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36-7361 TELEGRAM FEDERAL EBSBRVE BOARD WASHINGTON Young - Boston Harrison - Ifew York Morris - Philadelphia Pancher - Cleveland TRA2JS. 1611 Seay - Richmond. Black - Atlanta McDougal - Chicago Martin - S t . Louis March 10, 1933. Geery - Minneapolis Hamilton - Kansas City McKinney - Dallas Calkins - San Francisco Section 10(b) of the Federal Reserve Act was amended "by the Act of March 9, 1933, to read as f o l l o w s : QUOTE: In exceptional and exigent circumstances, and when any member bank has no further e l i g i b l e and acceptable a s s e t s a v a i l a b l e to enable i t to obtain adequate credit accommodations through rediscounting a t the Federal reserve "bank or any other method provided by t h i s Act other than that provided by s e c t i o n 10(a), any Federal reserve bank, under r u l e s and r e g u l a t i o n s prescribed by the Federal Reserve Board, may make advances to such member bank on i t s time or demand notes secured to the s a t i s f a c t i o n of such Federal reserve bank. Each such note s h a l l bear i n t e r e s t at a rate not l e s s than 1 per centum per annum higher than the h i g h e s t discount r a t e in e f f e c t a t such Federal reserve bank on the date of such n o t e . i"o ad- vance s h a l l be made under t h i s s e c t i o n a f t e r March 3, 1934, or a f t e r the expirat i o n of such a d d i t i o n a l period not exceeding one year as the President may p r e s c r i b e . UNQUOTE. You w i l l note from the foregoing quotation that the authority to make an advance to a member bank under s e c t i o n 10(b) i s no longer subject to the condition that such bank have a c a p i t a l not exceeding $5,000,000 nor to the requirement of consent to such advance by a f f i r m a t i v e a c t i o n by not l e s s than f i v e members of the Federal Reserve Board but that no change has been made i n the p r o v i s i o n that such advance may be made only i n exceptional and exigent circumstances and only when*bhe member bank has no further e l i g i b l e or X-7361 4.»K —2— acceptable a s s e t s a v a i l a b l e t o enable i t to obtain adequate c r e d i t accommodat i o n s from the Federal r e s e r v e bank through rediscounts or any other method provided by the Federal Reserve Act other than that provided by s e c t i o n 1 0 ( a ) . Likewise there i s no change i n the requirement that a l l such advances be secured to the s a t i s f a c t i o n of the Federal r e s e r v e bank. Your a t t e n t i o n i s a l s o d i r e c t e d t o the f a c t that o b l i g a t i o n s of member banks acquired by Federal r e s e r v e banks under s e c t i o n 10(b) are not e l i g i b l e f o r use as c o l l a t e r a l f o r Federal reserve notes but that under s e c t i o n 401 of the Act of March 9, 1933, they may be used as s e c u r i t y f o r the new i s s u e s of Federal r e s e r v e bank notes ,to an extent not more than 90$ of the estimated value of such o b l i g a t i o n s d e p o s i t e d as s e c u r i t y . Pending f u r t h e r a c t i o n t h e Federal Reserve Board approves a discount r a t e of 5$ per annum upon advances made under t h i s s e c t i o n except where such r a t e would be l e s s than 1 per centum per annum higher than t h e h i g h e s t discount r a t e i n e f f e c t a t the Federal r e s e r v e bank, i n which case the Federal Reserve Board, approves a discount r a t e 1 per centum i n excess of such h i g h e s t r a t e . Until further a c t i o n by the Board Federal reserve banks may make advances i n accordance with s e c t i o n 10(b) under the c o n d i t i o n s hereinbefore s e t out f o r such purposes as have been or h e r e a f t e r may be authorized by r e g u l a t i o n s of the Secretary of the Treasury pursuant to the P r e s i d e n t ' s Proclamations of March 6 and March 9, 1933, and the Board«s c i r c u l a r l e t t e r of March 10, 1932, (X-7115), as f a r as i t r e l a t e s t o s e c t i o n 10(b) i c hereby canceled. Reports on Schedule B D four of loans under s e c t i o n 10(b) of the Federal Reserve Act, as amended, should be continued i n accordance with the Board's telegram of June 23, 1932 (Trans. Ho. 1478) and telegraphic advice of such advances should be made i n accordance n i t h the Board's l e t t e r of March 21, 1932 (B-721). iiorrill.
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