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FEDERAL RESERVE BOARD 121 WASHINGTON address official correspondence t o t h e federal reserve board SUBJECT: X-8007 September 17, 1934# Section 32--Suggestions as t o Questionnaire t o be Answered by Member Banks Operating under Blanket Permit. Dear S i r : There are inclosed f o r your information a copy of the body of a l e t t e r received from the o f f i c e of the Federal Reserve Agent a t the Federal Reserve Bank of Mew York, a copy of the form r e f e r r e d t o t h e r e i n , and a copy of t h e Board's l e t t e r t o Mr. Case, r e l a t i n g t o the obtaining of i n formation from member banks regarding syndicate operations i n which they p a r t i c i p a t e pursuant t o t h e blanket permit r e f e r r e d t o i n t h e Board's telegram of June 23, 1934 (Trans 2015). Very t r u l y yours, Chester M o r r i l l , Secretary. Inclosures• TO'ALL FEDERAL RESERVE AGENTS EXCEPT HEW YORK. A-8007-a 132 Folio-wing our telephone conversation, I am enclosing f o r your c o n s i d e r a t i o n a d r a f t of a p r i n t e d form which might be used t o f a c i l i t a t e obtaining from member banks information d e s i r e d i n conn e c t i o n with Section 32 of t h e Banking Act of 1933. In g e n e r a l , t h e questions appearing on t h i s form f o l l o w those suggested i n t h e Board's l e t t e r of J u l y 17* I a l s o enclose a copy of t h e c i r c u l a r l e t t e r which was sent t o a l l member banks i n t h i s d i s t r i c t , i n accordance with the Board's l e t t e r of J u l y 17. In compliance with t h i s c i r c u l a r l e t t e r , we have a l r e a d y r e c e i v e d some twelve or f i f t e e n r e p o r t s from member banks. These r e p o r t s are not uniform i n a l l cases, as t o t h e i n f o r m a t i o n r e p o r t e d , manner of r e p o r t i n g and time as of which the r e p o r t was made. I t would m a t e r i a l l y f a c i l i t a t e our a n a l y s i s of t h e information i f t h e incoming r e p o r t s were uniform as t o period covered, the answers given and the s i z e of paper used i n r e p o r t i n g . I n informal d i s c u s s i o n s with s e v e r a l of t h e important r e p o r t i n g banks, t h e l a t t e r have volunteered t h a t a p r i n t e d form would likewise f a c i l i t a t e them i n f u r n i s h i n g t h e desired information. From t h e d i s c u s s i o n s r e f e r r e d t o , i t appeared t h a t c e r t a i n of t h e questions enumerated by t h e Board might be s l i g h t l y r e p h r a s e d , t o f u r n i s h a somewhat c l e a r e r p i c t u r e of the underlying t r a n s a c t i o n s . The q u e s t i o n s , as phrased i n t h e proposed p r i n t e d form, met with t h e approval of the banks, who t e l l us t h a t t h e answers can i n every case be e a s i l y a s c e r t a i n e d from t h e i r e x i s t i n g records w i t h a minimum of e f f o r t . You w i l l note t h a t i n our proposed question No. 2, we have included the amount of p a r t i c i p a t i o n of each syndicate member. This i s r e a d i l y obtainable from t h e copy of t h e syndicate l e t t e r which each p a r t i c i p a n t r e c e i v e s . In 2b we have provided f o r the name of t h e syndicate manager, i n t h e event of any question a r i s i n g upon which we might d e s i r e f u r t h e r information than t h a t contained i n t h e r e g u l a r report# 2c would i n d i c a t e r e l a t i o n s h i p as t o l i a b i l i t y . P r a c t i c a l l y a l l syndicates o r i g i n a t i n g i n t h e East are s o - c a l l e d undivided syndicate accounts, t h a t i s , each p a r t i c i p a n t i s l i a b l e , not only f o r the s a l e of h i s own share of t h e account, but p r o p o r t i o n a t e l y t h e unsold share of other p a r t i c i p a n t s . The more unusual divided account i s one where t h e p a r t i c i p a n t i s r e s p o n s i b l e f o r t h e d i s p o s i t i o n of h i s p a r t i c i p a t i o n only. -2- 123 X-8007-a In our suggested question 3a, we have used t h e expression "withdrawn from the account", r a t h e r than t h e word subscribed# since i t i s t h e p r a c t i c e as regards municipal i s s u e s not t o s u b s c r i b e but t o withdraw s e c u r i t i e s from t h e account only as t h e y a r e a c t u a l l y s o l d . Hence t h i s f i g u r e may be more or l e s s than t h e a c t u a l amount of p a r ticipation. 3b w i l l i n d i c a t e t h e amount of the i s s u e apportioned t o t h e r e p o r t i n g bank, i n a d d i t i o n t o what the bank i t s e l f took down from the account. Question 4, I b e l i e v e , i s s e l f - e x p l a n a t o r y . Question 5 should i n d i c a t e the spread between purchase and s a l e p r i c e , i n d i c a t i n g t h e approximate p r o f i t r e s u l t i n g from t h e transaction. In 5b, p r o v i s i o n i s made f o r t h e average p r i c e t o t h e p u b l i c , because i t sometimes happens t h a t a p r o p o r t i o n of the i s s u e w i l l be sold a t one p r i c e and t h e n , i n order t o move t h e balance, a p r i c e adjustment must be made. As I say, we have discussed t h i s i n f o r m a l l y and r a t h e r c a r e f u l l y with s e v e r a l banks who t h i n k well of i t . If i t meets with your approval, we should l i k e t o adopt i t f o r t h e balance of t h e period during which t h e information w i l l be coming i n t o u s . If you have any questions regarding the use of t h e r e p o r t , or t h e phraseology of t h e q u e s t i o n s , I should be glad t o t r y t o answer them. COPY CORRESPONDENT RELATIONSHIPS BETWEEN MEMBER BANKS AND DEALERS IN SECURITIES X-8007-1) Information t o be Submitted t o Federal Reserve Bank of New York by Member Banks Operating Under Blanket Permit (Section 32 of t h e Banking Act of 1933) 1. Description of i s s u e , including name of t h e i s s u e r , n a t u r e of t h e o b l i g a t i o n s (vdiether bonds, n o t e s , or other o b l i g a t i o n s ) , amount of t h e i s s u e , m a t u r i t y , and r a t e of i n t e r e s t » 2. a ) Names of members of t h e syndicate or group, including yourselves, which p a r t i c i p a t e d i n the t r a n s a c t i o n , and amount of each member's o r i g inal participation b) Name of syndicate manager c) Nature of r e l a t i o n s h i p Divided) .. , .,. , Undivided) a s t 0 l i a b x l i t y 3. a ) Amount of the i s s u e a c t u a l l y -withdrawn from t h e account by the r e p o r t ing member bank b) Amount of t h e i s s u e apportioned t o r e p o r t i n g member bank on t e r m i n a t i o n of t h e account c) Amount of t h e i s s u e otherwise acquired by the r e p o r t i n g member bank during the term of the account d) Total of a, b, and c 4. a ) The amount of t h e i s s u e sold by the r e p o r t i n g member bank during t h e term of t h e account b) The amount of t h e i s s u e r e t a i n e d by the r e p o r t i n g member bank as i n vestment c) The amount of t h e i s s u e held by t h e r e p o r t i n g member bank pending r e s a l e d) Total of a, b, and c 5. (Should equal 3d) a ) Purchase p r i c e paid t o i s s u e r of s e c u r i t i e s by t h e buying syndicate or group b) Average o f f e r i n g p r i c e t o p u b l i c (Please forward above information as of close of account, as promptly as p o s s i b l e a f t e r i t s t e r m i n a t i o n ) (Name of Bank) (Official signature) (Date) COPY X-8007-c 125 September 17, 1934. Mr. J . H. Case# Federal Reserve Agent, Federal Reserve Bank of Hew York, Hew York, Hew York. Dear Mr. Case: In i t s l e t t e r of J u l y 17, 1934 (X-7963), t h e Board described t h e information which should be submitted t o you by each member bank i n your d i s t r i c t regarding each syndicate o p e r a t i o n i n which i t p a r t i c i p a t e s pursuant t o the b l a n k e t permit r e f e r r e d t o i n t h e Board's telegram of June 23, 1934 (Trans 2015). The Board a l s o requested you t o obtain such information i n a d d i t i o n t o t h a t described i n i t s l e t t e r as you may f e e l i s necessary t o enable you t o form a conclusion as t o whether or not t h e permit i n each p a r t i c u l a r case i s i n the public i n t e r e s t . Accordingly, t h e Board's l e t t e r of J u l y 17, 1934, was not intended t o p r e s c r i b e r i g i d l y the form of the questions which should be asked i n connection with such syndicate o p e r a t i o n s , and the Board w i l l o f f e r no o b j e c t i o n t o t h e use by your bank of a q u e s t i o n n a i r e s i m i l a r i n form t o t h a t inclosed i n Mr. Douglas 1 l e t t e r of August 23, 1934. I n view of the f a c t t h a t t h e r e may be i n s t a n c e s i n which you w i l l wish t o obtain information other than t h a t c a l l e d f o r by the q u e s t i o n n a i r e , or a t a time other than the c l o s i n g of t h e p a r t i c u l a r account, you may f i n d i t d e s i r a b l e , i n t r a n s m i t t i n g any r e v i s e d , q u e s t i o n n a i r e t o t h e member banks i n your d i s t r i c t , t o r e p e a t t h e -2~ X 8007 - $36 substance of t h e l a s t paragraph of your c i r c u l a r Ho. 1403, dated J u l y 23, 1934, -which r e a d s : "In i t s l e t t e r of J u l y 17, 1934 the Board a l s o requested me t o obtain such a d d i t i o n a l information from a member bank as I deem advisable, i f i n any case I f e e l t h a t t h e information submitted i s not s u f f i c i e n t t o enable me t o form a conclusion as t o whether or not t h e permit i n t h e p a r t i c u l a r case i s i n the p u b l i c i n t e r e s t . " Very t r u 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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