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494
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
J u l y 18, 1934
B-999
Dear S i r :
On March 23. 193*+, Governor Black, In t e s t i f y i n g before the
Committee on Banking and Currency of the United S t a t e s Senate, r e newed on behalf of the Federal Reserve Board the recommendation of
the Board f o r l e g i s l a t i o n e s t a b l i s h i n g a system of member bank r e serve requirements based not only on the volume of deposits but a l s o
on t h e i r turnover.
This system of reserves was f i r s t recommended by
the Federal Reserve System Committee on Member Bank Reserves in 1931.
As you know, the Federal Reserve System Committee on Member Bank
Reserves submitted i t s recommendations a f t e r extended research and i n vestigation.
In the course of that i n v e s t i g a t i o n i t was necessary to
estimate on the b a s i s of e x i s t i n g data what the required reserves of
a l l member banks as a whole would have been under the Committee's
plan had i t been i n e f f e c t during e a r l i e r p e r i o d s .
I t has now been
decided t o extend the scope of that i n v e s t i g a t i o n somewhat i n an
e f f o r t to obtain information for individual banks and for groups of
banks regarding changes i n reserves required under the committee's
proposal compared with changes i n reserves required under the p r e sent law.
I t i s d e s i r e d to determine with respect t o such banks (a)
the extent to which required reserves under the proposed plan would
495
2 —
B-999
f l u c t u a t e during d i f f e r e n t seasons of the y e a r , compared with changes
i n present required r e s e r v e s , (b) the extent t o which required r e s e r v e s
under t h e present and proposed plans f l u c t u a t e with changes i n b u s i n e s s
and c r e d i t c o n d i t i o n s , and ( c ) the extent t o which the burden of r e serves would be increased, decreased, or s h i f t e d among banks by the
proposal.
In connection with t h i s study we should l i k e t o have you e n l i s t
the cooperation of r e p r e s e n t a t i v e groups of member banks, as i n d i c a t e d
below, i n supplying the necessary data f o r determining what required
r e s e r v e s would have been under the Board's proposal over a p e r i o d e x tending back through 1928.
I t would be very h e l p f u l a l s o i f the
necessary data could be obtained f o r 1924 - 1927 f o r at l e a s t some of
the banks.
The groups of banks f o r which we should l i k e t o obtain the data
are:
1 . Weekly f i g u r e s from member banks that now submit weekly
condition reports.
2 . Monthly f i g u r e s from other banks i n groups l o c a t e d i n or s e r v ing communities or regions whose c h i e f economic a c t i v i t i e s may be
characterized by the production of s p e c i f i c commodities or by t h e
dominance of a p a r t i c u l a r type of industry such a s :
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Cotton growing
Tobacco growing
Wheat r a i s i n g
Corn growing
Livestock
Dairying and poultry r a i s i n g
F r u i t s and vegetables
Mixed farming
Lumbering and logging
Oil producing
: 496
*
- 3 k.
1.
m.
n.
B-999
Coal mining
Iron ore mining
Other mineral producing
I n d u s t r i a l and commercial
The data required for our purposes are i n d i c a t e d by the f o l l o w ing i n c l o s u r e s :
1 . Form 234 - For obtaining currently commencing with
September 1934. monthly data from s e l e c t e d
banks other than those that now submit
weekly condition r e p o r t s .
2 . Form 235 - Tor obtaining monthly data for back periods
from such banks.
3 . Form 235a- For obtaining weekly data f o r back periods
from s e l e c t e d reporting member banks.
4 . A statement explaining the forms.
5 . A suggested form of l e t t e r to be sent to the member
banks whose cooperation i s to be s o l i c i t e d
i n securing back f i g u r e s .
In the case of weekly reporting member banks i t i s proposed to
c o l l e c t the required current data in connection with a revised form
of weekly condition report about which you are being advised i n a
separate l e t t e r .
I t would be d e s i r a b l e to have whatever back data may be o b t a i n able on Forms 235 and 235a i n your p o s s e s s i o n i n time for you to comp l e t e the compilations on these forms f o r individual banks and groups
of banks by the end of October.
The current data on Form 234 i t i s
contemplated should be c o l l e c t e d commencing with September 1934 and
t h e r e a f t e r u n t i l otherwise advised.
I t i s thought that i f the required data f o r p r i o r periods can
be obtained for approximately 10 percent of the member banks i n each
d i s t r i c t , properly d i s t r i b u t e d , such a sample w i l l make p o s s i b l e a
s a t i s f a c t o r y t e s t , representative of a l l member banks i n the d i s t r i c t .
- 4 -
B-999
However, i n s e l e c t i n g the "banks whose cooperation i s t o be e n l i s t e d
i n the study, i t would be d e s i r a b l e to take only such banks as had been
l i c e n s e d by the end of June, 1933« and whose past records are known t o
bo w e l l k e p t ,
In order to avoid any b i a s i n s e l e c t i n g the banks i t
would be p r e f e r a b l e , wherever p r a c t i c a b l e , t o i n c l u d e a l l r e p r e s e n t a t i v e
member banks i n s e l e c t e d economic a r e a s , and t o c o n f i n e the l i s t of
banks from which back data are requested to banks which are a l s o b e i n g
asked t o supply current data.
Such data as are c o l l e c t e d should be transcribed at your bank t o
Forms 236 and 236a, copies of which are a l s o i n c l o s e d , the information
c a l l e d f o r i n columns 8 and 11 added and the c a l c u l a t i o n s i n d i c a t e d on
these forms made,
You w i l l be advised l a t e r i n what form to transmit
the data to the Board.
I t i s e s s e n t i a l that the f i g u r e s of "daily
average required r e s e r v e s during week (month) under present law" c a l l e d
f o r i n column 8 and of "average borrowings from Federal Reserve bank
during week (month)" c a l l e d f o r i n column 11 bo comparable with the f i g ures i n the other columns.
Accordingly, s p e c i a l care should be taken
i n the case of the f i g u r e s f o r any bank that absorbed or merged with
one or more other banks during the p e r i o d to insure t h a t the f i g u r e s
supplied from the records of the Reserve bank represent the same banking u n i t s as do those furnished by the member bank.
I t w i l l be appreciated i f you w i l l f u r n i s h u s , as soon as p r a c t i c a b l e , with a l i s t of the reporting member banks and other banks i n
your d i s t r i c t from which you propose to obtain back data, the banks t o
be grouped i% the manner i n d i c a t e d on page 2 of t h i s l e t t e r .
Please
show i n t h i s l i s t the t o t a l d e p o s i t s of each such bank a t the end of
1933 and the population of the c i t i e s i n which the s e l e c t e d banks are
- 5 -
b-999
l o c a t e d , and the r a t i o s of the aggregate deposits and population f o r
a l l s e l e c t e d banks and c i t i e s to the t o t a l s for your d i s t r i c t .
The
l i s t w i l l be examined and you w i l l be advised whether we have any
suggestions to make i n regard t h e r e t o .
A supply of the forms referred to herein w i l l be sent you i n due
course.
Very truly yours,
hrjoiAZuLf
Chester M o r r i l l ,
Secretary.
Incloeures.
ALL FEDERAL
TO
RESERVE AGENTS*
Form 23U
Federal Reserve Board
June 1934
499
Report on D e p o s i t s , Debits, and Vault Cash f o r the month of
(Name of bank)
(City)
(State)
. 193_«
F.R.Dist.No.
Enter a l l f i g u r e s
i n even d o l l a r s —
omit cents
1.
Total d e p o s i t s at end of month
_____________________
2.
Deductions: Amounts due from member banks, items
i n process of c o l l e c t i o n , exchanges f o r c l e a r i n g
house, checks on l o c a l and outside banks, and other
cash items payable on presentation i n the United
S t a t e s , at end of month
2a. Net deposits at end of month ( 1 - 2 )
____________________
Debits (Charges)during month to deposit accounts:
3.
Own c e r t i f i e d and o f f i c e r s ' checks paid
___________________
4.
Other d e b i t s to deposit accounts
___________________
5.
Cash i n vault and i n t r a n s i t to and from Federal
Reserve Bank at end of month
6.
Debits t o individual deposit accounts during
month (comparable to weekly f i g u r e s reported
to clearing house or other reporting agency)
___________________
-
Signed
(Cashier or Treasurer)
NOTE: Numbering on t h i s form
i s same as on form 235
(b-999)
Form 235
Federal Reserve Board
June 193^
Report on D e p o s i t s , Debits? and Vault Cash
(Name of tank)
(City)
(State)
I n t e r a l l f i g u r e s i n even d o l l a r s — omit cents
Year
and
month
Total
deposits
(end of month)
Deductions: Amounts due
from member banks, items
D e b i t s { c h a r g e s ) t o deposit
i n process of c o l l e c t i o n ,
accounts during tho month
exchanges f o r c l e a r i n g
Our c e r t i f i e d
house, checks on other
and o f f i c e r s ' Other d e b i t s
banks and other cash items
checks
to d e p o s i t
payable on p r e s e n t a t i o n
paid
accounts
i n the United S t a t e s
(end of month)
2
•For comparative purposes. Figures reported i n column 4 w i l l ,
of course, include d e b i t s to i n d i v i d u a l deposit accounts.
Cash i n v a u l t
and i n t r a n s i t
to and from
F. R. Bank
(end of month)
Debits to i n d i vidual d e p o s i t
accounts during
the month (comparable to weekly
f i g u r e s reported
to c l e a r i n g house
or other r e p o r t ing agency)
6*
Ul
©
^
(B-999)
Form 235a
Federal Reserve Board
June 1934
Report on D e p o s i t s , D e b i t s , and Vault Cash
(Name of Bank)
(City)
(State)
Enter a l l f i g u r e s i n even d o l l a r s — omit c e n t s
Week endi n g Wednesday
( I n d i c a t e year,
month, and
day of month)
Total
deposits
(end of week)
Deductions: Amounts due
Debits ( c h a r g e s ) t o d e p o s i t
from member banks, items
accounts during the week
i n process of c o l l e c t i o n ,
Our c e r t i f i e d
exchanges f o r c l e a r i n g
house, checks on other
and o f f i c e r s ' Other d e b i t s
checks
to d e p o s i t
banks and other cash items
paid
payable on p r e s e n t a t i o n
accounts
i n the United S t a t e s
(end of week)
2
Cash i n v a u l t
and i n t r a n s i t
to and from
F . R. Bank
(end of week)
Debits to i n d i vidual d e p o s i t
accounts during
the week
(as reported to
c l e a r i n g house)
6*
CR
P
•For comparative purposes. Figures reported i n column 4 w i l l ,
of course, include d e b i t s to individual d e p o s i t accounts.
(B-999)
r 502
REQUIRED RESERVES UNDER PROPOSED L W
A
B-999
Summary of Federal Reserve Board 1 s Recommendati on to Congress
Required r e s e r v e s
1 . 5# of average d a i l y net d e p o s i t s during
a . Week i f i n Federal Reserve bank or branch c i t y ,
b . 4 weeks or month i f outside Federal Reserve bank or
branch c i t y .
plus
50$ of average d a i l y d e b i t s to d e p o s i t accounts during
a . Preceding g weeks, requirements to change weekly i f
i n Federal Reserve bank or branch c i t y ,
b . Preceding 8 weeks or 2 months, requirements to change
every 4 weeks or month i f outside Federal Reserve
bank or branch c i t y ,
2 . 15$ of average d a i l y gross d e p o s i t s i f t h i s amount i s l e s s than
the sum of two amounts determined as i n 1 above.
Reserve balances
1 , In Federal Reserve bank or branch c i t y *
a . Balance with Federal Reserve bank, not l e s s than
/
4 / 5 of requirements,
b . Cash i n v a u l t and i n t r a n s i t to and from Federal
Reserve bank, up to 1 / 5 of requirements.
2 . Outside Federal Reserve bank or branch c i t y *
a . Balance with Federal Reserve bank, not l e s s than
2 / 5 of requirements.
b . Cash i n vault and i n t r a n s i t to and from Federal
Reserve bank, up to 3 / 5 °f requirements.
Gross d e p o s i t s
Total d e p o s i t s as d e f i n e d i n c a l l r e p o r t .
Deductions from g r o s s d e p o s i t s
A l l c o l l e c t e d balances due from member banks, items i n p r o c e s s of c o l l e c t i o n , exchanges f o r c l e a r i n g house, and checks on l o c a l and o u t s i d e banks and other cash items payable on p r e s e n t a t i o n i n the
United S t a t e s . Collected balances due from banks not members of the
Federal Reserve System would not be d e d u c t i b l e . Deductions to be
made from gross d e p o s i t s , not from due to banks.
*See paragraph (h) of Committee's proposed amendment to S e c t i o n 1$.
-
Total d e b i t s
2 -
bSF
Debits or charges to a l l d e p o s i t accounts included i n gross d e p o s i t s
except d e b i t s r e s u l t i n g from the payment of the bank's own c e r t i f i e d and
c a s h i e r ' s checks.
Form 235 ( 2 3 5 - a ) U
Although the Board's proposal c a l l s f o r a reserve of 5$ a g a i n s t a v e r age d a i l y n e t d e p o s i t s at the opening of b u s i n e s s , f o r the purpose of t h i s
study i t i s b e l i e v e d that an average of d e p o s i t s at the beginning and at
the c l o s e of the month (week) 1 / w i l l be s u f f i c i e n t l y accurate to g i v e an
i n d i c a t i o n of the e x t e n t to which the proposal would a f f e c t the r e s e r v e
p o s i t i o n s of i n d i v i d u a l member banks. Form 235 ( 2 3 5 - a ) 2 / , t h e r e f o r e , does not
c a l l f o r average d a i l y d e p o s i t s .
Col. 2 . C o l l e c t e d balance* due from banks not members of the Federal
Reserve System should be excluded i n column 2 .
Col. ,-3» In t h i s column should be shown the aggregate amount of c e r t i f i e d . and c a s h i e r ' s or t r e a s u r e r ' s checks cashed or p a i d during the month
(week)ly— not the amount of such checks i s s u e d . The amount charged a g a i n s t
d e p o s i t o r s ' accounts f o r c e r t i f i e d and c a s h i e r ' s or t r e a s u r e r ' s checks
issued should be included i n column 4 .
Col. 4 . In t h i s column should be shown the aggregate amount d e b i t e d
or charged during the month (week)]J to a l l d e p o s i t accounts, e x c l u s i v e only
of the amount of c e r t i f i e d and c a s h i e r ' s or t r e a s u r e r ' s checks cashed or
paid during the month (week)U, i . e . , d e b i t s to accounts of i n d i v i d u a l s ,
p a r t n e r s h i p s , corporations, domestic and f o r e i g n banks, the United S t a t e s
and S t a t e , municipal and f o r e i g n governments, including withdrawals from
savings accounts, payments from trust accounts, and c e r t i f i c a t e s of d e p o s i t
paid.
Col. 6 . This i s a memorandum item to be f i l l e d i n only by banks that
now report d e b i t s to i n d i v i d u a l accounts to the l o c a l c l e a r i n g house, or
other l o c a l agency, f o r transmission to the Federal Reserve bank. The
amount of such d e b i t s to i n d i v i d u a l accounts, as shown i n t h i s column, w i l l ,
of course, be included a l s o i n column 4 as a p a r t of "other d e b i t s to d e p o s i t
accounts".
Form 235 (235-a) 1/should be f i l l e d i n by the member bank and returned 60
as to be i n the p o s s e s s i o n of the Federal Reserve bank not l a t e r than
October 1, 1934.
Form 234&/
The items i n t h i s form are ' i d e n t i c a l with the corresponding columns i n
Form 235•
l/*Omitd,E3511 and"tttonth"in l e t t e r s to weekly reporting member banks, and omit
11235-a" and "week" i n l e t t e r s to other banks,
2/-Omit the paragraph r e l a t i n g to Form"234" In l e t t e r t o weekly repon±in&
member banks*
i
504
B-999
Dear S i r ;
As s t a t e d on page 205 of the April 1934 i s s u e of the Federal Reserve
B u l l e t i n , Governor Black of the Federal Reserve Board, i n t e s t i f y i n g bef o r e the Committee on Banking and Currency of the United S t a t e s Senate on
March 23, 1934, renewed the Board's recommendation f o r l e g i s l a t i o n establ i s h i n g a system of member bank reserve requirements based not only on the
volume of d e p o s i t s but a l s o on t h e i r a c t i v i t y .
This system of r e s e r v e s
was f i r s t recommended by the Board to Congress in March'1932, the proposed
amendment to the Federal Reserve Act being printed on pages 215-216 of the
April 1932 i s s u e of the Federal Reserve B u l l e t i n .
The recommendation f o r a change in the method of determining reserve
requirements was made a f t e r extended research and i n v e s t i g a t i o n by the
Federal Reserve System Committee on Member Bank Reserves, in the course of
which the required r e s e r v e s , on the proposed b a s i s , were c a l c u l a t e d f o r
each member bank i n d i v i d u a l l y during one month (May 1931) and were e s t i mated f o r a l l member banks and f o r important groups of banks over a period
of time and compared with required reserves on the present b a s i s .
The Fed-
e r a l Reserve Board would now, however, l i k e to make a study of present r e quired reserves and of proposed required r e s e r v e s f o r individual banks and
f o r a number of small groups of banks over a period of time, with the view
p a r t i c u l a r l y of determining f o r these banks (a) the extent to which required
r e s e r v e s under the proposed plan would f l u c t u a t e during d i f f e r e n t seasons of
the year, compared with present required r e s e r v e s , and (b) the extent to which
B_99p^
— 2 —
required r e s e r v e s under the present and proposed plans f l u c t u a t e with changes
i n business c o n d i t i o n s .
In order that such a study may be made i t has been decided to ask f o r
the cooperation of a s e l e c t e d group of member banks from which i t i s desired
to obtain current data, as well as any corresponding back data that may be
a v a i l a b l e , with r e s p e c t to d e p o s i t s , d e b i t s , e t c .
Your bank has been t e n t a t i v e l y s e l e c t e d as r e p r e s e n t a t i v e of banks
l o c a t e d in a ( g i v e the economic c l a s s i f i c a t i o n ) region, and i t w i l l be
g r e a t l y appreciated i f you w i l l cooperate with us in the study.
For t h i s
purpose i t i s d e s i r e d that you f u r n i s h the data c a l l e d f o r in the i n c l o s e d
Form 335 (235a)^ as of the end of each month (week)^ f o r the period January
1924 to August 1934, or f o r any part thereof f o r which the data can be comp i l e d r e a d i l y from your records, (and also that you report monthly beginning with September 1934 the data c a l l e d f o r by Form 234 u n t i l fu rth er
n o t i c e — probably for a year) .
After the compilations based on those
data have been completed at t h i s bank, we s h a l l be glad, i f you d e s i r e , to
f u r n i s h you a copy of the part thereof r e l a t i n g to your bank.
For your
f urt h er information, there i s i n c l o s e d a memorandum o u t l i n i n g the proposed
reserve requirements together with i n s t r u c t i o n s f o r the preparation of
reports on Forms 234 and 235 (Form 235a)1.
I t w i l l be appreciated i f you w i l l kindly l e t us know whether you w i l l
be able to cooperate i n compiling the data desired f o r back periods and, i f
1J Omit"235", "month", and "Forms 234 and 235" in l e t t e r s to
r e p o r t i n g member banks, and omit "235a", "week", and "Form
235a" in l e t t e r s to other banks.
2/ Omit clause i n c l o s e d i n parentheses in l e t t e r to reporting
member banks.
X
506
3-999
— 3 —
so, how rnuch thereof can. be furnished and when the f i g u r e s may "be expected,
( i n any event, v.e should l i k e to have you f u r n i s h us current monthly r e ports on Form 234 u n t i l further n o t i c e .
Very t r u l y yours,
Federal Reserve Agent.
3/ Or.it from l e t t e r to reporting raercber banks.
@FedFRASER