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3 8 8 FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-9004 October 31, 1934, Dear Sirs On June 8, 1934, following the approval by the United States and Cuba of a t r e a t y abrogating the s o - c a l l e d P i a t t amendment, the board of directors of the Federal Reserve Bank of Atlanta adopted a resolution directing the o f f i c e r s of the bank t o apply t o the Federal Reserve Board for permission t o discontinue the agency operated by the bank at Havana, Cuba. A copy of the r e s o l u t i o n referred t o i s attached. The Federal Reserve Board was advised of the action taken by the board of directors of the Atlanta bank, and a f t e r giving consideration to the matter, decided t o arrange for a meeting i n Washington of representatives of the American and Canadian banks operating o f f i c e s in Cuba for the purpose of discussing -with them the question of the discontinuance of the Havana Agency. Such a meeting was held i n Washington on July 13, 1934, at which representatives of the National City Bank of New York, the Chase National Bank of New York, the F i r s t National Bank of Boston, the Royal Bank of Canada, the Canadian Bank of Commerce and the Bank of Nova Scotia were present, and the resolution adopted by the -2- X-9004 board of d i r e c t o r s of t h e A t l a n t a bank and t h e f o l l o w i n g t e l e g r a m r e ceived under d a t e of J u l y 12, 1934, from Acting Governor Johns of t h e F e d e r a l Reserve Bank of A t l a n t a , were brought t o t h e i r a t t e n t i o n : "The f o l l o w i n g cable has been r e c e i v e d from Manager of our Havana Agency: "* Late y e s t e r d a y t h e Cuban S e c r e t a r y of Treasury c a l l e d me t o h i s o f f i c e and advised t h a t he had i n f o r m a t i o n t h a t a c o n f e r e n c e between F e d e r a l Reserve Board and r e p r e s e n t a t i v e s of f o r e i g n banks o p e r a t i n g i n Cuba would be h e l d J u l y 13th t o d i s c u s s t h e Cuba s i t u a t i o n . He s t a t e s t h a t both he and t h e P r e s i d e n t f e a r e d t h a t t h i s c o n f e r e n c e might r e s u l t i n t h e withdrawal of t h e Havana Agency and due t o t h e v a l u a b l e s e r v i c e r e n d e r e d c o n s i d e r e d t h e withdrawal of i t would prove v e r y d e t r i m e n t a l t o Cuban i n t e r e s t s and would l i k e t o see any such d e c i s i o n avoided i f p o s s i b l e . S e c r e t a r y of Treas u r y r e q u e s t e d t h a t 1 a d v i s e you t h a t on J u l y 13th he w i l l recommend t o c a b i n e t r e p e a l of a l l l e g i s l a t i o n r e l a t i v e t o withdrawal of money from Cuba e n a c t e d s i n c e May 22nd and t h a t i n a l l p r o b a b i l i t y immediate a d o p t i n g i n t h i s connection w i l l be t a k e n . S e c r e t a r y of T r e a s u r y and t h e P r e s i d e n t r e q u e s t t h a t t h i s i n f o r m a t i o n be t r a n s m i t t e d t o you w i t h t h e r e q u e s t t h a t you t r a n s m i t same t o F e d e r a l Reserve Board. 1 1 1 Governor Black advised the r e p r e s e n t a t i v e s of t h e banks t h a t t h e f u n c t i o n s of t h e Havana Agency s i n c e i t s e s t a b l i s h m e n t had cons i s t e d l a r g e l y of t h e f u r n i s h i n g of new c u r r e n c y t o banks i n Cuba, t h e exchanging of f i t c u r r e n c y f o r m u t i l a t e d , d i r t y and u n f i t n o t e s , and t h e h a n d l i n g of cable t r a n s f e r s between the United S t a t e s and Cuba. He s a i d t h a t t h e agency had been o p e r a t e d a t a l o s s and t h a t such o p e r a t i n g l o s s e s had always been a c c e p t e d and had n o t a f f e c t e d t h e c o n t i n u a n c e of t h e agency by t h e F e d e r a l Reserve Bank of A t l a n t a , b u t t h a t t h e d i r e c t o r s of t h e A t l a n t a bank had been concerned about c o n d i t i o n s i n Cuba and f e l t t h a t t h e f u l l r e s p o n s i b i l i t y of t h e agency 3- X-9004 should not be upon the Atlanta bank and that t h i s was e s p e c i a l l y true because the agency served the commercial and exchange needs of a l l parts of the United States and was in r e a l i t y operating f o r system purposesj t h a t for a considerable period the Havana Agency kept on hand approximately $>25,000,000 in currency and i n emergencies a great deal more; that the amount had been reduced to between §10,000,000 and vl2,000,000 a f t e r conferring with banks in Cuba; and that the reduced amount had been found t o be a s u f f i c i e n t supply t o keep on hand at the agency except in cases of emergency, (in t h i s connection i t may be noted that under date of September 17, 1934, the Board was advised by the Atlanta bank that i t s directors had authorized the reduction of the amount of currency at the agency t o $5,000,000). He stated also that the Havana Agency was established for the purpose of carrying on the operations of a money depot i n Cuba at a time when transportation f a c i l i t i e s were slow and unsatisfactory as compared with those of today; that the Federal Reserve Bank of Atlanta has a branch i n Jacks o n v i l l e , Florida, where i t keeps on hand both issued and unissued currency which can be transported by airplane from Jacksonville t o Havana i n a few hours; that currency also can be sent by r a i l to Key 7/est, Florida, and from there could be transferred by plane t o Havana in a few hours; and that i n the circumstances i t would seem that the transportation problem as between t h i s country and Cuba has been solved. He added that he was of the opinion that the directors of the Federal Reserve Bank of Atlanta were not concerned g r e a t l y over the p o s s i b i l i t y of actual loss of funds inasmuch as i t was f e l t that the -4- : 2 9 i X-9004 revolutions i n Cuba were merely p o l i t i c a l uprisings, but he f e l t that the primary considerations prompting the action of the directors of the Atlanta bank i n adopting a resolution to discontinue the Havana Agency were ( l ) the f a c t that the transportation problem has now been solved, (2) that the directors desire t o eliminate the risk of the p o l i t i c a l unr e s t in the island, and (3) the rscent abrogation of the s o - c a l l e d Piatt Amendment• All of the bank representatives present at the meeting expressed the opinion that the agency should be continued and they were requested to address l e t t e r s t o the Board s e t t i n g forth t h e i r reasons for t h e i r opinion. Copies of the l e t t e r s received by the Federal Reserve Board i n response to t h i s request are attached for your c o n f i d e n t i a l information. At a meeting of the board of directors of the Federal Reserve Bank of Atlanta held i n Atlanta on August 10, 1934, at which Governor Black was i n attendance, he reviewed the consideration given by the Federal Reserve Board to the resolution adopted by the Atlanta bank r e l a t i v e to the discontinuance of the Havana Agency and stated that he had considered the p o s s i b i l i t y of the agency continuing as a system agency which would be operated by the Federal Reserve Bank of Atlanta for the twelve Federal reserve banks. At that meeting the directors of the bank voted that the Federal Reserve Board be advised that the Atlanta bank would cooperate i n a system operation of the agency and t h a t , i n t h e i r opinion, such an arrangement would be a proper solution of the problem. As you know, Governor Black resumed his duties as Governor of the Federal Reserve Bank of Atlanta on August 16, 1934, and under date -5- X-9004 of September 27, 1934, he addressed another l e t t e r t o the Board with regard t o the operation of the agency on a system b a s i s , and a copy of that l e t t e r i s also attached. Under the law the Federal Reserve Board has the power t o r e quire a reserve bank t o operate a foreign agency but the Board f e e l s that t o require system action would be undesirable and at the present time unnecessary since the Board endorses the suggestion of the Atlanta bank that the agency be operated by that bank for the account of the twelve reserve banks, and has under consideration the necessary d e t a i l s for that purpose. Accordingly, i t w i l l be appreciated i f you w i l l pre- sent the matter t o the board of directors of your bank at i t s next meeting and advise the Board as soon as possible as to the attitude of your bank towards participation with the other Federal reserve banks on a system basis i n the operation of the agency by the Atlanta bank. Upon acceptance of such participation by a l l banks, the d e t a i l s of the arrangement w i l l be determined promptly and submitted t o your directors for approval* Very truly yours Chester Morrill, Secretary. TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS. (No copy t o Governor, or extra copies to banks) copy " Federal Reserve Bank of A t l a n t a 2 9 3 X-9004-a "YffiEREAS, t h i s bank has maintained f o r a number of y e a r s , •with t h e consent of t h e F e d e r a l Reserve Board, an agency i n t h e City of Havana, Cuba, through which agency t h e banks i n Cuba have been supplied w i t h currency of t h e United S t a t e s ; and 1/VIIEREAS, t h e p r i n c i p a l reason f o r t h e e s t a b l i s h m e n t of s a i d agency was t h a t t h e Federal Reserve System might a c t i n accord w i t h t h e s p i r i t of t h e s o - c a l l e d ' P i a t t Amendment', and t o t h e end t h a t a s u f f i c i e n t supply of u s a b l e currency might be maintained i n Cuba; and YffiEREASj by t r e a t y between t h e United S t a t e s and t h e Republic of Cuba, the s a i d P i a t t Amendment has been abrogated and i t s p r o v i s i o n s a r e no longer of f o r c e ; and WHEREAS, t h e d i r e c t o r s of t h i s bank f e e l t h a t t h e s a i d agency should now be d i s c o n t i n u e d , THEREFORE, BE IT RESOLVED That the proper o f f i c e r s of t h i s bank be and they hereby are d i r e c t e d t o apply t o t h e F e d e r a l Reserve Board f o r permission t o d i s c o n t i n u e t h e s a i d Havana Agency. BE IT FURTHER RESOLVED That i n a d d r e s s i n g t h e F e d e r a l Reserve Board the o f f i c e r s of t h i s bank make i t p l a i n t h a t t h e Board of D i r e c t o r s d e s i r e s t o work no unnecessary inconvenience t o the banks i n Cuba, and t h a t while i t i s t h e d e s i r e of t h e d i r e c t o r s t o c l o s e s a i d agency as soon as p o s s i b l e , t h e y wish i t s d i s c o n t i n u a n c e t o be e f f e c t e d i n such wise as not unduly t o a f f e c t t h e banking and b u s i n e s s i n t e r e s t s of Cuba• BE IT ALSO RES0D7ED That the good o f f i c e s of the Federal Reserve Board be invoked t o t h e end t h a t t h e i n t e r e s t s of t h i s bank may n o t be i n j u r i o u s l y a f f e c t e d by r e a s o n of l e g i s l a t i o n , o f f i c i a l d e c r e e s , or other enactments or developments consequent upon or f o l l o w i n g t h e withdrawal of t h e s a i d former t r e a t y o b l i g a t i o n s s e t out i n t h e s a i d P i a t t Amendment•" I , L« Me Clark, S e c r e t a r y of t h e Board of D i r e c t o r s of the F e d e r a l Reserve Bank of A t l a n t a , do hereby c e r t i f y t h a t t h e f o r e g o i n g i s a t r u e and c o r r e c t copy of a r e s o l u t i o n adopted by t h e Board of D i r e c t o r s of t h e Federal Reserve Bank of A t l a n t a a t a meeting held on t h e e i g h t h day of June, 19 34• (Signed) S E C L. M. Clark R E T A R Y 2 9 4 COPY X-9004-b THE NATIONAL CITY BANK of New York New York August 8, 1934. Honorable E. R. Black, Governor Federal Reserve Board Washington, D i s t r i c t of Columbia Dear Governor Black: I beg t o apologize f o r my delay i n complying with your request t h a t , as one of the banks represented at the hearing held by the Federal Reserve Board in Washington on July 13, 1934, we send you a b r i e f w r i t t e n statement i n support of the verbal arguments made at that hearing i n favor of the continued maintenance of the Habana Agency of the Federal Reserve Bank of Atlanta. This delay was due t o our desire f i r s t t o obtain the views of our r e p r e s e n t a t i v e s located i n Habana on t h i s very important question. The Federal Reserve Agency i n Habana was o r i g i n a l l y e s t a b l i s h e d , I b e l i e v e , for two reasons: (a) Because of the r e s p o n s i b i l i t y which i t was f e l t had been assumed by the Government of the United States t o maintain i n Cuba an adequate supply of American currency when the American a u t h o r i t i e s , charged with the s e t t i n g up of a new order of government and f o l l o w i n g the f r e e i n g of Cuba from Spanish r u l e , e s t a b l i s h e d American currency as t h e chief circulating-medium and as l e g a l - t e n d e r i n payment of a l l debts; and (b) Because of the very important s e r v i c e which such Agency could and would perform f o r American business and banking i n t e r e s t s i n Cuba. These reasons s t i l l e x i s t and with p r a c t i c a l l y the same f o r c e as at the time of t h e establishment of t h a t Agency. American currency i s s t i l l l e g a l - t e n d e r and the chief circulating-medium i n Cuba. I t s place has not i n any way been taken by the recent i s s u e s of additional Cuban s i l v e r coins or other legal-tender currency. The Agency i s s t i l l performing a most important s e r v i c e for American business i n t e r e s t s located in Cuba, f o r American exporters of raw m a t e r i a l s , foods t u f f s and manufactured goods, and for American banks doing business i n Cuba, e i t h e r d i r e c t l y , through branches located there, or through correspondents. X-9004-^ty*^ Sheet ifo. 2 Governor E. R. Black - Washington, D. C. August 8, 1934 I t i s a w e l l Icnovm f a c t t h a t t h e b e n e f i t s c o n f e r r e d upon American b u s i n e s s j t o say nothing of Cuban b u s i n e s s , by t h e e s t a b l i s h ment of t h e Agency, have been very m a t e r i a l # The g e n e r a l l e v e l of i n t e r e s t r a t e s i n Cuba has dropped very m a t e r i a l l y from what i t was bef o r e t h e establislament of t h a t Agency. I t i s probably f a i r t o s t a t e t h a t , from a peak of twelve per c e n t . , with an average of approximately t e n per c e n t . , t h e i n t e r e s t l e v e l f o r sound s h o r t - t e r m advances of a commercial n a t u r e has dropped t o around s i x per c e n t . This i s l a r g e l y due t o t h e presence i n Cuba of t h e money-stock provided by t h e Agency and t o t h e ease and r a p i d i t y with which t r a n s f e r s have been e f f e c t e d by t h a t Agency. Before t h e Agency was e s t a b l i s h e d , r e s e r v e s of from f i f t y per c e n t , t o t h i r t y per c e n t , of d e p o s i t s were g e n e r a l . To-day t e n t o f i f t e e n per c e n t , i s considered a d e q u a t e . The e f f e c t of t h e unlocking of t h e s e r e s e r v e s upon the l e v e l of i n t e r e s t r a t e s was most pronounced. I b e l i e v e t h a t I express t h e g e n e r a l c o n v i c t i o n of banks doing b u s i n e s s i n Cuba when I say t h a t a m a t e r i a l i n c r e a s e i n i n t e r e s t r a t e s would f o l l o w immediately upon t h e withdrawal of t h e Agency. During t h e p e r i o d of t r o u b l e through which Cuba has passed and i s p a s s i n g , t h e presence i n Habana of t h e Reserve Bank Agency has been a very important f a c t o r i n m a i n t a i n i n g what confidence has remained i n t h e s t a b i l i t y of t h e f i n a n c i a l s i t u a t i o n t h e r e . The withdrawal of t h a t Agency a t t h i s time would, i n my o p i n i o n , have a very u n f o r t u n a t e e f f e c t upon t h e confidence w i t h which both American and Cuban b u s i n e s s i n t e r e s t s would regard the f i n a n c i a l s i t u a t i o n i n that island. From t h e s t a n d p o i n t of American b u s i n e s s , t h e maintenance of American currency as l e g a l - t e n d e r i n Cuba i s of v i t a l importance. This i s e s p e c i a l l y t r u e of t h e American e x p o r t e r of American goods, such as American-grown r i c e , American-made automobiles, American f l o u r , l a r d , o i l , e t c . These e x p o r t e r s can now draw f o r t h e i r s a l e s i n American d o l l a r s w i t h o u t worry or r i s k of exchange c o m p l i c a t i o n s . The c o s t of f i n a n c i n g such e x p o r t s i s p r a c t i c a l l y t h e same as f i n a n c i n g shipments from one p a r t of t h e United S t a t e s t o a n o t h e r , p r i n c i p a l l y because of t h e f a c t t h a t t h e currency i s t h e same. The presence of t h e Agency i n Habana, w i t h an adequate supply of c u r r e n c y , i s almost a v i t a l f a c t o r i n t h e continuance of t h e l e g a l - t e n d e r c h a r a c t e r of American currency i n Cuba; whereas, i t i s g e n e r a l l y agreed t h a t t h e withdrawal of t h e Agency would provide a p r e s s i n g argument f o r t h e c r e a t i o n of a bank of i s s u e by t h e Cuban Government, the f o r c i n g i n t o c i r c u l a t i o n of t h e i r own (and probably a dangerous and unsound) c u r rency, and t h e probable withdrawal of t h e l e g a l t e n d e r power of American currency t h e r e . As a r e s u l t of t i e s of American currency as t e n d e r value i n Cuba, a v a s t has been b u i l t up t h e r e with t h e i n t r o d u c t i o n by t h e American a u t h o r i t h e chief c i r c u l a t i n g - m e d i u m of l e g a l b u s i n e s s s t r u c t u r e and economic system American currency as i t s b a s e . Many 296 X-9004-b Sheet ITo. 3 Governor E. R. Black - Washington, D. C. August 8, 1934 millions of dollars of obligations are owing i n Cuba t o -American exporters, business-men and banks, the c o l l e c t i o n of which would be made i n f i n i t e l y more d i f f i c u l t with the creation of a Cuban bank of i s s u e with i t s own currency and the disappearance of American currency as tho chief circulating-medium of the i s l a n d . The trend i s i n that d i rection to-day, and both Cuban and American business i s already f e a r f u l that i t may come. The exchange problem i s one of the major obstacles impeding the s a l e s of American goods and products t o the other countries of the world at present and i f Cuba were to aboli'sh the legal-tender value of American currency i n Cuba, and by the advent of a cheaper currency of i t s own cause the disappearance of American currency from circulation, there would be created just one more obstacle t o the sales of American goods abroad, and t h i s to a country which has for over t h i r t y years been one of our principal customers. The withdrawal of the Agency would be p a r t i c u l a r l y unfortunate at this time when a new commercial t r e a t y with Cuba i s about to be signed by our government providing for added r e c i p r o c i t y , as i t would unquestionably make more d i f f i c u l t the payment f o r our goods sold to Cuba. I t would, thus, have a tendency t o destroy some of the benef i t s which i t i s hoped w i l l f o l l o w the signing of the new t r e a t y . We fear such withdrawal w i l l have the e f f e c t of destroying t h a t confidence in the s t a b i l i t y of the Cuban currency system which has already been badly weakened by the p o l i t i c a l and s o c i a l disturbances through which the Cuban Republic has passed. Maintaining a money base at Miami w i l l not, i n our opinion, answer the needs of the s i t u a t i o n . That base would be outside and not inside of Cuba, and the psychological e f f e c t of that f a c t w i l l be very important as bank depositors w i l l continually f e e l that there i s an inadequate supply of money i n the country, as banks w i l l not f e e l the same s a f e t y in the matter of low reserves and consequent low i n t e r e s t and transfer costs that they now f e e l , and the argument i n favor of, and the temptation f o r , creating a Cuban bank of i s s u e w i l l continue t o e x i s t and t o grow stronger. Emergency transfers of money from Miami t o Habana would be very much more c o s t l y than they are now under the simple procedure in e f f e c t under which currency can be obtained at any moment during the business day from the Agency at a very reasonable c o s t . I t i s also important, in estimating the future, t o take into consideration the probability of an important increase i n the f i n a n c i a l turnover in Cuba which should f o l l o w the development incident to the establishing of new trade r e l a t i o n s favorable to Cuba through the medium of the new treaty, and i t c e r t a i n l y seems f a i r t o estimate that the operating p r o f i t s of the Reserve Agency i n Habana w i l l r e f l e c t materially t h i s larger f i n a n c i a l turnover. X-9004-b Sheet Ho• 4 . Governor E. R. Black, Washington, D. C# 2 9 7 August 8, 1934 Fundainentally, we b e l i e v e t h a t , because of her c l o s e and economic r e l a t i o n s h i p t o t h e United S t a t e s , i t i s t o t h e g r e a t advant a g e of Cuba h e r s e l f t o have American c u r r e n c y as her p r i n c i p a l c i r c u l a t i n g medium, and t h a t advantage i s as g r e a t t o American b u s i n e s s i n Cuba and to American e x p o r t e r s of goods t o Cuba as i t i s t o t h e Cubans t h e m s e l v e s • Cuba i s a c o u n t r y which h a s , s i n c e her independence, been almost e n t i r e l y dependent upon American c a p i t a l f o r f i n a n c i n g her a g r i c u l t u r a l and b u s i n e s s t u r n o v e r and i t seems l o g i c a l t o suppose t h a t , f o r a c o n s i d e r a b l e time t o come, she w i l l c o n t i n u e t o remain so* That n a t u r a l demand f o r t h e use of American f u n d s i n Cuba can b e s t be met w i t h t h e c u r r e n c i e s of t h e two c o u n t r i e s b e i n g t h e same and t h e p r e s e n c e i n Cuba of an agency of our F e d e r a l Reserve System i s one of t h e s t r o n g e s t f a c t o r s t h e r e can be making f o r a continuance of t h a t s i t u a t i o n . Under i t , American banks i n Cuba can o p e r a t e w i t h t h e g r e a t e s t e f f i c i e n c y and a t t h e lowest c o s t . The o p e r a t i o n of t h e s e banks i n Cuba i s of g r e a t b e n e f i t t o American c i t i z e n s doing b u s i n e s s w i t h Cuba and t h e f i n a n c i n g of what w i l l p r o b a b l y a g a i n exceed two hundred m i l l i o n d o l l a r s of annual imports and e x p o r t s between Cuba and t h e United S t a t e s w i l l be m a t e r i a l l y helped by t h e continued maintenance of t h e Habana Agency of t h e F e d e r a l Reserve Bank of ^ i t l a n t a . Thanking you f o r t h e o p p o r t u n i t y a f f o r d e d t h i s i n s t i t u t i o n t o l a y b e f o r e you i t s views upon t h i s problem, p l e a s e b e l i e v e me Very s i n c e r e l y yours (Signed) H. E. Henneman Vice P r e s i d e n t COPY %9004-e 2 9 8 TEE CHA.SE HA.TI01TAL BAH Of The City of Hew York NEW YOEK Shepard Morgan Vice President July 20, 1934. The Honorable Eugene E. Black, Governor, Federal Reserve Board, Washington, D. C. My dear Governor Black: I take pleasure i n complying with your suggestion, made at the meeting in Washington l a s t Friday, that I put i n writing our opinion on the question of whether the Federal Reserve Bank of Atlanta should c l o s e i t s "branch i n Havana. I would l i k e to say at the outset that the Atlanta Bank has provided through t h i s "branch an important service to member banks and to American commerce with Cuba. The Chase National Bank, as you know, has one o f f i c e i n Havana; otherwise i t has no branches i n Cuba. For that reason we are perhaps not subject, i n the same degree as banks having a large number of branches, to the consequences of sudden and unforeseeable demands for currency. Yet even i n our own experience i t has been sometimes a matter of p r a c t i c a l importance to have a ready source from which to obtain currency, and at a l l times the ease of obtaining i t at a moment's notice from the branch of the Atlanta bank has made our admini s t r a t i o n simpler and more economical. This has undoubtedly resulted i n easier credit terms to both Cuban and American customers having f i r s t or second-hand r e l a t i o n s with our Havana branch. I cannot quote figures from our own records because the Chase national Bank has operated i t s o f f i c e i n Havana only since the Federal Reserve Bank of Atlanta established i t s branch there. But i t i s clear that should the branch be withdrawn tre should have to hold larger reserves of currency and would have to r a i s e our credit terms accordingly. Similarly, the withdrawal of the Reserve Bank's transfer f a c i l i t i e s would mean heavier charges for exchange transactions between New York and Havana. Our records i n d i c a t e strong seasonal movements of funds i n and out of Cuba, and these periodic movements do not coincide. Even assuming that American currency should remain legal tender a f t e r the withdrawal of the branch, i t follows that the e x i s t i n g premium or discount on exchange operations would be materially larger and would s u f f e r considerable " X-9004-c The Chase National Bank Of The City of 17ew York TO The Honorable Eugene R. Black 2<. rw *' Sheet Ho 3 fluctuations from one season to another. Thus American commerce with Cuba would be subjected to costs which the present arrangement l a r g e l y obviates. But I think American currency would not remain l e g a l tender for long. During the l a s t few months there has developed i n Cuba an aggressive movement favoring the establishment of a central bank. You w i l l r e c a l l that during our conference the other day frequent references were made to the monetary decrees, which, according to the observations of the banking representatives present, threatened the s t a b i l i t y of the Cuban currency and interfered s e r i o u s l y with exchange operations. The f i r s t , among other things, provided that the Cuban s i l v e r peso should have the character of unlimited legal tender. The author of that decree, Juan Andres L l i t e r a s , frankly stated i n the Havana newspaper Pais under date of May 37th that one of the purposes he bad i n mind in drawing up the decree was the ultimate establishment of a central bank of i s s u e . The decree r e l a t i n g to exchange transactions has now been abrogated and i t i s hoped that similar action w i l l soon be taken with respect to the currency decree. I f t h i s hope i s r e a l i z e d much damage w i l l be undone. But i f i t should develop that the Reserve Bank of Atlanta withdraws i t s branch, i t seems probable that both measures w i l l assume their former e f fectiveness , and that the a g i t a t i o n for a central bank would be pressed to a conclusion. Cuba inadequate for under e x i s t i n g the bounds set not be touched rency would go hope to obtain now and probably for some time to come w i l l have resources a central bank. I t would be d i f f i c u l t and probably impossible conditions for such a bank t o keep i t s c i r c u l a t i o n within by i t s limited reserves. The consequences of i n f l a t i o n need upon except for t h i s , that a deterioration of the Cuban curfar to n u l l i f y the b e n e f i t s which Americans and Cubans a l i k e from the trade treaty now under negotiation. I t has been suggested that a money base i n Miami would serve the practical purposes of the Atlanta Bank branch i n Havana. I venture the opinion that such a base would not meet the r e a l requirements of the case. I t would not r e l i e v e the banks from increasing reserves nor obviate wide exchange f l u c t u a t i o n s . Nor would i t prevent the a c t i v e prosecution of the plan for a Cuban central bank of i s s u e . On the other hand, i f we r e t a i n Cuba within the f i e l d of our own currency, we avoid with respect to at l e a s t one country one of the major factors of world-wide trade disturbance. I much appreciate the opportunity the Board gave me t o appear before i t l a s t week. With kind regards, Yours very truly, (Signed) Shepard Morgan Shepard Morgan COPY X-9004-d THE FIRST B.TIOH6.L BkW. OF BOSTON BOSTOIJ, MASSACHUSETTS 1784 * 1934 July Twenty-four 1 9 3 4 Hon. E. E. Black, Governor Federal Reserve Board Washington, D. C. My dear Governor Black: Just as we l e f t the meeting i n Washington I think one of your Board members suggested that we might send i n a memorandum and I am enclosing our thoughts regarding the Atlanta Agency of the Federal Reserve Bank. For your c o n f i d e n t i a l u s e , I am enclosing a copy of a memorandum of the Board of Directors of the American Chamber of Commerce of Cuba which was taken up at a s p e c i a l meeting that they had on June 13th and forwarded by the President of the Chamber of Commerce to the State Department i n Washington. Yours very t r u l y , (Signed) Charles E. Spencer, J r . Charles E. Spencer, J r . Vice President Enclosures X-9004-d 3 0 1 COPY Liomorandum for Governor Blaclc, Federal Reserve Board, Washington, D. C. Our 'bank would favor the continuance of the Atlanta Agency of the Federal Reserve Bank for the following reasons: It allows us to carry a smaller cash reserve than would be necessary i f we were dependent upon replenishing our reserves from outside the Island. With the higher cash reserves carried, this would contract the loaning a b i l i t y of the bank operating on the Island and, as long as the Cuban government carries United States currency as l e g a l tender, we f e e l there i s a r e a l need for the Federal Reserve Bank Agency i n Cuba. Should they start a Bank of Emission, at that time we f e e l that the continuance of the agency would not be called for; that the discontinuance of the agency would have a strong bearing on f o s t e r i n g or bringing to a head a central bank for Cuba, our best estimate being that i t would be a barrier which American business would have to cope with should Cuba have i t s own currency. The r e t i r i n g of the agency at this time would have a very d i s q u i e t ing e f f e c t upon the depositors and would undoubtedly a f f e c t the economic improvement of the Island for some time to come. "Je trust that the Board's decision w i l l be to continue the f a c i l i t i e s that e x i s t at present. (Signed) Charles E. Spencer, J r . Charles E. Spencer, J r . Vice President July 24, 1934. COPY COPY X-9004-a "Z Memorandum of the Board of Directors of the American Chamber of Commerce of Cuba June 13, 1934. I Revival of Cuba's p o l i t i c a l and economic l i f e , and of America's trade with Cuba, i s President Roosevelt's announced purpose. Secretaries Hull and Wallace have eloquently stressed t h i s double object i v e , i n urging those bold and constructive l e g i s l a t i v e measures which now make i t a t t a i n a b l e . A l l Americans whose l i v e s , i n t e r e s t s or sympathies are with Cuba, desire i t s f u l l e s t r e a l i z a t i o n . The Sugar Act and the a b o l i t i o n of the Piatt Amendment are already r e a l i t i e s . How comes the third and most v i t a l step, - a new and more l i b e r a l Reciprocity Treaty. Unless talc en, and taken promptly and soundly, the program i s unfinished, and i n e f f e c t i v e . The Treaty should contain appropriate mutual safeguards against the f r u s t r a t i o n of i t s aims. b e n e f i t s T i l l not come. Otherwise the expected mutual trade While of great i n t e r e s t to both countries, such safeguards are v i t a l to Cuba - as her l i f e depends upon prosperous trade with America. II I t i s axiomatic that t a r i f f s and trade t r e a t i e s can be neutralized by f i s c a l p o l i c y . Legislation a f f e c t i n g currency, f o r e i g n ex- change, taxes, e t c . can either increase or diminish the b e n e f i t s of lowered duties and concessions. Unwise l e g i s l a t i o n might even annul them. For example, as Secretary of Commerce Roper, and h i s Assistant Secretary John Dickinson, recently stated during the Reciprocal Tariff B i l l hearings, one x-9oo4-a 8 0 3 — s — e f f e c t of the devaluation of the American dollar was to heighten the already high American t a r i f f w a l l . This devaluation made i t more c o s t l y for Ameri- cans to buy goods from foreign countries, and made i t l e s s p r o f i t a b l e for foreign countries to send t h e i r goods to America for s a l e i n competition with American goods. Applying that principal to Cuban-American trade, i t i s easy to pcrccivo how the b e n e f i t s which American exporters might expect to receive through the concession by Cuba, of an additional p r e f e r e n t i a l to the United S t a t e s , might bo rendered to a large extent i l l u s o r y by Cuban fiscal policy r e s u l t i n g i n depreciated Cuban currency. If such depreciation happened to be greater as compared with the dollar, than as compared with the pound, the mark or the franc, the result would be a .."preferential" which did not "prefer". The essence of reciprocity i s mutuality. Mutuality i n international trade between Cuba and the United States should be complete, not p a r t i a l . And i t should be a mutuality of l i b e r t y . In matters of trade, prohibitions and r e s t r i c t i o n s may completely destroy mutuality and laclc of confidence may v i t i a t e i t to the point of making i t unattainable. Subject to any necessary quota r e s t r i c t i o n s required to protect vested i n t e r e s t on either s i d e , there should be no r e s t r i c t i o n s other than those covered by the tariff i t s e l f . i n interchange Realization of the President's objective of a revival of goods between the two countries, w i l l not occur i f Cuban merchants and Cuban f a c t o r i e s , whoever may own then, are penalized and r e s t r i c t e d by export taxes, exchange embargoes, depreciated currency, expropriations, etc. Such measures strangle trade, destroy confidence and i f adopted in either country would grievously d e v i t a l i z e and eventually ruin, X-9004—d 804 - 3 the mutual b e n e f i t s which are the objective of the Treaty. Ill The new Treaty, l i k e the new Sugar Act, i s experimental. It i s of paramount importance that the experiment he s u c c e s s f u l , and that safeguards he provided to prevent i t s f a i l u r e from the outset. As such safeguards> to protect the new commerce which these measures are designed to promote, the following points are suggested as e s s e n t i a l l y important matters for inclusion in the Treaty: 1. xTeither country should impose any export tax, embargo or similar r e s t r i c t i o n s (in addition to those e x i s t i n g January 1, 1934) upon exportation to the other country of money, or credit (whether in the form of currency, exchange or credits) for the purpose of payments. A- On or with respect to loans, investments or s e c u r i t i e s . B- For s e r v i c e s . C- For the purchase or use of property, r e a l , personal or otherwise. D- In cases in which such payments are made by persons or e n t i t i e s , c i t i z e n s or residents of the one country to persons or e n t i t i e s , c i t i z e n s or residents of the other country. 3 - Uor upon the exportation of money or credit to the other country for the personal requirements of c i t i z e n s or residents of either country. 2. Provisions for payment of money in the national currency of either country contained i n contracts made prior to or during the l i f e of the Treaty by c i t i z e n s of either country s h a l l not be invalidated or suspended X-9004-d ; 305 - 4 by l e g i s l a t i o n of cither country during or subsequent to the adoption of the Treaty. 3. Neither country should impose any export tax, d i r e c t l y or i--tdii eculy' , (in addition to any such tax e x i s t i n g January 1, 1934) uoon the products of i t s s o i l or industry exported, or produced or processed for export, to the other country. 4. Citizens or e n t i t i e s of either country r e s i d i n g or carrying on business in the other country should enjoy the same r i g h t s and p r i v i l e g e s , and "be e n t i t l e d to the same status and treatment, as c i t i z e n s of such other country, v/ith respect to engaging i n commerce, industry, agriculture, professional or other lavrful occupations, and to holding and using property; and there should he no discrimination d i r e c t l y or i n d i r e c t l y , ".7ith regard to taxation, or protection of property and person, "by either country against c i t i z e n s of the other country, or against e n t i t i e s o:zned or controlled "b; c i t i z e n s of the one country, "7lien resident or doing "business in the other country. Ho c i t i z e n s or e n t i t y of either country s h a l l "be subject to confiscation of property, nor shall he or i t bo deprived of property except by competent authority and f o r just cause of public u t i l i t y and a f t e r proper indemnity. ITote: f i n a l form the If under the terms of the Reciprocal Tariff B i l l i n i t s inclusion of such matters as p o s i t i v e covenants of the Treaty should be deemed to be beyond the pouor conferred by Congress upon the P r e s i dent, i t might bo p o s s i b l e to safeguard the Treaty i n t h i s respect by s p e c i f i c a l l y recognizing, as grounds for denunciation of the Treaty, a c t s i n v i o l a t i o n of the provisions above outlined. APPROVED i; COPY X-9004*e ° AGE1TCY OF THE ROYAL BAM OF CAMDA. Incorporated 1869 68 William Street Frederick T. walker) John A . Beat son ( Agents Edward C. Holahan ) HEW YOEK, JulyEighteenth 19 3 4 Honorable Eugene E. Black, Governor, Federal Reserve Board, ULSHOTPCGSr, D. C. My dear Governor Black: At the meeting to which you called the representatives of the "banks doing business i n Cuba, for the purpose of hearing their views as to the continuance or discontinuance of the Havana Agency of the Federal Reserve Bank of Atlanta, i t was the unanimous opinion of those attending that the Agency of the Atlanta Federal Reserve Bank should "be maintained and reasons were given therefor. After t h i s discussion i t was suggested that, for the purpose of record, each of the I n s t i t u t i o n s represented should write a l e t t e r to the Board i n support of the opinions expressed at the meeting. In compliance with t h i s request, I "beg to say on "behalf of t h i s I n s t i t u t i o n that I think there are two principal reasons why the Agency should "be continued, certainly for the present time at l e a s t , and these are: F i r s t , - That the present i s a c r i t i c a l stage for the Mendieta Government and such a step would be "bound to have a "bad e f f e c t on public confidence j u s t when conditions seem to be improving and the Government has taken the necessary steps to undo the i l l considered f i n a n c i a l decrees of the l a s t two months, " 307 X-9004-e - 2 — Second, - As the Board i s aware, there has "been considerable a g i t a t i o n i n Cuba for the formation of a Cuban central bank with powers of emission and while i t i s d i f f i c u l t to see how such a project could be carried out on any sound l i n e s i n view of the f a c t that the Cuban Government i s not at the present time i n a p o s i t i o n to provide a m e t a l l i c base for a national currency, at the same time i t i s quite conceivable that the withdrawal of the Agency would be seized upon by the advocates of a National Cuban currency as a pretext for pushing such a plan, with the p o s s i b l e result that some unsound currency plan would be adopted. I need not s t r e s s to your Honorable Board the detrimental e f f e c t that such a plan i f carried out would have on business between the United States and Cuba. Owing to the very low price of sugar obtaining for the l a s t couple of years, reciprocal trade between Cuba and the United States has f a l l e n i n terms of Dollars to very low f i g u r e s , but under the improved conditions made possible by the Jones-Costigan Act and the betterment of World sugar s t a t i s t i c s , there i s every reason to believe that Cuba with a greatly enhanced return from her sugar crop w i l l be i n a p o s i t i o n to l a r g e l y increase her imports from the United States provided no currency or exchange barrier i s set up. Another point which should be mentioned i s that while i t i s true, as stated by the Atlanta Bank, that the f a c i l i t i e s fcr the shipment of currency from Jacksonville and Miami have been enormously improved, i t i s , nevertheless, a f a c t that the withdrawal of the Atlanta Agency i n Havana would n e c e s s i t a t e the carrying of larger reserves by the commercial banks i n Cuba, adding to the already great expense of doing business there and having a tendency to : 308 X-50G4-1 — 3 *• bring "back the very high rates for money which prevailed a few years ago. I think v/e may sun up our argument "by saying that the c l o s i n g of the Agency of the Federal Reserve Bank of Atlanta would he a serious "blow to American investors and business men in Cuba j u s t at t h i s time when they were beginning to have hope and need a l l possible help in creating stable conditions i n Cuba. In conclusion, I wish to express the appreciation of t h i s I n s t i t u t i o n i n being given the opportunity of s t a t i n g i t s views and thank the Board for the courtesy and consideration with which we were received. ITith assurances of our highest respect, we remain, Yours very truly, THE ROYAL BAH OF C&8H&, (Signed) F. T. Walker A g e n t COPY 3N9004-# THE CAMADIAH BAHK OF COMMERCE Hew Y ork Agency Exchange Place and Hanover Street HEW YORK July 19, 1934 COiOIDEifTlAL The Honourable Eugene H. Black, Governor, Federal Reserve Board, Washington, B.C. Dear Governor Black: In accordance with your request, we have pleasure in confirming our verbal advices to you of Friday, the 13th instant, regarding the a d v i s a b i l i t y or not of discontinuing the Havana Agency of the Federal Reserve Bank of Atlanta. The foreign trade of Cuba with Canada i s n e g l i g i b l e with the result that the Cuban branches of Canadian banks handle the same class of business as do the Cuban branches of American banks, consequently a large portion of this business i s dependent upon and of assistance to the interchange of trade between Cuba and the United States. We are i n f u l l accord with the arguments set forth i n d e t a i l by the representatives of the i n t e r e s t e d American banks and emphasize the follow!ng:The presence of the Havana Agency of the Federal Reserve Bank of Atlanta has a strong s t a b i l i z i n g e f f e c t on the f i n a n c i a l trend of thought of the population of Cuba generally, and p a r t i c u l a r l y i n p o l i t i c a l c i r c l e s . That the Cuban Government r e a l i z e s this would appear to be evidenced by the f a c t that upon learning there was a p o s s i b i l i t y of the closing of the Havana Agency of the Federal Reserve Bank of Atlanta the Cuban Administration i n order to show i t s good f a i t h and restore f i n a n c i a l confidence rescinded the Decree prohibiting the exportation of c a p i t a l from Cuba. To close the Havana Agency of the Federal Reserve Bank of Atlanta at the present time would not only n u l l i f y a l l t h i s but would encourage - indeed i t might f o r c e - Cuba to resort to some form of currency of i t s own with a l l the attendant hardships upon business i n and with Cuba, The withdrawal of the Havana Agency of the Federal Reserve Bank of Atlanta would n e c e s s i t a t e a l l Canadian and American banks with branches i n 309 X- 9004—f The Honourable Eugene B. Blaclc - 2 July 19, 1934 Cuba carrying much larger cash reserves there, rzith a consequent increase i n the cost of c r e d i t , which increased cost would have t o be "borne not only by Cubans but a l s o by Americans doing business i n and with Cuba. We take this opportunity of expressing to you our appreciation of the services rendered us i n the past by the Havana Agency of the Federal Reserve Bank of Atlanta, and a l s o to thank you for your courtesy i n asking us to appear before your Board. Yours f a i t h f u l l y , (Signed) C. J. Stephenson Agent COPY. X-9004—g AGEiJCY OF THE BAM OF NOVA SCOTIA 49 HaLL STREET P. IT. Murphy,Agents F. W. Murray,( HEW YOKE July 20th 1934, The Honorable E.R. Black, Governor, Federal Reserve Board, Washington, B.C. Dear Governor Black: Having reference to the recent conference at your o f f i c e when Hew York representatives of Banks, American and Canadian, which have "branches i n Cuba, were i n v i t e d by your board to give consideration to the continuance or discontinuance of the Havana Agency of the Federal Reserve Bank of Atlanta, - At your request I am glad to submit herewith our views in the matter. It i s undoubtedly advantageous to American business men i n Cuba and to American exporters to that Country to have the Federal Reserve Agency i n Havana. Were i t withdrawn the banks would have to carry larger cash reserves i n their own v a u l t s , and consequently Americans i n Cuba, as well as others, would be required to pay higher i n t e r e s t rates on loans from the banks. The psychological influence of the Agency i n Havana on business a f f a i r s , particularly while the general s i t u a t i o n , p o l i t i c a l l y and economically, i s uns e t t l e d , i s undeniably favorable to the i n t e r e s t s of Americans i n Cuba and to American exporters to Cuba. The proposed trade treaty between Cuba and the United States now under consideration, and, i t i s thought, soon to become operative, should be very h e l p f u l to reciprocal business and we think that a continuance of your Agency i n Havana would assuredly serve i n furthering the b e n e f i t s under the treaty to American trade, inasmuch as i t would exert a powerful influence i n s t a b i l i z i n g the currency and a s s i s t materially i n f a c i l i t a t i n g the movement of money into and out of Cuba. % think that while i t i s true, because of a i r mail f a c i l i t i e s , currency can now be shipped quickly to Havana from Atlanta or Jacksonville, nevertheless some (contd) ; X-9004-g — 2r~ The Honorable E.R. Black, Governor, Federal Reserve Board, Washington, B.C. July 20th 1934. of the American and Canadian "banks have tranches i n the i n t e r i o r of the i s l a n d and i n case of emergency i t would he greatly to their advantage to have an immediate source of supply of currency such as i s now afforded "by your Agency i n Havana. We are i n agreement with the views of the representatives of the American "banlcs which were expressed "by them at the meeting. We appreciate the "benefits that we, as a Canadian i n s t i t u t i o n , derive from the Havana Agency of the Federal Reserve Bank, and we f e e l that i t s withdrawal would "be hurtful to the i n t e r e s t s of a l l "banks', as w e l l as to those of commercial corporations and i n d i v i d uals doing "business i n or with Cuba. I would l i k e to express to you and to your "board my sincere thanks f o r your i n v i t a t i o n to attend the conference and f o r your courtesy there. Yours f a i t h f u l l y , (Signed) P. W. Murphy Agent. PW/AS 3 1 2 <? ZJ> 13 X-9004-h COPY FEDERAL OF RESERVE BAKE ATLANTA Office of Governor September 27, 1934 Mr. J . J . Thomas, "Vice Governor, Federal Reserve Board, Washington, D. C. Dear Governor Thomas: At the June meeting of our directors a r e s o l u tion was passed directing the o f f i c e r s of t h i s bank to applyto the Federal Reserve Board f o r permission t o discontinue the Havana Agency of t h i s bank. The resolution directed the o f f i c e r s , in transmitting tliis action t o the Federal Reserve Board, to inform. the Board that t h i s bank desired to work no unnecessary inconvenience to the banks in Cuba and that they desired i t s d i s continuance e f f e c t e d in such a way as not u n d u l y t o a f f e c t the banking and business i n t e r e s t s of Cuba. This resolution was transmitted to the Board and in considering i t the Board invited representatives from the d i f f e r e n t banks in Cuba to a hearing in Washington. At that hearing these banks protested the discontinuance of the agency and afterwards transmitted opinions from business i n t e r e s t s , a l l adverse to the discontinuance of the agency. The Board has taken no action on the June resolut i o n of our d i r e c t o r s . At the August, 1934, meeting of the directors of t h i s bank a second resolution was passed in which the Federal Reserve Bank of Atlanta stated that i t would cooperate with the other twelve banks in the System operation of t h i s agency and in which resolution it suggested t o the Board that the establishment of such System agency would be a proper s o l u t i o n of t h i s question. This August resolution of our Board has been duly transmitted t o your Board. Last week when I was in Washington I discussed with the members of the Board the question of the establishment of t h i s Havana agency as a System agency. This would r e a l l y mean that the Atlanta bank would continue to operate the agency for the account of the System. This procedure would be very much in l i n e with the practice of the New York Bank in operating foreign accounts as a System matter. %9004rh Mr. J. J . Thomas, Vice Governor - 2 . For your information I tm attaching a statement of the d i f f e r e n t functions of t h i s agency. You are, of course, familiar with the f a c t that t h i s agency i s largely a currency depot for the purpose of handling cable transfers of money in and out of Cuba for the account of banks in Cuba, and e s p e c i a l l y those banks i n Cuba which are branches of American banks. I t i s true a l s o that the Havana agency has been of b e n e f i t to the Cuban Government in the matter of currency exchanges. I t should be borne in mind that the Havana agency has no credit functions— that i s , i t lends no money in Cuba or elsewhere. I t s operation, in my opinion, has been of great advantage to the banks in Cuba and t o the Government of Cuba. I t s operation has resulted in the furnishing of clean and adequate currency t o Cuba, which country has no currency of i t s own. I t has prevented the n e c e s s i t y of the banks in Cuba carrying large currency reserves in t h e i r own v a u l t s . I t has furnished a measure of s t a b i l i t y to banking and currency operations in Cuba. You w i l l r e c a l l that Assistant Secretary of State Sumner Welles conferred with me on the discontinuance of t h i s agency and expressed h i s strong opinion that at t h i s time, when Cuba was struggling t o get on i t s f e e t both p o l i t i c a l l y and f i n a n c i a l l y , i t would be a direct blow to such e f f o r t s t o have the agency discontinued. You w i l l a l s o r e c a l l that the Cuban Government has taken a c t i o n against the discontinuance of the agency. I personally am in accord with the views of Mr. Welles and with the views of the banks operating in Cuba and with the views of the Cuban Government in t h i s matter. However, the Federal Reserve Bank of Atlanta has operated t h i s agency through a number of years and in i t s operation has served the whole country and other s e c t i o n s of the country more e s p e c i a l l y than t h i s section, and my opinion that the agency should be continued would not be complete without expressing my f e e l i n g that i t should be continued as a System agency. This conclusion i s reached, f i r s t , because of the f a c t that the whole country i s being served; second, that the currency carried in Cuba has been equal to the combined c a p i t a l and surplus of t h i s bank and in that respect i s too large an operation for t h i s bank in a foreign country. The agency has been operated at some l o s s , but t h i s l o s s has not been a .moving factor in the decision of our directors, and the l o s s can be l a r g e l y overcome by changing the rate f o r handling currency operations in Cuba. 3C-,9004-h Mr. J . J . Thomas, Vice Governor - 3. Under the law the Board has the r i g h t t o require a reserve bank t o e s t a b l i s h and consequently t o maintain an agency in a f o r e i g n country. This puts rather a large r e s p o n s i b i l i t y upon the Board with respect to any one reserve bank and I would not even suggest now that the Board require t h i s agency t o be accepted by the System as a System agency. I rather f e e l t h a t i f the Board would conclude t h a t t h i s agency should be operated as a System agency and would request the cooperation of the twelve reserve banks in the r e s p o n s i b i l i t y attached t o t h i s agency, such proper s o l u t i o n would be accepted by the twelve banks and t h e agency could be operated by the Atlanta ban!: f o r the account of the twelve banks, and a l l questions as t o the continuance or d i s continuance of the agency would be solved. At the present time we are reducing our currency , holdings i n Cuba t o $5,000,000. I think t h i s amount would be adequate because currency can be transported from our Jacksonv i l l e branch, or indeed from a money depot which we might e s t a b - ' l'ish in Miami, in a very few hours. A supply of ')5,000,000 in currency w i l l solve a l l the day t o day needs of the agency and in event larger sums are required they can be s p e e d i l y transported to Cuba. I am of opinion t h a t t h e A t l a n t a bank should be t h e o p e r a t i n g bank f o r t h i s agency because of i t s n e a r n e s s t o Cuba and because t h e agency i s a l r e a d y w e l l e s t a b l i s h e d by t h e A t l a n t a bank in Cuba. I w i l l g r e a t l y appreciate i t i f the Board w i l l consider t h i s matter and w i l l determine that t h i s agency should be a System agency and ask the cooperation of the twelve banks to t h i s end. If the Board takes t h i s a c t i o n and the twelve banks acquiesce in i t , the d e t a i l s of such arrangement can e a s i l y be worked out. Thanking you and the Board f o r immediate considerat i o n of t h i s matter, I am, with my warm regards, Sincerely yours, (Signed) B-C E. R. Black Governor. * 316 Federal Reserve Bank of Atlanta X-9004-h miOEAKDUIvl FOR GOVERNOR BLACK: FUNCTIONS OF THE HAVANA i&ENCY The Federal Reserve Bank of Atlanta i s authorized t o exercise the following powers in Havana, Cuba, through i t s Agency; 1 . To buy, s e l l and c o l l e c t , prime bankers' acceptances and prime b i l l s of exchange which are payable in dollars arising out of actual import or export transactions; bear the signatures of two or more responsible parties; bear a s a t i s f a c t o r y bank endorsement; have not more than 90 days to run, exclusive of days of grace, and are secured at the time of purchase by shipping documents evidencing the actual importation or exportation and the actual sale of goods, and conveying or securing t i t l e to such goods; 2 . To buy from or s e l l to the Republic of Cuba, or any banking i n s t i t u t i o n doing business in Havana, cable transfers to or from any banking i n s t i t u t i o n located in any c i t y in the United States in which there i s located a Federal Reserve Bank or Branch, charging a commission of $1 per $1000, provided that no such transf e r shall by i t s terms be for credit t o the account of any third party; 3 . To pay out Federal Reserve notes or other currency of the United States in such denominations as may be demanded in payment of cable transfers t o Havana, or i n payment of cable transf e r s , bankers' acceptances or b i l l s or exchange purchased in Havana, the kinds of currency t o be paid out to be discretionary with the Agency; 4 . To accept any and a l l kinds and denominations of United S t a t e s currency, including Federal Reserve n o t e s , in payment for cable t r a n s f e r s , bankers' acceptances, or b i l l s of exchange sold by i t in Havana; 5 . To make direct exchanges in l i k e denominations and amounts of new or f i t currency for mutilated or u n f i t currency, tendered by the Treasurer of the Republic of Cuba, or any banking i n s t i t u t i o n doing business in Havana, charging for such exchanges a commission at tho rate of $1 per $1000; The Agency maintains a stock of $1 b i l l s for convenience of tho Havana banks and they are authorized to exchange these b i l l s for any other denominations of United S t a t e s currency, a charge of $1 per §1000 being made f o r such exchange* X-9004 - 2 — FOKCTIOI-E OF THE HAVANA AGENCY - Cont'd. 7. The Havana Agency i s also authorized t o make direct exchanges of new and f i t currency for American s i l v e r or gold coin tendered by the Treasurer of the Republic of Cuba or any banking i n s t i t u t i o n doing business i n Havana, charging for such exchanges a commission of §1 per ()1000. This has been discontinued in view of the high cost of transportation of American s i l v e r coin t o the United S t a t e s and such exchanges as have been made during the l a s t two years have been made with the understanding that the entire cost of transportation would be borne by the Treasurer of the Republic of Cuba, plus our exchange commission of £>1 per AlOOO. We have not been tendered American s i l v e r coin by any of the Havana banks. 8 . The Havana Agency performs other f i s c a l transactions for the Treasurer of the Republic of Cuba, such as receiving Cuban gold coin under a repurchase agreement, delivering United States currency f o r such Cuban gold coin; the Cuban gold coin to be r e deemed by payment of United States currency at the expiration of the repurchase agreement. Recently the Second Export-Import Bank desired t o ship t o Cuba 10,000,000 Cuban pesos, and in order that delivery might be made in Havana, our Agency was requested to act as a representa t i v e of the Second Export-Import Bank and the Treasurer of the Republic of Cuba in making t h i s delivery. A commission rate of $1 per $1000 for the currency received in payment of these pesos was charged, the t o t a l p r o f i t to the Agency being approximately $3,800. From time to time the Agency w i l l l i k e l y be c a l l e d upon to perform other f i s c a l agency transactions which they w i l l l i k e l y agree t o do, upon proper approval, when such transactions can be consummated with due s a f e t y .
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