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Federal Reserve Bank of St. Louis
JOINT C O N F E R E N C E
O F THE FEDERAL RESERVE
BOARD W I T H T H E G O V E R N O R S
O F FEDERAL RESERVE
BANKS.
TREASURY B U I L D I N G
Washington,
D . C.
April 8, 1925.
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Federal Reserve Bank of St. Louis
JOINT CONFERENCE O F THE FUDERAL RESERVE
BOARD W I T H T H L GOVeiniNORS O F F E D W R A L R E S E R V E
BANKS.
Wasninebon, D . G., April 9 , 192s.
16.50
The j o i n t c o n f e r e n c e
O o clock
acme
o f t h e Federal Reserve B o a r d
with the Governors o f Federel Reserve Banks convened
in the hearing room, Federal teserve Boarc, Treasury
Building, Washington, D.-C., ApPsi BS; 2925, a t 10s30
o'clock a.m.
Pres e n t ;
D. KR. Crissinger, Governor, Federal Keserve Board
iidmund Platt, V i c e Governor, Federal Reserve Board
Charles S . Hamlin, M e m b e r F e d e r a l K e s e r v e B o a r d
G KR, James, iiember F e d e r a l K e s e r v e Board.
Adolph C . Miller, Member Federal Reserve Board
Edward 7 . Cunningham, Member Federal Reserve Board
Present also:
W. P . G . Harding, Governor, F e d eral Reserve B a n k
of Boston,
George W . Norris, Governor, Federal Keserve B a n k o f
Philadelphia,
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Federal Reserve Bank of St. Louis
fe
E. RK. Fancher, G o v e r n o r F e d e r a l xseserve B a n k o f
Cleveland,
Georsze J . Seay,ad3 G o v e r n o r F e d e r a l R e s e r v e
Richmond,
B. Wellborn, Governor Federel Reserve B a n k o f
ftlanta,
Mcbougal, G o v e r n o r F e d e r a l iieserve
Chicago,
Governor Federal n e s e r v e B a n k o f
SPL
Young,Qs G o v e r n o r F e d e r a l K e s e r v e
Bank
lilmneepolis,
Bailey, Governor Federal weserve B a n k o f
Kensas City,
NeKinney, Governor Federal K e s e r v e B a n k
Dallas,
Calkins, Governor F e d eral Keserve B a n k o f
n Strong,
i
New Y o r k .
mGovernor
a Federal
j
nReserve
e
B eBn k o f
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Federal Reserve Bank of St. Louis
PROCEEDINGS.
Governor Crissinger.
G o v e r n o r Strong, a r e y o u
ready n o w t o meke a n y kind o f a report?
Governor Strong. I
think possibly Mr. Harrison
had better r e a d t h e action taken i n our meeting o n the
guestion o f legislation.
Mr. Harrison. (Reading:)
"The Chairman.
T h e meeting will come t o order.
I want t o report about t h e discussions o f the committee.
You remember t h a t this morning Governor Crissinger made
some remarks relative t o legislation concerning t h e
Federal H e s e r v e S y s t e m a n d m o r e p a r t i c u l a r l y
dden b i l l s
should
b e dealt with.
a s t o how
H i s sthate-
re discussed a t the meeting o f the O p e n Market
Committee, a n d after informal discussion b y the comnittee, t h e committee decided t o recommend t h a t this
conference u r g e upon t h e Board t h e importance o f the
Board t a k i n g s o m e a f f i r m a t i v e p o s i t i o n
i n the matter
of banking legislationr a n d further carrying o u t
Governor Crissinger's suggestion, a
be a p p o i n t e d
suiteble committee
b y the Board t o advise w i t h t h e Board
in r e g e r d t o t h e s o - c a l l e d M c F a d d e n b i l l s
o r other
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Federal Reserve Bank of St. Louis
banking legislation.
"The committee! suggested
+ : Harding, Young,
seay, Willis, Tally a n d Strong.
"Governor Strong expressed the desire t o be relieved o f serving o n this comaittee.
“The committee also recommends thst Profess o r
Sprague
o f H a r v a r d a n d Dr. S t e w e r t
o f t h e Federal
reserve B o a r d b e a s s o c i a t e d w i t h t h e w o r k o f t h e c o m -
mittee under some s uitable arrangement a s t o Dr.
sprague's time a n d compensation.
T h e committee a l s o
recomienced t h a t t h e B o a r d t a k e s o m e s t e p s t o s e c u r e
the p a r t i c i p a t i o n
o f the Comptroller
o f t h e CUrpPency
in t h i s m a t t e r .
“On motion duly seconded t h e recomsendations s u b -
mitted b y the Cheirman were anproved b y the Conference."
Governor Crissinger. I
that t h e B o a r d h a d a
might s a y t o the conference
meeting a n d a p p r o v e d t h e r e c o m m e n d a -
tion o f your conference. I
might s e y further that
Governor Strong a n d myself have m e t a n d talked with the
Comptroller o f the Currency;
h e i s quite i n sympathy
with t h e movement a n d will g o along with t h e committee
andwheatever a s s i s t a n c e
h e c a n g i v e h e w i l l render.
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Federal Reserve Bank of St. Louis
5
If t h e r e
a r e n o further romarks
o n Chis,
we w i l l p r o c e e d t o t h e n e x t question.
s u p ecs
t
£ - a o n o t “enanc
we went t o g o through this whole program with
resard
to these operating matters.
“ @ ha
h
e non-cash
item proposition a n d thet i s one thing thet t h e
Board
would like t o hear from y o u on.
W h a t w e s your finding
as t o t h a t ?
Governor s t r o n g . i
think
i t -micht
b e weki
t o -re<
view a little b i t t h e procedure t h a t hes taken
place i n
revard t o t h e s u b j e c t
will recall a
o f n o n - c a s h collections.
H O .
comnittee o f the Governors m a d e a n investi-
gation o f the whole subject o f voluntery services
some-~
time ago.
T h a t committee mede a
report a n d recommenda-
tions a s t o those services, including a
great m a n y dif-
ferent types o f service performed b y the
reserve banks.
The r e p o r t w a s s u b m i t t e d
t o t h e Federal Keserve B o a r d
and a p p r o v e d a s t o a l l matters,
w i t h t h e exception o f
the non-cash c o l l e c t i o n s , d
n
e the Board advised that that
matter w a s still under consideration.
T h e t w a s t h e re-
sult o f the conference h e l d o n a r c h 2 4
o f last year.
The r e c o m m e n d a t i o n
o f thet r e p o r t w a s t h e t t h e collec-
tion o f n o n - c a s h i t e m s s h o u l d p r o c e e d
a s had been
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Federal Reserve Bank of St. Louis
6
developed u p t o that time.
T h e comnittee, a f t e r digs
cussion with t h e Board, undertook a
further investiga-
tion o f the matter, u n d e r instructions t o
report first
as t o whether a n y Charge should b e made
f o r services,
second i f it was made, what the charge should
bey and
third, w h a t t h e effeet o f t h e charge would
be,
In the meantime t h e Standing Comnittee o n
Collec-
tions hed a meeting with the Collections Committee
o f the
Federal Reserve Board, a s I understand
it, a n d a t thet
time t h e y were asked t o make a
report a s t o the repre-
sentations o f the Barton conmittee o f
the American
Bankers Association.
‘ f h e Stending Committee o n Collec-
tion has pursued a n investigation a s
t o making a
charge
for n o n - c a s h c o l l e c t i o n s a n d t h e y
have a l s o made a
on t h e r e p r e s e n t a t i o n s
brief.
report
i n the Barton comuittee report
or
T h e substance o f the report o f
the collections
committee o n those t w o matters i s that
t h e collection o f
non-cash items should b e continued
without a n y charge
being made.
In connection w i t h t h e report o f
the Berton Committee
the Collections Committee w a s a s k e d
t o report specifical-~
ly a s t o whether t h e collection
items payable a t street
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Federal Reserve Bank of St. Louis
7
addresses should b e discontinued. T h e a t h e d
already
been covered i n the report o f March £ 4 o f last
year,
and the committee recomuended that n o
change b e made
in respect
t o those collections;
t h e conference h a s
voted t o adont t h e report o f the Collections Committee
and a p p r o v e i t , w i t h t h r e e d i s s e n t i n g v o t e s ,
stand i t , a n d t h a t i s t h e s t a t u s
as I
o f the matter
under-
et
present t i m e .
Governor Crissinger.
I s there a n y member o f the
Board w h o wishes t o b e heard
o n this? T h a t comes f r o m
your committee, M r . J a m e s .
Mr. J a m e s .
N o , Governor.
Governor Crissinger,. i
interested
think t h e Board would b e
i n having s o m e r e v i e w o f t h e
business situa-
tion i n the various parts o f the country, j u s t
briefly,
as g i v e n b e f o r e t h e O n e n M a r k e t C o m m i t t e e .
Governor Strong.
‘ w e had a meeting, adopted a
port w h i c h h a s b e e n s u b m i t t e d
had t o b e c h a n z e d
beingOo m a d e n o w .
to b e rewritten.
i n writing.
re-
‘ T h a t report
i n one particular a n d t h e change
is
T h e r e was
o n e pa
r< a >g r: a up h
t
s
I t i s just a
o f i t thet had
review o f t h e Changes
in
the interest rates which have t a k e n
place following t h e
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Federal Reserve Bank of St. Louis
8
sales th:.t were made earlier i n the year, a n d a t the
end o f last year, giving a
chart showing t h e relation
of the various rates a n d i t makes reierence t o the
fact t h a t t h e r e h a s b e e n s o m e l e t - u p i n t h e s p e c u l a t i v e
activity
i n the stock market
i n N é w York.
T
o review
what took place during the quarter day turn-over since
the last meeting;
i t makes a
recommendation a s t o a
reapportionment o f purchases, w r i c h involves this change:
that w e h ve heretofore pursued t h e principle uniformly
of changing reapportionment o n l y o n new purchases, t h e
C1 e c c o -nts--
s
t
c
y unchanged, a n d a s the
eerning position o f one o r another o f the reserve banks
changes
i t i s compens.ted
of n e w purckases.
by a
chenze
i n the allotment
T h e situation n o w i s thet there a r e
certain r i s e r v e b a n k s w h i c h a r e d e f i n i t e l y s h o r t o f i n -
vestment a n d w e have sdopted a
resolution authorizing
an entire reapportionment a m o n g t h e s e r v e banks o f
the existing account, t h a t reeprortionment t o t: ke into
consideration
t h e situation
i n Minne:.polis,
where they
need e « lurger p r o p o r t i o n o f bills t h s n o f G o v u r n m e n t
securities
note i s s u e ,
i n order
t o se.ve
4 s collaterr]
f o r their
a n d a l s o t h : t i t will b e desireble
t o in-
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Federal Reserve Bank of St. Louis
cre s e the account t o approxim:tely %3300,000,000.
Governor Crissinger.
Governor Strong.
Mr. M i l l e r .
I
Yes.
s there a n y recommendstion
Governor Strong.
ie. Miller.
T h e t i s your recommendstion?
as to
O n l y thet.
S i m p l y a reeprortionment?
Governor Strong.
A s the seapportionment i s made,
Dr. Hiller, t h e recomiend t i o n o f the committee i s that
the accovnt b e increased t o around -,300,000,000.
course
w e d i d n o t replace
t h e maturities
o f
o f the lest
two issues.
Miller.
“
r
e s p e k i n g o f Treasury certi-
GOVErPROr=Surone . Y e s , s h o r t G o v e r n m e n t s ,
around
500,000,000 f o r the present.
Myr, Moller.
I f there e : e a n y maturities y o u will
replace t h e m ?
Governor Strong.
I t meens r e p l a c i n g a b o u t .:55,000,-
O00 o f maturities t h : t have r u n off, o r sales th:.t
have b e e n made, a n d o f course w e have n o t replaced t h e
Last “ M e t u r t i e s
4 5 ad1.
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Federal Reserve Bank of St. Louis
10
pL Elers
W h a t i s the rete o n your re-sele
contre.cts?
Governor Strong.
Wa-
pa S i n gvane
O n G overnments, y o u mesn? 2
N o , accepténces.
Governor Strong. T h r e e per cent.
is re: lly u n d e r y o u r a c c e p t a n c e
Governor Strong.
Mr. Miller.
N o t for short bills.
N o t f o r t h e shortest bills. I
notice
2
ne report yesterday o f maturities
i n bills thet have
run o f f i t w a s s e v e n m i l l i o n s : n d t h e r e - s a l e c o n t r e c t s
ten millions.
Governor C r i s s i n r e r
sbi
f p p r o x i n e telly n i n e - m i l b i o n
a k
Hille:
ten millions.
T
h
e seven m i L o n s m a t u r i t i e s
were p r a c t i c a l l y a i l i n N e w
Governor Strong.
Z l s o Chicas
n d Boston.
Governor M e D o u t e 5
1 G n i c e a g o - i s o n - a slightly
aifTerent basis.
on &
I
r re-sale a g r e e n c n t
cherge e q u i v e b e n t
buys t h e bills.
r
e prediceted
t o t h e r a t e a t which t h e borrower
- e t: ke them
t h e rate t h e y p a yJ for
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Federal Reserve Bank of St. Louis
the bills, instead o f having a fixed rate.
Mr. Miijier.s T h e ques t i o n that arose i n m y mind
was whether t h e maturity o f a bill i s not followed b y
a re-sale borrowing f r o m t h e bank.
Governor Strong.
W o , t h e y nave n o relation,
Governor MW:
t
A
l a pate w h i c h m a y b e c o n s i d e r a b l e
lower t h a n t h e a v e r a g e r a t e u p o n a l l t h e b i l l s p u r e
e
chased?
Governor Strong.
Dr. Miller.
from b a n k s
mature,
W e deal w i t h different people,
W e b u y v e r y f e w bills
w i t h t h e i r endorsement,
i n New York except
a n d u s t h e bills
o r r u n off, t h e y are p u i d y T h e extent t o which
the dealers c o m e into u s for money i s governed b y the
money m a r k e t
Mr. M i l l e r .
when y o u have a
H o w d o y o u explain t h e fact t h a t
big maturity running o f f y o u usually
big re-sale contracts?
Governor Strong.
T h e bills which are matured and
are paltd e l i v e n o r e l a t i o n
ing from g
Mr.
o
W
h
a
this c o i n c i d e n c e : I
t o t h e dealers borrow-
n Pre=sele contracts,
t would y o u r explanation
be of
notice t h a t t h e r e - s a l e s a r e a p t
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Federal Reserve Bank of St. Louis
a2
to g o u p : h e n t h e m e t u r i t i e s - a r e r e a c h e d .
T h a t looks
is s o m e d e m a n d f o r r e p l a c e m e n t
o f the
money that disappears w h e n t h e Federal reserve b a n k
collects u p o n t h e m a t u r e d a c c e p t a n c e s .
Governor Strong.
bills m a t u r e
T h a t v e l l m a y be, When. the
i n our hands
i t tekes
s o much reserve
out
of t h e m e r k e t .
Governor Strong.
our r a t e , c o n s i d e r a b l y ,
f n d i f money rates are above
a s they heve been off end o n
lately, a n d the bill dealers
t o have their rate
merked u n above o u r carrying rete, t h e n they come i n
to u s t o b o r r o w .
Mr. iiiller. I
there t h a t s o o n e r
think there i s a real question
o r later ought
t o be consider:
db y
the conference, e n d thet i s whether w e should accord
a lower rate o n those advances i n the form o f a ressle
contract t h a n are eccorded t o member banks o n redis-
counted: paper and generally t o the sellers o f acceptances.
Governor Celkins.
O u r repurchase r e t e e t the
present time is 3-1/8, our view being thet with that
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Federal Reserve Bank of St. Louis
135
rete o n repurchase agreements t h e member banks having
sold t o u s a l l except t h e long maturities a t a rate
comparable w i t h t h e repurchas e ¢ rate + + i n other words
on the shorter meturities i s about 3-1/8 and there can
be n o objection because i f our carrying rate i s lower
than the rat’. a t which t h e member bank c a n sell their
short time bills t o us, n o objection will arise.
is what y o u have i n mind, I
Mr. lidller. i
Thet
think.
think so, i f I understana-the
propositi0n.
Governor Strong. T h e s e telegrams would s e e m t o
indicate t h e t t h e reverse i s true. H e r e i s one o f
April 3rd, maturities amounted t o a total o f 3,155,000,
sales c o n t r a c t s
ties e m o u n t e d
d e c r e a s e d .3,870,0003;
t o four
o n April 4
maturi-
e n d eae half m i l l i o n s a n d s a l e s
contracts d e c r e a s e d y 1 , 0 6 1 , 0 Q 0 .
L
c otha m k thet- 4 4 s e e n
movement relsting t o the money market, t h e relation o f
our r e t e s
t o t h e rates w h i c h t h e dealers h a v e b e e n
chergéasby t h e banks - - we’are n o t carrying bills @ é r
t @ lower:
r a t e t h a n t h e member banks a r e able
to g a t m o n e y a t t h e F e d e r a l r e s e r v e b a n k o n t h e b i l l s
for a
like p e r i o d o f time.
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Federal Reserve Bank of St. Louis
14
is there a
uniform rate o n re-sale
contracts n o w i n all t h e reserve banks?
Governor S t r o n g .
Mr. Miller,
I t is
Whac i s i t i n Chicago?
Governor StPomg...
O u r rate fluctuates somewhat,
Dr. Miller. ‘ i e buy these bills a s stated from dealers a t the r e t e u t which t h e y pay, i f w e b u y them a t
all. ‘ s e are not buying sny a t present, I believe, i n
order t o g i v e t h e m t i m e t o t u r n a r o u n d a n d s o a s t o h e l p
ing
the a c c e p t i n g b a n k s
i n further/treir acceptance busi-
It i s a temporary matter.
T h e r e i s n o sprea
between o u r r a t e a n d t h e r e t e i n w h i c h t h e d e a l e r b u y s
the bilis 6nd. he s e d e m a k e a n y money there.
Governor Harding. B o s t o n would b e a little higher
the N e w York rate.
Governor S t r o n g . I
think
i t world “be generally.
a
e 6 d vanced t h e r e t e w e advenced t h e coupon r a t e
« MIiLLEr.
A L t h e coupon rate?
Goernor btrong.
A s I remember it,
y e i e e e
spread between t h e coupon rate a n d our rate a n d there
no s p r e a d » e t w e e n t h e r a t e e t w h i c h t h e d e a l e r b u y s b i l l s
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Federal Reserve Bank of St. Louis
and t h e r e t e
a t which
w e tenporerily loan t h e m the
money. ‘ 4 . 6 d o v e r y l i t t l e o f that. O c c e s i o n a l f l y w e
have s o m e of.1it.
Governor Crissinger. ‘ b o g i e s :
d
you under-
stand Governor Calkinst statement?
Miller. I
think so, b u t I
Governor Calkins.
purchese a g r e e m e n t s
O u r carrying rate f o r re=
i s 3-1/8.
ber b a n k s h a v e o p p o r t u n i t y
see f i t t o u s a t a
a m not sure.
O u r view being t h a t mem-
t o sell t h e i r bills
i f they
compareble r a t e , n o t h i g h e r t h a n t h e
rate a t which w e carry f o r dealers, t h e rate o n sshorttime bills being 3-1/8~*- o n occasions t h e member banks
make j u s t a s good terms a&*the dealers d o - Governor Strong.
T h g e t e x a c t l y t h e same terms
in Now. York. G o o .
Mr. Platt.
T h e O p e n lierket Committee's suggestion
involves buying b a c k .55,000,000 o f maturities
Wea
Ose «
Governor Strong. Y e s .
Pa.
I
believe
i t i s rether questionable
time t o put »55,;000,000 o n the merket.
Governor.Strong. I
think, Mr. Plett;> t h a t i t i s 2
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Federal Reserve Bank of St. Louis
16
Sirable.
W e h e v e p l e n t y o f b o r r o w i n g (Crom u s i n
the S y s t e m n o w f o r u e n y o f t h e p u r p o s e s
thul
w e have
i n
minds G e r t a i n l y i f t h e r o v e s -chapee a n d t h e sile-aor
investments a n d g o l d e x p o r t s h a v e h a d w n y effect, -the
effect h a s been t o put a littie d a m p e r o n speculation.
If you throw $55,000,000 into the
market and they pay off $55,000,000 i n rediscounts y o u
autometically lower t h e rate a t which t h e market g e t s
money.
GoVernor Strong.
Mr. Platt.
O h , n o --
W h y not? Y o u b u y Government securi-
ties a n d y o u loan money t o the market a t the rate a t
which
y o u b u y s u c u r i l i e s >: preetice lly.
Governor
Strong
T
t enéblées t h e D a n k s
t o pay off
er h e r r t o n n e , t n e t - i s - u l k .
Mis Fleet.
T h e securities yield-less- t h e n t a r e s
per cent and your rate is 3 4 per cent.
Governor
Strong
N o t necessaridy.
i b depends
vOuvemern. Fron thes Unngpoim.
It s e e m s
o n
O L e i rpnings?
t o m e you not only put
money. i n the market b u t y o u lower t h e rate o f return o n
it.
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Federal Reserve Bank of St. Louis
ay
Governor S t r o n g .
CONnSLAOCrEtLOn,
T h e a t isn't a
A S -1t. i
ir. Platt. I
very important
Platt?
think i t d e s e r v e s s o m e c o n s i d e r a -
tion, especially a s y o u e
e
e
g i v e money a t a
lower rate.
Governor Strong.
B u t Lt°wiil b e a good deal sasier
to d o this t h e n i t would b e t o have s o m e o f the reserve
banks buying longs time bonds.
Mr, Platt. I
do not-weht t o g t i n t o a
discussion
not s u r e th:.t I a g r e e w i t h y o u e v e n o n
me t o a s k t h e q e s t i o n :
is t h i s
r e c o m .endation b a s e d u p o n t h e e x p e c t a t i o n t h a t
Lf o l s 8
n O dere. some
time bonds,
i n other words secure
Governor. Strong.
bit c o m p e r e b l e
an
1 ° think t h e
t o wheat i t w e s i n t h e f a l l o f
There i s c e r t a i n l y s o m e e v i d e n c e t h a t b u s i n e s s
ing u p a
bit.
i s pick-
T h i s r e : p p o r t i o n m e n t w i l l b e o f consider-
venefit a n d a n additionel purchase will give u s a
beport f o l i o t h a t w e c a n h a v e w h e n i t c o m e s n e c e s s e r y t o
sell, o f a r o n d *;00,000,000 instead o f ‘245,000,000.
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Federal Reserve Bank of St. Louis
18
i personally d o not think 1 t i s going t o d o a bit. o f
harm t o r e l e a s e g r a d u a l l y ,
s a y a b o u t w o o ,000,000
of
reserve credit, e v e n i f i t does enable t h e banks t o
pay o f f t h e t a m o u n t
o f discounts.
/ e have h a d a
net
loss o f gold o f a large amount, considerably over
700,000,000,
w e have s o l d n e t .:255,000,000 o f our
securities, making .,450,000,000 taken o u t o f the member
banks' r e s e r v e s a n d t h e r e s u l t
o f thet h a s b e e n t o re-
duce t h e member bank deposits i n New York b y the t i d y
sum of .500,000,000 since the first o f January.
Which w a y does t h e conference s t a n d
on this recommendation, the o n e y o u have j u s t described,
or t h e other?
Governor Strong. I
“Wee M E L e x , I
method
f o r use later
d o a n y injury,
understand y o u .
a m Lett. i m d o u b t 8 s t o whether t h e
y o u have b e e n following
ting p o r t f o l i o
won't
d o n o t thin: I
has been
t o get
a n opera-
o n - - assuming t h e t i t
y o u g i v e t h e m a r k e t t h e money,
and
you zét ~55,000,000 i n earning a s
Governor S t r o n g ,
situation:
B o t h .
T h e @ommittee f a c e d this
s o m e o f the res erve banks have purchased
ere intending t o purchase s o m e more l o n g time bonds
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Federal Reserve Bank of St. Louis
19
for e a r n i n g purposes.
T h a t i s the point o f view o f
some o f t h e i r di:.sctors.
oution o f t h e ¢
s
.
@ a r e proposing a
o f t h e committee,
redistri-
s o t o speak,
s o
thet i t will relieve their minds o f earnings, a n d the
committee a l s o f e l t t h a t i t w o u l d n o t b e i n o p p o r t u n e
now, a n d n o harm would result, f r o m bringing o u r portfolio u p t o around j300,000,000, b u t i t would possibly
be a little sefer t o d o so.
T h e port folio i s pretty
low, a n d t o r e d i s t r i b u t i o n w i l l t a k e cea:e o f b o t h
situations.
lips Miller.
b i d the committee o r the conference
consider t h e a d v i s a b i l i t y
o f the program o f certain banks
of go:nr. i n t o t h e market o n their o w n account a n d purchasing l o n g t i m e b o n d s ?
Governor “trong.
so a n d w e r e p r o p o s i n g
Niller.
S o m e o f them have already done
t o b u y more.
H a v e t h e y considered h o w that a f f e c t s
the open market policy o f the Federal Keserve System?
Governor S t r o n g .
folio
I t would build u p e
port
i n the individual districts w h i c h would n o t b e
subject
folio
Y e s .
t o handling
b y t h e comaittee
o f securities
thet e r e outside
at B A e
o u r field
-pORG
o f
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Federal Reserve Bank of St. Louis
20
Operations, a n d the feeling o f the committee w a s that
it w o u l d b e b e t t e r
t o have n o purchases m a d e o f a
charecter which would n o t permit u s t o handle then,
but that they should b e o f a character which w e could
dispose o f i n case o f need without imposing a
loss o n the reserve banks.
if a purchase
possible
F o r dnetence, D r . Milter,
o f long time bonds had been made b y one
reserve bank, a s was suggested a t the time i t was first
sugtested,
a n d w e w e r e u n d e r t h e need, f o r m a r k e t
reasons o r credit reesons o f selling t h e m now,
they
have had a loss o f 4300,000 i n the account. I
think t h i s c o m m i t t e e s h o u l d a s s u m e t h e r
of s a y i n g t o t h e d i r e c t o r s
w o u l d
do not
sponsibility
o f A n y reserve b a n k w h i c h
has made e n investment o f t e n o r fifteen o r twenty
million dollars, t h e t t h e time has come f o r them t o
take a loss o f w300,000.
T h a t i s the best way t o
break u p the functioning o f this committee.
present a r r a n z e m e n t
B y this
w e a v o i d a n y s u c h situetion,
the
securities purchased w i l l b e subject t o the committee's
decision a s t o s:le,
a s t h e y alweys h a v e been, a n d
they w i l l b e s h o r t t i m e s e c u r i t i e s .
£-oo- not think i f is. necessery, b u t 2
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Federal Reserve Bank of St. Louis
el
assume i t 1 s necessary because i t i s not adequately
covered i n a n y existing rule a n d regulations o n that
-- but d o y o u not think i t would b e highly desirable
thet e v e r y i m p o r t a n t f o r m o f o p e n m a r k e t p u r c h a s e
should b e made under t h e general supervision o f the
comiittee? Y o u r argument,
4 s I understand it, prac-
tically c o m e s d o w n t o this.
your p u r c h a s e s
a n d have a
Y o u a r e g o i n g t o enlarge
re: l l o t m e n t
s o a s t o pre-
vent certain banks f r o m doing things that y o u revard a s
undesirable, a n d which t h e y w: nt t o d o for the purpose
of getting earning assets.
Governor Strong.
T h e t i s part o f the reason.
not understand your point v e r y clearly, Dr. Miller.
Miller. P e r h a n s I
is a s s u m e d t h e t t h e b a n k s
did not make i t clear.
a r e free
I t
t o SO. ANnCO..t1e- O m e n
market a n d purchase l o n g time bonds a s a n investment.
Governor Strong.
T h e y are absolutely free t o d o i t
Bi
They a r e doing it.
have n o m o r e p o w e :
M y v i e w thet t h e y
t o d o thet under t h e general o p e n
market r e g u l a t i o n s t h a n t h e y h a v e t o g o
acceptances
o r short t i m e securities
i f they w:nt to.
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Federal Reserve Bank of St. Louis
22
Governor Strong. I
do not believe y o u have t h e
rules, i f you wish t o call t h e m thet, accurately i n
your mind.
I t really i s a n sgreement among t h e
reserve b a n k s a b o u t l i k e this:
T h a t t h e purchese
of
short time obligations o f the Governorment shall b e
made b y the committee f o r account o f all o f the reserve
banks through t h e committee a n d a l l o f those purchases
shall b e subject t o the c o m i t t e e ' s control, f o r
sale,
at a n y t i m e .
B u t t h e comaittee
never undertook
t o
exere s e a n y control o v e r t h e purchasé o r sale o f
long
time s e c u r i t i e s a n d n o r d i a t h e y e v e r u n d e r t a k e
t o ex-
ercise a n y control o v e r t h e reserve banks i n buying
or
selling securities w i t h their member banks, n o r
buying
and selling acceptances with their member banks
in
their o w n district.
T h i s w a s j u s t a n open market trans-
action, conducted principslly i n New York, a n d t o
some
extent
i n other districts, t h r o u g h dealers
a n d brokers,
in those securities w h i c h t h e committee dealt
with.
W e
did n o t g o s o f a r a s t o s h u t t h e
d o o r t o a n y reserve b a n k s
» deeling w i t h their o w n membors.
T h e t w a s specifically
excepted, a n d investments i n long time
bonds were e x cepted because t h e committee f e l t thet
i t hed nothing t o
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Federal Reserve Bank of St. Louis
GO w i t h that.
ir. Miller.
Y e s , b u t i t i s nevertheless t r u e
thet t h e genersl resolutions o r regulations i s s u e d . y
b
the Board, u n d e r w h i c h t h e c o m m i t t e e
i s operating,
speaks o f t h e p u r c h a s e a n d s r l e o f U n i t e d S t a t e s
Government securities particulerly, particulerl
issues,
o n the theory thet o f course t h e operations i n
the o p e n m a r k e t f o r e r e c i t c o n t r o l P U L P O S E S W o u d d be. i n
short stuff a n d not i n long stuff.
r Strong
o n r eZe v o Yes.
G
Miller.
serve
N o w i f w e assume t h e t a n y Federal r e -
b a i s free t o pursue «
different policy, a
policy
of its o w n i n buying l o n g time bonds t h a t busts y o u r
open m e r k e t p o l i c y a n d y o u h a v e n o n e .
N o w the Onen
Merket C o m m i t t e e s a y s t h a t r a t h e r t h e n h a v e t h e t d o n e
they will meke a
banks t h a t n e e d a
reapnortionment s o a s t o give certain
Digcver v o l u m e o f e x r n i n g assets,
and
for thet purpose i t will also b u y a lerger volume o f
seciupitiés .
Governor »trong. I
do not went t o pret
position o f a n y o f the Governors, t h e committee o r a n y
of t h e other banks. I
think t h e y ought t o express their
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Federal Reserve Bank of St. Louis
24
not
Views about. it, Dr. Miller. @
tre transact:.ons
o f t h e comiittee
w o u l d care t o conduct
i n N e w York,
a s we
are obliced t o do, i f i t resulted i n a-situc.tion where
the other reserve banks were n o t entirely free i n dealing with the question o f investments, outside o f those
which t h e c o m m i t t e e d e a l s w
ith,
o r i n dealing w i t h
their o w n member banks.
Mee M l l e r :
A
s t o t h e member: b a n k s n o q u e s t i o n
has ever been raised, b u t { £ wonder where t h e logic i s
in giving a
reserve b a n k freedom t o b u y long time
securities a s i t wents t o a n d then restricts i t when i t
operates i n the purchase o f short time securities.
I n
either case you are putting money into the market o r
teking m o n e y o u t o f t h e market.
Governor
Governor M e D o u g e
T
h
e cherecter a n d scope o f the
activities o f this committee a s s outlined b y Governor
otrong a r e e x e c t l y i n accord w i t h m y u n d e r s t a n d i n g
the situation.
of
F r o m time t o time t h e question hes
arisen Which y o u have raised a s t o the right
to amt independently.
I
o f a bank
t has always b e e n understood
bank elected t o d o s o they were a t libeity t o
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Federal Reserve Bank of St. Louis
25
ed a s long time securities.
been n o barriers put u p t o thet except
thet i t has always been understood that these purchases w e i e m a d e i n t h e o p e n market,
end I
speak o f
that a s compared with t h e purchases w h i c h a r e made
for member banks, which come i n i n the ordinary course
of b u s i n e s s ;
that
i n the interest
o f t h e Government,
including t h e Treasury, t h : t t h e purchases ought t o
be made through o r with t h e knowledge o f the O p e n
Merket C o m m i t t e e .
made n o p u r c h a s e s
S o far a s w e are concerned
o f long time bonds
w e have
i n t h e merket.
The o n l y a c c u m u l a t i o n o f t h e m t h : t w e h a v e c o m e s
naturally f r o m s m a l l p u r c h : s e s t h s t a r e s e n t t o u s
from o u r m e m b e r banks.
w e advised t h e Board a
time a g o o f our policy t o accumulate a
bonds.
long
few o f those
B u t i f w e were going into t h e market n o w t o
buy long time securities w e certainly would n o t d o
so except trrough t h e committee, a n d with their full
understanding. I
think that i s t h e general under-
standing throush t h e
Governor strong.
T h e y are a l l reported t o the
committee, a n d b y the committee reported t o the Board
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Federal Reserve Bank of St. Louis
26
in assembled f o r m every week.
T h e Board g e t a report
of a l l t h e s e purchases.
The Board hes never issued a n y general regulations governing purchases of’long time securities, as. 1
u n d e r s t a n d algo
Governor Strong. — N o t t o iay knowledge.
ir. Hamlin. W
3 } t h a t power, b u t I doubt v e r y
much whether t h a t power would give 1
stroy, t h a t i s t o s
1 ¢ right t o de-
a y that t h e Federal reserve b a n k s
should n e v e r b u y them.
Governor Strong.
T h e o n l y market f o r sone
Government securities i n some districts, t h e principal
market,
i s a t the resurve bank, a n d i t would b e a very
serious thing t o d o that.
Mr. Miller. £
do not went t o scem fractious, b u t
it d o e s r a i s e t h e question,
a n d t h e QUSSstLon in: thas
form o r some similar f o r m has arisen every time i n the
last f e w years t h a t w e g e t a dull period andthe earning
;)
the Federal ressrve
then a disposition t o g o out, e g pecielly o n the
pert o f s o m e b s
position,
L
ei
i n t h e lesst comfortable
a n d b u y s e c u r i t i e s f o r t h e s e k e o f earnings.
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Federal Reserve Bank of St. Louis
27
I should sexy that t h e major consideration, t h e controlling consideration o f the formulation o f a Poiicy I n
this matter i s t o forestall t h e reoccurrence o f just
such @
situetion a s thet.
w e s e e m t o b e moving into
a period o f acquiescence now, a n d thers i s
disposition
o n the part o f certain banks
t o g o out a n d
buy bonds o n the theory thet t h a t hes nothing t o d o
with t h e o p e n m a r k e t a n d t h e t t h e y e r e p e r f e c t l y f r e e
to operate o n their o w n judgment.
N o w I think i t has
just a s m u c h t o d o w i t h t h e o p e n m a r k e t o p e r a t i o n s
as
he purchase o f short time securities.
Govern Crissinger.
i
c
h G o v e r n o r McKinney
would like t o b e heard o n that.
Governor McKinney.
w e have purchased about
six and a half millions i n long time securities. M o s t
of those were purchased through t h e open market committee o r t h r o u g h t h e N e w Y o r k Bank.
Mr. Hiller. M o s t o f them were purchased i n that
way?
Governor McKinney.
Y e s .
A s Governor Strong has
stated w e have reported those regularly, a n d i t i s o u n
l
a
e
n
g
2
conception
or f the matter
that
a s e t o those
obli-
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Federal Reserve Bank of St. Louis
28
ons, w i t h i n r e a s
t
warranted i n i n g t h a I
C w e were
might s a y w e have v e r y
few bonds offered u s i n our district, b u t I
cannot s e e
difference i n buying bonds f r o m member banks
because w e put money into t h e
ecent c o r r e s p o n d e n c e b e t w e e n o u r b a n k a n d t h e
nes e r v e Board.
lip. Miller.
B o y o u report t h e t t o t h e O p e n Market
Gommittee a n d t a k e i t u p w i t h t h
Governor Nc! 1 e y
Willer. I
circular
W e reported
a t the time, yes.
would like t o read a line f r o m the
o f t h e Board o f april 7 , 1923 t o a l l reserve
banks:
Manner, charecter a n d volume
of open market investments
b y Federal reserve banks
be g o v e r n e d w i t h p r i m a r y r e v r r d t o t h e a c c o m m o d e t i o n
comaerce a n d business,
purchases
o r sales
o n the
Cf SeCu i t i e s .
Mao v
i
gctintet g o e s
and to
o n
of
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Federal Reserve Bank of St. Louis
29
(2)
purchases,
T h e t i n making t h e selection o f o p e n market
c a r ( i l r e s a r d b e always g i v e n t o t h e
bearing o f purchases
o f United States Government
securities, e s p e c i a l l y t h e s
hort d a t e d issues, u p o n
the market f o r such securities, a n d that o p e n market
purchases
b e primarily commercial investments, e x c e p t
thet T r e e s u r y c e r t i f i c a t e s
b e d e a l t i n , a s a t present,
under s o - c a l l e d !repurchase!
other words
h e r e i s a distinet.slant
a g ins t
in the purchase o r sale o f Government securilong
vernor Strong.
T h i s meets t h e situation,
completely, Dr. ifiller.
T h e reser b a n k s w h i c h had i n
mind making t h e s e purchasss w e r e satisfied w i t h this proOpen M a r k e t C o m m i t t e e
a n d felt
i t would
be a
satisfactory w a y o f s o e w h . t e n i e r e i n g t h e port. toric;
which w e thought should b e enlerged,
tunity permitted.
to t h e e x t e n t
i t removes a
a s soon a s oppor-
dou.
i y O U R minds a 9
t o which l o n g time bonds w i l l b e purchased
‘in the market, because t h e y will n o t a
this arrangement.
purchased under
‘ T h e comuiitteets report, w h i c h w a s
afted i n N e w York, m a d e n o r e f e r e n c e
t o a n y s u c h proposél,
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Federal Reserve Bank of St. Louis
30
and when i t came u p a t the meeting I
suggested that w e
discuss this a t ovr board o f directors meeting i n New
York, because t h e queetion was always i n front o f us,
always
i n front o f t h e committee a n d particularly before
the Bank o f N e w Y o r k because w e d i d not b u y long time
bonds
a t all. I
had eat o n e t i m e m a d e a
recomrendation
to our directors, w h i c h d i d not appeal t o them very
strongly,
b u t which I
t h i n k h a s s o m e merit, t h a t t h e
committee b e abendoned, a n d '
Instead o f having t h e
committee p r o c e d u r e t h a t f i v e o r s i x banks,
s a y the
five banks which a r e n o w represented o n the committee,
plus S : n F r a n c i s c o , s i m p l y h a v e a n o p e n m a r k e t a c c o u n t
together, a n d t h e other reserve banks would b u y from t h e
committee f r o m t i m e t o time a s they needed i f they
wanted t o o r sell t o t h e comiittee, a n d that would give
these o t h e r banks, w h i c h s e e m e d t o h a v e a
for servings; =
recurrent n e e d
sort o f f i x e d i n v e s t m e n t a c c o u n t w h i c h
would n o t b e s ubject t o the committee's control a t all.
Then about 7 5 o r 8 0 per cent o f the System. would have i t s
account,
i t will b e plenty large enough,
easier t o handle.
a n d i t would b e
O u r directors f e l t thet a s the Federal
teserve Board w a s satisfied with t h e existing arrangement,
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Federal Reserve Bank of St. Louis
and t h e t a s
i t worked pretty well a n d a s i t was a
System matter,
otherwise
i t was better t o let i t stand, because
i t would have t h e effect
fying t h e banks,
f classi-
i t wouldn't g i v e a s good control a n d
they d i d n o t t h i n k i t w a s
carrangement.
o
a s g o o d a s t h e present
B u t that i s a
P O S S sLiity.
lD
5-do. net
think i t i s going t o d o a bit o f harm from t h e merket
point
o f view
o r the organization point
o f view
to
somewhet enlarge t h e account a n d give these banks t h e
earning assets that they need. T h i s will d o it. ‘ h e n
the q u e s t i o n c a m e u p t h a t w a s t h e p r o p o s a l m a d e , f i r s t
thet w e should have this readjustment o f the existing
account, t h a t w e should s o m e w h : tenlarge it, providing
market development did not make i t unwise t o do so. I
think m y s e l f t h a t
w e are going
t o have plenty
o f earn-
ings from now on, certainly with this slight addition
to the account a t the present time, a n d enough t o make
everybody h a p p y a n d satisfied.
Governor McKinney.
w e recognize o f course t h a t
the purchase o f these long-time securities does put money
in t h e market, j u s t a s t h o u g h w e p u r c h a s e s h o r t t i m e
securities.
B u t a s the Board will recall, l a s t fall
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Federal Reserve Bank of St. Louis
about a
year ago, wkth t h e a c q u i e s c e n c e
Market Committee,
w e wele grented permission t o take
on about 1 0 , 0 0 0 , 0 0 0
own account.
o f the O p e n
o f Government securities f o r o u r
T h o s e securites w e r e purchas
e d a n d dis-
posed o f l a s t s u m m e r a s t h e d e m a n d s f r o m o u r m e m b e r
banks i n c r e a s
e d a n d w e h a d opnortunity
into benkers a c c e p t a n c e s s
t o convert t h e m
T h e n i n the fall, w h e n o u r
rediscount r a n o f f v e r y rapidly,
w e t o o k t h e matter u p
again i n a sonewhet informal w a y with t h e members o f
the Open Market Committee, a n d they expres:ed n o objection t o o u r resuming that within reasonable limitations, e n d the Board has been advised thet o u r directors
had determined t o g o out a n d b u y ..10,000,000 worth,
taking whet w a s offered u s f r o m our member banks, t h e
clearing h o u s e s a n d elsewhere,
chased a b o u t s i x a n d a
Oe
b u t w e have o n l y pur=
helf m i l l i o n s u n d e r t h a t author-
a
iow much?
Governor MeKinney.
Mr. M i l l e r .
H o w r e c e n t l y heve y o u purchased them?
Governor licKinney.
fe
three
o r for
m o n
S i x a n d a half millions.
T
h
F r o m time t o time within t h e last
e
r
e
i s a
letter a d d r e s s e d
t o the
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Federal Reserve Bank of St. Louis
Ziving t h e details, w r i c h y o u should have r e ceived i n t h e l a s t f e w days.
Governor Young. M i n n e : . p o l i s i s o m e o f “the banks
thet
i s not earning s
ufficient
t o meet i t s expenses.
I can:ot s e e t h a t i t w i l l e a r n s u f f i c i e n t f o r a
great
number o f yeers t o come, although the other gantlemen
assure m e that there will b e sufficient earnings.
The
ieserve Bank o f Minneapolis, t h r e e years ago,
or f o u r years, p u t i i t s s u r p l u s
bonds.
i n long time Government
T h a t was before t h e O p e n Merket Committee w a s
in operation.
S i n c e the: t i m e w e h a v e n o t p u r c h a s e d a n y
long time bonds n o r d o w e intend t o purchase any.
feel thet w e have a
i e
sufficient number, regardless o f
whether w e m a k e e a r n i n g s
o r not.
' ¢ @ have n o t purchased
any accertances i n the open market.
‘ h e t w e heve r e -
ceived has been received entirely f r o m t h e open market
nvestment committee.
be h a n d i e d
O u r people f e e l thet thet should
b y o n e committee.
about t h e s i t u a t i o n
w e d o not k n o w anything
i n the e a s t a n d w e have t o rely o n
someone e l s e a s t o w h e n i t i s t h e p r o n s r t i m e t o b u y
and when i t i s the proner tine s e l l .
T E have n o t re-
quested anything o f the committee i n the w e y o f earnings.
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Federal Reserve Bank of St. Louis
They h a v e s t a t e d t h : t they h a v e
they c o u l d t u r n s o m e o f i t e o v e r
we are taking them.
t o us: a n d t h e t
u € heve to
rather t h e n Government oblisetions
run c l o s é o n r e s e r v e r e p e a t e d l y a n d c a n n o t u s e G o v -
ernment oblizations a n d c e n use
buying bills without knowing anything a b o u t t h e m e t all,
relying o n someone ¢lsé i n the proposition.
thst i s good business o r not I
Whether
do not know.
Mr, Plat G o v e r n o r Young remarks t h e t there i s a
netursl l i m i t
o n the bonds t h s t a n y reserve b a n k should
hold anyw:y, a n d thet i s Government securities.
They
have g o t t o h a v e
cOllateral f o r Federal reserve notes. W h a t e v e
h e y
have already i s taken into consideretion b y the O p e n
Market Committee inits allotments o f purchases; t h e y
cannot geo
et a
big accumulation
o f Government b o n d s
or
they would n o t heve anything t o put u n a s collaterel
for Federal reserve notes. T h e r e f o r e there i s
upal l4mit o n its
Governor licKinney.
T h e member benks
1,400,009 a n d you cen s ee how limited w e
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Federal Reserve Bank of St. Louis
35
aveilable c o l l a t e r a l
t o s e c u z e F e d e r a l r e s e r v e notes.
Governor Young. I
want t o make o n e other explana-
tion. M i n n e a p o l i s i s quite a
ways f r o m the N e w York
Market a n d w e d o c o n d u c t o p e n m a r k e t o p e r a t i o n s
this way.
in
T h e banks want some United States bonds t o
sell f o r delivery i n New York three o r four days
later a n d w e a d v a n c e t h e m o n e y i m m e d i a t e l y
t o carry
them f o r three o r four days a n d thet runs u p t o
‘51,000,000 a dey, covering maybe s i x o r seven hundred
transactions a
month.
i e d o thet f o r member a n d non-
member banks and i t brings i n a revenue o f about
440,000, a
year.
I f that i s a n open market treans-
action w e are doing that.
Governor S t r o n g .
T h e r e i s one defect
i n the or-
ganization o f the committee, which, i f we can find means
to correct, w o u l d o v e r c o m e a
l o t o f t h i s difficulty.
I was wondering whether i t would b e wise t o propose it.
The a p p o r t i o n m e n t
o f n e w securities purchased f r o m time
to time o r bills i s made b y percentage w h i c h i s figured
every month o n the reports received f r o m the reserve
banks a s t o their esrning needs.
T h a t has left t h e
committee i n a position where i t c a n only take care o f
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Federal Reserve Bank of St. Louis
the n e e d s o f a
something,
given b a n k i n c a s e t h e y w e r e b u y i n g
o n thet basis, w h i c h m a n y times i s not
sufficient beeause t h e y a r e smell i n volume.
no power t o reapportion exis t i n g holdings.
W e have
I f the
comaittee h a d power, under a n agreement among t h e banks,
and when the situation o f the Minneapolis b a n k was
Sach 6 6 10. 2s, i f the committee h a d power t o make
direct sales t o them, t o b e held subject t o the control
of the comsittee o f a n increased amount o f securities
in order t o take care o f their need, w e would hear a
has :
good deal about t h e difficulties w i t h regard t o the
than
purchase
o f these bonds
w
e have h e a r d
Governor Bailey, f o r instance,
i n t h e past.
i s i n a position j u s t
now w h e r e h e n e e d s m o i e t h a n a n y o t h e r r e s e r v e b a n k s
I think; t h e y s
e e their earnings slipping a w a y t o a
point where their directors a r e getting uneasy.
if t h e c o m m i t t e e w a s i n a
either t e m p o r a r i l y
position
t o m a k e a n increase,
o r permanently,
ten o r twenty millions,
N o w
a n d l e t t h e m have
i t would teke care o f it.
The account h a s been reduced t o the point n o w where i t
would b e a little more difficult.
would b e easier.
W i t h “509,000,000 i t
B u t t h e committee h a s never h a d power
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Federal Reserve Bank of St. Louis
o7
to d o that. “ w h e t h a s b e e n done, I
think l a r g e l y w i t h
the ballas bank, i s that n o w a n d then Governor
McKinney sends u s a telegram a n d w e generally have
given them some o f our o w n bills o r bills owned b y
some o t h e r r e s e r v e b a n k . I
a large c o n t r i b u t i o n
a t o n e time.
Governor McKinney. I
very c o n s i d e r a t e
remember P h i l a d e l p h i a m a d e
want t o s e y t h a t y o u h a v e b e e n
i n t h a t connection.
Governor Seay. I
power f o r t h e c o m m i t t e e
think i t i s a very necessary
t o have.
I f t h e Federal reserve
banks r e l i n g u i s h t h e i r f r e e d o m o f g o i n g i n t o t h e m a r k e t
to meke purchases t o provide for a n income, then there
ought t o b e s o m e p r o v i s i o n w i t h i n t h e c o m m i t t e e
care o f those banks which develop a
power.
t o take
deficient earning
T o m y mind t h e committee i s not a s effective a s
it could b e unless there i s some agreement
o r under2)
standing that such reapportionment should b e mede from
time t o time,
N o t being inter«sted i n the matter, be-
cause o u r rediscounts a t the present time furnish u s
an adequate income, t h a t i s a n independent opinion, I
think; f o r the first t w o months o f the year o u r discounts were n o t sufficient t o afford u s a n earning power
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Federal Reserve Bank of St. Louis
o8
equel
t o o u r expenses a n d dividends a n d m y attention
was d i r e c t e d
t o the matter
to-mé t h e c r r n e < c o m n i t t e c
a t t h a t time, a n d i t s e e m s
W a t
e a l
s o r
.ol
b e e s
beneficénce i f such a n agreement o r understanding i s
the c o m m i t t e e d i s t r i b u t e
acceptances?
Governor Strong.
Y e s , a n d everything w e b u y i s
divided.
Governor Seay.
although I do not
I f you will notice,
e c h y
i t s o happens - -
significance t o i t -- that
those banks which r e p r e s e n t e d o n the investment
comnittee a r e t h e b a n k s w h i c h «at t h e p r e s e n t t i m e a r e
utrning sufficient t o p a y all those expenses a n d dividends,
a n d i t haprens t h e t t h o s e b a n k s w h i c h a r e not,
some o f them,
o r m o s t o f them, aire t h o s e b a n k s w h i c h
are showing a
deficiency.
e
m gled I
said I did not
attach a n y significance t o it, b u t i f y o u will notice
the Liesl thet 20-18 ‘S66
Governor Strong.
T h e t i s purely a
fortuitous
it-is t h e result o f the situstion i m the, civies
in w h i c h t h e r e s s r v e b a n k s a r e located.
I n those cities
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Federal Reserve Bank of St. Louis
o>
they h e v e c i t h e r h e d d i s c o u n t s
o r have h a d trensuctions
with membur banks i n bills which nave temporarily
brought t h e eerning assets up.
there 1 6 a
F o r instence i n Boston
lapses m u r k e t f o r b i i l s o n d t h e B o s t e n r a y
serve b a n k h a s u w lurge a c c u m u l a t i o n o f biils.
ever t h a t ¢ o n d i t i o n o b t a i n s
w e c u t o f f their nitet=
ment until their percentage comes down.
should suddenly ucquire a
the c o m m i t t e e
has
When-
I f
large volume o f disco
n o power
t o compensate
thet
b y allote
ting o u t o f s e c u r i t i c s h e l d i n t h e c o m m i t t e e a c c o u n t s
to o t h e r r e s e r v e banks.
Mr. Platt.
Y o u mein securities ulready owned?
GOvernos. S b r o n g s S u c u r l t i e s n i r e a d y o w n e d ,
yoo
I-think i t i s w i t h i n t h e p r o v i n c e
BEG
O M l C H G L L
O
M C l bile b e . b u e
terms O f the resolution under which y o u are proceeding
are OveGn Moey brosdly,
committee
[ i b says 2 0 [ s t h d u t y o o r
ae
t o devise e n d recommend p l a n s f o r t h e pur-
ibubion;.
distribution I
G n d so-forti,-end t h e
think would fairly come under @ con-
SUrUC TION SOT. tie terna,
the funetion.of t h e committee,
1 f it i s desirable,
to
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Federal Reserve Bank of St. Louis
40
meke s o m e u p r e n g e m e n t f o r t h e r e a p p o r t i o n m e n t
times, a n d t o make a
« t such
recommendation t o that effect.
Governor S t p o n g e T h e r e h a v e
ino vane W i s
O n e O f tnem, 2
but which c é n b e overcome,
v e r y -preetieal g i t f i c e i ,
y
i
i s thet t h e xecount h a s be-~
@ome cCxceedinegly conplice ted, b y sunetin o f =the fuct
tae
W e evi :
O e G a o p e n t Desies> p a c e 2esuc
Purchased o n a different baste, crict
varlety o f interest rates, o n d uovery time I neve brougms
the subject u p i n the benk t h e accounting department
has s i m p l y t h r o w n u p i t s h a n d s c n d a s k e d m e n o t t o p u t
het Chinese puzzle before them t o figure out.
Mr. M i l l e r .
“WoulG thee
Governor S t r o n g .
p e trie
o f seceptances?
T h e trouble t h e r e
of them are p u t u p behind Poederal reserve notes e n d
then w e heve a
whole l o t o f detiil t o g o through with.
io3,
Thet i s t h e o n e aifficulty, b h o
Another -ditfaculty i e t h i ine. «
DOsLLiLonSs V e r y from tim:
b o bimeo.
every month.
you pleas, J
we h e v e n ' t t ,
m
a
o n which
d
e arbitra
t o make
a n automat
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Federal Reserve Bank of St. Louis
redivision. T
have always shied a t having t h e
position where i t mekes arbitrary allotSystem.
T h e y should b e doneif possible,
on
a purely a u t o m a t i c b a s i s w o r k e d o u t f o r r e d i v i s i o n
wich does n o t involve t h e u s e o f a n y discretion.
Governor Seay. I
think t h e situation really ought
to b e met, a n d p e r h a p s t h i s i s e s g o o d a
an egreement
c a n be made
time a s any,
o n it.
Governor Crissinger. Y e s , you are a l l present.
Governor Strong.
banks w a n t t o ¢ a
I f the Governors o f the reserve
resolution a u t h o r i z i n g t h e c o m -
mittee t o make arbitrery reapportionnents f r o m time t o
time i n case o f need i t would greatly facilitate handling t h e matter; t h e r e i s n o d o u b t a b o u t that. I
have
shied a t it very much and have never attempted t o get
SUCH S u a e r o e m e n s «
Governor Seey. I
will make a
motion thet t h e com-
mittee b e vested with power t o make redistribution i n its
dise¢retion.
Governor Strong. I
members
would like t o a s k the other
o f t h e comiittee h o w t h e y feel about it.
Governor McDouge.l. I
think i t ought t o b e v e
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Federal Reserve Bank of St. Louis
42
w e act upon it. I
fully c o n s i d e r e d b e f o r e
plications, p o s s i b l y ,
can s e e com-
w h i c h would n o t affect u s i n the
at t h e p r e s e n t t i m e .
O n e o r t w o o f the banks 1
are long o n eerning assets a t the present t i m e
heir eerning assets that t h e y have d o not reflect
whet t h e y are going t o have t e n days f r o m now.
bring a b o u t a
I t might
constant shifting, a n d i t ought t o b e
considered v e r y carefully.
understend t h e motion would
Governor Crissinger. I
leave i t t o the comnittee t o consider it.
Governor Seay. T h a t wes m y motion, sir, thet the
committee
b e v e s t e d w i t h t h e power.
do not object t o the motion.
Governor McDougal. I
. G
Governor Calkins. i
k e t o inquire whether
the report o f the committee, w h i c h wes approved b y the
conference, d o e s n o t really s e t u p the practice t h e t y o u
are n o w discussing?
Governor Strong.
Governor Calkins.
Governor Strong.
J u s t f o r t h e o n e time.
T h a t w e s n o t stated, w a s it?
Yes.
Governor Galkins. I
stood.
did not think i t was s o under-
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Federal Reserve Bank of St. Louis
43
Governor S t r o n g i
T h a t was t h e intention o f the
committee, Governor Calkins. I
believe i f y o u will
only
reed t h e minutes t h a t t h e t i s t h e i n t e r p r e t a t i o n t h a t
can b e p u t u p o n i t - -
Governor Hcebougal. I
think the committee has
had that power b u t t h e comuittee h a s n o t exercised
it.
I d o believe that w e were called upon t o d o that
that i t might b e necessary a n d would b e necessary i n
determining the policy under which i t was t o be done,
to reconcile t h e proposition a t frequent intervals a n d
it would b e a difficult thing t o handle I should think.
I believe w e h a v e a l w a y s h a d t h e t p r i v i l e g e
o f doing i t
if w e Wieh to.do it:
Governor Strong.
H o w does G
overnor Harding feel
about i t ?
Governor Harding.
T h e board o f directors o f the
Boston bank authorized m e t o g o ahead a n d participate
in i t with the understanding t h a t any securities a c quired were subject t o disposition b y the committee.
This o t h e r p r o p o s i t i o n h a s n e v e r b e e n e x p l a i n e d
t o the
board a n d I would n o t feel a t liberty t o g o into i t
without t h e consent o f m y directors. I
will explain i t
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Federal Reserve Bank of St. Louis
to them e n d s e e i f they will give their consent.
Governor Seay.
I f they a r e subject t o sale a n d
disposal b y the committee I
cannot s e e a n y different
aspect
r y
i t p u t s o n t h e case.
a
d o f disposing
of
them i n t h e o p e n m a r k e t t h e y a r e d i s p o s e d o f t o o t h e r
Federal res. erve banks.
Governor Harding.
W e have a
different understand-
ing o f i t a s originally l a i d down.
Governor Norris. I
Harding does about it. I
feel t h e s a m e w a y G o v e r n o r
come d o w n here andhear these
System q u e s t i o n s d i s c u s s e d . T
a m subjected
suasion b y Governor McKinney a n d others. I
t o per-
have a t
various times recommended t o the Board a n d they have
accepted, I
must s a y not alweys v e r y heartily, t h e
transfers t h a t have b e e n alluded to, direct transfers
of o u r o w n a s s e t s
t o o t h e r banks, t h e y h a v e a l s o a g r e e d
thet w e should refrain f r o m participation i n these purchases a t certein times,
s o that a t the present time
we h a v e l e s s t h a n t h r e e p e r c e n t o f t h e total, l e s s
than a n y o t h e r b a n k i n t h e System, w i t h a
f e w exceptions.
They have also agreed
that o u r shere o f the joint hold=
ee
ce ane sell o a v a i l a b l e f o r s a l e f o r t h e p u r p o s e s
of
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Federal Reserve Bank of St. Louis
credit control; b u t when w e g o one step further a n d s a y
thet e v e n t h e s m e l l p e r t i c i p a t i o n t h a t w e h a v e s h a l l
t o b e taken a w a y f r o m us, n o t f o r t h e purpose
be l i s b l e
of credit control, b u t t o help out. the earnings o f
another Federal reserve b a n k , I do not know what o u r
directors will d o about it... I
would n o t like t o cast
any vote o r make a n y statement t h e t would prejudice
whatever position they might see fit t o think about itGovernor Crissinger.
I s there enything further o n
subject?
Governor Strong. I
a m i n the ssme position o f
Governor Harding and Governor Norris. ‘ T h e action t a k e n
here i s subject t o the approval o f our directors.
All
proposals o f the O p e n Iierket Committee a m e passed through
in that way, they are subject t o d i r e c t o r s ! approval.
I pergon&#lly v e r y m u c h p r e f o r
nosition
t o s e e t h e committee
t o make s o m e necessary adjustments
ings f r o m t i m e
directors,
but I
in
i n t h e hold-
G i m e a n d Wille r e c o m i e n d 1 . b o o u r
vould n o t l i k e t o s e e section t a k e n h e r e
to p u t t h e t i n t o e f f e c t
i f there i s the
est reservation i n the mind o f a n y member o f the
committee, b e c a u s e e f t e r a l l t h e
m i t t e e has the
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Federal Reserve Bank of St. Louis
46
responsibility o f doing it.
i e have n o t discussed it.
It i s t h e k i n d o f t h i n g t h a t g i v e s t h e directors'!the
thet h e i s not running his o w n bank a t all, that
he h a s d e l e g a t e d m o s t o f h i s pow::
t o a
committee,
and
I can thoroughly understand t h e reluctance o f the directors o f some o f the reserve banks t o g o a s f a r a s
is. £
do not went t o urge i t i f i t adds t o a n y
feeling o f t h a t s ° ort.
Goveinor Harding.
O u r directors a t Boston have a
keen a p p r e c i a t i o n o f t h e i r d u t i e s a n d re-ponsibilities.
You will remember t w o yeers a g o i n March Mr. Gilbert
was i n here asking u s t o sell a
lot o f securities t h a t
the Treasury wented t o buy. B o s t o n c a m e i n with t h e
other banks a n d I went back a n d reported i t a n d the
directors passed a
resolution that hereafter I
should
sell n o s e e u n i a e s o w n e d b y t h e b a n k w i t h o u t s p e c i f i c
instructions P r o m the board o f direetors.
All-thege
open m a r k e t t r a n s a c t i o n s h a v e b e e n r e p o r t e d
Board o f directors.
t o the
T h e y understand t h e present pro-
grem a n d I have n o authority t o chanze i t without their
approval.
Governor Seay.
T h e situstion i s this:
t h e boerds o f
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Federal Reserve Bank of St. Louis
directors
o f sevel‘al o f t h e r e s e r v e b a n k s h a v e r e l i n -
quished t h e i r f r e e d o m o f a c t i o n i n g o i n g o u t i n t o t h e
open market a n d I think, f r o m what h a s transpired here,
which shows that t h e directors o f some o f the banks,
because t h e y a r e not earning sufficient t o pay expenses, m u c h l e s s t h e i r d i v i d e n d s ,
- - w h e n y o u recall
that c e r t a i n o p e n m a r k e t p u r c h a s e s
o f long time securi-
ties have been made and when you elso take into
account,
a s I und :rstand it, that some o f the banks
are considering making other purchases o f long time
securities,
then I
think
i
sa
question t h a t o u g h t t o
be p r o v i d e d f o r , b e c a u s e o t h e r w i s e y o u a r e s o m e w h a t
in danger o f disrupting the harmony which now exists
among t h e F e d e r a l r e s e r v e b a n k s
the O p e n Market Cormuittee.
a s t o t h e operations
of
I f y o u have t h e power t o
distribute i n the case a t the beginning i t seems t o m e
it i s very logical a n d sensible t h a t i f conditions
alter tha
p o w : r o f redistribute m a y well b e lodged
in the committee.
‘ h e n y o u make t h e first distribu-
tion, f r o m w h a t b a s i s
d o y o u make i t ?
based upon a percentage o f expense
banks,
a n d later w h e n a
Y o u make i t
o
larger d i s t r i b u t i o n
f the
i s neces-
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Federal Reserve Bank of St. Louis
sary i n o r d e r t o m e e t
e x penses,
i t seems t o m e t h a t
it.is-perfectly logical t o make it, a n d that t h e logic
is A n v i n e d b.
e
l
Governor Bailey.
O u r board passed a
resolution
thet w e ought t o buy some l o n g time bonds, a n d since [
have b e e n h e r e I
can s e e t h e practical
inadvisability
of doing it. W i t h t h e assurance t h a t there i s earning
power enough n o w i n the System t o take
banks I
c a e of all t h e
will g o back with this story t o the board, t h a t
we have assurance t h a t a s earnings accumulate i n those
districts
t h : thave t h e m w e c e n p e r t i c i p a t e
i n the
earnings t o such a n extent that w e will come somewhere
making a
decent showing, a n d I think th:t w i l l
be agreeable t o us. I
a m i n accord w i t h Governor Seay,
thet i t would b e a very satis factory arrangement t o us,
but t h e n
w e a r e t h e receivers
2
a n d n o t t h e givers,
and
that
I should think thet this i s a question thet ovght t o b e studied b y the committee v e r y
carefully. I
think i t i s one o f the biggest issues
before t h e F e d e r a l R e s e r v e S y s t e m ,
but w i t h r e f e r e n c e
t o i t s future.
n o t a t t h e moment,
Unless a
reserve b a n k
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Federal Reserve Bank of St. Louis
49
is g o i n g t o b e s u r e o f a
in i t s d i s t r i c t
t o give i t &
Governor Strong,
tr. iitler.--
sufficient v o l u m e o f business
resuler: v é l u m e - o f c c r n i n g s =
T h e others would help t h e m o u t -
B u b t-think— s
a
debatable q u e s -
tion. S o m e o n e might s e y let's operate t h e Federa
Keserve Banirs a n d h a v e e a c h s t e n d o n i t s o w n bottom.
If a
bank r u n s f o r t h r e e o r f o u r y e s r s a n d c a n n o t m a k e
earnings i t raises t h e question w h e t h e r o r not
needed, a n d raises t h e question c a n i t maintain itself
irrespective
other aspect
o f credit conditi
T
h
e
n there
i s an-
o f it which h a s n o t b e e n raised here.
Suppose t h e b i g ezsrning b a n k s s h o u l d d i s t r i b u t e a
por-
tion o f their securities t o the baniks that have n o
earnings.
I f they did not
would have a
oe a
L e . h o s e b i g banks
surnlus andthe Treasury would b e getting
o F -1G.
S e 1 e i s they e r e S e
other banks t o help meet their expenses i
and t h e m e m b e r b a n k s
dividends,
i n t h e d i s t r i c t g e t t h e t money,
pert o f w h i c h would o t h e r w i s e n a v e g o n e t o t h e T r e a s u r y
as @
franchise tax.
a
Governor Strong. I
would b e a good one.
d o not believe t h a t argument
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Federal Reserve Bank of St. Louis
50
Miller.
T h e Government might take a
different
if i t interests itself a t all i n the
problem.
Governor Strong.
A r e s e r v e bank which i s earning
in excess o f its needs f o r expenses a n d dividends,
partly b y r e a s o n o f t h e f a c t o f a
large o w n e r s h i p o f
gecurities which i t has purchased i n the open market,
might v e r y properly g o into t h e market a n d sell that
excess,
a n d certainly t h e Government c o u l d n o t ques-
tion that.
I f a t the same tine enother reserve b a n k
is short o f earning as.ets a n d i t should g o into t h e
market a n d b u y the securities, t h e n surely there i s n o
reason w h y one Federal reserve b a n k could n o t sell t o
another Federal reserve bank.
Mr. Miller.
N o , b u t i t i s admitted that a n y
reserve b a n k c a n g o into t h e market t o get assets f o r
earnings,
es)
develop a
wh:t w e c a n d o t o
b u t w eu a v e t r y i
v n
rg
e a t o see
method o f operating t h e reserve banks under
which t h e p u r c h a s e a n d s a l e o f s e c u r i t i e s
exclusive
o f t h e actual c r e d i t conditions.
Governor Strong.
tion?
i s made
D o e s n o t this meet thet situa-
I f w e adjust t h e s e accounts b e t w e e n t h e reserve
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Federal Reserve Bank of St. Louis
51
anks a t t i m e s w h é n t h e r e i s n o o c c a s i o n e i t h e r
t o buy
then o p e r a t i n g t h e S y s t e m w i t h r e g a r d
to eredit conditions, a n d i f the banks b u y a n d sell
independently o f each other a n d o f credit conditions
we a r e t h e n o p e r a t i n g t h e i n v e s t m e n t a c c o u n t w i t h o u t
regerd t O credit conditions.
Governor Seay.
T h e n y o u must take into account t h e
condition o f the bank w i t h respect t o its holdings a s a
result o f the adjustment e t the beginning,
a n arbitrary
istribution o f the securities
Governor Strong.
e
mJ
e
d t o think that the
way t o h a n d l e t h i s i s t o h a v e t h e i n v e s t m e n t c o m n i t t e e
have a
meeting a n d s e t out a formula, w h i c h would b e
prepared more accurately t h a n i t c a n
d o n e hére i n
this meeting, a n d submit i t directly t o the different
reserve %
e a r n u m b e r o f considerstions
r
entering into. it.
i
s
, a t whet price shall t h e
ry adjustment b e effected?
matter t o determine.
i h e n they tal
apportionments t h e c u e s t i o n o f p r i c e t a k e s
self.
J u s t a s s o o n a s w e t a k e a reapportionment
o f exis-
got t o f i x a price somewhere o r
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Federal Reserve Bank of St. Louis
52
another a n d a
complicated q u e s t i o n arises r i g h t away.
The p r o b a b i l i t y
i s that t h e comiittee w o u l d b e able
to offer o n l y one sugzestion o n t h t , namely, t h a t t h e y
a s thou;
would b e t r e s t e d exactly
t h e securities w e r e
a bank which g o t e
sola i n the merke d
special
allotment w o u l d t a k e t h e m a t t h e m a r k e t price.
I t
would thereby participate i n its proportion o f the
prorit. o r Loss
s e c u r i t i e s w h i c h i t bought.
a profit
or a
I l
loss a t t h e
it purchased those, a n d that would b e
Simplest w a y o f d e a l i n g w i t h t h e a c c o u n t i n g e n d o f
If y o u could s e e th:t account o n our books i n
York y o u would realize h o w difficult i t is.
wily motion would b e t o refer this t o a committee
consideretion a n d preparation o f a proposal.
»
Governor Crissinger. jiii11 th:.t- suit you, Governor
Governor Seay. I
will accept thet fully.
the q u e s t i o n that E T havé
withdraw
m y motion
i n mind... I
I t meets
will t h e r e f o r e
i n favor o f thet o n e a n d will second
Governor S t r o n g ' s m o t i o n .
(The m o t i o n h a v i n g b e e n d u l y seconded,
w a s carricd,:}
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Federal Reserve Bank of St. Louis
55
Governor Crissinger.
A n d n o w y o u have quite a
long program here a n d I do not think w e went t o call
LOY a Peport o n each o n e o f the 2bems,- b u t if: Gnere 2 a
any particular thing that any of the Governors o r any
riemDSPSs o f the Board would like b o brine up.-2 would-be
glad t o have y o u d o i t now.
Governor M c D o u g a l .
T h e r e were some matters
sub-
mitted t o u s b y the Board, a n d i t might b e well t o discuss those.
Governor Crissinger. M e m b e r s h i p i n the American
Acceptance C o u n c i l a n d t h e A m e r i c a n B a n k e r s A s s o c i a t i o n
was o n e o f t h e m a t t e r s w h i c h w e r e f e r r e d
was y o u r a c t i o n o n that?
t o you.
What
H a v e y o u géntlemen discussed
thet?
fovernor S t r o n g .
Y e s .
T h e discussion erose over
the question a s t o whether a n y benefit accrued t o the
Reserve System b y membership i n the American Bankers
Association.
tance
o n the part o f the directors
serve b a n k s
tion a
I t developed t h e t there w a s s o m e reluco f some o f the re-
t o continue t h e membership
E * t h i n k the £
that t h e a c t i v i t i e s
i n that associa-
l i e h a d Ata origin 2 n the feat
o f some
o f the committees
o f the
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Federal Reserve Bank of St. Louis
54
American B a n k e r s A s s o c i s t i o n h a v e b e e n r a t h e r h o s -
ral nescerve System h a v i n g i n mind
of t h e C l a i b o r n e C o m m i t t e e a n d t h e
Barton Committee more especially, a n d the resolution
passed a t t h e c o n v e n t i o n
i n ¢iiesso. I
have n o t
that feeling v e r y strongly, possibly n o t a s strongly
as some o f the other gentlemen present, b u t t h e vote
was I
think rather conditional
i n respect
Bankers A s s o c i a t i o n a n d u n c o n d i t i o n a l
the A m e r i c a n A c c e p t a n c e C o u n c i l .
t o t h e American
i n respect
to
S o m e hone has been
expressed here b y the Governors t h : twe could have a
better working relationship w i t h the American Bankers
Association,
s o that w h e n t h e y want t o pass resolutions
condemning a
policy o f t h e S y s t e m t h a t t h e y would t a l k
it o v e r w i t h u s first,
o r turn loose a
A lot o f these things c a n a l l
face,
commit .ee o n us-
b e dealt w i t h face t o
i f they will come forward a n d taken t h e m u p with
U u s . «
Governor Seay. I
would l i k e t o know whether
Board has a n y program f o r meeting tomorrow, anda I
thet o n behsif o f the members o f the Legislative
Committee.
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Federal Reserve Bank of St. Louis
Governor Crissinger. I
understand that Dr.
Sprague w i l l b e h e r e t o m o r r o w m o r n i n g e n d w e a r e g o i n g
Go. Miect. Paent here in. this: room.
Governor Seay.
T h e committee i s expected t o meet
independently o f the Board?
Governor Crissinger. i
think so. T h e Board wild
probably s i t i n with y o u i f i t i s felt desirable.
Miller.
A n d Dr. Stewart will b e here.
[ I
understand i t i s the intention o f the Board t o give
br. S p r a g u e a
place i n t h e D e p a r t m e n t
o f Research
so
thet h e will b e a part o f the Board's staff, a n d h e a n d
Dr. S t e w a r t w i l l s e r v e a s t h e w o r k i n g l i n k b e t w e e n t h e
committee
a n d t h e Board.
Governor Strong. '
ence w a s a
T
recommendstion
to a p p o i n t a
committee.
h
e a c t i o n o f the confer-
t o t h e Federal Reserve B o a r d
W e felt t h a t w e h a d n o power
&
”2
to a p p o i n t a
committee c o n s i s t i n g
a
-
P e d e r a l Reserve
Agents, t h a t w e could o n l y request t h e m t o serve o n
that committee, a n d the arrangement f o r the appointment
committee
a s t u r n e d o v e r t o t h e B o a r d i n response
request f r o m t h e B o a r d t o c o n s i d e r t h e matter.
Governor Seay.
I t would b e a convenience i f a n
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Federal Reserve Bank of St. Louis
56
understending could b e arrived a t now a s t o when w e
might b e expected t o meet i n the moining.
Governor Cirssinger.
A t 9.50 o'clock tomorrow
morning.
Governor McDougal. I
understand t h e committee
just referred t o will take u p the McFadden bills?
Governor
h
e
t w a s t h e subject t h a t
we p u t o n t h e p r o g r a m a n d t h e r e w i l l b e n o n e e d f o r
discussion o f i t here. |
think t h e Board would like
to hear something n o w about t h e credit situation i n
the v a r i o u s p a r t s
o f t h e country.
M a y w e hear f r o m
you, Governor Calkins?
Governor Calkins. I
think i n the S a n Francisco
district t h a t t h e credit conditions a r e comparable w i t h
those i n the country generally.
in Sen Francisco a r e ~25,000,000.
T h e r e i s n o active
Geman Tor. credit t n sigit. C o n d i t i o n s i n the district
generally a r e fair, nothing more t h a n that.
culturel conditions:
T h e agri-
i n t h e lerger p a r t o f t h e district
hen they have b e e n f o r several years a n d i n
the smaller part o f the district t h e y a r e worse. T a k i n g
them altogether t h e conditions a r e just about fair.
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Federal Reserve Bank of St. Louis
they bad, G o v e r n o r ?
I n Southern California, particu-
Governor Calkins .
How ebout y o u r industrial condition?
Governor Calkins.
more o r l e s s level.
T h e industriel conditions a r e
T h e r e i s n o unemployment
o f any
dimensions.
Governor Crissinzer.
Governor Fancher.
district, M r . Chairme
G o v e r n o r Fancher.
C r e d i t conditions i n the fourth
a r e keevi
p a c e with general
T h e borrowings o f our member
conditions i n the country.
banks a t the close o f business April o r d was 5 , 0 0 0 , 0 0 0
yeer ago.
T h e total o n April
n
a
‘ a yecr ago £50 banks were
3rd was 3 3 3 , 0 0 0 , 0 0 0 , d
porrowing ..38,000,000.
it-ie- s
fact thet 2 8 7 borrowing banks a r e borrowing ;5,000,000
inereases h a v e c o m e i n t h e s m a l l c o u n t r y
banks,
4 0 more
o
hr
benks a r e b o r r o w i n g , a l t h o u g h
i n d u s t r i a l conditions
porrowing » 2 , 0 0 0 , 0 0 0 less.
are generally satisfactory.
are r a t h e r disappointing.
s in a
T h e r e a r e sone lines thet
O u r bituminous c o a l situation
very depressed s t e t e a n d does n o t l o o k v e r y
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Federal Reserve Bank of St. Louis
58
pres e n t time.
ave had’ a
O u r steel industries
little d i p i n eetivities, t h e r e h a s b e e n « 4
little r i c e s s i o n i n t h e l a t t e r p a r t o f !'24 a n d t h e
first month o f '25, b u t there seems t o b e a Littie
better feeling i n the last f e w weeks.
T h e automobile
industry, gensrally speaking, s e e m s t o b e i n e
pretty
optimistic frame o f mind . t present, t h e t i s t h o s e
people
thet I
have t e l k e d
with.
T h e r e
i s a
very g o o d
demand f o r n e w cars, which meens thet t h e accessory
peouldé a r e busy G e n e r a l l y sp:-cking t h e automobile
indy
c
e
s
t o be in a
prett: s e t i s r a c t o r y condition.
Labor i s p r e t t y g e n e r a l l y employed.
of unemployment o f labor.
Ther:
G e n rally speaking I
the industrial conditions e r e i n pre y
f a c t o r y stz.te.
satisfactory.
i s n o surplus
Agricultural
conditions
M a r c h has b e e n a
There h a s b e e n - s o m e c o m p l a i n t
feir a n d satisa r e zencrally
feirly normal month.
i n certain lines
retail trade b u t 1 think there i s g e n e r a l l y a
feeling
sel 2 i n the last tio «
think
o f
beter
m r e e weeks i n that respect.
Complaint h a s been made b y the retail hardwere business;
apprrently there h a s b e e n a lack o f buying o n the pert
f
+
o
people
w hjo generally b u y this time o f the year a n d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
it h a s b e e
m e w h
L S & p }
ating
e
cete perhans t h e t t h e word “economy”
G
i s pret
in the minds o f 2 sood many people a n d they a r o
a little conservative i n the metter o f
improvements a n d making repairs.
r
C ro i s sni n s re r . e G ov v e ro n o r
&
G
<
i
Governor Seay. i n - o u r district. a s
LIthink c o n d i t i o n s c a n b e d e s c r i b e d a s
Ls some distress i n certain portions o f the
esriculturzl
benks
a r e a o n d there
i n t h : tarea.
i s some distress
‘ i e h a d t w o feilures
among the
o f national
last week, o n e a t F l o r e n c e e n d o n e a t Bemberg,
in S o u t h C : rolina.
T h e r e are
f e w b a n k s which
been i n a n e x t e n d e d c o n d i t i o n f o r f o u r o r f i v e
YOseLrss w i L e h a r e : n o w
i n
a very precarious
and w e e x p e c t t h a t t h e r e will
Paiiures.
f t t h i n k - w é e:e-. s e i i
toe F e i l u r e s
management.
b e a
7 ; G o c eo
e
few more b e n k
e y i n g
Gb bitoae
I t w a s not because
condition
o f
They were
too liberal credit, a n d i n most e c
hausted t h s i r s u p r l y o f c l i g i b l e e n d a c c e n
S h o n -adk
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Federal Reserve Bank of St. Louis
60
2 aided t h e m 1
n e i s t a n d t o t h e limit i n order
thet i t mightnot b e said thet t h e feilure o f the reserve b a n k s
t o support t h e m w a s i n a n y w a y t o t h e
fine. teiiwee.
Governor Crissinger. G o v e r n o r Harding, w i l l y o u
te'l u s something about N e w England?
Governor Harding. C o n d i t i o n s i n New England a r e
rether mixed.
I n some lines t h e situetion i s dis-
inectly better t h e n i t was a
is worse.
year ago a n d i n others i t
T h e trensportation lines a r e i n better shape.
The N e w Haven road,
10,000,000
i n spite o f the reduction
i n gross, s p e n t 5 , 7 0 0 , 0 0 0
and instead o f e debit t h e y had: a
something l i k e (ij5,500,000.
o f
i n betterments
surplus i n 1924 o f
T h e N e w H-even r o e d r e f u n d e d
sr ~€6,000,000 o f bonds locally, without going
to a n y broker.
and s t o c k o w n e r s
T h e y g o t t h e menufacturing interests
=
o f t h e r o a d t o t a k e u p t h e bonds. I
is revardecd a s a u i t e
The B o s t o n &
organization without a
receivership. A p p l i c a t i
a receivership w e s nade some t i m e a g o b u t denied b y
the court a n d i t i s possible t h e reorgrnization will
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Federal Reserve Bank of St. Louis
61
go through. ‘ T h e i r plan o f organization contemplates
the abandonment o f a good meny subsidiary lines a n d
the s u b s t i t u t i o n
o f m o t o r trucks.
T h e roads h a v e
undoubtedly b e e n helped b y the v e r y mild weather w e
have had... Vie.? .
had n o c o l d w e a t h e r u n t i l J a n u e r y
and n o r e a l c o l d w e a t h e r
Jenuery.
o r snow since t h e 30th o f
I t h a s b e e n a n o n e n winter.
T h e upkeep:
the roads hes been correspondingly reduced.
of
O f course
most o f that i s going t o show i n this year's earnings.
The m i l d w e a t h e r h a s h a d a n a d v e r s e e f f e c t
teil t r a d e b e c e u s e
as anticipated.
merkable.
Boston
o n the re-
t h e heavy winter goods have n o t sold
T h e season really has been v e r y re-
T h e foilage i s almost a s f a r advanced i n
e s i t i s here a n d
fully a s far advanced.
i n the small shrubs
i t is as
T h e Hassachusetts cotton crop
is about t w o inches h i g h e n d further advanced t h a n the
cotton crop o f Texas,
The t e x t i l e b u s i n e s s
is
running more fully than t h e y
part O F 9024.
T h e b i g mill
Keag h a s b e = n r u n n i n g f a i r l y
e t Manchester
t
h
e
h
e Amos-~
y claim they are
meking n o money, b u t their cleim will have t o b e digs-
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Federal Reserve Bank of St. Louis
because 1
t h e labor situstion
is v e r y bad; t h e r e a r e a
there n o w i n the building trades,
are doing well t h e y are afraid t o admit
except t o their banker.
The shoe business i s very bad. O n e shoe manufacturer i n Brockton, t h e maker o f the Educator shoe,
lost “,700,000 i n 1924. A
lerge firm there, interested
in mill a n d mill agents have asked f o r a n extension
from t h e i r creditors.
T h e f i r m seems
t o b e solvent,
the statement shows a s s e t s t w o t o one over liabilities,
will probsebly work i t out.
T h e worst d e -
pression i n New imgland seems t o b e i n the shoe industry r e t h e r t h a n i n textiles.» t n e r e a r e c e r t a i n
i n e s
of specialties i n textiles t h e t e r e doing v e r y well.
In fact t h e general disposition o f the N e w England
cotton m a n u r a c t u r e r s >
srecisltics,
. seems
t o be to
g o into
t o t r y t o take t h e leadership
end t o g o o u t o f t h e s t e p l e l i n e .
thet t h e s o u t h h a s b e e n
f e e
i n that
T h e y sscem t o a d m i t
O n = Stepies. 4
Mere
as
one marked difference butween t h e psychology o f New
England a n d t h e t o f t h e W e s t a n d South.
I f
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Federal Reserve Bank of St. Louis
65
bit b a d l y i n t h e W e s t a n d S o u t h y o u h e a r a
kick, a n d they d o a lot o f complainiag.
‘ T h e New Eng-
lander takes a l l kinds o f hard knocks a n d doesn't s a y
much about it.
H e takes i t a s a matter o f course.
Governor McKinney.
down i n o u r district.
w e have h a d some complaints
O u r c o t t o n c r o p l a s t year, w h i c h
68 fairly normel i n yield a n d which brought g o o d r i e s ,
produced v e r y satisfactory liquidations a n d brought d e posits
u p to a
n e w p e a k f o r o u r district.
I t also e n -
abled o u r member banks t o p a y u s practically a l l they
owed us.
A s I seid awhile a g o a t the present time, not-
withstanding t h e fact that w e are fieht i n the midst.of
a producing season, o u r advances t o member banks a r e
only about a
million a n d a helf a n d there i s n o tendency
at all gdiseenhable t o us towsrd a n increase.
J e think
the e n o m t t h a t w e w i l l l e n d t o o u r m e m b e r b a n k s t h i s
season will b e negligible.
are p e r t i c u l e r l y
f r o m banks
and f r o z e n condition.
T h e redis counts werhave
i n more
o r less ex:ended
( i c heve h a d about a
hundred
our district, a n d we heave some
banks t h e r e y e t w h i
w i l l p r o b a b l y c a u s e u s s o m e grief.
But i n the main o u r district i s pretty well clesned up.
4
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Federal Reserve Bank of St. Louis
64
We h a d o n e f a i l u r e l a s t w e e k b u t i t w a s d u e t o deflation a n d n o t t o a d v e r s e c o n d i t i o n s o t h e r w i s e .
T h e
building trades! activities a r e moving along i n very
good shape i n our district.
ties a r e somewhat quiet.
T h e other retail activi-
A t the preseht t i m e w e are
going through about t h e driest spell down there that
we h a v e e x p e r i e n c e d
which normelly has a
i n the operetions
o f t h e district,
sufficient rainfall, a n d which
may call f o r some further finencing; b u t i t enre:rs t o
us thet t h e member benks a r e going t o b e able this
year t o o p e r a t e w e l l w i t h i n t h e i r o w n resources.
Governor Young.
w e have h a d a satisfactory small
grain crop i n the Northwest which was disposed o f b y
the p r o d u c e r
meant a
crops
a t a seatisisa
r
y price a n d which h a s
g r e t deal t o t h a t district.
I t will t a k e more
t o g e t t h e people o u t o f t h e difficulties
of them c a n never g e t out.
T h e banking situation, i n -
far a s t h e F e d e r a l R e s e r v e B a n k o f i i n n e a p o l i s
concerned,
i s good.
a n d some
is
4
T h e member benks o w e u s three a n d
a half million dollars, a n d it wes $115,000,000 i n
1920 » T h e closed banks, a t t h e time o f closing o w e d
us ¥11,000,000. ‘ T h e y now ove u s 2,600,000.
W e have
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Federal Reserve Bank of St. Louis
65
meny banks i n our district, particularly i n the larger
cities, t h a t a r e i n e x c e l l e n t c o n d i t i o n ,
w e l l forti-
fied w i t h p r i m e c o m m e r c i a l p a p e r , g o o d . r e s e r v e s
Government securities, a n d w e have a
and
numb«r o f other
banks i n the district which, while t h e y are not i n debt,
have a
great deal o f slow paper, a n d w e feel that t h e y
can work i t out i n time b y refraining f r o m peying dividends a n d making some assess ments possibly. U n f o r t u nately t h e r s a r e n u m b e r o f m e m b e r b a n k s
i n the dis-
trict f o r w h i c h t h e r e i s n o h o p e i n m y opinion;
they
cannot solve their problems e n d I look f o r more failures there. f
cannot state t h e exact number o r the
approximate number because I
State banks, b u t I
know very little about t h e
do hear thet t h e y a r e i n a much worse
condition t h a n t h e n a n a l banks.
Governor Crissinger.
Governor Young.
I n worse condition?
O h , yeas.
t h l e r s , jobbers and
wholes: lers e x p e c t e d m u c h m o r e o u t o f t h i p
i n the
were justified i n exn-cting.
use their m o n e y t o pey their debts a n d back
tH Lens co. end: Gases.
n e r s
sales i n the retail trade.
e
a be
o
t
e
r Of Corea”
T h e copper industry has b e e n
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Federal Reserve Bank of St. Louis
66
Pa)
number o f y e s r s a n d t h e r e
yl2ef for-them,.
industry y o u k n o w a b o u t .
iw
U e o
T h e livestock m a n i s
hard time, t h : tis the cattle-
hape a n d i s havingLe] a
man.
i e
Pn]
T h e s h e e p m a n h a s c o m e b a c k a n d made a lot o f
H e has disposed o f
money a n d p a i d h i s obligations.
his ‘wool e n d t h e c o n t r a c t s
very satisfactory
on a
basis.
Governor
Governor Young.
G overnor Crissing
Governor Young.
W h e t d i d they sell the wool
T h e people
i n Montana l a s t f a l l
sold t h e i r w o o l u n d e r c o n t r a c t a
Ay C o n t ss.
without i n t e r e s t
on
s h e e p .
wool i s s e l l i n g i n t h e ] e
tween 3 8 and 4 0 cents.
profit
i n that.
of
d a n advance
s
ia
J u s t a t t h e moment
Forche C o m p a n y a t b e -
o f U y s
e r e i
.
good
T h e recent break i n the wheat mar-
ket Has n o t affected t h e producer, because h e h e d disposed o f his crop.
the N o r t h w e s t
T h e elevators a t the terminals i n
a r e full.
Z - d 0 Hot:
fark
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Federal Reserve Bank of St. Louis
67
dealers have b e e n affected because t h e y h a d hedged a l l
the w e y along, a s they always do. T h e r e have b e e n some
loss € s but n o t many.
T h e break i n the wheat market
will k e e p a number o f people f r o m putting wheat acreage
oy W i e n G a y be-just a s w e l l , T h e t - i e a l l t R a v e t e
report
o n the district I
Governor Crissinger.
think.
G o v e r n o r Biggs,
m a y w e hear
you?
Governor Bigeas.
district I
T h e conditions i n the eighth
should s a y are fair o n the average.
A s
far a s banking conditions a r e concerned w e a r e only
lending t h e member banks ebout $ 6 , 0 0 0 , 0 0 0 a s against
~v9,000,000 @
year age. I
can s e e n o reason w h y w e
should h a v e t h e d e m a n d s t h a t w e h a d l a s t year.
people have liquidated a great deal.
T h e
O u r farmers have
passed t h r o u g h t h e p e r i o d o f e c o n o m y a n d h a v e g o n e i n
for work.
T h e y are working harder a n d will probably
put i n move c o r n a n d mo:e cotton, t h e y have borrowed
all t h e money they c e n get.
T h e manufacturers
in
St. Louis a r e busy i n running o n fairly good time a n d
are n o t complaining.
well
b u t there
T h e jobbers sere d o i n g about a s
i s some complaint
f r o m t h e retailers.
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Federal Reserve Bank of St. Louis
68
The livestock industry i n our section i s the same a s
it i s i n the Kansas C i t y a n d Minnespolis sections.
The s h e e p m e n a r e i n g o o d shape.
he i s busted.
T h e cattle m a n thinks
W h e t h e r h e i s o r not I don't know.
Most o f them that are b ying cattle borrow money f r o m
the banks t o buy them.
T h e country banks
those districts a r e i n very good shape.
« s @ Puls. a z
T h e y a r e not
rediscounting m u c h with us, v e r y little, a n d i n fact
thet i s the o n l y demand w e have.
had t h e r e
i n t h e middle w e s t h a s b e e n c a r loading f r o m
the railroads.
T h e y aré increasing a n d show that there
as a c t i v i t y s o n o w e r e w e n e m e s
mous business.
except I
lumber.
T h a t « b o o m + we have
t h e y a r e d o i n g a n enor-
J u s t what t h e y e r e moving I
know that t h e y a r e moving a
don't know,
greet deal o f
B u i l d i n g activities a r e heavy n o t o n l y i n t h e
big cities b u t i n the sinaller towns.
I t has been a n
open s e a s o n f o r t h e l a s t f e w m o n t h s a n d e v e n i n t h e
smaller towns there h a s b e e n a good deal o f building
activity. y
i s w e l l émployed a t high prices.
The banking situation,in Missouri particularly,
is very b a d among t h e smaller banks.
T h e y have about
three times a s many banks a s they need.
T h e y are
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Federal Reserve Bank of St. Louis
69
closing o u t about t w o o f them a week, a n d that isnit
half fast enough.tm Y o u could k e e p that u p fer tive
years a n d still n o t s e t enough o f them out.
The
banking commissioner closed 8 2 banks i n Missouri, w i t h
a force o f only 25, a n d h e has t o g o o n the outside a n d
get 4 0 o r 5 0 additional m e n t o help him.
able t o examine b u t very f e w banks.
n e t s
et
H e hasn't examined
one bank i n St. Louis f o r t w o years thet I know of, a n d
h
wren they did exemi
h
e
y found they he acharged
off ‘800,000.
Governor C
Governor
s i n g M e m b e r banks?
g I s
y
a
member bank, a
sa
very
good bank.
Governor Crissinger.
b
o n o t t h e y examine t h e
member banks i n St. Lowte?
.Governor Bigzs.
‘ W e examine them. I
of the State banking commissioner.
a m speaking
A s a rule w e work
with h i m when w e c a n and w e get some o f his m e n t o g o
into institutions t h a t a r e members. I
particularly
feilures,
ara
o f the small places where w e have h a d
i n towns o f a thousand inhabitants where t h e y
will have three banks w h e n t h e y just about have business
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Federal Reserve Bank of St. Louis
enough f o r one.
On the whole I
well. I
think things a r e winning o u t pretty
know everybody i s working harder this year
han usual, especially those thet need t h e money.
Governor Norris.
W h a t Governor Fancher h a s
as t o conditions i n both t h e soft coal, i r o n a n d
steel industry ézactly describes t h e situation i n our
district. I
find a good desl: o f disappointment among
business m e n gencrally, particularly manufacturers, a n d
as\fer a s I
can make o u t that disappointment
i s due
not s o much t o the fect thet t h e y a r e not doing a
big
business, b u t thet t h e y a r e doing i t a t a very small
margin o f profit a n d they have n o t g r e : . t volume o f
orders o n hand. I
tell t h e m E
do not beli v e they
are ever a t a n y time within t h e next t w o years going
to gee anything like t h e volume o f orders t h e t they
saw a
few years azo.
T h e jobbers a n d retailers h a d
t o
take b i g losses i n 1921, a n d they were s o big that
they are n o w making t h e manufacturer c a r r y t h e bag.
only o r d e r i n g f o r their i m m e d i c t e r e q u i r e m e n t s .
The result i s thet a
orders
manufecturer, instead o f having
o n hand that will r u n his p l a n t f o r f r o m three
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Federal Reserve Bank of St. Louis
ee
to s i x months, h a s orders o n hand th: t will o n l y r u n h i m
A s t h e y shift contin-
for f r o m o n e t o t h r e e months.
vally f r o m o n e l i n e t o another,
i t inereases t h e c o s t o f
manufacture, reduces ‘ i s profits a n d leaves h i m i n a
satisfactory condition.
B u t t h e volume o f business
t
. i e sconce rice
e LOUb
our d i s c o u n t s r a n u p t o ‘ 4 9 , 0 0 0 , 0 0 0 a
few weeks e g o a n d
A s f a r a s t h e eredit S
is large.
were $41,000,000 w h e n I left o n Saturday.
O f that amount
only about 113,000,000 w a s d u e t o 2 0 odd Philadelphia
City banks a n d $28,000,000 w a s loaned t o 500 country
banks, w h i c h i s a
our district.
revers:1
o f t h e usual conditions
i n
O u r business outside o f Philadelphia i s
vsually comparatively small, b u t within t h e l a s t s i x
months w e have h a d a great m a n y small country banks
discounting with u s f o r the first time.
banks o u t s i d e
quite a
o f the city discounting
considerable extent.
condition,
with
us now t o
T h a t i s due t o the local
t h e s l o w s a l e o f tobacco
tobacco district.
W e have over 3 0 0
i n the Lanchester
T h e tobacco growers h a d a
pert o f
last yeer's c r o p o n hand a n d inste.d o f selling this
yeer's c r o p i n December
o r January a s they usually do,
buyers have o n l y comsenced t o b u y within t h e last
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Federal Reserve Bank of St. Louis
couple o f weeks, a n d I suppose t h a t
for u s having o n our books 2 0 t o 5 0 t o 4 0 banks t h a t
we w o u l d n o t o t h e r w i s e h a v e . I
think that i s the o n l y
tcing t h a t i s s p e c i a l
t o o u r d i s t r i c t t h : ti s w o r t h
wn.lee reporting on.
T h e general s itue tion i s about
I think a s described b y Mr. Fancher a n d which exists i n
most o f t h e o t h e r districts.
Governor Crissinger, G o v e r n o r Wellborn?
Governor Wellborn.
T h e conditions ‘ a the Atlanta
district a r e o n t h e w h o l e I
o u r steel
think v e r y good.
industries a n d lumber concerns a r e doing well a n d the
railroad b u s i n e s s
in a
turel c o n d i t i o n s a r e fair, e x c e p t
down t h e r e i s enormous a n d s p e c u l a t i o n
the State o f FPloride.
f e w spots.
T h e
T h e development
conditions i n Florida a r e remarkable.
very well.
Agricul-
i s e s v e c i e l l y prosperous.
i s rampant
in
O u r textile industries are doing
T h e y a r e all quite prosperous a n d there i s
very little unemployment i n our district.
growth o f t h e c o t t o n c r o p .
a t this t i m e does n o t ecual
the M a s s a c h u s e t t s c o t t o n c r o p
s
t
not ra:se o u r cotton i n a sun parlor.
do i t e f t e r awhile,
while the
i
l
l we do
i e may have 0
i f weather conditions change.
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Federal Reserve Bank of St. Louis
735
regards o u r b a n k s t h e r e a r e a
few banks
i n the district
extended condition, d u e t o over extension i n 1920.
We d o n o t e n t i c i p a t e m a n y m o r e failures,
a n d o u r fail-
ures heve b e e n rather small a s compared with some o f the
other districts.
Governor Crissinger.
Governor Yellborn.
H o w many banks have failed?
A b o u t t w e n t y o f o u r member
banks failed - - not large banks, but nearly all small
panks, m o s t o f them.
A n d t h e t w a s d u e t o adverse c o n -
ditions a n d bad 1 .
Ser T h e y went o u t t o o far a n d
got caught.
Mr. Platt.
banks b o r : o w i n g
G o v e r n o r Wellborn,ave t h e Florida
i n the s
peculative n e i g h b o r h o o d t h a t
you speak of?
Governor iijellborn.
rowing anything.
N o , sir.
T h e y a r e n o t bor-
T h e y have money o n call i n New York.
very f e w F l o r i d a b a n k s a r e borrowing.
whit t o d o with their money.
T h e y d o not know
i e have n o w rbout
:;:30,009,000 i n loans and about four o r five weeks ago
we had o n l y 315,000, 000. I
d o not anticipate t h e t w e
will have a shortage « t the end o f the year, although
I would like, a n d our participation o f the O p e n Market
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Federal Reserve Bank of St. Louis
74
Committee
t o uake u p this shortage
i n the last t w o o r
‘three months, because w e have h a d a deficit o f ebout
,140,000* t
h
e last t h r e e m o n t h s
Governor Crissinger.
i n o u r earnings.
M a y w e hear f r o m y o u now,
Governor McDougal?
r McDougal.
o
n B u s irn e s s ,
e
generally
v
o speaking,
G
in our section o f the country, Mr. Chairman,
we e x p e c t e d
a n indrease
prophesied a
i s quiet.
o f business e c t i v i t i e s t h a t
few months a g o b u t i t has n o t developed
and thet i s particularly true with respect t o the retail
trade.
T h e r e a r e sone exceptions.
T h e implement manu-
facturers a r e feeling encouraged, t h e i r volume i s increcsing, a n d some o f them put o u t some v e r y satisfactory
figures, a n d are looking f o r better times.
T h e y have
been dragsing through t h e m u d for a good many yeers.
The noteble exception t o the rule o f course i s probably
the m a l o r d e r business, w h i c h i s inersasing w i t h leaps
and bounds. D u i l d i n g activities h a v e b e e n showing a
slowing d o w n .
I t i s feared thst t h e y have overdone
sovewhat i n our city both with respect t o office buildings a n d other buildings.
The general credit situation there i s satisfactory.
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Federal Reserve Bank of St. Louis
75
Most o f the banks tin the district a r e going o n their
own i n d e p e n d e n t l o a n i n g power.
O u r loans a t t h e
present t i m e a r e e p p r o x i m a t e l y 4 1 5 , 0 0 0 , 0 0 0 ,
the
greeter pert o f which i s loaned t o banks i n the reserve cities, a n c most o f that i s temporary.
T h e
demand f r o m the agricultural sections have been inconsequential.
T h e r e have b e e n n o new demands f r o m
any State t o speak of. I
mention t h r t particularly
because o f the s itvation i n Iowe, where for many
yeers,
o n the first o f March, w e have b e e n called upon
to h e l p t h e m m a t e r i a l l y
i n furnishing funds f o r what
they call the March turnover. T h a t passed over without
being noticed a n d where t h e y got t h e money nobody seems
to know.
T h e general conditions inthe agricultural
sect.ons a r e satisfactory.
Y o u are a l l intere t e d o f
course i n the State o f Iowa, Notwithstanding t h e fact
that s h e hed her crop failure, o r at least a partial
erop failure,
s h e h a s b e e n making s t e a d y progress a n d
the state o f mind has m u c h improved since I was lest i n
Washington.
T h e banks are g e t t i n g along. A
gre-t m a n y
of the weak spots have been strengthened a n d w e have h a d
no s u s p e n s i o n s
f r o m member banks
i n Iowa since late
i n
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Federal Reserve Bank of St. Louis
76
we have some thet look hopeless, b u t some
of those hopeless cases w e have h a d a r e recovering.
It i s interesting t o see whet t h e y have done.
storm they owed u s $99,000,000.
gradually, l i q u i d a t i o n
this spring.
I n the
T h a t has gone d o w n
i s taking place e v e n through
A t the pres e n t time Iowa i s only owing
us e i g h t m i l l i o n s
o f dollars,
a n d t h e t i s represented
alnost entirely b y credit w e are still extending t o
banks w h i c h w e r e b a d l y o v e r e x t e n d e d a n d w h i c h h a v e n o t
shared i n t h e r e v i v a l
i n the matter
have h a d i n o u r d i s t r i c t
o f recovery.
W e
4 3 member b a n k suspensions.
The a g z r e z a t e a m o u n t o w i n g t o u s b y those b a n k s
a t the
time o f s u s p e n s i o n w a s a p p r o x i m a t e l y 3 4 , 5 0 0 , 0 0 0 .
That
has been liquidated and brought down until they have paid
33,400,000 and are still owing about .900,000.
of t h e t w i l l b e p a i d ultimately.
Most
T h e r e a r e t w o o r three
cases where w e will probably have s o m e losses b u t i t i s
not g o i n g t o b e v e r y serious.
Credit conditions locally i n Chicago a r e satisfactory, n o t w i t h s t a n d i n g w h e t s e . m s t o b e a
condition o f affairs, a
very q u i e t
slowing d o w n o f business.
The
demands o f the member banks i n Chicago have b e e n about
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Federal Reserve Bank of St. Louis
77
as they w cre «
month o r two o r three months ¢.go.
T h e
OnLy noticerbic..tchrngec t s “-slignt- P i m i i n e
i n rater.
Carrying r a t e s a r e 4 . o r 4 3 , W H E G h LSE O O R L
h s Guorter
higher t h a n they were o
short time ego. A n o t h e r thing
is thet t h e Chicago banks generall y
speaking have very
little money i n New York a t the present time, which i s
rather unusunl.
P a r t o f the money which has b e e n brought
out o f N e w Y o r k h a s b e e n u s e d i n m e c t i n g d e c l i n i n g d e posits.
O n e banker t o l d m e that their deposit w a s d o w n
$20,000,000.
T h e money which w e are lonning i n Chicago
now, Which i s only temporary, h a s been loaned bec: use
of decline i n deposits which alweys tekes place i n our
Gisteiot,
o r i n Chicago a t leiet,
Aprils se Bart m o n e y will come back.
o n the tires o f
O n the whole I
think things a r e pretty satisfactory there.
Governor Crissinger.
M a y w e hear f r o m you, Governor
Bailey?
Governor Bailey. . This last year has been a
very
good year f o r the tenth district. P r a c t i c a l l y over t h e
whole district w e have h a d good crops a n d good prices,
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Federal Reserve Bank of St. Louis
78
In n o r t h e r n N e b r a s k a c o r n f a r m e r s h e v e n o t r e c e i v e d t h e i r
full s h e r e o f t h e b o n e f i t s
A s f o r a s credit
o f it.
conditions e r e concerned i t looks t o m e a s though t h e
locel banks a r e going t o b e able t o meet t h e local
demends without calling o n us. T h e r e i s hardly a
dey g o e s b y b u t thert s o m e b a n k e r w i l l c o n e in, o r
write a
letter a s k i n g m e t o s e l e c t s o m e s e c u r i t i c s
purchase.
to
A S long a s that condition exists w e cre n o t
going t o b e called o n t o rediscount.
O f course t h e
Kansas wheat c r o p generally g e t s killed about three
times a
year.
I t has o n l y been killed once s o far,
We have g o o d rais since I
left a n d with favorable
conditions i n Kansas t h e y ought t o reise a
million bushels.
fines:
hundred
T h e soil conditions o u t there a r e
I t has rained f o r three o r four days since I
left h o m e a n d I
expect t o f i n d a
good r e p o r t
thet i s concerned w h e n I get back.
conditions,
s o far a s
A s t o business
s o m e o f the banks have s e i d t o m e thet t h e y
didn't g u t a s good business o u t o f Kansas a n d Nebraska
this y o a r t s t h e y e x p e c t e d b e c r u s e
crops.
T h e s
o f t h e wonderful
ame reason t h e t h a s b e e n g i v e n h e r e i s the
reason t h e y didn't, because t h e farmers have b e e n hard
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Federal Reserve Bank of St. Louis
79
up for t w o o r three yerrs a n d they have p a i d their
debts a n d have gotten back t o earth again.
mers a r e living a little closer, a
T h e far-
good many o f the
farmers have taken down their hats t o have t h e m rerather t h a n b u y n e w ones, a s a result o f the
of general economy o f the gentlemen d o w n here
washington. I
think i t i s a honeful s i g n when
thes e farmers are leaving their money i n the banks
and «re not spending all o f it. I
think thet i s just
exectly what hes b e e n t h e matter w i t h them.
I f they
realize t h e promise o f the crop thet i s out there this
yeer t h e n t h e y a r e g o i n g t o s p e n d m o n e y e
Governor C r i s s i n g e r .
G o v e r n o r Strong, w i l l y o u
discuss t h e discount rates a
Governor Strong.
was a n explanation I
in H e w York.
little?
T h e o n l y d-scussion w e hed here
mede o f the increase i n the rate
T h e c u s t o m i n former years h a s b e e n f o r
thet discussion t o teke plac’
a t a meeting w i t h t h e
I simply stated w h t the members o f the Board
alreadylmow t h e reasons f o r o u r change.
ir. Platt. W o u l d y o u report f r o m N e w York o n
business c o n d i t i o n s ?
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Federal Reserve Bank of St. Louis
80
Governor Strong.
A s t o business conditions t h e
statements g e n e r s l l y r e f l e c t w h a t i s g o i n g o n i n N e w
York.
T h e retail business i s ©
reduced. I
p r e t t : good.
cannot t e l l t o w h e t e x t e n t t h a t i s
snecifically d u e t o t h e e n o r m o u s d e v e l o p m e n t
o f chain
stores a n d m a i l o r d e r h o u s e s w h i c h a r e c u t t i n g i n t o t h e
middlemarn'ts business.
T h e r e a r e n o labor troubles
ezcent those thet have grown o u t o f disputes between
different divisions o f the building trades.
T h e y have
had some troubles there which a r e i n course o f adjustment.
O n the whole I
should s a y t h e business
district i s pretty fair.
i n our
W e have h a d consider:ble
change i n the financial conditions there.
w e believe
thet t h e e n t h u s i a s m h a s g o n e o u t o f t h i s s t o c k m a r k e t
spectlation.
T h e striking t > ing i s thet t h e N e w York
panks h a v e s
hown a
reduction s i n c e J a n u e r y 1
of
$500,000,000 o f deposits a n d {550,000,000 i n loans a n d
investments.
T h e general level o f inter s t rates i s
rovghly o n e p e r cent above whet i t was last summer a n d
fall.
T h e situation
expected
i n the reserve b a n k i s what w e
i t t o b e a s a result o f wh:t w e n t on, t h a t i s
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Federal Reserve Bank of St. Louis
81
heavy g o l d e x p o r t s a n d s:.les o f o u r s e c u r i t i e s .
There w a s a loss o f reserves i n New York a n d throughout the country d u e t o those t w o causes o f over
&450,000,000, a n d thet was a t once compensated for
the
by heavy borrowings temporarily f r o m N e w York Bank
and the discounts o f our memburs went u p t o over
200 ,00050009 end fluctuated quite widely. S a y over
é period o f weeks t h e average requirements f r o m u s
was around 150,000,000. W i t h i n the last ten days
they have b e e n able t o pay off quite a
little.
The
export o f gold has about stopped, that ig, A t ies
slowed down, e x c e p t t h e g o l d w h i c h w e e r e s h i p p i n g
to Germeny f o r account o f the Reichbank.
I t goes o u t
at about ~5,000,000 a week, they have asked for a
336,000,000 s h i p ment, b u t i t wés a l l e a r marked a n d
does n o t affect t h e bank reservese
The most interesting thing that has taken place i n
New York from o u r standpoint, because i t has a
direct
relationship t o the decision o f the directors t o
inerease t h e discount rate, i s the effect u p o n t h e
stock exchange l o a n account e n d speculation g e n e r a l ly.
I d o n o t know thet w e heve ever discussed here
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Federal Reserve Bank of St. Louis
82
at these meetings i n very much detail just h o w t h a t
works i n the market, b u t i t has a
Hearing o n opr Pele oe.2 d e d
i l l u s t r a t e i t b y what
I believed h a p p e n e d t h i s time.
-¢@ u r r e n c y
very important
T h e return flow o f
t o N e w Y o r k a f t e r t h e h o l i d e y s w a s v e r y heevy.
Our member banks o w e d u s almost nothing a n d t h e slack
wes t e k e n u p b y t h e s e l e s o f i n v e s t m e n t s e c u r i t i e s
held i n the investment account.
gold e x p o r t s r e s u l t e d ,
as I
T h o s e @.ades. i n d
say,
i n Februery,
i n
making i t necessary f o r o u r member banks t o borrow a s
high a s $200,000,000 and o v e r from us. Then o n the 27th
of F e b r u c r y w e a d v e n c e d o u r r a t e f r o m 3
t o 3 % per
conte ~ T h e effeet o f thet w a s a t once t o tnduce t h e
member banks which were rediscounting heevily t o call
their stock exchange loans. f
personally a n d I
have b e e n all. through t h a t
know e x e c t l y t h e w e y i t works.
O n e of
the officers i n » member b a n k which i s borrowing heavily
from u s under t h o presont system, Looks o v e r nis
Toens-in
o r d G r to-dccide
w i t
l é a n s noe w a l
call.
very simplc rule i e followed, w h i c h ite eimest
universal.
T h e y call t h e loens o f the least desir-
able houses, t h e lorens o f houses t h e t have t o o large
A
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Federal Reserve Bank of St. Louis
835
loans w i t h t h e m e n d e s p e c i a l l y t h o s e l o i n s u p o n s t o c k s
which a r e generally unders t o o d around t h e street a s being ¢
the subject o f pool operation.
I o a personally pleased with t h e effect o f the
increase i n our discount. rate under t h e conditions
which e x i s t e d e a r l y i n Maren,
amount
a s L t applied a
o f direct pressure a g a i n s t undesirable
certain
specula-
tion. T h e r e a r e others w h o m a y disagree w i t h m e e s t o
thet b u t I w a s quite confident i t would result.
I t
has been completely vorificd b y whet h a s happened.
I t
was a selutary cheuge i n the ratve, which cume a t the
right t i m e s n d n a d «
wholesome r e s u l t .
T h e directors
who Were there o t the meeting when the discussion took
place h a d some resurvetions a s t o whether t h e effect o f
che i n c r e n s e
ness génerully,
i n o u r r e t e w o u l d n o t b e f e l t b y busib u t e 1 1 t h e considerations
l e d them t o
decide t o increase t h e rate a n d I doubt i f i t has h a d a n y
perticulerly adverse effect o n business,
The speculution o n the stock exchange h a d distinctly degenerated i n quelity, a n d I think there w a s
some 6€vidence, thet w e felt a t the bank, thet the
cheracter.of t h e offerings o f securities. being made t o
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Federal Reserve Bank of St. Louis
84
the public b y the issue housus, h a d «also somewhs.t
detverloreted,, t h e t t h u y wurte not o f u s goud: quality
as t h e y h e d b e e n l a s t y u i r e
W e p u l v u r rake up.
There h a s been a large reduction i n loans.
Money
PatGs O r e still faiwely-Livm e t t h e now. Level tind” thet
1S One. P e a s o n W h y L e l e l e a c u i ,
be a n o p p o r t u n e t i m e ,
without t h e possibility o f doing a n y harm, f o r u s t o
our S y s t e m p o r t folio.
- I noticed thr.t s o m e o f
our d i r e c t o r s f e l t t h a t w e y c b o u t i t tides T h e p s y c h o l o g y
of the speculetion i n the country I. thine hus changed
quite nan DLts ‘ T h e V o h i m e o f etipeve 2 0 0 n s a s r e p o r t e d
by the banks i s «a little o v e r t w o billion.
confidential reports, w h i c h w e uever published.
W e
Gennot t e l l t r o m e i o s e r e p o r t s /s' t o m i t of. t h e b o r r o w =
ing o n the stock exchanges
thet a n d t h e s l o w h
w
I t i s somewhat leurger than
e apply t o i t would indicate
thet i t might b e several hundred millions higher t h a n
t a o ~ L- Peel very.
g
When w e heve a
l
a
t there 1 8 « defect
big bulge i n t h e merket a n d
the e x c e s s o v e r t h e PYeported- o m o u n t o fi l o a n s L s n o u a
great, t h a t i s that t h e ratio narrows a s the l o a n
account increases a n d thet today w e are probably well
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Federal Reserve Bank of St. Louis
85
under t h e peak o f the stock exchange borrowings t h a t
wer, estimated e t the bank a month o r two ago.
Governor C r i s s i n g e r .
Governor Strong.
W h e t w e s t h e estimate?
T h e estimate appeared t o b e
about %2,€00,000,000. I
personally d o not think i t
ever g o t a s h i g h a s that,
a n d thet t h e consequent r e -
duction which has t a e n place m a y not b e i n a s large
proportion a s i t w o u l d h a v e b e e n i f i t h a d a l l t a k e n
On the whole o u r conclusion i s that t h e
panking situetion i n New York i s very much healthier
than i t was a
few months ago, v e r y much.
Mr. Platt.
A p e t h e amountslo a n e d o n the stock
exchange p u b l i s h e d m o r e o r less?
Governor Strong.
N o ; the avount o f loans made
n
a reported to. us, o a G
from d a y t o day a r e e s t i m a t e d d
that does n o t f o r m the basis o f a n y estimate o f the
total l o a n a c c o u n t b e c a u s e a
the S u i s
G d
very l a r g e p r o p o r t i o n
of
b o stock exchange brokers never g e t o n
the borrd a t all a n d n o estimate o f the loans a r e made
py t h e board.
Nese P l a t e .
L o a n s made
o n the board
: r e semi-
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Federal Reserve Bank of St. Louis
published,
. t l e a s t e v e r y b o d y w i t h i n he:.ring k n o w s
what t h e y are.
Governor S t r o n g e
O h , y e s , t h e y know roughly h o w
much m o n e y c h i n g u s h a n d s ,
b u t t h e n t h e :uount o f money
thet c h a n g e s h a n d s m a y o n l y b e o n e p e r c e n t o f t h e
loen a c c o u n t
i n a
day a n d rarely m o r e t h e n t w o p e r
ECn ls
Mr. Millers I - w a s interested i n your stetenent
thet t h e e d v a n c e in- t h e r a t e l e d t h e m e m b e r b e n k s
to
Look over thelr port fulio a n d eats sorns end. t o
greduclly w e e d o u t t h e l e s s d e s i r a b l e o n e s .
Governor S t r o n g .
becomes &
T h v y hive t o p a y u s o f f
little m o r e e x p e n s i v e
t o borrow f r o m u s i f
we aececlurate t h e p r o c e s s ; . littic.
Mr. Miller.
profiteble,
W h e n t h e business w e s made less
i n licu o f borrowing f r o m y o u they dis-
criminated egrinstt t h e less desirable loesns that they
hed given brokurs?
Governor Strong.
T h e y alweys d o thit, w h e n i t i s
aoborrower's morket, t h e brnks o f N e w York call u p
the b r o k e r s e n d a s k t h e m i f t h e y d o n o t w a n t money.
it 1 s a
When
lenderts m a r k o t a n d t h e y h a v e lorsns w h i c h s r e l e s s
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Federal Reserve Bank of St. Louis
desireable t h a n others
t h e y always discriminate
when they call their loans.
Nr. Niller.
H o w about i t when there i s a low
reserve bank rate, does i t reduce the disposition o n
the pert o f the banks t o extend credit against t h e
less desirable securities?
Governor Strong.
I f they are borrowing from us
at a n y rate, Dr. Miller, I
et out o f debt t o us.
think t h e y always t r y t o
A l l thet I
think t h e rate
advance d i d was t o just a d d a burden o n borrowing f r o m
us, &
burden o f o n e - h a l f
o f o n e p e r cent,
at a
time
when they were borrowing a lot from us, and i t
loan
accelerated the process o f liquidation.
Mr. Millers
T h e fact thet they were borrowing
a lot from your bank was n o t particularly influenced
by the thrce per cent rate, was i t ?
Governor Strong.
O h , n o s T h e y were borrowing
from u s f o r gold export e n d because o f our sales o f
securities a n d they could not help themselves.
First National B a n k hed a
The
heavy loss o f deposits, t h e y
lost a hundred millions of, deposits a n d the only thing
they could d o was t o borrow f r o m us. T h e y d i d not have
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Federal Reserve Bank of St. Louis
a large stock exchange account.
I t w a s reported t o u s
at a time w h e n t h e y wére heavily i n debt t o us, thet
they only hed {440,000 i n street loans and the only
thing t h e y could d o wes t o borrow f r o m us.
Governor Miller.
the banks,
W h e n y o u advanced your rate
s o t o speek, borrowed f r o m t h e merket instead
of continuing t o borrow f o r t h e market f r o m you.
Governor S t r o n g . I
d o not think I
understend y o u ,
Miller.
They called their loans a n d that
relieved t h e m t h a t way.
Governor Strong.
Y o u mean w e borrowed f r o m the
market?
Mr. Miller.
N o , t h e member banks - - the member banks
thet h a d b i g port folios o f stock loans a n d also a considerable rediscount l i n e w i t h you, t h r e w t h e burden o n
the m a r k e t
t o take c a r e - -
Governor Strong (interposing).
O f , they threw the
burden o n the rest o f the country particularly b e ause
they called loans .f
T
h
e stock exchange
locn account, generally speaking, d o e s n o t decline i n
olume e x c e p t
a s stocks decline
i n price.
T h a t i s whet
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Federal Reserve Bank of St. Louis
affects t h e necount.
W h e r e y o u merely substitute
one l e n d e r f o r e n o t h e r y o u d o n o t affvuct i t a s
decline i n price dous. T h e totel uccount moves u p
very s l o w l y - s prices w u d v e n c e a n d g o v s d o w n s l o w l y a s
T h t h a s beun a
prices decline.
C
a c t e r i s t i c move-
ment since w e e v e h e d reports about t h e business..
Mr. Miller.
W o u l d y o u attach e n y importance t o
reserve b a n k acting a s f a c t o r cither i n advancing
price o r i n declining i t ?
Governor Strong. W e l l , i t i s herd t o siy,
t h i n k
rete h e s l e s s i n f l u e n c e p r o b a b l y t h e n t h e f a c t t h a t
banks o w e u s money.
T h e banks h a d t o owe u s money,
they could not escupe borrowing from us e t whatever
rate w e cherged a t the moment, because t h e y lost over
$200,000,000
i n reserves i n the gold movement a n d they
lost $250,000,000 that had to be paid for the
securities t h e t were sold, e n d thet operation h i s l e d
to t h e p r o c e s s
posits.
o f reduction o f bank t o m s
a n d de-
f f e r e n c e i s mude u p o f whet t h e y ere
borrowing f r o m us, e n d they cunnot eserpe b i s sc Eee i a
exactly what w a s forcast w h e n Wwe Were telking
operati
o n o f this account,
t h e t w h e n w e b u y w e liquidate
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Federal Reserve Bank of St. Louis
90
the N e w Y o r k l o a n a e c o u n t
a t once, t h a t b s t h e borrow-
ing f r o m us, a n d w h e n w e s e l l t h e b o r r o w i n g
a t once
takes place.
Governor Crissinger.
“Governor Strong. I
I s t h e r e anything further?
think perhaps t h e Governors
would like t o hear something f r o m t h e Board a s t o their
Views o f t h e outlook.
Governor C r i s s i n g e r .
W e w i l l a s k Dr. S t e w a r t
to
COs: debe.
Mr. S t e w a r t .
W n e n t h e present business situation
is c o n s i d e r e d w i t h r e f e r e n c e
over t h e n e x t f e w m o n t h s
important f a c t o r s
t o prospective developments
there seem
t o k e e p i n mind.
t o m e t o b e three
A l l three, o f t h e s e
factors b e a r u p o n t h e f u t u r e b u y i n g p o w e r f o r A m e r i c a n
products
a t h o m e a n d abroad.
T h e domestic demand f r o m
ultimate c o n s u m e r s d e p e n d s l a r g e l y u p o n t h e g r o w t h
employment a n d i n c o m e
i n
o f factory workers a n d t h e extent
to w h i c h t h e f a r m e r s w i l l u s e t h e i n e o m e f r o m the. s a l e
of thelr crops i n current buying.
T h e income o f factory
workers h a s i n c r e a s e d a l m o s t c o n t i n u o u s l y d u r i n g t h e p a s t
eight m o n t h s a n d i n M a r c h w a s m o r e t h a n 2 0 p e r c e n t a b o v e
the l o w p o i n t
o f last. June.
E v e n a t i t s present lever,
however, t h e total payroll o f factory workers i s consider-
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Federal Reserve Bank of St. Louis
os
ably below that O f a yeer ago.
T h e demand f o r mer-
chendise f r o m f a r m e r s h a s b e e n d i s a p p o i n t i n g l y l o w i n
certain sections ,
notwithstanding t h e better returns
from most crops r a i s e d during 1924, chiefly because s o large
a portion o f the proceeds f r o m t h e crops were u s e d i n
the p a y m e n t
o f indebtedness.
V o l u m e o f merchandise
e and retail, h a s been a t
distribution, b o t h a t w h o l e s : l
a higher l e v e l d u r i n g t h e f i r s t q u a r t e r
o f -192e5>than
a year ago. T r a d e activity does n o t ordinarily fluctuate a s widely a s industrial activity a n d merchandise
distribution,
w h i l e i t has b e e n a t a relatively high
level, d i d not increase during t h e last a o e of: L e t
nor d i d i t decline during recent months t o the same
extent a s t h e output o f basic industries.
The t h i r d f a c t o r i s t h e e x t e n t a n d c h a r a c t e r
foreign demand f o r American products.
of
T o t a l value
exports w a s considerably larger i n the last half o f
1924 a n d t h e first quarter o f 1925 than f o r the corresponding pertiod.a year. ago.
T h e buying power back o f
this f o r e i g n d e m a n d h a s r é s e n l a r g e l y f r o m c r e d i t s
placed i n this country.
1923,
T o a much larger extent t h a n i n
o u r domestic m a r k e t s a r e dependent u p o n t h e con-
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Federal Reserve Bank of St. Louis
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tinuation o f foreign buying u n d these foreign purchases
in turn a r e dependent u p o n t h e willingness o f American
investors t o avsorb foreign securities.
At t h e p r e s e n t t i m e t h e o u t i o o k
i n t h e business s i t -
uation c a n b e b e t t e r j u d g e d b y c o n s i d e r i n g t n e m o v e m e n t
of
factory payrolls a n d domestic buying power i n general
than b y r e f e r e n c e e i t h e r
prices
t o t h e movement
o f wholesale
T h e con-
o r o f t h e output o f basic industries.
siderable i n c r e a s e
i n output w h i c h t o o k p l u c e d u r i n g t h e
t half o f 1 9 2 4 w a s «et a rate m o r e r a p i d t h e n c o u l d n o t
be sustained,
a s indicated
both prices a n d production.
b y the r e c e n t r e c e s s i o n s
i n
I f this readjustment,
however, d o e s n o t carry with i t a decreese o f employment,
the v o l u m e o f m e r c h a n d i s e d i s t r i b u t i o n s h o u l d c o n t i n u e
at least a t its present level until mid-year.
Beyond
thet time t h e trade situation will depend largely upon
the developments
i n ugriculture.
At m e m b e r b a n k s t h e m o s t i m p o r t a n t f e a t u r e
situation h a s b e e n t h e r a p i d d e c l i n e
the beginning o f this yeur.
o f the
i n deposits s i n c e
T h e very large decline
in New York City reflects i n part t h e sale o f investments
by member banks,
t h e effect o f t h e exports
o f gold, a n d
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the r e d u c t i o n
i n bankers! b a l e n e e s d u e t o t h e i n c r e a s e d
loans m a d e w i t h i n t e r i o r banks.
T o t a l l o a n s a n d invest-
ments f o r e l l r e p o r t i n g m e m b e r b a n k s h a v e c o n t i n u e d d u r i n g
the -Tirst quarter o f this year near the high level
reached a t the opening.
At t h e F e d e r a l r e s e r v e b a n k s t o t a l e a r n i n g a s s e t s s i n c e
the first o f the yerer have b e e n somewhat above a
dollars.
T h e increase
billion
o f about $150,000,000 b e t w e e n t h e
middle o f January a n d the e n d o f February reflected
chiefly t h e influence o f gold exports, t h o u g h there w a s
also s o m e i n c r e a s e
i n t h e d e m a n d f o r currence.,
F r o m the
viewpoint o f the effect o f borrowings a t reserve banks
upon t h e money market,
i t i s important t o keep i n mind
the distribution o f discounts between t h e N e w York
ede ras. peactve b a n k a n d t h e o t h e r r e s e r v e b a n k s .
A t
the time o f the discount r a t e increase a t the N e w York
bank a t the e n d o f February,
counts
5 0 per cent o f the dis-
o f t h e s y s t e m w e r e i n t h e N e w Y o r k bank.
that t i m e , w h i l e t h e t o t a l d i s c o u n t s
Since
o f the system have
remained about t h e same, t h e proportion h e l d b y New
York has declined t o about 3 0 per cent.
T h e demand f o r
reserve b a n k c r e d i t o v e r t h e n e x t t w o m o n t h s w i l l d e p e n d
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Federal Reserve Bank of St. Louis
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largely u p o n t h e m o v e m e n t
change
o f p:yrolls a n d t h e consequent
P
i n the demand f o r currency a n d upon t h e direction
of g o l d movements.
Governor C r i s s i n g e r .
I s there anything further?
not, t h e Chair will entertain a
(Whereupon
conference
Governors
motion t o adjourn.
a t 1.15 o'clock psme,
t h e joint
o f t h e Federal Reserve B o a r d w i t h t h e
o f t h e Federal Reserve B a n k s adjourned, s u b j e c t
to the call o f the Chairman. )