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Federal Reserve Bank of St. Louis
EIGHTH C O N F E R E N C E
GOVERNORS O F FEDERAL RESERVE BANKS
BOSTON, MASS.
SOMERSET H O T E L
‘WALTER
S. COX
SHORTHAND REPORTER
COLUMBIAN
BUILDING—TEL.
WASHINGTON,
D . C.
M . 8324
INDEX T O VOLUME I .
1. A p p o i n t m e n t
2. M i n u t e s
o f Chairman
o f Seventh Conference
o f Governors
3. U n f i n i s h e d b u s i n e s s
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Federal Reserve Bank of St. Louis
(a) Distribution o f stpenses o f moving
gold for. gold fund.
Retroactive liability f o r expenses
of operating g o l d fund
Conference
o f Auditors
Audit o f gold fund.
Disp:sition o f matters reported t o
Federal Reserve Board
1. C h e c k s received f r o m collectors
of customs a n d i n t e r n a l r e v e n u é
carrying exchange charges
Copies o f i n s t r u c t i o n s t o c o l lectors o f customs a n d i n t e r n a l
revenue
Communications between Federal
Reserve Board, Federal reserve
banks a n d Federal reserve agents
4, M e m b e r banks' earnings statements
4. C o m m i t t e e reports
(a)
C o m m i t t e e o n reserve
reserve c i t i e s
a n d central
Committee o n questions submitted
by Federal R e s e r v e B o a r d t o u c h i n g
foreign operations
(See also Vol. I I p. 350)
Committee o n method o f calculating
dividends
Committee
o n allotment
o f invest-
ments
Committee o n d i s p o s i t i o n o f
Government b o n d s
Foreign arrangements.
(See also Vol. II, p. 356)
A. B. #&. Meeting i n Kansas City,
Press statement
Next meeting
(NOTE: }; F o r topic 5
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Federal Reserve Bank of St. Louis
and 6 and subheads thereunder
see Index t o VolumesII a n d III.)
PROCEEDINGS O F THE
EIGHTH CONFERENCE O F GOVERNORS O F
FEDERAL RESERVE BANKS.
Hotel Somerset, Boston, Mass.
Tuesday, August 22, 1916.
The Eighth Conference o f Governors o f Federal Reserve
Banks c o n v e n e d a t t h e H o t e l Somerset, B o s t o n , M a s s . ,
at
10 o'clock a. m. Tuesday, August 22, 1916.
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Federal Reserve Bank of St. Louis
There were present:
A. L . Aiken, Governor, Federal Reserve B a n k o f
Boston, Chairman,
G. J . Seay, Governor, Federal Reserve B a n k o f
Richmond,
C. J . Rhoads, Governor, Federal Reserve B a n k o f
Philadelphia,
W. W. Hoxon, Deputy Governor, Federal Reserve
Bank o f St. Louis.
Theo. Wold, Governor, Federal Reserve B a n k o f
Minneapolis,
J. A. MeCord, Governor, Federal Reserve B a n k o f
Atlanta,
R. H. Treman, Deputy Governor, Federal Reserve
Bank o f N e w York,
Archibald Kains, Governor, Federal Reserve Bank
of S a n Francisco,
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Federal Reserve Bank of St. Louis
Z,. Willer, Governer, Federal Reserve B a n k o f
Kasas City.
R. Faneher, Governor, Federal Reserve Bak
Cleveland,
B. McDougal, Governcer, F e c e r a l R e s e r v e B a n k o f
Chicage,
R, Mehay, Deputy Geverner, Federal Reserve B a n k
of Chicago.
Pr, Curtis, C o u n s e l f e r t h e T e d e r a l R e s e r v e B e n k o f
New Y o r k e n d S e c r e t a r y
t a t h e Conference.
INFORMAL PROCEEDINGS.
Governor Seay:
I n the absence c f Governcr Strong, I
mae t h a t Governcor A i k e n b e r e q u e s t e d
t o act e s Cheirman
of this meeting.
(There w e r e s e v e r a l s e c o n d s
t o this m e t i e n a n d Governor
Aiken w a s thereupen elected Chairman o f the eighth Confer-
ence, )
The Chairman:
Gentlemen,
t h e meeting will please
tO Prey,
Mir. Treman:
M r . Chairman,
may I
read a
telegram,
at
time, which I have received f r o m Governor Strong?
The Chairman:
Y e e , - 4 2 y o u will,
Mr. Treman: “ P l e a s e sive
l o v e t o these attending
the Conference a n d tell them that i t breaks m y w a r t n o t
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Federal Reserve Bank of St. Louis
to be there. B e n j a m i n Strong, Jr."
The Chairman:
G o v e r n o r Wold n o w moves that t h e Secre-
tary b e requested t o prepare a
telegram t o Governor Strong
sending h i m o u r a f f e c t i o n a t e g r e e t i n g s a n d e x p r e s s i n g o u r
regret t h a t h e i s n o t here,
a n d that w e hope h e will b e
with u s v e r y soon.
(The motion was unanimously adopted a n d the telegram referred t e i s a s follows: )
Mr. Benjamin Strong, J r .
Estes Park, Colorado.
Your telegram received i n conference assembled.
W e
want y o u t o know h o w much w e miss y o u r genial leadership
and send greetings a n d ardent wishes f o r a speedy a n d complete recovery a n d return t o our midst.
Aiken,
Treman,
Rhoads,
Seay,
McCord,
Fancher,
McDougal,
Wold,
Miller,
Hoxton,
Kains,
"On reading the above over t o the bunch they
all v e r y w e l l b u t b e s u r e t o s e n d h i m o u r love.
Curtis."
a.
The Chairman:
I t nas been t h e custom a t these meet-
ings t o confine t h e meetings t o Governors o r acting Governors o f t h e F e d e r a l R e s e r v e B a n k s , e x c e p t i n g
deputy governors,
ea t o us.
i n cases w h e r e
o r their representatives, w e r e duly accredii
M r . Hoxon i s here representing Governor Wells
of t h e F e d e r a l R e s e r v e B a n k c f St. L o u i s a n d c o m e s p r e p e r l y
accredited,
I t would b e i n order t o make a
motion asking
Mr. Hoxon t o join i n this Conference a s a representative
of Gorernor Wells.
Goernor McDougal: I
s o move, Mr. Chairman.
(The motion was duly seconded and carried. )
The Chairman:
T h e next order o f business i s the adopt-
tion o f the program a s o u r order o f business.
tary h a s p r e p a r e d a
Governors,
T h e Secre=-
program f o r t h e E i g h t h C o n f e r e n c e
o f which all o f you have a cnpy, I
of
believe.
Will s o m e o n e m o v e t h a t t h e p r e g r a m b e accepted?
Governor Milier: I
Gov ernor Kains: I
move t h a t t h e p r o g r a m b e accepted.
will second t h e motion.
(The motion was duly carried, )
The Chairman:
h
e next i t e m o n the program i s min~
utes o f the Seventh Conference o f Governors.
W h a t is the
pleasure o f the Conference W i t h reference t o that?
Governor Wold: I
move t h a t t h e y b e accepted a s sub-
mitted.
Governor McCord: I
The Chairman:
will second that motion.
G o v e r n o r Rhoades moves that t h e min-
utes o f the Seventh Conference o f Governors b e accepted
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Federal Reserve Bank of St. Louis
as submitted a n d that t h e reading o f them b e dispensed
with.
W i l l y o u accept that, Governor Rhoads?
Governor R h o a d s ?
Y e s , M r . Chairman,
(The motion being duly seconded, was carried.)
The Chairman:
T h e next i t e m o n the program i s
"unfinished business."
Governor Seay: M r . Chairman, may I ask if we are
expecting t o meet members o f the Board here a n d whether
we a r e e x p e c t e d t o c o m m u n i c a t e w i t h t h e m ?
will s a y t h a t M r . D e l a n o a n d M r .
The Chairman: I
Harding expect t o b e here tomobrow morning. I
umerstand
they would like t o have u s devote t h e time w h e n they are
here t o a discussion o f the various subjects o n our progrem
that bear upon check collection a n d transit oye rations
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Federal Reserve Bank of St. Louis
of the banks.
T h e y know that this meeting i s taking place
and t h e y a r e e n r o u t e h e r e . I
d o not know that a n y for-
mal communication f r o m this meeting t o them a t this time
is necessary.
d o not think that i t i s necessary,
Mr. Curtis: I
Governor Seay. I
have a letter from Mr. Delano stating
that h e and Mr. Harding would b e here. Theyunderstand
the situation fully; theyunderstand that they are invited
to attend the second day o f the Conference, when We are
to take u p transit matters, @ n d that t h e y a r e invited t o b e
with us as long thereafter a S they care t o stay.
The Chairman: I
might Say that Governor Hamlin was
in o u r o f f i c e l a s t w e e k a n d I
told h i m a t that t i m e I
was
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Federal Reserve Bank of St. Louis
6
sure i t would b e a pleasure t o the Conference i f h e would
join u s i f h e h a p p e n e d
t o b e i n town.
H
e i s o n his vaca-
tion a t t h e p r e s e n t t i m e d o w n a t Mattapoisett,
and I
think
he m a y b e h e r e tomorrow.
If there i s n o objection w e will take u p the program
in o r d e r u n t i l w e r e a c h a
point w h e n i t s e e m s d e S i r a b l e
to
put i t over until t h e members o f the Federd Reserve Board
are present.
The nextitem is "Unfinished business."
T h e first
subheading under that i s
(a)) D i s t r i b u t i o n o f expenses o f moving g o l d f o r
gold fund.
(
G
o
v
e
r
n
o
r Kains.)
Governor Keins w a s responsible f o r that b e i n g p u t o n
the p r o g r a m o r i g i n a l l y a n d I
will a s k h i m t e o p e n t h e d i s -
cussion o f it.
Governor Kains:
M r . Charman, I
understand t h a t these
items ( a ) a n d (b) are simply t o b e kept before t h e Conference until something happens s o that w e will understand
whether there i s going t o b e any retroactive liability f o r
expense o f operating t h e gold fund, t h a t i s , b y the movement o f gold.
I t would seem t o m e that sub-topic ( a )
should properly come after Sub-topic ( b ) until w e know
what t h e expense i s going t o be.
T h e r e i s n o use i n talk-
ing about distributing i t except i n the cases o f banks
like M i n n e a p o l i s ,
w h i c h h a s t o undergo expense w h i c h i s
not l a i d u p o n b a n k s t h a t h a v e s u b - t r e a s u r i e s
cities.
i n their
T h e r e i s nothing particular t o s a y about i t i f
none o f u s have a n y further light tpon i t than w e h a d a t
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Federal Reserve Bank of St. Louis
the last meeting.
The Chairman: I
would like t o ask i f anyone h a s
heard a n y t h i n g f r o m t h e T r e a s u r y D e p a r t m e n t s u g s e s t i n g t h a t
expense u p t c the present time?
Governor McDougal:
W e h a d the metter u p with t h e
committee s e v e r a l m o n t h s a s o a n d w e w e r e t o l d a t t h a t t i m e
that there w a s n o liability e n d n o expense involved u p t o
that particular date.
Min. Curtis:
I
n addition
t o that, s i n c e t h a t tine
they have published i n the bulletin a
statement c f the ex-
pense s o far incurred amounting t o about 5400, w h i c h was s o
small that i t was being absorbed b y the Federal Reserve
Beard a n d put down a s a pert o f their running expenses,
That was published i n the Bulletin a
month o f s o ago, a n d
jt seems t o m e that w e c a n safely drop this matter from o u r
program entirely.
The Chairman:
D
e y o u think t h e y would b e estopped
coming back o n us?
Wye. f o r t i s :I
think i t i s pretty safe, i n view o f
the fect that t h e y have published t h a t statement.
Governor Seay:
T h a t w a s f o r the expense o f handling
the gold Settlement f u n d i n Washington.
T h a t d i d not
perta@into t h e m o v e m e n t b e t w e e n subtreasuries,
Mr. Curtis:
A s Governor McDougal h a s said, t h e C o m -
mittee spoke t o them about that a n d they said there w a s n o
xpense.
T h a t was about three months ago,
months ago.
or tw
o r three
I s n o t that correct, Governor McDougal?
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Federal Reserve Bank of St. Louis
8
Governor McDougal:
Yes,
W e were t o l d a t that time
that there w a s n o expénse involved i n the matter o f moving the cold; t h a t t h e expense involved i n the clerical
operation o f the fund a t Washington W e s very small.
W e
afterwards g o t t h e figures o n that a n d i t was taken care
of.
Mr. Curtis:
I t occurs t o m e that i n view o f their
published s t a t e m e n t t h a t t h e r e w a s n o expense,
a n d o f their
oral statement t o our committee t h a t there h a d been u p t o
that time n o expense i n moving t h e gold, t h a t i s sufficient
to make i t safe f o r u s t o drop i t from o u r program.
Governor Kains: I
do not think i t would wee wise t o
drap t h e matter f r o m t h e program because undoubtedly t h e
Government will, a s a result o f our operations, h a v e t o
make m a n y transfers o f gold, a n d until t h e y tell us, i n
tones o f authority, t h a t there will b e n o expense,
w e can
not s a f e l y a s s u m e t h a t t h e r e w i l l n o t b e a n y expense.
The Chairman:
W o u l d i t not b e sufficient t o put t h e
matter o n the program after w e were put o n notice that
some expense h a d been incurred?
(Informal discussion followed.)
Governor Seay: I
move that t h e item b e droped: from
the program,
(Further informal discussion followed.)
The Chairman:
graphs ( a ) a n d (b)?
W h a t action shall w e take o n para-
9
Governor Seay: I
move t h a t t h e t o p i c s
will withdrawi
b e centinued j u s t a s a
Governor McDougal: I
gentle reminder.
Will second that motion.
(The motion, b e i n g d u l y seconded,
The Chairman:
m y motion a n d will
w a s carried.)
T h e next i s
{ce} C o n f e r e n c e o f Auditors.
(Mr. Curtis.)
Mr. Curtis i s responsible f o r that item, a n d w e will
ask h i m t o address u s upon it.
ir. Curtis:
A t the last conference i t was voted t o
elaborate t h i s tepic somewhat, a
suggestion being made t o
the Federal Reserve Agents, w h e also h a d i t i n hand.
The
Governors s a w n o necessity f o r a conference o f auditor g s at
that time. I
have here a memorandum f r o m Mr. Jefferson,
the auditor f o r the N e w York Bank, which I will take t h e
liberty t e read,
L
t i s v e r y prief,
"Confirming m y conversation with you today, i t does
not seem that there i s any immediabe demand f o r a conference o f a ditors a n d accountants,
possible f o r m e t o outline a
cussed a t the present time.
many p o i n t s
a t least i t would b e in-
list o f subjects t o b e disT h e r e are, however, a
great
i n connection w i t h t h e o l l e c t i o n S y s t e m t h a t
I hope c a n b e made more uniform i n one w a y o r ambher.
may b e t h a t l a t e r a
conference
I t
a t which t h e practical opera-
tion o f the collection work could b e discussed would b e
well w o r t h while,
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Federal Reserve Bank of St. Louis
I wish t o accent t h e desirability o f meetings o f the
10
auditors f r o m t i m e t o time. I
find that m y correspond-
ence w i t h Boston, P h i l a d e l p h i a , R i c h m o n d , C l e v e l a n d a n d
Chicago produces far better results than d o letters t o the
other banks, I
find that Mr. Cadwallader a n d I get along
much better with Washington t h a n t h e other banks because a f
Our c l o s e a c q u a i n t a n c e w i t h Messrs. B r o d e r i c k , J a c o b s o n ,
Gidney a n d Harrison, I
believe i t would b e a n excellent
thing f o r the auditors t o get together, s a y once a year, a t
different Federal-reserve cities a n d become acquainted."
He told m e i n addition t o this that h e thought there
was n o necessity a t the present t i m e f o r having a n y conference o n t h e q u e s t i o n o f statistics;
t h a t that matter was
are
being a t t e n d e d
t o a n d t h e y still working w i t h t h e statis-
ticians o f the Board t r y i n g . t
o get t h e volume reduced; t h a t
he felt i t was not necessary a t that time t o call another
conference o f a ditors.
The C h a i r m a n : D o e s t h e c o n f e r e n c e w i s h t o t a k e a n y
action o n Mr. Curtis’ report?
I f not, i t will b e accepted
and incorporated i n the record,
The next topic i s (d).
(d) A u d i t a f Gold F u n d .
(Mr. C u r t i s , )
Mr. Curtis.is a l s o responsible f o r that topic.
Mr, Curtis: I
have here also a memorandum f r o m o u r
auditor o n thd matter,
"Cafirming conversation with you o n Friday last, the
regulations o f t h e Federal Reserve Board provide f o r a i
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Federal Reserve Bank of St. Louis
ad
quarterly audit o f the Gold Settlement Fund b y a representative o f the Federal Reserve Board a n d a
representative
of the banks; l a t e r another person w a s added t o represent
the Federal reserve agents.
APPOINTM:NTS F O R T H L Y L A R 1916.
At the sixth conference o f governors held a t Washington i n January, Governor Strong w a s authorized,
a s chairman,
to appoint representatives o f the banks f o r t h e year 1916.
The r e s o l u t i o n s u p g é s t e d t h a t t h e s e a p p o i n t m e n t s r o t a t e
among t h e banks beginning a t Atlanta,
a s t h e first o f the
eastern b a n k s n o t y e t h a v i n g b e e n represented,
a n d proceed
then t o Cleveland, Chicago, S t - Louis, Minneapolis,
Kansas City, Dallas and San Francisco.
Mr. J a y assumed t h e responsibility f o r making t h e appointment o f the representative o f the agents f o r t h e February audit, although t h e Federal Reserve Agents' Conference h a d n o t p a s s e d a
similar resolution.
APPOINTMENTS O F RLPRLSENTATIVI.S - AUDIT
SECOND QUARTER.
Mr- J . A. Slattery o f Atlanta represented t h e Federal
reserve banks.
M r . W. F. Taylor o f Cleveland represented
the Federal reserve agents.
APPOINTMENTS O F REPRESLNTATIVLS FOR
THIRD .UARTER.
Someone f r o m Chicago should b e appointed b y Mr- Perrin,
Chairman o f the Conference ¢«f the Federal Reserve Agents,
to represent t h e agents i n a n audit t o b e made during t h i s
quarter, preferably before t h e e n d c f August.
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Federal Reserve Bank of St. Louis
I
n the
le
absence o f Govérnor Strong Someone should appoint Mr. Taylor
to represent t n e banks i h this audit, a n d similar arranyements s h c u l d b e m a d e f o r t h e f o u r t h quarter.
I shall b e glad t o lock after a l l details i f the chair-
man c f the Governors’ Gonference s o desires."
Mr- Strong w a s authorized,
a s Chairman,
t o make appoint-
ments f o r t h e whole year, b u t h e has n o t doné so.
now h a v e a
new chairman I
A s we
think t h e proper proceeding w o u l d
be for t h e Conference t o authorize t h e Chairman t o make
the appointments,
s o far a s a
representative
o f t h e banksis
concerned, f o r the last t w o audits o f this year, o n e o f
Which will take place pretty soon, a n d t h e second o n e
a t the
end o f t h e year.
Governor Kains: I
s o move, Mr. Chairman.
Governor Fancher: I
The Chairman:
will second that motion.
G o v e r n o r Kains moves t h a t the Chairman
of the Conference b e authorized t o appoint t h e representative
of t h e F e d c r a l r e s e r v e
m M nks t o b e p r e s e n t
a t the audit o f
the gold settlement f u n d f o r the remaining t w o quarters o f
the year.
I s there any further discussion o f that motion?
(There was n o further discussion o f the motion and i t
was duly carried.)
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Federal Reserve Bank of St. Louis
Governor Rhoads:
W i l l t h e Secretary remind Mr. Perrin?
The Chairman: I
will remind Mr. Perrin.
The n e x t t o p i c i s
(e) D i s p o s i t i o n o f matters p r e s e n t e d t o Federal
Reserve Board.
(Mr. Curtis)
Mr. Curtis: I
think all o f the Governors present have
13
had a copy o f the letter which I sent t o the Federal R e serve Board reporting t h e various recommendations adopted
at the last Conference o f Governors. S i n c e that time we
took u p t h e q u e s t i o n o f checks r e c e i v e d f r o m c o l l e c t o r s
of
customs a n d internal revenue, w h i c h checks sintiea exchange
charges, and under até of June 12 I wrote to Mp. Delano
giving h i m a summary o f the situation i n that regard a s re-
portedy
b the 1 2 banksi I
have here a copy of my even:
toMr. Delano, o f Mre Delano's letter t o Mr+ Malburn, o f
the Treasury Department, u r g i n g h i m t o straighten i t out,
Mr+ Malburn's reply t o Mr. Delano and Mr. Delahd's replyto
me « I
have sufficient copies here t o give o n b t d each
Governor, a n d I do not think i t i s necessary t o read i t all.
I have given t h e substance o f it-
T h e only bank that r e -
ported a n y substantial amount o f charges w a s Atlanta.
A t
Atlanta there had been charges up to May 17 of $108.79.
The highest was Kansas City, which had $12.62.
T h e others
ranged from nothing t o three o r four dollars.
Governor McCord:
A s t h e amount reported b y Atlanta
is larger t h a n t h e others, I
had m y attorney prepare a n
opinion c n the question o f handling checks w i t h exchange
charges > I
submitted that t o the Board, and I have a rul-
ing from t h e Board that t h e y a r e non-negotiable a n d w e c a n
not accept them. I
think w e will p u t a quietus o n that
proposition down our way because w e are declining t o accept
any c h e c k s w i t h q u a l i f i c a t i o n s
The Chairman:
a s t o the manner
o f payment.
D i d I understand y o u t o Say that i n
the opinion o f your attorney t h e y were non-negotiable?
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Federal Reserve Bank of St. Louis
Governor McCord:
Governor Seay:
in mind?
Y e s sir.
H a s n o t Governor MeCord something else
T h e s e checks a r e received f r o m collectors o f
internal r e v e n u e . .
h e t
d i s c u s s i o n followed.)
The C h a i r m a n : . I
the e
r e
e
e
think i t w o u l d b e i n t e r s t i n g
t o hear
w h i c h Mr. C u r t i s h a s h a d w i t h t h e B o a r d
and with t h e Treasury Department, a n d i f i t i s not very
long and there 1 8 no objection, I
am going t o ask him t o
read i t .
Mr-e Curtis: ( R e a d i n g : )
“LXCHANGE GHARGES ON GOVLRNMENT DEPOSITS.
June 1 2 , 1916.
Dear Sir:
Referring t o our earlier correspondence i n connection
with t h e résolution adopted b y the last Conference o f Governors concerning t h e disposition o f domestic exchange charged
against Federal reserve banks o n checks deposited b y collectors o f customs a n d internal revenue, I
give below t h e r e -
sults o f inquiries m a d e o f t h e t w e l v e F e d e r a l r e s e r v e b a n k s
in this connection. I
also give t h e comments o f various
governors w h i c h accompanies t h e i r statements.
Date
o
f
Report
Federal R e s e r v e B a n k o f
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Federal Reserve Bank of St. Louis
Boston
J
New York
Philadelphia
Cleveland
Richmond
u
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e 2.
y ll
Federal R e s e r v e B a n k o f
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Chicago
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.
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u
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7
9
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L 2 0 3 " )
o
a
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Net amount
paid b y bank.
#x#x% M i n n e a p o l i s
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Dallas
San Francisco
* M r . Fancher states:
"On o n e o r t w o o c c a s i o n s
a n exchange c h a r g e w a s a t
first deducted b y the bank o n which t h e item was drawn,
but i n c o m p l i a n c e w i t h o u r r e q u e s t t h e r e m i t t a n c e w a s
later made t o bring the amount t o par."
%% M r . McCord's memorandum states:
"We have endeavored, b u t without success, t o get the
collector o f intennal revenue t o receive f r o m debtors o f
the g o v e r n m e n t o n l y e x c h a n g e
o n t h e C i t y o f Atlanta,
o r on
some o f the larger eastern cities, w h i c h w e could handle
at pare T h i s t h e collector h a s declined t o do, stating
that h e i s couwmitted t o the present p l a n o f receiving
checks drawn o n country banks throughout t h i s district.
"It has frequently been the case that items s o deposited p r o v e t o b e u n c o l l e c t é b l e a n d a r e r e t u r n e d
t o us as
‘not good', i n which cases difficulty has been experienced
in g e t i n g t h e d e p o s i t o r
t o t a k e u p s u c h items,
t h e collec-
f o r instance,
t h a t h e has
tor o f internal r e v e n u e s t a t i n g ,
no f u n d s t h a t h e c a n u s e f o r t h i s p u r p o s e e x c e p t h i s p e r -
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Federal Reserve Bank of St. Louis
16
sonal funds, a n d h e nas declined t o reimburse u s when
we have made demand u p o n h i m until s u c h time a s h e could
obtain ecsh,
o r g e t c h e c k s f r o m t h e t a x payets, w h o s e
first deposits i n the form o f checks h a d proved t o b e un-
collectible,"
*%& =\Mr. Wold writes:
"It has been our practice when talking checks received
from the collectcr o f customs o r the collector o f internal
revenue,
w h e n drawn o n banks o u t o f town, t o send them
direct, s a y i n g that t h e government p e i d n o exchm ge,
and w e w o u l d e x p e c t t h e m t o b e p a i d a t par.
T h i s has
worked o u t pretty well u p t o this time, t h e result b e i n g
that we have had only one charge of twenty-five cents.”
HERE
M r . Miller reports a s follows:
"The items range from 2 0 cents t o {2.08 per day, a n d
@11 occurred between January 10th a n d 24th, 1916.
T h e
checks o n which w e paid exchange were o f course o n nonmember banks, a n d pricr t o January 2 4 t h t h e items were
sent b y u s direct t o the bank o n which they were drawn f o r
collection.
W
e have arranged W i t h o u r local members toa
handle these checks without charge, and, therefore, t h e
question o f exchange thereon has n o t sénce concernedus."
Respectfully,
Secretary,
Ronorabiée F s A. Delano,
Vice Governer, Tederal Reserve Board,
Washington, D . C ,
JFC/LCE.
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Federal Reserve Bank of St. Louis
PgRlaBathewhOb B degome
My dear Mr. Secretary:
Referring t o our conversation some time ago, I
hand
you herewith summary o f statements f r o m t h e various Federal
Reserve Banks i n regard t o cheeks deposited b y collectors
of customs a n d i n t e r n a l r e v e n u e
er drawn upon par points.
i n many cases n o t certifed
T h e enclosed letter f r o m Mr.
Curtis, Secretary o f the Federal Reserve B a n k o f New York,
shows u p the situation.
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Federal Reserve Bank of St. Louis
Y o u will note that collection
charges which have t o b e paid d o not amount t o much except
in the case o f Atlanta,
"Our new collection system goes into effect the 15th
of July and that ought t o remedy the situation t o a great
extent. I
think that after i t gets well established w e
ought t o r e v i e w t h e situation,
a n d you may then see fit t o
issue some instructions t h a t checks will n a t b e accepted
unless drawn c n member banks o f the Federal Reserve System,
or else,
o n non-member b a n k s w h o s e c h e c k s a r e p a y a b l e
at
par t h r o u g h t h e F e d e r a l r e s e r v e b a n k s .
Yours v e r y truly,
(Signed)
“7
p e
Hon, Wm. P . Malburn,
Ass't Secretary o f the Treasury.
TREASURY DEPARTMENT.
Washington
June 21,1916
My dear Mr. Delano:
I a m i n receipt o f your letter o f June 2 0 t h with the
18
letter t o you from Mr. Curtis o f the Federal Reserve B a n k
of New York attached,
I a m very glad t o note that t h e cost o f exchange t o
the Federal veserve banks o n items received f r o m the collecting o f f i c e r s
o f the United States
i s s O small.
Even
in the case o f the Atlanta B a n k the amount i s inconsiderable w h e n compared vith the large balence that h a s been
kept i n that bank t o the credit e f the Treasurer o f the
United States,
I return Mr. Curtis's letter herein.
Sincerely yours,
(Signed)
W m . P. Melburn,
Assistant Secretary.
Hon. F . A. Delano,
Vice Governor, Federal Reserve Board,
gune. 22, 4916;
Dear Mr. Curtis:
Please r e a d a n d return t h e enclosed, I
had quite
a talk with Mr. Malburn b u t h e was immovable, t h o u g h h e
said h e w o u l d b e g l a d l a t e r o n t o i s s u e a
notice
t o his
collectors telling them not to accept checks not payable
through member banks o r through non-member banks agreeing
to remit a t par.
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Federal Reserve Bank of St. Louis
Sincerely yours,
(Stened 2’. Az Dedano,
PUBLICATION O F EARNINGS.
Mey 26, 1916.
« R. Fancher,
Governor, Federal Reserve Bank,
Cleveland, Ohio,
My dear Mr. Fancher:
In reference a g a i n t o t h e s u b j e c t
cation o f earnings: I
o f the publi-
find that this matter was dealt
with b y the Board first o n March 14th.
T h e first time
it was resolved that t h e earnings o f the Banks should b e
published J u l y 1 , 1915, a n d thereafter quarterly, giving
a Statement o f earnings a n d expenses,
T h e subject w a s
again taken u p a t the request o f the Governors o n February
7, 1916, a n d a t thet time i t was resolved t o continue t h e
quarterly statement e n d t o suggest t o those banks w h o were
publishing more frequent statements t h a t hereafter t h e y
should p u b l i s h t h e i r s t a t e m e n t s o n l y quarterly.
I think t h e t i m e w i l l c o m e w h e n w e w i l l m a k e t h e s e
statements o n l y semi-annually, e n d I think.it will b e better s o , b u t i n t h e f o r m a t i v e p e r i o d w h e n e v e r y b o d y i s wateh-
ing the growth o f the system a n d asking numerous questions
it seemed better t o the Board t o publish t h e statements
at least a s often a s quarterly.
Yours v e r y truly,
(Signed )
Governor Seay: I
f o f "
D e l a
might state, a s a possible h e l p
to Governor McCord, that the collector i n our city
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Federal Reserve Bank of St. Louis
20
deposited t w o checks which were destroyed i n the mails.
He could n o t trace tle source f r o m which h e received them.
We communicated with the Treasury Department a n d reminded
Mr. M a l b u r n o f t h e f a c t t h a t h e s h o u l d r e q u i r e t h e c o l l e c -
tors t o conform t o good banking practice.
H e then wrote
a letter t e the collector requiring h i m t o make good those
checks i f h e could n o t obtain duplicates,
Governor Miller:
was r e q u i r e d
D o I umerstand that t h e collector
t o m a k e g o o d o u t o f h i s o w n money?
Governor Seay:
H e took steps t o get duplicates a n d
rinally s o t them.
Governor Miller:
H e h a d t o make g o o d i f h e d i d not
get the duplicates?
Governor Seey:
Yes.
Governor Seay: I
customary s t a n d a r d s
told h i m w e were conforming t o the
o f banking p r i n c i p l e s
and I
thought
it would b e only fair f o r his collectors t o d o the same
thing.
Governor F a n c h e r :
this w a y v i t h us.
O u r collectcr h a s cooperated
in
J u s t a b o u t t h e t i m e t o accept deposits,
the first of Jamary, he notified all of his collectors
that h e would receive payments i n a certain form; t h a t
is, i n the f o r m o f certified checks o r bank exchange, a n d
that individual checks would n o t b e received,
W h e n the
question a r o s e a b o u t h a n d l i n g u n c e r t i f i e d c h e c k s
items t h a t w e r e n o t b a n k exchange,
and told h i m o u r position.
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Federal Reserve Bank of St. Louis
o r other
w e took i t u p with h i m
H e Said that i n s o far a s i t
at
wes possible t h e y would discriminate; t h a t some o f the
checks might possibly g e t through; t h a t i t had been the
practice o f his office t o take checks a s they aame i n beceuse t h e depositary banks h a d received t h e m without question, I
told h i m t h a t w e h a d t o h a v e s o m e recourse,
and
we arranged with h i m that a l l o f these checks, o t h e r t h a n
certified checks o r bank exchange, w o u l d bear his personal
endorsement;
those items.
t h a t w e lonked t o h i m pérsonally
e n all
W e h a d n o trouble whatever then.
The Chairman:
I s there a n y further discussion o f
item 1 under (e)?
I f not, w e will proceed t o No. 2 ,
(e)-2 C o p i e s o f instructions t o collectors
of c u s t o m s e n d i n t e r n a l revenue.
Mr. Curtis:
conference I
I n accordance t i t h the vote a t the last
esked the Board t o send t o each Gawernor o f
the b a n k s c o p i e s o f i n s t r u c t i o n s t h a t h a v e b e e n i s s u e d t o
collectors
o f customs a n d i n t e r n a l r e v e n u e w i t h r e s p e c t
handling t h e revenue,
York. I
to
W e have n o t received a n y a t N e w
d o n o t k n o w a b o u t t h e o t h e r banks,
The Chairman: I
wanted t o inguire
i f any o f the
Governors h a d r e c e i v e d t h o s e instructions.
W
e have not.
I asked t h e cashier yesterday i f h e h a d received a n y a t
our bank and he said he had not.
Governor Seay:
that.
M r , Chairman, I
I t i s quite a
large book, I
think w e received
a m not sure, b u t m y
impression i s that w e received it.
Gov ernor McDougal:
rules w h i c h a r e c o n t a i n e d
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Federal Reserve Bank of St. Louis
I f the collectors abided b y the
i n that publication w e would n o t
have a n y difficulty with exchange matters.
Mr. Curtis:
£ 8 e matter o f fact t h e rules a r e v e r y
explicit,
Goaverner Wold: I
think t h e M i n n e a p o l i s b a n k r e -
ceived a copy o f the rules e n d regulations.
Mr. Hoxon:
T h e a t refers
t e the criginal instructions
sent o u t t o a l l eof t h e cnllectors,
T h e r e a r e special
instructions issued t o collectors f r o m time t o time a n d w e
have n o t received a n y o f those instructions.
Gavernor Rheads:
M r . Chairman,
i s there anything g e
could d o t o improve t h e system that n o w obtains i n the col-
lector's office? D u r i n g the month e f June, a t the request o f S e c r e t a r y Malburn,
men t o t h e c o l l e c t o r
itate t h e work,
W
w e leaned from three t o five
o f internal r e v e n u e
i n order t o facil-
e l o a n e d t h r s e m e n f r o m o u r bank.
course i t was werth i t t e us.
O f
O u r m e n reported that i f
they could only teach t h e collector's assistants g o o d
banking practice, t h a t t h e matter would b e handled v e r y
much b e t t e r a n d b e d o n e m o r e s p e e d i l y ;
t h a t t h e y were
tied u p b y regulations which were exceedingly difficult t o
carry out. I
was wondering i f there w a s a n y w a y w e could
get the Secretary o f the Treasury t o put pressure u p o n the
different collectors s o that t h e accounting methods c o u l d
be improved.
F o r instance, t h e y only have o n e adding
machine i n the Philadelphia offi ce.
Tne Chairman: I
will s a y , G o v e r n o r Rhoads, t h a t w e
have d i s c u s s e d t h a t i n Boston b o t h w i t h t h e c o l l e c t e r ' s
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
23
office a n d i n s i d e t h e bank.
¥
e h a d the s a m e experience
you h a d during t h e payment o f the income tax, i n June.
i t
Ilremember correctly w e sent over some m e n
~"*
t o t h e collector's office t o handle t h e
checks a n d take t h e m u p t o the bank.
O u r feeling has
peen that t h e only w a y i n which w e could improve methods
there w a s b y our cultivating friendly a n d intimate relations
with that office.
T h e collector o f customs h e r e h a s a
very satisfactory a n d efficient organization a n d the collector o f internal r e v e n u e a n d h i s a s s i s t a n t s a r e q u i t e d i s -
posed t o accept a n y suggestions locking t o the improvement
of their organization e n d methods.
I t seemed t o us, i n
aiscussing it, that t h e easiest w a y t o d o i t and the w a y
that would cause least friction a n d accomplish t h e best
results w a s b y personal suggestion a n d b y cultivating intimate relationship w i t h them.
Governor Wold:
I t may b e interesting t o y o u t o know
hw w e solved t h e problem i n our bank.
W e have collectors
of Internal Revenue a n d collectors o f customsboth a t St.
Paul a n d i n Minneapolis, t h e larger office being i n St.
Paul. I
suggested t o Mr. Malburn that i t would avoid a
lot o f trouble f o r u s a n d also f o r his representative there
if his representatives w e r e permitted t o carry a normal
balance i n one o f the St. Paul banks, deposit a l l their
stuff from time t o time, a n d let that bank tedasfer the
excess
t o u s i n o n e e h e c k e v e r y day.
avoid thenecessity o f handling that.
T h a t i s done a n d w e
T h e bank thé, trans—
fers t h e e x c e s s b a l a n c e
The Cheirman:
t o u s e v e r y day.
D i d y o u d o that w h e n t h e income t a x
peyments w e r e made, Governor Wold?
Governor Wold:
Y e s , w e did.
The Chairman:
I t does n t s e e m desirable t o take
any section eon sub-topic 2
under (e), a n d w e will pass it.
The i n d i v i d u a l G o v e r n e r s t a n t a k e t h e m a t t e r u p v i t h t h e
Treasury Department a n d get copies c f such instructions,
copies o f which t h e y have n o t already received.
The next item i s No. 3 , under (e).
{e)-3 Communications between Federal Reserve
Board, F e d e r a l R e s e r v e B a n k s a n d P e d e r a l
Reserve Agents.
Mr. Curtis:
I n the letter sent t o the Board after
the last conference v e again renewed t h e rewmmendation
that t h a t m a t t e r o f c o m m u n i c a t i o n s
out. I
now.
b e further straightened
think i t i s done very satisfactorily i n New York
T h e b a n k received a
copy o f everything that comes
to the egent, a n d vice versa,
s o far e s I know.
D o you
net understand so, Mr, Treman?
Mr. Curtis: I
Governor Seay:
think i t i s satisfactory t o us.
A r e n o t both t h e copy a n d the original
to the agent?
Mr. Cupiidss I
think not.
(Informal discussion followed. )
The Chairman:
D o e s anyone t i s h t o take a n y further
action i n regard t o this matter?
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Federal Reserve Bank of St. Louis
25
Governor Wold: I
think t h e matter should again b e
brought t o the attention o f the Board, Mr. Chairman,
(Turther informal discussion followed, )
Governor hiller:
M r . Chairman, I
mave t h a t commnuni-
cations bearing strictly o n the operation o f the banks b e
addressed t o the managing e n d executive h e a d c f the bank
itself.
The Chairman:
T o again bring t h e matter t o the a t ~
tention o f the Federal Reserve B o a r d Governor Miller maves
the a d o p t i o n o f a
resolution a d o p t e d a t several previous
conferences bringing t h e matter t o the attention o f the
Board, I
have n o t the text o f the resolution here, b u t i t
has b e e n p a s s e d s e v e r a l times.
(Mr. C u r t i s t h e r e u p o n r e a d t h e p r e v i o u s m m i o n ,
passed
at other conferences, a n d Governor Miller's motion, being
duly seconded, was carried, )
The Chairman:
T h e next under i t e m ( e ) i s 4:
(e)~4 © Member banks' earnings statements,
Mr. Curtis: I
might say that with reference t o that
a recommendation w a s m a d e t o t h e B o a r d i n m y letter o f M a y
ae.
Governor MeDeugel:
A n d i t was acted upon b y the
Board y
Mr. Curtis:
S
o far a s I
know n o t h i n g
i n that let-
ter has b e e n acted upon,
Governor McDougal: I
knew that had been acted upon
because w e are receiving copies o f same o f the annual r e -
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Federal Reserve Bank of St. Louis
a6
ports m a d é b y member banks.
T h e y ere sending t h e m in.
(Several cther Governors stated that t h e metter h a d
been acted upon b y the Board.)
r o r m y o w n information I
The Chairman:
would l i k e t o
ask t h e Governors present h o w insistent t h e y have been i n
obtaining these statements f r o m their member banks.
S o m e
af the larger banks h e r e have cbjected t o filing these
statements w i t h us.
T h e y perhaps have n o t objected soa
much a s they have allowed i t t o g o b y default, allowing t h e m
to g o b y default because t h e y were n o t disposed t o make t h e
statements
t o us.
T h e president
o f one o f the largest
banks told m e that those statements w e r e a l l i n the files
ef the Comptroller c f the Currency a n d i f there w a s a n y
particular r e a s o n f o r o u r h a v i n g t h e m w e c o u l d g e t t h e m
from t h e o f f i c e
o f .the C o m p t r o l l e r
o f t h e Currency;
that
they were n o t fevorably impressed vith t h e idea o f making
these statements e v e r y little while, e n d having t h e m i n
the records o f the Federal Reserve Banks w h e n there w a s
real reason f o r it.
A
n o
s a matter c f fact almost a l l o f
our c o u n t r y b a n k s a c q u i e s c e d
i n this without a n y m e s t i o n .
We have discussed a t some length the cuestion o f the d e -
sirability o f insisting o n those statements from all our
city banks, a n d w e have n o t done so,
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Federal Reserve Bank of St. Louis
Governor Kains:
our city banks.
W e have n o t insisted upon i t from
I f y o u have n o doubt a s t o the absolute
solvency e n d a s t o t h e methods e m p l o y e d
do y o u w a n t t o b e b o t h e r e d w i t h i t .
b y t h e banks,
why
eT
The Chairman:
i
y Teeling i s that i t i s e n additional
accumulation o f s t a t i s t i c a l i n f o r m a t i o n t h a t ,
i n most
cases, i s o f n o value.
Governor Kains: I
The Chairman:
agree w i t h y o u there,
A n d i t i s never used,
would arise primarily i n the case where a
I t s usefulness
bahk was redis-~
counting heavily a n d y o u were anxious t o serutinize i t s
situation t o determine whether o r not that bank was being
properly a n d p r o f i t a b l y r u n .
A
s that information h a s
always b e e n subject t o call y o u could get i t from the bank
examiner.
W e are accumulating these statements from 500
to 10006 o r more banks, a n d they are Simply filed away a n d
are a n additional source o f irritation t o our banks,
T h e
information i s o f absolutely n o value except i n extraordinary cases,
a m i n those extraordinary cases w e c a n alwasy
get the information.
(Informal discussion followed.)
The Chairman: I
w o u l d l i k e t o inquire h a v t h e m e m ~
bers o f t h e conference f e e l about t h e continuation o f
this practice w h i c h i s a source o f irritation t o our banks.
I understand that t h e practice h a s been established o n
the r e q u e s t cof t h e C o m p t r o l l e r ' s o f f i c e e n d t h a t i t w i l l
continue a s a request f r o m the Comptroller's office until
we a s k that i t b e discontinued.
Governor Miller:
I
t c a n b e allowed t o g o b y default
with regard t o the banks f r o m whem y o u d o not desire t o
request it,
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Federal Reserve Bank of St. Louis
28
My feelirg i s that there i s more chance
of trouble i n letting i t g o b y default t h a n there i s i n
stopping t h e practice a n d preserving o u r rights.
to m e y o u lose a
good deal o f your effectiveness
for it-Lif v a simply 1 6 t i t go.
I t seems
i n asking
N o t o n l y that, b u t i t oper-
ates unfairly ageinst some o f t h e banks w h o a r e willing t o
grant a n y r e q u e s t “ e make.
I
f w e l e t i t g o b y default w e
do not let i t g o b y default w i t h all.
T h e willing m a n
Will continue t o make t h e statement a n d the unvilling m a n
will n o t d o anything about it.
Gevernqr- Nitzer? I
think the record @
earnings a n d
the
dividends i s probably y.. q u i c k e s t photograph y o u c a n get
of a
bank's affair. I
daresay G o v e r n o r M c D o u g a l
o r any
other Governar a r o u n d this table could t e l l more i n five
minutes i n that w a y than h e could tell b y going over the
reports a @ conditions five @
The Chairman:
s i x times a
year.
I s n&@ t h a t information always o b -
tainable f r o m other sources?
Governor Miller:
Yes.
W e keep a very elaborate
statistical record i n reports o f conditions, b u t y o u have
got to go back e m figure i t out. T h i s other way it is a
sworn Statement-~- i t is the thing i n a nutshell.
T h e
large banks a r e the ones with regard t o which w e want t o
act quickly.
F o r instamce,
y o u m i g h t w a gntto a c t s o m e
night between t e n o'clock a n d daylight;
y o u might g e t a
flash over the wire, « n d you would n&@ h a v e t i m e t o g o out
and get statistics.
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Federal Reserve Bank of St. Louis
2g
Governor McDougal: I
broad a statement.
think y o u make entirely t o o
T h e report o f earnings a n d dividends
is simply a report o f earnings a n d a report o f the distri-
bution a f those earnings.
Gorerner. 4 3 . 1 ex T h a t . 198° true.
Governor McDougal:
I d o n é e a g r e e with. v o u “in: the
belief that y o u get, f r o m that report, a
genebal knowledge
of the status o f the affairs ¢ @ a n institution. I
agree
With the chairman, that w e ought t o either abandon the thing
ar w e o u g h t t o b r i n g t h e s e f e l l o w s
to g i v e t h e reports,
t o time w h o d o not want
T h e c u e s t i o n i s whether
o r not w e a r e
justified i n doing that.
(Informal discussion followed. )
Governor Wold: I
must n o n f e s s I
ful purpose served b y these reports.
do n e t s e e a n y use-
W e c a n get better
information f r o m the statements published s i x times a
year,
I
n addtion t o that w e have access
t o the files o f
the chief examiner i f w e want addi tional information.
W e
Simply file these reports a w e y a n d w e d o not know whether
they are a l l being sert to us o r not.
I f they d o come t o
us t h e y a r e p u t i n t o t h e c r e d i t files. I
think i t is’ a n
addi tional burcen o n the member banks a n d unless i t serves
some useful purpose,which I cannot see, I believe w e
should ask the Comptroller o f the Currency t o disentinue
the request,
The Chairman:
D o y o u wish t o make a
upon this topic, Governor Wold?
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Federal Reserve Bank of St. Louis
motion bearing
350
Governor Wold:
meeting, I
I n order t o get the matter before t h e
move t h a t r e c u e s t
continue a s k i n g m e m b e r b a n k s
b e m a d e t o t h e B o a r d t o dist o s e n d t o t h e Federal Reserve
Banks periodical statements o f their distribution o f earnings.
Governor McDougal:
W o u l d y o u p e r m i t m e t o make a
suggestion there, Governor Wold?
Gay erncre Vold:
C e r t a i nly.
Governor McDougal:
I n view o f the fect that this
information i s available f r o m @ & her sources, a n d with a
view o f lessening t h e burden o f the member banks, w e recommend t h a t t h e r e q u i r e m e n t t h a t m e m b e r b a n k s s e n d i n a
copy
of their earnings a n d dividends reports t o the federal reserve b a n k s
b e discontinued.
Governor “old: I
he Chairman:
will a c c e p t t h e amendment.
Y o u Will accept t h e amendment m a d e b y
Governor McDougal?
Governor o l d :
Y e s sir.
Gor ernor Rhoads:
M e y I speak t o thet motion, Mr.
Chairman?
The Chairman:
Y e s .
Covernor Rhoads: I
fail t a see h w y o u c a n get t h e
same i n f o r m a t i o n f r o m t h e r e p o r t s
o f condition.
2 bank charges o f f a certain emount ¢
preciation o f securities.
done it.
b a d debts o r de-
Y o u cannot t e l l t h y they have
W h e n y o u have t h e statement before y o u o f thee
earnings e n d dividends
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Federal Reserve Bank of St. Louis
Suppose
i t s h o w s e x a c t l y why. t h e y h a v e d o r e
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Federal Reserve Bank of St. Louis
51
ih I
féel very strongly that i t i s a very important
thing f o r u s t o know,
W
e have found i t very useful t o
have this before u s when a bank comes i n for redisccunt.
We have had no objection from any o f the banks t o furnishing it, a n d have b e e n very much opposed t o a discontinuation o f the practice,
Governor McDougal:
O f what edvantage i s i t t o you
to know what t h e bank i s charging o f f i f y o u are satisfied
that t h e bank i s clean a n d that i t s assets a r e wholesome?
Governor Rhoads:
V e want t o know what t h e bank i s
doing m d w h y i t i s doing it.
Governor Seay:
VOT I
T h e r e i s another aspect o f this mat-
believe w e will get along better with our member
banks if it were taken as a matter of course that they
should furnish u s with everything that t h e y furnish t o
the Comptroller.
or dispute
L e t i t not b e a subject o f controversy
a t all, b u t l e t i t b e t a k e n a s a
mtter
of
course that everything that t h e y furnish t h e Comptroller
they w i l l f u r n i s h t h e F e d e r a l r e s e r v e b a n k .
Sooner
or
later w e are going t o b e i n a more intimate relation
with o u r member banks, through t h e medium o f the Federal
Reserve Board, t h a n w e have b e e n u p t o the present time,
and for tnat reason I
a m inclined t o believe t h a t i t
would b e well i f they would get accustomed t o sending
everything t o the Federal Reserve B a n k that t h e y send t o
the Comptroller.
The Chairman:
T h e Secretary calls t h e attention
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Federal Reserve Bank of St. Louis
33
of the Chair t o the fact that this resolution w e s passed
at o u r m e e t i n g t w o months a g o a n d i t m i g h t n o t i m p r o v e o u r
position with the Board i f w e retract i t now.
feel v e r y m u c h e s G o v e r n o r
Governor Fancher: I
Rhoads feels about these things.
checked u p a l l t h e banks
W h i l e w e have not
t o know whether these statements
have b e e n filed with u s b y all o f them, y e t i n n o case h a s
any bank objected, a n d I think w e heve practically a l l o f
those statements i n our files,
L t think- i t i s a
source o f
information thet i s quickly available a n d reflects t h e conthink i t has e n importent bearing o n
Guct o f the. benks. I
the q u e s t i o n c f rediscounts
to a
benk.
Governor McDougal makes t h e statement t h e t w e have
think t h e
access t o the files o f the chief examiner. I
matter o f getting information f r o m the chief e x m i n e r i s
pretty well curtailed a t the present time.
Y o u get t h e
exeminer's report o n his examination o f the bank « n d his
understanding o f the situation, e n d that i s all y o u d o get;
in fact, t h a t i s all h e i s authorized t o give you.
W h a t
information t h e c h i e f ezxeminer c a n g i v e u s t s p r e t t y c l e a r l y
defined, a n d v e are getting just that.
The Cheirman:
N o one h e s secended Governor «old's
motion a s amended b y Governer McDougal.
Governor Kains: I
Governor Yold: I
will second the motion.
mace t h e m o t i o n f o r t h e p u r p o s e
getting t h e matter before t h e meeting. I
do n a t h i n k
the p r e s e n t t i m e i t s e r v e s a n y u s e f u l purpose.
W
e are
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Federal Reserve Bank of St. Louis
335
getting all the information w e want f r o m t h e chief examiner.
I do net see what bearing t h e question o f the payment o f
dividends h a s upon the question o f granting a loan, anyway,
There a r é l o t s o f institutions p e y i n g d i v i c e n d s u p o n w h i c h
we look with suspicion,
paying d i v i d e n d s
m d there a r e those that a r e not
t o whom w e would b e v e r y s l a d t o make a
loan.
(Informal discussion followed. )
Governor hicCord:
D e I understand that there i s n o
second t o that motion?
Governor fcDougel: I
suggested the amendment t o Gov-
ernor Yold's motion, but i n view o f the various opinions
that have b e e n expressed I
think i t vould b e inadvisable
to undertake t o d o anything w i t h regard t o this matter a t
present. I
think i t would b e better t o let i t rest.
Tne Cheirman:
D o y o u move that Topic 4
be passed
for the present, Geverner MeDougal?
Governer McDougal: I
will make s u c h a mation i f i t
£6. in-order.
Governer Seay:
T h e motion i s that n o action b e
taken?
The Chairman:
Yes.
Governor ‘old:
I n order t o keep the record straight
I will withdraw m y motion w i t h the consent o f m y second?
Governor Kains:
The Chairman:
{ I will. consent t o it, yes.
G o v e r n o r o l d h a s withdrawn h i s m e e
tion, a n d Governor EcDougal n o w moves t h a t n o ection b e
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Federal Reserve Bank of St. Louis
34
teken a t the present time i n the matter o f member bank
earnings.
(The metion, being duly seconded, was carried. )
would l i k e t o discuss n o w informally
The Chairman: I
the a u e s t i o n o f entertainment.
("“hereupon t h e matter referred t o b y the Cheirman was
discussed informally b y the conference, )
Mr. Gurtis:
M a y I complete e
report that seems t o
by
heave been a n erroneous o n e with regard t e topic (e)~4,
reading correspendence f r o m Mr. Delano o n another topic
with regard t e the publication o f earnings statements c f
the Tederal reserve banks, because a t the last conference
restlution suggesting that t h e y b e net published v e r y frequently. I
think t h a t v i t h e l l r e s p e c t
for “r. Pancher, w h o i s generally s o accurate,
h e was i n
Slicht errer o n wheat h a d happened, a n d Mr. Delane's r e turn straightens o u t both the pesition c f t h e benks a n d
the Board,
Governer Fancher: I
might e d d that tnat topic was
suggested f e r consideration o n the part c f the Governors
i n December,
et t h e m e e t i n g w e w e r e t o have, I
think,
which w a s p u t o v e r u n t i l January,
w a s i t not?
Mr. Gurtis:
but
Y e s .
Governcr F a n c h e r :
ht
W h a t brougg
i t
w
a
sL s o m e a l l u -
Sion i n the October o r November Bulletin t o the earnings
quarterly f r o m July t o Octcber, a n d the Board, i t was
thourig h
t ,
might b e disposed toe give o u t a gered deal c f pub-
licityv 8w i t h r e f e r e n c e
t o t h e banks' earnings, 3 b u t t h e
4.
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Federal Reserve Bank of St. Louis
35
policy c f the Board was clearly defined between December
and January;
s o that h a d I known c f that i t would net inm
have been suggested a s a topic.
The Chairman:
Mir. Curtis:
W i l l you read Mr. Delano's letter?
U n d e r d a t e o f M a y 2 6 h e w r o t e M r . FPanch-
er, h e h a v i n g e s k e d m e a b o u t t h i s t o p i c c o m i n g u n ,
and I
having r e f e r r e d h i m t o Mr. Fancher:
"In reference a g a i n t c t h e subject o f the publication
ef earnings: I
find that this matter wes dealt with
by t h e B o a r d f i r s t o n M a r c h 13th.
resolved thet the earnings o f t
f
i
r
s
t tine i t was
s n k s Sheuld b e publis&-
ed J u l y 1 , 1915, a n d t h e r e a f t e r q u a r t e r l y , g i v i n g a
ment o f earnines a n d expenses.
taken u p a t t h e r e q u e s t
state-
T h e subject w a s again
o f the Governors
o n February 7 ,
1916, e n d a t that time i t was resolved t o continue t i e
uarterly statements a n d t o suzgest t o these banks w h o were
publishing m a e frequent statements t h a t hereafter
would p u b l i s h t h e i r s t a t e m e n t s o n l y quarterly.
“t<think t h e time will come w h e n w e will make these
statements o n l y semi-annually, e n d I think i t will b e better so; b u t i n the formative period, w h e n everybody i s
watching the -rowth o f the system a n d asking numerous
cuesticns,
i t seeméd better
t o the Board t o publish t h e
Statements e s often as quarterly."
I have h e r e c o p i e s
e f a l l t h i s crerrecpondence r e l a t i n g
tn exchange charges o n checks received f r o m collectors,
and i t may b e distributed around t h e table.
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Federal Reserve Bank of St. Louis
36
The Cheirman:
I s there a n y further Ciscussion o n the
question c f the publication o f Feceral Reserve B a n k earnins statements?
(Infermal discussion followed, )
4, C o m m i t t e e Reports.
(a) C o m m i t t e e o n Reserve a n d Central
Reserve Cities,
he Chairman:
Will p a s s
I
f there i s n o further discussion w e
o n t o t h e n e x t topic, N o . 4 , c o m m i t t e e r e p o r t s .
rst o n e , s u b - h e a d i n g ( a ) , C o m m i t t e e
o n Reserve a n d
Central Reserve Cities, w a s brought u p b y Governer Seay.
Governcr Seay:
M r . Chairman, I
advised the Secretary
upon m y own responsibility I would not undertake a t
this time t o make a
report o n that subject.
I t i s a very
broad a n d deep o n e a n d I thought this Conference w o u l d b e
seo occupied with the collections t h a t w e should have a s much
to d o a s w e w o u l d f i n d t i m e f o r doing, I
him net t o exvect a
therefore a d v i s e d
report f r o m m e o n that s u b g c t ,
and I
trust that t h e other members o n thet committee will indulge
the chairman f o r not putting something before them.
I t
isa matter that I should like t o centinue t o study before
making a report,
Governor WeCard: I
move that t h e commit tee b e con-
tinued a n d the heading b e kent o n the program.
Governor EKains: I
second t h e motion.
(There w a s n o discussion e n d the motion w a s duly carried. )}
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Federal Reserve Bank of St. Louis
4-(b) C o m m i t t e e o n cuestions submitted b y
Federal Reserve B o a r d touching foreign
operations.
The Chairman:
T h e next topic i s (b), Committee o n
questions submitted b y Federal Reserve B e a r d touching foreign operations.
G o v e r n o r Kains,
Gaveiide Kains:
M r . Chairman,
i t w a s last January
when t h i s m a t t e r w a s w i t h t h e committee,
e n d i n t h e mean-
time G o v e r n o r S t r o n g w e n t t o Europe, p r e s u m a b l y
on a
matter
of foreign exchange, a n d I fancy that h e hes covered t h e
matter v e r y thoroughly with t h e Federal Reserve Board, H o w ever, 2 s the Secretary s a i d i t was expected that I should
report, I
wrote t h i s o u t . o n t h e t r a i n o n t h e w a y h e r e - - - I
just g o t your letter before t h e train started-~- a n d i n this
report I
a m joined b y G o v e r n o r ‘ o l d e n d Governor Miller.
"Tt is evident that under sub-division 'E' of Section
14 o f t h e F e d e r a l R e s e r v e A c t , F e d e r a l R e s e r v e B a n k s h a v e
sistiee: w i t h t h e c o n s e n t o f t h e F e d e r a l R e s e r v e B o a r d ,
enter t h e f o r e i g n e x c h a n g e m a r k e t
provided
a n amendment
in a
to
v e r y f u l l degree,
t o t h e a c t passes g i v i n g authority f o r
dealings i n ninety d a y o r three month Sight exchange, e x clusive o f grace,
a n d your committee considers i t prudent
to
prepare a t once t h e machinery f o r the exertion o f a n influence f a v e r a b l e
t o t h i s country,
i n accelerating
ing the e b b a n d flow o f gold internationally.
b r retard-
F u r t h e r than
this your committee does net consider i t wise t o go, a t
least f o r t h e present, b e i n g o f t h e o p i n i o n t h a t e x c e p t
for P i s g e a l r e a s o n s
t h e Federal Reserve Banks Should n o t enter
358
into a c t i v e c o m p e t i t i o n c o m m e r c i a l l y w i t h o t h e r banks,
whether members o r non-members,
f . g the benefit derivable
from the exercise ofthis function i s common t o the commerce
of t h e w h o l e c o u n t r y ,
i t seems advisable t h a t a l l o f the
Federal Reserve Banks should j o i n i n the undertaking,
which i t i s conceivable might sometimes have t o b e accomplished a t a financial loss f o r the benefit @
t h i s country's
trade. T h e r e f o r e participation i n this activity should b e
shared proportionately, b a s e d upon t h e capital a n d aecedi te
of each Federal reserve bank, a n d operations b e uncertaken
through o n e a g e n c y f o r t h e F e d e r a l r e s e r v e b a n k s c o l l e c tively.
Y o u r committee d o e s n o t t h i n k well o f t h e estab-
lishment a t this time o f foreign agencies t e lorging t o the
system, b u t r a t h e r inftlines t o t h e b e l i e f t h a t t h e o b j e c t
can more easily b e attained b y arrangements w i t h t h e national banks o f foreign countries, w h i c h might i n some cases
be reciprecal, u n d e r w h i c h p u r c h e s e s
o r sales f o r account
of o u r s y s t e m m i g h t b e made, w h i l e o n t h e o t h e r hand,
through o u r agency, p u r c h a s e s
banks c o u l d b e accomplished.
o r sales
o n account
Conse-uently,
pear i n the m rket, generally speaking,
o f these
w e would ap-
a t all times, a n d
your committee w o u l d propose t h a t t h e agency f o r our operations b e s i t u a t e d
i n t h e F e d e r a l R e s e r v e B a n k o f N e w York,
under t h e supervision o f the Governor o f that bank (which
‘latter w o u l d h a v e s o l a r g e a
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Federal Reserve Bank of St. Louis
financial i n t e r e s t
i n our
operations) a s well a s the Federal Reserve Board.
T h e
agent o f t h e F e d e r a l r e s e r v e b a n k s u n i t e d f o r this p u r p o s e
shoulda c f course b e a foreign exchange expert, a n d h e should
39
manage t h e affairs o f the office quite independently o f
the affairs o f the bank, making a n accounting a n d settlement o f profits o r losses a t regular intervals.
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Federal Reserve Bank of St. Louis
would,
o f course,
b e many details
There
t o t e w o r k e d out, b u t i t
is belie ved that before l o n g a working arrangement might
be h a d including t h e principal European countries a s well
as ultimately those o f South America, w h i c h would not o n l y
afford p r o f i t a b l e e m p l o y m e n t
o f o u r funds, b u t a l s o w i e l d
a large influence i n regulating t h e price @
exchange a n d
consequently the flow of gold,”
The Chairman:
Kains{ committee.
Y o u have h e a r d t h e report o f Governor
I s there a n y discussion o f the report?
It i s a very important matter.
A s w e all know, Governor
Sicong o n his trip abroad took sume accurate a n d definite
steps t o w a r d t h e d e v e l o p m e n t
o f this business
in a
specific
way. G o v e r n o r Kains' report deals with the question i n
& general way. I
should l i k e t o have some expressions
of opinion f r o m t h e Governors a s tao the repat.
Governor Kains:
M r . Chairman, I
think i t i s time
that the Governors made representations t o the Board.
lies with the Board, I
fancy. I
a e
a m not j u s t apprised o f
the full particulars o f what Governor Strong has done,
but I
think t h a t i s t h e w a y t o d e a l w i t h t h e q m e s t i o n - ~ =
enter into relationships w i t h t h e Bank o f '.England, say,
the Bank o f France, a m i t h e Reichsbank a n d the Bank o f
the Argentine Nation which I knov w o u l d b e very glad t o
deal with us.
I t i s a national b a n k i n every sense o f
to
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Federal Reserve Bank of St. Louis
40
the word.
I
T
t h a s a b o u t 2 3 0 bran¢ches.
t i s a s well
managed a s a n y bank I ever saw,
D o y o u think that t h e initiative
Governor Seay:
in this matter should b e left with the Federal Reserve
Board?
A
Governcr K a i n s :
s long a s w e get action I
do not
think w e ought t o work together.
care w h o initiates it. I
mean b y that, d o you believe that
Governor Seay: I
the Gevernors s h o u l d urge u p o n t h e attention o f t h e Board
the i m p o r t a n c e
o f making progress
Governor Kains:
Yes; I
Governor McDougal:
i n this m a t t e r ?
think so,
D o e s n o t m u c h depend here upon
the recommendations a n d the accomplishments o f G a ernor
Strong?
Governor K a i n s : I
should think so.
Governer McDougal:
has b e e n a p p r i s e d
T h e nature o f which none o f us
o f s o far.
Governor K a i n s :
T h i s will smoke t h e m out a
Governor McDougal: I
understand that Governor Strong
has made a report t o the Board?
Governor Kains: I
little
I s that t h e idea?
presume so.
W h e n they get this
they will b e able t o tell u s what h a s b e e n done.
Governor McDougal:
adopted,
T h e intent o f this report,
if
e simply t o give t h e matter consideration?
wouldt
Governar Kains:
Governor Seay: I
T h a t i s tne idea.
move that the report b e received with
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Federal Reserve Bank of St. Louis
41
thanks a n d communicated t o the Federal Reserve B o a r d a s
the sense o f the Qonference.
Governor McCord: I
Governor Rhoads:
second t h e motion.
I n that connection I vould like
to ask whether there w a s not another commit tee-~~
Goyernar Wold: I
wish t h e motion would come before
us first;
Governor McDougal:
T o what extent i s the adoption
of this report going t o bind the banks? T h a t i s a very
important matter, a n d I think i t should b e understood b y
the executive commit tee o r t h e entire board o f each bank,
It i s amatter that w e have discussed t o some extent i n
Chicago, a n d I know a t the present time t h e consensus o f
Opinion varies a n d w e h a d better keep o u r hands off,
Governor Kains:
T h i s i s keeping o u r hands off.
Governor McDougal: I
understood from Governor
Kains' report that that w a s contemplated; s i m p l y t h e intent w a s t o get t h e matter before t h e Board a n d lct that
be t h e f i r s t step.
Governor Kains:
T h a t i s all---— j u s t t h e machinery,
not t o d o anything.
Governor Wold: I
te l i e v
e there i s another committee,
of which Mr, Strong i s Chairman, a n d you « n d I are upon it,
having reference t o Mr. Strong's visit abroad a n d report
to the Board, a n d until t h a t committee h a s made some report
I do not think i t wouH
b e advisable f o r t h e G w e r n o r s
go o n record i n this matter.
to
I t i s well f o r t h e Goernors
42
to give thought and consideration t o this report b y
Governor Kainsj a n d then await developments f r o m this
other committee which should have something m a e specific
to offer.
Governor McDougal:
would embody, I
T h e Committee's report, Mr. Wold,
suppose, t h e information that Governg@
Strong h a s ?
Governor Wold:
I t would embody, I
have n o doubt, sons
specific rewmmendations.
Governor McDougal:
T h a t i s something that w e are
looking forward t o seeing and hearing with a good deal o f
interest,
W e d o not k n o w what i t is.
expressed interest a
O u r Board has
number o f times i n knowing t h e r e -
silts o f G w e r n o r Strong's t r i p abroad, a n d t h s t a t u s is,
as I understand it, that none o f the banks have b e e n fully
informed i n regard t o the matter,
Goa erna Wold:
A m I right about that?
N o n e o f the banks have b e e n informed
so far a s I know,
Governor Seay:
M y idea, Mr. C h a i r m m , in presenting
this thing i n a very general w a y t o the Federal Reserve
Sena.
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Federal Reserve Bank of St. Louis
w a s that afterwards t h e next proceeding w o u l d prob-~
ably b e some report f r o m this Committee which Governe
Wold mentions,
(Infomal discussion followea which t h e stenograph-
er was directed not t o repa t.)
Governor McDougal: I
believe, since t h e p l a n i s based
on Governor Strong's remmmendations, that i t would b e in-
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Federal Reserve Bank of St. Louis
advisable t o «sk the Federal Reserve B o a r d t o st@ i n
between a n d proceed.
ed, because I
wmt
I t would t e s o far a s I
a m concern-
t o knoy a n d our Board wants t o k n a
what Governor Strong h a s i n his mind a n d whet machinery
he has f o u m t o b e available. I
do not telisve I
would
want t o bind the bank o f Chicago t o anyd efinite procedure
until w e know more about it.
Governga Wold: I
bind i t s e l f
do n&é think the Committee will
t o a n y t h i m t h e y d o not thoroughly understand;
but the premature disclosure o f Governor Strong's
neg ~
tiations might make i t impossible t o close e v e n i f w e wanted
to, G o v e r n o r Strong's plan would o f cowse necessarily
require t h e endorsement o f the Federal Reserve Board,
Governor Seay:
A n d o f the Federal reserve banks,
Governor McDougal:
Governor W o l d :
Individually.
T h e c o m m i t t e e c a n n o t b i n d t h e banks,
and does n o t propose to, T h e r e a r é s o m v e r y delicate
negotiations carried o n b y Mr. Strong, a n d i f the Governors
can exercise a
little m a e patience t h e y will g e t all the
information t h e y w a n t b e f o r e i t i s p u t u p t o t h e m t o deter-
mine whether t h e y want t o cooperate a n d participate.
Governor Seay:
T h e Board being aware that this
matter i s upon o u r program f o r consideration, a n d being
likewise aware that there i s another committee which Mr,
Strong h a s a s s o c i a t e d w i t h himself, w o u l d t h e B o a r d e x p e c t
us t o take some action i n this matter now, o r will they expect u s t o wait?
T h a t was t h e condition i n which I thought
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Federal Reserve Bank of St. Louis
‘4A
the matter was.
O r i f w e express t h e opinion t o the
Board that t h e matter was o f some importance a n d probably
now was t h e time t o consider it, t h e y would begin t o consider i t a l o n g t h e l i n e s w h i c h h a v e b e e n d e v e l o y e d
Strong.
I t is here o n this program.
b y Mri
W i l l they expect u s
to take s o m e action a n d will t h e y d o anything themselves
until t h e y h e a r f r o m u s i n t h e m a t t e r ?
Mr. Curtis: I
think I
can make a
statement that will
put this i n its correct light.
Goernor Strong h a s made a
further memorandum o n this
topic which will b e taken u p with the Board, possibly with
those members w h o are going t o b e here tomorrow, a n d i t
is i n a
c o n d i t i o n where, f r o m m y knowledge
o f what h e has
done, i t would be, I think, quite inadvisable f o r this conference without further action t o make a n y move i n it; e n d
it i s also i n a condition where I
a m equally convinced i t
would b e inadvisable t o have further information g o out a t
this time.
I t i s just i n a rather fluid situation where
I think w e B t
i r touch, 134 P o s s i b l y d a y after tomorrow
the situation will b e changed. I
would suggest that this
be passed without action o n Mr. Kains' report.
Governor Kains:
this.
M r , Curtis i s responsible f o r all
H e wrote me, "We expect you to make a report.”
That i s what I was doing.
Governor Wold:
T o quiet Governor Seay's motion, this
matter was taken u p with the committee a n d they umerstand
it,
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Federal Reserve Bank of St. Louis
45
Governor Seay:
T h a t i s all I had i n mind, whether
this Board looks t o the committee t o make S o m e move, o r
whether i
t is looking t o Mr. Strong.
a committee,
a s I understand,
M r . Strong was n o t
H e went over informally a n d
did not desire t o have i t understood that h e was acting
for anybody but himself, i n a purely informal way. W h e n
he g o t b a c k h e a s s o c i a t e d w i t h h i m t w o m e n i n o r d e r t h a t
he m i g h t h a v e t h e b e n e f i t
The Chairman:
o f t h e i r counsel.
I f I a m not mistaken that w a s consti-
tuted a formal committee a t the meeting i n Washington held
last April t o conduct th@ee negotiations with the Federal
Reserve Board and to bring the matter t o their attention
and ultimately t o report back t o the Conference o f Governors, I
a m quite s u r e t h a t t h a t i s a
fact.
Governor Seay: T h e n there aretwo committees operating o n the same thing.
Governor Rhoads:
I
s there a n y h a r m i n accepting Gover-
nor Kains' report end spreading i t o n the record?
Governor Seay:
W i t h Governor Kains’ permission I
Will withdraw that part o f m y motion a n d move o n l y that
the r e p o r t b e a c c e p t e d w i t h t h a n k s a n d s p r e a d u p o n o u r
records,
I s that satisfactory t o you, Governor Kains?
Governor Kains:
Perfectly.
Governor McCord:
D o y o u mean t o dismiss i t entirely,
or carry i t along?
Governor Seay:
A w a i t developments,
Governor McCord:
A s your second, I
will agree t o
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Federal Reserve Bank of St. Louis
that w i t h that understanding.
The Chairman:
G o v e r n o r S e a y withdra w s his original
motion a n d mores that Governor Kains' report b e accepted
with thanks a n d spread upon the record,
seconded b y Gxernor McCord.
T h e motion i s
I s there a n y further dis cus-
sion.
(There w a s n o f u r t h e r d i s c u s s i o n a n d t h e q u e s t i o n w a s
taken and the motion duly carried, )
(c) C o m m i t t e e o n method o f calculating dividends.
The Chairman:
T h e next topic i s subtopic (c), c o m ~
mittee o n method c f calculating dividends, G o v e r n o r S e y .
Governor Seay:
M r . Chairman, d i d y o u find out from
the bank whether anything h a d been sent b y the Secretary
of the Federal Reserve B o a r d t o me?
The Chairman:
T h e r e h a s been nothing. I
told them
at the bank that anything that came i n should b e sent a t
once b y a
messenger
u p here,
Governor Seay: I
would like t o apologize t o Gover n @
McCord a n d t o Mr. V a n Zant, w h o i s absent, f o r the f a c t
that I have prepared this report without communicating w i t h
either o f t h o s e gentlemen.
Governor McCord: I
will u n d e r w r i t e a n y t h i n g y o u
say o n the subject.
Ga ernor Seay: I
prepared i t s o late that there was
not a chance t o confer with either o f them.
The Cliairman:
Seay?
W i l l y o u r e a d y o u r report, G o v e r n o r
47
Governor Seay:
I
n c o n s i d e r i n g t h e r e p o r t i t was a l -
most n e c e s s a r y t o have a
along with it.
memorandum N o . 6 0 1 o f t h e B o a r d
T h a t i s a memorandum o f some five o r six
or seven pares. I
asked the Board t o send enough topies
of the memorandum t o g o around here, b u t I
them;
do nat fina
b u t probably with the report before you, r e a d i n
connection with t h e memorandum w e c a n understand t h e report
better.
REPORT G @ COMMITTEE APPOINTED B Y THE
CONFERENCE
O F GOVERNORS
T O CONSIDER
THE METHOD O F COMPUTING DIVIDENDS AND
@ HER MATTERS RELATING THRETO,
This Committee made i t s report t o the last Conference
of Governors, a n d there w a s referred t o i t for considera-—
tion a n d further report Memorandum No. 6 0 1 o f the Federal
Reserve Board, b e i n g a
"Memorandum i n r e payment o f divi-
dends b y Federal Reserve Banks, payments u p o n n e w stock
subscriptions, and payments upon stock surrendered,"
ist. D I V I D E N D PAYMENTS.
(a) T h e Committee i s i n agreement with the opinion
expressed
b y the B o a r d that Federal Reserve Banks s h o u l d
notify t h e B o a r d w h e n i t i s t h e i n t e n t i o n t o submit t h e
question o f the payment o f dividends t o directors, a n d a t
the time should submit t o the Board information a s t o the
earnings o f the bank upon which payment o f dividends w i l l
be based,
(b)
T h e Committee i s also i n agreement w i t h the opin-
ion that dividends s h o u l d b e paid annually, books t o b e
Closed a t t h e c l o s e o f business D e c e m b e r 3lst.
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Federal Reserve Bank of St. Louis
I
t also
48 4 9
agrees that undistributed earnings s h o u l d b e carried i n
the profit a n d loss account, a n d thet n o transfers should
be made t o surplus a c m u n t until s u c h time a s all accrued
dividends s h a l l h a v e b e e n p a i d t o date.
T h e Committee
agrees that dividends should b e paid a t t h e full rate o f
6 per cent.per annum u p t o the last dididend period;
that
is, December Slist o f a n y year, before making a n y distribution f o r a. current year,
a n d that i f a
bank i s n o t a b l e
to make a full payment o f 6 per cent i n any current y e a r
it should make s u c h payment i n the discretion o f its direc-—
tors a s i t i s able t o make.
end, PAYMENTS O N ADDTIONAL STOCK SUBSCRIPTIONS O F
MEMBER BANKS.
The C o m m i t t e e
i s o f the opinion that f o r the present
payments m a d e b y m e m b e r b a n k s f o r n e w s t o c k o r f o r a d d i t i o n -
al stock should b e made a t par, a n d that dividends should
accrue thereon f r o m t h e date o f payment.
I t i s believed
that this arrangement s h o u l d continue until s u ¢ h time a s
the Reserve Banks a r e established upon a 6 per cent dividend
basis.
5rd, C A P I T A L SURRENDERED FOR PAYMENT AND CANCELLATION.
The Committee agrees t h a t payments should t e m d e a t
par f o r capital stock surrendered, unless material actual
impairment o f capital should b e shown from causes other
than organization a n d current expenses,
T h e Committee
is o f the opinion that t h e payment o f dividend o r interest o n capital stock surrendered during a n y menth should
be’ made u p t o the close o f business o f the preceding month
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Federal Reserve Bank of St. Louis
50
out o f accumulated earnings, a n d that earnings during a n y
current y e a r s h o u l d b e d e t e r m i n e d
by a
standard m e t h o d
prescribed b y the Federal Reserve Board.
submitted
i n the memorandum
T h e statement
o f t h e B o a r d i s approved,
except that item “Depreciation i n Real Estate" should b e
construed t o mean depreciation i n the value o f bank building.
T h e payment o f interest o r dividend should t h e n
be made o n the stock surrendered a t the rate shown t o have
been earned, taking into account accumulated earnings i n
profit a n d loss account a s well a s earnings f o r t h e current
period u p t o the close o f business o n the last d a y o f the
preceding month.
F a y m e n t s t o member banks f o r stock
surrendered m a y thus b e made , for the convenience o f the
member b a n k a t t h e t i m e o f surrender,
b u t payments f o r
additional stock i n the Federal reserve b a n k taken b y member b a n k s s h o u l d b e m a d e a t r e g u l a r periods.
It i s believed that, except i n cases o f new stock
subscriptions w h i c h s h o u l d b e p a i d u n d e r t h e r e g u l a t i o n s
at the time o f making subscriptions, a l l payments f o r
addi tional stock, d u e t o increase i n capital a n d surplus
from earnings, should b e made annually,
o r a t the most
semi~annually.
The statement of earnings to be fil’ed with the Federal
Reserve B o a r d p r i o r t o t h e d e c l a r a t i o n
of a
dividend,
marked "A", i s approved, except that depreciation i n real
estate should b e construed t o mean depreciation i n bank
building, e x c e p t f o r e x t r a o r d i n a r y reasons.
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Federal Reserve Bank of St. Louis
SUPPLEMENTAL INFORMATION.
The items contained under this head are approved,
DIVIDENDS.
The items u m e r this head are approved.
With respect t o the opinion o f the Board expressed
in the note under this head (b) "10% o f net earnings t o
provide f o r u n e x p e c t e d e x p e n s e s
first few years)."
o r losses ( d u r i n g t h e
T h e committee i s o f the opinion that
if the Board will make a ruling t o that effect i t woulda
be & Wise policy.
Attention, however,
i s called t o Section 7
of the Act
which provides that "After all necessary expenses o f the
Federal reserve b a n k have b e e n paid o r provided f o r the
stockholders shall b e entitled t o receive a n annual divi-
dent o f 6 per cent o n the paid i n capital stock,”
It i s a l s o t o b e c o n s i d e r e d w h e t h e r t h i s d e d u c t i o n
of 10 per cent to provide for unexpected expenses o r losses should n o t b e made i n current carnings before paying
interest o r dividend o n stock surrendered.
T h i s item i s
not provided f o r i n the estimate o f current earnings s u g gested b y the Board i n such cases.
RESOLUTION F O R DIVIDEND,
The second paragraph i n the resolution f o r dividend
should i n the opinion o f the committee r e a g a s follows:
WHEREAS,
I t appears f r o m this statement t h a t t h e
estimated acc,ued dividends d u e the stockholders o n
day of
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Federal Reserve Bank of St. Louis
w
i
l
l amount t o 5 »
and that
52
after charging
t o profit a n d loss account a l l expenses,
whether paid o f accrued which a r e properly chargeable a s
current expenses, a n d after making provision f o r a n y depreciation that n a y have occurred i n the value o f the a s sete o w n e d b y t h e b a n k a n d f o r probable l o s s e s ,
unexpected e x p e n s e s a n d losses,
a n d for
a n d after carrying current
earnings t o the credit o f profit a n d loss account, t h e r e
will remain i n said profit a n d loss account t h e s u m o f
dh
4?
Ry: b e V a n Zandt,
Jos, A , McCord,
Geo. J . Seay, Chairman.
Governor McCord:
D
o y o u wish t o amend that part
about declaring difidends?
Governor Seay:
T h a t i s i n the resolution o f the
Board.
The Chairman:
M r , C u r t i s r a i s e s t h e poirt, w h i c h
as t o
seems t o b e very well taken, t h a t paragraph 1 , subheading
(a), i n the matter o f dividend payments,
be s u b m i t t e d t o t h e B o a r d o f d i r e c t o r s
. - - the matter
o f t h e Federal r e -
serve b a n k f i r s t a n d t h e F e d e r a l R e s e r v e B o a r d afterwards.
Goernor Seay:
I t is the Board o f directors that
Submits this t o the Board,
Mr. Curtis:
N o t i n memorandum No. 601.
Governor Seay:
bank, t h a t i s right;
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Federal Reserve Bank of St. Louis
Mr. Curtis: I
T h e officers o f the Federal reserve
i t w o u l d t a k e t h a t course,
o f course.
think i t i s n o o n l y improper, b u t v e r y
53
likely illegal, a n d certainly i t i s a 6ross improperety f o r
the officers o f a reserve bank t o submit somethin t o the
Federal Reserve Board before t h e y submit i t t o their o w n
directors,
Govern@ Seay:
I a m fully i n accord with that opin«
ion,
The Chairman:
W h a t a c t i g n d o y o u w i s h taken, g e n t l e -
Governor McDougal: I
think this m r a g r a p h ( a ) that
you a r e d i s c u s s i n g n e e d s s o m e attention,
d o e s i t not?
Governar Wold: “ T h i s dees n & s a y the officers,
Ga ernar McDougal:
A S a matterof fact, the officers
would f i n d i
t impossible t o d o what this paragraph states.
They would have t o notify t h e m o n the 15th o f June a n d
give t h e m t h e c o m p l e t e f i g u r e s
which they cannot do,
u p t o t h e 3 0 t h o f June,
B u t I firmly b e l i e v
e that t h e of-
ficers will notify t h e directors before t h e y notify
the
Federal Reserve Board.
Goernor Seay: I
a m i n full accord with that, a n d i t
was m y intention t o provide f o r that,
Y o u might p u t i n
there that t h e Federal Reserve Banks, through their
direc-~
tors, Should notify t h e Board,
Mr. Curtis: I
wrote rather a n elaborate m e m @ andum
on this a t the request o f Governor Strong,
tion b o t h o f p r o p r i e t y a n d law.
I
I t i s a ques-
f this recommendation
is
changed, a s suggested, t h e n the Board o f directors
will
first notify t h e Federal Reserve B o a r d that they
are going
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
54.
to consider something, a n d then, after they have done that
they s e n d t h e i r c o n s i d e r a t i o n d o w n t o t h e F e d e r a l R e s e r v e
Board before t h e dividend i s actually p a i d and announced.
Governor McDougal:
T h e B a r d o f directors w i l l deter-
mine w h e n the bank c a n p a y the dividend, a n d i t seems t o
me t h a t i f t h e F e d e r a l R e s e r v e B o a r d e x p e c t s t h e B o a r d o f
directors t o notify them i n advance o f their action they are
going t o d o something that i s very objectionable.
W
e
meet once amonth, a n d when the time comes w e will declare
a dividend and motify the Board afterwards.
W e cannot
always tell beforehand whet i s going t o b e done.
i d o
not t h i n k t h e F e d e r a l R e s e r v e B o a r d h a s t h e a u t h o r i t y t o
determine w h e n w e are g o i m t o pay o u r dividends,
think the Federal Reserve Board i s
Governor Wold: I
justified i n sayim that they ought t o have the last say.
Governor Seay: I
think they have that authority
under a n y circumstances a n d conditions.
The Chairman:
I s n o t h e natural methad o f operation
to h a v e t h e m a t t e r s u b m i t t e d
t o t h e B o a r d o f directors,
the facts a n d figures, a n d t o have t h e m vote t h e dividends
subject t o the approval o f the Federal Reserve Board?
Gwernor Wold: I
The Chairman:
think that i s proper.
I t seems t o m e t o t w t h e normal methad
of procedure,
Governor Seay:
" T h e committee t s o f the opinion
that t h e Federal reserve banks, through their directors,
should n o t i f y t h e B o a r d w h e n i t i s t h e i n t e n t i o n t o c o n s i d e r
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Federal Reserve Bank of St. Louis
the question of the earning of dividsnds,."
Goiennot Wold: °No3; I do not agree with that. B u t
after t h e y have considered a n d determined a n d voted o n the
dividend, t h e n i t i s submitted t o the Federal Reserve B o a r d
for approval.
L e t the directors t a k e action first, b u t
before t h e distribution i s made i t should t e a @ proved b y the
Federal Reserve Road,
Governor Seay:
I n that case y o u might come i n t o con-
flict with the cuthority o f the Board, a n d i t would b e very
easy t o avoid it.
cannot s e e h @ there would b e a n y
Governor Wold: I
conflict,
to
w h e n t h e B o a r d o f directors v o t e s t h e d i v i d e n d
te p a i d subject t o approval b y the Federal Reserve Board.
umierstand, Governor Seay, i t must
The Chairman: I
dividend without
W e cannot declare a
be made i n that way.
such approval.
Governa Wold: N e i t h e r can you without the approval
of a .
o w n directors
The Chairman:
i n authority?
W o u l d i t n d b e possible t o modify
that first paragraph?
Governor Seay:
V e r y easily, Mr. Chairman.
T h e
dividend c a n b e arrived a t i n two ways. I b e l i e v e t h a t
the information that t h e Board calls f o r here should t
turned t o t h e B o a r d without q u e s t i o n , I
re-
w a s believe t h a t
only the directors o f the bank c a n declare a
that t h e B o a r d c a n n d d e c l a r e t h e dividend,
dividend;
B u t I
do be-
lie ve that considering t h e relationship which exists b e tween
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Federal Reserve Bank of St. Louis
56
the Board a n d the bank, n o matter what the legal rights o f
the b a n k m a y be, t h e F e d e r a l R e s e r v e B o a r d a n d t h e b a n k s
Should b e i n accord i n any action they take. I
a m inclined
to the opinion that i t would b e having that i n m i w m o r e
to submit the digures t o the Board before.
Governor M c D o u g a l : Y o u w o u l d b e i n danger, I
of being compelled t o hold t w o meetings.
think,
S u p p o s i n g the
Board met o n the 20th o f June, a n d they believed t h e bank
was i n condition t o pay a dividend u p t o the first o f July
out of the earnings,
them t o declare a
T h e natural procedure would b e for
dividend a s o f July 1 8 t o r June 30th,
whichever i t might be, a n d make i t payable o n July 10, f o r
instance, subject t o approval o f the Federal Reserve Board.
I think that would cover the whole thing.
Governor McCord:
T h a t i s exactly what happened i n
the Atlanta bank.
Governor Seay:
with all o f us.
T h a t i s exactly what h a s happened
O u r directors declare dividends a n d fur-
nish the information.
it, I
S i n c e w e were t h e first t o declare
have e x p l a i n e d that t h a t i s t h e a c t i o n w e took, a n d
Icammunicated with the Board a n d sent t h e m a statement
just a s they have outlined here.
hold u p f o r a
T h e Board asked u s t o
few days announcement
o f the dividend until
they could bring i t formally before them.
W e d i d that,
So that h a s been the action w e have b e e n taking.
The Chairman:
C a n y o u n o t incorporate i n that para-
graph your procedure a s outlined?
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Federal Reserve Bank of St. Louis
57
Governor Seay:
V e r y easily, yes Sir.
I
t would
make i t t h i s w a y ; t h e n :
"The committee i s o f the opinion that the Federal reserve banks, t h r o u g h t h e directors,
s h o u l d notify t h e
Board o f the declaration o f the dividend, a n d a t the time
should submit t o the Board information as to the earnings
of t h e bank upon which the payment o f the dividend i s
based, a n d that t h e dividend should b e declared subject
to the approval of the Bard,"
Governor McDougal:
A n d Sa mouncement w i t h h e l d u n t i l
the approvel h a s b e e n secured, I
mentioned that, Mr.
Seay because o f tle ppecautions t h a t t h e Board took i n
your case,
Governor Seay:
T h e y asked us t o hold u p the an-
nouncement f o r afew days.
The Chairman: I
think y o u might incorporate t h a t
expression i n the report.
Governor Seay:
Y o u mean, holding i t for t h e approval
of the Board?
The Chairman:
Governor Seay:
Yes.
M r . Curtis, h o w does that strike
you?
The Chairman:
W i l l y o u read it, Governa@ Seay,
as i t i s drawn a t present?
Governor Seay: ( R e a d i n g : ) " T h e Committee i s o f the
Opinion that Federal reserve banks, through their directors, should notify t h e Board o f the declaration o f the
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Federal Reserve Bank of St. Louis
58
dividend, a n d a t the time Should submit t o the Board information a s t o the earnings o f the bank upon which t h e
payment o f the dividend i s based, a n d that the dividend
Should b e declared subject t o approval o f the Board, a n d
that announcement o f the dividend should b e withheld until
approval of the Board is received,"
The Chairman:
I t seems t o me, i f y o u would permit
a Suggestion, that i t would b e better t o say "furnish the
Board a statement upon which the declaration i s proposed,"
or you could say, "The payment is to be based,"
Governor Seay: I
term,
think "Declaration" i s a better
M r . Secretary,
Mr. Curtis:
d o y o u approve
o f that language?
Y e s sir; I think that i s the correct
principle,
Governor Seay: ( R e a d i n g : ) " N o t i f y the B a r d o f
the declaration o f a dividend, a n d a t the time should submit t o the Board information a s t o the earnings o f the
banksupon which t h e declaration i s based, a n d that t h e
dividend should b e declared subject t o approval o f the
Board, a n d that announcement o f the dividend should b e
withheld until approval of the Board is received."
The Chairman:
A r e t h e r e a n y Other comments
o r amend-
ments t o b e suggested with reference t o this report?
If not, w h a t action d e s t h e Conference w i s h t o take o n
Governor Seay's report?
Governor Seay:
to read anddigest a
I
t i s v e r y diffcult, M r . Chairman,
report which refers, a s this doas,
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Federal Reserve Bank of St. Louis
59
to methods o f accounting, a n d t o give i t approval a t once.
So that i t might b e wise for the Governors t o take this
report a n d consider i t and make s u c h corrections a n d communicate t o the Board their o w n opinions
they deSire,
o n the subject a s
i f they d o not approve o f this.
Governor Kains:
I t all seems s t u n s enough, I
move
that i t b e received a n d adopted a s changed,
Governor Wold: I
second t h e motion.
#. ( T h e r e was n o further discussion, a n d the motion
oe d u l y c a r r i é d , )
Governor McDougal:
M r . Seay, there i s n o m e s t i o n
but what under this plan, i f w e agree u p o n it, a
bank
might pay, i f they were not able to pay their full dividend, their dividend u p t o any given time a t 6 per cent?
Governor Seay:
T h a t i s the intention o f the report.
Governor McDougal:
T h i s wragraph (bo) des not read
that way, i t seems t o me.
Gor ernor McCord: I
should like t o change that, i f
agreeable, t o "quarterly"--- u p t o a quarterly periad instead o f a t a given time.
The Chairman:
W h e r e i n that paragraph would y o u
make that change?
Governor McCord:
R i g h t d o w n i n the last l i n e o n
subparagraph (b);
"Such payments t o a quarterly period i n the discre-
tion of its directors a s it is able to make,”
Governor Seay:
period?
M a k e a
payment u p t o a quarterly
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Federal Reserve Bank of St. Louis
Gorernor McCord:
The Chairman:
Y o o ,
T h e l a s t d a y s o f March, J u n e , S e p t e m b e r ,
and December?
Governor McCord:
Y e s sir,
T h a t i s recognized a s
quarterly.
Governor Seay:
W o u l d i t meet your views i f i t were
worded this way:
"The Committee agrees that the dividend should b e paid
at the full rate o f 6 per cent u p t o a specified period"?
Governor McDougal:
Governor Seay:
T h a t would meet i t exactly,
A n d l e t y o u specify the period,
Governor McCord: I
do not know; I
think i t ought t o
be quarterly.
Governor M c D o u g a l : I t w o u l d n o t b e a n y @
Governor McCord:
her w a y .
I n actual practice I do not think
it would,
The Chairman:
Y o u withdraw y o u r suggestion?
Governor McCord: I
Governor McDougal:
withdraw i t , M r . Chairman,
W i l l y o u read (b), t h e w a y you
have i t changed?
Governor Seay:
" U p to a specified date."
I f
you d o that i t i s not necessary t o have anything that fol-
lows that. I
think you can cut out everything else o f
you co: thats
Goernor McDougal: I
I a m concerned,
think that covers it, a s far as
2
That i s i n (b) a n d i t i s half w a y i n the paragraph.
"The committee agrees that dividends should b e paid a t the
full rate o f 6 per cent u p to a specified date,"
Mr. Curtis:
W i l l y o u s t r i k e o u t t h e rest?
Governor Seay: I
think a l l t h e r e s t c a n b e s t r i c k e n
out, Mr. Secretary.
Governor Treman:
A n d that dividend will o n l y b e
declared u p t o December 3 1 o f gach year.
would not,
o n t h e f i r s t o f July,
T h a t is, y o u
d e d are a
dividend u p t o
the f i r s t o f April.
Governor Seay:
Yes; I
think that i s covered.
The
committee i s o f the opinion that t h e payments should b e
declared annually.
Gor ernor McCord:
T h a t would knoex you out again i f
you could n o t d o i t except once a year,
Governor M c D o u g a l :I
do not s e e that i t i s neces-
Sary t o make a n y reference t o the matter o f dividends b e i n g
paid annually.
Y o u might make y o u r report t h i s w a ,
that t h e committee recommends that n o transfers should b e
Made ~~=-
Governor Seay:
I t i s the memorandum o f the B a r d - - -
"Dividends should be paid annually if earned."
Governor M c D o u g a l :i
think I f y o u put that i n ,
"if earned", i t settles the whole thing.
earned,
I f they are
w e are going t o declare t h e m annually.
Gwernor Seay:
T h e r e are a
great m a n y points, w h e n
‘we consider this report, w h i c h must b e considered with ref-
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Federal Reserve Bank of St. Louis
62
erence t o the memorandum, because i t i s a reply t o the
te
I
am sorry that I do not have copies o f t he
memorandum h e r e i n c o n n e c t i o n w i t h t h e repa@t.
The Chairman: I
understand t h a t a
dividend, e s t i m a t e d
from t h e period u p t o the 3lst d a y o f March, shall b e de-~
clared after t h e close o f the business; a n d tle closing
of t h e b o o k s i s D e c e m b e r 3 0 ;
t h a t there will not b e any
interim declarations———
Governor Seay:
T h a t would be contrary t o the policy
which w e are a t present pursuing.
The Chairman:
W h a t does t h e first sentence
o f that
parasraph mean i f it does not mean that? "Dividends shall
be declared annually; b o o k s t o b e closed a t the close o f
business December 31."
Governor McDougal:
I f you put the words "if earned"
after "annually", I think that will clear that up. T h e n
it goes o n and says i f they are not earned, then you can
do something else,
Governor Seay:
P a y annually i f earned,
The Chairman: P e r s o n a l l y , I
should like t o see a uni-
form practice a s t o the date o f declaring dividends, n o t
have t h e m declared a t any time during t h e year that a
particular b a n k desires t o declare them.
Governor Seay:
cent rate u p 3
S u p p o s e y o u were t o p a y a
four p e r
December 31. T h e n , before making good
full s i x per cent rate y o u would waid until t h e following December?
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
63
The Chairman:
the year.
Y e s , b e c a u s e y o u c l o s e y o u r books
Y o u d o n o t c l o s e y o u r books
by
a t a n y interme-
diate t i m e o r period.
Governor Seay: I
The Chairman:
fully agree with you.
M y feelireg i s that y o u cannot declare
a dividend unless y o u d o close y o u r books.
Governor Seay: I
believe I
The Chairman: I
agree w i t h you,
think uniformity i n that regard
is v e r y desirable.
Governor Seay: I
The Chairman:
agree w i t h you,
O n e bank declares a
26 and another J u l y 14,
dividend April
T h e dividends m u s t b e declared
on the last o f the year's operations.
T h e earnings
might o n l y b e sufficient t o pay a dividend u p t o the 3 1 s t
of March,
Governa: Seay: I
am i n agreement with you.
T h e
report, p r o p e r l y c o n s t r u e d , w o u l d m e a n that.
The Chairman:
T h a t w a s m y clear C O n s t r u c t n
o
i of 1
Governor Miller:
W o u l d not t h a t b e subject t o change
until w e all get o n a regular dividend basis?
The Chairman:
M y feeling, M r . Miller,
might j u s t a s well establish a
i s that w e
uniform practice i n that
respect now, a n d that t h e banks should declare w h a t dividends t h e y could.
Governor Miller:
The Chairman:
ceding year.
I
I n January?
n January,
f r o m t h e earnings
o f the
64
Governor Miller:
we h a v e g o t a
T h e only thing about that is that
thousand banks, n e a r l y ,
a n d 950 o f them have
charged that t h e bank i s a losing proposition, a n d some o f
them have been taught t o believe that i t would b e a n asséssment. I
do not know anything t h a t h a s happened
t o our
bank that has done mare g o o d than the little dividend which
we declared u p t o June 30, 1915,
ant surprise, I
I
t came a S a very ples-
admit that your suggestion i s good policy,
but I think that during the formative stages o f the
bank
it is a good policy, also, t o work o n the sentiment o f
the
members, a n d thereby y o u get better cooperation,
Mr. Chairman, a f t e r w e declared o u r dividend w e were
sending o u t t h o s e c a r d s w i t h r e f e r e n c e t o S t a t e
banks,
we got hundreds a n d hundreds o f letters, a n d I
and
a m sure that
they hold the Bank o f Kansas C i t y a s a n entirely different
institution,
Governor Wold:
W h a t effect would that have o n remit-
ting a t par?
Governor Miller:
I t did have a n effect;
t h e prac-~
tical workings o f i t h a d a n effect.
Governor Seay:
Y o u have made your initial payments?
Governor M i l l e r :
Governor Seay:
Y e s ,
W h e n you make another you will make
it u p t o December 31, i n full?
Governor Miller:
Y e s sir; a n d I think y o a r e right
about t h e n e x t o n e b e i n g e v e r y s i x months,
a t least, u n t i l
we catch u p a n d get o n a regular dividend paying
basis, a n d
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
then i t could b e annual, because t h e dividend-—-—
The Chairman:
M a y I ask, i f I may interrupb y o u
there, w h a t y o u m e a n b y e v e r y s i x months
a t least?
D
o
you contemplate paying dividends e v e r y s i x months?
Governor Miller:
U n t i l w e catch u p with o u r divi-
dends.
The Chairman:
books twice a
T h e n that involves t h c l o s i n g o f
year?
Governor Miller:
W e d o not close t h e t w oks.
W e
charge i t t o a dividend a c c o u n t a n d k e e p t h e books o p e n .
We will charge this dividend account i n o n December 31.
Governor McDougal:
your books twice a
The Chairman:
M r . Chairman,
d o y o u not close
year?
Once.
Governor McCord:
W
Governor McDougal:
The Chairman:
e c l o s e o u r s t w i c e a-year.
W e close ours twice a year.
W e understood i t was a
ruling o f the
board that t h e y were t o b e closed annually.
Governor Seay:
W e closed ours last June, but we
did no& t h i s year.
I
t i s v e r y difficult
t o keep account
of the comparative earnings o f the banks, a n d f o r that
reason w e d o n o t c l o s e t h e m t h i s year.
The Chairman: T
understood t h a t w a s t h e i n t e n t o f
the Board a n d that that was their Puls ne.
Governor Seay:
I t is, according t o this memorandum
they have prepared,
The Chairman:
T h a t i s the policy w e have pursued
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Federal Reserve Bank of St. Louis
66
from the start. I
notice some o f the banks closed their
books a t t h e e n d o f t h e f i r s t y e a r , e n d t h e n t h e y c h a n g e d
and c l o s e d t h e m a t t h e e n d o f June, t h i s year.
Gowernor Seay:.
I f not a declaration o f policy b y
the Board, i t i s a recommendation b y the Board.
Goernor McDougal:
I t does not follow t h a t y o u c a n
not close y o u r books twice o r three times,
them t w i c e a
I
f you close
year y o u a r e m e r e l y f o l l o w i n g b a n k i n g customs.
The Chairman:
P l a i n enough; b u t these dividends,
it
Seems t o me, b y inference, a r e declarable annually, n o t
semi-annually.
Governor Seay:
I t i s the specific language o f the
Governor McDougal:
T h e declaring o f a dividend has
nothing t o d o with closing your books.
The Chairman:
T r u e enough; b u t t h e f£ommon banking
practice-~—
Governor McDougal:
T h e common practice i s t o close
them e v e r y t w o months.
The Chairman: I
do not know a n y bank that, w h e n i t
closes i t s books, does n o t p a y a dividend.
T h a t is
the common banking practice i n this part o f the country,
and not t o close their books a t other times.
Gor ernor Seay:
T h e r e might b e n e w banks which would
probably c l a e t h e i r books semiannually, although they
were n o t i n a position t o d e c l a r e a
dividend,
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Federal Reserve Bank of St. Louis
67
The Cheirman:
B u t they close their books a s a basis
for a dividend, whether t h e y c a n declare a
dividend o r not.
(Informal discussion followed which the stenogrepher was directed not t o report.)
The Chairman:
L e t u s return t o the consideration
of t h e report, G e n t l e m e n .
A r e there a n y further sugges~
tions o r modifications t o b e made, a n d are w e prepared t o
adopt this report i n the form i n which i t i s mojified? I
umerstand t h a t paragraph ( a ) has been s o modified that
it p l a c e s t h e i n i t i a t i v e a n d t h e a c t i o n w i t h t h e d i r e c t o r s
of the Federal reserve bank before submission t o the Feder-
al Reserve Board for their approval; t h a t paragraph (b)
has been s o nodified that i t provides t h a t t h e dividends
shall b e p a i d a t t h e f u l l r a t e o f 6
per c e n t p e r a n n u m u p
to any specified date, a s the board @
Federal r e s e r v e b a n k m a y approve;
directors o f the
t h a t paragraph 2
is
unchanged--—
Governor Seay: P a r a g r a p h (bd) provides i n its tnitial sentence t h a t t h e committee i s i n agreement t h a t dividends b e paid annually i f earned.
Gov ermor Treman:
D
o y o u n o t t h i n k i t w o u l d b e bet-—
ter t o declare i t annually, a n d then i f they want t o make
a quarterly payment t h e y c a n d o it.
I t seems t o m e i t
would t e better t o declare t h e m annually.
to declare
i t q u a r t e r l y o r semiannually,
S o m e m a y want
o r annually,
my o w n j u d g m e n t i s t h a t i t i s w i s e r t o declare
but
i t once a
year because there might b e periods i n the operation o f
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Federal Reserve Bank of St. Louis
68
these hanks where y o u have loss i n one period a n d profit
in another, a n d i f you base your declaration o f a dividend
either s e m i - a n n u a l l y
o r annually,
a n d t h e n e x t Quarterly,
you might n o t earn it.
The Chairman: I
think t h a t p o i n t i s v e r y w e l l taken.
Governor McDougal:
annually,
I f y o u declare y o u r dividends
i t means y o u p a y them, because n o bank, c e r -
tainly, w o u l d d e c l a r e a
Governor Seay:
dividend
i n advance.
A n d h a v i n g declared i t , t h e b a n k
would n o t withhold t h e payment o f it.
Governor Treman:
Delaware &
S o m e railroads d o that.
The
Hudson declares dividends quarterly a n d does
it o u t o f t h e e a r n i n g s
The Chairman:
o f t h e p a s t year.
T h e n y o u would approve
o f the substi-
tution o f the word "declare" f o r the word "paid" i n the
second line, a s giving a wider option and scope?
Governor Seay:
T h e A c t says, a f t e r providing f o r
all necessary expenses t h e member banks shall b e entitled
to receive annual dividends.
I f that i s the case, I
should think that the word "paid" was more applicable
than the word "declared" because the Act requires the
payment.
The Chairman:
A r e y o u ready t o take action o n this
report before luncheon?
Governor Wold;
time.
L e t u s mull i t over during lunch
69
The Chairman:
of before w e t a k e a
T h e r e i s one matter I want t o speak
recess f o r luncheon, T
want t o r e -
mind you of what Mr. Strong said at the last meeting,
when h e spoke o f the foreign relations a n d the fact that
it was necessary that t h e matter b e treated a s absolutely
confidential a n d that n o mention o f those relations b e
made outside o f this meeting.
I
t i s o f the greatest
importance t h a t there should b e n o discussion o f them
‘Whatever, a n d I a m sure that, particularly i n his absence,
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Federal Reserve Bank of St. Louis
you will want t o respect h i s wishes i n the matter.
(Whereupon,
a t 1 o'clock p . m., t h e Conference
took a recess until 2:30 o'clock p . m.)
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Federal Reserve Bank of St. Louis
AFTER RECESS.
The Conference reconvened pursuant t o the taking o f
MecesSsS... S t 2250 0. clock py. mi.
The Chairman:
T h e conference w i l l p B ase come t o
order,
Mr. McKay, t h e Deputy Governor o f the Federal Reserve
Bank of Chicago i s here, a n d I have taken the liberty o f
asking h i m t o sit with us,
We were considering t h e matter o f the report o f the
Committee o n method o f computing dividends a n d other mat~
ters relating thereto.
T h e report has been submitted.
Paragraph 1~(a) a n d paragraph 1~-(b) have b e e n commented o n
and t h e i r f i n a l f o r m h a s b e e n a g r e e d upon,
if I
a m not
mistaken,
Governor Miller:
I s there anything i n this amended
wording t h a t w o u l d p r e v e n t o u r bank,
it desired t o d o so, f r o m declaring a
o r a n y o t h e r bank,
if
further dividend f o r
this year, a t irregular times, until w e catch up?
The Chairman: I
will h a v e t o r e f e r t h a t q m e s t i o n t o
the Chairman o f the Commit tee.
Governor Seay: I
will state,
i n answer t o that,
that t h i s o p i n i o n d o e s e x p r e s s t h e b e l i e f
o f the confer-
ence--— a n d i t i s offered i n that way--— that t h e dividends
should b e declared o n l y annually.
Governor Miller:
T h a t would have prevented Governor
McDougal a n d our bank, f r o m declaring t h e dividends t h a t
we h a v e r e c e n t l y declared,
Governor Seay:
Yes.
Y o u would h a v e waited until
the e n d o f t h e y e a r t o d e c l a r e t h e m , u n d e r t h i s opinion.
If this i s a c c e p t e d a s i t stands, d i v i d e n d s w i l l b e d e c l a r e d
only o n c e a
year, h e r e a f t e r ,
Governor McDougel: I
because I
think that i s a mistake,
think the language would still permit that, i n
thecase t h a t Governor Miller refers to.
T h e question
under debate w a s whether o r not w e h a d better na& male i t
go further.
Governor Seay: I
would n o t think i t would, i f the
present language w a s adopted.
T h e language i s a s follows:
"The committee i s i n agreement w i t h the opinion that
dividends should b e paid annually, i f earned, "--ft &
c l e a r t o you gentlemen that that i s the opinion
expressed b y the Board,
I n consicering t h e memtvandum
of the Board the committee agreed with them, " ™ h e com—
mittee i s i n agreement w i t h t h e o p i n i o n t h a t d i v i d e n d s
should b e p a i d annually,
i f earned, b o o k s
the close o f business December 31st,
t o b e closed a t
I t also agrees
that undistributed earnings should b e carried i n the
profit a n d loss account a n d that n o transfers should b e
made t o surplus a c c o u n t u n t i l s u c h t i m e a s a l l a c c r u e d
dividends shall have b e e n paid t o date.
T h e committee i s
of opinion that dividends should b e paid a t the full rate
of 6 per cent u p t o a specified date,"
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Federal Reserve Bank of St. Louis
Ags it stands there i t agrees with the declaration o f
the Board, o r the opinion o f the Board, t h a t dividends
S h o u e
l paid
d
b
annually,
i f eerned.
U n l e s s i t i s modified
it would express t k e sense o f the Conference that dividends
Should not b e declared a t a n y other time.
B u t a f course
this r e p o r t i s b e f o r e y o u t o b e d o n e w i t h a s y o u will,
Governor McCord:
T h e changes suggested h a v e brought
about that condition o f affairs?
Governor Seay: Y e s .
I t brings i t now in conformity
with the memorandum o f the Board--Governor Wold: I
a m inclined
t o the opinion that w e
ought t o have u n i f o r m i t y o f a c t i o n o n t h e a n n u a l d i s t r i b u -
tion o f dividends which i s contemplated b y the Act itself.
I can see where i t might leave u s i n an embarrassing positons
I
f w e were n o t i n a
to declare a
position
o n January,
1 , 1917,
dividend, t h e n w e would b e unable t o entertain
a dividend until andther year.
T h a t would male a
pretty
long wait.
Governor McDougal: I
believe,
as a
matter o f policy,
that t h e b a n k s o u g h t t o discharge t h e i r o b l i g a t i o n s f o r
dividends a t least semi-annually, just a s fast a s they
can do so, until they overtake that liability and discharge
it,--- that is, i f they saw fib t o do it,
(Informal discussion folloved, )
The Chairman:
A r e there a n y further comments
on
this matter?
Gevernor Wold: I
should lik to see that amended t o
provide thet that w o u l d b
e our policy o r recommendation
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
v4)
after w e h a v e p a i d u p o u r dividends.
T h e n w e will g e t
on the annual dividend basis.
Governor McDougal: I
think w e could meet t h e situa-
tion h a l f w a y b y ‘having i t u m e r s t o o d t h a t t h e r e w e r e t o
be n o q u a r t e r l y p e r i o d s ,
b u t that i f a
the e n d o f the semi-annual period,
bank wished,
at
t o pay a part o f its
back dividends, t h a t i t b e permitted t o d o so.
Goernor Miller:
T h e Kansas City bank has discussed
this matter very thoroughly with reference t o its own situation.
W e think that i n November w e will h a w e n o u g h money
to p a y another s i x months o f our dividend liability.
would hate t o wait e v e n until January,
W e
6 0 days later.
could not p a y a n y more t h a n s i x months then.
W e
O f course
we will have a large undivided profit account--Governor Fancher:
W o u l d thet m e a n that y o u would
have p a i d t w o dividends this year a n d n o t closed your
books until t h e e n d o f the year?
Governor Miller:
W e have simply opened u p o n our
pooks a dividend account.
W e have n o t closed o u r books.
Governor McDougal: I
think i f we adopt t h i s report
it will b e well f o r u s t o bear i n mind that t h e same
applies
principle w h i c h a p p l i e s
i n connection w i t h another feature
of the situation which wo were discussing this morning,
and that i s that w e cannot bind our boards anyhow.
The
poard i s the authority t o determine w h e n dividends a r e t o
be declared.
W
e c a n simply recommend it.
The C h a i r m a n :
W
e cannot
b i n d t h e directors
o f the
reserve banks i n regard t o dividends——~
Governor Wold:
T h e e
i e
e r
tion g o e s t o t h e B o a r d a n d t h e y e l a b o r a t e
rule c o n c e r n i n g dividends,
P
e
e recommenda~
o n their previous
t h a t would not prevent t h e action
of o u r boards i n declaring dividends within t h e periods-——
The Chairman: I
opposed t o payments
would like t o b e recorded a s being
o f dividends
by the Federal reserve banks. I
a t irregular intervals
think w e should have a
regular time f o r t h e declaration o f these dividends.
P a y ~
ment a t irregular intervals create s confusion a n d criticism
of the different banks. I
think a s a matter o f policy
it would b e better t o have a regular time f o r the declara~
tion of dividends, whether that b e semi-annually o r annual~
ly. Furthermore I think that dividends should not be declared b y Federal r e s e r v e b a n k s e x c e p t a s t h e b o o k s a r e
closed and the profits arrived at by that process.
Governor McDougal:
tory t o me. I
think t h a t i s a
The Chairman:
tice, I
definitely,
T h a t would b e entirely satisfacgood platform t o stand on,
I ’ feel t h a t t h a t i s g o o d bankirg p r a c -
do not wish t o disagree with Mr. Miller too
but I
would n o t w a n t t o d o i n the Federal r e -
serve B a n k o f Boston what y o u contemplate doing, w h i c h i s
to enter t h e dividends a n d carry t h e m a s resources o f the
bank,
Governor Seay:
A s the report n o w stands i t expresses
the opinion t o which you have just given utterance,
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Federal Reserve Bank of St. Louis
Governor McCord:
I
n o r d e r t h a t w e m a y g e t together,
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Federal Reserve Bank of St. Louis
75
Suppose wemake i t Semi-annually instead o f annually.
Governor Miller:
Governor Seay:
I . Will b e satisfied w i t h that.
T h a t t h e dividends shall b e paid
semi~annually?
Governor Miller:
W i t h t h e understanding that the
dividend i s t o t e declared u p t o the clase o f busizress o f
Jure 30th, o r December 31.
T h a t would f i x a semi-annual
period.
Gagernor Seay:
I s i t your idea t o suggest that t h e
declaration p e r i o d s h a l l b e s e m i a n n u a l ?
Governor McDougal:
T h a t would b e m y preference. I
would not say "declaration period", b u t I would s a y it
should b e optional w i t h the banks a s t o whether o r not
they w a n t t o p a y a
dividend
o n the l a s t o f June--~ paying
it o f course always o n December 351,
The Chairman:
D
o y o u offer that a s a n amendment
to
the report a s made?
Gor ernor McDougal:
I t would not b e a full amendment,
Mr. Chairman, b u t wculd simply settle t h e point under discussion,
The Chairman:
I
t would practically change t h e
second line o f paragraph ( b ) t o read, "dividends shall b e
declared a n n u a l l y o r s e m i - a n n u a l l y
a t the discretion o f
the directors o f each bank, w i t h the approval o f the Feder-—
al Reserve Board", would i t not?
Governor McDougal:
Governor McCord:
T h a t would w
a l l right.
Y o u used the expression, "shall b e
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Federal Reserve Bank of St. Louis
76
declared",
W o u l d i t not be better t o say “shall not be
declared oftener than semi-annually"?
T h a t does not
put y o u t o the point o f declaring t h e m semi~annually.
Governor Seay:
T h e langugge i n the report i s "should
be".
The Chairman:
the a m e n d m e n t
G o v e r n o r McDougal,
w i l l y o u suggest
i n y o u r o w n language?
Governor McDougal: I
think this would cover it:
"The Committee i s in agreement with the opinion that dividenda s h o u l d b e d e c l a r e d a n n u a l l y o r semi-annually,
earned, b o o k s
if
t o b e c l o s e d a t t h e c l o s e o f business J u n e 3 0
or December 31,"
Mr. Curtis:
I
s that i n agreement w i t h t h e principles
of the memorandum?
Governor Seay:
The Chairman:
N o , i t i s not,
T h a t would have t o b e somewhat modi-
fied, s
o that the paragraph would read, "The committee i s
of opinion that dividends should b e declared", etc.
Governor McDougal :I
do not see that that changes
the meaning here i n the least.
The Chairman:
W h e n you say the committee i s i n
agreement w i t h the opinion, t h a t m e a n s t h e opinion o f t he
Board.
A
s I understand i t i s i s not t h e opinion o f the
Board that they should b e declared annually o r semi-~
annually, b u t that t h e y Should b e declared annually.
Governor McDougal, w i l l y o u state y o u r amendment again?
Ga ernor McDougal:
T h e committee i s o f the opinion
6
that dividends should b e paid annually a n d semi-annually,
if earned, books t o b e closed a t tke close o f business J u n e
30 and December 31,
The Chairman:
W o u l d i t not b e advisable f a r t h e Chair-
man o f the Commit tee t o redraft these paragraphs a n d sub~
mit them later?
Governor Seay:
T h a t amendment would first have t o
be passed upon a n d agreed upon, w o u l d i t not?
The Chairman:
the a m e n d m e n t
T h a t i s correct, M r . Seay.
H a v e you
t o the first paragraph?
Governor Seay:
e a e I
think those amendments,
as r e a d here, h a v e b e e n a g r e e d u p o n , u n l e s s I
a m mistaken:
"The committee i s o f opinion that Federal reserve
banks, through their directors, s h o u l d notify t h e Board
of the declaration o f dividends, a n d a t the time should
submit t o the Board information a s t o the earnings o f the
bank upon which t h e paymert o f dividends i s based.
T h e
dividends shovld b e declared subject t o the approval o f
the Board, a n d announcement s h o u l d b e withheld until a p -
proval of the Board is received,"
I think that w a s agreed to,
The Chairman: I
do not think there was a formal
agreement o n that. H o w e v e r , Governor Fancher n o w moves
that t h e report a s amended, d o w n t o and including paragraph ( a ) b e adopted.
(There w e r e s e v e r a l seconds
was duly carried.)
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Federal Reserve Bank of St. Louis
t o this motion a n d i t
78
The Chairman:
i t h respect t o paragraph (b) I will
ask G o v e r n o r M c D o u g a l
t o once more r e a d h i s proposed amend-
ment t o t h a t paragraph.
Governor McDougal:
T h e eanendment is:
"The conmittee i s of the opinion that dividends
should d e p a i d a n n u a l l y o r semiannually,
to b e c l o s e d a t t h e c l o s e o f business
i f earned, b o o k s
o n J u n e 30th,
or
December 31st,
"It also agrees--—" b u t that is not essential--- "It
agrees that undistributed earnings should b e carried
in
the profit a n d loss a c m unt, a n d that n o transfer
should
be made t o surplus accourt u n t i l s u c h time a s all
accrued
dividends shall have been paid t o date,”
That i s all I care t o change, Governor Seay.
Governor Seay: E v e r y t h i n g after that i s
eliminated,
Governor Wold:
N o , there i s another sentence. " T h e
Committee i s of the opinion that dividenda s h o u l d e
b paid
at the full rate o f 6 per cent u p t o a specified date,"
It then stops, E v e r y t h i n g i n that paragraph f r o m then
on i s eliminated,
The Chairman:
Y o u have heard t h e amendment offered
by Governor McDougal t o paragraph (b). W h a t action d o
you d e s i r e
t o take?
Governor McCord: I
move t h a t i t b e adopted.
(There were several seconds t o the motion a n d i t was
duly carried, t h e following negative votes being recanted.
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Federal Reserve Bank of St. Louis
Governor Wold: I
desire t o b e recorded a s voting
79
against t h a t motion. I
a m i n favor o f a n annual divi-
dend.
Governor Seay: I
also desire t o b e recorded a s
voting against it.
The Chairman: I
would like t o show o n the record
that if I were voting I would vote against it.
The q u e s t i o n n o w a r i s e s a s t o t h e a d o p t i o n o f t h e r e -
port a s amended.
W i l l someone move t h e adoption o f the
report a s i t n o v s t a n d s b e f o r e t h e C o n f e r e n c e ?
Governor McCord: I
move t h e adoption o f the report
as amended,
Mr. Treman: I
The Chairman:
will s e c o m t h a t .
I t has b e e n moved a n d seconded that
the report a s amended,
b e adopted.
I
s there a n y further
discussion?
(There w a s n o further discussion; t h e r e were calls
for t h e question endthe motion was duly carried.)
Governor Seay:
A s before I
desire t o b e recorded a s
voting n o ,
Governor Rhoads: I
would also desire t o b e recorded
as voting against thet motion,
The Chairman: I
would like t o have t h e same record
made i n the minutes w i t h regard t o m y attitude i n the
matter.
hin. C U P t i S
W h a t i s t o b e done with the report, n o w
that i t has been approved?
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Federal Reserve Bank of St. Louis
Governor Seay: I
think i t s h o u l d b e t r a n s m i t t e d
to
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Federal Reserve Bank of St. Louis
80
the Federal Reserve B o a r d a s the opinion o f the Conference
on their Memorandum No. 601.
T h i s memorandum w a s sent
to the banks w i t h a n invitation t o express a n opinion upon
it, a n d I suppose a l l o f u s have replied t o it.
The Chairman:
I f n o objection i s made t h e suggestion
made b y Governor Seay will b e incorporated i n the motion
to adopt the report, t h e three negative votes o n the question o f semi-annually dividends b e i n g recorded.
The next i s sub-topic 4-(d).
4~(d) C o m m i t t e e o n Allotment o f Investments.
(Governor Seay.)
Governor Seay, will y o u submit your repart t o the
Conference?
Governor Seay: “ p u r s u a n t t o the r e c o m m e nidton made
by this committee a t a meeting h e l d a t the Federal Reserve
Bank of New York o n February 23rd, 1916, which rew mmendations were subsequently adopted b y the conference o f
Governors, t h e committee submits herewith a second table
of estimated deficits a n d apportionment percentages.
"The estimated deficits embodied i n this table are
calculated upon the following basis:
"The estimated expenses o f each Federal Reserve Bank
for the calendar year are based upon the actual expenses
for t h e s i x months e n d i n g J u n e 350th, 1 9 1 6 ,
a s Shown b y the
published report o f the Federal Reserve Board i n the
August Bulletin.
T h e estimated earnings a r e calculated
from the reported earnings f o r the s i x months ending June
Bp
530th, 1916, published i n the same report,
the d i v i d e n d r e q u i r e m e n t s
I n estimating
f o r the calendar y e a r t h e figures
used i n t h e l a s t t a b l e w e r e a g a i n u s e d a s t h e r e h a v e b e e n
no alterations
i n d i v i d e n d r e q u i r e m e n t s w h i c h w o u l d mater-~-
jally affect distribution percentages,"
There m a y h a v e b e e n a
other,
few thousand o n e w a y o r the
m t t h e y d i d not enter into t h e results t o a n
apm e c i a b l e degree.
"In the accompanying table the estimated deficit o f
each bank i s shown i n the last column.
I n each o f the
other columns t h e estimated deficits o f eleven Federal
reserve banks a r e shown, t h e deficit o f the bank whose
name stands a t the head o f the column being omitted.
"Therefore t o apportion any investments purchased b y
one Federal reserve b a n k f o r the other Federal reserve
banks t h e figures apperring i n the columm@ under t h e name
of the purchasing b a n k should b e used, c a c h other
Federal reserve b a n k t o receive t h e percentage placed
opposite i t s name i n the column,
"As the estimated earnings a n d expenses are based o n
the figures i n the published report o f the Board, a n d a s
the dividend requirements a r e based o n the figures appearing i n the last report o f this committee, t h e committee
has n o t deemed i t necessary t o embody i n this report a
table
showing t h e items entering into t h e calculation o f the estimated deficits,
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Federal Reserve Bank of St. Louis
"Any bank making investments f o r all Federal reserve
B82
banks i n c l u d i n g itself, w i l l m a k e a p p o r t i o n m e n t a c c o r d ~
ing t o the percentages s h o w n i n the last column o f the
table,"
In other words there a r e t w o methods o f distribution,
one i n which the bank makes investment for all of the others,
excluding itself.
column.
I n that case you would read down the
T h e other method i s that i n which the Federal
reserve b a n k makes investment f o r all o f the banks, i n cluding itssif,
i n which case y o u would use t h e last column.
For iatance, B o s t o n would get 6.24;
N e w York would
get 25.64; P h i l a d é l p h i a would get 9.69; C l e v e l a n d would
get 15.72; R i c h m o n d would g e t 1.31; A t l a n t a woulda gat 2.92;
Chicago w o u l d g e t 9.85;
S t . Louis would get 11.11;
Minnea-
polis would get 6.09; K a n s a s C i t y would get 1.69; D a l l a s
would get 1.58 and San Francisco 12.36,
The verbiage o f the report o f the commit tee a t the
last Conference w a s a s follows:
what investments made b y one Federal Reserve Bank
on orders f r o m other Federal reserve banks b e apportioned
upon t h e b a s i s o f t h e n e c e s s i t i e s
o f e a c h Federal reserve
bank t o meet i t s annual current expense s
reguirements,
and dividend
T h e basis o f distribution shall b e the
proportion which t h e net requirement o f each Federal r e -
serve bank bears t o the requiréments o f all the Federal
reserve banks,
T h e n e t requirement i s t o b e computed b y
taking t h e estimated current expenses o f each bank, plus
the dividend requirements, a n d deducting therefrom t h e esti-
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Federal Reserve Bank of St. Louis
mated earnings.
"That current expenses shall be computed according to
the analysis prescribed b y the Federal Reserve Board.
"That current earnings o f Federal Reserve banks shaadi”
include e a r n i n g s f r o m a l l sources.
"That the statement o f earnings a n d expenses upon w hich
the apportionment i s made, shall b e adjusted quarterly.
"To begin with, earnings a n d expenses f o r the quarter
ending March 31st shall b e used a s a tasis f o r distribu-
tion o f investments made during the quarter following.
Governor McDougél:
Y o u did not include earnings for
thre last quarter-~~
Governor Seay:
T h e report does n o t s a y so.
Governor McDougal:
B u t your original report, which
is approved, provides t h a t that b e done..
Governor Seay:
N o ; t h e original report says that t h e
earnings should be adjusted qarterly, " T o begin with, earn~
ings a n d expenses f o r the quarter ending March 3lst shall
be used a s a basis f o r distribution o f investments m a d e
during the quarter fbllowing."
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Federal Reserve Bank of St. Louis
I t dees not state that the
adjustment o f one quarter should b e based o n the earnings
and expenses o f the p e v i o u s querter,
I t states t h e y should
be adjusted quarterly, a n d i n computing this w e came t o
the conclusion,
safe guide,
i n our bank, t h a t i t would b e a much more
a n d probably a
mare e q u i t a b l e guide,
t o take
the earnings a n d expenses f o r the full period that was b e hind you.
W h e n i t comes t o the next periad y o u will have
only o n e quarter left.
Y o u will h a e t h r e e quarters t o
84
gO upon,
S o that, a s y o u advance i n the year, y o u r basis
becomes a
little méré accurate.
I f you take a n y one
isolated quarter y o u are a p t t o have a n unbalanced
apportionment.
Gw ernor McDougal:
I s i t not true that w e passed o n e
quarter when there should have been a reconcilement o f the
matter?
Governor Seay: I
d o not think so. I
think w e are
about a month behind i n bringing t h e apportionment into
eifect.,
Mr. Curtis:
The Chairman:
W
e a r e t w e n t y - t w o d a y s behind.
I s i t n o t inevitable that w e shoulda
be t w o o r t h r e e w e e k s b e h i n d e v e r y quarter,
s o that i n
the long r u n n o injustice i s done t o anyone?
Governor Seay: Inevitably. I
do not think you
Will f i n d t h i s a p p o r t i o n m e n t d i f f e r i n g v e r y m u c h f r o m
the previous one, except i n the case o f banks that have
come forwardin their earnings--~~ Kansas City and Dallas
for instame, h a v e fallen back, a n d the other banks have
come forward,
The Chairman:
I s there a n y further comment o n the
report o f this committee?
I t i s t h e p i n i o n o f the
Chair that t h e adoption a n d acceptance o f this report
implies a c q u i e s c e n c e
this querter,
i n this method
I s there a
o f dis tribution f o r
motion f o r t h e adoption o f the
report?
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Federal Reserve Bank of St. Louis
Governor Fancher: I
s o move, Mr. Chairman.
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Federal Reserve Bank of St. Louis
85
Governor Rhoads:
I
s t h e r e m u c h difference, G o v e r n o r
Seay?
Governor Seay:
now i t i s 6.94;
N o . B e f o r e Boston received 6,13 a n d
N e w York received 24,42 a n d n o w will r e ~
ceive 23.64; P h i l a d e l p h i a received 11.68 a n d n o w i t i s
9.69; C l e v e l a n d received 12.72 a n d i t i s now 13.72;
Richmond received 1.16 a n d i t i s n o w 1.31; A t l a n t a r e ceived 2.09, a n d i t i s now 2.92; C h i c a g o received 8.44
and i t is now 9.85; S t . Louis received 9.50 and it is now
11.11; M i n n e a p o l i s received 5.30 a n d i t i s now 6.09;
Kansas C i t y received 4.72 a n d i t i s now 1.69; D a l l a s
received 2.17 a n d i t i s now 1.38;
2216
S a n Francisco received
a h d “Th Ls: H o w 12.56.
You see, therefore, t h a t t h e variation i s not v e r y
wide,
Goernor McDougal:
W h e n will be the next period for
readjustment under this plan?
Governor Seay: A f t e r Octoter,.
Governor McDougal:
T h a t would b e for the period
covering what?
Governor Seay: I
your earnings
should think then you would take
a n d expenses f o r the nine months a s a
gSuide.
Governor McDougal:
D o e s n o t t h e repart s a y that
you will take i t over three months a s a guide?
Governor Seay:
every three months,
T h e repart s a y s i t shall b e adjusted
86
T h e report says that t h e state-
Goernor mcDougal:
ment o f earnings a n d expenses u p o n w h i c h a p p o r t i o n m e n t
is m a d e s h o u l d b e a d j u s t e d quarterly.
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Federal Reserve Bank of St. Louis
Governor Seay:
The Chairman:
Y e s : t h a t i s what i t says.
M r . Curtis,
i s there n o t a point t h a t
wish t o raise i n connection w i t h this?
would like t o ask the committee whether
Mr, Curtis: I
it i s assumed that t h e N e w York Bank has its amount s e t
aside first?
Governor Seay:
This i s merely a
Y e s ; t h a t w a s t h e o r i g i n a l report.
readjustment o f the percentages.
original report stands.
should first acquire a
T h e
I t i s u m e r s t o o d t h a t N e w York
proportion o f investments w h i c h
would yield them a sum sufficient t o cover their expenses.
The Cheirman:
T h e r e i s a motion before t h e Conference
that this report b e acepted and thet the basis o f distri~bution,
a s s e t f o r t h therein,
Mr. Curtis:
T h e r e is a
b e adopted.
m o r e point.
O
f course
the amount necessary f o r the N e w York bank might vary. I
do not remember exactly h o w t h a t was determined before.
Governor Seay:
I t was determined b y taking those
figures o f earnings a n d expenses f o r s i x months rather
Snes f o r t h r e e m o n t h s - - ~
Me. C u r i s :
T h e amount that t h e N e w York Bank would
be entitled t o before beginning distribution would o f
course p r o b a b l y b e s l i g h t l y i n c r e a s e d n o w ,
Governor Seay:
I t might b e slightly increased now,
but y o u have n o data t e lay before u s a t this time, t o deter-
mine what that increase should be.
Mr. Curtis:
N o .
The Chairman: I
understood t h e Bank o f N e w York
reserved t h e i r r i g h t s
t o modify t h a t requirement,
o r reserved
the right t o advise that t h e y wished a modification o f it,
at. their pleasure.
Governor Seay:
T h a t was not incorporated i n the re-
pobt a n d I do not think that N e w York took exactly t h a t
position.
Mr. Curtis: I
did not quite c a t c h the C m i r m a n ' s
remark,
The Chairman: I
understand that the:Federal Reserve
Bank o f New York reserved t h e right t o advise us, i f i t
found its necessary expenses were greater,
request a
modification.
a t a n y time, a n d
T h a t is, t h e y reserved t h e right
to s u b m i t i t t o this C o n f e r e n c e f o r c o n s i d e r a t i ,
n
o
Mr. Gurtis:
T - t h i n k thats:
Governor McDougal: I
true.
have here a n extract from t h e
record covering that, i f you care t o hear it.
The Chairman:
I f you will b e s o good,Governar Mc-
Dougal.
Goernor McDougal:
I n a s m u c h a s N e w York City i s t h e
chief market i n which such investments a r e likely t o b e
made, t h e local situation o f the N e w York bank entitles
it t o p a r t i c u l a r c o n s i d e r a t i o n ,
"Tt is therefore recommended that the necessities o f
the N e w York Federal Reserve B a n k t o meet i t s expenses a n d
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
88
dividends requirements b e recognized a s entitling that
bank t o take for itself a
minimum amount o f investments
before executing t h e orders o f other Federal reserve banks
in that marketi
"phat this minimum amount o f investments for the quarter te ginnihg@ April lst should be $25,000,000, which sum
at 2 per cent annual interest would yield a n income which
would a b o u t c o v e r t h e c u r r e n t e x p e n s e s
o f the N e w York
Bank."
Governor Seay:
T h a t i s true,
The Chairman:
t s thtrée a n y further discussion o f
this motion?
Mr. Treman:
I f the New York Bank decided t o make
certain investments whith i t deemed wise t o make itself,
then do you eliminate the New York Bank from the apportionment that takes place afterwards?
Governor Seay:
N o . T h e New York Bank participates
in the apportionment o f all investments made after that.
It could either elect t o participate o r not.
I f i t does
not elect t o participate there i s one percentage o f distripution;
i f i t does e l e c t t o participate t h e r e i s another
percentage o f distribution.
Governor Kains: 4
would like t o ask i f i t i s quite
understood t h a t t h e o u t s i d e b a n k s k e e p t h e i r h a n d s O n t duck
often have offers made t o m e which 1 a ecline t e cause I
think i t would not b e playin t h e game t o accept them. I
would l i k e t o k n o w a b o u t t h a t ,
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Federal Reserve Bank of St. Louis
Governor McDougal:
T h a t matter w a s thoroughly dis -
cussed a n d threshed o u t when y o u were n o t here, Governor
Kains. I
words,
think your position m a y b e stated i n a very f e w
a m t h a t i s that y o u must keep your hands. off under
all a n d a n y circumstances,
The Chairman:
G o v e r n o r Kains, t h a t matter w a s taken
up a t the last c o n f e r e n c e , n
e
h
w you were n o t present.
Governor Kains:
I
n San Francisco t h e r e a r e a
couple
of Banks, t h e Hong Kong a n d Shanghai B a n k a n d t h e Yokohoma
Specie Bank.
T h e bills o f these banks a r e offered t o us
Some times a n d they are similar t o those t h a t w e g e t i n
New York, b u t very often they have nothing t o d o with New
York.
T h e Yokohoma Specie B a n k m a y offer m e a n aceeptance
of the Mitsui Company, a
firm with which I
a m very familiar.
I have taken their paper quite apart f r o m N e w York busi-
nema, because I do not see what it has to do with New York,
although I
get t h e s a m e k i n d o f p a p e r f r o m N e w York,
Governor McDougal:
U n d e r those circumstances, t h e
bill being accepted bythe New York bank o r the New York
house.
I s that right?
Governor Kains:
Yes.
Governor McDougal: I
think y o u would b e quite within
your r i g h t s t h e r e , j u s t t h e s a m e a s t h e o t h e r b a n k s a r e
buying a c e ptances i n their o w n districts.
The Chairman:
T h a t i s m y understanding
Governor McDougal:
o f it.
T h a t i s t h e condition,
i n s o far
as Chicago was concerned, t h a t w a s discussed a t the last
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Federal Reserve Bank of St. Louis
90
meeting.
I t was umMerstood that i f the Chia go banks were
not aco: pting a n d w e could get o u r hands o n the bills, w e
were welcome t o them, I
think that would c o v e r your
Situation,
The Chairman:
A
s I
understand i t , a n d Mr. T r e m a n
will correct m e i f I a m wrong, Mr. Strong's position was
that they wanted t o b e protected against bids f r o m other
Federal r e s e r v e b a n k s
i n N e w York, b u t t h e y h a d n o o b j e c t i o n
at all t o the purchase o f such bills i n your own market;
it Was simply t o protect the situation i n New York; that
the banks should refrain f r o m buying there,
Mr. Treman:
T h a t i s entirely right, Mr. Chairman,
Governor Seay: P r o v i d e d they were n d offered b y
New York houses i n his local market.
The Chairman:
nard &
T h o s e might b e New York bills. I f Bar-
Goodwin o f f e r e d H o n g K o n g &
San F r a n c i s c o B i l l s ,
i t would b e a
Shanghai b i l l s t h a t w e r e
v e r y d i f f e r e n t proposi-~
tion from their offaring bills t h a t w e r e i n New Y o r k for
Sale i n San Francisco.
T h a t i s the o n l y thing that N e w
York wishes t o be protected against, a s I undebatand it.
Governor Kains:
T h e N e w Y o r k o f f i c e sometimes s e n d s
me San Francisco bills which i t buys i n New York.
H o w
they get to New York I do not know; but they are acepptances
of our own banks.
I f they .ere offered t o me direct I
should think I would take them.
The Chairman:
I f you were t o buy those bills through
Barnard and Goodwin o f New York you would become a competi-
tor o f the N e w York Bank---
Governor Kains: (Interrupting) I
Mr. Cheirman,. I
a m a t a loss toknow h o w t h e e things g e t
to Barnard & Goodman. I
in m y l i f e t h a t I
would not d o that,
never bought anything from them
k n o w of.
B i l l s
b y Guthrie &
Company a n d
other firms i n San Francisco filter through y o u t o me;
acceptances o f our o w n banks come through N e w York t o me.
Governor McDougal:
T h a t w o u l d n o t b e strange,
cause they would naturally g o to New York.
T h e Federal
reserve b a n k t h a t a c c e p t s t h e m c a n n o t c o n t r o l them,
Governor Kains:
be-
c a n it?
T h e y are n o t bank acceptances; t h e y
are firms' acceptances.
The Chairman:
I
s there a n y further discussion
on
the motion t o adopt t h e report?
(After a little informal discussion the motion
having been duly seconded, was carried. )
The Chairman:
A s a matter o f record t h e Chair will
take t h e liberty o f taking this effective f r o m August 1
to
November 1 , s o there will b e a specific date o n which
this distribution will become effective,
Gor erner McDougal: I
would l i k e t o m a k e a m o t i o n
that t h e Committee b e authorized t o adjust t h e apportionment a t t h e e x p i r a t i o n
o f the three months without a n y
meeting o f the Conference o f Governors,
The Chairman:
Y o u have heard Governor McDougal's
motion t h a t t h e C o m m i t t e e
o n apportionment
o f investments
be authorized t o make t h i s adjustment e a c h quarter without
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Federal Reserve Bank of St. Louis
92
formal approval b y the Conference o f Governors.
I s that
motion seconded ?
' Governor Fancher! I
Mr. Treman:
will second the motion.
W o u l d i t not b e wise, t h e n the report
is sent S a e e e bank, t o have attached t o it the recommenda-—
tions b y the Committee i n refard t o the New York bank,
becuse i t is apt t o be overloaked--The Chairman: (Interposing) W h i l e that could be
done, I
think that matter i s quite clear.
Mr. Treman:
i f i t i s clear, t h a t is-sufficient.
GOvernor Kains: I
think i t i s clear i n the minds
all the banks that t h e N e w York Bank reserves t o itself
the right t o invest a
sufficient amount o f its funds t o
take c a r e o f its expenses before distribution i s made.
Mr. Treman:
V e r y well, Mr. Chairman.
The Chairman:
I s there a n y further discussion o f
this motion?
(There w a s n o further discussion « n d t h e motion was
duly carried, )
Mr. Treman:
M e y I ask i f there has been any criti-
cism from a n y o f the banks o f the method b y which this
matter has been handled i n the New York banks?
The Chairman:
S o far a s I know t h e criticisms h a v e
all b e e n v e r y f a v o r a b l e a n d complimentary,
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Federal Reserve Bank of St. Louis
The next item is 4-(e).
4—(e) C o m m i t t e e o n distribution o f Government bonds.
Mr. R h o a d s }
Governor Rhoads, w i l l y o u m a k e y o u r r e p o r t ?
Governor Rhoads:
( R e a d i n g:)
REPORT O F C O M M I T T E E O N T H E S A L E @
CONVERSION
BONDS T O T H E GOVERNG@S!' C O N P E R E N C E , B O S T O N ,
AUGUST 22, 1916.
The c o m m i t t e e r e p o r t s t h a t i t h a s h e l d t w o meetings
in New York, o n e o n June 28, 1916, a n d tne otheron J u l y
24, 1916, copies o f the minutes whereof a r é attached hereto and constitute a
portion o f this report.
The following statement shows t h e bonds offered b y
each Federal reserve b a n k f o r sale under t h e commit tee's
agreement w i t h Messrs.
Harvey Fisk &
Sons, t h e b o n d s a c -
cepted b y the committee, t h e percentage o f participation
in sales allotted b y the committee t o each Federal reserve
bank, t h e bonds called f o r t o provide f o r deliveries
against sales b y the committee, t h e committee's sales
and apportionment o f sales among t h e participating banks,
and t h e amount o f bonds o f other Federal reserve banks
remaining o n hand with the Federal Reserve Bank o f New
York pending delivery under Messrs. H a r v e y Fisk & Sons'
further exercise o f their options.
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
94
Per~
cent B o n d s C a l l -
F.R.Bank o f B o n d s Offered Bonds Accepted Allot~ e d for a n d
téd., R e c e i v e d .
ee
yy
re
5
4?
000
200,000
200, 000
2,234,000
1,800, 000
510, 000
Philadelphia
818, 000
650,000
500,000
Cleveland
300,000
250,000
250,000
Richmond
680,000
550,000
300,000
1,000,000
800,000
400,000
St. Louis
100,000
100,000
100,000
Minneapolis
325,000
250,000
100, 000
San F r a n c i s c o
500,000
400,000
290,000
Boston
New York
Chicago
2
5
0
,
$6,207,000 8 5 , 0 0 0 , 0 0 0 h 2 , 8 6 0 , 0 0 0 ,
Deliveries h a v e b e e n m a d e t o Messrs.
Harvey Fisk &
Sons:
2,000,000 of bonds at 100-3/4 and interest and
$250,000 of bonds a t 100-7/8 n d interest o n the following
dates:
July 27,
7
Aug.
2
Aug.
5
1
1
0
0
5
,
,
2
0
,
,
5
Aug.
,
0
5
Aug.
0
5
0
0
0
0
0
0
0
0
0
,
0
0
0
0
82,250,000
Sales have been apportioned a s Sollows:
(Par Value)
fee
o e m
Boston
New York
OL
9
8
A
m
o
0
1
u
,
0
n
0
,
t
0
0
0
0
0
Philadelphia
S
Cleveland
2
1
Richmond
2
Chicago
1
4
3
8
6
0
9
2 ,000
2
, 000
,
0
0
0
,
0
0
0
St. Louis :
4 5 , 0 0 0
Minneapolis
1
San Francisco
1
Total Delivered
1
8
2
,
3
0
2
,
5
0
, 000
0
,
0
0
0
0
0
Balance ¢ € bonds o n hand received
from Federal reserve banks &
The Chairman:
Committee.
I
610,000,
Y o u have heard the report o f the
s there a n y discussion?
(There w a s n o discussion.)
The Chairman: :
The Chair will entertain a
motion t o
accept t h e report a n d confirm t h e action o f the committee
in entering u p o n this contract w i t h Harvey Fisk & Sons.
Governor F a n c h e r :
The Chairman:
A n d that t h e committee
b e contin-~
G o v e r n o r Fancher moves that t h e re-
port o f the Committee b e accepted;
t h a t t h e action o f
‘the committee b e confirmed a r t h a t t h e committee b e continued.
i s there a
second t o that?
(The motion was seconded and duly carried.)
The Chairman:
W e have n o w come t o the section o f
the p r o g r a m w h i c h s h o u l d b e d i s c u s s e d w i t h t h e F e d e r a l R e serve B o a r d t o m o r r o w .
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Federal Reserve Bank of St. Louis
Vir? b o .
(
I
n
f
o
r
m
a
l discussion followed. )
The Chairman:
I f that i s satisfactory t o the Confer-
ence, l e t u s take u p Topic 8 , t h e American Banle rs Associa-—
tion meeting i n Kansas City.
Ge
A . Be. A. M e e t i n g
Mr. Curtis: I
man,
i n Kansas C i t y .
put that o n the program, Mrs Chair-
A t the last conference w e h a d a n invitation f r o m
the American Bankers' As@ciation t o hold the next Governor's
meoting out there i n conjunction with the A. B. £. meeting, which t h e G a ernors decided would b e inadvisable,
and directed m e t o s a y t o the A. B . A. secretary that probably several o f the Governors w o u l d attend that meeting
personally.
I t was p u t o n the program under the feeling
that i t might b e wise t o make definite arrangements i n
order t o counteract whatever possible criticisms might b e
leveled a t the collection plans.
The Cheirman:
who e x p e c t s
P e r h a p s i t would b e well t o find out
t o go,
I
f t h e Governors h e r e present w h o
expect t o g o will s a y so, w e will provide t h e Secretary
with the record.
A r e you going, Mr. Fancher?
Governor Fancher: I
have a
reservation. I
a m plan-
ning t o go.
Ga@w ernor Wold: I
desire
have a
reservation,
t o g o unless t h e r e i s s o m e p u r p o s e
b u t d o not
t o b e served b y
going.
Ga ernor McCord:
tend. i
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Federal Reserve Bank of St. Louis
T h e chairman o f o u r board will a t e
Cagnok.
Governor McDougal: I
a m expecting t o go, although
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Federal Reserve Bank of St. Louis
it i s still somewhat uncertain,
Governor Treman: I
think Mr. J a v will probably go.
He has been invited t o speak there.
H e i s just back
from his vacation, b u t I think h e will perhaps b e able t o
gO.
Governor Rhoads:
i L do’ mot “expect: to: go.
Ga ernor Hoxon: I
think t h a t v e r y l i k e l y Mr. M a r t i n ,
our Reserve a g e n t w i l l g o ,
W
e have nat discussed i t a t
EUS
Governor
A y : I
have a
reservation,
M r . Chairman,
I do not m u c h desire t o go, a n d doubt i f 1 shall.
Governor Kains:
W
e w i l l s e n d somebody.
will b e right there, a n d will b e
Governor Miller: I
RIaete see. eny- o F you.
H o w about you, Mr. Aiken?
Governor Rhoads:
shall not b e there. I
The Chairman: I
expect t o
be-on a vacation,
Governor Seay:
T h a t i s one o f m y governing reasons.
Governor Fancher:
T h a t Situation m a y have a
bearing
on m y attending.
Governor Miller:
W e would b e glad t o have y o u come,
and I would b e glad also t o know j u s t what i s supposed t o
be done, a n d i f I could b e o f a n y service i n bringing about
just w h a t i s d e s i r e d t o b e accomplished, I
shall b e v e r y
glad t o d o so,
(Informal discussion followed which t h e stenographer w a s d i r e c t e d
na
t o report, a f t e r w h i c h t h e f o l l o w e
ing proceedings took place.)
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Federal Reserve Bank of St. Louis
9. P r e s s statement.
The Chairman:
L e t tis take u p Nos. 9
and 1 0 o n the
program.
As y o u gentlemen know, i t has been the practice o f
these c o n f e r e n c e s
t o entrust t h e preparation
ment f o r the press t o the Secretary.
o f the state-
T h a t h a s worked
admirably, a n d the Chair will entertain a
motion with
reference t o it.
Governor Fancher: I
s o move, Mr. Chairman.
(The motion was duly seconded and c a r r i e d . )
2.
N e x t meeting.
The Chairman:
ference, I
A s t o the next meeting o f this Con-
think a t t h e l a s t m e e t i n g o f t h e G o v e r n o r s
it
was left that the Secretary b e empowered t o call a meeting o f Governors o n request o f two o r more Governors :'or
the Federal Reserve Board.
Mr, Curtis: I
may s a y that I
had a request o f more
than two.
Mr. Kains: I
move that t h e Secretary b e empowered
to call a meeting o f the Governors o n request o f any two
members o r o f the Federal Reserve Board.
(The motion was d u l y seconded a n d carried.)
(Informal discussion t o o k place, a t the conclusion o f which the Conference adjourned until tomorrow,
Wednesday, August 23, 1916, a t 9:30 o'clock a. m.)
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