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332.3-7 - Purchase of Governnent Bonds by FRBank, Atlanta under repurchase agreement (1919 - 1921) I HANSI*tH , A 17)te-er ?1, 14.171. near Mr. .Cord: The Board into conaiOsred yovr lstter of Vas 'nth instant an anthoriles a charge of 350,000 out of .3urrent eurnix11:e an' tA-.A udlition of t.1 1A amount to your SICY1,000 special reserre, which ia approvs.1 1.7e.9t . Jim,. Thi3j11 117m your bank a resnrve for :.,ontiogent 10slet% of $250,c)00 which th9 un-I.erst:Lnls aPPlictai%le lotti to t)11, rrrlirchasc ar?,reaments &II undetermined losses on paper disccunted for Te.:1r!tr 1-ants. , Vnry- trulr yours, Govsrnor. Mr. Joseoh A. cCori, Cbalrman, 'Federal PFeserve Bank, Georqta. Form 148 FE AR A L_ R, AI LEAS A • 1' VE B RD Pt SERVICE HINGTON --) --) The telegram given below is hereby confirmed. Deoem56Y—ZE, —i941 Wellborn A.tiant,4. Your iv1I1 noet::-.i with nv ax:roval, reply to Coun1 is farnilia..:. with the agx.GurL3:at ._, .provaz Lie ai.;tion .11.) sTria propose to talte IIARDIWG 2--9454 I • TELEGRAM FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) RECEIVED AT WASHINGTON, D. 2 C 7921 Atlanta 124.5p Dec 20 Harding Viashn FollowinL wire reed from Attorney,Bank of Tenn:"PresuminE, that liquidition was really what4ou desired cLused us to take up loan instead of repurchase. Certainly we must have credit for that transaction. Now inasmuch as it is our intention to work off bonds in January,if the market holds around present figures you will cet full settlement;but if the market will not take them you surely would not expect a forced termination before the expiration of the five years as stipulated. Feeline cure that you will be reasonable and treat us as you would like to be treated,and as high class bankers are accustomed to treat their customers,v ,ho furnish the highest class of coll.clteml,the matter will work out pleasantl:y-,nrofitably,and as promptly as you could hope for. If the market is too weak,we supt)ose it would be very hurtful Je financial plans of the Ceeretary of the Treasury to throw bonds overboard o/-- TELEGRAM ////• r FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) RECEIVED AT WASHINGTON, D. C. anddemornlize the market". I suggest the following reply if it meets pith your approval: Under contrct we have after demcmd for payment of unp,Iliu purchase price of bonds,the right to sell these bonds,applyint the net proceeds in reduction of the amount due. In vie of fact that you make no defirite promi se to dispose of these bonds within sixty days, selling of the bonds will be begun by us early in January and Itast be left to our judgment. We will probably decide to sell portions of the same from time to time and will keep you posted as to resul ts. We will in selling,of cource,endeE.vor to get the most favorable price on the rew York market. Wellborn. 155p December 19,.1921. Mr. W. I'. (. Harding, Governor, Federal Reserve Board, Washington, D. C. Dear Governor Harding:Your letter of December 15th, with reference to the recommendation of oUF Board that a reserve of $250,000.00 be established, in addition to the $2.)0,000.00 reserve for probable losses in connection with repurchase agreements heretofore approved by the Federal Reserve Board, was considered by our Exe.cutive : Committee at its meeting today, and I report below the views expressed: The Committee agrees with the point made by the Board, that because of the improved market fer Liberty Bond.;, the probability of loss incident to the repurchase agreements is negligible. We have from twelve to fiteen banks that are in an extremely delicate position, and while, as going institutions, their bills that are under rediscount with us v.ould not make us a loss of more than '',21.),()00.00, should something unforei seen bring about their closing, it is possible that some of the bills under rediscount for them would not entirely work out. Considering the fact that the possibility for loss in connection with the repurchase agreements is remote, and the further fact that we were very liberal in our stimates of losses that might be incurred, should the weak banks referred to close, the Committee was uanimous in its opinion a combined reserve of $250,000.00, to be applicable, both the repurchase agreements and other probable losses, would be ample. We would, therefore, request the Board's approval that the $200,000.00 special reserve•approved last June be increased by $50,001.00 and be made applicable both to the repurchase agreements and undetermined losses. Very truly yours, Jos. A. McCord, Chain of the Board, Federal Reserve Alsent. Your letter of the 15th instant, relative to special reserve of .250,000 that our Board requests to be set aside to take care of possible losses in discounts, has been received, and I have handed the letter to Governor Wellborn and . also to Deputy-Governor 2 delson, and we will answer your inquiry on Lionday next. Hen. W. 4. G. Harding, Governor, Federal Reserve Board, Washington, D. C. • '141 Form 148 A 4 FEttlikAL FR;ESEf4VE BROW • LEASED WIRE SERVICE WASH!NOTON The telegram given below is hereby confirmed. ;.- 2-94114 Tellborn Atlanta Think it would be advisable to send teleexam to Nashville in form proposed your telegram to me of yesterday. In corresponding with these people it might be well to call attention to fact that high Grade bonds are always highest in dull times when there is no constructive demand for money. Many anticipate revival of business in spring and if so probabilities are Government bonds will be higher in January and February than at any time thereafter during year. Also Soldiers' Bonus seems likely HARDING gra "we o TELEGRAM SO FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) 142anr NON: -17A01 7) y11.4,1., I : RECEIVED AT WASHINGTON, D. G4i-,713,,40 • , Atlanta 243p Dec 16 1921 I 1 :661. :)1C1 I .CLEA ra07.Li Harding 1 .'ottshn Bank of Tenn reply is as follows:"AS the market looks now it would be our purpose to begin selling bonds soon after Jany 1,1922 in small amounts daily. If the market should decline,we woula not plan to crowd it. We honed and expected and still expect to have the transaction worked out by April first next,but would act with discretion in the matter,and if we found it inexpedient to get throu11 by that time we would not want to sacrifice our property. In other words,it is now and has been our purpose to try and v:ork out the trans.qctim soon after Jany first as pr_ctiaable. a: would like to be given this opportunity to close out the transaction,and if this is Allowed we will proceed to carry same out as expeditiously as the market will justify. "you will notice tbutit we have alreadybli;;uidated 4 250,000 which should be sufficient to satisfy the situation through the holiday season when the market will necessaril y be dull;and we confidently hope and expect that you would not want to depres:„ the market just at this stage". In reply,haw woulcl something Inc.:: this do? Your purpose to begin selling soon after Jany first is agreeable to us,but we feel that it would be improper to give you a longer time than sixty days to have a final livuidation. This is the tirie limit on agreements with all member banks who subscribed to bond s at par during liberty bond campaigns ,whereas yours was made for trading purposes. The )250,000 liquidation referred to was borrowed money,and no part of our repurchase agreement. Wellborn. o6Op / Form 148 A ED • A JR- E,F/ V E E3 Oak D LEASED WIRE SERVICE W-7 49/H I N GTO N l giv:en telegr4a kl below is hereby confirmed. 2-94S4 Wellborn - Atlanta Your telegram this dIfcte. Your suggestion to Roberts Attorney for the bank at Tennessee meets rdth Board's approval anti it is hoped that you will be able to reach an arnica:hie agreement based on gnadual liquidation within sixty days and suggest therefore revocation of former notice 3f siictrfiliA,3. and sending of a new notice requiring repurchase at th.selligradually it will get the benefit of the average If bank agrees to market price of bonds during the sixty day period. Unierstand that other banks which have repurchase agreements are pursuthggthis policy. TELEGRAM FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) RECEIVED AT WASHINGTON, D. 50cnr Atlantc, 1022a Dec 16 Harding Washn have sent following telegram to Ex-Govr L H Roberts Atty for the bank of Tenn :"Would it be agreeable to Bank of Tenn to 6radua11y sell bonds say in amount forty or fifty thousand dollars daily with a view to final liquidation within sixty days? Thiswould avoia throwing a large amount of the bonds on the market at one tithe" dellborn 1138a sr/ J DacAmP:ler 15, 1921. Dear Mr. McCord: Bsfort approving the vote of your directors to set up a special roserve-°f $25919a in aidition to the reserve of'MO,WrilreaAy set aside to tlke cDre of proWle loasssin conn3ction with or 1onr1 rspurch3se agreements, the Board desires infovnation as to the prdalle losses ttlt mill resalt from these rtpurchaGe agrldmento. In vie4 of the very aubstantial advance in the market value of the Bonis sinca the avelTente -care made it occurs to the Board ths.:.t t probahle losses in connection vilth your Bond trImsrxtions shonld be negligible. What the Board mouli lo o have is an estimate of your Joubtfal paper an. •vitil this in hand will . 4 be in position to determine the advisability of aprroving the reserve a4ainNt esti,mter! loslas. Tory truly yottru, Governo r. r. Joseph A. McCord, Chairman, Irter;4 riewirvl Bank, Atlant 4, Glon74L,. , Form 148 TELEGRAM FEDERAL. R SERVE BOARD WIRE SERVICE .421), pH!NGTON , .0000mbor 1t3, isika. .tst lant a. :--.Lociso ati nnzi-.5rIt i'321 wit h rfOntIvi t(1,,r3to your t97.11,-irtr :. . coie eti1 o riocurents 3ntoreti into in bor. mattor and. c(;:eroapomionc.;ci Bobartv lottor roXorrtvi to in atrfit.c • -....______.----•_•4111 FEDERAL ill:SERVE B CO AnICT.L.ElbaSTT .Ewe December fifteenth, I'dneteen Hundred Twenty-one. . \ \,.. / 1 4 OFFICE'pF DE.ru 1.Y GOvERwCort \ /. C) 6 \ \ ,,,, iNN - 1,•*< „...., -,......., ,....../ Dear Governor Harding:- .., .,,.., '''' ••••"'" XI) • tcp4ey,/ Complying with your telegram addressed to Governor Wellborn, there are enclosed copies of the correspondence immediately preceding the bond repurchase agreement entered into with the Bank of Tennessee; copies • of the resolution of their board; agreement and receipt; and copies of the correspondence that has passed since the question was taken up that the repurchase be made. With kindest personal regards, I am, Very truly yours, L. C. delsonTh Deputy-Governor. Honorable W. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. Enos. FALL RESERVE BANK OF ATLAN. CONTINUATION SHEET NO. Doc. 15, 1921. ":ashington. 'ash to advise that all steps taken by us in Nashville mattor have been under advice of counsel. Counsel advises that, since notice and demand has been formally made, the method of selling can be left to us. Under all the circumstances, perhaps it may be well to have agreement with Bank of Tennessee to sell at least 3100,000 of bonds daily. Before making such suggestion to Nashville, would be glad to have any suggestion from your Board . All other banks under Repurchase Agreement had sixty days' notice. Do you think that it would be advisable to suggest to 'Bank of Tennessee that they take sixty days by soiling 025,000 daily ? -Jellborn. COPY. FEAAL RESERVE BANK OF ATLAN• CONTINUATION SHEET NO. NASIWILLE TENN 442P DEC 14 1921 . Gov M.B. 1 7ellborn Federal Reserve Bank, Atlanta Ga. Ue hereby protest against your sale of one Ldllion five hundred thousand dollars Liberty Bends in accordance 7:ith your notice under date of December Tenth Ninet7een T:uenty One, and notify you that we 17hiCh 770 rill hold you responsible for all loss and damage ma:: sustain thereby. positioa Letter of this date, detail, follows. BANK OF TEUNESSEE, By A.R. Roberts Attorney. 503 Pi: COPY. FE AL RESERVE BANK OF ATLAN• CONTINUATION SHEET NO. ROBERTS & COOPI2 LAYERS COiflCL.L C LIZ BUILDIIIG IT.ISHVI=, TEM'. December 14, 1921. YTellborn, Gov. Federal Reserve Bank, Atlanta, Georgia. Dear Sir: Bank of Tennessee has sham me your notice bearing date of December 10th, 1921, expressin7 your purpose to terminate an agreement under date of June 22, 1921, betueen Fedoral Reserve Bank Formal protest against of Atlanta, Ga., and Bank of Tennessee. such action on your part and on the part of the Federal Reserve Bank luas transmitted to you today by telegraph. You Tdll find belou a brief statenent of some of the reasons for the protest en the part of the Bank of Tennessee. I - These bonds were originally purchased by the Bank of Tennessee at the most urgent solicitation of officials of )3'ederal Reserve Bank of Atlanta, Georgia, an' at a time when there was a strong likelihood of the purchaser suffering heavy losses on account This rns done under certain very dezinite promof such purchase. ises and assurances on which the purchaser implicitly relied to the effect that Federal Reserve Bank would carry the loan and enable the purchasorto have a long period of time in which to protect itself. Time was of the very essence of this origihal engagement; 2 - Subsequent to the original purchase, on Juno 22, 1921, a uritton agreement was entered into, expressl- providing that the . Purchaser should have five years in - :hich to take full paLnent for said bonds, but with an emergency clause, which is Paragraph 2 of This paragraph contains a throe-day-notice provision, the contract. vlich was intended to protect Federal Reserve Bank against any sudden emergency which might arise, and was not understood by the purchaser as enabling Federal Reserve Bank, merely because it might satisfy its convenience to do so, and without reference to the effect upon the purchaser, to compel all said bonds to be thrown on the market, at such Ko emergency exists at this time, price as might be offered for sane. justifying the exorcise of the pm:er IThich the contract purports to confer upon Federal Reserve Bank. 3 - It is manifest that the value of said bonds is steadily rising, and that an immediate and expected sale of said bonds by Fednecessarily result in material and substantial eral Reserve Bank FECOAL RESERVE BANK OF TLAN• CONTINU TION SHEET NO. loss to the purchaser, both by reason of the fact that so large an amount of bonds is thrown upon the market in a body, and also because the purchaser will be thus deprived of early and certain pro' its which it would other,ise receive from the continued increase in the market value of said bonds. This is an equity to which the purchaser is clearly entitled, since it took the great risk of purchasing these bonds originally at around 95 %, when there was every reason to believe that the value thereof would decline, and which value did decline to around 82 c,.% After this purchaser has weathered the storm and has reached a point where it is quite evident that a substantial profit is in sight, it is inequitable and unjust to so construe the contract of June 220 1921, as to allow Federal 14)serve Bank to resort to a provision in said contract which us merely a protection in case of emergency, which will result unnecessarily in serious loss and great damage to said purchaser. For the foregoing and ether reasons, Bank of Tennessee strongly protests against the proposed action on the --rt of Federal Reserve Bank to throw said bonds upon the market at this time, and gives notice hereby that it will rely upon its legal and equitable rights under said contract and under the terms of the original purchase, and will insist that upon all the facts and circumstances taken in connection with this entire business transaction, froa. the beginning down to the present time, it is entitled .o be compensated for any losses and damages it may sustain on account of such sumnary action by Federal Reserve Bank. Very respectfully, (S) AHR*BF. BANK OF TENNESSEE By A.H. Roberts, Atty. FEDERAFESERVE BANK OF ATLANTA PRIVATE WIRE SYSTEM • INCOTIIING From 15 NVJ11. Nashville Tennessee 1053A Dec. 15,192 1 Adelson Atlanta, Georgia. Letter 14th was delivered to Mr. Caldwe ll 1030AM. (Signed) McNamara 1055AM. COPY. COPY December 15,1921 Bank Of Tennessee, Nashville Tennessee. Fear Sirs: Pursuant to formal notice given you as of December 12th,1921, we hereby make demand in accordanc with the contract referred to in said notice, for the fu:11 unpaid purchase price of the Liberty Bonds agreed to in said contract, to be purchased, the amount for which demind Id made being One Million,Four Hundred Seventqen Thousand1 Five Hundred (- $ 1,417,500) Dollars, plus accrued intereut to date ( $10,638.38), being a total amount of One Millitcn Four Hundred Twenty Eight Thousand, One Hundred EightyThree and 38/100 ($ 1,428,183.38 Dollars. Now Respectfully Yours, G o V er n o r JMS:H I December 14,1921 COP:(. Mr. J.B.McNamara, Manager, • Branch-Federal ReserVe Bank, Nashville, Tennessee. Dear Mr. McNamara: There is enclosed a communication addressed to Bank of Tennessee, Nashville, Tennessee, which contains the formal demand for the unpaid purchase money on the bonds held by us under their repurchase agreement. We gave them formal notice that the demand for payment wouldbe made in three days if the matter had not been closed prior to that time. You, will, therefore, tomorrow morning present in person the letter herein enclosed to one of the officials of the bank (preferabl7 Mr. Caldwell) who is authorized to sign on its behalf. Please telegraph me when the letter has - been delivered, which should be not later than eleven otclock. Yours very truly, L.C.Adelson, Deputy Governor. LCA:A Encl. FE AL RESERVE BANK OF ATLAN1P CONTINUATION SHEET NO. December 13, 1921. Dear Sir: I have your letter of December 12, and regret very much that you have seen fit to adopt such a disagreeable attitude. We are merely endeavoring to carry out the contract, as provided When the agreement was entered into, I do for in its aun terms. believe that there was ever any idea, either on the part of not -our bank or of ours, than that the bonds would be sold, and that we would be paid when the bonds reached a price equal to or higher than that at which you purchased them. You characterize our action as "unexpected and uncalledI hardly see haa you can take this viaw, since, as a matter for." of fact, I have written to you several times in the past thirty days, calling your attention to the natter. I anticipated that you would, of :rour am volition, dispose of the bonds, and not make it necessary for us to issue a formal notice under the provisions of the agreement. Very truly yours, (S) Governor. Mr. Rogers Caldwell, President, Bank of Tennessee, Nashville, Tennessee. 1,231IMP17 FEAPAL RESERVE BANK OF ATLAN. CONTINUATION SHEET NO. BM OF TEUNESSEE AOGERS CALILELL President. ITASHVILLE December 12th, 1921. ifellborn, Governor, Feaeral Reserve Banks Atlanta, Ga. LTy Dear Sir: I have yours of the 10th, and am astounded that the Reserve Bank would call a customer on paper secured by Federal Government Bonds. 'Alen we made the contract referred to in your letter of the 10th inst., it was clearly understood that we would have five years within which to work this transaction out. True, a stipulation was made that you could call on three days' notice, but that implied that it was only a precaution against same imeptinding disaster, which is not nau the case, as the reserves of the Federal Reserve System stand higher than they have at any time. Less than six months of the five years have expired, and your action now indicates that you made the contract with us Trith a view of victimizing us by holding out the idea of running it for five years and slipping in a JOLLH, under which you nag propose to catch us. Your action is so unexpected, uncalled for, and contrary to every reasonable interpretation of the agreement, that, if carried out, we shall be compelled to resist you in the Courts, whore your actions will be revieued fram the beginning, and aired before the :orld. Very truly yours, RC/L. V. (S) ROGERS CALD.:ELL, President. December 10,1921 Bank of Tennessee, Nashville, Tennessee. Dear Sirs: rec t In view of the ramint rise in the prices of Liberty Bonds, and the present high level they have reached, we feel that we should terminate the agreement existing between us. Therefore, we give notice to you that, under paragraph (2) of said agreement, this shall be considered as being the three days' notice required in the agreement of sale and repurchase- that is, three days from December 12,1921. The unpaid purchase money for the bonds purchased by us from you mounts to $ 1,417,500.00 plus accrued interest to date of payment. • We trust that this action on our part, which is be best interest of the bank, ing done for what we believe is the will be duly appreciated by your institution. Very truly yours, Governor Registered. TELEGRAM • FEDERAL RESERVE BOARD LEASED WIRE SERVICE WASHINGTON Dccombor 150 1931 iAllborn Atlnta P1oome koop Board fall7advioed rding altihvillo bond mattorv Prommo that in eni'oroimis ropuroftace mr7eament yoi took all steps ander savice of or Oaunsel. If not would su3f;et:t you be carE,ful to do tiaz in future. 14an mt Atlanta 944a dec 15 Hardinc Thshn Following wire received late yesterday "we hereby protest against your sale of one million five hundred thousand dollars liberty b nds in accordance with your notice under date of december tenth nineteen twenty one and notify you that we vill hold you responsible for all loss and damage which we may sustain thereby. follows. Letter of this date explaining our position in detail Bank of Tennessee, by 1, H 7oberts attorney" when letter arrives will advise you of contents " -ellborn 1050a rerm148 A rEDARAL RESFRVE BOLD • LEASED WAS dt_t:t"tERVICE eN TON ) The telegram given below is hereby confirmed/ 2-4454 71311born Atlanta In view of fact that all other banks under repurchase agreement are entitled to si:tty daya notice, see no reason for hurried action regarding Bank of Tennessee. Would advise effort to mach agreement with Bank of Tennessee as to amount of daily sales with view of final liquidation within ticre given other banks having repurchase agreements and think it would be well to avoid litigation if po3lible. Please advise What Nashvilln bank in willing to do TELEGRAM . I .44 FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) I C 15 RECEIVED AT WASHINGTON, D. C., 1( i • C.)FPICL: Of .. H L. GO V 17:, 151.any Atlanta 235p Dec 15 Harding ,Vashington Ash to advise that all steps taken by us in Nashville matter have been under advice of counsel. Counsel advises that since notice and demand has been for— mally made, the method of selling can be left to us. Under all the circumstanc— es perhaps it may be well to have agreement with Bank of Tennessee to sell at ;100,000 of bonds daily. Before makinc such suggestion to Nashville would least 4 be glad to have any suggestion from your Board. All other banks under repurchase agreement had sixty days notice. Do you think it would be advisable to suggest to Bank of Tennessee that they take sixty days by selling „25,000 daily. Wellborn. 4p 0 I FEDERAJ, RESERVE 13 K CoV _AnCI—A.1•TT A. OFFICE OF Clu•nniArr OF TILE Bo.lau). FEDERAL R.E..W.Rv AGENT. December 13th, 1921. Dear Lr, Harding: At a meetingof the board of Directors of this Bank, held December 10th, it was voted in view of possible losses, and at the suggestion of Go,vernor Wellborn, to set aside 250,000 as a special reserve, this to be in addition to the 200,000 already set aside to take care of probable losses in connection with the bond repurchase agreement. Very truly yours, JI1S:H Gov. W. P. G. Harding, Federal Reserve Board, Washington, D. C. , FEDERAL RESERVE BANK OFFICE OF CSIAIRMAW OF TUE BOAFID. FEDERAL RESERVE AGF:147T. December 10, 1921 Dear Governor Harding: Your letter of the 8th instant_w4s morning, and read to our directors; and received this based thereon, the Governor is sending out notices to the two Nashville banks, i.e., a sixty day notice to the fourth & First National Bank and a three day notice to the Bank of Tennessee, as per our contract with them. These notices will be dated Monday, December 12th. The other banks with which we have repurchase agreements, have been served with notice, and we believe that shortly we will begin to collect in some of these repurchase agreements. Very truly yours, Hon. W. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. http://fraser.stlouisfed.org/ -Vat Federal Reserve Bank of St. Louis FE.DER1.1. ,r-7tE December 8, 1921. Dear Mr. McCord: Referring to your lette of the 3rd . inst:int, I lvouli state that the Fedeml Reserve Board Is very anxious to hair! the Nashville bond matter out of the way and in view of the fact that your contracts with the ban7::'s frog whom you took bonds under repmx4has,-agreemtnts provide for sixty days nofibi; the Board lesires that this notice he given at once. Vary truly yours, Governor. Mr. Joseph A. McCord, Chairman, Federal Reserve Bank, Atlanta, Georgia. • TE • FEDERAL itt -4 11 S r yE SYSTEM D WI ,. RVICE) firi • RECEIVED AT WASHINGTON, D. C., tI RECEIVED flIC 121anr 1 +11: 00 Atlanta 1228p Dec 7./ - 792'i OF / **) harding • Mshington So far our total purchases of Victory notes amount to approximately ,?900,000 many banks decline to sell hardly think total will reach above million Wellborn 140p 1 AE.SUNE. December 8. 1931. Dear :!.r. r:cCordi I have your letter of the 3ri instant, which I have real with intarest. If the bans for which you are carrying liberty bon-Is tinier a fepurchase apTnement should tale the view that the present is an opportune tims to dispose of the bonds your reserves would be gr3ativ increased and / think von wr)uld then be Ible to pay off your rediscounts in full. Very truly yours, Governor. Ur. Joseph A. 7,(14Corl, ChairmAn, re1er,11 R3serve Bank, Atlunti, Geor7ia. VILE 441 O FEDERAL RESERVE BAINIi T3-37 cox' -4,,Ti.A.r_AOFFICE OF CILAIRMAIV OP TILE BOARD. FEDERAL RESERVE AGENT. December 3, 1921 s c tc.)\ )•"- Dear Governor Harding: Referring to your letter relative to the resolution passed by our Board of Directors at their last meeting, suggesting that Governor Wellborn take up with the banks the matter of our repurchase agreements covering government bonds, wish to say that Governor Wellborn has been in correspondence with the Fourth & First National Bank of Nashville, Tenn., and with the Balk of Tennessee, located at Nashville, reLative to their disposing of the bonds we have under repurchase agreement, as the price has now reached such point as to justify them in the sale. Correspondence with 1,1r. Jas. E. Caldwell, President of the Fourth & First Na, ional Bank of Nashville shows that he at first was not disposed to sell under any conditions, but later seems to be inclined to yield to the request of Governor Wellborn that he begin to sell of the bonds gradually. As to the Bank of Tennessee, you know that that institution is owned and controlLd by the Ca3d wells, and the same policy would apply to them. At a meeting of the Executive Committee this morning, Governor Wellborn brought LID the matter of giving notice to all of these banks, about twenty in number, that we wanted them to sell their bonds tt we have under repurchase agreement. He also exhibited to the Committee your telepram, in which you stated that it was the desire of the Board that the bonds be sold or cleared out by the first of January next. This feature was discussed by the TlYecutive Committee, and in view of the fact that our contract with all of these banks provides for a sixty day notice, we were of the opinion that we could not violate the contract in reference to the sale. However, the Governor is going to send notices to all of the banks, dated as of Lionday, December 5, on which date the notice will have reached the banks thus interested, giving notice that we desire the sale of their bonds or relief to us of their repurchase within the sixty days, and suggesting that in our opinion it is desirable that they be sold at an earlier date than the sixty day notice. In case of the Bank of Tennessee, Nashville, the contract was worded differently to that of the others, and three days' notice was all that was given that bank. And in view of the fact that they purchased their bonds in the open market at a price that would now mte,-(3 them whole, possibly with a slight loss of interest, we can see how no hardship would come to them, and probably the Governor will exercise his right under that contract and suggest a sale within three or four days' time. By reference to our condensed statement, which is laid upon my desk every dqsr, I notice that our member banks that have been borrowing on collateral notes secured by war obligations have gradually reduced FEDERAL RESERVE BANK (2)1F _A-91CI.A.INTAL OFFICE OF BOARD. FEDERAL RESERVE AGENT. CILAJFINIAlci OP THE Page 2. their borrowings, the anount on November 25th being 45,342,000, and on Friday, December 2nd, 23,542,000, being a reduction of about 2,000,000 within a week's time, and this has been a gradual reduction from previous hither records. Up to the present date none of the bonds purchased under repurchase agreement have been disposed of, but I am of the opinion that when the notices reach the banks an Monday next that we will see a gradual reduction in that line. Very truly yours, Chairma n. Hon. W. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. to=msdP • • 00 - FEDERAL 1EsERvi 13 -87W-K-A °° 114ja ()JP OFFICE OF CILAIRMAN OF TIFE BOARD. FEDERAL RESERVE ALDIZ. IT. Arr3L.A.1\711C A._ December 3, 1921 Dear Governor Harding: Referring to our rediscounts with other Federal Reserve Banks, 1 notice that on Llonday, November 28th, we touched the lower level of ':46,899,000, but at the close of business Friday, December 2nd, it increased to 0,987,000, being an increase of about 2,000,000 during the week. At the same time I wish to call your attention to the fact that our member banks' reserve accounts, which stood at 044,186,000 on Saturday, November 26th, declined to 40,901,000 on Friday, December 2nd, being a decline of about .3,000,000. We are watching the lines very closely, and we are not allowing any member bank to have money for new loans unless it is absolutely secured by readily marketable commodities, and we are insisting on a reduction of the open lines not thus secured. However, the member banks report to us that they are not making any new loans, but are using their best efforts to collect. The difficulty, however, is in the decline of deposits, caused by a gradual liquidation of debts, payment of taxes, etc. We can see no immediate need for an increase in rediscounts at this time, and hope to be able to reduce from our present level within the next ten or fifteen days. Very truly yours, Hon. W. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. FEDERAL RESERVE COP _A 4LT31_,ANIEAkOFFICE OF GrovEnwon. 1.1317/017 December 5, 1921. Dear Governor Harding:- Replying to your letter of December 2 I Trish to advise that I have written to all of our member banks which on Victory Eotes, offering them par and accrued interest. Today, I havo replies fron nuLte a number, accepting our offer; but several, for cno reason or another, prefer not to sell. I an today -.Titinc, to the Under Secretary of the Treasury, Gilbert, relative to the possibility of the Treasury's accepting the Victory iTetes from us_A_tbe_elld_o5Z_the .year, as payment on the franscise t=. ,ttAt Irere.,.... Very truly yours, Governor. Harding, C:evernor, Hon. The Federal Reserve Board, Uashington, D.C. December 5, 1921. iy dear 1ir. Secretary: I should like to inquire whether it is agreeable to your office to receive from us Victory notes in paymen t of our franchise tax for the current year. We are contemplating the purchase of Victyry notes, at Dar and accrued interest, from our member banks. Before taking such a step, we wish to obtain from you an expres sion as to the acceptability of these Victory notes, 1.11D to the amount of our franchise tax. Very truly yours, (signed) .1. B. Wellborn, Governor. Hon. S. P. Gilbert, Jr., Under Secretary of the Treasury, 'Tashington, D. C. Compliments C. B. CLINKSCALE CO. PRINTERS RICHARDSON PRINTING CO "KEEP THE QUALITY UP" 4.1 ( N11-611er ?, 1931. Dear Governor wellborn: I acknowIedro rsoeipt of your telegram of the :aril instant and would request that you keep me advised of any purchhses that you tna3. T wonld sugTest also that you. write a letter tn the Treawory Departalent stt-Ain!1! that you may 7:3.1.01 to rurchs.se Victory Notes from your meniber banIcs up to tlIn amount of !our frz=.nchine tax anA r:sing whether the Treasur7 will take them off Your hands at par in pa!rment of 'our tlises. In this 'gay you will get a otrit ben confirmation of the conversation yihich I had a few days soo vith Urrier Secretry of the Treasury Gllert. Very truly yours, Governor. Mr. M. B. Wellborn, 3overnor, Federal Poserye Bank, Atlanta, Georgia. * • TELEGRAM 4110 FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) 37anr RECEIVED AT WASHINGTON, D. C.. Atlanta 1010a Dec 2 Harding *la,shn We are today offering to purchase from our member banks/victories owned by them ( at par and accrued interest this is in accordance wit1 your letter of recent date Wellborn 1115a r FEDERAL 14ESERVE BANK oF A.a.v-rr OFFICE OF GclvEnwn . . December I, 1921 Dear Govornor harding:I. received your letter of Novonber 29, this norning and ired you as follaus: For past three woeks, I "Your letter Kovenbor 29. correspondenco with the Calduolls, taking alhave boon in It would greatly plcaso most the same position as you have. me, and our bank would approciate it, if you would %.;:ite to -Jour copy Calduells, as per copy enclosed with your letter. brings out now points which may influence them to act at once. If those bonds are sold, our entire rediscounts will be wiped out. I am enclosing, also, copics of 1::y correspondence with ho CalCaro11s Very truly yours, Governor. Harding, Governor, Hon. Fodoral Reserve Board, :iashington, D.C. 7 13V1A 11 .7 Eno. FE. RESERVE BANK OF ATLAN. L CONTINUATION SHEET N :ovenbor 7, 1921. Dear yr. Caldwell: - It appears that the Liberty Bonds T;hich Tx purchased from you under the Repurchase Agreement, are now above the purchase r)rice. Our Discount Dopartnent figures tIlatit is short ;.)35„000.00 Oil the Third Liberty Loan Bonds, but :YI00,000.00 over on the Fourth; so, the average is above the -purchase price. Hon do you feel about closing these out, and cancelling your obligations with us ? Perhaps, it night be well, or the sake of the market, -if and when you decide to sell - to put the bonds on the market gradually, covering a period of several weeks, for distribution. Very truly yours, (3) J.B. 1:17,LLBOaN Governor. Janes B. Caldwell, President, Fourth and First Kational Bank, Uashville„ Tennessee. 1,57A4F17 COP:. FE L RESERVE BANK OF ATLAN110 CONTINUATION SHEET NO. James E. Caldwell, President. FOURTH AND FIRST NATIONAL BANK -ashville, Tenn. _overaber 14, 1921. Dear Lr. I am sorry that you wrote nB as 7:ou did your letter of the loth inst. You urote asking for ny opinion, and I gave it to you. Yes, you did us a nice turn last Sumner, and I trust you do not regret it and are now willing to nullify 1.,ho effects thereof. By the terms of that agreement, it was clearly the understanding that wo would have two years in which to uork this thin: out, unless something desperate and unforeseen should happen. :othing of that sort has happened and does not seen likely; on the contrary, it :s generally recognized that the bonds arc going to par and over, get in a good humor, and go on and give us a little chance. *alio you did nicely by us last Sunnier, Tre did a splendid service for you during tho trying uar tines, and we have had an unhappy time for the last tuo years. Therefore, as I say, get in a good humor and have some compassion on us and give us a chance for recovery. Vie will appreciate it and not forget it. Yes, the wheel of fortune has thrown us together f_'n a Tray and under circumstances that make it necessary for us to be closely identified and to have a heap of business with each •other, and we must be good friends and pull together. Yours truly, ac/o. (L;) President. E.B. '.7ellborn, Governor, Federal Heserve Bank, Atlanta, Georgia. FE L RESERVE BANK OF ATLANIIIIP CONTINUATION SHEET NO. 1.0ve1ber 15, 1921. Dear Lr. Calduell:- have your letter of November 14th; and think t.z'.-t you must have misunderstood my former letter. -mite sure you I am ( did so, if you think that I was in anything but a good humor whon -.rotr) it. I have always boon in good humor with you, and hope to remain so, oven though we do not always agree. Sinco you mention the agreement which your bank made with us, perhaps it might be well for you to re-road that paper. You will then find that the agreement has a termination prior to tuo years, in case the bonds roach a certain price. Rather than give you a formal notice of the termination of the contract, I thought that,I was justified in assuming that you would anticipate, frau my former letters, such a termination, and that you would take advantage of tho present price of the bonds. I felt that you night, perhaps, wish to soil, when you took into consideration the possibility that a genoral offering of the bonds throughout the country might e:cceed the demand for therm in the market, and, consequontly, night bring daun the price. Very truly yours, (S) i. "ELLBORN, Governor. .1,1r. James E. Caldwell, President, The Fourth and First National Dank, Nashville, Tennessee. 133Virt7E7 FEi RESERVE BANK OF ATLAN. L CONTINUATION SHEET NO. James E. Caldwell, President, FOURTH An FIRST HATIONAL BANK 1:0,S.1771110 3 TOM,• 0ve3.1er 17th, TNT. : Dear Fr. T;ellborn:- I thank you very much indeed for your kind letter of Nov. 15th, wherein I note that you say that the contract provided for a termination priol. to two years, "in case the I have examined the contract bonds reach a certain price." I do find very carefully, and c not find any such provision. that you reserve the right to call the loan whenever you please, but we presumed, of course, that this was intended as a precautionary measure, in case of some unforeseen calamity or pending disaster, but as nothing of that sort is pending, or seems likely, we have presumed that you meant to give us a fair chance during the period of two years. Please be assured that we are not unmindful of this situation, but are watching it closely. It was brought up at a meeting of our Board of Directors on Oct. 10th, and again on Nov. 10th, all prior to your correspondence, so that, as I say, our whole Board is taking a hand in the natter, and you may, therefore, be sure that it has the benefit of the best judgment of some thirty of the best business men in this community. 1 7ith very kindest regards and host wishes, I remain, as over, . Yours truly, CAL=LL, Pros;dent. ac/o. '::ollborn, Governor, Federal Reserve Bank, Atlanta, Georgia. COPY. FEqaL RESERVE BANK OF ATLAN. CONTINUATION SHEET NO. Kavamber 30, 1921. 11 Dear :r. Calduell:- Referring to our recent correspondence, I ulsh to call your attention to the fact that Liberty Bonds have advanced very materOur books show that the ially in value during the past ten days. bonds, on which you are borrowing from us, carrying value of those ; amounts to u 7,346,121.75; while ti.o narkot value is 37,788,410.76, making a difference of 242,289.01. Today, our Executive Committee had this natter under conI read to them our correspondence; and they feel that, sidoration. since the bonds have reached such a high price, you should sell and pay up your indebtedness to us. iiiile, I nay say, we have a right to give you a rormal notice of :linty days, we had rather not do this, preferring to bring about a settlement by mutual agreement. You must boar in mind that we are still rediscounting with ulilo we are carrying other Federal Reserve Banks at a rate of Oi on every trans. . your bonds at 4.1 5, thereby sustaining a loss of I* action. Awaiting your reply, which will, I trust, be favorable to the views of our Executive Committee, I an Very truly yours, MULTiORIT, Govornor. Li'. James E. Calduell, President, Fourth and First Hational Bank, Hashville, Tennessee, 11317A7R7 P.S. - A duplicate of this letter was sent to Mr. Rogers CaldIn his well, President of the Bank of Tennessee, in the same city. case, the figures wore: Carrying value Market value $1,417,50040 1,461,400.00 Difference $ 43,900.00 COPY. FE • L RESERVE BANK OF ATLAN. 401 CONTINUATION SHEET NO. DAII. OF TElIEL;011;. Calduell, President. ITA=TLL: :ovember 17th, 1921. • 11.B. Uellborn, Governor, Federal Reserve Bank, Atlanta, Ga. Py Dear lr.riellborn:- have your letter of the 10th with reference to carrying our bonds under the contract, and regret very much your attitude, as I was in hopes that in viau of the very heavy loss which we sustained in carrying, that we could expect you to take a more liberal position. You can readily understand that we are very anxious to overcame this loss, and, if possible, gain same profit out of a transaction which at one time caused us so much anxiety and worry, and u c) fool that you will . agree with us that the influences affecting present market conditions insure that the bonds will go much higher. Harrover, in view of the recent reaction in the market carrying the bonds below their cost to us, we presume that it is not necessary to discuss the matter further at tho present time. Vath kindest personal regards I remain Yours very truly, RC.v (S) ROGERS CALMELL. re COPY. • RESERVE BANK OF ATLA FE AL CONTINUATION SHEET NO. IfiRTAIP17 :ovamber 30, 1921. Dear Mr. Caldwell: - Referring to our recent correspondence, I wish to attention to tho fact that Liberty Bonds have adcall your vanced very materially in value during the past ten days. Our books show that the carrying value of those bonds upon which 7ou are borrowing from us, amounts at present to $1,417,500.00; while the current market value is :„1,461,400.00, making a difference of 043,900.00. Today, our Executive Committee had this matter I read to them our correspondence; under consideration. and they feel that, since the bends have reached such a high price, you should sell and pay up your indebtedness to us. Thile„ I may say, we have a right to give you a formal notice of sixty days, we are anxious not to do this, preferring to bring about a settlement by mutual agreement. You must bear in mind that we are still rediscounting Trith other Federal Reserve Banks, at a rate of 5-1 5, while we are , 5, thereby sustaining a loss of I 5 on carrying your bonds at every transaction. Awaiting your reply, which will, I trust, be favorable to the viaus of our Executive Connittee, I am Very truly yours, (s) 11.3. ".:ELLBORIT, Governor. Yr. Rogers Caldwell, President, Bank of Tennessee, Nashville, Tennessee. COPY. F.AL RESERVE BANK OF ATLANO CONTINUATION SHEET NO. BANK OF TENNESSEE ROGERS CALD.ML, President. NASHVILLE November 17th, 1921. Yr. L.B. Wellborn, Governor, Federal Reserve Bank, ktlanta, Ga. 1- Dear LI.. Wellborn: 7 I have your letter of the 10th with reference to carrying our bonds under the contract, and regret very much your attitude as I was in hopes that, in view of the very heavy loss which we sustained in carrying, that we could expect you to take a more liberal position. You can readily understand that we are very anxious to overcame this loss; and, if possible, gain some profit out of a transaction which at one time caused us so much anxiety and worry, and we feel that you will agree with us that the influences affecting present market conditions insure that the bonds will go much higher. However, in view of the recent reaction in the market carrying the bonds below their cost to us, we presume that it is not necessary to discuss the natter further at the present time. lath kindest personal regards, I remain 'fours very truly, (S) ROGERS CALD- TELL , RC.v COPY. FE.AL RESERVE BANK OF ATLAN. CONTINUATION SHEET NO. 1137117P17 Hovember IO, 1921. Dear :r. I have your letter of ilovembor 9th. I must say that I am somewhat surprised, as won as disappointed, in the position you take regarding the sale of your bonds. Vie feel that we acted very liberally last sumner; and that it would not be asking too much of you to relieve us navr, since the bonds have reached a price greater than that which ycu originally paid for them. Another element which you should take into consideration, is the possibility of the bonds dropping again in price. This may be brought about through the action of many of the holders, -rho have been awaiting just such an advance in price as that which has come, in throwing the bonds upon the market, thereby reducing the 1 -arlmt cuitation. lease consider this matter carefully. while we do not wish to urge you into doing an act, which would benefit only ourselves, we sincerely fool that the act under discussion would not cam under that category. e believe that your own interests, as well as ours, will be best served by such a sale of the bonds as 70 have recommended. It would, of course, be very gratifying to us to have this large liquidation, which would enable our bank to pay up all of its rediscounts with other Federal Reserve Banks. Very truly yours, 1.3 . Governor. Mr. Rogers Calauell„ President, Bank of Tennessee, Eashville„ Tennessee. Copy. FAIPAL RESERVE BANK OF ATLA1111) CONTINUATION SHEET NO. ROGIUS President. BANK OF TENNESSEE NASHVILLE November 9th, 1921. Vfellborn, Governor, Federal Reserve Bank, Atlanta, Ga. My Dear 1dr. -biellborn:- Replying to your letter of the 8th inst. 'ail° it is true that under present marl-ot at a little above 95, the bonds which you are carrying for us stand slightly above the purchase price, yet in view of the fact that we have stood a little above 025,000 in carrying charges and additional charges covering commission on purchases and sales, and in. view of the fact that conditions nau affecting the market make it apparent th;t these bonds will rapidly increase further in price, we should like very much to have you continue the loan further, and assure you that it would be highly appreciated by us. Sincerely yours, (S) ROGERS CALD,7ELL RC/L. COPY. FE.AL RESERVE BANK OF ATLANOIP ; CONTINUATION SHEET NO. November 8, 1921. Dear Jr. Cold:m11:- Our Discount Department figures that the bonds which we are carrying for your bank are nau $6,900.00 above the purchase price. I am wribing to ask how you feel about disposing of the bands, and Taping out your indebtedness to us. Very truly yours, (S) tJ.B. TELLBOiN, Governor. Mr. Rogers Caldwell, President, Bank of Tennessee, Nashville, lennessee. 1.D3TTA1Pi7 COPY June 24,1921 Mr. Rogers Caldwell, President, Bank of Tennessee, " Nashville, Tennessee. Dear Sir: Receipt is acknowledged of yours of June 23rd. advising that your Board of Directors has agreed aitb accept the proposition set forth in Governor WellbornIs letter of Jane 17th, and enclosing resolution passed by your Board of Director, together with agreement and receipt executed pursuant thereto. ‘.• In.accordalace therewith we are today purchasing from you 1 1 500,000.00 of your Fourth Liberty Loan Bonds at 95, and are crediting your account 1,437,1q2- 62, covering the . accrued interest to date 3.21192.62. We are chargiprincipal and 31,045,000.00 in settlement of your note for like ng your account amount due July 5 and are also charging your account :I.V680,000.00 as a partia l payment on your note for $617,500.00 due June 27th. Your account will be creditied with the rebate of the unearned discou nt covering the two payment, formal advices of which will be sent you under separate cover. From the bonds Which are Ittached as collateral to both noteS, we are removing a,500 0000.00 thus purchased, leavinil $250,000.00 as collateril.to'the unlaid -portion, 1237,500.00 of your note duo June 27th. We also acknowledge the receipt of fourteen certif for an aggregate of 2600 shares of stock in the Ford Flouricates Company, to be held Incompliance with the collateral requir ements of the agreement. As requested we are sending the said certificates to our Nashville Branch, so that they will be readily accessible for delivery in event it should become desirable for substitutions to be made. files. We return herein one copy of the agreement for your Very truly yours, LCA:A Encl.-Reg. Deputy-Governor. Arne 23rd, 1921. C P Jr. Li. B. Wellborn, Governor, Federal Reserve 13ank, Atlanta, Ga. dear A-. Wellbrtn: I have befor-Ile your letter of the 17th addressed to our attorneys, ssens. 7. F. Horvell,Jr. and A.. H. Roberts rerarding the settlenent of the Liberty Bond transaction. I also have before me copy of jr.liartford's wire to you of the 2lot with references to construction of additional collateral covering the difference between the cost price of the bowls of 95 and the present narket, also your wire stating that Ir. Fartford's construction of the collateral agreement io correct, wIlereby you agree to accept as collateral on this tranction, any bonds, stocks, or other paper whit* hms been anr roved by , your emainers on examination of our Bank. the Proposition as offered by , rou is not al, that we had hoped for, we anpreciate thild,tlierr a-, certain difficulties confronting your side of the sitiation which must be reckoned with but in the carrying out of sane we feel sure may expect as Fenerous a treatment as nossible, therethat fore in order to put the entire natter at rest and to work with you as harmoniously as possible at all tines, our Board of Pirectors have.ugreed to accept your proposition and we therefore encloeo herewith copy of resolution as 'Passed torelher with signed agreenent and receipt as drawn by your attorneys. -e are also encloeing as collate-al to cover *145,440. as r,quired in nararraph E of your letter and 20,200. as required by naragraph H$ 2,600 shares of the capital stook of the Ford J:lour Corny of is city which is carried on our books at a little above ‘4.00 a share, in round figures a value of 0.66,400. Tlis stock is quoted locally at 70 bid and the last sale that we know of coverinr, a large block or this stock was made at a little above 67i a If it is agreeable to you, we should prefer 411. 4 you share. forward this collateral to your local branch in order that it may be accessible for subiiitution at any tine which we nay desire as Hartford's construction of the col3atera3. understood under agreement. C 0 P Y. - 2. Trusting that tic itbove iu in encordance with your .desires and with kindest 7n)rnonal rel:rd, I rennin Yolu-s very iruly, Signed, Rogers Caldwell, P,C.v • COY 411 June 17th,1921 Messrs. W.E.Norvoll, Jr., & A.H.Roberts, Attorneys at Law, /;700 Fourth & First National Bank Building, Nashville, Tennessee. Gentlemen: At a meeting of our Board of Directors held yesterday, your communication of May 31st, submitting proposals from the Bank of Tennessee, Nashville, with respect to its borrowings from this bank, was given full consideration, and am directed to advise you as follows* For obvious reasons proposals No.1 and No.2 woul,d not be acceptable. Our Board of Directors, taking due cognizance of the fact, that by a resolution passed sometime ago it authorized the officers of this bank to purchase from any member bank, under certain conditions, the amount of the said member bank's Government War Bond holdings acquired through originsl subscription: or through the taking over of original subscriptions which are in excess of the said member Bank's capitil and surplus, is agreeable that a similar service be extended to the Bank of Tennessee, with certain changes in the conditions, so as to be substantially in line with the suggestions contained 1n the proposal No. 3 made by the Bank of Tennessee. The working of the plan would be as follows (a) We will purchase 71'ion the Bank of Tennessee, subject to conditions named below, .11.,500,000.00 of its Fourth Liberty Loan Bonds that are now pledged as collateral to its direct note borrowing. • (b) Weir will pay the Bank of Tennessee 1,425,000.00 for :21,500,000.01 of its Fourth Liberty Loan 'Bonds, which is at the basis of 95. (c) The flank of Tennessee will agree to repurchase the said securities at the same price at which they are purchased from the Dank of Tennessee by the Federal Reserve Bank of Atlanta, less the partial payments that are made by the Bank 4, - Messrs. Norvell & Roberts, Nashville, Tennessee. 111111111111ERVINI.6140•••••••p0.11011.1•••••••01•1.011.0.1.11NOsainimIl iMP.. of Tennessee, in accordance with the terms of the succeeding paragraph; the Federal Reserve Bank of Atlanta reserving the right to call upon the Bank of Tennessee to make the said repurchase at any time that the prevailing market price of the Bonds purchased by the Federal Rese-ve Bank of Atlanta under said repurchase agreement shall be equal to the mount paid to the Bank of Tennessee by the Federal Reserve Bank of Atlanta, less the aggregate of the partial payments that have'been m.ade'in accordance with the terms of the succeeding paragraph. (D) The Bank of Tennessee will agree to pay the Federal Reserve Bank of Atlanta, at monthly intervals from the date of the repurchase agreement, on account of the repurchase price, a sum equivalent to one tenth of one percent of the aggregate principal amount s'par value, of the Bonds sold to the Federal Reserve Bank of Atlanta. This payment would amount to ci1500.00 monthly. (e) The Bank of Tennessee will deposit and maintain with the Federal Reserve Bank of Atlanta collaterals acceptable to it in an amount sufficient to cover, at a ratio of 3120 to OM, the difference between the purchase and market prices, of the securities, On the basis of yesterdayls'market, the amount of callateral necessary would be 0145,440.00. (f) The agreement would be made for a term of five years; the Bank of Tennessee to have the option of making the repurchase at any time, on a basis of 95 less the aggregate oflannthly payment s that had been made up to the time of the repurchase. (g) The remaining 3250,000.00 (capital and surplus of the Bank of Tennessee) of Bonds pledged as collateral would be accepted as collateral decurity to the direct note of the Bank of Tennessee for 2.37,500.00; the Bank of Tennessee agreeing to reduce the said directr obligation at monthly intervals frem the date of the repurchase agreement by a sum equivalent to one tenth of one percent of the aggrOgate principal amount, par value, of the Bends pledged as security. The amount of this-payment would be (250.00 per month. (h) The Bank of Tennessee will deposit and maintain with the Federal Reserve Bank of Atlanta collaterals acceptable to it in an amount sufficient to cover the difference Mut =kat ARi%. between the market prices of the Government War Bonds pledged as security to the direct note borrowing and the amount that is being loaned to the Bank of Tennessee. 2. C 0 P Y. essers. Korvell & Roberts, shville, Tennessee. ...•••••••• by the Federal eserve Bank of ivtlantt: fteainst Buell securities. rihe amount of collateral necessary to cover this provision would be :,20,200.00. (i) 'Abe amount raid by the Federal -,eaervc B,A1I7 of Atlnnta for the Bonds purchased under the repurchase agree7ient and the proceeds derived from the discount of the $237,500.00 note would be used in the liquidation of the present direct note obligation of $A,662.500.00. the Bank of coupon rate rate of 6%4 which is in direct note You will see from the operation of the above plan; Tennessee would be saving the difference between the of the Bonds, 4 1/4%, and our prevailing discount which on 0.,425,000.00, would amoubt to f!:24,937.50„ excess of the required amortization and reduction of borrowings, their total being 21,000.00 annually. Assuming that the Bank of Tennessee will desire to avail of this ceipertunity, we enclose form of resolution to bc adopted by its Board of Directors: also , forms of agreement and receipt to be executed pursuant to that resolution, after its adontion. All signatures made on behalf of the bank should be properly witnessed and the seal of the bank impressed. Ilien re— turning papers, please send one copy of the resolution and the receipt and both copies of the agreement, so that we nay execute one copy and return to the bank. The papers should also be ac— compied by the $165,640.00 of collateral to cover the collateral provisions, and when received, we will be pleased to consummite the trsnsaction. Very truly,yours, LCA:A. 41' GlVERNIR. 496-d 101--6-21- .FEDERWESERVE BANK OFOLANTA Ge eral File Copy PRIVATE WIRE SYSTEM OUTGOING TO ATLANTA, GA. COPY W. H. Hartford, c/o Nashville Branch June 21, 1921. Your interpretation of contract is correct except where they borrow on bonds by direct note 15 days, the Collateral required is only difference between 95 and par value and cn bonds on repurchase agreement 120 dollars for every 100. -Jellborn foi SENT BY 5m 12-21 FE 40 W L RESERVE BANK OF /04NTA PRIVATE WIRE SYSTEM ORIGINAL INCOMING FRO 6 U NASHVILLE TENN 1130 A JUNE 21 3:J21 GO1fl3NORN B 1,1ELLB0RN ATLILITA GA . BANK OF Tat:.:ESSEE HAS RECEIVED CO:TTR,,CT AND OTHER PAPERS. IT HAS REQUEL;TED -Y CONSTRUCTION 02 THIS CONTRACT AS TO AMOUNT AND NATURE OF COLLATERAL RD.. fs UIRED IT Li MY C OilsTRUC TION THAT THE AMOUNT IS •VARIABLE ACCORDING TO 1.1AillET PRICE OF GOVERMENT SECURITIES ALWAYS BEING- ONE HUNDRED TWE/ITY DOLLARS (.12O.00) FOR EVERY ONE HUNDM DOLLARS ( ?100.00 ) DIFFERMICE BETITEIT MARKET PRICE AND SALE PRICE. ACCEPT AS ALSO THAT YOU WOULD NOT REQUIRE PRITLE COE=IAL PAPER BUT WOULD coLLATLau STATE COUNTY OR -MUNICIPAL BONDS *ACCEPTABLE PAPER WHICH HAD BE OR STOCT13 AND OTHER , APPROVIM BY YOUR E- C.A.MII\IRS ONEULIITTATION OF 2 BANK SECURITIES TO BE SUBSTITUTIM FOR THOSE HELD BY YOU =I DES'HUD BY BANK OF TENITESS:E. THIS BANK DOES NOT HAVE COLLERCIAL PAPER OF LIQUID OHARI3C7ER. IS MY CONSTRUCTION OF CONTRACT CORRECT ? RECEIVED B W H HARTFORD PLEASE WIRE REPLY CHAIRMAN 1140A COPY June 2, 1921 Gentlemen: This is to acknowledge receipt of your letter of May 31st, and as stated by Nr.Y.CCord and myself in our converaimp sation with 1127. Caldwell, we will be glad to put your proposition before our Board of Directors at its next.meeting on June 16th. Yours very truly, G OVERNO R essrs. W. E. Norvell, Jr., & A. H. Roberts, Attorneys at Law, :ashville, Tenn. 1111 10 0 2 Y Law Offices W E. UORTML, Jr., 700-1-2-3 Fourth and 2irst National Bank Bldg. NASHVI= 1,:ay 31, 1921. Honorable B. 1. 11born, Governor, Federal eserve Bank, eAlanta, Ga. Dear sir: Rogers Caldwell, President of the Bank of Tennessee, told us about the interview you and ha'. :,IcCord had with him while in Nashville recently, in which interview he understood you to request some proposition of adjustment. We have talked the matter over with Mr. Oaldwell and ber! to state that the Bank of Tennessee will be willing to adjust ; . this in either one of the three following ways: 1. That your Bank carry the present loan, secured by the Fourth Liberty Bonds, at a rate not exceeding 4-1/45; or 2. Your Bank purchase from the Bank of Tennessee its Liberty Bonds now held by you as collateral at the price at which they were bouc-ht by the Bank of Tennessee, and the Bank of Tennessee cease to be a member of the Reserve e'ystem; or 3. Your Bank buy from the Bank of Tennessee its Fourth Liberty Bends ncw held by you as collateral at the price the Bank of Tennessee paid for same, the proceeds to take up and pay the loan of the Bank of Tennessee with you, a .d the Bank of Tennessee to execute with you a reeurchase agreement briefly under the terms of which the said Bank of Tennessee would deposit with you as an amortization fund one-tenth of one per cent of the cost of said bonds monthly and would at the end of say five years (or sconer at the option of the Bank of Tennessee) repurchase said bonds from you at your cost less the amount of the amortization fund. Our view of the situation is that the Bank of Tennessee became a member of your Reserve System and purchased these bonds under a definite and flattering proposition and representation which warranted its officers in believing and feeling that these bonds would be carried without loss. The Bank of Tennessee has already lost some „;50,000.00 on this )roposttion by payment of interest in excess of interest the , bonds drew. Therefore, we feel that either cf these suggestions are proper and are offered with the hope that such settlement can be arranged without the necessity of litigation. He trust that yeu will give this matter your prompt attention so that an early conclusion can be reached. Yours very truly, signed,W. 7e. Uorvell, H. I-OBTTRTS. eb • COPY May 20th, 1921. Governor A. H. Roberts, Mr. VI. E. Norvell, Jr., 700 Yourth & First National bank Building, Nashville, Tenn. Dear Sits: Your joint letter of May 16th I find on my desk on returning to the city today, and I shall take pleasure in taking the matter under discussion, up with Uovernor Harding on my visit to Nashville on the 26th instant at which time I bhall have a conference with him With best wishes, I am Very truly yours, uh....tman of the Board. COPY O COPY Law Offices W. E. Norvell, jr., Nashville May 16th, 1921. Honorhble Joseph A. McCord, Chairman, Federal Reserve Bank Atlanta, Georgia Dear Yr. cCord: We enclose herewith in the form of a letter in duplicate a brief st-itement of the position of the Bank of Tennessee, as per the suggestion of you gentlemen made on last Friday in Atlanta. Will you kindly take this matter up with Governor harding promptly as we believe it is the mutual desire of all parties to dispose of this matter at Nashville while Governor Harding is here on the 26th of this month. We believe that neither of Us considered the matter miterial to the present situation, but in the course of the conversation last Friday, you stated that you were surprised tb know that Er. James E. aildwell had no financial interest in the .ank of Tennessee as you had understood at the time application was made for membership, that Mr. James E. Caldwell owned $ 50,000.00 worth_ of stock. N) have talked this over with Mr. Rogers Caldwell and looked over the correspondence and we refer, you to your letter to Mr. Rogers Caldwell of date March 28th, 1919, and hisreply of March 31st, 1919, which showed that you evidently got this impression from the discussion at the time in regard to the loan to Yr. James E. CaldWell. We want to thank you gentlemen for the courteous hearing extended to us while in Atlanta. "ith kindest regards, we are Yours very truly, Signed, If WEN-FT A .11. ROBERTS, I. E. NORIML, Jr., Law Offices W. E. Norvell, Jr., Nashville 1:ay 16th, 1921. Federal Reserve Bank Atlunta, Georgia. Gentlemen: Re: Bank of Tennessee matter ':(3 herewith reduce to writing the position of the Bank of Tennessee as sub4itted orally by us to your Executive Committee in Atlanta on last Friday. The Bank of Tennessee, as you know, is a State Bank incorporated under the laws of the State of Tennessee, with a capitalization of 200,000.0. In the early part of the year 1919 this Bank, as doubtless did other State Bank and Trust Gomoanies, received circulars or circular letters from you suggesting the advantages of becoming memb rs of the Federal Reserve System. At that time, as you will recall, the jovernment and the Federal Reserve Banks were very anxious to maint:An the credit af the Government so as to facilitate the floatation of a Victory Loan and issues of certificates of indebtedness by the Government, which loan was puccessfully floated and *hid: certificates of indebtedness were placed or sold for some time thereafter at smaller rates than later obtained. While /patriotism was one of the impelling motives of the subscribers to said Victory Loans and certificates of indebtedness, yet nevertheless a ready sale was made because the subscribers fela that they were obtaining securities of the soundest character which would always be practi_cally worth par; and necessary to cause said latter view to obtain, the market for prior issues of Lrovernment bonds had to be maintained. . In Earch, 1919, rJ. Aogers Caldwell, President of the Bank of Tennessee, made a trip to Atlanta and INIftile there had an extended conversation with honorable Joseph A. ILcCord, Chairman of Ir. Vdord discussed and your _oard and Federal Reserve A gent. su7:ested numerous advantages that a State iank would have from becoming one of your member banks. The conversation was particularly alon7 the line of the desire of your bank that as many of the State Banks as possible should become members of the system in order that Government wecurities might be purchased and carried and of the extremely favorable terms you would give the Bank of Tennessee on 1101 (2) 41P With circulars which were being sent State Banks made a most vivid impression upon Mr. Caldwell's mind that yo e would discount in practically unlimited amounts, at par and at "rate of discount moderate and stable" (as stated in sme of your circulars), which rate was 4%. Me Bank of Tennessee shortly thereafter purchased on the market 1,750,000.00 worth of U. 73. Bonds of the Foufth. Liberty issue. Of course, those purchases were largely in excess of the capital stock of the •bank and while other motives may have actuated to some ex, ent the Bank of . iennessee in making said purchases, yet . it would not have done so save because of the support IL understood it would receive from the Federal Reserve dank. By gradation, your discoun- rate t) the bank of Tennessee on loan secured by these bonds was raised to 5-% but this was done under the claim that the resources of the Federal Reserve Banks were becoming exhausted and that such an advance was neeessary to protect themselvev from becoming overwhelmed and to avoid a national financial crisis. The dank of Tennessee paid th's increased rate,tifilkin'g of course, that as soon as said crisis was over and the reserves ;of the Federal Reserve Bank was again built u7, that the former rate would be again put into effect. Novi, the reserves of your bank and the reserves of other Fe loral Reserve Banks have been built up and yet the rate has been raised to 6%, evidently as a more or less permanent policy. This will farce the flank of Tennessee to sell these bonds on the market at a loss of a sum approaching the amount of their capital stock or will force it to pay you a rate of interest approxim-tely 40,: greater than it is receiving from the Government upon said bonds, or over $ 30,000.00 a ye:r excess, payment of which exeess would soon wipe out its capital. In view of the fact, not only that this grave hardship would be worked upon this particular bank, but also in view of the fact that it made these heavy purchases in reliance upon its understanding of what would be doneto assist it and that such purchases necessarily assisted the Government in maintaining the market price of these bonds and thereby assisting in the ready disposition of later issues of Lbvernment securities, we feel that you will do everything Tn - y6ur power to alleviate the situation and to not work nn unnecessary hardship. his might be effected by reduction of rate or, if you gentlemen deem this impossible, you doubtless can make other suggestions to meet the situation possibly such as an arran-ement of repurch ase. sincerely trust and believe that this matter can be adjusted amicably at an early date and we request your cooperation to that end, but, of course, our mutual cornunicAons and conferences regarding this proposed settlement shall be without prejudice to the legal rights of either party. WEN:ft Respect fully, Signed, A. H. Roberts, " W. E. Norvell, Jr., ....oretoralee ackiiirod, um.'-er original Lilt, braa: now 0..-Ite certain or by trAkilitsr °liarrrrlEilabaor - pt " on, ty 'bonds axtd Victory not isvoed by ;he United. 'itates; fld . ; ?odezni Receritt- Dank of Atlanta is vill:E.; to ? r, 41440 31at, a :irice evival(nt to the irty.tntat rtaia of 214(1 ut this tile °arr.; nt; said bonds on its books, upo this bit* ociton,hownireiro I thet tyl is bnnli* will re-perc-lue tlx sltse ut the sr.dte crefor by Lise said Pederal neserre Bank of Atlanta i.;,•nd u-tee terms and conditions fully Eet fort-. mad mo-t:Anad in n xintrnot prIpuscoi to be antured into between the said lioserre ?Auk is her :1113 t1.1 bf-FT.q.'" a or of . 4.1411 .ortr)osed contraot =ad* In all respects a. , _.-1P.rt of this resolution tillti 14; Ci be tir>read upon the tfizratou as a r,Art Vric -cof; R)E i1 I REE31.V12.14 that the ?resident or '71.:e-PreLl ent end fiaE...ier of this bank be and Vi:ey are he...57 out of I is bank, to sell lit DeouriLios vudoll G-Dvenraf, for am: iit b ialf this bank came, Or in 'SPA* it say /give an Salt:west, to the segregate pia' wane of ..,Qcs. ("' 1,500400.00 ared Thzise)4 Four Hundred twenty-five Thousand 7-Tuu- ), at awl far tile 'rise of One Trillion . ;alarm' 0 1,4a5000.00 4 said price 'beim the saw an the anotatt at Itlich this beak Mr /,ftrries the ead relttritIce on ito books. ', r! irirri,"!-71 111)1.V1.:1"), that said offloorn of t. la bark be end they are her- by natborized and directed to enter, for and' in behalf of this .ntn to re,bank, into nin agrooment wit:-, rg,te :;i'ederal 7.eservo Bank of Atl, xtrobass stild bonds ullon the terns and ociAlitions tiny aet forth in said ' s,pro)oscd t.:Cilltrtust. Said ofisiners a7.-e fart a* nit orited to de osit trl- li lateral aeouriLles with avid Reserve Bank in order to seotire the oa -rying oat by t.is balfs of it istp,m:riont, we this bank* obligattAis as rict forth in said aflee i nt. Dad moolt. --d, to boo )71e the binding corporate obligation of ' 2 BE IT ?Mtn : Tr. 1137IT- D. that or rm in consideration of tbs purchase of said bonds by the PewLoral Ileuerve BC2-it of Atlant * tFe sad , , officers, or atv of tI evi be ;.111„.1 t anCi (Irected to ziraNtle bon are hereby aat.erizefl, e-:„:erc-red. so,id Federel Reocrvc "B%2.1.17. of Atlfztas that Via will rodo.ue the eigmeiLte of tri It obliantions to eald .1c-rerve - Burt-, soofzred by thliwd Stotea bor.:Lz or notes by tr.int'l.ly 7erst to Said 1101,erve Dank at slaw rate as allsal tgi revircti bz? said Reserre be ner uneorate)ode .owevort tlsat it Tlevorvt,t. Dank in ati..er no olilleikti itt , to rfitiev; or extezul raw lcua or aavanco l'.eratefeyre. !lode ti it to the or to cP. nt t DX 1411011set of t',18 batik n.rw vox 10Z11 or *stmt.* rionWni.). V.:7A for ane_itexfzisiactratl -tt of W.* b the FaArtl 7.eserre rark of Atlr,nti, thr nnt officer:so or any of them, be an,-7 tivy cro 1,eroby eutLorized, 07:7:ovvred and dircatod to scree dt sal( Rer,ervc' rank that thic baer vill soc-_zro all of tha outotang thg loi:Vvances :nada to it 8,7 sad ar Federal Rut:erre Bark, necoCt byropverf:nert 7 Spoe.rit ice, b:; the de:nzlt 'with Datil Pezzerve Brall:: of acceptrIle tv:dittcrarl aollatoral evivnlent to the diffe-erme between the -Tint of onf3h lcana an Nanoes so ruzde , von the Rea rity of Covernment bont's or notes and 'Or market value of oicers eiro tbe ert;no* rnt orizedg, on: . so Tered on directed to ameo with rinid 2e1orni notier7o 13.-atl- of Atirnth to -,..11.7-tntr, at all tineo collatorras sareioient to ••-eep said lonns anft aviioo scf<xared as aforo VIIRM:4 R• EOM% thrit the ditector5 rEd offie.", rs of t't.is bwfic wicierstrzd t:tvt the 'onnt ilne by t' -is batik ot acoo-rat of the ..trol:ase of sac% bonds shall* to all irtents mki ,Airilotir, be clr_tidoreil 25 a pmbt i of t1e distio - nt lino aocorded tte bock by said 7ederal 7lot;erve Bmkof Wants* BE PrillTrETI IrLIMIFFD, thelt sr4d officert. or any of them, be end they ere hereby atithorcd icYdiroot. to 611 nny thing irleh they raw deal lic00SSW" CY: • roper Ler or fartEer In oitilor to effectuate VA* resolution to oonsaartate timid arreemwata and to narry ;Tat the Zr) in all 1.981104 J. H. Crowds Cs.Mtier of the se Tonnesset do he -eby oertify thnt the " 1 and passed at ,n/3 foregoing is a true ecktry of a resolution above auset1n7 of the Board of Direetors of sai0 bank held o( the 22nd day of * 1921* whit:1h said meeting ma regularly onlisit end * which Juaa, a quer= mut preset. I do nuttier certify that the above red f7)recoire is a true ft.:Tarr' t tton the rilnutin and that the same oorreotly seto forth nnd declares the oorporate natim of t. is bank in the respects set ent t'nerein. I do furt:Aqr oerbtify that the arrennt exeantod on behalf of t is bark on the &or of 221 c1. , Office?, to—wit: * *193. by the folloring Tue attested by nrzelf a1th7J.- 7're_sid it as GasAer* is identiosl with miaow of the acrecnent referred to In the above and foreciYng resolution and that said orrement as =coated is the 7 Ogreealint Wioh Wan pr000sed to the said 1. treat-ors tm.c. the execItion of *bleb was evre:Ally autllorised kr the said BoDrit. TIMMS ww hand and the scal of s7A(1 bank, this day of Jilne 4921, 6igned, J . TT g1 0,1(11 , , Caster Seal Bank of Tennessee, ashvillo, Tenn. .4116 22n • AGRFEME.NT i B. MEMORANDTA OF AGREEMENT, Made this of June day 22nd , 1921, between FEDERAL RESERVE BANK OF ATLANTA, hereinafter sometimes, for convenience, esignated the "seller", and the Bank of Tennessee, Nashville, Tenn., herein- after sometimes, for convenience, designed the "purdhaBet." WITNESSET H: That the said Federal Reserve Bank of Atlanta has agreed to sell, and the said purchaser has agreed to buy, upon terms and conditions hereinafter set out, the following listed United States Bands and Notes, here- inafter called Bonds:- One Million five hundre thousand ($1,500,000.00) dollars of face amount, Fourth L4 berty Loan Bonds, 1. The price to be paid for said bonds 143. One Million Hundred twenty-five thousand Dollars our ($1,425,000.00), together with an amount equivalent to any interest accrued and uncollected on said bonds at the time of delivery to the purchaser pursuant to this agreement. (2) 2. he purchase price of said bonds is to be paid in full by the purchaser on or before five y ears from date, except that the seller, at its absolute option nay, when reckoned at the prevailing market price for said bonds the market value of said bonds is equal to or in excess of that portion of the purchase money then unpaid, require a payment of that portion of the purchase money then unpaid, upon notice to the purchaser that it will demand payment of the entire unpaid purchase money three days from the date of said notice. Any such notice shall be in writing and shall be sufficient- ly given, if mailed, duly addressed, to the purchaser at its office in Nashville, State of Tennessee. In the event of such notice end demand, the purcla ser binds itself, its successors and assips, to make due, punctual and prompt settlenent of the full unpaid purchase money on or before three' days from the date of said notice. 3. At monthly intervals, 1921, the purchaser beginning on the 22nd day of July, will pay on account of the purchase price a sum equivalent to one-tenth of one percent of the aggregate principal amount, par value, of the said bonds herein agreed to be purchased, which amounts shall be credited monthly on account of the said purchase price, provided always that nothing herein contained shall alter, abridge or weaken the force and effect of the absolute covenant, hereinbefore set out, to pay in full for said bonds at the expiration of three days from and after the notice herein provided for, and provided further, that the entire purchase price shall be paid in full on or before five years from date, as hereinbefore set out. 4. To secure its covenants, obligations and undertakings herein set forth, the purchaser has deposited with the Federal Resort() Bank of Atlanta, certain collateral securities duly endorsed, set forth and described in a list hereto attached. With the consent of the s aid Federal Reserve kiank, any of said collaterals may be taken down and acceptable collaterals substituted therefor. When and if such substitutions shall be made, the substituted collaterals shall be subject to this agreement in all respects as though the same had been originally deposited hereunder. ahe proceeds O () 3 said collateral securities or substitutions lierefor shall, when and if collected by the said Federal Reserve Bank, or for its account,be h.ld, to the full extent of such proceeds and avails, in lieu of the said securities except that if there be no defaulteretmder at the time any of said securities are collected or realized on, the said Reserve Bank will credit the reserve account of the purchaser with the net amount of such proceeds or avails upon substitution therefor of acceptable collateral of at least equal value. 5. Upon any default hereunder by the purchaser, the seller shall have the right forthwith to collect, or otherwise liquidate, said securities or any of then, and to apply the amount, so realized, in discharge pro tanto, of the said pui• chase price, and to do any other or further thing necessary or proper to be done in ordeb to avail itself of the benefit and security of the collaterals iforesaid. 6. With repsect to any of the securities so deposited, and also with respect to the bonds which the purchaser hereby agrees to purchase, the Federal Reser)le Bank of Atlanta shall have the right immediately upon ay default hereunder to sell the same or any part thereof at public or private sale, with or without notice, and to apply the net proceeds of such sale on the purchase price of said Government bonds. I4'ederal Reserve 7. At any such sale the Bank of Atlanta may be a purchaser. Any remedy or ritt herein granted shall be cumulative to any legal or equitable right or remedy which the seller may have in the premises. 8. Upon any default in the carrying out of any obligation or undertaking on the part of the purchaser hereunder, the entire purchase money for said bonds then unpaid shall forthwith become due and payable without notice, anything herein contained to the contrary notwithstanding, time being of the essence of this agreement. (4) 9. Until the purchase price of such bonds has been paid and liq- uidated in full, the interest collected thereon shall be the absolute propfe, erty of the Federal Reserve Bank of Atlanta, and such interest so collected by the Federal Reserve Bank of Atlanta for its own account and as its own property, shall in no wise affect the purchase price or be counted as purchase money paid in, except that there shall be added to the purchase price above set out, at the time of final settlement, an amount equivalent to interest earned and then uncollected. Until the purchase price of said bonds has been fully paid title thereto shall remain in the seller and the same shall be in its custody and control. 10. bhauld at any time the aggregate value of the securities so de- posited with the Federal Reserve Bank of Atlanta as collateral be insufficient to furnish a margin of security, based upon a ratio of , ;120 to each 100, of the difference between the par value of the said bonds so sold and the prevailing market price thereof, the purchaser will, promptly upon demand, deposit additional collateral acceptable to the seller and of a value, in the opinion of the seller, sufficient to furnish a margin in security, based upon the ratio aforesaid. To this end the purchaser covenants and agrees to deposit and maintain at all times with the Federal Reserve Bank of Atlanta, as collateral, notes, bills of exchange, or securities acceptable to the said Reserve Bank, in an aggregate amount, at a ratio of `,:? )120 to 100, to cover the difference between the principal amount of the bonds so sold and the prevailing market prices therefor. 11. This contraot is made and entered into btween the parties pur- suant to and under the authority of the following respective resolutions evidencing due corporate action of the respective parties, to wit: Resolu- tions of the L\oard of Directors of the Federal Reserve Bank of Atlanta, passed on i-arch 11, 1921, and on June 16, 1921, and a resolution of the Board of Directors of the unersigned purchaser, passed on the 22nd day of June, 1921. () 5 WITNESS the hands and seals of t._e undersigned parties hereunto affixed, in duplicate, by their propel—officers, duly .authorized in the premises, the day and year first above written. FEDERAL RESERVE BATIK OF ATLANTA (Signed) L. C. Adelson, Deputy Governor. By Seal of Federal Reserve Bank of Atlanta, ATTEST: (Signed) 11. W. Bell, Casl- leer. '111E BANK OF TENNESSEE, Nashville, Tenn. By ATTEST: J. H. Crowdis, Cash ier. Seal Bank of Tennessee, Nashville, Tenn. (.Signed) Rogers Caldwell. (6) List of securities as collateral. 2600 Shares Ford Flour Company, Capital btock. Seal - Federal Reserve Bank of Atlanta. RECEIPT, STATE OF TFdlIE:3S77;, COUNTY OF DAVIDSON. Received of FEDERAL RESERVE BANK OF ATLANTA One Million Four Hundred Twenty-five Thousand Dollars ($ 1 425 000.00 ), said amount being -- aid ) by said lederal Aeserve Bank of Atlanta, as the purchase price of the lollowing listed bonds and notes of the United States, hereinafter called bonds, all of which the undersigned acquired under original subscri2tions or by taking over original subsdriptions. 0.,500,000.00 face amount of Fourth Liberty Loan Bonds, Said amount is accepted by the undersigned in full payment for said bonds to the full extent of its interest therein, the amount so paid being the exact amount at which said bonds are now carried on the books of the undersigned. he Federal Reserve Bank of Atlanta is hereby ahthorized to apply the entire amount of the purchase money, hereby recei2ted for, or any part thereof, toward the payment of any notes or other obligations due or to become due by the undersigned to said Feder7t1 Reserve Bank of Atlanta and secured, either in whole or in part, by the bOnds hereinbefore listed. (2) In consideration of said purchase of said bonds by said Reserve Bank and for other good and vuluable considerations, the undersigned agrees with the said Reserve Dank to reduce the aggregate of all of its obligations to said Reserve Bank, secured by United States bonds or notes, by montly Aro Hundred Fiftvibllars payments to said Reserve Bank at the rate of ($ 250.00 ) per month, the first payment to be made thirty days from date, it being understood, however, that such Reserve bank is under no obligation to renew or extend any loan or advance heretofore made by it to the undersigned or to grant to the undersigned ally new loan or advance. In consideration of such purchase of said bonds by said Reserve Bank and for other good and valuable considerations, the undersigned further agrees with said Reserve Bank to further secure all outstanding loans and advances made to it by said Reserve Bank, and secured by United States bonds and notes, by the deposit with said Reserve Bank of additional collateral acceptable to said Reserve Bank equal to the difference between the amount • ,of such loans and advances made to the undersigned upon the security of United States bonds or notes and the market value of such bonds and notes, and the undersigned does covenant and agree to deposit and maintain at all times with said Reserve Bank acceptable collateral sufficient to keep the said loans and advances secured as aforesaid. The sale of said bonds to the Federal Reserve Bank of Atlanta and the agreements herein set forth are made under and pursuant to a resolution passed by the Directors of the undersigned at a meeting of said Board held an the 22nd ' day of 'Dine , 1921. Witness the hand and seal of the undersigned, affixed by its proper officers duly authorzied in the premises, this 22rd day of . 1921 Seal: Ban-1T_ of Tennessee, :Nashville, Tenn. MT" , BY ATTEST: J. H. Crowdis, Cashier BANK OF 73oFerc" TETT1ESS7E 2 ::ovambr 1921 \, Dear Idr. I firet your On nv r.)trirn from thf, lottr-z• of the 11,1:11tutut tind tote ttrt it is yottr boart:. of dirc;otorn th•A it iu the vi 17 visl.Lble in calltIC Where y011 carry government obligationf3 um.er i ropurctIca i.t:;reerlertt that the imni'a cry out their af7conentr, to repurchw4o. , Txoulu appreoizit: it if you would k 'op rne vice(' of the pro,Toss rande in this corratieticn. Very trui, your v,, , ( l'ioCori, r. Joseph "(. .!etorril :iloerve Bank, Atlanta, '3eor;ia. %ern() r. • 72 FEDERAL _RESERNT, 430 ATIATA. OFFICE OF CHAIRMAN'OP 'rimy BoAnD. °\ \?.):°‘ FEDERAL RESERVE AGENT. November ea0 . ft-1921 Dear Er. Harding: At a meeting of the i3oard of Jirectors, Federal Reserve Bank of Atlanta, held on Novem'oer 11th, 1921, it was voted as the sense of the -oard, that in view of all circumsl,rinces, that vvhere we have repurchase agreement of Government obligations, that liquidation at this time would be advisable and that the Li°v ern o r of the Bank take the matter up and handle the question with such member banks. Very tuly yours, Chairman of Board. Yr. Id, Y. G. Harding, Governor, Federal Reserve 'Board, Washin6ton, D. Form No. 131. Offife Corresp To ___ 411/ Date_ ence /At 4, September 15_, 1921. Governor Harding. Smead. 2-6495 • There is attached hereto a st*emelitAOR__g the amount of \ Liberty bonds acquired by the Federal Redfrve INInOt anta from its \ member banks under the special n repurchase\ag eement" approved by the Federal Reserve Board the early part of this year.. Figures of monthly payments made at the rate of 1/10 of 1 per cent of the par value of the bonds are also shown. Of the total of 0.0,273,561 of bonds purchased by the Federal Reserve Bank, ;7,586,061 represents bonds acquired from the Fourth and First National Bank of Nashville, Tenn. : UNITED STATES LIBERTY BONDS TAKEN UNDER SPE3IAL RETUR3HASE AGREEMETT BY THE FEDERAL RESERVE BANK OF ATLANTA DURING 1921. First National Bank, Anniston, Ala. : Monthly Payments Purchase; : Amount Par price : Date : : value :_lBook value): : 490 00,000 June 30 00,000 90 July 29 90 Aug. 30 Purchases : Name and Location of Selling Member Bank : Date May 12 Fourth & First National Bk., May 31 Nashville, Tenn. : : 7,987,850 7,686,061 June 30 July 29 Aug. 30 7,987.85 7,987.85 7,987.85 Bank of Tennessee, Nashville, Tenn. June 16 1,500,000 1,425,000 July 29 Aug. 30 1,500 1,500 Pascagoula Natl. Bank, Moss Point, Miss. June 16 140,000 140,000 July 29 Aug. 30 280 140 Brunswick Bk. & Tr. Jo., Brunswick, Ga. Apr. 15 May 31 130,000 05,000 130,000 85,000 June 30 July 29 Aug. 30 465 215 215 • -Z- UNITED STATES LIBERTY BONDS TAKEN UNDER SPE3IAL REPURIUSE AGRELLIENT BY TEE FEDERAL RESERVE BANK OP ATLANTA DURING 1921. Name and Location of Se lling Member Bank : • : Date Liacon National Bank, lacon, Ga. Apr. Li Bibb National Bank, May : : Purchases : par : value , 250,000 i1 200,000 : Monthly Payments purchase price : Date : .(Book value) 4237,500 July 29 Aug. 30 200,000 Llacon, Ga. Anhisto41 National Bank, Apr. 19 June 30 July 29 Aug. 30 200 200 200 140,000 June 30 July 29 Aug. 30 140 140 140 Aug. 30 70 American National Bank, Lebanon, Tenn. Aug. 5 70,000 70,000 Sheffield National Bank, Aug. 5 170,000 170,000 v3250 250 140,000 Anniston, Ala. Sheffield, Ala. Amount FEDERAL RESERVE BOARD FILE 2 1,P \:21 • June 49, 1921 Dear .1:41.. Atialson: Your letter of the 27th instant., 4ugcosting that your bank establidh n reserve, arounting to M35,102.33, to cover fully the differenee butween the price paid for Government Mr Bonds acquired =dor repurchase a.E.,ree-7.ents and the prevailin7, ril&mt price, 1-4(As considered at the meting of the Board today and rired you this afternoon, vilich is now confirmod, as follows: "Your letter 27th. 1.1: vie:; of repurchase aEree, manta and collateral hold Board believes it undesirable to astabliall nal rost!rve for nmourt mentioned. Beard approves of auggeution, hovever, in principle and will authorize re:lc:rye of 200,000, one-:half to be set up torwrrow and balance at close of next six vouths period." In the opinion of the Board, upon the assumption that the bas aoncerned will ::(44ain z ...olvont„ the collateral nor held b;; . ;four bank at the ratio of 420 for ecoh 2.00 ought to protect your bank In the difference between the price paid and norket value of bonds acquired. The Board is 7illinC, presont however, to have your bank fortify itself still fl`arther and has, therefore, authorized the setting ur of a reserve durin7 the current yoar of ;32t.)0,030, one-half to be establidhed aim 30th and the bLaance December 31ot, as indicated in rtj toloLTara• Ver: traly ) ;', .ours, 14. Jeputy Governor, eederal 3esorve 3a11%, Ltlantu, Geor3ia. G overno r. es Form 14S A " • rEt INMAL RESERVE BO LEASED WIRE SERVICE WASH!NGTON The telegram given below is hereby confirmed. Jhne 29, 1921 Adelson Atlanta Your letter 27th. In view of repurchase agreemants and collateral held Bpard believes it undesirable to establish full reserve for amount mentioned. Board approves of suggestion, however, in principle and will authorize reserve of .,)200,000, one-half to be sot up tomorrow and balance at close of next six months period HARDING 2-0454 4 1 11110 • vito JOS-Aa UCORD, , ILN;GcnrEn.,,las NCR. Nit I-CADE . CHAIRMAN OF THE BOARD FEDERAL RESERVE A_OENT N,DXPITTY GOVERNOR ...I.M.C.AMEr BELL,Dzwry GOVERNOR ,JOS.1.I. SLATTERN',Bxeir.T.Alzy MAN:RET,T , FEDERAL RESERVE BANK. EXINV:T.RROWNT, DEPUTY CITAIRMAN W.ARJD .A.I.DE FtT ON , . ASST FE:13.1u, RESERVE AOENT D.R OPM2 W. R.PATTIMSON,ASST CASHIER R..A.S12f,S,A8S T CAHHIER , . C.R.TIDWELL, ASST FEDERAL RESERVE AGENT OF ATLANTA_ . H.F.CONNTIFF,AE4ST Cami.rx12 -OR A . J.II.TU TWILlat, 63 Hi C....snip.. RECEIVED June 27, 1921. ED TAYLOR , OENE IZAL A_UDET OR JUN.? 9 1921 cFplez THE GOV Hon. J. P. G. Harding, Governor, Federal rieserve board, Washington, D. G. Dear Governor Harding:In connection with the closing of our books on June 30th, it has occurred to me that possibly it would be in order for us to establish a reserve covering the difference between the price we have paid for Government War Bonds acquired under re-purchase agreements and the prevailing market price. It is true that we hold collateral, at a ratio of 4120 for 4100, covering the said difference, which would, most likely, make us whole, should any unlooked-for circumstance arise in connection with any of the banks from whom we have made purchases. It would be my idea, in establishing such a reserve, to take care of any possible contingency and make any re-adjustment in the reserve at the end of each half-year period, which would be necessary by reason of payments to us on account of the repurchase price, and which might be necessary by improvement in current market values. The amount required for a full reserve covering the difference between the price paid and today's market value would be 4835,102.83. If the Board concurs in this suggestion, to the extent of permitting us to establish a reserve of the amount indicated, or any part thereof, I will appreciate your wire advice, so that we can make our entries on the last day of the month. Very truly yours, r.o.° A/o. Deputy-Governor. June 22, 3.91 Dear 3ir: In reply to yuar telegram of this date, I sired ya this afternoon *.s follovs, which I now desire t confirm: "Your telegram Jane 22nd. Board reGurds it as unfortunate that condition was permitted to develop hioh now rni. es necou=ry the transaction referred : , to. That condition being an acicorvlialityi fact, however, the Board will offer no objection to the . pur 1hDse at ninety five by the Fe-ieral Parve Bari( / 1 4 of Atlanta from Bank of Tennessee of any Fourth Liberty Loan bonds acquired by the selling b•tnit, the selling bank agreeing within five years to repurchase the bonds sold and the Reserve Bank having the right to require the selling bank to rerurchaso the bonds thentiver the mari:.et price is not loss than ninety five less the agGregute of the one-tenth of one per aent. arnortirAtion raymento mr),de up to that time. It is understood that the rasolution of the board of directors of the selline, bank, the receipt o.focutoti by the selling Vat:, and the memorandum of agreement between the selling bank and the Federal reserve bank will be in the for f..ip%roved in the Board's letter of Itirch 23 and toloi- ,Tam of arah _ e:coort as modified to provide for the special provisions stated in your telegrem." Very traly yours, Govornor. Lt. L. C. Adelson, Deputy Governor, Federal Reserve Bank, Atlanta, Georgia. • TELEGRAM , FEDERAL RESERVE BOARD LEASED WIRE SERVICE WASH I NGTON 7.--2434 Juns . 1.921 Adelson, Atic.:.nta. Zortura te timt conaition was perc,itt34 , Your telezrari June 22. I Bor1 regards it s13. necessary the transaction referred to. That coalition to develop which now Luai-ea beinz tn accortTplished rt, honaver, the Boc..ri will offer no objtl.on to the plow chase at ninety five by the Federk.11 Reserve Bac of Atlanta, from Bank of Tennessee apsz=seigr=effstio., of ny Fourth Liberty Lew' bons acquired 1,4r the sellina b5.n1::, I the selling bank agreeing within five years to re:rarchase the bonI3 sold and. the Reserve :Bank having the right to . require- the Belling bank to repurchase the bord.3 114111111111.111.111111111111101 1 whenever the market price is not lesx tilan ninety five less the raggregate of the one-tenth of one per cent. allortizittlon pEiymentlrnIe up to that time. It is understood that the resolution of the board of directors of the selling banl:, the receipt exec:ate& by the selling bank, and the uottorandurn of agreecant between the selling bank =1 the Federal Reserve Bank will be in the forms approvei in the Board's letter of Mf.roh 23 :and telegraa of Mai-oh 28, except as :/oclified to provide for the special provi- • sions stated in your telegruzi. HARDING. 72111, •TELEGRAM , 116.Mal • FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) RECEIVED AT WASHINGTON, D. C.. 38anr Atlanta 1150a Jun 22 Larding ',./ashn authorizing purchase our Board directors passed resolution At roetin:: June sixteenth agreement the amount of ssee under repurchase at ninety, five from bank of Tenne direct note borrowing bonds now pledged as collateral to its fourth liberty loan time limit of said capital and surplus. The which amount is in excess of its repurchaseing at The bank of Tenn to have option of agreement to be five years. repurchase at any we to have right to call for any time within that period and to ninety five t price of said. bonds shall be equal time that the Prevailing marke payments that shall one percent amortization less the aajregate of one tenth of all other the date agreement was entered into. In have been made monthly since Reserve Board ith and approved by Federal respects resolution passed Larch elevel requirement except that instead of sixty days notice of is to be embodied in agreement purchase one and d. Under the plan we would to repurchase three days be substitute rs and on four hundred twenty five thousand dolla half million bonds for one milli five hundred dollars thirty seven thousand we would lend on direct note two hundred ly payments by Bank of Tenn would be against quarter million bonds. The month reduced two hundred fifty monthly. Total fifteen hundred and direct note to be approximately one hundred sixty five adeiticnal collateral required would be tion this particular case and :r Y.c0ord thousand. You are acquainted with situa Wire approval of Board wouk be 'ice discussed it with Vice Governor Platt. aPprecited. Adelson 1217p •••• 4,3 ...v.,.• . —. — vsoothoWilAl •.....-......,_ ._ _ , tb.1.1.c.- :20, 1921 Dear Governor ;:ellbora: I 11,:lvi, J loiAks: or tlw 3t4 luslAuto : vhiah hn73 nntd nIth rludh LitertAit• und'3r3tt.la thot the iV..114-;;3:,LC;?IrJt . riar.: of n'2., :3h1-1111 hzIn . . , ILJt /Oar o.t7 thv. r..;7"17c1.:cea It . 11. 2 fliroctrr; art 1,1tuf.J.1 vith 1 the • 1 w;t:c. ;7. riiLj En'tn,z1vn.,./ttn for , tcti ith '2.(31:2;1,ozz,A;;. c; , pieatuLie 1.1*407: f:tan2 that the pxo:pozed tr41.16ction . . this ior, ci...otaC. bt it . royesi thc 7'elcrn1 ":%asel 70. Board bu2ore bt;ing cencummt(e. Very trzly wcalxn, Govornor. 2. Be 7011b3rn, lovernort Nderf.11 leaczve Ban.14 2,.tlant:4 1(4rariiiLe 1LN,GovuRNOR (AD}LSONDzpr3OvRNoJ L. n J.L.CAMPISELL, DEPUTY GO ...ii-NCYR , .30S.1.T. SEC...TART SLATTERY, BEL,tw CA:411'XX W.13.12.0PER, 4110 41110 FEDERAL RESERVE BANK 12-A.S12.18,ASNT CARRIER CHAIRMAN OrIRE 13 AILD 0 FEDERAL RESERVE AGENT T Minh: T.13R OW, DEPUTY CHAIRMAN WARD ALBERTS024, AP4.4T FEDERAL RE F1F-Tryr ACHENT reiT CABmER PATTEaLSON, R. Al48T CArntizit . JOS.A.McCORD, TnywEaa., OF ANTAA1NTTAL . C , ASSI 7F-DE12AL RE REII r. 'Lk:CONNIFF,A14,1T CARRIER J.B.TUTWER,AHMT CAM 1 ER June 8, 1921. Dear Governor Harding: I notice in the press that you are taking in the far West in order to keep in touch with the agricultural situation. I am glad to knau that something is going to be done to assist the live stock grauers so that their young stock . ::ill not have to be sacrificed. Our loans here are increasing some but not by "leaps and bounds" as they did last year at this time. New Orleans has increased about eight million dollars in the past three or four weeks. We have clused up the deal with the Fourth & First National Bank of Nashville, and purchased from them, under the repurchase agreement, bonds to the amount of about seven and one half million dollars. Mr. Caldwell and his Directors are very much pleased with this arrangement. When our Directors meet on June 16th, I think we will close with the Bank of Tennessee, of Nashville, and take over their bonds under the repurchase agreement. I can see no loss in this transaction with us except a difference in the rate of interest borne by the bonds and our prevailing rate, and by taking the bonds from them, it will amount to the saving of that institution. 'We have made our first purchase of bills fram the Fedefal International Banking Corporation of New Orleans. We took $375,000.00 worth of various bills a feu days ago. I am leaving this afternoon for Cleveland to have a conference with the Richmond and Cleveland officials. 1j- . Mcr Cord left this morning. I will join him in Cincinnati tomorrow. I trust your trip will not fatigue you too much and that you will get some recreation and enjoyment out of your visits to the various sections. Yours very truly, GOVERNOR Hon. U.P.G. Harding, Governor, Federal Reserve Board, c/o Federal Reserve Branch Bank, El Paso, Texas. T CREED TANI. , Elwr 14.A.I. -AUDIT OR (.1- batna Fan, _. at.,-Co.—Phono 4073. C. Shean—Phone 3696. h. _ FUTURE OF THE SW 1EE1 r t Governor W. P. G. Harding, of the Federal Reserve Board, "born and raised" in the heart of the South, is a man of imagination and 'practical horse sense. He knows all about the sweet potato, and he tells the easterners something of what he knows about it. He speaks a word of hope, too, for the Southern growers of the toothsome "tater." Governor Harding declares that a "sweet potato education" for the public is what the agricultural south needs, among other things. He even goes so far as to say that if the American public could be brought to a greater consumption of the sweet potato the South would have a companion crop upon which dependence could be placed when cotton fails to bring proper returns—as cotton so often fails to do. We, too, believe this. The sweet potato industry is yet in its infancy in this country. We in the South know about the yarn and its uses, and each year the yam becomes better acquainted in the consuming market in sections where it is not grown. Gradually the South is working out the practical problem of storing and marketing. Gradually the Eastern and Northern mar: kets are becoming familiar with the potato and increasing their orders. Of course sweet potatoes never will sup. plant cotton as a money crop. It is not necessary that they should. But it is bound :to become each year of greater economic importance. The sweet potato offers an unquestionable opportunity to the enterprising fanners of the South who have solved their storing and marketing problems. of 'ugh a part of very f, mental as tvorse ant jazz melo: Would ample of is to be f. meat Ring mushy ditt heart-brok "Take bac' bac Wearing it am •To make r gri( So take it bac!, That is c€ not so bad which haw, thusiasm o there was American which the N was told b3 street, "Ju. It was sun the countr• called vari. from there . they still In did the pet And sinc young foil the e was 1 th park" ofj aut tci stay Isia goes back to silver."—Russia Pose ;ll ,o back to a good mans old-fashioned corr -fore its wrinkles are fil .ut n- 2 , 2 Form No. 131. Office Correspoilkience To Mr. elmead From Mr. Van FOssen FEDERAL RESERVE BOARD t ate Juneele 1921 Subject: _Bonds_ takeneundererepurahase agreement by Federal Reserve , Bank of-Atlanp!.,_ see'D IN °GT ifl37 1:5 Aeaording to my understanding of the plan the bondseareepurchased at their book value, commonly their par value, plus accrued interest. If so upen purchase "Interest aocrueu on U.3. securities" shoulu be debiteu with the aeount of the accrued interest. Likewise upon resale this account should be credited with the amount of interest accrued. This assumes, of course, that the Federal Reserve uank receives the Income from the bonds. As regards the need of a reserve for depeeciacion, I am in accord with Mr. Horbett in the case of bonds purchased at par. Where bonds are taken at a price less than par, the Federal eserve Bank does not hold a reserve in the form of additional collateral pledged by the member bank to cover the Gifference between the market value and par but merely between the market value and the purchase price. If the bonds are carried at par, and I believe it is not desirable to depart from our uniform practice of so aoing, the difference between the purchase price and the par value, however tacen up on the books, is equivalent to a reserve against depreciation and I should circuit "Depreeiation reserve on U.3. bonds" with the amount. ny recollection is that this has been done by some Feeeral Reserve barks in the past when U.S. bonds were purchased at less than their par value. I do not think that this account should in any ease be combined with the receipts from meeber banks of the one-tenth of one pee cent per month whose flunction is to amortize the uifferenae between the actual market value of the bonds and the price at Whieh carried on the books of the member banks and taken over by the Federal reserve bank. It will follow from the above, of course, that the rate of income so ter as these bonds are concerned will be based upon par value and not upon the actual investment of the Federal Ruserve bank. I feel that this is in accordance with our previous practice where bonds purchased at a preadum were written down to par value anu the inewe calculated on the par value, also with the practice ie the case of bill holuings enioh are carried at face value although not representine the investment cost. jo long as we are consistent in our treatment, and it is understood generally that incone rates are calculated on par or face values and not on actual investment cost or market values, I believe the above course is fully justified. ____ / I °rill. No. 131. Offic Correspdlidence To FEDERAL RESERVE BOARD 4r. Emerson ;'' ;/, gitate_ May Subject: .- Sine ad 24,1921. -'""'""--------------: t GENERAL FILT:':7. IN D' .17.3! 17 1937 ' \W. 644-/ Attached hereto is a schedule of investments purchased by the Federal Reserve Bank of Atlanta from which you will note that the Bank is buying Liberty bonds from member banks under the so-called Repurchase Agreement. The par value of the bonds taken unaer repurchase agree- ments was apparently advancea to the Brunswick Bank & Trust Company and the Anniston National Bank, while in the case of the Macon National Bank the bonds were apparently taken at 95 per cent of their par value. There is nothing on the schedule to indicate whether or not the bonds were taken on a 4-1/4 per cent basis. So far as the records of this division indicate, no other Federal reserve bank is purchasing U.S.bonds under repurchase agreements, anu it is difficult to see why the Atlanta bank should be permitted to do so. In the past the Federal reserve banks have carried all U.S. securities at par and there seems to be no good reason for our departing from this practice. It is accordingly recommended that the Federal re- serve bank of Atlanta be advised that the Board does not approve of their purchasing U.S. bonds under the so-called repurchase agreement, and that where advances are desired on such bonds, they should be obtained on member bank collateral notes secured by Liberty bonds. 11A, iL A LUA • M. B. Ali/BORN, 'GOVERNOR L. C. ADELSON, DEPUTY GOVERNOR J. L. CAMPBELL, J. M. SLATTERY, DEPUTY GOVERNOR SECRETARY • O JOS. A. McCORD, FEDERAL RESERVE BANK CASHIER W. B. ROPER, ASS'T CASHIER W. R. PATTERSON, ASS'T CASHIER R. A. SIMS, ASS'T CASHIER H. F. CONNIFF, ASS'T CASHIER J. B. TUTWILER, ASS'T CASHIER CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT EDW. T. BROWN. DEPUTY CHAIRMAN M. W. BEM., WARD OF ATLANTA. ALBERTSON, ASS'T FEDERAL RESERVE AGENT C. R. TIDWELL, ASS'T FEDERAL RESERVE AGENT CREED TAYLOR, GENERAL AUDITOR March 26, 1921. Rf; MAR:33.1921 OFFIr4.. T Jai rt`zt-3,- Honorable W. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. Dear Governor Harding: Receipt is acknowledged of yours March 23rd, enclosing memorandum from the Board Counsel with respect to the forms prepared by our counsel, in connection with the carrying into effectthe purchase of Government War Bonds from member banks under repurchase agreement. The changes recommended by Mr. Log-fl are agreeable to us, but the language immediately preceding the blank space left on the first page of the sales agreement for description of the securities, ("All of which have been acquired under original subscriptions or by taking over original subscriptions") is somewhat confusing, in that it might be implied therefrom that the Reserve Bank has 'Icquired the Bonds under original subscription or by taking over original subscriptions. The said language does not appear to afflanything to the contract, and, if agreeable to tho Board, we would like to eliminate it. I am enclosing copies of the new forms prepared by our counsel, so as to conform to the Board's suggestions, and, await your advice of their approval. Very truly yours, LCA:A. Enclosure Deputy-Governor. • MEMORANDUM OF AGREEMENT, Liade this day , 121, between FEDERAL RESERVE BANK OF ATLANTA, of hereinafter sometimes, for convenience, designated the "seller", , hereinafter Bank of and sometimes, for convenience, designated the "purchaser", WITNESSET E: That the said Federal Reserve Bank of Atlanta has agreed to sell, and the said purchaser has agreed to buy, upon terms and conditions hereinafter set out, the following listed United States bonds and notes, hereinafter called bonds,(all of which have been acquired under original subscriptions or by taking over original subscriptions: 1. The price to be paid for said bonds is Dollars ), together with an amount equivalent to any interest accrued and uncol- (2) le cted on said bonds at the time of delivery to the purchaser pursuant to this agreement. 2. The purchase price of said bonds is to be paid in full by the purchaser on or before years from date, except that the seller may, at any time prior thereto and at its absolute option, require a payment of that portion of the purchase money then unpaid upon notice to the purchaser that it will demand payment of the entire unpaid purchase money sixty days from the date of said notice. Any such notice shall be in writing and shall be sufficiently given if mailed, duly addressed, to the purchaser at its office in State of In the event of such notice and demand, the purchase binds it- self, its successors and assigns, to make due, punctual and prompt settlement of the full unpaid purchase money on or before sixty days from the date of said notice. 3. At monthly intervals, beginning on the day of , 1921, the purchaser will pay on account of the purchase price a sum equivalent to one-tenth of one per cent of the aggregate principal amount, par value, of the said bonds herein agreed to be purchased, which amounts shall be credited monthly on account of the said purchase price, provided always that nothing herein contained shall alter, abridge or weaken the force and effect of the absolute covenant, hereinbefore set out, to pay in full for said bonds at the expiration of sixty days from and after the notice herein provided for, and provided, further, that the entire purchase price shall be paid in full on or before years from date, as hereinbefore set out. (3) To secure its covenants, obligations and undertakings 4. erein set forth, the purchaser has deposited with the Federal eserve Bank of Atlanta certain collateral securities, duly endorsed, set forth and described in a list hereto attached. .ith the consent of the said Federal Reserve Bank, any of said collaterals may be taken down and acceptable collaterals substituted therefor. .hen and if such substitutions shall be made, the substituted collaterals shall be subject to this agreement in all respects as though the same had been originally deposited hereunder. The proceeds and avails of said collateral securities or substitutions therefor shall, when and if collected by the said Reserve Bank, or for its account, be held, to the full extent of such proceeds and avails, in lieu of the said securities, except that if there be no default hereunder at the time any of said securities are collected or realized on, the said Reserve Bank will credit the reserve account of the purchaser with the net amount of such proceeds or avails upon substitution therefor of acceptable collateral of at least equal value. 5. Upon any default hereunder by the purchaser, the seller shall have the right forthwith to collect, or otherwise liquidate, said securities or any of them, and to apply the amount, so realized, in discharge, pro tanto of the said purchase price, and to do any other or further thing necessary or proper to be done in order to avail itself of the benefit and security of the collaterals aforesaid. 6. With respect to any of the securities so deposited, and also with respect to the bonds which the purchaser hereby agrees to purchase, the Federal Reserve Bank of Atlanta shall have the right immediately upon any default hereunder to sell the same or any part thereof at public or private sale, with or without notice, and to apply the net proceeds of such sale on the purchase price of said Government bonds. At any such sale the Federal Reserve Bank of Atlanta may be a purchaser. (4) 7. Any remedy or right herein granted shall be cumulative to any legal or equitable right or remedy which the seller may have in the premises. 8. Upon any default in the carrying out of any obligation or undertaking on the part of the purchaser hereunder, the entire purchase money for said bonds then unpaid shall forthwith become due and payable without notice, anything herein contained to the contrary notwithstanding, time being of the essence of this agreement. 9. Until the purchase price of such bonds has been paid and liquidated in full, the interest collected thereon shall be the absolute property of the Federal Reserve Bank of Atlanta, and such interest so collected by the Federal Reserve Bank of Atlanta for its own account and as its own property shall in no wise affect the purchase price or be counted as purchase money paid in, except that there shall be added to the purchase price above set out, at the time of final settlement, an amount equivalent to interest earned and then uncollected. Until the purchase price of said bonds has been fully paid, title thereto shall remain in the seller and the same shall be in its custody and control. 10. Should at any time the aggregate value of the securities so devosited with the Federal Reserve Bank of Atlanta as collateral be insufficient to furnish a margin of security, based upon a ratio of 0.20 to each 0.00, of the difference between the par value of the said bonds so sold and the prevailing market price thereof, the purchaser will, promptly upon demand, deposit additional collateral acceptable to the seller and of a value, in the opinion of the seller, sufficient to furnish a margin of security, based upon the ratio aforesaid. To this end the purchaser covenants and agrees to deposit and maintain at all times with the Federal .,,eserve Bank of Atlanta, as collateral, notes, bills of exchange, or securities acceptable (5) the said Reserve Bank, in an aggregate amount, at a ratio of 120 to 0.00, to cover the difference between the principal mount of the bonds so sold and the prevailing market prices therefor. 11. This contract is made and entered into between the parties pursuant to and under the authority of the following respective resolutions evidencing due corporate action of the respective parties, to-wit: A resolution of the Board of Directors of the Federal Reserve Bank of Atlanta, passed on March 11, 1921, and a resolution of the Board of Directors of the undersigned purchaser, passed on the day of 1921. WITNESS the hands and seals of the undersigned parties hereunto affixed, in duplicate, by their proper officers, duly authorized in the premises, the day and year first above written. FEDERAL RESERVE BANK OF ATLANTA BY ATTEST: Cashier. BANK OF BY ATTEST: Cashier. to. 6 STATE OP COUNTY OF Received of FEDERAL RESERVE BANK OF ATLANTA ), Dollars ($ Federal Reserve Bank of Atlanta, said amount being paid by said bonds and notes as the purchase price of the following listed called bonds, all of which the of the United States, hereinafter or by taking undersigned acquired under original subscriptions over original subscriptions, Said amount is accepted by the undersigned in full est therein, payment for said bonds to the full extent of its inter t at Which said bonds are the amount so paid being the exact amoun The Federal Reserve Bank now carried on the books of the undersigned. entire amount of the of Atlanta is hereby authorized to apply the thereof, toward purchase money, hereby receipted for, or any part or to become due the payment of any notes or other obligations due Atlanta and by the undersigned to said Federal Reserve Bank of nbefore listed. secured, either in whole or in part, by the bonds herei • • (2) In con:Aderation of said purchase of said bonds by said Reserve Bank, and for other good and valuable considerations, the undersigned agrees with the said Reserve Bank to reduce the aggregate of all of its obligations to said Reserve Bank, secured by United States bonds or notes, by monthly payments to said Reserve Bank at the rate of ) per Dollars (.;) month, the first payment to be made thirty days from date, it being understood, however, that such Reserve Bank is under no obligation to renew or extend any loan or advance heretofore made by it to the undersigned or to grant to the undersigned any new loan or advance. In consideration of such purchase of said bonds by said Reserve Bank, and for other good and valuable considerations, the undersigned further agrees with said Reserve Bank to further secure all outstanding loans and advances made to it by said Reserve Bank, and secured by United States bonds and notes, by the deposit with said Reserve Bank of additional collateral acceptable to said Reserve Bank equal to the difference between the amount of such loans and advances made to the undersigned upon the security of United States bonds or notes and the market value of such bonds and notes, and the undersigned does covenant and agree to deposit and maintain at all times with said Reserve Bank acceptable collateral sufficient to keep the said loans and advances secured as aforesaid. The sale of said bonds to the Federal Reserve Bank of Atlanta and the agreements herein set forth are made under and pursuant to a resolution passed by the Directors of the undersigned at a meeting of said Board held on the day of , 1921. NIT/1E3S the hand and seal of the undersigned, affixed by its proper officers duly authorized in the premises, this day of , 1921. BANK OF BY ATTEST: • 111.REAS, this bank has heretofore acquired, under riginal subscriptions or by taking over original subscription, and now owns certain Liberty bonds and Victory notes issued by the United States; and WHEREAS, the Federal Reserve Bank of Atlanta is willing to purchase certain of said bonds, at a price equivalent to the amount at which this bank is at this time carrying said bonds on its books, upon condition, however, that this bank wil re-purchse the same at the same price paid therefor by the said Federal Reserve Bank of ..tlanta and upon terms and conditions fully set forth and contained in a contract proposed to be entered into between the said. Reserve Bank and this bank, a copy of which proposed contract is hereby made in all respects a part of this resolution and is to be spread upon the minutes as a part thereof; THEREFORE BE IT RESOLIED, that the President Or VicePresident and C shier of this bank be and they ore hereby authorized, for and in behalf of this bank, to sell Government securities which this bank owns, or in which it may have an interest, to the aggrog_te par value of Dollars ), frt and for the price of Dollars ( ), said price being the same as the amount at which this bank now carries the said securities on its books. BE IT FjaT_LIR RESOLVED, that said officers of this bank be and they are hereby authorized and directed to enter, for and in behalf of this bank, into an agreement with said Federal Reserve Bank of Atlanta to re-purchase said bons upon the terms and conditions fully set forth in said proposed contract. Said officers are further authorized to deposit collateral securities with said Reserve Dank in order to secure the carrying out by this bank of its obligations as set forth in said agreement. Said agreement, when executed, to become the binding corporate obligation of this bank. • 2 • BE IT FURTHER RESOLVED, that for and in consideration of he purchase of said bonds by the Federal Reserve Bank of Atlanta, he said officers, or any of them, be and they are hereby authorii„;ed, empowered and direced to agree with said Federal Reserve Bunk of Atlanta that this bank will reduce the aggregate of all its obligations to said Reserve Bank, secured by United States bonds or notes by monthly nayments to said Reserve Bank at such rate as shall be required by said Reserve Bank, it being understood, however, that said Reserve Lank is under no obligation to renew or extend any loan or advance heretofore made by it to this bank, or to grant to this bank any new loan or advance. BE IT FURTHER RESuLVED, that for and in consideration of the purchase of said bonds b, the Federal Reserve Bank of Ilt'anta, the said officers, ex any of them, be and they are hereby authorized, empowered and directed to agree with said Reserve Bank that this bank will further secure all of the outstanding loans and advances made to it by said Federal Reserve 7anh, secured by Government 7Iar Securities, by the deposit with said Reserve Bank of acceptable additional collateral equivalent to the difference between the amount of such loans and advances so made upon the security of Government bonds or notes and the market value of the same. Said officers are further authorized, empowered and directed to agree with said Federal Reserve Bank of ktlanta to maintain at all times collaterals sufficient to keep said loans and advances secured as aforesaid. BE IT FURTHER RESOLVED, that the directors and officers of this bank understand that the amount due by this bank on account of the purchase of such bonds shall, to all intents and purposes, be considered as a part of the discount line accorded this bank by said Federal Reserve Bank of Atlanta. BE IT FURTHER RESOLVED, that said officers, or any of them, be and they are hereby authorized and directed to do any other or further thing which they may deem necoss,zy or prop,Ir in order to effectuate this resolution to consummate said agreements and to carry out the same in all respects. , Cashier of the -Rank of , do hereby certify that the above and foregoing is a true copy of a resolution introduced and passed at a meeting of the Board of Directors ol said bank held on the day of , 1921, which said meeting was regularly called and at which a quorum was present. I do further c2rtify that the above and foregoing is a rue excerpt from the minutes and that the same correctly sets forth and declares the corporate action of this hunk in the respects set out therein. I do further certify that the agreement executed on behalf of this bank on the day of , 1921, by the following officer, to-wit: attested by myself as Cashier, is identical with a copy of the agreement referred to in the above and foregoing resolution and that said agreement as executed is the agreement which was proposed to the said Directors and the execution of which was expressly authorized by the said Board. ,f o: =NESS my hand and the seal of said. loc./IL, this , 1921. Uashi-T March 23, 1921. Kr. L. C. Adelson, Denuty governor, Federal 1,eserve L.tlanta, . ‘ear -ir: Eeceint is acknowledged of Your letter of arch 19, 1921, enclosing forms prepared by your counsel for use by the :Federal Tieserve Bank of Ltlanta In carrying into effect the purchase of 7,ove1nment bonds from member banks under a re-purchase agreement as set forth in the resolution of the board of directors of :arch 11th, an modified by the j'ederal Leserve Board's telegram of :.:arch 1Fth. , • k \ The forme were submitted to Counsel and I am enclosing a. copy of his memorandum isuggesting certain changes. 7ith these changes, the Federal :.eserve 2 ,oard aproves the forms submitted. If for any reason you:: object to any of the suested changes, the 2oard will be glad ti consider your objections. Your attention it called to the last paragraph of Counsel's memorandum in which it is suggested that the additional collateral should actually be deposited with the i. ederal 1.eserve Bank before that bank buys the bonds of the ieTter bank. fours very truly, Enclosure. overnor. , Correspoillence aral-Reserve Board From r -S. Logan 0 Subject: Forms -for :U-se' --Fied-e al :Ret, serve Bank of Alanta•when Purchasing Liberty- Bonds from :4:-Biliber Banks under Re-Purchaae Agreement. I have,examined the forms enclosed with Cir. Adelsonts letter .larch 19 These forms were prepared by Jr. Randolph, C'Oansel-foi of tsiiT"ls.friiiiia Bank for use by that Bank in putting into operation its plan for buying Liberty Bonds from its member banks under a re-purchase agreement, pursuant to the resolution adopted by its Board of Directors on March 11. A number of Changes in the form of receipt seem to ma to be advisable and I have therefore prepared a form of receipt embodying these changes, a copy of which form is hereto annexed. The last clause of the third paragraph is suggested so as to avoid any possible inference that the Federal Reserve Bank agrees in advance to renew any loan, since an agreement to this effect would be ultra vitas. It will be noted also that under the terms of this paragraph the monthly paya- nts e In reduction of outstanding loans are to be continued indefinitely, instead of only until the aggregate of such loans is not in excess of the market value of the collateral as was provided in the form enclosed with ill'. Adelsonls letter. Inasmuch as the member bank is to deposit immediately additional collateral sufficient to make up the difference between the amount of the loans and the market value of the collateral now held therefor, the member bank would probably not be obligated to make any monthly payments whatsoever in reduction of outstanding loans under the terms of the form enclosed with :.1r. Adelsonls letter. I have therefore suggested this Change although it is somewhat of a departure from the terms of the resolution of the Directors of the Atlanta Bank. I have also changed this paragraph so e..3 to specify the exact amount of the monthly payments so as to avoid any possible dispute as to the basis upon which the amounts of such payment are to be calculated. As to the form of agreement. under which the member bank will agree to repurchase the bonds I have the following suggestions to make: Change the paragraph of the first page following the heading "WITNESSETH" to read -"That the said Federal Reserve Bank of Atlanta has agreed to sell, and the said purchaser has agreed to buy, upon terms and conditions hereinafter set out, the following listed United States bonds ar notes,• hereinafter called bonds, all of which have been acquired under original subscriptions or by taking over original subscriptions:" At the end of the fourth line of the third paragraph, change - the word "seturities" t ."bonds". In tne second line of the sixth ;..ragraph strike out the words "as collateral" and substitute in lieu thereof "and also with respect to the bonds which the purchaser hereby agrees to purchaee", and in the sixth line of the same paragraph, strike out the words "Goverreeent securities" and substitute the word "bonds". In the second and third lines of the eighth paragraph strike -Yherein :entained and set forth and covenantcut the words substitute the word "hereunder", and in the fcurth ed to be done" line of the same paragraph strike out the words 'Goverment securities" and substitute the word "honis". Change the first sentence of the tenth paragraph so as to read "should ...et any tiehe the aggregate value of the securities so aeposited with the Federal Reserve Bank of Atlanta as collateral be insuffieient to furnish a leargin of security, based upon a ratio of & 120 , to,each $100. of the difference between the par value of the said bonds so sold and the prevailing market price thereof, the purchaser will promptly upon demand deposit additional collateral acceptable to the seller and of a value, in the opinion of the seller, sufficient to furnish a margin of security based upon the ratio aforesaid." It the end of the tenth paragraph strike out the words "market prices prevailing at the time of sale and thereafter" and insert in lieu thereof "prevailing market prices therefor". As tc the resolution to be adopted by the Board of Directors of the member bank I have the following suggestions to make: Change the first paragraph at the top of page 2 to read "BE IT FURTHER RESOLVED that for and in consideration of the purchase of said bonds by the Federal Reserve hank of Atlanta, the said officers or any of them be and they are hereby authorized, empowered and directed to agree with said Federal Reserve Bank of Atlanta that this bank will reduce the aggregate of all of its coligations to said Reserve Ban, secured by United States bonds or notes, by monthly payments to said Reserve Bank at such rate as shall be required by said Reserve Bank, it bein understood, however, that said Reserve Bank is under no obligation to renew or extend any loan or advunde heretofore made by it to this bank or to grunt to this bank any new loan or advance." Change the last sentence of the second paragraph on page 2 to reed "Said officers are further authcrized, empowered and directed to agree with said Federal Reserve Bank of Atlanta to e.aintain at all times collaterals sufficient to keep said loans and advances secured as aforesaid. In the third line from the top of page 3 between the word "thing" and the word "necessary" insert the words "which they may deem". come of the above suggestions are of minor importance, while others seem to me to be necessary. -ath the exception of the chanr e, , the purpose of which I have already explained, I think the purpose of the amendments will clearly aupear upon reading the forms prepared by Eandolph and noting the changes which I have su-Eested. In the form of receipt the member bank aLrees to put up additional collateral sufficient to cover the difference between the amount of its outstanding indebtedness to the Federal :eserve Bank, secured by United States bonds and notes, and the market value of the collateral therefor it would siem to me that the member bank should as a matter of practice be required to put up this collateral before the Federal Reserve :ank actually buys any bonds. CC_ 77SL.-Tad lORN, GOVERNOR M. B. W•dAl L. C. ADELSON, DEPUTY GOVERNOR J. L. CAMPBELL. DEPUTY GOVERNOR J. M. SLATTERY, SECRETARY • FEDERAL RESERVE BA JOS. A. MCCORD, CHAIRMAN OF THE BOARD AND ..„ 4_,FAUXUESERVE AGENT . HsettP9.4}iiithi. 40 441,4, 0 1 M. VC BELL. CASHIER W. B. ROPER, ASS*T CASHIER W. R. PATTERSON, ASS'T CASHIER R. A. SIMS, ASST CASHIER H. F. CONNIFF, ASST CASHIER J. B. TUTWILER, ASST CASHIER L z6 t "KROLIVEW,° AlcliktteeiLoR, OF ATLANTA.. Federal Reserve Board, Washington, D. C. Dear Governor Harding:Pursuant to the resolution passed by our Board of Directors, with reference to the purchase of bonds from member banks under a repurchase agreement, and your telegram 7 of_Yarch 1,54, advising the Board's approval of the plan, with certain modifications, I enclose herein forms prepared by our Counsel, together with his letter of transmittal. We await advice of their approval before putting the plan into effect. Very truly yours, Deputy-Governor. A:C. RESERVE AGENT GENERAL -arch l,, - Honorable W. P. G. Harding, Governor, &.cs. EPUTy CHAIRMAN AUDITOR /. FEDERAL RESERVE BANK OF ATLANTA L ANV DEPARTMENT 42 - 431 H EALEY BLDG. HO L .INS N. RANDOLPH ATTORNEY llarch Mr. L. C. Adelson, Deputy Governor Federal Reserve Bank, Atlanta, Georgia. Dear Mx. Adelson: Enclosed herewith :Toil will fina certain proposed forms which I have drbfted in order to carry into effect and practical working, the provisions of the Directors' resolution of March 11, 19211 providing for the relief of such of your members as may be ifi need of help in carrying Liberty Bonds in excess of their cqpital and surplus. In drafting these forms I have, in my opinion, tracked the resolution and the suggestions of the Board with respect thereto. In only one respect have I departed from the literal language of the resolution, and that is to provide for a definite period in which the entire money due on account of the "re-purchase" of the 1:onds shall be paid. In order to pzotect your bank, however, I hve inserted in the agreement covering the"re-purchase" of the Bonds a provision makin, the entire purchase money payable on sixty days demand. scribed The proposed forms enclosed herewith may be briefly des follows: A receipt to be signed by the member bank acknowledging 1. full p yment by such member bank from the deserve Bank of an amount of money equal to the sum at which the tonds affected are cc,rried on the books of the member bank. In this agreement are inserted certain covenants, viz: to reduce the amount of all loans secured by Government War Securities monthly, and an arfnement to margin all of such loans, as suggested by the Federal Reserve Board. A resolution to be passed by the member bank authorizing 2. sale of the bonds to the Federal Reserve . Bank, and a "re-purchase IT a thereof upon certain terms 7.),nd conditions set out in a contract. The contract wherein the member bank a:7rees to "re-pur3. chase" the Bonds sold to the Federal Reserve Bank upon an agreed basis. • Mr. Adelson • (2) In my opinion, these 10pers c n be used in practice in order to carry out and effectuate your resolution. The forms can be printed and, when printed, will be largely selfexplanatory. They can all be filled out and signed by the member bank, and then forwarded to the deserve Bank for completion - that is to say, the member bank can pass the resolution, execute the proposed contract and forward both, together with the form of receipt, to the Pederal Reserve Bank of Ltlanta, after which they can be :.cted upon by your Discount committee. I st,_;_nd ready to make any changes which you may suggest in these forms. I return for your files the copy of the resolution and the suggested additions thereto by the Federal Reserve Board, which last mentioned papers you furnished me for use in preparing the enclosed form. Yours very truly, 1,c1--"hi o2---414-4/2. General Counsel RSP-h • STATE OF COUNTY OF Received of FEDERAL RESERVE BANK OF ATLANTA Dollars ($ ), said amount being paid by said Federal Reserve Bank of Atlanta as the purchase price of the following listed bonds and securities of the United States, namely: „j; t}, 0 -NL" Ard - 4 • V% I V 0-P‘ // said amount is accepted by the undersigned in full payment for said securities to the full extent of its interest therein, the amount so paid being the Atli amount at which said —seouriti-ee are now carried on the books of the undersigned. The Federal Reserve Bank of Atlanta is hereby authorized and directed ) to apply the entire, purchase money, hereby receipted for, toward , the payment "anddisCharge/ of any notes or other obligations due by the undersigned to said Federal Reserve Bank of Atlanta and secured, either in whole or in part, by the Government bonds -e ---e-ther Government securitieahereinbefore listed. P() 7 In consideration of said purchase of said bonds or other governmental securities by said Reserve Bank, and for other good and valuable considerations, the undersigne4 agrees with said Reserve Bank to4reduce the aggregate of all'its obligations to said Bank, WecAred by Government War Securities, by payment to said Bank at monthly intervals, beginning one month from date, of 44 '0),) 4-121.) jf ' • • LA ) t 20 1 • ( -r ( 12 • e ) 1, - (2) /o 1.1 ..1 -7 6-1 -14 •-7 j V fi ' an amount equal to onetenth\of one per cent of the total of all obligations, co secured such\payments to bef-made,-until tho full aggregate amount of' such loans\and obligations, so-secured,,,is Jiot in excess of the market va1\ue-6f the securities. ------La— consideration of such purchase of said bonds by said valuable considerations, /'Reserve Bank, and for other good and said Reserve Bank to further / the undersigned further agrees with secure all outstanding loans and advances made to it by said / Reserve Bank,and secured by Government War Securities, by the deposit with said Reserve Bank of additional collateral acceptable to said Reserve Bank equal to the difference between the amount of such loans and advances made to the undersigned upon the security of government bonds or notes and the market value of the same, and the undersigned does covenant and agree to deposit and maintain at all times with said Reserve Bank acceptable collateral sufficient to -furnish the said margin of security upon the said loans and advances 09 secured as aforesaid. , o A ( , ?At)) 142 '", e' . . ,,--" , The sale of said bonds to the Federal Reserve Bank of Atlanta and the agreements herein set forth are made under and pursuant to a resolution passed by the Directors of the underday of signed. at a meeting of said Board held on the 1921. \ WITNESS the hand and seal of the undersigned, affixed by its proper officers duly authorized in the premises, this ,1921. ' day of BANK OF BY — ATTEST: \, \ a\ jul A l i • O day of MEMORANDUM OF AGREEMENT, Made this 1921, between FEDERAL E1SERVE BANK OF ATLANTA, hereinafter sometimes, for convenience, designated the "seller", and , hereinafter Bank of sometimes, for convenience, designated the "purchaser", WITNESSET H: That the said Federal Reserve Bank of Atlanta has agreed to sell, and the said purchaser has agreed to buy, upon terms and conditions hereinafter set out, the following listed 6 vernmental securities,, to-wit: United States bonds or other Arr'`.d , 6h. 41 po' 1. The price to be paid for said bonds is Dollars ), together with an amount equivalent to any interes4_ accrued and uncol- • (2) lected on said bonds at the time of delivery to the purchaser pursuant to this agreement. 2. The purchase price of said bonds is to be paid in full by the purchaser on or before years from date, except that the seller may, at any time prior thereto and at its absolute option, require a payment of that portion of the purchase money then unpaid upon notice to the purchaser that it will demand payment of the entire unpaid purchase money sixty days from the date of said notice. Any such notice shall be in writing and shall be sufficiently given if mailed, duly addressed, to the purchaser at its office in , State of In the event of such notice and demand, the purchaser binds itself, its successors and assigns, to make due, punctual and prompt settlement of the full unpaid purchase money on or before sixty days from the date of said notice. 3. At monthly intervals, beginring on the day of , 1921, the purchaser will pay on account of the purchase price a sum equivalent to one-tenth of one per cent of the aggregate principal amount, par value, of the said securities. herein agreed to be purchased, Which amounts shall be credited monthly on account of the said purchase price, provided always that nothing herein contained shall alter, abridge or weaken the force and effect of the absolute covenant, hereinbefore set out, to pay in full for said bonds at the expiration of sixty days from and after the notice herein provided for, and provided, further,that the entire purchase price shall be paid in full on or before years from date, as hereinbefore set out. (3) 4. To secure its covenants, obligations and undertakings herein set forth, the purchaser has deposited with the Federal Reserve Bank of Atlanta certain collateral securities, duly endorsed, set forth and described in a list hereto attached. With the consent of the said Federal Reserve Bank, any of said collaterals may be taken down and acceptable collaterals substituted therefor. When and if such substitutions shall be made, the substituted collaterals shall be subject to this agreement in all respects as though the same had been originally deposited hereunder. The proceeds and avails of said collateral securities or substitutions therefor shall, when and if collected by the said Reserve Bank, or for its account, be held, to the full extent of such proceeds and avails, in lieu of the said securities, except that if there be no default hereunder at the time any of said securities are collected or realized on, the said Reserve Bank will credit the reserve account of the purchaser with the net amount of such proceeds or avails upon substitution therefor of acceptable collateral of at least equal value. 5. Upon any default hereunder by the purchaser, the seller shall have the right forthwith to collect, or otherwise liquidate, said securities or any of them, and to apply the amount, so realized, in discharge, 22:9_ tanto of the said purchase price, and to do any other or further thing necessary or proper to be done in order to avail itself of the benefit and security of the collaterals aforesaid. 6. With respect to any of the securities so deposited 4.- als-o f_e3 jje-7"-"e , 1, LA-€1-&S-e-ellateral, the Federal Reserve Bank of Atlanta shall have 3 1 .-• the right immediately upon any default hereunder to sell the same or any part thereof at public or private sale, with or without notice, and to apply the net proceeds of such sale on the purchase price of said GovernmeT—Emxmartr. At any such sale the Federal Reserve Bank of Atlanta may be a purchaser. (4) 7. Any remedy or right herein granted shall be cumulative to any legal or equitable right or remedy which the seller may have in the premises. 8. U.2on any default in the carrying out of any obligation or undertaking on the part of the purchaser, hare-in---containell -e-d----to be clone, the entire purchase money _aefo_rtnd._Q_Yqna-nt -securities then unpaid shall forthwith become for said Government' due and payable without notice, anything herein contained to the contrary notwithstanding, time being of the essence of this agreement. 9. Until the purchase price of-such bonds has been paid and liquidated in full, the interest collected thereon shall be the absolute property of the Federal Reserve Bank of Atlanta, and 4,irti such interest so collected by the Federal Reserve Bank of Atlanta for its own account and as its own property shall in no wise affect the purchase price or be counted as purchase money paid in, except that there shall be added to the purchase price above set out, at the time of final settlement, an amount equivalent to interest earned and then uncollected. Until the purchase price of said bonds has been fully paid, title thereto shall remain in the seller and the same than be in its custody and control. 10. Should at any time the aggregate value of the securities so deposited with the Federal Reserve Bank of Atlanta as collateral be insufficient to furnish a margin of security, based upon Lk._ • • /1--e• O7 / par value/of a ratio of $120 to each $100,(prIal4pftl-smammti AAA 1, / .+ 4 .A-"tA / ' ), the said bonds so sold, thecpurchaser will, promptly upon demand, Ana'ke- good the difference -by the deposit of acceptable. collateral 9 Of a value, in the opinion of the seller, sufficient to make-up the-dell-e-itin security, based upon the ratio aforesaid. To this end the purchaser covenants and agrees to deposit and maintain at all times with the Federal Reserve Bank of Atlanta, as collateral, notes, bills of exchange, or securities acceptable • (5) to the said Reserve Bank, in an aggregate amount, at a ratio of 0_20 to 0.00, to cover the difference between the principal ; -L. amount of the bonds so sold and the market prices prevailing at the_ time—et-sale and thereafter. 11. This contract is made and entered into between the parties pursuant to and under the authority of the following respective resolutions evidencing due corporate action of the respective parties, to-wit: A resolution of the Board of Directors of the Federal Reserve Bank of Atlanta, passed on March 11, 1921, and a resolution of the Board of Directors of the undersigned purchaser, passed on the day of 1921. WITNESS the hands and seals of the undersigned parties hereunto affixed, in duplicate, by their proper officers, duly authorized in the premises, the day and year first above written. FEDERAL RESERVE BANK OF ATLANTA BY ATTEST: Cashier, BANK OF BY ATTEST: Cashier. • 44. , 0 • WHEREAS, this bank has heretofore acquired, under original subscriptions or by taking over original subscriptions, and now owns certain Liberty bonds and Victory notes issued by the United States, and WHEREAS, the Federal Reserve Bank of Atlanta is willing to purchase certain of said bonds, at a price equivalent to the amount at which this bank is at this time carrying said bonds on its books, upon condition, however, that this bank will re-purchase the same at the same price paid therefor by the said Federal Reserve Bank of Atlanta and upon terms and conditions fully set forth and contained in a contract proposed to be entered into between the said Reserve Bank and this bank, a copy of which proposed contract is hereby made in all respects a part of this resolution and is to be spread upon the minutes as a part thereof, THEREFORE BE IT RESOLVED, that the President or VicePresident and Cashier of this bank be and they are hereby authorized, for and in behalf of this bank, to sell Government securities which this bank owns, or in which it may have an interest, to the aggregate par value of (t5 , Dollars ), at and for the price of Dollars (?) ), said price being the same as the amount at which this bank now carries the said securities on its books. BE IT FURTHER RESOLVED, that said officers of this bank be and they are hereby authorized and directed to enter, for and in behalf of this bank, into an agreement with said Federal Reserve Bank of Atlanta to re-purchase said bonds upon the terms and conditions fully set forth in said proposed contract. Said officers are further authorized to deposit collateral securities with said Reserve Bank in order to secure the carrying out by this bank of its obligations as set forth in said agreement. Said agreement, when executed, to become the binding corporate obligation of this bank. t , 2) ( 1-, ,it-P,T 7,, 7 V 77.7. , ,"'t*IP41Gr7 BE IT FURTBER RESOLVED, that for and in consideration of -4m* of said bonds by the Federal Reserve Bank of the purchase pm Atlanta, the said officers, or any of them, be and they are hereby authorized, empowered and directed to agree with said Federal Reserve Bank of Atlanta that this bank will reduce -the4 / , )tcA---“./11 at • egat.- f all its obliiationg-to-aaid-Rese T;c -Bank, secured-by— saiLbank-at monthly. b-paentto. ()Government War be GA ) 6 ..-ot-1 9 - n amount equal to I 4litermals,Jaaginnin 1 - 11.-/LcV /* tr LLL, Dne.tenth_of one per---eent-ef-the total bf all obligattns, so ( Be-cured, such payments to be made until the full aggregate amount of such loans and obligations, so-secureetT is not in excess of the market value of the securities BE IT FURTBER RESOLVED, that for and in consideration of the purchase of said bonds by the Federal Reserve Bank of Atlanta, the said officers, or any of them, be and they are hereby authorized, empowered and directed to agree with said Reserve Bank that this bank will further secure all of the outstanding loans and advances made to it by said Federal Reserve Bank, Ssecured by.Lover-riment-kAlar- ezulities, by the deposit with said Reserve Bank of acceptable additional collateral equivalent to the difference between the amount of such loans and advances so made upon the security of Government bonds or notes and the market value of the same. Said officers are further authorized, empowered and directed to agree with said Federal Reserve Bank at all times collaterals sufficient to of Atlanta to maintain , 'I furnish the said margin of security upon all of the said loans __so securedBE IT YURTTTPT RESOLVED, that the directors and officers of this bank understand that the amount due by this bank on account of the purchase of such bonds shall, to all intents and purposes, be considered as a part of the discount line accorded this bank by said rederal xesefve Bank of Atlanta. I BE IT FURTHER RESOLVED, that said officers, or any of them, be and they asza hereby authorized and directed to do any . other or further thing necessary or proper in order to effectuate this resolution to consummate said agreements and to carry out the same in all respects. , cashier of the , do hereby certify that the Bank of above and foregoing is a true copy of a resolution introduced and passed at a meeting of the Board bf Directors of said bank held , 1921, which said meeting was day of on the regularly called and at which a quorum was present. I do further certify that the above and foregoing is a true excerpt from the minutes and that the same correctly sets forth and declares the corporate action of this bank in the respects set out therein. i do further certify that the agreement day of behalf of this bank on the on the following officer, to-wit: attested by myself as uashier, is identical with agreement referred to in the above and foregoing that said agreement so executed is the agreement proposed to the said Directors and the execution expressly authorized by the said Board. day of executed , 1921, by a copy of the resolution and which was of which was WITNE6S my hand and the seal of said bank, this , 1921. Cashier. _ McCord Atlanta. March 15,l921. Your letter Larch twelfth.. Board has approved plan for purchase of Government bonds under repurchase agreement as set forth in resolution of your directors on March eleventh provided that paragraph (a) of that resolution be amended to read "to purchase, under the following conditions, from any member bank such an amount of United States Government War Bonds now awned by such bank and acquired by it under original subscriptions or by taking over original subscriptions as the amount of such bonds so owned and acquired exceeds the capital and surplus of such bank". And provided further that in addition to the collateral which the selling bank is required to deposit and maintain with you under paragraph (f) the selling bank shall deposit and maintain with you additional collateral equal to the difference between the amount of your advances to it upon the security of Government bonds or notes and the market value of such security. Before the plan is put into operation form of agreement to be entered into between you and member banks should be prepared by your counsel and submitted to the Federal Reserve Board for the approval of its counsel. HARDING. March 15, 1921 Dear Nr. McCord: Your letter of ilardh 12th, enclosing col,y of resolution adapted by your directors relative to the purchase for member banks of Government bonds under a repurchase agreement was brought to the attention of the Board today, and I sent you the following wire, thiCh is hereby confirmed: "Your letter March twelfth. Board has approved plan for purchase of Government bonds under repurchase agreement as set forth in resolution of your directors on :lareh eleventh provided that paragraph (a) of that resolution be amonded to road "to purchase, under tho following conditions, from any member bank such an amount of United States Government -ar Bonds now owned by such bank and acquired by it under o7.tina1 subscriptions or by takinr, over original subscriptions as the amount of such bonds so owned mid acquired e:xeeds the capital and surplus of such bank". 4%nd provided further that in addition to the collateral which the selling bank is required to deposit and maintain with you under paragraph (f) the selling banh shall deposit and maintain with you additional collateral equal to the difference between the amount of your advances to it upon tho security of Governmont bonds or notes and the marhet value of such security. Before the plan is -jut into operation form of agreement to be entered into between you and member banks Should be prepared by your counsel and submitted to the Federal Resurve Board for the apl.roval of its ,;ounsel." - Very truly yours, Governo r. Mr. Joseph. bCord, Chair -tan, Federal Reserve Bart:, Atlanta, Georgia. Form No. 131. Correspoence To FEDERAL RESERVE BOARD Date_ :) March 15, 1921 Purchase of Liberty Boads by Federal Reserve Bank of Ltlanta from member banks under repur2fr-8496 chase agreement. Subject: G overnQr Harding From_______Ti'alter S. • Logan, General Counsel. \\ You have requested my opinion as to the legality of the plankof the Federal Reserve Bank of -,tlanta to purchase from member banks Liberty Bonds owned in excess of the member bank's capital and the memsurplus at the book value at which such bonds are carried by agreeing to re-purchase the bonds at any ber banks, the member banks time on sixty days notice. This plan is set forth in a resolution adopted by the Board of Directors of the Federal eserve Buak of Board lanta on ',larch 11, 1921. I understand that the Federal ileserve ion be amended so as to has suggested that paragraph (a) of the resolut limit the bonds to be purchased td those which have been acquired by the member bank under original subscriptiony taking over such subscriptions, instead of permitting the purchase of any bond which the member bank acquired prior to .1pril 1, 1920. Under the terms of the resolution the member banks from which 10 bonds are purchased must agree to make monthly payments equal to 1/ carrying of 1 of the price at which the bonds are purchased until the memvalue of the bonds is equal to the prevailing market prices. The Federal ber banks are to agree also to reduce their indebtedness to the payments of Reserve bank of Ltlanta upon bond-secured paper by monthly of the indebtedness is not in excess of the 1/10 of 1";: until the amount deposit market value of the collateral. The member banks agree also to . of the difference between the price additional collateral equal to 120:1 value of tha paid by the Federal Reserve Bank of ktlanta and the market the right to re-purchase at any bonds. The merber banks are to have time any part of the bonds sold to the Federal Reserve Bank of 4Lt1anta previousat the purchase price less the monthly payments of 1/10 of 15 of the carrying value of such bonds. ly made and q2p1ied in reduction I am of the opinion that the Fedefal Reserve Bank of 4tlanta the Federal has legal authority under subdivision (b) of section 14 of ions of the United states in accordance ileserve ct to purchase obligat reserve banks with the proposed plan. This section gives the Federal and notes of the United states and does authority to purchase bonds rese.rve barb( not place any limitations upon the price which the Federal that purchases shall ordimay pay. While it is no doubt contemplated opinion that narily be made at prevailing market prices, I am of the more than the the Federal reserve banks have legal authority to pay that such market price under special circumstances which make it appear ration a course is advisable, provided, that they receive some conside for the excess paid by them over and above the market price and, provided further, that the transaction does not amount to a dissipation of their assets. • -2- The agreement on th2 part of the aieaer banks to regurchase the bonds and to deposit collateral to cover the excess price constitute such technical consideration. It occurs to me, however, that it would be advisable to require also that the member banks isindiately deposit additional collateral sufficient to cover the differ ence between the amount of their bond-secured indebtedness and the market value of the bonds already held as collateral for such indebtedness. This collateral would not necessarily have to be elieible paper. The purchase of Government obli.ations under the propos ed plan at prices in excess cf market prices but at not more than par will not result in the dissipation of the assets of the Federal reserv e bank but will only result in a lesseninL of the earning capacity of the Federal reserve bank to a certain extent. In Jay oipinion no one is in a position to object to this except possibly the other melliber banks if the Federal reserve bank's earning capacity should be reduce d to such an extent as to jeopardize its ability to pay divide nds. In order to avoid the charge of discrimination among member banks it seems advisable that the bonds which the Federal reserv e bank may :purchase under the proposed plan should be narrolidy limite d by the terms of the resolution and that the Federal reserve bank should, as far as possible, purchase all bonds offered to it coming within the terms of the resolution. This I understand was the puri4se of the Boards suggestion that paragraph (a) of the resolution be amende d so as to authorize the purchase of only such bonds as have been acquir ed by original subscription or by takinL: ever such a subserildtion. Respectfully, General Counsel. Form 1LS tie • TELEGRAM • MI FEDERAL RESERVE BOARD '‘L2 • LEASED WIRE SERVICE at• WASH I NGTON 2-9481 Larch 11, 1921. JItlanta .?lease wire amoaat of bonis jou 1121 bo liablo to yurOklase under rosolution(of ymir dirootors :",laroh 11th, also amount if purcses wore limited to bonds representinG auineripticrilo Or st;.60ork)tiOnS t.Ovor by bank, OUlninatinc market LuroiLises made beforo jiri1 1,19: Q 7 Aush aziever• is • TELEGRAM FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) _.)7" 3-7 RECEIVED AT WASHINGTON, D. C.. 12an mt Atlanta 1116a mar 14 Harding Vb,shn .iotal amount liable to be purchased under resolution approximately twelve million eight hundred thousand Amount if purchases limited to original subscriptions or subscriptions taken over by bank approximately five million dollars. Latter plan would not give relief where most needed. ellborn 1220p M. B. W ORN, GOVERNOR L. C. AD ,ON, DEPUTY GOVERNOR J. L. CAMPBELL, DEPUTY GOVERNOR J. M. SLATTERY, SECRETARY M. W. BELL, CASHIER W. B. ROPER, ASS'T CASHIER W. R. PATTERSON. ASS'T CASHIER R. A. SIMS, ASS'T CASHIER H. F. CONNIFF, ASS'T CASHIER J. B. TUTWILER, ASS'T CASHIER JOS. A. McCORD, CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT FEDERAL RESERVE BANK EDW. T. BROWN. DEPUTY CHAIRMAN WARD ALBERTSON. ASS'T FEDERAL RESERVE AGENT OF ATLANTA C. R. TIDWELL. ASS'T FEDERAL RESERVE AGENT CREED TAYLOR. March 12, 1921. GENERAL AUDITOR .RECRIV MP M1.192 oFFic2 OP 11-IE 00VE0 Dear Governor Harding: NOVI Enclosed please find copy of resolution passed by our Board of Directors at their meeting yesterday, relative to a repurchase agreement to be entered into by the Federal Reserve Bank of Atlanta and its member banks covering such Liberty bonds and Victory notes as its member banks held as of April 1, 1920, which were in excess of their This is in accordance with the conversation Governor Wellborn states that he had with you, and I was requested to forward the resolution at the earliest possible date and ask early consideration by the Board of the same. The resolution is self-explanutory, and we believe this would materially relieve the situation with several of our member banks in the district. Very truly yours, 7/4fr°).) Chairman. Hon. 7. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. 41w Resolution adopted oy the Board of Directors of the Federal Reserve 2.ank of ,_tle.nta, on Larch 11, 1921 WHERF.AS certain of our member banks own United States Government War Bonds in aulcunts that are disproportionate to their capital and surplus, which, because of economic conditions, they are compelled to use as collateral for borrowings frcm the Federal Reserve Bank of Atlanta, and which, if sold at prevailing market prices, would cause such banks to incur losses that would impair their surplus, and, in some cases, impair their paid-in capital stock, and WHEREAS, because of the difference between the present discount rate of the Federal Reserve Bank of Atlanta and the coupon interest rate borne by said bonds, a steady drain is being made u2on the earnings of the said member banks, BE IT RESOLVED, That, in order temporarily to minimize such losses to the member banks and enable them, in a measure, to amortize the carrying value down to the market value, the Officers of' the Federal Reserve Bank of Atlanta be, and they are hereby, authorized, acting under Sec. 14 of the Federal Reserve Act, (a) To purchase, under the following conditions, from any member bank who owns United States Government War Bonds, which were acquired by them prior to April 1, 1920, the amount of such bonds that is in excess of the , member Bank's capital and surplus; (b) The Federal Reserve Bank of Atlanta to pay a price for such jiivalent to the basis upon which the selling bank is bonds that is eo . now carrying them upon their own books; (c) That the sellinF bank, by a resolution passed by its Board of Directors, at a regular or special meeting, certified copy of which to be filed with the Federal Reserve Bank of Atlanta, will agree to repurchase the said bonds _ from the Federal Reserve Bank of Atlanta, within sixty (60) days after the receipt of written notice from the Federal Reserve Bank of Atlanta that it desires to be relieved from continuing to carry the said bonds at par, less any payments that may have been made to the Federal Reserve Bank of Atlanta in accordance with paragraph "(d)"; (d) That the selling bank will embody in the resolution referred to in the preceding paragraph its agreement to pay to the Federal Reserve Bank of :tlanta, at the end of each thirty days after date of purchase, a sun equal to one-tenth -1- (1) of one per cent (1/10 of 170) of the aggregate principal amount of bonds sold to the Federal Reserve :Bank of Atlanta, until the aggregate amount of such payments applied as against each respective issue of bonds included in the sale shall have brought the carrying value equal to prevailing market prices; (e) That the selling bank will, also, embody in the resolution referred to its agreement to reduce each thirty days, by one-tenth of one per cent (1/10 of l), the amount of its loans from the Federal Reserve of Atlanta, which are secured by Government War Bonds, until the amount of such loans shall not be in excess of the market value of the securities; (f) That the selling bank will, also embody in the resolution referred to its agreement to deposit and maintain with the Federal Reserve Bank of Atlanta, as collateral, notes, bills of exchange, or securities acceptable to the Federal Reserve Bank of Atlanta, in an aggregate amount, at a ratio of .a20.00 to $100.00, to cover the difference between the principal amount of the bonds sold under the said re-purchase agreement and the market prices prevailing at the time of sale and thereafter; (g) That all agreements set forth in the resolution of the selling bank hereinbefore mentioned, with the exception of the thirty-day payments, to be consummated before any purchase is approved by the Executive or Discount Committee of the Federal Reserve Bank of Atlanta; (h) That the selling bank shall have the right to repurchase all or any part of the bonds sold to the Federal Reserve Bank at any time, at the price at which they were purchaseiby the Federal Reserve Bank, less the aggregate amount of the thirty-day payments referred to in paragraph "(4" that has been applied against the respective bonds that it is desired to repurchase; (i) That it is understood by the selling_bank that the sale of tbe_bnrula____ referred to under repurchase agreement will be, to all intents and purposes, considered as a part of the discount line accorded that bank by the Federal Reserve Bank. ***************** I hereby certify that the foregoing is a true and correct •cow of a resolution adopted oy th: Board of Directors of the Fedenal Reserve Bank of A tlanta. at a meiting held Friday, h 11th, 1 21. 49 / /caw Secret YX:,111i iL iia0T :1()NiL 13.71X, . rr;• 17...V311ViLLE, 2,4416,1;6 2,446,16 2,416,16 17,437,016 17,000,781 16,607,178 2,106,995 2.,106,996 2,106,9v5 14,7-18,935 13,836,657 12,547,1)36 2,017,235 ;047,235 7,..35 2,088,806 '2,088,80o 2,088,805 14,547,013 14,4/6,947, 15,734,539 * Basic discount line eluals 2.1 times (average reserve balanoe Li,aintained uuring precedinc oalendar month, pill:: aid-1n subscription to capital stook of ifederal wNiwfiL- 1 I •• -- "44-. -4-nr. Dear :':« ,:icorotarwt— I acia-..owlo.tge receit t of of th 14.tter 15th inetant, enclosing copiea of letters oz:chanca with the 7uurth tmd :'irzt tioiai Baia of Naahvillu, I rather ‘Jiin37 I shall ioar directly from r. Caldwell before very loilt;• 7erf trul: jarS GOVerLOrA, Eon. 7). .1. 1 Occretary of the Trenaur.y. I. THE SECRETARY OF THE TREASURY WAS July 15, 1920. RECEIVED JUL 2 0 1D20 orrirlit "tt- 4E GOVERNtitl. - Dear Governor Harding: In connection vith the Liberty Bonds held by the Fourth and Arst iational Bank, of liashville, '2ennessee, I am enclosing for your information a copy of a further letter of July 8, 1920, from the President of the Bank, together with a copy of Illy reply of this date. Very truly yours, 1<r Hon. W. P. G. Harding, Governor, 2edera1 heserve Board. Enclosures. v/v/1/11.4%..: Jn17 15, 1,M, Dew I awe, reco.Woa ziou? l'i4rther Uttar of Jlay anii regret WInt :3>oa fccll as to thu- abort:, Awls hold b, yovir you 'to tosart the aercrnment in thts is eslly enplainet la mr 1P2r)„ with rospeet ittter. The TresEarps position letter ef Jane US, 1$20, and I thial: tliat alma further reflection you 'ill acroe that it is et:wrest. Libarty Semi* 100, VlotorY Notes viers offered. by the Treasury rith iefiaite interest rates WA maturities, hut without *WV Genaitliont as to Vitt- count robes et the Agora geb kr eserve Lana. Aose rater are fix*to the fteeeery, but b, thm ?eteral :iesertm -,301271 -s„ wobect to review mid dotormiastleft b/ the 1Wertil Resort* 14oard. forvardinor a oow of your letter of july eth to covernor Hardirc„ of th4 ;'oderal aeverve Board, for hie :APorastion aid atknttest. i Wry traly Houston (Signed) U. V. Jams .z4 0.63twen, 'resident, Veurth ana Arst Ketionel leffige Xasikville, Tenn. 5P11114101 • FOURTH 2I1:1352 NiTICJW. COPY. -2Nashville, Tenn. July 6th, 19L0. 4 dear Jecretary: I thank you very much for your kind letter of the 26th ultimo laccompanied by the two long letters of uovernor hording, which are very plausible and extremely well written, but back of it all, and what is to me the greatest regret, is my loss of confidence and respect for my uovernment. As before stated, we responded with enthusiasm and alacrity, and furnished the uovernment something like „40,000,000.00 of credit. I thout we could trust it implicitly, but to find how badly mistaken I have been, and that irly own uovernment, throuLh its financial departments, that urged this on us and complimented us so while we were being used, now turns on us with indifference and utter disregard causes such a shock, and, as i say, to find myself with a complete loss of confidence and respect for mu government is indeed very distressing. I hope in time to recover mu feelings of Pride and respect for it and its departments, but at present it seems that honor and justice are of no concern where expediency is involved. :e looked with dismi and contempt upon the uermin government for treating its obligations as a "Scrap of paper", and, yet, that is exactly the attitude in this case - except the Lermans could Plead that they were dealing with an outsider, whereas, our uovernment is ucalin, with its own citizens. The folloain, is taken from a recent publication written by one of the best thinkers of our tine: it covers this situation exactly: "But scarcely yet, in the noonday lit of the twentieth century, is this struggle of the ,ryan man over; for bewildered and helpless, in the midst of the only as yet half-comprehended machinary of a civilization which is become his master, the individual turns, startled, dispairin, as his fathers did of old, before the forces of nature. This Aryan man stands today, awed in the Presence of the powers he has conjured 112. The far-reachin„, elusive forces of the civilization he has builded are become to him as the shadowy forms about 2aust: jhether he shall cower before them; or whether he shall go dodn, crushed, yet defiant; or whether he shall become their master and hold fast to the old faith in the ultimate triumph of justice, is the mental and spiritual problem of modern civilization as it stands face to face with the future." Yours very respectfully, Lou. D. 2. Houston, Secretary of the Treasure, Jashington, J. (Signed) Jams h. Caldwell President. M. B. WELLBORN. GOVERNOR L. C. An LSON. DEPUTY GOVERNOR CASHIER M. W. W. B. ROPER. ASS'T CASHIER . W. R. PATTERSON, ASST CARSHIE R R. A. SIMS, ASST CASHIpi t J. L. CAMPBELL, Ass•Vc.Atill ER H. F. CONNIFF, ASS' CASHIER *OS. • • FEDERAL RESERVE BANK .., DEPUTY CHAIRMAN WARD ALBERTSON, ASST FEDERAL RESERVE AGT, cRup TAx.oR, GENER'AL AUDITOR - July 13, 1920. 1. RECEIVED iftYV ‘ AND EDW. T. BROWN. OF ATLANTA. J. M. SLATTpir, StRET'ARY r• A. McCORD, CHAIRMAN OF THE BOARD FEDERAL RESERVE AGENT JUI_ 19?n OFFICE OP THFC.OVERNn rZ, Dear Governor Harding: our Referring to your telegram of the 12th and to ards as the final conclusions of telegram sent you afterw and policy on our Executive Committee regarding rates l Reserve Board which we requested approval of the Federa tions; wish to say for notes secured by Government obliga conference with 2.1t. Jas. E. that we had a very pleasant National Bank, Caldwell, President of the Fourth & First and believe that we will have Nashville, Tenn., yesterday, his hearty cooperation. or to comply with We believe Mr. Caldwell will endeav approve our request to our request, if the Board should collateral, although accept eligible paper as additional produce .A,500,000. of it might be burdensome on him to such paper all at one time. Very truly yours, {on. Y. P. G. Harding, Board, Governor- iederal Reserve 'Nb.shington, D.C. M. B. WELLBORN, GOVERNOR L. C .SON, DEPUTY GOVERNOR M. W. 1tL, CASHIER W. B. ROPER, ASST CASHIER W. R. PATTERSON, ASST CASHIER R. A. SIMS, ASS'T CASHIER J. L. CAMPBELL. ASST CASHIER H. F. CONNIFF, ASST CASHIER FEDERAL RESERVE BANK CHAIRMAN OF THE BOARD FEDERAL RESERVE AGENT EDW. T. BROWN, DEPUTY C TSON, rroritAC-..RESERVE ACT. RD AL OF ATLANTA. ASS li,. CREED TAYLOR, GENERAL AUDITOR J. M. SLATTERY. SECRETARY AND RECSIVRP .111 14 100 ortrteft OM/EVIN011, Dear Governor Harding: At the meeting of the Board of Directors July 9, it was brought up for discussion the matter of requesting additional collateral from the Fourth and First National Bank, Lashville, Tennessee, in order to bring the value of their Liberty Bonds pledged up equal tne value of the member bank notes. It was finally determined to have Capt. Hartford, Director from Nashville, request one of the officers of the bank to come to Atlanta in view of adjusting this matter, and I am informed by Governor ',wellborn that he has just received a telegram from Capt. Hartford stating that Messrs. Caldwell and Webb, President and Vice President, will be in Atlanta on luonday, July 12. Yours very truly, Chairman of the Bo Mr W P G Harding, Federal Reserve Board Washington D C . Jli TREASURYDEPARTMENT ' '---- - _.. . ,----- Washington, June . . ./r ;,.., r ......--...1, r):\1) 21,.-91 21--C\k'i 9 0.1 ‘ TO GO'VERNOR HARD EU: Referring to our talk yesterday: The Fourth and First National Bank of Nashville in its letter of June 14th stated that it held Liberty Bonds to the amount of 010,500,000 and Treasultv Certificates to the amount of 02,200,000. Its letter was in re- sponse to the Secretary's circular asking banking institutions to subscribe for certificates and use their best efforts to obtain the widest possible distribution of them among investors. Of course, a batik in this position ought not to hold any considerable amount of certificates. , I assume that its holdings of certifi` dates will liouidate thnnselves in short order and its borraaings be cut down to that extent. If I understand your Allan, it is to approve for Atlanta and Dallas a rate of 5% on loans secured by Liberty Bonds originally subscribed for by member banks arid continuously held by them provided the loan is collaterally secured by other eligible paper to an amount at least equal to the discount in the market price of the Liberty Bonds and provided the member bank:pays off the loan at the rate of 1,5 per month. The plan seems pretty bad to me, but it may not be as bad as the situation thidh it is int ed to meet. I ae7mow1elge receipt of your letter of the 5th ; instant, anclosin, copy of your lettor of Llay Oth, the original of which has never Ileon. recoivud. There does not seem to be anj Iallediato pro3Dect of puttiac; ILtu effect the noliv suggested by "1:r. Caldwell vhan you were hare with him. r.T. D. 7 :e114, Vice President, Fourth and First National Bank, Nashville, Tenn. ACTIVE VICE-PRESIDENTS T. G. WEBB J. S.Mo HENRY RANDAL DURELL JAMES E.CALDWELL.RREStocnir CASHIER HARRY L.W1 LLiAmSON ASSISTANT CASHIERS G. W. PYLE DREW ROWEN GEO. E. FARMER WILLIAM P. SMITH FOURTH AND FIRST NATIONAL BANK AUDITOR N ASHVILLE.TEN N. W. W. McNEILLY F.W. WI L.LiAM S•ASSISTANT AUDITOR June 5th, 1920. ,-----c- -P I, - figGF "'I _ ovriout il .. , '14 r! ,0,,,,,rT . ---- IN REPLYING PLEASE QUOTE INITIALS Hon. W. P. G. Hardinc, Governor, Federal Reserve Board, Lashinton, D. 0. 11:7 dear Mr. Harding:I enclose herewith copy of my letter to you of May 6th, 1920. hot having received an answer, I thought probably the same had miscarried in the mail. Yours truly; JAMES E.CALDWELL.PREsioENT t ACTIV i PRESIDENTS J R WEBB CHENRY AL CURELL l CASHIER HARRY L.WtLLIAmSON FOURTH AND FIRST NATIONAL BANK ASSISTANT CASHIERS G.W. PYLE DREW ROWER GEO. E. FARMER WILLIAM P. SMITH AUDITOR NASHVILLE.TENN. W. W. McNEILLY F.W.VVILLIAmS ASSISTANT AUDITOR May 6,1920. IN REPLYING PLEASE QUOTE INITIALS _TDW:C Hon.1'.P.G.Harding, Govenor, Federal Reserve Board, Washington, D.C. 14y Dear Mr.Harding:Referring to your memorandum of questions in reference to the number of employees and number of bonds, etc., sold at the Powder Plant in October 1918, I return herewith the memorandum in question, with the following answers: Number of employees at Powder Plant, October 1918, about n Number subscribing to bonds it subscriptions Total Amount of ti subscriptions Number paying on u Range of amounts paid thereon, 41,000 35,000. $4,000,000.00 15,000.00 10% ( These subscriptions were made on the basis of 10,;) down, and the balance in weekly payments, for a period of six months. On account of the signing of the Armstice, the employees at the Powder Plant began leaving early in November 1918, and scattered to the four winds of the country. The result of it was, as we had underwritten the entire subscription, that we were left with no alternative but to take up and pay for the $4,000,000.00 of bonds, which we did and which we still have on hand. Yours truly, Vies President. io. 131. Form. Ic (iffice el 'orrespo FEDERAL RESERVE BOARD To 0 0? 4 e 411' Subject: Att d hereto please find several tables bearing upon the subject lscussed in Senator Owen's letter. You will note that since January, 1919, the United States bond holdings of the Fourth and First National Bank of Nashville, Tennessee increased almost three million dollars, while during the same period like holdings of all report:Ing member banks in the Atlanta district declined about one and one-fourth millions. Reporting member banks in New York City during the same period de- creased their United States bond holdings by 23.5 millions, and all reporting member banks - by about 176 millions. By using the attached table showing the average monthly prices paid by the War Finance Corporation for Liberty bonds purchased in the New York market, you will be able to estimate approximately the loss accruing to the bank on the bonds acquired since January, 1919. Data in the attached rate table showing changes in discount rates made by the Atlanta Bank during 1919 and the present year may also prove helpful. Respectfully, Misc-37 FEDERAL RESERVE BOARD OFFICE OF THE GOVERNOR To jo t41, - ,19 -a. • 'X • I —/700 /6 7-,1 /C1 1 / 4 /ill(f; li 0 / ,1/7. 0 1 //,:.:" , 7 ° / ?co . / 9' V' ? : 7 ./ ,r:?. 2 /,/ 4 7ir--- pori /4',-. 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VICTORY NOTES: Maturing within 15 days Maturing within 16 to 90 days - Where paper discounted was secured by 4th Liberty bonds and was taken by discounting bank at coupon rate 4 4-1/4 4-1 2 / 4-3/4 4-1/4 4-1 2 / 4-3/4 -- 4-1/2 4-3/4 4 - All other We WO 5-1/2 5-1 2 / 5-1/2 4.11 ••• -- 5-1/2 / 5-1 2 5-1/2 COMMERCIAL PAPER: Maturing within 15 days 4-1/4 -- 4-3/4 -- _- 6 -- -- 6 Maturing within 16 to 90 days 4-3/4 -- -- -- -- 6 -- -- 6 ?7 7. 12-1 9427‘ ,9W 3 /13 g5,7587 57L/3 9 9.6/0 / 0 • 1- y'tn, 97 q A •9.3 I , / qf SI 110FOURTH AND FIRST NATIONAL BANK JANM$E.CALDWLL, PR esti DENT, 1V91) 9 920 NASHVILLE,TE OFFICE OF ERNOR. April 27th, 1920. Mr. .1. B. Weilorn, Governor, Federal Reserve Bank, Atlanta, Ga. Lear Sir:This is ill ropy to :mar favor of April 24th, asking our opinion as a stockholder in the Federal Reserve Bank with regard to °Normal line and scale of charges'. There has been no meeting of the stockholders, and as we have not had an opportunity for conforoace with you, we are, in the very nature of the thing, entirely without knowledge of the facts and figures, and forces which should be considered, and, hence, any opinion of ours would be more or less offhand, and hardly worth the giving. There cre certain outstanding features in connection with these matters which seam deserving of notice. In your analysis of our account you give as our borrowings, 015,434,000.00 on Government securities, which we cannot recognize as being a thing that was done for our benefit. We were urged and entreated to do this service by you for the Government, and, therefore, as I say, we cannot recognize this as any charge to be nade against us. The borrowings for our own account, which you give as amounting to 42,555,000.00, we cannot feel are in the slightest degree open to criticism or comment. Indeed, I do not believe that, if you will examine the record of our rediscounts and borrowings from you for our commercial business, you will find a single thing to find fault with or criticise during the last six years. There have been months and months at the time when we have asked nothing of you, and at no time have we asked for anything that was excessive or unseasonal. We have not been backing any speculations or unproductive enterprises, but, instead, have adhered most steadily to promoting commerce and productive enterprises. I gathered the impression when the Bank was under consideration that it would be in position to take care of the seasonal requirements of the various sections of the country, whenever and as they presented themselves, While, theoretically, if all of your customers applied to you at one time it might be serious and embarrassing; yet, that would apply to any bank in the world; the answer is, that all customers do not apply at one time; the law of average plays throughout, and when the cotton people are needing assistance, the tobacco people are not; and when the tobacco people do, the grain people do not, and so on all along the way. This whole Federal Reserve scheme is a new one to all of us. 10 have not had an opportunity to give it a fair trial. During most of its life we • FOURTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PRESIDENT NASH VI LLE,TENN. #2; have been in the midst of war and reconstruction, *holly abnormal and unusual conditions, in connection with which it does seem that te ought all to encourage good spirits, and in good fellowship co-operate as far as possible to work out, and sympathize with each other in the trials and difficulties which confront us all, doing our best to straighten things out, which will require time and patience, Whereas, crimination and recrimination will not produce a remedy. With regard to your progressive rate, I do not know how you intend to get around the state usury laws. The Comptroller of Currency has been very insistent and exacting with us on the subject, and just how you will arrange this is beyond my comprehension. We are doing all that we can now to work our business down to where we will be able to relieve you entirely of our commercial rediscounts, and we will exert ourselves to the utmost to avoid calling on you again for anything. It is quite in the nature of things that if the Federal Reserve System is to be of no real profit and benefit to its stockholders, it cannot hope to continue, and this would seam to be a phase of the matter which those who are to determine its policies and practices will have to bear in mind. I am truly sorry that I cannot be of some service to you in this matter, as I would gladly do so, but as I said before, I could not undertake to formulate an opinion without more detailed knowledge and information. Yours President. JE,c/o. ledge receipt of your letter of the L3rd instaLt, elicloninG copy of your Latter to the Bol:.rd of )IrLotora of tho Poderal :-:osorvo Bank or :Itlanta, ich havo ruaci7.ith interet. I note that you =1)z:et to Le in 7arhingtou on ?riday, 4r11 Z;Otla, a that at thu ugestion of .iellater Owen4 7:Ith thom ,lorjU 3t4t0 you have recezt1d discus:Je.a ;Nur re— lationLjth thQ 1,eilem1. 110servi.: Bank, you 7.111 call upon for a diseusAon of the riattt,r. c.oe I Ilai1 be v4ry clad if you ?Jill call at my office about 10:30 in the morning or 3:30 in the afternoon on the 30th instant. l Mr. Jai os E. Caldwell, President, Fourth and First rational Bank, fladhville, Tenn. FOURTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PRESIDENT NASHVILLE,TEN N. Ipril 23rd, 1920. Honorable P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. Lear Sir:In the course of a visit paid me a few days ago by Senator Owen, of Oklahoma, in discussing our relations with the Federal Reserve Bank, he recommended that I call on you In regard thereto. I am truly sorry that we did not have the pleasure of a visit from you last week, as was contemplated. 11 I am now arranging to be in ';.a6hiagton on Friday, the 30th instant, and hope to have the pleasure of seeing you. In the meantime, I beg to hand you herewith copy of a communication addressed to the Board of Directors of the Federal Reserve Bank, of Atlanta, and which was directed by our Executive Committee to be sent to you. s very respectfully, JEc/o. . OU RTH AND FIRST NATIONAL BANK JAMES E.CALDWELL, PRESIDENT NASHVILLE,TEN N. To the Board of Directors of the Federal Reserve Bank, Atlanta, Georgia. Gentlemen: With regard to the loans of the Fourth and First ITational Bank carried with you, to which reference was made at your meeting of the 16th instant, permit Me to submit the following facts for your consideration. The Annual Report of the Federal Reserve Board, just submitted to Congress, pace ro. 1, says: "To the extent, however, that what was accomplished in saving fell short of actual requirement, there was a margin of bonds that could not be paid for immediately out of savings, and which it became necessary for the banks to carry, either directly or indirectly through loans to purchasers, this expansion of bank loans must be kept in mind in order to understand the situation. 7ailure to understand it leads to the impression held by many that Liberty Bonds could all have been sold to investors had they borne a higher interest rate. ro rate within reason could have accomplished this, as the investment funds to absorb these enormous issues in their entirety simply did not exist. "In order that the member banks might carry the burden of ment securities, they were obliged to rediscount with the FeCeral in order that such rediscounting should not involve them in heavy sential that the rediscounting rate should be related to the bond undigested GovernReserve Banks, and loss, it was esrate. "Distribution of the certificates has been effected through the Federal Reserve amks, with the co-operation of the member banks, a vast organization which cannot be duplicated - the member banks buying the certificates in the first instance and then gradually selling them to their customers. "This could not have been accomplished if member banks had not had the assurance that their investments in certificates, could, if necessary, be carried in Federal Reserve Banks without loss. In making rates for rediscounting loans on Government securities, the nolicl was to avoid loss to the banks, Whidh were necessarily the distributing media." Your Chairman, Jos. A. LcCord, in his Annual Report just published, on pace ro. 18, says: "In view of' the fact that the Commercial Banks were called upon to make up the full-quota of the district in the sale of Liberty 3onds, Victory :Totes and U. S. Treasury Certificates of Indebtedness, this naturally encroached upon their resources for the handling of their commercial business. It was, therefore, necessary in many instances for the Commercial Banks to use the bonds, notes and certificates issued by the Government and Iurchased by the banks to build uptheir a- 4110 41 1 111 OURTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PR ES ID E NT NASHVILLE,TEN N. #2; vailable resources for the handling of their commercial business. This brou,ght about the unavoidable result of the banks showing in their statements of condition more rediscounts and bills payable than would have otherwise existed." Sentlemen, I ask you in the lancuace of the Federal Reserve Board please "keep this in mind in order to understand the situation." I am sure you all remember vividly that a tremendous propaL:anda was put the United States Treasury and the Federal Reserve Banks; every sort of as0n by surance and entreaty was employed. To this the Fourth and First ITational 3anl: responded, and in a manner indicated by the follawinL; ficures: First Liberty Loan; our total subscription in Tennessee, Of which amount the Fourth and First rational Bank took dh was 1/7 3econd 11 11 Your total subscription in Tennessee, Of Which amount the Fourth and First rational Bank took hich was 1/6 Third It 11 Your total subscription in Tennessee, Of Which amount the Fourth and First Tational Dank took Lhidh was 1/6 Fourth IL Your total subscription in Tennessee, CI Which amount the Fourth and First rational Bank took l r41- ich was 1/5 Fifth Your total subscription in Tennessee, Of which amount the Fourth and First ational Bank took Total subscription in Tennessee, Total amount subscribcd and paid for by the Fourth and First National Bank, lehich was 1 6 / 1,100,000.00 15,705,000.00 2,6C0,000.00 22,766,000.00 3,600,000,00 37,503,000.00 7,111,000.00 23,550,000,00 2,000,000.00 107,5'7,000.00 16,/110,000.00 JU RTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PR ESI D ENT NASHVILLE,TEN N. Total U. 0. Treasury Certificates subscribed to by the Fourth and First 1:ational Grand total of securities bouL;ht from and for to the Government, c;16,200,000.00 paid 32,610,000.CC Jeinc equal to thirty times the capital of the Baal:. You are now carrying on a caLipai,3n for Thrift Ztaps, etc., and the folloinL', auonc; other thins, was sent to us, with the request that it be inserted as an advertisement, which was done: 9AwalG2 YOUR LLTERTY sellin thin' BO:LC" . tt .lien an ex erienced investor finds some of :his favorite securities below that he first bouZht them for, does he sell the lot, and tarn to some- 1Tot at all. He buys as many more as he can at the lower price, in order to 'avereze his cost.' does this, because he always desires the booh- values of his securities to be close to the actual market values, so that if forced to sell at any time, his loss, if any, will be small. "The present prices of all issues of Libert7 Bonds offer the most favorable opportunity for averaL;inc cost. Ahundred dollars worth bought at par, another hundred bouht at Q91., and you have two bonds costinc only c::95.50 each. Lon; be; fore maturity date you will be able to see either or both at a profit. BUY•.;. O. 3." This is a:cactly that we did in April, 1919, purChasinc in the open market, 6,000,000.00 `,.12ich makes a Grand total of Government securities handled by this :lank amountinG to 30,610,000.00 e still have on hand the fell:,winG: Government Bonds, Treasury Certificates, 1)chased from the public, have sold to the public, Co that out of the total Government securities operations of 11,567,200.00 2,20C,000.00 6,000,000.00 11,5L13,5'15.00 36,610,000.00 S FOURTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PRESIDENT NASHVILLE ,TEN N. We owe you about And of this amount there are Treasury Certificates Whidh will mature and be paid in a few months, aggregating „e13,700,000.00 2,209,000.00 The balance of our indebtedness to you, aside from that above indicated, is for strictly commercial purposes. It is pertinent to an understanding of this business to review the various correspondence whidh has passed bet -weer tho Fedoral Reserve Bank andthis Bank. In the very beginning of the campaign, in the sumier of 1917, there was held in this City a meeting of the Bank official s of riddle Tennessee, to hear the Secretary of the Treasury, the Eonorabl e G. :cLdoo, Who was present and urged upon the banks the desirability of the investments, and the importance of their assistance, pointing out how such scuriti es could be carried by them at no loss with the Federal Reserve Bank. On September 28th, 1918 you sent out a circular by the Treasury Certificate Committee, in whidh it was stated: "L majority of the banks in this district have not subscribed to any issue." On October 14th, 1918 you sent us a telegram saying: "To relieve you of apprehension concerning your ability to finance subscrip tions, we assure you we will discount your notes secured by the Fourth Loan Bonds at 4, if 1 a your rate to your customers does not exceed 4iP*. On Yovember 15th, 1916 you sent out a circular using expressions as follows: "Your Government needs the credit accommodation° etc. On Yorember 29th, 1913 we wrote you stating that we had something like 4;6,000,000.00 of bonds yet to settle for, and that it would, therefore, be necessary for us to borrow still further from you, and to this you answered under date cember 2nd, 1918, as follows: "Zlile the war is practica of lly over, yet it is going to be necessary to float another issue of Liberty Bonds, necessit ating the issue of these Treasury Certificates, and we sincerely hope that we can count on your splendid institution to aid us in this difficulty, and it is to be hoped that the Government can continue to count on your Bank to aid in the matter of finaming for some ti.do to come, as it is Going to be absolutely necessary", etc., etc. "Having had years of experience, of course, I understa nd what this means to your Bank", etc. On January 28th, 1919 you say: "If we could get even minimum subscriTtions 111 RTH AND FIRST NATIONAL BANK JAMESE.CALOWELL. PR ESI DENT NASHVILLE,TEN N. it from all of the banks, we would reach our quota with but little difficulty". On January 20th, 1919 we answered you in these words: "This Bank alone has up to the present time subscribed and paid for 11,135,000.00 of these Treasury Certificates, and I have the feeling that this is quite as much as should be expected of us. 17e have taken .1,000,000.00 of every issue that has been presented". en Ilebruary 0th, 1212 we wrote, indicating a hesitancy in going any fluither. On February 10th, 1919 we received a communication reading as follows: "Although we came near to reaching our quota of subscriptions to the series of Treasury Certificates, the burden continues to be carried by a relatively small number of banks. To those who are giving to this appeal an intellient and faithful consideration, we are very grateful" etc. In L.pril, 193S), we punliased „"Z, 000,0C 0.00 Liberty- Bonds in the open market to average up. In ray, 1219 we took 02,000,000.00 of Victory Bonds, doing so on the first of the month. On May 10th, 1919 you telegraphed, asking us to subscribe to ;250,000.00 more if it was found necessary that we do so to enable you to complete your quota, and we immediately communicated our approval. On Lay 12th,.1919 we received a letter from you containing the following: ":pressing ny thani:s for this further evidence of your patriotic desire to maintain the reputation of the Zi:zth Federal Reserve District”, etc. On May 14th, 1219 you wrote, making reference to our purchase of Liberty Bonds in the open market, aSkinz our opinion of Section 4 of the Federal oserve Act. On . :y 16th, 1919 wt answered, =pressing surnrise and disaopointment, 1 to which you replied, under date of May 20th, 191: "I wish you to understand that we have no objection Whatever, nor any criticism to make, with regard to carrying for your 3 m17. Governman , 3 t securities. 'Le are all aware that you subscribed very liberally in all campaigns, and we are perfectly willing to carry these securities for -ou as long as you see fit to offer them to us. You have done nothin,' whatever to disappoin , 4 t us - on the contrarz, you have done much to lease us and therefore I ve mach re that 7ou feel as you do in the matter". Thus this transaction closed. 4 1 . OU RTH AND FIRST NATIONAL 11 BANK JAMESE.CALDWELL, PRESIDENT NASHVILLE,TEN N. 17:6; On June 28th, 1919 you answered as follows: "I not only request you to subscribe largely to these offerings, but urge upon you to do so, and wish to add that the Federal Reserve Bank will take the greatest pleasure in standing back of you in carrying these obligations for your Bank". Mow, gentlemen, could anything be plainer or more assuring, and could we possibly have retained a doubt Yet, in July following Mr. Paull:. "::arburg, and other UewYork interests, began an agitation for the liquidation of loans secured by Government Bonds, and on the 16th of July we received a letter from you asking for the liquidation of loans secured by bonds bought, and this notwithstanding your declaration made in your letter of Yay 20th, stating that you were "perfectly willing to carry these securities for you as long as you may see fit to offer them to us". On July 21st, 1919 we answered at length. On July 23rd, 1919 you answered, saying: "Taking everything into consideration, however, and the request that we have from time to time made of you in subscribing to bonds and Treasury Certificates, we do not ask that you bring your indebtedness down within a short time. Itrmit ED to suggest that you gradually reduce your indebtedness - say about one-half million a month". We reduced the loan :5,000,000.00 immediately. 11r. Webb went to Atlanta for conference and reported in writing to me on his return that your officials stated "that we must under no circumstances decline to handle the commercial business for our customers". The Government and Federal Reserve Ewiks having discontinued their efforts, Government bonds declined and have so continued, making it impossible to sell, emcept at a great loss. On July 30th, 1919 this was confirmed in your letter, as follows: "In order to confirm what I told Mr. Webb, I may say that we agreed to assist your Batik in whatever rediscounts that are necessary to handle the grain and other commercial business of your section, in order for your Bank to take care of the situation with your customers". On August 9th, 1919 you wrote concerning correspondence with regard to raising rates, and you say: "You must admit that it is necessary for the member banks to bring about some liquidation of their loans, especially those Who are borrowing so heavily from the Federal Reserve Bank. As to haw this should be done is the question. I agree Fo uRTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PRESIDENT NASHVILLE,TEN N. #7; with you that it would be cult° hard upon the banks if we increase our rate in order to force a liquidation. It may be this will not be necessary; but, as I wrote you in a former letter, and as stated by rr. ';arburg in his address, this seams to be the prevailing thought of those who have expressed themselves upon this matter. °It appears to MB that the next six months will be probably the most critical period of the existence of the Federal Reserve System, and it behooves member banks to bring about some kind of liquidation. I hardly think this liquidation can take p1ac.1 through the sale ,of Liberty Donds_for the reason that th6" banks to get out without a -loss". price has not advdnaid-bilificient* to enable the en August 18th, 1919, in acknowledging receipt of a pamphlet from MB, you quoted from the United States Investor on the subject of "Cutting down the inflation", and you wrote: "Then the Fourth Liberty Loan was offered by the Government, everybody was encouraged to borrow, so as to be able to buy Liberty Bonds. Borrowers were assured that for at least a year they could count on being carried by the Banks on such loans. The Banks were able to make this pledge, by an understanding with the Federal Reserve Bank, that it would rediscount such loans with proper liberality as to rates and for at least a year. To raise the rate now, and crowd those who are borrowing on such security, would be a distinctly improper thingfbr the Federal Reserve 3anks to do, in the light of this understanding". rothing further was said with regard to cutting down the loans. December 4th, 1919 we wrote as follows: So, on nvie sent you in, the other day, a subscription for ;4,000,000.00 Treasury Certificates. It appeared that we might have a falling off in commercial demand for funds. It now looks differently, and that we might have to call on you to carry this through. If, therefore, you would prefer not to do this, then please be so kind as to cancel the said subscription, and oblige'. On December 5th, 1919 you answered, writing: mI have your letter of December 4th, and note your remarks regarding your subscription for 3.,000,000.00 U. S. Treasury Certificates of Indebtedness. "For your own information, I may say that it is my opinion, since you paid for the Certificates by deposit that they will remain with you for quite a While, and consequently our bank will not be called upon to carry these Certificates for you - at least I hope not. Anyhow, I am willing to take a chance on that, and am perfectly willing that you let your subscription remain as it is". L'e continued to take the offerings of Treasury Certificates, each tirfe O FOURTH AND FIRST ATIONAL BANK • JAMESE.CALDWELL, PR ES I DE NT NASHVILLE,TEN N. 40; with a memorandum attadhed to "take or reject as you preferred". On February 24th, 1920 you brought up the question again concerning our indebtedness. On February 25th, 1920 we authorized you to dispose of c3,500,000.00 of Treasury Certificates. On February 26th, 1920 you replied "There are very few in the marl:et at the present for 3ertificatos of Indebtedness". At the time of your meeting in this City on April 17th, 1920, in a speedh delivered at the Commercial Club, you said: "Yie are going to put the clamp on the banks; we are going to establish a .rule that when a bank borrows more than a certain amount we are oing to raise our rate. This 2rogressive raise will make the 6:; rate look like thirty cents". This, of course, is very ominous, and I submit, gentlemen, that with this record can you afford to press us, either by calling the loans or raising the rate? Up to this time we nresumed that this raise in rate was p3rhaps temporary, to be tried as an mperiment, but it now appears that it is an avowed purpose to force the liquidation of Government Bonds, which has had the effect of destroying the market for said Bonds, and aking the situation impossible. After assuring us that you were"perfectly willing to carry these securities for you as long as you see fit to offer them to us" and "we not only request you to subsc_lbe largely to these offerings of Treasury,Certificates, but urge upon you to do so, and wish to add that the Federal Reserve Bank will take the greatest pleasure in standing back of you in carrying these obligations for your Bank", and "In order to confirm what I told you, I may say that we agreed to assist your Bank in whatever rediscounts that are necessary to handle the grain and other commercial business of your section, in order for your 322ffk to take care of the situation with your customers", how can you possibly criticise our loans? As in the language of the Federal Reserve Board heretofore quoted, "the investment funds to absorb these enormous issues simply do not e:ist" and In order that the member banks may carry the burden of undigested Government Securities, they are obliged to rediscount with the Federal Reserve Banks, and in order that suck rediscounting should not involve them in heavy loss, it is essential that the rediscounting rate should be related to the bond rate". I ask you to carefully note that linenevcr from time to time we showed a hesitation about increasing this indebtedness, we were urged to :;o ahead and were given assurances. If there is any jnstice left in -1 us throu:fa with these transactions, and wo . Yours truly 3.740/G. you cannot do other than see lly ask that 'ou C.0 s . • VE VICE-PRESIDENTS T. D. WEBB J. S. Mc HENRY RANDAL CURELL JAM ES E,CALDWELL PRESIDENT CASHIER HARRY L.Wi LLIAM SON FOURTH AND FIRST NATIONAL BANK ASSISTANT CASHIERS G. W. PYLE DREW ROWEN GEO. E. FARMER WILLIAM P. SMITH AUDITOR NASHVILLE,TENN. W. W. McNEILLY F.W. WILLIAMS ASSISTANT AUDITOR IN REPLYING PLEASE QUOTE INITIALS "Nashville, Tenn. April 43,19',..0. . At the regular meeting of the :xecutive Connittee of the Fourth and First National Bark held this day, the following members being present, viz: Messrs. Walter Keith, J.H.Ambrose, Thomas 70Smith, G.P.Rose, Goulding Marr, Walter 0.Parnier, J.II.Reeves „Tames E.Caldwell Joel 0.Cheelt, T.D.Webb, Percy D.Liaddin, Charles S.111artin. the President presented a communication addressed to the Board of Directors df the Federal Reserve Bank of Atlanta, which was redd,fully discussed, and un— animously approved. It was further directed that a coy of said letter be furnished to the Federal Reserve Board of Washington, D.C. (signed) II.L.Willianson". Secretary I hereby certify that the above is a true and correct col- y from the Minute Bock of the Executive Committee of ) the Fourth and First National Bank, of Mashville, Tenn. This 24th day of April Cashier. • • ; • , •• 4 -r'tqi *0r • kril 5. 1920 door 31r: I acknovludge receipt of dour letter of :larch rolth enclosures, all of which I have broujit to the attention of my colleagues on the Board. I expect to be in radhville the latttx part of next week and while there hope to have the pleasure of seeing you. I hope then to be able to discuss with you fully the questions which have been brought up in our correspondence. 7ery truly yours, Governor jnmes :;.Caldwell, President, Fourth and First 7cAtional Bank, rashville, Tenn. . • • FEDERAL RESERVE BOARD April 5, 1920. t trte meeting of the Board today the following matter was ordered circulated: / Letter dated Yarch 31st fromrir.James E. President, First National Bank, Nashville, CaldWell, Tenn., on the subject of discount rates of Federal Reserve banks, and the general discount program of the Federal Reserve System. THE GOVERNOR L!R. MILLER 12. HAMLIN V it MOEHLENPAH ‘7 , CHAPLIAN MT. HOXTON FOURTH AND FIRST NATIONAL4 ANK JAMESE.CALDWELL, PRESIDENT APO Foof b.9011.trAni : .--/Dear NAS H VI L L ,TENN. 1:ardh 31st, 1920. Governor Ht ,rdinE,r:' I am very much obliged to you for your kind favor of Larch 25th, and in reply thereto I have to say that in my study of the cuestion of rates which the Federal Reserve Banks are making I have endeavored to view the matter from an impersonal standpoint. I have not nresuned that any of these acts were prompted by other than the very best motives on the part of all concerned; I have not presumed that the Federal Reserve Banks were doing anything whatever Which they did not have a clear legal ri,3ht to do, but that it was a question of good judgment and good business morals, the business morals being with respect to the handling of the Liberty and Victory Loans. The following is a succinct chain of facts Which took place with us, and I am of the opinion that the same is typical of What went on over the country: In the early stages of the campaigns, Honorable ;,*. G. rcAdoo, Secretary of the Treasury, came to Nashville in person, and all the bankers of this District were invited here for a conference with him. There was a very free discussion, the Secretary urging and emphasizing the importance of floating these issues, and laying stress on the advisability of having the public to take them, if possible, but in any event the main thing was to have the securities taken, and the banks were expected to be the agencies through Which the work was to be done, and if they could not get the public to take the securities, then it would be up to them (the banks) to take them themselves. As I say, this was done by Lr, LcAdoo, Secretary of the Treasury, while here in person. And I do not "know how many other people representing various phases of these campaigns were here they were legion - including Lr. Burke, Treasurer of the United States; and they all put it up to the banks to urge their customers and carry these securities for them, and, finally, for the banks to underwrite the subscriptions, taking them on their own account. In point of fact, I do not think the world will over again see such a propaganda. Although I have not all the correspondence and papers before me, the following quotations will show very clearly how our minds at any rate were influenced: Under date of rov, 29th, 1913 I indicated to the Federal Reserve Bank our hesitation about increasing our indebtedness with them, or going any further in the Government financing, and they replied thereto under date of Dec, 2nd, as follows: "Vhile the war is practically over, yet it is going to be necessary to float another issue of Liberty Bonds, necessitating the issue of these Treasury Certificates, and we sincerely hope that we can count on your splendid institution to aid us in this difficulty." Fou RTH AND FIRST NATIONAL BANK 4111 JAMESE.CALDWELI_, PR ES ID ENT NASI-IVI LLE ,TENN. #2; In January, 1919, Oscar Wells, signing himself as Chairman, and writing on the stationery of the Federal Reserve Bank, says: "If we could count on even minim subscriptions from all the banks, we would reach our quota with little difficulty." On February 8th I wrote to know how much more of this we might expect, and they replied on February 10th, in the following manner: "It is assumed that they will continue this practice and each two weeks we will have such an issue until the time of the last Liberty Loan Campaign." On May 10th the Federal Reserve Bank telegraphed me as follows: "I am wiring one hundred principal banks, asking authority, if necessary, to enter their subscriptions for c;250,000.00 each, or such amount Of same as may be necessary to put this District over", to Which I replied by authorizing them to subscribe for us in Whatever amount they desired, to Which I received a wire in response, as follows: "I appreciate very much your willingness to make additional subscription in order to assist the Sixth Federal Reserve District in completintj Its quota." In a letter from the Federal 2Wserve Dank dated May 20th, 1919, they say: "I wish you to understand that we have no objection whatovcr, or any criticism to make, with regard to carrying for your Bank Government securities. ;ie are all aware that you subscribed very liberally in all campaigns, and we are perfectly willing to carry these securities for you as long as you see fit to offer tb.ern to us. You have done nothing whatever to disappoint us, but, on the contrary, you have done much to please us." On June 27th I wrote to know that their views would be with reference to any further increase in our indebtedness, and they replied under date of June 28th, as follows: "Vie not only ask you to subscribe largely to these offerings, but urge upon you to do so, and wish to add that the Federal Reserve Bank will take the greatest pleasure in carrying these obligations for 'your Bank." , This is the way the record stood down to last August, all the rate being 4%. So, I am quite sure you can appreciate that after precautions and with these assurances, under such circumstances could dreamed that the rate would be advanced? Is it fair or just that the the while takingall we have same be done? As I study your Annual Report and the Bulletin which you so kindly sent me, I gather the following facts: Fo u TH AND FIRST NATIONAL BANK • JAMESE.CALDWELL, PRESIDENT NASHVILLE,TENN. At the close of business for the year 1919 the member banks had (I am using round figures for convenience) (.680,000,000.00 of Liberty Bonds, :235,000,000.00 f Victory Bonds, ce00,000,000.00 of Treasury Certificates, and loans to customers based on such collateral of („1,000,000,000.00, raking a grand total of something like That was approximately precisely the same total of the loans of `1?297009 0009 000.00. the Federal Reserve Banks of the country, and while all the loans of the Federal Reserve Banks were not for Government securities, yet, as I say, their total loans represented exactly the line of Government transactions, direct and indirect, Which the member banks had, and this condition provailcC. iractically every month throughout the year, varying in detail, but varying very little in the sum total so that it would appear that all of the borrowing that has been done by the banks of the country represents a replenishment to them by the Federal Reserve Banks of their funds vhich they had used, directly, and for their customers, in connection with Government financing. I sympathize with your anxiety that if you should make a lower rate on Government Bonds you might be overwhelmed with loans. Yet, you were making a low rate all during 1918 and 1919 without harm. At the present time you are making a difference of 1/2 of *' in favor of such loans, and in the nature of things every bank would use all of that class of securities available, and you no doubt now have all of such loans that the banks could offer you; but I would grant that if a very low rate was made, sufficiently so that speculation could be made profitable by carrying the Bonds at a profit, that might be a troublesome situation. This could not be done on a rate of 4.- %. Lhile that rate would not be sufficient to prevent a loss 1 2 to those handling these securities for the Government, yet it would be a rate that would not be intolerable, and one which I think would produce a very happy effect all around. In other words, as I have said heretofore, you are making a rate of 5against 65 for commercial paper, and it would seem that you would be just as safe in making it Is it fair to complain of exhaustion to the member banks so long as the Federal Reserve Banks buy any paper in the open market? I have recently taken occasion, as suggested in your letter under reply, to write a number of our correspondents in this District, and enclose herewith their various replies. I, myself, feel that they are quite typical of what would be received from over the country at large. One thing is quite clear, my dear Governor, and that is that those banks Which stood up to the rack and were so largely instrumental in carrying the Government through its trying period are entitled to consideration, and every elenont of equity, fair-dealing and humanity cries aloud in their favor. This rate of 51 is too high; it cuts too deep; and the Federal Reserve Banks 1 5 do not need the profit arising therefrom, and should grant relief. Also, I have read with very great interest the remarks made by the Bight Eon, R. YcKenna which you published in your Bulletin, and I quote with approval tilorefrom, to-wit: "Deflation is bound to be very slaw. Any attempt, indeed, to bring f:OU RTH AND FIRST NATIONAL BANK • JAMESE.CALDWELL, PRESIDENT NASHVILLE,TEN N. 44; it about rapidly would CY:.155 widospread ruin among manufacturers and traders. The greatest caution will be necessary in handling our financial machinery, and many of our pre-war ideas must be modified in view of the fundamental change in our conditions. "In illustration of what I mean, let us take the bank rate and consider its operation today as compared with pre-war times. In the conditions we then enjoyed, raising the bank rate was an admirable means of checking excessive borrow:111,2;1 restoring our exchange, and restricting the demand for currency. To-day ve cannot be certain that it will achieve any of these purposes. It is conceivable, indeed, that it may have the opposite effect. "I cannot help thinking that the advocates of dear money are premature in their policy. They do not take sufficiently into account the actual circumstances of the moment. They wish to stop the continual rise in prices, with its concomitant social dangers, and rightly recognizing that the high prices are in a large measure due to the immence increase in purchasing payer consequent upon the growth of bank credit, they hope to restrict further bank advances by raising the bank rate. But they overlook the fact that much the greater part of the inflated credit is due to borrowing by the Government. Bank advances to industry, though heavy in the aggregate, are not greater than industry requires having regard to the amount of money sunk in the high-priced stock which a trader has to carry. Dear money 13 an additional expense in production, and has the effect in itself of raising prices." It is rather interesting to note that the reserves of the Bank of England have been ranging around from 95 to 22, and in the telegrarhic report of the London market quotations today I read: "Loney was plentiful on call, easing from 45 to 3. Bills were easy at 5-9/6 and 5-5/0." J:c/o. Honorable W. P. G. Harding, Governor, Federal Reserve Board, I;iashington, D. 0. • UNITED STATES DEPOSITORY • NO 7848 14' HAMILTON NATIONAL BANK PAID IN CAPITAL $1,000,000.00. T. R. PR E 5TO N, PREIS 10 EN T .C. M. PRESTON,Ac-rivE vtcr PRES G. H.M ILLE R, vicE PRESIDEN T JNO.STAGMAIER,vicc PRESIDENT J. B.F.LOWRY, CASHIER D.S.HEN D ER SO N.ASST CASHIER S. A STRAUSS,ASST. CASHIER E.B SHADD EN,AUDITOR SURPLUS $700,000.00. CHAVFAN00GA:FENN., "larch 31 1320 Mr. James E. Caldwell, President, Fourth & First National Bank, NASHVILLE, TENNESSF.E. Dear 7:1r. Caldwell: We have yours of the 27th, in which you ask if the Federal Reserve Bank should make a rate of 4," on loans secured by Government Bonds and continue their present rate of 6 for commercial paper rediscounted for members, ”that effect it would have on us and other banks in this community, and would there be much shifting of commercial paper to Governnent secured paper? We are of the opinion it would have very little if any effect, and there would be comparatively little paper shifted in the manner indicated, for many of our large borrowers have already disposed of their Liberty Bonds. every Liberty Bond subscription that was taken by various Committees and turned over to us was underwritten, many of them could not pay, and .7e were forced to take up these subscriptions, which leaves us with the bag to hold to the amount of about al 200,000.00 of the various issues of Liberty Bonds, and it is costing us about a4,000,11111.00 per year to carry them with the Federal Reserve Bank, in excess of the amount the Bonds draw. It is either this, or sell them at the prevailing market, which would entail a loss of about 0_00,000.00, and it does not seem as if the bond market is going to be in very much better shape for sometime to come. The method of securing these subscriptions was either sanctioned by the Treasury Departm ent or the Federal Reserve Banks, - or at least they did not object to the method of practically forcing some subscri bers to take bonds, and many subscribed beyond their ability to pay, and we daresay there are many banks throughout the country in the same fix we are in. It is working a great hardshi p on us and is a punishment we do not think we deserve. Yours very trul President • THE FI 1603 • T NATI0NAL BANK OF CLARKSVILLE DESIGNATED DEPOSITARY OF THE UNITED STATES. WESLEY DRANE.CHAIRMAN CHARLES W.BAILEY. PRESIDENT J.J.CON ROY,VICE PRESTDENT F.T.110D G S ON, VICE PR ESTA CASHIER ROY B.DROSTERASSISTANT CASHIER THOS. OSTER,ASSISTA.NT CASHIER 61.AR K SVI LLE.TEN N.. Earch 30, 1920. Er. James E. Caldwell, President, Fourth and First National Bank, Nashville, Tennessee. Dear Yr. Caldwell:Vie are replying to your letter of the 27th. If the Federal Reserve Bank should make a 4 rate on loans secured by government bonds we would immediately convert all of our borrowings into that form of indebtedness. f.t the present time we are carrying a certain amount of re-discounts, having heretofore converted our borrowings from bills payable secured by United States Government securities into discounts of our commercial paper which were for a longer time. Vie were borrowing considerable and did not feel satisfied with a fifteen day limit. If the rate should be lowewlis indicated in your letter it would mean a shifting of about $150,000.00 on our part. V:e do not believe that it would be the means of bringing about any increase in local loans. 'With best wishes, we are, Yours very truly, 0 President. ESTA,E31...1 SHED 1672 EAST TENNESSEE NATIONAL BANK DESIGNATED STATE AND UNITED STATES DEPOSITORY KNOXVILLE,TENN. FISHER, Rparsiocry -r W. WOODRUFF, VIC= PRES, V. CARTER,C Asti cn V. BOYD, ASST. CASHIER TTerch ,r50, 1920. LLIAM RULE,J,ASsTCAsHIER I7r. games E. Caldwell, President, Fourth and First National Bank, Nashville, Ten.a. Dear Mr. Caldwell: Replying to your favor of the 27th inst. I do not think a 4'4 rate by the Federal Reserve Bank on leans secured by Government Bonds would have any effect on this bank of any consequence. 7e are not carrying many loans and very few of any considerable amount secured by Government bonds. Hany purchaser of the Liberty and Victory bonds have sold their holdings and taken the loss. I have spoken to several of the bankers here and they aid not think that it would effect them much in any way. Very truly; President. NO. 94529 R P. WHITESELL. PRESIDENT J S ROBERTS. VICE-PRES A. L GARTH. CASHIER. SEID WADDELL. VICE-PRES. A J. CORUM. VICE-PRES. J. WALKER KERR. Ass-T CASHIER . OLD NATIONAL BAN K CAPITAL. $75.000.00 SURPLUS AND PROFITS $25.00000 UNION CITY. TENN. !arch 29th.1970 Mr.James F,Caldwell, President, Fourth and First rational rank, Nashville,Tenr..... Dear YR.Caldwell: In reply to ycur letter we are rather impressed with the plan you suggest of the Federal Reserve Rank loaning to the associate banks money at 4'70 secured by rloverament Bonds. I don't know that this will incrase loans to any great exten#t for the banks that we have any dealings with seem to be rather e-nservative in the loanirg of money,but only go so far as the necessities require. The advantadge I see about the rlan suggested over the discountimg peper at 65 is that it gives the borrowing bank a chande to make a lttt le money. You know the rate in this state that National Ranks are allo wed to chargle is 6 1 and no more. If we have to reloan money borrowed on paper that costs us 61 you can see the disadvantage at whic ; h we are placeA. In feet it has a tendency to keep us from helping thos e that need heap. I hope the plan that you sugcrest in your letter may be eRrriel out, I ha-7e always had an idea that the Federal Peserve Bark should go as far as possible in aiding the rember banks to accomodate the public ataa reasonable rates leaving a marl:in for the member bank to make a ltttle money. Yours truly, 1 fa J, Pre R.M.MARTIN,Ass't Cash'r. TURNER RICE, Cash'r. .ES, Vic E Pres't. L.R.NORVELL,Ass'tCash'r. • CAPITAL $100.000.Q9 SURPLUS AND PROFITS 325,000._9 0 NO.3981. LT Fl ItIrl /ALI LL, FUER t: N GE E3 AL AN K tLA Larch 29th, 1920. Lr. james E. Caldwell, president, 2ourth & Virst National Bank, Ann. Dear 1.".r. Oaldwell: In response to your letter of the 27th instant, I beg to state that in case we need funds tnis institution will be glad to avail itself of the opportunity of borrowing money at tne rate of 4 per •lainum on loans secured by United States „1-overmaent Bonds. At present we have no bills payable. Very truly yours, airAPP e luent. • H E. DRYDEN,PR 411P T S.C.HIPSH.Vice PRESIDENT MORG CK,C,ksHitia 8.535 BANK CAPITAL, SURPLUS AND PROFITS $150,000°.9 FAYETTEVILLE-,TEXS1ema imorazalmnurc,1 4.:SSEE,, 4u4lat Mar.9 1+1•1 0 9n Lir.Jas.E.Caldwell,President, Fourth & First Nat.Bank, Nashville ,Tenn. Dear Lir.Caldwell:Replying to your letter just received relative to what would likely be the effect on the Banks of our community if the Federal Reserve Bank should make . rate on notes a secured by Government Bonds at 4%,and leave the . rate of 670 on commercial paper,beg to say that it is my opinion thart very little change would be made either in the volume of business that would be asked of the Federal Reserve Bank t or the shifting of loans from one class to another. I tkke it that the 4% rate lif put into effect,would apply,as now,to customers notes secured by Government Bonds ,and in that case we might use some notes secured in this way,in smaller amounts than we are now re-discounting, but aside from that,which in volume would be small,I see nothing to indicate that our borrowings would be more than they would be otherwise, or that the shifting from one class to another would amount to anything. Yours very truly, President. • FIRST NATIONAL BANK 1692 GEO. W. H OWSE. PRESIDENT JOHN M. BUTLER, VICE•PRESIDENT H. H. WILLIAMS, CASHIER C. B. BELL. ASST. CASHIER NURFREESBOROJENN. March :39, 1920. Jas. E. Caldwell, Pres., Fourth & First National 2ank, Nashville, Tenn. Dear Sir:In regard to what effect it would have upon us for the Federal Reserve Bank to make a rate of 4% on loans secured by Government _,onds/ maintain a rate of 6% for rediscount of Commercial paper. It would not have any effect upon us, as we have no re-discounts 6r money borrowed In my opinion for the Iederal Resefve on bonds. Bank to make a rate of 0 secured by Government 2onds would have a tendancy to expand loans which ,t might not be a wise thing to do at the present time. With kindest regards, I beg to remain, Yours very truly, President. GWH/H • L W.BUFORD, PREsinENI WJ.POLK. VICE PRESIDENT E E. RE EN, CASHIER N.C.PERKINS,AssT. CASHIER N01834 1 -11-1A-NX-1411V ( ,)TATIONAL FRAN KLIN,TEN N. Larch 29th 1920 Mr James E,Caldwell President, Fourth and First National Bank, Yashville Tenn, Dear Mr Caldwell:In rcIply to your favor of the 27th inst, I be '6o state that we have already made the shift in question and have taken up all our rediscounts with the Federal Reserve Bank, consisting of commercial and agricultural paper, and have substituted our OWD Bills Payable secured by Liberty Bonds. Our . 1)j_rci- pal reason for this action was the difference in the interest and then we wanted to "clean up" with the Reserve Bank. I believe this will have a tendency to reduce loans with all Banks which charge only 65 as there will be nothing gained by making a loan at 65 and then borrowing the money at the same rate with which to do it. With best wishes, I remain : Yours truly, • • ,NLWALLING,Presicler, GM.SMITHAtiCePresi .. F. S.CLARK.C,sh,er. Wi 2221 ) Tiru MtsemitomAkiL4 3.A.,-sitc IvIVINIx-NITA-A)Lot,a41 5 7rJENN. , 3/29/1920 Mr.James E.Caldwell Prest Fourth & First National Bank Nashville,Tenn. My Dear Sir,We have your letter 27th., and since we have never used the credit facilities of the Reserve Banks e the change in the rates of discount upon Government Bond secured paper to 4%,it appears would not greatly effect our transactions. Fowever we would be glad to see a preferential rate s since it would tend to stableize the bond market for Liberties,which is now in a demorilized state. The fact that we knew of our ability to procure loans at 45 upon bonds,would likely enable us to carry a larger vollume of loans, both commercial and bond secured.and make it more desirable to have on hand a good supply of the bonds. We should be glad to see the rates so fixed. Very Truly, EMBREY, PRESiDENT 411P 4110 -FAIRMIIA:44R8 TVA:8T TOM EMBREY, SEC.-TREAS. 01 I.1ANY FARM LOANS MADE AND SOLD WINCHESTER, TENNESSEE 29 1920. Mr James E. Caldwell. Pres. Nashville, Tennessee.. 1 Dear 11- - Caldwell: Yours of the 27th to hand, ( asking what amount of commercial -caner would be shifted if the Federal Reserve Bank, should make a rate of eo on loans se(mred by Government bonds. So far as the Banks, in this County, are concerned, I do not think it wollad cut any l'igure, for the reason that none of the Banks in this County, •-Iembers of the Reserve Bank, _.re now carrying fly rediscount with the Federca lieservo, but my ori'ion worOd be that if this policy was adopted by the Reserve Banl-, the member banks would load irn to ti-e limit on the 4i3 O loans secured 17 Government bonds. 7it' best wisheFl, I am, Yours I rly de:1r 3enator: I have your letter of the .6th instant enclosinc coLy of a letter to you from :It. James Caldwell, President of the Fourth and First rational Bank of rL;shville, ?ann. transmitting a copy Mr. Caidwell's letter vas received at my office T4hile confineI to my home rith an attack of the influena and uron my return to office, I rerlied to Lr. Caldy:ell. I am sendinE: you, for your information, a copy of my letter to him and I am also returninr, your enclosures as re.mested. er,Malb a fib JOHN K. SHIELDS. TENN.. CHAIRMAN. JOSEPH I. FRANCE, MD. OIL S. PAGE. VT. DAVID I. WALSH, MASS. GEORGE P. MC LEAN, CONN. HARRY S. HALL. eLERK. ?Anita),..T)tafez Zenafe) COMMITTEE ON TRANSPORTATION AND SALE OF MEAT PRODUCTS Idarch 26, 1920., .G.Harding, Governor, Federal Reserve Board, 7Iashington,D .C. dear Governor:I enclose herewith letter and enclosure received by rre from Lir.James E.Caldwell,President, Fourth and First National Bank,Nashville,Tenn., for your consideration. I will thank you to return these letters for my file when you are through with them. Yours very truly, \ b.. HLU WpW BOW iEDUNNI , :larch 25, 1920 ) 4, 0 ee Dear Mr. Caldwell: and rely Your letter of the 15th instant ees duly received because of my illness. thereto has been delayed it is L;ituated as you are with respect to Governeent bonds as your case entirely natural that you Should feel as you do; but that there is an oecertional one, heo tho ieea occurred to you g the Federal may be other neans of obtaining relief than by havin rate on paper , reserve banks mdertake to maintain a 4;? discount me, that if secured by Governnent bonds? Lou are aware, I presu to apply to such a rate Should be put into effect it would have no provision all paper secured by Government bonds, for there is rate in favor in the law Wich would permit of maintaining this for which they only of member banks lAhich may have on hand bonds on to investors in subeeribud and which they are unable to pass rates of know tle their respective communities. You doubtless ve bank, al resue 4iacount are fixed by the directors of a Feder review and determinat6on of the Federal Reserve subject to the reserve Board has never Board, and I would state that the Aideral . During the time authorized any conaltinent as to discount rates number of member a When the 4th Liberty Loan Was being floated, published 'rev York CIty, and I believe in other cities, banks in , for a period of twelve a statement to the effect that they would at the rate borne months, lend money to subscribers to that issue er, was made by the Federal by the bonds. ro commitment., howev Federal reserve bank, Reserve Board and no promise was made by any consent of the Board, that the at least with the knowledge and ted to the rate rate at the izederal reserve banks would be adjus that it has always been generally borne by the bonds. I think reserve banks are understood that discount rates at the Federal e. During April, 1919 when consubject to change without notic federal reserve sideration wao being given by the Board and the rates, and when the banks to the matter of Increasing discount between certain member banks and subscribers twelve months agreement s longer to run, the to the 4th Liberty Loan still had six month discouraee all meeber Board instructed the Federal reserve banks to the Victory Loan, banks from making aereements in connection eith r period than six which eas then being subscribed for, for a longe to the discount months. :von though not canraittod • ith respect al reserve banhs rate on paper secured by Gov,rmeent bonds, the Feder of rovemb,r, 1919. did not advance thuir rates until after the month • The Federal reserve banks are rb:uired by ley, to maintain a gold reserve against Federal reserve notes outstandin of 401, and a reserve ; in gold and lawful money al ainst deposits of 35. During the past six months several of the Federal roaerve banks have been able to maintain these reserves only by rediscounting heavily 171,th other Federal reserve banks, and the reserves of the twelve banks as a ;thole have declined steadily, until last week, to a point not far above the legal requirements. During the last week there vas an improvement of about l‘i;, the combined reserves of all the banks standing at the close of businoss, Friday, Larch 19th, at 43.55 as against 42.5% the reek before. You express the opinieL that it would to eminently advisable. and fair to restore the 4(;. rate for audh lows as were made for carrying Government bonds and that the present rate is very unpopular, althouill no criticism is made on the advance in the commercial paper rate. If the rate on rate maintained on bond secured paper should be made 4% and the commercial paper, it is clear that bend secured paper would be substituted at the Federal reserve banks for the commercial paper now held by them, and my on belief is that credit expansion on a largo scale would 1-er.eli5te1y ensue and that within a very brief period of time the reserves of all Federal reserve banks would be far below the minimum reuired by law. it would be intoreeting, however, to have a line on the erfect of the plan you advocate b:.7 gettin;..7 reports feem serarate localities, and would appreciate It very much if you would make a study of the district served by your branch and send me an estimate of the effect upon the borrowings of the member banks in that particular district if the plan advocated by you should be made effective. 1 will ask others in verious parts of the country to send in sililiar estimates, and. will see what conclusions cun be draun from the statemente they submit. 6,1 Very truly yours, Governor ute, James L. Caldwell, President, Fourth and First rational Bank, rashville, Penn. Llirch 19, 19,...0 -)ear :Tr. Caldwell: Your letter of the 16th instant received during Governor Harding's absence from the office and y111 be brought to his attention upon his return. Very truly yours, Secretary to the Governor r. James 1]. Caldwell, - resident, Fourth and First rational Bank, rashville, Tenn. 4 P •O FOURTH AND FIRST NATIONAL BANK JAMES E.CALDWELL, PR ESI DENT NASHVILLE,TENN. Larch 16th, 19204 - R8CEIVED Mr1 C 1920 Hon, J. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. bPhet yrtrz f;ovERNoR. )3ar Sir:I am indebted to you for your kind letter and the copy of your 1.1nnual Report, Which afforded ms very interesting reading; it is admirably conceived and elegantly compiled. Some conclusions thidh I draw therefrom, however, I ask permission to discuss a little with you. It appears that it is your intention, if not to make your discount rate on paper secured by Government Bonds permanent, at least there is no apparent intention to lower it to former figures. those current then the debts were created. This is most unfortunate, and in every way regrettable, Your Report shows that it was impossible for the loans to be absorbed by the public, and that Banks had to be relied upon to carry them through, and I am sure you will concede that the Banks did a splendid service in the matter, urging the subscciptions upon the public, and agreeing to aid them in carrying them, actually underwriting the subscriptions, and thereby becoming directly involved for large amounts for thidh the subscriber failed and defaulted. In Our own case this was intensified by reason of the great amounts which were subscribed for by the army of workers at the Government Powder Plant, all of which were handled by this Bank, and as the Plant was shut down immediately on the closing of hostilities, all of those people scattered to the four winds, leaving us with the bag to hold, thich we did and paid the Government therefor. Indeed, in advancing your rate for carrying these war loans entails a cruel loss upon those who bought said Bonds from you; even if they are not actually borrowing money on them, the act has depressed them in the market to a point there it is quite disturbing, and when money has to be borrowed for carrying them, it produces a severe loss; indeed, the impression prevails that a very great injustice has been done, so groat that it might be too serious to handle, It seems that it would be eminently advisable and fair to restore the 4 rate for such loans as were made for carrying Government Bonds. It would produce a very happy effect on all such subscribers, and might have a beneficial effect on the open market for said 3onds, and thereby tend to lighten your load. At any rate, nothing could be lost by giving it a trial. I do not believe that you can quite realize how unpopular the advance in that rate is. There is no criticism whatever to make of the advance in comer- 4 0 11. • FOURTH AND FIRST NATIONAL BANK JAMES E.CALDWELL, PR ESI DENT NASHVILLE,TEN N. cial paper rates; no sort of question of bad faith can be raised as to that; but it is quite different in the case of the Government Bonds. They were taken at your urgent solicitation and entreaty, and a rate for carrying them was made and maintained all during the campaigns, and to advance it before it is possible for the 3onds to be digested produces a feeling of great unfairness and injustice. With assurance of my greatest personal consideration and Rind regards, I am, ac/o. I S ) 411 M. B. WELLBORN. GOVERNOR L. C. ADELSON. DEPUTY GOVERNOR / M. W. ,FE,DEilAL RESERVE BANK--s" BELL, CASHIER WARD ALBERTSON. OF AT LAN TA. ASS'T FEDERAL RESERVE AGT. CREED TAYLOR, GENERAL AUDITOR . SLATTERY. SECRETARY \t, 10 OARD AND AGENT DEPUTY CHAIRMAN fl 4. CHAI5MXN OF TH FEpERAL RESERVE EDW. T. BROWN. ROPER, ASS'T CASHIER , W. , 4R. PATTERSON. ASS'T CASHiER . 111,' . SiMS. ASS'T CASHIER' IN) CASHIER', CAMPBELL, ASS'T 14. . CONNIFF, ASS'T CASHIER J JOS. A. MCCO RD. r :larch 11, 1920 Lear Governor Harding: MIAs is to acknowledge receipt , _, of your letter ox narch 6, enclosing copy of letteFL / / addressed to Mr Jos Caldwell, of Nashville. In sending member banks the excerpt from the annual report of the federal Reserve Board, I frircly intended to cati. their attention to tle leading features regarding the discount policy and credit control uy the federal Reserve Board. I know that so many of the banicers nuvur taK.G time to read the full f,r0rG, and it occurred to me that the points I crave them would make some impression unon them in their own discount policies. Very truly yours, JRNO R G OV , Mr W P G Harding, Governor Federal Reserve Board, Washington D C Do.).r Go7'rnor Wollborn: I 11:tp.1 rocoiwni a. lotto'',from nr. Jzznoc 2. Cal/loll, of IT.44hii11o, ea:Ulric; a,ttontion tn a, ,rogJ.3.7(1.1 Tann:n:1.7-A vr).,y to whAt arrl. criticirppolicy of the) roao131 Itialrro r3i.i In Inc ThArticularl,y tho aloncIrtnn.t TICY7 Conry 33 to plrnit Fodri re7.1orsto iy.lair:s to nar,.7./..1.i-. nail a. nor1 clisconn.t 15.ni rr.l.ch.rv provaoive ra.ton for ailvancas in (moons or thn normal lino. , I cu,, nvololing for your ir.formation a copy of rorly. M. B. tiollborn, -3 7 a nrvn Govornor, Bank, March 8, 1920 My dear Sir: I ac11.7.nowledge racei:et of your letter of the 5th inntezt, which I have ree.d with much interent. I have jutst received from fa% ileilborri a copy of hie cirmiler letLer o: Llerch 6th, in which he recTinte in 4). disjointed vi;ly certain ilarte of the Board'a calnual report to Congress for 0 the year 191'3. ha hal Qrattnd 3 tTl7.211 heeeerer, that what he , reprint:: is liable to be mieleaciin,fe, and I am lab.seefore. sending ecion of discount policy 3 you a eel- 1)13.U)'copy of the Board le diecu of the and credit control. I a aleo sendinc you n achTICICO CO' , the eecoptIon c clrtain Boardie rapoet, iehich :Is cone:lets with .4raticre., and would invite your schedules eh.ich are nail in ierep..tion ee:pecially to the introductory review. atten you conI note your criticism of the proposed. x-yendreent which and au".;hority over strue to give the Federal Reserve Board power control exercinad individual banks. It is not proposed to have this Bark.s themselves, directly by the Board but by the Foderal Reeerve the propozed xeendani swot control that the Board. would have dy in Section ment over indierielual batiks has been riven to it alrea board or director 1 , of the Federal Reserve Act, .4hich requires the toackeinieter the affe.irs of aaid o: each Federal Reserve Baa in favor of . b:Ani-, fairly .e11 ity:eartially and tiithout A.ncrireination Directors) d. of or ace.inst any member bank. or banks and teata,Boar 2raera of the thq leen shall, subject to the i:reerielone auch discounts, Federal Reserve Board, extend to each member benufoly rnd reaeonably made advancements and. accomoci:...tions ae m . is o other nernbar barLs11 iith clue reGard for the claire and clonan that Feder:ea rezerve burg:. The Board_ already heel paler to se.y to a bank beyond a corteln point, but it cannot rediscount for a member pceer, feeller, that if the of the Board in loath to exercine thie ,on rfncroll be :,ranted at a -1 is encl. )1e and good the „Ixorodati price and not be flatly refuned. Very truly yours, 'Governor Mr. James E. Caldwell, Presiient Fourth and First National Bank, Nashville, Tenn. 110 FOURTH AND FIRST NATIONAL BANK r- S JAMESE.CALDWELL, PRESIDENT NASHVILLE,TEN N. Larch 5th, 1920. Hon. 7. P. G. Harding, 2resident, Federal Aeserve 3oard, Washington, D. C. Ly dear Sir:Concerning the difficulties and especially with reference to the some matters in connection therewith tion, and I am taking the liberty of confronting the financial situation, problem of the Federal Reserve System, seam to me as being worthy of consideraexpressing them to you. is I gather from the lyublic statements, the impression rrevails that the depletion of the resources of the Federal 'Reserve Bank z :raus out of an ab. normal condition of the commercial and business activities of the public, coupled with What is stated to be a wild speculation, and that in consequence of this state of affairs, the resources of the Federal Reserve Bank have been depleted, and that, therefore, the correction necessary must be made by throwing a restraint upon these activities. ..:hen the Federal Reserve System was under contemplation before Congress, and the scheme trying to be worked out, the underlying idea seemed to be to establish an institution to promote the commerce and general welfare of the business of the Country, and it was upon that understanding that we took stock and joined. There was no thought then of war, and, hence, the institution was organized on a basis that was thought to be adequate and sufficient, and only intended to be such in meeting the business requirements of the Country, and not to finance a great war; but the war did come on and the Government's necessities were very great, all of which we quite readily understand. The Government naturally seized upon the most available channel through which to meet its requirements, and the Federal Reserve Bank being right at hand, it was made the main vehicle for carrying the great burden of Government borrowing, so that now quite GO;.; or 66,, of the loans outstanding by the Federal Reserve System are for the use and benefit of the :ational Government, and only about 33,: or 40., of the Bank's loans are made for business purposes, the real purnose for which the Bank was chartered. Therefore, it does not seem that the trouble of the Federal eserve Bank arises from the business activities of the Country, but is traceable, unquestionably and directly, to the onerations of the Government itself, and, as I have said heretofore, in view of the fact that the Bank was not organized to carry on war financing of the Government, but was organized for business purposes, now that the Government has used so much of its resources, the blame should not be laid upon the business demands, but every consideration of good policy would seem to be to continue to keep the commerce of the Country in a growing, healthy and spirited condition. To do this it might be advisable, indeed, necessary, for the Government to arrange for such relief as would enable the Federal 2eserve 'System to continue to nerform the service for Which it was designed. Therefore, if there should come the 1-roper relief from the Government 4111P Fou RTH AND FIRST NATIONAL BANK JAMESE.CALDWELL, PRESIDENT NASHVILLE,TEN N. Hon. ';;., P. G. Harding, 2resident, borrowings, the Federal aeserve System would appear to be easy. Just how the Government could grant the relief, I am not prepared to say, but I cannot imagine that the powers of the Government are not quite sufficient to take care of its needs. One very simple remedy does occur to me, and that would be for Congress to modify the law so that against the notes of the Federal eserve System that are outstanding for loans made on Government securities for the war necessities, the Bank should be required to carry only a nominal reserve. As they are all backed by Government Bonds, a 5% gold reserve would appear to be sufficient. *je financed two wars and fifty years of comaerce on that basis quite successfully; and, therefore, when that amount of your gold reserve as required for that purpose would be released, you would have an abundance of gold to back your deposits and notes issued for connercial purposes, and to take care of such other demands from that source as mijit be made upon you. The contention that unless checked, the demands upon the Federal Reserve Bank will be overWholming, under these conditions same would not seem justified. The safeguards surrounding eligible paper are quite sufficient to insure its moderation. Such paper is not made by wild sreculators; it can only be made by people of the highest character and standing, who are comparatively few in number, and who can be trusted to the uttermost. 17o, such paper will never flood the market, and if it does, it Should not be stopped, but a way found to handle it, for of a certainty it is issued for a good purpose. To recapitulate: ,juite manifestly the trouble now resting with the Federal Reserve System grows out of the Government's war necessities, and not out of business onerations, and, therefore, the business requirements of the Country should not be blamed or hampered, but good policy would seem to be to encourage and stimulate it, for only through that source can the Government be finally and permanently relieved. ith regard to the advance in discount rates; conditions being abnormal, a Shortage existing in commodities, the effect seems to be to add the additional interest on to the price of present supplies, to alarm the public, and to discourage the further production, making it probable that prices will advance. The effect on Government credit is immediate and pronounced, reflected in the sharp decline in Liberty and Victory Bonds, :t.nother matter: An application has been made to Congress to modify the law so as to give the Federal Reserve Board power and authority over individual banks. In the hands of yourself and other prudent men such power might never be misused, but just hr this would operate in the future is very problematical; indeed, it is very disquieting, for your successor might not be a cautious, prudent or reliable man, but who might easily be a scheming politician, Who would use this immense power in such a way as to place every bank in the Country in a state of serfdom. This power could be used for tremr,ndous political advantage in the hands of some man Who would not scrurle a moment to use it. In that aspect of it, I am sure you realize how intolerable the con 411 11 Fo U RTH AND FIRST NATIONAL BAN K JAMESE.CALDVVELL, PRESIDENT NASHVILLE,TEN N. Hon. i. P. G. Harding, ,:resident, 43; ditions would be, and that some Andrew Jackson might ruthlessly sweep away and destroy the Whole fabric at one blow, and thereby entail a tremendous loss and bring a catastrophe on the Country. These are things which should be very carefully considered, and it may be better to bear with the ills Which we now have than to create greater ones, wht,h we would probably be unable to stand. ao/o. • S . B. WELLBORN, GOVERN° . JOS. A. MCCORD, CHAIRMAN OF THE BOARD AND L. C. ADELSON, DEPUTY GO M. W. BELL, CASHIER W. B. ROPER, ASS'T CASHIER W. R. FEDERAL RESERVE BANK FEDERAL RESERVE AGENT EDW.T. BROWN. , D*PUTY CHAIRMA. PATTERSON, ASS, CASHIER . OF ATLANTA. R. A. SIMS, ASS, CASHIER J. L. CAMPBELL. ASS, CASHIER H. F.3,CONNIFF, Ass, CAsHisi WARP ALBERTCON. ASS, FEDERAL RESERVE AG! CREED TAYLOR. GENERAL AUDITOR LAiTERY. SECRETARY" J. MI 1 .'-3 (1 .„i 7- e' ' ',1 ----March 4th, 1920. RECEIVED , 17' ,"1 R 6- 020 OPFICE Or 11-4r RNOR. Dear governor Harding: I have yolag let,er of February 28th. Acting upon your sugJestion, we have tried to dispose of some of our customers' Certificates of Indebtedness to the iederal 'Reserve Banks of Cleveland, Philadelphia and Richmond, •but did not meet with any success. 1 presume they are not encouraging their customers to buy these Certificates as they are anxious to maintain their ratio of reserve at as high a point as possible. Very truly yours, rrIkfUIY Governo r. Mr. W. P. a. Harding, governor. Federal Reserve Board, Washirgton, D. C. fe. . 'ie'40 k- k , et 11 . 1. .; Tcli;4. I i C.• ‘,D ;. lt1.Li ..e,. . a I 1, 'Mr; ofIr.%:, C., 1 Gov • tzt,r, •i ikef Atlan (11- iticz,i, trott (.•1 ) • Tbbruary 28* 1920. Da;.r Governor Wellborn:I haw: yonr lottar of ha 2Gt irLt rc:tool- x i oo• y of lottr 'from lir. J. E. Call •• -mil, .1":7:11.1,rit-nt of Us...a Fourth cr4.1 First Nation:Al ilath of nasb.ville, Ton.nossea. 11:.-.;.,"v'C' idol... that ycli ri.14.14 b L.blO to d.taroao of filo r2maar.nr Cc•rtitlo,,tes muntiovya to ottilar tido Fc,14,1.4 2r)aerve of Clervtallnel, 11,1.1‘0.01Itia or R.I.±moni. c.aio c3rttiti v.iciiworc.‘ aold in thoao triatu lo not arvant in tho 4:-..g.r•,r7,LAo to arzrihorn ; onottrt. to offtsc t,th tt paymarAG d.1.10 on TUroll 154 , 23,4 if fan y Liaratt maturi Lica• I lava no (loubt . ;:t on of •t!.:7A,41 tb:mo bNre:....3 would ta 1. to 11.- v.:1 1 7-.c7r3. 6 Very truly Govarnor. • T! B.Viollborri s Govarnor, Y, 3inr. 1 7!.11, lrvo 1 : Atlevata, e4-- .LLBORN, GOVERNOR JELSON, DEPUTY GOVE . BELL, CASHIER W. B. ROPER, ASST CASHIER W. R. PATTERSON, ASST CASHIER R. A. SIMS, ASST CASHIER J. L. CAMPBELL. ASS'T CASHIER H. F. CONNIFF, ASST CASHIER JOS. A. McCORD, FEDERAL RESERVE BANK CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT EDW. T. BROWN, DEPUTY CHAIRMAN WARD ALBERTSON. FEDERAL RESERVE AGT. OF ATLANTA. R ric:Eitajihcp44 ' R, 0 GENERAL AUDITOR J. M. SLATTERY, SECRETARY 1g20 tietfwtt tJf tl-lr_ 1;avEnrithl. Febr-mry 26th, 1920. Dear Governor Fardin3: I attach hereto a leter from President ualdwell of the Fourth and First National Bank of Nashville, Tennessee, which is self explanatory. I wish that we had some way of disposing of their .3,: 00,000 of U. S. D Certificates of Indebtedness. Do you knaw Where we can sell them? Very truly yours, Governor Hon. -% P. Hard in, Governor, Federal 1- eserve Board, l Washington, D. U. S ourth aFirSt VAtional Bank Janes Caldwell, President. Nashville, Tenn. COPY February 25th, 1920. My dear Mr. Wellborn:In reply to your kind favor of February 24th, in regard to our loans, we have about 13,500,000 of United States Treasury Certificates with you, some of which fall due in the very near future, most of them in fact, but if in the meantime you find any opportunity to dispose of them, it will be entirely agreeable to us, and please be assured that we shall , not call on you for anythino; whicl we can possibly avoid, and will exert ourselves in every -fay to minimi' e the , requirements. Yours very truly, (6i;ned) Jamesldwell, President. JEc/o. Mr. M. b. Wellborn, Governor, Federal Reserve .1.an'tc, At Georgia. L. C ,_BORN, GOVERNOR SON, DEPUTY GOVERNOR M. WIELL, CASHIER W. B. ROPER, ASS'T CASHIER W. R. PATTERSON, ASS'T CASHIER JOS. A. McCORD. FEDERAL RESERVE BANK R. A. SIMS, ASS'T CASHIER J. L. CAMPBELL, ASS'T CASHIER H. F. CONNIFF, ASS'T CASHIER CHA:RMAN OF TIIE BOARD FEDERAL RESERVE AGENT AND EDW. T. BROWN. DEPUTY CHAIRMAN OF ATLANTA. WARD ALBERTSON. ASS'T FEDERAL RESERVE AGT. CREED TAYLOR. GENERAL AUDITOR J. M. SLATTERY, SECRETARY February 24th, 1920. Dear Governor Harding: heplying to your letter of February 18th, practically all of the liquidation shown in the account of the Itourth and First National Bank of Nashville, Wennessee, was occasioned by the sale of '.4,500,000. of certificates of indebteness on August 12th and 0.,940,000. on August 18th. These certificates were sold by us for their account in order to reduce their indebtedness. September 17th, note of $550,000, secured by Liberty bonds and Victory notes, was paid. The bonds securing this note were attached to rediscounts amounting to :555,719.45 discounted for their credit on the same date. The item of '.;;160,000 paid on December 9th, and item of $400,000 paid January 6th, appear to have cone back into the bank on January 24th, represented by note of $550,000 discounted that date. The payment Of :A50,000 on January 8th, appears to be a liquidation. On August 14th, we discounted for this bank their customers' notes secured by Government obligations amounting to :315,000. This amount gradually increased until October 23rd, when we held under discount customers' notes secured by Government obligation s amounting to 1,274,000. ;This class of rediscounts gradually decreased from that date to November 24th, to '.599,999. On November 29th, it increased again to .J,175,000 and from that date has shown a gradual decrease until on January 31st this class of rarer amonnted to :632,000. On Au7ust 16th, we rediscounted unsecured paper for anproximately :A28,000. This amount increased right along showinT 02,000,000 on September 19th, •2,500,000 on November 11th, $2,000,OflO on December 10th, and :1,113,000 on December 21st. From December 21st there is a gradual deduction. On January 31st this class of paper amounted to : 5453,000. Very recently this bank has rediscounted with us commercial paper amounting to about '2,000,000., which puts them nearly up to their capital and surplus. At various times during the past six months I have kept an active corres2ondence with Er. Caldwell, the president of the bank, and endeavored to impress upon him the importance of being conservative and restricting his loans to his customers as mach as possible. He writes ma that he has done all he could along this line but that he is obliged to offer US rediscounts of commercial paper in order to take care of the regular and ordinary requirements of their customers. The main trouble with the Nashville bank is that they purchased too many U. b. bonds and on account Of the decline in price it would entail too great a loss upon them to sell these bonds and liquidate their indebtedness with us. Our committee has given very careful consideration to this account and We feel that it would not be wise on our part to decline to rediscount for the Nashville bank their commercial paper offerings from time 411 FED to time. L RESERVE BANK OF ATLANT CONTINUATION SHEET NO. 2• If we refuse to accommodate them it may have disastrous effects. Re7ardin; the rediscounts of the Bank of Tennessee, I have written to the president of that institution and requested him to reduce their loans to the amount that they paid for the bonds in the open market and we are expecting this week that our request will be complied with. Their indebtedness now is 4,7b0,000 and the payment we requested them to make would be around ,_75,000 in order to bring them down to the actual purchase price of the bonds. Very truly yours, 7)7 4 iVi/V12EQPnriY ----Governo r. Hun. W. P. G. Harding, Governor, iederal Reserve Board, Washington, D.0. vor.s. ftiM KLSERVE SCAM OLELi Pubrua7 13, Dr Gov:Le:nor Wollborn:Ibitorrim: to r:rovic")..o corrooponianos, I hr):: to all yxrt,tter,!.:1;).1 to 4 :41.11 fact tl..1.4.1 icar atatiraont of .7...x1v:try Zilat Sacva that tha Pourt.1. ein3. Arnt nation-A 1 3n ? TrInnoosos, with oa.nittl cni.sixr--.1.-as of -2120, • 0 000 1)01 -0413v, -L t'.:1a..t , lato from the Petiam.1 Thaai3r7,13n of At1i.alt.3 0: .!11i5, 06.15„C'tx) tus sr.tourel by Unitld 13tb.to-u tlowt, , Irmant ob1i.E.7ttionz. Berorts roonivoct by thoBor3. 11.0w thi.,, t on 31.117 it tha irviabtaineftil of t'Llm rti'rtioni tAr b.nitsebanrad. by Govelrncent obligations titua f;117,20:).000, alcit reducod attrirk.: AnTant, 5%aptombor, anil Octo ult vw)riiy bar 1;12,2U0,000, gralwAlly incroo.ned &trine tha r..1..)nl:11.3 of to , 7.:ovornb)r, Darcer,bor, Cmc1 Jr,until on .Taruva7 3154 it lato-0i at Vaa fir7txre of Stla 33oa,r1 ravortto that rya adviw., it of just àz the security .t1LAt you. i.).,r3 ho1.tin ti.D) 4.15cc..11321,t lira of the arid Firat ition1 ikn1 1 it) tb.0 stAun of taa inalbtlluass of it o..1. 41t30 ju.t 7111utla was icnvortol somo,tizzo O a orIn you. ,TAITr0xim..:It-)14 1„00 7 0,(n0 on aavc,nry)rit uccurition. . Vory truly your3, GOVa rnor. Mr. 2. B. Wollborn, Got.tarnor, ro ral 71-)nctrvo AtIvit Form No. 131, Offi To Correspoitence TI From FEDERAL RESERVE BOARD ! 41 ate Febru.ary 36, _1920 Gornor Harding Subject: _ilorrovvines of Fourth and virst Mr—Emerson National lank, llashville Tenr 2 8495 - The January thirty-first statement of the Federal Reserve Ban1,7. of Atlanta showing liabilities of member banks to the Reserve Bank, in excess of capital and surplus, shows that the Fourth and First Nat;onal Bank of Nashville, Tennessee, was borrowing on that date from the Federal Reserve Bqnk of Atlanta $16,0 1F3,000, of which $15,615,000 is indicated as secured 17y United States securities, as compared with this bank's capital and surplus of 12,200,000. There is attached hereto a statement showing the borrowincrs of this bank as indicated by lonthly reports since July 1919, together with the file of correspondence had. with Governor Wellborn previously on this situation. It would appear to me that if a large proportion of the borrowings sedured.by United States securities is composed of borrowings to carry Liberty Bonds and Victory Notes, the penalty suffqred by the borrowing bank at the present discount rates would cause liquidation of this account at the earliest possible moment. If, however, this line secured by United. States securities represents bonds of the bank or its customers, actually owned and °lath:red to secure loans at more favorable rates than are Obtainable by rediscountirg commercial paper, and if the funds so obtained are used for commercial purposes, the indications are that thlre'line will not be liquidated until there is a slackenin/rn the demand for credit or until the Reserve Bank force 7a reduction, and hence may be subject to criticism. Misc-37 7' Form No. 131. Offi To CorrespSdence FEDERAL RESERVE BOARD 1920, LLr. Subject: From_ 2-S4316 There is civen below statount showing the capital 4.1111 surplus of the Fourth and First Nat ional Bank, Nashville, Tennessee, the total liability of this b auk to t:-e Feddral Reserve Bank of such liability secured by U. S. securities At Malta, ail the amount for the months of July, Auast, Sorteuber, Oct ober, Ir.ova December and. January: (In thousands of Dollars) dcp tel and Surplus July August September October . November Decor10er Jo:a...IL:x:7 Misc-37 2,200 2,200 2,200 2,200 2,200 2,200 2,200 Total 1ity 17,200 13,674 15,374 15,033 15,077 15,149 16,060 Secured by U. Securi ti os 17,200 12,409 12,564 12,290 13,285 14,036 15,615 OADF N, L. C. 7 BEL , W. R. PATTERSON. B. ROPER. W.A. SIMS. R. L. CAMPBELL. J. F. CONN H. • WEI-LBORN. GOVERNOR JOS. A. McCORD, CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT DEPUTY GOVERNOR M. W. CASHIER ASST CASHIER AIS, CASHIER EDEP(AL RESERVE BANK - E.T. BROWN. DEPUTY C k ASS, CAB/4AR OF ATLANTA. ASST CASHIER WARD ALBERTSON. CREED TAYLOR. ASS, FEDERAL RESERVE AGT. GENERAL AUDITOR J. M. SLA SHAH August 21, 1919 Dear Sir: For some time past, I have had considerable correspondence with Mr Jas E Caldwell, President of the Fourth and First National Bank, of Nashville, Tennessee, relative to their bank reducing their loans with us and liquidating their securities. I have given Mr Caldwell warning that there is a likelyhood of our rates on Governrent securities being advanced within the next ninety days, in order to prepare him for what is coming. A furl days ago, I sent him a clipping from the National City Bank monthly circular, to the effect that the Federal Reserve Board would very likely, within the next few months, take up the matter of increasing rates on Government securities, and I hand you herewith his reply, in order to Show you his views regarding these matters. Very truly yours, GOVERNOR Mr W P G Harding, Governor* Federal Reserve Board, Washington, D C enclo- 11110., 410 RT H AND FIRST NATIONAL DIAN K JAMESE.CALOWELL, PRESIDENT NASHVILLE,TEN N. August 20th, 1919. Dear r.r. Wellborn:I thank you very much for your kind favor of the 18th instant, Whin. I have read with interest, and, especially, the clipping from the National City Bank. Ail° the National City Bank does not say so, it can clearly be read between the lines that they would advocate an advance of rate on the part of the Federal Roserve Bank carrying Government securities. Just What their motive for this may be is inmaterial. The facts are that the National City Bank has been rather conspicuous in not handling Government Bonds, and if all the banking institutions in the Country had displayed the same form of patriotism and caution evinced by the National City Bank, the Government's financing would have been a dismal failure. I have noted all along from the publications of the National City Bank how sparingly they touched the Government Bonds, and the largest amount I can find was less than „.25,000,000.00, which, with a bank with (suite a billion dollars of resources, was a more bagatelle. On the other hand, the First rational Bank of 1Tew York went well over :,100,000,000.00. So, as I say, if all the banks in the Country had shown the same form of patriotism and interest in the Government securities that the National City Bank did, the Government's financing would have been a dismal failure. Er. Li. B. - iellborn, Gov , Federal Reserve Atlant orgia. BOARD hAL iEWVE July aa "") :77 Dear Governor Wellborn: 4.'5th Ln;t2,:nt h.A7e your letter of thq •'V, ^- • ^ -•^ rth and with your bank of the Pom regarding the relations kAcw tht, hville. I am gLid to rirsttlational Rink of Nam :,:rust that t un1er3tanding, ana you luwe come to a defini s in the for :.4ny mizunde3tunding thare will be no occasion Very ;ruly you:, Goiarnor. • oor, W. U. B. Wellborn, Gov.pr vo Buik, Paderl Reer Atlanta, G. ME BORN, GOVERNOR •ON, DEPUTY GOVERNOR M. WWLL. cAsmER W. B. ROPER, ASS, CASHIER W. R. PATTERSON, ASS, CASHIER o• 0. FEDERAL RESERVE BANK JOS. A. McCORD, CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT EDW. T. BROWN. DEPUTY CHAIRMAN WARD ALBERTSON, R. A. SIMS, ASST CASHIER J. L. CAMPBELL, ASS, CASHIER ASST FEDERAL RESERVE *GT. OF ATLANTA. H. F. CONNIFF. ASST CASHIER CREED TAYLOR, GENERAL AUDITOR J. M. SLATTERY. SECRETARY July 5, 1919 Dear Governor Harding: I have your letter of July 22, regarding the indebtedness of the Fourth and First National Bank of Nashville. On yesterday, we had a call from Mr T D Webb, Vice President of the Fourth and First, and we carefully went over the whole matter with him. I think now that we fully understand each other. In the course of a few months they will very materially reduce their indebtedness with us. They are now carrying with us about p7,000,000. worth of U 3 Certificates of Indebtedness .A,000,000. of which exPires during August and Senteriber. At the expiration of these Certificates, their account will show quite a shrinkage. Mr Webb is very anxious to be assured by us that we will aid his bank in taking care of their customers in handling grain and other crops and their regular business. I assured Mr Webb that we would take care of such business for them and that they need not have any uneasiness along that line, for it is our wish to see the commercial and agricultural business, and especially in the important territory around Nashville, to be taken care of. I do not think: we will have any further trouble with the Fourth and First National. Very tray yours, GOVIRNOR Mr W P G Harding, Governor Federal Reserve Board, Washington D C AL ,RESEIE 4 - .40 July 23, 1919 It dear Mr Caldwell: Your letter of aqy 21 has opened a lulte interestins quoStion - that is on the line that a member ban1,- is entitled to. UD As you aro -erebably aware, the :Federal Eeserve Act (lees not specify this and simply says that . "advances and wIcommodatIons to meriber banks shall be made with duo regard .eor the oderal 1-eserve claims and (lam•zels or other neA3er banks". The 7 a rule ana has stated Board has not deemed it proor to 14y out that the determination in such cases shall be left to the officers I do not believe that a hard and of Federal Reserve Fianks. fast rule can be made for th-re are so mlny varyine: circumstances from time to time, therefore the accommodations to a maabor bank !c:rald have to be determined When the occasion prises. For your informetion, I wish to say that the largest amounts that we have loaned to aoy one bank in our District is as feller's: Llnbann Florida 2,000,000. Loilisinne.3,400,000 : . c,eorc Ja ;7,5,400,000. 04,600,000. Tennessee Mississippi 380,000. In your letter you eek the quention - "how much of a In lino of credit do we consider sour bank entitled to. areed with operatine* the Federal Eeserve Bank, we have never any of our member banks on any "line of credit". In fact, we have studiously avoided doinfs anythin: of this kind for tho conditions re.7.son that under different circumstances and different metber bank nor for it would not be well to do so - either for the ourselves. In vice/ of the 1!_fferont amounts loaned to the banks in and our the different stetes in our District, it alvears to me, decision, that, at the Executivo Committee concurs with me in this neijhborprosent time, a fair =punt for your bank would be in the consideration, however, Taking everything into ,.hood of T5,000,000. in subthe re:Luest that we have from time to tie made of you and 778 do not ask that you scribime to bonds and Treasury Certificates, 1 -3HLE brins your indobtoduoss dovrn to this arrant a short time. Po to sur r7ost that you , adually roduco your itr.3.cbtodnoss - about ono-half million a month. • And ne.-/ as to your subscribin; to Certificates of . ndobtecinoss, we are very varzious for you to continue to do so, for it Is absolutely nOCOSSally :or the 1.12.211:s of this District to aid the Govern -milt in its financina -.7haiov•-.r they 13sue thoso Cortincatos„ and a 1Y•21.11: of your siset in a city important as :Tashvillo, certainly should have liberal subscriptions to those . Certificates. I, therefo...e,„ trust that you can arl.,•)n_e the : , liquidation of your lon to such till. t- ?rtont that yoa af- ..n join -!3 . ir with tho otht bank in this District and subscribe to Treasury Certificates 7.1teso thy arc offered tbrowt our 1)alitr.• trast that I Irrro nr,tim rrcrneif clear in this lotto?, and that evt- 1.7,7thiri7 - 7ill '1070 r1,1011C harrionirmufly fro dovr on. 3 . :a Very- tr7.1.y GOVE 2.7TOR - Janos r Fourth .!% riccaville9 Cract7en, .i-no*S.A.ent 7Tatioml TtYMV ' LLAL RESERVEABOAiii) FILE ? do ggie ', 0 04%1,y 22, 1919. Dear Govlrn.-Jr '73111:tomt Your letter of the 14th instant regarding the indebtedness of the Fourth and Fir3t National Batik of Nashville, Tennessee, has been coneidared by the Bo„aid. The Board's vinN of the Itatter W3,3 based on st,Aomentl mtAe by Chief Rsaminer Pole which indicated that the bank in queltion had bought a 1•.4rge :;:lciant of bowl market which it wras 1JrryIng with you. aa the open Th3 Board haz no doubt that you will gat tha line reduced to r.)43onable proportions before a great while without irmosing any hArdshiI) upon the borrow ing bank. indictations point to a biavy dmvAnd for money this fall, and should your re3tIrvem be above the Iveraza it may be that the Board aill have to aSk you to redisc ount for other Fed! .,r2.1 .7 BesIrve banks. Very truly yours, Governor. Mr. M. B. Wellborn, Govarnor, Fedlral Relsrve B3nk, Atlanta, G3orgia• July 16, 1919. Dear Governor Wellborn:' Your letter of the 14th instant regarding the indebtednIss of the Fourth and First National Bank of Naahvillo, ann., to the Federal Reserve Bank of recoWel during Governor Hardingls absence from the city, and will be brought to his attention upon his return the latter part of thir, week. Very truly yours, Secretary to th,l Governor. : Mr. M. B. Wellborn, Governor, F,31eral Reserve BAnk, Atl-ita, Ga. el . WELLBORN, GOVERNOR JOS. A. McCORD, CHAIRMAN OF THE BOARD AND . ADELSON, DEPUTY GOVERNOR FEDERAL RESERVE AGENT M. W. BELL, CASHIER W. B. ROPER, ASST CASHIER W. R. PATTERSON, ASS, CASHIER FEDERAL RESERVE BANK EDW. T. BROWN. DEPUTY CHAIRMAN WARD ALBERTSON, R. A. SIMS, ASST CASHIER J. L. CAMPBELL, ASS, CASHIER OF ATLANTA. H. F. CONNIFF, Ass, CASHIER ASS'T FEDERAL RESERVE AGT. CREED TAYLOR. GENERAL AUDITOR J. M. SLATTERY, SECRETARY 130tiON:. 6[6!) f July 14, 1919 Dear Ni' Harding: Replying to your letter of July 11 with regard to the indebtedness of the Fourth and First National Bank, of Nashville; you state that their indebtedness to us on June 30 was .115,600,000. Today it is ca,000,000 less than that amount, or n4,600,000. As to their purchases in the open market of United States bonds and borrowing on this paper from our bank - as I wrote you sometime ago, just as soon as this fact was aisclosed to us, on TJAy 20 I wrote thorn declining to assist their bank in carrying any additional bonds when purchased by them in the open market. This they acceded to and since that time we have not discounted ary notes for them, covered by such purchases. We have never regarded the Fourth and First as having unduly imposed upon us, with the exception of their purchases in the open market, above referred to, and this practice was stopped by us as soon as we ascertained the facts. While it is true that the amount loaned the Fourth anu First is pretty large, we have to take into consideration the fact that the greatest part of their loans were incurred in subscribing to bonds of all the Liberty Loans. They are, we think, entitled to Lair and liberal consideration at our hand, inasmuch as all of their indebtedness to us is on account of Government securities, there not being a single dollars worth of other paper. If we had thought that the large line of the Fourth and First was having the effect of discommoding, or jeopardizing the interests or requirements of other member banks, we would most assuredly have had them to reduce their indebtedness to a more reasonable amount. In justification of my position in permitting the large amount of loans to the Fourth and First, I wish to say that we have always felt it our duty to encourage the banks in subscribing to the various offerings of Certificates of Indebtedness, and a large subscriber like the Nashville bark, we did not think it proper to discourage them for the reason that so many of the bank's bought little or nothing, and had we sat down upon the banks who were purchasing more liberally it would have resulted in this District failing in doing their part in the plan of Government financing. FL RESERVE BANK OF ATLAVO CONTINUATION SHEET NO. 2 Since taking charge of this part of the Reserve Bank's activities, I have carefully scanned the list of subscribers and their total amounts of subscriptions, and when I find that some of the banks, by their large subscriptions and liberal takings, are crowding out the other ba nks, then I would feel justified in calling them down and pointing out to them the letter and spirit of the Federal Reserve Act. It has occurred to me, rather than to ask for specific reduction of the Fourth and First National Bank's indebtedness to a certain amount, it would perhaps be a better plan to ask them to relieve us of any loans secured by bonds purchased in the open market. I am sure this request would be readily complied with. The rust of their bonds and Certificates of Indebtedness I think it would be proper for us to carry for them. I have never thought, nor has our Executive Committee, that we were being "over ridden" by the Nashville bank, and as for myself I would not fOr a moment entertain the idea, nor have I expressed it to you, any fear of thorn withdrawing from the .oaderal Reserve System. Ey action was prompt and firm in stopping what I considered was wrong on their part, and since then additional subscriptions to Certificates of Indebtedness, I may say, were made at py solicitation and request. Our attitude with respect to the Fourth and First would be different if our reserves reached the point that we had to resort to rediscounting with other Federal Reserve Banks, but instead of our reserves going to 40 per cent they have recently been climbing, and with the immediat e outlook for large sales of cotton, we may reasonably expect the reserves to increase considerably. Under all circumstances, if in your opinion you think we Should ask them to ruduce their loans with us to $10,000,000. I feel that it can be done simply by a letter from me, unless you desire your Board to take a hand in it, which is quite agreeable to me: but I must say frankly that I see no necessity of putting the responsibility upon yourself. Very truly yours, G 0 VE R N 0 R W P G Harding, Governor Federal Reserve Board, Washington D C 10N1 6-19 FEDERAL RESERVE BANK OF ATLANTA ICE • CORRESPONOCE To From Date Mr. M. B. Wellborn, Governor. July 14th,1919. Subject: Mr. Slattery, Secretary. Dear SinThe following is a list of notes secured by cotton charged to the account of the discounting bank today, paid in advance of maturity, Central Bank and Trust Corp. Georgia National Bank, 9 It Jackson 9 First 9 If If If 9 If 9 9 it 9 9 9 It tf Atlanta, Ga. Athens, Ga. ;16,687.48 3,700.00 If If 1,500.00 ft I/ 6,000.00 '9 If 10,000.00 Jackson, Ga. 5,100.00 9 9 366.05 Jefferson, Ga. 406.00 q tt 396.00 9 If 177.63 It It It PP It If 9 9 9 It 9 9 9 it 9 9 It 9 " ft It it 9 it 9 9 9 It 9 9 9 Georgia 9 9 9 It it Colquitt, Ga. ATHENS? Ga. If 9 it 9 9 it It 9 Yours very truly, ecretary. 7,a_ a eV;4 €76 A 5:60040 9 - 500.00 1,032.11 300.00 524.18 5,000.00 15,000.00 5,000.00 350.00 4,053.33 \c? 4.-40 July 11, 1919. Dear Mr. Wellborn:I nese just hill .1 talk with Mr. Pol e, thn Chief Nationel Benk Examiner of your dietrict, regardin g the Fourth and 'irat Netional Bank of Nanhville. That institut ion is nas being subjected to an examination, and Mr. Pole has told me sone things which do not impress Me 4s being at all creditab le to that institution. I am surprised to note that the stat ement of June c'ith shave en indebtedness of that bank to the Federal Reserve Bank of Atlanta of $15,600,000. It seem thet the Fourth and First Nat tonal Bank hes been buying bonds in the open meeeet and crediting the differen ce between the market price and the face value to a suspense account, out of which they have been char ging losses and depreciation. I had. undereteed from lettere you wrote me in May thet you were not going to let Mr. Caldwell override you , but it eems that he has gotten Intl you more heavily than even . The directors of your bank are cherged under the law with the duty of alminietering the affaira of your bunk fairly and impartie lly and in giving accommodations having In mind the wants and requirem ents of all member banks. If it half e dozen large member benke in your district should pursue the same policy that Mr. Cediwell hat; adoeted, you leaulJ be obligei to rediecount heavily eith other Fede ral reaerve banke. The Feiorel rosereie system is not intended to promote specnlation either in stocks or in Government oonde. The Chief National Bank Exam iner tells me that the Fourth and First National Bank has abou t six million dollars of Liberty Bonds which represent bona file subscriptions and probably more than the same amount which they have picked up in the open mae.et at a discount. It is, of course, enti rely proper for you to help the bank out on their logitieete subs criptions as well as on Treasury certi'icetes of indebtedness, but the Boar d thinks that you should deal firm ly with Mr. Cldsell have him understand that you will not liecommode your own bank or jeop ardize the interests of year other member banks by carrying him on the bonds which he has bought for investment. It see to us here thet you She Id have the line relecal as early as eracticable to about ten million dollars. Mr. Polo tern me that he All talk with you upon his retu rn to Atlanta end give you all the information that he has riven me. After you get the line darn to tan million dollars, you can exor cise your judgmant as to what further reductions should be male. 2 Do not lot M. Caldwell put anything over on you, and not be disturbed by his do implied threat to withdraw fro m the systemi We can got along withou t him. My opinion is, he Is mer ely bluffing. The Board will back you up in tie matter, and I have refrained from writing Mr. Caldwell mys elf in order to give you an opp ortunity of showing him that you are capable of taking a firm stand and must not be trifled with. Please keep me advised of this sitation, awl if you think letter should be addressed a to the Fourth and First Nation al Bank by the Board on this subject, please lot me know and I will see that Mr. Caldwell does not res t under any misapprehension as to the Board's position. Very tru4 yours, Governor. Mr. M. B. Wellborn, Governor, Federal Reserve Bank, Atlanta, Ga.