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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 am in hopes that they will be able
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.
On the rates on notes for discount secured by United States
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 we raised the 10 day rate, they would both be at 4%
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