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FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-7635 October 12, 1933. Dear S i r : There are i n c l o s e d , f o r your i n f o r m a t i o n , copies of t h e Board's l e t t e r of June 21 t o t h e S e c r e t a r y of t h e Treasury and of t h e r e p l y of the A s s i s t a n t S e c r e t a r y of t h e Treasury under date of September 18, w i t h r e g a r d t o a b r a s i o n on gold coin, t h e holding of gold coin and gold c e r t i f i c a t e s i n j o i n t custody f o r t h e account of t h e Treasurer of t h e United S t a t e s , t h e c a n c e l a t i o n of and shipment t o t h e Treasury of new and f i t gold c e r t i f i c a t e s i n denominations of $500 or over, and t h e shipment t o t h e Treasury of gold coin and standard s i l v e r d o l l a r s . Very t r u l y yours Chester M o r r i l l Secretary. Ir.closures. TO GOVERNORS OF ALL FEDERAL RESERVE BANKS. 345 COPY X-7635-a 34(3 TREASURY DEPARTMENT WASHINGTON September 18, 1933. Mr. Chester Morrill, Secretary, The Federal Reserve Board, Washington, D. C. Sir: Reference i s made to your l e t t e r of June 21, 1933, advising that the Federal Reserve Batiks have on hand large amounts of gold coin and gold c e r t i f i c a t e s . You request to he advised as to ( l ) whether the Treasury w i l l permit the Federal Reserve Banks t o ship United States gold coin to the Treasury or to the mints or assay o f f i c e s at the Treasury's expense; (2) whether the Treasury w i l l reimburse the Federal Reserve Banks for abrasion on gold coin deposited since March 7; (3) whether the Federal Reserve Banks w i l l he required to determine the amount of such abrasion before shipment to the Treasury or Treasury o f f i c e s ; (4) whether the Treasury w i l l permit the Federal Reserve Banks to hold a portion of their gold coin or gold c e r t i f i c a t e s , or both, i n j o i n t custody by the banks and agents for account of the Treasurer of the United States; (5) whether the Federal Reserve Banks w i l l be permitted to cancel and ship to the Treasury new and f i t gold c e r t i f i c a t e s of denominations of $500 and over; and (6) as to what p o l i c y the Treasury w i l l f o l l o w i n connection with the disposal of standard s i l v e r dollars held by the Federal Reserve Banks i n excess of their requirements and whether these dollars may be shipped to Treasury o f f i c e s at Treasury expense. X-7635-a Mr. Chester Morrill - 3 Your questions are answered in the order presented, (1) The Treasury i s not i n a p o s i t i o n t o pay the expenses of shipping f i t gold coin from the Federal Reserve Banks to the Treasury the mints, or the assay o f f i c e s . Moreover, Section 16 of the Federal Reserve Act, as amended, provides that a l l expenses incident to the handling of deposits of gold coin or of gold c e r t i f i c a t e s f o r credit in the Gold Settlement Fund shall he paid "by the Federal Reserve Banks. (2) The Treasury has authority to assume the abrasion l o s s on gold coin only when the weight thereof i s not below the l i m i t allowed "by s t a t u t e , and furthermore, there are no funds a v a i l a b l e with which the Treasury can reimburse the Federal Reserve Banks for the abrasion l o s s on lightweight gold coin. I t i s my understanding that the Federal Reserve Board authorized the various Federal Reserve Banks to assume this loss. (3) I t w i l l be necessary for the Federal Reserve Banks to c l a s s i f y the gold coin as to current, uncurrent, and lightweight. In view of the circumstances, however, and i n order t o avoid the n e c e s s i t y of determining the l o s s on each piece separately, the banks, upon a p p l i cation to the Treasurer of the United States i n the usual manner, w i l l be permitted i n t h i s instance to ship the lightweight coin at a bulkweight value subject to adjustment to the mint's value when v e r i f i c a t i o n has been made. (4) The Treasury w i l l not object to the establishment of j o i n t custody accounts for a portion of the stock of gold c e r t i f i c a t e s X-7635-a 348 Mr. Chester Morrill - 3 and current gold, coin of these hanks. It should he understood, however, that i f these j o i n t custody accounts are established, the expenses involved i n the subsequent shipping of the gold coin to the Treasury o f f i c e s w i l l be borne by the Federal Reserve Banks. (5) There has been no permanent p o l i c y established with respect to the further paying out of gold c e r t i f i c a t e s . The Treasury, however, has no objection to the redemption, c a n c e l l a t i o n and shipment to the Treasury i n the usual manner of the gold c e r t i f i c a t e s i n denominations of $500 and over. (6) The Treasury i s not i n possession of funds with which to pay the expenses of shipping standard s i l v e r dollars t o Treasury o f f i c e s , and the available storage space at the mints i s exceedingly limited. However, the s i t u a t i o n with respect to the standard s i l v e r d o l l a r s i s somewhat d i f f e r e n t from the accumulation of gold. Several years ago the Treasury made an attempt to place the s i l v e r dollar i n c i r c u l a t i o n , and because of t h i s attempt large accumulation of s i l v e r d o l l a r s i n the various Federal Reserve Banks r e s u l t e d . I f e e l , therefore, that i n due course the Treasury should pay the expenses of shipping these s i l v e r dollars to Treasury o f f i c e s . To r e l i e v e the Federal Reserve Banks of dead a s s e t s i n their cash holdings, j o i n t custody accounts f o r s i l v e r d o l l a r s were established some time ago, and 13,470,000 s i l v e r dollars axe now held i n j o i n t custody accounts at two-thirds of the parent banks. The t o t a l amount held i n the cash of a l l Federal Reserve Banks and 349 X-7635-a Mr. Chester Morrill - 4 "branches i s l e s s than $5,000,000, and any surplus therein could a l s o "be placed i n the j o i n t custody of the tanks and the agents u n t i l such time as funds are available to pay the expense of shipping the d o l l a r s to Treasury o f f i c e s . Respectfully, (Signed) Thomas Hewes Thomas Hewes Assistant Secretary of the Treasury COPY , X-7635~b June 21, 1933. Honorable William H» Woo d i n , S e c r e t a r y of t h e Treasury, Washington, D. C. Dear S i r : As a r e s u l t of r e c e n t gold movements, a l l of t h e F e d e r a l r e serve banks have on hand very l a r g e amounts of gold c o i n and gold certificates. At s e v e r a l of t h e banks, however, t h e p r o p o r t i o n of t o t a l gold h o l d i n g s now maintained i n t h e form of gold s e t t l e m e n t fund b a l a n c e s i s r e l a t i v e l y low, and t h e y a r e d e s i r o u s of i n c r e a s i n g t h e s e b a l a n c e s i n order t o f a c i l i t a t e payments t o o t h e r F e d e r a l r e serve banks and t r a n s f e r s t o t h e F e d e r a l r e s e r v e a g e n t s and t h e United States Treasury. In o r d e r t o accomplish t h i s , t h e banks are c o n s i d - e r i n g shipments of gold coin and c e r t i f i c a t e s t o t h e T r e a s u r y . Sev- e r a l q u e s t i o n s have been r a i s e d i n t h i s c o n n e c t i o n , as summarized below, and r e g a r d i n g which t h e Board w i l l a p p r e c i a t e a d v i c e as t o t h e p o s i t i o n of t h e T r e a s u r y . 1. W i l l t h e T r e a s u r y permit t h e F e d e r a l r e s e r v e banks t o s h i p United S t a t e s gold c o i n t o t h e T r e a s u r y , or t o the m i n t s or a s say o f f i c e s , a t t h e T r e a s u r y 1 s expense? 2. W i l l the T r e a s u r y reimburse F e d e r a l r e s e r v e banks f o r a b r a s i o n on gold coin d e p o s i t e d with t h e F e d e r a l r e s e r v e banks s i n c e March 7? 3. W i l l i t be n e c e s s a r y f o r t h e F e d e r a l r e s e r v e banks, e s - p e c i a l l y t h o s e n o t equipped with e l e c t r i c weighing machines, t o det e r m i n e t h e amount of a b r a s i o n on g o l d c o i n b e f o r e shipment t o t h e 35 Honorable William II# Woo d i n -2~ X-7635-b T r e a s u r y , a m i n t , or a s s a y o f f i c e ? 4» W i l l t h e T r e a s u r y a u t h o r i z e such F e d e r a l r e s e r v e banks as f i n d i t d e s i r a b l e t o do so, t o s e g r e g a t e a p o r t i o n of t h e i r s t o c k of gold c o i n , or gold c e r t i f i c a t e s , or b o t h , to be held i n j o i n t custody by the banks and a g e n t s f o r account of t h e United S t a t e s Treasurer? 5« W i l l t h e F e d e r a l r e s e r v e banks be p e r m i t t e d t o c a n c e l and s h i p t o t h e T r e a s u r y new and f i t gold c e r t i f i c a t e s i n denominat i o n s of $500 and over? I n q u i r y has a l s o been made of t h e Board as t o t h e p o l i c y which t h e T r e a s u r y w i l l f o l l o w i n c o n n e c t i o n w i t h t h e d i s p o s a l of s t a n d a r d s i l v e r d o l l a r s held by F e d e r a l r e s e r v e banks i n e x c e s s of t h e i r r e q u i r e m e n t s , and advice i s r e q u e s t e d as t o whether t h e Fede r a l r e s e r v e banks w i l l be p e r m i t t e d t o s h i p excess h o l d i n g s of s t a n d a r d s i l v e r d o l l a r s t o t h e Treasury, a m i n t , or a s s a y o f f i c e , a t t h e T r e a s u r y ' s expense• R e s p e c t f u l l y yours, (Signed) Chester M o r r i l l Chester M o r r i l l , Secretary.
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