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COPY June 11, 1923 My dear Governor: Since June 1, when I acknowledged your letter of May 31 and advised you that copies were being sent to members of the Open Market Investment Committee, I have heard from each of them and find that each received the letter with the same surprise as that which I had expressed to you in our telephone conversation on June 6. The facts are as follows: Early in May it was suggested that the Open Market Investment Committee should have its next meeting in Cleveland on or about June 25. The Board was advised of the proposed meeting and on May 9 requested that the meeting be held in Washington as there were some other matters which the Board might like to discuss with the committee. At about the same time the committee decided that an earlier meeting would be advisable, and this meeting the Board arranged should be held in Washington on Wednesday, May At this meeting the first act of the committee, all the members being 23. present, was to advise the Board that the committee was in session and to inquire if the Board had anything to communicate to itThe Board replied that it had nothing to communicate to the committee. Toward the end of the morning I was called into a meeting of the Board to discuss a currency matter, and while there I stated to the Board that the committee was proposing to recommend to the Federal reserve banks the sale of about $50,000,000. of Government securities. This statement was received by the members of the Board without comment. A resolution to this effect was finally adopted by the committee. Late in the day and towards the end of our session, Vice Governor Platt attended our meeting but expressed no dissent from the program we had adopted. The surprise of the members of the committee arises out of the fact that a few days after our meeting, the Board having been fully advised of our action which we felt was in entire accord with the letter and spirit of the Board's letter No. X-3689, the Board should not only express disapproval:of our action but without opportunity for discussion should in substance direct the committee to take action to dispose immediately of all the remaining Government securities held by the banks. The Open Market Investment Committee succeeded the "Committee of Governors on Centralized Execution Of Purchases and Sales of Government Securities." This committee functioned for about a year and had several meetings in New York, Cleveland and Boston. At nearly all of these a member of the Board was present throughout, Messrs. Platt, Miller and Mitchell having from time to time represented the Board on these occasions. The presence of the Board member permitted, through discussions of policy and of market and credit conditions, the development of a program for recommendation by the committee on which the Board and the committee were in full and harmonious agreement. The new Open Committee had assumed that the same relationship would prevail in connection with their meetings and work. The members of the committee hope that at its next meeting the Board will be represented through as in the past, that they may then have the opportunity- of discussing with the Board it views concerning the disposal COPY - 2 - of the remaining Government securities, and that the Board will give the committee its opinion as to the manner in which such a course would accommodate commerce and business, and affect the general credit situation, these being the principles by which, under the Board's resolution, open market operations should be governed. Your letter of May 31 requests me to"advise promptly of the sales of the Government holdings of the various banks, and to what extent each of the banks contributed." I am sending you herewith a statement showing in detail the holdings of Government securities of the various Federal reserve banks as at May 23, 1923, amounting in the aggregate to $140,788,000. exclusive of about $31,000,000. held as miscellaneous investments for self-insurance funds, etc., and about $15,000,000. held under sales contract. Appended to this statement are the quotas for sales which the committee has suggested to the respective banks, and the amounts sold up to June 8, 1923. As a result of the sales already consummated you will note that four of the Federal reserve banks, namely, New York, Richmond, Atlanta and Dallas, hold no Governments except fluctuating amounts of securities held under sales contracts, and nominal amounts of miscellaneous long-term securities held as investment for certain special funds. Governor Norris of Philadelphia, a member of the committee, has just sent me as its chairman, a communication upon this subject, copy of which, with his permission, I am transmitting herewith. Very truly yours, (Signed) Ends. Honorable D. R. Cirssinger, Governor, Federal Reserve Board, Washington, D. C. J. H. Case Chairman, Open Market Investment Committee for the Federal Reserve System September 22, '923. Sirs: We have received and have given careful consideration to the Board's letter of September 8, 1923, (X-7R9F) which requested our views on the subject matter of the inquiry by Congress into Vie question of membership in the Federal Reserve system. The matters suggested for discussion seem naturally to fall into two classifications, vie.: What is the effect of the present limited membership? Why do not more eligible banks become members? With respect to the first, we submit the following: The proportion of membership in this district is relatively high. Out of a total of 1183 banks, 830 or 70 per cent. are members of the Federal Reserve system. The division by states is as follows: Member Banks New York (entire) New Jersey (12 counties) Connecticut (1 coenty Total Benks 84 Percentage of Membership 870 285 50 204 12 Total 71 72 40 1183 With this high proportionate membership, and partly because of It, the banks of this district were not affected by the adverse economic conditions of 1920 and 1921 to the same extent as were the banks in parts of the country where membership was less general. There were in fact no instances of bank failure during this period which could be attributed to general banking or economic conditions. A substantial number of banks -2temnorarily affected through the dereliction of officers or from other 'causes, were able to meet demnans upon them throngh their relation to the Federal Esse:no syetem, altoeether eith the assistance of nationn/ or State banking departmenta. This is- a condition which has been more or less general in Fedora Feserve dietriatn tenving a ltrge proportion of member banks. The cuection, hooevenn cannot be enseered from the United experience of one dietrict. In the country %a a whole one-third of the banks belon6 to the Federal heserve eysten. But thie -,e-third repreeento epproximately two-thirds of the total bailki46 resourcee of the country; memberehip hes nppenlea bore nenerelly to the lnrner city inenn. Hence the Federel heeerve eysten he been nble Le enezcise its infleence more generndly in the contere of populetien than in th- rurel oonnunitiec. In those statee enere menbershie ewe peoportienately emellect it we nntural that the credit-mnking power of the Federn1 Reserve system should be least evnilable to the public. Neverthless it cennet be doubted thet even in those rein e where the Federel Reserve eystam unnele to exercise a direct influence, non-meaber Onnke cenuren benefits indirectly throu0 corresponnent member banks. An indirect influence is never as effective ns e direct influence. From the standpoint of the Federhl Reserve nenks niainterpretations of the note :id purposes of the system have been moet generel in those regions where ito influence ens felt indirectly; and fron the stnndpoint of the nonmeaner banke the direct relntiun hns limited their ability to adjnst themselvee.to varying economic oonditione. If the influnnce of the Federel nesrve Federal Reserve Boerd, -3- Seetember 22, 1923. eystem is to be of maximum effect and benefit, indirect rel tions must yield to direct relations and the proportion of membership must increase. The system is bound to move in one direction or another; its membership will increese or decrense. Any large decrease will impair its ability to serve the credit needs of the country, not only because the member banks, which are the principal means for making Federel Reserve credit available to the country, will become fewer, but beceuee tee creditmelting powers of the Federal Reserve Benke themselves will be lessened. Individually both member and noneember banks wilt benefit from rn extension of membership. In e crisie the member banks now have to provide credit for any nonmember banks, which may involve additional exeenee to the latter and poseible deneer to both. Outside but export testimony on the benefits of a wider extension of membership is furnished in t resolution adopted by the directors of the National Association of Credit Men on September tt:), 1923: "The Federal Reserve system has saved the country from several esnics; end :r to .resent membersnie has rendered so ereet s service to the country no stretch of imagination is required to appreciate how yore safe we would be if every qualified bank were to enter the system." A larger membership would make credit more generally available, not only because the Federal Reserve Banks would have added credit-making power but because that credit would rewoh the users of credit more directly. This would result to the special advantage of those regions *here membership is now less general and where credit is now inadequately supplied. Federal Reserve Board, (2) -4- September 22, len. The reesons elven by nonmember banks in this district for not joining the Federel Reserve systee may be summarized sk6 follows, ta the order of their importance: Cost, because of the lose of interest on belences, intbility to oeunt ctee in vault *s reserve, snd limited dividends. Ability to secure benefits from correspondeets without memberehip, and disinclinination to sever these relationships. State laws, rescribine reserve requireeents at verience with the requirements prescribed by the Federal Reserve system. Incoevenience of further xaminetion end supervision. A. Cost. Of these teree consideration the argument of cost is most often encountered. Yet the officers and other representatives of the bank, woo are most closely in =Asset with member banks, neve found that in most CAROB eemberehip in the Federal Reserve systee involved so, or very little, additionel expense. It does not epeear, generally seekins, that membership has reeelted in reduced profits to state beaks either thromee loee of interest on reserve balances foreerly keet with city correspondents, or through lose of exchange 311 checks; weere earnines :AVO been reduced in one direction they have been increesed in others. The social services afforded by the system end the earmark of security which memberseip elves is usually regarded as ale comeensetion for any adeed expense incurred. Few country bankers have a cost aceountine system welob onebles ttem to comoite precisely tee cost of membership. T-6 MOSt Obvious factor ee an active deterrent to eembarehip Is the loss of the interest which the Federal Reserve Board, September 22, 1925. country benker aes been enrning on his reserve balance with his city oorreeyondent. Under t e Federal Reserve Act country eember banks are obliged to keep 7 ver cent. of their demend deposits, as reserve, wholly with the Federal Reserve thank. Under the betional B5nk Act a country eationel hank had to keep 6 per cent4 in vault 9 an eermitted to keep ab edditionfl er cent. on decosit in t reeerve or central reserve city, ..e,kin6 a total reserve requirement of 15 per cent. Sui.erficially the reserve requirement for country member banks under tl.e Federal Reserve systee is 7 per cent., se coal,. red with 15 per cent. foroerly reired undr tee Xa lone' Bfik 4ct. But actually there should be added to the 7 etr cent,. which country banks ere reluired to keep on de,eosit with the Federal deserve %Alice the folloaing emounts, whIc are not counted RS reserve: Cent, in veult . . . . . Fleet Belances wIth city oorre eondents 4 . 0 0 .- about Z per cent. " " Total 21/2 9 " 71/2 s R " " Thus the reserve actually required of ceuntry national beaks is very close to tLe reserve previously required and the amount on which interest is earned is much reduced. In the ease of liew York State country banke, for which the State Alm reluires only 10 per cent. reserve, the lose in intereet on memo deposits is even more pronounced. It has been observed, however, that. country bankers ere now thinking lees and less about tie loss of interest on reserves. They recognize the fact that if te Federel Reserve Banks it s sons of slack credit "lowland as 11411 as in setson a of active credit deeand, were obligated to pay interest on deposits, they would be obliged at ell times to invest their funds freely and in consequence Federal Reserve Board, -6- would necessarily compete with banks everywhere. Soptember 22, 192S They recognize also tuat such action by the Federal Reserve 9anks w-uld crete forced inflation with all the evils appertainin6 to it. Latterly the country banker in this district he Friyed rather that hie ;-artioipation in the eernings of the Federal Reserve Bank abAald not be limited to 5 per cent. on hie stock owner- ship, and that in yeare when Federal leserve profits warranted the rnember banks should sflare eouwhat more largely in those eornines. Taw loss in exclon60 on checks is not at preent a factor of importance in 'L.'s district since all banks, ehet'isr 2eff.lber or nonmember, pay their checks at per. This is a question whicb may sell be argued on its oval merits, quite apart from membership in the Federal Reserve system. BeC511815 of the check collection system now oerated tbroutt the Federal Reserve 13anks and the absorption by the latter of coats formerly held to justify the oargiag of exchange, the axe:maze charse has beco_ce obsolete and unnecessary. Apt:ended 'hereto is a maeorenium prepared for another purpose whioll discusses the various objections to the payment of checks at per. In sutrgary of the foregoing ttere are certain tangible losece which cluntry bsnks in this district may nave to incur if they join the Fodf,re.1 Reserve system. Balanced against these are intangible banefits derived from the servics rendered by the Federal Reserve 9anks, the s.ivertising value at-. tech% to membership, end added insurance in times of severe credit demand. These benefits, If fully taken advantage of, permit the country beaker to operate more effectively aai therefore more profitably. Federal Reserve Board, B. -7- September 22, 192!. ebility to secure benefita from corres ondents. s'any country bankers believe teat through their city cerreseondente they can obtain any of the benefits of membership indirectly and at the sane time secure from their city oorresie)ndents advantaeme end services which the Federal Reserve Banks ere not in a position to give. It is undoubtedly true that certain of the services performed by city benks for their country correseondents cannot be performed by the Federal Reserve Bsnks. The latter have confined themselves to eivine meceanicel servicee as distineuished from such services 43 giving information and advice on securities, lending money on call or time, affording :participations in leans and syndicates, '-urchasing comeeroial paper, etc. These and other similar eerviees the city banks can and do render to their country corr ieondents, and in consideration of them many country banke maintain balanecs with one or more city correspondents. The services which tbe Federal heserve Banks render are or a nature consistent with the purposes of the Federal Reserve system and include the supplying of currency mad coin, the collection of checks, the collection of non-cash items, the afekeepine of securities, the purehase and srie of severi- ties on instruction, the trensfor of funds by mire, etc. Vany of teese ser- vices are interrelated with other eeerations of the Reserve Banks en e tend to give the c3untry member banks a participation in the benefits of the system equal to those enjoyed by city member bunks. Many of thee ere of such a character that they cannot be carried on as expeditiously by city correspondents, or in the gross so economically, as by the Federal Reserve Banks. These services are ineortant factors in insurime the :ermeaency of the Federal Reserve system, becauve through Um' the Federal Reserve Banks are Federal Reserve Board, September 22, 1925. constantly in contact with the PM b e r banks end without them contact with :member beaks, vertical arly country member benks, would be itaieired. To eost state banks the velue of these services rendered directly and wLhout cost, constitute a benefit which considerably offsets the ex,..enses involved in membership. To country national banks, whose membership is compulsory as lone as they remain in the nationel syatem, the services are often imi-ortent considerations in determining their continuance as national banks. Further, the services tend to steke the Federal Reserve systee a living bank organisation, beceuse efficiency of operation cannot be effected on an emergency basis. The services are sufficiently continuous to insure the maintenance of a well knit organisation, available for use at all times, emereency or otherwise. IL Federal Reserve system regarded solely or mainly as a means to supply currency and credit in rgencies is a rederei Reserve system frozen and without humpee relation. No corres?ondent beak can Ave the seme services as the Federal Reserve Bank as directly or as Ail:4011d 110,611 the city correasoneent serves as the eedium through which these services are rendered, expense of handling Is incurred aed that exeense naturally falls upon the ueerof the services, n moll the country banker. lost of the Federal Reserve Ranks maintain limited organizations which maintain, by visit and otherwise, reiations with amber banks. Their mein function has been to ascertain and eliminate the difficulties which country banks have met in their various dealleze with the Reserve Banks. Federal Reserve Board September 22, 1923. -9- They have also informed tee country banks how to make most effective use of Federal reserve services. They on a parity *ith city banks in have done much to place country banks their relations to the Federal Reserve system. In the States of Nei rork and New Jersey state State Laws reserve requirements are no longer effective on member banks; on tte contrary e state bank becoming a member of the Federal Reserve system becomes subject to the reserve requirements of the Federal Reserve system only. In the State of Conneoticut, however, state reserve requirements are still effective against member banks. There state laws require the retention of a certain amount of cash In vault and specify the type of security in which ssvings deposits may be invested. Thus upon Connecticut state banks which join the Federal Reserve system two sets of reserve requirements are effective, those of the state and those of the Feeeral Reserve Banks, and in every item the more stringent of the two eets of regulations prevail. sequently state banks whi-lh become members of Con- the Federal Reaerve system are often in unfavorable competition with both national ban ke and state beaks. ThereBre many state banes are deterred from becoming members. This beak, however, is affected only to a limited extent, because only the western most county of Connecticut is in this district. Inconvenience of further examinations and sueervision. in tics past there has been considerable complaint of the number of reports required by the Comptroller of the Currency and Reserve BAnks, and particu- 1,rly of *interference in banking sethode on the pert of bank exeminers. Recently there have been fewer complaints of ttis character. complaints were based upon eany of these misunderstanding and in general may be regarded Federal Reserve Board -10- geptemeer 22, 1923. as an unimportant factor in restraining banks in this district from joining the systee. A snore positive deterring influence has been a reluctance on the part of state banks to submit to an examination preparatory to entrance into the Reserve eyetem. These cease have resulted Alually from the posses- sion of slow or doubtful weeate which might be criticized, and discussion of this as a restraining feetor may therefore be dismissed. Possible Remedies There are four ways, emeng others, to encour- eee increased membership in the Federal R-serve systems To compel membership by federal law sae undergo the test of the courts on the question of constitutionality. A possible precedent was the teeing out of existence of state bunk currency when the Rational Banking System efts established. Such a plan would lead to endless controversy and to a type of unwilling membership of doubtful beeefit. To secure uniformity of reserve requirements for banes, both state and national. This %Lane a modifioation of aany state lacs and possibly a modification of the Federal Reserve Act itself. The effect of such legal ohangee, however, would remove the penalty now attaching in some states to state banes becoming members of the Federal Reeerve system. To educate systematically all eligible nonmember banes upon the value of lemberehip, appealing both to their self Interest end to tLeir public spirit. This 'would result in t voluntary membership of joint benefit to the banks and the systee. It is necessarily a long process, but in certain districts has been suocessfully pursued. Federal Reserve Board, A. -lie Seetember 22, 1923. To %eke membership more attract:ve finencially. Mould this prove to be eossible, it would remove the lain obstacle in the way of an enlarged memberable of state banks of this district in the liederal Reserve system. But any plan so desieened should be f eed so .1S to preclude the chences of inflation. evitably to inflation in (a) Two of the elens sometimes eroposed would lead in- reater or lase deereel Peyment of interest on reserve deposits. This pre- supposee greatly enlarged eernings by Reserve Banks in yeara of any but the most intense credit deeand. At all times, slack or active, the Rseerve Banks would heve to keep their funds very generally invested. The result would be that the Reserve Beaks would save to initiate comeetition with national end state benke, interest rates would be out and businese be unhealthily stimulated as inflation advsnced. It should be borne in mind that an investment by a Reserve 3ank correseonde to the interjection of free t eold into the money earket, and funds so invested erovide adeitional reserve upon which member banks can build deposits. In otter words, an investment by a Reserve Bank is likely to be multiplied in the loan accounts of banks generally. And excessive investment would lead to exceseive multiplication of bank lotns. (b) Reduction of the reserve requirements for country banes. To reduce reserves rele es funds not ereviously available Seetember 22, 1923. Federal Reserve Board, for inveeteent. linlees Vie revised reserve requirements represented a fair evere.ge of all reserve requirements now effective on country banks, both State and national, and uni ese there was fair neserance that a great majority of banks in states where reserve requirements are now lowest would seedy for 31611bershi2 in the system and be admitted, a large volume of fresh funds would be reLeseed for investment. Or funds co releesed would be available as reserve for additional deposits. would result. In either case inflation Veen reserve raluirements have been reduced in this country heretofore, loan expansion has followed. A third plan may or arty not be opin to a similar ob,L jection, depending on how it is framed. (0) Payment of additional dividends upon Federal Reserve Bank stock, when and if earnings warrant. Such a plan would result in e closer relationship between the member banks and- the Reserve Banks, and no doubt also in a fuller attention on the part of the zember banks to the operations carried on by the Reserve enks. But if from suce a elan pressure resulted upon the Reserve Renke to make eernines, it would lead to inflation. In years of quiet credit demand the Reserve Banks are unlikely to earn Tore this their expenses, and in that case under t e present law no return to the Treeeury results. In years of larger credit demand, if additional dividends to the banks are to be Federml Reserve board -13- Sgptember 22, 1925, allowed,d if pressure to make large &.rniugs tre resisted, the return to the Treasury would be lose than ander present law; in other words, seise of the funds now derived by the Treasury would be shared with the h411'4.6. The foregoing views 4re offered for your consideration. Very truly yours, J. h. ,ce. Deputy Gev5rnor. Federal Beserve Board, Washington, D. C. December 11, 192$. Dear r Governor: I have been asked by the New York State Chairman, Mr. A. 3. Colvin, if I will serve as a member of the Advisory Board of citizens in this ,§tate which will have charge of the organization of the Harding Memorial Association I have never accepted appointments of this sort, even though strongly tempted to do so at times, without having a word with the Federal Reserve abard, as it is so easy to create the impression that the officers of the Reserve Banks are in some way engaged in political activity. Of course, none but a very cheap mind would offer such a suggestion in this matter, but I think I should still bring it to your attention, if you or your associates have any views on the subject that you would care to give me before I answer the invitation. Yours very truly, Honorable D. R. Crissinger, Governor, Federal Reserve Board, Washington, D. C. 3S. lir Lecember 15, LivK,o. Dear Mr. Criesinger: Thank you for your note of the 12th. I have decided that on the whole it v,uld be unwise for me to accept the ap2ointment, much as I ahould like to have mv ntme associated with thr movemon to establish a Memorial for our late President. Thei.o aro some personal considerations which I shall explain to you when I see you. Yours very truly, HonorabLe D. F. Criseinger, Gov:rnor, Federal Reserve BoP.ird, Washington, D. C. BS.MX ky 6 Al cA II 7-r a 1-34 ZaUjfz, Gt. # t af,t144.1. Usrob 4, 1924, Federal Ileserve Board, r;ashington, D. 0. 2 1 r s hreve to refer to mar letter to you of February 4, in regard to your letter 'x-Z9E3 of ,January Zb, 1924, in which time was asked to consider oertain quoetions raised by the reeolution quoted In your letter. Also I have to aoknorledge receipt of Govornor crisainger's letter of Februery 14, end have coma-utilize:316d with the The following consideretions Federal aeserve Bank of Philodelphia, vs euggested. result froLza study of the proposals in x-Z9b3: An to the law - Is there any authority in law for a resolution or rogulation of the peservo aoard making it possible for reserve banks to ooneider cash in transit, either or both ways, an part of the required reserve of member banks, or to take such currency In transit into account in computing penalties for defloienoies in reserves? , Section 19 of the Federal nosorve Act, among othor things, definitely fixes tho amount nnd chureoter of the reserves to be maintained. it requires that each mombar bank "shall hold and maintnin with the ?ederal reserve bank of its district an actual not balance equa1 to not loss" than a fixed percent of its deposits. The effeot of the aoardfs resolution, if adoptod, In practice, is to roduoo those reserve requirements, (so far as they relate to banks outside Federal reserve and branch bunk cities) below the figure fixed by the law. The purpose of it seems to be to obviate elements of time and space, - factors which we believe wore fully considered when the present different reserve requirements for oity and country banks wore determined by Congress. The requirement of the lwn is unequivocal that °doh member bank shall hold and maintain "an eetual net balance." trbitrarily to rule that cash in truntit is such a balanoo, neoessarily results, therefore, In the possibility of a member bank's reducing its reserve below the figure fixed In the law. The legal reserve of meesber banks, that is, the reserve to which the Government. looks as the minimum below which the public interest demands that banks should not go, Congress intended and proscribed by law should be kept on deposit In Federal reserve banks, rhioh, the history of this legislution shows, was to establish national reser- voirs of reserve menoy of fixed amounts and specified character. These reservoirs will, of course, not servo their purpose if in one my or another their supply is re- In short, Congress proscribed by beotion 19, as amended by the Aot of Juno 21, 1917, that only one form of legal reserve should be recognised, namely, the "actual not balencese which member bunks should "hold and maintain" with their reserve banks. Is it not obvious that money on a railroad train or in to hands of an express company cannot bo said to be an actual balance "hold and maintained" with the Federal reserve bank, oven If title Is hold by the hoserve bank, but not actual pouseasiono Certainly. Congress in fixing the reserve percentages for oeuntry banks never contemplated that cash in transit would be coneidered an "actual balance." duced. , 0 2 ffiedoral !'Yonorve 9oard. 170 boliovo, thoroforo, tint thoro to nocolthoritv in law for a b1ru1 "noorvo incb- to oanoidor oaoh in transit, oithor or both vnyo, Z1E3 a iv.rt of the roquirod rosorvo of rambor brooko, rant boing co, we boliovo that it to itr;poo- oiblo to ttke rooh aida in tranoit into ncooirat in oor;outing pmaltioo for doficioncioa in rosorvoo. Fuoh cash oithor lo or is not "an actual not balanoo" with the Tlosorvo bank. If, no wo boliovo, it in 29.1 stash a balanoo, thon thoro somas to be no p000iblo justfleation tbr taking it into oonnidoration In computhAg ponaltioo tor ".19.!,Lciompag. in ro rvo,', If Chore io a klaficioncy the pcmaltoattaohoa, oause of the 03301o:143y, 410 amattor of Iva, .tvould smolt to bo irrolovant, c. wtxr itvortant oopoot of .t:o.e can% Ifflo Board*o r000lution This pr000nto givoo to each 7Oooro1 rmorvo trifit the 27,..41m, to oonaider curronoy in trdloit conyoutin,3 te rosary° reouiromonto ond pornitios Der tioficioncios, It in norLront that this option my result difforontlyin the novord. dintricto, and it rny woll that a cealtrg /milt in one district will to poralttad, in acasequonco, to ta:lint:4n different renorfe from that of a country bank, In an adjoining district. ):apt for the difforont rosorvo roquirominto for aourstrj and °itj ban, cicz.lr17 cczpronsod in the 1a, tbAro is nothina in tho licoorve .4ot which on be oonstruod as r;Ivinc: the "Rosary° 3oard or tho :losorvo bt-Anko authority to aoplo difforont rosorvo rovirmenta to the saw °lass of bonito in difformt distriato, It in our boliof, thoroforo, that any roling or rodblution. of the nosorve Board, whidl til:.;ht be oonotrood an civing authority for such dincrorxancien in the rosorvoo of marabor bcotho, mold rooult in =authorized variations of the plain provision of the law that oach rombor ban% 'oha3.1 hold and rrointain with the :'odoral moron bank of ito die triot an aotual not balance equal to not loos" than a fi;tod poroont. of Ito dope:alto, , 7,1nal1y, there are important praetioal co712 i tiara ti ono of polio y involved. in the Board's rulinti, rhich will inevitably arise and flood to be dealt tith in kue tiro, If ourroney in trassit to to be taken into aocount in detorminina rosorvea,, It moot be a r000rvo balan(oo "riaintaload" at the rteaomo bank, AO ooh, it must opooar upon the boos of the bank at the crodit of Ito tortoor, Othordoo it is not a "balance" and not "roservo," '31%o law by affirmativo prevision givoo roonbor banks the right to thoolt out rosary° bolancon and to use them vdth provicion for inpooins certain ponaltioo in ono° thou do, if thoreA)r0, curronc In trnnsit is sot up upon the balks of the :l000rvo bank no a r000rvo baanoo -(which should not be woo), and 5 f the turabor bani Ia antitlet to me those boInoces by chock or tolormaphio trknotor, oto,, than the cotton at once arl000 whethor a 'llocorvo bank would bo justified In roftioino- to pay a cheek which ovorirow an a<r"ount, altholch that account in fact mold not hive boon overarm.= bad currency in trannit to the bank been on torod on the be eke as a balance, o what extont the universal application of this rule will load to IlruS0 In ohipromto of currency cannot be dotorraine, !;Ci thr an wo are amre no investilation of the actual amount in transit ban bow, attic, "n do know by c.z.tvrionco, however, that thorn is a tondo:Icy in the cane of com banlIs to abuse tho privileac or thIPPlrig3 OtirMIV at the ezp4tone of the n000rve Van1t siTapIr for the porpooe or siftina out now billo ;;;n4.1 traciatol shippinz; bad: bills which are not now but which the 'Troaoury connidora tit .for furthor alroula.tion. Intorvicwo with norm of our di roc taro Ilto are familiar with those mm ttorm dovolop the toot that thoy believe tot advantage will be takon of this priviloge to increase the amount of cash ohippoo for roporve puroosoo f.)11,y mporionoo will dovolop whether Clio is the that. novorrilr ;lords oatimtoo t1v.tt in the middle of loot year the LIVOStkea allowance on ineonim and outgoing nhipnontn of 3 em eederel ieserve eoerd 3.4.24. curronoy in the reserve oelculations amounted to )2,i13,00O daily. An cote:vete ceeld be made as to Mrif muoh 040A in tna nil, azeordIng to the ezperienee of, say, 1923, vould be lite' to be empleyed 46 a ration of resetrve releireteets Dee figure subeitted by Philedelphia weeld ineieate, roughly, Chat for the eystem the /event woeld eteeed ee5,000,C00. it might be by country meeber banks. very ouch wore after the praotioe deeelopod and extended. In eau) the Federal Roaervo Bank of to York ahould deoldo not to treat cash in trunsit us U part of Cho ronorvu balanon, and the lecteern1 neeerve nunk of Boston iheeld decide to do so, bank:: in euolt neighboring titles as erideoport end Now Huveno end benka sleilerly vitneted in edjeiniee dintricts vbero different de- olsions *ore errivoe at, would in time bootee teere that different referee requirements applitd to their respective banks, notwithstanding that they ere located in the Ban* state, and in tome oases in adeolning cities. This Is certain to oaeoe ocnfasion and complaint, and is in feet a type of disorieinetion whioh herdle SOOTS justified in preotice, irrespeetive of octsideretions of law. eeterve concessions mede to oeuntre banks beve been shown in the past to Invite apeeels for tartest* oenceselono. There aro meny countre eanes which now oiaim that they are requiree to carry more is on hard teen 'Omura of lorremeoneine size are reeeired to *am, in reeerve end Contra/ reeerve citiee, end they are still aakine that oh on hand be allowed as a dedeetion fie= the required rewire() and in acme ceEee, that it count us reeorvo. eau,' oountry banks whinh have considerable balances due rrom banks, eut welch haw) no beluneon of importanee ette.12 bunko frOra ;titian the eden to belenoes oan be deduotee, claim thnt they uro uudnly penalized in Aueltrett with the city banks by roenen of Icontion end the charucter or their bugle:ace. The boerd'u letter X-e977 indiaetes Chet applicetlems are still beirg received for reemotlene of required reservel by member bus located in outlying dibtricts of rottrvo oitioe. Indeed, tho teedency is eleays in the direction of loworine reterve roquiremento lAtti rover inorseeltg theme And the tenaenoy to convert *tete boctunteento ties depovits reeeiritte but 24 reEerve is gaining impetus at le disturbing rate. The requireeent of les tnat country benks mey carry lee* reoereos than bulks in reboree oitlet, end those in roterve cities a oenller reterve than tetra in contrel telt:tree citiet, tee L. recognition of tcr,* of there ivenuelities arising fro Che imeopoIbilite of eliminating diettect end time. It feet, this Is a reeerve odjuetmett vhioh hns alroody on mede by Cercreet. cessicns woule not scam to be enetifiod, ueletee maee in tee seem say. ate eituution in gonerui es to the affect of the roverve provioices of the ester,. Act upeu the reeereoe-cf country monber bunko hne tete very elebrately °eared in a ieper recently erepered by Ocvernor eesty of the Vedcrel etterve tank of =amend, welch settee to shoe tnot contrary to tho °lams ef meny country backs, the provision of the eoterve eot bete bad tht effect tf reducing the n:tel of reserves, bunk balences, snd cash which ocentry banks find it tie:watery to carry In emetic:0, considerably more, relatively, then those ef atty. other °lets of bunks, and that the grounds for there veritus ueevels for ccueessecne in reterves are very slender indeed. even bread greenest, it seems Very difficult tc justify any ruling lcokine to roducleg reserve requireeetts at a ties when the country is terdend with a surplus cf reeerves and is regerded es being in some danger thereby of entering neon a period of infletlet vbion *cold es disattrous to the stability Of the country's baseness. Further 4 /federal itosorve Board 3.4.24. zop1y to your inquiry, tho officers anti In all these oirourastanoes, believe we theuld not consider chipnents of currency in transft direotors computin,.; reserves uf meruer ban:cs or Su asseening penalties for deficiencies thereof, and aux directors will thico no Lotion in that reGard ODD way or another until reoeipt of further word from the Wederal Iieserve board conourninz the (rogations of law and polioy referred to in thia letter. Yury truly your s, BZ.T. LISTONG Goys? nor. BSAGLH.11,111$ FEDERAL RESERVE 3ANK 1924 MAR 2 OF NEW YORK March 28, 1924. Federal Reserve Board, Washington, D. C. Sirs: LOANS AND INVESTMENTS! Our total earning result of today 's operations. assets show very little change as a Rediscounts and advances declined $7, 300, 000 but bills held under sales contract s advanced approximately $7,1 00, 000 and other bills purchased, including those held temporarily for other Reserve banks, were slightly higher. The System's holdings of government securities in the special investment account increased $2, 000, 000 to $1 81, 793,1 00, as shown in a later paragraph, and our all otment of the new deliveries was 000. A comparative statement follows : Millions of dollars 'Mange from Yesterday Today Bills di scounted Bills held under sal es contracts Other bills purchased Special investment a/c Other investments Total earning as sets 1 04. 9 39.4 1 8.3 51. 2 3.5 '317.3 + + + + + Change from March 26 + 11.1 + 13,5 + 5.0 + 0.6 + 2.3 + 32.5 7.3 7.1 0.3 0.6 0.9 1.6 The following banks decreased their borrowings materially: Pre sent indebtedness - Paid today Bank of Commerce National Park First National Bank of America 1, 500, 000 New York Trust reopened by borrowing 42, 000, 000. individual RESERVE RATIO: serves were 311, 000, 000 0 32, 200, 000 1, 000, 000 $4, 000, 000 4, 000, 000 2, 800, 000 Changes in accounts .o f other banks were smaller. Deposits and notes declined $1 4, 000, 000 today but total cash re- al, 000, 000 lower. As a result, our reserve ratio appears to be unchanged, at 85.6 per cent., according to an early cal culation. balance in the Gold Fund was practically unchanged. Our 2 Federal Reserve Board, Washington, D. C. ).1-6TEM'S SPECIAL INVESTMENT ACCOUNT: 3/28/24 Holdings of government securities previously reported 12.79,793,100 Delivered today: Maturity Sept. 15, 1924 Dec. 15, 1924 Par Value 1, 000, 000 2, 1,000,000 Total holdings ;$181,793,100 none purchases for future delivery and apportionment $181,793,100 Total purchases to date JOVERNMENT ACCOUNT: 000, 000 Principal credits to the Treasurer's account were revenue collections of 0,600,000 and other collections, 1,500,000. After paying checks amounting to $6,600,000, the balance in the account is 127,000,000. Following opening and renewal at 4 3/4 per cent., stock exchange call MONEY RATES: money rose to 5 per cent, at noon where it remained until the close. In all, ,133,000,000 was placed in new loans with only a small amount left unlent at the closing rate. Time money was quiet at 4 1/2 per cent. Mercantile paper fairly active in New York with prevailing rate on prime names 4 1/2 to 4 3/4 per cent. Bill market continued quiet with rates unchanged. A summary of money rates follows: Week Ago Today Call money, renewal Call money, new loans Time money, 61-90 days Commercial paper, prime Bills, 90 days offer U.S. 0/I, 4-6 mos., yield U.S. C/I,10-12 mos., U.S.Treas.Notes, 1-2 yrs,yield 4 4 4 4 4 1/2 3 4 1/2-5 1/2 4 1/2 4 1/2-4 3/4 3-2 1/2 4 1/4-4 1/2 4 4 3.56 3.91 4.07 3.50 3.88 4.07 3 7/8 3.43 3/4 3/4-5 1/2 1/2 1/2-4 3/4 3..84 3.97 Bond trading continued moderately active and prices generally were 30ND MARKET: firm. Yesterday Liberty bonds were quiet and firmer than since the first of the week. St. Paul issues continued active at slightly higher levels. A new offering of 10,000,000 Cleveland Union Terminal 5 per cent, bonds, priced at 97 to yield 5.15, was reported quickly oversubscribed. bond sales decimals express 32rds: In the following summary of Liberty c 3/28/24 Federal Reserve Board, Washinzton, D.. C. 3 I Amount in Thousands 3 4 4 4 4 4 339 49 299 362 632 265 1st 2nd 3rd 4th Treasury STOCK MARKET: Yesterday Issue 98.26 99.15 99.12 100.1 99.15 100.7 1/2s 1/49 1/As 1/4s 1/4s 1/4s Gain Today Today 98.28 99.16 99.15 99.31 99.15 100.12 Gain since Jan. 2 - .12 1.06 1.17 .2 .1 .3 - .2 .19 1.12 .26 .5 In the early trading greater strenttthapneared in stocks generally, but political developments were used as the basis in the afternoon. for a resumption of selling Following the announcement of increased dividends for Corr Products, prices rallied somewhat but the general position of the market at the close was again lower, the Dow-Jones industrial average in fact reaching a further new low point for the year. a million shares. The Dow-Jones averages follow: Change from Yesterday Today 20 railroads 20 industrials FOREIGN EXCHANGES: steady. Total transactions were slightly under 81.05 - 0.24 92. 54 - 83.06 101. 31 O. 36 1923 1924. High High Low 79.98 90.63 92.54 105.38 76.78 Low 85. 76 Little interest in exchanges was shown and rates remained Sterling and other European exchanges were virtually unchanged. South American and Far-Eastern rates were slightly lower. Closing cablc rates in New York were: France Belgium Italy Holland Rio de Janeiro Buenos Aires Yokohama Shanghai Calcutta Canada (check) -jMMODITY MARKETS: .7000 .301875 .97 5/8 1.00 Today 4.30 .0548 .0430 .0433 1/2 .3694 .1120 .7599 .420625 .69875 .301875 .97 5/8 Cotton prices fluctuated widely today but closed moderately wheat closing 7/8 lower at WRB/GH .0431 .0434 .3698 .1155 .7619 .42125 .4866 higher, with spot up 60 points firm in quiet Yesterday 34.30 1/2 .0547 1/2 Par 4.865 .1930 .1930 .1930 .4020 .3244 .9648 .4935 London to 27.40. Grain markets continued weak, May 100 5/8 and May corn 5/8 lower at 75 1/8. Rubber tr4ding. Respect fully, W. Randolph Burgess, Assistant Federal Reservert -F- 18 me de Tilsitt, Paris. 17 Ootober3. PERSONAL & COLTIDMIT-LAL The iionorable Cressingere ,e(lora1 eserve Washingten, D. C. 1). Th. Governor, ard, 1. !?.. Dear Gove rnor arissinge tb2i LOC Mere I wrote you throe or four weeka IW the awning into effect of the Tames Plan kiss boon proceeding rapidly sadI ara gam to write you about soma of ten thieees that have been taking place on the ohanoe that they may not have been in our enerloan papers, none of which I have seen I hope I ray eot oe repeating thircs I spoke of in try for many weeks. earlier Letter., of which I have no copy. The Loudon agrseennt, providing for the aoceptaece of the DIVAS Plan and setting forth a definite dated progrFtm fbr its ooriiing into effect, prnvided for a transition period of five weeks from the Lime the eteseeti on laws to give Oftsvnisoion announced that eezeoey L. passed the nooessaw the 1:alves Plan, namely, 'effect to the requirements of a moo ns ti tuted siohsbsnk, the formation of a W.lemei Comaay to take over the Gernan railroads from the Gertven Government and to create a mortgaes thereozi of 11 billion eeld marks, the provision for a mart ;age. of 5 billion :4)1d maries on the Gorman industries. laws On September 1 the reearation Gorar-is' sion announeed that the German you, ,;:is I wrote had been passed, and the ,traasit ion period dad begun. a smell rile Ilea 3rd with the Agent Genera ,;ont to Serlin on eeptember ana other Commissions, anti= staff drawn from tho personnel of the nreelf as temporary volunteer associates, and with Mr. Tawes, tr. Auld aed tobinson and his Mr. iieney assistants or advisers. el few days latereiterjoined 14. volunteer staff. this Tore brnther, :4r. Thomas eobinson,of Hew received; the Geman Gevernment payments First of all there was money to be railroad profits, etc. being reand tie colleotions of oustems, taxes, the Itahr oo 0U ti on. els° there ceived by the k'reneli azri 3elgians from other producers for Was iloney to be paid out to the German coal and .300014.. the flow (Amnon deliveries in kind, and for verione exp. ns a 8. its 11 billion bond Is 3411 delivered, Railway eompazy read to be organized, Tetra, the Irelustrial eoaik, Allah ani, the railroads turned over to it. Industries, nad to be orginieed and mortgage on the is to deal with the bond on the industries oad to be delivered to it. the E billion mark to be contracted fore fourth, the loan of WO !Allion gold marks hadbe brought into axis tenon. pifth, the now leioesbank organization had to In my last letter I remember speaking of Monsieur levorver sae Commissioner of Railways. Along with Sir William eoworth, the eailway jeceert, i1. everve spent a fortnight in :earlier getting the wag Rai bey Comparey organized and takieg over the railroads. The Ca:true/is have put their best men on the iioard of the eel lway eemparee taking over the railwsys frnn the State. '.73re foreign directors are also ran of hi:* standing. 3asides rye arid Sir 4l1iarn Acworth, the French representative is M. Margot, one of the Directors of the earls, eyon ieediterrenhe eallway. Ire Italian is a large iniustrialist and the !3elgian is a railmy en4neer interested in railways and traction companies in Europe and other countries. The London Agra nt required the French. and Belgians by Deoember 5th to return to eenteny the rally/we,. they am now operating in the auhr. :ey way of showing their desire to cooperate in returning the leeer to ,..iereen central, the erench and Belgians have decided to turn over the mi.:mays on November leth, or three weeks ahead of the reqtairee ties. The Comitiiceioner of the Iudtwitrial Debentures is an Italian, n vet, high type of North Italian Ns ne se man, sh reig, practical anti unemotional. The :airecto re of the industrial Bank, which Mr. 3. Nogate, Is to deal with the 6 billion be le marks industrial debentures, has as it s foreign directors men of the saice high type as the lailvnr Compeny, he apportionment of this he mortgage logara beirc one of them. among the different induetries,on a basis which will be about 210 ';;; of the taxable value of eaCh plant or concern, is an immense uxxlertaking ant it will be the middle of December before the German eovemment is ready to In the meantime it 140$ ro rely report won the peeposed apeortionceat. issued to Mr. eeeara a blanket bond for the five billion gold tui Ars. This week also the Gerran Goverment MS delivered to the proper authorities the bond for 11 billion Feld marks on the German railways. 3ruins, a Dutchman of about The Bank COntinissiOnOr is ler. forty, professor of banking in Rotterdam: University. fie was suggested for the appointment b 'r. Vissoring, il'resident of the litsderlaneacno Bank. He has been in 3erlin for two or three weaks and is a neat likeable and intelligent fellow, ge' is evidently thought highly of in Dutch banking circles for he told ree that he had been offered the Presidency of the ,irank of Java after iIr. Leilinga's resignation. as is to live in 3erlin lie is required to put his seal aid have his office in the Beichsbank. on all notes issued by the new eeichsbank so as to guari ameest overOf course this will be done mechanically issees of notes in the future. but he is going to have a small oreenteation in the 3tatt to lop elope From all I glean he and Dr. watch on this part of its operations. Schacht get on feraously together and from what I know of the personalities of the two ra/n it leeks to me like a very /Peppy arraneerent. The Germans are putting their Yew best men on the aoard of the Ileionsbank and the foreign directors are as follows: Great Britain, Sir Charles Addis; erarne, M. Sorgent, ;lead of the BaliqUO l'Union earisienne; Italy, Ur eeltrinelli a very important bus lees:elan and director of arm of the two best of the banks - I forget ereichs letritzerlard, r, 3achertere foreerly head Bruins; Swiss Bank of Issee and now head of a private bank; 'folitind, ler, United States, Mr. eloGarrah; Belgian, 14. Francqui, Head of the Societe Generale, the largest bank in eelgium. I u*lerstand that Max ..arburg Is to be one of the German directors. The reconstituted Reionsbank is all ready to function. other day in andon ar. Young asked lir. dehacht hoe long it would take him to get the new Bank into operation. His reply was "Less than a The TIDNir eatichsmark notes are engraved and only have to have day." soma last minute data printed upon them. The stockholders of the Reichsbank r..tet a for tnicnt am and p as5ed all the necessary resolutions. The new directors neet October :gt or 31 to put the reeonstituted tee& into operation. Perhaps tin most I Portant of tha new organizations is the Agent Gera ml is ex-officio the head. The other //webers of this Conrnittee are, Groat nritain, Mr. Bell, nager of hloydts eank; Frame, Mr. Porrentier, former Urder-Secretary of eirrince ard a iember of the lerperts Committee; United. States, L.Ir. Sterrett, dead of Price eraterhouse Oompany; Jelgiwa, ir. Jan.-11E380n, ore of the directors (vice presidents of the Banque Nationale d Be lgi que ; Italy, Lir. Jannaocone, Transfer Commi ttne of which t The Transfer Committee does not commence to function until the transition period is over; that is, about 'On end of October. It will have its first meeting on the 31st of Ootober in Berlin ad ter. Your* has several very important ristters to lay before it at once, one of them of a rather far-reaching nature. This Committee, as you transferring out of nernany the know, is charged with the duty of Agent General moneys paid in to the Relchsbank for account of thethis must not be under providing that done the 1.4wes Plan; the Plan, havever, the German exchange or the German in such a way as to damage either first couple of industrial and financial eco now. Of course for theGermany as all to be transferred out of years there will be no money of it over and above expenses, eta, will be spent on paying for deliveries in kind IfirideF. by German producers. Bat the Transfer Committee deliveries has very wide authority in deciding not only whether the the 113oovery in kind are harmful to the German economy but also whetherAllies, are by other ts passed by ingiand and eran.ce, and pe rhaps ,,inder these nets, as you operating harmfully to the German economy. local importers 261 of know, England axe eranoo oolleot from th.eir keep it against their the value of goods imported from Geruany and turn reimburses the reparation claims. The German Government in him in marks. ?hose German shipper but, of course, only reiliburses considerable voltam of dots nave the effect of cutting off a very through exports and the Germany's available foreign exchange created to the spirit of the Germans feel that they are entirely contrary on account of the aritish Reoovery .ect the German Dawes Plan. eau. per month to Treasury is paving out some 10 to 15 million old Riarks month; so you by about 60,000 per its uationals, represented noel end of this vouchersan item as well. is quite 010 teen see that the neve Of eourse the sine uua 2.133 of the vadole alen was the loam. Meentine the Oerman DI:wire; the latter pert of august D. Schacht, re.ad other auropotin Gomm/rent, vtsito Italy, Holland, xiteoriand in the loan. About countries with a view to getting them inWrestedboth °me to London the WV, of deptember are Youree and Dr. achacht two of where, after r sone prod liana ry discus al on vrith Kr. Morgan Raireareeene Norman and other "Jaiglish bartairs, his partners. and Governor and Italy tatives fie= eden, holland, eelgium, Vennee, eeitseriand came to ei/vtace ainister, Dr. lett/a/re wore called in and ainerica wasthe lerman to taae o?s-half, iengland about eee London as welle quarter and the rest of the countries eel/allied, including eerie/My, You have deubeless read of the allotments in the other querter. although some of the smiler repeat then the papers so I won't difficulty inhere. providing for their quotas it countries found great a great is felt to be of the greatest Iwo rtaree to have the loanaria represented countries international ors) with all important discussion and negotiation, three weeks of .finally, after nearly contract gr. Young came back to Paris on the 9th with a form of aid a set of decisions to agreed upon, a form of bond agreed upon, remaiug it absolutely clear be Wean by the asearati on joremission cieream ahead of reptamation that the loan would be a first cearfer on presented to the eieparation and all other payments.trahese bebareters were feathered together in sion on Pridw the 10th While the lin }lobin.son, who London awaiting the results over the telephone. which lasted four or five hours, aceempanied +er. Young at the muting, tie situation was remarkable. tells we that Mr. Young's handling of wrote you before, had not ?*-I The ler aeration ChemadefliOn which, as least, in makine its decieions the tofore 'been very prompt, to say called upon by Mr. Yang to make The has during the past 'month been number of decisions on yea/ important /natters.opporpreeptly a large on the 10th withoarfrevious one they were called upon to makefor the abeo art e priority of the loan tunity for discussion, declaringdetails, with the bankere at the other other and dealing with a lot of waiting to 3Drld cables that evening to the telephone wire end of the in emerica was an especially webers of the underwriting syndicatemade, all in toe beet of good ions .ieferennes were large order. the speed with which the nature and thoroughly appreciatively, to decisions and to Ara Young's make these s that az, Young's Oomaission was being asked to aat air. bIuaon says ti v ties. _wound up with mul ti ferious ac masterful and the evening /lane ling of tie situation was of the COiNniaiSION a telephone nei-,saae part a complete deoision on the their dispstoees of tee necessary eablos to the London bankers, aid to the ttelerwriting syndicate*, Every day only serves more olear3,y to snow Ir. Young as the mastemind of this whole situations I fiather that the central Young's idea of the activities of the 'Transfer Oorsaittee vas contribution to the Plan in addition to his great contribution as Uhairraan of the Comaittee that drafted the Report except for those portions of it drafted by General Dawes hirmelf. ife was in London all through the Conference and was instrumental in writing into the report of th ondun Conference two sentences which I see quoted in the published bond prospectus which protect the bond holders in case fuither sanctions are imposed on Germany; and be was the final their negotiator with the rieparation Commission in more,decision to grant -.eurthe he is steeped in comple to p ri ority to the bond I sem. the philosontw of the Wiwi° Plan; is thoroughly imbued with the as with limitations of the position of Agent General as well line and its attempts and never steps over the powers and responsibilities within toe authority of the Reparation to decide questions that are Commission or of the Posers themselves. With all his grasp of tie entire situation, his clear mathod of presentation and his ability the rights and as a nesotiator, he is so fair and so respectful of completely that be is proper sensibilities of other authorities nfter six weeks of his "activities', master of tie situation. decisions the Reparation Commission is with the need for prompt today giving him a lunch pa rty During the past fortnight I nave been presenting some to ,mrroan bankers and businessiren which Tiarlts of J. Henry 30hrOeder and Conin&W were given to mo by Ur. opinion as to ahen I was in v..onclon and I find a somwhat divided marks, of Mrether Germany can provide the necessary number required under 2,500,000,000. per annuan beginning the 5th year, the Dawes Pia u but a awl general belief that Germarsr will do her did not find anybody best to p roy isle them; on the other /rind Iwoulki be able to get this who believed that -the Transfer Committee present ti ms the industries number of marks out of Germany. At the tile proportion of unare very slack, labor is inefficient and foreign productive) labor is muoh too high. Adverse tariffs in taxation high internal very countries hinder Gowan exports, while riii; to 14 on the output was told, from of industry, varyingI render competition in warid kt to the cost of production andthat through inflation a large .irkets difficult. Tile fact is means a large proportion proportion of the investing class,vrniohconsequently the taxes of tie Lax paying power, ../a.s wiped out extent on industry itself; have to be assessed to a very largebasic tax of 10-0, with certain letters of In although I am told that there is a be collected at the source rebates, on wage earners which is to the GOVertZ11311 t this tax turned, over by the industries andimposed by atoiceialistic Government. As curiously enough was advised. lates doubtless to the credit situation you arewets scarce fullypartly because and are high, partly because credit -6of the :ielahsbank's policy of vostricting credit to /support the renter.mark. Oank Minolta during the period of inflati On shrank re rhaps 75 to 85: and oavinos (ioposite almost oeased to exist. atlea now overage slightly over the o YO- r baits' ROM expert kArnic people get- tiog actually l0ss. nxt womeo kflIOorellled A10 rkft vs get oonnicorabiy more and this brircs i t)of svornee. &any people think that was will have to rise fi s buoiress troves, tooyirig that the tooroors ars eiol,y content with the pmsont sole becoose it is that or nothing. In the other Ilona the present scale represents oonsiderably more then they have b -en getting during the past too or throo rears of tre declining moron Tao thing that am particularly impressed itsolf on me has been the toad i re es of the aran people loader the Long period f tho loflatirolary "reign of terror". Amy people olio ow go through that patiently aid quietly oannot be very rabid radicals. Ani after baying loot all their savinos through ireflati rn mrsi havin otten onti rely out of the habit of saving them they have begun to !evert to their old saving practises in the past fn tenths is 0011 as the mark booamo stable. Bofore coming back to Parts I male a little, trip to ?Tagus to see our oorrosponients too oe, oenkovni ete. as tray ale troikikng about lerroring some money from us. I had a long talk with OW of the unmoor* and arn bringing horns their figures month by month. ohile they are ostennibly alai in fact a barking devartment of the Oinistry of oinanee tneir orerations are novertheless Reverted by a *la Ai of ten Diroetors who are businosamon, .bank ors, economists, eto.presided over by the Ooard of Directors ono V.113. t1410 manogers :. muter of Yinanoe. are thesroweily imbued with solve. bank of issue ideas, are cond,eo tine, in a censervative nInns r aid are expecting during the their if or next ,oar to convert the present organisation into an actual bank ale aid issrmo with its own eopi tole Oley are highly Tefoorded locally thoroughly iodooenient of tie oinister of nuance. Not only io they 1_15 ver Leal to the Goverment, but at tines they even deolino to lend The on the collateral security of Ozenho-olovakian Treasury 3111.4 under two ziua, s toad Joe ss of ti e Cze oho-. Olovak crone Ouring the past thoir manogerento has been rs :Tara:thin* will you please tell Or. !.3towart that I looeived his cable message in Aerlin and will endeavor to arraneo through Colonel Loom to get reports and statistical data from the 3soaratIon Corooission of be as for the Board. I don't Onow haw difficult this mg other many are letter, these, ino/uling the one which I san.t you vrith IV I will do tho oonsiderod by tho Conmies Ion to be conft tentiol but boot I caT1. sendirc sve just received a letter from lin. Caseregard tome a the resolution in oopy of ton 00000so odoisory 0ouncilis of his letter of September investrents in foreign bills, also aolv I am planning if Clove rnor in View of this dtscsaaton 30 to you. be there to spone aoeuple of euvis in :oorolon discussing Norfaxn tues Jac t v:ith him and 1°o:icing over the situation there. .7.. With kird zemards to yourself and all the Evrabers of the Board, are looking forward with much interest to the autumn conference which I understand is to begin November 10th, Iam iaithfu.11y yours, Lecember 18, 1i24. Federal Receive board, tashington, D. C. Attention - Honorable D. R. Criseinger. dear Governor Criesinger: /he requeet eubmitted by the Federal Reserve Board et the last Conference of Governors that suggestions be offered as to posaible amendments to banking Act was, as you recall, received too late to be fruitful of the National reeults. My on opportunity to examine the McFauden Bill has been rather slight, although I have had one or two currency, discussions of it with the Comptroller of the and our officers have talked it over occasionally in the bank. There are three matters in connection with thic legislation which, I Aiieve, enould receive earnest 1. consideration before the McFadden Bill ia paeeed. The proposal to amend the bill 80 that membership in the Feceral Re- serve System will be denied to state banks located in states which may hereafter pass branch banking laws, in case such members open branches, se believe to be a mistake. We unueretanci that the effect of this peneing amendment eould be to ?revent beaks in those -states Which co aibeequently pass branch beak acts, from establishing- branches unless they rein membership in the Federal Reserve System. Is not this an attempt to control state legislation and the development of state banking, Whieh is not justified, and which may indeed have the effect simply of0preventing or reducing membership in the Federal Reserve System, rather than preventing the establishmert of branch bane in a certain limited number of states? 2. Is it wise to extend the powers of national banks to make mortgage loans, as is proposed in the McFaduen Bill, without further eafeguarde than are provided? #2 3. 12/18/24. Honorable D. R. Grisainger Even more important, possibly, is trio faot that the McFadden Bill does not attempt to deal with the growing practice of nationel banks to open savings ac- counts, the withdrawal of which may be aubject to notice of thirty or sixty days. A rapia growth of this type of banking is taking place in the national banks of the country, End aeeositore of that character in the national banke eAven no special protection, in fact, their intereets ere eepecially jecneerdized in the event of embarreeement by the bank. Those who have small savings aeeountn in natinnal banks are frequently pooe eeople ehoee entire savings arc inveeted in this wey. Under the present law, a national bath pete these eavinge depoelto ieto the common funds of the bank. They are eabjected eo all of tlie rieke of oomeeroial ban 1n, and in the small- er country barele, ae wo knee: Lhese are very eonelaeruble. of inveutmen'oe, the aavingsedepositor There ib no segregation ets no priority of claim as he would receive if he were a preferred creditor with recouree upon etegregaeee eueetc, ane ehoula a bank doing this claee of Ducincee L6(.0ME, embarrasaea, and seek the protection of the thirty or sixty- nay notice contract, the geneeal depositors are then in a position to withdraw their aepoeite,- getting the advantage' of payment out of the liquiaation of the best aosete of the tank or from the prececte of loene epon them; wher eae the depositor who should nave he beet protection, that is the poor eaver, cannot eithuraw his money, and if the bank fails, the remaining euseta to which he mu'A look ere liable to be the poorest. I have not attempted in any way to influence the Comptroller or Mr. McFadden as to the terms of the McFadden Dill. In a very general eay, I have gathered that it contemplates improvenente in the National oank Act, by an enlargement of the powers of the rettionel banks which mostly are to their anvantaee, but i confess a considerable concern as to the three points referred to in this letter. Possibly it is not fully retlized thet something like CO % of the increase in uepEite rtich hes taken place in American banks in the last tea or twelve years, are those which are generally classed as time deposits, which includes e large amount Alio of savings accounts; #3 Honorable D. R. Crissinger 12/18/24. that a very considerable eroportion of the accounts are those of poor leopla who deposit their avings in national banks, and it is my conviction that, under the law as it now stands and s it will stand after the propoeed McFadden Bill is - aseed, they do not receive the adequate protection to which they are really entitlod. am submitting this brief sugge:ztion Gs a personal reeponee co the Board's request, for such action as you may think desirable. Very truly yours, BLdj. tT5)-i7G Governor. .93,JAS k \\O 61: July M, 19n. Federal Reserve Board, Washington, D. O. Sir 6 Your letter- X-4.577, dated July 10, 1V2b, concerning -"EMployment of Expert Service by Federal fieserve Benke," has been reported to our directors who have given much thought to it and have asked me to write to you frankly their views. They are thoroughly in accord with the object which the Board obvious- ly desires to accomplish by teking the action reported in its letter. Clearly, it seems desirable from a System point of view that in emlioying specie:lists or experts in any field which concerns the System as a whole, a hoserve bank should consult with the Federal heserve Board to ascertain its views and thether it may have any suggestion as to who might berA perform the work contemplated. Our directors feel, however, that your letter of July 10, if followed literally, might result in s, very cubstantial curtailment of the obligations imposed upoa them by the termssof the law. They believe that the effective organization and admiaistration cf the affairs oI the heservo bank is a responsibility which the law places upon them Ind which they cannot avoid either direct- ly or indirectly. The ordinary operations of en institution of this size are SO numerous and often so far reaching lu their contacts that it may well be imperative for the directors from time to time to employ counsel or experts, as the .zase may 24,1 be, in order to protect the interests or rights or the bank. The law does not contemplate that the Reserve Board must of neceesity be consulted in such a case or that its aTi,-roval la a prerequisite to any such special mployment. -2- Federal Reeerve Board July 30, 1925. Of course, under the terms of the law, the emeunt of compensation paid to "directors, officere or ameloyeee of the Federal reeerve bank" im eubject to the approve' of the Boerd, but our direotore question whether this right of ealery approve' eivec to the Board the right to deny the epecial amployment in queetion or to ;lace zmy such restriction as that contained in its letter, upon the exprees right of the directors "to perform the dutien usually appertainine to the office of directors of banking encociations." To ang&ge the servioee of experte or counsel ellen the effairn of the bank depend them, eeema not only a right butmay be e. neoeemery duty of the directers. In so fer an the Board's letter aubjeetu the action of the directors in this regard to the advenoe epprevel of the Federal Reserve Bocrd, it eeeme to place upon the Feeerl Reserve Board tt responsibility for the operation-5 of the benk which in our opinion is, 5.6 t matter of law, eloced 117:-on the directors. In fact, a literal compliance with the terms of the Bonrd's letter or e logical insistence ueon the principle it enunciates might reeult completely in depriving the directors of that independence of ection and control in the conduct of tho benk's affairs which the law clearly contempletes end which, indeed, eeems to them to be the spirit of the Federal Reserve Act. In expressing the foregoing, however, our directors reiterate their be- lief that in every case her the ',employment of expert cervices involves a question of Syetem interert, their rhould and wculd consult with the Federal Reserve Board If the circumstances make it possible to do so. Respectfully, Pierre Jz=1., Chairmen. GLH RECOMBENDATION3 FOTI REVI3ION OF PUBLISRAD CONDITION STATE/LINTS OF THF, FEDERAL RESERVE HAMS Captions as shown in weekly statement at present Captions proposed to be shown in weekly statement as revised Items to be included under shown in precediNLoolumn Bills bought in open market $ Bills bought in open market $ Bankers' acceptances payable in dollars Bankers, acceptances payable in foreign currencies Trade acceptances Foreign loans on gold All other earning assets All other earning aseets: Domestic Federal Intermediate Credit Bank debentures Municipal warrants Foreign All other resources at present lankerst acceptances based on Imports Exports Domestic: transactions Dobler exchange All other Trade acceptances Foreign loans on gold Foreign loans on gold Due from foreign banks at interest All other resources Items as ashawn in Federal Reserve Bulletin e aaptione Miscellaneous assets Dae from foreign banks not at Items proposed to be shown in Federal Reserve Bulletin Y Bills payable in dollars: Bankers' acceptances based on Imports Exports Domestic Transactions Dollar exchange All other Trade acceptances Bills payable in foreign currencies . All other earning assets: Domestic -Fed. Intermediate Credit bank debentures Munioipal warrants Foreign -Loans on gold This from banks at interest interest The renewal of the charter of the Federal Reserve System he been the eubject of public discussion. The System hes been in operation eleven years, its existence create an atmosphere of eonfidence, and benkere and businese men are united in their desire for its continuance. The American Bankers Association wiehee to make two recommendstione tinuance of the System, which it believes will uncertainties which misht otherwise with reg,rd to the con- preserve confidence end evoid arise. The Act now provides that at the end of its charter period the system shall automatically cease to esist unlese Congress tskee affirmative action to continue it. We believe the situation should be exactly reversed. The system should automaticelly continue until Congress tekee affirmative action to dis- solve it. Also, the question of the continuance of the Syetem ehouid not be confueed, or subjected to partisan controversy by involving it with emendments to the Act. Amendments Ehould be coaeidered esperetely and on their merits. The Act confers on the System no unchangeable rights; amended seventeen times; it has already been and Congress, under our proposal, would forfeit none of its prenent rights to amend it further at any time. we, therefore, respectfully ask Congress, when the question is considered, To provide that the Federal Reserve System shall continue until Congress talces effirmeti-ve action to ctiessolre it. To attach no rider or emendmente to the bill providing for its continuance. (8) To consider any amendments which may be offered, not in connection with the continuance of the System but under the continuing right of Congress at any time to alter or emend the Puguet Federal Reserve Board, 19P5. Washington, D. C. 51 re At e recent westing of the Auditing Committee of the directors, who ,.ere considering a report of the Generel Auditor concerning vsrious matters relative to the handling of the cesh and operation of the vaults of the bank. the directors reco rended Vest immeilate etepe be taken to consider the increase in the e.dary of certeAn employsee cr.nnected with those matters whesc eemineration is no so out of line with the e tent of their respective responsibilities. As a reslt of this recom-endetion, the Salary Comeittee of the officers ceneidered the. °see of each cf these men, -nd while they snd also the directors felt that ordinsrily it would be ranch better to meke incre-ses ie the usual °nurse at the end of the yesr, n-vertheless, because of the excepticnal circumetences -urrounding the work of ther?te particular 'en, they were forced to the conclusion that some immediete action is nece-sery. Accordingly, the directors have voted to approve the recommendetion of the of leers that the following men h,ve their salaries increeeed es of August 1st, by the amounte specified below: Present ,Salery Blac, Adrian Senior, Charlee Anderson, Edeard . Preroned $2,840. Cash Department - Pkying Divieion Propored $180. 180. :.:5,000. 2,840. 2,500. pre .e ',-:00. 2,800. 2,500. ,600. 200. 2,800. 2,700. 2,500. 100. 200. Cesh Derert ent- Cesh Custody Division Janssen, John Alminietrstien Department - Veui.t Division Lynes, Charles Eschelmen, Chsrlen N. 3/4g. OTAFting Dermrtalont - 21=2.1.W.L1;lx, luether, Herbert A. P,700. ZOO. 3,000. 2 It will aggregating in all 6/06. be seen that there ere $1,5P0. Of the Federel Reserve Foard. rly 7 men who ere reccemended fer increeees ven, three are in the paying telleare deeertment. Bleck is a paying teller, who eten makes paymente ae high es $9,000,000 a day. : et of these payments ere mede over the eindot in the meet difficult end tedioue circemetaces, and the strain incident te making so a oeriod reajuires the exterience en' ability. or any payments in such lerge units and in 80 limi of een coeeeeeing e;ceptionel qualifications in tempeteeemik, Senior Pnd Anderson are alternate paying tellers who substitute for Black and other paying tellers when occesion demands and ehoee regulPr work invoves either the erecsretion of or the makine of actual parents over the eindoe. As regerd ell three of' these len, the directors feel that there is no justification for tl,is bank paying to men handling this type of work a enlary under 0,000. per annum. while the rropoeed increases are recommended to teke -lace as of August 1, the directors 'eel that it may be necessary soon to rece mend further increeses in this department en of the first o' the year, certainly in the case of those man whoee salaries rre till under 43,000., even atter the increaees no recomeended. Jannsen is an ersist nt chief of the Ceeh Custody Divieion. There are in all six employees in this division, all with about e'uol reap nsibility nnd all representing the officers in maeing eithdrawals from or le ()siting cash in the vault. Jenn en ie tte only one of the six zen who is not now receiving et least $2,800. and It in felt that in fairness to hie and to the benk, his ealery ehoold be raieed at the crest the by an amount eufficient to piece 'im on a le eel with the ether en deing eim'ler ,erk. Thie increase will pave the may for an increase in the salaries ef all of the six men in the Cash Custody Divieion as of the first of January, 1926, to an emount not less than 0,000. per annum. The directors, as recommended by the Auditing Cemmittee of the Directors feel that thie is the minimum that should be paid to any of these men. To of the three remeining men nre emeloyeee of the Vault Divieion who Are the repreeentetivee of the senior officers of the bank in co-trolling access to all of the vaults of the bank. Their responsibility, while not so close to the actual cash or securities of the bank, is levelly importnt in that they have comelete control of the s/s/n. Federal Reserve Board. ,ults and access thereto, end the directars feel that as reerese:tatives of the officers of the b,qnk in their custody or the aesets of the bank, the seven men in the Vault Divi- sion should ultimately receive not less than $3,000. nly four of them receive $2,800. or above. the ere=ent tiae. Of the seven men in that division, recommen4-tion As to these four no is eede at The directors feel, however, that Lynes and Epchelean should receive the -reposed incre -es in order to bring them mere nearly i view to making the general adjuetment line with the others, with at the first of the year more equitable. There is only one other men for whom eny increase is proposed at the present tine. rht is blether, ehe is assistant to the Building Slperintendent. connected ith the building hip 'newledge and e perience operations of the bank )-im He has been sice they were first commenced, end ith the maintenance and operation an invaluable under-study to the ereeent superintendent. of the no* building make It would be impossible in the opinion of the directors, to replace him at a s-lnry substentielly in excess of what tee is now recemmended, and the directors the eresent time, fe may fear that unle's this increase of $300. is maJe at receive hi- resignation and be laced in a position o'2 having to go -ertsids for a man at a much higher salary. In conclusion, the directors appreciete the desire of the Beard to have in- creases in the clerical force n' the bank take place only at the and of the yeer, but in view of the particuler nature of the cases ender consideration, all but one relatinr to the handling or custody of very large amounts of the banks cash, our directors believe that it is most Ira-portent to .eake these fe:-. inerenses at the proeent time. therefore, respectfully submitted to the Board for its approval. Very truly J. yours, Case Deputy Governor. They are, Ateention of August G:esernor Crissinger: 6, 1925. Sire: The directors arm officers of this bank have carefully considered the mutters referred to by the Federal Reserve Examiner in Schedule Niir of his examination as at the close of business May 29, 1925, and desire to make the following commente thereon: CREDIT AND DISCOUNT DEPARTMENT DISCOUNT DIVISION Member Banks borrowiag in excess of their Capital and Surplus. At the date ef the examination, there were 25 banks in all in this including one in the territory of the Buffalo Brench, which were borrowing in excess of their capital and surplus. Due to the great variety of business and agricultural interests served by the bentes in this district, there are always a greater or leer! number of benke in this poeition. Genereley speaking the reason be found in the for banks borrowing in excese of their capital and surplus seasonal nature of their customers demands for accommodetion. About half the benks listed by the emaminer are located in summer resort sections. Their deposits are usually lowest and their icanc higheet each year just before Decoration Day, which As of July 28, five of the banks happens to bev also, the dete of the examination. c),It of our debt and eight of them owed us an listed by tee examiner were.entirely A list of borrowings in excess of amount less than their capital. end surplus. capital and surplus is furnished the directors every seek. district, is to Member Banks required to pledge Additional Collateral to their General Line. The additional collateral consists of miecellaneoue securities with par 4D6,000. pledged with us at different times over a period of years in the past by nine borrowing banks (inclueing two in the Buffalo territory) under d general loan and oolleterel agreement, either becausc of large borrowings or because of the condition of the banks. value of Maker's Line in Excees of 10% of Discounting Bank's Capital and Surplus. There was only one bank where there was a line in excess of 10%. This bank discounted a note for 5,000. whereas its capital end ourplus was only 1'40,000. There was an erroneous conclusion that Our taking this note was due to En error. It was not it was not excessive for us because it was secured by Liberty bonds. excessive so far as the limitations of the member bank were concerned. Federal Reserve Board evrIT DIVI$10* Exoeotpne to Finoitolal,Steteoente suoortiao Notee un,..O-r Rediscounts (Including Buffalo Branch) The exsoiner l'ete 17 eloptiono to makooel atateoente. Hia comoonts tre directed orineinslly to low ratios shown y the stateoenta. *e wee with the examiner thot the great majority of this poker is not prime. This peper WE'AO taken on the strength of detailed credit informstion which made the financial ateteoeate in our judomeno retsonably satisfactory. Azasui:IloN O'CAPITAL. STOCK X ober ?Janke which h*ve not subscribed for re uired amount f Ce.ital Stock of the ,rederel Hoserve an error In checkin, the capital and sorplus of two This woe Ous &Alai me000er banke, (as shown ty their ponoltion reports) to their stockholdings in toe reserve bank. Applicotione for the required additional stock hove already teen received. CIEERIAL **ober banks which . eve teen frevuentiv deficient in re o ired reserves. Four banks out of a total of 573 members were deficient in their reserves In each °tee the etotutory osnalty W.S8 Such bonks hove hod 000cial attention, sot we 76te oonsttnt efforts to to 9 times between October 11 sine Yay 29. ab,iegoaod. correct the situation. The thorouoll nature of the board's oxavinatione is alwoye source of entlefection to the directors and officers of the beolc- end they aro extremely gratifiod at the rsoort of your examiner that "no critic's a of enter'el inportance were developed and conditions enera.Uy were found to be sstiefrotory." Respectfully, J. H. Cie., Deouty Governor. Federal heserve Board, a$tshi.noton, D. 0. JPC/INE OTHER ITES OF INTEREE1 WHICH THE DIRECTORS MAY CARE TO FOLLOW IN SCHEDULES OF THE REPORT Dnadlusted Items (Carried in Suspense Account General. Pages 10 & 11 of report. The euspense account general is reported to the directors each month. The examiner states his opinion that undetermined losses will probably be sustained on some of these iteme which tote]. $1,550.25. Profit and LOSS Account. ?apes 27 & 28 of report. Entries made tentatively in the profit and loss account are reported to the directors each month and are finally passed on when of the year. the hook are cloeed at the end The ?roflt ano lose account on May 29, 1925 showed a debit of $1,187.58 and a credit of $3,288.08, a difference of $2,095.48, beine the credit balance as per the general ledeer. Losses and Recoveries. (October 12, 2924 to May 29, 1925) Pace 43 of report. All losses, totallinF $27,411.12, covered by insurance policies have been recovered es follows: Under registered mail insurance: $10,000. currency in transit from a member bank, stolen by a bandit $1,500. currency stolen from the mail in transit from the Buffalo Branch. Under policies insuring the fidelity of employees' Shortege in a package of currency in Paying Tellerte Division Amount lout by a messenger of the City Collection Division Defalcation of F. G. Adams * Of this amount $243.45 was stolen during the our own insurance and was charged to last year. period when we also $500.00 149.08 15,282.04* carried profit and loss at the end of No claims are pending:. Pendine Suits. Page 42 of RePort. The examiner comments on pending suite as follows: 02 V . 0, Can Co., Inc. W. art qattI Construction Co., and. P4deral Rover,* Baal of Sea York. Action for infriumowest of patent on oertain deska which federal hewer,* Bonk ourokitood from and whiab were installed 6y the At Metal Construction Co. In opiniot of Coonzel, Rtoorve Bank is pootootod by the Art Kota' Construction Co. or Sore Lidlits & 2on, Inc., sineral oontroctor. Action in Foderel Court. atfrounOs Oly pia 4arkeit Vs. toot River Notional Bonk, Pedorsi i'Oseerve Bank of Mew York, and ?trot National nonk or Mount Vernon. tion in Superior Court, New York County, involving 31 chsaiks totolling. $4,317.10, ech of sblob lo alleged to 'neer e forgod ndorsoment. Reeerve tenk is joined as defendant upoa its jairantte ol' *tearoom...at but la ,:rotectod by the 'ewe oeroates or th ;irat Notional Bank of taunt Vernon and the First NatiOnsa Bank of Brooklyn. (The Federal PGASTVO adironotek Power 1! Light Co. V. Horkmis ower 00.(Bank woo vouched in (so t deo:adopt. Aion it RutIond County Court, Vermont, on *50,000 mote of Rortonia Company. Deem** booed on fullura of conoiceration, defendant allegizv that °hook isaued for not. woe mioapproprittod And eolleotsd by onother. Check OAS oollectod llofondant claiot that tbe inetrulout obowed tat It bad been sid or credited to ooze person other than the Bortonia C0000ny, the Payee. Judgoent bee teen recsved ogoinot the Rortonit Cet*any, but exeoution boo boon rostrsinod. In opinloa of counool Reserve Bank is protected by the Central Union Trust Co., who doposited the cheek for collection. throuch Fodera). Roe:woo Bank, Tlnde:. Budget Over Budget 0 1 a, Thous ands of Doliare 0 2. * 6 k 10 IL 14 16 * 1? 40 2-4 Dept. ,Personnel Dept. IAdministration Accounting I Dept. Equipmant Repairs ICash Dept. Currancy Ship. 3afekocping Dept.a Securities Dept. renter Bank Rel. Dept. Gov. Fond Dept. Stock of Supplies Buffalo Branch4 Total Cur'. Expen be Building Apprls 5,b00. *Excess consists mainly of New aBudget provided z. lid not actufor reduction in personnel. sQme time after first of year; expenses now run- ally take place until ning under budget. xExcess consiste of Salaries e2,400, Postage 11,100, and ris- cellaneouD e1,300. 111111111140 Firet 7 months of 1925 e3,926,169.44 Estimated Budget Actual Expanses Saving 1925 First 7 c.cnthe of 1924 Estimated Budget 3 801 688.61 Ltual Expenses e 134,480.83 Savij i24 e3,F;86,552.&1 3 825 147.79 ,* 0 August 10, 1925. Dear Governor Ctissinger: You may remember that before Dr. Stewart left for Europe he and Mr. Smead prepared a memorandum recommending certain changes in the published condition statements of the Federal reserve banks in order more accurately to represent and more clearly to portray foreign transactions. Mr. Smead and I have considered this natter from time to time, and at the meeting which we held in Washington two or three weeks ago agreed upon the changes represented in the enclosed memorandum. While Governor Strong and Dr. Stewart had previously cabled that they approved of the substance of the changes included in this memorandum I forwarded a copy of it to Governor Strong under date of July 21 in order that there might be no possible misunderstanding of its purport so far as it concerns possible transactions under the Bank of England gold credit. I mentioned to Governor Strong that it would be fairly easy for anyone at all familiar with the statement to ascertain precisely the amount of bills bought in the London market as a result of any use of the credit in New York. You May remember that Governor Norman was particularly anxious that the statement should not portray this fact too clearly since it might interfere with his operations in the London market. As I have just said all of this was pointed out in my letter to Governor Strong, and we have received a cable which reads in part as follows: "Harrison's letter of July 21 after consulting Norman believe within legal limitations proposed form is best available." As I remember the discussion which we had of the possible change in the weekly statement it was the opinion of most of us that it might be advisable to make whatever changes are to be made as soon as feasible, and perhaps well in 2 8/10/25. Governor D. R. Crissinger advance of any possible use of the Bank of England credit. In the circumstances it might now be well to have the Board formally consider the advisability of issuing a new form of statement. Er. Snead is entirely familiar with all of the changes proposed in the enclosed memorandum and the reasons which have prompted them, but if there is anything further which you may care to have me do or concerning which I may be of any help I know that you will be good enough to let me know. Very truly yours, George L. Harrison Deputy Governor Honorable D. R. Crissinger, Governor, Federal Reserve Board, Washington, D. C. GLH/RAH Etc. Federal Reserve Bank of New York. &C.. Cf/62/24 gfrevng 1'6 COPY August 20, 1925. Sirs: The Bank of Poland, which is the central bank of issue in Poland, has requested us, through its Vice President, Dr. Feliks nlynarski, who is now in New York, to give them a credit of 410,000,000 secured by gold of a value of 410,500,000 to be deposited for our account at the Bank of England, London. The Board has approved of our opening an account for the Bank of Poland and appointing them our agent and correspondent in Poland. Because the balance of payments has been running against Poland, primarily on account of last year's crop failure which necessitated large importations of food, the foreign currency reserves of the Bank of Poland have decreased from 254,000,000 zloty on December 31, 1924 to 91,000,000 zloty on July 31 last. The resources of the bank abroad are, therefore, inadequate at the present time and the bank urgently requires credits to support its exchange. Dr. Mlynarski states that their budget is now practically balanced and, in order to maintain that position, the stabilization of their currency must be continued. Furthermore, he adds that this year's crop in Poland is an excellent one and that fact, coupled with higher import duties now in effect, is tending to restore a more favorable balance of payments. The Bank of Poland is called upon to purchase substantial amounts of United States currency and dollar checks which are remitted to Poland by emigrants and that entails a continuing lockup of the bank's funds. The credit of 410,000,000 which they require will be used to finance the purchase and remittance of United States currency and dollar checks and will be liquidated from the proceeds of such remittances. In accordance with the recommendation of the officers, our board of directors today voted to extend a credit to the Bank of Poland under which h 2- ;/2, 4/Z-S' 1- COPY -2- we will make loans on gold not exceeding 010,000,000 outstanding at any one time, gold to the value of 010,500,000 to be lodged as security with the Bank of England, and the term of the credit to be for a period of three months beginning from the time the gold is so pledged with interest on that portion of the credit Which is used at the rate of 4-1/210 per annum. We have also agreed to make three renewals of such credit, each for a period of three months. The rate of interest on each renewal will be adjusted at the time it is made. In accordance with our usual practice we will offer the other Federal reserve banks their prorata participation in this credit. The Board will recall that we are now making loans to the Bahkovni urad Ministerstva Financi, Prague, against gold deposited abroad and, at the time that arrangement was made, we suggested to the Board that the State Department might be interested to learn of our proposal to make advances to the Bankovni. Department. The Board subsequently advised us that it had so informed the State Perhaps the Board will also desire to acquaint the Department with the facts in connection With this credit to the Bank of Poland. Respectfully, J. H. CASE, Deputy Governor. Federal Reserve Board, Washington, D. C. JEC:IIK ENC 3 :Fit. 6 /I G- o Federal Reserve Bank of New York. Viroyti; COPY August 22, 1925, Sirs: Referring to our letter of August 20 regarding the creditto the Bank of Poland, we beg to enclose for the information of the Board copy of the letter defining the terms of the credit which has been accepted by Dr. Mlynarski on behalf of his bank as well as a copy of a memorandum of procedure which has also been mutually agreed upon. The credit will become effective upon cable confirmation from the Bank of Poland and on receipt of notice from the Bank of England that the gold has been deposited with them as security. Dr. Mlynarski stated that the Bank of Poland is anxious that no publicity be given to this credit and we have assured him that there will be no difficulty in meeting their wishes in that respect. As loans are made against the gold, they will of course appear in the published statement under the present caption "Foreign Loans on Gold" which is the account in which the current loans on gold to the Bankovni are carried. Respectfully, J. H. CASE, Deputy Governor. Federal Reserve Board, Washington, D. C. JEC:MK .6-- October 3, 1925. ;17 der Governor: rou ai31 reoF.11 my ere9kirt,,, to you about Dr. Seh6cht, p MVO teCI vieit to this country. He ci,bleel me a ofne time ,igo that he would b". unmvolaably delKyed h rid I aid not expect him until the midole he juFt sailiLv, on tlte ninth of October after all, and ',oil' be here about the., nineteenth. ton .tc,i i 6 hi 6 e (.31:ii e- ington, and I aki now writing to Inquire 'whether you 1,ind your f, to the timecr hi aseoch.tee have ay !Ind any ep ecia1 '21 "in to ropo se. It, *ill be poseible for me to take t'im to Vitetitz6ton ir.mociiately after hi rrLvai to porici poottlitly one aay, or, st moor.,to, or, if you prefer, he could go to weehington after vi ;it to N454 'fork, ..ould be About the t7.1entyouid then plan 1".0 retrAkin in v no6..!...1.'e."./A, end ch9cri, would ninth o: thirtieth of October. Arcohio.,;:...on for Lh' kb.loh I either return to Uere Y..r org-., .iirectly to Chico, where he f.larrh ai,; end 61 ...'ew (IV As his !.....tay i.iere is very enort one, smu as he ha(ii a, great marly people to see, will you be good enatig:...t let me know as promptly as p.oible ou olu liicc totove me do hi visit to iie.ohington, r..).rid greatly obliz,Ye ioura 5i neerel y , Honorable D. ft. Crisainger, Governor, Federal Reserve board, shine,tor., L. C. October e, My dear Governor Thank you for your letter of October 6. I had deferred takinE tk: the (4usetion of Dr. Schacht/a visit until I knsw dHtinitely that he w coming and on wht date. firet on the 19th. of October, ten jecided thA he in November, and onl Let &tul,y when.I wrote you He had proposed comin6 L 1tl sometime et wort! 1,1t, he would definitely be here about October 19. Ria visit has no ;articular object such ae the tIrancoment et cred.ite or anything of that sort. He iu coming to inform himself Oa the iitu.tton, to make the aoquainianeu of some of our bankers whom he haa not yet met, and aepecially to make a, visit tc Vashington and New York and beome acquainted with the 3.0t,ITV His stay here will be a very short one, probably not over tan days, bnd he would like, if pos.ible, to limit hie etay in Wauhington to one (lay ernd one nignt. If he arr1.vei5 on i. 19t, it might Fo that a ,.!hrAer on the evening of the 20th would meet. the situation. I agree with you that it will not be tieviruble for him to be in Washington at the time of the confernce .Nhen everyone will te TO busy, end when his visit might 4Ltiect special attentior. 4u1,1 lead to infe.,:encae that ere not justified. I should 1.41cin that Dr. Schacht is determinve to ntke ro puUic &r; wishes to cacape Kb much ne..eper discussion te possible. If this entirely me,As your views, I will make the nacesoary arrafemente and keep you informed whenever I hear from him further. Very truli yours, Honorable D. R. Criesinger, Governor, Federal Rev:terve Board, Washington, D. C. BENJ. MONS Governor FEDERAL RESERVE BOARD WASHINGTON Governor Crissinger: Governor Strong's secretary telephoned the following message, to be conveyed to Dr. Schacht: "There was an error in the cable received yesterday from Berlin. The figure in the cable should be '.,,i13,000,000 less' instead of '4330,000,000 more.' Mr. Wisemann received a telegram today which confirms that the first telegram was in error." OctobsIT 10, 1925. My detr Governor: The progTsm in regard to Dr. Schschtie visit le, of course, 1,1 dependent upon the prompt arrivsl or the. neutechlenr1 on which he sailed yesterday. It will be due in New York on the 19th of October. He 1.41 plenning to spend thtt night in New York City, and go to Wsohington by (icy train on the 20th, spending the night of the 20th there, snd returning to Now York on thcl 21st by day trsin. rw planning to give him N amall dinner party in order to make him &coal:lied tith some of the leeding New York banker-6 on the night of the 22d at the Metropolitan Club, and tut sendins you an invitation to attend the dinner. Dr. Schacht might, of course, be delayed, Bm0 if there is any change at the last minute, / Ail let you know promptly. Sincerely yours, honorable. D. E. Crisisingef, Governor, Federal Reserve Board, Wschington, D. C. ES.LS April 29, 1v8. PhaSONZ Dear Governor Oriesinger: I understand that this morning you asked Mr. Ti_rrison if he would submit to you a little informal memor*.ndum of tht re,.6ons actuating our board of directors in mvkilv tha recent change in our discount rte. Mr. Hg.rrison, I find, left the office little early this afternoon, and, thinking thr:t you miht possibly desire this informa- tion tArly prnm:tly, I am tr-n6milting memor,ndum herewith. It is, of course, precticaly impossible for snybcdy to put claim on paper all the rcscns why cision; group, of men re,ch 6 certan de- so thet this memorsndum must necessarily be very informal and probably fals short of giving complete picture. In view of the informality with which it 117 been preksred, I hope you will consider it tn. informal memorandum simply for your own use. Very truly yours, J. H. CASE, Deputy Governor. Honorable D. R. Criesinger, C/o Federal Reserve Board, ThIshington, D. C. Encl. April ?9, ION!. Federal Reserve Board, Vashington, D. C. ,ATVENTION OF: Governor CrineinAer Dear Governor Cri si nom: I hive your letter of 4111 27, in reference to the terms of the approval given by the YederA Reserve Bosrd on March 8, 19?f., to the Federal reserve bankel participation in the credit to the National Beak of Belgium. In accordance with your instructions I qdvising Governor Strong that, under the resolution adopted by the Federal Reserve Hoard at the sleeting referred to, be was authorized to 1.rocieed with the mat- ter, subject to fine): formal approval of the Ford, and that on report from him that the matter has been coneutamsted in SubstEmtied conformity with the terms of its tentative approval, the Board will formally approve the transaction. Very truly yours, J. H. GiZE, Deputy Governor. July 15, 1926 My dear Governor Crissinger: You may remember that when I was in Washington on July 2, I read to you a cable which I had just received that day from Governor Strong, Baying that Governor Moreau, the new GIrernor of the Bank of Franoe, asd ,i,Eked for an opportunity to discuss ed to Paris. natives: Terid;ny monetery matters with him ati soon as he return- 48 Governor Strong e,,,easined in hie cable, theTe:, ikere two alter- (1) to take part jn discuesions tith Ccvernor T4oreau immediately, or (2) to advise Governor Moreau thst he muLt procsod n his trip wad decide later whether a meetinq, in desirable after further progress has been made with the bankers. He indicated in hie cable that if ixmediAs discussions seemed to be justified, he would take part in them only provided (a) our directors did not disagree, (b) Secretary Mellon would support 116 in case a credit on sound lines was recommended, (c) Governor trow knew whether ratification of the debt settle- ment was a necessary preliminary to a credit, and (d) the Federal Reserve Board was favorably inclined toward bur aiding. ifter discussing the matter with you and Mr. Jades, who were the only members of the Board present on that day, I cabled Governor Strong end explained to him that so far as the Board was concerned that you and Mr. James were the only members available On they say they want that day and stated that "speaking for themselves only to be helpful to monetary stabilization in France." I understand from Governor Strong that after receipt of this cable, he indicated to Governor Moreau thrt he would be glad to talk things over with Jly 15, 1928 Governor Criselnger 2 him when Governor Mbrenu wanted to do so. Governor Moreau sent word back to Governor Strong on July 5 that the situation was still too uncertain to offer the basis of satisfactory conversations at that time. I only yesterday received another cable from Governor Strong saying that he plans to go to furls on Monday, and while he does not state the purpose of his vtElt, I annume that in the circumstances he will no doubt see Governor Moreau from whom he can very likely ob- tain much more information that he hes been able in the ;last to obtain indirectly concerninn the pending ;Inns of the French to effect some sort of monetary stabilization. The nennen.,Jers ooatinue to lnle vnrioun referfinots to Covernon Strong'e visit sae. what he is doing or is not din, tut there is little, if any, basis for most of thnee articles. As you know, Governor 3tr, han been renting in the south 4,,f Fromen since early 1, June, and while 'lc has been Isecirtz himnelf an fully informed nu possible of development& in Pnrin, nevertheiaes 46 i ex- plained to the Board, he has onisintently avoided way eort atnegotintione with the officlalc of the French Government, and since his visit aith Governor Robineau of the Bank of France in th.: midle of Mny, ho he not had any meetings or talks with the ropresentativen of the ,Lank of France. I hope, however, that his visit to Intris next weet may enable him to ascertain a little more definitely Junt what are the present plans of the Bank of France, and whether indeed there ie any likelihood of our later being asked by the for acne sort of a credit. I nm writing thin letter merely to keep the Feard advised, as I stated I would nhen I last SGW you in Washington, and shall let you knot if I hear anything further cf moment. Hon. D. R. Crissinger, Governor, Federal Reserve Board, Wneninnton, D. G. GUAM Very truly yourth, GEO.GE L. HARRISON, Deputy Governor, July 20, 1928 My dear Governor: As I telephoned to you this morning, the French .0203 as contrasted with a closing last night of .0215. franc opened at The Belgian franc dropped from .0227 1/2 to .0219, and the lire from .0333 1/4 to .0319. No doubt all these declines reflect the acute conditions in Paris, and while there is no way to foresee what may develop out of the present it seems that matters sill get worse before they get situation, better. The new Herriot Government has not yet officially announced ite I understand that it is to do so on Thursday. platform. we can gather from the press at the present But so far as time, it is apparently against any foreign loans and against ratification of the debt settlement in its The Herriot Cabinet is composed almost entirely of members present form. of Herriotts own party, that is, the to be a National Union Vinistry. Radical Socialist, and cannot be said The Socialists, who are headed by Blum, have not ys yet joined with Herriot because they insist on a capital tax, and the most that Herriot has indicated at the moment appears to be a sort of super-tax on accumulated capital. Thie may be near enough to a capital tax to satisfy the Socialists, but apparently it is not yet certain. While the reports from Paris are much confused, and while one guess is perhaps as good as another, it is difficult to see how the Herriot vive many days. Government can sur- They lack the support of the Republican Union Party, which is the second largest in the Chamber, and thus far lack the support of the Hon. D. P. Criseinger Socialists, a party almost as large as the Republican Union. July PO, 1926 Marin, leader of the Republican Union Party was the one who, according to the newspapers, really led the fight against Gailleux, and was largely responsible for his downfall. It may be that he was piqued at the selection of Herriot to form a Cabinet. But without hie support and without the support of the Socialist Party, it is likely that Herriot could not survive a vote of confidence in the Chamber. In any event, at the moment the color of the picture is such that there seems to be little or no likelihood of any serious request by the present Government for any This morning sort of credit in this country. we received a cable from Governor that he arrived in Versailles yesterday. Strong merely saying It contains no comment on present conditions or about his plans. In view of the new developments, however, there would seem to be little basis for any but the most informal discussions between him and Governor Moreau of the Bank of France. While conditions might conceivably change very rapidly, there could be nothing for the Bank of France to propose at the moment. It seems a great pity that such a political upheavel in France should have caused their present serious predicament at the risk of losing all that they had an opportunity to gain under some competent leadership. possible for forceful With the right sort of command, it might well have been the French to have made come order out of chaos, and on the basis of the report of the Experts Committee, to have formulated a compre- hensive plan of monetary stabilization with reasonable chances of success and at 8 figure higher than the present value of the franc. Indeed, in view of the fact that neither wages nor the cost of living have advanced proportionately to the present level of the franc exchange, a much higher rate than the present level might have been accomplished, although so far 3 Hon. D. R. Crissinger July 1978 as we knot, there haa been no careful study of the balance of prices and other factors necessary to determine what rate of stabiliation could be made perman- ently effective. cat writing this to you jutlt to confirm What I discussed with you over the telephone thie morning, and to keep you and the Board advit,ed of what little tve are able to learn of the present confused eituhtion in France. Things are heppening co quickly that that lettere we get from Governor Strong are pretty much out of date by the time they reach us, and most of our present information comes from tde n(iftipaperti Very truly yours, (At GEORGE L. HARBISON, Deputy Sovernor. Hon. D. R. Crissinger, Governor, Federal Reserve Beard, Washington, D. C. .July 21, 1926 Dear Governor CriesInger: Supplementing my letter to you of yesterdhy, you mt,_y be interested in the onciosed clipping which appeared in this morning'e Nee lork Times. It is the best of the newspaper references to Governor 9treng'8 presence in Paris Very truly yours, GEORGE L. tWriRISON, Deputy Governor. ,. H. Criseinger, Governor, Federal eserve Board, Washington, D. C. GLH.VM Enc. . . ',AM BANK ,ORK IN R0 i. CE E - Lip , ' SERVICE DIVISION MESSENGER SECTION DATE FROM . DEPARTMENT DIVISION SECTION N. B. USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE. TO INSURE PROMPT AND ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED TO F. STRICTLY CONFIDENTIAL August 5, 1928 My deer Governor Crissinger: As you will remember, when I met with the Board on Tuesday, July 27, I read to you in full a cable which we had received late the previous Saturday afternoon from Governor Strong, briefly outlining the political and financial conditions in France /ending up to and immediately following the nee Coalition Ministry that week, and expressing the opinion that the crux of the eituetion, which he regarded as Still serious, was the ratification of the debt settlement, without which American credits would, of course, be out of the question. de also stated that the general belief in Paris ,as that if debt ratification was assured, our prompt cooperation was regarded as essential to the euccese of any program of monetary stabilization. After referring to two conversa- tions which he had had with Governor Moreau and Deputy Governor Fiat of the sank of France, in which he had impressed them with the fact that he could not participate in any diseussione with them which might create even an atmosphere of commitment, rover-nor Strong stated in the cable that if the obstacles to debt ratification, to which he referred, were surmounted, he would have to decide whether to continue his discussions eith the Sank of France. You may remember that you, Mr. Platt and Mr. James and I discussed, among other things, the prevailing anti-French sentiment in this country, rhict we believed was due not only to the attitude of the French towards debt ratification, but also towards the recent anti-American outbreaks in Vnverner Crieeinger Paris. August E, 1925 We also discuseed the f!..et that if Governer ftreng did take part in any diecu,Dsione with the Bank of Frence, they eheuld, it 3oseible, be of such a character as to preclude any likelihood of their being misconstrued as ft colemitment br him since any credit which might be reeueeted by the Penk of Frence could not, ef cobree, be consummated ebroed, but would necesearily have to be eubmiited to our direeters for their speroval and later to the Federal At the cencluelen of our dieceseion, I Peeerve Bourd for its e.prrevel. drafted 4 uartgraph which you, 11r. ?Lett end Pr. Jemee tuthorized frP to in- clude in a cable to Governor !!trenp.., rciteretine, ycur nersonel der e to be helgul to eonetery stebi/ity in Frence, end cereceing your individuel viewe taint you Tereonelly tititt no objections to Governor Strong heving decuesictie Stith the Bank of Freneee'4 ,I commueicated'Ilese views ever the telephone to eur directore who were in'eeeeion tArt day, nnd whim IIster returned to Nee York, I advieed you of a eable whic-e we received from Governor Strong on July PS, eayinF, that there was then uothin immediate to consider until the situation clarified, -r It having been ennouaced by-the French Government in the meantime that the question of debt r Jficetion would not be erented to the Uhamber of Dcoutiee for the eresent. But es I told you over the telephone on Tuesdey, August 3, we re- ceived to cable the previous afternoon from governor Strong, who hae gone to Afacterdem on 3unday stating in substance that conditions were again in a procese of change and that Governor Moreau had asked to have further die1. cussions with him concerning the technique and policiee of the operations of banka of issue, evidently hecsuee of his unfamilierity with the lerger eepects of theee mattere. Gevernor Moreau is apiesrently moot anxioue to have thee discussions since he feele that the Eank of France might later be asked either to cooperate in the preparation of a. plan or to assume the responsibility of executing a plan when and if adopted. -*rem3 Governor Criseinger 4-- eugust 5, 1926 e Our directors yestirday cabled Governor Strong thet they saw no objection to his continuing his discussions with the officers of the Bank of France, provided, of course, that he shell take every possible precaution to 4Ltor insure that those discussions shall not in any way be misunderstood or misconstrued as a c mitment on his part for the future. As stated in the press on Tuesday and yesterday, it now appears likely that the French Government will soon formulate or announce a plan contemplating debt settlement, stabilization of the currency, some sort of satis- factory disposition of the question of the internal debt and foreign credits. Governor Strong's purpose, however, in continuing his discussions with the ree' 'arlk of France is merely to discuss the technique and policies of Central Bank ,perations, as requested, and of course not to participate with the officials of the French Government in any progrem they may be formulating. You may have noticed that the French franc yesterday reached a high on this movement of .0E96 5/4 as contrasted with a lo* of .196 on July PO. This evidently reflects an improvement in eeatiment on all sides, but perhaps of confidence and the resultant, sore particularly in France itself where lack flight of capital from France had done so much to lower the exchange value of the franc. portence I shall, of Course, keep you informed of any further news of i- that I may hear from Governor Strong. ertee to have FurVery truly yours, f the e of to with the I reer 414' to hee GEORGE L. HARRISON, ,441IN Deputy Governor. Hon. D. R. Crissinger, Federal Reserve Board, Washington, D. C. GLH.W r be ask, STRICTLY August 23, 1926 CONFIDENTIAL Dear Governor Crissinger: a 4.. In my letter of Auguat 5 confirming some earlier telephone conversations, I mentioned, among other things, that Governor Moreau of the Bank of France had asked Governor Strong to have some discussions with him concerning the technique and policies of the opertione of the banks of issue, and that our directors had cabled Governor Strong that they saw no objection to his continuing the discussions with the officers of the Bank of France, provided, of course, that he shall take every possible precaution to inure that those discussion& shall not in any way be misconstrued or m-sunderetcod as a commitment on ME part for the future. that time, Governor Strong was in Amsterdam, and ed returning to Paris while I about the middle of August to eee At think he then contemplat- Governor Moreau, he modi- fled his plan slightly and spent a few days last week at Lausanne and Fvian les Dains, where he ea* Mr. Mellon before returning to Paris. This letter le merely to confirm my telephone call of to-day to the effect that we received a cable from Governor Ftrong Friday night stating that he would return to Paris yesterday to continue his discussions with Moreau along the lines I wrote you. Very truly yours, GEORGF L. HARRISON, Dep0y Governor. Hon. D. R. Criasinger, Governor, Federal Reserve Board, lashinton, D. C. GLE.MM Governor September 8, 1928 STRICTLY CONFIDENTIAL My dear Governor: As I telephoned you this morning., Mr. Strong left Paris for London yesterday, and while we are not yet certain juFt what date he will sail for New 'York, it le likely that he will do so a.bout the eighteenth of September unless developments in London, where I understand he is to see Mr. Mellon, might make it desirable for him to delay sailing a little beyond that date. I shall of course keep you informed of any further developments. Very truly yours, GEORGE L. HARRISON, Deputy Governor. Hon. D. E. Criesinger, Governor, Federal Reserve Board, Washington, D. C. otember 15, 1025 Dear Governor Crissinger: This ie merely to confirm my telephone convereAione in which I reported to you that Governor Strong went to London from Paris on Tuesday, September 7, and that he is to sail from there on the "Mauretania" this Saturday, the 18th. Very truly youre, GEORGE L. HARRISON, Deputy Governor. Hon. D. R. Criesinger, Governor, Federal Reserve Board, Washington, D. C. COPY FEDERAL RESERVE BOARD WASHINGTON May 28, 1923 Dear Mr. Case: Referring to our telephone conversation this morning, the matter read to you during the Conference with the Federal Reserve Board held a few days ago, was as follows: "The Federal Reserve Bank is authorized to establish an agency in Havana, Cuba, and through such agency to buy and sell cable transfers, buy, sell and collect prime bankers, bills and acceptances payable in dollars which arise out of actual import or export transactions, bear the signature of two or more responsible parties, bear a satisfactory bank endorsement, ha-:e not more than 90 days to run, an are secured at the ex 1 si e o' uays o time of purchase by shipping documents evidencing the actual import or export, and the actual sale of goods, and conveying or securing title; and to exercise only such incidental powers as shall be necessary to the exercise of the above powers." Very truly yours, (signed) W. W. HOXTON Secretary. Mr. J. H. Casa, Deputy Governor, Federal Reserve Bank, New York, N. Y. COPY FERAL REMRVE BaaRD iiINGTON May 31, 1923 My dear Mr. Cases This will acknowledge receipt of your letter of May 25, in re the report of the Open Market Investment Committee for the Federal Res erve System. You are advised, that the report has been presented to and The Board notes with some surprise that in the resolution of May 23, 1923, the committee limits the sale of government security holdings of the various Federal Reserve banks to 11150000,000, which is prorated among them. The limitation of the I-..ale of thse securities to the above amount is not in accordance with the policy of the Board. The Board. sees no reL.son why there should be any limitation. considered. by thc, Board. Your attention is being directed to the Board's determination that these government securities should. be disposed. of as rapidly as possible until all are out of the banks. lit the earliest ppportunity it is desired. that you bring this to the attention of the Open Market Investment Committee and. the various banks in order that this policy of the Board may be carried out in its entirety. You will also advise promptly of the sales of the goverment holdings of the various banks and. to what extent each of the banks contributed. It appears to the Board. that the time is propitious for the disposition of all these securities, and. the Board trusts that you will immediately take action to dispose of the governments, having due regard., of course, to market conditions. Kindly let the Board be advised. at your earliest convenience. Very truly yours, (Signed) D. R. Crissinger Governor J. H. Case, Esq., Deputy Governor, Federal Reserve Bank, New York, N. Y. C0PY FEDERAL RESERVZ BOARD W &SHIN:Ca June 18, 1923. My detir kr. Case: ilelsec to soknowled e raceiet of your letter of June 11 enoloeint, co:y of a letter written by Uovernor Georiie A. Norris in the mtitter of the 0 en Market trineuctions is conYuur letter trolled by the Open Market inveetment Cormittau. and MI. Norriel letter are very intersetine. if in your juo,ment the rflatters which you have written at length bout conoerninb the Open Market trineactions re uiro further consideration you are It lib rty to print, them up at the next 11.etiting uf the Oken Market investment .:,otm;ttes to be held on June 26, vitt the bu,rc. Assuring you of iy tjeit esteem, I im, Very truly your, (Signed) D. E. Crissinger, Governor. Mr. j. H. Case, Deputy. Governor, New York, N. Y. REVISED DRAFT OF fX-3734, WHIMCONTAINED AN ADDITIONAL PARAGRAPH AS NOTED AT THE FOC? HEREOF X-3779 RESOLUTION ADOPTED BY FEOERAL RESERVE BOARD AT MEETING ON JUNE R7, 1923 SWETT:CUBAN AGENCIES NHEREAS, the United States Goeerneent, by virtue of the ,n-called ?lett emendment has entered into relations with Cuba ehich it does not have with eny other foreign eountry, especially in renoy of the United States metters of finance and currency, the our- having been made legal tender by Cuba; WHEREAS, the Federal Reserve Board is of the opinion thet the establishm,nt of an 'Ineney in Cuba is lesirable s 2 moans of stabilizing banking conditione and furnishing an ad iquate supply of 01624 currency; AIEREAS, the President of the United State& and the State Department have edvisel this board that it in important that such an agency should be eatabliehed; AHEREAS, the Federal Reserve bank of Atlanta and the Federal Reserve Bank of Boston have each petitioned the Feleral Reserve Board for authority to establish an agency in Havana, Cuba, for the purpose of conducting operations pernitted under -ection 14 of the Federal Reserve Act; WHEREAS, the Federal Reserve Bank of Boston deeireq to eat blieh suet an agency primarily for the purpose of buying and selling cable transfers an: buying, selling and collecting bankers' ecceptanoee and bills of exchange bearing satisfectory bank eneorsementei WHEREAS, a substantial nortion of the currency now in cironletion in Cuba consists of Federal Reserve notes of the Federal Reserve bank of Atlanta; andeit is feared that the establishment of an a2ency of another Federal Reserve Bank in Cuba night result in the retirement of such notes from eirculAion4 and the liederal Reserve Ban of Atlanta deeires to eetablieh an agency in Cuba primarily in order that it may maintain the circulation of its Federal Reserve notes in Cuba; WHEREAS, the Federal Reserve bane of Bonton does not Jeeire to gut its Federal Reserve notes in circulation in Cuba but is willing, if authorized to ee,A.ablieh such an eeency, to preserve as far as possible the circulation in Cuba of Federal Reserve notes issued through the Federal Reserve I3an of Atlanta; BE IT RESOLVED BY THE FEDERAL RESERVE BOARD, that the apelicetions of the Felerel Reserve aank of Atlanta and the Federal Reserve Bank of Boston for perniseion to establish such azencies are heieby granted on the following terns and conditions, (1) The Federal Reserve Bank of Atlanta and the Federal Reserve Bank COPY FEDERAL RESERVE BOARD WASHINGTON June le, 1923. My dear Sir: This will acknowledge your letter of June 15th advising of the action of the Federal Reserve bank of Boston discontinuing its participation in the transactions with foreign banks. The letter of Governor Harding and your letter to him were presented to the Board for consideration. The Board is of the opinion that Governor Harding's letter raises very important questions - which challenge the transactions as matters of doubtful public interest. The Board is of the opinion that the questions raised by Governor Harding's letter and your letter are of such importance as to require thorough consideration. You are therefore advised that the Board is of the opinion hat the question should be given consideration at the next meeting of the Open Market Investment Committee which will be held on June 26th. A copy of this letter is being sent to the Governors of all the Federal Reserve Banks for consideration. The Board would like to be advised, and is requesting each of the Federal Reserve Banks to give their views pertaining to the subject matter raised by Governor Harding's letter_ For the information of the Board it is desired that you prepare a statement showing the total amount of free balances growing out of these operations for foreign banks; also the total amount of investments; the kind of investments, and the yield upon such investments, and such other information as will put the board in possession of all the facts incident to and neceseary for a thorough consideration and understanding of the questions involved. It would be interesting also to have the view of your bank of the importance of carrying on these transactions for foreign banks, and whether it should be continued or discontinued. Yours truly, (Signed) D. R. Crissinger, Governor. Mr. J. H. Case, Deputy Governor, Federal R serve Bank, New York, . Y. X-577D of Boston are eoh authorieed to establish an eesucy in Havant" Cuba, and through such ageecy to buy and sell eableetranufers; buy, sell and collect prime baakers/ acceptances and prime bills of exohange, which acceptances and bills are payable in dollers, arise out of actual import or export traneections, bear the signatures of two or more reseonsible ,earties, bear a satisfactory tank erOoreement, have not more then 90 days to run, exclusive of days of grace, and are seeured at the time of purchase by shipping documents evidencing the actual import or export and the actual sale of goohs and conveying or securing title to such doods; and to exercise only suoll inoidental powers as shall be neoceeary to the eeercise of the above as hereinafter used shell mean cable transfers, beakers/ powers. The tera acceptance aal belie of exohange of the kinds described in this paragraph. The Federal Reserve Bank of Atlanta SHALL NOT BUY OR SELL ANY CABLE (2) TRANSMRS EXCEPT AT THE RheUESI OF THE FEDERAL RESERVE BAN OF BOSTON AS PROVIDED IN PARAGRAPH 5 HEREOF; and shall not purchase, sell or collect any bills im Cuba except such as originate in or arc drama upon beaks or other drawees, in the Sixth Federal Reserve )istrict and such other bills as it shall be necessary to purchase in order to maintain ate circulation or its Federal Reserve noted,. in Cuba; and before purchasing in Cuba any bills apt originating in, or drewn ueon banks or other draweee in the Sixth Federal Reeerve'District it shall first offer to purchase for the Federal Reserve Bank of Boston bills to be selected by the Federal Reaerve dank of Boston. The Feder.1 Reserve Bank of Boeton shall not pay out its on Federal Reserve notes in Cuba, except as hereinafter provided, and whenever bills OR CAeLE TRANSFERS are offered for eele to its Havana Agency and tee sellers request payment in Federal Reeerve notes, the Federal Reserve Bank of Boston shall request the Federal Reserve Bane of Atlanta to purchase such bills OR CAULE TeANSFERF for it and immediately pay for them with Federal Re-erve notes iseued through the Federal Reserve aane of Atlanta. The Federal Reserve Bank of Atlanta may at its option comply with such requent or decline to do el, but if it purchases such bills or CABLE TRANSFERS it shall pay for them only with its own Federal Reserve notes AND SUCH CASH AS 4AY ;eE NECESSARY INCIDENTALLY TO COLVLSTE TEE PURChASE and a:AAA ima ediately reeell them to the Federal Reserve Bane of eoston at cost and without recouree. If the Federal Reserve Bank or Atlanta shall fail or refuse to purchase such bills promptly for the Federal Reserve .'.;ang of eoston or shall not have available in Havana a sufficient sUpply Of its eon Federal Reserve notes, the FeAeral Reserve dank of BOSLOA may itself purchase such bills and pay for them with its own Federal Reserve notes or in any other form of money or currency which it my 'Z/) heve available except Federal Reserve rioter issued through. other Federal R=serve Banks. ;Nothing in this paragreph shall be construed as qualifying or limiting In any way the right of the Federal Reserve earik of Boeton to purchase bills through ency and pay for them with bank drafts, cable transfers, book credits, or in any other manner exeept aith Federal Reserve notes. such (4) The eeteblishment and operation of such agencies, and the exercise - all the above powers through such agencies, shall be subject to such chars such further rules and regulations as the Federal Reserve Board may time to time. . X-7,179 (5) The Federal Reserve ,oard expreeely reLerves the revoke its consent at any time to the oontinuance of such ugencias, to right to the disconrequire tinuance of such agencies JR TO AUTHORIZE THE EST -1LISHMERT OF REi4 AGEhCIES ,enever in its discrAion it con9iAers it de rable to do eo. OUITTip ?A GRAY OF A-3114, REFERRED TO Aii.OVE (4) The FLtderal kiserve Board expressly reserves volume of Federal Reserve notes of any or hll Fejeral the right to control the Reserve Ban out in Cuba through such agencies and the right to do everything ku to be paid necessary to !ake such control effective, including thz, right to authorize other Federal Reserve Banks to pay out their notes in Cuba whenever deemed by the 3oard, and if necessary to authorize other Federi Reserve desir&ble establish ean)cs to agencies for tn.t purpose. COPY FEDERAL RESERVE BOARD WASHINGTON August 6, 1923. My dear Mr. Case: The Under Sec4etary of the Treasury transmitted to the Board, for its information, a copy of a letterthat he wrote to you on August 4 which raises the question of fiscal agency expenses of the various Federal Reserve Banks. This letter and the letter written to you by the Under Secretary were read at the Board meeting this morning. The Board is greatly concerned over the possibilities that may result if the Treasury Department is not to account to the Federal Reserve Banks for their fiscal agency operations and. to pay for the services rendered by the banks. If Congress denies an appropriation to the Treasury for the payment of these expenses on the theory that the Federal Reserve Banks are making money- and it no doubt is upon that theory, then it would seem as if Congress was opening up the way for the Treasury and possibly Congress to place upon the Federal Reserve Banks not only the expenses of the fiscal operations as we now have them, but the further possibility of loading up the Federal Reserve Banks with such expenses as some subsequent Secretary of the Treasury might deem and decide to be fiscal agency operations. It would appear that this would make possible inroads upon the earnings of the Federal Reserve Banks to such an extent as even to threaten the dividends of the member banks of the system. It does not require any stretch of imagination ..#2. to see how these expenses, which may be termed fiscal Agency expenses, should so absorb the earnings of the banks as to make payable a dividend to the member banks impossible. The payment of such expenses might further raise a very serious problem in the matter of the discount rate, or, put it in other words, in providing adequate revenues for the operation of-the banks. The Board notes that Mr. Gilbert suggests that the Treasury Department would hesitate to ask the Committee on Appropriations to make a supplemental deficiency appropriation for the payment of these fiscal agency expenses; the Appropriation Committee having denied such an appropriation. The Undersecretary suggests that such a request should come from the Federal Reserve Banks to the Board. It is suggested that you prepare a statement expressing your views upon the questions and such recommendation to the Board as you think proper in the premises. It seems that the Appropriation Committee and the Budget Committee have not a clear understanding of what is possible to happen with reference to the earnings of the Federal Reserve Banks at any time and partnularly at the present time. Kindly let us have your views about the matter at your earliest convenience. Very truly yours, (signed) D. R. Crissinger, Governor. J. H. Case, Esq., Acting Governor, Federal Reserve Bank, New York, N. Y. FEDERAL RESERVE BOARD ACkNOWLEDCIED DEC 1 3 1923 WASHINGTON OFFICE OF GOVERNOR December 12, 1923. My dear Yr. Strong: I have received your latter of the 11th instant and at the meeting this morning brought it to the attention of the other members of the Board. We will interpose no Objection to your acceptance of the membership tendered you on the rew York State Advisory Board in charge of the organization of the Hailing Memorial Association. The Board would, however, request that you accept this appointment in your personal capacity and that you do not permit the use of your title as Governor of the Fedetal Reserve Bank in the connection. ifery truly jrs, / /1 Yr. BenjmnIn-etr, c/o Federal Reserve Bank, New York, N. Y. 13 St (1.30333400$4*.ilik ORA08 3V5133351 JAiLEC1 0.3a ,si 44)1.4i-IIIVCO leciaeoso: 4 :ForroTSE iti 76fth; 3,3Y s twat( I i -rs/J91. Tiro f,-, /, , o.7101! eilf../ .:,71J135.2 sd$ 4a hisit /.ms, r; farw Isristo ofi.i.),R froft-, I Sit '." F tvr e. 41 set o vet e ,,,,-) 2-retie, f. 1 .1 1 . . .1.roftrw3 11:4.7,1 .1 fet7,-, ,,sral .: i L ''- ' ntt '.,- ati.J. s , , C77.) LIT' ... ,:::"" g.?../4, -.kl.' i' i1 ...., . ii 1 '.. '.'. ---,..:: 'a ....... Cz.:::' '`. 1 ,..70 .... . ill'' 9V.:C:-.1.--,:' .?.* 1 , -- : : lovic.: ' ..- :, ......_. loasa ,1/40.0sehm! ' , viotrzoq ., ', , rc., : -- ? -. I ,... ...._____,,...... OSID1710 OFFICERS HON EXECUTIVE COMMITTEE Y PRESIDENT, CALVIN COOLIDGE CHARLES E. SAWYER, CHAIRMAN D. R. CRISS/NGER EDWARD B. McLEAN JOHN W. WEEKS JOHN BARTON PAYNE CHARLES G. DAWES FRED W. UPHAM JOSEPH S. FRELINGHUYSEN, PRESIDENT JOHN HAYS HAMMOND, VICE PRESIDENT JOHN BARTON PAYNE, 2ND VICE PRESIDENT ALBERT D. LASKER, 3RD VICE PRESIDENT GEORGE B. CHRISTIAN, JR.. SECRETARY ANDREW W. MELLON, TREASURER THE HARDING MEMORIAL ASSOCIATION' BOARD OF TRUSTEES PRESIDENT CALVIN COOLIDGE CHARLES E. HUGHES ANDREW W. MELLON JOHN W. WEEKS HARRY M. DAUGHERTY HARRY S. NEW EDWIN DENBY HUBERT WORK HENRY C. WALLACE HERBERT HOOVER JAMES J. DAVIS JOSEPH S. FRELINGHUYSEN CHARLES E. SAWYER D. R. CRISSINGER CHARLES G DAWES EDWARD B. McLEAN JOHN BARTON PAYNE FRED W. UPHAM JOHN HAYS HAMMOND GEORGE B CHRISTIAN, JR. HOKE DONITHEN JAMES F. PRENDERGAST PUBUCITYCOMMITTEE JOHN W. WEEKS, CHAIRMAN WILL H. HAYS GEORGE R. HOLMES MALCOLM JENNINGS ALBERT D. LASKER LAWRENCE C. MARTIN JOHN W. MARTYN LEROY T. VERNON SPECIALGIFTSCOMMITTEE JOS. S. FREL/NGHUYSEN, CHAIRMAN C. GLOVER FREDERICK HALE FRANK J. HOGAN DWIGHT W. MORROW JAMES PARMELEE GEORGE M. REYNOLDS HENRY WHITE SPEAKERS COMMITTEE JOHN BARTON PAYNE, CHAIRMAN ARTHUR D. CALL JOHN TEMPLE GRAVES DR. THOMAS E. GREEN DAVID JAYNE HILL WILLIAM MATHER LEWIS JOHN POOLE W. L. RADCLIFFE THEODORE G. RISLEY ROLLAND S. ROBBING ORGANIZATION COMMITTEE R. CRISSINGER, CHAIRMAN GEORGE E. CHAMBERLAIN FRANK T. HINES CLARK HOWELL HENRY C. WALLACE W. B. WOODBURY HUBERT WORK ASSOCIATIONS COMMITTEE CHARLES E. SAWYER, CHAIRMAN NICHOLAS MURRAY BUTLER MRS. CALVIN COOLIDGE JAMES J. DAVIS HARVEY S. FIRESTONE HERBERT HOOVER CHARLES E. HUGHES W. FREELAND KENDRICK ELMER S. LANDES JOHN A. LEJEUNE A. P. SANDLES HEADQUARTERSTT414-PSTREET WASHINGTON January 10, 1924. FILES My dear Mr. Presidents 4p--) 171-cr(?: 411 3 1994 On November 21 we wrote you, informing you of the organization of the Harding Memorial Association, of which President Coolidge is the Honorary President and every Member of the Cabinet is a trustee. This Association was organized for the purpose of building a suitable memorial and shrine to the memory of the late President Harding. We asked you at that time, through the organization, to display a card of announcement of your appointment as one of the depositories of the fund, and to this we have had a very gratifying response. We feel, however, that a more wide-spread opportunity should be given to people to make smaller subscriptions, in order that a great number of citizens should be members of the Harding Memorial Association. We are enclosing herewith twenty certificates for membership in the Harding Memorial Association, and we are asking you if you will not undertake to call the attention of your customers to become mombers, issuing a certificate for all individual subscriptions of one dollar and above, reporting not later than February 1st the number of certificates which have been issued, together with the names of the contributors and the amount subscribed by each, and return to us the balance of the'certificates unused and money received. The President of every bank in the country is being similarly requested personally and not officially to assist us so that every locality can in this small way voluntarily help make the Memorial a nation-wide one, and through your kind assistance we feel we will be able to do this. There is no partisanship in this tribute. It is a Memorial to a President of the United States, and we are hoping to have every citizen who respected President Harding give out of the fullness of his heart and become a permanent member of the Memorial Association. Very truly yours, WAYS AND MEANS COMMITTEE EDWARD B. McLEAN. CHAIRMAN CHARLES J. BELL DAVIS ELKINS SAMUEL J. PRESCOTT THEODORE ROOSEVELT CUNO H. RUDOLPH ganization CONTRIBUTIONS EXEMPT FROM FEDERAL INCOME T tee. 3.K I A, gAWC, 7 ..440,4All v.,1.23 .2/ E3-LRAND MAH9U .11V Cr3sil AotTalooaeA 1,41.R06- vs 01.110FIAH 3HT T.13Ri"- 3.!.10 ,2q3TRAuonA3H 1.10-7Z,.11tHZAW V1 8L11i43 t. FEDERAL RESERVE BOARD WASH' NGTON OFFICE OF GOVERNOIOD s74 October 5, 1925. 144.0 ,61 1?* My dear Governor: I have your letter of October 3rd and note the fact that Dr. Schacht is to be here along about October 19th. You understand that on the 29th, 30th:and 31st of October the Federal Reserve Agents will be here in Washington and on the succeeding days of the next week the Governors will be here. It has occurred to me that you might not want Dr. Schacht to be here or you may not want to be here during that time. I do not know exactly what his purpose is and it occurred to the Board therefore that if the Board was to give Dr. Schacht special attention, and the Board desires to do so, probably with a dinner- that it would be advisable for him to come over here soon after his arrival in the United States. However, we want to handle it to meet your views about when Dr. Schacht should be here. You are in full possession of the facts and the Board will adopt its course to whichever date you may select. You will realize that during the week the Agents aid Governors are going to be here that the Board will be pretty busy with them and might be somewhat handicapped in giving Dr. Schacht the attention that should be given him. Will you kindly write me your views about it and whatever you think best we will carry out. Very truly yours D. R. Crissinge Governor. Mr. Benj. Strong, Governor, Federal Reserve Bank, New York, N. Y. Dictated but not signed by the Governor. '1 PM WA E ,:re 1.* -.77K ' P. TIT 07T.T.:\ ;Win TT! .1 7 r 2. :174 Or) r T:1 _ vtr r,c7477 '19(1. :TAT 1 t-FAI ;Tr r1To -101%37 17,17.7 5,0r/ ittue' ,M71.1c.71 r 0 AFT4j7E3A=31. rt7 r .7)* ry 0.7a 1,17 firwq.11,Ton AT-'PT, T. 03. n-51.ry q-GeT1.4m rr T tlOç O. pin :0 -, 4f 7,7 A,1 74. nrIpErOTIT :orta Tor rrf 1.717r T 7- 000 f r nor r r:yrp T S 11 .171:71;74 ()Li . * frr ti.101.7.f 0; .(1./ /154st,,, oosorni, BE:4 77,7. ru'I fpc, `,/CrOP,.17. -11 Ae..20 7;)! T' " IA I h.,. (1-:1 .?:.7395,01.y.t .rpc)rtfl4re51:7 on ,777 1!.n. t.r,t; r TT r TT ` 7-77 "Tcv SIE)Xf .1 ri rr:10 c:ta,-.. Cf0 cps, c ,,f 7'4' r ',Tour .0,.; ra.* Or' "In* v'T --.1/ fpJ IO47( ("I-LT COPY FEDERAL RESERVE BOARD Washington April 07, icn5. Dear Mr. Case: Under date of March 31st, I addressed a. letter to Governor Strong, requesting information desired by the Board as to the present status of the credits to the Belgian Government and the National Bank of Belgium that were in contemplation at the time the Governor apIn a letter received from him peared before the Board on March 8th. under date of April 15th, he referred back to a telegram which he sent Mr. Platt on March 18th with reference to the terms of the approval given by the Board on March 8th to the Federal reserve banks' yarticipation in the Central Btnk credit. You are requested to advise Governor Strong that under the resolution adopted by the Board at the meeting referred to, he was authorized to proceed with the matter, subject to final formal approval of the Board and that on report from him that the matter has been consummated in substantial conformity with the terms of its tentative approval, the Board will formally approve the transaction. Very truly yours, (Signed) Mr. J. H. Case, Deputy Governor, Federal Reserve Bank, New York, N. Y. D. R. CRISSINGER, Governor. REDUCTION OF THE DISCOUNT PATE OF THE FEDERAL RESERVE RANK OF NEW YORK FROM 4 TO 3 1/2 PER CENT. ON APRIL 22, 1226. The principal considerations entering into the discussion which preceded the change of rate were as follows: The reasons which led to an increase of the rate in January had largely passed away. The stock exchange speculation had subsided and street loans had been reduced 700 million dollars. There had also been a reduction in the deposits of New York City banks, and the amount of credit extended by those banks was no larger than a year ago. The psychology of business had changed, and there Was some indication of business hesitation, the principal evidence of which was to be found in weakness in commodity prices and a tendency toward price concessions in many fields of business. With business in this condition the amount rowing of member banks at the Federal Reserve Ranks throughout the country exerted some pressure on those banks to liquidate their borrowings, and hence some pressure on business, which tended to aggravate the downward tendency. put A lower rate would have a tendency to make funds move away from New York rather than towerd New York. It would encourage banks in other parts of the country to withdraw funds from New York and use these funds for ouaineas purposes, or to repay the Federal Reserve Banks in thoseaiisSimilarly, lower rates would tend to facilitate gold exports rather tricts. team gold imports. A lower rate was in keeping with what the directors believed to be a tendency toward easier money rates. In lowering the rate, it was recognized that there was some possible danger that the lower rate would stimulate further employment of credit for speculative uses or for overextension of business. It WES not believed, however, that this danger was great, and it was recognized that, if the danger should become a real one, it could be met by sales of securities in the open market and by again increasing the discount rate. FECEVEE IC71 FEDERAL RESERVE BOARD WASHINGTON OFFICE OF GOVERNOR July 17, 1926 )IAA). 4JJILAJ Dear Mr. Harrison: I acknowledge receipt of and have brought to the attention of the other members of the Board your letter of July 15th, confirming what you had to say to Mr. James and me on July 2nd, with respect to the cable you received from Governor Strong concerning the proposal of the Governor of the Bank of France to confer with him on French monetary matters. The contents of your letter was noted by the Board members. Very truly yours Mr. George L. Harrison, Deputy Governor, Federal Reserve Bank, New York, N. Y. 21 1PR esrvrnp AT Arzwrzma L BOARD OF VERSCTOIN. SalRirrARV et) FEDERAL RESERVE BOARD RECEIVE !.} WASHINGTON J ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD 23 1C20 July 22, 1926. 09LEJ Dear Mr. Harrison: Receipt is acknowledged of your letter of the 20th instant, addressed to Gacternor Crissinger, describing conditions in Paris and the French situation generally. Your letter was noted with interest by the members of the Board. / Very truliJiurs, Eddy, Secretary. lter ill'. George L. .iarrison, Deputy Governor, Federal Reserve Bank, New York, N.Y. 2 3 1926 FEDERAL RESERVE BOARD GT- WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD July 23, 1926. / Dear Mr. Harrison: I acknowledge receipt of and shall bring to the attention of the members of the Board, your letter of July 21st, addressed to Governor Crissinger, enclosing newspaper clipping which appeared in the New York Times on July 21st with reference to Cove or Strongls presence in Paris. Very truly o °". ,,t96.11 alter L. Eddy, Secretary. Mr. George L. Harrison, Deputy Governor, Federal Reserve Bank, New York, N. Y. MWMVIAJDATM2WINGOU °moms on,uwcz. a- (9 /-73 /4)-r 02_7 L. H. iv FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD August 6, 1926. Dear Mr. Harrison: By direction of Governor Orissinger, I acknowledge receipt of your confidential Auust 5th, which the Governor has brought to the attention of the other members of the Board present, in Washington, at this time. Very truly rs, Walter L. Eddy, Secretary. Mr. George L. Harrison, Deputy Governor, Federal Reserve Bank, New York, N.Y. ' "-rel) AT W111.0 comma cotroCEL Ni-/W19 citrrAlav ) 26 44,1y4.4.,241k FEDERAL RESERVE BOARD tLCEVIJ WASHINGTON AUG a co 1926 a. L. H. OFFICE OF GOVERNOR August 24, 1926. My dear Mr. Harrison: I have your confidential letter concerning the movements of Governor Strong, for which I thank you. This of course confirms our conversation over the telephone, sincerely yours, Mr. G. L. Harrison, Deputy Governor, Federal Reserve Bank, New York, N. Y. lettuir-a-14, AT IsT=T'ING 01INCEL TARY