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FEDERAL RESERVE BOARD WASHINGTON X-7079 ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD January 28, 1932. SUBJECT: C o l l a t e r a l S e c u r i t y to Government Deposits Treasury Department Circular Ho. 92. Dear SirThere i s enclosed herewith, f o r your information, copy of a l e t t e r addressed to the Governor of t h e Federal Reserve Board, under date of January 6, 1932, by A s s i s t a n t Secretary of the Treasury B a l l a n t i n e , on t h e s u b j e c t of the proper c l a s s i f i c a t i o n of a g r i c u l t u r a l paper as s e c u r i t y f o r Government d e p o s i t s under Treasury Department Circular ZTo. 92, as amended. There i s also enclosed copy of a l e t t e r which the A s s i s t ant Secretary of the Treasury addressed on t h e same d a t e to the Controller of the Federal Reserve Bank of St. Louis r e l a t i v e to the acceptance, from a d e p o s i t a r y bank, under sub-paragraph (h) of the c i r c u l a r , of a note of a correspondent bank secured by mark e t a b l e s e c u r i t i e s other than customers' n o t e s , d r a f t s or b i l l s of exchange. Very t r u l y yours, Chester M o r r i l l , Secretary. Enclosures. TO THE GOVERNORS OF ALL F. R. BANKS. X-7079-a C O P Y ijLG TREASURY DEPARTMENT WASHINGTON January 6, 1932. My dear Governor; Mr. Drinnen has requested the r u l i n g of the Treasury as to the proper c l a s s i f i c a t i o n of a g r i c u l t u r a l paper as s e c u r i t y f o r Government d e p o s i t s under Treasury Department Circular Fo. 95, as amended, a copy of which I enclose. I t has been g e n e r a l l y considered by the Treasury t h a t a g r i c u l t u r a l paper p r o p e r l y f a l l s within the p r o v i s i o n s of p a r a graph (g) of t h e c o l l a t e r a l s e c u r i t y p r o v i s i o n s of the c i r c u l a r which includes customers' notes indorsed by a correspondent i n corporated bank or t r u s t company and rediscounted by the d e p o s i t a r y bank or t r u s t company, r a t h e r than under paragraph ( f ) p r o v i d i n g f o r the acceptance of commercial paper and bankers' acceptances, except in the case of notes of d e a l e r s in mules and c a t t l e and d e a l e r s in a g r i c u l t u r a l implements, or other s i m i l a r n o t e s , which have been c l a s s i f i e d by the Federal Reserve Board as commercial r a t h e r than a g r i c u l t u r a l paper. As you w i l l note, however, under t h e terms of the c i r c u l a r the approval and v a l u a t i o n of s e c u r i t i e s i s committed to t h e Federal Reserve Banks a c t i n g under the d i r e c t i o n of the Secretary of t h e Treasury and i t has been the p o l i c y of the Treasury to a l a r g e ext e n t to depend upon the d i s c r e t i o n of such banks as to the c l a s s i f i c a t i o n of e l i g i b l e paper r a t h e r than to make an i n f l e x i b l e r u l i n g . Federal Reserve Banks a r e in a b e t t e r p o s i t i o n to determine the d e s i r a b i l i t y of the paper and the condition of the i n d o r s i n g and pledging banks which v;ould appear to be the primary c o n s i d e r a t i o n . I t i s expected t h a t the Federal Reserve Banks w i l l give t h i s type of paper tendered as c o l l a t e r a l f o r d e p o s i t s under Circular No. 92 t h e same c a r e f u l s c r u t i n y t h a t i s given paper rediscounted f o r member banks. By d i r e c t i o n of the Secretary: Very t r u l y yours, (Signed) A. A. B a l l a n t i n e A s s i s t a n t Secretary of the Treasury. Hon. Eugene Meyer, Governor, Federal Reserve Board, Washington, D. C. (enclosure) X-7079-15 COPY January 6, 1932. Mr. S. F. Gilmore, C o n t r o l l e r , Federal Reserve Bank of St. Louis, St. Louis, Missouri. Dear S i r ; I have your l e t t e r of December 15, 1931, addressed to the Division of Deposits, r e q u e s t i n g advice as to whether you should a c c e p t , from a d e p o s i t a r y bank, under sub-paragraph (h) of the c o l l a t e r a l s e c u r i t y p r o v i s i o n s of Treasury C i r c u l a r No. 92, a note of a correspondent bank secured by marketable s e c u r i t i e s o t h e r than customers' n o t e s , d r a f t s , or b i l l s of exchange. If the notes to which you r e f e r are otherwise e l i g i b l e under t h e terms of sub-paragraph ( h ) , the Treasury w i l l not obj e c t to t h e i r acceptance as s e c u r i t y f o r d e p o s i t s under Circular No. 92, provided the s e c u r i t i e s pledged as c o l l a t e r a l a g a i n s t such notes a r e a l s o e l i g i b l e under the other c l a s s e s s p e c i f i e d in the c i r c u l a r , as amended, and provided f u r t h e r t h a t the s e c u r i t i e s so pledged a r e in amounts a t l e a s t equal to the n o t e s in each case. Very t r u l y yours, (Signed) A. A. B a l l a n t i n e A s s i s t a n t Secretary of the Treasury.
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