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FEDERAL RESERVE BOARD WASHINGTON X-7247 address official correspondence t o the federal reserve board SUBJECT: September 20, 1932 D e c i s i o n of C o m p t r o l l e r General r e c o s t of Federal r e s e r v e n o t e s . Dear S i r : R e f e r e n c e i s made t o t h e B o a r d ' s l e t t e r o f S e p t e m b e r 1 , 1 9 3 2 , X - 7 2 3 6 , o n t h e s u b j e c t o f t h e "Charge f o r p r i n t i n g F e d e r a l r e s e r v e n o t e s d u r i n g f i s c a l y e a r 1 9 3 3 , " and t h e r e i s i n c l o s e d h e r e w i t h , f o r your i n f o r m a t i o n , copy of a l e t t e r addressed t o t h e S e c r e t a r y of t h e Treasury by the Comptroller General of the U n i t e d S t a t e s , under d a t e of September 13, 1932, which quotes and r e p l i e s t o a l e t t e r which t h e S e c r e t a r y a d d r e s s e d t o t h e C o m p t r o l l e r G e n e r a l on S e p t e m b e r 1 , 1 9 3 2 , r e q u e s t i n g a r e c o n s i d e r a t i o n o f t h e d e c i s i o n t h a t no r e d u c t i o n i n t h e c h a r g e made a g a i n s t F e d e r a l r e s e r v e b a n k s f o r t h e p r i n t i n g o f F e d e r a l r e s e r v e n o t e s may b e made a s a r e s u l t o f t h e r e d u c t i o n i n t h e c o m p e n s a t i o n of employees engaged i n t h e p r i n t i n g of s u c h n o t e s by t h e o p e r a t i o n o f t h e Economy A c t o f 1 9 3 2 . In view of t h e Comptroller General's a f f i r m a t i o n of h i s p r e v i o u s d e c i s i o n , t h e charge a g a i n s t the Federal r e s e r v e banks f o r the p r i n t i n g of F e d e r a l r e s e r v e n o t e s during the f i s c a l y e a r 1933 w i l l be a t t h e r a t e of $ 9 0 . 5 0 p e r one thousand s h e e t s . Very t r u l y y o u r s , Chester Morrill, Secretary. Inclosure. TO GOVERNORS OF ALL F . R. B A M S . X-7247-a COPY COMPTROLLER GENERAL OF THE UNITED STATES mSHIUGTOU A-43585 September 1 3 , 1 9 3 2 . The H o n o r a b l e , The S e c r e t a r y o f t h e T r e a s u r y . Sir: T h e r e h a s "been r e c e i v e d y o u r l e t t e r o f S e p t e m b e r 1 , 1 9 3 2 , as follows: " R e f e r e n c e i s made t o y o u r l e t t e r o f A u g u s t 5 , 1 9 3 2 ( A - 4 3 5 8 5 ) i n w h i c h y o u h e l d i n r e s p o n s e t o q u e s t i o n Ho. 5 s e t f o r t h i n my l e t t e r of J u l y 22, 1932, t h a t employees of t h e Bureau of Engraving and P r i n t i n g e n g a g e d u p o n r e p a y work a r e s u b j e c t t o t h e p r o v i s i o n s of s e c t i o n 1 0 1 o f t h e Economy A c t , t h a t t h e a m o u n t s w i t h h e l d f r o m t h e c o m p e n s a t i o n o f s u c h e m p l o y e e s by r e a s o n o f t h e o p e r a t i o n o f t h i s s t a t u t e m a s t b e impounded, a n d t h a t t h e f a c t t h a t t h e convp e n s a t i o n a c t u a l l y p a i d such employees has been reduced by the o p e r a t i o n o f t h e Econony Act does not a u t h o r i z e any r e d u c t i o n i n t h e amount o f t h e c o s t o f p r i n t i n g F e d e r a l R e s e r v e n o t e s and p o s t a g e s t a m p s w h i c h i s t o b e r e i m b u r s e d t o t h e Government b y o t h e r agencies. "The F e d e r a l R e s e r v e Board h a s i n v i t e d my a t t e n t i o n t o t h e f a c t t h a t i n making t h i s r u l i n g y o u a p p a r e n t l y d i d n o t have b e f o r e you s e c t i o n 16 of the Federal Reserve Act, which p r o v i d e s f o r t h e payment b y t h e F e d e r a l R e s e r v e B a n k s o f t h e e x p e n s e s n e c e s s a r i l y i n c u r r e d i n c o n n e c t i o n w i t h the p r i n t i n g and i s s u e of F e d e r a l r e s e r v e n o t e s ; and, a c c o r d i n g l y , a t t h e i n s t a n c e of t h e B o a r d , I am a g a i n p r e s e n t i n g t h i s m a t t e r t o y o u w i t h t h e request that i t be given reconsideration i n the l i g h t of the p r o v i s i o n s of t h i s s t a t u t e . " S e c t i o n 16 of t h e F e d e r a l Reserve Act c o n t a i n s the f o l l o w i n g p r o v i s i o n s on t h i s s u b j e c t : " 'The p l a t e s and d y e s t o b e p r o c u r e d b y t h e C o m p t r o l l e r of t h e Currency f o r t h e p r i n t i n g of such c i r c u l a t i n g n o t e s s h a l l r e m a i n u n d e r h i s c o n t r o l and d i r e c t i o n , and t h e e x p e n s e s n e c e s s a r i l y incurred i n executing the laws r e l a t i n g to the procuring o f s u c h n o t e s , and a l l o t h e r e x p e n s e s i n c i d e n t a l t o t h e i r i s s u e 215 X-7247-a A-43585 -2~ and r e t i r e m e n t , s h a l l b e p a i d "by t h e F e d e r a l r e s e r v e "banks, a n d the F e d e r a l R e s e r v e Board s h a l l i n c l u d e i n i t s e s t i m a t e of e x p e n s e s l e v i e d a g a i n s t t h e F e d e r a l R e s e r v e Banks a s u f f i c i e n t amount t o c o v e r t h e e x p e n s e s h e r e i n p r o v i d e d f o r , ii t * * * 11 'Any a p p r o p r i a t i o n h e r e t o f o r e made o u t o f t h e g e n e r a l f u n d s o f t h e T r e a s u r y f o r e n g r a v i n g p l a t e s and d i e s , t h e p u r c h a s e o f d i s t i n c t i v e p a p e r , or t o c o v e r a n y o t h e r e x p e n s e i n c o n n e c t i o n w i t h t h e p r i n t i n g o f n a t i o n a l - h a n k n o t e s or n o t e s p r o v i d e d f o r "by t h o a c t o f May t h i r t i e t h , n i n e t e e n h u n d r e d and e i g h t , a n d a n y d i s t i n c t i v e p a p e r t h a t may "be on hand a t t h e t i n e o f t h e p a s s a g e o f t h i s A c t may "be u s e d i n t h e d i s c r e t i o n o f t h e S e c r e t a r y f o r t h o p u r p o s e s o f t h i s A c t , and s h o u l d t h e a p p r o p r i a t i o n s h e r e t o f o r e made "be i n s u f f i c i e n t t o m e e t t h e r e q u i r e m e n t s o f t h i s A c t i n a d d i t i o n t o c i r c u l a t i n g n o t e s p r o v i d e d f o r "by e x i s t i n g l a w , t h e S e c r e t a r y i s h e r e b y a u t h o r i z e d t o u s e s o much o f a n y f u n d s i n the Treasury not o t h e r w i s e appropriated f o r the purpose of f u r n i s h i n g t h e n o t e s a f o r e s a i d : P r o v i d e d , h o w e v e r , That n o t h i n g i n t h i s s e c t i o n contained s h a l l be construed as exemption n a t i o n a l b a n k s o r F e d e r a l r e s e r v e banks f r o m t h e i r l i a b i l i t y t o r e i m b u r s e the U n i t e d S t a t e s f o r any expenses i n c u r r e d i n p r i n t i n g and i s s u i n g c i r c u l a t i n g n o t e s . ' "Under t h e s e p r o v i s i o n s o f t h e s t a t u t e , t h e F e d e r a l r e s e r v e b a n k s a r e a u t h o r i z e d and r e q u i r e d t o p a y t h e n e c e s s a r y e x p e n s e s o f p r i n t i n g and i s s u i n g F e d e r a l r e s e r v e n o t e s ; and t h e y h a v e n o a u t h o r i t y to i n c l u d e i n t h e i r payments c o v e r i n g such expenses amounts w h i c h a r e t o b e u s e d f o r o t h e r p u r p o s e s . Amounts i m p o u n d ed i n t h e T r e a s u r y o f t h e U n i t e d S t a t e s u n d e r t h e p r o v i s i o n s o f t h e Economy A c t c l e a r l y do n o t c o n s t i t u t e a n y p a r t of t h e e x p e n s e s of p r i n t i n g or i s s u i n g F e d e r a l r e s e r v e n o t e s . I t i s r e s p e c t f u l l y submitted, t h e r e f o r e , that s i n c e the law governing the p r i n t i n g and i s s u e o f t h e s e n o t e s s p e c i f i c a l l y p r e s c r i b e s t h e "oasis o f r e i m b u r s e m e n t o f t h e T r e a s u r y b y t h e F e d e r a l r e s e r v e "banks t h e r e may n o t l a w f u l l y b e i n c l u d e d i n t h e amounts w h i c h t h e F e d e r a l r e s e r v e b a n k s a r e a s k e d t o p a y a d d i t i o n a l sums w h i c h a r e t o b e impounded i n t h e T r e a s u r y o f t h e U n i t e d S t a t e s . "Moreover, I am a d v i s e d t h a t t h e a p p r o p r i a t i o n b y C o n g r e s s f o r t h e B u r e a u o f E n g r a v i n g and P r i n t i n g d o e s n o t i n c l u d e a n y amount f o r t h e e x p e n s e s o f ' r e p a y w o r k ' , i . e . , w o r k a s t o w h i c h tho expenses are repaid by other a g e n c i e s , but the only approp r i a t i o n f o r t h e B u r e a u i s f o r . work ' e x c l u s i v e o f r e p a y w o r k . ' I t i s t h o p r a c t i c e o f t h e B u r e a u t o make p a y m e n t s o f t h e s a l a r i e s of i t s e m p l o y e e s e n g a g e d c i t h e r i n r e p a y work or i n n o n - r e p a y work X-7247-a A-43585 -3- o u t o f t h e f u n d t h u s a p p r o p r i a t e d "by C o n g r e s s , "but t h a t p a r t o f t h e c o m p e n s a t i o n o f e m p l o y e e s w h i c h i s a p p l i c a b l e t o r e p a y work i s reimbursed t o t h e Bureau from time t o time by t h e a g e n c i e s f o r w h i c h t h e work i s p e r f o r m e d . I n t h e c a s e o f F e d e r a l r e s e r v e n o t e s , s u c h r e i m b u r s e m e n t i s made b y t h e F e d e r a l R e s e r v e B o a r d f r o m a s s e s s ments l e v i e d upon t h e Federal r e s e r v e banks, and t h e amounts obt a i n e d through such reimbursements are p l a c e d t o the c r e d i t of tho a p p r o p r i a t i o n made b y C o n g r e s s f o r t h e e x p e n s e s o f t h e B u r e a u f o r non-repay work. "Inasmuch a s t h e o n l y a p p r o p r i a t i o n b y C o n g r e s s f o r t h e B u r e a u o f E n g r a v i n g and P r i n t i n g i s f o r t h e work o f t h e B u r e a u • e x c l u s i v e of repay w o r k , ' i t i s submitted t h a t s e c t i o n 110 of t h e Economy A c t p r o v i d i n g t h a t ' T h e a p p r o p r i a t i o n s o r p o r t i o n s of a p p r o p r i a t i o n s unexpended by r e a s o n of t h e o p e r a t i o n of t h i s t i t l e s h a l l n o t b e u s e d f o r a n y p u r p o s e , b u t s h a l l b e impounded and r e t u r n e d t o t h e T r e a s u r y * i s n o t a p p l i c a b l e i n t h e c a s e o f amounts w i t h h e l d f r o m t h e c o m p e n s a t i o n o f t h e e m p l o y e e s o f t h e B u r e a u w h i c h i s a p p l i c a b l e t o r e p a y w o r k . T h e r e i s no a p p r o p r i a t i o n c o v e r i n g s u c h c o m p e n s a t i o n a n d , t h e r e f o r e , no amount t o w h i c h t h e t e r m s o f t h e impounding p r o v i s i o n a r e a p p l i c a b l e . The p a r t o f t h e a p p r o p r i a t i o n f o r t h e c o m p e n s a t i o n of e m p l o y e e s o f t h e B u r e a u e n g a g e d i n n o n - r e p a y work w h i c h i s u n e x p e n d e d b y r e a s o n o f T i t l e 1 o f t h e Economy A c t i s , o f c o u r s e , s u b j e c t t o t h o i m p o u n d i n g p r o v i s i o n ; b u t i t w o u l d seem c l e a r l y i m p r o p e r t o impound a n a d d i t i o n a l amount e q u a l t o a p o r t i o n o f t h e c o m p e n s a t i o n p a i d employees f o r repay wcrk which i s not i n c l u d e d i n t h e a p p r o p r i a t i o n by Congress f o r non-repay work. "For t h e r e a s o n s s t a t e d , i t i s r e s p e c t f u l l y s u b m i t t e d t h a t amounts u n e x p e n d e d b y r e a s o n o f t h e o p e r a t i o n of T i t l e 1 o f t h e Economy A c t u p o n t h e c o m p e n s a t i o n o f E m p l o y e e s o f t h e B u r e a u w h i c h i s a p p l i c a b l e t o r e p a y work a r e n o t p r o p e r l y s u b j e c t t o t h e in>p o u n d i n g p r o v i s i o n o f t h e Economy A c t , b e c a u s e n o t d e r i v e d f r o m a n a p p r o p r i a t i o n b y C o n g r e s s ; and f u r t h e r , t h a t , n o t w i t h s t a n d i n g t h e i m p o u n d i n g p r o v i s i o n o f t h e Economy A c t , t h e F e d e r a l R e s e r v e A c t d o e s n o t o b l i g a t e or empower t h e F e d e r a l r e s e r v e b a n k s t o p a y t h e B u r e a u o f E n g r a v i n g and P r i n t i n g amounts w h i c h a r e n o t t o b e u s e d f o r t h e e x p e n s e s o f p r i n t i n g and i s s u i n g F e d e r a l r e s e r v e n o t e s , b u t a r e t o b e impounded i n t h e T r e a s u r y o f t h e U n i t e d S t a t e s , a n d c o n s e q u e n t l y t h e T r e a s u r y cannot i n c l u d e s u c h amounts i n i t s c h a r g e s against the banks." I t w i l l b e n o t e d t h a t t h e d e c i s i o n t o y o u of A u g u s t 5 , 1 9 3 2 , d i d n o t r e q u i r e a n y r e d u c t i o n i n c o m p e n s a t i o n or a n y i m p o u n d i n g w i t h r e s p e c t t o employees, i f such t h e r e be, whose compensation X-7347-a A-43585 -4- 2 1 7 i s p a i d e n t i r e l y f r o m f u n d s c o l l e c t e d "by a s s e s s m e n t a g a i n s t t h e f e d e r a l r e s e r v e b a n k s and t h a t , a s t o s u c h e m p l o y e e s , t h e g r o s s amount o f t h e i r c o m p e n s a t i o n w o u l d , o f c o u r s e , b e c h a r g e d a g a i n s t t h e "banks. Your p r e s e n t s u b m i s s i o n , h o w e v e r , a p p e a r s t o b e c o n - c e r n e d w i t h t h o s e e m p l o y e e s whose c o m p e n s a t i o n i s n o t e n t i r e l y p a i d f r o m a s s e s s m e n t s , b u t who a r e e n g a g e d more or l e s s u p o n r e p a y work. S e c t i o n 1 0 4 o f T i t l e 1 o f t h e Economy A c t o f J u n e 3 0 , 1 9 3 2 , 47 S t a t . , 4 0 0 , e x c e p t s from t h e d e f i n i t i o n of " o f f i c e r s " and " e m p l o y e e s " a s u s e d i n t h a t t i t l e " p u b l i c o f f i c i a l s and e m p l o y e e s w h o s e c o m p e n s a t i o n i s d e r i v e d f r o m a s s e s s m e n t s on b a n k s a n d / o r i s not p a i d from t h e Federal Treasury". I f the compensation of p a r - t i c u l a r employees i s not p a i d e n t i r e l y from a s s e s s m e n t s on banks t h e y do n o t come w i t h i n t h e e x c e p t i o n and t h e r e d u c t i o n i n comp e n s a t i o n and t h e impounding r e q u i r e d e i t h e r by s e c t i o n 101 ( a ) , s e c t i o n 1 0 1 ( b ) , o r s e c t i o n 1 0 5 ( d ) , o f t h e Economy A c t i s compulsory. As t h e a p p r o p r i a t i o n s f o r t h e Bureau of P r i n t i n g and E n g r a v i n g a r e s p e c i f i c a l l y " e x c l u s i v e o f r e p a y work" t h e amount o f s u c h r e d u c t i o n and i m p o u n d i n g , i f n o t i n c l u d e d i n t h e c o s t o f r e p a y w o r k , w o u l d r e s u l t i n r e d u c i n g t h e amount a v a i l a b l e f o r t h e o t h e r work of t h e b u r e a u . S e c t i o n 8 0 3 o f t h e Economy A c t , 4 7 S t a t . 4 1 9 . expressly makes a l l a p p r o p r i a t i o n s f o r t h e f i s c a l y e a r 1 9 3 3 s u b j e c t t o t h e p r o v i s i o n s of t h a t a c t . A s s e c t i o n 16 o f t h e F e d e r a l R e s e r v e A c t , w h i l e a u t h o r i z i n g expenses i n v o l v e d i n the p r o d u c t i o n of X-7247-a A-43585 -5- F e d e r a l r e s e r v e n o t e s t o "be a s s e s s e d a g a i n s t t h e "banks, d o e s n o t d e f i n e s u c h e x p e n s e s , and i n v i e w o f t h e e x p r e s s p r o v i s i o n s o f t h e Economy A c t , s a i d s e c t i o n 1 6 may "be c o n s i d e r e d a s m o d i f i e d o r a m p l i f i e d "by t h e l a t e r a c t i n s o f a r a s n o t s p e c i f i c a l l y e x cepted therefrom. The Economy A c t was n o t e n a c t e d i n a i d o f t h e F e d e r a l r e s e r v e "banks b u t f o r t h e p u r p o s e o f e f f e c t i n g s a v i n g s d u r i n g t h e f i s c a l y e a r 1 9 3 3 and b a l a n c i n g t h e F e d e r a l b u d g e t a n d , i n e f f e c t r e q u i r e s t h e o f f i c e r s a n d e m p l o y e e s t o whom i t s p r o v i s i o n s a r e a p p l i c a b l e to c o n t r i b u t e a p a r t of t h e i r earnings f o r t h a t purpose. If the amount o f s u c h c o n t r i b u t i o n s w e r e t o b e p a s s e d on t o t h e b a n k s , the purpose of t h e a c t would to t h a t e x t e n t be d e f e a t e d . Careful c o n s i d e r a t i o n has boon g i v e n to t h e arguments advanced i n your s u b m i s s i o n , but i n v i e w of t h e e v i d e n t i n t e n t and p u r p o s e o f t h e Economy A c t , I am c o n s t r a i n e d t o a d h e r e t o t h e p r e v i o u s d e c i s i o n t h a t t h e amount r e q u i r e d t o b e w i t h h e l d and impounded f r o m the compensation of employees p a i d o n l y i n part from a s s e s s e d funds i s t o b e i n c l u d e d a s a p a r t of t h e c o s t t o b e r e i m b u r s e d b y F e d e r a l reserve banks; i n other words, that the cost to bo reimbursed i s n o t t o b o r e d u c e d b y t h e o p e r a t i o n o f s e c t i o n s 1 0 1 or 1 0 5 o f t h e Economy A c t . Respectfully, Comptroller General of the United S t a t e s . g f g
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