The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BOARD
WASHINGTON
June 10, 1921.
X-3140.
sti.BJECT:
Comnents by the Federal Reserve :Board of recommendations
made by Governors of the Federal Reserve Banks at their
Conference with the Federal Reserve :Board, ~pril 12th to
15th, 1921.
Sir:
The Federal Reserve :Board has exandned the record of votes taken
by the Governors of the Federal Reserve Banks on·the topics considered
at the eonference held in Washington, April 12th to 15th-, 1921.
Those matters relating to fiscal operations and contemplating cooperation between the Treasury Department and the Federal Reserve System
Will be taken up by the :Board with tpe Treasury Department • and you will
be advised of the results in due course.
With a few exceptions, the Board concurs in the recommendations
made by the Conference. The following matters are those which call for
Board action or which req.uire special comment. The paragraphs listed
refer by number to corresponding paragraphs appearing in the mimtea
prepared by the Secretary of the Conference.
1
j
'
t
l
~
Paragraph 11: What arrangements mould be made in cases where
Federal Reserve Banks have presented to them Federal Reserve notes ~
sealed and unnumbered, but otherwise duly executed, which were apparently
'stolen within the Treasury Department and circulated, in view of the advice
of the Treasurer that there is no provision for their redemption?
In view of the expression of the Governors at the Conference that
they would be willing. to redeem, under certain conditions, incomplete
Federal Reserve notes as mentioned above in an amount not to exceed
$20., 000 which may be presented to the Treasury for redemption, the Board
has approved _this action in order to prevent a possible discrediting of
the Federal Reserve note circulation. The Board has advised the Treasury
Department that the Federal Reserve Banks will redeem up to $20,000 in-:
complete Federal Reserve notes with the understanding, however, that the
Federal Reserve Banks do not admit of any liability in connection with the
~irculation of these incomplete notes and expect to be reimbursed ulti~ately
by the ~vernment for these advances.
j'.
,'.
r··-~'r"J
.....,_.,'/ {1
- 2-
X- 3ll.lQ
The Board has further directed the Treasurer of the United States
to forward any i~ornplete Federal Reserve notes which he has redeemed to
the Federal Reserve Board's Division of Issue and Redemption, and has
advised him that after the necessary verification and proof, the Board
will reimburse him for the face amount of such notes up to $20,000. The
Board will then assess the Federal Reserve Banks the amount of such payments in the usual way, i. e.; pro-rated on the basis of capital and surplus. The notes will be held by the Board for delivery to the Treasury
when final disposition is made of the matter either through reimbursement
by the employees of the Department or by an appropriation by Congress.
Paragraph 39: It was voted, (1), that a uniform practice be established in each Federal Reserve Bank with reference to the shipments of fit
notes to other Federal Reserve Banks, the receiving bank to insure and po..y I
shipping charges; and it was voted, (2), that each Federal Reserve Bartk
absorb the postage and shipping charges upon all unfit Federal Reserve
notes sent by i t to Washington for redemption, whether or not those unfit'
notes were issued by another Federal Reserve Bank.
The Board is of the opinion that the above action should be more far
reaching and that the sending Federal Reserve Banks should absorb the cost
of all shipments of Federal Reserve notes, whether fit or unfit, except
the cost of insurance, which should be borne by the receiving Federal Reserve Bank, as heretofore. It is felt that this practice would eliminate
u:any petty entries at the Federal Reserve Banks and that the expense would,
in the long run, be practically equalized. in view of the fact that the
Governors' Conference considered this matter and took the limited action
above set forth, the Board is not inclined at this time to insist that the
practice as approved bytthe Governors should be extended, but suggests that
the matter be taken up for consideration at the next Governors' Conference.
The Board, therefore, approves the action of the Governors as set
forth in paragraph 39 and rules that the said action shall be effective at
all Federal Reserve Banks beginning July 1, 1921.
Paragraph 47: It was voted that the Federal Reserve Board be requested to advise the Federal Reserve Banks of its conclusions upon the
question of unifo~ indorsements upon inter-district cash and collection
items sent direct by menber banks in one District to .Federal Reserve Banks
in other Districts.
The Board has placed this matter in the hands of its General Counsel
and it is now receiving attention in connection with other matters of a
like nature which were referred by the last Governors 1 Conference to a
committee consisting of Mr. Harrison, Federal Reserve Bank of New York,
Mr. Logan, Counsel of the Federal Reserve Board, and Mr. Walden, Federal
Reserve Bank of RiChmond.
,J
.
'
- 3-
X-314o
Paragraph 52: It was voted, (1), that it was the sense of the
Conference that tederal Resetve Banks should adopt a plan whereby each
Federal Reserve :Bank shall wire each night the amounts of notes of each
other Federal Reserve Bank counted and shipped by it, whether Shipped to
Washington or back to the bank of issue, credit for the amount of these
notes to be given by the respective banks of issue as of that date; and
(2), that the Federal Reserve Board be req_uested, with the reco:rr:mend.ation
of the Conference, to consider the advisability and, if legally possible,
the adoption of a. plan whereby each Federal Reserve Bank may deduct fror.a
the amount of its own notes outstanding the total amount of all Federal
Reserve notes held by it, those issued by other Federal Reserve Banks, as
well as its own.
The Board approves the first vote, as set forth above, and will deal
with the matter in a separate circular, in which circular an effective
date will be fixed~ With reference to vote No. 2 above, the C~sel ~f
the Board is of the opinion that the adoption of the suggested plan to
permit each Federal Reserve Bank to deduct from the amount of 1ts Federal
Reserve notes outstanding the total amount of Federal Reserve notes of
other banks held by it would contravene the provisions of Section ·ll(a)
of the Federal Reserve Act which requires that the weekly statement·
published by the Federal Reserve Board shall "show in detail the assets and
liabilit;es of the Federal Reserve Banks, singly and combined."
Paragraph 53: It was voted, (1) 1 that free wire transfers over the
leased wire system be limited to a minimum amount of $1 1 000, and that any•
thing below that minimum be transferred over conmercial wires at the
expense of the member bank; and (2), that telegraphic advices relating to
collections be limited to a. minimum of $100.00, and that a.d.vices relating
to collections below that minimum be transmitted over commercial wires at
the expense of the member bank.
The ~oard disapproves the a~ove vote. It rules that free wire
.
transfers and telegraphic advices shall not be arbitrarily limited and is
of the opinion that the Federal Reserve Bank should handle personally and
individually those member banks which are inclined to abuse or make e.
nuisance of the privilege.
Paragraph 54: It was voted that the proposed pension plan be approved and that it be referred to the Federal Reserve Board for action,
sUbject to such satisfactory adjustment of the suggestions made by Senator
Smoot as might be effected by the special eommittee appointed by the
Conference.
Mt· Curtis of New York has prepared a bill for introduction to
Congress covering this matter. This bill has been approved: in general,
except with regard to the insurance feature, by the Federal Reserve Board.
· Paragraph 6o: It was voted that the recommendation of the last Co~
ference regarding th~ appointment of eligibility committees in tne several
Federal Reserve ~nks be affirmed and carried out by each of the Federal
Reserve Bank$,-that is, that each Federal Reserve Bank appoint an eligibil~
ity committee which shall report to all other Federal Reserve Banks any
paper of general cireulation which it holds to be ineligible.
The Board concurs in the above a.nd fixes July lst as the effective
date for 'the above action ..
r
r~ .A'
l;..._.:_,r..._)_,L
• •
.. 4Paragraph 63: It was vote·i that ac.ceptances made by banks which
have defaulted or refused to honor their confinned or irrevocable comrr:er..
cial letters of credit be referred to the eligibility committee of the ]'ederal Reserve Bank to Which they are presented for discount or purchase,
for the ascertainment of the facts relating to the alleged default· or dishonor; and if the accepting bank is found to be guilty of such default or
dishonor with respect to other credits, all Federal Reserve Banks be advised of that fact. with the understanding that such Federal Reserve Banks
will not purchase any acceptances of such a bank.
The Board disapproves the last sentence of the above quotation,
since it is felt to be improper for the Federal Reserve Banks to enter into any agreement in advance as to the paper of any particular bank which
they will or will not purcrte.se; all such cases. however, should be imnediately reported to the Board.
Paragraph 67: It was voted that the Federal Reserve Board be requested to recommend an amendment to the terms of Section 5202 of the Revised Statutes by eliminating the words "payable abroad" from the terms of
the 7th exception of that Section.
The above action has been approved by the Board, upon the recommendation of its law committee, and the following proposed amendroent has been
:prepared by General Counsel and submitted to Congress~
A :BILL
To amend Section 5202 of the Revised Statutes of the United States.
BE IT ENACTED l3Y TT:IE SENft'T'E AND HOUSE OF RE'PR!SENTATIVES OF THE
UN!~
STATES OF AMERICA IN CONGRESS .ASSFMBt.ED, That Sec tiori 5202 of the
Revised Statutes of the United States, as
~nded,
be further amended by
striking out the words "payable abroad" in the seventh exception enumerated
in said section so that said exception will read as follows:
"Seventh, Liabilities created by the indorsement of accepted bills
of exchange actually owned bv the indorsing bank and discounted at home
or abroad. 11
Very truly yours,
Vice Governor ..
To Governors of all Federal Reserve Banks.
@FedFRASER