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MEMORANDUM RELATIVE TO CHICAGO RATE CONTROVERSY
LnA1Lit..3 IN ("ULU Kr... t.K.Vt-b
F.R.B. of N EW YORK
(FIGURES IN MILLIONS OF DOLLARS)
CHANGES IN GOLD -RESERVES
MON TH
TRANSFERS
OF
oRD.
cm";
or
August 1926
September
FOctober
November
December
Jan. 1927
February
March
April
May
43
-
29
+
5
39
-
29
12
95
+
-
26
17
+ 59
+ 95
+ 61
+ 37
+146
+ 32
+ 15
+226
+ 29
+ 80
+241
- 14
- 25
- 13
+ 22
-
- 28
- 20
- 2
REDENP-
710N
CHANGE
-
5
+ 34
-
6
-
7
6
6
-
- 97
+ 27
-
2
+
7
0
+
8
15
+ 38
+ 35
+
1
+
5
32
+
2
- 12
-
1
0
-
+
20
12
-
61
-
35
26
25
64
31
-
8
+
June
- 115
-
15
34
July
August
-
8
-
27
-
77
+
-- 81
+
10
- 17
+ 36
0
- 17
+
1
+
5
2
+ 29
3
+ 40
0
.+
0
-
1
+
-
1
4
- 20
+
2
2
13
1
16
22
20
25
27
20
25
22
20
21
23
23
8
6
- 15
-
7
6
-
6
-
6
-
7
-
7
-
7
+109
- 88
+ 31
+ 50
- 48
- 65
-
1
- 65
.;.-
11
+ 88
-
6
9
RE5.
0/
NET
GAINovLOS
/°
(IMP.,EXP..
END oFPE RI OD
MARKING
RES. RES.
NET
- 14
- 20
- 29
- 14
6
+
+
CERT.
-
-
-
muT.GoLD
EXPORTS
GOLD
TREAS. NET:4-tC* EARMARYIMPAIS SHIPPED FUND
PAyt-IN1! -I NG
2."0015T.
F. R.
+
+
TOTAL
NEL_
CERT&COIN
TOTAL TOTAL
1,002
994
988
973
962
1,050
1,041
,150
1,062
1,093
1,143
1,095
i3O30
1,028
1,019
1,011
997
984
1,082
1,073
1,181
1,093
1,125
1,177
1,127
1,057
EAR
80.8
82.0
81.4
76.0
76.4
83.9
- 6
- 22
- 2
- 22
+ 3
+ 69
81.7
87.9
84.1
85.7
87.7
87.2
82.1
+ 16
0
+ ' 3'
- 70
+
5
8
+
6
76.2 -
1
+
WEEKENDED
Sept.7t'27
4
965
989
*Includes Federal Reserve Notes shipped.
MILLIOIT5 of DOL LARS
120
MILL IONS 0/DOLLARS
500
1
41 g-t'
400
300
110
1000
1
5/Z25 5
TOTAL
GOLD 7?E5r7Vr5
5
RITIE5
200
100
tilli
12
.......,
-100
75
EA
50
EN
-.1112=111
900
(jai *E7 X 'f.r./7-Es
0.NDJ FM AMJ
1926
1927
A5
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Ak)- V, Y5 tc, -} '44
THE; CHICAGO RATE OATItr.Nall
This- memorenduie is ireparet. solely for the rafts ef sr. 3. 5. Alexander
-
YoliC
,
tpf -the Federal Advisory C.uncli - to aid in tht, die cu eon of
the abc.\vo_Tastr ut the Council sieetin,:::' to ba be.id in 4.ashington on Zeilmbez 15,
19E7.
This stetwent and the documents attached aro confidentil, not to he
published,. entered in any record c7,./' the eettni,,, nor distributed t.,; the netber4i.
2r. Alexander sill use hie ovin discretion in mak:ing references tc or reading
from tr,,e papers.
i
The di .seU
11#1ll be confusing unles:i care in
i
to sep&rnte
the threc very distinct: (;usetiwts involved, to sit 1st. The ;.teritt, of the pal i ey of loscr disc2,unt rates.
?mi.
The e:;eneral vettod val.:IA:led to doi.lt e ay Acta pi4ity
6rd.
T
rticur feetbrc. inployed. in
' lcser Nimes.
ChicaEo.
Kit bef:-re discussing these ,:.uestions it la ri.t304
ry to refer to
some erroneous currt>nt reports se to the motives vg-:ich mg have actuated the
Federal lieserve Bank of fie* York.
Thoec-,5 shish have currency are mainly, -
To aid the Treasury's progrtut for the 15th Suptelpher financing.
To aid the Buck of Eni,land.
r t atonic epeculatton.
As to (a).
khenr.Mellon first took office in Varch,
held the vies that our rates sore too high and eight be reduced..
kwa.e
probably riEht - but never urted that visits.
early in 11.41.
It sao.3 cliecuf!sed were tn once
From that tine to the pratient neither he
i bteassistonts
have ever urged, rec:juested, or ugtee:Avd aLy chersEe f rate, or way policy as
to open market epele.ticAle.
;a hate
*onsidered it Aar duty us Fiscal
kents to keep the Treasury fully informed aa to tur policy and have done so.
It has slmayo beefl initiated free uf Treasury subtamtiun or influence, and
PO have never prcpused or volunteered policiee beneficial to Treasury financing which were not bseed upon anund cm4iderstion of Federal Aeserve policy.
the July 27 mceting f the Open kv,/*-et Committee, when a
At the time
chanl=e was to be proposed, the alter was rekz rted to Mr. ki; la, then Actin$,
abomcs, but he 1-4frained frl?,m advice even, and
becratary in Yr. M
said that he w=uld observe the policy of nt nterferinE with any 7 ressury
consi(eration.
He ettened the meeting in hit. enon, a st:aence, and shen
f he cared to di cuss the object of rate* and c=ponmet4lat policy,
asked by me
'..te declined on the' ground that tes Tf t.oury should not attempt to influence
far ae the Federal Reserve Bank- of New 'fork is aare, the
the decision.
Treasury under W . icilon has scrupulously pur aed tni4 policy of non-interference.
az to kb).
The relations between the Federal :eserve EMU of New
Tor4 and the Fan;; of Ent.ltad trc little undal stood end ftw.uently miarerssented.
It he been :Jur purpose and policy, SQ far .is sight be possible
consistent with ourown position, to aid in the resum;,tion of atable monetary
oonditicne, stsble eichm142ep, and the reesiabilohmmt of the sold st.Endeird
In utope.
ge believe that thie policy is sound and not only aide in the
restoration of 0%,rld trace en d prosperity, but particularly in tbtl preeerve,
Lion of our osn markets abroad, and full employment and prosperity at Lao.
There has haver been
Lagimnd or
trty
&seatic welfare.
ny obIietion, evict's or iefled,
to
aid the Bank of
reiEn bank of Issue *Lee suet aid is '.ncL,mpatibie alth our
ny ugibet,tion to t
c.-.41trary A44et tt based upon ignorance
f the facts as
to
our rsiticns to Europe, te cially
and credit matters,
But since 19E4 and 1I
BADA. of Pe
York at ny time, by rate advances and by
sr money
policy - to brasa down this very structure of ittbility 06 have been striving
to erect.
Withdrawal
r foreign bdneo by American hanks elovint our
marketo to foreign loans, veining large exports of gold to Nes York, and.
.forcing dangarcruely high bank r tea in Europe, could easily destroy xell that
been accomplished.
The penalty for us would be a recurrence of die-
orderea exchan6e and a lose of our export trot - no lase In food stuffs and
cotton than in manufactured gode.
Europe unk, the Bank of En gi rnd are de-
pende t upon us - not we upon them - and unles4 we ;00444:Ike that fact too
avoid Es hostile or dest alai' policy -4 e shall suffer c sercee bz4it as
serious as those we could
As to (c).
tt 1t ardiy necessary to refute a charge tPt we ale
peculation or rotsct the speculator.
But I have no hesitation
in exprees rig some views on this =urallng compile ,i-n in our situation.
There is no dvabt that the li uldstion of 1A0 and 11421 A4 tbs. dnpreciateU
value of the dollar etill remaining after liquidation. mas concluded, left both
fixed interest and equity invsotennte below their real values, o:,noidering
trio still reduced yureh 4.ng poser of the dollar, that is, gold, and considering
the generally lower level of interest ratee prevailing.
and 'latterly a rapid, rea8justent of theae values
past few years 6 grad
has been under way.
-of the
pro.
During the
It had bean such accelerated by thu enerave savings
cin-
an
unsatisfied daiand for invoetants, urgently
roinforced by t.he release of from. WO,00-0,000 to s billion dolla,re of funds
,:)sicla recant year for reinvestment, duo to tile repayment of tX
oYznt
Tie stir: a dewsiQpnent ziecurred to a less extent in the rea3. estate
war loans.
end buil-din6 bo:ao shich reached its aint..z lust yet.r.
Those readjustconts
ware bound to take place and to be larseiy finnced by browings.
Fixed
intem,st investatote hav4t now freatly advanced and bece note nosrly stttbil-a to be arpected, hes been centereci upon Clildr1
i zed; but pecuifttion to
roeently both the rate of advance ;of rtoern ,nd ofgri.;itt of
ett),Cita,
I.Q6116 t16116 been ease-that reduced.
The reel ,Aicetion is wnther we should
ignore all other objec-tivee of pi.7licy and direct ;,ar oftorte e-olely tochscicir44 suck apecuiation.
ipose tor
If so, as nave the ob.-L-;.ce either et hie, rates ,or of
of irot ft.44ressive totitn.
It is our opini..:)n that tither course
would 1nviv6 ;.-011Cl'et4 tthich could not be eupported on tho 6round of our
leery req.-
which is not the stom ma-rket, and if AUCCessfui i.n
ri4dueine the speculation vic.,,u1 d have bad cAher c.;neetztutiaces,
augaseted -too r tve to face.
The Federal
4.6 abt:.
e end lett,;r
,.serve Lietee. wee no wore
lewd to rtgulste the prices of st4.-,ms tban it was to reculete the price of
cotton or real estate torp
iron or 14.4.68, or rents.
And durine; lac:et of
these leet to yew; there hat been no cvaluodity speculation and the ,rice
level h
decline&
One crest perU to th
derek fetverve byst -
.
the assumption,
by the yetee, er by the public, that it can manage or reguIat or in acx
bay control those i eol atod and epecid oveeento, such zos peculation in
PItoae or rei state, or advsnces or declines in prices of indivinual con-UtOdities.
Thedestand that
tion of this tendency.
ebo.ild curb stook apecul4tion is one manifesta-
Once we outetit to this demmid, we must subeit to all
others And 4ur respAasibliitite will crush us.
Th pending bill attemptIng
to char4e UN pith ti t duty of price control is me it,A6 A& evidence of this
tendency.
As to lat. Merit* 4f te nate Chani.
Tht justification of :4ur polity le to b* found ia taut or five
simple facto.
One is thtit uftre dependant upon. Europa for a market for
our marginal production of export goods, mainly cotton, automobile, wheat,
meets, oils, and copper.
&wther that wo shall lose that market if monetary disorder, exchange
troubiso, blab interest rates mmd price detainee Abroad force liquidation: there.
A thir is that we cannot sell our surplus abroad during the
years of re-
covery without extending credit.
A fourth la that Lump al. udy
s heavy obligati-
tates tor wax 1. an payments and the service
to ueet in the United
private loons, no less in
fact then a billion dollars 4 yoar,
And finally, that a restrictive credit policy sill force gold shipments
this oountry in default of otter meens of payment.
1.-et us briefly examine these facts.
cotton, the mast important tiPort se have.
The first is Illustrated by
Last year as irow our largest
crop on record, la,000doo bales, of which es exported 11,000,000 bolas,
within two million and a. half of this year's total estimated crop,-and onehalf of our export s *ent to in&land.
Bed the world not been. Able to borrow
about one and one-quarter billion dollars hare that year we could nct have
eid uU that cotton.
This applies squally to the meat animal*, v45ich
consume the torn crop, and automobile* and other export good", upon which
the Chicaeo district largely depends for its prosperity.
ho discu.sion of the adverse influence of monetary disorder upon inter-
national trade le necessary bev,,re d westine af bankers.
,Cist that subject
A depreciation in tk.. values
the world ban expressed s unanimoue opinion.
of Europs$s currencies &nor Us good progress made toward stability vrAild
mean & brief period 4f trttficiU.y timulated export* by turope, curtailment cf our exports and then collapse - amd world 4ide hlarm.
Ti
.
.004 for credit std te EUrope during reconetruction le +shown
by simple facts.
In the it few years *t have loaned over 0,000,000,000
net abroad, snd du-tint that period have had AO net exports of gold.
The
only way the borrowed dollars. could be used wee to spend thee in buying
haerlcan goods.
64 exetpt for the balances left -with our bank*, all this
borrowed money has be n uaed to pay for urtoads.
Had we not looned it
tbe 4,00ds =would have been ufm14, unless they had bean paid for In eold.
*0 have maintained
It ding market At reaer-Jnabis rates and i,ept aur trade
goint and our people asployed.
The ilculdallon or 06T
bii tu
to
rour Government and mestrig
service 4f loans privately held calla for grose payments ,4 shout a billicn
dollars & year, - less abet applies
to
securities repurchaaed by foreign
investors, - some frantic* of the awls.
Pending the graduea tflotorationof
trade, elevRtica of 110.14, ptandards, increased capacity to consume Lad increased experts by Europe, tstse payments are now possible only by borrowing,
wainly in the United states.
here end abroad aro 8110li 4$
That la feasible cniy it rats ruitti4as1nps
to
eftke borrowings not only possible, but not so
costly fte to impoverish the debtors.
In time the adjuateente of production
and trade and Dr services to be paid for - or poesibly &van readjustments of
debts, will enable these paymonts to be made without unsupportable strain on
-7central
r
yea.
But In these, yers
recxyvery :Jur credit is
t fAtly
needed but ee4t1i, nd undue curtailment means t otoppso cf payment and
die' ttr.
Finally, if credit is restricted in the Wilted Btates cad Aber means
of payment for PO% ecde mad old debts fall, 716 *hall be paid in gold to the
extent gold can be spared.
Sc3 far we have succeeded in svziding a perilous
told inflation, end we Gan probably continuo to dc so if We are fsiriy liberal
Onto we atop *o will drsln Wrope of are
444 well ae careful in lending.
am unts of bar gold, inflaticin here ill be unavoidable ful *e shall then fate
another !)siriod of worldwide mt. ettry disorder - blvape dr tad
gald, we
glutted with it.
There tre decided
vtntatte to be gained other t t,rt those relst
to our trade, by defarrine the test as to whether war debts can be met ithe t
br sik-&en of monstary systems.
The 'Ovite pi a hat f4,: far p wed to bt a
success, but it must be rcesbered that the entire poymont
far made by
Germany has bott bi.:.rromed abro-ed, mstiy here, fend even Eb oer cent c.s. ac,re
In xcesa of tbcee paymonta.
The fourth annuity year juet t:fAmmenced will
iiiely isoee ne strait which cannot be met.
In the fifth year eampancing
5eptember, lata the full payment of M1,000,000 is to be made, and then the
test will ariae.
t4; pay us.
if Germany cannot pay her creditor, Uy2ay not be able
The plan provides z,eano for certain tspitti payments which can
be employed to sealWrato the burden.
Political considerations indicate
that an adjuatment r.t thst character ili be unlikely until the German, French
American el alone, all occurring in M.8, are out of tho may.
So a polity
AAth ssintaine the present equilibrium in th6 meantime ie justified on that
account fts well.
-8%at rt;latit.,n hes all thie to tie
to the Philadeipnia end Lam Frenctsixa) dunt
61,11 n, urally be 4:44K6
Chic1/47(o (which sitto appli
rate.
the &Asset is in
Tmr, wr.:ney rates 5nd their relation metal)* to
London rates.
ent., and New Tort tht 5 lit,
1 t te the Chica4-., rate at 4
e
can event end believe vie now observe threc tettdancies.
1st. BNIA balances carried th New Tort tend to ts.!.-ive t
igher fete
il tttots.
End.
interita bans (end Qther bormwere also) tend
ing.,:einNew Tort, where rates tiore no
.5rd.
ezm
Skiney employed in Stoci 'aichanize
be drawn h,>ne
t;.;
IA
borrow-
t ehespaned.
st
1/2 per cent tends to
the interior - especially by aimber benke, which at this
604i.son need to borrow from_ the iieserve Btu*.
Thieall tends to ileL
.1 tu t e ti
ere demsed on Nos
banks, impairs their reserves, forces la.ror bort-owing Imo us, ,:qui may cause
"nigher rates f.-.ta,:..1rAey that ce.n be c,attinued witivAtt forcing edvv-1106* in di
count reis-s abroad.
The 4eration of these tendencies is illustrated in the
folloarint chart end table* The chart t.)n reserves 'indicates that the Second
DiatCoot lost 163 Million &flare t other districts between July jand
_eptember 7.
/926
I
_
I
10
L
I
17
24
31
7
AUG..
5EPT.
Gold Reserves, Federal Reserve Bank of New York.
2
9
16
JULY
23
30
6
13
20
AUG-.
Average Call M ly Rate
27
10
SEPT.
(Renewal).
0
0
Loans to Brokers and 5ealers - Secured by Stocks and Bonds
(000 Omitted)
For
Own
Account
Banks
of
Otbere
6
41,105,949
991,498
981,769
41,166,799
1.204,316
19202,644
1,187,441
1,189,618
1,216,369
1,248,136
1,246,846
1,222,914
1,238,326
4664.679
863,466
874,661
906,144
872,771
910,290
918,796
920,266
915,476
921,900
$3.126,327
13
20
27
3
10
17
951,862
1,0169148
1.018,361
631,636
682,296
648,223
663,302
669,379
692,496
718,967
717,012
668,746
664,707
2,602088
2,601,267
2,620,952
2,602,042
2,688,717
2,718,332
1927
July
24
31
3ept. 1
1,047,606
1,109,666
1,063,670
1,022,037
1,000,961
1,045,669
1,046,074
1926
July
7
14
21
28
Aug.
4
11
le
26
Sopt6
For
out-of
tom
Far
Aug.
&mount
1
8
1,019,298
932,813
964,368
933,881
994,672
936,741
918,775
941,544
991,407
963,901
1,014,859
1,024,766
1,089,093
1,104,676
1,072,654
1,098,091
1,134,421
Account
Total
30359,279
3,058,974
3,141,193
3,171.846
3,190,329
3,188,969
3,168,074
3,184,068
3,206,299
2,742,388
2,731,210
2,766,274
2,763,029
itb the officers sf et least flee or six European
Diecussion
centre' banka, ee well es eur own observetiene, convince us that the importence
of the relative rate level between
for% and London and oeme of the c4iti-
nentel acmay centere, le greater than is generally underetned.
Fr Dome
menthe titter we edvanced our rate te 4 per cent, thua reducint the differen-
tial -0 reughly 1/2 per centl eteriiz
nd continentuI exchange nitea *ere
mainteined above their gold export points.
loans to freidia borrowere.
?hie
h
lergely due to our
terly this year, 11ever, an unseaentble
drain upwa barepeau reeervee etartad, And in) fax this year we be impf::xted
net ebout 00,000,000 (4 gold.
food,
eonf ective expnrte Ab American
Az the
oducte amo nottan approached it appear
gold *ere likely.
that
vary much lareer Imperts of
tie 4earned that the Leede tof two Impontent continental
bisnica of iaeue were ceneuitini; the Beni of Engli d re erdng a policy of
rate edvancee by all ttre on that account.
Out rste reduction at leant
deferred ,Itad peesibly ?reverted iienerel advanced abroad.
Sumethlne of the influence of our rate reductlnn. mny
be
seen in the
etcenth of sterling this August and Eeptenher compered with a year ago. The
average nonthly tat o.) heve been as fellows:
J-024
act
July
4.a541
4.n1b
kuguet
4.8E:40
4.8603
September (1-10)
4.e514
4.8574
If the drain on 3** Tor;:: frjm other arte of the ceuntry oeusee auch
advances 4G to suet reduce the preeent differential of 1 per cent beteeen Nen
Tort nd London money mites, we *411 either be ferced to buy large esounts
41
- 12ecities en Ree York eo cc to reduce mtee, or take in WOre a hirope'e eold
- until finally they are forced te edvance dieceunt rcte.
Our policy ueuld
then fail.
it
our policy.
utat not be underetood that the Chic
tt is itself fatal to
We cold edjust or plans te seet A 4 per cent rate there. But
it will be easier no* thet they have reduced.
Evidenee fo4.14 end is etill accumuletine thet teere le seize elomi
down of bu ineaa in certain linos, netebly. iron end oteel end autemebilea, beyond tae esual eft:sena:1 roceesien.
Thle la ereal;y
reductiens cac do no hare end muy be heipfUl.
cendltion in etIch rate
snel
A reductien et our
eireerts -uld greatly accelerete u bueiness recession.
Finally, Joe heve
1,11$0.t edeenteee
an advance later becemem necessery.
a ear :3 IA' per cent rate in Chbe
itarting up tease from a 4 per cent etertine
point weuld be much mere dangeeeua then It we etert from the e 0 per cent level.
as te En4e
TheILLJ10edtlitetbedie*ALote2,etteeee.
This will involve nerrating in events of the lest rev menthe.
On Rey 9 a meetine of the Open detect Investment Cemaitteo ees held in
Wastington, at which the enoic eituetion wee revieeed,end it ea decided to pure
et e, ac neee eppeered, not over *100,000,000 of securities, the progrem to
terminate Aueuat I.
e have rarely held e meetine where diamesien end vier:hence
of Vid046 Wita more ceeplete end it fully cevered the Lurepeee preblee.
The situe-
tion wee elite eet out in writing, end the etatement has been sent te all Reserve
Balite and the Federal Reserve Beard.
Between June 28 end July 20 ee had eeetiags in teew fork
th Governer
hernan of the Bent of Fee:lend, Dr. Enhecht et the aeichabani, and Dr. Riot end
Ileutieur lcrd. of the Beni of France, and reviewed the entire altu t on with
Governor Crissinger aud all the members of the Open Market investment
them.
GomaAttee spent
with these ventIemen, and discussed the
day in ?ow
situation fully. Governor McDougal heard all -of the discuesion, took part
in it, and then reviewed it separately sat the officers of the Federal
Peserve Esnk of het fork, 0,60 to point of himeelf suiveetinE that Go e
ac,r
Etrang or Mr. Harrison gp to Chi 06e, t0 diecuem the whole matter with hie
di rectors.
The gentlemen
abroad met our directors, in vidu ily and at
estings, and our direct:74.e heard all aspects of the ,7,mib1em discussed. They
spent a day, July 7, in dashington and discussed the situation eith members
Ali the
of the Federal eeerve Soard.
nableviers ott,liad intc,
ference, riven opportunity to as questions, and
al
i qustion* seied mars
freely answered by our visitors.
Finally, 48 our suthoriration to "like open market purchtsee aaa eaon Au6ust 1, a meeting of the cumitteie was held in Aashington, all
twin plesent, on July 27.
aenk* of Easas Cit.'
In addition the. Governors of the Federal
vs
St. Louis, and dinnes,polie attended, end the Ch4irmen
from bt. Louis. hain a written memorandum was ocbmitted, and a distuesn
lasting al day covered the entire subj ct.
No mom P:Jmplete or enlightecing
sachem-es of vieas could have been poeible.
The poettion of the
fienk of Nee Yor:d.,: *a* briefly as follows:
were oc.nvinced that the time was
at hand then. we should reduce our rate
to
2
1/2 ?fir cent.
era
;,userve
ite reit that to
mgae the reduction. effective *e night need to parchtse additional securitlea,
say $60,000,000.
reserve.
*e Invited thoee preeent t discuss our rata proposal K I thaut
de did !La seuest thtt tither banks shr.,uld reduce their rtes.
GzArermr Crissineer, eapporten by other member* .,:4f the &-,:ard, did 4ugcect that
8deRust.
tho amps sa,u14 first bo he4c ist the
uut hetotie4 t
rechlow.
* who reduced fiat
Us stated that it r1NA
ao.t olf4114 stisentiul th,t y0.1 Ott:wild
evt teit it itt.311d bo ac,st AO 0111 had 04h le4os.4.4 aacesl.ary, tor
same other reductions to he asde
and Chiceco.
coiacialiy &Attu% PailudelphiA,
e nould *tit, or reduce fist, %t of4t ba
The esetlk tee UD011114tAla hit to a redaetioo la Res Tart.
tacDousi
at
hie 41reeturs wou4C mot that% be in few4r
Chleato end coxtftinly udeld
condition* etbaieed.
Isevi
f
Cowtralr
rate, rtliaction in
-t ts** the lead, tiveuth tuq it Pollee It
"Amit at the atherovetnote expressed the view that
1.1*4.06 did oct tai jestily lawcr :stets, but thet te a avtter
of general systaa policy ttasy favored A reduction.
tiI1 ther* ftvored
reduetiou la 'thole b4LA.i:4 uu toth #tvende.
Nhere Govestwr Crieeingor ord the thzotetta et
24: 4to tt.kot
were la Kee ton, OePereoar Cri**iucer *144ests4 thfA he Lett
Closel.
sad Chicva ter the puti<Jue 4if &uottn,1 the at' otoro t.1 th,+ft tee
bia
hs ralse4 the lasetiorl, soda
*44 haAt La UsAiurt,t,e.I th,1144ht it *4
to* aitusti:iu 04roatvliy.
eitaer ty telapleave or *hen,
eoatoited
u1dvitAt
it Imil4 be navies ftr fee to
tem*etes herv, And decided tt..
Afpasr Wtore tUe direetts,uf z,iay
Ziever*
diseuseleg 4 fete eh,,L-sAeo by tit beak, und
eant it tke purie>st of
etotriceetm4r Crt,Nkiavtr,
c4y of' $y istLer -a thet *object b Jut enana thee* tec-uriAhliag this me2athadan.
Over thrpe Lareita hae tewu tjav*teei t4 tto,4 se-4411111r aud itheate of
Daileyly tho 4ater
over beet seavassed sat* tLoroughly thee wet this one.
Por 04.11,4LIWOO et ratotenc4 * alteno;u0
tle diszusalwIe ie facetted
15 Chronoloicy of ..bvents Leading to i':atie edoctione
neeting of the Opez Narkst investaent 1.7A4t,Latittee V5,8 held in
tashingten at which a zonorandus was malmatted diet/seeing this whole situp-
tion, mid this resulted in the authorization of pliteb&-Se8 f3f $100,000,000
Ciovernment
ecuritiere in the open alareet, of which, hosever, only about
,00g were purch4:a*xt.
t a 0,000,00O
June Et, Dr. Etat and V. hio-,rd of the Sena of Frtice arrived in New
Tort, having cone for the purpose of d.tact881n.g the whole central bunt problem end the relations between the Eur4ean wad American money Fortrete.
.July I, Governor 'Norman Qf the Bank of Eingl rnd find Dr. 'Schacht of the
heichsbsofK arrived in Yi es T.ri.
tzor te
Following the ft
urpose.
eimmediately left
of thee gentlemen wntintioue discus-eion took. place
Ns* Tort sktW spent five
4uly
r si a day a at a private ir,:-us E,,gt Long iaiencL
ifeare. icLAt:41n, Schacht,iist,
"
ickt.rd and StrE:ng went t4
Nash.ington end .pent west of July 7 in discussion with the ftembere of the
Federei Eeserve
ard, lunohine with them at the Hotel. Willard.
duly 8, the m-smbere J.f' the Open Zerzet Ccaasittee, Weiser*. herding, Norris,
eacbsr, McDougal and stroNi, tx get her with Grat 1 rno r Cri knEtr, spent the day
in New lora, swet of it devoted to a diecurasi,:n f thane btatie subjects with
sere. Ilorm0, Eahacht end Met.
Thereafter the visitors fron abroad left
On different delee, the last, 0OW611143-r
roma, ea.iling.
auly 20.
July 27, a neetine ef the Open Nariet investetsnt Cuweittee was held in
whole rate
Nashington for the purpose of reviewini, the/ situation, especially in the light
also
of the zwetinge previously held, end/because the a.utharity to purchase securities up to S100,000,000 IME4 expiring on illawaet 1.
in addition to all the
Oltabtre of the Open US,rket Investment CrAnittee and the :Timbers of the Federal
Femme Beard then in Washington (Dr. ;alter NW Nr. Cunninthem *ere awl)
there sere present Governers Tung el Minn.:asp:A i 5, Beigg f t. ',oxalis,
Ar. Wertin, chairmen-of the Federal i-eaerve Baer of tt. Louis,
of the Fo4er Si heeerve Bank of hew Tort.
' Dr. Burgees-dm
C6vernor Bailey was in Xashineton
the Gay previous eaten Goverm:n. ftrons was also there, in order to diecuss the
eituation with the Foceral Ciewerve Board, end left at once for Kansas City as
his meeting occurred the folloving day !end he had to return in ,:.roar to lay
the matter befere his di ect,re.
vesteent Cemmittec
At this me tang of the upen M
*t In-
mem,randum we submittec similar to the one .elemitted
at the neetint of May W.
ftilowing this dieceeeion, on July 2W:, the Federal feeerve Bonk of
Kanaae City reduced its rate to 5 112 per cent.
A few dye later the Federal
'eeeerve Beni of Beaton reduced Ito rate, re-,ueating the Federei eeeerve Beard
to ee the arinsiuncement elswiteneeusly with the anno cment of the rate reduction in hoe Tore when that eecurred.
Ate.ust 6, the tederel here Beale of bee Tort reduced its rats
to a 1/2 per cent, and that raductien, tetether with the 5,,etLn rite see
announced on the *nee day.
The other changes *ere made in the folloeine z:rders
Cl evei and, AUfUst 8
Dell as, 12
Atlanta',
hicW.md,
*
13
w
16
feptepber 7, two meeting days haviiv elapsed in Chicago, the
Federal Reeerve Board reduced the Chicago rate to 3 1/2 per cent and announced
it.
On September 3, Philadelphia. reduced.
17
ber 10, Ban Francietz reduced.
p
3n
Eeptember 3 and 10, Governor btreng wee in Meshingtan on other
matters having to da with the Treasury Deperteent, be vleit there htering
been arreneed by Mr. Pa
Gilbert prior te the action by the Fedora
items:rye Board in reducing the Chiceie rate, med his vieit there was not a
result of tbs. Boardle action or in uny wey related to it.
September 12 Minneapolio reduced.
As to Zr4.
The perticulex gethed employed in the ea*? of Chicago.
There may be little gained by dieceseing the ceen ug of the
se to rate chenes.
At beat it is indefinite.
te believe that Coegreee intended the Feder
rate eh:,4sie
.
1 heve never been willing
rv Board to initiate
But QS the ether bend na fermuie ppeare for C-.4.8C4 *lot,
ohaagee having been diseppreved, a new rate muet be fixed, or where
new
It
rote CAA be fixed, if an existing rate le not chanced by the directors.
do** stem, bevever, that Cengreee seuid hardly have requit 4 the vete of five
it of eeven members of the Board to f x rates ter tad/ oeunte between eeeerve
Ant's, an infrez4uent and relatively unimportant occur/once, tod then give un,
limited uthority ta initiate eheaget el discount rate, QUI' meat importent
act, by vote of a majority only.
This hee been
matter of controversy from the *tart.
Sarly in
li15 the Governor of the Minaeapolis eeeuree Bank-, by order ef his directors,
reported to imeet-Inc of the Oovernore that the Federal Aeserve Besr4 had
etteveted to foram a reduotien in their rate. The Governere past4ed a reealu,
tion unanimously p testing, and sagiested testint the quee ton in the curte.
This never became neceseery, but I see tad that an epinion, possibly informal,
sae at&ed 5f the then Attorney Generel who did net masteen the E;eard.
I have!ever bad eanfirsed nor bee much an opinion even been published.
This
In le12, for prettically the entire year, end eith increeeine
insistence in the autumn, the Federel heeerve BOMA of liew Teri advieed and
urged rote edvaneee.
The Beard never epproved eur &eine la, clearly their
right, but teen also the epinion ef the Attorney General was adeed und Acting
Attorney General
in wrote en opinion upbeldlne the Beerd'e prevent contene
tion that they ceuld initiate a change.
In liah, the Federal Remerve Bent of Mee Tort eletsined an opinion
ftem John U. Johnson of Phiiadelphise *ha,
e I recall, held that tee Beard
could not Initiate u chant but could determine e rite different from ane
eetabliehed by a bank WA dent to the Beerd for review.
In Ii40, *bite end Cw?,01 rendered 411 opinion thet the Board, under
Its eeneral supervieery powers, could initiate a rate creme,.
Theo* opinions
are atteched.
The neereet cese to initiating e ehenee by the Beerd ef ehich I
.eve eaurd, W30 sAso in Chicaeo where the directetee an lesveing of the Boerd's
Intention, ected promptly erioueh se thet en issue wan evaided.
tion te the Chicage rite change bee
In the preeeut instance our
alreedy been explained eve on one pent. After elem er eight
banks had reduced their retell, Gevernor Crienineer teiephened
me that Chiceeo had declined to do so, that the Beard had dieapproved the eentinuence at e per eent, end at A meetine to be
held on TuesdAy, September 6, prepeeed te afkke their rate 6 eit2
per cent. I Gt.tted to him thet I hoped the Beard would not do
ae e I doubted the wisdom yf that course ee well es the Board's
Teeeday morning he 'phened me that the et ard would act
power.
eet morning. I eat:toted that Vt. Mellen was In New Tort end
sleet whetter they ceuld not *tit one day until he reeched
eaehineton, when the full Beard would be evallable. Ee ttaked ma
to got Vr. Mellon *ad eet hie 1,1;61te." This required time te
uptown, which I did, explained the aituation fully to Mr. Mellon
and aseed hie views. Me said he beped the Board eould aeeit tie
return Wednesiley mernino, and he eeuld gee the Governer et ence
4t1 hie Arrival. fben I 'ph,,',nett this to Governor Crisalneer seen
after 12 o'clock (efter 11 terhineten time) en that Tuesday he
Reid that the Beard had already acted, the wire the being or weuld
be sent, end he thought it *euld reed to the difficulty were he to
repert my talk with the Secretary. I did aee him to thine it
over again if not too late.
The Fedor* Feserre Act is lamentably lacking in separating and
defining the reepective powers of the Be..,erd and the Battize.
It souid be
far better, towever, to find mearte tedjuatine different ie
just nes than
to attempt a series of macre:laterite such es mey weil result fres title contro-
versy, or than to attempt arbitrary action thich invites controversy which ia
detrimentel to the ystem.
Xy
on judgment is that the .beard is too detached free the ecenes
of operation and fres operation p-robl set, money mericete and all the cemplezi-
ties af the business to sieiy initiate chenees .4t discount and open market
policy or atterapt their execution.
mere experience.
A nice Names can best be .e,-Aind after
If the ect must be cheneeti - then a United rower to initiate,
- eel upon a speeifted number of lecjerity votee, and only in a. case ett#ire RT3
individual beak is recalcitrant, - might be granted ta43 the Beard.
There ta oie oint upn whicb there east be no misunderatending.
has been too frequently published in recent Chicego preas erticlee to be ignared.
There is rk$ desire end never kca be
Federal
any conscious attempt by the
es.rve 8cneofNew York to dominate the Board or the Syetes. Zie have
jo the peat and altwal in the future, urge views upon our se '--eistee, se eis expect
them to do with us.
It ere .ready to submit our individueI vi ewe to the cuthcrity
of the Bourd *here It .s deer the Be.-..ard has authority, and I know or no caws eeere
Tit have failed to oonfore to 4stem. policies, even when eur individual views wars
contrary to those of the other hearer's Brake.
The pctea eu.eetion is bee
polielee are to be adopted and then x.ecuted.
Cur vievis are clear eeough.
Ilepreseing the problem, in one extreme there- is the choice of cemplete ceetralize*
tiara of power to initiate policy and direct its executien in the ?ederal Beserve
- 20 8z:41rd, - or at the other extreme, cemplete decentralisation, with pewer
ea h bank to conduct its boldness in each di etrict in s wetertight cempartvent, with no Syetem policy!
The
Either would be fatal to the 4.step.
an has graduaiiy evelved, se es te eecape either dener, of
arriving at policies by agreement At weetinge of the Governors end Chid fin Sn,
or f Cemeittette of thee end other officers.
is the itie on Open Xereet inveetmeete.
The meet importent cevesitte-e
Thie me:mitts° wes first eppeinted
by the Center -erece of -Geverriere, but in 1423 tbo it..aard rbit1rily, witheut
previeus neties, Meals-eat% the committee, and reappointed the same aen as a
00411flittee wit-
I &rawly the setae functions, but 'with en attempt to subject it
completely to the
control.
That ties
mietake which ceuted mach un-
4111CCOSiary controverey end frictiqw theueh there now exists e much better
Eariatta imderatendtng.
ky ,positi
ch trawl of that czesaittee has ee
te everyone necessary, as the Use yort bank, in the principal money, security
and foreieel exchenge *erect, must execute most of the areere.
Tbe alternative here atein Is ton the flee 'fork bans. to ignore the
other he rye bank e, develop end execute its own policy, or eubject itecif
*acme eupervision &rid enjoy with other teierve Beaks teme te..rt of ceoperation
a
yet= p.t an, through committee sup erv sten.
This Latter we hive az-he aa scrupulously ea peeetble.
-ated la-
crulry of ambers Li the ceemittee and of the banks notrepresented on the oam-
mittee convinces us that they mre eatiefied and eppreve net only the plea but
the way the hew Tr ic b
execute the cremittee
wishes end directiens.
ThiztA centrittee now tee supervision of (a)
All open market purchetee :End eta *IS of ekvernment securities,.
save strictly iratter-di atria t rev sections, with stember beaks.
(nut even transactions arith members, the Federal emeerveBanis-,
of Woe "fork voluntarily makes a iart of the cemmittee ccount).
-21
urcheoes and seats of bills.
(b)
AII
(0)
The distribution of these to investments between the eserve
Banks.
Operation of all foreign accounts (bewts c,f issue) which are
ratably divided.
(1)
All intents for fOreicn account.
cc
reti transact4Qns, such as tte credIts to toe
Black ef Baajand, Harfa. of BeleAum, and Barp
fPulend.
All gzJid transactions sbr17,ad.
(k)
And ad a &atter of courtesy, aad because aankee i4 the New
Tort rate :If ,Iso,744it yk,..babIy have u.ire affect upo;) otner
diatricta than their chsneas have ift New T7,m, we have never,
1-te cznititta ca.111 intc axletenca rads b_ chtnro kt
rate ithvut first emeultin# the cJasittee either at a
meettng, cr by latter, or by teielencAs.
f.$
lo
faa--biyr-itsa.:34,TriN
evtivi,settiainitJthl autatiasoirai oila /4.444 -7. ,216001110"b atit;
14 IQ
tkik
Atiosa
2
Its 110,#$Rrzetri-4
.tos b
kb 040.ta
tautoub G:ibletait A adaemitievat .4A
-
a4two 1.-fritt
.bro
sbrfa
isktal !Ito
leler 4.4 lag, .11,A
'met& 1:34taigag io *pa
4:tiaaviirk.*
I
ttexeisivr$ blavi *if=
,baiAdet
444 4,e
-ttoft-fli.
0,b,004 4,444 off
;
4
asasoe-ci
$1.3.
tom
flog ti,t orti
iesigf 436 is, coal-
1;;4;- 14:4) wet -o4 4/71
Ist4tts* 4 as b-7
iu4it uitg
lk<1
*ks",t...t
df-111 41J-:44,1 to 'DOI
1_7
tinZStiois
(
(I)
COPY
FEDERAL RESERVE BOARD
WASHINGTON
March 4, 1920
Subject:
Recommendations covering changes
in discount rates.
Dear Sir:
Since the Board no longer considers recommendations
for changes in discount rates at Federal Reserve Banks upon a
stated day each week, and is at all times prepared to consider
such recommendations in its regular meetings, it is requested
that the practice be discontinued of sending to the Board each
Wednesday a code telegram submitting your recommendations regarding discount rates in your district.
The instructions regarding reports to the Board each
Wednesday with respect to discount rates, contained in the
Board's letters of December 14, 1918, and August 7, 1919, (X-1507,
"Rates of Discount", and X-1646, "Additional Code Word for use
in Discount Rate Telegrams") are accordingly revoked, and hereafter, the Federal Reserve Banks will advise the Board only when
submitting recommendations for changes in the prevailing discount
rates for the review and determination of the Board. When
recommendations are forwarded by wire, the code suggested in the
Board's letter of December 14, 1918 (X-1307) should be used.
Very truly yours,
W. T. Chapman
Secretary.
Mr. Pierre Jay,
Chairman, Federal Reserve Bank,
New York, N. Y.
COPY
February 2, 1920.
Dear Governor Harding:
At the last meeting
of our directors the proceedings in regard to
the estatdishment of the rates of discount which were announced by this bank
on January 22 were
reviewed and considered, particularly with respect to the
new minimum rate of 5 IA% for the purchase of acceptances in the open market,
which was fixed by the Board not only without recommendation from or consultation with our directors or officers, but as far as our officers can remember
we had had no previous intimation from the Board that it felt our buying rate
was too low.
The discount market which centers in New York City is a delicate
affair, the resultant of adverse interests and made
up of many elements, in-
cluding national and state banks, private bankers, branches of foreign banks,
discount houses and bill dealers.
while it must necessarily fluctuate
Stability is one of its essentials and,
with
the demand for money, yet it is
important that such fluctuations should be reasonably gradual.
***.it-X-ire***441-31-**-11,X-
**************
;;,..,-*4.1.1-71-*****:14*34-11-****-A-4431,1*-1-11*****ii-*****31-*-1441-****11.***3
Our directors, accordingly, ask Me to request the Board
he minimum buying rate
to reduce
to 5% in order that there may be an element of flexi-
bility available should it be consideredadvisable, from time to time, to
buy very short prime import bills at somewhat less than 5
1/0.
In sending the Board this request our directors have asked me to
express to you their unanimous feeling that whatever may be the legal powers
of the board in respect of fixing rates, it is desirable, if the interest and
services of responsible directors are to be retained, that there should be a
continuance of the practice heretofore followed of arriving at discount rates
by cooperation between the bank and the Board which
seems to them to be the
procedure indicated by the wording as well as the spirit of the law.
Hon,NeP.G.Harding,
http://fraser.stlouisfed.org/
Governor,
Federal Reserve Bank of St. Louis Federal Reserve
Very truly yours,
Pierre Jay
Board,
Chairman.
FEDERAL RESERVE BOARD
WANHINGTai
X-1307
December 14, 1918
SUBJECT:
Rates of Discount.
Dear Sirs
You have been reporting to the Bocrd reekly, on form No. X-877,
rates of discount prevailing in your district and your recommendations
as to what changes, if any, should be made. As you know, the Board
requested that in order to have all reports eoncidered at the Board
meeting on Thursday, your report be in its hands each Wednesday, and
carry your recommendations of rates for the succeeding week.
The Board has decided to discontinue the use of these mail
reports, and requests that reconmendations of changes be sent in by
telegraph on each Wednesday. If it is desired to continue in effect
prevailing rates, a telegram to that effect should be sent, so that
the rate situation in your district may be before the Board constantly.
In telegraphing changes recommended, kindly identify the various classes
by the code words shown in form Y.,877, as fellows:
Open
DISCOUN TS
; DAIS
:Within
DEMJ
DOOR
:DUAL
:
Trade
:
:Acceptances:
Market
Purchases.
DOVE
DRUM: DALE
:Secured by US:
:16 to:61 to:Agri- :certificates :1 to :61 to:
Maturities t15 days :60 :90 :culturtof indebtedness
tinclud- :days :days :al and:or LibcrLy Loan
:ing
in
:
:stock :Within 15:
:member saive
:sive :paper :days in- 16
;banks' t
days
lover :eluding to :
:collet90 :
:90
:member
seral
t
:days :banks! days:
:notes a
4
:collator- in:al notes
60
:
90
daystinclu:
Al].
maturities
in- : sive:
clu-:
sive:
1
emu
Kindly acknowledge receipt.
Respectfully,
Harding
The Chairman,
Federal Reserve Bank,
New York, N. Y.
Governor
1-877
COPY
To be forwarded to reach the
Yederal Reserve Board not later
than Thursday a.m. each week.
Date
New York, N. Y., December 11, 1918
Federal Reserve Board,
Washington, D. C.
Sirs:
have the honor to forward the recommendation that no change be made in the
existiag discount rates for the vote of our directors, for the week ending Thursday,
December 19, 1918.
(signed) R. M. Gidney
Asst. Feeeral Reserve Agent and
Cheirmen
of the Beard
nave tee honor to request that the following rates be approved by the
Federal Reserve Board for the Federal Reserve Bank of
to become effective Friday morning
191
DISCOUNTS
OPEN
CODE WO#DS g
DAIS
:
DEAN
DINE
DOOR
DUAL
DRUM
DALE
Secured by U.S.
61 to Agrieu1- certificates of
: Within : 16 to
indebtedness or
Maturities : 15 days : 60 days 90 days tural
and
live
Liberty Loan
inclusinclue: ineludin
lye
ive
stock
ponds
ing
paper Within 15:
: member :
days
banks'
t collet- g
s
eral
: notes
Over
days in- :
16
90
eluding
:
days
member
t 90
:days
banks'
to
collater-anclueal notes : ive
and so forth
DYhE
MARKET
PUB-
1 to
61 to CHASES
03 days 90 days
inelus- inclusive
lye
FEDERAL RESERVE BOARD
WASHINGTON
December 6, 1917.
Dear Sir:
Inclosed herewith is a table showing the discount rates which have
been approved by the Federal Reserve Board as of December 4th. This
table Shows the changes which were made by all the Federal Reserve Banks
at the suggestion of the Board, except in the case of the Federal Reserve
Bank of New York, which, because of conditions of a local character, has
asked that action be deferred until December 15th.
The table will show greater uniformity in the rates established
by the eleven banks which have acted than has existed heretofore. It
has been the desire of the Board to eimplify the rate schedule and the
means of acting upon changes in rates. There are only two schedules
for fifteen day paper, one for commercial paper and collateral notes secured by commercial paper, (including commodity paper and trade acceptances) and the other for collateral notes and customers i paper secured
by Government securities. Heretofore there were four rates, as some
banks charged a different rate for a note secured by commercial paper
than for fifteen day commercial paper discounted, and some had a rate
one-half per cent higher for member banks' customers' notes secured by
Government securities than for a collateral note secured in the same way.
Some banks had a special quotation for the fifteen day trade acceptances.
In telegrams which were exchanged between the Board and the
banks some confusion has arisen because of difficulty in describing the
character or maturity of the paper to which the rate referred. In
order to avoid this in the future there has been inserted in the table
a code eord at the head of each classification of paper, and hereafter
in telegraphic corresliondeace reeardine rates these code words will be
used. In additional code word has been inserted for bankers 1 accept-
ances, and two additional code words appear for commodity paper having
from 16 to 60 days and from 6l to 90 days to run, for use by such banks
as still maintain a quotation for this kind of paper, although for the
time being the rates are the same as on ordinary commercial paper. The
fifteen day rate for commodity paper shall remain merged with the
fifteen day rate for commercial paper, even though a special rate folonger time commodity paper be reestablished later on.
2
It should be understood that fifteen day trade acceptances
will be taken under whichever classification may be the lower.
To
illustrate, one of the banks has a trade acceptance rate of 5% for
I to 60 days and a fifteen day commercial paper rate of 4%. Fifteen
day trade acceptances will according be taken by that bank at 5e.
At another bank the rate is 51% for trade acceptances from 1 to 60
days and 3% for fifteen day commercial paper. In that case the trade
acceptance would be taken at the commercial paper rate of 5%. The
Board is of the opinion that when commercial paper or trade acceptances
have run down to fifteen days, the difference in classification is not
of sufficient impottance to warrant a special quotation.
Very truly yours,
Governor.
C0PT
FEDUAL eEBERVE BOARD
WAaiINCTON
January 27, 1915,
4y deer 6Overnor Stron:
I have your letter of January twenty-sixth inclosing clipping from the
Anneliet end copies of telegreme concerning cheNcee in discount raters sent to you
free time to time by our Becreteryte office with the Boerdle approval.
I we eorry to have the Governors raise this queetion of interpretation
of the law Lad thought that the Board tad me its point of view entirely clear.
Inasmuch, however, as yeu revert to this matter, I think it necessary to stete
that since the conference with the Governors the Board has fully discuesed the
question raised by you on their behalf and I repeat to yuu that Was steted at
the meeting, and in doing so am voicing the opinion of all the members of the
Board.
The riEhte and duties of the Board are fully expreeeed in the lam.
It is our function to review mac determine the rates.
Le mel review and deter-
mine the rtes of the Federel Reserve Banks at eny time, jut 4t much as it is
incumbent upon us, ehen es think it our duty to de SO, to require one Federal
_eaerve Bane to rediacount for another.
To concede that the Board should have
the right only to review rates when Federal heeerve Banks stall indicate their
willingnese to metea chen,e, would not only be abdicating a poor, but would be
neglecting a duty ehich bee clearly been impoeed upon us.
There cannot be any
doubt that it is our function to use our influence in regulating rates to each
en extent as it may be necessary to bring the various Yederal
eserve Bente into
harmonious relation ead cooperation pith each other, end to exerciee such influence
or power in such a way ue may be indicated by the requirements of fkay district,
r the entire country, trld
it
rel ,. ticnship to the world markets.
The Isle
clearly..cOntemplated a. central c:uthority al a meKna of coordlnatinrs the twelve
ban14':Under r. comprehensive policy, and the ..7'06:rti he determined to act upon
Ae you st...ted, you and I ceitainly are not ery far apart in this
ffe
al
have only one thing in mind, end that is to achieve the best
possible results, end I fle convinced tb,3t when once the system will be wall
under w ay ..nd when normal times will be re-aeteblished,the rates will originate
in their natural way in the districts end that noneally the Board's function
will rather be to approve than to indicate rates.
Under no circumstances, however, can the Ebetrd consider for h moment
failing to insist on its leAsal right to suggest chan.f.es in rates or to review
end det-aneine them rhertever this .F)hould be required, for the beet of all.
The :ix/estin is of such lavortance thht I thought that I should,
express myself fully and clearly upon the subject.
Very truly yours,
(el Fell eri) Peul
Benjemin Strong, J r . , Esq.,
Governor, Federal eserve Bank,
New York.
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;41 o'f
CORRESPONDENCE WITH MEMBERS OF COMMITTEE
AND OTHER FEDERAL RESERVE BANKS
RE TRANSACTION IN OPEN MARKET A/C
OPEN MARKET INVESTMENT COMMITTEE
MEETING - MAY 9, 1927
and
MEETING - JULY 27, 1927
CORRESPONDENCE WITH PHILADELPHIA AND CHICAGO FRBANKS
RELATIVE TO LOWERING OF REDISCOUNT RATE
(File copies
F.R.B. New York)
CABLES AND CORRESPONDENCE
wi th
FOREIGN BANKS OF I SaJE RE REDI SCOUNT RATE
SAMPLES OF CORRESPONDENCE WITH OTHER FEDERAL RESERVE BANKS
RELATIVE TO FOREIGN CREDITS.
Correspondence relative to negotiation of and participation in credit extended to National Bank of Belgium.
Correspondence relative to negotiation of and participation in credit extended to Bank Polski.
Correspondence relntive to opening an account with a
foreign correspondent.
*tat-or.)
EXTRACTS FROM ARTICLES OF ASSOCIATION OF
CHICAGO CLEARING HOUSE ASSOCIATION
and
NEW YORK CLEARING HOUSE ASSOCIATION
RELATIVE TO INTEREST ON DEPOSITS.
Article XI Section 3 as amended.
Copy of resolution adopted January 28, 1920
by Chicago Clearing House Association in
regard to payment of interest on bank de-
posits.
CONFERENCE OF GOVERNORS
- January 20 -
a,
1915.
Extract from Minutes of Secretary of Governors
Conference regarding action taken on the
subject of initiation and establishment of
discount rates by Federal reserve banks.
Memorandum of Governor Strong, Chairman of the
Governors Conference, regarding oral report
to Joint Conference.
Extract from stenographic record of Governors
Conference covering that part of discussion
relating to initiation and establishment of
discount rates.
OPINIONS RELATIVE TO RIGHT OF FEDERAL RESERVE BOARD TO
INITIATE CHANGES IN DISCOUNT RATES.
Opinion of John G. Johnson dated
February 16,
3914
Opinion of Alex. C. King, Acting Attorney General 1PP
dated December 9, 1919.
Opinion of White & Case dated February 25, 1920.
da,c \74:
Alt,.
a#
24.
/4r
(/',/ez
644v4
j
COPIES OF CORRESPONDENCE RELATIVE TO PURCHASE
AND SALE OF GOLD AND STERLING EXCHANGE. /
ALO 0-611-4,4,
@FedFRASER