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FEDERAL RESERVE BOARD
WASHINGTON
X-3471
July 101 1922.
SUBJECT:
Amendment to Check Collection Circulars
Suggested by Treasury Department
Dear Sir:
I enclose for your information ~d guidance
copy of .J. letter received today from the Secretary of
the Treasury, together with copy of letter addressed by
·him on July 8, 1922, to the Governor.of one of the
Federal Reserve Banks. The Federal Reserve Board suggests that those Federal Reserve Banks which have not
already done so take steps to amend their check collection circulars so as to conform, on the point mentioned,
to the provisions of Treasury Department Circular No.
176, as amended and supplemented M~ 15, 1922 •.
Very truly yours,
G ov e r n o r •
. (Enclosures)
GOVEBNORS OF ALL F.R.B.ANKS
COPIES TO AGENTS
c0
p
y
'!HE SECRETARY OF THE TREASURY
WASHINGTON
July 8, 1922.
X347la
Dear Governor Harding:
On a number of occasions within the past six months the
Treasury has had brought to its attention notices circulated by banks,
purporting to be based upon circulars of various Federal Reserve
Banks, stating that the Government of the United States has for many
years reserved the right to char~ back unconditionally, at any time,
checks and warr~ts which for any cause have not been considered
good.
This statement is incorrect and misleading, and calculated
to cause the Treasury and the holders of Government warrants and
checks considerable difficulty. Difficulty has been experienced
on this account in connection with the cashing of Gpvernment warrants and checks abroad, and complaints have been received from
various correspondent banks in this country. The notice has been
so widely circulated and there is so much of a coincidence in the
time of the circulation of the notice that it would appear that
some bank, or group of banks, is responsible for the circulation
of the notice~,
The Federal Reserve Bank of New York has revised
its check collection circular so as to avoid any statements-which
would afford a basis for the circulation of the objectionable
notice, and the Federal Reserve Bank of Chicago is undertaking a
revision of its check ~ollection circular with the same end in
view.
I have just taken the matter up with the Federal Reserve
Bank of ·
in a letter, dated July g, 1922, a copy of
which is inclosed for your informn.tion. In view of the apparent
tendency to spread the circulation of the objectionable notices
from one part of the country to anotper, I would suggest for your
consideration that it might be advisable for the Federal Reserve
Board to tike up with e~ch Federal Reserve Bank the matter of
possible amendment of their check collection circulars so as to
conform with the provisions of Treasury Department Circular No.
176, amended and supp~emented May 15, 1922, {copy inclosed) on
this point.
Very truly yours,
{Signed) A.
Hon.
w. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. c.
w.
Mellon,
Seer e tn.ry.
c0
p
y
X-347lb
July B, 1922.
Dear ~overnor --------I enclose a copy of a letter, dated June 23, 1922; addressed
by the ----- Trust Company, ·-------- to Senator --------- with regard
to a circular apparently sent to its correspondents by the ---·-~-National Banko! --------- which states that:
"The Federal Reserve Bank of Cleveland reserves the
right to charge the account of the last endorsing bank,
unconditionally, at a:ny time, with the amount of such
returned items deposited with, endorsed to, or otherwise
paid by this bank"
in case of all Government warrants and checks received by it from member
banks. This misrepresents the Treasury's present practice in its
further statement that:
'~e United States Treasury has for years exercised the
right to return at any time checks and warrants which for
any cause have not been considered good."
and is calculated to cause the Treasury considerable difficulty.
A
notice somewhat similar to the statement just quoted as to the alleged
practice of the Treasury with regard to later cY,.a:rging back of checks and
warrants previously paid, issued some years ago by the Federal Reserve
Bank of New York, was taken by certain New York banks doing a foreign
business as a basis for a notice stanPed upon foreign advices covering
Government items, and, as a result of the circulation of that statement,
considerable difficulty has recently been experienced by holders of
Government checks in cashing them in certain foreign countries. The
Federal Reserve Bank of New York has recently issued a revised circular
regarding collection of checks which eliminates the objectionable statement. Because of a similar statement circulated by a certain one of its
member banks, which has caused the Treasury considerable trouble, the
Federal Reserve Bank of Chicago is also undertaking the revision of its
check collection circular so as to make its circular conform strictly
with the present practice of the Treasury Department, as outlined in
Treasury Department Circular No. 176, amended and supplemented May 15,
1922, (copy enclosed).
The member bank of the Federal Reserve Bank of
Chicago is also withdrawing its circular.
The notice circulated by the ---------- National Bank of --------of which the ---- Trust Company of ----------- complained in its letter
of June 23, 1922, is incorrect and misleading as the Government of the
United States does not reserve the right to charge back at any later time
all warrants or checks Which for any reason are not considered good, and
the wide circulation of the statement is obviously calculated to put
-2...
•
Government warrants and checks at a disadvantage as conpared
with commercial items. The Treasury's practice with respect to
the p~ment of Government warrants and checks is stated in
paragraphs 35-38 of Treasury Department Circular No. 176, amended
and supplemented May 15, 1922, and conforms generally to commercial practice. I should, therefore, appreciate it if you
would, if necessary, take up the revising of your regulations on
this point along the lines followed by the F'ederal Reserve Bank
of Chicago, or those followed by the Federal Reserve Bank of New
Yq;rk in revising their check collection circulars, and i f you
would at the same time take the matter up with the --------National Bank of -------- with a view to preventing further
circulation of this notice.
Very truly yours,
{Signed) A. W. Mellon,
Secretary.
@FedFRASER