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♦COPY CIRCULAR NO. 8 Series of 1925 FEDERAL RESERVE BAN O DALLAS K F D allas, Texas, December 28, 1925 CLASSIFICATION OF DEPOSITS O INDIAN FU D F NS To the Member Bank Addressed: For the information o f those o f our member banks which are, or may be come, depositaries o f Indian funds, I am quoting below Order No. 212 o f the Depart ment o f the In te rio r, dated September 21, 1925, rela tin g to the proper c l a s s i f i cation o f such deposits: "To A ll Disbursing O fficers o f the Indian Service and Bank Depositaries fo r Individual Indian Money: D M N AN TIME DEPOSITS E AD D Recent correspondence had with the Federal Reserve Board establishes the fa ct that deposits o f Indian funds secured by corporate and individu a l surety bonds are demand deposits within the meaning o f the Federal Re serve A ct, because o f the in a b ility o f the Department in a l l cases to guar antee th ir ty days* notice to depositaries before making withdrawals. Sure ty bonds given by banks to secure deposits o f Indian funds provide in part* ♦But in case the surety or the Commissioner o f Indian A ffa irs shall desire to terminate this contract as to future acts or defaults o f the p rin cip a l, eith er may, subsequent to said stipulated period , give the other notice in w riting, to be e ffe c t iv e th irty days from receipt thereof, o f h is intention so to do, and thereafter no new l i a b i lit y sh a ll accrue against the su rety .f It w il l be seen from the foregoing that upon expiration o f the stipu lated term, the bond is subject to can cellation . I f the surety desires to take advantage o f the can cellation p r iv ile g e , he must n o tify the Commission er o f Indian A ffa irs to that e ff e c t , such notice befoming e ffe c t iv e th irty days from it s receipt by the Indian O ffice . Under th is arrangement i t would be impossible to give a bank f u l l th irty days* n otice o f withdrawal without the deposit becoming unsecured. The p ra ctice , however, o f allowing depos it s which have heretofore been considered as time deposits to remain undis turbed during the l i f e o f the bond w ill be continued, and banks w ill be no t i f i e d promptly upon receipt o f can cellation n otices in order that they may have as long a time as p ossib le to arrange fo r substitute security or for re linquishing the funds. As indicated above, only such funds as are secured by corporate and in dividual surety bonds are to be classed as demand deposits. Funds secured This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) Circular Ho* 8, Series o f 1925 Cont’ d, by Government bonds w ill be kept on deposit as long as the bank d esires, unless good administration necessitates withdrawals. In such cases banks w ill be no t i f i e d at least th irty days in advance. This, o f course, does not apply to checking accounts. In th is connection, i t is desired to correct an erroneous impression which some in stitu tion s appear to have with regard to c e r t ific a te s o f deposit. The regulations do not provide fo r the acceptance o f c e r t ific a t e s , and, inasmuch ad deposits are placed subject to the provisions o f the bonds furnished as se cu rity , they have no binding e ffe c t upon the Government, in so far as they at tempt to stipu late the periods fo r which deposits are made. (SIGHED) CBAS. H. BU RKE, Commissioner Approved: September 23, 1925 John H. Edwards, Assistant S ecretary.” Since the issuance o f the above order we are in receip t o f the follow ing advice from the Department o f the In te rio r, dated December 23, 1925: ” In this connection, you are informed that since the issuance o f Order Ho. 212, this O ffice has let it be known that no objec tion would be offered should any depositary for Indian funds succeed in persuading it s surety to modify the bond given as se cu rity so as to provide a fo r t y -fiv e day can cellation p eriod . In such cases i t would be p ossib le to assure banks that th irty days* n otice would be given in advance o f withdrawals, which, accord ing to Section 19 o f the Federal Reserve A ct, would establish the deposits as time d ep osits.” Member banks a ffe cte d are requested to observe the above rulings in the fu ture preparation o f th eir reports o f net deposits. Yours very truly, (SIGHED) LYM P. TALLEY, G o v e r n o r .