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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

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

5

+ 34

-

6

-

7

-

- 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

+

0

0

- 17
+

+ 29
3
1

- 20
2

-

5
2

+ 40
13

.+

0

+

1

+

+

1

1

4

16
22
20
25
27
20
25
22
20
21
23
23

-

8

6

- 15
6

.;.-

7

+ 88

6

11
9

-

7

-

7

-

7

+109
- 88
+ 31
+ 50
- 48
- 65

-

1

6

(IMP.,EXP..
MARKING

1,002
994
988
973
962
1,050
1,041
,150
1,062
1,093
1,143
1,095
i3O30

- 65

-

NET

GAINovLOS

END oFPE RI OD

CHANGE

-

-

+

10
- 17
+ 36

2

RE5.
0/

/°

RES. RES.

NET

- 14

- 20
- 29
- 14

6

+

+

CERT.

-

-

-

muT.GoLD

CERT&COIN

GOLD

TREAS. NET:4-tC* EARMARYIMPAIS SHIPPED FUND
PAyt-IN1! -I NG
2."0015T.

F. R.

+

+

TOTAL
NEL_
EXPORTS

TRANSFERS

OF

TOTAL TOTAL

1,028
1,019
1,011
6
997

984
1,082
6
1,073
1,181
6
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




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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
&mount

For

Own

out-of
tom

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

Far
1927

July
Aug.

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




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
t a 0,000,00O were purch4:a*xt.

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

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).

wishes e

-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

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
Federal Reserve Bank of St. Louis

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
inclue- inclus- and live Liberty Loan
: 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

1 to

PUB-

61 to CHASES
03 days 90 days

inelus- inclusive

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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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,

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