Full text of Federal Reserve Bulletin : November 1915
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FEDERAL RESERVE BULLETIN ISSUED BY THE FEDERAL RESERVE BOARD AT WASHINGTON NOVEMBER, 1915 WASHINGTON GOVEENMENT PRINTING OFFICE 1915 FEDERAL RESERVE BOARD. EX OFFICIO MEMBERS, WILLIAM G. MCADOO, Secretary of the Treasury? Chairman. JOHN SKELTON WILLIAMS, Comptroller of the Currency. CHARLES S. HAMLIN, Governor. FREDERIC A. DELANO, Vice Governor. PAUL AI. WARBURG. W. P. G. HARDING. ADOLPH C. MILLER. H. PARKER WILLIS, Secretary. SHERMAN ALLEN, Assistant Secretary. Af. C, ELLIOTT, Counsel. SUBSCRIPTION PRICE OF BULLETIN. The Federal Reserve Bulletin is distributed without charge to member banks of the system and to the officers and directors of Federal Reserve Banks. In sending the Bulletin to others the Board feels that a subscription should be required. It has accordingly fixed a subscription price of $2 per annum. Single copies will be sold at 20 cents. when it will be required. Foreign postage should be added Remittances should be made to the Federal Reserve Board. m TABLE OF CONTENTS. Work of the Federal Reserve Board Service to member banks Foreign agencies * Earnings and expenditures of Federal Reserve Banks Interdistrict movement of Federal Reserve notes Addresss by Hon. P . M. Warburg Franking of Federal Reserve notes Allotment of United States bonds Conference of Governors in Minneapolis Gold settlement fund Discount rates Informal rulings of the Federal Reserve Board Law department Fiduciary powers granted , Intradistrict clearing system Report of Federal Reserve Agents' Committee on Clearances General business conditions Distribution of discounts Acceptances Federal Reserve Bank statements Gold imports and exports IV , .. Page. 345 346 348 349 351 352 355 355 35$ 357 359 360 363367 367 369 373 381 385 387 390 FEDERAL RESERVE BULLETIN VOL. 1 NOVEMBER 1, 1915 WORK OP THE BOARD. During the month of October the work of the Federal Reserve Board has included the following principal elements: (1) Investigation and formulation of policy regarding the question of foreign agencies of Federal Reserve Banks in South America and elsewhere. ; ' (2) Adoption of a policy with respect to open-market operations by Federal Reserve Banks as embodied in a letter of October 8 transmitted to Federal Reserve Agents. , (3) Investigation into petitions of Louisiana banks for. transfer from the eleventh to the sixth reserve district. ; (4) Decision of, policy with respect to allotment of offers of bonds to Federal Reserve Banks on behalf of member banks. (5) Investigation of conditions regarding examination of member banks. Further development of the system of clearance under the gold-settlement fund has proceeded during the month, four Federal Reserve Agents having opened regular accounts in the Federal Reserve Agents' fund. The total amount in gold-order certificates held in the two funds on October 21 was 876,670.000. Dming the month transit managers of Federal Reserve Banks held a conference at Chicago for the purpose of considering methods of enlarging and improving the existing system of clearing checks through Federal Reserve Banks. Governors of Federal Reserve Banks held a regular quarterly meeting at Minneapolis on October 21-23. Two members of the Board, Mr. Warburg and Mr. Harding, were in attendance during the sessions, in response to invitation, for the purpose of consultation and general exchange of ideas as to the progress of the work at the several banks. The Federal Reserve Agents' Clearance Committee held a No. 7 session in Boston and adopted a report with reference to the general question of clearing checks, which will be found on page 369. Applications of State banks and trust companies for membership in the system have continued at about the same rate as during the preceding month, a total of 30 applications having been favorably acted upon up to October 25. Applications for fiduciary powers have continued numerous, and a considerable number have been favorably acted upon. In not a few instances, however, it has been found necessary to defer action pending the elimination of objectionable conditions by the applying banks, or the fulfillment of requirements that seem to be advisable as a preliminary to the granting of the desired powers. The Board has received numerous questions from member banks with respect to the conditions under which elections of directors designed to fill places falling vacant at the close of the present year are to be held, and in reply it named November 16 as the date of formally opening' the polls for the election of such directors, giving to Federal Reserve Agents instructions necessary for their guidance in securing nominations of electors, and in carrying through the choice of candidates for the vacant positions. The process of conducting the election of new directors to fill vacant appointments is now going on. Results probably can be announced early in December. In accordance with the provisions of the Federal Reserve Act, the Board has directed Federal Reserve Banks to make a call upon their members for another installment of reserves, such installment to be due and payable on November 16. This will be one-twelfth of the total reserves required from country banks, and one-fifteenth of the total reserves required from city banks, there being, of course, 345 346 FEDERAL EESEBVE BULLETIN. no further call upon central reserve city institutions. Such reserves are payable in any form that may be determined by the Federal Reserve Banks themselves, and attention has been directed to the provision of the Federal Reserve Act authorizing Federal Reserve Banks to receive one-half of the installment if so desired in the form of rediscounted paper of eligible varieties. Permission has been granted to the National City Bank of New York to establish a branch in Valparaiso, Chile, with sub-branches at Antofagasta and Santiago in the same country. SERVICE TO MEMBER BANKS. Following is the substance of a letter lately sent to all Federal Reserve Agents on behalf of the Board: Under recent date the Federal Reserve Board received a letter from Governor Strong of the Federal Reserve Bank of New York, inquiring whether a Federal Reserve Bank may undertake to perform the following services for its member banks: (1) Collect notes and drafts. (2) Collect items not covered by the present collection system. (3) Collect items drawn on banks which are not members of the Federal Reserve System. (4) Execute orders for securities. (5) Answer inquiries as to credits. (6) Purchase commercial paper. These questions have had the careful attention of the Board, and it has been thought that the matters referred to were of such large interest as to warrant a general letter addressed to each Federal Reserve Agent. I have the honor, therefore, to advise you as follows: (1) Collect notes and drafts? There is no doubt whatever that a Federal Reserve Bank may collect notes and drafts sent to it by its member banks for collection and credit, such collection being a necessary incident to the power of a Federal Reserve Bank to receive deposits from a member bank. NOVEMBER 1, 1915. (2) Collect items not covered by tlie present collection system? By items not covered by the present collection system, Mr. Strong evidently contemplates the collection of coupons, etc., and the legal principles discussed under the first question will apply equally well to the collection of such other items. It seems, therefore, that the second question should be answered in the affirmative. (3) Collect items draum on banks which are not members of the Federal Reserve System? The Board has already held that Federal Reserve Banks may collect items drawn on nonmember banks, there being no difference whatever between the first question and this one as far as the legal rights are concerned. A Federal Reserve Bank could not, of course, accept checks drawn on nonmember banks for immediate credit, because such nonmember banks do not and can not legally have a deposit with the Federal Reserve Bank against which such items could be immediately charged; but there is no legal objection to the Federal Reserve Bank collecting such items from nonmember banks and crediting them when collected to the account of the member bank for which the service was performed. (4) Execute orders for securities? There does not. seem to be any provision of the Federal Reserve Act which gives to the Federal Reserve Banks either express or implied authority to execute orders for securities for member banks. It is true that a Federal Reserve Bank may, in an exceptional case where commercial paper also has the additional security of stocks and bonds, have to sell such stocks or bonds to realize on the security in case of default. But the right to sell securities on such an occasion as that does not imply a power to act as an agent for a member bank in the execution of general orders for the purchase or sale of securities. In connection with this matter the Board wishes, however, to suggest that it would be possible for Federal Reserve Banks acting on behalf of their members to transmit such orders to certain brokers, requesting such bro- NOVEMBER 1, 1915. FEDERAL RESERVE BULLETIN. kers to^ confirm their transactions direct to the member banks. It would not be proper for Federal Reserve Banks to give orders in their own name and to execute them on a commission basis. Federal Reserve Banks should not secure any revenue from such orders. (5) Answer inquiries as to credits? There is no express provision in the Act relating to the answer of inquiries as to credits, but inasmuch as the regulations of the Federal Reserve Board reasonably contemplate that member banks maintain credit files and certify in each application for rediscount of paper by a Federal Reserve Bank that statements as to the credit of the borrowers are on file, it would seem clear that each Federal Reserve Bank might advise its member banks in advance as to the credit of various borrowers in its district. Such advice, however, must be considered merely as advice and not as a guaranty on the part of the Federal Reserve Bank. It must be carefully considered, however, that the Federal Reserve Banks receive from their members confidential reports which they may not divulge and that this may lead to embarrassment. 347 must not be underestimated. Difficulties will arise; paper which has been bought with the greatest care and in the best possible faith will turn out to be bad, or it might happen that the bank examiner might criticize paper bought by the Federal Reserve Bank, or which has been bought upon the strength of information received from a Federal Reserve Bank. However, it may be possible to find a mode of accommodating the banks, and the object might be achieved by the banks simply acting as intermediaries in the matter, turning over the information as received from others to the member banks, and, when purchasing paper, forwarding the same with tho letter of the broker through whom it has been purchased, the letter being addressed direct to the purchasing member bank. Federal Reserve Banks should not indorse paper to their member banks, or turn over paper which they had previously bought. They should act distinctly only as intermediaries in the matter, without taking any responsibility or appearing as contractors. The questions here raised might well be discussed at the conferences of Governors and Federal Reserve Agents, and the Board will (6) Purchase commercial paper? be pleased to receive their reports and recomWhile there is no express authority given in mendations. the Act permitting Federal Reserve Banks to Meeting of Reserve Agents. act as agents for their member banks in the purchase of commercial paper, nevertheless, Federal Reserve Agents of the twelve Federal there is no doubt that a Federal Reserve Bank Reserve Banks have been invited by the might, under the provisions of section 14, Federal Reserve Board to meet in Washington purchase bills of exchange of the kinds and on Thursday, November 4. These gentlemen, maturities made eligible under section 13, and who are the chairmen of the boards of directors sell such paper to one of its member banks of the banks, will discuss with each other and under an agreement made prior to the trans- with the Board problems, which have arisen or action. There does not seem, however, to be are anticipated, not to be solved through corresany power vested in a Federal Reserve Bank pondence. which would permit of its buying promissory State Banks Admitted. notes for its member banks. The only express authority given for the purchase of bills of The following State banks have been adexchange in such a manner is in section 14 mitted to the Federal Reserve System during which makes no mention of promissory notes. the month of October, the number of such The Board desires to emphasize in dealing institutions which have joined the system now with this question the fact that the task of being 30: Bank of Hartsville, Hartsville, S. C : advising and purchasing paper for member Commercial Trust & Savings Bank, Joliet, 111.; banks will involve a moral responsibility which Commercial & Savings Bank, Albion, Mich. 348 FEDERAL KESERVE BULLETIN", FOREIGN AGENCIES. The following press statement was issued by the Board on October 12: At the meeting of the Federal Reserve Board this morning there came up for consideration and discussion the report of a committee of the Board, to whom had been referred the subject of banking relations with the South American and Central American countries, as recommended by the Secretary of the Treasury in correspondence transmitted to the Board October 6. . The committee report expressed the view that Federal Reserve Banks, being the custodians of the reserve money of the member banks, should not be permitted to do pioneer work in Latin American countries, granting credit facilities which would lead to a lockup of reserve money in loans which, in most of the cases, would be subject to wide fluctuations of foreign exchange. Secretary McAdoo stated that his recommendations about joint agencies for Federal Reserve Banks did not contemplate this character of operation. The report reminded the Board of the policy pursued for generations by the large government banks of Europe, which do not go into foreign fields, except that they hold as secondary reserves foreign bills on the most important European countries where large discount marT kets exist and where the gold standard is established beyond question. In those countries these government banks maintain correspondents, and the committee believes that when normal conditions shall have been restored in Europe joint agencies or correspondents could be used to good advantage there. The committee also called attention to the fact that England, Germany, and France have established independent banks or branch banks of deposit banks in Latin American countries to do pioneer work, and that the United States should pursue the same course, inasmuch as it is necessary for banks going into this field to have the widest possible range of activity in order to be able to compete with the local banks and the branches of the foreign banks already established in these fields. Federal Reserve Banks being properly restricted to certain transactions, and such as may not interfere with the absolute liquidity of their NOVEMBER 1, 1915. condition, could not compete successfully in this respect, whereas it should be their function to do all in their power to assist American banks which enter the Latin American field. The committee favored, and the Board and Secretary McAdoo concurred in, suggesting an amendment of the Federal Reserve Act which would enable American member banks to cooperate for the purpose of jointly owning and operating foreign banks. The contribution of the Federal Reserve Banks in this development in Latin America would primarily consist in providing conditions so favorable for American acceptances that the American banks willing to oner credit facilities there will be materially assisted in meeting the European rates which, at the present time and probably for some time to come, will compare unfavorably with the American discount rate. Wherever the Federal Reserve Banks can help in the development of American banking by establishing direct connections in Latin American countries for the purpose of facilitating discount operations of this kind it will be, in the opinion of the committee, the proper function of Federal Reserve Banks to do s^>. The committee took the position that American banks entering this field ought to be permitted to develop the opportunities first, but that in trade centers where American banks are not established it might be proper for the Federal Reserve Banks to appoint joint correspondents or agents in order to facilitate the development of American acceptances in such places. The Board expressed itself as in entire agreement with these views of the committee. The Secretary of the Treasury, who was present at the meeting, announced himself as also in full accord. The Secretary stated that he agreed with the Board that the resources of the Federal Reserve Banks should not be invested in nonliquid loans in Latin American countries, and that he was in hearty accord with any measure that the Board might ultimately evolve which would have as a result the development of American banking, in Latin American countries. The committee hopes to make its final report early in November, alter recommendations shall have been received from the conference of Governors of Federal Reserve Banks which is to take place at Minneapolis on October 20 and the conference of Federal Reserve Agents which is to take place in Washington on November 4. NOVEMBER 1, FEDERAL RESERVE BULLETIN. 1915. 349 The earnings for oach of the three months EARNINGS AND EXPENDITURES OF FEDERAL RESERVE BANKS, JULY 1 TO SEP- show increasing totals, while the monthly current expenses show declining totals, with the TEMBER 30, 1915. There are presented below detailed figures of earnings and expenditures of each of the Federal Reserve Banks for the quarter ending September 30, 1915, in continuation of like figures published in the August Bulletin for the period November 16,1914, to June 30,1915. The combined earnings of the Federal Reserve System for the three months ending . September 30 are given as 8599,813.16, and the total expenditures as 8807,620.10. The latter are composed of current expenses, $394,730.21, the cost of printing and shipping Federal Reserve notes, §363,057.97, and the cost of equipment, $49,831.92. No account is taken in the above expenditures of amortization charges, which are reported separately only for the New York Federal Reserve Bank. The total excess of earnings over current expenses for the quarter was $205,082.95, or at the rate of about 1.8 per cent on an average paid-in capital of 854,462,000. The more active southern banks report more favorable results of operation. Thus, Richmond shows net earnings from operation for the 3 months of 371,282.58, or at the rate of 8.5 per cent per annum on an average estimated capital for the quarter of S3,361,000; Atlanta's net earnings for the same period were 834,540.61, or at the rate of about 5.7 per cent per annum on an average capital of 82,417,000; while the net earnings of the Dallas bank, 852,362.81, were at the rate of about 7.6 per cent per annum on an average estimated capital of §2,761,000. Four banks, viz, Philadelphia, Cleveland, St. Louis, and Minneapolis, are shown not to have earned their current expenses for the quarter. 11672^15 2 result that the total not earnings of the system from 840,655.79 in July increased to $71,666.04 in August and to $92,761.12 in September. Of the total earnings for the quarter, 56.5 per cent was from bills discounted, 21.7 per cent from municipal warrants, about 11.3 per cent from bankers' acceptances, less than 8 per cent from United States bonds, and the remainder from sundry operations, mainly commissions and exchange. These percentages vary considerably by banks and groups of banks. Thus the earnings of the southern banks for the quarter were derived almost exclusively from the discounting of notes. The New York bank derived its main revenue from bankers7 acceptances and warrants, while the Chicago bank reports over 35 per cent of its total earnings from United States bonds, and only 25 per cent from discounts. Of the current expenses, about 30 per cent went as compensation to bank officers and over 24 per cent as salaries to the clerical staff of the banks. The next largest item is the quarterly assessment for the running expenses of the Board, §54,142.13, or 13.7 per cent of the banks7 total current expenses. Rent constituted slightly over 10 per cent. Other specified expense items for the quarter in excess of S10,000 wero "printing and stationery,7' "postago/7 and " directors' fees/7 The cost of Federal Reserve notes prepared during the quarter was 8363,057.97. Over 65 per cent of this quarterly expense is charged to the New York bank. The cost of equipment, comprising mainly vaults and machinery, was $49^831, of which over 60 per cent represents the cost of vaults installed at the Minneapolis and Dallas Federal Reserve Banks. Earnings ind expenditures of the Federal Reserve Banks for the quarter from July 1 to Sept. 3C >, 1915. Boston. (1) Earnings for quarter ending Sept. 30, 1915: Bills discounted (members) 13ills bought (bankers' acceptances). InvestmentsUnited States bonds Municipal warrants Sundry profits New York. Philadolphia. §2,853.21 12,9*27.33 $5,216.23 30,202.67 56,155.51 8,351.07 $6,899.91 2,164.02 1,663.05 2,500.00 19,359.44 " 45," 893." 03* 15,102.48 602.48 6,635.14 1,564.81 4,872.42 12,300.23 623.48 Cleveland. Richmond. 595,611.07 83.33 MinneapoSt. Louis. lis. Kansas City. O Dallas. Son Francisco. Total. $81,843.85 $19 t 388.58 3,425.72 $339,184.20 67,746.00 Atlanta. Chicago. 857,954.37 $15,855.71 4,554.80 $12,550.66 2,149.04 $19,066.45 1,259.98 $15,188.65 2,628.04 1,225.00 5,313.88 5,134.39 4,163.80 547.40 5,088.06 4,104.55 64.21 63.14 5,050.00 8,501.62 1,071.05 46,995.55 130,344.90 15,542.51 29.75 860.30 21,402.63 15,599.87 3,420.75 39,204.79 87,947.07 31,934.59 26,8G6.06 95,724.15 58,814.67 00,893.76 21,238.58 30,772.02 07,073.51 81,906.99 37,436.97 599,813.16 4,804.93 55.00 1,350.00 300.00 10,920.30 500.00 1,590.00 5,261.75 56.50 610.00 2,011.65 5,950.30 3,354.90 2,376.65 10.00 980.00 375.00 2,964.24 2,755.60 3,935.60 820.00 503.62 6,013.20 30.00 520.00 250.00 2,788.86 460.00 2,415.80 40.00 1,635.00 150.00 580.00 800.00 440.00 38.75 290.00 54,142.13 691.50 10,105.00 4,429.02 8,474.98 4,470.81 46.00 19,549.96 18,393.63 500.70 8,999.98 9,066.18 1,356.57 7,500.00 8,835.79 220.00 6,883.29 6,412.07 200.00 309.25 7,503.91 6,154.27 595.99 12,500.00 10,201.79 1,175.50 774.00 12,700.12 7,907.50 420.00 300.00 6,750.00 4,683.26 392.15 30.85 6,750.00 7,115.77 620.00 8,624.95 7,187.70 229.00 1,155.25 11,541.67 5,017.50 33.00 117,838.88 95,512.27 6,788.91 2,569.95 285,75 I'M: 73 350.00 250.33 14.30 536.28 59.70 3,125.01 540.00 535.89 430.00 518.24 69.91 1,063.51 138.79 9,779.99 247.03 280.00 ' 342.35 140.52 49C. 70 193.08 2,124.99 446.25 445.94 300.00 187.83 59.65 801.81 26.03 1,573.08 378.47 177.85 380.00 73.24 26.73 698.25 779.28 1,000.00 767.37 262.10 322.50 96.77 28.22 958.42 2.18 1,806.71 404.47 300.39 200.00 278.16 49.75 986.03 29.97 6,643.76 203.60 364.44 200.00 188.97 109.10 1,105.05 118.20 3,990.00 448.60 451.98 270.00 133.74 45.36 380.68 765.03 1,250.01 497.10 672.65 290.35 450.66 302.00 896.00 106.07 120. 79 105.23 79.48 951.18 2,482.26 1,858.84 534.36 2,124.99 . 2,524.50 613.52 90.00 74.39 17.60 349.30 &06 3,795.00 4,891.29 4,023.85 4,020.60 2,371.48 745.85 11,409.50 4,514.12 39,738.04 Light, heat, and power Printing and stationery Repairs and alterations All other expenses n. o. s 175.79 248.82 .490.49 45.92 1,071.84 168.67 204.57 1,120.92 10.00 4,241.62 244.38 3,742.72 213.50 3,417.64 694.70 25.74 956.65 16.54 90.76 1,482.66 44.06 810.60 289.36 3.10 900.80 57.60 217.96 75.18 272.87 718.43 51.56 745.09 Total curront expenses 26,292.68 72,534.81 36,933.08 28,728.15 24,441.57 24,274.06 42,826.75 Total (2) Current expenses for quarter ending Sent. 30, 1915: Quarterly assessment for expenses of Foderal Reserve Board Fedoral Advisory Council Directors'fees Legal fees SalariesBank officers Clerical stall Special officers and watchmen... Other Traveling expensesOfficers and clerks Per diem allowance of directors Telephone . . . Telegraph •. Postage Expressage Rent... Insurance and premiums on fidelity bonds Amounts amortized (3) Excess of earnings over current expenses (4) Cost of Federal reserve notes (5) Equipment: Furniture and fixtures Vaults Machines Other Total (6) Total expenditures, exclusive of amortization charges 830.00 - -9100 237.95 441.06 18.17 308.01 141.50 995,51 77.81 1,541.22 63.09 1.30 651.73 14.10 1,746.84 01.05 - 849.50 115.55 ' 612.12 1,399.56 1,023.97 12,902.86 704.01 15,907.54 32,786.08 20,111.15 28,947.24 29,544.18 27,309.86 394,730.21 460.55 802.34 39,801.59 39,801.59 12,912.11 18,978.87 15,412.26 204,426.15 -4,998.4$ -1,862.09 71,282.58 34,540.61 10,864.93 16,636.43 10,263.30 8,780.75 570.85 550.00 456.00 35.44 18,067.01 -11,548.10 10,060.87 31,935.39 13,211.42 8,498.56 45.20 132.97 202.50 11,473.88 2,091.20 -1,873.73 6,060.73 52,362.81 8,896.89 10,127.11 205,082.95 17,604.55 363,057.97 3,329.95 .30,872.34 14,738.33 891.30 76.75 721.51 291.19 3,760.63 737.51 1,539.62 272.80 7.00 975.10 88.42 582.53 911.00 1,017.75 5,219.68 1,830.81 1,343.32 582.53 1,612.29 529.05 3,385.87 13,827.58 332.93 19,215.11 935.00 49,831.92 .40,289.30 282,180.64 55,628.82 46,707.90 35,287.40 34,667.10 75,291.19 49,383.97 42,437.29 36,240.90 57,656.18 45,849.41 807,620.10 483." 85' •""3,*25i.*25" . 1.65 373.65 18,841.46 301*68* 28.25 935.00 I Earnings and current expenses of the Federal Reserve Banks for each of the months of July, August, and September, 1915. Boston. Now York. Philadelphia. $10,886.69 12,673.44 15,644.66 $21,260.39 29,521.67 37,165.11 $9,388.63 10,794.96 11,751.00 $7,906.34 9,095.01 9,864.71 Current expenses for July Current expenses for August Current expenses for September 9,206.71 8,505.68 8,530.29 24,749.18 24,590.73 23,194.90 15,983.37 10,839.73 10,109.98 NOTE.—Advanoo payments by Federal Reserve Banks for maintenance of Federal Reserve Board from Oct. 1 to Dec. 31, 1916. 4,804.93 10,920.30 5,261.75 Earnings for July Earnings for August Earnings for Soptombor Atlanta. Chicago. St. Louis. Minneapolis. Kansas City. Dallas. Son Francisco. Total. $30,961.22 33,194.76 31,568.17 $19,086.26 18, M6.84 21 t 181.58 $18,451.70 20,155.58 22,286.48 $5,940.20 7,077.45 8,220.93 $9,038.91 10,766.40 10,966.71 $6,910.10 8,950.82 11,212.59 $26,563.43 27,171.88 28,171.68 $13,651.15 12,121.94 11,763.88 $179,945.01 200,070.65 219,797.60 9,748.13 9,693.29 9,286.73 7,941.17 8,019.47 8,480.93 6,874.16 8,247.12 9,152.78 14,960.06 13,602.92 14,263.77 11,601.54 10,202.57 10,982.57 7,518.11 6,132.44 6,460.60 11,608.25 8,894.50 8,444.49 9,787.59 10,937.80 8,818.70 9,310.95 8,738.27 9,260.64 13n,2S9.22 128,404.61 127,036.38 5,950.30 3,354.90 2,415.80 6,613.20 2,788.24 2,376.65 2,964.24 2,755.60 3,935.60 54,141.51 Cleveland. Richmond. CD M Amortization charges of tho New York bank, which have beon disregarded In the forogoing statement, are made up as follows: (1) Organization expenses, Including expenses of the Federal Reserve Board prior to July 1,1915, $5,856.08; (2) cost of Federal reserve notes, $32,000.67; <3) cost of equipment, $1,938.84; total amortization charges, $39,801.59. INTERDISTRICT MOVEMENT OF FEDERAL RESERVE NOTES. Amounts of Federal Reserve notes received from and returned to other Federal Reserve Banks for redemption or credit by each Federal Reserve' Bank during the period Nov. 16, 1914, to Sept. SO, 1915. DIst. No. 3— Dist. No. 4— Philadelphia. Cleveland. Dlst. No. 5— Dist.No.6— Dist. No. 7— Richmond. Atlanta. Chicago. DIst. No. 8— Dist. No. 9— DIst. No. 1 0 - DIst. No. 11— Dist. No. 12— San FranMinneapolis. Kansas City. St. Louis. Dallas. cisco. Total. 1 11,090 10,315 35,865 15,800 10,925 1^770 10,305 Dolls. Dolls. Dolls. Dolls. Dolls. Dolls. Dolls. Dolls. 295 535 9,255 33, M0 105 10,690 10,010 9,405 . 120,290 GS1,310108,185 11,750 915.560 17,630 226) 390 3-1, 775 1,295 335 195,520 1,225 10,635 " 23,655 750 875 4,050 405 335 23,655 10,735 108,185 875 4,700 6, 860 44,805 14,195 915,605 4,225 193,5S0 54,080 8,410 510 35,210 331,105 1,535 26,500 1,135 185 21,195 1,215 19,735 50,195 4,010 7,490 12,2S0 1,205 83,800 170 55,05.5 12,260 9S5 85 25,395 1,265 2,510 0,655 34,500 175 30 1,2S5 60 440 3,765 115 42,085 440 215 435 610 42U 380 3R5 45 3,490 40,555 2,620 950 2,23010,600 580 720 275 55 8,325 2,175 107,8J5 20 6,530 12,080 155 80 95,785 1,725 4,020 3,975 5G,4S0 i, Dolls. 10,925 40,665 7,325 1,285 185 1,350 23,780 1,425 455 400 5,60o Dolls. Dolls. Dolls. Dolls. Dolls Dolls. Dolls. Dolls. 60 25 5,435 8,780 1,400 1,770 1,205 9,125 81,200 25; 395 30,500 40,235 440 37,130 I,G20 101,335 40 3,490 45 8,325 1,400 3,4S0 4,040 2,510 3S0 3S5 85 500 440 115 6,055 12,280 215 010 175 130 14,155 170 950 19,735 C90 85 610 120,910 67,810 1,285 27,925 1,185 455 26,02(1 OS,'7951,485 72,4-fO 72,180 20,155 2501 ,070,455 20,155 4,935 115182,455 "' 470 490 80 9,575 115 95,795 3,375 490 470 72,770 250 231,440 60,180 1,0-fOl ,163,330 215 225 2,215 3,375 310 13,315 2,770 7,750 305 7,830 18,895 1,315 Dolls. 3,205 93,695 4,020 SO 20 155 18,895 2,320 1,640 70 215 340 2,385 10O 190 Dolls. 15 2,435 65 275 5SO 4,415 400 Dolls. Dolls. Dolls. 3,850 522,905 101,420 43,1801,820,1001,330,265 * — 950,455 142,140 1,723 19,000 167,465 3,975 28,4351,274,200 14,3S5 "~ ""* 9,930 217,830 493,160 5,605 421,370 111,180 54,450 1,3451,395,055 2,795 175,310 11,180 9,055 309,710 10,070 :, 17,630 . 0,9901 381,960 119,215 125,705 90,310 535,565 1,330,880 1,950,935 144,205 001,635 IGG,94O2O,43O 1,278,270 30,420 345,630 06,640 105,400 417,375 51,6501,563,800 103,925 3,435312,780 8,260 1,400,23512,005122,990122,8755,516,265 5,727,085 CO 352 SOME FEDERAL BESERVE' BULLETIN. NOVEMBER 1, 1015. PROBLEMS OF THE FEDERAL send it to Delphi. Now there was a scarcity of gold in the city, and the magistrates knew not whence it could be had. RESERVE BANKING SYSTEM. Hon. Paul M. Warburg,. member of the Federal Reserve Board, offered the following remarks at the conference of Governors of Federal Reserve Banks held at Minneapolis October 22, 1915: In these times, when we are so deeply stirred and bewildered by the unhappy fate that has overtaken Europe, when it is so hard and well-nigh impossible to understand the path along which man is progressing, nothing will help us more toward finding our bearings than the study of ancient history. The more fully we understand that, for thousands of years, human problems have remained fundamentally the same, the more nearly we succeed in attaining a judicial and sympathetic understanding of the tragic struggle of our race. Human problems and human nature, indeed, do not appear to have changed since the time of Themistocles' speech on "national preparedness," delivered 2,400 years ago, of which Plutarch tells us, urging the building of a strong navy, or since his confidential message to.the Persian King, Xerxes, informing him after the battle of Salamis, that the "allies" were going to attack the Dardanelles. We are told this message caused Xerxes to evacuate Greece in order to rush back for the protection of his bridge across the Hellespont. When reading a sketch of the life of Lucullus, I was surprised to find myself suddenly thinking of the Federal Reserve Act. Lucullus had been sent to Egypt, Libya, and Crete, Plutarch tells us: "He also made Cyrene, and finding it in confusion * * * he restored it to order, and fixed its constitution, * * *. They asked him, it would seem, to write laws for them, and to mold their people into some form of sound government, whereupon he said that it was hard to be a lawgiver for them when they were having such good fortune. In fact, nothing is more ungovernable than a man reputed to be prosperous; and, on the other hand, nothing is more receptive of authority than a man who ia humbled by misfortune." So, you see, even in those days they required a 1907 in order to be ready for some sound legislation. The following evening, I took up the life of Camillus, and came upon this incident: After a protracted siege, Camillus had taken the city of Veii. He had vowed that, if he should take the city, he would consecrate the tenth part of the booty to the Delphian god. But, after the city had been taken, he apparently forgot his vow. At a later time, however, he referred the matter to the senate, and, the seers announcing that the gods were angry, the senate voted that every soldier under oath should return one-tenth of his share: "The soldiers were filled with indignation * * *. However, all of them brought in the necessary portion, and it was decided to make a bowl of massive gold and So the women, of their own accord, determined to give the gold ornaments which they wore upon their persons for the offering, and these amounted to eight talents weight. The women were fittingly rewarded by the senate, which voted that thereafter, when women died, a suitable eulogy should be spoken over them, as over men. For it was not customary before that time, when a woman died, that a public encomium should be pronounced." When I read this chapter, it struck me that the "votes for women" movement was already showing strength in the year 376 B. C, The Romans, however, were by far shrewder than the men of our generation, inasmuch as they at least secured a good and valid consideration for what they conceded. The next thought that came to me in connection with this story was that even the question of the "gold reserve1' is not modern, but that 2,000 years ago the same problem, how to withdraw gold from circulation and use it for the general good, confronted our forefathers. Seriously speaking, the incident can not but remind us of the gold now being given up to the Banque de France and the Reichsbank by the people of France and Germany. Like Lucullus in Cyrene, the advent of the Federal Reserve System came at a time of acute adversity. Its operation, however, had so excellent an effect and the resulting changes were developed with such speed that many are now forgetful of its benefits. When, some months ago, we were near the brink of a most serious international complication, few people stopped to consider the fact that we were not then subjected, through fear of panic, to any convulsions, such as we should inevitably have experienced before the establishment of the Federal Reserve Banks. I shall not tire you by enumerating the benefits of the system. I believe that those who think already know them; while those who do not think will learn to know them from actual experience. That will be conspicuously the case when excess reserves are next reduced and when higher rates for money again prevail. I could wish, for many reasons, that it might have been possible to open the Federal Reserve Banks before the war began and that they might have furnished the about $380,000,000 of notea that were issued under the AldrichVreeland Act, as amended by the Federal Reserve Act. The functions of Federal Reserve Banks in general and our present policy would then be better understood and there would be less talk about our earning capacity and the necessity of preserving the prestige of our Federal Reserve Banks by earning dividends. Had the Federal Reserve Banks been in operation when the war began and had they issued all the currency required last autumn, the rediscounts underlying these notes, at 5 per cent interest, would have produced a return of about $4,500,000, or about the sum required to cover running expenses and dividends of all Federal Reserve Banks for a year. NOVEMBEU 1, 1 9 1 5 . FEDERAL RESERVE BULLETIN. If the. Federal Reserve Banks had put out this circulation and secured this return, would anyone suggest at this time that our banks should now make efforts to employ their money? Would not everyone agree that this present period of excessive ease of money was the proper moment for the reserve banks to withdraw their reserve money from active employment? Earning capacity must never be considered the test of the efficiency of Federal Reserve Banks. Personally I should have felt heartily ashamed had all our banks, considering the circumstances under which they began operations, earned their dividends in the past year. Such an earning, with all it implied, would have been a proof that they had completely misunderstood their proper functions and obligations. It must be conceded, however, that only men who have been trained in banking or who have given close study to the question will fully understand that failure to earn dividends does not mean the impairment of the prestige of a Federal Reserve Bank as it would that of a member bank. It can not, moreover, be denied that the banking instincts of those in charge of the banks will always remain—if only subconsciously—sensitive on this score. For these reasons it may well prove advisable to reduce the proportion of the paid-in capital of the Federal Reserve Banks so as to reduce, as far as possible, the conscious and subconscious pressure to force the funds of Federal Reserve Banks into actual employment at times when these funds should properly be withdrawn or held idle. Unless in times of great ease of money Federal Reserve Banks withdraw the bulk of their money from actual employment, they can not possibly be prepared to have their funds available at the turn of the tide when their beneficial powers should make themselves felt. It is apparent, therefore, that the smaller we can consistently make the dividend requirement and the operating expenses of the Federal Reserve Banks the better protected the system will be in time of trial. But, on the other hand, we dare not consider the item of expense when it involves questions of safety. One of the heavy items of expense, for instance, is that of printing Federal Reserve notes. A large supply of such notes, ready whenever required, is, however, a most fundamental safeguard, and the steady issue of Federal Reserve notes resulting in an accumulation of gold and gold certificates in the hands of Federal Reserve Agents will form an important element of strength in times of need. The Federal Reserve Banks have now in the hands of Federal Reserve Agents some $135,000,000 of gold and lawful money which, in case of a growing demand for rediscount by the member banks, may be freed by a process of redemption and substitution of commercial paper. This gold may be turned, as a free asset, into the vaults of the Federal Reserve Banks and may thus form the basis for an additional note issue of $200,000,000. It has been claimed by some of our critics that this process spells inflation. Nothing could be more unwarranted than such 353 assertion. As long as there are deposited with the Federal Reserve Agents $10 of gold for each $10 issued in Federal Reserve notes there is neither inflation nor contraction, but simply a substitution of one gold certificate for another. But the beneficial effect will be shown when demand will spring up for additional circulation, when, as a result, this demand will be satisfied, not by paying out currency which may serve as reserve, but by issuing the Federal Reserve note which has been created for this very purpose. This process ought to be furthered by all member banks and even nonmember banks, for it is being carried on for their own protection. There is no such thing as the interest of a Federal Reserve Bank as against the interest of member banks. As yet, I fear, this is not sufficiently understood. The Federal Reserve Bank is the member banks'; it is your bank, your fire engine, constructed for your greater protection. You have paid for it and you are operating it. We are to be considered as your fire marshals. It is our function to see to it that the machinery is in good order and that conditions are such that fires may not too easily occur or spread too fast and too far. . But yours is the engine, and yours is the fire. It is to your interest that your engine should not become rusty or obsolete, but that it remain a well-oiled and efficient instrument. In other words, Federal Reserve Banks must remain active banks operating in certain fields with a varying degree,of intensity. If they are to exert+se. effectually the functions for which they have been created, access to these fields of operations must be given them ungrudgingly. They can not protect you unless they can secure for themselves the strategic position without which they can not act as regulators warding off interest rates both too high and too low and creating for the entire country a basis for a healthy development on a safe and solid foundation. It is to your interest to see the Federal Reserve Banks ag strong as they possibly can be. It staggers the imagination to think what the future may have in store for the development of American banking. With Europe's foremost financial powers limited to their own field, with the United States turned into a creditor nation of all the world, the boundaries of the field that lies open for ua are determined only by our own power of safe expansion. The scope of our banking facilities will ultimately be limited by the amount of gold that we can muster as the foundation of our banking and credit structure. Gold that is carried in the pockets of the people, gold that accumulates as excess reserves in the member banks' vaults, does not afford the maximum service that the country is entitled to expect. Excess balances and idle gold should accumulate in the Federal Reserve Banks. They should not control $300,000,000 of gold, as they do now, or $450,000,000, as they will after another year, but they should control a billion or two of gold. The stronger the Federal Reserve Banks become, the stronger will be the country and the greater its chance to fulfill with safety and efficiency the functions of a world banker. The basis of 354 FEDERAL RESERVE BULLETIN". NOVEMBEH 1 , 1 0 1 5 . this development must be confidence. Unless the mem- may be safe to say that they will find that many will then ber banks are profoundly convinced that their balances come in after the next period of anxiety. This is not are as safe with the Federal Reserve Banks as they are in meant aa a threat, but I am afraid it will be a physical their own vaults—besides being more useful and efficient impossibility to take them all in during such a period of there—and unless they are convinced that the Federal stress. Examinations take time, and many State banks Reserve Banks will not abuse their vast resources for will not look as strong during a critical period as they may inflation of credit or for the purpose of aggressively com- look to-day. Moreover, the Federal Reserve Banks will peting with the member banks, the full growth of the find it difficult, in fairness to their own members, then system, and with that the full growth of American bank- to burden themselves with banks that might add an element of weakness, remembering that in times of ing, can not be developed. I believe that I may say with confidence that both the sunshine and peace such institutions had refused to Federal Reserve Banks and the Federal Reserve Board contribute their share to the work of protecting the entire are fully alive to the duty and responsibility that rest upon community. And now permit me to relate to you one last reminiscence them in this respect and that they will do their share of the work as they trust not only the member banks but from ancient history. Aristotle, in defining the elements of liberty, gives us this definition: ' * One element of liberty those not now members will do theirs. Believing in the bankers1 sense of public duty and ani- is to govern and in turn to be governed. The other is, to mated by the motive of creating the broadest possible live according to one's inclinations." I do not think that foundation for the development of a strong and united any modern writer has ever given a more interesting or a banking system in the United States, the Board has gone more original definition of liberty. Liberty without reto the utmost limits of liberality in determining conditions striction is anarchy; submission to restriction arbitrarily for the admission of State institutions. In order to achieve imposed produces a slavish surrender of human rights. this aim, it found itself in the difficult position of having Between the two lies true liberty, which means the exerto concede to these State banks and trust companies con- cise of our own free will and powers within the limitations ditions which, in certain respects, give them a distinct which, for the protection of our liberty, we have agreed to advantage over national-bank members. It is the hope | impose and enforce amongst ourselves. &nd aim of the Board to see the powers of national banks Our Federal ReBerve System is to be considered from beralized; still, for the t ime being, it remains a fact that this point of view. For your own safety and liberty you State institutions entering our system are at an advantage. have created this law and created the necessary organizaSuch of them as are strong and conservative may come in tion for its enforcement. You have elected your governpractically with all the powers now enjoyed by them, ment and appointed your directors and officers. Do not and, in addition, may leave the system if they do not like think now of these administrative organs as something t. Still they he3itate. As Lucuilus said, " I n times of imposed upon you by others, but only as something of prosperity it is hard to legislate," and Walter Bagehot, the your own creation. This system, permitting you *' to govBritish economist, expresses the same thought in slightly ern and in turn to be governed," as Aristotle puts it, is an more.modern language when he says: "Political economy expression and a safeguard of liberty. ia only an absorbing topic when a nation is, financially and You create your own traffic laws and clothe the traffic industrially, uneasy.11 policeman with authority. As long as we obey the law, we Let me ask those of the State institutions that are proud consider him a means of protection and we resent him as of their independent standing: Is it quite fair to let your a restraining influence, only when we exceed the speed neighbors pay for the expense of the fire department when? limit. While the Federal Reserve System is in its early incase of fire, you know you will count on the benefits of stages, there must of necessity be a great deal of regulatory the general protection, and when, as a matter of fact, you work. But I sincerely hope that the writing of regulations enjoy every day the advantage of the greater security pro- will soon become an occasional or incidental function of the vided by your neighbors? Let me tell them, at the same Federal Reserve Board and that traffic rules in banking time, that insurance companies are generally willing to will have become no more unusual or irritating than the take risks while applicants are young and conditions raising of the hand of the traffic policeman. As for myself, I am not in accord with the school of serene, but are not very eager to write new insurance when the "quake" is on. Let me ask you, too, is it conservative thought that believes that law and government's sole funcbanking for State banks to reduce reserve requirements, tion is to regulate. I believe that the function of governas authorized by many State laws in consequence of the ment is not only to regulate but to construct, and I believe establishment of the Federal Reserve System, if these that I am expressing the feelings of my colleagues of the State banks do not enter the Bystem? Should not State Federal Reserve Board and of the men in charge of the banks remaining outside the system, as a matter of pru- Federal Reserve Banks when I say that we are looking dence, continue to observe the old reserve requirements? forward to the time when all our energies may be applied, The thought IB often expressed that "at the time of the not to regulation, but to helpful cooperation in the general next crisis the State banks will all come in." I think it j work of construction. Reserve Notes Not Frankable. Federal Reserve notes may not be sent through the mails under penalty envelopes or labels canying the frank of the Federal Reserve Board. A ruling to this effect was first made by the Post Office Department. Desiring to use every effort to obtain the privilege, the Federal Reserve Board requested the Post Office Department to submit the question of franking Federal Reserve notes to the Attorney General. This was done the latter part of August, and on October 5 the following opinion of the Attorney General was sent to the Postmaster General, and by him forwarded to the Federal Reserve Board: 1 have the honor to acknowledge your letter of August 24, 1915, wheiein you request my opinion as to whether Federal Reserve notes can be sent through the mails under penalty envelopes or labels by the members of the Federal Reserve Board. The solution of the question depends alone upon the correct interpretation of the act of December 23, 1913 (U. S. Stat. L., Advance Pamphlet, p. 251), commonly referred to as the Federal Reserve Act, the material portion whereof reads: "When such (Federal Reserve) notes have been prepared, they shall be deposited in the Treasury, or in the sub treasury or mint of the United States nearest the place of business of each Federal Reserve Bank^ and shall be held for the use of such bank subject to the order of the Comptroller of the Currency for their delivery, as provided by this Act. * * *, and the expenses necessarily incurred in executing the laws relating to the procuring of such notes, and all other expenses incidental to their issue and retirement, shall be paid by the Federal Reserve Banks, and the Federal Reserve Board shall include in its estimate of expenses levied against the Federal Reserve Banks a sufficient amount to cover the expenses herein provided for. 11 . • This language plainly imposes upon the Federal Reserve Banks all expenses involved in the procurement, issuance, and retirement of Federal Reserve notes. As the shipment of these notes to the subtreasury, etc., and ultimately to the bank applying for them, is necessarily a step precedent to their issuance, it follows that the expense of such shipment is one "incidental to their (the notes) issue," and under the terms of the act must be borne by the banks. 355 FEDERAL BESBBVE BULLETIN. NOVEMBEQ 1, 1 9 1 5 . Numerous other provisions of the Act, not necessary to be here set forth in detail, manifest the purpose of Congress to impose upon the banks all expenses connected with its administration. Having reached the conclusion that the Federal Reserve Act imposes the expense of shipment upon the reserve banks, I deem it unnecessary to pass upon the additional reason assigned by your solicitor, viz, that these notes do not relate "exclusively to the business of the United States," and therefore, regardless of the Federal Reserve Act, could not enjoy the benefit of the free carriage provision of the Act of March 3, 1877 (19 Stat., 319, 335). Allotment of Bonds* Much interest h as been apparent on the part of Federal Reserve Banks and member banks of the system in the retirement of bonds under section 18 of the Federal Reserve Act. In response to certain of these inquiries there was sent by the Federal Reserve Board to the Conference of Governors, opened in Minneapolis on October 20, a letter containing the results of its consideration of the matter. The principal points raised are as follows: " 1 . In the allotment of bonds at the end of each quarter, wil e limitation of $25,000,000 be divided by four and the amount of bonds purchased by the reserve banks in that quarter be deducted from the quarterly amount?" As to this the Board has had passed the following resolution: Resolved, That until further notice, in requiring Federal Reserve Banks to purchase United States bonds offered for sale by member Banks under the provisions of section 18, the Federal Reserve Board will not allot to any one Federal Reserve Bank in any one quarter more than one-fourth of its pro rata share of the bonds to be purchased during the calendar year under the provisions of this section. "2. In case the applications received exceed the amount to be allotted, will the allotments be based upon the order of receipt of the applications, or upon the pro rata share of each applying bank?" It would seem that if the applications filed with the Treasurer exceed the amount to be allotted in any one quarter, the allotments 356 FEDERAL RESERVE BULLETIN. should b e based n o t u p o n the order of receipt of such applications b u t rather u p o n the pro r a t a share of each applying bank. The A c t evidently contemplates t h a t any b a n k which has its application on file 10 days prior to the end of the quarterly period will be on an equal footing with a n y other b a n k which has filed a similar application, and the order in which such applications are received would seem to b e immaterial as long as they are filed before t h a t 10-day period. " 3 . Will a n y mention be made of bonds securing circulation other t h a n the 2 per cent V Bonds made eligible for sale b y member banks under section 18 are n o t limited to 2 per cent bonds b u t r a t h e r to a n y United States bonds which are securing circulation. T h a t excludes the 3 per cent P a n a m a bonds, series 1911, b u t the 1908-1918 3 per cent bonds and also the 4 per cent bonds, loan of 1925, are eligible if they, as a m a t t e r of fact, are securing circulation. " 4 . To w h a t date will the accrued interest on the bonds t h a t are sold be figured V There is nothing definite in the A c t to indicate w h a t date shall be fixed to determine the amount of accrued interest on the bonds sold under section 18, b u t all provisions of t h a t section, as read together, would seem to justify the conclusion t h a t the accrued interest should bb figured as of the date on which the lawful money to cover the purchase price of such bonds is deposited with the Treasurer of t h e United States. " 5 . If an application to sell bonds is n o t granted in full a t one quarter day, will it be considered as continuing in effect for the< balance a t the n e x t quarter day, and so on, until the sale is completed?" The Board believes t h a t banks whose applications have n o t been granted in!full a t one 'quarter day should reapply. <' ••:•:••, Mr. Strong raises again the question whether or n o t the limitation of $25,000,000 contained in the proviso of section IS prohibits the p u r chase b y Federal Reserve Banks of bonds in XOVEMBEE l, 1915. the open m a r k e t . T h e Board h a s already ruled on two or three occasions t h a t t h a t proviso is not intended to and does not apply to or restrict the purchase of Government bonds under the provisions of section 14 of the Act. Conference of Governors, The fifth conference of Governors of Federal Reserve Banks was held in Minneapolis, opening on October 20. There were present at the meeting, Governors Benjamin Strong, jr., Federal Reserve Bank of New York; A. L. Aiken, of the Federal Reserve Bank of Boston; C. J. Rhoads, of the Federal Reserve Bank of Philadelphia; J. B. McDougal, of the Federal Reserve Bank of Chicago; A. C. Kains, of the Federal Reserve Bank of San Francisco; George J, Seay, of the Federal Reserve Bank of Richmond; E. R. Fancher, of the Federal Reserve Bank of Cleveland; Theodore Wold, of the Federal Reserve Bank of Minneapolis; R. L. Van Zandt, of the Federal Reserve Bank of Dallas; C, M. Sawyer, of the Federal Reserve Bank of Kansas City; W. W. Hoxton, Deputy Governor of the Federal Reserve Bank of St. Louis; F. W, Foote, a director of the Federal Reserve Bank of Atlanta; C. R. McKay, of Chicago, with L. H. Hendricks and J. F, Curtis, of New York. For the last two days Hon. Paul M. Warburg and Hon. W. P. G. Harding, of the Federal Reserve Board, were present at the conference. This is the second conference of the governors that has been held away from the city of Washington, the first one having been held in Chicago last June. Governor Strong, who is chairman of the conference for the current year, presided at the meeting. During the course of the four-day session about 70 topics were discussed. Among them were the following: Directors' profits in dealing with member banks. Appointment of representative to examine Federal Reserve notes sent to Washington for destruction, .Periodic reports of reserves by member banks. . ; NOVEMBER 1, 1915. Report of the executive committee of the conference, composed of Mr. Mc-Dougal, chairman, and Messrs. Aiken, Strong, Rhoads, Fancher, and Seay. Reports of conference of auditors and accountants of the reserve banks held at Washington last summer. Report of a conference of transit managers of the banks held in Chicago early in the month. Report of committee on method of.computing dividends. Collections and clearances. Gold settlement fund, daily settlements. Functions to be exercised in behalf of member banks. Cost of Federal Reserve notes. Cost of returning Federal Reserve notes to bank of issue. Retirement of national-bank notes and purchases of Government bonds. Reserves of member banks. Cooperation with national-bank examiners. Standard form 6i trade acceptance. Domestic acceptances. Commodity rates. Advisability of limited open market transactions. Discussions were also had with respect to the advisability of recommending the enactment of amendments to the Federal Reserve Act on the following topics: Date of transfer of reserves for member banks. Elimination of designation of capital for foreign branches of national banks. Direct authorization of domestic branches for national banks. Par collections. Domestic acceptances. Loans on real estate. Savings bank membership. The conference adjourned to meet in about two months, probably in the city of Washington in order to be accessible to the Federal Reserve Board. 11672—15 357 FEDERAL RESERVE BULLETIN. -3 GOLD SETTLEMENT FUND. Total deposits of the Federal Reserve Banks with the gold settlement fund have decreased slightly since the issuance of the last Bulletin, the amount now held being $55,470,000. During the same period, however, the deposits of the Federal Reserve Agents have been materially increased and now stand at §21,200,000, as shown in the table giving summary of transactions for the account of Federal Reserve Agents from September 8 to October 21. Tables showing the amount of total clearings to and including October 21, and the balances at the clearings are given below, also a table showing net changes in ownership of gold held in the fund, from which it appears that such changes have amounted to 5.94 per cent of the total clearings. Amount of clearings. Total clearings. Balances. Previously reported, Settlement of— Sept. 30 , Oct.7 Oct. 14 Oct. 21 $428,600,000 $87,355,000 25,739,000 30,640,000 24,400,000 38,874,000 6,542,000 8,060,000 4,120,000 4,643,000 Total... 548,163,000 110,720,000 Changes in ovmership of gold. Federal Reserve Bank. Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas* San Francisco Total . Total net deposits. Balance, Oct. 14, 1915. Increase. 53,230,000 •52,620,000 3,734,000 23,000,000 6,950,000 2,339,000 2,580,000 4,597,000 *S2*6i7,'666" 1,500,000 6,901,000 5,404,000 1—3,240,000 2,736,000 5,976,000 5,098.000 5,770,000 10,863,000 1,220,000 4,054,000 2,834,000 1,400,000 5,125,000 3,725,000 3,330,000 2,748,000 1—1,250,000 6,062,000 7,312,000 5,930,000 3,683,000 65,470,000 55,470,000 Decrease. $610,000 24,266,000 4,611,000 552,000 2,297,000 32,366,000 1 32,366,000 i The withdrawals of the Federal Reserve Bank of Atlanta and the Federal Reserve Bank of Dallas have exceeded the amounts of the gold deposit made by them. . 358 FEDERAL RESERVE BULLETIN, Gold settlement fund-nummary Federal Reserve Bank o— f Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louij Kansas City Dallas San Francisco Total Federal Reserve Bank o— f Boston New York Philadelrjhla Cleveland Atlanta St. Lonls Minneapolis Kansas City Dallas Total Federal Reserve Bank o— f Boston New York Philadelphia. Richmond Atlanta Chicago St. Louis Minneapolis KansasCity Dallas San Francisco Total Federal Reserve Bank o— f New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Total Balance last statement, Sept. 23, 1915. S3,228,000 8,789,000 2, SOS, 000 4,813,000 6,396,000 2,483,000 12,454,000 5 124,000 2.658,000 3,028,000 5 053,000 1,916,000 58,750,000 Balance last statement, Sept. 30, 1015. Withdrawn. Deposited. "$5,*666,'666" Balance last statement, Oct. 7, 1915. $3,257,000 1,954,000 3 497,000 Z, 850,000 7,217,000 2,548,000 14,111,000 5,032,000 3 733,000 2,711,000 5,789,000 2,851,000 56,550,000 Balance last statement. Oct. 14, 1915. $5,000,000 Total debits. Total credits. $2,929,000 9,256,000 3,364,000 433,000 876,000 604,000 3,153,000 2,952,000 170,000 1,422,000 568,000 12,000 $1,847,000 5,499,000 6,025,000 480,000 2,095,000 1,820,000 3,739,000 1,550,000 663,000 1,115,000 1,351,000 549,000 25,739,000 25,739,000 $5,600,000 230,000 »900,000 12,000,000 1,396,000 307,000 1,500,000 9,400,000 5,230,000 Gold. Withdrawn. Deposited. 1,080,000 3,050,000 Gold. Withdrawn. Deposited. 5,600,000 5,600,000 6,542,000 Credit. Debit. $872,000 Net debits. $6,350,000 '138,'000 $872,000 872,000 872,000 8,060,000 . Transfers. Debit. Credit. $264,000 Net debits. $945,000 944,000 158,000 149,000 i$900,000 tl,000,000 1,576,000 $264,666 348,000 *53O,666 2,430,000 264,000 Gold. Withdrawn. Deposited. 3,650,000 5,000,000 264,000 4,120,000 Credit. Net debits. $300 000 $21,000 21," 666* 21,000 321,666 $2,540,000 1,021,000 1,082,000 34,000 34,666 376,000 376,000 4,643,000 Sept. 30, 1915, balance in fund after clearing. 783,000 537,000 $2,146,000 4,432,000 5,069,000 4,860,000 6,945,000 1,699,000 13,040,000 3,728,000 3,151,000 2,721,000 4,336,000 2,453,000 6,542,000 54,5S0,000 $1,661,000 47 000 1,219,000 1,216,000 586,000 493,000 Oct. 7, 1915, balance in fund after clearing. Total debits. Total credits. Net credits. $4,050,000 10,061,000 3,650,000 454,000 1,187,000 875 000 5,132,000 2,630,000 145 000 1,306,000 493,000 57,000 $5,161,000 4,311,000 2,078,000 310,000 2,159,000 1,724,000 6,203,000 3,934,000 727,000 1,446,000 2,126,000 455,000 $1,111,000 972,000 849,000 1,071,000. 1,304,000 582,000 140,000 1,633,000 398,000 $3,257,000 1,954,000 3,497,000 3,850,000 7,217,000 2,548,000 14,111,000 5,032,000 3,733,000 2,711,000 5,789 000 2,851,000 30,640,000 30,640,000 8,060,000 56,550,000 Settlement of Oct. 14,1915. Total debits. Total credits. $3,384,000 7,600,000 3,203,000 539 000 1,620,000 1,198,000 3,406,000 1,153,000 103,000 1,603,000 467,000 4,000 $2,439,000 6,716,000 3,045,000 390,000 3,022,000 1,213,000 1,830,000 2,150,000 613,000 1,315,000 1,072,000 595,000 24,400,000 24,400,000 Net credits. Total debits. Total credits. $5,954,000 12,471,000 5,439,000 812,000 2,992,000 964,000 4,933,000 3,772,000 129,000 997,000 398,000 13,000 $5,962,000 9,931,000 4,418,000 1,708,000 3,277,000 2,137,000 3,851,000 3,797,000 1,011,000 1,348,000 1,180,000 254,000 38,874,000 38,874,000 Oct. 14. 1915, balance in fund after clearing. 605,666 591,000 $2,312,000 1,274,000 3,339,000 3,701,000 7,719,000 1,563,000 12,271,000 6,029,000 4,243,000 2,363,000 5,804,000 3,442,000 4,120,000 54,120,000 $1,402,000 15,000 997,000 510,000 Settlement of Oct. 21,1915. Transfers. Debit. Net credits. Settlement of Oct. 7,1915. Transfers. . * Transfer to Federal Reserve Agent. Net debits. $1,082,000 3,757,000 $5,600,000 $2,312,000 $5,000,000 1,274,000 3,339,000 3,701,000 7,719,000 i $1,100,000 1,563,000 12,271,000 6,029,000 "2,*666,*666* 4,243,000 2,353,000 5 5,804,000 550,000 3,442,000 54,120,000 Settlement of Sept. 30,1915. Credit. Debit. $2,146,000 4432)000 $3,000,000 5 069,000 4,850,000 6 945,000 "»"$700"000" 1.699,000 13,040,000 3.72S, 000 3,151,000 200,000 50,000 2,721,000 1 336,000 180,000 2,453,000 54,580,000 of transactions Sept. $0,1915, to Oct. 21, 1915. Transfers, Gold. NOVEMBER 1, 1915. Net credits. Oct. 21, 1915, balance in fund after clearing. 25,000 882,000 351,000 782,000 241,000 $2,620,000 3,734,000 2,339,000 4,597,000 6,904,000 2,736,000 10,868,000 4,054,000 5,125,000 2,748,000 6,062,000 3,683,000 4,643,000 55,470,000 $8,000 896,000 285,000 1,173,000 *$500,000 transferred to Federal Reserve Agent. NOVEMBER 1, 1915. 359 FEDERAL RESERVE BULLETIN. Federal Reserve Agents' fund—-Summary Week ending Sept. 9, 1915. of transactions Sept. 8,1915, to Oct. 21,1915. "Week ending Sept. 16, 1915. Week ending Sept. 23, 1915. Week ending Sept. 30, 1915. Deposited. Depositod. Balance. Depositod. $2,600,000 $2,000,000 $1,100,000 2,000,000 4,500,000 1,000,000 $3,700,000 5,500,000 $900,000 2,000,000 $4,600,000 7,500,000 7,100,000 9,200,000 2,000,000 12,100,000 Federal Reserve Apont at— Deposited. Richmond Atlanta Balance. $2,500,666 $2,500,000 Total 2,500,000 2,500,000 4,600,000 Balance. Week ending Oct. 7, 1915. 2,100,000 Week ending Oct. 14, 1915. Balance. Woelr ending Oct. 21, 1915. Federal Reserve Agent at— Deposited. Richmond Atlanta Dallas.. Total $700,000 700,000 .."..' Balance. Deposited. Balance. $5,300,000 7,500,000 $900,000 SG,200,000 1,000,000 8,500,000 500,000 500,000 $1,100,000 500,000 4,400,000 $7,300,000 S, 500,000 1,000,000 4,400,000 12,S00,000 2,400,000 15,200,000 6,000,000 21,200,000 Balance. Deposited. DISCOUNT RATES. Discount rates of each Federal Reserve Bank in effect Oct. 28', 1915. Maturities Maturities Maturities of over 10 of over 30 of 10 days to 30 days, to 60 days, and less. inclusive inclusive. Boston New York..... Philadelphia... Cleveland Richmond Atlanta Chicago St. Louis , Minneapolis... Kansas City... Dallas San Francisco. Trade acceptances. AgriculMaturities tural and of over 60 live-stock to 90 days, paper over To 60 days, Over 60 to 90 days, inclusive. 90 days. inclusive. inclusive. Commodity paper. 13 3 3 (*) i Rate for commodity paper maturing within 90 days. * Rate for commodity paper maturing within 30 days, 31 per cent; over 30 to 60 days, 4 per cent ;over 60 to 90 days, 4J per cent; over 90 days, 5 per cent. . Authorized rate of acceptances, 2 to 4 per cent. • •• . On March 10 the Federal Reserve Board fixed the following rates for rediscounts between Federal Reserve Banks: 3J per cent for maturities of 30 days or less; 4 per cent for maturities of over 30 days to 90 days, inclusive. 360 PEDEBAL BESEBVE BULLETIK. NOVEMBER 1, 1015. INFORMAL RULINGS OF THE BOARD. Below are reproduced letters sent out from time to time over the signatures of the officers of the Federal Reserve Board, which contain information believed to be of general interest to Federal Reserve Banks and member banks of the system: Open-Market Operations. The Federal Reserve Banks are empowered under section 14 of the Federal Reserve Act, subject to rules and regulations prescribed by the Federal Reserve Board, to— "purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations or individuals, cable transfers and bankers' acceptances and bills of exchange of the kinds and maturities by this Act made eligible for rediscount, with or without the indorsement of a member bank." The Board has already issued regulations covering the purchase in the open market of bankers' acceptances, of United States Government bonds, and of municipal warrants, but it has not yet issued regulations relating to "cable transfers" or to the purchase of "bills of exchange of the kinds and maturities by this Act made eligible for rediscount." The original bill for the establishment of Federal jReserve Banks, etc., permitted the purchase in the open market of "notes, drafts, and bills of exchange," but in the bill as finally enacted the words "notes and drafts" were stricken out in section 14, although they are retained in section 13, which relates to discount operations for member banks. After careful study and investigation the Board has reached the conclusion, in which it is sustained by opinion of Counsel, that Congress beyond question drew a distinction in sections 13 and 14 between the several forms of commercial paper, and that promissory notes, even though bearing an additional indorsement, must be regarded as excluded from open-market purchases under section 14. There remain then, as eligible for purchases under this section, "cable transfers" and "bills of exchange" of two kinds, (1) so-called foreign bills of exchange, and (2) domestic bills of exchange (other than bankers' acceptances) drawn by one party on another, as by a seller of goods upon the purchaser, such as have been classified by the Board as "trade acceptances," either accepted or not accepted at the time of purchase. In view of the abnormal conditions prevailing in Europe, the Board feels that the banks should be more than usually cautious in any foreign exchange operations entered into at this time. As to open-market dealings in "domestic bills," while the special rate authorized for this class of paper may prove in the future a helpful factor in developing its freer use, the Board has been informed that the supply of desirable paper is still very limited. There are also other objections that may be urged against openmarket operations in "domestic bills" at this time. However, the Federal Reserve Board recognizes that the Federal Reserve Banks have the right to engage in open-market operations in bills of exchange and that the decision whether the Federal Reserve Banks should engage in such open-market transactions rests entirely with them, severally, and not with the Federal Reserve Board. Should the transactions engaged in by any bank assume very large proportions or develop along lines which would make regulation appear desirable, the Federal Reserve Board will exercise its right at any time to regulate such transactions, but at present the Board deems it best to leave each Federal Reserve Bank free to exercise the authority granted under section 14, with respect to bills of exchange, without governing or restricting regulations, it being understood, of course, that any Federal Reserve Bank; desiring to establish an open-market rate for domestic bills of exchange by this Act made eligible for rediscount will submit such rate to the Board for approval and determination in the customary way. You are cautioned that no bill may be bought in the open market which, even if indorsed by a member bank, would be ineligible for rediscount under section 13. The Board appends opinions of Counsel bearing upon the subject of open-market transactions. Please call this letter to the attention of your board of directors. OCTOBER 8, 1915. Election of Directors. Inasmuch as the term of office of one Class A director and one Class B director of your bank will expire December 31, 1915, arrangements should be made to hold an election of directors to succeed those whose terms expire, such new directors to serve for terms of three years each. For your information and guidance there are inclosed copies of forms used by the Reserve NOVEMBER l f 1915. FEDERAL RESERVE BULLETIN. 361 Bank Organization Committee and letters of instruction sent at that time setting forth the procedure in such cases. The Board has fixed November 16 as the date for opening the polls. You should accordingly arrange to have printed: (a) Certificate of election of district reserve elector. (b) Certificate of nomination for Class A twelfths, and for each succeeding 6 months an additional one-twelfth" of 12 per cent of the aggregate amount of its demand deposits, and of 5 per cent of its time deposits. Similar language is used with reference to the banks in reserve cities. The "said date" referred to is the date officially announced by the Secretary of the Treasdirector. -»f .-i ':••''• ury for the establishment of a Federal Reserve (c) Certificate of nomination for Class B Bank in any district. That date was Novemdirector. . :r ber 16, 1914. These certificates, copies of :which are inIt therefore fol^ys that on November 16, closed, contain form of resolution to be adopted 1915, country banks and banks in reserve cities by the member banks. < A sufficient number of will be required to pay their Federal Reserve these certificates should be prepared and mailed Bank an additional installment of reserves. to each member bank in the group which elected The amount thus to be paid by them will be the director whose term expires on December for country banks one-twelfth of 12 per cent 31, 1915. It will be necessary, therefore, for of their demand deposits, as held on and after you, as chairman of the board, to group the November 16, plus one-twelfth of 5 per cent banks in your district in accordance with the of their time deposits; and for banks in reserve Act, following the general lines of the plan set cities one-fifteenth of 15 per cent of their demand forth in the circular of the Organization Com- deposits, plus one-fifteenth of 5 per cent of their mittee,'herewith inclosed. When these cer- time deposits. tificates have been returned by the banks the It is suggested that each Federal Reserve electors should be listed and the preferential Bank call the attention of each member bank ballot prepared. A copy of the form used in to the date upon which the transfer of reserves the first election is also inclosed for your above referred to is due, and that it arrange information. •" ; such additional details with 'member banks Under the provisions of section 4 this ballot as may seem desirable. The Board recomneed not show the name of the bank placing in mends that the member banks be called upon nomination any candidate, but a separate list to pay their own express charges unless there may, at the option of the chairman, be pre- is some good reason why the Federal Reserve pared showing by w k ° m each candidate is Bank of the district thinks it best to bear these nominated. If this is done the ballot form express charges itself. The form in which payused will be somewhat simplified, since the ment is to be made may be suggested by the voting columns, showing the first, second, and Federal Reserve Bank in such circular or notice third choice of the elector, can appear on the as it may send out, and it will be well to make same page as the name of the candidate. some reference to the provision of the Act that Arrangements should be made to have the any Federal Reserve Bank may receive from ballots in the hands of the electors by=Novem- its member banks as reserves "not exceeding ber 1. The polls will be closed after 15 days one-half of each installment eligible paper as from November 16. described in section 13, properly indorsed and acceptable to the said Federal Reserve Bank* SEPTEMBER 30,1915. Payment of Reserves, Inasmuch as the date when the next installment of reserves will be payable by member banks to Federal Reserve Banks is approaching, the Federal Reserve Board has directed the transmission of this letter for the purpose of securing uniform action with reference to such payments. Section 19 of the Federal Reserve Act requires each member bank not in a reserve or central reserve city to keep—* "in the Federal Reserve Bank of its district for a period of 12 months after said date two- OCTOBER 1, 1915. "Federal" Not Now Prohibited. You are advised that there is no provision of the Banking Act or of the Federal Reserve Act which prohibits the use of the word "Federal" by a State institution as a part of its name. Section 5243 of the Revised Statutes of the United States forbids the use of the word 11 National" as a part of the name of a bank not. organized under the national currency laws, and the matter is now being considered 362 FEDERAL RESERVE BULLETIN. of asking Congress to amend this section so as to include the word " Federal." The Board is glad to have this information, as it may prove helpful in obtaining the desired legislation. OCTOBER 4, 1915, Eligible Acceptors. I have received your letter of October 2, and h&ve submitted the same to the Board. Your letter contains the following paragraph: "The point on which he desires information is, whether or not a firm, person, company, or corporation referred to in said subdivision (b) must be engaged exclusively in banking, or the business of accepting or discounting before its acceptances can be handled by Federal Reserve Banks, In other words, a commission house at Fort Worth, as incident to their main business, are engaged in the business of accepting and discounting; such is not their sole business, but they are engaged in that business in a limited degree. Now, the point upon which I desire information is, whether or not the Federal Reserve Bank may handle acceptances of concerns who do some accepting and discounting, but who do not engage exclusively in that business, or in the banking or trust company business?" On this point I am directed to cite to you the provisions of the acceptance regulation, and to say that the question of determining the eligibility of an acceptor under the regulation is left to tne discretion of Federal Reserve Banks themselves. It is, of course, understood that the Board would not wish to see concerns regarded as eligible acceptors which are not in the habit of carrying on some acceptance business regularly and are not generally of such character and standing as to qualify their acceptance as a "banker's acceptance," OCTOBER 8,1915. 1915. Compensation of Deputy Reserve Agents. At a meeting of the Federal Reserve Board, held this morning, October 6, I was instructed to inform the respective Federal Reserve Agents and directors of Federal Reserve Banks that, where the compensation of the Deputy Federal Reserve Agent is fixed upon a per diem basis and no regular duties have been assigned to him by the Federal Reserve Agent or by the respective boards of directors, no payment of compensation should be made to such deputy agents except for official services rendored to the banks at the request, in writing, of said Federal Reserve Agents or of said boards of directors. This ruling is not intended to prevent the payment of directors' fees for attendance at meetings of the board. OCTOBER 6, NOVEMBER l p 1 U 1 5 . Member Banks Not Receivers* I wish to acknowledge receipt of your letter of October 8, relating to the question of national banks acting as receivers. The Board has received a number of inquiries of this nature and has ruled that section 11 (k) does not confer upon it the authority to authorize national banks to act as receiver, the powers referred to in that section being limited to trustee, executor, administrator, and registrar of stocks and bonds. OCTOBER 11, 1915. Clayton Act Interpretation. I wish to acknowledge receipt of your letter of October 12, relating to the question of your eligibility to serve as a director of both a national bank and a savings bank organized and operating under the laws of your State. You are advised that there is nothing in section 8 of the Clayton Act which prohibits a person who is a director and officer of a national bank with total resources exceeding $5,000,000 from serving at the same time as a director of a State institution with resources less than that amount, provided, first, that tho State institution is not a member of the Federal Reservo System, and second, that the State institution is not located in the same city as the national bank, or, if in the same city, that the city has loss than 200,000 inhabitants. Under the facts as stated by you it is evident that you are eligible to qualify as a director of both institutions mentioned in your letter. OCTOBER 14, 1915. Window Advertising. Your letter of October 6 has been received and placed before the Board, and by it referred to a special committee. The opinion was expressed that member banks should be discouraged from placing signs on their windows reading "Deposits have Government protection," or "This bank has Government protection." It was suggested rather that a sign reading "Member of Federal Reserve System offers depositors all the protection and facilities afforded by membership." OCTOBER 15, 1915. NOVEMBKB 1 , 1 9 1 5 . FEDEEAL BESEBVE BULLETIN. 363 LAW DEPARTMENT. The following opinions of counsel have been A mortgage, on the other hand, is more than authorized for publication by the Board since either of these, for it is in no way dependent the last edition of the Bulletin: ~~ upon possession and legal title vests in the mortgagee outright, the mortgagor retaining a Pledges of Collateral Security. Kediscounts held by a Federal Reserve Agent as secur- mere equity of redemption. In the case of the ity for Federal Reserve notes, and gold order certificates pledge, however, the general property or title deposited with a Federal Reserve Agent for the purpose of remains in the pledgor, the pledgee obtaining reducing the liability of a Federal Reserve Bank for its a specific property merely for the security of outstanding Federal Reserve notes, must be so indorsed the obligation. (Jones v. Baldwin, 12 Pick. as to enable such agent to realize on such securities or to (Mass.), 316; Thompson v. Dolliver, 132 convert such certificates into gold if necessary. Mass., 103; Parshalv. Eggart, 52 Bab. (N. Y.) 367.) JUNE 28, 1915. There is au exception or qualification to this Sm: The following question has been regeneral distinction between mortgages and ferred to this office|for an opinion: (1) Must rediscounts hold by a Federal Re- pledges, regarding the transfer of title, in the serve Agent as collateral for Federal Reserve case of choses in action or negotiable instruments. (Jones on Collateral Securities and notes be indorsed payable to such agent? Pledges, 3d ed., p. 14.) This exception is a The term "collateral security" or "collateral" has been defined in Jones on Collateral natural result of the fact that a negotiable inSecurities and Pledges to mean "a pledge of strument usually can not be pledged without a transfer of title necessarily resulting from the incorporeal property assignod or transferred transfer of possession. The'fact that the title and delivered by a debtor * * * to a does pass in such a case does not of itself make creditor as security for the payment of a debt the transaction a mortgage. (2 N. Y. 443.) or the fulfillment of an obligation/' In discussing this point in Gay v. Moss, 34 In consequence, section 16, in providing that Cal. 125, 132, the court said: a Federal Reserve Bank shall deposit collateral "The with the Federal Reserve Agent as security for the thingassignment was absolute in form, but assigned is a chose in action, and the Federal Reserve notes, impliedly requires that assignment and delivery are necessary to give notes and bills made eligible for this purpose the pledgee the full authority to readily control it, and afford a prompt means of making the be pledged with the Federal Reserve Agent. In order, therefore, to determine what steps pledge available. For these reasons the fact that the in form by must be taken to effect a valid pledge of the in case oftitle passes action, doesthe assignment, a chose in not necessarily securities deposited with the Federal Reserve make it a mortgage. It is a pledge * * *." Agent as collateral for Federal Reserve notes, On page 15 of Collateral Securities and it is necessary to discuss briefly the legal points Pledges, supra, it is stated that— involved in the law of pledges. the pledge (of negotiable paper) A pledge is more than a lien. Both depend an"To makesecurity, it is necessary that the effectual upon a continuance of possession by the pledgee should have the legal title. * * "* pledgee or lienee and, generally speaking, title A transfer of the title to such incorporeal propremains in the debtor in both cases. But the erty is generally an essential part of the depledgee, unlike the lienee, has an implied livery of it in pledge. An absolute transfer of property as security power of sale, and this is the main distin- suchnot a mortgage. The for a debt is a pledge and general property may guishing feature between the two. (Doane vm be regarded as remaining in the debtor, though Russell, 3 Gray (Mass.), 382; First National the legal title may be transferred to the creditor." Bank v. Harkness, 42 W. Va., 156, 164.) 364 FEDERAL RESERVE BULLETIN. It would seem, therefore, that a Federal Reserve Bank, in transferring eligible paper to a Federal Reserve Agent as collateral security for Federal Reserve notes, should indorse such paper in some manner—to be discussed hereafter—such as will give to the agent the legal right to realize directly on this security whenever it is necessary. It is true that negotiable paper made payable to order, may be pledged by the delivery of possession without indorsement, but in such case the pledgee obtains a mere equitable security, good as between him and the pledgor. The pledgor retains legal title, and though the pledgee could maintain a suit upon it in the name of the pledgor—and in some States in his own name—nevertheless, in such action he would be subject to any equitable defense against the pledgor set up by the defendant. There is a further objection in the fact that the mere possession of such paper when not indorsed to the Federal Reserve Agent is not sufficient evidence that he is holding it in pledge. In such a case there must be some further evidence of a contract of pledge before the holder could be declared a pledgee. (Jones on Collatoral Securities and Pledges, p. I l l ; Sharmer v. Mclntosh, 43 Nebr., 509.) In this latter case two notes were delivered to the pledgee, under exactly similar circumstances. One was indorsed, the other unindorsed. The court held that the indorsed note was a valid pledge, under the facts, but that the unindorsed note was not, because there was no evidence of an actual contract of pledge. There must be, of course, a contract, either expressed or implied, in all cases. The general rule is that a mere delivery of the property, without any writing, constitutes a valid pledge, the contract being implied in law, but tho delivery of an .unindorsed negotiable note is not of itself sufficient evidence. A collateral agreement giving the Federal Reserve Agent power of attorney to collect on all paper in his possession would give him only the right to sue on tho paper in the name of the Federal Reserve Bank, and he would NOVBMBEK 1, 1915. be subject to all equities or offsets which could be made against the bank itself. Because of these objections, it seems a far safer and wiser course to require Federal Reserve Banks to make a valid legal pledge of paper deposited with the Federal Reserve Agent as collateral security," and in order to do this, it is necessary that an indorsement be made which would make the note payable to the Federal Reserve Agent, giving to him the legal right to realize directly, and without danger of equitable defenses, on the security in his possession. It is suggested, therefore, that in any case where the paper is not indorsed in blank by the member bank, the indorsement by the Federal Reserve Bank may be made in any one of the three following ways: (1) The Federal Reserve Bank may indorse the rediscounts in blank; (2) It may indorse them to the order of the Federal Reserve Agent; or (3) It may indorse them, "Pay to the order of any bank or banker or to the Federal Reserve Agent, or to ourselves/' It is to be noted, however, that if eligible paper is tendered to the Federal Reserve Agent as collateral security indorsed in blank by the member bank which secured the rediscount, or if the paper is indorsed to the order of the Federal Reserve Bank or the Federal Reserve Agent, it will not be necessary for the Federal Reserve Bank to make any further indorsement in order to vest the proper title in the Federal Reserve Agent. In such case, however, the list of rediscounts filed with the Federal Reserve Agent showing securities deposited as collateral for Federal Reserve notes should contain a full description of all such items in order that they may be identified, if necessary, as a part of such collateral security. It has been suggested by some of the Federal Reserve Banks that they would prefer not to reindorse rediscounts p payable to the Federal Reserve Agent, because such an indorsement would indicate that this paper had been used as the basis of a note issue; but, if the indorsement suggested above—that is, an indorsement payable "to the order of any bank or NOVEMBEtt 1, 1 9 1 5 . FEDERAL RESERVE BULLETIK. 365 banker, or to the Federal Reserve Agent, or to Single Name Paper. ourselves/' be made, there will be no indication Any Federal Reserve Bank may, under the provisions on the paper that it has actually been used as of section 14 of the Federal Reserve Act, purchase acceptthe basis of a note issue and at the same time ances and bills of exchange of certain kinds and maturities in the open market, but promissory as disthe legal right due the reserve agent will have tinguished from bills of exchange, whether notes or more one been afforded. Under such an indorsement he names, are not eligible for such purchase. could collect direct on any rediscounts deposOCTOBER 8, 1915. ited with him for security of note issues. SIR: The question has been raised whether Another question presented is: Federal Reserve Banks may, under the pro(2) Must gold order certificates made pay- visions of section 14 of the Federal Reserve able to the Federal Reserve Bank be indorsed to the Federal Reserve Agent by such bank Act, purchase single-name paper in the open when such certificates are deposited with the market. Federal Reserve Agent for the purpose of Section 14 provides in part that— reducing liability on outstanding note issues ? "Any Federal Reserve Bank may, under It is suggested that when gold order certifi- rules and regulations prescribed by the Federal cates which are made payable to the order of Reserve Board, purchase and sell in the open the Federal Reserve Banks are deposited with market, at home or abroad, either from or the Federal Reserve Agent for the purpose of to domestic or foreign banks, firms, corporations, or individuals, cable transfers, and reducing liability on outstanding note issues, bankers' acceptances and bills of exchange of the reserve bank should indorse such certifi- the kinds and maturities by this act made cates payable "to the order of the Federal Re- eligible for rediscount, with or without the serve Agent or to the order of ourselves." Of indorsement of a member bank." course, if gold order certificates are issued payUnder the provisions of this section a Fedable "to the order of the Federal Reserve Bank eral Reserve Bank may purchase bills of or the Federal Reserve Agent/' no further in- exchange (that is, orders drawn by one perdorsement will be necessary. son on another to pay on demand, or at a It is true that these certificates are deposited fixed or determinate future time, a sum cerwith the Federal Reserve Agent, to be held by tain in money to order or to bearer), whether him until the Federal Reserve Bank offers in before or after acceptance, provided they are exchange its Federal Reserve notes, and it may of the kinds and maturities made eligible for be contended, therefore, that it is not necessary rediscount under section 13. to vest the legal title to such certificates in the It is clear, however, that promissory notes, Federal Reserve Agent. as distinguished from bills of exchange, are From a practical standpoint, however, he not eligible for purchase under section 14, may be called upon to transfer some part of the irrespective of the number of names thereon. gold represented by such certificates to tfo Respectfully, Treasurer for redemption of notes at the TreasM. C. ELLIOTT, Counsel. ury, or he may be called upon to deliver to th To Hon. CHARLES S. HAMLIK, Federal Reserve Bank only a part of the gold Governor Federal Reserve Board. so held; and so he must be placed in a position to convert such certificates into gold or into gold certificates, in denominations that will enable him to meet either of these two contin- Election of Directors. Any person coming within the inhibitions of Bection 8 gencies. of the act generally known as the Clayton Antitrust Act, Respectfully, who is elected a director at the annual election in January, M. C. ELLIOTT, Counsel. 1916, may serve in that capacity until October 15,1916. To Hon. CHAKLES S. HAMLIN, Governor Federal Reserve Board. 1167^-15 4 The vacancy occurring in such case on October 15, 1916, may be filled by the remaining directors. 366 FEDERAL EESBEVE BULLETIN. OCTOBER 12, 1915. SIR: In an opinion published on page 222 of the August, issue of the Federal Reserve Bulletin this office discussed the following question which had been submitted to it for consideration: "If a director of a national bank having deposits, capital, surplus, and undivided profits aggregating more than §5,000,000 is elected at the annual meeting in January, 1916, may he, without violating section 8 of the act referred to, continue to serve until January, 1917, and at the same time serve as a director of another national bank?7' It had been suggested that directors under such circumstances, elected in January, 1916, could serve until January, 1917, by reason of that provision of the act, generally known as the Clayton Act, which reads as follows: "* * * when a director, officer, or employee has been elected or selected in accordance with the provisions of this act it shall be lawful for him to contiaue as such for one year thereafter under said election or employment." In the opinion referred to, however, after reviewing the general provisions of the act in question, the conclusion was reached that a person who is a director or other officer of a bank having aggregate resources of more than $5,000,000 will be ineligible to serve as a director on the board of another national bank or of a State bank or trust company which is a member of the Federal Reservo System after October 15, 1916, although elected at a meeting held in January, 1916. From letters subsequently submitted to this office for consideration it appears that this opinion has been interpreted to mean that no bank can elect a director at the meeting to be held in January, 1916, if, after October 15, 1916, such director will become ineligible, and this specific question has been submitted to this office for consideration. NOVEMBER l , 1915. Section 5145, Revised Statutes, provides in part that directors of national banks shall be elected— 1 ' * * * at meetings to be held on such day in January of each year as is specified therefor in the articles of association. The directors shall hold office for one year and until their successors arc elected and have qualified." Section 5146, Revised Statutes, provides in part that— "Any director who ceases to be the owner of the required number of shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate his place." Section 5148, Revised Statutes, provides that— "Any vacancy in the board shall be filled by appointment by tho remaining directors, and any director so appointed shall hold his place until the next election." In view of these provisions it seems clear that directors who will be ineligible to serve after October 15, 1916, may be elected at the annual meetings to bo held in January, 1916; that they will become disqualified to servo on October 15, 1916, and that their offices will thereupon become vacant and their successors may be appointed by the remaining directors, who shall serve until the next election. In the case of State banks or trust companies which are members of the Federal Reserve System, but which are not subject to the provisions of tho Revised Statutes above quoted, successors to directors becoming disqualified on October 15, 1916, should be elected in accordance with the charters and by-laws of such associations and in conformity with any State laws which provide for filling vacancies on boards of directors of such State banks or trust companies. Respectfully, M. C. ELLIOTT, Counsel. To Hon. CHARLES S- HAMLIN, Governor Federal Reserve Board. NOVEMBER 1, 1915. FEDERAL RESERVE BULLETIN. Fiduciary Powers Granted. 367 Intradistrict Clearing System. Applications from the following banks for Immediate credit at par has since October 4, permission to act under section 11 (k) of the 1915, been given by the Federal Reserve Bank Federal Reserve Act have been approved since of New York to drafts on the Federal Reserve the issue of the October Bulletin, as follows: Bank of Richmond, Va. Notice of this arrangement was given in the following letter: DISTRICT No. 1. Trustee, executor, administrator, and registrar of stocks RICHMOND, VA., October 4t and bonds: First National Bank, Brandon, Vt. To members of the Federal Reserve Bank of RichTrustee, executor, and registrar of stocks and bonds: mond: Norway National Bank, Norway, Me. This is to advise you that, from this date, DISTRICT No. 3. Trustee, executor, administrator, and registrar of stocks and bonds: Deposit National Bank, Dubois, Pa. Peoples National Bank, Laurel, Del, DISTRICT No. 4. Trustee, executor, administrator, and registrar of stocks and bonds: First National Bank, Greenville, Pa. McDowell National Bank, Sharon, Pa. Trustee and registrar of stocks and bonds: German National Bank, Marietta, Ohio. DISTRICT No. 7. Trustee, executor, administrator, and registrar of stocks and bonds: Franklin County National Bank, Brookville, Ind. DISTRICT NO. 9. Trustee, executor, administrator, and registrar of stocks and bonds: Aberdeen National Bank, Aberdeen, S. Dak. your drafts on this bank will be received by the Federal Reserve Bank of New York from members of its collection system, until further notice for immediate credit at par. Up to the present time drafts on Federal Reserve Banks have been received by other Federal Reserve Banks subject to deferred credit, according to a prearranged schedule. The deferred credit perioa between the Federal Reserve Bank of New York and this bank has been one day, being the time of transit. The arrangement now made will have practically the enect of giving the currency of New York exchange to your drafts on this bank. We further advise you that by arrangement with the Federal Reserve Bank of New York, checks and drafts on all Richmond banks and trust companies, both members and nonmembers, will also be received by that bank from members of its collection system, until further notice, for immediate credit at par. Very truly, yours, GEO. J.SEAY, Governor. DISTRICT No. 11. Trustee, executor, administrator, and registrar of stocks and bonds: Marshall National Bank, Marshall, Tex. DISTRICT NO. 12, The total number of banks which have joined the intradistrict clearing system is 2,456, shown by districts as follows: District No. 1 50 Trustee, executor, administrator, and registrar of stocks District No. 2 District No. 3 and bonds: District No. 4 First National Bank, Milton, Oreg. District No. 5 American National Bank, Pendleton, Oreg. District No. 6 First National Bank, Pendleton, Oreg. District No. 7 First National Bank, Portland, Oreg. District No. 8 Seattle National Bank, Seattle, Wash. District No. 9 Trustee, executor, and administrator: District No. 10 First National Bank, Harrisburg, Oreg. DistrctNo.il Executor and administrator: District No. 12 First National Bank, Ontario, Oreg. Eegistrar of stocks and bonds: Total Nevada First National Bank, Tonopah, Nev. 126 120 123 91 74 116 365 184 951 96 160 2,456 368. FEDERAL RESERVE BULLETIK. NOVEMBEU 1, 1915. DISTRICT NO. 8. Additions to and withdrawals from the sysAdditions: tem since the publication of the lists in preFirst National Bank, Clarksville, Ark. vious issues of the Bulletin are as follows: National Bank of Arkansas, Pine Bluff, Ark. DISTRICT NO. 1. Additions: Old Colony Trust Co., Boston, Mass. First National Bank, Greenfield, Mass. Withdrawals: First National Bank, Suffield, Conn. DISTRICT NO. 2. Additions: First National Bank, East Newark, N. J. First National Bank, Morristown, N. J. Withdrawals: National Bank of Westfield, Westfield, N. J. First National Bank, Tuckahoe, N. Y. DISTRICT No. 3. Additions: Elk County National Bank, Ridgway, Pa. Withdrawals: Farmers National Bank, Watsontown, Pa. DISTRICT NO. 9. Additions: Farmers National Bank, Aitkin, Minn. German-American Bank, Minneapolis, Minn. Stockmen's National Bank, Fort Benton, Mont. Commercial National Bank. Great Falls, Mont. Great Falls National Bank, Great Falls, Mont. DISTRICT NO. 11. Withdrawals: First National Bank, Jacksonville, Tex. First National Bank, Mount Calm, Tex. First National Bank, Omaha, Tex. First National Bank, Sulphur Springs, Tex. DISTRICT NO. 12. Additions: Northern California National Bank, Redding, Cal. First National Bank, St. Maries, Idaho. First National Bank, Brigham City, Utah. DISTRICT NO. 4. Additions: First National Bank, St. Paris, Ohio. Withdrawals: Merchants National Bank, Butler, Pa, Spring Valley National Bank, Spring Valley, Ohio. DISTRICT NO. 5, Additions: First National Bank, Rocky Mount, N. C. First National Bank, Sumter, S. C. DISTRICT NO. 6. Additions: First National Bank, Daytona, Fla. First National Bank, Statesboro, Ga. First National Bank, Waynesboro, Ga. Citizens National Bank, Dickson, Tenn. Withdrawals: First National Bank, Aimiston, Ala. Cordele National Bank, Cordele, Ga. First National Bank, Sandersville, Ga. National Bank of Tifton, Tifton, Ga. First National Bank, Valdosta, Ga. First National Bank, Woodbury, Tenn. DISTRICT NO. 7. Additions: Mills County National Bank, Glenwood, Iowa. Withdrawals: Rush County National Bank, Rushville, Ind. Balances as Reserves. The question whether State banks which are members of the Federal Reserve System may count as part of their reserves balances carried with other State banks and trust companies has been under advisement by the Counsel of the Federal Reserve Board. Counsel now holds that, although the Illinois law is silent on the question, the Auditor of Public Accounts has specifically ruled that banks located in Illinois may count as part of their legal reserve, balances due from other State banks or trust companies, and it would seem to be entirely consistent with the purpose and intent of the Act for the Federal Reserve Board to permit State banks or trust companies located in Illinois, which become members of the Federal Reserve System, to count as part of their reserve balances due from other State banks or trust companies for a period of three years from the establishment of the Federal Reserve Bank of Chicago. The Board has approved Counsel's opinion in the matter. NOVEMBER 1, 1915. FEDERAL EESERVE BULLETIN. 369 REPORT OF FEDERAL RESERVE AGENTS' checks constitutes a restriction. Membership in the collection system requires them to carry COMMITTEE ON CLEARINGS. larger reserves, tho burden of which will bo felt increasingly as more and more of their reserves In this report it is suggested that each dis- are transferred to Federal Reserve Banks. trict be allowed to handle the clearing situation CHECKS ARE NOT COUNTED AS RESERVES AND in the way that seems best suited to meet its RESERVES PAY THE COST OF COLLECTIONS. local conditions. It allows an immediate credit and immediate debit basis, or a deferred credit One of the purposes of the Federal Resorve and deferred debit basis. It also suggests that System is to concentrate reserves and put an each Federal Reserve Bank may carry such end to the pyramided reserves which the portion of its float as it feels that the needs of National Bank Act has permitted. An inits member banks warrant. It also suggests evitable accompaniment of this reform is tho that the intradistrict and interdistrict systems elimination of checks-in-transit from the reof clearings can bo developed simultaneously. serves of member banks. Such checks, forIn addition to what the report sets out, per- warded by one bank to another for collection sonally, I believe: and counted in its reserve before either credit First. That whatever system is adopted by or remittance for them has been received, conthe respective Federal Reserve Banks, it should stitute a so-called u float" of large proportion^ be made mandatory on the member banks of the natural volume of which is often further each district. A positive stand on the part of increased by indirect routing and delayed each Federal Reserve Bank, it seems to me, remittance arrangements. will help the banks to overcome their spirit of In many cases tho same check-in-transit hesitation and inspire a spirit of confidence in serves as a reserve for both a country bank what is being done. and its reserve city correspondent. These two Second. That whatever system is adopted, classes of banks are able to use their balances the ultimate aim should be an immediate credit with reserve agents to compensate tho latter and immediate debit basis, as this, in my judg- for their services in collecting checks. Not ment, is the soundest banking method, one that only do they receive immediate credit for checks will correct the present evil of drawing checks they deposit with reserve agents, but checks against anticipated balances, and is less liable drawn upon them are seldom charged against to other abuses. their accounts; usually they are given several days in which to remit for them. Receiving Yours, respectfully, immediate credit themselves for foreign items, WM. MCC. MARTIN, they in turn do likewise for their depositors, Chairman Federal Reserve Agents' although a collection charge is sometimes Clearing Committee. made. In this way the circulation of checks outside the place of origin is encouraged and is ST. LOUIS, MO., October IS, 1915. constantly increasing. The desire to convert SIRS : As requested, the committee on clearings of the Federal Reserve Agents has had such checks promptly into reserves has created two meetings and respectfully presents the the present transit and reserve problem. following report: SITUATION WHEN RESERVES WELL NO LONGER The extension of the present collection faciliPAY FOR COLLECTIONS. ties of Federal Reserve Banks is more of a The Federal Reserve Act gradually requires reserve than a transit problem. In its transit aspects it opens a privilege to member banks, the reserves to be transferred from present rebut in its reserve aspects the collection of their serve agents to the reserve banks. With this (Presented to Federal Reserve Board Oct. 18.) 370 FEDERAL RESERVE BULLETIN, transfer the tangle of reciprocal collection arrangements which the competition of half a century has developed will be unraveled and ended. Country and reserve city banks will, therefore, be brought face to face for the first time with the problem of collecting their foreign items. Reserves with reserve agents will no longer provide and pay for their service. Clearly the service can not be had for nothing; some one must pay the cost. Checks now count as reserves and the reserves carry the cost, but when the reserves have been completely transferred this will not be so. The cost will fall primarily on the bank which receives the foreign item on deposit. If the bank is unwilling to bear the cost, it must obviously impose it upon the person depositing the foreign item by either exacting a charge, deducting interest, or compelling a larger balance to be kept. Now that the cost of collecting foreign items is to bo shifted from the reserve agent to the bank of original deposit, the latter must do just what the former has done—analyze its accounts and requiro those who deposit foreign items to keep compensating balances. FEDERAL RESERVE BANKS MUST PROVIDE COLLECTION SYSTEM. NOVEMBER 1, 1915. The first step has been taken within each district. The need for an extension of the present system across district lines and to include state bank items and noncash items will become more pressing as more and more reserves are transferred and member banks' ability to collect through reserve agents is correspondingly curtailed. The approaching transfer of reserves on November 16 suggests the desirability of prompt action looking toward the establishment of a general system for the collection of all items. Such a system should be planned on lines of unquestioned soundness, assuring the most direct collections, and guarding as far as possible against inflation, manipulation of domestic exchange, and the purchase of "float" by reserve banks. Not only should existing unsound practices developed, under competitive conditions be eliminated, but a constant watch should be kept for new elements of unsoundness to which new conditions may open the door. The practice now inaugurated, of figuring the reserves of member banks from the books of the reserve banks is sound and prevents checks in the mail from counting as reserve before they reach the reserve bank. I t is, however, not thoroughly understood by the member banks and as long as the Comptroller figures reserve from their books it will be difficult to change this long-established custom. Consequently, the 'reserve banks find themselves now carrying a considerable amount of float, although they have announced that it is against their policy to do so. In the Federal Reserve Bank of New York during August, reserves of member banks of the collection system outside of Now York City averaged about one million dollars under the legal requirements. Clearly, if the Federal Reserve System deprives member banks of their present collection facilities, it must provide a substitute; not only must it do this as a matter of both justice and law, but it should do it as a matter of policy as well. For in a majority of the districts rediscounting has brought and probably will bring but a few of the member banks into active relations with their reserve banks. At best the relationship through rediscounting is occasional. But the daily depositing of checks and drawing of drafts will foster a close and normal relationship between the reserve bank EFFECT OF CALCULATING RESERVES FROM BOOKS OF RESERVE BANKS, and its members and will be constant evidence both to them and to the public that the system If all member banks joined the collection is doing something for them; nor will the effect system and did business only with the reserve of this be lost on the State banks. bank, each country and reserve city bank NOVEMBER 1, 1915. FEDERAL BESERVE BULLETIN. would be required to increase the reserves carried to an amount sufficient to offset the uncollected checks which are now constantly in transit to its reserve agents and are counted by it as reserves. It is clear that the assumption of such a float will entail a distinct hardship on the country and reserve city banks. The hardship will be felt by them not only because it will reduce their loanable fund and their earnings, but because it will handicap them in competing with State banks. It is probable that until they have had time to adjust themselves and educate their depositors to carry their float the reserve banks will find it necessary to be somewhat lenient and share such portion of the burden as their resources will permit. It seems clear, however, that the development of the Federal Reserve collection systems will inevitably, by prompt collections, materially reduce the proportions of the present float. SUGGESTED METHOD OF ELIMINATING CHECKS FROM RESERVES. Having for so many years been able to count this float as reserve, it is probable that the complete assumption of it by the member banks can only be brought about by ruling of the Comptroller or by the imposition of the penalty for deficient reserves authorized by the Federal Reserve Act. The latter method would doubtless cause great dissatisfaction. The former is, therefore, to be preferred, but, in our opinion, it should not be attempted until the Comptroller has secured an agreement with all or nearly all State bank supervisors to make a joint ruling, effective after reasonable notice. At the same time, a study might profitably be made of what should constitute "net deposits" in calculating reserves, for adoption uniformly by supervising authorities. It is our belief that the excessive reserves now held by the banks make the present an especially favorable time to endeavor to effect this reform. 371 THE CHECK IS NOT LIKELT TO BE SUPERSEDED BY THE BANK TRANSFER. If remittances to distant points could be made by means of bank transfer checks, the problem of the "float" would be substantially eliminated, but the individual check is an instrument of such convenience and value to the user, carrying, as it doe3, its receipt for the payment, that it is not likely to be superseded; in fact, through the use of voucher and other receipt forms of checks, receipting of bills and invoices is being quite generally abandoned. EVENTUALLY THE DEPOSITOR MUST CARRY HIS FLOAT. While it is undoubtedly sound to charge a depositor for paying his checks which he sends out of town in preference to buying a bank draft, yet member banks feel that this is an. impracticable charge to impose. The practice even has some advantages to the member bank, for its reserve is not reached by its depositor's check as promptly as by its own draft. But for a depositor to draw against foreign items deposited, before the bank has collected or received credit for them, is obviously unsound. A bank may properly compensate itself for assuming the float which such a depositor, by accepting foreign items in payment of bills, creates either by charging for collecting such items or by requiring the depositor to maintain an increased average balance sufficient to carry them. EXPLANATIONS WHICH SHOULD BE MADE. * In developing the present systems and extending them across district lines, it is suggested that each reserve bank should make to its member banks a frank statement of the reserve requirements of the Act and of the effect which the operation of the collection 372 FEDERAL RESERVE BULLETIN. system will have upon their reserves. Also that it should explain to the member banks the desirability of analyzing the accounts at least of those customers who deposit out-of-town items and should offer its services to member banks to assist them in inaugurating such work. Also that the proposed development and extension of the collection system should be explained to the commercial, industrial, and agricultural interests of the country through appropriate organizations in order that they may understand the service which the Federal Reserve System is undertaking, largely for their benefit, and be prepared to bear their proper share of the burden. RECOMMENDATIONS. In view of the foregoing considerations, the committee recommends: 1. That as soon as practicable, and under arrangements which will make clear and restrict its use to the purposes for which it was established, settlements through the gold settlement fund should be made daily. 2. That tho Federal Reserve Banks should soon arrange to undertake the collection of notes and drafts, and of items drawn on nonmember banks upon the most favorable terms which can be arranged in the respective districts. 3. That the Comptroller should be asked to endeavor to arrive at an agreement with all state bank supervisors that on and after a given date checks in the mail shall not bo counted as reserve, 4. That through mutual agreements, each Federal Reserve Bank should receive checks drawn on members of the collection system of every other Federal Reserve Bank, deferring NOVEMBER 1, 1915. credit for them a sufficient number of days to allow them to reach the Federal Reserve Bank of the district of origin, plus the number of days, if any, allowed by such Federal Reserve Bank to reach the paying bank; and further 5. That through mutual agreement, any Federal Reserve Bank may receive for immediate credit checks drawn on members of the collection system of any other Federal Reserve Bank; and that whenever it is both practicable and more direct, member banks in such collection systems may send direct to the Federal Reserve Bank of the district of origin instead of to their own Federal Reserve Bank, 6. That the development of inter-district collecting need not await the completion of the intra-district collection systems, 7. That in extending the collection system both within and across district lines uniformity need not prevail but instead there should be freedom and flexibility of rules and requirements in order that each reservo bank may best meet the conditions and needs of its member banks. 8. That each Federal Reserve Bank should retain the right to change immediate credit points to deferred credit points, to assess upon members the cost of its collection service, to make charges against its member banks for using their balances to create exchange on other districts, and generally to make such rules and regulations as will enable it promptly to safeguard its position and protect itself against unsound developments. Respectfully submitted. WM. MCC. MARTIN, FREDERIC H. CURTISS, PIERRE JAT, Committee. NOVEMBER 1, 1915. FEDERAL RESERVE BULLETIN. 373 1914, the largest volume with two exceptions during the past 15 years. Exports for September to the port of Boston, 1915, $7,177,360; 1914, §4,185,524. Imports for September to the port of Boston, 1915, $12,246,533; 1914, $11,426,000. Receipts of the Boston post office for the month of September, 1915, show an increase DISTRICT NO. 1—BOSTON. of $30,000 over the corresponding month last There is considerable improvement in com- year, and in increase of $130,000 over August, mercial activities throughout the district and 1915. . the reports coming from the different lines of Net operating revenues of the New York, trade are not only cheerful but decidedly New Haven & Hartford Railroad: August, optimistic for the future. While it is difficult 1915, $2,095,039; August, 1914, $1,632,239. to differentiate between the normal seasonal Net operating revenues of the Boston & demand and the unusual demand for European Maine Railroad: August, 1915, $1,270,930; deliveries, or between the direct and indirect August, 1914, $921,607. stimulus those orders have given to general The demand for monoy is below normal, and business, still the domestic demand is daily rates continue much tho same as during the becoming more and more a factor. previous month. There is a strong demand for Money conditions, on the other hand, show good mercantile paper with but a limited little if any improvement over the preceding amount in the hands of the brokers. Call month, and while the financing of the Anglo- loans, 3 per cent, with a slightly better demand French loan, which was freely subscribed for from tho brokers; time money, 3 J to 4 per cent; in this district, was expected to strengthen town notes, 2.10 per cent for shorter maturities money rates, as yet no apparent change has and 2.40 per cent to 2.50 per cent up to six manifested itself. While the loans and dis- months; bankers' acceptances, 2 ^ to 2% per counts reported by the Boston, banks show cent. . an increase over the preceding month, on the Tho woolen mills are busy, and the worsted other hand, there is shown a heavy increase in mills are doing a fair amount of business. The the surplus reserves. The statistics for the reports of the wool trade show that the demand month as compared with the previous month is a little better if anything than the previous are as follows: month, and prices are about the same. Excess reserve of Boston banks: The boot and shoe industry shows a marked Oct. 16, 1915 §78,831,000 improvement over the previous month. OrSept. 18,1915 : 56,027,000 ders are said to bo coming in freely from tho Due to banks: South and West, and many of the larger conOct. 16,1915 141,529,000 Sept. 18, 1915 125,194,000 cerns are not only running full time, but are Demand deposits: having more trouble filling orders than getting Oct. 16, 1915.... 324,482,000 them. Tho wholesaler and tho retailer have Sept. 18, 1915 282,551,000 been running with a low stock of goods on hand Exchanges for the week ending— Oct. 16, 1915 203,064,782 for some time, and the present demand has cre. Sept.18, 1915 .- 144,404,908 ated a largo amount of orders to refurnish stock. * Oct. 16, 1914 134,223,120 The reports from the shoe business would indiBuilding and engineering operations in cate that business in that trade is better than it New England for the 10 months to October has been at any time during the past 18 months. Tho cotton-mill situation is much the same. 13, 1915, 5138,808,000, as compared with $134,219,000 in the corresponding period of The fine-goods mills in New Bedford are doing GENERAL BUSINESS CONDITIONS. General business and banking conditions are described in reports made by Federal Reserve Agents for the 12 Federal Reserve Districts. Below are given in detail digests of conditions in the various districts substantially as reported by Federal Reserve Agents. 374 FEDERAL BESEKVE BULLETIN. a good business, and those mills manufacturing coarse goods are showing a steady improvement. Mills are buying cotton from "hand to mouth," being loath to buy cotton at 13 cents when they had bought that commodity a year ago at 7 cents. Those mills who bought heavily of cotton last year at low prices are showing good profits, as the price of goods is not only firm but is steadily going up, and it is felt that it will not be long before the goods will advance so that even at the present price of the staple a satisfactory profit will be shown. The dye situation is still acute, and it is being felt to a considerable extent by the print mills, many of whom have been obliged to refuse orders and reduce their operations. Wood dyes and other substitutes are being used, but the operations of such mills have been considerably curtailed. While there is still some disturbance from labor, it is largely confined to industries working on foreign orders. The bond houses are reporting a good demand for the higher grade of railroad bonds; in fact, the demand is exceeding the supply, thus creating higher prices. Savings-bank deposits in the district are increasing, and savings banks are purchasers of high-class securities, many of which are coming into this market showing evidence of former foreign ownership. DISTRICT NO. 2—NEW YORK. During September industrial activity increased, wholesale and retail trade expanded, and collections improved. Reports almost uniformly good have been received from many sections of this district. A correspondent summarizes the general crop situation of New York State as slightly below normal with prices in general above average. The potato crop was very poor, and in some places peaches were left ungathered because of the low price. The most important recent event affecting American financial affairs was the formal agreement between the British and French Governments and a large American syndicate for the $500,000,000 five-year 5 per cent loan, which was underwritten at 96J, and is offered to the public at 98, It is also announced that Ameri- NOVEMBER 1, 1915. can bankers are arranging to make a one-year 6 per cent loan of $25,000,000 to the Italian Government, to provide, as in the case of the Anglo-French loan, for purchases in this country and to stabilize exchange. New York Clearing House banks on October 16 held deposits of $3,194,620,000, the largest amount ever reported by the association, and an increase of $1,269,266,000, or 65.9 per cent, since November 14, 1914. The loans and investments were §2,973,542,000, an increase of 8840,372,000, or 39,4 per cent, since November 14, 1914. Excess reserves were $188,263,720, Compared with the statement of August 28 last deposits have increased $384,998,000, loans, etc., $318,168,000, and excess reserves decreased $16,535,860. Statistics for September, 1915, compared with September, 1914, show the following: Exchanges through the New York Clearing House, $9,264,363,278, an increase of $4,636,239,836. The Stock Exchange was closed a year ago. New York City building permits, 28, for structures to cost $20,739,850—• no change in number, but increased $15,630,800 in amount. New York State failures, 204, with liabilities of $2,543,609, a decrease of 25 in number and $9,231,300 in liabilities. Exports of merchandise from the port of New York, $163,608,127, an increase of $101,712,521, and higher than any previous month. Record shipments of Canadian wheat are going out through New York this fall. The latest totals of exports from the port are $1,120,386,269, against $670,836,494 for the same period last year. Imports of merchandise at New York, $85,617,505, an increase of $9,498,964. Imports, according to the latest compilation, have reached a total of $740,218,702, against $760,664,577 for the same period last year. Including the $25,000,000 in sovereigns which arrived October 19, imports of sovereigns and francs amounting to $41,670,000 have been received at New York since September 10. In September, $81,661,500 par value of bonds sold on the New York Stock Exchange, NOVEMBER 1, 1915. FEDERAL RESEBVE BULLETIN. an increase of 38,600,000 over Augustj and 18,497,797 shares of stocks, a decrease of 1,936,440 from the preceding month. The speculative character of much of the trading has evoked some public comment. The heavy movement of exports causes continued weakness in foreign exchange. Sterling moved within a narrower range between 4.66J and 4.73 since it steadied after the violent fluctuations of last month. Continental rates were also steadier. Quotations for checks on October 21 were: Sterling, 4.66£; francs, 5.90; marks, 82J; lire, 6.39. DISTRICT NO. 3—PHILADELPHIA. Improved business conditions are reported from nearly all parts of the district. A hopeful sign is the report of increased sales by department stores, retail clothing, dry goods, grocery, and other concerns dealing directly with the consumer. While domestic trade is still below normal, for the first time this year we have reports of a distinct betterment. Most industries and manufacturing plants are busy, and in certain lines it is difficult to obtain merchandise, deliveries being slow. Labor is well employed, and from the point of view of the laboring man conditions look good for the fall and winter. The textile industry, one of the most important in this district, which a few months ago was the most depressed, now shows substantial recovery. In this district this industry includes manufactures of all kinds of cotton, woolen, and silk goods. It is estimated that plants are now being operated at from'70 to 75 per cent of their capacity, as compared with 30 or 40 per cent some months ago. There is much complaint that owing to the high cost of raw materials manufacturers' profits are too small. The scarcity of dyestuffs 5s a serious detriment to this industry and is daily becoming more acute. Collections are reported good. Railroad shops are now operating on almost full time, being in a better condition than at any period since 1913. Substantial increase in the number of loaded freight cars being moved is reported, and this movement of loaded cars 375 applies to both castbound and westbound traffic. There are practically no good-order ars which are idle. Coal-mining operations continue to improve, paper mills are busy, and glass industries are reported to be in fair condition. Building operations throughout the district are steadily increasing, although the lumber trade is dull and is still much below normal. At the port of Philadelphia, imports, that for a number of months have shown a steady decline, are picking up because of importations of iron and copper ores, nitrate of soda, and sugar. Exports continue in large amount, greatly exceeding the corresponding figures of last year. The general condition of crops is not as good as last month, and prices are not up to the average. Tobacco is of good quality, and good prices are anticipated, as it is reported that all the old tobacco has been distributed. The cattle trade is slow—the usual purchasing of live stock has been postponed because of the recent prevalence of the hoof-and-mouth disease. Activity is looked for in the near future. The exceedingly small amount of rediscounts made by this bank for member banks is evidence that money is very plentiful in this district, and this is emphasized by the statements of the Philadelphia Clearing House Association, which show large increases in the excess reserves of its banks. There is apparently no immediate prospect of any change in the low rates for money prevailing here. DISTRICT NO. 4—CLEVELAND. Unprecedented conditions in the steel trade continue to be the big factors in influencing all business throughout this district. The report of unfilled orders on the Steel Corporation books for September, showing an increase of 409,153 tons, is an indication of the remarkable situation in that industry. This means that new business has kept up with the demands of production—in fact, is exceeding it. One change over last month's report is that much of the demand now in the steel trade is domestic, which has made contracting, even into next 376 FEDERAL BESEEVE BULLETIN. year, quite active. : Prices of several items have been advanced $1 per ton in finished lines, and an uncertain advance in semifinished lines. A barometer of industry and trade throughout the country is the idle-car report for September, showing a decrease of 100,000 cars. The enormous tonnage in this district, accounts for a large part of this decrease. Traction travel in the down-town districts of the large cities is again on the increase. Suburban-train service demand: is also larger, but this gain is moderate. •••-. : . Building permits issued in the six large cities of the district show §7,252,791 against $4,531,000 for September, 1914. Post-office receipts in five large cities reporting show an average increase of 8 per cent over September, 1914. Retail business continues to improve, due no doubt to the large distribution of cash through increasing pay rolls at the mills. Conditions in the lake trade are reflected in" orders for two 12,000-ton steamers by the Pittsburgh Steamship Co., and another order for a similar-sized vessel by one independent company. The soft-coal business and coke industry are much more satisfactory, and it. is nearly a seller's markot for the first time in several years. , Shoe manufacturers, shoe jobbers, wholesale carpet and dry goods dealers, jobbers in millinery, etc., report good business—in some cases as much as 25 to 30 per cent increase. Knitgoods and garment manufacturers report urgent demand for their output, taxing their capacity for early deliveries. Correspondence from the southern portion of the district is distinctly optimistic. The greatest corn crop ever raised in Ohio and Kentucky is now being marketed. Farmers are inclined to hold their wheat for better prices, and owing to woathor conditions it has been more profitable to uso some small grain crops for feeding purposes, which has resulted in largo purchases of live stock to fatten. Collections since the 1st of September have been good, and while dealers seo no reason to NOVEMBER 1, 1915, anticipate any sudden termination of the conditions prevailing, they are nevertheless keeping their accounts within bounds and insisting, on customers keeping their affairs in good order, avoiding a very strong temptation to spread out and take on new burdens. Money continues easy practically throughout the whole district, with rates unchanged from last month. There is a feeling, however, that the lowest rates were reached during the quarter ending September 30, and from this on there will be slightly better demand for money at a little improvement in rates. DISTRICT NO, 5—RICHMOND. After watching the slow and at times halting development of business during several months, it is now possible to report that this district is experiencing much improvement. While cotton is largely responsible, it can fairly be said that the improvement is attributable to the fact that intelligent and very general curtailment of acreage, while naturally having a direct bearing upon the immediate price of the staple, accomplished much both immediately and it is hoped prospectively, in that the value of diversification has been clearly demonstrated. If the principle can be adhered to and the idea further developed in the future, landowners in the cotton States will soon insist; not only with themselves but with, their tenants, that better average results will be had in diversification than in devoting their entire supply of energy to the cultivation of a single crop. It, therefore, is true that while the change in policy has resulted in high prices for a comparatively short crop of cotton, it also is the fact that the acreage withdrawn from cotton has yielded tobacco and grains of generous values, with the result that the farmers will remember the present year as one of plenty. Cotton has been moving freely, permitting generous liquidation. The movement is allowing local jobbers and merchants to replenish, with confidence, [stocks which have been carried at low-water mark, thus materially helping manufacturing lines. Many planters NOVEMBER 1, 1915. FEDEEAL EESERVE BULLETIN. 377 who have sold sufficient cotton to enable them | DISTRICT NO. 6—ATLANTA. to pay outstanding debts are now apparently Events of the past month have not only susdisposed to store and hold part of their crop for! tained but increased the confidence of the genprices which they hope to see even better than eral business public in the expanding activities those prevailing at the moment* The liqui- of almost all lines. This is not confined to any dation noted can be observed all along the particular section, but is the condition preline from a local bank or merchant to the more vailing generally throughout the Sixth Federal or less distant bank, jobber, or manufacturer. Reserve District. Tobacco has been of excellent quality and is With the continued favorable development selling at prices good for the growers. of the cotton market, the farmer appears disVegetable and fruit packing, a large indus- posed to sell and meet his obligations, many of try in this district, after a long period of stag- which were extensions from last year. This nation reports conditions to be decidedly is being reflected through the wholesalers and better than was the case two months ago. jobbers by merchants paying off their obligaThere is noted a very much better tone to tions and the purchasing of increased stocks by business and a very marked change for the a renewal of their credit to its former status. better in the demand for goods, particularly The commercial travelers report a noteworthy increase in their sales, and say that merchants' from the cotton districts. Lumber, always slow to recover from stag- sales are double in comparison with the same nation, shows some real signs of improvement. time last year. Retailers are quite generally feeling the ef- Tho entire district has grain for sale this fect of changed conditions, while automobile year, with more cattle and hogs than any predealers, certainly in some sections, report more vious season. Cotton for the first time can be business at the moment and prospectively classed as a somewhat " surplus-monoy crop." than for several months, which fact, while in- The port communities were the most seridicating immediate comfort of mind, may also ously affected during the depression, but with suggest that the resolution prompting econ- the movement of cotton, naval stores, and the omy undertaken when in distress some months increase in lumber exports the conditions are reported greatly improved in the past 30 days. ago may have been forgotten. Cotton milling is prosperous and mills are The continued improvement in the business of running full time, taking cotton as offered lo- tho railroads is a reflection of the marked incally, though under no pressure either to buy or crease of business conditions in this district. sell. Coal is in good position and its great ton- Bank clearings in Atlanta show an increase nage is materially helping the railroads in car- of 42 per cent, New Orleans 33 per cent, Savaning for its territory. nah 92 per cent, with substantial increases in Labor seems to be fully employed and on a almost every large city in the district. Money basis satisfactory to all interests. Public-serv- is plentiful, and with the crops moving actively ice utilities, such as street railways, gas and the banks have not found it necessary to rediselectric concerns, report an enlarged use of count to any groat extent. their facilities. Banks, including most institutions located in DISTRICT NO. 7—CHICAGO. The business situation in this district, as resections which are debtor more or less continuported by bankers in the large centers in Indiously, are in a very easy position, many of them ana, Michigan, Wisconsin, Illinois, and Iowa, reporting funds to spare. can be summed up in the words of one of them ' From present indications, a very comfortable and promising industrial situation with us at to the effect that "affairs are seemingly gradthe moment is apt to continue to be in evidence ually gaining in strength from day to day, trade during the next three or four months at least. is giving some evidence of being on the increase 378 FEDEBAL BESERVE BULLETIN. and a noticeable spirit of returning and increasing activity appears to be abroad." While a few lines are operating at less than normal activity, there is evidence of more generally restored confidence and more activity in most lines. The weather conditions have been favorable and this undoubtedly has had a good influence in most branches of production and distribution. Increased demand has enlarged the iron and steel outputs and there has been a further decrease in idle capacity and an enlargement in the reeraployment of labor. Inquiry discloses increasing business in general merchandise, both retail and wholesale. Capacity production in the automobile and automobile accessory business, which is very important in several cities in this district, continues in evidence. Improved conditions are reported in the general manufacturing lines and in both wholesale and retail trade at Chicago, Detroit, Indianapolis, Milwaukee, Des Moines, and Peoria. With all of this increased activity the banks in the large centers show unusually large and increasing deposits, with interest rates at a low point. However, the banks in the smaller communities throughout the district seem to be well loaned up at their usual rates. A considerable percentage of the corn crop in this district is soft and will not grade up to the market requirement. This will be fed to stock, probably resulting in increased loans by the country banks to farmers to carry live stock for feeding purposes and will probably increase the rediscount operations at this bank from that source. Another feature of the cereal situation is delayed wheat marketing. The result of this is that elevators in Chicago are bare of new wheat and the houses which handle this product are heavy depositors, instead of large borrowers, which latter condition is the ordinary situation at this time of year. NOVEMBER 1, 1915. substantial gains during the past 30 days, and there seems to be a somewhat marked feeling of confidence among merchants. This is manifested by the adoption of a more liberal buying policy, which is having its effect upon both wholesalers and manufacturers. The number of failures for the third quarter of this year show an appreciable decrease as compared to the two previous quarters both in number of failures and total of liabilities. Climatic conditions during September may be said to have been favorable. The rainfall, generally speaking, was below the normal for the month, but this was counterbalanced by the excessive precipitation in August. The temperature was somewhat above the normal, and this seems to have aided the various crops. The composite crop report of October 1 indicates that agricultural conditions in all the States within this district are satisfactory, and the harvest should be larger than either 1914 or the five-year average. Cotton was the only crop which did not gain in condition during the month, and this staple shows a considerable loss as compared to previous reports. The price, however, has gone up, and from appearances the farmer will receive an adequate return. Cotton and wheat are both moving freely. The present reports on the corn crop indicate an exceptional yield in all of the States in this district. Illinois leads with an estimated production of 372,400,000 bushels. Reports indicate that the yield of oats, tobacco, potatoes, and other crops will also be above the 1914 harvest and the five-year average. The supply of small-fruit crops and truck-farm products continues plentiful, but the prices seem to have advanced somewhat in the past 30 days. Banking conditions show little change. The demand for funds does not seem to be nearly as arge as usual at this time of the year, and rates are correspondingly low. Commercial paper rates remain abnormally low, best names quoted at 3f and 4 per cent, and little paper DISTRICT NO. 8—ST. LOUIS. available. Business interests in this district show conThe improvement in general business conditinued improvement. The jobbing trade tions continues. There seem3 to be a feeling of throughout the district appears to have made confidence among all classes of business men NOVEMBER 1, 1915. FEDERAL RESERVE BULLETIN. and farmers in this section which would seem to indicate further activity. DISTRICT NO. 9—MINNEAPOLIS. 379 DISTRICT NO. 10—KANSAS CITY. Financial conditions prevailing throughout District No. 10 have not materially changed since the date of our last report. While the demand for money ha3 slightly increased, yet in some sections of the district deposits are increasing, and there seems to be an ample amount of loanable funds in the hands of local banks. The total deposits in Kansas State banks and trust companies September 15 were 16 J millions more than a year ago, and loans were 7 millions more. There are now on deposit in Kansas banks, exclusive of national banks, about 3130,000,000. Deposits show a shrinkage of about 81,000,000 since June statements were published, which is largely attributed to the lateness of the wheat harvest and the slow marketing of that crop. Farmers are still inclined to hold their grain— wheat, oats, and corn—on account of prevailing prices, apparently believing that higher prices will rule a little later. Killing frosts have not yet visited the district, and Nebraska and northern Kansas farmers still entertain the hope of a bumper corn crop reaching full maturity. Cotton and cotton seed are bringing the highest prices in many years. Receipts of live stock, as well as prices, are below normal for this season of the year. The horse and mule market, while not as active as a few months ago, is above the average. j The oil industry is very active on account of the high prices prevailing. The milling industry is again becoming active, and lead and zinc mining is experiencing an era of great prosperity. Building operations throughout the district, and especially in the larger cities, are very extensive, with the naturally resultant great activity in the lumber and building materials trade. Wholesalers, jobbers, and retailers report active trade, with fair collections. Labor is generally employed throughout the district. Rainy and unsettled weather during the first two-thirds of the month;had an adverse effect on the marketing of grain at local points west to the Rocky Mountains and greatly reduced the expected arrivals at the Minneapolis and Duluth terminals. Wheat receipts have not more than kept pace with the milling and other current demands. There has been difficulty in securing a milling supply that is dry and hard, as the arriving wheat in many cases showed dampness. The Minneapolis mills have been producing on an unusually active scale, and the slow movement of the crop has been a handicap. Wet roads and interruptions to thrashing have been general in the wheat belt, with the result that the movement of grain from the farm to local elevators has been cut down materially. Improved weather recently has brought a sharp increase in arrivals of wheat. Unless further rainy weather interferes, it is expected that the crop will now begin to move and that Minneapolis-Duluth receipts during the next six weeks will be very heavy. An unfortunate feature of the situation resulting from adverse weather is a material reduction in the amount of fall plowing that is done or in progress. The period until cold weather sets in is short. Many fields that would ordinarily be plowed will not be touched this year. The remaining good weather will be largely utilized for thrashing rather than plowing. Collections are showing some improvement as a result of the marketing of the crop and will further improve as grain moves in larger volume. Retail business is everywhere fair to good, with an excellent outlook. Manufacturing lines show little or no change. Wholesale business is good, especially in the hardware and grocery lines. DISTRICT NO. 11—DALLAS. The demand for money is not what it should Conditions throughout the eleventh district be, and banks generally are well fortified against all requirements. Rates hold about as continue favorable. There is a general improvement in all lines of business and an optibefore, with little or no change. 380 FEDERAL RESERVE BULLETIN. mistic feeling as to the fall months. At the prices now prevailing for cotton and cottonseed products there is considerable movement, which has contributed to a general liquidation. Interior banks report reduction of their loans and increasing deposits, with light demand for accommodations,. and interest rates easier and below normal. Jobbing houses report a large increase in shipments and retailers duplicating orders. Collections show continued improvements, and in some channels are fully normal or better. In connection with the crop movement, during the past month this bank has made daily shipments to its members of currency and silver averaging from $150,000 to $200,000. The net reduction in the loans of this bank for the first 15 days of October was $1,750,000, all of this liquidation being the rediscounts of member banks. Live-stock interests throughout the district report excellent conditions, with plentiful forage and feed crops, and good prices prevailing for all classes of stock. With the gathering and marketing of the cotton crop there has been an increasing demand for all classes of labor. DISTRICT NO. 12—SAN FRANCISCO. Crops, which in this district are of great variety, have xhis year been large. All have not yielded equal profits, some possibly even showing losses, but the final result will give fair average return for labor and capital employed. The localization of certain products in this territory is interesting. Ninety per cent of. the lima beans of this country's commerce are grown near Ventura, Cal., because they mature there with the pods lying on the ground, while elsewhere poles are required to support the vines. Eighty-five per cent of the raisins produced in this country, amounting to approximately 115,000 tons this year, are grown within 50 miles of Fresno, Cal. There is an absence of pessimism. This seems logical, in view of the certainty of large crops, coupled with present easy credit conditions. At least moderately good trade is an NOVEMBER l, 1915. inevitable result, and here and there volume is exceeding that of the previous year. Petroleum is one of the leading industries in this district, with a present annual production of approximately 100,000,000 barrels. This general condition would seem to assure a most favorable situation, but as a matter of fact this industry has been greatly depressed during the past few years and shows no present prospect for betterment. The production, approximating 250,000 barrels per day, about balances with current consumption, but approximately 60,000,000 barrels are in storage and there is a considerable "shut-in" production; that is, wells whose output would be immediately available if desired. Some financially strong and ably managed corporations are operating with moderate profit, but many are not operating. Effort is making to consolidate more than 100 of the smaller companies. If accomplished, the industry would be in the hands of several large corporations whose financial strength would give greater stability to the industry while apparently assuring adequate competition. Depression in lumbering continues. Mining is exceptionally active and profitable. The salmon-packing industry is in excellent condition. Trans-Pacific transportation has suffered a tremendous loss in the withdrawal of the Pacific Mail steamers. Although there are reports of a speedy increase in the number of ships of the Japanese line, yet these will naturally seek primarily the business of Japanese interests. The interruption of Panama Canal traffic is obviously a considerable loss to the Pacific coast because of the higher rates by rail. The railroads benefit accordingly.: However, the congestion of transportation - earlier predicted by many has not appeared. Tabulation of the last published statements of national banks shows large increases in deposits quite generally throughout this district. It evidences conservatism that the increase in "cash and exchange" has been approximately equal to the increase of deposits, the loans having expanded very slightly. There seems to exist an attitude of contented confidence, with absence of speculative inclination. NOVEMBER 1, 1915. FEDERAL RESERVE BULLETIN. 381 DISTRIBUTION OF DISCOUNTS BY SIZES discounted showing an increase from 8.4 per AND MATURITIES. cent in August to 13.7 per cent in.September. The total amount of commercial paper ex- The largest figures under this head are reported clusive of bankers' acceptances discounted by for the Atlanta district, where a relatively the Federal Reserve Banks during September large amount of cotton and sugar paper of was 314,405,000, compared with 812,233,700 in large denominations appears to have been disAugust and S13,23S,200 in July. The Sep- counted at the special 3 per cent rate for comtember total was about $1,000,000 in excess of modity paper. the June total, the largest monthly total pre- Small notes (in amounts up to $250) conviously reported. Largely increased discount stituted 22.8 per cent of the total number, operations for the month are reported by the though only slightly above 2 per cent of the Atlanta, Chicago, Kansas City, and Dallas total amount of discounts for the month. For banks. Of the total bills discounted 5301,400 the three southern banks, which handled about were trade acceptances and §846,000 commod- 80 per cent of the total number of small notes, ity paper, discounted at special, lower rates. the corresponding proportions were 26.7 percent About 80 per cent of the former class of paper of the total number and about 2.4 per cent of and over 88 per cent of the latter class are re- the total amount of all paper discounted by ported from the Atlanta district. The number them during the month. The largest increase over the August figures of notes discounted was 9,173, compared with 9,240 in August, 10,155 in July, and 10,734 in is shown for the amount of 60-day paper June. Of the total number of notes 67.1 per discounted, the increases being especially cent and of the total amount 65.4 per cent marked in the case of the Atlanta and Dallas represented the share of the three southern banks, while the amount of 10-day paper disbanks, as against 73.5 and 68.2 percent reported counted is less than half the amount discounted in August. The total of agricultural and the month before. The average size of all notes discounted live-stock paper with maturities in excess of 90 during the month was Sl,570, as against Sl,324 days handled by the banks, while larger than in August, Sl,304 in July, and $1,249 in June. the month before, constitutes a smaller perThe September average ranges from $1,217 for centage of the total monthly discounts. Over the Boston bank to S3,069 for the Philadelphia two-thirds of this class of paper was handled bank. The average for the three southern by the Chicago, Dallas, and Atlanta banks. The number of banks accommodated during banks is about §1,529. the month was 762, compared with 693 in Of the total number of notes . discounted about 33 per cent and of the total amount over August and 796 in July, and constitutes less 52 per cent were notes in amounts from 81,000 than 10 per cent of the total number of member to $5,000, as against 29 and 54.4 per cent banks. Of the total banks accommodated 416, shown in last month's distribution. A large or about 55 per cent, were in the three southern increase is noted in the number and amount of districts, Dallas alone reporting 160 banks notes of over $10,000 in size, the proportion of (out of a total of 648) which availed themselves this class of notes to the total amount of notes of the discount privilege. 382 FEDEBAL BESERVE BULLETIN. NOVEMBEE 1, 1915. Commercial paper, exclusive ojbankers' acceptances, rediscounted by each of the Federal Reserve Banks during the month of September, 1915, distributed by sizes. NUMBER OF PIECES AND AMOUNTS, [In thousands of dollars.] To $100. Over $100 Over $250 to $250. to $500. Over $500 to $1,000. Over $1,000 Over $2,500 Over$5,000 to $5,000. to $10,000. to $2,500. Over $10,000. Per cent. Total. Ban*. Boston New York Philadelphia... Cleveland Richmond..,., Atlanta Chicago St. Louis.^.... Minneapolis... Kansas City... Dallas San Francisco- 1.4 22 9.0 21 15.9 74 12 2.2 8.9 21 0.1 1.8 4.5 .4 19 1.8 20316.8 425 75.8 506 204.9 468 184 14.1 245 39.6 249 97.4 213 10 .7 37 7.5 77 32.5 142 .5 30 5.1 84 31.7 58 35 5.9 54 20.5 99 .1 58 4.6 192 33.8 212 78.4 195 L80.9 453 20315.7 385 64.4 26 4.3 33 11.9 .5 15 16.5 55 61.2 15.5 22 15.9 78 386.0 453 171.4 264 117.5 200 45.8 110 68.4 89 144.5 192 336.8 433 24,0 44 75 211 110 190 226.52,459 853.81,505 42.1 569 10.2 364 328 311.1 968 341.7 2,196 121.8 198 72.0 91.3 286.2 337.6 481.3 3,537.4 3,193,4 953.1 612.0 448.4 1,337.8 2,686.5 440.0 0.8 0.6 2.3 2.0 1.2 2.3 2.1 3.3 26.8 24.6 16.4 22.2 6,2 6.6 4.0 4.3 3.6 3.1 10,5 9.3 23.9 18.6 2.2 3.1 359 2,520,8 112 1,979.2 9,173 14,405.0 100. O 100.0 J 679 53.51,41124141,780 696.51,80111,403.51,955:3,307.01,076 4, Total. 5,4 26.3 95.5 168.5 613.5 628,4 138.2 120.8 133,2 . 126.6 344.4 120.0 33.7 25.3 95.9 84.7 98.2 45.8 143.6 141.6 799.6 3061,214.3 — 475.2 223 913.5 334.2 79 280.4 175.1 56 222.8 138.6 26 81.7 320.7 82 318.1 695.2 189 707.4 71.0 22 86.5 PERCENTAGES OF AMOUNTS OF EACH CLASS TO TOTAL. 52 4 A 5.9 ft 7 ?,.7 15.3 10.8 12.5 5.5 1.7 4.8 9.7 23.0 R 5 4 01 St Louis Minneapolis Kansas City Dallas San Francisco .... g ?1 1 2 5 4 1 1 g g .3 6 .1 Total 99 5 5 ?6 1 1 3.4 18.1 21.4 46 3 3 10.9 5.4 12.3 7.5 5.9 36 9 9.2 33.5 28.3 29.1 35.0 30.9 ^ 17.4 34.3 19.7 28.6 14.5 29.4 36.4 19.7 29.7 18.2 9.5 . . . . 23.8 . . . . 12.8 26.4 27,3 19.6 29.2 . . . . 1 3 2.5 ?4 ^ o 27 7 29.6 * 13.6 29.4 22.6 14.9 35.1 28.6 30.9 24.0 . . . . . 25.9 16.1 1 5 Boston New York Philadelphia Cleveland Richmond Atlanta 17.5 . . . . 23.2 12.7 27.7 100 0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 13.7 100.0 21.3 6.4 26.7 4.4 1.7 * Commercial paper rediscounted during September by each of the Federal Reserve Banksf distributed by States and maturities as of date of rediscount, [In thousands of dollars.] Number of member banks. Districts and States. District No. 1—Boston: Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont 73 70 170 56 18 48 New Jersey Total Total commercial paper rediscounted. 4 4.9 29.2 1.5 35.6 3 4.0 10.2 14.2 41.5 .... .. , 2 9.9 18.1 9.0 4.5 9 9.9 18.1 17.9 43.9 1.5 91.3 2 11 5.1 9.2 12.1 3.8 39.1 5.0 210,8 1.1 18,0 26a 2 612 Total Total Paper maturing after 90 days. 131 481 District No. 3-Philadelphia: District No. 4—Cleveland: Kentucky Ohio.: Pennsylvania West Virginia Paper maturing after 60 days but within 90 days. Paper maturing within 10 days. 435 Total District No. 2—New York: New Jersey New York P e n n s y l v a n i a . . . . ---.. Papor maturing after 10 days but within 30 days. Paper maturing after 30 days but within 60 days. Number of banks accommodated. 13 5.1 21.3 42.9 215.8 1.1 286.2 24 70 533 2 12 3.9 209.6 10.8 • 14.4 5.2 23.3 21.8 315.8 627 14 1.9 68.5 70.4 213.5 25.2 28.5 337.6 72 376 301 14 4 5 10 8.4 1.6 1.8 92.8 15.7 22.8 90.1 154.7 12.5 14.5 18.3 48.1 37.1 253.9 190,3 763 19 = = = = = 10.0 110.3 267.6 45.3 48.1 481.3 NOVEMBER 1, 1015. FEDERAL RESERVE BULLETIN". 383 Commercial paper reuiscounted during September by each of pie Federal Reserve Banks, distributed by States and maturities as of date of rediscount—Continued. [In thousands of dollars.] Districts and States. District No. 5—Richmond: District oi Columbia Maryland North Carolina South Carolina Virginia-.--. West Virginia Number of member banks. 15.6 127 16.5 Paper maturing after 30 days but within 60 days. Paper maturing after 60 days but within 90 days. 83.4 1.9 117.3 86.9 102.9 11.7 16.2 26.8 507.8 707.5 557.8 32.1 84.7 54.3 514.3 232.7 244.2 38.2 404.1 1,848.2 1,218.4 50.2 3,537.4 304.3 1H.6 395.5 302.3 100.0 179.5 488.6 30S.O 2S8.3 25.0 145.0 163-7 74.3 35.3 76.0 6.4 8SS.1 488.9 811.7 352.3 270.3 382.1 186.6 Paper maturing wlhin lOiiays. Taper maturing after 10 days but within 30 days. 20.9 31.0 51.9 25.0 25.3 32.5 14 98 80 72 137 105 506 Total Number of banks accommodated. 1,306.2 1,418.6 102,0 3,193.4 73.2 30.0 229.5 4.6 22.0 35.3 57.0 192.5 214.3 107.0 575.2 12.9 43.7 284.8 953.1 Paper maturing after 90 days. 3.0 32.9 13*. 9 Total commercial paper redlscounted. 184.3 86.0 1,173.2 1,077.5 934.4 82.0 District No. 6—Atlanta: * Alabama Florida Georgia Ivouisiana Mississippi Tennessee Total.-*- 385 District N o . 7—Chicago: Illinois Indiana Iowa Michigan Wisconsin 316 197 348 75 51 11.0 3.5 16.9 1.0 94.8 16.5 136.3 8.3 20.7 987 32.4 276.6 359.3 3.0 33.6 2.9 46.7 54.6 .8 1.5 17.3 9.9 67.3 19.0 3.0 18.6 7.7 31.6 137.4 21.3 24.2 37.4 41.2 1.2 14.0 5.3 71.7 284.6 225.4 25.0 612.0 4.0 1.2 9.8 1.5 34.4 82.8 10.2 14.6 16.1 29.8 51.6 19.7 43.2 9.1 36.5 4.6 16.0 201.7 31.1 72.2 42.7 100.7 50.9 153.5 171.8 72.2 448.4 1.9 224.7 14.4 100.5 14.0 85.9 16.7 92.6 5.5 33.1 3.2 25.5 21.4 548.4 71.5 236.0 Total ' District N o . 8—St. Louis: Arkansas Illinois Indiana Kentucky Mississippi Missouri Tennessee Total District N o . 9—Minneapolis: Michigan ...m. Minnesota Montana North Dakota * South Dakota Wisconsin Total District No. 10—Kansas City: Colorado Kansas Missouri Nebraska. New Mexico Oklahoma Wyoming Total District No. 11—Dallas: Arizona Louisiana N e w Mexico Oklahoma Texas Total District No. 12—San Francisco: Alaska Arizona. California Idaho • Nevada Oregon Utah • Washington Total 95 55 115 5 18 97 129 156 61 68 17 80 20 462 8.0 53 31 279 64 152 115 87 728 120 217 53 210 9 308 33 43 150.6 8C3 3.0 47.9 33.1 10U 1 10U. 0 "i.*6 200.5 37.2 15.8 43 8.7 39.9 202.9 159.3 49.7 460.5 950 89 14.5 13.4 544.4 368.5 117.0 1,337.8 27 42 545 9 4 18 129 85.6 2.5 27.5 108.4 124.0 23.8 94.4 986.4 144.0 10.7 61.2 765.1 3.2 11.3 32.0 206.4 356.8 48.3 215.1 2,066.3 648 160 224.0 1,228.6 981.0 252.9 2,686.5 25.5 6.1 6.3 69.3 7.8 124.2 6.4 35.9 7.9 6.3 254.9 28.2 4.2 1 265 57 10 86 23 78 18.1 2.2 91.8 112.1 *22*2 *8*7 "7*6 "*38."5 527 71.9 94.3 230.0 H Includes New Orleans branch. 43.8 440.0 384 FEDERAL RESERVE BULLETIN. NOTBMBEH 1, 1915. Commercial paper rediscounted during September by each of the Federal Reserve Banks, distributed by States and maturities as of date of r rediscount—Continued. RECAPITULATION. fin thousands of dollars.] Districts and cities. Number Number of banks of member accommobanks. dated. No. 1—Boston No, 2—New York Vo g phlladplnhia XOm 4—Cleveland Vo 6 Atlanta No 7—Chlcaeo No, 8—St. Louis fjn Q ... Mfnneanolis No 10—Kansas City No 11 T) all as No. 12—San Francisco Total for September Per cent for September Percent for July Per rent for Mav Percent for ApriL 435 612 G27 763 506 3S5 987 462 72S 950 648 527 7,630 9 13 14 19 127 129 65 53 43 89 160 41 Paper maturing within 10 days. Paper maturing after 10 days but within 30 days. Paper maturing after 30 davs but within C O days. Paper maturing after C O days but within 90 days. 18.1 21.3 213.5 110.3 404.1 186.6 32.4 71.7 50.9 293.4 224.0 71.9 17.9 42.9 25.2 267.6 1,848.2 1,396.2 276.6 284.6 153.5 544.4 1,228.6 94.3 43.9 215.8 28.5 45.3 1,218.4 1,418.6 359.3 225.4 171,8 368.5 981.0 230.0 9.9 5.1 70.4 10.0 16.5 5.3 14.5 Paper maturing after 90 days. Total commercial paper ro- Per cent. discounted. 48.1 50.2. 192.0 284.8 25.0 72.2 117.0 252.9 43.8 91.3 286.2 337.6 481.3 3,537.4 3,193.4 953.1 612.0 448.4 1,337.8 2,686.5 440,0 (4.3 13.1 fg.3 18.6 }3.1 100.0 1.5 1.1 762 131.7 1,698.2 6,180.0 5,300.5 1,083.6 14,405.0 10.0 9.1 10.5 10.3 .9 2.6 11.8 11.3 12.2 42.9 40.8 34.1 29.1 31.4 33.9 36.8 3G.9 40.0 38.7 35.6 39.2 7,6 8.4 12.9 18.7 19.6 15.3 0.6 2.0 23 f3.3 24.6 22.2 6.6 100.0 100.0 100.0 100.0 100.0 100.0 .8 13 ,5 13 .4 11 . 0 9.4 8.1 Amount of commercial paper held by each of the Federal Reserve Banks on Friday, OcL 1, 1915, distributed by maturities. (In thousands of dollars,] Federal Reserve Bank. Boston New York..., Philadelphia.. Cleveland Richmond.... Atlanta Chicago St. Louis Minneapolis.., Kansas City... Dallas San Francisco, Total..,, Percent Paper maturing within 10 days. 29.3 68.1 145.9 142.0 1,323.0 636.0 94.5 159.4 124.2 284.1 863.5 298, G 4,168.6 13.9 Paper maturing after 10 davs but within 30 days. Papflr maturing after 30 dava but within 60 days. Paper maturing after 60 days but within 90 days. 26.7 117.2 34.9 328.8 2,318.4 1,516.4 275.1 374.5 287.2 771.0 1,721.3 219.1 70.1 235.5 72.4 104.9 3,135.2 2,409.2 457.9 587.9 626.6 670.2 2,789.2 359.3 31.3 38.7 16.9 39.1 925.7 1,098.2 407.1 249.2 363.0 330.8 1,110.1 265.2 8,020.6 26.7 11,518.4 38.4 4,875.3 16.2 Paper maturing after 90 days. 48.8 16.3 230.1 341.5 50.6 161.4 109.5 441.0 51.8 1,451.0 4.8 Total. 157,4 459.5 270.1 663.6 7,748.6 5,8S9.9 1,576.1 1,421.6 1,562.4 2,165.6 6,925.1 1,194.0 30,033.9 100.0 Per cent. 0.5 1.5 9 2.2 25.8 19.6 5.3 4.7 5.2 7.2 23.1 4.0 100.0 385 FEDERAL: RESERVE BULLETIN. NOVEMBEE l f 1 9 1 5 . ACCEPTANCES. 1 Bankers acceptances, by classes, held by the Federal Reserve Banks each week. Nonmember banks. Member banks. Date. September 27 October 4 . . October 11 October 18 1915. Trust companies. 7,281 9,000 8,957 9,015 ..... Private banks. State bonks. 5,314 4,808 5,118 4,802 74 132 116 116 Total. 408 343 134 199 13,077 14,373 14,325 14,132 Acceptances indorsed by member banks: Private bank acceptances, 12,000. Distribution of bankers' acceptances held by Federal Reserve Banks, according to schedules on hand Oct. 18,1915, by classes of acceptors and sizes. Over $5,000 to $10,000. To $5,000. Over 510,000 to 825,000. Over $25,000 to $50,000. Over $50,000 Over $100,000. to $100,000. Total. Per cent. Class of acceptors. I a Member banks.... Trust companies. State banks Private banks Total.. 5581,440 154 51,265,118 179 53,079,292 "' 249,091 60 446,469 64 1,223,916 48,750 67500 67,500 24,841 114,859 59,364 301 57S2 ] 2,329,559 705,861 18 $979,085 946,178 904,122 222 1,770,951 25' 4,490,567 3,035,420 26 1,925,263 S7S0,OO0 60S $9,014,494 1,225,789 245 4,802,304 116,250 199,0M Percent 6.4 ?14,132.112 100.0 11 2,005,789 1.4 13.6J... 21.5 31 8 12.5 63.8 Amounts of acceptances held by the several Federal Reserve Banks at close of business on Fridays, Sept. 24 to Oct. 22,1915. [In thousands of dollars.] Boston. Acceptances maturing within 10 days: gept 24 Oct 1 Oct 8 Oct 15 Oct 22 Acceptances maturing after 10 days but within 30 days: gept 24 Oct 1 Oct 8 Oct 15 ... Oct 22 •• Acceptances maturing after 30 days but within 60 days: Sept 24 Oct 1 Oct. 8 Oct 15 Oct 22 Acceptances maturing after 60 days but within 3 months: Sept 24 • *••• Oct. 1 Oct. 8 Oct. 15 Oct. 22 Total acceptances held: Sept 24 *••• OcVl Oct.8 Oct. 15 Oct. 22 New Phila- Cleve- RichYork. delphia. land. mond. Atlanta. Chicago. San Total Dallas. Franfor cisco. system. St. MinneLouis. apolis. Kansas City. 46 21 SO 68 1,325 1 595 '994 3,208 1,536 639 527 312 1,259 764 451 281 50 219 25 25 70 20 192 30 25 160 126 301 100 25 94 86 192 52 45 73 90 83 7 45 93 101 114 59 954 1.170 1 355 1.055 965 1.523 1,649 1.777 1,242 736 280 246 221 88 178 237 208 337 92 115 436 401 335 283 610 236 193 157 113 87 116 96 32 81 93 128 114 80 237 212 146 168 172 202 195 4,050 4,245 4 466 3,393 3,091 785 1 241 1,294 1 424 1,322 1.488 1,265 1,517 1,282 1,378 160 259 349 459 606 145 129 132 209 157 100 610 617 832 730 452 140 122 150 94 94 96 96 138 79 62 271 237 250 82 82 363 307 336 257 196 4,058 4 273 4998 4 616 4,449 626 1,433 1,201 <27 672 1,269 1,443 1,522 863 899 821 107 164 93 100 100 100 350 374 269 59 52 65 51 51 62 1,909 635 178 93 133 111 inn 171 3,619 4,733 4,346 4,259 2,435 4,095 4,038 3,969 3,390 4,919 4,884 5,128 4,991 4,787 1,759 1,685 1,441 1,454 1,444 514 571 582 587 480 13,058 14,846 14,804 70 251 188 763 431 ACfl 393 100 100 100 100 100 1,421 1,552 1,662 1,527 i;455 494 542 504 504 404 101 87 96 84 102 ins 113 316 317 325 495 495 493 605 605 631 263 440 572 Ad ii 1 A iy?ft 13,335 386 FEDERAL BESERVE BULLETIN, JNOYBMBBB 1, 1 9 1 5 , Amounts of acceptances purchased by each of the Federal Reserve Banks from Feb. 19 (date of first purchase) to June SO, and for the months of July, August, and September, 1915, distributed by maturities. [In thousands of dollars.] Boston. Acceptances maturing within 30 days: Feb. 19 to June 30 July August September , TotaL Acceptances maturing after 60 days but within 3 months: Feb. 19 to June 30 July '. August... , September , Chicago. Minne- KanSt. sas Louis. apolis. City. San Dallas. Francisco. 61 141 103 109 43 42 642 194 101 141 103 39 235 17 17 1,543 276 269 38 237 121 33 18 136 310 71 35 23 226 24 18 119 13 269 2,126 726 785 304 149 117 1,876 521 140 994 732 265 115 107 162 276 87 84 178 87 61 190 202 51 713 Total. Acceptances maturing after 30 days but within 60 days: Feb. 19 to June 30 July , August September , AtNew Phila- Cleve- RichYork. delphia. land. mond. lanta. 2,899 1 046 931 756 8,145 1,977 1 443 1,557 1,524 426 593 343 TotaL 1,032 43 314 61 4;093 698 512 310 17 5,613 1,112 120 347 17,481 4,999 3,945 4,039 1,077 1,675 30,464 5,632 13,122 3,531 1,219 Total accei Feb. 19 to June 207. July August , September , 3,134 1,063 987 756 10,227 2,253 1,815 1,595 2,353 801 303 994 1,394 298 170 243 1,975 497 628 366 455 300 141 120 526 191 116 68 736 194 247 1,806 143 364 121 22,606 5,740 4,771 4,349 Grand total. 5,940 15,890 4,451 2,105 3,466 1,016 901 1,263 2,434 37,466 Total. NOVEMBER 1, 1915. 387 FEDERAL KESEBVE BULLETIN. FEDERAL RESERVE BANK STATEMENTS. Resources and liabilities of each of the Federal Reserve Banks and of the Federal Reserve System at close of business on Fridays, Oct. 1 to Oct. 22, 1915. RESOURCES. [In thousands of dollars.] Boston. Gold coin and certificates in vault: octi ...: Oct. 8 Oct. 15 Oct. 22 Gold settlement fund: Oct. 1 Oct. 8 ' Oct. 15 Oct.22 Gold redemption fund: Oct. 1 . . . Oct. 8 Oct. 15 Oct.22 Legal tender notes, silver, etc.: Oct.l Oct.8 . Oct. 15 Oct.22 Total reserve: . Oct.l Oct.8 Oct. 15 Oct.22 Commercial paper: Oct. 1. Oct.8 Oct. 15 Oct.22 Bankers' acceptances: Octl Oct.8 Oct. 15 Oct.22 -. United States bonds: Oct.l Oct.8 Oct. 15 San AtRichSt. Minne- Kansas mond. lanta. Chicago. Louis. apolis. City. Dallas. Francisco. Philadelphia. Cleveland. 7,584 11,428 9,191 11,883 11,377 11,269 11,015 5,fi94 5,917 5,958 6,059 6,074 6,076 5,835 26,638 26,727 29|461 29,445 4,139 2,8U 2,376 3,925 3.3S3 2,SS4 2,227 4,260 3,850 3,701 4,597 6,645 6,517 7,219 B,104 1,699 2,548 1,563 2,736 13,040 14,111 12,271 10,863 3,72S 5,032 375 375 375 375 225 225 225 225 1J463 3,997 3,997 3,999 6,262 5,865 5,766 5,391 227,274 227,769 226,956 227,005 3,151 3,733 4,243 5,125 2,721 2,711 2,363 2,743 5,236 5,789 5,864 6,062 2,453 2,851 3,442 3.6S3 55,180 55,850 58,620 54,670 77 87 87 87 341 341 341 341 21 21 21 21 1,202 1J212 1,212 l!2l2 8 7 432 430 271 266 331 421 414 307 8,179 8,072 8,607 8,161 6,568 6,753 6,508 6,625 7,802 7,63S .7,129 7,212 1,576 1,667 1,833 2,025 1,422 1 441 1,499 1,476 1,562 1,590 1,568 1,611 2,166 2,339 2,464 2,6-19 1,552 1,562 1,527 1 455 542 504 504 404 317 325 297 887 887 907 932 3,986 4 006 4,031 242 242 952 952 133,071 133,952 129,903 132,752 2,146 3,257 2,312 2,620 5,032 1954 6,274 3,731 3,947 3,339 2,339 6 6 6 6 55 55 55 55 37 37 37 37 164 47 1 412 10,107 15,363 13,360 28,495 2,625 2,490 2,617 2,740 991 1,001 1,005 1,003 87 90 86 84 123 14S 156 153 1,345 1,097 1,656 977 277 194 167 147 16,502 18,027 16,400 16,977 148,265 151,329 149,592 165,036 15,315 14,962 17,421 14,307 17,134 16,228 15,975 16,615 13,001 12,899 13,fi38 12,532 8,106 8,995 8,020 8,949 41,023 41 935 43,3SS 41,290 157 154 149 159 459 417 270 •218 664 5S6 534 607 7,749 7,573 7,13S 6,995 5,S90 6,587 6,273 6,475 4,095 4,03S 3,969 3,390 4,884 5,128 4,991 4,787 1,685 1 441 1,454 1,444 571 582 587 480 100 100 100 100 340 344 491 491 491 491 491 491 Oct.22 4,054 35 35 3.5 35 16,493 21,302 19,748 34,626 9,511 10,551 10,616 10,709 8,743 8,744 9,236 9,100 300,149 306,133 306,536 317,513 6,925 6,672 6,242 6,320 1,194 1,202 1,031 1,013 30,034 30,561 29,403 29,937 495 493 480 440 605 631 647 572 14,846 14,804 14,556 13,335 1,027 1,032 1,032 1,082 1,356 1,501 1,501 1,501 1,000 1,000 1,000 1,000 9,329 9,483 10,380 10,480 831 821 816 809 1,624 1,637 1 457 1,379 27,381 27,029 26,583 25,381 1,904 1,658 1,930 1,898 15,378 15,523 15 236 15,650 9,355 9,231 9,113 8,513 3,069 3,017 2,978 3,704 3,691 3,721 3,663 2,985 2,970 2,970 2,940 1,143 1,153 1,153 1,140 795 770 770 793 349 329 378 8,923 9,089 8,872 9,781 5S4 307 621 547 272 320 193 154 2,161 2,170 2,174 2,176 633 1,072 199 527 558 913 746 4,093 2,539 142 3,400 745 1,236 1,035 214 1,270 4,575 2,336 1,231 2| 483 1,559 1,628 1,316 2,344 585 493 661 ' 526 178 120 125 120 266 208 64 193 224 362 220 176 152 122 134 206 212 310 184 24,003 23,159 23T2S3 23,606 21,909 21,747 21,747 21,184 14,853 16,099 14,874 16,913 58,034 56.778 57,251 56,534 13,931 14,324 14,540 146fil 1,171 512 533 507 1,318 401 418 523 391 392 979 692 458 753 26.839 27,707 25,895 25,674 172,282 175,576 174,669 188,948 26,335 23,635 23,845 24,051 • 793 967 807 1,488 % 753 527 1,924 1,087 796 1,563 1,182 1,603 1,153 1,600 Ul,194 17,723 110,160 »12,342 64 64 63 67 481 467 503 494 121 123 117 121 82 79 85 85 3,326 3,124 3,018 3,163 11,445 11,5S5 11,812 11,713 13,278 13,259 13,646 13,632 18,481 18,433 17,771 18,713 16,334 16,559 16,539 16,647 411,637 414,3S0 415,572 427,SSO 147 1 Items In transit, i. e.f total amounts due from, less total amounts duejto, other Federal reserve banks. . 7 7 7 5 3,865 3,735 3,600 3,219 Oct.22 Total tor system. 4,572 4,410 4,408 4,111 14,186 14,717 14,OS7 13,909 Municipal warrants: Oct.l Oct.8 Oct. 15 Oct.22 Federal reserve notes, net assets; Oct.l Oct.8 Oct. 15 Due from other Federal reserve banks, net: Oct.l Oct.8 Oct. 15 Oct.22 All other resources: Oct.l... Oct.8 -.. Oct. 15 Oct.22 Total resources: Oct.l Oct.8 Oct.15 Oct.22 New York. 388 FEDERAL RESERVE BULLETIN. NOVEMBER I , 1915, Resources and liabilities of each of the Federal Reserve Banks and of the Federal Reserve System at close of business on Fridays, Oct. 1 to Oct. 22,1915—Continued. LIABILITIES. [In thousands of dollars.] New York. Philadelphia. Cleveland. Richmond. Atlanta. Chicago. 5,267 5,267 5,267 5,266 5,944 5,944 5,944 5,945 3,358 3,358 3,349 3,349 2,417 2,418 2,418 2,413 6,632 6,633 6,633 6,634 5,000 5,000 5,000 5,000 7,378 7,430 7,529 7,591 5,394 5,515 4,647 5,671 1,97S 3,097 2,738 3,702 Capital paid in: Oct.! * ; Oct.8 *" Oct. 15 W* Oct.22 Government deposits: Oct 1 Oct.8 Oct. 15 Reserve deposits, net: Oct l Oct 8 Oct 15 Oct.22 Federal reserve notes, net liability: Oct. 1 Oct.8 Oct 15 . .... Oct.22 Due to other Federal roserve banks, net: Oct 1 Oct.8 Oct. 15 Oct 22 All other liabilities: Oct 1 Oct.8 Oct. 15 Oct.22 Total liabilities: Oct 1 Oct.8 Oct. 15 Oct °° 5,134 5,181 5,181 5,181 21,705 22;520 20,714 20,493 10,957 10,987 10,987 11,047 152,737 157,806 161,355 170,920 Minne- Kansas Dallas. St. Louis. apolis. City. San Francisco, 2,764 2,765 2,765 2,767 3,931 3,932 3.933 3i 933 5,000 5,000 5,000 5.000 6,037 5,820 5.727 5,09S Boston. 21,008 18,368 18,578 18,785 18,064 17,215 17,339 17,661 2,782 2,782 2,782 2,783 2,489 2,491 2,491 2,491 5,000 5,000 11,149 11,542 11,758 11,841 37 5,484 5 519 4,927 6,208 5,233 5,149 5,079 4,743 12,403 12,627 12,606 12,714 324,884 326,787 328,766 340,444 14,359 15,225 14,791 14,809 77 136 139 142 146 2 466 2,379 2,327 2,575 172,2S2 175,676 174,609 188,943 9,144 9,000 9,374 9,438 1,111 1,159 1,247 1,169 8,956 9,094 9,321 9,222 54,728 54,781 54,775 54,834 15,000 15,000 15,000 15,000 5,000 51,402 50.145 5o;ei8 49,900 6,092 4,404 26,839 27,707 25,895 25,674 3,023 3.023 3iO25 3,025 Total for system. 20,335 23,635 23,845 24,051 24,003 23,159 23.2S3 23,COS 64 69 71 72 21,909 21,747 21,747 21,1S4 14,853 16,099 14,874 lfi.iUS 2,666 2,587 2,540 2,793 58,034 56,778 57,251 56,534 13,931 14,324 14,540 14.001 11,445 11,585 11,812 11,713 13,278 13,259 13,646 13,632 18,481 18,433 17,771 IS. 718 16,334 16,559 16,539 10,647 411,637 414,380 415,872 427,880 Circulation of Federal reserve notes at close of business on Fridays, Oct. 1 to Oct. 22, 1915. |In thousands of dollars.] Boston. Federal reserve notes issued to the bank: Oct.l Oct.8 Oct. 15 Oct, 22 Federal reserve notes in the hands of the bank: Oct.l Oct.8 Oct. 15 Oct.22 Federal reserve notes in circulation: Oct.l Oct.8 Oct. 15 Oct.22 Gold and lawful money deposited with or to the credit of the Federal reserve agent: Oct.l Oct.8 Oct. 15 Oct. 22 Carried to net liabilities: Oct. 1 Oct.8 Oct. 15 Oct.22 Carried to net assets: Oct.l Oct,8 Oct. 15 Oct.22 New York. Philadelphia. Cleveland, Richmond. Atlanta. Chicago. Minne- Kansas St. Louis. apolis. City. Dallas. San Francisco. 4,000 4,000 4,400 4,400 141,000 148,590 153,790 159,280 1,904 1,658 1 930 1,89$ 18,718 18,268 18,025 17,711 Total for system. 5,120 5,320 5,320 5,420 61,620 04,020 65,520 07,920 5,030 5,390 5,830 5,760 6,600 7 400 7,600 8,000 11,300 12,100 12,700 13,400 11,280 11,450 12,550 13,150 ,4,380 4,380 4,380 4,380 3,325 4,825 4,825 4 825 7,100 7,500 8,300 9,100 6,780 7,0S0 7,080 7,480 14,405 15,125 15,285 15,445 3G9 349 329 378 9,198 9,359 9,092 10,001 584 307 621 547 272 320 198 154 363 280 273 202 1,802 853 1,312 '48S 2,161 2,170 2,174 2,176 992 1,572 699 463 527 558 913 746 354 406 318 496 192 436 166 162 4,751 4,971 4,991 5,042 52,422 54,661 56,428 57,919 4,446 5,083 5,209 5,213 6,328 7 080 7,402 7,846 10,937 11,820 12,427 13,198 9,478 10,597 11,238 12,662 2,219 2,210 2,206 2,204 2,333 3,253 4,126 4,362 6,573 6,942 7,387 8,354 6,426 6,674 6,762 6,984 14,273 14,689 15,119 15f283 2,096 2 342 2,470 2,502 122,282 130,322 135,765 141,569 5,120 5,320 5,320 5,420 61,350 03,750 65,300 67,700 5,030 5,390 5,830 5,760 6,600 7 400 7,600 8,000 4,900 6,000 6,700 8,100 7,500 7,500 8,500 8,900 4,380 4,380 4,380 4 380 2,966 4,325 4,325 4,325 7,100 7,500 8,300 9,100 5,315 5,515 5,515 5,815 9,040 9,540 10,040 10,540 4,000 4,000 4,400 4,400 123,301 130,620 136,210 142,440 6,037 5,820 5,727 5,098 1,978 3,097 2,738 3,762 1,111 1,159 1,247 1,169 5,233 5,149 5,079 4,743 8,928 349 329 378 8,872 9,781 584 307 621 547 272 320 193 154 37 2,161 2 170 2,174 2,176 633 1,072 199 527 658 913 746 14,359 15,225 14,791 14,809 1,904 1,658 1,930 1,898 15,378 15,523 15,236 15,680 389 FEDERAL RESERVE BULLETIN. NOVEMBER 1, 1915. Statement of Federal reserve agents' accounts at close of business on Fridays, Oct. 1 to Oct. 22, 1915. [In thousands of dollars.] Boston. Federal reserve notes: Received from the Comptroller— Oct.l Oct. 8 Oct. 15 Oct. 22 R e t u r n e d to t h e Comptroller— Oct.l Oct. 8 , Oct. 15 Oct. 22 Chargeable to the Federal r e s e r v e agent— Oct.l Oct. 8 Oct. 15 "» Oct.22 In the hands of the Federal r e s e r v e agent— Oct.l Oct. 8 Oct. 15 Oct.22 Issued to the Federal reserve bank, less amount returned to • the Federal reserve a sent for redemption— Oct.l Oct. 8 *Oct. 15 Oct. 22 Amounts held by the Federal reserve agent: In reduction of liability on outstanding notesGold coin and certificates— Oct.l Oct. 8 Oct. 15 Oct.22 As security for outstanding notes— Commercial paper— Oct.l Oct. 8 , Oct. 15 Oct.22 Federal reserve agent's credit balances: In gold redemption fund— Oct.l Oct. 8 Oct. 15.> Oct.22 WithF.R. Board— Oct.l Oct. 8 Oct. 15 Oct.22 Total: Oct.l.. Oct. 8.. Oct. 15. Oct. 22. Memorandum: Total amount of comm e r c i a l paper delivered to the F e d e r a l reserve agent— Oct.l Oct. 8 Oct. 15 Oct.22 11,800 11,800 11,800 11,800 New York. 63,700 67,560 70,520 73,520 Philadelphia. Cleveland. Richmond. 9,2S0 8,000 12,800 9,280 8,000 12,500 0,280 10,000 14,100 12,480 10,000 14,100 Atlanta. 13,600 15,200 16,000 16,000 310 310 310 380 300 300 300 300 Total for system. Francisco. 9,000 13,000 13,000 13,000 10,800 18,260 19,580 19,580 10,000 10,000 10,000 10,000 175,820 190,8S0 199,260 205,460 200 3,400 6,600 6,600 6,600 Dallas. 745 745 745 1,015 8,000 9,000 9,000 9,000 120 120 120 120 9,260 9,260 9,260 9,260 3,400 6,600 6,600 6,600 9,000 13,000 13,000 13,000 8,000 9,000 9,000 9,000 16,785 18,245 19,565 19,565 10,000 10,000 10,000 0,800 175,075 190,135 193,515 204,445 1,400 600 2,400 2,000 1,500 700 1,400 700 2,320 3,750 3,450 2,850 4,8S0 4,SS0 4,8S0 4,8S0 75 1,775 1,775 1,775 1,900 5,500 4,700 3,900 1,220 1,920 1,920 1,520 2,320 3,120 4,280 4,120 6,000 6,000 5,600 5,400 34,075 41,545 44,725 45.165 5,030 5,390 5,830 5,760 0,600 7,400 7,600 8,000 11,300 12,100 12,700 13,400 11,280 11,450 12,550 13,150 4,3S0 4,3S0 4,380 4,3S0 3,325 4,825 4,825 4,825 7.100 7,500 8,300 9,100 6,780 7,080 7,0S0 7,4SO 14,465 15,125 15,285 15,445 4,000 4,000 4,400 4,400 141,000 145,590 153,790 159,280 5,030 6,270 7,030 7,220 7,600 2,966 4,325 4,325 4,325 7,100 7,500 8 300 9,100 5,315 5,515 5,515 5,815 9,010 9,540 9,540 9,540 4,000 4,000 4,400 400 4,260 4,260 4,260 4 260 110,451 116,630 120,010 119,920 1,465 1,565 1 565 1,665 5,425 5,5S5 5,245 4,905 6,380 6,180 6,180 6,0S0 2,140 3,540 5,000 5,600 3,940 3,5S0 3,140 6,340 5,120 5,320 5,320 5,420 61,620 64,020 65,520 67,920 5,120 5,320 5,320 5,420 61,350 63,750 65,300 67,700 5 830 5^760 6,400 6,100 6 000 5,300 270 270 220 L>20 4,900 450 490 500 520 8 100 11,300 12,100 12,700 13 400 11,280 11,450 12,550 13,150 6,515 6,126 6,010 5,379 3,7S8 4,055 4,050 4,251 500 1,000 4,400 12,400 13,500 15,700 22,000 6,780 7,080 7,0S0 7,480 14,465 15,125 15,285 15,445 4,000 4000 4 400 4,400 141,000 148,590 153,790 159,2S0 1,466 1 568 1,568 1**- 5,695 5,748 5,412 4,972 7,500 7,500 8,500 8,500 60?2 6 700 6,600 7,400 7,600 8,000 17,699 17,970 17,580 6S4O 120 120 120 120 400 5,030 5,390 5 830 5,760 359 500 500 500 3,780 3,950 4,050 4,250 330 370 270 270 220 220 San Minne- vansas apolis. City. 13,600 15,200 16,000 16,000 63,760 67,560 70,520 73,520 61,620 64,020 65,520 07,920 9,3S0 9,3S0 9,3S0 St. Louis. 8,970 8,000 12,800 8,970 8,000 12,800 8.970 10,000 14,100 12,100 10,000 14,100 11,500 11,500 11,500 11,500 5,120 5,320 5,320 5,420 Chicago. 4,380 4 380 4 3S0 4 3S0 3,325 4,825 4,825 4,825 359 500 j 500 500 7,100 7,500 8,300 9,100 !"M."i 13,0-33 IS,267 17,766 16,9S9 390 FEDERAL RESERVE BULLETIN. NOVEMBER 1, 1915. GOLD IMPORTS AND EXPORTS. Imports o gold, by customs districts, Jan. 1 to Oct. i 5 , 1915. I In thousands of dollars.] For week ending Sept. £4. Ore and base bullion Bullion, refined United States coin Foreign coin Total 40 21 213 11 516 746 Total 259 359 12 5,332 4,816 140 21 4,856 ===== For week ending Oct. t. Ore and base bullion United States mint or assay office bars Bullion, refined United States coin Foreign coin 29 140 10 54 17 29 sc 117 5,962 195 434 208 208 1,286 28 1*207' 42 1,261 117 195 64 58 194 101 81 12 252 182 12 7,536 58 203 46 498 1,923 6 8,479 203 40 10,906 4,038 4,083 4,038 10 208 For week ending Oct. 8, Ore and base bullion. Bullion, refined United States coin.... Foreign coin Total 54 264 1 4,730 135 2 5,049 137 1,855 | 21 150 127 1,297 .307 1,673 5,553 For week ending Oct. 15. Ore and base bullion. Bullion, refined United States coin.... Foreign coin Total 9 476 3 5,558 15 2,921 6,046 171 4,345 . . . Jan. 1 to Oct. IS. 816 Ore and base bullion United States mint or assay office bars , 8,996 Bullion, refined 48,390 ....119,869 United States coin 11,650 50 j20 j20,G74 Foreign coin Total. 60,041 H355 332 342 142 799 450 8 363 1,328 2,871 10,885 22 36,488 792 1,478 3,144 48,194 3,213 1,775 12 4,655 114 1,318 12,015 6,920 8,131 86,557 5,254 279 49 498 114 6,923 34,730 154,920 74,680 1,318 106,863 3 283,268 NOVEMBER 1, 391 FEDERAL BESERVE BULLETIN. 1915. Exports of gold, by customs districts, Jan. 1 to Oct. 15, 1915. [In thousands of dollars.] 1 For week ending Sept. £4. United States mint or assay office bats.. Bullion, rtfined, domestic United States coin.... Foreign coin , 50 503 11 514 Total. 72 10 21 5 51S 62 "COG 10 For week ending Oct. 1. Ore and base bullion United Statos mint or assay office bars.. Bullion, refined, domestic United States coin , Foreign coin 27 2S 1 6 1,307 1,300 75 Total. 34 1,300 1,417 For week ending Oct> S. Ore and base bullion.. United States coin.... Total. For week ending Oct. 15. 585 15 Total. 5S5 15 600 United States coin.. Foreign coin 600 Jan. 1 to Oct. 15. Total. 270 250 16 Ore and base bullion United States mint or assay office bars.. Bullion, refined; Domestic Foreign United States Foreign coin 70 20 9,134 4,113 19 1,805 195 10 84 195 353 3,975 2 12,780 10 24 16 S 134 ... 274 5 3 22 14 13,700 INDEX. Page. Acceptances 381, 382 Address by Hon. P. M. Warburg 352-354 Business conditions throughout the 12 Federal Reserve Districts 373-380 Commercial paper discounted by Federal Reserve Banks 381-384 Conference of Governors held in Minneapolis 356 Discount rates in effect October 28, 1915 359 Discounts, distribution of 381-384 Earnings and expenses of Federal Reserve Banks 349-351 Federal Reserve Agents' Committee on Clearance, report of 369-372 Federal Reserve Agents, date of meeting of 347 Federal Reserve Agents7 accounts, statement of... 389 Federal Reserve Banks: Earnings and expenses of . 349-351 Resources and liabilities of 387,391 Services performed for member banks.. 346,347 Federal Reserve notes: Circulation of 388 Decision of Attorney General re franking privilege 355 Interdistrict movement of 351 Fiduciary powers granted to member banks 367 Foreign agencies 348 Franking of Federal Reserve notes, decision of Attorney General relating to 355 Gold imports and exports 390,391 Gold settlement fund 357-359 • Governors, conference of, at Minneapolis 356 Page. Informal rulings of the Federal Reserve Board.. 360-362 Open-market operations 360 Election of Class A and Class B directors 360 Payment of reserves 361 Use of word " Federal" by State banks. 361 Compensation of Deputy Federal Reserve Agents 362 Eligibility of an acceptor under acceptance regulation 362 No authority granted member banks to act as receiver 362 Interpretation of section 8 of Clayton Act 362 Window advertising 362 Intradistrict clearing system 367 Interdistrict movement of Federal Reserve notes.. 351 Law department 363-366 Pledges of collateral security 363 Single-name paper 365 Election of directors under Clayton Act 365 Meeting of Federal Reserve Agents, date of 347 Report of Federal Reserve Agents' Committee on Clearances 369-372 Resources and liabilities of Federal Reserve Banks 387,388 Services performed for member banks by Federal ReserveBanks 346,347 State banks admitted to system 347 Trustee, executor, etc., applications to act as, approved 367 United States bonds, purchase, etc., of, by Federal Reserve Banks 355 Work of the Federal Reserve Board 345 o