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FEDERAL RESERVE BOARD
WASHINGTON
X-9450
ADDRESS OFFICML. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
January 17, 1936.
Dear Sir:
In planning the study of closed banks which has recently been
undertaken as a WPA project, it was proposed that the general supervision, analysis and publication of significant findings be undertaken by the Board and the placement and supervision of workers be
undertaken
~
the Federal Reserve banks.
This was done in order to
ensure efficient supervision and also to meet the requirement that
ninety percent of total expenditures would be for labor from relief
rolls.
This requirement precludes the possibilit,y of meeting the cost
of supervision from the amount allocated to the study by the President,
since the rent of space, machines and equipment for the tabulating
center will absorb the remaining ten percent of expenditures.
~~ile
the Reserve banks have been cooperating in the preparatory work incident to the initiation of the project, the allocation of the cost
of supervision has not yet been determined beyond instructions that
a separate record of expenses be maintained.
The Board now proposes that the cost of supervision, exclusive
of supervision provided qy the Board, be prorated among the Reserve
banks according to their capital and surplus.
siderations which prompt the suggestion.
There are several con-
133
X-9450
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In the first place, this would be in harmony with the procedure adopted in connection with the studies on member bank reserves
and on branch, group and chain banking.
Secondly, the burden of supervision is unevenly distributed.
In selecting the closed banks for stuqy an effort was made to include
all national banks which had suspended from 1951 to 1955, inclusive,
in towns with a population of 25,000 or over and with deposits of
$1,000,000 or over.
It was felt that small banks in places with a
population of less than 25,000 would not have adequate space nor have
their records in good shape.
Moreover, it would be difficult to secure
white-collar workers in small places.
In addition to the national
banks, certain State banks were included where the cooperation of the
State Superintendent of Banking could be obtained.
As a consequence of this method of selection
~~e
number of
closed banks to be supervised is very unevenly distributed geographically, as is shown in the accompanying table.
There are no banks in
the Ninth and Tenth Districts, and only one in the Eleventh District.
On the other hand, almost half the number of banks is concentrated in
the Fourth and Seventh Districts.
Finally, the findings of the stuqy should be equally valuable
to all the Reserve banks.
The Works Relief Program offers a unique
opportunity to secure the transcription and tabulation of the itemized
assets and liabilities of a substantial number of banks for some years
preceding their suspension.
Such data would be of great help in
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studying tP.e weakness in our banking structure disclosed by the depression.
In a few years, when the receiverships are closed, records from
which such a study could be made will have been destroyed.
The value
of the study, moreover, is not purely historical in nature.
Anything
that can be done to make banks conscious of the necessity of correluting their loan and investment policies to the particular composition of their deposits would be a contribution to the improvement of
banking practice.
The magnitude of the work of transcribing and tabulating the
necessary data would have precluded the System from undertaking the
study at its own expense.
Since, however, the President has allocated
upwards of $600,000 for tho study th0 only cost to the Reserve banks
will be that of supervision.
In view of the foregoing the Board hopes that its suggestion
that any costs incident to supervision should be borne by the System
as a whole in an equitable manner, will receive your favorable consideration.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL GOVERNORS
tas
X-9450-a
PRELIMINARY DISTRIBUTION OF CLOSED BANKS AND WORKERS IN THE
WPA PROJECT
District
Number of Banl{S
Number of Workers
1
13
29
2
10
26
3
14
28
4
21
68
5
11
22
6
5
13
7
46
98
8
18
59
11
1
4
12
6
16
145
343
9
10
@FedFRASER