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FEDERAL RESERVE BOARD WASHINGTON X-3507 August 19, 1922. SUBJECT: Discounts for Member :Banks at Progressive Ratas. Dear Sir: Thare is enclosed. hara'vith copy of a resolution (S-335) submitted to tha Senat0 undar date of August 10 rrnd r~ferred to the Committee on Agriculture and Forestry. Vlhile the rasolution, which relates to graduat"d or progressive discount rates charged member banks under the provision of Section 14 of the Federal Reserve Act as amended April 13, 1920 has not been reported out by the Committee, the :Board feels that it should be in a position to answer the inquiry as promptly as possible in case it is adopted by the Senate, and therefore requests that a report be rendered covering each member bank in your district which was charged progressive or graduated rates of discount of 10 per cent or more (including the normal: basic rate) during any part of the time that such rates were in effect in the district. No report need be submitted covering any bank where the maximum rate charged including the normal rate did not at any time progress beyond ~ per cent. In order that the information may be co~ piled on as uniform a basis as practic~ble, we are enclosing a form to be used in those cases where prograssive rates were applied to average excess borrowings over a reserve computation period. ~here the graduated rates .were applied to currant offerings, it will be necessary to modify the a~tached. form by ch::mging i tam 1 to r aad 11 Tot.3.l borrowings, including currant offering, 11 and to substitute tho d:t.te on which the paper was discounted in lieu of the reserve computation period. In acknowledging receipt of this letter, it is raquested th:.:tt the :Board be n.dvisad whethdr or not thera will be any difficulty in supplying the information dasired, :.:tlso approxim~t3ly when complete reports may be expacted. Kindly forward the raports in duplicate. Very truly yours, Vice Governor. (Enclosure) TO THE GOVERNOl~S AT ATLANTA, ST. LOUIS, Yu\NSAS CITY .AND D.ALLA5. • • X-3507a DISCOUNTS FOR MEMBER BANKS l'i'HERE PROGRESSIVE RATES (INCLUDING NORMAL BASIC RATE) REACHED 10 PER CENT AND OVER. Name of member bank_ _ _ _ _ _ _ _ _ _ _ _ _c.apital and Surplus $.______ Location _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _.Federal Reserve District No. _ __ 1. 2· 3· 4. 5· 6. 7· Daily average borrowings - total .•.................• $_____ $______ Basic discount line . . . . . . . . . . . . . . . . . . ............. . Borrowings in excess of basic line-total (1-2) ..•... Excess borrowings not subject to progressive rates .. Excess borrowings subjact to pro~ressive rates: (a) Amount ....................................... . _ __..,\,;;(S;;..:e=e no.x.te:::..lr....-_ __ (b) Additional discount charged at supr~rates* .... . (c) Average superrate (eAcess over normal rate) as per formula below •...................... (d) Range of rates (From to ) ....... . (e) Discount charged at superratas, ·after deduction of amounts subsequently rebated .. (f) Rangr;; of rates 3fter rebate (From to ) .. Average superrate (excess over normal rate) i~- · plied to total borrowir.gs ,as per formula below .... Basic discount line as it would have been if reserve balances required had been used in the calculations, instead of reserve balances maintained by the member bank . • . . . . . • . . . . . . . . . . . . . . . . . . ..... . FORMULAE Item 5-c should be calculated by multiplying item 5-b by the number of days in the year, and dividing the product by item 5-a multiplied by the n~~ber of days in the reserve c Otrpl.ltation period. Item 6 should be calculat~d by multiplying item 5-b by th0 numb.::r of days in year, and dividing the product by item 1 rrnltiplied by the n~'1lber of days in tha reserve computation pBriod. *Exclusive of discount charged at the normal rate. NOTE: No report should be submitted cov.Jring borrowings of any bank unless the rate of progression (including noriTAl basic rate) during some reserve computation period reached 10 per cent or more. In thQ case of banks covered by the report, figures should be submittsd only for those reserv.e COir!PUtation pe:!'iod.s during which the rate of progression (including normal basic rate) reached 10 per cent or more. ., .. r X-3507b 1017 COPY OF SENATE RESOLUTION 335· to Ee::ate ..U.ug,1tst lJ, 19::.:::• Submitt~·i .. Whereas it has been charged on the fioor of the Senate that the amendment to the Federal reserve act authorizing the charging of progressive interest rates had been obtainad largely as a result of express and definite assurances givt:n to W'.embers of Congress by W. P. G. Barding, governor of the F~deral Reserve Board, that the object and purpose of.said legislation was to secure a fairer and more equitable distribution of the funds of the Faderal reserve system and was expressly designed to prevent the und.ue absorption of Federal reserve funis in certain large cities at the expense of the great farming interests in th0 West and South, and at the expense of the smaller business man throughout th.::. countryj and Wher~as the official records show that the said "progressive rates" after the passagd of the law were put into effect only in the agricultural sactions of thz West, South, and Southwest, including the four Federal reserve districts of J.tlanta., St. Louis, Kansas City, and Dallas, and were not put into effect in N~w York and other big money centers, where the funis of the F~der-al reserve system were principally loaned; and Whereas the official records show that its country banks were charged unconscionable and wholly indefensible interest rates, and that these inhuman rates were c~acted from many banks in the States of Alabama, Colorado, Nebraska, Kansas, Oklahoma,· Te~as, Louisiana, Mississippi, and ot~ers; and ~hereas the reserve board defeated two resolutions offered by the former Gor.tptroller of the Currency, one designed to limit interest rates to 6 per cent per annum, and when that was defeated another limiting interest rates charged by Federal reserve banks to 10 per cent per annum; and Whereas the undue concentration of Federal re$erve funds to the big cities is illustrated in thJ fact that in th~ autumn of 1920 the official records show that the national banks in New York City, in proportion to thei~ total loans and discounts, wer~ being accommodated with three tim~s as large an amount of Federal reservo funds as were the 7 ,6oo "country" national banks throughout the entira United States; Therefore be it RESOLVED, .That the Federal Rdserve Board be requcst~d to obtain from the . ~•..ideral Reserve Banks of Atlanta, St. Louis, Dallas, and Ka!·1sas City statements showing all cases where int erE.st ranging betwe~n 10 per cent and 87! per cent per annwm, both· inclusive, was exacted from member banks, giving names of the banks. their c.-apital and surplus, and location, wher~ 10 por cent per annUIIl or more was charged on loans and. rediscounts, the rate a.n:i amount of interest charg8d in each instance as expr~ssed in dollars and cents; also let th;; stat~ment show. whether the Federal reserve banks. have refunded to each member bank from which such exactions were.made the amount of such interest .collect~d in exc~ss of 10 per cent per annum upon each loan upon which such interest was charged.
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