The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
X-1U59 TOPICS DISCUSSED AND RECOMMENDATIONS MADE BY GOVERNORS AT CONFERENCE WITH FEDERAL RESERVE BOARD- WASHINGTON, MARCH 20-22,1919. 1.DISCOUNT POLICIES: a. How long should reserve banks continue the present d i f f e r e n t i a l rates in favor of notes secured by Government obligations? Recommendation: I t i s the opinion of the meeting that present d i f f e r e n t i a l rates in favor of notes, secured by Government obligations, should be continued u n t i l a f t e r the f i f t h loan i s placed, and for such reasonable period thereafter as w i l l permit a considerable liquidation of such borrowings without imposing undue penalties upon the banks which are required to rediscount with the Federal reserve banks. I t i s further suggested that no recommendation for a change in the present d i f f e r e n t i a l rates can well be made u n t i l i t i s known at what rate the next loan w i l l be offered, at which time some readjustment of rates for loans to be secured by bonds of that issue may be necessary. The establishment of a d i f f e r e n t rate for loans secured by the bonds of the F i f t h loan may necessitate a review at that time of rates applying to loans secured by bonds of the e a r l i e r issues. b» Current rates of member banks for bank loans in the several reserve d i s t r i c t s , and their r e l a t i o n to present rediscount rates of Federal reserve banks. See ommendation: None, c . Liquidation of Government secured paper at Reserve Banks. d. Expression of opinion as to the length of time which w i l l be required to make a permanent distribution of the Government s e c u r i t i e s held by member banks. Recommendation: I t i s the opinion of the meeting that i f no further permanent borrowing i s required by the Government after the F i f t h loan i s placed, and provided the general tendency toward a general commercial l i q u i dation continues as expected, the amount of unliquidated paper held by member banks and by the Reserve Banks at the end of a period of say a year from June 1 s t , next, w i l l be so small as to be a n e g l i gible factor in the p o s i t i o n of the Federal reserve banks and can be readily dealt with at or before the expiration of that year by re adjustment of rates. - 2 - X-1459 G. Discussion of recommendations made by Advisory Council as to discount rates and p o l i c i e s . Rec ommendat i on; The answer to topic (a) f u l l y answers topic ( e ) , except that i t i s the unanimous opinion of the meeting that the r a t e s to be adopted and maintained by the reserve banks, for loans secured by Government bonds and notes should be uniform i n a l l the reserve banks. BANKERS1 ACCEPTANCES - OPEN MARKET. a. Development of open market. b» Is a low rate at Federal Reserve banks necessary to develop the acceptance market? Recommendation: I t i s recommended that in general the present p o l i c y as to rates for bankers 1 acceptances be continued. The present developments in foreign exchange may, however, present the opportunity for securing a large increase in the volume of b i l l s drawn in d o l l a r s , of which advantage should be taken, in c.ase i t does a r i s e , by quoting favorable rates for open market purchases, and p a r t i c u l a r l y forward rates for b i l l s to arrive, even though that involves a larger accumulation of b i l l s by the Reserve * - banks. I t i s further recommended that in order to develop an active market for b i l l s i n the d i f f e r e n t reserve d i s t r i c t s , that steps should be taken by the reserve banks to insure dealers in b i l l s a s u f f i c i e n t supply of credit with which to carry them, without penalty of a high rate, u n t i l they are able to market them. I t i s suggested that the reserve banks can f a c i l i t a t e the development of carrying arrangements for dealers by making arrangements for special purchases of b i l l s from them under contract to repurchase within f i f t e e n days, in cases where member banks are not w i l l i n g to make c o l l a t e r a l loans on b i l l s at reasonable rates. c. Reserve Bank P o l i c i e s in making Purchases: 1. Direct from accepting banks. 2. From member banks, with or without endorsement. (Miscellaneous b i l l s other than own acceptances). Recommendation: I t i s recommended that the purchase of b i l l s be made f r e e l y from member banks, with their endorsement, unless bearing otherwise s a t i s factory endorsements, those b i l l s , however, to be other than those accepted by the s e l l i n g banks. 3. Through brokers and accepting houses. Recommendation: That steps be taken by the reserve banks to encourage the development of the business of dealing i n b i l l s i n each of the reserve bank c i t i e s , as a f a c i l i t y for the development of t h i s market, and that dealers be encouraged by having f r e e access to Federal reserve banks, -3- X-1U59 to s e l l t i l l s and to carry them under a 15 day repurchase arrangement, 4, Through other Federal Reserve banks. 5. Through brokers or banks, other than reserve banks, of acceptances of member banks in other d i s t r i c t s . Recommendation: That Federal Reserve banks should not appear as purchasers of b i l l s in other Federal Reserve d i s t r i c t s , except through the Federal Reserve banks of those d i s t r i c t s # d. Sales of acceptances to other Federal Reserve banks with or without reserve bank endorsement* Recommendation: I t i s recommended that where voluntary open market purchases are made by one reserve bank through another reserve bank, no endorsement be expected or required. Where sales of b i l l s by one reserve bank to another reserve bank are made by mutual arrangement, endorsement may be required by the purchasing reserve bank and such transactions should promptly be reported to the Federal Reserve Board. That where rediscounts are X-l4j3 / - 4 arranged through the Federal Reserve Board, a t r a t e s f i x e d by the Board, endorsements should always be given by the borrowing bank. e. Expression of opinion i s asked as to d e s i r a b i l i t y of reserve banks making miscellaneous s a l e s of bankers 1 acceptances. 1. To member banks in i t s own d i s t r i c t . 2 . To other banks, bankers, brokers, or accepting houses in i t s own d i s t r i c t . 3* To baiks, bankers, brokers, or accepting houses i n other d i s t r i c t s . Be c o mnendat ion: It i s recommended that i t be the p o l i c y of the System that no s a l e s of b i l l s be made by reserve banks out of t h e i r p o r t f o l i o s , except to other reserve banks; but as a temporary matter, to aid in the development of the market f o r b i l l s among member banks, c e r t a i n reserve banks may f i n d i t necessary for the t i n e being to act as the agent of member banks in making purchases of b i l l s and to some extent to act as dealers in b i l l s f o r t h a t p u r p o s e . That Federal reserve banks may very properly buy b i l l s ' nfemBer banks, a s s i s t them i n t h e i r purchases by giving advice and taking d e l i v e r i e s for them. f. Necessity f o r general cooperative p o l i c y covering a l l i n t e r d i s t r i c t purchases, s a l e s and rediscounts- Recommendation: It i s the sense of the meeting that where one Federal reserve bank takes i t s b i l l s i n another Federal reserve d i s t r i c t , i t should be through the Federal reserve bank of that d i s t r i c t . Special Recommendation: That the Federal reserve banks be permitted, as l o c a l c i r cumstances warrant, to e s t a b l i s h f r e e luncheon f a c i l i t i e s for t h e i r employees , i n the b e l i e f that the expenditure involved w i l l be more than o f f s e t in economy of time and increased control of the e f f i c i e n c y of the workers. 3. BANKERS' ACCEPTANCES - GENERAL. a. To what extent i s inquiry made by reserve banks to determine e l i g i b i l i t y of bankers' acceptances. b. D i s t i n c t i o n — Foreign and Domestic Acceptances as t o Security Required at the time of ardsubsequent to Acceptance. (General d i s c u s s i o n - no recommendation) BANKERS' ACCEPT#CES — DOMESTIC. a. Use and abuse of domestic acceptances. be Custody of c o l l a t e r a l * c. Discrimination in purchases by reserve banks* Recommendation: The discussion developed the f a c t that there i s a growing tendency on the part of member banks to misuse and possibly abuse, the right of acceptance credits in domestic transactions. These abuses doubtless grow, in many cases, out of a lack of knowledge of what are correct practices, and to some extent out of d i f f i c u l t i e s incident to the war/ The principal abuses noted were in the employment of acceptance credits for transactions which are in f a c t loans upon commodities* In such cases the use of the acceptance credits i s frequently a subterfuge to escape the prov i s i o n s of Section 5200 of the National Bank Act, and in other cases an improper drawing of b i l l s against domestic shipment of goods * It i s the b e l i e f that i t would be a mistake to endeavor to correct these practices through general regulations applying to the purchase of b i l l s by the reserve banks. Recommendation: That the Federal Reserve Board obtain the s e r v i c e s of bankers who are thoroughlyfa mi l i a r with both domestic and foreign acceptance c r e d i t s , to prepare l i t e r a t u r e for use by the reserve banKs in educating their member banks in sound methods to be employed in a l l branches of the acceptance business. It was further recommended "that no attempt be made, by regulation of the Federal Reserve Board, t o control the method employed by member banks in conducting t h e i r business, u n t i l the l i t e r a t u r e above referred to has been prepared," Attention was directed to a memorandum in regard to a ruling by the Comptroller of the Currency, "If t h i s ruling i s s t r i c t l y construed, no bank buying the acceptances of another bank, in excess of 10 per cent of i t s own c a p i t a l , would be able to ascertain whether the provisions of section 5200 had been v i o l a t e d or not, without inquiry as to every transaction under which these b i l l s originated. The danger l i e s in the p o s s i b l e impairment of the marketability of the b i l l s , r e s u l t i n g from the fear of granting excessive loans to member banks through the account 1 b i l l s purchased 1 x-V-19j - 6 - The ruling of the Comptroller of the Currency i s as f o l l o w s : 11 Subject:Limitations of Section 5^00, as applied to bankers' acceptances. "Recently Mr. NewJrhsm, supervising examiner of the Comptroller f s o f f i c e , was c a l l e d to discuss t h i s subject i n the l i g h t of present practice and rulings of the Federal Reserve Board, and the theories of the Comptroller's o f f i c e . "He explained that in the Comptroller's o f f i c e i t has been held f o r many ye^rs that only paper which resulted from the sale of goods could be classed as commercial paper, a c t u a l l y owned, e t c . , or if b i l l s of exchange as b i l l s of exchange drawn against actually e x i s t ing values, that, the mere fact that there were goods as c o l l a t e r a l security pledged to a b i l l of exchange would not constitute actually existing values. "The opinion of counsel published in the Federal Reserve Bull e t i n of March 1, 1917> c i t i n g from the decision of the case of the Second National Bank of Oswego, versus Burt, 93 N. Y. 233> i s considered affirmative of this view. Mr Newnham a l s o inclined to the b e l i e f that with regard to acceptances discounted f o r or purchased from the acceptor, such purchase or discount constitutes a loan to the acceptor and would be l i a b l e to the limitations of the statute as borrowed money; that they could not be considered as commercial paper actually owned, e t c . , by the acceptor offering them f o r sale or rediscount. "Also, that with regard to b i l l s drawn on a n a t i o n a l bank against the pledge of goods in warehouse owned by the drawer: (a) If the b i l l i s taken by the acceptor that i t i s merely a secured loan and f a l l s within the limitations of the s t a t u t e . (b) That in the hands of a third party as there i s no sale f o r goods antecedent to the instrument i t is within the limitations of the statute and could not be held by a national bank purchaser for an amount inexcess of 10 per cent of the capital stock and surplus of the national bank purchaser," 5. LOANS TO MEMBER BANKS: a. What i s the p o l i c y with respect t o discounts by reserve banks of notes and b i l l s secured by commodities; margin required. Rec ommendat i on: In view of the statements made, i t seems to be the opinion of the meeting that special conditions e x i s t in only one or two of the Federal reserve d i s t r i c t s , and they had. best be dealt with d i r e c t l y by the Federal Reserve Board with the banks in those d i s t r i c t s , rather than be made the subject of a recommendation by t h i s meeting. -0 I . b. The attention of the Board has been c a l l e d to what has been termed "extraordinary l i b e r a l i t y " of loans to small member banks.The margin between the reserve bank discount rate and the r a t e charged to customers of rediscounting banks, tends to encourage easy c r e d i t . Recommendation: I t i s the sense tif the meeting that during the period when the Government i s making Such heavy demand Upon the banks, i t i s impossible to r e s t r i c t the l i n e s to individual bortowers, as would otherwise be the case, and individual inagiry and remonstrance as a general practice i s checking the tendency on the part of member banks to profiteer*. The development of the special department of examination in the reserve banks has provided f a c i l i t i e s f o r making not only special c r e d i t investigations in cases where needed* but examinations of member banks themselves, with a view to checking up their condition and improving their banking p r a c t i c e . In general, the examining board f o r the reserve banks cooperates with the examiners of the State Banking Departments. 6. CREDIT STATEMENTS. a. Extent to which reliance i s placed:upon the standing and cond i t i o n of an endorsing bank and i t s c e r t i f i c a t e a s to e l i g i b i l i t y of notes submitted for rediscount, rather than determination as to e l i g i b i l i t y as well as d e s i r a b i l i t y , through analysis of financial s t a t e ment of the payers of the notes rediscounted. Discussion of t h i s topic d i s c l o s e s the f a c t that a l l the reserve banks require financial statements for a l l commercial paper discounted where the regulations of the Board require i t . In the case of some of the reserve banks, statements are required where the amount of the note taken i s considerably l e s s than the maximum required by regulations of the Board. In general, a l l large l i n e s of paper taken through the member banks are considered not only upon the standing and condition of the endorsing bank, but also the value and quality of the paper discounted. b. Corporations operating subsidiary companies; suggested requirement, that such companies furnish to reserve banks, separate f i n a n c i a l statements of parent and a l l principal subsidiary cooperations as of the same date. Recommendation: In the opinion of the meeting, i t i s desirable that separate f i nancial statements of parent and principal subsidiary corporations as of the same date, be furnished. ?. EE-DISCOUNTS BETWEEN RESERVE BANKS. At present when the reserve bank percentage against combined note and deposit l i a b i l i t i e s i s reduced to about f o r t y per cent, b i l l s are sold to or rediscounted with other Federal reserve banks. At present,, the reserve percentage of a number of reserve banks i s i n excess of 6.5$. I t has been suggested that the rediscounting point be r a i s e d from 40 to 45 per c e n t . -S, x-1459 Recommendation: I t was the unanimous view of the meeting that there should be no change in the present p r a c t i c e . 8. CREDIT BAROMETRICS. Consideration of the suggestion made by A. Wall of Detroit, that a Bureau of Barometrics be established by the Federal Reserve Board, Would the b e n e f i t s warrant the expense? Rec ommendat ion: I t i s the unanimous b e l i e f of the meeting that the b e n e f i t s of the employment of t h i s service would not warrant the expense involved. 9. RESERVE BANK BUILDINGS. Need for cooperation and interchange of ideas in the development of plans for the erection of new bank buildings, i n s t a l l a t i o n of vaults and other equipment. Rec ommendat i on: After f u l l discussion, i t was the unanimous opinion of the Governors of a l l the reserve banks, that i t would be desirable to adopt the suggestion of the Federal Reserve Board, that an architect be employed to act as a clearing house for information in regard to building plans between a l l of the reserve banks, and to act as advisor to the Federal Reserve Board i n giving approval of certain plans. The meeting also favored the employment of Mr. Alexander B. Trowbridge, as recommended by the Board. 10. RESERVE BANK INSURANCE. Central Insurance Agency: I s i t desirable to e s t a b l i s h or appoint a central insurance agency to represent a l l the Reserve Banks in placing registered mail and other insurance? I t i s claimed that t h i s plan w i l l have the advantage of uniformity in p o l i c i e s and rates, and that better r e s u l t s w i l l be obtained f o r the twelve banks acting in unison rather than as twelve separate unitS"sat present. Limited Self Insurance: A Reserve bank has submitted to the Federal Reserve Board f o r approval a plan f o r the readjustment of i t s f i d e l i t y insurance, which contemplates: a. Primary individual bonds. b. Excess insurance, bankers* blanket policy,and Lloyd's blanket p o l i c y to be continued u n t i l accumulation in "self insurance fund" would j u s t i f y the discontinuance of such excess insurance. c. The s e t t i n g aside annually out of earnings of a stated sum over and above c o s t of primary bonds and excess insurance while the l a t t e r i s maintained, to c o n s t i t u t e an insurance reserve fund. I t has been suggested that i f t h i s plan can l e g a l l y be adopted, i t might be w e l l to have that or a similar plan in other Federal Reserve banks, or -9- * X-1U59 have the twelve banks j o i n i n e s t a b l i s h i n g one"Insurance reserve fund." < (Mr. Kenzel was appointed Chairman of the Committee with authority to s e l e c t representatives from two other reserve banks to a c t with him as a committee in making recommendations covering uniform p r a c t i c e of r e s e r v e bank insurance^ which recommendations are to be submitted i n w r i t i n g to the reserve banks at a l a t e r date. Committee was a l s o authorized to make a study of pension fund p l a n s . ) 11. BRANCHES* OF FEDERAL EE SERVE BANKS. su The extent of service rendered to member banks. b. The value of such service to member banks of the d i s t r i c t in which the branch i s located. Recommendation: In the opinion of the meeting the s e r v i c e s rendered to member banks f o r the establishment of branches, i n furnishing prompt supplies of currency and c o l l e c t i o n f a c i l i t i e s , are of s u f f i c i e n t importance to j u s t i f y the establishment of a system of branches, even though the expense involved i s considerable, and frequently without regard to the earnings of the branches from discount operations* Geographical conditions l a r g e l y determine the extent of the t r a n s i t f a c i l i t i e s in each branch. The extent to which branches are permitted to grant c r e d i t s to member banks must be governed by l o c a l , geographical, and other conditions, which vary so greatly i n the d i f f e r e n t d i s t r i c t s that no general formula can be stated to govern that type of business. c. The extent and value of service rendered by the branch to other Federal reserve banks. Recommendati on: The extent and value of service which may be rendered by branches to other Federal reserve banks l e confined almost e n t i r e l y to the e f f e c t i n g of prompt c o l l e c t i o n s and transfers, which w i l l be developed with experience, d. Cost of operating branches. Recommendation: In the opinion of the meeting, the value of the branch should not be measured by i t s earnings or by c o s t of operation, but by the value and e x t e n t of the s e r v i c e s which i t i s capable of rendering to the member banks, to the parent bank , and to the other reserve banks. In the c a s e s of branches e s t a b l i s h e d for the purpose of supplying currency and t r a n s i t f a c i l i t i e s , w i t h discounts conducted i n the head o f f i c e , no earnings can be shown, and the only measure of the value of the branch would be the volume and value of the s e r v i c e s rendered. To a considerable e x t e n t , the added c o s t of the branch represents a reduction i n the c o s t of operating the main bank. e. Branches with l i m i t e d functions, f . Use of agencies instead of branches* -10- ' X-1459. Recommendation: • I t i s the opinion of the conference that we have not s u f f i c i e n t experience at this time to enable us at this time to form a d e f i n i t e opinion upon this very important question. When we have further experience and have learned what the developments of the agency at Savannah are from Governor Wellborn, and possibly from other Governors, in d i s t r i c t s where agencies have been established, we w i l l probably be in a position to make recommendations. 12. CONCENTRATION OF GOLD AT FEDERAL RESERVE BANKS. a. P o s s i b i l i t y of further increase in gold holdings* b. Demand for Sold. 1. In exchange for Federal reserve notes . received at Federal reserve banks. 2. For other purposes. Recommendation: 1. That the Federal Reserve Board send s p e c i f i c directions to each Reserve Bank, c a l l i n g attention to the importance that no obstacle shall be offered at any reserve bank or i t s branches to the immediate redemption of Federal reserve notes in gold. 2. That each reserve bank be requested to keep a careful record of a l l receipts of gold and the sources from which the gold comes, and of a l l payments of gold and the purposes for which the payment i s made, whether for redemption, for manufacturing purposes, for export, for reserves of banks, or otherwise; that this information be assembled in a report to be rendered monthly to the Federal Reserve Board in such form that the actual gold movement through the reserve system can be calculated and made a matter of record. 13- INTER-DISTRICT COLLECTION SYSTEM. a. Suggestions as to improvement in present f a c i l i t i e s , so that reserve banks may render increased or better service to member banks. Recommendation: The meeting recognized that the principal improvement in present f a c i l i t i e s w i l l consist in an increase in the number of banks remitting at par, and that aggressive steps, should be taken, a f t e r the next Liberty Loan, with the object of putting a l l non-member banks on the par l i s t . b. Desirability of harmonizing present i n t e r - d i s t r i c t time schedules, at l e a s t between Federal Reserve c i t i e s . Rec ommendati on: A committee of transit experts i s now engaged in the study of time schedules, with the object, among others, of harmonizing present interd i s t r i c t time schedules, and they expect shortly to submit a report. The committee of transit experts w i l l include in their report -11- 4 X-1459 various proposals for the reduction of f l o a t carried by Federal Reserve banks, including r e v i s i o n s of i n t r a - d i s t r i c t and i n t e r - d i s t r i c t schedules c . Reduction in f l o a t carried by reserve banks. Recommendation: I t i s recommended that the Federal Reserve Beard secure from the Treasury Department such rulings as w i l l reduce the f l o a t now arising by reason of immediate credit for the various checks received on deposit in Federal Reserve banks as the Government's f i s c a l agents. d. Recommendation of Federal Advisory Council that items be sent d i r e c t l y to c i t y or town in which they are payable* Recommendation: I t i s urgently recommended to the Federal lbserve Board that no extention of the plan for direct sending of items be now undertaken u n t i l the number of par points i s increased and u n t i l the mechanical problems of the c o l l e c t i o n system are more f u l l y developed and the system i s working smoothly. In addition to the recommendation above mentioned, the attention of the Board i s c a l l e d to the probability of the nenewal of an aggressive campaign, under the leadership of the smaller banks of the country, to secure the restoration of exchange by ametidment to the Federal Reserve Act. 14. LEASED WIRE SERVICE. a. Probability that entire c o s t w i l l have to be assumed by reserve banks after the Victory Loan campaign has besn completed. b. Suggestions as to improvements in present service. (Governors McDougal and Fancher were appointed as a committee to consider the matter of increasing e f f i c i e n c y , and a l l other points in connection with the operation of the wires; also to consider and report upon the subject of the use of codes.) 15. PENALTIES FOR DEFICIENCIES IN MEMBER BANK RESERVES. D e s i r a b i l i t y of adoption of uniform method of determining d e f i c i e n c i e s in reserves, and assessing p e n a l t i e s . (Governor Fancher offered a motion f o r a uniform method of c a l c u l a t i n g reserves, which motion was duly seconded and carried.) Recommendation: After the above r e s o l u t i o n was adopted, i t was found that the p r a c t i c e s , which vary in the d i f f e r e n t Federal Reserve D i s t r i c t s , cannot be changed by agreement among the Governors, and i f uniformity i s to be obtained i n the method of c a l c u l a t i n g d e f i c i e n c i e s in reserves, i t w i l l be necessary to have i t adopted by a r e s o l u t i o n of the Federal Reserve Board, the a l t e r n a t i v e being the continuance of methods which are not uniform in the d i f f e r e n t d i s t r i c t s . The d i s c u s s i o n developed that there are p e r s i s t e n t offenders against the reserve requirements —12— ' X-1U59 in some d i s t r i c t s , and. i t i s suggested that any rule which may be developed for uniform method of c a l c u l a t i n g d e f i c i e n c i e s , provide an exception in the case of these i n s t i t u t i o n s so that they may be more severely dealt with. 16. FORM OF APPLICATION FOE EMPLOYMENT AT FEDERAL RESERVE BANKS. Becommendat ion: I t i s r e s p e c t f u l l y suggested that the Federal Reserve Board consider whether a ruling should not be issued as to the form of blanks used by applicants for p o s i t i o n s with Federal reserve banks, which would e l i minate the p o s s i b i l i t y of c r i t i c i s m a r i s i n g on account of some d i s crimination in matters of race or r e l i g i o n . I t i s a l s o suggested that i t may be advisable, in the interest of the system, that employees of Federal reserve banks should only be c i t i z e n s of the United States, or those who have declared their intention of becoming c i t i z e n s . 17. NATIONAL BANK NOTES. Suggestion of Federal Advisory Council that reserve banks receive national bank notes on deposit, and pay out in place of them clean Federal reserve notes. Recommendation: Unanimously disapproved. 18. OFFICERS OF FEDERAL RESERVE BANKS ACTING ON COMMITTEES OF BANKING ASSOCIATIONS. Re c ommenda t i on; I t i s the unanimous view ofl the meeting that the recommendation of the Governors, made i n 1917# that o f f i c e r s of reserve banks should not serve on committees of banking associations, be followed out. 19. DIRECTORS AND OFFICERS OF F.R. BANKS - MENTION (F CONNECTION WITH FEDERAL RESERVE BANK IN DEALING WITH PRIVATE ENTERPRISES IN WHICH THEY MAY BE INTERESTED. Recommendation: I t i s the understanding of the conference that the Federal Reserve Board has taken cognizance of the p o s s i b i l i t y of embarrassment arising , in t h i s matter, and the conference expresses i t s hearty endorsement of the views entertained by the Federal Reserve Board. 20. PAR POINTS - CAMPAIGN FOR ADDITIONAL PAR POINTS. (Covered i n recommendation submitted to Board on Topic 13 )A.) 21. CHECKS AVAILABLE BUT NOT PAYABLE AT A FEDERAL RESERVE BANK. Suggestion that clearing houses put on discretionary l i s t s checks marked "The amount of t h i s check i s immediately available without deduction, upon presentation at the Federal Reserve Bank of ." Recommendation: The meeting recommends that the p r a c t i c e described under t h i s heading should, i f p o s s i b l e , be checked and u l t i m a t e l y eliminated, X-1459 ^2, SUGCESTED AMENDMENT TO SECTION 5202 OF REVISED STATUTES. Suggestion by Federal Advisory Council removing l i m i t of b i l l s that a bank might negotiate by endorsement* Be c omrrenda t i on: Advisory Council's recommendation approved. 23. FAILURE TO OBTAIN DUPLICATE CHECKS TO REPLACE CHECKS DEPOSITED BY THE COLLECTOR OF INTERNAL REVENUE, AND LOSf IN THE MAILS. Recommendation: The conference unanimously recommends to the Federal Reserve Board that the Board send a circular l e t t e r to a l l Federal Reserve Banks requesting a report as to the extent of the d i f f i c u l t i e s and of possible l o s s e s which they have encountered by reason of l o s s e s in the mails of checks deposited by the Internal Revenue Collectors . of which duplicates cannot be obtained by reason of the f a i l u r e of the c o l l e c t o r s of internal revenue to keep adequate records and descriptions of checks so deposited. I t i s further recommended that upon receipt of these reports» the Federal Beserve Board undertake in behalf of the Federal reserve banks to secure siich r e l i e f ill this matter as the treasury Department i s able to a f f o r d . 24. PENALTIES FDR DEFICIENCIES IN RESERVE. (On the program suggested by the BoardTopic 15.) Recommendation; None. (Topic discussed under Topic No. 1 5 . ) 25. UNIFORM TITLE FOR BOND DEPARTMENTS. Recommendation: None. 26. ADVISABILITY OF SECURING AN AMENDMENT TO THE POSTAL LAWS, INCREASING THE WEIGHT LIMIT ON FRANKED MAIL MATTER. Recommendation: None. 27. OUR GENERAL CAMPAIGN FOR ADDITIONAL PAR POINTS, AND IN CONNECTION WITH THIS, OUR CAMPAIGN FOR INCREASING STATE BANK MEMBERSHIP. Recommendation: None. (Covered i n the d i s c u s s i o n under topic No. 13 •) 26. HOW CAN EXCESSIVE BORROWING ON THE PART OF INDIVIDUAL BANKS BE BEST REGULATED. Recommendation: None. (Covered in discussion under topic 5-B.) 29. EXCHANGE CHARGED BY NEW YORK BANKS ON FEDERAL RESERVE EXCHANGE DRAFTSRecommendation: I t i s recommended that Federal Reserve Exchange Drafts be placed on the par l i s t s of a l l Federal reserve banks. 30. UNIFORM FORM OF ENDORSEMENT STAMPS USED BY FEDERAL RESERVE BANKS AND THEIR MEMBERS AUTHORIZED TO SEND ITEMS DIRECT. • Recommendation: I t i s recommended, that the subject of uniform endorsement stanpe be referred to the special committee of transit experts f o r investigat i o n and recommendation. 31, PRESENT METHOD OF RECOVERING FOR POSTAGE AND INSURANCE FOR SHIPMENTS BETWEEN FEDERAL RESERVE BANKS. RecOmmenidation: I t i s recommended that this question be referred to the next meeting of Auditors of Federal reserve banks. 32. REAL ESTATE AND BANK BUILDING. (Board's topic No. 9 . ) Recommendation: Subject discussed and recommendations made at the meeting o§ the Governors, on Thursday, March 20th. 33- DUTIES OF THE FEDERAL RESERVE AGENT, AND PROPER COORDINATION OF HISTORKWITH THAT OF TEE GOVERNOR.Recommendation: After discussion of the above topic, the conference requested the Chairman to discuss this subject informally with Governor Harding. 34. FORMATION OF CREDIT DEPARTMENT AND THE EXTENT TO WHICH THE BANKS ARE JUSTIFIED IN GETTING FIRST HAND INFORMATION REGARDING PAPER OFFERED FOR REDISCOUNT (Topic discussed at an e a r l i e r session under heading No. 6, credit statement.) 35. CALCULATION OF INTEREST; Treasury Department pays on a 365 day b a s i s while a l l the Federal reserve banks except those of New York and Boston calculate i n t e r e s t and discount on a 360 day b a s i s . Cannot uniformity be obtained in t h i s regard. Recommendation: I t i s recommended that discounts with Federal reserve banks and between Federal reserve banks, be calculated on the b a s i s of 0365 days a year, beginning July 1 s t , next. 36. NECESSITY FOR THE BANKS MAINTAINING AN AGENCY TO COUNT AND WITNESS THE DESTRUCTION OF FEDERAL RESERVE BANK NOTESRecommendation: I t i s suggested that the Federal Reserve Board ascertain from each of the Federal reserve banks the total cost and the c o s t per thousand of present f a c i l i t i e s , and the probability of an increase in the cost for witnessing the destruction of Federal reserve bank notes, at the Treasury Department i n Washington. I t i s also r e s p e c t f u l l y suggested that the plan recommended by Mr. Emerson to Mr* Broderick be examined with a view of determining whether that, or some other plan, cannot be adopted, which w i l l r e l i e v e -15i i x-1459 the banks of this expense, or at l e a s t reduce i t . Governor McDougal: I would l i k e to bring up the subject of forwarding to Washington mutilated Federal Heserve notes. Under the present practice, such notes are forwarded to Washington uncancelled^ registered mail, insured or expressed, and the cost of such shipment charged to the Federal reserve bank issuing the notes. .This cost would be very materially reduced i f we could be permitted to ship mutilated Federal reserve notes of other Federal reserve banks to Washington in the same manner as we do our own. During 1918 a saving of $5,993* 53 could have been made on Federal reserve notes shipped to Washington by us for other Federal reserve banks, and on our Federal reserve notes shipped by them. From this you can see that the saving for the twelve d i s t r i c t s would be well worth while. . Governor Strong: I t i s suggested that the Federal Reserve Board give consideration to the adoption of some plan by which Federal reserve banks may be permitted to ship reserve notes of other Federal reserve banks, u n f i t for circulation, cancelled and s p l i t , as they do with their own notes.
@FedFRASER