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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.
the work yet to be donev/i

As there is considerable of
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

Date

Governor Strong

From

FEDERAL RESERVE

BANK OF NEW YORK

H. L. Jefferson

'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.
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.

I have jus

/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




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

a letter from Er. Gamon, of Philadel-

phia, enlarging upon th

necessity 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

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FEDERAL RESERVE BANK OF NEW YORK




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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

October 10_,1919.

Subject Statement for London Economist

GovernoriatrOng_

From

Date

H. M. Jefferson

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 in the ffice
/arly at your home. It is a go00thing fo particuyou
to get away from the grind for ad weeks/ nd I fellows
glad that you and Mrs. Jefte onfew abl VC) get am
are
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 -




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





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102