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Federal Reserve Bank of St. Louis
VOLUME Zest?
THIRD C O N F E R E N C E
BOARD O F G O V E R N O R S
FEDERAL
March 11, 1915 - Night Session
March 12, 1915 - Day Session
WALTER
SHORTHAND
S. COX
REPORTER
COLUMBIAN BUILDING—TEL. M. 8324
WASHINGTON,
D . C.
GOF GOVERNOR
OF P E D R A L RESDORYE BANKS,
RVENIN
Shoreham H o t e l , W a s h i n g t o n , D . C . .
Thursday, M a r c h 11, 1915,
The C o n f e r e n c e r e c o n v e n e d p u r s u a n t
t o adjournment,
at
nine o'clock p, m.
The Chairman: I
a m requested
b y Governor M c D o u g a l
to r e a d a l e t t e r t h a t h e h a s j u s t r e c e i v e d f r o m Mr. E . D .
Hulbert, Vice President o f the Merchants' L o a n & Trust Company o f Chicago. I
will read i t for the purpose o f the
record,and i t may b e well f o r u s t o take some action o n
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Federal Reserve Bank of St. Louis
this matter:
"Chicago, March 8, 1915.
"Hon, J: B, McDougal,
"Federal Reserve Bank, Chicago, Illinois.
“My dear Mr, McDougal:
"T suppose y o u are getting more suggestions than
you k n a w h a t t o c o with, b u t I
want t o a d d o n e t o t h e
number,
"We, and I dare say all the other banks handling commercial paper, a r e exceedingly annoyed b y the loose methods
employed b y nearly a l l t h e commercial paper concerns i n
L171
Sane
dete,
t h e i r
paper.
for t h o s e h o u s e s
t + is n o t a n uncommon occurrence
lot o f paper f r o m their custom-
t o take a
w i t h n o specified maturity,
ers undated,
with n o s p e c i f i e d d a t e o f paymont,
a n d sometimes
i t being L e f t t o t i e
broker t o fill i n t o suit t h e buyor.
"Tt i s becoming almost a
universal practice t o have
these notes filled i m with the typewriter,
T h i s , i t seems
a s i t i s n o t very m u c h @if,
ferent f r o m having t h e m filled i n with a lead poncil, s u c h
to me, i s very objectionable,
filling being easily erased a n d changed,
"We are constantly returning notes which have b e e n
purchased b e c a u s e t h e y s h o w p l a i n l y o n t h e i r f a c e t h a t
o r even amounts h a v e b e e n changed, t h e
dates, maturities,
broker u s u a l l y claiming,
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Federal Reserve Bank of St. Louis
w h e n his attention
i s calledato
it, that h e had authority from: the maker o f the note t o c o
this.
"Tt sgeoms t o m e that t h e Federal Reserve Banks
might v e r y p r o p e r l y a n d f a i r l y s t o p t h i s p r a c t i c e
b y mak-
ing a requirement t h a t Federal Reserve notes, t o b e eligible
for rediscount a t the Preceral Reserve Bank, shoulda b e
filled o u t in. i n k a n d m u s t s h o w n o e r a s u r e s
o r alterations,
"Tt make this suggestion f o r your consideration,
“Very truly yours,
(Signed) .#.-D,. Hulbert.”
Seay:
oa
Vatnss
T h a t is a
W
very p r a c t i c a l s u g gabe
a) s t i o n ,
e h a v e t a k e n a c t i o n o n t h a t v e r y thing.
Le
I got a n a p p l i c a t i o n f o r a
paper, c o m m e r c i a l s t u i f ,
and e x p l a i n e d
loan f r o m o n e m a n o f s i x months
and I
sent t h e a p p l i c a t i o n b a c k
t o him, a n d h e j u s t c h a n g e d t h e f o r m h i m s e l f
and s e n t i t back,
W e have s e e n them altered t o fit t h e ocs
Mr, Seay:
casion, I
a m sure, a n d w h e r e t h e r e w a s t h e l e a s t s u s p i -
cion w e h a v e a l w a y s r e t u r n e d t h e m ,
Le. NeCord:
D o y o u know wnat w o call them down i n
the sixth district? " M a i l o r made",
Mr, Wold:
W h y d o not t h e commercial banks take t h e
position t h e m s e l v e s
o n t h e matter?
W h y d o they want
us t 6 D u l l their. c h e s t n u t s o u t o f the-fire?
I think h e thinks t h e y w i l l c o m e t o u s
from t h e m e m b e r b a n k s a n d say, " W e w i l l n o t t a k e them,"
and t h e member banks w i l l s a y they will n o t take them.
Seay:
e will n o t take t h e m i f they have b e e n
W
Mr, Wold:
T h a t i s what |
McCord:
suppose h e means,
‘ h a t a r e y o u going t o d o i f a little
fellow comes in, where a
bill o f goods h a s b e e n sold?
Is i t outlawed because i t i s w i t t e n i n typewriting?
The Chairman:
as a
M a y i t not b e possible f o r u s t o agree
matter o f p o l i c y t o d i s c r i m i n a t e a g a i n s t
is not properly prepared, a n d a s k Governor McDougal i f
he w o u l d g e t M r ? H u l b e r t
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Federal Reserve Bank of St. Louis
t o prepare s u c h a
letter a s w o u l d
173
seem t o c o v e r t h e g r o u n d ?
would b e v e r y glad,
mercial b r o k e r
I
f h e will send i t t o u s w e
i n N e w York,
t o give i t t o every com-
i n town a n d t e l l h i m t h a t w e a r e g o i n g t o
observe t h e rule about this, a n d that they h a d better
get their clients t o b e a little more careful about making
out t h e im “paper,
Mr, Fancher:
I
f the broker w i l l b e more particular
it will s o o n bring about a
The Chairmen:
W
change i n that condit4on,
e d o n o t have t o bother t h e member
banks w i t h i t
Mr. Seay:
H
Fancher:
seay:
e ne S a a l e
r e
e t ee
T h a t i s all right i f h e does,
I t i s less o p e n t o suspicion, b u t i t i s o f
loose method,
Wold;
I
s that a
Seay:
I
n s o m e places, y e s ,
The Chairman:
many o f them.
pactice on. t h e p a r t o f t h e
T h e y m a k e i t while y o u wait, a
good
T h e y g e t bunches o f it, i n New York, s o m e
of t h e brokers,
a n d t h e o u t o f t o w n concerns
té
them that t h e y will necd s o much money, a n d the’ broker
in N e w Y o r k j u s t b u y s t h e p a p e r h i m s e l f
a n d gives h i m
credit, a n d then h e goes o u t a n d sells i t and gets t h e
pieces m a c e u p t o fit, b o t h a s t o m a t u r i t y a n d denomination.
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Federal Reserve Bank of St. Louis
MdDougal: I
think t h a t w i l l b e a
very n i c e w a y
174
to h a n d l e t h i s m a t t e r , I
would p r o b a
d
assumc t h a t t h e o t h e r G o v e r n o r s
o t h e same thing
mnendation
g o t o t h e brokers w i t h a
that t h e y d i s c o n t i
he Cyairman:
t
l
S
W o u l d
suggestion
o O L t i e c o pereter:
Y e s ,
Mr. McDougal: I
Chairman:
i n their cities,
think t h a t w o u l d b e a
T
O
I
think a
good s u g g e s e
typewritten n o t e i s
a dangerous thing.
Governor Aiken, would y o u b e willing t o communicato
with t h e n o t e b r o k e r s
i n B o s t o n a n d call. t h e i r a t t e n t i o n
loose p r a c t i c e d e v c l o p i n g
i n the w a y they make u p
for-their c l i e n t s ?
Mr, Aiken: I
h i e LO>OF. AG,
made
will b e glad to,
W e receive t e r y
I w a s j u s t trying t o think o f any notes
u p o n t h e typewritor,
The Chairman:
Aiken: I
W
e have h a d s u c h come in.
would b e v e r y g l a d t o d o i t , h o w -
am s o r r y t o s a y w e d o s e e s o m e a c -
ceptances coming i n i n that form.
ated a g a i n s t t h e m b e c a u s e
i t is a
tion w h e n y o u g e t t o a c c e p t a n c e s
W e have n o t discriminlittle d i f f e r e n t s i t u a of a
concern s t a m p e d
on
the complicted note,
fir, McDougal: I
shall b e v e r y g l a d t o undertake
have M r . H u l b e r t p r e p a r e s u c h a
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Federal Reserve Bank of St. Louis
letter,
and I
shall b e
to
too.
very g l a d t o h e l p h i m i n thet m a t t o r ,
Now, M r . C h a i r m a n ,
may I
bring b e f o r e t h e m e e t i n g o n e
the reason that I
or t w o small matters a t this timo, f o r
t o leave y o u tomorrow morning?
am p l a n n i n g
The Chairman:
P l e a s e d o , Governor McDougal.
Mr4 McDougal:
F i r s t , w e have h e r e a circular I
tributed
t o y o u called No. 180,
dis-
which Mr¢ Delano asked
,
me t h i s m o r n i n g
t o distribute
a m o n g t h e Governars,
A e
a copy.
have handed t h e m around, a n d I think each one has
It bears u p o n t h e m a t t e r o f t h e e s t a b l i s h m e n t
@ & branches.
a n y action,
It w a s n o t t h a t h e e x p e c t e d u s t o t a k o
but he
before t h e
gaid h e w o u l d l i k e toe have t h e m a t t e r p l a c e d
Governogs
think
i n order t h a t t h e y m i g h t h a v e s o m e t h i n g t o
about, i f they d i d not have onough already,
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Federal Reserve Bank of St. Louis
he Chairman:
W
e Giscussed t h a t while y o u were
n o t a r r i v i n g 4 t a n y conclusion,
outy Governor M c D o u g a l ,
put ‘stating s u b s t a n t i a l l y w h a t y o u s a i d .
MeDougal:
Cpairman:
Mr, MeDousal:
I
t got before t h e meeting?
<7
Y e s ,
T h e other matter
i s this, t h a t i t
i s with t h o
seems t o m e t h e clearings matter, l e f t a s i t
committee,
i n all probability unless w e take further a n d
necessary
definite s e t i o n a t t h i s t i m e , w i l l m a k e i t
hold another meeting o f the Governors
to
i n the near future,
conference
and I would suggest f o r the consideration o f the
a n a formulate
that this committee b e empowered t o g o ahead
L768
e definite plan s o that i t will not b e necessary t o bring
the G o v e r n o r s t o g e t h e r a g e i n i n t h e n e a r future.
Mr. Ksins: I
second t h a t motion.
that there i s anything t o prevent f o u r o f our m e n from
putting u p s o m e t h i n g t h a t will pacs w i t h every o n e o f us.
At a n y rate,
i f there a r e m o d i f i c a t i o n s
t o make,
w e can
each modify.
Mr. Fold: A
certain point i n that discussion,
to N e w York, Chicago, Cleveland a n d Richmond,
left optional v i t h the banks.
as
w e want t o b e
W i t h that uncerstanding,
there i s n o <bjection whatever. I
think i t will save u s a
lot o f time i f the committee goes ahead a n d completes t h e
plan f o r clearings along t h e lines w e have talked of, a n d w e
will not have t o come back for the purpose o f approving it.
Mr. McDougal:
Mr? Rhoaces: I
R i l l y o u make a motion t o that effect?
make t h e motion that tine matter b e
left w i t h the committee, w i t h power,
Mr. Kains: I
second t h e motion.
(The motion, being duly seconded, was put and
carried.)
Mr. McDougal:
N o w , Mr. Chairman, another matter i s ~
the matter o f providing f o r the Secretrry's salary.
not k n o w t o w h a t d a t e i t i s paid, b u t I
Jalan
c o k n o w t h a t n o defin-
ite provision h a s b e e n made, a n d I would m o v e t h a t w e a t
this t i m e arrange f o r t h e S e c r e t a r y ' s s a l a r y t o b e p a i d
half a month i n advance, s o that the apportionment c a n be
made a t t h e t i m e t h e e x p e n s e s
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Federal Reserve Bank of St. Louis
o f the meeting a r e sapportion-
second t h e motion.
Rhoades: I
(The motion, h a v i n g b e e n d u l y seconded,
w a s put
carried.)
Sawyer: R e v e r t i n g , j u s t a moment,
t o the motion a s
I suppose y o u all understand t h e conditions
district a r e s o m e w h a t p e c u l i a r ,
i n our
f r o m t h e fact t h a t w e have
been operating t h e clearing function t o a certain extent,
conditions.
and w e w i l l h a v e t o m o d i f y t h e p l a n t o s u i t o u r
think that w a s taken into ¢onsideration
Mr. McCord: I
in the discussion o f the subject.
The Chairman: I
t h i n k i t w a s c l e a r l y unccrstood,
both a s t o Kansas C i t y a n d S t . L o u i s , M r . Sawyer.
just w a n t e d
Mr. S a w y e r ; I
t o k n o w t h a t i t Was.
A n d p r o b a b l y t h e committee,
The Chairmen:
i n dealing
with t h e c i r c u l a r i t s e l f , w i l l m a k e s o m e r e f e r e n c e
Mr. Fancher:
M r . MeDougal's reference t o the salary
for t h e s e c r e t a r y b r i n g s
t o m y mind t h e matter o f the expenses
t h e committee
of this c l e a r i n g s c o m m i t t e e ,
_ have h a d t w o o r t h r e e m e e t i n g s ,
whether
t o that.
i t i s not a
and I
proper e x p e n s e
o f Tive.
would l i k e
t o know
T h e expense h a s
been b o r n e b y t h e f i v e banks.
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Federal Reserve Bank of St. Louis
Mr. Kains: I
Mr. S a w y e r : I
I t certainly ought t o be.
move t h a t i t b e s o pro-rated.
second
e
u p t o t h e present time,
to b e apportioned among t h e twelve banks.
Mr. Sawyer:
K
t h e motion,
M r . Chairman.
178
The Chairman;
I
s there a n y debate
o n that question?
(No response.)
he Chairman:
T h e r e being none, I
will p u t t h e ques-
(The question, being duly seconded, was put and
carried, )
Mr. C u r t i s : I
would
paid u p t o l a s t month;
s a y that
m y compensation
n a s been
t h a t is, i t w a s added i n t o t h e amount
sent around t o each bank.
Mr. Fancher;
Mr. Curtis:
U p t o some date i n February?
T h e 1 0 t h o f February.
The motion, t h e n , M r . C h a i r m a n , w o u l d i n -
volve our turning i n our traveling expenses a n d pro-rating
the whole?
Mr. Curtis:
I f you gentlemen will send t h e m i n t o m e
I will a d d t h e m o n t o t h e expenses.
Mr. S e a y :
G o v e r n o r Strong,
d o y o u regard t h e letter
from Mr. D e l a n o a s disposed o f , s i r ?
The Chairman: I
understand t h a t h e G o e s n o t w a n t a n y
action o n the matter.
Mr. McDougal;
N o ; n o action.
H
e thought h e would
like t o have i t brought before t h e Conference, n o t f o r a n
expression o f opinion, S
e
t o let t h e m know that t h e m t -
ter was heading u p that way, t h a t i s all,
it u p
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Federal Reserve Bank of St. Louis
Mr. Wold;
I s i t his desire t h a t w e write h i m o r take
i n a n y way?
N o .
Mr, McDougal:
think, judging f r o m e conversation I
The Chairman: I
had with Mr. Lelano some weeks ago, t h a t this i s a varning
of possibly sone formal inquiry later, a l o n g thase lines.
Mr. Kainsi
D i d y o u discuss t h e matter, Governor
Strong, t o d a y .
N o .
The Chairman:
have n o doubt that Governor Strong
Mr. McDougal: I
has stated t h e exact facts, f o r t h e reason that Mr. Lelano,
as I was leaving h i m this morning, s a i d h e would h a n d m e
these pages, a n d asked m e just t o distribute them, n o t that
b u t s i m p l y t h a t h e w o u l d l i k e t o have t h e
ne w a n t e d a c t i o n ,
matter b e f o r e t h e G o v e r n o r s
s o that t h e y would k n o w what
o r something o f that sort.
might b e caning,
Mr. Kains: I
of t h e Governors!
would like t o g e t a n expression
o f some
o p i n i o n s r e g a r d i n g t h i s b r a n c h business,
if w e could, n o w that w e are all here together.
The C h a i r m a n :
G o v e r n o r Kains would l i k e s
cussion o f this m a t t e r o f branches.
little d i s -
T h e Tloonr-is o p e r .
h e has l e t
I think w e ought t o hear f r o m Mr. Seay, because
it o u t t h a t h e h a s a n o p i n i o n a b o u t i t .
Mr. S e a y ?
W h i l e
i t applies
would l i k e t o a s k G o v e r n o r K a i n s
t o m y o w n district, I
i f the matter h a s b e e n dis-
cussed among t h e bankers o f his district,
_Mr. Kains:
I t i s being discussed.
S o m e o f them want
branches, b u t they d o not know what t h e y vant t h e m for.
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Federal Reserve Bank of St. Louis
180
rivalry b e t w e e n S e a t t l e a n d Portland,
Principally, t h e r e i s a
Portland a n d
I f a branch was established a t
for instance.
t h e devil t o pay a n d n o
not o n e a t Seattle, t h e r e would b e
pitch hot.
Mr. ceay:
since. y o u
M y o w n opinion, Governor Strong,
asked i t , i s t h a t t h e p r o b l e m s
are
w e have t o work o u t n o w
i s altogether premature
of such a pressing nature that i t
to consider t h e subject o f branches.
Mr. Hains: I
have a n idea that t h e Federal Board a r e
going t o vress t h e question.
(At t h i s p o i n t
a n informal c i s c u s s i o n occurred,
t o report; a f t e r
which t h e stenogr:pher w a s airected n o t
place: )
which the f cLlowing proceedings t o o k
The Chairman:
Mr.
W h i l e y o u were o u t this afternoon,
Kains, t h i s circular w a s submitted.
out, also.
W
G o v e r n o r Mcebougal w a s
little d & s c u s s i o n ,
e had a
a n d t h e congensus,
that there were s o many
as I gathered i t at. the time, w a s
t o b e dealt w i t h that w e
other things just n o w that ought
a lot o f work f o r very
would b e burdening ourselves w i t h
possible n e w branches.
little result i n dealing with
Mr. Kains: I
I
a m glad t o know that, pecause
do n o t
bothering w i t h the thing m y see a n y present necessity f o r
self. I
Reserve Board i s
a m just afraid t h a t t h e Federal
going t o force action.
Mr. McCord: I
gentlemen, briefly.
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Federal Reserve Bank of St. Louis
from,
will tell y o u where i t all comes
N e w Orleans m a d e a
fight o n Atlanta a n d
181
found o u t s h e w a s s So i n g
kind o f a p r o p o s i t i o n
came t o a
leans.
t o lose o u t
6 ’
o n t h a t fight,
t o have a
a n d
i t
branch i n N e w O r -
said "thenBoard, a n d t h e Board
I t came u p t o the
t o New
T h e Board had n o objections
ever i t is expedient."
Orleans having 4
have p u t i n their o e r
branch bank, a n d they
right there f o r a
obit ete, a p p l i c a t i o n
;
b r a n c h i n N e w Orleans
because N e w
eomes from, evidently,
this
where
i
s
that
and
branch
t h e question t o get that
Orleans evidently i s pressing
pank there.
ir. Seay:
to
which w e are about
T h e adventure u p o n
t o pass u p o n
will give u s experience
embark i s something t h a t
that subject, I
think.
T h e clearing question?
Mr. Kains:
Mr, S e a y :
question.
Y e s } t h e clearing
a
t h i n k t h a t woulda b e
Mr. Aiken: I
very i m p o r t a n t
factor.
The Chairman:
t h e n e x t subject?
A r e y o u ready f o r
I t e m Coe oe ee "Establishment
Governor Aiken hes suggested
o n member
District number printed
have
t
o
practice
the
of
pank checks."
w a s attached
wondered w h y m y n a m e
Mr. Aiken: I
inguiry
1. nad e v e r r a i s e d t h a t
hed forgotten t h a t
that. I
at all.
i n it. ( L a u g h t e r )
t I have lost interest
Mr. MeCord:
T h a t i s a n sdvantage,
O F i t will b e a n
into tnis clearing system.
‘advantage, w h e n w e get
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Federal Reserve Bank of St. Louis
to
e have that i n practice.
Mr. Kains:
w
Mr. McCord:
o u r district.
J a k e , f o r instance,
182
Tennessee
i s s p l i t i n t h e middle;
s o i s Mississippi.
handling t h e checks i n Tennessee a n d Mississippi,
District 8
n
i f w e had
and District 6 , w e would k n o w what t o d o with it.
New A k e r : I
by a
I
think that w a s brought
salesman f o r a
t o m y attention
bank stationery concern,
a n d h e told m e
that a l l t h e other banks were going t o d o i t and asked w h y
I was s o refractory i n the matter. I
suggested i t because
I would l i k e t o f i n d o u t i f numbers h a v e b e e n a d o p t e d
b y the
other banks.
T h e Chicago banks sent out notive o f drafts
Mr. McKay:
to b e drawn o n the bank, w i t h a large figure o n i t i n the
center.
O u r district i s cut u p into a l l t h e States except
Lowa, a n d w e thought i t would b e a good index i n sorting t h e
checks,
s o that w e would k n o w what district t h e y were i n ;
not o n l y t h e m e m b e r b a n k s
i n the district,
b u t t h e other
districts involved.
Y o u put a
The Chairman:
Y e s }
Mr. McKay:
skeleton number o n ?
i t i s q u i t e plain.
goed many o f the banks a r e adopting
Mr. Fancher: A
that.
Mr. Wold:
T h a t is, drafts drawn o n the Federal Reserve
Banks; n o t t h e c h e c k s d r a w n u p o n t h e m e m b e r b a n k s ?
Vie
e a ys
N o t yet.
Mr. Fancher:
W
e have suggested t o our banks that t h e y
have t h e skeleton figure 4 ,
Mr. McCord:
W e suggested t o our lithographer down there
that h e put i n the upper left hand corner a
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Federal Reserve Bank of St. Louis
small letter a n d
figure, "F-6."
Mr. &
T h i s topic applies t o member b a n k checks,
you know
Mr. MeCord:
Yes,
O u r reason for making that sugges-
tion instead o f a skeleton number was that you cOuld hardly
get t h e smaller banks t o g o t o the expense o f the skeleton
number
i n t h e c e n t e r o f t h e check, e n a i f g h e y c o u i c - p e t
the "F-6" u p i n the corner i t would b e without a n y sdditional
expense,
Mr. McKay;
T h e y could p u t t h e skeleton number there
just s s cheaply a s this number i n the corner.
I t i s large,
and t h e minute y o u s e e i t y o u c a n tell a t a glance.
The upper left hand corner i s the poorest
corner f o r sorting purposes.
circular t o our member banks
x -Sarrple
when w e received f r o m the Federal Reserve Boerd /
Mr, C e a y
Z
e issued a
the c h e c k t h e y s e n d o u t .
h
e issuec a
cCirculer s i m p l y
gesting that i n the course o f time, w h e n t h e supply o f
checks w a s exhausted,
i t would b e advisable t o adopt that,
but i t was nothing pressing.
The Chairman:
w e are ready f e r a motion o n this, I
Zuess. G o v e r n o r Aiken, y o u are responsible for the topic.
Mr. Aiken: I
have nogheard a sufficiently enlighten-
ing discussion o f the subject t o warrant making a
it. I
cannot r e c e i v e i d e a s e n o u g h o n t h e s u b j e c t
mulgate them. I
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Federal Reserve Bank of St. Louis
motion o n
move t h a t t h e subject b e passed.
t o pro-
184
Mr. Seay:
M r . McKay, w h e n w e begin intra-district
clearing a n d handling o f checks i t will facilitate t h e
physical handling o f checks very much?
Mr, MeKay:
V e r y greatly.
W h e n y o u see that "7" i n
the middle o f the check y o u c a n see where i t belongs.
Mr. Aiken:
W o u l d y o u like t o have m e make t h a t a s a
motion?
Mr. McKay: I
Tne Chairman:
think that i s a very good motion.
G o v e r n o r A i k e n moves t h a t t h e Federal
recouuend
districts p u t t i n g a
alone,
t o the banks
i n their r e s p e c t i v e
skeleton n u m b e r o r letter,
o n their checks
b o t h f o r acceptances
o r number
a n d checks
o n
the Federal Reserve Banks.
Mr. Fancher: I
second t h e motion.
(Tse motion, b e i n g duly seconded, w a s p u t a n d car-
ried.)
The Chairman:
not b e neglected, I
I
n order that t h e Pacific Coast m a y
suggest that w e take u p topie No. 33,
"Abrasion o n gold coin.”
I would like t o suggest i n connection w i t h that “that
tobk t h e l i b e r t y o f trying t o p u l l s o m e o f y o u r c h e s t n u t s
out o f the fire, G o v e r n o r Kains,
Secretary
b y telling t h e Assistant
o f the Treasury t h e other d a y that t h e y h a d a
rotten
sub-treasury out i n San Francisco; t h a t they could not
weigh gold c c i n out there a n d they received m a e t h a n a n y
other sub-treasury i n the United States.
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Federal Reserve Bank of St. Louis
H
e was very much
surprised a n d ssid h e would investigate it.
Mr. Kains: I
M
this up.
did not k n o w y o u were going t o call
y cashier h a s m a d e u p a
l o t o f figures
on
questions o f this kind, a n d I will just read y o u what h e says,
if y o u will bear with m e a moment.
"The coinage laws o f the United States a r e defective
in two particulars:
wig T h e y permit gold coins t o be issued b y United
States Mint, w h i c h are never receivable b y United States
Treasury:
oe
T h e y place u p o n t h e innocent holder t h e cost o f
abrasion plus the original deviation below stancard."
I will s e n d t o e a c h G o v e r n o r
-- I
here n o w - - ~ s a n e f o r m s w h i c h g i v e a
have a
few o f them
very c l e a r e x p o s i t i o n
of the facts i n the matter, and a chart showing the years
that c o i n s a r e receivable;
t e n s a n d fives, w h e n t h e y a r e i s -
sued, a r e notreceivable right back,
enough t o b e received,
abrasion e a c h year.
T h e y d o not weigh
b u t t h e y allow a
certain amount o f
A f t e r t h e y have b e e n i n circulation
for s i x o r seven years t h e amount o f abrasion i s s o much
that i t entitleé t h e m t o b e received.
As a mattcor o f fact, w e have about t e n millions o f dollars i n o u r s a f e w h a t w e i g h s
u p v e r y well,
o t i c
Treasurer
Pod
will n o t t a k e i t b e c a u s e h e s a y s s a m e o f these c o i n s a r e
below t h e limit o f tolerance, while others m a y b e much
above.
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Federal Reserve Bank of St. Louis
Therefore I
cannot g e t c e r t i f i c a t e s f o r t h a e c o i n s .
186
At a n y tate, I
think that a s a matter o f general policy t h e
Government should h e l p u s t o get a l l t h e gold i n the country
behing a
cage a n g u s e t h e r e p r e s e n t a t i v e p a p e r instead.
They ought really t o follow the example o f the British
Government a n d father that expense.
great.
I t i s not s o very
J u s t n o w i t i s cgubing a good deal o f shifting, a n d
with this abraded gold i n the safe m y life i s hardly worth
living.
I f I went i n the clearing house t h e y would make
me t h e receiver:
o f the whole thing,
The Chairman:
silver c e r t i f i c a t e s
T h e y a r e working u s f o r fifty-cdollar
i n N e w York.
T h e r e i s n o abrasion
on
them, b u t there i s a terrible l o t o f storage room,
Mr. Seay: I
shipped “800,000 i n gold coin t o the
treasury about t e n cays ago, a n d I
a m waiting t o hear vhat
the a b r a s i o n was, n o w .
Mr. Wold:
H a v e y o u a n y w a y O f weighing i t up?
Mr. Seay:
C o i n b y coin?
Mr. Wold:
A n d i n bulk.
Vir. seay: I
c o u l d w e i g h i t u p c o i n bycoin. I
some t r e a s u r y s c a l e s ,
f o r that purpose,
but it is a
have
pretty
big job.
Mr. “old:
W e , i n Minneapolis, w e i g h all o f our gold
and t h e n take t h e short weight a n d compute t h e abrasions.
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Federal Reserve Bank of St. Louis
Vr. Kains:
MP V o i d :
D o y o u weigh coin b y coin?
y e s e@ir.
137
Mr, Kains:
H o w m a n y millions
Mr. Wold:
d o y o u g e t o u t there?
# e C o notget a s much a s y o u do, b u t w e
haves a s g o g «deal of. tet.
W
e g i v e t h e member b a n k t h e o p t i o n
of t a k i n g b a c k s h o r t v e i g n t , s u p p l y i n g u s w i t h f u l l weight,
OY give t h e m credit tae t h e bullisn vadiue,
B u t w e have
Shipped a l l that short weight stuff t o the sub-treasury a n d
what w e have i n our vaults i s absolutely full weigh s t u f f .
Mr. S e a y :
Mr. Wold:
D
o y o u k n o w w h a t y o u h a v e t o pay?
T h e r e 1s a
difference
o f four c e n t s
o n ten
thousand d o l l a r s b e t w e e n o u r Bigures a n d t h e sub-treasury,
and t h a t v o u l d b e l o s t i n shipment.
Mr. S e a y :
H o w m u c h d o y o u s h i p there?
Mr. "old:
A b o u t seven o r eight million dollars.
Mr. Seay:
W h a t i s the abrasion o n the whole amount?
Mrs. WOOL: I
could n o t t e l l y o u that; b u t w e h a v e a
scale t h a t w e i g h s n o t o n l y e a c h coin, b u t v e c a n compute,
Mr. S e a y :
P e i s
Mr, Wold:
T h e c o i n scale i s automatic.
The Chairman:
of coinage,
I
w e have a
Mr. Kains:
n o p -auvome tLeseis--1t?
f y o u a r e going i n t o t h e whole subject
b i g job.
I t means a
change i n the law; a n d t h e l a w
should b e changed.
The Chairman:
I f w e are going t o deal with the subject
of abraded c o i n alone, a n d h o w t h e sub-—treasury m a y f a c i l i t a t e
handling,
i t seems
t o me that w e c a n make some representations
by resolution here t.o the Federal xXeserve Board t o b e brought
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Federal Reserve Bank of St. Louis
188
to the attention o f the Treasury Department, w h i c h would help
in a situation like Governor Kains, where h e i s n o w helpless,
tn get gold certificates.
(At this point a n informal discussion occurred w h i c h
the s t e n o g r a p h e r w a s d i r e c t e d n o t t o report; a f t e r w h i c h t h e
following proceedings t o o k place:)
Mr. Keins:
w e are saddled h e r e with this stuff a n d i t
takes t o o much time t o pick i t over.
t - a m getting i t - i n
évery d a y , t w o o r three h u n d r e d t h o u s a n d d o l l a r s a
day, a n d
we cannot d o it.
The Chairman:
Mr. Kains:
I
t keeps o
clerk veighing i t up?
I t does not settle anything.
I t keeps
you a t i t all t h e time.
Nie s- Seay:
Mr. Kains:
Y o u w i l l n e v e r s e t t l e i t a n y o t h e r way.
O h , yes; w e have g o t t o settle t h a t thing.
The b a n k s a r e j u s t u s i n g g o l d a s a
use p a p e r
football, w h e r e t h e y c o u l d
i n i t s M i e s j u s t a s wvell.
The Chairman:
Mr. Kains:
W i t h n o abrasion
o n it.
R i t h n o abrasion, no.
Mr. Fold: .
If the Government e v e r attempted t o take
gold otherwise t h a n for i t s bullion valuc, everybody would
be sweating gold.
Mr. S e a y : .
Mr. McDougal:
The p u b l i c w o u l d h a v e t o p a y f o r it.
G o v e r n o r Wold, I
understand t h e s i t u a t i o n
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Federal Reserve Bank of St. Louis
i n California.
d o not believe y o u
T
h
e gold that
189
Governor K a i n s h a s o n hand w e c o u l d t a k e i n r e a d i l y a n d g e t
full v a l u e f o r ; b u t h i s s u b - t r e s s u r e r w i l l n o t feohickDia a
bag vee:
him.
Mr. Wold:
B u t h e says that mixed i n with that gold
is some that i s short.
Mr. McDougal:
Mr. Kains; I
Mr. Folds I
N o ; h e says it is all full weight.
say i t i s all good gold.
thought y o u said some o f i t was below
the l i m i t o f tolerance,
Mr. Kains:
ance.
N o ; i t i s a w a y a b o w e t h e l i m i t o f toler-—
W e cannot g e t action unless i t i s brought i n
i n mint
sacks,
I
We h a v e a
f i t i s out 2 5 years t h e y will n o t t a k e i t
a t all.
cub-treasurer w h o s a y s t h a t h e w a n t s
t o have h i g
gold where i t c a n b e counted, where h e c a n see every b a g
go
into it, a n d h e would n o t l e t u s have a little corner,
H e
has s e v e n t e e n r o o m s , a n d h e would n o t g i v e u s o n e o f t h e
rooms
i n t h a t building.
T h a t i s the sort o f a
sub-treasurer
we have.
The Chairman:
I f you took that u p with t h e department
here t h e y vould straighten that o u t i n n o time.
Was i t y o u r f e e l i n g t h a t w e s h o u l d t a k e s o m e a c t i c n ?
Mr. Kains: I
thought w e might. I
any p r e s e n t a c t i o n i s necessary,
but I
before y o u t o show y o u the conditions,
do not know that
just w a n t e d
t o get i t
I t i s a n intolerable
sort o f a concition out o n the coast, where w e are handling
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Federal Reserve Bank of St. Louis
light weight stuff a l l t h e time, nov, a b r a d i n g i t still
L930
more. I
circular s t a t i n g t h a t w e w o u l d n o t t a k e
sent o u t a
it a n y more; t h a t w e w o u l d t a k e i t a t i t s b u l l i o n v a l u e - - -
which scared a l l the country banks.
T h e country banks a l l
sent gold into the c i t y a n d drew Grafts against it.
aS
T h e
o r e a r e full o f it, m d t h e y a r e all fighting e a c h
other about i t t o see w h o will b e the goat, a n d they a r e
trying t o make m e the goat.
Mr. McCord:
The m o r e
I
t i s l i k e t h e c o n d i t i o n s d o w n South,
y o t a l k about reduction
o f acreage
i n the cotton
crop t h e m o r e a c r e a g e t h e y plant.
The Chairman:
w o u l d y o u suggest a
resolution f o r u s
to a c t o n , G o v e r n o r K a i n s ?
Mr. Kains: I
think i f w e a r e d i s c u s s i n g t h i s a b r a s i o n
I would l i k e t o make a
motion, giving i t a e b r o a d e r scope.
I move t h a t t h e Federal R e s e r v e B o a r d b e a p p r o a c h e d a n d a s k e d
to help o u t i n this dituation i n regard t o the handling o f
e will show t h e m what t h e situation i s
W
abraded coins.
and t h e y c a n p r o b a b l y s e e t h e T r e a s u r y D e p a r t m e n t w i t h m o r e
influence t h a n w e have.
Mr. Seay:
Mr. Kains:
any o t h e r p l a c e
Y o u mean now, a s i t affects Balifornia?
A s i t affects California,
i n this country.
Mr. MeCord:
Ur. Kains:
I
t is a
o r a s i t affects
broad question.
I t arreataua, Lae:
B
e are all
f e e t :
a n d w e a r e a l l inter-
ested i n getting this gold c o i n behind bars where i t belongs.
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Federal Reserve Bank of St. Louis
The Chairman:
I
s this m o t i o n seconded?
Mr. McCord: I
second t h e motion,
(The motion, b e i n g duly ceconded, w a s p u t and car-
ried.)
he Chairman:
cuss t h e s u b j e c t
program.
G o v e r n o r M c C o r d s u g g e s t s t h a t w e dis-~
o f f o r e i g n exchange, b e i n g N o .
3 0 o n the
G o v e r n o r McCord, m a y I ask for your views o n
this subject.
Mr. McCord: i
Wonted. y o u g e n t l e m e n
wanted y o u g e n t l e m e n w h o a r e e x p e r i e n c e d
T o discuss: i t s 1
i n this matter
lead out, because this i s a new field t o me, a n d I
the fact that I
to
recognize
have t o g o u p against it, a n d I wanted t o
get t h e e x p r e s s i o n o f o p i n i o n o f y o u g e n t l e m e n w h o h a v e h a d
experience o n it, s o that I would k n o w h o w t o handle i t when
it c o m e s u p t o m y counter,
Mr. C h a i r m a n ,
a r e w e authorized
t o open
London a c c o u n t s ?
The Chairman:
T h e Federal Reserve Board c a n give
authority t o open London accounts, I
think t h e likelihood
is, unless some good reason i s shown t o t h e cotrary, t h a t
it w i l l e n d e a v o r
t o w o r k o u t a n arrangement
b y which there
will n o t b e twelve L o n d o n a c c o u n t s a n d t w e l v e B e r l i n accounts,
but simply o n e account f o r t h e whole system, w h e n t h e time
comes t o open it.
T h e t i s very m u c h i n Mr. Narbpurg's mind,
who i s t h e b e s t p o s t e d w e a n o n t h a t s u b j e c t
ir. Kains:
tries?
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Federal Reserve Bank of St. Louis
h
o n t h e Board.
T h a t would t a k e i n all other foreign coun-
e w i l l d o business w i t h S v e d e n a n d a l l t h e r e s t o f
them?
The Chairman: U l t i m a t e l y ,
business,
w e would have to.
i f w e went i n t o d o that
W e cannot d o business w i t h one
without coing i t with all o f them.
mean t o say that w e would a l l work t o -
Mr. Kains: I
gether.
The Chairman:
P r o b a b l y through o n e agency.
Now, Governor McCord, a r e y o u thinking o f commercial
bills, t h a t is, coviton bills?
Mr. MeCord: L a r g e l y , yes, because t h a t i s the principal
amount o f our foreign exchange--- a n d phosphates a n d tobacco
and s o on.
would L i k e
Mr. W o l d : I
t o inquire,
Governor Strong,
if the foreign bills Sterling have b e e n handled i n approximately t h e s a m e m a n n e r a s t h e d o l l a r a c c e p t a n c e s , w i t h o u t e n d o r s e -
ment.
M y understanding w a s that o n the foreign sterling
pill t h e banks through whom i t passed endarsed it.
flour crafts endorsed b y the Minneapolis banks.
T a k e our
T h e y sett
to Chicago a n d t o New York andthey a r e endorsed a n d t h e document i s attached.
The Chairman: Unfortunately,
Mr. t o l d :
T h a t i s peculiar
I
The Chairman:
more p a r t i c u l e r l y
i n the South-—
t o t h e c o t t o n b a l i , 16. 1 t ?
t i s peculiar t o certain bills, b u t
t o t h e c o t t o n b i l l t h a n a n y other.
T h e
cotton sixty o r ninety d a y draft i s negotiated i n the South
by t h e c o t t o n f a c t o r
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Federal Reserve Bank of St. Louis
o r shipper
o r b y the broker w h o buys t h e
193
egchange through t h e local b a n k down there, a n d that local
bank o r the broker himself negotiates t h e sale o f the draft
to N e w York, s a y , a n d t h e l o c a l b a n k c r a w s
o n New York with
the s t e r l i n g c r a f t a n d t h e s h i p p i n g d o c u m e n t s a l l attached;
but t h e L o c a l b a n k c o e s n o t e n d o r s e t h e S t e r l i n g d r a f t a t
Bats
i
t never takes-title ve=it.
T t . is<-sinply a
drait
in the N e w York bank with documet 6 attached; a n d when t h e
buyer o f t h e s t e r l i n g d r a f t p a y s t h a t l o c a l d r a f t h e s i m p l y
detaches t h e foreign draft without getting t h e endorsement o f
the southern craft a t e p e e
Mr. Kalins:
A n d t h e n selis i t ?
T h e n the N e w York buyer o f the sterling
The Chairman:
draft e n d o r s e s t h a t c r a f t a n d s e n d s i t t o h i s c o r r e s p o n d e n t
in Liverpool
o r L o n d o n f o r acceptance.
T h e r e t h e documents
are detached a n d t h e draft goes into t h e portfolio f o r the
account cof the N e w York draft o r i s sold t o a discount heuse
or discaunted, where t h e goods a r e sold against it.
Mr. Wold:
T h a t i s net true o f our bills. O r d i n a r i l y
they bear the endersement o f the banks through whem they
passed.
The Chairman:
‘rarely endorsed.
T h o s e that Mr. McCord reférs t o are
T h o s e l a k e perts a r e a l l rebate drafts.
They are almost a l l o f them endorsed; t h a t is, t h e y are crawn
at seven days! sight a n d rebated o n presentation instead o f
accepted payable s e v e n days after sight. A
great m a n y
miscellaneous commodity drafts a r e handled directly i n New
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Federal Reserve Bank of St. Louis
194
sreat b u l k o f t h e m a r e s o t h a t y o u c a n n o t s e e
interior e n d o r s e m e n t
t o a n y o f them,
think there a r e a
great m a n y d r a f t s
other h a n d , I
O
n the
made from
the m i d d l e w e s t , s u c h a s g r a i n f r o m y o u r territory, w h e r e
they draw sixty days f o r grain shipments,
frequently e n d o r s e d
b y t h e interior banks,
T h o s e a r e very
and I
think t h e
Canadian b a n k s a l m o s t w i t h o u t e x c e p t i o n e n d o r s e t h e i r c r a f t s ,
Kains:
Always.
(At this point a n informal discussion occurred which
the stenographer w a s cirected n o t t o report; a f t e r which the
following proceedings took place:)
The Chairman:
T h e s o u t h e r n banks, G o v e r n o r Kains, h a v e
always s a i d that t h e y handled s o many cotton drafts t h a t
the l a w w o u l d n o t p e r m i t t h e m t o endorse t h a t q u a n t i t y o f
sixty @
ninety c a y paper, a n d they have always "ducked" it.
They have claimed that t h e endorsement w o u l d b e ultra vires,
anyway, b e c a u s e t h e y w o u l d b e e x c e e d i n g t h e a m o u n t
o f theiz
capital a n d surplus m a n y times over. I
lacy, b u t n e v e r t h e l e s s t h e y h a v e m a c e t h a t c l a i m q u i t e often.
Mr. McCord:
P o s s i b l y t h e y p a y for i t i n the rate.
The Chairman:
cotton drafts,
G o v e r n o r MeCord,
just now i t is a
o f course a s t o those
very s p e c u l a t i v e c o m m o d i t y
to buy i n a market like this; a n d personally I
would hesi-
tate either t o buy sterling l o n g drafts o r carry t h e necessary balence abroad o r r u n the risk o f having t o carry t h e
draft
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Federal Reserve Bank of St. Louis
a b r o a d u n t i l maturity.
T h e re g r e q u i t e a
few A m e r i c a n
195
houses t h a t d o a n exchange b u s i n e s s t h a t h a v e b a l a n c e s
abroad t h a t t h e y will whistle f o r until this w a r i s over, i n
different
parts
o f Europe,
Mr, S e a y :
Y o u have n o t opened a
The Chairman;
W e have not, -
Mr, M c C o r d ; I
I
w e d o not intend to.
raised t h e q u e s t i o n p u r e l y t o g e t r e a d y
fa t h e f a l l movement;
present. time.
department y e t ?
n o t w i t h t h e i d e a o f anything a t the
f w e handle t h e e drafts
w e have t o c o n f o m
to the rule down there, a n d i f w e insist o n endorsement w e
will n o t g e t any.
The Chairman:
Exactly.
Mr. M c C o r d ; I
just w a n t e d
views o f t h e G o v e r n a r s
t o know what w o u l d b e the
a s t o w h a t w e w o u l d h a v e t o do; w h e -
ther w e w o u l d heave t o e n d a s e o r not,
The Chairman:
W h a t y o u c a n d o i s this:
Y o u r member
banks a r e going t o be. handling those sterling drafts i n large
quantities.
Mr. McCord:
Y e s sir; and they are not going t o en-
dorse t h e m , e i t h e r .
The Chairman:
T h e y a r e n o t going t o endorse then,
but what they will d o will b e equally good f r o m your point
of view,
T h e y c a n t u r n those i n t o y o u simply a s collec-
tion items attached t o their o w n drafts made o n the buyer
of t h e e x c h a n g e
i n N e w York, a n d i f y o u w a n t t o t a k e t h o s e
drafts a s N e w York exchange w i t h t h e documents attached,
why,
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Federal Reserve Bank of St. Louis
then, y o u get t h e draft o f your o w n member b a n k a m
196
that draft c a n b e sent forward t o u s for collection; a n d
while i t c a n n o t g o t h r o u g h t h e e x c h a n g e s
i n N e w York,
w e can
collect them, deliver t h e documents t o the drawee o f the member b a n k ' s d r a f t ,
surrender them,
a n d g e t N e w York Exchange
for then,
Mr. McCord:
T h a t h a s b r o u g h t o u t something.
not know whether y o u would d o that f o r m e
Mr S e a y :
themselves?
o r not.
W h y d o y m n o t make t h e member banks d o that
A f t e r sending t h e m t o New York they c a n draw
on New York and y o u c a n take their drafts,
amount
J I E !
T h a t would
t o t h e s a m e thing.
The Chairman:
T h a t would amount t o the same thing.
Mr. McCord; S o m e t i m e s t h e y want t o use them right
there, a n d I would like t o get m y bills afloat.
T h e r e are
a good m a n y t h i n g s a r o u n d t h e c o r n e r (laughter).
Suppose
the National Bank o f Savannah wants t o create a balance with
me t o meet t h e checks w h i c h are crawn against then,
have t o remit t o me.
T h e y
T h e y say, o v e r t h e long distance
phone, " C a n y o u handle foreign drafts, documents attached?"
I want t o know o n what basis I
can handle them. I
want
to be i n a position t o say, "Yes; w e can handle it", i f we
can handle it.
I f w e cannot, a l l right.
The Chairman:
Mr. McCord:
T h o s e a r e purely collection items,
T h e y a r e p u r e l y c o l l e c t i o n items.
Same t i m e , S a v a n n a h c a n b e c a l l e d
o n t o p a y o u t quite a
of money i n the interior t o p a y for that cotton.
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Federal Reserve Bank of St. Louis
A
t the
lot
I t has g o t
Loy
to m o v e q u i c k l y a n d t h e y d o n o t w a n t t o w a i t u n t i l t h a t c r a f t
goes t o N e w Y o r k u n t i l t h e y c e t t h e i r guarantee, T h e y w a n t
may b e
the g u a r a n t e e o u t o f me, a n d I a m v e r y g l a d i n d e e d a t t h a t
time o f the year t o give i t t o them, a n d 1 get m y exchanges.
D o y o u think w e c a n handle those, Mr.
The Chairman;
Hrndricks?
Mr. Hendricks:
surely.
The Chairman:
L e t u s t r y i t on, s n y w a y , G o v e r n o r
Mecord.
Mr. M c K a y :
I
t i s j u s t l i k e b u y i n g i n t h e exchange.
Mr. McCord: I
thee
did n o t k n o w w h e t h e r y o u c o u l d h a n d l e
o r not,
The Chairman:
I
s there a n y further d i s c u s s i o n
on
foreign exchange matters?
Mr. MeCord: I
had a n inquiry f r o m N e w Orleans t h e o t h e r
day t o k n o w i f w e c o u l d h a n d l e t h e i r acceptances,
T h a t is
the N e w Orleans national.
Mr. Kains: B a l d w i n ' s bank?
Mr, McCord:
Yes.
T h e y were cashing t h e drafts o f
people o u t i n t h e c o u n t r y b u y i n g export:
T h e y accepted a
draft, y o u understand, a n d t h e y wanted t o knov i f w e could
handle those,
U n d e r this l a w where t h e y are c o c e n t r a t i n g
this p r o d u c t f o r f o r e i g n s h i p m e n t t h e l o c a l b a n k c a n a c c e p t
a domestic exchange uncer those conditions, a n d t h e y wanted
to k n o w w h e t h e r
told t h e m yes,
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Federal Reserve Bank of St. Louis
w e could handle them, I
blazed r i g h t
T h e y certify those against t h e actual
i n and
8
i
product, c o n c e r n t r a t i n g f o r f o r e i g n export.
good thing.
t is avery
T h a t i s all I have t o s a y about it, Mr. Chair-—
man.
The Chairman:
I
t was suz;gested that inquiry b e made
as t o whether i t might n o t b e desirable t o a s k the Federal
Reserve Board t o change t h e date a s o f which the report i s
mace b y t h e F e d e r a l R e s e r v e b a n k s
so w e mighthave a
t o the Board every week
day free i n which t o prepare t h e figures
as o f t h e c l o s e o f business T h u r s d a y night.
some l a t e w o r k i n t h e b a n k s F r i d a y night,
T h a t would save
s o t h a t t h e figures
get o f f that evening o r the next morning.
Y o u s e n d t h e m b y mail s n d w e send t h e m
s
tins h e w e n e r
by wire.
Mr. Aiken:
t would s a v e t e l e g r a p h i n g expenses
I
to
some o f us, which i s a very b i g item.
G o v e r n o r Fancher, h a v e y o u a resolu-
The Chairman:
tion: 7 0 suggest?
Mr. Fancher: I
would o f f e r a
resolution recommending
to the Board that the repert b e made u p o n those lines a s
of t h e c l o s e o f business T h u r s d a y ,
The Chairman:
tion r e c o m m e n d i n g
G o v e r n o r Fancher h a s offered a
resolu-
t o t h e Fedcral Reserve Board t h a t t h e report
of the condition o f the Federal Reserve Banks b e prepared
on Friday, making t h e figures a s o f the close o f business
Thursday, instead o f Friday,
seconded?
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Federal Reserve Bank of St. Louis
a s heretofore,
I s that motion
McCord: I
second t h e motion.
(The motion, having been duly seconded, was put
and carried.)
he C h a i r m a n :
Z
e have received
a n inquiry f r o m t h e
Federal h e s e r v e B o a r d r e f e r r i n g t o I t e m No, 3 1 a s t o w h e t h e r
li c e r e t o authorize t h e p r e p a r a t i o n
bank n o t e s
t o b e used i n t h e event w e should w i s h t o issue
bank notes against government bonds,
the p r o g r a m f o r discussion,
su_.ested
o f Federal R e s e r v e
T h a t matter w a s put o n
a n d inasmuch a s I
think i t was
i n o u r o v n office a n d w e h a d n o t made a
final r e -
ply t o that inquiry, Mr. J a y thought t h a t i t might b e desirto bring i t u p f o r discussion a t this meeting w i t h the
of submitting something t o the Federal Reserve Board.
Mr S e a y
Y
MeDougal:
é h a v e d o n e s o , a n d p a i d f o r t h e plates.
S o m e time a g o w e began purchasing i w o
bonds w i t h a view a t the time o f exchanging t h e m
Upon r e c o n s i d e r i n g t h e matter, however,.
it
was d e c i c e d t h a t w e v a q i d h o l d t h o s e b o n d s f o r c i r c u l a t i o n
purposes,
C o r r e s p o n d e n c e w a s b e g u n w i t h t h e Board w i t h
the result that o u r dies a n d plates I
think a r e a l l ready
for the Federal Reserve B a n k notes, a n d a s I understand it-—-I think I
a m correct--— o u r notes c a n b e furnished n o w i f
we w a n t them, w i t h i n a
v e r y f e w days! n o t i c e .
I
t -Vs-the
expectation t h a t w e w i l l h a v e t h e m v e r y s o o n , n o t f o r cthe p u r pose o f p u t t i n g t h e m out, b u t s i m p l y t o s t r e n g t h e n o u r p o s i tion a n d h a v e t h e m
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Federal Reserve Bank of St. Louis
i n the vaults
i n case
w e need them.
i t y
200
ting n o t h i n g t o c a r r y t h e n o t e s
i n t h a t form, a n d
would b e i n readiness f o r a n y emergency.
Tre Chairman:
Y o u h a v e b o s t y o u r reserve, h o w e v e r ;
purchase
:
vesuncn..
W e have,
o f t h e bonds?
W
e have a
t w o p e r c e n t ina-
w h i P t c t i e d kalyrosalspalsicneas 25
Re have ordered t h e plates a n d t h e printing
rancher:
W
pawyer:
e have ordcred
W
chairman:
McCord:
t h e plates.
e h a v e o r d e r e d t h e plates.
G o v e r n o r McCord, h a v e y o u ordered a n y
N o .
Chairman:
G o v e r n o r Aiken?
Governor R h o a d e s ?
choades:
N o .
Chairman:
Kalns:
G o v e r n o r Kains?
W o ; but I
Chairman:
W
think w e will.
e have n o t ordered a n y plates
bougnt a n y bonds i n New York,
or
S o m e w a y o r ocvher I have h a d
a Seeling t h a t w e were going t o g e t away f r o m bond-secureé
bank n o t e s u n d e r t h i s n e w b a n k i n g lav.
Mz, Aiken:
I t seems t o me, Mz. Gheirman, t h a t i t
simply p e r p e t u a t e s o n e o f t h e most,
of t h e c u r r e n c y system.
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Federal Reserve Bank of St. Louis
W
e h a v e b o u g h t n o n e f @ t h a t reason,
201
Mr. Wold:
M a y I inquire a s t o what y o u propose t o d o
when the Federal Reserve Board, after t h e first o f next
November, buys °25,000,000 and asks you t o participate?
You will take them, w i i l y o u not?
Mr. Keins:
W e bought a million dollars j u s t f o t h a t
reason,
The Chairman:
G o v e r n o r Kains,
t h e Federal Reserve
Board h a s n o p o w e r t o m a k e i n v e s t m e n t s
o r b u y a n y bonds f o r
you. o r for any o f us.
It h a s t h e p o w e r t o r e q u i r e t h e b a n k s t o
buy them.
The Chairman:
O h , that i s a different matter.
They
cannot S t a r t t h a t f o r t w o years.
Mr. McCord:
T h e 23rd o f December, 1916.
(At this point a n informal discussion occurred,
which t h e s t e n o g r a p h e r w a s d i r e c t e d n o t t o report; a f t e r
which t h e f o l l o w i n g p r o c e e d i n g s
The Chairman: I
t o o k places :)
would like t o make a
get s o m e o n e e l s e t o p u t it. I
motion,
move t h a t w e i n q u i r e
i f I can
of
the F e d e r a l R e s e r v e B o a r d w h e t h e r t h e y u n d e r s t a n d t h a t i n t h e
apportionment
o f 25,000,000
o f b o n d s w h i c h m a y b e p u r chased
under t h e automatic provisions o f t h e Act regard w i l l b e
given t o any purchases t h a t m a y have b e e n made i n anticipation
by the Fedcral, Reserve Banks.
Mr, McCord:
T h e question i s settled right here, before
that motion i s made, i f y o will allow m e t o read j u s t this
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Federal Reserve Bank of St. Louis
one sentence,
i n section 18:
"The Treasurer shall, a t the end o f each quarterly
period, furnish t h e Federal Reserve B a r d w i t h a list o f such
applications,
a n d the Federal Reserve B o a r d m a y i n its dis-
cretion r e q u i r e t h e F e d e r a l R e s e r v e B a n k s
t o purchase s u c h
bonds f r o m the banks whose applications h a v e b e e n filed w i t h
the T r e a s u r e r
ly period
a t least t e n days b e f o r e t h e e n d o f a n y Quarter-
a t which t h e Federal R e s e r v e B o a r d m a y direct t h e
purchase t o b e made, provided, t h a t Federal Reserve mmthambanks
shall n o t b e c a m p e l l e d
t e purchase
a n amount
t o exceed
225,000,000 o f such bonds i n one year, and which amount shall
include b o n d s a c q u i r e d u n d e r S e c t i o n 4
o f this A c t f o r t h e
Federal Reserve Banks,”
That COvVerS -Lt.
Mr. Curtis:
Section 4
does n o t provide f o r the acquir-
ing o f a n y bonds,
Mr. Seay:
T h a t also m a y mean that t h e agregate required
to be purchased cannot exceed $25,000,000, b u t i t may not
necessarily m e a n t h a t
y o might n o t have t o buy your propor-
tion o f those o f f e r e d u p t o t h a t amount.
Mr. McCord:
Mr. Seay:
I t says i t shall include those,
T h a t i s to include the %25,009000.
(At this point a n informal discussion took place
which t h e s t e n o g r a p h e r w a s d i r e c t e d n o t t o report; a f t e r w h i c h
the following proceedings w e r e had:)
The Chairman: I
motion that Isuggesied.
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Federal Reserve Bank of St. Louis
will a s k t h e s t e n o g r a p h e r
t e read t h e
203
(The stenographer thereupon read the motion a s
above recorded.)
The Chairman:
T h a t i s rather
a n important m a t t e r
when w e c o m e t o c o n s i d e r t h e q u e s t i o n o f price.
I
t seems
to m e i f w e are going t o b e required t o b u y bonds, anyway, a n d
we c a n b u y them voluntarily f o r 98-1/2, a n d m a y have t o buy
them u n d e r d i r e c t i o n
o f the Board a t par i n the course
of
some months, w e had better have notice o f that right now, a n d
act.
I s that motion seconded?
Mr. Kains: I
make t h a t a s a
Mr, Fancher: I
motion, M r . Chairman.
second t h e motion.
(The m o t i o n r e f e r r e d t o , h a v i n g b e e n d u l y seconded,
put and carried.)
Chairman: I
think w e w o u l d r a t h e r h a v e t h a t q u e s -
tion answered before ordering o u r plates made.
I f w e are
going t o be+required t o buy some bonds later o n w e might a s
well o r d e r t h e p l a t e s made.
I
f w e c a n avoid i t w e a r e
going to.
Mr. McCord:
T h e bonds a r e convertible i n t o threes
after purchase, u n d e r t h a t rule,
(At this péint a n informal discussion occurred
which t h e s t e n o g r a p h e r w a s d i r e c t e d n o t t o report;
after w h i c h t h e f o l l o w i n g p r o c e e d i n g s t o o k place:)
Mr. Kains:
N e . 36, chatted mortgages. I
cattle, principally.
W e are likely t o b e offered a
deal o f t h a t paper, c o m i n g f r o m Oregon.
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Federal Reserve Bank of St. Louis
refer t o
D A O
good
I O U S . eaeaag
204
objection t o our taking it.
a
k
e i t under the
W e carmot- t
t h e l a w o f Oregon.
1aw o f California, b u t I think w e c a n under
ee
discount
C a n y o u not t a k e i t under t h e
MeCord:
I t i s a question o f holding t h e
Mr. Kains:
p o e
have t e know
If the cattle walk into another township w e
about i t a n d e n f a r c e o u r claim.
would a d m i t o f that s o r t &
Mr. Seay:
I
thing,
f the’ laws o f your S t a t e
d o y o u s e e a n y objection?
understand i t i s
W e are taking them. I
Board.
permissible under t h e r e g u l a t i o n s fo the
Mr. Kains}
T h e r e i s a danger.
T h e Portland Cattle
surplus,
Company; with “100,000 capital and 4100,000 of
banks and
makes a business o f borrowing money frem national
itself extended,
other banks a n d lending it, and i t has had
and does i t
It loane~ $3,000,000 o r $4,000,000 o n cattle,
n
a makes lots o f money.
i n t e l l i g e n t l yd
S o m e o f these country
e a s y w o k getting that paper
banks s t a t e t h a t t h e y w o u l d h a v e
made every effort a n d
discounted w i t h us, a n d t h e y have
sort o f thing t o get
used all kinds o f influence, a n d that
g e t ourselves disliked.
us into a positinsn where w e would
Of course,
w e would n o t take Lt,
Mr, Wold:
P a p e r endawsed
b y t h a t company,
and you
will not take it?
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Federal Reserve Bank of St. Louis
Mr, Kains:
Mr. Wold: I
w i s h w e h a d s o m e r o nRagetaee
W e would t a k e
205
Mi enweecayt
e Y o u w o u l d n o t i f the c o m p a n y w a s extended,
Mr. Wold:
f the paper was not g o o a n d t h e bank was
I
not g o o d , w h y no.
Mr. MeCord:
W e are glad t o get it.
Chairman:
Kains;
I s this subject exhausted?
I t i s exhausted,
Chairman:
Kains:
Seay:
A n d n o r e s o l u t i o n 1 8 required?
N o sir.
N o . 3 5 could b e disposed o f very quickly.
> Chairman;
T h e question h a s b e e n
t e e
a
e
the
consequences w o u l d b e i f i t w e r e f o u n d t h a t a n o f f i c e r
of
a member bank has incorrectly certified t h e eligibility o f
some paper that i s offered for rediscount, and whether the
forms which w e are n o w using, calling f o r a
that character, c o r e r t h e ground, I
certificate o f
forget w h o raised that
question.
r.. Carites G o v e r n o r Kains.
Mr. Kains:
T h a t i s right. A
wrote u s a b o u t t h a t thing.
bank a t Los Angeles
T h e y said t h e y would discount
with us, o n l y they had t o stretch their consicence a
iit-
tle; t h a t is, t h e y d o n o t know; t h e y think i t i s all right
but t h e y cannot certify that i t i s i n all respects eligible
according t o the Federal Reserve Act.
I t i s t o the best o f their knowledge a n d
The Chairman:
beliler?
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Federal Reserve Bank of St. Louis
Mr. Kains:
e
e
h y OB
Boule t h e y g o that far?
Goats
Yes; t h e y would ~ ° t H e
they a r e required
Is t h a t n o t a l l t h a t
H e i s rather tender.
Mr. Kains:
b e arrested,
turned o u t badly h e would
t o
H e thought i f i t
o r something o f that
sort.
Mr. Seay:
I f i t i s a perjury, I
a m very sure there a r e
guilty. ( L a u g h t e r )
a good imany o f ours that are
that
Governor Kains, lI did not know
The Chairman:
they h a d consciences
b u t inaslike that d o w n i n Los Ageles,
settled b y
a matter that c a n b e
much-as t h e y have, i s that
a soothing letter from San Francisco?
Mr. Kains:
soothe them.
O h , yes; w e c a n
raised
he wave n o t h a d that question
The Chairman:
with u s a t all.
Mr, Fancher:
whether i t
That brings t o m y mind something
w--» I
of
you o r nots-in the matter
do net know has occurred t o
the a p p l i c a t i o n
of national b a n k s
tor, administrator,
etc.
t o a c t a s trustee,
execu
recommen-~
D o you know whether t h e
Directors
dation o f the Board o f
carries w i t h i t any respon=
sibility?
Mr. McDougal:
Our B o a r d o f d i r e c t o r s
permits b e issued,
declined t o recanmend t h a t
of counsel.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
in C h i c a g o h a v e
o n the advice
207
Mr, Fancher:
Mr, Seay:
W e have t h e matter u p with o u r counsel
W h e r e t h e Federal Reserve Agent i s undertak-
ing t o d o that w i t h us, I
a m very willing t h a t h e should
shoulder t h a t r e s p o n s i b i l i t y
i f h e wants to.
Weare miyoualediats,
n
a
s
O u r board wants
t o know its responsibil-
The Chairman:
T h i s qestion
o f national b a n k s e x e r c i s -
ity.
ing t h e s e n e w powers
a s trustees
i s g o l n g t o raise m o r e o r
less o f a storm all over the country.
I t i s brewing i n
our state w h e r a @ I> understand t h a t yesterday a n amendment
was t o b e introduced i n the State Legislature-—— a n amendment t o the State banking law--- removing a
‘against national banks exercising t h a e
prohibition
powers;
a n d that
will array a l l t h e trust companies against t h e national banks
in the State.
will h a v e a
T h e y will b e a t i t pretty s o o n and t h e y
great c o n t r o v e r s y S p o u t A t a
I
n t h e meantime,
my o w n feeling i s that t h e Federal Reserve Banks should l a y
low a n d w a t c h w h a t i s g o i n g o n .
B a t y i t m a y teccigtfieuit
always t o d o that,if pressure i s brought, c a n the Federal
Reserve B a n k s c o m e o u t a n d t a k e t h a t pesition?.
Mr. Fancher:
H a v e y o u h a d a n y applications?
The Chairman: A
Mr. Seay:
few.
H a v e y o u answered a n y o f them a t all?
The Chairman:
T h e state l a w i s clear a n d unequivocal
in our state that t h e y cannot exercise t h e e
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Federal Reserve Bank of St. Louis
powers.
208
place which
(At this point a n informal discussion t o o k
was d i r e c t e d n o t t e report;
‘the s t e n o g r a p h e r
were had: )
following p r o c e e d i n g s
The Chairman:
a f t e r which the
the meeting t h a t
I s i t the desire o f
Reserve Board i n
o
i b e made t o t h e Federal
any r e c e m m e n d a t n
exercising powers
regard t o the subject o f national panks
of trastees, e t c . ?
(No response. )
b e marked
I f not, t h a t matter will
The Chairman:
"discussed."
Mr, C h a i r m a n ,
Mr, MeDougal:
The Chairman;
52?
m a y w e t a k e u p No.
believe, p y you,
T h a t was suggested, I
was i t not?
No; I
Mr, McDougal:
am interested i n it. I
I
did n o t suggest i t , although
to
would s a y that w e are sending
each o f t h e b a n k s w e e k l y a
complete s t a t e m e n t ,
and I
think
you are, i n New York?
The Chairman:
Mr. S e a y :
Yes.
A n d Richmond i s .
Mr. McDougal:
t é know t h e
W e have s o m e curionity
e f resarces.
details regarding these items
W
e have a
the Board, o r at least the
little difficulty, I think, with
w h o i s rather insisting
secretary o f the Board a t present,
publication
upon o u r d i s c o n t i n u i n g t h e
which w e have done e a c h week,
you do, b u t w e do.
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Federal Reserve Bank of St. Louis
of a
i n Chicago. T
complete s t a t e m e n t
a o not. think
The Chairman:
Mr, Fancher:
N o ; w e have n o t d o n e it.
T h a t contains t h e orders?
Mr. MeDougal: I
think that should b e done. I
think
the inte grity o f each statement c a n b e questioned w h e n they
include
i n there a m o n g t h e i r o t h e r a s s e t s h e a v y e x p e n s e
accounts,
a n d p e r h a p s f u r n i t u r e a n d fixtures;
at any rate.
to continue
b u t expenses,
W e have t a k e n that view o f i t and a r e going
t o publish o u r report
i n t h a t way, a l t h o u g h w e
have b e e n ‘riticised b y the Secretary.
The Chairman:
with regard
T h i s i t e m was p u t o n the program n o t
t o t h a t matter,
b u t w i t h regard
to a
have e a c h bank send t o each o f the other banks a
plan t o
complete
Statement o f the condition o f the bank every Week, uniform
in character, a n d i t seems t o me that that i s the sort o f a
thing that ought t o b e delegated t o a committee o n one,
Say, t o prepare t h e f o r m s o that each bank could b e furnished
with i t i f w e decide t o adopt t h a t a s a policy,
W e can
possibly g e t some information o f interest a n d value f r o m a n
examination o f t h a e
Mr. Seay:
stxtements w h e n they came in.
D ® they all keep t h e same kind o f books?
Mr. MeDougal?:
I t seems t o m e i f the banks would exchange
statements a n d give a detailed statement f r o m their ledger
or their d a i l y s t a t e m e n t b o o k , t h a t w o u l d c o v e r a l l p o i n t s
and make i t all uniform,
Mr. Seay: P r o v i d e d w e all keep the same kind o f books ,
as I
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Federal Reserve Bank of St. Louis
believe w e a l l do.
210
showing t h e
T h e y must k e e p pooks
Mr. McDougal:
conditions.
accounts coming in, a n d a statement o f
cur ledger, a n d
O u r statement i s a éopy ef
Mr. Seay:
I presume New York's is?
Yes.
The Chairman:
t h e amount
T h e amount d u e the banks a n d
Mr, McCord:
separated,
due the reserve b a n k s o u g h t t o b e
believe I
* Mr, Wold: I
peing put o n the program. | I
formal statement, b u t I
i n m y opinion.
a m the o n e w h o suggested t h a t
have n o desire t o submit a
think discussion o f i t here possibly
furnishing s o com—
would encourage some o f us who were n o t
statement which could
plete a statement a s we might t o give a
little more intelligently.
be analyzed a
The Chairman:
Mr, Wold;
T o each other?
Yes,
Mr, Kains; I
Mr. Wold: I
have n o objection a t all t o that.
de not agree w i t h m y friend f r o m Atlanta--
and that i s not the first time I
either. I
have disagreed w i t h hin,
f r o m Federal
think w e should show d u e t o and d u e
Reserve Banks--Mr. MeCords
The Chairman:
amount.
B u t i t all gees i n t o o n e
week,
W e separated o u r s last
W e started
statement, a n d w e n o w
two weeks a g o i n our published f o r m
publish a
items ;
means,
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Federal Reserve Bank of St. Louis
balagce s t a t e m e n t
i n New York giving a l l t h e
i n our ledgers,
n o t i n detail, a s i t appears
b u t w e publish a
statement w h i c h balances.
b y any
2ki
Mr, Aiken:
W e Nave, too, sir. I
a Statement p u t o u t t h a t w a s n o t a
was n o t willing t o
balanced S t a t e m e n t .
sé have done that f r o m t h e beginning.
MeLDougal:
# e have done that, showing t h e detail.
Fancher:
condensation
W
e publish a
balanced s t a t e m e n t w i t h a
o f c e r t a i n matters,
The Chairman:
N
o objection having b e e n made t o t h e
Chair's suggestion t h a t . acanmittee o f one b e appointed t o
prepare a n d f u r n i s h a
form f o r use f o r t h e purpose
o f ex-
changing t h i s information between t h e Federal Reserve Banks,
i take t h e l i b e r t y o f a p p o i n t i n g G o v e r n o r W o l d o n t h e c o m —
mittee,
a s h e s u g g e s t e d t h i s i t e m f o r t h e program,
t o prepare
a form statement a n d send i t around; a n d w e all hereby obligate ourselves t o observe t h e spirit o f this discussion a n d
furnish each o f the banks w i t h a statement i n such form a s
Governor W o l d prepares.
I
s there a n y objection
t o that
course?
Mr. McDougal: I
move that course b e pursued.
(The motion was d u l y seconded, p u t a n d carr ied.)
The Chairman:
gentlemen.
I t i s just five minutes t o eleven,
c o m e b o d y s a i d w e s h o u l d a d j o u r n a t ll.
have m a d e v e r y g o o d p r o g r e s s
o n t h e program.
W
W
e
e have o n e
or two hard nats here t o crack, however,
Mr. Rhoades:
I t has b e e n suggested t h a t i f w e stay
at i t a n o t h e r h o u r w e c a n g e t a w a y t o m o r r d w night.
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Federal Reserve Bank of St. Louis
‘The Chairman:
W
e have t o meet t h e Federal Reserve
Board b e f o r e w e l e a v e t o w n ,
Number 20: " B o o k k e e p i n g methods o f handling gold deposited w i t h Federal Reserve Agents."
we c a n dispose o f ,
other day, a
W
T h e r e i s a matter
e made o u t thirty schedules t h e m a
hundred a n d eighty sheets t o get o u t three
million o f notes using 4100,000 o f paper for that purpose,
and w e h a v e s e n t a
letter
t o Washington inquiring whether
or n o t w e c o u l d m a k e u p o n e s h e d u l e a n d t h e n p u t a p p r o p r i a t e
notes a n d indications a t the foot o f that shhedule showing
that i t i s in proper form, thereby getting out $3,000,900
of notes
o n o n e p i e c e o f paper.
Mr. Seay:
H a v e t h e y indicated a
The Chairman;
T h e y have not answered yet.
Gentlemen,
recommending a
hostile attitude?
w e have not t a k e n a n y action toward
plan for facilitating this substitution o f
gold f o r commercitgl paper.
Mr. S e a y : I
cussion, I
myself,
believe t h a t w o u l d t a k e a n extended d i s -
would like t o discrss s o m e features o f that
I f w e are going t o adjourn a t eleven,.however,
will n o t have t h e opportunity t o d o So.
we
T h e question o f
substitution o f notes i s a right serious o n e with us.
Mr. McCord:
H e r e i s a subject w e c a n dispose o f very
quickly.
The Chairman:
G o v e r n o r S e a y proposes t h a t w e let
this matter o f the method o f substituting collateral f o r
the Federal Reserve n o t e s g o over until tomorrow.
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Federal Reserve Bank of St. Louis
W e will
BLO
pass that.
T h a t i s 1 9 and 20, both, Governor Seay?
Mr. S e a y : Y e s - 6 i 9 7 .
4 y e u c a n h a n d l e v e r y quickly.
2
Mr. McCord:
" F e d e r a l Reserve netes a S reserves
The Chairman:
for national banks,"
W h a t i s your recommendation o n that,
Governor McCord?
Mr. McCord:
I t cannot b e dme.
I t not only c a n b e done b u t i t ought t a b e
Mr, Seay:
done.
N o . (Laughter)
Mr. McCord:
I t is pyramiding yeur
reserves,
think there i s a methed b y which i t c a n
Mr, Seay: I
are t o
be done.
I f you get t h e geld circulation o f this country
you have g o t t o d o it.
Mr. eGera's
The Chairman:
W e must g e t it.
I f y o u attempt i t n o w y o u will pyramid it.
Y o u would not, now, Governor McCord,
if y o u d o one thing, a n d that i s i f you could previde f o r
the closing o f your nade issue,
s o that t h e greater p a r t
of i t would b e simply gold certificates issued b y the
panks i n s t e a d o f b y t h e Government.
Mr. MeCord:
B u t that i s not a Federal Reserve note;
that i s a godd certifieate issued b y the bank,
The Chairman:
T h a t i s true, b u t i t would m w bsequently
take t h e form a s the p l a n developed e f a note o f the bank
with a
very large gold reserve, w h i c h would decline i n the
percentage a s paper w a s substituted, a n d would b e subject,
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Federal Reserve Bank of St. Louis
214
possibly,
t o a
system;
tax a s i n the case o f t h e German
s o
flexibility which the gold
that t h e note issue would g e t a
notes have n o t got.
certificates o r bond secured b a n k
I t
o f accumulating t h e gold
seems t o m e i t would b e the means
{nto t h e Federal Reserve banks.
T h e n y o u would b e perfectly
deposit i n national
safe i n having thes e notes issued for
banks.
this reserve business 1 s
W h e r e w e get confused i n
f o r deposits,
that w e are talking about reserves
hand, a n d r e s e r v e s f o r n o t e i s s u e s
o n t h e other;
o n the o n e
a n d they
a s i n the Bank o f
should b e just a s distinct a n d separate
England.
Kains?
D o you n o t agree t o that, Governor
Mr, Kains:
T i doy: bir.
The Chairman:
i s wrong
T h i s whole Federal Reserve Act
on that, and i t ought t o te amended,
W e are debarred now,
i n between the
by the terms o f the Act from getting
coinage o f gold bars i n t o coins,
s o that there i s n o means
by a
Banks c a n accumulate g o l d
py which t h e Federal Reserve
getting i n between the Governnatural process o f buying i t or
w e ought t o b e able t o do.
ment a n d i t s circulation, w h i e h
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. Seay:
gold o f the country.
K e ought t o control t h e
The Chairman:
w e have n o control at-all.
I f we could
Federal Reserve notes against
puy gold a t a price a n d issue
s u c h @ transaction w e
the gold, e v e r y time w e performed
banks.
would strengthen the Federal Reserve
B u t you cannot
100
w h i c h would b e secured b y
do that unless y o u r o w n notes,
rese:ves~
available a s national b a n k
per cent gold, a r e just a s
215
aS a r e t h e p r e s e n t g o l d c e r t i f i c a t e s - - ness f o r s o m e y e a r s a n d p r o b a b l y a
a n d w e caild d o busi-
good m a n y y e a r s a n d n e v e r
put a
dollar o f c o m m e r c i a l p a p e r b e h i n d t h e s e F e d e r a l R e s e r v e
notes
i f w e c o u l d g e t t h a t started,
Mie. Seay:
T h e Act provides f o r the exchange o f
Federal
Reserve notes f o r gold, a n d then leaves t h e matter u p
in
the air,
Mr. MeCorad: I
ugree w i t h beth o & y o u eentlemen, except
i say that t h e present Federal Reserve note ought n o t t o
be
counted a s a reserve i n a natienal bank, t h e w a y i t i s issued
today o r the w a y i t i s possible t o issue i t today.
The Chairman: I
Mr. Seay:
d o not k n o w but what I agree t o that,
I t is a better note than the reserves o f the
now *
Wa
7
bank now; a
va
T
i >
better n o t e t h a n t h e s i l v e r c e r t i f i c a t e s ,
The Chairman:
A n d i n most cases better t h a n t h e bank
of London notes with {150,000,000 trust funds behind then.
Mr. Seay;
T h a t subject ought t o b e continued, I
think, Governor Strong,
I t i s one o f the most important
features w e ought t o address ourselves t o , a n d i t i s a n
important development o f the Federal Reserve Act and a
pressing o n e ,
Mr, K a i n s ; I
move w e adjourn,
(The motion was seconded, and the Conference, a i
11:04 o'clock p . Me, adjourned until tomorrow, Friday,
Mare
12, 1915, a t 10 a'ecloek a, m,.)
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Federal Reserve Bank of St. Louis
O L THis
THIRD C O N F E R E N C E
V d
F E D E R A L RESERVE
Shoreham Hotel, March 12, 1016,
10:20 o ' c l o c k a , m ,
fopearances n o t e d u p o n t h e r e c o r d o f yesterday.
The Conference resumed i t s session, Governor Strong
presiding.
have o n e matter t h a t h a
The Chairman: I
over r e c e s s t h a t I
pion,
n e v e
would l i k e t o b r i n g u p f o r d i s c u s -
u s t b e e n informed that i t would b e timely
for u s t o register a
method
very strohg protest against t h e
b y which Federal Reserve notes a r e being shipped
from Washington, a n d the
e e
be-
a t t a c h e d t o it. I
lieve t h e cost that w e have p a i d N e w York o n recent ship% 9
»
i n
ments, amounting t o ¥;1,200, might have been reduced (3300
if w e h a d b e e n a b l e t o e m p l o y t h e c h e a p e s t means,
a n d that
is borne o u t b y the calculation made b y Governor Fancher,
where they paicé a bill of $160, and the shipment might
have b e e n c o v e r e d a t a
cost o f p o s s i b l y f i f t y o r s i x t y
dollars.
Mr, Fancher:
about [354,
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Federal Reserve Bank of St. Louis
Y e s ; between fifty a n d sixty dollars:
‘B17
The P o s t m a s t e r
The Chairman:
Getreral r e c e n t l y
heserve Board, b e i n g a
a ruling t h a t t h e F e d e r a l
ment o f the Government,
matter,
ments
mace
depart-
i t s mail
had a right t o frank
Government
a n d b y using t h e frank o f t h e
mail insurance,
b y mail a t registered
on snip-
there i s a
tremendously
t h a t w e c a n get this c o s t
very g o o d c h a n c e
reduced,
a n d I think w e
i f w e c a n persuade t h e m t o d o it,
should m a k e a
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Federal Reserve Bank of St. Louis
strong r e p r e s e n t a t i o n
to t h e Board,
a n d sug-
i s handled
p e made a s t o h o w that matter
gest a n inquiry
office.
in the Comptroller's
Mr. Seay:
*.
u s t e n days
M r . Chairman, t h e y shipped
and sent 4a
ago $600,000 b y registered mail insured,
franked it.
special,man d o w n with it. T h e y
W e only h a d
&
thousand, t h r o u g h D e l a n o y
to p a y f i v e c e n t s a
Delanoy.
they shippec u s "200 ,000
Tt cost only (32. Subsequently
and w e paid +40 f o r it, 4
Mr, Wold:
shipment b y express.
a s t o how the
D i d y o u make a n y request
shipment should be made?
Mr, Seay:
W e did not.
to m a k e a n y request.
cheapest manner.
that fashion,
I t ought n o t t o b e necessary
the best a n d
I t ought t o b e done i n
w e have h a d i n
B u t that i s one shipment
charged o n l y t h e
T h e y d i a frank, a n d they
small now.
insured mail rate, which i s very
Mr. Sawyer:
T h e y made t h e other shipment
b y express?
o f “200,000, they made
Mr. Seay: T h e next shipment,
by e x p r e s s .
Me. Fancher:
insurance
D i d y o u attend t o t h e
a t your
15
end of: t h e L i n e ?
Mr. Seay’
and s e n t
t o t h e insurance there,
N o , t h e y attended
u s the bill.
Fancher:
Seay:
Wold:
D i d y o u request i t ?
N o , w e d i d not.
T h e y made t h e arrangements.
think
I f you did request it, do you not
would aecede t o your request?
not advise us.
Mr, Seay: T h e y might; a n c they did
have.
insured i t under p o l i c i e s w h i c h t h e y
ividently
insuring it.
are t r y i n g t o m a k e s o m e a r r a n g e m e n t f o r
companies
were insured under t h e policies o f the five
with which Governor Strong made a n arrangement through
Delanoy &
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Federal Reserve Bank of St. Louis
Delanoy.
The Chairman: I
would l i k e t o m a k e a
statement
on
the letters written
that matter, U n f o r t u n a t e l y s o m e o f
which were
from our office, which I did not dictate, but
I was asked t o sign,
written b y one o f our m e n and which
that w e were
very reasonably might givo the impression
poosting Delanoy f o r business.
the fact.
O f course, t h a t i s not
a
i
s employed i n our office t o make u p
D e l a n o yw
with making shipschedule o f time a n d rates i n connection
a
ments a t the time w e were discussing
money b a l a n c e s b e t w e e n r e s e r v e banks.
method o f settling
A g spon a s h e saw
t o d o s o m e business,
there w a s a n o p p o r t u n i t y t h e r e
h e got
together t o make special
a syndicate o f the good insurers
rates f o r this particular service.
T h e result o f that has
reduce rates
been t o v e r y m a t e r i a l l y
before p e t w e e n a
anything t h a t w a s k n o w n
Aric.
down t o a
very m o d e r a t e amount.
Delanoy i s b e c a u s e
for nothing,
and 1
for his position,
ed p o s i t i o n
bureau.
us
great d e a l o f w o r k f o r
4
cannot h e l p f e e l i n g
a s he
i
little s y m p a t h y
spirits taking a very public
warrant insurance
i n connection w i t h this
Washington
H e came over here t o
Government,
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Federal Reserve Bank of St. Louis
h e has done a
r f s a s o n w e employed
t o r u n i t for t h e
successfully,
a n d has d o n e T e OVer
and he is
time himself personally
over here v e r y much o f the
this end,
er t o watch this thing from
I t is Mr. Delanoy
shipments ,
o f f a n d o n a s t o these
who has kept m e posted
exnensive now. S o , f r o m
which h e thinks a r e outrageously
o f the
like t o take advantage
our standpoint, w e would
h i m the
bring about, a n c give
t
o
able
been
has
h
e
rates
t o any
B u t that does n o t apply
penefit o f the insurance.
other bank.
arrangements w h i c h a r e
I f they heve local
t h e y ought t o employ those,
more economical, certainly
ur Wold:
the rates furI f I remember correctly,
o n l y between panks.
nished t o our bank a p p l y
W e have
Washington.
not had quoted any rato t o
Mr. Seay:
H
nS
t o you i f you ask for
o will give i t
covering t h e whole country,
They have sent u s @ schedule
under
a t a lively rate b y them
and w e have b e e n shipping
s i n c e w e g o t them, a n d I
those policies, a n a exclusively,
i n most cases about half
woula s a y t h a t t h e r a t e s a r e
what t h e y w e r e u n d e r o u r o t h e r policies.
The Chairman:
to b r i n g a b o u t a
T h e effect o f the whole t h i n
:
great
bring u p some
e c o n o m y already, a n d t o
rates among t h e insursort o f a n understanding about these
r a t o a p p l y i n some W a y t O
ers, a n d n o w w e m u s t m a k e t h a t
notes, because
the s h i p m e n t o f Foderal R e s o r v e
w e are just
having a
n o w that w e shouid
great oxpensé imposed u p o n u s
NOt D a y s
W i l l someone offcr a
resolution t o submit a
asking t h e m d e a l
memorial t o the Reserve Board, formally
with this mattor viforously right away?
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Federal Reserve Bank of St. Louis
I s o move.
Mr, Fancher: I
The Chairman:
second t h e motion,
w e bring
I t i s moved a n d seconded that
Federal Reserve Board,
the matter t o the attention o f the
a n d development o f a
and a s k for a prompt investigation
Reserve notes.
bureau system o f shipping Fedoral
t h e motion was carried, )
(The q u e s t i o n h a v i n g p e e n put,
Mr, Rhoades:
M r , Chairman,
i n endeavoring t o get
p a y o u r debts, I
large notes t o ship t o y o u t o
the s u p p l y a t t h e l o c a l s u b - t r o a s u r y ,
arranged t h a t I
by turning’
exhausted
a n d Mr. Warburg
Washington
should have t h e m shipped f r o m
i n order certificates a t Philadelphia.
M r .
office could
Malburn said that nobody i n the Treasurer's
s a Government officer, a n d w e would
make the s h i p m e n t a
Pol
have t o designate some individual.
The Chairman:
burn.
H a v e y o u struck that?
Y e s , a n d discussed i t with Mr, Mal-
T h e y have n o one here w h o i s properly authorized t o
take t h e r e s p o n s i b i l i t y
o f making a
shipment a n d t a k i n g a
rfceipt, a n d Mr. Malburn asked m e about that. I
also spoke
to one o f the members o f the Board about i t , a n d I think
it w a s t h e i r f e e l i n g t h a t t h a t s h o u l d b e t a k e n u p a s p a r t
of t h e w h o l e s u b j e c t
o f t h e sub-treasury relations,
s o
that w e could thrash i t all o u t a t once. ~#nother branch
of the same subject develops i n San Francisco about t h e
gold, a n d s t i l l a
different p h a s e o f i t appears i n N e w
only
York, w h e r e w e c a n d e p o s i t
“ y gold, b u t w e c a n n o t w i t h ~
draw gold.
Mr, a
attempting
T h a t i s t h e situation
t o make a
h
wa
transfer f r o m C i n c i n n a t i
a
d in
t o New York
the o t h e r day.
The Chairman:
T h a t i s Item 5
o n o u r program,
and we
have passed i t for t h e time being, inasmuch a s i t had been
turned o v e r t o a
committee
o f t h e Governors
t o d e a l with.
At our meeting yesterday i t was decided t o refer t h a t
whole subject b a c k t o t h o Committee f o r further negotiation
with the Treasury Department,
Mr. McDougal:
M r . Chairman, bearing u p o n this subject,
I take t h i s o p p o r t u n i t y o f b r i n g i n g a
matter b e f o r e t h e
Conference w h i c h has b e e n suggested b y our assistant
treasurer i n Chicago.
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Federal Reserve Bank of St. Louis
H e has looked i n t o t h e future, a n d
where ultican see plainly, w i t h his o w n eyo, a t least,
various banks
mately t h e Federal Reserve Agents i n these
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Federal Reserve Bank of St. Louis
a n d have charge o f
will b o c o m e t h e a s s i s t a n t t r e a s u r e r s
the sub-treasury;
i n other words, h e c a n see coming. con-
Roserve Agent
Solidation o f the department o f the Federal
have n o t h i n g t o s a y there, e x -
ana t h e sub-treasuries. I
matter
cepting h e w i s h e d m e t o p r e s e n t t h e
t o this Confer-
t o whether o r not,
ence a n d get a n expression o f views a s
a n d worked o u t
in other words, t h a t might b e practical,
at some time i n the future,
was also disThe Chairman: G o v e r n o r MeDougal, that
members
cussed w i t h Mr. M a l b u r n a n d w i t h t h e
o f the
Malburn tells
Federal Reserve Board, informally, a n d Mr.
me t h a t h e h a s a l r e a d y b e e n i n s t r u c t e d
b y the Secretary
all o f the serof the Treasury t o prepare a schedule o f
b y the subvices a n d duties t h a t n o w a r e performed
treasury b y statute,
a n d t h o s e h a v e b e e n tabulated ,and
they a r e n o w d i s c u s s i n g
method
i n the Treasury Department s o m e
o f those
o f arriving a t a decision a s t o which
Banks.
duties m a y be performed b y the Federal Reserve
w i t h h i m about
Mr, Malburn informed me, w h e n I was talking
so f a r a s h e c o u l d d e t e r m i n e ,
of a l l t h e d u t i e s
t h e great part
performo f t h e sub-treasurers c o u l d b e
ed b y t h e s e r e s e r v e b a n k s ,
a n d p r o b a b l y a l l o f them, w i t h
the disposition i n
avery slight amendment t o the law, a n d
the D e p a r t m e n t s e e m s
t o be
w o r k i n t h a t direction. I
MLS
suggested
=
t o some o f those w i t h whom I
we ought t o have a
committoe,
talked a b o u t i t
s o m p o s e d o f one o r two
s o m e of
the Assistant Treasurers o f the United Stat
Assistant Secretaries o f the Treasury.
n
a
eBe
o
Federal Reserve B o a r d a n d t h e Federal Reserve banks,
make a
f
to
special s t u d y o f t h a t w h o l e s u b j e c t a n d t a k e i t u p
comprehensively.
T h e reply w a s t h a t t h e y thought a
large
committee mignt develop conflicting opinions a n d difficulties, a n d that a
w a e committce, consisting o f possibly
one o f the Assistant Treasurers a n d one o f the Governors,
and, say, t h e Governor o f the Federal Reserve Board,
might make some progress.
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Federal Reserve Bank of St. Louis
M r , Warburg this morning tells
me thet t h e y a r e anxious t o make progress i n the direction
a s possible,
of developing t h a t whole subject a s promptly
the member
as well a s the matter o f the examination o f
u s bring
banks, a n d I think h e would b e very glad t o have
that u p for discussion with t h e Board
L e t
that i f anyone would like t o make a specific recommenda-—
a very
tion b y w a y o f resolution o r otherwise, t h i s i s
proper t i m e t o get i t o n the record, because w e c a n take
Board
it u p this efternoon i f w e decide t o meet w i t h t h e
then.
Mr. Seay: I
think i t i s a
very pressing q u e s t i o n
in
the development o f this system, o n e which takes precedence
over t h e b r a n c h b a n k s a n d m a n y o t h e r questions.
The Chairman: W o u l d not a resolution intimating that
24
t h e matter t o
he feeling o f this Conference pring
SKE s o m e thing s t a r t e d ?
I will offer s u c h a resolution.
the l a n g u a g e
o f that
onference t a k e u p w i t h t h e Ped~-
o f sub-treasury r e eral Reserve Board t h e whole subject
w i t h t h e Federal Reserve
lations a n d Treasury relations
Banks,by a
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Federal Reserve Bank of St. Louis
the Federal
committee t o b e appointed f r o m
a n d the Governors
Reserve Board, t h e Treasury Department,
a view o f developing t h e
of the Tederal Reserve Banks, w i t h
conducted b y the
banking business o f the Reserve Banks ; , now
freasury Department.
Rhoades: I
Chairman:
Rhoades:
hairman:
second it.
the motion?
I s there a n y @iscussion o f
reference
D o e s t h a t motion include a n y
N o , that has been covered already.
t h e motion was car(The question having b e e n put,
ried.)
The Chairman:
of
Y e left off last night i n the midst
20; t h a t is, t h e question
the consideration o f Items 1 9 and
the mechanical difficulraised b y Governor Seay, which was
i n and o u t t o the Federal
ties o f moving bills receivable
effecting
Reserve Agent, a n d the bookkeeping method o f
substitutions o f gold f o r other collateral,
I s i t your
925
wish t o m a k e a n y f u r t h e r r e c o m m e n d a t i o n
t o the Board a s t o
those t w o items, which w e are considering together?
think t h e m a t t e r
Mr. Seay: I
i s o n e o f v e r y consider-
able importance i n the practical operation o f the banks,
To illustrate:
W e have about s i x a n d one~half millions
under discount, represented b y bills o f all denominations,
from f i v e t h o u s a n d
u p t o t e n thousand, t w e n t y - f i v e , s o m e -
times f i f t y , w i t h b i l l s o f a
nating.
smaller d e n o m i n a t i o n p r e d o m i -
W e havo u p with t h e Federal Reserve A g e n t n o w a s
security for our notes about %3,500,000 bills.
W e have
maturing within t h e next thirty days $2,600,000.
There is
$6,100,000 o f bills.
W e have outstanding for collection
at all times about a million dollars o f bills.
Y o u see,
therefore, t h a t o u r rosources a r e n o t fully available a s
million
security f o r t h e Federal Reserve notes. H a v i n g a
or more out, w i t h t h e present volume o f discounts,
i t wil}
increase
o discounts i n i n proportion a s o u r v o l u m e f
ereases.
Likewise,
t h e proportion o f short t i m e bills
will increase a s our volume o f discounts increases.
is s a f e t o say, t h e r e f o r e ,
I t
t h a t a t least 2 5 per cent o r
more, o r 33-1/3 per cent, of our bills will not be available a s s e c u r i t y f o r o u r F e d e r a l R e s e r v e n o t e s .
avery considerable l o s s o f capital.
Thateis
I f there should b e
an active demand f o r Federal Reserve notes, a n d I antici‘pate t h a t t h i s f a l l t h e r e w i l l b e i n o u r d i s t r i c t
up cotton a n d other crop-moving purposes, a
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Federal Reserve Bank of St. Louis
t o back
very heavy de-
RBL6
mand f o r Federal Reserve notes, I
a m inclined t o think w e
dollars o f
could probably u s e fifteen o r twenty million
o w n cistrict.
Federal Reserve notes j u s t f o r use i n our
t o put u p for them,
But w e will n o t have bills receivable
in the first place, a n d i n the second place,
i f w e did
onerous i t would
heave them, t h e substitution would b e s o
have j u s t said, w e
present great difficulty, and, a s I
our capicould only use within 25 or 33—=1/3 per cent of
tal i n bills.
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Federal Reserve Bank of St. Louis
t o that
The Chairman: Governor Seay, with reference
i s o u t f o r collection,
portion o f y o u r c o l l a t e r a l w h i c h
you are n o w offecting substitutions,
a s Il understand it,
get the maturing
with Federal Reserve Agents, s o a s t o
place, a n d conpaper o u t a n d get long t e r m paper i n its
o u t f o r collection
sequently t h e m i l l i o n d o l l a r s t h a t i s
is f r e e p a p e r
i n the hands o f t h e B a n k
hands o f
Mr, Seay: Y e s , that i s freoe paper i n the
the bank,
i n process o f collection.
Tho Chairman:
to
W h y would i t not b e possible n o w
given t o the
have t h a t g o o u t d i r e c t l y o n t r u s t receipts.
Federal Reserve Agent,
s o that t h e paper i s , a s a matter
your notes, a n d al}
of fact, still serving a s security f o r
you w o u l d n e e d t o
d
the
o would b e t o a d d every d a y t o
a n amount equivapaper h e l d b y the Federal heserve Agent
t o your deposilent t o what has matured a n d b e e n charged
torb account o n that day.
£e7
That would b e a n improvement,
considerable
render available a
which i s now lost, s o t o speak,
or three hundred notes 4
w
i
portion o f our capital
the
B u t i t would n o t avoid
a s two
and w e sometimes h a v e a s much
daily substitution,
and i m a g i n e
and would
day t o substitute,
a t present,
fifteen million t o dish twelve o r
t
to
o r fifty millions o f bills
forty
have
would
w
e
count;
substitute.
Mr. McDougal:
f o r that,
W h a t would b e your remedy
mind?
Governor Seay, that you have i n
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Federal Reserve Bank of St. Louis
Mr, Seay:
Agent, a
t h e Federal Reserve
S o m e method o f giving
o f the bank,
lien o n t h e bills receivable
a
n
putting t h e notes u p i n
effective lien, without actually
Board a
n
a furnish t h e Fedvral Reserve
his c u s t o d y } 3 . d
list
w e take
e n d a list every time
every time w e put t h o m up,
week, a n d
w a s d o w n t o see u s last
examiner
T
h
e
down.
them
use
h e believed n o practical
I understood h i m t o s a y that
list which the Federal Kewas made of that substitution
serve B o a r d h a d ,
o f discounts
T o begin with, o u r l i s t
a
dgily sent t o them, siving
is
and
full history o f the bills,
o f the same
were b u t a repetition
sheets
substitution
those
them.
nothing practical n e w t o
information, a n d conveyed
The Chairman:
reporting t h e
Y o u would suggest, then,
giving a
total transactions ,without
detail o f the bills
substituted?
Mr, Seay:
T h a t would also b e a
great i m p r o v e m e n t .. The
tes
Federal Reservo notes a r e a
lien upon all the assets o f the
quite, w i t h a repro-~
have never b e e n able t o see
pank. I
person o f the Federal
sentative o f the Government i n the
i t gives t h e m a n y more e f Reserve Agent i n the bank, h o w
i n his hands.
fective l i e n t o place t h e notes
Federal Reserve Agents
Ne, Rhoades: Governor Seay, the
here, I
took the same view i n their conference
was told b y
our Federal Reserve Agent.
Mr. Seay: I
necessity
do not quite s e e t h e absolute
for that.
that arises
The Chairman: Governor Seay, one difficulty
from making a
Reserve
gencral recommendation t o the Federal
one, i s that they themBoard, w h i c h i s a very practical
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Federal Reserve Bank of St. Louis
a n d running them, a r e
gelves, n o t boing i n these banks
t h e technical, m e c h a n i c a l
really n o t i n p o s i t i o n t o d e v i s e
means o f meeting theso developments.
Mr, Seay: I
. . appreciate that.
The Chairman:
very
A n d I think w e can assist them
if w e offer a
concrete a n d fairly complete sugges~
of how t o meet a
w6
difficulty o f that sort, where
a recommendation.
Mr. Seay: I
accounting
a m sure o f that; although t h e
Board undertakes t o make
department o f the Federal Reserve
t o the Federal Reserve Banks
a great many recommendations
as t o how they shall make
f
e
o
t s calculate reserves,
d o differently,
and do various other things which we might
one point o f which w e discussed here yesterday.
The Chairman:
Mr. S e a y :
Yes.
I f they desire
t o keep t h e matter entirely
within t h e i r c o n t r o ] , t h e y m a y b e c o m p e t e n t
t o devise t h e
that i t
mechanical means t o d o this, a n d I agree w i t h y o u
,to
would b e practical i f we all agreed upon some method
which
submit this matter t o the Federal Reserve Board,by
it might b e done.
The Chairman:
W o u l d i t meet your -situation i f the
Board a g r e c d t o a c c e p t f r o m y o u r b a n k a
statement
o f the
a
total o f the notes that a r e substituted, together w i t h
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Federal Reserve Bank of St. Louis
amemorandum o f the amount which matured i n 30 and the
matured
mount which matured i n 60, a n d the amount which
in 90 days, i n each instance,
s o that t h e y would have a
Then,
fair i d e a o f how t h e notes were running off?
in
with t h a t r e p o r t o n l y required,
your o w n bank, y o u would b e able t o devise t h e most
without being
economical means o f keeping your o w n records,
Board a t all
under t h e n e c e s s i t y o f g o i n g t o t h e R e s e r v e
in that matter.
Mr. Seay:
T h a t would b e a
very g r e a t s t e p i n advance.
The Chairman: T h e n , t h e next recommendation would
be, t h a t a
policy b e a d o p t e d t o p e r m i t o f t h e
the notes o n the trust receipt b y the Federal
“pent f o r t h e p u r p o s e
o f collection,
w i t h t h e understanding
paper
that t h e substitution o f n e w paper against maturing
before
t h a t is being p a i d w o u l d b e effected, s a y , o n e d a y
230
T h e n you
maturity o f t h e p a p e r t h a t i s b e i n g c o l l e c t e d ,
would b e able a t all I
feed into t h e Federal R e -
»
serve a g e n t t h e n e w paper,
t o take t h e place o f what m a -
tures, a n d y o u would n o t have t o make o u t these: Loan substitution rcports o n account o f maturities.
That could b e done i f the legal
the matter would b e satisfied,
o r would b e met,
in mind this, whéther o r not the Federal Reserve Bank, i n
sonding o u t such notes f o r collicction, w i t h its o w n endorse-
-ment upon them, could, unless some different method were
being pursuod, give the Federal Reserve Agent any real lien
upon t h o s e notes,
The Chairman:
Me, Curtis: I
Y o u would b e acting a s a
collection
think that might b e done, I
have n o t
thought over that probiom.
Me, Seay:
W i t h o u t t h e bank which w e use having a n y
knowledge o f the matter , and without being able t o identify
bas ae oe s g
The Chairman:
Y o u r collecting agent would n o t b e con-
cerned with that, because y o u are dealing w i t h that o n your
own books entirely.
Y o u make a
with t h e F e d e r a l R e s e r v e A g e n t ,
contract,
i t seems t o me,
a n agency Sontract o f some
kind, a n d if, the day prior t o the maturity o f that paper ,
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Federal Reserve Bank of St. Louis
o f paper, t h e n h e i s
he does n o t get a n equivalent amount
f o r t h e gold, w h i c h
entitled t o come t o y o u with a demand
y o u would make t o
would b e realized b y the charge t h a t
your depositor's account.
Mr. Seay: I
am supposing the far-off contingency,
a Federal Reserve
which I cannot s a y ever would arise, o f
having
o u t
and |
Bank becoming involved i n difficulties,
w h i c h could n o t
for collection a proportion o f its assets
be identified,
a s having b e e n segregated f o r t h e purpose
might become mixe d
of securing Federal Reserve notes which
its o w n
with
o
F g e n e r a l funds a n d b e subject
t o s u c h eredi-
have,
tors o f the Federal Reserve Bank a s i t might
idencannot s e e i t w o u l d r e q u i r e a n y
The Chairman: I
o f ownership i s the
tification, because t h e only question
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Federal Reserve Bank of St. Louis
question w h i c h w o u l d a r i s e r i g h t
i n your o w n bank, a n d t h e
t h e time a s a n ofFederal Reserve Agent, w h o i s there a l l
have his
ficial representative o f the Government,.would
I
record, a n d each d a y h e would s a y “Today
go m u c h i n amount o f p a p e r
a m entitled t o
i n substitution f o r t h a t w h i c h
will mature tomorrow,"
Mr, Seay : A l l right.
The Chairman:
he
I f you d o not give h i m that paper,
t o the acwill s a y "You are going t o charge t h a t paper
get s o
count o f the momber bank tomorrow, a n d you will
much gold releascd,
g
and you give me that gold,"
tfe)
o into your general asisets,
R32
the Federal
rights o f ‘he bank a n d
definition o f the legal
the
Board can be asked * 0 review
‘he
that
s
o
Agent,
Reserve
rulisg o n that point?
matter a n d give u s 4 definite
the Board o n
have written a letter t o
lir, Seay: I
subject, 2
because I
t o the Governors,
copy o f which I have given
b e a n occasion nhiee
have f e l t t h e r e v o u l d
R i e
:
case, ;
:
disare
n e c a u s e ve
our ~
has presented 4tself i n
counting, heavily. I
in the Atlanta case,
have n o d o u b t
4 ¢ has presented itself
B u t y o u will a l l encounter
i t and
freely C o r
t o substitute g o l d
I feel t h a t t h e a b i l i t y
that t h e
w e s h o u l d have, a n d
these n o t e s i s o n e t h a t
make &
i f possible s h o u l d
Federal R e s e r v e B o a r d
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Federal Reserve Bank of St. Louis
ruling t h a t
T h i s une
t h e goid freely.
substitute
t
o
able
b
e
we w a y
directly,
t o put t h e g o l d u p
able
n
o
t
a
r
e
w
e
fortunate
and p e r h a p s i n d i r e c t l y ,
Board might
T h e Federal Reserve
v e could d o it:
be able t o rule s o that
The Chairman:
the o t h e r s
t o you and t o
W o u l d i t v e satisfactory
£ 0 dictate
o n whe record a
request
t o the
outlining
letter t o the Board
special
a
write
t
o
Secretary
a ruling,
Sdapieuea; 6 c ask for
the three points w e have
t9
rhich will b e conveyed
matter
che
o
f
or some treatiuent
the F e d e r a l R e s e r v e B a n k s ?
Hr,
aspect o f she case,
another
i
s
There
Mr, S e a y :
f o r Tederal
bills u p a s security
Chairman, “ e p u t o u r
partly i n
reported i n detail,
are
they
a
n
d
Reserve notes,
233
the h a n d s
o f Tederal
hands o f t h e p a n k ,
Reserve
Agents a n d p a r t i y
in “ h e
i n our statements
T h e y a r e reported
e n e full amount given.
discounted,
pills
in full a s serely
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Federal Reserve Bank of St. Louis
of
gold f o r the s e c u r i t y
u
p
p
u
t
w
e
ven
ITdo wot s e e Why,
notes,
«ne Tederal Reserve
4 + from
w e should eliminate
from our
t h e same amour’
eliminate
should
our assets, a n d
circulation, I
from @
sirable practice,
think i t i s a de
point o f
from every other
a
n
d
view
o
f
circulation point
o f the
4 full liability
report
should
view, t h a t w e
ida our statements.
Pederal Reserve notes
The C h a i r m a n
“©
that now, a r e
W e a r e doin’
Mir, Seayt H O .
They
gen&@ ovt &
The Ghairman:
that
yetter r e que sting
ve a o that.
only.
wr, Seay? Supplementary
in
I t does not occur
your b a l a n c e gneetvé
The Chairman:
wri Seay! I
O o .
u p and
“hen + e put cold
do pot see why,
receivable,
take d o w n o u r pills
our assets.
so t o speak, f r o m
that out,
w e ghould wipe
resources
Y o u reduce t h e
p y doing it.
uaterially
very
Bank
of the Federal Reserve
u p four millions
W e want t o put
instance,
Suppo se , for
I t
s h e e t afterwards.
palance
4
publish
Y of gold, a n d
Y o u would a p ~
appearance.
small
would present v e r y
y o u would have n o
parently have wiped o u t your gold, a n d
liability f o r F e d e r a l R e s e r v e n o t e s
o n t h e o t h e r side.
it.
ve. Wold: Y o u have n o liability, a s I understand
Seay: Suppose the Mederal Reserve Agent, for
example p
l
e
,
else,
were located off the premises, somewhere
notes w e r e presented
and h e d y o u r gold, a n d s u p p o s e t h o s e
at y o u r c o u n t e r f o r redemption,
Y o u would have t o redeem
them,
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Federal Reserve Bank of St. Louis
fe. Wola:
T h e fact is, h e i s not; h e i s right there,
Mr, Seay: I
am theoretically arguing the case,
The Chairman: Governor Soay, I
gard t h e l a n g u a g e
unusual.
o f t h e statute,
think we have t o rem
6 v e n though i t m a y seem
gold
T h e statute provides t h a t w h e n y o u deposit
t h e s e notes,
with t h e F e d e r a l R e s e r v e A g e n t t o s e c u r e
really extinguish your liability o n them.
you
W e must bear i n
Reserve
mind t h i s point, t h a t t h e n o t e s o f t h e F e d e r a l
and,
Bank a r e t h e notes o f the United States Government,
b e e n adto use t h e language o f the statute, t h e y have
vanced t o t h e s e b a n k s
- - l o a n e d t o them,
i f y o u please.
those
whe Unitod States Government i s obligated t o pay
behind t h e notes,
notes, a n d the minute y o u put U p gold
obligation i s
you step o u t o f the transaction, a n d t h e
t h e gold i n
simply t h e obligation o f the Government , with
hand t o meet it.
T h e theory o f the l a w i s that whenever
when
you do that, you do exactly what a national bank does
B55
w i t h t h e Treasury t o
necessary l a w f u l m o n e y
and
It extinguishes i t s liability,
takes d o w n i t s bonds,
avment
y
o f those.
liable f o r the
a n d t h e y a r e n o longer
T h e National
w e l l
B a n k Act c a n ver
be
t o make
h a s b e e n construed,
construed, a n d lL understand
of n e
liable f o r t h e payment
the G o v e r n m e n t d i r e c t l y
t h a t money goes into t h e
National B a n k notes, because
o f the 5 per cent fund i s
deposit
the
a
n
d
fund,
general
t h e entire liability o n the
the first s t e p i n putting
Government
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Federal Reserve Bank of St. Louis
o f N a t i o n a l B a n k notes.
t o p a y t h e entire i s s u e
I
appreciate your position, and while
Mr, Seay: I
a n y statute
nevor u n d e r s t o o d t h e r e w a s
o n t h a t s u b ject
of
o f a proportionate amount
requiring t h e extinguishment
sirculation
bank:
e n t h e b o o k s o f t h e national
a n d the
o n the other side, I
deduction f r o m its assets
thought
be
grown up; however t h a t m a y
it was a-practice w h i c h h a d
is
occurred t o m e that there
with national banks, i t has
t h e practice
no particular reason for following
of Federal Reserve Banks,
In other words, I
i f i t i s practically undesirable,
indi=would like t o b e able t o accomplish
a t this Board, a n d that
reotly what w e have just discussed
notes,
behind Federal Reserve
ig p u t t i n g u p g o l d d i r e c t l y
would
In t h a t c a s e t h e g o l d
Reserve Agent.
b e i n the hands
o f the Federal
from your assets.
Y o u would n o t eliminate i t
o n one side, a n d y o u would
You would s h o w your liability
on
the Federal heserve Agent
show t h e gold i n the hands o f
236
the other side,
T h a t 1 s all w i e n : t o brine about, a f
they c a n d o i t i n d i r e c t l y
by a
construction o f t h e rul-
ing o r the law. ‘Suppose, f o r instance, t h i s fall w e d e sired t o put out five o r t e n millions o f gold a n d have n o t
the b i l l s
t o put uj f
w e p u t o u t o u r o w n g o l d w e prac-
tically extinguish t h a t amount f r o m o u r o w n asset
eliminate t h a t from o u r assets,
w e
w e publish o u r statement,
and i t will appear.
The C h a i r m a n :
f F fear t h a t
i s what t h e l a w requires
VOU TO. do,
Mr. Seay: I
it i n some w a y ,
foar so, too, mnless they can get around
i f i t i s desirable,
The Chairman:
as I
believe
i t t o be,
A s a practical matter, whenever t h e
time comes when you must put u p gold t o take care o f your
Federal Reserve notes, your commercial paper will have
liquidated i t s e l f
t o s u c h a n extent t h a t y o u w i l l h a v e
plenty of commercial paper t o put up, and you will be able
to keep your gold o n the basis o f 20 per cent reserve, a n d
as t h e g o l d c o m e s i n , y o u w i l l e x t i n g u i s h y o u r l i a b i l i t y b y
dopositing 1 0 0 per cent gold, a n d your statement i s strongthened b y the fact that t h e gold i s coming in.
Mr, Wold:
inflatien
I n your plan, Governor Seay, there would b e
of
y o u r statement,
The Chairmen:
You would have your liability stated, a n d i t
is a
liability u n d e r t h e Act.
Y o u might assert
o n one s i d e
of your ledger t e n million l i a b i l i t y Federal Reserve notes,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
2357
and a s s e r t a
Side.
I
resource
o f t e n millions
o f gold o n the other
t w o u l e n o t m e a n anything,
Mr. Seay:
I t is a@-question of fact, i s it get?
iiabllity i s there, e v e n thouth i t i s not shown,
liable f o r t h e payment.
Mr, Wold:
Y o u deposit the gold
pose o f satisfying,
o f extinguishing
bank,
The Chairman:
Mr, Seay:
Y o u
e n
i a b l
h o s e notes at
I f they come t o your counter y o u
have t o p a y those notes
o r¢
v u e gold from t h e
Reserve agent.
The Chairman:
Y o u do not have t o pay them.
have g o l d b e h i n d t h o s e n o t e s ,
them u n d e r t h i s statute,
ly u p o n t h e Government,
y o u a r e n o t obligated
T h e obligation t h e n rests entirea n d t h e Government m a y p a y t h e m b y
requiring t h e Federal Reserve Agent t o furnish i t with the
gold w h i c h y o u w o u l d h a v e g i v e n i t ,
Mr Curtis:
T h e Treasurercan a s k t h e Secretar
O o re- y
quire the Federal Reserve Agent t o ship the gold t o Washington,
The Chairman: G o v e r n o r Seay, Mr. Curtis i s our authority o n t h i s s u b j e c t ,
Mr, Seay: I
have a
situation m i g h t a r i s e ,
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Federal Reserve Bank of St. Louis
H e has m a d e a
s t u d y o f this.
very h i g h r e s p e c t f o r him,
T h e b i g volume
T h i s
o f those Federal
238
Reserve n o t e s w o u l d a c t u a l l y c o m e b a c k t o t h e b a n k f o r r e demption,
a n d i t will extinguish t h e m w i t h t h e Federal R e -
serve B a n k notes,
What I
more d e s i r e d t o b r i n g a b o u t t h a n
anything e l s e b y i n d i r e c t i o n
w a s s o m e p l a n b y which w e
might actually p u t u p the gold behind these Federal Reserve notes, t a k e i t from o u r member banks, f o r instance,
in the fall, w h e n they a r e called u p o n t o ship currencics
and have only legal ténder t o put u p behind i t --- w e take
the g o l d a n d c a r r y o u r o w n Federal R e s e r v e n o t e s a g a i n s t
it, a c c e m p l i s h i n g
i t i n a n indirect m a n n e r , j u s t a s N e w
York d o e s e v e r y day.
The Chairman:
statement
Mr,
Y o u c a n d o that without weakening your
o n e particle,
S é:
the outside,
I
know
w e can, provided
I f . however,
t h e gold comes f r o m
w e put u p our o w n gold, w e d o
weaken i t , P e r h a p s t h i s h a s b e e n p u r s u e d l o n g enough, h o w -
ever.
The Chairman: I
recommendations
think w e a r e a l l a g r e e d o n t h e t h r e e
t o make, Governor Seay, i f you feel willing
to entrust t h e framing o f this a s a resolution a n d a letter
to t h e B o a r d t o Mr, Curtis.
expresses, I
W e have g o t a
record h e r e t h a t
think, w h a t w e all feel about it.
Mr, Seay: I
am more than willing t o entrust i t t o the
counsel,
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Federal Reserve Bank of St. Louis
The Chairman:
H e h a s b e e n a t t h e m a l r e a d y o n that.
2359
Mr. Curtis: o n l y o n this dast
point; not o n the other
question,
The Chairman: G o v e r n o r McDougal?
- McDougal:
T h e subject I
have i n mind e t the moment
is s o m e t h i n g t h a t i s f o r e i g n
t o t h e matter u n d e r
discussion,
The Chairman:
B e f o r e w e take that
up, then, m a y Tf
state t h a t w e s h o u l d n o w
arrange o u r conference
with the
Pederal Reserve Board this
afternoon,
Mir, McDougal:
M a y I
announce
i f possible,
a t this t i m e t h a t
I
should like to be excused in
five minutes, and that before
I
80 there i s one matter
that I
before t h e Conference,
I
should like t o bring
thomtina
t pertains t o
No, 1 3 o n the program,
It i s m y understanding t h a t
t h e Federal Reserve
Board i s now
preparing f o r a
call u p o n t h e m e m b é r
banks f o r a
periodical
Statement,
The Chairman: Xess, 2inMr. McDougal:
M r , D e l a n o requested
m e t o s a y here that
he, a n d h e thought t h e
Board, would appreciate
v e r y much i f
this Conference, o r a
committee o f one o r
more, would l e t them
have. t h e benefit o f its
advice, o r their advice,
w i t h respect
to the items t h a t should
b e enumerated o n this
statement, h i s
thought b e i n g t h a t t h e y
wanted t o make i t
a g Simple.as possi-
ble, ‘and not a s k for
a 166. o F unnecessary
detail that would
be o f n o use, a n c h e
said h e would personally
a p p r e c i a t e nbae
very m u c h i f y o u w o u l d
appoint someone t o
confer w i t h their
committee f o r a f e w
Moments a n d h e l p
t h e m t o determine
just
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Federal Reserve Bank of St. Louis
what would b e useful, a n d what t h e y should a s k for.
Mr. Wold:
D i d w e not make a
recommendation
a t our
last conference t o the Federal Reserve Board o n that
question?
Mr, M c D o u g a l : I
do not think there w a s anything done
at that time that would take t h e place o f the question h e
asked t h i s morning,
The Chairman: Gentlemen, possibly I do not need t o
refresh your memory a s t o what transpired a t the last meeting. “
formal statement w a s submitted, w h i c h w e ali re-
garded a s too long a n d too complicated, involving s o many
computations t h a t t h e m e m b e r b a n k a n d t h e F e d e r a l R e s e r v e
Bank would b e m m immensely embarrassed b y it. A
new form
was considered a n d generally approved u p o n the basis that
to
the a v e r a g e f i g u r e s s h o u l d b e g i v e n o n l y a s t h m b a n k s
the r e s e r v e c i t i e s ,
a n d actual figures
by a l l o t h e r banks,
Personally, I
o n reserves
a m prepared
in
b e given
t o stand b y
the recommendation w e made a t that time, t h a t t h e report b e
asked for monthly only, and that the report should consist
practically
of a
member b a n k s ,
calculation o n l y o f t h e r e s e r v e s
o f the
a n d that t h e reserve figures should b e given
on the basis o f the actual figures o f each bank, w i t h the
exception o f banks i n reserve a n d central reserve Cities,
and those banks should give b o t h t h e actual a n d t h e average
figures.
I s there a n y dissent f r o m that general statement.
of the action taken at the last conferenceg and, Governor
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Federal Reserve Bank of St. Louis
241
McDougal,
i s that what Mr. Dolano wanted f r o m us?
think that i s exactly what h e wants,
Mr. McDougal: I
and I think h e would like t o have someone m e e t with their
finish. I
committee a n d w o r k t h e p j a n o u t t o a
thought
from w h a t h e d i d s a y t h a t t h e y c o u l d v e r y q u i c k l y d e t e r -
mine what figures t h e y would a s k for, after t h e y h a d hada
our help.
I s i t your suggestion that I should
The Chairman:
appoint a
t o deal w i t h that matter w i t h them?
committee
T o take u p with h i m personally, a n d
Me McDougal:
hen carry i t over t o the committee. I
think i t would
take o n l y a few moments,
I f that i s the wish o f the meeting,
The Chairman:
T will a p p o i n t a
McDougal,
committee
t o m e e t w i t h them, G o v e r n o r
d o y o u offer that a s a resolution?
would d o s o ; y e s , s i r ,
Mr, McDougal: I
Mr, Kains: I
second t h e motion,
{The q u e s t i o n h a v i n g b e e n p u t ,
The Chairman: I
Mr, Kains: I
t h e m o t i o n w a s carried}.
will appoint Mr. McKay a n d Mr. Rains.
wish y o u would n o t appoint me. I
am
not i n shape t o t a l k a t all.
The Chairman:
Thon I
will a p p o i n t G o v e r n o r F a n c h e r
serve w i t h M r , McKay,
Mr. McDougal:
N o w I
me, i f you please. I
a m going t o ask y o u t o excuse
a m going b a c k t o Chicago, a n d would
like to have Mr, MeKay reprosent m e during m y absence, i f
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Federal Reserve Bank of St. Louis
that i s agreeable,
W e a r e a l l v e r y s o r r y t o h a v e y o u go,
ine Chairman:
and will miss you.
Mr. McDougal: I
a m sorry t o go.
(Mr. McDougal thereupon withdrew, )
i t was agreed, u p o n motion,
After informal discussion,
to m e e t
i n conference w i t h t h e F e d e r a l R e s e r v e B o a r d a t
four o'clock p. m. T h e Chairman withdrawing, Mr. Fancher
took t h e c h a i r ,
The Chairman Pro Temporo:
W h a t will be the next
item t o b e taken u p during t h e absence o f Governors Strong
and Wold?
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Federal Reserve Bank of St. Louis
T h e r e i s a n item here
Mr. McKay:
i n regard t o t h e
banks joining certain associations,
The Chairman P r o Tempore: I
think that was cleaned
up a t t h e l a s t conference,
Mr, Scay:
H a s anything new arisen i n regard to that,
Mr, C u r t i s ?
Mr, Curtis:
O n e member p u t that d o w n for the purpose
of finding o u t what h a d actually b e e n done, j u s t a s a mat-
ter o f inquiry, what banks had joined, a n d what associations,
Mr. Seay: I
will state that the reserve bank of
Richmond h a s b e e n a d m i t t e d
State Association.
t o associate membership-in t h e
W e have not as yet joined the 4merican
29
Bankers! Association.
W i t h o r without a
Mr, Sawyer: Mr. S e a y :
without a
fee?
n the State Association t h e y a r e admitted
I
fee.
T h e Virginia State Association?
Mr. Sawyer:
Mr. Seay:
T h e Virginia State Association.
The C h a i r m a n p r o Tempore:
W a s t h a t permissible w i t h -
out a n amendment o f their constitution a n d by-Laws?
Mr. Seay:
T h a t was permissible, yes, a s associate
members.
The C h a i r m a n p r o Tempore: I
might s a y f o r t h e C l e v e l a n d
bank t h a t w e h a v e c o r r e s p o n d e d w i t h t h e s e c r e t a r i e s
o f the
i n no
Four State Associations m a k i n g u p our district, a n d
case d o t h e c o n s t i t u t i o n s
associate m e m b e r s h i p ,
o f t h e associations p e r m i t
of an
a n d t h e y a r e going t o take action a t
w h i c h will
an early day, e a c h probably a t their convention,
provide f o r a s s o c i a t e m e m b e r s h i p s ,
tion t o join.
Fransworth,
W
a n d then i t i s o u r inten—
e have h a d s o m e correspondence w i t h
S e c .
a s lI
o f the American Bankers’ Association, and,
Bankers! Assounderstand t h e constitution o f the American
ciation,
i t does n o t y e t provide f o r associate memberships.
u p a t the
That i s a matter which I understand will b e taken
coming convention.
Mr. Seay:
I s i t not a fact, however, t h a t some banks
counsel
have joined t h e association u p o n t h e opinion o f the
actively
of that association that t h e y might d o so, a n d n o t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
244
50
participate i n it? I
understood t h a t there were some
banks--—
Mr. McKay:
M r . Farnsworth,
t h e Secretary
o f the
_American_Bankers” “Association, G a l l e d o n u s a n d s t a t e d h e
did n o t t h i n k i t w a s - n e c e s s a r y
t o make-any~-change
i n their
rules f o r t h e federal reserve banks t e become members o f
the Association, t h a t t h e y did n o t need t o take a n active
part unless t h e y s a w fit t o d o so, that t h e matter w a s
/ b r o u g h t u p , a s Mr. F a n c h e r s t a t e d ,
a t t h e n e x t meeting,
but
that h e did n o t believe a n y particular action would b e
taken b y t h e A s s o c i a t i o n a b o u t i t .
H
e thought t h a t a n y
of t h e F e d e r a l R e s e r v e B a n k s c o u l d c o m e i n under t h e p r e s e n t
regulations
a s members,
a n d n o t t a k e a n y a c t i v e part,
was u p t o t h e F e d e r a l R e s e r v e B a n k s t h e m s e l v e s
they w a n t e d
1Ser
a S t o whether
t o take a n a c t i v e p a r t ,
Mr. S e a y :
A n d n o t b e bound i n a n y embarrassing w a y
by a n y a c t i o n t h a t t h e A s s o c i a t i o n m i g h t t a k e i n w h i c h t h e
Federal R e s e r v e B a n k s d i d n o t participate.
Mr. McKay:
Tes,
H e said a n y action that w a s taken
would n o t b i n d t h e m e m b e r s
o f t h e A s s o c i a t i o n individually.
The Chairman p r o Tempore:
H o w e v e r , t h e Federal Reserve:
Banks would b e subject t e the usual admission fee and dues?
Mr. McKay:
Y e s ; t h e y would h a v e t o p a y t h e same dues
aS a n y o t h e r banks,
i n accordance w i t h t h e i r c a p i t a l , I
believe,
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Federal Reserve Bank of St. Louis
The Chairman p r o Tempore:
M a y I ask o f Governor
245
OL
Rhoades,
d i d n o t y o u r b a n k j o i n t h e American Bankers' A s s o -
ciation?
W
Mr. Rhoades:
e joined t h e Association before t h e
b y t h e Governors,
matter w a s d i s c u s s e d
W
e have b e e n invited
to join the State Association, b u t have n o t done 50,
they reported a
B u t
recommendation t o the Federal Reserve Board
that w e b e admitted a s associate members, a n d t h e y have that
under consid eration.
The Chairman p r o Tempores
H a s a n y other gentleman
present anything t o offer o n that tppic?
Mr, McKay: I
the Federal
scciation
t e s
would like t o know i f it i s proper for
B a n k s t o join the American Bankers' A s -
u n d e r t h e present status?
Y e have joined w i t h a definite understand-
Mr. Strong:
ing w i t h t h e A m e r i c a n B a n k e r s ' A s s o c i a t i o n , e x p r e s s e d
cerrespondence,
t h a t w e a r e free o f any obligation
tion w i t h o u r m e m b e r s h i p t h a t m i g h t
bank.
i n our
i n connec-
j n a n y w a y embarrass t n e
T h e w a y w e handled i t was t o write t o the General
o f the letSecretary, Colonel Farnsworth, g i v i n g h i m a copy
ter o f t h e F e d e r a l R e s e r v e B o a r d , v r i t t e n
i n response
t o our
request f o r a ruling, a n d asking whether there was a n y objecita
t e membership
i n the association u n d e r t h e limitations
expressed i n that letter, a n d t h e y advised us, i n reply, t h a t
the m a t t e r h a d b e e n t a k e n u p w i t h t h e c o u n s e l
o f the Associa-
tion, w h o stated t h a t there w a s n o objection t o our takius
membership w i t h those limitations, a n d w e went in.
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Federal Reserve Bank of St. Louis
246
Mr. Rhoades:
Mr. Strong:
H a v e y o u joined t h e State Association?
W e would i f w e were invited, b u t they have
not m a d e a n y o v e r t u r e s y e t .
banks
T h e r e are a
good m a n y c e e
i n that membership.
Mr, S e a y :
D
o they look t o y o u f o r the first move i n
the m a t t e r ?
Mr. Strong:
ct
W e really have n o t done v e r y much about
T h e only State association that I have dealt w i t h i s
the trust companies, a n d they got m e ower a t their mesetns
a few weeks a g o and p u t m e i n a terrible position b y quoting
some remarks t h a t I
had made t h e year before i n regard t o
this bill, a n d asked m e what I had t o say.
Mr. S e a y : I
think w e c o u l d a l l t e l l t h e m t h a t o u r
views have become v e r y much modified b y a close association
with this bili.
Mr. Strong:
Y e s , t h a t i s just what I
that I was i n bie S
e
did tell them,
o f the m a n who h a d been i n the
habit o f criticising h i s neighbor's children a s being
very b a d mannered, r o u g h children; t h a t w h e n his o w n baby
arrived,
h e modified h i s views a
good deal, I u n d e r s t a n d
the Federal Reserve Board, a s a matter o f fact, h a v e n o objection t o our taking membership i n the various
and would, I
c a h e e anes
think, b e inclined t o encourage i t , with a view
to the officers o f the Reserve Banks getting next t o the mem-
ber banks and establishing closer relations with their stockholders a n d depositors, attending t h e meetings, .
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Federal Reserve Bank of St. Louis
talking
247
the
about t h e workd o f the banks, a n d familiarizing
generally w i t h what they a r e doing.
‘Mr. Strong thereupon resumed the chair.)
b e some memG o v e r n o r Delano says there w i l l
Mr. W o l d :
We d e -
all
o know whether we would be prepared t o discuss
sirea t
matters w i t h them. I
told h i m w e vould n o t have finished
our program a t that time,
The Chairman:
preN o , b u t w e are going t o make great
gress i n i t b y that time.
W
We w i l l n o w t a k e u p I t e m No. 2 2 .
jn New York,
e have b e e n asked
terms o f
i n a friendly fashion, whether t h e
a
the F e d e r a l R e s e r v e A c t w o u l d p r e v e n t
director
i n the
which h e might
National b a n k getting interest o n a n account
a director,
carry with the bank o f which h e i s
o f the A c t w h i c h p r o h i b i t e s a
to t h a t p o r t i o n
making, d i r e c t l y
o r indirectly,
the b a n k i n w h i c h h e i s a
a n y profit
director,
W
T h a t relates
director f r o m
i n dealing w i t h
e have also been
whether a
asked i n the case o f some country banks,
director
business could write
who happened t o b e running a n insurance
a n d a number o f
a policy o f insurance o n the bank building,
i n q u i r y h a s b e e n made.
other s i m i l a r c a s e s a r o s e w h e r e t h e
o f this particular
I happen t o know a little about t h e genesis
o f critipart o f the Act, a n d that i t has caused a good deal
i s a source o f some
cism i n different parts o f the country a n d
embarrassment
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Federal Reserve Bank of St. Louis
t o t h e banks.
W h e t h e r
i t i s desirable
for us
248
354
to discuss that matter, w i t h a view t o making a n y recommendation o r not, i s a qiestion, I
would b e a m e n d e d
d o not k n o w whether t h e a c t
o r not, b u t c e r t a i n l y
n o ruling o f t h e
Federal R e s e r v e B o a r d w o u l d c u r e t h e e x i s t i n g doubt, b e c a u s e
the Board i s not a judicial b o d y a n d cannot interpret t h e
Act--— a t any rate that part o f it--- a n d i t was p u t o n the
program b e c a u s e w e h a v e h a d q u i t e a
and I
number o f inquiries,
happen t o b e a w a r e o f o t h e r i n q u i r i e s t h a t h a v e b e e n
made i n o t h e r districts.
W h a t a r e your wishes about I t e m
NOe 2 2 ?
Mr, W o l d :
W h a t r e p l y h a v e y o u m a d e t o those inquiries?
The Chairman:
M r . Curtis h a s b e e n o u r authority
those matters, a n d h a s generally ruled, I
understand, t h a t
in writing insurance a n d making commissions, a n d n t h e
that s o r t , t h e A c t i s prohibitive.
W
on
of
e have n o t done a n y
more t h a n convey t h e conditional r u l i n g o f the Board i n re~
gard t o interest o n bank deposits.
T h e y made a
ruling o n
that subject with a string t o it, indicating that the ruling
was n o t any more t h a n a n expression o f their personal
views, a n d had n o weight i n law.
Mr. Curtis:
O n the question o f a direct d e a l i n g a s
an insurance broker f e r bonding t h e employes o f the bank o r
putting f i r e i n s u r a n c e u p o n t h e b a n k property, I
felt i t
fell right within t h e terms o f the statute, a n d I have s o
advised two. o r three banks, I
done about it,
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Federal Reserve Bank of St. Louis
d o not k n o w what t h e y have
O n e m a n told m e that h e h a d t o resign, t h a t
249
he w o u l d h a v e t o s t i c k b y h i s b u s i n e s s a n d n o t b y t h e bank.
It i s p r e t t y s t i f f
i n his b a n k i n protesting matters?
notary p u b l i c
T h a t h a s n o t come up.
e h a v e h a d that.
W
Mr. Rhoades:
n New York City there i s a
I
The Chairman:
statute w h i c h p r o h i b i t s a
service w i t h o u t a
have a n i d e a
H a v e y o u had t h e case o f the cashier
Mr. Rhoades:
Mr. Curtis:
B u t I
t o be.
that i t w a s m e a n t
. being a
o n those people.
penal
notary p u b l i c f r o m p e r f o r m i n g h i s
fee,
Mr. Rhoades:
I
n Pennsylvania a
H
e cannot
bank officer c a n n o t
notary.
Mr. Fancher:
i n Ohio.
Mr. Rhoades: ( C o n t i n u i n g )
in N e w Y o r k
Reik f 1 s 8
eo
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Federal Reserve Bank of St. Louis
h e can.
a n d a c t for t h e bank.
B u t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
zo0
They r e c e n t l y p a s s e d a
billin t h e
Minnesota legislature making i t légal f o r a cashier o f
@ bank t o a c t a s a
notary
i n connection w i t h papers
in
which the bank i s interested.
Uno. oeay:
W o u l d y o u cons.tpue t h a t a s p e r m i s s i b l e
under t h e a c t when w e are guided n o t b y a state law,
but b y laws passed b y Congress?
tsge
L
é>
you mean f o r a
cashier t o accept
a notary
PYa n y O f f i c e r
o f the: pank,
Do y o u t h i n k t h i s m a t t e r
the B o a r d ?
t igs a question o f expediency a n d
and t h e m a n w h o m u s t C G e t e r m i n e
i t for himself
ee
man w h e h a s t o decide b e t w e e n t h e b a n k a n d h i s business,
and i f t h e F e d e r a l R e s e r v e B o a r d s a y s a n y o p i n i o n i t m a y
render i s not a legal authority, b u t i s only Z o r guidance
or moral conduct, h e couldn't get any advantage from it.
Do y o u not think so, Mr. Curtis?
Mr. Curtis: I
d e not think there i s a n y use i n put-
ting i t out,
The Chairman:
I
t b e i n g t h e s e n s e o f t h e meeting, t h e n ,
that this topic b e passed, i t is s o ordered.
We will now take u p item No. 18, "Stock subsc¢eriptions"®.
This letter f r o m Mr, Willis, d a t e d March 10, 1915, i s a
final letter, a s I understand it, Go. ernor Rhoades?
Mr. Rhoades:
T h a t i s a copy o f a letter received a t
our office yesterday.
The Chairman:
T h i s h a v i n g t o d o w i t h T o p i c N o . 186,
possibly I had better read it.
"
“ W a s h i n g t o n , March 10, 1913.
'"Mr, Richard L . Auétin,
Federal Reserve Agent, Philadelphia, Pennsylvania,
It i s believed that a
of t h e approval
satisfactory
system o f notifying member banks
o f applications
f o r stock which will b e more
t o t h e F e d e r a l R e s e r v e B a n k s c a n b e adopted.
has h e r e t o f o r e b e é n t h e p r a c t i c e
o f t h e Federal Reserve B o a r d
to send a notice o f call f o r the payment o f the first i n -
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Federal Reserve Bank of St. Louis
I t
stalment
o f subscription d i r e c t l y t o t h e member bank, a n d a t
the same time advising t h e Federal Reserve Agent o f the
district o f this action.
T h i s system will b e more satis-
factory t o all i f the members banks receive notice o f the
approval o f their applications f o r stock directly f r o m the
Federal Reserve Banks, and t o accomplish this the following
will i n the future b e observed:
"NEW BANKS
"Under t h e l a w , n e w b a n k s c a n b e r e q u i r e d
t o pay one-
half their subscriptions a t the time o f taking o u t stock .
Upon t h e receipt o f notice f r o m the Board o f the
allottment o f stock t o such banks t h e Federal Reserve Agents
can notify t h e banks a n d require t h e necessary payments t o
place t h e m o n t h e s a m e f o o t i n g a s t h o s e w h i c h o r i g i n a l l y
entered t h e system, until M a y 2 , 1915, w h e n t h e third instalment i s payable, a n d t h e n require payment i n full o f the
required 3 % . "
The Chairman;
T h a t i s a most satisfactory method o f
dealing with this matter.
Mr. Fancher:
I
n other w a d s ,
t h a t would mean that
the n e w bank would p a y its t w o calls.
The Chairman:
T w o c a l l s a t o n e clip.
"ALDITIONAL STOCK
The Board has been advised that in the issuance of |
a.ditional stock, member banks v e r y frequently prefer t o pay
ane~half o f their subscription a t the time the stock i s
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Federal Reserve Bank of St. Louis
issued, t h e r e b y a v e i d i n g t h e i n c o n v e n i e n c e
required, b u t t h e
U n d e r t h e l a w this cannot b e
payments.
option should,
receipt
o f three s m a l l
upon
i t would seem, b e given. T h e r e f o r e ,
o f notice f r o m t h e B o a r d o f allotment
o f additional
acvise t h e applistock, t h e Federal Reserve Agents shoule
cant b a n k s a n d e x t e n d
t h e neces—t o them t h e option o f paying
same footing a s other
sary instalment t o place i t o m the
stock h e l d b y them.
procedure i s
"Tt i s believed that i f the foregoing
followed,
the same footing a s
s o that a l l stock will b e upon
regards p a y m e n t s ,
w i l l b e greatt h e w o r k o f keeping accounts
Reserve Banks a n d b y the
ly simplified b o t h i n the Federal
Federal Reserve Board.
"Respectfully,
"(Signed )
H , P A R K E R WILLIS, S e c . "
o f a s t o new payThis whole subject will b e disposed
ments b y our acting o n this letter.
Mr. W o l d :
J u s t o n e moment, M r . C h a i r m a n .
I
seme additional information that
from Mr. W i l l i s
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Federal Reserve Bank of St. Louis
H e r e is a
tentative
a n additien—
t o put out, a n d here i s
covered
al o n e c o v e r i n g p o i n t s n o t
Mr. Curtis:
secured this morning
o n this s a m e subject.
circular t h a t h e p r o p o s e s
H e r e is
i n t h i s letter.
still
W e l l , there a r e several points
left.
Mr, " o l d :
T h e r e i s n o doubt a b o u t that.
The Chairman:
intended
T h e letter, w h i c h i s apparently
to a c c o m p a n y a
circular,
i s a s follows:
follow
“In view o f the confusion which will inevitably
payment
the taking o u t o f additional s t o c k a n d t h e subsequent
of instalments a n d t h e t r a n s f e r
Federal R e s e r v e B a n k s
to
o f the required reserve
i n e a c h instance w h e r e t h e r e i s a n in-
crease i n the paid i n capital o r the surplus o f a member
bank,
y o u will plcase hereafter require member banks
t o adjust
their stock allotments quarterly o n the first days o f January
April, J u l y a n d October i n each year.
N e w l y organized
been
banks upon coming i n t o t h e system, a n d banks which have
pay~
allotted additional stock, shall immediately make such
ments a s h a v e b e e n c a l l e d a n d f u r t u r e p a y m e n t s
a s may b e cal-
led.
"In making applications f o r additional s t o c k member
t h e blanks a r e probanks should exercise c a r e t o sée t h a t
capital a n d surperly filled in, using a s 4 basis t h e total
allotment,
plus a t t h e t i m e o f t h e i r l a s t p r e v i o u s s t o c k
stating t h e total o f all increases
a m
i n capital o r surplus,
separately, s o that the total a t the Jate of the prior allottotal capital a n d
ment a n d t h e i n c r e a s e s w i l l e q u a l t h e t h e n
surplus.”
The Chairman:
Broderick
T h e r e i s also a
t o t h e Secretary.
tion o f Dr. Willis' letter.
I
memorancum here f r o m Mr.
t seems t o b e simply a
repeti-
T h i s pretty nearly disposes o f
this matter except a s t o decreases.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. Seay:
T h e letter i s preferable t o the circular.
284
assumed t h a t t h a t l e t t e r h a d b e e n s e n t
Mr. Rhoades: I
to everybody,
a s i t came t O UB.
The Chairman:
A p p a r e n t l y this letter
is a
recast
of
a n d addiMr. Broécrick's circular a n d relates t o new panks
tional stock only.
T h e other letter i s supplementary a n d
t refers
t o fixing a
definite
has n o t y e t b e e n s e n t out.
I
period, t h a t i s , q u a r t e r l y ,
f o r m a k i n g t h e s e r e a d justments.
Are there a n y suggestions
i n regard t o these t h a t w e c a n sub-
mit t o the Board?
think they a r e disposed t o act o n the sug-
Mr. Wold: I
gestions f r o m t h e Governors' r e p l i e s
t o t h e s e eirculars.
deT h e y d o not touch o n the meatier o f
Mr. Fancher?
creases there a t all.
The Chairman:
N o .
A l s o they d o not state definitely
Mr. Curtis:
as to
dividend payments
what dates these stocks will b e issued a n d
very b i g question.
calculated upon, a n d that i s going t o b e a
Mr. Fancher:
proposition
I t i s certainly g o i n g t o b e a very hard
t o solve,
Mr. Seay?
W e have received a
letter f r o m the Board
any bank,due
saying that i n cancelling the subscription o f
w e should n o t a t
te dissolution o r consolidation w i t h others,
a
the p r e s e n t t i m e p a y t h e m a n y i n t e r e s t
t h e capital f o r t h e
time i t had beenwith us.
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Federal Reserve Bank of St. Louis
Mr. Curtis:
Mr. Fancher:
N o r charge t h e m a n y assessment.
H o w about deducting f o r the deficit?
288
Mr. Seay:
ter,
T h a t matter was n o t touched u p o n i n our let-—
a s Tar a s I
Mr. Wold:
c a n recall,
T h e r e i s one other question that I. disaus-
sed with Dr. Willis bearing o n this same
Subject, d
n
a that
is i n reference t o the report o f the Comptroller's
office a g
to surplus a n d application,
i G , always c o m e s b a c k r e q u e s t =
ing affidavits o f the officer. o f the bank,
w h i c h i s rédiculous,
and I suggested t o h i m that t h e y a s k for a report
f r o m the
bank a s u s u a l l y m a d e t o t h e Comptroller,
t h a t report
t o be
ma@e i n duplicate, o n e c o p y t e g o t o the Comptroller
and
ane copy t o come t o the bank with the application for
edditional stcck,
Mr. Seay: I n s t e a d o f the Federal Reserve Bank requir~
ing the banks t o adjust their books t o the books o f
the
Board, I
think i t ought t o b e the other WAY,
Mr. Wold: I
did not think anybody else h a d a n y
trouble e x c e p t M i n n e a p o l i s
Mr. Fancher:
o n that score,
I : believe i n going over o u r correspondence
for t h e last sixty days letters o u t o f our bank bearing
on
Capital stock adjustments I a v e averaged fifteen a
day;
inquiries a n d applications a n d that sort o f tuing, correspond-.
ence h e a r i n g
o n this particular topic, p n o r e d e c e a
e
of capital s t o c k ,
Mr. Seay:
D o you think, Mr. Fancher, t h a t quarterly
adjustments would b e more advisable t h a t semi-annual
adjustments?
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Federal Reserve Bank of St. Louis
286
There a r e a
A n d t h e n u m b e r i s increasing.
Mr. Fancher:
would rather s e e i t semi-annually, b u t
Mr. Wold: I
there i s a
great m a n y b a n k s t h a t t h i n k s o .
reason f o r t h e q u a r t e r l y r e p o r t ,
d u e t o the fact
thet there i s a quarterly adjustment.
M i g h t w e not recommend t h a t a s long a s
The Chairman:
the Federal Reserve Board adoots a
system o f monthly reports
in
of reserves b y the member banks, t h a t there b e embodied
that a
t o report a n y change,
requirement
i f 1 % oocure: i n * t h e
capital o r surplus, dire¢etly t o the Federal Reserve Banks?
W o u l a
Mr. F a n c h e r ;
y m suggest that that b e one
& t h e captions o f this report,
t o show their capital s t o c k
and s u r p l u s ?
Whe Chairman:
W e l l , t h a t i s o n e inquiry there.
b e
there i s n o change t h e y c a n check it.
Mr. Wold:
come
A r e y o u sure that that report will
to the bank a t all? I
was under t h e impression that i t
would g o t o the chief examiner,
The Chairman: I
understand t h a t i s t o g o t o the
Federal Reserve Bank.
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Federal Reserve Bank of St. Louis
Mr,
M c C o r d s W h a t report
Mr. Wold:
i s that, G o v e r n o r ?
T h e monthly report.
Mr. McCord: t
Mr. McKay:
understand i t i s going t o the bank,
T h e Federal Resefve B a n k i s supposed
to
make u p all these reports.
Mr. McCord:
reserve b y
T h e Auditor h a s t o compute t h e
267
by it, a n d h o w would m h h e get i t i f i t went t o the chief
examiner o n l y ?
Mr. Seay:
report, I
T h e n t h e bank has t o make a
consolidated
think, based o n that.
Mr. F a n c h e r :
somewhere
i n this report w e could a s k t o
have t h a t q u e s t i o n included.
Mr. McKay:
A n d have t h e capital a n d surplus reported
monthly.
Mr. Fancher:
T h e i n q u i r y could.
b e made whether there
had been a n y change i n capital o r surplus since t h e last
report,
Mr, C e a y : I
Yelleve
i t would
b e better
t o make i t
separate.
Mr. Curtis:
bank.
Y o u want t o throw t h e burden o n the member
Y o u d o n o t want t e have t h e reserve b a n k s always
checking u p t o s e e i f t h e r e h a s b e e n a n y change.
Y o u want
to have t h e m take t h e first move t s tell y o u o f a change.
Mr. Fancher;
these c h a n g e s
T h a t i s the w a y w e a r e n o w finding c u t
i n surplus.
I
t i s not f r o m t h e banks report—
ing t o us, b u t w e find i t i n checking u p o r making a
parison o f the statenents,
com-
W e r u n a card o n these statements
and make compsrisons o f each call.
Mr. McCord: I
think y o u would h a v e t o continue t o rely
upon that.
Ff they g e t i n the habit o f reporting quarterly, t h e y will, u p o n circular request, m a k e t h e definite
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ot think w e will getit i n any other way,
PROSE A
couple
o f weeks p r i o r t o t h e e n d o f
Srelwouarie c
:
.
semi-annual r e p o r t
o f earnings.
it o n that report.
Theré 1 8 a quarterly repert b y many banks.
LTci: n o t t h i n k i t applies, t h o u g h , o u t s i d e
The Chairman:
i
n our district there i s a
good d e a l o f
complaint about t h e amount o f calculating a n d information
required
o f m a n y banks,
Dart o f t n e p r e s e n y
TEpOrt.
ai i
O r O n Unedro p e s t e r
of the Comptroller,
about reports.
another
cai
a n d i f w e could m a k e i t a
W S t e m - O f YeporLs
Cporl i
O n 2uhe- m o n t h l y
P e c t o n s e = yO l h e 2 cr.)
w e would s a v e considerable kicking
G o v e r n o r C e a y ' s s u . vestion w o u l d i n v o l v e
o n the bank for a
special r e p o r t
on a
special
subject, w h i c h I think i n our district t h e y would n o w resent.
Mr. Rhoades:
I
f t e got copies
o f the earnings report
which each o f us makes t o the Comptroller, t h a t would s h o w
any c h a n g e
i n cureius
Mr. Seay:
O n oCAanoit
lca<
I t would necessitate g o i n g through all
those r e p o r t s f o r t h a t purpose.
MP Pole:
i i : you: get: five reports a
year a n d y o u
check those up, i t seems t o m e i t i s a very simple matter t o
ascertain those that have made a n y change i n their capital.
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Federal Reserve Bank of St. Louis
Mr. Fancher:
I
f a quarterly d a y vere determined u p o n
289
for the adjustment,
i t seems t o m e that each bank, i n a
circular, c o u l d simply send out. s n d ask those banks which
have m a d e a n y a d j u s t m e n t
the q u a r t e r
i n their c a p i t a l a n d surplus d u r i n g
t o report.
Mr. MeCorad:
M r . Chairman,
that w e c a n get around. I
I ’ am adverse
t o a n y report
believe t h a t t h e auditors o f the
Federal Piaaeve Banks c a n control this situation b y checking
the reports a s they a r e called f o r five times a year, I
that m y auditor d o e s i t , a n d w e i m m e d i a t e l y
g o for a
that h a s i n c r e a s e d i t s surplus, I
i t is a
believe
ter way o f handling i t than a n y other.
know
bante
far bet-
L i o g e t e ric: o F -<ine
report o f the bank and saves them that trouble.
W e have
enough thin .s n o w t o look after.
Mr. Seay: I
believe that Governor MeCord was nothere
when that letter from the Secretary o f the Board was e a e
relating t o the payment.of capital stock a n d t h e adjustment
quarterly.
T h a t might perhaps m a k e a difference o s his
view.
The Chairman: . Possibly t h e stenographer will hand t h e
letter
t e Governor M c C o r d
t o read.
(The letter f r o m the Secretary o f the Federal R e -
serve Board was thereupon handed t o Mr. McCord. )
Mr. McCord: I
beg y o r p a r d m ,
on asubject that came u p while I
gentlemen,
f o r talking
was n o t present. I
that a d j u s t m e n t c a n b e m a d e j u s t t h e s q m e quarterly.
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Federal Reserve Bank of St. Louis
believe
Seay:
T h e reports d o not come a t
They c o m e irregularly.
B u t w e c a n g e t i t through t h e auditors
Mr. McCord;
of t h e banks.
T h a t i s w h a t w e h i r e t h e m for.
Mr. Fancher:
I s i t not, after a l l , a
OQubk o f o u r 7 5 0 o d d b a n k s t h e r e
n
or £ 0 that would have t w o reports.
out a
o
simplt matter?
t b e more t h a n 1 5
Y o u would simply send
notice c a l l i n g t h e i r a t t e n t i o n t o t h e f a c t t h a t
those w h o h a d n o t m r e p o r t e d s h o u l d report.
re
Le S e a y ?
simply a
the
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Federal Reserve Bank of St. Louis
A E i U abcine ommma sind siseding G a t e a xGOOallN
m
er « P i e s
question o f uniform practice i n dealing with
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Federal Reserve Bank of St. Louis
250
Mr, Fancher:
I
t only calls f o r a
a b a n k t h a t h a s m a d e s o m e adjustment.
response f r o m
T o closely
check y o u r C o m p t r o l l e r ' s r e p o r t s t h a t c o m e i n five
times a
year involves a
good deal o f labor.
I
n that
way y o u w o u l d c h e c k f i v e h u n d r e d o r more, w h e n b y t h e
other method y o u would o n l y have t o check fifteen o r
twenty; a n d one report would b e a s good a s another.
Ve. M e c o r d :
aman w h o takes
same w a y , I
I
f y o u could provide a
method w h e r e b y
a n extra s h a r e c a n p a y f o r i t i n the
would a p p r e c i a t e t h a t .
The Chairman:
Mr. Sawyer:
T h a t i s covered
I
b y that.
t seems t o m e that matter c a n b e
covered b y one line i n this monthly report a n d obviate
the necessity o f a n extra report.
I t could b e covered
by one line showing t h e capital increases since t h e
last roport a n d probably increases o r decreascs since
the l a s t report.
The Chairman:
G o v e r n o r Seay, w o u l d n o t that ac-
commodate y o u r m a t t e r ?
Perfectly. I
The Chairman:
circular,
w e canframe
Mr. McCord:
Mr, Fancher:
decreases,
I
have n o objection t o
f Governor M c C o r d h a s r e a d t h a t
u p a resolution:
T h a t simplifies-it.s ~ft--is all right,
E x c e p t t h a t i t does n o t t o u c h o n
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Federal Reserve Bank of St. Louis
251
The Chairman:
T h e n , suppose I
dictate a
resolu-
tion t h a t m a y c m b o c y t h e i d e a s o f t h i s meeting, p r o vided Mr. C u r t i s h a s n o s u g g e s t i o n s
Mr, Curtis: I
t o make.
was g o i n g t o s u g g e s t t h a t i t
be l e f t t o t h e C o m m i t t e e t h a t w i l l t a l k t o G o v e r n o r
Delano,
T h a t committee might cover these things. T h a t
question o f decreases a n d d a t e s f r o m w h i c h a n y dividends
may b e calculated w i l l b e covered b y that committee.
{Ithink w e are all agreed a s t o the necessity o f
pinning t h o s e t h i n g s d o w n definitely.
I
t does n o t
make much difference when, s o long a s the time i s
established.
Mr, Fancher:
T h e n t h e d a t e o f dividends w o u l d
¢ done b y rulings o f the Board,
Mr, Curtis: I
should t h i n k t h e y c o u l d e s t a b l i s h
it easy enough.
The Chairman:
T h e resolution, then, would b e a s
Tollows:
Resolved, T h a t t h e Committee consisting o f Messrs.
Fancher a n d M c K a y s u b m i t t o G o v e r n o r D e l a n o t h e v i e w s
of t h i s m e e t i n g i n r e g a r d
t o t h e method o f handling
increases a n d decreases o f capital stock a n d reporting
changes
i n capitel a n d s u r p l u s
o f m e m b e r banks ; t h a t 1 %
is t h e s e n s e o f t h e m e e t i n g t h a t t h e p r o p o s e d c i r c u l a r
/
/
letters w h i c h h a v e b e e n s u b m i t t e d s u b s t a n t i a l l y c o v e r
/
the poijts referred t o in those letters, b a i t is
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Federal Reserve Bank of St. Louis
hat t h e f o r m o f m o n t h l y r e p o r t b e
required f r o m member banks, b u t enlarged t o include a
prief r e p o r t t o i n c l u d e a n y c h a n g e s m a d e i n Sea pates
plus o f the member bank; a n d that that ruling b e
Reserve B o a r d
with docercases
a s t o method
o f dealing
i n capital s b o c k a n d c a l c u l a t i n g d i v i d e n d s
to b e paid o n capital stock which has been paid i n b y the
member
bank
i n installments.
Does n o t t h a t c o v e r t h e w h o l e t h i n g ?
think s o .
hire C U P tS : I
T h e r e i s one more point
they ruled o n for us, that i s where a
hands
bank went into t h e
receiver a n d i t w a s r e o r g a n i z e d a n d s o m e n e w
of a
moncy p u t i n a n d i t w a s reopencd. I
thought t h e
receivership u n d e r t h e l a w a u t o m a t i c a l l y t e r m i n a t e d i t s
i n the reserve b a n k a n d that t h e y would have
membership
to make o u t a new application based o n their n e w capital
and s u r p l u s
a s o f t h e d a t e w h e n t h e y reopened,
but the
Board s e n t m e w o r d t h a t t h e y d i d n o t c o n s i d e r t h a t
necessary, t h a t they might adjust their o l d capital a n d
surplus a n d t h e s t o c k s u b s c r i p t i o n b a s e d t h e r e o n t o t h e
time o f reopening, a n d whether o r not they are entitled
to a
dividend f o r t h e t i m e t h e y a r e i n t h e h a n d s
receiver, I
of a
d o n o t know.
licCord:
O
r asscssment,
Curtis:
O
r assessment.
peay:
D o they reopen under t h e same name?
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Federal Reserve Bank of St. Louis
255
Me, Curtis:
undoubtedly.
Y e s .
I t i s the same institution,
Q u e r y , were they a
member
o f the Reserve
Bank during t h e time o f the receivership?
M r , Secretary,
The Chairman:
i s i t not a fact
where b a n k s b e c o m e i n s o l v e n t t h a t c u e s t i o n w i l l
will
such a n i n d e f i n i t e v a r i e t y o f f o r m s t h a t i t
to b e dealt with i n individual cases?
T h a t is to
capital
one bank will rcorganize a n d will leave t h e
will
stock i n the hands o f the reserve bank, a n d another
withdraw i t a n d p o s s i b l y r e o r g a n i z e a n d s u b s c r i b e
again,
a n d s o on; a n d will i t not b e necessary
t o deal
b y special rulings
i n each
with t h a t p a r t i c u l a r m a t t e r
o f dividends h a s
case, p a r t i c u l a r l y w h e n t h e q u e s t i o n
to b e d o a l t w i t h ?
think a
Mr, Curtis: I
genoral r u l e s h o u l d b e
laid d o w n b y t h e B o a r d a s t o w h e t h e r
o r not a
receiver-
stockholder autoship t e r m i n a t e s t h e r e l a t i o n o f t h e
matically.
Seay:
Gesirable
. believe t h a t w o u l d b e m o r e
I
o
w about readjustments o p e n i n g
McCord:
H
Gurtis:
T h e s t a t u t e s e e m e d t o m e t o contempl12
of
t h e relationship
that t h a t a u t o m a t i c a l l y t e r m i n a t e d
a n d started
stockholders, a n d when they were revided
t h e y should start a
business u n d e r t h e o l d n a m e a g a i n
b e cancelled. I
new s u b s c r i p t i o n a n d t h e o l d o n e
think
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Federal Reserve Bank of St. Louis
the p r i n c i p l e u n c e r l y i n g
i t c o u l d b e established,
whether t h e r e l a t i o n s h i p c o n t i n u e s u n d e r a
I think
t h o matter w o u l d
prought t h a
b e covered
receivership.
i f t h e committee
t o the attention o f Mr, Delano a n d suggeste
that they might make a
Mr. S e a y : I
ruling o n that point.
think there w a s s o m e difference betwee.
the d i v i d e n d c i r c u l a r s u b m i t t e d h e r e a n d t h e l e t t e r o f
the Secretary. I
believe t h a t t h e letter o f the
Secretary sounded more satisfactory t o this conference
than t h e d i v i d e n d c i r c u l a r s u b m i t t e d
The C h a i r m a n : I
to w a s s i m p l y a
think
b y Mr. Broderick,
t h e circular
that
y o u re-
m e m o r a n d u m m a d e b y Mr.
to b e s e n t o u t t o t h e r e s e r v e b a n k s , b u t f o r t h e
of the Federal Reserve Board i n preparing a
Mr. Wold:
circu-
T h a t circular letter i s not complete
asked m e f o r a n y s u g g e s t i o n s t h a t w e m i g h t
have t o m a k e o n that.
airman:
T h e n s u p p o s e w e a d d t o t h e resolu.
tion already dictated t h e following:
Be i t further r e s o l v e d t h a t t h e F e d e r a l R e s e r v e
Board b e a s k e d t o m a k e a
bank c o n t i n u e s
t o be a
ruling a s t o w h e t h e r a
stockholder
member
i n the reserve b a n s
after i t s affairs a r e placed i n the hands o f a receives: |
or w o u l d i t a u t o m a t i c a l l y c e a s e t o b e c o m e a
stockhdlder
and t h e a m o u n t o f i t s p a i d i n capital s t o c k t h e r e u p o n
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Federal Reserve Bank of St. Louis
255
immediately b e set aside i n suspense subject t o withdrawal
b y t li
o
f t h e b a n k u p o n evidence
of
authority?
lie. Curiae:
raised
T h e r e w a s o n e more question m a
i n the same case that I
into t h e h a n d s
o f t h e receiver
refer t o .
A f t e r
i t went
i t was discovered t h a t
its s u r p l u s w a s a l l w i p e d o u t , a n d t h e q u e s t i o n h a s b e e n
raised wnether t h e original surplus should b e roduced
irom t h e v e r y b e g i n n i n g o f ites e v 0 c s s u b s c r i p t i o n ?
HCL me) Gacye
s
I
t would probably involve readjustment
in any circumstance.
The Chairman:
M i r , Secretary, w i l l y o u dictate
a further r e s o l u t i o n c o v e r i n g t h a t p o i n t ?
Mr; Curtis:
whetner
I
t brings u p the question also
a n application
t o decrease
i s retroactive,
whether y o u r decreasc i s dated b a c k t o the original
subscription o f stock; a n d also these increases,
is a n o t h e r question.
Are you raising the question for
interested Giscussion,
o r t o set t h e Federal Reserve
Board i n a hole?
Me. Curtis: I
think t h e r e s o l u t i o n c o v e r s
nearly e n o u g h a s
Mr, Wold:
I n - t h e case: r e f e r r e d
t o they s a d not
put i n their portion based u p o n the capital a n d surplus.
oy Wrote u s t h a t t h e c u r p l u s w a s r e a l l y w i p e d o u t a n d
if
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Federal Reserve Bank of St. Louis
they c a r r i e d
i t a s a n i m a g i n a r y surplus.
The=Charrmay:
appointed a
G o v e r n o r F a n c h e r a n d Mr. M g C o r d a r e
committee f o r t h e purpose o f c o n v e y i n g this
delicate qthestion t o G o v e r n o r Delano.
M a y I
ask i f
both o f y o u have. t h e s e r e s o l u t i o n s i n d e l i b l y e n g r a v e d
in
your memory a n d a l l the questions ready t o present t o
Mr, F a n c h e r :
whether
T h e question comes
t o m y mind
as to
o r not this could n o t best g o u p t o them i n
the regular way?
Mr. W o l d ;
T h e y are getting ready
t o orepare a
circular, a n d y o u might just.as well g e t ready t o put
O26
I n t h a t eircuLay,
ITwill adé& Governor W o l d t o t h a t
committee.
W
e have a
committee
o f t h r e e now.
move t h a t t h a t c o m m i t t e e
Mr, Aiken: T
b e limited
to three,
Mr. Wold: T
amend t h a t m o t i o n t o c o n f i n e t h e
committee t o two, a s originally intended.
The Chairman:
D
o w e wish a n y more discussion
of this topic, gentlemen?
That motion has n o t beeh passed yet,
Gentlemen, y o u have heard: t h e resolutions
a s s t a t e d a n d amended,
A r e y o u ready t o a c t o n
them?
(The r e s o l u t i o n s
a s amended w e r e d u l y seconded a n d
!
i
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Federal Reserve Bank of St. Louis
carried, )
Mr. S a y ?
M r , Chairman,
by parcel post;
done?
i n reference t o shipments
i s that authoritative,
that i t can b e
O u r office w i l l n o t t a k e i t unless
i t i s sealed
anc. they cannot g e t a t it.
The Chairman:
T h e Fedoral Reserve Board has franking
privilege t h r o u g h t h e P o s t O f f i c e .
H o w t h e y exercise
that w o d o not .care, a s long a s i t i s insured a n d the
shipment
i s by a
method t h a t w i l l p e r m i t u s t o g e t a
full a n d unrestricted insurance.
Me, 5 cay? T h a t = i s “TromeEnem - Toss ~ inough,
The Chairman:
Mr. Mckay:
Y e s ;
w e could n o t ship t h e other
T h e q u e s t i o n i s whether Federal Reserve
Banks c a n s h i p b y parcel p o s t o r not, t h a t i s f o r o r d i -
nary shipments.
The Chairman:
Mr. 5 6ay:
N o ; t h e y w i l l n o t p e r m i t that.
Y o u have t o seal it, and,
i f sealed, t h e y
charge t h e r e s u l a r postage.
The Chairman:
it g o e s
I
t does n o t make a n y difference i f
a t regular postage
Mr, S e a y : I
i f i t goes u n d e r frank.
m e a n o u t shipments;
t h e shipments
US.
ir, McCord: I
think going o u t from t h e Treasury
Department i f they c a n use their frank w e ought t o have
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Federal Reserve Bank of St. Louis
them d o it, that i s get them t o aid u s i n that way,
but,
o f course, w h e n i t comes
to submit t o the regulations.
t o our shipping w e have
T h e r e i s n o cuestion
about that.
Mr, Aiken:
B e f o r e
w e leave question No. 1 8 , I
would like t o s a y that. I amstill n o t satisfied a s t o
our l e g a l r i g h t s
retirod,.
i n paying p a r f o r s t o c k t h a t i s
U n d e r conditions existing
we h a v e p a i
O
liquidation ,
n
e o r t w o banks h a v e g o n e i n t o
O n e o r t w o have reduced their stock,
and w e have paid under a
somewhat indefinite letter fuom
Me, W i l l i s , w h i c h h e c o n f i r m e d
our stock, b u t I
ao L y I
i n our district
b y telephone,
p a r for
still t h i n k w e h a v e n o l e g a l r i g h t t o
would l i k e t o k n o w w h a t h a s b o e n d o n e i n
other d i s t r i c t s w h e r e t h e v a l u e o f s t o c k i s a s g r e a t a s
par value,
Mr. Seay:
W
e have received a
letter f r o m the
Board stating that i n making payments f o r stock handied
the m a t t e r s h o u l d b e r e f e r r e d
t o the Dobe.
and, if-that
is the case generally, t h a t responsibility c a n b e put upon
them a n d thus relieve us.
Mr. MeCord:
D o e s n o t t h e l a w s a y that i t shall
not exceed t h e book value, a n d would n o t that b e left
to the board o f directors t o detemmine t h e real value
and p a y the real value?
Mr. A i k e n :
W h a t
i s t h e b o o k value?
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Federal Reserve Bank of St. Louis
259
Mr. McCord:
T h e b o o k value i s whatever y o u r e x -
penses a r e b e l o w y o u r f a c e v a l u e ?
do n o t t h i n k w o care t o s o o n record
Nir, Wold: I
in saying that o u r stock i s impaired.
It s e e m s t o m e i t i s p u r e l y
a question o f practicality.
A
s long a s the
says y o u m a y sgwend par, w h y 8 p behinc i t ?
The Chairman:
G o v e r n o r Aiken, y o u raised this
question a n d w e are lining u p a convcorsation here t o
set o n it.
H o w are y o u going t o take i t ?
Mr, Aiken:
w
i
l
l take i t for what i t i s
worth a n d carry i t along with me.
Ti 1 S w o r n pale.
conversation
o r t h e stock?
Both, c o n s t r u c t i v e l y a n d actually.
But when w e get into t : ‘ u c s t i o n o f calculating t h e
book v a l u e o f t h e s t o c k i n a
Federal R e s e r v e B a n k o n
e have a
the basis o f a liquidation o f the b a n k , w
vory
serious cuestion t o face, because w e are making contracts f o r leases a n d s o forth, a n c i f w e cnarg h o s e
liabilities t h a t a r e actual liabilities against t h e
bank w i t h o u t c r e a t i n g f u n d s
earnings
o f t h e future,
i n the b a n k o f the component
y o u would impair t h e stock
the banks, until w e had actually a large surplus.
scems
t o m e that t h e practical w a y t o handle
consider t h a t w e a r c n o w e n t i t l e d
i t is
t o t a k e i n t o consid-
eration t h e f u t u r e e a r n i n g p o w e r o f t h e s e b a n k s
as
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Federal Reserve Bank of St. Louis
260
peing s u f f i c i e n t
as
a
expense,
relations
t o justify strengthening t h e banks a n d
g impai ;
its c a p i t a l
a n d o n a n equitable b a s i s
o f the member banks
b y organization
i n considering t h e
t o t h e Reserve
Bank I
do n o t b e l i e v e t h e r e w o u l d b e a n y q u e s t i o n a b o u t that.
Me, Aiken:
the subject I
h a t i s the most helpful discussion o f
have heard yet.
The Chairman: I
would like
r
e
a
d t o the
Gonference t h e text o f a telegram dated March 10, 1915,
from Secretary Willis, conveying t h e ruling o f the
Board i n regard t o rediscount.
In view o f the possibility o f a n early
demand f o r r e d i s c o u n t b e t w e e n F e d e r a l R e s e r v e
Banks, t h e Federal Reserve Board today fixed a
rate o f discount f o r the present between Federal
Reserve Banks o f 3 4 per cent for paper u p t p
to t h i r t y d a y s a n d f o u r p e r c e n t f o r p a p e r o f
maturity over t h i r t y days a n d u p t o ninety days.
All a p p l i c a t i o n s f o r r e d i s c o u n t s a r e t o b e f i l e d
with t h e F e d e r a l R e s e r v e B o a r d , t h e B o a r d r e s e r v -
ing the right t o apportion t h e applications f o r
rediscounts a m o n g other Federal Reserve Banks,
I woule like t o suggest that w e submit a recommendation t o t h e B o a r d t h a t t h e b a n k w h i c h a p p l i e s f o r t h e
rediscount b e givon reasohable discretion i n determining where t h e y would like t o g e t their money, s o a s t o
svoud t h e Gost. o f s h i p p i n g currency,
Both for i t s rediscount a n d for repayment o f i t s rediscount.
The C h a i r m a n :
B o t h for the amount
o f its redis-
count a n d f o r t h e amount o f r e p a y i n g t h e m .
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Federal Reserve Bank of St. Louis
261
-—
I co n o t k n o w whetner t h a t i s the
If Minneapolis r e d i s c o u n t s n o t e s f o r
notes a r e payable,
w e accept t h e m o n
ere p a y a b l e a n d w e m u s t e x p e c t
When w e b u y from y o u o r rediscount
you w e m u s t e x p e c t t o p r o v i d e y o u w i t h t h e funds.
i
T a o T o t tasne
Mr, M c O o r d s
Governor Strong means.
H e meal
s what
b i t h e bank should
be permitted t o s a y "We prefer t o d o i t w i t h Cleveland
or w i t h Chicago, b e c a u s e t h a t i s m o s t c o n v e n i e n t f o r
us a s t o t h e s h i p m e n t o f m o n
f w e purchase p a p e r f r o m t h e Richmond
I
money a t all.
a n d also i n connection
bank w e p a y f o r i t a t Richmond,
a n d w e collect
it
where i t
Lip,
7
3
D o y o u collect i t ?
We collect i t through you.
Would
n o t t h e Richmond
Bank have
t o
pay y o u i f i t collects f o r you?
Mes Wold:
W
e would have t o stand t h e exoense
of
getting t h e money back.
I do n o t think that i s a
I a m s o r r y t o d i f f e r w i t h you, G o v e r n o r Wold.
the f i r s t t i m e t h i s h a s e v e r o c c u r r e d ,
sound v i e w
This is
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Federal Reserve Bank of St. Louis
262
piece o f p a p e r o f f e r e d
by A
Boston broker, p a y a b l e
a t Providence,
w e must
expect payment a t Boston.
L
he Ghairman:
e
t u s suppose, h o w e v e r , t h a t o n e
of your customers i n Richmond days t o y o u “We would
A
Like t o borrow some o f your money.
you lend it?"
t what rate will
D o y o u s a y t o that customer o f yours i n
Richmond, "That i s ell right; w e willstanc the cost o f
shivping t h e m o n e y t o Richmond,
a n d will p a y t h e
cost o f y o u r s h i p p i n g t h e m o n e y b a c k t o u s w i e n y o u
pay t h a t l o a n off."
T h i s is a
imposed upon you, where a
case w h e r e a
loancan
be
Federal Reserve Board c a n
or
require y o u t o l o a n t h e m o n e y w h e t h e r y o u w a n t t o
not.
I
Mr, Wold:
t i s not t h e borrowing
o f money;
i t is
the rediscount o f a specific instrument t h a t has a
definite security a t a given place.
Mr,
i
t may require you to do it. I t
has such a right.
The Chairman:
Y o u would establish this inter-dis-
trict d i s c o u n t b a s e d u p o n t h e p l a n o f H a v i n g t h e l e n d ing b a n k p a y t h e e x p e n s e
o f t h e l o a n , w h i c h i s contrary,
according t o m y view, o f what i s sound banking.
When the Federal Reserve B a n k o f Dallas - - - they not
being h e r e w e c a n u s e t h e m a s a n i l l u s t r a t i o n
= =
wants t o rediscount s o m e o f its paper u p i n Chicago,
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Federal Reserve Bank of St. Louis
they o u g h t n o t b e p u t t o
s a
i
the m o n e y t o Chicego.
of t h a t b a n k i n Dallas,
loan made f o r t h e benefit
a n c t h e interest r a t e should b e
exchange, free o f cost f o r shipping t h e
Mr, Wold:
i s o n e here i n minc, where i t i s
n a d .
optionel w i t h u s w h e t n e r
w e perticipate
we m o n o t c a r e t o p a r t i c i p a t e
heave to.
I
o n those terms,
f i t wore mandatory, I
T
o r not
E
w e d o not
might t a k e a
ent position.
I
Mir, Rhoades:
of i n t e r e s t
t i s not optional w h e r e t h e r a t e
i s fixed.
Mr, Wold:
P o s s i b l y I
might g e t t h e D a l l a s
e x -
change o f discount w h e n I made t h e l o a n anc g e t a premium
for i t w h e n t h e n o t e s w e r e c o l l e c t e d ,
Mehay:
h
i
n
k the N e w York o r Chicago
exchange c o u l d b e m a c e b y a n y b a n k t h a t r e d i s c o u n t e d
it, a n d t h e y c o u l d p a y t h e m i n either k i n d o f exchange,
and i n t h a t w a y t h e r e w o u l d n o t b e a
necessity
t o move
money.
Mr, Boay:
W h i c h t o m e goes t o show tnat i f the
bank h a d t h e l i b e r t y t o make l o a n s w h e r e i t c o u l d m a k e
exchanze
t o i t s o w n advantage,
aple.
THe Cheat r a w s
i t would b e more desir-
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Federal Reserve Bank of St. Louis
264
either b a n k coula u s e either
Chicago o r N e w Y o r k e x c h a n g e .
Mr. Aiken:
T h e f o r m that t h e operation would take,
if a Boston bank were d i s c o u n t i n g i n New York, would
pe that they would s e n d some receivables t o New York f o r
discount.
T h e nroceeds would b e passed t o our credit w
with t h e F e d e r a l R e s e r v e B a n k a t siew York,
a n d w e would
create N e v e x c h a n g e b y doing it, a n c i t would b e
that e x b h a n g e
p r pay for the money
thet w a s s h i p p e d o v e r £ O Us.
Governor M c C o r d , c o u l d
handle a
rediscount b y taking N e w York exchange f o r
MeCord:
Cortainly.
Chairman:
ing some paper ;
G o v e r n o r Aiken,
i f you were discount-
itlantay would you be willing t o
have that cleared s a y a t N e w York, o r t o have that
operation teke place o n your books s o y o u would participate j u s t a s y o u d o i n b u y i n g a c c e p t a n c e s
a n c send a
bill f o r the cost o f getting t h e exchange o u t o f New
there w e r e a n y ,
t o Governor McCord?
Yes.
Chairman:
T h e r e woulc n o t b e a n y cost, a s a
matter o f fact, woulc tnere?
Mr, Aiken:
T h e r e might b e a cost. I
to s h i p c u r r e n c y t o thew York.
might nave
SEKOP
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Federal Reserve Bank of St. Louis
265
Chairman,
T h a t i s setting exhcange i n t o
to m e e t t h e investment;
Weg Aiken:
Y e s s cand L i w o u l e p e U p t e G o v e r n o r
Mecord t o p a y f o r i t s
Min S e a y * I t w o u l d b e a
question o f g e t t i n g t h e
money t o G o v e r n o r Mecord.
The Chairman:
N o w , this h a s occurred t o m e a s
of dealing with this matter, w h i c h I ao not
believe
i n as a
permanent p o l i c y ,
matter m i g h t d o . I
but as a
temporary
do n o t t h i n k w e o u g h t t o t a k e a
Step i n t h e d i r e c t i o n o f n a v i n g t h e F e d e r a l R e s e r v e B a n k
pf N e w York clearing t o o much o f this stuff f o r t h e
other banks a s long a s w e are working i n the direction
of h a v i n g a
clearing s y s t e m ,
those w h o w o u l d p a r t i c i p a t e
have t h e d i s c o u n t s h a n d l e d
b u t i f i t would accommodate
i n any such transaction
to
b y the use o f New York
exchange b y having u s make i t a clearing committee,
pending t h e establishment o f a clearing fund, which
would take care o f i t autom atically, we.would b e very
glad inceed t o Co that, but I would rather have that
recommendation
g o t o t h e Pederal Reserve B o a r d f r o m
re4
the G o v e r n o r s n e r e o f tineir o w n m o t i o n than. a p p e a r i n g
to c o m e f r o m m e a s . a suggestion,. b e c a u s e I
do not
want t
o have t h e N e w York bank appear t o b e endeavoring
to s w i n g t h a t t h i n g , w h i c h
to do.
w e have n o desire whatever
I f it is. going t o be a. convenience -to put this
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Federal Reserve Bank of St. Louis
266
w e would b e very glad t o d o
1c t r a n s a c t i o n through,
pending t h e establishment o f the clearance fund.
Mr. Wold:
S o far a s Minneapolis i s concerned,
would b e p e r f e c t l y a g r e e a b l e
t o u s t o participate a n d
allow the bank who desires a
rediscount t o indicate
it
woether t h e y preferrod Chicago o r New York.
Mr, Seay:
t the risk o f reiteration, I
A
want t o
exoress t h e opinion that i t i s more desirable f o r the
bank w h i c h d e s i r e s
t o rediscount
t o make i t s arrangement
with t h e b e n k f r o m w h i c h i t desires
t o have t h e
and which c a n most advantageously “urnish funds t o it,
with,
Board,
t h e approval
o f course,
and at a
o f t h e Federal Reserve
rate t o b e a p p r o v e d
The Chairman:
O
b y t h e Board.
f course, Governor Kains i s a t
a very distinct disadvantage i n part Gipating i n such
a transaction, a n d I
do not s e e h o w h e c a n d o i t without
considerable expense a n d inconvenience.
Er i k o n :
R e f e r r i n g a g a i n t o this notice o f
the establishment o f the rate, y o u understand t h a t i t
is optional w i t h t h e d i f f e r e n t F e d e r a l R e s e r v e B a n k s w h e t h e
they take u p this allottment?
Tne Chairman:
Mr, Wold:
I
Y e s ,sir.
I
t i s underwritten.
s i t understood t h a t t h e repayment
will b e made i n the same class o f e é n g e a s the payment
i s made i n ?
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Federal Reserve Bank of St. Louis
20¢
Mr. Seay:
T h a t i s between t h e bank Branting
he d i s c o u n t a n d t h e o n e a s k i n g
f o r it.
T h a t is
the w a y all the other banking transactions a r e carried
One
Mr, McCord:
Suppose I
two o r t h r e e months.
rediscount w i t h i n t h e n e x t
T h a t w o u l d n o t b e i n currency;
it would b e for credits i n New York o r Chicago.
could u s e t h a t v e r y r e a d i l y ?
you n o t s e e t h a t I
when i t comes t o repayment,
the n e x t n i n e t y d a y s , I
Chicago, p o s s i b l y a t a
D o
T h e n
i f I had t o repay within
would h a v e t o p u y N e w Y o r k o f
premium,
o r s h i p t h e funds, b u t
if I should wait until J u l y o r “uzust t o make m y
rediscount, I
would probably have t o call for t h e gojd
equivalent, because I
for circulations,
would want t o use i t a s a basis
T h e n m y repayments w o u l d b e i n
cotton b i l l s i n t o N e w York, a n d t h a t w o u l d s a v e m e t h e
expense o f paying exchange.
he Chairman:
I
t i s not perfectly clear that t h e
handling o f the exchange settlement growing o u t o f a
rediscount h a s g o t t o f o l l o w t h e l i n e o f least r e s i s t -
ance, b y taking t h e least expensive method?
Mr, McCord:
Absolutely,
Me. oeay:
I
n addition t o that, h e i s imposing upon
the mtediscounting bank t h e bookkeeping burden o f eleve71
operations too, where i t might b e made w i t h o n e o r meyue
tWO.
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Federal Reserve Bank of St. Louis
268
I
Mr, Fancher:
Subject h a s a
k
S
t s e e s t o m e that this whole
u p o n t h e matter
a
Reserve B a n k settlements,
o f Federal
W h a t e v e r o u r recommenda—
tion i s here i t ought t o b e coupled u p with that.
And c o u p l e d u p w i t h t h e i n t r a district c l e a r i n g j u s t a s well,
other,
O n e bears u p o n t h e
D o y o u agree w i t h that, Mr. Mchay?
Yes,sir.
Mr. MeKay:
T h e y a r e usually pay-
able i n Chicago o r N e w yor).
Mire Seay:
S u p p o s e o n e Federal Reserve B a n k i s
heavily indebted t o another Federal Reserve Bank,
whether
N e w York,
Kansas
City or
N e w York,
would want t o rediscount a t that point.
itis
H o w would y o u
do -about the apportionment w h e n such a thing occurs?
The Chairman:
privilege
I
f y o u give t h e borrowing b a n k the
o f f l u c t u a t i n g i t s o w n market,
a l l that
happens t h e n i s i f i t borrows a l l o f i t s m o n e y a t o n e
place w e m i g h t h a v e a n a r r a n g e m e n t
b y which t h a t c a n
be a p p o r t i o n e d a g a i n u s i n g t h e e x c h a n g e w h i c h i s t h e
least expensive.
Mr Seay. I
think t h e Federal aetal ce Bank c a n
manage t h a t a d m i r a b l y e m o n g t h e m s e l v e s
i f left a t
Jiberty t o do. so,
Mr. F a n c h e r :
I
t seems
t o m e i t would
b e the most
natural thing i n the world wiere o n e bank has a
heavy
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Federal Reserve Bank of St. Louis
DSI
269
creditor
willing
a t some other Federal Reserve B a n k i t would b e
t o arrangq a
rediscount f o r t h a t
That could b e a n operation that could b e arranged
those t w o banks.
That w a s i n m y c o n c r e t e i l l u s t r a t i o n .
In v i e w o f t h i s d i s c u s s i o n ,
we n o t s i m p l y h a v e i t u n c e r s t o o d
t h a t a t our meeting
with t h e F e d e r a l R e s e r v e R o a r d w e s u g g e s t
views
can
w e excha
o n this subject informally without m a k i n g a
recommendation?
Mr, MeCord: I
think t h a t i s a
proper c o u r s e ,
Since t h e y h a v e t a k e n t h a t position,
I think t h a t w o u l d b e t h e m o s t d i p l o m a t i c w a y t o »vresent t h e m a t t e r a n d t h e n l e t t h e m m o d i f y i t i f t u e y
find t h a t t h e v i e w s p r e s e n t e d a r e o f s u f f i c i e n t f o r c e
bo ¢ al.
fori;
The Chairman: I
think t h e y m a y d e c i d e t o m o d i f y i t .
Our t a l k w i t h G o v e r n o r D e l a n o s b o u t i t i n d i c a t e d t h a t
there w e r e s o m e p o i n t s t h a t h a d n o t b e e n c o n s i c e r e d W o i c h
they would b e glad t o discuss w i t h us.
to p a s s t h a t m a t t e r
cussion,
A r e w e satisfied
i n t h a t s h a p e without: f u r t h e r d i s -
o r i s there a n y recommendation t o g o o n record?
Mr, Fancher:
A r e w e to-discuss t h e further c u s t o d y
a)
of t h e p a p e r ?
Mir. McCord: I
would l i k e t o h a v e t h a t discussed,
that w o u l d v e r y m a t e r i a l l y c e t e r m i n e t h e
action
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Federal Reserve Bank of St. Louis
270
we h e v e t o h a n d l e t h i r t y d a y p a p e r t o
and B o s t o n a n d Atlanta,
would b e d u e b y t h e t i m e w e g e t i t u p there,
it
a n d any
arrangoment t h a t w o u l d b e p e r f e c t l y s a f e t o t h e d i s c o u n t ing b a n k o r t h e b a n k t h a t f u r n i s h e s t h e m o n e y w e w o u l d
be perfectly willing t o meet their agreement, b u t w e
would n o t l i k e t h a t b u s i n e s s
o f switching backward a n d
forward o f t h e securities.
The C h a i r m a n :
loan o f a
H
o
w would
round amount, m a t u r i n g
i t d o t o make a
on a
specific
specific d a t e , a n d
put u p the collateral w i t h a Federal Reserve agent,
and p r o v i d e t h e a d v a n c e
Mr. McCord:
t o meet i t ?
T h a t i s a logical solution o f the
proposition.
The Chairman:
A r e y o u w i l l i n g t o recommend t h a t
to tne Federal Reserve Board i f they c a n find the means
tO.002 i G ?
Mr. Seay:
F o r consideration; otherwisc the dis-
counting benk will b e paying offevery d a y i t s items a s
collects a n d rediscounting e v e r y d a y t h e small items
that i t has t o rediscount.
The Chairman:
Mr. Wold:
A n d t h e w o r k w i l l b e simply bremendour
C a n they borrownon collateral?
The Chairman:
Mr. McCord: I
T h e y c a n b o r r o w n gold.
can borrow a certain amount of
gold from N e w York, a n d how I
settle w i t h h i m i s another
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Federal Reserve Bank of St. Louis
question.
It involves j u s t b h e s a m e p o i n t a s
the b i l l s r e c e i v a b l e
se r v e agent, a n d w i t h t h o s e t w o
c a n tell y o u that t h e ais-
together I
will b e a
ails
I
very l i v e l y one.
s i t desired t h a t w e p a s s a
reso-
lution covering t h e recommendation a s t o loan rather
tnan d i s c o u n t ?
I T move, Mr, Chairman, t h a t t h e Federal
ir, Seay;
Poserve B o a r d b e r e c u e s t e d
t o consider h o w transactions
with Federal Reserve Banks involving t h e l o a n o r rediscount c a n b e m a n a g e d f r o m t h e l o a n p o i n t o f view.
(The m o t i o n w a s
d u l y seconded,
p u t and carried, )
As w e have still a
before t i m e f o r luncheon,
few moments
w e may
item No, 2 4 ,
Governor S e a y h a s o f f e r e d a
resolution w h i c h w a s
not acted upon, b u t which w a s t o b e reflected upon,
recommencing
t o the Federal
special c o m m i t t e e
Reserve
b e appointed
Board that a
t o consider
a n amend-
ment t o t h e F e d e r a l R e s e r v e A c t w h i c h w o u l d u l t i m a t e l y
serve t o bring about t h e u s e o f Federal Reserve notes
as r e s e r v e s f o r m e m b e r banks.
Mr. Seay:
M r . Chairman, there w a s introduced,
I believe,
amendment
a t one time i n Congréss a
t e the Federal Reserve
bill making. a n
é c t which woyld h a v e
allowec t h e gradual substitution o f Federal Reserve n o t e s , ©
or t n e “gradual u s e o f Federal R e s e r v e n o t e s a s r e s e r v e
Peo newneanaoneal b a n k s oO. t n e ExTenu- O n t i v e p e r conu..or
their total reserve, t h e idea being t o increase t h a t
gradually,
o n e p e r cent t h e first year,
the first year, a n d so. on. I
impressed
o r two per cent
cannot h e l p being
w i t h the conviction
that either that
o r some
other:method w i l l h a v e t o b e a d o p t e d t h r o u g h t h e i s s u i n g
bank t o gather i n the gold circulation o f the country.
ta O a e n
D o y o u mean o n e p e r cent o r one-twelfth?
Mr. S e a y :
O n e p e r c e n t o f t h e i r t o t a l reserve,
and u p t o m u m five p e r cent o f their total reserve.
Mr. Wold:
One-fifteenth
a s the case m a y be?
Mr. Seay: O n e - f i f t e e n t h a s the case m a y be.
The Chairman:
A
s t h e m a t t e r n o w stands,
t h e only
way i n w h i c h t h e F e d e r a l R e s e r v e B a n k s c a n g e t t h e
reserve g o l d o f the country i s t o substitute t h e i r
notes f o r the gold shipments h e l d b y the national banks
and t h e o n l y w a y i n w h i c h
i t would
substitution i s b y having a
b e safe
t o effect t h a t
majority o f the Federal
Reserve notes issued against g o l d a n d substituted directia.
A
s that c a n only b e
brought
a b o u t
b y a n amendment
to the Federal Reserve Act, i t c a n b e safeguarded
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
t a x u p o n that p a r t i o n o f t h e n o t e s o f
py i m p o s i n g a
the F e d e r a l R e s e r v e B a n k s w h i c h a r e s e c u r e d b y commer-
cial paper,
T i a t i s the w a y i n which reserves o f the
Imperial B a n k o f G e r m a n y h a v e b e e n h a n d l e d a n d t h e y h a v e
W
peen v e r y satisfactory.
e would have t o d o i t
withevery p o s s i b l e s a f e g u a r d a r o u n d t h e p r o c e s s
country,
but I
i t i s t h e only w a y i n which this
believe
method c a n s e r v e
i n this
t o g e t t h e g o l d together.
Originally
I did not think so.
Mr. Wold:
W o u l d n o t that make i t necessary. t o
have t w o c l a s s e s
o f Federal Reserve notes,
The Cheirman:
N
o
t a t all.
sfoing t o d i f f e r e n t i a t e ?
The Chairman: 4
the p e r c e n t a z e
Mr, Wold:
a
g o i n g t o put the tazx o n
b y t h e books o f tle b a n k
I
t would b e a
reduction o f your reserves
under t h e p r e s e n t method.
The Gheirman:
the r e s e r v e s
I
t w o u l d b e only a
reduction o f
t o the extent t n a t Federal Peserve
notes w e r e i s s u e d a g a i n s t p a p e r , w o u l d i t not?
Yes»
Suppose t o d a y a t c r s s t r o k e w e t o o x
undred million of gold which is held b y
national banks:-as r e s e r v e a n d s u b s t i t u t e f o r t h a t
e notes
o f t h eh F e d e r a l
R e s e rt v e B a n nis.
k s W Wh Ya t w o u l d
the p o s i t i o n o f t h e F e d e r a l R e s e r v e B a n k s b e ?
v e r y
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Federal Reserve Bank of St. Louis
a4
dollar o f their notes would b e secured b y a dollar o f
gold, w o u l d i t n o t ?
Mr. Wold:
W h a t would y o u d o w i
b o n d s held
as security?
The Chairman:
Version.
T h i s would facilitate t h a t con-
U l t i m a t e l y t h e Federal Reserve b a n k s w o u l d
be t h e n i n a position o f h a v i n g v e r y l a r g e h o l d i n g s
gold.
T h e y would b e able t o retire a
of
portion o f the bonds
in circulation a n d againattract additional g o l d a s
roserve, a n d a very large portion o f ali the notes
of the Federal Reserve Banks would b e secured b y gold,
and t h e y w o u l d h a v e f i f t y p e r c e n t o f their g o l d a t
oncei
Mr, Wold:
T h a t would give you three hundred
seventy-five million dollars invested;
W h a t would
have left t o d o business o n ?
The Chairman: I
cdo not claim that w e could a t
one s t o r k e r e t i r e a l l o f t h e s e G o v e r n m e n t bonds.
The a c t might have t o b e amended a s t o amortization
of t h e w h o l e n a t i o n a l b a n k o l r e u i a t i o n ,
b u t i f the act
can b e amended s o that t h e greater proportion o f the
Government bonds c a n b e sold, t h e y i n themselves would
be the means o f attracting t h e gold t o the bank a n d
would g e t r i d o f the bank circulation entirely a n d
substitute
t h e Federal Reserve notes.
Mr. Seay:
T h e n there i s the question o f being
w o
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Federal Reserve Bank of St. Louis
able t o a c q u i r e t h e n e w gold.
W
e a r e supposed
circulation
have s o m e c o n t r o l o v e r t h e g o l d
to
o f the
best b e exercised
country, b u t I cannot s e e h o w i t c a n
at this time.
Mr. McKay:
T h a t would mean a
transfer
o f the
o f the
gold held b y the Government t o the loss
Federal Reserve banks?
The Chairman:
that.
I
t would n o t necessarily involve
H o l d t h e cortificates.
B u t i f these banks
ultimately t o o k over t h e sub-treasuries a n d accumuwould
lated a l l t h e gold certificates, t h e n the thing
Y o u would take t h e direct custody
clear itsclf.
of the gold.
Mir. Wold:
W h a t would your basis be; o n e hundred p
per cont, a n d forty p e r cent, w i t h a
£
tax for exery
potnt that t h e reserve dropped?
The Chairman:
Y e s ; t h a t i s contemplated b y the
act now.
Mr. Wold:
B u t i t would n o t b e below o n e
hundred p e r cent.
The Chairman:
B u t t h e principle would b e applied.
Federal
Another n e c e s s a r y s t e p w o u l d b e t h e n t o have t h e
Reserve b a n k n o t e s a c t a s t h e r e s e r v e
departmont
o f t h e banking
i n the Federal Reserve banks, because
that i s all you would have, A l l o f your gold would get
pehind
t h o notes then.
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Federal Reserve Bank of St. Louis
Mr, Mckay:
T h a t would limit your issuance
of
notes,
are o n l y r e q u i r e d n o w t o c a r r y
In this c a s e y o u w o u l d b o
roguired
t o c a r r y o n e h u n d r e d p e r c e n t a g a i n s t s u c h eas
wore issuead a g a i n s t gold.
A
The Chairmen:
s l o n g a s y o u could issue notes
for gold directly, a n d y o u would issue f$hem gradually
to t h e extent t h a t your notes would a c t a s reserves
for national banking, y o u would simply take t h e gold
in, b u t a s soon a s y o u were able t o cover your notes
with gold, y o u would adopt that process rather t h a n
pledge y o u r c o m m e r c i a l p a p e r .
T h e n t h e issue o f
the notes against commerféial paper would b e i n the
nature o f a n emergency issue entirely.
W h e n your
notes w e r e s e c u r e d b y l e s s t h a n t w e n t y p e r c e n t gold,
then y o u r t a x w o u l d b e g i n t o operate.
T h e extent that
they would reqiire g o l d covered b y the votes would
have t o b e g o v e r n e d
Mr, McKay:
b y experiencc.
T h e Federal Reserve notes w o u l d
fluctuate dependent u p o n h o w much gold there w a s
against ibhem.
I think w e c a n f i g u r e o u t h o w
the currency system would b e left with this operation
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Federal Reserve Bank of St. Louis
277
completed.
L e t u s assume t h a t w e take i n one
hundred m i l l i o n o f g o l d a n d i s s u e d o n e h u n d r e d m i l l i o n
dollars
o f notes a g a i n s t that.
h e n l e t u s assume
that w e retired a l l o f the national b a n k notes, s a y
seven h u n d r e d a n d f i f t y m i l l i o n a n d i s s u e d a g a i n s t
thom s e v e n h u n d r e d a n d f i f t y m i l l i o n s c o f Federal R e W
serve notes,
e would t h o n have
i n our vaults
hree hundred d n a desunhy-five million dollars o f
three p e r c e n t t h i r t y y e a r b o n d s a n d t h r e e h u n d r e d a n d
seventy-five m i l l i o n s d o l l a r s
o f o n e y e a r notes.
W e
would sell t h e thirty year bonds a n d g e t three
hundred a n d seventy-five millions o f gold,
W e would
consequently h a v e t h r e e h u n d r e d a n d s e v e n t y - f i v e
million o f gold a n d three huncrod a n d seventy-five million i n notes against a
total note issue o f o n e
billion s e v e n h u n d r e d a n d f i f t y million.
W
e al-
reacy h a v e i n g o l d s a y t h r e c h u n d r e d a n d f i f t y
million f o r t h e p u r p o s e
o f figures, w h i c h w o u l d b e
added t o the billion, three huncred a n d seventy-five
million, a n d w e would have o n e billion s i x hundred a n d
twenty five million i n gold against a
total note
issue o f one billions even hundred a n d fifty
milli
N
o
w
, l e t u s suppose t h a t t h e country r e -
quired r e d i s c o u n t w i t h t h e F e d e r a l R e s e r v e b a n k s < o f
poh
five hundred million, a n d this were issued i n notesé
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Federal Reserve Bank of St. Louis
yAgw
That w o u l d i n f l a t e o u r n o t e i s s u e u p t o t w o b i l l i o n
two h u n d r e d a n d f i f t y m i l l i o n a n d a g a i n s t t h e m w e w o u l d
have o n e b i l l i o n s i x h u n d r e d a n d t w e n t y f i v e m i l l i o n s
of gold a n d three hundred a n d seventy-five millions o f
one year notes a n d five hundred million o f commercial
paper,
a n d t h e proportion o f commercial p a p e r w o u l d b e
trifling compared t o the gold holdings o f the bank
ft w o u l d
b e about eighteen
p e r cent,
r o u g h l y speaking.
We w o u l d h a v e o n l y e i g h t y p e r c e n t o f g o l d b e h i n d t h e
notes.
Mr, Wold:
T h e r e h a s g o t t o b e a break there a t
some place,
The Chairman:
Y o u have t h e tax.
Y o u raise your
discount rate a n d protect b y t h e amount o f your tax,
Mp. Seay:
The Ghairm
T
o a
N
o
point t h a t w i l l - b r i n g t h e m f n .
w let us go a step further, L e t
us suppose that i n order t o strengthen t h e bank's
reserves,
w e hat a contract w i t h t h e Government b y
which o f t h o s e t h r e e h u n d r e d a n d s e v e n t y f i v e m i l l i o n s
of one year renewahle notes t h a t w e held w e were permitted u n c e r c e r t a i n c o n d i t i o n s
t o a gain c o n v e r t a
portion o f t h o s e i n t o t h i r t y y e a r b o n d s
at a
rate o f
interest that would enable u s t o market them. T h e r e
.
we would g e t more g o l d in, e n d a t any point where t h e
reserve o f the bank g o t down w e raise » o u r discount
rate a n d require t h e payments o f our discounts, a n d again
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Federal Reserve Bank of St. Louis
we a t t r a c t gold. I
of 2 5 y e a r s
cannot s e e where, t a k i n g a
period
t o work this thing o u t that these banks
would hold possibly, w i t h t h e growth o f the country,
two thousand millions o f dollars o f gold a n d might
have t w e n t y - f i v e h u n d r e d m i l l i o n s
o f cxrculation out-
and w i t h t h e e i g h t y p e r c e n t r e s e r v e
i t would
bank n o t e i n the-worl a n d w e w o u l d h a v e t h e
flexible system,
It would b e available i n pulling
the gold into their vaults without t h e Government having
TO.C.0- 1 b .
Mee Wold:
T h e y recently passed a
bill
i n the
Minnesota legislature making i t legal f o r a cashier o f
act a s a
notary i n c o n n e c t i o n w i t h p a p e r s
i n
bank i s interested.
Vireo o e e ys:
W o u l e y o u construe t h a t a s permissible
under t h e a c t when w e are guided n o t b y state laws,
but b y laws p a s s e d b y Congress?
New Gurtis:
D
o you mean for a
cashier
notary f e o ?
Seay:
O
The Chairman:
be b r o u g h t
D
o y o u think this matter should
t o t h e attention o f t h e Board?
Seay: I
by- them.
r any officer o f the bank.
do not b e l i e v e t
i could b e solved
I t i s a question o f expediency a n d fact,
and t h e m a n w h o m u s t d e t e r m i n e
i t for himsclf
i s the
292
we attract. gold. i
cannot. s e e where, t a k i n g a
period
of 2 5 years t o work this o u t that these banks would h o l d
possibly,
millions
w i t h t h e g r o w t h o f t h e country,
o f dollars
t w o thousand
o f gold a n d might h a v e twenty-five hundres
millions o f circulation outstanding, a n d with the eighty p e r
cent r e s e r v e
i t would b e t h e b e s t b a n k n o t e i n t h e world a n d
we w o u l d h a v e t h e m o s t f l e x i b l e system.
Mr. McCord:
I
t would b e a v a i l a b l e
i n pulling t h e
gold i n t o their vaults without t h e Government having t o
€o-5u,
The Chairman; I
have n o t said anything about t h e
banks vithdrawing t h e deposits f r o m t h e national banks,
There would still b e a very sonsidecrable amount o f gold there
that w o u l d o p e r a t e a s a
reserve a g a i n s t a
deposit l i a b i l -
ity against t h e Government, w h i c h would h a v e t h e effect o f
increasing the banks' reserve again.
Mr. Fancher;
O f course, i n this computation here, out
of that 8 0 per: cent o f gold y o u would have t o take your
reserve
o n deposit,
The Chairman:
E x c u s e m e right there.
Y o u a r e goingto
take o u t y o r n o t e s f r o m t h e F e d e r a l R e s e r v e A g e n t
o n this
plan, n o t issue t o yeur depositor i n the first instance,
but i n o r d e r t o m a k e t h e r e s e r v e f o r t h e f i r s t d e p o s i t
of
the bank.
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Federal Reserve Bank of St. Louis
Mr. Faneher: I
The Chairman:
see,
Y o u change t h e f o r m o f reserve,
Y o u chanse t h e f o r m o f reserve,
e o it
293
figures a s a part o f the note liability o f the bank,
Mrs. Pemeners
Y o u change t h e =
1d i n t o F e d e r a l R e s e r v e
notes a n d t h e y a r e reserved a s Federal notes a n d liability.
The Chairman:
18,000,000 p o u n d s
T h e bank o f England holds today
o f obligations
in i t s i s s u e department,
o f t h e British Government
w h i c h a r e s i m p l y g o v e r n m e n t bonds.
The Bank o f Lngland issues those notes against 1 0 0 per cent
of gold, except a s t o this 18,000,000 pounds o f Government
securities.
more.
T h a t has b e e n there f o r a hundred years o r
T h o s e notes issued b y the issue department o f t h e
Bank o f England s e r v e a s a
reserve f o r t h e d e p o s i t s
o f the
bank, a n d when y o u read about fifty p e r cent reserve o f the
Bank o f England
i t means t h a t i n their banking department
they have their deposit liabilities covered b y fifty p e r cent
of their notes, t h e e
notes being covered b y 18,800,000
pounds obligation o f the British Government a n d t h e balance
by gold.
S o that w e would b e doing n o more t h a n has worked
successfully w i t h the Bank o f England f o r 100 years o r
more, except t h a t even o n this basis t h e percentage o f mis-
Sing gold covered would b e considerably less than i s the
case i n either t h e Bank o f England o r the Bank o f France
or the Reichstag.
The Chairman:
A s indicating what t h e prevailing
opinion i s i n London,
t h e joint s t o c k banks h a v e frequently
urged u p o n t h e Bank o f England that instead o f having a
rigid g o l d security note issue t h e y amend t h e charter o f
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Federal Reserve Bank of St. Louis
3
294
the Bank o f England s o that they may b e permitted t o issue
notes t o their banking department secured b y their pills,
that n o t e i s s u e b e i n g a
super-issue,
s o t o speak,
taxed e x a c t l y a s t h e n o t e i s s u e o f t h e R e i c h s t a g
t o be
i s taxed
so t h e y w o u l d g e t t h e f l e x i b i l i t y t h a t w e w o u l d g e t b y t h i s
system.
T h a t h a s b e e n recommended
b y t h e bankers
o f England
. combined with this condition, that the Bank o f England has
already o v e r t r a d e d
o n t h e i r s t o c k o f gold,
T h e bank o f
England w h e n t h i s w a r b r o k e o u t h a d b e e n r u n n i n g a l o n g o n a n
average o f 170,000,000 million t o 200,000,000 o f gold, which
is nearly 190,000,000 less than these Federal Reserve Banks
have now, a n d t h e y were doing t h e trade o f the world o n it,
They thought t h e Bank o f England w a s n o t carrying enough
gold,
T h e y were trying t o make t o o much money f r o m the
deposits.
Mr. Fancher:
I
n the reserve n f national banks t h e y
are permitted t o carry fegal tender notes, a n d bank o f them
what have they?
T h e y have 150,000,000 against a
309,000,000
issue,
The Chairman:
I
f w e once start this thing going that
and t h e
Will-happen w i l l - b e this;
adjustment
C o u p l e d
w i t h this process
w e will g e t t h e Government
m f re-
t o start amortization
fund f e r t h e greenbacks, t h a t will t a k e care o f the
550,000,000 i n our vault.
then p e r n a p s
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Federal Reserve Bank of St. Louis
h e n that i s out af the way thin
w e c a n declare t h e silver certificate,
295
Mr, Seay:
T h e whole financial System @
t h i s country
is b o u n d u p i n t h i s issue,
Mr. McCord: I
have b e e n o n t h e D a n k i n g anda c u r r e n c y
committee looking t o the taking care
o f the greenbacks b y
the purchase o f gold, a n d I have always
advocated ’that f r o m
the beginning t o the finish.
The Chairman:
I t may b e a wild cream, b u t I
hope
that, sane d a y w e m a y b e a t work
bringing about a n amendment
to t h i s F e d e r a l R e s e r v e A c t t h a t
will accomplish this v e r y
thing,
I
t will n o t require v e r y many
computations
o n paper
to show what a n immense Strength
t o our whole SyStem i t
would b e t o have such a thing developed,
(Thereupon, a t 1 o'clock D e mM., a n adjournment
was taken until. 2:15 o'clock p. m )
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Federal Reserve Bank of St. Louis
—O00——e
n
AFTER R E C E S S ,
The Conference resumed i t s session a t 2:30 o'clock
The Chairman: I
that. [
have a letter f r o m Governor Delano
will read:
"The Federal Reserve Board, i n session this morning,
received w a d through Governor W o l d that menbers o f your
Conference desired t o meet members o f the Board informally
at four o'clock this afternoon.
"I beg t o say that w e will b e glad t o meet you a t that
hour,
I
t has occurred
t o us, h o x e v e r ,
certain specifie topics t o b e e e
t h a t i f there w e r e
u p , time might b e saved
by referring commiitees o f your Bonference o n those topics
to committees
o f our Board w h o have those subjects
i n hand.
"Yours v e r y truly,
tp 2 . pelano."
If anyone c a n suggest a
now c o n s i s t i n g
method b y which this program,
o f c o n s i d e r a b l y o v e r 4 0 items,
up s o that w e c a n convey i t i n that way, I
c a n b e divided
will b e glad t o
appoint t h e committees.
Mr. Wolds I
think w e should proceed a s we have i n
the past; a n d t h a t i s t o l e t t h e C h a i r m a n b e t h e s p o k e s m a n
and t o have members o f the C o n f e r e n c e , o
h
w
- wish t o add anything, h a v e t h e privilege o f doing it.
The Chairman:
T h e o n l y trouble i s that I have b e e n
doing a l l t h e discussing,
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Federal Reserve Bank of St. Louis
a n d consequently I
have b e e n getting
2
Gil ( h e e e e
.I
d o not mind that, though,
Mr. Fancher: I
think t h a t method h a s accomplished g o o d
results,
Mr. Rhoades:
T h e y c a n refer i t t o a
committee a f t e r
they h a v e g o n e o v e r i t ,
The Chairman;
I
t seems
t o m e that w e ought t o convey
word t o G o v e r n o r D e l a n o P r o m p t l y a s t o t h e
difficulty
arranging a
acvance,
of
conference b y committees, w h e n w e have MOL,
Ae
a n arrangement o f the topics s o that e a c h
committee
of t h i s B o a r d a n d o f t h e i r B o a r d w i l l h a v e a
of t o p i c s t h a t w i l l f i t i n together, I
specific s e t
do not see h o w
1t c a n b e d m e ,
However, I
would l i k e t o h a v e y o u r w i s h e s
i n t h e matter,
(Governor Wold was thereupon appointed a s a committee t o c o n v e y t o G o v e r n o r D e l a n o a n e x p r e s s i o n
o f the views
of the meeting a s t o dealing with the report b y sub-committees,
which t h e meeting felt could n o t b e arranged without m a e
preparation. t h a n i s possible now.)
The Chairman: I
have b e e n s k i p p i n g a r o u n d
o n this
program a good deal a n d I will a s k that t h e next topic b e
suggested b y someone other t h a n t h e Chairman,
Mr. S e a y :
C a n w e clean u p t h e first page?
Mr. Fancher:
The Chairman:
N o . l l i s a n open topic,
Y e s ; discount rates,
terday t o pass that f o r the time being.
program a n d unchecked, t h o u g h .
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Federal Reserve Bank of St. Louis
y e decided yesI
t i s still o n the
298
Mr. Fancher:
U n d e r present conditions,
could n e not
pass i t ?
Mr. S e a y :
W a s that p u t upen the program with a
view
of discussing t h e question which has b e e n raised heretofore
as t o the authority f o r initiating a n d putting i n t o force
rates?
O
r w a s i t p u t o n t h e p r o g r a m f r o m s o m e o t h e r jQhameaane.
OLS e w e
The o e . . .
I
think t h a t w a s j u s t carried
o n as a
permanent subject a n d there w a s n o particular object i n
putting i t there a t this time.
I t did not have relation t o the
former discussion, particularly.
Mr. Seay: I
move that w e allow i t t o stand i n its
present status,
Mr. Fancher: I
The Chairman:
I
11, discount rates,
Mr. Rhoades:
second the motion.
t i s moved a n d seconded t h a t topic No.
b e passed,
M a y I
ask for a n expression
o f opinion
on the publication o f acceptance rates i n that connection?
Mr. Fancher:
D o you mean a s t o giving publicity?
Mr. Rhoades:
ves.
The Chairman:
O u r feeling i n New York i s that w e
should only have a minimum rate. I
do not know that our
feeling i s very sirong o n e w a y o r the other, a s t o this being
published, I
think i t was a matter that ought t g b e worked
out b y evolution, rather t h a n b y a decision a t the outset,
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Federal Reserve Bank of St. Louis
Mr, A i k e n :
A
S a
matter
o f fact t h e rate will s o d n
be
4
2
2
9
known a t w h i c h w e a r e d o i n g business, w h e t h e r
lished o r not;
i t i s pub-
t h a t i s , i f y o b u y t h e acceptances.
The Chairman:
Mr. Fancher:
B u t your m i n i m u m r a t e m a y n o t b e known.
M e y I inquire i f i t i s generally known
that c e r t a i n b r o k e r s a r e b u y i n g t h e s e a c c e p t a n c e s
Federal K e s e r v e B a n k s ?
o f the
H o w g e n e r a l l y i s that k n o w n i n
New York?
The Chairman:
E v e r y broker w i t h whom w e have dealt o r
contemplated dealing, h a s been told t h a t the first evidence
we get o f a leak w e will c u t t h e m off the list a n d will d o t
do a n y b u s i n e s s w i t h them.
Mee r a n c h e r s
The Chairman:
matter?
T h a t i s very, v e r y essential.
I
s there a n y further discussion
o f the
I f not, will somebody suggest t h e next subject.
Items 1 4 and 1 5 are still unchecked o n the first page.
Mr. McKay: I
understand t h e Federal Reserve Board a r e
considering t h e State B a n k proposition, a n d t h e last t i m e w e
were h e r e I
think t h e y s a i d t h a t t h a t w o u l d b e t h e n e x t s u b -
ject t h e y would l i k e t o dispose of.
T h e time i s short between
now and t h e time set f o r the meeting this afternoon.
The Chairman:
P o s s i b l y w e ought t o r e p a t w h a t occurred
at the last meeting o f the Committee o n Clearing checks,
You attended t h a t meeting.
state b a n k membership,
W e discussed t h e subject o f
a n d t h e statement w a s m a d e t o the Feder—
al Reserve Board that t h e inauguration o f a system o f clearing c h e c k s w o u l d d o u b t l e s s crystallize t h e s i t u a t i o n a s t o
State
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Federal Reserve Bank of St. Louis
b a n k membership a n d t h e opinton
i n regard t o that, a n d
300
5
_mtgnt dévelop i n the near Tuture t o the psycologtcal_moment
for t h e i r admission;
adjust t h e m s e l v e s
itely. A
on a
a n d w h e n t h a t moment passed t h e y would
t o n o n - m e m b e r s h i p a n d c o n t i n u e o u t indefin-—
Suggestion w a s made that a
regulation b e prepared
more l i b e r a l b a s i s f o r t h e i r a d m i s s i o n ,
a m t h e members
of the Board were i m p r e s s e d w i t h what w a s said because t h e y
incic a t e d that they would like t o consider a
suggéstion o f
a regulation along that line.
A number
o f attempts
have been mace
t o prepare
such a
regulation a n d e v e r y t i m e w e b u m p i n t o a n o p i n i o n o f c a n s e l
or some difficulty that seems t o make i t unworkable.
Besides
hat, some o f the state bankers w h o have m e t t h e Federal
Reserve Board, h a v e taken t h e ground t h a t t h e y would n o t
cane i n a n y w a y u n l e s s t h e A c t w a s amended.
T h e y have not
suggested in’what particular t h e Act should b e amended.
They have raised objections
grounds,
t o admission a p a n three general
O n e i s that t h m i t will subject t h e m t n a new
Federal e x a m i n a t i o n w h i c h t h e y a r e u n w i l l i n g
t o submit t o ;
another i s that i t subjects t h e m t o future regulations o f
the Board which m a y b e restrictive a s t o the character o f
the business t h e y do; a n d t h e third objection i s that there
is n o means f o r them t o get o u t o f the system a n d consequently
they c a n n o t r u n t h e h a z a r d
o f subsequent restrictive r e g u l a -
tions which will d o them a possible injury.
T h o s e are, I
think, t h e three particular general grounds t h a t have b e e n
advanced,
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Federal Reserve Bank of St. Louis
B01
Mr. MeCord:
a member
A s t o the last objection I was advised b y
o f t h e B o a r d t h i s m o r n i n g t h a t t h e y h a d a b o u t ar-—-
rived a t a conclusion a s t e how t o allow t h e m t o get o u t o f
thesystem,
trouble.
minds
i f they a r e n o t fully satisfied, without a n y
S
o I
think t h a t t h e y h a v e a b o u t m a d e u p their
o n that question.
The Chairman:
an attempt
Governor McCord,.wee
r
a going t o hazard
a t preparing a
regulation o v e r i n N e w York,
and
it might b e a good plan for t h e Governors t o send u s sugges—
give u s
tions a n d w e t t h e benefit o f any thing that occurs t o them.
It i s a very pressing matter right now, w i t h opinion crystalizing all Aver t h e crountry.
over i n N e w York,
H e r e w e have a
big fight a n
T h e r e i s o n e o u t i n Michi;,an a n d o n e
developing o v e r i n New Jersey, I
understand,
T h e r e i s sure
to b e o n e i n Pennsylvania o n the amendment t o the l a w there.
Mr. Seay:
o u l d it not be ausreseaw, i f I may use
the word, i n the light of what has ocurred, t 4 let them
prepare a
regulation a n d then submit it.
The Chairman: 6
Mr. S e a y : -
this meeting?
T o t h e Governors;
(Informal discussion fnllowed, )
The Chairman:
to t h e i r admission,
A s I have said, there are objections
a n d o n e very strong incentive
t o their
admission; t h a t i s one very strong practical incentive
and o n e v e r y s t r o n g p e t e n t i a l i n c e n t i v e .
T h e r e 1 s the
clearance matter, w h i c h i
s a practical incentive, and there
is t h e protection,
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Federal Reserve Bank of St. Louis
which i s a
potential i n c e n t i v e ,
T h o s
there a r e t h r e e v e r y s t r o n g objections,
objections I
ficulty, *
t h e o rest. o f t h e
believe c a n all b e ironed o u t without great difThe q u e s t i o n i s c a n w e g e t t h e Federal R e s e r v e
Board t o apply itself right away t o the preparation o f a
regulation which will b e promulgated simultaneously,
i f you
please, w i t h the giving effect t o a system o f clearing checks,
so t h a t o n e w i l l t a k e t h e e d g e o f f t h e other,
Mr, Seay:
A r e youinclined t o think that t h e smaller
banks among the State banks would welcome t h e clearing systam
any more than the smaller banks among t h e natienal banks?
The Chairman:
N o , I do not, i n all cases, but the queer—
est thing about i t i s that i f the clearing system i s success—
ful among the national banks i t i s geaing t n deprive the state
banks
o f their exchange charges ultimately, anyway.
a matter o f competition.
I
E G . ies
t seems t e m e that t h e y will t h i n
set u p t h e i r o w n s y s t e m w h i c h w i l l b e s u b s t a n t i a l l y t h e s a m e
in effedt a s the Federal System, a n d they will lose their
exchange charges b y their o w n system when they adopt it; a n d
both systems will b e antagonistic t 6 each other.
Mr. M@éKayi I
think they will very likely adopt a clear-
ing h o u s e s y s t e m s i m i l a r
The Chairman::
Mr. McKay;
t o t h e o n e i n Boston.
Yes,
T h e State banks w i l l h a v e t e provide s o m e
system u l t i m a t e l y ,
Mr. Seay:
I s there a
State, Mr. Chairman?
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Federal Reserve Bank of St. Louis
state b a n k cemmission i n your
The-Chairman: “ Y e s .
=
Mr. Seay:
banks broadly
D o y o u be&lieve_the state-
ee
which were made b y
could b e admitted under t h e regulations
j
your S t a t e b a n k i n g d e p a r t m e n t ?
\
on 5g
aoe
O u r State banking department really
The Chairman:
the
T h e y have n o power t o interpret
makes n o regulations.
law.
T h a t i s d o n e b y t h e Attorney-General.
T h e function
o f New York, generally speaki
of the Banking Department
the legislature a n d t o take
to make examinations a n d report t o
éharge o t failed banks.
T
a
e Banking Department covers
h
o f instituticns, l i k e Buildgreat variety o f aifferent kinds
bankers t h a t receive
ing and loan associations, private
t r u s t companies, S t a t e b a n k s
deposits, s a v i n g s p a n k s a n d
t h a t a r e a l l subject t o
and various gooperative associations
I
the S t a t e B a n k i n g Law:
bpuild=—
t also covers r e a l estate
ing and l o a n concerns.
a n d S O On.
A m d mutual savings concerns
Mr, McCord:
The Chairman:
Yes.
T h e y a r e a l l under t h e banking
a n y regulations.
department, b u t they d o not make
T h e y give
are
f r o m t i m e t o time,. t h a t
certain r a t h e r n a r r o w i n s t r u c t i o n s
the form i n which y o u shall
contemplated b y the Act, a s t o
make y o u r statements,
various m a t t e r s
bmitt ing
a n d a s t o the method o f s u
t o the Boards
o f Directors a n d t h i n g s
of
administrative matters.
that sort, b u t t h e y a r e p u r e l y
your wishes w i t h
The Chairman: G e n t l e m e n , w h a t a r e
regard t o State b a n k membership?
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Federal Reserve Bank of St. Louis
move that that b e brought t o the atten-
Mr. Aiken: I
a n d tha. t h e y b e intion o f the Federal Reserve Board a g a i n
formed that, i n the judgment o f the Governors,
i t i s most i m -
a n d some p l a n deportant t h a t t h e matter b e taken u p a t once
which i t would b e possible f o r t h e m t o become
yised u n d r
stockholders i n the Federal Reserve Banks.
The Chairman:
I s that motion seconded?
second
Mr, R h o a d e s : I
The Chairman:
t h e motion.
I f there i s n o further d i ,eussion I will
aok T o r e Nous,
(The motion was put t o a vote and duly earried.)
The Chairman:
Mr. Wold:
satifactory
W
e w i l l n o w h e a r G o v e r n o r W o l d ' s report.
M r . Delano stated that that would b e very
t e h i m under t h e circumstances, I
explained
business t h r o u g h c o m m i t
to h i m t h a t w e d o n o t t r a n s a c t o u r
o f the whole, a n d that
tees a t all, b u t through a committee
we have n o t finished quite a
number o f subjects, a n d that w e
u p o n t h e established
preferred t o have o u r interview based
custom which has heretofore prevailed,
would
b e agreeable,
b u t said, h o w e v e r ,
H e said that that
t h a t h e did not expect
would b e present,
that o w e r four members o f the Board
The Chairman:
Reserve A g e n t s
Federal
T h e next subject i s "Relation o f
t o Federal R e s e r v e G o v e r n o r s , "
Mr. Kains: I
would l i k e t o get some ideas. I
out o n the outward boundary that I
cotributing here a n y ideas. I
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Federal Reserve Bank of St. Louis
T o p i
Nowe,
a m sofar
must apologize f o r not
come here f o r light a n d i n -
10
spiration.
The Chairman:
T h i s sibject appears a l s o under Topic
Ne. 28, i n a different form,
Mr. MeCord: L e t us discuss them together.
The Chairman: I
understand unofficially t h a t t h e Board
is a t the present t i m e engaged i n proparing a regulation o r
regulations pertaining t o the duties a n d responsibilities o f
the F e d e r a l R e s e r v e Agents.
T h e question i s whether
i t would
be a n unwarranted intrusion i n t o that field o f their activities t o ask them t o confer w i t h u s o n that subject.
Mr, Wold:
B o long a s i t does n o t conflict w i t h t h e oper-—
ation o f t h e b a n k , I
d o n e t know that w e have anything t o
say about it.
Mr; Seay:
M r . Chairman,
i t i s a matter which might
also very well b e brought t o the attention o f the Federal
Advisory @ o u n c i l ,
(Extended discussion followed which the reporter
was directed n o t t e take.)
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Federal Reserve Bank of St. Louis
Mr..McCord:
C a n w e n o t check o f f
and No. 34, a s being fully discussed?
The Chairman: I
doe not k n o a b o u t No,
(After informal @iscussion o n No. 34, Lxaminations
cof Federal R e s e r v e B a n k s
serve Board,
B y the Examiners
o f the Federal R e -
o n motion o f Governor Rhoades, w h i c h was seconded,
it was resolved:)
"That t h e Federal Reserve Board b e requested t e give
the management o f t h e Federal Reserve Banks the benefit o f all
comments made b y t h e Fxaminers i n regard t o the management
and affairs o f the FederalReserve Banks. )
(This r e s o l u t i o n w a s p u t t o a vote a n d d u l y carried.)
The Chairman:
Gentlemen,
w e h a v e d i s c u s s e d I t e m No. 3 4 ,
Do y o u w i s h t o t a k e a n y a c t i o n g e n e r a l l y
Mr. Kains: I
o n that Subject?
d o not think a n y action i s necessary,
(Discussion followed o n Topic No. 29.)
The Chairman:
A s t o the first part o f Topic No. 29,
it seems t o b e the sense o f the meeting, a f t e r considerable
discussion,
t h a t t h e auditors
o f the Federal Reserve Banks
should m a k e their reports t n the Board o f Directors o f the
Banks a n d should b e subject t o the direction o f the Governors
and t h e Feceral Reserve Agents w i t h respect t o their work,
(Extended discussion followed a s t o the second part
of that paragraph, "Credit Lepartment. )
The Chairman:
F o r t h e purpose o f the record, w h a t d o
you wish t o appear o n the subject o f relation o f the credit
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Federal Reserve Bank of St. Louis
Le,
department w i t h the bank a n d with the Federal Reserve Agents.
Will somebody offer a resolution covering t h a t matter?
Mr, M c K a y ?
t
T will o f f e r t h i s resolution:
T h a t the
credit Gepartment b e a part o f the bank a n d under t h e supervio f t h e Bank, a n d t h a t s o f a r a s b a n k r e -
sion o f t h e G o v e r n o r
cords c o n c e r n i n g examiners! r e p o r t s , t h a t t h e y b e i n t h e
hands o f t h e F e d e r a l R e s e r v e A g e n t s a n d t u r n e d o v e r t e t h e
credit d e p a r t m e n t ,
a n d that t h e credit manager have access
to those files f o r the use o f the Executive Committee.
The Chairman:
Mr. Kains:; I
H a s Mr. McKay's motion a second?
second i t ,
(The motion was put and carried, with qualifications.)
Mr. Wold: I
voted n o a n d w i s h t o q u a l i f y m y v o t e b y
saying that a l l credit informatinn should b e kept i n one
£118,
(Mr. Sawyer, Mr. Wold and Mr. Strong dissented.)
The Chairman: G e n t l e m e n ,
i t i s now time f o r u s t o
make a u r c a l l u p o n t h e F e d e r a l R e s e r v e B o a r d .
(fhereupon,
a t 3:55 o'clock p . m . t h e conference
adjourned f o r t h e p u r p o s e
Board,
A
o f calling u p o n t h e Federal Reserve
t the Joint Conference w i t h c i a Boaered Reserve
Board a n understanding w a s h a d that within a period o f two
months, subject t o the call o f the Chairman, another meeting
of the conference wauld b e held, theplace o f such meeting being
tentatively agreed upon a s San Francisco, California, )
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
@FedFRASER