The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
— ™~— ^
Reproduced from the Unclassified
I Declassified Holdings of the National Archives
-
ni?ri
assififd
Authority £ 0
5 c<b is fix.es section
ftUG 2 1 VB42
August 15, 194E.
Mr. W* V* Paddook, Praaidant,
Fadaral Baaarva Baak of Boaton,
Boaton, Xaaaaahuaatta.
Daar Mr* Paddock:
Tha waakly report of "Open M I X Market Condition*
and Operationa* which you aand m aaah waak baa, aa you
know, become laaa and laaa aignificant with the dwindling
of tranaaationa. In tilla emergency, whan unneceaaary raporta
and papar work ahould be cut to a minimi*, wa auggaat diecontinuing this report. Tom wight! howeYer, kaap In general
touah with tha ana dealer raporting to you ao that it thara
ahould ba a aignifioant revive1 In tha volma of tranaaationa
thaaa raporta oould ba ranawad.
Vary truly youra*
1* JL Goldenweiaer,
Director of Eaaaarth and Statiatiea,
p1 IR: ecg
F
rr-
COPY
\
1^50'
August 15, 1942
Mr* Goldenweiser:
It appears that the weekly reports from
acceptance dealers in New Tork and Boston have
been collected for a number of years, but as this
market has fallen i nto disuse the report from
Boston has come to be more and more meaningless*
During the y ear 1942 so far there have been only
six dates in which.there have been any transactions
to report*
We might even consider discontinuing the New
York report although in this case there is a regular
though small volume of transactions* The market,
however, is without much significance and these
reports probably c° uWbe dispensed with* There
is attached a draft or&|letter by which the Boston
report can be discontinued~eSia~Tf\ desired a similar
letter could be sent to New York* V - / .
R.I.R.
Attachment
FOB viVC*'E . A .
r\.
'lUV 2!o 194-1
f
a , wta.
Mr. Ooldms>il - r
9m
D m praetioe of biqrii| M i ty t m - ond short-*tem lirinMrt
seourities from teles and dealera w ltr repurohaae agrimmirt mas adopt
ed ter m m of tlM r « d m l X » M m luki, notably Bern Tork, at t very
• t r h period* Frmn the eerrespendoaee it oppoaro that this praetioe
m o for tho purpeae of developing tho bill and United Statee OoTornneat
loourity mrkotc and at tho saas tima as regarda bills waa looked upon
ao being mare ©oarenimt to the Heserro Bonks thsn would be the diaeo«t
of tho bills to maturity.
^
On Maroh 19, 1925 the Board adopted the foHouiag reeelwfcieui
"The Federal Bsssrvo Board reaffirms
provions deeisions authorising the praotioe, long ©entinued, of purehaa© end solo
in the opsn mrket of borers* aoeoptanees
end ffisiai meant aeeuritiea, by Federal re
serve bonks fro* end to honks end qualified
dealers, under 15-day ’
repurohaae ar;r©«Marts*,
it being vndorstood that sush transaction*
■hall bo opsn, under similar foots and ©onditisms, to all federal reeerve banka with
relation to benks end similarly qualified
dealers in their respeetiro distriots" •
In Beptsober 1926 on analysis of sshednlec reoeired from the
Federal Beeerve V 1" eereriag United States Oorernaeat seeurities teksn
uader repurehaee agresaamt indieotod that euteh troaeaetiona were eonfinod
to iisrShssos from dealers eaeept in the ease of t m of the Mailer Federal
Beeerve BMks, eeeh of whioh wao purahealng soeorities from na*er banks
in a M i l TolmM. It is possible that the feet that m m ber beak eollatoral promissory notes seemred by •ovosmmnst obligations were eligible as
eollatoral oeeurity for Federal Beeerve notes, whereat Oeveramsnt seeur
ities eonld not bo so need, nay have had something to do with the praotioo
of tonflnlng repurahaM agreemamts to tranaaetiona *ith dealers. In this
oomaootiem it may bo stated that the rate eharged on reparehaso agreomamto
mas eomnmaly, though mat invariably, the aama aa tha dieoomrt rato#
Regulation M, effeetiro August 10, 1933. prohibited tho Fedsral
Beeerve
from pursheslng or aelling ®©v©ramoat aeourities smsopt in
aoeor donee with am e p m market policy approved by the federal Be terVO
Beard and in effeet at the time, with o©rt*ta «p«oifio exoeptieaa. Fellowiag tho pTf*£t of tho Bank Inc ^ot of 1935 the Federal O p m Market 0
«t|]lss ^pointed under the terao of that lot adopted a Regulation am
L
&
fei
Mr* g > l i n l i i r
• 8•
Mareh I9i 190(>4 pnk&iMimg t t i f i ln t l E m m iHdn fre» yarshsslag
•r ••Iliac liorsTnaoafr M w ll i i i i n p l f v r a ik t i tittiritgr granted
hy tki Osenittee «r lm m m K hm # with the open mrtwt pollejr adopted
I f tk» ft— W im ia i i i offeet »t thi t i n . Tha 0— Ittiss tlae r««
w m d th» right U r«t«lrt tti i « l i ef ugr iw inM irt iM itritUi thea
held «r thtrw ftir p v th tn l ly m i ia iiflM li M n l iM w m lu k or
to r*|«ir« that suoh •M urltivi be t r t ic ft m l 1st# thi tystea Opmm
Hutrt
i t you know, a ll (liw r—irt n n ritie s to ll Vjr tlM
^
M »ri]L Eeoerre Banks wore transferred to the tyataa Ojwa Hurfcet
-.«*
Aeeeaat as ef July 1 * 193^• On H^r 85* 1936 *Tfp«a aetisa ivly aade u i ;>
■tmrirt ind by w k s i a i w vote, the fn— Ittoo gnsteA authority to eaeh
r '^ Federal P t i t m biak to aake t w y i n i y yurehaees of fliTsrw— it i M t r i l i M
<
tttor rm l t agreements for period* aet eaeeediag fifteea 4iyi.a
lepershaso agrs— »s « m r lic Baited State* fli urn— t eeearities hivt boon reported separately ift the Federal Beeeree Saaks* daily
htdaaee sheet* aaeag holdings ef flatted States froTsraaoat seewritie*.
Maaeraadaa it— shearing «ueh holdiags hy olasees ef seetarities, alee
holdiags ef h ills talcs* under reparehaoe agrese— t, have alee been
oarrled ea the re w ee side ef the hal— e *e e t. Is dietiasticsi hae
heea aade 4a the Beard* s weekly stats— it hoteosa hills aad securities
aader roparshioo agreo— fr aad h ills aad soewities porehaeed oatright.
D E C L A S S IF IE D
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority fl- Q
ttq r
1 9 3T
Mr# £• 0* Douglaa
Atnagor* Bill Dopartawnt
Fodoml Roaorro Bank of I** York
I"m York# Sm York
Dm
t
Hr * Douglaa s
Thank you for your lottor of Miy 21#/in
onoloaod
ma
tablo allowing tho Syataa^a porohaaaa and
holding* of teotpttnoil by mtarititi for it&tintQt
VOOfct*
Wo ahould liko to aiaggoat that tho ordor of tho two
itmm *Aooajjta»ooa hold payablo In foroign onrranoy* and
"C&ango 1b foreign auaponao account* bo rororaad* It la
our uadoratandlng that tho niatoographod for* vill hare
apaoo for figturoa for ono dato only*
V w y tnaly youra*
E* A« Goldacvolaor
Director of Boaoaroh and Stati«tiea
SO \
D E tu m v m
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^--Q. l^SOj
?EC'D IK FILES SECTIOK
AY
9 1938
F e d e ra l R eserve Bank
of
N e w Yo r k
May 21, 1937
Dear Dr. Goldenweiser:
We enclose a Table giving figures on the System’
s pur
chases and holdings of acceptances at the close of the statement
week ending May 19, as requested in your letter of that,.Ja^g^. {
Inasmuch as this inaugurates a new procedure, we have
taken the liberty of making certain changes in the sample form you
sent us. As we pointed out to Mr. Edmiston, we can only enter such
items as have been purchased for System account by this bank as or
dinarily we would not know about purchases made by other reserve
banks in their respective districts. The same is true as regards
maturing items.
We added a heading for Sale Contracts as well as one
to take care of Foreign Currency Bills, for while we understand
that you are otherwise advised of these figures, we felt that their
might be possible advantage in having all acceptance data grouped
on one page.
It is our intention to prepare a supply of mimeographed
forms upon which, for the sake of convenience, we can enter the
appropriate figures from week to week. Before preparing these forms,
however, we should appreciate your advising us whether the captions
as thay now appear are satisfactory to you.
£
■~v Very truly yours,
E. 0. Douglas,
Manager, Bill Department
Dr. E. A. Goldenweiser,
Director of Research and Statistics,
Board of Governors of the Federal Reserve System,
Washington, D. C.
D E C L A S S IF IE D
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority j^- Q
,
& q r 19
Mr* 1 * 0 * Deugl***
Wmsmgrnt
Bill Paprt— nt tad Otllfotion Dopartraat
P*d*ral ®*ilarwi 0mlt ©f liv York
l«w Tork# B*v Tortt
D*ar l&r* Dmsglatft
la «6oordaie» *itfa your conversation ** M*jr If
with Hr* S M t t « c «* *fcoald apprealat* it If you
m m l d sand ** tb» figure# on til* Symtmm** porofcasaa
and foldings of a**»«ptane«a a* shown la th*
table. W* should also like for you to M i d us thas*
rigarvs cturr«rci.y ax «*• m m w
•aon sxatsMiziT w#*k
la tilt ftttara.
V*iy traly ycHtr*#,
S.* A. Qoldarmwiser
M m lo r « f H*ts«arefe « a d Statist!**
Bnelostir* * 1
&S*Jfe
lift
l^ SQ l
FEDERAL RESERVE TRANSACTIONS IK ACCP'TANCSS FOR SYSTEM ACCO0HT BY MATURITIES
Waak andad
liaroh 84
Puroha«a« of
dollar aooaptanoaai
1-16 day*....
10*30 day*#..
51*46 day* ***
40-60 days...
61*90 day**..
91*120 days#*
If1*180 day**
Total•«..
Matured from
portfolio..
Chang* In foraign
•ucpen** account*
Syst**’
* holdings
at and of period*
March 81
Apr* 7
Apr* 14
Apr* 21
Apr* 88
Mfcy &
May If
V ¥
%
■
I
W
ta*ds§* ^ a a B m i a m o y ^ ^ s 4 -a asb ® w > m
iiQg£b&j> bflfik
**oo«pt<mo«» 3dl4
by im K bs&ks
.. 2- 13 033
IOY.10- 24 896
1*0. SI- 32 873
iifty 1 4uft« 303t**«uI c m ifm * + *7in f
Jter oont
Of
3 t© 4
fofcal bankers *
aoceptanae*
outattmdlnfc
m m m u w s ® m z * m m :\ \
D
*®r cent Aooeptaaee*
Total benders'
of
w i i r
4lOOOpt4tOOO« hold2 B to 0 ®Mdb®r bsnldi'
by
1. b&axs
4 7 *9
13 970
33.6
42.3
62
79
ti
103
462
441
M
301
107 90t
♦Apr* 20- 47 503
V « M 30- 71 093
*Sept.l3- 32 609
**o t . 17- 97 739
*B&a. 29-127^497.
Ifrr* 3- 10S 330
Juaa 30- 137 370
Dec. 31- 353 £34
n&r. 2- 114 030
V«a* It- 202 270
*Ste«.l§- 273 366
10- w
ib w
W
lo * *
uw *m ~
10M i 29w0a a vtM&i date’ Sov.l4 7 7 300
30O.27£sa«sl H«por*fp.23
$ZZ
m
821 623
400 6
286
216
377
303
0'34
<*40
072
673
378 331 [ c m 74 i$Jj: 4
t # to tot&l *ooep%s*a«#^
lifcbilltU. v; ;
*
»rel
in *
4* 461 4
H i 30- 444 3
1st* If* 665 4
B30. 31- 641 0
$6b«23- ^Lt §23
J«a«&0- 333 §lf
271 toi
Kov.30- 347 332
1*0.21- 403 339
43*6
49.7
3 3 *9
63*0
l*d.31-l J00 000
272
314
337
49©
346
499
407
614
33ft
369
I
*
16.2
^ u a 3 Q~231 W m iw m 90 6 3 4 }
5 6 .6
66.1
1 4 *3
1930
1931
*9aa
1133
1934
May 4- 473 8
Jim# 30- 673 5
I0V.15- 647 3
1*0*39- 593 7
Apr*30- 370 300
June 30-255
QollSOi fwE m
S o t .30- 153 303
Boo*30- 169 387
40.3
37.9
36*9
^pr.2 3 - 304 1
«2ua.S0- 431 *6
3*0.31- 363 $
Aj>r*30- 63 337
Juno 30- 36 7S7
1*0.31- 110 364
13*3
#eft*3S~ 69
915
«tm *S0-
431 300
349 300
«aftj>*14- 313 300
D#o*33— 436 300
J#r*30- 139 190
«*«&& 30-140 956
ftp *30- 110 027
i*0.3l- 339 344
413 300
J4^afr» 304 600
034*10-* 357 000
497 TIN)
Btr.31a«a*303#j>*3dS**t31-
316 733
Wua.30- 320 770
' P»#*39~ 400 191
l^r*10~
**pr*3-
1933
*pr*6~
3 1 7 537
jus® 30- 407 $16
tq p 4 ,1 0 - 4 £ 5 337
Dto. Si- 540 166
051
3*0.31- 139 176
*m *3 0 - 12?
144
13
m
357
433
934
473
734
J»*S1- 306 0 0 9
#•**33- 305 374
l*r.31~ 193 373
359
§|J
516
873
49*6
Apr* 1-
109 142
40 z m
145 045
14.9
33*1
39*6
47*3
A|>r* 1~
105 110
25*3
4 4 .8
Apr* 1-
J fa *. 31- M l £ 4 2
4 9 .5
36.0
6*3
34*5
51.6
A$T*1-
* pr* 1l--
T O 001
28,5
6*2
29.9
33*6
34.6
56.0
iNNfeSI*
834
303
000
757
630
■
•iuxi® s o - 607
*sly 31- 569
*ttg*51* 655
&Vpt«30~ 407
Oat* 31- 474
Xov.So- 639
£fco*31- 773
J a n .3 1 *
37.6
fc*38~
2i&r«31Apr*30Mssf 39-
335
359
137
074
345
M2
334
147
025
146
76a
736
396
ggg
333
253
31-334 073
47*1
313
315
313
341
31-*367
353
307
313
34a
344
357
373
37.6
39*0
39.1
34*6
43*4
41*7
36*4
33*3
44*3
51*4
51*3
43*3
006
330
*47
633
*60
507
399
040
310
414
601
139
506 694 io*tt 33 322 J
45.1
0.8
110 620 lovm 33 900}
£6*6
5.2
216 537 (onm447i044J
47*5
13.0
176 049 Cowa 23 756)
44*3
6*5
333 375 (Om 61 T O !
74.6
20.3
r
a
•j.**—
525 at4
*u»e 30- 447 SOS
1M0*31-
650 $m
534 zm
*
Includes
^an. 30- 783 254
i'eb. 2S- 767 127
&ar*31- 745 660
/ i-,r*30- 720 611
lay 3d- 665 333
t^tano 3 0 - _ £ £ U M _
*»iy 32- 600 487
u£. 31- 582 6’ci>
614 151
o«pfc
^ot* 31- 601 647
lev. 30- 7£6 395
Jo a.31- 756 260
«ix*n.31- 773 604
i&bmH<J— 735 466
609 446
Uar.
i:*|5r*s o - . <no $66
31- 774 7£0
30- 751 270
July- *:1- 7ft 2$8
*«g*31- 782 065
300
2*9
243
COiJ
227
^43
214
£57
272
330
363
37 J
319
295
23tf
237
ZZ7
no
163
105
618
^6
630
lu7
i;a
93£>
917
094
1 ::i>
391
;-jj>
72 ^
244
3&11*
S3 j
231
343
335
I~-i
3S.1
39*1
33.4
33*0
34.6
40.0
25*6
44*1
45*1
4/ •0
51.5
50*3
41.3
37.6
£3*4
29*3
29*S
25*0
22.6
v'C^n acceptances hold
by accepting b&oKs
t30
L;> $93
73 004
56 651
39 822
46 237
SI
54
32 296
l s i l l * feoqgit*
1 Does not include o«s aaoepfeiaoos held by &seepting ben a 3*
*XnaludM' '&aod{>t&aa»8 of br^o^cs end a^oncioa of foreign bmfcs but not tri&e
'jo|>tfiaoM exaopt as
lttdlos.t*d»
o
"
---- declassified
.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority ^ - 0 -
Form F. B. 1S1
?c rB IN GENERAL FILES
J
~
Jy
BOARD DF G O VER NO R S
<r7X\
r
□ F THE
FEDERAL
RESERVE
SYSTEM
Office Correspondence
Tn
DafP
Mr. Morrill____________________
May 19, 1937
Subject
From__ Mr /^Sinead
As you know, the Federal Reserve Bank of New York has recently
$
purchased a small volume of bankers’acceptances.
On May 12 the Federal
R ^ e ^ e n B a n k 'Of New York purchased a total of f?95,220.38 of acceptances
from the Bank of Manhattan Company at a rate of i of 1 percent, participa
tion in which was given to each other Federal Reserve bank except Boston.
The amount allotted to each of the eleven participating Federal Re-
$34-6,057.70
75,647.49
81,508.61
New York
Philadelphia
Cleveland
Mr, Szvmc?ak
Mr. McKee ..
Mr. Davis .
Mr. Fa ;om
Mr. Clayton
Mr. Merrill .
Mr Bethea
Mr, Carpenter
Mr. IDoell
Richmond
Atlanta
Chicago
St.Louis
29,395.48
25,500.34
76,064.52
26,067.26
Minneapolis
Kansas City
Dallas
San Francisco
18,794.39
27,376.22
25.552.48
63,256.39
795,220.88
TOTAL
Mr.
Mr.
Acceptances, payable in dollars, previously purchased during 1937 by
Please note
/a
ral Reserve banks are as follows:
*>■
Bank
New
San
New
New
New
York
Francisco
York
York
York
Amount
Date
March
March
April
April
April
24
29
2
14.
22
Total
$ 232 ,795.62
33 ,737.9 7
87,388.34
89,834.63
3U.789.73
755,546.29
No participations were given to other Federal Reserve banks by New York in
(3 a m
!
acceptances purchased prior to March 12.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A a S lF lE ir
Authority ^ - Q .
j
cy
f
May 19, 1937
Mr. Morrill
vX_
.
Mr. Sana&
-7
At you know, the Federal Reserve Baak of lev York has recently
purchased a sml l volnne of bankers
* acceptances. Du lay 12 the Federal
n
.. Wl
„
--
,| —
t " -•
Reserve Bazik of Hew York purchased a total of $795# 220*88 of acceptances
fron the Bank of Manhattan Coapasy at a rate of §of 1 percent, participatlon in which was gives to eaoh other Federal Reserve bank except Boston*
allotted to each of the eleven participating Federal He*
as follows*
lew York
Philadelphia
Cleveland
*346,057.70
75,647.49
81,508.61
Richmond
Atlanta
Chisago
St.Uouis
29,395Jfi
25,500.34
76,064^2
26,067.26
Minneapolis
Kansas City
Balias
San Franeisoe
13,794.39
27,376.22
25.552.48
63,256.39
WVTAT
jvsju#
795,220.88
Acceptances,gpgr&ble in dollars, previously purchased during 1937 by
Federal Reserve basics are as follows*
I^y&
lew
San
Sew
Mew
Sew
York
Francisco
York
York
York
gate
Karsh
March
April
April
April
24
$232,195*62
33,737*97
*7,3*8.34
89,834*63
29
2
14
22
Total
* » , M 6.29
So participations were given to other Federal Reserve banks by lew York in
aoceptefcses purebased parlor t© March
Reproduced from the Unclassified
D E C L A S S IF IE D
I Declassified Holdings of the National Archives
Authority E
O
\
ipjrU 6, 1937
fti * IWI^JUUi
Mr. 8aead
f~JC
In connection slth Mr. Hale* s letter of March 29, advising of t&e
purchase of 133*737*97 face amount of talker** acceptances on Kareh 29,
there is attached a schedule received from that batik this aoraing list-*
iag the acceptances purchased* the only ether purchases made by the
Federal Beienre banks since March 19f 1936, were as followsi
Purchased bgr the Federal Reserve
Bank of K*w York froa the First
Boston Corporation on March 24, 1937
Purchased b*y the Federal Reserve
Bank of Mew lork froa the First
Boston Corporation on April 2f 1937
*232,795*62
87*388*34
the schedules reporting these purchases are attached*
Attachaeats*
'5 X . {>
JL/
lf t S O '
DECLASSlHtu
^ ^ ^ ^ S i ' c e d from the Unclassified
I Declassified Holdings of the National Archives
Ur. Hoy A. Youna, Oorwoar,
FodoraX losarYO Bank of Boston,
Boston* Massaohusotts*
Authority 1 _ O J A 5 0 \
,iKlt o 1MJ
'
" ***
$oar OoYtrcor Young*
This rofors to your l^ettor of Doooabor 27a l»55i
r«ply to
tho Board** lottor of Poogabor ffc^Jwtth rospoot to tho parohasos of
bills by tho FodoraX Hosor?o Bank of Boston roforrod to in tho two tolo*
grant* nhioh you addrossod to tho Board undor dato of Doooabor 9f 1933*
You stato that tho tranaaotioiis 1& quostlon woro of
a
oustoaary oharaotor,
ooeurrod in tho ordinary oourso of businoss, war# not ongagod in for tho
purposo of
a f footing
gonoraX orodlt oonditiona and did not
Hi t *
a aatoriaX
offoot upon ganoral orodit oonditions; and you osxpross tho opinion that
tho transactions* for thoso and othor roasons aontionod in your lottor9
did not roquiro tho approtal of tho Fodoral Hosorro Board undor th#
toras of paragraph ft of Sootion VII of tho Board’
s Rot a t i o n 11*
Upon oonsidoration of tho nattor in tho light of tho stataaonts
ooatainod in your Xottar, tho FodoraX Hosorro Board soos no roason to
diffor with your w i m that tho Board's approval of tho purohaso froa tho
Matlonal Shawaut Bank of Boston of biXXs in tho aaount of #2,Q0Qt000c
whioh was roforrod to in ono of your toXograas of Doooabor 9$ was not
roquirod undor tho provision of HoguXation M in quostion*
In your othor
toXograa of that dato# howovor* you advisod that tho FodoraX Rosorvo
Bank of Boston had suggostod to ono of its asnbor banks thatc if it
D E C L A S S IF IE D
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority ^ - 0 - ^
Mr* Roy A. Young - - 2
later should find it necessary to offer any bills far sale, such offer
be made to the Federal Reserve Bank of Boston instead of to the Hew York
marketj and the question whether the Board’
s approval will be necessary
under paragraph 5 of Section VII of Regulation M as to any such purchase
should be determined by the circumstances existing at the time that the
particular purchase takes place and will depend upon the character of
the transaction, the amount involved, and other factors*
Attention is
invited to the fact that all such transactions, whether or not the
Board’
s approval is required, must be reported daily to the Federal Re
serve Board under the requirement of paragraph 1 of Section VII of Regu
lation M and the other applicable requirements of the regulation, of
course, are to be observed in any such case*
FOR APPSOVAt
Very truly your®,
Secretary*
If you approve, pImm
tettiai and ratals It /? sH / /
It, Carpenter
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^
33 e.H
/
3 - 3 - 3 - ----
JAN1 01934
Mr* Hoy A* Young, Governor*
?«d«rtl Reserve Bank of Boston*
Boston, Hesiaohuaette*
Dear Governor Youngt
Reeaipt it acknowledged of your letter of January 11,
1984* in which you advise that tha Federal Reserve Bank of Bo•ton
haa purchased bills in tha amount of #1 ,000,000 with maturities up
to forty »five days at a rata of ana-half of ona par oant from tha
Hhoda Island Hospital Trust Company, a nonmeaber bank, with its in <*
dorseaiantT"
^
You state that you bought the bills in question in the
usual aoursa of business to inoraaaa your earnings and that tha
transaation was a usual ona having no natarial affaat upon tha general
oradit situations and you advise that you ara reporting this natter to
tha Board in aaaordanaa with paragraph 6 of Section VII of Regulation
M*
You apparently feel, however, that thia purehase waa not ona whleh
required tha approval of tha Federal Reserve Board under the paragraph
nantloned and, on tha basis of the information contained in your letter,
the Federal Reserve Board seas no reason to differ with this conclusion
with reapeot to this transaotion*
Tha only provision requiring a re*
port of this purehase, therefore, is that In paragraph 1 of Seetion VII
Q. 1 ^ 5 0 l
Reproduced from the Unclassified / Declassified Holdings of the National Archives
”
BECtA'ssmwr
Authority ^ - Q .
Mr* Roy A* Young - - 2
of the regulation which retires that all open market transaction*
other than the purchase and sale of Government securities shall be re**
ported daily to the Federal Reserve Board*
Very truly yours f
tSJjrrfccf) Chester Mewfl!
Chester Morrill,
Secretary*
FOR APPROVAL
/ "
«W.
Mf. H a m l i n . ,
Mr. Mite....
----------
j
Mr. Thomas..iff /
*f
approve, please
and return to
m'. uarpeate*
E KT f
G B Y /s a d
o r m t.Lt i n u o w
JAN 221934
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^
"Y w
FEDERAL
RESERVE
BANK
OF BOSTON
ROY A.YO UNG
GOVERNOR
Januaiy 1 1 , 1934
Federal Reserve Board
Washington, D. C.
Gentlemen:
Pursuant to our telephone talk today, I advise that this
bank has purchased for delivery tomorrow, fl,000,000 in prime
bills, maturities up to 45 days, at a rate of one half of one
per cent, from the Rhode Island Hospital Trust Company ( a nonmember bank) with their endorsement.
In accordance with paragraph 5, section 7 of Regulation M,
we are reporting this to the Board and advise that we bought the
bills to increase our earnings, and in the usual course of
business.
The Trust Company sold us the bills to provide funds
to cover an actual withdrawal from their War Loan Account and
other anticipated withdrawals.
If this bank had not purchased the bills
been sold to the New York market and we, there
transaction is a usual one and has no materia
general credit situation.
old have
/eli eve the
upon the
lours
R. A. lo
Governor
/op>
1^50\
Reproduced from the Unclassified
I Declassified Holdings of the National Archives
Authority ^ - Q -
\\Vj
FEDERAL RESERVE
BANK
OF BOSTON
ROY A.YO UNG
GOVERNOR
December 27, 1955
Mr. Chester Morrill, SecretaryFederal Reserve Board
Washington, D. C.
Dear Mr. Morrill:
This will acknowledge receipt of your letter of .D ecember 22.
and in reply to your srpecific inquiry I advise that in my opinion the bills
purchased by this bank and reported to the Federal Reserve Board did not
require the approval of the Federal Reserve Board under the terms of
paragraph 5, Section 7 of Regulation U, for the following reasons:
If a free and active market for bills is to be maintained
throughout the United States, obviously a Federal reserve bank or the
Federal Reserve System must be prepared to accept all desirable bills
at a rate.
In other words, the discount window for bills must be open
at all times - not partly open and partly closed and certainly not closed
entirely - otherwise there can be no free open market.
If for any
reason we feel that we should not take desirable bills offered to us, our
refusal should be through a punitive rate which should prohibit their
being offered to us.
This is a precedent of long standing in the
Federal Reserve System and, in my opinion, a thoroughly sound one.
In regard to the two transactions mentioned in your letter,
it appears to me that we operated entirely within the regulations of the
Federal Reserve Board and not because of one exception, but because of all,
which are as follows:
(a) The transactions were of a custosnary character
(b) They did occur in the ordinary course of business
(c) They’
were not engaged in for the purpose of affecting
general credit conditions
(d) They did not have a material effect upon general credit
conditions.
d e c l a s s if ie d
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
Mr. Chester Morrill
-
t
Deeember 27, 1953
2-
The Federal Reserve Bank of New York which is the large
bill market of the United States buys bills at a rate dai2y~ahd while the
Boston market is much smaller and narrower, there is no/reason why the Federal
Reserve Bank of Boston should not be in a position to pffer jC
cie same service
as New York, particularly to its own member banks.
o
Yours1
R. A. Young !
Governor
t(\ 5o '
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
Authority ^ Q
VI
1
-V
/
*
T
X
,
.
'"4
>
' ,f| V
J
lfe% Soy A* Ttm$i Governor,
Fedors! Reserve B«k£ik of Bostoa*
Boston, Massachusetts*
DEC 2 ^
Do s t Governor Young t
Soforeae# is
Mode
to y o w two ^ologrMM of Poooaborfr,
l§ 3Jt ta regard to jmrohases of bill# by tfao **4oral Reserve Bank
Of Bottom#
In one of those telograns you stated that the Federal lo
ser** Bank of Booton has suggested t© ©as of its Member banks that,
If it Istor should £ £ M it .asooosary to offer any bills for sals# suoh
offer to made to t&ft U M l
Reserve Bamk of Boston instead of to the
Bow 3ftSfc Market* that this action was taken because of your desire to
iaeroase your earningif and that, 'if such a purchase by yovn* bank is
ultiMately consulted, it will have no Material offoot upon tho genera#oredii
In tho Other telagraa you stated that tho Federal Reserve
Rank of Boo ton M# purchased frow the Jiatlonal 3bawmut
of Boston
indorsed haa&ors1 bills in tho aaount of $2f0O©t$Q0# at & rate of onohalf 'Of ono por oent, with Matwltio# fro* eleven to fowtoon. days|
that you purohaood those b ills because you desired additional osnsi*
lugs, beoauee with the expanding seasonal demand y o w action had no
effect upon tho Money Market, and because tho member bank had previous
ly purchased sows short-term OovercMODt secw i ties that wore tiMod to
SO
R e p ro d u c e d fro m th e U n c la s s ifie d
ID 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
Authority
Mr. Boy A* foia^j
'Off*»r*d tto bill* to. th* Fedora! S**®rw* Bank to rwlfiw th* temporary
«&$**£!£* dtnring tb* loterim*
tm $h£* connection yon #fc*t*d that you
■ad* tho purchase of thews bill* in aceoaydane* with paragraph, 5.of #•&»
tton 7 o f Regulation « i» .
will ob**rf» tfe&t p**«g3*aph 5 of *ection 7 of Bognlatloii
•M* jw*Mto* that, accept with th* approval of th* 9*te*3L fi***rv*
Board, m Fodoral rwaerv* busk *ball *^«g* in any opan *arkot trenaaotions(a) which a** not of th® ci»t<mary character, (b) which do not occwr in the ordinary ooure© of' boBluess, (c) which are engaged in for the
purpooo of affecting general credit condition*, or (d) which aay have a
*
material effect \ipon general credit condition** with
a
provl*o that any
Federal r**«rv» bank way purchase obligations for th* purpo*o of afford
ing rali*f in a situation involving a *p*dfle hanging Lnetltutioo in
it* <n*i3?&et*.
It la not clear, therefore, that the traa*octlon* referred to
a?^ovai
in yowr two t40*gr&*a are of a character which *ay be engaged In without
of th*
Mr
Saaortw Board before th*y are eiamti—fit*d
U\ mt
wad It * H X b* app*«l*t«d If you wlU *tat* m x m »pe<dftftagly tb* rea
Mr
son* why In your opinion they do not reqwire approval of tb* Federal 1*^
if ism
Mr
wi$#r paragraph 5 of **etlon 7 of Bogt^tlon "IP1, *0 that tbo
3ppiOV0j
initial and roturu
matter mmj b* five* fall ooo*ldwratlon before tb*- Board rale* upon th*
0
S O 1
Reproduced from the Unclassified
D E C L A S S IF IE D
I Declassified Holdings of the National Archives
Authority
'
F o rm
A
\S
1 18 b
TEL.
*7.
FEDERAL RESERVE BOARD
WASHINGTON
Deceaber K f 1913*
louag - Bo#to®
Bad«ral B® aerr® Beard latorpoaaa »o objection to y o w bank taking the
of the Fedaral Baa*rv» Bank of tim tork# in addit&ttn to yo«r
own allotaeiit^or bankers* M i l s purchased dU&tly by t&® law lark beak,
yjstiX y@t3sr total holdlngD of bazikwra* &cc0pt4U2cos amount to
I
;
#35,000,000.
{&aM$ iftimw iWHTM
aforrill.
cc:
Mr. Smead
ATSOft&fcMEFnW*
___
occ
1 81333
0
^
1
DEC LA S S1 F IE D
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority £ - 0 - I ^ S O j
TELEGRAM
FEDERAL RESERVE SYSTEM
(L E A S E D W I R E S E R V IC E )
B oston £©c 1 4 10 5 8 A M
RECEIVED AT W ASHINGTON, D. C.
B oard
W a s h i ng t on
I n ad d i t i o n to t a k i n g m o u r regular allotment of B an k er s a cceptances
p urch as e d by the F E B of N e w T o r k daily we have a lso ag reed to
take their share u n t i l our t otal hold i ng s r e ac h ap p ro x im a te l y
thirty five m i l l i o n dollars in a c co r da n ce with r e g u l a t i o n M
We are report i ng the contemplated t r a n sa c ti o n to the Board.
O ur r ea sons are the same as gi ven y es t er d ay
Young
11141
U. S. GOVERNMENT PRINTING OFFICE: 1993
16---764
Reproduced from the Unclassified
D E C L A S S IF IE D
I Declassified Holdings of the National Archives
Authority
\ i
l e o r m li f e
\
~ A
T E L E G R A M
to
vlf
A
FEDERAL RESERVE BOARD
WASHINGTON
Boceaber 13, 1933.
Xouag * Boston
JtoJMJaflQg&Li, Federal B « n m Board approves purch&ss© by your bank from
tbo Fester®! R®i»«rv» Bank of Hew York of approxi»at«lj #8,500,000 of bunker*1
bills with Maturities up to 90 days at a rate of 1/2
Morrill*
cc:
Mr. Smead
ICEfl#'
FULE,
B
0
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
- 0
i
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
B©c«ab©r 13, 1933
Barrisoa - Hew Tork
Board hm r#eeiv®d
Governor loung advi&i^g that tb© Feder&l
Re««rv© B&ak of Boston has ‘
today agreed to taka frcm the Federal Be0erve
Bank of Sew Tork approximately fS, 500,000 of bankers1 bills with Maturities
v® to
90 days at r&ta of 1/2 of
l$ f and G&vermr loxsng hm beoa advised that
Board approves proposed purchase*
Morrill
iknert) Chester Sir
1^
\
M a M m ;
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
TELEGRAM
♦
FEDERAL RESERVE SYSTEM
*
t
3 2 . 3 , if
(L E A S E D W I R E S E R V I C E )
**
S*
lft_794
RECEIVED AT W ASHINGTON, D. C.
16QB MB
Washington
Re our XE7 date please correct to read
"at one h a lf per vent*
Instead o f "two and on a-h alf per e e a t."
Boston Dee 13
407pm
U. 8. fiOTSBMMSMT PRINTING OFFICE: 1933
16---794
£-Q-
Reproduced from the Unclassified
— DECLASSIFIED
I Declassified Holdings of the National Archives
Authority ^ - Q - l ^ S O j
TELEGRAM
1933 D E C 1 3
PM
2
2 4
FEDERAL RESERVE SYSTEM
^ S Ji' v'~y
(L E A S E D W I R E S E R V IC E )
127 bmr
RECEIVED AT WASHINGTON, D. C.
B o s t o n 21Op Dec 13
Board
Wash i ng t on
We have today a gr e ed to take f r om the F R B of N e w Y o r k a p pr o ximately
eight a nd one half m i ll i o n of bankers bills maturi t ie s one to
n in e ty days at two and one half percent.
In accordance w i t h
reg ul a ti o n M w e are repo rt i ng the transaction to the Board. Our
reasons for buying the bills are - one the N e w Y o r k banks
reserve is still low ours is high: Two-We need the additional
earnings: Three-The t ransaction has no effect on the m o n e y
market
Young
221p
O. 8. fiQYZ&NliXNTPRINTING OFFICE:
1833
16— 794
Reproduced from the Unclassified
---------D E C L A S S IF IE D ,
I Declassified Holdings of the National Archives
Authority ^ - - Q-
TELEGRAM
1933
DEC 9
AM II
12
3
FEDERAL RESERVE SYSTEM
3 g , <-f
(L E A S E D W I R E S E R V IC E )
RECEIVED AT WASHINGTON,
•°-c- / a / f
7 2bf a
Boston Dec JL-llam
JQ ;/ C
3 3
Board
Washn
I© advise that this bank has suggested to one of its member banks
that if the membe r bank found it n ecessary to offer any
bills they offer them to us instead of to the N e w Y o r k Market#
This actio n was taken because of o ur desire to increase our
earnings and if u l t im a te l y consummated will have no material
effect u p o n the general credit situation.
Y oung
1111 a
i
V. 6. GOVERNMENT PRINTING OTHCB: 1933
16---794
Reproduced from the Unclassified
I Declassified Holdings of the National Archives
Authority S . Q . i f t S o '
TELEGRAM
FEDERAL RESERVE SYSTEM
(L E A S E D W I R E S E R V IC E )
1933 DEC 9
AM II
15
,
RECEIVED AT WASHINGTON, D. C.
10— 794
73bfa
B o s t o n Deo 9 H am
R - . , f
Board
fashn
U nder date of Dec seven|;his b ank purchased f r o m the National Shawmut
Bank of B o s t o n t w o m i l l i o n endorsed bankers b i l l s at one half
of one percent m a t u r it i es eleven to f o u r t e e n days. W e purchased
theser in accordance with parag ra p h five S e ction seven of regulation
M and for the follo w in g r e a s o n s - One, We wanted additional
earnings ; two , w i t h the e x p an d in g seasonal demand this action
had no effect u p o n the m oney maiket; three, the member bank had
p reviously purchased some short time Government securities that
were timed to m e et certain m a t ur i ti e s coming due in the future
and the bank offered u s the bills to relieve temporary situation
d ur i ng the interim,
16-794
.V.S.OOVBSNMENTPRINTINGOFFICE:1938
Y o u n g 1114am
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
/
T E
FEDERAL RESERVE BOARD
W ASH IN G TO N
Dacaabor 09 1933.
j!
Young - Boitos
Bafarrlsg your toiagraa data and confirming «mr telephooa
eon*
Teraatioa, I • A m i Heaarve loird approve® purchase by yo\ir bank
froa tbe Federal Rasarra Bask of Mew York of # 1 0 ,0 0 0 ,0 0 0 of
bankora* acceptances with aatnrltlea up to 9 0 daya at a rata of
1/i of 1#.
(Signed) Chester Morrill
Morrill
cc:
Mr# Smeadv
0
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority fl. 0
"f
F o r m 148 b
TELEGRAM
t
FEDERAL RESERVE BOARD
W ASH IN G TO N
DEC 8
1933
Harrlsoa • Hew York
Board Iws r e o a m a toia«raa froa
that amagsnsnts fca*» fcoea *ada for purcfcaii by fsdsial Baaan*
Baak of Boaton fwai Fadaral Raaarra Bask of Saw York of #20,000,000
of fea&kara* aoeaptaiioea with nat&ritlea up to 90 days at rata of
1/8 of l*t and Governor Youag has baaa a4hriae<5 that Board *pproT«a
proposal purchase.
Signed) Chester
Morrill•
SBP-jcb
— DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - . Q-
TELEGRAM
FEDERAL RESERVE SYSTEM
.n
-* ■
5 3 3 , Lf~
(L E A S E D W IR E S E R V IC E )
DEC ‘
RECEIVED
16—794
AT
WASHINGTON, D. C.
QObfa
Boston Dec S
12k
Board
W«ahia
This bank contemplates purchasing ten million in bankers acceptances
from Federal Reserve Bank of ^ewYork maturities up to- ninety
days at a rate of ©me half of one percents This action is taken
because NewYorks reserves are low and earnings high and Boston
reserves high and earnings low* I have boon informed by telephone
;
that a transaction of this kind requites approval of the Board and <
therefor© wou!4 appreciate It very m c k if yom would wira reply
promptly; :
'f
Young
DEC 8 1993
. eovM n M a m
m anm o om cs;
m
lft—794
r--------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority fl Q
A M
FEDERAL RESERVE BOARD
— /
W ASH IN G TO N
J U N 2 7'i<y3
y -7 ^
Conniff,
Atlanta
Xn&SBttdi as Board*a &*f»latl0n B f<rrar»a opaa warkat
psrchiitt of bill# of •x<NhsB(pis trada *oo#pt&8Cii a&A
V&nkara1 accaptaacaa under aactiois
FoAoral w w r w
banka Maj contiim© to purefeaaa bankar»* accaptanoaa
in tcoordanot with that rtgaUlioB*
■ORBILL
tSi^nad) Ch-5^ m »
Mr.
Please
Pice n o a - ' d
Retuvn \o »»►»• v.v.t>fc"tei
p
h
g r
PY
7
?
I^
\
D E t L A M ir 1
Authority J L 0 J A 5 O 1
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3 33 . V
x'X-7477
Carded
con.
June 27, 1933.
Conniff,
Atlanta.
Inasmuch as Board* s Regulation B governs open market
purchases of bills of exchange, trade acceptances and
■bankers1 acceptances under section 14, Federal reserve
backs
continue to purchase "bankers* acceptances
in accordance with that regulation.
UQSHZXJj
D E C L A S S lF lE lT
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
E .Q . l f t S o l
TELEGRAM
E r ir n ir o A l
d c c fd \ / f
< n / r T g u R E C E lV E D
F E D E R A L , K t b t K V c b Y b l(FFf|jE OP GENEBAL OOTOBL
(L E A S E D W IR E SE R V IC E )
1A _
JUN 26 1933
RECEIVED A T W ASH INt?! UN, U. Ui A.^IW.
NUMgtff
94fot 45
Atlanta l239p June 26 1933
Morrill
»
Washingtoni
Under the banking act of 1933 no Federal Be serve Banks May engage
in open market operations exeept in aeoerdanoe w ith regulations of
Federal Beserve Board. Please advise if ve may purchase bankers
acceptances originating in our district if offered by somber bank
Conniff
149p
18—
794
Reproduced from the Unclassified
D E C L A S S IF IE D -
I Declassified Holdings of the National Archives
Authority £ . 0 . > ^ S O \
July IS , 1933.
J
3 3
,
*f
Jnlv IS- rrlAnyl
$h© Board continued I t s meeting frith tho 5ovemors»
voted as fo llo w s^ - 9 to 3 f o r tho resolution givsa bolowi
TimGovernors
Iloved that the Ifcsocutivo O om ittee be author!r>ad to
tswsr Goremaent sec u ritie s to the extant necessary to
maintain
reserves o f
"banto at appfoxlrmtoly
2Q0 o i l -.ion d o lla r s , to ta l purchases to be lim ited to tlio
am uat previously authorised by tho Open Market P o lio p
Confersno* tiiioh i s 30? m illio n d o lla rs * For the ^ud&anoo
o f tho &xoouftlve Gom ittee i t
tho
o f the
oonferenoe that except in unusual o r unforeeon circumstances
purchases should not osceed 15 m illion d o lla rs a tiaek, bat
f o r tho naact four wee
should ho not le s s than 5 n U lio n
d o lla rs a week#
mown
mmtibor
mm
$mm
Im
Sis throo totes wero probably tiwcmorn McPou^al # Yoxng ml Seay#
She meeting then took t%> the question of regulations cov&rias
the new al&ss ar^entesnt* A fte r much discussion§it \ms detemlned that
a li iItation should he put upon tho federal res<snpe baalcs as to those
loans to individuals to 1$ o f tho a&pltal and surplus of Federal r e s o w
banks, unless a la r g e r m*a wore f lo w e d an application to tho Federal
Jlosorve Bor.rd*
It mm also determined that tho rate o f Interest to he charged
shotald he practically the customers rate charged in tho district# Bom
thought that the minlmm rate should ho the m t e for loans uadar
Section 10 (b) of the Glass soesggnoy hill. 3 M s was not f in a lly
detem ned, but the consensus of opinion seamed to ho that these should
not ho regarded as penalty loans, and therefore the customers r ,to should
generally ho followed.
fhe csatter of securities was then t^on ur>*
Governor Harrison
stated that he thou$it clearly t o t the a^eridiient would pemit the
Federal reserve hank: to ^iv© a o-^edit sn i^s books to the ind^ridu@l
borrower, and also seeded to eagree that if this wore so, a fixed balance
might he required as is tho usual case with rndfosT banks* and that this
fixed balance m>uld constitute tho security which, the amendment calls for.
Dr* Hiller said that it \10uld be vexy dangerous to peralt the
Federal ros v© bantes to give credit on its boote to tho borrowers* Ho
felt that they should give a chock for tho full mount of the loan, Hhich
the borrower could deposit in aone othor barite# Shis m t t e r was not finally
determined#
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
DECLASSIFIED _
Authority
j G
3*
$he
$mmm?t tor wsmtfk** aoiild
m %i t# the
tseiiE# ©©^iwid* « f oourse,
% an ondorBaacmt and aatlofaotoxy oollafceml* OoTemor
etymm9& Ifosspiatoa that this
Im d«a, Iral St*
said II
i u a d'b&tofel* X«0aX Ration. It
det«ii»sd* thorofor®, to I« flro
th6 r«gulAttono as thsqr ar«,
K M to fc$ly $*&t no w&dt direct
0*$*E+
g lY e a
ls s a eiroXd %e in a ls , m & J e c t to d s ls m lJ J & tta ii In th « f t & w # *
Bis resting than adjourned*
$0
— ------------------------------------------------------------ ---------------- ------ —
R e p ro d u c e d fro m th e U n c la s s ifie d
ID e c la s s ifie d
D K C L A S M U l II
H o ld in g s o f th e N a tio n a l A rc h iv e s
July A*\ 1932.
Ivisf
fhe to¥#rtiej?e m % with tho Boaid ia m opea-masfcet conferenoe
thl* *&g!&ixk$» #©v«mof Wt&»t £avo * reauai ®f th® slte*tio% &S0Pihg
that the epan tricot polioy M l been effeotive, and expressing th#
opinion that It would be vexy l l U d y i w i and clangorous to stop lit
that m ou^ht to 0 on, a§ the ©poratioiia from sow m wouliih®EV^.'i0 eh
m m tw m
t&ear ©<?*&d before* %mmw*
sold eaporte# Governor
Harriet** t h « addressed the nesting, showing the ^ood effect of % e a
aarkot operations up to the present date, a®d e3$>ressinc the f l m
belief that we ehould aontinue ICM^tajgr the ftxoesa resetvee at about
250 alllion dollar*.
Qm&VMV SidSoiigal @5g?re*se& t o opinio** that wo ehoald alep
feqrtX&g*. and 0*S*R* pointed out too him that ho originally voted for tho
sia^or opeffstioh* ** 600 nilliona on &pril 18th -* and aekid him whether
he. did not believe It would bo (^ia®eroias to stop ooig&letoly not* He
said ho could tee that thete »i$it be non* daa^ef frara II*
Oovofnor W » » thou#t it fm not neoessaiy to keep up the
a©o^»t to 260 atlliOBB ea&oeea r<*B#rves# hut that it nould he a ll right
to go on keepiag' ®*e re©©m» ftt about their present statue * a l i t t le .
over 300 taHlieiiau
0ofomoir fo**a§ euggested that while he mm origiaally oppoeed to
the operation and M l#t vote to discontinue if that were the sentiment
of the rntxt&mm** ¥** otherwise he beliffeA it would be wiie %o piNxieed
and buy a lit fla each week so that tho pdblic would not see Or feel we
had discontinued our open aaifcet polity*
0o#rota^ uilla addressed the meeting, eaproaain$ the f l m belief
that to atop purchases sow would be disastrous*
Governor Heyer, la hie opening i#idress* apoke of the piloted
amendment offered by Senator ftlass pemit tine direct loans to individuals,
ei#* He aald that all ove# the oountiy bank presidents are statin®
that everyone entitled to credit can get It. ie said this wag pure
"bxs** * that he tatew* and efsiyoae toe** that all o*e* tfc# oosattfy
people si*# were entitled to oredit * with satiafsoiory ooilateimi tm
baalaese ptufpote* * were mable te %mmx* it f ma the banka* Secretary
Hilla ataiod that only this gtef&lxtg he had net two gsRtlOiiaa who stated
positively that credit was not available even to zaanyborrowor* who had
gOOd oolliteral. He said that one representative of the Southern-Pacific
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
DECLASSIFIED.
, * , . P f\ 11\C
Authority
$
fcailroad told him he had m d e an eaamination all along their lines of
QtlstQGMr* itio ^imiihed them frs4#i» and that he w*# ft&tt§lt«d that
w m f of these ouato»«r» wan tad to ^ on and manufacture, m m $»®d
rtsks irith satisfactory collateral, yet were not able to obtaia credit*
la tho *ft#moon# <U»c\j»»ian as to the apea n^rkat pollagr *•§
resuwsd, aad thfra #«re’
s o w «%*•»*! go* #f
m t M pv0&m&
draft of regulations uaiar tha now Glass amendment •
Q*3*H* heard today, indirectly* that Mr* Morrill who w i down
at tho Senate ifran tho aiaac araeadnant m s introduced, called It to the
attantion of Ur* Ballaatlae, tha ttader-3acre tary of tha Treaauxy, who
■bitterly oppeaad It, and did all in his power to d ofoat it in tha Senate
a«4. in tha House, bit that when Ogden Mills returned frtsa Boston ha
$uid»dgr reversed thi* procedure awl did, aad is now doing, all he can
to tecrurs it* passags*
After the
Harrison told at th&t ha
therouefrly £ w * s 4 tha propaaad aia»« atsendoent, but that ha would go
errea farther, * he would act ha*e tha condition ic^oaad that tha borrower
«nut first try to dbtain & loan fraa a uwnbw bank* He earned to
almost enthusiastic about If*
Governor Yotavg told me that at first ha has opposed to it, but
that or further **anination he itt« inclined 1p think that it would be a
rev? wim nmtmr* tt adopl* In th# afternoon sassion, Qwm ar issgrsr
aanowioad that the Pre^ idmt w<7uld be very
to laaet the Governors
this ttmiftg* Hothing w«s said about tha federal Reserre Board mashers*
After tfclfelns the matter over, tho Governors felt that it mi£it b# very
tnbarrassine If this public ware to feaow that th# Governors all went to
the President* and Elicit areate a false ijopresslon, and therefore
Q w s m & W Mayor said he would tell the Preoi&ant that ha felt ihay had
better aot cone*
i
Reproduced from the Unclassified
D E C L A S S IF IE D .
I Declassified Holdings of the National Archives
tk
BILLS BOUGHT III OPEN MABKET BY FX'JItAL RESERVE 3ASKS I2T 1.928 J- - •
CLASSIFIED ACCORDING TO IMDERLIIHG COIv^ODIl'IES
!^ ^ i $
,
j
15-
(in thousands of dollars)
Commodity
1928
V' "
ACCEPTANCES BASED ON IMPORTS
Total
^ 7 2 ,7 7 7
Animals and animal products, except wool and
hair, - total
Egg albumen
E g g yolk
Casings
Bristles
Hides and skins
Leather and leather goods
Furs
Fish
Animal and fish oils, fats and greases
Ca.sein
Feathers
All other
75.126
1 |1 0 9
2,129
2,322
^ 5,851
^,531
12^6
1,0^2
95O
g<^
615
2,7142
Vegetable food products and beverages - t o t a l
Coffee
Cocoa
Cocoa, beans
Fruits: Figs
All other and not specified
Grains
.
Nuts: Peanuts
Walnuts
Almonds
Coconuts
All other and not specified
156,129
80,623
7 ,U 15
2,199
1,029
1,707
830
1,^53
*
552
7 77
293
g ^7
3,0U 5
1+7,115
Tea
Sugar
Spices: Pepper
All other and not specified
Tapioca
Vegetables: Beans
All ®ther and not specified
Olive oil
All other
Vegetable products, inedible, except fibers
and wood - total
Rubber
Tobacco
Essential oils
Varnish gums: Shellac
Copal
Damar
All other and not specified
'
L^g
gjjg
x gift
1 Lj-ig
g^Q
^ cjyg
^ , 9^1
29,649
5.765
*^262
235
Lj.^y
•
St. 6is6
I
D E C L A S S IF IE D .
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority
i
-
2
-
Commodity
Vegetable -products, inedible, except fibers
and wood, (Cont'd)
Vegetable oils:
Coconut
Wood
All other
Oilseeds:
Castor
Copra
Cotton
Hemp
Flax
All other and not specified
-111 other
~
Textiles - total
Braid:
Straw
Hemp
All other and not specified
Cotton
Cotton manufactures
Carpets
Hair
Henrp
Hats
Kapok
Silk
Hugs
r/ool
Burlap
Linen
Hope
All other
Wood end paper - total
Logs
Lumber
Woodpulp
Paper
Hags
Pulpwood
All other
ITonmetallic minerals - total
Cement
Crude oil
Diamonds
G-lass and glassware
Refined mineral oils
Pyrites
All other
1928
2,0^2
b,9 o'9
3 S7
108
^, 0^0
28
SO
U 76
3,991
129 ,236
U 33
131
2^-6
8,751
1,209
1,784
911
93^
2,923
99S
76,691
2 ,Ull
21,303
l,3o0
759
209
g.lS^S
18,284
1,776
2,2^3
6,897
3,097
1,93.4
2,357
^,513
kjO
634
566
963
520
100
l.2S0
S t. 6186
D E C L A S S IF IE D _
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority j - : Q . I f t S o l
Co r-modi ty
3
-
1928
Ketals and manufactures, except machinery
and vohiclos - total
Jintimony
Copper
Iron and sto61
Tin
Jill othor
6,958
379
566
2,289
1,098
2,626
Machinery end vohiclos - total
1,297
Chemicals and related products - total
Creosote oil
Potash
Fertilizer, except potash
Menthol
Fireworks
All other
12,367
$2%
8,330
209
29^
U 3U
2 ,173
Kiiscellaneous - total
Brushes
Films
Matches
Toys
Optical goods
All other
13,926
292
Uo4
I7 S
5
13,0^7
ACCEPTANCES BASED 01? EXPORTS
Total
Animals and animal products, except wool
and hair - total
Leather
Lard and meats
Hides and skins
Furs
All other
Vegetable food products and "beverages - total
Coffee
Cottonseed cake and meal
Flour
Fruits:
Raisins
All other and not specified
Grains:
Wheat
Rice
Barley
All other and not specified
Sugar
Linseed oil cake and meal
All other
T O . 7^7
13 yI+U3
1,^22
8,817
1,768
1*05S
37 s
82,559
1,022
2 565
U f’
o 62
1,W*
5,211
20,6^1
1,319
1,483
2,635
Uo,882
567
10
Z2JL.
S t. 6186
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority ^
-
4
-
Commodity
Vegetable products, inedible, except fibers
and wood - total
Tobacco *
ITaval stores:
Rosin
Turpentine
All other and not specified
Rubber and rubber products
All other
Textiles - total
Cotton
Cotton manufactures
Silk
Wool
All other
12M
5.^91
1,861
l,2lU
281
225
1,067
SU3
310 ,5U 2
307,936
967
1^6
2^9
1 ,2^
Wood and paper - total
Lumber
Cooperage stock
Woodpulp
All other
9,75^
-,.A
,... — ..
Honmetallic minerals - total
Coal
Refined mineral oils
Crude oil
A H other
Metals and manufactures, except machinery
and vehicles - total
Copper
Gold
Iron and steel
Zinc
All'other
6,310
Machinery and vehicles - total
Automobiles
Auto parts and accessories
Farm implements
Motors and motor parts
All other
Chemicals and related products - total
Paints and varnishes
Fertilizers
Borax
All other
Miscellaneous - total
Oil
Building supplies
Films
Matches
All other
119
818
222
3,668
^70
1,950
Up. 22*1
31,785
751
888
U 52
6.3^
29,623
23 .8X
7
2,010
226
2,2^9
1,321
3,015
1,014
919
273
- gQ9
*+
9,776
5,337
12
UU.U27
S t. 6186
0-
D E C L A S S IF IE D .
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
-
5
E 0 - 1^50l
-
Commodity
1928
ACCEPTANCES BASED ON DOMESTIC TRANSACTIONS
Total.
Animals and animal products,
and hair - total
Lard and meats
Eggs
Hides and skins
Casings
Furs
Fishj
Herring
Salmon
All other and not specified
All other
Vegotable food products and beverages - total
Coffoo
fruit 1
Raisins
Peaches
All other and not specified
Grains:
Wheat
All other
Nuts:
Peanuts
Walnuts
All other and not specified
Sugar
Eltiur
Tea
Vegetables:
Beans
ill other and not specified
Cocoa
All other
Vegetable products, inedible, except fibers
and wood - total
Rubber
Tobacco
Naval stores
Vegetable oils:
Cottonseed oil
Chinese wood oil
All other and not specified
Al! other
3^7,690
except wool
2612^7
7 >233
S34
10,780
53U
1,296
IO5
287
$+5
^»533
66,88*+
*+,2lU
5,251
197
2,813
10,639
18,212
*+62
102
1,196
16,226
1,803
$11
736
1,809
892
1,821
*+0.993
18, *+15
18,069
1,818
221
$2
399
2,019
»y
1
St. 6lS 6
DECLASSIFIED.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority £ . Q .
-
6
-
Coaur-Qdity
Textiles - total
Cotton
Cotton manufacture$
Mohair
Silk
Wool
Kapok
All other
Wood and paper - total
Lumber
Rags
All other
Nonmetallic minerals - total
Coal
Glass
Crude oil
Refined oil
All other
Metals and manufactures, except machinery
and vehicles - total
Copper
Iron and steel
All other
1928
21^,23^
192.71*
377
2,&SU
2,6^7
1^,157
193
1 ;.632
3»*>65
3»675
34-
156
10 ,*+17
6,038
175
772
900
2,532
1,596
272
27*+
1 ,0 50
Machinery and vehicles - total
220
Chemicals and related products - total
Fertilizers
All other
468
2b2
206
Miscellaneous - total
Canned goods
Oil
Provisions
All other
22,766
o ,4Q8
297
12,870
1,101
GOODS STORED IN OR SHIPPED BETWEEN FOREIGN
COUNTRIES
Total
585,69^
Lard and moats
Hides and skins
Leather and leather goods
C offoe
Flour
Grain
Sugar
Vegetable oils
Tobacco
3*594
8,825
5,811
21, %6
11,781
29,2^5
120,080
2o0
7,283
Authority £ ^ _ J l 5 0 \
Reproduced from the Unclassified I Declassified Holdings of the National Archives
- 7
-
Commodity
Rubber and rubber goods
Cotton
Wool
Lumber
Pulpwood
Timber
Woodpulp
Wood and wood products
Diamonds
Gr.soline
Copper
Iron ore
Iron and steol products
Zinc
Machinery and vehicles
Fertilizers
Potash
Electrical material
Matches
Films
All other and unclassified
1928
2,756
56*867
14,230
5 *5^3
6,455
5*675
722
1 ,802
643
16,951
6,253
47,931
2,684
3^,615
5,550
3M l
6,385
3»625
32
155*3.53
TRADE ACCEPTANCES
Total
Coffee
Sugar
Hemp
Silk
Copper
All other and unclassified
3,744
932
1,3s 5
216
576
635
DOLLAR EXCHANGE BILLS
Total
29,020
BIL l S PAYABLE IN-FOREIGN CURRENCIES
Total
3,59S
UNCLASSIFIED
Total
Total purchased outright
Taken under repurchase agreement (not classified)
Grand total
25,374
2,058,634
2,182,035
4,240,669
St. 6186
FEDERAL RESERVE BOARD
DlVlS'IOn OF BANK OPERATI02JS
MA.Y 10, 1929.
Reproduced from the Unclassified
d e c l a s s if ie d
I Declassified Holdings of the National Archives
Authority E . Q . l f t S o '
EEC’
D IN FILES SECTION
F o rm N o. 131.
gry |
I
FEDERAL RESERVE
Urnce Correspondence
AUG 2 5 1 9 4 9 ^
__
iM
Subjec.I: Torrent acaoptance ra te s in the
Dab
February 2, 1927
-------a ~ n "
nS
MNP I — I
To
Hr. ffoldermel s e r ______________^
rI?rom— MissBrown-- ^ n
i V -----“
*5 |
market ancLat the reserve tank.
Since January 11 the ITew
York Federal Reserve Bank1s "buying rate
on acceptances has been ^ T t h a n
and 90 day b i l l s *
the ra te o ffe re d in the market f o r 60
This s itu a tio n has not e x is te d since la s t
Bay and accounts
la r g e ly f o r the d eclin e o f $50,000,000 in the acceptance holdings o f the
reserve banks since the f i r s t o f the year*
Purchases o f both 60 day and
90 day b i l l s in the ITew York market f e l l o f sharply a f t e r the low erin g o f
the market ra te from 3 3/4 to 3 5/8 per oen t, w h ile purchases o f the sh ort
e r m a tu ritie s — 30 days and under—were made in about the usual volume*
Last
A p r il the market rate on b i l l s o f the lon ger m a tu rities d eclin ed below the
reserve ta n k 's buying rate on these b i l l s on the 7th o f the month and on the
27th the Reserve bank reduced i t s buying ra tes from 3 5/8 per cent to 3 l/4
p er cent fo r 60 day and 3 l/2 p er cent fo r 90 day b i l l s *
I t had, however,
lowered i t s discount ra te from 4 to 3 l/ Z per cent the week b e fo re .
At that
time the market ra te s continued downward in to 1'ay and the bank's ra tes
folio-wed them*
At present there seems to be a tendency f o r market ra tes to
s t i f f e n s lig h t ly and some d ea lers are reported to be o ffe r in g 3 3/4 w h ile
most o f them s t i l l o f f e r 3 5/8 p er cent fo r 90 day b i l l s .
w i l l be in te r e s tin g to watch the s itu a tio n , p a r t ic u la r ly i f
does not low er i t s buying r a te s .
I think that i t
the Reserve bank
My charts in d ica te that the market rates
have not been below the Reserve bank's buying ra tes f o r more than a week
w ithout th is s itu a tio n b ein g fo llo w ed by a d eclin e both in the buying ra tes
and the discount rate o f the !?ew York Reserve Bank since 1924 when a l l rates
were a t the bottom#
.. ......
A
•
-------Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - Q - i ^ S O \
TELEGRAM
FEDERAL RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
149fb lo
RECEIVED AT WASHINGTON,
,*\
*
V. A
©
Dallas Nov 1 1212p
Eddy
Washing ton.
‘..
(Twill 399, th irtie th .
Following i s statement of acceptances sold
member banks from our p o rtfo lio January 1 to Oct 31.
Assume it is
proper to include these as open market transactions *
A p ril 11 '
19,750.00
I p r i l 25 $24,815.10
May 16 $10,200*28
Sept 19
fL20.123.26 September 26 $165,919.53
October 3 ,$64,190.18
October 10 $96,089.54
0ctober(17 $197,349.03
Oct 24 $235,137.86
October 31 $116,1^6.99 Total $1,039,761.77
In addition to amqunts
indicated we sold between July 11 and July 20 acceptances amounting
to $6,740,118.85 to other Federal Reserve Banks.
Unable d e fin ite ly
determine whether these transactions were purchased by Federal Reserve
Banks fo r th eir own account or others.
Talley
15 9p
2— 11901
aoratMiuurr
omos
printing
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority S . Q . I f t S o l
1
3 3\.
TELEGRAM
. /io/ .
4
G. .
'
a
(L E A S E D W IR S S E R V IC E )
RECEIVED AT WASHINGTON, D. C.,
Atlanta Ga ^ov 1
958am
Received-----
Washn
Twill 399, Intform-ation
a- m
P m- 1
TranscribedV,/
>K lo ■
:*...£
•
—
requested relative acceptances sold in open market
each week ending Wednesday since January 1 1,923 to date as follows:
Week ending february 21
mm*
9-4H0I
fciOV 1 192d
25,000. larch 7 20,000. October 24 5,000*
McCord
1103am
Reproduced from the Unclassified / Declassified Holdings of the National Archives
-----s r a m s m r
Authority £ . 0
Acceptances sold from own p o r t f o lio each week ending Wednesday, since
1922:
January 3rd none; January 10 $562,163.84; 17th 599,612.63; 24^h 459,122.61;
31st 259,462.50; February 7th #586,735.08; 14th 591,285.99; 21st 185,837.40;
28th 461,329.86. March 7th §290,048.58; 14th 470,583.30; 21st 196,521.02;
28th 174,833.10; A p r il 4th 54,930.24; 11th 819,758.26; 18th 199,787.50; 25th
340,522.95. May 2nd 77,997.42; 9th 254,823.58; 16th 218,744.93; 23rd 39,801.55;
30th 34-5,081.73. June 6th 480,229.50; 13th 184,865.61; 20th 109,988.29; 27th
278,664.20. July 4th none; 11th 208,504.62; 18th 230,567.13; 25th 90,128.54.
August 1st 264,993.74; 8th 239,472.05; 15th 201,130.73; 22nd 365,629.20; 29th
! 546,606.18. September 5th 142,832.86; 12th 117,696.18; 19th 100,000.00; 26th
1 293,145.33. October 3rd 300,971 . I Z i 10th 391,515.09; 17th 425,130.91; 24th
353,444.35. D otal 1 2 ,5 1 4 ,2 9 9 .7 1 .^
Post
11a
AlSo\
Reproduced from the Unclassified
DECLASSIFIED
I Declassified Holdings of the National Archives
Authority S . Q . I f t S o l
TELEGRAM
FEDERAL RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D. C.,
$2brs
Best on 114S5A Oct ol
f J-
i cra* i9 „
% , ; Sa
Bddy
^ashn
ifcsrrepln^ v3.re trasis 399* Wo have never sold any -acceptances so far as our records
she-?? in the cpon mszfcet from our portfolio
3—-119®
Curtics
1216P
a. m.
p. m.
Transcribed by.
OK
fife__ _
D E C L S S S lF IE ir
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority E . Q . I f t S o l
TELEGRAM
o
o C , '
*r►. R D
<r
V C'J
iT
FEDERAL RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D. C.t
h
i
U
\
6£crct
I—............. p. m.
Transcribed by-,
OK to -----
Board
^ashn
Baplying te the Board's wire 20th to Mr Jay we tore sold no acceptances in the
$pen market fT'om. cur portfolio since January 1, 1923t«
S—119Qf
Kenzel
259p
---- declassified
Authority E.O.lftSol
.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
TELEGRAM
Mb
FEDERAL RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D.
126od a
Cleveland 348p oct 31
Re ce ived--------- *—
Board
CCT
-a. pi.
Transcribed b y—
P‘ m ' \
f'^CElViKD
IDG
Wo have sold no acceptances from our portfolio in open j&ar3s»t since
Jaataary 1,1923
Wills
a— usot
41 Op
1928
r
---- d e £ l a §3IHED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority E . Q . I f r S o '
TELEGRAM
FEDERAL RESERVE SYSTEM v
(L E A S E D W IR E S E R V IC E )
RECEIVED AT W A S H IN G T O N , D?C.
96rhta
Richmond Va 235pm Oct 31
rii
f
•ddy
Washington
£will 399, October 31stacfc No acceptances hav^ b ^ n sold in oppn maifeet
from our portfolio
•OTSBMMSNTPROfTDfQ07710
Hoston
243pm
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E - 0 -
TELEGRAM
,1 ^ '
t/
,,v
FEDERAL RESERVE SYSTEM
IJ
(L E A S E D W IR E S E R V IC E )
1 3 7 f eg .
RECEIVED AT WASHINGTON, D. C.
Chicago
Eddy
Washn
Oct 31, 1238pm,
I rrCelV
~~~~jed
'inscribed
OK t0
L
T w ill 399.
Replying your w ire. We have not sold any acceptances from Our
p o rtfo lio in the open market this year, We have sold to a few member
banks from our p o rtfo lio to f i l l special orders fo r weeks ending
as fo llo w s: January 10, 1923, §20,000; January 17, $9,936.33;
January 31, 104,851.52; February 7, 24, 666.52. February 21
$5,000; March 28 $29,947.61; A p ril 25 §25,079.85; June 13, #50,000
July 11, $160,000 July 18 $140,000. July 25 §150,000. September
19 $L5,211.27. Total i734t693.
Heath
148pm,
2—11001
m t h u im m t n o r m a o
num
Reproduced from the Unclassified
^
I Declassified Holdings of the National Archives
---
nr/'T a^ T pif n
Authority ^ . . Q .
TELEGRAM
FEDERAL RESERVE SYSTEM
X '”
/
<s
'
(le a s e d w ir e s e r v ic e )
^
RECEIVED AT WASHINGTON, D. C.,
/
>
9=
....... "
v
- ^j
6
127fot
25
A
s A‘
^CT 31 1923
___
i!
Stlo-ais Mo 1205p Oct 31
Received..........
j Iranscriiod
R r c E ’ V 1- ;■
a'
Eddy
Washn
[Dwill 399 October 30, 1923 since F irs t this year have sold no acceptances
in open market from our P o rtfo lio ,
http://fraser.stlouisfed.org/ 2—1190J
Federal Reserve Bank of St. Louis
Martin
126p
Reproduced from the Unclassified / Declassified Holdings of the National Archives
.
Authority ^ - 0 - l ^ S O j
TELEGRAM
> ...A--'*'
^ ^V
v '
"...■
FEDERAL RESERVE SYSTEM
,
(lease d
w ir e
.
s e r v ic e
V
'
)
\
i
RECEIVED AT W A S H IN G T O N , D. C ,
Minneapolis Oct 31iJL015a
n
■^oard
j
a.
|j'Received---------- ----- p, v
- J
* *-'•
i ransor-'Dea b1 GK v
Twill 399 Ho sales of acceptances made since January 1,1923.
Rich*
1120a
2—119)
•omanuDiTPKDrnMu
o it ic i
''* J
^
:• $
H
»* f
Reproduced from the Unclassified
I Declassified
----- D E C L A S S IF IE D ,
Holdings of the National Archives
Authority
TELEGRAM
FEDERAL RESERVE SYSTEM
(LEASED W IRE SERVICE)
P V ')
-
'... "^
56fr le
RECEIVED A T W A S H IN G T O N , D. C.,
/$
KansasGity Oct 31 1020a
>•
M&y
Washington.
Twill 399 IIo acceptances sold
2—11001
aonnrMUfT
n n tn o umca
McClure
1130a
Received
Transcribed b,
OK
*
“
*n( \
\s\ ay
'
/Jcr
Reproduced from the Unclassified
I Declassified
---- DECLASSIFIED
Holdings of the National Archives
Authority l l - Q -
TELEGRAM
FEDERAL RESERVE SYSTEM/S,.,?" " ^
(LEASED W IRE SERVICE)
'j'g /
RECEIVED AT W A S H IN G T O N * Ov,C., x f
Sanfraneiseo oct 31,
1145am,
^
^
'
X
^
4'
Eddy
Washn
Heferring 3rottP^telesras_ue 392* We have not sold any aeceptanc es
in open market our port folio since January
Perrin
3—1100
• o n u n R nuMTDio ofiici
448pm,
1,1923.
R ep rod uced from the U ncla ssified
n-v ,
I D eclassified H oldings of the N ational A rchives
Authority
TELEGRAM
R E SE R V E
B O
LEASED W IR E SERVICE
W A 8 H IN Q T O N
v' C u rila a - W m % m
~ Jay - Mmt T«rk
v Atxailn * Fa ilju U lp h ia
i lunDona
IfeCar4 • Atlanta
/ftm\h * Chio*to
^Hir%4»4 + fa*
»h - Mlnnoapolla
«o^lttra - laiuM City
T a lla y • ffellaa
B arrln - Can franoiaaa
TRAHB :Y - /
wir* !«r< l «Kwn*» If any
aeoop*ane»a #*14 la
open ■aSGTTraii your portfolio during *aah w m k « n d ii( W*dn«»dAy tin*#
Jammry 1, 1025, Thia a ta tw n t should no% lnaluda aaoafiaaaaa a*34 under
r«purah*»* t grx cu n ii 'or aaoaplaoaea aold to othor F»do?al roa®r*a feanka*
DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^- 0 - l ^ S O \
\*
Federal R eserve
of
Bank
N e w Yo r k
Jl
IN R E P L Y P L E A S E R E F E R
to
November 20, 1922.
DiBc - MJM
Dear Sir:
We acknowledge receipt of your letter of November
18 regarding the telegraphic report of acceptances allotted
to other Federal Reserve Banks.
We note that the Board will not require thia in
formation hereafter and will accordingly discontinue the
dispatch, of the telegram.
verym
T^
o . o
S. S. Vans ant,
;er, Discount Department,
Mr. fcalter L. Eddy,
Asst.Secretary, Federal Reserve Board,
Washington, D. C.
r*"
---- DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - . Q-
Soveefeer 18, 1922
Dear s i r :
For 6or» time past the Board has received
telegraphic reports from your bank shoving in thousands
of dollars the amounts of aoceptanees allotted each day
to other Federal reserve banks*
Inasmuch as th is in
formation Is shown in fu ll on the dally statement of
investments, which Is received from your bank, the
Board will not require the information to be telegraphed
hereafter*
Very tru ly yours
(Signed) W. L. Iddy
Viaite r U Eddy,
Assistant Secretary*
Hr* £• S. Vansant,
manager, Discount Department,
Ftdaral Reserve Bank,
liew York, N» Y*
Reproduced from the Unclassified
I Declassified
DECLASSIFIED
Holdings of the National Archives
Authority S O -
fTDRA!.
FEDERAL RESERVE BOARD
W ASH IN G TO N
-V-V -
October 16 , 1922.
st.3105 .
SUBJECT;
Be vised Form A, Monthly
Report of Discount and
Open Market Operations.
Dear Sir:
In accordance^with the Board's letter
St. 3057* dated September 26 , there is enclosed
herewith a supply of Form A, to be used in sub
mitting the monthly report of discount and open
market operations beginning with October 1922.
Very truly yours,
L. Smead, Chief,
Division of Bank Operations*
Enclosure
(Letter t o ;all F« JR. Agents)
r--------- -------------------------------------------------------------------------------------------------------------- -----------
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
V o r
>To. 131.
To
" .U "I \ I
■/
Office Corresponaence
Governor Harding.
jf
0
FEDERAL RESERVE
Dafe December 5 « 1921.
Subject:.,
Prom Mr. Smead.
Attached hereto is a statement showing the amount of banker,^ *,
..
ances, purchased by each Federal reserve bank during October 1921, classi
fied according to import, export, and domestic trade transactions, and ac
cording to general classes of commodities which the acceptances were used
to finance.
It will be noted that of the total amount of acceptances pur
chased during the month $36,000,000, or 26 per cent represented import trans
actions, $47,000,000, or 34 per cent - export transactions, and $44,000,000,
or 32 per cent domestic transactions, while about $7,000,000 represented
dollar exchange bills, and $5,000,000 - acceptances in the- foreign trade
which were not classified as to import and export transactions on the banks’
investment schedules.
In regard to the commodity classification, it will be noted that a very
large percentage of the acceptances purchased by the New York. Bank are class
ified as miscellaneous.
This is due to the fact that no information regard
ing the underlying commodities is shown on New York schedules covering ac
ceptances taken under so-called repurchase agreements.
The Federal Reserve
Banks of Kansas City and San Francisco also fail to show commodities for
acceptances purchased locally, i.e., not through another Federal reserve bank.
There are certain difficulties in connection with the classification of
acceptancys taken under repur cha gg
eemen£ s, as for example, brokers who
...
.........
//
have so/d acceptances to the Reserve bank under a repurchase agreement fre
quently ask permission to take up certain of the acceptances within two or
throe days frcmthe day they were acquired by the Reserve bank, and later on
i 7
ei/her sell the same acceptances to the Reserve bank under another repurchase
/
60
\
D E C L A ^ ifT O
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^- Q .
F orm N o . 131.
Office Correspondence
FEDERAL RESERVE
BOARD
Date.
To
Subject:.
From.
-
agreement or sell them outright.
2
-
If these acceptances were included in a
commodity classification, the figures would be misleading to a certain extent
because of the duplications which they would contain.
It is possible of
course for the New York Bank to ”
$ar-markw all acceptances purchased and to
indicate by a special symbol on schedules furnished the Board those accept
ances which are purchased for the second time . This, however, would re
quire a considerable amount of work.
In case, however, you desire a commodity classification of all accept
ances bought in the open market the matter will be taken up with New York
with the view of making some practical arrangement regarding acceptances
taken under repurchase agreements.
There should be no difficulty in having
the Kansas City and San Francisco Federal Reserve Banks indicate commodities
on schedules covering acceptances purchased locally.
1
Reproduced from the Unclassified / Declassified Holdings of the National Archives
COMMODITY CLASSIFICATION OF
BANKERS * AND TRADE ACCEPTANCES PURCHASED BY M O H FEDERAL RESERVE BASK DURING OCTOBER, 1921.
(In thousands of dollars}
Classification
Imports
imports
Domestic
Unclassified foreign
Dollar Exchange
T o t a l -----------
i
i New
iBoston * York
4,293
2,840
5,770
150
827
13,880
j Phila
idelphia
25,981
28,001
£2,813
3,366
5.117
85,278
2,398
3,472
2,558
--
350
8,778
•» St. sMinnea : Kansas •
•
: San
: Cleve- j Rich «•
•
s land. ; mond •.Atlanta *Chicago : Louis j polis : City : Dallas :Francisco 1 TOTAL
SUMMARY
—
—
—
_
368
131
1,740
35,791
880
—
—
—
2,052
2,516
932
163
5,690
47,115
1,449
—
882
44,211
155
2,145
1,702
460
1,367
4,352
2,007
—
—
—
207
691
216
5,007
152
225
—
...
—
—
---—
—
363
6,957
300
139,081
754
1,573
155
4,483
2,939
4,108
10,626
6,507
m
-m
Acceptances based on imports*
COBMODITIES
Wheat and wheat flour
Other foods and kind
red produets - -3,158
Cotton (unmanufactured)
Other textiles and
their products - 251
Metals and metal pro
ducts - - - - - - —
Chemicals and allied
products - - - - 14
CSoal and coke - - - Tobacco and manufactures 75
Leather and its finished
p r o d u c t s -- -- - Miscellaneous - - - 795
4,293
Total ---------
1,069
125
359
1,551
319
96
50
135
57
64
81
231
30
9,026
155
16
2,233
185
30
467
227
155
50
19,792
25,981
523
2,398
240
880
255
369
40
130
19
129
96
1,070
1,348
1,740
22,993
35,791
QSO \
DECLASSIFIED ,
Authority
4,064
COMMODITY GLASSIFICATIOEf OP
BAHKERS* A
N
D TRADE AGQEPTAKCJES PURCHASED BY EASH FEDERAL RESERVE BANK DURING OCTOBER, 1921
(In thousands of dollars)
glass!fisation
s
5 Hew
tBoston : York
i Phi la- • Oleve- • Rich- %
;
* St. jMinnia- • Kansas *
:
San
•
: del phi a : land
t mond ^Atlanta «Ghicago t Louis ; polls s gity « Dallas ;Francisco* ISQ£AL
T
Acceptances based on exports,
QCMMQDI31BS
Wheat and nfceat flour
Other foods and kin
dred products —
Cotton (unmanufactured) - Other textiles and
their products - Metals and metal
products - —
- Shemicals and allied
products —
----goal and coke - - - Tobacco and manufac
tures - - - - - - Leather and its fin
ished products - Miscellaneous —
- -
3
807
63
20,002
665
-------
2,840
28,001
3,472
Total
577
679
500
264
54
11
122
2,207
365
3,507
868
206
4,183
13
441
9,589
829
1,995
869
426
130
67
118
7,811
17
99
10
51
45
888
96
164
42
155
262
16
28
50
—
—
—
490
436
200
—
—
88
1,449
932
2,445
177
—
820
71
25
2,048
13
49ft
171
225
1,626
30
—
275
932
2,51$
182
72
1*108
66
22,924
5,690
163
2,052
47,115.
S C M l O D m CIASSIFICATIOH OF
BANKERS* AND m A D E ACGEP2IANCE3 PURCHASED BY EACH FEDERAL RESERVE BASK DURING OCTOBER, 1921.
(In thousands of dollars)
••
Bo ston : New
: York
•
i Phila- ; Cleve : Rich:delphia • land : mond
St •
*Atlanta * Chicago:
Louis
s
:
• Minnea-j Kansas ♦ _
* polis *
City s a
.
san
*
aS:Francisco •
TOTAI
Acceptances based on domestic transactions
CQMMQDITIES
Wheat and wheat flour
Other foods and kin
dred products - - Gotton - (unmanu
factured) - - - Other textiles and
their products - Metals and metal
products - - - - Chemicals and allied
products - - - - al and coke - - - I'bacao and manu
factures - - - - Leather and its fin
ished products - Miscellaneous - - -Total
---------
——
——
336
375
83
395
950
957
312
1,291
52
3,940
3,989
751
809
190
551
1,270
200
484
423
364
138
—
—
29
600
—
252
—
—
423
—
308
32
350
241
—
—
27
—
—■
—
—
—
—
4
9
37
308
—
19,404
—
49
—
109
—
165
5,770
22,813
2,558
1,702
2,00 7
65
1,367
—
40
51
910
120
—
-
—
336
8,353
27
—
732
100
50
8,669
—
—
15
49
1,473
262
—
—
—
—
1,208
37
—
—
—
—
—
—
—
1,167
273
—
—
——
—
—
—
150
—
—
1,659
37
22,035
m
m
r
n
r
n
882
155
2,145
44,211
—
—
45
—
—
25
—
—
—
50
—
—
97
14
4,352
460
86
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority E O -
Form N o. 181.
\
-O ffice Correspo
To _ ~Governor Harding. . ^
iERAL
RESERVE
BOARD
3 3 2.
j •••'•••••
fox
.jate July 22, 1921.______
Subject:.
•j
a—mm
With reference to Mr. Harrison*s letter regarding thfc manner of re
porting sales of bankers 1 acceptances between Federal reserve banks, I
desire to make the following comments:
The caption to which the Federal Reserve Bank of New York takes ex
ception appears in the brief edition of the Federal Reserve 3ulletin
(page 245 of July Bulletin). The suggestion is that the first caption
"Paper rediscounted with or sold to other Federal reserve banks --- tt be
changed to read "Paper rediscounted with or purchased by other Federal
reserve banks --- ’
*.
It is evident that whatever objection there may be
to this caption would also apply to that used in the Board’
s weekly press
statement whenever one Federal reserve bank sells acceptances to another.
The caption ’
’
Paper rediscounted with or purchased-by other Federal reserve
banks" certainly could not be used on the liability side of the Board’
s
press statement, and to use it in the statement published in the Bulletin
would result in confusion, in that the figures in the first 4 columns
represent paper rediscounted or sold by the banks listed, and not papep
purchased by such banks.
When the Federal Reserve Bank of New York receives a request from ‘
another Federal reserve bank to purchase acceptances for its account, the
New York Bank may either purchase such acceptances in the open market or
sell them out of its own portfolio. In either case the gold reserves of
the New York 3ank are increased by the total amount of the acceptances
sold to the Federal reserve bank making the request, and strictly speaking,
no portion of such acceptances should be included in our tables showing
inter-Federal reserve bank accommodation. It is very difficult, however,
if not impossible, to distinguish between acceptances sold by the New York
Bank from its portfolio at the request of other Federal reserve banks and
acceptances sold for the purpose of improving its reserve position, since
the New York Bank does not endorse acceptances sold to other Federal reserve
banks whether sold for its accommodation or at the request of other reserve
banks. We have experienced in the past considerable difficulty in making
totals of acceptances sold to other Federal reserve banks agree with totals
of acceptances purchased from other Federal reserve banks and if an attempt
is made to classify acceptances sold to other Federal reserve banks accord
ing to whether or not they vrere purchased as an accommodation to the selling
bank, it is doubtful whether the Division .will be able under present methods
to obtain a balanced statement.
The difficulty could be overcome if the New York Bank would adopt one
of the two following courses:
First, Enfiorse all acceptances sold for the purpose of improving its own
reserve position and not endorse acceptances sold at the request of other Re
serve banks. Or,
Second, Rediscount paper discounted for member banks whenever it desired
•fcrO obtain accommodation for the purpose of improving its reserve position,
"instead of resorting to the sale of acceptances.
In the latter case acceptances sold from portfolio would be entirely
eliminated
from our table showing inter-Federal reserve bank accommodat ion.
-----DECLASSIFIED .
^^^^^^^^^Slfce^ro^^h^Unclassifie^^DecIassifle^Holding^o^h^Na^ona^rchives
|
I
Authority E . Q . I ^ S o l
"1J & N o. 131.
y ^ ir r *
M
r r i ^ ^
ice
Z''*
i
A
f f A
c n
A
I
FEDERAL RESERVE
< la n / «o
board
T o __ --Governor Harding.__________________
Subject:,
From__ Mr.t. Smead.____________ ____________ _
______
-
2
rfat*
July 22, 1921.
-
and no account would be taken of such sales in calculating adjusted reserve percentages.
\
;
In view of the fact that the Federal reserve banks now hold less
than |25,000,000 of bankers * acceptances and that the reserve ratio of
the Federal Reserve Bank .of New York (the only one which has ever sold
acceptances to any extent for the purpose of improving its reserve posi
tion) ranges around 70 per cent, it would seem that the necessity for
future sales of acceptances between Federal reserve banks for the purpose
of obtaining accommodation is a remote possibility, and that, therefore,
no material objection would be raised by the Federal Reserve Bank of New
York to the plan outlined above.
|
As no acceptances are at present ■under sale between Federal reserve
banks, the captions in our Bulletin will be changed to read "Bills redis
counted with.other Federal Reserve Banks - all reference to acceptances being omitted.
f
---- DlCEXSSIFIElT-
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - Q -
3 B 3 - H"
N o . 131.
/ " 'I
Office Corresponaence
FEDERAL RESERVE
Subject:
__
Attached le tte r July 12th. from
H[r. George L. Harrison.
I re ca ll that the subject matter of the attached le tte r was taken
np with yon at the tin® of the la st Gowncre* Conference and t&at you
made a memorandum relating to it* It seems to m# that the two captions
suggested by Mr* Harrison mean en tirely different things, hat however
that may her i f you are in faror o f the change, please get ont a notice
cowering i t . If jeu are not in faror of the change, Governor larding
desires that ysu speafc to him about the matter.
Ml$o-37
2—S406
DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority S . Q . l f t S o l
Fed
er al
o f
Re s e r
New Y
ve
Bank
ork
Dear Governor Harding:
You will no doubt remember that at the la st Governors*
Conference there vas some discussion with respect to the manner of
reporting sales of bankers' acceptances between the reserve banks*
I t was thought that i t would be very desirable to have the report
prepared in suoh manner as would not indicate that these accep
tances purchased by another reserve bank a t its own in itiativ e would
be considered the same as a rediscount for the purpose of improving
the reserve position of the selling bank.
After some l i t t l e discussion i t was recommended that the
caption of the Board*a statement, which now reads "Paper rediscounted
with or sold to other Federal Reserve Banks**, be changed to read
A
"Paper rediscounted with or purchased by other Federal Reserve Banks", j
While i t was, I think, appreciated that the distinction between these j
two tit le s was extremely technical, i t was fe lt nevertheless that the
ohange in caption would perhaps prevent a misunderstanding, or at
least forestall comment to the effect that the statement as prepared
by the Board clearly indicated that these figures represent the sales
made on the in itiativ e of the selling bank rather than the buying bank.
Ho mention was made of this matter in the Board's le tte r
of June 10, 1921, X-3140 and I am, therefore, writing to ask what, i f
any, action the Board contemplates with respect to this matter.
G. L. Harrison
Deputy Governor
Hon. I . P. G. Harding
Governor, Federal Reserve Board
Washington, D. G
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - 0 -
f
FEDERAL RESERVE BOARD
W A S H IN G T O N
June 10. 1921.
X~3lkQ.
SUBJECT: j^roents by the Federal Reserve Board of reconmendatioils'
^'made “by Governors of the Federal Reserve Banks at their
/
Conference with the Federal Reserve Board, .April 12th to
/
15th, 1921.
siA
Tha^godaral Reserve Board has .ejaasbwd"' the record of vote a taken
by the Governors""©? tfte'^l^eraT Reserve Banks on the topics considered
at the Conference held in Washington, April 12th to 15th, 1921.
Those matters relating to fiscal operations and contemplating co
operation between the Treasury Department and the Federal Reserve System
will he taken up by the Board with the Treasury Department, and you will
be advised of the results in due course.
With a few exceptions, the Board concurs in the recommendations
made by the Conference- The following matters are those which call for
Board action or which require special comment. The paragraphs listed
refer by number to corresponding paragraphs appearing in the minutes
prepared by the Secretary of the Conference.
Paragraph 11: What arrangements &ould be made in cases where
Federal Reserve Banks have presented to them Federal Reserve notes un
sealed and unnumbered, but otherwise duly executed, which were apparently
stolen within the Treasury Department and circulated, in view of the advice
of the Treasurer that there is no provision for their redemption?
In view of the expression of the Governors at the Conference that
they would be willing, to redeem, under certain conditions, incomplete
Federal Reserve notes as mentioned above in an amount not to exceed
$20,000 which may be presented to the Treasury for redemption, the Board
has approved this action in order to prevent a possible discrediting of
the Federal Reserve note circulation. The Board has advised the Treasury
Department that the Federal Reserve Banks will redeem up to $20,000 in
complete Federal Reserve notes with the understanding, however, that the
Federal Reserve Banks do not admit of any liability in connection with the
circulation of these incomplete notes and expect to be reimbursed ultimately
by the Government for these advances.
Reproduced from the Unclassified
I Declassified
D E C L A S S IF IE D .
Holdings of the National Archives
Authority f~• 0
- 2 -
x- 31^0
The Board has further directed the Treasurer of the United States
to forward any incoiqplete Federal Reserve notes which he has redeemed to
the Federal Reserve Board's Division of Issue and Redemption, and has
advised him that after the necessary verification and proof, the Board
will reimburse him for the face amount of such notes up to $20,000. The
Board will then assess the Federal Reserve Banks the amount of such pay
ments in the usual way, i„ e», pro-rated on the basis of capital and sur
plus. The notes will he held "by the Board for delivery to the Treasury
when final disposition is made of the matter either through reimbursement
by the employees of the Department or by an appropriation by Congress*
Paragraph 39: It was voted, (l), that a unifotm practice be estab
lished in each Federal Reserve Bank with reference to the shipments of fit
notes to othei* Federal Reserve Banks, the receiving bank to insure and pay
shipping charges; and it was voted, (2), that each t'ederai Reserve Bank
*
absorb the postage and shipping changes upon all unfit Federal Reserve
notes sent by it to Washington for redemption, whether or not those unfit
notes were issued by another Federal Reserve Bank.
The Board is of the opinion that the above action should be more far
reaching and that the sending Federal Reserve Banks should absorb the cost
of all shipments of Federal Reserve notes, whether fit or unfit, except
the cost of insurance, viftiich should be borne by the receiving Federal Re
serve Bank, as heretofore. It is felt that this practice would eliminate
many petty entries at the Federal Reserve Banks and that the expense would,
in the long run, be practically equalized. In view of the fact that the
Governors 1 Conference considered this matter and took the limited action
above set forth, the Board is not inclined at this time to insist that the
practice as approved by tthe Governors should be extended, but suggests that
the matter be taken up for consideration at the next Governors 1 Conference.
The Board, therefore, approves the action of the Governors as set
forth in paragraph 39 and rules that the said action shall be effective at
all Federal Reserve Banks beginning July 1, 19^1 *
Paragraph kj i It was voted that the Federal Reserve Board be re
quested to advise the Federal Reserve Banks of its conclusions upon the
question of uniform indorsements upon inter-district cash and collection
items sent direct by member banks in one District to Federal Reserve Banks
in other Districts.
The Board has placed this matter in the hands of its General Counsel
and it is now receiving attention in connection with other matters of a
like nature which were referred by the last Governors 1 Conference to a
committee consisting of Mr. Harrison, Federal Reserve Bank of New York,
Mr. Logan, Counsel of the Federal Reserve Board, and Mr. Walden, Federal
Reserve Bank of Richmond.
\
Keproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fl- 0
- 3 ~
X-3lU0
Paragraph 52: It was voted, ( l ) , that it was the sense of the
Conference that Federal Reserve Banks should adopt a plan whereby each
Federal Reserve Bank shall wire each night the amounts of notes of each
other Federal Reserve Bank counted and shipped by it, whether shipped to
Washington or back to the bank of issue, credit for the amount of these
notes to be given by the respective banks of issue as of that date; and
(2), that the Federal Reserve Board be requested, with the recommendation
of the Conference, to consider the advisability and, if legally possible,
the adoption of & plan whereby each Federal Reserve Bank may deduct from
the amount of its own notes outstanding the total amount of all Federal
Reserve notes held by it, those issued by other Federal Reserve Banks, as
well as its am*
The Board approves the first vote, as set forth above, and will deal
with the matter in a separate circular, in which circular an effective
date will be fixed. With reference to vote No. 2 above, the Counsel of
the Board is of the opinion that the adoption of the suggested plan to
pemit each Federal Reserve Bank to deduct from the amount of its Federal
Reserve notea outstanding the total amount of Federal Reserve notes of
other banka held by it would contravene the provisions of Section 11(a)
of the Federal Reserve Act which requires that the weekly statement'
published by the Federal Reserve Board shall "show in detail the assets and
liabilities of the Federal Reserve Banks, singly and combined-*
Paragraph 53* It was voted, (1), that free wire transfers over the
leased wire system be limited to a minimum amount of $1*000, and that ear
thing below that minimum be transferred over commercial wires at the
expense of Xtie member bank; and (2), that telegraphic advices relating to
collections be limited to a minimum of $100.00, and that advices relating
to collections below that minimum be transmitted over commercial wires at
the expense of the member bank.
The Board disapproves the atrove vote. It rules that free wire
transfers and telegraphic advices shall not be arbitrarily limited and is
of the opinion that the Federal Reserve Bank should handle personally and
individually those member banks which are inclined to abuse or make a
nuisance of the privilege#
Paragraph 54: It was voted that the proposed pension plan be ap
proved and that it be referred to the Federal Reserve Board for action,
subject to such satisfactory adjustment of the suggestions made by Senator
Smoot as might be effected by the special committee appointed by 1fce
Conference.
Mr. Curtis of New York has prepared a b i l l for introduction to
Congress covering this matter- This b ill has been approved in general,
except with regard to the insurance feature, by the Federal Reserve Board.
Paragraph 60: It was voted that the recommendation of the last Con
ference regarding th<& appointment of eligibility committees in the several
Federal Reserve Banks be affirmed and carried out by each of the Federal
Reserve Banks,-that is, that each Federal Reserve Bank appoint an eligibil*
}ty committee which shall report to a ll other Federal Reserve Banks any
paper of general circulation which it holds to be ineligible.
The Board concurs in the above and fixes July 1st as the effective
date for the above action*
D E C L A S S IF IE D
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
Authority £ U
-*4-
X- 31 UO
Paragraph 6 3 : It was voted that acceptances made by hanks which
have defaulted or refused to honor their confirmed or irrevocable commer
cial letters of credit he referred to the eligibility committee of the Fed
eral Reserve Bank to which they are presented for discount or purchase,
for the ascertainment of the facts relating to the alleged default or dis
honor; and if the accepting bank is found to be guilty of such default or
dishonor with respect to other credits, all Federal Reserve Banks be ad
vised of that fact, with the understanding that such Federal Reserve Banks
will not purchase any acceptances of such a bank.
The Board disapproves the last sentence of the above quotation,
since it is felt to be improper for the Federal Reserve Banks t?o enter in
to any agreement in advance as to the paper of any particular bank which
they will or will not purchase; all such cases, however, should be immed
iately reported to the Board.
Paragraph 67 : It was voted that the Federal Reserve Board be re
quested to recommend an amendment to the terms of Section 5202 of the Re
vised Statutes by eliminating the words ’
’
payable abroad" from the terms of
the 7th exception of that Section*
The above action has been approved by the Board, upon the recommend
ation of its law committee, and the following proposed amendment has been
prepared by General Counsel and submitted to Congress.
A BILL
To amend Section 5202 of the Revised Statutes of the United States.
BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF THE
UNI'i'ED STATES OF AMERICA’IN CONGRESS ASSEMBLED, That Section 5202 of the
Revised Statutes of the United States, as amended, be further amended by
striking out the words ^payable abroad” in the seventh exception enumerated
in said section so that said exception will read as follows:
"Seventh. Liabilities created by the indorsement of accepted bills
of exchange actually owned bv the indorsing bank and discounted at home
or abroad *11
Very truly yours,
Vice Governor,
To Governors of all Federal Reserve Banks.
j O \
Reproduced from the Unclassified
I Declassified
D E C L A S S iF I
Holdings of the National Archives
Authority ^ - Q .
OPEN MARKET PURCHASES OF BILLS OF EXCHANGE, TRADE ACCEPTANCES, AND
BANKERS’ ACCEPTANCES, UNDER SECTION 14.
.
S j( o / * > /
-------------I. G e n e r a l S t a t u t o r y P r o v is io n s .
«— ------
Section 14 of the Federal Reserve Act provides that Federal Reserve Banks under rules
and regulations to be prescribed by the Federal Reserve Board may purchase and sell in the
Open market, at home or abroad, from or to domestic or foreign banks, firms, corporations, or
individuals, bankers’ acceptances, and bills of exchange of the kinds and maturities made
eligible by the act for rediscount, with or without the indorsement of a member bank.
II. G e n e r a l C h a r a c t e r o f B i l l s a n d A c c e p ta n c e s E l i g i b l e .
The Federal Reserve Board, exercising its statutory right to regulate the purchase of bills
of exchange and acceptances, has determined that a bill of exchange or acceptance, to be eligible
for purchase by Federal Reserve Banks under this provision of section 14, must have been
accepted by the drawee prior to such purchase unless it is either accompanied or secured by
shipping documents or by warehouse, terminal, or other similar receipt conveying security
title or bears a satisfactory banking indorsement, and must conform to the relative require
ments of Regulation A, except that—
(а) A bankers7 acceptance growing out of a transaction involving the importation or
exportation of goods may be purchased if it has a maturity not in excess of six months, exclusive
of days of grace, provided that it conforms in other respects to the relative requirements of
Regulation A, and
(б) A bankers’ acceptance growing out of a transaction involving the storage within the
United States of goods actually under contract for sale and not yet delivered or paid for may
be purchased, provided that the acceptor is seeured by the pledge of such goods; and provided
further that the acceptance conforms in other respects to the relative requirements of Regu
lation A.
III. S tatem en ts.
A bill of exchange, unless indorsed by a member bank, is not eligible for purchase until a
satisfactory statement has been furnished of the financial condition of one or more of the parties
thereto.
A bankers’ acceptance, unless accepted or indorsed by a member bank, is not eligible for
purchase until the acceptor has furnished a satisfactory statement of its financial condition in
form to be approved by the Federal Reserve Bank and has agreed in writing with a Federal
Reserve Bank to inform it upon request concerning the transaction underlying the acceptance.
(2)
WASHINGTON : GOVERNMENT P R IN T ! JK3 O JFTCE : m i
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - . Q-
FEDERAL RESERVE BOARD.
W a s h in g t o n , May 6,1921.
The Federal Reserve Board transmits herewith its Regulation B, Series of 1921, super
seding Regulation B, Series of 1920, relating to open-market purchases by Federal Reserve
Banks of bills of exchange, trade acceptances, and bankers' acceptances under section 14 of the
Federal Reserve Act. The new regulation is issued primarily for the purpose of permitting
Federal Reserve Banks until further notice to purchase in the open market bankers’ acceptances
with maturities not in excess of six months, which grow out of transactions involving the impor
tation or exportation of goods. Heretofore three months has been the maximum maturity of
acceptances eligible for purchase by the Federal Reserve Banks. This amendment to the
Board’s regulation was recommended by the Federal Advisory Council at its conference in
February, 1921, and by the Governors of the Federal Reserve Banks at their conference in
April, 1921.
Two considerations have led the Board to take this action: (1) The desire to widen the
acceptance market by meeting the wants of savings banks and similar purchasers of bankers’
acceptances who are now deterred from investing in acceptances of longer than three months’
maturity, because of the lack of authority of Federal Reserve Banks to purchase longer matur
ities up to six months; (2) to provide more ample facilities for financing import and export
trade with countries where either normal conditions or present abnormal conditions indicate
the desirability of rendering assistance by making acceptances of maturities not exceeding
six months eligible for purchase by Federal Reserve Banks. While the Federal Reserve Banks
would, under ordinary conditions, prefer to confine their investments to paper of short maturity,
that is, not exceeding three months, it is believed that the present emergency in the foreign
trade situation would be relieved by a more liberal practice. Vigilant care, however, should
be exercised by Federal Reserve Banks in purchasing acceptances of long maturities, in order
that the liquidity of the aggregate investment in acceptances held by them should not be affected.
In amending its regulation in the manner described, the Board looks to the good banking judg
ment and discretion of the accepting banks and of the Federal Reserve Banks to avoid any
untoward results. To avoid misunderstanding, the Board desires to add that the results of
this widening of the investment powers of the Federal Reserve Banks will be followed closely,
with a view to such modification of its rules or amendment of its regulations as future develop
ments may indicate to be necessary.
The Board has also taken this occasion to make another slight amendment to Regulation
B so that its terms will more clearly indicate the Board’s purpose in permitting Federal Reserve
Banks to purchase in the open market bankers’ acceptances growing out of the domestic storage
of goods other than readily marketable staples.
W. P. G. HARDING,
W. W. HOXTON,
Governor.
Secretary.
46490°— 21
[o
v er
.]
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority | ~ Q .
REGULATION B.
Series of 1921.
(Superseding Regulation B of 1020.
OPEN MARKET PURCHASES OP BILLS OF EXCHANGE, TRADE ACCEPTANCES, AND
BANKERS’ ACCEPTANCES, UNDER SECTION 14.
I. G e n e r a l S t a t u t o r y P r o v is io n s .
Section 14 of the Federal Reserve Act provides that Federal Reserve Banks under rules
and regulations to be prescribed by the Federal Reserve Board may purchase and Sell in the
open market, at home or abroad, from or to domestic or foreign banks, firms, corporations, or
individuals, bankers’ acceptances, and bills of exchange of the kinds and maturities made
eligible by the act for rediscount, with or without the indorsement of a member bank.
II.
G e n e r a l C h a r a c t e r o f B i l l s a n d A c c e p ta n c e s E l i g i b l e .
The Federal Reserve Board, exercising its statutory right to regulate the purchase of bills
of exchange and acceptances, has determined that a bill of exchange or acceptance, to be eligible
for purchase by Federal Reserve Banks under this provision of section 14, must have been
accepted by the drawee prior to such purchase unless it is either accompanied or secured by
shipping documents or by warehouse, terminal, or other similar receipt conveying security
title or bears a satisfactory banking indorsement, and must conform to the relative require
ments of Regulation A, except that—
(a)
A bankets’ acceptance growing out of a transaction involving the importation or
exportation of goods may be purchased if it has a maturity not in excess of six months, exclusive
of days of grace, provided that it conforms in other respects to the relative requirements of
Regulation A, and
.
(&)
A bankers' acceptance growing out of a transaction involving the storage within the
United States of goods actually under contract for sale and not yet delivered or paid for may
be purchased, provided that the acceptor is secured by the pledge of such goods; and provided
further that the acceptance conforms in other respect® to the relative requirements of Regu
lation A.
III.
S ta tem e n ts.
A bill of exchange, unless indorsed by a member bank, is not eligible for purchase until a
satisfactory statement has been furnished of the financial condition of one or more of the parties
thereto.
A bankers’ acceptance, unless accepted or indorsed by a member bank, is not eligible for
purchase until the acceptor has furnished a satisfactory statement of its financial condition in
form to be approved by the Federal Reserve Bank and has agreed in writing with a Federal
Reserve Bank to inform it upon request concerning the transaction underlying the acceptance.
(2)
W ASHINGTON : GOVERNMENT PRTNTT ^
01. FTC® : ifm
SO \
Reproduced from the Unclassified
I Declassified
•-....
j■
i-
Holdings of the National Archives
Authority
FEDERAL RESERVE BOARD.
W a s h in g t o n , May 6,1921.
The Federal Reserve Board transmits herewith its Regulation B, Series of 1921, super
seding Regulation B, Series of 1920, relating to open-market purchases by Federal Reserve
Banks of bills of exchange, trade acceptances, and bankers’ acceptances under section 14 of the
Federal Reserve Act. The new regulation is issued primarily for the purpose of permitting
Federal Reserve Banks until further notice to purchase in the open market bankers' acceptances
with maturities not in excess of six months, which grow out of transactions involving the impor
tation or exportation of goods. Heretofore three months has been the maximum maturity of
acceptances eligible for purchase by the Federal Reserve Banks. This amendment to the
Board’s regulation was recommended by the Federal Advisory Council at its conference in
February, 1921, and by the Governors of the Federal Reserve Banks at their conference in
April, 1921.
Two considerations have led the Board to take this action: (1) The desire to widen the
acceptance market by meeting the wants of savings banks and similar purchasers of bankers’
acceptances who are now deterred from investing in acceptances of longer than three months’
maturity, because of the lack of authority of Federal Reserve Banks to purchase longer matur
ities up to six months; (2) to provide more ample facilities for financing import and export
trade with countries where either normal conditions or present abnormal conditions indicate
the desirability of rendering assistance by making acceptances of maturities not exceeding
six months eligible for purchase by Federal Reserve Banks. While the Federal Reserve Banks
would, under ordinary conditions, prefer to confine their investments to paper of short maturity,
that is, not exceeding three months, it is believed that the present emergency in the foreign
trade situation would be relieved by a more liberal practice. Vigilant care, however, should
be exercised by Federal Reserve Banks in purchasing acceptances of long maturities, in order
that the liquidity of the aggregate investment in acceptances held by them should not be affected.
In amending its regulation in the manner described, the Board looks to the good banking judg
ment and discretion of the accepting banks and of the Federal Reserve Banks to avoid any
untoward results. To avoid misunderstanding, the Board desires to add that the results of
this widening of the investment powers of the Federal Reserve Banks will be followed closely,
with a view to such modification of its rules or amendment of its regulations as future develop
ments may indicate to be necessary.
The Board has also taken this occasion to make another slight amendment to Regulation
B so that its terms will more clearly indicate the Board’s purpose in permitting Federal Reserve
Banks to purchase in the open market bankers’ acceptances growing out of the domestic storage
of goods other than readily marketable staples.
W. P. G. HARDING,
W. W. HOXTON,
Governor.
Secretary.
46490°— 21
[o
v er
.]
ll-Q-
x-3o6o
March 3 * 192X .
SUBJECT: Monthly Suramry of Local Acceptance Market Conditions.
Dear Sir:
The Board is informed that the American Acceptance Council
has requested each Federal Reserve Agent to furnish it on the 15th of
each month with a two hundred word statement of conditions in the
local acceptance market,. The Board is of the opinion that a study
of conditions in the local acceptance market is highly desirable and
that it would he well to include each month in the regular report of
business and banking conditions a summary of the situation with
respect to acceptances.
The Board believes, however, that the Publicity Departments
of the Federal Reserve Banks -should not act as agencies of private
organizations, even though an organization be one as useful and co
operative as the American Acceptance Council.
If this were permitted
it might be difficult to draw the line against other requests and an
eiribarrassing situation might arise • The Board understands that the
monthly reports w ill now be sent regularly to the Division of Analysis
and Research and would suggest that the information desired be given
to the American Acceptance Council by the Division of Analysis and
Research as soon as the monthly reports of business and banking con
ditions are received from the several Federal Reserve Banks*
Very truly yours,
Gove r n o r
TO ALL FEDERAL RDSFRfl AGENTS*
released for publication Sunday morning, ?3~bruary 27. 1921; npt earlier .
RESOURCES AND LIABIlTflES OF^fr'STMSSPAL BFSFRVF BATIKS AT CLCSF OF BUSINESS FEBRUARY 25, 1921*
(In thousands of dollars)
LI A3I.1I T I E S
Federal Beserve B?
Boston New York Riila» Clevel. Richm. Atlanta Cliicago St*Louis Minn* Xans»Cy» Dallas 'Sisn Er-an» Total
Capital paid in
(VO
100,790
4,126
7,031
4,490
7, 859
26,^58
8,584 10,897
5,305
*+,021 1^,067 4,467
3,485
Surplcts
,
(V~)
202,036
6,980
6,033 14,194
8,346
56 ,4 l4 17,010 20,305 10,561 . 8,3 U3 23,980
15,711
9,159
62,9 s**
Government deposits
7,663
2.44g
3,099
3,396
2,552
23 ,3f 0
601
5 ,889
1,552
1,925
6,750
3,719
Due to members - reserve account
109,737
655,730 108,126 1 ^ * 1 7 2 56,973 44,^34 251,965 mtizj 43,296 79/321 49,455 111,163 1,722,919
Deferred availabili 17 iterns
^69,811
79,110 44,896 51,359 37,236 12,698 56,316 33,027 12,906 U3 ,% 3 26,696 29,439
36,655
er deposits including foreign
.overment credits
J 21
m389
11.506
799
394
221
314
I.4?4
530
¥+2
261
6.254
23,305
530
Total gross deposits
I 5U J 76
7&
3J 36 154,482 206, ivT 95,982 657371 3l5 >505 1017563 59,1^3126 76 ^ 2 ^ 78,860 149,945 2,279,019
T. It. notes in actual circulation
265,717
796,383 26c , 274 312,502 150,218 165,284 U 97,763 122,984 71,223 100,195 66 ,0 a) 243,143 3 ,051,706
R. BarO?: notes in circulation net liability
5,928
8*902
189,325
7,562
6,6 88 12,194
16,9^3
37,798 19,052 20,853
9,231 12 ,791 31,383
All otlier liabilities
1.386
2,073
2,318
1,274 UZL 6 >150___ 1.396
1 ,3 84
2,058
-1*332____ 13,995
i,8x 221
2 ^ 1
TOTAL LIABILITIES
>+62,919 1 ,700 ,7 sU 461,1+75 572,959 272,571 257,523 89i+,si+8 2U 6.218 11+8,903 25U,73 8 162,353 >+25,780 5,861,101
Ratio of total reserves to net deposit and F.R*
note liabilities combined, per cent
64-3
Contingent liability as endorser on
discounted paper rediscountcd with
other Federal Reserve Banks
Bankers* acceptances sold to other
171. R« Banks without endorsement
uingent liability on bills purchased
for foreign correspondents
1, l6S
Ti\ R» notes outstanding
T* R« notes held by banks
R* notes in actual circulation
Bills discounted
Bills bought in open market
TT
. Certificates of indebtedness
1+0 .5
53-6
69.9
M E M O R A N D A
Us .6
U 2.7
50,3
5U .2
U3.3
U 6 .5
Uo-l*
13,615
23,962
-
-
-
-
-
51-6
1+9,9
13,615
23,962
12 ,22s
768
U 16
8,100
1,200
1,312
78>+
576
i,9oU
1+32
736
752
FEDERAL eesebvf fotes outstanding- ahd in actual CIRCULATION
279,31“
+ 919,011 273,287 329 ,1 U6 156 ,12U 171,286 531,956 l'+3,323 73,106 107,965 70,660 293,295 3 .3 US. 1+73
U. 6U0 50.152 I 296.767
13.597
122 ,62s 13.013 16 .6U1+ 5.906
6.002 3*+. 193 20.339
1.883
7.770
265,717
796 ,’
3 83 266,27!+ 312. 5P2 150,218 165'2SU 1+97,'763 122,981+ 71,’ 223 100,’
195 6C 020 2l+3, l1+3 3 ,051 ,70 $
F IKDEBTFDWESS BY MATURITIES
DISTRIBUTION OF BILLS AND U. S G F H T m C A T R S O
Total
Over 90 days
Within 15 days * 16 to 30 days
6l to 90 days
31 to 60 days
397,788
2,396, 251*
37,651
222,558
1, *+55,023
283 ,23u
170 ,503
1+3,3 US
Ul+,213
63.335
19,607
261,510
s,32 U
9,036
23U , 393
5,350
1+.1+07
D E C L A S S IF IE D
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
A uthority
/
S - 0 - 1ft
J >■'.
X- 3 O5U
RECOMMENDATIONS OF THE
FEDERAL ADVISORY COUNCIL
TO THE
FEDERAL RESERVE BOARD
FEBRUARY 22, 1921.
Si•*
TOPIC NO. 1.
Should the Board exercise the authority given it in Section
16 of the Federal Reserve Act and impose an interest charge against Federal
Reserve Banks on the amount of their Federal Reserve notes outstanding,
less the amount of gold or gold certificates held by the Federal Reserve
Agftnts as collateral security, and if so, what should the rate of interest
bet
Re coramendat ion i
the Council Voted unanimously in the negative.
The Council is
of opinion, that the argument of excessive earnings should not impel the
Board to exercise its authority to impose an interest charge against
Federal Reserve Banks on the amount of Federal Reserve notes outstanding.
The Council believes that if an educational campaign is carried on stating
that the earnings of the Federal Reserve Banks are used for the purpose
of reducing the amount of government bonds outstanding particularly the
Liberty Loan and Victory notes, it would dissipate any unwarranted
criticism concerning excessive earnings made by Federal Reserve Banks,
and that it would not be difficult to convince the people that the earnings
of the banks could not be used to any better purpose*
In this connection, and with the same point in view, the Council
expressed itself unanimously a^tinst the proposition to permit the payment
of interest on member banks reserve balances with Federal Reserve Banks.
The high profits of the Federal Reserve Banks should not, in the opinion
of the Council, lead to the payment of interest on balances which in the
best interest of the system should be kept uninvested as far as may be
practicable*
If interest were paid it would act as a stimulant towards
keeping the funds of the Federal Reserve Banks invested and it mi$it
r?
'
: v
Reproduced from the Unclassified / Declassified Holdings of the National Archives
"— nffri
-
Authority E Q . l ^ S O l
*.2~
X-305U
therefore interfere with the proper conception on the part oi"~those in
charge of the Federal Reserve Banks, concerning their first duty to keep
the Federal Reserve Banks in a condition of maximum strength.
TOPIC NO* S. Should the Board establish for the year 1921 a tentative
limit for each Federal Reserve Bank on the amount which it may rediscount
with other Federal Reserve Banks?
Recommendation:
The vote of the Council was unanimously in the negative,
the
Council1s opinion is that no limit should be placed on the amount which
one Federal Reserve Bank may rediscount with other Federal Reserve Banks.
The Federal Reserve System is one and indivisible and not twelve independent
districts*
The Council holds the view that the Board should exercise its
own discretion and should not limit its own power of action by binding
itself to definite rules, which, with conditions varying in the several
districts and strongly fluctuating at this time, might fit one condition
and one period but might prove embarrassing in others.
The Council believes,
however, that where Federal Reserve Banks are fairly regular rediscounters
with other Federal Reserve Banks their discount rates should not be per
mitted to be lower than those prevailing with the Federal Reserve Banks
granting the rediscounts.
TOPIC NO. 3*
Should existing preferential rates on notes secured by
Liberty Bonds and Victory notes be continued?
(a) With respect to customers 1 paper rediscounted.
(b) With respect to member banks 1 15 day collateral notes?
Recommendation;
The Council is of opinion that for the time being it may be
opportune to continue preferential rates on notes secured by Liberty Bonds
and Victory notes, both (a) in respect to customers 1 paper discounted, and
D E C L A S S l r ll^U _
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
Authority ^ - Q
^3 .
/
(b) in respect to member banks 1 15
^ -30 54
collateral notes, but such pre
ferential rates should be discontinued as soon as it can be done advanta
geously and without injustice.
TOPIC WO* U.
Section lU permits any Federal Reserve Bank under rules
and regulations to be prescribed by the Federal Reserve Board to purchase
and sell in the open market cable transfers and bankers acceptances and
bills of exchange of the kinds and rraturities by this Act made eligible
for rediscount with or without the endorsement of a member bank.
Section 13 provides that *any Federal reserve bank may discount accept
ances of the kinds hereinafter described, which have a maturity at the
time of discount of not more than three months 1 sight, exclusive of days
of grace, and which are indorsed by at least one member bank0.
Counsel is of opinion that the words *of the kinds and maturities
by this Act made eligible for rediscount*, in Section 14, apply only to
bills of exchange which therefore cannot be bought where they have a
maturity of more than three months, but that they do not apply to bankers
acceptances and that consequently the Federal Reserve Board might legally
issue regulations permitting the purchase by Federal Reserve Banks of
bankers acceptances of six months 1 naturity.
As a natter of sound
banking policy does the Council advise the Board to issue such a regulation?
Recommendation:
The Council voted unanimously to advise the Board that in its
opinion it should permit Federal Reserve Banks to purchase bankers accept
ances drawn for the purpose of financing the importation and exportation
of .goods having a maturity up to six months*
The Council understands
that, the Board has expressed its preference by ruling to have accepting
banks, in cases where the transactions extend over a period in excess of
three months, grant acceptance credits in the form of acceptances running
as nearly as may be possible over the whole period involved in the
liquidation of such transactions not to exceed six months, rather than
favoring the granting of acceptance credits extending over ninety days with
the privilege of on© renewal.
This ruling will force the accepting banks
to issue their acceptances for periods in excess of three months, and it
is most important that these acceptances when offered in foreign markets
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or in the United States should find a ready market and should not be
penalized by being offered as ineligible bills.
It is claimed that the
open market might absorb these bills, but the rate for them in that case
would be so unfavorable,, and moreover the confidence in their ready
salability Would be so much weakened by the mere fact that the Federal
Reserve Banks would not be regular purchasers of this class of paper,
that it would seriously impair the ability of American Banks to establish
themselves in foreign markets as acceptance bankers able to compete with
England.
In our opinion it is no more than logical and right for tha
Board to follow up its ruling with the granting of the power to Federal
Reserve Banks to purchase eligible acceptances financing the importation
and exportation of goods and having a maturity of from three to six months.
TOPIC NO, 5* Under authority given in Section 13 of the Federal Re
serve Act the Board has authorized member banks to accept drafts or bills
of exchange having not more than three months sight to ru£, drawn by banks
or bankers in Central American and South American countries for the
purpose of furnishing dollar exchange as required by the "usages of trade *1
in those countries-.
Within the past few days the Board has authorized
member banks to accept drafts in the same manner for banks or bankers
in Australia, New Zealand and other Australasian dependencies, having
received assurance that there is now a nusage of tirade** in these de
pendencies which requires dollar exchange, fill the ^usages of trade*
in European countries likely- lead to requests for the extension of these
privileges to those countries, and if so, what should the policy of
the Board be regarding such applications?
RecoHsnendati on:
The Council expressed itself unanimously in favor of endorsing
the Board*s action in authorizing member banks to accept dollar exchange
drafts for banks in Australasia in addition to the authority already
granted them to accept in like manner for banks in Central and South
American countries.
With respect to the question asked by the Board
whether such power should be extended to banks in European countries the
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Council is of opinion that this should not be dcnie.
The Council does
not favor the granting of this power to countries where there exists a
system of a large number of highly developed banks of great financial
strength which could easily issue drafts for the purpose of furnishing
exchange to an extent which might become embarrassing to the Federal
Reserve System, and moreover it would appear impossible in these countries,
where stock exchange and financial transactions are highly developed,, to
provide for safeguards which would prevent the abuse of facilities so
offered by financing stock exchange loans and other financial transactions
not directly involved in export or import operations; nor does it appear
that in the exportations of Europe to the United States there are regular
seasonal movements which would warrant the drawing of finance drafts in
anticipation of exportations such as exist in the United States with
respect to cotton or similar crops.
The Council feels that the power to
accept for the furnishing of dollar exchange should be restricted to such
Colonial countries and dependencies and countries on this hemisphere as,
after proper investigation, may seem entitled to the granting of the
privilege,
t
ADDITIONAL RECOMMENDATIONS
TOPIC No. 6
Recommendation!
Resolved that in view of the grave economic conditions
abroad and the influence they will exercise upon the future trend of Ameri
can commerce and. trade it is the sense of this Council that it might be
advisable for the Federal Reserve Board to appoint a suitable representative
to visit European countries for the purpose of making a thorough first hand
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investigation and report of the social, economic and financial situation of
those countries.
TOPIC NO.
The Council wishes to go on record agptin that in their opinion
the office of the Comptroller of the Currency should be abolished and the
duties pertaining to this office should be taken over by the Federal Reseirve Board and that the number of appointive members of the Board be in
creased from five to six.
The Council favors the creation of the office of an Under-Secretary
of the Treasury in charge of financial matters who would take the place
of the Secretary of the Treasury as an ex-officio member ol the Federal
Reserve Board, the Governor of the Federal Reserve Board, who would act
a s its chairman, to be chosen by the Board itself from its appointive
members.
Resolved that the Executive Committee, or a subcommittee, not
exceeding four, of which the President and Vice President shall be members,
to be appointed by the President, communicate these views of the Council
to the incoming Secretary of the Treasury and to the chairmen of the
proper committees of Congress and that it point out the importance
pending
the proposed legislation, of appointing a comptroller of the currency who
could qualify as a member of the Board in case amendments on lines as
proposed should be enacted.
Resolved Further That the executive committee or said subcommittee
be hereby authorized and instructed to take such further steps to aid
in the attainment of the aims above outlined as it m y deem proper.
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TOPIC NO. S.
With respect to discount rates it was Resolved that the
Council does not favor at this time the reduction of any discount
rates*
TOPIC NO. 9.
the Council suggested to the Board the cancellation of the
redi-ecount rate for bankers acceptances*
Rediscount rates for bankers
acceptances now in force appear inoperative and anomalous in their
relation to one another and to the open market i*ates for bankers accept
ances.
A rediscount.rate for bankers acceptances, if established at all,
should logically be higher than the open market rate for such paper,
TOPIC NO. 10.
The Council urges upon Congress the necessity of the immediate
enactment of legislation authorizirg the Treasury to pay over to the
railroads the sums due them, obviatirg the delay in those payments
which at present seriously hampers the entire banking situation.
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of "Broadening the Market for Bankers1 Acceptances%
BOSTCK
There has been a considerable amount of educational work done
in this district toward a wider distribution of bankers aooeptanoes,
especially with the oat~of~town bankers by personal oontaot through
our opportunity to talk with them in this office. We have been
consistent advocates of bankers acceptances as a secondary reserve
and have never missed an opportunity to foster their use.
At a forum meeting of bank men held recently in Boston, the
subject under discussion was bankers acceptances and was directed
by a prominent bank official* This undoubtedly reached seme bankers
who had never been buyers of bills. This work of bill dealers has
been extensively and intensively carried on by literature, letters
and by personal solicitation.
One of the most successful means of extending the market has
been our 16-day repurchase agreement which has enabled the bill
dealers to carry raoret extens ive portfolios and thereby attract more
buyers.
Savings banks and trust oenpanies are buying in increasing
volume and are encouraged by bill dealers through their willingness
to take baok bills previously sold at any time.
As to figures, it is worthy bt note that in 1919 at this season,
we were carrying in our cwn portfolio approximately $34,000,000 in
acceptances and were not exceptionally free buyers owing to our
reserve position at that time while nor we hold but $20,000,000 and
are taking up the current heaviness in the district, as well as buy
ing some bills that come from other distriots.
ACCEPTANCE LIABILITY OH SOVEMBKR 15, 1920
HEW ENGLAND
National Banks
Member Trust Companies
Non-Member Trust Companies
Other Corporations
.
61.897.000
22 686.000
2,172,000
10,193,000
Total
Acceptances held by Banks
Held by ?•R* Bank of Boston
Held by national Banks
23*966,000
23.463.000
47.448.000
Acceptance liability November 17, 1919
DigitizedMlao-37
for FRASER
109,736,000
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PHILADELPHIA
In the last six months there has been a great increase in the
amount of bankers* bills purchased by the banks in this district*
previous to that time, on account of the large borrowing from this
bank by member banks$ nothing was done to encourage the purchase
of acceptances, on the contrary all our efforts were directed to
effecting the liquidation of loans by our member banks for the
purpose of reducing their borrowings here, hut since the change
occurred in our condition we have been endeavoring to have banks,
that were not borrowing from us, use a portion of their funds for
the purchase of bills, in which endeavor we feel we have been quite
successful.
In order to enlarge the market and insure a sufficient supply
to meet the demands, we believe it will be necessary, in the near
future, for us to arrange to carry several millions of dollars of
bills which could be bought from us at any time by those dealing
in such bills* This would prevent delay in filling orders for the
m r ohase of bills and make investing in them more attractive to our
banks*
. We hope, in the near future, that there will be a law passed
in this state permitting savings funds to invest in bankers bill*
This would enlarge our market very much.
When there is a further Improvement in the condition of our
banks we expeot to make a more systematic effort to interest them
in the purchase of these bills, and believe we will find a market
in the distriot for many millions of them unless the rates should
go too low.
CLE7ELASD
Otis & Ccmwiny, who have established a department for the hand
ling of bankers’acceptances in this district, and who makes the bulk
of the sales, reports a turn-over of a $1,000,000 a week* They esti
mate that the Hew York sales are in the same amount throughout this
district. The demand for acceptances has doubled in the last six
months*
Wherever the opportunity is offered, our officers have suggested
the desirability of bankers1 aooeptanoes as a secondary reserve. We
have also beought to the attention of the country banks the additional
desirability of these aooeptanoes to banks that have not established
an extensive oredit department in that *n unexpected increase in funds
may be safely put to work without loss ofstime.
Our i*®pf»sentatives from the Bank Relations Department are asked
to report on all banks that are visited as to whether bankers' accept
ances are purchased. This means that the representative oalls to the
attention of the visited bank the subject which often results in re
quests for advice and infonnation* The information is given that we
will purchase bankers1 acceptances for their account if the name of the
accepting bant is given and charge their aooount with us, and either
hold the aooeptanoes purchased in our Custodies Department or forward
to them as instructed*
It is not unusual for the representatives of the Bank Relations
Department to be given aooess to the books of the meatber banks. In cases
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where these banks show unusual amounts of uninvested funds, it is
suggested that these funds night well be invested in bankers' accept
ances.
Our Bank Relations Department has probably done more towards a
wide distribution of bankers* acceptances than any other vehicle that has
been used, and we are daily receiving requests from small institutions
to purchase acceptances for their credit. The aggregate of this amount
is not yet large, but is growing, and it is not unusual to have several
such requests in one day*
Much of this same information ie given to non-member banks through
addresses at group meetings, conferences and whatever opportunity offers.
It is possible, however, that something more could be done to enoourage
the sale of acceptances among non-member banks, but I am afraid that an
active aampaign through the medium of the Federal Reserve Bank of Cleve
land might be resented* To further the sale of acceptances, the Federal
Reserve Bank of Cleveland has arranged with Otis & Company to carry on
a repurchase agreement, purchases to the amount of $600,000. A ttcJjadd*
acr
t
g
&
x
w
a
fhis firm is now able to turn
this amount twice each week*
It is probable that if a company (not an accepting oanpany) were
forfted with sufficient capital to carry a larger amount of acceptances
than the local dealer is willing to do, and to secure the oooperation
of banks through the district by forming acceptance syndicates, it would
be possible to materially increase the isarket, but it is doubtful if the
time is yet ripe for such a company.
It was thought that the methods pursued by our Bank Relations Department were the most effective means that could be used, and that the
results have jusfified this opinion.
RICHMOND
le have adopted and until this time followed the practice of pur
chasing acceptances direct from the aocepting banks because, first,
there is not enough money seeking investment in this district to
properly establish an open market for bankers* acceptances and, second,
it Is our wish and purpose to keep in the closest possible touoh with
the accepting banks'*
We recognise the fact that as a general rule the acceptances purchased by a Federal Reserve Bank should have the endorsement of sane
bank other than the aooppting bank but until the conditions In this
district make it possible to establish an open market we will continue
our practioe of purohasihg from the accepting banks*
Sinoe steps have been taken to eliminate the use of bankersf accept
ances for commodity loans, the aoceptanoe business has gravitated from
the smaller banks toward the larger institutions*
Our holdings of bankers * acceptances have decreased gradually from
111,280,000 in January 1920, to $5,710,000 in November 1920* There is
some indication that acceptances instead of being offered to us are sold
in the open market or sold |irectly to other banks; but as these have
not been offered to us for rediscount, it is impossible for us to esti
mate the total amount of aooeptanoes in existence*
Due to the increased exportation of grain through Baltimore, the
Baltimore banks h e r e carried a larger smcunt of bankers’aooeptanoes
as investment*. We know that this tee been done to a considerable ex-
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tent bat we have no data t r m which to estimate the total volume*
Recently oar Baltimore Branch reported inquiries from some Mary
land and West Virginia banks as to whether we oould supply them with
bankers' aooeptanoes from our portfolio or whether we oo&ld invest
surplus funds for them in bankers1 aooeptanoes to be bought by us in
the open market* Both these proposals were rejected* We did,*however,
advise these banks of several reliable note brokers who deal in
begnkers * aooeptanoes from whom they oould obtain these investments*
j
Vie will also purohase aooeptanoes for the aooount of any bank provided
they wire us the request and specify the banks whose acceptances they
wish us to purchase* The Richmond office also follcws this praotioe.
ATLANTA
— — .—»
There was very little business being done in this district re
lative to bankers* acceptances, due to the fact that all of our member
banks arc very largely loaned up in taking care of conditions whioh
have arisen from the non-marketing of the crops, and that mops of the
banks are in position to buy bankersf acceptances at this time.
We have been endeavoring to educate our member banks to the pur
chase of bank aooeptanoes, and last spring mmm business was done in
this direction when the banks had idle funds* I believe that we would
be enabled to broaden the market when like conditions return; but under
present conditions, there is very little opportunity of broadening
the market on bankers' acceptances in this district*
CHICAGO
I have been informed by three of the principal bill dealers in
Chioago that the market has improved greatly during the last year, and
that the volume of sales and distribution is showing a steady inorease*
Comparative sales made month by month during 1919 and 1920 show
an increase this year of well over 100$ in volume, and 15Q?S in the number
of purchasers. Many corporations and individuals are now buyers of bills,
and this is an encouraging feature in the development of the market*
°ur part in the development of the market has been to grant the
dealers lines of oredit through repurchase agreements whereby we carry
the bills for a period of fifteen days or less for the same rate that
they pay for then. It is also our praotioe to encourage country banks
whioh are in funds to purchase aooeptanoes*
Our traveling representatives in the Department of Member Bank Re
lations have been encouraging all banks which are not borrowing heavily
here to purchase bills, and the dealers Inform us that a large number
of the orders they receive are the result of solicitation on the part
of our representatives.
The dealers are well satisfied with the progress that has been
made in the development of the market during the year, especially in
view of the strong demand for funds which has prevailed every since
the early part of th© year.
ST, LOUIS
In this district, as the larger banks that are familiar with ac
ceptances transactions have not had surplus funds to invest, the mar
ket for bankers' acceptances has been very quiet for the past eight or
ten months. In the Northern part of this district there are some smaller
banks that have had surplus funds, but as yet we have not succeeded in
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getting thefe to handle banker*1 acceptances. Tftey HaVe preferred to
purehase oosnnerclal paper
eight per cent* Banks in the Southern
portion of thia District, particularly in Memphis and Little Rook,
normally have surplus funds to invest in the spring and summer months
but due to the unusual conditions this year these banks have not had
surplus funds to invest.
However, in spite of oar reserve position we have maintained a
market for bills in this district. With a view of encouraging St.
Louis banks to accept, we have freely purchased or rediscounted or
oarrled for brokers, bills created by St* ^ouis Banks*
We could have handled a larger volume of bankers * acceptances
had wo been willing to permit member banks to exchange indorsements
and sell each other bills to this bank* This praotlce has seemed
unwise to us, particularly at this time, especially as it would have
a tendency to discourage the inter-district distribution of t&lls,
which we believe desirable.
. V.ith a view of maintaining an open market and in an effort to
encourage the purchase of bankers * acceptances, we have maintained a
preferential rate of discount for indorsed bills whioh has been used
from time to time by bank# who were not borrowing in excess of their
basic lihe. We have also maintained a rate for the open market purchase of suoh bill* and bills bought by us under this rate have not
been counted in the selling bank*a line of credit, nor are they subject
to our progressive discount rates.
We have at all times allowed brokers to carry with u* under a re
purchase agreement any bills which they could physically deliver to us#
We have required them to sell bills in this District or ship them to their
correspondent within one fifteen day period* Under this policy it seems
difficult for dealers to carry of varied assortment of bill* to enable
them to maintain the maturity requirements of their customers* It is our
underttadddng that in sane of the districts two fifteen day periods are
allowed to brokers at times and that this helps the situation. It per
haps might be well for us to consider a change of polloy along this line
whan we get in an easier reserve position* We are encouraging banks to
create their acceptances in small amounts, as there are a number of banks
In this ^istriot which we believe could buy bills if they were in denomi*
nations of $2,500*, $5,000. , or $10,000*# instead of In larger units*
MINNEAPOLIS
Our officers have spent considerable time, with purchasers of com
mercial paper, pointing out the advantages of bankers acceptances*
We believe some progress is being made toward broadening the market
in this district in order to introduce this type of paper* We have in
one or two eases sold direct to country banks* In most oases we have
been encouraging oountry banks to purchase direot through bill brokers*
We have an agreement with one brokerage concern for the purchase and
release of bankers* acceptances under whioh they take back from
us acceptances in small denominations as they have opportunity to place
then with banks in the oountry* Most bankers in this section are un
familiar with bankers1 acceptances and it will take some time to educate
them*
KANSAS CITY
The bankers of this district have dealt in acceptances only to a
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limited extent* The jrinciml part of outside paper purchased by .
banks of this district ii !|4|Speiented by commercial paper, and on ae*
count of long praetioe they are slew to change their investments frc©
this kind to that of acceptances* However, the banks havenet had a
surplus of funds for outside investment in this district for the past
year, and the Federal Reserve Bank of Kliisa* City has done very little
to encourage them to purchase bankers * acceptances on that account,
and I feel it useless to bring this matter specifically before them
until greater liquidation has been affected*
It is our opinion that these acceptances *re purchased by no
one in this district except the banks* No doubt, the Federal Reserve
Bank can assist in broadening the market for investments of this kind
as soon as the investing publio and banks are.in position to absorb
more than the local demand.
DALLAS
We have undertaken, as far as practicable, to «m»ourage the use
of bankers * acceptances and their purchase by actual investors in this
district, without, however, attaining any very large success* Here*
tofore, we have, too frequently I think, bought from banks their own
acceptances at our current rate. We have given notice, however, of the
discontinuance of this,-policy and of our unwillingness in the future
to accept unendorsed bills, -which will tend still further to limit the
purchase of bankers * acceptances by this bank. In fact, our entire .
Investments in bankers’acceptances at this time amounts to only
$215,000*00*
Quite a few of the banks in the country have issued their acceptanoes and have been able to place same among the small local banks in
moderate amounts, In respect to some of the largest banks in the district, their acceptances have been offered |nd sold in Bew York and
other cities*
The 'whole proposition of bankers * acceptances in this district is
in its most rudimentary status and very little has been done generally
to extend the use of this form of credit. Undoubtedly, a campaign of
education is very much needed to broaden the acceptance market in this
district* I am inclined to believe that our present policy of revising
to accept unendorsed bills will have the effect of imposing on the
accepting banks the necessity of seeing that a broader market is made
for the acceptances, which will probably bring about a broader distri
bution of them*4
SAK P M DC ISCO
Interest in this district in bankers * acceptances confined pri
marily to banks in large cities* Although few of these banks have at
present surplus to invest, broadening of fearket is indicated by com
parative statement of acceptances of other banks held by national banks
in Federal Reserve and Branch cities given belqwt
San Francisco
Los Angeles
Portland
Seattle
Spokane
Salt Lake City
TOTAL
November 16, 1920
2,668,955.42
2O1*9$0,OO
2,638,988.06
2,786,840.82
none
none
8,286,740*20
November 17, 1919
681,#00* 14
none made
5,227,896.35
1,326,923*73
878,164*If
none
8,114,148.39
r
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Although holdings In iorti&nd ehcnr eontlderable decrease, m o Portland
national bank reporta that it and ita affiliated savings bank has pur
chased 14,840,000 bankers1 acceptances in 1920 as compared with 4,587,000
in 1910,
Federal Heaerre Bank of SanFranciaco is carrying most of bankers*
acceptances created in this city* Most smaller banka in this diatrict
are not purchasing acceptances, either because executed in amounts too
large for them to handle or because unacquainted with aooeptanoes and
their advantages*
We hare foil aired no definite program of further bankers * accept
ances in this district but officers of this bank have discussed, with
banks having surplus funds, advilability of investment in aooeptanoes
and have discussed this subject at group meeting of bankers association*
In 1919 it was proposed to extend investment service to member banks
by offering to sell thera bankers1 acceptances from cur portfolio but
inauguration of this plan was deferred following receipt of your tele
gram of February 19, 1919, stating Board is not prepared to endorse
suoh policy. Subsequent to receipt of your letter August 25, 1920, stating
that Federal Reserve Bank may sell acceptances whioh it holds in its
portfolio, we have sold $2,214,000 bankers * acceptances to seven banks
in this district*
As soon as liquidation has progressed somewhat further in this dis
trict, it is planned to attempt to secure wider distribution of holdings
of acceptances and the knowledge concerning them by writing series of
letters to banks in this district drawing attention to character of aooept
anoes , lliiFlsabllity of purchasing them and offering to «e&l acceptances
froa our portfolio*
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Fe d e r a l Re s e r v e Ba n k
o r New Y ork
I
December 20, .1920
P
W.
Hoxton, Esq.,
Secretary, Federal Reserve Board,
Washington, D. C.
Dear Mr. Hoxton:
I
learned by telephone Saturday noon that the
memorandum on our development of the acceptance market
had been prepared for some time
and had been held await
ing submission to me, so that I myself was unwlttijigly
responsible for your not having received it earlier.
Yours very truly
PJ sR
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M O C . .’ - OM-I- Q
F ED E R A L RESERVE BANK
OF NEW YORK
________________________
D
OFFICE CORRESPONDENCE
TO
FRom
Mr. Jay,
D‘TE- Sove3;ber
subject
O’
Hara. _
- F. R. Bd. letter X-2054, Nov. 9,
1920 - "Broadening of market for .bankers
acceptances”.
Attached hereto is a statement (Exhibit A) of the purchases and sales of
bills by the acceptance dealers for the six months period ended November 13, 1920.
This statement shows not only the dealers 1 total sales and purchases, but also the
total amounts purchased from the various sources as well as the total amounts sold
in their various outlets.
It will be noticed that out of sales aggregating $1,042,541,000.
during this period, exclusive of those to us, $690,963,000. 'was sold to banks and other
investors in New York City.
No statistics are available with regard to the amount of
sales in the Second District outside New York City, but of the three largest dealers,
one estimates roughly that approximately 25% of their out of town sales were made in
the Second District, another estimates 6
%and still another about 1%
, Were we to take
a rough average of 10%
, it would show aggregate sales in the Second District of about
$726,120,000. out of total sales of $1,042,541,000.
I
also attach a statement (Exhibit B) showing the outstanding acceptance
liability of the national and State banks in the Second District, and also the aggregate
amounts of acceptances of other banks held in the portfolios of our member banks upon
the dates of various calls from March 4, 1919, to September 8 , 1920.
It will be noticed
that in eighteen months the number of banks in this district who held acceptances of
other banks increased from 40 to 174.
Statistics are not available to show the aggre
gate amount, of bills held by other than member banks.
Of such banks, however, savings
banks have been probably the largest investors, and we learn that on June 1, 1920,
fifty savings banks in New York State held approximately $30,000,000. in bills.
On
July 16 the number of savings banks had increased to 69, with aggregate holdings of
about $66,700,000.
over $70,000,000.
Their investment in this class of paper is at present probably
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority t
MISC.
Q-
SO
\
3.1 S0M-1-20
FEDERAL RESERVE BANK
OF N E W YORK
OFFICE CORRESPONDENCE
TO
M r - Jay,_______
SUBJECT:
R. M
. O'Hara.
- 2-
The marked increase in the number of member banks in this district which
have become purchasers of bankers acceptances is due in large measure to the efforts
of this bank.
Early in 1919 we commenced an active campaign to bring to the attention
of our member banks the value to them of bankers acceptances as a safe, liquid and
profitable investment for their surplus funds, and to offer our services in making
purchases of bills for their account.
In September, 1919, our Member Bank Relations
Department also made itpart of their regular program to bring the matter of investment
in bankers acceptances to the attention of our country members during their visits to
them.
Much credit is due to their work in this connection, which has materially helped
in producing very gratifying results.
In addition to the *vork of our Member Bank
Relations Department, investment in bankers acceptances has been made for a considerable
time past one of the topics at the group conferences held from time to time at this bank
with our members.
During luncheon at these conferences one of our officers addresses
the visiting officers of our member banks on the subject.
After the conferences, follow-
up letters have been written to the banks represented, in which an outline is given of
the character of bills which are offered in this market and the services which we render
to our member banks in making purchases for their account.
In addition to this, we take
advantage of every appropriate occasion to recommend investment in bankers acceptances
to the individual officers of our member banks when they are in this office on other
matters of business and when the question comes up with regard to the most advantageous
manner in which to invest their surplus funds.
Furthermore, certain of the officers of
this bank have been called upon from time to time to deliver addresses before various
gatherings of bankers upon the subject of acceptances and the discount market, and have
on such occasions taken the opportunity to call attention to the value of bankers acceptances aa an investment.
This bank hae also through its officers cooperated closely with
Reproduced from the Unclassified
I Declassified
D E C L A S S IF IE D
Holdings of the National Archives
Authority
0
SO \
FEDERAL RESERVE BANK
OF N E W YORK
November 50 , 1920
OFFICE CORRESPONDENCE
TO
FROM
Mr. Jay,
SUBJECT :
R..M, 0 VH-ara*.
-5-
the American Acceptance Council in its extensive program to educate bankers and other
investors in general on this subject.
As an indication of the success which we have attained in educating our
member banks to invest in bankers acceptances, at the beginning of the year 1919,
practically none of our members was purchasing this form of paper.
During the year
1919, we purchased acceptances for account of thirty-eight of our member banks in an
aggregate amount of approximately $4,000,000*
Up to the present time, this year we
have made purchases of acceptances aggregating approximately $36,681,000, for 209 of
our members.
Our service in this connection comprises the initial purchases of the
bills, which in practically all cases bear good banking endorsement and in all other
respects are of the same character as those which we purchase for our own account.
Purchases are made at the risk of our member banks at the current open market rates,
and the cost of the bills is charged to their reserve accounts.
the complete details are sent to them.
Schedules showing
The acceptances are usually held by us for
collection and the proceeds credited to the accounts of our member banks at maturity.
In cases where our members require funds before the maturity of the acceptances which
they hold, while we make no definite commitment to purchase, we usually do take the
at our regular rates for bills of like character and maturity
bills ourselves/and credit the proceeds. In addition to our efforts among our country
members, we have taken advantage of every occasion which has arisen to encourage our
member, banks in this city to purchase bankers acceptances as liberally as possible,
calling the attention of particularly those banks which have not been purchasers of
bills, but which have had outstanding acceptance liability, that their duty as acceptors
was very clearly that they should also be buyers.
In addition to having encouraged our member banks to purchase acceptances,
we have also endeavored to have particularly our New York members adopt the practice
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
Q
FEDERAL RESERVE BANK
OF N E W YORK
DATE
OFFICE CORRESPONDENCE
TO
FROM
Mr^_<Iay,
November 50 ? 1920
SUBJECT.
-4-
R. M. 0*Hara
of lending funds to the acceptance dealers at rates sufficiently favorable to enable
them to carry their portfolios without loss.
In August, 1918, a very acute situation
developed here v/ith regard to the acceptance dealers.
Heavy offerings of bills in the
face of little or no demand extended their portfolios to comparatively large amounts.
At that time the dealers 1 oMTyigg rate was
discottrrt in the face
of call money against securities at 6%
, While some of the dealers were able to obtain
moderate loans against their bills from one or two of the banks in the city at a favor
able rate, they were obliged to borrow a large portion of their requirements at the
regular call money rate.
As a result they were sustaining a substantial loss in carry
ing their portfolios and arrived almost at the point of withdrawing from the business.
This bank called a conference of a number of the larger banks in the city to see what
might be done towards the extension of loans by the banks to the dealers against their
bills.
As this led to little or no action on the part of the banks, -:e ourselves re
lieved the dealers’position by making substantial purchases of bills from them at a
favorable rate, under their agreements to repurchase them from us v/ithin 15 days at the
same rate.
Shortly after our action, Messrs. J. P. Morgan and Company made substantial
loans also to the dealers at a preferential rate, and shortly thereafter several other
banks and bankers adopted the same policy.
The supply of outside money, however, has
frequently not been in sufficient volume to meet the dealers1 requirements, and they
consequently have had to lean quite heavily upon us at times.
While our efforts in
this respect have proved very helpful to the market, much has still to be done towards
increasing the supply of outside funds available to the dealers with which to carry
their portfolios.
Of this more will be said later.
This bank practically since its establishment has directed its efforts at
all times toward the development of a broad, open discount market, and our policy and
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority fl- Q
SO |
I
FEDERAL RESERVE BANK
OF N E W YORK
November 50 , 192Q.
OFFICE CORRESPONDENCE
TO
FROM
D A T E ------ -
Mr. Javr
SUBJECT:
R. M. O'Hara
-5-
practices cannot be better described than in the able replies to the Board1s recent
questionnaire by Mr. Paul M. Warburg on the "Practical Problems in the Development of
Bankers Acceptances", which was published in booklet form by the American Acceptance
Council.
We have at all times extended an active support to the bill market both in
our purchases of bills from the dealers as well as from our member banks and other
banks and bankers who have qualified their endorsement with us.
In making purchases
from the dealers, we have had in view at all times the development of a larger and
wider distribution of bills, and we have constantly encouraged them towards greater
selling effort.
We have endeavored to take from them no bills which w
e believed could
be sold in the outside market and have purchased from them as far as possible only bills
of comparatively short maturities and in such volume as appeared to be absolutely
necessary to relieve their position when the outside market was not absorbing bills in
volume equal to the supply.
Bills, however, which have come through the market and
which have been offered to us by our member banks and by other banks and bankers who
have qualified their endorsement with us, we have taken freely with their endorsement
in the endeavor to establish firmly the confidence that the bankers acceptance is an
instrument of the most liquid character.
fthile a good deal has already been done to develop the discount market, there
is much which may be yet accomplished to assist the further development of sales of
bankers acceptances within this district and throughout the country.
In this regard
the following lines of action are suggested:
(l)
More liberal and more uniform laws governing the investment by insurance
companies and savings banks of their surplus funds in bankers acceptances.
As a specific instance, permission to New York State savings banks to buy
bills of institutions other than those of banks, national banking associ
ations or trust companies incorporated under the laws of the State of
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
3
MISC. . C'SOM-I-ZO
FEDERAL RESERVE BANK
OF N E W YORK
DATE
OFFICE CORRESPONDENCE
TO
M r. Jay,
SUBJECT:
O^H&ra
FROM -
November 30, _1920*
-
6-
New York or under the laws of the United States and having their
principal places of business in the State of New York.
Under the
present laws of New York State, while savings banks
purchase
may
acceptances of the smallest banks in New York State, they are not
permitted to purchase the acceptances of any of the great banking
institutions located out of this State,
this might very properly be corrected.
It is self-evident that
Furthermore, with regard
to life insurance companies, under the laws, for instance, of New
York State, such companies are not permitted to purchase bankers
acceptances. As is well known, the purchasing power of insurance
companies, particularly that of life insurance companies, is very
large, and the aggregate amount of funds which they usually maintain
in liquid condition and which, therefore, could be and we believe
to a large extent would be invested in bankers acceptances *,culd
be of great assistance to the market.
The aggregate resources at
close of year 1919 of the life insurance companies of New York State
alone were $3,235,570,755. and their cash on hand was $42,837,129.
(2)
The establishment of a system of term settlements for security trans
actions on the various stock exchanges throughout the country.
This
has already been made the subject of a favorable report by a committee
appointed by the New York Stock Exchange to study the question.
While
no definite action has yet been taken, it is hoped that some such plan
may be worked out within a reasonable time*
This suggestion, however,
is made with some reservation, in view of the fact that we
have re
cently been informed that the London Stock Exchange will probably not
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority fl- 0
SO \
FEDERAL RESERVE BANK
OF N E W YORK
date
OFFICE CORRESPONDENCE
November 3QT -i9£0
SUBJECT :
TO
R. M. O ’
Hara.
-7-
return to their former system of term settlements, but will continue
its practice of daily settlements which was adopted after the outbreak
of the war;
that the feeling has become somewhat pronounced in London
financial circles that to return to a system of term settlements would
be a retrograde measure.
(3)
The establishment of a more general call money market against bankers
acceptances.
Looking to the development of the discount market and the
widest possible distribution of bills, it is of fundamental importance
that the dealers should be able to carry large and diversified port
folios, to the end that they may supply investors with the particular
amounts, names and maturities which may be desired.
In order that the
dealers may carry such portfolios, it is absolutely necessary that they
should be able to obtain at all times a plentiful supply of funds at
favorable rates.
This is of the utmost importance and every effort
should be made toward this end.
As indicated in the foregoing, the dealers have experienced in the past and
are still experiencing considerable difficulty in obtaining from the banks in New York
a sufficient volume of call money at preferential rates.
I believe, however, that
there is at practically all times here a more or less large volume of out of town
money held by New York banks under instructions to lend it on call against stock ex
change securities.
We have been informed that there has recently been a considerable
volume of funds offered on the exchange which could not be placed, owing to its being
restricted to securities as collateral.
At the same time, the bill dealers here were
able to obtain their requirements only after considerable difficulty.
It is thought
that all that would be necessary to release such funds to the dealers «ould be to inform
Reproduced from the Unclassified
I Declassified
D E C L A S S IF IE D
Holdings of the National Archives
Authority
Ml SC.
0
SO
\
3-5 0OM-I-2O
FEDERAL RESERVE BANK
OF N E W YORK
November
OFFICE CORRESPONDENCE
Mr. Jay,
SUBJECT
R. M. O'Hara.____ ____________
- 8-
out of town lending banks of this condition, to the end that in placing money with their
New York correspondents to loan at call, they stipulate that the funds are to be loaned
against either securities or bankers acceptances.
We believe that out of town banks
would usually be quite willing and in some cases prefer to have their funds loaned
against acceptances, particularly at times when money against securities is practically
unlendable, as it was for several days recently and frequently is in normal times.
It
is suggested, therefore, that the banks throughout the country be informed through their
respective Federal reserve banks or through the American Bankers Association or both
that there is in New York a call money market against bankers acceptances as well as
against securities.
This situation might further be assisted by the Federal reserve banks using
their influence with their member banks to accomplish the desired result.
It has also
be£n suggested that the Federal reserve banks should extend their services in loaning
of funds against acceptances for account of their member banks, and that a plan be worked
out under which we, for instance, would place such funds with the acceptance dealers here
against their bills, Under instructions from any Federal reserve bank for account of one
of its members.
This might be a desirable service for Federal reserve banks to render
until such time, at least, as there may be a sufficient volume of funds available to the
dealers at favorable rates in the outside market.
(4 ) Encourage the issuance of acceptances in well assorted denominations, say
$5,000., $10,000. and $25,000.
The ultimate breadth and stability in the
demand for bankers acceptances, we believe, will depend in large measure
upon the combined buying power of a large number of banks and other investors
throughout the country.
It is, therefore, necessary that there be a suffi
cient volume of bills of moderately small denominations to meet the require
W
...............
I ------------------------------------ ■''"L.-!I I-' --
Reproduced from the Unclassified
I Declassified
D E C L A S S IF IE D
Holdings of the National Archives
Authority
3 3
0
-20
M I C. -S-OOM-I
FEDERAL RESERVE BANK
OF N E W YORK
November
OFFICE CORRESPONDENCE
t o ___M r ♦ J a y p_________________
from
__________________________
s u b je c t
- R. M, OtHara......... „ .. ...._ ...
-9-
ments of the smaller investors.
(5)
Conduct a campaign of education designed to inform national and State
bank examiners with regard to the value of bankers acceptances as a
safe and liquid investment for banks’surplus funds as a second line of
reserve.
,*
Much good work could be accomplished by the examiners who come
+■
into constant and close contact with the banks in their respective districts
(6) The discouragement of the practice of some banks
their own bills.
who act as dealers in
We understand that a number of our foremost institutions
at the present time are acting as retailers of their own acceptances.
This practice is particularly unfortunate where such banks sell their
bills at the same rates offered for them by the dealers, who in the
ordinary course would sell the bills at usually l/Q
% profit.
This not
only deprives the dealers of their legitimate business but also delays
investment and prevents a wider distribution.
(7)
Amend Section 5202 of the National Bank Act in respect of the 7th pro
vision thereof, which reads:
"Liabilities created by the endorsement
of accepted bills of exchange payable abroad, actually owned by the
endorsing bank and discounted at home or abroad". This operates in
favor of bills which are payable abroad, to the disadvantage of the
j
development of the discount market m
this country.
At the present
time, when our member banks sell bills to us with their endorsement,
the liability thereby incurred is, we believe, exempt from the limita
tions of the Section;
but when our member banks endorse bills and
sell them elsewhere than to us, their endorsement does come within
the limitations of the Section, although the contingent liability which
SO 1
Reproduced from the Unclassified
I Declassified
D E C L A S S IF IE D
Holdings of the National Archives
Authority
0
l^ SO j
3 0 -20
MISC. - I B M-I
FEDERAL RESERVE BANK
OF N E W YORK
November 30, 1920
OFFICE CORRESPONDENCE
to
FROM
•••r. Jay,___ __
R .
_________ __
f £ . . 0 f H a r a . ........... ........................... ...... ............. ..........................
SUBJECT:
- 1 0 -
ia incurred in both cases is similar.
It would improve the market for
endorsed bills and would result in a wider distribution were the liabi
lity incurred by national banks in endorsing accepted bills of exchange
payable in this country placed on the same basis as similar bills payable
abroad.
This might be effected by deleting the words "payable abroad”
from the 7th provision of Section 5202.
(8 ) Bring to the attention of accepting banks throughout the country the
nature of the obligation which they incur when issuing a letter of credit;
that under no circumstances whatever except a violation of the terms of
the credit should they decline to accept drafts drawn thereunder;
that
the ethics of a bankers acceptance credit be thoroughly appreciated and
understood and be strictly adhered to in practice by all acceptors as well
as by the takers of credit is of vital importance to the good name and
continued use of the American dollar acceptance.
This might properly be
made the subject of a communication by the Federal Reserve Board or by
the Federal reserve banks under the direction of the Board to all member
banks.
It might also be desirable to bring the question to the attention
of the legal profession through the Bar Association or the Attorney General.
(9)
The issuance of a concise and authoritative statement by the Federal Reserve
Board or by the various Federal reserve banks, setting forth the advantages
of eligible bank acceptances from an investment point of view.
While grati
fying progress has been made in the Second District, there is without doubt
much educational work which it would be advisable to have lone among a large
number of outlying banks in practically all sections of the country. An
intensive campaign by all Federal reserve banks would probably be very
Reproduced from the Unclassified
I Declassified
DECLASSIFIED
Holdings of the National Archives
Authority
0
FEDERAL RESERVE BANK
OF N E W YORK
November 50, 19.20.
OFFICE CORRESPONDENCE
TO
FROM
Mr. Jay,__
SUBJECT;
R. M. 0 fHara
beneficial.
-
11-
In the last analysis, it is not to the comparatively few
very large institutions in the large centers, but to the great number
of smaller institutions and individuals in all parts of the country
that we had best look for the widest and most stable market.
(10)
A continuation of effort on the part of all Federal reserve banks to
the end that all accepting banks in their respective districts may
become thoroughly familiar with the Federal Reserve Board's Regulations
and with the correct principles and practices in the use of bankers
acceptance credits.
We believe that a number of bills which are drawn
at the present time transgress the existing Regulations at one point
or another in a more or less minor degree, due mainly to a lack of
accurate knowledge on the part of the acceptors.
We have been informed
that a great many institutions who buy bills with their surplus funds
and are later desirous of selling them with their endorsement to the
Federal reserve banks or of rediscounting them, have had a great deal
of difficulty in so doing because of technical objections which have
been raised, the result being that such institutions in order to avoid
this trouble prefer to invest in other ways their funds which should
go into bank acceptances.
This is not only a question of the education
of acceptors but also perhaps of a little more liberal and helpful atti
tude on the part of the Federal reserve banks in considering offerings
of bills, until such time at least that the acceptance business and
the Board's Regulations are better understood.
i^SOj
---------------- -----------------------------------------------------------------------------------------_
—
-----
.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
r »p r i TOTVTTTT
-
Authority ^
0- l^SO j
EXHIBIT B
OUTSTANDING ACCEPTANCE LIABILITY OF AND ACCEPTANCES OF OTHER BANKS
DISCOUNTED BT NATIONAL, AND STATE BANKS IN THE SECOND DISTRICT
AS AT THE CLOSE OF BUSINESS SEPTEMBER 8 , 1920.
OUTSTANDING LIABILITY
Number of
Acceptors
Outstanding
Acceptances
ACCEPTANCES OFJDTHER BANKS
DISCOUNT^"'~~
Number of
Investors
Amount
March 4, 1919
65
$242,332,445.
40
$119,606,404
June 30, 1919
80
238,337,390.
44
65,105,204
November 17, 1919
88
289,018,922.
58
157,536,079
June 30, 1920
99
355,420,228.
158
119,396,921
*103
353,727,822.
174
99,544,321
September 8 , 1920
* Based on:
Controller* s call September 8
Superintendent’
s call June 30
PUtti .iSES AND SALES OF ACCEPTANCES BY PRINCIPAL DiEALERS..'IN NEV, )J£
AMOUNTS BY WEEKS FOR 6 MOUTHS .PERIOD ENDING ..NOVEMBER,-13. 19^
ACCEPTANCES PURCHASED FROM
WEEK ENDING
Acceptors Indorsers
SAVINGS BANKS
Others
Total
Local
Out of Town
Sold in
Open Market
Total
T O T A L S
Sold to
JT*
Bsmk
Total
Sales
May 22
27,593
9,568
13,383
50,544
1 ,8 88
487
2,375
26,519
59,406
May 29
32f887
7,603
14,787
55,277
2,289
722
3,011
18,610
58.249
June 5
27,476
8,450
9,151
45,077
2,869
632
3,501
12,347
50,000
June 12
25,318
8,204
15,534
49,056
2,500
3,320
5,820
14,311
52,283
June 19
24,849
6,481
17,198
48.528
3,642
1,560
5,202
17,859
62,993
June 26
24,358
11,739
24,021
60,118
2,420
1,553
3,973
12,918
49,555
July
3
28,181
7,222
11,050
46,453
5,173
2,540
7,713
14,599
50,191
July 10
22,273
7,374
9,250
38,897
3,362
1,794
5,156
8,193
42.036
July 17
25,734
9,413
12,304
47,451
5,730
3,638
9,368
8,981
47,826
July 24
25,553
15,453
17,381
58,387
2,448
1,938
4.386
16,156
53,055
July 31
21,525
11,499
9,525
42,549
1,389
1,131
2,520
13,854
53.037
Aug*
7
28,445
9,424
12,686
50,555
1,974
894
2,868
10,981
46,087
Aug* 14
33,015
16,373
10,102
59,490
3,316
870
4,186
10,351
53.249
Aug* 21
34.610
15,490
17,893
67,993
1,673
1,160
2,833
18,652
56,481
Aug. 28
28,481
7,872
10,536
46,889
2,082
1,102
3,184
15,463
50,168
Sept* 4
37,713
9,324
13,347
60,384
2,457
1,736
4,193
16,142
49,961
Sept.11
23,169
14,564
10,890
48.623
1,928
1,458
3.386
14,077
47,166
Sept•18
27,979
8,702
12,847
49.528
2,415
3,308
5,723
11,661
56,382
Sept*25
31,568
8,672
17,569
57,809
5,035
2,777
7,812
11,082
59,646
Oct*
2
39,904
7,957
14,209
62,070
3,918
1,227
5,146
6,549
54,612
Oct*
9
29,930
12,541
17,138
59,609
5,676
2,262
7,938
13,911
6q ,c 99
Oct* 16
37,281
10,903
16,747
64,931
4,126
3,403
7,529
11,225
57,326
Oct* 23
36.610
9,879
21,769
68,258
2,255
1,580
3,835
14,649
62,69 7
Oct* 30
3L ,592
4,626
23,149
59 ,36 7
2,644
1,534
4,178
13,210
48,401
Nov*
6
19,950
5,529
17,144
42.623
2,560
1,766
4,326
9,357
47,342
Nov* 13
33,589
12,812
20,912
67,313
4,696
3,093
7,789
11,098
67,048
759,583
257,674
80,465
47,485
127,950
352,755
1,395,296
Totals;
390,522 1,407,779
542,552
273,419
815,971 [67,946
J,
30,674
98,620
1,042,541
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C t iA S S lF lE IC T ”” ^
Authority ^-.Q -
Ky r
y O
Dececier 20, 1320.
Pi
mrrmJay, &aq.
Fedaral Baaorra Agast
Federal BoBorre Ba&e
TFe*? forlc City
Dear I?r. Jay:-
I a&cnorcdodge receipt of yotur letter of Docoalaor l§tk, enclosing a affiomodtn and eahlMta ooTWin^ in
formation atfced for la tba Board's letter X-2054.
I
have traaamitted to Governor
Hardin#
Kr.
0 9Baxmva nenorandra, to be w a d as material for the Animal
leport of tli® Beard, togetber with Kjetflorsatda previously wtfc*
mcmoraadtsa firoa jour bank ie raost interesting,
and X Dave especially called tfte Governor*s attention to it.
Witfe higfr regards, 1 an,
Vary traly ;youra.
Secretary.
(* r
r
--------- DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^E-Q- l ^ S O j
Fe d e r a l Re s e r v e Bank
o r N ew Y ork
December 18, 1920
Dear Mr. Hoxton:
Referring to the Board’
s letter, X-2054, as to what
efforts are being made in the several districts to increase
sale of acceptances, etc., I transmit herewith report covering
this district, which is in the form of a memorandum to me by
Mr. O ’
Hara, our manager of investments, with exhibits attached
as noted.
Very truly yours,
W. W. Hoxton, Esq.,
Secretary,
Federal Reserve Board, Washington, D. G.
Enes
RECEIVED
<
'
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
Authority £
5
4y>
Form 148
P:
TELEGRAM
I
,
r.^-EF.VE
i
' ‘5-
/
FEDERAL. RESERVE BO^RD
LEASED W IR E SER V IC E
W A S H IN O T O N
]
^
It
Keazel - Bear York
SJr. Heston hi® Just permitted me to examine relies of
Federal Beeerve Bank* to Board*® letter >-2054 on offbrts b€d^
Rade in th© different Mstricts to increase cnle of acceptance®*
He reports no answer jet received from new Sark stop I m very
imich chagrin®* to learn that we teve been dilatory, and ftould
ap^reoiate it if you could send off a reply today* reaching here
Eonday looming
m ?*
J5
tl2 1 — —
December 10f 192D.
Q- l ^ S O j
^
DECLASSIFIED'
Reproduced from the Unclassified / Declassified Holdings of the NationalArchives
December 13, 1920
Dear Mr* Oortlass
n
I acknowledge receipt of your letter of the Ittfi
instant* replying to Board* s letter (X-2064} of SoTeniber
9th* on the fftibjeot of "Broadening the Market for
Bai&ers* Acceptances".
Tery truly yoore*
Governor.
lir* Frederic H* Curtiss* federal Beeerre Agent*
federal Seeerve Beak*
Boston* Bass*
Reproduced from the Unclassified
I Declassified
DECLASSIFIED .
Holdings of the National Archives
Authority
December 13* 1920
Dear Hr* airtis:
I acknowledge receipt of your letter of the
replying to Board*s letter of
l&vei&er 9th {X-&054}* on the subject of ’
’
Broadening
the Maiket for Bankers* Acceptances" •
?©ry truly jours*
Oovernor*
Sfir* Bs* Hoc* Ifertin, Chairasn,
Pedextl Beeerve Bank*
St* Louie* tt>«
d e c l a s s if ie d
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
d
i
Deoember W , 1920.
J-adge W. F. Bsassy* Chatman
Fs&srsl M m rm Bctzfc
M ilas, $sxas
B oat Judge Bsaseyj-*
I beg l e f t t o acSmowledge receipt of
touf
letter of Decent)ear tth, MBiclx^ r^ply to the Board’
s letter
X-20B4 on the sofe^eot of "Broadening of l!aricet for BsjflEers*
Accept ancas**.
With kind regards to «y friends in the Feder
al Beeerve Bank of Dallas, wtfh especial reference to 30nr
0ood self, 1 am,
?ery truly yoxrs,
(Signed) W . W . Hoxton
Secretary*
Reproduced from the Unclassified
I
DECLASSIFIED
Declassified Holdings of the National Archives
Authority ^ Q .
F e d e r a l R e s e r v e Ba n k
OF
S t. L
o u is
December 10, 1920
SUBJECT:
Broadening of Market for
Bankers* Acceptances.
Hon. ¥. P. G. Harding, Governor,
Federal Reserve Board,
Washington, D. C.
Dear Governor Harding:
Your letter of Jgovember 9th (X-2054), in regard to the above
subject, has been received.
I
In this district, as the larger banks that are familiar with
j acceptances transactions have not had surplus funds to invest, the mar| ket for b a n k e r s ’acceptances has been v e r y quiet for the past eight or
11 ten months.
In the Northern part of this district there are some
Ij smaller banks that have had surplus funds, but as yet we have not succeedj! ed in getting them to handle bankers* acceptances.
They have preferred
II to purchase commercial paper at eight per cent.
Banks in the Southern
I j portion of this District, particularly in Memphis and Little Rock, normal/ j ly have surplus funds to invest in the spring and summer months but due to
( / the unusual conditions this year these banks have not had surplus funds to
invest.
However, in spite of our reserve position w e have maintained a
| market for bills in this district.
With a view of encouraging St. Louis
| banks to accept, we have freely purchased or rediscounted or carried for
\ brokers, bills created b y St. Louis banks.
I
As was said in the early part of this letter, the conditions in
this District have not been such this year as to encourage an open market
for bankers* acceptances, but we have maintained such a market right along
in spite of our reserve position.
Our larger banks have had all they
could do to take care of lojpal customers and have not had funds to invest
in the open market, f W e could have handled a larger volume of bankers*
willing to permit member banks to exchange indorse
ments and sell each others bills to this bank. This practice has seemed
unwise to us, particularly at this time, especially as it would have a
|| tendency to discourage the inter-district disbribution of bills, which we
believe desirable.
With a v iew of maintaining an open market and in an effort to
|| encourage the purchase of bankers* acceptances, we have maintained a preferII ential rate of discount for indorsed bills which has been used from time to
Reproduced from the Unclassified
I Declassified
r-
Holdings of the National Archives
Authority £ 0
Page No. 2.
time b y banks who were not borrowing in excess of their basic line. We
; have also maintained a rate for the open market purchase of such bills
I and bills bought b y us under this rate have not been counted in the selli ing bank's line of credit, nor are they subject to our progressive dis
count rates.
We are now slowly getting to a point where w e can perhaps be
more effective in our efforts to establish and maintain an open market for
ba n k e r s ’acceptances.
Some years ago it was our practice to permit brok
ers in St. Louis to purchase unindorsed bank bills from their correspondents
in New York and other Eastern cities and we would carry these bills in tran
sit for the St. Louis brokers and purchase them on arrival in St. Louis under
a fifteen day repurchase agreement.
As I understand it there was some ob
jection on the part of other Federal Reserve Banks to our purchasing bills
originating in their districts under a repurchase agreement and, carxyiug— ""
them in transit and we, therefore, discontinued this practice. I We have at
frail times allowed brokers to carry with us under ^ r e p u r c K a s e agreement any
j bills which they could physically deliver to us.
We have required them to
j sell bills in this District or ship them to their correspondent within one
| fifteen day period. Under this policy it seems difficult for dealers to
carry a varied assortment of bills to enable them to maintain the maturity
■requirements of their customers.
It is our understanding that in some of
the districts two fifteen day periods are allowed to brokers at times and
j that this helps the situation. It perhaps might be well for us to consider
!| a change of policy along this line w hen we get in an easier reserve position.
ft We are encouraging banks to create their acceptances in small amounts, as
|there are a number of banks in this District which we believe could buy bills
j if they were in denominations of $2,500., $5,000., or f>10,000., instead of in
H larger units.
We will greatly appreciate any suggestions to aid us in the broad
ening of the market for b a n k e r s 1 acceptances. Some progress is being made
in this District and there are several of our larger business houses that
are beginning to invest available funds in this character of security.
Yours v e r y truly,
A=*
'fcc.
Chairman of the B oard,
i
Ift S O '
Reproduced from the Unclassified
I Declassified
DECLASSIFIED
Holdings of the National Archives
Authority
FEDERAL RESERVE
5 3
IN
S T A T E
B A N K OF B O S T O N
S T R E E T
REPLY
PLEASE
Q UO TE
received
rj£C 1 *
T H r " 0 V E «N0H.
Mr. ¥• P. (J. Harding, Governor,
Federal Reserve Board,
Washington, P. C.
December 10, 1920*
Letter X-2054
Dear Governor Harding:
B y reply to t o o t l8-tter.j^Kaysa&ar
on broadening of market for
■bankers' acceptances has been delayed partly in order to enable
me to secure information from bill dealers to supplement that which
I could give you myself.
rrl?here has been a considerable amount of educational work done in
this district towards a wider distribution of bankers acceptances,
especially with the out-of-town baiiteers b y personal contact through
J^our opportunity to talk with them in this office*
Of course, the Board is familiar with the difficulties to be met
in broadening the market through the competition which acceptances
have to meet w i t h Certificates of Indebtedness and call loans which
have proven so attractive to the banks as secondary reserve, f W e ~
Jjhave been consistent advocates of bankers acceptances a s a secondary
|j reserve and have never missed a n opportunity to foster their use.
a forum meeting of bank m e n held recently in Boston, the subject
under discussion w a s bankers acceptances and was directed b y a
prominent barite official. (This undoubtedly reached some bankers who
LI h a d never been buyers of bills.
fTfhe work of bi l l dealers has been extensively a n d intensively carried
jf On b y literature, letters and by personal solicitation. p ^ e H a c c e p t a n c e
5 dealer who is also active in the b o n d business has his salesmen - some
29 - instructed that they are never to leave a prospect without m e n
tioning the subject of bankers acceptances. The result of their efforts
has been apparent in an increase of over 100 per cent in the number of
bill buyers a m o n g their clientele over those of a year ago.
Another
dealer who also handles commercial paper is pushing the acceptances
through their salesmen. At present there are tw> houses preparing e x
tensive literature for wide distribution, fhe representative of another
house has written quite a good booklet which is about ready for p ubli
cation*
Mr. W. P. G. Harding, Governor,
Federal Reserve Board,
Washington, D. C.
-2-
December 10, 1920
i One of the most Successful means of extending the market has heen
| our 15-day repurchase agreement which has enabled the hill dealers
\ to carry more extensive portfolios and thereby attract more buyers.
I Savings banks and trust companies are b u y i n g in increasing volume
iand are encouraged by bill dealers tiirou^i their willingness to
j take back: bills previously sold at a n y time.
IAs to figures, it is w o r t h y of note that in 1919 at this season,
Iwe were carrying in our own portfolio approximately $34,000,000 in
Iacceptances and were not exceptionally free buyers or/ing to our
Ireserve position at that time while now we h o l d but #20,000,000
^fand are t a king up the current heaviness in the district, as well
/) 'UQS buying some bills that come from other districts.
On the whole, we feel well satisfied that the educational work which
we are doing supplemented b y that of the bill dealers is meeting w i t h
excellent results.
Very truly yours,
-■ h
Federal Reserve Agent,
WHKsR
Enclosure
D E C L A S S IF IE D
^^^^^^^^^^fon^^UhctesSffie^^eclassifie^olding^^h^ationa^rchives
Authority
ACCEPTANCE LIABILITY OK NOVEMBER 15. 192©
NET ENGLAND
N ation al Banks
51 897 ©00
Member Trust Companies
22 686 000
Hofr-Hember Trust Companies
Other Corporations
Total
*
2 172 000
10 193 000
86 948 000
Acceptances held by Banks
Held fey f B Bank o f Boston
23 965 000
Held by n atio n al banks
23 483 000
47 448 000
Acceptance l i a b i l i t y Hovember 17 1919
109 735 000
-j
-------- S E c m § m E r —
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority £ . 0 -
^
r
TELEGRAM
-PERAL RESERVE BOARD file
/F E D E R A L R E S E R V E S Y S T E
3
V
"i U ;
\Ji 1
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D. C.,
24rdr
liohzaond Ip Dec 10 1920
Host on
Sfe.sim.
Answering your w ire o f y e e t e r d a y in regard c ir c u la r X-2054 I have governor
H ardings' acknowledgment o f Uovr 26 o f my l e t t e r o f the 24th enclosing memorandum
on the su bject " Broadening Markst fo r Bankers Acceptances”,
Hardy,
107P
r
DECLASSIFIED
.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - Q -
f
IE L E S B A M
|
FED ER A L RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D. C„
b55f bn
St jueuis 1255p Dcr 10
I^
Hoxtoa
Washington
Our r#ply to circular X 2054 mailed today.
Martin
216p
FiESEUVE BOAtii)
h\JL
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DECLASSIFIED
Reproduced from the Unclassified/Declassified Holdings of the National Archives
_
Authority C
i a
O-
RECEIVED AT WASHINGTON, D. C *
194 F Ott
M inneapolis Minn 1110A 3jec 10 1920
Boston
Washington D .C.
lo u r w ire yesterday/re g a rd in g o ir c u la r X-2054 1our o f f i c e r s have spent con sid erable
| time/With purchasers o f cccsnercial "p ip e r p o in tin g out the advantages o f bankers
I acceptances^ We b e lie v e same p rogress i s bein g made toward broadening the market
| in th is d i s t r i c t in order to introduce th is type o f papery we have in one o r two cases
s o ld d ire c t to country ban&s^in most cases we have been couraging country banks to
purchase d ir e c t th ro n g h -b ill brok ers^ we have an agreement With one brokerage concern
j f o r the purchase and r e le a s e o f bankers acceptances under which they take bank from
us acceptances in sm all denominations as they have opportunity to p lace them w ith
banks in the country^M ost bankers in th is section a re u n fa m ilia r w ith bankers
M acceptances and i t w i l l take seme time to educate them.
Rich Agent
I31p
/
O M
--------------------------------------------------------------
...... ^
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
.
Authority ^ 0 - l ^ S O j
Dmnfeer XO, 1930
B e a r Sr. Perrins
I mlaxmlm&m leoeipt o f your telegram of
t ^ a 3rfs date* replying to Boordf8 letter of
(X-^2054) cm th e subject of **Braefi-
ea log iU e Jfarkot for Bookers* Aoaeptancea"*
V e ry t r o l y yotira ,
G o v e r n o r *
Hr* Jobs* Perrto* Ohalasaan*
fls&eral Beserve Bank*
8** Pranoisoo, CeXlf*
Hsrding
Waahn DC
I
Seferring your letter 2*2054] interest in this district in bsnkers* acceptances ^
co^I^dT^ljiar ^
o VCnKiln large cit ies. Although few of these banks have
st present surplus t© inveat^Srros&sning of market is indicated by ooaparative^
statement of acceptances of other bsstks held by J^stionsl Banks in Federal Beserve
and Branch cities given below:
^
Kevesfeer 15,1920
ffov 17, 1919
Sanfranciaco
2,658,956.42
681,360.14
Losing*let
201,950*00
none made
Portland
2,638,988.0S
5,227,695.35
Seattle
2,785,846.82
1,326,928.73
Spokane
mm
878,164.17
Salt lake
WOM
W m
%
,
Total
8,285,740.20
8,114,148.39
Although holdings in $rtland show considerable decrease .one portlsndnational
Bank reports that it and its sff 114^iated savings bank has purehsse^P14,840,000
bankers acceptances in 1920 as compered with $4,557,000 in 1&L9.
"*PFederal Reserve bank of Sanfranciseo is carrying moat of bankers^ acceptances
creating In thia city. Most smaller bsnks in this distriet are not purchasing
acceptances .either.because executed in amounts too largs for them to handle
or because ^acquainted with aooeptanoes their advantagea^jwe have followed
no definite prsgrtm of furthering bankers acceptance in this district but tff
— .—
' ■
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L" , ------
t
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D ,
"P- A
Authority \ --\ J-
TELEGRAM
'I
FED ER A L RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
sheet two b86-f-Saafran^arding"*eKrdJEivED AT WASHINGTON, D. C.
©ffieera of this bank last discussed with basics having surplus funds advisability
of investment in accsptaness and hatfe discus sod this subject at grottp meet lag of
bafikera association* In 1919 it was proposed to extend investment service to member
banks by offering tp sell them bankers acceptances from our port folio but
inauguration of this plan waa deferred following reeeipt of your telegram of
February 19,1919, ydtating board is not prepared to endorse such policy*
Subsequent to receipt of your letter August 25, 1920 stating that Federal
reserve bank may sell acceptances which it holds in its port folio, we have
sold §2,214*000 bankers acceptance to seven basks in this district jfl» soon
as liquidation haa progressed somewhat further in this district^it is planned
to attest to secure wider distribution of holdings of acceptancea and the
knowledge concerning than by writing series of letters to banks in this district
drawing attention to character of acceptances, advisability of purehase ing them
and offering to sell acceptances from our portfolio.
Perrin
411pm
J '- 'x
—
—
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Authority ^ - Q - l ^ S O j
\T
e le g r a m
....... ,, «
"i, 3
(L E A S E D W IR E S E R V IC E )
I
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*
RECEIVED AT WASHINGTON. D. C.,
32f i y
'r:T u ^ - R£SEav£ 5DAaD bl£
SanFrancisco Deo 9 420p Deo 10
Reserve Beard
Washington.
^ele^raa^t^ have deferred reply X-2054 Broadening market for bankers acceptances
pending receipt ef infoiraation from branches shall answer this week*
Perrin
950a
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
Authority ^ - 0 - l ^ S O j
1
/
T
e
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e
g
r
a
m
FED ER A L RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D. C.,
* " f * 5 JUA- RESERVE 80A&> rl^
San tranoisoo Deo 9 4Z0p Deo 1©
He serve Board
Washington.
laare deferred reply X-2054 Broadening oariBt for bankers aooeptanoes
ponding reoeipt of information from brandies sisal1 answer this week.
Perrin
950a
DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority J L Q J A M
I-
jt
TELEGRAM
FE D E R A L . R E S E R V E S Y S T E M
(L E A S E D W IR E S E R V IC E )
RECEIVED AT WASHINGTON, D. C„
9le d bn
Cle v e l and December 9 354pm
j
Hoxton
Washington.
Y©ar t e ^ jg r ja iC ir c a la r X 2054 dated J j w j f l g a U L i / b r o a d e n i n g market fo r
Bailkers acceptances” Was re p lie d to under date o f November 12 to Governor Harding.
Mention was made by Mr W ills o f it * a re ceip t by the B eard .S h all I send you a
copy
Kevin
405pm
....- -
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
------‘
lif ii- ijA iM ir i
Authority £ ■ ( ) •
TELEGRAM
■ My
FED ER A L RESERVE SYSTEM
(L E A S E D W IR E S E R V IC E }
RECEIVED AT WASHINGTON, D.
78anr
A tla n ta 220p Dec 9
y-
t *1
Hozton Washn
,in re Q i r f u | a r w i s h
Efovr 12j have
to ad vise wrote Governor Harding
h is acknowledgment Novr 15 iwrote him again &ovr 16 forw arding
copy l e t t e r 16th hy m ail.
McGord
328p *
/
Reproduced from the Unclassified
I Declassified
d ec l
Holdings of the National Archives
A s s if i E d
Authority • E . Q . I ^ S o l
TELEGRAM
federal reserve m m
F E D E R A L R E S E R V E SYSTEM !
(L E A S E D W IR E S E R V IC E )
•
RECEIVED AT WASHINGTON, D. C.,
5542fot
Balias 34Op ^ec 9
Hoxton
Waslm
answering
m I M P M Q c:
circular
"amsey
640p
Reproduced from the Unclassified I Declassified Holdings of the National Archives
™
Authority £ 0 - l ^ S O l
FED ER AL R ESERYE B AN K
O F DALLAS
December 9* 1920
Mr. Wm. 7/. Koxton, secretary,
Federal reserve Board,
Washington, D* 0*
Dear jjr. HOxton*
*?
fifC 1 3 referring to y o u r telegram ofVjthis date v#ith
reference to letter £-2054, on the suo.ject of "broadening of
Market for Bankers* a c c e p t a n c e s , " x a m writing
say that you
seem to be correct in the fact that for sane reason, I had not
answered this inquiry.
por your Information I may sa y that m f h a v e under
taken, as far as practicable, to encourage the~ ^se of’barkers *
acceptances and their purchase^ by actual investors in this dis
trict, without, however, attaining a n y very large success* Here
tofore, v»e have, too frequently I think, bought from banks their
own acceptances at our current rate* v:e have given notice, how
ever# of the discontinuance of this policy and of our unwi l l i n g
ness in the future to accept unendorsed bills, which will tend
still further to limit the purchase of bankers' acceptances? by
this bank. In fact, our entire investments in b a n k e r s 1 accep
tances at this time amounts to only $215,000.00.
Quite a few of the ban^s in the country have is
sued their acceptances and have been able to place same among
the small local banks in moderate amounts. In respect to some
of the largest banks in the district, their acceptances have been
offered and sold in Hew York and other cities.
l’
he whole proposition of bankers' acceptances in
this district is in its most rudimentary status and very little has
been done generally to extend the use of this fora of credit. Un
doubtedly, a campaign of education is very much needed to broaden
•the acceptance market in this district.
I a m inclined to believe
ithat our present policy of refusing to acdept unendorsed bills will
|iave the effect of imposing on the accepting banks the necessity
Df seeing that a broader market is made for the acceptances , which
will probably bring about a broader distribution of them.
ye hope, during the coming year, to do more along
this line than we have done, but the pressure on us about a great
m a n y things requiring Immediate attention has so absorbed our at
tention that not m u c h has been done in this matter recently.
Yours v ery truly,
WFR/ Q
Chairman
-------- D E C L A S S IF IE D ,
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority ^ - Q .
December 4, 1920
Bear Hr* Heatht
X acOmowlod^e receipt of joar letter of l)ooeraber 2nd,
In roply to Board** latter X-2064* os the subject of
’
♦Broadening of Maxfcat for B a a k m ' icceptanoes", and have
read with Interest your o m o m t of uhat your bank Is doing
in the natter and of the statements nada to you by certain
bill dealers in Chloago with respect to the voltcne of their
business daring the yaat year*
1 tfiall bring your letter
to the attention of the other oonfcera of the Board#
/
Very truly yotzrs#
Governor.
Sir* Wm Am Heath, Chairman*
federal Beaerve Batik*
Chicago* Illinois*
5 0
\
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASS 1FI1D
~
Authority ^ - 0 -
F E D E R A L R E S E R V E B A N K OF C H I C A G O
79
WEST
MONROE
STREET
Subject: Broadening of Market
for Bankers* A c c e ptances.
December 2, 1920
Dear Governor Harding:
I regret that y o ^ ^ l e t 5t§rw.iof
(X-2054) has not had an: ejarlier reply.
She truth of
the matter is that I have been away the most of the time
for the last month, either at Washington or attending
various conferences, and that is m y only apology, for I
did not want to send a letter w h ich was not comprehensive.
In connection with this subject 1 b e g leave now
to submit a memorandum drawn up as a result of a confer
ence between Mr. McKay and myself, and for its contents I
w ish to give Mr. McKay full credit.
;■
/.
MI have been informed by three of the principal
jj bill dealers in Chicago that the market has improved greatly
j| during the last year, and that the volume of sales and distrlbution is showing a steady increase.
"This is due principally to the efforts made in
educating the country banks as to what Bankers Acceptances
are.
When banks have been induced to make their first
purchase of bills they are almost certain to continue to
purchase if they are in funds.
’
’
Comparative sales made m o n t h by month during 1919
7" and 1920 show an increase this year of well over 100$ in voll ume, and 150$ in the number of purchasers.
M a n y corporations
j and individuals are n o w buyers of bills, and this is an enj-~u2xiiiraging feature in the development of the market.
w0ne of the dealers rejjorts sales of $40,000,000 this
year, $7,000,000 of which were sold to corporations and in
dividuals and $33,000,000 to the country banks principally
Reproduced from the Unclassified
I
Declassified Holdings of the National Archives
™ ”M C L A S S i F I E D ^ ‘"
Authority ^ 0 -
F E D fR A L
RESER VE
BANK
O F C H IC A G O
Governor Harding - 2.
located in this district, with nearly 50$ of the sales to
country banks in the State of Illinois.
Another dealer
reports $38,000,000 sales since June 1 this year.
— '
“Our part in the development of the market has been
to grant the dealers lines of credit through repurchase agree
ments whereby we carry the bills for a period of fifteen days
or less for the same rate that they pay for them.
it is also
n our practice to encourage country banks which are in funds to
purchase acceptances.
"Our traveling representatives in the Department
j of Member flank Relations have been encouraging all b an k s which
U are not borrowing heavily here to purchase bills, and the dealU ers inform us that a large number of the orders they receive
are the result of solicitation on the part of our representatives.
**The dealers are well satisfied w ith the progress
]| that has been made in the development of the market during the
fj year, especially in view of the strong demand for funds w h ich
il^asjpLE&yailed ever since the early part of the year.
"The prospects are that after January 1 next there
will be some ease in the money market, and this will have a
very beneficial effect on the market for acceptances.**
Mr. ?/. P. G. Harding, Governor
FEDERAL RESERVE BOARD
Washington
HsR
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—
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•*
“p.’ /\ i A C c~\\
Authority t - U -
Xovesober *i5, 1920
Dear Hr# Hardyi
1 acknowledge receipt of your l^t^ei^ of the 24th
instant, enclosing memorandum on the subject of "Broad
ening of Market for Bankers* Acceptances”, as requested
in Board’
s letter of Hoveotoer 9th (&*2054}»
Tftmr letter
and enclosure w i H he brought to the attention of the
Federal Reserve Board*
Very truly yours.
I
!
i
5
Governor*
fir* Caldwell Hardy, Chairman,
Federal Reserve Bank,
Richmond, Virginia*
.... m c L A m n m
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Authority ^ - . Q - l ^ S O j
F E D E R A L R E S E R V E BANK O F R iC H M O N D
FIFTH
DISTRICT
O F F IC E R S
G E O R G E J .S E A Y ,
C HAS A.P8PLE,
R .H BRO ADDUS, d e p u t y
CALDWELL
g o v e r n o r
C.V. BLACKBURJ'I,asst.
DEPUTY GOVERNOR
TH O M A S MARSHALL,J r . a s s t '
governor
GEORGE H.KEESEE.casm ier
<
W.W.DILLARD, a s s t , c a s h i e r
ED W .W A LLE R ,J r .as st . c asm ,e .
A S S IS T A N T
*■-
.
HARCYJcha
J O H N F.BRUTON, w , l s o n , n .c .
D. R.CO KER,ha*tsville,s.c..
EDWIN MANN-,b l u e f ie i .d, w-\
VED
.......... ......9a
i_Re
D F E D E R A L R E S E R V E AGi
NOV
HOWARD BRUCE, BALTIMORE,m . d .
c a s h ie
NCU
STEF) .WASHINOTON
I
iH .RRlEMAN,i
IE M i
L j H B ®oy®§ w®ft.
F E D E R A L RESERVE A G E N TS
A .H .D U D L E Y
J . G FRY
November 24, 1 920#
SUBJECT:
Broadening of Market for Bonkers* Acceptances*
Hon. W. P. G* Harding, Governor,
Federal Reserve Board,
W a s hington, D. C.
M y dear Governor:
The Board's letter of Koveraber gth, X-2054, on
the above subject, has had the careful consideration of our
officers in conference. Enclosed please find memorandum from
Deputy Governor Peple covering the subject and our conclusions
in regard to it.
We should be glad to have any further advices
from the Board on the subject.
CH:F
ALTI MORCpM. [
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I Declassified
Holdings of the National Archives
Authority E . Q . I f t S o '
M1SCEL, 14
F*
,RAL RESERVE BANK OF RICHkwND
O F F IC E C O R R E S P O N D E N C E
Date
To__________ Mr. Caldwell Hardy, Chairman
Subject Broadening of Market for
M r t Chas« A, Peple, Deputy Governor
From.
November 23, 1920
_______ Bankers* Accept^Tices*____
Dear Sirs
In regard to the question of "broadening of market for Bankers1
Acceptances" referred to in the Federal Reserve Board’s letter of Novem
ber 9 - X-2054* I submit herewith the following memorandum JAs you know,J we have adopted and until this time followed the
II
practice of purchasing acceptances direct from the accepting banks, for
two reasons:- First,there is
not enough money seeking investment in this
District to properly establish an open market for Bankers1 Acceptances;
andt second, it is our wish and purpose to keep in the closest possible
touch with the accepting bankp, in order (a) To ascertain which of them are using proper discretion
and proper -precaution in making acceptances, and
i
i
I
(b) To have the opportunity to instruct others, where neces
sary, with reference to the proper procedure,
I
We recognize the fact that, as a matter of principle, acceptances
I should not be purchased direct from' accepting banks, and that as a general
j rule
the acceptances purchased by a Federal Reserve Bank should have the en~
| dorsement of some bank other than the accepting bank*
This we look upon,
however, as the ultimate goai to be reached, but we do not consider it
^practicable to introduce that exclusive practice at the present time, or in
Sj fact until the conditions in this District make it possible to establish
\\
}j an open market*
In the beginning there was a decided disposition on the part of
i
| many of the small banks to use the acceptance privilege, which, as the law
expressly states, was given to all National banks of whatever size*
There
..... .. D ^ L ASMFIED:
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Authority
ll-Q-
fhas been a tendency, however, particularly since steps have been taken
j
their use for
(to eliminate / eommo&ity, . loans, for the acceptance business to gravitate
.——-—
|
|towards the larger institutions,! Aa analysis of the list of banks offer
ing acceptances to us sine# January 1, 1920, discloses the following in
teresting facts;-
Virginia
Number of accepting banks
,
20
Smallest capital $150,000
(Surplus #62,500;
North Carolina
Number of accepting banks
6
Smallest capital $200,000
(Surplus 1110,000)
South Carolina
Number:of accepting banks
13
Smallest capital $100,000
(Surplus $100,000)
Smallest combined capital and
supplus
Capital $125,000
Surplus
50,000
Maryland,
Number of accepting banks
11
t a l l e s t capital $350,000
(surplus $1,000,000)
Smallest combined capital and
surplus
C apit al $400,000
Surplus
200,000
District of Columbia
Number of accepting banks
Smallest capital $200,000
(Surplus $200,000)
5
----DfcCI-ASSWlfefl
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority £ . 0 .
Our holdings of Bankers1 Acceptances have decreased gradually
from |llt280,000 in January 1920 to $5,710,000 in November 1920*
There
is some indication that acceptanoes, instead of being offered to us, are
sold ia the open market, or sold directly to other banks; but as these
I i have not beien offered to us for rediscount, it is impossible for us to
II
[
estimate the total amount of such acceptances in existence.
Some months ago, it was realized in Baltimore that the ex
portation of grain through Baltimore would be considerably larger this
year than heretofore, and that banks in Baltimore would be called upon
to finance grain exports to a greater extent than heretofore*
this situation, arrangements were made by a group
To meet
of member banks with
the local non-member banks and trust companies, to carry the acceptances
as investments,
k now that this has been done to a considerable extent,
II
but we have no data from which to estimate the total volume,
/*
n
Quite recently, the Manager of our Baltimore Branch has report
ed inquiries from a few Maryland banks, and from a number of West Vir
ginia banks (whose rediscount lines with us indicate an easier money
situation than exists in any other part of the District) as to whether
we could supply them with Bankers’ Acceptances from our-portfolio, or,
I I failing this, whether we could invest surplus funds for them in Bankers1
!i
!: Acceptances to be bought in the open market,
II
The first of these proposals to sell member banks* acceptances
1.1
[ from our own portfolio, we disposed of promptly in the negative.
\
The
second,' however,- to purchase acceptances for them upon request in the
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
Authority 1~.Q-
a*
4
m
open market * we considered very carefully, but finally r e j e c t e d ^ Our
reasons for not adopting this policy are as follows:(1) *» If we should go into the open market and buy acceptances
for a member bank, using our own judgment in making the selection, we would
inevitably incur a certain moral responsibility, even though we might have
the most distinct understanding,that no actual responsibility existed*.
In our opinion, we could not afford to allow a member bank to lose money
on an acceptance which we had purchased for the member bank, or, in effect,
recommended to the member bank as a desirable purchase,
(2) ~ The following alternative occurred to us, and was thorough
ly considered:-
That we make a list of banks whose acceptances are, in
our opinion, desirable * this list to include some of the principal banks
in this District and possibly a number of banks in other Districts,** that
we allow the member bank to designate one or more of these banks whose
acceptances would be satisfactory,
and upon order purchase for the member
bank acceptances of specified amounts, and selected from the banks named
by the member bank*
It occurred to us* however, upon consideration, that in publish
ing such a list we could by no means include the names of all of the
accepting banks in this District,
As a matter of fact, such a list would
carry with it a recommendation, if not a moral endorsement from us, and,
as an "open door* proposition, we would probably not be willing to list
the names of more than 20^ or 25% of the accepting banks of this District,
I have no doubt that the immediate effect would be that we would
be importuned by other banks in the District to have their names included
in our recommended list, and in case of our failure to grant such requests
..............L
- LU- J L J "
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Authority ^. Q.
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5
-
we might easily he placed in the position of having to give reasons for
our refusal,*
Such a practice could be productive only of misunderstand
ing, if not a bad feeling.
W e finally reached the following conclusions- the Manager of
©ur Branch was instructed to advise several of the reliable note brokers,
who deal in bankers1 acceptances, to sdnd their lists to the banks that
| had displayed an interest in Bankers* Acceptances as investments^, • Ht
\
| .will also communicate directly with any banks indicating a wish to pur: j ehas. acceptances,
and .d r is e them o f our w i l l i n ^ s s to make inveetments
j j for them at any time, provided they wire us the request, and specify the
J j banks whose acceptances they wish us to purchase* They can, of course,
II iI
I j give alternative names, so that in case the exact acceptances requested
■
j are not available we will be authorized to purchase those of some other
IfI ! designated bank instead* We will also follow this practice in the Rich
h
j
mond office.
Moreover, we intend to let interested banks- know that as
sistance of this kind can be,obtained, and for the present we propose
to authorize member banks to send us wire orders to purchase acceptances
collect*
.ij
Respectfully,
CAP-M
Beputy Governor
I
I
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Holdings of the National Archives
Authority ^ - Q -
Hovenber ZZm 19201
Dear Mr* Austins
I have your letter of the 20th instant„ aofcnowledfcing
receipt of Board's letter (X-2054), on the subject of
"Broadening of Iferfeet for Bankers* Acceptances" * and note
skat you have to say with respect to the present market
In your district and what, in your opinion* m y be done
to give greater breadth to it*
to the attention of the other tmnbors of the Board#
Very truly yours*
G o v e r n o r *
Mr. B» L. Austin* Chairman*
federal Reserve Bank,
Philadelphia* Pa*
jv
X shall bring your letter '
\
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority E . Q . I f t S o l
Fe d e r a l R e s e r v e
Ba
nk
of
Ph il a d e l p h ia
9 2 5 C H E S TN U T STREET
O F F IC E
OF
THE
CHAIR M AN OF THE BOARD AND
November 20,
FEDERAL RESERVE A O E N T ’
Hon. W. P. G. Harding,
Governor, Federal Reserve Board.
New York City
Dear Governor Harding -
^
In reply to your letter H j?054,/ subject nBroadening
of Market for Banker’
s Accetpances", in which you ask us t» furnish you with
any information we may have as to the extent to which bankers, investors, and
others in this district are now purchasing bankers* acceptances, and also as
to what extent we have been able to assist in awakening an interest in bills
among such purchasers, we would s a v ^ U ^
last six months there has been
a great increase in the amount of bankers’ bills purchased by the banks in this
} district.
Previous to that time, on account of the large borrowing from this
bank by member banks, nothing was done to encourage the purchase of acceptances,
j
¥
tj
1
1
| on the contrary all our efforts were directed to effecting the liquidation of
I
! loans by our member banks for the purpose of reducing their borrowings here,
I but since the change occurred in our condition we have been endeavoring to
ff
have banks,that were not borrowing from us, use a portion of their funds for
the purchase of bills, in which endeavor we feel we have been quite successful.
In order to enlarge the market and insure § sufficient
| supply to meet the demands^we believe it will be necessary^in the near future^ for
W
m
* \j
jus to arrange to carry several millions of dollars cf bills which could be bought
I
jfrom us at any time by those dealing in such bills.
This would prevent delay
!
j in filling orders for the purchase of bills and make investing in them m o r e a t t r a c -
DECLASSIFIED
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority E . Q .
ederal
P a g e
R e s e r v e B a n k o f P h il a d e l p h ia
N o .
T o
ive to our banks.
We hope, in the near future, that there will be a law
passed in this state permitting savings funds to invest in bankers bill.
This would enlarge our market very much.
When there is a further improvement in the condition
of our banks we expect to make a more systematic effort to interest them
in the purchase of these bills, and believe we will find a market in the
district for many millions of them unless the rates should go too low.
Yours truly,
&So\
from the Unclassified
I Declassified
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Holdings of the National Archives
Authority ^ - Q -
f
!
°
SOToa b or 20t X$£0#
Doar to* ta**ayt
'Roooipt la
letter o f
of yo«*r
to
tte Board’ a
"Broadening o f B a rto t 'f i r Banker**
Aooof&aiie*##*
Xnote o
fcafcjoa. have to m $
aa
to
tho brwudth of tho proaont aooept&noo aar .et In
your Diotriot,
and
shall bring your letter
to
attention of ttea other *«nb©rs of tho Board*
Very truly yours,
Governor*
Hr* Aaa S* Raaaaj*
Fodoral Hoeorvo A^mit,
Fodoral &®a#r*« Bank*
laiiaaa City, Ho*
tho
----- M m S S l f l E U
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authoritv
ASA
M C D
C. RAM SAY,
O M M I M M M « « F DIRECTORS
AMO FEDERAL RESERVE A.EN T
F e d e r a l R e s e r v e B ank
W . F k C M IH C ,
DEPUTY CHAIRMAN
BOARD OP DIRECTORS
OP
Ka n s a s C i t y
C .K .S O A R D M A N ,
ASST. FEDERAL R I H R V t M U T
AMD SECRETARY
Hovember 17 th,
1 9 2 0.
J . Z . M I L L C R , JR „O O VKR N O R
C . A . W O H T H I NOTON, DSRUTVGOVBRNOR
J . W . H K L M , C a s h ir r
JO H N P N IL U P (,J M M t C M N )l«
C . P .T Y N C R ,A S S T .C a s h ic r
L . H . C A R H A R T , ASST.CASHISR
0 . 1 . R A R L K Y . ASST.CASMIER
C . K . D A N I K L , ASCT.CASHICR
M .w . c . P A R K , a s s t . Ca s h ie r
A . O . r R O S T . A s s t .C a s m ie r
FEDBFAL F.23EEVE BOAPE,
Washington,
D. C.
Gentlemen:
Su bje ct: Broadening o f J&rket f o r Bankers*
Acceptances.
B ep lyin g to "7ours o f the 9th (X~2054l!i -you are advised
that p fa'e bankers o f th is d i s t r i c t have d e a lt in acceptances
o n ly 'to a lim ited exten t.
The p r in c ip a l p a rt o f outside
paper purchased by banks o f th is d is t r ic t i s represented by
commercial paper, and on account o f long p ra c tic e they a re
slow to change th e ir investments from th is kind to that o f
acceptances.
However, the banks have not had a surplus o f
funds fo r outside investment in th is d i s t r i c t f o r the p ast
year, and the Federal B eserve Bank o f Kansas C ity has <3one
very l i t t l e to encourage them to purchase ban k ers' acceptances
on that account, and I f e e l i t u s e le s s to b rin g th is matter
s p e c if i c a l ly befo re then* u n t i l g re a te r liq u id a t io n has been
e ffe c te d .
,
I t i s our opinion that these acceptances are purchased
I j by no one in th is d i s t r i c t except the banks.
ITo doubt, the
j F ed eral Beserve Bank can a s s is t in ‘broadening the market f o r
1 investments o f th is kind as soon as the in vestin g p u b lic and
J banks are in p o s itio n to absorb more than the lo c a l demands
and we s h a ll be g la d to take whatever a c tio n the Board suggests,
Yours very t r u ly ,
E-O- 1^50l
-------- d e c l As SIFIe Ij -
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Authority ^ - Q -
N. B. WELLBORN.
L
GOVERNOR
JO S. A. MCCORD,
LSON, DEPUTY GOVERNOR
M. W. BELL, CASHIER
W. B. ROPER, A S S 'T CASHIER
W. R. PATTERSON, A S S 'T CASHIER
R. A. SIM S, A SS’ T CASHIER
J . L. CAMPBELL, A S S 'T CASHIER
H. F . CONNIFF, A S S 'T CASHIER
CHAIRMAN O F THE B*ARD AND
FEDERAL RESERVE ACENT
Fe d e r a l R e s e r v e B a n k
EDW. T. BROWN.
OF A T L A N T A .
WARD ALBERTSON.
A SS 'T
FEDERAL RESERVE
A ST.
D TAYLOR,
8ENERAL AUDITOR
J . M. SLATTERY. SECRETARY
Homabar 16, 1920.
SUBJECT:
7
Broaden log of market for Bankers Ago
Board’
s letter N o x t - J ^ X ”2^54^^
Bear Governor Harding:
tances •
j
o
Following u p m y letter of the 12th instant with
reference to the above subject, wish to say that I read your
communication before our Dir act ore at our meeting on the 12 th,
and each j)f_them expressed ths wisw that[ thsrs~~ias very little
T T b u s i n e s s being done in this district relative to b a n k e r s ’accept/ ances, due to the fact that all of our member banks are very
largely loaned u p in taking care of conditions which have arisen
| from the non-marketing of the crops, and that none of the banks
j are in position to buy bankers' acceptances at this time*
j!
We have been endeavoring to educate our member
banks to the purchase of bank acceptances, and last spring some
business was done in this direction when the banks h a d idle funds*
I believe that we would be enabled to broaden the market when like
I j conditions return; but under present conditions, there is very
! I little opportunity of broadening the market on b a n k e r s ’acceptances
\ I in this district#
Tsry truly yours,
W. P. d. Harding, Governor,
sral Beserve Board,
iz^ton, D« G+
-------- d e c l a s s i f i e d
jd u c e d f n m t h e U n cla ssified / D'ectessified H oldings of the N ational A rch ive s
A u th o r ity
n.fiL'PAL r:i;
-T
o
t)mr Hr* flarsont
There i a enalo»ed
f a r jfQ«r
information eopjt of Board*. Ukter. of ^ w b e r . ***,
X-2054, uador til# B ubj*#t o f 'Broadening: © f Jlarket
f a r Banker* * Aooaptanoaa", t o g e t W with a copy © f
re p ly r « « « l v e 4 from A aalatant 9 i M
® f th e
Reaerra h&m%
Bank * f
1 ^//o? kt>
f
f
V e ry t r u l y y o u ra #
A. G, Em9rSM
2 a n e l* .
Hr, j# f, ft«rs0ti.f
I t l f A i a l t y ?t r e a t ,
B ro o k ly n , N,T»
O overo& r.
1 0
- \^ S o \
D E C L A S S IF IE D
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
Authority £
November 15, 1920
Bear j&3r* McCord:
I have your l e t t e r o f the I2 t% instant# aoknorare c e ip t o f Board’ s le t t e r (£ -2 0 5 4 ), on the
o f "Broadening o f Sforket fo r Bankers * Accept
X note that you w i l l "bring the su bject up
f o r disous3lon by your Board o f D ire c to rs*
1 presume 1 s h a ll hear from you ar^ain on tho
subject g iv in g the Information reqo&rttei in the con
clu d in g paragraph o f the B o ard 's le t t e r * and o u tlin in g
your own views as to what can be done to a s s is t fu rth e r
development o f s a le s o f bankers* acceptances w ith in
your d i s t r i c t .
ledging
subject
ances”•
Very t r u ly ;jours.
G o v e r n o r
Mr* Joseph A* ItoCord, Cfoairrsan,
Federal Beserve Bank*
A tlan ta, Georgia*
0
Reproduced from the Unclassified
I Declassified
-------- DECLASSIFIED
Holdings of the National Archives
Authority
Ifeveaber X5# 1920
£*or Hr* le T ln u
■
I' hwrm ycmr lftt#r of th* 12thin*tant, aofcaowlodging raoaipt of Board*®
C3WS064) au&4 o&rttiBg of tha axtant to vtileli tmster»*
investor*, and othara la. yoor &$*ferlot ar© ao* parohaalng htmfcars aooaptanoaa*
t*r*at
I hara rood with i»*
you hare to m & on tha subject and shall
bv$»& yoxxr latter to .the attention of the other raan&ere
/
of til# Board*
ixmro.
O o v a r n o r
] * • J* 0» V *rla » Aaaista&t Federal Baaerro 4®aat*
diio*
l^SOj
DECLASSIFIED
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Authority ^ . Q -
M.
b
- E L L B O R M , G O V ER N O R
JO S. A. MCCORD,
L . C . A D E L S O N , D E P U T Y G O V ER N O R
. W. BELL, C A S H IE R
. B. ROPER, A S S 'T C A S H IE R
. R. PATTERSON, A S S ’ T C A S H IE R
> A. SIM S, A S S ’ T C A S H IE R
J . L. CAMPBELL, A S S 'T C A S H IE R
H. F. CONNIFF, A S S T C A S H IE R
J . M. SLATTERY,
C H A IR M A N
Fe d e r a l R e s e r v e B a n k
FED ER A L
OF
BO ARD
A SEN T
D EPU TY
OFATLANTA.
AND
EDW. T. BROWN.
C H A IR M A N
WARD ALBERTSON,
ASS’ T
FE D E R A L
RESER V E
AG T.
CREED TAYLOR,
G ENERAL
SECRETARY
THE
R ESERV E
Hovember 12, 1920*
SUBJECT:
Broadening of Market for Bankers Accept
ances •(X-2054)
Dear Governor Harding:
I beg leave to acknowledge receipt of your
letter of the 9tfy instant* with reference to the above
s ubject.
X shall take pleasure in reading this letter
to our Board of Directors at their meeting today, and
urge that they talk with our member banks, looking to
the broadening of the market on acceptances, rather than
the purchase of other securities, which would materially
he l p the commercial, industrial and agricultural condi
ti o n s at this time*
Very truly yours,
Hon* W. P. G. Harding,
Governor-Federal Beserve Board,
Washington, D# C*
A U D IT O R
DECLASSIFIED
Reproduced from the Unclassified J Declassified Holdings of the National Archives
Authority £
F
ederal
of
C
R
eser ve
Ba
. 0
.
1ft 5 0 '
n k
levelan d
November 12, 1920
Hon. W. P. G. Harding, Governor,
Federal Reserve Board,
Washington, D. G.
My dear Governor Harding:
In your letter of November 9, X-2054, the Board requests
information as to what extent bankers, investors a n d others in this dis
trict are now purchasing bankers’acceptances . J otis & Company, who have es
t a b l i s h e d a department for the handling of bankers’accepttrices in this
[district, and”who makes the bulk of the sales, reports a turn-over of a
j$1,000,000 a week. They estimate that the New York sales are in the same
it|amount throughout this district *
I
The demand for acceptances has doubled in the last six months \ It
j»ay. be of interest to you to know that the July demands arose primarily from
the manufacturing and industrial centers in the district, and that the August
demand was chiefly from the same sources with a few inquiries from agricultural
centers. In September the largest demand was from the agricultural and mining
centers, with the demand from the manufacturing and industrial centers remaining
about the same. In October the main market for acceptances was in the mining
districts, with~a slight falling off in the manufacturing and about the same
demand from the agricultural centers.
Wherever the opportunity isf offered, our officers have suggested
the desirability of b a n kers’acceptances as a secondary reserve. We have also
brought to the attention of the country banks the additional desirability of
these acceptances to banks that have not established an extensive credit de
partment in that an unexpected increase in funds may be safely put to work with
out loss of time.~
Our representatives from the Bank Relations Department,-whe-»g4aX«xl^.~jsaXL on
are asked to report on all banks that are
visited as to whether bankers’acceptances are purchased. This means that the
Representative calls to the attention of the visited bank the subject which
often results in requests for advice and information. The information is given
that we will purchase b a n k e r s ’acceptances for their account if the name of the
accepting bank is given and charge their account.with us,’and* either ;hold the
acceptances purchased in our Qustodies Department or forward to them as in
structed.
It is not unusual for the representatives of the Bank Relations
Department to be given access to the books of the member banks. In cases where
these banks show unusual amounts of uninvested f u n d s , it j^jruggejtad.that these
funds might'well be invested in b a n k e r s ’acceptancest?an3^serve as a secondary
reserve.
--
-
F
-------- D1TEX5SIF1E1T"
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority E . Q . I f t S o l
FEw&RAL RESERVE BANK OF CLEVELAW
-
2
-
Hon. W. P. G. Harding, Governor,
Federal Reserve Board,
Washington, D. G.
November 12, 1920
[iOur Bank Relations Department has probably done more towards:
wide...die-fjtribution of bankers* acceptances than any other vehicle that has been
• used, and we are daily receiving requests from small institutions to pur
c h a s e acceptances for their account. The aggregate of this amount is not
yet large, but is growing, and it is not unusual to have several such re
quests in one day.
Much of this same information is given to non-member banks
'through addresses at group meetings, conferences and wherever opportunity
offers. It is possible, however, that something more could be done to en| jpourage the sale of acceptances a,mong non-member banks, but I am afraid
Jslfthat an active campaign through the medium of the Federal Reserve Bank of
* Cleveland might be resented. To further the sale of acceptances, the
:Federal Reserve Bank of Cleveland has arranged with Otis & Company to aarry
;on a repurchase agreement, purchases to the amount of $500,000. As indicated
Uon the first page of thi» iBtt©^, this firm is now able to turn this amount
twice each week.
It is probable that if a company (not an accepting company)
-*ljwere formed with sufficient capital to carry a larger amount of acceptances
jithan the local dealer is willing.
to do, and to secure the cooperation of
nbanks through the district b\ forming acceptance syndicates, it would be
Impossible to materially increase the market, but it is doubtful if the time is
’
•yet ripe for such a company.
In talking over with some of the other officers of the bank
the question of what could be done to assist further d evelopment of sales-of
.hankers1 acceptances in this dist r i c t .I it~was~thought tht.t the methods pursued
b y our Bank Relations Department were the most effective means that could be
used, and thst the results have justified* this opinion'.
Very truly yours,
^
JCN-T
/£
\
Assi^fcanjt Federal Reserve Agent.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority £ O J l 5 0 i
: "*-T
W.
E X tJF T IC IO M I M B I M
P. 0 .
H A R D IN G . GOVERNOR
E D M U N D P L A T T ,V IC E SOTERNOR
A D O L P H C . M IL L E R
DAVID F. HOUSTON
C H A R L E S S . H A M LIN
SECRETART OF T H I TREASURY
C h a ir m a n
m pm bv
JO H N S K E L T O N W IL L IA M S
COM PTROLLER O F TH E C URRENCY
FEDERAL RESERVE BOARD
*
\
M O EH LEN PA H
M A N , SECRETARY
E R S O N , ASSISTANT SECRETARY
A D D R E S S R E P L Y TO
WASHINGTON
FEDERAL. R B SE R V E B O A R D
Subject:
N<JV
. M. IM L A Y .
FISC AL A g e n t
eo.
YOC-2054
Broadening of Market for i n k e r s 1 Acceptances*
Dear Sir:
During the past five years the Federal Reserve Banks
have been called upon to carry that portion of the increasing
volume of bank e r s 1 acceptances which has not been absorbed by
the discount market. The fact that, with the increase i n th#
volume of bankers* acceptances, the Federal Reserve Banks have
not been called upon to carry a n even larger amount, i s evidence
of the better distribution of bills and of the broadening of the
discount market, the strength of this market lies in its breadth,
that is, in the number of institutions or individuals forming the
habit of purchasing bankers* acceptances.
The Beard feels that the development of the broadest
possible market for bankers* acceptances is of vital interest to
the effective functioning of the Federal Reserve Banks, and that
this will be increasingly so a s international movements of credit
approach the freedom of flow which obtained before the war. With
rates for bills at the high levels now prevailing, the Board feels
that the present opportunity is most favorable for interesting the
widest possible circle of buyers and it believes that the influence
of the Federal Reserve Banks, in their respective Districts, might
appropriately be used to bring about a more general distribution
of bills.
The Board requests that you furnish it with any information
you may have as t o the ex.tf*$t to which bankers, investors and others
in your District are now purchasing bankers* acceptances, and advise
also to what extent your Bank has been able to assist in awakening
a n interest in bills among such purchasers- The Beard would be pleased
to have your views as to what can be done to assist further develop
ment of sales of bankers* acceptances within your District*
Very truly yours,
( £-h^ .4 ^
a >3 $ c ■
2 *
To Chairmen of all FJR. Banks*
http://fraser.stlouisfed.org/
Federal
Reserve Bank of St. Louis
I
Governor.
Reproduced from the Unclassified
I Declassified
----------- d e c l A s s I f ie ij
Holdings of the National Archives
Authority
During the past five years the Federal Reserve
Banks have "been called upon to carry that portion of the
increasing volume of bankers acceptances w hich has not
been absorbed by the discount market.
The fact that,
with the increase in the volume of bankers acceptances,
the Federal Reserve Banks have not been called upon to
carry an even larger amount is evidence of the better
distribution of bills and of the broadening of the dis
count market.
33he strength of this market lies in its
breadth, that is, in the number of institutions or
individuals forming the habit of purchasing bankers
acceptances.
The Board feels that the development of tie
broadest possible market for banksrs acceptances is of
Xtz:
vital interest to the effective functioning of Federal
Reserve Banks, and that this will be increasingly so as
international movements of credit approach the freedom
of flow which obtained before the war.
V/ith rates for
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority £ . 0 .
bills at the high levels now prevailing, tha Board feels
that tfie opportunity is most favorable
0
in
interesting
the widest possible oirole of "buyers and it "believes
that the influence of the Federal Heserve Banks, in
their respective Districts, might be used to bring about
'^mArnx distribution of bills*
The Board jyinuuLl!j^PB*g3i3y3aS^^^«ikw^aMeasasaqciwfcgtr furnish
it v/ith an:/ information you m a y have as to the extent to
which bankers, investors and others in your District
-v^rvJ
o^-e)
are purchasing- bankers acceptances, to what extent your
/N
Bank has been able to assist in awakening an interest in
bills among such purchasers} am t t-e » o o o i ^
4 r
y<m
u Jiwild assist further ip.
i^frrnffTTno'
■District.
"L.-
- U
-
sale of bankers acceptances within your
IftSol
Reproduced from the Unclassified
I Declassified
—
Holdings of the National Archives
DimssiFiub
Authority
May 22, 1920.
Dear Mr* Koxton:
I am in receipt of your O g i A & r o f M ^ . g o / a d v i s ing me that at the recent conference of Governors held
last month, I was appointed on the committee to consider
the stabilization of the open bill market and an equal
..f|i|MI..— nitnin titt—*— ‘
''^^’
■
“
^~1‘
rir'-fr'rt*niiMiiwiiiiiirria‘
'
distribution of the bills among the twelve...haJQkfiUe,
The committee will probably hold a meeting about
the middle of June or soon after Mr. Kenzel returns from
the Pacific Coast.
Very trula
rs,
Mr. 1. 1. Hoxtoh,Executive Secretary,
Federal Reserve Board,
Washington, D.
£ .0 . iftSo'
.....
........... .........................
„
D E C L A S S IF IE D
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
Authority fl- Q
May 20, 1930.
Bear S i r : -
Aa Acting Secretary of tha Governors* conference, h o l d % r i l
7*10, I bag leave to advise y o u that it tm# moved and carried as
the s*n«# of tiie meeting that the stabilisation of the open bill
market is iiaaraibant upon the System as a vfeole, and that a eorrmitto®
be axTOinted to develop a u equitable basis for making &uc$i support
effective.
Permit me to advise y o u that the committee appoint od wider
till» action la aa follow®!
$. B, f&nosher, Governor, Federal Reserve Bank of Cleveland,
Charles A. Moras, *
*
»
«
* Boston,
S. B. Kenael, Controller of Investments, federal
Be serve Batik of He*# Tori.
Very truly yours,
Executive Seerttafgr*
Mr, E. B. Ibncfcor,
Governor, fe d e r a l Hoaerve Bank,
C leveland, Chio.
P. 3. Copies sent to all raetobera of the Cot wit tee.
SO j
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority f~ Q
MaJ 20, 1920.
Dear S l r : As Acting Secretary o f the Governors1 eonf erotica, hold April
7*10, I bog leave to advise you that i t was nsovad and carried as
the sense of tha nsetin^ that tha s ta b ilis a tio n of the opon b i l l roaricst I s inctribont upon the System os a vfoolo* and that a oamsitteo
be af-ointod to develop- an ©fjultablo basis fo r ranking switch support
o ffectiv e*
Permit roe to advise you that tho e o m ltts s armointed under
th ia action is as follows?
E* 3. 7anahsr« Gcwam or, Federal Beaarvo Bank, Cleveland,
Charles A. M brss,
*
*
*
*
, Benton*
S. a* Kiensel, Controller of Xnvastiaents, Fodar^l Bcaarve
Banl:, lfa* Tork«
Vvvy tru ly ?ov.ri,
Exaout ivs Seoratory*
Mr. E. B* Kenzel,
Cbnferoller of Investments,
fed eral Beserve Banl:,
2few Tork City*
P. S. Copiaa sent to *11 members of the Countttee*
j
*■
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—
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority fl- Q
Jfay 30 * 1920#
Dear S ir :*
As Aating Secretary of tiio Governors* conference, hold April
7*10,, X bog loavo to ndviao you, that i t m s moved and carried as
tha sense of the irnaeting that the sta b ilisa tio n of th© open b ill
m rkot is incur foent upon tho System aa a # io le, and that a oorxiittee
bo an ointed to develop an #<jai table basis fo r a&JdU**
s i^ o r t
e ffe ctiv e.
Permit m to advise you that tho conrnitteo appointed unlar
tliis action Is as follows:
S. H. handier, Governor, Federal Beserve Bank, Clovelund,
Charles A* Moras, *
*
*
* * Boston,
S, B. Kenssel, Controller of Investments, JVhietnl Bosorve
Bank, New York#
Very truly yours*
Executive Secretary*
Mr. Charles A* Mors©, Governor,
Federal Beserre Bank,
Boston, Mass*
P. 3, Copies sent to all members of the Corar*ittee.
SO
\
D E C L A S S IF IE D ,
Reproduced from the Unclassified / Declassified Holdings o f the National Archives
Authority
It is the judgment tf your committee that tho Federal Reserve
Bank* can best assist in the broadening and development ef the spen
discount market for Bankers* bills by coming to a mutual understand^
ing with respect to;
(a)
Proper principles and practices to
be followed by accepting banks;
(b)
The proper method for placing the
bills on the market; and
(c)
The proper practice and policy for
Federal Reserve Banks in purchasing
bills in and from the market; io Ooc
the character of bills, their source
and volume of purchases as well as a
policy as to ratese end then conduct
such operations in accordance with
such understandings
Each Federal Reserve Bank sh«ulde so far as possible, work for
the development ef a market within its district in which dealers and
discount houses may carry a port folio of bills from which to supply
the local demand*
This will require the development in each district
of a local call money market on acceptance collateral at rates which
will permit the dealer to carry a port folio without lesso The Feder^
al Reserve Bank should supplement this by itself extending reasonable
accommodation to dealers locally on their port folios through fifteenday purchase and resale agreements suitably safeguarded.*
Bach Federal Reserve Bank should encourage tho widest possible
investment by banks within its district in Bankers9 Acceptances as
their most desirable secondary reserve* and stand back of its advice
by making that reserve liquid on occasions when it becomes neceseary
to realise on such bills* by buying freely from its members good bill*
£ .0 .
IftSol
D E C L A S S IF IE D
iK e d 'fro m -the Unclassified;/ Declassified Holdings o f the National Archives
Authority ^ . Q .
which they have purchased in the open market; and should render every
reasonable assistance in affording facilitiee to ite members for the
purchase of billso
Each Federal Reserve Bank should, by its own purchases either
for investment because investment is desired, or ia support of the
general market when support is necessary t- aim to emphasise its adherence
to proper principles and practices, thereby indicating that they stand
behind the Bankers' Acceptance unreservedly and that it is entitled to
the most attractive rate that can be coneistently offered under any and
all circumstance*:
This could best be accomplished by each Federal
Reserve Bank developing in its own district such an open market demand
for bills as would effectively mobilize credits so that with due allow
ance for varying seasonal conditions and requirements in the several
districts member banks would nornally carry a substantial proportion of
their secondsry reserves in bankers acceptances* this without regard to
the amount of bills created in the relative districtSc
•
*
This procedure would not leave to other banks the burden of sup
porting bills made for the financing of business not originating in er
benefitting their districto
Hie support of all Federal Reserve Banks generally of bills in open
market is not only a benefit to the market as a w h o l e g but also a proper
assumption of a reciprocal part of the strain of financing seasonable
movements in staples in their own and other district# which,, without dis
tribution through the discount markets would congest as bank loans in
particular districts frsm time te. time and increase the volume, if not
the frequencys of inter®district rediscounting.
Therefore* even if #pen
D E C L A S S IF IE D
Reproduced from the Unclassified / Declassifie^Holding^onh^N^jona^rchives
Authority
£.0.
lft5 o |
=3market purchases e f Bankers* Acceptances might seem to in volve rediscount^
th at rediscount i s net in con sisten t with the purpose e f purchases made at
•uch tim es*
Te shew the in e q u ita b le d is tr ib u t io n e f b i l l s held by the Federal
Reserve Banks at the present timet,
fiv e banks have in t h e ir pert fe lie s
90/£ o f the t o t a l b i l l s held by the System*
This committee concurs and holds to* the views expressed by l£r» Warburg
in t r e a t in g fundamental questions o f theory^ p o lic y , and p ra c tic e promul=
gated by the Federal Reserve Board in i t s questionnaire o f la s t A p rilo His
r e p lie s to those questions were discussed and unanimously approved by the
f u l l board o f the Executive Committee o f The American Acceptance Council
and have been published by the Council in booklet form under t i t l e of ; "P ra c
t i c a l Fro bl«nne in the Development o f Bankers Acceptance®** and gen erally ap=
proved by the banking community®
This corcndttee recommends the d is tr ib u t io n of th isbook let by the Federal
Reserve Banks to a l l marcher banks making o r who contemplate making acceptancest
as w e ll as to a l l banks purchasing or contemplating purchasing* a»d the adoptien by a i l Federal Reserve Banka o f the p rin c ip le s and p ractice s a* to
epen market ep eratien s th e re in set fo rth and recommendedo
p a r t ic u la r atten tio n i s in v ite d to questions and answers 1, 2C 3S 5* ?,
11, 13, 2?t 23, i f ,
27, 28, 30, 31, 32, 35, 37, and 38, as appearing io the
b o o k let.
Ihis Conm ttee fu rth e r recemmends that a standing committee be appointed
te e en fer at frequent in t e r v a ls , by ’ phene er w ire , as t® market conditions
and rates* with a view e f naming rates in conformity with conditions sur
rounding the b i l l market, and that each Federal Reserve Bank be advised promptly
i g te any and a l l changes suggested by the committeeo
------ DimSSlFIEU
Authority £ .0 .lfr 5 o l
of the National Archives
w
3sj
ttj M ii
Tha eaudttaa is unable t# agr«« in a plan afearaby tach Ftdtral
ftaaarra Bank ahauld agraa ta taka its praparti«n af billt, undar any
and all oircu»urtaneaaB baugfrt by athar Fadaral Haaanra Banka.
(£&nmrttee) f -
w.
Reproduced from the Unclassified
I Declassified
----------D E C L A S S IF IE D
Holdings of the National Archives
Authority ^ - Q -
I received your memorandum of December 24th*
The follow
ing is a quotation from the New York Times of the same date:
"The Federal Reserve Bank yesterday advanced the rate
at which it is willing to buy acceptances* The former rates
were 4 1/fe per cent* for thirty-day paper; 4 5/8 per cent*
for sixty-day paper, and 4 3/^ per cent, for ninety-day bills*
The new rates are 1/8 of 1 per cesi. higher throughout the
list* This is the second advance in buying rates this Fall,
the first rise having been made from the level which obtained
for more than a year, and w h ich quoted the longer at 4 1 fZ
per cent. Yesterday afternoon, after it became known that
the Reserve Bank had t aken this action, most dealers moved
their rates up to figures l/8 of 1 per cent* above the bank
rate."
Apparently what happened w h e n the New York Bank increased
its open market buying rate was that the dealers increased theirs
to a corresponding extent, w i t h the result, no doubt, that the R e
serve Bank will continue to get most of the bills*
I doubt whether member banks should charge l/4 of 1 per
cent, for each acceptance for a period of ninety days, and I do not
understand that that is the universal practice*
It seems to me that
while in the first instance it was no doubt proper t o stimulate
artificially the issuance of acceptances b y making this form of bor
rowing peculiarly attractive t o the borrower and to the banks, the
time has come w h e n something must be done t o prevent loading the
r
D E C L A S S IF IE D .
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Reserve System with these bills*
Certainly the Reserve Banks are
not creating a market for acceptances by buying all the bills.
I
am wondering hew far our enonnous export balance is being financed
by these purchases, and how far the foreign bills are really liquid<
Very truly yours,
Hen* rr.P.G* K a r d i n g ,
Gove rnor, Fede ral Rese rvre B card ,
Washington, D. C*
D E C L A S S IF IE D Reproduced from the Unclassified IDeclassified Holdings of the National Archives
Authority ^ - Q -
S
w m m m
msmi m m m m
m
v m m m .
Year lskisrof ^ § 1 $ ^ Instant regarding tho ojpan m rk at
parch asos by tfca JMiiii f*oarr«- banfes waa bron$it to tbs
attazrtlon ©f tho Board sad has boon givan dmo consideration.
At tba l i M ytrar lottar was writ ton tho bonks woro buying
aocaptanoo* at & four sad orto-half po react rata, but tho rata has
now baon adtancsd #»orallyt and in Bow fork particularly, to
four and threo~<n*artars poroont.
As tbs usual co«mis#lon cfcargad by o*®bor banka for aocapt*
lag 1o o®o*fc<jBhM,tor of ooo ptirciot for oaoh poriod of ntnsty days,
yon w in too that # four
&roo»qn*rtor porcont rate is
o^tsivaloa* %9 an amtasal rata of flv* and Jiiroa-qjaartara poreent,
tfcidb la Jttat alxmt on a par ( If not a little aboto) with
ooanorelal p*por r&tos.
At tho praastit tiiao tfcer* la no appreciable dooand on tho
part of it»vo*to*a for bills and tha brant of taking eara of tho
bill market has naturally fallsn upon tho ftsdoral reserve banks*
tho Board hopes that a four and throo-q^aartars paroont rata will,
aftar tho ft rat of tha year» prwro attractive to private Investors
and that tharo will ba a broadening of tho market for bankers'
aooeptanoee.
Reproduced
from the Unclassified /
Declassified Holdings o f the National Archives
D E C L A S S IF IE D ,
".........................
Authority ^ - . Q .
/
THE S E C R E TA R Y OF THE T R E A S U R Y
W AS HINGTO N
Re c e i v e d
DEC 1 719)9
December 16, 1919*
The G o v ern o r.
D ear Governor Hardings
I notice that in tlie period from June 7th (immediately
after the flotation of the Victory Loan) to December 12th the
twelve Federal Reserve Banks* loans and discounts secured by
Government war obligations decreased
from......... .
to............... .
*$1,621,000 #000
1.588.000.000
or ........ .........................*..... § 33,000,000
wiiile their total earning assets increased
from* **«••«•....... *§ 2,264 ,000,000
to........... .
2 fS 8 1 T000.000
or......................... *..... .
$ 717,000,000
I notice also that nearly half of this increase in total
earning assets is accounted for b y the fact that the Fed
eral Reserve Banks* holdings of bills bought in the open
market increased in that period from §198,000,000 to
$542,000,000, or about 274/d#
It occurs to me that the v e r y rapid and continuous
increase in the Banks* open market purchases of bills pre
sents a question as to the propriety of the practice of the
Reproduced from the Unclassified
I Declassified
D E C L A S S IF IE D
Holdings of the National Archives
Authority fl- 0
—
2
—
"banks in tliis respect which ou/iit to have the serious con
sideration of the Eeserve Board*
Very truly yours,
Eon* V/. P. G* Harding-,
Governor, Federal Beserve Board
I^SOj
Reproduced from the Unclassified
I Declassified
Holdings of the National Archives
.
_
Authority S . C M f t S O l
E X -O F F I C I O
W . P . G. H ARDIN G , GOVERNOR
A L B E R T S T R A U S S . VICE GOVERNOR
M EM BERS
CARTER GLASS
ADOLPH C . M IL L E R
f
C H A R L E S S. H AM LIN
|
SECRETA"Y OF THE TREASURY
CH* .Wn
JOHN SKELTOf.' WILLIAMS
Co m p tr o l le r o f t h e c u r r e n c y
J . A . J g r a p E R I C K . SECRETARY
f g l P M A N , A ss is t a n t s e c r EfR
e ^ ry
FEDERA L RESERVE BOARD
W . M .S S l A Y . F is rftl, Ag en t . .
&
a d d r ess
WA SHINGTON
r e p l y
to
FED ER AL RESERVE BOARD
•<; <
^ w
SUBJECT:
Comments and rulings "by the Federal Reserve Board
with respect to recommendations made by Governors
of Federal Reserve Banks at conference with Fed
eral Reserve Board, March 2 0 - 2 2 , 1919*
?
\
!
X-lUb3
•'
*>2
■ / n
Bear Sir;
k stenographic copy of the minutes of the conference held on
lykrch 20th-22nd has "been sent to the Governor of each Reserve Bank,
and upon request a copy of the minutes of the meetings held on IVkrch
20th was sent to the Advisory Council member fof each Federal Reserve
district*
There is enclosed herewith for reference, a list of topics
discussed, with the recommendations submitted b y the Governors to the
Board (stencil X - 1 ^ 5 9 ) •
The Board has carefully considered the recommendations made
b y the Governors and with respect to certain of the recommendations the
Board offers special comments and in a few instances rulings have been
made as hereafter indicated*
For convenience, the topics referred to are numbered in same
order in which they were discussed at the conference, and are also
l i s t e d / n the same order in the mimeograph (X- 1 U 59 ) enclosed.
TOPIC 2.
B A N K E R S ’ACCEPTANCES: /
/
;
(d)
Sales of acceptances to other Reserve Banks
with or without Reserve Bank endorsement.
*
Rec ommendation:
It is recommended that where voluntary open market
purchases are made b y one Reserve Bank through another
Reserve Bank, no endorsement be expected or required.
Where sales of bills b y one Reserve Bank to another
Reserve Bank are made b y mutual arrangement, endorsement
m a y be required b y the purchasing Reserve Bank and such
transactions should promptly be reported to the Federal
I
D E C L A S S IF IE D .
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Authority
_2_
X - 1 4 -6 3
Reserve Board. That where rediscounts are arranged
through the Reserve Board, at rates fixed by the
Board, endorsements should always be given b y the
■borrowing bank.
The Board approves the recommendation with the exception
that it considers it essential that all interdistrict sales of bankarrangement s
ers 1 acceptances be made through, or under participation/approved by,
the Board, in order that it may be kept fully informed of the loan
and reserve conditions of all Federal Reserve Banks.
practice at present.
This is the
0
@FedFRASER