Full text of Mimeograph Letters and Statements of the Board : Letter From Asst. Secretary Noell re Revision of Member Bank Reserve Requirements, Number X-6031, Volume 28, Page 425

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

FEDERAL RESERVE BOARD

X-6031
T'P '-£<04,

WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

SUBJECT:

May 4 , 1928.

R e v i s i o n of Member Bank Reserve Requirements.

Dear S i r :
Under d a t e of A p r i l 12, 1928, t h e Board a d d r e s s e d a
l e t t e r to a l l Governors of F e d e r a l r e s e r v e b a n k s , a copy of
which was s e n t to each Agent, s u b m i t t i n g t h e f o l l o w i n g t o p i c
to be p l a c e d on the program f o r t h e Governors' Conference.
" D e s i r a b i l i t y of recommending l e g i s l a t i o n amending
S e c t i o n 19 of F e d e r a l Reserve Act r e l a t i n g to r e q u i r e d r e s e r v e s of member banks and of w r i t i n g i n t o
law a complete d e f i n i t i o n ( a l o n g l i n e s of t h e B o a r d ' s
R e g u l a t i o n D) of what c o n s t i t u t e s s a v i n g s and o t h e r
time d e p o s i t s . "
This q u e s t i o n was d i s c u s s e d a t t h e Governors' C o n f e r ence and the Governor of your bank w i l l a c q u a i n t you w i t h t h e
action taken.
The Board would l i k e to have a t your e a r l y convenience
your views w i t h r e f e r e n c e to t h e p r o p o s a l s o u t l i n e d in t h e memorandum p r e p a r e d b y t h e Chief of t h e B o a r d ' s D i v i s i o n of Bank
O p e r a t i o n s ( S t . 5 4 2 0 ) and t h e s u g g e s t e d b i l l p r e p a r e d by t h e
B o a r d ' s Counsel which would w r i t e i n t o law t h e changes s u g g e s t e d
in t h e memorandum.
The proposed b i l l through i n a d v e r t e n c e f a i l e d to i n c l u d e t h e p r o v i s i o n c o n t a i n e d in p a r a g r a p h one on page t h r e e of
t h e memorandum to t h e e f f e c t t h a t ,
" ( d ) no withdrawal in e x c e s s of $500 on any one day
s h a l l be made u n l e s s t h e d e p o s i t o r h a s given n o t i c e
of such i n t e n d e d withdrawal n o t l e s s than 30 days
b e f o r e t h e withdrawal i s made."
I t w i l l be a p p r e c i a t e d i f you w i l l change t h e words
"may a t i t s o p t i o n " a p p e a r i n g in s u b - p a r a g r a p h t h r e e on page
two of t h e b i l l to "must", so t h a t t h e s u b - p a r a g r a p h w i l l r e a d
" A f t e r w r i t t e n n o t i c e which t h e bank must r e q u i r e to be given— 1 1 .
For your i n f o r m a t i o n we a r e e n c l o s i n g an a d d i t i o n a l
copy of t h e memorandum and t h e p r o p o s e d b i l l .
Very t r u l y y o u r s ,

10 AIL M . A G M T S .

Enclosures:


A S A T L L E ^ T A R Y .

X-5090-c

•A

A BILL

To amend S e c t i o n 19 of the F e d e r a l Reserve A c t .
BE' IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That the
f i r s t p a r a g r a p h of S e c t i o n 19 of the F e d e r a l Reserve A c t , as
amended, "be f u r t h e r amended and r e - e n a c t e d to r e a d as f o l l o w s :
"Bank R e s e r v e s . "
"Sec. 19. The term 1 demand d e p o s i t s 1 w i t h i n the meaning of t h i s a c t s h a l l i n c l u d e a l l d e p o s i t s of p u b l i c
moneys of the United S t a t e s , a l l c e r t i f i e d checks, c a s h i e r 1 s checks, t r e a s u r e r 1 s checks, demand l e t t e r s of
c r e d i t , a.nd t r a v e l l e r s ' checks o u t s t a n d i n g , and a l l
o t h e r d e p o s i t s except ' time d e p o s i t s 1 and ''"bank d e p o s i t s '
as h e r e i n a f t e r d e f i n e d .
"The term ! time d e p o s i t s ' w i t h i n the meaning of t h i s
a c t s h a l l i n c l u d e a l l ' s a v i n g s a c c o u n t s ' , 1 time c e r t i f i c a t e s of d e p o s i t 1 , *postal savings d e p o s i t s ' and 'open
account time d e p o s i t s ' as h e r e i n a f t e r d e f i n e d , exce-p.t
t h a t whenever, Toy the l a p s e of time or the ^giving of
n o t i c e of an i n t e n d e d w i t h d r a w a l , s a v i n g s a c c o u n t s , time
c e r t i f i c a t e s of d e p o s i t , and open account time d e p o s i t s
become p a y a b l e i n l e s s than 30 days, such d e p o s i t s s h a l l
be c o n s i d e r e d demand d e p o s i t s .
"The term ' savings. a c c o u n t s " s h a l l mean d e p o s i t s of
i n d i v i d u a l s and r e l i g i o u s , c h a r i t a b l e or s i m i l a r c o r p o r a t i o n s , in respect to wiich>,

'

1

''

'

•

(1) A p a s s book, c e r t i f i c a t e or o t h e r s i m i l a r form of
r e c e i p t , d e l i v e r e d to and r e t a i n e d by the d e p o s i t o r
or h i s a s s i g n e e , mast a c t u a l l y be p r e s e n t e d to the
bank whenever a withdrawal i s made;
(2) The d e p o s i t o r or h i s a s s i g n e e may a t any time be
r e q u i r e d by the bank to give n o t i c e of an i n t e n d ed withdrawal not l e s s tnan t h i r t y days b e f o r e
a withdrawal i s made; and
(3) The b a n k ' s p r i n t e d r e g u l a t i o n s , a c c e p t e d by the
d e p o s i t o r i n c l u d e the above r e q u i r e m e n t s .
" D e p o s i t s which a r e p e r m i t t e d to be withdrawn by check
or o t h e r w i s e , w i t h o u t the a c t u a l p r e s e n t a t i o n of the p a s s
book, c e r t i f i c a t e , or o t h e r s i m i l a r form of r e c e i p t whenever
a withdrawal is made, s h a l l n o t be c o n s i d e r e d ' s a v i n g s a c c o u n t s ' w i t h i n the meaning of t h i s a c t . The r e t e n t i o n of



$
X-5090c .
- B W (§ .
UR

the p a s s book, c e r t i f i c a t e or o t h e r i / a i l a r form of
r e c e i p t or a d u p l i c a t e of same, by the bank or by an
o f f i c e r , a g e n t or employee t h e r e o f , and the p r e s e n t a t i o n of same by the bank, or by an o f f i c e r , agent
or employee t h e r e o f , s h a l l not be c o n s i d e r e d an a c t u a l
p r e s e n t a t i o n w i t h i n t h e meaning of t h i s a c t . A dep o s i t made by one bank i n another or a d e p o s i t of a
e b u s i n e s s c o r p o r a t i o n or f i r m s h a l l not i n any case be
c o n s i d e r e d a 1 savings account 1 w i t h i n the meaning of
this a c t .
11

The term 1 time c e r t i f i c a t e of d e p o s i t ' s h a l l
mean a d e p o s i t evidenced by w r i t t e n i n s t r u m e n t d e l i v e r ed to and r e t a i n e d by the d e p o s i t o r e v i d e n c i n g the dep o s i t w i t h a bank, e i t h e r with or without i n t e r e s t , of
a c e r t a i n sum s p e c i f i e d on the f a c e of the c e r t i f i c a t e ,
p a y a b l e i n whole or in p a r t to the d e p o s i t o r or on h i s
order(1) On a c e r t a i n d a t e , s p e c i f i e d on the c e r t i f i c a t e ,
more than t h i r t y days a f t e r the d a t e of the d e p o s i t ; or
#

(2) A f t e r the l a p s e of a c e r t a i n time subsequent to
the d a t e of the c e r t i f i c a t e , i n no case l e s s
than t h i r t y days; or
(3) A f t e r w r i t t e n n o t i c e which the bank may a t i t s
o p t i o n r e q u i r e to be given a c e r t a i n s p e c i f i e d
number of days, n o t l e s s than t h i r t y days b e i o r e
the d a t e of repayment; and
(4) In a l l cases only upon the a c t u a l p r e s e n t a t i o n
of the c e r t i f i c a t e a t each withdrawal f o r p r o p e r
endorsement or s u r r e n d e r .
"The r e t e n t i o n of the c e r t i f i c a t e , or a d u p l i c a t e of same,
by the bank or by an o f f i c e r , agent or employee t h e r e o f , and
the p r e s e n t a t i o n of same by the bank or by an o f f i c e r , agent
o r employee t h e r e o f s h a l l n o t be considered an a c t u a l p r e s e n t a t i o n w i t h i n the meaning of t h i s a c t . A d e p o s i t made by one bank
i n a n o t h e r s h a l l n o t in any case be c o n s i d e r e d a 1 time c e r t i f i c a t e
of d e p o s i t 1 w i t h i n the meaning of t h i s a c t .
"The term 1 p o s t a l s a v i n g s d e p o s i t s 1 a s
^~iv. a c t
s h a l l mean d e p o s i t s of p o s t a l s a v i n g s funds i n banks under the
terms of the p o s t a l savings a c t , a p p r o v e d June 25, 1919, as amended.
^
*
"The term 1 open account time d e p o s i t s ' as used i n t h i s a c t
s h a l l mean d e p o s i t s not evidenced by c e r t i f i c a t e s of d e p o s i t s or
s a v i n g s p a s s books, i n r e s p e c t to r h i c h a w r i t t e n c o n t r a c t i s ent e r e d i n t o w i t h the d e p o s i t o r a t the time the d e p o s i t i s made p r o v i d i n g t h a t n e i t h e r the whole or any p a r t of such d e p o s i t may be




I

/

•3-

X-5090-c

withdrawn, by check or o t h e r w i s e , except on a given d a t e , more t h a n
t h i r t y days a f t e r t h e date of the de^o i t ,
or on w r i t t e n n o t i c e
which mast "be g i v e n by t h e d e p o s i t o r a c e r t a i n s p e c i f i e d number of
days i n advance, i n no case l e s s than t h i r t y days. In o r d e r f o r
d e p o s i t s to be c l a s s i f i e d as *ope;i account t i n e d e c o s i t s * the bank
i n which such d e p o s i t s a r e made mast a c t u a l l y r e q u i r e such w r i t t e n
n o t i c e b e f o r e p e r m i t t i n g withdrawals t o be made.
"The term 1 bank d e p o s i t s 1 s h a l l i n c l u d e a l l d e p o s i t b a l a n c e s
due t o o t h e r banks, b a n k e r s , and t r u s t companies i n the U n i t e d
S t a t e s and f o r e i g n c o u n t r i e s .
"Every bank, banking a s s o c i a t i o n , and t r u s t company which i s
or which becomes a member of any F e d e r a l r e s e r v e bank s h a l l
e s t a b l i s h and m a i n t a i n a r e s e r v e c o n s i s t i n g of an a c t u a l n e t
b a l a n c e w i t h the F e d e r a l r e s e r v e bank of i t s d i s t r i c t equal
to not l e s s t h a n t h i r t e e n p e r centum of the a g g r e g a t e amount
of i t s bank d e p o s i t s , t h r e e p e r centum of the a g g r e g a t e amount
of i t s time d e p o s i t s , and the f o l l o w i n g p e r centum of the a g g r e g a t e amount of i t s n e t demand d e p o s i t s :
Banks i n c e n t r a l r e s e r v e c i t i e s , 13 p e r centum;
Banks i n r e s e r v e c i t i e s , S p e r centum; and
Other banks, 7 p e r centum;
"PROVIDED, HOWEVER, That, upon the a f f i r m a t i v e vote of f i v e
members of the F e d e r a l Reserve Board, any bank l o c a t e d i n an o u t l y i n g d i s t r i c t of a c e n t r a l r e s e r v e c i t y may be p e r m i t t e d to maint a i n a r e s e r v e b a l a n c e equal to not l e s s than seven or nine p e r •
centum of i t s n e t demand d e p o s i t s , and any bank l o c a t e d i n an o u t l y i n g d i s t r i c t of a r e s e r v e c i t y may be p e r m i t t e d to m a i n t a i n a
r e s e r v e b a l a n c e equal to not l e s s than seven p e r centum of i t s
net demand d e p o s i t s ; AHD PROVIDED FURTHER, That, i n computing t h e
amounts of n e t demand d e p o s i t s a g a i n s t which r e s e r v e s must be
m a i n t a i n e d , a l l member banks may deduct from the amount of t h e i r
g r o s s demand d e p o s i t s , a l l b a l a n c e s due to thorn from o t h e r banks
( e x c e p t F e d e r a l r e s e r v e banks and f o r e i g n b a n k s ) , a l l cash items
d e p o s i t e d by them w i t h F e d e r a l r e s e r v e banks and o t h e r banks i n
p r o c e s s of c o l l e c t i o n , a l l exchanges f o r t h e c l e a r i n g house,
and a l l checks i n o t h e r banks i n the same p l a c e .
"The F e d e r a l Reserve Board s h a l l have a u t h o r i t y to p r e s c r i b e
r e g u l a t i o n s governing t h e maintenance of t h e r e s e r v e s r e q u i r e d
by t h i s s e c t i o n and f u r t h e r d e f i n i n g thu v a r i o u s c l a s s e s of dep o s i t s h e r e i n mentioned.




-4-

X-5090-c
L

"No member bank s h a l l keep on d e p o s i t with any S t a t e bank
or t r u s t company which i s not a member bank a sum i n excess of
ten p e r centum of i t s own p a i d - u p c a p i t a l ana s u r p l u s . Ho member bank s h a l l a c t as the medium or a g e n t of a nonmember bank
i n a p p l y i n g f o r or r e c e i v i n g d i s c o u n t s from a Federal r e s e r v e
bank under the p r o v i s i o n s of t h i s Act, except by p e r m i s s i o n
of t h e Federal Reserve Board.
"The r e q u i r e d balance c a r r i e d by a member bank with a
F e d e r a l r e s e r v e bank may, under the r e g u l a t i o n s and s u b j e c t
to such p e n a l t i e s as may be p r e s c r i b e d by the Federal Reserve
Board, be checked a g a i n s t and wi thdrawn by such member bank
f o r the purpose of meeting e x i s t i n g l i a b i l i t i e s : PROVIDED*
HOWEVER. That no bank s h a l l a t any time make n«w loans or
s h a l l pay any dividends u n l e s s and u n t i l the t o t a l b a l a n c e
r e q u i r e d by law i s f u l l y r e s t o r e d .
" N a t i o n a l b&nks, or banks organised under l o c a l laws,
l o c a t e d in Alaska or i n a dependency or i n s u l a r p o s s e s s i o n
or any p a r t of t h e United S t a t e s o u t s i d e the c o n t i n e n t a l
United S t a t e s may remain nonmember banks, and s h a l l i n t h a t
event m a i n t a i n r e s e r v e s and comply with a l l the c o n d i t i o n s
now provided by law r e g u l a t i n g them; or s a i d banks may, -vith
the consent of the Reserve Board, become member banks of
any one of the r e s e r v e d i s t r i c t s , and s h a l l i n t h a t event
take s t o c k , m a i n t a i n r e s e r v e s , and be s u b j e c t to a l l the
o t h e r p r o v i s i o n s of t h i s A c t . "




43<J