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Circular No. 9
Series of 1921

February 15, 1921.

Our Board of Directors, at the meeting held on February 7th, after full consideration, abolished
the progressive rates of discount heretofore established and in force in this bank. At the same time
a rate of six per cent per annum on all paper secured by Government obligations, and a rate of
seven per cent per annum on all other paper rediscounted by us, was established, effective Feb. 15.
The rates of discount in this bank have, for almost a year, been substantially lower than those
in force at the Federal Reserve Banks at the great financial centers in New York, Chicago and
Boston. In view of conditions in this district we have, during the ordinary seasons of production
and liquidation of the year just past, been reluctant to advance our rates of discount, though we
have for many months been paying to other Federal Reserve Banks interest at the rate of seven
per cent on many millions of dollars, which we have advanced to our own banks at six per cent
and less. With the opening of the new crop season we all deemed it a matter of simple justice to
let our member banks know what our rate was to be. It should not be necessary and we hope that
this increase of rates by us will not result in any increases in rates by the banks to their customers.
After full discussion it was determined to establish the rates above named, in line with the
rates prevailing in the commercial centers. It is hoped that it will not be necessary to re-establish
and put in force the progressive rates heretofore existing. However, if any considerable number of
banks seek to impose undue lines of rediscounts upon us, it may become necessary to do so.
Again, the slightest reflection must convince all banks of the necessity of wisely husbanding
their resources and extending loans only for productive purposes and in such amounts only as a
prudent regard for their own resources and the indispensable needs of their customers would
suggest and permit.
It has always been the sincere wish and purpose of the Federal Reserve Bank of Dallas to
be of real service in promoting the welfare and fostering the interests of banks and business inter­
ests, including live stock and agriculture, of this district. To do this we should have the co-opera­
tion and support of our member bank in limiting credit to the absolute needs of production and
distribution. It is believed that with such co-operation and the practice of intelligent, if severe
economy, that sufficient credit will be available for all legitimate business.
Finally, we beg to remind our member banks that there are many sources of liquidation yet
to be availed of in practically every part of the district. It is of the highest importance that all
available sources of liquidation be realized on and that as rapidly as practicable the products of the
farm, ranch and shop be converted into money. If a wise policy along these lines is pursued the
situation will be immensely strengthened and improved.

Chairman, Board of Directors,
Eleventh Federal Reserve District.

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