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W. p. G. HARDING, GoVERN:OR
ALBERT STRAUSS, VICE GoVERNOR
EX·OFP'ICIO MEMBERS
ADOLPH C. MILLER
CHARLES S. HAMLIN
CARTER GLASS
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SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMP'TROlLIR 0' THE CURRENCY
FEDERAL RESERVE BOARD
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J. A. BRODERICK, SECRElARY
l. C. ADELSON. ASSISTANT SECRETARY
W. T. CHAPMAN, ASSISTANT SICIETARY
W. M. IMLAY, FISCAL Af;ENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
December 26, 1918.
X-1331
(Radempt ion of Fadera1 Reserve notes by the
(Treasurer of the United States.
SUBJECT:(
(Ra:ialH;;tion funcl.s with the Treasurer of thB
(United States.
DGar Sir:
The handling of the numerous shipments of Federal Raserve
notes forwarded to the Treasurer of the United States by Federal Reserve Banks and their branches for redemption have so added to the
work of the National Bank Redemption Agency of the Treasury, that
the Board has been requ2sted to use its offices in having all the
Federal Reserve Banks authorize the Treasurer of the United States
to adopt a unif om settLra;ont method which will ponr.it of the n.ost
oxpodit ious disposition of such sh iprr..onts.
At this tia;e, there are tNo rr,ethods of sett1err:ent for
shipm2nts of Federal Resarve notes received for rerl.emption, L a.:
METHOD NO. 1.
The National Bank Redemption
Agency advises the Federal Reserve Agent and the Federal Re-:
serve Bank that a certain amount of its notes has been
received from a certain Federal Reserve Bank.
On receipt of such notice,
the Fedaral Reserve Agent pays
the amount of the remittance
to his Federal Reserve Bank
out of the gold or laNful money:
deposited Nith him as security
for Federal Reserve notes.
On receipt ct:':l,: vorHication of
a ren;ittanc8 0f F2dera.l R0sorve
notes, sett1en.;.mt is rr.a.ie on the
books of the Treasurer of the
Unit3d States by transfer from
Gold Redemption Funj of the
Faderal Eeserve Agent to the
credit of the Gold Eederr:ption ..
Fund of the Federal Reserve Bank
of issue.
Six of the banks are using Method No. 1 1 and the oth3r
six. are using Mathod No. 2. It is obvious that under Matrod Nu. 2.
the transactions are covered by book entries at Washington and at
the F3deral R.e3erve Banks) NhenJas, under Method liTo. 1, in addition
X-1331.
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to b<"'ok entries at both places, the;·e is a necessary handling; of the
actu2..l c:ash retu7"ned by the P.ge~t n1 the bank for notes redeeme0.,, or
tran:der of fund:1 by the ae:ent +;o the bank ·~Jtr.O::J1l&::'l:l Gold Settlerr.ent
Fund. ThG National Bank Redemp~iC>1 Agency considers Method No. 2
as being the more desirable.
If Method No. 2 is adopted~ it is possHi.e, a.s OlJtlined
bel ow, to also arrange a plan by whj ch transDJ;t t' ns in the Gold
Wde'-lption Funcl accounts w:i.ll be simJlififHL All Federal Reserve
Banks now maintain three Rederr:ption c.cr;ounts with the 'I'reasurer of
the United ~"tc.l.tes_, i. e,
PURPOS:2:
1. FGderal Reser're Age:1t
1. For tho redemption of un£i't Federal
Reserve notes of his bank.
2. Federal Reserve Bank
2. For the redemption of fit Federal
Reserve notes of its awn issue.
3. Federal Reserve Bank
3. For the redemption of fit and unfit
Federal Reserve bank notes of its
own issue.
Under Method No. 2 you will note the Gold Redemption fund of
the bank against Federal Reserve notes is automatically replenished
by ti:ansfers from the agent's redemption fund. The National Bank Rederrpt ion Agency states that Federal Reserve notos of any one Federal
reserve Bank sent in by other banks for roder.1pt.:'.rm c.mount to a great
deal more than the fit notes of its issue 1 v1Thid1 J.c~o \"edeerr:ed in the
usual course of business and returned to the issl'ir.g 'he.nk. This will
result in the bank 1 s redemption fund against Fe.c:.e r·al kserve notes
being in excess of the amo\.mt necessa17 to redeo~l" :•:~s fit notes)
and upon the bank 1 s request to the TreB.surer of the IJnitod StatesJ this
Gxcess can be used to replenish the bank 1 s Redeoption l''und agains·t
, FGderal ResGrve bank notes; and any excess above the requirements of
the bank 1 s two redemption funds, upon request, can be transferred in
u.ultiplos of 10,000 to the credit of the bank 1 s Gold Settlement Fund.
From this you 'Nill see that -the only original deposits in the
Q:lld Redemption Fund necessary under this plan would be by or for account of tho Federal Reserve agents. All other transactions Nould be
book entries by the Treasurer of the United States) tho Federal Reserve
~ent and tho Federal Reserve Bank.
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At present, deposits for credit in the Gold Rederrpticn
Rlnds are rrade throu~h various channels, and there is confusion in
placing the deposits in t}le accounts i or which they are intendod,
occasioned by the inaccuracy of the reports of such deposits which
corr.e from many different sources.
The Board is of the opinion that settlement Wethod No. 2,
which Nill permit handling the redemption fund acr.ounts as indicated,
would result in economy of tirre and labor in the Federal Reserve Banks,
as well as in the office of the Treasurer of the United States, and
in the interest of uniformity) the Board recon::mends its adoption by
all the banks.
Please advise, if it is agreeable to your bank, that the
Treasurer of the United States institute this un.if orm method of
settlement and that the redemption accounts be handled as "outlined.
Very tmly yours,
Governor.
The Chairrran,
Federal Reserve Bank,
@FedFRASER