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VT_ r-1 27.c-c titz ct--1L-k /1-0 fr ttee__ ef-r-c_e 7 fc.?4, ct,7 -A I CtL. ct_ -c, LA- 44;21,62 ct Zo-c.) cc Ia 17e,t-a_GLA 3, 7-z- c(Le , aAL7 cc 4-(7C- C,U 0-7 `21A_ J 3-.0 F tet t,-,.1 ri-e_ -o-c- e-(-L_ ---t-o-c-e ,-,(_ c , >,-,. 1-1ak_ ( ,vt R 0( ,,r (J--- ce..4 a.42 -67tt. 70-( a,x_ 6.. art-c G(Q , c 7-7-L , 777 ?;zi,_ Wat 7, e4-647 f FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT August 9, 1916. Dear Mrs. McLaren: I enclose herewith bill from Hemstreet's for 4201.25 to which you referred just before leaving. We have satisfied ourselves regarding the 4.5o and c;30.00 charges, but inasmuch as the 679 pages upon which the charge of 4169.75 is based are in the press, we shall be unable to make any examination of this part of the bill. As there is considerable of the work yet to be donev/i suggest that you draw a check for this, and we shall keep tresok of the matter and check the pages as soon as the books are delYvered. I shall also write you at that time if there is any discreRtncy. Very truly yours, Mrs. V. C. McLaren, C/o Benjamin Strong, Jr., Esq., The Lewiston, Estes Park, Colorado. HUT/HAB End. FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT August 29, 1916. Mrs. V. . McLaren, "The Lewiston," Estes Park, Colorado. My dear Mrs. McLaren: I wired you taday in accordance with the enclosed confirmation and in dictating this letter confirming it am surprised to find that it was addressed to "The Lawrence" instead of "The Lewiston." I telephoned to the telegraph company and hope that it reached you without trouble. Er. ialkenbury called to-day and said that volumes 33 38 inclusive were in the hands of the printer and finished; that volumes 3 - 42 were ready, but that the book-binder would not un- dertake any more work until he had received some money on account. While no bills have been rendered by them for the month of August, , Mr. Strong is indebted to/them at the present time for about 4:650, ra-ct I am sure tha you would like to pay the July bill im- mediately, and inasmuch as the August account is heavier than it probably will be again owing to the large number of volumes prepared, they would like very much if you could pay them something Your will remember that after my visit I mentioned on account. that they probably have very little capital to work on. I believe that the profits on this entire work for Governor Strong are very I/ small, and that they are compelled to make large outlays for labor,' Mrs. V. C. McLaren etc. 8/29/16. in addition to this they are probably more of the artistic type and do not pay so close attention to accounts and records as It occurs to me that if a "cold-blooded" business man might do. some way could be found to have the money in their hands quite prompt- ly, the quality of work done by them would no doubt be of a higher grade than if they have cause to worry over money matters. Mr. Falkenbury just telephoned and said that he had received a letter from you with check for 41;201.25 for the July bill. I could almost see his face over the telephone. We are taking care of the books and posters as they are delivered, and you may be sure that I shall be glad to do anything I can to help in this matter. With kind regards to you and Governor Strong, I am, Very truly your A.ior. HMj/IWB. Enc. u I A' Misc. 34 FEDPRAL RESERVE BANK OF NEW YORK AMO/ELS ].2:Z5 p.m. (TO BE MAILED) eostal CONFIRMATION OF' TELEGRAM We have today telegraphed you as follows : August 29. 7416- rs. 7. C. LicLaren, Secretary, The Lawrence, Estes .ark, Colo- Hemstreet says July bill two hundred one twenty five not oaid August charges aggregate over four hundred dollars Nesda money badly Please wire July bill and swrie on account August if willirg Charge a/c of Senjamin Strong, Jr. B-2 FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT August 30, 1916. // Dear Mrs. McLaren: Your telegram of the 30th instant advising that you had mailed a check for ,400. to the Hemstreet Company, has been received. I am very glad that you remitted this amount to them and know that it will be very gratefully receiyod. I have asked the Hem4treet Company to be sure to send their I/ bill to me promptly, shawin - this credit, and I shall forward it to you as soon as we can make' some kind of a check of the items. Very truly yours, Lrs. V. C. M9Lare,,, The Lewisto*, _Ates Park, Colorado. HMJ/HAB FEDERAL RESERVE BANK OF NEVORK (d4 5'<< AUDITING DEPARTMENT 10 September 8, 1916. Dear Governor Strong: I enclose herewith two receipted bills from Hemstreet's, one being for ;p201.25 covering the clippings for the month of July and the work on 679 pages from January 9th to Ilarch 12th, the other covering clippings for the month of August and work done on volumes 33 to 40 inclusive. In connection with this latter bill, the check I had from you was for 4400. which is 4,4. in excess of the bill rendered. I shall keep track of this and see that you get value for the money so advanced in the September account. I would like to make a suggestion in connection with future payments for this work, which I trust you will not consider as presumption on my part. You will doubtless realize that practically all of the cost of preparing these books for you represents money paid out by the Hemstreet's Bureau for paper, labor, cost of binding and so on. Their profit is small, amounting to not more than 20%. While the concern seems to be well-organized to do its business, they do not seem to have a great store of capital and I asked them this morning if they would be able to arrange their finances easily and comfortably if I should arrange with you to pay them for the books as deliVered and pay for the monthly charges for papers at the end of the month. AL RESERVE BANK OF NEW YORK ..... Governor Strong 9/817.6 They said this would be very satisfactory to them, if arrangements could be made so thatT I would pay on delivery instead of having to send the bills out to Colorado and then to have the checks come back. To accomplish this end, in connection with the bill for the month of August, I had planned to have them return to me any portion of the 000. not used, provided that was a substantial amount, but after studying into the matter they forand they would be able to deliver all but two of the volumes called for in the bill, which they did. ,, I am wondering if you will be willing to open a small account on which I could draw checks as the books are presented, sending you the bills as raid, and thus keep these earnest fellows keenly enthusiastic over the work they are doing for you. The work continues to be in most excellent shape and the books are handsome-looking volumes. We are binding them up carefully so as to keep the dust out and storing them so that nothing will injure them in any way. If you think well of my suggestion it might be well to provide some money at an early date, as I feel confident that there will be deliveries, within two or three weeks, of books that are now in process. I am delighted to hear the good reports from you and hope that each letter will show continued increase lei strong Very trul Benjamin Strong, Esq., Estes Park, Colo. yours (&,, ?,.(o .4 FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT September 29,l6. Yrs. V. C. McLaren, The Lewiston, Estes lark, Colo. my dear Mrs. McLaren, I enclose herewith bill of Hemstreet's amounting to 4;239.35 net. In checking this we found an error of ten in the count of the pages and we reduced the bill 2.50, after telephoning to Mr. Hemstreet. I am not familiar with the arrangements regarding the labeling of the 44 volumes at 50¢ and will have to rely upon you to check that. If there is any deduction for this or any other part of the bill will you kindly send a check for whatever amount is satisfactory at your early convenience. Cordially yours, HMJ/ELS Enc. Misc-37 FEDERAL RESERVE 9ffice Correspondence BANK OF NEW YORK Date March 30, 1916. To _Governor strong From R. m. Subject Jefferaan Cooperation among Bank Auditors. While you were abroad I had-a conversation with Mr. E. S. Underhill, of the Department of Justice, regarding a young uan who had applied to them The conversation naturally turned to the subject of auditing for a position. and accounting in general, and I outlined a plan of cooperation among the men in banks who are responsible for methods of accounting which met with his hearty approval. The plan I proposed has been in my mind for three or four years and would, I believe, if put in actual operation, be of value to the banks of the country. Every bank president, especially one in charge of large resources, feels a responsibility for the assets under his care and at times wonders if he is receiving the best possible protection. Defalcations and irregularities of any kind within a bank are spoken of in whispers, the details rarely getting beyond the four walls of the institution suffering the loss. If any informa- tion does leak out it is a garbled report, of no value to those who may at any time be placed in a similar situation. -ithin the institution the real facts are known to a few officers, many of whom are not sufficiently informed regarding accounting methods to aiply adequate safeguards as a result of the experience. There is no literature on the subject on bank auditing and Practically none on the subject of bank accounting. Banks are not cooperating in the way they should in the matter of improvement of methods. It seems to me that tie movement which I will outline very briefly would make it would make for improvement in this respect and at the same time would be gratepossible for the Federal reserve banks to start something that fully received by the member banks. 1. The plan I have in mind is as follows: Organize under the auspices of the Conference of Governors, citfice Correspondence To Governor Strong From H. L. Jefferson FEDERAL RESERVE BANK OF NEW YORK Date 'Arch 30, 1916. Subject: Cooperation among Bank Auditors -2- or otherwise, a bank auditors' conference or association, with the auditors of the twelve Federal reserve banks and a few Picked men as a nucleus. Among these picked men I would suggest representatives of the Department of Justice, the Comptroller's office, the State Banking Departments, the auditors of several of the large banks in each of the Federal reserve cities, Er. C. A. Benten, of Marwick, Mitchell, Peat & Company, and possibly representatives of certified public accountants in the large cities who have considerable bank auditing to do. Arrange a permanent headquarters with a paid secretary, who should be a competent bank man, or during the process of organization one of the members might act as secretary with a competent assistant to de=the actize_werk. Secure a pledge from each bank having a representative in the conference to permit its representative to submit to the secretary of the conference, upon request of any member, details of any methods of operation, of any part of its system of accounting or reporting including the details of any plans to circumvent defalcations, or the details of any defalcation it might have suffered, or anything of like nature. This information to be received and used as follows; Each member to be privileged to request the secretary to secure for him information about a definite problem; such requests to be submitted to each member of the conference without giving the name of the applying bank; each member to prepare and submit a reply to the secretary. These replies to be edited by the secretary, a report prepared showing the results of the review, and a copy submitted as confidential matter to each of the members of the conference; all flares of banks and of members of the conference to be eliminated. ....(/// &tfice Correspondence FEDERAL RESERVE BANK OF NEW YORK Date March 30, 1916. To Governor Strong Cooperation among Bank From H. M. Jefferson Auditors. 3 The report so prepared by the secretary to be receipted for by the members and kept in strict confidence at all times. Reports might be surrounded with other instructions if these seem to be desirable or necessary. 4. The expense of conducting this work should be met by assessment on the banks or by a fixed annual fee of say50 which might be reduced as the membership is permitted to increase. I should like to have your candid opinion of this idea. If you think it is worthy of the effort, I shall be glad to work out the details and confer with you about it. HMJ/JM FEDERAL RESERVE BANK OF NEW YORK October 6, 1916. Dear Governor Strong: On March 30, 1916, after much careful thought, I dictated a memorandum regarding cooperation among bank auditors but have refrained from presenting it to you until you had an opportunity to rest up a bit. The more I think over the problem the more valuable I think an organization of a limited number of the best auditors in the country would be to us. I have a number of problems in my mind now on which I would like to have the opinions of such a group of men. I might name a few of thesaand in a few words show the problems and suggestions presented. 1st. The question of continuous vs. periodic audits of money and securities. I am very nwrious to install in the Federal reserve bank the most complete and safest method of caring for money and securities that can be devised, at the time we transfer our assets from the outside vaults to the new The auditors of some of the banks in Cleveland vault. keep daily control of assets as deposited in and taken out The Bankers Trust Company follow the same of the vault. practice, with which you are familiar and in hearty accord. I have always felt.that this can be carried to such an extent that the auditor becomes a part of the operating staff He should be sufficiently far away from the of the bank. actual operation to view the handling of the assets as an I believe that while current control might well outsider. be established over securities, it should not be put into effect with regard to counter cash and with money held over Responsibility there should be concennight by tellers. trated upon the tellers and those having control. Securities deposited in the vault may be regarded in the same category as officers' cash and, therefore, subject to dual control. Before we begin to plan for the arrangements in our new vault I mean to look more thoroughly into the Bpnkers Trust Company's methods, and to visit Cleveland to study their methods. It would be very helpful to present the broad phases of this question to the best bilk auditors in the country. FEDERAL RESERVE BANK OF NEW YORK 2nd. 2. Governor Strong. 10/6/16. The question of security furnished by loose leaf and machine records. Modern methods of handling bank work are employing machines to wonderful advantage. I have just been discussing the ledgers of the Federal Reserve Bank of Richmond with Mr. Peple, and I believe they are rendering more complete and valuable service to their member From what Mr. Peple says everything banks than we are. These results are seems to work out in wonderful shape. accomplished because they are willing to admit the validThe opinions of ity of loose leaf and machine records. such a body of men as I have in mind on a subject of this kind would be very valuable. 3rd. Block proving. We have heard quite a little of late, in New York, about the relative merits of re-listing checks vs. After trying some experiments in acceptblock proving. ing re-listing we have gone back to the block proving system. It would be valuable to know the experience of others in this respect. 4th. Form of reconcilement of members' accounts. Our system of having the banks report only on the balance and vouchers without giving us the figures from which the reconcilement is prepared has led my department to the conclusion that much more satisfactory results would be obtained if we asked our member banks to show us how they arrive at the reconcilement of our statement with them. When I was in Richmond with Mr. Broderick we had a discussion of this problem and I have been in a very receptive mood toward the complete form ever since. I should like to present this question to a group of experienced men. 5th. Combination of mail teller and transit department. Mr. Hendricks has been anxious to combine our mail teller with the transit department. As a matter of principle it seems to me that the incoming mail Ought to be entirely separate from the outgoing mail. In our case, where so much of the incoming mail consists of checks to go out immediately through the transit department, there may be some arguments on the question of conHere again I should like to know if experisolidation. enced bank accountants as a whole would stand solidly against consolidation of two such departments. /7/(7FEDERAL RESERVE BANK OF NEW YORK 3._ Governor Strong 10/6/16. I have been thinking a great deal about this conference, association, or whatever it should be called, since I dictated my memorandum of March 30th, and a number of times have felt that I would start the movement in a quiet way without referring it to anyone by inviting the auditors of the Federal reserve banks and a dozen or more others to join me. I have refrained largely because I believe that the plan would give the best results if there were a few more men connected with it and if sufficient money could be provided to hire a secretary to do the work. I also believe that the large banks would be very glad to contribute to its support. As I mentioned on my memorandum I should like very much to have your candid opinion of this idea, and if you think it is worthy of the effort I should be glad to work out any further details that may be necessary. Very truly y enjamin Strong, Esq., The Lewiston, Estes Park, Colorado. HMJ/IWB. FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT October 7, 1916. V. C. McLaren, The Lewiston, 2stes Park, Colo. Dear l_rs. McLaren, I acknowledge receipt of your let ober 3d regarding the photographing of r of Oct- ernor Strong's war books. shall do my best to co Strong's wishes in this matter, of any action that takes plac I shall also telephone to L indicate to him that the ly with Governor id. will report to you in connection with it. Hemstreet on Monday and may proceed with the work if they desire. ry truly yours, HMJ/EL3 FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT October 9, 1916. Dear Governor Strong: 0 ii hr. Hendricks sent me an S. O. S. to sendI'you D. Q." a statement of Federal reserve notes o I"P. 'stand- ing, divided according to denominations, and thinking that you might like to know something about the gross action, I have had figures prepared as of the close of business October 9th as per statement enclosed. There was quite a demand for Federal reserve notes during the month of September, and it would appear that there will be some demand during the month of October. We took out 2,400,000 this morning. If this is not just what you want I shall be very happy to send other figures. Very truly y Benjamin Strong, Esq., The Lewiston, Estes Park, Colo. HLO/IWB. Close of Business October 9, 1916. Amounts in Dollars. 55 los 20s 5os loos TOTALS :ederal reserve lotes delivered o bank since organization 48,400,000 50,800,000 16,240,000 2,200,000 6,000,000 4123,640,000 Sent to Comptt. to be destroyed 22,268,565 19,195,810 3,529,060 206,350 837,700 46,037,485 Total outstanding 26,131,435 31,604,190 12,710,940 1,993,650 5,162,300 77,602,515 FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT October 16, 1916. Dear Mr. Strong: Your letter of October 11th regarding co-operation among bank auditors, is received. that you approve of the idea and am grateful that it be started among the men of the F of the Federal Reserve Board. me. Your su We should get the twelve banks i memorandum about I am very glad or your suggestion al reserve system and stion appeals strongly to fine working order before Inviting others to join us. For a long time I have f together more frequently and be tical questions that come from letter, that you are in acco t that the auditors should get clearinghouse for the many prac11 sources. I judge, from your with this, and I shall feel free to urge something of this kind This morning I phia, enlarging upon th a letter from Er. Gamon, of Philadelnecessity of uniform methods of handling accounts with other F deral reserve banks. He says that this is but one of many que4ions he would like to present and thinks that a conferenollof auditors would solve many of the problems that now confront us. I shall refer our correspondence and my FEDERAL RESERVE BANK OF NEW YORK Benjmrin Strong, Esq. memorandum to Er. Treman at the first opportunity. 10/16/16. He is planning to be out of town for a day or two this week, and I shq11 be on jury duty for the entire week, but I shall make it a point to see him at the first opportunity and advise you regarding his opinion of the plan. Sincerely yours, Benjamin Strong, Esq., 4100 Montview Boulevard, Denver, Colorado. 11147/HAB FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT JAN1 2 1917 'December 16, 1916. Dear Governor Strong: I have refrained from sending you a copy of the minutes of the conference of auditors until I could revise them a little and find time to comment upon the action taken. I am very glad I waited because Er. Bullen called after having been present at the conference of governors and gave me a memorandum of the action taken by them upon our recommendations. I have indicated on the copy of the minutes I am sending you the decision of the governors which I am sure will be interesting. The secretary of the conference apparently relied entirely upon the stenographer who was with us part of the time and really did not measure up to his responsibilities. I therefore felt that it was necessary to cooper- ate with the stenographer myself and revise the minutes as you find them. The volume of the minutes is not large but the work done at this conference was extremely helpful. To begin with, every bank was represent- ed which I felt would be tile case if we held the conference in the lilddle Jest instead of Washington as was first proposed. Then, too, we had been operating under the collection system for a number of months and each delegate had something to offer for discussion. The whole army was out of step on the first topic discussed. delegates and two visitors disagreed with me to a finish on the question of deducting the cost of operating the transit department from cur- fEleven rent expense and setting it up on the books as a separate item. I argued very strongly for carrying the entire expense of the bank in one account and managed finally to secure the privilege of carrying the entire expense into FEDERAL RESERVE SANK OF NEW YORK 1g/16/16. ..2..... current expense during the month and making one deduction at the end of the month as a memorandum to appear on the expense register and on the statement of condition (Form 34) sent to the Federal Reserve Board for that day. shall thus be able to carry this account along in the usual manner on our books reporting separately to the Federal Reserve Board uniformally with the rest of the banks. We had an extremely interesting discussion in connection with the consolidation of the two accounts with the Federal reserve banks and finally agreed to the plan given in full on page 8 I believe this is a marked step in advance though I was in favor of two accounts until within six or eight weeks of the conference. We have had so many entries in the mutual accounts upon which there have been disputes that we finally adopted the policy of not arguing for our viewpoint but simply passed entries in accordance with the way that they had been placed on the books of the other banks. I found that the other banks had been having similar experience and that entries of exactly the same nature would be passed through the books in different ways. The new plan of consolidation of the accounts will save all of this trouble and all of the correspondence connected with it and it will give us an opportunity to experiment with synchronization of entries which is an essential condition of daily settlement: The strongest objectors to the consolidation of the accounts were those who were in the habit of buying New York exchange and they felt that they would lose some of the control they now have on what they term their own funds. Mr. Broderick actually dictated the motion regarding the spreading of the cost of notes issued over the entire year found upon pace 5 . Mr. Bullen, as a delegate to the conference presented the motion, and I am inclined to think we passed it without much consideration. the governors turned it down at once and I an glad they did. At all events RESERVE BANK OF NEW YORK 12/16/16 rFEDERAL It seems to me that the banks which are compelled to telegraph their full statement on Friday night will be much benefited if they can send forward only the figures required for the Board's published statement. The governors asked Mr. Bullen to state the reason for this change and they appointed a committee to confer with the Federal Reserve Board regarding the whole subject including the sending of the figures for Thursday night instead It seems to me that the Friday figures are much of Friday night. more desirable than Thursday figures from many viewpoints including the fact that the New York Clearing House and the New York State Banking Department's figures are published on that day. The question as to whether the Federal reserve banks should regard the reserve balances of member banks instead of the gross balances as the basis of their accounting was presented in connection with the revision of the daily statement (Form 34). It was decided to show the reserve balances of member banks and the amounts upon which credit had been deferred on the statement and this has been agreed to both by the governors and the Federal Reserve Board. This is a long step toward giving deferred credit, if not an actual adoption. de can show the figures from our present records and if we continue to report the accounts in this way I shall be inclined to be in favor of changing our members' ledgers so as to dhow the reserve balance as the basic feature. I am wondering how the new form 34 will take with all the powers that be,including Senator Owen. He was in the bank a day ior two ago and argued very strongly with Mr. Sailer about the immediate availability of arafts upon Federal reserve banks. The discussion of methods of determining the cost of operating the transit department showed some slight differences in the items to be included but I think that while we do not agree absolutely we are all trying to follow the plan outlined by the Chicago conference of transit managers as closely as Cr. FEDERAL RESERVE BANK OF NEW YORK 4 12/16/16 /////// possible and we therefore did not recommend any change in this respect. While Mr. Jacobson was present Mr. Bullen made a strong plea for standardization of statistics required by the Federal Reserve Board and said he thought the Board should determine just what statistics they would require for at least six months in advance and that no change should be made in its requirements during that time and when made to be made sufficiently far in advance to make it possible for the banks to adjust figures could be compiled from the records. their records so that the He showed how hard it was to receive requests for statistical figures after the original records had gone into the files and said he felt this work was entirely useless. I think the other items in the minutes will explain themselves. If not, I shall be very happy to write you regarding any of the details. The routine work of the bank is running along very smoothly. The clerks are making good hours and all departments are getting good clean proofs. The transit department handled approximately 38,000 items per day during the month of November with an average overdifference of ZOO. between 4:10 and 5:30 with just a few occasions where Their hours were some of the clerks were a little late. While in ChicPgo I had an interview with a Mr. Lyle of the Union Stockyards National Bank. The officers of this bank have evolved an inter- esting merit and demerit system for use with the younger clerks. Their plan in short is to reward each clerk with a credit called a merit for each piece of work well done, for prompt attendance, etc. given for securing accounts. is larger. Larger numbers of merits are The number is increased as the average balance Demerits are given for lateness, absence, errors and other things improperly done. At the end of a quarter, these are summed up and the clerk receiving the net largest number of merits is given a money prize. Mr. Lyle says that it has changed the attitude of the clerks in his bank in a wonderful RESERVE BANK OF NEW YORK 12/16/16 9FEDERAL 0 degree and that they are very well pleased with the results. It has been in operation but nine months so they nrobably will have a number of new things to learn about it. Zhis is the first time I have seen this in operation in a bank although I have studied a number of plans in connection with other industries. I do not wish to make any recommendation about this but thought you would be interested in hearing of a plan of this kind. lath kind regards and sincere good wishes, I am, Respectfully yours, Benjamin Strong, Esq., 4100 Montview Boulevard, Denver, Colorado. HMJ/ELS Enc. FEDERAL R SERVE BANK OF: Yir,YORK JAN 9 AUDITING DEPARTMENT 1917 4PO 7 17).5- /?-in /6"-- /JA.A.<_6( itA91/r at-e ott . (1cz-u_ & -0 ca- La-1._..e4 70--(cz-&1--)tp_,wz./r- --t f4-4A1 -411- -49--"74Q-e-,1)--.Ct-t-A,1-t, ,clArk, at, t00 ct--3--c_ 631 .2/7.4. tkar t;t/Qt1Or- rare( t;7/- _a( -.Ca z-cr_ 14.4,a-4" atit 1-1241 Le' (a-cx-civY Ac c--/vir C. R.._ pr-L Ltirt-ik L-LtAr+- (ts 64-c-c a,_L.( /7:cwQ c71 ,&74r. tri7a0 ccte. aa,,_k czy /yr,, FEDERAL RESERVE BANK OF NEW YORK V 911/6 a/l/Ywm-p 14-471,7 cre4.4V/Oft.tiju 4-613-0,1 .6 clAA,v71, eu4/1/44:44"- /v _ eAl ff11 efc-/ Cir-a-t:fra-tt A. -r-03/1,1A1E: /6 , 2_ re./74.g? ft 4,4441,x4 /6/ _ 1 7.0 6 g, int,,Ilwaz a-Zar-0 630. / ,t. ( L 1-,4)_. 041/14/14,ura-lit-t-;:rx--e- i(-9 o S1I _AJE-c_gt-o-c_4( r 7, 3 47, v-z- 4154te7. a 69-at d c ett ./(1,Q,e,,,)-7( *ex_ a444 g - (Ie. 68; attaor ro-t-a-L *5-0-1 0 riteti,Ø7 a;et- cra, I /. / 63 6160. qcr d. 0-1 f, .3v1, q) Astik aak, 0_4 _ ft It 71/1-14411/4"- -6-A-444 it It C lfefU,. cf....(xtt) / 2. 3 73. 2 A-14-14-A1-0 7: go 7, ./44.4e49-t1&e4W, u ir, 6-6-1.. 9 k 2. S. 1--)e 76. 276-, aiz-eicA2/ o4A,4-ece4A_f >1( a2A . f ,0e44Vo.,ed at- 0 cait t. /ez,-c kte-e4-vk ket.e A14-it.44.v k etpt.Arz/ recat:o 1071, / 4.5-7 4-i. - (cep. cr..a*.k) -14 6 )G -O77, I? 2-5-03. /68: a" "144-4 etirtaA. r-4.4.k.al Ca-o-t /3. k66---.S-q7, s/C ,&aa.v.(A ({,Zt c e.s rel -617, 5-1. 2 So _oglat ZsZ. 0-0-Vwt--' ,216. ess. dK. 54, FEDERAL RESERVE BANK OF NEW YORK di.,L. AUDITING DEPARTMENT -FEB21 1911 February 2, 1917. Benjamin Strong, Esq., 4100 Montview Boulevard, Denver, Colorado. Dear Mr. Strong: Since receiving your letter of January 13th I have made a condensed summary of the action of the conference of auditors and find that we have lived up to the resolutions, as indicated in the following schedule. The items marked (X) have been completed: CONSOLIDATION OF "DUE TO" AND "DUE FROM" ACCOUNTS: One account (X) Immediate debit and credit entry for telegraphic transfers. (X) Defer all other debit and credit entries. Partially completed: working on the balance. Endeavor to synchronize all entries. Partially completed: working on the balance. Report credit side - Gold Settlement Fund. (X) Daily statements - reconcile weekly. (X) Wash out differences except errors. (X) Defer credit for drafts drawn) Drawee bank open draftaccount) Under ordinary conditions the entry for a draft presented over our window would synchronize with the entry on the books of the other banks if we debited immediately on payment. We draw no drafts on other banks and, consequently, have taken no action. CALCULATION OF RESERVE: Items. Due to member banks - reserve account. (X) Due to F. R. banks - collected funds. (X) Due to branches and offices. (X) U. S. Government deposits. (X) Cashiers checks. (X) FEDERAL RESERVE BANK OF NEW YORK 2. Benj. Strong, Esq. 2/2/17. Expense checks. (X) Returned item checks. (X) Dividend checks. (X) Deduct. , Exchange for clearing housa (X) Checks and other cash items. (X) Due from F. R. Banks - collected funds. (X) Due from branches and offices. (X) REPORTS TO FEDERAL RESERVE BOARD: Condensed statement Friday, instead of Form 34 Not interested, since our statement goes forward by mail. Form 34 shows: Due to member banks - reserve accounts. (X) Due to member banks - deferred credits. (X) Due to F. R. Banks - collected funds. (X) Due to F. R. Banks - deferred credits. (X) Separate report of transit expense after January 1st. (X) General cooperation with F. R. Board re statistics. I am disappointed with this matter since our meeting but hope to adjust some things when Er. Broderick makes his next examination. ACCOUNTS WITH MEMBER BANKS: Shaw reserve balances on Form 34. (X) Adjust internal accounting re members' accounts, as desired. We have taken no action yet. It does not affect the other Federal reserve banks; so there is no need for immediate attention. TREASURY DEPARTITNT: Send check upon receipt of returned checks. (X) TRANSIT COST AND SERVICE CHARGE: Current expense, exclusive of expenses of transit department. (X) Expenses of transit department - grouped with suspense. (X) Service charges net - grouped with suspense. (x) No recommendation as to items to be included. (X) eb' Benj. Strong, Esq. FEDERAL RESERVE BANK OF NEW YORK ......... . , .._ 2/2/17. ACCOUNTS WITH OTHER FEDERAL RESERVE BANKS: Acknowledgment of letters for deferred credit; show details. (x) Advise cost registered mail and insurance at time of shipping notes. (X) Credit all letters without change. (X) Make special entry and advice of debits and credits for errors. (X). Daily statements show sufficient explanation to reconcile without looking up advices. Have made revisions, within the last few days, improving our outgoing statements, and am working on further details. Service charges to be assessed on the basis of items received as of the day of receipt show total number of items and cover calendar month. We propose to put this into effect during February. Mail confirmation of telegraph advice to indicate clearly that telegraph advice has been given. (X) I have recently written to the other auditors regarding a method of simplifying reconcilements and am receiving interesting replies. quested Dallas and San Francisco to wire on receipt of my letter. I re- While the plan I have suggested is not meeting with favor, we shall settle this point not later than February 7th. I think you will see from the foregoing that we are following up closely the details of this conference and mean to give all recommendations a thorough trial. This spirit seems to pervade the entire system. At last I have succeeded in persuading the other officers to let me have John Raasch to assist in studying operations in the various departments and in endeavoring to make the work of each department as systematic and efficient as possible. We shall work together and keep our eyes open for every possible improvement. visit Hartford In this connection we have arranged to on Tuesday, where I know of an extremely well organized ' FEDERAL RESERVE BANK OF NEW YORK office. 4., Benj. Strong, Esq. 2/2/17. We shall get from this visit a great deal of help in the mat- ter of making surveys, to say nothing of ideas. Among other things we shall study the question of a record of individual performances of the clerks. I know that we shall report to you from time to time good progress in many lines. With all good wishes, I am Sincerely yours, HMJ/II.A.B FEDERAL RESERVE BANK OF NEW YORK AUDITING DEPARTMENT May 22, 1917. Benjamin Strong, Esq. , 4100 Montview BoulevardMAY 2 6 1917 Denver, Colorado. _mar Governor Strong: You will undoubtedly wonder why we showed among the assets on our press statement an item of $83,361,000 as due from depository banks on account of fiscal agent. This was done in accordance with the following letter received from the Federal Reserve Board: "With the view of giving the Board a clearer idea of your bank's activity as fiscal agent for the Government in connection with the latter's loan transactions, it is requested that your bank include among Government deposits (Code "CAKE") the amounts received as subscriptions to U. S. certificates of indebtedness and bonds of the pending and subsequent loans whether or not redeposited with the subscribing member and nonmember banks. An additional asset item "Due from depository banks, - fiscal agent account" (Code "BABA") should be set up* this item to include subscribed amounts redeposited with subscribing banks and trust companies. "Our Statistical Division will show separately in the published weekly statement, following item "Due from other F. R. Banks - net" the new item "Due from depository banks - fiscal agent account," and it is requested that your bank's published weekly statement likewise show separately the corresponding asset-item." Very truly yours, FEDERAL RESERVE BANK OF NEW YORK 01.FICE CORRESPONDENCE To GovernoriatrOng_ From H. M. Jefferson Date October 10_,1919. Subject Statement for London Economist I submit the following comparative statement of condition of the twelve Federal reserve banks as at the close of September 5 in response to your memorandum of October 6 regarding a form of statement for the London Economist: As Shown in The Economist -?otal gold reserves Of which held by banks egal tender,notes,silver,etc. Suggested Form 413,410,000 : Gold reserves 157,110,000 13,964,000 : Legal tender notes and silver reserves : Redemption Fund - Federal reserve bank notes : Bills discounted for members of Federal reserve banks Bills bought in open market 70,934,000 : Bills bought in open market 11,822,000 : Government deposits Total net deposits 346,248,000 : Other deposits - net Federal reserve notes in actual circulation 522,338,000 : Federal reserve notes In : actual circulation . 13,964,000 2,232,000* 369,484,000 : Bills discounted for member banks 369,484,000 : Government Obligations Government deposits 413,410,000 : Federal reserve bank notes in actual circulation 70,934,00e 55,515,000' 11,822,000 334,426,000 522,338,00e 44,713,000* : : Ratio of total reserves to net : deposit and Federal reserve note liability combined : Ratio of gold reserve to Federal : reserve notes in circulation : after setting aside 35% against met_deposit_liahilities_ Please note particularly the paragraph beginning at the bottom of page two. 50.4% 60.1% )c. FEDERAL RESERVE BANK OF NEW YORK 01-FICE CORRESPONDENCE Date Ontober 10,1919. Subject: Statement for London Economist To 2. From I think we should try to get them to eliminate the misleading line indicating the gold held by the banks. While this statement is Correct it does not convey the true status. On the date in question the banks carried. 5. 421,465,000 Sterling in eligible bills with the Agents although they were required at the time to carry only .1) 324,386,000 Sterl- ing, leaving an exeess of % 97,078,000 Sterling. The banks might have requested the Agents to transfer this amount of gold to their vaults, which mould have materially increased the amount held by them. I have no figures to show the amount of Federal reserve notes on hand on the same day, but the gold in the banks might also have been increased by depositing the Federal reserve notes with the Agents and demnrding gold. These facts, together with the legal status permitting the banks to count gold with the Agents as reserve, would seem to argue against the negative item "Of which held by banks." The attention of The Economist should be called to the punctuation in the third item and they should be requested to omit the com- ma between "tender" nma "notes." You will notice that I have changed the phraseology of this item also. The amount of Government obligations held seems to me to be a rather large figure to omit and I have shown this and of Federal reserve notes in actual circulation. Showing the notes, also the amount however, raises the question of reserves against bank notee AI would seem to require the showing of five per cent redemption fund, whieh at FEDERAL RESERVE BANK OF NEW YORK 0 ICE CORRESPONDENCE Date October 10,1919. Subject:_aatemert for London Economist__ To 3. From this time amounted to fn 2,232,000 Sterling, which I have also inserted. Is it wise to suggest the addition of three figures of this character which may dwindle to very small proportions when these bank notes are redeemed ,3t. silver certificates take their place ? The Economist shows Government deposits ft. 11,822,000 Sterling and Total net deposits fn 346,248,000 Sterling, which includes Government de- I have suggested that Government deposits be shown as one figure posits. and "Other deposits" sham net, the sum of the two giving the total net deposits. I have she= two reserve percentages although personally I would much prefer to see only Ratio of total reserves to net deposit nrd Federal reserve note liability combined. I notice that The Economist is rather particular about shoving the gold held abroad by a number of the banks. Our figures for Septem- ber 5 show nothing of this Rind and it is usually such a small item that I would suggest disregarding this amount in recommending a change in the statement. You also instructed me to Show each item. SOMB explanatory remarks about The following may be helpful: Gold reserves: Includes gold coin Prld certificates in vault, Gold Settlement Fund with Federal Reservek Board, gold with foreign agencies if any, gold with Federal Reserve\4-gentmlamd_Gold Redemption Fund for Federal reserve notes. FEDERAL RESERVE BANK OF NEW YORK OFFICE CORRESPONDENCE October 10,1919. Date Subject: To Statement_fer_Lond-en_2Conamist 4. From Legal tender notes and silver reserves: Legal tender notes, silver certificates and silver coin in vaults. Redemption fund for Federal reserve bnrk notes: Five per cent redemption fand deposited with Treasurer of the United States to redeem Federal reserve bank notes presented for redemption. Bills discounted for member banks: Receivables of member bnnks rediscounted for their credit and advances to member banks on their own notes secured by receivables or U. S. bonds, notes and certificates of indebtedness. Bills bought in oven market: Acceptances bought from banks and brokers in open market. Government obligations: United States Government bonds, notes and certificates of indebtedness the major portion of thich are deposited with the Treasurer of the United States as security for Federal reserve bank notes. Government deposits: Self-explanatory. Other deposits - net: Reserve deposits of members, clearing deposits of nonmembers, deposits of Federal 1Pnd banks, and foreign banks and governments less amounts of checks credited but not yet collected. Federal reserve notes in actual circulation: Demand obligations of the U. S. Government issued through the Federal reserve banks secured in the first instance by deposits of commercial paper. Federal reserve bank notes in actual circulation: 4 Demand obligations of Federal reserve banks secured by U. S. Government bonds or certificates of indebtedness deposited with the Treasurer of the United States. , FEDERAL RESERVE BANK OF NEW YORK Dee OFFICE CORRESPONDENCE Su bject To October 10, 1919. Statrrnant fnr_Lordon EQOXIMTli St 5. From Five Per Gent Redemption Fund: Carried with the Treasurer of the United States to redeem such Federal reserve bank notes as are presented. Reserve percentages: Self-explanatory. Thinking it may be desirable, I attach hereto The Economist of September 13 and the Board's statement from which the figures were prepared. Estes Park, Colo., July 28, 1916. Mr. H. M. Jefferson, P. 0. Box 458, Stamford, Conn. Dear Mt. Jefferson: I was delighted to receivi,46 ter of Tilly 20th, with news of things the ffice /arly at your home. It is aingo d thing fo particuyou fellows to get away from the grind for 00 a few weeks/ nd I am glad that you and Mrs. Jefte on are abl VC) get so much enjoyment out of t an is a very sensible one and the o you co on t grow tired of it. I/ This isKst 1o\aokno4é,ge your letter and it yii1 be delighted to hear again wheneve thank you for umv-e----time to scratch off a few lines. me I am en I get( ack. Out here and you won't know With, warmest regards, Sincerely yours, Li Estes Park, Col., August 29th, 1916. Dear Yr. Jeffereont Your wire wan received last night, and in view of the fact that I forwarded a check to Hemstreet's 1st week, which :hould have been received before this tils didsdre the money as requested. It mny have been 1ayed in r aching its destination, as they give as th irtd.ess, the "Tenth Avenue, near 45th Str for a firm newly locat No bill has pings, but Mr. Strong d ancl\, re whic aptd one of s rather indefinite AV of imp Issive size. : e-4f"CylAugust work on the clip- --------..._. \\king to send a Check for V100 as Alm enclosing this, though r. Strong suggested by your w havètr4i bills in hand bdfore paying them. that in order not to inconvenience the rIAugt-get Press elipOimg Bureau that you approve their bills as soon as would p to I ! you conven,intly can and forward them to me as promptly as possible: I appreciate the position of the Bureau Mr. Strong would like to see the but, of course, bills before paying them. With kind regards, Sincerely yours, Secretary to Mr. Strong. H. M. Jefferson, Esq., reuerai Reserve Bank, York City. Fetes Park, Colo., October llth, 1916. ale!' Mr. Jeffersor: Replying to yours of October 6th, enclosing memorandum regarding cooperation among hank auditors, I think the plan is a good one. You heve, however, undertaken too ambitious a program to mete et of practical value to the Vederal ref:erve hank r at thie stage of their development. The oree.nization should be a very smell one coreistirg of representativee from a rumber, possibly all, of the reuerve benee, and representative from the Federal What re nee in the Syntem is uniformity of method. Reeerve Tionrd. -hie can only be arranged by meetings of the auditors who will dovie methode which are accepteble to ell of the reserve banks, and where one or rore of the benke provee recalcitrant, then the authority of the Board should be aveileble to bring them into line. You know the principle which I think eh,eild apply in this The responsibility for results rests upon thP men in charge of the different departments and, personally, I woule not care to go into the detail of how the results are obtained with too great cere, so long as the principal object e seem to be achieved. We muse not harden the System with too much detail, too much accounting, re- It is an expensive orgaSization already and the meeting of auditors should be directed toward reducing the machinery, pertine, etc. To H. M. Jefferson, Esq. Oct. 11, lC,16. Rnd simol*fying it rather than adding new and expensive opera- tions. if you and your associates can brit about that result, it will save money, clerks salaries and expenes of organization. At the outset, I would rot think the holding of ouch a town meting as would resultftom having repreeentatives from other orgAaizstione than the reserve banks theneelves. Why don't you talk this over with mt.. Tremun and see if, with hie consent, the Board canhot be interested in promoting the plan,which I think is an excellent one We must, however, simplify the machinery and reduce the expEnse of it. Thank you for writing me FO fully, I will be interest- ed to hear of wnut progres you are able to make. Sin,:,erely your H. M. Jefferson, Esq., Auditor, Federal Rencrvo Bank, Equitable Building, New York Cit. BS/VOM Denver, Colorado, January 9, 1917. , Jefferson,. Thank you for yours of the 30th ult. giv figures which are very interesting - Tie the closing re certainly gratify- ing and I agree that some figures of this sort sho member banks at once, prelimi regular annual you can arrange to do that. ours, Federal Reserve New York City. e sent to the eport. 1 hope Denver, Colorado, January 13, 1917. My dear Llr. Jefferson: I am sorry to have so delayed an answer to yours of the 15th reporting the proceedings at the Conferee to have been a very satisfactory meet and the action by the subsequent Co give effect to what has been done. t is art of organi- soffle friction. the wisdom of pub comparative results. ce, but it shoulu be based upon the ions of the he I am In a bank like ing system to cover errors; in Other words, negati soonsibl; I believe formance of each clerk, but ours I think we migh each department, who should be held re.ual performance of each man under him. - to learn that tho directors have shown a considerate and human vi of the they have we d hard and faithfully. interests of the force; they deserve it for With warmest regards, Very sincerely yours, E. M. Jefferson, Esq., Federal Reserve Bank, New York City. BS/CC see matters u refer to was tried keeping a record ob I hope will the basis of at the Bankers Ti' doubt progress Don't forget that The system of merit in with no end renee of Govern() need constantly following zation and It seems ors. exch 21, Denver, Colorado, March 21, 1917. aaiounts, so I Lnsive ee lt, eel ehould jos Dear Mr. Jeff .:on: f it . .4 Mis xlier to -e-ei those items. :et two 13, in. I have been over the various rorns of Statement of Condition le and your memorandum of explanation, r on to please submit to the officers the following sudgesti One of the liabilities of the b he deferred is usdoubtedle liability represented by checks in nrocess of collec an be con b how the statement of the aSsets and liabilities wit I do not see eluding all ledger ut showing this ability on one side an0 viee") the offsetting asset of eh Although ks in process, tch that I t to exhibit our profits more accuracy, and that ently suggested would have o disclose our earnings I am we, with o believe that :a.. Curtis is correct these figur should not be shown. uendri ks criticism, I agree with Ier. Mr. Sailers.' ated in my former letter, I do not believe in dividing the - gold between . 71d not two. .m e funds, of which, of course, s I feel quite strongly. The use ie ine , lected items" items', eed "Un there are three of the words "Collection are both objectionable. as you say, although I think the fie res should be shown. There should be no difficulty in adopting a title Which would be descriptive and a-curate. Anent the assets it might be "Uncollected Items City and Country" and among the liabilities "Deposits not jot Collected". Statement "D" covers most of this ground, but not quite all. I understand that the item of dxhhanges or Clearing House - ' dash items 2. To - Mr. j'akrch 21, 1917. Jefferson. 4,053,094.09, is exclusive of items in the deferred accounts, so I think the statement should be consolidating them, if corrected Id order to show those items, you please, as suggested above. The last two items in hesources might be consolidated under Assets". itle "All Other The liabilities side of the sta ;,ent strike= right, except that Net Earnings and Tin ed Discount and ties might be consolidated under one heal - "All Other Li What I do not understand thor Liabiliilities" deposits being carried at 4)245,000 00 $101,000. as being all 1 Reserve Banks As explained at your mewrandum, I pre- sume this figure is j stifi his to reconcile it with the figures as sh You gentlemen can much better than I and the other items sugges out i these figures of denosit libilities you with suggestions, but as to ope that the statement can be put form indicat not be a good Her stantial unif Thank plan to endeavor to gat sub- ty among all the Reserve Banks? for writing me so fully. Very truly yours, H. M. Jefferson, Esq., Federal Reserve Bank, New York City. B3/CC Denver, Colorado, February 21, 1917. Dear Mr. Jefferson: I was glad to have your letter of February 2nd, for more reasons than you possibly realize. The essence of a talent for following things un. I h proceedings of the Governors' Conferen wondered some and of the oth received that kind of treatment, as they should, reassuring as to the Auditors such work as that that we larly, an ideal bank in No H. M. Jefferson, Esq. Federal Reserve Bank, New Yor_ City. organisation is - es whether the various meetings letter is very fforts. It is by system and, particu- Denver, Colorado, May 26, 1917. Dear Ur. Jefferson: Yours of the 22nd just reaches me and raises a question that 1 would like to discuss with you on my return next week. I am not at all sure that Our books dhow our relations to the government's financial transactions in just the right way, but let's have a full discusslon of the subject and make sure that we get started right. Very sincerely yours, 15.11.-2efferson, Esq., Federal Reserve iren4New York City. BS/CC N. Office Correspondence To From FEDERAL RESERVE BANK OF NEW YORK October 64 1-19 Date Mr. Jefferson Bank Statement,forLondoc- Subject: Economist GovernotStrong Will you please look in the current number of the London Economist, which dhows a rather poor form in which they print the statement of Federal Reserve Bank. I au anxious to have the the Federal Reserve state- ment published in the Economist in better form than at present, and wish you would pre3are a suggestion of d form, together with some explanatory remarks about each item, bearing in available for the publication mind that of an extended they have very little space statement and that it dhou14, as nearly as possible, conform to the Bank of England statement, but should give the reserve percentages in addition. Mi., 37 , C. fice Correspondence To Ur. Jefferson-- F FEDERAL RESERVE BANK OF NEW YORK Date Subject: October 16, 1919. STATEMENT FOR LONDON ECONOMIST Benj. Strong From I should think it would be poanble for the Economist without the additioniof 62OR f'.'1404P-P #P6OAtithan they now use so as to show assets andhowfor too, , ttjw4j the Bank of Franca, and the reserve percentage as you recommend. Won't you take another try at it and then prepare a letter, addressed to Hartley Withers, care of the Economist, explaining just what is included in each figure, showing the method of consolidation, and the reasons for stating them in the form in which they are stated rather than in the form given in the Economist. As the figures are cabled every week, it is necessary, of course, t6 include as few items as possible, but I think we should in some way get a balanced statement without, however, putting in the footing. I will be glad to have the papers back with an explanatory letter. BS.MSB Hotel du Cap d'Antibes, Antibes, July 13, 1926. PERSONAL Dear Mr. Jefferson' Mr. Case has just written me that you have resigned to accept the position of Assistant Boston. to the President of the First National Corporation of I hope it means excellent things for you. Bank very much We shall miss you at the indeed, but I don't suppose we can say that of recent years any more than Professor Kemmerer cant It has been one of my regrets of the growth of the Bank and the enlargement of its last few years that the enormous activities eeeme to have thrown me out of personal contact with so many of the officers, end this has applied to you unfortunately the same as many of influence in the organization the others. I hope you realize that your has been felt and has always been good. You have the affection and respect of everybody in the Bank, and I am especially anxious that you should feel that the years spent with us were not wasted. sacrifice and, I fear, always will be to limit one's future It is a by work of that sort, but the satisfaction comes in. realizing it is public service. I am writing you to make sure that you understand how warmly you have my good wishes for success and happiness. Sincerely yours, Mr. Howard M. Jefferson, c/o Federal Reserve Bank of New York, New York. BS :M