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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) - 2 ~ Yf ? w i l l fyrn ish tvo ?-uny vc -cnl^ ^ h l o H r J e ^ ir o s to maV*> o xl applicS-tlon. ■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,
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