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EX·OFFICIO MEMBERS W. p, G. HARDING, GOVERNOR PAUL M. WARBURG, VICE GOVIRNOR WILLIAM G. McADOC FREDERIC A. DELANO ADOLPH C. MILLER CHARLES s. HAMLIN SECRETARY OF THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS COMPTROLLER OF THE CURRENCY FEDERAL RESERVE BOARD WASHINGTON ·,.: . 46 H. PARKER WILLIS, SECII'ETAitY SHERMAN P. ALLEN, ASST, SECRETARY AND fiSCAL AGENT ADDRESS RltPL. Y TO FEDERAL. RESERVE BOARD July 22 1 1918. X-1000 Dear Sir: . Some of the Federal Reserve banks continue to discount under an agreement to repurchase within fifteen tays commercial paper of longer maturities. · Transactions of this kind are authorized by the Board 1 s ruling of November 28, 1917, ·wich was w.ade. at a time when member banks 1 fifteen day collateral notes were subject to revenue stamp requirements, even though secured by United States Government obligations. Although the Board's .ruling was made for the purpose of facilitating transactions in Gov~rnment bonds and in Treasury certificates, there is no objection to repurchase transactions in conm:rrcial paper, and the Board sees no occasion· to withdraw the ruling referred to, although notes secured by Government obligations are now exempt from the stamp tax up to the face value of the Govenrunent· securities attached as collater.al. The rate for member banks' fifteen day collateral notes secured by commercial paper remains at 4% except at three banks and 4f. %respectively._ This short time where the rates are rate ·Nas left undisturbed at nine of the banks~ upon the assumption that the .stamp tax on the fifteen day notes would bring the interest rate up to about 4!%. . 4t, 4t It is the view of the Board1 however1 that wherever Federal Reserve banks give their ffiember banks the privilege of discounting longer term paper} under an agreement to repurchase within. fifteen days, instead of requiring the banks to discount their own notes, the. rate should be !% higher than that at which collateral notes subject to stamp tax are taken. Very truly yours, Governor. The Governor, Federal Reserve Bank1 .'
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