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F E D E R A L R E S E R V E B O A R D WASHINGTON X-3003 December 27, 1920. SUBJECT: P o l i c y of Federal Reserve Banks Toward Commercial Paper Accompanied by New Financial Statements. Deaf S i r : One of the Federal Reserve Banks has c a l l e d the Board *s a t t e n t i o n t o the f a c t t h a t in the case of large mphufaccuring, i n d u s t r i a l and l t e r e a n t i l e concerns, which close theii 4 hooks f o r the y e a r on the ) l s t i n s t a n t , i t i s a l t o g e t h e r probable, t h a t t h e i r new f i n a n c i a l statements w i l l show a very m a t e r i a l r e d a c t i o n i n the r a t i o of quick a s s e t s &s compared to previous statements* I t i s suggested t h a t i t would be d e s i r a b l e f o r Federal Reserve Banks to adopt, as f a r a s p o s s i b l e , a uniform, and perhaps a somewhat mote l i b e r a l , policy i n d e a l i n g with commercial paper o f f e r e d them f o r rediscount when accompanied "by new s t a t e m e n t s . The f e e l i n g Of o f f i c i a l s of some of the Federal Reserve Banks i s t h a t i f a p o l i c y too c r i t i c a l or too r i g i d be adopted, not only would the moral e f f e c t upon the Banks be bad b u t the consequences might be d i s a s t r o u s . The Board would l i k e t o have, as e a r l y as convenient, the views of your Executive Committee on t h i s s u b j e c t . Very t r u l y yours, G o v e r n o r . To chairmen of a l l Federal Reserve Banks. Copy t o Governors.
@FedFRASER