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February 25, 1918. Dear Governor Wold: I have your l e t t e r of the 21st instant, and thank you for your views as to discount rates. You understand, of course, that the telegram to which your l e t t e r is a reply, was sent merely in the way of a suggestion, and that no A C t i o n will be taken until a l l d i s t r i c t s have been heard from and until the matter has been thoroughly considered. The Board will discuss the discount situation further at i t s meeting on Friday next, and I will keep you advised of any new developments. The point you make that banks have been buying bonds and certificates at 3 1/2% and 4% for patriotic motives only, is a strong one, and it does not seeem right that they should be penalized for responding promptly to the c a l l of the government while others which have held back wil1 have the advantage of the higher rate on the new issues. I note your suggestion that the fifteen-day rate on b i l l s secured by Treasury certificates and bondsbe1/2%below the rate borne by these certificates or bonds, and the plan was discussed freely at the Board meeting this morning, but no definite conclusion was reached. Very truly yours, Governor. Mr. Theodore Wold, Governor Federal Reserve Bank, Minneapolis, Minn. Form 1201 RECEIVED AT B81A CS 8 8 GVT STLOUIS MO 331PM FEB 25 1918 HARDING GOVERNOR FEDERAL RESERVE BOARD WASHINGTON DC EXECUTIVE COMMITTEE RECOMMENDS THAT FEDERAL RESERVE BOARD AUTHORIZE INCREASE OF RATE OF FIFTEEN DAYS OR LESS MEMBER BANKS COLLATERAL NOTES AND REDS I COUNTS SECURED BY LIBERTY BONDS OR UNITEDSTATES TREASURY CERTIFICATES FROM THREE AND ONE HALF TO FOUR PERCENT THAT THE RATE ON COMMERCIAL AND AGRICULTURAL PAPER RUNNING FROM SIXTY ONE TO NINETY DAYS BE INCREASED FROM FOUR AND ONE HALF TO FIVE PERCENT THAT MAXIMUM RATE ON BANKERS ACCEPTANCES BE INCREASED FROM FOUR TO FOUR AND ONE QUARTER PERCENT WELLS GOVERNOR FEDERAL RESERVE BANK OF BOSTON 5 3 STATE STREET February 25, 1918. Hon. W. P. G. Harding, Governor, Federal Reserve Board, Washingtonf D. C. Dear Sir: Answering your confidential telegram of February 20th, referring to interest paid by banks to their customers on deposits, I wish to say that I have talked with a number of the members of the clearing house committee on this subject individually, but not aa a committee, and while they consider i t desirable to do so, none of them appear to have any very constructive ideas. They felt especially that i t would not be effective for the Boston Clearing House to attempt to do anything by i t s e l f , and I suggested to Mr. Ripley t Chairman of the Clearing House Committee, that he take i t up with the Clearing House Committees of lew York and Philadelphia. This he has agreed to do, and I a in hopes that they will be able m to formulate something that will be useful. In the meantime, i t does not seem to be necessary to do anything more. Referring to your suggestion of increasing the discount rates, our Executive Committee felt that as our commercial rates are as high as they are in any Federal Reserve district, i t was not wise to raise them further. O the rates on notes for discount secured by United States n securities they do not approve of raising the 90 day rate because of the hardship that it would put on many owners of liberty Loan 4% Bonds, who are s t i l l borrowing, and will continue to borrow. This eliminated a l l but the31/2%15 day rate. If w raised the 10 day rate, they would both be at 4% e and the banks would feel that an unnecessary hardship was being put on them. If a large movement to borrowing on 15 day collateral notes should be induced because the rate was to remain at31/2%we should take the matter up again. Very truly yours, Governor. CAM/M
