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Volume 2
CONFERENCE
O F GOVERNORS O F THE
FEDERAL R E S E R V E B A N K S
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TREASURY B U I L D I N G +
W A S H I N G T O N , D. C.
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MARCH 22, 23, 24, 1926
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Federal Reserve Bank of St. Louis
WALTER S. COX, S H O R T H A N D REPORTER
472 Louisiana Avenue, Northwest W a s h i n g t o n , D. C.
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Federal Reserve Bank of St. Louis
The Conference G o v e r n o r s reconvened pursuant t o
recess a t 2:30 o'clock p.m.
The Chairman,
T h e meeting mill vlease come t o o r
der. iir. S¢rater, when ir. Baker came i n this morning
we were discussing t h e revort o f the standing connittee
on collections, a n d were tacing u o the first mart o f the
sehert.
wir. Strater. I
part, I
think I have covered that first
d o not « n o w o f anything else that needs t o b e
said a b o u t that.
The Chairman,
W e have referred the matter o f s y m
dols t o your Committee, with power.
wr. Serater.
T h e seconc part o f the revort
i s another
report on vrogress on the revision of the form of TreasRe-~
ury Warrants t o facilitate t h e i r handling b y Federal
serve Banks.
T h e r e i s nothing t o d o except that w e have
have shown
taxen t h e matter u p with the Treasury a n d they
a disposition
of
t o cooverate a n d h a v e a l r e a d y m a d e s o m e
the changes which r e suggeste’. I
think a t the next con-
has
ference w e can revort definitely what t h e Treasury
done a n d w i l l do.
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Federal Reserve Bank of St. Louis
265
The n e x t d i v i s i o n o f t h e r e o o r t
of unsorted c a s h letters."
i s tAvailability
T h e committee recommends n o
change f r o m t h e o r e s e n t procedure.
The next subdivision i s "Cost o f telegravhic advice
of non-paynent o f checks o f $500 and over."
T h e comnit—
tee has recommended a varasraph f o r inclusion i n the
check collection circular.
A t the last meeting o f the
Comnittee t h e m e n b e r s w e r e s o m e w h a t c o n c e r n e d
b y the
action taken a t the last conference, a s t o whether o r
not t h e G o v e r n o r s r e a l l y u n d e r s t o o d t h a t t h e c o m m i t t e e
dig n o t make a n y recomneniation, b u t h a d merely ovointed
the
out t h e fact that $55,000 annually might b e saved f o r
system.
T h e committee feels that i t might b e charged
at
with responsibility f o r the action o f the Governors
their last conference,
i f i t does n o t noint o u t again
that i t made n o recommendation o n the subject a n d also
that t h e committee d i d not contemolate t h a t action would
and
be taken discontinuing t h e present practice unless
the
until i t should pecone imperative t o further reduce
cost o f check collections.
The Chairman,
T h a t concludes t h e revort.
T h a t i s your nleasure, gentlemen?
Governor Talley, I
wanted t o comaent u p o n t h e last
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Federal Reserve Bank of St. Louis
266
point touched vpon, concerning the cost o f telegraphic
advice regarding the non-vayment o f checks o f $500 and
over.
I t i s our thought that the cost o f scrutinizing
each cash letter f o r special instructions would b e more
than t h e cost o f the telegraphic expense, a n d I want t o
ask wir. Strater i f we are t o get the idea from the
report t h a t t h e c o m m i t t e e r e c o m m e n d s t h a t t h e p r a c t i c e
of absorbing t h e exnense o f telegraphic advice b e discontinued.
Governor Calcins.
does not recomend,
T h a t i s just what t h e committee
a s I understand it.
I s that correct,
air. Strater?
ir, S+rater.
Y e s ,
Governor Talley, T h a t vas the recommendation bdefore.
D o e s the C o m i t t e e recommend i t now?
Mr. Strater.
N o , the Committee maxes n o recomuenda—
tion a t all, T y i s i s about “hat t h e Committee h a d i n
mind w h e n e
discussed i t a t o u r last meting:
T h e
amount o f saving, $55,000 annually, i s comaratively
small normally, but if it wes urgent that additional savings b e effected t h e passing o f these charges back t o the
depositing meaber bank night b e something t o de seriously
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Federal Reserve Bank of St. Louis
considered.
Governor T a l l e y ,
Y o u will remenbsr s o m e time a g o
the Guestion ca:e u o i n reference t o the acceptance o f
items subject t o wire instructions a s t o non-payment.
wir. S+rater.
Yes.
Governor T a l l e y ,
" h i c h w e s m a d e uniform, t h a t a l l
Federal R e s e r v e b a n s w o u l d a c c e n t i t e m s s u b j e c t
t o wire
non-payment o f items o f #500 o r over, s o that a n y attempt
to even consider a t this time t h e matter o f absorbing
the cost o f telegravhingadvice bac’ t o member banks would
destroy xthat uniformity i n the matter o f instructions
in cash letters, that i s the uniformity i n the handling
of the cash letters, would i t not?
wir. Strater.
N o , I do not think i t would, I
think i t would affect i t a t all.
do not
Y o u could still secure
that uniformity b y incorporating i n your check collection
circular t h e paragraph which this committee recommended
in its last report.
Governor Talley, S y p n o s e w e wire beck i n reference
to t h e n o n - p a y m e n t
o f a n i t e m o f $500 o r o v e r a n d h e comes
back a n d says h e won't p a y i t because h e didn't instruct
us i n h i s latter?
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Federal Reserve Bank of St. Louis
268
Me. S+rater.
E u t the mere fact that t h e check w a s
sent t o the Federal Reserve Bank, w i t h t h e general in-—
structions contained i n the check collection circular,
would obligate t h e m t o vay.
Governor Talley, t ' n a t i s “hat I
wr. Strater.
wanted t o bring
T h e y agreed t o pay when they got t h e
check, regardless o f whether i t was put o n their letterhead o r not,
Governor Talley.
M y thought w a s i t would create a
good deal o f confusion i n discontinuing t h e practice t o
absorb the charges, notwithstanding the fact that the
check collection circular might state that t h e items were
sent subject t o wire advice o f non-payment o f items o f
$500 o r over.
I t puts the shoe o n the other foot.
1 %
is all right, a n d w e will g o ahead and s e n d items and
there will b e no objection a s long as you absorb the cost
of t h e messages,
T h e y want t o reserve t h e right t o
send the items i n rith their own instructions, when i t i s
a matter o f some expense t o them,
Governor Seay.
Y e have examined the letters over a
period i n our b a n and w e find that the majority o f the
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Federal Reserve Bank of St. Louis
letters f r o m the largertanks h a v e those instructions o n
them.
Mr. S+rater. I
expect t h a t i s more nearly true n o w
than i t was when y o u started it, Governor Seay.
The Chairman. d a v e you any resolution t o offer, G a v
ernor Talley?
Governor Talley, T h e r e i s just o n e other voint.
W e
would lixe, i f i t i s vossible, f o r the committee o n col-
lections t o submit standard paragraphs t o the Federal Ree
Serve B a n x s b e f o r e t h e y i n c o r n o r a t e t h e m i n t h e revort,
for discussion a n d reaction i n the oanks.
pened s e v e r a l times,
I t has hap—
n o t o n l y witth o u r bank, b u t I
with others, t h a t certain standard paragraphs
think
t o g o into
the check collection circular, c o u l d not b e incorporated
in t h e c i r c u l a r s
i n c e r t a i n districts.
The Chairman.
T h i s revort h a s been circulated
in ad
vance.
Governor Talley, I
understand that. I
understand
that t h e Conference acts o n the revort w h e n i t i s sub-
mitted, b u t w e want t o recomnend t o the committee that
they submit these standard paragraphs which a r e t o g o into
the circulars t o the banks before they p u t t h e n i n the r e
port.
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Federal Reserve Bank of St. Louis
270
T h e paragraph that they have suggest.
Governor Young.
ed i s right
i n t h i s report.
Governor Taliey, Y e s , b u t w e cid not see i t until
it was put i n the report.
Governor Y o u n g .
I t i s n o t i n t h e c i r c u l a r yet.
Governor T a l l e y ,
C e r t a i n l y HOts
N o w i s the tine t o take i t u p a n d
Governor Young.
see whether o r not i t shall g o i n the circular,
before t h e July l s t edition goes out.
W e d o not want t o b e put i n the
Governor Talley,
awkward position o f having t h e report approved b y the
Conference w i t h these certain paregraphs
i n the report,
ana then find that w e cennot accommodate ourselves t o it.
The Chairman,
Y o u want a vorimary election first;
is
that i t ?
Governor Talley.
The Chairman,
Y e s , sir.
A n d then a general election?
Governor Talley, Y e s , sir.
Governor Seay, T h i s i s not the character o f para-~
graph which anybody could object to.
Governor Talley, I
a m speaking generally. I
a m not
referring varticulaerly t o the paragraph that i s i n this
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Federal Reserve Bank of St. Louis
report.
The Cheirman. ‘What d o y o u wish t o d o with this r e port, gentlemen? M o t i o n s a r e i n order.
T o get this before t h e Conference 1
Governor Young.
move that t h e following uniform paragranhs b e included
in the check collection circular o f each Federal Reserve
Bank.
"All telegraphic costs nertaining t o payment o r non-
payment, o r i n connection with receiving o r transmitting
any other information o r instructions, will b e charged
to the account o f the depositing bank.
A l l such telegrams
to the depositing bank mill b e sent 'Collect!."
Governor wicDougal. I
The Chairman,
will second t h e motion.
I s there any discussion?
N o t h i n g further t h a n t o s a y that I
Governor Talley,
will vote i n the negative o n that.
Governor Calzins.
I f the situation i s as has been
suggested b y Governor Talley, a n d a s I believe i t t o be,
that i t will cost more t o carry o u t t h e provisions o f
that clause than i t mill t o d o the other thing, t h e n w e
ought not t o d o it.
A s Mr. S+rater has said, i f i t b e
comes n e c e s s a r y a t a n y t i m e t o m a k e t h e s e c h a r g e s
i n order
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Federal Reserve Bank of St. Louis
ara
to save part o f the $55,000 - - you cannot save i t all —to change our policy, w e should perhaps change it, but not
until that time comes.
Governor Young, Y o u will recall that a t the last
two conferences I
reported that there were many direct
items t o
sending banks sending/#inneapolis with letters of instructions, n o two o f which were alike; sending u s ten
dollars, fifty dollars and $500, with instructions a s t o
protest a n d everything else a l l different.
impossible
t o g o t h r o u g h a l l o f those.
I t i s utterly
M r . Strater r e -
ferred that matter t o counsel a n d reported that o u r circular w o u l d h o l d e v e n i n v i e w o f t h o s e instructions.
all threshed o u t a
I t was
couple o f years a g o a n d I was voted
down o n it. T h e r e i s no use i n going into that again,
that I can see.
I f i t was right then i t i s right now.
Governor Calkins.
A s the matter now stands, t h e
various Federal Rsserve banks a r e a t liberty t o use their
discretion with regard t o this matter.
T h e effect o f
Mr. Young's motion would b e t o take away that discretion
and compel a l l o f u s t o follow a uniform practice, w h i c h
would c o s t m o r e t h a n t h e p r a c t i c e n o w f o l l o w e d
US.
b y some o f
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Federal Reserve Bank of St. Louis
273
Governor S e a y .
A s I
understand t h e e f f e c t o f t h i s
proposed paragraph i t would obviate t h e examination o f
any letters a t all, a n d would n o t impose a n y expense u p o n
us whatever.
I t would s a y t o our menber banks " Y o u send
us checks f o r collection subject t o the conditions o f o u r
general circular, w h i c h contains t h e following varagraph. "
It therefore imooses n o duty u p o n t h e Federal Reserve
Bank t o examine their letters a t all, i t relieves u s o f
trouble a n d imposes n o expense.
Governor Talley.
B u t y o u get into arguments w i t h
your menber banks a n d they write i n with reference t o
receiving advice o f non-payment o f items.
O f course i f
they don't want t o receive advice o f non-payment t h e y
certainly don't w a n t t o pay f o r it.
Governor Seay, T h e n t h e y ought n o t t o send them in.
We recite other conditions under which t h e y send u s collections, a n d i f they are bound b y some i t may b e said
that t h e y a r e bound b y all. T h i s i s not a n imposition;
it i s good banking practice;
and I
i t has g r o m t o b e a custom
think will svread,
Governor Calxins.
J I insist i t i s good pvrimary bank-
ing practice, b u t i n our present voint o f v i e w I do not
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Federal Reserve Bank of St. Louis
B74
think that a n y practice that leads t o unnecessary 6 xpendi-
ture o f money i s good practice for us; t h e r e i s no principle i n v o l v e d
i n this.
The Chairman,
There is a
That m o t i o n i s o n t h e a d o o t i o n
motion b e f o r e t h e Vouse.
o f this v a r a g r e p h
i n the
report t o b e included i n the check collection circular.
Governor Galxins.
Z % will b e uniform, a s I under~
stand it.
The Chairman,
I t will b e uniform.
W
regular d a t e w h e n w e i s s u e t h e s e circulars.
is recommended, I
e have a
J u l y list
Y o u r motion did not include
believe.
the date when this should take place, Governor Young.
Governor Young, I
will add t o m y motion that 1 %
takes place July 1, 1926. T h a t i s the date suggested,
isntt it, wr. S+rater?
wir. Strater.
T h a t i s the date suggested i n the re-
port.
Governor Norris. I
will s e c o n d t h e motion.
(The motion, h a v i n g been d u l y seconded, w a s carried,
Governors Talley and Calxins voting no.)
The Chairman.
H a v i n g acted w o n t h i s specific r e c o m
mendation o f the comaittee,
i t will b e now i n order t o move
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Federal Reserve Bank of St. Louis
that t h e report
b e accepted a s a
Governor Young. I
whole.
move that t h e repors b e avproved
and filed,
Governor Welibora, I
will second that.
(The motion, having been d u l y seconded, w a s carried.)
The Chairman.
T h e question h a s come u p about uni-
formity o f circulars a n d o f practices a n d procedure.
W e
have h a d that u p a good many times i n connection with
these matters, Mr. Strater.
H o w well a r e w e nerforming
in this matter o f uniformity?
Mr. Strater. W e l l , a t best i t has been a
cess. However, I
slow pro-
think i n view of the fact that w e have
had practically n o unformity u o t o the last f e w years,
that t h e results a r e gratifying.
W e are anoroaching u n i —
I
n this
formity,
Y e are doing i t slowly b u t steadily.
report I
think there i s some reference t o that o n page 5.’
The Gyairman’
T h a t and the subject o f vostage i s
another one, i s i t not?
Mr, St¢rater. P o s t a g e i s evidently o n e that has g o n e
astray somewhere, with the aid o f the Federal Reserve
Board. I
think this Conference voted that t h e practice
i s postag~
of absorbing postage should b e discontinued, t h a t
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Federal Reserve Bank of St. Louis
on directly sent c a G E E " s
A s I recall i t Boston
and Kansas QGity still a b s o r b vostage, t y some extent a t
least.
Governor Young.
wr. Serater.
direct
b o t h member and non-member banks?
N t d i r e c t letters, o n letters sent
b y member b a n k s
i n a
Federal R e s e r v e B a n k c i t y t o
other Federal Reserve banks a n d branches,
The Chairman,
w h a t d o you estimate t h e cost o f that
vould
/ b e for us, about $75,000 a year, Mr. Harrison?
if. Harrison. I
do not ‘now the figure, b u t i t is a
very large figure,
bir. Strater. I
d o not rensuber t h e amount exactly,
right now, b u t several hundred thousand dollars f o r t h e
system.
The Chairman,
‘ h a t i s the situation i n Richmond?
Governor Seay.
The Chairman,
W e have abandoned it,
D i d you have much trouble?
Governor Seay, N o t a t all.
Mr. Strater,
S t . L o u i s pointed o u t that they a r e
embarrassed somewhat b y the fact that Xensas City stili
continues i t ,
Governor Bailey,
I t costs u s about $700 a year.
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Federal Reserve Bank of St. Louis
B77
Governor Seay,
I + was n o t a
matter o f a n y conse~
quence t o us, d u t f o r the same o f uniformity w e eabided b y
the decision,
The Chairman.
w r . S+rater, t h a t seems t o conclude
our discussions w i t h you. Y o u r report h a s been approved.
We will b e glad t o have y o u s i t i n with u s o n our other
discussions.
(The report o f the standing committee o n collection
is as follows:)
REPORT
of
STANDING COMMITTED O N COLLECTIONS
tO
CONFSRENCE O F GOVERNORS
March 22, 1926.
To the Conference o f Governors:
At the Conference o f Governors held November 2-5,
1925, t h e following topics were referred t o the Standing
Committee o n Collections and the Committee submits its
report herewith:
REVISION O F TIME SCHEDULES W I T H A VIEW T O REDUCING FLOAT
AND AVOIDING E X I S T I N G INEQUALITIES,
Following t h e discussion o f this tonic, w h i c h appearec.
4 stg”
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Federal Reserve Bank of St. Louis
278
on the nrogram o f the Conierence,
i t was voted that t h e
Standing Committee o n GUollections
b e requesued t o make
8 study o f the nresent t i m e schedules
a n d provare a
scientific revision o f them i f that should s e e m t o b e n e c
essary,
I t was understood t h a t t h e Goumittee should c o n
sult o r advise with any Federal Reserve Banks whenever
it might b e helpful for the Committee t o d o s o and that
tentative shcedules b e submitted t o each bank f o r review
before a n y final schedules a r e submittec t o the federal
Reserve Board a s a recomnendation.
In its study o f the present t i m e schedules t h e
Jommittee compiled a tabulation shoving for each Federal
Reserve bank and branch (1) t h e number o f days o f deter
red availability g i v e n o n country items payable i n each
State o r part o f State i n other districts and (2) the
number o f days actually required t o collect such items
according
t o oresent s c h e d u l e s ,
T h e result o f this c o m
pilation i s attached hereto a n d made a
vart o f this
report, therebeing vwwelve schedules, o n e for each Federal
Reserve District.
T h e time o f deferred availability
according t o the present schedule o f each bank i s shown
in the first column and the actual time required t o
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Federal Reserve Bank of St. Louis
373
collect i s shown i n the next column.
T h e actual time r e
quired was obtained b y using the inter-district time
schedule o f the System i n conjunction i t h t h e intradis—
trict t i m e schedule o f each reserve b a n k a n d branch.
example,
F o r
t o collect a n item yayable i n the State o f Kansas
sent b y the Federal Reserve B a n k o f Boston t o the Federal
Reserve Bank o f Xansas City, would require 5 deys which
is obtained b y adding 3 days required f r o m Boston t o
Kansas C i t y and 2
days required b y Kansas C i t y t o collect
the i t e m i n accordance w i t h i t s intra-district time schedule after Kansas C i t y receives it. T h e s e schedules s h o w
that there a r e numerous differences between t h e time
shown i n the present schedules o f the various banks a n d
the actual time required f o r collection a n d are given t o
the Governors w i t h this revort f o r their information a n d
consideration.
As i s well known a n d generally recognised, t h e r e a r e
numerous intricacies a n d rather complicated conditions t o
be considered a n d overcome i n prevaring f o r t h e various
reserve banks time schedules which will reduce float a n d
avoid present inequalities a n d a t the same time produce
a schedule, t h e expediency o f the adontion o f which cannot
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Federal Reserve Bank of St. Louis
230
T h e Committee feels that i t cannot com.
be questioned.
plete i t s report without taking a n exhaustive s t u d y o f
the whole subject, which will include the intra-district
time s c h e d u l e
o f e a c h bank.
T h e C o m m i t t e e ise p r e p a r i n g
t@ obtain certain data f r o m each dank which will enable
it t o continue the study, looking t o the completion o f
eafinal reoort.
REVISION O F THE F O R M O F TREASURY WARRANTS T O FACILITATE
THZIR HANDLING B Y FEDERAL RESERVES BAN<S.
Barly i n December the Committee communicated with the
Treasury Devartment, nrooosed certain changes i n the f o r m
arousing t h e
of government checks a n d was successful i n
interest o f a number o f Treasury officials.
T h e Commit—
tee h a s been furnished w i t h specimens showing t h e changes
which the Treasury and the Government Printing Office are
willing t o maxe and, while these changes are i n harmony
with some o f the Committee's suggestions, i t i s felt
that further orogress i s possible.
The Committee feels, therefore, that i t cam only re~
port p r o g r e s s
a t this time b u t hopes t o b e able t o make
s definite report t o the next Conference o f Governors.
understands
The C o m m i t t e e b e l i e v e s t h e C o n f e r e n c e
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Federal Reserve Bank of St. Louis
that e v e n after t h e Treasury officials h a v e approvec
accepted t h e chenges suggested b y this Committee,
siderable t i m e must elapse before t h e effect o f the
changes will become noticeable.
governnent c h e c k s o r u n t e d
I n time, however, t h e
o n the r e v s e d forns will r e -
in f a c i l i t a t i n g t h e i r h a n d l i n g
b y banks g e n e r a l l y ,
t—
The Conference v o t e d t o refer t o the Standing Commi
tee o n Collections f o r consideration t h e question whether
vanks
Federal reserve vanxs should request smaller nenber
the
to sort a l l cash items strictly i n accordance w i t h
time schedule, o r whether Federal reserve panks might
o f unsorted
in t h e i r d i s c r e t i o n , a v e r a g e t h e a v a i l a b i l i t y
cash letters o r accept t h e n o n some other oasis.
exception
All o f the Federal reserve bDan<s, w i t h the
in
of winneasolis a n d Dallas, specifically state
check c o l l e c t i o n c i r c u l a r s
t h a t letters commosed
sorted i t e m s w i l l b e c r e d i t e d
o f
u n
o n the available d a t e o f
its discrethe item o f the latest availability. Dallas, i n
“ o r sorting
tion, m a y d o l i x e i se. M i n n e a v o l i s provides
for
of cheoxs b y tine schedule, b u t makes n o orovision
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
letters composed o f unsorted
The Committee i s o f the opinion that the m a t t e r o f
determining t h e a v a i l a b i l i t y
o f cash letters containing u n —
sorted items m a y safely b e left t o the discretion o f the
Federal reserve banks.
T o credit such letters i n accord—
ance w i t h the average availability o f the checks enclosed
might sometimes result i n more favorable availability
than would b e the case i f items were »vroperly sorted i n
accordance with t h e vublished time schedules.
T h e sort—
ing o f cash items i n accordance w i t h t h e time schedules
is correct i n vrinciple, a n d with a reasonably accurate
time schedule this anpears t o be the most equitable way
of déteraining availability.
The C o m n i t t e e b e l i e v e s t h e t a l l n e n b e r b a n k s s h o u l d
continus t o be encouraged t o sort checks i n accordance with
the time schedules, elthough i t recognizes t h e fact that
many o f the small member banks with limited equipment
and personnel may find i t difficult o r burdensome t o d o
this.
I n the case o f small nexber banks ~ h i c h s e n d only
a small volwne o f checses t o the Federal reserve banks i t
mould s e e m vracticable f o r t h e Federal reserve banks t o
analyze t h e cash letters, g i v i n g credit f o r t h e unsorted
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Federal Reserve Bank of St. Louis
checks i n accordance w i t h their actual availability.
This would involve b u t f e w more bookxeening entries t h a n
would b e the case i f aveilability were averaged, a n d
which would n o t s e e n t o b e more difficult t o d o than t o
computes t h e average availability.
If the reserve banks continue t o l a y d o w n the general
rule requiring meaber banks t o assort items i n accord—
ance with their time schedules, i t will b e vossible
for t h e m t o use their discretion i n excevtionel cases
and a t t h e same time b e i n a nosition t o control a n y
abuses
o f t h e rule.
The Committee recomnenis, therefore, t h a t n o change
be made i n the present nrovisions o f the majority o f
the circulars i n this narticular, a n d that t h e matter
of determining availability o f unsorted items received
from t h e smaller member banxs b e left t o the discretion
of t h e s e v e r a l F e d e r a l r e s e r v e banks,
CONT O F TELTGRAPHIC ADVICT O F NON-PAYw=rT O F CHECKS $500
and OViR,
The Conference voted that t h e Federal Reserve banks
should not absorb the cost o f these telegraphic advices,
and that t h e standing Committee o n Collections b e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
234
requested t o orepare a
varagranh o f advice t o menber
bankxs which might b e forwarded b y each Federal reserve
bank t o its members,
The C o m i t t e s
i n its last renort stated that t h e
annual cost t o the System i n this connection was a p p r o x
imately $55,000,
T h i s figure included o n l y the cost
of commercial wires.
I t is, therefors, assumed that
the a c t i o n t a c e n a t t h e l a s t C o n f e r e n c e d o e s n o t c o n t e m
plate any change i n the extent t o which the leased wires
are used i n advising non-payment o f checks.
Aythough the vote o f tne Conference i s recorded
as applying t o items "over $500", t h e Committee,
of
course, agsunes that the Governors intended t o refer t o
items o f $500 and over" instead o f 'ipver $500."
The Committee suggests t h e following uniform »Dartagraph f o r inclusion i n the c h e c collection circular o f
each F e d e r a l r e s e r v e b a n :
"All telegraphic costes pertaining t o
yayment
o r non-payment,
o r i n connec~
tion i t h receiving o r transmitting
any other information o r instructions,
will b e charged t o the account o f the
depositing bank. A l l such telegrams
to t h e d e p o s i t i n g
D a k will v e sent
'Collect!. .
This parasraph n o t o n l y taxes into consideration
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Federal Reserve Bank of St. Louis
telegraphic costs incident t o advising non-payment
items $500 andover, b u t also all telegraphic costs
curred a t tne
The Comnittee i n its report 1
h e Govern
3 } Con
ference o f October 10, 1922, recommenced a uniform paragraoh with reference t o Telegranhic Costs i n connection
with the handling o f checks and other cash items for inclusion i n the check collection circulars o f all] Feder—
al R e s e r v e banxcs.
the Governors; a
T h i s recomnendation ~ a s adooted
by
number o f t h e reserve Danis, however,
failed t o include the varegreoh for some time and i t i s
only recently that i t has been unifornly used.
h e
Committee desires t o state that i n its oninion i t i s
highly essential f o r t h e practice o f reserve banks i n
this matter t o b e uniform a n d that a l l reserve banks
insert t h e s a m e v a r a g r a p i
i n identical w o r d i n g
check collection circovlars,
i n their
T h e Committee further r e c o m
mends t h a t t h e e f f e c t i v e d a t e f o r t h e s u b s t i t u t i o n
of
the above varagraoh i n piace o f the for-aer paregraph T e -
garding "Telegraphic Costs" b e fixed uniformly a s July
1,1926.
banks b e
It i s considered important t h a t depositing
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
285
promptly advised o f telegraphic costs incurred, a n d for
this reason t h e Committee feels i t i s essential that
advice o f such exnense b e oromotly forwardsd b y meil t o
the Federal reserve banks a n c t o the d g o s i t i n g banks
whosé accounts a r e affected,
It i s recommenisd that t h o s e Federal reserve banks
which issue loose leaf sheets a s general letters o f Instruction, c a l l attention t o this varagranh i n the let—
ters o f transmittal accomoanying s u c h sheets, a n d that
Federal Teserve banks which issue sevarate operating circulars c a t ] v a r t i c u l a r a t t e n t i o n
t o t h e n e w paragraph.
The Committee fesls that i t will not h a v e verformed
its full duty and responsibility t o the Governors i f i t
fails t o state that i n its former report i t may have creat—
ed t h e i m p r : s s i o n t h a t t h e C o m n i t t e e f a v o r s t h e d i s c o n -
tinuance o f the vresent oractice o f absorbing s u c h t e l e
graphic costs.
O n the contrary, w h i l e t h e Committee m a d e
no recommendation,
i t dic n o t contemmlate that action
would b e ta’en discontinuing t h e oresent practice unless
and u n t i l i t s h o u l é b e c o m e i m e r a t i v e
t o further r e d u c e
the c o s t o f c h e c s collections.
Resvectfully subnitted, H . F . S t r a t e r ,
Chairman,
J.S.Walden,Jr. 0 . iM. 4ttebury
G
H
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C
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o
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of BOSTON
Showing - (1) Number of days of deferred availability given on COUNTRY I T E M S payable outside of the
First District according to present time schedule.
, (2) Actual number of days required to collect.
PAYABLE I N
S
STATE
E
N
F
T TO
B
O
S
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T
O
S
N
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T
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Y
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L
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Alabama M
E IN
S
E
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N
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T TO
. R. B A N K
S t ouis
N
Memphis
Little Rock
California
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(
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O Aa 22
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Nevada
O
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e
n Francisco
Los Angeles
v
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w Jersey
w Mexico
w
w
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e
n
v
E
N
e
r
l Paso
w York
amen ge
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r
Richmond
Philadelphia
Richmond
Oklahoma City
Dallas
e
n
Salt Lake City o
a
k
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p
S
San Francisco
Portland
7
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P
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P
O
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Philadelphia
Pittsburgh
South Carolina
R
i
c
h
m
o
n
d
South Dakota
Tennessee____.._.
F
O
r
o
a
t
Salt Lake City
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a
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Mississippi
MeISSOUT a. 22: :
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Federal Reserve Bank of St. Louis
O
Nebraska
Connecticut
MinmOSOtHsse
B
N
Arkansas_.___-_---- e e
Colorado
A
A
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,= e e s
Kansas City A
a
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Richmond
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Seattle
West Virginia
Wisconsin
Wyoming
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Table Gompiled from Present Time Schedules
for the
Federal Reserve Bank of N E W Y O R K and Branch
Showing - (1) Number of days of deferred availability given on C O U N T R Y I T E M S payable outside of the
Second District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE
IN
S
STATE
E
N
F
T
TO
N
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S
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(1)
Alabama
A t l a n t a
IN
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n
B
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m
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Oklahoma City
Dallas
w
w
w
w
w
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n Francisco
Portland
P
O
W
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Pennsylvania
P h i l a d e l p h i a
Rhode Island
Pittsburgh
B o s t o n
Tennessee
W
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P
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r
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P
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O
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D
W
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S
P
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Mississippi
o
O
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P
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
A
W
M
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P
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Missouri
D
O
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o
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Massachusetts_._-....| Boston__.._._-
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POLtlands =.
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c
C
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O
P i t t s b u r g h
Richmond
Baltimore
P
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ia
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W YORK B U F F A L O
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Atlanta
a
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P
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Jacksonville
K
N
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P h i l a d e l p h i a
Dist. Columbia
TO
New Mexico
S a n Francisco
Los Angeles
v
T
San Francisco
Salt Lake City
New Hampshire
Colorado
N
y
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C
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Oalifornia...........--.|
E
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(
Arkansas
Kentucky
E
O
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Arizona
Kansas
L
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P
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New Orleans
Birmingham
Delaware
B
T
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of P H I L A D E L P H I A
Showing - (1) Number of days of deferred availability given on COUNTRY ITEMS payable outside of the
Third District according to present time schedule.
(2) Actual number of days required to collect.
E IN
a
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BB
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i
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s ys P A Y A B L
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N
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o
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Arizona
o
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New Hampshire
Arkansas
w
o
W
New Jersey
New Mexico
California
Colorado
S
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a
n
n Francisco
Los Angeles
v
e
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e
4
a
w York
w
P
r
Connecticut..._.-.-- eteae sie
N
o
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h Carolina
North Dakota
Spokane
D
a
Salt Lake City
Chicago
l
l
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P
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s
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a
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d
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P i t t s b u r g h
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Maryland 7
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E
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MASSISSIPDisi2 2.2005 e
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Federal Reserve Bank of St. Louis
Salt Lake City.
BOStOnigi i
e S e e
Virginia
R
i
Washington
c
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West Virginia
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C
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s a s
Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of G L E V E L A N D and Branches
Showing - (1) Number of days of deferred availability given on COUNTRY ITEMS payable outside of the
Fourth District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
STATE
S
F
E
N T T O C L E V E L A N D | CINCINNATI | PITTSBURGH
, R. B A N K
S
T
A
RLY
Alabama
P A Y A B L E IN
T
E
C L ) a yaiate) Chui)
N
o
o
N
o
o
O
O
O
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n Francisco__-Los Angeles
B O S p O m s
e e
D
D
Delaware-.- -
Philadelphia
|
R
R
B
New M e x i c o .
New York
Spokane
Salt Lake City-_-w
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w
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o
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P
R
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Louisiana
a
n
N
s
e
a
w Orleans
Dallas
Boston
Maryland
Minnesota_-_.-_-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
A
P
P
k
w
w
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o
Massachusetts__
Mississippi-___. --
t
n
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Memphis o
a
W
W
W
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P
W
W
W
P
P
P
S
n Francisco__Salt Lake City___-
0
0
P
F
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P
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P
F
S
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A
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I
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San Francisco- --_Portland
Pennsylvania_..._| Philadelphia__-_-_-
D
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O
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O
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F
F
F
P
F
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F
F
F
SPOKANG s h Cane
Portland
Seattle
O
O
O
O
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1
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P
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w
w
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W
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Baltimore
n
F
o
n
o
a
n
a
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e s
C h i c g e e : 72a!
Minneapolis
4
O
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South Carolina_-
Wyoming
p
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f 2
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m
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e
O
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Chicago
a
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P
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W
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Florida J a c k s o n v i l l e
St. Louis
Louisville
S
New Hampshire_|
M
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O
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O
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a
N T T O C L E V E L A N D | CINCINNATI | PITTSBURGH
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Missouri 4
New Orleans
Birmingham
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California
S
F
Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of R I C H M O N D and Branch
Showing - (1) Number of days of deferred availability given on COUNTRY I T E M S payable outside of the
Fifth District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
STATE
SENT T O
F.R. B A N K
PAYABLE I N
STATE
RICHMOND B A L T I M O R E
SENT T O
F.R. B A N K
RICHMOND B A L T I M O R E
(1) (2)
(1)
Alabama
Missouri
U
O
A
Arizona
MONA tai
H
O
H
a
N e v a d a l v c o r s lo)
Arkansas
Memphis
Little Rock
O
N
T
Cahformiawy su ste
San Francisco
Los Angeles
M
O
New Jerseviun w i s ) ores
Colorado
Denver
©
New Mexico
Connecticut
O
W
o r o ens
M
O
Nebraska
s
e
e
S
San Francisco
Salt Lake City
New Hampshire
R
P
e
e
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t
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ING O Y Ore t a r e
w
e
Philadelphia
Atlanta
Spokane
Salt Lake City
New Orleans
Dallas
s
!h
P
P
O
A
R
R
P
P
O
Pennsylvania
R
T
O
I
C
R
A
H
P
F
O
O
Philadelphia
Pittsburgh
RHode Island eos.) we
Boston
P
F
P
F
South Dakota
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o
Tennessee
n
o
u a
o
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aMw
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ORICHRO i
ee
o
P
P
p
o
t
A
Minnesota
Mississippi... --__-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
New Orleans
Memphis
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ae
o
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»
o
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D
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W
W
R
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F
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F
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W
O
D
W
O
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Jacksonville
M
O
P
F
o
Oklahoma
Oklahoma City
Dallas
Oregon
San Francisco
P O r t l a b opi b e i
H
D
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e
n
o
A
g
a
n
o
a
P
D
D
D
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P
P
R
R
P
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W
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I
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A
F
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A
A
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n! |
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A
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O
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F
P
Spokane
Portland
Seattle
D
D
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Minneapolis:i
c
( vi xo
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4
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of A T L A N T A and Branches
Showing - (1) Number of days of deferred availability given on COUNTRY I T E M S payable outside of the
Sixth District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
S
E
N
T T O A T L A N T A |NEWORLEANS|BIRMINGHAM| JACKSON- | NASHVILLE P A Y A B L E I N
STATE
C
e
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OS y i
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R
A
R
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K
M
M
T
T
A
T
R
M
A
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B
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O
O
O
O
R
R
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Chicago
St. h e u i s -..sJ7
Louisville
I
T
A
P
e
~
Maryland
R
P
F
O
R
R
P
A
A
A
R
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A
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A
P
T
T
A
F
O
Massachusetts
R
U
C
2
m
o
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d
R
R
P
A
F
O
P
P
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Minnesota
T
A
F
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ee
7}eof
a
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A
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A
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G
A
T
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T
A
A
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AT
A
m
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A
A
Missouri
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
M
O
M
@
Chicago
Nebraska A
a
a
a
Denver
Salt Lake City-_--
-Montana____...
o
w
O
O
A
T
A
A
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Buffalo
North Carolina R i c h m o n d
North Dakota
A
R
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Salt Lake City_-_--
Virginia
t
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A
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n
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Portland
West Virginia P i t t s b u r g h s ) i@2.
Richmond
Baltimore__......-
O
R
P
a
2
7
S
B
Wisconsin
oa
r
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n
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D
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R i c h m o n d
Washington._._.....|
O
O
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Tennessee
s
R
P
R
R
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R
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T
Rhode Island B o s t o n
South Carolina
South Dakota
o
H
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A
A
e
o
O
O
a
n
a
n
P
Philadelphia
Texas d
A
A
T
L
A
W
Pittsburgh
B
e
( 2 ) G y 22) h e aa)
O
N
Seattle
T
A
o
A
O
O
W
r
O
R
a
Sen Francisco-__-Portland
Vermont
R
E
P
A
@
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A
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P
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T T O A T L A N T A |NEWORLEANS|BIRMINGHAM| JACKSON- | NASHVILLE
e
S
New York
R
R
P
p
P
R
New Mexico
n
a
a
R
N
. R. BANK
New Jersey
_ o
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New Hampshire_-_-_.| Boston._____..---
]
F
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A
T
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Salt Lake City-_.--
o
A
a
A
A
M
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T
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1
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(
4
a
San Francisco. __Los Angeles
Philadelphia
Mississippi
e s e )
S
P
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of CHICAGO and Branch
Showing - (1) Number of days of deferred availability given on C O U N T R Y I T E M S payable outside of the
Seventh District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE
IN
S
STATE
E
F
N
T
TO
C H I C A G O DETROIT
. R. B A N K
S
T
P A Y A B L E
A
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Alabama
A
t
l
a
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Arizona
ATKANGAS 2203 \\L o e
@ a l i f o u n t a r soo.
Colorado
SS
S
a
L
G O L
Memphis
Little Rock
n Francisco
Los Angeles
New Jersey
O
N
H
O
New Mexico
E
F
S
a
F
E
R
P
Delaware
P
F
P h i l a d e l p h i a
T
TO
C H I C A G O
4
OSUOT
Estey
shu a e
O
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New York
Buffalo
R
P
o
a
Spokane
Salt Lake City e
Kansas
K
Kentucky
a
n
s
a
s City
C i n c i n n a t i
St. Louis
Louisville
New Orleans
Dallas a
p
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r
K
D
A
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B
W
W
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Minneapolis
San Francisco
Portland
e
a
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P
R
Boston
F
o
Richmond
o
D
o
o
F
T
T
O
T
T
w
o
P
P
B
Salt Lake City
BP
e
Boston
P
F
D
Virginia
o
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Washington
F
P
P
k
a
O
O
P
O
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Missouri
o
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P
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L
Montana
7(>)
Q
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a
Nebraska >
»
R
N
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>
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M i n n e a p o l i s
Minnesota_.._...------| M i n n e a p o l i s
M I s s i S s I D p I . locus
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
N e w Orleans-__. Bh T s a i
P
P
T
H
F
Pittsburgh
P
P
B o s t o n
L
P
D
O
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V
Philadelphia
O
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West Virginia
V
N
V
N
A
D
P
P
S
p
P
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k
t
t
r
n
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Seattle
t s b i
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r
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n
n
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Wyoming
n
o
a
P
L
W
W
T
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re
?
P
P
R
P
D
A
Cleveland 2 . 2 3 5 2 3 S
e
Cincinnati
O
O
P
Maryland
Massachusetts
(14) @ )
D
H
F
D
M
A
O
R
R
P
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Atlante. :c.s6 o s e
DETROIT
) (2)
n Francisco
Salt Lake City
N
A
D
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h Wl
t MANE Rone
N
. R. B A N K
1
New Hampshire__-___--
a
Q
Connecticut
Dist. Columbia
S
(
Nevada
n t a
New: Orkeans st as osu!
Birmingham
IN
E
w
a
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P
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se
A a
E
O
W
l
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of ST. LOUIS and Branches
Showing - (1) Number of days of deferred availability given on COUNTRY ITEMS payable outside of the
Eighth District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
STATE
SENT T O
S T . LOUIS LOUISVILLE
LITTLE ROCK
MEMPHIS
PAYABLE I N
STATE
ST. LOUIS
SENT T O
F. R. BANK
(4) (2) (1) (2)
(1) (2) (14) (2) (1) (2)
San Francisco____
Los Angeles
A
P
A
P
K
R
P
New Jersey
I
7
Y
W
I
N
A
New Mexico
8
8
Y
W
M
O
6
®
T
O
O
T
R
K
New York
4
4
Delaware
Philadelphia
4
Dist. Columbia
Richmond
4
Atlanta
4
Spokane
{6
‘i
Salt Lake City_-__e
a e
Eat cbe:ha: Myer O e
3
Chicago
w
o
Kansas City
I O U A S I Oy
NG
sie I arnt hese New Orleans
Dallas
m
i
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1i G
Boston
Maryland
BP
O
C
o
c
Cincinnati
>
[o
Baltimore
Boston____.
Michigan
C h i c d e oe r
oefe21u:
i
y
F
F
O
Mississippi
New Orleans___. _-
Missouri
Kansas City
r
o
w
Montana
Helena
i
ae
Nebraska
San Francisco____
Salt Lake City___-
K
P
P
P
P
P
P
B
a
W
W
O
}
R
O
O
A
P
R
R
B
ai
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h
L
P
P
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F
P
P
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P
P
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W
w
H
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F
F
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F
P
W
A
P
I
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R
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w
W
W
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H
P
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o
n
a
Pennsylvania
Philadelphia
Pittsburgh
R
F
W
Boston._
k
h
w
P
P
South Dakota
Minneapolis. __. _.
W
A
Tennessee
ALIA Giiice Whe a t
Nashville
D
R
K
P
A
a
Dallas diel a y e
A
oy
O
O
O
O
T
A
O
T
O
T
Salt Lake City.__.
Vermont___-
P
S
,
-
Washington
P
K
R
T
P
K
W
P
P
L
West V i r g i n i a _______ Pittsburgh
Richmond
Baltimore
F
P
R
P
F
n
O
J
“e
Wiseonsin
Wyoming
>)
lo
Boston
Virginia
E
R
P
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Rhode Island______South Carolina
P
P
P
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e
P
Q
P
K
P
San Francisco____
Portlamdiess 23.0 e
P
F
W
R
O
W
T
T
T
P
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Oregon
M
o
a
I
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P
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Minnesota
~
e
l
a
S
P
W
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
u
Ne
O a
r
o
a
R
P
W
H
T
O
w
Oklahoma City__Dallas____
O
F
R
O
R
O
o
I
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Massachusetts. .___-
Nevada
R
K
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r
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f
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w
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3
C
L
Chicago
Chicago.
Kentucky
e 0
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T
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(1) (2) (1) = )
SP
o
a
A
( 0 0 .
Spokane
Portland
Seatile
Chicago
Minneapolis
LITTLE ROCK
S
K
>
D
H
MEMPHIS
r
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g
D| =
si
H
5
BUTTONS c
New Hampshire. ___ ‘BOS Uanuesou:,
4
4
4
Denver
LOUISVILLE
R
P
N
a
n
n
r
n
a
D
T
w
W
D
A
W
A
I
D
K
H
D
A
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P
T
A
N
n
a
D
O
O
O
O
D
w
N
D
m
A
a
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M
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w
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a
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r
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a
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of MINNEAPOLIS and Branch
Showing - (1) Number of days of deferred availability given on C O U N T R Y I T E M S payable outside of the
Ninth District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
STATE
SENT T O
F.R. B A N K
MINNEAPOLIS
(2)
Atlanta___.
New Orleans
Birmingham
Alabama
HELENA
PAYABLE I N
STATE
(2)
(1) ( 2 )
San Francisco
Salt Lake City
N
A
New Hampshire___._.-
H S O S S hO nose
Ri LL
New Mexico
I
A
N O W r O O E Ku .Sue
o
las
Denver______
Dist. Columbia
Richmond
Florida
Jacksonville
Spokane
Salt Lake City
N
E
G
1
2
a
~
P
O
W
T
O
r
O
r
o
M
o
O
A
?f
Maryland
B a l p l m o r
s nenc
eo i svee
i
r
o
Massachusetts
B o s t o .n i.fe.
s
F
O
Michigan
Chicago
Detroit
Mississippi
M
G
A
H
T
Q
T
H
R
T
o
r
o
e
P
Kentucky
Newey O P K a .ccuk
Buffalo
5
4
N
A
C
B
’
O
T
C
4
5-6
R
W
San Francisco
Portland
e
P
V
ae
(
e
)
P
P
a
N
N
A
N
A
®
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A
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A
I
A
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A
A
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n
a
a
t
o
Salt Lake City
N
A
A
A
o
a (
e
)
be
a
r
n
a
a
a
Rhode Island
o
Q
a
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a
s
w
»
n
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I
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A
o
~
South Carolina
Tennessee
I
)
>
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q
N
A
W
Pittsburgh
o
n
I
i
IS
B
9
Philadelphia
o
M
D
A
R
N
D
M
A
4
4
M I G S Os suptaa
Ut TE wah ule
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
D
r
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A|
6
A
A
z
w
R
g
a
R
A
T
A
A
M
W
R
A
W
P
aul
O
B
T
I
I
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a k
Atlanta
Kansas:
A
W
O
l
O
New Jersey
San Francisco
Los Angeles
Philadelphia
(14) (@)
o
NGVada c r e o Saeenee om
A
A
A
Delaware
HELENA
Nebraska
A
A
A
St. Louis
Memphis
Little Rock
BOS On. tae
New York
SENT T O M I N N E A P O L I S
BOGTOU Ss i
em aaa
Virginia
Richmond
Y
A
Washington
Spokane
Portland
Seattle
T
H
T
Fittsbureiie
Richmond
Baltimore
a m o s
J
Q
A
I
A
A
Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of KANSAS C I T Y and Branches
Showing - (1) Number of days of deferred availability given on COUNTRY ITEMS payable outside ofthe
Tenth District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
STATE
SENT T O K A N S A S
OKLAHOMA
CITY
DENVER
CITY
Ql) (2)
(1)
(1)
a
2
D
A
A
W
a
a
a
A
z
w
M
M
A
a
z
n
o
A
W
A
D
A
g
a
n
PAYABLE I N
STATE
SENT T O
F.R. B A N K
Calitormmiauy. o2 y
San Francisco___Los Angeles
Connecticut
B O S T O MiuAaMc s
New Y o r k s . J
Delaware
Philadelphia_____-
Dist. Columbia
Richmond
»
n
a
A
Florida
A
A
P
I
O
MDOKaANe h a o 8
Salt Lake City___-
P
T
0
2
“
D
A
im-3
e1
s
a
b
~
n
o
a
T
T
P
O
O
S
New Orleans.__..
Dallas
n
> | |a
Cleveland__Cincinnati
R
P
Q
P r a l b a nsiAge
el nu
h
p
San Francisco-___Portland
t
y
R
R
P
w
w
w
w
d
r
o
r
o
L
H
F
L
I
O
w
w
F
F
F
f
A
R
P
F
P
n
a
A
r
o
n
D
O
A
D
A
B
D
W
R
A
A
D
A
A
W
A
n
n
a
n
a
n
B O S P O Mue dae ic a
o
O
Maryland
Baltimore__.__-_-
O
o
Massachusetts
Boson.
F
O
Michigan
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Ohicagous
i
( s i
New Orleans__._._
Memphis
Sts P O W s
c u
a
W
P
O
n
r
F
a
O
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A
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w
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P
n
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A
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a
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a
n
a
»
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a
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O
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Rhode Island___...- .
South Carolina
South Dakota_-___.-
O
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Tennessee
e
m
n
n
»
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a
n
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Salt Lake City___-
n
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Richmond
Washington
Spokane
Portland
Seattle
West Virginia
f
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N
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D
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Q
A
A
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W
W
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Pittsburgh
o
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Richmond
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Table Compiled from Present Time Schedules
for the
Federal Reserve Bank of D A L L A S a n d Branches
Showing - (1) Number of days of deferred availability given on COUNTRY ITEMS payable outside of the
Eleventh District according to present time schedule.
(2) Actual number of days required to collect.
PAYABLE I N
STATE
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Atlanta
New Orleans
HOUSTON
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Jacksonville
D
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Chicago c a g e s :
Kansas City__-__--
P
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New York.--..
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New York
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Philadelphia_____.
N
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San Francisco- __Los Angeles
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Jacksonville
A
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Kansas City
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Federal Reserve Bank of St. Louis
209
The Chairman.
N o w , w i t h regard t o t h e Ciscus—
sion with Mr. Baker this morning, I think what Mr. Baker
mould lize would b e for each reserve b a n k t o formulate
a report,
i n such form that t h e y will b e fairly uniform
in presenting t h e matter; t h a t is, p u t o u t a question—
naire o f some ‘ i n d a n d submit them t o wir. Wyatt.
When
hr, W y a t t h a s gotten t h e m i n shape f o r consideration ir.
Baker will taxe t h e m u p with h i m some time ~ h e n h e i s
over here a n d they will prepare a n opinion a s t o what
safeguards a r e desirable with which t o surround o u r
lending operations.
Governor Calxins. I
™as about t o esx whether,
in
view o f the interest w e all heve i n this ¢iscussion
with wr. Baker, whether o r not w e could not have pre—
pared for us, sevarate from the minutes o f the meeting,
a sufficient number o f additional copies o f that ciscussion f o r t h e n u r o o s e o f t a c i n g i t u p w i t h t h e c o u n s e l
of the various bans.
I n other words, t w o o r three
copies f o r each o n e o f us.
The Chairman,
“ h y tmld i t not b e possible t o just
have one copy struck off separately i n order *hat that
copy might b e carefully edited a n d put i n shape?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
500
Governor Calkins. I
will a m e n d m y s u g g e s t i o n
by
aiding t o i t that t h e Reporter b e requested t o make c n e
copy o f t h e r e c o r d o f t h a t d i s c u s s i o n t h i s m o r n i n g t o
be sent t o Mr. Harrison t o use his discretion vwpon i t
and t h e n h a v e f u r t h e r c o p i e s v r e v a r e d t o b e s e n t t o e a c h
Governor.
Governor F a n c h e r .
J I will s e c o n d G o v e r n o r Calxins'!
amended motion.
(The motion, h a v i n g b e e n d u l y seconded, wascarried. )
Governor Y o u n g .
W r . Chairman , did y o u finish w i t h
1-G?
The Ghairman. That i s one of the things that we
thought w o u l d b e s u b m i t t e d
Governor Young, I
t o Mr. B a k e r .
should think that i s something
that action has t o b e taxen o n right away.
The Chairman.
j e are provosing t o eliminete i t from
our application blans entirely, pending some other plan.
Governor Oalxins.
The Chairman.
T e have already eliminated it.
N o w with regard t o amendment t o sec.
tion I V (b) o f Regulation A, are you willing t o recommend that that change v e nade, that is,, elimiration o f
indication o f whether i t i s depositors! paper o r not,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
until w e h a v e c o n s i d e r e d t h e m a t t e r f u r t h e r w i t h mr,
Baker?
Govermor Young. T h e suggestion i s that w e eliminate
it f r o m everything except paper required f r o m non-mem—
ber banks.
J I think y o u can eliminate t h a t too, because
the evidence i s right there; just leave i t out altoge—
ther.
The Chairman, L e a v e everything o f that s i m o f f i n dicating t h e sources o f the paper?
Governor Young. I
will make a
motion t o that e f -
fect, ir, Chairman.
Governor sicDougal, -lhat i s the motion?
The Chairman, T o leave everything off indicating
the source o f the paper.
P e r h a p s t h e resolution should
be something like this, that pending further review o f
the whole subject b y Mr. B a k e r t h e Conference recommends
elininating f r o m the applications a l l designations o f
member -
the origin of the »aper including that relating t o non-/
banks.
Governor Young, I
will s o amend m y motion t o get
it b e f o r e t h e Conference.
Governor Talley, I
will second it,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Chairman, I
suppose i t is understood that
the designation a s t o whether i t i s depositors!
paper —
or not i s going t o b e eliminated f r o m these applications?
Governor Talley.
I t already has »deen.
I t has n o t i n our bank,
Governor Young.
W e are simply
witing t h e bank,
Governor Seay. I
do not s e e after a l l there i s a n y
particular necessity for that, but I an willing t o go
along, T h e important thing you have i n the application
is that the banc owms the paper and has discounted it.
Governor wicDougal, I
think that statement would
cover t h e e n t i r e matter, w i t h o u t t a x i n g a n y a c t i o n i n r e -
gard t o changing o u r blanks.
The Chairman,
A r e you prepared t o act o n that a s a
recommendation until you get Mr. Baker's advice about it?
My proposal i s that until Mr. B a k e r does advise u s what
the aoplication d i d contain i n respect t o i t w e should
éliminats t h i s p a r t i c u l a r t h i n g .
T h e n Mr. B a k e r m a y w a n t
to put a certificate o f agreement o n the application, a n d
what i s the use o f doing i t all over again, and then maybe
a third time?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
303
Governor Seay.
I t would necessitate,
i f we comply
with that, t h e destruction o f all o f our application forms
which, f r o m the beginning, h a v e alvays required t h e mewber
banks t o specify whether o r not i t owned t h e paper a n d
that i t was discounted paper.
I n view o f the decision,
and i n view of the discussion that took olace, that
appears t o b e the o n e important thing t o know. Nothing
else i s important. T h e important thing t o know i s that
the b a n k o w n s t h e paper.
The Chairman. T h e r e i s n o »roposal t o eliminate that.
The only provosal i s t o eliminate t h e D
o r P, showing
that i t i s depositors! p a p e r o r purchased
is all w e are vroposing t o do,»
would h a v e n o objection t o that.
Govermor Seay, I
Y o u could not eliminate that
Governor McDougal.
without destroying the blamks and having them rsorinted,
Governor Seay.
O u r ban’ merely requires some state-
ment a s for whom i t is discounted, which commits the bank
to the fact that i t i s Giscounted never, a n d that i s the
important thing t o <now,.
Governor Morris.
T h e o n l y question t o m y mind about
the advisability o f adopting i t i s that i t will compel u s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
304
set o u t n e w blanks n o w and i n a few months w e will
be sbliged t o get out still another set o f blanks.
I s
the risk that w e have been running f o r t e n o r twelve
years s o sreat that w e ought n o t t o run i t for some little
further time i n order t o save changing t h e blanks?
The Chairman.
W h a t does i t cost t o get out a
new
set o f forms?
Govemor Norris.
I t isn't a question o f cost, b u t
it d i s t u r b s t h e m e a b e r oanks, b e c a u s e t h e y a l w a y s h a v e a
Zot o f o l d f o r m s
o n hand.
Governor Seay.
A s I understood lir, Baker the first
of his comments w a s that w e should eliminate that desig—
nation thet would s e e m t o indicate that i t was depositors!
paper.
The Chairman, T h a t i s the motion now.
Governor Seay, ‘ W e never had i t i n ours, that i t
was Cepositors! paver,
The Chairman, T h e n y o u are i n a fortunate position.
You G o not have t o d o anything.
Governor Seay,
I f that i s the case, y o u d o not in.
tend t o eliminate t h e provision which requires t h e m t o
state for whom discounted?
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Federal Reserve Bank of St. Louis
305
The Chairman. T h e r e i s n o ref=rence t o that.
T h e
motion i s t o eliminate t h e indication o f whether o r not
it i s depositors! »vaper-.
Governor Seay.
T h e n I misunderstood it.
Governor Oalxins.
i y understanding o f the motion
is that anything that refers t o origin should b e eliminated,
T h a t i s whet I
Governor Seay.
thought. I
do not
with that.
The Chairman.
T h e motion wes changed, ~ending
consideretion o f the matter b y Mir. Basxer, after
these r e p o r t s a r e s e n t i n a e r e h a v e “rovosed,
that there
be eliminated f r o m the anplication blanks t h e letters
vhich indicate whether
yaner
o r not t h e paper i s denositors!
o r p u r c h a s e d paper.
T h a t lsts Governor S e a y o u t o n
his s t a t e n e n t t h a t i t i s d i s c o u n t e d vaver.
I
e that
your ypnderstanding o f it, Governor Young?
Governor Young,
ax. H a r r i s o n ,
A n d there w e s also adced that w e
recomnend t o the Fed=ral Reserve Board that they élLliminrequirement about t h e non—ne.wber bank.
The Onéirman, Y e s .
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Federal Reserve Bank of St. Louis
306
Governor iicDougal, T h a t would eliminate t h e reference
of the origin o f the »naper, except t h e statement that i t
might b e menber b a n paper.
(The motion, having been duly secondec, w a s carried. )
Governor .icDougal. I
vould like t o be recorded a s
voting n o o n that motion.
The Chairman,
T h e next topic i s IV-F.
IV. O P E R A T I O N A N D ADMINISTRATION.
F. D i s c u s s i o n
o f capitalization a n d other r e q u i r e
ments imposed b y state l a w o n State banks a n d trust c o m -
paniec exercising fiduciary powers, a n d advisability
of Board adopting for all national banks a minimum capital requirezent a n d imposing other requirements i n conneotion with its granting authority t o such banks t o exercise t r u s t powers.
That topic was suggested v y the Board and I wili
make a
until
motion that w s defer consideration o f that matter
w e mset w i t h t h e B o a r d a n d t h e 3o0ard makes c l e a r
eactly what t h e y h a d i n mind i n this topic.
Governor Fancher. I
second t h e motion.
(The motion, having been duly seconded, was carried.)
The Chairman, G o v e r n o r McDougal has some business
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Federal Reserve Bank of St. Louis
45
to discuss w i t h Mr. Dewey, a n d during h i s absence
will consider supplementary topics, a n a w h e n h e comes
back with wr. D e w e y Mr. D e w e y will report o n his topic
36, "Treasury currency comiittes. R e p o r t o f Progress
first suoplementary t o n i c i s V-A.
V. SUPPLIMENTARY
Permanent eimloyment b y the Board a t a figed
of special counsel o f outstanding ability t o
assist i n litigation, a n d t o act as a clearing house
for the legal departuents o f all Federal reserve banks.
(See Board's letter o f warch 9, 1926, K-4550; also
paragraph 26, ijnutes o f Noveaber 1 9 2 5 Governors! C o n -
ference.)
I call t h e attention o f t h e meeting t o this curious
fact, t h a t t h e first, seconc, t h i r d a n d fourth questions submitted a r e questions o f law o r
of t h e statute, a p p a r e n t l y n o w b e f o r e t h é
serve Board. I
a m wondering w h a t <¢dvantage will b e gained
discussing these questions o f l a w which w e have n o t
d opportunity t o take u p with t h e counse1 o f our o w n
banks «
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Federal Reserve Bank of St. Louis
S08
Governor Cal'sins.
T h a t would hardly apply t o the
first one.
The Chairnan,
to the Board, I
but I
I t i s a question o f léga] advice
a m willing t o g o ehead and “iscuss i t
a m wondering i f w e can make a n y progress without
ths Board being
Governor Cal'sins.
A s a matser o f fact, t h e first
topic was one proposed b y Governor Talley.
The Chairman.
I t was proposed
Governor Calzins.
b y him a
year ago.
A n d reintroéuced n o w
The Chairman, I s n ' t i t a fact that there a r e t w o
types o f legal matters which affect all the reserve
banks a n c i n w h i c h w e a r e a l l i n t e r e s t e d ?
L
a t O One O r
those questions w e have h a d difficulty b y want o f having
System counsel i n the first instence,
O n e i s advic« - n
close questions o f l a w that involve a n y litigation, i m portant legal questions
i n v o l v e t h e policy o f the
System, enc the other i s the litigation o f litigated cases
where t h e advice o f System counsel i s not sought before
the case i s tried b y local cotinsel, where some big im.
portent princinle i s involved anc where
counsel h a s n o t t h o u g h t
o f thse question
i n terms o f S y s t e m
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Federal Reserve Bank of St. Louis
responsibility.
Frankly I
co not agree with t h e idea
of having System counsel f o r those matters, because fT
feel a
tendency would develop wherever a n y difference
of opinion arose, I
mean any question involving the lav,
to refer those questions t o counsel o f last resort,
to speak, w h i c h w o u l d involve a
so
gooc deal o f delay, a n d
they would very much weaken t h e finality o f the opinions
renderednby t h e Board's o w n counsel.
personally I
O n t h e other h a n d
rould l i x e t o see a rule edovted b y the
de
System that every single niece o f Litigation should
reported, the minute i t arises, i n order that considera.
tion m a y b e given t o ths question a n d cetermmination made
considered
of waether i t i s o f sufficient i m o r t a n c e t o b e
a system matter.
Y o u will recall t h e case that Governor
Wellborn had, t h e warehouse case, T h e case was lost,
4 %
cos: t h e Atlanta B a n s o m e money a n d i t was yroposedts6
tare a n enpsal t o t h e Supreme Court.
I n fact t h e Federal
Reserve Board directed that a n anpeal b e tacen.
Governor Yellborn.
The Chairman.
W e d i d not want t o taxe a n anpeal,
Y o u dic not want to.
I t came u p here
t h e matter
at a meeting o f the Governors a n d w e urged thet
pe referred t o wir. Beker, i t was referred t o him, and he
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Federal Reserve Bank of St. Louis
rendered a n opinion that b y ell means n o t t o take the
appeal. T h e r e f o r e I
think that a l l litigation, c v e n
though i t appears t o b e o f small importance a t the
manent, ought t o b e tacen u o right a w a y a n d considered
in that aspect o f it.
Governor Talley,
M r . Chairman, I
vould like t o s a y
a word i n m y o w n defense i n reference t o this tonic
appsaring
o n t h e p r e s e n t program.
Y o u may have a
copy
of the letter before you, but a letter was sent t o all
the Federal Reserve Bancs w h o varticinated i n the expense o f e m p l y i n g ifr. B e k e r
i n the G r i m n Alfalfa case,
and i n the last paragraph o f m y letter t o Governor Crissinger, c o p y o f which was sent o u t with t h e first letter,
states that after having obtained s o m e later views b y
some o f the Governors,
i f you s o desire, a n d y o u think i t
worth while, places the topic o n the »rogran o f the Governors! s p r i n g conference, a n d I
would b e willing t o lead
the d i s c u s s i o n a n d < e f e n d t h e m e r i t s
The Chairman,
o f m y proposal.
T h a t d i d they reply t o that?
Governor Talley.
I t is t o de assumed that some later
views o f some o f the other Governors were obtained, a n d
that w a s a sort o f condition orecedent t o its anpearing
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Federal Reserve Bank of St. Louis
311
on the r o g r a m , a n d the Board thought i t was worth while
to out i t o n this program f o r reconsideration.
I
n
another part o f m y letter t o Governor Orissinger I
said, " A t the risk o f appearing t o discuss a
subject
that m a y b e considered a s having b e e n definitely passed,
I a m outlining a
little more i n detail t h a n I have here-
tofore t h e reasons underlying o u r reference t o the sud—
ject". >a n d s o forth.
W o w then, i t seems t o me that a s
this Conference employed Mr. B a k e r a s consulting counsel]—
The Chairman.
I n a certain matter.
Governor Talley, Temporarily, yes, b u t i t seems t o
us that i s a very good illustration o f the questions
that come up| I s n ' t our idea i n making thispro,osal
that, a s one statement would seem to amply, that h e
should d é consulting counsel for the Federal Reserve
Board, but shat h e be consulting counsel for the Federal
Reserve banks and b e a Clearing houce for legal informa-
tiln for the Federal Reserve banks, anong their own
counsel?
The Chairman.
D o n ' t y o u think that w h e n t h e Board
t o be
has c o u n s e l h e r e t h a t t h e c l e a r i n g h o u s e o u g h t
oO o
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Federal Reserve Bank of St. Louis
here i n Washington with the Board's counsel?
Governor Talley.
i t seems t o m e that Mr. W y a t t
and his assistants a r e fully occupied with B o a r d ' s
businsss,
Governor Calkins.
deficient i n reasoning power, concurred i n
of the conference o f counsel. I
am one o f
who voted against t h e enployment o f joint counsel b y
he Federal Reserve banks, but Mr. Talley's argument, t o -
meé
gether with some discussions thet I haves hac, h a s led
information i n rec
b
o Litigabion.
a)
e
x
y
o
n
e
will agres with ne on that. G e r t a i n l y I velieve that
inas@uch as a consid
a n o u n t + i m e would be neces—
crder t o
sary, i f counsel i s emoloyed for each case, i n
give c o u n s e l o p p o r t u n i t y
t o familiarize himsel* w i t h t h e
Federal Reserve System and its operations, that it would
be aGventagsous t o have counsel reteainec gene
Governor Fencher.
W e hold that view i n our bank.
Oc.lxins has
t pelieve i t is advisable. J u s t a s Governor
case
seid, ir. Baker was called into the Grimm Alfalfa
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Federal Reserve Bank of St. Louis
313
that
without having a n y time t o review the matter, a n d
situation should n o s arise,
W e are going t o have Liti-
gation i n various forms coming Up.
The Chairman.
Y o u s e e m t o assume t h a t r e t e n t i o n
of s p e c i a l c o u n s e l u n d e r a
fixed retainer w o u l d b e Limit—
ed specifically t o the s u p e r v i s i o n o f litigated cases,
is that right!
Governor Talley. T r h a t i s only overtly right,
view o f it,
M y lett:
to what w e wish
i n my
t o the Board i s verfectly clear a s
b y t h e proposal, e n d that i c that con-
sulting counsel shoulda b e employed b y the Federal R e serve Bank t o act f o r them.
he Gyairman. I
do not believe y o u woulG find Mr.
all
Baker v e r y happy i n having twelve clients
material
go
t o h i m without f i r s t h a v i n g i t
counsel o f the Federal Reserve Board.
Governor Talley.
h a t i s a method o f procedure that
i s adopted o r
would b e decided w o o n after t h e principle
rejected.
would g o t o
M y thought w a s that w a r whatever
counsel o f
the consulting counsel would g o through the
espective Federal Reser¢ge banks,
the resoective
The Chairman. T h r o u g h t h e counsel o f
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Federal Reserve Bank of St. Louis
eserve banks?
Governor Talley
Y e s ,
The Chairman, I
do not believe that y o u would f i n d
wie. Beker would take v e r y ‘sindly t o that.
Governor Talley, I
dic not especially nominate
Mie. B a k e r f o r the position.
The Chairman,
O r any counsel. H e r e i s a system
which h a s i t s o m m counsel
Governor Talley.
t o d o t h e s e v e r y things.
Y o u are refsrring t o the Board's
counsel}?
The Ohairman.
Yes.
Gowernor Talley.
I s not h e counsel retained t o
advise t h e Board?
say o n e more thing, before
In t h i s enmoloyment o f s y n e
cial counsel i n special cases, i t seems t o me that you
immediately raise the fla:
jury cases,
s t r e s sertioulerly i n
I f ~e have a man regularly employed, t h e n
we are n o t adnitting right a t the start t h a t v e are o u t
on a
l i m b a n d h a v e g o t t o e m p l o y c o u n s e l w i t h a n outstand.
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Federal Reserve Bank of St. Louis
ing r e n u t a t i o n
t o c o m e a n d d i g u s o u t o f t h e mire.
The Chairman,
D o you insist thet this retainer
Shall b e b y the twelve Reserve Banks?
B y the twelve Reserve Banks, yes»
Govermor Talley.
The Ghairman.
W e would have t o pay t h e cost rata
ably just the same, i f the Board retained him, and would
it not b e a more regular vroceeding t o have h i m employed
by the Board and have t h e c o s
o f the retainer assessed
upon t h e Federal R e e e r v e B a n k s
i n the regular way?
Governor Talley.
A g a i n I think that i s a question
of p r o c e d u r e a n d n o t a
The Chaimman.
have S y s t e m c o u n s e l
put I
q u e s t i o n o f principle,
I t i s v e r y important, I
think,
t o
t o w h o m t h e b a n k s m a y g o directly,
think i t w o u l d s e t u p a n unusual difficulty,
a n
unusually difficult situation t o deal with because t h e
Board!s counsel w o u l d b e sidetracked,
Governor Talley. I
do not think s o a t all.
T h e
Board's counsel w o u l d continue t o perform his function
of advising t h e Federal Reserve Board,
illustration,
I n Texas, a s a n
t h e railroads a l l h a v e t h e i r legal d e p a r t
ments a n d have their regular attorneys, b u t t h e n they
retain counsel w h o act f o r all t h e roads i n just t h e
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Federal Reserve Bank of St. Louis
Manner I an »wrovosing here, a n d i t is
prooosition.
The Chairman.
report.
M r . D e w e y i s coming i n t o make h i s
W e can discuss this afterwards, u n l e s s a
reso-
lution can b e framed which will dispose o f i t now,
Governor Talley,
Sion o f it, .tr CGhaimnan.
(dhereuvon Mir. Cyarles 3. Dewey, Assi
tary o f the Treasury, a n d Mr. Hand, o f his Department,
entered the Conference room. )
Tne Chairman. G e n t l e m m , sir. Dewey i s here and the
topic f o r consideration i s 3~D,
IT. C O I N , CURRENCY A N D CIROULATICH.
Currency Committes.
R e p o r t o f pvrogress
Mad Se
wiv, Dewey.
T h e nroblems entering i n t o t h e currency
situation a r e exceedingly commlicated, a n d a n y solution
unesr existing l e w is b y way o f comoromise and not
wholly satisfactory.
G o l d i s the standard unit o f
Silver dollers a r e Standard money, w h i l e a
— U y i t e d States n o t e s — - introduces a
debt
element i n the currency system. T h e s > three cinds o f
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Federal Reserve Bank of St. Louis
money f o r m the lawful money base o f the currency
system o f t h e U n i t e d States.
G o l d a n c silver dollars
circulate i n the f o r m o f paper receipts; g o l d certifi-
cates have legal tender qualities, silver certificates
have not, National bank notes m e t b e recroned with;
are redsemable i n lawful money; t n e y are not avail-—
able a s reserve money, b u t t h e y must b e ‘soot i n circulation.
T h e Secretaty o f the Treasury Must maintain
the circulation o f these xinds o f money, idoreover, Fed.
eral r e s e r v e n o t e s w h i c h s u n d l y t h e e l a s t i c e l e m e n t
to the curreacy system must c e includec i n any c o n s i d e r
tion ziven the subject. Z l e v e n denominations o f paper
currency a r e provided, m a n y o f then o v e r l a m i n g a s reThe t w o dollar note i s out
of line with other denowinations, a n d the pudlic refuses
to use it, y e t i t s issue i s required b y law.
T h e
use o f one dollar notes has asswned enoruous proportions,
and t h e handling o f this Cenomination b y t h e Federal
Reserve Banrs e n d t h e Treasury h a s become a
very great
burden.
During the calendar year 1925, trensactions i n one
@ollar n o t e s a t F e d e r a l Asservs B a n x s a n d B r a n c h e s w e r e
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Federal Reserve Bank of St. Louis
as follows:
Received - —
No. N o t e s
From c i r c u l a t i o n
4 6 5 , 7 1 6 , 00
. 482, 567, 000
848 ,233, 0
From Treasury New....+--+..++++ 4 8 8 , 8 4 5 , 00
-
Total Receipts
, 437,128,000
1
Paid Out —
To circulation
po r
o
r
es »491, 227,000
» + 4 6 4 , 8 7 3 , 00
956,100,0
Unfit t o Treasury....482, 567,000
Total paymerts.
r
e
+
e
Total Receipts and Payments
d
, 4 3 8 , 6 6 7 , 0
2
, 875,795, 0
or more than 9,500,000 each business day.
I do not x n o w thet anything c a n b e done about it,
but I think the situation should further b e looked into,
nerticularly t o see i f anything can be Gone t o eliminate a
part o f t h i s turnover,
The maior nroblems o f paper currency supply involve
determination o f requirenents, a n d the proper standard
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Federal Reserve Bank of St. Louis
319
of fitness; provision for manufacture, distribution o f
currency
i n s u c h marmnez e s w i l l i n s u r e t h e m a x i m u m u s e o f
United States notes, silver certificates, a n d National
bank notes u p t o the amount available, a n d will insure
the circulation o f gold certificates t o the amount —
deemed available; distribution i n such manner a s will
insure a n even Gistribution o f n e w notes throughout t h e
United States t o t h e e n d that t h e condition o f notes i n
circulation s h a l l b e a s n e a r l y u n i f o r m a s v o s s i b l e a n d
of a n acceptable standard; a n d further t h e determination
of a
tyne o f p a p e r c u r r e n c y n o t e s w h i c h s h a l l g i v e t h e
maximum security, which may b e yrocuc3d a t the lowest
poscible cost, a n d which serve t h e greatest general con~
venience.
More than a
year a g o w e formally established a
Cur-
rency Board, consisting o f the Fiscal Assistant Seoretary, t h e Commissioner o f the Public Debt, a n d the
Secretary o f the Federal Resdérve Board.
determines u a t t e r s
o f Solicy involved
suoply a n d distribution. A
T h i s board
i n saver currency
Currency Control U n i t h a s
been established which now sollates reoorts, determines
requirements, originates printing orders and,
i n asso~
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Federal Reserve Bank of St. Louis
331
ratio i n which new and fit notes have been returned t o
circulation. T
h
e matter requires further study, a n d i t
later may be thought desirable t o call another conference, when representatives o f the Federal Reserve Banks
and the Treasury may taxe counsel together.
Involved i n the matter o f currency suvply are (1)
the shinment o f unfit notes b y Federal Reserve Banks a s
transfers o f funds, a n d their mdemotion o n receipt b y
the Treasurer o f the United States, and (2) the shipment
of new notes b y the Treasurer o f the United States t o
Federal Reserve Banks a s transfers o f funds.
T h e tran
sit account covering these shipments averages $10, 000, 000.
It i s highly desirable, a n d i t seems entirely feasible,
to e l i m i n a t e
b y f a r t h e larger p a r t o f this transit a c -
count, Accordingly, t h e Department has under cons,dera.
tion a t the present time the designation o f Feceral R e
serve Banks a s Redemption agents, a n d instructing them
as unfit United States notes, silver certificates, a n d
gold certificates, a r e canceled and the lower halves
shipped t o the Division o f Loans and Currency, o n the
day o f shipment t o charge t h e Treasurer's account w i t h
the redemption o f such notes a n d certificates;
o n the
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Federal Reserve Bank of St. Louis
322
game d a y reoorting t h e transaction b y wire.
T h i s pro-
cedure m a y b e placed i n effect w i t h respect t o all Federal Reserve Banks a n d Branches.
I t will pernit t h e
Treasurer o f the United States, u p o n receipt o f wire
reports, i m m e d i a t e l y
t o t r y m s f e r f r o m reserve s t o c k t o
cash lixe amounts o f the sane xinds o f notes a n d certifi-
cates and make shipment thereof a s transfers o f funds.
This procedure, w h e n i n effect, will cut d o m the trans—
it a c c o u n t m o r e t h a n 5 0 p e r cent,
The next move i s t o place w i t h Federal Reserve
Banks reserve stocks o f n e w notes t o b e naid into t h e
bank's c a s h o n l y u n d e r a u t h o r i t y f r o m t h e Trsasury-
leases m a y b e ziven b y wire.
some <inds a n d denominations a
R e
I t i s very vossible f o r
general authority m a y b e
given under which the release o f a lixe amount, kind,
and denomination, m a y b e made when corresponding amounts,
kinds a n d denominations e r e c a n c e l l e d a n d t h e l o w e r
halves f o r w a r d e d
t o t h e Treasury,
D e t a i l s have not been
worked o u t but i t i s believed t h e reserve s t o c k o f n e w
notes i s n o w amole t o inaugurate t h e »vrocedure.
probability, however,
I n all
i t will n o t b e found possible, a n d
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Federal Reserve Bank of St. Louis
it may n o t b s found desirabie,
t o nlace reserve stocks o f
new notes with t h e branches except i n instances where
the currency transaxtions a t a
branch a r e o f such voiume
as t o compare with the transactions a t the parent.
The matter o f reforming t h e designs o f the paper
currency issues o f the U,jited States has been before the
Department since the wacVeagh administration.
T h e sud-
ject i s so complicated that u p t o the present time i t
has not been found vossible entirely t o apply corrective
Measures.
S o m e months a g o w e were confronted b y a very
serious condition,
partment w e r e t a x e d
T h e existing facilities o f the Det o the u t m o s t
t o supply t h e vaper
currency required. >t h e annual cost, exclusive o f red—
eral reserve notes, w a s about $8,000,000 a year, a n excessive amount; t h e naner currency i n circulation w a s
in bac condition, a n d t h e life o f the notes w a s f a r
low the prowar span; supplies were not sufficient t o
demands a n d n o ons was satisfied.
O n Ay,gust 30,
1925, t h e Secretary appcinted a new committee with the
Fiscal Assistant Secretary, Chairman, T h i s comnittee
is representative a n d includes n o t only treasury ex-
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Federal Reserve Bank of St. Louis
324
perts b u t experts f r o m other branches o f the Government.
A new study o f all t h e problems involved w a s directed.
Considerable progress has been made and within a few
months i t is expected a comprehensive plan will b e p r e
sented t o the Secretary proposing a
complete revision
of the currency designs.
Incidentally, t h e distinctive paper h a s recsived
attention.
I n thie matter t h e Byreau o f Efficiency,
the Bureau o f Standerds, t h e Byreav o f Engraving a n d
Printing, a n d the present contractor have b e e n a c t i v e l y
associated, w i t h t h e result t h a t vaner showing b y test
a very much higher bursting a n d folding strength has been
evolved,
o f w h i c h g r e a t h o p e s a r e expected.
silver c e r t i f i c a t e s a r e b e i n g p r i n t e d
O n e dollar
o n four sneci-
men runs o f this paper. 8 , 0 0 0 , 0 0 0 notes a r e n o w being
paid into circulation i n the Chicago district a n d 500,000
in Washington. S p o r t l y after Anril 1, 8,000, 000 will
be paid out b y New York. T h e experiment m a y b e extended
elsewhere,
W e are exceedingly hopeful t h a t these notes
will s h o w greatly increased wearing qualities.
Incid-
entally,,ione o f the subcommittess which has given particular a t t e n t i o n
t o t h e d i s t i n c t i v e paper,
Pa ?
h a s recom.
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Federal Reserve Bank of St. Louis
325
mended the elimination o f the rows o f silk fiber and
in substitution therefor, a s a distinctive feature, seg—
ments
o f s i l k s c a t t e r e d u n i f o r m l y t h r o u g h o u t t h e vaper.,
The reasons for the committee's recommendation have
been comminicated t o you with a request that a t this
meeting y o u w i l l a d v i s e m e a s t o y o u r o p i n i o n o f t h i s
proposal,
I shall b e very glad t o hear from you.
The Chairman. T y i s pak plan o f appointing the Reserve Banks a s redenption agents with regard t o these
transfers o f funds, y o u say will cut d o m t h e transfers
by Laity
lin. Dewey, I
am going to let Mr. Hand give you the
detail o f that operation.
H e has handled i t for a good
Many ysars and can d o it far better than I can, and more
Clearly.
M r ’ Hand, w i l l y o u exvlain t h e economy t o b e
made boy chib. eire transfer?
Mr. Hand.
T h e cfedit chsrged t o the government's
account b y the Reserve B a n s is, a s you ‘now, a live assét until i t s redemption h a s been completed s o that i t
can b e replaced with new issues. T a k e , f o r instance,
this illustration:
T h e N e w York Federal Reserve Bank
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Federal Reserve Bank of St. Louis
will charge the Government's account today with a
million a n d a half unfit notes a n d ship t h e lower
halves.
T h e charge i s m d e
o n the date t h e lower
halves a r e shivped. T h e currency i s cancelied first,
as y o u «now, b y cutting i t into t w o parte longitudinally;
s is destroyed a n d yet i t hes t o b e carn the Governasnt!s account while i t
is i n transit u n t i l i t reaches t h e Treasury a n d has been
verified from ths manifest o r invoice, a n d the succeeding
oes out a s a redamtion a n d can b e revlaced w i t h
new issues.
N o w i f w e c a n cut o u t that transit period;
in other words, i f ~ 3 can t a k e t h e redemption point a s
the date t h e lower halves o f ths notes leave t h e Federal
Reserve Banks, t h e n w e save t h e t w o days! redemption proposition a u d w e c a n balance t h e incoming cencelled n o t e s
with the outgoing n e w issue, W i t h the Federal Reserve
Banks a n d branches w e have estimated that transit cavital
that
as t e n million dollars, a n d »robably i t will exceed
with t h e greater volume o f gold certificates being v a i d
into a n d o u t o f circulation.
The Chairman.
Y o u mean that permits a
the general f u n d b y that amount?
lowering o f
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Federal Reserve Bank of St. Louis
Mr. Hand.
T h i s would cecrease
rowings b y a t least $10,000,000 a n d
kesping procedure i n t o a real
proposition.
Governor Seay, W h e a t a r e thse difficulties
way O f that »rocedure?
id. Hand.
T h e r e s e e m t o b e none except w e were
in
doubt a s t o whether w e could consider t h e notes redeemed
when t h e y left t h e Federal Reserve Bans.
T h e proposi-
tion w a s placed before t h e Sclicitor o f the Treasury a s
to whether, under the state o f the law the notes had been
formally a n d o f f i c i a l l y r e d e e m e d
b y ths Treasury Depart—
ment, whether his opinion was t o the effect that redemp~
tion could b e made a n d considered a s made a s o f the date
the lower halves leave t h e Federal Reserve Banks. U n t i l
that t i m e the question w a s never raised until this question w a s presented here b y the Secretary.
T h e procedure
that h a d been observed theretofore w a s considered sufficient, because i n the pre-war period w e were n o t borrowing
money and i t did not angut t o s o much.
The Chairman,
D o y o u cons der that t h e general f u n d
is c h a r g e d w i t h t h e n o t e s o u t s t a n d i n g f o x s o m e n y d a y s
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Federal Reserve Bank of St. Louis
longer than i s necessary?
The Chairman.
I s that a
sir. Harrison.
O h yes.
real saving?
I t i s charged, a n d thoy
haven't g o t t h e right t o reissue until t h e y get them
here.
[ I t enables t h e reissue t o b e made t w o days before
it would b e otherwise vossible.
I f i t maxes t h e R e —
seresecbancs depositories o f unissued notes i t will s a v e
two days going i n this way, o r the other fifty per cent,
Governor T a l l e y ,
W e u l d i t have a n y bearing
o n the
Supply o f new notes?
My. Dewey.
W
e cannot s e e that i t would, because
the s u p p l i e s w i l l b e u n d e r o u r c o n t r o l u n t i l ~ e r e l e a s e
them.
The Chairman.
Y o u would yut them i n the hands o f
the Federal Reserve agents?
iy. Dewey, Sp_nething “ould b e w r k e d out.
not worked o u t t h e details.
I t i s rather n e w
W e have
W e wanted
to submit i t t o y o u a t this t i m e a s a matter f o r consideration, a n d when w e get a
little closer t o i t w e will
Communicate w i t h e a c h one o f t h e Governors.
Mr. Harrison. Would it be your plan to maxe us de-
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Federal Reserve Bank of St. Louis
depositories o f unissued y o l d certificates?
do not k n o w a s t o whether w e would
Mr. Dewey, I
do that, ‘ T h e chances a r e w e would when w e get sufficient
stocks.
W e have got t o build them up.
Y e haven't got
sufficient stocks i n all denominations a n d xinds yet,
ii. Harrison.
M r . Dewey, I
was assed b y the Confer—
yesterday what h a d been your program o f gold coinage
Spring, and I wasn't sure.
ifr. Dewey,
A + t h e present moment w e a r e trying t o
make u p t h e r e m a i n d e r
about $10,000,000, I
o f t h e P i t t m a n silver.
There is
think that was the amount, o f un-
minted Pittman silver i n the mint, which w e were losing
interest on.
W e decid
n a t w e h a d a sufficient amount
of gold c o i n o n hand for o u r prssent needs a n d w e would
get this silver out; that it would taxe until about May
1 to get this $10,000,000 minted u p and out o f the way,
and then w e exoect t o g o back t o gold coinage again.
The Chairman
I s the minting o f that silver manda-
tory?
ifr. Dewey, Y e s , and then i t i s advisable, because
it i s l y i n g o v e r t h e r e a s a
Governor Harding.
can y o u not?
d e a d asset.
Y o u can issue certificates against
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Federal Reserve Bank of St. Louis
Mr. D e w e y
4
W e covld, b u t n e w w e cannot.
y o u only a two months
T h a t wovld zive
poo) v
Mr. Harrison.
a
coinage p r o g r a m i n g o l d b e f o r e y o u w o u l d h a v e t o b e g i n
minting subsidiary silver a n d coin.
do not think i t will taxe u s past
Mr. Dewey, I
May 1
and w e could not get i n t o the subsidiary silver
much before t h e i s t o f October.
Governor Harding.
H a s Congress actually made y o u
the reeset o f t h a t P i t t m a n s i l v e r ?
iy. D e w e y ,
W e hope n o t e
Governor Morris.
H a v e y o u minted n o gold this year?
lip. Dewey. O h , yes.
W e
within t h e vast t w o weeks, w h e n w s wont i n t o t h e Pittman
Silver coin.
W e decided t o get t h a t o u t o f our mints.
Governor Seay.
T h a t part o f the menorandum which
you have read d o y o u think calls f o r special action b y us?
Me. Dewey, I
just want t o mention this o n e point,
to get a n impression t o pass o n t o this subcommittee
and t h e currency design committee. I
might s a y i n that
connection that there a r e about 3 0 m m b e r s
tee,
o f that comnit—
W e are covering every angle o f i t rather carefully
and w a n t
oS
t o leave
n o stone unturned
s o when w e Make o u r
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Federal Reserve Bank of St. Louis
ZI
OOd
final report i t will b e a s nearly commushensive a s pos~
sible,
N o w this subcommittce consists o f Mz. Herbert
Brown, o f the Byreau o f Efficiency, t h e Chisf o f the Secret Service, t h e Director o f the Bureau o f ingraving and
Printing, a n d Or. Godchalk o f the Bureau o f Standards.
The c o m n i t t e e h a s c a l l e d b e f o r e
it a
number o f experts
on printing, w a t e r marks, photography;
w e have h a d ex-
perts f r o m the Eastman Kodak people, a s k i n g their advice
as t o m e a n s o f n r o t e c t i n g t h e c u r r e n c y a n d o f g e t t i n g
distinstive marks.
other
T h e y came forward w i t h a report t h e
d a y that i t w a s t h e unanimous o p i n i o n o f this C o m ~
mittee, even including the Chief o f the Secret Service,
and that their recommendation would be, that w e d o away
with t h e distinctive rows o f silk fiber.
The Chairman,
W h y was that?
Mr. Dewey, I
was just going into that. B e f o r e
making s u c h a report I
told t h e m that I thought i t was
such a revolutionary thing t o d o that w e would like t o
have their revort sent t o t h e Governors o f the Federal
Reserve Banks with the idea that t h e y take i t u p with
their people i n their v a n s , d i s c u s s t h e question a n d
get t h e i r views, t h a t i t w a s s u c h a
revolutionary s t e p
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Federal Reserve Bank of St. Louis
that i f the views o f the Federal Reserve System were
against i t I thought i t ought n o t t o g o into t h e report
at all, except a s having b e e n covered, b u t without a n y
recommendation, I
thought i t would b e somewhat embar—
rassing,
The Chairman.
Y o u wanted t o hear f r o m u s o n that?
Mr. Dewey, Y e s . I
would like t o get just a brief
&pression f r o m this body t o take back t o this Committee,
The Chief o f the Secret Service suggests first that the
public h a s become s o imbued w i t h t h e idea that t h e only
distinctive feature i n our currency i s the silk fiber,
that t h e y will take anything t h a t anvears t o have t h e
silk fiber i n it; that the counterfeiters take two sheets
of paper a n d glue t h e m together, p u t silk threads i n between,
o r they will take a
red p e n and a
blue p e n a n d
make little zigzag marks o n a spurious bill, w h i c h h a s
the real appearance o f silx fiber.
real s i l x fiber y o u c a n take a
O f course with t h e
needle a n d pick i t out.
That i s t h e test, b u t t h e o u b l i c d o e s n ' t <xnor thats
T h e
Chief o f the Secret Service maintains t h a t t h e true
protection
o f o u r currency a n d t h e proof t h a t i t i s
genuine a s against t h e spurious currency,
i s the port—
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Federal Reserve Bank of St. Louis
33
Trait. O u r nortrai t s are done b y the intaglio printing
process, w h i c h i s a very hard process t o counterfeit.
The p a p e r h a s t o b e w e t a n d t h e y h a v e t o h a v e a
plate made.
steel
I t has t o b e completed b y hand a n d put
through a process i n the Bureau o f Engraving.
I f you
take any counterfeit note and compare i t with a genuine,
the w e a k p o i n t i s a l w a y s t h e portrait.
very p o o r l y done.
I t i s usually
T h e portrait
i s
a n indistinct l o t o f
lines a n d t h e C h i e f o f t h e S e c r e t S e r v i c e b e l i e v e s
that o r o p a g a n d a s h o u l d b e n u t o u t s o t h a t e n y o o d y w h o
wishes t o find o u t whether t h e y have a real note o r
not, they b e told t o study the portrait a little bit.
They are going t o eliminate a number o f portraits.
The
regommendation i s that there will b e fewer a n d the same
portrait will always appear o n the same bill. T h e y will
taxe people w h o a r e well xnown a n d whose features a r e
well xnown, a n d he says that that will b e the best way
to maintain the integrity o f the currency.
Now from a practical standpoint, t h e paper i s manufactured i n this way:
I t i s r u n out i n skeins o f pulp
and turned into a long narrow sheet.
I v i s rolled up,
and a s i t nasses along a machine droos these little
cuttings o f silk fiber —. silk thread, I
think i t i s -——
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Federal Reserve Bank of St. Louis
so that t h e ifibe: 1
of t h e sheet.
lengthway
N o w the grain o f the sheet o f paper i s
alvays lengthwise o f the sheet, b u t w e have t o print
the bills cross.wise o n the sheet i n this way (indicating).
Consider a
long ribbon o f vaper extending t h e length o f
the roll, a n d w e have t o orint across t h a t w a y (indicating).
Therefore t h e b i l l s a r e m u c h e a s i e r t o r n t h a n t h e y w o u l d
be i f printed lengthwise.
I
f w e could t u r n i t around
and Yrint t h e Dill w i t h the grain o f the sheet they would
be much harder t o destroy because y o u would b e tearing
against t h e grain o f the paper. I
mean i t would b e h a r
der t o tear t h e vaper this w a y (denonstvating).
T h e y are
by b e i n g s p l i t a c r u s s t h e middle,
and it
would awake them much more durable t h a n they are n o w i f
a s [ T have d e m o n s t r a t
they c o u l d b e p r i n t e c t h e o t h e r way,
ed t o you. T h o s e a r e the t w o main features, besides c e r
% 5
tain saving i n the manufacture.
a
‘
f
Aé
y %
T h e wnols Comm, ttS w a s
Lae
;:
h
a
e
a
e
a e
unenimous i n the thought that i f we sprinkled this ‘silk
.
rows,;
fiber all over the sheet instead o f putting i t jn
es,
that i t roulc have soue Cistinctive quality.
The Chairmen.
B u t w o u l d t h e y s h o w u v a s Cistinctly?
Mr. Dewey, W o , because there would b e fewer o f then,
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Federal Reserve Bank of St. Louis
There w o u l d o n l y b e a b o u t 1 5 o r 2 0 p e r c e n t a s m a n y
as aré used now.
Governor Bailey. Wovwld not the small fibers become
obliterated?
Mr. Dewey, ‘They would not be anywheres near as
obvious, there would only b e about 2 0 per cent o f what i s
there now, but they would b e scattered through the entire
bill.
Governor Bailey. T p a t was she objection i n our bank,
that i v was thought the little pieces would become obliterated,
ir. Dewey,
O f vourss t h e Ghief o f
vice claims that t h e y have n o part i n protecting t h e c u r
rency, t h a t p e o p l e l o o k f o r t h e s i l k f i b e r a n d i f t h e y
see t h e s i i k f i b e r
i n the bill they s a y i t i s a
He says that i s not what t h e y should loox for.
could s e e i t a l l o v e r t h e bill.
portrait.
printing
T h e R n g l i s h bill,
good bill.
T h e y
T h e y shouid look for t h e
f o r instance,
h a s very little
o n it. W N o o n e e v e r l o o k s f o r t h s w a t e r m a r k
o n
the British bill. T h e y looked a t the well known St.George
and t h e dragon,
%
4 i s s o well drawn a n d s o very
familiar t h a t e v e r y b o d y c a n t e l l i t casily.
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Federal Reserve Bank of St. Louis
Governor Bailey,
A r e y o u going t o have t h e one
dollar bills with the vortrait o f Washington o n them?
lip. Dewey,
T h a t would b e
Governoy Bailey.
Me. Dewey,
A n d the five dollar bills —
W i t h a n y other well known character, s u c h
as Poosevelt o r someone lixe thet.
bank noves, Federal Reserve notes o r National Bank notes.
think that would b e 4 great
Governor Bailey, I
thing, Mr, Dewey.
Governor McDovgal, I
understand from your committee
report that this n e w distinctive paper would furnish addi-
¢ional protection, reduce the cost o f manufacture a n d not
impair the quality 3
Mr. D e w e y . I
i s not that true?
think t h e v a v e r i t s e l f w o u l d f u r n i s h
less protection than our present papsr; b u t a s the Chief
of the Secret Service hag said, the paper should not f u r
nish t h e protection.
I t i s t h e orinting t h a t goes o n ii,
the familiarity w i t h the printing a n d design a n d other
joints
o n t h e note,
Governor Harding.
T h e oeople
i n o v r c u r r e n c y depart.»
ment thought v e r y well o f your suggestion. A
good Money
counter does not rely o n the silx, but they can tell from
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Federal Reserve Bank of St. Louis
the portrait
a n d that sort o f thing.
The Chairman.
aiming % o yrotect?
I s n ' t i t a question o f who y o u a r e
I f it i s t o make counterfeiting dif.
ficult that i s a question t h e vublic i s not s o much i n terested
i n directly,
t h a t i s i n the specific workmanship
Of t h e wore.
wir. Dewey.
W e would have 1
a new ghotozraphic
process, w e think.
The Chairman.
I f you are going t o d o something n e w
to enavle the public t o permit the detection o f counterfeiting —
they are awfully stupid about i t now.
Mr. D e w e v , I
think t h a t i s t2v3.
The Chairman,
‘ I have t h e feeling, a n d I think i t i s
shared i n tne banx, t h a t t o t h e extent that i t i s useful
at all, t h e s i l k t h r e a d s a r e t h e b e s t p r o t e c t i o n t h a t
the public has, because they d o not s e e m t o pay any atten-
tion t o the very poor imitations o f the vignette which are
made.
W e get t e n t o twenty a
day i n the bank i n New York.
Of course i f it is simply a question o f enabling the
banks t o detect counterfeits, t h e cignette does that.
All t h e detection that takes place i n the Reserve Bank
is through t h e worxmanship o n the bill, especialiy i n the
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Federal Reserve Bank of St. Louis
I believe
to
to put more o f a ourcen
NOW.
Governor McDougal.
T o wha
i
s counterfeiting
on genuine vaper w i t h silk threads i n it? H a s that
cons t o s o m e
ul, Dewey, J
v e r y b i g percentage.
percentage i s where they g o right o u t a n c Max
paper o r get good bond paper a n d print o n that a n d put
in i n k marks. R e c e n t l y a
very good counterfeit o f a
$100 gold certificate came u p from Mexico.
I t was ex-
tremely w e l l Cone, a l l b u t t h e p a p e r ivself.
Governor Harding.
I n this u s w currency t h a t y o u pro-
pose d o y o u L e a v e s o m e s i l k t h r e a d s
i n i t s o that a n y o o d y
who Gepencs o n silk threacs,
Nr. Dewey. T h e y may d o
and far between, only about
they h a v e n o w
you pus more in?
Mr.
vignette.
w e y ,
s c a u s e t h e n i t w u l d intertere w i t h t h e
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Federal Reserve Bank of St. Louis
339
"he Ghairmean.
Little p r o t e c t i o n
T h e silk threads apparently afford
i n preventing counterfeits
which can
be negotiated w i t h t h e nublic.
My. Dewey.
Yes.
The Chairman. T h e y are certainly n o t going t o use i t
in d e t c c t i n g t h e nots, b e c a u s e t h a t i s d o n e b y t h e v i g n ~
ette, a n d i f they a r e not going t o b e used b y the public
for the purpose o f detecting counterfeits, w h y put the
Silk i n a t all?
Mir. Dewey, R e a l l y , t h e o n l y reasor f o r putting t h e
sil i n at all i s t o maxe the paper itself distinctive.
This will b e helyful t o the Bureau o f Engraving, because
in handling such large quansities o f vaner, t h e y will b e
able t o distinguish o u r distinctive paper a n d our non—-distinctive p a p e r a n d t h e r e w i l l a l w a y s b e t h a t l i t t l e d e .
gree o f e x t r a c a r e u s e d i n c h e c c i n g u p t h a n w o u l d b e u s e d
if they used just any old k i n d o f paper that i s
around.
The Chairman.
H o w d o y o u f e e l a b o u t t h a t , Mr. H a r r i -
My. Harrison. I
think y o u have sxpressed the opinion
of the m e n a t the banx.
S o f a r a s our o w n money department
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Federal Reserve Bank of St. Louis
340
'
they p a y n o a t t e n t i o n t o t h e silks t h r e a d s
at all.
T h e vignetse
i s the impor %
thine,
T h e y
have d e e n v e r y much interested i n the discussion o f
feature o f macing o n e photograph 7oreach perticular
denomination regardless o f the c i n d o f currency that i t
is. I
do not thinc that would afford mich protection
to the public, excent i n the case o f araisec note, b e —
cause o f ¢
t h a t s o f e w neonle c n o w the y,ortrait
,
on the varticular
I d o mot believ: t h e
i s a man i n the r o o m r h o xnows
the face that >slongs o n each denomination o f Federal
reserve notes.
Governor Bailey. I
notes are s o mixed up.
think that i s true, but the
I f you just hed eieven differ-
ent xinds o f notes with eleven signatures, I
think the
people would soon learn t h e t Washington would b e o n the
one dollar bills, b u t wouldn't b e o n anything else, s o
that i f you founc Yashington o n a one collar dill faised
to a ten dollar bill, y o u would xnom
iy. Dewey.
ation.
T h i s also should b e tasen i n t o consider—
I f we just t a s e then out n o v a n d leave o u r same
old n o t e s I
d o n o t t h i n k t h e p u b l i c r o u l d t a k e t o gee 8 ,
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Federal Reserve Bank of St. Louis
B41
well a n d i t would n o t b e o f a n y particular help.
B u t
it i s also contemplated, i f this bill nrogram should
go through, t h a t t h e s i z e o f t h e c u r r e n c y b s reduced,
with probably a difference i n design o n it. T h a t would
be a n interesting feature t o the pudlic a t
the screme should b e carried o u t t o reduce t h e size o f
the currency, change the silx i n the paper and mare the
other changes i n the general design o f the notes,
if
that s h o u l d e
» approved, long »efore those notes g o out
we would degin writing propaganda stories o n the thing
in order t o familiarize t h e peoples ~ith t h e notes.
Governor Harding.
A r e y o u voing t o orint a n y t w o
dollar bills?
wf. Derey, T h s chances are we will.
under the law now.
‘ V e have t o
I t depends o n how much legislation
we c o u l d get.
Governor Narding.
T o what d o y o u attribute t h e i r
unpopularity?
wir. Dewey. I
haven't t h e faintest idea, I
somebody ‘ade a test. I
think
saw i n some newspaper recently
the statement t h a t most people carry their bills i n two
ways.
O n e d o l l a r b i l l s t h e y n u t i n t h e i r yvockets a s
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Federal Reserve Bank of St. Louis
emall change; f i v e dollar bills a n d above t h e y carry
in a wallet sevaratel?
i n a different pocket.
two dollar bill i s unusual.
T h e
I t i s net b i g enough t o
be put i n a separate pocxet, a n d i f put i n the pocke
with change and naid out a s a one dollar bill, a n d when
a man gets h o m e h e finds that h i s t w o dollar b i l l i s
gone a n d h s has 9 0 cents i n change i n his pocket f r o m
street c a r fare o r consthing l i x e that.
Governor Harding.
I n France t h e y have bills o f
differeut sizes, a n d the same way i n dngland.
Governar Seay, D o n ' t y o u really regard t h e prejudice
against t h e n a s formidable?
iir, Dewey. Sp,mething does it.
Governor Harding.
S o m e veople thins i t i s supersti-
tiion more than anything else.
wit. Dewey, Y e s .
Governor Norris. I
have often heard people s a y
"Get rid o f that two dollar bill; i t is unlucky."
Governor Harding. I
think i f you would orint t h e
pill w i t h efour—leaf clover o n i t that t h e public would
taxe it.
The Chairman.
# i t h regard t o the propaganda regard—
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Federal Reserve Bank of St. Louis
343
n@ bills, h a v e y o u noticed that m e n t h e question
cane u p before there w a s a good deal o f nervousness
about the country and quite ea nuxb=r o f reports came
in t h a t w e s h o u l d b e careful a b o u t r e c u c i n g t h e s i z e
of tae paper money because i t would have t h e effect o f
reducing i t e buying power?
wl. Dewey.
T h a t w a s so, d u t I
thins t h e c o u n t r y
the present t i m e i s s o hapoy financially that I
do
not think that would anount t o anything.
Governor Fancher.
I s i t contemnlated reducing t h e
size Dut Mazine ths bills ell the same size?
ir. D e w e y , A
1 dills w o u l d b e t h e s e x s i z e ,
Governor Fancher.
I n this revort h i c h y o u send
with your communication mention i s «mde o f a msthod of
detecting.
H o r closely i s that t o b s zuarced a s a
Treasury s e c r e t ?
wip. Dewey, T h e t i s rather a n ontisistic viewpoint,
because you could not seep it as a Treacury secret. I
do not think that amounts t o very much, Governor.
The Chairman. A n o t h e r thing:
H a s t a e Committee
considered, i f the size o f the notes should b e reduced,
just what method o f distribution should b e put i n opera-
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Federal Reserve Bank of St. Louis
344
tion s o a s t o c a u s e t h e l s a s t i n c o n v e n i e n c e
Ve really h a v e s
esed that i
r
gotte
t o t h e nub.
t h a t voint.
investigations yet.
to d o was t o b e very sure before wre got
that far, a s t o whether there would b ® a n y saving mede
end what the saving would be, whether ~ e would have t o
maxé @
great n a n y expensive chenges i n handling, a n d s o
on end s o forth, a n d after w e had Ciscovered that there
would b e a saving that ~es worth while r e thought w e
would tace i t u p vith the various ocenxs i n due course
and find out what their recomnaendations a r e a s t o nut—
ting i t into effect, a f t e r t h e nrogran was decided unon.
The Gyairman.
I f all Genominstions
o f smaller
size are put into circulation a t th: s e m e time, before
the others a r e well retired,
i t would b e a very great
inconvenience, b u t v<rhans i t woulc. ror: i f you would
clear u o your ones first.
wir. Dewey,
Y
e hac thought o f cleaning u n the larger
denoMinations first for the reason that, a s I said, most
of the denominations o f larger s i z e a r e xent i n e rallet
or i n a s8nscial nocret.
T h e ones are carried a s large
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Federal Reserve Bank of St. Louis
345
Lenominations
and then
the n e w ones in.
The Chairman,
é
@ ones wear o u t s o fast that
could complete t h e shift i n them sooner.
wir. Dewey, T h a t might v e true, too.
The Chairman.
A n d let the larger denominations
Etay o u t vecause t h e y have s o u c h longer life.
Governor Seay,
I t would nrobably increase t h e out—
standing circulation for a while, a s people would want
to retain them until they got faniliar with then.
My. Dewey, T h e r e a r e a
™ a r e getting a
g
m a n y thing >
con-
report o n each o n é a n d w e a r e
going along gradually a n c trying t o cover e a c h proposition,
Governor Fancher.
T h e reaction f r o m o u r currency
departnent w a s v e r y favorable. I
woulda l i x e t o h a v s :
t
h
a
was r o n d e r i n g
i f you
t communication f r o m
the Ban's?
Mr. D e w e y I
opportunity
would like that. I
wanted t o taxe this
t o g e t t h e p e r e o n e l ecuation,
a n d then a s x
the Governors, when they return t o their banks, t o reoly
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Federal Reserve Bank of St. Louis
346
formally s o t h a t w e w i l l h a v e a
definive
opinion.
Governcr S e e D o n ' t t h e y fool t h e nudlic n o w b y
imttating t h e silk fiber with i n k lines?
t
sip, Dewey. Y e s , T h e maj
only h a v e i n k o n t h e m i n s t e a d
h
e counterfeits
o f the silk fibers
do not thins that i s a fact
Governor Ssay. I
which i s entitled t o very great consideration s o far
ag t h e p u b l i c
co not thins y o u need
i s concerned. I
hesitate t o abolish the fiber, s o far as the pudlic i s
W h e n tasy are fooled i t i s usually b y some—
concerned,
thing t h a i
NG
n a the S
e w e ya. tes
Secret Service weaintains.
tection.
wi
t h e
H e says i t doss n o t give p r e
I f you a s a n y m a n t o tell y o u h o w h e det:r..
‘nines w h e t h e r
o r not a
note
i s counterfeit
h e will t e l l
then.
Governor Seay.
to d i s c o v e r w h e t h e r
V
e s8ei
o r not i t w e
m e neonle tear a bill
i l s f i b e r o r whether
4+ was a line, a n d not v e able t o tell until they had
done that.
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Federal Reserve Bank of St. Louis
347
Some years a c o t h e silx fiber
anpéeared i n 3
i n t h e shaps o f two 2arallel
bi
lencth o f the bill.
Lines, running the ¢
that ciscontinuedt
cannot answer h e t . t
ig. Dewey, I
otc
that w a s so.
Governor Harding.
Y o u will reneaber
silx threads, straig n r e a c .
o n e a t the tcp and one
at tas bottom.
wit, Dewey,
i m e i 4
to the hand »rinting o f e
Govsrnor Harding.
aight p a v e heen doné o n
notes before power vrss—
I t was vocgiols t o tae a nin
null the vhole thread right out.
The C,airman.
T a t w a s when they first introduced
Silx fiber into the paper, I believe?
Mr, Dewey, I
Governor Seay,
do not remenber that.
T h e reaction i n our bank i s quite
favorable s o the nrovosal, ur, Dewey.
The Ohairman.
beyond t h e w r i t i n g
SOOK ENT
M r . Dewey,
d o y o u want a n y action here,
o f the tetters about which y o u have
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Federal Reserve Bank of St. Louis
348
irs Dewey.
of t h e G o v e r n o r s
No,
I f » ¢ c a n c e t @ response f r o m each
i t w o u l d h e l p t h e donnittee
i n macing
ite dsoision.
The Opnairman.
A l right, w e will c o thet.
(Ther=upon Mr. Dewey and wir, Hand retired from the
and the Conference o f Gyvernors pro-
he Onairman.
J T would 1 i t ‘ O o have air; Harrison
é@letter which h a s jus
by Governor Orissinger.
wy. Harrison.
T h e letter i s a s follors:
OY. 0) P F
FSVERAL RESERV. BOARD
Washington
March 23, 1926,
Governor o s r o n g :
'The B o a r d h a s u n d e r c o n s i d e r a t i o n a n d c e s i r e s
Gisvose o f the netter o f non-cash collections,
to
I t is
+
considering the services under three heacs,
h o s e w h i c h c e n b e Giscontinued; t h o s e waich c a n
be continued rithous imposing a
charge f o r the service;
and, those which can b é continusd o n ceyment o f a charge
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Federal Reserve Bank of St. Louis
present Governors!
enbers
a conclusion
fer w i t h a n d t o a i
on these
questions b e f o r e a d j o u r n m e n t
l 3
s of
of
l
i
m eW o f the
please
advise
r
t o con-
Sa
be
conference.
names o f t h e
e
b
a conference
e
m
appoints
the
committee
which
thie p u r p o s e?
Wery t r u l y yours,
n(Signed)
D
p
, Rn. Grissinger,
Governor. a
Mr. Benj.
S4rong,
Federal Reserve B a n k Governo vs! Conference,
Washington, 0.¢,"
e Chairman. :
h
is your »leasurs,
T
gentlemen?
Governor Norris. H a v e you any suggestion t o mace,
.
Chairman?
I
M
The Chairman.
I think w e shoulda a p o o i n t t h e C o m n i t —
Governor Calins.
H a s the Bard bee
“o
}
advised o
action taxen b y this donference?
e Cyairman.
T recommendation
Theyh are acting o n the
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Federal Reserve Bank of St. Louis
made &
year e g o u r s i x months ago,
Governor Wellborn. I
move that a
committee b e ap-
jointed, a s suggested b y the Board.
Governor Biggs. I
will second that.
suggest that v h e Chair aopoint
Governor B a i I
the cormittes,
The Opairman.
V e r y well, I
will appoint Governors
Fanchér, Harding, Bailey, a n d Mr. Strater a n d sim. Harrison,
Wo c a n n o w resume consideration o f Tonic B a w e
Ve S U P P L E M E N T A R Y TOPICS
A. P e r m a n e n t emtoloyment b y thse Board a t a fixed
to
retainer o f special counsel o f ousstanding ability
house f o r
assist i n litigation, a n d t o act a s a clearing
the legal departments o f all Federal reserve banks.
(See Board's letter o f March 9, 1926, K-4550; also
paracraph 26, wynutes o f Novenber, 1925, Governors!
Conference.)
Governor Talley. w i r . Oneirman, I
say o n e other thing.
just ranted t o
h e proposal € i s not intend that
he should b e retained a s special counsel,
o r have a n y
o f the different
jurisdiction over t h e various counsel
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Federal Reserve Bank of St. Louis
e651
Federal Reserve dani
f
0
6
portance, their authority,
8 n o t minimize their i m
n
e S
t
h
e
Least.
The Chairman. W h o i s 1
e c i d e a b t h e terms o f
the retainer; h o w t h e i n e r shall b e paid, what the
conditions
o f e m p l o y m e n t s h e l l b e , w h a t <asthods o u g h t
to b e e i p l o y e d
counsel?
i n setting
u p contacts w i t h t h e special
H o w i n f a c t a r e w e t o decide w h e t q u e s t i o n s
shall ¢ o before the special counsel, unless that i s cone
here i n Washington?
Governor Talley. I
do not think that necessarily
follows a t all, that i t
These matters woule€ not have
b e put up counsel i n
ington, o t h e r than t h e
reference
ao?oroval
t o t h e s n n l o y n e n t a n d naynent
The Chairman. (Interposing)
o f the Board i n
of a
retainer
——
B u t suspose the eleven
banks submit all <inds o f questions t o this counsel and
run w o fees t o the extent o f $50,000 a n d t h e twelfth b a n k
hssn't a n y question t o submit a n d n o voice i n the decision
as t o whether they should submit matters o r not, a n d what
position i s that twelfth oank i n when i t i s called uoon
to pay?
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Federal Reserve Bank of St. Louis
352
i I can o n l y rep2at t h e remark
Governor Talley.
4
that y o u made o n yestercay, >t h a t these sunposititucus
things have a way o f not materializing.
The Chairman.
I
t does n o t seen t o m e t o b e the
orderly w a y t o h a v e o n e counsel f o r t w e l v e i n d e p e n d e n t
organizations w i t h n o means o f coordinating
Governor Talley,
L e t m ¢ s a y this: I
think there
very much
are s o m e m e n b e r s ox: the C o n f e r e n c e w h o a r e n o t
lite.
interested i n this question a n d there i s danger o r
lihood o f giving i t hasty consideration. I
to make a suggestion, t h a t a
would like
sort o f legal committee b e
apoointed t o g o i n t o t h s q u e s t i o n a
little > i t f u r t h e r
and draft some suggestions a s t o the “stalled procedure,
sort o f thing.
Chairman.
vier,
I t ~ould not tece n e long t o get m y
i f I served o n the comnittes. I
about t w o words. I
c a n tell y o u i n
think t h e System should have soecial
a l l Liticounsel t o whom the Bnarad!s counsel shoulec refer
zated cases a t their inception; t h a t
o r y Federal R e —
to
serve B a n x should reoort e v e r y pieces l i t i g a t i o n
the F e d e r a l
Reserve
B o a r d t h e cninute
the p a v e r i n ; t h a t t h e e n o l o y m e n t
a r i s e s
a n d send
o f this counsel under
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Federal Reserve Bank of St. Louis
O53
those conditions, w i t h liability uoon all the Reserve
Banks t o share i n the cost o f the counsel, should b e
limitsd
t o that t y n e o f works, a n d n o other.
I f
tione a r e t o b e referred t o that counsel b y ths
Reserve Board, t h a t i s a matter i n which w e are
interested,
W e w i g e t assessed for it.
off t h e F e d e r a l R e s e r v e B a n k s f r o m s e n d i n g
m e t
i n no end o f
questions t o syscial counsel without any method o f coardination a t
Governor T a l =
T
thins f f t h e orovi Sion w e r e
not made thet all these questions should oroceed
through t h e l e g a l d e p a r t m e n t s
o f t h e Fed:
chen t h a t w o u l d b e @
Governor dalczins. I
rather cuestion
move t h e a d o o t i o n o f «
resolu.
tion that t h e sense o f this Conference i s contained i n
Governor Strong h a s just made,
Fencher. I
The G h e i r m a n I
opinion, b u t I
will s e c o n d t h a t motion.
a n not afrail
t
h
e question
of
a n afraid o f litigation which reaches
the point where the record i s made o n the trial, a n d
a decision rendered b y a jury, a n d w e < n o w nothing about
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Federal Reserve Bank of St. Louis
Governor Bailey,
a n d where 7™eé have n o t laic t h e
foundation f o r carrying the c a s e up.
The Gyairman.
B u t have l a i d a foundation against
it, a n d we might have a hard time.
opinion doesn't b i n d anvoody.
O f course legal
I t i s just a n opinion.
Now I will tell y o u what I thin< i t would accomplish.
If
we renorted every litigated matter t o the counsel o f
the Board, a n d i t i s submitted t o wir. Baker, say, i f
he i s selected, e v e r y Reserve B a n k i s going t o b e under
a certain degree o f supervision.
I f local counsel e x e r
cises proper c a r e h e will ‘snow the minute h e hears f r o m
his client whether i t i s desirable t o call ir. Baker i n
or not.
A s i t i s n o w some o f these cases a r e tried a s
Gistinctly local cases a n d t h e counsel d o not always
realize t h a t t h e w h o l e S y s t e m h a s a n i n t e r e s t
Harrison,
i n them,
w e have consulted ir. m a s o n about this and.
Mason ‘ould approve t h e procedure I
Mr. Herrison. Y e s , I a m certain h e would.
Governor Seay. I
a m convinced that t h e decision t o
which w e came a t t h e last meeting i s a wise one.
T f
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Federal Reserve Bank of St. Louis
think that even though w e had the opinion that sos
amployed for the Board, i t wiil tenée t o introduce complicated legal m a c h i n e r y i n t o t h e
bring about delays, a n d i n spite o f ovinions e m r e s s e d
so the contrary, I
believe that i t will tend t o mini-
mize t h e »osition o f iocal officers i n the Federel R e ~
serve Banks. I
believes i t will b e wholly impracticable
to adopt any other plan, i f counsel i s employed, t h a n
to have t h e Board employ counsel. I
think I would
be very much i n sympethy with the suggestion you made
at t h e deginning,
w i t h resnect
t o any litigation
in
which a Federal Reserve Ban« finds itself involved,
that it should always be reported to tne Board, I t
secns t O m e that i t i s ween f o r the Soard 1 6 determine
and the responsibility oucht not t o be avoided,
I t
seems t o ms, ar. Onairmen, t h e t i t i s very cesirable
from all »oints o f view that the Board b e advised. wWhen~& venke finds itself involved i n litigation that
may b e o f importance t o the antire system,
i t seens t o
that i s a matter f o r t h e Board t o det=rmine.
The Cheirman. I
would b e temmted t o agree with you
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Federal Reserve Bank of St. Louis
356
In fact,
m y own opinion avout these matters
has changed, because I was a t first opposed t o the
counsel arrangement,
B u t m y whole opinion h e s
changed i n that respect since t h e Cisclosure o f the
method
o f handling t h e appeal
i n t h e A t l e n t a case, w h e r e
we felt rather alarmed about t h e pnosition ~ e would b e i n
appeal h a d been taxen,
W h y couldn't this pro-
gram b e set up3 i n such @ way that when litigation
develops i n any Reserve B a n k i t i s always sconsidered b y
the officers o f the bank and the bank's counsel, a n d
in sending copies o f the papers t o Washington a n d i n
revorting
o n t h e case, t h e b a n k i t s e l f s h o u l d r e c o m m e n d
to t h e B o a r d o r t o t h e B o a r d ' s c o u n s e l w h e t h e r
o r not
in its opinion i t i s a cese that justifies submission
Then h e would b e the one t o
determins finally whether thers should b e System counse
employed,
Governor Seay,
I t i s important that w
n o t intro-
duce s o m e objectionable feature i n t o t h e ordinary legal
procedure o f the Federal Reserve Bank,
I f counsel o f
the various banke a r e t o b e given t o unéerstand that
they cannot 2ass opinion woon certain matters, b u t must
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Federal Reserve Bank of St. Louis
357
wait for reference t o special counsel o f the Board,
examination o y special counsel, report b a c x t o the
Board, a n é then t h e Board advise t h e counsel o f tho
banx, I think very regrettable and injurious celays
would b e i n t r o d u c e d i n t o t h e S y s t e m a n d w e s h o u l d a v o i d
such @ situation,
The Chairman.
W
e are n o t talsing about opinions
but about litigated cases,
Governor Seay,
I t has not b e e n wholly confined
to that, a s I understood it.
fhe Cpairman' T h e discussion o f this proposal i s
wholly confined to that because we are proposing to
exclude o p i n i o n s f r o m c o n s i d e r a t i o n
Governor Harding. I
i n t h a t way.
thins your suggestion i s a n
improvemcat over the first suggestion, Mr. Onairman, b u t
I am just wondering hor counsel i n some o f the districts,
who a r e very feniliar w i t h t h e laws o f their resvective
States, a r e going t o feel a b o u t having associate counsel put into a case with them i n that way.
Governor McDougal, I
think local counsel should,
and vrovably would i n many cases, choose his o w n associate counsel.
W o u l d i t b e y o u r i d e a that a l l matters
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Federal Reserve Bank of St. Louis
of litigation b s referred t o this proposed counsel?
The Opairman.
‘ t h a t i s i n m y mind i s
L
s
T h a t
every “eserve B a n s h a s i t s o m counsel t o advise i t
about local matters, b u t certainly when one Reserve Bank
has important litigation which involves t h e other Re-
serve Banks, when those other banks have a s vital a d interest i n the litigation a s his o w n client hes, t h e n
it seems t o m e that i f h e has t h e right attituce o f
mind tomards h i s j o b h e would welcome t h e cooperation o f
counsel that could s p e a k f o r t h e System, t h a t could
speak f o r t h e o t h e r e l e v e n banks,
Governor Talley,
i f y o u »lease,
T h a t i s true i n the case o f
counsel, a n d he has s o stated.
Governor Calxins.
F r o m that point
o f view i t
be pertinent t o ask whether i n cases o f litigation
volving t h e Federal Reserve B a n k would s e e m t o b e o f
sufficient importance t o call for consulting counsel, i t
would b e more agreeable t o t h e attorney o r counsel f o r
the individual ban’s t o call w o o n o n e recognized author—
ity o n the subject, o r t o have »ut over him a local
practitioner o f indefinite capacity, j u s t because h e was
senior,
o r perhaps more vrominent? I
believe, a f t e r
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Federal Reserve Bank of St. Louis
359
consideration b y counsel f o r various banks, t h a t i t
would b e acceptable t o every one o f them.
The Chairman,
H o w d o y o u feel about
i t i n Cleveland,
Fancher?
Governor Fancher.
V e r y m u c h tfhefavor o f it.
W e
recommend i t very strongly.
Governor Seay,
I t seems t o m e the tendency would
lixely develop t o consider almost all matters a s System
matters,
The Chairman.
N o t i f i t i s confined t o litigation.
Governor Seay, I
mean; I
mean litigation; t h a t i s what I
mean all litigation a s System matters.
The Chairman.
W e would never have enough litigation
to make that a serinus question.
H o w many suits are pend
ing i n the System now?
Governor Seay. I
should thinx w e have four o r five
and all o f those a r e System matters.
Governor Wellborn.
that I
w i r , Chairmen, I
have a
letter
would lixe t o have y o u read.
Governor Talley,
W e have a case from our Supreme
Court n o w that h a s b e e n a f f i r m e d
It w a s d e c i d e d
i n our favor
b y t h e C o u r t o f Avpeals.
i n t h e l o w e r c o u r t a n d “*aze
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Federal Reserve Bank of St. Louis
360
Opinion o f the lower court wes confimmed | T h e matter
involved i n that i s tue same as t h e matter i n v o l v e d i n
the Malloy case.
j e have three o f those suits pending
Governor Seay-
and I think o n e o f them has been abandoned. I
do not thin's
any Federal Reserve Bans would hesitate f o r a minute
t o
report t o the Board a n y pending o r threatened Litigetion
of importance. I
t h i n i t would unquestionably d o it. 1
think i t would t h e n b e for the Board t o determine whether
it i s a system matter a n d i f 80, whether consulting o r
assistant counsel should b e employed.
The Chairman.
Bhat I
a m seesing t o d o i s t o cet t h e
orderly m e t h
tmoortant cases before System counsel b yys o m e
od, w h e n i t i s d e c i d e d t h a t t h e y a r e i m o r t a n t ,
cases i n litigation.
tion.
a n d only
T h a t i s the object o f m y sugees-
of de
W h a t method shall b e employed i s a matter
feel t h a t w a y 158
I do not care.
T h e reason I
I d o not s n o w
tried
i n N e w Yors’ w h e n s o m e c a c e i s
that will put
and appealed i n some reserve district
I think I a m en—
liabilities o n the bans i n New York, a n d
to
titled t o xnow, a n d I thinx I a m not only entitled
i n the conduct o t that
know but t o have something t o s a y
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Federal Reserve Bank of St. Louis
case,
Governor Talley.
T h a t i s exactly the princivle t h a t
is behind this rhole proposal, :ir.
Governor Seay.
bring i n e great many trivial things.
The Chairman
‘ T h a t d o y o u sugrest a s a n elternative,
Governor S e a y ?
Governor Seay, I
‘think the decision w e rendered
at the last d o n f e r m c e i s a wise one. I
believe there
is necessity f o r t h e emnloyment o f especial counsel b y
the Federal R e s e r v e B o a r d o n occasion,
occasion arises I think i f
b
and whe
the
e t h e judge o f it.
I think i n the San Francisco case if, instead o f refer—
ring i t t o the various Federal Reserve Benks a s t o whe—
ther they would particivate o r not, i t hai been referred
to the 3nard, I
think that w o u l d have been t h e vroper
course a n d that i t i s incumbent u p o n the Board t o d e t e r
mine those matters.
Governor Calxcins,.
I
t was t
necessary t o do that
because the San Francysco Bans retained ur. Baker entirely
independent o f t h e Guesticn o f whether t h e other banks
would varticipate o r not.
W e only asked y o u after t h e
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Federal Reserve Bank of St. Louis
fact.
Governor S e a y , I
think w i t h r e s p e c t
t o that t h e r e
might have been s o m e criticism that t h e S a n F.ancisco
Ban's 6 M loyed counsel without referring i t t o the Board.
Governor Calkins.
I t was our intention t o say very
plainly that wr. B a k e r h a d been emnloyed b y the S a n Francis—
co Bank, t h a t w e b e l i e v e d t h e c a s e i n v o l v e d a
System
matter a n d t o inquire, b u t only t o inquire, whether the
other banks were willing t o participate.
Governor Fancher. I
think there i s a good deal i n
the point t h a t ~ e should have g e n e r a l counsel retained,
some m a n t h o i s familiar * . t h t h e s i t u a t i o n a n d i s conti-
nuously familiar w i t h it. B e c a u s e when a Snecial c a s e
comes u p that requires outside counsel w e might n o t al-~
ways b e able t o get t h e same man, i t might n o t b e possible
to have h i m represent us, a n d I thins i t i s a great a d
vantage t o have t h e same man, t h o would become faniliar
with t h e System operations a n d g o along w i t h all this litigation.
Governor Talley.
A n d w h o has some obligation t o the
System.
Governor C a l x i n s .
I n o u r c a s e w h e n Mr.
Baker was em-
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Federal Reserve Bank of St. Louis
3563
ployed i t was only with great difficulty a n c inconvenience
that h e w a s a b l e t u g i v e t h e t i m e n e c e s s a r y
t o nrevare
case, w h i l e i f h e h a d p e e n r e g u l a r l y e m p l o y e d h e
would have been a t the call, a n d that i s the largest point
in favor o f it,
The Chairman. I
move that t h e committee b e anoointed
by the Chair consisting o f three members o f the Conference t o orepare a
resolution,
t o submit t o the Confer-
ence a t its m e t i n g tomorrow, designed t o disoose o f
this topic 5-4,
Governor Cslxins. i
s h e matter w i t h the resolu-
tion now before t h e house? T h e r e i s a resolution before
the House that was moved and seconded.
Governor iigDougal. B e f o r e the motion i s put I would
lixe t o make a n inquiry.
L a s t summer counsel for the
several bancs met and considered this question, I presume
carefully,
a n d reached t h e conclusion t h a t i t was n o t
a d
visable t o employ s u c h counsel a s w e are considering.
Conference o f Governors net subsequently, I believe,
and confirmed that opinion. i l y inquiry is:
M a t has hap_
pened since t o change the imoression here i n this body?
T h e G r i m n - A l f a l f a Case.
The Chairmen.
>
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Federal Reserve Bank of St. Louis
364
Governor Seay.
I t has not changed the law, i n the
opinion o f counsel for the Board, because the nrocedure
that w a s folloved there was t h e vrocedure suggested b y
the meeting o f counsel themselves, a n d I believe that
we should leave i t a s i t was left under t h e decision w e
made a
year ago.
Governor Caliins. I
will s a y that i t was not t h e
Grimm-Alfalita case out t o a great extent i t was the arguments contained i n the letter which Mr. T a l l e y wrote, b u t
which h e h a s n o t r e a d t o u s yet.
The Chairman. G e n t l e m e n , w h a t i s your pleasure?
I suggested a
motion.
Governor CGalcins.
I n deference t o the Chair I
will
withdraw m y motion w i t h the consent o f m y second.
The Chairman.
T h a t was your motion?
Govermor Calkins.
T h e t t h e v i e w exnressed b y the
Chair should b e adooted a s the sense o f t h e meeting.
You
mey c o n s i d e r t h a t m o t i o n withdrawn.
Governor Seay.
M a y I
i n q u i r e w h a t t h e m o t i o n i s now?
The Chairman, T h a t w e should have System counsel t o
consider a l l litigated matters.
Governor Seay. E=moloyed b y whom?
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Federal Reserve Bank of St. Louis
065
The Cyairman,
B y the System —~ b y the Board, that
would be; aud that all litigated cases b e reierrea t o
counsel f o r the Federal Reserve Board, e n d that t h e y
should b e referrec t o sveciai counsel when i n his opinion
the i m o o r t a n c e
o f t h e c a s e j u s t i f i e s i t , o r whem r e q u e s t e d
to d o s o b y the submitting bank.
would like t o sugrest a
Governor Talley, I
amend.ient, t h a t s n e c i a l c o u n s e l
b e nominated
slight
b y the G o v
ernors! Conference a n d approved b y the Federal Reserve
Board.
The Chairman, I
would suggest t h a t y o u nominate Mr,
Baker.
Governor Talley. I
Governor C a l i n s . I
~
would gecord that nomination.
do not think there i s any ques-
tion about that i n the minds o f any o f us.
Governor Talley.
T h e Board has its regularly consti-
tuted legal department.
T h e several Federal Reserve B a n k s
have t h e i r l e g a l d e p a r t m e n t s a n a r e g u l a r l y r e t a i n c o u n s e l — -
in our case he i s o n the vremises.
N o w then m y thought
about this i s that this will b e consulting counsel f o r t h e
banks, a n d with a proviso that i f such counsel i s retained
that all cases o f litigation b e reported cirectly t o him,
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Federal Reserve Bank of St. Louis
and also t o the Board, =
t h a t matter.
T h e n I
mpevial counsel ought t o b e re‘ained b y
Federal Reserve banks subject t o the aonroval o f the Board,
The Cpairman.
i y . Harrison, w i l l y o u read the oending
motion?
will r e a d Governor Calcins! ‘notion:
Harrison. I
hat t h e Federal Reserve System retain soecial counsel t o
consider litigated matters oniv; t h a t a l l Federal Reserve
Banks report t o t h e counsel o f the Federal Reserve Board
every litigeted question, v l u s papers, a n d that counsel
for tic e d e r e l Reserve Board refer a n y such matters t o
the s p e c i a l c o u n s e l
a % once j
= )
n k
~
of sufficient imoortance t o justify it, o r
% they a r e
t h e counsel
of the submitting b a n s requests it.
Coverror Fancher. I
will second Governor Calkins!
motion.
and
The Chairman. T h a t motion was m d e a n d seconded,
then Governor Talley proposed a n amendment t o the effect
that t h i s report should b e tade both t o the Board's counsel
end t o special counsel.
Governor Talley.
The Cheirman.
Yee.
I f you wish t o press that i t would b e
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Federal Reserve Bank of St. Louis
on the amendment first.
Governor Talley. 1
offered i t more i n the nature o f
1,
a suggestion. I
have n o d e s i r e
t o prees i t . T h e o n l y
thought t h a t i s g c i n g t h r o u g h m y m i n d i s t h e p o i n t t h a t
Governor Seay raised | about t h e complexity o f it.
The Chairmen, T e l l , w e have a n excnange o f views
in the event o f this nrocedure being followed between t h e
Board's Counsel a n d t h e Banx'e Counsel,
m t h automatic
reference i n case t h e Bank's counsel thinks i t i s sufficiently imoortant.
(The motion, heving been duly seconded, was put on
a year a n d n a y vote.
T h e Chair was unable t o determine,
and t h e vote was taken b y the raising
Seven G o v e r n o r s v o t e d i n f a v o r
h
e right hand.
c f the motion a n d five
Young,
against it, those voting against i t being Governors
Seay, weDougal, Biggs and Jellborn,)
Governor Seay. I
would like t o out i n the record
that n y reason f o r voting n o i s chat nothing h a s trans—
pired s i n c e t h i s C o n f e r e n c e g a v e a n a d v e r s e r e p o r t
on
or
this proposal which caused m e t o change m y opinion
vote, a n d because I believe i t will introduce comolica—
tions into the legel mchinery o f the Federal Reserve
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Federal Reserve Bank of St. Louis
Banks a n d increase t h e cost.
The Chairman.
I t has b e e n suggested t o m e that 1 %
would b e nerhans impolitic t o appoint o n the committee o f
five t w o gentlemen present w h o a r e not Governors o f Re—
serve Bancs, t o meet with the Board o n this non-cash collec.
tion business. I
have already appointed Governors Bailey,
Fancher and Harding, a n d I will add to that GovernorsTal—
ley and Young.
N o w the Chair will entertain a motion t o
adjourn,
Governor Young. «ft. Chairman, I move that w e adjourn.
(Whereuvon, a t 5:50 o'clock p.m., o n motion duly
seconded, t h e Conference adjourned until Wednesday, March
24, 1926, a t 1 0 o'clock a.m.)
-
— 0O--——
—
0
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Federal Reserve Bank of St. Louis
' R R D..
F s Ts
CONFERENCE O F GOV™RNORS O F FEDERAL RESSERVS BANKS.
Conference Room, Treasury Building,
D . O.,
Washington,
Wednesday, March 24, 1926,
10 ofclock a.m.
APPEARANCES?
(As indicated i n the First Day's Record.)
~— w
The Chairman,
e
l
l
T h e C o n f e r e n c e w i l l c o m e t o order.
Ne will proceed with ‘our committee revorts.
Y o u have
received copies o f the report o f foreign accounts. I
have a l s o referred verbally t o one c r t w o matters i n c o n
nection with it.
W h a t i s your pleasure w i t h regaid
to the revort which h a s been distributed?
Governor Young. I
move t h a t t h e r e p o r t
b e approved
and filed,
Governor Talley, I
second t h e motion.
(The motion, having been duly seconded, was carried.)
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Federal Reserve Bank of St. Louis
The Chairman.
IV.
T i i e d i s x s cis 1 7 h ,
O P E R A T I O ND
N
A ADsINISTRATION.
H. R e p o r t o f Sub-Committee o f Ceneral Committee o n
Bankers' Acceptances.
What i s your pleasure w i t h regard
Governor Norris, I
Governor Young, I
t o this report?
move that i t ove avproved a n d filed.
will second t h e motion.
Governor Calxins. I
vould suggest t h a t i t b e r e f e r
red t o t h e Federal Reserve Board before i t i s adooted a n d
filed, w i t h the recommendation t h a t t h e Board adopt t h e
recommendations
i n the report.
(The motitn, h a v i n g b e e n duly secondec, w a s carried,
and the recort o f th2 comnittee i s as follows:)
REPORT FOR TH2 CONFERENCZ OF GOVERNORS, .NRCH 22 2926,
Jee
GENTRAL COMMITTEE O N BANXIRS! ACCZPTANCES.
BY THES
In accordance w i t h t h e a c t i o n o f t h e Governors’
ference i n November, 1925,
Con-
i n respect: t o t h e report o f
the Special Comnittee o f the American Acceptance Council,
concurred i n b y the Sub-Committee o f the General Accept—
ance Committee o f the Federal reserve banks, which r e c o m
mended greater latitude i n bankers! domestic acceptances,
recommenda
your C o m m i t t e e h a s c a r e f u l l y c o n s i d e r e d t h o s e
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Federal Reserve Bank of St. Louis
S71
enceavored t o
orinscisziles that
o the greater
latitude recomuended and which would guide
serve b a n k s
i n detsraining eligibility
o f domestic bills
be hekpful t o them and t o member benzs a n d d é
in dst=rmining u n d e r w h a t c i r c u m s t a n c e s a c c e p t a n c e
in domestic transactions might b e granted.
The well cstablished practice o f granting »vankers!
acceptance credits, v a i l a b l e t o shiopers! drafts i n
domestic transactions i n goods and commocities involving
Shipment a n d against documents covering readily marxet~
able s t a p l e s s t o r e d
i n i n d e n e n d m % archousss, o p e r a t e s
so satisfactorily, where they are availed of, that n o
modificetion:
tended.
o f t h e n i n themselves
Y o u r Committee, h o r e v e r ,
i s recommended
h a s drawn u p a
o r in-
state-
ment o f gen=ral »rinciples which are applicable t o these
established p r a c t i c e s
a s well a s t h e contemplated broadr
ened u s e i n which Gomestic acceptance credits m a y b e oxtended with advantage t o trade a n d commercs.
T h i s broad
ened use will permit the purchaser o f goods under banxers!
credit t o draw bills having a
maturity consistent w i t h
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Federal Reserve Bank of St. Louis
the relative trades, instead o f requiring t h e shipper
to draw the bill
i
usence i n sxcess o f actual
¢ has a
o f bills secured b y
<
transit time o f the goods n
warehouse receipts covering readi m a r s : etable staples,
ic would b e vnermissible t o convert t h e staples into another
form o f readily marxetable stapie t h r o u g a
s
c o n v e r tr
independent c f the drewez, provided t : i d e n t i f y o f the
goods b e not lost a n d the a c c oting b a n k remains secured
by the independent converter's r e c
in principle,
y o u r Comnittse cons
credit i s t o
nurpose o f a danker's commercial acceptance
suostitute b a n crecit f o r
carrying goods f o r market;
m e
r é d i t i n buying a n d
a : s h a t t h e fundamental
credit principles involved >
the sane a S i n othe1 f o r m s
clients, w i t h
of credit granted b y vanks t o commercial
ordinary borrowing
the distinction, hovever, t h a t whereas
business use,
lines o f credit a r e extended f o r seneral
the ovankers a c c e p t a n c e e r e w i t
i s given o n l y f o r epecific
o f self—lLiquitransactions i n goods vhich contain elnents
creditors.
dation a n d may b e secured against generel
These f u n d a m e n t a l Z
1
a s they have been
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Federal Reserve Bank of St. Louis
373
evolved, h a v e been recognized i n the development o f p r a c
tices designed t o accomnodate changing business methods
and conditions i n trade.
A s developed, t h e y include
consideration o f trade customs, s a l e s terms, reasonable
expectation o f liquidation f r o m the goods turnover, a n d
the c a p a c i t y o f t h e c u s t o m e r
t o n a y o r vruvide r e i m b u r s e
‘ment a t maturity i n any event.
T h e circumstances under
which the oanxts customer, t h e taker o f the credit, would
have p r o p e r o c c a s i o n t o d r a w o n h i s b a n k i n respect
of
Shipments o f goods for a period i n excess o f the transit
time, a r e i n purchases o f goods, t h e delivery o f which
involves domestic shipment.
h
e old »ractice i n such
cases h a s been f o r t h e banker t o grant credit t o his
customer, available t o the draft o f the séller and shivper o f the goods, against shinning documents. T h e use
of stica credits i n this country h a s been v e r y restricted,
Mainly, your Committee believes, because the custom o f
selling goods o n open account with cash discount i s s o
firmly entrenched i n the United States.
Your Committes regards a s a orinciple, t h a t t h e p u r
pose o f credit i s equally served whether the seller o r
the buyer'drawms under t h e banc's credit granted t o the
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Federal Reserve Bank of St. Louis
374
buyer,
I n cons;dering
the test should
t h e prooriety o f g u c h credits
g e s ! s r a n s a c t i o n i s one i n which
b e
the banker might proverly
ssller's d r a f t
Your C o m n i t t e e
granting accenta
L
should accuire 2
thus p r e s e r v i n g
re
j
e
t o buyers, t h a t
goods o n l y through t h e
t o t h e banker m o r e effectively t h e
of the trust receipt a s against gensral creditors; a n d
that t h e b a n k e r s h o u l d r e q u i r e
goods,
a s received b y the
tion o f the credit
W i t h recard t o t h e u s a n c e
o f crafts w h i c h
accept under credits t o buyers, your Committee
as a matter o f princivls,
goods
o n credit t e r m s w h e r e
on time a n d i n cases where coods ordinarily e r e
4
on cash terns, s
van'’ter should limit usencs t o
and reasonabls t i m e ordinerilyv required i n
turnover.
warehouss r e c e i n t s
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Federal Reserve Bank of St. Louis
for readily marretable steples a n d i n respect he t o the
recommendation t h a t vrocessing o f the relative staple,
or its conversion b y nrocessing i n t o another staple curing
the term of the credit, your Committee regerds a s a
principle, t h a t t h e security o f a n indeyendent c o n v e r t e r s
negotiable reccipt i s equal t o a warehouse receipt issued
by a n independent warehouseman, provided that t h e identity
of the goods i s not lost o r c a n v e effectively established —
as, f o r instance,
i n the tanning o f h e s
o r the bleaching
ofgray goods. T
he same principle would apply i n any
case w h e r e t h e c o n d i t i o n o f t h e t r a d e c u s t o m a r i l y i n v o l v e s
the mingling of the staples vith other staples of similar
character,
i f the receint o f t h e incenendent c o v e r t e r
effectively entitles t h e holder t o a oroportionate
amount o f the mingled o r pooled staples i n the same o r
a changed form.
In the application o f these principles, your Committee
regards t h a t t h e practical t e s t a s t o eligibility i n any
particular case should b e whether drafts are d r a m against
merchandise a n d w h s t h e r t h e t r a n s a c t i o n
i s i n fact s e l f —
Liquidating i n character; a n d further, whether the transection conforms not only with the letter but with the
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Federal Reserve Bank of St. Louis
eral Reserve Act,
not Sought o r granted simply f o r t h e »murmose o f e
to loans.
in summary, y o u r Committee regards
acceptance orivilegs,
eans o f financing, t h r o u g h acceptance credits,
the purchase a n d sale o f soods t h e delivery o f which i n volves shionent,: a n d t h e storage o f readily marketable
staples vending orderly marceting.
A s this facility
ls intended t o apply only i n the financing o f distinct
transactions
a s distinguished f r o m general financing,
is essential] t h a t e a c h credit c a n b s identified r i t h a
specific transaction i n goods, a n d that thse acceptance
be drawnin s u c h terms a s t o indica c l e a r l y »roper usance i n conformity w i t h trade customs relative t o the
particular goods involved, a n c that the self-Lliquidating
character o f the transaction b e esnecially considered
Further, n o accentance crécit should be »stablishe
the grantor would feel warranted i n »nacing
for the sane transaction.
If i t i s d e c i d e d
t o broaden credit practice
a s recom
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Federal Reserve Bank of St. Louis
O77
meaded, y o u r Committees s u g g e s t s
a s reasonable,
the ToL
lowing rules a s t o usance i n domestic credits.
SHIPPING CREDITS — USANCE:
(a) W h e r e t h e seller draws under a
crecit arranged
by the buyer, t h e usual credit t=rms o f the particular
business should vrevail.
()
W h e n t h e buyer o f goods draws, t h e terms should
not b e longer t h a n t h e time necessary t o finance t h e s h i n
ment, excsot i n cases where t h e customer will obtain
title t o the goods through t h e bank a n d where i t would
be p r o p e r f o r t h e s e l l e r t o d r a w a n a c c e p t a n c e u n d e r a
credit issued b y the bank for the account o f the buyer.
In s u c h c a s e s t h e u s u a l c r e d i t t e r m s o f t h e b u s i n e s s w o u l d
constitute a vroper'usancse, t h e same a s i f ths seller
are.
(¢)
I
n cases where t h e r e i s n o usual credit t i m e o n
seles, t h e buyer m a y draw for t h e time ordinarily required
in t h e t r a d e f o r turnover.
Incases under (bv) and (c) the proceeds o f the accept—
ances m u s t b e u s e d t o p a y f o r t h e ZOOdS.
STORAGE ORESDITS — USACE:
Acceptance credits based upon t h e storage o f readily
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Federal Reserve Bank of St. Louis
378
marzetable staples, pending orderly mrketing should b e
drawn f o r a period consistent w i t h ths tims necessary
to accomplish orderly marketing,
e n d with particular r e -
gard t o avoiding furnishing credit f o r the »nurpose o f
hoarding o f o r conducting speculation i n comaocdities,
Respectfully submitted,
Pad oct
wicllhenny
Peovle
gurlinden
iickay
Attebury
Worthington
Kenzel, C h a i r n a n e
wir. Campbell o f Atlanta wes the only member o f ths
absent.
Governor Young,
would like t o maxe a
h i l e w s a r e o n that subject I
request o f the bauzers! acceptance
committee a n d a l s o t h i s Confsrences.
T h e recomnencation
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Federal Reserve Bank of St. Louis
of this comnittee bears d o w m a
credit a n d pronsr security.
little b i t o n what
i s good
I a n not familiar w i t h the
trensaction a t all, except f r o m whet I
have reac about
it, b u t v e have a n acceptance i n our district t h a t I be-
lieve i s just a
i
n acceptence a s there i s anywhere,
It i s against t h e dcmestic storage o f grain.
I t ras a c c e p t
ed and nurchased b y ths Feceral Reserve B a n k f o r four o r
five years. T h e n the question of its eligibility was put
up t o t h e Federal R e s e r v e B o a r d a n c i t w a s t u r n e d d o w .
It was turned down because t h e wheat i s stored i n a n e l e
vator t h a t i s o m e d
b y t h e d r a w e r o f t h e draft,
T h e facts
The banzers o f that District h a v e h a d a great
deal o f experience i n respect t o the storage o f grain which
is used a s security.
h
a
v
e t h r o m o u t evary safeguard
that y o u c a n v o s s i b l y a s k , a n d t h e y h a v e f i n a l l y d e v a l o v e d
what t h e y c a l l t h e r e g u l a z r e g i s t e r e d t e r m i n a l w a r e n o u s €
receipt. T h a t means t h a t even though a
grain
man stores h i s
i n his o r m el:vator, t h a t i t i s checked i n b y the
urveillance o f the chamber o f c o m
merce. Negotiable warehouse recsipts are issued and i t
is utterly impossible f o r that m a n t o get that grain o u t
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Federal Reserve Bank of St. Louis
380
of the elevator until h e returns t h e receipt.
guard hes besn thromn out, %
v e r y safe—
is e good credit instru-
ment, a n d certainly issued i n accordance w i t h t h e intent
of the law, a t least.
control
o f the draw
T h e ¢rain absolutely leaves the
o
f t a s dvart.
W
e would lize t o
request that the regujation b e amended s o that that form
of acceptmcs c a n b e nurchased b y Federal Reserve Banks.
Governor M M gPougal,
W h o i s the custodian o f this
grain?
Governor
Governor iigDougal.
Is this a regular warehouse receipt?
Governor Young.
I t i s not a terminal warehouse re-
ceipt but a receipt issued b y the slevator company, checked
in and checksd o u t b y representatives o f the state Farehouse Commission.
Governor icDougal,
B u t the State i s not i n charge o f
the warehouse,
Governor Young. They have a man thers all the t i
Governor iAigDougal, T h e voint i s that t h e warehouse i s
omned b y the devositor o f the grain?
Governor Wellborn.
I s t h e State custodian under bond?
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Federal Reserve Bank of St. Louis
Govemor Y o u n g
M a g s , e v a t o r comoany
to put u o a bond :
m v s a bushel, a n d
they have t h s State t
elevator
i n iisnne:
S
n t a t i v e there.
A & A termin
s under s t r i c t s u p e r v i s i o n a n d c o n
trol o f o u r S t a t e R a i l r o a d a n c W a r e h o u s e Gommission,
AI1l
grein that i s stored i n the elevator i s checked i n b y
& reoresentative o f t h e State Railroad a n d Warehouse C o m —
mission a s t o g r a d e s a n d weights.
in l i x e m e n n e r t h a t
A l l . grain i s checked
i s renoved f r o m t h s elevator.
MThers—
an elevator company issues a negotiable terminal
warehouse receipt against grain stored i n i t s o m elevator, t h e grain cannot b e removed f r o m the elevator except
with t h e x n o r l e d g e a n d p e r m i s s i o n
of &
representative
of the State Railroad a n d Yarehouse Commission.
is oné exception t o this statenent,
There
I t will b e possible
he elevator c o m a n y t o
o'tclocs i n the evening a n d s
t
morning. However, t h e possibility '
h
n
e following
elevator company
removing grain f r o m its o m el*vator during these hours
is almost n e g l i g i b l e a n d n e e d n o t b e considered,
because
the only w a y i t could remove a n y great amount would b e
by box cars, anc the railroads would not handle the grain
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Federal Reserve Bank of St. Louis
382
those hours.
# v e n i f i t i s admitted thet i t i s
to remove a
nortion o f t h e grain »etween these
the otate h a s t h r o m o u t e n additional safeguard
by requiring t h e slevator commant t o furnish a dona o f
15 cents a bushel o n the elevator's capacity.
I n addi—
every terminal elevator i n the Twin Cities
tion t o ;
is under t h e direct surveillance o f our local chamber
of commerce, that is, a repres
t i f
the Chamber
of Commerce c a n checc a n y terminal elevator a s t o bushels
at a n y tims.
Gavernor .icDougal.
Character
T h a t i s the difference
o f warshouse
t h a t y o u spear o f a n d
designate a s t h e regular terminal warehouse?
Governor Young.
T h e laws i n Mjniesota a r e very
not i n some o f the other S t
tir. Harrison tells m e
situation i s already covered b y a ruling o f the B,ard and
Goes n o t require a n y action.
Governor Young.
T h e y have t u r n e d i t co™n twice here.
T have h a d i t u p w i t h x .
Tyatt a : n e h a s Gram
a n emend-
regulation which will cover this oarticular
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Federal Reserve Bank of St. Louis
3835
is your resolution, Governor
Young?
Governor Young, J
to amend subdivision 3
Regulation A , t o r e
move that the Bj,erd be requested
of section 1 0 o f Article B
a s follows;
of
T h e storage o f readily
Marxetable stanles, provided that t h s bill i s secured a t
the time o f accentance b y & warehouse, terminal, o r other
Similar receipt, conveying security title t o sucni staples,
issued b y a party independent o f the customer o r issued
by a
terminal g r a i n e l s v a t o r c o m p a n y d u l y b o n d e d a n d
licensed and regularly inspected b y State o r Federal
authorities w i t h w h o m all receipts f o r g r a i n and all
ttansfers thereof m u s t 0 :
.
c and without w h o s e
consent n o gtain ca: b e withdrawn; a n d yrovided further,
acceptor remains secured throughout the life o f
the acceptance, anc. s o forth,
The Onairman.
w h e n dic this question arise a b out
particular t y p e o f comnoc. ity?
Governor Y o u n g 7
The Cyairnan,
hree y o a r s a g o e
a s k e d t h e q u e s t i o n f o r t h i s reason:
re is a vrovosal which you Mare t o the meeting waich
relates t o the ruling o f the Federal Reserve Board i n these
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Federal Reserve Bank of St. Louis
384
matters.
i t w e could g e t
Chance t o éxamine the ]
mach more i :
g
e
n
1 6 i n a d v a n c e a n d have a
i o u s ruling w o could discuss i t
M
r
. Harrison i s under t h e impres—
covered b y a ruling with r e —
to the tobacco growers warehouses.
Governor Young.
N o , T h e Board has definitely written
me that this is not sligible. I
have tazen i t u p with
Mr. j y a t t .
Mr. H a r r i s o n .
< A number
o f years a z o t h a t p r e c i s e
situation cane u p i n comnsction i t h s o m e tobacco accept—
ances, w h e r e the tobacco w a s stored i n the warehouse D e l o n g
ing t o thse tobacco commany, a n d i n order t o maxe t h e a c c e p t
eligible they provided for surveillance b y a third
atirely indeomdent o f the warehouse owners, a n d
the Board i n that c a s e ruled that w i t h t h e collateral a r —
ngement f o r a n outside checkx o r vise t h e acceptance
eligible,
e v t h o u g h t h e warehouse belonged t o
tobacco men.
The Cnairman, I
do not l i e t o vote o n a matter
about w h i c h I have n o t h a d a n opportunity t o get a revort.
Governor Young, T u a t i s the way t o handle it. I
not w a n t y o u t o t h i n k t h a t I
do
a m trying t o p u s h s o m e t h i n g
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Federal Reserve Bank of St. Louis
385
through a t the last minute.
T h e facts a r e that this w a s
taken u p w i t h Wr. K e n d e l s o m e t h r e e y e a r s ago.
M r . Kendell
arrived a t the conclusion that i t was « good acceptance,
“8 were satisfied w i t h that a n d purchased t h e a c c e p t
ances and m d e o u r o m interpretation o f the regulations
Somebody asked the Board whether i t was
Gligible o r not a n d i t was turned down.
The Chairman.
W o did that?
Governor Y o u n g . I
d o n o t k n o w j u s t w h o i t was,» S i n c e
that time I have gone where I thought I should go, a n d
tO
that was/iir. Kendel, and he sent me to the Bard. T h e
Board does not s e e m t o want t o change i t s regulations. M r .
Geary w e n t d o w n t o C l e v e l a n d h e r e a
couple o f weeks a g o ,
but there was s o much other stuff o n the »vrogram o f the
meeting that i t closed u p before h e could bring t h e matter
up. I
have t o bring i t u p somewhere.
Ths Onpairman,
I n v i e w o f your v e r y vigorous s t a t e -
ment o f the matter, I
would vote i n favor o f your recan-
mendation,.
Governor Harding.
W e had a case i n a bank a t Birming—
ham, w h e r e a cotton buyer, w h o h a d business w i t h the bank,
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Federal Reserve Bank of St. Louis
386
controlled, although h e did not own, the warehouse.
H e
had his own agent there and then h e needed any additional
collateral
o r a n y money f o r a n y purpose h e would h a v e
his agent write o u t war ghouse receipts f o r cotton which
did not exist. G o v e r n o r Wellborn may renember something
about that.
I + w a s not a
question o f title t o real e s —
tate o n which the warehouse was located, b u t i t was a
question o f t h e c o n t r o l
o f t h a t warchouss.
A l l these
regulations that were made during m y time o n the Board
were m a d e t o preveat anybody, w h o was interested i n borrowing money o n warehouse receipts, f r o m having a n y con—
trol-over the goods represented b y those receipts, where
recsipts c o u l d b e issued where there weren't a n y goods
or where the goods could be withdram ~ithout delivery o f
the receipt. T h a t w a s the whole underlying purpose o f the
Board i n maxing thess regulations.
Governor Young.
M r . Kendel h a s gone into this.
H e
figures i t i s a good acceptance,
Governor McDougal.
B e f o r e t h e motion i s put I would
like t o inquire o f the chairman o f the gensral acceptance
committee whether o r not the comnittee has considered that
matt
ers
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Federal Reserve Bank of St. Louis
387
It has not been brought t o the attenof the Commitee.
Governor iicDouglas: U n l e s s these warehouses a v e safe.
varded o f c o u r s e t h e r s i s Canger,
quests o f that xincd i n Chicago,
a n d v e have h a d re-
i r . Kend
a s chair
man o f that committee h a s passed o n i t I would
of voting f o r t h e resolution. O t h e r w i s e I thin:
referred
it
t o t h e Committee.
The Chairman T h e present motion i s t o approve
ernor Young!s recommendation.
W e will have t o vote
that first.
Govemor McDougal.
M a y I
inquires w h e t h e r
Kendel1, t h e C h a i r m a n o f t h e Committee,
o r n o t ifr.
h a s consydered
it
as a n s l i z i b l e a c c e p t a n c e ?
Wp. Kendell. |
@ question o f fact.
I
a m frantly
i n coudt,
I t i s entirely
I f t h e g o o d s coulda n o t ose tacen f r o m
the warehouses without surrender o f the recsivt b y the
borrower t o the State authorities w h o h a c control o f t h e
warehouse, then I thin’ i t comes perfectly within the
scope a n d extsnt o f the present regulation.
B u t I
a m doubt
w=h i c h Governor Young o f ful i f the anended regulation,
g’
fers, would secure the situation, i f the grain could be
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Federal Reserve Bank of St. Louis
388
tazcen o u t during t h e night hours b y the borrower without
Surrender o f the receipt t
h e S t a t e authorities.
I t e m s t o n s that Governor
Governor Harding.
Young h a s covered that pretty well b y pointing o u t t h a t
there never could b e very much taren o u t because t h e
railroac would not deliver t h e cars.
Governor Young.
not b e taxen out. I
F r o m a practical standpoint i t could
have been informec, since I wrote
that letter, which was September 1 7 of 1924, a little o v e r
& year ago, t h a t I
vserhaps overstated t h e situation, c h a t
they really have a
night m a n o n the job. I
was trying t o
show the actual condition that existed a n d that w a s the
oné possibility; b u t from a practical standgoint they
could not d o it.
Governor iicDougal,
F r o m a practical standpoint I
think those receiots are good collateral, either for a c
ceptance o r for money borrowed.
The Gyeairman.
h a t i s your rleasure?
T h e motion
before t h e house i s t o approve Governor Young's recomnendation,
Govemor Talley, I
just wanted t o s a y that w e a r e
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Federal Reserve Bank of St. Louis
very Much interested i n t h e question.
W e have elevator
coMmanies i n our districi, o n e company that orns a large,
squiposd series o f elsvators.
addition t o thet t h e y have taken out a Federal warehouse
license o n those elevators, a n d i t seemec. t o me the position w a s i n c o n s i s t e n t
W
e are perfectly willing t o dis—
count that elevator comoany's note basec upon its f i n a n
clel statement, a n d then o n the y
n c . w e decline t o
nurchase acceptances that are secured
when the slevator company itself i s tue
cntance.
e
Governor Yellborn,
r
e s e e n s t o b e that
this i s a State controlled elevator a n d t h e o n e you speak
of i s not.
Govermor Talley.
The Chairman,
I t i s a Federal licensed warehouse.
A r e y o u r e a d y + o v o t e o n t h e motion?
Govemor Bailey. I
will second the motion,
(Tae motion being duly seconded, was carried.)
The Chairman.
T h e next i s Topic I V I .
IV.e- I. R e p o r t o f leased wire committee.
Governor Talley, I
move that t h e repor
leased wire cornittee b e approved a n d filed,
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Federal Reserve Bank of St. Louis
gecond t h e motion.
Governor Norris. I
(The motion having been duly seconded, w a s carried,
and the reoort o f the leased w i r e committee i s a s fol-
lows: )
REPORT O F LEASED W I R E COMMITTEE.
the Conferences o f Governors:
Since t h e last revort rendered b y your committee
there have been n o changes i n the circuits comprising t h e
Leased Yire System a n d but little change i n the volume
of business hendled.
T h e syston i s aoparently operating
Batisfactorily t o all concerned a n d the facilities i n
use a p p e a r t o b e c o m m e n s u r a t e w i t o t h e v o l u m e o f busi-
ness n o w current.
Volumes Handled and Expense_Involvec for Year 1925
and C o m a r a t i v e F i g u r e s f o r t h e T w o P r e c e d i n g Years.
otal Nymber
of W o r d s
C
Annual
o
s
t
G o s t
P
e
r Word
1923 30,379,547 $312,979.48 $ 0 1 5
1924 16,987,120 297,850.17
1925 14,002,339 270,592.19 .
1
?
O19
The reduction i n the volume i s caused largely b y re-
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Federal Reserve Bank of St. Louis
391
striotions i m o s e d o n the classes o f dusiness handled,
which oscame effective July 15, 1924, and w h ils the
decreass i n cost h a s not b e s nronortionatse t o the decrzase
i n volume, t h i s i s c u e l a r g e l y t o t h e n e c e e s i t y
of r-taining a sufficient nuuber o f sires anc opsrators
tO m a i n t a i n + a s c e s s a r y c o n t a c t o e t e e n a l l t e n a n t s
of the system,
thers i s attached a
of the Leased “ i r e Svate
ap
m i n g t h e arrangement o f
the verious
ct
f u l l y <7
( gigned)
Tire Committease
Cyaizmen.
T h s next i s IV-J.
d. R a p o r t o f Incurence
Sat
i s v o u r »-leasur= w i t h r e g a r d t o t h a t r e n o r t ?
Governor Y o u n s . I
aove t h a t t h e r e v o r t b e a m r o v e d
anc. filed,
Sovernor F a n 3
€
the notion,
(The motion heying oven duly seconded, wae
(Tha renort
c h e Insurance Comanittes
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Federal Reserve Bank of St. Louis
REPORT O F THE INSURANCE COMMITTSE T O THE GOVERNORS'
CONFERENCE MARCH 22, 1926.
The following report i s made with respect t o matters
which have been referred t o this committee.
TREASURY REGISTERED M A I L INSURANCE CONTRACT.
The committee submitted a t the last confsrence a
plan f o r distributing thse total cost o f the insurance o n
shipments o f new Federal Reserve notes from Washington,
D.C., t o the various Federal Reserve Banks a n d Branchss
on a basis which would b s equitable a s between t h e banks.
This p l a n provided f o r rates based o n the various factors
entering i n t o t h e risk o f these shipments, w h i c h rates
it was recommended b e used i n place o f t h e contract f l a t
rate o f 4 7/8¢.
T h e conference approved o f this recommen~
dation a n d r e q u e s t e d t h e T r e a s u r y t o a r r a n g e w i t h t h e
underwriters f o r t h e adoption o f the plan.
Your committees i s pleased t o report that following
the c o n f e r e n c e ,
t h e Treasury t o o k t h e matter u p a n d effsct~
ive December 1, 1925, all shipments have been billed a t
the rates recommended, a n d this matter is, therefore, n o w
ckbsed.
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Federal Reserve Bank of St. Louis
395
Wo n e v aatters have B e e n ref+rrec t o t n e comnittes.
Respectfully e o n i t t ed,
TAYLOR
Dillard
fenzel, Chairnan
Inecurance So.Aanittse.
The Cheivman.
T h e n e x t t o n i c i s N-X.
IV-~ &. R e v o r t o f Pension Comnittee.
GoVirnor Fancn*r.
w o n d e y evening a t the close o f
she session, when I had revorted what hed besn done,
the question v a s i s e d a s t o h o t the seorstary would
vievintrocucing t h e b i l l a t t h i s t i m e i n v i e w o f t h e
i
enencd:uent t o t h e a i ‘ A e n }
n t h e Senate.
a r . Platt
Seeretary y e s t : r d a y a n d s a w
hia this morning.
com lications.
5
ena h e i s i n full a c c o r d w i t h w n a t h a s d e e
wes also reised
t
o »rovicding f o r the liduide-
tion o f t h e n l a n i n t h e « v e r t t h a t t r e c h e r t e r s
o f the
Dance were not renewed, T h e t a a t t e r h e s deen considered
very fully, a n d i f the Conferences desires a n y light o n
thet I
thint ur.ao Z e n z e l c a n v e r y o r i s f l y s t a t e t h e c o n -
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Federal Reserve Bank of St. Louis
394
sideration + 3 h a s deen given t o that varticular
feature.
T h e advice o f our counsel w a s n o t t d include i t
ta %a2 Diil,
The Cyairnan’
nlan?
Governor Fancher. Y e s , b u t coun sé¢1
should b e left o u t o f the m a b l i n g
reised b y iir. Hamlin o f the Byard, T h e r e h a s o¢a@ a n
ne: o f letters a n d h e i s entirely satisfied,
T h e r e
has been a n exchang? o f + e r s bettveen i i t . Hamlin, -ir,
Kenzel a n d wir. Curtis a n d wr. Yanilj i s satisfied a s t o
that »noint.
The Cnairmen. T h e n the report o f the committee i s
thet,
i n accorcfance with t h e action tecen a t the lest
Conference t h a t t h a t committee
h a s ore
thet t h e y h a v = c o n s u l t e c t h e V i c e - G o v e r n o r
introduced?
synor Fancher.
Yess.
Have stevs b e m texen t o follo™ u p
tiaat i t aoves along?
assurance.
T h e
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Federal Reserve Bank of St. Louis
895
Senator asked that a statement b e prepared setting uz
the h i z h v o i n t e
o f o u r nlan,
a s commared w i t h t h e civil
service plan a n d ~ith t h e plan f o r t h e State
Departnent
employes, M r . Xenzel has nrepared that and thet will
be
submitted to Senator .icLean end to Chairman iicFadden
today, Thet will give them the highlights of the vlan and
the comperisons that they havs asked for.
The Chairman. W h a t is your pleasure with regard
to ths report o f the pension committee?
Governor Sea:
Y
ve 3
Governor Y o u n g , I
T move t h a t i t b e anvroved, w i r . Chair-—
will s e c o n d t h e motion.
(The motion, having been duly seconded, w e s carried.)
Govermor Fancher.
w r . Kenzel brings
u o one matter
with resard t o the revamping o f the vlan, based o n the
fizures furnished b y the banks a s o f the l s t o f Jenuary.
The plan that i s being considered now provides two options, either t o »rovide f o r anortizing past eccumulathe n a r t o f t h e s m m l o y e s a n d o n t h e p a r t
of the bank, o r give the banks the ootion t o save the
interest
just a
o n the a c c u m l a t i o n s
a n c pay a
l u t sum. T h a t i s
question o f general policy b y the Danks,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
396
Mr. K e n s e l , “ T h a t i s o n l y i m p o r t a n t f r o m t h e v i e w p o i n t
of the committee.
The Chairman. I
do not think we should take time i n
the discussion o f a vlan which i s not necessarily involv
ed i n the legislation, because i t has all got t o be
worxed out.
T h e committee i s now under instruction,
as I understand it, t o taxe steps t o secure legislation,
and t h e plan c a n v e discussed later.
Is there a n y further discussion o f the action taxen
in regard t o Topic V-A? T h e r e seemed t o be a good deal
of difference o f opinion yesterday..
Governor Seay.. T h e r e w a s a
vote o f seven i n favor
and five against.
The Chairman.
V e passed a
resolution,
sort o f jaumed through i n a hurry,
b u t i t was
I t i s a very i m o r t —
ant Matter. Governor Talley d i c not s e e m satisfied w i t h
it, a n d that i s the reason I raise the noint again.
Governor Seay: T h e r e i s a n i r r e c o n c i l a b l e d i f f e r e n c e
of opinion a n d I suppose t h e majority will have t o rule,
Governor Talley. ifr. Chairman, o n the contrary, I
feel very well pleased with the nrogress made.
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Federal Reserve Bank of St. Louis
Tae Chainmnan. T h e t
tonics, V-B, O
2 eserve
consideration
.
Board ,
i n comnection w i t h t h e rest o f
a t o matters
r
eh a t h
t
Th-ym relates
Conference.
Be Sdvisability o f
a
m
e
n nent t o the lew
in order t o restore t o Federal Courts juryscdiction over
suits
b y a n d evainst F e d e r a l r e s e r v e b a n s .
( S e e
Board's letter of .erch 11, 1926, %-4558. )
6. Q u e s t i o n s arising o u t o f Board's ruling o f Dec
ember 30, 1925 (X-4484) relating to the *ligibility of
notes
of &
corporation r e o r e s * n t i n g b o r r o r i n g s
to b e a d v a n c e d
o f funcs
t o subsiciarics.
wiarch 2, 1926, X.4560. )
D. Advisebility o f issuing reguletions relative
service
he rediscount o f notes secured b y adiusted
certificates u n d e r t h e » r o v i s i o n s
o f Section 5 0 2 o f the
Worlé War Coto-nsation Act. ( S e s Board's jetter of
March 13, 1926, X-4561.)
Governor Seay,
M t h refsrence t O Topic B I think
matter for the determination o f counsel, a n d
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Federal Reserve Bank of St. Louis
I nuove that couns:l f o r th: seserve Pan's D e Teciested
to »revare a n ovinion f o r the Governor o f
be renortec t o the Governor o f the Raserve
Governor Norris. I
i l l second that
(Tye motion having bes duly séconded,
The Chairnan.
W i t h regard t o
cuestion ~hich aross i n Ol<cv land.
too late t o 0: given sonsidsration
cealae ce
it beck t o ths
2
¢
orocrem f o r ths next meeting,
Y e have n o t h a d ojoortun—
ity t o stucy it.
Governor Telley, I
will s o ‘nove, w r , Cneirman.
Governor Norris. I
second t h e notion,
b e nduly second:d, wascarried.)
(The aotion having
The Cyairman,
T h e same i s tras o f Toric D.
Governor Celsins. I
,
aaze the same motion, tf. O h e i r |
The Chairmn., T h e t i+
Governor Galcins.
Stovernor “ o r r i s . I
Yes.
will s e c o n d that.
(Te notion having be2n duly seconded, wae ¢ @
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Federal Reserve Bank of St. Louis
The Chairman,
.
I
F e
T h e next i s 4.
s i t not discriminatory a n d unfair t o
requir: me-ber banks t o rewit f o r cash letters i n funds
remit—
of immediate availability whereas nonme aber par
vanes a r e alloved t o remit
not immediately available?
Ths Chairman’ That cane i n
nrogram also.
Governor Jellborn, T h a t simply asxcs the question.
t want t o find out what the other bancs did with regard
uncéerstancd some o f them d o not accept
to this matter. I
cheeks unless tasy ere iwaediately available,
clways adhered t o that rule with < ;
Danke w h o are n o n
mewoers, b u t m e take checks o n other points,
W e Tigure
it makes us carry about a million collars i n fivet.:good aeny of our nember bans think t a i t is unfeir t o
r +}
shat they
them t o have that ciscrimination, a n c thins
ought
t o b e nut
o n the seme basis
w i t h o u r m e m b e r bdan<cs,
tact is reait i n aveiledl» funce.
pants, nommenber par reaitting Danks in our cistrict.
The Chairman’
‘seeping?
I
housse not t h a t e setter o f Gomestic
I s it not a local matter entirely?
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Federal Reserve Bank of St. Louis
Governor ‘Yellborn. I
Governor Young. I
thought
thins i t goes
han that, B r i )
and i f Governor Yellborn s a y s i t i s only e short
until t h e meunb: o a n z s finc o u t that
furnishing their exchange.
The Chairman, I s n ' t i t a question o f what exchange
you are willing t o recsive i n your cash letters?
T h e r e i s o n l y one solution o f t h e
Governor Young.
difficulty a n d shat i s t o tare t h e non-par dant off t h e
par list,
I t is growing very rapidly i n our district.
is g r e a t d e e l o f dissatisfaction o n the part o f
banks becauss n o ~ t h e non-member banks c a n
and the member banks cannot.
I t i s growing;
to spread, a n d I thint i t i s the system nolicy.
The Cyaimen.
S h a t c o you recomnend, Governor W e l l
born?
Governor Wellbornm. I
would recomaend that w e put t h e
tha
same basis with
non—mecocr par remitting banks o n the
the member b a n s .
The Chairman, T o e
Governor Young,
thea remit i n aveilable funcs.
Y o u cannot d o it,
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Federal Reserve Bank of St. Louis
401
This matter h a s been discussed
previous conferences, t h e
policy aconted being that non—nexoer banks would have
to remit i n acceptable funds.
Governor Young.
T h e question i s what acceptable
funds means,
Governor Seay, T h a t question cannot b e reasonably
answered e x c e o t
unfair
i n o n e way.
I s n ' t i t discriminatory a n d
t o require t h e mender D a n k s t o n a y c a s h letters
in imnediately available funds?
discriminatory.
I t is positively not
T h e collections w h i c h w e m a e
member b a n r s a r e w h o l l y f o r t h e d e n : f i t
o n non--
o f o u r menber
banks. Whatever ben:fit there is, and i t i e very great,
accrues t o the nenber d a n s ,
W
e simmoly d o the best
we c a n ~ith the non-mezber b a n k s , a n d w e c o i t i n the
loterest
o f our meuber
Governor Oalzins.
‘ * , at i s ‘nore, n o general rule
adopt here a s a System matter will prevent
the application o f cisocretion e t the place wheres discre—
tion i s celled for. G o v e r n o r Young a n d everyone e l s e hsre
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
403
will d o what h e thinks best a t the moment, I s n ' t that
correct, Governor Young?
Governor Young,
J I told y o u three o r four
rhat
any harm o r not, n o r i t 3
am getting r i d o f 14, I
p e a k about
tis
@
a0 o t anxious %
c
h
e
c
k
s
thet y o u c a n n o t collect,
r Wellborn,
o
n W
there w a s a
uniform policy,
O f course i f the Con—
s 7 that i t i s a matter f o r each
taxes t h e
determin:
5,
e rhave e been uvn d e r ot h s i mGp r e s —
3
¢it4
t h a t
w i l l
b e
e n t i r e l y
N o t with respect t o the nenber banks,
Governor geay.
It i s not a ‘matter left s i t h t h e discretion there.
W e
require imnecdietely available funds f r o m them?
Governor Tellvorn, I
acan with reference
t o t h s non-
menosr venkzs,
The Chairman,
D o you wish a n y action o n this?
Govertor Vellvora, I
The Chairmen
ur, dellborn. .
h
sim nly wanted a :
e situation clear enough?
clear enough i f we can g o ahead
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Federal Reserve Bank of St. Louis
403
and d o L i k e s o m e o f t h e o t h e r oants.
i
G not
o r
they d i c that,
di“. not « n o w that there was ev=r
Governor Young, I
~s shoulc accept nothing b u t
available exchange.
Chairman,
I
f n o action i s des
consider t h e tonic desnatched.
the n r o g r a n i s discount r a t e s
T h e next nronosition o n
T o o -
s h e l l w e have
a discussicn o f the discount rates before msetine w i t h t h e
Board?
move that w s
Governor sé6ay. I
formél discussion.
there any sentiment i n any reserve
The Chairman. ;
that t h e r e snouled
b e any c h e n g e
i n discount
tine?
Credit Trensactions a n d Policies
B. D i s c o u n t rates.
Governor yelloorn,
Q u r Board has
Tt seems that a l l o f our rates a r e lower
rates i n the centers,
coming
W e realize that
i n business a f f a i r s a n c —
e m inclined
that w e ought t o raise o m rates a little,
t o think
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
are always zoing u w above th- discount
w
Governor Yellbporn.
a
s a l w a y s suncosed that
equal t o
The Chairman T h e y never have been e x c n t
unusual circunstances, with a great surplus o f noney t o
on the Ss+o0ck Exchanges.
Governor Jellborn. I
have n o authority f r o n m y Board,
I would lice t o see our rate up to 4-1/4 and later o n to
4-1/2. B u t I would not want t o do it or aes for it unless
the other ocanks were §
Chairman.
A r e e r e a n y o 7 o a n k s cons 4dering
ernor Young.
h e r e i s n o necessity f o r i t i n o u r
Distriet,
Governor +
agate
u
r i d e a t n B o s t o n i s that c u r
elated t o t h e m a r x e t r a t e i n & way.¥
+ try t o xeso our rate above current rates for loans,
joe
ut w e d o try t o £89p a e r a t e above t h s going rate f o r
banxers! a c c e o t a n c e s .
Governor Seay.
w h y feeling i s that a n y change i n
the Giscount r a t e a t the nresent t i m s would b e harmful.
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Federal Reserve Bank of St. Louis
405
if we lower t h e rate i n the r e s e n t s t e t e o f hesitency
Seen
t o M e t O avount
for s t i i l e a t i o n .
t 0 a n 2cu1setion t h a t t h e r e
L f 1 % w a s rearsee f o t h i n k t h e r s
tecdnency t o a c c e n t
i t a s a n admonition ~ h i c h
the
t present time. I
I oe
believe,
t
unless t h e r e
is some urgsnt need, t h a t a n y chang? i n rats would d ¢ harm.
i,
The Gheairman.
I s n ' t i t z e n rally f2lt a
ent R e s e r v e B a n s t h e t t h e d e v e l o p n e n t s
o f 7!
months h a v e c r e a t e d a
i n business?
t
little h e s i t a t i c n
g
uthat toh e other
t
d a y i thet tth e
when hw e discussed
Ex—
oression was that i t wes nretty gen-rally felt, T h o s e a r e
not very concitions undsr “hic: t o rais* Giscount rates.
re]isnit e n y7voting t o
other
vies
t o
1het n o s s i o l e e x c u s :
for a n y d a n x
is a
demand
Governor
Governor
Governor
d
i
s
c
o
u
n
t
s h a v e increased
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
darch 1, 1925, there were 1 9 million. ‘ t h e n I
wo they wers u o t o 45 million but they heve cone cown
Million s i n c s I
cane here.
The Chaixrman
s t h a t t h e F l o r i d a r e a l e s t a t e snsecula-
I
doing t h a t ?
Governor Nellborn, W o , I dGontt thin« so,’ T h e y have
there o f the fertilizer being s o l d
on credit. H e r e t o f o r e fertilizer h a s b e m s o l d o n credit
to t h e m e r c h a n t s a n c dealers b u t n o w t h e f : r t i l i z e r c o m m a n i
sell f o r cash strictly,
eS
y v a n c s heve t o furnish t h e
cesh for t h e fertilizer,
ons way i n w i
The Chairman.
o u r borrowings h a v e increased.
Y o u aré loaning money cdo-n ther
fertilizer m e o p l e i n s t e a d o f t o t h e vants.
You
other comoanies?
Governor ‘wellborn.,
Y e advance monsy t o the banks
a
to enable their customers t o vay cash for t n e fertilizer.
rman, Formerly t h e fertilizer c o m o a n i e s b o r
rowed money i n N e w Yor.
ernor seay,
T h e c a s h cifferential i s s o auch n o w
farmer cannot afford n o t t o tase advantage o f it.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
407
He b o r r o w s
[ T h e Rest s
f r o m h i s banc.
Bank
d o m
i n our
mart o f t a c c o u n t r y l e n i s m o n s y t o t h e c o u n t r y b a n s s f o r
the nuroose o f taxcing c a r e t h a t .
1
The G n a i r m e n
iger i t used t o m
.
o
2
l
d imthod o f s s l l i n g f e r t i l —
yea s i g h t s e n months before t h e
I
s there enything further?
accounts w e r s
c a n e d
not I
w e h a d better n o t i f y Governor
veliev:
that 7 s a r e through
a n d a t t h s Gisposal
O r i ssinger
o f the
We have two other things, t h e meeting with the
the c o m m i t t e e m a t t e r
Board,
Board a n d
o n non-cash collections.
(Whereunon t h e Conference o f Governors went i n t o
session with the Federal Reserve Board. )
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Federal Reserve Bank of St. Louis
iO D i e
of the
FEDERAL R&SSRVS BOARD “ITH TH. GOVSRNORS O F THi FEDERAL
RESERVE BANKS.
PRESENT: G o v e r n o r Crissinger (Presiding), ViceGovernor Platt, sip. Hamlin, Mr. Myller, ir. James and
wir, Cunningham o f the Federal Reservé Board.
PRESENT ALSO:
T h e Governors
Governor Crissinger.
o f t h e R e s e r v e Banks.
A r e the Governors ready t o
report, mr. Strong?
Governor Strong.
T h a t part o f this ».rogram did the
Board w i s h t o taxe un?
Governor Orissinger.
W
“e
e thought w e would like t o
call u p o n e a c h o f t h e Governors,
o r have s o m e b o d y s t a t e
the conclusion o f the Governors,
a s t o the condition o f
things i n the country a n d what ought t o b e our policy.
Governor Strong.
T e have h a d very little discus-
sion o f that, Governor Crissinger,.
Governor Orissinger. I
thin: that i s the most import—
ant t h i n g o n t h e p r o g r a m f r o m t h s t a n d p o i n t
o f t h e Board.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
409
The r e p o r t O f . t h e o p e n w e a r ret
Py
Mittes w a s s u b m i t t e d + 0 t h e P o a r d b y t h e c o m m i t t s e
vance o f this meeting
anc d i s c u s s e d
c o n
i n ad—
I t "es considered b y the Board
a t o u r meeting,
a n c the discussion " a s just
about o f the sams character a s “as h e l d with the Board
by the o p o n marcet comaittes.
a
n
p
N o action was tazen deyond
r fo t h
v e oarevort.
l
Governor O r i s s i n g e
I
*de
t i s o n e c f t h e things w e
thought w o u l d c o m e u o u n d e r t r i s heading, w h e t h e r t h e C o n ferencs h a d c o n s i d e r e d t h e c o u n t r y a s a
business situation.
whole a s t o t h e
D i c y o u d o thatt
Governor Strong, Heretofore ~ e have always reserved
Giscussion f o r t h e Joint ..seting o f the Poard.
T h e
GAiscussion t h e t h e s t a z e n n l a c s " a s i n c i d e n t a l
to a
Orie? Gis@ussion o f t h e cusst2
C i s c o u n t rates a n d
the discussion o f the revort o f the open narset comnittes.
With only one exception, I think, all the Governors reported t h a t t h e r e w a s n o s e n t i m e n t
i n the diffsrent
Reserve Banks i n favor o f changing t h e discount r a t e a t
the R e s e r v e R a n k s .
n e v dic. r e p o r t s o m e t h i n g
ofsentiment i n the
s
Little b i t o f d o u d t a s
t h e
o
m
T
e hesitation, a
h
a
t in a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
suanarizges t h s
A r e
Gov-rnor Crissingér.
e r e any m e n b e r s
o f the
Boaré w a o w a n t + 0 t a l a b o u t t h a t ?
wit, James,
W i t h o n e e x c e n t i o n t h e s e n t i m e n t w e s oni--
as t o n o c h a n g s
Governor strong.
Mp. James.
M i n d telling u s who the e x c e p
roule y
7TES?
Governor Strong, G o v - r n o r Telloorn *thourht —
h e is
co not want t o naranhrase
to snyeat for hins? I
you said, .ir. ‘tellborn.
Gov .xrnor Yellborn.
Ciccussed t h e natter.
s a t e d that o u r »doerd had not
W e have n o t discussed i t i n e i x
sev:n months, b u t I a m inclined t o think thet nom would
very zoo. time t o T a i s s r a t e s a little, P e r s o n a l —
would b e i n f a v o r
i
t
i
n t h e vast
pretty
sffect.
At a time lice this, ?r a e n w e see thet a
i s coming
change
“
over business affairs, m i t h possibly borrovings increasing
a
at the oancs, that v e should coricer raising the rates
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ake ta tea 2
411
little, I
would personally b e i n favor o f i t and I would
try t o i m p r e s s t h a t v i e w u p o n m y board, I
my b o a r d a s a
and I
might s a y t h a t
rule h a s a l w a y s b e e n i n f a v o r o f l o w rates
have d i f f e r e d w i t h t h e m i n times past, T h e y a r e u n i -
thought p e r
formly i n favor o f maintaining l o w rates, I
haps w e should raise the rate a quarter, t o 4-1/4, a n d
then later on raise it to 41/2.
W h y would y o u want t o raise i t
Governor Crissinger.
Gown there?
Governor Wellborn.
Well, I
offerings a r e i n c r e a s i n g
notice t h e recdiscount
i n o u r bank. A
year a c o a t
this time they were 1 9 million dollars a n d n o w they a r e
45 millions. T h a t i s not a
Mr. James.
seasonal increase.
I s there a n y evidence t h a t a n y o f your
increased borrowing may possibly b e traced t o tre recuction i n devosits i n Florida?
Governor Yellborn, I
have b e e n t r y i n g t o f i g u r e
that out, ur, James but I canno: see much evicence Of: 34,5
It i s true that deposits o f the Florida banks a r e declining, b u t they have very large balances w i t h N e w York
City banks and they are drawing o n them t o meet their
demands. I
think a good deal o f our increase i s coming
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
413
from the fertilizer demand. U p t o a year ago all fertiliz
€r i n our section was sold o m credit t o the dealers, b u t
now they are selling f o r cash.
My. Jemes. T h a t looks Lixe a
Governor Wellborn,
pretty g o o d reason,
T h e vanxs have t o furnish money
to their customers, a n d they c o m e t o us a n d borro™,
D
Governor Crissinger.
o y o u thins y o u r rate ought
to b e raised?
N o t necessarily o n that basis, no,
Governor Vellborn.
I do not think so; b u t I notive there i s a n increase i n
the borrowings f r o m the N e w Orleans bans a n d I do not think
is c o n n e c t e d w i t h t h e f e r t i l i z e r proposition,
T h e y
heave been borrowing »retty heavily recently.
would l i x e t o a s k G o v e r n o r W e l l
Governor 8 c a y . I
born, when h e refers t
¢
changes i n business affairs,
whether h e means vreater activity o r a slowing down?
thinks there i s a slowing down;
Governor Vellborn. I
I think t h e tendeney i s along that line,
Governor Crissingér,
W h y raise t h e rate i f there
is a slowing down?
Governor Vellborn.
are going t o decline; I
W e l l , I thins that fhe deposits
think business operations a r e going
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
413
to b e curtailec considerably this year a n d when that
time comes that devosits a r e idle, t h e n t h e banks will
have t o borrow pretty heavily.
Governor Crissinger.
on this s u b j e c t ?
H a s anyone else anything t o of-
A n y mexber
Governor Yellborn I
o f the Board?
did not mention, Governor, that
of our rates a r e velow the marcet rates everywhere,
r Yor, Boston, Philadelphia a n d Chicago,
O u r discount
rates are below the going rates a t the oresent time,
Vice-Governor Platt. I
rates.
would like t o say a word about
I t seens t o me that the rates a t the Federal Re-
serve Banrs, outside o f the financial centers, a r e all too
low and have deen for a good . while. I
believe they ought
to b e r u n with a t Least some consideration t o profit. T h e
western “eserve Bancs, outside o f the centers, a r e practically c o r r e s p o n c e n t banss.
T h e y a r e Reserve Banks o n l y i n
the sense that t h e y carry reserve. T h e r e i s n o reason w h y
their rates should b e way below the m r x e t rate.
I t doesn't
much difference t o the average borrower whether t h e
rate i s four o r five p e r cent,
H e will p a y i t just t h e
sams. T h e Federal Reserve B a n k itself maxes less money a n d
has t o put money i n t o N e w Yors C i t y t o maxe i t up, buying
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
the
iw
S
for t h e p u r p o s s
f o r c i i z g t h e moner into
esking
New Yors, “hich wfe7 Yors dossa't asx for, o r isn't
i!
as
for, b u t f o r t h s ourpose o f supporting itself e s mich
‘ossidle i n th: ¢istricte th-aselves. I
thins t h e rates
ought t o b e «stablished ~ i t h s o n r e f e r e n c e t o that.
o f ths financial c e i t e r s
Fadsral R e s e r v e R a n t s o u t s i c e
no real connection,
r influence o n business.
or
T h e
l i t t l e connection, w i t h
I + t i s the f i n e
retes that influences sysculation
.wost o f tac vorrowers
vay a n y t h e r e f r o m s i x + o t e n t o twelve
ing t h e soread would not n a
bants
mete e @ Gifference i n t h e earnings o f the
anc w o u l e wzaxe e
Gifference
i n t h e amoun’ f
.aoney t h a t
seEricat vapcr.
they n u t i n t o N e w f o r k t o b u y o p e n
Gov:rnor Crissing=r.
ject?
A n y other ismarse o n thie s u b -
I t i s a big subject.
we. James.
just seid,
I n line with what « . P l a t t h a s
there, meTnans.
it occurs t o n e that there i s a cuestion
axtent d o e s t h e r a i s e
o f rate
i n one district
district
2 tendency t o throw business i n t o another
have
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
the rate i
thins, 2 !
recall thet when t h e rats r a e
e x } I
p e r c e n t lower i n Clev-land
3t. Louis, t h e vanxers from Tentuccty vrote
eee)
vigorously »sceuse t h e y were o n a line eest,
of Frencfort, whereas the danters o n
nore f a v a r a b l y t r e a t e d t h r o u g h t h e i r r e l a t lLonship
with t a e C l e v e l a n d Bank, a n d t h a t h a d a
business t h e t o u l d o r d i n a r i l y
Cincinneti.
tencendcy t o t h r o w
~ 9 t o Louisville i n t o
l o n t t c n o r that t h e r e was enything v e r y
serious a o o u t i t , b u t i v was e n o u g h t o ceauss comirnt.
Vice-Gov-rnor Platt.
I t inoreasec the borromings
in C i n c i n a n s t.i
six, Jemes,
alone t h e line,
t h e r srords,.sh* oantera i n
~ e ~ i l l say, p e t r a s n t h e t w o c i c t r i c t s
borzomec from their corresvoncent v a n s in.Cincinneti,
nore favorable Fed-ral Reserves rate
than t h e r e w a s i n t h e =t.iLouis
district.
A s a mettor o f fact I contt <now that i t aace
very a u c h difference, I
shovlc think f r o n a vractical
stendvoint that i t would b e most d e
at t h i s tims,
Phe C i s tricts,
t o m a i n t a i n p r e ctica]
t h e same rete i n all
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Federal Reserve Bank of St. Louis
Vice-Governor :
sideration t h
C
O 7 4 0 t r t h i n e thes.
m s oucht t o g i v e t
we, James,
2s
n o s t thoucht
f T agree “ith y o u that i t i s s i r a b l e t o
zive n o thought t o ths political s e t up, b u t circunstances
Just n o w maxe i t absolutely imoossibl> t o entirely ignore
the p o l i t i c a l sentiment.
I t hee a
tremendous b e a r i n g
o n
business affairs, there i s n o question about that. There
is a whole l o t o f psychology bacsc o f business activity.
If t h e s t a t e o f m i n d o f t h e p u o l i c b e c o m e s f
idea that w e are t o have a recession i n trade,
tty apt t o have it.
gen-rally »vegins
a
w e are
O n the other hand, i f the public
e
b
ea f
conficence o r main-
tains a feeling o f conficence, then you are liable t o have
good business. T h a t i s all there i s t o that,
Governor Talley
T h e volume o f borrowings i n our ex.
perience i s more sensitive t o t h e
a Gistrict l i e ours. I
gen-orally, when s
thitx I
I o n e might think,
recall ~hen t h e rate started
rediccount rates were reduced
generally, that 3
cent, I
i
r
a
a n correot in. se
t
e down t o
r , u n t i l efter
hee reduced its rate to 3-1/2. T h e n w e moved our
rate d o m
to 4
and there w e s a
very n o t i c s a b l e t e n d e n c y
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Federal Reserve Bank of St. Louis
417
for borrowings t o leave u s a t that time,
our M a t t e r
I n voresenting
t o the
tion i n our rate from 4-1/2 per cent a t that time t o 4 per
cent would probably b e the cause o f increasing o u r redis—
count,
a n d t h a t followed...
O u r rediscount w e n t u o some-
thing l i k e t e n m i l l i o n d o l l a r s w i t h i n j
after w e lowered o u r r a t e t o 4
per cent,
clined t o azree s u b s t a n t i a l l y w i t h what
sifficiently l o w and that i t should b e nérhaxns t h e minimum
Ban o f Dallas.
B u t that situation arose w h e n
the Cifferontial betveen the fastern rate a n d r a t e got
as w i d e a f o n s v e r cent, a n d t h e iarger b a n * t s i n o u r d i s —
trict j u s t peid u s off a n d borrowed monsy i n other n a r ets,
“
After
v e c h a n g e d o u r r a t s t h e rediscounts increased,
par—
TLoOuULesiy f r o m t h a t
I thins that i s something y o u
Oota: i n t o consideration.
e
r
o
than thse
traffic
will
rence o f one per cent. A
Y o u are charzing a
AhNSge I N E S T
helf o f o n e v«r cent,
howev+r, F i l l not d o it,
Governor Talley, I
thin that i s ~robably true. They
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Federal Reserve Bank of St. Louis
418
be inclined t o borrow f r o m u s o n a slight differenOn account
o f t h e »nroxi:
Governor Crissinger. z
;
to b e the volicy o f
the Fedsral Reserve Banks t o charge a l l that t h e traffic
will posar?
Governor Talley, I
do not think thet that should b e
& principle, no.
ip. Miller.
T o what e x t e n t h a v e t h e R e s e r v e B a n s ,
particularly o u t s i d e o f t h e b i g centers, e x p e r i e n c e d a n y
effect, i f not necessarily i n an actuel reduction o f volume o f their rediscounts, a
recuction o f rediscount c e -
mand, w h e n t h e System i s putting monsy i n t o t h e ooen Mar-xet t h r o u g h the purchases f o r special investment account?
Is that question clear?
Governor OCrissings
I
t i s not. t o ms, air.
oe
ii, w i d e r ,
S y p 20se w e shouldc. d e c i c e
mut $250,000,000 into the open market b y having the open
market committees >nurchase short governuents, woulc y o u experience a n y e f f e c t
i n .jneeapolis, G o v e r n o r Young,
Kansas City, Governor Bailey,
ley? ‘ p u l d i t reduce,
o r in
o r i n Dallas, Gover,or Tal-—
d o you thins, y o u r rediscounts?
We ‘now that i t has that effect v e r y conspicuously i n N e w
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Federal Reserve Bank of St. Louis
419
York, especially i n a period when there isnit any active
demand for money there,
I t has visible effects i n Boston
and Philadelphia, and also i n Cleveland, has it not, Governor Fanchsr?
Governor Fancher. Some, yes,
wp, ujller., And in Chicago, Does it get out there?
Governor Young.
polis i s concerned,
A t the present time,
s o far a s Minnea—
w e only have approximately t w o o r three
millions, a n d I cannot s a y that v e would notice a n y effect
at all,
B a c k i n 1920 o r 1921 i f $250,000,000 h a d been
put i n t o the open marcet i n N e w Yorxs I think w e would have
Felt 1%,
dip. sgller.
borrowing —
onen m a r c e t
Y o u would feel i t when y o u r b a n s w e r e
if a
good c e a l o f m o n e y w a s o u t i n t o t h e
d o v o u thinks i t w o u l c r e d u c e y o u r d i s c o u n t ?
Governor Young, Y e s . I
our D a n s
think the cifficulty with
i n the Western otates i n 1920 a n d '21 was not
the money they loaned b u t i t was t h e atount o f denosits
that t h e y lost,
w h e n y o u tave Government b o n d s o n a
5 per cent basis i t is quite a n inducement t o the depositor
to draw his money o u t o f the ban’ a n d put i t into Gpvernment bonds.
T h a t causes a reduction i n deposits i n the
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Federal Reserve Bank of St. Louis
430
bank a n c f o r c e s
t h e banx
t o borrow.
I t takes then some
time t o collect a n d adjustment themselves.
P u t t i n g $250,—-
000,000 i n the o v e n
raisé t h e »rice a n d
not b e quite t h e inducenent f o r the dsoositor t o invest.
t i s really a n indirect reduction.
I
great d e a l
of that i n 1920 a n d '2l,
iy. willer. I
would lixe t o g o a little further
with that question,
I f there w a s a considerable inorsase
en aarcst holdings o f the Federal Reserve bank's
investment account, d o you think i t mould have a n effect
Goveruor Harcingy
Governor Harding.
wir. Miller.
Yes, I
think i t rould.
H o w about Philadelvhia?
Governor Norris.
tip, wailler. I
i
g
h
t effect, I woulc say.
will a s x Gov-rnor H a r d i n g w h y h e t h i n k s
it would.
Governor Harding,
T h e N e w In¢land cankcs are pretty
lirges holders o f Govermuent bonds.
I f the System should
cut $250,000,000 into Government bonds it would tend to
of Government bonds a n d a good ‘teany o f
be disposed t o sell and taxes their profit.
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Federal Reserve Bank of St. Louis
421
would n a t u r a l l y b e so.
T h e y don't o w e u s much m o n e y
cy woulc clean that
Up, undouotedly.
wr. James. [
wonder
i f that would aoply t o all t h e
aistricts?
Governor I
co not now, b u t the Boston Dis@ boncholding district, T h e y have all
uy. James.
the others, I
Y o u r district
i s different f r o m s o m e o f
have i n mind that »erhaps t h e bancs that
are borrowing i n ths wlinneapolis district, t h e Dallas
district a n d t h e S t , L o u i s d i s t r i c t a r e a t t h e nresent
hat w o u l d n o t h e v e v e r y m a n y G o v e r m n e n t b o n d s .
of fact a good deal o f the uoney that i s loaned
that heven't facilities f o r borrowing anywhere
xcept a t the Federal Reserve Bant, 2c u e t o one circumStance
O r anothex.
I
f y o u taxe o u t o f t h e System's r e -
iigcount loans o n collateral other than Government, c o m
read w i t h t h o s e l o a n s w h i c h e r e l o e n s
t o danks that a r s
somstines i n a n extended condition, y o u w e u l d n ' t h a v e a n
awful lot o f aoney loaned i n the districts, would you; that
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Federal Reserve Bank of St. Louis
432
is t o say, those districts that ~ e are referring t o now?
Governor Young, P r a c t i c a l l y n o t h i n g
air, James.
i n minneapolis.
A n d i t would b e vsry near the sane thing
in Dallas, would it not?
Governor
Governor Young. E x c e p t some tamoorary borrowing f r o n
the T w i n C i t y banks.
wir, James.
O h , that i s a cifferent thing.
Governor Fancher, I
think there a r e t w o reasons t h a t
affect districts t h a t a r e adjacent t o the N e w Y o r d i s —
trict where the o p e n merset operations a r e largely conduct—
ed.
I f you nurchase $350,000,000 worth o f securities Many
of those would b e orned b y banks o f the Cleveland district,
and. as Govemor Hardintg has said, thet would have the ef_
fect o f etimuleting t h e vrice a n d many more securities
would b ¢ sold, b y reason o f the purchase o f that a-nount i n
the o p e n market,
a n d w e would cetect t h e effect o f i t t o
some extent.
Mr. Miller. Governor Fancher, suonose a policy o f that
_were initiated when the security m r c e t s ,
w e will
wer? rather unresponsive, w h e n there wasn't v e r y much
inclination t o tare t h e money f o r speculative purposés,
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Federal Reserve Bank of St. Louis
423
to become o f the money that w e put i n t o
is put i n i n N e w Yors, because that i s o f
course t h e c e n t r a l m o n e y w a r c e t
o f t h e country,
T h a t be-
comes o f i t w h e n t h e s e c u r i t y m e r c e t d o e s n o t w a n t i t ?
Nould i t have a n y effect upon y o u r rediscount denands a t
home b y reason o f the fact that there i s a larger anount
of money i n the central money marxet o f the country?
Governor Fancher. I
would think, Dr. Mjller, that i f
we had soms o f our member banks that were borrowing, banks
which omned their securitieass I
think there would b e a n
effect that w e tould b e checked.
Mr. Myller.
H e v e y o u a n y idea h o w that effect,
so
to sveaz, could b e transvorted into your Dallivick?
Governor Fancher, I
do not i m o w that w e could tell
the vatticular transaction, D u t I think a n easier s i t u a
tion i n Ner Yors i s reflected i n a gen*ral sort o f w a y
bacs into the aciecent districts.
A n easy money condi-
tion h a s i t s effect.
Mr. willer.
s o m e o f that money that i s put i n would
percolate through t o your District?
Governor Fancher. G r a v i t a t e o u t t o our District, yes.
wir. ugller.
S o m e o f i t wovldc find its way i n t o t h e
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Federal Reserve Bank of St. Louis
434
hands
o f banks t h a t a r e i n y o u r debt,
a n d their discounts
would b e p a i d o f f ?
Mr. Fancher.
wir. ilgller.
Y e s ,
N o w I would l i s t o ast whether t h e G o v
ernors o f the more agricultural districts t h i n k that t h e y
would feel a n y a f that effect?
Governor Talley. I
think this would b e true;
can only measurs i t through o
W
e
ur transactions w i t h t h e lar—
ger bants. D u r i n g t h e t a x paying veriod comeof o u r larger
bancs p a i d u s off, I
haven't followed i t sufficiently
far t o see whither temporary e a s e i n money h a d enything
to d o with the circumstances.
O n the other hand I could
readily s e s that i f a substantial amount o f money was o u t
into t h e o v e n m a r e t t h a t g r e a t e r a c t i v i t y
i n comercial
paper would arise and then the borrowers f r o m our banks f o r
their current needs, w o u l d let their paper r u n off a n d g o
to t h e marcet f o r t h e i r monsy, s e l l t h e i r p a p e r
i n the mar—
xet. A n o t h e r thing that might b e observed would b e the
fact that when money i s throm into the open market or,
rather, p u t i n the open marcet, t h e daily telegrams nearly
always state f o r the next f e w days that bills a r e scarce;
rates show a tendency t o fall and then our larger banks,
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Federal Reserve Bank of St. Louis
425
who have a suostantiay anount
of banxersi! acceptances i n
portfolios, t e n d t o let those r i n o f f t o put t h e m
thei
e€asier condition.
r
Tt i s true i m connection with a
e
bwhich
m
ocanc,
ies @ m
ler
ge dealer i n Government
curities, which carries some ten o r twelve million dol~
lars ; in Government securities a l l the time, t h a t that
s
D
securiis i n and 'o u t with u ns borrowing a o n Governnumt
ties f o r two, three, f o u r o r five days a t a time, a n c I
d s e e h o r li t w o u l d a f
ufect
thetobanz'!s t r w
ansactions
directly.
Nikola cere
Governor Morris, y o u say i t sould have
no effect w o n your local rediscount situation?
r
o
Norris.
. stiller.
stances t h a t h a v e
nItwould
r affect
e
v very
o slightly.
G
it
r shat d o y o u is a y a s t o these
M
circum
been oresented b y .t. Fencher a n d «ir.
Talley?
Governor Norris.
Of course w e constantly t r y t o
anelyze t h e b e n s t h e t a r e b o r r o w i n g f r o m us,
Out o f our
755 member danke but 370 are borrowing at the vresent
time, 1 8 o r 2 0 i n the city o f Philadelonia, a n d all t h e
in the country.
N o r why a r s
they borrowing? T a k e
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Federal Reserve Bank of St. Louis
4236
the city banks first, I
regret t o say that there a r e o n e
or two chronics among them, b u t t h e rest a r e i n and o u t
from d a y t o day just adjusting their reesrve belances.
There a r e a
fer who a r e borrowing because t h e b u l
their c u s t o m e r s a r e i n s o m e t r a d e w h i c h r e q u i r e s
sual amount o f money a t this time.
of
a n unu-
O f course a t other
Seasons o f the year there are other banks borrowing for
trades that a r e i n ths same position,
always a
s o that there a r e
certain number o f the city banks borrowing f r o m
us owing t o seasonal conditions.
f a k e the great bulk
of t h e 3 2 0 o r 3 3 0 o u t - o f - t o w n b a n k s t h a t a r e b o r r o w i n g
from us, a n d a lot o f then are i n the tobacco section
around Lancaster, w h e r e they have been unable t o sell
their tobacco f o r a year o r t w o a t satisfactory orices,
y have had some othe
l o c a l troubles u n there,
lergely growing out o f that situetion.
the result o f ths anthracite strike e
O
f course a s
great m a n y o f the
banks i n that section a r e borrowing f r o m us, L a s t year
there w a s a n enormous vack o f tomatoes which could not b e
marketed s o that a
nunber o f bancs i n the States o f N e w
Jersey and Delaware are borrowing, either the growers o f
the t o m a t o e s
a r t h e canners.
B u t those a r e a l l local con-
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Federal Reserve Bank of St. Louis
427
ditions,
t h e y a r e a l l relatively unimoortant a n d I
only
mention them t o illustrate t h e fact that o u r borrowings
determined b y local conditions. N o w , i f the System
dic. anything that h a c the effect
m a c i n g strixing o r
sensational advance i n the price o f Government securities,
@ number o f the banks vould b e attracted t o them a n d
woulc sell their bonds.
I t would boring more money into
the District a n d indirectly w e would n o doubt feel some
results f r o m it.
B u t i f a trensaction w a s effected that
only h a d a slight effect o n the orice, that changed t h e
interest base o f the security f r o m 3.70 t o 3.60, t h a t
would o n l y affect a
few o f t h e large vanxs i n Pyiladel—
phia who, a l m o s t c e r t a i n l y , w o u l d n o t b e b o r r o w i n g f r o m
US.
ir. wigller.
L e t me ass y o u about this ohase o f its.
Do the New Yors b a n s compe: for business i n your district?
Governor Norris.
T h e y a r s o n s t e n t l y seexing accounts
rith Philadelphia canes. T h e y d o not, s o f a r a s [ <now,
compete: t
o any extent f o r t h e incividual business.
Mir. wjller. T h e y d o not l o a n money t o many manu-—
facturers i n your dcistrict?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor »trong, r
Mr. igilor.
T a u
t a e y do,
f
r
o
—
m Governor Norris
»
o
Governor Norris. 4
o O w a y of knowing
to what extent,
wir. aljller.
T h e answer t o the question i s predicat—
ed o n t h e a s s u m t i o n t h a t m o n e y t h e t w a s v o r r o w e d
i n your
Aistrict w a s borrowed f r o m Philadelphia banks. I
under—
stooc vour answer t o the main cuestion w a s that t h e nut—
ting i n o f a considsrable volume o f m o n e y i n t o the mar—
xet i n New Yors would not affect t h e situation i n your
Gistrict,
Governor Norris.
affect o u r Ciscounts.
A f f e c t i t very slightly. T h a t is,
T h a t i s the way I
understood your
question.
siller. A f f e c t y o u r discounts i f y o u hac a n y
rable d i s c o u n t s .
Governor Norris.
Mr. ijller. A
Y e s .
good many o f the bdan’ss will obvious-
ly, when thers isn't a n ective demand for securities,
eith=r < o out a n d seek business through Lowering o f the
retes t o their customers o n comnerci
securities. I
can s e e i t i s clear,
" D E
o r buying
i n the event t h e y
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Federal Reserve Bank of St. Louis
429
buy seourities, t h a t i t might have a n effect i n temoting
banks e l s e w h e r e
t o b u y securities,
B u t suonose t h e c o m
mercial rate goes down, what does that c o to you?
Governor Norris.
I f the commercial r a t e goes c o w
the borrowers get lower retes from their banks.
Mr. algller. I
ass tois a s a question, although I
venutt a n y definite impression u p o n it, b u t are there
mMereantile o r manufacturing concerns thet will sometimes
sell their
at other times, w h e n t h e r s i s not a sufficient c i f f e r e n
tial, borrow as customers from their bans, which i s also
called line of credit loans.
S u oD0se you have borrow
ers o f that r i n d i n your District? I
will just taxe f o r
@ sunpositious c a s e t h e B a l d w i n L o c a m o t i v e Yorks,
one
cig enterprises, a n d suppose they a r e borrowing
1eavily f r o m a Philadelphia Banr; suppose, a n d rhether
they d o this o r not I
do not xnow, b u t I
the commercial p a p e r mar: s
a m just assuming,
sufficiently attract—
by reason o f the fact that money i s very sasy i n
New York. that they place some o f their borrowings i n
the coumercial paver market, tase u p their loans a t the
Philadelvhia Netional Bank, a n d if the Philadelphia
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Federal Reserve Bank of St. Louis
National
they not,
Ban
i s i n your c e b t t h e y w i l l reduce, w i l l
i n e l l probanliit7?
Governor Morris. Yess, but they very seldom are.
mr. uiller. T h e y seldomare i n your debt. ‘ W h a t will
they € o with their reserve balance?
@oyernor Morris.
T h e y would vrodacdly sither b u y s o m e
thing o r nut i t out o n the street i n New York.
ilps WMillsr.
B u t assume that t h e Street i s not active?
Governor Norris.
I f they could n o t d o anything b e t —
ter they vrould probably b u y ban*xers! bills,
sips Myller.
T h e y w o u l d b u y vankers! b i l l s , w h i c h
rould run the rate doyvm o n banxers! bills, a n d they would
buy c o m n e r c i a l paper, p e r h a p s ?
Governor TTorris.
T h e y might, b u t t h e banks that a r e
borrowing f r o m us, most o f them, haven't a n y bought paper,
so that their borrowings f r o m u s are t o taxe care o f their
own customers,
Mr. Myller,
I f they are o n your rediscount ledger
they will take d o m their. rediscounts, that much jis
clsar.
Governor Norris,
Myr. ifjller.
Yes.
I f they sell something?
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Federal Reserve Bank of St. Louis
431
Governor Morris.
Y e s , cortainly.
If they have rediscounts ~ith you, d o m
will g o their rediscounts.
I f not, t h e ceompstition t o
gest business o f some x<ind will b e increased, a n d affect
the comnsrcial rates i n your District,
commercial marcet,
i f there i s a good
o r possibly might z o t o the length o f
influencing t h e rates t o so-called competitive custamers.
Now the reason I
asx t h e question is: I
a m interested i n
getting informtiwion, b y way o f experience, a n d i t has r a ther occurred t o m s lately f r o m time t o time the question
of the extent t o which the o p e n m r x e t operations m a y
become afactor i n the actual relationship between the Re-
serve Bank and the menber banks o f the District, whether
or not the oven marxcet operations, either o n the purchase
side o r t h e s e l l i n g side, t e n d t o p u t t h e member b a n k s o u t
of o r into the borrowing c o l u m f r o m causes that originate,
s0 t O speax, outside the District.
Governor Norris.
I f I hawenot already cone so, may I
mace i t vlain that i n m y original answer o f "very slight"
to your question, I
understood your question t o be, a n d
I believe I am correct, "*hat effect would i t have o n
the v o l u m e o f o u r r e d i s c o u n t s ? ! T
never f o r a n i n s t a n t
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Federal Reserve Bank of St. Louis
432
meant t o s a y t h a t i t w o u l d n o t h a v e a n y e f f e c t
straint o f other operations. I
i n re-
was soeaxing solely o f its
effect o n our réediscounts.
ir. Mgller. I
was t r y i n g t o c o n c e n t r a t e t h e e f f e c t
it would have o n the rediscountsat the time, assuming
that there were redcis:
a
n
d I had partly i n mind t h e
interior banks t h a t usually have considerable volume o f
rediscounts,
J o u l e there D é , especially
the i n t e r i o r b a n s
o n the part o f
i n t h e a g r i c u l t u r a l sections,
fect? Putting i t i n this form:
any e f
A t a time when the se-
curity m a r c e t s a r e i n e f f e c t i v e a n d w h e n t h e r e f o r e y o u
cannot tempt t h e sveoulative eppetite w i t h money a t a
low rate, a n d when, therefore, a n y money that i s put i n t o
the o p e n marcet
i s going t o g o either unemployed
o r takes
effect i n stimuleting competition f o r business outside o f
e big centers,
i f at such time y o u have considerable
rediscounts, will i + reduce your rediscounts?
Govemor
Governor
affirmative. i
Govemor Young, I
l u c e t h e redis counts
think so.
Vice Governor Platt, F r o m your city Danks?
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Federal Reserve Bank of St. Louis
4335
Governor Norris.
F r o m t h e city banks directly, a n d
more indirectly fran the country Danks.
sir, Myller., W o u l d that b e your answer, Governor Calkins?
Governor Galcins, S p e a k i n g more o r less directly
to the question, i t is my opinion that the effect o f put—
a large amount o f money i n t o the marxet i n New York
it i s inactive, a s you have indicated, will unquestion—
ably have a n effect throughout t h e country, T h a t effect
Will decrease a n d become attentuated i n prooortion t o the
renoteness i n niles; i n other words, where conditions are
somewhat closely commarable t o those i n the centers the
effect w i l l b e g r e a t e s t e n d s o o n e s t Telt. and: 2
will
dim
igish f r o m that point on, a n d eventually that condition
prevails affecting rediscounts over all sections o f the
country outside o f New Yorx. I
do not <now that I have
mede ayself clear.
wir. Miller, Y e s .
Governor Calzins. F o r instance,
w e Might expect a n
almost imnediate -ffect i n the borrowings,
Los Angeles and Seattle; a
i f any, i n
lesser effect
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Federal Reserve Bank of St. Louis
4,34
and a more deferred effect i n other vlaces b o t h e s t o
cannot s e e a n y escape f r o m
condition a n c distence. I
the conclusion that ~hon t h e marcet i n N e w York i s inaoctive, a n d a large a
merxet,
f money i s thrown i n t o the open
o
i t will have t h e ¢
o
f driving d o m t h e mar—
te for aoney and that, t o a measurable exve t, will
ead country banks a n d renote c i t y vanks t o withdraw f r o m
the warxet vecause t h e rate i s not attractive.
wip. aljller; Y e s .
Governor Calkins.
I t will also lead t o the sale o f
i s attractive
Government s e c u r i t i e s b e c a u s e t h e p r i c e
and renresents
l e r g e vrofit. ‘ T e :
o
u
r District
banks
some heavy Govermuent investors i n thse banks. T h o s e
to
would neturally d e inclined t o grasp a n cpportunity
sell o u t a t a n advances
O r , t o put i t the other w a y around
return.
would b e disnosed t o sell because o f ths decreased
Symning u p once more, I
thinc the effect o f mutting a
large
when
amount o f nonsy i n t o the o p e n market i n New York,
market conditions are inactive, will b e felt throughout
renote—
the country, t h e effect deoreasing w i t h t h e greater
ness
i n v o t h d i s t a n c e a n d conditions,
conditions.
a n d particularly
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Federal Reserve Bank of St. Louis
435
would like t o asx this question o f
Mr. Myller, I
Governor Yourg first, particularly a s regards the interior
banzs.
A s the operating head o f the Reserve Bank, when
your District i s really borrowing, w o u l d y o m rather have
them borrow from y o u b y way o f rediscounting o r would y o u
went t h e m t o borrow from the country a s a whole through
the open Marxet operations?
Governor Young, I
do not wmderstand that, Mi. Myller.
Mr. Mgller. S y p p o s e a
banxing situation i n which y o u
have rediscounts t o the extent o f $20,000,000 fran member
banks? B u t i n order t o make i t more strixing, l e t u s
maxe i t a little more artificial, a n d s a y that t h e most
part o f it comes from banks i n the Twin Cities, the big
bants.
N o w the
b y reason o f the fact that open market
>
purchases are made i n New York, this 30 million i n rediscounts would be ta’cen up, and many o f the bans,
s o t o speak
would b e out o f your bank, a n d i s that a question that inf control o f things i n
terests y o u from the point o f v i e w o
your District?
Governor Young,
I s it fair, Dr. szyller, t o asx m e to
take a n indeomdent v i e w o f it? H a v e I not got t o take a
System v i e w o f i t ?
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Federal Reserve Bank of St. Louis
436
Mr. sgller. T h a t i s what I am trying t o find out.
think I
Governor Young, I
have got t o take a System
view o f it,
air, willer.
L e t ! s put i t this way:
D o you lose con-
trol? D o you feel that y o u lose control locally o f your
situation? H a v e y o u better control o f vour banxs that a r e
éxtended, say, b y reason o f the fact that they are borrowing
from y o u through rediscounts?
Governor Young. J
think y o u always h a v e a better con-
trol o f the situation when t h e b a n i s i n your deht, W h e n
the b a n k i s not i n your debt y o & have n o control o f the
situation
a t all, I
a m t r y i n g t o victure t h e c a s e t h a t
you d e s c r i b e d d e v s l o v i n g
i n t h e T w i n Cities,
and I
cannot
wicture it.
Mr. Muller.
L e t u s asswee that t h e y have loaned e x
tensively t o t h e i r c o r r e s p o n d m t b a n k s
i n Myntana,
and so
on, a n d they want t o ease t h e load b y borrowing through you!
I hevs assumed t h e extravagant s u m o f $30,000,000.
L e t us
assume, b y reason o f the fact that a considerable amount
of money i s mut i n t o t h e open marsxct that their rediscounts
will b e reduced f r o n twenty million t o fifteen million,
to whatever amount y o u went t o assume. I
or
have gone t o the
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Federal Reserve Bank of St. Louis
437
extreme limit o f assuming that s o much money percolates
to y o u r D i s t r i c t t h a t t h e y a r e o u t o f y o u r b a n k entirely.
Governor Young,
e whether I would have
Y o u asked m
better control o f the situation,
ooint z y would s a y no, F r o n a
F r o m a theoretical stand-
practical standpoint I
would
say i t would not maxe a bit o f difference, because i f the
Twin C i t y b a n c h a d l o a n e d t h a t m u c h -noney t o t h e b a n k s
in
montana a n d other places t h e y o u l d have plenty t o worry
about s o that they wouldn't g o any further. I
+tstatensnt t o b e facetious. I
do not
a m trying t o fig-
just that would happen i n the District itself.
in trouble they s e t awfully careful.
hiv. Myller. T h e n i f we assume that the money could
go into the marctet without chenging the situation o f these
banks, t h e y would b e Sack borrowing five, t e n o r fifteen
million dollars.
I n other words, w e can put then cut o f
vour debt a n d put t h e m back i n t o your debt, a n d the fact
that t h e y a r e i n vould indicate n o change i n the situation
with you) but e change i n the situatio
money wmE.rcet o f the country.
Governor Young.
Mr. Miyller.
Y e S e
F r o m that poin® o f view y o u say that i t
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Federal Reserve Bank of St. Louis
difference
t o you?
Governor Young.
wir. Mglier.
Noe
Y o u l d thas b e a general view? F o u l d
that b e vour view, My. Bailey?
Governor Bailey. I
thins w e would b e affect
money i s cheap i n New Yors, t h e big borrowers, t o the
detriment o f our banks, w i l l ¢ o elsewhere.
the rats.
T h e y will c u t E
T h e local banc does n o t care t o meet it, a n d i t
gets away. T h a t i s the way i t would percolate o u t t o u s
and that i s the o u l y way I think i t would percolate out.
Mr. Wyller.
B u t i f your lerger e m b e r Danks,
of them, p a i d u p t h e i r d e o t s
o r many
t o you b y reason o f the fact
that m o r e money g o t into your District, f r o m y o u r point
of view, a s Governor o f that banc, i t would n o t bother y o u
oné w a y o r t h e other?
Governor Bailey.
Mir. Myller.
N o , I
d o n o t t h i n k i t would.
I t micht affect earnings, b u t otherwise
would not b e concerned i n it?
Gov«rnor Bailey, N o , sir.
Y e are not bothered
when the bancs ars not borrowing fvom us.
W e are bothered
sometimes shen they are, B u t t o get your idea, i f I have
followed this thing correctly, when there i s a lot o f money
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Federal Reserve Bank of St. Louis
439
Aen out thers t o loan t o our
below the current rate that o u r heme banks
are charging, w h i c h denies t h e local bank t h e orivilege
of l o a n i n g t o i t s c u s t o m e r s
i n Nansas C i t y a n d t h e Z e n s a s
City territery, a n d the result i s that t h e Xansas C i t y
more monsy than t h e y want a n c they won't
borrow fron us,
ip. James.
by the fact that the larger concerns i n pretty nearly each
District have accounts i n New Yorx?
Governor Bailey. Y e s .
Mr. James.
N o t o n l y a c c o u n t s f o r denvosit, b u t c r e d i t
through N e w Y o r
a n d Chicago a n c other m o n e y
‘iy experience i s that they “ould borrov i n
the different Cistricts. .
A very surprising thing, t o
a
developed o n my recent trio, a n d that
was the high
the b a n s
i n Los Angeles were able t o obtain.
In discussing i t -rith one o f t h e lerge
concerns i n ios Angeles, that i s the question o f ~hat h e
was paying for money, rates, I
tions
a n c h e s t a t e d 1 that
x e d him about his op+ra-
h e borrowed v e r y largely f o r his
concern i n the East, n o t o n l y throug eh t h e s a l e o f c o m m e r c i a l
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Federal Reserve Bank of St. Louis
paper b u t through
m e accounts, carrying dalances,
60 O11, i n the Zastern mar'cet
T h a t on
borrowed f r o m the f{ i n g e l e s Bank, i n which event h e paid
the current rate, h i c h w a s a
‘uch higher r a t e f o r Los
Angeles t h a n h e would have h a d t o
that h e had a n interest i n the L o s Angeles B a n k
that because o f that interest h e woulc n o t b e willing t o
advocete tating a
lover rate o n his paper o n that parti-
cular b a n t h a n t h e banc was macing genzrally t o its c u s t o m
ers.
N o w i n Memphis I found this condition, with r e
card t o ths bank w i t h whom I dié business o r ~ith which
my c o m p a n y d i c business.
I f I
wantsd t o m a z e a
loan w i t h
the bank h e would s a y to me "Old man, s i x per cent i s the
pest rate; y o u snow that; w e will b e glad t o let y o u
what y o u want a t s i x o e c e n t " a n d i f I was
corvoration paper through t h e open market a t
, I have s s e n this sort o f thing happen, t h e t t h e same
bank
:
m
b o u g y
h papi
t
7
x e
u
r and a half v e r
cent, when I couldn't mase a loan at the dank directly
at less than s i x per cent.
Governor Bailey. I
have done that many times, be-
cause i f t h e y l o a n e d i t t o y o u a t a
lower r a t e t h e y
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Federal Reserve Bank of St. Louis
44).
woulc. h a v e
t o loan
WMes .
i + t o t h e o t h e r fellov~ a t a
lower rate.
O f course h e wouldn't c u t t h e r a t e t o 3 s
is s i m p l y b u y i n g cormnercial p a
MT. miller. G o v e r n o r Crissing
to my question again, because i t
I think,
Governor
i
n
c
e G s r t a i n l y , M r . Maller,
Mr. wijller., F r o n the point o f
eserve B a n k — —
mace t h i s p e c i f i c n o w - — d o e s i t make a n y
difference t o the Reserve Banks that a r e not represented
On the open marxet committee ~hat the open market policy
is with respect t o »nurchases o r sales, whether i t i s a n
increase
or ¢ .
e i t h e r ?
D o t h e o p e n marxet o p e r a
tions o f the System i n your judgement constitute a
factor i n
your oroblen that gives rise either t o a favorable o r une
favorable
i
, o n e w a y o r the other, under a n y condi-
tions that ~ e have ordinarily h a d t o deal with? I
take
it maces n o cifference t o you, Ma. Young, a n c i t makes n o
Cifference t o you, Myr. Bailey,
Governor Young.
L e t m e reply i n this way:
A t t h e pre-
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Federal Reserve Bank of St. Louis
4423
sent time, a n d since i t h e
i
no difference t o our bank,
when 1 % might
L
e
r
Governor VYellborn.
c
n operetion i t has made
a
t
n t h e time comin
BO L a r e a s
iverantitelk< i n O u r D i s t r i c t
1 2 hese a e
material e f f e c t w h e n s o y e y i s m a d e e a s y i n N e w York,
b e
causs N e w Yors i s i n competition with o u r banks d o w n there
for t h e business o f the big concerns a n d i t affects o u r reciscount, I
a m sure.
ify, igller.
It is admitted that i t does not, from the
point o f view o f maintaining what y o u would rezard a s
relationship
good adninistrative control a n d good worcing
between y o u r bank end, w e will say, the borrowing intsr—
ests o f your District, affect you?
Governor Young. %
Governor Talley.
far i t has not.
I t brings about a
necessity f o r the
of administrative control provided such a condition
extends o v e r s o m e v e r i o d o f time.
or t e n d s
Anything t h e t e a s e s u p
ease u n t h e c i t y b a n k s f a c i l i t a t e s thse c o u n t r y
t o
bans borrowing f r o m then o n bills nayable security, a n d
they inevitably c o it.
wir e
M y
L k
ols
Governor Talley.
They a r e m o r e i n c l i n e d
t o run t h e i r
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Federal Reserve Bank of St. Louis
443
lێans u p and consider t h a t their line a t t h e Federal R e serve Eank i s beyond that,
W e have t o take into c o n s i d e r
¢ tiga, a n d d o take i n t o concideration, t h e total b o rrowings
of our member banks, regardless o f the sources from which
they have obtained the funds.
wir, Miller.
D o you?
Governor Talley,
wir. wjller.
Yes.
I s that fair?
Governor Talley, O n , yes,
e d o that, I n some in-
stances i t has presented problems i n view o f the fact
that the country member bank has assumed that, after borrowing @
considerable amount o f money f r o m i t s correspond
ents, i t can come t o us and get more money, and we have
to take into consideration t h e total borrowings,
Governor Bailey.
of paper put up.
W e taxce into consideration the *ind
I t not only h a s t o b e eligible b u t i t
has t o be mighty good i f he is porrowing a lot o f money
from anybody else,
Governor Talley,
pect»
W e g o
a t i t from a broader a s -
W e consider h o w m c h m o n e y h e i s putting i n t o t h e
local community, whether the total borrowings are out o f
proportion t o the amount o f business, what the volume o f
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Federal Reserve Bank of St. Louis
444.
business properly should be, a n d the cavital investment.
Governor Scay.
I t seems t o m e that t h e injectioy
of any considerable volume o f n e w credit,
o r the withdrawal
of any considerable volume o f now credit anywhere must
have a n effect anywhere, s e n s i b l y o r insensibly.
call t h e open markets,
W h a t we
o r the great markcte, a r e accessible
to all varts o f the country, b u t t h e different parts o f
the country have a
varying interest i n them.
what like casting a stone i n the waver,
I t i s some~
T h e disturbance
is g r e a t e r w h e r s t h e s t o n e e n t e r s t h e w a t e r a n d t h e r i p p l e s
diminish
i n intensity i n proportion
t o t h e distance.
Theoretically y o u cannot avoid t h e conclusion that i t has
some effect o n the general situation, a n d practically
also i t has some effect which i s felt unequally o v e r t h e
country according t o the relations which t h e interior m a y
have w i t h the credit centers,
Governor Crissinger.
I s there anything further o n
this s u b j e c t ?
Govermor Strong.
W h a t Governor Wellborn h a s said
about the change i n the handling o f fertilizer, i 1 the
case that illustrates t h e noint pretty well, i f I u n d e r
stand t h e inquiry,
T w e l v e years a g o I was connected with
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Federal Reserve Bank of St. Louis
445
a large fertilizer company, a n d t o d o
e ssasonts business
with t h e South w e had t o b o r r o v y s
a high a s fifteen t o
eighteen million dollars i n N e w York.
F o u r o r five o f
the big companies had a total borrowing o f
pretty close
to @ hundred million dollars i n the big
centers a n d that
money was not collected back until t h e y
wers beginning t o
handle t h e n e x t y s a r ' s d i s t r i b u t i o n
o f fertilizer.
[ I n
fact y o u couldn!+ S a y that t h e whole line
o f credit o f
these big companies tas fully paid u p inside
o f eighteen
months f r o m t h e t i m e t h e s t u f f w a s
delivered,
N
o
w the
fertilizer comanies began this year, did
they not, Gover—
nor YWllborn?
Governor Wellporn,
T h e y began last year.
Governor Strong. This year the dealers have t o pay
cash f o r the fertilizer a n d they a r e offering
very great
inducemmts,
i n the w a y o f vrice concessions,
ers t o vay cash.
t o the f a r m
T h e inducement therefore i s for the hand-
lers o f fertilizer out i n the country t o borrow
fran their
local banks i n order t o finance tharselves,
T h a t will
transfer t h e burden o f borrowing t o the local banks w h o
will Ciscount a t the Federal Reserve B a n k a t Atlanta.
Four
or f i v e o f t h e s e b i g f e r t i l i z e r c o m s a n i e s M a y
reduce t h e i r
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Federal Reserve Bank of St. Louis
446
regular borrowings
i n New Yor’ 2 5 t o 5 0 million dollars.
D o y o u xncew why they changed their
Governor Yellporn,
plan?
Govermor Strong,
m o r t h e disasters they met.
Governor Wellporn.
I n 1920 a n d 2 1 they dic n o t g e t
paid; t h e notes were n o t vaid.
Governor Strong. !
a r e not
Governor Orissinger.
I s there anything further, Dr.
Miller, w i t h regard t o your inquiry?
M r a t i s the c o n
Clusion o n i t all?
W h y , Governor, I
Mr. Myller,.
whether
was anxious t o see
i t made a n v difference really t o t h e interior
reserve banks.
i i y own thought mould bé, i f I were a
ernor, i t would make a great difference t o me.
whole, when m y district was borrowing, I
Gow
O n the
would like +
have that borrowing f r o m m y bank i n preference t o having
it f r o m t h e o p e n market,
s o t o speak, I
thin'’s t o m a i n t a i n
a good, effective administrative control t h a t that would b e
desirable w h e n t h e meuber banss were really i n debt t o
the R e s e r v e B a n k ,
I t has always seemed t o m s t o b e o n e
a n open
of the really difficult matters i n connection with
market policy,
W h e n w e operates through t h e open mar'ret
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Federal Reserve Bank of St. Louis
we are a centralbank w i t h branch stations. i
confess
i the enswers a r e t o 1
an imnensely r e l i e v e d , f
their face valve,
t o find out thas i t makes
I t means that w e c a n €o0 ahead with more con-
ence t o you,
fidence i n the System i n cperating t h e o p e n Market policy.
But I repsat that I
have always felt that t h e contrary was
probaoly t h e fact.
Governor Young. I
answering I
answered for the present, a n d i n
assumed that i t was none o f m y oatticular busi-
ness a s t o how the banker r a n his bank when i t was n o t i n
debt tous. I
bit.
have got t o modify that statement a little
I f that banker i s much o u t o f line, d o i n g a
of things that w e xuow are wrong,
lot
w e will probably call
that man i n and caution him, e v e n i f he i s not i n our debt.
get t h e
When h e gets o u t o n a limb h e i s not going t o
accommodetion t h a t h e thinks
Federal Reserve Bank.
h e i s going t o g e t f r o m t h e
I f o n the other hand, because o f
a n d low G o v
easy money, because o f low commercial rates
ermment b o n d returns,
b y many o f the bonds that have b e e n
issued i n the last five years o n the policy p e r h a p s ,
that t h e y wouldn't c a r e t o let good commercial paper o u t
assuming
of their portfolios, a n d accumulate bonds, a n d
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Federal Reserve Bank of St. Louis
443
a secondary reserve, I
ao nov know that I
apetent t o criticise that ‘wanker, T h a t i s his affair.
Mr. i ller.
I nut i n t o it, I
B u t you are leaving ovt a factor tha’
egree with y o u i n what y o u have said,
but suppose that a l l the conditions y o u have described
are made still easier b y reason o f the fact that w e deGide, looxing a t the situation i n a larger w a y a n d from
a longer viewpoint, t h a t i t i s desirable t o put a
couple
of hundred millions i n t o the o p e n market through t h e pur—
chase o f securities.
D o e s i t make a n y d i f f e r m c e
t o you
then?
Governor Young,
ir. Miller.
I t might then.
O f course i t maxes a
effects t h a t y y
o’
u fesl.
differmce
i n the
b u t d o e s i t mike a n y difference
to you, f r o m the point o f view o f the relationship o f your
bank t o bank movenents a n d conditions i n the District?
Governor Young,
Governor Calkins.
I t might.
M y impression i s that Dr. Miller i s
assuming t h a t h e g o t a n answer
to that which,
t o his l a s t question c o a t r a r y
i t seems t o me, w a s mac’,
I n other words,
he
got t h e answer that t h e operation o f the open m r x e t d i d
not i n any way affect t h e administrative policy o f the F e d
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Federal Reserve Bank of St. Louis
449
eral Reserve Banke.
J I do not think that anyone h a s answer-—
ft seems t o m e thet t h e answer i s that
inevitably affect t h e adminis-
trative problems o f all the Federal Reserve banks i n a lesser degree a s conditions a n d distance present greater dit.
ferences,
idr. Myller. I
got the impression o n the whole that
it does not make enough difference t o “sve offect o n a n
Mar'cet policy.
Governor Calkins. I
think Governor Young has s a i d
it doss not yet, b u t that i t might.
Governor Strong, T h e report o f the open market commit—
tee w a s d e p e n d e n t s o m e w h a t w o o n d e v e l o p m e n t s
i n N e w York
which h a d not y e t been completed a s the result o f financing
Over t h e q u a r t e r d a y ,
T h o s e developments h a v e reached a
stage today where i t appears t o m e that t h e picture i s
nearer t h a n i t w a s a
week o r t e n cays ago,
T h e report
from New York today i s that our discounts are $142,000, 000.
You Will notice that yesterday a n d today, a n d for the last
day or t wo, money has been 4-3/4 and 5 per cent. That
has occurred notwithstanding t h e fact that t h e total Stock
Exchange loan account, s o far as we can gather from the
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Federal Reserve Bank of St. Louis
4.50
reports, h e s been reduced b y nearly four hundred million
dcllars, possibly quite that now, T h a t would indicate
to me, with the volume o f borrowing i n New York that w e
aré S t i l l g o i n g t o h a v e p r e t t y h i g h r a t e s f o r money.
I n
other words, t h e total o f the N e w York loan and deposit
account requires t h e support o f $142,000,000 o f borrowed
reserve m o n e y p e r month.
A s a
matter o f S y s t e m p o l i c y
as t o discount rates a n d open market rates, t h e question
is whether i t i s best for the country a n d the country's
business t o continue t h e situation i n New York, w h e r e t h e
banks are paying four ver cent for that amount o f money
and a r e trying t o pay i t off, a s they are endeavoring t o and i f that situation i s to b e changed i t will not b e materially altered b y reducing t h e discount rates i n New Yor‘,
which w i l l c h e a p e n w h a t t h e b a n k s h a v e t h a t b o r r o w f r o m us,
there won't b e a s heavy a penalty a n d they won't b e a s
anxious t o pay off. T h a t amount o f money has got t o b e
borrowed t o keep their reserves good, i n bulk, and i f the
time cane when w e felt that a
generel level o f five p e r
cent, possibly, o r i f the bulk o f the moncy borrowed from
the banks w a s t o o high, t h e only w a y y o u c a n g e t i t down i s
to b u y securities a n d put funds i.to the marrst s o that t h e
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Federal Reserve Bank of St. Louis
banks c a n pay u s off.
lip. Myller.
I s there a n y evidence
o f any Snécial
reason of why they have run u p their discounts?
Y o u would orcGinarily expect
Governor Strong,
to c o m e d o w n i n t h e f a c e o f t h e l i q u i d a t i o n
i n the
Market —
Mr. Mgller.
I s i t l o s s o f denosits?
haven't g o t the figures o n the
Governor Strong, I
wire transfers,
but I
shins
i t reflects t h e f a c t p a r t l y
that there are 3 5 millions i n Government securities t h a t
we have not reourchased. T
he call o f Government deposits
of c o u r s e i n c r e a s e s t h e r e s e r v e requirements.
T h e payment
yesterday of $121,0C0,0C0 looxs lixe a great big payment,
but i t o n l y i n c r e a s e s t h e T e s e r v s r e q u i r e n e n t s
age o f 1 2 millions,
o n the a v e r
o r about t e n oer cent o f that,
s o that
would n o t count a s a very Largs amount i n this borrowing.
If the Government h s s accumulated a
balance i n the Reserve
nx, a n d I have n o figures o n that score, that would account f o r i t also.
Vice G o v e r n o r Platt,
T h e Government b a l a n c e
i n your
bank i s higher than usual.
Governor Strong, T h a t wae just i n anticipation o f
yesterday's nayments.
W e have 90 million to pay. T h e r e
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Federal Reserve Bank of St. Louis
452
are @ variety o f things that might account for this,
W e
have h a d a n increas? o f 2 5 t o 3 0 million dollars i n the
ear-marke@ gold i n the bank, ‘That, however, i s entirely
offset, a n d more,
T
by (
h
e fact
remains t h a t a f t e r t h e t r e a s u r y ' s
banks still owe us $142,000, 000.
Vice G o v e r n o r Platt.
T h e Governmnent ‘Surnover i s n o t
entirely completely a s long a s t h e Government balances
in the N e w York bans a n d i n other banks a r e higher t h a n
nommel,
Governor Strong. T h e y have been lower t h a n normal.
If they are higher than normal that i s a very recent
accumulation.
Vice Governor Platt, I
noticed sithsr t h e d a y before
yesterday o r yesterday that t h e y were considerably higher.
Governor Crissinger.
I t seems t o m e that this q u e s
the most important t h i n g before t h e Conference o f
the
Governors, t o determine what/policy ought t o b s i f this r a t
continues t o g o u o o r stays up.
Governor Hamlin.
C a n ' t w s discuss that a
better a f t e r w e h a v e h e a r d f r o m t h e G o v s r n o r s
little
a s t o busi-
ness c o n d i t i o n s ?
Govemor Orissinger. S o m e b o d y s a i d there wes a little
slowing u p all over o f business. However, i t will not take
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Federal Reserve Bank of St. Louis
y .032 tro set t hea s information.
V
uw 3 4 ;
T
Hoarding,
Gov=rnor
cultural situation,
1
O p are
s
w i t h t h e exception
ore
e
AEN
i ct. TAS
r
o f t h e tobacco
+
business, G i s t i n e c t l y better +
years,
t
:
has
b
s eiDe e n
for some
‘ T h e Haine s i t u a t i o n i s
f b o v e o f debt.
vy aoout 5 0
l
well,
heve i n c r e a s e d t h e i r
i
stock
sa
tb
a n d iasurplus
a
p t a an
a dc
s
ray cleaned
! very
T h e manufacturing situation
house pretty
is spotty.
T h e milla
complain o f small profits a n d slo7 ing denanc. T h e r e h a s
been a
tendency o n thse part o f the
aT
\ em
=ngland nills t o
fortify t h e m s e l v e s w i t h s o u t h e r n connections.
at
d n i fch
You w i l l
great m a n v o f the larger mills h a v e acquired rights
in o r aosolutely own, mills i n the
ingOo m i l i s
South,
T h e money—macare running o n
i n we
specialties.
Going well,
T h e mills that mac:
the Palm Beach cloth are
New Hanno~
The Amoskeag Mills i n .
shire, which aanufactured ginghams
oretty much, h a v e g o n e
on rayon goods.
tendency o f the textile
business g s e n s
I n fact the whols
t o d e towards s p e c i aities a n d
maczing higher
s
srade g o o d s 8, g o o d e w h i c h a r s
, s eaving
n o iih
t tso their
a f
Suscs
iible t o changes i n
Mite
t o work.
w o 3ie
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Federal Reserve Bank of St. Louis
454
,
s
e railroad
e
ls i t u a tpi o n h aas s h o wtn s t e asd y
i m
provement all during the past fourteen months. That has
been d u e t o the introduction o f drastic economies i n opseration,
T h a t s i t u a t i o n s e e m s t o b s honeful, m o r e s o t h a n i t
has b e e n f o r a
number
o f years.
road i s about t o undergo a
T h e Boston &
reorganization.
Maine R a i l -
T h e N e w Haven
Road h a s n o large maturities t o meet f o r some years a n d
they a r e honing t o have t h e Government reduce t h e rate o f
interest o n Government loans and »mrovide a vlan for gradual
amortization o f the loans.
T h e retail business since
Christmas h a s besn disappointing,
in January,
I t imnroved a
little
b u t e a r l y i n F e b r u a r y r e h a c h e a v y snowstorms,
one storm i n Boston, followed b y another a week later, a n d
each o n e o f t h o s e s t o r m s c l o s e d t h e scdiools f o r t w o o r t h r e e
ae
cays a t a time a n c t h e city spent helf a
in mazing t h e streets vassabls.
million dollars
S o u t h e r n N e w England
has pretty well d u g itself o u t o f the s n o w now, b u t N e w
Hampshire, Vermont a n d laine, a r e still covered with
three o r four feet o f snow.
T h e maple sugar »business i n
Vermont i s late a n d some aoprshension i s felt a s t o whether
going t o develop a t all.
T h e y are afraid that t h e
Sap M a y comsnence t o r i s e o e f o r e t h e w o o d i s s u f f i c i e n t l y
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Federal Reserve Bank of St. Louis
455
clear o f s n o v
it t r a n s p o r t e d
seems
t o b e satisf
have n o bank u
i s t w h i k e e p u s awake a t
all.
Governor Crissinger. M r . sijller has just been called
from t h e room.
H s w o u l d l i x e t o hear t h e s e r e v o r t s a n d
has a s k e d m e t o a d j o u r n f o r l u n c h n o w a n d c o m e b a c k
if agreeable t o the Governors,
Taerewuoon,
a t 12:40 ofclock o-m., t h e Joint Confer-
ence recessed until 3
o'clock p.m.
Joint C o n f e r e n c e
o f the same day.)
o f s h e Federal Reserve B o a r d
Governors
o f the
to r e c e s s
a t 2 : 5 0 o t c l o c x p.m.
esrnor Orissinger.
e r a l R e s e r v e Bankes r e c o n v e n e d
T h e meeting will xindly come to o
order. Govermor Norris, will y o u t e u s about the gener
al conditions a n d what y o u think about t h e situation, j u s t
briefly%
Governor Morris I T - c a n tell y o u i n a few rords.
ciable change i n our district beyond a nossible
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Federal Reserve Bank of St. Louis
iment, which has not yet manifested itself
We nave h a d a late, c o l d spring, w h i c h has i n terfered v i t h the retail t r e d ¢ a n d w e will have t o wait a
few weeks t o see ¥
moned,
t h a t trade hes simply been post—
o r whether i t has gone,
Governor Orissinger. G o v e r n o r Fancner.
Governor Fancher.
T h e situation i n our district i s
pretty m a c h t h e s a m e a s s t a t e d b y G o v e r n o r Norris.
is j u s t a
tancy, a
little c h a n g e sentimentally,
little m o r e caution, p e r h a p s ,
just a
little h e s i -
b u t with many o f our
lines o f industry t h e volume seems t o b e going along. T h e
late spring h a s h e d some effect u o o n different lines.
The retail veople a r e complaining some.
I t has h a c a
bearing u o o n the automobile industry i n that t h e ultimate
user o f t h e c a r h a s n o t y e t b o u g h t h i s n e w c a r o r m a c e h i s |
exchange.
I t has affected t h e entire industry, b u t g e n e r
ally speaking w e a r e having a
good volume o f business a n d
conditions a r e sound,
Governor Crissingeér.
G o v e r n o r Seay, will y o u plisaseé
tell u s about conditions i n your District?
Govarmor Seay, Theres has been n o appreciable diminutioa o f business i n our section, according t o such statis-
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Federal Reserve Bank of St. Louis
457
tics a s measure t h e volume o f treads.
very well; employasnt i s
b
u
I t i s xeesoing u p
t i t is undeniable that
there i s developing a stats m i n d , and i n connection
with t h e R e s e r v e B a n k p o l i c y I
Us t O watch
believe
i t i s incumbent u p o n
v e r y closely the situation a s i t develops
and meet i t according t o the necessities o f ths case,
I d o not ‘ n o w a n y cause f o r worry, j u s t because o f that
State o f h e s i t a n c y t h a t s e e m s
t o b e m a k i n g headway,
but you
know what the sentiment is; 1 % i s uncontrollable. I
think
it is undeniable that psople are getting into a state
of mind which looks f o r some recession i n business, with-
out the cause being very apparent o n the surface,
Governor Orissinger.
H a v e you anything t o say
tion, Governor Vellborn?
Governor T e l l y o r n
M o , e x c e p t t o s a y that t h e c o n d i
tion h a s n o t S e c u l e s i t s e l f
i n any material way, t h a t
s this slowing d o m . F a c t o r i e s producing building mater-
ials are slowing domm a bit, probably.
W e notice that the
Ford dealers are not sellimg their cars and there i s a
Little decline i n deposits, I
Governor Crissinger.
think,
h e t do you snow about the
Central West, Governor .icDouga.?
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Federal Reserve Bank of St. Louis
453
Governor zicDougal,
I n tne Chicago District t h e credit
situation i s s a t i s f a c t o r y
M o n e y i s easy a n d the g e n e r
al business situation is, I think, satisfactory. I
of n o evidence o f slowing d o w n i n volume.
‘now
I n resvect
to the automobile business, which o f course i s a very i m
portant industry,
i t i s interesting + o note that t h e reports
show that t h e volume o f production o n ths vart o f the m a n u
facturers shows a
very sudstantial increase over the same
period last year. I
three months, I
a n speaking n o w for the last t w o o r
i n k t h e distribution t o the wholesaler
is keeping pace with the uanufacturers! output but that
volume o f sales b y retailers h a s been slowing o f f a n d
Slowed off; that there i s some accumulation a t that noint
You hear some authorities stating thet thet i s due t o bad
roade a n d that i s very often t h e truth a t this time o f the
There i s ons feature o f the situation o u t there that
is c a u s i n g c a r e f u l
c o n s i d e r a t i o m,
d
n
a I think, s o m e a p p r e -
hension, a n d that i s the increase i n the installment o l a n
uying,
o r offerings. I
was t o l d just before I
the large Chicago banks felt a
left that
little apprehension i n re-
garc t o the increasing prceportion o f automobile sales that
wers being m d e
o n thess deferred payment terms, I
a m not
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Federal Reserve Bank of St. Louis
459
sure b u t what t h e c z e r banks have acted i n concert o n
that a n d have ciscussec t h e matter a n d have taxen s o m e
steps
t o undertars
t o correct t h e situation.
O n the whole
I thint that o u r business situation a t t h e present t i m e
is satisfactory, B u i l d i n g operations s e e m t o indicate
that w e have just about reached the peak i n Duilding activities. T h e volume c f contracts
i c t this year i s slightly
in excess o f those that were issued a year a g o a n d »er—
mits, I
think, a r e materially i n excess.
Y e t the general
impression i s that w e have about reached t h e t o p o f that.
The l a b o r s i t u a t i o n i s satisfactory, t h e r e deinzg v e r y
little unemployment.
Governor Crissinger. Governor Byges, a a y w s hear
you?
Governor Rigcs.
m a n u f a c t u r s r s a r e busy, running
full time. T h e wholesalers are a little quiet, not much
off, perhaps three per cent. T h e retal
off about ten ner cent as against a ycar aco. T h e r = are
certain sections t h a t a r e not i n such good condition.
P a r
ticularly i s that trus o f the cotton districts, w h e r e t h e y
hac a
die c r o n£ 5i n sight.
>
a: n d they s p e n t s o m e money
o n that
basic, ;a n d yonly Ysgo St about half o f what they thought the
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Federal Reserve Bank of St. Louis
460
would get,
T h e installments proposition i n semhis,
Louisville a n d L i t t l e R o c k i s s i m p l y enormous.
W e have
just visited a l l these branches a n d made inquiry regard—
ing conditions a n d find that t h a v are »buving everything
from household furniture t o automodiles
o n the install~
Conditions a s a whols a r e v e r y good.
season might b e stated a s normal,
T h e
I t i s not backward
and f a r m operations a r e going o n through o u r territory
as usual.
V
e s e s n o cause f o r e n y unrest
o r any
uneasiness.
T h e r e i s just 3, little guistness now, W N o -
body seems t o d é =xcited o n e v a y o r the other, b u t t h e y
hope business will g e t a little better.
G o v e r o r OGrissinger.
Governor Young.
ly agricultural.
G o v e r n o r Young?
T h e iynneavolis District i s largs-
W o i l s t h e situation i s not perfect,
it i s much better then i t wes i n ‘24, 1 9 2 4 was better
than 1923, a n d s o o n bacx t o 1920.
T h e cattle industry
has been i n a deplorable condition since 1920 and has
been m u c h b e t t e r lately,
T h e sheep m a n has done pretty
well f o r the last t w o a e vedae years rith g o o d vrosvects
for this year, B u s i n e s s i s claccing a
little bit with
the excention o f the implement men. T h e i r business
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Federal Reserve Bank of St. Louis
461
seems t o b e e r e a s i n g .
O u r situation i s very much
peen a t a n y t i m e f o r t h e l a s t s e v e n
*
.
Many banks heave closed,
but those that
believe a r e i n p r e t t y g o o d condition,
w e l l forti-
fied with cash reserves, Government bonds, o t h e r markst—
able bonds, a n d »rime commercial paper. I
District could? stand cuite a
l e;
think o u r
expansion o f business
without a n y borrowing f r o m the Federal Reserve Bans t o
speak of. T h e banks a t the present time owe us practically
nothing, outside o f the Trin Cities, a n d I think that i s
only t w o m i l l i o n dollers,
T h e s t a t e o f siontane o n l y o w e s
The bank situation I feel i s vretty well
cleaned up.
W e are going t o have some more bank failures,
but not a s imany i n mumber o r assets.
T h e State o f Montana
was hit narder than any other State, I think, s o far as
banks a r e concerned, b u t w i t h three banks o u t o f ths w a y
that situation rill b e cleened u p entirely i n Montana.
ir. Hamlin,
c h a t about retail sales, Governor
Young?
Governor Young.
a little recession.
N o t quite s o g o o d T h e r e has been
J I would l i x e t o mention t h e situation
of t h e s m a l l c o u n t r y banscer.
M a n y o f those institutions
u
b confidence h a s been deare excellent i n s t i t u t i o n s , t
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Federal Reserve Bank of St. Louis
462
stroyed a l l through thas countyy,
i
s pretty hard
for them t o mare a n y money.
dom t o such a point that h e %
make } i
T h e de
lixe
posits have drifted into t h e larger o: ters, points
Fargo, Sioux Falls, Helena, Butte, anc s o forth.
banks i n those places s e e m t o b e increasing v e r y rapidly
in deposits a n d t h e o t h e r s a r e g o i n g c o w .
Vice G o v e r n a Platt.
Governor Young.
t h a t i s nob 2
Y o u have
ricultural a n d l i v e s t o c r i n t s
t s i n some w a y o r
ientt c o n e b y t h e s m a l l ban’s i t h a s t o
be d o n s
i n s o m e o t h e r way.
T h o s e neople a r e entitled t c
credit.
Mr. James.
T e n t t h e afforded credit i f h e carries
deposits i n the larger cities?
Governor Young. Y e s , but I think lack o f confidence
has more t o d o with i t than anything else.
i n our disGovernor Talisy, T h e r e a r e some spots
what w e call t h e
trict, notably i n the u g h t a r e a a n d
south plains country,
i n the nortivestern part o f the dis-
fifty counties that
trict, T h e r e i s a n area o f forty o f
i n the fall o f 1924
suffered severe a n d continuous drought
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Federal Reserve Bank of St. Louis
and o n u p t o the season last year, T h a t h a s
well analyzed a n d i t i s very well understood
s o e c t i n t h a t areca
that t h e r e n e v e r w e s %
wey o v e r o f i n v e n t o r i s s
5
a r e a b y t h e retailers.
i n*
anything o f t h a t k i n d
is the o l d settled part
s h e district a n d w e d o not
h
look for anything alarming
e credit situation t o come
oon o F 2%, “ Y e have had a good deal o f pressure
b u t t h e y a r e depending m o r e a n d
on u s t o extend advances,
more o n their o w n resources
undertook t o discount a
i n t h e p l a i n s country.
T h e y
very favorable-appearing c r o p a n d
I thins i t was c u t short b y about 6 0 per cout b y a n early
17th o f October, a n d inventories i n that
country have accumulated a n d are being c a r
risd over.
T h e y shipped a lot o f goods i n there with a
rospect o f this crop, which dic not turn out a s well a s
they thoughts,
Governor Crissinger.
T
a
t section d i d y o u call
that?
north
Governor Talley, T h a t i s the plains section i n
west Texas.
wir. Hamlin.
T h e c o t t o n section?
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Federal Reserve Bank of St. Louis
464
Governor
Y
e
s
, @
comparetively n e w cotton
section.
Governor
Losin;
U
n around Amarilio a n d i n that
section?
Governor Talley. S o u t h w e s t o f A marillo, s o u t h a n d
southvest o f Amarillo, q u i t e a n area i n there.
O n the
other hand t h e rest o f the district has mace good crops
and things are all right, which largely offsets the other
Situation.
T h e r e has been a
very voor demand f o r cotton
last t h r e e m o n t h s b u t t h e r e i s s t i l l q u i t e a
good
cotton i n the hands o f the exporters, T h e r e i s
guite a
z o o d d e a l o f i t accunvlated, c a r r i e c
b y the city
bancs, b u t that, however, i s a n indication that there i s
some hove o f further liquidation, w h i c h ‘aight b e attached
to the orevious season, w h i c h would have a tendency,
het cotton moves o u t f r o m time t o b i n e
as
t o decreasé pres--
for loans o n the
Governor s s a y .
e
a
t p o r t i o n o f that c o t —
r
r
I
was just going t o touch o n that,
ton l o w grade cotton?
Gov=rnor T
,
.
“So a
Ne estimate there i s sane 800,000/, million bales o f that
:
3
cotton that i s not only very l o w grade, but i t 1
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Federal Reserve Bank of St. Louis
465
poor cuality cotton.
Y e had sone fall rains that stopped
the maturity o f it, a n d u o i n the vlaine country they hac.
the cotton that they z o t after t h e freeze
wes Simply what 2
|
acipe s n o I
had the
thought i n mind that along + o
i s the middle o f the
Sumner r e will l i s e l y w a x
o the f a c t that instead
+
of a ten million bale total c r o p "re are going t o find
t7o o r three million bales o f that cotton that isn't suit—
able; t h a t t h a t c o t t o n h a s n o t b e e n l o o x e d a t yet,
it
has just been accounted for i n the number o f bales, a n d
for that reason there might b e sons improvement i n the
demand f o r good quality cotton,
T h e exporters h a v e
done this, t h e y have offered substantial premiums f o r
cood staple cotton, a n d they have sole very little o f
that,
s o that I think w e will have a
more favorable situa-
tion later o n in the summer.
Tye loan account o f the Fed«ral Reserve Ban* o f Dallas
bas been very strixing.
I n the last three o r four months
I thins i t has never exceeded, except i n ons instance,
after the first o f the year, a n d thet just for a few
days,
nine million collars.
I
t has avereaged about
seven Million dollars b u t t h a t h a s been Cistributed among
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Federal Reserve Bank of St. Louis
466
large nuwvboer o f menber banks.
Maturities
D a y after d a y o u r
w o u l d c o v e r o u r n e t Loans
borrowing,
i n spite o f the fact t h a t .
borrowings i n some sections w o u l d b e earlier, o r a s early,
than w e e x p e c t e d t h i s y e a r t h e y w o u l d be.
Governor Crissinger.
G o v e r n o r Calxins, w h a t c a n y o u
say about t h e
Gov-emor :
thins I may s a y thet concitions
I
in the 12th District a r e normal.
I n some parts o f the
district they are s o normal a s t o be somewhat unfavorable,
which, b e i n g interpreted i n t o olaein English, m e a n s that
have a slightly deficient rainfall i n California, “hich
unfavorable.
a whole,
A g r i c u l t u r e itself throughout t h e district
o n a n average, I
shoulc s a y possibly i s slight—
under t h e a v e r a g e f o r t h i s s e a s o n o f t h e year, e
Pond
¥
have.
some crops t o deal “ i t h that a r e not considered i n the
Ne had quite a
severe winter i n the east—
ern section o f the country, resulting i n a n excellent
~ h i c h was perhaps unusually
tourist c r o n i n Celifornia,
profitable.
T r e branch
a n o
The condition o f emloyment
i s very pronising.
i s a s usual, w i t h only a slight
dsficiency i n agricuitural labore
S o m e apprehension i n
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Federal Reserve Bank of St. Louis
467
the Southern part o f the State because o f interference
with sexican labor crossing t h e line. E o r r o r i n g s i n what
have been t h e distressed sections o f the District a i
negligible.
T h e list o f borrowers i s very small.
T h e
only considerable borrowingsfrom t h e Fed-ral Reserve B a n
in the district are i n the San Fra s e c t i o n o f the
District, T h a t borroving i s occasioned largely I think
Sseasctnal movements, although i t seems t o b e slightly i n
acdition t o the usual seasonal movements,
The installnuat v l a n buying aopears t o b e a subject
that i s interesting mors neople, m o r e economists, a n d s o
forth, t h e n anything else.
I t aovears t o b e one o f the
principal u n s e t t l i n g c u3e s t i o n s
i n t h e p u o l i c mind.
nther words, t h e r e i s a very important factor,
I n
o r whatever
you might call it, t h e dimensions o f which are unascertain-
able, s o far a s my experience goes. There i s nothing that
is now attracting such attention a s the discussion i n the
mind o f the economist a s t o what t h e volume o f this install—
ment b u y i n g i s a n d ~ h a t t h e c o n s e c u e n c e s w i l l be.
seems
t o ne to be a
v e r y s e r i o u s question,
I t
T h e automobile
industry, w h i c h neans sales o n the Pacific Coast, s e e m s t o
be very active, extremely active, probably largely because
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Federal Reserve Bank of St. Louis
468
been falling o f f a little i n the eastern section
country a 1 y
nave been pushing there harder t h a n
Taxing i t altogether i t appears t o
District thars
d i s t u r b i n g indications
do n o t o b t a i n i n a l l t h e r e s t o f t h e country,
Finally
there i s a feeling o n m y nart t h a t conditions throughout
the c o u n t r y a r e s o m e w h a t d o u b t f u l , I
any more strongly than thet, I
ing o f hesitation,
d o not want t o nut i t
think there i s that feel-
W e do not see i t i n our part o f the
country y e t , b u t t h e r e s e e m s
t o be a
feeling
i n other v a r t s
of the country:
Governor Crissinger. G o v e r n o r BaileytT
Governor B a i l e y .
T h e conditions
i n the Tenth D i s —
O F course i n vier o f the large
trict a r e about t h e same.
crop that w e are going t o raise o u t there w e think conditions a r e favorable.
T h e r e i s n o reason that I
can g e e
why this rumour i s going around, b u t the retail trade h a s
fallen off, 1 4 February.
largest s t o r e o m m e r s
cerned a b o u t i t .
‘ comes.
N
e have o n our Board o n e o f the
i n O x l a h o m a City, anda h e i s n o t c o n -
H e says thas i s one o f the things t h a t
W e have another m a n w h o i s a wholesale drygoods
man a n d h e r e v o r t s
sales made
a n d collections made.
L a b o r
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Federal Reserve Bank of St. Louis
469
is well emloyed,
a s far a s w e c a n see building activi-
ties are going o n just a s much ove> the District a s they
have been going o n i n the last two o r three years.
haven't a n y great demand for money.
W e
O u r discounts run
T h e bent deposits
fron 1 5 t o 2 0 million,
w o a n d ccwn.
are j u s t a b o u t normal.
T h e y G O B O s V a r y < S r y Muchas
t w e e
is plenty o f money i n the local bants t o test local d e
would s a y t h a t t h e p r o s p e c t
Mancds. I
i s sood
business year i n the Tenth District.
Governor Crissinger.
H o w i s i t reflected i n New fork,
Gov-rnor S t r o n g ?
Governor Strong. I
change
do not think there i s a n y great
i n industrial conditions f r o m that h a s bsen t h e
Situation f o r s o n e time.
T h e r e h a s been a
Slight r e d u c -
tion i n t h e r a t e e t w h i c h n e v b u i l d i n g i s t a t i n g place,
but n o t v e r y great,
T h e veonorss t h a t c o m e i n i n M a r c h a r e
not y e t assembled t o a point where w e have g o t a n y statis—
ty4cal basis o r any actual report t o us
i n definite s t a t e
ments, b u t w e d o hear f r o m individuals t h e statement
definitely made that i n the retail trade, t h e retail sales
in February have oeen disaorointing, a n d that t h e y a r e fall.
ing off.
T h a t w a s partly ettributed
t o b e d weather a n d
partly t o the vagaries o f the svock market a n d t h e gensral
feeling o f uncertainty, I
do not think, however, that
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Federal Reserve Bank of St. Louis
470
that n e e d b e intocrpreted a s e a n i n g
what t h e y were a
4
% s a l a r e velow
yeer azo a t the *
date 8 0
much a s that t h e expectations o f this year's business h a v e
not been realized, a n d that goods have b e s n purchased which
ere not being s o l d fast enough t o lead t o ths expectetion
all b e sold.
After a l l t h e most imoortant development i n New York
has t o d o more with financial conditions,
s o far a s w e
have actual information, a n d for what i t may be worth, I
would l i x e t o review a bit t h e past twelve months s o a s
to get t h e whole victure i n m y mind.
A little o v e r a year a g o w e started t o sell t h e secur—
ities that t h e System o m e d a n d sold a total o f 290 nillion
comparatively short period.
T h a t occurred coindident
@ loss o f gol:. a t that time, t h e n e t loss a t that
maxing a totai o f about $175, 00,000.
T h a t has since
reduced b y importations, which have made the net
losses
nov not much over a
hundred million
f o r that item,
But those t w o things together, v l u s t h e gold that i s n o w
ear—marked i n our hands, h a v e h a d the effect o f having
the N e w Yorks banks continually i n our debt during this en—tire time f o r very considereble sums o f money. T h a t fluc—
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Federal Reserve Bank of St. Louis
40}
tuates seasonally a n d according t o very special c i r c u m
stances. F o r instance, t h i s morning t h e banks i n our Dis—
trict owe us $142, 000,000.
V e have $55,000,000 i n accept
ances, a large v a r s o f which have been carriec for dealers.
T h e bauance a r e very short bills o f
s h o r t matur—
ity t o divide anone the other Reserve Bons.
Now, curing this time the Federal Reserve Danks o f
Boston, Chicago, S a n Francisco a n d Cleveland, have advanced
their rate f r o m three a n d a half t o four v e r cent.
W e
have advanced o u r rate f r o m three t o three a n d a half, a n d
on January 8th, t o 4 per cent. T h o s e advances have been
made a t a time shen t h e banks e r e borrowing heavily i n
New York.
O n e o f the consequences o f that i s undoubdté-
edly t o naintain interest rates a t about their present
level, a n d when there i s a shortage,
rather sheroly.
t o run the rate u p
I t i s a day t o day rate.
A t the same
time s t e p s h a v e b e e n t a x e n t o i n f o r m t h e p u b l i c a s t o
the amount o f the Stocc Exchange l o a n account, information
undoubtedly o f value. I
lished s t a r t l e d a
think t h e figure finally pub—
great m e n y p e o p l e b e c a u s e
It w a s s o m e w n a t l a r g e r t h a n I
expected
o f i t s size.
i t t o be, t h a t
is
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Federal Reserve Bank of St. Louis
473
Stocr E x c h a n g e revort, e r p e c i a l l y s o when i t i s c o n —
idered that t 9,
h e wnouns handled b y the Stock
houses outsids o f New Yors, through their brenches, a n d
s0 on, i s not included i n the fieure a t all. T h e n there
which res have t h e
the decision o f the
+0 permit t h e railroad
consolidation t o vroceed because o f finenciel reasons
reth-r than because o f the merits
o f the i
a
n
d those
things hevs uncoustedly comdined t o develop s o m e feeling
of ciscourazenent, especially o n the Hart
t h e money
soeculators, 6 a c t e t reflects b a c c a dit anong t h e business men,
I t just s o hapzvens that y o u (Governor Crissinat th: m e t i n g o f ovr directors w h e n this matter
ssatenent being made
rate i n New
4
if the osn’ss continued heevily i n our debt, b u t intere
Tabes coatinued e s thay were, Tairly
o and down, e n d i t was t a e opinion
juined w
Ore that i i
COUNt.
6
by o t s
a
E
1 c é that l o a n ac.
Vecirabl= %
O
S
T
a
e
n at a
recent
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Federal Reserve Bank of St. Louis
A473
me sting
f tt
he € i r s coi v o r e 1 2 1 6
Sor sclLrectors a r t
convinced
that w s h a v e p u r s u e d
the s y s t e n a r e s e r v e d b
through a comnittee, i n conducting
count,
a n d they voted unanimously
,
ac-
this i n v e s t m e n t
i n favor, u n d e r t h o s e
o
c
o fs i n c n
r e a s ion g tih e atn o u n ti o f do u r nholdings.
Re
said to the directors then, a s I exoected t o be here i n
f e n days,
that i t seome ‘ o O me inadvisable t o begin t o a
do that until w e were out o f a period o f large swings
c t o government f i nua n c i n g .
The figures
d
n o w from t h e
banx, today, together with the fact that money is loaning
Stocs Bxchange, thet they have
at 5-1/2 ver ce
a very b a d marxet there a n d undoubtedly a
gooc deal o f
uneasiness Geveloving from it, leady m e t o believe that
to the extent
o r e d i t h e s a n y influence o n t h e
development o f sentiment o r uneasiness o r distress, w e
have i t i n our power,
i f w e mant t o exercise it, t o
ease o f f the situation, a n d I
e time has onme t oh do it.
a 4 rather inclined t o think
i c<now our
t
directors f e l t
that way when they voted t o increase our Ciscount rate t o
4 »er cent o n January 8th, I reconmended
d it, believing
e
g t h e tine
r
hed us o m e t o
it, a n d rather
oHoemerec
But
f i t was
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Federal Reserve Bank of St. Louis
Gistinct feeling t h a t
untoward results from it, and t h i n s i t is
thet o n the first vote o f our directors t h e i e r
But I
joubtedly w a s 6
st %
éxolainsd
sentiment i n the
Federal Reserve B o a r d that t h e increase t o four p e r cent
comolstion o f a »nrogram, t h e »relininaries
been carried o u t o f other rate increases
things that ~ e had been d o i n g throughout
some t o comolet> it;
resentations h a d »een made here o n ths
Bay, ~ i t h very s t r o n
such conditions a s these arose, t h e
Open Marcet coanittee should t s : steos t o remedy them | and
if the Committee did not, w e should i n New York,
Now this has a
not ¢ e
room, out 7
bearing o n the discussion this norning.
full report o f i t because I
had t o leave
j u d g e from Dr. «jller's remarrse tiat h e
the operations o f the c o m
mittse d i z not have t h e <
management,
o f tasing t h e control a n d
o r effectiveness o f the operation o f the Reous o f the héends o f ths local management a n d
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Federal Reserve Bank of St. Louis
+
put i t really i n the hande o f the comnittee whenever
it
wsnt i n t o the marcet t o buy securities, t h a t i t would b e
roflected i n the portfolio o f the xiynneapolis a n d 3t,
Louis Reserve Bance, f o r instance.
T h a t m a y b e so.
Pacts] taint i t is. so,
fect. B u t you have got t o have i n mind that i f
eral Reserve Banc o f New York alone, j u s t a s n y
business institution, snould und*rtace t o invest i n securities when thsy felt that the situation required i t i n
the effect would b e just t h e same i f w e dic i t
as i t would b e b y having the committee t o d o it.
would m u c h p r e f e r
t o have i t a
system matter, a
policy w o r k e d t h r o u g h t h e comnittec,
W e
system
e n d not have w h e
burden and resyonsibility o f i t all rest upon ths New
Yors Banx. A l l o f this, Govsrnor, leads simply t o this:
Governors o f the Reserve Bants have apvroved
adopted a renort o y the comnittee which reconnends
provable n e c e s s i t y f o r i n c r s a s i n g t h i s a c c o u n t u n d e r
certain conditions, i f they j
Simple guide, i n the reports 0
get O f the New Yor's bance, b e c
, way.
W
s
i
e introduce a very
é borrowings that w e
n
d
e
x in
I f the borrowings i n F o w York were one-third o f
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Federal Reserve Bank of St. Louis
478
re today I would s a y that there would b e
if any, occasion t o increase shat account; b u t
as a matter o f fact t h e Government yesterday disbursed
22 million dollars o f their bealence with us, which i s
felt i n todayts business.
T i t h e r e a r e th? thirty—odd
million securities t h a t we h a v s
O
W
‘ c , b u t notwith—
standing thees disbursements g o i n g into the market the
taoney Market i s ¢
g
n g e r right along;
i t i s not
Whe memver banks! borrowings f r o m u s
have increased,
I believe I
I think I
a s w e expected t h e y would.
a m the last one t o express any views and
a m expressing t h e viers o f a l l the Governors
of the Reserve Banks, anc the question i s whether the
Board will n o w express i t s views about i t because w e
ought n o t t o leave Washington without having a
our Dolicy and, i f »,ossible,
a n agreement writ
Board a s t o what w ¢ should do,
Governor Orissinger. I
brought t h i s tel*gram i n
thinking that i t really raised a n imortant question v e fore t r o n f e r e n c e a s t o whet t h e nolicy o f the System
ought t o de.
Governor CGalxins. I
would l i x e t o a s s G o v e r
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Federal Reserve Bank of St. Louis
@ question. I
u n d e r s t o o d y o u t o say, G o v e
that y o u f e l t i f t h e o p e n m a r c e t c o m m i t t e e d e t e r m i n e n o t
i n the marxet that t h e N e w Yorx Bank
to put a n y money
+,
should
o r would?
b
e
c
a
u
s
e I
d o not think
I heard y o u correctly.
T
G o v e m o r S t r o n g .5
f we a
o r e h a v i n g Sa
troublesome
+
time i n New Yorkake our directors would insist upon it, veaay
cause that i s our responsibility, t h a t m o n e y marset there.
I don't c a r e a button what t h e stocks d o a n d I a m sure
that i s the opinion o f our board o f directors, b u t w e
have t o c a r e a
great d e a l a b o u t t h e r e a c t i o n t h r o u g h o u t
the country of having 5-1/8 and 6 per cent money right
along i n New Yor,
Vice Governor Platt. n t t i t certain, with a deClining stocks marcet, t h a s a
lot o f «aoney will d e re-
leased and thas the callrate will g o d o m within a day
or two?
I t always has.
Governor Strong.
W e fool ourselves about thet a
Ihe Stock Exchange loan account w a s r e p o r t
ed t o b e t h r e e a n c a
helf b i l l i o n dollars.
clined a b o u t f o u r h u n d r e d million.
I t has d e —
F o u r huncred millions
reduction i n deposits, w h i c h accompanies a
Ts uction i n
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Federal Reserve Bank of St. Louis
loans, o n l y veraits t h e repayment o f forty millions
it w o u l d t a k e a
very
widespread liquidation t o effect anything like liquida—
tion o f o u r loan accounts.
Y o u would haves
reduction o f a billion dollars i n the S,ocs Exchange
joan account a n d y o u would have t o have a panic, w i t h
failures,
a n d t h a t i s w h o l l y unnec*ssary-
occasion f o r that,
Vice Governor Platt, I
you h a v e t o have a
don't think i t follows that
»enic o r a n y s u c h b i g r e d u c t i o n a s
that t o maxe a substantial reduction i n your loans.
Governor Strong,
change L o a n a c c o u n t a
rather serious time, I
Y o u cannot reduce t h e
billicn
don't believa.
Vice Governor Piatt. T h e 5-1/2
thing temmorary,
Y o u have h a d a big
Hxchenge loans.
T h e rats sho.
was i n t h e c o u r s e o f a
the
to g o d o m ,
g o o f f i n a t a k t i m e a f t e r s i c h a n occasion.
It always h a s d o n e
Governor “trong.
T h e N e w York banks o w e u s t w o h u n d
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Federal Reserve Bank of St. Louis
479
red Million dollars.
I t may b e they don't want t o borrow
any O r e t r o m us.
Vice Governor Platt.
H o w d o they o w e y o u that much,
exceot o n dirsct loans?
Goveamor “trong.
T h e banks i n our distiict o r e u s
142 Million a n d t h e ciscounts a n d loans that w e are carry-
ing for houses o n very short bills are 5 5 million, which
is néarly 200 million, outside o f our investment account.
Vicse-Governor Plait.
I t cdossn't Look t o m s like a
“renendously imressive amount, since one o f your banks
can borrow fifty million collars a t one lickx, sometimes
MOTs.
Governor ©trone.
m x i o u s t o get a n exoression
the Board e s t o wheather t h e v ars quite satisfied t o
tne situation ride along a s i t is,
wi
r, Hanlin, I
v
g
have followede what Governor Strong h a s
sat i n t e r e s t a n d I
think v i t h p e r f e c t anproval.
and help t o maka a recessi<
m e r e w e have n o w what
I believe is only a temporary movenmnt.
we, Jemes.
I f y o u have anything t o s a y o n that
subject I would lise t o hear. it, rv. Hamlin.
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Federal Reserve Bank of St. Louis
not p e l s
action o f the Board o n
has b e s n c o n v e y e d t o t h e G o v e r n o r s
e a r di t o
i n reg
port.
Governor Strong.
N o , w e have not b e e n acvised o f
any action.
Governor C r i s s i n g s r .
Governor Strong
Mr. Hamlin.
I t h a s n o t b e e n c o n v e y s d yet.
M a y I asx what i t is?
I t was approval o f your recommendation
as + o reourchasss.
Governor Strong. +
r e c o m n e n d repurchases.
wir. Hamlin,
Mr, w i ller.
I would not want +
h
e ques n
i s rather a
s u b t l e one,
x o r e e s anything more t h a n the mere
reaction which I have, w h i c h would b e unfavorable.
sent digoosition would b e t o s a y that I
my point o f view,
reserve b a n k s
the marcet,
M y vre—
ses nothing, f r o m
i n your operations that w o u l d requires
t o assume r e s c o n s i b i l i t y
o f putting money
I f the menbers d o not want t o reciscsount,
money i s there f o r the inenber banks,
i f they went it,
four ver cent reciscount o r aico o n acceptances. I
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Federal Reserve Bank of St. Louis
481
would rather leave that responsibility,
time, where i t i s
a t the vresent
»
Governor Stronz.=
{ I think y o u will find, D r . i l i e s ,
*
New Yors banks oractically d o not own a bill.
iip. liiller.
A l l right, b u t a t a n y rate I would s a y
tha situation i n which a
member bank c a n get practical-
ly all the money i t wants a t four per cent
n o t i n any
an urgency s u c h a s would justify us, a s I see things,
et the nresent time, i n tacing the leadershin out o f their
hands a n d into o u r own, a n d therefore I
rould d e indis—
posed a t this moment, snearing f o r ayself, t o favor a
policy o f t h a t ‘sind,
T h a t does not “san that the s i t u a
tion might not b e otherwise i n a weer o r a month, o r two
or three months, b u t I think n o Man c a n foreses that,
I n
that connection i n m y opinion there i s not very mach t o
warrant the pessimistic forecast that i s going around the
country f o r t h e y e a r 1926. I
expect
o n t h e whole t h a t
the year 1926 will b e a good one, vyarring, o f course,
a l
ways t h e possibility o f a contingency o f some sort o r a
break d o m i n Zurope that would seriously interrupt t h e
a n c t h e f i n a n c i n g o f t h a t operation.
Ge e
flow o f o u r z o o d s t h e r
That m a y come a t a n y time.
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Federal Reserve Bank of St. Louis
Governor otrong.
[ t is
been f o r s o m e time.
b u t whether
AV
eigteater C t gcse 3
jalize i n t o anythinz i s a n uncertain factor about which
we cannot tell,‘ B u t I
a n inclinec t o
ohere will clerify iteelf and that when T e close the
for 1926 v e will f i n d o n the whole
od year,
o r will s t a c k u p a s z a N r e t t y
say that while these gencral exnectations might n e r
sist a t this time, t h e y a r e subject t o revision o n very
short notice,
m y Cisposition therefore a n unts t o a n
attituce o f very watchful vaitinz. I
see nothing i n h e
imnediate duture that I thin’ should require
either i n our open marcet v o l i c y a
discount volicy.
B S
I were t o discuss t h e thing h y vothetically I woulc. rather
pe inclined t o say that I
would b e less i n favor o f a
enLower Giscount r a t e i n New York than I would b e o f a n
largement i n the open marxet purchases, p u t with a rated
effect f o r a veriod o f two tontas,
somesent t i m e w e had better s t a y where w e are a n c await
thing that cives u s a little aore definite indication a s
to wnat m i g h t b e n e c e s s a r y f o r t h e future,
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Federal Reserve Bank of St. Louis
433
If you reduge the discount rate
Governor %trong,
oe
ew Yors you would
a e
the yellow »vress o f the entire
neve
country charging u s w i th fixing o u r rate i n New York t o
Suit t h e s t o c s x m a r x e t .
tial c h a r a c t
.
nundred
oP,
ae
willer.
t
i
a
r
iS:
A great M a n y p e o p l e
Qrx7
8 a t
Ba u t
o f substan—
ing that also.
what twrould t h e y s a y
o r t o
we n u t a
millions i n money i n the marxet?
fe m o u l d s i m o l y r e d u c e t h e l o a n
, t n u o c cvo
a2
wouldn't
LLbELGs
Governor strong.
ve necassary
air. James.
art a
ea
. Collar i n t oe t r e marcet,
wnat y o u would accomolish would b e t o
Haider.
Cheapen c r e d i t a
nut
That i s v r o b a d l y a
sooner
o r lator.
The cheapsaing o f crecit G a n b e acconmlish-
%.
varough t h s reduction o f
wre dijllear.
thine t h a t i s
S
I thins j u s t
!
discount
E
H r aTt e ,
as effectively, probably
Mors 8 O o
Governor Strong.
That would.
A reduction i n the discounts would n o t
Governor
Ytrong.
I t would have t o g o d o m t o t w o per
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Federal Reserve Bank of St. Louis
Mr. Miller.
W h y would a n increase
xet investment affect a
i n the open mar-
recuction i n the rate t o borrowers?
Governor Strong, B e c a u s e t h e banks would not b e
I t would b e more o f a
borrowing f r o m us,
Marset t h a n a
borrower's
Lender's market.
There would
Governor Strong.
b e no mors money i n the
N o , but w h e a
dank gets out o f
every time i t gets a surplus i t nuts o u t that money,
air. idiller.
B u t i t gets i t s surplus f r o m you?
Governor Strong.
wr, miller.
Yee.
Y o u put i t i n t h e marret a n d i t comes
arouncd t o tne d a n a n d takes t h e money o u t through r e discounting.
Governor Strong. E x p e r i e n c e discloses clearly that
when t h e vanxs g ¢ a
L e y i t e a s e s money,
I f there
is one thing that ~ e have learned from our o p e n market
operations I
thint it i s that.
Mr, L L L ORs
I t eases stoney t o the banks b u t i t
Goesn't e a s e i t t o the community, i
think,
B u t I think
if y o u put 2 0 0 millions i n t o t h e m r r e t a n d 200 millions
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Federal Reserve Bank of St. Louis
485
is t a k e n d o w n f r o m y o u r rediscount,
y o u simply change
channel through which that money
Banks u n d t h e r e i s n o m o r e
onsecuence o f that particular operation, I
thins the facts are quite the
Governor Strong, I
contrary t o that, Dr. iiiller.
don't s e e h o w there could b e a n y
vit. sig ller. I
more and there would v e nore money i f you put out gold
certificates instsad of Federal
Governor Strong. Wait until I ger
shows t h e relation.
J e have h a c the charts attached t o
the o p e n m a r c e t c o m n i t t e s revorts,
story,
a n c t h e y tell the
T h e victure; comnencing i n about January a n d
February, 1 9 2 5 , s h o w s t h e c h a n g e d r e s >
from t h e s a l e s
of securities, I think i s unuistacadle.
‘mean t h a t t h e t e s w e n t d o r m ?
Governor :
g
. T h e raves w a t u p after w e sold
securities a n d have been going w o ever since.
dow w h e n w e bought thea,
long b s
n
T h e y went
but t h e y sterted t o g o c o m
e N e w York bank started,
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Federal Reserve Bank of St. Louis
ir, biiller.
s h e n were y o u buying?
Governor Strong.
W e started i n November anc.
e m sozmry I haven't that chart here.
ember o f 19283, I
We bought a few securities i n 1923, but our purchases
really began January, February a n d March o f 1924, a n d
the member banks! borrowings declined a n c t h e money rate
declined.
T h e r e w a s t h e usual increase o f borrowing a t
the e n d o f lycd,
T h e n w e began t o sell o u r securities
and o u r d i s c o u n t r a t e w e n t u p , a n c t h e w h o l e l e v e l o f
money rates went up, Tising right along, a s s h o m here,
Mr. wij lier.
Y o u s a y that t h e money rates went d o m
ia 1924 because w e bought securities?
a
Governor t r o n g ,
. Miller:
One, é
y t h e y went c o w f o r t w o rca-
fact that r e were importing
sole, which alone would not have done it, but the importation o f gold was supplenented s y our ourchases o f sécurities a t a rate which was fast enough t o put t h e N e w York
bancs o u t o f our dedt s i x months o r a year before t h e y
would h a v e g o t t e n o u t o f d e b t i f w e h a d s i m p l y
h a d
the gold movement alone,
ir, Mqller. e
;
Governor Strong, i
no d o u d t a b o u t
the purchase o f securities,
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Federal Reserve Bank of St. Louis
487
Wiich w a s a c c e l e r a t e d
hed a
on a
very large scale, n o t o n l y
great i n f l u e n c e v o o n t h e m o n e y r a t e s b u t m o r e i n -
fluence voon general business, because i t certainly
precipitated forsign borrowing.
wir. Goldenweiser.
Here
t h e procuction chart (in-
dicating). R i c h t a t the turn
in 1934 a n d a n
c
s
h
a
r
p decline
s i n the latter part o f the year;
in 1925 there w a s t h e a m e sort o f decline, n o t quite s o
sharp,
and a
rise t o w a r d t h e e n d o f t h e y e a r (
indicating
on chart),
iiy. Maller.
I n other words they had the gold im-
ports i n 13924 and Ira
were d o i n g i t i n a
w y
a
period
l
s
o
buying securities; e
w
o f v e r y mearced D u s i n e s s r e c e s —
sion, t h e demand for noney was slack for n e w trade.
O n e
of the best crops w e had ever raised wes coming on. W e
had a n a c c e l = r a t e d
o r e x a g g e r a t e d movencnt,
Governcr S t r o n g , I
end effect. I
do not agree with y o u a s t o cause
think ~ e were going into a serious period
of decline of business, production and trade.
ir; Miller. T h a t i s ons reason why the rates went
aom,
Governor strong, I
think t h e cause o f the decline
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Federal Reserve Bank of St. Louis
483
in business w a s partly the faci that there w e s a
general
ibquidation going o n throughout t h e country i n order t o
Cebts, 8 0 0 millions o f which wes d u c a t the R e
serve Bank b y the inenoer banks, a n d this rnurchase o f secur—
ities
L
i
a
ri
Z 0 l d evoided t h e necessity
of the continuance o f that liquidation f o r a much longer
period.
I f we had not »urchased securities and had not
imported gold w e might have had a longer n e v i o d o f liquid
ation a n d a very sharp reduction o f priced.
curious similarity b e t w >
There is a
condition today a n d t h e
condition that existed i n the fall o f 1923 a n d the svring
of 1924,
h e b a n k s a t that time owed u s abcut 8 0 0 million
dollars, just a s they d o now. T h e interest level was a
shade higher then t h a n now, n o t much.
W e got t h e same
“ind o f reports a t our méeting i n Nev York i n L926. 1
had just returned f r o m quite a n absence a n d founc t h e m
feeling unsasy about t h e outlook. Gov-rnor Harding r e ported q u i t e a
England,
recession
i n t h e textile business
i n New
r e u s n b e r thse factory revort a n d ths automobile
business report.
T h e fellows o u t i n Ohio were getting
uneasy a n d uncomfortable.
V e also hac. renorts —
get t h e detail o f t h e m —f r o m various »yarts o f the
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Federal Reserve Bank of St. Louis
489
country thet b u s i n e s s w a s not going e s well a s i t might.
The
“ y i n g q u i t e a set-back,
s e l opsrations w
I t
a debt »aying neriod, a n d with five, five and a half
six per cent money a n d 800 miliicn dollars owing t h e
Recerve Banks, a n d w e decided that t h e w a y t o arrest i t
was t o liquidate the loan account a t the Reserve Bank b y
buying securities. I
thinc i t was aninently successful
and i t certainly helped o u r foreign trade.
T h e similarity
in conditions leads a c t o thin’s that w e might b e going
into a similar period, t h e cause o f it not being the
same,
b y which I
mean I
think t h e f o r s i g n s i t u a t i o n
might h a v e a n influence a n d various o t h e r matters.
B u t
here w e are i n Washington, T h e s e matteTs have been
studied repeatedly Ya&n d ciscussed repeatedly, ;t h e reports
are here and are regularly studied, e n d I would like t o
6, a n d I an sure the other Covernors would, w i t h a
definite feeling that the Board i s willing t o go ahead
with t h e program o f enlarcing t h e investaent account,
W
or that i t definitely disapproves o f it,
e will n o t
5|
meet again for six months, when we will all b e here together,
Mx.
YViller. T h a t i s why w s have comnittess,
s o that
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Federal Reserve Bank of St. Louis
they c a n meet oftencr,
Govenor Strong.
juterest
e s I
i n i t because I
feel a Little personal
a m going a w a y myself v e r y short-
ly.
Governor Harding
PorTLy, i
T h e N e w Yorx banks have very pro-
think, decided that t h e y would u o t d o all tais
lending o n call f o r t h e interior correspondents without
sone compsnsation,. I
thins t h e y h a v e recsnatly v a s s e d
a rule that they tvrould charge five per
view o f
ese total borrowings a r e published,
declining,
i t i s vossible t h a t some o f the country banks
haven't t h e same incentive t o send the money o n call t o
New Y o r k t h a t t h e v f o r m e r l y had. I
“xnow o n t h e v a r t
some o f the Boston c i t y banks that there i s a little
as they are i n debt t o the
have a
feeling
that t h e y h a d better n o t d o anything about call loans,
I agree with Governor Strong that w h e n t h e bank i s o u t o f
debt entiz
a
t i t takes a more liberal v i e r o f its
customers! demands i n general a n d par-icularly t h e stock
market demand, t h a k when i t i s borrowing itself, a n d for
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Federal Reserve Bank of St. Louis
A491
that r e a s o n I
thing t h e p u t t i n g
o f mcuecy i n t o t h e m a r —
opligations
is a
much m o r e e f f e c t i v s m e a n s
mMarsést t h a n t h e m e r e r e d u c t i o n
s L i s v i u g t h e money
i n ciscount rates.
Governor Strong. That does not get them out o f debt.
xnow there i s a feeling o n the
Governor Harding. I
part o f t h e B o°s>t o n B e n s
n o t cause.
b y a n y action o n t h e
part o f the Boston Reserve bank itself, b u t some o f them
are a f r a i d t h a t i
h
a
v
o bigloans
o n call, t h a t t h e y
will f i n d som: time that t h e y zeally need t h e money a n d
would b e met b y a ruling o f the Board that they could
not get that soney as -
as they had loans o n call.
That feeling i s quite gensral I think.
J I do not know whe-
ther i t i s s o i n N e w Yors o r note
Governor strong. I
ters, 1
surmise, I
think i t exists
dontt l i x e t o base a
recomnendation o n a
di-~ not intend t o rel:
had n o t m e n t i o n e d
it I
i n some quar—
i t , and if you
would n o t h a v e r e f e r r e d t o it; b a t
what I surmise i s happening i n N e w York today i s really
are getting the cumulative effect o f a
series o f acts t h a t have penetrated t h e m i n
t
h
e
anzers throughout t h e country. That serics consists o f
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Federal Reserve Bank of St. Louis
492
iscount vate increases, revorvs o f t h e Stock Exchange
loan account, t h e imoosition o f a charge
t h e New
York lending benks, t h e clearing house banks,
decline i n the stock market.
there a r e quite a
are a
I
T have
fev bankers i n the United States w h o
little uneasy lest t h e position i c t o o extended
and they are not a s xeen t o lend money a t any rate, abroad,
no Matter w i t h e rate is.
Governor Orissinger.
i r . Cunningham, have you any—
thing t o say?
wir. Cunninghem, I
have followed Governor Strong
pretty closely i n his explanation o f the situation a s h e
views it, but I a m inclined t o follow ‘ir. Platt's sugges—
tion, that w e not b e stampeded into this matter.
do not want t o stampede you.
Governor Strong, I
Mr. C u m n i n g h a m ,
Just a
moment,
do not want t o get stampeded.
i f y o u please.
W e
T h i n g s m a y right themselves
48 hours a n d look altogether different,
I f this
thing i s going t o c o n t i n u e p r o b a b l y w e w i l l h a v e t o h a v e
another meeting, D u t I
think there oug!
what s o m e o n e h a s r e f e r r e d
b
t o h e r e a s watchful
in o r d e r t o s e e w h a t develops,
W
e a
neriod o f
v a i t i n g
e c a n always d o what i s
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Federal Reserve Bank of St. Louis
necessary,
w h e n t h e t i m e comes, G O s u p p o r t t n e a r k e t
at willwrobably b e time enough t o d o it.
Governor Strong. Y o u do not think the time
yet?
ir. Cunningham.
N o , I do not.
I f am basing that
largely w o o n the report that v e got f r o m t h e open market
committee.
T h e open market committee
not feel that wey.
O f course vossibly something h a s hap-
pened during t h e d a y that makes t h e m a little nervous
about t h e situation, b u t I don't want t o b e governed
entirely b y what happens today. I
would b e inclined t o
follow Governor Platt's suggestion that w e g o a little
slow, w a t c h this thing f o r a while a n d ses what t h e dev.
elopments are,
Governor S¢rong.
T h a t report w a s prepared last Thurs—
day a week ago, war, Cunningham.
I t was just a weex between
last Thursday and the day when w e were going t o be able
to determine whether the New Yor’ banks were going t o remain h e a v i l y i n o u r d e b t o r w h e t h e r q u a r t e r d a y o p e r a t i o n s
would result i n their getting o u t o f debt, a n d the
7
Change that h a s taken place i n the wees has convinced
m e
that they are not going t o get out o f our debt very large-
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Federal Reserve Bank of St. Louis
Cunningham,
Y o u uncerstand,
have permission t o g o ahead a n c reolace your
of larch 15th, T h a t was what y o u asked for.
Y o u have
You c a n put that money i n t o the marxet.
Sidly won't have u c h effect.
I t pos-
B y putting monsy into t h e
Market i t seems t o m e y o u are putting i t into the Reserve
Bank, b e c a u s e
i t has been stated here that w h e n y o u put
it i n t o the m r x e t
i t merely comes bacx i n the way o f
reduction o f rediscounts.
Governor Strong.
iv. Cunningham.
R e d u c t i o n o f borrowings.
Y o u ars really putting that m o n e y
into the Federal Reserve Banks, a n d we really d o not feel
it a s a real benefit, unless there i s a feeling that i t
will p u t t h e dans i n a position t o have a
more liberal
policy i n the ciscounting o f loans.
Governor H a r d i n g , I
would l i x e t o i n q u i r e w h a t h a s
been theminimum call rate since t h e l s t o f February? i l y
recollection i s that the minimum has been four a n d a quar—
tor.
Yovernor Crissinger- T h e r e have b e e n a
four p e r cent.
few cays a t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gov-rnor Strong,
B u t i t hes deen v o to six.
siz. Goldenweise
I
4
-
day, but was e
wm a S h i g h
t was dorm t o four just for a
1
been
2 end. 5. ;
/
a s six.
I t is 5-1/2 and wap 4-3/4 yes—
Governor btrong.
terday.
Governor Seay.
I t i s clear that t h e pants o f the
country a r e in¢=bted t o the Fedsral Reserve Banxs. P a x .
ticulerly I shoulé say i t i s true that the large banks
+o b e i n debt mnoce
o
u
t not continu—
ars not willing + 0 let that indebtedness
mount
u o
N o w i n the absence
o f n e w sunplies
o f credit
going i n t o the narcet, t h e r e i s this alternative: T t i t h e r
the b a n k s r e m a i n i n debt a s t h e y n o w a r e o r t h e y e n d e a v o r
to 2
except
U
o
w will they get out? T h e y cannot get out
o y some c i n d o
licuidation.
T p h e n supyose a
new
will say b y
sus2ly o f cresit i s placed i n the marcst, w e
that they a r e able t o vay out.
eid, naturally b e more
libsrally disyosed and willing
exteu.t thet t h e y want to. S u n n o s e thea
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Federal Reserve Bank of St. Louis
496
they will o r will n o t b e s o called o n and I
do not s n o w
when they will o r will not b e s o called on, b u t t h e y
probably w i l l n o t b e b e c a u s e t h e y a r e a l r e a d y h e a v i l y
th C o n t .
yr. aij ller.
W o u l d y o u b e willing t o c o o n record
as stating that t h a t i s the attitude
the m e m b e r ban!
t
h
a t t h e moment c f
e Systemfy
Governor Seay. I
should s a y i t i s the attituce
of the menber banks partly, that they are willing t o be
in d e b t t o a
certain extent,
Mr. wgller. That they are not willing t o borrow from
the R e s e r v e Ban's a t t h e
p
e
r c e n t r a t e i n order t o
comly w i t h t h e needs o f their producing communities?
Governor Seay. I
said thet they a r e willing t o b e i n
to a certain extens, e n d while I believe that i s true,
are not willing t o have i t nount u p nor t o b e i n
continuously.
All right, l e t ' s s t o p right there.
H o w
in depot? L e i t s t a c e the existing situation,
™ have they gotten i n deot t o the Federal Reserve Ben xs?
Governor Seay, Y o u mean
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
iG. Miller.
Governor S e a y . I
take i t f o r
debt b y reason o f calls f r o m those ¥ a
t h e right t o
ask credit o f them.
ie. M i l l e r .
T h a t i s t o o vaguc,
Governor Strong, N o , I
think they g o t i n debt orim-
earily a year ago because w e lost zold and sold sscurities
and i t depreciated their reserves.
ir. Maller.
T h a t accounts f o r a
part o f i t perhaps,
but t h e expansion i s much bigger t h a n that.
Governor Strong, The
o e e n no change i n our
earning assets t o spcax of. T h e y run along just about
Level,
Mr. Maller.
I ' a m taxing t h e banks a s a
any particular »vanx, I
whole,
a n d not
. e z i n g this quesvion decause
there i s always creat danger, when we are speaking o n
things thet s e e m t o u s t o b e rather technical, s h o p q u e s
tions a m o n g curselvesa, w e m a y d ¢ t h i n x i n g
o f somethin
that has a vory remote but very important bearing, and
thet i s why I think it is worth while t o ask if you are
going to take ths position that the bigger banks, as I
stated t o Governor S e a y , a r e n o t o r W a l l n o p b o r r o n I r cn
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
498
their R e s e r v e b a n k s
t o suoply t h e i r commercial needs,
then I want t o find ous w h y i t i s that these b i g banks
have b e e n i n debt t o t h e i r R e s e r v e banxs.
Governor Ssay.
I think t h a t deposits, v a r t i c u l a r l y
they
of the N e w Yors banks, declined v e r y heavily, d i c
not?
r Strong.
o
m
Governor Seay.
e Very
v heavily.
o
G
About s i x months ago. T h a t wos o n e
of the orime causes,
they m a d e d e m a n d s u p o n t h s oanxcs 1 o7
purpose o f exporting the gol
wir. Miller.
As a
credit
for t h e
i
Le
matter
of f a c t t h e d e p o s i t s
in the banc increased, d i d they not?
wir. Goldenweiser.
r
,
F o r t h e y yeeaa r
a little change.
e t s
W h y would t h e y h a v e t h e reserve
Ran xs
increasing
i f the deposits a
of t h e imenoer d a n k e h a d n o t i n c r e a s e d ?
Soldenweiser.
T h e y didn't increase much un—
tii 1925.
iit. Myller, T h e y n o r e a s e d spout f i f t y million.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
499
ir. GOldenweiser.
Wr, siller.
F o r a certain part o f the time.
A b o u t 5 0 millions,
r Strong,
o
n
r
N o ,e
Ivthinks
o not.
G
Governor Seay.
T h e y a r e not a s high a s they were.
wr, willer. I
suggest t h a t y o u get t h e annual r e —
on reserves a n d i t i s t h e r e s t a t e d c a b o e o r i c a l l y
they increased 5 0 million dollars. S i t h e r t h e f i g
ure i s correct
o r i t i s incorrect.
Governor otrong.
D r . .tlile
year t n e reserves f i g ;
was &
a s I
remenber,
are almost identica
drop throuzhout t h e year, w h i c h has
last
T h e r e
r e c o v
ered towards t h e e n d o f the year.
e, o f course, always,
but I an tasing a s my vredida r m h a t the Board has
stated officially i n it a
i . renort, a n d that state-
ment i g that they have increased fifty million dollars,
Governor Strong, I 4 +
snow rhat i t is.
ir. idiller. F i f t y million increase i n our reserve b a l a n c e s m e a n s a
five n u r d r e a m i l l i o n i n o r s a s e
in the deposit liabilities o f the nender banks.
much i n o r e a s e h a v e w e h a d i n t h e deposits
H o w
o f menber
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Federal Reserve Bank of St. Louis
no. o f t h e y e a r a n d
Million
end a
in 1925, a n d what a r e those deposits
chart shows i t pretty clearly right there (indicating)
liscounts r
in loens a n d discounts. Y
comnercial
purpossts have increased h o w auch?
Goldenwieser.
hundred nillion
O n l y about a
an increase o f 500 mil—
lion i n credits, meaber bancs!' credits, andthat i s based
zpon 5 0 million increase i n our reserve valences,
of
woich one-fifth, o r #90 million, represents increase in.
commercial borrowing.
W o w “hat does t h e other four
T
hundred m i l l i o n r e n r e s e n t ?
e whole increase
is
five h u n d r e d m i l l i o n .
Goldenweissr
the year a s
-
=
‘
B
qi :
Mr, .4ller. sxactly,
G
S 2
tna ;
E
.
had better n o t b e overloosing t h a
where w e c o m e
o
tm
V
bt
afraid i t
e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
501
is going t o be brought u p pretty soon, f r o m the mutter—
27° oOUnG.
already consideradly incedtec.
a m loath t o
if that i s ea fact, a n d I
Lieve 3 % i f i t i s a fact,
i t means t h a t t h e y will
row i n order t o supvly the funcs
when t h e y r e a c h a
certain p o i n t
o f indebted:
5
Horrow
Bans t h e y will n o t
the R e s e r v e
i n order.
heS a i t
mest t h e c o m m e r c i a l demands,
f
I cannot
Governor »5eay.
o
r any
. NOKItTiON
particular bank,
con't y o u
vo
Gisvosition o f the larger
thin that
to renain continuously i n
and m o r e r e s n o n s i o l s
they would n o t borrow t o
en indispo-
meet c o m n e r c i a l demands.
Pe
sition, p a r t i c u l a r l y
2 stronger a n d
on
emain continuously i n
better managed banks, n o t
debt.
tir. Hgller.
that t h a n J
an,
Y o u are
morse
I a n loath
t o
cometeat
t o speak o f
believe t h a t t h e m e n b e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
502
banks
o f t h e countiy, p a r t i c u l a r l y t h e bigzser ones,
willing t o t a x e t h e v o s i t i o n t h a t t h e y w i l l b o r r o w
the purnose o f macing security loans b u t that
they will not, w h e n they have forged their discounts
up to a certain amount, g o beyond that and borrow for
the purvose o f meeting commercial demands,
I dic not m a s h a t statement.
I thousht v o u r s t a t e m a m t t r a n s l a t e d
I think not.
wit, Miller.
H o r c a n y o u avoid it?
Governor Seay, I
“ur. Maller,
did n o t make it.
Y o u cic* not invend t o maxe it, but i f
tiose facts a r e correct i t translates i n t o that, d o e s i t
not?
Governor S é a y ,
t
i
c n o t m a x c t h e stasenmmt,
deny having made it.
we. willer.
Y o u cannot escane it.
GOV..rnor strong,
T r e vans L
o t lisse t o dvorrow
money,
Governor seay
i
t is h a
s a i d
n s y d o not
lixe t o borrow money a n d remain continuously i n debdt.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
503
Governor Strong
T f a volicy i s suitable f o r the
e System which. would b e effective i n preventing
that increase o f 400 millions i
e c u r i t y loans because
not willing t o make comaercial
means i n effect higher rates f o r 50-cay balences o r
40—~day balances o n comacrcial borrowings
i n order t o
venalize three a n d a ralf billion o f speculative b o r —
rowings.
wir, u g ller. I
do not think so,
Governor Strong,
ltr, Willer. I
H o w are y o u going t o reach i t ?
do not think So,
jn a situation n o w that cannot be, s o t o speak, u n scrambled; t h a t w e are i n a situation where a
certain
pert o f reserve bans credit h a s been usec. i n supplying
t a n already v e r y c o n s i d e r
the baSis f o r a n a d d i t i o n o
able volume o f security loans. I
would
batable just what t h e conclusion w e should d r a w from
that e x p e r i e n c e i s , b u t i t s u g g e s t s
t o m y Mind o n e v e r y
pertinent conclusion, a n e that i s that h e n a situation
uoon
of that ‘ind i s i n prospect, w e had ovetter throw
the member banks t h e responsibility o f determining h o w
marsst,
much o r e d i t they a r e g Ooo i n g t o p u t i n t o t h e s e c u r i t y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor Harding.
W e have o n e
ton that carries a n average
lion dollars.
J I do not care t o b e
could give t h e name i f necessary.
bank t o borrow from u s
three d a y
n
d h a r d l y f o r more than
time, a s mich a s ten million dollars, less than
of i t reserve valance, I
have noticed that that bank
en million.
ten million collar:
N o w they v a y o f f that
a t a time when their weerly c l e a r
ing house statement doesn't s h o w any increase i n ae~
posits, end sometimes a large drop i n deposits.
t h e
inference i s they either liquidate some loans o r some
urities o r sousthing t o cet o u t o f cebdt.
T h e y
are o u s o f debt f o r probably three o r four weeks o r a
month, a n d then t h e y will come bect again a n d borrow
five million, nevsr moré than ten million, a n d the same
process reprats itself.
anount a n d d o not extend
in d e o t
t o that extent.
s n i n k they n a f i x e d that
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
505
d n e n a they have reachad a limit o f
ey. 3
think t h e y v o u l d n o t b o r r o w m o r e
to taxe care of their c o m e r c i a l customers?
Govermor Harding, I
don't x n o w anything about that,
I an stating t h e fact a s shomm b y our books.
want further demonstration I
I f you
will give y o u the name o f
the bank.
Mr. wjller. 3
Mr. Hamlin,
Is
j o n ' t c a r e about that.
r
e a n v indication that h a s coms
to y o u r attention, D r . < j l l e r ,
o f a n y “Menber var'ss n o t
borrowihg t o tace care o f their uercantile and comnsr—
cial business?
wr. «jiller. T h e r e has n o t been since w e got through
isflation period.
Goverhor Sea t h e n there i s another thing.
You
woulc have t o s o l i s h that this increase i n loans was
broucht about b y those banks w h i c h are borrowers,
H o w
do wre ‘cnov that? T h a t cartainly i s a n item for con-
sideration.
I t may b e due t o lending i n excess o f the
reserves o f those oancs a n d they have been compelled t o
borrow f r o m the “eserve bani. t h e borrowings o f some
s
e n d the b o r r o w
a
p i n deposivc
=
m a y bt e due nt o a decline
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
506
ngs o f other banxs m a y b e d u e possibly
a
n increas
of their loans.
m a y D e true, b u t w e g e t a
hat
picture
of what i s going o a i n the situation
year. T h a t i s about t h e only thing ‘re c a
basis t o either mace a diagnosis o f what
or what i s taxing place, o r as 8
future,
have b e m v e r y m u c a i n t e r
Governor Galctins. i
ested i n t h e d i s c u s s i o n a n d I
structive,
thins i t i s s o m e v h a t i n -
thinx there i s atendency f o r t h d i s —
B u t I
cussion t o become somewhat obscure, I
a m wondering i f
I a m right i n assuning that t h e point a t issue
question whether i t i s better a t this time t o out
money i n t h e m a r x c t t h r o u g=hi t h e o p e> n m a r k e t committee,
o r
let the loans o f the Reserve Banks, particularly the
I s that not t h e question?
New Yor: b a n , inoerease?
N
Governor s i
Gov-rnor
T
Govemor
51 P
o
h
, n o t f r o m a y standp
t i s the question?
a
-
bants
i n N e w York, c i r e c t l y
through their acceptancs accounts vith us, o v e us 200
million dollars,
Y
e have a
constantly rising lev*l o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
507
interest rates a n d some uneasiness about t h e business
outlook, T h e amourt o f the borrowing i n New York can b e
reduced, n o t b y ovtting n e w money into the market, which
won't increase t h e amount o f Federal Reserve Rank funds,
but b y c o n v e r t i n g t h a t d i s v o u n t a c c o u n t i n t o a n i n v e s t -
mont account, which tares the pressure
n
e money wmar--
cet —
Governor Calcins.
a s Governor Strong another
M a y I
question, f o r m y own information and not for discussion,
and that i s whether the sequence o f events which have
led t o this situation a t present w a s Tirst w i t h respect
to t h e i n c r e a s e
i n t h e d i s c o u n t r a v i s e c o n d t h e nudlic-
ation o f the amount o f Str:
3
. t h i r d , t h e fact that
the New Yor bancs were charging their correspondents o n
these loans,
a n d fourth, u n s e t t l e m e n t
bf?
o f t h e market?
Governor Strong, Y e s , a n d l vould a d d t o that t h e
influence o f some loss o f gold and the sales o f securities, w h i c h e r e commonly cnown.
Governor Galxins.
W o u l d y o u sey that most o f those
events were i n inverse ordez?
Governor Strong. I
thet 1 8 a 1 .
stated t h e a chronologically;
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
503
I t enpears t o me that the in-
Governor Cal<ins.
of the rate i s aliwost negligible, t h a t t h e pubaccount h a d less effect, n o t quite
+
I don't “<now anything about
be considerable, b u t temporary, I
?
think.
I %
me ths situation i s almost wholly c u e t o the N e w Yors
MAT Zet , w h i c h w a s n o t v e r y ¢ r é a t i n f l u e n c e d
other events;
b y these
i n other words,
minor importance.
Govemor
Str
w
o
u
l
d
n
t
t think s o if you
few weeks a n d listened t o the discussions.
D o I understand y o u correctly
Governor sicfougal,
+o s a y that intsrest rates generally have advanced?
Governor strong,
e h a v e n ' t n o t i c e d that.
H
G o v e m o r si,how
d o not think w e have g o n e
call money rate i s u p rut
on
to s a y t h a t i t h a s a n y i n f l u e n c e
for c o m m e r c i a l
Governor
nacer
otrong.
below 3 per cent.
P
e
Tre
o F counter
a
s
ieiF
loans
“ a 2 0c o m n e r
i n Chicago,
cial
p a p e r
s o l d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
509
Governor McDougal, Y e s , b u i
recent retes i n Chicago,
V
a S p e a i n g o f the
1 / 4 t o 41/2 o n commer
The c o u n t e r r a t c s h a v e n o t m a t e r i a l l y
loans i n New Y o r have
shown e n y watsrial increase.
Governer “ t r o n g ,
O h yes, t h e y have.
Governor Aclouga n
t h e lags month o r so?
i
Governor Strong. i
turns
t o t h e Ban:
say the average re—
i n N e w Yors C i t y o n i t s i n v e s t m e n t
per cent higher
gonésy today i s fully one-quarts .
*
than i t was a year ago, a n d t
.
s been. quite a n
advance i n interest rates — -
Governor ipDeugal, O v e r a year’
nor Strong, Y e s ,
ig Dougal. 0
i t hes d e e n enread. through—
+t] r e p o r t o f the Comnittes
there w a s a n y suggestion that t h e port—
folio b e increased a t the present time.
I t was s u r e
ed and understood that i f conditions changed a n d made i t
necessary t h a t t h e c o m n i t t e e w o u l e w a n t t o h a v e a
hend t o g o ahead.
free
I t was a s s e d t h a t i f the contrary
developed w s could l e t some securities go.
T h e ques—
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Federal Reserve Bank of St. Louis
of increasing t h a n at this time h a s not been
-O the Gommnittes, b u t I understand f r o m
inxs chenged conditions d u r —
increase;
i s that
correc?
think i f you rill read the Com-
Govermncr strong. I
mittee's resort y o u will finc that c h e statement i s
clearly m a d e t h e r e t h a t w o e x p e c t e d a
& matter o f days o r a wee:
itself. I
"
7
v e r y s h o r t time,
t o have i t disclose
think i t has
Governor McDoveal,
was rendered there 3
B u t t
the t i m e t h a t t h e r e p o r t
some t
we expected t o replace, w a s there nov?
Governor S+rong,
O n l y twelve o r fifteen millions
of t h o s e h a v e b e e n r e p u r c h a s e d now,
Governor s l l y o r n , i
n i t i t all msan that the
edcral tessrvse Bank o f New York i s asked t o go t o the
relief o f the stock market?
(Discussion followsd which the Revorter was cirected
not t o take.)
fovermor Oriseinger.
TIa m going t
I
f there i g nothing further
a t 7 G o l d e n w e i s e r t o give u s a s t a t e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor Strong,
the C o m m i t t e e ?
d
s i t u a v s i o n
e
c
i
d
e
d
a s
t o anyt!
that s h a l l o r s h a l l
Governor Crissinger. I
would take i t t o b e avout
, from what I
Governor Strong.
hear here.
T h e o p e n mariet
iy o f the opinion, 3
f
r
o
m i . " e
was c l e a r
m the ciscussion, t
if monsy rates continue v e r y high i n Hew Yor.
%O D u y s o m e s e c u r i t i e s Ge»
ssinger.
A l l t h e menbers o f the B o a r d
present now.
teat d e a l o f d a n a g e c a n b e
Governor Strong. g
a f e w days i f w e have h i g h
in
money
h
a
n
k
s a r e r e l reluctant
t o borrow
in order t o ease the noney situation,
aig =
strued
acted w o o n what w a s being con-
c o m n e r d a t i o n o f the Comnittes the day
before yesterday.
Cov-rnor Griss
a p p r o v e d . that y o u renlace
to the 200 L L E L o n .
Mr. willer.
A r e w e t o understand v h a t i s a
recom
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
mendation?
Governor Orissingser.
T h e r e really w a s a statement
in the revort o f the Comnittee that i t might become
necessary v e r y s o o n t o i n c r e a s e t h e a c c o u n t
i n adéition
tO filling i t out.
Governor strong. A
guide was exoressed i n the re-
ort, a n d i f the report w a s approved i n its yresent
from a n d t h a t l o a n a c c o u n t c o n t i n u e s
t o works a s i t
has, ‘and thé"aovroval of thet would imply that we should
go a h e a d a n d a d d s o m e security,
itr. wgller. I
suggzest that y o u have a n accurate
transorivt o f the record s o that t h e Governors m a y <now
exactly what t h e Board did.
wir, Hamlin,
V e dic not reach a n y conclusion a s t o
sr statement that e
should b s prepared t o , o fur—
ther.
Governor Crissinger.
T h e rest o f t h e report i s not::
a recouanentation.
lie. James. F o l l o w i n g o u r usual »srocedure i t would
resubnit
be a d v i s a b l e f o r t h e B o a r d a t i t s o w n s e s s i o n t o
thereby
it t o t h e n e s t i n g t h a t w a s nelda o n yesterday,
Board
releasing under t h e usual r u l e t h e action o f the
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Federal Reserve Bank of St. Louis
513
meeting and waking i t aveilabl= t o the Gover
to just what w a e cone yesterday,
unless
T h a t would
w e abrogate t h s rule o f not nutting
anything until after the minutes have been read
(approved. I
thins w e could d o that.
I t wouldn't
, very f e w minutes f o r t h e Board t o have s u c h
a mecting.
Governor Crissinger.
V e r y well; w e c a n have
Meeting o n that.
Mr. James. You understand I am simply suggesting
because that i s our usual procedure.
Governor Orissing¢r.
e
s
V
e w i l l n o w ask Dr.
Goldenweiser t o give us the picture o f the country a s
the r e s e a r c h d e p a r t m e n t s e e s i t , briefly.
vir, Goldenweiser.
T h e s e conditions h a v e bean
reviewed i n the l a s t hour o r so.
Y o u are a l l imch closer
to the firing line than we are here, W e have not an
index nutber o f business psychology a n d w e have n o t a n
index nuvber o f hesitation. T h e facts that w e get are
the f a c t s o f t h e m o n t h o s f o r e a n d t h e y c a n d e o f u s e t o
you c h i e f l y
i n placing t h e recent p a s t
i n t h e p2resvect—
ive o f the more remote past. T h e production figures f o r
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Federal Reserve Bank of St. Louis
514
February for the basic industries, i f allowance i s made
for seasonal fluctuations, s h o y a n increased amount i n
the general level o f preduction, though o=rhaps a little
lower i n February o f 1925, y e t higher throughout most
of 1925. Y o u will note that f o r ceveral ysars n o w there
has been a
very sharp increase i n production a t the t u r n
of t h e year, folloved b y a sharp recession, T h e sched—
ules o f p r o d u c t i o n
i n both o f these y e a r s w e r e extremely
heavy (indiceting o n chart) a n d we hac some difficulty
in disposing o f the proéucts. T h a t i s followed b y price
decline i n basic comnodities
duction (indicating).
and a
curtailment o f pro-
S o far 2s w e can tel] this year
there h a s not b e e n quite t h e rapid outgoing i n productiésn
w
t years, n o r i s
that h a s characterized t h e p r e c e d i n g o
there s c far a n y evidence o f the sharp decline that h a s
occurred i n 1923 and 1924 (indicating chart).
end o f
Mr. Hamlin, T h e r e i s some decline a t t h e vory
eriod.
vip. Goldenweiser.
I n nrocuction?
wire Hamlin, Y e s .
wir. Golédenweiser.
we have.
N o t i n any of the figures that
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Federal Reserve Bank of St. Louis
I s that chart corrected a s to
Governor Strong.
the normal increase i n vopuletion?
wir, Goldsnweissr.
N o , i t i s not corrected
secular things, g r o w t h o f population,
o r any
that sort,
I f y o u take t h e usual computation
Governor Strong,
of the increase i n vopuletion, a n d s o on, o f about thres
anc a
helf p e r c e n t , t h a t daiffersnce o f 2 0 v e r c e n t
b e
tween where you start i n 1919, a year of <reat activity,
and the vast year o f great activity (indicating chart)
then w e are n o more then where w e should b e a t the rate
of production, a r e we?
iy. Goldenweiser. I
think srooably that i s so, I
not t h i n k t h a t t h i s n o r m a l i n c r e a s e
do
i n industry c a n
bedefinitely alloved, and the implication of 120 as
being 2 0 ver cent above the normal i s one thet we very
definitely fight with rhen we compare conditions this
year with last year and the year before (indicating o n
Willer, I
would t h i n k t h a t ™ » uld b e about a c t u a l -
ly what t h e change is,
dr. Goldenvieser.
Yes.
T h e figures that v e have o n
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Federal Reserve Bank of St. Louis
516
payrolls a n d employment a r e substantially confimmatory
of the production figures. There was a considerable decline
i n vayrolls
i n January because
o f inventory taxing
anc s o f o r t h T h a t h a s b e e n aecceleratec
i n February
(indicating chart), A l o n g i n March, and it is the March
figures that y o u gentlemen chiefly have i n mind, em,loy—
ment w a r r a t a
v e r y high level (indicating), i t de-
clined some i n January, recovered some i n February, b u t
it i s o n a level about e s high a s any plane during t h e
last y e a r a n d a
half, a l t h o u g h l o w e r t h a n G u r i n g t h e
very best oeriod i n 1923 here (indicating).
‘‘
y o u
idy. Hamlin H a v e /the production data for wdarch on
other chart?
Mr. Goldenweiser.
N o , w e haven't t h e production d a t a
available yet, b u t with regard t o o n e o r two things w e
Go x n o thet there i s n o evidence o f decline i n March,
So far a s w y recollection goes a n d s o far e s w e have t h e
figures I
thins there i s n o evidence o f a n y recession o f
production i n siarch.
Governor Strong. T h e Steel Corporation h a c quite &
reduction i n unfilled orders.
Mr. G o l é e n w i e s e r .
Yes.
U n f i l l e d orders have
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Federal Reserve Bank of St. Louis
517
been declining f o r some time.
T h e most satisfactory
data w e have i s o n stocks o f commodities, a n d o f course
the test a s t o whether there i s too much production o r
not i s to determine whether stocks have accumulated,
or whether production goes i n t o trade c u rrently a n d
regularly,
W e l l , apparently there isn't a n y evidence
ofany great accumulation of stocks, although some svid.
ence i s beginning t o come i n of accumulation o f stocks o f
rubber, v e t r o l e u m , a u t o m o b i l e s , d r y g o o d s ,
a n d they have
very large stocks i n department stores. T h e latest report
just a
few minutes ago, shows that there i s n o in-
creass i n that a s compared with January o r that i t i s any
larger t h a n u s u a l l y e x p e c t e d a t t h i s season,
b u t there
has been a growth i n department store stocks over a
perioc o f s i x months,
Governor Grissinger.
I s i t true that steel produc-
now about 9 7 per dent, w h i l e unfilled orders a r e
off?
T s that trier
ur. Goldenwiser.
9 7 per cent I think i s about right,
Governor.
Governor Crissinger.
g a y the statement i n the
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Federal Reserve Bank of St. Louis
518
paper that i t was 9 7 per cent a n d that unfilled ordsrs
were falling off,
Mr. Goldeuweiser.
T h e y a r e falling off.
T h e pro-
duction i s nearer 8 5 than 9 7 I believe.
Governor Seay.
T h a t was n o t t h e outpet o f steel f o r
the country, b u t f o r t h e Steel Corporation?
G o v e m o r Crissinger.
hr.
e n w e i
T
h
T h e S t e e l Corporation, y e s .
e test i s i n the price figures,
There has been a general decline i n the wholesale nrice
level which, with sume interruption, h a s been continuous
since t h e last part o f last summer, T h e figure n o w i s
around 154, which i s lower than at any time i n 1925, a n d
about o n a level with the bottom o f 1924.
Governor Ssay,
H a s that reduction v e e n fairly uni-
form o n ail commodities?
vir. Goldenweiser.
T h e reduction
i s due almost entire-
ly + 0 a decline i n agricultural prices. “ T y e green line,
if y o u c a n ses i t o n this chart, shows t h e agricultural
prices a n d the red line t h e nomagricultural prices. T h e
non-agricultural »nrices have b e e n fairly steady, w i t h something o f a n upward tendency since last simmer, although
the last couple o f months t h e y a r e unchanged, a n d agricul-
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Federal Reserve Bank of St. Louis
tural orices have been going down since last August
sharply a n d continuously,
The pric
Mr. Goldenwsicer.
r
i a t t l e a n d hogs.
C a s t l e a n d hogs h a v e n o t b e e n
going d o m . L i v e s t o c k i s the o n l y class o f agricultural
commodity that h e s moved up,
I n 1924, t h e b i g rise i n
the price o f wheat, w h i c h wes really quite substantial,
fron 146 t o 161, w a s due almost entirely t o the advance
in agricultural vrices, t o the rise i n cotton and wheat
prices.
of 1 2 5
I n 1925 the decline, especially since the middle
?
b e e n A u e t o the decline i n agricultural prices,
with relatively small change i n non-agricultural commodcities,
I t h i n t h a t i s what I
wanted t o c a i l a t t e n t i o n t o i n
my brief review.
iller.
H a r e y o u got t h e charts h e r e showing
permits, f o r instancs?
Goléenwaiser. I
Miller.
O r cogtracts?
Golcesawsiser.
Miller.
heven'tt charts f o r building
N o t f o r things o f that sort.
T e l l u s approximately t h e figures o n
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Federal Reserve Bank of St. Louis
contracts, a s compared with the year before
Care
ir. Goldensweiser. I
have t h e figvres o n charts i n
form (indicating small chart) t o which I can refer.
Mr. Miller. I
think that w i l l d o very well.
Mr. Goldenweiser.
H e r e i s the building permit chart.
It shows o f course a n unprecedented h i g h figure a n d a
tremendous rise all through this period since 1921; a n unprecedented high figure last December; a
uary, w h i c h i s essentially seasonal,
decline i n Jan-
T h e February figure
is not yet shown, b u t I think w e have those figures.
We have prepared a
statement o f business conditions i n
the United States, prepared i n coopsration with the N e w
York, B o s t o n a n d Fhiladelnhia Banks.
T h a t was done some
months a g o for t h e u s e o f the Governors. I
see that t h e
volume o f building contracts declined most i n January
and February b u t remained larger than t h e corresponding
months o f last year.
I t i s consjderably larger than t h e
corresponding month f o r last year, because i t i s some t e n
per cent higher.
Mr. Miller.
T h e n i n wractically everything,
compare 1926 with 1925, y o u a r e ahead?
i f you
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Federal Reserve Bank of St. Louis
wr. Goldenweiser. T h a t i s truc.
iit. Miller.
B u t i f y o u c o m a r e January a n d February
of 1926, a n d possibly that i s also trve o f wiarch, with
the highest »oint o f 1925, w e would be low. N o w as a
Matter o f fact i f you will turn back and read the so-called
business forccost o f a year ago you will find i t extreme.
ly pessimistic;
y o u will find a
distinct n o t e o f nessimism
in many instances. F o r t u n a t e l ye
w forget, b u t there were
distinct notes o f pessimism expressed a s late as September.
Governor ucDougal,
D o s s t h a t c h a r t s h o w building
contracts o r duilding vsrmits?
Wr. Goldenweissr.
it, ijller.
T h i s i s c o n t r a c t s awarded.
I s n ' t i t a fair statement,
o r I will
put i t o n the dasis o f an assumption, isn't i t fair t o
assume t h a t t h e m o s t i m o o r t e n t s i n g Ce
le factor
i n the volume
of production i n 1925 was building?
Mir. Goldenweiser, Y e s , I think 60. I
think the
lergest single factor i s building, w i t h oossibly automo—
piles next, Ajytomobils production i s aovarently a t a very
high level, with some evidence o f accumulation o f automobile stocts.
Governor Strong,
A n d there i s a bit o f orice cutting.
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Federal Reserve Bank of St. Louis
5A8
wir. James.
P r i c e cutting i s the best indicator o f
accumulations,
{(Wuereunon the Conference recessed for ten ainutes,
the Federal Reserve Board retiring f o r t h e vurpose o f
holding a
mesting.
A t t h e conclusion o f the recess t h e
Federal Reserve B o a r d re-entered t h e Conference r o o m a n d
the following proceedings were had:)
Governor Orissinger.
T h e Secretary, «a. Eddy, will
read that portion o f the minutes o f the meeting o f the
Board referring t o the open market report.
My. Eddy (reading:) "After full discussion, upon motion i t was voted that t h e committee b e advised that t h e
Board h a s c o n s i d e r e d t h e r e p o r t a n d epproves t h e a p p r o v a l
conteined therein t o the effect that the System's special
investment account should n o t b e changed i n amount, except
for the M a r c h 1 5 t h maturities m a y b e replaced a s condi-
tions seem t o warrant.”
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Federal Reserve Bank of St. Louis
525
Governor COrissinger.
T h a t »slaces i t b e f o r e t h e
Gouf erence,
Me. Hamlin,
t
n
e 4 ¢ g h t t o b e understood
that t h e l a t t e r p a r t o f i t w a s n o t r e a l l y c o n s i d e r e d
through a vote,
>
i n the sense that a
vote was taxen o n
it a t all,
Governor Strong.
T h a t leaves t h e latter part o f
it entirely undecided.
Mr. James, T h i w a s really nothing i n the way o f
a definite recommendation for action o n the part of the
Board.
Governor Strong. I
Governor Crissings
think there was, mr. James.
T
e di“ nov S
.
tha
as a Tecomnendation,
Goveraor Strong. The recommendation is: " A s
to the timing and extent of any ourchases which might
appear desizable, o n e of our best guides will b e the amount
of borrowing b y member banks i n »rincipal centers a n d v a r
ticularly i n New Yor: a n d Chicago,
O u r experience h a s
shom™n that when N e w Yor’: City b e n s a r e borrowing i n the
neighborhood o f $100,000 o r more, there i s then some real
pressure for reducing loans, a n d Money rates tend t o o¢
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Federal Reserve Bank of St. Louis
rkedly higher t h a n t h e discount r a t e s , "
Then i t describes t h e situation a n d a t t h e @ d i t
says:
" I n general i t would appear that w e should not i n -
crease o r diminish the special account immediately beyond gradually replacing t h e issues which matured o n March
15 as market conditions warrant, b u t that ™ e should prepare
ourselves n o w for t h e o r o m t purchase o f some further
amount o f securities i f and when there should b e further
evidence
of a
r e @ssion
i n business activity, e s p e c i a l l y
4f there i s n o further liquidation i n the amount o f Fed-
eral Reserve cretit e m l o y e d . "
hat i s a l l p r e d i c a t e d u p o n t h e s t a t e m e n t h e r e , ‘ W h e n
menber banks a r e owing u s about 5 0 million dollars o r
less the situation aopears t o be comfortable, with n o
marked pressure f o r liquidation a n d with t h e requisite
elasticity", a n d s o forth.
M y idea i s that a l l t h e trans~
actions relating + o borrowing a t the N e w York City banks
have n o w been completed,
T h a t i s the t a x payment, t h e
sale o f 1 5 millions o f future bonds, t h e repurc hase o f
the maturities o f March 15, the sale and repurchase o f
35 m i l i i o n
i n securities t e m o o r a r i l y o v e r t h e t a x p a y m e n t
the
period, t h e payment o f 121 million of/threee-four a n d a
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Federal Reserve Bank of St. Louis
525
half p e r cent bonds purchased b y the Treasury —
that
has all been completed, including the 1 5 million o f
March 1 5 maturities, s o that there i s now nothing t o d o
except c o n s h d e r f u t u r e policy,
a n d t h e report s a y s t h a t
we shall prepare n o w t o repurchase,
i n case this loan
account doesn't g o dom, that i s the recoumendation
which has not been acted upon.
T h e suggestion h a s been
made whils t h e Board was i n meeting that w e should a s k
the Board t o consider n o w a t this meeting t h e desirability
of nurchases being made u p t o a total o f 90 million t o
bring t h e a c c o u n t
u p t o 3 0 0 m i l l i o n dollars,
i f develop-
ments from day t o day i n the loan account indicate that
that i s desirable.
wir. James. T h a t would b e giving something definite
for the Board t o act upon.
Governor Strong, Y e s .
W e had no vote o n it, but
there w a s n o oonosition t o it; o r i f there w a s i t was
not expressed.
Governor McDougal,
i l y personal opinion w a s that i t
is just 2 s well t o eliminate reference t o the three hund—
red million but give the right t o reduce o r increase i n
accordance w i t h t h e situation,
T h a t i s always subject
to
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Federal Reserve Bank of St. Louis
526
consideration 0 1 j a r t o f the Board and b y the comnit—
tee also.
Governor
to extend beyond April 15th,
w y understanding o f
if correct, v a s that t h e r o g r a m f o r
he amount t o 300 million should b e revised
was done, o r i f i t was completed b y the 15th.
I
Governor Crissinger.
n otherwrords, taxe another
look i n t o t h e situation?
Governor Strong, Y e s .
Governor Orissinger.
D o y o u wish t o yut that r e c o m
msendation i n writing and submit i t to the Boara?
Governor Strong.
Yes.
(Te suggestion was thereupon submitted to the Board
oe)
in writing, a s follovws:)
If develooments
4
i n the money marret incicate a n y
ne2d f o r doing so, t h e amount o f security i n the System
account b e increased t o $300,000,000, b u t n o zurchases
shall b e made after Anril 15th, 1926, without further
consideration. "
Governor Grissinger.
would terminate.
A t that time t h e understanding
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Federal Reserve Bank of St. Louis
Governor Strong,
Mr. H a m l i n ,
I t would terminate.
T h a t would g i v e discretion f o r
three weeks,
wr, James. I
suggest that the Board retire and con-
Sider that now.
( Thereuvon t h e B o a r d r e t i r e d
t o hold a
mecting,
a t
the conclusion o f which t h e Board returned e n d the fol-
lowing occurred:)
Governor Crissinger, T h e recommendation t o increase
the amount b y 90 million dollars, u o to 300 million, terminating o n A,ril 15th, i s lost b y e vote o f three t o threé.
sir, wiSLlon i s i n Philadelvhie e n d won't b e back until t o bs | E
morrow m o r n i n g s o t h a t w e c a n n o t d s f i n i t e l y v a s s u n o n i t
until v e have another Boatd meeting.
I s there anything
further t o t a e un? W i l l . you d e here tomorrow?
Gov. rnor Strong,
T
o h a v e this uetter o f t h e comnit—
tee o n non-cash collections.
T h e Confsrence h a s concluce
its work,
sir. James,
T h y couldn't ~ s have @ useting o n that
matter a s soon a s w e adjourn here.
Governor .icDougal, A r e n ' t there
that h a v e n o t d e e n d i s c u s s e d ?
m b e r o f tonics
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Federal Reserve Bank of St. Louis
528
b
Governor Crissingsr.
u
t I understanc tie Con—
8 menbers a r e going home, U n l e s s y o u want t o have
a meeting this evening’
Governor »trong, I
thins i t i s for the Board t o ce-
cide that.
Governor Orissinger.
D e c i d e whether y o u stay o r not?
Governor Strong. D e c i d e wheth=r v s have a meeting
tomorrow o r tonight,
A l l t h e proceedings o f the Confer—
ence are reported i n writing, a n d I cannot see that any—
thing will b e zained b y discussing t a e m beyond t h e renort
that w e subnit
t o you.
Governor Orissingsr. I
Governor S¢rong.
was u n c e r t a i n t y
d o not thinx s o sither.
T h e r e w a s o n s tonic here whers
a s t o j u s t w h a t w a s asant j
s h e lanzuag
and
I vefer t o Topic 4 F , "Discugsion o f ceritalization
other r e q
S
I i m p o s e d b y State l a w o n otate Danss
povers,
and t r u s t c o m e a n i e s execrcisigg f i d u c i a r y
anc
Bans 4
advisability o f Board adooting f o r e l l National
requireminiman capital r e q u i r a n n t a n d imposing other
t o such
ments i n comiection with its grenting euthority
banks t o exsrcise trust powers."
Govermor Orissingsr. I
sucgest that we let that
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Federal Reserve Bank of St. Louis
529
matter g o over until t h e n e x t meeting.
T h e r e i s nothing
very important about i t a n d w e could not g e t legislation
regarding
i t now.
Y o u c a n report
t o the Board i n your
written report w i t h recard t o the other questions.
only s u g g e s t i o n I
have i s that s o m e nenbers
T h e
o f the Board
would lixs t o have sone statement bearing o n Tonic V—A,
permanent employnent b y the Board a t a fixed retainer
of special counsel, a n d s o forth. S o m e neubders o f the
Board would lixe t o xnow what determination, i f any, was
reached
b y t h e Conference,
Gov-rnor =trong,
T h e donferance nassed «
resolution,
a
s that t h s Confersnce,
the substance o f w h i c h w
by a
vote of seven t o five, recomnended the employment o f
Special c o u n s e l a n d t h a t eanlLoyment b e l i m i t e d t o t h s c o n -
sideration o f litigated matters only; t h a t t h e »orocedure
Should v e for the Fed=ral Reserve Banks t o submit a l l litigated a a t t e r s
t o t h e Board's counsel, w i t h recomisndation
oe t o whether counsel o f the Reserve B a n believed i t t o
os o f sufficient immortance t o z o t o soscial counsel, w h i c h
would automatically result i n its reference t o snecial
counsel, a n d as t o litigated cases renorted which were
not s o recommendation t h e determination o f whether t h e y
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Federal Reserve Bank of St. Louis
should b e r e p o r t e d t o s r j
c o u n s s l rest with the
Board's counsel i n Washington a s t o whether i t wae desir—
able t o cdo 50,
Governor Crissinger.
W e understand that that will
be extbodied i n your report s o that v e will have that.
Now i s there anything further before w e tace u p this other
Matter??
D o e s anyone o f the Governors w i s h t o mate a n y
stateaent o r does a n y wemder o f the Board desire t o make
srence o f Governors;
if not, this Conference mill adjourn and we will have a
omnittee o n non-cash collections, a a d
that m a t t e r
(Whereuvon, a t 5:20 otclock ».m., the Joint Confer-
weuce ot the Governors of the Feds:ral Seserve Benxs with
the Fed«ral Reserve Board adjourned, subject t o the call
of the Board.)
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Federal Reserve Bank of St. Louis
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