The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
332.3-7 - Purchase of Government Bonds by FRBank, Atlanta under repurchase agreemet 4-19,22 ge date)! yorm No. 131 • office Corresponden To Mr. From _ FEDERAL RESERVE BOARD • Ehae Dec. 6, 1932. Subject: McClelland W. L. Hooff ,? I have gone through the entire "General File" on the subject of the petition of the Fourth & First Nat Bk of :,ahhville, Tenn., - page by page - and find no reference to a Mr. Early. It appears that the petition by this bank was mailed to the Board by the F R Bk of Atlanta and there is no reference in the files to anyone appearing before the Board or before any officers of the Board in connection with the petition. The petition is signed by Mr. James E. Caldwell and Mr.P. D. :"addin, Counsel, and Mr. Wyatt says he recalls Mr. :_addin being up here and also Mr. Early as a sort of 14bbbyist. I have also gone through our file on this subject and it contains no reference to Mr. iarly. )1,78496 ( 40 FRANCIS E. WARREN, WYO.. CHAIRMAN LEE S. OVERMAN. N. C. WILLIAM J. HARRIS.GA. SMOOT , UTAH ._LEY L. JONES, WASH. CHARLES CURTIS. KANS. FREDERICK HALE. ME. LAWRENCE C. PHIPPS.COLO. WILLIAM B. MC KINLEY.ILL. CARTER GLASS. VA. ANDRIEUS A.JONES. N. MEX. KENNETH MC KELLAR.TENN. EDWIN S. BROUSSARD. LA. IRVINE L. LENROOT. WIS. HENRY W. KEYES. N. H. THOMAS F. BAYARD. DEL. JOHN B. KENDRICK. WYO. • 'Alenifeb Zfatez Zenale RECEIVED JUL 671926 orFici o IXiz 00 COMMITTEE ON APPROPRIATIONS KENNEDY F. REA. CLERK July 3, 1926 Hon. D. R. Crizsinger, Governor, Federal Reserve Board, Washington, D. C. My dear Mr. Crissingers Many thanks for your favor of the 2nd about the Fourth and First National Bank matter. I regret that on-actwottrit—orire—MiirsT7riny sister I must go home tonight, so I can not come by personally, but I hope some equitable adjustment of the matter may be agreed upon. Very sincerely yours, vi July AO 1926. hy dear Congresgmans I 4cknowledge 1acoil2t of and have brought to the attention of the Board at a regular meetinL:, your letter _Of Juxa Loth, in which you sust;est that the controversy between the Fourth and 2irst Htionl;Lank of NiAsLville, Tennessee, L;nd the Federal Reserve Balk of Atlanta, be .,111)mitted to arbitration, This matter botwecn Lhe suuks has been the subject of frequent discussion on the part of the Board. We have a rather voluminous record of thti ease auu will bc very clad to have you call and inspect the same at your convenience and to go over the matter with the members of the Board personally if you desire to do so. Vary truly yours, D. R. Orissinor, Governor. Hon. Jos. d, Byras, House of Representatives, Washineton, D. C. ev-) iTaly flear )1.44tort adknowleal, roceint of and have brauefit to the attention of tici roal-d at a regal:Ay' rao9tings your letter of kTutle 3th, concurring in the suggestion contained LI Conrenz:%,an nyrire letter to the 'Board or tho data, that tho controyerrer between the Fourth md. IPirst lational. Bank of Nashville, froxie3See, and. Vie 7kIderal Re erve "Rani, : of Atlanta, be oulvlittad. tov,,?..bitration. Vats ratter between tho two banks Ilas bean the subject of frequent discussion oi tho part of the Board. We lave a rather Yoluninfras recorl of the case and will be very glad. to Imve you call and inspect tho enzae at iour convenience and, to go tter with the me0)orts of the nlard 'perever the geaally0 if you desire to dn so. 'Very truly :roars. D. 11. Crissiager, Govoraor. lion. L. D. Tyson. Irattea States %nate, Veihingion, D. O. July 2, 1923. MV dear Oon3uu 1012-mt1oage reeetot of :Ina 'Ave bmut.,41t to the attention of the 'bard at a rmlar neetiag, ymtr letter of Juno 23111, noncurrinc:in the sucymetirIn coat:Anal in G ,I;rea..t.lan By11nt31 letter to the of tho atv -K1 date, that the controversy botween the Fourth and rirst National Nut: of liaahville, Tennessee, and the redoral Reserve Baal: of AU:vita, be submitted to aebitrntioA. This nattor betwoon the two banks has berm the subject; of frequent ditioussion on the part of the noard, We have a rathr.v vollrainoue record of t710 case and *ill be vary glad to havo you call ,:221d inspect the sale at your convenience and to go ovor the matter with the 1_11,11.)ors of flo if yo'a desire to do so. Vimt truly 77011r1, D. R. Criesinger. Governor. 701).. Cordell Itollse of Iteproomit:Itivel, Washington, D., C. I July 2, 1926. fly dear ,Iquatort I acialowitul:7•:1 roceint of and have brought to CI() attentioi of the Board at a regular meeting* your latter of Susie 25th*'coIlaarring in the sagcestion contained in Oonr,esalannyrnat letter to tho noard of the axle date* that the con— troversy between the Pourth 4nd Yirst nationnl ihrP: of laghville, Tenuessec, and the Yederal Relerve BA* of £tlant, bo waxlittod to arbitratioa. This matter bosareen t,10 to baall has U.* the aubject of frequent discussion on the part or the Board. We have a rather volumlne,J.1 rneolid or the caso and will be very glad. to 'nave you call and Inspect the smme at your convenience and to cp over the Latter with the 17:lathers of the Board person.' all, If you desire to do so. Very traly Alurs, D. R. Orissintpr, Governor. 17oa. Xonneth United States lenrIte, "jailiagton, D. C. Form No. 131. Office Correspoltence Date' -"e 30, 1926. Federal Reserve 1;oard. To Frorn FEDERAL RESERVE BOARD _ Subject: Letters from Congressmen Byrnes and Hull, and Senators 7.yson-andMcKellar regarding the controversy between the Fourth c FirxtNational Bank of Nashville and the Federal Reserve Bank of Atlanta. flis. James. This matter has been before the Federal Reserve 7oard many times during the past three years and the Toard has held repeatedly that this was a matter strictly between the Fourth SI First National Bank of Nashville and the Federal Reserve Bank of Atlanta. The Tuestion involves the payment of money by the Federal Reserve Bank of Atlanta out of its surplus which, as I see it, is practically the same as being paid out of the Treasury of the United States. If the claim is a proper course through a court of law. If obligation, then I submit that the ed can be made properly only on or gress. I, the one, certainly there is rethe claim is merely a "moral" payment of the money so claimthrough authorization by Con- -*ePtfe---t4afrep-a-4ka4-i-ert--rff-terir-n5rptt-t-,ttert inove taw that the letters with the above statein accordance above referred to be answered ment. ° IIT 130ARD MOMS JUN 3O -11140._ .01,1.11014, 1.015i111,16 40.1.1.11 AT BOARD Snaning A JUL 2 - 1926 1 2.) June 26, 1926. Lz,* dear Mr. ConresmiAn: folir letter undor dote of Ju 2Oth:eorieerniwl the oon- troyerzy between the loourth and Firat gutioaal Bwat of Naahville, Teunes$ee, and the ?ederal iit)oerve ikak of Ltlanta, with enolosures frum Convos6man Cordell Eull, Senator Kennett) McKuliar and ,:Amator L. D. Tyson has been reoolveu r 1.44I am pleased to dvise, will be brought to the attention of the Federal Reserve Board. Very truly ycrure, D. Urissincer, Governor• E4 Hon. Joseph W. Byrne, House of Representatives, Wa3hin3ton, D. 0. 4_2 1V: I .agolim6si..sa.irewirtUnliam...wo......•wwwrocililli Amrstmpapiamma JUN 29 19 /t.e E 014.-4--tetc: ,44/17(1, (to_ so, 15 140 MAJORITY MEMBERS flipTI . N D. MADDEN. ILL., CHAIRMAN DANIEL R. ANTHONY. JR.,KANS. WILLIAM S. VARE, PA. WILLIAM R. WOOD. IND. LOUIS C. CRAMTON, MICH. EDWARD H. WASON, N. H. WALTER W. MAGEE, N.Y. GEORGE HOLDEN TINKHAM, MASS. BURTON L. FRENCH,IDAHO MILTON W. SHREVE, PA. L. J. DICKINSON, IOWA FRANK MURPHY,OHIO JOHN W. SUMMERS,WASH. HENRY E. BARBOUR,CALIF. ERNEST R. ACKERMAN,N. J. GUY U. HARDY,COLO. FRANK H. FUNK,ILL. JOHN TABER, N.Y. MAURICE H. THATCHER, KY. FRANK CLAGUE ROBERT G. SIMMONS • JOSEPH W. BYRNS 6TH DIST. TENNESSEE iquitsr of ifirprrsnitatings MRS. MARGARET M.PERRY SECRETARY Tonunittre on Appropriations Tongrras June 26, 1926 Itlaslitugtint. D. al. To the Governor and Members of the Federal Reserve Board Washington, D. C. MINORITY MEMBERS JOSEPH W. BYRNS,TENN, JAMES P. BUCHANAN,TEX. JAMES A. GALLIVAN, MASS. GORDON LEE,GA. BEN JOHNSON, KY. CHARLES D. CARTER. OKLA. EDWARD T.TAYLOR,COLO. WILLIAM B.OLIVER,ALA. ANTHONY J. GRIFFIN. N.Y. THOMAS W. HARRISON, VA. JOHN N. SANDLIN, LA. WILLIAM A. AYRES, KANS. MARCELLUS C. SHEILD, CLERK Gentlemen: The Fourth and First National Bank of Nashville, Tennessee, and the Federal Reserve Bank of Atlanta, have for many months standing a very serious disagreement which has reached such a point that the Nashville Bank has, as far as it is possible for any National Bank to do, severed all business relations with the Atlanta Bank. The Fourth and First National Bank and its allied interests constitute one of the largest business enterprises in the South. Their business is in such sound condition that they are thoroughly able to get along without using the resources of the Atlanta Bank for rediscounting. But the situation is a deplorable one. When a great bank which for sixty-three years has been engaged in building up national banking sentiment and clientele in Tennessee, Southern Kentucky and Northern Alabama, through a large number of corresponding banks, declines to have any other than the most formal dealings with the Atlanta Reserve Bank, it is obvious that a condition has arisen which is inimical to the best commercial interests of a large section and must, in turn, be harmful to the steady and satisfactory growth of the Federal Reserve System. The record of the Fourth and First National Bank during the trying period of war financing was unexcelled by that of any other bank in the United States. Its record of support for and cooperation with the Federal Reserve Bank of Atlanta was so complete that it is obvious the Nashville Bank would not have gone to the extraordinary length of virtually severing relations with the Atlanta institution unless it felt that it had been severely and inequitably dealt with. Is it not possible for the old harmony in relations to be restored? I believe both institutions should agree to an arbitration in a common effort to heal old wounds and promote the commerce of Tennessee and adjacent territory. I am not authorized to speak for the Fourth and First National Bank, nor for the Federal Reserve Bank of Atlanta, but I am sure that the Fourth and First would agree to an arbitration. I am speaking as a friend of both banks, along with other representatives of Tennessee, -2MAJ JOSEPH W. BYRNS RITY MEMBERS likST B. MADDEN, ILL., CHAIRMAN DANIEL. R. ANTHONY,JR.,KANS. WILLIAM S. VARE, PA. WILLIA R. WOOD,IND. LOUIS C CRAMTON, MICH. CD WAR H. WASON, N. H. WALTE W. MAGEE, N.Y. GEORG HOLDEN TINKHAM, MASS. BURTON L. FRENCH,IDAHO MILTO W. SHREVE, PA. L.. J. DICKINSON,IOWA FRANK MURPHY,OHIO JOHN J. SUMMERS,WASH. HENRY E. BARBOUR.CALIF. ERNEST R. ACKERMAN, N.J. GUY Ii.HARDY,COLO. FRAN K H. FUNK, ILL. JOHN TABER, N.Y. MAUR ICE H. THATCHER, KY, FRAN K CLAGUE ROBENT G. SIMMONS 6TH 01ST. TENNESSEE 10ouse of itirtirgetttatitirs MRS. MARGARET M.PERRY SECRETARY Tommitter on Appropriations oungrrns Illarillitigtott, D. al. when I urge that a serious effort be made along these lines to effect a settlement. MI ORITY MEMBERS JOSE pliam.werm JAM ES P. BUCHANAN,TEX. JAM ES A. GALLIVAN, MASS. GOR DON LEE,GA. BEN JOIINSON, KY. CH RLES D. CARTER, OKLA. ED WARD T. TAYLOR,COLO. WI LIAM B. OLIVER,ALA. AN THONY J. GRIFFIN, N.Y. TH OMAS W. HARRISON, VA. JOHN N. SANDLIN. LA. LLIAM A. AYRES, KANS. ARCELLUS C. SHEILD, CLERK I believe that both banks would agree to an arbitration through some such agency as the Governor of the Federal Reserve Board, Comptroller of the Currency, one of our Federal Judges, or the Chief Justice of the Supreme Court of Tennessee. I think I know the officers of the Fourth and First well enough to say that they would be willing to submit the matter to any fair arbitration, and I assume that the Federal Reserve Bank of Atlanta would be equally ready to bring accord out of discord by resort to such an equitable method of adjustment. I regret exceedingly 6hat this situation has been allowed to continue, getting worse instead of better. The time has come, it seems to me, when for the good of the System as a whole the Federal Reserve Board itself should intervene and make a serious effort to bring about an adjustment. I do not think that such intervention by the Federal Reserve Board, in composition of an outstanding difficulty, is outside the proper function of your Board. On the contrary, it seems to be decidedly within your province and an altogether proper exercise of that supervision with which you have been charged by Congress. This is not a political matter and I do not approach it in the slightest degree from a political point of view. But I cannot emphasize too strongly that this situation has become intolerable to the business interests of our section, that it is an obstacle to our commercial development and that it is inimical to the best interests not only of the Federal Reserve Bank of Atlanta but to the Federal Reserve System as a whole. Were it a situation the solution of which offered insuperable difficulties, compliance with it might not be essential, but I am quite confident that it can be settled in all good feeling by the exercise of tact and judgment, as evidenced by an acceptance by both institutions of the principle of arbitration. It is for this reason that I urge so strongly prompt remedial action by your Board. • • SIXTY-EIGHTH CONGRESS WILLIAM R. GREEN. IOWA. CHAIRMAN JOHN N. GARNER. TEX. WILLIS C. HAWLEY,ORES. JAMES W. COLLIER. MISS. TREADWAY. MASS. ALLEN WILLIAM A. OLDFIELD. ARK. JAMES A. FREAR. WIS. CHARLES R. CRISP. GA. JOHN 0. TILSON. CON N. JOHN F. CAREW, N.Y. GANG BACHARACH. N. J. WHITMELL P. MARTIN. LA. LINDLEY H. HADLEY. WASH. CHARLES B. TIMBERLAKE.COL0. FETES F. TNGUE. MASS. HENRY T. RAINEY, ILL. HENRY W. WATSON. PA. CORDELL HULL. TENS. OODEN L. MILLS. N.Y. CLEMENT C. DICKINSON, MO. JAMES C. MCLAUGHLIN. MICH OHIO KEARNS. JOHN J. CASEY, PA. C. CHARLES CARL R. CHINDCLOM. ILL. N.Y. FRANK CROWTHER. CLAYTON F. MOORE. CLERK COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES WASHINGTON, D. C. June 2Q,l926 Federal Reserve Board Washington, D. C. Gentlemen: I join with Congressman Byrne in expressing my most earnest desire that the differences between the Fourth and First Bank of Nashville and the Federal Reserve Bank of Atlanta be ironed out or composed, and I feel that his suggestions are proper and should be satisfactory to both banks. I have read the record in this case carefully, and I can see no valid reason why representatives of both banks should not sit around. the table in the presence of any one or more of the gentlemen mentioned as arbiters, and go fully into this case and let it be adjudicated upon the facts from every angle without regard to legal technicalities. It seems clear to me that the splendid war record of the Fourth and First Bank should be sufficient evidence for your Board to see that said bank is entitled to this consideration. After all the facts and circumstances have been heard, the arbiters can decide this case finally. If, after a full hearing of this matter, and the arbitrator decides that the Fourth and First Bank is not justified in its attitude, then I shall feel that the fair thing has been done. As I say, I feel that Mr. Byrne' request is a reasonable one and should have the earnest consideration of your Board. Very truly yours, RAkCIS E. WARREN, WYO., CHAIRMAN LEE 8. OVERMAN. NC. WILLIAM J. HARRIS,0A. SMOOT,UTAH SLEY L. JONES. WASH. CHARLES CURTIS. KANS. CARTER GLASS, VA. FREDERICK HALE. ME. ANDRIEUS A• JONES. N. MEX. LAWREN`CE C. PHIPPS, COLO. WILLIAM B. MC KINLEY. ILL. IRVINE L. LENROOT, WIS. HENRY W. KEYES, N. H. KENNETH MC KELLAR. TENN. EDWIN S. BROUSSARD, LA. THOMAS F. BAYARD. DEL. • 9-leni1eb Zfafez Zenale JOHN B. KENDRICK, WYO. COMMITTEE ON APPROPRIATIONS KENNEDY F. REA, CLERK June 26,1926. To the Governor and Members of the Federal Reserve Board, Washington, D. C. Dear Sirs: I have seen a copy of the letter of Hon. Joseph W. Byrns, of this date, in reference to a disagreement between the First and Fourth National Bank and the Federal Reserve Bank of Atlanta. It seems to Imo that Congressman Byrns has stated the case fairly and I hope your Board will see fit to adjust the matter along the lines suggested by him. Tory sincerely yours, WIL ' LIAM B. MC KINLEY, ILL., CHAIRMAN t LES L. MC NARY ,OREG. ELLISON D. SMITH. S. C. IS ROTOR E. WELLER, MO. JAMES A. REED. MO. EDWARD I. EDWARDS. N• J. JESSE H. METCALF. R. I. BURTON K. WHEELER, MONT. ROBERTN. LA FOLLETTE, JR.. WIS. LAWRENCE D. TYSON. TENN. SMITH W. BROOKHART. IOWA GEORGE P. MC LEAN,CONN. -3.11 Crtifeb Zfatez Zerrate CHESTER A. WILLOUGHBY. CLERK COMMITTEE ON MANUFACTURES June 26t4,1926. To the Governor and Members of the Federal Reserve Board, Washington, D. C. Gentlemen: Attached hereto is copy of letter which was addressed to your Board by Honorable Joseph W. Byrns, in reference to a disagreement between the Fourth and First National Bank of Nashville, Tennessee, and the Federal Reserve Bank of Atlanta, Georgia. Mr. Byrns coming from Nashville and being familiar with the questions involved in the controversy has, I am confident, stated the case fairly, and I sincerely trust that your Board will be able to adjust the differences between these institutions in a manner satisfactory. to both Banks and along the lines suggested by Congressman Byrns. Ver truly yours, al. OM SO ••• T-S-T. 0 To the Governor and Members of the Federal Reserve Board Washington, D. C. Gentlemen: The Fourth and First National Bank of Nashville, Tennessee, and the Federal Reserve Bank of Atlanta, have for many months standing a very serious disagreement which has reached such a point that the Nashville Bank.has, as far as it is possible for any National Bank to do, severed all business relations with the Atlanta Bank, The Fourth and First National Bank and its allied interests constitute one of the largest business enterprises in the South. Their business is in such sound condition that they are thoroughly able to get along without using the resources of the Atlanta Bank for rediscounting. But the situation is a deplorable one. When a great bank which for sixty-three years has been engaged in building up national banking sentiment and clientele in Tennessee, Southern Kentucky and Northern Alabama, through a large number of corresponding banks, declines to have any other then the most formal dealings with the Atlanta Reserve Bank, it is obvious that a condition has arisen Which is inimical to the best commercial interests of a large section and must, in turn, be harmful to the steady and satisfactory growth of the Federal Reserve System. The record of the Fourth and First National Bank during the trying period of war financing was unexcelled by that of any other bank in the United States. Its record of support for and cooperation with the Federal Reserve Bank of Atlanta was so complete that it is obvious the Nashville Bank would not have gone to the extraordinary length of virtually severing relations with the Atlanta institution unless it felt that it has been severely and inequitably dealt with. Is it not possible for the old harmony in relations to be restored? I believe both institutions should agree to an arbitration in a common effort to heal old wounds and promote the commerce of Tennessee and adjacent territory. I am not authorized to speak for the Fourth and First National. Bank, nor for the Federal Reserve Bank of Atlanta, but I am sure that the Fourth and First would agree to an arbitration. I am speaking as a friend of both banks, along with other representatives of Tennessee, Page #2. when I urge that a serious effort be made along these lines to effect a settlement. I believe that both banks would agree to an arbitration through some such agency as the Comptroller of the Currency, or one of our Federal Judges, or the Chief Justice of the Supreme Court of Tennessee. I think I know the officers of the Fourth and First well enough to say that they would be willing to submit the matter to any fair arbitration, and I assume that the Federal Reserve Bank of Atlanta would be equally ready to bring accord out of discord by resort to such an equitable method of adjustment. I regret exceedingly that this situation has been allowed to continue, getting worse instead of better. The time has come, it seems to me, when for the good of the System as a whole the Federal Reserve Board itself should intervene and make a serious effort to bring about an adjustment. I do not think that such intervention by the Federal Reserve Board, in composition of an outstanding difficulty; is outside the proper function of your Board. On the contrary, it seems to be decidedly within your province and an altogether proper exercise of that supervision with which you have been charged by Congress° This is not a political matter and I do not approach it in the slightest degree from a political point of view. But I cannot emphasize too strongly that this situation has become intolerable to the business interests of our section, that it is an obstacle to our commercial development and that it is inimical to the best interests not only of the Federal Reserve Bank of Atlanta but to the Federal Reserve System as a whole. Were it a situation the solution of which offered insuperable difficulties, compliance with it*.might L - not.:be essential, but I am quite confident that it can be settled in all good feeling by the exercise of tact and judgment, as evidenced by an acceptance by both institutions of the principle of arbitration. It is for this reason that I urge so strongly prompt remedial action by your Board. Very respectfully submitted, 1 : .' i Ilif ,,,' 1 1, t •titi . / ' f C\, (iv • 1 V ,/ 0, / Hon. Cor011 Eull, Vhouse of Mpriletntritivesi 1- 1111in,7.ton, C. ry f'!m1,-Trsern: 'r.17e-rrin to aur cc,nv:-.rs'Ai-1,11 of this --:crninc wit rc•forrna to t7w' contrr)/mrs7 1:i6teeen thf! '!fAirth -irst Thiti:niTr, ,Alk of PAshvilln, 'fln7zrEttlr, nnd th, 7Werftl Tlevrve n,fcrro:ncr: to.er,rtain llbttrty bona tr,lnsftcof nre rtaviel!A t1-01- thr 7c,f-rd iii1br. v(ry OM to 6,;Ivr tir:ns, you. 111 onrortunity to exrtriline. its file on this srljr.at it mny time thnl RU -ny tr t dc-/ so. I rind, 1,cvAr, thPt it it contrary to th rules of the 'Pop.rd rrrmit :Arty of ite officini files to lrrAft ttt officnt enmert in rPonsr to P forol court orOer or a for,--1 rerluest by (11.1rr'es, ftna 70,!'114 wclu3d Inudh rrrff-As thPt 7i.yu txr-ninf'- VII(14* fils in its 4Tio,,s in th' Yrcp,mre7 71111dinj;.. Thn roprO Las only mcf trt of tiwtchc:A-1etitutns its .ff1t11111 r*eord on this sulbar,ct, M T bolsY thit you will nTr-Tr,c1r,,tf., t)-1( re'neonabl,ftees cf rate rositim in • thP nnttrr. Thfs 7-onrd's Pntire fil on CAA' tul.tjeet is nve AilrAblt. in 77 offict. nnO. I shell 1.1 very ple!kased to have you rrnd it cmPr f-t 'Fir" rr,nt 7uu rrty mr. to Jo to. r.,11 bPrt T 7Pr7, tru17 C - re r. J-xnes. /."•%: ;A: Form No. 131. Office Correspordence ate Subject:___ To _ From FEDERAL RESERVE BOARD June 30, 1926. _ Dear Mr. liyist':t: Will you, kindly let me know whether thn record in matter of the Fourth-First National Bank of Nauiwille th the Federal Reserve Bark. of Atlanta shows the following: 1. Does not the record show that Mr. Caldwell lost nothing by being forced to tak e up his reparobase agreements, and that his only claim for compensation is that if he bad been allowed to carry these bonds longer might have made more money? 2. Does not thii: record show that Kr. Caldwell advised. the diviatars that the whol e natter had been carried through with profit to the bank? Very truly yours, 1,1711,11 Si ,71,.\ I -i .i, , V 1,. I. 3 , i; eN,,../ .../, . fi i 1 1 At5 4: tg z) i Ce-ptamber 20, 1923. 1.4 dear Your latter of September 13 Ms bean brukIht to the attention of the ?oderal Deserve Board and the Board. is of the opinion that your oontrovorsy with the iourth Arat ilational Bank of lleshvill J,T.ennasseJ, iz a matter in tha first instance solely for your board to 6,et,:rminc. Very tru1-u- D. B. Jrissindar, LiarJrnor. licOord, 1dr. Jos. ,3ha1rrian, 2ederahl lleaervo Bank, Ga, L) FEDERAL RESERVE BANK CO TTTh. OFFICE OP CILAIRSIAIV OE THE BOARD. FEDERAL RESERVE Ac;ENT. Sept. 13, 1923. SUBJECT: Petition of The Fourth 8: First rLtion._1 3ank, rashville, Tennessee. .EDERAI, RESERVE BOARD, Washington, D. C. Gentlemen: On September 5th, p-overnor Wellborn forwarded to of-tai-Pdath & First rational Bank of rashpetifion a your Board with a reply of the Federal Reserve Bank together villa, Tennessee, acknowledged by the General Secretary were papers of Atlanta. These .and on ,Septomber 14th a telegram as 7th, of your Board on September with further reference to the matPlatt received from Vin- GOTEffhor7 ter. The eetition and reply were referred to a committee and at of Directors, composed of Lessrs. I:ewton, Kettig czid Littles, diswas subject the 14thm the meeting of our Board, held on September res committee' the that cussed and it was moved by Director Hartford port be deferred and that the Fourth (°_: First rational Bank be furnished with a copy of our reply to its petition, provided such action Counsel, and there w_s no objection had the approval of our General on the part of your Board or it Counsel. I have a letter from :Tessrs. Randolph and Parker, our General Counsel, advising that as the answer to the petition was framed so as to constitute a reply, or in other words, since the paper was framed with the idea that it would be sent to the bank in answer to its communication, there is no legal reason why the paper, a copy of which was forwarded to 70U by Governor Wellborn, should not be sent to the bank, if in the opinion of our Board of Directors it is desirable that a detailed reply be made. I shall be glad to have you advise me whether there is any objection on the part of your Board or your Counsel to our sending the reply to the petitioning bank. ETV'ED R 9 Yours very truly, e_ot Chairman of t Ooa 3 3-2- 3 Se,)tembor 14, 1923. ( Wellborn, Atlnnta. Roferring petition Fourth wld Yirst th41onal Bunk of Nashvil le for refund on Liberty 1)77-d-TF.177177ntIons, ro-Txr, --r.Mr-ar-rMion that you have no right to , ake refund unless legally 1ibl. Question of legal Mobility is one to be deternined by a court and not by Federal Reserve Board. Platt. 'T-sad • FEDERAL RESERVE BANK OF BOSTON September 13,1923. My dear Mr. Hamlin: I return herewith Governor Wellborn's letter of September 5 which came with the papers you sent me yesterday. In my hurry to got my reply off in the afternoon mail, I overlooked returning this. It is hard to believe that the Fourth and First National Bank of Nashville really intends to bring suit, but if it should, it should be fought to a finish. The principles involved are fundamental and if there is any question as to the Dowers of the Federal Reserve Banks and the Federal Reserve Board in the matter of discount rates, the sooner it is settled, the better. Mr. Caldwell's printed petition together with his intimations as to his course of action if his demands are not complied with impresses me as being designed for propaganda purposes, and I think it might almost be called blackmail. The action of the Atlanta bank in taking so large a loan for speculative purposes was unbusinesslike, and I presume Mr. Caldwell realizes the fact that the officers of that institution would not like co have a public airing of that transaction. At the same time, trial of the case in court would bring out some facts that would not give the Nashville people a very favorable impression of Mr. Caldwell as a banker. I hope the Board will encourage the officials of the Atlanta bank to stand firm and resist the attack in any form in which it may be made. Very truly you .P.G. Harding, Governor. Hon. Charles S. Hamlin, Federal Reserve Board, Washington, D.C. 4I • FEDERAL RESERVE BANK OF BOSTON September 12, 1923. Dear Mr. Hamlin: I have received your letter of the 11th inst. enclosing file in connection with alleged claimof the Fourth and First National I have read the briefs of the Bank of Nashville, Tennessee. Nashville, an ofthe Atlanta of Bank National First and Fourth to know that 1:r. Caldwell reason have I while and reply, in Bank and a bellyacherj I bluffer a high-handed, and arbitrary is action in trying to his at surpriIed somewhat am I that confess Reserve Bank of Federal the against claim serious a out make Atlanta. note that you ask for an expression of my views as the matter I do not see what there may come before the Board on appeal. and First National Bank Fourth The Board. the to appeal to is of Nashville either has a legal claim against the Federal Knowing the facts in Reserve Bank of Atlanta or it has not. the case as I do, I do not hesitate to say that if I were the President of a member bank in the Sixth Federal Reserve District, Iwould take legal steps to block any friendly settlement or You will notice that there compromise of this alleged claim. and Atlanta banks as Nashville the between disagreement is a were admitted to be facts the if even and fact, quest3onsof to not think that the do still I bank, the Nashville by stated as Nashville bank would have any legal claim, against the Federal Reserve Bank of Atlanta. There is no authority in the Federal Reserve Act for direct loans to member banks for periods longer than 15 days, and the rights of the directors of the Federal Reserve Banks and the rights and duties of the Federal Reserve Board in connection with the establishment and determination of discount rates, cannot in my opinion be abridged by any verbal or written understanding on the part of officers of a Federal Reserve Bank. The fact that a member bank has been able to rediscount a customer's note or to get an advance on its own note at 15 days at a rate of discount established by a Federal Reserve Bank and approved by the Federal Reserl!e Board, does not give the borrowing bank any right to expect a continuance of the accommoEvery Federal The law is explicit. dation at the same rate. Reserve Bank shall have power: "to establish from time to time, subject to the review and determination of the Federal Reserve Board, rates of discount to be charged by the Federal Reserve Bank for each class of paper". Caldwell's case is unique in that his bank wIs the only one which speculated in Government bonds to an extent which jeopardized its solvency; but there are thousands of banks as well as individuals which were borrowing money in large amounts when Fedend -2-• Reserve rates were 45 and were continuous borrowers during the times when that rate was being advanced to 65 or more. To recognize Mr. Caldwell's contention would be to invite claims from many others who might fancy that they had a grievance; and the Federal Reserve Board would be hopelessly hamstrung in the exercise of its duties to review and determine rates of discount established by Federal Reserve Banks, if it were held that Reserve Bank officers could promise borrowing banks an indefinite continuance of a given rate. If officers of the Federal Reserve Bank of Atlanta made any contract or agreement either directly or by implication, such as is claimed by Er. Caldwell in his brief, he might perhaps have some ground for action against them as individuals,but I do not see haw the bank can be bound, for such contract would be clearly ultra vires of the Federn1 Reserve Bank itself. I have recently had some correspondence with Senator Glass on this subject and I am enclosing copy of a letter which I wrote him a few Personally, I sympathized with Er. Caldwell in the load days ago. he was carrying, and you may remember, endeavored to get the Board to take some steps looking to his relief, several months before final action was taken. When he first came to see me in May 1920 he opened his conversation in a very dictatorial manner and tried to frighten me with the terrible thingsthat he was going to do. I called his bluff and he broke down and cried like a baby. Then I listened to what he had to say and suggested the relief measures which were finally adopted. If the Federal Reserve Bank of Atlanta had been willing to carry these bonds for two years after the repurchase agreement was made, it is quite probable that the Fourth and First National Bank of Nashville would have received no more for them when the bonds were finally sold than they actually did for the peak of the bond market was early in the year 1922. Since that time Clovernment bonds have declined to a figure about equal to what Mr. Caldwell's bank actually realized. He may think that he would have sold the bonds at the top of the market but there is no certainty that he would have done Then again, why did he not borrow money on the bonds, elsewhere? so. In view of yourstatement that the Board would be interested in my views, I would suggest that in case the Board should decide to take any action at all, that pains be taken to have the whole matter explained thoroughly to Ur. James, and that he then be appointed a committee of one to tell Mr. Caldwell in his inimitable way, -where to get off". Very truly you I.P.G. Harding, Governor. Hon. CharlesS,Hamlin, Federal Reserve Board, Washington, D.C. P.S. Please refer to Board's files for my official correspondence with the Atlanta bank on this subject. •; • • COPY September 4, 1923. Yiy dear Senator: I have received your leter of August 31 enclosing copies of your correspondence with Mr. James E. Caldwell, President of the Fourth and First National Bank of Nashville, Tennessee. ( I have never known a more arbitrary and inconsistent man than Mr. Caldwell. Officials of the Federal Reserve Bank of Atlanta did encourage him to take over about $4,000,000 worth of subscriptions to the Fourth Liberty Loan, which were made by the employees of the powder plant at Nashville, in the Autumn of 1918. Following the armistice the powder plant closed down and the employees scattered. I have a suspicion, however, that Mr. Caldwell was not altogether patriotic in the matter, and that his bank received the benefit of the initial payments that had been made by the employees. Then when you were floating the Victory Loan in May 1919, the Fourth and First National Bank of Nashville subscribed very lightly, butpErsuaded the officials of the Federal Reserve Bank of Atlanta to advance them five or six million Idollarswith which to purchase some of the Liberty Loan issues a about 94. The Nashville Bank assumed that the 45 rate was g to be permanent, and when the rate was advanced to 65 in January 1920, the Nashvill3Bank found itself indebted to the Federal Reserve Bank of Atlanta in the amount of about $12,000,000 on bonds. This was at a time when the reserves of the Atlanta Bank were low and that institution was rediscounting heavily with other Federal Reserve Banks. At the same time the Nashville bank had about $4,000,000 of commercial rediscounts. Mr. Caldwell came to Washington to see me in April or May 1920 and pointed out that a sale of the bonds at that time would wipe out the surplus and impair the capital of the bank; and that the payment of a 610 rate on ho large a loan secur3d by bonds bearing only 4,1%, would eventually make it impossible for his bank to pay dividends, and would have a most injurious effect upon its business and standing. It seemed to me that the Atlanta bank was a good deal to blamerafid-4 suggested ---t-----o Mr. Caldwell that it might be arranged tdhave the Atlanta Bank, under authoi'ity of Section 14, buy the bonds from his bank under a repurchase agreement. I discussed this matter with Mr. Williams and other members of the Board, but the plan was not approved at that time, 11r. Williams, I remember being one of those who objected to it. // /---c 1- / Z--, / „..t_, 2.6,:a--v' -'z .. /1c-c.---Vt: • - 2 - In the Spring of 1921, the situation became even more tense, and the plan The arrangethat I had proposed in 1920, wls finally approved by the Board. ment was made, much to Mr. Cildwell's relief, and the Atlanta Bank carried Lqte in the year 1921 the bonds at the coupon rate for several months. the bonds advanced sharply, and I wrote the Governor of the Atlanta Bank calling his attention to the repurchase agreement, and suggested that he The bonds at that time were_somew,here au.und put it into effect. Caldwell_objected azirTarizangement be permitted, to odritinde-Uail ho 6ouia-i,et-par for his bonds although he had bought at The Board instructed the Atlanta Bank 94. ,leait half of themat,around The bonds were sold, and the Fourth and First '65-enforce the agreement. National Bank of Nashville carried 3200,000 to its surplus and paid an ?Ir. Caldwell issued a circular to his stockextra dividend of 3100,000. holders taking great credit to himself for his foresight and acumen in buying and holding Government bonds at a time when they were a drug on the market, and I assumed that the episode had been closed to his entire satisfaction. / A little later on Liberty Loan Bonds advanced to par or a little better, and then Mr. Caldwell berm to grieve over the additional profit that he might have made had the Feder'l Reserve Bank continued to carry the bonds. I really believe that the action taken was necessqry to protect the The same privilege business, if not the solvency of the Nashville Bank. was extended, in order not to show favoritism, to a few other banks in the Atlanta district which had patriotically subscribed to a very large No protests were ever raised by amount of bonds and had them on hand. these banks, but on the other hand the,r expressed themselves in most appreciative terms. If your files are not complete you can get further information from Governor Wellborn of the Atlanta bank, and I am certain that you will find that all proceedings were taken in strict accordance with the terns of the repurchase agreement entered into between the Federal Reserve Bank of Atlanta and the Fourth and First National Bank of Nashville. With sincere regards, I am Very truly yours, Hon. Carter Glass, United States Senate, Washington, D.C. Digitized forL. FRASER 3 p t tib3r 11, 19.26. Dear Gov .n‘nor I i)n-1 h)r..nvith tü fL.1 in connlc.btion Ait'n Fourth & First Naticnal Bank, of iLishvil1.3. =ill ;cu 'a,: jOoci ,enoug,11 to rddid this ov1r, 1;:a.ying wa11, nd writ th! 13ri3.7: of Mr. C41d.- rse sow% viewe on it. trial ma:Itini ; of tilt 3o.Ard of Dtreictoril of tha AtlantA .3anicIa on tha 14th, Alai thy xi:3h us to violUn-a to thilr anawar. to Ei-ia th. any s.dviag in vialv of th bef ore uk; 4! euz.ht fact that :hc mitt-3r tzaey aolie but thi ?that; 3oard Nould b, v.try much intlrts tad in your vi V.44 nlrhap,t y011 so Cbil vps may hav In que“t ion very talvz.h 1-hth4r th soa)thinE b3for,1u blforl th) 14th. gvita t 44110, Sim;:r ,ly yoare., Hon. 7. 1 ?. G. Burrilre, Governor, ied,aral Resertr3 Bank, Boon, 1,4ass. y ;rail raclivi „„. September 7, 1923. )ear Governor Wellborn: In behalf of the Pederal Reserve Board, acknowledge reoeipt of y4nr letter of tember 5th, with reference to a petition Whion you enclosed of the 2aurth 11(1 2irst National Bank of Nashville. Governor Crissinger has direoted me to place this matter on the iocket to come before the 3oard at its next meeting, lues day, Septe•iber 12th. Very truly yours, 'rn. W. Hexton, General Secretary. n. Governor, Feloral Reserve Bunk, Atllnta, Georgia. FEDERAL REsERA!E BANK CO OFFICE OF ATT.ALTS7T_A_ September 5th, 1923. Govnwort_ /thl fr- 7/ 3 Federal Reserve Board, Washington, D.C. Attention: Hon. D.R. Crissingerf, Governor• Gentlemen: ( "4' I am enclosing herewith the Petition of,the Fourth and First Uational Bank of Nashville, together witKcopy of our reply. The latter, however, will not be passed upon by our Board of Di— rectors until their next meeting on September 14th. 'Jo submit both of these documents to your Board, and think it would be well for you to r!) -o over them carefully, and give us the benefit of any suggestions -which, in your opinion, would strengthen our reply. It is probable that the Fourth and First 'will appeal from us to your Board, or take SOMB action in smother direction. I trust that you will consider this natter closely, and favor us with a reply at your earliest convenience. Very truly yours, Governor. RECEIVED Enclosures (2). / REPLY OF FEDERAL RESERVE BANK OF ATLZTA To The Petition of FOURTH AND FIRST NATIONAL BANK OF NASHVILLE For a refund of excess interest claimed to have been charged against and paid by the Fourth and First Utaional Bank an carrying Liberty Bonds — The mount of excess charge claimed Being approximately 0235,000.00. TO THE FOURTH AND FIRST NATI,,UAL aiNK OF ii,s,SHVILLE: The Federal Reserve Bank of Atlanta has received and its officers and directors have carefully reviewed your petition in the above mtter. Ihe petition contains a damand for 0235,000., which dcmnd is based upon a contention framed in the petition in the follouing language: "The Fourth and First national Bank claims that The Federal Reserve Bank charged it a total of about $235,000.00 exoess intereot on account of carryiagLiberty Bonds over and above the rate at 'which it agreed to charge thereon." The above stated claim purports to be predicated upon same kind of a contract agreement or understanding to "carry Liberty Bonds" at a ii specified rate. 1410 Petition of the Fourth and First, %;hile ilaking a money demand oaly for "o=oss interest" claimed to have been charged by ti0 Federal Reserve Bank betueen October 10, 1919 and May 2ii 1921 (the date of the rem purchase agreament), also complains of certain acts of the Foderal Reserve Bank of Atlanta done under that agreement. any ccuplaint made Trith "Male it is impossible to connect respect to acts dons wider the repurchase agreeuel nt wibh a demand for interest paid prior thereto, the complaint of the Fourth and First in that regard TAU also be noted herein. The petition of the Fourth and First has been carefully ex2mined in an endeavor to find a statement of what is claimed to coustibuto the is now demanded, buQ ilouhere 1 )235,00040 contract, for the broac-.1 of which ; there-1 n do we find any such angooment, or oven the summry of a state of which, if true, would be sufficient to imply such an agreement. aate It does appet-ber froa th:) record, that althour:h tiler° ras no ouch 1 e::precio agroamnt or oici ti l'oderal . :tcserve Dant: did, no'aritilsding the constant ari increasing dc.T::'z'xls upon it, carry for the 20',.7.ri...11 arL F-;:st 1c...- ..t3.crs113,.-3:13:„ at a rate o2 four per cent., an augrogate of oblirations secured by 07,7ormlont bedc tine to time (in reuzr3. figures) S..*vcra 011#000#000.00 to over C,1110004,000.00 up to lioveraber 10# 1919, t7e1vo 1 nonths a2ter tho silln.img of the, armistice, arid low; after practioally ail the other banks in the 3t7th Federal Rosc, ,rve 1)1strict had disposed or all a..? the bonds subscribed for by then)except such as they night, bine desired to retain for trreotmen.'k.:, purposes.* The record shmts, 2urthemore, tho,t the Federal itesorre Bank of Atlanta, in its execution of the repurchase agrectrat:, to which reforenoe is /male above, Tron.t to mztraordisttry leazths in order to protect the Fourth and First acainst the situation into ,Jhich it had Gotten itseUt thrmagh the undue puroluso tuvl continued hoidinc of amessirc mounts of Liberty Bonds* 5:he record submitted by the rctitioner does not aocont the state:mat 02 i.r. Calttro1i there2or, February 1p rao sho7.- but 17.vs oi-l)oci4ou: Iris letter of 1922 to the stockholders of his ix'ak, that the Fourth nnit Pirst 7.3a:11: realized frau WI 'rant% of Liberty Bonds a profit of otror 1300,000 - 0200,000 of which was passed to perm:milt surplus and out of ths rona-indoran era divideml 02 five per cent declared* It is Irapossiblo to escape the conclusiat# therefore,, that the Fourth and First has no eoollaint at lur or in eclui.ty ulia;r contmc:,;, 521 act, or in good cmtecienoe uit the Federal Itoserre Baal: of At/ex:tap bulk tbat, on the contrary, it, its °facers, ani stockholders, should feel grata. the Federal Reserve Bank of Atlanta for the Inailgeuts sham terord tho Perth and lit-trat and for the excsoution of th.) rapurcInso ['Velment, .uhioli alone sexed the situattm for it, and brough4 about in the end a porronent cnviclenb of the surplus of the Fourth and First =1 an extra dividend stot:kilo/4°r , to -3. • 11/ Although the petition of the Fourth and First could, under no view of the case, or in any aspect which it presents, be regarded as presentin g any drI1an0 which would be cognizable in law, the officers and directors of the Federal Reserve Bank of Atlanta fool that the charges of unfair dealing as contained in the petition, although indefinite and really disproved by the petition itself, should receive answer. It is not alone a desire to sho.: courtesy to the distinguished gentlamen who are in charge of the affairs of the Fourth and First which promps this answer. e have a sincere desire to answer at all times any critician directed at the Federal Rosorvo Bank of Atlanta, although 1:70 nay knou such criticisn to be groundless and unjustified. Therefore, we will consider briefly the argunents and contentions As sot up and contained in the petition, answering the subdivisions thereof seriatim. Subdivision I of the petition makes reference to certain historical facts, about which there could be no argument - nano of which, hormvers have any bearing on the conplaint, even as matters of inducement. didodivision II appears to make no complaint of any kind against the Federal Reserve Bank of Atlanta and merely sota out, the fact that the Fourth and First subscribed for 41400,000.00 of the First Liberty Loans 'fetich it appears to have disposed of in an orderly ;Tay and -Athout any loss. Subdivision III of the petition contains quotations or excerpts from the Sixth Annual Report of the Federal Reserve Board, and Iran an annual report of the Chairman of the Eoard of Directors of the Federal Re servo Bank of Atlanta. These excerpts enhody well knom facts. If they have any relevancy at all to the contentions made by the Fourth and First, it is the ions which hot interesting fact that such excerpts make reference to condit then boon avercaae and which had passed into history. Ibese reports refer to to the efforts which the Federal Reserve Banks bad theretofore made would prevent carry government: secured obligations at a rate of intorost which loss. They were framed in the knoaledge that, genera137 speaking, all of the war issues had been than digested by the buying public; that the load had been carried and the emergency ended. The Federal Reserve Banks had adopted policies as stated to avoid for the loss to the banks vhich.uwe necessarily the distributing media issues. The armistice was signed in Udvanber, 1918, The last war loan, viz: the Victory Loan, had been successfully floated in May 1919. By the ibed end of 1919 the banks had Llarketed the bonds for watch they had subscr of what woe and the Federal Reserve Board was making a historical review then an accomplished fact. caseil It is worthy of note, houever„ that while in practically all the Liberty Bond holdings presented at the close of 1919 no probleolto amount of Gut* oemeroial banks, the Fourth and First still hold an enormous bonds. Az late as April 1920, Er. Caldwell, President, wrote to Mr. First on Walborn, Governor, referring to borrowings of the Fourth and goverment securities to an aggregate amount of #15,434,000,00. l If the ourpose in making reference to the annual report of the Federa Reserve Board for the year 1919 be to charge the Federal Reserve Bank of rediscountm lanta, by implication, with violating a pranise to make rates for loss to the lug loans on government securities at such figures as to avoid had banks, the obvious answer is that the policy referred to by the Board of boon faithfully carried out by the Atlanta bank to the full0extent reasonable expectation. was It was not until six months fM after the Victory Loan the armistice was finally out of the way and not until a full year after four and a half signed that the rates were advanced fran four par cent to par cent on government secured paper. Subdivision IV of tho petition sots forth certain ctatistios with reference to the total of Liberty- Bond subscriptions in the State of Tonnossee„ and the total subscribed by the Fourth and First. The officers and di- rectors of the Federal Reserve Bank of Atlanta do not undertake to question the patriotism of the Fourth and First in subscribing for Liberty Bonds as the:: wnre offered. Thoy desire to stato, houover, that a no time or in o.-wway„ either by letter or verbally, did they encourage banks to bwor or subscribe for Liberty Bonds in excess of amounts which tir3 banks felt reasonably sure night be passed on to the general public. The banks, it is true, T:ore tho distributin:, for Lilo bonds, but the bakc wore not expected *la inidfinitoly to tic up - very largo percentage of their resources in those issues. That the banks generally under- stood this is apparent from the fact that no banl: in this District found itself to the same =tent as did the Fourth and First in what it terms in its petition " a very precarious situation!' duo to Liberty Bond holdings. (Asher banks were holding bonds either directly or for their custmors, but none to the extent of the Fourth and First. In July 1919, the Governor of the Federal Reserve Bank of Atlanta wrote Mr. Caldwell, President of the Fourth and First, Galling attention to the large amount of accommodation which that bank then had.1414,600,000, being far in excess of that enjoyed by any other member bank in this district.' If tho Fourth and First felt it to be its patriotic duty-to sub. scribe for Liberty Bond issues far in excess of that which its customers could absorb, and it further felt it to be its patriotic duty to buy Liberty Bonds in the open uarket to hold up the price ,ux1 to create a L';2.rket therefor, as indicated in the letter of Mr. Cold:7011 of ay. 16, 1919, we have no desire to criticise such motives, whataver night be said with reference to the busdaless policy involved, but we do call attention to the fact that no 91-iher bank in the Sixth. Federal Reserve District regarded it as proper bankint to Garry millions of dollars in Liberty Bonds or to go out into the open market and buy the same, and no other bank except the Fourth and First Uational rested upon any belief that i had the right to demand and expect indefinite aceccrAodation, at a rate of interest actually belou the yield of the bonds 6.11(.1 far belou the rate obtaining on paper arising mu, of ordinary coeiercial traneactions• -V. Subdivicien V of the petition purports to set out a portion of a communicl'AaA said to amanate from tlx "Federal Reserve Board of Atlanta," Assuming that by "Federal Reserve Board of Atlanta" is meant the Federal Reserve Bank of Atlanta, vie call attention to the fact that the caumnication in question did not come frole the bank but frw. Mr. Silas U. Davis, the than Goernmont Director of the Savings Division of the Treasury Department of the United States located at Atlanta. The cenrundcation was from a branch of the Treasury Department, and uhilc this branch operated through the Federal Reeerve Sank of Atlanta as fiscal agent, the same Ivas in no wiso connected vrith the Federal Reserve Bank as an institution of banking and discount. t.G. say this hbove II-I-LI:cut any critisimm of the circular referred to, because said circular contained sound advice to investors wholtfould afford to 2,11tin-1 bonds, hols do ee rcfcr to Lix.: fact that the bank, as such, had ictbirg to do -sith the circular in an effort to evade any issue made in the41ZEMIXISii petition of the Fourth and First. UO merely cell attention to the fact that the circular came frau the office of the Govornment Director of the Savings Division of the Treasury Department at Atlanta, because that fact alone whould have indicated to the officers of the Fourth and First that the Federal Reserve Bank of Atlanta as making no representations to carry for amber banks at four por cent interest Liberty Bonds bought in theAtim =kat, whatever 'eight have theretofore been the policy of the bank vith reference to initial and original subscriptions. If the Fourth cad First wanted to buy in the open market 16,000,00040 of Liberty Bonds at less than par "in order to average down the price on the bonds which it had subsoribed for at par from the govern"acne, that was its business, and, apparently, its so doing had something to do 'with the happy results to which Mr. Caldwell makes reference in his letter of February 1# 1992 to his stockholders, but surely it cannot logically be said I .7m that the Fourth and First should have expected the Federal Reserve Bank of Atlanta to lend money upon the security of these purchases for an indefinite tine at four per cent interest e7hen it Tins then obtaining mon,c7 at a rate hie'her than that frco other Federal Reserve Banks and at a tine when its credit facilities were taxed to the utmost to take care of the conmercial delvands of this section. 17e assunD that the circular entitled "Average your Liberty Bonds" is inserted in the petition in an e...ttemyt to set up the "contract", for the breach of which the Fourth and First non claims a refund of interest* If this be the purpose in reeking reference to the circular, we sultait that this purpose vtolly fails. The fact in that the Federal Reserve Dank of Atlanta at all eimos made it perfectly clear that it ought not to extend ailr pref..e, erential rates on loans secured by bonds bought in the open, market. For example, on May 14, 1919, Lai. Wellborn, Governor, wrote 11r. 17ebb, Vice President of the Fourth and First as folloies: "Recalling conversation with you several months ago, in regard to your bank going into the open market and purchasing Liberty Bonds. You then desired to letio-.7 whether or not 17e 7ould carry those bonds for you. 11,y recollection is that T. told you that this proposition did not appeal to us very heartily. "I notice that :Tour bank recently made a large purchase of these bonds in lieu York, and that we are earring for you $48500,000 of this purchase. "What do you think of that portion of Section 4 of the Federal Reserve Aot, which reads as follows: lEach Federal iZeserve Bank shall extend to e.toh ,'member bank such discounts, advancements, and accommodation4 as reay be safely and reasonably made with due regard for the claims and demands of other member banks.' Mr. Caldwell, President, on May 16th, replied to lira Wellborn's l'etter of May 14th in part as follows: "Then M. Webb returned froel has visit to you sometime ago* lie stated to me that you merely said you thought it would be advisable to postpone the matter of purchasing bonds in the open market until after the Victory Liberty Loan was oucc, of the ray. That, as I say, was the impression that he conveyed to no on his return, and I Mid nab gather that you thought it On the contrary, we ill-advised to Inr,r Governmed bonds. do, as it would to thin sensible thought it would be the its securities that finding in clearly aid the Government open the in friends market. had same On May 20, 1919, Lt. Wellborn, Governor, wrote Mr. Caldwelli; President, as fella:rot "I Invo your lutter of 1Gth, vtich tras recoivod during ritr absence an. a visit 4.0 our How Orlerns Branch 13f_'.nic. I rgret very moll tir.t r.Webb :_dsunderstood no in our conversation relativo -to yourc oifl the opon. v..:,r1zot a1pArchasinG Fourth Liberty Loan Donde. "Au I mirk st,00d it, ly; st:vtozi that your bal.& thin!: a purchase of those 'bollasin (rtic:r to reccup the losses o 'ahat you had alroAr purohascxl, and -rrished to know froame if it would be f.-tgootzblo to ur ban!: to oc,.-cry these bonds for v-cur barilc., in case tho vurchaces rr.d.o. I told bin I did no' &n11,911 02 c proposition for the rOC.2011 'U1C1 i=ve all that ye could possibly tako care or in A/lancing tho ba3,13.,:c of thic Divtrict ii purcir.sing Victory Loon notes, in vie-.7 factthxt, it 1,rati apparent -Vint the banizs iiia tine would of 'rye to take nor° o.i these bonds than theyin previous loan cc,r3.1,445.Gns, since the enthusiasa of ho public U71..3 trailed to stsac extent; therefore, the burden road fal. rninly upon the banks in subscribing to the recon4 Victory Loan, to say nothing of the hea,r,/ (lemma that %Tore are are beirk; upon us in connection with the cryini; of comiodities, and the limn- (3.m.?..nde that wore sure to oom incident to the vikiN; of crops. Of "I ;Ash ye,, to undoreAnd that Ile ir.ve no objection 7yir.tc7or, nor oriticima to mace, with regard to oarrying for ;our bank gow,rrrmnt securities. 17e are v.11 cram/ that you st-bscribed very all oalpf.,- igns, and -.7c, are perfectly carry nest) securitios for you as long Ct.t;yousC2 /tit to el' or the= to us. "You hfAte done notleng IfirAever to disappoint us - i the contrary. r01.1 :1":170 dflte r0.401 to please us, :72112 therefore I very =oh regret that you foci as you do in this mtter. 0 , !,i , i 14 efli "17,3 fool that it we agree 1,0 authoriso oL4r =a:be:7 b:.-2:1:21 a this tire to go into tho open marlmt and purcInso bonds and carry thou. for ,, . I. x4,10 l zei.iu...t, . _. -1, night open a ridc field of „c.v.. , Of.,11&.*, speculation =their rx.i.rto and •%he triaunt might be so large Vila+. it 77ould co seriously afiacct our position that we would not. be able to aid our nether Ir:-.nks 5.n taking care of the comercial, agricultural, and .1seustriL l intorests of our District. "I C1,3;11a1:10 that yo'cl agree with me, that the purchase at this time, of Liberty Bores or ismie prior be Victory Loan notes can h.rdly be classed. as assisting Govornry.2x4 finc-L-Icing. The proc,xxis of the sales of thoso issuos mre used in liquiaating the curront indebtedness of the Goverrraent irziediatoly subsequont to their b zlarkotod„ and any trading in sue bonds no merely roprc,;.-,ent-s a 01,221.7 in cun,ership. It -':,rue that a heavy deLund for thou in the open LE.'171.:ot -.;-ould have a tallowy to nave the. prioo tovard pea., and this is no doubt a good *Aft to be done, but I fo,: if the Fed=1 :toserro Banks arc called upon to carry such purchases„ it ray be tazinc its strength to too peat a degree, a.C. to the ex:Awl:on a the weds of ocx.::aoroo. "11(Irsoric.11y, I regret very rztch that iv latter to Uri trobb 110 caused you to foci 1110, shock and a very groat disappointrmt." I ocrtrinly did not int.atid it to to so ,a-.1 regret that it has 11;41 thiz, "I value your ;pod opinion very highly, .111ki trust upon rofixotion, since I rriirn mde tin stv..tenezrt, position, that you -Jill cow to the conclusion that we are doing o.1.1.7 what business prudonce and proper raanngement derands on our part. -g.. "Today being the day fixed by the Secretary of the Treasury for the payment of subscriptions of banks in this District, our offerings for rediscount have been heavy, and I look for them to increase to the point that our reserves will go down to such an extent that we will have to call on the other Federal Reserve Banks tc rediscount for us, end the other banks being in the same positien as ourselves, they are very likkly to have all that they can stand up to." nothing could be plainer than the fact that the Foderal Reserve Bank of Atlanta did not agree at =Iv time to carry at a four per cent rate Liberty Bonds bought by /limber banks in anticipation of a prolit„ nor did it agree to carry the same at any other specified rate. lio'ehing could be clearer, furthermore, than that no repreeertations exre ever ne.de by the Federal Reserve Bank of Atlanta, or by avone in its behalf, that any Liberty Bonds acouired by banks would b( carried indefinitely at a four per cent rate. ribile the Governer, in his latter above quoted, says "we are perfect4 I willing to carry these Securities for you as long as you see fit to offer than to us", he did not agree, nor could he have agreed, to naintain a four per cent rate. The Reserve Bank did continue to carry the bonds at four per cent for almost six months after the letter next above soz out in full Yeas written, and continwd to carry the bonds after November, 1919, although at Agher rates, until the repurchase agrecment was executed, vhich agrement, as will hereinafter be sham, eltainated all questions of interest charges. Subdivisim'n of the petition teals entirely with certain correspondence beteleen the Fourth tend First and the Foderal Reserve Bank of Atlanta, a large part of Tthich has reference not to Liberty Bonds, but an entirely different thing, to---At: Treasury Certificates. Insofar as the corresponduace concerns Treasury Certificates, it is, of course, wholly irrelevant. ho telegram of October 14, 1.018 1:ran the Federal Reserve Bank of Atlanta to the Fourth and First contained a statement that the Federal Reserve Bank would discount notes locured by the Fourth Loan Bonds at itur per cent, provided that the rate of the Fourth and First to customers did not exceed four and a quarter per cent. Discounts wore made and the matter handled at four per cent for over a year thereafter and until november 10, 1919, Trhon there was a raise in rates to four and a half por cent. facts certainly '2ho damonstrato that thereiras no fanure on the part of the Fodoral Reserve m of Bank of Atlanta in living up to the letter and spirit of the tolegro October V, 1918. Lh letter of Deomber 2* 1916 had reference to the purchase of Treasury Certificr.tes to be izcuod in anticipation of another issue of Liberty- Bonds. lho letter of May 14, 1919, sent by the Governor of the Federal n Resorvo an.nh of Atlanta to the Fourth and First, is not sot out in the petitio a preceding portion of the Fourth and First, but the some is set forth in of this an000r. In° Purpose of thl letter of 4aty 14Lhwas to Gall attention dations to an to the fact that the Fourth and a'irct was then receiving accamio extent not ;ranted any ()Liar The extent of that excess accommo. the Fedora). Reserve dation is indicated in a /otter written by the Govornor of statoment thoroin Bank to I. Caldwell, President, an July 23, 1919, by a the Sixth District* set out of the largest amounts loaned to any one bank in viz: Alabama Florida Louisiana 12,000,000 2,000,000 3,400,000 Georgia Tonnossoo ississippi $ 5,4001000 11,600,000 380,000. The petition of tho Fourth and First sots out on pogo 14 a portion of a letter oritton by Er. Wollborn on Juno 26, 1019. The entire letter is as folloas: "I an In receipt of year letter of Jul.° 27, and al very glad that you have rrittertne upon this subject. mue arc vcry anxious for our nnmbor bonks to subscribe to the various offerings of the Troasury Department, which till be fraa now on confined to Treasury Certifioatos or Indebtedness. I on quito sure that the Government re will not resort to any more popular loans through bona issues* and therefo Treasthe assist to the country out through it is very nocessary for the banks dness. ury Department by purchasing fron timo to time Certificates of Indobte which on subject the oth do to nothing have to no Those offerings appear to d to In referre natter the that say Uo perni4 “rote you some time ago, and banks roing into arcy former corrospondenoo related to the action of the member for thoolsolves the open mc.rket and purchasing bonds in oiclor to make a profit it of rhiehorould therefore tie up the resources of our timber banks, and up --ith tied be course follous that the Federal Reserve resources would also and banks rie:Inbor these open market operations, oxid thereby render both the the Troasor gs the Federal Reserve Bank impotent to take care of the offerin today ma to make ury Dopartmont, and as I see it the proposition that you to subscribe largely Is entirely along another lino. I not only request you but urge upon you dness, Indebte to these offerings of Treasury Certificates of the greatest tako trill Bank Reserve to do so, =Irish to add that the Federal your bank." for ions Obligat those g pleasure in standing back of you in carryin S The excerpt fromhi 1Qh-er of June 28th„ 1919, as set out in the petition of the Fourth and is enZitely misleading. In the said letter of Juno 28-4h8 the Fourth and First ivus not urged to buy Liberty Bails, but the Said. letter ic set out in full above and speaks for itself. N(phere in this correspipAcnce is there l'Ad even a reasonable basis upon which there could logitinately, either at lau or in good conscience, be predicated any drra(tnd for a roLate of interest. Subdivision VII of the petition contain a s%f'.Uamont that the Federal Reserve Bank "carried all loans of the Fourth and F4rst scoured by covernnent obligations mr to Ndvorber 10, 1919 at the rlAc of ?, .,)er cont. Thi3 1.71.18 the bonl rate an the 30cond Liberty Loan issues and under the bond rate on all other later issues." That'statoment is, of coure*true, but there is nothiaj, any7hore in the petition contained to sustain the charge which is . rade by iLiplication that when the r-te was finally raised such action was in violation of soma contract or ,,zroentmt. -Trum Subdivision. VIII of the petition contains a recital of the dates upaft rhich raises in rates wore made. It shoGs that the rate romined at four per cent until Novenbor 10, 1919, :.;.ndl4US gradually increased until Lai 68 19218 when it reached six per cent, declining. This La* is followed by the unsustained charge, unsupported by doom:en:Lary or other widener: of any kind, "thc Poderal Reserve Bank had induced us to buy these large amounts of bonds upon the oxpross agreement that theyrould be carried at not exceeding the bond rate, and that to increase the rate ms a broach of the bank's agreeaent w;t1. us." elabWe IrrtY say* such a conclusion requires no answer, inasmuch as the orate petition prepared by the Fourth and First sets out no paper, letters document, or even the recital of a verbal statement which could by air stretch of the ima7inatien be regarded as an ex:preps a7lreenent to cz,rry bands for an indefinite time at not exceeding the bond rate, Ile nicht roll pass by the charge rithout further comment, but inasmuch as this is not r legal proceedinc, but bay a correspondence between this bar* and one of its CT maribers, ve submit a fair renarks slarr thekundless nature of the charger 10, 1919, Ia the first place, the rate remained undisturbed until november Surely this was a most complete cempliance with 17,wve rested upon the Bank. any moral oblieati•n7hich A7ain, it is well knoun that the Federal Reserve Board is the body rhich finally determines the rates obtaining fret time to time. The Federal Reserve Bank of Atlanta could not, had it de- sired, hexe entered into any agreement ntich would be so far beyond its pm-ors as that contendedtor by the Fourth and First. Repeatedly, state- rents were made that the rate on Liberty Bonds would inevitably be advanood. In his letter of July 50, 1919 to Er. Calduell, President, hr. liellborn stated: "Tho increase In rates e the Federal Reserve Banks for carryin?, Govern... merit Bonds is bound to came sooner or later - it is simply a euestiart of time." Tn another portion of the same letter, Dr. Wellborn said: "At the conclusion of the Victory Loan in. Day, it was eonorally understood that our present rate Ivould remain undisturbed for a period of aL, least six months, but after that time, I feel reasonably sure that the rate rill be raised in order to brine around a liquidation of these loans and rclicve the banks as much as possible." Gentlemen as intelligent and well informed as the officers of tne Fourth and First Aust have knoun that there could be no such tning under the law which roverns the Federal Reserve Banks as an agreamont to carry obligations, hauever secured, indefinitely at stationary rates. -IX THROUGH XI.X."Whatever is contained in subdivisions both inclusive, wbioll might be ccnsic:cred as relevant, to the contentions of the Fourth and First, has boon substantially answered in the above and foregoing, or will be answered hereafter in what is said with reference to the matters contained in the subdivisions of the petition subsequently herein indicated. THE REPURCHASE AGREEMENT. Whether or not there vms any justification on the part of the Fourth initely on its , and First in feeling satisfied that it would be carried indef rate, the fact is that obligations secured by Liberty Bonds at a four per cent • Fourth and the Federal Reserve Bank or Atlanta finally, in order to aid the on petition as First and to e.xtricate it Crain what it describes in its act referred to in the petition very precarious situatioe s entered into the contr ment." of the Fourth and First as the "repurchase agree This agreement beceme after the six per cent rate effective as of May 28# 1921, only twenty-tvro days of the repurchase agree. went into effect. Simultaneously with the execution frcra the Fourth and First the ment, the Federal Reserve Bank of Atlanta took in par value of $7,987,850.00. Liberty Bonds which it then held, to the amount took over said bonds I The price at which the Federal Reserve Bank of Atlanta carried by the Fourth and First I was the price at which tho seme were then being was relieved of its bond I on its books. The fact that the Fourth and First ing the same on its books is holdings at the prise at which it was then carry h and First, passed at a sham by a resolution of the directors of the Fourt meeting of the Board on the 27th day of May, 1921. One of the preanbles of that resolution is as follocrs: ng to purchase `therms, the Federal Resort° Bank of Atlanta is willi t at which amoun the to certain of said bonds, at a price equivalent , upon books its on. this bank 3.s at this time carrying said bonds at the same the chase repur condition, however, that this bank will Atlanta of Bank ve Reser al some prioe paid therefor by the said Feder a in ined conta and forth and upon terms and conditions fully set Bonk ve said Reser the en betwe contract proposed to be entered into is hereby made in and this Bank, a copy of which proposed contract be spread upon the to is and ution resol all. respects a part of this minutes as a part thereof." said resolution, The repurchase agreement, entered into pursuant to within a maxirawa time of. two years provided that the Fourth and First would, at 81,987,850.00 (that being fram and after May 28, 1921# buy the said bonds by the Federal Resort° Beak the exact figure at which they had been taken aver resolution of the directors of the of Atlanta, and the figure =fled in the lected at the time of delivFourth and First), plus interest accrued and uncol ery to the Fourth and First. On the purchase price, there was to be paid at monthly intervals on the 30th day of June, 1921 and thereafter, a sum equivalent to one-tenth of one per cent of the aggregate principal amount . or said bonds. The contract provided in express terms that the Federal Reserve Beak of Atlanta had the absolute right, at its option, to require' the full payment of any portion of the purchase price at any time unpaid, upon giving sixty days notice. 'he agreementwas full and complete. it is substantially sot forth in the resolution of the directors aforesaid. The resolution of the directors expressly recited, ealaae other things: "It being understood, houover, that said Reserve Bank is under no obligation to ronaa or extend any loan or advan oe theretofore mule by it to this bank, or to :rant to this bank any new loan or advance." The agreement was carefully considered in all of its phase s and discussed at length by all parties before the same was signed. The contract was full, complete, and explicit in its terms, and it is not even charged in the petition of the Fourth and First that it was not lived up to in every particular by the Federal Reserve Bank of Atlanta. It is true that the Fourth and First compleins particular com- plaint will be hereinafter fully considered) that the terms of the repurchase agreement 1A)re„ with respect to certain of the bonds covered thereby, drastically applied, but no complaint is nado that the contract itself was not fully complied with by the Federal Reserve Bank of Atlanta. Under the terms of the repurchase agreement all quest ions of literest charges were eliminated, because the yield on the bonds automatically took / *are of any returns received by the Federal Reserve Bank of Atlanta under the agreement. Any controversy which might have existed prior to the execution of said repurchase agreement was terminated by that contract, aml the officers of the Fourth and First National Bank expressed thems elves as being very grateful to Us on entering into the contract. Any interest drain an the Fourth and First was checked thereby. The agreement put into effec t a plan of salvation. which, in this case, actually saved. Shortly after the repurchase agreement was execu ted the market value Of Liberty Bonds began to rise. Uben the bonds reach ed a figure at which they could be readily disposed of at or above the contract figure (that isi the figure at which they 110 been acquired by the Reserve Bank from the PO and First and resold to the latter), the Federal Reserve Bank properly took the position that the repurchate agreamont had served its purpose and that the long standing obligations of the Fourth and First should at last be liqu dated. Accordingly, under the terms of the contract, the Reserve Bank exercised its option to call for the payment of the remaining unpaid purchase price of the bonds. The call, ha/ever, was not, peremptory, ThelkoVermar Of the Reserve Bank suggested a sale of the bonds by the Fourth and First in the early part of Ne Tambora 1921. It was not, until the follouing Docedber that the sixty days notice was given under the contract, and than every opportunitywas =bonded to the Fourth and First to sell the bonds in an orderly my-without dumping the same on the market at one time. It was not until February 1922 that the last of the bonds were taken up by the Fourth and First, or sold by it. It is woll to bear in mind that under the contract the Federal Reserro. Bank called for the paymenL of the unpaid purchase price duo under the repurchase agreement. certain of the bonds. The Fourth and First responded by selling at intervals The bonds wore sold by the Fourth and First - not by the Federal Reserve Bank. There is no contention made that any proceeding taken by the Federal. Reserve Bank vas inconsistent with the contract of repurchase, or violative' of any of its provisfaus. As we understand the petition of the Fourth lank First, the most that IL contends is that the agreament should not have been availed of to bring about a liquidation of the obligations in January and February$1922. Let us inquire for a moment as to whether or not the Federal Reserve Bank was harsh in any of its demands. In Subdivision XVI of the petition is contained the statement that the Fourth and First intended to carry those bonds until the spring of 1922, at which timo it felt that it could make a large profit. The complint_is that the action of the Federal Reserve Bank, in carrying out the contracts prevent the Fourth and First fram realizing that profit. t had, for a long time, conAs heretofore stated, the Fourth and Firs ng e of credit in the Reserve Bank, attempti sistently absorbed noro than its shar the plea that the bulk of its obligations to junti2y that diocriminatiaa -elth Justice to other member banks re." arose out of its "Government finmcing particularly at a tine rhen, the facil4ties quired equal accamodations to all, taxed to the utmost. of the Federal Reserve Bank retire effect this discrimination in The repurchase agreament continued in First. favor of tho Fourth and When finally the time arrived when, by the rchase agreement, the Reserve Bank could at application of the term of the repu th upon a basis which would yield to the Four last liquidate those obligations purchase price, as contained in the conand First at least the amount of the anything Bank could not in fairness have done tract, the officers of the Reserve staniing. eccet relieve the situation of long 1 I of a definite plan and purpose. The repurchase agrecment was nade in aid red into as a vehicle of speculation in As heretofore stated, it was not ente continue to hold its bonds until such tin', order that the Fourth and First night mum of profit. No man could kna:r at the as it felt it night realize the maxi ed for the payment of the unpaid purchase t:;4Je the Federal Reserve dank call It e. inue to show an increase in market pric money that tho bonds would cont t that t have declined again in price. Abou Tras quite possible that the7 migh an a Bonus Bill would be passed; and, in such tine it was believed by a:nu that obliged to issue bonds, which would of ovent, the Government would have been the price of outstanding bonds. When the course have resulted in deprecating gations eel the repurchase agreement bonds reached a figure at which the obli s, the officers of the Federal Roscrve could be satisfied by a sale of the bond expected to take the responsibility of Bank of Atlanta lhould nob have been the obligation at the contract figUre. disregarding the opportunity to liquidate r ito contract figure, and then declined bola had the bonds reached or passed the keen boon one for which they would have felt the resulting situation would have boon justly subjected to criticism. regret, and for which they would have The ropurchase agreement was ontered into to get the Fourth and First out of its "precarious situation!' - not to al1o.7 it indefinitely to hold the bonds in anticipation of realizing possible larger profits. The petition hints at groat lvssos to the Fourth and First an account of actions of the Federal Reserve Bank, although nothing definite with respect thereto appears in the petition. On February 1, 1922, hwavor„ Mr. Caldwell, the President of the Fourth and First, trote his stockholders as follous: "To the Stockholders: "EnclosQd i.ora:7ith you ..:111 find a conbined statelJent of •,ho condition of the Fourth and First liational Bank and the First Savings Bank Trust Company, at the close of business, January 31, 1922. "The min points to 7:hica your attention is called is the increase in fixed surplus of $200,000.00, making the account stand at ea,410,000.00, and the decrease in Government bonds of 0,000,000.00. "The Fourth and First rational Bank has demonstrated that patriotism and faith in our Country pays. *Palen this Country entered the var. the Bank enlisted rithout rosorvam tion. It considered that its position in the banking world Galled for all the assistance it could give the Government in its financing. It regularly headed the list of subscribers to all offerings of Liberty and Victory Loan andTreasury Certificates, furnishing the Government through these various issues quite $40,000,000 - a far greater per cent of its capital than any other bank in the United States. At the Andup of these campaigns, it had an hand quite $13,000,000.00 of Victory and Liberty Bonds, which declined in rarket value to about 83 cents the dollar, creating the appearance of a very severe loss. But the : Bank's confidence in our Cbuntry caused it not to lose faith in the ! securities or sacrifice than, and 1,, has recovered the loss, and ac- I tually returned a credit to the profit account of over 300,000.00 0200,000.00 thereof being passed to permanent surplus, all out of the remainder an extra divid.nd of 5% has boon declared, as per notice horoutth. "Yes, wo repeat it, the Fourth and First National Bank has had its patriotism and confidence in the Country splendidly vindicated. one reading that letter, and knot-ring that the fortunate result depicted therein was possible only because of tho help of the Federal floservo Bank of Atlanta, rmuld dream that -while Mr. Caldwell *max 1:riting the same he felt that his bank had been the victim of harsh and unjust treatment at the hands of the Reserve Bank. In all fairness, we subrrit that the record contains only a recital it consideration Shown the Fourth and First by the Federal Reserve Bank of Atlanta* which alone enabled the liashvillo bank to send its stockholders the above recital of ite achievements. -XVThis subdivision contains statements which, in effect, would chE,rge the Federal Reserve Bank with refusing to allow the Fourth and First an indulgence of ten days after February 2, 1922, in which to dispose of a,200,000.00 of bonds to one of the Farm Loan Banks. On the face of the petition, it might appear that while within the terms of the contracts the Reserve Bank was, nevertheless, peremptory in its treatment of the Fourth and First. It is recited in the petition that by February 2, 1922, the Fourth and First had sold all of the bonds except $1,200,000; that on February 2, 1922, it wrote to the iederal Reserve Bank stating these facts and saying that it had made arrangencnts to disposo of $1)200,000 of bonds to take effect on February 10, 1922, and asking for a few days blyond February 10th in which to close the transaction; that on February 3rd, th4 Federal Reserve Bank wrote declining to give this additional time and demanding payment in full on February 3rd, stating that the notice to sell was given as IT December 5, 1921, and expired February 3, 1922. The facts in the case, how;ver, in no way bear out that charge of inconsiderate treatment. Mr. Caldwelli s letter of February 2, 1922) is subgtantially as stated in the petition. Govern°. Wellborn's reply thereto is as follows: "We are in receipt of yours of February 2nd with reference to the remaining $1,200,000 of Third Liberty Loan Bonds covered by your agreement to repurchase. We had noted the Gradual manner in which you disposed of the Fourth Liberty Loan Bonds covered by the same agreement, as well as some that were pledged as collateral to your direct note borrowings, and it was gratifying to note the statement made in the circular sent to your stockholders February 1st that you had not only recovered the loss, but actually returned a credit to profit account of over $300,000. "You are incorrect in that our notice for the termination of the agreemmt expires on the 12th instant; the sixty days notice was given you as of December 5, 1921, and therefore expires today. Letter making formal demand was mailed in due course and should be in your hands today. "In view of the fact that all of the Fourth Liberty Bonds covered by the agreement have been repurchased, and you state you have made an arrangement for carrying the $1,200,000 of Thirds, to become effecitive February 10th, while we cannot ettend the repurchase agreement, we are willing to make you a fifteen day loan against the bonds as collateral, and thus provide you with funds to make the repurchase. If your new arrangement becomes operative February 10th, making it possible foryou to anticipate the note, we shall, of course, be glad to rebnto the unearned disount. The unpaid purchase price on the said $1,200,000 of Thirds is 41,190,400. plus accrued interest to date of payment. The noteshould be made for the latter amount, and provision made ill your reserve account for the charge covering the accrued interest". -19.6 • iir• Caldwell ackuovlodged receipt of this 'otter uaier dAte of February 4, 1922, ao felloJs: "I main receipt of your letter of -the 3rd instant, and note your suggestion that it will be agreeable to transfer the 01,200,000 Bends, romaininc, under the repurchase arrangement, into the bills ixgable account." It should be noticed particularly that, while Governor rielrbarn did not feel that he would be justified ir.var:Ing the terms of an axpress cows tract, be did unconditionally offer, on behalf of the Reserve I.J(2,nk, to put the Fourth cald First in funds with which to comply the terms of the repurchase agreement, his exact language 'acing "we are willing to role you a fifteen day lean azainst the bonds as collateral, and thus provide you with funds to make the repurchase." It subsequently developed that the sixty (Iv period did not expire an February 3rd, as stated in. Yr. Wellborn's letter, but upon February 10L14 %February 6th, Mr. L.C. Adelson., Deputy Governor, advised 11./.. C'Ild- =1.1„ President, or the mistake which had been made in dates, and confirmed hia tolozplxt in z. letter as follous: "In the absence of Gavornor Wellborn, I =halm-ledge roceipb of your letter of February 4th in respose to his catmur-ioation of the 3rd instant, relating to the $1,200,000 of Liberty Bonds renaming under your repurchase acreement. "I confirm telegram sent you this morning, advising that you are corect la that the sixty days notice will expiro an February 10th; it Tras RI error in informing tho Gdvernnr that February ad was the expiration date. "As stated in the telegram it will be entirely agreeable for the repurchase to be nado by February 10th. If your arrangment, as sot forth in your letter of February and, to take care of the natter has not, reached its conclusion by the 10th, it will be satisfactory for you to provide for the repurchase price through a loan transaction; ue„ of course, rebating the unearned discount, if bhc paper is takoa up before maturity. L4t44 "RoglOPtirr any annoyance occasioned you by the erroneous statement as to the expire4ion date, we are." It should be noted that lir. Adelson reiterates the offer ad the part of the Federal Reserve Bonk to i're74..e funds for the rcpuroLaso 'through a loan transaction. S 'OP On Fobruary 10th, the Foderal Reserve Bank of Atlanta was advised through its ".aceshville l*Luich to charge the account of the Fourth and First rational vith the balanno due on their Liberty Bond reperchasc a7,recnent, wiring the amount of the charge, and directing the Federal Reserve Bank of Atlanta to hold the bonds in safekeeping for the account of the Fourth and First. It appears, therefort:: urelistele.bly from the written record that , .ct to force the Federal Reserve Bank of Atlanta did not culeel the Fourth and F;' the bonds on the market in any drastie manner, but, in the contrary, offered to provide all funds necessary to prevent any hardship in the promises. We lay particular stress oa this answer to the charges contained in subdivision 345f the petition., because said subdivision sets out the only specific statement of what an its face night apparently be a lack of considera- •;.'SZ ,'• tion on the part of the Reserve Bank. Although we believe we have in KM this answer entirely refuted the charges of any inconsiderate treatment, we oa.nnot forego the query: That has this matter to do with a donand for a rebate of interest charged and collected prior to the execution of the repurchase ac,reement SUIVART. Lt%entien ic.,L;ain directed to the fact that the specific aenand of the Fourth and First 3s for a rebate or refund of alleged exces:: interest which it w,..r3 was charged it pursuant to the terms of a contract. After cloee study o: the petition, we are still unenl*htened as to '71-lent Lis contract was entered into and as to its terms and provisions. U0 arc perfeclay confident that the Fourth. and First has no legal claim of any kind or character against this Bank. 70 are equally con- fident that no unbiassed mind can, an a rovie7 of the facts, reach the conclusion that the Federal Reserve Ban!: of Atlanta has been in arv way or to any extent guilty at oppressive or unfair dcating with the Fourth and First. We con31uJe, Lhierefore, that we have breached no "cortre.ct", either expre-s or tmplied, with the Fourth and First - oertain1:7 no "contract" pursuant to which that institution could expect to acquire and hold a very large amount of Government securities yielding in excess of four per cent financed without limitatim upon Mint lol.ns at a rate less than the yield. All that is herein cont:,.iiked is said in a spirit of kindness and friendships and 'with deep respect for the Fourth and First and its officers. 'le regret iAlo fact that any inisundorstandiiv h& arisen between this bank and one of its highly esteemed nenlers. We trust that this statement of the view point of the Fcdoral loserve Bank of Atlanta will disabuse the minds of the officers of the Fgurth and First or what we believe to be an unsound conception of the liability of this bank in the prmises: nor do vx believe that the Fourth and First i;-_,.tional Bank has any just or reasonable our It secas perfectly evident that if the Fourth and claim against ENIA bank. First sustained any loss on its Liberty Bond 1,mnsact1ons, it was merely in that it did not realiza therefron the maxintri of podsible profit. IT the Fourth cle. First lost any rioacy, it Tms certainly no the only bank or in- dividual sustaining loss on Liberty Bond purchases. Surely the Federal Re- serve Bank of Atlanta :mould no be held responsible to miry one rho sold bonds at less than par, or who borrwed money on the sceuriy of Liberty Bonds at a rate higher than the bond yield. tained such losses - reasorLably takin Many thousands of bond buyers susthe view that it was their contribution to rinning the War. Respectfully, FEDIRAL RUSFIZVE BAIIK or :I'LLATITA By • ••• • -; • a •••• ••••• .• •..... •• 4.- Orin. NG. V:C 0 Correspilltdenc _a_ Harding. wrieaoi. L 41g ..)aie March 24,_L922. - • Subject:_Lihterty_Bonds taken. _under purchass;79grenti : 6f At anta_. With reference to my memorandum of September 15, 1921, to which was attached a statement showing Liberty bonds aggregating $10,273,561 acquired by the Federal Reserve Bank of Atlanta from its member banks under the special repurchase agreement approved by the Federal Reserve Board in the early part of 1921, I beg to say.that the Federal Reserve Bank now holds no Liberty bonds under repurchase agreement, the entire amount havint been redeemed by the member banks in January and February of this .year. v. \ 00'; lebrudirY 14, 1913. My lea?, Adelson: I acRno,vleige recql,,t of voiir letter tant, qhich T hrouTht to of the 10th. the attention of the Bonrd. It seems to un that thnijquirtion of the bonds Which were hell by your bank for 3ccount of the Bank of Tennessen has been accomplished in a very satisf%ctory manner, lnd I cannot sal that that bank h4is ny rounls mihatevIr upon ..hiCh to If ono shonll be filed, I bawl q. snit. o not think you wonll havn any lifficulty in Invinq It thro,vn out of c'- rt. Very truly your, G a V gr. L. C. ;Jolson, Actin/ Gov-)rn.pr, Folerll Reserve Bank, Atlant, G9org1a. r n o r. ) , FEDERAL RESERVE BAIcX _ Am) OF r \ —) OFFICE OF DEPUTY"GovEms-ort .0 February 13th, 1922. r ECS1\-1-1.), ,1 t..) ti I'. i'_........--.....--; ...:k L.)'i c., t_ . 114 -_ ' \„..-------- Hr. W. P. G. Harding, Governor, Federal Reserve Board, Washington, D. C. Detir uovernor narding: For the information of your Board, there are enclosed, copies of correspondence with the Bank of Tennessee Nashville, Tennessee, and copy of a letter I am today writing to Governor \Vellborn, who is away on a short vacation, all of which I trust will meet with the approval of the Board. Respectfully, LCA:H Ii. C. Adelson, Acting Governor. 0ERAL RESERVE BANE. OF ATLANTA K OF TENNESShE 214 Union Street. NASHVILLE Feb. 11, 1922. Federal Reserve Bank, tlanta, Ga. Gentlemen: We enclo 07,000.00, maturing 1. 000.00 par value U. 6. Th application in duplicate at 0.92,000.00, due in par value U. 6. in duplicate a Reserve B Kidder, Pea payment Feb. 13th p ew York to a Co., 18 Bro 00.00 b. 13th ed by „;100, nds, with note for y ,200,000.00 with application instr ct the Federal these bonds from Lessrs. New York, N. Y., against rs very truly litlEK OF TENNESSEE' J. H. Growdis, Ca-shier Enclo. rotes, etc. JHC:JG ..ERAL RESERVE BAN. OF ATLANTA robraary 13t1,„ 1922. 7'r• S. i."roladlo, hanLier, lank of Tennessee, r ohvill a, Tolinosooe. )war t)dny roceiv rdobrt 11th, offorini; for- dionount, your tva fift:on no to, (LA rebruary 1,3th, for 97,000 and 19 by 100 000, par vuluo borty 7':ondo and 7-ourt, 200,000, 1. cnd ilunk of r.uw York: rkylueat in, th at inujrat to accept the al d b. i frornOre Kid :80,14 and ‘o: pony, 10:rod r,treot Tie Yori;, T1. Y., age. net ptayrautt of 2,09,000. ni:lored ao fol tter of xtor ji thin uccAmmodAion loco nt ,"iorraitt I wan diructod to 1.Iiru you 7 c-Inf; ,oco t ackno‘..ae ,or Yebruary 11th, offor f-)r ylur 100,000 1.3c unt notes .aicrog, 2 9,000 socurod by )ar ,:luo Third hi Mg and 200,C00 ptrvkLue Fourth sibo 109, euid j to bo dolivcrod to Fedora !,:ow 7* )- rk agtii ot puynent 2n9,000. :413clunt 0 .0=0 yo at this tint) in amount atatod not an our x;ittoo. Your btia7c ..1'...e-.)1;nt lino, based rooa.. ,:-..aintnincd -. and invest:Ault in our c,epita d.y p‘ori.o.,..i ending January 31ot, in I 120,720. 200t1uJo of fact thnt clue nombur bunks aro not asking aiocount dccomodation 2e aro Imrrouring 1110 thn imnic lie0:kzit 'thou, 1,21,1 tho further fct thA your oondit!on 0'Ln-tot:writ 'ember 3lot, 1.9a alowod oldnorohip 253,000 Thibertion• Our Di.,.3coun: -orzlittce to d11i.n to ax!end you n50,-00 zIcNntsvtdrition, notwithatin -lin' wino condition et tur&it (bon not show that tho accoonoti:rtion t flooded bL:cause ot rteulturtil, comfitc al or in,Iuntri:.1 dcini, aprnwovini7, the ri,lvt-tncement ao arioim, fir thy etteryisv of or -tr,dinz in bnJ n1 notes of tho flov rfr: ent of the United fit,itee, w.7.th the unlieratan,lin,! that any omount of Licoonmodation o.).temied you in wcco•Je; of your 'ociolc liocryAnt lino c.ty OERAL RESERVE BANS OF ATLANTA 2. at any t3mo be callod, if, in the „Tinian of our Ascount Committee, the funds are needed in order to care for the . claims and demands of othtx member banks. Answer if :lbove acceptable and give necessary instructions. Payment cannot be made in ow York today s it to El holiday." o later roceivA your teler "Your telerrn today moots with approva Hu 192,n00 on Yourth !Abortion. secured by Third Liberti_es." We assume$ that your by Third Libf securod t 58,000, structions as to the am* nt on the par value amo unt of payment. , ding e note ow n to tonight for note for conta in— oa Company, d 13 gain 13. uid ith the now note “nd do s r ferrod to in our hmido, n st ted wo will enmnleto the t 1 or the u al advi(!(;s. in our tole rT, to 'day in 'ow York, and the 11:Inks are closA. ruly our°, C. Adelson, Acting Covernor. 41110ERAL RESERVE AN1.0 OF ATLANTA February 13th, 1922. 11r. !f. P. Thorn, (overnor, a/o 'eAllister notel, Miami, Florida. :)ear Governor iellblrn: today received from n we ht_ae today There io one the flank of 'Tennessee, n e written them, wh Leh are eelf-ex r. 1 0 kine, r. 1 ..pbell and the writer were )reeent at t' to day, wlien this to requeet for acco mod ion came fo cans d ration. hile on ite t he trail acti •yi a Tears t be revival of the same kind of trannactione tU it b ought about m ch 4np1easantnose, the .2ornittee could not ovenl ok hoe() onsenti le: tures: 0 Ct. 1. 1921 th 4 r cond hi? o atement as of December 3let, on • of Liberty Bonds. 2. That it gotten. possible that the mild 23,O0s of bonds rep anted a greater part of the amotint of ;ompany, against 'wee iti e to be roce ved 'rem Ic.idder, Peabody and , the eyrie t of 289 00• Allah may have been :arried by this o f ennessee on -4•44' repurchase agreement, so T cone() n for witI 0 or securities 0 collateral to cover the differen:e between the market price. relies° That papers arising from the carrying of and trad3. ing in of bonds and notes of the United States rre specifically made eligible by the Federal iteserve Act. M 4. because of the reserve balance maintained with us an 1 investment in our capital stock, the bank is untitled to accommodation on eligible puper,44F at least the amount of the theoretical b:,sic Our reserve position being very good, couoled Ath 5. the fact that it is no doubt known to the subject bunk, that we are extending accommodation to many members in excess of the di :count line, should we have offered accommod, tion of only OERAL RESERVE BAN/40 OF ATLANTA 2. $ 120,720, they could make the charge of discrimination. 250,000, the Their capital and surplus being 6. 117.1vin# shown ownership their and beini; paper eligible of class 1921, the st, ecomber on Bonds of Liberty amount that of grant the j#otiiably time, this they at could Committee felt am. our elop in stated amount of accommodation au ant, cannot be You will note the -Wier limitp that is -LI 250,000 construed by them other than that se 01* our time bec this we only give them such assistance unt of ccommoeasy position; but that if at arly .scouht ine, dation extended them, in exce er m is needed to care for the c on to banks, it is subject ceptance does not re" at a later Their unquali in my opinion, leave any open date. It with your appr. matter will meet Tara 8111 L. C. Adelson, Acting (1o). ernor. FEDERAL RESERVE Bic c• _Arr1AWTA_ OFFICE OF GOA, 11:14-011_ Felorttag:tia,64,1\ir4 EB " ov .‘ oi"*. Ir\v`. Hon. P. G. Harding, Governor, Yederal Reserve Board, 1.e.shington, D. C. Dear Governor Harding: Referring to our advice some time ago, that we had given notice to the Bunk of Tennessee, Nashville, for the termination of the bond repurchase agreement and their subsequent objection thereto, which culminated in our granting a sixty-day period for the gradual sale of securities, which they asked be not adhered to, and that they be permitted to make the repurchase over a period of months, perhaps, until prii, to which we did not agree,After a month had elapsed from the date of our notice (Dec. 12th), and nothing had been done by them, we proceeded gradually to sell the bonds, so as to liquidate the unpaid purchase price, which, at that time, amounted to :.4,416,000.00 for e1,500,000.00 par value of bonds. On January 13th, we sold the first block of :250,000.00, under notice to the Bank of Tennessee that we had done so, which notice was duly acknowledged by AL. H. Roberts, Attorney for the bank, stating that Er. Caldwell true out of the city and would not return for several days, but that, when he did return, the mutter would be taken up with him; stating further, that the Bank of Tennessee relied and adhered to the statements and contenLions made in their former communications, particularly Despite the statement that those of December 14th and December 23rd. upon Er. Caldwell's return they would communicate with us more fully on the subject, we heard nothing, except that, when there had been several other sales made by us, they requested the return of the securities held by us a collateral covering the difference between the carrying value and the mariet, with which request we promptly complied. Additional sales of ,;250,000.00 each were :nude January 18th, 24th and 26th. Further sales were made of el00,000.00 each l'ebruary 2nd 50,000.00 Zebruary 4th; ,400,000.00 February 6th; and and 3rd; The sixty days will expire today. The average .409,000.00 February 8th. price obtained on the 4,459,000.00 of bonds sold was 97.138517, less brokerage, 1/16, 911.88, net, ;1,416,339.72, of which we used e1,416,000.00 in payment of the repurchase price, crediting the account of the Bank of Tennessee with the remainder, $339.72. lik 11--.-11111 • #2-Hon. AL RESERVE BANK OF ATLI", CONTINUATION SHEET NO. P. G. Harding, Governor, Federal Reserve Board, V,ashington, D. C. This leaves 41,000.00 of bonds still in our hands, rhich e have advised the Bank of Tennessee we hold subject to their instructions. As near as I can arrive at it, from the data in our hands, the net cost of ,)13750,J00.00 of Fourth Liberty Loan Bonds to the bank, including the principal and accrued interest paid at the time of purchase, interest paid on borrowings, penalties for deficient reserves, prepayments on the repurchase price and reductions in direct noLe borrowings, less the coupon earnings of the bonds, was ?1,686.532.38. 250,000.00 of the bonds were pledged as collateral to direct note borrowings, wnich bonds they sold, but at what price, we are not informed. The delivery was ordered on December 12th, and the market closed that Allowing for the sale to have been made at 97.00, they day at 97.28. Le sold 0.,459,000.00, which netted them received ,;242,500.00. to cover the ',:27,692.66 difference, they have that, ,a,416,339.72; so of bonds, which indicates, in itself, that they value left ;41,000.00 par of about ,- 12,000.00. profit have made a Very truly yours, L. C. ndelson, Acting Governor. RAM • T • t FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) D RECEIVED AT WA2i:4INGTON. D. .L. 1 1. Lp OFFICE OF -•ENO11 rH:(.10 ) 86anr Atlanta 1157a 2eb 2 4.? z Harding Washn Answering telegram carrying under repurchase agreement at present ;2,805,000 sold approximately i7,200,000. One bank voluntary took up their bonds small amount. Sales for other two banks probably known to you. McCord. lP IA1. FED.RAL_ RESERVE BO LEASED WIRE SERVICE WASH I NG"TON The telegram given below is hereby confirmed. -----Tetrutter-24-1-9e2-McCord Atlanta Mthout undertaking to dotermtLe matter for your bank, am inclined to agree with you that subject to approval your Counsel it would be better to extend repurchase agreement thirty days rather than to make banks loans on their bonds. Market was firm yesterday and hope that your banks will be inclined to sell on the advance. Please inform me sammt of bonds you are still carrying under repurchase agreements and amounts that have been disposed of. liARDING 2-£454 TELEGRAM 41/ 110 , FEDERAL RESERVE SYSTEM • '''. (LEASED WIRE SERVICE) RECEIVED AT WASHINGTONi..6:C...0 \C)::, Ilanr \ Atlanta 9 32a an Feb 2 ; -- -.--it , \ c. V-C3 • -3\ "0 \-------- Harding Washn :aixty day notice on repurchase of bonds expires 2eby 5. Banks that have not sold want now take up their agreement and borrow money on bonds from us. Personally I think we should not increase these loans by taking up repurchase agreements. Once back in loan column they are likely to remain there. 22y personal opinion better to extend notice thirty days kindly wire your suggestions. 1.13,3ord. 1040a orm No. 131. tOffice Correspoitence To Governor larding. From Mr* Smead. FEDERAL RESERVE BOARD aae February 2, 1922. Subject: RECT IN GENERAL FILES NOV ii 19a7_ .? 2 _7 ............,0, ...,-.4 MIN."...........l. 7), , During the past few woks n nmiher of tho Federal reflerve banks have been purn4intne: Virttory notl nt a premium, and the question has arisen as to whetllor the amount of the premium paid should be imnediately charged to profit and loss or set up AS a. separate acoount on 'or:ti 34 to bc amortiled off daily or at the end of each month. Tn order that the amount an,1, aanm%'. rote of earnings on U. S. securities may be stated correct'', it Is recommended that the Federal reserve '7(knk3 which purchase U. S. seouritlos at r. premium or discount be instructed to set up new acoonnts as ftsllown: "Premium on United States stmrittits" "Discount on Matted States securities" and that the proper amortization of amounts thus set up he made into the bank's earnings on U. sevIrities either Oaily or as or the last day of eaoh iaonth. All 4. S. securities except those taken under repurchase agreements are now carried by the Federal reserve banks at par. Attached hereto is. a draft of a letter -7hich it is recommended be sent to the Federal reserve banks advising them of tbe method to be followed in handling both premium and discount ties. • securt- 2—S494 February 2, 1922. r,TVIXT: Discount and Premium on United States Securities. "ear Sir: tcrorts received by the Board during the past few weeks Indicate that considerable amounts of Victory notes are being purchased by certain of the Federal Deserve banks et n premium. In order that the amount and annual rate of earnings on 7. S. securities may ho correctly stated, i.e., based on cost prIce, it is requested that premium paid, if any, on U. 3. securities purchased by your bank be set up in ft separate account, and that such premium account be credited and the bank's earnings on U. S. Securities deblUed wit% the proper amortization chsrge eitler daily or at the end or each month. likewise, should the bank purchase U. S. securities at e discount, the amount of the discount should be set up in a special account, "Discount on U. securities", which account should he charged and the bank's earnings on U. S. securities credited with the appropriate amortization charge either drily as of the last day of each month. Or ())1 balance sheet, Form 34, the discount or premium accounts may be combined and shown agWnst the caption "Discount and premium on U. S. securities", code BIND. The amount of such discount or premium sh-Alld of course be treated as s deduction from or addition to the par value of earning assets in order to 'obtain the "liquid value of earnin6 assets" to be reported on daily balance sheet, Dorm 34. Very truly yours, G r1VERITO R. (Letter to nil AEents‘,, i January 17, -M, 4ear 7en .Aor: !Imve your lgtter of the 13th. tnAtant, ostni letter trora Mr. J=.1a N.10,7i,11 of 4017111e., T4nnesees, wl:Aoll I have rsad anA rltiarn lagr-awith. Ti‘it Laktt,ar to Nhla r. :111wea:t r.7fIrs In hts 1,ittar invclve a lonq story which I would l'zithgr state ti you than atArmpt to 7,;ti into tlritim; ani I bopa thElt 7 may have an o7Tortunity before very lt.)nz, of ,111)/%inInc, tFi tr) t\s„r qincer..i- lv yours, (.) V 3 Hon. Tr_fl,nnath Metellar, Unttel e1t.t, 9anate. r n 0 r. E.SERN'E O - 111,FEDEHAL RESERATE BANK. ' 444 ATJILLAWr_F_A_ 1 OFEIC}, OF " r 1. January 14, 1922. PERSONAL. Dear Governor Harding:- I have your letter of January 12, enclosing copy of a letter from you to la-. J.E. Calcluell, of Nashville, Tennessee. I an very glad that you wrote him, as I believe such a step on your part will be of material aid in causing him to have a better feeling tauard us. Vory recently, the Fourth and First rational I understand that Yr. Bank has sold I,200,000.00 of their bonds. Calduoll is "peeved" with no, because I served notice on him, calling for a termination of the Repurchase Agreement. I feel quite sure, concluded, ho will however, that when the affair is have a more friendly f-eling for MB, as I have consistently done everything in ny power to save his bank from undergoing a tremendous loss. Yesterday, we sold for the Bank of Tennessee 250,000.00 of their bonds, at 98. According to our calculations, the purchase price averaged around 95, when the Nashville institution bought, so that, if the present market maintains itself, no loss will result Next week, we propose to sell another to the Bank of Tennessee. 250,000.00 of this bank's holdings. Very truly yours, Governor. J.P.G. Harding, Esq., Governor, The Federal Reserve Boards Uashington, D.C. MAIM r -4 CHARLES E. TOWNSEND, MICH., CHAIRMAN. KENNETH MC KELLAR. TENN. 8. OAK. THOMAS STE JOSEPH I. FA.MD. GEO. H. MOSES, N. H. WALTER E. EDGE, N. J. DAVIS ELKINS. W. VA. LAWRENCE C. PHIPPS, COLO. J. W. HARRELD. OKLA. TASKER L. ODDIE. NEV. DAVID I. V/ALSH, MASS. NATHANIEL El. DIAL, S. 0. J. THOMAS HEFLIN. ALA. THOMAS E. WATSON. OA. EDWIN S. BROUSSARD. LA. ?Anita),Sfafez Zertale, ROBERT N. STANFIELD. OREO. FREDERICK J. BEAMAN, CLERK. COMMITTEE ON POST OFFICES AND POST ROADS DONALD O. SUTHERLAND. ASST. CLERK. Jan. 13, 1922 Hon. W.P. G. Harding, Federal Reserve Board, Washington, D. C. My dear Governor Harding: Enclosed I hand you a personal letter I have just received from TA". James E. Caldwell. Please note the second paragraph and then return the letter to me. I hore you can give him a lift. However, keep this letter confidential and return it to me. I am going to drop up to sae you in a few days. Very sincerely yours, January 12, 1922 'yTISONAL Dear Governor Wellborn: I enclose for your confidenti‘l informution copy of a letter Which I have today sent to Mr. James E. Caldwell, President of the Fourth and First National Bank of Nashville. It occurred to coo that it might be a good ilea to let him know somm of the possible factors which may operate against a further marked advance in the price of Liberty bonds and although I marked the letter "personal and confidential", I have an idea that in case he is at all impressed with What I have to say he might pass the thoughts along to his son, Who, I understand, is President of the Bank of Tennessee. Very truly yours, Mr. M. B. Wellborn, Federal Reserve Bank, Atlanta, Georgia. Form 14,3 TEL FEDERAL EIP R JR:VE BOARD LEASE.'!IRE '8ERVICE WASH I NGTON January 10, 1922: Rund At11141tu. .4 Bourd flanires Federal Tour teleerzz., January 11. iieservo Bank of Atic,nta to •:..t:t in Balk ofTenne3nee tizAter upon it own responsibility, under your tiavice. Di9cuzn1on relative to notice in 1:4 letter of Jr.nuctry 6 to Wellborn was merely a muggestion for bank' connideration. VSL:B liARDING. -TELEGRAM • FEDERAL RESERVE SYSTEM (LEASED WIRE SERVICE) T,CV, ,)-° , A •\ 207anr RECEIVED AT WM:MINOT:Pk'''. "v> Atlanta Ga 413p Jan 11 Harding Washington Bank of Tenn ratter: In my opinion no additional notice necessary or advisable stop If given might provoke litigation.After giving matter careful consideration have so advised Governor Wellborn. If satisfactory to Board bank here will so . proceed. Please advise. Randolph. Atty 5-10p ..anuary 6, 19k4. •Vellborn, (;ovornor, :.r. teNleral .!.eterve Atlanta, Lyeort i. .,4* dear Governor T.f.:11born: ackno-ylecif:,e receipt of :;our . ...i.n.st,calt_."(enclosinE copies of your recent corresondence ...r. i..u1;erts, attorney for the 'iank of , wuz.- considered tq the },ourd at its Itleetirw tnis It \vac, the taTVilliMOUti sentiNent of the orG that in ttw re:.)1;,, to you it shoulu be tmphnzized that in a;:provini- , sorxtirie a.co, tile action or the Federal ..cEerve r.ic of ..tTanta in tcIn, over iron the h..nk of '..,T.Inessoe 1,0,000 of ::ourth .4411;erty Loan -,,• onds uncier t repurche ak,,;reeY:ent, the card hay. no thou,yht of prIrnittitit;, .i3!,..nit of '4.'(?nne:izee 7:iaxe a prolit out of the trf.nsaction by 'Llavinv. the ..'ederal. « H.e,r,erve catry the bohdz for a further the after the :-.--.arket price of the bonds he reached trioriti ce at -Mich the ?ank of Tennez)see was then carryir4. them. ,,ccordine; to the resolution of its boa.rd of directors, dLiteci ‘urie tne bonds *Tore bein rrie, at '1,1if--I,, )00. it 'MB revresented to the .ioard that the :3 i tLtil tl 01: in 1.!..shvil1e rc...r. very acute, in order to relieve that situation c5..nd to previ>nt t risle failure 01 tr;e of '4.'ennecsee Ttn othc.!r bb.nks, the 'iloard took tne action that it hid. The 'is;oarci no- uucl esti!: that yo'; r,atter up :At once 7rj th a:-.sures you that yu are yc:ur 1ei,A1 rights In noinc, that ;,- ou LonciL adually civer a period ul sixty c-. ..:ys. e 1dus-.1 (;,uiet sale in thir w. nnot f:ot,binly have azq effect upon the Eenf,ral financial Lituation in hasnville .anri. ttio diffqrence 'between the pzir value ox Vie bonds and tie LLVer.:174:' rice that be received for them as s. rcsult of L'if's exceed at tne ,rte± .2oard wishes ,L.e to L furtncrore that it rethe transaction whic4 preceued L‘nil ::;,e caw:a to neccitate the tcir.4. over oc the bonds uncler a repurcth.2.se af:,rPe!nent as tile most remark:ble anti unfortunate trwaction the f.;:.,rt of Z.4 i-efieral recf-n- v, tizen4 that has ;jet C;f)!IA to t2 ;.ittention. I refer t t!,0 fact that the Bit of '2ennessee, tre:::bc:r ban it th a (itpitJ an urril us of . 2E0,000. •..n6 icl oarrinea reL,erve ok• about 7,000, recc.,ived ,7 • of from the .'.'etieral t.,.:terve it f3.:'I . ..t•hi(xt bonds rment uover on loans cost ui at t oken thu iu l.:ent ittvest VUXUALLeCi eis an the Tn Drd utalci much prefer, of cortrse, tt to tt '!A rutter be gotten out of the ray ,,vithout lit feder the . .ut woulu !' accept the f.iictrItos of ...ioveinor ...oberts uridic rve 11.carci in a al :eservc. ;:inx and the, i''ed.era.I 1,etie had nothini. to au ". ,o4:..txt `...he ion. lous Lkro.i hunillatini; posit familiar it trv? -ritn the loan Lit',oriinll rade z.tnti. you bre asc., ctuatect the r:coard in avroving the rerch reaon wdc exercise itE: ife4reefrient. Mo2 .3oard. expects your bank to end tat the orik tre to e-wnt , Lii,n. riht uuler the, retAirchase islished, and to accoyn Lr ray. thl r:urposes of that ak..reer3...nt the advicn of umler t resul y conduct an:/ litivation that f the ely. entir y uilit i so.nrs its c,-Junt&el ann upon its own re the )t he,-ain: is it n actio of 1 ,br of Telinevsee 4...vx any cause ) al Zecier the a.inzt . Llt.7 not ani of 4,tlanta iederal :i.eservo i,eserve that the ,Jounsel has czk.11eck attention to the fact ve t`.oard ,ese.r .ral . 1.'43(1,copies \k-hich 117.1ve been furnished tJ the of .e.ank the ol• Of the resolution of the. bcr.rzi of directors cf botq r..'enne.,ssee and of the receipt siu,--neti by tit bonds rthich are cated tune LZ, 1 .. ;?1, recite that the subscriptions naired by the ...4anic of'..:1"f!ner:s e under oricina1 recits.tiom or b tKin over ori,,imal subscrintions. r:hese unclerstood are not In accordance rith the facts ihS taej are r , but count',el Lai v ses that even thouth the :Tanne by the ssee of the acquisition of the 'vonds by the aZLI of Tenne ations recit these ztion litip shoulci 'become alaterial I. any -lould not be conclusive. that Linj ounel calls attehtion also to the fact to the prior t paymm del:iand u,;y. the ieceral e tienotic a of form the in expiration of five years must oe .e . tt. that and cik..ys of three ;nu:1(1114., pl.ci%leht at t:Ae or such notice sometime i..eserve ..:2.ank of ,tlanta, after it in 1nsts.114,ellts. ;..atle e in Lecember, LuLi*steti that payuent the bonds sell to ssoe ni of -..ei_.ne In order to [)ertnit the the iut;,t‘oi.od to or‘ier gradually. .•.ounsel su...kests that, ii. ed, .Thiv 13eeti na:: e that the ofit;ina) notic Ible three of cnd the new notice sr:: Oven op.:a:alai/r4f:. payn.ent at e is not comclays fror, onte anti stat Inv tiut if this notic ta. will roceed riled with the Yederal everve e-unic of .ttlan ts at it to sell the tiOndS at such t bar: art in such ar.oun d(7,e.ri ativisable. advied of deThe 5-"oarti tiesircs t:; Lie Akptfull,j , entire resuor.sitlw d,• state velo!):mmt, tilthoubt, e heretofore Alen rPste p ion situ: 011ity for worKirn, out t.As .unfortunhte the ir:dertil Leserve 'zignic of .tlanta. Yours verj truly, ( 44. • flo FEDERAL RESERVE BANK Ole TLANTA tiONIONO0 31-11. OVE \ 301A30 . ZZG1. -4)-110 OANISOS___q___. x10 OFFICE OF January 4, 1922. Dear Governor Harding:- For your information, I am enclosing a copy of the last letter received from the Bank of Tennessee through their attorney, the Honorable A.H. Roberts; and a copy of my reply thereto. Copies of all the previous correspondence which has taken place betueen the Bank of Tennessee and ourselves, are already in your possession; and WO should be glad to receive fram you further instructions regarding the "uinding up" of this affair. Very truly yours, 'I Governor. Honorable Yi.P.G. Harding, Governor, The Federal Reserve Board, Washington, D.C. 7.3q/UPU Enc. (2) (2 41111 COPY. 410 Jaunary 4, 1922. Dear Sir:Referring to your letter of December 23, I wish to say that we settled at the do not consider it necessary to go into matters which were It is our time of drawing up the purchase and repurchase agreement. provisions of solo purpose to carry out, to the best of our ability, the the contract as made. In your letter, you state that "if this policy is pursued, and if banks like the Bank of Tennessee are to be dmied an opportunity to the make even a small profit, in the face of abundant reserves in all the test to but Federal Reserve Banks, then there is no recourse left g t existin contrac the Tle do not feel that question out in the courts." ee's of Tenness Bank the of between us had an-thing to do with the question raking a profit out of their purchase of the bonds; and consider it hardly fair to the other member banks in the Federal Reserve System that their resorvos should be used to enable another member bank to realize a profit on its purchase of bonds. Your statement that the Bank of originally "that it might comply with the urged upon the officials of this bank" is myself am concerned, I find it impossible Tennessee purchased the bonds wishes of your officials as one with which, so far as I to agree. Very truly yours, (S) 11.B. 1ELLBORK, Governor. . Honorable A.H. Roberts, Attorney for the Bank of Tennessee, Nashville, Tennessee. 1,117ARVI COPY. 41111 ROBERTS & COOPER L.A.ViTa.S C01.1LERCIAL CLUB I3UILDING December 23, 192T. 1:11.SIT/ILLE, TEM'. Gov. E.B. ;dellborn, Federal Reserve Bank, Atlanta, Georgia. Dear Sir:Your telegram of the 21st inst., cane during m the city, -hence the delay in making reply thereto. absence from Tie note that you have expressed the definite and fixed purpose to begin selling the Liberty Bonds of sank of Tennessee early in January next, and continuing from time to time until all are sold within sixty days. Ub desire to reiterate the statements contained in our letter to date of December 14, 1921, and also our notice of same date under you . by telegram. Vie very much fear that you do not fully appreciate the importance and the consequences to the Bank of Tennessee, of the action proposed in not your recent telegram; and how- this action :Till necessarily affect to necessary It is not only the Bank but the financial situation here. underBank this reminf you of the assurances and conditions upon which It took a trementook to finance this important business transaction. , in order existence dous risk, and, in fact, jeopardized its financial upon the urged as , that it might comply Trith the wishes of your officials the of further you remind It is not necessary to officials of this Bank. liveand wheat, corn, sectionfact that this is strictly an agricultural been has section this that stock being gram here in large quantities- and bewe as largely, very very hard hit by the financial depression, caused ng in on withdrawi Tiashingt lieve, by the policy of the Federal Reserve Bank at ral agricu;tu from its band, notuithstanding the solvency of the security, having borroued sections, and concentrating the same in I:au York, one bank being millions many as much as $IF,0,000,000.00; anether QT00,000,000.00, porlarger the that loaned instanter when it was no dru",i- wr11 understood If thispplicy tion of said funds would be used in speculative channels. be denied an opis pursued, and if banks like the Bank of Tennessee are to portunity to make even a small profit in the face of abundant reserves in all the Federal Reserve Banks, then there is no resource left but to test the question out in the Courts. The Bari: , of Tennessee desires, and expects, to carry out the promise made in our telegram of Decenber 16th., and would much prefer to have an amicable adjustment of this affair, as early as practicable. But, having fully complied with its every promise and oblugation, both in lettor and in spirit, and having passed through the period of greatest depres sion in the Bond Larket, and in a way suffered heavy losses, it now feels that in all equity and good conscience it is entitled to be comccnsated for this risk and less, particularly Triwn there is no doubt wilatevor as to the solvency and sufficiency of its collateral, and no dount whatever as to the future trend of the market upward, as a result of which it will be enabled to recoup its less, and perhaps make a small profit, if the spirit of its contract, and both the letter and the spirit of the original inducements and assurances made to it, are carried out by the Federal Reserve Board. he Bank fools that it has the right to ask this treatm ent at the hands of the Federal Reserve Board, and that it ought to insist upon its said -2ights; and, as stated in our former cammunicatic ns, although the full term of five years was allowed for this ver:- purpose, still the Bank herb is willing and anxious to close all these natters during the early part of next year, provided the bond market will justify such action. The Bank has not, by .11y subsequent arrangements or agreement, abandoned or waived its rights under its oritinal purchase, and, of couve9 will not do so. Of course, from the A)rego:Img, you will understand that the Bank will be compelled, if the action indicated in your uire is taken, to resort to the Courts for protection against loss and damage, al-id for the recovery of such damage as nay result therefrom. Very respectfully, (S) A.H. ROBERTS A.TTORIEY FO-A THE BANK OF TEEliESSED. AHR*BF.
@FedFRASER