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W. P. G. HARDING, GOVERNOR PAUL M. WARBURG, VICE GOVIRNOR FREDERIC A. DELANO ADOLPH C. MILLER CHARLES S. HAMLIN Ex·OFF1C10 MEMBERS LIAM G. MCADOO SECRETARY OF THE TREASURY CHAIRMAN - t. 'JOHN SKELTON W)!..LIAMS WASHINGTON ADDRESS REPLY TO FEDERAL RESERVE llOARD .August 12., 1918. X-1118 Dear Sir: Recently the Federal E.eserve Bank of Chi.~ago ·raised its rate on transfer drafts sold from 10 cents to 15 cents ;per day per one thousand dollars. This was equivalent to a.n increase in ra~es from 3.65% to approxin::ately sf~ per annum. Believing that you will be interested_, I am inclosing herewith copy of the letter received from Deputy Governor McKay of the Federal Reserve Bank of Chicago, showing the efiect of the change. Very truly yours, Governor. Federal Reserve Agent, Inclosure • .. e.g H. PARKER WILLIS, SECJ¥TARY SHERMAN P. ALLEN, AsST. SECRETARY AND FISCAL AGENT FEDERAL RESERVE BOARD COMPTROLLER OF THE CURRENCY ..... X-1118-a FEDERAL RESERVE BANK OF CHICAGO 79 West Monroe Street. Hon. i~. P. G. Harding, Governor Federal Reserve Board1 Washington, District of Columbia. My dear Governor Barding: Mr. McDougal, before leaving on his vacation a few days ago, requested rr.e to advise you regarding our operations in the ~rcba.se of dorr.estic exchange. You will ... recall that when Mr. McDwgal. was in Washington recently, he nade the suggestion that the .rates for the purchase of New York exchange be increased fram a.65 per cent to appro~ately 5l per cent. Following your suggestion that instead of all the Federal Reserve Banks raising the . tates, that the Federal Reserve Bank of Chicago, might raise its rate in order to determine what the results would bej beginning August 1st we raised the. rates of exchange purchased on all ot the Federal Reserve *ities from 10 cents per.thousan4 401lars per day to 15 c,nts par th~and dollars per day~ the latter tat& being approxtmately at the tate of ~ per cent per annutna During the month of July, when the old rates were 1n effect, we purchasecl exchange in the form of drafts amounting to $208,150,000. being an average of $8,005,000. per day. Since August let, we ~ave purchased $14,452,000. in drafts, the daily average being $2,890,000• .. The dally outstanding dra.fts purchaeecl* or in otb.er words, the amount of float we ~rried on these drafts during JUly averaged $12,364*000. Since August 1st, the amount of float has averagect $3,897,000. daily.. 'fhe tele~raphic transfers purchasecl during the month of July amounted to $88,475,000. the cta.ily average being $3,403,000. Since August lst, the telegraphic transfers purchased have amounted to $33,925,000., daily average of $6,785,000. 70 X-1118-a Our action in increasing the rate of purchase of transfer drafts from 3.65 per cent to 5i per cent has resultea in reducing the amount of float carriea on trans!er drafts $S;467,000. and has more than doubled the daily average amount of transfers purchased by telegraph. We are of course accepting transfer drafts from member banks on other Federal Reserve cities for deferred availability at par, in accordance with our tirr~ schedule. The reduction in the float has correspondingly increased our reserve position and we feel that the results obtains~ are quite satisfactory, The above is submitted for your inforrration. Respectfully ~ubmitted, C. R. MCKAY. Deputy Governor. i
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