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Federal Reserve Bank of St. Louis
CONFERENCE B O A R D O F G O V E R N O R S
January 23,
SG
Cox,
NDREPORTER
COLUM ws G . WASHINGTON. D.C.
¥ S H I N G T O N
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Federal Reserve Bank of St. Louis
FOURTH DAY.
Yashington, D . C., January 23, 1915.
The C o n f e r e n c e r e a s s e m b l e d w i t h G o v e r n o r B e n jamin
Strong, d r e , presiding.
The Chairman:
W e are assembled, gentlemen, w i t h t h e
of the world upon UB, on the matter o f collections.
The committee thet w a s requested t o prepare a
rendum o f headings makes a report o r reports. I
memonotice that
My. MeKey, with that sbirit o f Sefdth mterprise that w e
are now all s o familiar with a t those meetings, i s inclined
to take t h e view that w e have got t o d o something anyway,
and h e submits a
program o f how t e separate w h a t w e are
going t o do.
Mr. Hendricks, who comes from Few England, I believe,
with the conservatism o f that section, starts w i t h t h e guggestion thet w e m a y not heve t o d o anything. I
would like
to a s k your judgment a s t o whether w e shell first consider
the possibility,
o r decide, whether w e are going t o take u p
clearance metters i n the near future, a n d i f so, what t h e
scope shall be, before considering any plan; o r whether i t
is your intention t o assume that w e have already decided t o
elear checks a n d a11 thet w e are t o consider i s a plan.
A a
you recall, t h e Chair i s under obligation, imposed b y himself, t o entertain o n l y constructive suggestions.
ir. MeDougel:
A f t e r the expression w e had last night
fron ® revresentative o f each of the d i s t r i c t s , t
i seemed
protty clear that, w i t h the varied eonditions,
n o two dis-
tricts being alike, thet w e wovld probably have t o g o ahead
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Federal Reserve Bank of St. Louis
and each district handle its own case.
I would move that thet b e done.
The Chairman: .
You have heard Governor MoDougiel's
motion, t h e effeet o f which i s t o make seach district autonemous a n d independent o f the others i n the matter o f handling
their intra-district clearances.
Ur. Aiken: I
second that motion.
The Chairman:
I s there a n y debe te?
My. Wells:
T h a t m a y b e what wall necesserily have t o
be done ultimately, but I shall b e very sorry i f we cannot
agree upon some conmon principles o f proeedure, because w e
ell teuch other districts a t the boundary line end there will
ensue very great confusion.
I f I undertake t o put i n oper-
ation one plan, while those i n three other districts a r e
operating under aothe: plan, there will b e confusion, a n d
particularly with those member banks who have 4 great many
customers i n the two districts.
The Cha irman:
Mir. Paneher: I
I s there a n y further discussion.
bear the views o f Governor ‘elis. I
think thet we are dery closely allied with District No, 7.
I @o not see how two districts, 4 and 7, could have any
plen that should b e very much a t variance.
W e could not
undertake, i n District No. 4, t o follow out the plen which
has been submitted t o the Federal Reserve Board b y Mr.
MeDougal. and his associates, for a ruling b y the Board or
for approval b y the Board, rather.
I t seems t o me thet
possibly w e could agree o n certain general principles t h a t
ean b e applied t o all the districts,
i n view o f the decision
which dudge Hlliott has given thet, without the consent o f
the member banks, you cannot cherge items areinst their
reserve balances. I
think the question o f time comes u p
here, whether i t shall b e a deferred oeredit and deferred
eharge.
I t seems a s though there are sane general princi-
ples involved here that should h e followed,
w h a t e v e r plan
is worked out i n the districts nas got t o b e put o n some eortain, general lines, unless w e went this while thing t o result i n a good geal o f confusion and dissatisfaction.
Mr. Aiken: I
agree with Governor Fencher.
I t seems t o
me thet the relations o f these regional banks are b y necessity t o b e e o intimately close thet t h e y showld have certain
fundamentals i n common i n handling the items i n the district.
When the s y s t e m i
s developed,
i f i t i s developed,
s o that w e
handle the inter-district cleerances, the confusion arising
from having different
m e t hr ohandling
df s
the inter-district
items would b e hopeless.
The Chairman:
ait. MeDougal; I
I s there any further debate?
would like t o be understood that w e
| have n o assurance whatever f r o m the Board that t h e plan which
we have submitted will meet with their approval.
T h e r e may
be some misunderstanding o n that question.
The Chairman: G e n t l e m e n , a r e y o u ready t o vote o n
Governor MeDougeal's motion, which has been seconded?
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Federal Reserve Bank of St. Louis
(Theres were requests for the question. }
The Chairman: I
will a s k a l l t h o s e i n f a v o r o f t h e
motion t o signify b y raising their right hend.
(There were two affirmative votes. }
The Chairman: I
will now ask those who oppose the
motion t o raise their right hands.
(There were six negative votes. )
The Chairman:
Mr. Aiken:
T h e motion is lost.
M e y I ask if the committee appointed t o
lay out a plan for taking m m this u p made a report this morn-
ing before I eame in?
heave not read the memoranda which
The Chairman: I
has been handed me, because there seems t o be two memorandums,
Mr, M e K e y assumes that w e are committed t o undertake clear-
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Federal Reserve Bank of St. Louis
ance a n d Mr. Hendricks apparently takes t h e ground that w e
are not committed t o anything and thet i t may be necessary t o
first decide whether w e are going t o d o anything a t all.
I had asked f o r a n expression o f views o n that point
end my request resulted i n Governor MeDougal's motion.
Mr. Aiken:
T h e r e were two minority reports from that
committee? (Laughter. )
Mr. MeKey: I
did not know that there would b e two re-
ports.
Mr. Hendricks: I
aia not intend t e give i t that ap-
pearance, either.
ir. MokKay: I
understood from lir. Hendricks that the
reports were pwractically alike-
W e first made them inde-
pendently and then brought them together.
M y report cover-
ed everything with t h e exception o f the q e s t i o n o f whether
we were going t o do i t et all. I
figured that we were going
to d o it,.and I have worked along that line i n my report.
The Chairman:
W i t h that exception I understand t h e
reports a r e identical?
Mr. MeKay:
Y e o ; that i s right.
Mee Hendricks:
Wr. Aiken:
Y e s ; that i s right.
M a y I ask if Mr. Elliott's opinion about
sherging checks sgainst member banks established a rule for
the operation o f the banks ---~
The Chairman:
A t the last meeting o f the Governors
the interpretation o f the word "par" was mubmitted t o the
Board. C o n s i d e r a b l e discussion resulted and the Board asked
Judge Elliott t o rule o n two questions.
O n e was whether t h e
word “par” meant, a s a matter o f fect, immediate credit,
end he has replied, a s I understand it, thet i t doses not
necessarily mean immediate credit.
H e alse ruled that t h e
aet does not recuire, o r permit, without the cocsent o f the
member banks, o f the immediate charge o f items t o their
account before they have a n opportunity t o examine them.
H e
hes further ruled that notwithstanding the apparent confliet
in the language o f sections 1 3 and 16, thet the Federal Reserve banks m a y i n fact receive o n deposit f r o m their member
banks checks drawn upon other Federal Reserve banks, regerd-
ing the general provisions o f Section 4 of the Act, giving
certain incidental powers t o the Federal Reserve bank, a s
| being comprehensive enough t o include the right t o receive
“those checks ondeposit, although it is not specifieslly
expressed i
n that way i n the statute.
So that w e n o w face this situation:
W e are sdvised b y
the Board thet w e cannot require member banks t o conform t o
the practice o f haying items charged against their account
before t h e y receive t h e m f o r examination.
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Federal Reserve Bank of St. Louis
W e must g e t their
consent t o thet procedure.
S e c o n d , t h a t t h e word “par"
in the stetuté dces m o t necessarily m e a n imeediete credit o f
the i t e m before i t reeshes i t s destination o r a return i s
made; third, that w e are authorized t o receive o n deposit
checks drewvm upon other Federal Reserve banks b y the members
proceeding --+
@ll of us, I think{ against the advice o f the cousel
for the Board.
The Chairman:
f o the extent that w e are charging checks
against the eccounte o f membsr bavike without their consent,
I believe w e are sondueting business o n a basis which the
statuté does not require, although i f tae member banks assent t o it, I judge w e are not violating the law.
I t is a
matter o f mutual arrangement rether than o f statutory provision.
iz. Aiken:
out: W h e t h e r ,
T h a t i s the very point I wanted t o bring
b y thet opinion eas to charging cheeks, w e
are estopped from charging them. 1
e@n charge these checks
in my district, I think, without any trouble and without
getting those agreenents.
Mr. O. Wells:
Y o u mey not b e able t o continue t o d o
ine face o f this opin
The Chairmen:
I f we carry out t h e proegrem which was
discussed yesterdsy w e will follow genscraliy t n e procedure
indicated b y these reports. I
feel obliged t o ask you t o
take notice o f the feet thet o u r first question f o r decision
would be:
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Federal Reserve Bank of St. Louis
W h e t h e r w e a r e t o undertake s a n e additional cBear-
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Federal Reserve Bank of St. Louis
ing fanction within our respective district), o r some interdistrict clearing funetion.
I ? Il emia get the consensus o f
epinicon e s t o whether w e should d o something o r nothing, t h e n
I epn preeeesé either todigcuss a
plan o f action o r else a
pian for determining what t h e action i n the future shall be.
ir. O . Yells:
pression, I
P o r t h e puxsese o f calling f o r a n ex-
meve i t i s the sense o f this meeting that i t i s
incumbent u p o n u e t o make a n effort t o proceed v i t h t h e en-
largement o f the transit operations o f the several Federal
Reserve banks.
ir. Rhoades: I
fhe Chairmen:
will second that motion.
T h e a t motion i s seconded.
I s there a n y
dehate?
Wold: Q u e s t i o n .
Cheirman:
A r e y o u veedy t o vote o n that motion?
I heer n o further gebate,.
Those i n favor o f the motion will signify b y reising
their right hands,
(There were sight affivvative votes and the motion was
earried unanimously. }
Mr. Keine: I
expleired a y effort lest night, a n d that
is the limit t o whieh I am w i l l i n g e
t go:
The Cheirman:
i r e you i n the mood t o offer a resolu-
tion, Governor Xeinat
Er, Keine:
H e , vir. I
have explained that I would g o
to & gertain limit with anything thet w e e=xn do.
mirsele workers.
A t the present t i m e I
W e are not
do not think i t can
Be done; that is, I meen satisfactory t o anybody.
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Federal Reserve Bank of St. Louis
The Chairman:
Y o u r plan, Governor Hains, f i t s i n di-
rectly with the first i t e m o n the program f o r discussion
which has been submitted b y the sub-committee, which i s Item
A =j— Iinmediate eredit a n d chargé.
W o u l d y o u facilitate dis-
cussion b y making a motion as t o the principle embodied i n
your plan, which, I
understand,
i s deferred credit a n d de-
ferred charge?
Mir. Kains:
4
my
Y e s ; deferred charge and deferred
credit,
in order t o keep yourselees safe ani i n order t o hold our
reserves which, i n my opinion, i s the vitel thing. I
pro-
eements from every bank that I
with.
The Chairman:
Y o u r motion i s that whatever o l a n o f
intra-distriect clearance i s dopted, i t shall b e based
upon t h e principle that items received u p o n deposit shali b e
eredited after the allowance o f certain time, and the charge
to the member mf® bank's account shall b e made after a similar
allowance o f time?
Mr. Kains:
Y e s , sir.
fhe Chairman:
lig. Wold:
I s that motion seconded?
H r . Chairman, a i d y o u offer that a s a motion
or a s @ n explanation?
ir. Keine: I
ir. Pancher: I
The Chairman:
offered i t a s a motion.
second that motion.
T h e motion has been seconded.
I s there
any debate?
(There was n o response. )
The Chairman:
A r e mm you ready for the question?
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Federal Reserve Bank of St. Louis
Mr. Wola: I
do not know thet I am ready. I
do not
believe I am prepared to diseuss it --- (Imaghter. )
ix. 0 . Wells: I
am willing t o express myself a s be-
lieving that the point raised b y you last svening i s a very
effectual one against the adoption o f that motion, a n d that
is that i t will n o t b e used, a n d i t i s unwise,
seem t o ms, f o r u s t o proceed u p o n a
theory,
i t would
i n the creation
of a plan, w h i c h eannot o r will n o t b e used.
Mir. Kains: I
think i t t m may b e used t o some limited
extent; a n i i t i s just o n e s t e p forward, showing &
willing-
n6ESS --—
Mr. 0. Wells: I
think i t is"a hesitation". (Laughter. }
ir. MeDongal: I
d o not think that system would b e used,
because t h e y c a n d o better then that now. W h a t w e are of-
fering t o do i n Chicago i s not any more than the banks have
@lways hed; t h a t is, immediate credit a n d deferred charge.
We would not get the items i f we handled i t under the terms
outlined i n that motion, o r we would not get any great part
of themat least.
fhe Cheirmen:
D e I understand, Governor MeDougel, that
your belief i s this l a w demands practically that w e should
now offer t o the member banks facilities for collections that
are a t least ecual t o those that t h e y sre n o w receiving?
My. MePougal: I
Mr. Pancher:
would think so; yee; i n our district.
I t seems t o me that i n this proposttion
there i s s broed underlying principle o f policy involved a s
to whether i t is deemed advisable that the Federal Reserve
Benke shall take v p this matier e f clearing country checks
and assuming this burden o f flicat.
I f you started out o n
the general line that y o u are going t o afford t h e same
facilities which the banks are now receiving from their
State correspondents, t h e n y o u cannot aveid getting into a
tie-up, a n d having a tie-up o f e large amount o f your asteta,
A
Which could not b e estimated.
T h e r e i s no basés, n o rule
by which w e ean determine what this float might be.
I t seems
to me i t is & pretty broad proposition which i s involved
here a g t o what w e shall d o with the resources o f these
Federal Reserve Banks.
The Chairman:
I s there a n y further debate o n Governor
Ksins' asttcn?
lr. Seay:
T h e r e i s a sound principle involved i n that.
{ithins i f we put i t i n practice i t would keep inviolate
the reserve balances o f the banks. I
believe that whatever
plan w e adopt should k e e p inviolate t h e resorve deposits;
thet otherwise t h e fundamental vrinciple o f this a c t will
be vitiated. W h a t e v e r W e may desire t o do for the commerce
of the country and for the eouvenkénwe o f our menber banks,
I believe, that anless w e recognize that principle, t h a t
we are Walking o n dengerous ground.
Mire Wold:
i t seems t o m e i t %a condition which i s
confro t i n g these banks, instead o f a theory.
providen i n the lew for clearance o f checks. A
T h e r e is a
great many
of the member banks are expecting it. T h e public i s expcctint it. I
do not believe that t h e Governors - - - I , for one,
at least - - - d o not scare t o teke t h e responsibility o f de-
termining o r saying that the law will b e better with i t not
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Federal Reserve Bank of St. Louis
in there, a n d w e are going t o proceed upon thet, t o o w
ao”
minds, i s & course for the best interests o f our banks, a e
gavitess o f the law.
T h e y are expecting something, a n d un-
| “ess the Federal Reserve Board are willing t o teke the responsibility o f putting this question off to some future
time, I think w e heve got t o commence a clearance o f sane
Ssert upon a basis that will result i n the handling o f sone
items f o r t h e benefit o f our member banks.
T h e suggestion
of deferred credit will vitiate the whole act.
T h a t relates
to the collection of checks, and we won't get any.
The Chairman:
O f course the subject o f your present
debate h a s been dealt with b y the first resolution which
followed the statement o f whet w e understand t e be Judge
Hiliott's ruling, that deferred eredit i s interpreted b y
the counsel for the Federal Reserve Board t o b e a correct
principle authorized o r contemplated b y the statute.
liv. Yold:
J u d g e Elliott's ruling does n o t prevent u s
from securing the member bank's consent?
The Chairman:
Mr. Wold:
K o .
I f it is necessary to get ies consent, in.
order to handle the cheeks intelligently, i n a business 1ike\,
wey end in accordance with good business practices, then
i
we ought t o secure it.
The Chairman:
W e have a motion dealing with the ques-
tion of immediate o r deferred credits.
I f that motion i s
. adopted i t simply expresses the sense o f this mesting that
the principle o f deferred credit ani charge should apply.
if that motion i s lost then the matter ean be dealt with
on the basis which y o u suggest through a separate reso-
lution, which would contemplate e n immediate oredit anda
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Federal Reserve Bank of St. Louis
n
sherge b y agreement with the member benks.
M a y I suggest
that w e first a c t o n Governor deing’ motion?
ix. Rhoades: - Tf think it is proper te osll attention
to the fact that w e heve a n intimation from the Board, i n
the eirowlar which they sent us, a g t o what their views
are.
the Chairman:
T h a t would algo come u p for discussion
after setion is taken on this motion. I
am familiar with
the eiroular which you have i n front o f you.
to appear t o force a vote o n the matter
T f ao not want
i f you ere n o t
ready t o vote o n it. _Howeyer, t h e motion h a s been
Seconded,
and i t will b e necessery t o either adopt o r reject
it.
Yhat are your wishes as te voting on the pending reselution?
(There were requests for the question, )
The Chairnan:
A i l i those i n fever o f Governor Eating’
motion will please reise their right hends,
(There were three affirmative votes, )
The Chairman:
h o s e oppose will please raise
their
right hands.
(There were three negative votes.)
The Chairman: I n a s m u c h a s there are two
Governors
present Wae have not voted, I will exercise m y
prerogative
by esking for a n expression from all o f those
present.
Governor EKains' motion contemplates adopting t h e
prin-
ciple of deferred sradit and deferred charge. T h o s e who
ere not prepared t o vote are o f course entitled t o
vote i n
the megetive, s o s s to approach the matter i n
foue other way.,
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Federal Reserve Bank of St. Louis
- {@ they wish.
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Federal Reserve Bank of St. Louis
All those in faver of the motion will please raise
their right hands:
(There were three votes i n the effirmetive. )
The Chedweiae:
W h o s e opposed will please raise their
right hands.
(There were four votes i n the negative.)
The Chairman:
T h e r e are now four negative votes. I
did not happen t o notice who was guilty o f not voting thet
time.
Mr. Aiken: i
did not vote because I am not clear i n
my mind yet whether this i s simply a declaration o f what i s
éonsidered sound banking practice o r whether i t is what we
eropoese, a s a voractical proposition,
The Chairmen:
t o put into oparation.
T h i s i s a declaratim,
o r in other words
an impression, o f opinion o f Governor Kains a s t o what
should b e the principle governing clesrance under present
conditions. G o v e r n o r Aiken, I hope you will feel justified i n expression a n effirmative o r nezative opinion o n thet.
Mr. Seay:
M e y I say that m y vote expresses m y decla-
ration a s t o m y conception o f sound banking practices.
Hr, Aiken: I
should concur i n that.
9. Wells: I
Wold:
think we all would.
B u t thet i s not the question we are voting
Mr. Seay: 1
beg your pardon; Ithought i t was. T h a t is
the meaning o f m y vote.
She Chairmen:
G o v e r n o r Kains' motion i s that t h e
prineiple which w e believe should b e adopted i n undertaking
clearance within our own distriet should b e that o f deferred credit and debit.
ir. MeDougal:
T h e a t i s for the present, Mr. Chairman.
The Chairmen:
Yes.
ir, Aiken: I
The Chairman:
should vote yes ---
T h a t motion has been lost.
ir. 0 . Wells:
I f Governor Aiken wants t o vote i n
favor o f thet motion, that would make i t a tie, ani I think
he should b e given a chance t o d o Wok
The Chairman:
I f Governor Aiken cares t o vote i n favor
of the motion, possibly i t would b e proper t o put the question again.
I will a s a l l t h o s e w h e a r e i n f a v o r o f this d e c l a r a -
tion o f principle which should govern intra-distric®
ehearances and the principle that the deferred charge and
deferred chedit should apply, please signify b y raising their
right hands.
Mr. Aiken: I
cannot vote f o r thet, Mr. Chairman,
because I cannot tell whether I could do it or not.
The Chairman: I
will have t o rule thet Governor
EKains" motion has been lost. I
do not believe i t is going
to d o any good t o declare principles.
W e went t o d o somee
thing.
Governor Wold, I
believe y o u h a d a suggestion t o make
that looked like a possible motion.
Mr. Wold:
N o ; I
The Chairman:
have relieved m y mind, thank you.
T h e item we are now discussing i s the
item o f immediate o r deferred credit and charge.
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Federal Reserve Bank of St. Louis
Whet disposition d o you wish t o make o f that a s a
matter o f practice, t o be adopted i m making progress i n
clearances?
Mr. 0. Vells: l i r e Chairman, only i n the interest o f
progress, I
should like t o move that w e undert«<ke t o embody,
in whatever plane w e may adopt, the giving o f immedate
eredit o r credit eat the time the item reaches destination,
with the consent o f the member banks which m a y participate
in the hanéiling arrangement.
Mr. Seay: 3
I s not that immediate credit?
Mr. 0. Welle:
I t may be t at we will have t o sdopt
some zone system b y which items four o r five days removed
mey, i n a sense, b e given immediate credit, that i s immed-
diate eredit when they reach destination.
The Chairman:
D e I understand your m o t i o n m
t t o b e that
weshould adopt a plan of giving immediate eredit and making
immediate charge i n the case o f those banks that agree t o
that basis o f clesrance, e n d sdopt a
principle o f deferred
sharge and deferred credit i n the ease o f those banks who
decline t o agree t o the imuediste charge and eredit basis?
My. 0 . Welle:
my idea. I
N o , lire Chairman, t h a t was n o t exactly
realize that this m a y seem to be a paradoxical
‘guggestion, but I am of the opinion thet im some of the
a
distirots, a t least, where member banks are fer removed
from each other, that i t will b e airost essential t o their
entering into a plan b y which excescive deposits m a y be
created, t o defer the entry o f both charge m d eredit until
the i t e m h a s r e a s h e d i t s destination.
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Federal Reserve Bank of St. Louis
O t h e r w i s e o u r re-
sources w i l l b e i n v e s t e d
i n t r a n s i t accounts,
T h e more I
think about the q u e s t i o n f
e applying the zone pringiple,
especially t o the larger district, t h e more I am convinced
that a s @ practical eperetion i t is feasible and defensible.
Therefore I
would undertake t o open u p the facilities t o
include member banks that agreed t e the plan o f sending items
for credits o n some particular arrangement a s t o maturity,
and that they b e given credit a t t the time the items reach
destination; a n d upon that seme day the member banks, wonld
be charged with those accounts.
T h a t i s not exactiy the
same thing as deferred credit, i n the sense suggested b y
the plan proposed, not b y motion, but suggested b y Mr.
keins last evening.
The Chairman : T h e n your suggestion i s that the plan t e
be adopted should contemplate t h a t t h e credit should b e made
after the lapse o f sufficient time for the item te reach the
place o f payment, a n d t h e charge should b e made after t h e
iapse o f & similar length o f time; ani that the arrangement
Should be based upon an agreement with seach bank as to the
amount o f time allowed.
it. 0. Wells:
W i t h the agreement o f each bank t o the
pian
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Federal Reserve Bank of St. Louis
Chairman:
D o you offer that as a resolution?
O. Wells: I
Chairmen:
Fancher:
Chairman:
will offer i t as a resolution.
i s that resolution seconiead?
F o r the sake o f debate, I will second it.
I s there any debate?
Seay: S u p p o s e there were 250 one way, 250 the
other way, a m i 1 5 0 half-way between.
Mr. O - Wells:
Ur. Seay: I
D e you mean 150 points?
mean banks.
Mee O . Welle: I
different zones.
would have, perhsps, f o u r o r five
M y idea was t o make our own schedule and
commit it to the member banks ani include those banks that
agree t o it into the handling arrangement.
My. Paenucher:
M a y I inquire h o w y o u would d o your ac-
counting?
Mir. Himiiia O. Wells: I
counts.
would d o my accounting b y two ec-
T h e plen contemplates that very clearly; that is, a
reserve account which i s being t
e
e e e each d a y from the
maturing zone, e n d a transit account.
The Chairman:
G o v e r n o r Wells, d o y o u believe that
such e practice, which would reduce the time substantially
one-halg o v e r that contemplated b y Governor Kains' motion,
would avoid the investment o f any considerable part o f the
esets o f the bank i n the float which, presumably,
would
also b e eut i n half?
Mire O-« Wells: I
and I
recognize the principle involved there,
think i
t would, f o r this reason; t h a t i t does not o p e n
it u p t o a vast member o f banks immediately, but i t is the
building u p o f s par list a s i t would b e obtaining t h e econ-
sent o f the banks gradually and would b e oi vous you @ chance |
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Federal Reserve Bank of St. Louis
+o control your resources.
The Chairman:
M r . Hendricks, what d o you say as to the
effect o f such a plan upon the float?
<2
Mr. Hendricks: I
think “ 1 would n o t change t h e float
at all.
Y o u would have t h e same amount o f float.
Wells:
I f a benkynsitueted three dsys away knows
that u p o n the morning upon which your letter reaches h i m
that h e «ill be charged with thet amount, does h e not have
a better opportunity f o r anticipating,
o r rather, a
better
opportunity t o k e e p h i s a m o u n t s u f f i c i e n t l a r g e t o m e e t t h a t
charge, than i f the charge was being made three days beforehand a n d t h e r e w a s a n accumulation
o f three d a y s m a i l against
him?
The Chairman:
T h a t question suggests thet you recognize
the necessity for member banks, entering that arrangement,
keeping e x c e s s i v e r e s e r v e d e p o s i t s ?
lire O. Wells:
accounts.
T h a t I
Yes.
I n order t o not deplete reserve
think w e s made clear i n m y suggestion,
whieh they would assent.
to
I n mmcother words, m y plan will b e
worked out as far as possible o n paper, through the creation
of a schedule; i t will b e submitted t o them and those banks
that feel that ont o f this system i s going t o come e handling
arrangement, and who are willing t o enter into i t i n the
same spirit i n which w e are n o w considerkig it, would become
participants, a n d w e would t h e n b e relieved o f being i n the
attitude o f not doing something practical which would give
themet least a n opportunity f o r handling their items, o r
some items a t least, a s SUENERATS 6 8 they are now being
handled.
Ghe Chairman:
I f the meeting i s ready t o take a vote
om this question, I willteke the liberty o f dictating a
resolution.
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Federal Reserve Bank of St. Louis
O t h e r w i s e t h e record will n o t b e left clear
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Federal Reserve Bank of St. Louis
for debate.
Mr. Seay: I
do mot ksow that I am addressing myself
to the particular point, e n d I may b e tardy i n bringing this
point out.
I t seems t o m e that Chicago h a s recognized the.‘
eoprect principle i n this business, a n d that i s that there
shall b e a deposit independent o f the reserve f o r t h e menbéx
banks a n d f o r the country banks w h o wish t o d o this business.
I believe the bank ought t o provide a protecting deposit
in excess o f the reserve.
idea s o closely that I
stating i t now.
reserve.
T h a t thought coincides w i t h this
may b o t b e entirely o u t o f order i n
S h e only safe thing t o d o i s t o protect t h e
I f the country wants t o elear checks a n d want t h e m
at immediate credit, let them provides the funds with which t e
do it.
W e will d o it at @ minimum cost and i n the most
direct way.
Yells:
T h e difference between m y suggestion a n d
the one o f Chicago i s that they are entering into a voluntary
arrangement with certain banks --- =m@R an underwriting proposition --- while I
distribute i t over a l l o f the banks that
adopt o r cane into t h e handling arrangement; a n d through
their consent t o the plan, which i s explained t o them, w e
are s e & very much vetter position t o insist u p o n their
keeping excess deposits t o the amount o f reasonable antici-
pation o f the charges t o their account. T h e a t i s better, i n
my Opinion, t h a n i s n o w being donw i n St. Louis a n d Kansas
City, t o some extent satisfactorily.
A t least, there i s some
mprovement being made.
ir. Wold: S p e a k i n g t o that point, m y thought i s that
the
it i s only practical w a y t o handle checks.
I t i s a basis
upon which w e would b e very glad t o open up.
N o t e a de-
ferred credit but a n immediate eredit; n o t a deferred charge
but a n immediate charge, and require the member banks whose
checks you are handling t o maintein sufficient funds there
to meet t h e checks.
open u p w i t h i n a
U p o n that basis w e would b e ready t o
week, b a t a
a n y other basis I
4@i n o t k n o w
when w e would b e able t o open up.
The Chaiyman:
i n erder t o get action o n your sug-
gestion i t will h e necessary t o offer a n amendment t o Governor Velie’ resolution, otherwise t h e o n l y w a y would b e t o make
& seperate resolution sfter w e heave rejected Governor Vellis'
reeolnution.
irs 6. Wells:
M a y I aa@4 that the idea o f making the
| eharge a n d eredit come a t the time o f destination w a s t o put:
cheeks from various distances o n s parity.
I n other words,
if we gave credit t o a bank located a t o u r door immediately
for a11 t h e items which i t might g i v e us, however f a r the
volume o f them might b e removed, s o far a s their place o f
destination would b e s o n e e r n e d , w
e open u p t o h i m the opprortunity t o get out o f u e the proceeds o f those items much
more quickly then w e can get the proeesede in.
(Further @iseussion followed: )
The Chairman: I
think w e ought t o bring the dissussim
to a focus i f possible o n the point o f time o f charge and
eredit. I
would like t o state for the record, i f I might,
the status o f the discussion.
resolution,
i f adopted,
I n the ease o f Governor Welis'
i t would certainly have t o b e uniform,
\ :
because one bank might b e o n the border o f his district f o u r
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Federal Reserve Bank of St. Louis
\
Ne
days away from his bank, i n point o f time, a n d it might b e
within a
mile o r less o f a bank which was just o v e r t h e
border i n the adjeining district w h e r e t h e immediate credit
plan prevailed,
s o that o n e bank would have t h e advantage
in t h e r e s e r v e c o l l e c t i o n o f a
considerable n u m b e r o f d a y s
oyer t h e bank i n Governor Wells’ district.
It seems t o m e w e have g o t t o make progress b y adopting
or r e j e c t i n g a
principle,
b y taking #
vote o n it, e n d i f w e
reject it, take u p the next principle.
The question before u s o f Governor Wells' motion i s a s
follows?
That b y agreement w i t h t h e m e m b e r b e n k e
a n arrangement
be made i n @ach district f o r t h e crediting o f items after
sufficient time has elapsed for the checks to reach their
destination, a n d the charging o f items after t h e allowance
of sufficient time fer the checks t o reach their destination;
end that i n adopting that plan each member bank. b e required
te enter inte a n agreement t o keep i n a separate t r a n s i t
aceount a
gum sufficient s o that the reserye aecount shall
not b e cverdrawn
a s a result o f extess charges against the
account.
Governor Wold, i n debating the motion, states that-in
his district h e i g ready toe at ence adept t h e plan e f i m
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Federal Reserve Bank of St. Louis
mediate charge and immediate eredit proviaed the member
banks sare willing t o enter into a n sgreement t o keep excess
balances 8 0 that they will b e carrying a
float, a n d that
their reserve account shall not thereby b e overdrawn.
That i g the issue, a n d I
a m coing t o ask y o u i f y o u
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Federal Reserve Bank of St. Louis
will vote o n Gevernor Wells' resolution, provided Governor
VolG d o e s n o t o f f e r a n amendment,
I f h e offers
a n eaxendment
we will tisem vote o n his amendment a n d subsequently vote o n
Gorernor Wells’? reselution.
Mr. Wold:
T h a t will save time, a n d I offer i t a s e n
% t o Governor Wells’ m o t i o n .
The Chairmant c G o v e r n e r W e l l s s t a t e s t h a t h e d i d n o t
intend his reselution t e embody a n y declaration o f method
of accounting,
a s i t might b e found necessary,
te cerry excess balances i n transit account,
i n some cases,
o r i t might b e
more desirable t o carry the excess balances i n the reserve
account.
Are you ready for a vote o n the matter?
ur’
a ) T h e r e i s one thing I would like t o say.
i t
appears t¢@ me that Governor Weld's metion i s s ® much more
in the nature o f ao substitution rather than 4 m amendment,
that I
will offer that statement t e y o u for parliementary con-
sideration,
The Chairman:
G o v e r n o r Wold's motion,
a s I interpret
it, amended t h e resolution e f Gevernor Wells simply t e the
extent o f mahm making t h e charge s m d eredit immediate instead
of after t h e allowance o f time f o r t h e items t o reach destination.
i t i s not a
new resolution because b o t h resclutions
contemplate t h e establishment o f excess balances f o r the
purpose o f making t h e charge e n d credit.
Mr, Seay: G o v e r n o r W o l d means t o make i t applicable
te ali the banks i n the District a n d net t e benks that exere
cise their privilege o f judgment.
The Chairman:
I s that t h e sense c f ite~-
I f i t must b e considered
as a
substitute
gn e n t i r e l y%
.
+ 2 5
your
Wold’*s amendment
a
t e
w e t
= »
a v CéenLi o n
t o Governor Wells
senond i t .
much p r e f e r
it @8 an amendment s i m p l y e
t save
rress. I
am perfectly willing
separately.
I would like
face o f o b j e c t i o n I
as a n amendment a n d w i l l t h e r e f o r e
Governor Welle’ reselution.
resolution w a s put a n d lost.)
Chairman?
G o v e r n o r Wold,
Governor Weld: Y e s , sir.
That
i t e m s b
e accepted
o r:
n
d o I
o
understand
v
s
e
x t h e motion?
a
c
h
for i m m e d i a t e e r e d i t a n d
benk accounts, w i t h t h e requirement t h a t t h e member
Senk maintain sufficient funds, a s shown b y t h e books o f the
Federal Reserve Bank, in. e x c e s s o f their legal reserve,
te
protect a l l s u c h charges,
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Federal Reserve Bank of St. Louis
hairman:
Y o u have heard t h e motion,
I s there a
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Federal Reserve Bank of St. Louis
H e a
:
oa
S e e
Chairman:
r
,
moticn i s s e c o nded,
G o r e PLOT
= =
5a e S
is i s a
ee
re
Samething i n
i &Ls
ap ¥ Pez ey"
country
G ahs
S e a r a n c e s
G feel
a
c a n v e y e d
Machisvellian
3}
vu
there
. w
that
in m a n y
principle u p o n
tat} &
ye}
WALCH
exper jienee: s h o w s t h e t w e
¢ principle,
Gepart f r o m i t
n
s1eg.
me
i Oe
1em f u r n i g h *
eee
direct
c h a r tgS e
By 4
e
L e w e hs t
be protected;
gafe
™haargb
y
thed. a n d w e w i l l m a k e
sit-prineiple s h o u l d
* Gop eeie y ee
i+
cannot
find a n y o t h e r
Carty
Sarz ¥
float t h e m s e l v e s , I
a m 3 Filling
principle, a n d I cannct
g
wre
n oie
i v
a
l
m i n d
any o t h e r principle,
Mr, H e D o u g ére al
Governer
motion tentai:
received
a3
we &
c
h
a
g
permission i s t o b e
from
immed:
eC.
Mr
Wella,
T
h
r
e
Woldts
banks
o o
their e c e o u n t s
can
d
e
metion
Goes n o t
Myre Wola?
state
noe.
Lod oOn o t t h i n k ,
SOCcssary
Myjudgement is that the)
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Federal Reserve Bank of St. Louis
Federal Reeerve Beard should require it.
Mr- Aiken:
A s IT understand Gevernor Wold's motion i t
is almost e x a c t l y t h e s a m e s u g g e s t i o n
a s contained
i n this
tentative cireular, N o . 107, o f the Federal Reserve Board.
The Chairman: I
will a s k the stenographer t o read
Governor Wold's motion again,
I t has been seconded,
(The reporter thereupon read a s follows?)
"Mr. Wold: I
new offer t h e motion that items b e
accepted o n member banks within each district f o r immediate
eredit and thet they be immediately charged to member
bank a c c o u n t s , w i t h t h e requirement that t h e member b a n k
maintain sufficient funds,
a s shown b y the books e f the
Federal. Reserve Bank, i n excess o f their m legal reserve, to_
protect all such charges.*
Wr. Seay? D e e s that involve i n your mind the twoacceunt system?
Mr. Wold:
N o , i t shovld b e made a s simple a s possible,
t® aveid complications.
Mr. Fancher:
W i l l t h a t contemplate o n l y t h e member
banks i n each district?
Mr. Wold:
I n each district, confining ourselves e x -
clusively t o o u r o w n districts.
Mr. 0. Wells: E x c e p t outside abiereeasihs teed
Mr. Wold:
W e will n o t accept t h o s e ,
The Chairman: I
feel obliged t o eall your attention
to the fact that t h e counsel f o r t h e Federal Reserye Beard
has ruled that items cannot b e charged against t h e reserve
account o f member banks without t h e y give their assent t o
deing so, P o s s i b l y we should not adept a resolution which,
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Federal Reserve Bank of St. Louis
ts face, w o u l d contemplate a
practice w h i c h viclates
ecunsel h a s advised i s the interition o f the Federal
Reserve A c t .
i f . you a r e willing
t e change y o u r m o t
it will appear that this plan shall b e adopted provided:
it does not conflict w i t h the statute, o r , second,
dees c o n f l i c t w i t h t h e s t a t u t e t h a t i t s h a l l b e b a s e d
upon agreement. w i t h e a c h m e m b e r b a n k ,
that sugrestion.
Mr. Wold: ,
Mr.
W e l d
M
a
y I
submit t h a t w i t h o u t e x c e p t i o n ,
with t h e exception o f this requirement w h i c h i s now being
injéeted i n t e t h e p l a n
n
o r inte t h e r e s o l u t i o n - - - G r rather
suggested
b y the resolution - = - that w e w o u l d
l
peet
a
exactly the game thing a s St. Louis and Kansas
attempting t o d e now.
Weld: W i t h o u t t h e requir ene
essential thing.
Wr. O . Yelle:
in actual operation
except that they a r e net sueceeding i n doing it.
Mr. Wold:. I
did not understand t h a t t h e y a r e requiring
excess balance either i n Kansas City e r St. Louis.
The Chairman: I
think o n t h a t p o i n t
w e ought
t e have
a better understanding before w e vote o n this métion,. W i t h
the amendment that Governor Wold has been willing t o aceept
to his resolution i t appears t o m e that t h e differe
tween t h e proposed plan a n d t h e plan which w a s adopted i n
Kansas City a n d S t e Louis i s that i n the o n e case t h e matter
is o t taken u p with the member banks a n d made t h e subject o f
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Federal Reserve Bank of St. Louis
some kind o f a special agreement with regard t o their reserve
accounts, a n d i n the other case, t h a t i s Kansas City a n d
St. Louis, t h e y have just gone ahead clearing checks,relying
upon t h e i r a b i l i t y
t e get a
sufficient b a l a n c e f r o m t h e
member t o cover t h e excess charged t o the account.
district, I
I n our
think, i f w e wndertoek c l e a r i n g o n the basis
contemplated b y Governor Wold's resolution,
w e would first
insure t h e maintenance o f sufficient balances b y these banks
to whom w e would give immediate credit a n d against w h o m w e
made immediate charge; a n d with those banks which were not
willing t o enter into such a n agreement w e would doubtless
establish either a
basis o f deferred charge o r some other
methed e f dealing with those particular banks, s e that there
would b e n o danger o f the impairment o f the reserve account,
Nr. Wold:
T h a t w a s m y thought, Governor Streng.
The Chairman:
M a y I ask i f you are n o w ready t o vote
on Governor Woldts resolution,
a s amended b y the brief
statement t h a t I have p u t into t h e record?
Mr- Mexay: I
would like t o read a letter, i f I may,
from one o f our correspondents.
The Chairman:
I s i t direetly o n this question?
Mr. McKay: Y e s , sir,
tically.
I t shows h o w i t works o u t prae-
T h i s correspendent h a s endeavored t o maintain a
sufficient amount a t all times with u s s o that h i s checks
will b e taken care o f a n d h e would have his reserve requirement w i t h us.
works out.
I t might b e interesting t o see just h o w i t
H i s minimum reserve requirement i s $120,000.
(lir, Meyay thereupon read inte the record the letter
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Federal Reserve Bank of St. Louis
ra
Ce }
Mevay: W i t h e u t reading these figure m i g h t s a y
that t h e balance, according t o the }eoks o f this corresponcent,
w a s never less t h a n , ; 0 0 G , a n d
as $289,000.
has c a r r i e d
T h e reserve requirement i g $120,000
o n his books practically
& @ half t i m e s
balance,
a n average
h i s r e s e r v e requirements.
o f two
. C n our books
a t t h e highest point, w a s $152,000,
a n d a t the
lowest point it was cverdrawmn 316,090.
less than $100,600 s11
idea a s to how the thine rork
u t i n actual practie¢, when
& member bank i s making every effort t o kecp i t s reserve
Chairman:
a
oes
so frequently that I
t matter has been put into the record
a m going t o ask y o u t o aasume t h a t w e
understand h o w i t works, a n d t r y t o get action o n the m o t i o n
Mr. MeKay: I
thought i t might b e a practical illustra-
ef interest.
The Chairma
O
f course those o f u s here w h o a r e d i g
cussing t h e matter have this i n mind,
i n rereard t o this
check plant T h a t y o u are eontemplating t h e Biving o f immediate credit o n all items a n d deferring t h e charge f o r
two days; t h a t t h e fleat,
s o t o speak, w i l l b e carried
by voluntary excess deposits a t certain o f the Chicage banks,
There a r e s o m e o f u s h e r e t h a t b e l i é v e t h a t s o m e o f y o u r
good friends i n C@icago a r e going t o get tired, after « a
While,
o f carrying t h a t load, which m a y b e considerable,
Se i t seems t o m e --~- and this i s just m y personal opinion---
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Federal Reserve Bank of St. Louis
that that plan goes exactly t h e wreng way, a n d that i t
forces upon the Federal Reserve banks not a normal float
but a n exaggerated float.
I f you give immediate credit
and d e f e r t h e charge i t seems t o m e that will work a l l
ageinet t h e bank.
Mr. MeDougal:
T h i s plan, a s I have stated before,
is only a temporary p l a .
W e realize t h a t t h e banks m a y
withdraw their suppert a n d w e realize that w e may have techange t h e plan later.
periment.
I t was only undertaken a s a n ex-
I t was thought o u t deliberately a n d carefully,
efter consultation with many o f the member hanks, a n d it
was considered w i t h great c a r e b y our executive committee,
I do not believe that would remain a permanent p l a n , certainly not after t w o o r three years, anyhow; b u t i t was cour
desire t o try i t out temporarily.
The Chairman:
A r e y o u ready for a
vote o n Governor
Weld@is resolution?
(Upen direction o f the Chairman the stenographer thereupon repeated Governor Wold's motion e s follows: )
“Governor Wold: I
now offer t h e motion that items
be accepted o n m m member barks within each district f o r
immediate credit a n d that t h e y b e immediately charged t e
member b a n k accounts,
with a
requirement t h e t t h e m e m b e r
banks maintain sufficient funds,
a s shown b y the booke o f
the Federal Reserve bankg i n exeess o f their legal r e s e r v e , .
to protect a l l such charges,”
The Cheirmant
A r e y o u ready t o yote o n the resolution?
Mr. McDougal:
W o u l d t h e adoption o f that resolution
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Federal Reserve Bank of St. Louis
bind each bank t o operate under t h e plan a s outlined i n the
resolution?
1 Chairman:
M a y I suggest this, f o r t h e
the r e c o r d a n d t o a n s w e r t h a t inquiry,
understanding
i t simply being m y
o f w h a t i s l i k e l y t o happen:
We are going t o submit «
Reserve Board. I
recommendation t o the Federal
t h i n k t h e Federal R e s e r v e B o a r d i s l i k e l y
to t a k e t h e g r e u n d
te be uniform, I
do not believe that this immediate matter
will b e o r should b e undertaken b y the Federal Reserve banks
some ruling from the Federal Reserve Board,
A l l
it will d o will b e t o express t h e epinion o f the gentlemen
here
i n t h e reom, I
d o not e v e n assume
Opinion o f t h e directors
it s e e m s + o m e
e f our bank.
s h o u l d undertake
t o express t h é
h a t being t h e case,
t o express t h e opinion o f
this r o o m t o 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 a w a i t
termination
o f what t h e uniform
policy should be, i f they decide i t should b e uniform, a n d
it seems t o me, i f there i s a n y objection o n the part o f a n y
ane o f the Federal Reserve banks, t o t h e adoption o f such a
uniform p l a n a s t h e B o a r d d e c i d e s upon, t h a t t h e y s h o u l d
then g o t o the Federal Reserye Board a n d make their position
clear t o the Board,
Mr, MeCord: I
understand that under that resolution
it i s optional w i t h the banks whether t h e y shall e n t e r that
agreement
o r not,
Mr. Wold; Y e s .
I f a member bank a t a n interior point
wants i t s checks paid a t the office o f the Federal
Reserve
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Federal Reserve Bank of St. Louis
on a
certain d a y t h e y s h o u l d p r o v i d e t h e f u n d s t h e r e t o
it - - - a n d n o t t w o o r three d a y s afterwards.
I
f they
want their cheek paid three days late, after i t i s presented
to the Federal Reserve Bank, t h e n they don't have t e maintein
the funds.
Mr. MeCord: I
just wanted t o know i f i t w a s a n option-
al preposition.
Mr. MeDougal:
position, I
present.
I t happens that I
a m i n a different
think, f r o m a n y o f the rest o f the Governors
Y o u know our plan; y o u know t h e plan was formul at-
ed b y the Board o f Directors,
o r b y the Executive Committee,
and has been forwarded t o the Federal Reserve Board f o r their
consideration. I
think o n that account I
different position f r o m the others here.
a m probably i n a
W e considered t h e
matter o f asking o u r banks t e maintain excess balances suf-
ficient t o take care o f their float. S o m e o f them undertook
te d o i t i n good faith and found i t was impossible m m t e d o
so fer t h e reason that t h e y themselves could net guess what
the fleat w a s going t e be, a n d i t resulted i n some everdraft.
The Chairman: G e n t l e m e n , t i m e i s pressing u s and I
will take t h e liberty, w i t h Governor M c D o u g a l s
' permission,
if h e will give it, o f m u m making a
te the Federal Reserve Board, I
statement o n this matter
understand Governor
MeDougeal's position, inasmuch a s w e are striving f o r u n i f o r m
ity,
that I
4 & f h e permits m e t e make a
was r e q u i r e d
statement, I
t o express w h a t I
doubts o f s o m e o f t h e G o v e r n o r s
should feel
understand
t e be the
o f the Federal R e s e r y e B a n k s
in regard t o the soundness o f the che p l a n .
I f Governor
MeDougal d o e s n o t desire m e t o make a n y statement I
will n o t
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Federal Reserve Bank of St. Louis
do so, W a t u r a l l y h e will pursue whatever course h e thinks
preper i n the matter,
would b e very gj.ad t o have y o u make
Mr. McDougal: I
to the Board
any statement, that y o u s e e fit, Governor Strong,
to your opinion,
i n regard
o r t h e opinion o f t h e Governors, regarding
our plan,
was only suggesting that, Governor
The Chairman: I
McDougal,
i n order that t h e ideas o n this question might
be presented; a n d certainly I
fairly,
will t r y t e pregent t h e m
i f that i s your wish.
Mr» MeDougals
I t is.
The Chairman? A r e you ready for the question?
(There were requests for the question.)
The Chairman:
A l l those i n favor o f Governor Wold's
motion, which has been seconded w i l l please raise their
right hands.
(There were six affirmative votes.)
The Chairman: T h o s e opposed will please raise their
right hands,
(There were three opposing negative votes.)
The Chairman:
T h e motion appears t o be carried.
May I suggest, w h e n this matter i s reported, t h a t these
gentlemen w h e o p p o s e t h e m o t i o n s t a t e t h e i r v i e w s
to the matter, explaining,timmm
i f they will, that they
were conscientiously endeavering t e arrive a t a
of the very perplexing matter. I
i n regard
solution
will prepare t h e w a y fer
them b y explaining that t h e conditions i n each district
appear t o be different a n d peculiar t o that district.
Now, gentlemen,
w e have n o t discussed t h e question o f
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Federal Reserve Bank of St. Louis
the possibility o f charges being imposed for the services
rendered
checks.
b y Federal R e s e r v e B a n k s
i n c o l l e c t i n g a n d c l earing
l i v e y o u a n y views t e express t o the Federal
Reserve Board a g t o the possible necessity f o r making chargep?
Mr. Wold: I
move y o u that that b e ieft until t h e
method o f handling t h e m b e determined.
W e d o not k n o w what
the charge would b e o r how i t ought t o b e proportioned until
we k n o w t h e m e t h o d
b y which w e a r e g o i n g t e handle t h e
checks,
Mr. G . Wellst
W e went t o adviee t h e member b a n k a s t o
the existing plan o f churges, d e we not?
he Chairman?
I
s i t your intention b y that motion
to enter inte this agreement w i t h t h e reservation that a
geale o f charges will later b e imposed for t h e services
rendered b y the F e d e r a l Reserve Banks i n collecting checks,
but that n o charge will b e made a t the cutset?
ir. Wold:
M y thought is, i f the banks avail themselves
of the privilege which w e have just voted upon, o f maintain-
ing balances sufficient i n amount t e take care o f the items
received f r o m d a y t o day, t h a t t h e b a n k s e o u l d v e r y w e l l
afford t o a s s u m e t h e c v e r h e a d e x p e n s e c o n n e c t e d w i t h t h e
handling o f the checks; b u t t h a t remains t o b e worked o u t
later. I
theught t h a t w e might t r y i t out o n that basis.
But I do net think w e ought t o g o o n record now a s t o what
we will de.
The Chairman:
T h e n your resolution i s that w e defer
the consideration o f the possible charge t o b e made until w e
have had experience under this plan, should this plan be
adepted a n d put inte effect?
Mr. Wold: e h a t was m y thought i n offering the motion,
Governor Strong.
The Chairman:
t s that motion seconded?
(After a pause?)
Your motion appears t o die a
natural death f o r want o f
& second.
Gentlemen, I will now ask you t e conaider whether you
desire t o make a n y recommendation t o the Federal Reserve
Board i n regard t o the system o f fines o r penalties t o b e
imposed u p o n F e d e r a l R e s e r v e b a n k s w h o s e r e s e r v e a c c o u n t s
may become impaired b y the operation o f this plan?
Mr. MeKay: M a y I ask if the matter ef charges has been
passec altogether?
The Chairman;
N o a c t i o n h a s b e e n t a k e n o n t h e matter,
Mr. MeKay: I
should think, i f you are going t o ask
the benks t o agree t o have their aceounts charged with these
items, t h e t w e c u g h t t o t e l l t h e m a t t h e t i m e w h e t h e r t h e r e
is going t o be a n y charge b y t h e Federal Reserye B a n k f o r
this clearing service,
The Chairmant W i l l y o u make a
motion t o that effect,
Mr. Meray?
Mr. Meray: I
move t h a t t h e member barks b e charged
the c o s t o f h a n d l i n g t h e i t e m s t h r o u g h t h e F e d e r a l R e s e r v e
banks
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Federal Reserve Bank of St. Louis
o n t h e b a s i s o f s o m u c h p e r item.
Mr-e Seay:
W e cannot d o that under t h e law,
The Chairman: I
Mr. McKay:
ao net k n o w whether w e c a n o r not,
A n d make t h e charge o n the basis o f s o
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Federal Reserve Bank of St. Louis
much
Chairz
arn W o u l d you add
rman
m
o
t
i
e
the Federal
Kay? I
will
1
t
.
T h e berge provides
at charges shall b e made o r may b e made.
The Chairman:
T h e n this
of t h e Pederal R e s e r v e
banks m a k e a
charge t o
n
b
e
e approximate
h
r banks
. of h e w e s
of p e r f o r m i n g % }
t h e # F R e s e r v e 5oarad
panks, p r o v i c
the l a w a u t h o r i z e
drawn?
On t h e b a n k u p o n w h o r s
bank u p e n w h o m
c
r
a
w
n
}
not k n o w w h a t
gentlemen h a v e
+t
S
.
wigy
r
C a n ¢
a
d
i
s
t
i cts,
r
Ww
g
ome
S England
B
and
balances
handling t h e s e i t e m s ,
i
n
v
i
c
t
o
v
e
r the
e t h e m t e come o n u p t o
New England a n d t r y i t ( L a u g h t e r .)
The C h a i r m a n : i
t
h
e approach
of a
banking @mmam A r m a g e d d o n h e ( L a u g h t e r ) .
Governer Mefay; I
motion, I
have not heard a
sec
will give fourteen seconds.
is Mr. M c K a y ' s m o t i o n s e c o n d e d ?
(After a
pause? )
Your m o t i o n f a i l s f o r w a n t o f a
second.
r e g ecular
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Federal Reserve Bank of St. Louis
Is t h e r e a n y discussi o c : .
the q u e s t i o n e f i m p o s i n g
w i t h r u l i n g b y t h e Chair t h a t
charges f o r t h e services,
only a motion will b e now entertained?
g o into t h a t matter.
move t h a t w e d %
Mr. Seay: I
%
The C h a i r m a n :
take n o action.
_—
S
=
3
seconded?
Governor
Seay offers a
resolution t h a t
on
S
The Chairmen:
t h o s e i n faver o f the motion will
please s a y “aye".
”
i
i
i
(It w a s ampocs si :
h a s .
"
—
b
tea determines
e
y
aPoha
the
Lemenrn
>
ising t h e i r r i g h t h a n d ,
(There w e r e f o u r v o t e s
i n t h e affirmative.)
I will ask these opposed t o signify
hand.
(There were four votes i n the negative.)
Mr. Wold: I - d o not think Governor Aiken got his vote
in-in time.
t o h e counted,
fhe Chairman:
I n t h a t e v e n t -I-will a s k f o r a n e t h e r
vote,
ALi those in’favor o f the motion will signify b y raising
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Federal Reserve Bank of St. Louis
T h e motion t o defer action o n the matter
ot
The Chairman:
charges
i s carried.
Are you prepared t o comment o n the other subject
suggested, n a m e l y , “ S h a l l
w e make a n y recommendation
to
sderal Reserve Board i n r e g a r d t e t h e fines o r other
imposed u p o n m e m b e r b a n k s w h o s e r e s e r v e
account m a y b e r e d u c e d b e l e w t h e r e q u i r e d reserve,
a s t
result o f the adeption o f this plan?
wr, Seay: I
move
under consideration t h e question e f fines t o b e imposed u p o n
member b a n k s f o r n e t m a i n t a i n i n g t h e i r r e s e r v e balances.
Mr. Fancher: I
secend that
(Informal discussion followed o n the motion.)
The Chairman: Gentlemen, there i s a motion before
Conference,
I f Gevernor S e a y d e s i r e s
t o elaborate u p o n
at motion, t h i s i s his opportunity t o d o se, otherwise I
ask for a
yote o n his motion.
seems to m e
wr. Aiken: t
whole theory. I
m
m
o
t agree t o
d e not believe i t would b e pessible f o r t h e
Federal R e s e r v e b a n k s
tained.
a
t o see that t h e reserves
a r e main-
i I think t h a t d u t y r e s t s i n t h e e f f i c e o f t h e
Comptroller o f the Currency.
I t lies with the office o f
the Comptroller o f the Currency t e force a
banker t o maintain
his reserve.
I think that t h e banks throughout t h e country a r e disturbed a n d h a r r a s s e d
b y these n e w regulations a n d t h e l a c k
ef facilities that t h e y h a d hoped f o r f r o m t h e Federal Reserve
Banks, a n d I think i t would a d d a very serious f a c t o r t o
if
that situationmim t h e proposition t o fine t h e m for small
i n their r e s e r v e s w a s brought before t h e m a t
deficiencies
this time. :
fhe Chairmant G c v e r n o r S e a y h a s n o t s u g g e s t e d a n y
elaboration
o f h i e motion.
Mr. Seay: I
A r e y o u r e a d y f o r t h e question.
think i t might b e left there, sir; a n d
the whole subject put o n the shoulders o f the Federal
Reserve Board, where the Act puts it.
The Chairman:
A r e y o u ready t o vote o n Governor Seay's
motion?
Mr. MeDeugal: I
do not sympathize with the term
“fines” i n this case, for the reason that when w e d o begin
operations o n a larger scale, t h e s e banks a r e going t o lay
themselves o p e n t o fines over which they have n o control
“whatever. I
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Federal Reserve Bank of St. Louis
am afraid if they had to comply with some
arbitrary regulation o f that kind that i t would work a hardship u p o n b a n k s t h a t s h o u l d n o t b e i m p o s e d u p o n them.
W e
find that n o mutter now they feel i n regard t o uncertaking
to keep their reserves good =-- a n d w e have fifty Federal
Reserve c i t y banks n o w --- a n d that notwithstanding their
willingness t o undértake t e d o so, that t h e y d o get down
on their reserves every time. I
f they were t o b e
thinki
b fair, because
subjected to fines that it would h a r d l ye
they act i n good faith a n d t r y t o maintain their reserves.
Mr. Wold:
T h e purpose o f this i s t e protect t h e bank
and to punish the flagrant a n d deliberate action i n allowing
the reserve t o get d o m .
W e have h a d two o r three cases
where they have deposited $200, and the Bank Examiner has
gene around a n d found that t h e y should have deposited $5,000.
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Federal Reserve Bank of St. Louis
They simply wanted t o keep u s quiet.
T h e s e fines should
apply t o cases where t h e y deliberately failed t o keep t h e m
up and should not apply t o technical violations.
The Chairman? G o v e r n o r Seay's motion w a s seconded.
Are y o u ready t o vote o n it.
(There were requests for the question.)
The Chairman? I
will a s k these i n favor o f t h e motion
to raise their right hands.)
(There were three affirmative votes.)
The Chairmant I
will a s k those opposed t o
to r a i s e t h e i r r i c h t hands.
(There were fcur negative votes.)
The Chairmen:
T h e motion i s lost.
Mr. MeCord: I
a m epposed t o this Board putting a n y
fines o n my members for things that they cannot help.
The Chairman:
I s there a n y other phase o f t h e matter
of clearances that c a n b e discussed i n the apace o f five
minut es?
Wr MeCord: I
want t o rise t o a question o f personal
privilege o e another matter,
when y o u h a v e @
i f I may b e permitted t e d o g e
concluded t h e d i s e u s s i c n
The Chairman:
o n t h i s subject.
I s there a n y further diseussion o n the
question o f clearances, b e f o r e w e k e e p c u r engagement w i t h
the Federal Reserye Board?
Mr. MeKay?t I
would like t e ask i f t h e matter h a s
been definitely decided that w e are not t o take items d r a w
on member banks outside e f cur o w respective districts?
The Chairman: I
have carelessly omitted t o ask for
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Federal Reserve Bank of St. Louis
an expression o f opinion a s t o
y t h e clearance
e
arrangement should b e extended outside o f the respective
before t h e
as t o t h a t
matter?
Mr. Fancher:
T I woul d offer a
resolution that -we
recommend t o the Federal Reserve Board.that t h e operations
we m a y undertake b e confined t o the respective dis-
The Chairmen:
I s thez a
Mr. Aiken: 1
second
pecond t o t h a t motion?
Mr. Pancher: E x e e p t
gerve banks.
Mr. MeCord: E x c e p t items
serve b a n k s
o r t h e member b a n k s
o
t
h
e
r Federal Ke-
i n t h a t city.
Mr. Fancher:
Mr e 0, Wells:
Y e cannot a c c e p t i t e m s
o n member b a n k s
in t h e t c i t y .
Mr. Wold: E x e e p t
Mr. MeCord: I
i n t h e settlement
o f balances.
will n o t encumber your motion, a n d will
withdraw
I w o u l d l i k e t o o f f e r a n amsendn
Goyernor F a n c h e r ' s m o t i o n t o t h e efficct t h a t t h e e x c e p t i o n
be made i n that f o r t h e reason, a n d until a
general p l a n
has been adopted b y t h e Federal Reserye banks a n d i n operetion b y t h e F e d e r a l R e s e r v e banks, t h a t t h e y b e p e r m i t t e d
to receive i t e m s o f purchase a n d e x c h a n g e s o l e l y f o r t h e
purpose o f adjusting balances between the Federal Reserve
Banks.
Wr. Fancher: I
The Chairman:
secept t h e t amendment.
A r e y o u ready f o r t h e question o n the
motion?
(There were requests for the question.)
(The guestion w a s put o n a n aye a n d n o vote, a n d
carried.)
The Coairman:
W h a t i s yeur pleasure i n regard t o eom~
municating w i t h Governor Sawyer, expressing regret a t his
absence a n d the cause o f it?
ir, Keine: I
move thet t h e Chairman s e n d h i m a téle-
Mr. Alken: I
second t h e motion.
gra,
(The motion was carried.)
Mr+ MeDougal:
that I
T h e r e i s a small = = b i g matter here
would like t o introduce, a n d that i s the matter o f
arranging some terms f o r t h e compensation o f o u r Secretary.
He i s here a t some expense a n d has devoted a
time t o t h i s matter. I
good deal o f
a m simply intreducing t h e subject
to s e e w h a t t h e e t h e r s m a y h a v e t o say.
Mr. Curtis:
T h e Secretary will retire,
i f h e may.
(The Secretary thereupon retired from the Conference —
room.)
Mr, Seay: I
think i t i s proper that w e should con-
Sider t h e matter,
Mr. MeDougel:
W e have been dealing f o r several weeks
with the p e r d i e m basis, a n d w e know a
diems. P e r h a p s that will help us.
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Federal Reserve Bank of St. Louis
good deal about p e r
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Federal Reserve Bank of St. Louis
Mr. Wold: I
think h e should b e compensated.
Mr. O . Wells: I
d o not t h i n k anybody questions that.
W e all know that t h e work t o b e done
The Chairman:
by t h e S e c r e t a r y a s t h e r e s u l t
e f such &
meeting
a g this
will probably last until the next meeting,
Y o u m e a n i n connection with hie duties
Mr. Fancher:
in the bank; t h a t i t takes extra time?
W e have been working a t the bank i n
The Chairmant
New York pretty long hours, T h e situation i n regard t o Mr.
H e came over f r o m Boston t o N e w York t o
Curtis i s this,
w i t h mus.
take h i s p o s i t i o n
H e has not y e t breught h i s
family over, b u t expects t e d o s o later.
in New York a n d I think devotes a
the e v e n i n g s
H e i s living alene
good deal o f his time i n
t o o u r matters.
wish t o state t h a t o u r advisory counsel
Mr. Seay: I
has e m p l o y e d a
secretary w h e s e d u t i c s a r e n o t n e a r l y s e
onerous a s those o f e u r secretary, a n d his relationship i s
ef a different charaeter. Still, they have provided a
month for their secretary.
hundred ddllars a
Mr. Kaine:
A n d $500 f o r traveling expenses.
$ 1 5 0 6 wus,
for t h e purpose,
Mr. MeCerd: I
would suggest, without b e i n g named o n
the committee, because I have m y hands full with the four
per cent rate (laughter) that a committee o f three b e appointed t o adjust t h i s matter a n d report t o the next meeting
of Governors. I
think that i s the best w a y t o settle this
question.
Mr. Dougal:
N e ; l e t u s settle i t here,
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Federal Reserve Bank of St. Louis
The Chairman: W h a t e v e r y e u say, gentlemen. I
knew
Mr. Curtis will appreciate the thought more than h e will
any c o m p e n s a t i o n t h a t y e u m a y sellew him.
Mr. MeDougal: i
would suggest t h a t w e pey Mr. Curtis
a Salary o f not less than $2,000 a year.
Mr, VFencher$
A n d his traveling expenses.
Mr. McDougal:
T h e n w e would feel quite a t liberty t e
call o n him for his services.
service, I
H e has rendered m e great
know, b u t i n Chicago a n d here.
Mr. Wolds W o u l d that b e sufficient,
The Chairmant I
i n your epinion?
think Mr. Curtis will b e satisfied
whatever y o u gentlemen deeide t e do.
O f . course w e
paid h i s expenses f r o m the office i n New York.
dirs Mebougal:
W e must take cere o f his expenses.
The Chairmang I
think that i s a n item that should b e
taken care of,
Mr. G. Wells:
H o w would w e apportion i t ? W o u l d w e
apportion i t among t h e banks?
Mr. Rhoadest Y e s ; e n d divide i t b y twelwé.
W e each
get equal benefit.
Mr. MeCord:
W h y not l e t t h e expense account come i n
the regular monthly expense a n d let t h e salary question
be e n t i r e l y s e p a r a t e ?
The Chairman:
M r , MeDougel, m a y I suggest that y o u
state i n your motion w h e n this compensation shall begin
_and what disposition sheuld b e made o f the expense account?
My idea would be t o arrange that his expenses b e actually
rendered a S an@mpense account w i t h other expenses incurred,
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Federal Reserve Bank of St. Louis
and that w e simply decide upon what compensation h e should
be paid and when i t shall begin.
Mr. Fancher: I
would like t o offer a n amendment t o
Mr. M e D o u g e l s
' motion.
The Chairman:
W h a t i s the amenanent?
Mr. Fancher: I
would like t e offer a n amendment t h a t
the salary be $200 e month.
Mr. Wold: I
second t h a t motion.
The Chairmant W h e n would that commence, M r . Fancher?
Mr. MeDougal:
F r o m the time h e was sleeted.
The Chairman:
F r o m t h e beginning o f t h e first Gonfer-
ence?
Mr, Fancher:
The Chairmen:
6
i
n Decamber 10th.
g a n amendment t o your motion.
D e
you aceept i t ?
Mr. McDougal:
Ido.
I t i s entirely satisfactory.
The Chairman:
A l l these i n favor o f the motion will
please s a y "“aye*.
{The motion was unanimously carried.)
Mr. MeCord: I
rise t e a question o f personal privilege.
The matter will only take a minute o r two. I
bought a n
Atlanta paper t h i s morning a n d I found this heading?
“Reserve Bank Board orders ancther e u t i n discount
rates. E f f o r t s o f Senator Hoke Smith a n d Hardwiek t e
improve cenditiens threughout t h e South a r e rewarded."
i will hand this paper t o the Chairmen o f this body s 0
that when h e wants t o make h i s remarks o n that line h e
may
have it with him.
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Federal Reserve Bank of St. Louis
The Chairman:
(Whereupon,
T h i s conference i s now adjourned.
a t 12:10 o'clock p . m. o n the 25rd d a y
of January, 1915, the Conference o f Board o f Governors o f
the Pederal Reserve Banks adjourned until March 11, 1915,
at the New Willard Hotel, Washington, D . C., a t 10 o'clock
ay ms)
APPENDI<Z
a fem See A EY AE oon Em eM
"THE JOURNAL O F COMMERCE
32 Breadway, N e w York
Washington Office,
29 Corcoran Building,
December 2 6 , 1914.
Mr. H . Parker Willis,
Sec. Federal Reserye Beard,
Washington, D . C.
My d e a r Mr. Willis:
A few days a g o y o u informed m e that t h e Federal R e s e r v e
Board h a d taken exception t e a n t i c l e I
wrote f o r t h e
Journal o f Commerce issued last Monday relating t o the question o f the clearance o f checks b y the reserve banks, . and
the situation that existed a t the meeting o f the Governors.
Understanding t h a t y o u are acting u p o n instructions f r o m
the Board i n this matter, I
submit m y answer i n writing.
Permit m e t o essure y o u that I inagimwss have not a n d
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Federal Reserve Bank of St. Louis
heretonew
system a r e p r o g r e s s i n g
d e y t h e puidance
o f very a b l e m e n
4
ected
u n d e r t h e elreane-
nénts, a
thing I
have n e v e r
my p a p e r
onver s
i
book exception
estate t h e v i e w s o f a n ‘official’
o f t h e Soard,
remarks w e r e m a d e a g t o t h e a t t i t u d e m a i n t a i n e d by: s u n d r y
clearing h o u s e s .
T h e s e statements
camc
t o me froma
source
ich I have confidence,
I must regretfully
information,
Fd
of
n e w s p a p e r
m a n must. r e m a i n
2
his p r e f e s s i o n a n d d e f e n d h i s c e n f i d e n c e s
the F o a r d w i l l i n f o r m
Commeres.
sincerely,
V. Gilmore Iden.
The words tor-empleyee’
ted i n ink.*
i n the original c o p y a r e
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Federal Reserve Bank of St. Louis