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606 IIX OPPICIO - W, P, G. HARDING GOVIRMOR X-1666~LBERT STRAuss; V1c1 Gov•••oa ADOLPH C. MILLER CHARLES S. HAMLIN MEM~ERS CARTER IILASI IICIITAIY OP THI TRIA.URY CHAIRMAN JOHN SKELTON WILLIAMS COMPTIOLLIR OF THE CURRENCY FEDERAL RESERVE BOARD WASHINGTON September 5, J. A. BRODERICK, SECRETARY W. T. CHAPMAN, ASSISTANT SECRETARY W.II.IIILAY, FISCALAIIINT ADDRESI!I REPLY TO 1919• FEDERAl. RESERVE BOARD Dear Sir: I' I As the gold which was received from Ger~ in payment for food supJ:.o].ies is transferred from Belgium and Holland to the Bank of England rind earmarked for the acco'Ullt of the Federal Reserve Bank of New York (then to be prorated among all Federal Reserve banks), it will be counted as part of the gold reserves of the Federal Reserve Banks. The total amount of gold which will be involve.d in the transfer will be in excess of one hundred and ten million dollar.s. and as received and earmarked from titre to titre by the Bank of England wlll be ·reflected in the increaied percentage of reserves. For sometime past the combined percentage of reserves of Federal Xteserve i&tilq; has fluctuated between 49¥ &Di 53~. but it should be remembered that for several months immediately preceding APril 191.1 the combined reserves of the Federal Reserve Banks ranged from 65% to 8~. You are requested to inform the officers and directors of your bank that it is the view of the Board that.as new gold is received it should be used to strengthen the reserve position of the Federal Reserve system and that these improved reserves, whether growing out of an actual increase in the amount of gold held or because of contraction in the amount of credit extended, should be regarded merely as a symptom of return to more normal conditions and not as an incentive to a loan expansion not essential to the public interest nor to the accomn:od.ation of coimterce and business. It has been the policy of the Board for sometime past to maintain the combined reserve of a Federnl Reserve Bark at not leas than 40~ by means of rediscounts with other Federal. Reserve Banks whenever that level was reached, but the Board wishes it understood that with a .general improvement 1m reserves a higher standard ~ be establiShed in which case a Federal Reserve !a.nk might oe expected to rediscount when its reserve approximates 45%. Very truly yours. Governor • •• ~his letter sent to Chairman of each F. R.·Bank
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