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986 FEDERAL RESERVE BOARD &-1753 STATEMENT FOR THE PRESS Release morning p a p e r s , December 12,1919« The F e d e r a l Reserve Board has advised a l l F e d e r a l Reserve Banks which have n o t y e t begun t h e i r b u i l d i n g o p e r a t i o n s to p e r f e c t t h e i r p l a n s i n d e t a i l , b u t t o postpone f o r the p r e s e n t l e t t i n g c o n t r a c t s f o r c o n s t r u c t i o n , A c a r e f u l survey of b u i l d i n g c o n d i t i o n s has demonstrated the f a c t t h a t b u i l d i n g m a t e r i a l s and c o n s t r u c t i o n c o s t s have r e c e n t l y advanced t o t o o higja. a p o i n t t o j u s t i f y t h e Board i n a u t h o r i s i n g b u i l d i n g a t t h i s time. I t i s impossible t o s a y when the b u i l d i n g o p e r a t i o n s of the F e d e r a l Reserve Banks w i l l be begun as t h i s i s a m a t t e r which must be determined b y developments i n b u i l d i n g c o n d i t i o n s . The Board h a s c o n s i s t e n t l y advised t h a t c a p i t a l , c r e d i t , l a b o r and m a t e r i a l b e a p p l i e d as f a r as p o s s i b l e t o purposes of irarcediate urgency* While t h e F e d e r a l Reserve Banks are i n need of permanent q u a r t e r s , t h e y can p r o b a b l y manage t o get along w i t h t h e i r p r e s e n t accommodations f o r sometime l o n g e r . I t i s the view of the Board, t h e r e f o r e , t h a t i t would be unwise i n the p r e s e n t circumstances t o have t h e banks add to the comp e t i t i o n f o r labor and m a t e r i a l . Washington December 11,1919* W . P . Q . H A R D I N G . GOVERNOR EX OFFICIO M E M B E R S A L B E R T S T R A U S S . VICE GOVERNOR ADOLPH C. IIILLER C A R TER 6 L A 6 $ > , SECRETARY OF THE TREASURY M CHAIRMAN C H A R L E S S . HAMLIN FEDERAL RESERVE BOARD J O H N SKELTON WILLIAMS COMPTROLLER OP THE CURRENCY HENRY A. MOEHLENPAH W . T . C H A P M A N . SECRETARY R . 6 , E M E R S O N . ASSISTANT SECRETARY A D D R E S S REPLY TO FEDERAL RESERVE BOARD W . M . I M L A Y . FISCAL AOENT WASHINGTON December 15,1919» X-1754 Subject: Acceptances of the Continental Guaranty Corporation Banks. Dear Sir The Federal Reserve Bonrd has been cdvised t h a t the Continental Guaranty Corporation of New York has widely c i r c u l a t e d c i r c u l a r s and f eras r e l a t i n g to a plan which i t has devised to finance the purchase of automobiles by l o c a l dealers from manufact u r e r s , and the Board has received from several of the Federal Reserve Banks i n q u i r i e s not only as to the nature and scope of t h i s plan but also as to whether or not paper drawn and accepted thereunder i s e l i g i b l e f o r rediscount as a. bankers 1 acceptance. The Board i s of the opinion that t e c h n i c a l l y the d r a f t s described, when accepted by the Continental Guaranty Corporation, coire within i t s d e f i n i t i o n of a bankers 1 acceptance s e t f o r t h in i t s r e g u l a t i o n s and as such are t e c h n i c a l l y e l i g i b l e f o r discount provided tiiat they comply i n other respects with the terms of the law aid the r e g u l a t i o n s of the Federal Reserve Board. The Board has been advised f u r t h e r that i t s l e t t e r of J u l y 2d, 1919, addressed to the Continental Guaranty Corporation, s t a t i n g t h a t i t s acceptances of the kinds described would be e l i g i b l e f o r discount provided, of course, t h a t they comply with the various terms ox the Federal Reserve Act and the regulations of the Beard, has been widely d i s t r i b u t e d with i t s other c i r c u l a r s and forms among banks and bani:ers throughout the country. Because of the very general misunderstanding which e v i d e n t l y has r e s u l t e d , the Board wishes to s t a t e t h a t t h i s l e t t e r of J u l y 22, 1919, was not i n f a c t and should not in any way be construed to be an expression of i t s approval of the merits or d e s i r a b i l i t y of the paper as an investment e i t h e r by t h e . r e s e r v e banks or t h e i r iner.-foer banks, X-1754 -2- and the Board r e g r e t s that i t has been c i r c u l a r i z e d i n such a manner as to give undue a d v e r t i s i n g value t o the p l a n of the Continental Guaranty Corporation which i t accompaniesFederal Reserve Banks are, of course, aware that i t • i s t h e i r r i g h t and duty c a r e f u l l y t o consider the merits or bankable r i s k attached to any paper presented e i t h e r f o r r e discount or purchase and in t h e i r own d i s c r e t i o n t o accept or r e f u s e the paper on the b a s i s of that c o n s i d e r a t i o n . The Board b e l i e v e s , however, that many member banks may f a i l to appreciate that t e c h n i c a l e l i g i b i l i t y does not of i t s e l f imply d e s i r a b i l i t y and you are therefore requested, whenever opportunities a f f o r d themselves, c a r e f u l l y to i n d i c a t e t h i s d i s t i n c t i o n t o member banks i n t e r e s t e d with a view of c o r r e c t i n g what might otherwise be a wrong impression of the purpose and e f f e c t of the Board's l e t t e r r e f e r r e d to above. Very t r u l y yours, Governor. Letter t o Chairmen and Governors of a l l F.R. Banks.
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