The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
! 630 X-6628' RECORD Of PROCEEDINGS OF C O ^ H W G B OF COUNSEL OF ALL ISBBBAIi RESERVE BASKS HELD IN WASHIiTSTCN, D. C., Off JUNE 9 AND 10, 1930. She Conference convened on June 9, at 10 a.m. in the "board room of the Federal Reserve Board in the Treasury Building, Washington, D. C» Those present were : Mr* Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr* Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. K* K. Carrick W. S. Logan C. H. Coe J* S. Sinclair James M. Toy Sterling Newell P. L. Holden H. F. Strater M. 8. Wallace J. S. Walden R. S. Parker Carl Meyer J. Gr. McConkey A. Ueland Sigurd Ueland H. G. Leedy E. B. Stroud, Jr. Paschal Dreibelbis A. C. Agnew Walter Wyatt B. M.e Wingfield George B. Vest Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Bank of Boston Bank of Hew York Bank of New York Bank of Philadelphia Bank of Philadelphia Bank of Cleveland Bank of Cleveland Bank of Cleveland Bank of Richmond Bank of Richmond Bank of Atlanta Bank of Chicago Bank of St. Louis Bank of Minneapolis Bank of Minneapolis Bank of Kansas City Bank of Dallas Bank of Dallas Bank of San Francisco Board Board Board. At the suggestion of the Chairman, Mr. Wyatt, the Conference first considered in what order it would take up the various matters on its program and it was voted to proceed at onco to a consideration of the effect of the decision in the ease of Early v. Federal Reserve Bank of Richmond* As a part of the preliminary discussion it was developed that the Feck eral Reserve Banks of Boston and of New York still reserve the right in their check collection circulars to charge chocks to the account of the drawee "banks but that no other Federal reserve "banks reserve this right. 2 - X-6628 ! 6ounscl for each Federal reserve bank <h6n proceeded to discuss the effect of the decision in the Early case in his particular Federal Reserve District. At tho Federal Reserve Bank of Kansas City one suit has been threatened as a result of this decision upon the basis of the Federal Reserve Bank's collection circular as it existed prior to the change in Regulation J of February 1, 1929. Several other Federal reserve banks - • . •have had numerous inquiries arising out of the decision in tho Early case; but it was said that in all of these cases xq> to this time Counsel for the Federal reserve banks havo been successful in convincing opposing counsel that the doctrine of the Early case is not applicable where the Federal reserve bank did not reserve the right in its check collection circular to charge checks to the reserve account of the drawee bank. Amendments to Regulation J. The Conference adjourned for lunch about 1 p.m. and reconvened at 2:30 p.m., at which time it proceeded to a consideration of suggested amendments to Regulation J, using as a basis a draft of Section V of Regulation J as prepared by Mr. Wyatt in July, 1929, The consideration of amendments to Regulation J consumed the entire afternoon session which lasted until 6:50 p.m., and the evening session from 8:30 p.m. until 11 p.m. After consideration and discussion of each paragraph of Section V the conference voted tentatively to recommend the adoption of each such paragraph substantially in the form as finally approved and as hereinafter set forth. In voting upon paragraph Ho. 4 as hereinafter set forth, Mr. Stroud voted "no", and in voting upon paragraph Ho. 6, Mr. leedy and Mr. Carrick voted "no". The Conference also voted tentatively ; ' 4 • . - .8 *• x-6628 633 to ?dcommend, amendments to paragraphs 1 and 3 of Section III of Regulation J and amendments./ to paragraphs 2 and 3 of Section IV of Regulation J, as hereinafter set forth. •Conference re Treasury Department Circular No. 176. On the morning of Diesday, June 10, the Conference convened shortly after 10:30 a.m. and discussed Treasury Department Circular No. 176 containing regulations governing the deposit of public monies and the payment of Government warrants and checks. At 11 a.m. Mr. B. G. Hand, Commissioner of Accounts and Deposits, and Mr. A. W. Starrett and Mr. E. J. Cunningham of tho Treasury Department came into tho conference, which then, proceeded to a consideration of a revised form of Treasury Department Circular No, 176 which the Department contemplates putting into effect. A number of sugh gostions wore made with reference to the proposed revision and many of these were informally agreed to by the representatives of the Treasury Department and. the Counsel for the Federal reserve banks. No substantial difference of opinion between tho Treasury Department and the Federal Unserve Bank Counsel developed with reference to the provisions of the proposed revision of the circular except as to sections 35 and 37. As to these sections no agreement could he reached "between the representatives of the Treasury Department and the Conference of Counsel, and after discussion on motion of Mr. Agnew it was voted that the Conference pass over these sections subject to the right of any Federal reserve bank to state its position with relation thereto in letters addressed to the Secretary of the Treasury. The Conference adjourned for lunch at 1:50 p.m. - 4 - x-eeie 623 Conforonco with Representatives of the Comptroller's Office. The Conference reconvened, at 2:30 p.m. with Mr. F. G. Await, Deputy Comptroller of the Currency, Mr. J. E. Pouts, Assistant Supervising Receiver of the Division of Insolvent Banks, and Mr. George P. Barse, Counsel to the Division of Insolvent Banks, present. An informal discussion then ensued with reference to the effect of the decision in the case of Early v. Federal Reserve Bank of Richmond and with regard to the interpretation placed by the Office of the Comptroller of the Currency on the opinion in this paso. This discussion proceeded entirely along informal lines and an understanding "between the Comptroller's Office and the Counsel for the Federal reserve banks was reached on several points "but no formal action was taken. ftnflpdm«nts to Regulation J. After the representatives of the Comptroller*s Office had left the meeting the Conforonco again took up the proposed amendments to Regulation J which had "been tentatively agreed upon the day before. Mr. Stroud moved "that Regulation J as tentatively approved yesterday be now formally recommended for adoption and that Mr. Wyatt and Mr. Baker be authorized to make any changes in punctuation or grammar as may bo deemed advisable and not inconsistent with the action Of this Conference." After a few changes in the phraseology of the proposed amendments to Regulation J were agreed upon, Mr. Stroud's motion was carried, Mr. Wallace, Counsel to the Federal Reserve Bank of Richmond voting "no" and representeetives of all other Federal reserve banks voting "aye"* Messrs. Ueland, Leedy, Carrick, Wallace and Meyer made the following explanatory statements 98 to their votes; - 5- X-6628 i Mr.tfelandi-I vote in favor of the proposed resolution in deference to the announced policy of the Federal Reserve Board upon the subject. Mr. Leedy:- While voting in favor of the adoption of the proposed amendments I wish to be recorded as not approving subsection (6) of Section 5 of the proposed amendments for the reasons; first, that such subsection in my judgment is contrary to the scheme of the Federal reserve check collection system and second, because it seeks to afford protection to the Federal reserve banks which they should not ask. Mr. Carrick:- I vote in favor of the proposed amendments except that I do not approve of subsection 6 of Section 5 because in my opinion it seeks to afford to the Federal reserve banks a protection which they should not ask. Mr. Wallace;- I voted "no" to the resolution because of objection to the proposed expression in subsection 7 of Section 5 upon the ground that it deprives Federal reserve banks of the power to give to the depositing bank and holders of checks a reasonable and proper protection which such holders and depositing banks need and which the Federal reserve banks could reasonably and safely afford. Mr.typyer:-Although not approving of paragraph 7 of Section 5 I am voting for its adoption because I think there should be uniformity in the system and it appears that a large majority of the counsel are in favor of the adoption of this paragraph. Bie proposed amendments to Regulation J as finally approved for recommends^ tion are set forth below: 624 ** 6 — X—6628 j The Conference of Counsel recommends the following changes in Regalation J: SECTION III. That paragraph 1 of Section III be amended by changing the words "acceptable to the Federal Re serve Bank of the District in which such nonmember banks are located" to read "acceptable to the collecting Fedy eral reserve bank." That paragraph 3 of Section III be amended by changing the words "acceptable to the Federal Reserve Bank of tho District in nfoich such nonmember bank is located" to road "acceptable to the collecting Federal reserve bank." SECTION IV. That paragraph 2 of Section IV be amended by changing the period at the end thereof to a comma and by adding the following words: "provided, however, that the Federal reserve bank may in its discretion refuse at any time to permit the withdrawal or other usetifcredit given for any item far which the Federal reserve bank has not yet received payment in actually and finally collected funds." That paragraph 3 of Section IV be amended by changing the period at the end thereof to a comma and by adding the following words; "provided, however, that the Federal reserve bank may in its discretion refiiso at any time to permit the withdrawal or- other use of credit given for any item for which the Federal reserve bank has not yet received payment in actually and finally collected funds." SECTION V. That Section V be amended to read as follows; 635 "SECTION V. TERMS OF COLLECTION. "The Federal Reserve Board hereby authorizes the Federal reserve banks to handle such checks subject to the following terms and conditions; and each member and nonmember clearing bank which sends checks to any Federal reserve bank for deposit or collection shall by such action be deemed (a) to authorize the Federal reserve banks to handle such checks subject td the following terms and conditions, (b) to warrant its own authority to give the Federal reserve banks such authority, and (c) to agree to indemnify any Federal reserve bank for any loss resulting from the failure of such sending bank to have such authority. "(l) A Federal reserve bank will act only as agent of the bank from which it receives such checks and will assume no liability except for its own negligence and its guaranty of prior indorsements. "(2) A Federal reserve bank may present such checks for payment or send such chocks for collection direct to the bank on which they aro drawn or at which they are payable, or in its discretion may forward them to another agent with authority to present them for payment or send them for collection direct to the bank on which they are drawn or at which they are payable. "(3) A Federal reserve bank may, in its discretion and at its option, either directly or through or from an ogont, accept in payment of or in remittance for such chocks, cash, bank drafts, transfers of funds or bonk credits, or other forms of payment or remittance, acceptable to the collecting Federal reserve bank. She Federal reserve bank shall not be liable for the failure of the drawee bank or any agent to pay or remit for such checks, nor for any loss resulting from the acceptance from the drawee bank or any collecting agent, in lieu of cash, of any other form of payment or remittance authorized herein, nor for the nonpayment of, or failure to realize upon any bank draft or other medium of payment or remittance which may be accepted from the drawee bank or any collecting agent. "(4) Checks received by a Federal reserve bank which are payable in its own district will ordinarily be forwarded or presented direct to the banks on which they are drawn, and such banks will be required to remit or pay therefor at par in such one or more of the forms of payment or remittance authorized under paragraph (3) hereof may be acceptable to the Federal reserve bank. 637 — 8w X-6628 "(5) Checks received by a Federal reserve bank payable in other districts mill ordinarily be forwarded for collection to the Federal reserve bank of the district in which such checks are payable; provided, however, that where arrange men ts can, be made satisfactory to the collecting bank or agent and to the Federal reserve bank of the district in which such checks are payable, any such checks may bo forwarded for collection direct to the bank on which they are drawn or at which they are payable, or may be forwarded for collection to another agent with authority to present them for payment direct to the bank on which they are drawn or at which they are payable. All such checks shall be handled subject to the terms and conditions of this Regulation. "(6) Bank drafts received by a Federal reserve bank in payment of or in remittance for checks handled under the terms of this regulation will likewise be handled for collection subject to all the terms and conditions of this regulation. "(7) The amount of any check for which payment in actually and finally collected funds is not received shall be charged back to the forwarding bank, regardless of whether or not the chock itself can bo returned. In such event, neither the owner or holder of any such.check nor the bank which sent such check to the Federal reserve bank for collection shall have any right of recourse upon, interest in, or right of payment from, any reserve balance, clearing account, or deposit account of the drawoe bank or of any bank to which such checks have been sent for collection, in the possession of the Federal reserve bank. Ho draft, authorization to chargo, or other order, upon funds of a paying, remitting or collecting bank in tho possession of a Federal reserve bank, issued for the purpose of settling items handled under the terms of this Regulation will be paid, acted upon or honored after receipt by such Federal reserve bank of notice of suspension or closing of such paying, remitting or collecting bank." - 9 - X-6628 The subject of the revision of the check collection circulars of 6,28 the Federal reserve tanks to make them conform to the changes in Regulation J which would "be made if the Federal Reserve Board should adept the recommendations of the Conference was then considered. Upon Mr. Agnew's motion it was "RESOLVED, That the Chairman of the Governor's Conference be requested to instruct the Standing Committee on Collections to prepare a tentative draft of a uniform check collection circular embodying therein the suggested amendments to Regulation J, the preparation of such tentative draft to he made in collaboration with a subcommittee of Counsel to the Federal reserve banks (such sub-committoe to be appointed by Counsel to the Federal Reserve Board and of which sub-committee Counsel to the Federal Reserve Board shall bo a member ox officio), with the understanding that such tentative draft, when prepared, shall be submitted to the Federal reserve banks for criticism and/or approval pending the adoption by the Federal Reserve Board of the suggested amendments to Regulation iT." A discussion then ensued with regard to the uniform policy pertaining to chock collections which was romamended by the Conference of Counsel and adopted by the Conference of Governors at their meetings in April 1929. The discussion pertained particularly to the question whether it was necessary to adopt any farther resolution expressing the sense of the Conference as to the interpretation of the uniform policy with reference to the point raised in the letter addressed to Governor Young by Governor Harding of the Federal Reserve Bank of Boston dated October 19, 1929. After some discussion it was the consensus of opinion that no action on this subject by this Conference is necessary. After a vote of appreciation to the Chairman for calling the Conference and for conducting the proceedings, the Conference adjourned at 6 p.m. George B. Vest Secretary.
@FedFRASER