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EX-Of:'P'ICIO MEMBERS W. P. G. HARDING, GOVERNOR ALBERT WILLIAM G. McADOO STRAUSS, VICE GoY!RNOR ADOLPH C. MILLER CHARLES S. HAMLIN SECRETARY OF' THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS FEDERAL RESERVE BOARD COMPTROLLER OF THE CURRENCY J. A. BRODERICK, SECRETARY L. C. ADELSON, ASSISTANT St:CRIT¥'( W. T. CHAPMAN, ASSISTANT SECREfA;Jtf~·· W. M. IMLAY, FISCAL A~ENT ': ..~• f WASHINGTON ADDRESS ftEPLY TO FEDERAL RESERVE BOARD November 7)1918. X-1267 SUBJECT: INVE~TIGATION OF FEDERAL RESERVE NOTE CIRCULATION~ Dear Sir: There is enclosed herewith a general outline of a study of Fedcnl Reserve note circulation :l'hich hCt.s been approved by the Fedenl Reserve BoetrdJ and Nhich .vill be IT;J..de by its Division of Analysis and Research. A part of the infomation Nill necessarily have to be obtained direct frorc banks and business houses. Portions of it rr.ust 1 however) be provided by Federal Reserve banks 1 cvh ile on one or t'NO points where the data might be obtained direct from nember b<inks 1 the Board h:;..s been advised. that better results would probably be secured if the request for the dc..ta .were to be rr,a.de by the Reserve bankr;. You are there-fore rewested to obtain 3.nct supply for the use of the Board 1 at ycur oarly convenience the following rr.aterial_, addressing your reply to H. Parker ~Willis, Director of Division of Analysis and Research 1 of the Federal Reserve Board, 37 Liberty Street 1 NaN York, to .vhorr. any further correspondence reg.:1rding the details of this investigation should be add.resse;i: (a} D.:1ta as called for in section (;;:) of the attached rrerr,ctandun:) shoNing notes issued by the Federal Reserve agent to the Federal Reserve bank rtonthly fror. the organization of the system to the present tirr.e. (b) DJ.ta as called for in section (3) of the attached rLerrorandum, sl1ovving by months the gross arr.ount of Federal Reserve notes paid out by the bank to ct'.storr.ers :mi the gross arr;ount received by the bank f rorr. all sources. (c) Data included in section (4) of the attached memorandum. It is recognized t:--dt in son:e cases it rr.ay be impossiHe to· furnish any inf omation on this point 1 but it is thought that in others at le2.st a general discussion rr.ay b~ furnished an.:l that scn:e figures rray also possibly> be available. (d.) Data called for in section ( 5) 1 such data to be obtained from 1 say) ten banks in each district. The rerr.arks rn:de under section (c) apply to this phase of the inquiry. (e) Data callej for in section (7) of the attached n:emorandum. Tte inforrration furnished should relC<te to the three months period 1 July 1)1918--0ctober 111918. Yours very truly> 1'he Ch::.irn.an) Federal Reserve B~nk~ Secretary. X-1267 a. FEDERAL RESBrNE lWTE CIRCULATION In or:ler to obtain a cor:plete and thorough account of the present situation ·Nith reference to the circulation of Federal Reserve notes in the United St=ttos 1 a study} framed along the follmdng lines ha3 been authoriZed b)' the Board and undertaken by the Division of .Analysis 3.nd Research. (1) Con,pile frou data already at hand in th·3 BoarJ. 1 s publications and files corrplete tables shov.ring the issue of Federal Eeserve notesJ in tha aggreg.:ctc c.nci by nonths, to Federal Reserve banks, Provide cr.2lxts shoNing the aggregate note i..ssue and. shmving 1 by separate lines; on the sarr.e chart, the gross arnount of notes rr.onthly issued to each Federal Reserve bank} either frorr, the Bureau of Engraving and Printing, fro~ the ~~n~s, or fro~ the Sub-Treasuries, the effect exhibited in each Cdse being the amount of notes actually ootained by the Federal Reserve Agent for use. (2) Prep~re tables of statistics and charts exactly parallel to those rr~ntioned in paragraph 1 1 except that in each case the effects exhibited shouli be the note3 is3uei by the Federal Reserve Agent to the Federal Reserve bank for use by the latter in rr.aking actual pay·ments. The differences bet:men the sho:vings rrade in paragraphs 1 and 2 will represent the an.ounts heli on hand by Federal Reserve Agents and Nill have an interest :?.S showing hoN the Agents have been equipped. fron: tirr;e to tirr.e with notes held in their custody for the purpose of nesting ,ossitlo denBnds. (3)0btain and corr:pile frorr ec,ch Federal Reserve bank, by rronths from the betables shoNing the gross an;ount of Feder::.l Reserve notes paid out by the bank to customers, and the gross areount received by the bank fron: all sources. Prepare charts shoNing 1 by separate line;;;~ the gross an..ount paid out) the gross arr,ount received 1 a.nd net differences} the latter being the actual net amount of circv.lation outstanding. ShouU it be im~ossible to obtain figures in this foro; fron, the beginning, obtain therr: in so Lr ::..s figures will permit 1 .;..nd if for any reasorj tney should not be available c..t all, substitute figures sho-r~ting the quantity of Federal Reserve notes sent in to the Treasury for redemption 1 as indicating the current Nithdn:.vals frorr. circulation 1 these to be charted. in the san:e Nay ..ts the issues of notes. ginning~ (4) Obtain fron. each Federal Reserve b:mk figures showbg as far back as possible the occasions or reasons calling for the issue of Federal Reserve notes> as, e.g., issued in exchange for gol~, issued in response to checks and drafts dr~Nn on the reserve account Of the trorr,ber banks; directly issued 2.S result Of the rediscounting of paper. Analyze these returns in order to show percentages of total notes issued ·'fhich .rv-ere represented by notes issuei for each of the purposes specified. (5) Obtain f rcru a group of selected member banks in each Federal Reserve district figures shoNing the total amount of Federal Reserve notes ~eceived by it from the Feder::tl Reserve bank of its district during a given year, together with analysis of purposes for w:'lich it obtained the notes; such as, e.g.,d.irect payu.ents to de:;o3itorsj payu.ents t'll2.de :'!.S the res1.1.l t of rediscounts obtained by cu.stoners for busines3 purposes (crop rr.ovingJ etc.) :Lnd payments rrade to other banks as the result of rediscounts or purc[-,ases of their :paper. Collate ;,n.:: corr.pare the figur~s ·thus obtained from~ say_, ten representative banks in each district, or one hundred btenty in alL 39 --J) (6) B.3Q1.l~st a nutLb.:;r of rJpt8sentativ 3 whol3sale). jobbing 1 · X-1267 a and r·3tail hou.s3S to analyz3 spJcifi9d data} to bo nam3d by tho Board, th~ circulating ~~diumwhich th~y r3c~ivcd, in ord3r to ascertain the p3rc3ntag3 of such rcc3ipts consisting of F3d3ral R0sJrv~ notJs. Also ask such h9us3s to stat3 wheth~r th~y hav3 blan in th3 habit of dir3ctly rJ~i3positing such F~d0r~l R3s~rv3 notas in th~ir banks or :paymg th,;,tn out ~gain. (7) Obtain fron: .3a.Ch F3dJrc:..l Rss·:'.rvo bank an analysis for a specified p0riod of r~s~rv-3 not;s is.SU3d by. oth.Jr rsd3ral Rescrv~ banks which haV$ th.; quantity of b~3n d3pos~tJd ~ith it) as ·contrast~d nith thJ quantity of its own not~s which have boan d~posit3d ·Nith it. Pro!=>a.ro frorr thes3 data. ·naps sha..ving pictorially the curr·3nt$ or moven;::.nts of· F..jd0ral R3s;3rv;:; not~s (a) fron: the Board .and its authoriz.3d ag~nci3s to tho R~s,:).rva Agants, (b) frorr th3 Ag.:.nts to ths .ResJrvc banks,. (c) fron: thi.:) Res.Hv::; banks to th~ n.:;tLb.::r· banks ~(d) frorr. th.:) m.3mb0r banks to th ... public_. .(..:,)- fron: tha publi'c back to tha m3n;b0r banks; tf ), frou.- thd u~m~Jr banks back to ~hv R~s3rv~ b~nksJ and (g) frorr. thu R0s0rve banks ba~k t~ th~ Traasury for canc3llation. Also sh~v by shadad ar3as on a blocked chart. th~ r~lat~v~ position of th~ circulation in th3 various F0~sral R3s~rv~. uis~ricts as consisti11g of F~dt}ra.l RosJrVe not~s and all oth3r forms of curranc·y... (8) ·ob-tain and tabul~ta ·statistics frorr. tha r~cords of th0 Gold. Export. Con:rr:ittee · and. fron: th.=.· puatorLs Hous.:,a 1 sho·Ning mov.3ments of F3d3ral Ri3S.Jrv:, notos out of and., if possibl.J~ into. th0 Unit..;d St~t3s during th0 p-3rio.d that such records h.;.va b.Ln kept. (9) From all of th~ f9r~goL1g d~ta formulatJ a t~ntative 3stirrat3 of th~ locat.i.on of F.)daral R~s~rv3 not~s) ·NhJth3r ·in th~ hands of Ag.::snts> vaults of R~ servs b~ks 1 vaults of ~~~b~r banks~ safos ~nd drawJrs of busin3ss hous3SJ pockJts of th~ public, and -ooss.3ssion of foraig-nors .. From th3so data praparc conj-ectural 0stin.ate of probabl3 'amount of F.:ld;ral R:Jserve no·t~s hoarded or · actually kept out of activ3 hand-to-hand circul.a.tion .. (1~) Pr~parQ p~rc~ntagc figur3s showing av~ragJ lif~ of F3daral Res0rve notosJ b.a.s.in~ this upon s3lact\3d data obtain~d for tne various d.)tlominations. From this to·r.m 3stinat$ of. actual cost (n~nufacturing cost) involv~d in providi~g paper currency circulation> consisting ·of F3d.:ral R3sJtv-e not:Js ~ (11) Contr.ast th3 da~a ~3latin~ to activity ~nd cost of FJd~ral RJs~rv~ not3s ani cost of rJs3rva hQld. bahind th~m :vith S\.tch· oorrasponding data as are avail- .. abl~j rJlative to th3 sam~ it~ms for national bank not3s or gold c3rtificatvs> or both. (12). Pr:-par.) brief d~acriptiv _, ta'blJs for d~ff~rant kinds and class3s of .circulation1 shoning thJ ehang~ in tha c~position of th~ circulation si~e3 tha or;;a.niza.tion of th3 FadJral R3sorve syst:3n: 1 by rr.,onths. Frorr ·th~s3 tablos d.3duc·,:; conclusion as to actual econott¥ of goli :rougnt about through the use of Federal Reserve note~~
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