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983 EX OFFICIO MEMBERS DAVID F. HOUSTON SECRETARY OF THE TREASURY ' CHAIRMAN FEDERAL RESERVE BOARD JOHN SKELTON WILLIAMS COMPTROLLER OF THE CURRENCY ADDRESS REPLY TO FEDERAL RESERVE BOARD WASHINGTON W . P. 6. HARDING. GOVERNOR E D M U N D PLATT, VICE GOVERNOR ADOLPH C. MILLER CHARLES S. HAMLIN H E N R Y A. MOEHLENPAH W . T. C H A P M A N , SECRETARY R. G. EMERSOft, ASSISTANT SECRETARY W. M. IMLAY. FISCAL AGENT October 2 8 , 1920. X-2C41 Subject: Absorption by Federal Reserve Banks of F i s c a l Agency Expenses. Dear S i r : There i s e n c l o s e d herewith, f o r your i n f o r m a t i o n , copy of a l e t t e r addressed t o the Board by the A s s i s t a n t S e c r e t a r y of t h e Treasury i n Charge of F i s c a l A f f a i r s , r e l a t i v e t o t h e a b s o r p t i o n by Federal Reserve Banks of overhead charges i n c o n n e c t i o n w i t h t h e i r f i s c a l agency f u n c t i o n s . The Board has r e p l i e d that w h i l e i t i s a n x i o u s t o cooperate w i t h the Treasury i n every way i n connection w i t h the d i s c h a r g e of f i s c a l agency f u n c t i o n s by the Federal Reserve Banks, t h e r e might come a time when the a b s o r p t i o n of overhead charges might j e o p a r d i z e d i v i d e n d payments by the Federal Reserve Banks. The s u g g e s t i o n made by the A s s i s t a n t Secretary of the Treasury was, t h e r e f o r e , agreed t o f o r the p e r i o d ending June JO, 1922, and the Treasury has been so a d v i s e d , w i t h the f u r t h e r statement t h a t a renewal of the arrangement w i l l be considered from year t o year1, p r i o r t o t h e submission t o Congress by the Treasury of i t s a n n i a l estimates. Very t r u l y y o u r s , Enclosure Governor, To Governors and Chairmen of a l l F.R. Banks. v r COPY 934 X-2U4l a TREASURY DEPARTMENT WASHINGTON October 25,3-920 My dear Governor: Since our exchange of Communications l a s t month r e g a r d i n g the f i s c a l agency expenses of t h e Federal Reserve Banks, the s u b j e c t has received the Secretary*s personal c o n s i d e r a t i o n , and he has now i n d i c a t e d to me h i s f u l l concurrence i n t h e views expressed i n my memorandum of October 14, 1920, a copy of which was sent to you with my memorandum of October 20th. The Treasury w i l l t h e r e f o r e continue t o adhere s t r i c t l y t o t h e p r i n c i p l e of r e imbursement f o r f i s c a l agency expenses and w i l l seek the necessary a p p r o p r i a t i o n s from Congress t o cover the period a f t e r June 30, 1921, when the e x i s t i n g a p p r o p r i a t i o n f o r expenses of loans l a p s e s . The Treasury does f e e l , however, t h a t the Federal Reserve Banks might properly absorb general overhead expenses, without attempting t o a l l o c a t e any given proportion of them to reimbursable f i s c a l agency expenses, and t h a t on t h i s b a s i s i t would be h e l p f u l from every point of view to have the Federal Reserve Banks absorb the s a l a r i e s of executive o f f i c e r s , even executive o f f i c e r s assigned c h i e f l y t o f i s c a l agency work, charges i n connection with the occupancy and operat i o n of t h e i r own b u i l d i n g s and other general bank expenses. In t h i s conn e c t i o n , i t i s t o be noted t h a t the Federal Reserve Banks and branches i n sub-treasury c i t i e s w i l l , during the current f i s c a l year, be assigned subs t a n t i a l amounts of sub-treasury space, and t h a t t h i s space, under the law, w i l l be assigned to them a s f i s c a l agents of the United S t a t e s and without reimbursement t o the United S t a t e s . I should g r e a t l y a p p r e c i a t e advice a s t o whether the Board a g r e e s with the Treasury's views i n t h e matter, and i f so, whether the Federal Reserve Banks w i l l be so advised, in order t h a t a uniform policy may ba pursued. In response t o r e q u e s t s from the Treasury f o r estimated reimbursable f i s c a l agency expenses f o r the current f i s c a l year and f o r the f i s c a l year 1922, t h e Federal Reserve Banks have already submitted e s t i m a t e s . For your i n f o r mation, I am a t t a c h i n g a compilation of t h e estimates as submitted. If the Board i s i n sympathy with the T r e a s u r y ' s p o s i t i o n a s t o t h e s e expenses, a s outlined i n t h i s l e t t e r , i t i s q u i t e p o s s i b l e t h a t the e s t i m a t e s submitted by some of t h e banks w i l l r e q u i r e r e v i s i o n , with a view t o t h e e l i m i n a t i o n of c e r t a i n of t h e general overhead expenses. Very t r u l y yours, (Signed) S.P. G i l b e r t , J r . , A s s i s t a n t Secretary of the Treasury, Honorable W.P.G. Harding, Governor, Federal Reserve Board.
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