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Uk-fs«' FEDERAL RESERVE BOARD WASHINGTON X-3242 November 9, 1$21. SUBJECT: P u r c h a s e of United S t a t e s Bonds B e a r i n g C i r c u l a t i o n Privilege. Dear S i r : S e c t i o n I d of t h e F e d e r a l R e s e r v e Act p r o v i d e s f o r t h e g r a d u a l r e t i r e m e n t of N a t i o n a l Bank n o t e s and r e q u i r e s t h e United S t a t e s T r e a s u r e r t o f u r n i s h t h e F e d e r a l R e s e r v e Board, a t t h e end of each q u a r t e r l y p e r i o d , a l i s t of a p p l i c a t i o n s from n a t i o n a l b a n k s t o s e l l , a t p a r and a c c r u e d i n t e r e s t . United S t a t e s bonds s e c u r i n g circulation. S e c t i o n 18 a u t h o r i z e s t h e Board t o r e q u i r e F e d e r a l Reserve Banks t o p u r c h a s e such bonds, p r o v i d e d t h a t t h e t o t a l amount p u r c h a s e d by a l l F e d e r a l Reserve Banks i n any one y e a r s h a l l n o t e x ceed $ 2 5 , 0 0 0 , 0 0 0 , which amount s h a l l i n c l u d e bonds a c q u i r e d under S e c t i o n 4 of t h e F e d e r a l Reserve Act by t h e F e d e r a l R e s e r v e Banks. P r o v i s i o n i s a l s o made i n S e c t i o n I d f o r t h e exchange of United S t a t e s 2 p e r c e n t Consols w i t h t h e T r e a s u r y f o r 3 P e r c e n t gold notes without the c i r c u l a t i o n p r i v i l e g e . For t h e r e a s o n t h a t t h e s e n o t e s could n o t be s o l d a t p a r , t h e Board h a s not f o r some y e a r s p a s t r e q u i r e d t h e F e d e r a l Reserve Banks t o p u r c h a s e 2 p e r cent Consols o f f e r e d by n a t i o n a l banks. The Board now d e s i r e s , however, t o e x p r e s s t o t h e F e d e r a l Reserve Banks i t s w i l l i n g n e s s t o have them p u r c h a s e on t h e open market a t p a r and a c c r u e d i n t e r e s t United S t a t e s 2 p e r cent bonds b e a r i n g t h e c i r c u l a r ! o n p r i v i l e g e . The amount t h a t may be p u r c h a s e d d u r i n g t h e r e m a i n d e r of t h e p r e s e n t c a l e n d a r y e a r i s $25,000,000, l e s s any bonds which may have been a c q u i r e d under S e c t i o n 4 of t h e Act. I t i s s u g g e s t e d , however, t h a t no F e d e r a l R e s e r v e Bank s h a l l p u r c h a s e , w i t h o u t f u r t h e r r e f e r e n c e t o t h e Board, a n amount i n e x c e s s of i t s a l l o t m e n t on t h e b a s i s of c a p i t a l and s u r p l u s . The amount a l l o t t e d t o each F e d e r a l Reserve Bank on t h i s b a s i s i s a s f o l l o w s ' Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San F r a n c i s c o P e r c e n t of T o t a l • Amount 7.66 27.27 2.28 10.53 5.19 4.C6 14,18 4.32 3.43 4.37 3-57 7.14 $1,915,000 6,317,500 2,070,000 2,632,500 1,297,500 1,015,000 3 , 5 4 5 , ooo 1,050.000 857,500 1,092,500 392,500 1,755,000 X-3142 I t a p p e a r s from t h e S e c r e t a r y ' s m i n u t e s of t h e Conference of Governors of Federal Reserve Banics h e l d r e c e n t l y t h a t i t was t h e sense of t h e Conference t h a t Federal Reserve Banks should be a u t h o r i z e d t o purchase i n eacn c a l e n d a r year t h e maximum amount p e r m i t t e d under S e c t i o n 18, a t not more t h a n p a r and accrued i n t e r e s t . Very t r u l y y o u r s , G o v e r n o r . GOVERNORS ALL FEDERAL RESERVE BANKS COPIES TO CHAIRMEN
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