The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
88
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
R-
696
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
August
;e,
1940
•
Dear Sir:
There is enclosed a copy of a "Proposal for
a More Economical Method of Effecting the I:nterdistrict
Settlement Fund Transit Clearing 11 , which has been received from the Federal Reserve Rank of San Francisco.
It will be appreciated i f
~rou
will have the
plan reviewed e.ncl advise us whether you would favor its
adoption.
the
plan~
Any comments or suc,gestions with respect to
or any modifics.tion thereof, 11rhich you desire
to submit will also he appreciatod.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
TO THE PRES ID::NTS OF AIL FEDEHLL
EXCEP'i' SAN FRANCISCO
T
ESERVE BANKS
89
R-696a
Proposal for a More Economical Method of Effecting the Interdistrict Settlement Fund Transit Clearing
•
The mothod heroin proposed for reducing tho cost of effecting the
daily transit clearing through the Interdistrict Settlement Fund is predicated on a reduction in the number of telegrams, l~,oth outgoing and return
wires, and the elimination of the detail now incorporated in the Board's
return telegra~ms. In lieu of individual wires now sent to the Board by each
of tho 29 parent banks and direct settling branchcs, the amounts credited by
participating offices in each district would bo combined and one wire dispatched to the Board by tho head office; return telogran1s would be sent by
tho Board to each parent bank only, advising tho amounts of credits duo it
and oach of its direct settling branches, if any, from all other districts.
The proposed method of settlemont is as follows:
Each direct settling branch would wire its ovm head office tho amounts
credited to each parent bank and direct settling branch of other districts in the same manner as this information is now furnished to tho
Board.
.
Each head office having direct settling branches would combine tho
branch credits with its own credits and wire tho Board tho amounts
credited by all offices in the district to each participating bank
and branch of other districts, This wire vmuld be in the same form
as tho present "EXNAG" but would show amounts credited by tho district instead of by an individual office •
Statements of credit would be mailed as at present.
•
Upon receipt of the 12 incoming tologro.ms tho Board would effect tho
settlement and dispatch a return telegram to each of tho 12 parent
bo.nks. ('l'his could be dispatched by mc.il if it will urrivo in time.)
Each such telogrmn would contain tho aggregate o.mount credited the
parent bank and tho aggrogc.te amount credited G£>.ch of its direct settling bro.nches by all other districts combined, and for proof, (as code
BABE), tho closing balo.nco in tho Intordistrict Settlement Fund, after
completing tho transit clearing. A specimen wire is attached. (If it
would not be practicable for tho Bonrd to include tho closing balance,
tho ba1o.nco of tho previous day would suffice, as at present.) Tho
Board would also airmail to ec.ch parent bt:.nk a sta temont showing sep•
aratcly tho rumounts credited to it and to oach of its diroct settling
branchos by oc,ch of tho other districts. Such a statement, while not
absolutely necessary, would facilitate tho locnlizntion and adjustment
of any discrepancies developing between statement totnls and amounts
wired. If desired, in order to further isolate such n difference to
the individuo..l office concerned, statements of credit mailed by each
parent bunk to participating offices of other districts could include a
memorc.ndum of o.mounts croditod by each of tho.t bank's direct settling
branches. but this additional 1ivork is not believed justified in view of
the infrequency of such discrepancies •
• for FRASER
Digitized
- 2 -
Upon receipt of the return telegram froo1 the Board~ each parent bank
would wire each of its direct settling branches the total credited it;
appropriate entries would be passed by all offices to take up the
amounts credited.
No attempt is made herein to suggest an accounting procedure for the
various Federal Reserve Banks, as each bank would undoubtedly wish to adjust
its procedure to its own accounting system. However, at the Federal Reserve
Bank of San Francisco it is proposed that Head Office and each branch would
clear the individual statements as received and~ when all statements of a
specified date received by any office are cleared, the grand total of all the
statements of that date would be proved against the amount of credit wired
by tho Board for that office in the return settlement telegram of tho corresponding date.
•
•
•
•
•
Under tho above procodure a bank having no direct settling branchos
would send tho same out~oing wire as at present, but the Federal Reserve Bank
of San Francisco, with 4 direct settling branches, would send 1 instead of 5
settlement wires to tho Board. This decrease, based on an average of about
75 words per message and tho Juno per word cost of $.018145780, would approximate 7500 words, or $136.00 per month. For all banl::s, tho reduction from 29
to 12 outgoing wires av0raging 80 words each would amount to 34,000 words, or
$617.00 per month •
It 1'rould appear that tho f;oo.rd would derive a bencfi t from tho proposed
procedure by reason of a more simplified settlement (12 incoming wires instead
of 29) and tho reduction in thu numbor o.nd content of the return tolegrams •
It is csti.'Tlatod that tho return tclegrruns under this proposal would range from
about 10 words for a bank having no direct settling branches to about 27 words
for a wire to San Fro.ncisco with 4 such branches. One vrirc; to San Francisco
with 27 words, compared to 5 messages to tho 'l'wolfth District at prosont averaging about 83 words each, would effect a reduction in the return telegrams of
9~700 words per month, or~ at the per word cost for June~ of $176.00.
While the saving computed on the basis of the current cost per word
would not be fully realized~ since the reduction in leased wire costs would
not follow in direct proportion to a decrease in number of words 1 it is believed the ultimate saving would be in substantial amount and that the above
proposal merits consideration as a means toward further economy.
SPEC ThmN RETURN TELEGRAM
SF
Ex nov
8.,110~451.24
SF
LA
Ptld
SLC
Seatl
Babe
5, 198.,532.41+
729 795 0 61+
1.,247 ,263.98
484,201.38
450,657 .eo
507,407 ,4a2,72
I
@FedFRASER