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Reproduced from the Unclassified / Declassified Holdings of the National Archives




555.

Open i i r f t Operations
vaKc
F E .B c iu .K s

(1£>U - 1918)
Part I

Reproduced from the Unclassified / Declassified Holdings of the National Archives

1

Dear Mr. McCord,
R*fer»ns< ,1* aada to your
J f.
.
relative to form# for aeelgnmonte of United Stat00 bond#*

.
/

The matter vti taken up with the Division of
Loar.s and Currency, and for your information, a
received
today from that tivieion Is quoted belowt
j
^^ | ^
"In reply to your letter of the 5th
inet*, in which yofl inowire whether certain forae
of power of attorney for the alignment of United
States regietersd bond® submitted to you by the
Federal Peeerve Bank of Atlanta, Georgia, will be
eatiefactory to thie office* you are advised that the
change# which have been indicated on the forme which
accompanied your letter appear to be eimply those
which would sake the power conferred special and limi­
ted in the manner indicated in the direct Iona printed
on the forme, and it would seem therefore that they
would prove acceptable to thie offloe*
It b u s t be understood, however, that
the Department cannot undertake to paes in advance of
its submission upon the eufficiency of any instrument
submitted to it in support of an assignment of United
States bonds* The right must be reserved to give con­
sideration to each instrument in connection with the
case which it accompanies*"

Very truly yours,

Assistant Secretary.
Mr* J* A* McCord, Governor,
Federal Keesrvs Bank,
Atlanta, Ga*




Reproduced from the Unclassified I Declassified Holdings of the National Archives

TREASURY DEPARTMENT

":

O F F IC E OF T H E SECRETARY

W ASHINGTON

D IV IS IO N O F L 0 A N 8 A N D C U R R E N C Y

December IB, 1913,

I RP. P E 8 Q O E
N EJY L A E U T
_______ s m ______

Mr, L. C. Adelson, Ass*t Secretary,
Federal Reserve Board,
Washington, D. C,
Sir:
In reply to your letter of the 5th instant/in which you in­
quire whether certain forms~oT~po\veF^T™atTorKe^
the assignment of
United States registered bonds submitted to you by the Federal Reserve
Bank of Atlanta, Georgia, will be satisfactory to this office, you are
advised that the changes which have been indicated on the forms which
accompaniedyour letter appear to be simply those which would make the
power conferred special and limited in the manner indicated in the di­
rections printed on the forms, and it would seem therefore that they
would prove acceptable to this office.
It must be understood, however, that the Department cannot
undertake to pass in advance of its submission upon the sufficiency of
any instrument submitted to it in support of an assignment of United
States bonds* The right must be reserved to give consideration to each
instrument in connection with the case which it accompanies.
The forms which accompanied

your letter are herewith returned

to you.
Respect fully,

Chief, Division of Loans and Currency.
Incs,




T
h

Reproduced from the Unclassified I Declassified Holdings of the National Archives

TREASURY DEPARTMENT,
SUBTREASU B Y SERVICE.

F o r m 2407.

Ed. 5 0
0 —F. C., Feb. 2-18.
R E S O L U T IO N FOR A S S IG N M E N T OF U N IT E D S T A T E S B O N D S.

We C e rtify , That at a Special M eetin g o f the Board o f
of

held a t _________________________ on t h e _________ day o f
191

, a t __________ o 'c lo c k ___________ M ., the follow ing resolution was adopted

and is now in f u ll force, viz:
Resolved, That

be, and

heraby authorized and empowered to sell and assign
_
_

_____________

{U n ite d S ta ffs k#gfatfrrjed / B f in jt s r f y 0 t e v e d pon^s of^ny/d e^cftptjfo?ijivhich are
transferable on the boohs o f the Treasury D epartm ent now standing
fta fi^ lin the name o f t h i s ______________________ ,
____________
and to appoint one or m ore attorneys fo r that purpose; and ive certify tha t notice
was duly given personally to all m em bers o f the said Board o f ________________
____________ o f the said tim e and place o f said m eetin g, and o f the object thereof,
fo r m ore t h a n __________ days p rior thereto, and in tim e to enable all to attend
said m eeting; and that at such m eeting so held a qu oru m o f all the members
o f said Board was present and voted fo r the adoption o f said resolution.
S ig n a tu re ____________ _________________________
SEAL
SHOULD

T itle

A L W A Y S BE
IM P R E S S E D .

Signature
T itle

* N-i. F —To

general and permanent* write after the word assign antf'br utt:

To make ti^auutiuai^r
write
the wordassigB;themiMrattt &nd diSserifrtiQB oi the bm ds to he .assigned.
In.the ioimer c a ^ tfee.aufliflnfcy
until seyoked,..aq4. cov«w-aE:^?e8antoKju3to»«ag#^Maeikt8; in the latter? it ceases
and terminates wi^hlJje.
—— »
2406) lor. resolution adopted a t r^ u la r meetings id il b e iisaished'Upea appHeattea*fc&^lev'Xkeasury
Depa*taa®ffifc.
2—8 4
26




w

Reproduced from the Unclassified / Declassified Holdings of the National Archives

T R E AS U R Y D E PA R TM E N T,
SUBTKEASURY SERVICE.

F o r m 2406.
Ed. 1,000—F. C., Feb. 2-18.

RESO LU TIO N FOR A S S IG N M E N T OF U N IT E D STA TES BONDS.

At a regular meeting of the Board of

o f the

h e ld __________

191 , it was, on motion

Resolved, That

be, a n d _________ hereby authorized and empowered to sell and assign1
*

£ Jfnifecf' Spates ^ e ^ s tjre d $ oy^isjbr degis^qftd Monfs

$ni^d$s<$^]^JrJw hich

are transferable on tl%e books of the Treasury Department now standing,
Jin the name of th is ______________ _____________
and to appoint one or more attorneys for that purpose.
I certify that the above is a true copy from the minutes.
SEAL
SHOULD
ALW AYS

BE
IMPRESSED.

Secretary o f Board o f
t f N . B .— To make tffleauthority general and permanent, write after the%jcrd assign any or all.
T o i^ j^ e this authority Special or specific, write afrafethe word assign the anil|mt and description of t&| bonds to be assj|pied.
In the format case the authori^yremains in force until r^tpked, and covers all preterit or future assignments; in the lat%r, it
ceases and ternnaates with the translation specified.
This resolutionTS^Duld be certified D^gpme officer of the Institution other than the one^taipowered to assigifWie bonds.
It is recommended ui&fcjresolutions be adol^ed only at regular m eetW s.

But when passedWh&spedal meeting, ffll^certificat^

must be signed by two officers, a form (No. 2407) f5hti%hich will be furnishecNipen application to tnWEjeasury Department'.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

T R E A S U R Y D E PA R TM E N T,
SUBTREASURY SERVICE.

Form 1781 E .1,0 0 M r6 1 .
.— d 0 0 — a . - 8

POWER TO SELL AND ASSIGN UNITED STATES BONDS.

BSP’To be acknowledged b y the constituent before the Treasurer of the United States, or an Assistant Treasurer, a United
States Judge, United States District Attorney, Clerk of a United States Court, Collector of Customs, Collector of Internal
Revenue, President, Vice President, or Cashier of a National Bank, or a President, Secretary, or Treasurer of a trust company
located in the District of Columbia. I f in a foreign country, before a United States Minister, Consul, or a Notary Public. In
all cases the officer must add his official designation, residence, and seal (if he has one). If the acknowledgment is taken in a
fordgn country before a notary public, his official character must be attested b y a United States Minister or Consul.
To make this authority general and permanent, write after the word assign, any or all.
To make this authority special or specific, write after the word assign the amount, name of Loan, and date of the Act under
which issued. In the former case, the authority remains in force until revoked, and covers all present or future assignments;
in the latter, it ceases and terminates with the transaction specified.

% rtm all men bg th m p r i n t s , That / , _ _ _ _ _ _ _ _ T _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ do hereby appoint
,

my attorney to sell and assign

^ jfn itg i Spttes^kegijffergi 0j/fds, <j/( ref/ste^ d bjrfids gf* a n jf d < ^ ip t^ rj now standing,
my name on the books of the Treasury DepartmentJ^ifl^c^ f ^ f y / b f g r a n t i n g
to said attorney fu ll power to appoint one or more substitutes for the purpose herein expressed; hereby ratifying
and confirming all that may be lawfully done by virtue hereof.
W itn e s s my hand and seal, th is ____ ___ _ _ _ _ _ _ _ _ _ _day o f _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 91
1

[ s e a l .]

Executed in the presence o f ___ ____ ____ ____ ____ _ ____ ________ , of the
o f _ ________________ , in the State o f _____________ 1_ _ _ _ _ _ _ _

2 20
—85




[ s e a l .]

Reproduced from the Unclassified / Declassified Holdings of the National Archives

Th* Honorable,

©le Jeoretary of the treasury,
Washington, D* 0«
Sir.

( \*>(>

CTiere is enclosed copy of lettgsr^apeoGiYed from
the federal Reserve Bank of Atlanta, wit'a refereaae to
_ -............ ........ ■ w m x in r>w P rw in iirriiirn rn iiriiiw iw iiw
_
■ > mn ftirn iiH iM n n
-T n iiiiiT u iiii

form of assignment* for Halted States Bonds._ m
Pleas© advise if the farms as a a a f d in copies
iedc
attached will f e satisfactory to your offloe.
e
Yery truly yotirs*

Assistant Secretary*
Enclosures
CJcpy of letter
Copies of forma*
JL-H




Reproduced from the Unclassified I Declassified Holdings of the National Archives

Dtosmber 5 f 1918.

3

Dear Mr# UoOordi
Tour Utter of Iteoember seooad,/ia rt
forms for assigwaeats of United States Bonds, ha® been
received.
X am sabMtting the matter to the
Secretary of the Erea*aryt and will advise you as soon
as reply is received*
Tory truly yours.

Assistant Secretary.
Ur. J. A* MoOord,
Oownor, Federal fieservs Baafc,

A tla n ta # G eorgia*
A-H




Reproduced from the Unclassified I Declassified Holdings of the National Archives

EDW . T. B R O W N .

JO S. A. M CCORD.

M. B . W E L L B O R N ,

D E P U T Y C H A IR M A N O F
THE BO ARD

GOVERNOR

C H A IR M A N O F T H E B O A R D
A N D FED ERAL. R E SE R V E A G E N T

J . B . P IK E .
V

C A S H IE R

M. W . B E L L ,

J O S . M. S L A T T E R Y ,

A S S IS T A N T C A S H IE R

A S S 'T F E D E R A L R E S E R V E
AGENT

W ARD ALBE R TSO N .

Fe d e r a l R e s e r v e B a n k

W, B. R O PE R,
A S S I S T A N T C A S H ir .R

W . R. P A T T E R S O N ,
A S S IS T A N T C A S H IE R

G E N E R A L . A U D IT O R

OF A TLA N TA .

R . A . S IM S ,
A S S IS T A N T C A S H IE R

December 2, 1918

Mr* J. A* Broderick, Secretary,
Federal Heserve Board,
mshington, D.C.
Bear X*. Broderick* We have received from the Treasury
Department three forms of assignments for the United States
Bonds*
In the endeavor to have a form which will be ac­
ceptable bo$h to the Banks in this District and the Treasury
Department, the forms used by the Treasury Department, of
which we enclose three samples, for Corporations, Corpora­
tions and Individuals are so general that we believe some
objections will be raised by the member Banks, chiefly
because it covers not only the Bonds which may be deposited
as collateral to their loans, but also on Bonds that may
be in the hands of any department in trust or awaiting
shipment.
The refore 9 for the protection of not only
ourselves, but of the member Banks it is deemed advisable
to have, if acceptable to the Secretary of the Treasury9
a form of assignment covering specifically the United
States Registered Bonds which the Banks may deposit with
us as collateral security to a note*
If you will kindly submit the thret
samples enclosed herewith to the Secretary of the Treasury
for his consideration and write us his decision in thw
matter we will appreciate it*




Reproduced from the Unclassified / Declassified Holdings of the National Archives




Your letter of^pvjmbgj.^L-is acknowledged and
appreciated.
Your suggestion that we "bring the matter of resolution for assignment of United States Bonds, and power of
attorney in connection therewith, to the attention of our
counsel will be followed.
The conment of Judge Elliott, which you report,
is observed with interest.

Should we conclude an unofficial

ruling of the Board on the subject to be desirable, we will
avail ourselves of your invitationto submit the matter.
With personal regards,
Respectfully,

Reproduced from the Unclassified I Declassified Holdings of the National Archives

4

%

dear

/

°

AMersoa*
It was with much regret I laura£&.

of ,/our illness, and I am w r y happy to loaow you have
tally reampered

and are bade at your desfc*
With reference to■the resolution for

assignment of United States Bonds, may 1 suggest that
you bring this miter to the attention of your Counsel
and have him rule thereon*

1 have spoken to J t L e Blliott,
tcg

and he believes there are many points involved which will
require a considerable amount of study.

However, if you

think the natter is one which will fall for an unofficial
ruling of the Board, please advise me*
lith best wishesv I am,
Very truly yours

Secretary*

M r*

4 *

W» .A n d e r s o n ,

3ecretary-Cashiert
**ederal Reserve Bank,
Kansas Qity, Missouri*




Reproduced from the Unclassified / Declassified Holdings of the National Archives

F

R

e d e r a l

J. Z . M I L L E R , J R

ASA

GOVERNOR

O

J.L .C R O S 9

X iT A

W. ANDERSON
s e c r e t a r y

B

a n k

E. R A M S A V ,

ch air m an

F

AN D F E D E R A L R E S E R V E A G E N T

F R E D W. F L E M I N G

DEPUTY G OVERNOR

ARCH

e s e r v e

X T d

A . d

f

>T

T

' V

'

^ P U T Y

CH A IRM AN

C .K .B O A R D M A N

-c a s h ie r

a s s t .f e d e r a l r e s e r v e a g e n t

C . A .W O R T H IN G T O N
ASS IS TAN T C A SH IER

M .A -T H O M P S O N

cS
f

ASS IS TAN T CASHIER

October 28, 1918.

Mr. J. A. Broderick, Secretary,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Broderick:This morning I am at my desk for the first time in
two weeks, having been detained at home by an attack of in­
fluenza.
/
It iswith interest I observe your 1ettej:,,of,,Qc.tob^r
14tlu/in response to my
the 8th, :
touching a
method of hypothecating registered Bonds under power-of-attoraey
to the Governor of this Bank to sell and assign, which power
was believed to be ample protection to this Bank, and might be
invoked if necessary*
Our views on the subject matter have been in line
with your own, and* we have made it a practice to discourage
the lodging with us of registered Bonds as collateral. My
letter to you was prompted, as stated in the first paragraph
thereof, by the present policy of the Treasury Department en­
couraging applications, on the part of banks, for registered
Bonds, and the consequent necessity for us to provide a means
to make advances thereagainst.
We are especially pleased at the interest you have
manifested and the comment you have made, and shall hope to
have some further advice from you after you have conferred with
Judge Elliott on the point of an official or unofficial ruling
from your office in this connection.




With kind regards,

Reproduced from the Unclassified I Declassified Holdings of the National Archives




FEDERAL RESERVE BOARD
October 21, 1918.
Memorandum for L r Broderick:
I«

Unless we are called upon for an
official opinion on this matter I prefer
not to pass on the attached form as it
will be necessary to look into the law
on this subject.

I " '-

; ;
^
Reproduced from the Unclassified / Declassified Holdings of the National Archives

E X -O F F IC IO M EM B E R S

W. P . G. HARDING. GOVERNOR
-------------------------. v ic e Governor
ADOLPH C. MILLER
CHARLES S. HAMLIN

WILLIAM 6 . MCADOO
SECRETARY o r THE TREASURY
Ch airm an
JOHN SKELTON WILLIAM S
Co mptroller of t h e currency

FED ER AL RESERVE BOARD

J. A. BRODERICK, SECRETARY
L. C. ADELSON. as sistant secretary
W. T . CHAPMAN. ASSISTANT SECRETARY
W. M. IMLAY, FISCAL ASENT

W A S H IN G T O N

ADDRESS R K P L Y TO

October 14, 1918.

FEDERAL RESERVE BOARD

HEKQRAHIMI FOR JUDGE ELLIOTT:




Dear Judge:
Referring to the attached letter%from
Mr. Anderson, will you please advise if it would,
be well to approve the use of the form of "resolution
for assignment of United States Bonds” with the modi­
fication suggested in L r Anderson’s letter?
I*

In the

conversation with you the other day, jrou indicated that
if this form or one

similar to it was

used, in your

opinion it would be advisable to change the phraseology.

Letter attached.

Reproduced from the Unclassified / Declassified Holdings of the National Archives




3
October 14, 1916,

Dear U r* Anderson«
/Referring to your letter
the
Qi^th-lniitant/'enclosing copy of ’
resolution for
assignment ofUhited States Bonds, X wish to say that
1 have shewn your letter to Mr* Broughton, and l e has
i
indicated that the use of blanket power was desirable
f*em a pr&etiaal banking standpoint. Personally* I
believe there are so many questions involved that, as
a general ralef the hypothecation of registered bonds
%hould bo discouraged*
Tour ldea9 if $egalf is a good
one* It will simplify the present method of handling
the matter* The question will be discuesed with Judge
Elliott and I will advise you if an offioial or unofficial
ruling will be made by this office* Before adopting any
plan 1 think it would be well for you to submit the matter
to your counsel in order that you jaay be assured that the
rights of your banic are fully protected#

Mr* A* W. Anderson,
Secretary Cashier,
federal Reserve Baxft,
Kansas Oity, Hi asour i*

Reproduced from the Unclassified I Declassified Holdings of the National Archives

ir

F

^ V

e d e r a l

R

e s e r v e

DEPUTY GOVERNOR

Ka

nsas

E. R A M S A Y 7 C H A I R M A N

F R E D W. F L E M I N G

J. L. C RO SS*
W .A N D E R S O N

a n k
AN D F E D E R A L R E S E R V E A G E N T

OF
ARCH

B

ASA

J . Z. M I L L E R , J R

C it y

S E C R E TA R Y - CASHIER

D E PU TY CH A IRM AN

C.K.BOARDMAN
A SS T . FEIDE R A L R E S E R V E A G E N T

C . A -W O R T H IN G T O N
A S S IS TAN T CASHIER

M. A - T H O M P S O N
ASS IS TA N T CASHIER

Oct. 8, 1918.
Mr. J. A. Broderick, Secretary,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Broderick:In view of the policy of the
applications for registered Bonds, and
of these securities in larger quantity
much pleased to have your advice as to
herein:

treasury Department to encourage
our anticipation of offerings
to us as collateral, we should be
the method of procedure outlined

You will find enclosed form 2406 of the Treasury Department,
being a resolution for assignment of United States Bonds, which resolu­
tion we have required of member banks placing Bonds with us as collateral,
in addition to the formal assignment on the Bonds themselves. This necess­
itates, in every case, a re-assignment and a transfer on the records of
the Treasury Department, and occasions the member bank a considerable amount
of inconvenience*
In view of the style of the form enclosed herewith, it is our
disposition to have resolution so drawn as to authorize J. Z. Miller, Jr.,
Governor of this Bank, under power-of-attorney, to "sell and assign.” Under
this plan, we feel that we could accept registered Bonds unassigned, accom­
panied by a certified copy of the resolution under seal, which certified
copy we could file with the Treasury Department in the event it was necess­
ary for Mr. Miller to exercise his power-of-attorney and make assignment
to the Federal Reserve Bank of Kansas City. It is our understanding that
this power-of-attoraey,as already provided for in the resolution, does not
necessarily have to be given to an officer of the assigning bank.
If we may inquire further, we would appreciate your advice as to
whether we might accept a certified copy of a blanket resolution, providing
for general and permanent authority to "assign any or all" from any one
bank, and, under this blanket authority, make exchanges and accept from time
to time Bonds of varying description as collateral without special and formal
assignment thereon. In this connection, your attention is respectfully di­
rected to the asterisks referring to note "N. B" on the form enclosed.
We have not addressed the Treasury Department in this connection,
assuming that you will confer with the proper officials thereof, if you deem
it necessary.
The suggestion here outlined would relieve the hypothecating of
United States registered Bonds of cumbersome details, and the Treasury De­
partment of numerous requests for transfers and re-issues, and we believe




Reproduced from the Unclassified / Declassified Holdings of the National Archives

#2— -Mr. J. A. Brcdeixck, Secretary,

at the same time would afford the Federal Beserve Bank ample protection.
Your advice on this point at your early convenience will be
appreciated.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

TREASURY DEPARTMENT,
S u b t r e a s u r y S e r v ic e

F O R M 3406

RESOLUTION FOR A SS IG N M EN T OF U N ITE D STATES BONDS.

A t a regular meeting of the Board of
of the.

held,________________, 1 9 1 8 , it was on motion resolved that

----

---------------------------------------------- be,

and__________ hereby authorized and empowered to sell and assign* _____________
United States Registered Bonds now standing, o r which may hereafter stand, in the
name of this__________________________ , and to appoint one or more attorneys
for that purpose.
I certify that the above is a true copy from the minutes.

(SEAL)
Secretary of Board of.

*N . B .— To make this authority general and permanent, write after the word "assign” any or all. To make this authori­
ty special or specific, write after the word “assign” the amount and description of the bonds to be assigned. In the former case
the authority remains in force until revoked, and covers all present or future assignments; in the latter it ceases and terminates
with the transaction specified.
N
This resolution should be certified by some officer of the institution other than the one empowered to assign the bonds.
It is recommended that resolutions be adopted only at regular meetings. When passed at a special meeting the certifi­
cate must be signed by two officers.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

r

14 / 6

FEDERAL RESERVE BOARD FiLEj

O FFIC E OF T H E SEC R ETA RY

W ASH INGTON

D IV IS IO N O F L O A N S A N D C U R R E N C Y

July 12, 1918.
P i n
Secretary,
Federal Reserve Board,
Washington, D. C.

J U l~ 1 5 1918

#****'& OtBtx-

^

Sir:

With your memorandum of the 10th instant t
VthiB
_L
,,»

.■• ■
■
■
*
j

office b e ^ to acknowledge receipt of a certified
copy of a resolution issued by the Board of Directors
of the Federal Reserve Bank of Kansas City on the
27th of June, 1918, authorizing C. A. Worthington,
Assistant Cashier, to sell and assign bonds for the
said Federal Reserve Bank.

The resolution has been

approved and filed.




Respectfully,

Reproduced from the Unclassified / Declassified Holdings of the National Archives

July 10,

1918.

Itoaorandua for Mr. Willi*m 8* Broughtons

In accordance with your »e&orandu» of July 5 , ad­
dressed to Hon. M. 0. Elliott, 1 a* transmitting the at*
tachea resolution for assignment of United States bond*
sont to the Board by the Federal Beeerve Bank of Kan­
sas City, and request that sane be placed on file in
your office•




Secretary.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

FEDERAL RESERVE BOARD
OFFICE OF COUNSEL

July 10, 1918.

su b jec t

Resolution of the Board of Directors of the Federal Reserve
Bank of Kansas City, authorizing C. A. Worthington,
Assistant Cashier,to sell and assign U, S. Registered
Bonis.

:

MEMORANDUM FOR DR. WILLIS;

Please note that the accompanying resolution
meets the requirements of the Treasury Department; also the sug­
gestion of Mr. Broughton that this resolution should he filed
with his office,




I recommend that this be done.
Very tr*’ - ---1

Reproduced from the Unclassified I Declassified Holdings of the National Archives

July 5, 1918.

MEMORANDUM:

My dear ^Judge Elliott:

The resolution of the Board of Directors
of the Federal Reserve Bank of Kansas City, submitted
with your memorandum of the 3rd instant/ is in proper
form.

Permit me to suggest that said resolution

should be filed with this office.




Sincerely yours,

Reproduced from the Unclassified I Declassified Holdings of the National Archives

FEDERAL RESERVE BOARD
OFFICE OF COUNSEL

July 3, 1918.

S ub jec t :




dear Hr. Broughton:
Please note the attached resolution of
the Board of Directors of the Federal Baserve Bank of Kansas
City authorizing G. A. Worthington, Assistant Cashier, or
his his attorney, to sell and assign 'bonds belonging to the
bank*
I will be glad if you
if this in proper form.-

7 / ill

let mo know

If not, just what form you usually

require.
.Very sincerely,

Reproduced from the Unclassified I Declassified Holdings of the National Archives




2
7

July 2,1918

the following matter

v a tg rre to y o u (
v o ie d
- -- - - - - -- - - -M
(as Counsel of Federal Reserve Bt)ard

Resolution for, assignment of U.S.Bonds
submitted by Secretary of Board of Directors,
F^*Scona^?ration as to correctness of form.

Documents

Reproduced from the Unclassified / Declassified Holdings of the National Archives




'JASHIHGTON.

I l y ZZ9 1918#
.a

Xetterf May 16a^Yrom Governor Lynch of San
Francisco, re purchase of old government
bonds by the San Francisco Dank.-

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Fe d e r a l R e s e r v e B a n k
R E CE/ V e o
of

Jam es K.Ly

nc h

S a n Fr a n c i s c o

m r 2 3 1 9 jo
GOvs * » o » a t ! 8

,Governor




My dear Governor Harding:
/Referring to my letter to you under date of
May 16th, regarding the purchase from the German Savings
& Loan Society of #1,000,000 United States Bonds 4s of
1925, these "bonds have been delivered to the Federal
Reserve Bank: of San Eranoisoo and not to the Federal
Reserve Bank of Hew York, as stated.
Yours very truly,
■i

Governor •
Q?he Hon W P G Harding
Governor, Federal Reserve Board
Washington D C

Reproduced from the Unclassified / Declassified Holdings of the National Archives

Fe d e r a l R e s e r v e B 4 N K
of

J

am es

K .L y

n c h

,G

S a n Fr a n c i s c o

*’ O ^
s

I

12 J.
May 16th 1913

overnor

My dear Governor Harding:
We have bought tinder purchase and sale agreement from
the German Savings & Loan Society of San Francisco, $L,000,000 United States
Government ’Old Issue” Bonds 4$ of 1925. The bonds have been delivered to the
’
Federal Reserve Bank in New York to be held for account of this Bank, and we have
issued our cheque in payment.
If not redeemed within 90 days, the bonds are to be sold for
account of the German Savings & Loan Society at the best market rates. Should they
not realize par, the German Savings & Loan Society is to make good the difference.
In the meantime, interest at the rate of 4% per annum is to be paid to this Bank.
The reason for entering into this transaction requires some ex­
planation. As you are no doubt aware, the German Savings & Loan Society is the lead­
ing savings bank of San Francisco, and has a very large clientage, in fact, something
over 27,000 depositors. The bank has been prudently managed and is recognized as
one of the soundest institutions in this City. Its business, however, has been built
around the name "German," this being manifest by the sub-title which they have used,
"The German Bank." They have made application to the conrti to have the name changed
to the San Francisco Savings & Loan Society, and they are somewhat afraid of the re­
sult on the minds of their depositors, so they have taken the precaution of having
this extra million dollars cash available, no matter what m&y happen.
The Bank has cooperated splendidly in the sale of the Liberty Loan
and circularized all their depositors, having sold $1,750,000 of the bonds. They
obtained the largest number of subscribers to the Third Liberty Loan of any bank
in this City, about 11,000. Mr George Toumy, the Manager, informed me recently
that they would have larger withdrawals on account of the bond payments than for
either of the preceding loans.
They wish to come into the Federal Reserve system, and will undoubted­
ly do so as soon as the legislature (meeting in January 1919) has passed the necessary
amendment to the California Bank Act enabling State banks to join the system without
additional penalty in the way of vault reserves.
We feel that this is a situation which fully justified our aid, but
do not regard it as a precedent, as there is no possibility that anything like it
will arise in this City.
Yours very truly,

Governor.
The Hon W P G Harding
Governor, Federal Reserve Board
Washington 1 C
)



Reproduced from the Unclassified / Declassified Holdings of the National Archives

Fe d e r a l R e s e r

ve

Bo

W ashington
O F F IC E

OF THE G OVERNOR




M 7# 1918.
ay

\
Dear Mr* WarburgsI

have had a talk with Mr, Leffingwell,

who tells m that he does sot feel that he
eaa purchase the bonds which are held or which
were oversubscribed for by the Federal Reserve
banks*
Sincerely yours,

Hon, P. M. W&rburg,
Federal He serve Board,

Reproduced from the Unclassified / Declassified Holdings of the National Archives

LIBERTY BOUDS m m D BY FSDERAL RESERVE BMKS.

Bostons

Actually own $80,000 3j$ bonds and
6,450 seeond 4s

3 f w York:
fe

Held at elose of business April 29th
$15f000 second 4s
30,050 3fc£s
Also hold
241,700 3§$s for redemption of
participation certificates of this hank.

Philadelphia

Cleveland

Richmond

Atlanta

First issue
$100.00
Second 4s
798,000.00
$1,966,900.
60,000.
314,555.

,400*
58,200.

first
converted 4s
Second 4s

first 3§s
Second 4s

First loan
Second *

(Sew Orleans Branch)
1,700.
Chicago:

Actually owns
$16,650.
240,050.

Second

*
*

Actually owns
$83,050*
Owns none of first issue, bat there was an overage
in first bond account which now amounts to
$305,100.

St* Louis




Owns no Liberty bonds of any Issue

Reproduced from the Unclassified / Declassified Holdings of the National Archives

—2»
r

Minneapolis t

Owns one $50* bond, on which payments are being made
>y employes*

Kansas City:

Total holdings $20,600. first issue

Balias:

Holds

$700. first loan and
2,200* second n
purchased for account of employes and has taken
their subscriptions for $13,000 third loam i&ich
the bank will purchase*
On account of duplications and adjustments
in allotments bank holds in suspense account for
Treasury first loan bonds aggregating $369,900 aUd
$36,950* second loan, which amounts are not taken on
baak,s books, the bank feeling that Treasary should
mate adjustment, thus relieving it of items and
close suspense account*

Saa Francisco:

Owns
First issue
1st concerted 4s
2nd




$50*00
16,250*00
400o00

Also has purchased, for purpose of delivering to
them whan, payment is completed, bonds of delinquent
subscribers as follows:
First
$55,200*
Second
10,450*

Reproduced from the Unclassified I Declassified Holdings of the National Archives




NO-

For ar- Hwatng.
At a meeting of the Federal Reserve Board on
— ---- Wedaenday, May X^.iaiS the following patter
(as Chairman> Gosaaiittee on
was referred to you(as member,
"
"
(as Governor*
ffce matter of ownership of bonds by federal Reserve
banlce, data having been obtained by inquiry
fr o a 41*e bmikM theme elvee by te3<e&r*$feu It
m
agreed that the Governor bring l&e datm
to the attention of Assistant Seoretary of
the' treasury
and disease the
matter with him*

PI
documejj

rn this inemoranduin with copy of
ine from action taken.,, if Sny,

Reproduced from the Unclassified I Declassified Holdings of the National Archives

%x\msnr® §zpRXtmmt

■
—
RECEIVED

TELEGRAM

_

APRS 0 1918

lo3<%:? 32 Collect; Govt ,

GOVERNOR’S OFFICE

OB Boston Mass 340KI Apl 3o 18
Farding
Federal Reserve Board

r Washington

actually own eighty thousand liberty loan three and
one half percent and sixty four hundred fifty second liberty
loan fours
Federal 'Reserve" Bank' of Boston




355p

j

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Form 1201
C1 ^SS OF SERVICE

UNION

SYMBOL

elegram
Day Letter

Blue

Night Message

CLASS OF SERVICE

Nite

Night Letter
NL
If none of these three symbols
appears after the check (number of
words) this is a telegram. Other*
wise its character is indicated by the
symbol appearing after the check.

AM
P R E S ID E N T

G E O R G E V . E. A T K lN S , F IR S T V I C E - P R E S ID E N T
M

4 2 GOVERNMENT

Blue

Night Message

N E W C O M B C A R LTO N ,

Day Letter

Nite

N L
Night Letter
If none of these three symbols
appears after the check (number of
words) this is a telegram. Other­
wise its character is indicated by the
symbol appearing after the check.

RECEIVED AT WYATT BUILDING, COR. 14TH AND F STS., WASHINGTON, D. C. A EY
^ AS
N
J3S9NY0V

SYMBOL

Telegram

j
;..T rT sV 7 n

•.'' i 1318
VA j
Q NEWYORK MY 5 2 2 P A P L 3 0 1 9 1 8 G O Y E R N O P r s OFFICE

H AR DIN G RESERVE BOARD

.
U bI ) I
WASHINGTON DC

WE HOLD CLOSE OF B U S I N E S S

ENJOYMENT L I B E R T Y LOAN BONDS AS

FOLLOWS DANDLER SECOND FOURS DARWIN

ADEGA DROUGHT WE ALSO HOLD

DESKLOCK DE B O N A IR B U L L E T I N DROUGHT FOR

RE DEM PT ION OF P A R T I C I P A T I O N

C E R T I F I C A T E S OF T H I S BANK
FEDER AL RESERVE BANK OF NEWYORK
547P
we hold close of business April 29th Liberty ,oan Bonds as follows # *,000
15
second fours <$30,050 3 - te also hold «,>241,700
^ .
for redemption of participa­
tion certificates of this bank.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

" C L .- o OF SERVICE

SYMBOL

CLASS OF SERVICE

Day Message

SYM 30L

Day IVkssaj3

Day Letter

Blue

Day Lcttar

Night Message

Nite

Night Message

Nite

Night Letter

N L

Night Letter

N L

if none of these three symbols
- :r» ars after the check (number of
ords)this isadaymessage. Oth rwise its character is indicated hy the
symbol appearing after the check.

N E W C O M B C A R L T O N , P R E S ID E N T

G E O R G E W . E. A T K I N S , F IR S T V I C E - P R E S ID E N T

RECEIVED AT WYATT BUILDING, COR. 14th AND F STS., WASHINGTON, D. C.
A5V5P 2 9 GOVT

MR PHILADELPHIA PENH 424 P 3C
HARDING GOVERNOR

5693

r-JO
'.i

HOLDINGS OF LIBERTY BONDS BY THIS BANK FOLLOW FIRST ISSUE
ONE HUNDRED DOLLARS SECONDS FOURS SEVEN HUNDRED NINETY
EIGHT THOUSAND




PASSMORE GOVERNOR.

If none of these three symbols
appears after the check (number of
wordsHhis isaday message. Other­
wise its character is indicated bythe
symbol appearing after the check.

J P’ 4
O i/
i

C «3<S
^OVERNOlf ’5 OFFICE

FEDERAL RESERVE BOARD WASHINGTON DC

Blua

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Form 1201
»S OF SERVICE

SYMBOL

Telegram
Day Letter

Blue

Night Message

Nite

Night Letter
N L
If none of these three symbols
appears after the check (number of
words) this is a telegram. Other­
wise its character is indicated by the
symbol appearing after the check.

WESTERN, UNION
TELEGRAM
N E W C O M B C A R L T O N . P R E S ID E N T

G E O R G E W . E. A T K I N S , F IR S T V I C E - P R E S ID E N T

CLASS OF SERVICE

SYMBOL

Telegram
Day Letter

Blue

Night Message

Nite

N L
Night Letter
If none of these throe symbols
appears after the check (number of
words) this is a telegram. Other­
wise its character is indicated by the
symbol appearing after the check.

RECEIVED AT WYATT BUILDING, COR. 14TH AND F STS, WASHINGTON, D. C. ALWAYS
OPEN
207HBG 46 COLL GVT
1318

RN CLEVELAND 0 5P APL 30 19 18

6207

HARDING

" OFf-.cg.

R ESERVE BOARD TREASY WASHINGTON
ANSWERING YOUR W IRE ONE M IL L IO N
HUNDRED F IR S T L L THREE

AND ONE HALFS S IX T Y TH0USAND

F IR S T L L CONVERTED FOURS
F IF T Y F IV E SECOND L L




N IN E S IX T Y S I X THOUSAND N IN E

THREE HUNDRED FOURTEEN THOUSAND F IV E

FOURS
FED ER A L R ESER V E BANK CLEVELAND
513PM

Reproduced from the Unclassified / Declassified Holdings of the National Archives

IM7SU

OE3KI MTEMT fe 4062»

/ i 1918
,

9 5 RD OX— 3 5 G o v t

43 o p

GOVERNOR’S OFFICE

R ie ie fte n d ?a A p l 3©

federal

t \^0l H w shn 1)0

answering your tei#graai/ we o w n W i h e r t y bonds first three and
forty two thousand fo«ar htaidrod.a^coiid fpi^s thirty eight thousand
two hundred,total eighty tfconsaad six hundred



Seay .

;

Reproduced from the Unclassified I Declassified Holdings of the National Archives

C> **»S OF SERVICE

„ UNiON

SYMBOL

ay IVIessage
Day Letter

Blue

Night Message

Nite

Night Letter

N L

If none of these three symbols
appears after the check (number of
words)thisisadaymessage. Other­
wise its character is indicated by the
symbol appearing after the check.

CLASS OF SERVICE

Day Letter

N E W C O M B C A R L T O N , P R E S ID E N T

G E O R G E W . E. A T K I N S ,

f ir s t

v ic e

Nite

Night Letter

AM

Blue

Night Message

m

w r..

N L

If none of these three symbols
appears aft<;r the check (number of
words)this isadaymessaie. Other­
wise its character is indicated by the
symbol appearing after the check.

-p r e s id e n t

RECEIVED AT WYATT BUILDING. COR. H th AND F STS.. WASHINGTON, D. C.
Ev E / : ;
. ■a
a 630AN

37 COLL CQVT
ATLANTA CA 710P 30

HARDINC

8173
COV FEDEPAL RESERVE BOARD WASHINGTON DC

THIS BANK ACTUALLY OWNS SIXTEEN THOUSAND SIX HUNDRED AND FIFTY
FIRST LIBERTY LOAN STOP TWO HUNDRED FORTY THOUSAND AND FIFTY SECOND
LIBERTY IOAN STOP NEWORLEANS SEVENTEEN HUNDRED
MCCORD COV.




SYMBOL

Day Message

/^

Reproduced from the Unclassified I Declassified Holdings of the National Archives

CLASS OF SERVICE

UNION

SYMBOL

Day Message

CLASS OF SERVICE

SYMBOL

Day Message

Day Letter

Blue

Day Letter

Blue

Night Message

Nite

Night Message

Nite

Night Letter

N L

Night Letter

N L

If none of these three symbols
appears after the check (number of
words)thisisaday message. Other­
wise its character is indicated by the
symbol appearing after the check.

AM
N E W C O M B C A R L T O N . P R E S ID E N T

G E O R G E W . E. A T K I N S , F IR S T V I C E - P R E S ID E N T

If none of these three symbols
appears after the check (number of
words)this is aday message. Other­
wise its character is indicated bythe
symbol appearing after the check.

RECEIVED AT WYATT BUILDING, COR. 14th AND F STS., WASHINGTON, D. C.
B527CH 57 COLLECT GOVT

L-. *
,,
MQ CHICAGO ILL 405P 30

HARDING GOVERNOR

6511

,
awDHni

'
0

G O V E R N O R ’S O F F IC E

-

WASHINGTON DC
ANSWERING YOUR WIRE OF THIS MORNING OUR BANK ACTUALLY OWNS EIGHTY
THREE THOUSAND FIFTY DOLLARS SECOND LIBERTY LOAN BONDS OWNS NONE OF
FIRST ISSUE THERE WAS AN OVERAGE HOWEVER IN OUR FIRST LIBERTY LOAN
BOND ACCOUNT WHICH NOW AMOUNTS TO THREE HUNDRED FIVE THOUSAND ONE
HUNDRED DOLLARS




FEDERAL RESERVE BANK OF CHICAGO.

2

Reproduced from the Unclassified / Declassified Holdings of the National Archives

T he Postal Telegraph-Cable Company(Incorporated)transmits and delivers this m essage subject to the terms and conditions printed on -the back of this blank.
I — 37807
I

KSKI M T U T I* 40939

378agwk

744 pn 22 ccak ct lexa
StLou i e Wo aja.3o

/
n

war d ing
Ref Board Treeury % e h n T)0 /
Replying your

telegram tM«> datej/ou are advteed that thli- bank

dose- not own an? lib«rtv bond* of any iesue




A t t e b e n y Cashr

pi mi iii

------------------------------------------------------- -

l"1- ' ----

Reproduced from the Unclassified I Declassified Holdings of the National Archives

greasxraj gjepartment
TELEGRAM

88W11T 25 Collect Govt
5U Minneapolis linn 104P Apl 3c IS
Harding

RECEIVED
APRS 01918

GOVERNOR’S OFFICflE

Reserve Board Treasury Washington
One liberty bond of fifty dollars owned by this bank
payments being made on this by employees




Wold Governor
250PM

Reproduced from the Unclassified I Declassified Holdings of the National Archives

r
vxm3ux% jppurtment
TELEGRAM

97WUKT 25 Govt
Kansas City Eo 150P Apl So 18
Farding Federal Reserve Board
I^ ^

r^aCEIVED
Apflg f |gjg
l
GOVERNOR'S OFFICE

Washington

lelegram/aoeiyed total holdings of this bank of liberty bonds
is twenty thousand six hundred dollars first issue




Hiller Governor
325pm

Reproduced from the Unclassified / Declassified Holdings of the National Archives

[f

" S O F S E R V IC E

SYM BO L

- a y Message
Day Letter
Night Me.

Blue
ge

WLSTE

UNiON

C L A S S O F S E R V IC E

Day Letter

Nite

Night Letter

Blue

Night Message

G E O R G E W . E. A T K I N S , F IR S T V IC E - P R E S ID E N T

N E W C O M B C A R L T O N , P R E S ID E N T

Nite

Night Letter

AM

N L

If none of these three symbols
appears after the check (number of
word^,)this is a d ay message. Other­
wise its character is indicated by the
symbol appearing after the check.

SYM BO L

Day Message

N L

If none of these three symbols
appears after the check (number of
words)this isaday message. Other­
wise its character is indicated bythe
symbol appearing after the check.

RECEIVED AT WYATT BUILDING, COR. 14th AND F STS., WASHINGTON,-D; C>; j;
hr i

*#jfcH lie COLL GOTO
2A LLA S

WARDING

30 P 4
M

A r n2Ci9J8
TE X

2 'O T

30

g °V E R N O R S

O F F IC E

A',

J

/M

RESERVE BOARD TREASUHY WASHINGTON
ANSWERING TELEGRAM IE HOLD SEfEN HUNDRED DOLLARS EIRST LOAN AND
TWENTY T i HUNDRED DOLLARS SECOND LOAN PURCHASED EY US FOR ACCOUNT
VO
OUR EMPLOYEES AND HAVE TAKEN THEIR SUBSCRIPTIONS EOF. THIRTEEN THOUSAND
THIRD LOAN 3HXCH BE WILL PURCHASE STOP OCCASIONED BY
DUPLICATIONS AND ADJUSTMENTS IN ALLOTMENTS WE HOLD IF SUSPENSE
ACCOUNT FOR TREASURY FIRSTIDOAN BONDS AGGREGATING THREE HUNDRED
SIXTY NINE THOUSAND NINE HUNDRED DOLLARS AND IN SAME ACCOUNT




I

Reproduced from the Unclassified I Declassified Holdings of the National Archives

C'

" OF SERVICE

SYMBOL

u w Message
Day Letter

Blue

Night Message

Nite

Night Letter

N L

If none of these three symbols
appears after the check (number of
wordsHhisisadaymessage. Other­
wise its character is indicated by the
symbol appearing after the check.

W E ST E Jm UNION
te lS § 1I r a m
N E W C O M B C A R L T O N , P R E S ID E N T

G E O R G E W . E. A T K I N S , F IR S T V I C E - P R E S ID E N T

RECEIVED AT WYATT BUILDING. COR. 14th AND F STS.. WASHINGTON. D. C.

CLASS OF SERVICE

Day Lettsr

Nite

Night Letter

N L

If none of these three symbols
appears after the check (number of
words)this isaday message. Other­
wise its character is indicated bythe
symbol aopearing after the check.

/..'I-

-T
0

SECOND LOAN THI3TT SIX THOUSAND NIIO EUNDEED FIFTT DOLLARS STOP
TWO LAST AMOUNTS HOT TAKEN ON OUE BOOKS AND V: FE3L TEEASU2Y
.E
DEPART!,EtlT SHOULD ADJUST AND RELIEVE US OF ITEMS AND CLOSE SUSPINSE

VANZANDTGOVERNOR.




Blue

Night Message

''& & S L SK3ST 3/36

ACCOUNT

SYMBOL

Day Message

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Form 1220
’> OF SERVICE

UNION

SYMBOL

Telegram
Day Letteir

{

Blue

Night Message

Nite

Night Letter
NL
If none of these three symbols
appears after the check (number of
words) this is a telegram. Other*
wise its character is indicated by the
symbol appearing after the check.

C U S S OF SERVICE

SYMBOL

Telegram

AM
N E W C O M B C A R L T O N , P R E S ID E N T

G E O R G E W . E. A T K I N S ,

f ir s t v ic e

-p r e s i d e n t

Day Letter

Blue

Night Message

Nite

Night Letter
N L
If none of these three symbol?
appears after the check (number of
words) this is a telegram. Other­
wise its character is indicated by the
symbol appearing after the cheek.

RECEIVED AT WYATT BUILDING, COR. 14TH AND F STS., WASHINGTON, D. C.
B 6SF XT 78 NL 2 EXTRA
SANFRANCI SCO C A L IF O R N IA APL 30 1918

'J/8
Oft
>,
/

HARDING
GOVERNOR WASHINGTON DC
R EPLYIN G TO YOUR TELEGRAM OF THE T H IR T IE T H WE OWN L IB E R T Y

LOAN BONDS AS FOLLOWS F IR S T F IF T Y DOLLARS F IR S T CONVERTED FOURS
SfX T E E N THOUSAND TWO HUNDRED F IF T Y BO LLAR S SECOND FOUR HUNDRED DOLLARS
TOTAL S IX T E E N THOUSAND SEVEN HUNDRED DO LLARS WE ALSO HAVE PURCHASED
FOR THE PURPOSE OF D E L IV E R IN G TO THEM WHEN PAYMENT IS
COMPLETED BONDS OF DELINQUENT S U B S C R IB E R S AS FOLLOWS F IR S T F IF T Y TWO
HUtiDRgJ DO LLARS SCCOWD TEN THOUSAND FOUR HUNDRED F IF T Y B 6LL A R 8 TOTAL
F IF T E E N THOUSAND S IX HUNDRED F IF T Y B O lW R S




C A LK IN S
DEPUTY GOVERNOR
525PM

Reproduced from the Unclassified I / Declassified Holdings of the National Archives

TELE

Form

FEDERAL

VE

BOA

IN Q T O N

HI

VMMtt M

Bostea# HAM*
SdW
H#
pfeUjuUi-o&U* Pa*
0 1 « 9 4 m 4 u&to*

l

M m iM m %t

Higher a 4 la*
?#
Atlanta# C«u
0hfoa0: v III*
f t Louis, & •
i*

P le a a a t a l a f r a j h w w an tof L l b t r v

iUnanioUt* srisn*
KmilVB Oitjp* MO*

DftUaa* ¥MMa«
Sm

fcoaAaof l b * v a r io u s in w 9 * a c t u a l l y

o*M«d f y y«mr teak*
e
siumt.

O FFICIAL BUSINESS
GOVERNMENT RATES

C arge F e d
Digitized forhFRASER e r a l R e s e r v e
2— 7729


Bo a r d

Reproduced from the Unclassified / Declassified Holdings of the National Archives

My de&r Mr. m i i s :
The accompanying file does not appear to
ctill for any action on the part of this office.
I would suggest that these papers be acknowledged
and filed.

Mr, H. Parker Willis,
Federal Reserve Board.

Enclosure.




F E D E R A L R E S E R V E B A N K OF G H I C A G O




79

WE S T

MONROE

STREET

Chicago, March 22, 1918,

Mr. H. Parker Willis, Secretary,
FEDERAL RESERVE BOARD,
Washington, D.C.
Dear Sir:
Enclosed herewith please
find copy of an extract from the minutes of the
Board of Directors* meeting held on March 22,
1918.
Yours truly,

7FM:S,

Secretary«

Reproduced from the Unclassified I Declassified Holdings of the National Archives

F EDERAL RESERVE B ANK O F CHI CAG''

"RESOLVED, That Assistant Cashiers F. J. Carr, Don A.
Jones and S. B* Oramer and Secretary W* P. McLallen be, and are hereby,
authorized to attest the assignment of United States Registered Bonds.
"BE IT HJRIHER RESOLVED, That the Secretary be instructed
to forward copies of these resolutions to the Treasury Department and
Federal Reserve Board, together with certified copies of the signatures
of the above named officers#1
*

I

HEREBY CERTIFY that the above is a true and correct copy

of an extract from the minutes of the meeting of the Board of Directors of
the Federal Reserve Bank of Chicago held on March 22, 1918, and that the
following signatures are the true signatures of F. J. Carr, Don A* Jones,




Secretary/ V

Reproduced from the Unclassified / Declassified Holdings of the National Archives

Fe d e r a l R e s e r v e B a n ^:

U.2 . M I L L E R , JR . ,

OF

GOVERNOR

U .L .C R O S S
D E PU TY

GOVERNOR

Ka n s a s

A R C H W .A N D E R S O N ,

C it y

S E C R C T A R Y -C A S H IE R
C.A.W0RTHIN0T0N ,ASST. c a s h i e r




March. 7, 1918.

iviAR 1 1 1 9 1 8
O'PFICB or

i f r i,. U j i i i j A . N O
V

Hon. F. A. Delaiao,
Member of Federal [Reserve Board,
Washington, D. C.

Dear Mr. Delano:
We aclmowled^e receipt of your conanunication of^the 4th instan t ^ advis ing that one of the
Federal fiesHJr^
to sell a block of
2/o Consols held by it, at 97-|, and as a suggestion you
thought we might be interested in selling a part of our
2% bonds on the same basis as a means of strengthening
our reserve, et cetera.
While it might be deemed expedient to matoe a
sale of seme of our 2*s on account of the indefinite
period of the war and on account of the huge issues of
Government bonds necessary therefor, we fail to see how
the sale of our bonds would affect our reserves in the
least since we have~.no investment in them, except the
usual 5fo redemption fund, and, therefore, our reserves
would not be increased by maiding the sale, ^he debit
to our resources and credit to our liabilities are an
offset. We paid 8 million dollars for the bonds we
hold and the G-overment has returned to us 8 million
dollars of bank notes all of which are in circulation.
We are getting a gross profit from this status of
§178,500, out of ,which we are paying §44,,625 tax on
circulation, leaving us clear profit of $>133,875 per^
nrnrmm on an investment of ^ 400,000 deposited with United
States Treasurer on account of 5% Eedemption Fund.
However if you or the Board think that we should
dispose of the bonds ot any part thereof and retire the
same amount of circulation., please advise.
^

~

Yours truly,

Governor.

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s




March 4th, 1918.

OOHPlBBWIAJj

M a*ar Mr. Mlllwr;
y

On® of our Federal Beserre Banks which
b&Q had a few hundred thousand of two per cent bonds,

Is contemplating soiling thea at 97£, and either in*
▼eating the proceeds In Ooramaent

per centi

/

or

tooling thoso prooeeds it the fora of a liquid in­
vestment*
Ton har© a large block of these bonds,
and I prestuae yon could not market any Tory large
proportion of than without breaking the market, but
It aicrht bo a good idoa to pass thea out.

Ton oould

strengthen your reserves # and at the same tiae aake
up the loss in discount* »*t of earnings*
Tonrs very truly.

Mr*
Z* Killer* Jr.,
Governor* federal Reserve Bank,
Kansas City, Ko*

Reproduced from the Unclassified / Declassified Holdings of the National Archives

\

-

V

December 14th, 1917*
C O U P O N S .

To the Bank Addressed?
Interest Coupons on United States Bonds are payable upon
presentation to the Treasurer of the United States, to an assistant
Treasurer of the United States, or a Federal Reserve Bank or Branch
thereof.
In sending to this bank any coupons from bonds of the First
Liberty Loan payable December I5th, either of the 3 ^ Bonds or the
4$ Conversion Bonds, you are requested to observe the following
procedure to insure safety and prompt and efficient services
1 - These coupons will be handled in the Fiscal Agent Department
therefore, send all coupons in a separate cash letter. Do not
include coupons with your regular cash letter.
2 - If more than 100 coupons are sent arrange them in packages of 100
each under straps or in envelopes. When possible, include in each package
coupons of only ONE DENOMINATION - for example, 100 coupons from $50 - 4^
Bonds, 100 coupons from $100 - 3i% Bonds, etc. Odd amounts of less than
100 of each DENOMINATION and KIND should EACH be placed in a separate
envelope or under separate strap.
3 - On each envelope containing coupons, or on each strap or package,
please note the number of coupons* amount of each, and total amount in
each package.
Coupons being small are easly lost, and only by careful handling as
requested can safety and dispatch be insured to you and to us.




FEDERAL RESERVE BANK OF RICHMOND

Reproduced from the Unclassified I Declassified Holdings of the National Archives

J

^ -7
OFFICE OF
FEDERAL RESERVE AGENT

November 15, 1917*

Mr* Sherman Allen, Seoretary,
Federal Reserve Board,
Washington, D* C*
My dear Mr* Allen:




"U/
/)

I have your letter of November 1 3 , /and have
taken up confidentially with Mr. Tiers in Pittsburgh
(whom I know very well) the subject contained in a
paragraph of his letter to the Comptroller of the
Currenoy.
I will advise you later if I consider the
situation one that should reoeive your further considera­
tion*
Very truly yours,

Reproduced from the Unclassified I Declassified Holdings of the National Archives

D ir e c t o r s

O F F IC E R S
o r

LA

F e d e r a l R e se r v e B a n k

W E LLS ,

o?

OVERNOR

. H O XT ON,
G o v e r n o r

G.

O UNSEL AND

a n d

OF

D.

LE

> F > . >z
B

5s istant

C ashier

St . L o u is

C LAE 3AU G H,
C ashier

lo

RO V

F R A N K

m o

P E R C Y ,

O. W A T T S ,

Z I E G L E R ,

St. Louis, Nov. 15, 1917.

Hon. Sherman Allen,
Assistant Secretary,
Federal Reserve Board,
Washington, D. C.
Dear Sir:
We have received your letter of November 1 3 f
th,
setting forth an extract from the^nutes^6T*tHa^foari''
for & meeting held on Monday, November 12th, and en­
closing a copy of general instructions covering the
payment of coupons of Unitad Statss bonds.
Very truly yours,

Cashier.

BBC

LITTLE

ST. LOUIS,

ALBION,

.

ROCK.

GREENVILLE,

C. P . J. M O O N E Y , M

C ashier

^A N ^ V IU L E ,
^ / s , nI o . ^ .

H

b!.. P LfO' Ki K E T T ,

S. A.

H A IL L,




C*. B I < R G & ,

W A L ^ ti^ J r

SECRETAR

W.

s s i s t a n t

M A R T IN ,

.CHAIRMAN OF THE BOA RQ AND
f E O B R A L R E S E RVlF' MyENT

I M. A T T E B E R Y ,

s s i s t a n t

M cC .

J O H N ^ B O E y j E ,

M cC O N K E Y ,

o *

e p u t v

ES

W.

A

MI S S
MO.

ILL.

e m p h i s

. T e n n .

Reproduced from the Unclassified / Declassified Holdings of the National Archives

y

f

~ . - ^ v E a

i

F E D E R A L R E SE R V E BANK

! < ^..7
7

/

OF NEW YO RK
_
u
.

November 14, 1917.

Sirs
/

Receipt is acknowledged of your favor of lovember

13til, giving us an extract from the minutes of the meeting
of the Board held on Monday, Hovember 12th, with reference
to the payment of the United States coupons, which has our
attention.
i

Thanking you for your courtesy, we are,
Respectfully,

Cashier.

Honorable Sherman Allen,
Assistant Secretary, federal Reserve Board,
Washington, D. 3.




RECEI\

r ------------- — — -------------- -— 1 ------------------------------------------------------------ ------------------—
Reproduced from the Unclassified I Declassified Holdings of the National Archives

/

*

’

V

j

2 3

J . , ..

FEDERAL RESERVE BANK OF PHI^ADEUPKJA
/

4-08

CHARLES J.

CHESTNUT

RHOADS

STREET

R IC H A R D

GOVERNOR

E D W IN
S

THOMAS

O F THE BOARD AND

FEDERAL RESERVE A G E N T
GOVERNOR

F R A N K £ puT^ « v° £ NOR

HENRY

and cash,er

B.

THOMPSON

GAMON, JR.

D E PU TY C H A IR M A N

ARTHUR

AS S IS TA N T

A.

C H A IR M A N

S. S T U A R T
DEPUTY

C.

L. A U S T I N

CASH IER

OF THE BOARD

E. P O S T
A S SIST A N T FEDERAL RESERVE AG EN T

M C lL H E N N Y




A S SISTAN T

C ASH IER

November 14, 1917.

S i r s :

We beg to acknowledge receipt of your
favor of the 13th Instant giving extract from
the minutes of the Board for meeting held November
12, 1917, also instructions for the handling of
coupons from United States Bonds received by the
Treasurer of the United States, an Assistant
Treasurer, or a Federal Reserve Bank for payment.
We will be governed accordingly.

FEDERAL HE SERVE BOARD,
Washington, D.C.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

O AH F!lr
O D

-V/

- ^ i L E COPY.

I
November

Dear Sir:
For your information there is given below an
extract from the minut e s ofc the Board for a meeting
held on Monday, November 12, 1917:
’
’
The request of the Treasury Department
for approval by the Board of a plan for the
payment of coupons cf U. S. Bonds by Federal
Reserve Banks acting as Federal Fiscal Agents,
was noted and given the approval of the B o a r d * ”
Attached there is a copy of the general instructions
covered by the above approval.
Very t ruly yours,

Assistant Secretary.

Federal Reserve Bank,

Inclosure.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

jiiiiui pmt mvx
iviiwii
Office of the Treasurer U. S.,
November 5, 1917*
INSTRUCTIONS FOR THE HANDLING- OF COUPONS FROM UNITED STATES BONDS RECEIVED BY THE
TREASURER U. S., AN ASSISTANT TREASURER, OR A FEDERAL RESERVE BANK FOR PAYMENT*
Coupons from United States bonds are actually payable only on presentation
to the Treasurer of the United States, to an Assistant Treasurer of the United
Statest or to a Federal reserve bank or branch thereof. When so paid they should
be canceled by punching a hole l/4-inch in diameter in the middle of the coupon
and near the top thereof through the words "United States” or immediately there­
under. THE HOLE MUST NOT BE PUNCHED THROUGH THE DATS OR NUMBER ON SUCH COUPON,
NOR THROUGH THE AMOUNT THEREON. Coupons should be arranged according to Loan
and denomination, one hundred of the same kind being put under a strap. The
remaining odds, arranged by Loan and denomination, should be strapped in 100s,
leaving only one package containing less than IOC). Each strap should bear a
statement in brief of the contents*
The total amount of coupons paid on any particular day should be charged
in the Treasurer’ account of that date and listed in the ’
s
’
abstract of payments'*
on the transcript of the paying office as “
United States coupons paid $ --- ---~~.w
giving symbol number 17199 and forwarding in support of the debit a charge
document on Form #6518, (if a Federal Reserve Bank) or No. 1748 (if a SubTreasury) - "Statement of coupons paid - U* S. bonds."
This charge document
must accompany the transcript in which the entry is made.
Coupons should be packed securely, sealed and forwarded, by registered
mail, to the Treasurer of the United States, Division of Banks, Loans & Postal
Savings, Washington, D. C. A Statement of Paid Coupons, Form 5686, properly
filled out mast be inclosed with the coupons.
The date of this form must
correspond to the date of the transcript of the Treasurer*s account in which
the coupons are charged and the total amount shown thereon must agree with the
amount charged in said transcript.
All Postal Savings Loans of Series One to Six inclusive, must be listed
by series on Form 5686 while Postal Savings Loans of the Seventh and subsequent
series must be listed under the head of "Consolidated Series*”
In order to facilitate the verification of coupons and the clearing of
such items, it is urged that each paying agency prepare coupons with care and
forward them promptly to the Treasurer the same day they are paid,
NOTHING- IN THESE INSTRUCTIONS IS TO B1 CONSTRUED AS PROHIBITING THE HOLDER
OF UNITED STATES COUPONS FROM CASHING THEM AT ANY BANK OR TRUST COMPANY THAT IS
WILLING TO ACCOfiODATl ITS PATRONS IN THIS RESPECT, OR AT A POST OFFICE AUTHORIZED
BY THE POSTMASTER GENERAL TO CASH SUCH COUPONS.
COUPONS SO CASHED, HOWEVER,
MUST UNDER NO CIRCUMSTANCES BE CANCELED EXCEPT BY THE TREASURER OF THE UNITED
STATES, AN ASSISTANT TREASURER, OR A FEDERAL RESERVE B A M TO WHOM THEY HAVE BEEN
DELIVERED FOR ACTUAL PAYMENT. COUPONS PREVIOUSLY CANCELED WILL NOT BE SO PAID.
JOHN BURKE,
Treasurer U. &•
Approved!
R. 0. LEFFINGWELL,
Assistant Secretary of the Treasury*




Reproduced from the Unclassified I Declassified Holdings of the National Archives




4

J

FEDERAL RESERVE BOARD Fll

A p ril 19* 1917,

-a

Or« C, J. Hhoads,
SoTeroor, Federal a e i i m Bask,
Philadelphia, Ba.
Dear Sirs
Xm r letter of April 18thJ stating the aituatlon

as you find it in eoxmeotioii with the aale of CJ.S. 3$
30-year bonds halt by Fedeml reserve backs, is received.
Ton will have thia morning received fron this offioa
a latter aant oat yesterday to Governora of all Federal
reserve banks which relates to thia natter*

Thia letter,

I think, ooYers the aatter eo far as e*s be done at this
tin*«
Very truly yoors.

Governor

Reproduced from the Unclassified I Declassified Holdings of the National Archives

FEDERAL RESERVE BANK OF PHILADELPHIA
4-08
CHARLES

CHESTNUT

R IC H A R D L .A U S T IN ,

J. R H O A D S ,
GOVERNOR

ED W I N S. S T U A R T ,
DEPUTY

FRANK

GOVERNOR

A R T H U R E. P O S T ,

GAMON, JR.
A S S IS T A N T

C H A IR M A N OF THE B O A R D A N D
FEDERAL RESERVE AGENT

H E N R Y B. T H O M P S O N ,
D E P U T Y C H AIRM AN O F THE B O A R D AN D
DEPUTY FEDERAL RESERVE AGENT

M . H A R D T ,
C ASH IE R

THOMAS

STREET

C A SH IE R

A S S I S T A N T TO FEDERAL R ESERVEAGENT

April 18, 1917
Federal Reserve Board,
Washington, D.C,
S i r s :

Immediately after the last conference of
Governors, the Committee of which the writer has
acted as Chairman, invited proposals for the pur­
chase from Federal reserve hanks of approximately
$5,500,000 United States thirty-year conversion 3's,
said proposals to be opened on the 17th instant.
Very soon after our invitations had been sent out
the Administration bill authorizing seven billions
of United States securities at
rate was intro­
duced in Congress, with the result that yesterday,
when our committee met to open the bids, we received
no bids but communications from several institutions
and firms interested in Government bonds, stating
that under the changed conditions they were not pre­
pared to make any bids.
All of the letters called
attention to the fact that our thirty-year 3*s if
sold at a
basis, which is the rate authorized
for the new Government bonds, it would mean a price
of 90f for our bonds.
They also called attention
to the fact that the new issues will contain a pro­
vision authorizing their conversion dollar for dollar
into any subsequent Government bonds which may be
issued duringr the life of the war at higher rates than
and that similar provisions should be made for our
thirty-year 3*s.
It is therefore obvious that Federal reserve
banks will now be unable to dispose of their conver­
sion 3*8, and it is the opinion of our Committee that
the whole subject should be taken up with the Secretary
of the Treasury with a view to the development of a com­
prehensive plan for the retirement of the national bank
note circulation, as well as the greenbacks.
Such a
plan would also have to make provision for our thirtyyear conversion 3's, our one-year renewable notes and
F1
probably for the Panama 3 fs which are now out standing ^ ' !
May I ask that the Board give consideration t^N j i
f
this subject and advise me whether or not they are dis­
posed to take up the whole subject as outlined,in th§
near future?



CJR'jR

Reproduced from the Unclassified I Declassified Holdings of the National Archives

,,vm-4
0

F E D E R A L

R f ^ E R V E

B O A R

W A S H I N G T O N

*

March 14 # 1917*

H»""-----

,

i^rria*

Federal Heserve Agent, ,

Sam I’
ranoiaoo, California#

Jkn ^ r l n g

yoara thlrteewt>i
-*o objsotlon your gelling

no tea at two three quarters Stasis.
MILISH.

*

OFFICIAL BUSINESS
GOVERNMENT RATES

Digitized forCFRASERe d e r a l R e s e r v e
harge F
http://fraser.stlouisfed.org/
2— 7729
Federal Reserve Bank of St. Louis

Board

Reproduced from the Unclassified I Declassified Holdings of the National Archives

CLASS O F SERVICE

UNION

S YM BO L

Day M essage
Day Letter

Blue

Night M essage

Nits

Night Letter

N L

If none o f these three sym bols
appears after the check (num ber of
w ord s)th isisa d a y m essa g e. Other­
w ise its character is indicated by the
sym bol appearing after the check.

CLASS OF SERVICE

SY M B O L

Day M essage
Day Letter

Blue

Night M essage

AM
GEORGE W. E. ATKIN??. F I R S T V I C E - P R E S I D E N T

NEWCOMB CARLTON, p r e s i d e n t

Nite

Night Letter

N L

-

If none o f these three sym bols
appears after the check (num ber o f
w ords)this is a da y m essage. Other­
w ise its character is indicated byth e
sym bol appearing after the check.

RECEIVED AT WYATT BUILDING, COR. 14th AND F STS., WASHINGTON, D. C.

1 1 MR 1 A I 39
97 A 4 M
A653CH 29 GOVT Nl TE C0LLsANFRANC, sco CALIF IS
MILLER FEDtRALjR£8tRyt' BOARD
5

WASHINGTON (DC)

HAVE OFFERED QUARTER MILLION ONE YtAS GOVERNMENT NOTES' DUE1JANUARY
AT I W THREE QUARTERS' BAS4S DOES' BOARD APPROVE1SELL ING NOTES NO
O
W
PERRIN
CHAIRMAN.




Reproduced from the Unclassified / Declassified Holdings of the National Archives




f e d e r a l

r e s e r v e

h o a r d

MEMORANDUM
For Mr.._______ Miller

______________ _______ '
Executive Committee

At a meeting of the

on

_____________ March 14_________ , -the following matter
(as Chairman, Committee on Operation of
was referred to y o u ( , F. R. "3. of "San Francisco:
(as
and the following,
minute entered:
"A letter from F. R. A. Perrin asking vfeether the
Board wjuln approve the sale of a Quarter of a1million of
Government notes on a 2 z/4$ basis, was read, and Mr*
Miller-was authorized to conmunicate to Mr • Perrin that
the Board would approve such action*’
*

Please return this memorandum with copy of
documents resulting from action taken, if any,
Date

_______

Documents,
Signature_

Reproduced from the Unclassified I Declassified Holdings of the National Archives

x -27

G « w ea

AMOUNTS AND PERCENTAGES OF TOTAL PAID-IN CAPITAL
FOR EACH FEDERAL RESERVE BANK AND PROPORTION­
ATE BOND CONVERSION ALLOTMENTS ON
$15,000,000 BASIS .

BANK
•

Boston
New York

Paid-in
Capital
March 2,1S17

Per cent of
Total paid-in
capital.

Proportionate
allotment for
$15,000,000.

5 ,083,000

9.0695

1,360,400

1 1 ,888,000

2 1.2 116

3,181,700

Philadelphia

5 >259 ,poo

Cleveland

6 ,085,000

10*8574

1,628,600

Richmond

3,409,000

6.0826

912,400

Atlanta

2,420,000

^.3173

647,700

Chicago

6 ,999,000

12.4882

l,873,?-00

St. Louis

2,794,000

4.9853

747,800

Minneapolis

2/412,000

4,3037

645,500

Kansas City

3 ,089,000

5 .5 116

826,800

Dallas

2 , 696,000

4.8104

721,600

San Francisco

•5,911,000

6.9783

1,046,800

56,045,000

100-0000

15.000,000

Total
March 6, 1917•




1,407,500

Reproduced from the Unclassified / Declassified Holdings of the National Archives

AMOUNTS AND PERCENTAGES OF TOTAL ?AID~IN CA
FEDERAL RESERVE BANK AND PROPORTIONATE
ALLOTMENTS ON #16,000,000 BAS

Batik

Ifcid«*iit
Capital
Maroh 2, 1917*

Btr oent of
total paid-in
capital,

Proportionate
allotment for
116,000,000

5,008,000

9*0595

1,560,400

11,888,000

21.2115

5,181*700

Philadelphia

5,269,000

9*5855

1,407,600

Cleveland

10,8574

1,528*500

Richmond

6,086,000
%
5,409,000

5*0825

912*400

Atlanta

2,420,000

4*5179

547,700

Chicago

5,999,000

12*4852

1,875*200

St* Louis

2,794,000

4*9868

747,800

Minneapolis

2,412,000

4.3087

545,500

Kansas City

5,089,000

6*5115

825,800

Dallas

2,095,000

4*8104

721,500

San Franoisoo

5,911,000

5*9785

1,045*800

55,045,000

100.0000

15*000,000

Boston
New York

To tel

DIVISION OF REPORTS AND STATISTICS,
FEDERAL RESERVE BOARD,
Maroh 6* 1917*




Reproduced from the Unclassified / Declassified Holdings of the National Archives

1 'OLML

Memorandum for Mr, Jacobson,
Will you please send me as soon as possible
the amount of United States bonds purchased by
Federal Reserve Banks during 1916, the total of
exchanges for 3 per cent Conversion bonds aid
one year notes, and the amounts by banks of Fed­
eral Reserve Bank notes issued against bonds with
the amounts of this currency outstanding on Dec­
ember 30, 1916,




Assistant Secretary.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

F R E D E R IC A . D E L A N O
A D O L P H C . M IL L E R

wADOO
,8 Y OF THE TREASURY

C H A R L E S S . H A M L IN

CHAIRMAN
S K E L T O N W IL L IA M S
Co m p t r o l l e r o f t h e Cu r r e n c y

FED E RA L R E SE R V E BOARD

H . P A R K E R W I L L I S , SECRETARY
S H E R M A N P . A L L E N . ASST. SECRETARY
AND FISCAL A G E ^

WASHINGTON

A DD RE SS R E P L Y TO
FEDERAL RESERVE BOARD

D I V I S I O N OF REPORTS A N D STATISTICS




January 10, 1917.

Memorandum for Mr. Allen:
Amount of U.S.Bonds on hand, January 1, 1916
Amountjpurchased during 1916
U.S.Bonds
1-year Treasury
notes

$15,918,470

$56,450,180
300,000

56,750,180

Total purchases to December 31, 1916.......... .... .$72,668,650
Amounts sold during 1916
U.S. Bonds
$13,882,000
1-year Treasury
notes
3,372,000
Total.......... 777777777.....

17,254,000

U.S.Bonds and 1-year Treasury notes held on
December 31, 1916....................... ..$55,414,650
Respectfully submitted,




4 U

9 <f~o

Reproduced from the Unclassified I Declassified Holdings of the National Archives




Reproduced from the Unclassified I Declassified Holdings of the National Archives




A O * - * -

If*

d > U

A Lf / C & 4 & 4 *
/

^

^

C w c
/

/

R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

v?
i1

„*W^
fSS

Jammry 9, 191?*

\

Mr* O&arlea J* abo&de,
3orernor fed*r«3. Reeerro Bank,
Dear Goreraor ITfcoadataddreesed to Mr. t&bxaz ilio

TOW le tte r o f t l » ^

referred to thlt off f t ** «

1* 0Q' of tom today, &**
|

the attrition of &ea&*?a of the Board m a of course ealled
to the reoent etatemente In the pros* that there eotild probai»ly
bo a 2*rge leeae of PftnaE* Oaaal

dnring the protect y*ar«

**sd;the m t t e r m « recently dlecueaed Informally with the Secretary
of th# $re*»*ay«

&» $» atffc f*t prepared to aa&e a definite e t a W -

neat a* to Mft IntentiooiB, and nr iqpro»sion Is that t$»*» 1# a
|

poMlbility, before bo ale are finally Issued, that one year oertl-

|

float*# will to* reported to*

*

loan* of atHstar oertificatee or l&&m* l» I m l n m t .In the irradiate

I h a w no reaeon to l»lieTe that m

j

futare.
I

|
f
i
1
l
i




Very truly yotaro,

Ooromor*

Reproduced from the Unclassified / Declassified Holdings of the National Archives

FEDERAL RESERVE BANK OF PHILADELPHIA
408
C H A R L E S

J.

EDWI N

CHESTNUT

R H O A D S ,

STREET

ST UART,

RICHARD

GOVERNOR

S.

DEPUTY

GOVERNOR

L. A U S T I N ,

C H A I R M A N O F THE B O A R D A N D
FEDERAL RESERVE AGENT

H E N R Y B .T H O M P S O N ,

United States 30-year conversion S ’ which Federal
s
reserve banks now have for sale, it is inevitable
that the purchasers with whom we deal will raise the
question as to whether or not there is likely to "be
a large issue of Panama 3*s during the current year.
From the announcement given to the press by the
Secretary of the Treasury it is not perfectly clear
whether such an issue is contemplated this year or
next, but my own impression is that the Secretary
of the Treasury will, if possible, defer making
such an issue until after July 1, 1917.
If you have any information on this
subject which you can impart to us it will be
greatly appreciated.
Very truly /»ours,

HOI'T. PAUL M. WAKBURGr,
Vice-Governor,
Federal Reserve Board
Washington, D.C.



C JRVR

Chairman of Governors1 Committee
on Bond Purchases.

LRAl RESERVE BOAfSD HLE
— r "* i

<*»«0n

. ■? '
J l j e f ____A

m m m u ron xn.

I

S ^ ' \ 1 K£
On lovoabor 30f ths Treasury raport* a total of 863.3 *111Iona
of tfnitod Stats* fcond* with circulation priviisgs outstanding, divided at
follow*:
2*«
3#s
«* •

$TOO,M*,QOQ
63,946,000
___ U8.480.0W
Total
#8 J, 317, 000

Of this total tbo Troaouror of Xht Onltad Stotsa M id in* { a l ­
lowing sla ««a t M i aaounto to ««c u r« oirsulatloa:
1. - tor > a tic i»l Bank* 3**
1*1

|*41,138,000
15,151,000
....

Total

tM 2,«»4,000

i . - For P «i»r * l » * * « ■ » • Bank* a*t
-J&AQ£Lm~.
Total for lational
and 7. ft. Banks

6*1,214,000

On Soy towbor 12 ths l^tionai bank* report to ths C ontrol lo r
a»oag thsir a*ssts a total of $72^,777,000 of Onitsd State* bond* and a
total of $WT,492#000 of bank Itotss rsosivsd from ths Coa^trollsr. This
loatsa a fros Margin of $42,086,000 of Unitsd gtatss bond*. Assuming a
Ilk * anoint on Vowsiibsr 10, and dsducting fro* this aaouat th* total of
$11,026,000 *f 3 p#r o*nt bonds without th* circulation prtwllsgs hold
for latlonal bank* by ths Unltsd Statss Troaaursr to Hfiurv dsposits, ws
obtain a p .)*«ibl* aaximua* of $31,069,000 of Uni tad St* to* bond* with c ir ­
culation privilege hold by tho Mstlon^l banks at tho cloe* of Mov«*b*r.
Our own raeand* shew that on that dato ths Jsdsral Hossrtrs Bank*, in
addition to th* 3.4 a illlo n s of 3 fo r oont bond® hold with ths Tr#a#ur*r,
■il*e had on hand a total o f ”26,131,000 of United S U U a bond« <*Uth c ir ­
culation privil«go dlstributod as follows]

3 BS
$l&,8il,000
3»s
7,407,000
4«s
__ 4,»f^0OQ.
_
Total *xclu*iw« of 3*4
w lllions hold by Tr^aa-r
uror
$26,131,000




KeproducecJ from the U n cla ssified / D eclassified H oldings of the N ational A rchives

✓Hr. I * r W g .....a.

---- --------------- t: 7 r I
'
T O t R A L $E££‘E yB0ARD H U j
W

Total ausouftt of U.S.bond* with circulation
privilofco outstanding on lovawtoor 30,1*16
Hold to Tro*#uror to ooouro
/
oir«u l*tion for (»)
National Baaks
(to)
f, n. Bank.
Total

|S82#tS4#000
___ M M « g « L
$ 491,254,000

lotimatod aa&lonni amount of
U.B.toondo with circulation
priv I I *(0 in &*nd* of ■*tiofUk.1 toank*

31, O 9, 000
S

A*oimt of U.S.bond* with cir­
culation privilog# in &and»
of Fodoral rtaonro toaak•

$133317,000

$S#131#QQG

Aaouat of U.S.bond* with c ir ­
culation privilege hold to
y
?r*atur*r of U.S. for Sat11
banks to ««ouro Oovomnont

K»tiaat»d naxloua amount of
U.S.bond* titfa circulation
privilog# outdid# th« con­
trol of tii# U.S.Treawuror,
tho F*4or*l ftoaorro bank*
and tho Ia t*l bunki on
* . , . . b . r 30, 1*1*

U.iiO.QOQ__________ * T»T.lPt..PPO

_______________________ $ m .a n .o o o

StAt 1*tlC U * .
Doc ->ab«r 30,1916




I D ecla ssified H oldings of the N ational A rchives

R eproduced from the U n cla ssified

TRE'.ASUf^Y D

E

P

A

R

T

S

f.ifj

^

ILLOTimfT O f 30 TUB 2$ COKTOSIG* B0ID6 AND X TEAS 3jt TfirilSOET B0TJ&

J1IERAL BKSfiiY* BANKS ■ CALZKHAB TEAS
*

Bank.

.
^

^

e

I

1 ^ 1W I i b
Allotaant of
1 yaar Traaaury afttaa*

Proportionata
ailotaont of
$30,000,000**

Allota*nt of
o«nT*r»l©n
bond*.

$a,696,aoo

| 1,346,200

$ 1,346,000

6,412,900

3,206,900

3,206,000

8,614,200

1,407,200

1,40*,000

3,227,200

1,614,200

1,613,000

1,799,100

900,100

699,000

1,335,600

666,500

667,000

ft,913,000

3,722,100

1,661,100

l,66l|000

8t. Le*l« ...... .... 2,794,000

1,504,600

762,600

763,000

1,261,600

641,600

640,000

1,642,900

621,900

621,000

1,461,200

726,200

726,000

2,112,500

1,006,600

1,066,000

30,000,000

15,006,000

14,995,000

Paid-In
(WIlUl*1

9a ston*

Philadelphia

...* 5,007,000

... ---

C h i c a g o .......

6,226,000

Xaaaaa City ,... .... 3,061,000

t I U l ..... .,,, 56,711,000

• 7&ralafa«4 by T t d s m l l e t t m B**rd.
** AlloUwnt V Ifc4tral B # w n r » Board.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

TREASURY DEPARTM EN.
OF FICE OF T H E SECRETARY

DIVISION OF LOANS AND CURRENCY

la*j,

Ps
pc>%

{ a +J*

r-

/ *"“
t/" 'S/I* ‘5
/n-




yfce’
&CZ,

t/fy
/fc/s

_

Reproduced from the Unclassified I Declassified Holdings of the National Archives

W . P . G « R A R l/ lN G , G o v e r n o r

Ex -O f f ic io M e m b e r s

-• P A tfL M . W A R B U R G , VICE GOVERNOI^
\

F R E D E R IC A . D E L A N O

W ILLIAM G. McADOO
SECRETARY OF THE S f t .
C H A lR M A (i/

JOHN S K E L T O f J w i L L l l i W
C O rfP T R d L J ^ jJ ^ F THE ,C

\

FED E RA L R E SE R V E BOARfo
WASHINGTON

A D O L P H C . M IL L E R
C H A R L E S S . H A M L If
A R K E R W I L L I * SECRETARY

ADEWC't. £
N^WI^eT

M A I ^ . A L U f N . A S J _ _ _____

A DD RE SS R E P L Y TO
FEDERAL RESERVE BOARD
a *-* *.

November 2H, 19 16 .

Qarded

Dear Sir:
The Federal Reserve Board has observed that certain
Federal reserve banks have recently purchased two per cent United
States bonds above par and its attention has been directed to the
fact that this price has been artificially stimulated by the com­
petitive bidding of those Federal reserve banks.
While it is not the desire of the Board to restrict or
to limit the purchase of two per cent bonds by the various Federal
reserve banks,,it is deemed advisable to point out that this policy,
which is unnaturally forcing up the price of two per cent bonds,
is fraught with certain dangers.
Section 18 of the Federal Reserve Act provides in part
that any member bank, desiring to retire the whole or any part of
its circulating notes, may file with the Treasurer of the United
States an application to sell for its account, at par and accrued
interest.United States bonds securing circulation to be retired.
The Federal Reserve Board is given the power to require Federal
reserve banks to buy $ 25 ,000,000 of such bonds in any one year,
,
less the amount of bonds bought by such Federal reserve banks in
the open market during the same calendar year. The power of the
Federal reserve banks to make open market purchases of bonds is
not limited by law, so that, strictly speaking, such banks are
acting within their legal rights in making such purchases even
though their competitive bidding is forcing the price of t w o ’
s
above par.
The difficulty, however, is that this policy is creat­
ing an artificial ana unnatural market for two per cent bonds. The
Federal reserve banks are afforded the privilege of converting a
certain amount of two per cent bonds into three per cent bonds and
three per cent one-year notes. Consequently, such banks will not
suffer any direct financial loss by paying for two per cent bonds
practically the same amount as the normal market price for three
per cent bonds. The fact, however, that Federal reserve banks may
convert bonds in this manner and that two per cent bonds are be­
cause of the conversion privilege worth substantially as much as
three’ to Federal reserve banks, is hardly a sound reason to
s
justify their forcing of the price of t w o ’ above their normal
s
market value by blindly bidding against one another.




W -------------------------------------------------------- ,,u .........
---~
Reproduced from the Unclassified / Declassified Holdings of the National Archives

- 2

885,

It is quite generally agreed that one of the purposes
of the Act was to promote a gradual retirement of the national
tank circulation,, and Section 18 in affording a fixed market, at
par and accrued interest, for two per cent “
bonds against which
circulation is outatanding, contemplated that member "banks would
dispose in that manner of those “
bonds which they are required "by
the national bank act to keep on deposit with the Treasurer of the
United States*
It is apparent, therefore, that if the open market price
of two per cent bonds is unnaturally established at a figure above
par, member banks m i l not be inclined to offer their two per cent
bonds for sale through the Treasurer at par* and accrued interest ,
even if such bonds are not free bonds and can not be released by
the Treasurer for sale in any manner other than that provided by
Section 18*
The result will be that there will be an artificial
stoppage ©f the retirement of national bank circulation in the
manner contemplated by the Act*
tfhe suggestion has been made that the Federal reserve
banks appoint a committee to consider the purchase of tv\fo per
cent bonds for the joint account of all Federal reserve banksi
The Board believes that such a course would not only be conducive
to a more healthy and normal market for two per cent bonds, but
also that it would best promote the results intended by Congress
in the matter of accomplishing the retirement of national bank
circulation*




Respectfully,

Governor-

Reproduced from the Unclassified I Declassified Holdings of the National Archives

C WJlti'WBOn • ■
...

The Federal Reserve Board has observed that certain
Pedaral raserve banks save recently purchased two par cent
United States bond* abore par and its attention has been directed
to the fact that this price has been a r t i f i c ia lly sticonlated by
the eoapetitive bidding of those Federal reserve banks,

Vhilm it is not tit* desire of the Board to restrict
or to limit the purchase of two per cent bonds by the various
Federal reserve banks, it is doemed advisable to point out that
this policy, *hich is vcinaturailjr forcing up the price of two
per cant bonds, is fraught with certain dangers*
Section 18 of the Ffcieral Reserve le t provides in p f-t
that any s«nher bank, desiring to rat ire the whole or any part
of its circulating notes, nay f i l e with the Treasurer of the
United States an application to e e ll for Its account , at n&r and
accrued interest. United States bonds securing circulation to b «
retired.

The Federal Reserve Board is given the power to require

federal reserve banks to tagr $35,060,000 o f each bonds in any one
ym r, lass the a&oent of bo»«4* b«*ght by such Federal reserve banks
In the open market during the sam calendar /ear.
e-

The power of

the federal reserve banks to na*a apan aarket parentsee of bonis
is not limited by law, so that, et*tfttlfr speaking* such banks are



Reproduced from the Unclassified I Declassified Holdings of the National Archives

li

16

actlag wit hip their leg^l rights in making each purchases even’
though their competitive bidiing is forcing the price of tw©#«
above par.
The difficulty, however, is that this policy i» creat­
ing an artificial and unnatural s,arVet for two per cent bonds.

Tim Federal reserve banks are afforded the privilege of convert­
ing a certain aoount of t*o par cent bonds into tbred per cent
bonda ani tbrae per cent one year notes.

Consequently, aucb

ban^s will not suffer any direct financial loss by paying for
two per cent bonds practically tbe aaaue saoont at the no fuel mar­
ket price for three per cent bond*.

?he fact, however, that Fed­

eral reserve banka nay convert bonda in this scanner and that two
per cant bomis are because of the conversion privilege worth sub­
stantially as m a t as three 1a to Federal reserve bank®, is hard­
ly a sound reason to justify their forcing of the price of two*a
above their normal aarket value by blindly bidding against one
another.
It is quite generally agreed that one of the purposes
of the Act waa to promote a gradual retirement of the national
bank circulation, and Section 18 in affording a fixed market, at
pnr and accrued interest, for two per cent bonds against which
circulation is outstanding, contemplated that meaber hanks would
dispose in that manner of thosb bonds -*hich they are required by
the national bank act to keep on deposit with the treasurer of
the United States.



Reproduced from the Unclassified / Declassified Holdings of the National Archives

To F.B. Agents

#3

It is apparent, therefore, f e t if the open market
price of two per cent bonds is unnaturally establisiiei at a
figure above par, &etsber b&nka w ill not be inclines to offer
their .two .per cent bonds for sale through the Treaaurer at par
end accrued interest, even if such bonds are not free bonds and
cannot be relented by t&e Treasurer for naie in any tasimer other
tbaa thint provided by Section IS*

Tho result w i l l be that there

will be -*& artificial sto p p l e of the retirement of national ban*
circulation in the nrarmar contemplated by the Act.
The suggest ion ij&st been j&ade tha t the Federal reserve
banka appoint a coutsit tee to consider ta» purchase of two per
cent bonds for the ^oint account of all Feaeral reserve banks.
The Board believes that such a coarse woola not only be condu*
civ® to a iiora healthy ani normal market for two per cent bonds,
but *isr.t tri.it it would be»t promote the results intended by Con­
gress in the coat ter of accoaipl iahing the retirement of national
bank circulation*
fiespect fully,

GLH-C.




Governor.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

fa s C

Praft for telegram or letter.

] ' ^ *f>
■
l I'Z®
|

The attention of the Board has been drawn to the fact

that Federal Reserve Banks have besn bidding against eaoh other
for Government 8*3, and have, in doing sot forced up the prloe
for these bonds above par - some purchases having been made
at par and an eighth.
The Board wishes to draw federal Reserve Banks* attention
to the danger of this course*

If there be established a basis

for these bonds above par it may well be that the plan contem­
plated by the Federal Reserve Act for the gradual withdrawal
of the national bank circulation might be frustrated - at
least in Its present form* Member banks would be inclined to
hold on to the 3jt bonds which they have feeling that* owing
to the eagerness of the Federal Reserve Banks to buy* there

is no danger of theifnot being able to dispose of these bonds
at any lafer mooent, continuing meanwhile to enjoy the profit
of keeping out against these bonds national bank circulation.
The plan particularly provided for by the Act of having these
purchases cade to the extent of $25,000,000 through the instru­
mentality of the Treasury would become entirely ineffective
lnasouch as the banks would* of course* sake no offers to the
Treasury when the market established by these bonds would be
above par.
The Board suggests that* in order to carry out the Inten­
tion of the Act* the Federal Reserve Banks do not purchase in



|

Reproduced from the Unclassified I Declassified Holdings of the National Archives

V

(3)
the opes market above par, so that if member banks desire to
dispose of their bonds they will feet that, at par, they will
have to offer the© through the Instrumentality of the Treasury *
which would appear to be the fairer and more appropriate plan
under the circumstances*

If the banks desire to buy slightly

below par, it might be the fairest way of apportioning these
purchases if the coio&ittee put in charge of the sale of Gov­
ernment bonds would be instructed to handle the purchase of
Government S’ in a similar manner*
s
Congress evidently did not expect or contemplate that
the Government , acting through the Federal Reserve Banks,
should pay more than par, for, after all, the Government is
vitally interested in the profits of the Federal Reserve
Banks*

The proce of the 3*s will have no effect on floating

future Government issues for we may all expect that Govern­
ment bonds will never be sold again with a note issuing priv~
l«ge.

P. K, ».
11-20-16.




xu

APPORT IOBMBSf 01 BASIS OF CAPITAL OF BALA ITCE OF #1*918,900 AVAILABLE FOR COSVEBS101
If OCTOBER 1916, AFTER THE PRO-RATA SHARES OF ALL C01IVERSI083 APPLIED FOR
A
BY THE FEDERAL RESERVE BASIS HAVE EEEH AWARDED.
Capital

o
r 5,059,000
Boston
11,821,000
fiew York
5,215,000
Phila.
5 t9481000
Clevelm d
3,545,000
Richmond
At 1 ant a
2,582 ,000
Chicago
6,654,000
St *Louis
2,788,000
2,560,000
Minnpls.
3,009,000
K a m *City
2,585,000
Dallas
3,944,000
San Fra©.
Tetal

54,910,000

Pro-rata share
of Oct* coarer­
st ons to which
banks are en­
titled

Amount* of
Oct* con­
versions ap*
plied for

2,263,900
1,565,200
712,300
849,600
456,900
352,700
935,400
380,900
699,300
411,000
353,100
1,154,900

1,500,000
1,565,200
712,200
849,600
456,900
352,700
935,400
380,900
699,300
411,000
353,100

10,135,200

8,216,300

Balance not
applied for

763,900
«»••••#
100

• ••••••

Additional
allottment
applied for

Calculated amomntji
allottabl® to
banks applying
for additional
conversions

345,750
• •••••*
68,400
fa)
fa)
400,000
fa)

345,790'/
68,400
315,200 ^
242,300S
400,000 V
262,700^"
»•*•••

356,000

203, l$G
•
• • • # *

1,154,900
1,918,900

.......
1,170,150

.

1,918,90^1^

(a) Willing to convert pro-rata share of the unconverted balance allottabl e to the bank.




Federal Reserve Board,
Division of Reports & Statistics,
September 19, 1916.

Jk 1 )

Reproduced from the Unclassified / Declassified Holdings of the National Archives

Bank*

Table showing Amounts Originally Awarded Federal Reserve Banks fL*- Conversion,
^t'
Amounts awarded and issued in April and July, 1916, amounts to be
Issued in October, and amounts available for re-apportionment*
______
Balance
Extra
Converted
October
Award.
April.
For Oct.
Convers'n* Available« Award*
July.

Atlanta
#1,410,600
Bbston
2,763,900
Chicago
3.635.400
Cleveland
3.249.600
1.412.400
Dallas
1,644,000
Kansas City
Minneapolis
1.398.600
New York
6,130,500
Philadelphia 2,849,100
1.827.600
Richmond
St* Louis
1.523.400
San Francisc 0 2,154,900




Total

$ '7Q5.300
500.000
1,000,000
400.000
820,600
699,300
3,065,300
1,424,600
913,800
761,700

$30,000,000 10,290,600

4

352,600

1.500.000
712,200
456,900
380,800
1,000,000

352,700
2.263.900
935,400
849,600
353,100
411,000
699.300
1,565,200
712.300
456.900
380.900
1.154.900

9,574,200

10,135,200J

1.700.000
2,000,000
1,059,300
412,400

£

$

352,700
1,500,000
935,400
849,600
353,100
411,000
699,300
1,565,200
712,200
456.900
380.900

$

763,900

100
1,154,900

8,216,30t.

1,918,900

i

770

C o n f id e n t ia l.

SCHEDULE OF CONVERSIONS OF 2% BONDS FOR 3j CONVERSION BONDS AND ONE YEAH TREASURY NOTES OCTOBER 1, 1916,

BANK.

Total al­
lotment for
1916 as ap­
portioned
by Fed.R e s .
Board,

t/Bos ton .........

Converted
April 1,
1916.

Converted
July 1,
1916,

Total
conversions
to date.

Balance
allotment
for 1916.

Issues that may
be approved
Oct. 1, 1916.
Bonds

$

500,000

$

$

Notes

500,000

$2,263,900

$1,132,900

$1,131,000

, , 6,130,500

3,065,300

1,500,000

4,565,300

1,565,200

783,200

?a?,oco

^Philadelphia-,, . . 2,849,100

1,424,600

712,200

2,136,800

713,300

356,300

3 56,000

400,000

2,000, 000

2,400,000

849,600

425,600

424,000

913,800

456,900

1,370,700

456,900

228,900

228,000

705,300

352,600

1,057,900

352,700

176,700

176,000

1,000,000

1,700,000

2,700,000

935,400

4 6 . ,400
*9-

467,000

1,523,400

761,700

380,800

1,142,500

380,900

190,900

190,000

^ Minneapolis .,. ... 1,398,600

699,300

699,300

699,300

350,300

349,000

l/kansas City..„, .. 1,644,000

820,600

412,400

1,233,000

411,000

206,000

205,000

1,412,400

1,059,300

1,059,300

353,100

177,100

176,000

ifSan Francisco,* . . 2,154,900

1,000,000

1,000,000

1,154,900

577.900

577,000

9,574,200

19,864,800

10,135,200

5,074,200

5,061.000

New York

V Richmond.......
vAtlanta*

,. 1,410,600

^ C h i c a g o ........
S t .Louis......

^ D a l l a s ..................

30.000,000
Total
10, 290* 600
Prepared by:
Division of Loans and Currency,
Treasury Department,



Reproduced from the Unclassified / Declassified Holdings of the National Archives




Up* 0* 3* B hoftd s ,
j
|
Governor , F*daral
Ifcxttt.
Phi
t I*iin#ylvanU.
%

d**r

Btooaft* t

I hav* your l«tterj # J uly
•noloamr* of oopy of l<*tt*r o f July 26th fro®

Banwy FI* It A $ftn» In. vw&wi % t o
tth ir ty - y w

f
stsnoea

I

w le o f

ooor»r«ion bood* fo r th« ffcdamX

mixik m & * v «&X th» circwBH
yoa htff* «»&> £» & good

one.
TharAing you for your lett«r, X am
'fieuv* T«ry truly #

fI«# (fcnrarnor.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

FEDERAL RESERVE BANK OF PHILADELPHIA
408
CHARLES

CHESTNUT

STREE

J.RHOADS,
GOVERNOR

EDWI N

S. S T U A R T ,

FRANK

M.HARDT.

DEPUTY GOVERNOR
CASHIER

THOMAS

GAMON.JR.
ASS IS TA NT CASHIER

July 26, 1916

Dear Mr. Delano:
I understand from Mr. Kenzel that he
advised you of the arrangement which we had concluded
with Messrs. Harvey Fisk & Sons for the sale of United
States thirty-year 3% conversion bonds for account of
the Federal reserve hanks.

I take pleasure in enclos­

ing herewith a copy of the letter from Harvey Fisk & Sons
so that you may have the fall details before you.
I happened to see Mr. Warburg in New York
on Monday for a few moments, and told him briefly that we
were negotiating with Harvey S’ & Sons and that we were
isk
about to close with them.
Trusting that the arrangement
satisfactory to the Board, T ~

5*. A. D I M H O , ESQ.,
Vice-Governor,
Federal Beserve Board
Washington, D.C.
C JR—R
ENC.



~

will be
A
t-

Reproduced from the Unclassified I Declassified Holdings of the National Archives

- om. HAKVBY FISK & SOUS
62 Cedar Street
New York
July 25, 1916*
U H I M ) STATES G O V EB MBM ? GOLD COUPON

BQKPS

PAYABLE JANUARY 1. 1946
Charles J* Rhoads, Esq., Chairman of
United States Government Bond Committee
of Federal Reserve Banks,
Philadelphia, Pa.
Dear Sir:We confira the purchase from you of $1,000,000* of the above
bonds at 100 3/4 and accrued interest to date of delivery, subject to
our call within thirty days; In consideration of which you have granted
us an option for ninety days on $4,000,000* additional bonds, namely:
$1,000,000* at 100 3/4 and Interest
2.000.000* at 100 7/8 and interest
1.000.000* at 101 and interest
options to be exercised in amounts of not less than $250,000*
It is understood that all bonds will be delivered to us by the
Federal Be serve Bank of Uewr York and payment made therefor to that Bank*
It is also understood that the minimum price of 101 l/Z and
interest for the present is fixed, subject to change by mutual consent* w
It is agreed by you that during a period of ninety days no Federal Keserve
Bank will offer or sell any United States Government
Bonds of 1946,
either coupon or registered, to any biayer below the price of 102 and
interest*
In order to encourage co-operation, while we maintain the
minimum price to the investor, in our discretion it is understood we may
allow any part of l/4 of one per cent* commission in oases of institutions
w ith bond departments, dealers or brokers, with the understanding that
any commission allowed them shall be retained by them and not given up
to the investor*
Kindly confirm this understanding*
Your8 very truly,
(Signed)
hld/ a il




Harvey Fisk & Sons

Reproduced from the Unclassified / Declassified Holdings of the National Archives

:? £ 3 V £ BOARD FitE

Fe d e r a l R e s e r v e B o a r d
W ashington

July 25, 1916.
Dear Delano:
the

I herewith retuii Mr. Ken
Y

in-

Chicago letter, both $r wjsuic
terest.

r
day at the

I happened t<| meet M

trade.

railway station and h f told

market for these

It does moX appe
bonds is in the middlt wee

I should be much inter-

ested to see how far

Cleveland have pooled

their bonds with thejl

’
s.

It is to be apprehended

that the banks which^fS&vf the better market will exclude
their bonds and sell £ b |02, and that the Fisi^ group
§
will be able to begin ^o|©ell effectively in the middle
western market only whln|the banks out there are through.
If they both sell at lfet it may be that they will hurt
each other by offering aft the same time.

We will have

to work out gradually some scheme and gain in experience
as we go along, but I doubt whether the present scheme
will work very smoothly for the reasons above outlined.
When it comes to purchases, New York gives the full
benefit in acceptances and other things to the other
banks.

What I am wondering at is whether, when it comes

to sales, all the banks should not have an equal advantage



Reproduced from the Unclassified / Declassified Holdings of the National Archives

(3 )
of whatever may be the best market.^Fut it will be just as
well not to "muddy the water" at this time and let this
thing develop a little further before we make suggestions.
Pending that, however, if you would ask for details as to
how many bonds are included in the pool and what propor­
tion each Federal Reserve Bank has contributed, I should
be much obliged.

Hon, F. A. Delano,
Vice-Governor,
Enc«




Reproduced from the Unclassified / Declassified Holdings of the National Archives

SERVE BANK OF PHI
408

CHESTNUT

STREET
RICHARD

ADS,
UART,
DEPUTY

G E O R G E W .N O R R I

GOVERNOR

D E P U T Y CHAIR MAN
DEPUTY FEDERA

H A R D T,
C A S H IE R

T H O M A S

A R T H U R E. P O S T )

G A M O N . J R .
A S SISTAN T

L.AUSTI

C H A I R M A N O F Tl
FEDERAL RESE

GOVERNOR

A S S I S T A N T TO F E D E R A L

C ASH IE R

July 14, 1916.
Dear Mr. Delano:
I beg to acknowledge receipt and thank you for your
favor of the 13th instant /confirming your telephone report
of the conversation you and Mr. Harding had with the Secre­
tary of the treasury, and I understand that it will he proper
for us to repeat the substance dl your conversation with the
Secretary to Harris, Forbes &yCompany, or any other bond house
with whom we may finally m ^ ^ a r r a n g e m e n t s to handle our Con­
version 3 * s.
I note your rfaarks in reference to taking the
whole subject up with other bond houses, which we should be
glad to do.
I am also interested in your suggestion that we might
use our bonds as collateral instead of attempting to sell them \
at the present time, but my own/ experience in banking leads me
to feel that for a Reserve T^anle to rely on borrowing in emer­
gencies should be a last resort rather than a guiding principle.
I am interested in the suggestion that the conversion
privilege should be given once a year rather than spread over
KjtZ/wJfc*M-I'fc*16 four quarterly dates, and hope that if any change in this
respect is made, it will be optional with the Federal reserve
1
banks to convert either all at one time or at quarterly periods.!
The reason for this is that if At were announced that the con­
version would take place say only at the first quarter it would j
mean that all the Federal reserve banks would try to buy their
bonds in anticipation of quarterly conversion,which would drive
up trie price of S's temporarily to a high figure, and they would:
then quickly fall baok after the demand had passed.
I think it
is desirable to have as few fluctuations in the price as possibles
and that the Federal reserve bsnks should use their influence toi
steady the prioe rather than to cause it to fluctuate.
You are correct in thinking that the paragraph
"Wall Street Journal” is a quotation from G. F. Childs
monthly circular.
You may be interested in a copy of
which we reoeived from them yes^rday, which I enclose
and to which we replied that we were not interested in
more 2*8 at the present time.
Yours ve
HOH. F. A. DELANO,
Vice-Governor, Federal Reserve Board,
D
(enc)




Governor.

in the
& Company*s
a telegram
herewith,
buying any

Reproduced from the Unclassified / Declassified Holdings of the National Archives

FEDERAL RESERVE BilE,
Philadelphia.
■
'

"'V,,

Subject to oonfirn»tion ^n& prompt reply, will
pay One hundred one for all or. soiie multiples of fifty
thousand up to Two hundred" fifty^-fejiousand Conversion
.<
II
bonds and agree to supply offset fijjig amount Consols
gradually or at onof at ninety-ninje .showing you two
thousand dollars p x i f J l ^ * e m h * ^ * ri ^ & r 6 d thousand, equiv­
alent selling conversions one^hundred two.

Please regard

this confidential an,|t do not re^leot inquiry elsewhere.
Our olient European! investor.




\

\ \ C. F. CHILPS & COMPANY.

R ep rod uced from the U n cla ssified

I D eclassified H oldings of the N ational A rchives

July mt»* i m .

M daar Hr* 8*wad»*y
Caitf iraing ay tal#f>hon# etavfrn tion with you thia aftamooa
aad *»aw#rittg your lottar of tha Itth in a t a n t ,! bag to aay that ia
in,-.:!’-...
,. ' * o
,

ft #oaw»raatl#n vlifch Hr* flardlag. and X had with tha Saoratary of tha
Traaaury thia aomlng, ha vat quit# unwilling t© Malta any dafiaita
p ladgo along th# 11a m iadiaatad ia your lattor or that of X trria,
ForW# & Coapaay.

Ha took th# poaitioa that it wauld ha fttlt* la*

poaalbla aadar tha 1
«*,. jJ|w lapropar* for h i» to pladg* tha GowaraJ

H t t la thia a*y^ 1» aaking a plarfga whlah m i witha«ft a#aairfarat ioo
t

m

far aa tha ©a*ara*»»* ia oa»«araod*
Th# Saaratary wao willing to aay quit# eaphatioally that ha

ha& aa lntantiwa of aalliag any b#ad«f that ha vaft carrying owar
a aarplaa of an# buadrwd alghty

lata thia flaaa l yaarj that

thin woeId taka M r * #f wiy ordinary daaaada apon tha OowanaHHt *ai
that ®nly aaa» aatraardiaary thing, #u#h a# tha d— nd whi#h would ba
aaaaalaaad by «a r» would aaaaaaitata tha iaaaanoa of boada.

In' thia

avaat haargwad that tbara acwld ba an iaaadiata pablla raapaaaa and
aa d ifficulty la aarfcatiftg tha boada tfcao #ffarad.

K» vaa ioallaad ta

that a«aa atfear band houaa aoold da fo r you aa aall* If aat bat tar than

«arrl»f forbaa A O
aapaay and that yewr Caaaittaa ooald v a il look furthar
and aartalaly aat fart aay waraa.




R ep rod uced from the U ncla ssified

I D eclassified

H oldings of the N ational A rchives

M lfe#*da (Shaat If*
r#

.)

Qm aathod of handling thia bond aattar whioh baa ooaurrad to aav
but whiah, to far at X Iu*ow» ha* not boen oonoldorad by tho Board, and
that !• to a*certain whothotf tho bank# could net wall ^^>rd to hold tha
boada with tha idaa of uoing thaa a* oollatoral la ohm of aaod*

Thoro

would aavor bo a tiao whan United fttataa thrao par cant boada would aot
bo food oollatoral for nlaoty~fiv® canto on a dollar* to bo tiaod oithar
again at gold or# f * tho lav apaoifically authorioaa tho hypothaaatloa of
tho bond*, it wao aridontly tho ldoa of tho franora of tho law that thay
sight bo oo uaad«

It la on thi# thoory that j hato al**yo ragardad tha

haIdlag of tho boada ao proper from the etandpoint of a liquid aaaat whioh
aould b# ooawortod into oaah» aot only by oala, but by hypothooation.
I f no now boada *oro odd, aa I boliovo to bo a faot* and I f tha
laaoa* ton la lncroaoad, it

mm*

to no raaaonably aortala to axpaot that

boada o*»«pt fro* laoo»a taa w ill 00*0 baok to a protty fa ir praalu»«
On* thing about whioh I opoko to tho 5* oratar y, wa§ tha au|fca*tion
aado by Hr# Dorburg, that tha oonworo iou prlvilaga ahou3d bo giran onoo a
yaar, rathar than apraad awar four porioda.

Tha Saoratary axprvaaad hia-

oalf ao rathar favorably iaproaoad with thio idaa and that ha would tala
it nador adwlaaaioat la tha ijaar futura.

I aotiood an artiol# on tho froat pago of tho oaoond aaotioa of tha
Wall Strottt Journal thia aorning, whloh appaaro to aaaaata froai C* F. Childo
f
t

la regard to tha aala of bondal

I taka it, hovavor, that thla 1*

aiaply m fwotatioa fro» tha CShilda ft Conpany oiroular*
Touro vary tru ly,
ir * ® M Rhoada,
* *

Qoworitor, Todoral Roaorro Bank
Philadelphia.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

FEDERAL RESERVE BANK OF PHILADELPHIA^
408
C H A R L E S

J.

CHESTNUT

STREET
R I C H A R D

R H O A D S ,

EDWI N

S.

ST UART,
DEPUTY

F R A N K

G E O R G E W. N O R R I S ,

GOVERNOR

D E P U T Y C H A I R M A N O F T HE B O A R D AN D
DEPUTY F ED E R AL RESERVE AGENT

M . H A R D T ,
C A S H IE R

T H O M A S

A R T H U R E. P O S T ,

G A M O N . J R .
A S SISTAN T

L . A U S T I N ,

C H A I R M A N O F THE B O A R D A N D
FED E R AL R E SE R V E AGENT

GOVERNOR

A S S I S T A N T TO F E D E R A L R E SE RVE AG ENT

C ASH IE R

July IE, 1916.
My dear Mr. Delano:
We took advantage of Mr. Warburg1s presence in
New York yesterday on his way to the Adirondaoks, to have
an informal conference on the matter of marketing the
United States 30-year conversion 3*s held by the Federal
reserve banks.
As you probably know, Mr. Kenzel has been
sounding out one or two bond men in Hew York as to whether
or not they would <*are to undertake the distribution of
our bonds.
I enclose herewith oopy of a letter received
from Messrs. Harris.Forbes and Company on this subject,
which was supplemented by a personal interview with Mr.
Beebe, who dictated the letter on behalf of Harris, Forbes
and Company.
You will observe that they wish to secure
some assurance that no new Government long-time financing
will occur in the immediate future.
Mr. Warburg thought that perhaps if the Federal
Beserve Board would address a formal letter to Seoretary
MoAdoo, stating that the Federal reserve banks were about
to dispose of some of their 50-year 3*s, and asking him to
give the assurances desired by Harris,Forbes and Company,
that he would probably be willing to give such assurances.
I believe that if we could secure this assurance
from the Seoretary of the Treasury, we could probably arrange
to sell through Harris,Forbes and Company all of the 30-year
3*8 which Federal reserve banks wish to sell at this time at
a price to net the banks 100 and l/2 and interest.
While
Harris, Forbes and Company think they could sell a moderate
amount of the bonds at higher prices at the present time,
they do not believe that the higher prices could be main­
tained and that it is better to start low witii a view to
working up gradually.
I shall be glad to talk with you over the tele­
phone further on this subject tomorrow morning if I have not
made the matter entirely clear to you.
Yours jkiA'f)/
z

HOH. F. A. DELANO,Vice-Governor,
federal Reserve Board,


http://fraser.stlouisfed.org/ fenolosurs*
Federal Reserve Bank of St. Louis

i

/

Governor.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

HARRIS,FORBES & COMPANY
Hew York

July 11, 1916,

ATTENTION MR. KINSAIL
Federal Reserve Bank,
19 Nassau Street,
New York City.
Gentlemen:
Referring to previous conversations between Mr. Kinsall and the
writer, regarding U.S.Government. Conversion 5s, and pursuant to Mr. Kinsallfs
request that we reduce to a written- summary the views we have formulated as
to the problem of marketing a substantial block of these bonds, we would state
as follows:
The views we have to express are the combined views of our people
in Boston and our associates in Chicago* the Harris Trust and Savings Bank aid
our own.
It may interest you to know that, the western people feel somewhat
surer of their position than do those in New England.
We have approeahed
this whole subject from as broad a viewpoint as it was possible to bring to
bear, i.e., not to ascertain the terms at which & comparatively small block
of these bonds might be put upon the market just at this time but what might
be done with a rather larger block coming along from time to time, for natur­
ally we would not want to assume the position of getting an arbitrarily high
price for the first bonds marketed where we felt reasonably sure that the
price would have to be adjusted to a more modest figure with any subsequent
offerings.
The views as to priqf'e* etc., which we have to express are predicated
upon assurances that no new Government long-time financing would occur in the
immediate future - lay, the our rent calendar- year, and which we understand
could no doubt be given.
As to price: The views generally expressed by the best posted peo­
ple in our various offices are to the effect that par and interest is the
nlogioalnprioe.
However, by carefully weighing the matter, 7/e feel reason­
ably sure that if properly handled four or five millions of the bonds could
be plaoed with investors at about’
101 and interest, and that probably an ad­
ditional four or five million could be plaoed a little later in the year if
the Federal reserve banks so desired upon the same terms.
In the marketing of these bonds we would expect to do more than
sell this amount of bonds.
That is, we would expect to lay the ground-work
for additional sales of reasonably good sized blocks later on.
For that
reason we believe that the work entailed and the expense involved would, as
verbally explained, justify something more than a nominal commission.
We
would be willing to handle the matter on a commission basis if that method
was desired - but we would really prefer to buy outright a round block of
the bonds for our own account with the understanding that we would have a
call upon suoh additional bonds as the Federal reserve banks wished to sell
for a reasonable length of time.
We do not feel that we oould afford to
take such a commitment for much less than 3/4 per cent, between the g®css
selling price and our cost.
We believe that we could more satisfactorily
and successfully handle these initial transactions on these bonds without
having others associated with us but would of course expect to be governed



Reproduced from the Unclassified I Declassified Holdings of the National Archives

J*

federal Reserve Bank
1 ew York
8

-2*

very largely "by the desires of th
The above has been
supply from our conversation
the above conclusions*

ral reserve bank in this respect#
repared but Mr. Kinsall can
easoning which has led us to

[ery truly fqpLxa,
“
(SigntdS-^HABRIS, FORBES & CO.
H IB -J




f e d e r a l r e s e r v e b o a r b file ;

comnsioi or c titc t

states bo

An$ta»is vriicft aaif
o» ee«t?drt*4

JLMs_____

_____ Ssittriiff.n.1,,
BmmU

I»te»

fetal

350,000

250,000

$00,000

3,763,900

3,163,fOO

3,283,000

4,565,900

6,130,500

1,565,300

1*318,800

818,003

2,136,800

2,849,100

713,300

i,aoo,ooo

1,300,000

5,400,000

3,24t,600

849,600

RUhaond

686,700

694,000

1,370,TOO

1,8^,600

466,900

Atlanta

531,900

526,000

1,057,900

1,410,600

352,700

Cfclc&go

I, §50,000

850,000

3,700,000

3,615,400

935,400

St. Louis*

572,500

570,000

1,14a,600

1,523,400

380,900

Kinoa&poll*

538,300

530,000

1,048,300

1,396,600

350,3®

1 u m s City
B

617,000

616,000

1,338,000

1,644,000

411,000

Sallaa

530,300

519,000

1,059,300

1*412,400

sy[53,i00

- 100.000

500.000

1.000.000

10,868,800

f, 345,000

30,313,800

BfifilM
Ip

Ter*

Cl#v#l*ii4

£*»
fOfAL

M & M o o

BIYISIOS OF 8$?m T$ AHB gTAftSIffCS,
FSUERAL B K S W T I BOJffiX),
June 31, 1916*




.___ _____________

.......

30,000,000

J^a^too

9,786,2pO
\

Of
V




1
/ &
C iA u a ^ *
j

'

e~ +.
_f

/ ^1
t ^ t b

f a *

t

i

II t K

jvjNa-iw'6
.

total *11 etna at for
1911 ftI* atTortiSHSGd
lar F©; j ’ jio4*rti
.«»

fet&J, allat^at*
f o r A p r* 1 tad
.^»iarju m e

o p .io&t

Ooamtrtod
M b u W IM

i.
l

^ u r i.

Bal&r*#* allots

e m l for

2$HL

fy w t TMfj*
c» f f "
j^nrrortm*
&lar JU.H H

# l tm v900

#£*

jMm## that my be apprtrrofl ^ s a l « m l
hiXr

$%
&m

Bo«U

'TaA'u*

~7#/t/>r

500f 000

§
i#st$99£s

3*04**300

1,8$£,&7S

1 * 4 M #600

n * #*ts

2 ,4 3 7 ,2 0 0

400*000

z,omjoo

1*827*600

1 *370*700

913*800

4U ,tW

m ,9 0 0 ^

xsa«ooQ v

496,900 *'

Atlanta

1,410,600

1*087*950

tos*tsoo

a K ,0 »

176,600 /

176,000 v '

3SE.600 v/

O osxfco
M

3*633,40®

2,726,580

1*000*000

i,m ,8 « o

863,600 fr o .0 0a

848,000

1*428*400

iti4z , m

761*700

s»M ae

190,800 ^

190(000 ^

890,800^

1*399*400

1 ,0 4 $ ,m

699*300

3*9»MB

178,400

m ,000 / ^ . o o o

849,800 S-fe*£o<»SO

w m m m Oity <

1*644*000

1 ,2 8 3 ,0 0 0

$ j? 9§qq
q

4is,4oo

£06,400 ^

106,000 *
>

412,400 t'

tteUa*

1*411*400

i,o m ,w w

• 1.0059.300

650,900 ✓

889,000 ^

M

£.154*900

i.s is .m
1K,S09,400

900.100 ^
6,109,006

4*9T4S*f00

4**072*9**

Bmi TofIe

4*130*000

4,*97,m

ffellatelffctft

2,^49*100

OlfPfel&M

3,M9,600

Hiclawrad

soirkoa

t. ym%8

Fra»cl*«»c
fOTAl-

F i B I ! A 1
f




u m .m
n ,m jm

30*000*000

! S S R I ! S
?

# H » 1* W if i.

! H

1C

,

V

t0,li0,4D9

7 U , 900 j Y f ^ # 704,000 y v w ^

744**0 r s b A * *

744*000 *fzo.*o<> x ^ z , m o ? m * * * ?§
.

mb+mv'

384*000

M U t^ao

i 9 i« 9
o ooo

!7 ? .C 6 o

•««■>

4,100,000

7U.200 v>
a,o

S r o .a a i)

m

z ,o m ,m

IK

1,924,800 /.y.d.o.o 80
80

1,059,300 ^
1-616.100
12,209,000

400

Reproduced from the Unclassified / Declassified Holdings of the National Archives

ICfSS.

TOTAL.

Boston,
&«w Terlc*

Philadelphia,

Clsvslajad,

$750,000

$750,000

$1,500,000.

356,200

356.000

712,200*

/,t)00,00&,

/, 0 6 0,D*Z)

^ , 6 0 0 . 0 t>>>

Richmond,

220,900

220.000

456,900*

Atlanta,

175,600

176.000

332,600.

Chicago,

@80,000

830.000

1.700.000.

St. Loals,

190,800

190.000

380,800.

Minneapolis,

179,000

170.000

349,000.

Kansas City,

206,400

206.000

412,400.

Dallas,

1,059,300

San Francisco,

1.000.000.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

* m m 20, 1916 *

Sacratary of tlia Treasury,

Washington, D* 0*

S i FfI h&yo tha honor to ban* you harawith application# of
tan Fadoral Baaarra bank* for tha conversion of

On!tad State*

bond* into 9$ thirty-year oonTaraion bond* and 9$ena~yaar
T T aaawy nota®, aa follow#
BUIES*

BOMB*

lew York,
Hilladelphla,
Bloh»Gndf

Atlanta,

Chicago,
St* Lottie*
Minneapolis,
Xanaa* City,
X a 3M
l l. M
Son Francisco,
,

#750,000.
356-200.
228,900*
176,600*
850,000.
190*800*
179,000*
206,400*
530,300.
000,000*

jsant*

X0K*
#750,000*
356*000*
228,000.
176*000,
860*000*
190,000*
170*000*
206*000*
B^ooo*
800,5MJ»\

,

#1*500,000.
712*200*
456*900**
352,600*
1,700,000.
$80*800*
549,000*
412*400*
1,059,300*
1*000*000*

All of thana application* submitted to tha Fadaral la*
w m




Board hava tha approval of the Board*
Tary respectfully.

Tloa Governor.

Reproduced from the Unclassified / Declassified Holdings of the National Archives

T r"

Boo4«, PterHpM

, 2. s o
Fe d

eral

R

v

W/SSf#j^GTO
May 11, 1916#
Dear Mr. Delano: «

K

/

2>

%

^

.

I do not know wheiilfr the holding® of Government bond*
toy Federal Reserve Banks oomes to me as Chairman of the In­
vestment Committee or whether there i* a special committee
on Government bonds*

But in any cast, I believe that this

matter ought to be taken up at onot and discuseed very close-*

ly by a committee♦
There are several things that 1 think ought to be
straightened out in this connection.
First:

I think it would be a crime to permit the twelv#

banks to sell, one against the other, and I believe that there
{ should be a committee amongst the Federal Reserve Banks who
j should be in charge of selling these bonds on some kind of a
/ j t j o i n t plan.

If it is proper for the banks to have joint

f \ agencies and deal on a joint plan in their foreign exchange
*

k v \*
t
’.'V

questions, there is certainly no objection to their getting
together in this question instead of throwing their money out
of the window and, incidentally, e£o$|:lng the price for TJ. S.
/

i Government t o n d a ^ ^ j ^ ,
/"'^Itecond:
bonds?

* t 34 4 4 m *+

Should the banks sell -their thirty-year Sf

I believe they should and I think it would be advis­

able to establish how many of them want to*




But whatever is

Reproduced from the Unclassified / Declassified Holdings of the National Archives

(3 )
done in thia raspeot should be done in a confidential way and
should not be advertised publicly, because it would interfere
with the sale of the bonds upon the most ‘
favorable terms*
Third*

The one-year notes*

My own feeling is that these

notes oould be placed within the System*

That is to say, that

if some of the banks would like to sell, X am sure that some of
the large banks, particularly New York, would want to buy.

I

have not discussed this with Hew York, but I should not be sur­
prised if this arere the case#

Has anything been done in this

matter?
Fourth:

What is to be done about the purchase of Govern­

ment bonds by Federal Reserve Banks in the next quarter? (I
append a letter received from Mr* Jay)

Personally, 1 think

that as soon as the amendments now pending are passed, we should
take up this question of Government bonds and see. whether we
cannot get a proper amendment to deal with this thing on a
somewhat more comprehensive basis*

But even as it stands how,

X should like to investigate why it would not be possible to
convert the § 30,000,000ich the banks have bought and which
the Treasury is willing to have converteJj no later than July
first*
havd:

As a matter of fact, I think that the conversion should
been permitted on April first*

As it stands, the whole

thing is being dealt with on a petty basis of a five and ten
cent store - on a basis of $15,000,000 and tw6* instalments of
$7,500,0004^, The effect of this may be a small saving for the
Treasury, but it interferes with ths prompt disposition of the



thirty-year bonds to the public, where they ought to go#
There cannot be any o&oubt that if a substantial amount of
Government bonds can be disposed of to ”

' ~ ‘ and bankers*
o

acceptances and commercial paper purchased instead and used as
4

a basis for our note issue, in this manner an elastic curren­
cy will gradually be created*

But if this is to be achieved

the Treasury has to be liberal and cooperate in a whole-hearted
way; no matter whether the annual budget of the Government will
be increased by a ilOQ#QQO more or less through this process*
The Federal Reserve Act indicates clearly that ultimately
this ^recess is to be carried through, even though the Govern­
ment^ has to pay one per cent more upon its $800,000*000 of
Government bonds, and it is therefore only a question of carry­
ing this plan into effect in a hesitating manner or in a liber­
al spirit as rapidly as conditions will permit#

Just now

we have an excellent opportunity of selling the 3% bonds to
advantage and this opportunity should not be lost*

Nobody

can foretell what the market conditions will be when the war
is over*

Hon. F. A. Delano,
♦Inc.
P. S. By the way, I am not so sure that I am not wronging
the Treasury and that the <ault may be with the Board’ rulings.
s
Mr. McAdoofs letter of February 28 said in effect: ’
’
Such conver­
sions will be made quarterly on the first days of January,
April, July and October, * * and applications must have been



Reproduced from the Unclassified I Declassified Holdings of the National Archives

(4)
received prior to such dates in order to have the exchanges made”
.
That does not indicate at all that the conversions would
have to be made in equal instalments on such dates, but only
indicates upon what dates they may take place. To my mind,
the wording of the letter would have permitted the Board to
allow the banks to apply for the conversion of all the bonds
up to {30,000,000 on any of these dates.
Please give this matter your careful consideration and let
us discuss it as early as possible.




P. M. W.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

BOSTON DISTBICT:

EOO
416
475
517
574
626
726
791
845
921
924
927
9*1
1038
1162
1184
1187
1203
1333
1368
1700
2270
2275
2295
2371
2494
3020
3923
3994
5155
7596
7812
9609

First national Bank, Boston, Mass
#500,000
First national Bank, Easton, North Easton, Maes*, - 50.000
Merchants national Bank, Boston, Mass.,----- - 335.000
national Mt. Wallaston Bank, Quincy, Mass., — 50.000
Amosakeag IB, Manchester, N. H., - ------25.000
Hopkinton KB. Hopkinton, Hass*, - — - - - - —
10.000
Merchants NB, Salem, Mass., - - - - - 25.000
Citizens NB, Waterbary, Conn., - - - - - - - - - 50.000
Middlesex Co.KB. Middletown, Conn., - - - - - - - - 150.000
City IB of Bridgeport. Conn., - - - - — ~ ~ ~ ~ 250.000
Metacoiaet IB, Fall Hirer. Mass., — - - - - - - - 100.000
Connect lent NB, Bridgeport. Conn.,- - - - - - - - 20.000
Canal NB, Portland, M e , , - * —
-- - - - - - - - 50.000
Stanford NB. Stamford. Conn., - ..... . 100,000
Gloucester IB, Gloucester, Maas*. - - — _ - - . 5.000
new Britain NB, Hew Britain, Conn., - - - - - - - - 100,000
'Jncas KB, Norwich, Conn., - - - - - - - - - - - - 40.000
Mahalwe Bank, Great Barrington, Maas*, - - - - - 62.000
Citizens NB, Tilton, N.H., ----------5.000
HB of Derby Line, Vt., - - - - - - .- - 30.000
Baxter IB, Rutland, V t . , ----- ---- ---- 50.000
--- ---- -National Shoe & leather Bank, Auburn, Me., - - - - 25.000
Horae NB, Milford, Mass., - ..........
15.000
Merchants IB, St. Johnsbury, Vt., ..... . 35.000
North National Bank, Rockland, Me., - - - - - - - 15.000
Manufacturers BB, Waterbnry, Conn.. - - - - - - 25.000
Naugatuck NB, Naugatuck, Conn., - - - - - - - - - - 100,000
Commercial IB of Boston, Hass., — - - - - - - - - 50.000
Mi ddleborough NB, Mlddleboro, Mass., - - - - - - 20.000
National Shawtnut Bank, Boston, Mass*, — - - - — 862,000
Merchants NB of Worcester, Mass., - - — - - - - 66.000
NB of New England, Bast Hadden, Conn., - - - - - - 15.000
NB of Gardiner, Oardiner. Me.,
50.000




Total, First District, (33 bks)
13.285,000

Reproduced from the Unclassified I Declassified Holdings of the National Archives

FEDERAL RESERVE 00

HEW YOiK DISTRICT

Utioo City national Bank, Utieo, I.Y., - ------ #35,000
1113 Jfatlonsl Iron Bank, Morristown, 8.J.* - - - - —
§0,000
121? Essex Co. IB, Hewark, S. J,, — - - - - 500,000
1316 lation&l Newark Banking Co., Newark, I.J., - ~ ~ 50,000
1517 Orange KB of Bow Jersey,-- - ---- - - ---- - - 37,500
1262

1395
2045
2517
2626
3244
4906
5228
8026
9060
9825

Hew York State IB, Albany, H.Y, #—

• - - - - - * 250.000

first IB, Utica. H.Y., - - - .................. 200,000
Union KB, ffewark, H. J., - ---- -- — - * - - - - 100,000
first fiatlon&l Bank, Greenwich, H.Y., - - ~ - - - 12.500
Yarrytown KB, Tarrytown, $*Y.,
30,000
Peoples IB, Hudson Falls, Hudson falls, I.*., - - 25,000
Babylon i*Bf Babylon, $.Y,, - - - — - - - - - - 12,500
Citlssns KB, Potsdam, I.Y.,
------------------ 50,000
Lincoln KB, Rochester, I* T . , -------- ~
. 50,000
Bast tforoester KB, Bast Worcester, 8.Y.,- - - - - 10,000
Yonkers SB, Yonkers, I*Y,,
— --- - - - 200.000




Total, Second District, (16 bks)#1,57?,500

Reproduced from the Unclassified / Declassified Holdings of the National Archives

FEDERAL RESERVE BOARD FiLE

PHILADELPHIA DISTSIC?

1
272
870
602
836
3198
6646
8129

First KB. Philadelphia, Pa.. - ------------------ $627,000
f i r s t B3, Horriotom. P a . , -------- ------------28.000
tirat HB, Vinoantown. H.J.,
50.000
Bank of Hortta Anerlean, PMlaielpMa. P a . , ------- 176.000
Wyoming HB, Tunkhannook, Pa., - - - - - - — - 6,000
Lincoln SB. Lincoln. P a . . ----------------------16,000
Xarohaats SB, Allentown. Pa., - - - - - - _ _ _
10.000
Paoplee 53. Pemberton, H.J.. - - ................
7.000




Total. Third Diotriot, (8 bks)

1814.000

Soringfiol? #

First n
S©OOQd $1

Urbana t

First 9B

Merchants

II

K*B*of Comiaaroo
First HB

Firet IB
fir s t I I
Mwtgm m* IB
£•£&&£&* SB




Wmmafkt
Dayton,

Toledo

*
*

w
*

*

Sowiekloy,
Ba*
tal«xr$&&* v
pa.
la^oleon*
Cannol tity
$ £ % % fa

Total Fourth District (10 Banks

#

£6,000
'O0«OQO
10,5^0

£00,000
376^000
6,000
£5^000
so ;o o o

£i*000
500+000

$1,226,660

Reproduced from the Unclassified I Declassified Holdings of the National Archives

FEDERAL

x

SERYE BOARD

BICHMQffP BIBtBXCf

414

Second IB* Baltimore, lid. f

— . « $100*000
*

2499 ®*w#r» & M©ofc. HB, Baltimore, Hd.»
4628

first IB, Elisabeth City, B.C.,

9164

Union SB, Charlotte, I,C,t - ~




- ---- -

- ......... -

Total. Flith District, flbbl,

60,000
5,000
£5.000

#180,000

I
I

Reproduced from the Unclassified I Declassified Holdings of the National Archives

fpEDEP" RESERVE BOARD

ATMBTA BXSfHIC?

2967

H 8 # Mari&iaa, Misa. , «
*

2 f b

#100 000

3450 Itorefeftntg JIB Viekeborg, m & « „ ,
------- . 100*000
*
4115 gawaoa IB, Daweon, Ga ., .*.«•- - * - . .
.
.
_ _ «
_
S '000
6207 *ir#t » B W Louisville, G &*#
35*000
7044 »?” !*!**
• . - --------- -6.400
?B63 Jirat *B, Loultrie. ® B - ***y. -« - *--------------Ga,, £2 000
7931 tfirst SB, Sandorevillo. O a . . ------ ----------- 25 ooo
9502 Jirat HB. Thonpeon. Oa.,
--------------- . . .
66-*500




Total, Sixth Dietriot, (8 bka)-------- $859,900

Reproduced from the Unclassified / Declassified Holdings of the National Archives

CHICAGO 8Z8fEtXC*

47
177

1003
2165

2894
9792

yirat IB, Terre Haute, Ind., * - - - — . ~ ~ — * $25 .OOO
Fleet SB, Wilmington, 1 1 1 * , .... - ......... - - 24,000

Hational Bxoh* Bank, Milwaa3eoet Vie., - - - —
~ 110,500
Farmera MB, Princeton, 111*,
-----* 110,000
Continental » Costaercial SBt Chicago, 111., — 2,000,000
Ft rat IB, Croeevell, Ml ok*, ------------- ----- 26,000




total* Seventh District, {6 bka),#2,296,500

Reproduced from the Unclassified / Declassified Holdings of the National Archives

ST. LOUIS BX
8CBICS

Third IB, St. I*onie, Ma*, - - ------ 500,000
Scotland Co* IB, Memphis. Mo., ------------ - 22,000
Firat IB, Milan, Mo . ,------ --- -- - ---- 75.000
IB of Commerce, St* Louie, lfo.t - — ~ ~ ---- 3,521,500
firm* IB, Washington,
- ---------- — *
1,500
First IB, Sturgis, Xy., - - - - — - - * • «
20,000
State IB, Texarkana, Ark.,
« *
* *
50,000
firet IB. Coming, Ark.. ^
« — ---7,750
First IB, Canton, $©*, « ~ ~ ~ ~
~ *
£5,000
third IB, anion City, Tenn. ,
*
, 15,000
Citisens IB, Corinth, lliae., ---------------37 .500




Total, Eighth District, (11 fcks),

#4,275,250

r1

Reproduced from the Unclassified / Declassified Holdings of the National Archives

FEDERAL RESERVE BOARD Fit

First
first
first
first
first
first




EB#
Wing, Mixta.,
IB, Owatoima, Minn.,
IB, fausaa. fis. t
SB, BeassMr, Mi oh.,
MB, Uora. Minn.,
IB, Portland, I.D.,

---- ---------- - - $100,000
• ^ ^ - « - —
25,000
- - - - * — - - ~ 10f000
- - — ~ — *.•*..
l£f5O0
- -------- - -----25,000
---- ------------6.250

Total, Biatij District, (6 bks) ,

$156,750

Reproduced from the Unclassified I Declassified Holdings of the National Archives

3UX3AS CITY DISTHICT

Ksota Y»B»
First SI
first IB
fourtli SB
first HB
first IB
first SB
0*1*111 TO
Citisene SB
first SB
first m
first 91
Eaton HB
faxmsrs SB
San Juan Co* 11
first IB




I*ot*»
Columbus,
ltanago.
Omaha,
Wiahita
fsllmrlts
it.Jteeph
Clayton
O’
Bsill
Teotmeeh
Arra&a
Ault
Windsor
Eaton,
Stafford,
Faraiȣton
Hsaingford,

Total, Tsatfe District (17 Banks)

Okla.
a*h.

coin*
Bebr.
Kas,
Colo,
Mo*
ff*H#
Isbr*
I#t*r*
Cols*
Colo*
Oolo#
Colo,
Kas.
$#Sg#
lobr.

m o

>ooo

50.000
100,000

25.000
25.000
10.000

60,000
50.000
20.000
6,000
20,000

25.000
10.000

4.250

tM IH M P M P M R M M
N M M W IB M tH M M W

♦ « t«

R ep rod uced from the U ncla ssified

I D eclassified H oldings of the N ational A rchives

M&I4S DISTRICT

Colorado 1*1*

Colorado,
Balllngor

f t m t IB
f i r s t IB

11##

Conun*tciol IB

lafftrsci*,.
Bosabmd,
Brady

Stockyards IB
IB
Plantare IFB




fetal* t l w v m t h District (7 Banks)

Ttf*.

Tax.

3?§
S*
f«at*
T®3t*
f«3C*

| 60,000
£6,000
12,600

&O0#O0B
§
#t60
12,600
50.000

J566,»60

Reproduced from the Unclassified I Declassified Holdings of the National Archives

H.
i

San Francieoo, District

u rn

3060
4229
BUZ

6426
6491
86$2
8765
9o21
9093
9121
9114
9156
9210
10212

Santa Barbara Co«5*B«
First IB
Seattle SI
First IB
American IB
First IB
First IB
First IB
U*s*Iational B
First IB
Union IB
Wfllase IB
0*s*latl B*
First IB
B^ptra IB




Total* Twelfth District
(15 Banks!

Santa Barbara,
San Diego,
Seattle*
Ontario, C
San Francisco
Canyon City.
Glendora*
Hialto
Sales
Englewood
Pasadena
Wallace,
Dinuba
Harrington
Lewiston,

Calif$ 100,000
160,000
100*000
Wash
Calif# 40*000
Calif 200*000
40*000
Ore*
5*000
Calif*
26,000
Calif*
31,000
Ora*
0 i 4 26,000
i
'
Calif. 100*000
60*000
Ida*
Calif. 12*500
30*000
Wash*
100.000
Ida*
$1,008,600

r

Reproduced from the Unclassified / Declassified Holdings of the National Archives

a

s
r*r£TV

Temporary Certificates for Bonds and One Tear wiiMsajry Notes have ^
been Issued to Federal Reserve Barites as follows^ ^
Philadelphia.

Coupon*
$962,600.00
462.Q00.Q0

/Je />&~j ,
'.
—

Bonds
Sotos

$1.424.600.00
rs
Coupon.

Cleveland#
#200*008*00
200^000*00

-* $

Bonds
Botee

3

£400*000.00________

Chicago.

Coupon,
&i.000.000.00

Bonds

Boston*

Co h p o i u
$250,000.00
250.000.00

Bonds.
Hotea.

£500.000.00

Hew York,

Coapon.
^1,533,300.00
1.532,000.00

Bonds
Kotos

S3.Q65.30Q.0Q

Kansas City.




Coupon.
#410.600.00
410.000.00
$820.600.00

Bonds
Hotea

<?>

Reproduced from the Unclassified / Declassified Holdings of the National Archives

Mijttoftpol1b .

Coupon

#349,300*00

Bonds,

$699*300*00________

Coupon
$457,800*00
456.000*00

Bonds*
go tee.

$501,700*00
380,000*00

Bonds
Sotos

St* Louis.

$761.700*00

3f3j3*T)
JST>f 0 _
tySj300’
Becapltulatlon.
Phlla.

$1,4^4,600*00

Cleve.

400,000*00
1,
000,
000*00

ChicagD.

500,000*00

Boston.

ITow York.

3+065*300*00

Kas. City,

820,600*00^
699.300.00

Bldm'd.

913.800.00

St* Louis*

761*700*00

Total




|® ,585*300.00

'[orjjm^It^Ojhoo-o*

R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

\t'

To the Federal Beaerr© Board
Gentlemen:

The ieoretary Of Hie treasury,. under date of Feb­
ruary 2 8 t 1916, authorised the Federal Heserve Banks to tender
for conversion into bond® and note®, thirty million dollars

during the present calendar year, fifteen nillloae Of which
would be converted April 1st, and the balanoe one-half July 1st
and one-half October lat*

fllne of the
dered

bonds for

and

than oan

^ive
he

Federal iieservo Banks

fact, all except Atlanta,

Banks

have offered more bonds

allotted

four Banks are offering

have ten ­

la

co n v ersion ;

F raaolsco*

oonvsrstoii

tw elve

to

fewer bonds

them

at

D a lla s
fo r

this time, while

than they would be

am-

thori*ed to take.
Tour Committee therefore makes the following recom
mandation:
ID




That the a p p lic a tio n o f the Bank o f Boston for
tfct eonveralon of #000,000 of bonds ba approved,
o n s -h a lf bond# and one-half notes.
the ap p lie& tton o f the Bank o f few t o w f o r
k
the conversion o f . # 3 , M § -,0 0 0 of bonds be ^ p r o v ­
ed im reepect to # f ,0 # § » £ § 0 , ©ne~hal# bonds and
one-half notes.
T&at

R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

•3 -

That th© applloation of th© Bank of £1iIXad©Xj»hla
for tfe# oonverafon of #31, §00*000 b© approved a#
to #1,424,660; f968,275 of Whioh will V* boada,

(55)

and $462,275 will b© one-year note#

(4)

that the application of the Bank of Cl*T«lan&
for the oonvereion of #400,000 be approved, on©**
half bond#, and one-half note#.

fS)

That the application of tho Bank of Hi ohaoad for
the ©onver#ion of $1, $76*00$ of bonds be approved
in respeot to f9X$#@ $ G t one-hoi f tend#, and one-

half not#®.

(6)

that the e^pXtoatiom o f the Bank of Chicago for
the conversion of $1,000,000 of bond# be approved*

(7)

That th# application of the Bank of St* Louie
for the conversion of #$,$09,000 of bond# b©
approved in r©#p#©t to $761,700, on«-baXf bond#,
and on©-half notes,

<$)

that the applioation of the lank of linnet®oli#
f&r the conversion of $1,000,000 of bond# be
approved 1m respeot to $699,300, one-half bond#

and one-half note#.

That the application of the Bank of JCanisa# City
for the convereion of |8£0,600 o f bond# be approv­
ed, ono^haXf bond# and one-half not©#.

(9)

It

will

b©

aeon

aggrogat© #X$#S1X ,0§
0*

th®

th a t

fo re g o i n f reoowaendation#

Under th© ruling already made by the

frmmt? y Department and our m n Cotin#©!,, if m y o f th® Bank*
do aot a sk f o r th© eonv#r#ion
b afore Qotober

the® #halX
t h o r it y




to

be

1* 1916, the

of

bond# aa th ori#ed

allotted to other

oonvert

1&©ir f a l l

Sank#

who

allotment by
to

or

be taken by

are ask in g -for au­

a larger percentage than their allotment.

R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

It i t understood that the Secretary of the treasury
wiH make each ©f these allotments one-half #*#1 of 2$ bonds
rod one-year natea.
the oaae of the

There was, howerer,

an exception »ade in

Fedaral Base ire Bank o f Chicago m to one

B illio n , and the

Faiermt Beaerre Bank of Philadelphia aa to

$500,000 bands, applied for

and approved by tha Sacretary be­

fore & ehan#e in the ruling waa deoided upon.




leipectfnllf iraitfsittel*

0#waitt#e

(
«
(
«
i
(
(
(
i

Reproduced from the Unclassified / Declassified Holdings of the National Archives

"ii
COIVKRSIOW OF g»IT»D STATES H BOBPS.

Federal
Rose r?e
Bank of
Boston
Hew Toxic
Philadelphia
Cleveland
Bichaond

total
Applications

Amount of
Bonds accep­
table for
Conversion
on Basie of
Capital (Ad*
justed to
Exeess
Apr*1,1916)
Applied for

# 600,000
♦
3,SG2,000

$1,381,960
3,06§,260

5.3$,760

1*600*000

1,424,660

76,450

4001000

1,624,800

1,676,000

913,800

Deficiency in
Applications
$ 881,960

$

1,224,800
762,200

706,300

Atlanta

817,700

Chicago

1,000,000

1,817,700

St.loniB

2#309,000

761,700

1,647,300

MlnneapoliB

1,000,000

699,300

300,700

Kansas City

820,600

822,000

Dallas
San Franc isco
Total




706,200
1,077,460
16,000,000

1,400

Reproduced from the Unclassified / Declassified Holdings of the National Archives

...

*

y

A ,
,<

S

_

s

*F .
\
J?r
«^' J '>' (
« f:' *
“ l
\V #
s
'F ■

'■

ys

1 ,^ / "b o s t o n ,
r </
4 /
V'
NEW YORK,

s

/

1

s

PHILADELPHIA,

W I T O A m S OF OFFERINGS
$250,000
200,000
534,000

CLBVEIAHD,

5,000

EICHMOUD,

5,000

ATLANTA,

----

CHICAGO,

112,500

ST. LOUIS,

----

MINNEAPOLIS,

15,500

KANSAS CITT,

60,000

DALLAS,

----

SAN FRANCISCO, 105,000




ft J6&

Unclassified / Declassified Holdings of the National Archives




WHEREAS,
It appears from statement f umished _ ,
the Board by tike offic e of the Secretary that eleven out ^
of th« twelvo F«daml reserve banks hat© purchased in th« open market bonds in excess of th© amount which might be
allotted to suoh banks at the end of this quarterly per­
iod on a basis of one-fourth of twenty^five tdUlMk dol­
la r * which the Board had considered a llo tin g at this time,
and
WHEREAS*
W bMd« offered for sale through
ho
the Treasurer under Section 18 of th© Federal Reserve lo t
aggregate more than twenty times th© amount which Bight
ha allotted on the basis indicated, and It w ill, there­
fore, be possible on this basis to s e ll for eaoh member
bank le ss than five par oont of the amount offered for
sale, and
WHEREAS,
It appears that the only Federal
reserve bank which ha« not purchased In the ©pen market
bonds in excess of th® amount which might bo allotted to
i t la under contract to purchase a oust very largely in
exoeos of Ite allotment and has been prevented from eonsum ating such purchase by raaaon of the f&ot that more
m
than nine million dollars in lawful money has be- n de­
posited with the Treasurer during th© current^to retire
circulation by national banks and the banks ui&ffT con­
tra ot to so il are thereby pretented from waking delivery,

wow,

t it m m m ., m

it

m w vm ,

that it

u

the

sense of the Board that no necessity exists fo r enforcing
the requirement provided for under Section 13 of the
Federal Reserve Act at the end of this quarterly p e r io d ^
and that i t w ill not at this time require the federal re­
serve banks to purchase any of those bonds which arc o f­
fered fo r sals by member banks through the treasurer of
the United States under the provisions of Section 18,
BE I f FURTHER RESCUED, that the Secretary be in structed to send a copy of tills resolution to the various
Federal reserve banks and to the member banks which have
offersd bonds for oale in order that they m be notified
ay
of the action of the Board in the premises.

Reproduced from the Unclassified / Declassified Holdings of the National Archives

General Plan for Allotting to
Beserve Banks the Bight to Co
thirty Millions of United St___
2$ Bonds into 3$ Bonds and Botes
U)

Each federal Reserve Bank shall he authorised to state
the full mount of bonds ikioh it wishes to convert;
If this amount does not exceed thirty millions* for all
Federal Beserve Banks, each Beak shall be granted the
privilege of converting the entire amount offered;

(o)

If the amount thus offered exceeds thirty millions, each
Federal Beserre Bank will be first allotted its aliquot
proportion of thirty millions, based on its capital stock,
and any excess over this aliquot proportion will be divid­
ed among the remaining applicants in proportion to their
stock holdings#

3 /2 /1 6




(T —

Reproduced from the Unclassified I Declassified Holdings of the National Archives




FEDERAL RESERVE BOARD
March 27, 1916.

MEMOBANJXTM FOB MS. JACOB SDH.
Can you have the attached table made up
for the use of the Board in making allotments
tomorrow morning, leaving out the column
headed "Amount Offered/* which will be tar­
ried in the letter of the Treasurer of the
United States to the Board, and leaving the
last column vacant, the figures to be filled
in from the replies to our telegram sent
out today viion received tomorrow morning?
With this information before yw*, you will
be able to show for Boston tbe amount ’
which
would be allotted in case an allotment is to
be made, that is, the relation ^foich the
$575 ,750 for Boston has to the total offering
of $16,000,000.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

F

'

Wrvu^

Basis for Allotment of U. S. Bonds offered by laeirper Ban ks ,
and Amounts purcKased *by Federal Reserve Banks since fan* l ^ T *
•

Federal Reserve
Bank of

I'aximum amt * .banks
may have to buy
during 1916(A).

,
Amou
One-fourth
of (A).

_
since
Jan# 1, 1916*

$2,303,250

$575,812.50

0 (a)

New York

5,108,750

1,277,187.50

$3,202,000 (b)

Philadelphia

2,374,250

593,562.50

2,216,000 (c)

Cleveland

2,708,000

677,000

1,867,000

Richmond

1,523,000

380,750

1,676,000

Atlanta

1,175,500

293,875

1,399,600 (d)

Chicago

3,029,500

757,375

2,446,000 (e)

St. Louis

1,269,500

317,375

2,369,000

Minneapolis

1,165,500

291,375

884,880

Kansas City

1,370,000

342,500

5,826,300

Dallas

1,177,000

294,250

San Francisco

1,795,750

448,937.50

$25,000,000

$6,250,000*00

Boston

Total

425,000 (f)
2,025,000
$24,336,780 (g)

Notes:
(a) Boston reports it has *acquired" $2,332,000 bonds, but that
transfer has not been possible account §9,000,000 limit to retirement
of circulation in Maroh.
(b) In hand or with Secretary of the Treasury in suspense account.
(o) Philadelphia reports it has in addition contracted to purchase
$284,000 of bonds, transfer of $272,000 of which is delayed account
§9,000,000 limitation and f 12,000 account closing of transfer books*
(d) Atlanta reports it has also purchased $15,000 to be delivered
April 1st and has written to the Federal Reserve Board under date of
March 27th that it will take $359,900 which has been offered by member
banks in its district*
(e) Chicago has in addition purchased $3,075,700, not yet delivered
or paid for.
(f) Dallas reports it purchased $32,000 of bonds on March 18th which
it is holding in bond suspense account, that it has written the Federal
Reserve Board in regard to the purohase of $1,481,250 additional on April
1st, and that it has also agreed to take $63,500 in addition to the above*
(g) Amounts purchased since Jan* 1st and in process of purchase,
Division of Reports and Statistics,
$32,559,730*
Federal Reserve Board,
1larch 28, 1916*
,



Reproduced from the Unclassified / Declassified Holdings of the National Archives

pikfiVE BOAPO HIE

2 $ o
Basis for Allotment of U> S« Bonds offered b y Member Banks,
and Amounts purchased *by Federal Iteservfe Banks since Jan, I, 1916.

Federal Reserve
Bank of

Maximum amt*
banks may buy
during 1916(A).

One-fourth
of (A).

Amounts purchased since*
Jan. 1, 1916.

$2,303,250

$575,812.50

0 (a)

Hew York

5,108,750

1,277,187.50

Philadelphia

2,374,250

593,562.50

2,216,000 (c)

Cleveland

2,708,000

677,000

1,877,000

Richmond

1,523,000

380,750

1,676,000

Atlanta

1,175,500

293,875

1,399,600 (d)

Chicago

3,029,500

757,375

2,446,000 (e)

St. Louis

1,269,500

317,375

2,369,000

LCinneapolis

1,165,500

291,375

884,880

Kansas City

1,370,000

342,500

6,826,300

Balias

1,177,000

294,250

San Francisco

1,795,750

448,937.50

*/

$3,202,000 (b)

Boston

Total

125,000,000

$6,250,000

425,000 (f)
2,025,000
$24,346,780

Notes:

5

%

(a) Boston reports it has "acquired" §2,332,000 bonds, but that
transfer has not been possible account $9,000,000 limit to retirement
of circulation in March.
(b) In hand or -with Secretary of Treasury in suspense account.
(c) Philadelphia reports it has in addition contracted to purchase
$284,000 of bonds, transfer of $272,000 of which is delayed account'
$9,000,000 limitation and $12,000 account closing of transfer books.
(d) Atlanta reports it has also purchased $15,000 to be delivered
At>ril 1st and has written to the Federal Reserve Board under date of
rlrch 27th that it will take *359,900 which has been offered by member
banks ^in

hag in addition purchased $3,075,700, not yet delivered

° P^ff)fDaila* has written authorizing purchase of {1,481,250 additional,
r
and has also agreed to take $63,500 in addition to the a b o w .



— ■
!
■
— ■
Reproduced from the Unclassified I Declassified Holdings of the National Archives

i ' k & M a

f,^ 7< JeQ
'H* &

SfSi/fiL,

frtt.we » o o

> . v a tw * r t > 7 ^ p /'
3 7 ^ 7^ 7
r
A

s t o M Q / . 6 e ~6

Y J Z C ib i z y j . f t /

/ .3 & o

o t X U ,

* * >

M uttoJ)

z ftf¥ o \

/tL H L /JA ? 7^

s ^ / .f ^ r

4

^ ^ , \^2 h

d- J y




2 9

fw

¥ 3 HA
.

#0?

I I S ' / ' ° £$

?'fi<h v

?

«J

Reproduced from the Unclassified / Declassified Holdings of the National Archives

1113

i m
u u
im
M M

mm

2617

3244

m $
52*8
8G£6
9060

08S*

Utico^City National Bank, Uticq, I.

ifrtional ivcm Baak, Morristown,
a m z o o * Si* i m r i c ,
latioaat gawaarlt Banking }o.,Uewark,
oinHage I I of Mm
•
£«* tOffc State KB, Alfcany, I*X*»
n * t *a# otiaa* jut**
Halo* EB, H«var*»
First Iptloaal Saalc* Grooowieh, vr.Y.
farryto#» KB# tarrytowtt, I*Y*
Peoplos ITBt Hudson Fallsf Hudson Falls, B*T*t
Batrloa BI* Mgft*n« B*T*
Citisima KB* Potato*, J?*T.
Lincoln 8»f Eoobsator* S*Y*
Sfcsfc Worooator #B* last Wore©# ter *$Y*
Toakars IB* Xoakars* 3ft*
'otal for Saooixd District

IIr»t 13, Philadelphia, it.,
First EB, ITomatown, P»,,
First 3B*.
TUumtCNfef S*JUBgtftfe of Fortfc, $neri«aa#. Bitls&elp&ia, l*wf
336 5'foatng Its, TmWmm&Q&t Pa*
31t8 Lliiooln SB* Irinooltt* Pa«
6645 s^rofeamt's KB* i.lX«fttas^v ?&*

$l$t Peoples :t3# Bita&srtoa* $*£«

Total *&i*A ©iatrict

100.000.^
18*600,K
60,000..*6,000./.
is ,600. x
ee^oo,^

80.000. y 1
10.000.X
...gs«.aagf.^

627,000.^
25.000./
60.000.^

H»,9Q0*<.
5,000.^
16,000./

10,000.^

#614,000,

, .,

First H9, tfpringfiold, e#f
Sooond IB, Urbwia, 0*f
First HB, How***, 0»t
1788 Moro&aat# llt D a y t m * 0*#
3S20 IB of OowaSreo, folsdo, 0#
44iS /iret latloaal Baafc* Swsfcofclay, Fa#
4615 First KB,i2aleatonf Pa*
6218 First SB* KEvpoleou, o.
7891. morgen ao« £B» Q w m l Qity#:$r*
7560 ISsystoao lb, Pittsburg, fa*

26,000./
10 000

300




500.000,/.
60.000,/,
37,600. / .
*60,000.
*00,000. ^

td ,n,87?^oo.

1
S72
37C
602

Total » r Fourth Biatrlet

"*357500/
$ 50 «000*/

10,860.*^
800,000./
376,000./

6,000*/
86,000./
60,000,/

86,000.*/,
/^

|1,286,660.

Reproduced from the Unclassified / Declassified Holdings of the National Archives

m
ZQ W

nmmtrnfa

ftom#*®

SN4tto»##t

&

»*

4690 n*«* it*
Gala* fl#
• H i

i# **

imtf* $«$**
$*$*;§

fttttft ibr n m
«ISf

i t *

mm

Mtltft#*

s jb *

!» !$ $ & %
& & ****
t $ f ¥ fc # & * & * * $ £ * E & f c f t * *

11%

S & **

f-wtf* jka* *
to*.i fttpaiari &
Fi*a& fit
'$***
iw ?tr«* it* iminiiPilltf

mm

$ $ ***

:;i> ,

rfc o o ^ w ;.,

i$ *

m

#sr §
taei&
4 t

ww#% if# $**#• ints*#*. nwi#*

tn

i-irat » * f||«M *left» O U #

»»e w «^
* 4 ,0 0 0 ,^

'mMm&X- xoii* Mfe*

il3 , S K » . /

110,000. ^

SSS4

4

S I*

*»*##.* » * itwwNiilt &S4&**
t«*eX ter

%n
mm

ft*tf& n f
daHlfltfMr&fc** I»t.
fiNl HB,

4 i? G

%B o f

S00#Q0D*^
*#

.'

#% *

f■ it* :
lti%
f

JHnferiat

H##

n w i *t»

% **

fW

$% *% m$
&

'w
»*%

W ft*

f|il|? 4

fe*ooo,^

life * #

m ^m

0t£g|ft i % fa«ap^aBa»% &ife#
fiSHrt » * Om h H * ^ !#&»*
$ %

iim.«,»** iit m t M m *

? * # :» ■

$ !# # ■ * £ < #
F ir . *

t%

fiW

tS f

I*

^

S

*

»

»

*

> /b ?

*
‘| W » |

10»§e«*<

irrt fi* gMNft* #■
***#
#ir#*
'$mmmm* itui**
fiml i % 'i##%
fir** 1%.




£

iM .re o .
'<

/-

.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Keota National Bank, Keoto, Oklahoma
f

tufa*

*9W

1 %

'$ * t k

r t r h1 $ <
ot t
% & **!# Hi*
*

fliurt tt$* filSwriii# '&»!**
f
ilf -0% ■imq&i*. &$**
6T13 ?$#»% ZJ3, #iqpMfc.«
^Rem
0*§ »mt t#*
i %

mi
W W

i

m m

M

imi##

%

m m

Ig&*
'$#Mk

m m
mm*
tun
w v w

m ^ m *^

i*

# i W ilf
$&* &«$t*
Sin.
*&P* $&lt*
r*r»*r* f»*

*$ t900*

Maif

'j&mjm*

sie^ooo

i$w #©Swg>i* fsafc#
16,#08#^

m m it* ma»* fm
im*$s&m&* ii*
u
fta # a $ r*

M to r# * * * *

'1 %

tfi* SUMP*

«i*Wfc£

f« i& *

^m § "
‘

|w

iMt&*
flrit flt
e m

fl* tarita
2»l#t^* &&££*'*

M&f*.#

*00,000. *~wj m * ^
t,900*^--

£$#**««& 31% s; s tflttfeBlifii#* M L If*#
#

f% gmym

fit# * ia ^ » i

mm

i t *

! ^

t*##§
«&i#i»#i..
fljett If#3&i6fe fi*

* #

* '

$*&.«%
tm&ifor'

>>lif#

$«tu<# *#* tulti*#*** ■* & *
£ §£
s*§# iMiioMt
:
im&tf*#
T i n t SB*

U&Xb^
5,006*< ,

w m




$*!«& for 1 * * m SU triet

/

Reproduced from the Unclassified I Declassified Holdings of the National Archives

On Basis of
Thirty Millions
Boston
Hew York
Hiila
Cleveland
Richmond
Atlanta
Chgo.
St .Louis
Minn’
pis.
Kansas Oity
Dallas
San Francisco

On Basis of
Twenty-five Millions

2,763,602 ------------- ---- — 2,303,002
6,121,910------------------ — 5,101,582
2,871,275--------------------- 2,392,729
^ ^
3,247,658 ----------------- — 2,706,382 ^
1,822,783 --------------------- 1,518,986
1,411,061 -------------------- 1,175,884
3,634,284 -------------------- 3,028,570
1,521,375----- -— ____________1,267,813
1,396,033 -------- ------------ 1,163,361
1,641,337--------------------- 1,367,781
1,412,836----------------- — 1,177,363
2,155,846------—
-1,796,538




\\j
.A*’
’
V

Reproduced from the Unclassified I Declassified Holdings of the National Archives

March 20, 19X6.

vmmnAmifm FOR GOVBB3JOB m U T O i SITUATION

OF BOND QOKVSRSIOK MATTERS. MBNDAY. A.M.
M CH 20. 1916,
AR

& A u

y^Baaka have applied for oonveraiona as follow s,

^

nothing has

heen received from Atlanta, Balias and San Francisco:-

1,3 % /.? o £
2.6
/,

°

4 1f

•*< «
•

I .b
et"c
'>
< f f . *> • 0
f
*
y & /“ * *
%
f,

4#f
i

i t?, e
>

BOSTOH, $500,000

(With Loams and Currency)

H
EW YOKE, $4,200,000
PHILADELPHIA, #500,000

^ 6 J & or * "

CLEVELAND, #400,000
BICHMDHB, #911,000

__
^ f O.
HGTE. Treasury w i ll write fo r proper reso­
lutions*

CHICAGO, #1,000,000 '
ST. LOUIS, #2,309,000

/,

,

7^




*7

0 ,* <r#»

Desire to convert as mach as possible d '
fiT
this amount.
. * .
MIHNEAPOLIS, #1,000,000

DALLAS,

SAN FRANCISCO,

(j

a

ATLANTA,

KAKSAS CITY, #820,000*

7$I

dJ'T- °^ o
L JLi o\ £ *
>
C o c „©«•'<?
t

Reproduced from the Unclassified / Declassified Holdings of the National Archives




Reproduced from the Unclassified I Declassified Holdings of the National Archives

S'j a
L
o

MaSTOlABD DISERICI
First II
8000111 m

First IB
H«rahants II

Comawros

First SB
First IB
First IB
Merg&a Co* IB
ILsystons IB




8sriAgfi#2K t Ohio I
Urbaxta,
"
Newark,
*
Dajrton,
w
Toisao

*

Sewicklsy,
Ba*
Bolszito&#
Piu
Iap©lsoat
Oldo
Cams! City
IQt*
fittslmrglt, fa*

I«t»X Fourth Diutriot (10 Basks)

16*000

10*000
10,660

200|000

376i000
6,000

£5,000
60,000
£6,000
600*000

Reproduced from the Unclassified / Declassified Holdings of the National Archives

B08T0B DISTRICT:

£00
416
475
517
574
626
726
791
845
921
924
927
9tl
1038
1162
1184
1187
1203
1333
1368
1700
2270
2275
2295
2371
2494
3020
3923
3994
5155
7596
7812
9609

First national Bank, Boston, M a s s. . —
#500,000
firat National Bank, Easton, Berth Baaton, Mass., 50,000
Merchants National Bank, Boston, Mass.,
335,000
National Mt. Wallaston Bank, Quincy, Ma88., - » ~ 50,000
Amosakeag IB, Manchester, H. H., ~ —
- - ----- -25,000
Hopkinton KB, Bopkinton, Mass. , * --- - - - ----10,000
25,000
Merchants U B # Salsa, M a s s . , ---------- - - - ------ Citizens BB, Waterbary, Conn.,
50,000
Middlesex Co.BB. Middletown, Conn., -------------- - 160,000
City IB of Bridgeport. Conn., - - - ~ —
250,000
Metacoaet BB, Fall Biver, Mass.,
------ 100,000
Connecticut HB. Bridgeport, Conn.,—
- - - - - - 20.000
Canal KB, Portland, M e . , - - 50,000
Stamford HB, Stamford. Conn.* - 100,000
Gloucester IB, Gloucester, Mass.,
5.000
Mew Britain IB, Hew Britain, Conn., - - - - - - - 100,000
Uncas IB, Horwich, Conn., - - - - - - - - - - - - 40,000
Mahalire Bank, Great Barrington, Mass., - - - —
62,000
Citizens KB, Hilton, I . E . , ....................... 5,000
HB of Derby Line, V t . , - —
~ ~ —
- - - —
—
30,000
Baxter HB, Jutland, V t . , —
- 50,000
Sational Shoe & leather Bank, Auburn, Me., - - —
25,000
Home IB, Milford, Mass., - - - —
~ - - - - - 15,000
35,000
Merchants HB, St. Johnsbury, V t . . --- ------ -- - - Horth national Bank, Hockland, Me., —
15,000
Manufacturers BB, faterbury, Conn., - - - - - - 25,000
Naugatuck IB, Baugatuok, Conn., - - - - - - - - - 100,000
Coiaaeroial IB of Boston, Mass., —
- - - —
- - 50,000
Middleborongh IB, Middleboro, Mass., - —
—
—
20,000
national Shawnrat Bank, Boston, Mass., - - - - - - 862,000
Merchants HB of Worcester, M a s s . , --- ------ 66,000
SB of Hew England# Bast Hadden, Conn., —
----- --- 15,000
HB of Gardiner, Gardiner, M e . t - - —
- - - - - 50.000




Total, first District, (33 bks)

Reproduced from the Unclassified I Declassified Holdings of the National Archives

PHILADELPHIA V W T R l C f

1

272

370
602
835
2198
6645
8129

Firet IB, Philadelphia. Pa., ........ ........ . #527,000

first IB, Uor rie to m, P a . ,
~ ~ ~ - --- —
flvm t IB, Yiaeentown, I*J., - —
— . . * ,

*
*

- -

Bmtfc of lortl* American, Philadelphia, Pa.t —
Wyoming BB, TunJthannoek, Pa,,
Lincoln SB, Lincoln, Pa. # --- - ~
l&erehiiats IB, Allentown, Pa., ~ - --- - - - - Peoples IB, Pemberton, I.<?.,....................




Total, Shird Bietrlct, (8 bke)

25,000

50,000
175,000
5,000
15,000
10,000
7.000
$814,000

■p— —

:
““
:
—
Reproduced from the Unclassified I Declassified Holdings of the National Archives

■

— - —

—

-

■

-

RICHHQBD DISTRICT

414

Saoond HB. Baltimore, BA.. - —

_ _ - « —

„ $100,000

2499 Ororers & Xaoh. HB. Baltimore, Md., -------4628 First HB. Kliiabeth City. B.C..

------ - - -

60,000
5,000

9164 Union HB. Charlotte, B.C., ..................£6.000




]■
'

Total. Fifth Sietrlot, (4 felts),

#180,000

Reproduced from the Unclassified / Declassified Holdings of the National Archives

ATXmABTA BISTBICf

2967
3460
4X16
6207
7044
7663
7931
9302

firat IB, Merl&iaa, Ittea,, - - ~ ^
~ ~
• #100*000
Merchants IB, Vicksburg, Hie*., 100,000
gawsoa IB, M m m , <2a., ■ —
*
.
6,000
^irat IB, J»0miaviXle, 0a*,
- - - - -------- -- * 56,000
Faroe** I Merohaata IB, Troy, Ala*,
*
6,400
l i n t IB, Lomltrie, §a*, 22,000
first IB, Saa&erirrille, Oa*, » —
• - « . * *
25,000
Fir at IB, T h oa p w m . G a . ,
. • ------- 66.500




Total. Sixth Dletriet, (8 hk a) .

#359,900

Reproduced from the Unclassified / Declassified Holdings of the National Archives

CHICAGO BISfBICf

47
177
1003
2165
2894
9792

First BB, Terre Haute, lad*, - ------- -- . * ^ #25.000
Fi*»t HB, Wilmington, 111*,' - - - ■
----- -------- --- 24,000
Sational Kxch. Bank, Milwaukee, Wis.. - * ----- -- 112,500
Farmers IB, Prince ton. 111., --------------110,000
Continental & Coa»arelal HB, Chicago, 111., —
2,000,000
First BB, Crosswell, Mich., - ---------------25.000




fotal. Seventfe District, (6 fcka),#2,296,500

Reproduced from the Unclassified / Declassified Holdings of the National Archives

ST. LOPIS BIBTBXCt

Third SB, St* Louie, l o . .
—
- - - $ 500,000
Scotland Co. SB, llsaphla, Mo., ----- * ---- -- •
22,000
76.000
Fir*t SB, Milan. M o . , ------- — ---- --------SB of Cofflaereo, it* Louis, M o . , - - - - . -----3,521,500
First SB, Washington, lio.,~ - . —
----- — , ^
1,500
first SB, Sturgis, If**
- ------- - .
20,000
Stats SB, Tsxarkana, Ark. t
50,000
first BB, C o m i n g ,
7,750
26,000
first SB. Canton, !©*, --------------* ~ -----Third SB, anion City, Tsnn.t --- • « « « . «
«
15,000
Citissns SB, Corinth, Miss,, - - ------ -------37.500




Total, Bighth District, (11 h k s ) .

*

$4,275,250

Reproduced from the Unclassified I Declassified Holdings of the National Archives

MHIKAP0I.lS?DI8fKIC T

i

first
first
first
first
First
First




JJB,
NB,
SB.
HB.
KB,
SB,

Had Wing, Mina*. Owaton&a. Minn., *
Wausau. fis.,
*
Beseemcr, Miolu, «
Mora, Mian.,
Portland, 5.3)*.

~
*
-

- —
—
#100,000
3,000
~ - --- -- •
- - - —
- - 10*000
. « • —
- • * .
12,500
25,000
6.250

Total, Hiatt* Bistrict, (6 bks).

#156,750

R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

*
KAHSAS CITY

Keota H.B.
First HB
First HB
U.S.H.B*
Fourth HB
First HB
first HB
First HB
0’
Beill HB
Citizens HB
First HB
First HB
First HB
Eaton HB
Farmers HB
San Juan Co. HB
First HB




BISIRICT

Keota,
Columbus,
Durango,
Omaha 9
Wichita
felluride
St.Jfeseph
Clayton
0 #l5eill
Teeumseh
Arvada
Ault
Windsor
Eaton*
Stafford,
Farmington
Heraingford,

Total, Tenth District (17 Banks)

kla.
Heb.
Colo*
Hebr*
Kas.
Colo.
MO.
H.M*
Hebr*
Hebr.
Colo*
Colo*
Colo*
Colo.
Kas.
9.X*
Hebr.

1 12,600
£,000
100,000
60,000
100,000
£5,000
26,000
10,000
60,000
60,000
6,260
20,000
6,000
20,000
26,000
10,000
4*250

$505t, 500
S/f,

Reproduced from the Unclassified / Declassified Holdings of the National Archives

DAXLAS DISTRICT

k

Colorado*
Balliagox
tin t m
Biss
First SB
Ft. Worth
Stookyards SI
Joff orson.
loA&*rs SI
RoaeVctd,
Fla&tsrs SB
Commofoial IB
Brady
Total, Blsventh District (7 Banks)

Colorado JUB*




t«au
T«u
T#x*
Tax*
Tsx*
T«x.
T«U

$ 60,000
25,000
i 2#aoo

200,000
12,500
50.000
#*§
t«s§
o

Reproduced from the Unclassified I Declassified Holdings of the National Archives

San Francisco, District

2466
3060
4229
6263
642$
6491
8662
8763
f*21
9093
9121
9114
9166
9210
10212

Santa Barbara Co.H.B.
First HI
Saattl© 9»
First IB
American SB
First IB
First IB
First IB
U*s*Batlonal B
First IB
Union SB
W%lla©e SB
t?«5«Satl B.
First SB
Kafirs SB




Total, Twelfth District
(16 Banksf

Santa Barbara,
San Diego,
Seattle,
Ontario, C
San Francisco
Canyon City,
Glendora*
Rialto
Salas
Englewood
Pasadena
Wallace,
Dinmba
Harrington
Lewiston,

Calif#
*
»
Wash
Calif#
Calif
0r«»
Calif*
Calif*
Ore#
Cal if*
Calif*
Ida.
Calif.
Wash*
Ida*

100*000

160,000
100*000

40,000

200,000

40.000
6,000

26.000
31.000
26.000
100,000

60,000
12,600
30,000

100.000

|1,008,600

R eproduced from the U n cla ssified / D ecla ssified H oldings of the N ational A rchives

To the Federal

Board:

Answering the •pacific 'faary which waa re­
ferred to mi at tha aeetlng thia morning:
our

Aftar oon
m itatiat

tioe, I find that tan of tha Baa&a ha*a already parohased aore bonds 1b tha open sarket than thaj can be
raf«l#aA to tate aa thalr one-quarter proportion of
t«anty-fire millions.

There are, howaver, two Banka

4

whleh hare not done thia; a«ely. Boston* whloh haa to
Its trail't a# booda purehaaad sinee Jaaiary 1 , 1916,
and may therefore he required by tha Federal Beeerre
Board to purohaaa through tha Treasurer -f tha United
o'
Stata« i®?f»f§@*S®', la^'.&tlafct** -whiah haa bought aoae
bonds 'hat stay ha required by tha Federal Heeerve Board
ttt purchase #110,971 additlonal.

Thia total of

5667,000, la round figures, would haTe to be taken fro«
the aggregate number of bonds offered
la in axoesK of sixteen. Billions.

This j p*e§
a§
ate

In round figures

thia would mean that about 4$J& of tha bonds offered
through the fraaaurar of the Uni ted Statea would be
taken, anleas this peroenta&e was considerably reduced



R eproduced from th e U n cla ssified / D eclassified H oldings of the N ational A rchives

■
m

T)y raaaoa of tht .Batioaal baa>ka;

X

thwsilviB

of tfta prIt !logo ouggoatod 'to thoa of withdrawing

thoir applloationa. up to tha mm$M§ of Maroh E8th.
la wtaw of tit* aituatioa and tbo Tory mmZkl
mmfowt' of bond* to

bo takoa, oay 4$^ of thooo

offora*, Whioh would laarltablf load to broaklag up
•roa blooka of bonds into aaiall laooaroaloat lots,
X raapoetfully aug#oat tbat tho Board doollno to
a$t?070 tho purobaao of aay of Ifeaao boado, but that,
at tbo aam M m * It augtoai to tl# Bo*tea and Atlanta

Baaka tho proprloty of buyiag from tlio baafca of 1fe*£r
Diotricto ©fforin# than for aala, t&a boada whioh
night haro boon alloftot to than by t&a Board.




loapootfally anbntttai*

•B'iONMD) F. A, DMLiMl-

Reproduced from the Unclassified I Declassified Holdings of the National Archives

'Y
E

Fe d e r a l R e s e r v e B o a r d
W ashinoton

March 22nd, 1916.
To the Federal Reserve Board:

Gentlemen: Answering the specific queiy which was referred to me at
the meeting this morning.

After consulting the Law Department

and our Division of Statistics, I find that ten of the Banks
have already purchased more bonds in the open market than they
can be required to take as their one-quarter proportion of
twenty-five millions.

There are, however, two Banks which have
Cti Ut t
not done this; B oston, which has no bonds purchased since Janl\ (
*\ *
>vk-#-y ^
At 'fVfw-*
uary f i r s t ^ t o tto OTyodi^^jwi oir th erefore purchase through the
Treasurer of the United States $575,750.50t and Atlanta «aet
.f h t.
'/
A
^ liit'itii ♦
'
.......
1 r
110,971.o o ^
P- wotLi"t,,
i i reeom- »
"
—
/

m
~nfl th r t..■ P " • " 1 r—
‘■
tr—
■ *™'

~ -^ T+—
t

TThrll tifilrt

fg*
/ *
y
t

^

.— >ji Ifi.
iet

^ s .

^
r
it
M,
MM X hL S - (*& i l
- L *• )
^
This total of 1687,000.00^WB*t^be & a k e n from the aggre-

^

gate number of bonds offered.
millions.

|

This aggregate is in excess § »
±

In round figures this would mean that 'Bin- r y

jM ifggt o f the bonds o ffe re d through the Treasurer o f the United
yr**’
'
States would be taken, unless this percentage
reduced see*-

rO%
V
Jf

M m t by reason of the national banks availing themselves of the
Suex^*$LXs ^
privilege o#P#ret^them of withdrawing their applications, up

^
^

to the morning of March 28th.

>




Reproduced from the Unclassified I Declassified Holdings of the National Archives

I/ I a U
a

^

Ux-tn*J- f L

I & M
m
oJ

'

*

m

I
f

^

d f c * & ^

h . A %

L

J
g

ft

’

TcT
b * * h

vmmnijk <m »»hmwh».-

J

^
't u * - * '




- ^

u

u

Reproduced from the Unclassified / Declassified Holdings of the National Archives

1L *
"but at the same time it suggests to the Boston and Atlanta Banks
K
the propriety of buying from t h ^ B a n k s in their Districts of­
fering them for sale, the bonds vfcich might have been allotted
to them by the Board*




Reproduced from the Unclassified / Declassified Holdings of the National Archives

Statistical Department, showing for each year of the
period 1918 to 1335 the amounts of capital and of
United States bonds to secure circulation held in
trust for all national banks whose charters expire
during each of those years.
This is the material that we had compiled in order
to enable us to judge of the merits of Mr.
proposition to amend the law to the effect that any
national bank whose charter expires shall receive a
renewal of the charter only without the circulating
privilege.




Respectful!

R ep rod uced from the U n c la s s ifie d / D ecla ssified H oldings of the N ational A rchives

a U M f f m n m m . men m m or m period m i to m i ra t m w m
U J t m m m o r m n p states bqiss to w arn , croegufioi,

m s/.m im .m xm t m or .tarn tears.
( I d thousand* of d o ll»r »)
...

8#»$«

............................................................ ...

m$
inf

20,320

12,893

m s

17,750

9,245

xm

I f , 11$

13,8*7

1130

34,224

28,249

1921

35,363

28,905

1922

83,959

58,738

1923

126,703

98,S10

1914

90,307

40,615

1925

824,992

139,323

192$

46,148

31,428

1927

44,347

32,0f* •
'

1918

36#0?i

31,082

191*

480180

38,923

191©

40,121

47,134

1911

34,898

26|813

1932

42,147

29,963

1931

19,910

14,668

1934

31,481

14,619

1911

24.905

TOTAL




4,400

................

TIB,88*

Reproduced from the Unclassified / Declassified Holdings of the National Archives

f l r w i r a JJTO or OltTCT STATES BOIDE TO PTOTOt CHICCT,mO»,
S,
MEE rBPSt.SBtff U |»T8 ? T
iS L

iSLt.aFIgg.

•

(In thotttand* of d o lla r*)
Tow

C*Blt*l

Bond*

xm

4,998

4,400

in r

30,320

13,893

1918

1?,?80

9,348

1119

I f , 165

13,38?

1920

14,224

38,349

m i

31,868

38,908

1922

83,989

§8,738

1921

136,708

98,110

1924

90,30?

60,618

191$

814,993

139,338

1926

46,148

36,439

1937

44,34?

33,073

1938

36,071

31,063

19*9

48,180

38,938

1910

60,138

47,134

1911

36,893

36,883

1913

43,14?

39,968

198)

19,910

14,668

1984

31,481

14,619

1988

34.908

iS .U t

1,018,988

T*«,8S«

TOtAw




Reproduced from the Unclassified I Declassified Holdings of the National Archives

-D R L R S R E BOARD RLE
E A EE V

: V '

ktf f i n a l l y o n * * . , y «b r m r i 18. 1916.)
fftKftlAB, B a rtla s -IB o f tha Psdaral Basarre *at

lay* apan

3 )2 '!

tha F*<iaral Bassrre Beard tha duty t o raasswsnd to tha Saaratary
of th# Treasury appravml ©r disapproval o f ap p lieat £©ns »ada by
Fadaral reaanra banka f «r tfe# sonrersisn ©f two par aant bonds
\

la te thraa par aani bands, and,
HfKBKBB, F adaral reaarva banka feat* already pur ohaaad about
(|3C,OOC#OCC) t h ir t y w iilla a a of band* baaring tha a i r aula tin g
p r i v ila g a , and
H fW B IB, F r o a t i « a to l i f t * d iffa r e n t m m b ara o f tha Board $
Waaara. HawIin, Warburg and BaXano;
3 a a r»la ry

tiava, upon raquaat of tha

ef tha Treasury, praparad informal, aaaoranda axprassing

their ? it «a aa t h i s ahold subject t and,
IWRROlt Tba Board has apprevad tha gsnaral pal lay aaprasaad
In said m.aitorafida aa f H ad fro a tiaa to t i» a , without , hosavor,
taking action

tharaon in any formal way, and

VHBltfli, Opinions Hava raean tly baan rendarad by tha B a i ia i f a r af tha Treasury Ospsrteaat and by Caussal of tha Fadaral Banarre Board, that tha 1 iu lt of e «s*puls©ry purohaaa tmdar aaction
.
ie a h a ll n«t ba regard ad as tha U n it to ba fis a d f o r tha so n*
t a r s ia s of t at p a r oast into thraa par a ant bonds, and
VRfBSAf,

I t i a daairabla that a formal aipraaaio n of ♦pinion

ba »ada a a aa tta r of raeard,
TRE*15TO*K, S IT fiXBGtYSP, That th# fa H a v in g ba statad aa
tha a ansa of tha Baardi




Reproduced from the Unclassified I Declassified Holdings of the National Archives

*•*
l«

That I t I t

important to g i f « f u l l ofFoot to th # pro-

▼iaio&a of tha law re la tin g t o tha radttailoi* of boad-aaourad
•u r rt r e y ar«d tha ooavaraloii of t*r© p«ar «a *t bonds lute thraa
par oant bonda m 4 t© g ito opportunity fa r tha Ira*** fa r to tha
public o f oooh bond* ocnvortod into t h r * a #« In ao f a r &a net
aaadad f « r purpcaad o f o ir o u la t lo a ,
2*

Thai aoah p o ll# ? will hafcp to aro al# a f laid f o r tha

• Iraiilatlo a of Fadoral raaarva bank Isauaa and alto aalarga tha
•porationa of Tm&mrml -raaanra baalta by tha grftdml oabatitj*t la a of «aa» r a t a l paper for feoado mm th a b «m i« of tha ocuntry*» nota
eireuXat Ion.

AW0

11 IT

That it ia tteo oaiiaa of tha

fa d o ra l S#*#r*a Hoard that th* S##r«4fcry of tha Traaaury ahould
not limit tha au» ha ia *111 lug t o oonvort fr o * two par ooat

Into th r»a par oow t ooaarit ioa daring t ha yaar Itlf to aaid
U n it

of eo »p a l» ©ry purohaaa if*a»*»oh aa ouoh a e tlcn -ig h t

•ra a ta a h a ra fu l j>r*#ad#at and night likowioo ha®per tha opora~
tiono of tha Fadara 1 raeonro banko, prevont la g tha* f r o * preloading fro o ly la t ha purohaoo of Govariwowt bonda*




R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

fm m i B ,

tha F a d a r a l Itaaarra A a t C N a t i o n IM J

ra&fcBC f w r t a i o m f o r tha a w r a r a i t s o f i n i t a # i t a t a a b o n d e
haariitg

: ri*rilafa, i m t # Iffl b o n d a and n # t # a *
p

b y tha f#«^atife3qr o f

I r a & a u r y . uj>ott a p f M a a f i o t i of

ftiaiml Saitawa iianicn, and
* 2 l M S * #&ah application «id conreraloji ra<tm:ira
tha a$fWff*i&. of Ufa# Fadaral Baaawa Boards and
'IWUjU* tha 4#t doaa not limit him in tha axarciaa
of him i i * a r a $ i # » to

ait.

amount «f

| i § f.O0$f # $ § i a&d

tha policy of muftis o«wft§io» baa baan
tilt aubjaot of m m ftil atudy by tha Board, and of diaouacion
within tha Board m l of tho Board with fha
■ fr a a tn m

mm,

of tha

th arafora., h* -it

BUI01&1& ftat tha Fadana Baaarva l®*rd aaaaatlf
racoawattda 'to tha ^aoratary of tha 9raawiry that in tha
aseartlaa ®f - e t «ttih**rttf to wtfca o<wran*iona f a tifow&t, in
fl
c
ordar to aetabliah m pmoadent that aaoh

ar# not

to ha XJH*lt#t to acKmat of twonty-fiva MXXimm #f teXXars*
asto pf'Wlal^u at £h# fraaani tiaa Ite tba coavoraion of an
anowt in axcaae of twanty-fiva utlllton*. of i&ll&rs.
tha ##tiupmi for tha polioy aftiwhi&h. this raoow&andat i m la hoaod h&ra bean f&lljr aat f&rth in mritn.* memoranda
$ r a a »n ta «

to

mm4*$tm

ftt t h i a

th * Board**

tha pacific

Mm i*
r

th a t

$lB,90Ct00Q

fsrar tha
of

mmm-

bonda had

purchased prior to January X9 X91d; that Hie f a te ftti

h#«n

la a a r ta

Baaka are required, under tha Aot. to paroh&oa this year



m fr&Wi aoiaber baaki $26,000,000

Reproduced from the Unclassified / Declassified Holdings of the National Archives

additional. asking. in round figwa*. a total *f $41,000,000
inrlng tho wremt «*X«wbur jaar.

it «fe* praaant tin*

#S»,«00,000 «f loait fcwra boea ^urefeaaod.
tha Board, tharoforo. aaaa strong reaaoa far fixing
tha lialt at laaat high aa«a# to a*rar tto* aurttar at towia
al*aaAy pujrofcauad.




R ep rod uced from the U ncla ssified

I D eclassified H oldings of the N ational A rchives

wmn*M$ tbm Fod*ral 'mmmm Aoi f C o tto n 18 I

mtet
ffo!

t&* mmtmim #f inti*# itnt^it bonde

%iwtef

pwivtbMS**

&<md« m l

1&f t3&o &#$p#t*3qr tf $ # fttaiwf, upon
5
&■

■
#
£

0B-&
#&*& application a<l

tf#
lc

#£ tfc*

and

1®3I4#* th*

4INHI tint limit M » la %$» octroie*

## M b

to a» amount tf | i i a n d
f H m u w t& # f o M o f # f

Isa* % #*»

tfc* tubjeot #f o i l i M atudy by

$00*$ v m i tf disoaaeion

witMa th* I#«i ® & #f tho Board Mtli t&# i&feftttfttfy o f th«
aow,

it it
fiuet tk* f i S * n * w *

raocuaaaud* to 1^1

lta*r& #«**irtl#

tf th« Troaeur^ that in tfc*

* & * » !# * #£ M u

to oftto

o * # « to ft&tfOilltth f
t

im

& *& & & ,

$i*t m m k

in

*.f# not

to b« ltattt«4 t& acKJuixt #f

i#41tt**f*if #f

oftko f r « f 0 i « #$ tfe« px®wm& %tm

Wm mm&w&m- $# £&

aaottat t® •xc**# $£
M* u m i

M l M m m «f itll&fa*
f m Hfci iw&S#?

t t « io baMd have Jm fally
m
pr*»*ttt*a to

fto tt ilm w i « « i ra»mo«n&&
ir o

H NiMPit tho
fl

KMndAtloa nt Us!# Hilt i* tfc&t
purohM*d

tiitu

fte t$* 'w m
m ^
#f bonda I t . Iwtfxi
nf

to Jaamry 1* Ml§i Hist tfe# f

!##*#**

Banto ar« r#Qttlr*dt under Ik# Aot, 't fflmtaMfe this j w
i•itb»r la th* o*«n s»A«t or fro® WiAtt banJta v^S.Oa^.CXX)




R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

additional, aailog. is round figar**. * total of M l ,OOC.000
Aw
elag tfc« current calendar j*ar.

At the pr»tm\t tlm

$£9,600,000 of bacdB & « • heea porobased
% # .Baarfi,

<*»• lla lt et least
altfMwly p«srabw«C.




m m

utreaif r m m m tw? fixing

»a«a#» to oovor tfao Mttet of boi&a

Reproduced from the Unclassified / Declassified Holdings of the National Archives

V8X18R&S, under tbs Federal Reserve Aet It Is the
duty erf Hi# federal Heoerva Board to m
ate* a recoasmendati on
to the Seerotary of the Treasury in respect to the right of
Federal Bsservs Banks to convert Bj6 Halted States Govern­
ment bonds with the circulation privilege, against which no
circulation ia outstanding, Into Z$ bonds, and rJp C L j tu tVBSK&AS, tills matter has boon the subject of earsful study by s m s members of the Board and of discussion
within the Board,

A

/c
/

ThW:jf^tmpmX,J^9Berre Boar^eaarnestly recommends

to ttie Secretary of t&s Ihrsa^!^^

Halt he fixss

on the conversion it should be la sacossl ^

that #16.900.000
of bond* had bean purehaead prior to Jaaaary 1,1916; that the
fedaral Becerra Beaks are required, wider tha Aet, to purn

.

ln “ • w “ “ * • * " f~ *

,E6- ° '
°0

additional, making, In round figures, a total of $41,000,000
Tiy ts tie an»’ the current calendar year.
»<

At the present

tins $29,600,000 of bonds have been purchased.
Th* Board. therefore, sees strong reason for fixing

ths limit at least high enough to oover the number of bonds
already purchased.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

s' - X

WHEREAS, under the Federal Reserve Act it is the
duty of the Federal Reserve Board to make a recommendation
to the Secretary of the Treasury in respect to the right of
federal Reserve Banks to convert

United States Govern­

ment "bonds with the circulation privilege, against which no
circulation is outstanding, into 3% bonds, and
WHEREAS, this matter has been the subject of care­
ful study by some members of the Board and of discussion
within the Board,

^
i

ithe Federal Reserve Board earnestly recommends
to the Secretary of the Treasury that whatever limit he fixes
on the conversion it should be in excess of $25,000,000.
The reason for this recommendation is, first, that |l5,900,000
of bonds had been purchased prior to January 1,1916; that the
Federal Reserve Banks are required, under the Act, to purchase^either in the open market or from memberpanks #25,000,000
additional, making, in round figares, a total of #41,000,000
up ' tho and ■ the current calendar year.
boof

At the present

time #29,600,000 of bonds have been purchased.
The Board, therefore, sees strong reason for fixing
the limit at least high enough to cover the number of bonds
already purchased.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

WHBKEA8, m ##r

F#doral B#serve Act it is the

ditty of the federal Beserre Board to make a reeomendation
to the Seoretary of Hi# Treasury in respect to the right of
Federal Beserve Banka to convert Z$ United States Governmeat bond* with the circulation privilege, against which no
circulation is outstanding, into 8$ bond#, and
WSISiS, this matter has been the subject of care­
ful study by some rashers of Hie Board and of discussion
within th# Board, ^

jk

Th# Federal Jeteserve Board earnestly reoomends
to th# Secretary of the treasury that whatever limit he fixes.
on the conversion it should be in excess of 125.000,000.
th# reason for this recommendation is, first, that t16,900,000
of bonds had been purchased prior to January 1,1916; that th#
?#d#ral &#s#rv# Banks are required, under the Act, to pnr"PC^r s-* **^

,

ohas#_ wither in the op#a market or from aemberbanks $25,000,000
A
1 0£f3 ^
3McL

t t x0L9& figures, a totsl of $41,000,000
t *£Jt

ufr-4# % t ^ s ^ #f th# current oalaxtdar year.

At th# present

tiae $29,600.000 of bonds have been parchased,
The Board, therefor#, sees strong reason for fixing
th# limit at l#ast high enough to cover the number of bonds
already purchased.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

under Hfi federal Boserrs Aot it is the
duty of tii* Federal Besorro Board to Make a rccoHimon&at1on
to the Secretary of tlio Treasury in respect to tho right of
federal Beserve Banks to convert Z$ Unitod States Gcvernaent bond* with tho circulation privilege, against whioh no
circulation is outstanding, into 8$ bonds, aad
9UHKA&, thio mattar has boon tho subject of care­
ful study by soi&o ©sabers of His Board aad of discussion

• m m th* Board,

/ t , U u + *£ c * J ~ '/G J *

tho federal Keserve Board earnestly reoomende
to tho Secretary of the Treasury that whatever limit ho fixes
cm tho conversion it should ho in excess of #25,000,000*
The reason for this reeoawsndaticn is, first, that |l§,900,000
of bonds hod boon purchased prior to January 1,1916; that tho
federal losorvo Banks are requiredr under the Aot* to pur73t^ y.*-/'1

chase ^ the r in the open market or from memberbanks $£5,000,000
additional, asking, in round figures, a total of #dl,000*000
u y « W ^ is^ ^

sf the current calendar year.

At tho present

tlao $29,600,000 of bonds have heen purchased.
fhe Board. therefor© , sees strong reason for filing

the lialt at least h i # enough to cover the number of honds
already purchased.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

federal

DISTRIBUTION OF UBITSD STATES BOIDS
Held by the Various
federal R eserve Banks
_______________________
lAs per echedules on hand Feb*
. .-federal
Reserve
Bank of

f

Boston,

Date of i".. ..... Latest
Schedule
On Hand
Twos
(1916}
Feb. 1
$ 1,000,000 1

*\
.

'O'

— *

Threes

Fours

Total
| 1,000,000

$

*

New York
Philadelphia

Feb. 3

3,225,000

Cleveland,

Feb. 5

400,000

3,225,000
1,353,000

1,428,000

Richmond

3,181,000

-

Atlanta

Jam. 7

25,000

Chicago

Feb • 4

2,525,000

1,843,000

St. Louis

Feb. 2

1,769,000

1,000,000

2,769,000

Minneapolis

Feb. 2

1,075,000

424,200

1,499,200

Kansas City

t£2 *31
J8L

2,221,150

300

Dallas

Feb. 2

1,295,000

1,296,000 j

San Francisco

Feb. 1

3,035,000

3,035,000

Total
|
_____________ i ____
Division of
Eeports & Statistics,
get. 7. 1916.



25,000
1,754,000

6,122,OO0te

2,221,450 1
i

i
7

"’
■

j

— 1

$16,570,150 ||4,695,500| #3,107,000 #24,372,650 !
1
_..J
____ i__________ I
..... ....... j------------------------ 1

R ep rod uced from the U ncla ssified / D eclassified H oldings of the N ational A rchives

v w s m a m im

or

m

it m

h a ijs

S U I f tfe* ?***#*•
f o t i w a . B w m 8*jUc«

m m

a

(A* far •aheiula* an Imtt Fab. T, 19X
6)

im m m

S*t* of
T*4m 4

m . 1
M W
U 4
# ^
'
IN T$fl
tH
«»
■
flillid ilp lis

w

*%

I

& m mm
*m : V -

O lrrvlu*.

r«v. «

*» p#M
* * #
* !
**"* * *
•*
AtXttU

# 1,000,090 1
1
,
+*0* * W& W
N H -- * 'W #* '(^
f
t
* 4F * A
M * i

rr.fn
.r in
„ ^PP^Prirr.
.
|
e 1 ,000,000
fw0gm> N '^ n
w
.
»g hh
# m
r
•#'W
w t
' -

H^
P*
* K
#
'(*’
#
•
*
*,**6.00©

Sft»0,OOO
W ■i *¥ -NK
* * •- Wf
' i *
W
W
i
l
A
♦00.000 1,4«0,000 % fPP,^ IP
4f «nX A A
>
Pw
9,181,000

M.000
M.000
J^il • f
«* #' ** «* m * 'm * im * ^ w m * m * ^ «m «m «* ^ ^ ** ** * ^
# *
>
•.its.ooci
fi#t>*$#
ooo 1vMS9
F*b. 4
«W i.«m,ooo
flkiwai*
» «
*
*
* * ** * ** *
w Mw *m mm mm mm- * '• '*#■* ** ■» > « *<-<* ■* «* **
»
* w* *
3 to i
M*
#**
«* ** ■* — ~ ~ ——
M** —
. ** •
•
. a •. ^
* *
^
*
*
m
w M«>< «* ** « -morn #
» MH v •■ *» ■
*
-" * **
* w
1,4#9,800
§
XtOfifMO
*
*» »
H*** :*** — ~ ■ ——
* » *
.
W ** W** ** M w *#*« *,' ^
>
”
—~
w « » <» *» «» ■» ** «•
# * * • ■ *» *
*
* »
£.281,4,60
m m
Jaa *ftl
i* s iit*§§
£&aa*a City
« ». •
>
M - * ^ «• «a «* ** mu «**mm mmmm
m
'W
#
*
< *; A * - *
* * * » * » * > » « * * «,
*# -«* «* w
•- * *- *
' * *
a ** .• *« -* y t. ,K
* *. )* ® *• ^ # ^
x^tte.ouo
pt n «t
■M I
fN i*
** ^ ^ —^ ^ ** *» «. m> * « rn , m * m » m m
^ *. ^ 4.
*
0
U #
M •
■
• *» mmm <mm mm mm- m M **
m
#,#§§*#§§
«, oat), ooo
Wfc* 1
B*a n v M ii**
W M •• M •a
> A * W*
I— *
f
•t «c < •c m
«a » p
W 5 • _ ar
S3SSS—
» ^ »
t
J W w«pW
V
#16,6YO,ISO N.6»0,&00 la.ior.ooo
l#t*l
„..... ,-.r .... .......
.SlTlfllom
f £t*u«u««,
t

?•*. ?, 1IU .




Reproduced from the Unclassified I Declassified Holdings of the National Archives

Fe d e r a l R e s e r v e B o a r d
W a s h i n g t o n
\

January 15, 1916
Dear Mr. Delano:

^

I have read your memorandum in regard to the pur­
chase of Government bonds, and thank you for the illum­
inating way in which you have analyzed the situation,
which is very helpful.
May I suggest that, on page 3, under "Third",
your language might be changed to advantage because,
as you have it, it reads that the Federal Reserve
Banks "shall, take these bonds * * * retiring the cir­
culation thereon and exchanging these bonds for 3$
S'S

• i

i

4

\

| bonds and notes, etc."

\

That permits of the construc-

’

| tion as if the banks were obliged to exchange these
j bonds whereas, as a matter of fact, the Federal Re! serve Banks have the power of either taking out cir­
culation and leaving the 2fo undisturbed or of applying
for the conversion of these bonds.

With a little

change in the language, you might make this paragrapht
I believe, clearer in this respect.
On page 4, you say: "It is safe to estimate that
under normal conditions and even with a liberal inter­
pretation of the Act it would take ten to twelve years
to effect a complete substitution."


i

I believe you can

Reproduced from the Unclassified I Declassified Holdings of the National Archives

(2

fiake this paragraph stronger because X am confident
i
I
Ithat a great many of the National banks - particularly

f

| the smaller ones - will not give up their note issuing
[
privilege as it is a profitable affair for them, and
my own feeling is that, after we get under way and
j after we absorb the first offerings, the voluntary
offerings will, from then on, rapidly grow less and
less*
On page 5 is the only point in which I do not
quite agree with you.

I do not think we should sug­

gest 1*hat banks which leave the system should take
back their bonds.

First of all, I believe that the

only material,amount of bonds that we shall get will
be from Rational banks that may feel that they want
to be rid of their bonds so as to be able to denation­
alize in case they want to, even though I do not think
it likely that they will.

But I do think that it

looks "as if we were afraid" should we put in such a
clause.

Moreover, I think it is a good investment

for the Federal Reserve Banks to hold the bonds and it
is better for them to hold these bonds, rather than to
throw them back upon the hands of unwilling holders.
In addition to all that I firmly believe that if con­
ditions should force National banks to withdraw and de~




)

Reproduced from the Unclassified / Declassified Holdings of the National Archives

V

(3)

nationalize it will have a very healthy influence on
Congress and the administration of the Federal Reserve
Board,

It would show that something was wrong, and I

should rather see that corrective brought to bear in order to get the system rights

My own feeling is that

the system cannot be considered a success unless it can
be put in such shape that its members will be satisfied
so that the State banks will come in because they see
we are a happy and prosperous family,

I do not believe

in the permanency of success achieved by constraint*
I am in full accord with all your other recommenda­
tions and with the spirit of your memorandum, and I
hope that the Board will act in sympathy with it*
■ truly yours,
tfWy
{ m u *.

Hon. F, A. Delano,




Vice-Governor•

Reproduced from the Unclassified I Declassified Holdings of the National Archives

MEMOEAHDUM IM REGARD TO
m

r o n u i.

op o o v ™

, , 30™ .

THE EXCHAHGE OF Z$ for 3% BONDS AMD UOTES,M
THE HETIHEMENT

Ol
f?

HATXOMAI. BAHK HOTS CIECULATIOE AND

SUBSTIWJIIOH OP FEBEHAL HESEKVE BAHK H0IE CIBCUIATIOH

Points upon which it is desirable to hare
a definite ruling or decision "by the Federal
Reserve Board, even if it requires a revision
or reconsideration of previous decisions.

“

'

Under the opem market provisions of Section 14 the
cx~

Federal He serve Banks are given on aliBelivfcgly free hand in the
purchase and sale ofgovernment "bonds, subject only to such
general regulations as the Federal Be serve Board may promulgate.
-

'

Under Section 18 there is the provision that National

hanks may tender Government bonds with the circulation privilege
for sale andAthe Federal Reserve Banks shall take these bonds
to ‘ extent of $25,000,000 per year, or ,16^350,000 e^ch^ua^ter Jr ^ .
the
*

__

She Federal Reserve Board has ruled that if the Fed...

~ __

___

^

eral Reserve Banks shall have purchased their quota of bonds

?

in the open market they are not required to take bonds tendered

'^T

through the Treasurer of the United States by National banks.

^

It is probable that this ruling ought to be reconsidered and
withdrawn, because the effect of such a rule WNiriMte to favor



R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

.2-

large banks- having close relations with the Federal Reserve
Banks, as against the small/ CQuatyy banks, not knowin g th &
<• ■
? '

fJ u / > '

ropata era- w e 3 :l, or not having close relations.
—

* \

If any Federal Reserve Bank buys 2% bonds with the
circulation privilege, but against which no circulation is
outstanding, in the open market, under Section 14, it has a
right to convert these bonds into 5% bonds, or half and half,

Z$ bonds and one-year notes.

This is a privilege, given

under the law, subject to the approval of the Federal Reserve
Board and the Secretary of the Treasury.
danger that this privilege will be

There need be no
eastgif t because the

Federal Reserve Board can at any time fix any general limita­
tions which it wants to.

The argument is s o m < 3 i mes raade

that under this privilege the entire $750,000,000 of Z% bonds
outstanding could be converted am a year from Zc to 3% bonds
/
o
and -p* increase the fixed charges of the GovernmentJ37,500,000^
JL

ffhis i& st
o-pe or lese absurd because it overlooks the facts
fa) ,
3S®Wr these purchases, are limit fed to^ bonds against which
/t

^

no circulation is outstanding.

JL

There are only ^51,000,000

of such bonds at the present time and the Board could easily
rule that this meant that no circulation should have been outstanding within ^ the previous six months

prior to the

purchase;
fb)

Under the National Banking Act the circulation of the




R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

-3-

country can not be reduced at a rate more, rapid than §9,000,000
j^r^month, which means a maximum of $108,000,000 per year.

It is very desirable that a liberal legal interpre­
tation shall be given the powers of the Board and-’
-^fee getteral
■ BaggcnEBwiws or

^ e^eral Reserve Banks, acting under

regulations of the Federal Reserve Board and the Secretary of
the Treasury xmimr Section 18, because the substitution of
Federal Reserve and Federal Reserve Bank Note currency for
7600 different kinds of National bank notes is desirable from
*
i
iawlc.
i
t*
»
th.
*»«
rapid progress possible under the Act and if each Federal Re™
serve Bank were to buy bonds as rapidly as the law ^11

'

which is quite inconceivable, it would take practically seven
years to retire the present National bank note currency, into
which void the Federal Reserve currency wouldiMMtdrfr^flow.
A.
A .
If, however, a narrowly interpretation is placed upon Section
18 it will take thirty years to accomplish this,
£a-all.
.
J
•__— ~ ... ..
t'jr
rit
y sebaMlity, under a liberal interpretation it would take > /
ten to twelve years to effect tfe* complete substitution, «kioh

vusmA-d/not Ifr hasty action.
The National banks of the country have grf
e-c
oJ ClZA^s
interestA in tjijg- matter.
Many of them, especially the. small^ones, paid



prices for their bonds,

in many

/

"
\

y
*

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

|I0.

cases as high as a. httB&r

-and ton.

They have had to write

off this premium and they are m m interested in gaJjitog*
the "bonds

at par, or approximately pat^

For

this reason, it would seem desirable that any zfo bonds, bought
in the open market, and exchange for Z% bonds, or zfo bonds and
notes, siiould not be deducted from the $25,000,000^ which

eral Reserve System should be protected against the action of
those banks which might w&tim+f) use the willingness of the
Federal Reserve Ba^ks to buy bonds as an o»«y opportunity for

, w i t h d r a w j ^ from the National banking system. -“ Federal ■
. The
Reserve Board

i^

justified in requiring Federal

Reserve Banks, buying the bonds of

National bank, to secure

an agreement from that bank that if it retired within three
1

years from the National Banking System, it
~H%z
tjj&e back the bonds^sold to the Federal Reserve Bank.




/

Reproduced from the Unclassified I Declassified Holdings of the National Archives




FEDERAL RESERVE BOARD FILE

eder

Xl Reserve Board
W ashington

January 14, 1 9 1 6 ^ ^ ,

Governor:I have read carefully the attached letter ^
of Mr. Reynolds in which he suggests that the Board
-nolds
make a ruling to the effect that Government "bonds
bought by Federal reserve banks after December 31,
1915, and prior to March 21, 1916, and during each
quarterly period thereafter, shall not count as a
part of the $25,000,000 of bonds which the Federal
Reserve Board can, in its discretion under the pro­
visions of Section 18 of the Act, require Federal
reserve banks to purchase from member banks whose
applications for the sale of their bonds have been
filed with the Treasurer.
I would suggest that Mr. Reynolds be ad­
vised substantially as follows:
That while the Board appreciates the force
of his suggestion, and deems it important that the
market price of government bonds should be pro­
tected, the difficulty in the present case is that
Section 18 does not give the Board the power to make
the ruling suggested. The particular language
involved reads as follows:
«*******The Federal Reserve Board may, in
its discretion, require the Federal reserve banks
to purchase such bonds***********PR0VIDED, That
Federal reserve banks shall not be permitted to
purchase an amount to exceed $25,000,000 of such
bonds in any one year, and which amount shall include bonds acquired under Section 4 of this Act
by the Federal reserve bank1
*.
From this it will be observed that a limit
is placed by statute upon the power of the bank to
purchase and the Board cannot require such banks to
purchase an amount in excess of what they are per­
mitted to purchase by law.
Under the ruling referred to, published on
page 217 of the August Bulletin, the Board reached
the conclusion that bonds bought by Federal reserve
bajjcs prior to December 31, 1915, should not be de­
ducted from the allotment made to any Federal

U J
*

Reproduced from the Unclassified I Declassified Holdings of the National Archives




reserve ‘
bank during the year 1916 on the ground
that such bonds were not purchased during the
year that the allotment is to be made, lot al­
lotment was made during the year 1915 since this
provision of the Act did not become effective
until December 23, 1915.
Where bonds are purchased under Section 4
during the same year that the allotment is made,
however, the Board has no discretion in the matter.
In such case Federal reserve banks are prohibited
by law from purchasing their full allotment under
Section 18 but must deduct those bonds which they
have purchased under Section 4.
Very sincerely

Hon. F. A. Delano
Vice Governor.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

PO *
M




Jaaaery XO, X9X6*

Gaorga M* BayaoXda»
Continental & GoanaeraiaX Uat local Bank,
Ohioag©* XXX,
S ir**
fhia w ill acknowledge th* receipt o f your
le tte r of January 5th giving the Federal Beeerwe
Board your viewa ia connection with the aotion o f
tha Board relative to tha purphaea of United State*
bande under tha federal Reserve Act, it reoeived*
X ahaXX taka pleasure in bringing your
Xattar promptly to tha attantion of tha FadaraX Be•erve Board*
?ary respectfully,

Secretary.

Reproduced from the Unclassified / Declassified Holdings of the National Archives

C A P IT A L , S U R P L U S A N D U N D IV ID E D P R O F IT S # 3 3 , 0 0 0 , 0 0 0

i n t n t m s b d N r tim w l B a n k
G E O R G E M. R E Y N O L D S ,
A R TH U R REYNO LD S,
R A LP H VAN VECHTEN,
ALEX ROBERTSON,
H E R M A N W A LD E C K ,
J O H N C- C R A F T ,
J A M E S R .C H A P M A N ,

V ic e P r e s id e n t
V ic e P r e s i d e n t
V ic e P r e s i d e n t
V ic e P r e s i d e n t
V ic e P r e s i d e n t
V ic e P r e s i d e n t

P r e s id e n t

G E O R G E B , S M IT H ,
W IL B E R M ATTER Y,
H .E R S K IN E S M IT H ,
W ILS O N W. LAM PE RT,
D AN N O R M A N ,
G E O R G E A .J A C K S O N ,

W IL U A M T. BRUCKNER, v , c r P * f * , de» t
N ATHANIEL R . L O S C H ,
C a s h ie r
JO H N R .W A S H B U R N ,
A s s t.C a s h ie r
HARVEY C. V E R N O N , A s s t .C a s h ie r

A s s t C a s h ie r
A s s t C a s h ie r
A s s t.C a s h ie r
A s s t C a s h ie r
A s s t.C a s h ie r
A s s t.C a s h ie r

January 5th, 1916*

FEDERAL RESERVE BOARD,
Washington, D. G*
Gentlemen:
While attending a meeting of the Executive Committee of
the Federal Reserve Bank of Chicago yesterday, Governor McDougal read
the telegrams which had passed between himself, representing the Federal
Reserve Bank of Chicago, and your board, relative to the redemption of
the 2$ United States bonds now used to secure circulating notes of nation*
al banks under the provisions of the Federal Reserve Act.
Mr. McDougal*s telegram to you was as follows:
"Please advise whether under the terms of paragraph three Depart­
ment circular number fifty-three issued by the Treasury Department
December third we will be allowed credit for purchase of United
States two per cent bonds made subsequent to December twenty-third
nineteen fifteen."
To which you replied as follows:
’
’
Your telegram December twenty-seventh received.
Board has ruled
two seventeen August Bulletin that Government bonds bought in open
market prior to December thirty-first, nineteen hundred fifteen are
not eligible as a deduction from allotment made under Section eight­
een.
Bonds bought on or after January first may be deducted.”
Believing, as I do, that the intent of that part of Section
Eighteen of the Federal Reserve law



which relates to the exchanging of

Reproduced from the Unclassified / Declassified Holdings of the National Archives

- 2 Z% United States bonds for 3^ gold notes in amounts not to exceed
#25,000,000 per annum, was to maintain a parity for the 2% bonds, of
which the national banks of the countiy, members of the Federal Reserve
System, owa about $680,000,000, and to stabilize their market value,
as well as to provide means for the gradual retirement of national bank
notes secured principally by those bonds, it seems to me that the ruling
of your board, as outlined in the above telegram to Mr* McDougal, will
tend to interfere with those purposes and, on the contrary, create the
very thing whioh the passage of this section of the law had expected to
prevent, viz; a demoralization of the raaricet value of these bonds.
Entirely aside from any discussion regarding your interpreta­
tion of the law, I believe that, as a matter of policy, the opinion you
have given to Mr. McBougal should not stand and that part of it referring
to bonds purchased after December 31st, 1915, be made public, for if such
should be the case it seems to m

that you will unconsciously be playing

into the hands of speculators in those bonds, rather than following a course
calculated to stabilize their market value and protect the national banks,
members of the system over which you preside, and whose ownership of the
major portion of those bonds has for years been the chief supporting factor
of the market.
Already the Federal Reserve Bank of this city has been approach­
ed by houses who would sell 2^ bonds to them at a slight discount and after
the two per cents, have been exchanged for 3$ notes, buy those notes from
the Federal Reserve Bank at par, or a price sli^itly above par.
During the last few days there have been many inquiries for 2%
bonds in Qhicago, but so far as I know, none of the banks here has, up to
this time, disposed of any of its bonds at a discount.



Reproduced from the Unclassified / Declassified Holdings of the National Archives

- 3 If the Federal Reserve banks are permitted to buy 2$
bonds in the open market and include bonds so purchased in the allot­
ment of #26,000,000 per annum, which your board has the right to require
those banks to buy, it naturally follows that it will stimulate activity
on the part of the bond houses to deal in these bonds, even though the
profit may fce ever so small, and we believe that in all equity and jus­
tice, the interests of the members of the Federal Reserve System, who are
co-operating magnificently for its success, should not be subordinated to
those of the street, which seeks only the profits it may derive through,
those transactions.
The fact that in one draft of the proposed currency legisla­
tion, which was printed before the M i l was presented to Congress, there
was omitted any treatment whatever of the 2$ bonds owned by national banks
and held in trust by the Treasurer to secure circulation,caused the first
depreciation in the value of these bonds he low par.
On the afternoon of the day "before the bill was introduced into
Congress, 1 had the honor to be one of a committee of four bankers appointed
by the American Bankersf Association to interview President Wilson and Secre­
tary McAdoo regarding this matter and its omission from the draft of the bill
which had been prepared, w i th the result that it was restored and later on,
in somewhat of & modified form, was enacted into law.
I know that it was clearly the intention of all taking part in
the framing of that legislation to have that part of the bill act as a safe­
guard against a demoralization of government 2$ bonds and to assure banks
owning those bonds that the Administration proposed to keep faith with them

and do all in its power to protect their values up to par.



Reproduced from the Unclassified I Declassified Holdings of the National Archives

Row, assuming that during the present twelve months period
the twelve Federal He serve ‘
banks should be able to buy in the open mar­
ket approximately $26,000,000 of these "bonds and would have the right,
under your ruling to offset them against their allotment, it is obvious
that it would be impossible for member banks to realize upon their bonds
through action of the Federal Reserve Board as contemplated by the law;
and assuming that $25,000,000 so purchased by the Federal Reserve banks
are bought at a discount of l/Z of l/£, the twelve Federal Reserve banks by
such transactions would earn #125,000,- would it not follow that an equal
discount might properly be chargeable against the whole $678,000,000 of
these bonds held by national banks, and entail a loss to them of $3,390,000,
on the one hand, while reaping $125,000 through their stockholding interests
in the Federal Reserve banks, on the other?
Furthermore, under the assumption that member banks would find
it impossible to dispose of any of their 2% bonds through your board, is it
not reasonable to assume that many of the bankers throughout the country
would become weak-kneed and offer their bonds for sale at a greater discount?
Now, since all of the stock of the Federal Reserve banks is owned
by member banks, I fail to see that it would be to their interest for the
Federal Reserve banks to earn a profit through the purchase of 2$ bonds at
a discount, when to secure that profit the market for those bonds would
necessarily be held below par and make a loss to them, collectively, of thir­
ty times the amount of that profit.
In our case, we are carrying $8,500,000 of these bonds,,and,
like other bankers of the countxy, we have gone into this matter in good



Reproduced from the Unclassified / Declassified Holdings of the National Archives

—

5

m»

faith, believing it was right to co-operate with the government and
that the government, in turn, would co-operate with us.

If the ruling

which you have made should stand, and it should develop that we are un­
able to reduce our circulation from time to time through the provisions
of the law because of the offsets Federal Reserve banks might male© of
bonds purchased in the open market, the only possible recourse for us,
if we realise upon our bonds at all, would be to throw them on the mar­
ket and get whatever we could for them.
I do not say that we would do this, but I think your board
will appreciate the fact that ever since the incident utiiich caused treat­
ment of the national bank notes and bonds securing them to be omitted from
the draft of the bill, as referred to, there have been some mis-givings
in the minds of many bankers, and I fear that the ruling which you make in
this connection, if permanent, will accentuate this and create the belief
that they had better do what they can to dispose of their 2$ bonds, rather
than take any chances on the outcome at some indefinite future time.
Would it not be advisable to promulgate a ruling similar to
that appearing on page 217 of the August 'Federal Reserve Bulletin” to pro­
vide that government bonds bought by Federal Reserve banks after December
31st, 1915 and prior to March 21st, 1916, and during each quarterly period
thereafter, shall not count as a part of the $25,000,000 of bonds which
the Federal Reserve Board can, in its discretion tinder the provisions of
section 18 of the act, require Federal Reserve banks to purchase fro® mem­
ber banks "whose applications for the sale of their bonds have been filed
with the Treasurer*




I believe that the members of the board are just as anxious as

pin

--------------;------------------ ----------------------------------------------------------------------- ------ ------ --------

Reproduced from the Unclassified / Declassified Holdings of the National Archives

-

6

-

the bankers of the country to handle this matter along lines which, will
do most to insure parity for the 2G bonds, and I have, therefore, writ­
j
o
ten you my iE$>ressions upon the subject with this thought in mind, feel­
ing, as I do, that it is worthy of your earnest consideration*




Yours very respectfully.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

1 2/2 5/15.

MEMORANDUM

Refunding Provisions, Section 18, Federal Reserve Act

(1)

The Executive Committee of the Governors, at their

recent conference, claimed that the reference to Section 4 in
Section 18 is in error; that the reference really was to Sec­
tion 14.
I do not think that this is correct; if correct, the
Federal Reserve Banks, by buying, in the open market. Government
bonds not having a circulation privilege, e.g., Panama 3 ’ could,
s,
pro tanto, reduce their annual liability to buy 25 millions of
Government 2's from the Treasurer of the United States, for
Section 14 gives Federal Reserve Banks the right to buy any
kind of Government bonds in the open market, that is, bonds with
or without the circulation privilege.
(2)

It is true that Section 4 gives no direct power to

the Federal Reserve Banks to buy any bonds, but merely gives the
right to take out Federal Reserve Bank notes against any bonds
bought with the circulation privilege under Section 14, although
this latter section is not referred to.

Congress, however,

evidently intended that the 25 millions abligatory quota may be
cut down by purchase, in the open market, of bonds having the
circulation privilege but not deposited with the Treasurer as
security for National bank notes.
(3)

The question is, whether it was the intention of Con­

gress to give to Federal Reserve Banks the right to convert
these latter bonds into gold notes and Government 3 ’
s.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

(4)

This privilege of refunding, whatever its scope,

is one given to Federal He serve Banks and not to the public.
(5)

The burden placed upon Federal Reserve Banks is to

buy not exceeding 25 millions, minus their open market pur­
chases, of bonds having the circulation privilege.
(6)

The privilege of conversion may be construed:
fa)

To be of the same scope as the burden, that is,

to be limited to bonds which the Federal

Reserve Banks must

annually buy from National banks through the United States
Treasurer, or,
fb)

The privilege may be construed as broader than

the burdent that is, Federal Reserve Banks may convert into
gold notes and Government S ’ any bonds bought in the open
s,
market having the circulation privilege.
(71

If fa), above, is correct construction, the privilege

would be limited to converting the 679 millions of bonds, or
such of those as are 2 per cent bonds, now held by the Treasurer
to secure National bank circulation, and it would be further
limited to the amount of 25 millions fless open market pur­
chases) in any one year.
(8)

If fb), above, is the correct construction, this

privilege would be increased so that the Federal Reserve Banks
could convert any part held by them of the 39 millions of bonds
in the hands of the public, and also the 12 millions of bonds
held by the Treasurer to secure deposits of public moneys.
In this case, the 25 millions annual limitation would not
seem to be applicable.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

-3-

(9)

It may be presumed that the intent of Congress was

to cancel, gradually, all outstanding national bank notes, but
Congress refused to permit a greater contraction than 25
millions each year.
(10)

On the other hand, the conversion of bonds bought by

Federal Beserve Banks in the open market does not directly con­
tract the circulation, it merely, pro tanto, prevents future
increase in the same.
(11)

It would seem, therefore, that (b), above, could be

held to be a perfectly possible construction of the law.
(12)

It would seem clear, however, that Congress could

not have intended to give to the Federal Beserve Banks the
privilege of converting only 25 millions of bonds held by the
Treasury, and at the same time the privilege of converting over50 millions of bonds held "by the Treasurer to secure public
deposits, and held by the public.
(13)

It would seem equitable, therefore, for the Federal

Beserve Board and the Secretary of the Treasury to apply to
bonds bought in the open market the same limitation as bonds
bought of National banks through the Treasurer.
(14)

I would, therefore, recommend an announcement that

the conversion privilege vested in Federal Reserve Banks:
(a) Is open for all bonds whether in the hands of the
Treasurer of the United States or in the hands of the public,
but that the total annual limit be fixed at 25 millions, or
(b) That the limit be fixed at 25 millions annually
for each class, respectively, making the grand total 50 millions
annually.
(c) Both (a) and fb), above, to be conditioned upon
the Federal Reserve Bank not having taken out Federal Reserve
Bank notes against any such bonds.



Reproduced from the Unclassified I Declassified Holdings of the National Archives

3

7 - 3
C h a ir m a n .

G

eo r g e

M .L

a

M

o n te

,

D e p u t y C h a ir Lia n .

3

3 3 .

> /■

R eserve B a n k O F P r n a n f f i S I
4 0 8 Ch e s t n u t St r e e t

-

'' ^

^

PH ILA D E L P H IA , B e e . 1 1 , 1 9 1 5 .

Sir:
I b e g to a c k n o w l e d g e r e ceipt and thank y o u for
y o u r f a v o r o f t h e 1 0 t h I n s t B h t i w i t h r e f e r e n c e to a r e ­
a d j u s t m e n t on o u r b o o k s o f t h e p r i c e at w h i c h w e a re
carrying our U . S .

b o n d s to c o r r e s p o n d w i t h m a r k e t v a l u e s

at t h e c l o s e o f t h e y e a r ,
t h e b o n d s up,

a n d n o t e t ha t s h o u l d w e m a r k

it w o u l d b e n e c e s s a r y

down again should the price decline,

f o r u s to m a r k t h e m
w h i c h is e n t i r e l y

s a t i s f a c t o r y to us.
Respectful^,

't
Governor.

D R . H. P A R K E R W I L L I S ,
Secretary,
Federal Reserve Board,
W a s h i n g t o n , D. C.




r

R ep rod uced from the U ncla ssified

I D eclassified

H oldings of the N ational A rchives

j

KSEHV

m

Dooombor 1$, lfl.fi*

Tour 1 otter af TJovanbor #9. a^dro aaod to Honorable
Paul I* Warburg#- i»

you ask vbetfe*# the 3oard v,t;uld

object lo your carrying your Govornmstit bands at the asarkot
prioo

m ts»
t

olo®o of ti» year*

hm

duly r e i v e d *

$bft matter has fooan dlscutsod toy tho

m

M& I

to l n f o w you that It has reached tho o«**oln~

flIon that no o&Jootion

§m%&

too m i t o d to yt»r carzyin#

ths bond# at market, provided that If your tomlc ttt&grti* this
poiiay, it shall a c m t t a e to follow II#

In oth«r *<*$»-*

If you mark; »$* your bonds '!» case the inaritot prlco &t tht

m & of th© year le hi&uir than th* purohaoo prio#t

will

also havs to aaric than down In a yoar wfcao the market prlco
sfcculd

'tmppm

to bo below tbe fa*ioe tf whiah yon caarry those
fc

toced# on your booJcs*

Secretary#
Mr* 0# J* RhoatlO)
flowno r, Federal Heeorro &aik of rhiladolphla.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

Fe d e r a l R e s e r v e B o a r d

~

_

W a s h i n g t o n

December 6, 1915*
Bear Governor Rhoads:
I still have to answer your letter of November 29th, in
whioli you ask me whether the Board would object to your carry­
ing your government bonds at the market price at the close of
the year.
1 have discussed the matter with my colleagues and we have
reached the conclusion that no objection tsould be raised to your
carrying the bonds at taarket, provided that if your bank adopts
this policy it shall continue to do so.

In other words, if you

mark up your bonds in case the market price at the end of the year
/VVU>

fa

is higher than the purchase price, you also^mark them down in a
year when the market price should happen to be below the price at
which you carry these bonds on your books.
Very truly yours,

C. J. Rhoads, Esq.,
Governor, federal Reserve Bank,
Philadelphia, Pennsylvania.




Reproduced from the Unclassified[I Declassified Holdings of the National Archives

MEMORANDUM FOB DR. WILLIS.

It is reasonable to expect that, as the time approaches,
when national banks will begin to sell their U. S. bond holdings
at -par, the market value of these bonds will show but little fluc­
tuation from par. There would then be little impropriety in mark­
ing crap on the books the value of the bonds carried as assets by
the F. R. b a n k s .
Whether the end of this month is a proper time to mark
up their value in view of the pending pressure to sell bonds, as
a result . of. the coming transfer to F. R. banks of Government
deposits, seems doubtful.

In my opinion the proper time to ao so

would be March 1, or some time after, when there is reasonable as­
surance that the market value of these bonds will be practically
par.

By that time their value might be properly marked up to par.
It may be stated in this connection that the Clevelaaad,

Chicago and Minneapolis F. R.
bonds at -par.

banks ccarry^ the bulk of their

It is believed therefore that if the Philadelphia

bank is; authorized to raise the book value/of its bonds that
authority be
99 f .




given to raise them to par rather than to 99-|~ or
Respectfully,

ro d u c e d fro m th e U n c la s s ifie d I / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

(Stencil recut on 10/27/57
and *«mpared with original)
459.

r

? 3°
?

Circular No.____
Series of 1915.
F E D E R A L

R E S E R V E

B O A R D .

tflAsVYU.'D'' V ' 2 7

/ ;
;

/

^

/ ^

November____ , 1915.

GENERAL OPEN MARKET OPERATIONS.

The Federal Reserve Act in Section 14, under the head "Open Mar­
ket Operations,”provides that:
"Any Federal reserve bank may, under the m l e s and regulations
prescribed by the Federal Reserve Board, purchase and sell in the
open market, at home or abroad, either from or to domestic or for­
eign banks, firms, corporations, or individuals, cable transfers,
and bankers' acceptances and bills of exchange of the kinds find
maturities by this Act made eligible for rediscount, with or with­
out the endorsement of a member bank."
The Act also provides that every Federal reserve bank shall have
power:
"To deal in gold coin and bullion at home or abroad * * * ."
"To buy and sell, at home or abroad, bonds and notes of the
United States, and bills, notes, revenue bonds, and warrants with
a maturity from date of purchase of not exceeding six months,
issued in anticipation of the collection of taxes, or in antici­
pation of the receipt of assured revenue by any State, county,
district, political subdivision, or municipality * * * .”
"To purchase from member banks and to sell, with or without
its indorsement, bills of exchange arising out of commercial
transactions, as hereinbefore defined."
Further in the same section permission is given to each Federal
reserve bank:
»»* * * to buy
or agencies, bills
transactions which
bear the signature




and sell * * * through (its) correspondents
of exchange arising out of actual commercial
have not more than 90 days to run, and which
of two or more responsible parties."

Reproduced from the Unclassified I Declassified Holdings of the National Archives

439
-

2

-

Several of these classes of transactions have already been
provided for in the circulars and regulations heretofore issued
by the Federal Reserve Board as follows:
In Circular No. 7, Series of 1915, regulations have been
established for the general purchase of warrants;
In letters to the various Federal reserve banks the conditions
have been indicated under which bonds and notes of the Unites States
may be dealt in;
In letters to Federal reserve banks conditions under which
Federal reserve notes may be exchanged for gold, gold coin or gold
certificates, have been stated, and operations of this nature are
in progress;
In circulars revised from time to time and culminating in
Circular No. 18,

Series of 1915, conditions have been established

for the purchase of bankers1 acceptances growing out of foreign
trade

operations;
In Circular No. 19, provision has been made for the purchase

of acceptances of

State banks and bankers growing out of domestic

operations of specified classes.
THERE REMAIN STILL TO BE DEALT WITH THE PURCHASE AND SALE OF
,CABLE TRANSFERS AND BILLS OF EXCHANGE OF THE KINDS AND MATURITIES
f
BY THIS ACT MADE ELIGIBLE FOR REDISCOUNTn.
The present circular and regulation is intended to cover
these two items, and the Board wishes particularly to call
attention to the purpose of the open market section of


* Copy


illegible.

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

~ 5 tho Federal Reserve Act,
eral Reserve

459

This purpose is twofold - to enable the Fed­

Banks to exert a greater influence upon prevailing rates

of interest by the use of their purchasing power whenever conditions
seem to make it desirable that they should exert such influence; and
when, ofAng to the lack of applications for rediscounts, they are unable
to influence rates through the latter means.

In addition to this the open

market power may afford to Federal Reserve Banks the opportunity of pur­
chasing in the open market enough paper to enable them to provide reason­
ably for their expenses and dividends.

The Board is of the opinion

that the reserve banks should, when occasion demands, stand ready to
engage in open market transactions, as buyers or sellers to the extent
that is necessary to attain these or any other desirable object.
The

Federal Reserve Board does not wish to be understood

as encouraging expansion of credits when in some Districts at least
there should be contraction, but rather that the Federal Reserve Banks
taking cognizance of the conditions in their respective districts will
avail themselves of the privileges granted by the

Act as explained in

our letter of October 8 just as they have other open market powers al­
ready defined if and when it seems wise to do so.
CHARLES S. HAf »IN,
€
Governor.
H. PARKER FILLIS,
Secretary.
12/1/15




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-439aRegulation___
Series of 1915.
F E D E R A L

R E S E R V E

BOARD.

Washington, November____ , 1915.
GENERAL OPEN MARKET OPERATIONS.

I
Definition.
Open market operations as defined -under the Federal Reserve

Act,

are all those operations permitted by the Act which do not require the
endorsement of a member bank upon the paper growing out of them, which
are not presented or brought to the attention of the Federal Reserve
Board by a member bank, or which involve dealings with persons or in­
stitutions not members of the system,
I I.
Operations

Already Authorized.

In the accompanying circular description has been given of, and
reference made to, preceding circulars and letters issued by the Board
providing for open market transactions in bankers1 acceptances, bonds
and notes of the

United States, warrants, and the exchange of Federal

reserve notes for gold, gold certificates, etc.

The present regula­

tion has no reference to any of these dealings, but the circulars and
regulations relating thereto are continued in force as heretofore.




r ~—

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- 2 -

-459a -

III.
Operations Provided for in this Regulation.
This regulation deals with operations in cable transfers, and
foreign and domestic bills of exchange. The statutory requirements
pertaining thereto have already been set forth in the accompanying
circular.
I V.
Character of Bills Eligible.
The Federal Reserve Board has determined that to be elig­
ible for purchase under Section 14 by Federal Reserve Banks, at
the rates to be established for open market operations :
(a)

Bills must comply with the provisions of Regulation

HB", Series of 1915, relating to "notes, drafts and bills of
exchange," in so far as applicable thereto, a bill of exchange
being hereby defined as an unconditional order in writing,
addressed by one person to another, signed by the person giv­
ing it, requiring the person to whom it is addressed to pay
on demand, or at a fixed or determinable future time, a
certain sum in money to, or to the order of, a specified
person or to bearer.




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

-3—

(b)

-439a-

Bills may have been made by domestic or foreign
firms, corporations, or individuals.

(c)

Bills need not be endorsed by any member bank.

(d)

Bills need not be accepted by the drawee prior to
purchase.

li.

Method of Ascertaining Eligibility.
In ascertaining the eligibility of paper under
this regulation, Federal reserve banks shall comply with the
provisions of Section III, Regulation B, Series of 1915, except
that the certification of eligibility to be furnished by a member
bank, under the terms of that Section, may be supplied by a nonmember bank, or by any other individual, firm or corporation able
to afford such information in a trustworthy manner, provided
that the name of such individual, firm or corporation shall be
submitted to and approved by the Federal. Reserve Board.

Statements of the financial condition of the maker
the paper may be waived where bills offered for sale comply with
the following requirements:




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

-4 —

(1)

-439a~

If the bill bears the signature of the purchaser and

seller of the goods, and presents prima facie evidence that it
was issued for goods actually purchased or sold; or
(2)

If the bill be specifically secured by approved v/arehouse

receipts, bills of lading, or other documents covering readily
marketable goods.

V I.
Credit Files.
The Federal Reserve Banks should establish credit files con­
taining information on the following points :
(1)

The nature of the business or occupation of the maker

of the paper purchased by the Federal Reserve Banks :
(2)

If an individual, information as to his indebtedness and his

financial responsibility;
(5)

If a firm or corporation, a balance sheet showing quick

assets, slow assets, permanent or fixed assets, current liabilities
and accounts, short-term loans, long-term loans, capital and surplus;
(4)

Ail contingent liabilities, such as indorsements, guar­

anties, etc.
(5)

Particulars respecting any mortgage debt and whether there

is any lien on current assets.
(6)

Such other information as may be necessary to determine

whether the borrower is entitled to credit in the form of short-term loans.




R e p ro d u c e d fro m th e U n c la s s ifie d

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-5 -

-459a-

V I I .
(a)

Cable transfers are defined as immediate transfers of

funds made on behalf of applying individuals, firms, or corporations
in such manner as to place at the disposal of the applicant a speci­
fied sum of foreign currency in a designated foreign country, in ex­
change for payment made to the Federal Reserve Bank in United States
standard money.
(b)

Federal Reserve Banks are authorized to make such

transfers up to a limit to be named on application by the Federal
Reserve Board, for each Federal Reserve Bank.
(c)

Every Federal Reserve Bank undertaking dealings in

cable transfers shall inform the Federal Reserve Board by tele­
graph at the close of each day’ business, the amount so trans­
s
ferred, the rate at which the purchase or sale of same has been
made, and any other facts essential to the operation.
(d)

The Federal Reserve Board reserves the right to alter

the rate at which such transactions are entered into, by telegraph,
and without notice.
CHARLES S. HAMLIN
Governor.

I PARKER WILLIS
I.
Secretary.

11/29/15




R e p ro d u c e d fro m th e U n c la s s ifie d

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439 b.
Regulation ____
Series of 1915.

F E D E R A L

R E S E R V E

B O A R D .

Washington, December _______ , 1915.
GENERAL OPEN MARKET OPERATIONS.

I.
Definition.

Open market operations as defined under the Federal Reserve Act,
are all those operations permitted by the Act which do not require the
endorsement of a member bank, or which involve dealings with persons or
institutions not members of the system.
II.
Operations Provided for in this Regulation.
As explained in the accompanying circular* a number of forms of
open market operations have already been covered in previous regula­
tions.
This regulation deals with operations in cable transfers, and
foreign and domestic bills of exchange.

The statutory requirements

pertaining thereto have already been set forth in the accompanying
circular.




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-2 -

-4 5 9 b -

III.
CABLE TRANSFERS AND FOREIGN BILLS OF EXCHANGE.

In order to carry on open market transactions in dealing
in cable transfers and foreign bills of exchange - that is,
payments to be made in, or bills payable in, foreign countries,
it will be necessary for Federal Reserve Banks to open accounts
with correspondents or establish agencies in the leading finan­
cial centers of those foreign countries where there is established
a reliable standard of exchange.

As the law prescribes that

these connections are to be established only with the consent
of the Federal Reserve Board, Federal Reserve Banks will com­
municate with the Federal Reserve Board whenever they are ready
to enter into these foreign fields.
The Federal Reserve Board realizes that in dealing in
foreign exchange, the Federal Reserve Banks must necessarily
have to have a free hand in determining the rates at which
they wish to sell or purchase.

The Federal Reserve Board how­

ever, desires to establish the general rule that in purchasing
long bills in foreign countries, such bills shall bear at least
three signatures

that is, the acceptor, the drawer, and that

of the firm from which the bill of exchange is bought, pre­
ferentially that of a banker.

It is not necessary, however,

that the bill shall have been actually accepted at the time




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- 3 -

of purchase.

439 b.

Of course, Reserve Banks will have to exercise the

greatest caution in dealing in this paper, and it is expected that
their Boards of Directors will fix a limit up to which the accept­
ances of one single firm may be taken.
IV.
DOMESTIC BILLS OF EXCHANGE
The Federal Reserve Board has determined that in order
to be eligible for purchase under Section 14 by the Federal Re­
serve Banks, at the rates to be established for open market opera­
tions

:
(a) A bill of exchange is defined as an unconditional

order in writing, addressed by one person to another, signed by the
person giving it, requiring the percon to whom it is addressed to
pay on demand, or at' a fixed or determinable future time, a cer­
tain sum in money to, or to the order of, a specified person or to
bearer.
(b) A Domestic bill must be payable in dollars in the
United States.
(c) It must be a bill, the proceeds of which have been
used, or ore to be used, in producing, purchasing, carrying, or
marketing goods in one or more steps of production, manufacture,
and distribution;




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

-

(d)

4

-

459

b .

No bill is eligible, tho proceeds of which have been used,

or are to be used for a permanent or fixed investment of any kind,
for example, land, buildings, machinery, etc., nor for any invest­
ment of a merely speculative character.
(e)

Domestic bills may have been drawn by a domestic or foreign

firm, corporation, or individual upon a firm corporation, or indi­
vidual in the United States.
(f)

Domestic bills need not be endorsed by any member bank.

(g)

Domestic bills must be accepted by the drawee prior to the

purchase by the Federal Reserve bank unless they are accompanied
and secured by approved warehouse receipts, bills of lading or
other document covering readily marketable goods,
V.
Domestic Bills - Conditions of Purchase.
(a)

Before purchasing domestic bills of exchange, Federal Reserve

banks must secure statements concerning the condition and standing
of the drawer of the paper, and, if possible, also of the acceptor
of the bill, sufficient to satisfy the bank as to the ligitimate
nature and quality of the paper to be purchased.
(b)

No Federal Reserve bank will be permitted to purchase an

aggregate amount of bills of any one drawer, or issued upon any
one maker in excess of a percentage of its capital, to befixed from time to time by the Federal Reserve Board, except when




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

- 5 -

-4 3 9 b -

secured by approved warehouse receipts, bills of lading or other
documents covering readily marketable goods.

The aggregate

amount drawn on any one acceptor, purchased by Federal Reserve
Banks shall not exceed a reasonable percentage of the net worth
of the parties whose names appear upon the paper.

V I

.

RATES AT WHICH THESE OPEN MARKET TRANSACTIONS
SHALL BE TAKEN.
Federal Reserve Banks desiring to enter into these open
market relations shall communicate to the Board the rate they de­
sire to establish, for review and determination by the Federal Re­
serve Board.
CHARLES S. HAMLIN
Governor.

H. PARKER HVILLIS
Secretary.

12/1/15




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

Ch a r l e s

J.Rh o a d s

R ic h a r d

L . A u s t in ,

G

M .L a M

G o v e rn o r.

C H A IR M A N .

E d w i n S. S t u a r t ,

e o r g e

onte

,

D e p u t y C h a ir

D e p u ty -G o v e rn o r.

Fr a n k

M .H a r d t .
C a s h ie r .

F e d e r a j /Resek ste B a n k

o fP h o a d e l p h ia

4 0 8 Ch e s t n u t S t r e e t

P h i l a d e l p h i a ^ v .29,1915.
D e a r M r . Warourg:
X w i s h to t h a n k y o u f o r y o u r k i n d n e s s in s e n d i n g m e a
co py of y o u r r e m a r k s d e l i v e r e d at C h a r l o t t e , N . C., o n t n e 2 3 d
instant, which I h a v e read through with m u c h interest, a n d hope
that this address will b e g ive n wide pub li cit y, b e c a u s e I a m
su re t h a t it w o u l d b e m o s t h e l p f u l i f p e o p l e g e n e r a l l y c o u l d
read a n d digest what y o u have stated.
I t o d a y p e r s u a d e d M r . R u e to let us h a v e a b o u t $ 2 0 0 , QQO.
o f acceptances made by the P h i la de lp hi a National Bank, mat ur i ng
t h r o u g h D e c e m b e r , the l o n g e s t r u n n i n g u n t i l t h e 3 1 s t o f t h a t
month.
W e h a v e so m u c h o f o u r i n v e s t e d f u n d s m a t u r i n g i n D e c e m ­
b e r tha t w e a r e v e r y d e s i r o u s o f r e p l a c i n g o u r m a t u r i t i e s , e v e n
at l o w r a t e s .
I h a d to t a k e t h e a c c e p t a n c e s f r o m t h e P h i l a d e l ­
p h i a B a n k o n a 2$> d i s c o u n t b a s i s .
W o u l d t h e r e be a n y o b j e c t i o n i n y o u r m i n d to o u r m a r k ­
i n g up t h e b o o k v a l u e o f o u r U . S. 2 * s , w h i c h s t a n d us, a p p r o x ­
i m a t e l y , 9 8 - 5 / 8 p l u s 1 / 1 6 to 9 9 - 1 / 4 o r 9 9 - 1 / 2 , i n v i e w o f t h e
a p p r e c i a t i o n in m a r k e t p r i c e w h i c h h a s ta ke n p l a c e in these bonds?
I f w e c o u l d t a k e c r e d i t f o r t h i s b o o k p r o f i t , it w o u l d p r o b a b l y
e n a b l e us to c l o s e o u r b o o k s at t h e en d o f t h e y e a r w i t h o u t s h o w ­
i n g any deficit on our so-called o p e r a t i n g expenses, a n d thi3
w o u l d e n a b l e u s to m a k e a l i t t l e b e t t e r s h o w i n g to o u r s t o c k h o l d ­
i n g b a n k s , w h i c h w e a r e v e r y a n x i o u s t o do.
From what bond deal­
e r s t e l l me, t h e p r i c e f o r U . S. 2 fs is n o w p r e t t y w e l l e s t a b l i s h e
at 9 9 - 1 / 2 b i d a n d 9 9 - 3 / 4 a s k e d , a n d w h i l e t h i s m a y b e a f f e c t e d b y
p r e s s u r e to s e l l the b o n d s r e l e a s e d w h e n t h e t r a n s f e r of g o v e r n ­
m e n t d e p o s i t s t a k e s p l a c e o n J a n u a r y 1 s t, y e t I h o p e t h a t t h e p u r ­
c h a s e of 2*s, a s p r o v i d e d u n d e r t h e F e d e r a l R e s e r v e A c t , w i l l
c o u n t e r a c t t h i s i n f l u e n c e a n d h o l d t h e p r i c e a t o r n e a r pair.
^
I enclose a slip from the N e w s B u r e a u Service, showing
the combin e d s t atement o f the P h i l a d e l p h i a C l e a r i n g H o u s e for the
w e e k just ended, w h i c h i n d i c a t e s a d e c l i n e o f n e a r l y $ 9,000,000.
i n s u r p l u s r e s e r v e s , d u e c h i e f l y to d e c r e a s e o f d e p o s i t s a n d a
small increase in loans.
1 will mail y o u the regular detailed
s t a t e m e n t t o m o r r o w , as u s u a l .

P A U L M. WARBURG, Esq.,
Board,
C.

 F e d e r a l R e s e r v e
http://fraser.stlouisfed.org/ s h i n g t o n , D.
Wa
Federal Reserve Bank of St. Louis

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

RECEIVED
U R Y

D E P A R T M m T i ^ l ' s

m

J>..

WASHINGTON
October 22,
My dear G-overn^r:I have just "been looking over the Septembuf,
statement of ths twelve Federal Eeserve Banks.
In the month of September, they all seem to have earned their
current expenses except the St. Louis Bank, which reports a deficit
of $2,761 •00*
Some other banks also sho^r'f? very small margin of
earnings over expenses;-and very few can be said to be earning
anything like a fair dividend on their shares.
Do you not think it mi^ht be t?ell to bring formally to tho at­
tention of some of these lean banks again the suggestion that they
purchase Government 2 per cent bonds and take out 100)* circulation
against them, so as to make a net profit of about l|^ per annum on
the amount they may buy?
If the St. Louis Bank, for instance, should purchase $5,000,OQC
Government 2/s at, say, 97, the transaction vrould work approximately
as lollops:
$5,000,000 at 97 . . . . . . . . . . . . . . . $4,850,000,
The company v?ould receive, against these bonds, Federal
Reserve Hotes for . . . . r . . . . . . $5,000,000,
Deduct 5f reserve fund. . . . . . . .
j
• 250.000P
let amount of money received........... 4,750,000 . . . 4 f75C,C0£J
Therefor© it appears that the net amount of money
which the Bank would be out would b e ................. .$
100,000,
upon which \re m i l assume the Bank will lose ’ per annum
3$
interest or $3,000#
The Bahjc, however, receives 2f interest on $5,000,000, or $100,000.
j
It has to pay a circulation tax of oneShalf of l£, or ____ 25,000,
!?et return from i n t e r e s t ............. ............... . $ 75,000,
3>000,
Deduct 3$ interest loss on say $1-0,000, as above.
72,000.
Leaves a net profit per annum of . . . . . . . . .
And in addition to receiving this net return, the Bank would make
$150,000 additional when the bonds are paid off at par in twenty years.
This $72,000 is equal to $5,000 per month.
I note that the TOTAL current expenses for 10|- months, from
November 16, 1914 to September 30, 1915, of several of the banks have
been less than $72,000; so Ahat, if they had made this investment of
$5,000,000. in Government 7$ bonds, the revenue on these bonds Trould
have paid ALL of their CUSfcSHT EXPENSES from the beginning of the
System to September 20, 1915.



F

R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

-2-

The total expenses for this period of several of the Banks are
reported as follows**
Pichmond . . . . . . . . . . $67^624.24,
Atlanta. . . . . . . . . . .
71,480.37,
70,910.55.
Mirmea polis...........
These Banks ^ould then have had the following s m s available
for distribution to their stockholders:
Richmond . . . . . . . . . .$243, 010.44, + % J 7 4 : 7 4 ^
■Atlanta...................... 161,630.82,^ »r/?. & 3 ^
Minneapolis. . . . . . . . .
63,104,61. f ° ?• Y V ~
s

^7f^ L bfr
j«

And the St. Louis Bank, instead of showing a deficit for the ten and
one-half months1 period of $2,761.64, T 0uld have sho^m a slight
J
surplus.
Should not this subject be brought forcibly to the attention
of those banks which are still falling behind?
Sincerely yours,•

Hon. C. S. Hamlin,
G-overnor, Federal Reserve Board.




"■ — ....
■
y

'

\

R ep rod uced from the U ncla ssified / D ecla ssified H oldings of the N ational A rchives

KWBRAOT&t G W R PURCHASE Of
K
oovewmbit m m *

tm tha month of 3apto«lrar* thay a l l sa#» t$i baft aarnnd thair
currant axpanaaa asoapt tha St. Louis Bank, which report* % d a flc it
of $2pt$X+9Q*
Son* ethar bank# ulao shot * vary m a l l aeurgtn of
oar*laga ovar ©xpansanj and rary fow aan ba said to ba ourtlng any*
tlln g lik a * f a ir dividsnd aa their sharaa.
1© you not think It night bo w ill to bring formally t© tha at**
5
taatio* of soon of thaan la * * banks again th# suggestion that thay
p u r d m m Oovaraant 2 par oant bonds and tak# o«t 100^ circulation
a ^ i n i t thaw, *0 as to mb a net p ro fit of about l#jt -per anmm m
th* aaoimt thay May buy!
I f tha ft# Louis Bank, fo r instanaa* should purahaaa $5,000*000
Geverment 3/a at* oay, 97, th# tranaaction would work appraaimtoly
as followai
|5|000|000 at 97
$4 *850 *000
Tha eosrpoay would raoslwa, against thsaa bonds* ?adar&l
Bussrva If©tan for * * * * * # # ♦ # #■* ?§5*-Q © 0O
O *Q |i
r*duet 5% ranart* f m & « « • * * • » * *
Hat samunt of wonoy raoaivad * * * * * 4*750*000 * *
4*7g0.OQOA
Tharefora i t appaara thit tha nst aaount of w M y
whish tha Bank would ba out would ba
• | 100*000*
upoa whioh m mill aasuaa tho Bank w ill loaa 3$ par annua
latarast or $3 *000*

fk» frink, howarar * raoairaa

intaraat on
*000*000* or $100,000.
I t haa to pay a sim ulation tax of ona-half of i t or
.
in V ra tu m fro * intaraat * « * * » * » * * * * » » * •
$ 75* 000
Daduot 3^ intaraat Ians on say $100*000, as abova. # *
j^qOO
Laawas si nat profit par anmai « £ « « « * * « * * * * «
$ 72,000

4nd la addition to ra©Airing thl# «©t rotum , thaBank would aaka
|150,000 additional whan tha beads art paid o ff at par in twanty yaara*
Thia |72*000 Is a<yaal « • $6,000 par ttonth.
T nota that tha Total currant ©xpansas for 10§ oonths, fron
Kor««bar l i # ltt4 to Saptaasbar 30, 1415, of sararal of tha bonk© hato
baam lass than 472,000} so that* i f thay had mdo this inrostaent of
f 3*000,000 in Oowamaant zfbonda, tha r & m m m m thoaa bonds would
bara piid »11 of thnlr aurrant sxpanaas frw i tha bog inning of tho
Syatav to $apta»bnr 30, 1915.
Tha total sxpanaas for this period of ©arcral of th# l&nfc* ara
rapertad as f o i l e-wat
Riohaond # *
.
$67*624*24
Atlssjtn * * « . # * . * * ■ ♦ # » #
71#4H0*37
Mirmoapolis • • • • # * # * # *
70§%Q'*5ii
f




R ep rod uced from the U n cla ssified / D eclassified H oldings of the N ational A rchives

Thsss Banks would than h*v# had th# relieving anus amilatels
for d lstrib a tisa t© th slr stoskholdsra#
Rioh»»id « » * * * t$43,O10#44' pkum 4*3?6*?* W * * * iM ?f& Q
S6«&
Atlanta • . . . * 1&1,G30.C& p i»«
S19.63 or * * • 162,150.4#
Uinasfepslis . . *
m * l W * U pi»s 1,069.44 or . . .
64,194.09
And tbs St.lLoi»i« Bank, inotsad of shewing a dsfioit 6or th* t m mmi
©ns-hsdf ocnihs* pnriod of y2,?61*64, would h& shewn * slight swrplus.
^rs

Should M t this subjset bs brought forcibly is ths attention of
thss* banks wbiefc ars s t i l l fallin g bshindf




R ep rod uced from the U ncla ssified

I D eclassified H oldings of the N ational A rchives

K W R H Jlf O WPS PURCHASE Of
T O A tX
N
QOTOWCBfT BQW
DS.

In tho month of Septe«*er, they a l l ee«w tfc imvo earned their
current expeaeee eaoept the St. Louie Bank, which report* m defioit
of $2,761.00.
Son* other bank* alao ehow a very moll WMTgl» of
carriage over oxpeaeee; and very f«w can be said to be earAlag *aytftlag like a f a ir dividend oa their shares*
H you not think it sight be well to bring fo raa lly to the at*
o
tent ion of acae of thess lean bank* again the aaggeatioa that they
purchase Ooveraaent Z ror cent bondo and take m % IQOf circulation
a ^ i a i t then, to ae to aake a aet profit of about i f . |>or annua oa
jf
the euacunt they nay bay?
I f the St. Louie Bank, fo r instance, ehould purohaee $5,000,000
Governsteat 2/e a t, eay, 97, the traneactioa would work approximately
aa f o i l o e
wi
$5,000,000 at
* f4,a£Q,0GG
tho coapaay would receive, against thee# bonds Federal
Reserve Hotea for * * * „ , * * * « « * * |5,000 000
T>eduet 5i roaerve fuad . . ...........
Vet *»ount of aoaey received . * * * « . »
4,
000 * .
Therefore it appeare thit the net aaouat of aoaey
which the Bank would be out would be # . # * * * • * • . f 100,000,
upon ’Thich we w ill aasuae the Bank w ill loee 3* per
iatereat or $3,000.

,

Ths Bank, howaver, reeeivea 2% intereat ©a $5*000*000* or flQO#000.
t t hae to pay a circulation tax of one-half of if or
Net return fro* intereat .............. . . . . . . . . . .
$ 75,000
Deduot 3$ iatoreet loe# oa a&y $100,000, m above.
e
Lea Tea a net profit per anntai of . . . . . . . . . . . $ ?2,000
\ad in a&ditioik to recAiviag this aet return, iheBank would «*k*
$130,000 additional whea the boada are paid off at par ia twenty yeare,
Thie $72,000 ie equal to $6,000 per nontfe.

t note that the Total current expeneee for 10^ seontha, fro «
Hoveaber 16,
to Septe»ber 30* l'915g of uovers! of the banks h&vo
bee* leee thaa $72,000} a© that, if they had m d e thie inveatoent of
fs,000,000 is OovsrwBea* zfboads, the revonue oa thoee bcnda vculd
have paid a ll of their ourrent expeneee fro® the beginaing of tho
S yetea to Sept«riser 30, 1915.
The total expeneee for thia ported of several of the Banka are
reported ae follows*
Richaead . .................................. $67,624*24
Atlaata .................
71 ,480.37
tfinneapolie . . . .
* * * * * *
70,®10.56




)duced from the U ncla ssified

I D eclassified H oldings of the N ational A rchives

ffeaas Banks would then hava had tha following it »> aratlabla

for diotribatiaa to thair atoskholdarst

Klafcartm * * * * * $243,010.44 piua 4,375*76 of* * * * t24T.3M.20
d
519.43 or . . . 162,150.49
A t l a n t a .............. 161.43C.62 plat
K UuM jM li* . . .
63,104.41 pla* 1,089.44 or . . .
S4,194.05
Aa<I tha 8t*lLaais Bank, instead of ohowln^ a d a fls it tor i&a t«a aad
w w -half months’ poriad of $2,761.64, would hay# show* a alight svrpltis.
Shaald mot this sabjsot bs broaght forcibly to th# attention of
thaaa boako which ara s t i l l fa llin g bahladI




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s




Form - 2:
4.

}
•

I

FEDERAL
O F F IC E

RESERVE

BOARD

OR COUNSEL.

date:

October 18th, 1915.

SUBJECT:

My dear Governor:-

if) h i
\
The accompanying memorandum ^

to the Secretary is evidently the opinion to
which you refer.

This is the only copy we

have in the office but a modified draft of this
was sent to the Federal reserve agents.
wish copies of the letters to the agents?
Very sincerely,

Do you

r ......

1
R e p ro d u c e d fro m th e U n c la s s ifie d

\

_

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

\
\ \

October ll t x n s «

Tho Federal Beeerve Board#
Washington* D*C*
Qentlenwa i
I have examined w it h interest th® letter sent
over the signatures of the Acting Governor mid the Secre­
tary of the Board to all federal Beeerve Agents* under
data of October 8*
I believe the Board has acted wisely and hae perfarmed its plain fluty in thus informing Federal reserve
banifce of their rights s and privileges under Section 14 of
the Act«

Tho Interpretation of the section afforded in

the letter of October 8 also seerae to me, from the cu»sory
examination I have given it, to be sound and well taken.
Permit me to urge, however, the necessity of talfcinc a farther titerj by the proparation of definite regular
tioae embodying the ideas *hieh are contained In. the letter
in question*

We can not, 1 think* afford to place our­

selves In the light of treating Section 14 as if it were dif­
ferent from any other provision of the Xasr*

Counsel ha$

ruled that the duty of the Board with respect to regulation*
Received from H. Parker Willie
library.

Collection froa Butler

http://fraser.stlouisfed.org/
Columbia University.
Federal Reserve Bank of St. Louis

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s




under that section la the same as Its duty with regard to
all ether reflations callod for b? the Act*

In no other

case, so far as I am award, has the Board adopted the
plaa of falling or refusing to issue a regalatlon until
suoh regulation has been called for by sane one or more of
the basics, or until the general development of business re­
quired It*

Were we to abstain from the preparation and

publication of the sarae type of regulations in this case
that has been issued la othere, we should, I thiiak, lay our­
selves open to the charge that for m m

reason we were leee

inclined to permit the fcasarve banks to engage In properly
guarded open market transactions in bills of exchange, than
we were to permit them to buy bankers' accept Races, munici­
pal warrants, and the like, la the open ncufeftt*

Zn view

Of ths general miaunderstending which pervaila on this whole
and the apparent disposition in some g a r t e r s to
seek a basis of criticism of the acts and purpoaes of the
Board, I am* therefcare, s t r o n g ^ of the opinion that no time
should be lost la following this letter with suitably
framed regulations, even If they should contain little m m

t h m Is already embodied in this letter*
80 far as I have observed, the Board has not here­
tofore cautioned the banks against any particular class of
operations In its previous circulars and regulations, and,
while there rafty be no present harm in the language which has

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

\




b m m «»•& to that purpo®« i » th©

of October $*

owing to %bo iaforaal duraeter of t » » t l« t t a r v I should
atrm gty tRiggae* that ao *a©l* exp r««»lo a i b« eafcodled
In sank ciiftK&a# or r e la t io n as th» Board zaay

to IM M on the gowaral eub^act*
T«ry tiiily youra*

Chaii-ffiao.

......... U" UdSSmed / Dec,assi^

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u n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

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R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

I 1
C J 3 *H *

X O /? /lB o

MEMORANDUM B Y MINORITY JM HKPI.Y fO $HE l&JCRITY RBPCET OF THE COMMITTEE
1PPOIHTED TO FHAMiJ HEGUMTIQIfS QOVEBNHGr PUBGHASKS BY HSDB93AL
E S S M B BASIS OF DOMESTIC BIXLS OF E 2 D H A M & 111 THE
dffl M & B M >
I.
The Majority originally reported against framing regulations covering
open, market purchases by Federal Reserve banks of domestic bills of exchange.
The Minority reported In favor of framing such regulations.
The Majority then filed another report answering the arguments in the
Minority report and reaffirming its opposition to framing regulations permitting
such open market purchases.

This memorandum is filed by the Minority in reply®
IX.

The undersigned has carefully studied the two Majority reports, - the
latter written for the Majority b y Mr. Warburg, - and will endeavor to answer,
as briefly as possible* the arguments advanced.

Mo answer, however, is considered necessary to the somewhat sarcastic
references, running through tha Majority report, to the statement of the
Minority that the Federal reserve banks should not be permitted to languish
unassisted by the Member basis, - as "this pathetic appeal to our sentiments”
;
nor to the further charge that ” Governor Hamlin, evidently, the making of
fo
immediate earnings is more important than the question of the future and the
safety of the System***
Discussions of law and policy as important as those herein involved
should be entered into without s&roaam and without innuendo, and in that spirit
this reply to the Majority report will be governed.
m .
The Minority report, in favor of open market regulations, rested upon
two principal proposition** - first; that the right to engage in such open market
purchases ia given to the Federal reserve banks by Section 14 of the Federal



R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

Beserve Act and that it ia the duty of the Board to frame appropriate regular

tions5 s e o o M : that the exercise of such ri^b.t may he necessary, at least to
some of the Federal reserve banks, in order to secure revenues with which to
meet current expenses and the dividends prescribed by the Act.
The Majority report takes an adverse position as to both these
propositionsf and it, accordingly, becomes necessary to consider the reasons
upon which such adverse report is baaed.
IT.
At the outset the Majority report denies that any duty is Imposed
upon the Federal Reserve Board to issue such regulations and points out that
many regulations on other subjects have not yet been framed and that it is the
duty of the Board to go slowly and not issue regulations which may brea& the
entire credit structure of the Country and undermine its safety.
As to the question of the duty of the Board to issue these regula­
tions there can hardly be any reasonable doubt.
Section 14 of the Act gives to Federal reserve banks the right to
buy in the qpon market;
"Bills of exchange of the kinds and maturities
by this Aot made eligible for rediscount* ***
1
*Ufcder rules and regulations prescribed by the
Federal Reserve Board**
Section 11 (1) of the Act prescribes that:
•Said Board shall perform the duties, functions, or
services specified in this Act, and make all rules
and regulations necessary to enable said Board
effectively to perform the same***
One of the duties laid down in Section 14 is that of prescribing
methods by whioh open market purchases of bills of exchange shall be conducted,
and it would seem clear that to refuse to issue such regulations amounts to a



R e p ro d u c e d fro m th e U n c la s s ifie d

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— 3—

refusal to perform the duties prescribed b y the Act*
Assuming, ho waver, as above stated, that no such duty rests upon the
Board, the Majority report takes the further position that no such regulations
should be Issued or are necessary*
The Majority report states that the matter should be considered under
two separate headings, - Firats Domestic bills accepted by banks or banters;
Second: Domestic bills drawn on or accepted by actual sellers or purchasers
and Known as "trade acceptances*"
As to the first proposition, - the purchase of domestic acceptances
of banks and bankers, - the Majority report enters into a discussion of the
advisability of amending the Act to permit National banks to accept such
domestic bills, strongly approving such an amendmentt in which position the
writer of the Minority report gladly concurs*
Much more attention, however, is given by the Majority to the
advisability of amending the Aet than to the question now before us aa to tho
duty and advisability of permitting open market purchases of such acceptances
under the Aet as it now stands*
To this gaestion little attention Is pald9 and the subject is dis­
missed with the statement that the writer of the Minority report "brushes
aside the danger that State- banks might derive rediscount advantages without
becoming Members***
The Majority report, in this connection, seems to confuse rediscount
operations with open market purchases*
For example, on page 3, it says that "whether or not it is advisable
at this moment to permit Federal reserve banks to rediscount domestic
acceptances before Member banks shall have secured an amendment permitting
banks to accept for these domestio transactions is a question of policy which
ought to be



carefully discussed”
.

R e p ro d u c e d fro m th e U n c la s s ifie d

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Again, on the same page, it saysv - *lf it should, be decided to
permit the re discount of domestic banters acceptances" the draft of the
Minority report "will have to be revised in many respects".
In making the above statements the Majority apparently forgets that
under the construction placed upon Section 13 of the Act, by the Federal Reserve
Board, the only acceptances which Federal reserve banks can rediscount are
foreign trade acceptances and that the question before the Board is as to the
purchase of domestic bills or aooeptances in the open market under Section
14, and not the rediscount cf such bills or acceptances under Section 13*
The Majority report states, as quoted above, that "if it should be
decided to permit the rediscount of domestic bankers acceptances'* the draft
submitted in the Minority report "will have to be revised in many respects*,
and points out that it should provide for more than acceptances by bankers
"in behalf of the purchaser", and should be extended to Include drafts drawn
"for the purpose of carrying commodities" against "savehouse receipts, warrants,
railroad, elevator, or terminal receipts and shipping documents covering all
kinds of staples"*
This Is tantamount to saying that the regulations of the Minority
report, as to purchase of domestic bills, are too restrictive and should be
broadened*
It is hardly necessary to reply that the Minority will gladly broaden
the scope of these proposed regulations in any manner permitted by the Act,
but, it is submitted with some confidence, the fact that the Majority believes
the Minority draft of regulations should be liberalised, is surely no reason
for the position taken in the Majority report that no regulations should be
issued at all on the subject©




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

Y#
To m m

as to the quest ion of regulations for the purchase of

domestic bankers acceptances the Majority apparently takes the position that
no such regulations should be issued until the Act is amended so as to permit
domestic acceptances by National banks, the chief objection being that the
State banks would be given rediscount advantages without becoming Members*
The obvious answer to the latter objection is that the privilege
of purchase in the open market of such acceptances was given by Section 14
of the Act for the direct benefit of the Federal reserve banks, and the fact
that incidentally the nonnaember banks might also derive some benefit is no
good reason for refusing this privilege and right to the Federal reserve bankso
It may also be pertinent to point out that the Federal Reserve
Board, in the acceptance regulations, ruled, - against the unanimous opinion
of the Federal Advisory Council, - that the power granted to Federal reserve
banks,under Section 13 of the Act, to discount aooept&noes in the foreign trade
included acceptances of non-member State banks and Trust Companies® as well
as those of Member banks*
It would seem clear, therefore, that consistency would require either
that the above ruling should now be revoked or that the equivalent right of
purchase of domestic acceptances of State banks and Trust Companies should be
given to Federal reserve banks.
Furthermore, it should be pointed out that even if the Act were
amended, as recoanended by the Majority, to permit of domestic acceptances by
National banks and then the right to purchase such acceptances in the open
market were given to Federal reserve banks, it would still be open to the
objection, - referred to later at great length in said Majority report, - that
it would lead to dangerous competition by the Federal reserve banks with the



R e p ro d u c e d fro m th e U n c la s s ifie d

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M&mber basics, exciting their antagonism and distrust*
VI*
She Majority report having disposed, to its satisfaction, at least,
of the purchase of domestic hankers aoceptanoes, next takes up the question of
permitting, by regulation, the purchase in the open market of trade aooeptances,
so-called, that is, hills drawn or accepted by the actual sellers or purchasers
of goods*

The report vigorously attacks the arguments of the Minority report

and takes the position that regulations permitting such purchases should not
be issued*
1©

Its arguments will now be considered in detail*
She Majority report apparently denies that the Federal reserve banks

have any right to go into the open market In order to earn their expenses and
|

dividends| such right, the report lollies, is restricted to purchases and sales

|

in the open market for the purpose of influencing, through rediscount rates, the
rates of Member banks, and of controlling the movements of the precious metals*
While the latter purposes undoubtedly oome within, and may very
likely be the chief purposes of the open market powers, it would be a manifestly
absurd construction of the let to limit these powers to these purposes only

|
|

|
j
I

j

and to exclude the right to go into the open market to earn money to pay
expenses and dividends*
It must be manifest that the same construction oust be given to the
provision authorising open market purchases of bills of exchange as to that
authorising the purchase of warrants, Government bonds and acceptances*

To

*

|
t
j
I
j
i
j
t

|

exclude the one for purely revenue purposes would necessitate excluding the
others*

And yet we see the Federal reserve banks today purchasing Government

bonds, municipal warrants and acceptances for the sole purpose of securing
revenues to meet their expense and dividend requirements9 not only with the
full approval of, but, as well, under regulations prescribed by the Federal


\
Reserve Board.


R e p ro d u c e d fro m th e U n c la s s ifie d

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Apparently, according to the views of the Majority report, the
Federal reserve banks must depend upon the good nature of th© Member banks
in offering paper for rediscount, and if such offerings be not made in suf­
ficient amount for their expenses and dividends the Federal reserve banks must
stand by and announce to the Country that they are forced to levy an assess­
ment upon their Member banks for the reason that the Federal Reserve Board
will not allow them to purchase bills in the open market for fear of the
antagonism of the Member bankB*
Such an interpretation of the Federal Beserve Act would plainly
defeat the intent of Congress.

The Federal reserve bankB have clearly the

right to live and to use every power granted under the Act to this end*
2*

That regulations permitting the purchase of trade acceptances would

permit the Federal reserve banks to compete all over the Country for unsecured
paper (meaning thereby, apparently, paper not indorsed by bankers) from parties
remote from the Federal reserve banks and with whom they could not possibly be
in touch*
This argument reveals an amazing distrust of and lack of confidence
in the officers and directors of the Federal reserve banks*

National banks,

State banks, and Trust Companies are today busily engaged in purchasing paper
all over the United States which has not the indorsement of a banker, and they
are considered competent to pass upon the standing and credit of the names on
such paper, and of the collateral, as well, if any*

It can scarcely be denied

that the offioere and directors of the Federal reserve banks are the peers of
the officers and directors of the various National banks, State banks and Trust
Companies, yet while the Majority report presumably is satisfied with the
business ability of the latter, it objects to trusting to the ability of tbs
former, although one-third of the Birectors of the former, including the Chairman



R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

of the respective Boards, are appointed by the Federal Reserve Board*
So

That to permit such, purchases for the saJoe of obtaining revenue

with which to pay expenses and dividend requirements would be to exceed the
bounds of prudence in their management*
This again displays utter lack of confidence in the management
of the Federal reserve banlcs.

One would almost believe that the framer

of the Majority report believes that the direct management of Federal reserve
banks is vested not in the banks but in the Federal Reserve Board*

This

argument will be referred to again later*
4*

That even if these powers were needed and could lawfully be used

for securing revenue needed for expenses and dividend purposes, the banlcs
would still "languish’for the reason that they could not be forced to use
,
'
this means of replenishing their treasuries! and further, that they have never
asked for any such power and in fact would never use it if granted.
If this be true in fact, it would seem clear that, as the power
would never be used, the disastrous consequences predicted by the Majority
report from such use would never come to pass*
5*

That i&iile m“mmmmmm i■ ■ ............ . pressure” some of the banlcs have been (M M M M M w a M M J b *
under some
"willing”
m tm
m

to say that it might be p r o p e r 1 for them to receive the power to under tal® such
*
open market operations, none of them has yet said that it wishes actually to
engage in them*
“
pressure”above referred to was a direct question to Governors
Fanoher and MacBougal, in the presence of the Federal Reserve Board, without any
previous consultation with either of these gentlemen, - asking whether they
believed or did not believe in the propriety and expediency of the Federal Reserve
Board issuing regulations granting this power; whereupon both these officers,
one representing the Chicago bank, and the other the Cleveland bank, replied



R e p ro d u c e d fro m th e U n c la s s ifie d

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that, in their opinion, such action m s both proper and expedient*
6*
!
I

That the Federal reserve banks, if given the power, could not

possibly buy enough domestic bills for this purpose*
If this be true, considering that the total sum needed for both expenses

I
|

and dividends is only about five millions of dollars for all the Bs serve banics f

i

|

and considering further the relatively large proportion of this amount now

|

furnished by rediscounts and purchases of Government bonds, municipal warrants

[

and acceptances, it would se^m to follow that the Majority report exaggerates
the dangers, even if they are dangers, - itfildh the Minority report denies,-

I

which would follow as the result of such purchases*
7.

That investing in such purchases would leave the Federal reserve

banka out of commission when a period of active money comes in again, as their
available means would, to a dangerously large extent, be tied up In these
investments, and they would thus cease to be Reserve Baziks*

I
i
:

One would naturally suppose from this statement in the Majority
report that the Federal reserve banks were proposing to invest the bulk of their
resources in, say, fifty year bond#.

The fact is, however, that these pur­

chases would be of the same paper as could be now rediscounted, the only
difference being that the indorsement of a Member bank would not be required.
8.

That, in order to earn the amount needed for expenses and dividends,

the banks, assuming the rate of purchase to be 3^, would have to acquire 120
millions of trade acceptances.
Mathematically this is probably correct*

It would be equally

correct to say that if the rate was 1% three times as much would have to be
acquired, or that, if the rate was 6% only one half as much would be required.
Such a statement, however, rests upon the underlying premise that the
banks abandon all banking functions, including rediscounting, and purchase of




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

10“ —

acceptances, Government bonds and municipal -warrants, and devote themselves
exclusively to the purchase in the open market of these domestic hills.
When, however, it is considered that the banks will still perform the
usual banking functions for which they were created, it will be seen that only
a relatively small portion of the amount needed for expenses and dividends' would
in any event ever have to be mad£ up from earnings on these purchases, and the
imposing 120 million trade acceptance castle thus vanishes into thin air#
9*

That to earn said expenses and dividends the banks would have to

invest an enormous and unsafe proportion of their deposits and capital, varying from 60$ in the case of the Boston bank to 112$ in the case of the
Dallas bank, - leaving only the Hew York and Chicago banks in a state of reasonable liquidity*
The fact that the Majority report says that the banks would never
invest any of their resources in such purchases deprives the above statement
of much of its terror.

Such a statement, furthermore, rests upon the assumption

that the banks would cease to be banks and would turn themselves into money
lenders or pawn brokers, and merely lend out their cash and cease to bank upon
their reserves.
10.

That while ordinarily reserves and not capital and deposits are the

measure of loaning power, this rule does not apply at the present time, and the
latter and not the former is the source today from which loaning or purchasing
power must come*
Three reasons are given for this statement:
(a)

Reserves are the measures of loaning power only when there is

a demand for circulation, that is, for Federal reserve notes*
(b)

There is no demand for such circulation today, therefore,

purchases of domestic bills must be made by cash payments, thus de­
 pleting


the resources of the Beserve banks.

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

(c)

Bills of exchange so purchased could not be used as collateral

for new issues of Federal reserve notes.
As to the first reason, - that there is no demand for circulation at
the present time, - i0e. for Federal reserve notes, - it is only necessary to
point to the fact that there are today over 133 millions of such notes outstand­
ing, - representing an increase of over 38 millions in the last two months.
This would seem to indicate that there is a steady and increasing demand for such
notes and that the only difficulty is to secure commercial paper to serve as
collateral for such issues.
As to the second reason, - that, because of lack of demand for such
circulation, purchases of domestic bills must be made by drawing down the cash
resources, we have already shown that there is a steady demand for Federal re­
serve notes, the only difficulty being a lack of commercial paper to serve as
collateral for such notes.

This difficulty has been, however, overcome by the

now familiar process of depositing gold to reduce liability on notes outstanding.
It may be claimed that this method is really carried out by reduction
of the cash resources of the banks, but, if true, it would apply to notes
issued for other purposes than the purchase of domestic bills.

It would seem,

however, that this process is rather a change in the character of the resources
of a basic than a reduction of such resources.
The third reason, - that bills so purchased could not be used sis
collateral for the Issue of new Federal reserve notes, - is certainly correct
a
as/matter of law, and, of itself, would furnish a reason for caution in purchasing
such bills.

The same reasoning would, however, apply to the purchase of

Government bonda and municipal warrants, as well as to acceptances of non-member
banks and bankers o

An examination of the present condition of the Federal reserve banks »



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*» |f..
■ t.
—*
however, would show that, taiding all the banks together, there Is now held a
supply of commercial paper and acceptances of Member banks, not pledged as
collateral, stiffieient to serve as the basis of further issues of Federal Reserve
notes, which would contribute, in part at least, towards payment of bills

purchased to secure revenue to meet expenses and dividends, - over and above
the revenue derived from investments in Government bonds, municipal warrants
and aoceptanees of non-nember banks and banters*
A computation of possible future issues of Federal reserve notes
based on present unpledged holdings of oomnercial paper and Itomber batik
aoceptanees shows AM
OUNTS OF COMM
ERCIAL PA5SR AID AC0EPTAM35 ATAHABIE
AS C0LU3JERAL FOR W BSmA L WSS B B M M S S OVER AND
ABOVE AM
OUNTS BSPQSITED WITH FKDSiAL BBsm m A w m m m m m m 20, 1915*

Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
5*Q*Branoh
Chicago
St* Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL

Commercial paper
available as col­
lateral for notes
$ 152,560
223,241
460,643
787,358
1,256,847
1,370,193
579,560
1,322,044
820,599
1,007,941
883,997
1,608,222
1*276*555
$11,749,980

Acceptances
available as
collateral for
notes
$2,124,990
2,359,921
989,248
115,445
50,000
-

w

-

Sxoess of paper
held by agent

«.

425,227
105,397
69,763
-

_

M

mm

«•

-

•

-

-

--------

$53,582
2,545
-------- ---

2,654
1,908
460
59,544

-

239*653
$6,479,644

mm

mm

mm

mm

mm

$120,693

Gross amount of paper available as collateral for n o t e s --------------$18,250,217
Less 10$ - estimated amounts of paper in course of collection - —
let amotmt
11©
time*

-

1,825*022

$16,515,285

That the question of earnings is relatively unimportant at the present




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

Inasmuch as the Majority report states, - as is undoubtedly true, that in normal conditions the Reserve hanks will have no difficulty in making
there expenses and dividends, this is tantamount to saying that the question
of earnings is of no importance at all.
(Phis would seem to he a very short sighted and mistaken view, es­
pecially when we consider the reasons given later in the report for such
opinion*
It is certainly true that the question of profits, over and above
expenses and dividends, is relatively unimportant.

In fact, we might go

further and point out that Congress never intended that these banks should be
maintained as purely money malting institutions.
2?o state, however, that it is of no importance whether or not these
twelve Federal resort* banks are able to earn eafcfcgb. revenue to ksep them
alive is to mistake the whole purpose of the Federal Reserve lot.
If earnings are not sufficient to meet expenses it will be necessary
to levy an assessment upon the Member banks for this purpose, and the response
to the inquiries of the Board as to how suoh an assessment would be viewed shows
conclusively that, - except possibly as to the most powerful banks, - it would
be viewed with alarm and the deepest dissatisfaction.
Such an assessment would also require a marking down below par of the
book value of the stock and would be hailed by the opponents of the Federal
Reserve System as an official declaration of the failure of the System.
For fear of this very result, the Board has directed the banlss not to
mark down said book value until, at least, a complete financial year has elapsed.
fhe question would seem plain, - either the banks must be given the
opportunity to increase revenues through these open market purchases or an
assessment must be levied against some of the Member banks.



As between these

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

— *1 4 —

alternatives there would seem to he no reasonable doubt as to the course to he
pursued*
(Those who favor the alternative of an assessment, apparently, un­
consciously, rest upon the belief that the Federal reserve basics are not banks
at all hut purely eleemosynary institutions, - a kind of financial fire insurance
companies, - and that they* like fire engines, are to lay unused except during
financial conflagrations*
They are certainly all this hut also much more*

They are, in short*

banks in the true sense of the tera, and when in the judgment of the directors
such, course is necessary* they have the lawful right to go direct to the individ­
ual over the heads of the Member hanks*
Such a right is possessed, though in much, more effective form, by the
Bank of England* the Reichsbank, and the Bank of France, and it is too late*
at the present day* to deny this right to the Federal reserve hanks*
The Majority report characterises the desire of the Minority to secure
to the hanks an earning power sufficient to meet expenses and dividends, as a
"pathetic appeal to our sentiments".
It might well he answered that sentiment is of great force in hanking,
as witness the beneficial effect cf the Federal Reserve System last year even
before the banks were opened*.
To test the matter in another m y , suppose that the directors of a
Member bank should report to the stockholders that the desire for earnings
expressed b y a Minority was merely a Apathetic appeal to the sentiments1
1
of the Majority of the directors and that accordingly the Majority had voted
to levy an assessment to meet the e ^ e n s e s of the bank rather than to continue
business on the exceptionally low rates then prevailing, - how long, it may be
asked* would those directors be allowed to remain in office?




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— 15—

12*

That those who sold dome at ic bills to Federal reserve banka, under

such grant of power, would thereby antagonise their regular banking connections
upon which they will remain dependent for the sale of the bulk of their paper*
(p*6*}
This thinly veiled, if not openly expressed, fear that the Member
banks would "black list" those individuals* firms and corporations which had
the temerity to exercise their legal right to sell their paper to Federal re­
serve banks, would, if true* indicate an extraordinary state of affairs* for
which, however, the Inti trust laws would offer a speedy and efficacious remedy.
The Minority knows, however, of no reason for such an arraignment
of the Member banks* and is loath to believe that any such blade-listing would
be undertaken*

If the Majority have knowledge of any such Intention on the

part of any of the Member banks the facts should be made known to the Federal
Beserve Board for its immediate consideration.
13*

That such purchases would antagonise the Member banks which would no

longer make voluntary deposits with Federal reserve bank# if their reserve money
is to be used In competition with them* (pp*6* & 9*)
To those who apparently fear that the Member basks would black list
all who dared to sell their paper to Federal reserve banka, the transition is
easy to the belief that the same banks would resent the use of Federal reserve
money in competition with themselves, even to the extent only of insuring
sufficient revenue to meet expense and dividend requirements*
The Minority, however* believes that these apprehensions are not well
founded*

As already pointed out* it was not the Intent of Congress that the

Federal reserve banks should use the money supplied by the Member banks for the
purpose of entering into a competitive warfare with them for the sake of huge
profits*



On the contrary, the intent of Congress was that the Federal reserve

Reproduced from the Unclassified / Declassified Holdings of the National Archives

banks should use every lawful power in order to secure their expenses and the
prescribed dividend, and a reasonable surplus, but beyond this the Intent was
clear that these banks should use their open marloat powers to mafra their regular
disoount rates influential and effective upon general rates, at times when they
could be made effective in no other way, and also to regulate in the public
interest the movement of the precious metals*
It is very lilosly true today, - at least in the large industrial
and financial centers, - that there is no necessity for the use of the open
mar icet powers to influence general rates through disoount rates established by
the Federal reserve banks and approved b y the Federal Reserve Board; as regards
localities removed from said centers, however, disturbing instances of excessive­
ly high rates continue to poar in, requiring careful investigation.
Assuming, however, that the only necessity for such purchases at the
present time is for expense and dividend purposes, there still remains the fact
that the Federal Reserve lot has given the right to the Federal reserve banks
to engage in such purchase*, and that the Federal Reserve Board is in effect
talcing awty said right by its refusal to enact the necessary regulations*
The Minority does not believe that the Member banks will be antago­
nized by the incidental competition Involved in purchases of domestic bills for
suoh revenue purposes.

If such antagonism were created, however, it would not

change the opinion of the Minority as to the necessity of framing regulations
covering suoh purchases*
Competition at certain times is essential to the well being of the
Federal Be serve Systea, as it is to the Bank of England, the Reichsbank, or the
Bank of France, and it is the belief of the Minority that the Member banks will
not be disturbed or antagonised by such incidental competition as the best
interest of the Federal reserve banks and of the people of the United States,




Reproduced from the Unclassified I Declassified Holdings of the National Archives

"•—1 7 -

in the judgment of the Federal reserve banlcs and the Federal Reserve Board,
seems to demand.
14#

That to break: down rates for the whole credit structure of the

Country wto secure a paltry return* is to undermine the safety of the Country*
It is submitted with some confidence that the purchase of domestic
bills to an amount needed to secure the *paltry return" of expense and divi­
dend requirements would not break dpwn the whole credit structure*
The small effect of such competition will be appreciated from
Mr. Forgan's statement, at the recent meeting of the Federal Advisory Council,
that the Member banks of the Chicago district would have to give to the Federal
reserve bank paper for rediscount only to the amount of 15 millions of dollars
to enable it to earn its dividends and expense®, - an amount, iJr* Forgan added,
only equal to the annual business of one very moderate sized bank*
So, also, Federal Beserve Ag»*t Wills stated that if the Member
banks in the Cleveland district were to rediscount with the Federal reserve bank
only enough paper to learn how rediscounts were made, it would incidentally give
to the Cleveland bank earnings enough to pay its expenses and dividends*
Thus the Member banks have it easily in their power to prevent the
use of such open market purchases for expense and dividend $tzr$>oses by simply
rediscounting a really *»paltryw amount of paper with the Federal reserve banks*
In fact if this power is given by the Federal Reserve Board to the banks, and
there is any such antagonism to its use &n the part of the Member banks, as the
Majority seem to fear, these banks would rush to the Federal reserve banks
with the necessary rediscounts*
There is also another side to this question*

A few days ago, Federal

Reserve Agent Wills, or Governor Fancher, of the Cleveland bank, stated that
recently a Member bank in his District secured a large loan from a 3STew York



Reproduced from the Unclassified I Declassified Holdings of the National Archives

— 18—
Member bank, and on being asked why it did not obtain this at the Cleveland
Bank, the president replied that the rate offered was far below the rate of
the Cleveland bank, and added that it was an exceptionally low rate only given
because of the ease of money and of the necessity of placing the loan by the
Hew York Member bask*
Presumably this exceptionally low rate was made in order that the
Hew York bask might earn its expenses and dividends*

Can it be that the

Majority will pronounce the action of a Federal reserve bank in purchasing
paper at low rates as sin and at the same time extoll the action of the Hew
York bank as righteousness, although the motive in both eases would be pre­
cisely the same, - the necessity of revenue to meet expenses and dividends*
Will the Majority take the position that the needy Federal reserve
bank shall cease to do banking business and make good its losses by an assess­
ment tqpon its Member banks when it thinks rates are unreasonably low, while
the needy Hew York Member bank shall have the privilege of meeting these un­
reasonably low rates with rates even lower in order to secure its revenue?
Will the Majority set its foot down upon competition of Federal
reserve banka with Member banks and at the same time view with equanimity
competition of Member banks with Federal reserve banks, - all for the same
purpose - of avoiding an assessment upon the stockholders?
15*

Shat the use of reserve money for breaking down Interest rates below

reasonably low rates will, in the long run, be injurious to the business
comunlty*
Shis is one of those axiomatic statements which no one will care to
dispute*

It is obvious, however, that the use by any bank of reserve money

or of any other money, and whether by a Federal reserve bank or by a Member bank,
for the purpose of unreasonably breaking down rates, will, in the end, not




Reproduced from the Unclassified / Declassified Holdings of the National Archives

— 19—

work advantageously for the business community.
The difficulty, however, lies in the definition of what are
"♦unreasonably low rates**.

Tha same rate might be unreasonably low under

certain conditions and unreasonably high under others.
Rate making is a matter largely of judgment born of experience and
no hard and fast rule can be laid down.
For can the test of the selfish interest of the banks alone be taken
as a safe guide*

The business of banking is clearly among those affected

with a "public interest*, so called, and the judgment of banking officers, if
against the real interests of the public, may be controlled by State, or, in
case of national banks, by national legislation*

See 219 U*£* pp.104, 121 and

128 *
Congress has given to the Federal reserve banks, under the general
control of the Federal Reserve Board, the right to fix rates of interest for
rediscounting which it is hoped will exercise a controlling effect upon the rates
charged by the Member banks to their customers*

If these rates, however, do

not exercise this controlling effect, these banks are given the right to go
direct to the public over the heads of the Member banks*
As stated above, the real test of reasonableness, in banking, depends
upon judgment*

In some industries it is possible to find with some exactness

what would be a reasonable rate or price, based upon the cost of production, but
no suoh test could be applied to banking*

We certainly could not base rates of

interest upon the actual expense of operation of the banks, for such expense would
vary so greatly that any general rates based upon it would be purely conjectural*
lor could we base Interest rates upon the value of the banking units, such value
depending in large part upon the original cost of the plant or the cost of sub­
stitution*

Hor would it be a proper method to base commercial interest rates upon

the rates paid by basks to their depositors, for these rates, when any interest is
allowed, vary from 2$ to 6 or 7%, and, in addition, the best banking opinion seems




Reproduced from the Unclassified / Declassified Holdings of the National Archives

to be that no such interest should be paid at all.
It may help to lead us out of these difficulties if we are able to
recognize - what is largely a fact - that banks do not so much make rates as
"record” rates, and that these rates are really the resultant between the
forces of supply and demand of credit, - that is to say, they are the market
value of credit reached by negotiations between willing borrowers and willing
lenders*
When, for example, discount rates are' said to be advanced in order to
keep gold from leaving the country, what really happens is that the banks merely
record a fact which they do not arbitrarily create or fix, and this fact is
that the balance of rates as between this and other foreign countries is out
of adjustment and that gold M&± efcrs>

leave the country for that country

in ^iich rates are relatively higher and this exodus of gold will at once
operate to make credit more scaroe in relation to the demand for it in this
Country, which will almost automatically operate to raise rates here*

The

"banks may possibly anticipate or, as it were, discount this operation, but
they do not create the conditions inevitably producing it*
In the long run, both in domestic and international operations,
demand and supply of credit will fix the rates of interest*

The banks have

credit to sell which their customers wish to buy, and the relation between
the demand and supply fixes the rate*
Of course the above presupposes normal conditions*

It is perfectly

conceivable that the supply of credit may be artificially reduced, e.go, by
combination among the banks, but In any event the rate of interest is fixed by
the credit placed on the market as compared with the demand for the same in such
market*
If the above be true, under normal conditions, as long as there is a



[r— -------------- ; ----------- ------------------------------------------------ -........
Reproduced from the Unclassified / Declassified Holdings of the National Archives

— 21—

legitimate demand for credit it can not be said that there can be aa "unreason­
ably low rate" so long as demand and supply, both, domestic and international,
meet in the market*
To deny this fact is to fall into the error expressed in the phrase, once often heard, - that *& cheap ooat makes a cheap man"*
We often hear the statement that what a borrower wants is accommoda­
tion and that he is willing to pay any rate for it*
It would be as true to say that all a shipper wants is transportation
and should not object to any rate the common carrier sees fit to impose*
The most that can be said is that when rates are so low that further
reduction will not call forth any legitimate demand for credit, but will only
encourage unhealthy speculation, then such further reduction might be an
unreasonably low rate and injurious to the country*
Clearly, however, all banks have the right, and have always in the
past exercised the right, to make rates low enough to insure expenses and
reasonable dividend, requirements*
If this proposition is denied then the principle of free banking
is denied, and the position must be taken that banking charters must be, as
it were, monopolized b y restriction in number, and from this the path to
Government ownership of all banking Institutions would be an ea£y one*
16*

That the question of reducing the capital and the number of Federal

reserve banks should be carefully considered*
In any such consideration the inability Of some of the banks to
earn expenses and dividends at the present time would surely be no argument
in favor of reduction in number, unless, at least, they be given open market
powers granted by the Act, to enable them, among other things, to earn these
expenses and dividends*
If, after the use of all their powers of rediscount and purchase,
certain of the banks can not earn their fixed charges, then it may become of



Reproduced from the Unclassified / Declassified Holdings of the National Archives

—

importance to consider whether the number should be reduced*

The question

would still be left, however, for careful inquiry, whether the fixed charges
of the reduced number would not be increased in exact proportion to the de~
crease in number, leaving the System in no better condition than before.
Should, however, Investigation reveal the fact that in certain dis­
tricts the Member banks were refraining from rediscounting for the purpose of
crippling their Federal reserve bank, then the question whether such banks
nee dad or deserved a separate Reserve Dank would become a very serious one*
VII.
Conclusion*
To sum up:

The Majority report rests upon the necessarily implied

premise that the Federal Reserve Board should do nothing which is likely to
antagonize the wishes of the Member banka; that the Federal reserve banks are
not to be trusted and should be denied rights explicitly given to them by the
Act for fear these rights may be abused; in short, that the Federal Reserve
Board members are merely trustees for the Member banks to carry out their will
and pleasure.
Such a conception of the Act is, in the opinion of the Minority,
absolutely unwarranted, and it is not believed will be entertained by a Majority,
or by more than a small minority, of the Member banks, themselves.
The Minority, on the other hand, rests its report upon the conviction
that the Federal Reserve Board represents the public interest as well as that
of the Member banks, and that the greatest good of the greatest number of the
people, and not that of the Member banks alone, should be its maxim of action*
For the foregoing reasons, the Minority reports in favor of the
immediate issue of such open market regulations*



nclassified / Declassified Holdings of the National Archives

> *
>
-J /
September 21th, 1915.

ttj dear Mr. Secretary: -




In the matter of open market operations pro­
vided for by Section 14 of the Federal Reserve Act, as
I understand the question submitted fo r consideration,
you desire to knew whether there Is any duty or obliga­
tion on the part of the Federal Deserve Board to pre­
scribe rules and regulations governing conditions under
which Federal reserve banks say purchase and e e ll in
the open market cable transfers, bankers1 accent&ncee
and b i l l s of exchange, or whether the Board, by fa ilu re
to prescribe such regulations, say withhold froa such
banks the right to exercise these powers.
To answer this queotlon i t is necessary to
detersise the legal effect of the provision in question.
The language of the Act is •Any Federal reserve bank may, under rules
and regulations prescribed by the Federal Re­
serve Beard, purchase and s e ll in the open market,
at hose or abroad, either from or to domestic or
foreign banks, firms, corporations, or individuals,
cable transfers and bankers* acceptances and b i l l s
of exchange of the kinds and maturities by this
Act made e lig ib le for rediscount, with or without
the indorsement of a member bank” .
The legal effect of this provision seems
clearly to be to vest in the Federal reserve bank the
right to exercise this power and to vest in the Federal
Reserve Board only the power to regulate it s exercise.
In other words, Congress did not intend to vest a dis­
cretion in the Board to determine whether Federal re­
serve banks should purchase and s s ll cable transfers,
acceptancee and b i lls of exchange, but merely to regu­
late th eir purchase and sale.
*h ile there are a great many cases dealing
with the question of how f a r Congress, or any le g is la ­
tive body, m delegate to an administrative body the
ay
power to regulate, it is not necessary to consider
these casee at length since *e are dealing not with the
question of what the regulation shall contain but merely
with the Board*s duty in the premlees. General speaking

R ep rod uced from ffre U ncla ssified




I D eclassified H oldings of the N ational A rchives

"while Congress cannot delegate the power to m
ake
law* It. can delegate the ptw*r to determine mom
f*0t or state of thing* upon which the statute
aafctt* or intend® to wait# l i t ow* action- depend*.
For collection of eases sse Encyclopedia of' Law and
Procedure, Tolu*e 8, page 830.
Congreaa might* therefore, have vested In
the Federal E m m Board the power to determine
whether Fodaral reserve bank® shoald purchase In the
open market cable transfers, acceptances and M IX * ,
of **oh&»£w*. Sal i t in te»i*d to io m f how#f»r, I f 1
*oald fcawt incorporated. this power in $*ct £ m i i U m
defining the po^erc of the Federal Reserve Board |»3
*t*ad * f if* Section 14 which deals with th* powers of
the Federal reserve banks,
for example, Section 11
authorises th* Federal Beeerve Board *
*
" (b ) t o per&lt* or, on the a f f i i w H v * vote o f
a t least liv e at**b#r* o f the Reserve Board
to r*^u ir«
r**sorwe banks to- r«dl***
count the discounted paper o f other Federal
reserve banka at rates of interest to be
fixed by th# Federal Res©rve Board.
(c ) to suspend f o r a period not axoeoding thirty
day*, and trm* tine to tiaw to renew such
suspension fo r period* not exceeding fifteen
day*, any reserve requirement specified im
t 3 Act * * * * ■*
*
(k ) To grant by special permit to national banks
applying therefor, whwn not in contravention
of S ia t* o r l o o # ! \m M the r ig h t t o a tf a»
trustee, executor, administrator, or regis­
trar o f stocks and bonds under such rul** and
regulations as the said Board nay proscribe*.
Tn&aauch, therefore, a# the power to parcha**
and e e ll fcabl© tran sf»rs, acceptances and b i lls of # *»
change in th# open aarket is veated in the Federal r » *
aerve b^nks, subject only to rules and regulations of
tha Federal Reserve Board, it would teen to be th* duty
of the loa*^ to prescribe the rales and regulations re­
ferred to Just as m m h m i f is
duty to prescribe
any' other regulations provided ior in this Act, and that
unlike the power* ettuaerat*d in Section 11, it ia m %
nec*a*ary for th* Board to deteraine as a condition pre­
cedent whether any fact or condition axlsts which sake*
i t necessary for th**e porera to be *xerci*wd.
Should tho Board .fail to wake such rules and
regulation* It. way bo reasonably contended by th* Feder­
a l r**# r** banks that th*#* powora m be exerci*ed ad
ay
lib it u * u # tllr**trtc ie d ; by such rules and regulations.

the U ncla ssified / D eclassified H oldings of the N ational A rchives

9aoh a poaltioa would be aoaewhat ooaaisteat with
the position of the Board in th« Batter of tha ta *
• « mm « of FeAemi
aoto**
M* li
dealing with the ieaaaaoe of f#4*ral reaerve notes,
provides that *
•
*«»oh'bfcalta M l V« ohargod with tho
aaorat -of ewch **$#• and shall pay anah g«$#
of iBt#root on oaid asoaat aa m f *o eatabliabod by tho Federal Rooanro Board*.
Tha Fad oral Reserve Board ?mvl«g eetabliahod ao rate
of late root Federal reserve Rotes are now bo lag la - .
sued without any Interest chargad against the banks
and by analogy the banks ad^ht contead that- utfctil:
«em» restriction la flawed upon the par chase and aalo
ol cable traasfere, acceptance and b i lls of exchange
by action ol tho Board they m m authorised to dead ta
without roatrlctloa.

Ron. Wllllass G. IcAdoo,
Soorotary of tho fm ta w f*




Reproduced from the Unclassified I Declassified Holdings of the National Archives

fitit

nm&ln'a mXmrit#

t#

'th ap««UI
o

ytjaf

o ife m
&
o
ibjoot of to
fltc
stlo lr»;&
o

m*

f&lo ffo$M o v g h t to bo a i r i d o d ua&or tw o ho«a* - tk«
»rt

with

oao

o *oa

m rkut tm^aotloao la &oa*fttlo moo?**
&

moM *m fc ©ihor v l i l t&oiio In
4 l*o
£fco»o two

txmmmllam.

a & g lo o *
<&«!$<*&?*©•• « r « k

trado iM
^ojptiwaooo#

a m t fee o o ft* id o r «& fxms o a t £r o l y

-f&o o b j« c t lo & a n t io o d
at

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ir&3^ »c«*

ioafclo t o < ?o»tio *ooof&&£*ooo«'
io 2

■£3& l & t t o r oxo l a o v o r y way o a t or*ly 4o*lrels& o but t h o i r d o r o l*
o

^>l>;*m w ill brlof In m &
t
o«uft* and of foottMd »»y ifco rosy relief
*&loh In now ootiffet by ppm mrkwt tr&xmmt io&o in ferodo mm
oofi&ao#*#

ffco «&joxlty sroport vtrvmglj Tmram th* dorelojw

. m % ot &>!*$#t it
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m Wm& Ximm both by

»n4 & ii*»3 0 bttf’ batiks*
0 8K

!fi fe0*omr# * rtgmlft ioa in to bo j»ro$awro# far t\m
-pu.xp®ml o f ro'rexwljjj t k * » o

4ojio m

iroapy m w h

&oi&>otlo ft<*c#ptanooO,

it t s m t

im

hTtmtev l l m # t’n e a ; * t o & p l & t o d b* : v m a ~ a o r
m

fh* ro#al*tloa & r m m

iuaooo b y b m k * t u *Im

by him

p r o r l f t M o a l y f a r aooef.t«»

b o &o lf of tho

fh&t w h o a

o&oltt&o dxmffco d r a m f o r tfto p a r p o o o o r a o n r y i a g o o m a d i t i o i * *




o o a o t l t t t t o th * r o r y f i o l i

th a t ou gh t t o

lo

ow om u#

i
1

Reproduced from the Unclassified / Declassified Holdings of the National Archives

<»)
Domestic accep tan ces should bo perm itted a g a in st warehouse
'r e c e ip ts , w arrants, r a ilr o a d , e le v a to r or term in al r e ­
c e ip ts and chipping doo-axsents, eo veriag a l l kinds o f s ta p le s
I f tha purchase o f euoh acceptan ces be perm itted a a t I f
they be made e l i g i b l e

f o r rediscou n t with fe d e r a l Ba&erve

Banks, th# g r e a te s t p o s s ib le r e l i e f w i l l be secured during
the crop~®ovlag season and w i l l i be
j

m h mors
m

e f f e c t i r t ttia l:

th a t to be had f r o * commodity r a t s s or open market tran sac­
tio n s in trade acceptances#

a s f a r as the f i r s t

r e con­

cerned, o o n tro l by the l o c a l hankers w i l l be g r a d u a lly and
e f f e c t i v e l y broken down hy am open market domeatio a o o e y tanc© dlaoount r a te and the a b i l i t y o f bankers o u tsid e o f
the lo c a l d l s t r l e t to* accep t f r e e l y a g a in st the pledge w f
commodities#

As f a r

m

the second c l a s s o f tra n sa c tio n s

;
.

i s concerned, th«$ dome®tie acceptance i s fr e e from the den**
ger o f h aring the

Federal

Reserve Banks fcfy paper w ildcat;,

anj banker*a endorses* At or acceptance and of having t k *
fe d e r a l lieserve Banks compete, a l l ever the cou n try, fo r m *
secured p ap er, buying f t from p a r t ie s with whoa norsat&ly
the F ed eral Reserve Banks are e n t ir e ly out o f touch*

If the creation of proper warehouse facilities er ter»
rainal facilities all over the country is persistently en­
couraged and if the development of doaestle acceptances be
permitted and encouraged the country will feel the greatest




Reproduced from the Unclassified / Declassified Holdings of the National Archives

(»)

y M t lU i K l U f withla a

fmef abort tiaa.

sfeathar or »ot It is adTiaabla at tM a
a it M i n i B m m

m m u t ta j>ar-

Banka to t r t l i o m l I w w t t i aaaopt-

m
i§M in X t it w t *******
ifd N
t flt r

t &it i»«ou
a f
r+d < a a ja m a
m as d sS

t l s f f W iftV a 4 * i e i i i e i

tfrfitnit f t f fl t Y f t H M l I a

iii»

la • qaaatian of policy vMofe M |bl to 1 « u * M 1 | ii* >
m
ohmmNU

31s* t
.*obla* it a * if la not a

tout 2 m beaa broacht to tho st tontioa
m

m m on* to tho B M ii
at tho isaawt orar

•loaa its axlatoaaa*
I f it tk otU to 4fc«i4e4 to porwlt tita ramaaaaat o f
iaaaatta koakoxs a*o*jit»aaaa, Ooreraar Haalla’a ragalatiaa
w ill lumi to to rsvlaod la aaay roayaata*
Aa against tfca ax^wwot t*»a*fet ty tho Majority to t%*
of foot that ayaa aatltat traaaaatiaaa la irate aaaoytaaaa#
Aa not aypacr AtaivaMU at this t i n , Sowmer Haalla o ff a n aaa aaia arriawat, Ih i aaaatiaaM o f tha|ea*aiaga o f
tha FaAayal Saaarra a*afca«

4 aaaaa* argaaoat, though

tewahai ayaa rary llg b tly by Uia, to that faa aaaaaiva* i t
ta ta t*» ia t f o f u»o JfMartt Baaarta Baact to luaaa thaaa
ragalatloaa*

ffaara'ara a fraat aaay fanotlaaa a f tba

fa t a w l iaaarra Baar* aklafc fcara aat yat toaa axoraiaat
aa& it is aataral ttet tho Saar* yraaaa* «n 4 a a U y aa tfca
ayatoa Aovoloya*

HaaaH rolatlona teva aat yat b*aa aatab»

liah a*} m riaaa finaa and aofea&Aaa

b*n aat yat fcooa aatat*

IK k M i f e n lp i aoooanta faatra aat yat tom aponaAj *ad aa aa.



R ep rod uced from the U n cla ssified

I D ecla ssified H oldings of the N ational A rchives

H u tu U rtafcln g o f «p«a
wltlk

f*tk»rtkk

mX)m t truuMMtioMi 1* option*,

Basks.

fib*;?

mar «n4*rtak* tbui

ma&vr pmjmx mg*S»Um * f th» Beast, but th«jr am not e H if*
ntorjr.

$« flur. m
e

hM b*«a

firmi

wmf f*4 *

ifoi H«s«rr# H
aaiy that th^ss anaa aarkat tnnfiMtiOBi ba
ponalttad to thorn*

f « t h *'
m
l«l# m

t« It* Hi# contra**, larefttlcatloa ftt

oaila4 f$rt$i t&t apiaioa fmm tha i^iom i

*> ik fiat tfeaa far ©pan pyfitt t raf»a o ti«u i ill,
JB

tred* aaeaptanoa* 4© aot appaar daalrabla to %m +
hm
aoaa ^ o tum iN w kaTi tia j^ rtl.HSIwy
3p ^ ira i® o
jW ^ i’

m y Wuit I t A&^ut

K *^s'
jk ntoftftf f^or t h M -t a '^
-paaaftwa tika aawax* fca
^
^wmkwh v w s
#
w^pr
o j»a m

ili

TJada*

^1^waP' -^alw^
a^a^^' m fpM
^*n^
a

o?>ar*tiotta, m*t a&aa ax t h o » m # $ t i « t l t t M t

I t wia&aa a o t u A ll/ t # s s p i s s 'In f l i t i i t

To *ia T © i iw r

a T iia n t lx , t h t

o f l& A a d ia ta

•^rola^a 1 aoro taportaat
®

tho qoaatloa of tha futux*

and th* w N i w l f w *
iftfitir a#
wWwHa ’
'>

H Pa UPfti^iP WMmmvmim tiia dtttMV
tt fnakaa A < * 1W*W wvNHJ^W^
.til 1
$i^P h

iYBtMU
* | p PwwWwP
Pjf

that §ti$f# t>aiika alitht darlTa l AdlAcoxuit i^vwlBiMW altx^aat
^tooadoi ffiaafcara#

H qootaa tbs SsiypBi#i ## tha fifa t
«

i^aderal i^etrra Board report, aaapluwililag l i t etataamt that
^thara ia Hi raaaoa a3ij thay ^ouIA aot aara tboir aiQ>aiiaa«
and a fa ir pru^it baalda9* tet orliaatljr ararlooklaf tin

m tttt lnBoailatalx followiji^,

without falling to axaralaa

thoiar propar funatiaaa aod axaaadliit tha bounda of pradaaoa
In th*ir .»m f«iiiat«M




Si oitw f)»a faot of awwa&tira

R ep ro d u ce d from the U ncla ssified / D eclassified H oldings of the N ational A rchives

If)

« U i k d lTltond* m m wrgiai**fct for «t omm ©©oar ing tfe# tvXX
d i T i d o a 4 * t If pooaifclo within tbo fi cut y o « r f t OT>*rofclo»,

Ml ho ooaoUor* i t o korfoklp 'timt thooo should
mod* nf la ottbooquoat jwurs*
M df tfeo dlvUoad*

$&#

m m tm I fb st 0onfiroo*

t&owo l l i l

#4 that tho dlTii«nd» Kif&i not bo
portiouiajly not in tho o&tflit*

fam to %t
m

Con rtae aoatoaplat-

m&rmt at t i l tln o t, and

ywutm whoa

'1»4j£w would

net bo in po»a«s«ioji of \ncli fu ll fund*.
itvoimor naalin

<iuo«tioa mt leoa* b«fgro

«fl i* # ohail tii# $t4*$& iio§tr?# Bonda! Ini jwimlttoMl i# Imm*
gultb

Ilf tho soabor fc&nk* whil# It iO .In dU
X

powor to pom it thorn I f oxtoad tk olr MIjmnMI operation*
la th« opoa cttirfcot ## ** pro^nbl/ I# lnflttn o&Jfl&agS auff 1 oiont to p«gr tM li* onions#* «n4 a i t s $tt* fctai
low le t 'in oonaldor la the ligh t # f rofkiom* this p ^ t ^ t lo
appool to our ^ itlaoat<»

f# «M tio l&a«ul*fela& #*4ir«&

Kooorro taoSdl %o holp#4 by

gtwimg thoa thoo# opoa a*rk*t

oporatlooa?

i lt a tho aojorlty poi&io omt tho taogtw &n4

ocaooquoaoo* of oo of orring I M i powtr Owomor
plloa tfcnt o f oomm# w o#ial4 not and
o

ro»

mm14 nfii tm m t l *

fodorol ittoorfo luales actually to oat«r upoo th<»»© opormtloai|
%m Ha 4 aottor o f rooord nad t o t f t i t 3oar4 should un4or tH t
oiroaaatoncoo lo ti* tho

mg&At1#**

tool off* * * * « ®uppo»o IN ought to , the
I

I f wo *ooopt th l* ton*
m tlm mgwmm* fo il#

'to tho ground wad*,- opon ia*rkot rogulot ioa or no op©a «ar~

lot rofrolotioa* - tho baako w ill oontlaa* to lan^aioh*



Ift

R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

ft )

htw«Y«r* m

m & ilffoiroiit tktovyv • peotlnc

B tm rm Bm&m to go m tlvm ly into #$txt i#*r&ot

oporatioao, whmt *oml4 I i tfet roomlto?
n

It 1» t*fo to m ?

tfest tho m tw m of tmi# soooptaaooo a**llis.fclt &t this tint
Is it lissitod tkifc %'m Jfodoml fitotnro Bcu&* ©oald not »#•
tart *ny «ttfe*t«atli& m & m t of tfeo* without ^mwtWky
lm

t # r a t * * a o l o w a * t h o ® ® fox- btmk m m p t m w *

po»#i&l3r % w w t wtitol** of e*«r**# womlt tie onflroljr
w
*oxs&fcl*«

£v*2;tho* if wwtiU 1»* tifflimit f o r 'lit** to
»:

&
00vm *m af»p>r#oi**>lo mmm% in t&o o m mttott*
jm o

nm%

mmmmlmt 1*rrowlaf s! this tin* in %*lAf ton* ozt {sla&lo

s m o $*!»•*#

fk# iom&i* mm* 'pm®** ttet mm omtot* 1* #f

* ol*** nfelofe mmrt it Ttrf t&rofully «omtij&l*o& *&&, *or*~
or«rt **»t*tt*»i w*«a4 terilf flat it pra*tt**blt to § into
wt
tomoli wttfe m 4i*t»*fe F*4or*l *#err* Imfc la otto* to toll
to it * await iv m t t m of %h$i» p*#*r m* jpooolltly ** *a«»
tagomti* tfe*f* rofmlur t**klftg oomaaotioii** #« wbi*fe tfc*y
w i l l- 1 mmmim 4nM ^^Tw a-iw n#w* » i f ^o ^r w n timi w r W W WlW*r w w o- tf^ ^ lit * 'M b it t f
o $ o i s w -Ti.^----^ ^ ■ w w ^ i M t u
..........
m-T----■ ......... ,......... m
^ t

tk # | jr m *

ff*^

#*A*n& ;io*#rf* I&nk* #111 fnio&ly pftrooivw %&*&. It* no
opoa aarkot % w m m m % i * m in tr*&* &oaop>t«jio*0 will M i s tfe*ft
inoxup a frost do»l of *at«fMlM and oritlolMt timt will protoo* Tory oaall mmvJLtm sn*& the Mjoiltf of Us# comittoo i*
sior« than tror **«kv1m «4 ttat Fodoral os rre ;mak» *** not
likol|r to «a4ftirt*M aaol t**a*a*tl*2
*u



R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

(?)
Mm lot m mm.M **v aa a final

of tuo aaoot

wbat mould t&ppm I f 1 taut fgd«fa& ftaaarra to Ice o&tmld
st
proto able lo p y « M 8i a im ff latent maasra* a;f fcr&de m m f V
anegg to earn tbei» dividend*•
I f at tfe*ge $m oont a ggfftolgdfe

#f twsde **e-

geptanagft genld tie aoaured f*£tloli in entirely m% of
qu««tio#l) V# OhouM find tkufc ia gsdg* to * * » the gating*
tad fuming axpanagg gni dtvi&en&g ^o^ulared, loataa, w old
have to iay#il «0 f«gr o«a$ of it® c o it a l gad depeaitas
Philadelphia, #§ pet eenii C&walgad, d# par oeiitf St* taoia,
i t far ooxxt§ Saa rraiieiaeg, f t *er e*jit|

?§

per m i l lm i« « City* f i $©r oentf Siehiaoad, f i j>#;r #«n%$
4tljsjt*ia# 10T p#r eeatf and .Ballag, I I I ger tial*

fie only

t w banka afciei* wmli a tilt gfeow a reaaana&lg assemit of
liquidity w eld % tMeaft* with «t lnv«gl^»«rl of §§ pmt teal*
e
and iiv ¥exfev gitfc an immtmmt « l &
0

tout#

thia w i l l m M I^ m i, that th* imiovtty o f tha fcaake
m t
wouli ia the\\tiMg of &*:gatggt t*t# imm tavaatgd the tall:
of

their a v a ila ! >le

nnd

that a t a tiiao *haa g period o f

active aoney net int tii# reaerve hai&e vault no ienfror fee t o *
eerve fcanfca, * they weitld bo om o f oonusisioiea, and tk# ooney
t
whieh aeaheif bank# afcoald fee Juatifiod l a l o t t i n g ape x aa r e »
aervo n©aeyf
would

hmm &one to m m ll the oicoeag re a erv a s of the mealier

feaake, o r




would have l e f t the f e d e t a l Bogganro M & and
mm

tfceae exoeaoee veald have hag* abaoxtad os a haaia

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

of ganaral oradit inflation.
Against thia rsaso&inf tha arguiaant will bs offer#4
that inasmuch aa tha Fadtr&l laaarwa Banks isst&a fadaral la*
aaanra notas, capital and deposits do not oonstlttits thair
loaning powar, but *atha? thslr ravarta*

i

i

But that doss m
ot

hold In c la this iastaaaa for two raasons* 111la purohaaad
against opm martat operation* cannot Ha usad aa a baa la of
nets ismaa.

I f , tharsfors, tha languishing banka wara f 11lad

with trad* aoosptanoss to tha axtant that Govamor Hamlin fora-*
asaa* thay would fears to aoquire about #130f00Qf000 of this
papsr, against which m circulation could Ini issuad.
o

But m addition aa lanst aonsidsr tha following fa#t| at
prasant thsra is no dasuuad for additional aurranoy.

Quits

tha contrary* with prasent conditions and furttiar gold imports
to ba axpaatad, thara will rathsr ba a redundancy of ourranoy,
«o that m • not r«*u lt, M jfflftg M
not b« counts &» r m m

»<wty »

h m mw
h U

teuttt. *h M .tw *&•

y«d«r«a R «*sr»« B*nk» *.t pra»«nt buy, th*y buy with thslx aotu&l

vim of th« px«»*nt «ta.tus of ? « d « U E «««n r«
t
#
notas* Tha theory of tha greater loaning pmmt holds good only
If it goes hand in hand with a demand for additional oireulmfiaa#
A oonaideration of thasa faats clearly shows that this

ittw rn m b ^ , is

is not tha tiaa for laying too much strass on tha question of
earnings by tha banka*

tfora Important than earnings is tha

iaflioitv faith of tha country, and in pa^fleula* of tha aaaber




|

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

t e a k s , in

m*

n t %m*%

mxmA rmmti

m owe

sn4

um
nkto*

at

mrs&m pow»r uml*r

Qm of % + w k & a of t'm pxvmnt
h
m tm m

ftitm lim i& Um th* ttiilwe. of
%

m$v&4

i&~

w«*X& 4# sior#

te -r* t&*& a p^rftofcl# #xpXlo*fcX* UoJc o f

ptm & tom lilt**#
m t

p a r t i t foartt

iri«r*m#o« ti*o

m iX o th#

to tm Itdor*! Btt^rrt SytftM*

r*~

I ftfco«X4

m&wm

tkm »?tfctM rz-orlto* ftr !«*£»
i

aiU oM l Ml&jttt0 to fet )t*§* »ifch Ftitral jitttmr M aiii bat
tfet ftt&b*r

bmk*

\Mna$*a tritii

w i l l ^ 1 , t £ tfe tlr # m uMieord, i n t r t t t t , t e t l r

ualtoa toi#

t& tljr iundt t M t t i f f f t i i i t l i f ***& do

faswui

i&t $'«?$>**• iIf

ttafc «rt atet*il«ta*

m%

*ttt*trift fca ***** tfcoir m

*4t& tk &
m +

le &re in fa il m & p with tfe* vltlm t* alli # f H i sysiia
ym vlfa
in 4?iYi.a^ tfct boat f i t

tjrjr»

m m mtstaX
t vm

**t«« t t

% o & tir t
im

oon&»

*hia roradU will h# wki&vmt fcp &rroloplii£ % * bmk m~
h

wjtmm* mfk*%9 wJj.U#

$ * « * & )« * • utttttptii t o r t n m lt tt oar oon~

fcro by 41r«nt intorfortflti will not I tad U tha £««£#•& *#•
X
£alt#

at^oapta w ill ?&t&«r &
to&

erlppla

o* p
u

growth

aai prQirest aa fros* at is*. &.U& ttso rtr? ^om wM»& m
ar
ulUmutoly pt&staa to exert a fctatfioial am halpital laflaoaat*
Sht sifcsaatita '*hl<& wt a r t aftout

m uttna oaaatftlas#
av

$0

rad® l a l& r g * otyoaft

I f w« aa&trata;*A fro to fer«a4«& tb*
*?

s &a®ls of o ar ft»4t*al Haatir#
u

ijy

® M iaw l
«ar

ilf th# ^#Xd 9f t.b# ^«uktry§ w sb^ulA be s waxli teOcXof paw#r
e
to a d«|rrt« wM«&

«x««9i our own •spoatatloiui*

to bsiat *lNwt tills ym XI, M r



la or&#r

wn*t lit p«xmitt#ri t#

R e p ro d u c e d fro m th e U n c la s s ifie d

$tm

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

tiohaapetad.

It

ra$uiraa •tsvta«HBan«hip whio't- w ill d i* »

r aga*d

iasadiata atxoaaas m ima&lata hlaaa* whara tha futuro

o f tha

ayataat i » iawolwad*

m

a

ouraalwao* oaa ©aly a a lt a

daflnlta and broad |>oll«y It w ill not Ini difficult to

aafca tha

patolio nadarataad arn
rj

port o f tha
of i t

I f w##

and to

aaaara tha imp-

antlr# o o e m m lty , or a t an? riita o f th at p ortion

on who*a e o n f l&aaaa dapanda tha farther dawela$*eat of

tha eyataa*

A» to

template aaralnga* w« do a o t haliawa th a t

.

Tha Iwmfca w i l l a o t l&ngulnh am lon gat •
oh

wa aoad Ini a l i d a d

If* aa we hawe ao &©«bt# large aooeptaaioe oradit operation*
are in etere for thia crouatry, there w ill be la tha vary aear
future a broad field for linfo®tM«nt la paper whioh w ill exoltide
leasee m tha aboorption of whioh w ill half tha dowolopaiont of
at

oar trada la a tiaely and legitla&to way*

la a Aeaeraadtaa

written by Mr* W&rburg la Itareh of thia year on thia ipieetloa

of do«eetl<» ©pea aarfcet reptlatiea werwua a broad aeeeptaaoe
polley, fu ll otsphasU waa laid oa tha grawe raapoawihality
whioh wa would tmdortake i f we u»ad reaerwe ctoaey for breaking
latereet ratee below a reaeoa&bly low *ate# thae crowding tho
aaaber bank* oat of their awa legitiaate iaweetaeatt and fora*
lag tha* into fixed lmroatsRonto, which rndtr taken im tia* of
great « u « of aoney haw# alwaye prowad fatal at tha twaiag of
tha tide*
Abfiorsjally high rate* alwaye hring a re&etloa of ahaormally
low rataaf aad abnormally low ra ta a bring a period o f exooowlwaly
high ra ta a *




Tho aiat o f tha Federal Ra«#rr« Syetois attat ha to

p p.**™ ------------------------------------------------------------ --R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

(XI)
t%$m m atta&y m pots Ibis %xmm& a nonaal point*

Tha

■ auaottsaital a hmfrlng njntm 1a in thia
oram j t a tha davalop»ant of a 001mtry#
lPsr

tha

tow rataa irhiah ax# only

oi patting ohaxaota? do aora bara II%m foot#

It it tha duty

of tha Ftdaral Raaarvt Banka to fight txotaalva rataa In both
diraetiona whan. thay hart a tandahoy of gatting too high or too
low#

If* ia order to aaeura a paltry rtturn* Fadaral Raaanr*

Banltt braak tha rata# for tha antira or adit atruotura of tha
oountry halo# tha latal whioh m y ba oonaidarad &a norm&l* tfeey
undaraina tha a&faty of tha oountry and taka^a vary ha&vy
ra&ponaibillty#

Itoraoirar* bafora any drat110 atap in thia

diraotiw* ought to ha vanturad upon* th# ayatas; ought firat to
hava a full opportunity of developing* both at to acope and
operation*

Tha rediscountlag faollitiaa between diatriota

•

ought to have a oha&oe to dtvelopj and tha <fneetloa ought to
be oarefully vantlisted whether there may not ha too mmy faderil
Raaarve Banka* whether tha oapltal paid la on$it not to be re-*
dttoad, or whether laore economic and nor# effeatlve operation
ba tenured nr

oannot

Raaarra Banka ara
e x o e a e lv tly

low

a

tttallar number of banka#

la ex'&otly tha

ea&e

t u i t i o n aa

r a t e t n ig h t b rin g about with

t h e ir naabera* a tendency o f ru ttin g out
ra t at

too moh

in order to tearure a reason ab le return*

P* M # W

d/40/lB




them*

Tha Federal
aanbar

,b&nkt|

a t with
money

at

loir

\

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

v

'

:

1

IS,
CiOMTT m i i or SPICIAL
WCT 0 1 iSBJXC?
BMn Mi ft .i l m . i s m t M m *

I ftfT it «1 H til* «a|orltgr report submittad ky Met«r«i£&r£i&g «ad
lartw rg 1a h fa r as I t atat** that tha par«haaa #1 i m l f f t r f a its* in
til* ap*a aarfcst 1* m*t p *n »itt*d aadar tha ?*d *r*l Raaorr* Aat*

1

furthor agr*a tkat thar* I* ao naooesity at tfc* praaaat t l» * far tk*
parahaa* *1 faraiga M il* © **ihfc*i|3 ky ft i* * a l r m m
£
i

kaaka aadar

p r*«*at lntanmtion«a condiUoa#, kut I k*U#v» i t would 1 wiaa t*
m
fraaa pr*p*r rogalation* oovariag aaoh parahasaa, tfc*r*ky diooh&rgiag
what I toaiaiva t* ka a duty of tko fa# *ra l B ***rf* Board.
I *aaaot ooatmr la tk* apiaioa of aaid aajorlty that a* jmkllc
good aoald ko fahoarrod 'by oaaotiag rogalatioao authori*lag Fadaral
r*a*r** fcaako to pur«fca»<i trad* »9$*ptaa**t la tha opaa aarlat.

I t ia

a fa it kocoaiag oara aad »or* apparaat tis&t tfc* a#*tk*r kaaka ara doing
l i t t l * or aa kaaiaa** tbrau# tha Fodoral raaarta kaako, aad that ualaao
aa aatharia* tk*** ka&ka to **t*md thair a o tlvltia a late tha *p*a ®arfc*t, thay *111 aat ba a lia to *ara tkatr axpaasao# aaoh laaa thair
dim oado.

Ia ay *p lal*a# Coagroao oupyoood that f*4 * r*l r***r?* kaako

woald k* akla at laaot to a*r» thair *sp*a*o* ailtk a
w*U a* a raaaoaakla ourplaa.

farthamoro, tha

dlvldaada* aa

dividaad ia a *u*a-

U t lv * oa*# aad I I i t aaaaat k* *ara*d at tfca pr*o*at t i* * , aay plaoa
a h***y kardaa upoa tha ratarta kaaka ia tha futuro.

C*a**«a*atly# I k*«

H ot* that th* f* d * r * l r*a a m kaaka aboald ka p*raltt*d t* g* lata in *
op*a aarfc*t aad parehao* tra i* pap*r# aa thay ar* aa* aatkarii** ta par911*** varvaat* and Import aad **p *rt aoooptaa***«




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

It 1« yolatad ami that I I tho farohaso i f irate

in tho

opon aarkot ho authorlaod, it would thorobjr afford to aoa-aoabor baako
oaa of tho groatoot boaofito to bo dorlfod froa aaaborofelp In tho ojrotoa*
fti«# hoaator, is a it tho roaooa for formlttlug im pteroh&ta««
eh

fhoy

•hould bo poral ttod la ordor to boaofit the Fodorsl rooorvo b&ako, aad
iadirooUr# tho s»a««oahor bank# obtala a bonoflt

irm

it,

thio praatloo, It

! • a baaafit roaaltiag from tho failur* of awAar basks ta g i n a raasoaaW i aaoaat of baolaaao to th* fodoral raoorro baaka with which to sue tala
thoa.
fturthoraoro, X boliovo that tho privilege of purchasing banker®* aoooptaaoaa, no* cotiflnod to lap art aad oxport transaction!, ohoald ba as*
toadod to daaootio aaaaptaaoof mda by 8tat* batiks, trust ooityaaioa aal
Hakori la bohalf of tho parohaoor of good*.

I romliao that at tho

prooaat fla t Satioaal bank* aro not pormittod to siako ouch asoaptaneoo,
aad X cordially agrso that tho Act should bo saoada4 to a* to givo thorn
thio | «r »r aador rsa§on&blo liaitationo.
I t a « f «*oa lasoaoictoat to poralt Fodfrsl roaarto banks to bay ae«*
ooptaasao of Stato bank* and tract foapaalos In tho opon aarkit, whaa
la tio a a l banks oaaaot aako such acceptance®♦

Thio, however, although aa

iaaonsUtenoy, lo one nhieh arieeo froa th# dual system ol iatio aal baak

mi

State kaak Msaborehlp.

I t la ao aore inconsistent thaa tho f u t that

wa permit State bsaks aad treat co*p*»los to Jeia tho Todona Xotorro
8 fit% bringiag la thoir breaches with thorn, while fa tlo c al baak* eaaaet
at tha prevent tiae have branches.

There are also aoay othor ineensiatea**

cies, ao 1 have stated,resulting i r m tho dual system of aeaborship, hut




R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

H o ld in g s o f th e N a tio n a l A rc h iv e s

thoso « • §»&! I mi coafidoat, oorroot ultiaatoly %j iaertaolitg tho powers
t l Batioaal toako* aakiag tho* aoro ooaaoaoarato *ith tho povoro givoa to
Btato haako aad trust oo*ppaio* ty tho roopoetito l U t i t .
TH# qmootioa at iootxo hoforo us is # dhall tho fodoral r » i « m

fcaako

to poraittod to laagaioh « s u i i*tod ky tho *io*ihor feaako* vhilo it it ill

01*r povor to porait thoa to oito&d thoir Imoiaooo operations ia tho opoa
aarkot* oo m
aad tho

prohahly to iaomro oar&iago sufficient to pay thoir exponoes

dividend.

I 4# mot believe i t would to o lio to postpone thio

desirable rosult to await tho aotioa ol Coagroos ia a»oadtag the l m $ oo
ao to givo Batioaal ba&ko tho o ia ila r privilege ol doneetie aoooptaaoo*
fho argaaoat ol tho majority ooom* to bo baood upon the supposition
that Fodoral reserve baako are merely eaergpnoy baaks# and that tho <|uoo*
tion whother or aot they aake their eapensss or dividends is iamaterial«
0* this out)oot tho Board ia ito annual report, page 18# oatdi

■tho looorvo Baako have oapenses to nootf aad while it would to a a io tako to rogard thoa merely ao prollt-ftakiag eonoerns aad to apply to thoa
the ordinary toot ol IkMliaooo saoooee, there io ao reason why tr oy »ho*ld
aot oara their oxpeaooe, aad a fa ir p ro fit besides, without la ilia g to
oaoroioo thoir proper funstiens aad easesding t&e bounde ol prudence ia
their aaaagenent. Moreover, the fteoerve Baako oaa aotor boeoae tho load*
iag aad iaptrtaat laotor ia tho aoaoy aarkot whieh they wore designed to
to ttfilooo a ooaeldorablo portion ol thoir resourooe io regularly aad ooa*
otaatly eapleyed.*
la ay opinion i t io tho plain daty ol tho Fodoral Hooerwo Board to ooo
that tho m o r a l rooorro baako aaiataia themselves.

Tho torjr faot that ao

provieioxt « » o aado ia tfce A»t fo r aoooooiag dolioioaoioool rooorto t a i l i
upea tho aoabor baake, oho** that i t «m oloariy in tho aiad ol Ooagrooo
that thooo kaako ohoidd oaoroioo a l l proyor faaotioao ia ordor to moot thoir
• H « m « aad diTidoad*, m




iro ll ao to aooiot tho am tor taako ia rodioooaat*

I-----------------------------------------------------------------------------------------------------------------------------------------------------------------------R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

•4*

I attach htrato & draft of Regulation covering the purcJms® of
dom'ztic bill® of a x o h w * * in th© op an rmrket, md another draft cover­

ing the purchaa# of dome 8 tic banker** accap ta>.nce* in ths* op an -market.




Reproduced from the Unclassified / Declassified Holdings of the National Archives

f*
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ih» m u

or rnxo^rnm

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ftow ootlo H l i i o f oaefeoii®® to too o llg ilu o fo r pwofcoao tta&or
$#0t&0tt 14 Of tho F o io to l Boooroo 40%

tha t to* thoy m m t h a m b & m i r m m f o r « r i m l t w i l f J M o o *
I r t i l i or oonne r o t a a pwrpoooa* o r tfcoir p r a o o o d o M o t b * m
1 m
m

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m u % 1*0 m & & f o r o u o h inorpptoi*

(1>| w it M t o a o tn rltg r o t tfto U se o f ^ o h o o o o f not a&ro th H l




f # $*yo * o r* to W M Of ^ jrle n a tu riO , or U » otooii ^ e r , o f
not f
fom

tlMM # jy itiosSho*

Reproduced from the Unclassified / Declassified Holdings of the National Archives

IIS*
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Fiwh M U *

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%im m m m &

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chong© sot oooicro& fcy * l i t a on or fey trsasofor o f tltJ o
to tlie goola m

vMt$k th© fciU o f

to feaoo*, or *y

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ac
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of Q h/m ao
m ge

pwoh*s«4

onsaot Ini w o 4 as oolloftorftl fo r Fedora! resort* motoof ta&oso thoy o#o
latorood l | * ambor bo*Ot* nor lo torn open ffisixtet pwroiaoo of no toe «n4
g ra fts , m dlotiapilo^oi froa B ill# o f

author! *e<l fcy too fo***ol,

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^purww

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Uwdk

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wwfrMr batika aoM too provable
I

o f o%hmr m t o m l rooono U&icb fo r

*u i# 00 o o ll* tJbo pooaittlo flowofnio ?$Gft tiio ir roaourooo i »
rodlooouattag aooo$taaooo to too import oaa escort trado*

fboy adtot&A*

la rfiortt alm y* :*»% ia * l a i ta* aoaotMifcXjr w y ia g aoo&o o f too country.

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r e c e iv e d

SEP 1 f> 1915
G > G V E -R n G H 'S O F F I C E

Fe d e r a l R e s e r v e B o a r d
/
W

a s h in g to n

S e p te m b e r

15t h

,

1915.

y

M .C . E L LIO T T

COUNSEL

My dear Governor:-




The attached letter dated September 9th from
the Cashier of the Mutual National Bank of Boston has
been referred to this office for suggested reply.
^
This bank desires to make application for
the sale,, through the Treasurer of the United States,
of 200,000 United States 2$ bonds.
Section 18 of the Federal Reserve Act pro­
vides that "After two years from the passage of this
A c t .... any member bank desiring to retire the
whole or any part of its circulating notes,
may file with the Treasurer of the United
States an application to sell for its account,
at par and accrued interest, United States bonds
securing circulation to be retired.
The Treasurer shall, at the end of each
quarterly period, furnish the Federal Reserve
Board with a list of such applications, and the
Federal Reserve Board may, in its discretion,•
require the Federal reserve banks to purchase
such bonds from the banks whose applications
have been filed with the Treasurer at least ten
days before the end of any quarterly period at
which the Federal Reserve Board may direct the
purchase to be made”
.
This provision will not become effective un ­
til December 23, 1915. The end of the first quarterly
period following that date is December 31, 1915. In
order to comply with the terns of the statute, appli­
cations would have to be filed with the Treasurer ten
days before this time, or by December 21, 1915. In
other words, the application would have to be filed
at a time when this particular provision of the Act
is not in operation.
Before replying to this letter, therefore,
it is necessary for the Board to determine whether it
will undertake to require banks to purchase any bonds
for the retirement of circulation on December 31, 1915.
I am of the opinion that while the Board
cannot require the purchase of these bonds until after

'

K e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

December 23, 1915, it will not be inconsistent with
the provisions of the Act for member banks desiring
to retire circulation to file applications with the
Treasurer before this date so as to have such appli­
cations in the hands of the Treasurer ten days be­
fore the quarterly period ending December 31, 1915.
The Board should, however, determine whether it will
require the purchase of any such bonds on this date
or wait until the end of the next quarterly period,
namely, March 31st, 1916.
Respectfully

Hon. Charles S. Hamlin
G o v e r n o r .




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

March 2Bn&, 1915.

My dear Mr. Warburg:
She Cousnltte© on Legal iSattere, which, as I recall it,
aonalat© o f Governor lo sa lin ,

jtm xm lf

and coun sel f enbmitted

to the Board a re p o r t on the m i n q u estion a s to th e r ig h t
o f F ederal Beserve Banks t o buy Government bonde, w ith c i r ­
c u la tin g p r iv ile g e and to issu e Federal He serve Bank l o t

m

a g a in st thorn.
fhe opinion o f counsel dated Jfoveisber 80 th , 1 9 1 4 , has
never been f o n a a lly a c te d upon.

On the o th e r hand, the

Board did a u th o r is e fe d e r a l Be serve Banks to buy Government
bonds.

aq

re q u e sts f o r the p rep aration o f p l a t e s , e t n .

fo r issu an ce o f fe d e r a l $ ©serve Bank B otes are mm mm u g
l
In ,

i t seems to me i t i s important th a t the main fn e a tio n e

should be d isp osed o f .

Tours very truly

Mr* fan! I. Marburg.




r ------------------— - —

..... ........ . i.- .i,
1

— -------------- -— .—

R e p ro d u c e d fro m th e U n c la s s ifie d

I D e c la s s ifie d

■

H o ld in g s o f th e N a tio n a l A rc h iv e s

F E D E R A

J a n u a r y 4, 1915.

M E M O R A N D U M FOR G O V E R N O R H A M L I N .

My dear Go vernor:
I have your l e tter a.f January 2nd and have c a r e ­
fully e x a m i n e d that p a r t of S e c t i o n 18 of the F e d e r a l
Re s e r v e Act which r e l a t e s to the e x c h a n g e of United
States b o n d s w i t h the c i r c u l a t i n g p r i v i l e g e for one
year gold notes of the U n ited States and t h i r t y year
3l gold b o n d s w i t h o u t the c i r c u l a t i n g p r i v i l e g e .
Af t e r a n a l y s i n g this whole s e c t i r n and after
c o n s i d e r i n g all the c i r c u m s t a n c e s , I a m i n c l i n e d to
thn v i e w that t e c h n i c a l l y the Fede r a l R e s e r v e Board
has the r ight at this time to a u t h o r i z e this e x ­
change and that the o p e n i n g s entence of this s e c t i o n
m a k i n g c e r t a i n p r o v i s i o n s e f f e c t i v e only a f ter two
years from the p a s s a g e of the Act, does not relate to
the p r o v i s i o n u nder c o n s i d e r a t i o n #
As h e r e t o f o r e a d v i s e d the p o w e r to p u r c h a s e b o n d s
h a v i n g the c i r c u l a t i o n p r i v i l e g e and to issue n a t i o n a l
c u r r e n c y against such b o n d s is s p e c i f i c a l l y g i v e n
to the F e d e r a l r e s e r v e b a n k s by other s e c t i o n s of the
Act.
W h e n S e c t i o n 18 was i n c o r p o r a t e d in the Act it
was o r i g i n a l l y i n t e n d e d , as its title implies, to
pr o v i d e a m e t h o d for g r a d u a l l y r e f u n d i n g b o n d s he?.d at
the time by the s e v e r a l n a t i o n a l b a nks.
This m a tter
was v e r y c a r e f u l l y c o n s i d e r e d by the C o m m i t t e e of the
House and the C o m m i t t e e of the Senate and a number
of p l a n s were s u b m i t t e d h a v i n g for t h e i r object the
ul t i m a t e r e t i r e m e n t of n a t i o n a l b a n k c i r c u l a t i o n and
the s u b s t i t u t i o n of other notes.
At the time of the
pa s s a g e of the Act there was a p p r o x i m a t e l y $ 7 5 0 , 0 0 0 , 0 0 0 *
in n a t i o n a l b a n k c i r c u l a t i o n o u t s t a n d i n g .
The b onds
se c u r i n g this c i r c u l a t i o n m a t u r e at the p l e a s u r e of
the U n i t e d States G o v e r n m e n t a fter t h i r t y y e ars from
the date of issue and it was a c c o r d i n g l y e s t i m a t e d that
if the F e d eral r e s e r v e b a n k s could a c q u i r e a m i n i m u m
of $ 2 5 , 0 0 0 , 0 0 0 . a year t h e y w o u l d have in their
p o s s e s s i o n at the m a t u r i t y of these b o n d s a p p r o x i m a t e l y
the enti r e issue, and the G o v e r n m e n t w o u l d have to deal



Reproduced from the Unclassified / Declassified Holdings of the National Archives

C. S. H. No 2.

only with the Federal reserve banks instead of with
the several thousand national banks in refunding such
bonds,
It was recognized, however, that unless the n a tion­
al banks desired to retire their circulation the Feder­
al reserve banks w o u l d be unable to procure the bonds,
and this method was provided of having those national
banks desiring to retire the whole or any part of their
circulation make application through the Treasurer
to sell the bonds for their account and the Federal
Reserve Board was empowered to require j'sderal reserve
banks to purchase bonds so offered, and, as suggested
by you, it was originally contemplated that the
Federal reserve banks should thereupon be required to
issue Federal reserve bank notes against such bonds#
In view of the arguments presented to the Committee
that this circulation becomes redundant at certain
times, it was later determined to permit the exchange
of bonds thus acquired with the circulating privilege
for obligation of the United States without the cir­
culating privilege,
As stated, this section was originally intended to
deal only with the bonds acquired from national banks
desiring to retire in whole or in part their national
bank circulation.
The section was amended, however, in conference so
that is now provides (a) for the issuance of Federal reserve bank
notes against bonds acquired under other
provisions of the Act as well as against
bonds acquired under this section; and
(b) for the exchange of any United States 2%
gold bonds bearing the circulation
privilege but against which no c i r c u l a ­
tion is outstanding for one year gold
note® of the United States without the
circulation privilege to an amount not
to exceed one-half of the 2% bond3 so
tendered f o r •exchange and the thirty
year 3% gold bond3, without the c ircula­
ting privilege, for the remainder of
the bonds 30 tendered.
It is significant that in the first two paragraphs
of this section in referring to the bonds which the


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i
Federal Reserve Bank of St. Louis

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C, S-, H. No. 3 ♦

Federal reserve banka may be required to purchase,
Congress uses the word3 "such b o n d s ” manifestly
referring to bonds w h i c h a national b ank desires to
sell through the Treasurer in order to reduce its
circulation.
In the fifth paragraph of thi3 section, however,
it is provided
“
Upon the deposit with the Treasurer of
the United States of b o n d s so purchased or
any bonds with the circulating privilege a c ­
quired under Section four of this Act, any
Federal reserve bank*** shall be entitled
to receive *** circulating notes *** equal
in amount in the par value of the bonds so de ­
posited."
In this paragraph the section for the first time
refers to bonds other than those acquired from bank3
desiring torsduce their circulation and in the follow­
ing paragraph the language of the Act is "Upon application of any Federal reserve
bank approved by the Federal Reserve Board, the
Secretary of the Treasury may issue in exchange
for United States Zjo gold bonds beerirtgthe
circulation privilege , but against which no
circulation is outstanding one-year gold n o t e s ,"
etc. etc.
The failure therefore to restrict this paragraph
by any qualifying clause the bonds wh i c h may be exchanged
other than the qualification that they shall be 2%
Unitod States bonds w i t h the circulating privilege, would
seem to indicate that the Federal Reserve Board may,
in its discretion, authorize the exchange of any bonds
b e aring this privilege acquired in any manner by the
Federal reserve banks.
In this connection, however, attention i3 called
to the fact that thi3 exchange involves the exercise of
a discretion on the part of the Federal Reserve Board
and there would seem to be a strong reason, as a matter
of policy, for the Board to refuse to exercise this
discretion until the expirati.on of the two years or at
least until a later date.
The two year limitation was imposed in order that
the Federal reserve banks might have an opportunity to
become firmly established before they shall be required




Reproduced from the Unclassified I Declassified Holdings of the National Archives

1/




C3 S. H. No
to take over bonds from national banks and there
would seem to be a still stronger reason for waiting
until this time before permitting them to exchange
bonds so acquired for one year gold n o t e s « Such
an exchange would require the Federal reserve bank
receiving such one year gold notes to enter into an
obligation to purchase new notes when those issued
mature and were paid and it is only upon this condi­
tion that the Government can undertake under the Act
to exchange these short term obligations for the
thirty‘
year 3% bonds* Accordingly the Federal
reserve bank should not be permitted to assume this
obligation until it ha3 become firmly established*
I would respectfully suggest, therefore, that
Mr. Perrin be advised that the Board cannot at this
time approve the exchange suggested and that the
matter be left open of whether or not the Board can
legally authorize such an exchange before the e x ­
piration of two years.
Respectfully,
(Signed) M. C. Elliott
Counsel•
Honorable Charles S. Hanlin,
Governor, The Federal Reserve Board,

Reproduced from the Unclassified / Declassified Holdings of the National Archives

My dear G o v e r n o r :I am in receipt of your note nf the twentythird instant in which you submit the following q u e s ­
tions for consideration:
Does sub-section ( b ) S e c t i o n 14, permit a
Federal reserve bank to buy United States Government
bonds regardless of the limitations of Section 18?
If a reserve bank did so, could it issue
Federal reserve bank notes against these bonds?
Sub-section (b) of Section 14, in defining
one of the powers of the Federal reserve banks, p r o ­
vides in part as follows “ buy and sell, at home or abroad, bonds
To
and notes of the United States **** such pu r c h a s ­
es to be made in accordance with rules and r e gu ­
lations prescribed by the Federal Reserve Board".
This section taken alone vests in every Fed­
eral reserve bank the power to purchase and sell United
States bonds without any limitation except such as may
be imposed by regulations of the Federal Reserve Board.
Unlike Section 18, which becomes effective
two years from the date of the passage of the Act, this
section takes effect immediately upon the establishment
of the Federal reserve banks, being a power vested in
such banks when organized and authorized to commence
business. It will, therefore, conduce to clearness to
consider the axercise of this power, first, without ref­
erence to the provisions of Section 18 and as an inde­
pendent power, and later, to consider whether the p r o ­
visions of Section 18 in any way affect or restrict the
provisions of this section.
It will be observed that Federal reserve banks
are given the power to purchase and sell United States
bonds. This power will include the purchase and sale
(a) of bonds not having the circulation privilege - for
example, Panama Three Per Cent bonds; (b) bonds having
the circulation privilege but against which no circula
http://fraser.stlouisfed.org/
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Federal Reserve Bank of St. Louis

$33, I (

Reproduced from the Unclassified / Declassified Holdings of the National Archives

C *S «R » No* 2«
tion is outstanding.
Such bonds to be purchased and sold
as the title to this section indicates, in the open market,
that is, from any source.
Section 4, sub-section 8, which likewise takes ef ­
fect when the Federal reserve banks have been authorized to
commence business,provides in part as follows "Upon deposit with the Treasurer of the United
States of any bonds of the United States in the manner
provided by existing law relating to national banks,
to receive from the Comptroller of the Currency circu­
lating notes in blank, registered and countersigned as
provided by lav/, equal in amount to the par value of
the bonds so deposited, such notes to be issued under
the same conditions and provisions of law as relate to
the issue of circulating notes of national banks secur­
ed by bonds of the United States bearing the circulat­
ing privilege, except that the issue of such notes shall
not be limited to the capital stock of such Federal r e ­
serve b a n k ”
.
Under these two sections any Federal reserve bank,
independently of the provisions of Section 18, may purchase
in the open market United States bonds not having the circu­
lating privilege or United States bonds having the circulat­
ing privilege but against which no circulation is outstanding
and upon deposit of latter bonds in the manner provided by
existing law relating to national banks, may receive from the
Comptroller circulating notes in blank equal in amount to the
par value of the amount so deposited.
Section 18, on the other hand, which, as stated,
does not become effective until after two years from the p a s ­
sage of the Act, deals with a specific class of bonds, namely*
those held by national banks which desire to retire in whole
or in part circulating notes outstanding. This section p r o ­
vides in part as follows:




"After two years from the passage of this Act, and
at any time during a period of twenty years thereafter,
any member bank desiring to retire the whole or any part
of its circulating notes, may file with the Treasurer of
the United States an application tjo sell for its account
at par and accrued i n t e r e s t U n i t e d States bonds secur­
ing circulation to be r e t i r e d .
The Treasurer shall, at the end of each quarterly
period, furnish the Federal Reserve Board with a list of
such applications, and the Federal Reserve Board m a y , in
its d i s c r e t i o n . require the Federal reserve banks to p u r ­
chase such bonds from the banks whose applications have
b e e n filed with the Treasurer at least ten days before
the end of any quarterly period at which the Federal R e ­
serve Board may direct the purchase to be made; PROVIDED,
That Federal reserve banks shall not be permitted to

Reproduced from the Unclassified / Declassified Holdings of the National Archives

C.S.H. No. 3.
"purchase an amount to exceed £25 >Q Q Q ,OOP o f such
bonds in any one y e a r , and which amount shall in­
clude bonds acquired under section four of this
Act by the Federal reserve b a n k ”
•
The question, therefore, arises whether the limi­
tation of $25,000,000 contained in the foregoing proviso lim­
its the amount of United States bonds which may be purchased
from any source, (e.g., bonds having no circulating privilege
and bonds having circulating privilege but against which no
circulation is outstanding), by a Federal reserve bank, or
whether it applies only to those bonds which are offered for
sale by a member bank through the Treasurer of the United
States with the intent to contract the circulation of such
member bank. The language of this proviso is somewhat a m ­
biguous since the enacting clause provides that "The Federal Reserve Board may, in its discretion,
require the Federal reserve banks to purchase such
bonds (that is, bonds which are offered for sale
through the Treasurer by member b a n k s ) ”
,
while the language of the proviso is
"Provided that the Federal reserve banks shall not
permitted to purchase an amount to exceed $25,000,000
of such bonds (that is, bonds offered for sale by member
banks as above indicated) in any one year, and which
amount shall include bonds acquired under Section 4 of
this Act by the .^dderal reserve b a n k " «
"Provided, further, that the Federal Reserve Board
shall allot to each Federal reserve bank such prop p r t i o n
of such bonds as the capital and surplus of such bank
shall bear to the aggregate capital and surplus of all
the Federal reserve banks".
If we analyze this language we find (l) that the
power is vested in the Federal Reserve Board to require
Federal reserve banks to purchase bonds offered for sale,
after two years from the passage of the Act, by member banks
through the Treasurer of the United States. (2) By way of
limitation to the oxercise of this power by tho Federal R e ­
serve Board, Federal reserve banks are not permitted to p u r ­
chase more than $25,000,000 of such bonds in any one year.
That is to say, the combined or aggregate purchases of all
Federal reserve banks of bonds offered for sale through the
Treasurer of the United States, and which the Federal Reserve
Board may require the several Federal reserve banks to pur­
chase in proportion to the capital and surplus of such banks,
shall not exceed $25,000,000 in any one year, and to quote
from the statutes 


Reproduced from the Unclassified / Declassified Holdings of the National Archives

C*S.H. No- 4*
’
‘
this amount shall include bonds a c q u i r e d under Section
four Of this Act b £ the Fedejral reserve b a n k »u
It will be bbserved *
*
First - that the amount to be included in the
§25,000,000 referred to is the amount of bonds acquired under
Section four w h i c h defines the general corporate powers of a
Federal reserve bank, and includes in such powers the right
on the part of the Federal reserve bank to deposit with the
Treasurer of the United States bonds b earing the circulating
privilege and to receive therefor circulating notes.
No reference is made in this proviso to Section 14
which authorizes banks to purchase in the open market United
States bonds either with or without this circulating privil­
ege. Section 18 deals with bonds which not only have the
circulating privilege but against which circulation is al­
ready outstanding. This is significant because the question
of contraction is unquestionably involved and the limitation
imposed seems to be a limitation on the amount of bonds which
the Federal reserve banks may be required to purchase from
member banks in order to permit such member banks to reduce
the amount of their outstanding circulation.
In • other words, Section 18 may be said to be sup­
plementary to the Act approved July 12, 1882 as amended by
the Act approved March 4, 1907, providing for the withdrawal
of circulating notes on deposit of lawful money, and the
withdrawal of bonds, which Act reads in part as follows "Provided that not more than nine mil l i o n dollars
of lav/ful money shall be so deposited during any cal­
endar month for this p u r p o s e ”
.
In other words, Section 18 provides a n additional method by
which member banks may reduce their outstanding circulation
to the extent of $25,000,000 a year bythe sale of such honds
to Federal reserve banks to this amount, provided, such Fed­
eral reserve banks have not lost their power to purchase
such bonds from member banks by purchases made in tie open
market.
Second - It will also be observed that the amount
to »be included in the $25,000,000 referred to is the amount
of bonds required under Section four by one Federal reserve
bank and not by the several Federal reserve banks which lang­
uage, as above stated, is ambiguous.
It may be that this
is the result of a typographical error and that Congress i n ­
tended that section to read -




**This amount shall include bonds acquired under
Section four of this Act by the Federal reserve banks",

from the Unclassified I Declassified Holdings of the National Archives

C. S. H. No.
in which case it would still seem clear that Section 18 is
independent of Section 14 and that the.limitation imposed
by Section 18 applies only to the amount of bonds which the
several Federal reserve banks may be required to purchase
in order to enable member banks to reduce their outstanding
circulation to the extent of v'25>000,000 a year in addition
to the amouht now allowed by lav/, namely, nine million dol­
lars per month*
On the other hand, if we assume that Congress in­
tended to confine the amount to be included to the amount
of bonds purchased by one Federal reserve bank, this ambi­
guity is partly explained by a consideration of the lang­
uage of this particular section as it passed the Senate and
as it finally appeared in the Act when passed by Congress.
In the bill as it passed the Senate on December 19th, 1913,
this section provided that tThe Federal Reserve Board may, in its discretion,
f
require the Federal reserve banks to purchase such
bonds ftfom the banks whose applications have been
filed with the Treasurer at least ten days before the
end of any quarterly period at which the Federal Re­
serve Board m y direct the purchases to be made”
.
No limitation was placed upon the amount o& such
bonds which the Federal Reserve Board might, in its discre­
tion, require the several Federal reserve banks to purchase.
As amended by the C o n f e r enceCommittee of the
Senate and House, the amount of such bonds whiah the several
Federal reserve banks are permitted to purchase is limited
to {25,000,000 in the aggregate in any one year, such bonds
being those held by member banks and having circulation out­
standing against them.
Without the language which follows this limitation
and which reads "And which amount shall include bonds ac­
quired under Section four of this Act bv the Federal reserve
bank".the word "permitted" woikld be synonomous with the word
"required? that is to say, the same result would obtain if
the proviso read "the Federal reserve banks shall not be re­
quired to purclmse an amount to exceed (;25tQOO.OOO of such
bonds in anv one year" •
Since in this case the limitation would have ap­
plied to the power of the Federal Reserve Board to require
the purchase of such bonds, while the Act as it passed ef­
fects the same result by limiting the power of the bank to
purchase instead of limiting the power of the Board to re­
quire such bank to exercise the power to purchase.



V......................... ..............

...................

1 ........................

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1 11

Reproduced from the Unclassified / Declassified Holdings of the National Archives

C* S. H* No. 6*
The question, therefore, arises - what is the effect
of the language "and which amount shall includecbonds acquired
under Section 4 &f this Act by the Federal reserve bank«"
As above stated, it will be observed that the pur­
chases to be included in the §25,000,000 are the purchases of
one bank, not the aggregate purchases of the sei’
eral Federal
reserve banks, and this language would be difficult to ex­
plain without the aid of the second proviso which follows
and which reads:
’
’
Provided, further, that the Federal Reserve Board
shall allot to each Federal reserve bank such proportion
of such bonds as the capital and surplus of such bank
shall bear to the aggregate capital and surplus of all
the Federal reserve banks"*
Considering this language as part of the context
the conclusion seems inevitable that Congress intended that
no part of the §25,000,000 in bonds which the Federal Reserve
Board might require the several Federal reserve banks to pur­
chase through the Treasurer from member banks shall be allotted
to a Federal reserve bank which had purchased under Section 4
United States bonds equal to or in excess of the amount which
would otherwise be allotted to such bank, and had taken out
Federal Reserve bank notes against said bonds.
Unless this view is adopted, it would be difficult
to attach any meaning to the proviso that the §25,000,000
should include bonds acquired under Section 4 of this Act
"by the Federal reserve bank".
The meaning of these provisions would perhaps be
clearer if they should be transposed to read "Provided, the Federal Reserve Board shall allot
to each Federal reserve bank such proportion of such
bonds cis the capital of such bank shell bear to the
ag^re^rfce capital and surplus of all the Federal re­
serve
banks"*
"Provided, further, that Federal reserve bank's
shall not be permitted to purchase an amount to exceed
$25,000,000 of such bonds in any one year, and which
amount shall (in making such allotments) include bonds
acquired under Section 4 of this Act by the Federal re­
serve bank (t6 which such allotment is made)."
It is significant that throughout both provisions
the language “
such bondr is consistently used.
sn
The bonds
referred to as "such bonds", of ^shich Federal reserve banks
are permitted to purchase an amount not to exceed {25,000,000



Reproduced from the Unclassified I Declassified Holdings of the National Archives

C. S. H. No. 7*
in any one year, are shown by the context to be bonds offered
by member banks f or sale through the Treasurer in order _to
reduce the circulation of such member banks, and also "which
form a part of an aggregate amount which the Federal Reserve
Board may require the Federal reserve banks to purchase*
These elements are necessary to bring such bonds
within the purview of this section*
The limitation prescribed
is the limitation of the amount which the Federal Reserve Board
may require Federal reserve banks to purchase, and it. seems
clear that if a Federal reserve bank has. under the power con­
tained in Section 4 already purchased United States bonds with
the circulation privilege equal to or in excess of v/hat its
allotment would otherwise be, it is not permitted or required to
share in the purchase of such bonds which must be purchased at par.
If we assume that Congress intended to include bonds
purch&sed by the several Federal reserve banks under Section 4
in the limitations prescribed, the effect would be that if any
number of the Federal, reserve banks had purchased in the open
market in the aggregate bonds having the circulating privilege
of $25*000,000 in any one year, then no Federal reserve bank
would be permitted to purchase any bonds offered by member banks
for sale through the Treasurer of the United States*
If, on the other hand, we follow the language of the
Act and interpret it as aforesaid, the effect would be that if
some of the Federal reserve banks had purchased in the open
market no bonds having the circulation privilege during the year
they might be required to take their allotment of this $25,000,000,
while those banks which had purchased bonds equal to or in excess
of the amount to which they would be entitled, would not be per­
mitted to purchase any such bonds*
In either view, the conclusions seem, fully justified First - That Federal reserve banks may, under Sec­
tion 14, sub-section (b), purchase in open market United States
bonds with or without the circulating privilege, to such an
extent as the Federal Reserve Board may by regulation permit,
and without reference to the limitations of Section.18*
Second - That any bonds so acquired, having the cir­
culating. privilege, may, under the provisions of Section 4, be
deposited with the Treasurer of the United States as a basis
for issue of Federal reserve bank notes.
Third - That after two years from the passage of the
Act any bonds against which national banks have outstanding
national bank notes, L?ay be purchased by Federal reserve banks
when offered for sale through the Treasurer of the United States,
provided, that the Federal reserve bank to which an allotment is.
made has not already purchased in the open market bonds with cir­
culation privilege equal to or




r

•

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Reproduced from the Unclassified I Declassified Holdings of the National Archives

C.S.H. No. 8
in excess of the amount to which it would bo entitled, or,
if it is assumed that the limitation of bonds purchased by
one Federal reserve b a nk was the result of a typographical
error, then, provided the several Federal reserve banks
have not already purchased in the aggregate in open market
such bonds amounting to $25,000,000.
Inasmuch, however, as
the language can be given a meaning without this assumption,
there would seem to be no justification for treating this
as a typographical error.
Fourth - That until a period of two years from
the passage of the Act has expired, Federal reserve banks
purchasing in open market bonds having the circulating
privilege may deposit same with the Treasurer of the United
States and obtain an issue of Federal reserve bank notes on
the security of such bonds.
Fifth - That after two years from date of the p a s ­
sage of the Act Federal reserve banks acquiring bonds b e a r ­
ing the circulating privilege under Section 14 or Section
18 may, under the provisions of Section 18 which becomes ef­
fective at that time, procure an issue of Federal reserve
bank notes on the security of such bonds, or, may, with the
approval of the Federal Reserve Board, exchange any such
United States two per cent gold bonds bearing the circulating
privilege (if such bonds have no circulation outstanding,) for
one year gold notes of the United States without the ci r c u l a t ­
ing privilege to an amount not to exceed one-half of the bonds so
tendered for exchange, and thirty year three per cent gold bonds
without the circulating privilege for the remainder of the two
per cent bonds so tendered, subject to the limitations p r e ­
scribed in Section 18.
Respectfully,

Hon. Charles S. Hamlin,
G O V E R N O R .




R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

OPEN MARKET OPERATIONS.

,

,

$ i 3,
1.

Original bill, June 26, 1913.
In the open market clause banks were given authority to purchase

and sell bankers' bills, cable transfers and bills of exchange of the
kinds and maturities by this Act made eligible for rediscount;

nothing

being said about the indorsement of a member bank.
Power was also given to invest in United States bonds and in short
term obligations of the United States or its dependencies or of any
State or foreign Government;

nothing being said about bills, notes,

revenue bonds and warrants.
2.

Draft of bill, August

, 1913.

Open market power to buy and sell, etc. prime bankers’bills and
bills of exchange of the kinds and maturities by this Act made eligible
for rediscount, and cable transfers.
Power also given to invest in United States bonds and bonds issued
by any State, county, district or municipality;

power to purchase from

member banks and to sell with or without its indorsement bills of
exchange arising out of commercial transactions as hereinbefore defined
payable in foreign countries.
3.

Bill as passed the House.
Power to buy and sell in open market prime bankers' bills and bills

of exchange of the kinds and maturities by this Act made eligible for
rediscount, and cable transfers.
Power to invest in United States bonds and bonds issued by any
State, county, district or municipality.

Same power as to bills of

exchange as above.
4.

Bill in Senate, September 18th.




In the open market powers, the words ’
’
prime bankers’bills"

R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s

changed to "bankers* acceptances'* so as to read "bankers’acceptances
and bills of exchange of the kinds and maturities by this Act made
eligible for rediscount, both acceptances and bills to bear the indorse­
ment of at least a member bank*’
.

(The words "cable transfers" stricken

out.)
Power given to buy and sell, etc. bonds and notes of the United
States and bills, notes, revenue bonds and warrants with maturities, etc.
issued in anticipation of the collection of taxes or of the receipt of
assured revenues, etc. by any State, county, district or municipality
of the United States, in accordance with rules and regulations prescribed
by the Federal Reserve Board.

The words "payable in foreign countries"

stricken out from the power to buy and sell bills of exchange with or
without its indorsement.
5.

Senate amendment, November 22, 1913.
Power given to buy and sell in open market cable transfers and

bankers’acceptances and bills of exchange of the kinds and maturities
by this Act made eligible for rediscount.
Power to buy, etc. United States notes and bonds and bills, notes,
revenue bonds etc., same as above.
Power to purchase bills of exchange same as above,
6.

Senator Owen’ amendment, December 1st.
s
Power to buy and sell cable transfers and bankers' acceptances and

bills of exchange of the kinds and maturities by this Act made eligible
for rediscount with or without the indorsement of a member bank.
Power to buy United States bonds and notes and bills, notes, revenue
bonds and warrants, same as above,
7.

In the Senate, December 19, 1913.




Same as above.

Reproduced from the Unclassified / Declassified Holdings of the National Archives

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8.

nk;

Bill as passed by the Senate.
Same as above.

9.

Bill as agreed to in conference..
Same as above, except power to buy bills, notes, etc. i

by including irrigation, drainage and reclamation districts.




increased