c a l value to j u s t i f y i t s retention in the regulations notwithstanding the legal d i f f i c u l t i e s to which i t may give r i s e . The Board has voted to adopt the recommendation of the recent Conference of Counsel, approved by the Governors1 Conference, that a change be made in the standard form of bankers' acceptance so as to eliminate any question as to e l i g i b i l i t y growing out of the decision of the Supreme Court of Texas, in the case of Lane and Company v . Crum. The necessary formal ruling of the Board w i l l be transmitted to a l l Federal Reserve Banks within a few days# —2— X—6066—a. > ^ j L. The r e p o r t submitted to the Governors 1 Conference "by the r subcommittee of the General Committee on Bankers 1 Acceptances which was approved by the Governors ' Conference has been noted w i t h i n t e r e s t by the Federal Reserve Board but r e q u i r e s no a c t i o n by the Board except i n so f a r as i t calls a t t e n t i o n to the f a c t t h a t no a c t i o n has been taken by the Board w i t h r e f e r e n c e to the recommendations of the General Comm i t t e e on Bankers 1 Acceptances submitted to the Conference of March, 1926. A f t e r c a r e f u l c o n s i d e r a t i o n of the r e p o r t submitted to the Governors 1 Conference i n March, 1926, by the General Committee on Bankers 1 Acceptances, the Federal Reserve Board adopted the f o l l o w i n g s t a t e m e n t with r e f e r e n c e t h e r e t o : "In so f a r as t h i s r e p o r t contains a s t a t e m e n t of the broad g e n e r a l p r i n c i p l e s r e g a r d i n g c o r r e c t p r a c t i c e s i n the g r a n t i n g of domestic b a n k e r s ' acceptance c r e d i t s , i t i s approved by the F e d e r a l Reserve Board. Such approval i s given, however, w i t h the d i s t i n c t u n d e r s t a n d i n g t h a t i t s h a l l not be construed as revoking or q u a l i f y ing any of the Board 1 s e x i s t i n g r u l i n g s , and t h a t a l l a c c e p t a n c e s i s s u e d by n a t i o n a l banks or r e d i s c o u n t e d by F e d e r a l r e s e r v e banks mast continue to comply with a l l of the p e r t i n e n t p r o v i s i o n s of the law and with t h e e x i s t i n g r e g u l a t i o n s and r u l i n g s of t h e F e d e r a l Reserve Board. "The Board b e l i e v e s t h a t most of the broadening i n the use of domestic b a n k e r s ' acceptances which i s contemplated by the Com- • m i t t e e 1 s r e p o r t can be accomplished without any m a t e r i a l m o d i f i c a t i o n of the B o a r d ' s e x i s t i n g r u l i n g s on t h i s s u b j e c t ; but the Board cannot u n d e r t a k e to modify any of i t s e x i s t i n g r u l i n g s through the approval of t h i s r e p o r t , because the B o a r d ' s r u l i n g s a r e based upon s p e c i f i c f a c t s and cannot s a f e l y be modified through the approval of g e n e r a l academic s t a t e m e n t s such as a r e contained in the Committee's report. " I f i t i s found t h a t the broadened use of domestic b a n k e r s ' ac ce p ta n c e s which i s contemplated by the Committee's r e p o r t i s hamp e r e d by any of the e x i s t i n g r u l i n g s of the F e d e r a l Reserve Board, the Board w i l l consider the q u e s t i o n of revoking or modifying such r u l i n g s upon the r e q u e s t of any Federal r e s e r v e bank, provided t h a t such r e q u e s t i s based upon a s t a t e m e n t of s p e c i f i c f a c t s a r i s i n g i n an a c t u a l c a s e . " The o t h e r a c t i o n s of the Governors 1 Conference were a l l noted by the Board, b u t none of them appear to r e q u i r e any p a r t i c u l a r a c t i o n a t t h i s time. A copy of t h i s l e t t e r i s being s e n t to each Governor f o r his information. Very t r u l y y o u r s , Mr. George L. H a r r i s o n , S e c r e t a r y , Governors 1 Conference, care of Federal Reserve Bank, New York, IT. Y. R. A. Young, Governor#
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