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W. P. 6. HARDING, GOVERNOR PAUL M . W A R B U R G , VICE GOVERNOR FREDERIC A. DELANO ADOLPH C. MILLER CHARLES S. HAMLIN EX-OFFICIO M E M B E R * WILLIAM 6. McADOO SECRETARY OF THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS COMPTROLLER OF THE CURRENCY FEDERAL RESERVE BOARD W A SH IN G TO N H. PARKER WILLIS. SECRETARY IRMAN P. ALLEN. ASST. SECRETARY z-39* AND FISCAL A fiE NT JRESS REPLY TO September 22, 191?'F ed eral reserve board De~r Sir The Bcurd hue already had eonb correspondence with Federal reeerve ••Danxs on the subject of the gold, which ie held by member and nonmember banks throughout the country, and has pointed out the desirability of getting this gold into the vaults of the Federal reserve b_.nks, several of which have taken energetic steps to accomplish this result by offering not only to p-*y the transfer charges on the gold, but in some cases to assume the loss on light weight <*oin. While the gold holdings of the Federal reserve banks have been greatly increased during the last six months, they still control less than one*half of the gold in the country, -aid the Board is anxious that their holdings be augmented still further. It realizes, however, that an unrestricted offer.on the p-rt of Federal reserve banks to receive At its face Value all of the light weight gold, might ent-.il upon the Federal reserve banks a very considerable loss. The suggestion is made therefore, to those Federal reserve banks which have not already adopted this policy, that they nuke to the banks of their district a proposition about as follows: (1) To pay transportation charges on United States gold coin delivered at their own counters or at the ne-rest sub-treasuryj (2) To pay .transportation charges on United States gold coin and to receive it at the face value in all c-ses where the loss by re-son of abrasion does not exceed an average of 3ix-tenths of one per cent, with the '.* * * s ( X-399 -2. underslanding that all coins showing a greater loss through abrasion or sweating, be returned to the sending banks. It i ; believed that many of the banks remitting gold will be willing to stand any loss in excess of sixntenths of one per cent, in which Case any light weight coin received from them could be sent to the nearest sub-treasury for condemnation and proper reimbursement. The experience of two of the Federal reserve bunks which have freely accepted gold coin from their member banks has been that .they buve sustained only _n insignificant loss- Before taking any action it migfrt be advisable for the Federal reserve banks to communicate informally with the larger banks of their districts, with the view of ascertaining the probable loss on the gold which has been sent in. An officer of one of the Federal reserve banks states that he has reason to believe that there is a bank in his district which has about $500,000 of gold on which there would be a loss of from ten to twelve thousand dollars. Even though this estimate be correct, the bank in question might be willing to stand the loss in excess of six-tenths of one per cent, or three thousand dol.ja* The Board has been advised by the Comptroller of the Currency that his office proposes in the futurq to give particular attention to light weight gold coin held by national banks. It is suggested that any offers on the part of Federal reserve banks to receive gold at their own expense might be more effective if ma.de for limited c periods only. The Board requests that you bring this letter to the attention of your executive committee or of your board of directors and that you advise it of the policy which may be decided upon. Very truly yours, Federal Reserve Bank, Governor.
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