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PROCEEDINGS
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Federal Reserve Bank of St. Louis
OF A
CONFERENCE
WITH
GOVERNORS
O F THE FEDERAL RESERVE B O A R D
THE
O F THE FEDERAL
RESERVE
ASSEMBLY R O O M
FEDERAL R E S E R V E B O A R D
METROPOLITAN B A N K BUILDING
WASHINGTON, D . C ,
APRIL 12-15, 1921.
ASSOCIATED S H O R T H A N D R E P O R T E R S
SUITE ( 8 - 2 3 A P P E A L S
BUILDING
426 FIFTH STREET, N.W. ©
WASHINGTON, 0, Cc,
BANKS
Af P R O C E E D I N G S
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Federal Reserve Bank of St. Louis
OF A
CGCNFERENCE W I T H T H E F E D E R A L R E S E R V E B O A R D
of t h e
GOVERNORS O F THE FEDERAL RESERVE BANKS
Assembly Room, Federal Reserve Board,
Metropolitan B a n k Building,
washington, D . C.,
Tuesday, April 12, 192i
A conference w i t h t h e F e d e r a l R e s e r v e B o a r d o f t h e
Governors
o f the Federal Reserve Banks w a s convened
i n the
Assembly R o o m o f the Federal Reserve Board, Metropolitan
Bank Building, Washington, D . C., o n Tuesday, April 1&,
1921 a t 1 0 o'clock a.m.
Present:
Hon. Ww. P. G.- Harding, Governor o f the Federal
Reserve Board,
Hon E d m u n d Platt, V i c e G o v e r n o r
Reserve Board,
o f t h e Federal
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Federal Reserve Bank of St. Louis
A. G. Miller, Member o f t h e
Hamlin, £
F e d e r a l teserve
A. @ s Mellon, Secretary o f the Treasury a n d
ex officio member o f the Federal Reserve Board.
Hon. D. k. Crissinger, Comptroller o f the Currency
and e x officio member o f the Federal Reserve Board,
Charles 4 . Morss, Governor, Federal Reserve B a n k
lal
of B o s t o n .
Benjamin strong Jr., Governor, Federal Reserve
Bank o f New York,
George %. Norris, Governor, Federal Reserve Bank
of Philadelphia.
B. & . Fancher, G o v e r n o r , Pederal keserve B a n k o f
Cleveland.
George J . beay, Governor, Federal Reserve B a n k
Richmond.
hi. F e eLlborn, Governor, Federal Reserve B a n k
G.evernor F e d e r a l
Chicago.
Reserve
Bank
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Federal Reserve Bank of St. Louis
B. C . Biggps, G o v e r n o r , F e d e r a l R e s e r v e B a n k o f
St
4 0 s .
i>
Re
A e Young, Hovernor, Federal xeserve B a n ky otf
(innescolises
3. &
Hiller, dr., Governor, Federal Reserve B a n k o f
Bansas City.
R. L . V a n Zandt, Governor, Federal Reserve B a n k
of Dallas.
Je U. Calkins, Governor, Federal Reserve Bank o f
san Franciscoe
George L e Harrison, D e p u t y Governor, Federal R e serve B a n k o f New York, a n d secretary o f the Conference.
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Federal Reserve Bank of St. Louis
P R O C E E D I N G S .
Governor Harding: G e n t i e m e n , c o m e t o order.
Secretary o f t h e T r e a s u r y i s g o i n g t o g i v e u s a
time this morning.
is always a
The
little
A S you well know, the Secretary
very busy official, a n d the n e u Secretary i s
particularly busy.
V i h i l e t h e Secretary
i s here---he t o l d
me that h e might give u s a n hour o r s o this morning---I
think he woulda like to have a general discussion of the
currency situation w i t h particular reference t o the dis.
count rates i n the various dishricts.
Secretary Méllon. A l l o w m e t o say, Governor Harding, t h a t I
J o not want t o interfere w i t h a n y regular pro-
eram.
Governor Harding.
T h a t question i s o n our program.
It i s the v e r y first topic o n the program.
Secretary Hellion. I
Governor Harding. I
am only here t o learn.
think i t might interest the Gov-
ernors a n d also t h e Secretary o f the Treasury a n d throw
some light o n how other people v i e w o u r transactions,
if
I bring to the attention of this meeting an editorial
which appeared i n the March 4th issue o f one o f the leadig
Vestern farm papers, Wallace's Farmer, published a t
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Federal Reserve Bank of St. Louis
Des Moines, Iowa, under t h e editorisl mene gement o f
Henry G . wellace, t h e n e w Secretary e f Agriculture
in
Preside tHerding's Cabinet:
"Whet i s the proper function o f the FedereI Reserve Bank?
I s i t t o b e simply 2
geet’ réserve b a n k
institution, where t h e credit reserve o f the country c a n
be m o b i l i z e d e n d l o a h e d s s t h e n e e d s o f b u s i n e s s m e k e
necessary?
O r besides being a banking institutién for
the mobilization o f credits igs i t t o have t h e right,
through the arbitrery extengion o r contraction o f these
credits
t o raise
o r l o w e r p r i d e s g e n e r a l l y a n d i n per-"
ticuler, e n d thus take good business o r bad business e c ~
cording a s thememberds o f the Federal Reserve Board i n their
wisdom m e y decide?
"rt 4s highly impertant thet its proper functions
be defined.
F o r this Federal Board n o w seems t o have i n
shoose .
$b the power t o meke and unmake business a s {it may
And further the power t o make o r break alma t any of the
great industries o f t h e nation.
"te the Federel Reserve Bank is to be a great danking instithtion a n d nothing else, t h e n i t i s entirely
proper thet i t should b e run b y bankers, the very best
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Federal Reserve Bank of St. Louis
bankers i n the entire country.
"rf, o n the contrary, i t 1s t o exercise almost absolute pewer over t h e business o f the country, m a k e e n d
unmake 4 t e s i t may think wise, s e n d prices u p and
down a t its o w n sweet will, t h e n i t i s highly importent that t h e members o f the Reserve B o e r d should b e not
bankers alone, b u t capable m e n w h o unéerstand t h e business o f the country a n d w h o are representative o f the
various great industrics.
"ag h a v e h a d a n i l l u s t r e t i o n d u r i n g t h e p a s t s i x
months o f the power o f the Federal Reserve Board over
the business o f the country.
I t is being held respon-~
sible f o r bringing about t h e drastic deflation.
P e r e
haps i t h e d not intended t o deflete prices t o the extent
ewey
they have been deflated. P e r h a p s the thing got
from them,
B e that a s i t may, they sterted i t and the
results a r e serious.
Bank
"at the present t i m e t h e Federal Reserve
has excess reserves amounting t o a little over five
hundred million dollers, more then eny time i n the
past eighteen months.
L e s t eummer i t s excess reserves
were two hundred and fifty million dollers.
A t that
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Federal Reserve Bank of St. Louis
time i t could have expanded t h e credit o f the country
at least five hundred million dellers without imperiling its reservas.
N o w its reserves a r e sufficient t o
serve a s the source f o r five billion dollars worth o f
extra credits.
"The inerease i n the reserves o f the Federal Reserve B a n k during t h e pest three months i s pointed t o
as reassuring.
T h a t a l l depends u p o n h o w w e look a t
L% T h e y indicate t h a t credit h a s r e e n restricted;
that liquidation h a e b e e n going o n a t e terrific rate,
They d o not, however, tell the story o f what this liquidation h a s cost t h e people w h o have liquidated, n o r whet
it nes cost t h e farmer.
"Tf the Federel Reserve Board is to be allowed t o
continue
t o exercise s u c h a
powerful i n f l u e n c e o v e r t h e
business o f the country, t h e n t h e members o f the Boerd
should n o t b e benkers alone b u t representatives o f the
verious industries, the most intelligent representatives
who c a n b e found i n the entire nation.
one o r t w o f a r m e r s
T h e r e should b e
o n the board, b e c e u s e f a r m prices
are more easily influenced b y the action o f the Feder81 Reserve t h a n prices o f anything else.
T h e r e should
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Federal Reserve Bank of St. Louis
be a representative o f the manufacturing interests.
"vg should heve a shewdown o n this whole business
right awey.
T h e theory o n which t h e Federal R e s e r v e
Beard h a s o p e r a t e d d u r i n g t h e p e s t y e s r p l a c e s a l t e -
gether t o o much power i n the hands o f m e n w h o are n o t
thoroughly representative o f the varinus industries o f
the netien."
The Federel Reserve Agent a t iiinneapolis, M r .
Rich, received this editorial f r o m e man named Kelly
at Devil's Lake, N o r t h Dekota, a n d h e hes made o n e o f
the mos t
sucai n
t and ferceful raplies t h e t I have ever
read, a n d I
here.
want y o u a l l t o r e a d t h i s w h i l e y e u a r e
H e goes right t o the meat o f i t end peints out
the general misunderstanding a n d the misepprehension
af the whole situation, e n d I want t m emphasize t h e fect
that t h i s m i s u n d e r s t e n d i n g
o f the pewers a n d functions
of the Federal Reserve system ought t o he corrected,
if paseible, because i t is dangerous that such a misunderstanding sheuld exist. A l r e a d y ,
o n the very
first day o f the sessien o f Cengress, @ bill was intreduced, w h i c h w a s introduced a t the last session o f
Congress, providing that i n # 6 circumstances should
the Federal Reserve B a n e charze a
hither discount rate
on any class o f vcaner than five » e r cent. i
ago not
know n o w m u c h forces t h i s i s ctoin~ t o have, b u t w e c a n
all yvsalize, 1
thins, t h a t l e m i s i a t i o n o f t h a t s o r t
exceszdinely danterous a n d have a
vary b a d ef-
The agitetion o f i t even i s dancorous.
idea s s e m s
in effect a
t o orevail a l l o v e r t h e c o u n t r y t h a t “ e have
central bani vested v i t h very broad a n d ar-
bitary o o s r s .
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Federal Reserve Bank of St. Louis
T h e
T
e i n d s .endent functionine=
o f t h e ted-
lost g i c h t o f ,
Tne vaoly o f ar. R i c h t o lr. Xelly i s a s follovs:
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Federal Reserve Bank of St. Louis
Mr. J o s e p h M . Kelly,
Devils Lake, N o r t h Dakota.
iy Dear Mr. Kelly:
Mr. wesley C. McDowell has forwarded t o me your
recent n o t e t o h i m t o w h i c h y o u a t t a c h e d a
clipping q u o t -
ing a n editorial from Wallace's Farmer o f Des Moines,
Iowa, which voices considerable criticism o f the Federal
Reserve System a n d the Federal Reserve Banks.
torial r e f e r r é d
t o seems
T h e edi.
t o create t h e impression t h a t
tue Federal Reserve B o a r d exercises s u c h a control over
credit a n d prices t h a t i t c a n make business g o o d o r bad
as i t m a y please, t h a t t h e B o a r d h a s s a u s e d d r a s t i c
deflation, that i t could i f i t desired expand the credit
of the country b y ¢500,000,000,
a n d that i t i s not suffi-
ciently representative o f t h e business interests t h a t have
been a d v e r s e l y a f f e c t e d
b y i t s policies.
These criticisms are not entirely new. T h e y have
been voiced a great m a n y times i n recent months a n d they
usually follow about the same line of thought.
‘hen I
hear t h e m they always impress m e a s being founded upon a
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Federal Reserve Bank of St. Louis
very i n a c c u r a t e k n o w l e d g e
o f t h e purposes a n d provisions
of the Federal Reserve Act, a n d insufficient comprehen-
sion o f what has been the actual history o f the Federal
Reserve Banks, a n d upon interpretations o f economic c o n ditions t h a t l a c k substance,
I a m sorry that a
man o f the standing o f Mr. Wallace
has permitted this editorial t o appear i n a publication
of such excéllent standing.
I t is possible that i t did
not come f r o m h i m personally b u t f r o m some editorial
writer o n his staff, I
a m satisfied that a careful
induiry i n t o t h e f a c t s w o u l d h a v e r e s u l t e d
i n conclusions
Quite d i f f e r e n t f r o m t h o s e w h i c h t h e e d i t o r i a l e x p r e s s e s .
I should l i k e t o m a k e s o m e c o m m e n t s u p o n t h e s e criti-~
cisms i n the order i n which they appear.
Whether business i s good o r bad i n this country depends u p o n production costs, t h e buying power o f the people
who make the domestic market, t h e condition o f foreign
markets a n d the foreign demand for our goods and products,
and the ability o f the vorld t o maintain a
flexible n o r m a l i n t e r c h a n g e
free a n d
o f f o o d s a n d credits.
O u r
Statistical records s h o v that t h e proportion o f the
total products w h i c h w a s e x p o r t e d t
o foreign markets i n
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Federal Reserve Bank of St. Louis
either 1919 o r 1920, depending o n which was the latest
year f o r which figures c o u l d b e obtained, w a s a s follows:
Leaf. tobacco 4 5 .6% S t e e l ingots
5
Copper
C o a l , anthracite
e
C o a l , bituminous
a
Cotton
A
Whe at
9 ,o%
u
t
o
m
o
b
i
l
e
s
,
commercLlal
Pork
Beef B
Automobiles,
passenger
When n o t Quite half o f c u r tobacco c r o p i s compelled
to f i n d a
foreign market a n d a l i t t l e l e s s t h a n one-third
of our cotton must l o o k t o a foreign market, a n i when
abou» four-tenths o f our copper m u s t b e sold abroad,
when a little bit more than one-fifth of our wheat must
be sold abroad, a n d when w e all knor that these foreign
markets have been steadily reducing their absorption o f
American goods f o r many months past, i t i s not hard t o
see that here i s one o f the most important reasons w h y
business
i s p o o r i n this country.
T a m unable
t o s e e i n that respect t h e Federal R e -
serve B o a r d o r t h e F e d e r a l R e s e r v e B a n k s c o n t r o l t h e c o s t
of production o f farm products, l i v e stock,
o r the product
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Federal Reserve Bank of St. Louis
of industry i n this country,
i n what respect t h e y c a n
control t h e b u y i n g p o w e r
o f the people u p o n v h i c h the
domestic m a r k e t d e p e n d s ,
o r i n that respect t h e y c o u l d
broaden o r c o n t r a c t t h e f o r e i g n o u t i s t s f o r A m e r i c a n
products.
I t seans t o m e that i t i s clear that these
fundamental conditions present problems none o f which
it i s w i t h i n t h e p o w e r o f e i t h e r t h e F e d e r a l R e s e r v e
Board o r the Federal Reserve Banks t o control o r solve.
The governments o f the allied powers and later the
government o f the United States “ e r e responsible f o r the
drastic advances i n prices w h i c h began i n this country
in 1914, i n the wake o f which inevitably followed a
Slow a n d steady advance i n Wage rates resulting i n increased cost o f production, a n d then i n very substantial
increases
i n t h e c o s t o f l i v i n g t o a l l t h e péople.
This
upward movement w a s d u e t o the abnormal demand o f the
foreign governments a n d then this government f o r a n
immense v a r i e t y o f goods a n d products,
of a
much o f w i e
competitive c h a r a c t e r a n d t e n d e a o f i t s e l f
was
t o ac-
celerate t h e upward movement o f commodity prices,
I t
is a notable f a c t that much o f this price advance h a d
already been recorded before there w a s a substantial
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Federal Reserve Bank of St. Louis
increase i n the p e r capita circulation, a n d from these
facts i t i s a logical conclusion that price inflation
preceded t h e inflation o f money a n d credits, a n d that
the inflation o f money a n d credits w a s t h e product a n d
not t h e Cause, I
d o not see f r o m these facts h o w the
Federal Reserve Board o r the Federal Reserve Banks c a n
inbe held responsible for either credit o r currency
flation.
T h e y d i d not bring o n the war, b u t war brought
on a scramble for goods, i n the wake o f which came price,
credit a n d currency inflation.
Among t h e unusual factors resulting f r o m the w a r
one should not overlook t h e decreased production which
accompanied t h e increased cost o f production,
There i s a n extremely important f a c t that relates
directly t o these matters,
I f the Federal Reserve B a n k
of Minneapolis desired before t h e e n d o f this month t o
increase t h e credit i t has extended t o the Ninth Federal
Reserve District by, let us say, »10,000,000, I would be
wholly u n a -lé t o define a n y method o r suggest a n y plan
by which this caild b e accomplished.
v i e are prohibited
by law f r o m making loans t o a n y individual, firm. o r
corporation.
W e c a n deal with o u r member banks only,
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Federal Reserve Bank of St. Louis
15
and they represent about o n e o u t o f four banks i n this
T h e y have t h e right under t h e l a w t o present
district.
to us certain kinds o f eligible paper f o r rediscount.
Their action i n rediscounting w i t h u s i s voluntary a n d
wholly o n their o w n motion.
“ e d o not control t h e
volume o f t h e p a p e r w h i c h t h e y o f f e r , n o r h a v e w e a n y
power t o s a y when o r i n what volume these offerings w i l l
be made.
T h e result is, therefore, that the volume
of loans outstanding i n the district a t a n y given date
is w h o l l y e n d e x c l u s i v e l y c o n t r o l l e d
b y the conditions
in each o f the localities, w h e r e there i s a member bank,
which m a y o r m a y not suggest t o that member b a n k that i t
ts d e s i r a b l e f o r i t a s a
member
t o exercise t h e o p t i o n
that i t h a s u n d e r t h e l a w t o d i s c o u n t
o r not t o dis-
count @ligible paper w i t h the Federal Réserve Bank,
Tho o n l y manner i n which w e c a n put o u t Federal Reserve
Notes
i s i n response
t o the rediscount
o f paper b y 4
member bank. T h e r e f o r e , t h e member banks a n d not
the Federal Reserve Banks, control t h e volume o f cur.
rency that goes out.
T h e return o f this currency which
produces a
b n the volume
reduction
wholly automatic.
1
of currency. 8
F e d e r a l Reserve Notes will remain
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Federal Reserve Bank of St. Louis
in the hands o f the public a s long a s the public needs
them i n the ordinary d a y t o d a y exchanges,
( h e n in-
dividuals n o l m g e r c a r r y the same amounts o f currency,
st finds i t s w a y immediately i n t o the banks a n d a c c u m T
lates there,
n 6ach o f the banks t h e tendency i s t o
get rid o f any excess accumulation, a n d the Federal Reser:
Notes a r e daily shippéd i n varying quantities t o city
correspondents o r direct t o the Federal Reserve Bank
Lor e e e alt s
I f these u s e d notes c o m e i n t o a Federal
Reserve B a n k a t a time when t h e demand o f its members f o r
currency i s light, t h e y a r e retired f r o m circulation
after t h e torm a n d mutilated bills h a v e besn separated
and destroyed,
{ think this makes i t clear that the Federal Re.
serve Board and the Federal Reserve Banks have absolutely
no power under t h e l a w t o arbitrarily increase t h e
volume
o f credit t o t h e country o r arbitrarily decrease
it, whereupon i t follows t h a t t h e assumption that they
have a r b i t r a r y c o n t r o l o v e r p r i c e s
b y reason o f their
control over t h e Volume o f credit,
i s -wholly i n errem,
Going b a c k t o o u r original thought, t l e p r i c e o f
goods will, after all, b e more responsive t o the breadth
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Federal Reserve Bank of St. Louis
and activity o f the markets t h a n t o a n y one factor,
A t
the present t i m e many fanufacturers a r e forced t o sell
for a n y price t h e market affords large quantities o f
goods which have unquestionably c o s t a great deal more
than they will bring a t the present time.
Fran tre se facts,
i t i s clear that while there m a y
exist i n the Federal Reserve System a basis f o r a
large
amount o f credit rhich i s not a t this date being used,
it i s p u r e a s s u m p t i o n
t o believe t h a t t h e F e d e r a l R e s e r v e
Board o f the Federal Reserve Banks c a n arbitrarily i n crease o r d e c r e a s e t h e v o l u m e
o f credit
b y turning s o m e
kind o f a financial water-~tap o n o r off, since t h e volume
of credit extended b y the Federal Reserve S y s t e m i s under
the exclusive control o f t h e member banks i n the System
and since their control i s i n turn dominated b y the n e cessities o f their respective communities.
The right o f a member H a n k t o rediscount eligible
paper i s a r i g h t w h i c h i s g r a n t e d b y specific p r o v i s i o n
of law.
I f a member bank i s sound and well-managed,
a b e h a s not over borrowed, a n d i f conditions i n its
community j u s t i f y i t s a c t i o n a n d i t presents f o r
rediscount paper which i s eligible under t h e l a w a n d the
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Federal Reserve Bank of St. Louis
regulations o f the Federal Reserve Board, I
d o not s e e
how the officers o f this bank coul@have any right to
refuse t o accept it. T h i s further emphasizes t h e pecul.
lar control which member banks have over the volume o f
credit extended b y Federal Reserve Banks,
The deflation o f prbces i s not a condition peculiar
to the United States,
“ e were riding e a s y a t the time
of t h e s m a s h i n r a w s i l k p r i c e s
i n Japan,
a n d sugar
in
Cuba, b u t t h e results o f these foreign conditions w e r e
apparent almost at. once i n the United States.
The
price o f silk i n Japan w a s a matter o f very serious con-~
sequence
t o the manufacturers
o f silk
i n the eastern
United States and to other people all the way down the
line t o t h e c o r n e r h a b e r d a s h e r w h o h a d e x p e n s i v e s i l k
Shirts t o selli o n a falling market,
The cutting off o f the foreign markets for cotton
depressed southern cotton prices i n a n abnormal derree,
Price deflation has been more radical i n some
respects
outside t h e United States t h a n within,
w e know that i t
is a worldwide condition a n d that i t was t h e inevitable
result o f the reactions following t h e war,
Eastern
manufacturers h a v e t a k e n t r e m e n d o u s l o s s e s
o n cancellaticn.
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Federal Reserve Bank of St. Louis
by f o r e i g n e@onsignees a n d v e r y l a r g e s u a n t i t i e s
o f our
goods a r e piled u p o n South american docks w i t h m t a
market. D e m o r a l i z a t i o n a n d interruption o f ordinary
trade r e l a t i o n s
i s apparent
i n almost a n y direction
that o n e looks, a n d i t i s not p o s s i b l e f o r u s t o g o
through such a situation a s this without feeling very
bad effects here a t home,
I f there has been radical de-
flation of credit I am interested in knowing where it
has occurred,
O
n January 2, 1920, the total
bill holdings o f the twelve Federal Reserve Banks were
%2,805,818,000.
O n December £0, 1920, the total bill
holdings o f the same banks were y&,972,858,000, a n d they
had increased during t h e year »167,040,000,
I n the
United States Senate o n December 15th last, Hon. Carter
Glass, f o r m e r S e c r e t a r y
o f t h e Treasury, p o i n t e d o u t
that t h e increases o f rediscounted paper b y the Federal
Reserve Banks i n districts t h a t a r e largely agricultural,
were from November 20, 1919 t o November 20, 1920, approximately a s follows:
Richmond
Atlanta 2
z
h
S
t
. Louis 85%
D a l l a s 1 4 0 %
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Federal Reserve Bank of St. Louis
hicago
9
Son Francisco
5
%
6 1 %
K
a
n
s
a
s City
4 8 %
M i n n e a p o l i s 108%
These fipurés d o not indicate deflation b u t they i n dicate t h r o u g h o u t a l l o f 1 9 2 0 a
steady increase
i n the
volume o f credit afforded b y the Federal Reserve System,
This bank entered the year 1920 with a n abnormally heavy
volume o f unliquidated loans resulting from the previous
crop and amounting t o $65,000,000. I n s t e a d o f deflat.
ing t h e volume o f credit afforded t o the district,
closed the year with w97,000,000 o f loans,
deflation.
it
T h i s i s not
I t i s the response o f the Federal Reserve
System t o the abnormal demands coming largely from agri.
cultural and live stock interests, which were the product
of the serious conditions t h a t have confronted t h e m dur.
ing recent months, V i e w i n g this problem from another
angle, w e find that during the first ten montis o f 1920,
800 membsr banks i n the Federal Reserve System, which
represent about seventy p e r cent o f the total resources
of the member banks, increased their own bi1l holdings
by$1,800,000,000.
The real trouble w i t h the agricultural a n d live
stock situation, a n d for that matter, w i t h the business
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Federal Reserve Bank of St. Louis
situation i n the United States,
i s that o n e o f the
hardest things a n y o f u s have t o d o i s t o face o u r
losses.
T h e disposition
i s t o stave o f f t h e fatal d a y
and t r y a n d hang o n a little while longer i n the e x pectation
o f better p r i c e s .
T h e farmer feels this v a y
about h i s problems a n d wants t h e banks t o extend credit,
with Little o r no consideration o f the amount oi credit
the individual i s actually entitled to, o r whether h e
has n o t already u s e d i t up, i n the hope that sone fortuitvous t u r n o f the market will l e t h i m out a t a profit.
Many manufacturers f e e ] t h e same way, a n d i t i s very
hard for t h e m t o face t h e present facts. I
because I
Imow this
a m interested i n a large manufacturing enter-
prise, w h i c h c a n n o t p o s s i b l y o b t a i n
o n t h e p r e s e n t market,
or expect a n y market i n the immediate future o n Fhich i t
can s 6 l l t h e p r o d u c t s m a n u f a c t u r e d o u t o f i r o n a n d s t e e l
it has o n hand, a t a profit.
I n v e n t o r y losses i n the
manufacturing business h a v e been v e r y heavy, a n d w h e n
one considers that these a r e coupled vith losses d u e t o
cancellations a n d radi cal decreases i n the absorbing
power o f the markets, I
am not s o sure but that the
manufacturer i s just a s badly o f f a s the farmer. g
geeLi
not k n o w a n y s h o r t a n d e a s y w a y o u t o f t h e s e c m d i t i o n s .
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Federal Reserve Bank of St. Louis
They are t h e product o f all that h a s been happening since
the b e g i n n i n g
o f the w a r ,
T h e y a r e t h e product
opments w h i c h extend b a c k over many months. I
o f devel.
d o not
know o f a n y wise course f o r a business m a n o r a farmer
but t o face h i s losses a n d take t h e m a n d g o t o work i t h
courage and fortitude t o meet the conditions that exist.
In t h e l o n e r u n , o n e b a d y e a r i s n o t g o i n g t o m a k e o r
break this country o r this district.
I a m not surprised that there i s criticism a t
this time because t h e situation whieh this country faces
is really v e r y serious, I
hope t h a t I
a m right i n m y
orn belief that i t i s less serious t h a n i t was, b u t I
do
not expect that w e are going t o work o u t t o easy credit
conditions a n d a period o f good business except b y slow
degrees,
T h e readjustments t h a t a r e i n progress h a v e
unsettled t h e p u b l i c a n d c r e a t e d a
bad e m d i t i o n
o f mind,
This, too, has come about slowly and cannot b e remedied
at o n c e ,
mcasures
M
y o w n v i e w i s that this i s n o time f o r radical
o r radical r e m e d i e s ,
P e r s i s t e n t application
of the tried a n d proven business principles,
always been a
w h i c h have
dependable support i n the past, w i l l pull
Us o u t o f these’ difficulties.
c e r t a i n l y thoughtless
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Federal Reserve Bank of St. Louis
criticisms a n d arguments t h a t l a c k a substantial foundation o f fact camnot help, b u t o n the contrary they serve
only t o confuse t h e minds o f a great many people r h o
already have problems e n o u g h t o think about. I
a m sure
that sound criticism i s something t h a t t h e Federal Reserv
Board a n d t h e F e d e r a l R e s e r v e B a n k s w i l l a l w a y s welcame.
When w e g é t far enough f r o m present conditions t o analyze
them clearly, I
a m satisfied that the people o f this
country rill have varn appreciation o f the services t h a t
the Federal Reserve System h a s rendered.
sufficient c o n t a c t
I f they h a d
t o u n d e r s t a n d t h e p e r s o n n a l a n d method:
of the Federal Reserve Board, I
am sure they would reahize
that i t has given a multitude o f problems t h e most serfous a n d intensive study, a n d that i t i s very unfair t o
Suggest t h a t i t lacks t h e fullest appreciation o f the
difficulties which confront the people.
M y own knowledge
of thé Board and its methods ‘ould not support any such
view.
I t has h a d the closest association v i t h the
Federal Advisory Council,
o n which each Federal Reserve
District i s represented b y a very able man, and i t has
had the closest touch "ith the principal kinds o f business i n this country, a n d with thousands o f men rhose
opinions a s t o business a n d finance have weight and value
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Federal Reserve Bank of St. Louis
To m é i t i s a
conspicuous f a c t t h a t t h e B o a r d l a c k s
neither contact v i t h t h e business a n d financial problems
of the country o r the desire o r ability t o contribute
in the fullest degree t o their colution,
We have prepared a booklet addressej t o farmers a n d
stockmen, a copy o f which I am sending you under separate
cover,
i n rhich some angles
carefully discussed. I
o f these problems a r e quite
should like t o suggest that y o u
take i t home vith you some evening a n d read i t over very
carefully.
There a r e m a n y things about t h e operations o f this
bank w h i c h w o u l d i n t e r e s t y o u a n d t h e r e a r e s i d e l i g h t s
On our policies a n d operations w h i c h I think y o u vould
be glad t o have, I
shall much appreciate i f i t a t
sone convenient time y o u c a n call upon m e a t m y office
here, a n d I smill b e g l a d t o discuss come o f the angles
of these problems which i t i s hardly possible t o touch
upon i n a letter s u c h a s this, w h i c h I find i s already
growing L o n g e
I.can a s s u r e y o u t h a t w e a r e e m p l o y i n g
i n this d i s -
trict, a s i s the Federal Reserve Board i n its relation t p
the country a s a whole, e v e r y power that t h e l a w grants
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Federal Reserve Bank of St. Louis
25
us t o a s s i s t f a r m e r s
a n d business
men
t o relieve
the
pressure o n credit, w h i c h h a s beén abnormally severe,
and t o e n c o u r a g e
ditions
a s rapid a
returm t o m o r e n o r m a l c o n -
a s i s possible,
Very t r u l y yours.
Tan not toing t o detrin you “ith 4 very n a s
Te
a m sure t h e Seorebtury o u l d L i k e
this morninr, because I
to have a qeneral discussion o f the rirst tonic,
rate policy, subdivisions (a), (bv), (c) and (da),
think osobably, dr. Secretary,
i n order t o thro
lirht o n the subjedt, 1 b ‘r0uld b e better t o have the roll
of the districts called a n d have t h e Governor o r each
Federal keserve District give b r i e f l y ,
i n five minutes
if h e can, h i s zaneral idea o f the situation, “ h a t
changes i f any i n rates should b e node, a n d ‘ i v e his
reasons therefor.
Secrstary s l l o n . I
think that would pea a mood idea.
Governor yacding. D i s t r i c t iio. 1 , Bostan, tdovernor
Governor wJorss.
>
Ne» snzgland comrortable,
» gonsider t h e c r e d i t s i t u a t i o n
i f not easy.
serve Banx< a t B o s t o n h a s h a d a
T a e Federal ne-
reserve p o s i t i o n l a s t s u m -
ran
mar a @ year 2 2 9 u o t o s e v e n t y p e r gent, a n d t h e n i t
down a n d u p again,
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Federal Reserve Bank of St. Louis
a n d i t has b 3 e n seventy Y e r cent
since t h e l s t o r January,
has r u n d o n
n i n :
t o s i x t y v e r cent,
S i n c a t h a t time i t
a n d i s no”
o n the i n -
@ thin«x thare that w e ourht t o reduce o u r
4
discount r a t e s
in
2 2 comiercial 2.aDer.
T h e r e i s n o indi-
cation o f a n y great denand o n the Boston bank:
banks
i n l e w dnzland.
T
h
a Loans
o r o n the
i n the Boston b a n k a r e
very small a n d t h e loans i n the member banks a r e ac-
cordingly small. @
and [
huve had our soring boom business,
am sorry t o s a y that i t did n o t anount t o much.
It cartainly d i d n o t brinz a n y demand o n the banks t h a t
mas 2 D .rgclable.
-
@ believe “ e hava 3 e a n the best o f
it, o u t a l l o f t h a t s o r t o f t h i n e m e a n s t h a t t h e r e i s
linuidation,
a n d w e d o not fesl t h a t there i s a n y sraat
demand o n the banks, a n d ~ s feel that “ae ought t o havea
a lower d i s c o u n t r a t e , at: 16ast
Governor Harding.
o n commercial saver.
D i s t r i c t Wo. 2 , W e w Yori,
Governor Stront.
Governor s t r o n .
G o v e r n o r tlarding,
of the denands uo9on tne ve: Y o r banks,
a t the maximum
v e vere dis-
counting f o r o w members i n round flevures a billion
aollars
change
i n N e Yorx., D u r i n e thse l a s t f e w m o n t h s t h e
i n o u r condition,
“ n i c h h a s b r o u c h t o%ur reserve
position f r o m about forty c a r cant u o t o a maximum o f
about fifty-six n e r cent, h a s been b r o u e h t about b y the
renvaynent o f somethin= over t e n hundrsd millions o f these
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Federal Reserve Bank of St. Louis
7)2
discounts, a n d b y a n addition t o o u r total cash o f
about t “ o h u n d r e d millions,
é>
i n round fivures. I
thins
toe change rapresents a o t liguidation i n the 3boc« mareket, " h i c h h a s b e e n »xretty c o m o l a t e f o r g o n e m o n t h s
past, b u t t h e etradual i n f l u e n c e
of comnodity“ loans. I
o f the Liquidation
doubt i f there h a s b e e n vory
much shift o f eredit, t h a t is, o f loans a w a y f r o m
Ney Yori t o the other xessrve Districts. I
think t h e
movement ovossibly has b e e n still i n the direction o f
inereased borrovtings i n Nev York b y out-of-town borroyers «
The most inoortant recent change i n money market
conditions i n ‘ies Yorks is svidenced b y the fact that the
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Federal Reserve Bank of St. Louis
banxers bills ar3 selling now below six per cent.
I t
is further evidenced b y the fact that Stoe« Jxchange
leans have finally totten below o u r rate f o r a period,
put that i s broucvht about b y conditions “hich “ e have
anticioated a n d wanted t o d e v e l o n ; : that i s t o say,
certain bants a r e n o s o u t o f debt t o the Federal Ressrve
Bank, a n d t h e influence o f their surolus funds u p o n the
marizet i s gradually ~orcinz toward cstablishine a
that 1 s e q u a l
t o o u r rate,
rate
o r l o v e r t h a n o u r rate, a n d
up until that time comes about, u n t i l o u r rate i s a t
least e q u a l t o t h e m a r t e t r a t e f o r t h e money,
think t h a t o u r r a t e s h o u l d b e reduced.
“ e d o not
T h e creat
bulk o f t h e b u s i n e s s n o v b s i n s d o n e
i n Nev Y o r s i s S t i l ,
I ~ould say, s e v e n a n d one-half o e r cent o r seven a n d
three-quarters
2 e r cant, *hich i s the rate a t “ h i c h
commercial loans a r e beinz made. I
feel that t h e
time h a s measurably ean»rdached “ h a n v e must consicer a
ln
review o f rates i n New Vors, b u t that i t would b e t o o
soon t o maxe a change nov. I
think these conditions
saich a r s davelooine a n d which a r e sound a n d which “oe anticipated a n d h o p e d “ o u l d a r r i v e , h a v e n o t y e t 2 r o -
grassed far enouzh t o justify a reduction i n rates.
Nov, t h e o n e reason w h y I say that i s the influence
“hich i t would have u p o n distinetly soeculative conditions.
‘ T h e distinctly speculative l o a n aceount
i n New
fora, t h e Stocx gxchenga sveculative account, h a s b e a n
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Federal Reserve Bank of St. Louis
mors t h a n cut i n half throuch this period o f liquidation
in stocxs a n d comnoditles. I
do not vant t o attribute
that entiraly t o the influence o f o u r rates.
x
S t o ei
a3 rates have b e e n about t h e same f o r a long yariod,
but t h e fact ranains t h a t the tecanical vnosition, a :
Soeculators deseribea it, o f thea stocr mivsat, t h e technical position,
i s such thet t h e sentinental influence
of the change i n our rata would b e very stronz t o develop
soeculation,
and I
fear t h a t t h e s e n t i n e n t a l i n f l u e n c e
of
any change b y a n y Fedaral Reserve B a n x just n o v o u l d h a v e
that tendency, u n d i t nicht extend t o c o n iodities.
i t
mizht v a r y vell extend t o comnodities, a n d “Lth s e
rezard t o the situation i n Net Yor'’s, I
think the sound
policy i s t o leave t h s rate unchanged f o r a time.
Governor dardinga. I
will stats that t h e oresent
rate i n boston t s 7 ser cent o n commercial paper a n d 7
per cent o n xaoer secured b y Government oblizations,
and that t h e ie? Yors rate i s the same. I
would sugzest
that each Governor i n his reamarcs state what t h e rate tis
in his district,
s o that t h e Secretary w i l l have a
full
picture o f ths “hole thing.
District N o . 3 , Fhiladslohnia, G o v e r n o r N o r r i s .
Governor Norris.
M r , Secretary,
“ a have antictoated
for s o m e t i m e t h a t t h e u n s l e a s a n t c o n s e q u e n c e s
af a
period o f deflation o u l d orobably b a olemed o n t h
Federal 2esarve Systen, a n d narticularly o n the Federal
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Federal Reserve Bank of St. Louis
nesarve B o a r d ,
a n d with that thouvht
i n ming, “ e a have
pernavs spoten a little slizhtinzly a t times o f the
po'er a n d influence o f the Soard,
phasized
i n that v e have e m -
o n evary possible o c c a s i o n t h e f a c t t h a t t h e
Federal :iesarve System,
s o far a s its discount rates a r e
concerned, o n e r a t e s n o t a t t h e d i r e c t i o n
o f t h e Board,
but that t h e rates f o r each o f the twelve clistricts a r e
fixed b y t h e b o a r d o f n i n e d i r e c t o r s r e e r e s e n t i n e t h e
banks a n d the comnercial, o u b l i c interests o f that
district, a n d I
think I
may s a y itn our district there
has b e s n oractically n o criticism o f the volicies o f
the s y s t e m o r a n y o f i t s c o m p o n e n t o a r t s .
@ are o n s o f the t w o o r three districts ~hich has
never advanced t h e comnercial rate nbove 6
dar cent.
e have n e v e r o u t i n t h e z r a d u s t e d s c a l e r a v e , a n d " 6
have e c mtinususly maintained a
Goysrnmoent-sescured pansr.
a have h a d n o difficulty
‘
vear a g o o r a Little
in maintaining t h e t oolicy. A
over a
year ago,
i n February
“ere o v e r p290,000,000,
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Federal Reserve Bank of St. Louis
orefsrential rate o n
o f l a s t yoar,
o u r loans
o u r t o t a l e a r n i n g assets.
The o n l y sort o f compulsion o r urgency that "oe have ever
attenoted t o apoly v a s i n the direction o f a yeduction
on losns
o n Governnent-secured
2aner, “ h i c h v e r e s r o s s l y
excsssive i n the district, o u t o f all oroportion t o
the system a s a “hole,
o r t o any other bans i n the sys-
tem, a n d -'¢ hava urged that either b y dayrents o n ace
count b y o r i z i n a l s u b s e r i b e r s
o v b y liquidation o f
Governnant bonda i n a cautious a n d ¢ c mseurvativea “ay,
acuced.
mitnout a n y t h r e a t 2
comoulston,
‘ T h a t vas cone
and as a
result
cane d o w n from 299,000,900
o f it
i n Peb-
na axe
ruary to/ 220,000,000 i n iucust, a n d our reserve position imoroved corres zondinaly.
almost e n t i r e l y
T h a t recuction ‘tas
i n Governnent s e c u r i t i s s .
autust a n d t h e p e a x i n o v e m b e r
B
e
w e vent u g Prom under
»220,000,000
t o o v e r 2 4 5 , 0 0 0 , 000--and n e a r l y . 3 0 , 0 0 0 , 0 0 0
of incrsase.
S i n e e t h e n there h u s b e e n a
further r e -
duction, d u e t o the gradual sloring u n o f bus lness,
level, a n d liquidation.
rith sona o f the other districts still
7 n 3 r c a n t rate,
“ e d o not feol that
tnere c a n 0 8 any jusstion a s t o “heather w e yaeht o r ought
not t o r e d u c e o u r 3 s 237 c o n t rate.
Gistricts a r e concrrned, I
f a l t h a t i t ‘0ul't b e s n un-
fortunate t h i n e f o r N e s o r s
of e o u c s s N e w Yorc, o w i n s
accedted e v e r y " n e r e
System,
t o reduce i t s rata, b e c a u s e
t o l t s size,
a s tne baromoter a n d t h e index o f the
center o f
a n d N e v o r s u i t y i s o r course t h e
all speculative operations. I
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Federal Reserve Bank of St. Louis
S vanias
A
feal that a reduction
of t h e r a t e i n t h e w a v Y o r s D i s t r i e t
o t this t i m e w o u l d
not only, 8 8 Governor Strons has sald, b e ilcely t o lead
to s o m e s o e c u l a t i v e activities--I[
@xchange s 2 e c u l a t i o n ,
d o not maan Stcx«
b u t sveculation
i n comnocities-
but t h a t i t “ o u l d a l s o h a v e a n o t h e r u n f o s t u n a t s e f f e c t ,
a notice
to the vublic t h e t t h e situation «as n o t “holesome a n d
“3ra c2int throucth a vsriod o f stress, a n d i f
Yor¢ vera n o s t o raduce i t s rate, I
think that o u l d
be generally seceoted a s a n indication that the veria
of s t r e s s ~ a s over, t h a t t h e s t o r m h e d b l o w n o v e r a n d
sag oassed, a n d that anybody t h o head not Liauidated u p
to tais t i m e , s h e t h a r
or iron and ste3l,
i t vas labor o r b u i l d i n materials
o m anything elso, t h a t onyoody “ h o
had n o t thiorouehly Liquidated,
h a d e s c a rted t h e n e c e s -
sity o f listuidation, a n d I feel that that "ould b e a
.
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Federal Reserve Bank of St. Louis
very t r e a t i n j u s t i c s
t o t r e o e d 0 l e ‘ h o h a d Lijuidated,
that o t h e r s w h o oucvht t o t a x e t h e s a m e d o s e o f m e d i c i n e
should escase it.
3 cer
the 7
e S
a
n
d t h e othar d i s t r i c t s t h a t h a v e
oar cent rate a r a concerned, T
feel that they
knot t h e i r o r n g i t u a t i o n o f c o u r s e i n f i n i t e l y b e t t e r
than I could hope t o learn it, b u t I
realize t h a t their
situation,
t h a t o f Boston
i n partloular,
i s a n extremely
dirricult o n e t o maintain, a n d [ £ do n o t feel that a rea-~
duction i n ons o r tv0 o f the districts o t h e r than slew
Yors< would d o any hara t o the situation.
of tne best remed:
larved p u r c h a s e
a t c a n b e applied here i s a n en-
o f bills
rate O n accsaptan
W y o n thousht
i n t h e merxet,
s o that i r the
“ o t down t o 5 o r 5-1/4 v e r cent,
the member bants t h a t are n o v buyint those otlls T
think
sould ston buyins them, and that money vould naturally < 0
into either Treasury Certificates
o r the vurchase o f
commercial »avnar, a n d i n s o far a s they v e n t i n t o Treasury C e r t i f i c a t e s
i t “ould b e helnful
t o t h e Treasury
and helyvful t o t h s m a v x e t f o r J o v e r n m e n t b o n d s ,
helpful t o all o f u s a s taxouyers.
into commercial oacsr,
a s it
i t sould h e l p every borrover o f
every comnerciul bond, a n d while I
a reduction i n the A e
Insofar
and
‘ould vecret L o see
r p s rota, a n d “ould n o t feel
other about reduction i n the other districts,
i t seens
t o m e t h a t t h a t o a r t i c u l a r meathod &
handlinz t h e s i t u a t i o n i s o n e t h a t i s woypthy o f eareful
thousht « a l l s “-@ a r e hare.
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Federal Reserve Bank of St. Louis
Dee M i l l a .
G o v e r n o r Norris,
d o y o u base y o u r
conclusion mainly o n the fact that linuidation a s y o u have
observed
reiched a
i t h a s n o t : 2 n e f a r enough, t h e t i s , h a s n o t
ie
suffisient nunber o f sadole i n your district?
Governor iworris. I
do not think that some thines
have b e e n o v e r liquidated,
but I
tion has been irregular. A
is i f y o u im-cinga a
think t h a t t h e l i q u i d a -
simils that sonenls t o me
town “here a n immense number o f high,
yamshactle structures h a v e been erected, a n d a tornado
sweeps throuch there, a
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Federal Reserve Bank of St. Louis
lot o f them are tumbled d o v n
but s m e o f the otiers a r e still left standtns, t h e
that a r e s t i l l l e f t s t a n j i n z o u v h t t o c o m e domn,
ousht t o so, a n d t h e natural conditlons o u z h t t o b e
alloved » l a y until t h e whols thing hes b e s n leveled a n d
stabilized.
Dr. silller. « h y haven't they come down?
Governor N o r r i s . T
thine t t i s l e r z e l y t h s r e s u l t
in some cases o f combinstions,
biculer s t r a t e t i c p o s i t i o n ;
i n other cases o f %ar-~
f o r examols,
i n the building
trade§all t h e vace seales a r e fixed f o r a year, y o u -mno",
and I
do not xno: h o r itt i g i n other districts, b u t i t h
us they r u n from ilay t o iday, a n d there i s very general e x pectation o n the i s t o f way there “ill b e a very con-
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Federal Reserve Bank of St. Louis
086
Siderable reduction i n wages i n the building trades.
that comes, I
e i
think i t will start u p this delayad build-
ing, a n d that o f course w i l l make freight f o r t h e railroads a n d improve t h e whole situation.
B u t i f thero
- were t o b e a general abandonment i n all districts o f
the 7 per cent rate, I
think i t would strarighten the
hands o f every fellow, whether i t i s a manufacturer, a
retailer, a
jobber,
o r a laboring man, o r anybody else
who has thus f a r escaped liquidation.
Governor Harding.
D i s t r i c t No. 4 , Governor Fancher.
Governor Fancher,
M r . Secretary a n d Governor Hard-~
ing, t h e credit conditions i n the Fourth Federal Reserve
District a r e c a s y a n d have b e o n vasy f o r some timo past.
Our p r e s e n t r a t e i s 6
per c a n t f o r a l l c l a s s e s
o f paper.
Up t o about ninety days ago we had a differantial o f a
quarter
i n favor o f G o v a r n m e n t ~ s e c u r e d p a p e r .
S i n c e
that time our rate has been six, and that has been
our high rate f o r commercial paper.
Our reserve position during 1920 w a s a l l the time
strong,
i n excess o f 5 0 per cent i n the forepart o f the
year a n d abovo 6 0 “the latter part, a n d about 7 0 a t the
present time. T h i s enabled u s along through the summer
and early fall t o discount liberally f o r the other fellowHeserve B a n k s , s h i c h t o a
sreat e x t e n t h a v e b e e n p a i d
off a n d w h i c h h a v e i m o r o v e d t h e i r r e s e r v e position.
The borrowing.
o n the part o f our member bani
has s h o w n s o m e d e o r e a s e d u r i n g t h e o a s t t v e l v e o n t h s ,
A
one tine t h e y “ere liquidated d o w n t o about ninety million
dollars; t h e y have increased s o n e during t t
days,
i n 7hich " e h a v e h a d s o m e b o r r o w i n g
the t a x p a y m e n t s
o n larch 15th.
b y reason o f
J u r l o a n s t o members i n -
creased about ~30,000,000 durins t h e latter part o f
darch, a n d have since s h o w n some d i p o r t e l v e
million dollars,
a s I recall it.
o r fifteen
- @ have b e e n able t o
maintain this e a s y situetion i n view o f the fact t h a t a
7 per cant rate h a s prevailed o n the part o f the N e m
Yorx B a n k s i n c e l a s t July, a n d t o t h e v e s t t h e C h i c a z o
Bank.
h
e
n thoss rates “ e r e sstablished there ~ a s some
question a s t o w h a t t h e e f f e c t “ o u l d b e u o o n o u r s i t u a -
tion, but ve did not apvarently ex»serience any marxed
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Federal Reserve Bank of St. Louis
new
d
e
m
a
n
d b y r e a s o n o f hieher rates.
I “ould n o t suggest i n our particular c a s e that a n y
adjustment b e made i n rates until t h e other banks, which
have h i g h e r rates,
d e e m i t advisable
t o make s o m e con-
t
cessions.
n
a
The legal rate which prevails i n P e n n s y l v a n i ad
asntucky i s 6 par cent. 4
hither rate i s permitted i n
Unio, and the zoing rate o n the part o f our larger banks i n
Ohio i s a t the present time 6.1/2 t o 7 par cent.
Governor Hardinz. District No- 5, Richmond, Governor
neay.
Governor Seay.
v e . Secretary a n d Governor Harding,
the highest discount r a t e o f the Richmond b a n k has b e e n
ner cant, b o t h against G o v e r n m e n t -
since about December 6
secured saver a n d commercial vavar,.
T h e r e i s n o dif-
ferential; t h e r e h a s n o t been since that time,
of Government-secured pacer. C o n d i t i o n s
of our district vary.
i n favor
i n various voarts
T h o s e i n the agricultural dis-
tricts, where cotton i s the chief crov, a r e i n a very
congested situation.
T h e r e h a s b e e n comparatively n o liqui-
dation a t those points.
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Federal Reserve Bank of St. Louis
T h i s i s the time o f the year,
perhaps a little earlier than this, when the demand begins,
when w e are called u p o n t o furnish funds f o r seasonal
operations a n d c r o p vreparation.
T h e yea
o f our loan
account usually i s reached about the latter part of May
or the lst o f June. L a s t year a t this time ™ e were ren
discounting w i t h other Federal Reserve Banks about tvonty
millions o f dollars.
A t the present time o u r reserve
is down t o about forty one.
i t h i n t h e last f e v ~eekxs
our loans h a v e increased t e n millions o f dollars.
comnercial d e v o s i t s
o f o u r member banks h a v e decreased
about “pll5,9000,000 itm ths Iss, yoar.
posits,
T h e
T h e savings d e -
o n t h e o t h e r hand, h a v e i n c r e a s e d a b o u t
%65,000,000, l e a y i n t a
net decrease
o n commercial d e p o s -
its o f .590,000,900.
The d e m a n d s f r o m a l l s o u r e
have c a u s e d t h e d e c r e a s e
f o r comnercial purposes
i n c o m m e r c i a l denosits.
There
are t w o states o f o u r district, N o r t h a n d South Carolina,
where t h e cotton c r o p its the main crop, “ h o a r e calling
uyon u s n o v for additional funds, a n d y e t they a r e t h e
tro states which have liquidated b u t v e r y slishtly during this period.
As I
have stated, t h a r s area b a n k s
i n vart o f o u r dis-
trict thich agnear t o have funds f o r investment. i
think the last-four o r five offerines o f certificates
have b e e n over-subseribed i n our district, b u t those da-~
mands h a v e c o m e f r o m p a r t i c u l a r p a r t s o f o u r district.
It i s s o m e w h a t
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Federal Reserve Bank of St. Louis
of a
mystery t o u s “hers t h e money comes
from, b u t a g I have stated, gavings devosits have accumulated notwithstanding t h e commercial condition a n d t h e
dacline i n commercial deposits.
of course,
o f a n y reduction
T h e r e its n o possibllity,
i n o u r district,
o f rates
the r a t e s n e v e r h a v i n g b e e n a b o v e G
p e r cent.
“ . e have
never apolied t h e orogressive rates, t h e entlef reason
being that our banks i n the agricultural districts got
themselves, through l a c k o f foresight,
through b a d m a n a g e m e n t
i n m a n y cases,
i t may have been,
b u t they rere
in
the clutch o f circumstances w h i c h they could n o t control.
They “ere obliged t o furnish funds, a n d t e felt that the
application o f a orosressive rate a t that time, when they
mere i n & Condition o u t o f which they could n o t oossibly
n o matter “hat t h e rate might be, rould
work themselves,
bring undue hardships t o bear u p o n t h e yarticularly agricultural regions. a
therefore d i d not aooly t h e oro-~
gressive d i s c o u n t rates. @
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Federal Reserve Bank of St. Louis
did, h o w e v e r , e x e r c i s e a
very f i r m control over credits, a s t o the apylication o f
the u n d s which “ere borrowed f r o m us, a n d “ e think with
some success.
-
@ repaid o u r redisecounts i n January,
with other Federal xeserve Banks, b u t " e are aovroaching
he time n o v when ordinarily--that i s , w h e n under con-
ditions which have prevailed f o r t h e last three o r four
years--our b a n k ‘rould b e compelled t o redisc ount with
anothsr F e d e r a l Keasarvs Bank.
T h e s e a r e t h e natural
oosrations o f o u r district, a n d they will b e reveated t o
some ext: i
voor;
t o “hat extent ~ e a r e unable
to
forecast a t this tine, because n o w w e area maintaining a
rather f i r m c o n t r o l o v e r t h e n o n e y “ e l o a n t o o u r m e m b e r
bens.
T h e r e a r e about 2 5 0 o f our member banks, o u t
of something mors t h a n 600, ~hich a r e n o t borrovers.
are i n Joubt n o : w h e t h e r
v e c a n exercise t h a t control
over e r s d i t “ h i c h v e t h i n k oustht t o b e exercised, “ i t h o u t
an a d v a n c e
i n t h e rates.
l
i
d succesad i n d o i n g i t l a s t
year, a n d during that year " e rediscounted o n l y about
ped,000,000, “iiiecn seemed t o b e absolutely essential t o
taxe c a r e o f t h e credit.
‘ T h e r e i s a certain amount
of
additional borrovinz, e v e n b y those banks “hich are heavly
extended n o w , “ n i c h m u s t b e undertaken.
are v e r y necessitous,
T h s conditions
t h a y a r s v e r y complex,
undeniable t h a t thore :
b
a n d i t is
e additional srant o f credit
to theses localities, h i c h h a v e nevsrthsless b e e n t h e
heavilast b o r r o v e r s a n d w a i c h n a v e n o t liquidated.
far-as
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Federal Reserve Bank of St. Louis
o e o a ) s e , certain banxine difficultles
A s
are
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Federal Reserve Bank of St. Louis
lixely t o arise.
4
@ G o not anticioate anything exten-
sive, b u t there a r e a number o f small banking institutions which ° e fear cannot survive.
- @ Find i n car-
ryinz o u t t h e v a r c l e a r i n g p l a n t h a t t h e y h a v e g r e a t
difficulty i n payins checks, e i t h e r i n exchange o r i n
cash. e
have m e n constantly o n the road t o look
after t h e collection o f checks which v a send t o the
pankxine institutions.
T h e y d o n o t alvays r e m i t prompt-
ly for them, a n d frevuently they are unable t o pay them
in cash when v e have t o present t h e m a t their counters.
So t h a t t h e c o n d i t i o n s
i n our district c a l l f o r a d -
ditional credit relief, with a great deal o f discretion.
I am unable t o forecast n o v whether i t will b e necessary
for u s t o raise t h e rate,
o r “hether w e c a n d o a s e
last year, e x s r c i s e a s f i r m a
be exercised,
control
did
a s reasonably c a n
b y communication with t h e officials o f the
bank with " h o m 7 e have b e e n i n very intimate touch.
jnenever a n occasion requires,
w e invite t h e m u o t o our
freely
bank, a n d v e a s k from them a n d usually obtain very
a full daseriotion o f their loans a n d the conditions
which have brought about their state o f exoansion a n d
their future requirements, a n d “ e have managed t o keep
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Federal Reserve Bank of St. Louis
On very excelient terms with them.
they u n d e r s t a n d t h e l i n i t a t i o n s
arg i n a very comnlex condition.
“
@ believe t h a t
o f borrotinsg,
b u t they
There
thers has b e e n n o demand f o r cotton i n a very considerable portion o f the district.
T h e cotton itself h a s
declined a b o u t 7 5 p e r c e n t o f i t s v a l u e
of a
i n the p e r i o d
year, a n d t h a t b e i n z t h e c h i e f cron,
stated,
have
i t has oroduced conditions w h i c h y o u c a n “ell
realize without describing.
pect o f a n y c u r t a i l m e n t
is s o m e prospect, I
control
as I
T h e r e i s therefore n o pros-
o f t h a discount rate, b u t there
think,
o f o u r havinz
r a i s i n t t h e rate.
t o exercise
I f v e find that “se can d o
it t o our satisfaction without raising t h e rate, w e shall
be v e r y g l a d t o d o i t , b u t I
a m unable t o s a y a t this
time whether that c a n b e accomplished o r not.
Dr. MLlllex.
3X2:
$ e a control o v e r “hat?
h a t do
you want t o control b y raising your rate, i f you cannot
do i t b y o t h e r m e a n s ?
Governor Seay.
credit
‘
.
@ want t o control t h e granting o f
b y banks a l r e a d y e x t e n d e d
t o their customers f o r
what t h e y belleve a r e necessitous ourvoses.
Dr. Miller.
D o y o u base that urson your belief t h a t
the p u r p o s e s a r e n o t n e c e s s i t o u s ?
Governor seay.
stance, h a v e a
I n soma cases.
n o s e banks, f o r in-
vary larve volume o f loans outstanding
woiich they never should have inade, a n d they claim they
cannot g e t liquidation o f thoss loans.
Dr. -Alllec.
L e t m e asx, d o y o u “ant t o oredicate
your o o l i c y f o r t h e f u t u r e u v o n “ h a t h e s t a r e n p l a c e
i n
the p a s t ?
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Federal Reserve Bank of St. Louis
Governor 3eay.
of credit,
No. @
-ant t o s e e that t h e amount
s o far a s “ e c a n s e e i t a t tne
additional crant o f credit i n the caso o f
are already extended,
i s really m d e f o r a desirable i f
not a n essential purpose, a credit that vill nelp the
not involve t h e b a n . further t h a n i t is,
without being able t o helo i t eventually.
D o I make my-
sods clear in’ r e s p a c t ?
Ore V L L e e o e t i r brat <8 Os
T
f I
understand, t h e n ,
you f e a r t h a t i f y o u m a i n t a i n y o u r e x i s t i n g r a t e ,
i t may
lead t o borrowings a t your ban« f o r o u r doses that a r e
not ni:
e
n
e
r
a
l situation?
Governor Seay. T h a t may be. ‘Thsre i s n o profit t o
of o u r banks
i n loaninz a t 6
ver c e n t e x c e o t
i n one
state, S o u t h Carolina, s h e r e t h e l e c a l r a t e i s 3
per cent.
in other portions o f the district t h e legal rate i s 6
per cent, a n d t h e r e f o r e t h e r e i s n o o r o f i t e x c e o t
i n
South Carolina i n the banks borroviny f r o m u s a n d loaning
the money,
a n d t h a t i s t h e «<ind o f control w e a r e a t t e m o t -
inv. £ 0 sxerciss and. whieh ~ e d i a ax: i s e durint t h e
past year,
a n d w h i c h “ e “ i s h t o exercise d u r i n e t h e c o m i n g
ar.
ar. Platt,
L a s t year y o u controiled it.
Sovernor seay.
L a s t year v e did sueceed i n controll-
ing it, a n d v e believe tnat w e could control i t i n that
same manner a s successfully a s " e could i n any other vay.
this i s a :
ates,
i o n devoted varticularly t o
I a m j u s t being cautious
b y s a y i n g [ I d o n o t iknow
“nether t e shall have t o invoxe t h e rate + o aid i n our
controllinzs the demand for credit. *
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Federal Reserve Bank of St. Louis
I
Seerstary -Aellon.
s t h s vressure f o r loans a t this
ereaater t h a n a t this time l a s t year?
Governor Seay.
w o , i t i s not.
Secrstary Mellon.
without a
i n d v o u did control i t last year
rate incrsase?
Governor S e a y .
Y e s , b u t y o u must t a k e i n t o account
that last year there h a d b e a n liquidatton a n a t h e demand
for loans iorced u n gradually a n d i n ordor.
T h i s time
"e bezin t h a season “ith a n extended condition a n d t h e
l o a n s comes t o u s from those
demand f o r rediscount a
banks “hich a r s already extended, w h i c h maxes t h e situa-
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Federal Reserve Bank of St. Louis
LImasa myssif clear, ir.
ivy dellon. I
“iv. Grissinzar.
C a u s e d larcely b y the cotton Crop?
n i z P l 7 y c a u s e d b y the condition
Governor 3eay. :
of t h e o n e eros, c o t t o n .
v
der. U r i s s i n g e r .
o y o u feel that
y o u c a n contro:
the rate n o v a s oasily a s y o u did lest year?
Governor seay.- I
thinx so, b u t
to advance t h e r a t e .
Governor dardins. G o v e r n o r Seay, I
to s a y t h a t = a l l
understood y o u
d e p o s i t s z e n e r a l l y W a d f eileen
o r
that denosits subject t o chacs nad dacrensad 3115,000,000,
yet o n the other hand your savinzs A 3 9 3 it
765,000,000.
Fovernor S e a y .
T h e y have,
Governor Hardinn:.
m a t e
t o
trios
i n the month
o f
February
talked
t o N o r t h Carolina,
i n the t w o t o w n s I
a n d t h e bankers
t o *hom Il
visited e x o r e s s e d t h e o p i n i o n
that there w a s i n that State a
very large amount o f
currency hoarded a n d n o t i n the banks a t all.
Now,
what d o y o u class a s savings deposits--the certificates
of deposit, t i m e certificates, t i m e deposits?
Governor Seay. Y e s , a n d certificates o f deposit o f
national banks.
Governor Harding.
\ 1 l l time certificates?
Governor Saay.
Governor dardinc.
h a t rate o f
erally o n time danosits?
Governor Sway.: T h e y are co%moeting for theses
and paying i n some cases u p t o 5, 6
Governor Harding.
o r 7 per cant.
D o n ' t y o u think orobably v a r t
of the reduction i n non-interest bearing deoosits a n d
he increase i n the socalled savings deposits i s due
to a transfer f r o m the non-intersst bearing account t o
the i n t e r e s t b e a r i n g a c c o u n t ?
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Federal Reserve Bank of St. Louis
Governor Seay.
I n some c a s s s i t is, a n d i n other
cases i t i s dus actually t o the high rate which many
small banks a r e offering f o r money.
Governor dardin:.
hoarded monsy,
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Federal Reserve Bank of St. Louis
‘ $ 1 1 that brine o u t some o f the
d o y o u think?
Governor Seay.
I n some cases ""e have «novyn m e n t o
Governnent b o n d s a n d t a k e c e r t i f i c a t e s
o f
deposits u s the proceeds.
tir. Platt.
H o t can they vay 6
9 s r c e n t o n daposits
and loan monay a t 6 ner cant?
Governor Seay.
money a t G
H o w can they pay 6 2er cent and
oer cant?
Mr. Platt. Y e s .
Governor Seay.
I n South Carolina, “ h e r e t h e rate i s
8 ver cant, o f course they can do that, but “here they
are i n @ condition “here t h e y must nest withdrawals o f
their deposits, they have t o get the funds irrespective
Ce
B P o r Lt i e tt.
ip» Platt.
pay 6
a S A matter o f fact, those banks that
p a r cent “here thers i s aposarently n o prorit g e t more
than 6 per cent o n ourt o f their loans, d o they not?
Governor Seay.
Y o u k n o t h e National banks cannot,
exceot b y v a y o f balance.
T h a t i s t h e o n l y v a y i n ~nich
they can get o vrofit out of it.
I n other sords,
nave about a 20 or 25 per cant balance, they can afford
to loan a t 6 dar cent and borvo~ a
in it there.
ux. 2latt. T h a r e L s a good deal o f alfference i n
the 6
osr cant u s u r y law.
I t ao3asn't a n v i y t o a n y b o d y
but t h e borro ers, 3 8 a rule.
3
FoOvsrNnor 3 9 a 7
i
t does
u
in the major p a r t o f our district.
learte p e r c e n t a t e
does
r dis t
I n other words, &
o f o u r wational banks “ h i c h borro* f r o m
:
us a t o S der c e n t l o a n a t t h a t r a t e , a n d t h e r e 1 s n o com-
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Federal Reserve Bank of St. Louis
agvarently t h e banks t h a t a r e overr
a i n the cotton section?
extended i n your d i s t r i c t , e
Fovarnor seay. f a s , almost exclusivel
wr. Crissincar.
d o w d o you e x .lain the fact t h a t
thay n a v e b e a n a b l e t o l i q u i d a t e t h e i x customers!
loans?
Are t h e customers s t i l l carryins t h e c o t t n ?
Governor s e a y .
T h e y a r e still carrvins
t h e cotton,
yes, a n d i n many c a s e s they a r e borrowing m u c h more t h a n
TOpta p a o TRO: S a l e o f s t o t t o n “ould n o t
liguidate t h e loans.
vy. Urissinger.
T h a t i s that I
wanted t o get at.
Governor seay. . i n d the b a n x i s really holding t h e
COULON .
Dre Hiller.
H o w d o y o u exoect
from t h e c o t t o n l o a n s
Governor Seay.
i f the mariet
t o ast Liquidation
i s t o o ~ywailr?
h i l e t h e mar.cet i s i n that condi-
tion there i s n o liquidation o r hove o f lijuidation o f
these loans.
J n the other hand, t h a merchants, t h e com-
mission merchants,
ith
h o m t h e cotton raisers
r e c a t 3)
are still carryine the cotton raiser, cannot liuuidate their
loans.
I t i s a eondition that y o u understand v e r y ~ell,
Governor dardinz.
I t 1 s not overdrayn
t n a n y vay.
I t is
a state o f affairs d u e s0lely7 t o the marsct f o r cotton
and t h e price o f cotton.
vovernor darding.
I t i s a state o f affairs that
nobody c a n understand a n d avoreciats unless h e has b e e n
down there a n d sone through i t and lived through s o m e o f
it.
Governor Seay. I
thin: that i s true.
Jovernor darding.
I t i s 8 eondilelon- that no-one “ 5
nas n o t zone throuch i t can trasy t o the extant that i t
is trasped b y t h e m a n sho has tone through it.
Governor seay.
Y o u have invited some o f the vlassk
non-banxine d i r e c t o r s , d
n
a I think y o u will hear t h e same
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Federal Reserve Bank of St. Louis
statament f r o m the Class B
dirsctor o f our aistrict.
You i l l srobably haar a n explanation o f the same thing
from t h e director f r o m Atlanta a n d from the Governor o f
i t i s a condition o f affairs “hich
the atlanta Bank;
no man can oroverly aoorecitats unless h e has a
very in-
timate understanding o f crop r a i s i n g conditions a n d the
practices o f the merchants, t h e banks a n d t h e borro ers.
Governor Harding.
I t i s a situation that requires
the utmost tact, vatience a n d finesse i n handling.
i
t
igs a situation that y o u cannot forcs, because t h e more
you foree i t thea worse off you get.
Governor Ssay.
Dr. M i l i e r . I
ars n o t f o r c i n g
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Federal Reserve Bank of St. Louis
Y o u cannot forces it.
a m wondsrinc, t h e r e f o r e , w h e t h e r y o u
i t “nen y o u s a y y o u 1 9 7 cannot g e t liqui-
dation.
Governor seay.
. 3 are n o t attempting t o get liqui-
dation.
Dr. willer.
Y o u are not attemoting i t ?
Governor Seay.
I f w e could maintain t h e status q u o
s@ ghould b e very much oleased indeed, “ h e n the demand
comes. W o t v i t h s t a n d i n z t h e »resent situation i n cotton
another cotton crop will b e raised.
I
t has been esti-
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Federal Reserve Bank of St. Louis
meted i n our district t h a t t h e
duced somewhere betvesn 3 0 and
attempt t o rais3,
“ e vill say,
that they re&bed l a s t year, e n d they a r e raising i t i n the
hope t h a t p r i c e s w i l l b e high.
South I
T
say i n some o f ths fields a
h vassin= throursh t h e
material l o t o f cotton
not picxed, a n d y e t probably i n those same fields t h e
raisers will z o t o “ork and attemot t o reise another
erop, n o t picking t h e remnants o f what t h e y h a d last year.
They a r e accustomed i n some localities t o raise a
eroo.
T h e y d o n o t «xnoy h o y t o raiss b u t a
cotton
most l i m i t e d
amount o f food crop for their o m uses. i l l thelr lives
they have been accustomed t o raisins cotton, a n d they
will raise cotton.
Governor Harding.
A r e t h e sales o f fertilizer cur-
talled t o any
Governor S e é
Governor : g
fertilizer,
V e r v matertally.
h
e
n you curtail the use o f
y o u reduces t h s r r o d u c t
of y o u r acreazs,
o f c o t t o n reztardless
d o y o u not?
Governor seay. U n j u s e s t i o n a b l y , u n l e s s t h e h a n r - o v e r
from the previous fertilizer leaves the ground i n such
state t h a t i t sill produce again, b u t that i s hardly t o
be expected.
Governor dardinz.
cause
T h a t i s hardly t o b s exvected b e -
o e c r o p o f cotton exhausts t h e nourishment?
governor yeay. L a s .
ditions; I
cant
I d o n o t wish t o overcram con-
a m not a t all avrehensive
o f a n y trouble
e x
i n locallties “ h e r s t h e r s a r e s-nall institutions.
Dr. ALllor.
h a t y o u are really a f t sr i s not t o
force l i q u i d a t i o n rurther,
b u t t o vorevent t h e i l l - a d v i s e d
use o f c r e d i t b y l o o s e n i n g
u p o n y o u r l o a n ons hull cay
practically suicidial,
t would b a useless,
T
Governor oaay. P r e c i s e l y .
t o force a
sale o f c o t t o n a t p r a s -
ent orices, w h e n there i s n o market.
J n e o f the junior
officers o f our bank t a s d o w n i n the UCarolines “here t h e y
had a
distress s a l e o f c o t t o n a n c h e b o u s h t t h r e e b a l e s
cotton f o r »42.00. T h e r e s w a s n o demand t h e r e ,
of
b u t they
very exagezer~
mould g e l l t h e l e cotton.
T h a t i s o f course a
ated s t a t e o f a f f a i r : a
b a l e o f c o t t o n s e l l i n z f o r ;:14.00
hat w o u l d n a v e b r o u z h t , 1 5 0 . 0 0
But t h e r e a r e m a n y localities,
t o 9200.00 a
year afd.
a s y o u a l l knov, “ h o r s
there i s n o demand f o r oroduct, a n d t h e situation cannot
be r e l i e v e d
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Federal Reserve Bank of St. Louis
b y sellin: c o t t o n , b e c a u s e
i t “Quld n o t v a y t h e
debt, a n d t h e banic should j u s t e s e l l j o i n i n the risk
of carryinz, a n d that i s i t s sreatest hops o f lictulidating
the debt.
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Federal Reserve Bank of St. Louis
I beg pardon for taxing s o much time.
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Federal Reserve Bank of St. Louis
Governor Hurding.
D i s t r i c t t o . . . Aabpeante, Georgia
Governor “ellborn?
Governor ‘ ellborn.
serves a r e a
I n the Atlanta District o u r re-
few .vints above t h e legal requirements; o u r
rate o n c o m m e r c i a l a n d i n d u s t r i a l p a p e r i s 7
p e r cent, b u t
we give a differential o n notes secured b y Government obLigations, t h e rate being five a n d one-half p e r cent.
i
e
feel w e have b.cught about, s o far a s the rate i s concerned,
all t h e liquidation v e c a n bring about i n our district.
tie feel that nor would b e a good time t o reduce t h e rate
6 per cent, a n d at the sume time, w e believe i t would b e
a good idea t o bring u p o u r rate o n Government securities
to 6 per cent, a n d have o n e uniform rate o f 6 per cent,
I think w e will sive a differential just about « s long a s
we feel that w e are under obligation t o d o it,
Now,
i n m y opinion,
i f w e lower t h i s rate,---I
d o not
apree w i t h Governor seay, t h a t there m a y b e excessive bor-
rowings t o control any credit,
s e d o not need that a t all
and I think the credit controls have cone far enough. i
do know w e need i t badly, because t h e c i t y banks were hbor-
rowing excessively at this time, and the credit control tha’
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Federal Reserve Bank of St. Louis
we undertook then, brought about liduidation f r o m them,
The country banks n o w a r e t h e banks that a r e extended,
and a s Governor S e a y says, i t cannot b e helped, because
they have n o t sold their cotton.
I n Louisiana, t h e y have
not s o l d t h e rice o r the sugar,
I n Tennessee t h e y have
not sold the tobacco o r the mules.
T h e y have t o wait
for a market f o r those things.
Now gentlemen, w e feel that i t would b e a little
o charge a
oppressive f o r t h e Federal Reserve S y s t e m t
higher rate t o carry these necessary borroWings.
V e ough
to have a lower rate,
Now, I have a letter that has just been received sinc
I came here, from a banker in. Klabama, Eufaula, Alabama.
It i s a national bank. G o v e r n o r Harding probably knors
this gentleman very intimately, M r . Merrill.
throw a
T h i s will
little lifht o n the situation.
"As you certainly know the financial situation
4s exceedingly stringent, especially i n this vicinity,
and the farmers, a large number o f whom are our customers,
are outlining and as they call i t ‘pitching! their crop;
and frequently e a l l o n u s t o know what amount o f accom-
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Federal Reserve Bank of St. Louis
modation t h e y c a n g e t i n the near future,
w e are somewhat
at sea t o know exactly h o w t o conduct o u r business, a n a
in d e c i d i n g o u r c o u r s e
i t i s very important f o r u s t o know
the rate o f interest t h e Federal Reserve B a n k will charge
I f i t is possible for
us during the Spring and Summer,
you t o d o s o , p l e a s e a d v i s e m e w h a t w e m a y expect.
"rf w e have t o continue t o p a y the. present h i g h rate
we w i l l n e c e s s a r i l y h a v e t o r e s t r i c t o u r l o a n s t o s u c h a n
extent that i t will operate v e r y largely t o the disadvantage o f our farming customers,
a s well a s all other custo-
mers,"
Governor Harding.
Y o u r rate i s 7 per cent, a n d the
legal rate in:Alabama i s 8 per cent, I
d o not Suppose
that they ever loan any money a t less than 8 per cent? I s n !
thet P i a n o s
Governor };¢llborn,
8 per cent.
N o Sir.
T h e current rate i s
T h a t i s what s t r u c k m e a s being rather strane
as t o h o w i t would affect him.
H e cannot afford t o make
loans t o any great extent without making a profit,
we d o not want t o s e e them make a
O f sour
profit o n a loan that
they get from a Federal Reserve Bank.
B u t , this shows
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Federal Reserve Bank of St. Louis
suppose t h e y w i l l c o n t r a c t
the s i t u a t i o n t h e r e , I
their loans i f they d o not g e t a lower rate,
Mr. Platts,
H e wants t o make t w o per cent o n his
loans instead o f one?
Governor Wellborn.
Y e s ,
H e vould want a break
of two per cent.
Dr, M i t e r .
i
s it a
fair statement t h a t i t i s a
question o f profit t o your member banks t h a t i s the decisive factor which l e d y o u i n recommending a
lowering
of rates?
Governor \iellborn,
W h e r e i t i s a profit w i t h them?
Die: M L L L E Y « Y e s ,
Governor Wellborn.
Dw Mishier:
I s that a factor with me?
Vos,
Governor Vellborn.
Governor Harding.
I t certainly i s not.
I s the rate o f 8 per cent legal
in Tennessee ,now,by contract?
Governor Wellborn.
Y e s sir; racently made s o b y
the legislature,
The great bulk o f our loans i n our district a r e made
at 6 per cent, b y city banks; such a s the cities o f New
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Federal Reserve Bank of St. Louis
Ofleans, Nashville, Birmingham, Montgomery, Atlanta,
Savannah a n d Aupusta,.
T h e prevailing rate there i s
6 per cent, that i s the commercial rate, W h e t h e r i t
ought to’ do*so o r not, t h e Federal Reserve B a n k rate seems
I f our rate i s 7 per cent, t h e y
to govern entirely.
will charge customers 7
per cént.
V i e hear a great m a n y
complaints f r o m merchants a n d manufacturers,
I t seems
to be hard t o impress u p o n t h e m that o n l y a small percentage o f t h e i r l o a n s a r e r e d i s c o u n t e d
Reserve B a n k s ,
B
a t the Federal
e t h a t a s i t may, t h a t i s t h e p r e v a i l -
u
ing rates T h e y say "The Federal Reserve Bank c h a r g e s s
7 per cent, a n d therefore w e will have t o charge y o u 7
per cent." T h a t cannot b e corrected now, anyway. T h e y
say "That i s the rate a t the present time,”
T h e pre-
vailing rate i s 7 per cent.
There i s a n o t h e r e m b a r a s s i n g s i t w a t i o n a b o u t o u r
district a t Richmond, they< being the adjoining district,
their banks borrow a t 6 per cent, ~hereas our banks p a y
7 per cent,
Governor Seay.
Y o u only have t o pay 5-4 per cent
on Government bonds, whereas w e have b e e n charging t h e m
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Federal Reserve Bank of St. Louis
GODer consy..
Governor Wiellborn,
W e a r e going t o correct that,
We w h i l e v e n u p o n that.
Governor Harding, D i s t r i c t No. 7 , Chicago, Governor
McDougal.
Governor McDougal.
M r . secretary e n d Governor Hard-
ing:
The rates i n the Chicago District a t present are
6 per cent o n Government secured paper a n d 7 per cent
on commercial paper.
V i n e n w e advanced t h e rate t o
7 per cent o n commercial paper, i t was believed that w e
were coming t o a point t h e n when o u r rate would b e equal
to a n d p o s s i b l y
i n excess,
i n a
small way,
vailling r a t e s f o r c o m m e r c i a l p a p e r
It was going fine u p t o 7 per cent,
to u s however,
o f the pre.
i n C h i c a g o o r N e w York,
I t was a Surprise
t o s e e t h e @as@ w i t h which the commercial
banks i n these sections f o u n d a
way o f pushing their fates
forward, a n d they are still charging i n excess o f o u r
commercial rate,
T h e current rates o n commércial paper
now, t h e b e s t named, I
believe a r e h i g h e r t h a n 7
p e r cent,
We believe w e will get some liquidations t h r a g h advancing
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Federal Reserve Bank of St. Louis
the rate.
W
e have been disappointed
i n the performance,
The liquidation o f commertisl loans h a s not gone forward
as w e h a d hoped. I m p l e m e n t dealers, manufacturers,
and
jobbers o f all kinds a r e carrying v e r y heavy inventories
which a p p a r e n t l y t h e y c a n n o t m o v e , I
believe t h a t t h a t
4s due perhaps, t o a considerable extent, t o the fact
that i n the central Viest the average retailer h a s n o t mark«
ed his goods d o w n t o the public t o a point that i s a t all
customary with t h e reduction i n the prices o f r a w materials
from which they are made, o r perhaps the jobbers! prices,
I think t h a t t h e E a s t h a s g o n e f u r t h e r
than the central est, I
i n that direction
believe that i f the retailers
will p u t their prices d o w n where t h e y should be, there
will b e a t l e a s t s o m e g e n e r a l i m p r o v e m e n t ,
As I have said, w e have b e e n disappointed i n not
getting commercial liquidation i n the agricultural situa-
tion, a n d w e find ourselves now, i n the Seventh District,
at t h e t i m e o f t h e y e a r w h e n t h e b a n k s ,
i f they ever a r e
able t o go o n their o w n resources,-..and w e believe i t
is just as necessary, o r moré s o now than ever, that
banks give consideration t o doing business within their
own resources a t least a part o f the year,---we find there
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Federal Reserve Bank of St. Louis
62
that i n s t e a d o f b e i n g
in a
s t r o n g position,
t h e country
banks generally speaking, a r e v e r y much overloaned,
T h i s
situation i s particularly noticeable i n the state o f Iowa,
Woere
i n December o u r l o a n s
t o member banks
o f which w e
have 458, m o s t o f which were borrowing, w e r e 98,000,000.
Vie knew that i f liquidation was t o b e secured i t had t o
come throurpr t h e w i n t e r m o n t h s a n d t h e e a r l y s p r i n g months,
from the marketing o f their products,
T h e y had a corn
crop out there, that was second t o none that they ever
have raised, a n d we made every effort t o bring about
T h e b e s t t h a t w e were able t o d o was
this liquidation.
to bring these loans from 498,000,000 down t o $52,500,000,
which figure they reached about the middle o f March,
Owing t o the early season,
n o frost i n the grand,
work i n the fields began about t h a t time.
T h e liquida-.
tion pradually slowed d o w n a n d stopped, a n d since t h e n
our loans i n the State o f Iowa have gone forward o r increased t o the extent o f about »~d,000,000.
loaned t o b a n k s
i n Iowa because
their basic line.
W e have
o f conditions,
m a n y tines
W e have loaned them, i n the face o f
declining dep osits, n o t i n order that they might make new
loans, b u t t o take care o f the declining deposits, T h e r e
are q u i t e a
number
o f small institutions there whose
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Federal Reserve Bank of St. Louis
condition i s such a s t o give u s a great deal o f apprehension.
I have h e r e t h e f i g u r e s s h o w i n g
the distribution o f our loans.
including Chicago,
i n a general w a y ,
O u r State o f Illinois,
i s borrowing a t the present time,
66 per cent o f their basic line. W i s c o n s i n , including
Milwaukee,
9 8 per cent o f her basic line, I n d i a n a ,
including Indianapolis, w h e r e most o f o u r loans are,
108 per cent. M i c h i g a n , borrowing 1 2 4 per cent o f h e r
basis line: I o w a a t present i s borrowing © 0 5 per cent,
Iowa's percentage there h a s been reduced f r o m £75 o r
280 t o 205 p e r cent,
V e are n o t satisfied w i t h the
situation, a n d I do not see how w e can Consistently
force a n y further liquidation a t the present time f r o m
the agricultural districts, a n d when w e get i t there,
it vill help o f course a t the centers a s well.
But,
I believe t h e t r e n d i n t h e a g r i c u l t u r a l d i s t r i c t
is
going t o be upward now until the Spring vork i s cut o f
the way, a n d then during t h e Summer months w e are hop-
ing that w e will get some further liquidation through
the sale o f livestock, surplus grain etc., o f which
there i s more i n the State o f Iowa today than there
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Federal Reserve Bank of St. Louis
ever h a s been i n her experience,
corn t o s o m e e x t e n t ,
oats,
w
T h e y a r e holding 1919
a n d t h e 1920 crop o f both c o m a n d
e feel t h a t under t h o s e circumstances t h e r e i s
ndhing that would justify a
reductioni
n rates,
M y own
impression i s that with respect t o our rate o n Government
securities, i t may well be advanced from 6 per cent to
7 per cent, because, generally speaking, t h e banks have
more o r less Government securities,
B a n k s , generally
speaking, know how t o borrow through the force o f least
resistance,
a n d t h e y a r e putting u p their Government secur
itiés undoubtedly t o a large extent, f o r t h e purpose o f
géttingt
h
e benefit o f the preferential rate, I
believe
though that conditions are not such a s t o warrant a n y
reduction o f rates i n our district.
Governor H a r d i n g .
D i s t r i c t N o , 8 , S t . Louis, G o v e r .
nor Biges,
Governor Biggs.
M r . Secretary a n d Governor Harding
The commercial a n d agricultural r a t e i n District Mo,
8 is 6 per cent, a n d has been all along. ‘ Y e only have
one rate below that, a n d that i s 5-4 per cent o n Governmen
bonds a n d Victory's. 6
cates.
W
per cent o n Treasury Gertifi.
e have however a progressive rate, which has
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Federal Reserve Bank of St. Louis
been i n force since l a s t M a y I believe.
We fave h a d very good liquidation, I
since t h e middle o f October,
tS ebOWt. 8/7. p e r c e n t ,
the fall a n d midsummer,
W
might say,
O u r reserve position t o a g
e w e r e heavy borrowers d u r i n g
A l l o f this liquidation that
has been brought, h a s been brought about without pres-
sure,
w
e have made n o great effort, other than t o
insist o n our members making
c e
a
e
a s rapidly a s
they can, without pushing anybody t o the wall,
W
e have
some bad spots, T h e r e i s no use going into the cotton
Situation,
W e have a little b i t different sitvation how-
ever t o that of Governor Seay and Governor Wellborn, b u t
we have t h e delta district, w h i c h i s probably worse o f f
than any other district, because they have practically
had less market f o r their l o n g staple cotton,
W e have
a few banks d o w n there t h a t a r e v e r y heavy borrowers,
Most o f these m e n are v e r y wealthy planters,
7 5 per cent
of them have applications f o r loans o n their plantations,
and a r e g r a d u a l l y g e t t i n g l o a n s f r o m s o m e s o u r c e s ,
T e
do not know where from, b u t t h e y are coming i n i n that
way.
The plantations a s a rule, a r e paid for, a n d many o f
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Federal Reserve Bank of St. Louis
64
these m e n s h o w s t a t e m e n t s
o f net worth o f from half a
mil.
to two a n d one-half million dolliers,
Governor H a r d i n g i s v e r y familiar,
n o Joudt, w i t h t h
district around Clarksdale a n d Greenville a n d such places
as that.
T h e y have got this cotton and they raised i t
with the idea o f getting anywhere f r o m 5 0 cents t o a dolla
& pound.
T h e r e i s need f o r i t probably somewhere, b u t
there i s n o price, S o o n e r o r later they will use it.
Wie have another b a d district, a n d that i s the rice
district,
R i c e h a s suffered a great deal,
W
e ave
probably given more attention t o cotton i n o r district
than a n y other o n e thing. H o w e v e r , t h e cotton people a s
a whole, h a v e n o t suffered,
i n m y opinion,
losses t h a n the livestock people,
care where @
a n y greater
a s t year, I
do not
man was located, w i t h livestock h e was taking
a greater chance o n a loss,
o n a percentage basis, t h a n
any other industry. T h e r e i s not a man that over fed
cattle any other year, w h o did not make some mmey, b u t
last year they did not get a cent for their feed, E v e n
jast f a l 1 , W h e n t h e decline i n cattle w a s 4 0 per cent,
they went out and fed them, a n d they are coming back nov,
and fat cattle are selling i n our yards there o n just
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Federal Reserve Bank of St. Louis
about t h e s a m e b a s i s
a s what t h e y would c a l l feeders
today, t o g o ait into Kansas a n d Nebraska a n d Illinois
and Missouri t o graze, where t h e y usually g o i n t o Texas
and O k l a h o m a
t o gst these cattle.
T h e y a r e u p against
that proposition a n d the banker w i l l n o t loan them,
They will n o t maxe loans without asking u s about i t . T h e
cattle a r e a t one place; t h e f e e d i s a t another,
T h a t
has been going o n a long time.
I think o n e o f the large cattle m e n o f Dallas, Texas
told m e that t h e y o n l y sent t o market 3 0 per cent o f the
stuff that was produced, I l l i n o i s , Missouri, Kansas and
other s t a t e s t a k e c a r e o f t h a t s u r p l u s p r o d u c t ,
I t works
a hardship o n the raiser o f these cattle i n Texas, a n d a
great hardship o n the m e n that work very h a r d t o raise
the c o m ,
I t cost...
as i t d i d cotton.
ae
a s much t o raise c o r n last year
S o , t h e y a r e u p against i t ,
5 . a6
not k n o w h o w t h a t s i t u a t i o n w i l l w o r k o u t ,
we have h a d our best liquidation f r o m our manufacturevs a n d s m a l l d e a l e r s ,
T h e retail merchants h a v e
begun t o reduce their prices,
before that,
T h e y d i d not reduce t h e m
T h e y have h a d fairly g o o d business,
I n
a general survey o f perhaps m o r e t h a n 200 merchants w e
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Federal Reserve Bank of St. Louis
find that t h e retailer claims i n our district,---that 7 5
per c e n t o f h i s s a l e s a r e p a i d i n currency.
used t o have a
T h e m é n tha’
charge account ( a n d that does n o t apply h o
ever t o our big stores) b u t I am talking about the smail
retaller i n cities o f the size o f S p r i n g f i e l d a n d places
of that kind; b u t there i s a great deal o f currency,
my o p inion,
i n the hands
o f the laboring man,
in
T h e r e
was o n e m a n With a chain o f 1 8 stores w h o told m e that,
during the month o f February h i s sales were ahead o f a
year ago, a n d 8 5 per cent o f those sales were paid i n currency o v e r t h e counter,
In Arkansas there h a s been a scare among the smaller
banks a n d deposits h a v e gradually gone down.
T h e y d o not
know where i t is going, b u t every man who comes i n will
have some real money i n his pockets.
help t h e South.
T h a t i s going t o
T h a t i s going t o help Mississippi, b e -
cause m a n y o f those people have sufficient money, either
buried i n a can, o r i n their pockets b u t i t i s not i n
the banks,~---they
c a n almost m a k e a
5
c r o p t h i s year,
they are going t o make a very cheap crop, I
a n d ?
do not sup.
pose they have made many since the Civil War, cheaper
than they will make i t this year.
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Federal Reserve Bank of St. Louis
69
To get back a t our rate o n Gcvernment bonds, w e
o u r
have h a d good liquidation o n Government bonds.
officers felt, i n order t o get i n with the other man,
that w e should have 6 per cent, and a t the last two
meetings w e have recommended it, but w e have some
Class €
directors, b o t h o f them i n the cotton district,
together with a great many bankers down there that have
bought bbhér bonds,
T h e y s o l d them.
T h e y loaded u p
with a lot o f bonds, a n d they still have them, T h e y
cannot afford t o take less, because i t means that they
will use u p their surplus, because t h e pank&Yon o u r
board, together with the class B directors voted to
let this thing alone, because w e showed them What
liquidation w e had i n 12 months, a n d i t has been very
good.
W e have probably twenty o r twenty-five per
nent liquidation.
The progressive r a t e applies t o quite a
few o f
our banks, b u t i t does not cost them very much money.
we servedour member banks l a s t year I
fraction less t h a n 6
per cent,
think a t a
o n the average,
W e
were probably somewhat t o blame i n advancing them as
heavily a s w e d i d a year ago, b u t w e were uwged t o
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Federal Reserve Bank of St. Louis
loan a n d t o loan freely, w i t h a view t o getting large
production, E v e r y b o d y w a s crying f o r production i n Jan-~
uary o f last year, a n d I think that w e were brought t o
let some o f these banks borrow a
little more t h a n w e
should, N o b o d y anticipated that w e were going t o have
such a Slump i n prices o f this kind,
e e s
w e haves h a d a n un-
g o o d demand for bankers' acceptances a t 90 days,
from a good m a n y o f our members a n d some o f our large
corporati o n s h a v e b e e n buyers,
O n e firm I
know h a s
‘
bought over 5,000,000 o f bankers! bills that were pur.
chaséd through our bank.
O n l y the d a y before I left,
we tried t o get some bills from Chicago, a n d they could
not f u r n i s h t h e m .
I t was rather remarkable,
b u t there
seems t o b e considerable funds there f o r investment b y
large industrial concerns,
I think that if possible, a uniform rate of the
banks a t this time, o f 6 per cent would have a sentimental
effect.
{ I do not think that v e would o n e t o raise o u r
rate o n Commercial p a p er, because I do not think i t is
‘aecueee. I
think w e would b e criticized severéty for
doing it, being i n the position i n which w e are,
Governor Harding, District No. 9, Minneapolis,
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Federal Reserve Bank of St. Louis
Governor Y o u n g .
Governor Young.
M r , Secretary, Governor Harding:
our rate o n commercial a n d agricultural paper, abl
maturity,
i s 7 per cent,
T h e rate o n notes secured b y
Government obligations, Liberty bonds and Victory notes
is 6 per cent, MTressury certificates 5 - 3 per cent,
Our people h a v e b e e n o f the opinion f o r same time
that w e should have a flat rate, b u t w e have been feeling
that w e c o u l d b r i n g t h e c o m m e r c i a l r a t e d o w n t o t h e
Liberty bond rate, rather than bringing the Liberty bond
rate u p t o the commercial rate,
T h a t position i s taken
because o f the conditions i n the Northwest, w h i c h a r e
not particularly good.
We have 1,004 member banks, 6 1 2 using o u r rediscount
facilities; 3 4 7 over their normal basic line.
T h a t is
a Situation that causes myself a n d m y associates a
good
deal o f concen.
The borrowing banks a r e n o t confined t o special districts,
W e will find a district where o n e bank.
borrowing a t all.
i s not
W e will find three o r four other bank.
in that same district borrowing lightly and others borrowing v e r y heavily;
s o w e have come t o the c m e l u s i o n
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Federal Reserve Bank of St. Louis
"2
that the management o f the bank has a great deal t o d o
with the amount o f money t h a t t h e b a n k borrows,
We anticipated last fall that the small grain crop,
the c o r n crop,~--that i t was valued a t that time approxi-
mately a billion dollars, a n d i t would not be a difficult
thing + o retire t h e obligations b e i n g borrowed among t h e
Uebreront Foabrel Reserve Banks, w h i c h a t that time was
about o n e hundred a n d thirteen millions,
B u t , t h e atti-
tude o f t h e f a r m e r s o u t t h e r e w a s s u c h t h a t t h e y w o u l d n o t
sell the products, A
yet.
great number o f them have not sold
W e have h a d our m e n o u t i n the country looking
into situation, b u t we find that people that are still
holding agricultural products a r e people t h a t d o n o t o v e
the banks anything, s o that w e think liquidation has for
just a s far a s i t possibly c a n i n the Northwest, a n d
from n o w on, w e will increase.
we have a very extensive district i n which t h e rates
charged b y commercial banks i n that district, vary. O v e r
in Northern Michigan they have a flat rate i n good times
and pyor times o f 6 per cent.
that,
T h e y undertook t o change
I n Duluth and the twin Cities they fallow the
money market,
I n Minnesota, outside o f the Twin Cities,
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Federal Reserve Bank of St. Louis
there h a s been a
number o f years,
1O per cent,
flat rate o f 8 per cent for a
great
I n South Dakota i t runs f r o m 8 to
I n North Dakota t h e same, 8
to 1 0 per cent.
In Montana, practically everything o u t there i s 6,
and 1 0 per cent, a n d a t one time w a s a s high a s l e
cent; b u t a couple o f years a g o that w a s reduced.
that, o u r rate o f 7 per cent i s not inflicting any hardship u p o n a n y m e m b e r b a n k i n o u r district.
City Banks are charging 7-3 per cent. I
they c a n d o otherwise,
T h e -
Twin
do not see how
T h e Twin C i t y Banks, according
to their o v m information, h a v e loaned t h e banks i n the
Northvest, »79,000,000.
‘ T h a t would include t h e States
of Montana, N o r t h a n d S o u t h Dakota,
a n d Minnesota,
and
they, l i k e ourselves, h a v e b e e n working very h a r d last
fall, t o get some liquidation, b u t they have o n l y been
able t o reduce t h a t %6,000,000,.
we have secured from 115,000,000
T h e liquidation t h a t
d o m t o .'71,000,000
or 72,000,000 t h a t w e have outstanding i n the district
now, has come entirely from the Twin Cities,
There
have b e e n f e w places i n the country that w e have gotten
&@little liquidation, b u t i t has been offset b y other
banks b o r r o w i n g .
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Federal Reserve Bank of St. Louis
At this season o f the year, t h e Federal Reserve
Bank o f M i n n e a p o l i s s h o u l d n o t h a v e o v e r f i v e o r s i x o r
seven million dollars loaned out i n the Northwest, b u t
we have t o member banks, o u t i n the neifhborhood o f
12,000,000.
I
t is very discouraging that these banks
that have borrowed from us, a good many o f them i n agricultural districts where t h e y would b e able t o l i q u i d a t e , .
they d o not s e e m t o b e able t o accomplish anything a t all.
Their loans remain stationery, w i t h very little reductions,
That i s the b a d part o f the situation i n the Northwest,
The g o o d part o f the situation i s this;
T h a t from
all sources w e find that t h e farmer i s taken care o r far
his seeding requirements f o r this Spring, a n d wlll n o denbt
be taken care o f for a great deal o f the summer expense,
and w e d o not look for a n y phenomenal raise i n our redis.
counts until along i n August and September.
W e are o f the
opinion that a good crop will clean most o f these banks
up this fall, that have borrowed money,
lematical,.
T h a t i s prob.
W e fee] that a great m a n y o f these agriculture
‘producers o u t there a r e a w a y over-extended, a n d that i t
will t a k e m o r e t h a n o n e c r o p f o r t h e m e v e n t o r e d u c e t h e i r
Loans d o w n t o a reasonable amount, I
think a great deal
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Federal Reserve Bank of St. Louis
of their relief will have t o come through f a r m mortgages.
Under those con@itions a n d circumstances,
i n Minneapolis t h a t t h e r e s h o u l d
opinion o f t h e p e o p l e
be n o c h a n g e
i t i s the
i n our commercial
o r agricultural r a t e s a t
the present time,
Governor Harding. D i s t r i c t No. 10, Kansas City,
Governor Miller,
M r . Secretary, a r m Governor
Governor Miller.
Hardingg»*
The credit situation i n the Kansas C i t y District
isprobably mobe stabilized this year than any for the
last three o r four years.
O n November 6 t h the loans
of the Kansas City Bank amounted t o »165,000,000.
Since that time, a n d u p t o about February lst, w e had
Liquidation o f $70,000,000 from our loans, bringing our
loans d o w n t o 95,000,000,
about %105,000,000.
T h e y have since increased t o
T h a t liquidation came from all
parts o f the District.
w é n o w have 3 6 1 banks borrowing
over their basic line,
A b o u t 1 6 0 per cent o f their
basic l i n e .
I
t i s not confined
particular l o c a l i t y .
t o a n y State o r a n y
T h e largest l i n e t o a n y member
of
any importance i s about t o a n d one-half times t h e basie
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Federal Reserve Bank of St. Louis
76
Eine.
W e have 3 1 9 other banks w i t h a
basic l i n e o f
$47,000,000 that are borrowing $27,000,000.
T h e n we
have 4 0 9 banks that a r e n o t borrowing a t all, T h e y have
a basic line o f 43,000,000.
O u r normal rate i s 6
per c e n t o n G o v e r n m e n t b o n d s a n d c o m m e r c i a l p a p e r ,
have t h e p r o g r e s s i v e r a t e ,
gressive r a t e o u r l o a n s
W
e
a n d were i t not f o r t h e pro.
e S
p r o b a b l y b e v e r y m u c h great«
and i t would b e necessary t o increase o u r rate o f dis-
count, mainly for the reason that i n no State o f our dis.
trict i s the legal rate under 8
the States i t i s 1 2 per cent.
per cent,
I n some o f
S o , a n y reasonable r a t e
fixed by our bank would necessarily be under the legal
fate,
Our District is, a s you know, almost altogether
agricultural,
W
e have large productions o f a t least
ten o r twelve o f the basic commodities, s u c h a s Cattle,-~..
that industry leads,---also rheat, corn, cotton, oil,
lead, Zinc, coal, sugar beets a n d wool; but i f i t were
not for the cattle industry w e would have n o difficulty
in furnishing t o all members the reasonable demands o f
those members f o r legitimate purposes; a n d i t i s not
the feed-lot cattle t h a t worries u s ,
herds.
I t i s the breeding
6 8 per cent o f all o f o u r loans a r e based
on
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Federal Reserve Bank of St. Louis
am
cattle and I/pretty sure that two-thirds o f those loans
are o n stock cattle.
T h e loans t h a t o f course a r e nade
to mature i n s i x months, a r e s u c h loans a s the menber
banks w i l l have t o carry f o r t w o o r three years,
I n
the past those loans have b e e n made b y livestock loaning
companies a n d large banks making a
specialty o f cattle
loans, a n d they have b e e n floated i n the East a n d i n
the North and the country throughout; but i n the last
two years they have been turned back o n to our district,
which makes i t exceedingly h a r d t o finance t h a t large in.
dustry.
s é cannot think o f reducing our rate,
I f we
did not have a progressive rate, w e would havé t o increase
ite
I think about 8 5 per cent o f the borrowing menbers
are i n favor o f t h e p r o g r e s s i v e r a t e ,
a n d would dislike
very much t o s e e i t abolished,
we have little o r no acceptance business, a n d as I
Said, o u r loéms are mostly i n the interests o f agricultire
We have n o chance o f ever liquidating until July
or August when the grass cattle will b e marketed, b u t
when they a r e marketed, t h e ranchmen a n d farmers r o u l d
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Federal Reserve Bank of St. Louis
greatly desire t o put t h e same money back into youngé:
stock from the Southwest.
T h e r e h a s been great pressure
on the Kansas City Bank t o extend further credit t o parti
larly these banks making livestock loans 4 specialty, b u t
up t o this time w e have t h e credit situation v e r y well i n
hand a n d w e d o not expect t o borrow anything like a s much
as we did last year, which was about 949,000,000.
Governor Harding. I
will ask the other two Gover.
nors t o be a s brief a s they o a n i n their remarks,
District No. 11, Dallas Texas, Governor Van Zandt,
Governor V a n Zandt,
n
a Governor
M r . S e c r e t a r yd
Hardings:’.
I will confine w h a t f e w remarks I
will make, t o
the rate situation.
In our district, t h e present rate, o r any rate which
may b e fixed, w o u l d have v e r y little affect o n the demand:
on the Federal Reserve Banks,
A l l o f our banks make a
profit o n their borrowings from the Federal Reserve Bank,
and n o flat rate should b e fixed which would stop those
rates.
An increase i n the rates a t this time would not,
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Federal Reserve Bank of St. Louis
7S
in m y opinion, reduce t h e demand upon u s a t all, B a n k s
are d e m a n d i n g o n l y s u c h m o n e y a s i s a c t u a l l y n e c e s s a r y
for t h e m t o g e t along with until some liquidation takes
place.
W h i l e o n the other hand, c
dcorease i n the rates
at this time would b e a Signal t o them that things were
loosening up, a n d that credit was available, a n d they
would g o t o work a n d make loans t h a t t h e y have been r e fraining f r o m making f o r a long time, s u c h a s taking care
of land speculations, a n d other speculations i n other
enterprises a n d new enterprises that people have a n
idea t h a t t h e y w a n t t o g o i n t o l a t e r o n ;
s o that I
would
hate t o see a n y reduction i n the rates, j u s t f o r t h e
psychological effect; not because i t would make the banks
borrow a n y more for their present needs, b u t because i t
would create other needs, F o r that reason, I
do not
think t h a t a n y i n c r e a s e in’ rates w o u l d h e l p us, a n d c e r -
tainly a decrease i n rates would hurt us.
L i k e Gover-
nor'Seay's District, w e have got t o take care o f some
of our banks t h a t a r e n o w i n a most badly extended con-~
dition, because they f a i l e d t
o get any liquidation, a n d
in order f o r t h e m t o ever g e t a n y liquidation t h e y m s t
be able t o loan a
few dollars p e r farmer t h a t will b e
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Federal Reserve Bank of St. Louis
RO
necessary t
o produce t h i s year's crop,
to b e f e w a n d far between, because a
T h o s e a r e going
great many o f them
have t h e money i n their pockets t h a t they are saving out;
others a r e being doled o u t a mere pittance b y the banks
each month t o p a y their grocery bills, T h o s e grocery
bills a r e very small.
Wie IMvée gotten about a l l the liquidation that w e c a n
out o f everything, e x c e p t t h e Government secured loans,
Those w e are trying t o force. A
little l i q i d a t i o n w i l l
come f r o m the sales o f cotton a n d such sales o f wool a s
may b e made i n the near future, b u t those sales will n o t
take care o f the ordinary shrinkage i n deposits.
W e
a
expaei e s get a good deal o f liquidation from the Rio Gra:
Valley country, o u t o f the early vegetables, b u t w e find
that those vegetables n o w will n o t b e harvested, a n d they
are n o t being shipped,
T h e y are n o t even being gathered
They are being plowed under, C a b b a g e a n d spinach are
being plowed under every d a y d o m tnere,
I think that i s about a l l that w e have o n the rate
Question.
Governor Harding, District No, 12, Governor Calkine,
San Francisco.
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Federal Reserve Bank of St. Louis
Governor C a l k i n s .
M r , Secretary a n d Governor Hardi
The Federal Reserve B a n k o f S a n Francisco h a s a uniform r a t e o f 6
per cent; t h e r e i s n o variation.
I
t has
been accused o f not being subject t o the fluctuations o f
its r e s e r v e p e r c e n t a g e .
t has experienced
n o wide f l u c
I t has never rediscounted with any other bank.
tuations.
It enjoys a
Quently a
I
greater diversity o f production a n d conse-
greater d i v e r s i t y o f c o n d i t i o n s t h a n a n y o t h e r
district.
There a r e Some actual b a d spots, fortunately comparaetively small.
W e are unfortunate enough t o prodice cott:
among other things, a n d there i s a n actue condition i n
the c o t t o n industry.
The m o s t p e r p l e x i n g p r o b l e m w i t h w h i c h w e h a v e t o
deal i s the problem o f the over-extended bank, which cannot liquidate, a n d probably cannot begin liquidation
without becoming more extended,
T h a t i s i n most cases,
due t o the fact that those banks, w h i c h a r e referred t o
as over-extended, become ovér-extended because t h e y made
what they believed t o be current loans, but what really
turned o u t t o b e capital loans, C u r r e n t loans based
upon prices f o r commodities, w h i c h declined s o far tka:
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Federal Reserve Bank of St. Louis
T h e cure o f that situation wil.
the loans became capital.
take time.
improved,
I t would
e e
i n m y opinion,
a
n
d i t would not b e
t o a n y extent,
b y the appli-
cation o f a higher rate, o r by the application o f the
progressive rate.
I am l e d t o say, i n regard t o the p r @ r e s s i v e rate,
that m y information i n regard t o i t indicates t h a t i t
may b e well called a. non-progressive rate, o r , a s Gover-
nor Biggs told us, the net average rate i n his district,
which has t h e progressive rate, w a s materially less t h a n
the rate i n other districts where t h e r a t e i s 7 per cent,
only slightly higher t h a n t h e 6
per cent rate prevailing
in four districts, Philadelphia, Cleveland, Richmond, a n d
San Francisco.
It might b e a n occasion f o r remark, a n d might l e a d
to some t h o u g h t , t h a t o f those f o u r banks, t h r é e have
consistently a n d persistently maintained t h e highest re.
serve position o f the entire system, Richmond being t h e
only o n e that has been i n the l o w class. C l e v e l a n d t y 3
been a t the top, S a n Francisco s e c o n d o r third a n d
Philadelphia second o r third,
M y o w n opinion i s that
cur s i t u a t i o n w o u l d n o t b e m a t e r i a l l y c h a n g e d b y a n
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Federal Reserve Bank of St. Louis
increase i n the rate, a n d that n o consideration o f a
decrease i s worth talking about,
I have n o desire t o express ovinions f o r t h e other
districts, b u t I fully agree with Governor Strong's view,
that i t would b e sentimentally ( i f y o u please) unfortunate
to have a
rate decrease i n New Y o r k o r a n y other leading
center o f the East.
Secretary Mellon.
illuminating t o me,
T h i s i s most interesting and
I t is much more congenial than a
preat d e a l o f t h e b u s i n e s s t h a t I
to give attention to, I
gO NOW.
I
have i n m y department,
am sorry that I am obliged t o
T haven't a n y t h i n g m y s e l f
t o s a y o n t h e question
of rates t h a t would b e o f a n y benefit,
A t least, I
am
not prepared t o take a n y part i n this discussion,
I would like, i f i t i s agreeable t o all o f y o u Gover..
nors o f the Fedéral Reserve Banks a n d the Comptroller o f
the Currency,
a n d t h e members
o f the Federal Reserve Boar?
to take lunchéon w i t h m e tomorrow a t whatever time i s
convenient; S a y a quarter afte; one, o r such time a s mar
be convenient for you,
a t the Metropolitan Club i n Wash-
ington.
Governor V a n Zandt, I
think that t h e Governors rill.
be very glad t o let you fix the time that will b e conveni:
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Federal Reserve Bank of St. Louis
for you,
W e will make i t convenient f o r us.
Secretary Mellon. I
tomorrow a f t e r n o o n . I
would s a y then a t one-fifteen
thank you.
Governor Harding. Gentlemen, t h e Secretary o f the
Treasury h a s invited u s t o luncheon w i t h h i m a t one fifteen tomorrow a t the Metropolitan Club,
O n Thursday w e
are going to have with u s one non-banking director from eac
Federal Reserve District a n d the members o f thé Board will
be glad t o have t h e Governors a n d the non-banking d i r e c t x
take luncheon with i t at one~fifteen o'clock o n Thursday.
Now, w i t h regard t o the program that w e have, Mr.
Gilbert, Assistant Secretary o f the Treasury, i s anxious
to have a conference with the Governors this afternoon,
if practicable,
i n order t o discuss some o f the routine
Treasury matters, W o u l d i t be agreeable t o the Governors
to give h i m that time this afternoon a n d then proceed
tomorrow with a discussion o f their own program, inde-~
pendent o f the Board, a n d then Thursday morning meet with
the Board again here, together with the non-banking d i z ~
ectbrs w h o a r e coming, a n d continue t h a t discussion during
the morning, a n d a t lunch time’ w e can determine what t o
do i n the afternoon o f Thursday, completing your o w n
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Federal Reserve Bank of St. Louis
program a n d then meeting Friday afternoon o r Satur day
morning with the Board again.
M a y I
Governor Wellborn.
ask i f i t i s the inten-
tion o f the Board t o discuss rates w i t h the Governors?
O h yes,
Governor Harding.
Governor Wellborn.: I
would like t o have their views
on the rate question,
Governor H a r d i n g . I
suppose
w e will have a
dJiscussior
of that further a t the luncheon tomorrow.
Here are some matters that I want t o turn over t o you
that y o u probably will want t o have when y o u discuss matte:
with Mr, Gilbert this afternoon.
pared b y m y assistant,
H e r e i s a memorandum p r e
M r . Emerson, r e l a t i n g t o t h e t o p i c
ae
“ourrency policy," which relates t o the physical end of
it, t h e supply o f notes a n d s o forth,
Y o u will find that
memorandum important i n discussing the matter with Mr,
Gilbert this afternoon a n d y o u will probably like t o dis~cuss i t with the B o a r d later on,
As t h e Federal Reserve Banks a r e n o w exercising t h e
functions o f a sub-treasury i t seems v e r y important that
they should have a
uniform policy w i t h reference t o ship-
ments o f currency, coin, a n d s o forth t o member a n d non-
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Federal Reserve Bank of St. Louis
member banks,
I t seems t h a t there i s quite a
of practice now.
diversity
T h i s h a s all b e e n tabulated here, s h o w
ing what the present practices are i n each bank,
Y o u
Will all agree that i t i s essential now, i n view o f the
fact that you are all exercising sub-treasury functions,
that there b e a uniform policy.
T h a t I
think i s one o f
the things t h a t Mr. Gilbert wants t o discuss w i t h you
this afternoon.
I think that i s all you will need this afternoon,
and i f i t i s agreeable t o the Governors Mr. Gilbert w i l l
be here a t two-thirty o'clock.
Governor Strong.
time I
I f w e adjourn promptly a t this
would suggest t h a t t h e Governors m e e t a t two
o'clock and p roceed with their meeting.
(Whereupon a t 12.30 o'clock p.m,, a recess Was taken
until 2 e'clock p.m. o f the same day.)
AFTER RECESS
fhe conforunce u a s re-asasembled, pursuant t o recess a t 2 yp
The Chairnan (Governor Strong).
procesd w i t h t h s m e s t i n e ? I
& : e n e n , shall = e
have t a x e n t h e l i b e r t y o f
asking wr. Harrison i f h e will b s available t a ect a s
Secerstary o f t h i s m e a t i n g
i n c a s e t h e ‘i9vernors r a n t e d t o
have & @ secretary, a n d h e i s here.
Governor dcDougal. I
move that h e b e anoointed s e c -
retary.
Toe Chalrinan.
I s that seconded?
Governor valxins. I
second it.
(The motion tas p u t and carrisd unanimously).
The v h a i r nan. G e n t l e m e n , b e f o r e t a x i n g u n t h e p r i n t e d
ororram w h i c h i s i n front o f you, “ i t h a
hibits
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Federal Reserve Bank of St. Louis
number o f ex-
i n connection v i t h i t , Governor H a r d i n a d v i s e d
that a n o r z a n i z a t i o n w h i c h I
believe e n o r a c e s t h e f a r m
bureaus o f the United States i s holdiny a convention i n
‘aghineton,
o r a t least t h e executive committees o r of-
ficers o f that organization have a mestin= i n vrotress
here,
a n d have expressed a
desire t o n a v e a
meeting wit-
us. Governor darding holds the view that i t mictht be
desirable t o have s u c h a meetings, b u t i n view o f the
==n a e
possibility o f its consuming a very larce amount oi/ time,
which i s pretty v e l l occupied n o v b y this program,
cover i t , h e sugzests t h a t v e n a m e a n hour f o r a
fu
i f ~e
meeting,
a g r e s a b l e t o this body t o have t h e m come t o a
meeting with us, and not only name the beginning but the
end o f the hour, h o w lons s e c a n have t h e m here.
Governor Faucher,
T h a t i s t h e o n l y w a y t o do, t o f i x
thse time--fiftesn m i n u t e s b e f o v e l u n c h ,
o r somotuing l i k e
that.
Mis. Chairmen.
H o r ~ould
i t d o £9
tomorrow?
Governor : e l l b o r n . e
have t o l e a v e h e r e a t 1
to
to lunch a t 1:50, a s I understand.
fhe Chairman. ‘That would zive them half a n hour,
from 12:39 t o 1 o'clocx, a n d w e certainly o u l d heave,as
luncheon v i
acce d
:
I understand +
s
e
c retary
a n invitation t o take
t h e Treasury.
I s : thet
agreeable ?
Gov. iicDougal.
quarter
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Federal Reserve Bank of St. Louis
h i n t s s e had better make i t a
o f a n h o u r e a r l i e r t h a n that.
he vhairinan. A
Governor ceDougal.
Governor Calkins.
quarter o e s t 1 2 ?
Yes.
D o n ' t y o u thinx limiting t h e m t o
half
a n hour,
o r e v e n t o t h r e e yAusrters o f a n hour, w o u l d
be a matter a t which they might take resentment?
That is a
Governor Seay.
move t h a t
Governor - e l l b o r n . I
The Chairman.
matter
t o consider.
“ e invite t h e m
to
I s that seconded?
Governor Morss. I
Governor seay.
second it.
I f think ~ e had better discuss that.
Someone h a s sugzested t h a t i t mizht meet vith resentment
on t h e l r voart.
Governor Willer.
H o w about a
nizht session, alr.
Chairman?
Govennor g l l b o r n . i
t e a t a g that t e should f i x
the hour a t 1 2 o'clocsc, a n d then "6 could tell them that
ne ned a n engagement t o taxes lunch i f they desired t o
stay longer t h a n l The Chairman. ‘ T h a t was m y idea, t h a t t e sould t h e n
be i n a position t o exolain that “ e had a n
Governor .ellborn.
2 2 0 % {
them i n a b u n c h a n d n o t i n t r o d u
tovyernor Biggs-e I
say something.
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Federal Reserve Bank of St. Louis
“ g introduce
a c t individually.
suppose t h e y vould a l l tant t o
The Cheirman. T
thinx t h e suggestion made b y Gov-
ernor Hardinz tas a n admirable one, a n d that i s that i t
be considered more a s a hearing t h a n a s a discussion, a n d
simply hear what they have t o say, rather than running the
risk possibly o f getting i n t o difficulties b y having a
discussion
o r argument.
Governor ¥ancher. L e t them do the talicine, und
Listen t o what they have t o say.
Governor Seay. T h i s was a t Governor Harding's s u g
gastion,
a s I understand i t ?
The Chairman. ‘Yes.
Governor seay.» I
ing yesterday.
had a
lone t a l x v i t h Governor Hard-
H e d s l i v e r e d t h e m a n address yesterday,
e
and t h e y betrayed,
a s h e said, u i t e a
lac's of snow lade
of the genius a n d structure o f the Federal Leserve ACT,
and their position was t o maze certain demands u p o n consress reflecting u p o n t h e Federal HXeserve System; t h a t
he exolained t o them that t h e Federal naserve System was
not devised f o r a n y such purzoses, a n d h e diverted their
attention t o the Farm Loan Act,
sort.
2 7 gomethine o f that
H e felt that unless a duo resvect tas valid t o
these men, a n d that unless they were p u t o
n the right
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
t o the
track, t h a t t h e i r t n f l u e n c e m i c h t b e e m b a r r a s s i n g
redoral mneserve coard a n d the Federal Nesesrve System,
and that h e wanted t h e m enlightened a s t 2 “hat the Federal Reserve Bank's limitations " e r a a n d what t h e limitations o f the Act. “ere “ith resvect t o lone-time credit
hat t h e s e v e o p l e a n t
t o nezotiate,
a n d h e diverted t h e m
to the Federal F a r m Loan Act, a n d h e thinks h e mide a hit
mith them.
h a t i s your pleasure o n the motion?
Ihe Chalrnan.
The motion i s that “ e invite them t o join us at 12 o'clock
tomorro’.
(The m o t i o n " a s p u t ’ a n d e a r r i e d unanimous 17).
The Ghairwnan. I
“ill a s x t h e S e c r e t a r y
t o get t h e
exact n a m e o f t h e orzanization.
we. darrison. I
Burgaus, b u t I
thin« i t i s t h e F e d e r a t i o n
am not sure.
Governor Seay.
I t is.
Governor . e l l b o r n . I
The Chairman.
program, m a y I
o f Farm
thin
i t i s t h e B u r e a u o f Markets.
G e n t l e m e n , before vroceeding with t h e
asx i f those w n o are familiar “ith t h e methods
mhich have heretofore prevailed i n conducting these meetings
are s t i l l w i l l i n g t h a t t h e y s h o u l d c o n t i n u e
a t t h i s mesting,
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Federal Reserve Bank of St. Louis
and “hether they will oledge themselves t o vrotect m e
against a s s a u l t
b y those Governors w h o a r e n o t familiar
with t h s methods
o f t n e Chairman.
Mmcted h e r e a t 2:50, a n d I
WE Y u n O v e r t h e t o p i c s
M r . Gilbert
i s 4x-
suzzest t h a t b e f o r e h e c o m e s
o f t h e v r o c r a m “ h i c h h e wants
u s to
discuss sith him. I h a v e , sentlemen, t h e resort o f the
committes anoointed t o examine into the subject o f
Supplies o f n e currency a n d t h e distribution o f n e v
currency. U n f o r t u n a t e l y i t has n o t been vrenared i n
sufficient nwnbers t o sive e a c h Governor a copy, a n d
failing that, a n d a s this i s the tovie which Mr. Gilbert
desires t o discuss v i t h t h e mesting, I
expressions
Possibly,
o f views
o n the yuestion
vill a s f o r
o f n e w currency.
t o facilitate t h e discussion, I
recomnendations o f the comnittee.
will read t h e
T h e y are short.
"Pirst, that i t be left with Jir. 2merson t o see
that distribution i s continued i n a falr and equitable
Wir. S n e r s o n i s G o v a r n o r Hardin:
reconnendation
i s that t h e distribution b e continued
i n
a fair a n d e q u i t a b l e m a n n e r b e t e e n t h e r e s p e c t i v e t e s e r v e
Banks.
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Federal Reserve Bank of St. Louis
24 \
2. T hFa t t h e anount o f n e m o n e y o a i d o u t should
t i
not exceed the amount printed."
3
4
t
That5 i s" t o say, t h a; t v e should n o t deflate
Mr ¢
stocis, b u t should p a y o u t fit money until
Governor Fancher.
Y a y I
inquire
1 f t h e y h e v e scotten
thea stock u p t o the voint whers t h e y feel that i t i s purticlient nov?
Ine Uhairman.
o u l d y o u centlenen lixe t o
N o t yet.
have ‘ir. S m e r s o n h e r e ?
H e
i s t t M m l y member
o f this c o m -
ashington.
mitteas t i n
Governor MeJougal. I
thinx h e 7ould lise v e r y much t o
on.
be p r e s e n t “ h i l e t h e 2 i s c u s s i o n i s z o i n g
Governor OGalxins. I
vas v e r y much o f the impress ion
that i e had been advised that t h e stoc« vas suff i
Tis Unairnan.
I t i s not w o t o the total o f
i mearded
orders. C o n s i d s c i n g t h a t t h e amount o r d e r e d s
as the sufficient amount,
i t has n o t yet reached that
point.
itz, r a t jr. susvson, i n cooperation mith the
re~
ury Deoartment, s h o u l d have general suosrvyision o f
demptions,
i n order
t o m a intain a
ceneral standard
af
o f
recemption,
a n e t o brine t h s c u r r e n c y u o t o a
hither l e v e l
of cleanliness.”
The fact t s that t h e sorting i s according t o such a
varlety
o f standards
i n t h e different lieserve Banxs
now
that a good deal o f money i s returned which should not be
returned according t o ths standards o f some banks, and
this i s designed t o maxe uniform t h e quality o f the money
which i s fit for further circulation,
"4. T h a t t h e time has n o t y e t arsived w h e n total
redemptions should exesed the issue of new notes.
"5.
T h a t seach banat r a i s e i t s s t a n d a r d
o f currency
sent f o r redemostion yuatil checxed b y the Federal nesorve
Board."
That is desitned, o f course, t o increase the quality
of m o n e y
that
i n circular a s t o fitness,
and I
regret
t o say
i n our district t h e oressure f o r currency l a s t y e a r
was s o g r a a t t h a t w e a r e v e r y m u c h b e l o v h a t s h o u l d b e
considered a
standard o f fitness.
Governor Callins.
T h e reasonable standard o f fit-
ness should b e constantly raised, that there should not be
a condition o f affairs i n Federal Meserve Banks ‘hich
maxes i t necessary t o cirdulate w i t h paper money.
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Federal Reserve Bank of St. Louis
ought t o hava orogress e n o u g h t o get past that v2oint.
The Chairman.
committes,
T h a t i s the recomnandation
o f the
p u t o f c o u r s e t h e res»xonsibility f o r t h a t
rests e n t i r e l y u n o n t h e B u r e a u o f i n g r a v i n g a n d Printing,
which c o u l d n o t o r i n t f a s t enough.
Governor valxins.
T h a t i s true.
The Chairman (reading):
‘6. T h a t reserve stocks b e gradually built u p t o
2 s 000,000,900."
about
That i s :
o
f the committee a s t o “hat i s re-
garded a s a sufficient reserve.
‘7, T h a t t h e m a x i m u m a n d m i n i m u m f i c u r e s
o f Federal R e s e r v e n o t e s s h o u l d b e b a s e d
stocks
o f reserve
o n the
averate c i r c u l a t i o n o f F e d e r a l X e s o r v e n o t e s f o r Bee 30,
rather t h a n o n t h e b a s i s
o f t h e volume
rency a n d c l e a r i n = h o u s e c e r t i f i c a t e s
o f emergency c u r d u r i n t h s crises
of 1 9 0 7 a n d 1914."
This toes b a c x t o the esrly system, w h e n “3s determined
that i t s h o u l d b e t h e b a s i s
supoly,
e n d t h e c o m m i t t e s h i s “or-<ced o u t a
Governor Calkins.
coviss
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Federal Reserve Bank of St. Louis
o f mexsurement
o f that reoort?
o f the reserve
n e w formula.
s i l l t h e banxs b e supdiied s i t h
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Federal Reserve Bank of St. Louis
The Chairman.
I w a s s o i n e t o csk M r , Harrison a t this
moment t o have a sufficient suposly o f these made t o send
to each bank.
ir. darrison.
T h i s report v a s j u s t handed t o m e yes-
terday b y vir. amsrson.
I t was intended t 2 have the
coples made, b u t there v a s n o t time.
wovernor Fencher.
will see that y o u get it.
de. Harrison. I
The Chairman.
e @ will g e t i t eventually.
N o v , the question i s “hether you care
to taxe any action o f a formal character upon this report
now,
o r a i t until y o u have h a d a n opportunity
in full.
t o read i t
h a t i s your pleasure?
Governor Seay. I
do not see how w e can taxe action,
that is, intelligent action, u n t i l m e have s e e n
gzovernor Fancher.
{
L
L i t b e vossible
t o have t h o s e
copies i n our hands before “ e return?
Mr. Harcison.
very shortly.
O h yes. a
can hava them risht here
T h e vavort itself i s not very lony.
get t h e m i n t o y o u r h a n d s c e r t a i n l y
T f will
b y Thursday.
Governor Fanchsr. T h e n I nova that w e defer action
until e a c h G o v e r n o r h a s h a d a n o v o o r t u n i t y t o r e a d t h e r e -
port.
Governor sieDouzgal.
I t can b e read i n about four o r
five minutes.
imagine, M r . Uhairman, t h e r e will b e
Governor seay. I
very l i t t l e d i s s e n t ,
i f i t i s dasired
t o finish t h e s u b o f it.
ject, t h a t i t b e r e a d a n d t h e n ™ e c a n d i s n o s e
Governor weDouzal.
I t i s rather a
The Uhairman. ‘ T h e n suppose I
s h o r t report.
read it, o r maybe I
will
get Mr. darrison t o read it.
(ir, darrison thereuoson raad t h e revort referred to,
which i s i n full a s follows: )
REPORT O F THE CURTSNCY COMMITTES
MARCH 12, 1 9 2 1
tthe Currency Committee appointed b y the Conference
of Governors
gins,
i n April 1920, a n d consisting o f J . D. Hig-
N e w Yorx, c h a i r m a n ; P e r o r R O SG. -b.0s
strom, C h i c a g o ;
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Federal Reserve Bank of St. Louis
J
. J . Netter~
a n d x . G . “Smerson o f t h e F e d e r a l R e s e r v e
Board, m e t i n New York o n March 12, 1921, w i t h a l l members oresent.
i r s Broughton o f the Treasury D e vartment
met mith t h e committee.
"Tig t o p i c s u n d e r d i s c u s s i o n w e r e ¢@s follows:
tribution o f n e w currency a n d redemption o f old currency
according t o past renorts o f the comnittee;
(2
ticemeant o f F e d e r a l -ieserve B a n k n o t e s i s s u e d u n d s r t h e
Pittman Acts a n d (3) Possible methods o f simplifying t h e
currsney system o f t h a United states.
"Distribution
o f N e w C u r r e n c y a n d nRedenotion o f Old.
+
"Mg y o r k o f the committee i n calling t h e attention
of the varlous Federal veserve banks t o the necessity o
cooperation i n ragard t o the currency h a s broutht about
more uniform oractisaes.
I
t has vrevented t h e scramble
for currency that would have. m a d e .d i s t r i b u t i o n i n equitable.
T h e coordinated efforts o f the rederal K e -
serve banks, t h e Fedsral H e s e r v e Board a n d t h e Treasury
Devartnent have resulted i n a m o r e systematic handling o f
the currency. d c o n o m y a n d voerhanps v e t t e r teneral condition h a v e b e e n attained,
a n d the
currency s i t u a t i o n a r e i n a f a i r v a y towards s a r l y s o l u Loyehe tae
"Distribution:
T h e comnittes
i n a former m e e t i n g
had veconnended t h a t n e v currency should b e distributed t o
the v a r i o u s F e d e r a l Hessarve B a n k s
total payments.
o n t h e basis
o f their
A c c o r d i n g l y reports w e r e requested a n d
rendered t o wr. Snmerson b y each Federal Reserve B a n k
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
shozlng i n detall,
b y xinds a n d denominations, t h e
monthly r e c e i p t s , d i s b u r s e m e n t s
of nev f i t a n d unfit currency.
a n d balances
o n hand
B u t Mr. smerson, a f t e r
examining t h e monthly resorts o f the varlous Federal Reserve fanks a n d tryint t h e o l a n sutessted found i t impractical t o distribute n e y currency o n that basis.
found t h a t t h e c o n d i t i o n o f t h o c u r r e n c y v a r i e d
H e
i n the
different districts, t h a t t h e standard o f sorting a n d
redemptions varied a n d that t h e different districts h a d
different needs. A c c o r d i n c l y t h e Federal keserve Board
had been distributing Federal Reserve notes o n the basis
of c u r r e n t needs.
I
n view o f t h e unequal conditions t h e
comnittes anproved t h e action o f Mr. inerson a n d decided
that t h e m o s t o r a c t i c a l m e t h o d w o u l d b e f o r t h e L o a r d
to
make whatever distribution i t thouaht best.
‘Me o r e s e n t c r o t r a m calls f o r a n increased r a t e
of distribution o f nev currency because o f the augmented
rate o f orinting.
T h e rate o f orintine has b e e n i n -
creased f r o m 209,000 sheets a
i
ec
day» H o w e v e r , a
day t o 325,900 sheets a
i
o
note o f caution “ a s sounded i n connection
with t h e orogram for increased distribution since this
orinting program m a y possibly b e slowed d o w n after svril l ,
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Federal Reserve Bank of St. Louis
unless
a n omercency avorovriation
period april 1
to June 30.
i s made t o cover
I f a much greater rate
disbursements s h o u l d b e adopted,
>
later t o c u r t a i l t h e orogram.
- c a l
i t
Tharefors,
1 t vould b e b e t -
ter t o inersass d i s b u r s e m e n t s o n l y 5 0 p e r
ample, t h a n t o increase t h e m 1 0 0 o s r cant., andlater r e duces them.
“Rede notions:
e2en- 0satx waiss t h s
and a l l o ? t h e i n s o e c t o r s
i n t h e r e d e m o t i o n agencles
to
ehecx t h e bank sandinz t o o clean currency f o r redemption.
In this manner a general level o f sorting for all Federal
Banks could b a asoroximated a n d therefore t h e con-
dition o f the currency i n the various districts o u l d b e
raised t o about t h s sane level. F u r t h a r n o r e t h e Federal
neserve Banks should resort t o sad. o t h e r i f 1 t avoears
that t h e i r
o n notes received f o r redemotion f r o n other
Federal R e s e r v e B a n k s a r e e i t h e r t 7 9 c l e a n o r t o o dirty.
This w i l l b e a n indication o f ~hether t h e sort i s closer
or i s o f a higher standard t h a n the sort o f the bank
receiving t h e notes f o r redemption, a n d should h e l p t o
establish a
nearly common standard o f sorvinz a n d re-
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Federal Reserve Bank of St. Louis
demotions.
I
TResarve Stocks:
t should b e pointed o u t t h a t t h e
committee i s endeavoring t o build u o resarve stocks a n d
at tha same tims t o increase t h e anount o f disbursements
Rerascceniennsinncninent
of n e w currency.
B u t t h s advisability o f building u o
———"
full q u o t a s
o f vraserves w a s b r o u g h t
u p i n view o f t h e s 0 s -
sibility o r t h e Treasury Devartment changing t h s size
of p a n s r c u r r e n c y .
I
t ~as t h e concensus
o f opinion,
hor-
ever, t h a t n o t much difficulty excent o f a temporary nature,
and n o v a s t e
i n printint n e e d arise i f such a
were m a d e e v e n thoucth t h e r e s e r v e s e x i s t .
change
T h e substitu-
tion should b e made tradual b y vaying o u t the n e w size
to reolace t h e o l d a s they wear out.
"another suggestion i n connection v i t h past reports
was t h a t t h e r e s h o u l d b e a
and m i n i m u m f i c u r e s
notes.
different b a s i s f o r t h e m a x i m u m
o f reserve stocks
P a s t sstimates w e r e b a s e d
o f Federal N e s e r v e
o n issues
currency a n d clearinz house certificates
crises, particulucly i n 1907 a n d 1214.
no> d e e m s
i t advisable
t o establish
o f emergency
i n time o f
B u t t h e committee
these linits
o n the
basis o f the averace circulation o f Federal Reserve notes
yroportion
uoon u s a
o f the 1920 circulation
sufficient r e s e r v e , t h e g e n e r a l
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Federal Reserve Bank of St. Louis
opinion w a s t h a t i t s h o u l d b e f i x e d s o t h a t t h e r e s e r v e
stock s h o u l d b e a b o u t t h e s a m e a s t h e o r i g i n a l f i g u r e ,
$2,000,000 ,000 o f the denominations that the year's
experience h a d p r o v e d n e c e s s a r y .
T h i s w o u l d b e approxi-
mately two-third o f the average circulation for 1920.
"Recommendations:
"(1) T h a t i t be left with Mr. Emorson t o see
that distribution i s continued i n a fair a n d equitable
manner.
"(2) T h a t the amount o f new money paid out
should n o t e x c e e d t h e a m o u n t p r i n t e d .
(3) T h a t Mr. Emerson i n cooperation with the
Treasury Departmant should have general supervision o f
redemptions,
i n order t o maintain a
general standard o f
redemptions a n d t o bring t h e currency u p t o a higher
level o f cleanliness.
"(4) T h a t the time has not yat arrived when
total r e d e m p t i o n s s h o u l d e x c e e d t h e i s s u e o f n e w notes.
"(5) T h a t cach bank raise its standard o f
currency s a n t f o r redemption until checked b y the Federal
Reserve B o a r d .
"(6) T h a t reserve stocks b e gradually built
up t o about $2,000,000,000.
maximum a n d m i n i m u m f i r u r e s
of
“8983rve n o t e s s h o u l d
circulation
o f Federal t e s e r v e
L¥ad P e t e r t h e n o n t h e b a s ?
y c na
e rn
r udc; c l e a r i n e
o f t h e volume o f emers
house certificates d u r i n g t h e
crises o f 1907 a n d 1914".
governor osay. I
thos2 sentinent
n
Ins chairman.
feal tnst I
can subscribe t o
d voc annendations.
Gentlemen, [
have
Peagsrat1
today,
Instead
forstoine s u s c s s t 0
1
Governx i c J o u c a l .
T h i s report h a s b e : r e a d ,
snd 1
its adgoottion.
Governor V a n sandt. |
Mise t h a w s o f
I second i t .
fas vosirman. s
thsre a n y discus n
o f Governor
JeDouzal's a o t i o n ?
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Federal Reserve Bank of St. Louis
“aS O y S h a -carricd: ynsninous iyi.
second s e c t i o n o f t h i s r e o o r t - - d i d
darrison?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
at. tarrison.
< AI
read this full w e port.
comnittes subinitted « i t h thet:
informal report of tho dis
w
h
o
a
T h e
t t h e y call a n
f the comnittee, and
it i s divided i n t o t r o sections, t h e t r discussions w i t h
the rotiroment o f federal
Banc notes issued under t h e Pittman act,
Si molifieation o f S urrent
x f the United
Snarson j u s t f o r t h e
no a f f i r m a t i v e r e c o m m e n d a t i o n s ,
intended
t o b e carried
topic
a discussion
o f t h e rvatiraner
P
o n t h e “ororran,
F the r i t t m a n
“hich i s fo. l e d o n t h e o r o z r a m i n front
b y the re-
a c t notes,
o f you, a n d t h e r e
is a section of this report “hich bears upon that matter,
and i f you cars t o discwss t h i s nov, I
“ould a s x ir. Har-
rison t o r 3 a d t h e rsn0ort
Fovernoyr 323a5
of t h i s v r o c t r a m t h a t t h e f r s a s u r y D e v a r t n e n t
yarticinoate
The vhairman.
M r . gilbe:
o r
i n tiis d i s c u s s ion?
" a g t o b s hers a t
but h e i s not here yet, a n d ~ e vill have t o report t o
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Federal Reserve Bank of St. Louis
LOS
him what w e have done a n d listen t o h i m after h e gets
Here, I
d o not t h i n k w e c a n wait. ‘ i h a t i s y o u r
pleasure, gentlemen?
o h e l l we b h ;
Feport about
the Pittman A c t read?
Governor F a n c h e r , I
think w e h a d b e t t e r h a v e i t
(liv. Harrison thereupon read t h e report referred to,
which i s a s follows.):
"RETIREMENT O F FEDERAL RESERVE BANK NOTES ISSUED
"The sources o f Silver under the Pittman Act ana
its coinage i n t o silver dollars carries w i t h i t the legal
obligation t o retire t h e Federal Reserve B a n k notes i s *
sued under t h e Act, a n d therefore t h e short-term certifi-
cates o f i n d e b t e d n e s s s s c u r i n g t h e s e n o t e s .
t h s
of F e d e r a l R e s e r v e B a n k n o t e s r e t i r e d m u s t e q a l
amount o f S i l v e r d o l l a r s c o i n d d u n d e r t h e a c t .
T h e
present p o l i c y o f t h e T r e a s u r y i s t o r e t i r e s a c h w e e k
an amount o f bank notes a n d a corresponding amount o f
certificates e q u a l
i n amount
t o t h e silver dollars coined,
Ultimately provision must b e made f o r retiring t h e total
amount
aS a
o f bank notas outstanding -
about »201,009,000.
n a t t e r o f fact t h e y area n o w b e i n g vsatired throucth
the
process
o f reden
not b e i n g r e p l a c e d
b y the
3S e x c e p t occastlonally - h e n t h s d e m a n d
ee notes h a s exceedad t h e aveilable s u o dly
of silver cartificates o r United states notes
denoninetions.
T h 3 r eera V e o y
o n “sand
i n t h 6
banas nearly 220,000,900 Federal reserve
mhich c o u l d b s r e t i r e d a t
ashington:
P u r c t h seniors
dsvartrent.
rovision m u s t
b e nade
t o mest t h s demands
a scarcity should b e cre
sta a t e d
foreme
ll
b y t h s retirement
Hons notes. . - o . printine P o r r a n
Treasury D e artment c a l l s f o r a
decressint a m o u n t
Mederal r e s e r v e b a n i n o t e s a n d t h e r e f o r e t h e y s h o u l d
gradually r3tired e s they come i n for rédemotion.
was t h e o p i n i o n o f t h e c o m m i t t e s t h a t n o
eae
now w e d e r a l
other s u p o l i e s
of s m a l l d e n o m i n e t i o n s s h o u l d fail.
T h o s e alraady
i n cir-
culation, hovover, s h o u l d b e vaid o u t froely until t h e y
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Federal Reserve Bank of St. Louis
fit f o r redemption.
T h i s i s not only a matter o f
economy b u t a vrecaution i n viem o f a vossibls slowing
up o f t h e o r i n t i n g o r o z r a m s d u :
appropriation.
o
f emreency
I t "as also the opinion that i n revlac-
ine t h e rstired Federal raserve b a n k notes, siiver cortificates should b e »vaid o u t first, and, i n case t h e y a r e
not sufficient,
U n i t e d s t a t e s n o t e s s e c ond.
'In order t o neet t h e demands f o r the smaller denominations,
i t s h o u l d b e t h e p o l i c y o f a l l i#ederal r e s a r v e
banss t o accumulate lemals a n d silver certificates
o f presenting
~5 a n d h i c h e r d e n o m i n a t i o n s f o r t h e p u r p o s e
them t o the Treasury f o r 3
and » 2 denominations.
r
e
i
s
s
of
u
e i n ~1l
T h e r e a r e n o w outstanding aporoxi-
mately »90,000,000 o f silver certificates
i n denominations
of » 5 a n d hithar chich could b e brocen u r into smaller
denoninations a n d t h e Trsasury h a s vurchased nearly
55,900,000
o f silver h i c h could b e ininted a n d
in s m a l l denoninations.
T h i s would taxs care o f
~145,000,000 o f the less t h a n 3200,000,000 Federal reserve b a n x n o t e s
o f small denominations
t o b a retired.
“woreover, t h e r s i s a larze p o t e n t i a l s u p p l y o f n o t e s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
based
o n further o u r c h a s e s
o f silver under t h e Pittman
total amount o f surchases u n d e r this A c t m a y
.e9ual 9279,900,900.
B u t should the silver cortificates
4
D3 avallable
i n time t o m e e t a l l demands, t h e r e a r e
outstandins avoroximately »155,000,000 United States
notes i n denominations
o f » 5 and hirher which could b e con-
denominations.
without f u r t h e r l e c a l enactments,
495,000,990 additional
t o
in se
2-1/2 times the amount outstanding Federal resarve bank
of small denominations.
I n fa
outstandines cCurrency:-of a l l typas
h
e total amount
i n denominations
somsvhat l e s s t h a n t h a t amount.
no: held i n tha system ( i n danoninations
of » 5 and hither) about »30,000,000 itn silver certificates
and nearly »359,909,090 i n legals maxine a
total o f
e110,000,000 which could b e used for immediate conversion,
£Fnecessary.
a r . “rouwhton intimated t h a t t h e Treasury
Department i s n o t avars3 t o convsrtine a l l legals a n d
silver c e r t i f i c a t e s i n t o
‘Racomuandattons:
'(1) T h a t t h e volicy o f t h e Treasury D e v a r t n e n t t o
issue s i l v e r c s r t i f i c a t e s
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Federal Reserve Bank of St. Louis
a n d United States notes
i n de~
nominations o f , 1 and 3 2 v e commended.
That t h e F e d e r a l
ver c e r t i f i c a t e s
e r v e banks accumulate
a n d U n i t e d S t a t e s n o t e s o f Ys)
tions a n d hishsr a n d cooperate i t h t h e program o f the
Treasury D e v a r t u e n t
i n brsaxine t h e m u o i n t o s m a l l e r d e -
nominations.
(3).
h e e
certificates
e n mestinz t h e d e n a n d f o r g m a l l n o t e s s i l v e r
b e p a i d o u t first, a n d ,
i n ease t h e y a r e n o t
sufficient, U n i t e d s t a t 3 s n o t e s s a c o n d .
“(4) T h a t n o Federal resarve b a n k notes shall b e vaid
out unless o t h e r suvolies o f small danominations should
fail.
“ote: I n a s m u c h a s t h e orozram outlined “ i l l c o v e r
a period o f one o r tyo years thers a r e t y o things “ h i d
could b e done t o sconomize o n the vorintin: orosram, b u t
which a r s seemingly inconsistent “ i t h 2rincirles stated
above.
"(1) P a y out ¥ads
already o r i n t e d a n d i n s t o c x a n d r s t i r e t h e m a s t h e y a r e
NOMR- Out.
This wil
e t e ect a
aavine
i n the s a t i s
a S
othar xinds o f currency.
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Federal Reserve Bank of St. Louis
"(2) P a y out silver certificates o f larna denomina-
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Federal Reserve Bank of St. Louis
tions n o v o n hand.
T h e y c a n b e used a n d “ o r
out by
the t i m e t h e y w i l l b e n e e d e d f o r c o n v a r s i o n i n t o s m a l l e r
denominations.
out s i l v e r
be to reduces our reserve sercentage, but the present i
very opvortune tims for such reduction.”
The Chairman. I
vould lice t o call the meeting's
attention t o one voint i n connection with t h e rec annenda-
as.to the Pittman ict Federal Reserve sank Notes,
and t h a t i s t h e r e v o r t i s r e a l l y d a a l i n t “ i t h t ™ 0 s@en-
arate things.
O n e i s as t o ravine then out at the FPed-
eral Reserve Bank, a n d ths o t h e r i s the »rocess o f actually redeening a n d retirinz then, a n d I
t h i n o u r ool-
icy i n Ne» York would b e t o accumulate t h e m i n the bank
and n o t p a y them o u t s o long a s ~ o have silver certifi-
cates availabls for currency denands, a n d then i n addition t o that completely retire t h e m and have t h e m cancelle
and o u t o u t o f circulation a s r a L l y a s t h e Treasury
Denartment is able and willinz to pay off the e rtificates
Governor .lcDouzal. I
thins t h e r e i s another
in the committee's report too.
I t is quite a long one.
The Chairman.
‘ n a t i s your pleasurs i n
report?
szovernor Seay, “ i r . Jhairman,
I T am more o r less f a ~
miliar ‘Lth t h e torms o f the Pittman ict. I
belter
thare i s some 2 7 0 , 0 0 0 , 0 0 0 »hich ware i n effect realized
by t h e b r e a k i n g
u p o f stiiver.
D o e s thse T r e a s u r y D e -
partment ragard that i t i s comnitted t o the vourchase o f
silver indefinitely,
amount e q u i v a l e n t
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Federal Reserve Bank of St. Louis
o r until t h e purchases r e a c h a n
t o the amount broxen u p ?
The Chairman. T h e y ars definitely comnitted b y
to p u r c h a s e s i l v e r a t a
Governor seay.
dollar
a n ounce.
I s there a n y vossibility o f the
receal o f the Pittman act, a n d i s i t not something which
should b e d o n e ?
D
o 7 e entar i n t o that ohase o f t h e dis-
cussion a t a l l ?
Ths Chairman.
No, I
do n o t thinic so.
T h e story
about t h e sassave o f the Pittman i c t i s this, t h a t i t
wag oassed t o méet a n emergency.
Governor Seay. I
The Chairman.
recall.
O f a very serious character, a n d i t
was passed vith t h e assent o f cartain objectors, par-~
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Federal Reserve Bank of St. Louis
ticularly t h o s ;
miners,
“ h o agr3ed
t o the legislation u p o n t h e terms
fixed as they ara, thich obligated the treasury t o reyurchase t h e silver a t a dollar a n ounce, “ h i c h
“hich
act,
i t "as s o l d ,
a n d a n y attempt
s o far a s t h e rapurchasing
t o reveal
o f the silver
t s con-
erned, would obviously b e a breach o f moral good faith
that ~ e r e consulted, although
Oongress i s i n a vosition t o reaneal that act, a s a n y
other act; y e t i t ‘rould b e rather a
gross breach o f the
good faith “nich existed w h e n the a c t was first vrepared
and 2 a s s e d .
Governor Seay. T h a t , o f course,
to g a t a t , ~ h e t h e r
t s “hat T
a m trying
o r n o t t h e T r e a s u r y cs D e v a r t m e n t v o u l d
loox upon i t as a breach o f good faith i r that act were
revealed.
A s I understand, t h a t will commit t h e Tfreas-
ury D e o a r t n e n t
silver p r o d u c e d
oroduced I
f o r some years
t o coma
i n this country.
t o nurchase
T h s amount
the
o f silver
believe i s something l i x e 60,009,000 ounces,
we w i l l say, h a l f o f w h i c h t s u s e d i n c o n s u m p t i o n
in
the arts, leaving verhavs 30,000,000 o f ounces available.
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Federal Reserve Bank of St. Louis
Governor Calxins.
h e r e i s not half o f i t used i n
the a r t s a t t h e o r e s e n t t i m e , w h i l e t h e o r i c e o f a m s r i c a n
silver i s a dollar a n ounce a n d foreign silver i s 3 8
or 4 0 cents.
The Chairman.
T h e effect o f the Pittman a c t i s t o
convert a l l Aamerican-oroduced silver i n t o coinage a n d t o
t h r o t h e d s m a n d f o r a l l c o m m e r c i a l stiiver u p o n f o r e l g n
silver.
Governor S e a y .
O n e s again,
a t t h a r i s k o f repeti-
tion, I w i l l asx, d o y o u thinx “'e are morally committed
to purchase a l l o f it?
Governor Ualxins.
mads a
statement
s e n a t o r Pittman h a s recently
i n which
h e called attention
that w e w e r e m o r a l l y c o m m i t t e d
t o t h e fact
t o t h e s i l v e r oroducers,
and while Congress o f course micht reveal t h e Act, a s
Governor S t r o n g h a s s a i d ,
i t “ould b e a n extreme c a s e
ofbad faith, and Senator Pittman added that it would
never b e reovealed, h e was very confident.
The Uhairnan.
T h e Governnent entsred i n t o 4
repre-
sentation t i t h t h e s l i v e r m i n e r s w h i c h h a s a l l t h e effect,
me think,
o f a contract, a n d t o reveal that e c t would b e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S r n e c yo. p a d faith,
difference
It does not make a n y I
believe.
t o the Treasury;putting
1 t i n the
FOP
O k <8
sale a n d reourchase really does n o t disclose t h e true
.
The s i l v 3 r v ats l o a n e dc i n a sense,
a
l o a nfe d
t o be
o f the silver f r o m american
revaid b y t h e r e c u r c h a s e
production.
r Seay.
o
.
Ina m not
r arguing
e
either
v
oo n e vay
G
or
hat
r n y renarsxs
e
hw o r e a dtd r e s s eod
t o wn
a s t o aac q u i r e
the i n f o r m a t i o n a s t o t h e p o s i t i o n o f t h e T r e a s u r y D e n a r t .
By t h et o p e r a t i o nn o f t h a t aec t “ e d i d mz e t r i d o f
a certain volume o f currency which w a s intrinsically
h o n l y about
t
r o n the dollar.
o
5 0 esnts
Now,
s
“ a are
gol
oing b a c k t o t h e s a m e s t a t e o f affairs w h e n w e a r e
assuming o b l i t a t i o n s
at a
dollav f o r which ~‘e are really
getting o n l y 5 0 cents.
r Ualicins.
o
n Of course,
r
teh e Treasury
v
oVepartment,
G
as t h e T r e a s u r y D e p a r t m e n t ,
the m a t t e r
a t
r
h a s absolutely
n o option i n
ail.
o
Seay.
Un n d err t hee
Governor Calkins.
law
v i to h a s Gn o t .
It m i c h t r e c o m m e n d a
The Chairman (interposing).
bill--
“hat a c t i o n h a v e y o u
in mind, Governor Seay?
have n o a c t i o n
Governor S e a y . I
i n mind, e x c e p t t h a t
I thought o u r oolicy a s t o the issuing o f F
notes sould b e coverned t o a large extent b y
as t o “"hathsr t h e Treasury Department f e l t that i t ~as
comnitted
t o the ourchase
chased w a s e q u a l
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Federal Reserve Bank of St. Louis
o f silver u n t i l t h e amount p u r -
t o t h e a m o u n t sold.
I
The Chairman,
[ e e are
t i s committed b y lar.
absolutely without volition i n the matter.
Governor: Seay. Y e s , b u t i f ”
mag t h e suoject I
r e r x e a l e d , “hich
i t would t h e n enter
was discussing,
into o u r issuing o f Federal “eserve B a n k notes.
ratirement
s this p o i n t a l s o i n connection
i
he Chairman.
o f t h e P i t t m a n i c t notes,
Woat w e a r e discussing,
a n d that i s that t h e Secretary
s
of
the Treasury has t h e authority t o use his discretion a s
think t h s officers o f
a
to the rate o f retirement, a n d I
the Federal ties3rve B a n k o f New Y o r a r e agreed that
2
wo a t least would lixe t o urge t h e Treasury Deoartment
to retire t h e m j u s t a s f a s t a s possible, w i t h o u t r e g a r d
to t h e r a t e
a t which silver
i s revurchased.
T h i s
the f i r s t t i m e t h a t t h e r e h a s b e e n f i f t y o r s i x t y
i s
million dollars o f certificates
o n hand
c u r r e n c y
want t o
see those retired v e r y oromptlyTreasury could b e osrsuaded t o retire further certificates
aserast
“
@ G o u l d s u r r e n d e r F e d e r a l R e s e r v e B a n k notes,
notwithstanding t h a t t h e s i l v e r h a d n o t b e e n r e v u r c h a s e d
for a corrasxondinz anount,
Treasury
“ e ~ould lixe t o have t a e
d o t h a t a n d gét. t h e s e b a n k notes, w h i c h a r e
hybrid affairs, o u t o f circulation a s fast a s possible.
Has t h e m e e t i n g a n y v i e w s
Governor Seay. I
Tie Chairman.
t o express
o n that s u b ject?
concur i n that view, certainly.
h e n jv. Gilbert comes, I think i t
would b s «sll t o as* h i m for a n express
h
i
s views
L006
Governor Ualxins.
exoression,
move t h a t
B e f o r e h e comes a n d
w o u l d i t n o t b e “ell t o adopt t h e
~ e adoot t h s
Governor #ancher. d
The Chairman.
the motion.
I s there a n y furthsr Aiscussionof t h e
report?
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Federal Reserve Bank of St. Louis
(The motion was n u t and carried unanimously).
The Uhairnan.
M r . Harrison calls m y attention t o the
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Federal Reserve Bank of St. Louis
fact t h a t t h e r e v o r t j u s t a d o p t e d r e c o m n e n d s t h a t t h e r a t e
of r e t i r e m e n t s h a l l b e f i v e m i l l i o n s a
month,
and I
do
not know "hat your views are, b u t I viould personally
like t o see t h e recomnendation o f this meeting b e t o the
effect t h a t t h e rate o f ratirenent should b e increased
over that, i f the Treasury feels willinz t o d o so.
Governor V a n dandt.
A r e e Chairman,
i s i t not five
million plus?
s five million »olus t h e amount
i
The Gnairman.
which n a y b e retired b y reason o f the cainage o f the silver ourchased,
million a
b u t a t oresent t h a t would n o t reach t e n
month, a l t h o u c h
the r a t e o f t e n m i l l i o n a
and t h r e s o r f o u r m o n t h s
i t vas hoped
month,
isserve
T t
t o retire a l l o f t h e
S a n k notes issued.
Governor F a n c h e r .
the m e e t i n t
i t
i t o u l d t a k e t v o years
t o r e c o i n a l l o f t h s silver.
nould t a x e a b o u t t v e n t y m o n t h s
Federal
i t would be.
that
C o u l d
not e
make a
recomnenda-
a n early ratiroment
Federal r e s e r v e B a n k n o t e s ?
Sovernor Seay.
T o a n amount that “ould n o t diminish
the ones a n d t o s outstanding.
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Federal Reserve Bank of St. Louis
The Chairman.
I t need not.
T h e fact i s that t h e
previous c e s o r t w h i c h w e a d o o t e d shoved, I
think q u i t e
conclusively, a n d fictures orevared i n the bank i n New
York i n d i c a t e d q u i t e c o n c l u s i v e l y ,
t h a t b y splitting
up
w i l l have a n ample supply o f one
silver certificates, e
t o t a e t h e olace o f the rittman
and t o d o l l a r b i l l s
act notes, a n d i f " e h a v e n o t a n a d e q u a t e s u p y l y , t h e n
they c a n split u o Unitad States notas.
Governor eazy.
B u t that policy would have t 2 b e
adopted simultaneously “ i t h t h e redemption o f the Vittman
Aet notes i n ordsr n o t t o diminish t h e suvolyct: siduld v e : a d o p r e d
o n d e )
ghould h a v e t h e s e o n e d o l l a r s i l v e r e s r t i f i c a t e s y r e n a r e d
just a s fast a s ° 3 c a n pre2are t h e m and disc oatinus orinting Pittman a c t notes entirely.
Governor 3eay. T h a t i s the voint I am qotting at,
that t h e y s h o u l d o 3 r e d e e m e d
sible,
b u t n o t t o a n extent
i n a ratio a s ravidly a s
t o diminish t h e supdly o f
and twos outstanding.
The Chairman.
T h a t i s "hat “ e want t o do.
Governor ‘ e l l d o r n .
covers
all
o f that.
I
t seams t o m e t h a t t h e r e v o r t
Governor Seay» a n d that would have t o b e cone s i multaneously-
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Federal Reserve Bank of St. Louis
The Chair nan. G e n t l e m e n , I
have i n m y hand a
revort
made b y wir. 3nerson t o (Governor darding o n thse subiect o f
laral Hesarve B a n x notes:
‘tn this connection, [
Director
am further advised b y the
o f t h e d i n t t h a t t h e m a x i m u n crinacte o f s t a n d a r d
silver d o l l a r s u n d e r t h e m o s t f a v o r a b l e c o n d i t i o n s
is
probably n o t over t y o million a “ee. A c c o r d i n g l y , t h e
indicatsd xroeram o r the Treasury Department »2rovides f o r
the r e t i r e m e n t
o f the svecial certificates
aporoximately fourteen million a month.
a t the rate a
A t this rate
mill taxe a t least seventeen months Defore a l l o f the n o w
outstanding s p e c i a l t v o o e r c e n t c e r t i f i c a t e s
o f indebt-
edness h a v e been redeemed. A l t h o u s h t h i s policy “ a s announced b y the Board o n February 21, u o t o noril 1 1 only
~10,009,999
2,000,000
o f excess collateral h a s b e c n retired a n d o n l y
o f cortificates r a t i r a d b y t h e coinage
equivalent a m o u n t
o f stands
s i l v e r dollars. I
i n
exvect
it w i l l b e s e v e r a l v e e r s n o r e b e f o r e t h e Treassury w i l l
standard
reach i t s maximum coinaze o f tr9 million/silver dollars
per veex.!
I am advised b y Mr. Baxer, t h e Director o f the Mint,
that t h e r s h a s b e e n c o n s i d e r a b l e d i s a v o o i n t m e n t
a t t h e rate
I f they c a n retire t h e m a t t h e rate o f
of coinage.
pl4,000,000 a
month, I
should s a y t h e n t h a t “ e m o u l d b e
getting along pretty “ell.
n a t i s your pleasure about
any fucther recommendation beyond that contained i n the
report a s t o the rate o f retirement?
T h e reoort has been adonted, hasn't
Governor ellborn.
The Chairman.
Yes.
Governor .ellborn.
The Chairman.
J u s t l e t i t stand a t that.
A r e yousatisfied
t o have those notes
constantly rzissuing and new supolies printed?
Governor -ellboorn.
T h s y contemolate t h e retirement
at five million a month.
Toe Chairman.
ent r a t e
F i v e million a
o f orogress
the c o i n a g e
ons
month, o l u s a t t h e vores-
o r t w o million more,
o f silver.
Governor :ellborn. I
suppvose i t has b e e n ficured
out t h a t t h a t i s a b o u t a s f a s t a s t h e y e a n r e t i r e t h e m ?
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Federal Reserve Bank of St. Louis
The Chairman.
I assume,
T h e y could retire t h e m a l l right away,
s o f a r a s t h e l a w i s concerned,
i f t h e y vere
willing t o convert a tyvo var cent note into a five a n d onehalf o e r c e n t note.
T h a t i s - h a t i t amounts t o .
H o w do
you feel about it, governor Norris?
Governor itllser.
tnat,
G 9 conys?t- a
note?
D
2 9sr ce
o y o u thinx that the conditions would warrant
that.
Ine Chairman.
and s a y i f they could g e t 2
per
per cent money, w h y not borrow a
billion that way?
Governor -siilller. Ws borrowed i n a n emergency.
sot these,
The Chatrtman.
a n d “oe have t h e n o t e s
Y e s , a n d ~“¢
bac«s t h a t have b e e n hangzine around o u r necxs f o r f o r t y
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Federal Reserve Bank of St. Louis
or Trirty years.
dAiller.
The U h a i r n t a n .
1 O W
a
S
Governor i i l l e r .
Governor Joris.
Y o u r taoucht i s that that report
snould b e mad2 stroncer o r fuller a n d that t h e retirement b e a s r a p i d l y a s possible.
The Chairman.
3 S raodidly a s oossible.
If y o u w i l l p u t t h a t i n t o a n y “ o r d s
you t h i n s oroper, I
maxe t h a t a s a
Governor Valxins. I
Tas Chairman.
motion.
second t h e motion, A r . Chairman.
I t means t h e t - e have a little sen-
timent o n the subject o f sound money after all. G o v e r n or Norris o f f e r s a
resolution
t o the effect that t h e
Conference, havint adovted the revort o f the committee,
nom recounsnds o v l e m e n t i n g t h a t revort that t h e rate
rittman i c t certificates
ased f r o m the five millions a
of
month
clus what i s retired b y reason o f the coinaze o f the
silver,
retire.
t o such a n amount a s t h e Treasury i s willing t o
I s that satisfactory, sir. Norris?
I thins Governor Calxins seconded it.
The vhairnan.
I s thers any discussion.
(The m o t i o n 7 a s a u t a n d c a r r i e d u n a n i m o u s l y ) .
The Chairnan.
W r . G i l b e r t w i l l b e h e r e v e r y soon.
de has l e f t his ¢ f i c s a n d i s 2 m his w a y over now, e n d I
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Federal Reserve Bank of St. Louis
think v e h a d b e t t e r 7 a i t u n t i l h e arrives,
not b e a n y 2rogram left
Governor MeDoutal. I
~ould l i s t o oressnt a matter,
ity. Gnairman.
The Chairnan.
Very
aovernor scDougal.
Y o u h a v e a l l verhaps r e a d t h e
to the train robberts
mail robpperies,
anothsr t h e Centra
or t h e F a r e s t e r n bpanaxs h a v e
On January 18, 1921, a
United States m a i l
held u p while u n l o a d i n g a t t h e U n i o n s t a t i o n
suchnes stolsn,
in
a n d ea Sart
of the contents oeing shioments f r o m this ban«--that i s ,
the Federal Rasarve B a n k o f Chicago--containins 322,:
Liberty L o a n couynon bonds w h i c h v e r e c o v e r e d
b y Treasury
Devertnent s31if-insurance.
In order that t h e dondholders mieht n o t b e ineonvenienced,
« @ imnediately made n e ~ shirmesnt i n e s h c a s e
and s s t u p t h s a m o u n t
in
justment b y the Treasury vevartuent>
not r e c e i v e d
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Federal Reserve Bank of St. Louis
a n adjustment
o n tiese
124
In the same robbery ~ere lost a nuxber o f shinaents
containing r e g i s t e r e d b o n d s , t o t a l l y 341,650.
not insured,
T h e s e ~ere
a n d i t i s tnoossible f o r u s t o rive r e l i e f
to the bondholders u n t i l t h e Treasury D e o
duplicate bonds.
T o s y stated i n this case they «ould
waive t h s c u s t o m a r y r e c u l a t i o n t h e t s i x n o n t h s ' t i m e m u s t
elavss befo:
but mors t h a n thi
roobery a t this dlace a n c “ e have heard nothing f r o m the
Treasury Devartment “ith respect t o thas issuance £ € o u r
duolicate b o n d s .
Jn april oth a United States mail vaapn was robbed
while uniondinzg a t the Dearborn Street s t a t i o n i n chicao,
and s e v e r a l r e c i s t e r e d m a i l »oouches s t o l e n w h i c h c o n -
tained i n part a number o f shinoments nade b y this b a n k
to a bans i n Indianapolis, totelline »$24,300, a i l o f
which were covered b y the Treasury Deaartment self-insur-
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Federal Reserve Bank of St. Louis
the banks involvec
lustment o f
claim i t will undoubtedly ssriously embarrass t h e m
their customers,
a n d some arranzement should b e made
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Federal Reserve Bank of St. Louis
whereby imnsdiate ralief c a n b e obtained.
The January 1 3 t h robbery contained about 3 7 shipments
of bonds, a n d t h s spril 6 t h robbary containsd quite a
large number o f snipnments o f bonds, t h e largest being
$521,600 o f the Indiana National, a n d i n view o f the fact
that i t i s z0inzt t o taxes a great deal o f time t o ever g e t
settlisnent f r o m the Treasury Department, I
sould lize t o
have t o e m a t t e r taxcen u o i f -
GLADSrEs
‘
S a i t
they c a n n o t i n j s c t i n t o t h i s s a r t i c u l a r b u s i n e s s
some s e n s i b l e o l e n b y v h i c h ~ e c a n r e c o v e r f r o m t h e D e vartnent
a s “ 6 o u l d r e c o v e r f r o m a n insurance c o m o a n y ,
for
instance, promotly.
to axplain t o thirty o r forty banks w h y
7%@ Cannot mazes good o n these shioments, b u t ~ e cannot c o
Bas
The Chairman.
volved
a
r
2 t h a t number o f banks i n -
i n t h e ship.ne
governor wdcvougal.
about f o r t y b a n s s involved.
The Chairnan. D o s s the Treasury Devartment i n any way
Governor McDougal.
I
n resard
of courss t h e y a r e n o t insured.
t o t h e resistered bonds,
T h a t i s simply a
matter
of p r o v i n g t h e c l a i n a n d ctettineg duvlicates, “ h i c h i s a
slov process, a n d i f ~e are going t o be subiected t o that
lone d e l a y t h a t i s customary,
“ h y + e a r e going t o have
trouble ~ith our member banks. T h i s thine o f te vine, for
instance, t h r e s h u n d r e d a n g t r e n t y o d d t h o u s a n d l o s s f o r
a member b a n k a n d o u r inability t o mate settlement,
i t might
be a very serious thing a t the other end.
The v h a i r n
T h o s e were bearer bonds?
Governor jcDouzal.
them.
T h o s s “ere bearer bonis, a l l o f
T h e y have “hat they call Government insurance o n
theses b e a r e r bonds,
b u t i t coss n o t v o r k a t a l l a s t h e i n -
nsurance companies’
imnediate s e t t l e m e n t
a l a n torss, b e c a u s e " e g e t
i n connection « i t h that, a n d h e r e i s a
adslay o f months a n d months.
Governor V a n Z a n d t . I
think t h a t i t i s q u i t e i m v o r t a n t
that somethine b e done about that, because i f these bonds
are r e c o v e r e d a n d C h i c a g o h a s t h e s a m e exserienece t h a t ~ e
had d o w n t h e r e w h e n o u r bonds v e r e r e c o v e r e d t h e s s c o n d
day after t h e y ware stolsn a n d m e did n & g e t them t o
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Federal Reserve Bank of St. Louis
handle t h e m f o r o u r m e m b e r b a n x s f o r t h i r t y d a y s t h e r e a f t e r ,
because t h e y "ere held u o b y the court i n the trial o f
the robbers.
after
h e rec:
d e has s o t still that much longer t o wait
S
ySaat i
Governor A c D o u c a l .
.
@ h a v e h e r e t h i r t y s e v e n odackage
that were l o s t i n the robbery o f January 13th, a n d t e are
having a
g r e a t d e a l o f t r o u b l e ~ i t h o u r n e m b e r banks.
Tog Chairman.
T h e r e i s over ,500,909 involved i n these
twvo robosries.»
Governor decDouzal.
T h e January robbery,
“ e had compara-
tively a small amount i n the aggregate, although a large
nunber o f shioments, I
thousand
i n bonds,
might s a y sixty-five o r seventy
b u t t e had about a
of commodity paosr l o s t too.
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Federal Reserve Bank of St. Louis
quarter
of a
million
;<
x
S
S
s
i
s ‘i
2
e t ai re y v&
3
3
s
e
. +
o rth
em Treasury
>t
Ds
ox fols
a2 510
T
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Federal Reserve Bank of St. Louis
h
e Chairman. Gentleome
a r e you ready t o oroceed
the o r o s r a m o f T r e a s u r y D e n a r t m s n t t o n i c s ? i y .
"3 havy3 adooted t h e revort o r a committee a p the o r a v i o u s c o n f e r e n c e
t o study t h s subject
ag Orevared,
a s I
understand i t ,
ir. Broughton , “ho attended the
You o r o b a b l y h a v e a
copy o f i t and
are f a n i l i a r - i t h i t .
Gilbert.
No, I
think i have n o t s e e n
under consideration.
The c o n c l u s i o n s
t h e ? eepvort:
are
I taxes i t this i s meant t o cover
currency a s well a s Faderal -eserve S a n k
The Chairnan.
Ho.
h
e fire? s r t o f 1%, I
is intended svecifically t o cover soderal ‘esarv
notes, b u t cansrally a l l currency a s t o t25
supoly i s dealt vith i n
aporoved a n d adopted b y the Conferen
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Federal Reserve Bank of St. Louis
129
the second section o f ths reoort deals s i t h retiremont O f t h e P i t t m a n A c t visotes, a n d t h e
report
i s that a s raoidly a s t h e y c a n b e prepared t h e
silver c e r t i f i c a t e s s h a l l b e s o l i t u p i n t s o n e a n d t o
notas a n d i s s u e d s o a s t o a f f o r d o p p o r t u n i t y
the frittman A c t notes,
to
a n d that t h e existing sup-
Notes t h a t a r e n e w should possibly b e
but n e v e r t h e l e s s t h e T r e a s u r y
an jiect notes
tra:
pressnt r a t s a
t
h
e
y can be
under t h s % w o p e r arrangement.
wie. Gilbert. I
thine y o u all know that
tiring t h e P i t t m a n A c t certificates,
Federal iiesserve Bank notes a r e outstandcinz,
of 3 5 , 0 0 0 , 0 0 0 a
month.
a t the rate
. 8 s h i a l r e a d y m a d e t r o monthly
retirements ound I thing z e w i m a x s anotner monthly r e tirement n e x t tes.
at the rata o f production,
and t h a t i l l
rats o f 95,000,000 a
b e a t the
month w h e n i t s e t s started.
B e e
may get hichsr than that i n order t o catch up.with the
accummulation o f silver bullion n o w i n the Treasury,
saiech +111 anount t o about
»50,000,000.
M y o r n view
is that i t o u l d b e danzerous
t o attempt t o retire t h e
Pittman act certificates
a t a greater rate. I
ama
little afvaid o f the retirement
o f uncovered certificates
at a
r e g r e a t e r t h a n 29,000,990
a
Figick tha iv m a y c r e a t e p r e s s u r e
month o n t h e g r o u n d
f r o m Vongress,
o r from other
Sources, azainst that much debt
retirement. I
9,000,000 a
budget a n d e
think a t
month t h e i t e m is s c a r c e l y
noticeable
i n the
w i l l nave n o trouble i n xeepine
t o that
feasible,
b y vsason o f a
surplus
"3S ¢€an very sasily incra3ase t h e
rats, b u t I
eny prospect a t the moment o f
a surplus.
o f re-
do
I d o
~ “hat recomnsndations h a v e b e e n
made o n the s u b ject
continued o r i n t i n e o f Reserve
B a n k Notes.
T h e
Treasury's yvyie~ has b e e n that
i t o u l d b e wise, vending
reedjustment o f -- one a n d t o dollar
currency,
a n d the
reintroduction o f the Silver
certificate, + t
five a n d t e n dollar silver certificates
to th
or existing stocxs, a n d while
toat process
to continue
notes.
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Federal Reserve Bank of St. Louis
U
t o retire productions
of
n that basis t h e Bureau
i s n o w oroducins a b o u t
200,000 notes a
day a n d i s *orcins tovards t h a t schedule.
The uhairmsan.
“ 1 d L t . be: D S S S ibis t o p r o d u c e s
lixe amount o f one and t r o doller silver certificates
OF
against the surrender/ 110,000,000 o f silvsar certificatss
of laresr denominations t h i c h w e nor have i n stock?
Gildsrt.
L
i2
course o F time.
'
e
under o n e very definite restriction now. v o n g r e s s
limited t h e a m o u n t o f U n i t e d S t a t e s p a p e r c u r r e n c y
that m a y b e orinted t h i s fiscal year;
i n fact, t h e
given a much less authority to. produce notes t h a n they
have a u t h o r i t y
t o b u y paser,
a n d w e have authority
to
buy more oavesr than z e c a n use, a n d they refuse t o PALL
tae g a p b y a u t h o r i z i n g d e l i v e r y o f notes.
-
@ will t r y
[4
to correct t n a t a t the oresent session o f Congress.
+.
b y the restriction
even t h e n v e w i l l b e l i m i t e d
500,900 shests a
ureaue
B u t
o f issuing
day and also b y the facilities o f the
T h e oroduction o f o n e dollar a n d t w o dollar
notes i s necessarily t h s slovest orocess o f all, a n d f
poinx i t tould b e a matter o f some s i x |
before
w e could effect a
Gollar n o t e s i n s t e a d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
turnover
o f fives
the m s a n t i m e
h
and hava one
a n d tens.
t h e fives
t months
yaid o u t t o a ereat extent, a n d b y the times ~ e settle
i n silver i t could
the necessary supply o f ones a n d t o s
sould t h e n b e c o m i n g back. t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
a f i v e s a n d tens which
1
paid o u t b y the rede:
think i t will “ o r k a l o n e @ T i a =
out much friction a n d with t h e
A n d that i s your recommeraation o n
The Chairman.
orogram?
reoort o f the comnittse “hich 7 @ have adopted. I
not « n o
do
o f a n y inconsistancy betveen y o u r yacomnendation
and t h s 3 onnendet i o :
P F the c o m
H
e
. Gilbert.
Do you cars t o have the meating taxe any action o n your
specific recomuendation?
Mir. Gilbert.
W o , n o t a t all.
Governor seay.
s r e y o u redeeming Pittman e4,-6oP=
tificates out of the general fund o f the Treasury, surolus
funds?
wir. Gilbert. 8
are t o the e x t e n t o f about five
million a month. T h a t i s also true o f the redemption
that comes from the coinage o f silver dollars, because
me h a v e t o u s e t h e g e n e r a l F u n d
i n order t o buy t h e
U n d e r the lar “s
silver.
a
from t h e B r i t i s h G o v e r n n e n t ,
for t h e s i l v e r bullion,
o
v
y t h e revayments
l
“ n i c h represents
o f Libert
t o th adamotion
ut s
so t h e t t h e z a n e r P
o u r vayment
affected a n d p a y s
the P i t t m a n i c t certificates.
4 p25,000,000 f r o m t h e B r i t i s h G o v e r n m e n t t h i s Friday,
yment o n account
apply t o the
b u t that ~ s 9
Silver,
Marsxst a n d n o t t o a
o f the
s i l v e r bullion,
reou% ‘
s o
that i t airects
The v h s
of t h e s e
mittes
yroce3d
1
r
y
h
t i o subjects,
e
r
n
o furthsr discussion
t n e s e t 7 9 divisions
o f the com-
report, a n d Ur. Gilbert's statement, 2
will
o n
t o tha next topic
Png
discussion vith t h e treasury
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Federal Reserve Bank of St. Louis
ne F e d e r a l r e s e r v e b a n x s a b s o r b
se o f s h i p m e n t s
and f r o m b a n k s
o f currency a n d
i n their respective
districts.
Should r e q u e s t s
o f nonmember d a n k s f o r cur-
rency a n d c o i n services, a c c o m o a n i e d
by
drafts o n city corresoondents,
b e received.
Tnose t i o sugeestions, a l m o s t identical, h a v e been
oarozram b y the Federal ‘ieserve Sana o f CleveHem Yor’.
Y o u will
of c a r t a i n f u n c t i o n s vser-
formed b y the sub treasuries vere made, that i t left
Certain i n e q u a t i t i e s b e t ’ s e n t h e F e d e r a l iesserve B a n k s
in the handling o f currency a n d coin,
o r a t least t h e
shipping o f coin by the respective districts, and to
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
start the discussion I
micht s a y that i n our district
since that time i t has been t h e policy o f the Federal
o shipoing currency
mesearve Banx t o absorb the e x p e n s e f
ana c o i n b o t h t o a n d f r o m m e m b e r a n d n o n - m e m b e r p a n s .
I a m not exoressing aporoval o r disapproval o f this
course,
b u t t h a t i s a t t h e m o m e n t o u r solicy.
one b a n w «
culty,
i n the district
which has caused 4
i n maxinz p a r r e m i t t a n c e f o r checks,
tha r e m i t t a n c e
There.is
Little diffi-
b y mascing
i n Federal e s e r v e s f u n d s f o r ehecis,
mhich m a y necessitate o u r
from that b a n ,
b u t otherwise I
think i t i s uniform
throughout t h e district.
dy. aarrison.
A t the present time i t i s practically
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Federal Reserve Bank of St. Louis
uniform throughout t h e district.
Y o u r bank vays t h e exvense f f
Governor Panchar«
bank
non-member/sh ipments ?
do.
The Chairman. a
Jovernor Fancher.
a n d o n ~hat ground, ifr. C h a i r m a n ?
T I think y o u will havs t o ask ily. dar-
Chairman.
igon t o defend t h e
Me. darrison.
T h e chief reason that ‘ e had i n adopting
that policy, a s I remember it, v a s t h e fact that the spiri
of the Treasury Deoartment regulations, i s s u e d a t the time
we took over t h e sub-treasury functions,
Should b e n o d i s c r i m i n a t i o n
7a
i n currency a n d c o i n s h i p -
ments, resulting because o f the transfer o f the sub-treasury
functions
t o the Federal Heserve Sanks, b e t w e e n t h e member
and non-menbsr banxs,
+
@ feel that s o ions a s “se vere
absorbing t h e exoenses f o r o u r member banks t h a t a n y
shipments woich w e micht make, o f a
character t h a t h a d
in t h e o a s t b y t h e s u b - t r e a s u r y ,
t h e exosnses
should b e absorbed b y u s even i t was t 9 a non-member
bank.
I have h e r e b e f o r e
n e a
tabulation
o f the yractices
of the various Federal weserve Banks i n regard t o the
expenses
o n both currency a n d coin shipments, w h i c h has
been prepvared f o r r - smerson.
I t tas j u s t handed t o m e
this m o r n i n g b y j o v e r n o r d a
.£ T
Over i t myself, b u t
-
G O : :
have n o t m o n e
t h a t t h e Federal
feserve B a n k o f Nev York i s the only
banks t h a t absorbs a l l exoenses o f coin a n d currency
Shipnents b o t h t o a n d f r o m n o n - m e m b s r banks.
mn
The Jhairman. G o v e r n o r Fancher, y o u also sugzested
ill y o u exvress t h e v i e s
Fonchsr.
J u r views
o f your bank?
a v e b e a n that i t a s
~e should absorb t h e charges both i n
and o u t o n shipments a n d raceipts
o f currency a n d c o i n
and “ e are doins that a t the voresent time.
Governor V a n sandt.
Governoe Fancher.
T o non-members?
N o , o n l y t o membar banics.
a matter o f redemption spsrations,
continued a l i x e w i t h a l l banks,
o f 2%
but e
have n o t a s yet
ustification o f payin~ express
shipoing charges t o and from non-member banks.
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Federal Reserve Bank of St. Louis
J f course,
in the matter o f collectinz chacxs o n ndn-mombar banks
it has b e e n o u r sractice t o pay charges o
ments
o f currency “ h e r e t h e y a r s unable t 2 remit u s
Cha trmnane
ence t h a t
< b “Toul 1
its
i n t h s e a r l y d a y s o f t h e develoomnsn
Federal “asarve collection s y s t e m ~ e found i t necessary
to a s s u m e t h a t c h a r g e
of t o e m e m b e r d a n :
a s a
basis
f o r 2vercomine
t h e claim
n a t t h e exchanze c h a r s e w a s equivalent
to the cost o f ths currency
o n e
o
y l e a s t took
Li t a i n
ote
position i n our district, = h i l e 7 e assume t o collect o n
every b a n x i n t h e
a
o " 6 actually do, sould b e
aid n o t a s s u m e theses s h i o v i n g
currency, a n d i f
from ‘ s h a t t h e y t e l l m e a t t h e bank, t h a t v e w o u l d h a v e
an increass i n
Governor Fancher.» e
charges
h a v e v a i d t h e incomin= shipping
f r o m non-membsr banks
but t h a t i s a
i n remitting
rather
of o r d s r i n e c u r r e n c y
Governor V a n sandt.
situation:
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Federal Reserve Bank of St. Louis
I t r o u l d create a
i n o u r cistrict. 9
very serious
have s everal m e m b e r s f r o m
whom--not m e m b e r s - - b u t s e v e r a l b a n k s f r o m “ h o m t e h a v e t o
make o u r c o l l e c t i o n s
b y exvoress.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
presenting c h e c k s
b y axpress a n d p a y i n y t h e express c o m -
pany i n currency.
F o r u s t o adopt t h e same policy that
Hes Yorx i s carrying o u t yould m e a n that those banks
which wanted t o causes t h e Federal “eserves B a n k all t h e
trouble a n d espense t h a t t h e y c a n would have u s shipping
them c u r r e n c y a t s u r e x o e n s e
i n order t h a t t h e y misht v a y
the express company and pay us for our checxs a t their
exvenss.
thinx i t i s only fair t o state,
we. Harrison. I
connection i t h
in
m y previous remarxs, t h a t the Treasury
Department regulations, t h e spirit ‘hich Lroeferred to,
could only relate technically t o redemotionsgovernor Fancher.
ite. Harrison.
f o redemptions, yes.
A n d the question o f paying with cash
checks o n them and shinving nev currency was merely the
outgrowth o f the var collection system, I
outgrosth
mean more the
o f t h e v a r collection s y s t e m t h a n anything
that was contained i n the Treasury Deosrtnent reguletions.
The Chairman. ir. §
=
“ Juld you exoress your
views o n this subject t o the meeting?
we. Gilbert. I
think i t i s not really a matter o f
Treasury business,
but hen
the curr
redemption, t h e Treasury does havs
asnuch a s t h e xvsserve B a n k s h a v e n o w t a x e n o v e r t h e s u b -
treasury funetions,
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Federal Reserve Bank of St. Louis
i t i s desirable a n d important, f r o m
Treasury's »soint o f view,
t o a v o i d a s m u c h a s p o s s ibls
any JYuestion o f d i s c r i m i n a t i o n b e t v e e n m e m b e r s a n d n o n -
members f r o m a n y point o f view, a n d t h e franchise t a x
payable t o the Treasury i s directly affected b y the amount
of t h e s e a x p e n s e s w h i c h t h e F e d e r a l R e s e r v e B a n k s assume.
In the “hole matter, from the ovint o f view o f the Treas-
ury, I think our preference: s l i g h t l y in favor of a
esneral absorption o n redemption,
o n the ground that i t
ayolds c i s t i n c t i o n b e t v e s n m e m b e r s a n d non-members,
but I
do not feel inclined t o make a n y very definite statement
to that effect.
T h a t i s m y inclination a n d m y preference
Governor J a n wandt.
Y o u recornize t h e fact t h a t
there i s a c o n s i d e r a b l e d i s t i n c t i o n b e t “ e e n r s d e m p t i o n
shipnents a n d s h i o n e n t s
i n sayment o f exchanme
on a
city correspondent.
die. Gilbert.
I h yes.
Governor Fanchsr.
‘ T h e n o n - n e m b e r b a n k “would c o m e t o
-ont
5
you direct 7ith its draft o n a corressond/somethere a n
ask y o u t o s h i p t h e currency.
Wr. Gilbert. I
think there micht b e a difference
betzeen t h e d i s t r i c t s - - t h a t i s , I
tion i n t h e d i s t r i c t s
are. Harrison.
mean t h e o h y s i c a l s i t u a -
i s q u i t e different.
#icht I
ask what 8
policy o f the
Treasury Department w a s prior t o our taking over the subtreasury function,
i n regard t o shipoing o u t n e w currency
to banks?
dre. Gilbert.
Me. carrison.
fir. G i l b e r t .
T n e b a n k s p a i d it?
Y e s .
sovernor WcDougal.
tion.
T h a t vas o n l y i n case o f redemp-
T h a t h a d wothinz t o d o ‘ith supplying their cur-
rency demands?
Mr. Gilbert.
V a r y often “hen t e replenished their
supviy t h e y p a i d t h e exvenses.-
Governor McDougal.
B u t y o u did n o t tive t h e banxs
of t h e c o u n t r y t h e porivilege o f c w l l i n g u p o n t h e s u b -
treasuries f o r currency, f o r instance,
b y offering their
draft o n a Chicaso bans, i f y o u olease,
Department.
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Federal Reserve Bank of St. Louis
T h e y would n o t honor that.
fre C h a i r m a n . —
WoO.<
a t the Treasury
Governor WicDouzgal- T n a t i s the o n e question i n volved hers, ~ h a t h e r
member b a n k s
o r n o t v e a r e godine t o d o f a r t h e n o n -
j u s t that
“ e ars doins
for the member banks
in supdlyinz t h e m v i t h c u r r e n c y r e q u i r e m e n t s ,
matter o f redemption,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
not as a
matter o f r e d e m p t i o n o l u s
but as a
r requirements o f currency, p l u s taxing care, a t our
over-supply o f currency, w h e n they have it.
Governor Seay.
a r e there a n y conditions under “ h i c h
you p a i d t h e c o s t o f t r a n s o o r t a t i o n
t o non-member b a n k s ?
do not recall any, a n d I think not.
‘then t h e R i c h m o n d b a n k undertook,
through t h e Baltimore branch,
t o perform t h e services t h a t
the sub-treasury h a d verformed,
w e adonvted what ~ e under-
stood t o b s thse attitude o f the Treasury Department,
that i s , v e a g r s e d t o r e n d e r t h e s e r v i c e s
t o the non-
member a n d member banks ~ h i c h the Tressury Department
had rendered,
a n d u o o n e x a c t l y t h e s a m e terms. I
not a sginztls f e s l i n z
non-memoer Danks.
have
o f tender consideration f o r t h e
T h e non-member b a n k i s a gorilla,
and i f “ e p u t t h e m o n t h e s a m e b a s i s v i t h t h e m e m b e r
bank, I
things » 3
deliberately depriving ourselves
of one o f tns advantages o f membership o f which t h e member
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
bank sould l i k e t o boast.
The Chairman.
G o v e r n o r seay, there a r e many banks
in t h e U n i t e d s t a t e s ~ h i c h a r e n o t q u a l i f i e d f o r m e m b e r s h
because t h e y have n o t sufficlent cavital.
Governor seay. ‘ T h a t i s very true, a n d I think ~ e ove
them nothings.
ine. Ghatewand..
d
o net suite a x e t h a t view, Governor
Seay.
Governor Seay.
O f that character,
a t least.
as-
pecially t e d o not o v e t h e m anything t h e n 7 e are giving
them ths same facilities a n d mors through o u r member banks
But t o a b s o r b t h e e x p e n s e
lirect velations w i t h t h e non-member banks, I
i n our
do not be-
lieve that c a n b e sustained b y a n y logical argument.
Governor Calxins. U n d s r t a k i n e t o shin currency t o a
non-member bans *aish «3fusas t o vay a checx o n it at
par, i s providing i t with t h e means o f meeting a situation
waich c o s t i t nothin- shatevar,
n o t e v e n inconvenience.
It seems t o m e that o u r collection system i s sufficiently
aifficult without putting that additional monxzey-wrench
into t h e machinery.
The C h a i r m a n .
Y o u must remember
that
~ e collect
o n
all t h e b a n k s
i n o u r district
s o t h a t discrimina-
a t var,
tion f o r t h a t r e a s o n d o e s n o 3
s New :
h
x
dis-
geval Vewire
Governor
would n o t c a l l i t discrimination.
« i n s I
£ think i t i s m o l y 2
Zondition.
a
e e r e n o t dis-
“
ecriminatinz against those banks, b u t they are discriminat-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
‘ge supply t h e m a n d p a y
the t r a n s p o r t a t i o n , I
think t h e r e “ o u l d b e n o p o s s i b l e
maans o f inducing t h e member bank t o forego t h e vrivilore
of handlins t h a t much currency.
Governor . g l l b o r n .
anytaing
i r . Chairman,
h a s t h i s discuss ion
t o d o “ L t h t h e T r e a s u r y Dgoartisent ?
The Chairnan.
it has, b e c a u s e
to t h e b a n k s
i n
that is, i n one c a s " 3 ara a b s o r o i n e the exoesnse and i n
the o t h e r c a s a 7 3 a r e n o t a b s o r b i n g i t , c e r t a i n l y t h e
moment
t e start
t o d o that
< e discriminate
i n exercis-
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Federal Reserve Bank of St. Louis
ine ths functions o f the sub-treasury between those
O f course,
renit a t var and those w h o d o not remit a t par.
tauat discrimination does not arise with us, because they
at p a r e
I
Governor . e l l b o r n .
of
think i t would b e all right, o f course.
redemotion, I
Seay.
geous,
f i t i s Treasury b u s i n e s s
I s i t not logical,
o
diseriminate
a n d i s i t n o t -tisy o
member b a n k s “ h e n e v e r
i s i t not advantai n favor o f o u r
“ s can?
anzc a v e r y t h i n e t h a t
Department x
J e r e d w h e n i t vas i n oneration.
dgorivins t h e n o n - m e m o a r b a n c o f a n y t h i n g
through t h e Treasury Department.
O S S
not
i t received
“ e are taxing i t over o n
equal terms, b u t w e a r s s i v i n g o u r m e m b e r b a n k s
a n ad-
vantage.
Governor JYalsxins.
S n i v o i n g c u r r e n c y t o o u r member
banks i s not a sub-tresasury function, b u t e d e r a l ‘-eserve
Bank function.
The Chairman. 3 x e :
the e a s e o f coin--
Governor Norris (interposing).
sub-treasury f u n c t i o n s
I n taxing
y o u have extended
t o the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
member b a n k s a
vrivilegs t h a t n o o t h e r d i s t r i c t h a s a c -
corded them, a n d which t h e y d i d n o t enjoy i n th:
the sub-treasuries.
Governor valicins. S X a C t l 7 .
Governor Nor;
T
h
e o n l y ‘uestion
ds wheather ~ e shall o r shall n o t pass a resolution r e yusstine y o u t o come i n t o line i t h t h e other eleven distriets, Governor strong.
The Chairman.
a x c u s e m e , Governor Worris,
are n o t doing exactly that.
pangs
o n the s a m e basis
remit a t boar.
but “e
- @ arg simply putting a l l the
i n o u r district, b e c a u s e t h e y a l l
I f =e had. nwoh-member banks i n our district
that d i d not r e n i t a t o a r , t h e n w e mizht have j u s t esround
to
Governor Fancher.
D o s s i t not resolve itself t o this
in actual o p e r a t i o n ? f l i e r s a r g n o n - m e m b e r b a n k s c a r r y i n g
their a c c o u n t s w i t h d i f f e r e n t c i t y c o r r e s p o n d e n t s ,
the
city correspondent shits some currency against i t s balance a t the bank's exvense,
mail, o r express.
b y insured mail, registered
I f they send y o u their draft a n d
t o t h e m a t y o u r expense,
order t h e i r c u r r e n c y s h i p p
3 ed
to s h i p t h e c u r r e n c y
t o the
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Federal Reserve Bank of St. Louis
146
non-member b a n k s a n d t h e y a r e z o i n z t o v i v e y o u t h e i r
draft o n their corresvondents.
T h a t is
actual operation o f it.
The chairman.
Yes.
Governor Fancher.
I
t i s entirely a
part o f t h s r e -
demption operation.
The Chairnan.
Governor Fanch:
a n d I
should n o t b e a c c o r d e d a
The Uhairman.
think that is-a facility that
non-member bank.
-hethser
i t remits
a t v a r o r not.
Governor Fanchsr. w«hether r e m i t s a t p a r o r not.
I tninsx t h e m a t t e r
o f collectinz c h e e k s a n d t h e m a t t e r
of
shiping currency a r e t o o entirely different Overations.
You a r e p a y i n g h i s e x o e n s e s
o n currency shiooed
t o you and
him the ontion of paying i n eschance o f currency,
he elects t o pay i n currency y o u o a y the charges.
pay. chePress
on ;
m e n t s o u t t o h i m y o u viEl p e
he currency-Governor Caltcins.
back a n d f o r t h .
Governor Strong.
Y o u will remember that “hen I ex-~
plained t h e c u s t o m o f t h e N e w Y o r k B a n s I
made a
oersonal
reservation
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Federal Reserve Bank of St. Louis
i n c o n n e c t i o n ~ i t h t h a t operation.
dc. dareison.
would
B u t before b e i n e v o t e d d o v n I
lixe t o p u t 2 m record o n e o t h e r c o n s i d e r a t i o n t h a t I
o
is important. s e f o r e %
thereto, the |
think
x o v e r t h e sub-treasury, and, oric
t o issue n e w
s u r y Devartment h a d cease
through
currency t o any bank throughout t h e country except
days a
i n the o l d
I n o t h e r words,
the F e d e r a l i e s e r v e Banks.
new
bank could -rite i n t o t h e Devartment a n d g e t
CUrYrSNncy
Governor Calxins.
Mr. Harrison.
A t the bank's expense, yes.
Governor Fancher.
dr. darcison.
B u t a t the bank's exoense-
-ilvays.
I t was a t t h e e x o e n s e
banits a n d t h e n o n - n e m b e r b a n k s both.
Banxs h a v e a s s u m n s d
o f the member
T h e Federal “eserve
t o taxe o v e r that service
from the
the banks,
Treasury Department, a n d that 4 s t h e only t a y
poth non-member
a n d member,
c a n n o w g e t n e v currency, t
1yak
8%
not from the
is, t h r o u g h t h e Y e d e r a l n e s e r v e Banic a n d
Treasury D e o a r t m e n t ,
s o t h a t “se felt i n d i s t r i b u t i n g
i t to
t o them o n the same
the n o n - m e m b e r b a n c s “3s shoulse s i v e i t
terms a s w e g i v e i t t o t h e m e m o e r banks,
Trsasgury I J e p£ a r t n e n t u g a d
t o maxe
j u s t as the
n t distinction
betvem
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
the tro.
Governor s e a y .2 a i x c e n t t h a t t h e T r e a s u r y i s s u e d i t
at their exoense, t h e bank's exvense.
av. darrison,
( a s .~end.co B r e N O Y S 1 7 ine 3b. 1 0 o u s
member b a n x s zretis.
Governor V a n Zandt.
Governor Fanchsr.
air. aarrison.
A n d t h a t i s b e c a u s e they a r e members
T h e members have a reserve with you.
I t i s a closes question ~hether v e should
taxe o v e r that function, t*hich used t o b e a freasury Vepartment function,
a n d sive i t t o the member banks merely because
they a r e m e m b e r b a n k s f r e e o f c h a r z e a n d a t t h e s a m e t i m e
chare3 f o r shionents t o the non-member b a n s .
Governor MeDougal.
Y o u d o not sive that a s a Treas-
ury function, d r . Harrison.
G i v i n e t h e member banks free
shipments o f currency i s not a Treasury matter. T h a t was
done b e f o r e
a matter
“ s t o o k o v e r t h e sub-treasuries. 6
T
o F $491 a
i
dia
a
e n a little extra divi-
dend.
dy. darrison.
I n the o l d days a
did write t o the Treasury Devartx
new currency f r o m the Treasury
Governor -leDougzal.
ereat m a n y o f t h e m
s h i o m e n t s of
s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
an e x p e n s e involved.
Las.
A n d i f y o u are
Governor :ellborn.
State banks f o r the service y o u are doing exactly a s the
our d i s t r i c t
in
would l i x e t o s a y t h a t
Governor iicDourmal. I
i t has b e e n o u r custom
t o absorb t h e cost
involved i n connection with outgoing a n d ingoins currency
The Chairman.
think =
Governor acDougal. I
now.
- @aty
the c o i n
2
the charge o n incoming currency f r o m our
non-member banks h e :
r
e
q
u
i
i
:
t in
to maxe exchange o r settle f o r cash letters
universal throucshout
Governor vMeDougsl.
a y be Bere.
n a t requests
o n
benalf o f non-member banks should perhaps b e confined
to requssts “ h i c h a r s made b y o u r member banics i n behalf
of those non-member banxs.
B y dotne thet, i f
thera i s one handling o f the currency avoided
connection w i t h
ao n o t r u n a n y r i s x i n / a c c e o t i n g e x c h a n g e f r o m
non-msmosr banks--and I
Strong,
Oecause
rT
don't supoose y o u do, Governor
y o u must hold those shinments
before maxing them, o r a t least I
fhe Chairman. I
Governor s e a y .
one day
assume y o u do.
hooves s e do, Governor.
o u l d 3
Governor sicDouzal.
2 0 t h a t a t t h e exsense
of
. 6 @ misht acceot orders f r o m mem-
ber banks f o r shioment o f currency t o their correspont
non-member b a n x s
a g a matter
o f service, s i n c e v e a r e
trying t o r e n d e r a l l t h e s e r v i c e wes c a n t o them-Governor s e a y .
to r e n d e r a
B u t i t seems t o m e t h a t
services f o r t h e n o n - m e m b e r bank.
Governor icDougal. I
would not g o s o far as Governor
strong t o e s “ h e n h e s i v e s t h e m t h e s a m e v r i v i l e r e t h e t h e
Goes t h e m e m b e r banies.
Governor 3
I
t would b e going very much further
than x e would b e willing t o go.
e
@ believe t h a t i f w e
omit anything t o m r x t h e line o f privilege between t h e
member b a n k a n d t h e non-member,
t h a t i f “ e d o anythine
ae | t h a t
w e are doing some-
thing distinctly t o the injury o f the Federal Heserve
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Federal Reserve Bank of St. Louis
to dn
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Federal Reserve Bank of St. Louis
Governor Caltins. ;
n d e r t o o x t o take o v e r
the functions o f the Treasury Denvartnent v e did n o t undar“nat t h e T r e a s u r y D e p a r t m e n t n e v
not undsrtexe t o d o anvthins a t the exvoense o f
Federal x e s e r v e B a n k t h a t t h e T r e a s u r y D e v a r t m e n t h a d
done without exoense. Antiresly aside from the taxing over
nent functions,
l o n e before
~ e did
axen t o supply o u r member banxs vith
tisy were member banks.
Governor S e a y says,
t o d o avay w i
n a t discrimination,
if. you want t 9 Gall it:a diserininatia, 2 3 . 0 9 3 9
to the injury o f the system. I
eons idsred.
8
3 should n o t s h i p c u r r e n c y t o t h e n o n - m e m b e r
bank ~ i t h o u t expense;
membdsr banizs ;
thinsx i t should n o t b e
w a should n o t fill w d e r s f o r non-
p e R i i c y n m s m b e r banics.
ago y o u d 9 s h e n “ o r n - o u t c u r r e n c y
Governor Calxins.
J u s t ~hat t h e Treasury Devartment
ve t o o x t h e f u n c t i o n s
The Chairman.
over.
Y o u maze t h e m p a y t h e shippins costs
ways ?
Governor C a l x i n s .
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
darrison.
B o t h members a n d non-members.
For non-membors »
diserlnination a s regards
Devoartnsnt f
a orivilerge a n d
Treasury d i d f o r
them.
h
e
n - e u n d e r t o o s t h e duties
o f the sub-treasury
in Baltimors “ a esaained v e r y carefully e n d critically
toe circulars o f the Treasury Department, a n d *“e announc-~
ed t o o u r n o n - m e m b e r
bans
that
7 s would
d o f o r t h o m everywv
thing that the Treasury Department had done hereto, ore,
“e are serupulously following that oractice.
Wr. Harrison.
% x c 3 0 t that t h e Treasury Department
Ss this, t h e y h a d n o objection t o our adsorbing e x pen
o f shipmants o n rejections, b u t they d i d a s « u s
that i f ‘es absorbed e l l axpenses f o r members t o d o i t for
non-manibers also.
Govarnor seaay. I
do not recall that request.
not t h i n k i t “ e n t q u i t s t h a t far.
Governor Seay. I
thins they ‘rould have been treat-
3
ing u s badly i f they h a d done so, a n d t h e Treasury Department h a s n e v e r d o n e t h a t .
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Federal Reserve Bank of St. Louis
hen the sub-treasuria
not v a y ths exsenses either
or going,
and
thinic o n the other
of the Treasury n o t t o d o i t now. I
nand t h a t “ h e n t h e H a s e r v e B a n k p e r f o r m s t h e f u n c t i o n o f
redemption f o r t h e Treasu
discrimination
t h a t i t a t least looxs like
t o t h e non-member bank,
a n d that i s tne
reason f o r such ovreference a s m a v e f o r the absorption
of ths chardss.
h a r d t o ex»xlain t o
s% 2
S
some o f o u r membsr b a n s , a n d ~ e have h a d some rather emparrassinz letters a p o u t it, b u t I
as é
t
i t is
really n o t o u r business.
isntlemen,
i t see
b
e t h e senti-
mestinz tnaat i n connection with t h e shipment
of coin und cureency t o and from member a n d non-member
banks t h a t t h e Fedsral Bank should n o t assume a n y § eater
exvense f o r non-menber b a n s t h a n t h e sub-treasur
assuming
the T r e a s u r y D e p a r t m e n t v a s i n t h e h a b i t o f
that
before t h e suo-treasuries vere transferred, e x c e n t
where n o n - m e r b e r b a n k s r e m i t
a t par t h s Federal hesarve
Banks s h o u l é p a y t h e e x o r e s s c h a r g e s
currency f o r t h e s s t t l s m e n t
o f remittances,
a n d accept-
ysorption b y the Feder: ‘ e s e r v e B a n x o f charge
ants
Governor Galxins.
tvo taoines.
o f mold coin and
T h e r e i s n o relation between those
I n one case y o u ars talking about a Treasury
Department function, w h i c h w e took over, a n d i n the other
case y o u are talxinz uoout a Federal Reserve B a n k function,
“hich h a s n o r e l a t i o n
t o t h s Treasury.
Governor Yan sandt. I
think the way the Chairman
a
gS tegege 22 Cea |
motion.
Governor
cut O f f ths last oart
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Federal Reserve Bank of St. Louis
(after soms discussion, t h e sietmenh. o f the Uhnairman,
offersd a s a motion b y Governor V a n uandt, w a s r e a d t o
Conferencs,
t h e m o t i o n put, a n d u n a n i m o u s l y carried).
Toe Chairman.
4
T h e next i s sub-topic 2 under {b).
(2) S h o u l d requests o f non-member banks f o r currency
and c o i n s a r v i c e ,
correspondents,
Governor i f a n c h s r .
accompanied
b r drafts
b e received.
I n considerin=s
t h e functions
sub-tresasuriss have b e e n verforming,
Circular
o n clity
t o o u r membosr b a n k s
“s
tact i t h t h e n o n - m e m b e r b a n k s v i t h t h s
Yodemptionoperations,
a n d a l s o . i n o u r circular t h e o l a n
of r e c e i v i n g r e i u e s t s f r o m n e m b s r b a n k s
t o shin f o r
to a n o t h a r bank, s i t h e r m e m b e r
think, forrnor eeay, t a t “ a s
member, “ a s includade. -
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
o r non-
in your
did agree t o adoot t h e practic:
governor Seay. e
of t h e T r e a s u r y D e p a r t m e n t
corresyondent,
t o receive c h e c x s u p o n a
Sauy
t o shin thai coin
a n d , u v o n collection,
and c u r r e n c y a t t h e i r o r n exxense.-
$
T h a t hes been the
Sim “ a s t o
the non-membsr banks e v e r y $ 2 @
ment h a d thavetofore rendered,
no complaint,
s o that there
i n vLonzgress o r a n y "hore elss, t h a t t h e
Federal w i e s a r v e B a n x s ,
functions,
that t h e Depart-
navine assumed
t h e sub-treasury
h a d curtailed priviles
country, a n d ~ e therefore adooted literally,
we could,
t h e proectices
a s far a s
o f the sub-treasury
spect.
Governor #ancher.
draft
I n o t h e r ~ords, c o l l e c t i n g
o n a c i t ye c o r r e s .ondent a n d shiopving t h e m o n e y a t
exvense.
their
do i t ; b u t i n e s m u c h a s i t h a d b e e n t h e o r a c t i c e
Treasury D e p a r t m e n t
our c i r c u l a r l e t t e r ,
t o d o it, s e i n c o r p o r a t e G i t
o f the
a 2
a n d v e a r e d o i n g i t now.
incorporated
Governor Fanch: @
cular letter t h e matter o f s e
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Federal Reserve Bank of St. Louis
t o
a s “ e "ere
ag r e l u c t a n t
Question o f shioments,
i n our cir-
@ , and " 6
u n d e r “ h a t conditions
“ 6 ould
a n d one o f the
maxe s h i o m e n t s f r e e t o o u r m e m b e r p a n s ,
conditions i s that the request shall come f r o m the member
‘
bank a n d n o t t h r o u g h a n o t h e r m e m p s r bank.
a have f o u n d
on investisation, investigations “which “e h a v e pesn matcing
throuzh o u r velations department, t h a t ve h a v e p e e n making
shipments
a t t h e request
o f o n e m e m b e r p a n k t o anotaes
has been
member b a n k a n d t h e m e m b e r b a n k m a x i n g t h e r e q u e s t
charging its corrss»xon:
< o r e s s charges, postagze, etc.
-@ h a v e r o u n d t h a t i n o n e c a s e
~ ¢ @ have p r o c e
ivle t h a t t h e c l o s e r c o n t a c t
the m e m b e r b a n k s
“ e have
t h
t h e mora “ i l l direct declings
them b y that contact b e encouraged. a
want a l l the
transactions t h a t s e c a n have dirsctly with o u r manber
banss,
a n d f o r t n a t r e a s o n “ec h a v e s e t
of f r e e s e r v i c e # i t h o u t e x p e n s e
u o the question
i n a n d out.
“ t a n B22o>
diract f r o m a member bank i t i s given, b u t
o f t h e member b a n k t o make
suests
shipmsnts t o a non-member b a n k a t our exDense.
other “ords,
i n
t h e non-member b a n k c a n send i t s draft
and ‘te w i l l c o l l e c t
i t a n d m a k e shipment,
in
b u t i t rill b e
at i t s exvenseGovernor S e a y .
T h a t ~ a s t h e g r o u n d “ 3 Goon, Srovernor
Fancher.
Governor Salxins.
T h a t i s just “hat t h e Treasury
Department d i d before.
Governor F a i
3 1
3xcantion t o this.
@ have o n l y o n e b a n k that has
“
I n e o f t h e banks
i n ome o f our
taxen exception t o this procedure. I
do not
their
recall whut t h e sub-treasury d i d f o r them o r what
they
= have taken the positio
contact was before, b u t /
de should b e guided b y theli t
to maxe shioment
cirfor t h e m t o member a n d non-member panks. T a a t o u r
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Federal Reserve Bank of St. Louis
cular d o e s n o t s o orovide,
b u t provid
be made free i n and o u t undor
did
those conditions a r e a l l that t h e Treasury Department
before.
i
fill find
aor] are findint this, o r “ e believe “ o
non-member banizs w i l l p r o b a b l y s e n d i n
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Federal Reserve Bank of St. Louis
their drafts t o u s o n some corresoondsnt i n some
city a n d w e will defer maxing t h e shipment until
are a c t u a l l y realized.
fa
T h a t will not b e a
very
r y service t o the non-member banks, because there
heir e x c h a n g e
o n
point o n e d a y avay.
Governor f o u n .
T h e r s i s|
i ) a:
I would like t o taxe u p for just a moment.
o f that that
I n :iinneapo-
to
lis last fall v e made a n analysis o f the situation a s
the currency holdings o f the T w i n city Sanxs, a n d i t
looked t o us unusually nigh.
T h a t came about because
of the carrying o f a n excess amount o f currency
nicht s o l e l y t > m x e t h e s e l a t e shipments.
that i f - e 2 u t i n a shipoing department a t our
could r e l i e v e t h e s i t u a t i o n t h e r e
i n Minneanolis
the extent o f a t least 43,000,000, “ h i c h w e did.
to
Now
on
we are shipping currency o r coin t o member banxs
other p a n
the request o f the Twin City banxs o r any
that wants t o request it. ‘There are no cherges t o the
b u t there a r e
member banks t h a t m a y request u s t o shin,
panics 2} T a m satisfied t h a t
charztes
zg t o ths non-nember
our position
i n inneapolis r i g h t a t the moment i s
four o r f i v e o o i n t s b e t t e r becaus:
It i s a
f f : t h a t a c t i o n o f curs.
service w e f e e l t h e b a n k s a r e s n t i t l e d
t o up
and w e heven't had any evidence yet o f anyone abusing it. f T n e r s m a y b e some cases o f abuss, b u t very small.
Governor Bisgs.
A t zthat h o u r d o y o u t a z e t h e m u p ?
Governor Young
Governor Sigs
x
Y o u taxe applications f r o m member
pangs after 4 ¢ *
Governor Younz.
with u s a n d I
for shipments o f currency?
Yes.
I t i s a very important thing
would n o t ‘vant t o c h a n g s i t .
Governor Calkins.
at t h e r e q u e s t
e then up at 4 o'e
Y o u a l s o s h i p t+o non-member b a n k s
o f meamber b a n k s ?
Governor Youngz.
it saves t h e Twin City B a n s rsdiscounting »3,000,000, a n d
at 7
p e r cent t h a t i s j210,000 a
Gentlemen,
year.
v e have a n hour left i n
which t o complete this part o f the program i f possible.
The discussion has brouzht thres subjects before t h e meeting, o n e raised b y Governor Seay, t h a t t h e Federal k
gerve B a n x o f Richmond ships c o i n against checxs which i t
Gollects f o r t h s b a n s t o w h i c h t h e c o i n i s t o b e shinped;
Governor F a n c h e r r a i s e s t h e v o i n t t h a t t n e y d e c l i n e t o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
maze a n y shipment, d i r e c t
o r indirect,
bank o r a member b a n k a t t h e r e q u e s t
Fancher.
The Chairman.
t o a non-member
o f another member
Tha
. i t h o u t charge, yes. G o v e r n o r Young
raises t h e interesting point that, f o r t h e T w i n City
bankers, t h e y a r o maxinz shipments f r o m thair
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ping d e v a r t m e n t
t o correszondents
and maxing n o cnarg2 m e i
o m ship-
o f tho T y i n oity banks
g o e s t o a member b a n k
making a charge where i t soes t o a non-member bank.
=e h a v e a
resolution f r o m Governor Fancher c o v e r i n g this
point, because h s put t h e topic o n ths yrogram? “ h a t i s
your pleasure, Governor Fanchsr?
would offer a motion that i t i s
nonthe sense o f the Conference t h a t requests from/member banks
Governor Fancher. I
for shipments o f currsney a n d coin, accompanied b y drafts
on city correspondents,
The Chairman.
b e not received.
h a t action “ould y o u tase o n receint
1t?
Governor B i g g s .
Y o u m e a n e v e n i f they p a y t h e charges?
wv
Governor Fancher (continuing)--and t a a t
at t h e e x o s n s e
o f t h e Federal Nesorve
d o w would i t d o t o answer t h e
Governor Seay.
query c o n t a i n e d
i n the topic " S h o u l d requests
o f non-
member banks f o r cursency a n d coin service,: a c c o m p a n i e d
by drafts
b e received",
o n city correspondents,
‘Ives, a t t h e e x o s n s e
b y stating
o f t h e non-member bani."
t h e non-member
h e soans £
The Cha i r m :
pank a n d after collecting t h e draft.
Governor Seay.
a f t e r t h e collection o f the draft.
“ould that cover you, Governor Fancher?
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Federal Reserve Bank of St. Louis
Governor Fancher.
Governor Seay.
tofore
Yes.
T h a t conforms t o the oractice here-
o f t h e T r e a s u r y Department.
Te C h e i r m a n .
T h a t i s t h e motion, t h e n ?
Governor Seay. Y e s , a n d I
second t h e motion.
7:
(The motion was out and unanimously carried}.
fue Chairman. G o v e r n o r Young,
d o you sish t o offer
y o u raised?
any resolution i n eonnection “ith t h e ooint that
Governor Y o u n g . I
d o n o t k n o w “hethser t h e y
this uniform i n all districts. f
y
a I
would
to make a resolution.
Governor Biggs. I
every district.
do not see h o w i t should apoly t o
own
Y o u are handling t h e matter i n your
way a n d t h e r e i s n o o b j e c t i o n f r o m a n y o t h e r district.
So far a s I
can see e a c a n not avpoly i t t o our ais-
trict a t a l l b e c a u s e
w e haven't a
larce c o m n e r c i a l b a n k
tnat c a r r i e s a n y t h i n g o v e r nizht, e s p e c i a l l y s a t u r d a y
nisht, e x c e s t t i l l money.
Y :
i
a enderinz a
service
to
your m e m b e r b a n k s t h a t w e d o n o t
districtey
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Federal Reserve Bank of St. Louis
I f I can g o o n doing what I
Governor Young.
a m doing
now I do not i s h t o offer a resolution, but T understood
it w a s t o b e uniform.
Toe Chairman.
T h a t i s t h e effect
o f the resolution
just passed.
Governor Seay. @
would feel that 7 e would n o t l i k
to h a v e t h a t q u e s t i o n r a i s e d w i t h u s .
Governor Fancher.
I n the program submitted
Federal Reserve Board i s Topic No. 3 , “Shipments
and currency t o memoer a n d non-member banks u p o n request
of a membsr bank’.
T h a t will come u o as a topic sub-
mitted b y t h e F e d e r a l xes3rve B o a r d f o r d i s c u s s ion.
Ghairman. I
realizedthat t h e r e v a s a
duolication
program
there, but that arose after I had submitted the
for t h e general Conference.
T h a t topic w a s add
gQuently, a n d i t h a d a l r e a d y a n v e a r e d
o n thse p r o g r a m f o r
discussion F i t h t h e T r e a s u r y Department.
Governor Fancher.
w r . Chairman, I
would sugte
further discussion o f Topic (b) b e deferred until v e
up the Board's program.
The Chairman.
I
f w e a c t o n i t now v e c a n convey t h e
action o f ths mestine t o the Board a n d they m a y have
further t z e s t i o n s t o maxe a t the joint meeting.
I
f
there i s n o objection, f u r t h e r d i s c u s s i o n o f t h i s t o p i c
will b e d e f e r r s d u n t i l i t c o m e s
u p o n ths regular p r o -
gram o f the Board.
Topic ( c } under Currency a n d Circulation i s
(c) S h o u l d t h e Federal Reserve Banks receive
for r e d e m p t i o n f o r a c c o u n t
o f t h e Treas-
ury D e o a r t m e n t u n f i t n a t i o n a l b a n k n o t e s
and o n deposit f i t national b a n x notes.
That i s q u i t e a
problem i n New Y o r k a n d o u r disposition
is t o handle a l l currency now, including national b a n k
notese
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
H a s anyone a n y Suggestion
The Cheirman.e +
t o make
ss t o o u r attitude i n handling national b a n k notes?
sibly M r . G i l b e r t h a s s o m e s u g g e s t i o n s
Pos-
t o make,
Y o u d o receive t h e m f o r redemp-
Governor Norris.
tion?
lr. Gilbert,
e have n o t generally, n o .
w
The Chairman.
T h e Treasury h a s already authorized
Federal Reserve Banks t o cancel national b a n k notes f o r
shipment t o the Treasury f o r redemption. :
Governor Norris, U n f i t e
t h e question whether t h e
Wirte = hI perk <<" Unt Et.
Treasurer will receive f i t national b a n k notes o n deposit
is another question.
Governor Norris. E n t i r e l y separate?
Mm. Gilbert,
Y e s sir,
The Chairman. ;
T h e question o f whether w e Will
put them i n and take them out again, i f they are unfit,
is rhat w e have t o consider,
Governor Van Zandt.
a s n ' t that the Treasurer's
function?
The Cheirmenos
in f o r r e d e m p t i o n
F
i
t national b a n k notes d i d come
t o t h e T r e a s u r e r a n d t h e y w e r e t h e n pat-
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Federal Reserve Bank of St. Louis
reese
T h e y were shipped o u t t o the bank which issued
them,
Mr. Gilbert,
T h e y were sometimes p a i d o u t illegally
Gevernor Seay.
that c o n f i n e d
T h e “ichmond Bank would like t o see
t o t h e receipt
o f fit notes,
T d i Woula t i c e
to modify that language t o make i t s a y explicitly that
such notes are not received for redemption, b u t that they
m d reda@ ption b y the Treasury
may b e received f o r credit,
Department,
s o that t h e Federal Reserve Banks m a y n o t assui
the position o f being t h e redeemers o f these notes,
T h e
redemption d o e s n o t t a k e p h a c e u n t i l t h e y r e a c h t h e T r e a s ury Department,
a n d for t h a t reason w e d o not receive
them for redemption, b u t w e receive t h e m for credit, a n d
for r e d e m p t i o n
b y the Treasury Department.
The Cheirmen. I
d o not believe y o u could le-
gally receive t h e m for redemption, c o u l d you?
Governor Seay.
wording
I t would just make a change i n the
o f the s e n t e n c e ,
A
t t h e p r e s e n t t i m e i t sayas,
"Should t h e F e d e r a l R e s e r v e B a n k s r e c e i v e f o r r e d e m p t i o n
for account o f the Treasury Department unfit national
bank notes and o n deposit fit national bank notes,"
is q u i t e d i f f e r e n t ,
That
i n r e c e i v i n g f o r c r e d i t a n d redemptic-~
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Federal Reserve Bank of St. Louis
by the Treasury Department.
I f w e redeem t h e m for ac-
count o f the Treasury Department,
i t i s a different matte
as I take it.
The Cheirmane
T h e n this should read: "Should the
Federal Reserve Banks receive a n d redeem these f i t nation:
bank notes?”
vould vote negatively t o that, b u t
Gevernor Seay. I
I a m not o p p o s e d t o receiving p r a c t i c a l l y unfit c u r r e n c y
for redemption by the Treasury Department/ receiving then
for the credit o f the member bank, a n d for redemption b y
the Treasury Dep artment. I
believe t h a t that distinct:
should b e rade,
Governor Calkins.
Mr, Gilbert.
F o r credit r h e n redeemed?
T h e y a r e immediately redeemed.
Governor Seay.
B u t that distinction should be made
in: t h e language,
Mr. Gilbert. I
a m not sure that the Treasurer
could p a y t h e expenses o f the transportation o f national
bank notes f r o m the Reserve Banks t o the treasury. I
think i t could,
Governor Seay.
T h a t i s a memorandum Which w e put
down against that, whether i n saying "Receiving them b y
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Federal Reserve Bank of St. Louis
Federal Reserve Banks," they would have t o pay the
expense o f transportation.
Mr. Gilbert,
I t rould b e a Question whether w e
could r e a s s e s s t h e e x p e n s e
t o t h e n a t i o n a l banks.
so full o f technical restrictions t r a t I
B E S
a m not sure
that w e could d o it.
thought y o u could take that
Mr. Harrison. I
out o f the t a x fund,
Mre Gilbert,
I t i s a Question o f whether i t
would b e availabje,! I
think i t would, b u t I camot
guarantee i t , offhand.
Governor S e a y .
A s t o r e c e i v i n g t h e m o n deposit,
perhaps t h e same experience h a s occurred with Federal
Reserve Banks, b u t w e have occasionally h a d actual shipments o f w3e7 circulation f o r credit,
Governor McDougal.
T h e policy i s t o accept both
classes from the out o f town banks, the unfit notes only
from the Chicago banks,
T h i s restriction i s due t o the
limited facilities t h a t w e have f o r handling a t present.
There i s a material advantage t o member banks i n deposit-—
ing unfit national b a n k notes w i t h us, inasmuch a s
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Federal Reserve Bank of St. Louis
168
are allowed
they g e t i m m e d i a t e c r e d i t f o r them, a n d w e
to make a n immediate charge against t h e Treasury account
for them.
W e f e e l w e a r e o u t nothing,
and it is a
matter
of service a n d i t i s our intention t o handle both classes
when w e h a v e t h e f a c i l i t i e s f o r d o i n g s o .
‘ h a t d o y o u d o w i t h the f i t notes
Governor C a l k i n s .
I f w e g e t them,
Governor M c D o u g a l .
Tie d o not take t h e m a t Chicago,
w e p a y t h e m out.
a t present,
W h e n y o u r e c e i v e t h e s e u n f i t notes
Governor N o r r i s .
you h a v e t o v e r i f y t h e m a n d r e s h i p t h e m t o t h e Treasury?
A
Governor McDougal.
S a matter o f service,
w e are
willing t o d o that.
I t i s a roundabout w a y o f getting
Governor Norris,
the results;
t w o p r o c e s s e s i n s t e a d o f one.
The Chairman. T h e point is, Governor Norris, that
4% makes p r o m p t c r e d i t ,
I
t i n c r e a s e s t h e service,
but
it i s a more efficient credit transaction.
Governor Seay.
I t would o f course result i n the
bank
carrying o f a certain amount o f float o f national
notes u n t i l r e d e m p t i o n b y t h e T r e a s u r e r .
Governor C a l k i n s .
T h e r e i s n o problem involved
in
receiving the unfit notes, b u t there i s a problem involZe
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Federal Reserve Bank of St. Louis
in receiving t h e f i t notes?
The Chairman. T
here iS.
Governor C a l k i n s .
W h a t i s the practice
o f the New
York bank i n regard t o receiving f i t notes? V i h a t does
it d o m i t h t h o s e n o t e s ?
The Chairman.
I n general, w e have not received the:
and that h a s been i n response t o the original action o f
the Governors' Conference,
tmt
w e would n o t receive t r o m
in settlement d f collections o r o n deposit.
Governor Calkins.
A S Governor Seay suggestéd, a
might ship its new circulation t o the Federal Reserve
for immediate credit, b u t what i s the Federal Reserv.
going t o d o with i t when i t gets i t ?
The Chairman,
P a y i t out.
Governor C a l k i n s ,
Governor Seay.
[ I t cannot
b e doné,
T h a t deprives i t o f the opportunity
of paying o u t its o w n notes, creating a
The Chairman.
capital thereby.
H a s anyone a n y motion t o offer o n
this s u b j e c t ?
Governor Van Zandt. B e f o r e y o u get t o that, I vould
like t o k n o w h o w m a n y o f t h e F e d e r a l R e s e r v e B a n k s r e f u s e
to receive,
f r o m their l o c a l m e m b e r s f i t n a t i o n a l b a n k
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Federal Reserve Bank of St. Louis
notes f o r deposit?
The Chairman.
D
o you, Governor McDougal?
W e a r e n o t receiving them.
Governor McDougal.
The C h a i r m a n . G o v e r n o r M i l l e r ?
The Chairman.
e receive them,
w
Governor M i l l e r ,
G o v e r n o r Welilborn?
Governor Wellborn, I
do not know,
The Chairman. G o v e r n o r Norris?
Governor Norris,
The C h a i r m a n .
W e receive them,
G o v e r n o r Young?
Governor Y o u n g e
The Chairman.
W e t a k e them.
G o v e r n o r Fancher?
Governor Fancher,
The C h a i r m a n .
Z e take t h e fit.
G o v e r n o r Biggs?
Governor Biggs.
W w e take eyerything, a n d w e have
been able t o use a good many o f them during t h e period
of the summer when w e cannot get good currency.
w e are
perfectly willing t o take them.
The Shairman. Governor Calkins?
Governor C a l k i n s ,
W e receive t h e unfit, b u t n o t t h e
Fits
The Chairman.
G o v e r n o r V a n Zandt?
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Federal Reserve Bank of St. Louis
Governor V a n Zandt.
The Chairman.
W e receive both.
G o v e r n o r Seay?
Governor Seay.
w e have n o t received cither.
W e are
ordered t o receive t h e unfit,
Governor Fancher, I
Vie d o receive,
want t o modify m y statement,
i n our miscellansous Shipments, f r o m the
small banks a certain amount, b u t from the local member
banks, w e d o note
Governor Seay. I
would like t o qualify m y statement
to the extent o f saying that w e receive a n y kind o f mong
that t h e b a n k s s e n d i n p a y m e n t
Governor C a l k i n s . ,
The Chairman,
o f checkse
W e a l l d o that.
T h e r e i s a considerable variety o f
practice among t h e Federal Reserve Banks.
i f there i s
any desire for uniformity i n our practice, this i s the
opportunity t o g e t i t .
Governor Van Zandt, I
think it showld be uniform
Mr, Chairman.
The Ghairman.
D o y o u offer a
Governor V a n Zandt,
tion. I
N o e I
resolution?
do not offer a resolu-
a m i n the h o p e l e s s m i n o r i t y , I
else t o f o r e e m e i n ,
want s o m e b o d y
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Federal Reserve Bank of St. Louis
don't think y o u are,
The Chairman. I
Governor Y o u n g . I
will m a k e a
resolution,
T h e
Federal Reserve Banks should receive for redemption,
for account o f the Treasury Department, u n f i t national
“bank notes, and for deposit, sither fit o r unfit na~
tional b a n k notes,
The Chairman,
I s that motion seconded?
Governor McDougal. I
The Chairman.
will second that motion.
D i s c u s s i o n i s n o W i n order,
Governor McDougal.
T h a t i s Qualified, however,
to the extent that w e c a n defer action until w e are
able t o handle t h e problem.
w e are doing i t n o w a s
best w e can, i n Chicago.
Governor Biggs. N o w , acting o n that motion,
wouldn't i t mean that w e would put our banks t o a lot
of trouble i n sorting t h e f i t f o r o n e case a n d the
unfit f o r another a n d just p u t t h e m t o a whole l o t o f
extra work?
The C h a i r m a n .
I t would,
Governor S e a y , I
y e s sir,
would l i k e t o s p e a k a b o u t t h a t ,
There a r e some o f the Federal Reserve BankS which were
perhaps far-sighted, I
think y o u might say, a n d made
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Federal Reserve Bank of St. Louis
an e x t r a o r d i n a r y e f f o r t
notes
i n circulation.
t o g e t their Federal Reserve
t h e y have thereby been able t o
accumulate t h e equivalent and a greater capital for
themselves,
T h e Federal Reserve Bank a t Richmond, a t
the beginning, m a d e every effort t o ¢€xpand its Federal
Reserve note circulation, a n d a t the present time w e are
to extend, without borrowing,
t o our member banks, a
very mach larger measure o f accommodation t h a n w e could
possibly d o i f w e h a d simply t h e Federal Reserve B a n k note
circulation.
I
t must b e perfectly plain t o y o u gentie-
men w h o observe your balance sheets, t h a t i n proportion
as t h e s e n o t e s
g o i n f o r redemption,
quirereénts a r e diminished,
minishe d.
y o u r capital r e -
Y o u r capital f u n d i s di-
Y o u are eating into your fund b y doing it.
We have taken t h e position f r o m the beginning, t h a t w e
would be Gating into our funds b y taking any national
bank notes.
I t i s perfectly patent, t h a t there a r e
only t w o things t o d o with these notes; o n e i s t o forward t h e m immediately t o the Treasury Department f o r
redemption, whether f i t o r unfit,
I f they are fit,
they g o back t o circulation, a n d nothing i s gained there-
by.
T h e other method i s t o pay them out, and i f we
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Federal Reserve Bank of St. Louis
pay t h e m out, w e p a y them o u t instead o f the Federal
Reserve B a n k notes,
a n d w e thereby deliberately deprive
b y cirourselves o f the capital power w h i c h w e c a n gain
culating t h e Federal Reserve B a n k notvese
Y o u say that you take these from
Governor Young,
T h a t is, you take anything thst
the non-member banks?
looks like money?
I n remittances f o r checks, yes,
Governor Seay.
which amounts t o a very small sum,.as y o u knov,
Governor Young, B u t , h o w c a n y o u treat a non-member
bank
o n more favorable
terms
That
Governor S e a y .
than you
i s for a
do a
member bank?
s p e c i f i c purpose,
a service w h i c h w e p e r f o r m f o r t h e m e m b e r b a n k s .
W
for
e take
t he h eeck for the member b a n k a n d w e collect i t for noth:
Wie are able t o d o that because w e agree t o take t h e m from
a non-member bank, a n d i f i t sends a n y sort o f Currency,
it m a y e
T h a t i s involved
a certain privilege.
non-member banks,
in a
special p e r f o r m a n c e
of
I t i s n o discrimination o f the
O n the other hand, i f we take o n de-
posit, n a t i o n a l b a n k notes,
w e will certainly accumulate
a burden, a n d there i s only one way to get rid o f it, ans
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Federal Reserve Bank of St. Louis
that i s t o charge i t u p i m m e d i a t e l y o
t the account o f
the Treasury Department, a n d get r i d o f it, a n d w e should
adopt t h a t a t t i t u d e r i g h t a w a y .
The Chairrean.
D
o y o u want t o expand t h e Federal
Reserve n o t e issua?
Governor Seay.
Tre C h a i r m a n .
w e d o a t the present time, y e s sir.
W h e n y o u have a
call a t t h e F e d e r a l
Reserve Bank a t Richmond for credit, does the mere fact
that you have a national bank note i n your vault make
it d i f f i c u l t f o r y o u t o e x t e n d t h a t c r e d i t ?
Governor Seay.
I t diminishes exactly our power,
as y o u v e r y w e l l know.
The C p e
e a
W h y n o t p a y i t out?
Governor S e a y .
place?
T
S u p p o s e w e d o n o t t a k e i t i n t h e firs.
e would take something elsé,for which r e woul
acquire gold.
W e therefore t a k e a national b a n k note
instead o f gold, whenever w e take i t ,
The C h a i r m a n . I
Governor Seay.
d o n o t a g r e e w i t h y o u there.
W e might take a
national bank note
and forward i t t o the Treasury Department for redemption,
and t h a
w e W o u l d g e t gold; b u t i f w e t a k e i t a n d p a y
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Federal Reserve Bank of St. Louis
it out, I
cannot s e e t h a t w e g e t anything.
The Chairman.
W i l l there e v e r b e a time w h e n t h e r : «
&
demands u p o n y o u for credit,
a t which time there will
be a n equal demand f o r currency that cannot b e met b y
paying this out?
Governor Seay,
A t the present time, there i s a ten-
dency o f Federal Reserve B a n k notes t o come in, a s you
know. T h e r e i s a tendency o f Hational b a n k notes t o come
in also, T h e r e f o r e ,
the e x t e n t
i t i s perfectly clear t o me that
t o w h i c h w e take national b a n k notes
o n deposit
that displaces o u r o w n circulation.
The Chairmene I
am personally o f the opinion that
with from two and a half t o three billions o f Federal Reserve notes outstanding, coming i n and going out every
day, t h a t a few hundred millions o f fit national b a n k
notes,---the minimum that woild ever b e required t o re-
ceive apd pay out again i n the seaeks o f a year, would
be n o burden t o us,
W e could p a y them m t a s fast a s
we g e t them in,
Governor V a n Zandt.
to us, i n our section,
%
e find i t a
a t this time,
Governor Seay. T h e y are a burden?
great b u r d e n
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Federal Reserve Bank of St. Louis
Governor V a n ZAandt,
The Chairman.
T h e y aré a
burden.
F i t notes?
Governor V a n Zandt.
F i t notes.
Governor Seay. T h e r e always will be, a t certain
seasons o f the year, a
great burden i n our district. I
should think there would b e also i n the Atlanta District.
I remember when their statement was issued, i t Was a burden, v e r y clearly.
The Chairman, Y e s , I
lation outstanding,
do too, a n d we had n o ¢ircu-
t o speak of, a n d there w a s n o demand
for circulation.
Governa Seay.
B u t the sams a c t that made i t a
burden a t that time, w o u l d make i t a burden a t this time,
Governor Calkins, I s n ' t i t obvious, that from the
time o f the declindyg demand f o r circulation, b a n k notes
would have a
tendency t o accumulate i n the Federal Reserve
Banks?
Governor V a n Zandt,
Governor Calkins,
Surely,
T h e scientific means o f handling
the n a t i o n a l b a n k n o t e s w o u l d b e t o t r e a t t h e m a s t h e
Treasury Department does, returning t h e f i t t o the bank
issuing theme
W
e then become a
redemption agent,
ix
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Federal Reserve Bank of St. Louis
178
the full-sense o f the rord.
the s c i e n t i f i c p r o c e s s ,
T h a t would b e carrying o u t
T h e o t h e r process,
o f accumi~
lating the national b a n k notes i n the Federal Reserve
Banks, i s not chhancing the power o r capacity o f the
Federal Reserve Banks, but diminishing it.
I f you
assume t h a t y o u c a n p a y t h e m o u t a s f a s t a s y o u r e c e i v e
them, under a l l conditions, t h e r e i s n o Question.
W e
find that w e cannot d o i t i n practice.
Governor Young. I s n ' t i t true, for instance a t the
present time, w i t h Governor Seay's b a n k a n d o u r o r n bank,we are getting i n some national b a n k notes, t h a t w e have
to c a r r y i n o u r till, b u t w e a r e n o t b o r r o w i n g a n y money.
What difference does i t make?
L e t u s assume that our
demand starts a n d o u r currency begins t o g o cit, r e p a y
them o u t a n d that i s all there i s t o it.
Governor V a n Zandt,
I n ovr district,
w e find that
some o f the banks have quite a large circulation i n proportion:to their size,---as much a s they can carry,--~they
get that new circulation from YVashington, a n d they bring
it r i g h t
i n a n d deposit
Governor Calkins,
None.
i t w i t h u s i n o r d e r t o g e t credit,
W h a t e n d i s served b y that?
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Federal Reserve Bank of St. Louis
Governor Y o u n g .
H o w m a n y cases o f that k i n d d o y o u
have?
Governor V a n Zandt.
Governor Y o u n g ,
W e have a wnole l o t o f them,
W e have o n e bank that t o o k o u t
additional cvrrency i n hundred dollar bills a n d i t has
just b e e n going around i n a circle,
Governor Calkins,
W h a t i s being accomplished b y
process?
Governor Young. N o t h i n g ,
Governor S e a y ,
H a v e y o u e v e r c o n s i d e r e d w h a t woudl
be your credit power i f you h a d outstanding %150,000,000
of Federal R e s e r v e B a n k n o t e s i n s t e a d o f » 8 0 , 0 0 0 , 0 0 0 ?
You will get the eguivalent.
Governor Young.
our district,
I t i s a very peculiar thing i n
O u r issue o f Federal Reserve Bank notes
is: n o t v e r y -tearge,
Go ernor Seay.
that policy.
I t could not b e sir, i f y o u adopt
T h a t i s one measure which keeps i t from
being large,
Governor Young.
how this happened.
W e l l , l e t m e g o backand tell you
S o m e o f our territory, for instance
Southern Minnesota, Wisconsin, Northern Michigan a n d t h e
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Federal Reserve Bank of St. Louis
180
Southern part o f Minnesota, f o r a number o f years h a s beer
ous
doing business v i t h Michigan a n d M i l w a u k e e , P r e v i
the
to the time o f o u r absorbing t h e currency Charges,
currency went out o f Chicago, a n d those districts were
Chicago.
flooded with Federal Reserve B a n k notes o n
That
large a s
is one reason w h y o u r circulation i s not a s
other Federal Reserve Banks.
There i s another reason,that Mr. R i c h has always
been against making that circulation t o o high. A
great
number o f times when other banks participated i n some
notes that were p a i d o u t b y the Treasury Department
here, o u r bank did not participate. I
do not agre? with
that policy o f course, b u t that i s the position that i s
taken,
T h a t i s w h y o u r note issue i s very l o w i n com-
parison with other Federal Reserve Banks.
N o w , we
were shipping o u r o n currency i n t o o u r district, f r e e
We
of (charge, a n d when o u r seasonal demands come o n
will i n c r e a s e s u f f i c i e n t l y
s o that w e will g e t r I d o f
this national bank currency.
D u r i n g the interim, i t
causes u s n o concern a t all, e v e n though i t does bring
our reserves down.
W e are n o t borrowing f r o m the othsr
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Federal Reserve Bank of St. Louis
181
Federal Reserve Banks, a n d i t does n o t necessitate o u r
borrowing y e t .
Governor Seay, I
can recall t h e time w h e n the N e w
York Bank was making t h e same effort that t h e Richmond
Bank was making, t o expand i t s Federal Reserve n o t e issvs,
’
distinctly a communication f r o m Acting GoverI
recall
and
nor Treman.
W e h a d some correspondence o n that, a n d w e
were fully i n agreement t h a t t o the extent t o rhich h e
t
could keep his notes i n circulation, would h e be a d d i n g o
the credit power o f the Federal Reserve B a n k o f N e w York,
and i t h a s p r o v e d i t s wisdom.
The Chairman, W e l l , I
things there.
think y o u are confusing t w e
O u r policy o f issuing notes a t the time
to which y o u refer, w h i c h was during t h e war, r a s designed
for o n e purpose only, a n d that was t o acaimulate gold.
Governor Seay. This w a s before the war,
The Chairman. T h i s was before the war, but i t was
to a c c u m u l a t e g o l d , a n d i t w a s a
policy desi m e d t o anti-
ci p a t e pessiovly o u r b e i n g i n v o l v e d
have g o t the g o l d nor.
in t h e U n i t e d States,
i n the war, b u t w e
T h e r e i s n o gold i n circulation
t o a n y g r e a t extent, outsicae o f
what w e hold, a n d what i s held i n the trust funds i n the
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Federal Reserve Bank of St. Louis
Treasury,
a n d o u r suggestion
o f taking i n bank notes
in
this w a y i s simply t o expand t h e field o f service t o the
member banks.
T r e a t i s all,
w e a e not d o i t nor...
I f
we d i d it, t h e topic would not have b e e n Suggested f o r
the program b y New York, N o w , y o u r motion i s that w e
shall receive unfit notes for the purpose o f sending
them through f c r redemption, b u t that w e Should not receive f i t notes f o r deposit?
Governor Seay. I
taken,
would like t o see that action
T h a t i s i n accordance w i t h t h e s o u n d e s t
of
Federal Reserve B a n k principles.
The Chairman.
Y o u except from your motion,
receipt o f national bank notes. f i t o r unfit, f o r
settlement
o f checks?
Governor >%¢éay. I
feel that that i s a n evil
we cannot thrust a w a y f r o m us,
The Chairman.
I s this motion seconded?
Governor Fandher, i
second t h e motion.
{The motion was put and carried b y a vote o f
and four nays.)
The Ghairman.
T h e motion i s carried, which
that i f we adopt a uniform policy i t shall be not
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Federal Reserve Bank of St. Louis
183
ecive fit-notes o n deposit.
N o w , t h i s raises t h e ques-~
tion a s t o what these banks till do, which are n o w reesiving t h e f i t notes,
I t i s just throwing a lot o f extra
Governor Biggs.
work o n y o u r m e m b e r b a n k s ,
The Chairman.
T h a t i s all,
T h i s action i s not t o receive them,
Governor Biggs.
Receive ¢
not f o r another thing,
them for o n e thing a n d
Y o u receive t h e m i n payment o f
collections, a n d they will send them i n i n one way, and.
then f o r deposit t h e y will s e n d them i n another way,
Governor Seay. B e t w e e n those t w o things, I
do not
think there i s any just relation. N e i t h e r i s there a n y
comparison a s t o the results,
a s t o the volume.
W e all
know t h a t t h e p a r t i c u l a r r e a s o n b y W h i c h w e a r e c o m -
pelled t o receive them from the non-member banks, i s i n
payment
o f checks,
I
n t h e f i r s t place, t h e b a n k h a r d l y
knows a n y d i f f e r e n c e b e t w e e n o n e f o r m o f c u r r e n c y a n d
another »
gete
{ T t has t o p a y u s i n such funds a s i t can
I f i t has n o exchange,it remits i n currency, a n *
it has t o remit such currency as i t has, ani I therefore
think that there i s n o connection between those t r o
performances,
Governor M c VPougale I
Should dislike t o see this
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Federal Reserve Bank of St. Louis
motion carried, i n such a way that the banks would be
bound t o comply with it.
W e a r e operating under t h e
other policy, a n d I think w e shall continue t o d o s o
unless w e a r e m a d e t o s t o p i t ,
Governor Norris. W e l l , I think w e will too, be~cause t h e m o t i o n i s d i a m e t r i c a l l y o p p o s e d t o o u r p r a c -
tice a n d belief,
a t both ends,
The C h a i r m a n .
I t i s i n a c c o r d a n c e F i t h o u r prac.
tice, but opposed to our belief. I
think that we vould
surely take all national bank notes o n deposit, o r for
the purpose o f redemption o r for t h e settlement o f col.
lections,
o r i n any other way, a n d sort them and d o the
work,
Governor Seay.
I s there a n y reason w h y there
should b e uniform action between t h e Federal Reserve
Banks
i n this particular?
Governor McDougal. I
dm't think so, I
think the
circumstances W i l l alter t h e cases,
Governor Seay.
E I do not see that i t i s a q e s t i o n
of m o r e t h a n t h e p o l i c y o f t h e i n d i v i d u a l b a n k .
The Chairman.
D o y o u want t o amend your motion t h c
and put i t the other w a y around?
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Federal Reserve Bank of St. Louis
Governor S e a y .
T h a t m o t i o n earried,
b u t i t i s per-
fectly agreeable t o me that the present practice o f the
Federal Reserve Banks should be a s i t is, and that they
e free t o f o l l o w t h e i r o w n p r a c t i c e s
shouldb
i n these
matters, according t o the conditions which exist i n their
Localities, I
would not like t o have i t thrust u p o n us.
I do not believe t h a t i t i s thoroughly sound i n its reSU1LtS «
do not care t o perform the ser-
I t i s not that I
vice f o r the member banks, I
do not believe t h a t i t
conforms t o good practice.
d o not think w e should have o a
The Chairmane I
currency i n the United States, i n circulation, performing the function o f currency, w h i c h Should n o t b e capable
of being deposited with the Federal Reserve Bank, o r
with a n y other bank,
i n order t o get credit f o r it.
I t
is a pretty poor a n d ridiculous k i n d o f currency t h a t
cannot g e t c r e d i t
adepesited there.
at a
Federal R e s e r v e B a n k w h e n i t i s
I t will get credit in any other
bank.
Governor C a l k i n s ,
notes w o u l d b e p r o m p t l y
the f a c e o f t h e e a r t h ?
Y o u mean t h a t t h e national b a n k
r e p u d i a t e dd
n
a abolished f r o m
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Federal Reserve Bank of St. Louis
36
agree w i t h that.
Governor Seay. I
T h e r e is
a method for i t s retirement.
= e have svill got them with us,
Governor Bigags.
and they a r e good a n d anybody will take t n e m .
A s long
as y o u have f i t currency, w h y Shouldn't t h e Federal R e serve B a n k s t a k e i t f o r d e p o s i t ?
Govermor Seay.
T h e Federal Reserve B a n k Act pre-
seribed t h e character o f funds which should b e paid
into F e d e r a l R e s e r v e B a n k s a n d t a k e n
o n deposit.
The C h a i r m a n .» é n d i t inclinded n a t i o n a l b a n k notes,
Governor Sesy. N o , I don't think so.
:
e
p a he
e e
t s.
t
The Chairman.
“ M ae ys receive
them eo na deposit.
Governor S e a y .
J t may, y e s .
Mr, Harrison. T h a t i s all it says, "Except Federal
Reserve B a n k notes, w h i c h t h e y must r e d e e m ; " but porer
to receive those i s only optional.
Governor S e a y . I
agree w i t h t h e o p i n i o n e x p r e s s e d
by Governor Calkins, t h a t unless w e pursue t h e scientific
method o f handling these notes, which i s that adopted
by t h e T r e a s u r y D e p a r t m e n t ,
there
should r é c e i v e t h e m o n deposit,
i s n o reason w h y w e
h
e are not i n a
at the present time t o receive them,
position
I f i t i s desired
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Federal Reserve Bank of St. Louis
187
to reconsider t h a t motion, h a v i n g voted i n favor o f it,
to relieve t h e other Federal Reserve Banks o f embarassmen’
I would move t o reconsider it. T h e n I would propose a
resolution,leaving i t t o the practice o f the Federal R e serve Banks, leaving i t t o the Federal Reserve Banks t o
establish t h e i r o r m practice,
Governor Young. I
move that t h e Federal Reserve
Banks m a y receive f o r r e d e m p t i o n , f o r account o f the
Treasury D e p a r t m e n t ,
u n f i t n a t i o n a l b a n k notes,
a n d for
deposit, either fit o r unfit national bank notes, using
the word "may" snstead of the word "should."
Governor Calkins,
I s n ' t i t absurd t o have t h e Fed.
eral Reserve Bank a t HKichmond following one practice,
and i t s n e x t d o o r n e i g h b o r f o l l o v i n g
ferent practice?
a n entirely iif-
H a v i n g S a n Francisco follow c n e
practice a n d N e w York a n entirely different one?
I s it
a system o r a bunch o f independent banks, dealing w i t h
the currency o n an independent basis, regardless o f
principles,
o r anything else?
Governor Y o u n g ,
L e t u s take a
specific c a s e .
L e t
us assume t h a t there i s a bank i n your district that i s
in a t i c k l i s h position;
y o u d o n o t know whether t h a t b a n k
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Federal Reserve Bank of St. Louis
is going t o last twenty-four hours o r not,
W o u l d you
not w a n t t o b e i n a p o s i t i o n t o t a k e a n y k i n d o f c u r r e n c y
you could get?
Governor Calkins.
W e w o u l d take t h e linoleum o f f
of t h e f l o o r .
Governor Young.
Y o u r resolution absolutely binds
you u p S o that y o u cannot take national b a n k notes i n
payment o f those collections.
The Chairman.
O h , I
think this i s just t o get t h e
practics, without béing binding.
Mr, Giloert,
T h e r e i s n o reason w h y the Federal
Reserve B a n k s s h o u l d n o t t a k e t h e n o t e s f o r r e d e m p t i o n ,
it does not care t o pay them out, they can send them
to the Treasury. T h a t i s the practice n o w i n Dallas,
I understand it, and i n that way you always take
national b a n k notes,
b u t y o u d o n o t a l w a y s p a y t h e m out.
I d o n o t t h i n k that practice
The Chairman.
i s s o bad.
I f you get too meny, s o that you
cannot p a y them out, y o u c a n s e n d them in.
Governor Wellborn, I
consider, L
second t h e resolution t o re-
a m converted,
The Chairmauma,. Governor Seay's motion i s to reconsice
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Federal Reserve Bank of St. Louis
the original motion.
I s there a n y discussion?
(The motion was p u t a n d unanimously carried.)
Governor séay. I
dislike t o see a n y motion o r a n y
subject, o n which there i s a substantial difference o f
opinion,
a n d where a
mere m a j o r i t y w o u l d f o r c e a
respect-
able minority o f the banks t o perform a practice w h i c h
they d i d not like t o have, a n d I
a m there o r e perfectly
Willing t o propose t h a t i t i s desirable t h a t Federal
Reserve B a n k s s h o u l d r e c é i v e f o r c r e d i t a n d r e d e m p t i o n
by the Treasury Department, u n f i t national b a n k notes,
and that the practice o f receiving b a n k notes o n deposit,
be left t o the several Federal Reserve Banks.
The Chairman.
D
o y o u offer t h a t recolution?
Governor Seay. i
The Chairman,
offer t h a t r e s o l u t i o n ,
I s that resolution seconded?
Governor Young. I
second that motion,
The Chairman. N o w , we have discussed this e e
fully already gentlemen.
Governor Seay.
A r e y o u ready t o vote o n it?
A S a matter o f principle, I
¥Fould
like t o say that I agree rith Governor Calkins, but
with some things y o u have t o use a little expediency
also, having due respect for the opinions o f others,
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Federal Reserve Bank of St. Louis
The Chairman.
T h i s resolution o f yours, Governor
Sesy, seems to conform to the spirit o f the
Act, which
provides t h a t Federal Reserve Banks m a y receive national
bank notes o n deposit.
( The motion ras p u t a n d carried.)
Governor C a l k i n s ,
C n principle, I
feel u n d e r o b l i -
gation t o vote "no," but I object t o being i n so small
a minority, a n d I vill b e counted a s not voting.
Governor Van Zandt. I
the s t a t e m e n t t h a t I
want t o vote "no, b u t o n
was n o t f o i n g t o
sending i n these national b a n k notes,that I
e
cannot afford
tocarry, I am going t o vote "yes,"
the Chairman,
“ 6 1 1 , t h e motion vas
A Question h a s been raised o n topic E
1, b y the Federal Reserve Bank o f Richmond, rhi
ite Gilbert would like t o speak about,
Mi G P a bert.
T o p i c D
has a l r e a d y b e e n c o v e r e d ,
understand i t ?
The C h a i r m a n ,
n
g
s
e
n dais
e
d a n d covéred,
submission
that, m a y I say ir, Chairman, t h a t there rere presented
to u s f r o m time t o time, certain Federal Reserve B a n k
notes w h i c h w e r e n o t n u m b e r e d a n d d i a
n o t have t h e seal
on
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Federal Reserve Bank of St. Louis
of the Treasurer attached, b u t they vere othervise auly
executed.
The Chairman.
e r e t h e y notes o n your bank?
Governor Seay. Y e s , t h e y were notes o n our bank.
tLe h a d detected them, a n d forwarded them t o the Treasury
Department, a n d a few o f them were remitted.
W e also
had a visit f r o m one o f t h e inspectors o f the Treasury
Department, t o endeavor t o get track o f these notes.
It came t o our knovledge---at least w e were informed i n
some way, t h a t these sheets h a d been stolen i n the Treas-
ury Department, which accounted for the lack of the seal
and the lack o f the number,
I n the process o f completion
they were stolen; but, certain other notes were presented
to us, a n d w e forwarded t h e m t o the Treasury f o r redemp-
tion, a n d fhe Treasury advised u s that they could not
be redeemed.
V
6 then tock u p vith h i m the fact that
they had been redeemed, a n d h e advised u s that they
were r e d e e m e d w i t h o u t w a r r a n t
o f law; t h a t h e h a d n o
funds v i t h which t o redeem them, a n d v e n o w have i n the
hands o f the Treasurer a
few o f those notes f o r t h e
account o f o u r member banks, I
was wondering i f any
of the other Federal Reserve Banks h a d experienced t h e
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Federal Reserve Bank of St. Louis
thing,
o r whether t h e Kiehmond B a n k was t h e o n l y o n e
had been placed i n that position?
The Chairman.
‘ T e have not séen any.
to m y attention.
Mr, Harrison.
I t has not
anyway.
T h e r e were a
am n o t s u r e s h a t b a n k i t was,
w
fev unsealed ones, I
e h a d Some unsealed
Federal Reserve B a n k notes t h a t came i n t o o u r possession,
which w e r e r e t u r n e d ,
Mr. Gilbert. I
the only bank.
think t h e R i c h m o n d B a n k W a s n o t
I t may not have come u p i n the same ray
at t h e o t h e r b a n k s however.
Governor M c b o u g a l .
Mr. Harrison.
e r e t h o s e remitted,
No.
Governor McDougale
ir, Harrison.
remember,
T h e y rere s e n t back
Y o u have t h e m now?
Y e s sir, w e have t h e m nor.
w e have t h e m now. I
e e2
d o n o t believe t h a t
any disposition h a s b e e n made o f them,
Mre Gilbert, I
d o not knor whether t h e Federal
Reserve B o a r d has presented this subject t o the Governcrs
or not, I
take i t t h a t i t h a s n o t b e e n presented,
al-
though the Treasurer suggested i t t o the Federal Reserve
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Federal Reserve Bank of St. Louis
Board i n January.
The s i t u a t i o n i 8 t h a t w e h a v e a b o u t ~5,000, f a c e a m o
of Federal Reserve notes o f several banks, which were re~mitted b y the Treasurer, although t h e y h a d n o seal a n d
no serial number,
I n addition t o that, there i s a rela-
Lively small amount o f notes, redemption o f which i s i n
SUSPENSE
B e s i d e s that, a
certain amount o f known theft.
from the Bureau o f Engraving a n d Printing, w h i c h m a y i n volve 44,000 o r 5 , 0 0 0 more.
T h e notes that appeared
without seal o r serial number m a y b e notes'which h a v e
peen s k i p p e d i n t h e p r i n t i n g .
happened, although I
T h a t i s knorn t o have
think the most likely presumption
is that t h e y were stolen f r o m the Bureau o f =ngraving
and Printing before completion, a n d therefore vere i l think
legally issued.
T h e thefts i n the Bureau have I
largely ceased.
T h e y occurred f o r t h e most part during
the w a r period, vrhen they rere working under a
2 4 hour
a day schedule, a n d for the most part, occurred suring
the night shift; f r o m midnight until early morning.
They have all been investigated b y sesret service men,
and they a r e still under investigation, s o m e o f them,
whenever r e s p o n s i b i l i t y c a n b e fixed,
t h e section
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Federal Reserve Bank of St. Louis
concerned i n the Bureau h a s made reimbursement,
thousand j o l l a r s
o f reimbursements
have b e e n p a i d b y t h e e m p l o y e e s
a n d severa
f o r uncompleted notes
o f the Bureau,
O n l y
this week w e have about §.20,000 o f uncompleted notes
that had been partly mutilated, which were stolen and
have since been discovered,
T h e r e i s a n excep tionally
¢lose watch k e p t a l l t h e time, a n d secret service operatives a r e constantly a t the Bureau.
T h e question
which was presented b y the Treasurer t o the Reserve Board
c&;
was whether,/the Treasurer of the United States remitted
these incomplete notes which were presented i n repuler
course,
him.
t h e Federal Reserve Banks vould reimburse
I n the absence o f reimbursement, t h e Treasurer
has n o funds o u t o f which t o pay the notes,
I
t isa
situation which could be presented t o Congress, a n d which
will ultitately have t o be presented t o Congress i n any
event, i n order t o relieve ths accounts o f the Bureau o f
Engraving a n d Printing.
P e n d i n g s u c h relief, t h e
Treasurer h a s a feeling that, ;
of the Federal Reserve System,
f
r
o
m t h e viewpoin:
i t would b e a "wise measure
to assume w h a t burden there might b e i n carrying these
incomplete notes pending t h e ultimate relief; t h a t t h e
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Federal Reserve Bank of St. Louis
preservation o f the free circulation o f the Federal R e serve B a n k notes, a n d the desirability o f inspection
to see whether t h e serial numbers were there, W o u l d
probably c a r r y t h e b a l a n c e
i n favor
o f redemption;
but
in the absence o f such provision, t h e Treasurer, f o r
his o w n protection, w o u l d feel obliged t o refuse t o redeam t h o s e ,
G n the absence o f a n y xvord from the Board,
the T r e a s u r e r n o w r e f u s e s
Governor Seay.
lir, Gilbert,
t o redeem t h e incomplete notes,
Y o u mean, t h e y have n o legal status?
T h e y have n o légal status, anid i t i s
a Question whether the Reserve Banks want him to remit,
and i n the meantime carry that burden, whatever i t may
be, ---10,000,
Congress.
W
o r whatever i t is, pending relief f r o m
e realize t h a t under t h e Federal Reserve
Act, t h e Federal Reserve B a n k notes a r e called obli-
gations o f the United States, I
do not know hor far
that places t h e obligation o n the Treasurer t o redeem;
but a t least, h e has n o w a y o f reimbursing himself,
in
case h e pays t h e notes, unless t h e banks d o propose t o
stand behind him.
Governor
M c Dougal.
T h e y a r e unconditional promises
of t h e U n i t e d S t a t e s a n d i t d o e s n o t t a k e a
number
cr a a
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Federal Reserve Bank of St. Louis
seal t o make t h e m good, d o e s i t ?
Mr. Gilbert,
T h e notes r e a d "The United States o f
America promises t o pay."
Governor Seay.
T h a t i s the point i n which w e are
interested, whether o r not they were legal obligations
of the United States,
Mr. Gilbert,
T h e r e i s a n express proviSion, under
which w e would p a y them i f they were U n i t e d States note
under s i m i l a r c i r c u m s t a n c e s ;
b u t there i S n o Such pro-
viSion i n the Bederal Reserve B a n k notes. I
think
probably there ought t o be, b u t i n the absence o f such
provision,
w e f e l t t h a t t h e b e s t w a y w a s t o have t h e
thing carried along, pénding legislation,
Governor S e a y .
legal obligations,
T h e decision i s that t h e y are
b u t y o u have n o funds
t o p a y them
with?
uP, Giloert, Y e s . I
think they a r e legal obli-
gations,
Mr. Harrison.
I n that connection, t h e thourht
occurs t o me, t h e Secret Service h a v e already procured
prosecutions
a n d convictions u n d e r t h a t statute v h i c h
authorized convictions for forging United States notes,
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Federal Reserve Bank of St. Louis
for t h e s e p e o p l e w h o h a v e f o r g e d F e d e r a l K e s e r v e B a n k
notes,
T h a t oecurred i n New York, a n d the court i n
New York has held they were notes o f the United States,
under that section.
Y o u l d n o t that protect you?
T E thick-ncot,.
Mr. Gilbert,
very b r o a d terminology,
securities
T h a t statute h a s a
a n d covers a n y obligations
o f t h e U n i t e d States,
D
or
o y o u mean under
the special United States notes act?
Mr, Harrison.
A s I understand t h e decision,
Mr. Moran t o l d m e about it, a n d h e said that the conviction was obtained under that provision o f the l a w
which authorized convictions o f the forgery o f United
States notes, a n d that t h e court sustained their contention i n t h a t c o n n e c t i o n .
Mr. Gilbert, I
d o not believe t h a t i s necessary,
It seems t o m e a little o d a t o rely o n that law,
ir. H a r r i s o n .
Y o u méan o n account
o f the chrase
"other securities”?
Mr, Gilbert,
Yes, a
Federal Reserve B a n k note
is a much more direct promise t h a n the Federal Reserve
Bank act seems t o contemplate, b u t that i s another
duestion.e
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Federal Reserve Bank of St. Louis
The Chairman. I
agree w i t h you. I
think the
printing o f these notes i n the f o r m o f a n obligation o f
this c h a r a c t e r w a s a
Governor Seay,
mistake f r o m t h e v e r y beginning.
W w e fesl that t h e holders o f these
notes have perhaps some rights, a n d i t i s a question o f
how they should b e treated, although there are only a
very f e w o f them.
The Chairman.
W e l l , Mr, Gilbert,
as 1
understand,
the F e d e r a l R e s e r v e B a n k Act, t h i s i n v o l v e s a l l F e d e r a l
Reserve Banks, a n d not withstanding t h e notes that were
stolen f r o m the Bureau m a y only have b e e n the notes o f
the Richmond Bank, there might b e many others.
kr Gilbert,
T t i s a thing that i s likely t o arise
with m o s t a n y o t h e r b a n k .
Governor Seay.
I f there a r e that m a n y outstanding,
there i s more t h a n t h e Richmond Bank involved.
Mr. Harrison.
I f they are legai obligations o f
kind, without t h e seal a s a matter o f operating con-
venience, Wouldn't e e e e s :
perhaps t o have these
particular notes redeemed a t the Federal Reserve Bank,
and then they would necessarily h a v e t o stand the loss?
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Federal Reserve Bank of St. Louis
Tren t h e T r e a s u r e r o u l d . refuse
t o reimburse them,
Mr. G i l b e r t , Y e s , ‘ T h a t i s a
matter
o f procedure,
The Chairman. W h a t rcould you like to have this
meeting d o about t h e s e notes hr, Gilbert?
D o y o u want
us t o t a k e a n y action?
Mir, Gilbert. I
as t o t h e a t t i t u d e
would l i k e t o h a v e s o m e e x p r e s s i o n
which
t h e Reserve Banks F i l l take,
The Treasurer thinks t h e y should b e paid, a n d wlll g o t o
Congress, a n d get such relief a s m a y b e necessary.
1 %
is another question whether v e g e t the relief}, b u t w e
probably vill.
The Chairman.
i i i g h t t h e suggestion b e that t h e
Federnl Reserve Banks indicate a
tillingness t o take u p
these notes a n d carry them, provided t h e Treasury Department will make a n effort t o secure legislation vhich
will p r o v i d e f o r r e i m b u r s é m e n t ?
Mr, Gilbert,
otherwise
T
f reimoursement
i s obtained,
b y collection f r o m responsible employees
through other means i t b e récovered,
o r
or
w e will reimburse
immediately.
Governor Biggs. W o u l d n ' t y o u put a stop limit o n
that? T h a t might b e very far reaching. T h e r e are
theftsin t h e T r e a s u r y D e p a r t m e n t ,
I
t might fall o n
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Federal Reserve Bank of St. Louis
bank,
i n a
very h e a v y amount a n d i f y o u obligate y o u r ~
self t o protect that, i t would be very far reaching i f
Voria
n o t paveca s t o p Limit
The Chairnan. I
o n it.
understand that t h e limit i s in-
aicated b y Mr. G i l b e r t ' s s t a t e m e n t ,
v h i c h was t o the
effect that there v a s about 410,000 involved.
Governor Biggs,
Y e s , b u t there might b e 4,
Strer d a y .
The Chairman,
now.
‘ é 6 aré not dealing vith that subject
w e are dealing w i t h another question.
Mir. Gilbert, I
up t o 1 0 , 0 0 0
think i t would b e quite all right
o r u p t o ~20,000, j u s t s o a s t o give a
working f u n d o u t o f rhich t o handle these o d d s a m ends,
There have been relatively f e w i n the last year; prob~
ably not over a few hundred dollars,
The Chairman. W h a t would y o u sugrest?
T e n thou
sand d o l l a r s ?
Mr. G i l b e r t .
T
o cover a l l banks I
should s a y
about %20,000.
The Chairman.
Governor Biges?
W o u l d that meet your Question,
2 0 , 0 0 0 2
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Federal Reserve Bank of St. Louis
Governor Biggs, w h y , that is something within reasc
I do not know mhat point might b e kept, b u t i t might b e
possible f o r a n enormous l o s s t o t a k e p l a c e a n d i f t h s b a r
would obligate itself t o take care o f all that,
i t might
cripple i t badly.
Governor Seaye M i g h t y o u not word the resolution
t such notes, n o t believed
to say that with r e s p e c t ’ o
to exceed $10,000, i t is the opinion that the Federal
Reserve Banks should remit s u c h notes a n d take u p their
ultimate r e d e m p t i o n w i t h t h e T r e a s u r y D e p a r t m e n t ?
The Chairman.
YES,
M
y suggestion went a
little
further t h a n that, because i t included the affirmative
Statement b y the Treasury LDeparvument that they vould
appeal
t o Congress f o r a n appropriation unless reimburse-
ment was effected b y contribution o r something o f that
sort.
I n other words, o u r action Would b e predicated
upon the express intention b y the T r e a s u r e r o f a n
appeal t o Congress f o r this purpose,
Mr, Gilbert, I
think i t i s true, that a n incomplete
note, i f a n cbligation a t all, i s first a n obligation o f
*
thé Federal Reserve Bank, a n d then secondly a n obligation
of the United States, i f that is material t o this dis2 SSLoON.
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Federal Reserve Bank of St. Louis
Gcvernor N o r r i s .
I
s a n i n c o m p l e t e n o t e a n obliga-
tion o f anybody?
Nee G i l bering
b h at-ad 1.
Governor Calkins,
T h a t i s a more vital question.
Is a n i n c o m p l e t e n o t e a n o b l i g a t i o n
Governor Biggs.
o f anyone?
I s n ' t i t a counterfeit, a n d ought
it not b e treated a s a counterfeit?
Governor hicDougal.,
are n o t a n o b l i g a t i o n
I t seems t o m e that these notes
o f the Federal Reserve Bank, because
they were n o t issued b y o r through the Federal Reserve
Bank; t h a t t h e T r e a s u r y D e p a r t m e n t i s . asking u s t o d o
Something. vyhich i s inconsistent.
A t the same time, I
understand f r o m Mr.Gilbert t h a t there i s n o other w a y
fa which they can treat these notes, b u t I think the
important q u e s t i o n i n v o l v e d i s a s t o whether
o r not the
Federal Reserve Bank, w h e n tendered these notes, i s going
to honor t h e m o r accept them,
Governor Norris,
w h y should they?
Governor McDougal. I
do not think we should, unless
we h a v e r e a s o n a b l e a s s u r a n c e f r o m t h e T r e a s u r y D e p a r t m e n t
that t h e y w i l l p r o t e c t u s ,
Governor Norris,
W h y should they b e honored?
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Federal Reserve Bank of St. Louis
The Chairman.
t
y be.
e
h should
F o r t h e l i f e o f me, I
W e have never received them.
Governor Biggs.
The Chairman.
Guestion.
cannot s e e w h y
A n d never issueq them.
B u t I understand t h a t i s n o t t h e
I t appeals t o m e i n the first question,
as e
Question o f comity between the Reserve Banks and the Treasury Department,
i n dealing temporarily w i t h a situation
which could probably b e vorked out b y an act o f Congress
or b y a contribution f r o m the various divisions o f the
Bureau w h e r e t h e s e t h e f t s o c c u r r e d ,
T h e y I
understand,
are i n the habit o f making g o o d these little faults t o
standpoint, I
cannot s e e how,
if the theft occurs i n the course o f printing a note which
has n e v e r b e e n i s s u e d t o us, w h i c h i s o n e o f t h e e s s e n -
tial acts of the issuing of these notes,-~-I cannot see
how the Federal Reserve Board ever became obligated i n
any Vay upon it; but I vas not thinking o f that feature
of i G a h A g s I
think there
i s a
matter
o f conven-
tence involved, a n d a matter o f comity between the
Department a n d t h e Reserve Banks,
I
f i t i s only t e n
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Federal Reserve Bank of St. Louis
or trenty thousand dollars, r a t h e r t h a n have a n y q e s tion a r i s e w i t h t h e p u b l i c
of
a s t o t h e existence
possibly a great mass o f this stuff outstanding, w h i c h
might c a u s e a n x i e t y a b o u t c u r r e n c y a s f a r a s o u r b a n k
is concerned, I
vould rather s e e t h e Federal Reserve
reasonable proper share o f this
Bank o f New York take a
small amount a n d carry t h e m until they c a n b e fixed u p
by the a i d o f the Treasurer e
w e l l , that might b e a bad prece-
Governor wellborn.
dent t o establish.
T h e r e might b e large losses o c a r
that w a y i n the future,
T h a t might b e a bad precedent,
because
think.
i t i s unsound I
Governor o 6 a y e
I
f i t i s a n obligation
o f the
f question whether t h e y e a n c
enkg 3 0 r e d e e m t h e m o r a n t e
The Chairman, I
camot see that, o r a t least I
would have t o have t o o r three lawyers first.
Governor McDougal. 1
they h a v e i n n
f
should like t o inGuire whether
t r i s time,
o r know h o w m a n y o f these
notes a r e floating,
Mr. Gilbert. I
a fery f e w dollars,
think ve can ascertain that within
T h e Bureau o f Engraving keeps a n
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Federal Reserve Bank of St. Louis
205
account a s t o the saper, a n d t h e y a r e ¢cxamined regularly.
I think the total credit t o those accounts i s about
20,000,
wLO, 000.
a n d the total that i s printed u p i s about
T h e r e i s a gap o f about $10,000 between t h e
total a m o u n t a n d t h e i n c o m p l e t e n o t e s rendered.
Governor wellborn.
I s there a n y Question before
the meeting now?
The Chairman.
T h e r e i s n o motion befSre t h e m e e t
Governor Seay. I
to b e settled,
think this i s a matter which ought
T h e notes a r e i n circulation,
I t is
thought that they a r e legal obligations o f the Treasury
Department, a l t h o u g h i t m i g h t t a k e t r o o r t h r e e l a w y e r s
to c o n v i n c e G o v e r n o r S t r o n g .
I t seems t o m e that i t i s
subject t o debate whether i f they a r e legal obligations
of the Treasury Departmemt, t h e y c a n call o n the Federal
Reserve B a n k s
t o r e d e e m them.
Therefore
i t seems
to
me that w e might a c t i n conforming w i t h the suggestion
of thé Assistant Secretary o f the Treasury that w e take
that action.
T h e Richmond B a n k i s willing t o carry
them upon the assurence t h a t t h e Treasurer vill a p p e a l
to Congress f o r the redemption o f such notes.
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Federal Reserve Bank of St. Louis
Thé C h a i r m a n ,
a n o t h e r c o u r s é o c c u r r e d t o m e y---1
am thinking particularly o f t h e question o f precedent,
which somebody raised,---that i s whether o r not this
discussion i s a
Suitable r e c o r d u p o n w h i c h t h e Federal
Reserve Banks should act; whether possibly y o u veuld
not be willing t o write a letter t o Governor Harding,
ir, G i l b e r t ,
that i n January.
T
e have already done that, 1
ae
i f the banks prefer n o t t o act until
after having examined that, I
think i t vould b e quite i n
order.
Governor Calkins,
Y o u have touched lirhtly o n
one aspect t h a t I think should b e dvelt upon v e r y ser.
Liously.
I f the g l a d tidings should b e Spread abroad
that there were i n circulation large volumes
o f genuine
Federal R e s e r v e B a n k notes which rere n o t
food, w h a t
would b e the effect o n the standing o f
the Federal Reserve
Bank notes, a n d h o w f a r rould they b e presented
f o r p a yment i n gold?
The Chairman, I
think that i s a bad thing t o have
happen.
ie, G i l b e r t ,
T h a t w a s the point o f view upon Fhieh
the Treasurer presented i t t o the Boards
t h a t i t was
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Federal Reserve Bank of St. Louis
necessary t o protect t h e currency.
The Chairman. I
have n o t said this, b u t I felt
when Mr. Gilbert w a s speaking t o me about it, t h a t I roul:
rather take u p our share a n d charge i t off than t o have
this happen.
Governor S e a y .
w
e f e e l t h e s a m e way, a n d t h a t i s
the reason that the Richmond Bank brought i t up, because
somebody's rights are concerned i n the matter, o n d i f
it i s a
legal obligation
i t o u g h t t o b e settled.
Rather
than have the matter abandoned back and forth, a n d become a
matter o f discussion,
r e greatly prefer
t o take
it u p ourselves,
The C h a i r m a n ,
portance,
i t t6 a
matter
c f sufficient:
im—
i t sears t o me, t o justify taking action o f
thes s o r t e a l t h e wmeevings,
“ é m i g h t a s k Mr. H a r r i s o n
to procure t h e letter that Hr. Gilbert rrote t o Governor
Harding a n d have i t examined b y h i m a n d possibly b y Mr.
Logan vith a viev t o the preparation o f a letter t o
submit t o this meeting which rould convey affirmatively
to Mr, Gilbert what action w e would propose t o take,
reserving o u r rights as.aganinst t h e establishment o f
By p r e c c d e u t .
W o u l d that course appeal
t o you as
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Federal Reserve Bank of St. Louis
satisfactory, M r . Gilbert?
Mr, Gilbert,
T h a t i s satisfactory.
Governor Calkins, I
wish t o offer a motion t o that
effect, carrying o u t that suggestion.
Governor Young, i
secmd the motion,
(The motion was p u t a n d carried.)
Governor Young.
U n d e r that same topic, may I bring
up something else that may throm a little light o n Richmond's large circulation?
The Chairman.
Yes,
Governor Young. I
wish t o make inquiry a s t o what
proviSion v e have f o r knowing t h a t another Federal Reserve
Bank does n o t receive a n d p a y out some o f our Féderal R e serve B a n k notes? I n f o r m a t i o n i n m y possession a t the
present time shows that the Comptroller's department d e livered some o f our F e d e r a l Reserve B a n k notes t o the
Federal Reserve Bank o f Hichmond, a n d the Federal Reserve
Bank o f Richmond p u t the netes i n t o circulation.
were o u r notes i n a package bearing o u r label,
caught t h e o p p o s i t e e r r o r
pay o u t the notes,
i n o u r office,
T h e y
W e
a n d 3Jid n o t
N o w , w e will redeem thoSe i n gold.
I don't know what protection w e have o n that,
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Federal Reserve Bank of St. Louis
Governor Seay. I
suit,
hope that y o u wont press your
I t might subject u s t o a fine,
Governor Young.
The Chairman.
No. I
wont d o that.
T h a t puts y o u i n Quite a
fix,
How
are there?
Governor Young.
S o far, o n l y $5,000 t h a t " e knor
That is, w e got a (5,000 package o f theirs a n d
got 45,000 o f ours.
Governor Seay.
Governor Young.
Governor S e a y .
W h a t d i d w e d o with those?
Y o u paid t h e m out.
T o "hom?
Governor Young. I
Seay.
don't know t o whom.
H o w d o you know that w e did pay
them out?
Governor Young.
T h a t i s what t h e Comptroller's
department t e l l s u s ; t h a t y o u p u t t h e m i n t o c i r c u lation,
Governor Seay.
T h a t i s subject t o verification.
I will n o t a c c e p t t h a t w i t h o u t p r o o f ,
Governor Young.
T h i s was just given to m e before
I left t h e office,
The Chairman.e: Governor Young, the Federal statute
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Federal Reserve Bank of St. Louis
provides a
certain remedy b y way o f penalty, a n d y o u
might c o l l e c t y o u r 1 0 p e r c e n t f r o m G o v e r n o r S e a y ,
Governor Y o u n g .
else,
T h e p e n a l t y g o e s o n t o someone
I t does n o t come t o us,
serious p a r t o f this.
I
T h a t i s not the
f there i s a n y great amount
of this, what protection has the Federal Reserve Banks?
Governor Seay. D o e s i t need any?
Governor Young,
Y o u are putting o u t $40,00
i n
gold against that, a n d putting them i n circulation a n d
when they come i n w e pay ©100 i n gold against them,
We n e v e r p u t t h e m out.
Governor Seay.
circulation
D o y o u mean they were p u t o u t i n
b y the Richmond Bank?
Governor Young,
L O G 5 T h e y Went o u t & s your
circulation.
Governor Seay, I
d o not think a s a matter o f
accounting, t h a t w e sould d o it,
Mr, Harrison.
T h e correct w a y f o r h i m t o d o
would b e for h i m t o send his notes i n t o the Treasury
Department for redemption, a n d get his gold o n them,
Governor Young.
T h a t i s all right for that
#5,000, but how much more o f it is there?
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Federal Reserve Bank of St. Louis
The Chairman.
T h a t would not answer t h e question,
because f o r t h e 65,000 notes y o u have got, y o u "ould h a .
given something.
Y o u have t o get back $5,000 from
Richmond i n some w a y o r other,
Governor Calkins, I
think the o n l y remedy i s t o
Richmond g e t t h o s e n o t e s b a c k ,
Governor Young.
F e think t h e remedy should b e some
protection i n the Comptroller's office s o that w e will
kmow h o r these notes a r e going out,
SEE 6 T h e r e m i g h t b e o t h e r c a s e s , I
It i s t h e o n l y o n e t h a t w a s b r o u g h t
T h a t i s all I can
d o n o t knor,.
t o o u r attention.
It i s just a matter o f luck that w e d i d not p a y o u t the
Richmond Bank's notes.
The Chairman.
D o y o u wish t o offer a
resolution
calling this t o Mr, Gilbert's attention and asking for
an inquiry?
Governor Y o u n g a
The. Chairman.
Y e s sig;
T h e motion offered b y Mr. Young i s
that this inadvertance b e brought t o the attention o f
Assistant Secretary Gilbert, with the request that some
inquiry b e made a s t o the practice i n the Comptroller's
office
i n New Y o r k f o r these issues
o f Federal Reserve
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Federal Reserve Bank of St. Louis
Bank n o t e s e
T h a t there m a y b e n o ¢ onfusion,
Governor Seay.
I think t h a t t h a t h a d better
b e submitted
i n writing
by the Federal Reserve B a n k o f Minneapolis,
i n a com-
munication t o the Secretary o f the Treasury o r the
Comptroller,
i n order that t h e facts m a y all b e pre-
think the proofs
sented, and n o confusion arise. I
had better b e given.
Governor Young. I
done. I
do not knor, I
Governor S e a y .
I
think that has already b e e n
will b e g l a d t o act o n that.
f it is a
matter
o f importance,
I think that should b e done,
The Chairman.
this
W o u l d you be willing t o submit
i n Friting?
Governor Young, C e r t a i n l y .
The Chairman. T h e n the motion i s that the request submitted i n writing b y Governor Young f o r in-
quiry b y the Assistant Secretery o f the Treasury shall
be made through this meeting, a n d with i t s approval,
(The motion was put and carried.)
The Chairman.
W
e have here a
matters t h a t c a n b e s u b m i t t e d
number o f r o u t i n e
t o Mr. G i l b e r t
i n the
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Federal Reserve Bank of St. Louis
215
usual course, a n d I would like t o ask h i m nov t o indicate
what topic h e would like t o consider o n this program.
Mr. Gilbert,
T o p i c ¢C i n Section 2: "Reimbursement
of fiscal agency expenses.
(c) K e i m b u r s e m e n t o f fiscal agency expenses,
(Federal Reserve Bank o f New York.)
The Chairman. I
Would like t o explain w h y w e
put t h a t o n the p r o g r a m .
sirable
t o endeavor
W
t o clean
e Considered that i t was d e u p all
o f t h e 0 1 4 accounts
of expense incurred i n emnection with the Liberty loans
and the Victory loan, a n d I believe w e have succeeded
in having final settlement o f those accounts, P o s s i b l y
all t h e o t h e r R e s e r v e B a n k s h a v e a l s o h a d f i n a l settile-
ments, b u t that leaves a
very large current account, o f
expenses which will r u n along until June 3 0 t h I under-—
Stand, a n d then w e c a n expect reimbursement f o r the
items u p to that date, b u t beyond June SOth, n o appropriation has been made b y Congress s o far.
f e have
considered this situation i n the b a n k i n New York, a n d
the officers o f the bank a r e agreed that a s a matter
of policy,
Banks
i t would b e wise f o r the Federal Reserve
t o continue
t o perform t h e services f o r t h e
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Federal Reserve Bank of St. Louis
Treasury a s fiseal agents, t h a t have b e e n performed
right along, a n d t o assume a n y further functions i n
that capacity that t h e Treasurer feels Willing t o delegate t o them; without expectation o f reimbursement o f
‘
expenses.
Now, t h e reason f o r suggesting this principally i s
that the Federal Reserve Act now makes n o provision
whatever f o r reimbursement o f a n y expense,
o r 6ven---
I mean reimbursement b y way o f payment f o r services,
nor rsimbursement f o r actual o u t o f pocket expense.
It i s 2 blank o n the subject, a n d the T r e a s u r e r h a s
heretofore a s s u m e d t h a t t h e e x p e n s e s
o f the Liberty
loans for instance, were payable out o f the percentage
appropriation made p y Cungress,
N o w , t h a t that ap-
w reach the
propriation rill shortiy b e e x h a u s t e d , e
point where w e will b e dependent u p o n Congress every
year f o r a special appropriation bill t o reimburse
us f o r a
2
o r f o r a n y services w h i c h w e might
feel e n t i t l e d t o b e p a i d for; a n d I
believe t h a t t h a t
puts the Federal Reserve Banks i n a position where
their a c t i v i t i e s m a y b e c o n t r o l l e d
legislation. I
b y appropriation
think that i s distinctly a n undesir-
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Federal Reserve Bank of St. Louis
215
able thing.
T h e first thing y o u knoz, w e m a y have
Gongress passing acts subjecting the employees o f the
Federal Reserve Banks t o the Civil Service rules o r
the
something of that sort; and so long as/legal position,
in making these disbursements o u t o f our own income,
and not seeking reimbursement,
C a n b e maintained, I
would r a t h e r p a y t h e b i l l s a n d r é d u c e t h e a m o u n t
of
our franchise tax, payable t o the Treasury, rather
than pay a larger t a x a n d seek reimbursement b y appropriation. I
think t h e R e s e r v e B a n k s a r e i n a
mich s a f e r p o s i t i o n t o e x e r c i s e t h o s e f u n c t i o n s
most efficient w a y possible,
i n the
L e t u s p a y What salar-
les w e ought t o p a y t o get i t done properly, a n d b e
perfectly free from Governmental control through appropriation b i l i s ,
M r . Gilbert, I
have n o doubt,
has
views o n this subject, a n d I would like t o hear them,
Mr. G i l b e r t ,
views
B y that, I
think y o u r e f e r t o m y
o n some action o f the Committee o n Appropriations
in Congress.
A
S y o u a l l know, t h e T r e a s u r e r h a s , f r o m
the first, taken the position that i t would make reimbursément through t h e Federal Reserve Banks f o r actual
out o f p o c k e t e x p e n s e s
i n connection with t h e fiscal
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Federal Reserve Bank of St. Louis
216
agency operations,
the r e i m b u r s e m e n t
W e would be quite prepared to contim
i f t h e appropriation w e r e available,
You know, w e submitted a request t c Congress a t the last
session f o r a n a p p r o p r i a t i o n s u f f i c i e n t
i n amount t o
cover t h e reimbursable items d u e t o the Federal Reserve
Banks « A f t e r s o m e discussion, including a
discussion
on the floor o f Congress, Congress flatly refused t o
provide t h a t a p p r o p r i a t i o n ,
a n d b o t h i n Committee
and
on the floor, representative members o f Congress stated
that i n t h e i r o p i n i o n t h e F e d e r a l R e s e r v e B a n k A c t r e Quired F e d e r a l R e s e r v e B a n k s
and t h a t t h e y d i d n o t p r o p o s e
t o render t h e services,
t o provide reimbursement.
Some members made that statement 1 think, with the
thought i n mind that i t would reduce t h e franchise t a x
if the Federal Reserve Banks absorbed t h e expense, a n d
Said that they quite understood w e were prepared t o
accept the situation o n that basis, T h e r e were also
several political speeches against Federal Reserve Banks
in connection with this fiscal agency appropriation,
by some o f the people f r o m t h e South a n d West.
T h e
Treasurer i s Quite prepared t o g o u p t o Congress a g a i n
under r a t h e r m o r e f a v o r a b l e c i r c u m s t a n c e s
a n d request
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Federal Reserve Bank of St. Louis
the necessary -&ppropriation.
tation that w e would g e t it.
W e have n o real expecw e might g e t it. T h e
Treasurer i s also Quite prepared,
i f the Federal Reserve
Banks are ready t o assume the expense, a n d t o relinquish
the r i g h t
t o r e i m b u r s e m e n t f o r t h e o u t o f p o c k e t expenses,
to make n o further recommendation t o Congress, a n d l e t
the matter r u n along f o r a
year o r so, i n order t o see
whether t h e earnings o f the Federal Reserve Banks w i l l
permit i t after a
few years,
T h e r e might b e some
Question whether, when matters g o a little further,
whether the Federal Reserve Banks will b e able t o absorp
the expense,
I
t might become disproportionate a n d
be a large i t e m i n their current expenses, I
think there
i& bilynome qualification, that i f the Treasurer should
undertake a n y exceptional operation, s u c h a s n e w note
issues o r bond issues, w e would expect t h a t a sufficient
profit would b e made o f f those t h a t the Federal Reserve
Banks w o u l d n o t b e c a l l e d u p o n t o b e a r t h i s e x t r a _ o r d i n .
ary G&pense, a n d that what i s now i n question i s the
reimbursement f o r g e n e r a l f i s c a l a g e n c y e x p e n s e s a n d
certificates.
P r e s e n t current expenses,
Governor Fancher,
T h a t is, beginning June 30th?
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Federal Reserve Bank of St. Louis
Mrs
G i Lbert.
Y e s sir,
Governor Wwellborn.
I
t strikes
m e that a
may a r i s e s o m e t i m e a b o u t d i v i d e n d r e q u i r e m e n t s
Federal R e s e r v e B a n k s ; s t o c k s .
Question
o f the
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Federal Reserve Bank of St. Louis
Governor W e l l b o r n .
M r . Chairman,
i t strike m e
that t h e question m a y arise sometime about t h e dividend
requirements o f the Federal Reserve Banks.
I t seems
to m e w e ought t o g o o n record w i t h regard t o paying t h e
expenses o f the Fiscal Agent Department, because I
appresere
we w i l l h a v e d u l l t i m e s s o m e t i m e l i k e w e d i d i n 1 9 1 6 a n d
the question t h e n will b e a s t o earning dividends.
Governor Fancher.
A b o u t what would b e the estimate
for the fiscal year?
think i t wes approximately three
Mr. Gilbert. I
and one half million dollars~--between three a n d three
think probably t h e t i s 4
and o n e h a l f million. I
little
high.
M a y I ask i f that includes t h e opera-
Governor Seay.
tion o f the W a r Savings Department?
Mr. Gilbert.
No. I
a m prepared t o talk t o y o u about
control o f the W a r Savings.
Governor Morss.
D o e s t h e sllowence f o r expenses - n
the bond issues includes t h e cost o f the bonds?
ir. G i l b e r t .
expires J u n e 3 0 t h .
I t does under t h e existing law, w h i c h
W e have a n appropriation
o f o u r own.
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Federal Reserve Bank of St. Louis
Goneress h a s orovided f o r onerntions
zovernor jieDoucal.
i n ashincton.
I s i t your understandtas
mot c o n t s n o l e t s t h a t t h e b a n « s ~ o u l d b e
exoenses!:
dr. Gilosrt.
statements
n
o
t so stated i n the lam, but
i n t h s hearinzts
a n d o n the floor o u l d
s o indicate,
and the amount orovided i s a clear indication o f that.
They c u t dovn t h e e3atimate f r o m seven a n d o n e cuarter
million dollars t o three a n d three quarter million dollers
on the understanding t i F e d e r a l Treasury “ould not
reimburss
the
r
o
l nesarvye B a n x s .
zettin= t o o much i n the
the a o o r o v r i a t i o n c o m u i t t e s ,
a n d i t i s a nice
of policy, “hethsr i t is “orth while t o bring i t
Ressrve canzxs h a v e b e e n a d s o r v i n t t h e s x ens:
executive
officers
whose
exclusive
duties
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Federal Reserve Bank of St. Louis
with t h i s m a t t e r .
think that i s being done.
Mr. Gilbert. I
M r . Chairman, w h a t i s the v i e w
Governor Calkins.
of the Federal Reserve Board i n regard t o this matter?
asked t h a t q u e s t i o n s p e c i f i c a l l y
The C h a i r m a n . I
formerly, b u t i n various discussions, particularly I
with G o v e r n o r Harding, I
Governor S e a y . I
think
have n o t h e a r d a n y opposition.
can s a y that Governor Harding w e s
present a t one o f o u r Board meetings about t w o months a g o
and h e asked i f the Richmond B a n k was willing t o assume
those charges, t h a t is, informally, indicating a s I
thought, a n d a s w e thought, t h a t t h e disposition o f the
Board w a s favorable t o it, although n o t committing t h e Boar.
to thet attitude.
Mr. Harrison. I
was speaking t o Governor Harding
sbout it, Mr. Strong, a n d h e told. m e h e thought i t was a
matter that should b e settled between t h e Federal Reserve
Banks a n d the Treasury Department.
The Chairman.
W e l l , i t i s the last think i n the chai
to convince m e that w e are i n a position t o relieve M r .
Gilbert o f the unpleasant d u t y o f going u p and arguing
this matter o u t with t h e Appropriations Committee. I
Bhink we are i n a very much better position t o absorb this
2e2
expense. I
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Federal Reserve Bank of St. Louis
supdose t h e b a n k i n N e w Y o r k m u s t h a v e p r e t t y
nearly one-half o r tha total g e n s s , h a s i t not?
vir. Gilbert. I
The Chairman.
should s a y about o n e third.
a n d I
a m very sure s e would b e vary
aiad t o a b s o r b o u r s h a r e o f t h i s e x d e n s e a n d p a y L G S i t oOF.
our sarninzs rather t h a n r u n the r i s x o f interfsrence
of the character that a n apvrovriation mitht indulze i n
in comnection ~ith aosrooriation legislation.
think you are right about it.
Govarnor Miller. I
Governor Seay»
I a m i n full accord too.
Does anyone desire t o offer a resolu-
point that I
wanted t o
bring u o to be referred b y our Board.
Governor sicQougal. {
believe i f the act: contemplates
hat se should absorb the exvense that ve can be required
to abdsord it.
O u r Board has t i v e n some consideration,
BS
and
for instances, t o the ex2ense o f avsoroing var savings
other Fiscal Agency things a n d ~ e believe v e should b e
reimbursed.
The chairman, G o u l d you nersuate them t o the con-
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Federal Reserve Bank of St. Louis
Governor wcDougal.
Obs f
a m sxeaxing
nov, a n d I
I d o n o t ano7 ~hether “ 6 could o x
o f the General Fiscal agent's expensss
d o not t h i n k t h e f a c t t h a t i t -ould reduce
our f r a n c h i s e t a x s h o u l d b e t a x e n i n t o consideration,
caus2 t h a t ~ o u l d b e v e r n a s s s i m p l y a
Governor F a n c h e r . I
be-
subterfure.
would l i x e t o i n g u i r e o f ir.
Gilbert h o w hse feels pnersonally, “hether h e wants t o make
another a t t e m o t
o r ~hether h e w o u l d o r e f e r t h a t t h e m a t t e r
be taxen over no? a n d settisd, t h} e banks t o assume t h e
expense.
Me. Filbert. I
think I “ould prefer
Governor ranch:
i t n o u t soine
t o have t h e banks
assume
tions G C o m n i t t e s ?
Mr. Gilbert. Y e s . I
would say that with ressrva-
tion, t h a t i f the Treasury could i n some “vay get t h e
money, t i t n o u t r a i s i n g t h e i b sue, 6
money, b u t I
do nat thins %
would
i
t now mith out
raising t h e issue.
Governor Fancher.
i n d y o u “ould o r s f e r n o t t o raise
the i s s u e n o w ?
dr. Gilbert. I
would o r e f e r n o t
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Federal Reserve Bank of St. Louis
now.
I f , f o r instance,
i a could g e t a
aporovoriations a n d could pay, I
borger
would much prefer t o pay,
and that s o u l d n o t raise t h e issue.
Governor seay.
B u t “ e cannot z e t i t n o w ~ithout
Are y o u willing t o s a y that i t i s a t
cequest o f the Treasury Denartnent?
dc. Gilbert. I
would n o t objsct t o that.
I T think
that i s i n accordancs w i t h t h e act.
uovernor sgay-.- I
thins so.
Treasury Deoartnant that n o provision has been made,
at t h e r e q u e s t
o f t h e Treasury Desartment.
Governor Calxins. I
thins t h a t i s undesirable,
the question.
I f you are going t o
the q u e s t i o n o f a b s o r o t i o n a n d i n j e c t
cussion w i t h Jongress,
i t into t h e dis-
w h y c u t i t u o t o the Tressury
partment again?
Jovernor 3eay.
I s there a n y objection t o having
opinion exoressed b y the Treasiry Yeoartment t h a t t h e
exoense should b e absorbed b y t h e banks?
Governor Ualxcins.,
e Le a
if
i % < i s aa
e 4
‘
a : e n e
raguast
for
I f i t i s merely 4
D e -
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Federal Reserve Bank of St. Louis
partyent I
aise, n o .
thin« i t i s v e r y objectionable,
I n o t h e r “ords,
b u t other-
t h e ‘freasury D e p a r t m e n t s h o u i d
not b e >2ut i n t h e p o s i t i o n o f p l e a d i n g w i t h C o n g r e s s
t o
reimburss t h s F e d e r a l x e s e r v e B a n k s .
The Chairman.
T h e Tersasury Department h e s authority,
the Secretary o f the Treasury m a y require t h e Federal k e serve B a n k s
t o a c t a s fiscal arent o f t h e United States,
and i t s3ems
t o m e t h a t i t i s comorehnsnsive e n o u g h
to
cover everytiing.
governor sicDoucal. I
think i t ~ould b e ~ell i f the
request v e r e m a d e e n d a n e x o l a n a t i o n m a d e t o t h e D e p a r t ment.
Governor A o r s s .
A
s £
see i t , t h e i a v requires
you to
do it. c o n g r e s s c a n reimburse y o u o r not a s they vlease.
Therefore i
zot t o d o i
s not a n aporoxriation m a d e y o u have
i
B
ya
g o t t o d o i t anyway.
B u t dr.
Gilbert, t i t i a l l his experiences i n dealing vith Congress,
expresses t h e o p i n i o n t h a t i f t h e i s s u e e r e f o r c e d b y
the Treasury Devartment before th:
it m a y r e s u l t
m 7
e e o f Vonzress,
i n interference * i t h t h e
Banas t h a t o u l d b e very undesirable, a n d i n that cese
I should say w e oucht not t o force it.
J u r earnings
are larze enougn a t this time. I
™e x e e p a
Separates r e c o r d
thin« i n the Boston bank
o f t h o s e exvzenses, a n d i f some
day earnings decline a n d i t i s necessary f o r u s t o have that
money “oe would «xno¥# n g m u c h 3 6 h a d s . e n t a n d b e
present t h e friza
T
h
e
n if a
case s h o u l d b e
Gongress w e would b e prepared i n that w a y only, t h a t vould
be sufficient.
The Chairman.
“
h
a
t i s y o u r pleasure, z e n t l e m e n ?
theres a n y motion?
The Chairnan.
‘ T h e r e i s n o motion pending, n o .
Governor Caltins.
I f ur. H a r r i s o n w i l l b e x i n d e n o u g h
4o out the motion i n shane, I sould b e l a d t o offer a
motion t o t h e e f f e c t t h a t i t i s t h e s e n s e o f t h i s v o n f e r ence t h a t t h e F e d e r a l H e s e r v e B a n k s s h o u l d a b s o r b t h e c o s t
of fiscal agency operation.
Governor s e a y .
T h a t t h e : c t contemplates t h a t t h e y
should absorb.
Governor Ualxins.
pernaps s u b j e c t
F r o m a n d after June 30th, 19el,
t o tha aroroval
o f t h e various boards
of
dirsactors,.
Governor MeDouzal.
o u l d y o u o b j e c t t o incorporat-
ing i n that that the Act contemolates i t and, beyond that,
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
hat G o n e r e s s h a s f a i l e d
Governor J a l x i n s ,
t o make a
T
> thin
zoronriation?
t h e Piassy oS:
r o u l d
be
suitable a s a vreaahtee, “but I think i t o u l d
to leave Jontress out. v o n e r e s s h a s already
and there i s a provision i n the l a w that t h e s s c r e
of the Treasury m a y rejuirs it.
Ths Chairnan.
T h e n y o u “ould recite 3 5 a pre
o f the Conference
your r e s o l u t i o n t h a t i t i s t h e b e l i e f
o r the Treas-~-
that t h e a c t contemolates t h a t t h e Secretary
Heserve Banks t o 2rovide these
functions w i t h o u t r s i m b u r s s m e n t u n l e s s C o n g r e s s a n o r o -
priates f o r that purposes,
o
p
i
n
i
o
n o f the
Gonferenca t h a t “ e should oserform the duties without r e imbursement, i n a s m u c h a s C o n g r :
Governor
3
Na
“heather i t i s i s i
Secretary m a y r3%
3
m a x e s
u
h a s m a d o n o such vrovision?
i
r e c o r d
t is a
question
T
u p t h a t way.
s t o verform t h e duties, a n d
h
3
vill v e r f o r n them.
of D a y m e n t
o r reimbursement.
the duties a n d « e may o e r f o r m them, a n d then aftervards
the question aris s h e t n e s r e
~J }
shall b e reimbursed f o r the
have b e a n out. I
think i t i s »orover
“hether “e@ area reimbursed
or Bots s u k
s e a m s o
7
" 3 g sucht t o adhere t o the p o -
sition that " e o u t n t t
o bs reimbursed, n o t t o claim i t o r
insist u p o n it, b u t hold t o that oositton, a n d t h a
i
l
u
o
i t e n n i n its s bucset,ceu
that
include
annually
*
his e x o s n s e
hairman.
i r . o r r i s , h o r o u l d y o u feel i f next
r, “ h e n t h i s m
appeared
o f thrse a n d o n e h a l f m i l l i o n d o l l e r s
i n the T r e a s u r y b o o k s
o f estimates, U o n g r e s s
should s a s s a n a c t n a x i n ~ t h e ardrroorietion « i t h a
oroviso
that t h s
Governor Jaris.
a l l , I d3 not suppose “ e ~ould
be obliged t o accent i t under those circumstances, “ o u l d
76?
The Chairaan.
Governor N o - r i s .
Toe Chairman. I
do not
required.
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Federal Reserve Bank of St. Louis
Governor . e l l o o r n .
I t w o u l d n o t m a k e i t anolicable
to t h e c l 3 s r x s
Governor
3 9 8 7 -
U n l e s s
t h e y
i
E a n
W w e
t
w o u l d
apply t o t h e * h o l e force.
governor e l l p o r n .
T h e Treasury Department hes announced
a orivat: corjdoration.
amend
GIADIPN «
T h s r e
t h e act.
a r s t h e flational B a n k
c t .
Jf c o u r s e t h e y c a n n o t o u t a l l t h e i r e m p l o y e s u n d e r C i v i l
service.
Tos Chaicnan.
h
allborn.
y not?
T h e y cannot
d o i t unless
Governrnent enoloyes.
Jovescenor Seay.
T h e y are not i n
fiscal agent o f thse Governnent that t h e Federal
Governor U a l x i n s .
W
o
r
r
i
s misses
one
Banks t o perforn certain service t h a t inolies t h a t t h e y
serform that service without cost. J t h e r v i s e h e micht
be. reduirsed t o rei:
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Federal Reserve Bank of St. Louis
p s 2 t h e Federal Reserve Banks--that
taco b r i e a c t .
h y d o ‘'e have t o a s s a n y resolution
Governor dorss.
t
t h i su
at
o l ? ¢
e l
Neat r y £0: 5arass a
b
a
Be a:|
a
m
t o get into trouble ~ h e n
7 2 D
ot
ys a o
Secretary
ce
T a s Sueres
resolutton.
o f tas
en ouia m o t d o ?
The C h a i r m a n .
T u a t
i s all richt for the moment, b but
eo
n Sd
how a b w t comint t o maxa u p your accounts e b the
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Federal Reserve Bank of St. Louis
o
r
the
a .oroor La$g
D o you not charge off #11 items that are
year?
40 b e c h a r g e d o f f ? c
r
o " i t h sxo0enss
either
i n
t o r ‘ths othsr.
one W aay
ould -“e not v e w l i g e d t o charge
reimoursement,
j u s t a s “ e ™ould
charge
Governor e l l b o o r n .
reaching
oass i t
p
o
s
r
our c o u n s e l . i
d
s c a n ciscs
4nivis t i e >
tac
of @ resolution ourht t o ba edooted a t a mesting
a=
ind should b e carefully consias A R A N
ai
w r . ®
L
srould- m u c h
2ol
t o d o that, b e c a u s e t h i s s h o u l d b e e a r s f u l l y c o n -
prefer
I would much vorefer t o d o that because this
may have a very inoortant bearing o m the future, involves
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Federal Reserve Bank of St. Louis
fundamental q u e s t i o n s ,
and I
“ould m u c h o r e r e r t o
the matter u p ‘ith m y board a n d discuss t h e matter
Will o r o b a b l y h a v e a n o t h e r m e s t i n g
our counsel. 3
fall.
The chairmen.
e l l , Governor ‘elloorn, 2 1 1 that I
contemplated v a s t o tet a n expression o f the vicnvs o f
the m e n a t this mesting, subject t o ratification b y the
Directors o f the respective banxs.
i o n L f vould lixe t o
say t o our Virectors t h a t w e a l l agree t h a t this policy
should v s o u r s u e d a n d s t a t e s o t o t h e Tr3asury. I
think
it i s a n ovportunity t h a t w e have today t o adovt t h e
policy,
i f our Directors v i l l ratify it, “hich w i l l i n mer
sure a
certain a m o u n t
o f osrotection t o t h e Kesearve B a n k s
from Gongress.
aovernor Morss.
S u p p o s e t h e A coroortations C o m -
mitte3 makes t h e recommendation a n d ULonaress rofuses.
Then y o u w o u l d n o t h a v e a n y claim, “ o u l d y o u ?
Governor Seay.
Governor Morss.
T h e y would n o t i n any event.
Y o u vould n o t have a n y claim unless
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Federal Reserve Bank of St. Louis
Gongress sees f i t t o admit it.
Bevories Werris.
e l l , y o u would have a
claim but y o u
could n o t g e t i t paid.
Governor Caliins.
Y o u h a v e n o t a n y claim.
T h e law
says t h e Treasury n a y require y o u t o d o it.
The Chairman.
Reduced
t o simole languages,
" e are
required b y l a w t o a c t i n this canacity.
mandatory i f the Secratury requires u s t o d o it. N o w ,
voneress
has 6
i i e d w e should
n o t b e reimbursed.
The Question therefore i s shall ~ e o r shall w e not a s x Congress f o r a n anvrovoriation.
M
y oninion i s “ e should not.
«we have asged once a n d i t has been denied.
Governor w#cDoucal. I
should rathor s e e
disoosed o f sithout passing a rssolution, b u t with the
understanding that under t h e circumstances recited there,
and shen notified b y the Treasury Devartment o f the facts,
that ‘ e will g o ahead and verform our functions subject
to t h s a p p r o v a l
o f o u r Boards.
Governor Calkins. I
think - e o u s h t t o « n o w i n a d -
vances what the status o f o u r operetions i s t o b s for the
next year.
The Chairyen.
J u n e 30th
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Federal Reserve Bank of St. Louis
everything i s not reimbursed, a n d probably sould n o t be.
s I
i
Governor “anchsr.
understand,
to J u n e 30th; + w e will h a v e t h e l a s t h a l f
i t “ould b e u p
o f t h e year,
i n
closing o u r booxs f o r 1921.
o u l d l i t e t o second t h e motion
Governor C a l x i n s . I
that i a s made.
r
The Chairman.
Ei00. b a t 4
fication
a
y
i
g ins c
a s a resolu-
s a n s e o f t t m e e t i n g , subject t o rati-
i n the case
e a c h Governor
b y h i s directors,
toat a f t e r J u n e 3 0 t h v e s h a l l n o t a s k t h e T r e a s u r y t o r e inburse u s f o r t h s e x v e n s e s i n c u r r e d
functions
a s fiscal atents
i n performing o u r
o f t h e U n i t e d states.
s3cond t h e motion.
Govarnor “illsr. I
(at t h i s t i m e G o v e r n o r d a r d i n g e n t e r e d t h e room).
(Toe ‘ y u s s t i o n v a s t a k e n a n d t h e C h a i r m a n a n n o u n c s d
o n e dissenting
that t h e m o t i o n w a s c a r r i e d “ i t h a d v a r e n t l y
vote, G o v e r n o r e l l i b o r n v o t i n g no).
Governor ‘icDouzal. I
should l i x e t o b e r e c o r d e d a s
voting "no™ o n that, i n the form i n “hich the resolution
Te Chairman.
T h a t i s your »rivilege, sir.
Sovernor Micboutal.
T h a t will make t 79 votes against
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Federal Reserve Bank of St. Louis
it, then.
H e r e i s quite a
The Chairman.
Richards. I
wondered i f ~ e might n o t have i t mimeographed
I t has n o t bean read a t t h e meeting
and r e a d uround.
yet.
l o n g l e t t e r f r o m ir.
D o y o u thins i t ~ould b e desirable t o have i t read
nov a n d also have i t mimeogravhed?
Governor darding. I
think i t micht b e “gill t o have
it read now.
T h i s i s a revly f r o m Joseph
The Chairman.
addressed
t o a
m a n n a m e d MeDov-ell.
(The Seerstary read the letter referred t o
be f o u n d
n connection ~ith
i
a t page
I
Governor i a a
a n
will have this
graphed a n d circulated.
fhe Chairman.
I t i s nom nearly 6 o'clock.
your pleasure about continuing o r adjourning the mesting?
Governor V a n sandt. a
Governor Norris.
have “ir. G i l b e r t w i t h u s
I f thoare is anything else that can
be t a k e n u p a n d s 3 t t l e d w i t h i n a
that M r . G i l b e r t
taxe i t u p now.
reasonable t i m e , a n y t h i n g
i s interested i n , I
thins ~ e h a d b e t t e r
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Federal Reserve Bank of St. Louis
ar.
3
3 T h e r a are t79 o r three
could b e d i s p o s e d o f , I
think,
i n half a n h o u r a t t h e
most.
Cuairman.
I t ~ould b e asracable t o m e t o conthe subject that y o u r d
t o discuss,
it o n t h e o r o s r a m ?
One of t h e n i s under 3 (a), o n the
Savines Division, t h a t has b e e n raised b y several banks.
IIT. F I S C A L A G G s e Y FUNCTIONS.
(a) « a s the issvwance o f Treasury (
ar) savings
s x .snsive
is a n e x c e o d i n s l y
mathod o f vrocuring funds a n d such securities accomolish v e r y little toward thse encouragement o f thrift a n d a s Liberty bonds
of later issues a r e raadily available i n denominations
o f ,50. a n d ,100.
orices, y i e l d i n g
a t market
a n interest r a t e m u c h i n
ae peyitnts s o c u r i i i c s ,
the
and
a r Savings
JIrganization activities b e continued?
a p TI
ws
Gilbert (continuing). A b o u t six reeks
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Federal Reserve Bank of St. Louis
wrote a l l t h e Governors suggesting t h a t t h e savings o r ganizations
i n the districts w i l l b s consolidated ~ i t h
the Fiscal Agency Denartment a n d made subdivisions o r
special dsoartnents o f the Fise
of the Kesarve Banks.
i t e Yepartments
T h e reolies “ s r e n o t very c o n -
sistent a n d seemed t o m e somewhat under t h e misunderstanding that w e oroposed b y that t o maintain t h e ortanizations a t their oressnt size, b u t t o thro? t h e e x dense
upon t h e iieserve Banks.
T h a t v a s n o t a t a l l i n contem-
plisation.
-@ have b e a n o r x i n g f o r some months toward a oro-
gram for roducing t n e savings organizations i n the districts.
I n fact, ~ s have i n mind that b y June 5Uth, o r
thersabouts,
t h e s a v i n e s owr7zanizations
will b e r e d u c e d
to a
mere sxaleton,
ssparate orzanizations.
i f ¢
abolished
ag
T n e @raasury nas already issued
the s a v i n g s s e c u r i t i e s f o r 1921.
chinery,
i n the districts
They
i
n the m a -
a n d * e o r o v o s e d t o k s e p t h e n o u t d u r i n g t h o year.
Congress h a s n o t z i v e n t h e a n o r o o r i a t i o n r e q u e s t e d
for the savings orzanizations' york beyond Jungs 50th.
has, n o v e v a r , p r o v i d e d a
sufficient f u n d o u t o f which
can p a y t h s n e c e s s a r y e x o e n s e s
I t
v e
4
o f issuing a n d ensraving
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Federal Reserve Bank of St. Louis
the seCurities,
a n d a n y technical matters t h a t m a y
arise i n that connection, a n d perhaps a s much a s 1 0 0 , 0 0 0
that c o u l d b s u s e d f o r orctanization.
hat
w e tould l i x e t o sea would b e t h e maintenance
in .ashineton o f a n active savings orzanization under
or w i t h a
oersonnel o r o b a b l y o f n o t o v e r t h r e e o r f o u r
men, t h a t s o u l d s e n d o u t t o t h e d i s t r i c t s m a t e r i a l ~ h i c h
could b e u s e d b y t h e d i s t r i c t s a n d u s e d m o r s
under t h e s u v e r v i s i o n
o f the Federal Aesorve
at t h e s a m s t i m s c o n t i n u e t h s s a l e t h r o u g h t h e n e s e r v e
Banks a s f i s c a l a s e n t s
o f the
sales t o b e handled i n the Fiscal ..gency Devartments
of t h e n e s e r v e s a n x s v i t h a
small o r g a n i z a t i o n
i n much
the s a m e m a n n e r t h a t t h e c e r t i f i c a t e
handled, although t h s size o f the operation ~ould o f
courss
b e Juite different
hers, a n d I
i n provortion.
U r . Levis
is
vould lixe t o have h i m s a y a fev ~ords o n
the p r o g r a n o f t h e s a v i n g s o r z a n i z a t i o n s ,
s h a t v e have
in mind.
ue. Lewis.
I d o n o t .mo7,. d e s S t o n s , t h e t f t can
say a n y t h i n g v e r y m i c h i n a d d i t i o n
has s a i d .
t o “ h a t ob. G i l b e r t
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Federal Reserve Bank of St. Louis
It has seemed t o us that i t was v a r y tise t o attemot
to g e t t h e s e l l i n z s x o s n s e o f t h s T r e a s u r y s a y i n g s s s c u r i ties
i n a better ralation “ i t h t h s a c t u a l s a l e s t h a n
has b e s n xnov™n u o t o t h a o r s s e n t time, n o t P e x R e b t i n g t h e
fact, h o v s v e r , t h a t t h e r s h a s b e e n a
amount o f “orice dor u t s i d s :
very c o n s i d e r a b l e
n e actual sales i n all
the districts, a n d not forzetting t h e @ :
o
f the
general aducation i n thrift a n d savings a n d t h s consequent b r i n z i n z o u t o f a
ereat d e a l o f a c t i v e c a n i t e l
from savings b a n k s a n d o t h e r orcanizations,
not have b e e n possible.
H o ever,
w h i c h could
‘ e feel that t h e time
for that tors a s a Treasury opsration has vassad.
It has b e a n o u r attsmpt hers t o get a s muel E
i s
work taken over b y various schools, labor organizations
and vomen's organizations a s nossible.
It “ould s 3 e m inadvisable,
a t least f o r the oresent,
to take t h e Treasury savings securities o f f sale o n account
of the undoubted heavy radanption that * ould f o l l o s u c h
a policy.
T h e Question which ¢o3ms
of t h e districts,
t h e fact t h a t t h e redemotions h a v e b e e n
very m u c h h i c h e r t h a n t h e sales, I
think does n o t e n t e r
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Federal Reserve Bank of St. Louis
into this.
I f t h s sales a r e very small t h e y a r e still
heloine t o keso t h e redemotions down.
S o that unless y o u
stop y o u r salss y o u r r e d e m p t i o n s a r e s o i n s t o b a m u c h
laresr t h a n a t t h e o r : s 3 n t time.
forzet ~-s are redeemins securities
"3 are only sellins sscurities o f
year, naturally.
O u r idea i s that b y having undor
the Fiscal agency Department o f the banx t r o o r three
men a t the outside i n each district t ¢ i l l ayoic t h e
duplication o f control which i s now found a n d “hich i s
now a “eairness o f the system.
will e n a b l e u s t o k e e p t h s s e c u r i t i e s
o n sale
and t o help t h s secondary marxet value Sutstandins s e curities,
a
e
L l , I
think, relieve t h e district i n
that i t w i l l o u t t h e v u b l i c i t y a n a o t h e r
are dangerous i f not oroperly heundled dirsctly uncer t h e
Trea
3o that t h e volicy i l l
b e t o maintain f o r that
part o f the w o r b u t t o o r three m e n i n the district.
fuo o r threa m e n un,;usstionably could v e r y greatly h e l p
not only i n the sale o f Treasury savings securitiss b u t
in promotine s o n s o f this c e n e r a l wortc i n sducation,
which, a s I say, i s bringing o u t a great deal o f active
caoital i n small anounts, brincvinzs i t into the savines
banks a n d i n t o t h e c o m m e r c i a l banks,
a n d into other l e -
eitimate savings snterzrises, w h i c h * e feal i s a thing
that i s ~ o r t h
F
e
d
e
r
l ttieserve B a n k s
a
t o en-
cCOoUurare.
think o u r thouchts c o n -
That i s , G o v e r n o r 3 t r o n z , I
cerning t h e policy,that while this thing should n o t b e
kept u p i n a n expansive v a y a n d should b e cut t o tue bone,
but that i f there c a n b e a n arrangement made b y which a
small group--not large enough t o b e called a sroup, probably, b u t t v o o r three n e n i n each Federal nesorve bank,
or u n d e r t h e F i s c a l i g e n c y D e p a r t m e n t
o f t h e bani, t h a t
they c a n help o u t the whole situation i n regard t o Government s e c u r i t i e s a n d c a n maxes t h e m o n e y “ h i c h h a s b e e n
already exvended i n this educational ywor« orth “hile.
Jn the other hand, a s :ir. gilderthas indicated, a
very s m a l l s r o u o i n a s h i n z t t o n c a n d o t h e n e c e s s a r v
ners f o r t h e Treasury Department.
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Federal Reserve Bank of St. Louis
Governor Fancher.
mind ?
M a y I injuire “hat °
i l l a l l t h e literature
quarters
here?
a v e in
b e h a n d l e d f r o m the h e a d -
Y o u s o s a x o f tv70 o r t h r e e
men
i n each
241
‘hat vould t h e y do? - : 6 have a n office a t
Pittsburcth a n d a n o t h s r o f f i c e
i n Columbus.
supvo0se
“ e
bring t h e m into t h e office i n Cleveland, “ h a t ‘sould those
men do, what d o y o u “ant t h e m t o do?
ar. Letis.
T h e y would mage t h e necessury contacts
with t h e postmasters, “ i t h th:
o r s ; t h e y sould k e e p
the l i n e s o f s a l e o n a n a s far a s vossible.
xovernor Pancher.
Gilly L
MET
t a y o o -25F. 38° oar
assistanée “ e had i n the Fourth Feds: J r i s i n a l “sssrve
-3g had absolutely n o assistencs whatever; absolutely t h e b a n k s h a v e v a s s e d e n t i r e l y o u t o f it.
J u r
sales have g r o w n o u t o f contact w i t h school organizations
a n d various organizations
o f that sort;
s o far a s
any c o o p e r a t i o n ~ i t h t h e banus, t h e y h a v e v a s s e d e n t i r e l y
eut o f i t , “ e c a n n o t arouses a
bit o f interest.
s o I
do
not b e l i e v e + 8 c a n n o n e f o r v a r y m u c h b a n k cooo3ration.
I a m just tonderins ~hat these m o n “rould b e exoacted t o
wors w i t h t h e banxs,
o r "ork
wat t h e i r l i n e o f s a l e s i s ,
they are t o xeep that line open eas “ell as possible.
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Federal Reserve Bank of St. Louis
They a r e t o merchandise t h e s e c u r t t i o s a n d t h e y a r e a l s o
o see t h a t t h i s ~ o r k w h i c h h a s b e e n d o n e i n t h e s c h o o l s
ag f a r a s t h e y c a n s e e i t , i s k e p t u p t o
the point “hers theses organizations t a x e i t over f o r
themselves,
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Federal Reserve Bank of St. Louis
a s a zood m a n y o f tham are really n o w o n the
point o f taxsinz i t over.
keso u o “ith t h e omcanization
Governor .ellborn. I
pretty c l o s e l y
i n o w e district.
T h e i r . office
i s i n the
same bloc«x “ith o u r bank. ‘ T h e y tell m e that their business i s incrsasinz, ssvecially through t h e oostmasters,
that thers has besn a “ond:
six months.
i n e r e s a s e i n the last
A n d t h o s e t 7 o o r three m e n t h a t y o u o r o o o s e
to Keen, t h e y g o out a m o n g t h e schools a l l over the dis~
trict a n d t h e y t e a c h t h e c h i l d r e n t o s a v e a n d t h e y t e a c h
the people generally t o buy these securities. I
supoose,
dive Levis, t n a t o u r district shovs pretty sell, d :
not,
L t
o n t h e sale o f securities?
Mir. Lewis.
I t has shovn a n increase recently.
O L
courses, f o r a tims sales vere l o .
Governor e l l b o r n .
I
T sunvo3se i t y o u l d s a v s t h e
Government considerable exvense huving cnelr
the Federal Resarve B a n k .
T h e y n o w have cons:
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Federal Reserve Bank of St. Louis
ex dans.
The total sales this year have b e e n
about trice what they ~2:
13207 m o t e i t h s t a n c
n z t
i n the last thres months o f
T U L E
i n e luge a
lot o f re~
ductions f r o m the returns o f last year's securitiss.
I tains
i t I s also important f r o m t h e voint o f
of the Postofrice Department.
-
@ have talked
master +:eneral dayes a t some lenzgths;,and h e i s fairly e n thusiastic a b o u t it.
development
o f t h e r e l a t i o n b e t w e e n p o s t a l savinazs a n d
war savings.
son (
@
that. I
3 8 think thers should b e further
“ @ had that u o with Postmester General Burle-
expressed intersst,
b u t " e esuld n o t g e t beyond
thins P o s t m a s t e r s e n e r a l d a y e s n a s
it u p w i t h s o m e o f n i s
a s
L e
2
set action alont that line within a
r a n d y taizen
6 are lixely t o
few weexs, I
thinte.
It o u z h t t o r3sult
by the Fostoffics vanartn
Gevernor - e l l b o r n .
[ s e a
i t i s sugtested
P
o n the pro-
>
gram that this orzanization b e done a w a y with a n d g e t
the people
t o buy small dG3nominations o f United states
=
ponds
o n t h e marxet.
i y observation
i s that osonle o f
limited means 7111 n o t b u y United States b o n
244
nave zone d o v n and-they a r e afraid o f them.
Mr. Gilbsrt.
T h e savyincs organization o f course f o r
I n some dis-
the last t 7 0 years h a s h a d a double object.
tricts I
think there has b e e n a considerable movement,
with the help o f the savinzs organization, t o sell $56 and €103
Lid5erty Bonds a t current market orices.
I
n some
jistricts t h a t does n o t "rors.
Governor 3eay. J u r exverienes with the panks i s similar t o ths exverience t h e y have h a d i n the Cleveland District.
T h é d i r varticivation has dvindled t o the minimum.
In January a n d February I
cost of 2-3/4 per cent.
see v e sold »275,000 worth, a t a
I t is manifest that “e have some
good r e s u l t s f r o m t h s 3 d u c a t i o n movement.
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Federal Reserve Bank of St. Louis
Notvithstanding
the conditions during the year, the nunber of savings depositors i n the district increased, four hundred and thirty
six thousand, a n d the savings dsvosits o r the district
cominereased v e r y much, s i x t y five nillion, “hile t h s
mercial daoosits diminished.
been
te find that t:enty thousand school banxs have
a n d eleven
distributed among t h e children o f ths district
thousand t e a c h e r s h a v e b e e n r e c e i v i n g i n s t r u c t i o n s ,
that w h a t y o u t e r m t h e g o s v e l
s o
o f thrift h a s b e e n t a u t ,
and I
should s a y o n t h e w h o l e v e r y e n e r e s t i c a l l y d i s -
seminated, a n d undoubtedly i t has h a d some effect o n the
savings accounts o f the banks,
i t has h a d some effect o n
thes accunulation o f savings. I
am forced t o the conclus-
ion t h a t i t h a s s o m e v a l u a b l e e f f e c t s ,
b u t s o fer a s the
the banks i s conesrned i n ths actual
sale o f t h e s e t h i n s
a z t i n d l e d d o w n t o a minimum.
The C h a i r n a n . e
g
e
m
s
a s thouch
of t u e T r e a s u r y Deosartment a s t o t h e c h a r a c t e r
t h e viervs
o f the
organization t o b e maintained s r e controllins any~vay.
@ have a not v e r y lerza orctanization i n Hew Yor<, b u t a
very m u c h lergqer o n s t h a n w a s econtanvlated b y t h i s v l a n ,
and t h e survervision anc manacenent a n d s o forth a r e t o
be c o n s i 1
would b e zlad 6
with o u r fiscal azency operations ~ e
that, f t tuinmkx, 1 f that i s the vish o f
the vecretary. é
Governor 3eaytions
.
@ veached five thousand organiza-
o f various c h a r a c t a r
Governor V a n Zandt.
i n o u r district.
V O U M i l a MOb a d a ,
that t w o o r thres m e n could take care o f
touch with a l l that a n d carry o n the correspondence w e
have?
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
iy. Seay. I
do not know hoy many men it vould be
necessary t o have, b u t still i t i s your idea that t h e
publicity d e p a r t m e n t s h o u l d b e c o n t r o l l e d
b y t h e Treas-
There ~ c u l d b e l e s s sxublicity, b u t “ h a t e v e r t h e r e
it, i t sould emanate f r o m the Treasury Vevartment.
You would establish contact, I
understand, throuch the
medium o f this small organization i n the "ederal Reserve
Banks.
I s that t h e concention, i r . Levis?
Mr. Levis.
Governor seay.
Y o u have t h e n t o orovide f o r a suf-
ficient number t o carry o u t your idea.
T gaid t w o o r three i n difrerent a
tricts,
larvzely r e d u c s d
b u t ztenerally a
o
b
e = f
Sy tanizet L
nink there a r e n o w a s much a s twenty o r thirty i n some
districts.
Governor siorss.
panks interssted.
are t h e vostoffica.
safety r a z o r s
proportion
I n our district w e cannot g e t the
U f course,
9
}
t h e »vrincinal d i s t r i b u t o r s
i k e a rwoblem t o sell
o r a n y t h i n g o f t h a t ‘sind; y o u s e l l t h e m i n
t o t h e a d v e r t i s i n g y o u do, a n d i f v o u r e d u c e
your advertising t h e sales f a l l off.
I t i s just a retail
pusiness a n d i t works t h e s a m e a s s e l l i n g R o y a l b a k i n g
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Federal Reserve Bank of St. Louis
Powder
o r Gillette razors,
in p r o p o r t i o n
cannot
o r anything
of
t o t h e a d v e r t i z i n g y o u do.
d o a n y advertizins,
t h e y have n o t
and they are too busy “ith other things.
Governor iAcDougal.
J u s t shat does your v l a n con-
template doing f r o n .ashington that i s not being done now?
In o t h e r “ords, t h a t r e l i e f d o e s t h e o l a n v r o p o s e f o r t h e
panks t h a t maintain a very small organization a n d t h e
organization worss i n harmony a n d i n contact “ i t h o u r
cal agency.
cilities
T h e y u s e t h e same mailing r o o m and their
t o s o m e extent.
F r o m t h e standooint
o f economy
ve d o n o t t h i n k a n y t h i n g v o u l d b e s a v e d u n l e s s y o u t a k e
some o f ths rors away f r o m us, a n d i f y o u should t a e these
men over,
* e haves t v o o r t h r e e m e n r e c e i v i n g v e r y s o o d
salarics a n d t h e y a r e a b l e men, s p e c t a l i s t s
o n this y o r k ;
if you should take t h e m over a n d then i n r a i s i n t h e
amount they would t h e n b e discontinued,
“ e sould b e left
*ith these m e n o n our hands a n d “ e would n o t vant t o
feel responsible f o r them, because “ 2 could n o t use them.
It may b e a small m t t e r here, b u t i t i s quite a n im-
portant matter t o our men, and T thins they have had i t i n
to l e t t h e o r g a n i z a t i o n s t a n d a s
it is.
Governor Calrins.
this “ a r s a v i n e s
T h e ultimate fustification o f
o r g a n i z a t i o nt
s
u
m b e sellers. I
cannot
imacine a n y o n e w o u l d c o n t e n d t h a t w e s h o u l d c o n t i n u e
to
conduct this organization without sellers.
T h e sales
ars from a practical standpoint negligible.
The sales
organization i s a very loose one.
i l e . Gilovrt referred
to a sxkelston organization, a n d I
vant t o say that i n
our district 3e¢ have a very t h i n sxeleton organization,
which s p e n t
i n thres m o n t h s - - J a n u a r y ,
10,000 a n d sold 3100,000. I
F e b r u a r y a n d March--
think t h e result i s entirely
out o f p r o p o r t i o n t o t h e cost.
I cannot
by t u r n i n g
s e e that t h e situation would
b e imoroved
i t o v e r t o t h e F i s c a l i s e n c y Department.
can see very serious objections t o it.
T f
T h e work carried
on b y the Fiscal agency Department i s definite
specific,
w e know v h a t t h e y do; a
propaganda o r s a n i z a -
tion i s a
loose o r z a n i z a t i o n h i c h c a n n o t b e c o n t r o l l e d
and snich cannot b e xept within definits tasks o r bounds.
It appears t o me that unless justification for a continuance o f the organization can be found i n results
it c a n n o t b e f o u n d anywhere.
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Federal Reserve Bank of St. Louis
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The question i s ~hether t h e results justify t h e continuance :
“ o r k t h a
o
# 2oing
o n o t think
d
there i s a n y o t h e r Qusstion.
Mr. Gilbert.
O f courss, t h e r e m a y b e
r e s u l t s ,
Governor, b e s i d e s t h s sales.
o t h e r
H o w d o y o u measure
Governor Calzins.
results?
Mr. Gilbert.
determinins t h i n z ,
I t its imoossible t o measure them.
f r o m o u r p o i n t o f view,
The
i s that o n and
after June 30th w e exoect t o have n o aporopriation available
for a n y substantial organization i n the districts, a n d
with that i n mind I
sumption
think there ought t o b e a gradual r e -
i n force b e t w e e n n o w a n d J u n e 30th,
not come t o o abruptly.
sirability
8 9 i t will
T h e n ates question S u i s remain
o f xeeping a
very small organization
to d i s t r i b u t e a n d k e e n c e r t a i n l i n e s o p e n .
T h e Treasury
mould n o t c a r e t o w i t h d r a w t h e s e c u r i t i e s f r o m s a l e
they ought t o have a full year's
trial, w i t h increased cooperation, s u c h a s " e m a y set
from t h e P o s t o f f i c e D e p a r t m e n t u n d e r P o s t m a s t e G e n e r a l
I think i t would b e a subject f o r careful con4
sideration i n the fall i f tangible results a r e n o t
t snould b e abandoned, a n d s o far
plainly seen, w h e t h e r i
as the sale o f securities i s concerned, b u t I
think - e
ouzht t o tive i t a trial o n as much o f a sxsleton o r sanization a s c a n b s c a r r i e d a f t e r J u n e S O E s
Govsrnor Seay.
H a v e y o u determined i n your o n mind
proshat/port ion o f sales c o u l d b s a b s o r b e d
relation o f expenses
ip. Gilbert.
t o the volume
i n exoenses,
the
o f sales?
T o s l a y generally contemplates o n e
fifth o f l osr esant.
V F course, t h a t i s c u t o f the question
on war savings, a n d was a v e n i n 1913.
per cent a l l the time, I
I t has b e e n over 1
think.
Governor Norris. i b o u t 2-1/2 ver cent last year, I
think i t as.
ay. Uilbert.
other things.
has h a d a
Yes.
‘
g apportioned t h a t against
T h e secondary market f o r Liberty Bonds
great d e a l o f a t t e n t i o n a n d I
think a
proper
understanding o f the Liberty bond situation comes a s the
result o f savings york. T h a t , too, i s very hard + o trace.
e Governor Seay.
T
t i s m o r e t h a n lixsly,
a s your ac-
tivities diminish, t h e expense i n provortion t o your
volume o f gales vould increases.
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Federal Reserve Bank of St. Louis
re. Gilbert. T h a t sould depend o n what ~e get out
he Postoffice Department.
I t i s coneeivabple t h a t v e
stir t h e m up.
Mie » L e w i s .
n
e
r question
o f “hat w s consider t h e number o f steady buy-
standpoint
‘in this c o u n t r y today; I
exoenss
cent. I
that too, f r o m t h e
do not believe
i f y o u cut
5 0 per cent your sales would b e c u t 5 0 per
believe t h e b i g part o f the small sacuritie
sold n o w a r e s o l d t o veonle w h o h a v e t h e habit,
speak.
s o to
Jur investigation leads u s2 4 9 b e l i e v e t h a t .
the fact o f cutting certain o r the
activitiss
A n d
would not
be followed b y a diminishing o f sales.
Jovernor seay. I
a m advised t h a t t h e sales
are
{nereasin: tirouzhout t h e Fifth District.
Mr. L e v i s .
Taxine t h e country a s a “hole, t h e y a r e
about 1 0 0 o e r cant mors t h a n thoy
“sre i n Ictober, N o v e m b e r
and December; b u t that i s practically negligible f r o m the
point o f view o f covering current requirements.
Governor Seay. « a n d whether o u r b a n k s b e l i e v s
i t or
a very v a l u a b l e “ o r k i s b e i n g d o n e i n t h e i r intersst.
Me. Gilbert.
I thins such results a s m a y b e
incre
to come will come vary largel
throush
of t h e P o s t Offices Department,
anc i f there
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
creased a c t i v i t y
i n t h e P o s t O f f i c e Department,
“ e do
need t h e field organization i n each Federal “eserve District t o act a s field reoresentatives f o r the savings
organization i n .ashington.
Governor V a n sandt.
T h a t would b e t o soread oropa-
ganda.
Me. Gilbert.
Y e s , a n d a c t o n local matters a n d dis-
tribute s u c h material a s mizht b e sent o u t from a s h i n g ton.
Governor
V a n szandt.
o u l d
n o t that
b e more aporopriate
under t h e head o f the Interior Department t h a n under t h e
Treasury Department? T h e Interior Devartment educates the
Indian.
Mr. Gilbert.
‘ a i t until v e get a department o f
Public e l f a r e a n d v e might s u t i t i n thet.
Tas Chairman. - o g u l d n ' t you lixs this meeting t o
some action b y the w a y o f a vote o n a resolution?
Me. Gilbert. S e l l , I d o not imo~ that the thing
can be put a s definitely a s that, although I would b e
glad i f i t could be.
h a t w e wanted chisfly w a s a n ox-
pression o f visvs.
The chairman. s e l l , m y own view as to the organiza-
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Federal Reserve Bank of St. Louis
259
tion matter that Governor Calxins rveferrsd to, through
the var savines organization a n d t h e bank i n Ne~ York,
mas litte s o m e o f t h e s e m o r e o b s c u r e b u r e a u s
i n some &
the davartments here, t h e y g e t lost i n ths shuffle.
That “war savinzs orztanization i s a n orohan baby a n d i f
it m e r e u n d e r t h e h e a d o f o n e o f t h e srceanized d e v a r t x
vart o f t h e machine
ments a n a m a d e a
o f t h e b a n k i t sould
got more attention than i t doss now. T h a t i s possibly
due t o conditions
r x , “ n i c h a r s n o t t h e same a s
i n Jer
in o t h e r r e s a r v e b a n s s .
T h e r e a r s s o many mors veople
there, f o r o n e thing.
“ould l i k e t o h e a r a n ex»nression
Governor C a l i n s . I
from t h e G o v e r n o r s
a s t o the desirability
a propaganda-~because t h a t i s what i t is.
sales organization. I
o f conducting
I t i s not a
have n o doubt i t has b e e n o f some
ponefit, t h a t thers h a s bean some useful vork cone i n
the s h a v e o f s d u c a t i o n s l vork.
‘e have h a d t h e b e s t c o o v e r a t i o n f r o m t h e s c h o o l s
in the large a
tidely
probably o r t h something.
s
t
r
i
c
t
s
.
T h a t is
B u t i s i t desirable a n d justi-
fiable f o r the Federal eserveiBanks
t o conduct a onop-
oganda o r g a n i z a t i o n ~ i t h o u t t a n z i b l e r e s u l t s ? £
$hink
it i s v e r y undssirable.
dic. Gilbert. 8
agree with y o u o n that.
T h e grad-
ual elimination o f the propaganda organization a t the
banks i s “hat z e vant a n d have i t
may of sending out such things
l e r s e r v i c e i n the
“ e misht want to send
out.
I t i s not your idea t h a t this o r -
Governor Seay.
ganization r o u l d a c t i n t h e n a m e o f t h e F e d e r a l K o s e r v e
Bank?
de. Gilbert.
W o , n o t - a t ail.
e r e you not under that impression?
Governor Seay.
Governor Calkins.
Y e s , t h a t i t would b e a part o f
the Fiscal agency operations o f the Federal -eserve Bank.
gies i
pores
L h ould.
m o b bos
desire t o change t h e name?
Governor seay. u
wir. Gilbert.
h
an o r z a n i z a t i o n
i
r
i t sould cease t o exist a s
i n the Federal Reserve Bank.
Governor Calicins.
A g s ©
understand i t , i t o u l d
cease t o exist o n ths 50th o f June, 1921, a s the
I think
i t i s soins
a r
t o vorx o u t that
vay anyhow, a s a sep o r t a n i z a t i o n , sxcept that a
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Federal Reserve Bank of St. Louis
small part o f the Fiscal .igency Department o u l d b e devoting
tts a t t e n t i o n
£ 0 thls:
fiem
Governor . a l l b o r n .
o f work,
B u t t h s exvenses v i l l b e
the T r e a s u r y Deoartment.
Gilpert.
N o t a f t e r t h e 3 0 t h o f June, n o t t o e x -
of any organization.
Governor wcDouzgal. I
from t h e s t a n d o o i n t
besn a
think t h e
a r savings movement
o f a means o f p r o m o t i n g t h r i f t h a s
g r e a t success,
2
a n d from t h e standpoint
o f raising
money f o r t h e G o v e r n m e n t r e q u i r e m e n t s h a s n o t b e e n a
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Federal Reserve Bank of St. Louis
cess. I
suc-
feel i f t h e F e d e r a l :essrve B a n k s a r e t o c o n t i n u e s
serving t h a t i t w o u l d b e “ e l l f o r t h e p r o v a g a n d a
t o origi-
tbnh e
e rne t tro a ps ae nd-
fasnhington a n d for t h e
larged a n d d o the educational work from this end, a n d
to permit Federal Reserve Banks t o act merely a s distributing azents a n d taxe i t away f r o m the banks in.other
respects, relieving t h e banks.
“That
i s what I
would
lixe t o see done.
The Chairman. Y T h a t i s m y
Have y o u s u c h a n e x o r e s s i o n o f
Gilbert?
Meo Gilbert. £
thing so.
dsa, Governor McDougal.
vievs
a s y o u wanted, M r .
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Federal Reserve Bank of St. Louis
Governor ilarding. I
have a
vomptroller o f the Currency, I
which I
communication f r o m t h e
mean t h e new vomotroller,
would like t o oresent t o the Conference.
"In the matter o f compensation for copies
aa)
to t h e v a r i o u s F e d s r a l Reserve B a n x s m a d e b y t h e U e t i o n a l
Bank e‘aniners, I
a m handins y o u a
menorandum vrepared
a s
py Mr. H . B. Davenvort, Chief o f the Division o f 4xaminations.
‘My. Davenport tells m e that he has had this
My. smerson. I
a m now handing i t t o y o u for your infor-
mation a n d that y o u may take i t u r
see what raally ought t o b e done. 8
l 4 m e r s o n and
r
are, a s y o u will
note, approximately 295,000 behind, a n d v e ouvht t o have
more examiners.
"T shall b e vleased t o talk t h e matter o v e r vith y o u
mhenever y o u area at liverty.*
I discussed this with t h e Board t h e other d a y a n d
they r e f e r r e d
i t t o m e i t h p o w e r t o taxe i t u p mith t h i s
sugztestion.
This i s a memorandum from the Chief
of sxaminations
t o the vomptr
This i s h e a d e d “iwlenorandum f o r D e p u t y C o m o t r o l l e r
requested, I
submit t h e f o l l o w i n g s t a t e m e n t
rel-
ative t o the fund f o r meeting
expenses a n d examinations
of Wational banks a n d Suggestions
f o r maxins o o d t h e
ieGls og
present deficiency:
"The following i s avvroximately a statement o f
the
funds a s o f t h e c l o s s
o f business M a r c h 3 1 , 1 9 2 1 :
“BLlls due and vayable, i n c Luding
February 23th,
262,767.23
"Payroll March 16th t o Merch 3 1
4 6 , 242.26
"Approximate expenses o f examiners, a s s i s t a n t s ,
a n d miscslla-~
neous bills f o r March
4 0 , 0 0 0 . 9 0 $149,909.54
"Available cash, iiarch Si, 1921,
"Allo? ing t h e s u m o f a p o r o x i m a t e l y 3 3 0 , 0 0 0
bills f o r e x a m i n a t i o n s
o f ijational b a n k s t h a t h a v e n o t
been v a i d i n t o t h e fund,
95,000
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Federal Reserve Bank of St. Louis
i t would require aporoximately
t 9 mest oblizations d u s a n d navable
of b u s i n e s s
t o reoresent
t o t h e close
Warch 31.
“Somptroller illiams inereased the fee, effective
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Federal Reserve Bank of St. Louis
February 1,-from 2-1/2 cents t o 3 cents f o r 31,000
i n
excess o f the first »25,000 o f assets o f each bank.
that t i m e p r o m o t i o n s a m o u n t i n g
A t
t o a p p r o x i m a t e l y »~65,000
were made. o O v i n y t o the deoreciation i n total assets
of N a t i o n a l b a n x s
i n the United States, e s t i m a t e d
a t be-
tween f o u r a n d f i v e m i l l i o n d o l l a r s f o r t h e y e a r 1921,
the r e t u r n s e x n e c t s d f r o m t h e i n c r e a s e m a d e F e b r u a r y 1
were thereby oractically sliminated.
"Comptroller Crissinger authorized a n increase o f a n
additional one-half cent per 31,000, effective April l.
It i s b e l i e v e d t h a t t h i s i n c r e a s e w i l l t a k e c a r s o f cur-
rent obligations for this year, but will not vermit of
the a p p o i n t m e n t
o f a n y n e y examiners
all banxs e x a m i n e d t w i c e ,
i n o r d e r t o have
i f possible, d u r i n g 1 9 2 1 . "
AS probably y o u k n o , t h e revised statute requires
the C o m p t r o l l e r
t o maxes tyvo examinations
o f tational banks
each year.
"For several years p a s t a copy o f the report o f examination, e x c l u s i v e
o f the confidential section,
h a s been
sent t o the Fedsral Resarve Agents o r the Federal reserve
Banks f o r their information, f o r “hich n o fes has besn
charged o r collected.
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Federal Reserve Bank of St. Louis
"Surins t h e year 1920 there ~sre 14,571 examina
made a n d c o p i e s o f t h e s e r e o o r t s w e r e f u r n i s h e d
t o the
agent o r the Federal Reserve Bank.
I t
Federal n e s e r v e
gach f o r t h e $4,571 rsports
Banks during 1920, amounting
BOO Gia, 300¢
"It i s furthsr recommended t h a t t h e Federal Reserve
Bank b s askad t o p a y a
@
e
@ charge o f »10.00 der annum
for each o f the 3,162 banxs revorting December 31, 1 % 0 .
a r e g 7
This ;
a d a t o t h e e x a m i n i n g f u n d .31,620.
annually, t h i s charce o f 3:10.00 o a r banx t o b e made
vhethsr o n s o r s e v e r a l e x a m i n a t i o n s a r e m a d e d u r i n g t h e
F2aL 6
T h e complete revort, ineludinz t
saction,
i s t o b e furnishec
or Federal Keserve Bank."
Wo,
t h e Board could n o t very e l l stana this o u t
of its assessments because 7 ¢ did not anticipate this “hen
we l e v i e d t h s a s s a s s m e n t s
o n t h e #sderal ressrye Banks;
put i t seems t o u s that this i s a very fair proposition.
Tog n e w Comptroller wants t o cooperate a n d work richt
alongs.
H e wants t o zive t h e banks a l l the information
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Federal Reserve Bank of St. Louis
he c a n possi bly zet.
H e -rants each Fedoral
simply £to pay a service charce o f 1 0 . 0 0 f o r
its m e m b s r b a n k s a n d
reoort t h a t y o u seat.
governor willer. .iIneludine t h s confiden
Governor Hardins.
port.
Governor V a n sandt.
d o s e s n o t contemolate 215.09
gach b a n k ?
Governor
governor
Governor
sovernor V a n sandt. » 5 . 0 0 f o r vast
YWes,30-00 f o r p a s t
that i s it.»
Governor s e a v r
muess y o u
offices
s
i n a
exenination
o f
i
a means o f exanininzg the banks
inors cheanly
@¢an a o i t yourselves.
han y o u
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Federal Reserve Bank of St. Louis
governor V a n szandt.
S o f a r a s o u r office
"8 vould r a t h e r
egudine. t h e c o n f i d e n t i
hard ing.
s h o u l d thinic
Governor Norris. ‘
i
Governor H a r d i n c .
Zoinz
s b o base G a r e o r
G O 2 0 b -
t s
N o d bone
t o last, y o u cno:’, b e c a u s e i r . .iciaddon i n t r o d u c a d
his bL1l1l yasteard:
e n o e e Per o s
o n e
g
s a n admin-
Estration bill.
sovernor H o r r i
3
3f
the lcFadden bill i s not
passed a n d t h e C o m p t r o l l e r ' s offices z o e s o n , t h e n
payment o f these f e e s o r charges b y the FPederel reserve
s t o continue?
Governor dardinz.
governor Norris.
to t h i s s c h e d u l e
T h e dayment o f the charges according
i s t o continue.
Governor Harding.
g a l l , until they c a n rork o u t some
a chance t o levy a n addi-
would t i v e y o u a
talxine s o i n t t o y o u r inember b a n s ,
I i
they t a l x about n o t vetting a n y exchange o r any interest
on t h e r e s e r v e b a l s n c e s ,
t e l l t h e m y o u helped
t o v a y far
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Federal Reserve Bank of St. Louis
examination.
Governor vUalxins. e
eould t a i l t h e m v e p a y f o r =
examination a n d t h a t “ o u l d a p v e a l
sinnly t o
e
u
a
t o t h e m v e r y much;
n additional amount--I don't
thing that sould aposal t o the:
d
o
there i s anythint t h a t t h e Federal Heserve System coul
3
ordinarily d o that o u l d decrease t h e friction that exists.
aovernor Hardins.
T h i s dogs n o t have t o
this evening, b u t I wish you mould think anout
Governor V a n Sandt. C a n n o t t h e income o f
troller's offics o v the incomes o f the Treasury obtained
through t h e t a x o n National b a n k n o t e c i r c u l a t i o n b e
used f o r t h i s p u r o o s e ?
Governor darding. W o , I do not think so. H r . -illiams soma years devised a
olan o f levying a
seneral a s -
sssstiont i n proportion.to t n s S i o f the b a n k . I t may
it
be that/would b e “ell t o rece samend t o the Vomptroller
a complete change i n raising it, but anyvay that i s the
way i n e systen worked out, s o m e $25,000 behind.
Governor HeDougal. I
should lixe t o stave that
the r e p o r t s w h i c h w e h a v e r e c e i v e d f r o m t h e W a t i o n a l S a n k
Hxaminsr D e p a r t m e n t h a v e n o t a n s ~ e r e d
anster i n a g r e a t m a
daal o f “ o r k o n O n e o f a c c o u n t
have d i s c l o s e d s o m e startlinzs conditions.
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Federal Reserve Bank of St. Louis
is t o this $ 5 . 0 0 ,
i s t h a t f o r d e s t vean,
Govarnor darding.
Yes.
Governor Mcvougal.
suppose.
i s 1 % Pretre-
A n d .10.00 f o r future service, z
T h a t includes o n e c o p y o r t h e renort?
n c l u d e s a
Governor Harding.
complete c o p y o f t h e
revoort.
Inc ludinz t h e confidential
Governor Hardins
Y e s .
Governor Seay. “ o u l d y o u buy one a t that orice?
Governor jicDougal.
our o w n examination. I
W o t i f “ s were oernitted t o make
think a s s o o n a s
tne examinins deosriments t h e soonsr o u r position will b e
strengthened; I
think that i s cominz h e r e a
orospéct o f that, I
ood
think.
Governor itiarding.
(Thereupon,
a t 6:30, t h e Vonference adjourned until
tomorroy, ‘ednesday, ipril 13th, 1921, a t ? o'clock a m).
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Federal Reserve Bank of St. Louis