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M ISCL. 14.

2CM-10I25

FEDERAL RESERVE BANK
OF DALLAS

NOV. 21, 1914.

BULLETIN #2.
TO THE M BER BANK ADDRESSED:
EM
The o f f ic e r s and s t a f f o f employees o f the Federal Reserve Bank
o f D allas have been engaged since the organ ization in r e c e iv in g , counting,
c la s s ify in g and s to rin g the monies that have been sent in to the bank in pay­
ment o f allotm ents o f c a p ita l stock to member banks, and that proportion o f
th e ir reserves which co n stitu tes the i n i t i a l requirements under the Federal
Reserve A ct.
The bank has now reached the p oin t o f engaging in other func­
tio n s, c h ie f among them being the handling, in a lim ite d way, o f tra n s it
items and the rediscounting o f commercial paper. Already a few rediscounts
have been accepted and the proceeds placed to the c r e d it o f the applying
bank. The c h ie f problem before, us is the form ation o f a d is t r ib u t iv e p o lic y
in the ex ercise o f our lending power, without a d e fin it e knowledge as to the
extent o f the demand that may be made upon us to meet the requirements o f
our d i s t r i c t * in the use o f the rediscount machinery o f the bank. We there­
fo r e must develop th is fu n ction somewhat g ra d u a lly , and must crave the in ­
dulgence o f our member banks in that regard, reminding them that the c o l­
le c t io n o f funds in payment o f the c a p ita l stock is , in the operation o f the
law, spread over a p eriod o f time, w h ile the tra n s fe r o f the d eposits in the
form o f reserve is to come to us during a period o f three years*
We are anxious to g iv e each applying member some lin e o f
c r e d it , and a fte r' enough time has elapsed to r e c e iv e the a p p lica tio n s fo r
rediscounting from member banks during the f i r s t few days, we can then
determine something o f the natural demand and perhaps can o f f e r to e a rly ap­
p lic a n ts fu rth er accommodations. The ra te o f discount in th is d i s t r i c t at
the present time is 6% upon paper maturing w ith in t h ir t y days, and & - fo r
J
longer m aturities.*
Several in q u irie s have reached us as to the character o f paper
which is e l i g i b l e fo r red iscou n t. In response to these, we would c a l l the
a tte n tio n o f member banks to C ircu la r No. IS , issued by the Federal Reserve
Board at Washington, which, together w ith the s e vera l regu la tion s accompany­
ing i t , contains f u l l inform ation on th is s u b je c t.
I t is p o s s ib ly riot amiss fo r us to say that during the e a r ly
operations o f the bank, i t is p a r tic u la r ly d es ira b le to re c e iv e from member
banks the most liq u id , short time paper which may be a v a ila b le in making ap­
p lic a tio n s fo r rediscou nts, and such paper as w i l l meet the requirements o f the
language o f the Federal Reserve A c t, a r is in g from actu al commercial transac­
tio n s , proceeds o f which have been used fo r a g r ic u ltu r a l, commercial or indus­
t r i a l purposes. As the law c le a r ly in d ic a te s , we a re.n o t a t lib e r t y to
take such paper as represents fix e d investments in lan ds, p la n ts, machinery 1
e t c . , nor that which msy have been given fo r the ca rryin g o f stock or bonds,
o r, in any way, can be con stru ed ,las having been made fo r sp ecu la tive pur­
poses •

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

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■blank forms to be used. One o f ttese is an ’’A u th ority to Rediscount” , which
must be passed by the Board o f D irectors o f the applying bank* The A p p li­
ca tio n fo r rediscount i t s e l f w ill contain the statement upon the part o f
the o f f i c e r o f the bank, that to the best o f his knowledge and b e l i e f , the
paper submitted is e l i g i b l e under the requirements* A l l paper should be
endorsed by member banks, em ploying ink in a f f i x i n g the authorized signature
o f the endorsing o f f i c e r , and such endorsement should waive demand, n otice
or p r o te s t. We s h a ll p a r tic u la r ly appreciate f u l l inform ation condernin g the fin a n c ia l and moral stren gth o f the makers o f a l l paper that may
be o ffe r e d fo r rediscount*
In the beginning o f c le a r in g fu n ction s, we sh all confine our opera­
tion s to the handling o f items fo r c r e d it , drawn by member banks on th is bank,
or upon member banks in the severa l reserve c i t i e s in our d i s t r i c t , o f which
there are s ix : D a lla s, F ort Worth, Galveston, Houston, San Antonio and Waco*
This fu n ction we sh a ll undertake on next Monday, and the member banks in the
reserve c i t i e s are requested to bear in mind th a t, in order to maintain
th e ir reserve requirem ents, they should a n tic ip a te , as n ea rly as p o s s ib le ,
the exten t o f the sendings which th is bank is charging against t h e ir r e ­
sp ective accounts, that we may be given the best opportunity fo r a s a t is ­
fa c to r y handling o f the volume which may cone to us through th is function*.
We must ask our member banks to use our f a c i l i t i e s , as fa r as p r a c t ic a l, in
the normal way, g iv in g checks against proceeds a r is in g from a l l c r e d its in
such a manner as to la r g e ly confine the c ir c u la tio n o f them to our own
D is t r ic t *
We s h a ll undertake to keep our member banks r e g u la r ly informed, and
to answer separate in q u irie s as promptly as our lim ite d f a c i l i t i e s w i l l
perm it*
Our Tran sit Department is desirous that the member banks be in ­
formed as fo llo w s :
D a ily tra n s c rip ts w i l l cover advices fo r cash l e t t e r s , while
sp ecia l advices w i l l be sent fo r other c r e d its .
Monthly statement w i l l not be fu rnished, as d a ily tra n s c rip ts
cover a l l e n trie s * These should be checked upon day, o f r e c e ip t and ex­
ceptions rep orted at once*
Cash le t t e r s forwarded to member banks w i l l be charged on date
dispatched.
I t w i l l f a c i l i t a t e our work i f D allas items be l i s t e d on separate
l e t t e r s from m iscellaneous items on other reserve c i t i e s .
Work can be handled more r e a d ily i f
ed endorsement stamps.

the banks w i l l employ number­

We are e n clo sin g h erein f o r your inform ation R egu lation #7, issued
over the signature o f the Governor o f the Federal Reserve Board*
Very r e s p e c tfu lly ,

Oscar W ells,

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