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FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-7097 February 18, 1932. SUBJECT: Necessity f o r the approval of the Federal Reserve Board in purchasing municipal warrants. Dear S i r : For your information there i s enclosed herewith a copy of a l e t t e r r e c e n t l y received "by the Federal Reserve Board from one of the Federal reserve "banks, t o g e t h e r with a copy of the Board's r e p l y t h e r e t o , with regard to the question whether i t i s necessary t h a t a Federal reserve bank obtain the s p e c i a l approval of the Federal Reserve Board b e f o r e purchasing from a member bank municipal w a r r a n t s , which bear the indorsement of such member bank, in accordance with the p r o v i s i o n s of Section V (d) of the Board's Regulation 3 . Very t r u l y yours, Chester M o r r i l l , Secretary. Enclosures. TO GOVERNORS OF ALL F. R. BANKS. ! 173 COPY X-7097-a February 18, 1932. Mr. W. B. Geery, Governor, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. Dear Governor Geery: Reference i s made to your l e t t e r of January 19, 1932, in which you i n q u i r e whether i t i s necessary to obtain the s p e c i a l approval of the Federal Reserve Board b e f o r e purchasing the warrants of m u n i c i p a l i t i e s having a population of l e s s than 10,000 i n h a b i t a n t s , when such warrants are purchased from and indorsed by a member bank i n accordance with the p r o v i s i o n s of Section V (d) of the Board's Regulation E. While the language of the r e g u l a t i o n i s not c l e a r , i t was the i n t e n t i o n t h a t the purchase from a member bank of warrants which bear the indorsement of such bank and comply in other r e s p e c t s with the p r o v i s i o n s of Section V (d) should be exempt from the r e q u i r e ments contained in Sections V(a), V(c) and VI, of the r e g u l a t i o n . You are advised, t h e r e f e r e , t h a t warrants may be purchased by a Federal reserve bank in accordance with the p r o v i s i o n s of Section V (d) w i t h out o b t a i n i n g the s p e c i a l approval of the Federal Reserve Board, even though ( l ) such warrants are issue# by a m u n i c i p a l i t y having a populat i o n of 10,000 i n h a b i t a n t s or l e s s , (2) the amount of warrants of a s i n g l e m u n i c i p a l i t y so purchased exceeds 25 p e r cent of the t o t a l i Mr, W. B. Geery - 2 X-7097-a amount of warrants i s s u e d and sold "by such m u n i c i p a l i t y or (3) the amount i n v e s t e d in warrants of a s i n g l e m u n i c i p a l i t y exceeds the p e r centages p r e s c r i b e d in Section V(c). Your a t t e n t i o n i s i n v i t e d to the f a c t , however, t h a t , under the p r o v i s i o n s of Section 5136 of the Revised S t a t u t e s , a n a t i o n a l bank i s p e r m i t t e d to s e l l investment s e c u r i t i e s only "without recourse" and, t h e r e f o r e , may not s e l l warrants of m u n i c i p a l i t i e s with i t s indorsement. Very t r u l y yours, Chester M o r r i l l , Secretary. 175 176 COPT X-7097~b FEDERAL RESERVE BANK OP MINNEAPOLIS J anuary 19, 1932 Federal Reserve Board, Washington, D. C. Gentlemen: We a r e a t the present time "being examined "by your examiners, and one question has come up which has never a r i s e n b e f o r e because i t has so happened t h a t we had never been c a r r y i n g warrants a t the time the Examiners were h e r e . Our Northern Michigan and Northern Wisconsin banks use us every year through the months of November, December and January f o r the purpose of carrying borrowings of t h e i r c i t i e s , counties and school d i s t r i c t s in a n t i c i p a t i o n of the tax payments which a r e due January 10th in Michigan and February 28 in Wisconsin. Section V(d) of Regulation E provides t h a t any Federal reserve bank may purchase from any of i t s member banks warrants of any m u n i c i p a l i t y , indorsed by such member bank, with waiver of demand, n o t i c e and p r o t e s t i f such warrants comply with Sections I I I and V (b) of these r e g u l a t i o n s . Section VI provides t h a t warrants of a m u n i c i p a l i t y of 10,000 population or l e s s s h a l l be purchased only with the s p e c i a l approval of the Federal Reserve Board. We have considered V(d) as waiving the requirement r e g a r d i n g the s p e c i a l approval of the Federal Reserve Board. The Examiners quest i o n t h i s , and I would a p p r e c i a t e i t i f you w i l l make a r u l i n g on t h i s f o r our b e n e f i t . Yours very t r u l y , (S) W. 3 . Geery Governor
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