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c.;, Jr. PERSONAL, ON I. 1\1 Qct * 11 _ ii L I L I I L 1.. I i 4 :,.... B41:74IN. VBFT, F' 7, 2- M5 -Ls; s I,. 0)1,141P 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 r2r7(7 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, 4 our thanks for your letter of the matter relating to the distribution e 0 a e leadeeyei 7yeepy,e414 at 00 1 ed .41-a? Cd.47;,..4elerywa 0-_,---r7 2a,0,,, / 7-0r4-:;c07,0&70 ,94: C.6 1-- ..44,,4:iod.01-,-4_ 4 OP-1 a i,9 is- z ,Lrl ' ?"4)-a-(77 '- 7 i. 4?i-e/ /"Zi,YllorfiZi./AvAe-ei Y- 4 ,444. 0~0,-,.w do.GEORGE SEAY NweRICHNIOND.VIRGINIA '7e1 C°V ' 7Ze 6<. e ;fL -er-ZG,Z Ptt,f b' Z-Ziet "Z2,CG/L-e- A 1-0,7- 74--eac-v Ge/ 7e-c- 7i-- "7 2-Z gz.--9 -c - 1P2 d--1" - ,:3EORGE U. SEAY ticHm0No. VI RG IN IA et.A-e .1 6R-GL/ /IZ 7A6ce-e--'-e-A---c-1 V ..-.5EORGE J. SEAY IR IC H MONO, VI RG IN IA /,.1-/7 A G-Z ,77 6.rer, 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 N 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. (2) 3EORGE J. SAY RICHMOND. VIRGIN IA b7/ 1 Z-e VE7 7-o,-,7( zu 17C-c- c puA en, ece-e-4,1 .62-f-4 wz-el 40,-G-,..7 GL Jjj 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 7-7 42/7+ Z-uf 7/24A tf 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 Ver. IIHUHUU1/11111111011111111HUUU11U114.11HU1111111111HUHUH.UU1111111111111111 11 11 11 It 11 II ill 11 11 11 11 11 II I, I/ if 11 11 11 11 .1 11 I. 11 II 11 if l III.o, tilt 11 11 II II 11 11 II 71 11 1111 if 11 11 ,1 I! I, 11 11 II 11 II II 1. 11 11 If It 11 II A MEMORANDUM II If 11 11 11 11 11 I! ON SUGGESTED PLAN FIXING A NEW III/ 11 14 11 II II II 11 I, lit, lilt RATIO OF RESERVES TO BE KEPT IN FEDERAL 11 If RESERVE BANKS, AND MAKING NO RE- 11 II QUEIEMENT AS TO VAULT RESERVES BY II It MU tilt It 11 11 I/ 11 il I/ 11 11 11 11 11 II 1/ 11 GEORGE J. SEAY fit, 11 11 1(11 RH IfU U IF It HU UU 11111111111111111,11111101111111111111111/11111M1.11H0i1.1111111111111111111111111111/UHUU usluitlIsM.u..,.,11.11uttutistummulluntluiluilltulv.11,39M.u.u. .1, 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