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FEDERA REIERVE BANK

January :J0,1915.

.

dear Governor Seay:-

an sending you, uneler aeparate cover, a set of circular
letters and forms issued by the old Fund Connittee adviairc contributors

in repu. 1 to the dtstribution of the Fund, which aro self-exT4anatory.
A largo nunber of the contributors have taken advantage of
the "Second" .maiti as set forth in the (.otrlittet's

circular of Jr y 27,

19184 desiring a check of the Federal "eserve Bank of New York in lieu

of the actual gold.
are therefore issuing our cashiers checks to contributors
desiring our checks and receiving a draft on the Asaistant Treasurer
of the United States in New York to offset the *mount of Checks so issued
It was originally intended to request member banks to deposit with the Pederal,Reserve Bank in their district the check issued

to them, but as the majorlLy seem to desire to have checks issued to
their New York Correspondents fOr

accountn instead, it will be
irTossible for us to determine the amount of the chocks v4hich will be
deoositol:, witlrthe various Federal Reoerve Banks.

raspoctfully,

George J. Softy, nag.,
Governor, Federal Reserve Ban%,
Riehmond, Va.



IAN

30 -315

FEDERAL RESERVE BANK




Jan. 29th, 1915.

4y dear Governor Seay:

It ia disappointing to learn tht you will
not .be able to attend the meeting inshington on the
4th, and you will also understand, I judge, that on
that account, I am unable to accept your kind invitation
e.lOrrluncheon that day.

Later on, I hope to have the pleasure of seeing
you in Richmond, but for this week and some weeks to

come, I am going to be pretty hard pressed for time.
With many thanks for wishir4; to have mo with
you and meet your Richmond friends, I am,

Very truly yours,

Governor.
George

Governor, Poderal Ileserve Ba71k,
Richmond, Va,
BSJr/VG24,7

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FEDERAL RESERVE BANK OF RICHMOND

FIVED

FFR 2 1915

10 97

February 1.19].
i'LtERAL RESERVEBANK
OF NEW YORK

Benjamin Strong, Jr., Esq., Governor,

Federal Reserve Bank of New York

F.40. sTR,Oblal
PS`39010't.

New York, N. Y.

Dear Governor Strong:
Please accep

30th and for the circula
of the GOld.-Tund,

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our thanks for your letter of the

matter relating to the distribution

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BE IT RESOLVED:
let.

That the Directors of this Bank have received with

profound regret and dissent the reply of the Federal Reserve Board
to the resolutions of this Board passed at a meeting held on the 4th
day of March,

1915v relating to the salary of the Governor of this Bank.

2nd.

That the Directors of this Bank are and will be held to
be responsible for its management;

that by reason of residence away from

the seat- of management on the part of those not officially connected with

the Bank they are compelled to act through a chosen representative to a
greater degree than the Directors of

ordinary

of this Bank is its Executive head;

appointed by the Directors to

represent them in the administration of

that the Governor

banks;

its affairs, and is

responsible

to them for its efficient management and in all dealings with its stock
holders, the member banks, by which the majority of this Board are
elected:

3rd.

That in selecting a Governor the Directors of this Bank
were actuated by a high sense of their responsibility;

that they are,

and should be, free to determine for themselves the person, the ability,
experience and qualifications desirable and necessary for the responsible

position, and are and should be free to control within reasonable limits
the compensation which should be paid and may be necessary to be paid
to their representative, realizing that it is but a narrow step be*ween
the control of the Governorship and the control of compensation for that
office, and moreover, acutely conscious

that

the compensation carries with it the power to

the right or power to fix

defeat

any appointment to

said office:
4th.
TAWG

in overruling the deliberate judgemant and unanimouae

action of this Board taken in the best interests of the Bank, and in
arbitrarily fixing the salary of the Governor after his election by this
Board and the determination of a proper and reasonable compensation,

(which judgment is sustained by a comparison with salaries paid in other



0

Federal Reserve Banks), the Federal Reserve Board has abridged the autonomous management of this Bank in a manner which, is not in our opinion
warranted except upon misuse of the powers of Directors or a gross error
of judgment, and that in taking such action involving the personal responsibility and the integrity of the judgment of the Directors in a matter
peculiarly within their

province, the

Federal Reserve Board has assumed

a control over the authority of Directors which cannot in the future fail

to prove dangerous to the

exercise of independent judgment.

Such action

is viewed by us with grave anxiety, and will in our opinion tend to create
uneasiness and alarm among the member banks, already jealous of
nomy, and of their part in the conduct

of the

thil/tUto-

Federal Reserve System through

Directors elected by them tp represent themselves and their business interests.
5th.

That the Directors of this Bank desire to place on record
their belief that the success of the Federal System of banking, as at
present constituted and governed, lies in giving the fullest measure of
%utonomy possible to Federal Reserve Banks i4 in order to develop that close

Sympathy and feeling of local

interest and understanding between the

management and Directors and the member banks in the several districts,
which would otherwise be impossible in this great country with its complex

relations, and which in our judgment is
lishment

of confidence

absolutely essention to the estab-

and good will, and is particularly essential in this

connection in order to bring State banks into the System:
6th.

That the present action of this Board is based upon a deep

conviction of its duties and responsibilities, As just and independent
powers, and is not determined by its relations to
4

the present

Governor of

this Bank, who in our opinion, however, combines a knowledge of the science
of banking, a familiarity with the details of its practice and of account-.
ing, with

a

sound judgment of the correct principles of credit, in. .a higher

, degree even that this Board believed he possessed at the time his salary

4

was fixed by this Board.
7th.

Thta it is the desire and purpose of this Board to
co-operate with the gederel Recerve Board with mutual understnading having




only in mind the development of the Federal Reserve System

possibilities of good, and to

that end its

to its

best efforts will

highest

be always

directed.
8th.

That the Directors of this Bank regard it their sacred
duty

to point with deep

concern to the actio# of the Federal Reserve

Board, in the following particulars:

The repudiation of the judgment and unanimous action
of the Directors of this Bank fixing the salary of the Governor.
The announcement, see First Annual Report of the Federal

Reserve Board, page 190, that this Bank had fixed the said salary
at $10,000.00, whn in fact no such action was taken by this Bank
or its Board of Directors.

The arbitrary fixing of said salary by the Federal Reserve
Board, thus usurping in our opinion one of the prerogatives
Bank's Directors, see paragraph 44 of section 4

of

this

of the Federal

Reserve Act.

That against
writing is filed as a

and on account of the foregoing this paper

respectful but solemn

that the same be made a part of the minutes
copy be transmitted

to the Federal

protest, and it is directed

of

this meeting, and that a

Reserve Board.

(Signed)

John F. B ruton,
Edwin Mann,
R. Coker,

James F. Oyster,

Waldo Newcomer.
4




(By wire),

Your Special Committee to whom was assigned the duty of

preparing

resolutions relative to the actions of this and of the Federal Reserve

Board bearing upon the Governor's salary, beg to submit the following pre-

amble and resolutions, the adoption of which we respectfully recommend:
WHEREAS, the Board of Directors of this Bank did on the

day of November, 1914, fix the salary of the Governor of the Bank at
Fifteen Thousand Dollars from the date of his election, to-wit: October

5, 1914, same to be payable monthly; and whereas, upon report of this action
to the Federal Reserve Board same was not at once acted upon, but through
a semi-private

letter of one of

the Federal Reserve Board the sum of ten to

twelve thousand dollars was suggested; and whereas, at the succeeding meet.
ing of this Board resolutions in

support of

our action were adoreted, and

forwarded to the Federal Reserve Board for consideration, and to which
and Whereas, later a Special Committee by our

reference is here made;

inetructions

visited Washington and laid the matter

before Ur. Harding

of the Federal Reserve Board, report of this conference having been made to

this Board; and whereas, following a full and fro* discussion it was mania.

this Bank would be pro-

mously agreed by this Board that the interests of

moted by paying the Governor the salary first named,
Thousand Dollars;

tip4vit:

Fifteen

and that it would be proper to respectfully urge

Federal Reserve Board to reconsider its

the

action disapproving the amount of

salary fixed by this Board as aforesaid, and that resolutions be submitted

setting forth some *four

well

considered

reasons:

NOW THEREFORE RE IT RESOLVED:
1.

That in justification of our action we respectfully emphasis*

the reasons heretofore assigned and hereinbefore

referred to,

copy of

which here follows, to-wit:

(COPY OF RESOLUTIONS ADOPTED NOVELBER
NO

1910

THEREFORE BE IT RESOLVED that the Board in support of its

action of last meeting in fixing the salary of the Governor at the sum
of fifteen thousand dollars per annum, to begin from the date of his



election, October 5. 1914, same to be payable monthly;

That this salary mover as well th8 services to be rendered by
Mr. Seay, the Governor, as a member of

the

Federal Advisory Counsel;

Respectfully submit the following as some of
support of the foregoing

the reasons in

and the same are submitted to the Federal

Reserve Board, through the Federal Reserve Agent, as follows:
A majority of the

Board of Directors are direot re-

presentatives of the steekholders of this Dank, and as an excess expense ratio will primarily affect the interests of coin' electors, the

member banks, to whom we regard ourselves as personally accountable, we have
given the matter of the salary of the Uovernor our most careful consideration.

The incumbent of this office, Ur. George J. Seay, is, in our
opinion, by equipment and experience eminently qualified to fill a position
supported by a salary of this amount.

*e are informed by outside indisputable authority that he
has within the last twelve months declined a position of very high trust
at a salary of twelve thousand ($12000) per annum.
We have advised with responsible representatives of some
of the largest member banks in the District, and they have

counselled us

to fix the salary at not lees than fifteen thousand dollars.
kr. Seay's usefulness to this Bank

as Governor will be

crippled, and the Bank's position in the District suffer should the
salary be fixed at a less amount, for that, the highest salary paid by any
bank in the City of Richmond

is

larger 01, 43000 and one of the next highest

is lose than the salary named by a like sum.

6:

A large majority

of the banks in the territory composing this

District are State banks and the prospects of securing them as members will
be improved by the rank

immidiately accorded the Federal Reserve Bank of

Richmond, aid by the remarkable tact1 ability and especially by the clearness of thought and expression possessed by Ur. Sooty -- all of which can be

be assured by the payment to him of a proper compensation, vihich we find



to be not less than fifteen thousand dollars.
And we burden him -further, without extra pay, with the responsible

duties of representing this Bank as a member of the Federal Advisory Counsel,
7.

By virtue of conditions confronting the Board, it is practift

cally impossible for its members to give the bank daily or even weekly

personal attention, and se long as the responsibilities incident to its
management remain none the less their own, the membensof the Board are not

content to place a smaller estimate than the amount named on the services

to be expect ed !rem the Xxecutive of the Bank.




3.

AS FURTHER RAt3OSV% RSDPECTFULLY S'JBMITI

That in many of the districtø the salary of the Governor is twice
ects.

the amount of the salary of the Federal Reserve Agent, and that in
rev* one, to-wit;

nviistritt

District #10, is the salary of the Governor fixed the

sumo as that of the Federal Reserve Agent, and it is respectfully suggested

that this having been done by the Board of Directors of that District there
were undoubtedly well considered local reasons for sueh action. And further,-

that no schedule or p len has been followed in fixing the salaries of the
Governors or other officials, and the judgment of the directors, guided by
circumstances and the fitness of

That the action of the

'the

an for the position has

Federal Reserve Board in

prevailed.

disapproving the

amount of salary 'fixed by us for the Governor unconsciously or othervi se

disoriminated against this

District, or

will be so construed, for that the

aggregate amount of the salaries of the other Governors is 60 larger than
the aggregate amount of the salaries of the other Federal

Reserve

that the chief reason given by the Board for its action -

to..wit- the desire

Agents, and

4

not to burden the bank

with expense has proven by the

operation of the bank to

be less applicable to this district than to any other.

That the responsibilities of the

Adminietrntive head of this Dank

are as large comparatively, if not larger, and probably more complex than any
other District

in the system.

That the work of the 'Executive or Administrative department of this

Bonk is in advance of any other District
tag the fact

in the system, and thip,

that the duties of the Cashier have thus

notwithstand.

far boon discharged in

part by the Governor, effecting a saving to the Bank to date of from sixteen
hundred to two thousand dollars.

That

after full revieW in the light of all knowledge and developments,

we are firmly convinced that the action of this Board was just and well founded.




WHEREFORE WE R

FULL! ask that the

Federal Reserve Board re-

consider its action and conftra the judgment of (4111-44aiitvievel-e4-4h*-Aa414n

of-I- this Board in fixing the Governor's salary at Fifteen Thousand Dollars.

4




5.

PERSONAL.
Febr-zzy 24th, 1915.
Dear Mr. oeay:

I have been trying every minute since receiving yours of the

9th inst., to write You a longhand lotter, but it has literally been
impossible on account of engagements at home, my absence from the city

and the tremendous amount of work at the office.

I am moot :Incious to have a serious talk with you along the

lines of your letter, and as we are to have a meeting of the Clearance
Committee at an early date, X take this opportuniLy to drop you a line

to sugt',vst that we got off in a corner adri talk it over then.

Is

this soon enowth to meet your own views?

Please accept apologies for my delay in writing you,which
absolutely unavoidable, also, my very warmest regards.

Very truly yours,

George J. ;4,

,,:,

Governor, Pèral Resorve Bank,

, Richmond, Va,

3S Jr.




was

FEDERAL RESERVE BANK OF RICHMOND

VC

r

;

FILING DEPT.
APR 2 - 1915
mar FEDER/it RESERVE BANK

My dear Governor Strong,

By the time this reaches
New York you probably will have returned from your
short vacation, which I hope you greatly enjoyed.

The enclosed will explain
itself.

I am very much in-4erested to know your

comments upon the suggestion of the Board.

With kindest regard, I am
Very truly yours,

Benjamin Strong, Jr., Esq.,
Federal Reserve Bank,
New York, N. Y.
Enc.

4




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4,-

IN G DETT.
7."') 4 w 1315
;-LdERAL RESERVE BANK




April 9,
1 9 1 S.

Dear Sir:

.1a". Strong returned to the office on Mon-

day, and since that time has been 30 busily engaged

that he has found it impossible to reply to the tuo
letters received from you in his absence.

He has

asked ma to write and apologize for the delay and
advise that you may mcpect to hear from him in a day
or two.

Very truly yours,
Secretary to Mr. Strong.

George J. eay, Esq.,

Governor, 7edoral Reserve Bank,
rtiohmou4*..
Vett

April 12, 1913.

PFRSOAAL

Thar Mr. Seay:

This to

ry

first opportunity to reply to your letter of the

:6th, and to return tho enclo,mres,

vith

whInch I now do, having read them

rtreat intorsat and very syGrathetically.

On some of these matters, :18 you particularly tUlly realize,
I have relied a great deal upon Mk. Curtis' juagment and exnerience,
and if you felt warranted in 5:uthorising mo to

I would be glad to do so

talk this over with him,

then diecuas it with you very frankly at

our next moetina, which likely will occur in Washington on sous clearance matters before very long.

fact

Of course? I 3M conscious of the

that it is none of my business officially, but I am nevertheless very

much interested as your

It

113,5

tion along these linos in Washington,

be:Iring on our last conversar

and having that also in mind

I would like to talk it wrer with you when next we r...re in Vashington.

If you feel justified to-permit Irv) to talk this over with Mk. Curtis,

I will do so right away, in which mIse

might be deairable for you

to return the enclosures.

Very truly yours,

Governor.
4

George J. Seay, Esq.,

Governor, Federal Reserve Bank of Richmol7d,
Richmond, Virginia.

BS,Jr.:010

ales.




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3EORGE J. SAY
RICHMOND. VIRGIN IA

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GEORGE J. SEAY
RICHMOND.VIRGIN IA

December 23rd,

1915:

Benj. Strong, Jr., Esq.,
Federal Reserve Bank,
New York City.

Dear Mr. Strong:

This is to give you my very best wishes for a
happy Christmas and a most prosperous New Year, and I
wish to take the occasion to express the very great
pleasure derived frem our personal intercourse during
the past year, and the hope that the

have grown

friendships which

up among us will be strengthened in the

coming year.

With my warmest regards,

Sincerely yours,

c)




,

GEORGE ...I. SEAY
RICHMOND. VIRGIN IA

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FEDERAL RESERVE BANK OF RICHMOND
FIFTH DISTRICT
DI RECTORS

OFFICERS

JAMES A MONCURE

CALDWELL HARDY.
GEORGE U SEAY. GOVERNOR

CHAS A PEPLENICE GOVERNOR
GEORGE H KEESEE.cAsHIER

DEPUTY FEDERAL RESERVE AGENT

CHAIRMAN AND FEDERAL RESERVE AGENT

H El_WILCOX. BP LTIMORE. Ho.

EDWIN MANN.eLucFIELo w.VA.

JAS_F.OYSTER.wAsHINGTON o C.
JOHN F. BRUTON,wiLSON N c.
EDMUND STRUDWICK,RiCHmONo

H.GOUVERNEUR .WILMINGTON,
D R.COKER, HARTSVILLE, s.c

October 27th, 1916.

Benjamine Strong, Jr., Esq.,
The Lewiston Estes Park,
Colorado.

My dear Strong:

I have thought of you many many times, and hearing that you like to
receive letters from the seat of war I have determined to send you this so
that I may hear from you directly as to how a war horse feels when he is
far from the battle.

I know that you have an inordinate alAetite for work, and I am enter-

taining the conviction that you are making the most of your furlow to
batch out trouble for the Federal Reserve System.
We all missed you tremendously at our last gathering in Boston, and tried
to make it plain to you as far as a personal telegram would do it.

I am sure that it would have warmed your heart to hear expressionsof
affection and admiration from everybody there.
I came down from Boston with Kains, and we spent half a day together
in New 'fork.

He is a bu2ly good fellow, as you know, and becomes more and

more attractive as you know him better.
tell of his visit to South America.

He had many entertaining things to

Having traveled more or less over the

world he has acquaintances and friends in most every port, and I undei.stand

that it wastecause of some wonder and amusement, particularly to Mr.
Untermyer-, to find that Kains knew somebody, either from back home or else-

where,at most every important place visited.



Untermyer'thought that he was

Benjamine Strong,

Jr., Esq:

October 27th, 1916.

-2-

bluffing until it proved otherwise.
Aiken presided

over us in

from talking too much.

Boston and was

much occupied in

keeping us all

Mr. Delano and Mr. Harding, who, as you know,

were

with-us, fitted into the scheme of things admirably and were quite outspoken
in meeting._

But for the fact that I know

y0 u

like to be where the trouble is

thickest I should say that you were lucky to be away at the time of
the new collection system.
of

us, and

launching

It interfered with the holiday plans of most all

;have not been able to get more than a two weeks period even yet.

Aiken, I think, had to postpone his expedition after Block Island tuna and

Maine trout.

I believe you have some trout fishing in your vicinity.

If so,

I envy you, since that is my most beloved Pastime.
Well, we launched the collection system along the lines previously
agreed upon, which caused us all so much travail.
_There are kickers aplenty, of course, but most of the banks,

particularly

the larger ones, are praising the system and the public is certainly keenly
interested in the results.
One of the effects of the operation of the system is encroachment upon
reserves.

plan
,

Of course there is no real reason why this should be so, since the

is upon the deferred credit basis, but some of the banks have neverthe7

less made it a pretext for encroaching upon reserves.

We have been' imposing

the penalty since the first of August, and the charge for that offense during
the month of August amounted to about $4,000a00.
I communicated all this to the Board, all of whom were keenly interestod

and seamed to entirely approve the position taken by this Bank.
As a result of the imposition of the penalty, or as the result of the
combination of other causes



our reserve balances have increased about

-3-

Benjamine Strong, Jr., Esq:

$3,000,000.

October 27th, 1916.

The amount of reserve required to be kept with us on June

30th, Which is the last Comptroller's report, was
reserve balances are $21,500,000.

collection system will

per cent, of the

convince

collection

to

To day our

This, of course, does not include any

deferred credits which frequently amount
If anybody was in doubt as

15,700,000.

Ito

as much as $8,000,000.

there being such

them.

We are

not

anuanimile

as float, this

doing more than twenty

business of the district, according to my

estimate, although up to this time this Bank has been doing more than any
of the other Federal Reserve Banks, excepting, of course, the big banks of
New York, Boston, Philadelphia and Chicago.
At this time of the year New York is in debt to us at every weekly settle,

ment period, but that state of affairs will change later on.
For the period September let to Octobor 11th we paid New York t103,000,000.
through the gold fund.

For a few weeks back New York has been paying us at the

rate of about t2,000,000. a. week.

I am very deeply interested in the matter of making checks of member
banks on Federal Reserve Banks pass at par for immediate availability at all
Federal Reserve Banks, settlement to be made through the gold fund daily of
course.

This matter was discussed in Boston, and while there were some

objections to and disbelievers in the plan, the majority sentiment was favor.!

able to it, and the two members of the Federal Reserve Board stated that the
Board believed it to be desirable if it could be effected with entire safety;
which I am sure can be done.
This will operate in favor of the New York Reserve Bank, although, of
course, it will tend to operate against member banks, at least in the Central
Reserve




Cities,

since it will if

put into

effect substitute Federal Reserve

October 27th, 191.

-4-

Benjamine Strong, Jr., Esq:
.40

exchange to a very large degree for New York exchange.

It will also result

in retaining the balances of member banks within the district to which they
belong to a very much larger extent than heretofore, and will so increase
the financial independence -- so to speak -- of the several districts, which,
of course, is one of the chief purposes of the Federal Reserve Act, however
it may be brought about.

You see I am discussing the matter rather freely and you will understand, I am sure, that all of this is intended to be gossipy rather than
argumentative.

Mr. Jefferson is down with us to remain several days to discuss with
our Vice Governor and Auditor various methods of accounting, etc., and to
. exchange ideas and information.

Perhaps you

We are all very glad indeed to have him.

mayhave heard that we have bought a site for a

bank building,

and now have before us the interesting but vexatious problem of constructing
a building adequate for present and future needs of the Bank as far as we
can look into the coming years.

Mat the public or treasury functions we may have to perform will be
is to some extent, of course, conjectural.

It is probable that we shall

have to call upon the imagination to an extent to provide for the developOur building lot is 95 by 120 feet, and it is our

ment of the system.
purpose to erect

a building

On yesterday I

of classic outlines comprising four floors.

received a letter from Mr. Hendricks saying that he

.

had spent a week with you and that you were looking fine and working hard.

These are wonderful times through which we are passing,and grAing
more wonderful daily.

Gold is still flooding us, as you know, and prices

are climbing and still climbing, likewise the wage of labor.
also adding to the complexity of



things. It seems

Politics is

that we are in

reality

October 27th,

-)-

Benjamine Strong, Jr., Esq:

becoming the world's banker, at

least

for a time.

1916.

The extraordinary prices

which the other nations are having to pay for the things they obtain from us is
transferring their wealth to us to an undreamed of

Our discounted bills are
South may possibly

bring a

oil. Tobacco is bringing

The cotton crop of the

fast being paid off.

seed and

billion and a half dollars, including
twice as much as

posits of some of our-little country banks
at this time,

degree.

it
are

The de-

brought last year.

twice what they were last year

and the South will be overflooded with a greater flood of money

than it has every known in all of its experience.
that our bills are being paid off.
offered to us more freely.

There is no wonder then

have bankers'

We shall probably

The nev, French

acceptances

industrial loan is a highly interest-

ing transaction and the banks seem disposed to participate
to look to business of this character very largely

in

in

it.

We shall have

order to obtain revenue.

Pocsibly you read that interesting review of the Federal Reserve System
by Professor Sprague.
of the

paid in

capital.

He advocates the return to member banks of one-half
I am very glad he took that stand and I believe it

will become a serious question with us to make expenses
return on our present capital.

and pay

an interest

-

I should not venture to send you such a long letter under other circumstances, but 1 am- making it proportionate to the distance between us.

for myself and'I know for

all

of "us fellows", we are looking forward to

having you back before very long.




Speaking

With very warm regard, I am
Sincerely yours,

november 1st, 1916.

My dear Seay:
ust reached me

Your fine letter of October 27th ha
and has been very much enjoyed.
and

prticularly,how things are
The report of

the

I

et all

am glad t

the news

going>pi RicluAo u
----7.

Boston ;onference dimkp

inted

me a

t e program as unfinished

bit because so many items were 1

business.
The

brushing up

:7llection plan require more
rough edges in the <(4)
d i. gathered that many.of
tn
than almost
s ussion seemed to be impossible
e question of giving immeuiate

the topics on the pr
of solution. One of
credit to chec Ilrnwn,Qn

er

1 renerve banks.

As you know,

.-----

I havo n1wj
diested no

opposed this after our early experiences which in-

hat it c1ud not be done, but

ake one stop at a time.

well to go s

sitate daily

that it Iles just as

settlements which would

and "Due From" reserve banks.

reduce

It would neces-

the items "Due To"

On the other hand, it would nec-

essitate the adoption of very effective safeguards against kiting
and against the development of the float.

just how

the operation would work.

I gathered that the cuncen-

sus of views of those at the meeting was
my own in one matter:




Mr.

4,arding

It is hard to see
rather different from

and others expressed the

r

-2.p

To

George J. Seaj, Esq.

Nov. 1, 1916.

banks would

view that chocks on Federal reserve

be drawn inva-

riably against balances in excess of the minimum reserves and

consequehtly, the practice of drawing these transfer cheek$
would not only create no float, but would lead to member banks
carrying increased balances with the reaerve banks. This is

I thin, xperience indicates that member banks "ill draw jut a ma checks for
transfer purposes as they can and send/tTlem oa rig just as
far abroad as possible, covering h
, nearly or t day they
particularly herd

for me to swallow.

t/

-

are presented as can be 6r:tie-rate /14
.

,tink they are entitled

Furthermore, I am i

to do so if

vie give immediate cre

t

for member banks is no
serve bank i consequen

own

the me b

The reeerve ceiculetion

y the books of the re-

r bankeaccically 11

entitled

seynif checks en rue to re hr e banks for deposit are not
\
to count as t)my r4r- then why, per contra, should my
to

reserve bnle(n'ee be ch r ed with checks which I have drawn on
that accoun
d which hive rot yet been presented?" We must

be consistent

k to one of two theories: namely, that

the reserves of member banks

ire calculated on

the books of the member banks.
as the place for calculation.

our books or on

We have adopted our cwn books
If, therefore, we permit this

transfer business to Jevelop, we will be abandoning much

that we

have gained in putting reserves on a good sound footing. This
is about the way 1 view the discussion at Boston, with which you




To

George J. Seay, Esq.

Nov. 1, 1916.

I an glad you wrote me frankly about

do not seem to agree.

this view, nor need you have any fear that my aectional feeling will influence me in my Vi3'7!s

Making

chacke on

reserve banks par exchange in any pert of th

Federal

country will

draw a good deal of money awae from New York; I have always

felt, and still feel that that kind of

money h Id by the eew

been a merinos to their securit and largely
the csuse of their unpopulerity, both throuhou the country
York bank r

and politically'.

They will do b

of balances from interior baka.,

without ii.

1e

h

In place

w York banks are going

0.6, and they are going
to be just ae big and strong land
porous al ever.
I congratula
the , easeful collection of
penalties. I doubt(i4 it woul. ,ork in our district, however,
to have huge balances from .

but it is a matter

under c nsideration.
Nee

Wh2A/

is a husky

in my mind. It
ave asked Mr. Hendricks toAeke up

ay able/4

imal.

d now employed by

with the B a d the, m

in reporting

e float is always

Int

,
thar accountants

of float, which is not correct.

week, we should be able to tell exactly how much of our assets

are invested in uncollected checks..
which exhibit this correctly.

The Board makes no.figures

Congratulations upon your new departure.

I hope your

uuilding will be a great success and only wish we could do as
well.




It will be impossible for um to considera building of

To

George J. Seay, Esq.,

Nov. 1, 1915.

our own probably for some years on account of the rapid development of business and the enlergement of our force. Then

again, if Congress should upset out collection program, our
force might shrink RE rapidly as it has grown.
I thought Professor Sptague'e article rather good and
would agree with hie view ebout the return o one of the paid
in capital were we now earning a larger margi over expenses.
In other words, if we could look eith/pertei.. oon the regular
accumulstion of.eurplus.

'There ie little news to
taken a furnished houee for t
doing a little work and a good

of myeelf.

dnte

I have

Denver verore I am

loefing. The doctor
tolls me that I an ge
a o in,
t shape and I judge he
in right as I have gaited about f fteen pounds.
Once more,any thanks r your letter and for the
11\\
nice things yext---611.

every good wish and warnest regards, I am,

incerely yours,

George J. Seay, Esq.,

Governor, Federal Reserve Bank,

Richmond, Va.
BS/VCM




- DERAL RESERVE BANK
OF NEW YORK

November 24, 1916.
.2!>e-ae-aaaereesq.,
Governor, Federal Reserve Bank of aichmoade
Richmond, Vat,

Dees Mr. Seay:

We have not

replied to yoar letter of the 20th regarding allotment of in-

vestments because we hoped to be able to present figures that woulu be satisfactory
ee have been devoting every spare minute to a study of the pro-

to all concerned.
.

blem and have prepared some figures based upon expenses since organization, etc.
These do not seem to throwliny light upon the subject but since you requested them
and we have prepared them, we enclose a copy herseith.
We worked along several other lines
satisfactory resalts.

whioh did not

One method (which we submit

seem to give any more

herewith) is simple and ap-

F

parently to us would be a satisfactory basis at the present time.
operation this does not give

the best results, we

If, however, in

llignt take it up ween we have

more time and work out a plan perhaps more correct in some details.
We believe that the investnents available for allotment should be distributed on the basis of present operations as taut is the situation We are compelled
to face and that

the

basic prieciple of apportionment should be to enable

the backs

to earn expenses, current dividends and accumulated dividends in so far as that may
be possible.

Acting on this belief, we have the

following simple plan

to offer:

1. Let eacte bank whether or not it participates in the
distribution of inveetmouts, send to a representative of the investment Committee, copies of its monthly reports to the Federaleaeserve
in order to
Board, of earnings and expenses (forme 266b and 287b).
begin the work of distributiun, let them send copies of their reports
for the months of October, November, and Uecember, 191v, and else the
The earning and expense
figures called for beloe for the same esriod.
statement for the nine months ending. eepteeber 3e, 1916, shown ea
pages 54 and 595 of the November bulletin will illustrate what we
have in mind.




C.

DERACRESERVE BANK
OF NEW YORK

2, .et eaoh bank send thin representaLlve also the
following figures.

a. Molv,hly average capital paid in
including Sundays and holidays.
b. Service cearget received.
c. Service charges paid.
Let each bank submit a statement of the total amount
of dividends aceraed but not paid to the clese of business, December
31, 1916,

Let the representative of the committee prepare a
statement for each bank shoeing the total of its requirements for all
oharges, ineluding:

Current exeenses as sheen on 287b.

Cost of Yederal reserve notes issued by
'bank (including expressage, insurance, etc.)
0, :isoellaneuus charges, account Federal
reserve notes.
d. Cost of Federal reserve bank notes issued
incite:ling taxes.

e.

Amortization charges:
1.

Federal reserve notes,

2, All other

organizatiun expenses.
1

furniture and equipment.

f.

Depreciation of

g.

Amount required to meet current dividends,
of average capital paid in).

(one-half Of 14
h.

A fixed proportkon for all banks (say 1/12)

of the necumulated dividends unpaid to the close of busi-

ness December 31, 1916.

These requirements are to be added together and compared with the cur-

rent earnings fer

eech bank for the same period.

This 111 give the excees or

defloiency in earnings for each bank, Eann bank tut shoeing a deficiencyjn =ref

rent earnings for all reqairements as above outlined should receive such proper-

tion of the inVestments to be distributed, as its deficiency beaes to the total




,A; RESERVE BANK
-61, NEW YORK

defiaienay for all banks not showing earning equal to or in excess of all requirements.

This plan

seals to meet the requirement that it be simple and be as

.equable a distribution as oe aan have without getting into tuo minute aalaulattons.
Very truly yours,

Searetary,

SW/J04:: -

End.




FEDERAL RESERVE BANK OF RICHMOND
FIFTH DISTRICT
DI RECTORS

OFFICERS
GEORGE J SEAY. GOVERNOR
CHAS A PEPLE.V,GE GOVERNOR
GEORGE H KEESEE.cAsHIER

JAMES A MONCURE

CALDWELL HARDY,

DEPUTY FEDERAL RESERVE AGENT

CHAIRMAN AND FEDERAL RESERVE AGENT

EDWIN MANN.EH,EFIE,o W VA.

H B.WILCOX.BALTIMORE, MD.
JAS. F. OYSTER .WASHINGTON DC.
UTO
os N G.
JOHN F
R
H MOND
EDMUN

JAN1 0

Si F. H. GOUVERNEUR .wtLmINGYON, N. c.

D R.COKER.HARTsvtu_c,s C.

1911December 22nd, 1916.

Ley dear Strong:

I am writing to send you my very best wishes for a happy Christmas and
for complete restoration to your former vigor in the Mew Year.

We enjoyed our last conference in Washington, but I know that all of us
missed your presence.
-

I am venturing to send you two or three articles which I have recently

had to write, which probably you may find of interest.

at all new, but apparently all of them are

still

The subjects are not

under discussion, as I found

at our recent conference, and each one was written at somebody's request.

I know that you are very deeply interested by the turn which our foreign
relations has taken in the last few days.

More serious blunders have been

committed, as it seems to me, and their effects were certainly disastrous in.
one respect at least -- that is, upon the markets.
I am wondering how you felt about the recent announcement of the Board
with respect to the purchase of foreign securities.

While feeling the necessity for banks maintaining a liquid condition, my
own feelings and opinions did not coincide with the Board's utterances.
I trust that you have continued to improve right along,

which

is what'

I heard when I last had the opportunity to inquire.
4,

With my best regards,
Yours sincerely,
Mr. Benj. Strong,


The
http://fraser.stlouisfed.org/ articles
Federal Reserve Bank of St. Louis

referred to are being sent under separate

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A MEMORANDUM

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ON SUGGESTED PLAN FIXING A NEW

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RATIO OF RESERVES TO BE KEPT IN FEDERAL

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RESERVE BANKS, AND MAKING NO RE-

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QUEIEMENT AS TO VAULT RESERVES
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TABLE




1.

Showing different kinds of cash held by
member banks on September 12, 1916.

2.

Showing ratio of cash hold to total net
deposits.

It

3.

Showing % of reserves to total net deposits

/equired under Act when in full effect.

"

4.

Comparison of vault reserves carried under
old law and under Federal Reserve Act.

Showing legal reserve required under full
operation of Act in comparison with reserves
carried by country banks of 5th District.

$.

showing 5 of total net deposits required to

be kept in Federal Reserve Banks under suggested
plan compared with Act,

7.

Comparison of reserves likely to be required
for operation under suggested plan, with reserves
required under Act.

The average lawful cash reserve carried in vaults by the national banks

()of the country for a period of about fiv:: years preceding the establishment
of the Federal Reserve System -- that is, from February 5th, 1909, to August
9th, 1913 -- was as follows:
By

Central Reserve Banks
Reserve City Banks
Country Banks

.. 25.5%
..... 12.7
..
7.5

The central Reserve and Reserve City banks carried little more than

was reeuired to be carried by law, the small excess probably being the result
of effort to insure average maintenance of requirements.

The amount required to be kept by Reserve City Banks, Viz: 12-1/2 percent,
was adequate and doubtless more than adequate for purposes of daily operations.
Since the country banks ,which were required to keep a lawful reserve
of only 6 percent, maintained an average of 7-1/2 percent, one of two conclusions

may be drawn:
conditions;

First, that 6 percent was not adequate for operation under old

second, that in order to insure the maintenance of the 6 percent

required, it was necessary to make provision which resulted in keeping on hand
an average of 7-1/2 percent.

In this connection it is enlighting to consider that the commercial state
banks of the country, large and small, had on hand Jun,? 30th, 1914, acco ding to

statemmts furnished the Comptroller, cash of all kinds amounting to 8.2 percent
of their deposits, which happens to be the exact percentage carried by all
national banks on September 12th, 1916, as will be shown hereafter.
It is only since the establishmer

of Federal Reserve Banks that we have

come into possession of information tending to show the amount of cash on hand
which the banks find it necessary or advisable to carry.
Following is a statement of the legal reserve held in vaults by the-'three

classes of national banks on the dates specified:




.

of Total Net Deposits

0
Nova 10,1915

Dec. 31,1915,

June 30,1916

Sept. 12, 1916

Central Reserve
Banks

16.41

14.86

15.

12.02

Reserve City Banks

7.42

7.24

7.06

6.66

Country Banks

5.75

5.56

5.52

5.37

This shows a gradually declining ratio, and while in each case the amount
carried is in excess of the amount required to be carried under the Act prior
to the amendment relating to vault reserves, it is so little in excess of the

amount required, except in the case of Central Reserve banks, that no definite
conclusions can yet be drawn as to the amount necessary to be maintained for
operation, and we shall have to wait for further information and experience to
determine approximately the minimum required.

Following is a comparison of the percentages of reserve carried with that
required to be carried,

of Total Net Deposits
Amount required

in.

Vault

Amount carried in Vault
Sept. 12, 1916.
12.02

Central Reserve Banks

6/18

5.90

Reserve City Banks

6/15

5.52

6.66

Country Banks

5/12

4.12

5.37

The foregoing statement gives only the legal reserve carried, which does
not include national bank notes and other till money.

The amount of national bank notes carried on September 12th
probably may be taken as an average,
cf.

as as follows:

of Total Net Deposits

Central Reserve Banks

.28

Reserve City Bank:

.93

Country Banks

.91




191,6, which

I.

Adding this cash to the lawful money reserve carried will give the
total cash or till money on hand, as follows:
Central Reserve Banks

12.30

Reserve City Banks

7160

Country Banks

6.28
Average

8.20

This average amount of cash carried by all national banks is the exact
equivalent of the amount of cash of all kinds carried by commercial state banks
on June 30th, 1914, as previously mentioned,

It may be reasonably assumed that banks now feel the assurance of being
able to obtain currency qu.ickly and with certainty from Federal Reserve Banks,

and that, therefore, they are willing and able to operate with lower vault
reserves than under former conditions.

If tnen it can be fairly assumed that the amount of cash carried in
vatilts in the case of each class of banks, as shown in the foregoing statementf

is close to the minimum needed for daily operations, then it may be necessary
to consider whether the reserves required to be carried in Federal Reserve Banks
under the proposed plan will not increase the total amount of resources to be
maintained for operating purposes, and, therefore, add a burden to the banks
rather than give them the relief for which many of them are now asking.
Following is a statement of the reserves which the suggested plan would
require to be maintained in Federal Reserve Banks in comparison with the reserves required to be carried with Reserve Banks under the present Act:




RESERVES REQUIRED IN FEDERAL RESERVE BANYS
LNJER SU,IGES'ED PLAN WEICh WOULD MAKE NO REQUIREMENT
AS TO
RESERVES.

war

Central Reserve Banks:

135 Demand Deposits)
.11
)
35 Time

12.74 against

6.88

under present Act.

Reserve City Banks:
105 Demand Deposits)
3% Time

9.33

against 5.52 under present Act.

-5.80

11

against 4.12 under present Act.

Country Banks:
77. Demand Deposits)
3% Time

If we add to the amount of reserve required under the plan as set down
in the foregoing, the amount necessary to be carried as till money, assuming
amount
. that the amount heretofcre specified is the approximate/required, the follow-

ing would be the result!

NEW PLAN

In F. R.
Banks

F.

R. Act

Till Money
--------

Total

12.74

12.30

25604

17.70

Reserve City Banks

9.33

7.60

16.93

13.80

Country Banks

5.80

6.28

12608

9.90

Central Reserve Banks

It is reasonably certain that Central Re3erve Banks can operate with
a much smaller cash supply than above specified,

The ability to obtain

currency from Federal Reserve Banks as needed, also the ability to obtain gold
for excess balances., and for the proceeds cf rediscounts are important factors
in this case.

Whether Central Reserve Banks will be satisfied to keep on htlnd

only the cash which may be needed is another matter.




.

0
42,

The effect of the prcpOsed plan upon t17.e banks of

0

he country wov7,o vary

widely, not only according to locality, but according to the character of
business done by each bank.

It would perhaps fall heavily upon country banks remote from a Reserve
Bank which find i.t necessary to maintain larger vault reserves because of the

inability to replenish frequently and with dispatch.

At the beginning it is probable that banks which have been maintaining a
large vault reserve will not be willing to assume that they could do with
much less, and only experience will satisfy them
Table No

5,

in

that particular.

which aecompanies this memorandum, gives a comparative state-

ment of the vault reserves maintained by the country banks of the 5th District.
The situation with respect to these country banks is probably typical of
the smaller country banks generally.
It is the cash reserve carried by the larger country banks, so called,

which brings up the average, and it is, therefore, to be taken into account,
that in the case of such banks, which are numerous, the cash required will be
considerably in excess of the average here given for country banks generally.

Those banks which carry the accounts of other banks will doubtless feel
it necessary to carry a reserve considerably abo-ffe the average.

CONCLUSION

The indications are that the proposed plan would result in compelling banks
generally, and a large number of banks in particular, to carry a larger proportion of unproductive resources than is now required under the Federal Reserve
Act.




Geo. J. Seay

TABLE 1
1

DIFFERENT KINDS OF GASH HELD BY MEMBER BANKS
SEPTEMBER 12TH, 1916.
(In

thousands)

National Bank
Notes

Central Reserve City
Banks

o -

Federal Reserve
Notes

Legals

Gold

4,246

3r401

287,840

38,287

Reserve City Banks

21,295

5,141

165,261

24,300

Country Banks

36,697

6,282

209,919

42,514

62,238

14,824

663,022

105,101

TABLE 2
RATIO OF CASH HELD TO TEELNLT_DEpOSITS
Total Net Lawful Money g of
Other Moneys
Deposits
In Vaults
Deposits

g of

Total
Cash
in Vaults

Central Reserve City
2,711f000,

326,127

12.02

7,647

428

12.30

2,839,000,

189,563

6,67

26,436

4 93

7.60

4,697,000,

252,433

5.37

424979

.91

10,247,000.

768,123

7.45

77,062

.75

Banks

Reserve City Banks
Country Banks

8.20

TABLE 3
PERCENTAGE OF RESERVE TO TOTAL NET DEPOSITS
REQUIRED UNDER ACTS VEEN IN FULL EFFECT.
In Federal
Reserve Banks

4

Central Reserve
Cities (18-5)

Reserve Cities

Country Banks


(15.5)
(12-5)

In Vault

Optional

6.88

5.90

4.92

17.70

5,52

4.60

3.68

13.80

4,12

3..30

2.48

9.90

Total

TABLE 4
COMPARISON OF VAULT RESERVES CARRIED
UNDER OLD LAW AND UNDER FEDERAL RESERVE ACT;
of Total Not Deposits

Average from
Feb. 5,1909 to
Aug. 9, 1913'.

Nov. 10, 1915

Central Reserve
Banks

25.5

1.641

Reserve City Banks

12.7

7.42

7.5

June

5.75

Country Banks

30,1916 Sept.12,19J
Dec.31,1915
14186

12,02

1424

7.06

6.66

5.56

5.52

5.37

15-4

TABLE 5
LEGAL RESERVE REQUIRED UNDER FULL OPERATION

OF THE FEDERAL RESERVE ACT
Based upon condition of Country Banks of 5th District as shovin in
Comptrollers 'report of March 7, 1916 compared with Reserve carried on
March 74 1916, and the average reserve carried from February 5,
1909 to August 9, 1913.
Due from
Reserve Banks
Cash in Vault
Per Cent. of
Per Cent, Of
Net Deposits
Net Deposits
Optional
1,

Maryland:
Reserve required
Reserve carried March 7, 1916
Average reserve carried 1909 - 1913
Virginia:
Reserve required
Reserve carried March

Average reserve

7, 1916
carried 1909 -

West Virginia:
ReServe required
Reserve carried March 7, 1916
Average reserve carried 1909 North Carolina:
Reserve required
Reserve carried March 7, 1916
Average reserve carried 1909 South Carolina:
Reserve required
Reserve carried March 7, 1916
Average reserve carried 1909 


2.70
4.51

3.38
2.19

6.54

334
1913

2,03

5,27
6.94

3.17

2.51
_

4.18

2.38

1.96

2.91

2.53

5.33
7.49

1913
3.49

1913.

3.17
4.81

1913

2,62

4.36
z.68

2.38

3.96
3.16
41I

5,18
6.83

6.77

Ca
C)

TABLE 6

RESERVES REQUIRED IN FEDERAL RESERVE BANKS
UNDER SUGGESTED PLAN THTCH 'WOULD MAKE NO REQUIREMENT AS
TO VAULT RESERVES.

of Total Net Deposits

Central Reserve Banks:
13 % Demand Deposits)
3 % Time
=

6.88

12.74 against

under present Act

Reserve City Banks:
10 % Demand Deposits)
It
)
3 % Time

9.33

against

5.52

under present Act

Country Banks:
7

3

Demand Deposits
)
Time

5.80 against 4.12 under present Act.

TABLE 7

COMPARISON OF RESERVES LIKELYTO BE REQUIRED
FOR OPERATION UNDER SUGGESTED PLAN WITH RESERVES REQUIRED
UNDER PRESENT ACT WHEN IN FULL
OPERATION.
UNDER SUGGESTED PLAN
In Federal
Reserve Banks
City
Central Reserve/Banks

In Vaults
Based on amount held
Sept. 12,1916

12.74

12.30

Reserve City Banks

9.33.

7,60

C ountry Banks

5,80

6,28

Total

25.04

12.08

UNDER PRESENT ACT
In Ieederal

Res3rve Banks

Optional

.6.88

4.92

Reserve City Banks

5,352

3.68

_

Country Banks

4.12

2.48

-

C antral Reserve City
Banks




In Vaults

Total

5,90

37.70

4.60

13.80

3.30

9.90

Denver, Colorado,
January 10, 1917.

Dear Governor Seay:

Please pardon this tardy acknowledgment of your kind letter of
December 22nd Which was occasioned by mu

Denver and re-

turning to quite an accumulation of wo
I have read the enclosure with

t interest.

subject of parring Federal Reserve Banks I am sorry not

at all, either as to the pl

feat-

one on the

o agree with
your argument.

If that subject can be lef

collection plan is more

fully developed, we can

ransfers on a sound basis

that will accompli

bout

in mind, without the

Reserve Banks encounte

n unwise extension of credit

on uncollected checks.

Your argument a

reserves in a separate memo-

randum is very imeres
that must be ca
fixed and

hope they may

Don't a
foreign relati

are other features of the proposed
lly considered before the percentages are
are certainly in the right direction;

e effected.

me to comment on the various

developments in our

about Which just now I am feeling rather distrubed.

1 an certainly continuing to improve and

look forward to the date

of my return sometime this year.
My 'gamest thanks to you good friend for your Christmas and New
Year's greetings, Which I very heartily reciprocate.
Very sincerely yours,
George J. Seay, Esq.,
Va.

Richmond,



Lcrci,
Yittr-0--;

March 6, 1919.

PERSONAL AND CONFIDENTIAL:

My dear Governor Seay:

For some time I have been interested with some friends in a study of some
of the problems of our

national

financial system and particularly to the possibili-

ties of a reform movement which might result in the establishment of a scientific

-,..

plan for a Federal

bigia.

The need for this has been made apparent to me during the

past Iwo years and as a result of contact with the financial

machinery

in washinF7ton.

Some of my friends believe the time is now opportune for a general attempt to interest the people of the country in national financial reform.

The campaign for

savings,

thrift and sensible spending, incident to the flo-

tation of Government loans has put many of our people in a receptive mood for further suggestions in these matters.

The national debt must be reduced and can only

be reduced if both individuals and the Government practise sensible spending.

It

is particularly true with the Government but cannot be made possible until scientific machinery is installed to accomplish it.

Students of this subject seem to be in general agreement that a scientific

budget system

is the only solution.

To persuade our people that such a

system sheuld

be installed, a nonpartisan organization should be built up and a wise and sane cam-

paign of

publicity

inaugurated.

It is a plan,of

that

sort in which some of my frienos

are interested with a view to activity after the next loan is placed.

In the meantime,

steps must be taken to prepare the publicity, and the personnel of the organization
must be developed in advance.
It is, of coarse, out of the question to utilize the Liberty lean organizaons as such for an enterprise of

proper for me to ask you

this

character.

if in your experience

other organizations in connection with the war,

It does not, however; seem im-

with the Liberty Loan, War Savings, or

you have come

in contact with individuals

in your district who would be likely to be interested in this movement and who would



f2

March 6, 1919.

be qualified for service in such an organization and who would do so as a matter of
public duty.

What is first needed is a representative in every State, competent to

take charge of the movement and direct in
to enable him to become a leader of the

it

the State.

He should have qualifications

State movement, some ability as an

organizer,

should be public spirited, able to gragp the subject and willing to study it, and

locally as

should be regarded

without political prejudice or purpose, and have the

confidence in general of the people of the State.

In addition to state directors, similar

organizers

must be appointed in

the various counties and principal cities.
I shall be greatly indebted to you if you can let me have suggestions and

names of men in your district for this work without, however, mentioning the matter
to them.

You may know them well °now& to make definite recommendations not only

because you came in contact with them in Liberty Loan matters, but other public
spirited activities with which you are acquainted or connected.

This is a matter in Which I have a strong personal interest and will be
grateful

have an

for your

assistance.

opportunity

At

our

meeting in Washington on the 20th I hope to

to refer to this matter more specifically.
Sincerely yours,

Governor.

Georg* 3. Seay, Esq.,
Governor, Federal
Richmond, Va.

BS 'NB




Reserve Bank of Richmond,

FEDERAL RESERVE RAM,,,C

we NEw Vox.'

r
?

,

Department,
Interested

Prepared by

J

t.'

Copy

Translation

TELEGRAM

NA 95101

19

Checked by
Code used

0. K.
TEL. D. 1

FEDERAL RESERVE BANK OF NEW YORK
PRIVATE WIREINCOMING

25bdsj

Richmond

Va Dec 24 1135a

Strong NewYoi..

Most cordial greetings and good wishes from us all to all of you




Geo J Seay
,rrommealWoor..

Governor .
1215p

P

C

it:

,

.....
0'e/

4:

49

COPY

September 14, 1920.
CONFIIIENTIAI

George J. Seay, Esq.,
Governor, Federal Reserve Bank of Richmond,
Richmond, Va.
Dear Governor Seay:

'

There are two matters related to the foreign operations of the Federal
Reserve System about which I wish to advise you as follows:

liA.V OF ENGLAND STERLING GOLD ACCOUNT We have decided to bring to this country the gold earmarked with the
Bank of England for account of the Federal Reserve Banks.
that this quastian was discussed at the governors conference last April, and it
was left to our discretion as to whether this gold should remain in London or
be brought back. After giving the matter careful consideration and discussing
it with our directors and the Federal Reserve Board, we have decided to bring
the gold to New York. As a matter of courtesy, we cabled the Bank of England
to ascertain whether any object would be served by our leaving a portion of
the gold with them, and they replied that they saw none from their position.
The Bank of England has agreed to arrange tandhandle the shipment Of the gold,
settling freight and other Charges. Insurance is being effected by us here in
New York. As this operation progress there will undoubtedly be further details
to report to you and I shall see that you are fully informed. No statement has
yet been made to the press, and when we decide to do so, which will probably
be shortly before actual shipments begin, we shall be careful to explain the
nature of the transaction so that there will be no misunderstanding as to its
effect upon the reserves of the Federal Reserve Banks.
-

BANK OF FANCE EARVABI7D Gqp An inquiry has just been received from the Bank of France regarding
our willingness to accept a deposit of earalarked gold with them. We understand that the French Government plans to meet its share ($250,000,000)
of the Anglo-French bonds maturing October 15, 1920, in approximately the
following manner: -




1.. $70,000,000 has already been provided.
100,000,000 from the new issue of 8% twenty-five year bonds,
dated September 15.

$80,000,000 through gold imports or accumulations
exchange in other ways.

of

dollar

We are informed that the French Government proposes to start gold

You wi

-2p

shipments immediately, but in order to meet any possible contingency which
may arise prior to October 15, the Bank of Prance has inquired whether we would
accept a deposit of gold earmarked with them which we could withdraw at our
option and at their expense.
The figure mentioned was 035,000,000.

Our directors and I felt that under existing circumstances we should
accede to their request and that to refuse would create a very unfortunate
Some of our directors thought that even if the amount should run
situation.
as high as $50,000,000, we should indicate our willingness to permit them to
earmark that amount for us, and I share their views. The Board has also advised
us that they see no objection to the transaction and that they will agree if
reoxested to permit this gold to be counted as part of the lawful reserve of
the Federal Reserve Bank pending its Shipment to the United States, although
it is no longer the policy of the Board to permit gold with foreign agencies
to be counted as reserve indefinitely. The Board adds that it is understood
that any other Federal Reserve Bank desiring to do so may assume its pro
rata share of this deposit.
I am giving you this outline of the transaction to ascertain whether
in case the gold is earmarked with the Bank of France up to $35,000,000 or
possibly even $50,000,000, you would care to take a pro. rata share such as
In this connection, it should be borne
you had in the German gold account.
in mind that shipments of the gold with the Bank of England will begin shortly
and in case the Bank of France desires us to earmark 05,000,000 or $50,000,000,
our gold with foreign agencies will be considerably decreased over its present
total.

With kind regards, I am
Very truly yours,

J. H. CASE
Acting Governor.
ar




September 14, 1.9P1.

Dear Governor Seay:

You will rece'

that obout two years aze we had eome correspondence in

regard to the work of the National Budget Cemmittee.

In ;oart, st leeet, ;etesage

of the budget legislation by the Congress ens due to the work conducted by that
comiAittee.

ticeo

that the bosie of the budget system bits been rido.ted by Congress,

our organization iF endeaVoring to cryetellize oablic sentiment for the support
of the 2roejm, of governueut eoonomy and thereby to insure permanent suceese for

the oew zationel budget systee.

are soaking :Al extend tole or by celeeting, eo fer as eossible,
o,nkere to .ccep.

oiv (Alai:reel:ships in various of the more important cities,

simply to carry on work which will be lsid out for them by the national committeo.
The eccpe of the or in deecribed in tha eociosed memorandum.

Cen you auggest representative wen, preferably beneers, IOW it be
willing, to accept boob appointmente in the ities of Baltimore, Norfolk, Bichmond
and Weehington.

At the present tiee I shall only as you to suggest names, but later on
possibly you would be willing to co' unicate with thee directly and further our
object of having them accept these apiosintments.

If for aay reason you think it unwise to meke these suggentione, will you
not writs me quite frankly and, if you are willing to do OD, give me your reasotle.
With best regards, and thanking you very cordially, I am,
Yours very truly,

George J. Seay, Esq.,

Governor, Federal Aeservo Bank of Richmond,
Richmond, Va.

38:11k


6

BANKkei
'14441,

FEDERAL RESERVE

OF RICHMOND

44)

41k

174

444

June 22, 1922. A`

Dear Governor Strong:

I have just received your letter of the 21st
relating to the policy of requesting the Treasury Department to
reimburse us for fiscal agency expenses, beginning July 1, 1922,
in accordance with the understanding arrived at at the last ConEnclosed is confirmation of the telegraphference of Governors.
The position taken by our directors
ic repIT which you requested.
could not be -reversed except in a formal way, but lam not inclined
to think that they would be willing to reverse it.
In the beginning it was assumed, as a matter of course, that
the Department would pay the expenses incurred in the performance
of fiscal agency work which the Reserve Banks were required to do,
and but for the huge earnings of the banks made during war time,
the question probably would not have arisen.
In recent testimony before Congress, representatives of the
Board have emphasized the fact that Federal Reserve Banks are privately owned institutions and not governmental banks, and, without
attempting to argue the legal aspect of the right of the Treasury
to require a Federal Reserve Bank to perform fiscal agency work at
its own expense, it seems to me that it is of prime importance to
adhcre to the principle
and establish; if possible, the public understanding that Federal Reserve Banks are not governmental institutions in essence, whatever powers may have been conferred upon them
by the Government, and whatever duties they may perform for the Government.

To assume as a matter of course, or to continue the practice
of absorbing, the expense of governmental work as fiscal agents would
tend to bring about the contrary view, and perhaps the feeling on
the part of governmental officials and others that Federal Reserve
Banks are more under the direction of governmental officials and probably of Congress than they were intended to be and are under the Act. The
term "Fiscal Agent" is broad enough as it stands and perhaps might,
legally construed, cover anything and everything that the proper officials of Government might feel disposed to require Federal Reserve Banks
to do.
I am not overlooking the fact that subtreasury functions have
been transferred to Federal Reserve Banks for performance at their own,
expense, but in the performance of these functions, their autonomy is
not brought into question, and the duties are performed only under general regulations relating to the currency, upon which the Treasury Department has acted for many years.
The present head of the Treasury Department has evidenced a readiness to assume that Federal Reserve Banks may and should be reimbursed




Governor Strong,Pg.2.

6/22/22

for expenses incurred exclusively in the performance of fiscal agency
work.
I did not understard that the Department would specifically
ask Congress for an appropriation to provide for the expenses of performing this work during the fiscal year beginning July 1, but that
But notwithstanding such
it would be done under existing authority.
may be the case, I nevertheless believe that we should seek to be reimbursed at least for the clerical labor of performing fiscal agency
duties, which is practically all that we ask for.
You allude to the adoption of a uniform investment policy by the
Federal Reserve Banks which, if carried out, will produce revenue sufThis is the policy to
ficient to meet expenses and pay dividends.
which we were driven by the lack of income, and it is one with respect
to which, so far as it involves investment in Government securities,
the Treasury acquiesced apparently with reluctance under present conditions. If we cannot count upon being reimbursed for fiscal agency expenses, it will require a much larger volume of investment than would
This I think is not good policy, and we should
otherwise be the case.
not be driven to it.
I have read the memorandum which governed or influenced your conclusions that it would not be wise to raise the question of reimbursement
for fiscal agency expenses.
Nevertheless, for the reasons given in the
foregoing, I believe we should at this time, when apparently the Treasury
is disposed to favor or acquiesce in reimbursement, take the position
that we should be reimbursed and ask for reimbursement; and I am inclined
to the opinion that if we do not take such action now, when the Department
is disposed to meet us, we may not hereafter be able to obtain reimbursement, and continued acquiescence in the payment of such expenses by Federal
Reserve Banks will establish a precedent from which we may not be able to
break away.
Very truly yours,

GJS-CCP

Benj. Strong, Esq., Governor,
Federal Reserve Bank of New York,
New York City.




eft for

4




trOttEGA 09
C31.113311

July 6, 1923.

Geo. J. Seay, Esq.,
Governor, Federal Reserve Bank of Richmond,
Richmond, Va.

Dear Governor Stag:

At the recent meeting of the Advisory Committee of Governors in Washington,
it was suggested that we send to each Federal Reserve Bank complete information regarding the investments made for fbreloa banks in
participate.

which the

several Federal reserve banks

The most practicable wag of do ing this seems to be to give you a state-

ment as of June 30 showing in detail the bills and certificates then'held for foreip
account.

With this as a starting point, we think it best to send/ you currently a copy

of the schedule which is preAred whenever bills or cart ificates are purchased for foreign Da/1;ES.

This will give you complete information on all investments in which you

participate, and enable you to keep such records as you may desire.

Furthermore, we

snail continue to sand you at the beginning of each month a condensed statement showing in totals the free balances, bills and certificates held
will enaule you to

check

for

each foreien bank which

the amounts of your participation as wired you on the first of

the month.

i trust that this arrangement will be satisfactory to you, but if you should
desire any additional information or would like to suggest any change in the Procedure
outlined, please do not hesitate to say so.

well as copies of the schedules of

The statements of June 30 are enclosed as

Dills bought

on July 2 and 3.

subsequent purchases will be mailed to you in the ordinary course.
Very truly yours,

J. H. CA3E,
En c.




Deput y Governor.

Schedules covering

COPY

letterent to governor of each Federtl rererve benk

January 14, 1924.
mr. George . Seay,
Governor, iederal Reserve Dank of Richmond,
Richmond, Va.
Dear Governor Seay:

In view of the Oontiaued strength in vecemalr and much greater strength in January
of the Government security market, (irclueing ihort-term certificates and notes) with higher
quotations for all isues, it has not been possible to purchase more than mod=rate amounts
fee the epecial Investment Aceount of 'Jae reserve banks. Purceeees foe 4.1e ystem so far
tetal about i35,0D0,000.
In order more nearly to meet /116.14ket conditions, the Caenittee changed slightly the

eree limite on january e, on some of the issues which are being purchaeed for the apecial
Investment Accouat of Which you were advised in a telegram sent by the secretary of the Committee. You will note that these changes only affect the issues of September 1924 to June
1925, inclueive.
Aaile the securities acquired tioeld dhow a profit if they were to be sold now,
nevertheless the Committee is acting on the belief that kedeeal reeeeve banke wish in this
matter wholly to subordinate profits to the successful prosecution of the policy established
that the reseeve beaks should acquire a portfolio of certificates and notes us
Thie matter was discussed at to-day's meeting of the Upon Market Investment Commitconditionpermit.

tee and it was the sense of the meeting that purchases of short-term is, with maturities
up to June 1925, should continue to be made in a mod rate way as canoitioae in the market
permit, at the limits established by the Committee on January e, 19a4.

At to-day's meeting the question of making purchases of later maturities was also
discussed and it wt.., decided that, in addition to acouiring eovernment issues maturing
between now and June 19,5, that further purchases might be made of -reasu y notes due December 15, 1925 up to an aleount not to exceed in the aggregate 415,000,000. between now and the
next meeting ot the aamnittee, at a price not to exceed 4.30»

The present maturities and limits are as follows:




Matutits

Price Limit

March 1924
June 1924

3.85%
3.95%

Sept. 1924
1924
March 1925
June 1925

4.10%
4.25%

Dec.

4..3O

Very truly yours,
Benj. Strong, Chairman
Open Market Investment Committee

for the Federal Aeseeve System


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102