The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BOARD WASHINGTON L & r c h b, 1922. st.2629. SUBJECT: Rediscounts. Dear Sir: In a c c o r d a n c e w i t h the r e c o m m e n d a t i o n of the F e d e r a l Reserve A g e n t s at t h e i r c o n f e r e n c e w i t h the F e d e r a l R e s e r v e B o a r d i n O c t o b e r 1 9 2 1 , t h e B o a r d h a s r u l e d t h a t i n t h e f u t u r e "bills r e d i s c o u n t e d "by m e m b e r "banks a n d "by F e d e r a l r e s e r v e b a n k s s h a l l "be i n c l u d e d w i t h o t h e r d i s c o u n t e d b i l l s o n t h e a s s e t s i d e o f c o n d i t i o n r e p o r t s a n d set u p s e p arately as a n e w item among liabilities, instead of being reported as a c o n t i n g e n t l i a b i l i t y b e l o w t h e b o d y o f c o n d i t i o n r e p o r t s a s h a s b e e n the p r a c t i c e i n t h e p a s t . A s u p p l y o f F a r m 1 0 5 , r e v i s e d a s o f F e b r u a r y 15, 1 9 2 2 to p r o v i d e f o r the i n c l u s i o n o f r e d i s c o u n t s i n t h e b o d y o f t h e r e p o r t , w i l l b e f o r w a r d e d to y o u t o d a y f o r u s e o f S t a t e b a n k a n d T r u s t c o m p a n y members in preparing their next condition reports. I n case one F e d e r a l r e s e r v e b a n k r e d i s c o u n t s p a p e r w i t h a n o t h e r in t h e f u t u r e , t h e r e d i s c o u n t i n g o r b o r r o w i n g b a n k w i l l i n c l u d e the a m o u n t o f r e d i s c o u n t e d b i l l s w i t h its b i l l h o l d i n g s u n d e r the g e n e r a l c a p t i o n "2-ills d i s c o u n t e d f o r m e m b e r b a n k s " , a n d r e p o r t the a m o u n t t h e r e o f a g a i n s t liability item "Bills rediscounted w i t h other Federal reserve banks", which will appear immediately preceding the item "All other liabilities",. The discounting or lending b a n k should change the general c a p t i o n "Bills discounted" a p p e a r i n g in the present statement to "Bills d i s c o u n t e d for m e m b e r banks"', a n d i n s e r t a n e w i t e m " B i l l s d i s c o u n t e d f o r o t h e r F e d e r a l r e s e r v e banks" immediately b e f o r e item "Bills bought in open market". Inasmuch as the a m o u n t s of b i l l s r e d i s c o u n t e d w i t h o t h e r F e d e r a l r e s e r v e b a n k s w i l l b e i n c l u d e d i n t h e t o t a l earning, a s s e t s o f t h e b o r r o w i n g b a n k s a s w e l l a s i n those of the l e n d i n g b a n k s , the c a p t i o n " T o t a l e a r n i n g a s s e t s " i n the B o a r d ' s d e t a i l e d s t a t e m e n t of c o n d i t i o n of F e d e r a l r e s e r v e b a n k s a n d in statements of borrowing banks will read "Total earning assets, including rediscounts with other Federal reserve banks". No c h a n g e s w i l l b e m a d e in the B o a r d ' s consolidated p r e s s statement for the r e a s o n that all inter-Federal reserve b a n k discount operations fflast b e e l i m i n a t e d i n o r d e r to o b t a i n a c o n s o l i d a t e d s t a t e m e n t o f the r e s o u r c e s a n d l i a b i l i t i e s o f t h e S y s t e m a s a w h o l e . A s t h e s u m of r e s o u r c e s a n d l i a b i l i t i e s in t h e d e t a i l e d s t a t e m e n t w i l l , t h e r e f o r e , e x c e e d the r e sources a n d l i a b i l i t i e s s h o w n i n the c o n s o l i d a t e d s t a t e m e n t b y the a m o u n t of p a p e r u n d e r rediscount b e t w e e n F e d e r a l r e s e r v e b a n k s , a note w i l l be a d d e d to t h e B o a r d ' s d e t a i l e d s t a t e m e n t o f r e s o u r c e s a n d l i a b i l i t i e s t o s h o w that the f i g u r e s a r e inclusive of r e d i s c o u n t s b e t w e e n F e d e r a l r e s e r v e - 2 - st.2625. "banks - A s a m p l e f o r m o f t h e r e v i s e d s t a t e m e n t is e n c l o s e d , i n w h i c h n e w items are shown in parentheses a n d on w h i c h lines have b e e n drawn through i t e m s t o "be e l i m i n a t e d * O n t h e d a i l y b a l a n c e s h e e t , f o r m t h e re d i s c o u n t i n g or b o r r o w i n g b a n k s h o u l d i n c l u d e p a p e r u n d e r r e d i s c o u n t i n i t s b i l l h o l d i n g s a n d report the total a m o u n t t h e r e o f i n the M i s c e l l a n e o u s L i a bilities b l o c k against code COTT* The lending b a n k s h o u l d report rediscounts for other Federal Reserve Banks following code B U S K against code BARR* Data w i t h r e g a r d to m a t u r i t i e s on the r e v e r s e side of the f o r m s h o u l d b e e x clusive of rediscounts for other F e d e r a l R e s e r v e B a n k s , i.e., thsy should cover paper discounted for m e m b e r banks in your own district, and acceptances b o u g h t in the o p e n m a r k e t . I n a s m u c h as n o F e d e r a l r e s e r v e b a n k is n o w red i s c o u n t i n g a n y o f i t s p a p e r , n o c h a n g e s w i l l b e m a d e i n t h e f o r m of t h e B o a r d 1 s w e e k l y s t a t e m e n t u n t i l it a g a i n b e c o m e s n e c e s s a r y f o r s o m e F e d e r a l r e s e r v e b a n k to r e d i s c o u n t w i t h a n o t h e r F e d e r a l r e s e r v e b a n k * I n v i e w o f t h e r e v i s e d f o r m of s t a t e m e n t a n d w i t h t h e i d e a of d e f i n i t e l y d e t e r m i n i n g i n a l l c a s e s the e x t e n t to w h i c h a F e d e r a l r e s e r v e b a n k f i n d s it n e c e s s a r y t o o b t a i n a c c o m m o d a t i o n f r o m a n o t h e r F e d e r a l r e s e r v e b a n k , it i s d e s i r a b l e , i n c a s e b a n k e r s 1 a c c e p t a n c e s a r e s o l d b y o n e F e d e r a l r e s e r v e b a n k to a n o t h e r for the p u r p o s e of o b t a i n i n g a c c o m m o d a t i o n , that the s e l l i n g b a n k e n d o r s e s u c h a c c e p t a n c e s , in w h i c h case t h e y w i l l b e s h o w n a m o n g n B i l l s r e d i s c o u n t e d w i t h o t h ^ r F e d e r a l r e s e r v e oanks 1 1 a n d " B i l l s d i s c o u n t e d f o r o t h e r F e d e r a l r e s e r v e b a n k s * b y the s e l l i n g a n d p u r c h a s i n g b a n k s , r e s p e c t i v e l y . W h e n b a n k e r s 1 a c c e p t a n c e s are s o l d at the request of t h e p u r c h a s i n g b a n k , a n d n o t a t t h e r e q u e s t o f t h e s e l l i n g b a n k f o r the p u r p o s e of o b t a i n i n g a c c o m m o d a t i o n , they n e e d not b e e n d o r s e d b y the s e l l i n g b a n k , a n d t h e a m o u n t w i l l n o t b e s h o w n a m o n g rediscounts n o r t a k e n i n t o consideration.in calculating adjusted reserve percentages* Very truly yours, GOVERNOR. Enclosure. L e t t e r sent t o a l l F » R < Agents*•
@FedFRASER