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FEDERAL RESERVE BANK OF CHICAGO
79 WEST MONROE STREET
OFFICERS
JAMES B. Mc OOUGAL GOVERNOR
C. R. Mc KAY DEPUTY GOVERNOR

W. F. Mc LALLEN SECRETARY
B. G. MSCLOUD CAsHIER

DI RECTORS
C. H. BOSWORTH

W. F. MSLALLEN

J. B. FORGAN. CHICAGO ILLINOIS
M. B. H UTCH ISON, oTrumwa.iowA

E.T. M ER EDITH, oEs MOINES.10WA
G.M. R EYN OLD S,CHICAGO,ILLI 5015

E. L. JOHNSON,wATERLOO, IOWA

A. H. VOGE L,MILWAUGEE ,WISCONSIN

CHAIRMAN AND FEDERAL RESERVE AGENT

DEPUTY FEDERAL RESERVE AGENT

H. B. JOY, DETROIT, MICHIGAN

...(1.70°

September 26, 1916.

,

"er
MY dear Governor Strong:

I beg to acknowledge recei7l5t of your letter of
the 23rd instant addressed to Mr. McDougal which will
be referred to him upon his return to the office next
Monday. He is attending the convention of the A.B.A.
at Kansas City.

We regretted very much your absence at the last
meeting at Boston and were unable to bring back any new
Scotch stories.
The collection system is working out all right
and it is a mighty good thing that we were not obliged
to carry the "float", because believe me there is some
It is not at all imaginary as some of our
"float".
friends tried to convince us some time ago.

Hoping that you are receiving the full benefit of
your rest in the mountains, I beg to remain with kindest regards,
Yours sincerely,
r

Deputy Gov e

Benjamin Strong, Esq.,
Estes Park, Colorado.

o

.

Estes Park, Colo.,
September 29th, 1916.
Dear Mr.

'

I am glad to receive yours of the 26th and particularly
to learn that Mr. McDougal decided to go to KaneaS City, after all.
The Federal Reserve System will be represented by about half of the
Governors, two members of the Federal ReeerveBoard and representatives from a number

of the other banks,

While Mr. Warburg, who

has juet been here, is optimistic about what the Convention will
do, I am not at all certain but what the country bankers may succeed
in stirring up trouble.

Would you mind giving me your ideas of how we can reduce
Also, where most of it now originates?

the float?

running between

it has be n

28,000,000 and 4:35,000,000 for some weeks past,

and when one conniders that every dollar of that is a conversion
of our gold reeerve into uncollected checks, the real importance
of the float situation is mede apearent.

Mr. Warburg is ready

to deal with this matter whenever it is put into proper shape.

Do you figure that daily settlements would have any beneficial ef$
fect7
I

am getting along up here but am restless, of course,

.et being away.

With beet regards

to all in the bank, I am,

Sincerely yours,

C. R. MeXay, Esq.,

Deputy Governor, Federal Reserve Bank,

Chicago, Ill.


http://fraser.stlouisfed.org/
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Federal Reserve Bank of St. LouisVC1!

FEDERAL RESERVE BANK OF CHICAGO

//kV

79 WEST MONROE STREET
DIRECTORS

OFFICERS

W. F. M LALLE N

C.H. BOSWORTH
JAMES B. Mc DOUGAL GOVERNOR

....i.,..1.41.7.W...aEPuTY GOVERNOR
W. F' McLALLEN SECRETARY
B. G. Mc C LOU 0 CASHIER

CHAIRMAN AND FEDERAL RESERVE AGENT

DEPUTY FEDERAL RESERVE AGENT

E.T. MER EDITH, oEs MOINES,I0WA
G.M.REYNOLDS,CHICAGO,ILLINOIS

J. B. FORGAN, CHICAGO, ILLINOIS
M. B. H UTCH ISON, OTTUMWA:IOWA
E. L. JOHN SON, wATERLOO, 10VvA

A.H.VOGE L,mt LVVAU SEE ,WISCONSIN

H. B. JOY, DETROIT, MICHIGAN

October 3,1916.

Benjamin Strong, Esq.,
Estes Park, Colorado.
Dear Mr. Strong:

di
Af4v

I have your very welcome letter of the 29th ultimo and note
you have" not lost interest in the collection system. My remarks about
the "float" in my letter of the 26th were not intended to convey the impression that the Federal Reserve Banks were carrying. it. The "float"
I referred to was that represented by the uncollected funds Which are
credited to the member banks' accounts but are not subject to immediate withdrawal. The average amount outstanding of such credits here
for the month of August which are not available for reserve to our memIn Spptember it increased to about
ber banks was about $5,000,000.
The amount of "float" we are carrying in our transit ac0,000,000.
count representing checks on non-member banks which cannot be charged
up and which take more than two days to collect in this district amounts
In fact the largest amount of "float" we carry is the
to only 4115,000.
Clearing House checkswhichare received too late for clearings and have
to be held over until the next day. This amounts to about $500,000.
Out of 993 member banks onlyriapiV,180 are short in their reserves and

the aggregate deficiency forhe month of August was 41,200,000, so you
see the amount of "float" we are carrying is not of great consequence
as compared with out member bank deposits of $79,000,000. Of course
there is the amount you refer to due from other Federal Reserve Banks
which is carried for a week pending the weekly settlement and a large
portion of this represents exchange purchased upon which we do carry
the "float", but the amount of exchange we purchase is within our awn
control at least in this district inasmuch as we can sell as well as
buy at the market rate.

I do not feel that it is yet advisable to have settlements
oftener than once a week, but in order that the published statement f
might show a smaller amount due from other Federal Reserve Banks
reports to the settlement fund could be made at the Close of business
Thursdey instead of Wednesday. It might be necessary later on to have 4
a settlement say twice a week, but it would seem to me that it would
be inadvisable to attempt to have daily settlements as the amount of
work it would necessitate and the liability for errors would probably




FEDERAL RESERVE SANK OF CHICAGO

0
B. S.

10-3-16

2.

more than offset the advantage gained.

While on this subject, it occurs to me that you might be interested in knowing how our transactions with your bank are working out
in the Gold Settlement Fund. During the month of September your bank
cleared for us $4,781,000, while we cleared for you $10,758,000, thus
leaving a balance in the Gold Settlement Fund in your favor of
$5,977,000. I might also state that during the last month we ordered shipped
from your bank $2,000,000 in silver certificates and legal tender notes
in small bills, as there was a demand for small currency here from the
Chicago banks. This relieved your bank of $2,000,000 silver certificates
and legals collected from the New York Clearing House.
We feel here that the collection system is working out all right
and that the Gold Settlement Fund is also operating satisfactorily.
Mr. McDougal informs me that he has advised you regarding the
Kansas City Convention. The reports that I have received from bankers
who have attended are to the effect that the addresses by Messrs. Warburg
and Harding were well received and helped materially to create a better
feeling regarding the Federal Reserve Banks. In fact one banker told me
that if Mr. Warburg had given his address the first day that the opposition to the Federal Reserve System which developed the first day or two
of the Convention would not have appeared.

With kindest regards in which
join me, I beg to remain




the other officers of the bank

Yours sincerely,

Depu

overnor.

Estes Park, Colo.,
October 6th, 1916.

Dear Mr. McKay:

Thank you for yours of October 3rd.
realize now thht I misread your letter, but neverthe-

I

less what
justified.

said about tne float which we do carry, I believe is
You will notice that it runs constantly now at about

t30,000,000, and haa greall!, inert-if:odd

since e year ago.

should find the means sore way or other of cuttin; it down.

We

that

portion whichmrises from the purchase or 14ew York excnange is, as
you say, under control but nevertheless takec gold cut of the System and particularly out of the Resery. lank of New York.
The expense of 'a

daily settlement in the Gold

would be corsiddrable and I an not quits yet prepared to aldvocate
thai courso, but it will loc, necessary when our 7ystem gots fully

think we all renli?e in Now York- certainly I
do - that you have cooporated with us like a soldier in this exchane matter. All of these kinks will be worked out in time
end the Governors meetings will be the medium, so I hope they are
not permitted to be discontinued.
ot pact the Kansas City oonvention in much better

into orereion.

I

shape than I had expected.




Oat, 6, 1916.

C. R. McKay, Fog.

ny thanku for your

letter.

If you h;lve time write

mo again, addressing me after the 15th of thiu month at 4100
nontview Boulevard, Denver.

Vith warmest regardu,
SinfLterely yours,

C. R. McKay, Esq.,
Deputy Governor, Federal Reserve Bank,

thicazo, Ill.
BE/Va,




Actated by !flr. tAro.,12; but

,ig:isa in his absence.

N MISC. 33C

FEDF'AL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR
Mr. McDougal

December 21, 1916.

FRC

Mr. McKay

WITH REGARD TO THE FOLLOWING VOTE OF THE TRANSIT MANAGERS' CONFERENCE
WHICH WAS ADOPTED BY THE GOVERNORS' CONFERMICE:

"Voted that it is the sense of this meeting that charges
for transfers be discretionary with and fixed by the
Federal Reserve Bank with which the transaction actually
originates; that the Federal Reserve Bank originating a
wire transfer should notify the other Federal Reserve
Bank interested."

If the action as indicated in this vote should become effective in
the Federal Reserve Banks, wire transfers of funds could be made free of
charge

at

the option of the Federal Reserve Bank with which the transac-

tion originated.

The practice of making wire transfers without charge is not only
Inadvisable but dangerous.

In Chicago there is a firm market for New

York, Philadelphia and Boston exchange.

Within the past year, the rates

have fluctuated from 25¢ per thousand discount to about 5¢ per thousand
premium.

Transactions in the purchase and sale of mail and wire trans-

fers aggregate millions of dollars daily in the Federal Reserve Bank of
Chicago.

All such transactions are made at the market rate for exchange

which is established by the exchange brokers.

The rate for selling wire

transfers to New York, Boston and Philadelphia is 10¢ per $1,000 higher
than the rate for mail transfers inasmuch as two days' time is saved by
making a wire transfer instead of a mail transfer, the 10¢ per
thousand additional charge for a wire transfer representing approximately
2% Interest for two days.



This rate is fixed at 2 % owing to the fact

II MISC. 33C

FEDFPAL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR

t.

FRC

2.

that the eastern banks pay 2 % interest on bank balances.
If charges for wire transfers are not made by the
eastern Federal Reserve Banks, the Chicago banks, instead of purchasing the wire transfers from us, will request their New York correspondents
to make the wire transfers

through

the Federal Reserve Bank of New York

and if no charge is made by the Federal Reserve Bank of New York, the
Federal Reserve Bank of Chicago will be obliged to furnish currency to the
Chicago banks in whatever volume they may require.

Furthermore, this will

force the Federal Reserve Bank of Chicago to receive at par all the New
York exchange the Chicago banks desire to dispose of, whereas the market
for New York exchange at the present time, and since the first part of
this year, has continuously ruled at a discount, the average rate being
about 1.50 per thousand discount.

Mail transfer drafts would not be offered

for sale in the market as they would be available for transfer by wire at
par the day they reached destination.

This bank would then be in the posi-

tion of being obliged to take at par whatever volume of eastern exchange
the Chicago banks desired to dispose of.

The reason that eastern exchange has been at a discount is because
of the large payments that are being made in the East for exports, a large
volume of which originates in Chicago and the West.

Domestic exchange

rates between the West and the East are governed by the balance of trade
in the same manner and for the same reason as the rates for foreign exchange




II

MISC, 33C

FEDFPAL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR
FRC

3.

in normal times.

This bank cannot undertake to make a par market for

eastern exchange, which must normally be at a discount, as long as the
West is a creditor in the trade balances, as it would be a physical impossibility for us to convert into currency the enormous volume of exchange
which is continually accumulating in New York to the credit of the
Chicago banks.

As long as there is a firm market for New York exchange,

these currency shipments are regulated, inasmuch as currency is ordered
from New York by the Chicago banks when the exchange rate goes below 20¢
per thousand discount, as it is then more advantageous to pay the cost of
the currency shipments than to pay the discount in selling the exchange.
On the other hand, when New York exchange goes to a premium of 20¢ or
better, currency moves East.

This bank ordered and received currency shipments from the Federal
Reserve Bank

of New York amounting to $6,000,000. within the last three

months in legal tender notes and silver certificates at a time when the
Federal Reserve Bank of New York had a large supply of legal tender notes
taken in the payment of its creditor balances in the New York Clearing
House.

The legal tender notes we received were immediately turned over

to the Chicago banks for the reason that when a bank sells exchange, it
must have currency.

Furthermore, the currency received was in the form

of small bills for which there was a demand from the country banks.




mmis,33c

140FEDFRAL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR

4.

FRC

This demand could not be filled by the issue of Federal Reserve Notes
for the reason that in most cases money which would count as legal
reserve was required.

The illustration given shows the relation the market rate of exchange bears to the movement of currency which is governed by the same
rule that applies in foreign exchange to gold shipments.
A market for eastern exchange has existed in Chicago for 25 years
to my personal knowledge and we believe that any attempt made to influence
the market rates of exchange by artificial means or any practice not in
accord with the economic law governing exchange is bound to result disastrously.

While it is true that we have a means of effecting transfers through
the Gold Settlement Fund, it should be borne in mind that if wire transfers
are to be made without cost, the Treasury Department will have to carry the
burden of all currency shipments from the East to the West and currency
shipments will only be in one direction as long as present trade conditions
continue, which make the East a continuous debtor to the West.

It is

questionable as to whether the Treasury Department would be willing to
assume the cost of moving this currency West;

therefore, the cost might

ultimately fall on the Federal Reserve Banks.
Regardless of the question as to whether it is possible to effect
wire transfers through the Gold Settlement Fund without cost, it is of
the greatest importance that a protective rate be established in all the



M MISC. 33C

FEDFRAL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR

FRC

5.

Federal Reserve Banks for wire transfers and that the present rates for
wire transfers be continued and made obligatory.
These rates are at present based on the rate of 2% for the time
saved by making a wire transfer as compared with a mail transfer.
As long as we have the protection afforded by a firm market for
eastern exchange, we are able to control our

own situation.

W

a market rate, we would be at the mercy of the local banks and would
have no control over the disposition of our own funds.

--Mtactrercl-herete-are-atatements-ai exchamge- bought. and sold,

in-

eluding wire transfers for four days which are typical of our exchange',
transactions.

You will note that,we deal with non-member banks as well

as member banks and also that we have frequent transactions with other
Federal Reserve Banks.

We buy and sell exchange at the market rate and

-yea-441-1-note-frcnrrthe-aheeta that exchange is sold on the same day at the

same rate as we paid for it.

Occasionally the market fluctuates 5¢ or 10¢

per $1,000 between the morning rate, before clearings, and the afternoon
rate.

Our principal transactions are in New York, Boston, Philadelphia and

St. Louis exchange.

Occasionally we buy exchange on Baltimore,Cleveland,

and Kansas City and are prepared to buy or sell on any of the Federal
Reserve Cities.




The

buying and selling of eastern exchange has been

--:,
..

M MIS, 33C

FEDERAL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR

FRC
6.

rill'
conducted here for a great many years by exchange brokers who receive
a commission of 3¢ per $1,000 from the seller.

Their transactions were

naturally limited to the amount of exchange for sale by the local banks,
and they were frequently unable to supply the exchange needed quickly
enough, nor were they able to sell large quantities of exchange promptly.
Since the Federal Reserve Bank has become a factor in the exchange market,
we have been able to either buy or sell any quantity of exchange that our
member banks may require to meet their needs and are therefore rendering
them better service than could possibly be given by the brokers, besides
saving them the brokers' commission.

A considerable amount of our profit in exchange operations has
been due to the large wire transfers upon which we get approximately two
days' interest at 2% over the market rate.

For wire transfers to New

York, Boston and Philadelphia, we charge 100 per $1,000 above the market
rate for mail transfers.

Before we entered the exchange market, the

price for wire transfers was 250 per thousand above the rate for mail
transfers.

The exchange brokers here are still doing business to some extent and it is through them that the market rates are established.

We

sell a moderate amount through the brokers in order that the rate may be
firmly established and represent actual conditions at all times.

Our member banks are well satisfied with their exchange transactions with us and we also do a large business with some of the nonmember banks.



Inasmuch as they are all free to patronize the brokers,

M MISC. 33C

FEDF'AL RESERVE BANK
OF CHICAGO

MEMORANDUM FOR

FRC

7.

the volume of business which we are now handling would indicate that our
services are more satisfactory not only to our member banks but to nonmember banks as well.

In dealing with the other Federal Reserve Banks,

we also give them the benefit of the market rate and do not make any
profit on such transactions.
In view of the conditions governing the market for exchange, as stated

above, it should be apparent that it is impracticable to maintain a par
rate for telegraphic transfers between Federal Reserve Banks and that
such a practice would be unsound and contrary to established principles
of banking.




FEDERAL RESERVE BANK OF CHICAGO
MEMORANDUM FOR
sir. LIcDougal
F

..)1v1

January 15, 1917.

Mr. McKay

COMMENT ON GOTANOR SAY' d PLAN P)R MAKING DRAFTS ON

FgDERAI RESEir7=7"TIMITITT4MY AVAILABLE FOR RESERVE
IN ALL FED7RAL RESER17. BANK

If this plan were put into operation without restriction as to the amount

for which drafts could be drawn, the large banks could throw the whole burden
of currency shipments upon the Federal Reserve Banks..

as to whether it would be

Aside from the question

sound banking policy for the Federal Reserve

to attempt to 'carry this burden, it is questionable as to

whether

Banks

they could

afford to absorb the expense or be able to handle the volume of currency and
supply all denominations of

bills

required by their members.

The total resources of the Federal Reserve Banks are small when compared,

with the total resources of the member banks to which should be added those

of the nonmember banks

which

in most cases carry accounts with member banks

and depend upon the latter to supply their
It should be

borne in

requirement

for

currency.

mind that domestic trade net balances between the

east and the west and the east and the south and between other districts
If all domestic exchange transactions'

must finally be settled in currency.

were to go through the Federal Reserve Banks, the net trade
still have to be settled in

Drafts

on

balances would

currency.

Federal Reserve Banks

should not

be sent out of the district for

the purpose of effecting transfers of funds. Member banks should

their

Federal Reserve Banks to make such transfers for them.

draft

is issued it should le drawn an

is to be made.




request

If a transfer

a bank in the place where the payment

FORM MISC 33 1500 11-23-16

FEDERAL RESERVE BANK OF CHICAGO
MEMORANDUM FOR

F

DM

2.

One of the vorst evils in connection with country bank business Is the

practice on the part of the country banker of sending for credit to his city
correspondent transfer drafts drawn on other points and then drawing his draft

against the credit thus created.
Coemercial banks in Chicago have been and still are discouraging this
unsound practice.

It is also the cause of most of the overdrafts of member

banks in the Federal Reserve Banks.
3.

the plan proposed would be sent by the banks in

Drafts used under

which deposited to whatever point they desired to accumulate funds or to the
demand.

city whose exchange was in

The Treasury Department was obliged to
of banks located in Sub-Treasury cities.

stop a similar practice on

the part

Payments for 5% redemption fund would

be ordered made in the city Whose exchange was at a discount or in the city
farthest away. As an illustration, Chicago might receive an order from a

Peoria bank to deposit for its account in

the 5%

redemption fund,and, St. Louis

exchange being at a discount, Chicago would request its St. Louis correspondent
to make the deposit. If Now Orleans funds were at a discount in St. Louis, the
request would be relayed to New Orleans and possibly the New Orleans bank might

want to dispose of San

Francisco

funds and relay the

request to San

and so on. There were cases where it took over two weeks for
covered into

the Treasury

Department.

the

Francisco

money to be

If drafts on Federal Reserve Bakke were

He available only at New York and Chicago, there would only be three places
to send them instead of twelve or thirteen if we include the New Orleans




branch.

FORM MISC 33 1500 11-23-16

FEDERAL RESERVE BANK OF CHICAGO
MEMORANDUM FOR
F -DM

3.

4. The subject of wire transfers is referred to in Governor Seay's plan.
although apparently not a part of the plan, on page eleven, third paragraph, it
is proposed that no

charge for

transfers. With regard to this

the transit time saved should be made for wire
question, the views of the writer are given in

another memorandum, the matter having been under

consideration as a separate

topic at the last Governors' Conference.

There is one point, however, in connection with the proposal

transfers free which may

to make wire

not have been made clear at that meeting.

interest charge is imposed by Federal Reserve Ranks on

wire

If no

transfers for the

transit time saved, member banks doing a domestic exchange business will be

enabled to sell mail exchange

short;

covering the sale by purchasing wire

transfers on the day the exchange reaches destination.

It would be easy for a

lar7e member bank to borrow millions of dollars in this manner without payment
of interest.

This practice would be very profitable to banks loonted two days

distant from Kew Yorkiand to banks located four days

tation to indulge in it

would be hard

distant

or more the temp-

to resitt.

In foreign exchange transactions, demand exchange sold is frequently
settled for by cable transfers.

The rate for the latter, however, is always

higher than for demand exchange, the difference representing the interest saved.
The proposal to sell wire transfers free or at the same rate as mail transfore if put into practice would violate one of the oldest and most firmly established principles of banking and one which Is recognized by bankers in all
parts of the world.




FORM MISC 33 1500 11-23-16

FEDERAL RESERVE BANK OF CHICAGO
MEMORANDUM FOR

-JM

4.

It is desirable that a safe method be found which will provide country

banks with a form of exchange to be sold

over the counter to their local cus-

tomers which will be as acceptable as New York or other exchange, so that they
may be relieved of the burden of carrying accounts solely for exchange purposes.
Many of the large banks will, in any event, continue

to

carry acoounts in New

York and other centers.. The plan proposed by Governor Seay, if modified and

prop-

erly safe-guarded, could be made available to such banks as do not starry balances
in banks located outside of their Federal Reserve district and to those which
desire to close such accounts.
o

o

The foregoing objections to the plan would be removed if it were amended
to include the following safe-gut/mita-

Drafts to be made available

as reserve

at Federal Reserve Banks of

New York and Chicago only.

The facilities of drawing drafts which will be
reserve in all Federal Reserve Banks to be extended to
only, excluding all member banks which are

immediately available as

country member banks

required to keep more than 12%

reserve against demand deposits.

NO draft to be drawn for more than $10,000.00.

No draft to be drawn for transfers of funds from one bank to another.
(This does not apply to remittances in payment for checks and collections.)
Drafts to be charged to account of member bank upon receipt. of advice
in all cases except when draft Is presented before advice is received.




4

FORM MISC 33 1500 11-23-16

FEDERAL RESERVE BANK OF CHICAGO
MEMORANDUM FOR

F

DM

5.

in case advice is not forwarded on date draft is drawn, an interest
charge or other penalty should be imposed.

Member banks receiving the drafts on deposit should be obliged to
send them to their own Federal Reserve Bank or direct to the drawee Federal
Reserve Bank for account of their Federal Reserve Bank.




FEDERAL RESERVE BANK OF CHICAGO
79 WEST MONROE STREET
DIRECTORS

OFFICERS
JAMES S. Mc DOUGAL GOVERNOR
C. R. Mc KAY DEPUTY GOVERNOR
W. F. Mc L ALL EN SECRETARY

B.G.MSCLOUID CASHIER

FEB

C. H. BOSWORTH

W. r. MSLALLEN

J. B. FORGAN. CHICAGO. ILLINOIS
M. B. HUTCH ISON, OTTUMWA.10WA
E. L. JOH N SON, WATERLOO, IOWA

1917

E.T. MEREDITH,Es MOI NES.I0 WA
G.M.R EYNOLOS,CHICAGO,ILLINOIS

CHAIRNIANA.F.ERALREsEwEAGENT

DEPUTY FEDERAL RESERVE AGENT

A. H. VOGEL, MiLVVPUSEE.WISCONSIN

N.B. JOY, DETROIT. MICHIGAN

January 30, 1917.
Mr. Benjamin Strong,
4100 Montview Boulevard,
Denver, Colorado.
Dear Governor Strong:

At a committee meeting held in Washington last week, Mr.
Treman handed me a copy of your letter to him regarding Governor Seay's
plan for making drafts on Federal Reserve Banks immediately available
at all other Federal Reserve Banks.
I was very much interest
you had to say in the matter particularly as nearly every point you
make agrees with my own views on the subject.
In view of your interest
In the question, I am taking the liberty of enclosing herein a memorandum which was also presented at the meeting in Washington.
There is another subject which I believe is of even more importance than the matter of making checks on Federal Reserve Banks immediately available as reserve, and that is the question of making
wire transfers free. I am also enclosing another memorandum of mine on
the latter subject.
If you are interested, would be pleased to have your
views regarding free wire transfers. This question has come up again
and there is a possibility that it will be reopened for discussion at
the next Governors' Conference.
There is also one other matter which we feel here should be reconsidered and that is the practice of carrying single accounts with the
other Federal Reserve Banks, which has been in operation since the first
of the year. I expect to prepare a brief on the last subject and if you
feel interested in these Federal Reserve Bank matters shall send you a
copy.

Green

We had the pleasure of a short visit from Mr. Curtis and Mr.
Saturday and hope they are enjoying Colorado.
With best wishes and warmest regards,

Yours sincerely,

.744'rer"''''utty

Enclosures (2)



or.

FEDERAL RESERVE BANK OF CHICAGO
79 WEST MONROE STREET
OFFICERS
JAMES B. Me. DOUGAL GOVERNOR
C. R. Me. KAY DEPUTY GOVERNOR

VV. F. McLAL LEN SECRETARY
B. G. MSCLOU ID CASHIER

DIRECTORS
C. H. BOSWORTH
CHAIRMAN AND FEDERAL. RESERVE AGENT

J.B.FORGAN, CHICAGO, ILLINOIS
M. B. HUTCH ISOM, OTTU lAWATOWA
E. L. JOHN SON. WET ER LOO, IOWA

W. r. Me LA LLE N

DEPUTY FEDERAL RESERVE AGENT

E.T.MEREDITH,oEs MOINES.10WA
G.M.R EYNOLDS.cHicAGo.ILLNois
A. H. VOGEL , MILWAIJ H EE ,WISCONSIN

N.B. JOY, DETROIT, MICHIGAN

February 6, 1917.

Mr. Benjamin Strong,
4100 Montvi ew Boulevard,
Denver, Colorado.
Dear Governor Strong:
I.
your letters of the first and second instant.
In regard to the question of free telegraphic transfers, the only
banks which voted against it at the last Conference were Minneapolis
and Chicago. It is expected, however, that this matter will be reopened at the next Governors' Conference, inasmuch as some of the
banks would like to reconsider their action.

With reference to Governor Seay's plan, it was modified
by the committee and now stands as follows:-




I

That the privilege of drawing 'Federal Reserve Exchange'
drafts should be limited to the country banks, or in other
words, to those banks carrying a 12% reserve.
That the drafts should be limited, as to the amount
drawn in any one day by a member bank, to $10,000.
That the drafts should be drawn by member banks upon
their own Federal Reserve Bank and made receivable for
immediate availability at par at any one Federal Reserve
Bank specified in the draft.
That a special uniform form of draft be adopted by all
the Federal Reserve Banks, such drafts when drawn upon this
form to be the only ones which are receivable for immediate
credit at par.
That the drawing bank be required to give immediate
advice to its Federal Reserve Bank of all 'Federal Reserve
Exchange' drafts drawn, and that such drafts be immediately
charged to the member bank's account on receipt of advice.

That this plan become operative when the final transfer
of reserves has become effective, and be made available to
such member banks as may agree to terms formulated by the
Federal Reserve Bank."

,ESERVE BANK OF CHICAGO




B. S.

2-6-17

2.

If the limit of $10,000 is not increased, and the
privilege of drawing Federal Reserve Exchange drafts is confined to country banks, the volume may not be great enough
to seriously inconvenience the Federal Reserve Banks although
it is my personal belief that the principle of the thing is
If drafts on Federal Reserve Banks are to be
not sound.
made available in other places, they should be actually
paid at the place where presented.

With kindest regards, in which Mr. McDougal joins
me most heartily,

Yours very truly,
--,/

OAtAiL)r4.
Deputy Go

or.




Denver, Colorado,

February 2, 1917.

Dear Mr. McKay:

I have just finished reading the oneitch came with

yours of

the 50th.

seem to be in

parring checks and free telegraphic

let° agreem

fers.

Can y

, both as to

xplain to

me Why,When New York, Chicago and Boston were all oppo

d to these

developments that they are no

sed upon us?

I regard them as dangerou
put into effect.

Thank you for endi

C. R. McKay, Esq.,
Fedezp.l Reserve Bask,

Chie., 111.

tha

they will not be




Denver, Colorado,

March 31, 1917.
PERSONAL.

Dear Mr. McKay:
Votat can you tell me about Mr. R. S. Hecht, formerly of the

First National Rank of Chicago and now of

the Hibernia in New Orleans?

I would like to know in What line he has been

particularly trained,

how good he is as a banker, his personal qualifications, whether of

agreeable personality,

Whether he is a college man or not and

Whether

he is a man of refinement, etc.

)

Anything you can let

me have will be of vd ue
NCs,

to me and will be

treated in strict confidence.

Hoping that you all keep well and with bost regards,
Sincerely yours,

N,
Nks

C. R. McKay,

Federaneserve Bank,

Chicago, 111.

BS/CC




FEDERAL RESERVE BANK OF CHICAGO
79 WEST MON ROE STREET
DIRECTORS

OFFICERS

W. F. MC LALLEN

W.A. HEATH
JAM ES B. MCDOUGAL GOVERNOR
DEPUTY GOVERNOR
C. R.

W.F. M . ALLEN SECRETARY
B.G. MCCLOUD CASHIER
S. B. CRAM ER ASST. CASHIER

CHAIRMAN AND FEDERAL RESERVE AGENT

J.W. BLODGETT GRAND RAPIDS. WM
J. B. FOR GAN CHICAGO., LLINOIS
M.B. HUTCH ISO N OTTUMWA IOWA

DEPUTY FEDERAL RESERVE AGENT

E.L.JOHNSON WATERLOO. IOWA
E.T. MEREDITH DES MOINES.10WA
G.M. REYNOLDS CH ICAGO.ILLINOIS

4. H. VOG E L UILWALIHEE.WISCONSIN

PERSONAL
April 2, 1917.

APR 2 1917
Mr. Benjamin Strong,
4100 Montview Boulevard,
Denver, Colorado.
My dear Mr. Strong:
I have your inquiry of the 31st ultimo regarding Mr.
R. S. Hecht of the Hibernia Bank and Trust Company, New Orleans. Mr.
Hecht at one time was connected with the Commercial National Bank of
this city before it was consolidated with the ContinentalNational Bank.
He occupied a clerical position in the Foreign Exchange Department. He
has not been in the employ of the First National Bank of Chicago.
I have known him for several years and have a good
opinion of him as a banker. Do not know whether he is a college graduate or not. He has a pleasing personality and I believe him to be a
I understand that for the last two
man of education and refinement.
years he has handled the trust business for his bank and previous to
my impression
that time had been in. the Foreign Exchange Department.
of Mr. Hecht is that he is a man of good ability and that he is energetic and progressive.
If you are in need of a man to take care of the foreign
exchange business in the Federal Reserve Bank of New York, it occurs to
me to mention Mr. John J. Arnold, one of the Vice-Presidents of the
First National Bank of Chicago, who has charge of their foreign exchange
business. The reason I mention his name is that about two years ago
he advised me that he was much interested in the development of the
Federal Reserve System and as to what the policy of the banks would be
in regard to their foreign exchange operations. He is very comfortably
situated where he is, but I believe would be open to an offer if the
j)b were big enough to make it worth his While to consider it.
have known Mr. Arnold for over twenty years and believe
him fully qualified to fill any position connected with foreign exchange.
He has had a broad experience, has a large acquaintance and besides
knowing his business has exceptional talents in public speaking. He Ts
also well posted on banking conditions in South America and has been
Chairman of the Foreign Trade Division of the Association of ComElerce
The First National
which is a very large and active association.
Bank,as you know, have graduated some excellent foreign exchange men and
if Mr. Arnold is as good as the others he should be worthy of consideration.

iRAL RESERVE BANK OF CHICAGO




B. S.

2.

4-2-17

I have taken the liberty of suggesting his name if
you are in need of a man to handle the foreign exchange business
for the Me?! York bank.

I am enclosing a copy of a letter written by Mr.
McDougal several days ago regarding Mr. Hecht in reply to an inquiry
from Mr. Treman. Mr. McDougal left today to attend the Governors'
Conference in lashington on the fourth instant.

Hoping that everything is going well with you and
with warm personal regards, I beg to remain

Yours very truly,

Enclosure




Denver, Colorado,

April 4, 1917.

Dear Mr. McKay:

Thank you heartily for yours of April 2nd about Mr. Hecht, which
answers my inquiry very fully.

I am also grateful for what you say about Ur. Arnold and will

take steps to develop this matter a little later. Ueantime please
hold the whole subjoct in confidence.
Very sincerely yours,

C. R. Mqay, Esq.,

Deputy Covornor, Pederal Reserve Bank of Chicago,

Chicago, Ill.




FEDERAL RESERVE BANK OF CHICAGO
79 WEST MON ROE STREET
DIRECTORS

OFFICERS

W. F. MF LALLEN

W.A. HEATH
JAM ES B. MCDOUGAL GOVERNOR
C. R. MFKAY DEPUTY GOVERNOR

CHAIRMAN AND FEDERAL RESERVE AGENT

J. W. BLODGETT GRAND RAPIDS. MICH.
J. B. FORGAN CHICAGO. ILLINOIS
M.S. HUTCH SON OTTUMWA IOWA

W.F. Mg LALLEN SECRETARY
B. G. MCCLOUD CASHIER
S. B. CRAM ER ASST CASHIER

DEPUTY FEDERAL RESERVE AGENT

E. L....JOHNSON WATERLOO. IOWA

E .T. MEREDITH DES MOINES.IOWA

A.H.VOG EL MILWAUKEE .WISCONSIN

auft.

April 9, 1917.

APR1 7 191/
Mr. Benjamin Strong,
.4100 Montview Blvd.,

Denver, Colorado
Lly dear Mr. Strong:

have your letter of the 4th instant and assure
you the matter referred to therein will be held in confidence.
There is another name which I should like to suggest; that is, Mr. H. CI. P. Deans, a Vice-President of the
Merchants Loan and Trust Company and Manager of their Foreign
Exchange Department. 7r. Deans is regarded very highly here as
an expert in his line and has not only had experience here but
in England. Although I have neverhEardhim express any desire
to make a change, I feel that he would consider any proposition
that was worth while.

-0Mr. Warburg gave an excellent address here Saturday
The result, I am sure, will
night before the Commercial Club.
be highly beneficial to this bank and the Federal Reserve
System. His message was particularly well received by the
prominent State Bankers of the city and we confidently expect
some of the important ones to become members of this bank in
the near future.
With best wishes,

Yours very sincerely,

c_

Denver, Colorado,

April 17, 1917.
PERSONAL.

Dear Mr. McKay:

Many thanks for yours of the 9th. Mr. Deans, confidentially,

was considered for the position over a year ago and declined.

f

am

sorry that he did for I believe he is an excellent man and would fill
the position.
am glad Mr. Warburg's speech took so well.
k

Very sincerely yours,
\\>%:.

C. R. McEay, Esq.,

Federal Serve Bank,
Chicago, Ill.




.421.

Misc. 24. 1

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40 M 6-25

FEDERAL RESERVE BANK
OF NEW YORK

1)1.,

SENT BY

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SEND TO FILES
.1'

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COPY OF TELEG,..13AM

05

c4i4+5AL

OF NEW
McKay

Novmober 01, 1.025.

Chict;ge

trfinclit r1i1n, o Dr. Salcht at Blawatons iiot61
"Kauffmnn dn,.htet (ect; letzt6n6 untr. viden katrA;elft nur drei

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r1 iiii1imn dcti.r autnburz eine
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Dolrar Nucrn------------------.-- lionm Dollar Itfifia5a atop 3,m4hmigung

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ElectrizitaeLsAniethe Ferlin bevorstehend ct Elaatrogo eri:19.crtta komp. class

Verorgung Industrie aonst, gefsehrdtt wtore.

WP/TiAliti"

CAA

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178

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.SERVE BANK

(SEND TO FILES)

Sent by

JV YORK

COPY OF TELEGRAM
1/8/20 -

GB

Jan. 8, 19P0
Cramer

F. R. BIC of ChicILso

J. you pleare -get in touch with Mr. St,rong ktt the Blackptone and tell
hi w th-at Lord Gualifte former Govarnor of the Rani;: of England, died Wday.

I anal). greatly,apprecite your courtocy.




Beyer

Secretary to Mr. Strong




Sent by

V YORK

(SEND TO FILES)

COPY OF TELEGRAM
1/6/20

CB

Jan. 5, 1920
Cramer,

Federal Reserve Bank, Chiego.,

Will you have transportation an deliver the following message to Mr. Strong
before he leaves Chiasego this evening:
"London, Jan. 6,i920.

We grieve to eay Cunliffe died last night.
Beyer,

.

Cokayne and Norman"

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