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Ex-Officio W. P, G. HARDING. G O V E R N O R P AU L M. WARBURG. V i c e G o v e r n o r FREDERIC A. DELANO ADOLPH C. M ILLER CHARLES S. HAMLIN members W ILLIAM G. MCADOO SECRETAR Y OF TH E TREASURY C H A IR M A N JOHN SKELTON W ILLIAM S C O M P TR O LLER O F T H E C U R R E N C Y FEDERAL RESERVE BOARD WASHINGTON H. PARKER W ILLIS . S E C R E T A R Y S H E R $ & H -S © @ .E N . A SST. SEC R ETA R Y and F is c a l A g e n t AD DRESS R EPLY TO FE D E R A L RESERVE B O AR D August 3, 1917, My dear Mr, Treman: Reforring to your letters of July 31st and August 1st addressed to Governor Harding in regard to the natter of clearing. Governor Harding wrote to you concerning one of those on August 1, but when ho wont to Now York last evening ho passed the file to mo. It nay bo of sonic into rest to you to know that I had a throe hour conference With five mongers of the Committee of Twentyfive,, including the Secretary of that Committee, oh Wednesday last. In that debate the concensus of opinion expressod by the Committee was that one of two things must bo dons to popularize the Federal Reserve Collection System and bring in the non-itetobor non-assenting banks; either that they must be allowed a por thousand or per item charge which would cover their actual out-of-pocket oxpenso for making remittances, or that the Federal Roservo Bank nsjst accept offsetting items without charge if it expects tho member bank to remit without charge. At the samo time, tho Committee took tho position that banks in reserve and central resorve cities did not need this help because they had other means of protecting thomsclvoo; yet they also admitted in tho discussion that it was difficult for •tho Board to make a rulo which would not apply equally to tho big bank in the largo city and to tho little bank in tho small town. While I listcnod attentativoly to all tho Committoo had to say and askod a good many questions to dovolop their position, I did not toll thorn what tho Board had promulgated on this subject; but it is interesting to noto that two ideas which tho Board sug gested to the Federal Reserve Banks would go a long way toward ac complishing the very purpose which this Committoo considorcd es sential, to wit: The paying of postage to the mombor bank and tho exemption of charges on a sufficiant number of itoms por day to enable tho country bank, without oxpenso to itself, to offset com pletely, or to a large extent at loast, items sent to it for col lection. You arc familiar with the objections which havo boon raised by officers of tho Federal Resorve Banks to those suggestions of the Board. The principal argument in each ease has boon that it f X-309 - 2 would be too expensive; that it would be unusual and contrary to general practice; and yet it requires no argument to point out that the partial exemption ’ of service charges, which admittedly would redound to the benefit chiefly of the country bank, would bo far loss expensive than the complete exemption of such chargos;and I think I could contend with considerable forco that wo might begin with an exemption of ten itoms per day for each of the banks and gradually work up to twenty-five, fifty or oven one hundred items per day, and perhaps finally agroc to absorb tho charges for all collections. I agree with you, and also with Mr. Jay and others that the dcsirablo, indeed, the essential, thing to accomplish is to get non-member banks to clear their itoms through tho Federal Resorvo Bank, or at least at par. The best way to do this is to got them in as clearing members, but in some districts it will tako not only moral suasion, but an appeal zo their self-interest to accomplish this. That it is important to make progross in the matter, however, I entirely agree with you, because if substantial progress has not boon mado and if tho System has not made more friends beforo next December an effort will bo mado in tho next Congross to get an amendment which will be more effective in accomplishing its purpose than tho Hardwick amendment. Dospite possible opinions to tho contrary, I have tried to keep an open mind on tho entire subjoct, and have viewod it, not only from tho standpoint of tho general public, but also from tho standpoint of tho banker in the snail town and in the big city. 1 cordially invito criticism and suggestions as to how to meet tho situation. I believe that the scheme of offering exemption of charges on a given number of checks daily (which orginated with Governor H^rdingC is a good suggestion and should be givon an..honcst and thorough trial, I believe that tho self-addressed, stamped envelope, which is a schomc in common uso in many largo collecting banks, and which is being omployod by several of our Fodoral Rcservo Banks, is a reasonable and not improper concession to bo mado to tho country banks; but if any of our Federal Reserve Bank of ficers have bettor suggestions, I shall bo pleased to receive them. Yours very truly, (Signed) F. A. Delano. Chairman of Committee on Clearing. Mr. R. H. Trcman, Deputy Governor, Federal Reserve Bank, Dew York City.
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