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Circular No. 51
Series of 1918

O F F IC E R S

D IR E C T O R S

W

R . L . V A N Z A N D T , GOVERNOR
J. W. HQOPES. D e p u t y Go v e r n o r
L Y N N P . T A L L E Y . C A SH IER
R . R . G I L B E R T . A S S IS TA N T C A SHIER
P A U L G . T A Y L O R , A S SIS TA N T C A SHIER
R . B . C O L E M A N . A S SIS TA N T C A SHIER
F R E D H A R R IS . A SSISTA NT CASHIER

EL PASO BR A N C H
S A M R . L A W D E R . M A N A G ER
J . M . P R O C T E R . CASHIER
P A U L S. M IL L E R . A S SIS TA N T
FED ER AL R ESERVE A G E N T

FEDERAL R E S E R V E B A N K
OF D A L L A S

F . R A M S E Y , C H A IR M A N AMD
Federal reserve

agent

W . B. N E W S O M E . . D e p u t y C h a ir m a n
j . J . C U L B E R T S O N . . . PARIS. T E X A S
F R A N K K E L L . . W IC H IT A F A L L S , T E X A S
B . A . M C K IN N E Y . . . D U R A N T , O K L A
M A R IO N S A N S O M . . F T . W O R T H , T E X A S
■INC. T . S C O T T .
. . H O U S TO N . T E X A S
E . K . S M IT H . . . . S h r e v e p o r t . L a
H . O. W O O TEN .
. . A b il e n e . T exas
C H A R L E S C . H A L L , A S SIS TA N T
fed er a l Reserve

agent

W . C . W E IS S .................................... A U D ITO R
CHAS. C. H U F F . .
. . .
Co u n s el

D a l l a s , T e x a s , October 19, 1918.

H ow to Provide for Maturing Obligations to Prevent Impairment or
Elimination o f Legal Reserve.
TO TH E MEMBER BANK AD D RESSED :
The attention of member banks is directed to the advantage or advisability of retaining detailed ad­
vices of credit sent them by our Loan & Discount Department covering the rediscount of their customers’
notes as well as their Bills Payable, until after such obligations have been fully disposed of.
The advices referred to are exact copies of the records of this bank and in conjunction with “ Applica­
tion for Rediscount” (Form B. D. 29) are intended to show the essential details of the items under discount,
i. e., names of makers and endorsers, maturity value, and a brief description of any collateral, rate of dis­
count charged, time for which rediscounted and dates when such items are payable.
It is an established custom of this bank to invariably charge to the accounts of member banks on day
of maturity, rediscounts on which they are liable as endorsers, and also their Bills Payable. It has been
our*observation that in numerous instances, owing to failure to provide promptly for such maturities
member hanks’ reserve balances have become impaired and they have been compelled to suffer the penalty
provided in such cases, in addition to telegraphic expense where necessary.
The memorandum advices referred to are of uniform size, and the suggestion is made that they be filed
in the order of their maturity. In this manner, with little trouble, the member bank will have available for
immediate reference full details of its outstanding rediscount liability with this bank and need never be in
doubt as to the maturity of the items constituting same.
It is also believed that this will greatly facilitate the checking of daily transcripts of account which do
not enumerate the various items but instead merely show total amount charged to cover same.
In connection with the above, owing to the volume of rediscounts that are offered us, it is at times impos­
sible for our Executive Committee to pass upon all offerings on day of receipt, and in cases where this cannot
be done it is our custom to allow credit for such offerings on the following business day, discount being cal­
culated from day of receipt (provided received in business hours), and improvement entered in member
banks’ reserve balances accordingly. In cases of this nature the memorandum advice above referred to will
give this information in the left hand margin under the head “ Date Discounted.” By way of illustration, a
note received during business hours on October 14th but not credited until the following day would be
shown on memorandum advise as follows.
“ Date Discounted”
“ 10-15”
(Date credited member bank’s account)
“ 64-14”
(Indicating that item was discounted for 64 days from Oct. 14).
In all cases it should he borne distinctly in mind that a member bank’s sole legal reserve is the collected
balance to its credit on the books of the Federal Reserve Bank, that is, the balance shown on the transcript
forwarded daily to ail member banks, plus any improvement proper to take into consideration by reason of de­
lays in the mail, inability on account of congestion to handle offerings or remittances, or otherwise. It is
essential to avoid impairment or total elimination of legal reserve to forward remittances of funds available
for credit on receipt here in sufficient time to be credited to the reserve account to meet the charge for ma­
turing rediscounts or Bills Payable which such remittances are intended to cover. In the event that other pa­
per is submitted for rediscount, the proceeds of which are intended to cover maturing obligations, the offering
should be submitted in sufficient time for action by our Executive Committee and for proceeds to be credited
to the reserve account, as noted immediately above in the case of remittances.
The above suggestions are made in the interest of our member banks and for the purpose of saving
them unnecessary penalties on account of reserve deficiencies; therefore your kind consideration is re­
quested.
Respectfully,

Governor.

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