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Federal Reserve Bank of St. Louis
Secretary's Minutes
G O V E R N O R S - - C O N F E R R E N S
November 12 - 16, 1923
>
Washington,
D . C.
INDEX T O SECRETARY'S MINUTES
GOVERNORS CONFERENCE
NOVEMBER 1 2 = 16, 1923
Paragraphs i n
Secretary's
Minutes
21,0
3
Absence o f Governor McKinney
Additions t o o r removals from par list - - -
27
Advantages of tax on circulation over franchise tax
41
Advisability o f tying u p policy enunciated i n Mr. Matteson's letter
in regard to open market purchases
Allocation o f reserves against Federal Reserve notes a n d deposits
Amendments t o Law - suggested
Deduction o f cash o n hand and checks i n process o f collection
from gross deposits
35,45,54
7
Attendance o f Chairmen o f Standing Committees
48
Automobile insurance = ~ = + =
Bills o f Exchange - routing sight o r demand bills drawn t o finance
domestic shipments o f non-perishable, readily marketable, staple
agricultural products (collection committee report) - «
Borrower ~ Interpretation o f word i n Sec. 1 3 of Federal Reserve Act.
Ruling requested o f Federal Reserve Board - - - = =
Borrowings o f member banks ~ constant a n d excessive =
---**%-
"==
Certificates o f deposit o n non-member banks not o n par list and which
cannot b e collected a t par. S h o u l d Federal reserve banks handle a s
non-cash collections (collection committee report)
Chairmen o f Standing Committees t o attend conference sessions
Check Collections
Clearing house charges = = = «
Par list - wire advice of additions and withdrawals (collection
committee report) ---+-+-+-+
Regulation J
Report of Standing Committee o n Collections - = = - =
, “
Circular - To define terms "Wire Fate," "Wire Payment o r Non~payment
"Wire Credit"
Ckearing House charges for collecting checks through Federal reserve
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Federal Reserve Bank of St. Louis
rParagraphs i n
Secretary's
Minutes
Collection Committee
Report o f joint meeting with Leased Wire Commission
Report o f Standing Committee
Committees:
Advisability o f tax o n circulation over franchise tax
Collection Committee
Committee to Investigate cost of securing credit information
Committee t o Standardize Supplies
Economy and Efficiency (Board)
insurance Committee
Leased Wire
Open Market Conditions a n d Operations - discharge
Open Market Investment Committee
Chairman's report =
Secretary's report
Pension Committee = - - - = =
38
22
al
16,22
49
47
47,48,49,50
44
38
6
Voluntary Services (Board)
Constant a n d excessive borrowers
Credit for borrowing members - ghould line b e established; what
Credit Informaticn ~- Committee t o investigate cost o f securing- - - Credit Policy - Reports covering Open Market operations ~
Currency
Cost o f shipments t o members for disbursing officers
Printing o f $1 bills - - - Redistribution o f fit United States notes
Intermediate Credit Banks taken under repurchase
D e b e n t uf rFederal
eo s
agreements
Deduction of checks in process of collection from gross deposits i n
ddtermining reserves=-- -
--- =
Definition of terms “Wire Fate," “Wire Payment or Mon=payment,”
Credit" - circular covering - - ==
Differential r a t e s - - - = «
Disbursing Officers - cost o f shipments o f currency t o member for
account o f
Discount Rates - Differential rates (X-3807 - 8.3.23)
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Federal Reserve Bank of St. Louis
3
5
,
4
Paragraphs i n
Secretary's
Minutes
Economy a n d Efficiency - Board's committee report
47,48, 49,50
Indorsements b y Federal reserve banks
Guaranty o f prior indorsements o n non-cash collections
Uniform o n non-cash collection items
25
24
Excessive Borrowers = methods of dealing with members which are -
11
“Exchange” added to non-cash collection items - - - - - - - -
28
Federal Intermediate Credit Banks ~ repurchase agreements
40
Fiseal Agency Operations
Elimination War Loan deposit account for profit making purposes ~- - Reimbursement for expenses
Fit U. S, Currency - redistribution of accumulated supplies
Foreign Bank Accounts i n which other Federal reserve banks participateGold Holdings i n vaults o f Federal reserve banks + - -
Gold Payments (certificates) ---+-+-+--.
Government securities - policy of purchasing for individuals and firms
Group life insurance - - - +--+. ~Index o f the Volume o f Trade
Indorsements b y Federal reserve banks
Guarantee o f prior indorsements o n non-cash items
Uniform o n non-cash items
Interpretation word "Borrower" Sec. 13 Federal Reserve Act
Insurance
Leased Wire
:
Definition of terms “Wire Fate", “Wire Payment o r Non-payment.” “Wire
Report of joint meeting of Leased Wire and Collection Committees- - Uses o f leased wire Line o f credit f o r borrowers ~- Should o n e b e established
McKinney ~ Absence
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Federal Reserve Bank of St. Louis
44,48,53
Paragraphs ir.
Secretary's
Minutes
Non-Cash Collections
Direct sending of non-cash collections
Guarantee of prior indorsements o n non-cash items
3
2
Handling certificates o f deposit o n non-members not o n par list
which cannot b e collected a t par a s non-cash collection items
{collection committee report)
Items which Federal reserve banks will not handle - Notice o f - --~ Items w i t h “exchange” a d d e d - (collection committee report) -
- - -
Uniform indorsement b y Federal reserve banks o n non-cash collection
items (collection committee report)
Withdrawal o f facilities from non-member clearing banks - - + - ~
Open Market Conditions and Operations - discharge o f committee o n
Open Market Investment Committee
Report of Chairman - - - - + - + - + + - + + - + - + + - + - Report o f Secretary
Open Market Operations
Committee o n Open Market Conditions a n d Operations discharged
Policy with respect t o distribution o f open market purchases
Report o f Open Market Investment Committee
Chairman's report - =
Secretary's report - ----+-+«-eOpinion o f Mr. Wyatt r e Repurchase agreements
Par Collections ( s e e check collections)
Payment o f Gold Certificates - - <Pension Plan - report o f committee
Printing o f $1 Bills <
Purchase o f Government securities for Individuals a n d Firms
Rates of Discount - Differential rates (X-3807 - 8.3.23) + Rediscount transactions - Withdrawal o f permission t o members t o rediscount for non-members - - = - + - + - . «#-+-+-<+--Redistribution o f fit U. 5S. currency = Regulation J - - - + - + - + - + - + - 5 2 - e - + + -
Reimbursement f o r fiscal agency expenses
Removals from o r additions t o par list
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Federal Reserve Bank of St. Louis
8
5
Paragraphs i n
Secretary's
Minutes
Reports o f Committees
Advantages o f tax o n circulation
Collection Committee
Economy a n d Efficiency Committee
Insurance Committee ~
-
-
e -e r r -t
e-
Joint Leased Wire and Collection Committee report
Open Market Investment Committee
Chairman's report
Secretary's report
t T *
- - e-e r r- Pension Committee - - -
41
16,22
47,48, 49,50
44
t -
r
Voluntary Services (Board)- - =
Repurchase Agreements
Application t o transactions involving debentures o f Intermediate
Credit Banks - = = -
Opinion of Mr. Wyatt (X-3817 - 8.18.23)
Reserves
Allocation o f reserves against notes and deposits
determining - - ~ ~
Deduction o f checks i n process o f collection i n
oneal b= 6 <= S e o
R
e
S
e
Telegraphic Transfers (see Leased Wire )
Uniform Indorsements o n non-cash collection items - - - - ; + °
committee
Unpaid Collection items - service charge on {collection
S e S e
e e
a
e
report) - - - - - - -
United States currency - redistribution o f fit notes
Vault Gold -<<--+-+<--*--ee7
reer
Volume of Trade = Index of- - - < e - - e -
= = "
"~~
e r r r
e e "
7
e
e
er e
Voluntary Services = -- e e eer e r e
*
making purposesWar Loan Deposit Account - elimination of for profit
for rediscounts o f
Withdrawal o f permission granted members t o apply
eligible paper acquired f r o m non-member banks
-- =
" W i r e Credit" - definition
“Wire Fate,”"Wire Payment o r Non-payment,"
of terms -
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Federal Reserve Bank of St. Louis
°c e 7 7 7 *
P R O G R A M
GOVERNORS’ C O N F E R E N C E
NOVEMBER 12, 1 9 2 3
WASHINGTON
CREDIT TRANSACTIONS A N D POLICIES
A. R e p o r t o f Open Market Investment. Committee
for the Federal Reserve System.
Governor Strong, Chairman.
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Federal Reserve Bank of St. Louis
Advisability o f tieing u p the policy enunciated i n Mr. Matteson's letter o f July 2,
in regard to open market purchases and a n
arbitrary distribution o f those purchases.
Kansas City
(Discussion )
Policy o f purchasing Government securities
for individuals or firms. (Discussion)
K a n s a s City
Opera=
Committee o n Open Market Conditions a n d
tions.
Governor Fancher, Chairman.
Recommended
That the committee b e formally discharged
have
in view of the fact that its functions
Investment
been absorbed b y the Open Market
Committee for the Federal Reserve System.
Rates o f Discount
rates
Advisability o f establishing different
upon different classes o f paper. Proposed
made
for discussion relative t o suggestions
August 3,
in X-3807, Mr. Gilbert's letter o f
1923, t o Governor Crissinger.
Repurchase Agreements.
X-3817.
Mr. Wyatt's opinion o f August 18, 1923,
San Francisco
Ll. General Effect.
2. Application t o transactions involving
K a n s a s City
debentures o f Intermediate Credit Banks.
Section 1 3
Interpretation o f word "Borrower" i n
of Federal Reserve Act.
Board
Ruling requested o f Federal Reserve
by October 1922 Conf erence o f Governors.
which are
Methods o f dealing with member banks
Philadelphia
(Discussion)
constant a n d excessive borrowers.
for bor=
Should a line of credit b e established
should
what
rowing member banks; and, i f so,
be the maximum amount? (Discussion)
A
t
l
a
n
t
a
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Federal Reserve Bank of St. Louis
2
Payment o f gold certificates.
For discussion o f extent t o which s u c h payments
are made i n each district. Relation t o gold
imports. (same topic under "Coin and Circulation," topic D).
Board's withdrawal o f permission granted member
banks t o apply for rediscount o n eligible paper
acquired from non-member banks. (see X-3784 o f
July 18, 1923). (Discussion)
K
a
n
s
s City
a
C O L L E C TD ICLEARINGS.
N
O NA S
Report o f Standing Committee o n Collections
Mr. Strater, Chairman.
(Topies referred back by March 1923 Conference of Governors.)
Unif orm Indorsements o n Non=Cash Items.
Opinion o f counsel o f e a c h fF, R. Bank
requested b y March 1923 Conference o f
Governors.
Blanket Guaranty covering indorsement b y
Federal Reserve Banks o n all items forwarded
direct for collection b y member banks.
Governor Young requested b y March 1923 Conference t o discuss matter with his executive
committee a n d advise other banks i f Minneapolis
will issue a blanket guaranty.
Par Collections
1. Policy t o b e pursued with respect t o Regulation J
in view of Supreme Court decisions a n d
recommendations o f Federal Advisory Council. Boston
2. Clearing house charges for collecting checks
through Federal Reserve Banks.
For discussion i n its relation t o the
subject o f exchange charges
Advisability o f a n amendment t o law authoriz~
New Y o r k
the
ing member banks t o deduct checks i n
banks
reserve
the
process o f collection w i t h
from their gross deposits i n order t o determine t h e net deposit Liability against
which reserves must b e carried.
Discussion i n relation t o collections a n d
the purchase o f float.
Intra-county clearing arrangements.
Diseussion o f advisability o f developing
in all Federal Reserve districts.
N
e: S h o u l d the non-cash collection facilities not b e
withdrawn from nonmember clearing banks?
(Discussion)
New Y o r k
e
w York
K a n s a s City and
San Francisco
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Federal Reserve Bank of St. Louis
a=
F, Reconsideration o f "Definition o f Terms ‘Wire Fate,"
‘Wire Payment o r Non-Payment,' a n d ‘Wire Credit."
(see pages 1 6 and 17 of Collection Committee report
submitted t o March 1923 Governors C o n f e r e n c e . )
As this i s a matter which, t o become fully effective,
requires the cooperation of all banks, member and
nonmember, i t i s
Recommended
That this subject b e reviewed b y the Conference
and b e referred t o t h e American Bankers’ A s sociation f o r action.
In the event that the submission o f this matter t o
the American Bankers’ Association i s considered
inadvisable, i t is
Recommended
That all Federal reserve banks simultaneously
issue a uniform circular setting forth the
dei initions o f certain terms a s they will b e
used b y the reserve banks i n connection with
non-cash collection items.
S
a
n Francisco
G. R e c o n s i d e r a t i o n o f decision t o prohibit u s e o f leased
wire i n tracing direct routed collection items.
The position o f the Federal reserve banks i s
inconsistent since i t tends t o encourage member
banks t o submit their collection items t o their
own Federal reserve banks rather than t o route
them direct t o t h e Federal reserve banks i n the
districts i n which the items are payable.
Therefore, i t is
Recommended
That t h e same Leased wire service b e accorded
direct routed collections a s i s granted t o
those deposited with the Federal reserve bank
with which the forwarding member bank i s
affiliated.
S
a
n Francisco
COIN, CURRENCY and CIRCULATION
A. R e p o r t o f Committee appointed March 1923
Conf erence o f Governors t o consider
advantages o f tax o n circulation over
government participation i n profits.
Governor Norris, Chairman.
B. R e d i s t r i b u t i o n o f Fit United States Currency
between reserve banks.
Recommended
That the Federal Reserve Soard b e requested
to devise some plan whereby excess supplies
of fit United States currency accumulated i n
certain reserve banks may b e utilized v y
other reserve banks.
N
e
w York
a
member banks
Cost o f shipments o f currency t o
for account o f disbursing officers.
these shipments
In view of the infrequency o f
banks
and the fact that the Federal reserve
shipments
are not i n a position t o identify
i
s
i
t
purpose,
ordered for this
Recommended
t o member
That the cost o f shipping currency
officers
banks for the account o f Government
banks, b u t that
be absorbed b y Federal reserve
+ o Government
the cost o f shipping currency
San Francisco
absorbed.
not
officers direct b e
Dd. P a y m e n t o f G o l d Certificates
Transactions a n d
(see discussion under Credit
Policies - Topic J)
vaults o f the Federal
BE. I n c r e a s e o f gold holdings i n the
Reserve Banks.
Cleveland
IV. OPERATION
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Federal Reserve Bank of St. Louis
A. R e p o r t o f Insurance Committee
(see X-3814 of August 18, 1923)
- Committee
Messrs. Dillard, Taylor, Kenzel
Report o f Pension Committee
Mr. Kenzel, Chairman.
Services
Report o f Committee o n Voluntary
Chairman,
Governor Fancher, Cleveland,
Economy a n d Efficiency
Discussion o f progress made.
Report o f Leased Wire Committee.
banks will not +ransf er
The fact that Federal reserve
forwarded b y a member
proceeds o f collection items
member bank i n another
bank i n one district t o a
of the leased
the use
district, and are discouraging
which a n individual,
telegraphic transfers i n
wires for
as
than a bank i s nominated
firm, o r corporation other
to complain that
banks
the ultimate payee, has caused
business into the
we are driving all the collection
Federal reserve banks are
Federal reserve banks because
o n any collection made
willing to telegraph payment
by them.
reserve banks are active
It would now appear that Federal
the telegraph wires
competitors of banks, and unless
for the transfer o f
are throm opentto mexber banks
direct-routed t o such
proceeds o f collection items
disFederal reserve banks
member banks, o r unless
for
advice of credit
continue giving telegraphic
b y them, a n unpleasreceived
proceeds o f collections
ant situation w i l l occur.
San Francisco
V. FISCAL AGENCY OPERATIONS
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Federal Reserve Bank of St. Louis
A. Reimbursement for Fiscal Agency Expenses (Discussion}
N e w York
Be W a r Loan Deposit Account
Submitted for discussion with a view t o
eliminating War Loan Deposit Account solely
for profit making purposes.
1. A s result o f operations o f larger banks
under the present practices investors
are not able to obtain certificates t o
f banks d i d not
same degree they w o u l d i
compete f o r them.
2. Suggested that the use of commercial paper
as security i s n o Longer necessary.
San Francisco
CALENDAR A N D PROGRAMME FOR
JOINT CONFERENCE O F FEDERAL RESERVE BOARD
WITH CHAIRMEN AND GOVERNORS
CALUNDAR
Mon day
J
o
i
n
t session with Board at 10 A. M. Upon adjournment
Chairmen a n d Governors convene i n separate sessions.
Tuesday
J
o
i
n
t session w i t h Board a t 1 0 A. M. T o p i c : C R E D I T
POLICY.
Wednesday
S e p a r a t e sessions,
Thursday
J
o
i
n
t session with Board a t 10 A. M. Topic: O T H E R
FEDERAL RESERVE POLICIES.
Friday
U n a s s i g n e d ,
PROGRAMME
lst JOINT SESSION
General Topic: C R E D I T POLICY:
1, R E L A T I O N O F REDISCOUNTS AND OPEN MARKET OPERATIONS T O CREDIT POLICY.
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Federal Reserve Bank of St. Louis
Atclose of October 1922, joint conference the following statement
on credit policy was unanimously adopted:
"That ‘ f o r the present t h e credit policy o f t h e Federal Reserve
System should aim to furnish credit and currency t o member banks for
their seasonal and emergency. requirements, but such policy, a s well
asopen market operations, should be administered in each district
in such marner as to assist the system i n discharging, a s far as it
may b e able, i t s national responsibility t o prevent credit expansion
from developing into credit inflation."
(a)
H o w has this policy been carried out i n each district
with respect t o both rediscounts a n d open market
operations?
(b) T o what extent, i n each district, has the borrowing,
during the past year, been for seasonal and emergency requirements; a n d to what extent does i t
appear +o have been ef a more permanent nature or
merely for the profjt involved.
Statement regarding (a) and (b) for each
Federal Reserve District not exceeding 5
minutes, :
Districts 1, 3, 5, 7, 9, 11, by chairmen,
Districts 2 , 4, 6, 8, 10, 12, b y governors..
Report of governors' open market committees /
Gov. Strong,
orgs
be
What does t h e experience o f the past y e a r s h o w t o
redisa
n
d
operations
the influence o f open market
count transactions, respectively, o n the credit
situation and what i s the proper function o f each
in a well conceived--credit policy.
Gov. Harding
Mr. H e a t h
EXAMINATIONS AND THEIR RELATION T O CREDIT FOLICY.
of Federal Reserve
Is i t ‘desirable and practicable t o make more use
a means of securing information to be used i n
Bank examinations as
instead of plac~
regulating member banks' borrowings more directly
discount rate.
ing the exclusive and main reliance upon changes o f
Gov. Fancher
Mr. T a l l e y
DISCOUNT RATES.
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Federal Reserve Bank of St. Louis
(a) General discussion,
Mr. R i c h
Gov. Harding
regard~
(b) U n d e r Secretary Gilbert's letter of august 3, 1923,
commercial
for
rate
ing differential between rediscount
acceptance.
paper a n d open market r a t e f o r bankers
Gov. Seay
Gov. Strong
COLD MOVEMENTS .
gold during past
(a) General statement regarding movements of
and out of
into
and
into and out o f country
year toth
Federal Reserve Banks.
Mr. C u r t i s s
{b) Paying out gold certificates.
Mr.
Perrin
Gov. Biggs
2nd_JOINT SESSION
General Topic:
O T H E R FEDERAL RESERVE POLICIES
GENERAL POLICY I N REGARD T o CHECK COLLECTIONS.
up check
Among other matters discuss Clearing House charges, speeding
collections.
Gov. MeKinney
Mr.
J a y
Gov, hcDougal
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Federal Reserve Bank of St. Louis
GENERAL POLICY I N REGARD T O SERVICES T O MEMBER BANKS
Report o f governors’ committee, Gov. Fancher
Gov. Bailey
Mr. M c C o r d
Among other matters the Board desires discussion o f Philadelphia
shipments.
plan regarding time o f charging a n d crediting currency
GENERAL POLICY I N REGARD T O SECURING NEW MEMBERS
Gov. Wellborn
Mr. A u s t i n
THE PUBLIC
GENERAL POLICY I N REGARD T O RELATIONS WITH BANKS AND
Report o f chairmen's committee, Mr. Jay.
Mr. M a r t i n
Gov. S e a y
B E DEVISED?
CAN A BETTER SYSTEM O F TAXING FEDERAL RESERVE BANKS
would have
It bas been suggested that - a tax o n uneovered notes
advantages over present plan.
Report o f governors* committee, Gov. Norris
Mr. M e C l u r e
Gov. Calkins
ALL
SHOULD THE FEDERAL RESERVE BANKS SEEK REIMBURSEMENT FOR
FISCAL AGENCY EXPENSES?
Mr. H o x t o n
Gov. Young
ARE ANY AMENDMENTS T O THE LAW DESIRABLE?
b y the Board:
The following amendments h a v e been suggested
cash o n hand
(a) T h a t member banks b e permitted + o deduct
gross
and cheeks i n course o f collection from
deposits,
Mr. Curtiss
Report o f chairmen's committee o n reserves,
from making
(o) T h a t every member bank be prohibited
of checks
collection
the
for
any charge whatsoever
Banks.
Reserve
handled through Federal
REPORT REGARDING BOARD'S EFFICIENCY A N D ECONOMY PROGRAMME
Mr. W i l l s
Gov. Norris
G O V E R N O R S
C O N F E R E N C E
November 1 2 = 16, 1923
Washington,
D . C.
First Dav's Session, Monday, N o v e m b e r 1 2
Joint Conference w i t h Federal Reserve B o a r d
and Federal Reserve Agents
Morning
The meeting was called t o order a t 10:30 o'clock a, m.
Present:
Members o f the Federal Reserve Board,
Messrs, Curtiss, Jay, Austin, Wills, McCord,
Heath, Martin, Rich, McClure, T a l l e y a n d
Perrin, Federal Reserve Agents,
Governors Harding, Strong, Norris, Fancher,
Seay, Wellborn, McDougal, Biggs, Young,
Mr. Harrison, Secretary.
(1)
Governor Crissinger addressed the joint conference, welcoming the
members i n behalf o f the Federal Reserve Board, a n d congratulating the
Federal reserve banks upon t h e accomplishments o f the past year.
Index o f the Volume o f Trade. G o v e r n o r Crissinger thereupon
(
introduced t o the conference Mr, Snyder, w h o reviewed a t some length t h e n e w
index o f the volume o f trade which h a s been prepared under h i s supervision.
He explained the basis upon which the various elements i n the index are
weighted and outlined i n general the purpose o f the index.
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Federal Reserve Bank of St. Louis
At 11:30 o t clock a. m, the joint conference adjourned,
Separate Governors Session,
The meeting was called to order at 11:45 otclock a, m,.
Present:
Governor McDougal, presiding
Governors Harding, Strong,Norris, Fancher,
Seay, Wellborn, Biggs, Young, Bailey and
Calkins,
Mr, Harrison, Secretary.
2
)
wee
Topic IT. A. R e p o r t o f Open Market Investment Committee
for t h e Federal R e s e r v e System.
Upon motion o f Governor Strong i t was
VOTED
t o approve and file with the records o f the conference the
report o f the Secretary o f the Open Market Investment Committee.
The Secretary t h e n r e a d t o the conference t h e special report o f tne
Chairman of the Committee (printed pages 5=19 stenographic record)- This report was discussed a t some leneth b y the several members o f the conference with
particular reference t o that feature o f it relating t o a possible renewal o f
open market purchases under the terms o f Section 14.
Governor Strong called attention t o the fact that the c o m m i t t e e d
i
not specifically recommend that reserve banks immediately make such purchases
but merely suggested t h a t t h e y should n o t hesitate t o resume t h e m rather t h a n
permit a n unwarranted state o f mind o n the part o f the public t o disturb the
even course o f the country’s production and consumption.
I t was suggested dur-
ing t h e course o f discussion t h a t i t might b e advisable t o commence s u c h purchases now, when money rates a r e n o t a s easy a s they m a y b e after t h e turn o f
the year, rather t h a n t o wait until t h e y d o become easy.
I n this connection
it was the sense o f the conference that the committee should discuss with the
Federal Reserve Board the text o f the report, keeping i n mind the importance
of being preparéd a t all times t o exercise control over the market not only
by purchases under Section 1 4 but also b y sales whenever conditions make a
withdrawal o f funds from the market advisableBefore final vote o n the report, Governor Strong called attention
to the last paragraph, wherein the committee agreed, upon the request o f the
Federal Reserve Bank o f New York, subject t o the approval o f the Board, t o
supervise all foreign transactions.
In the discussion o f this paragraph, i t was suggested by Governor
Harding, a n d generally agreed, t h a t t h e committee should n o t have jurisdic
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Federal Reserve Bank of St. Louis
tion over those Cuban transactions o f the Federal Reserve Banks o f Boston and
Atlanta which are i n their owm behalf a n d not for account o f any other Federal
Reserve Bank,
A t the same time Governor Strong suggested that a s long a s the
committee should not assume jurisdiction over that foreign business i n which
other reserve banks are not interested, n o member o f the committee should review any foreign transactions within the jurisdiction o f the committee i n which
the bank h e represents i s not interested.
Jpon motion o f Governor Harding, i t was
VOTED t o approve the report.
(See pages 3-52 inclusive stenographic record).
Topic 1. B. Advisability o f tying u p the policy enunciated
( 4 )
in Mr. Matteson's letter o f July 2 , i n regard
to open market purchases a n d a n arbitrary dis-
tribution o f those purchases.
This topic was suggested b y Governor Bailey i n order t o ascertain
whether the Federal Reserve Bank o f Kansas City would be obligated t o take
its pro rata share o f bills bought b y the committee even if credit conditions i n its district d i d not justify i t i n doing so.
it was pointed out that there i s no obligation o n the part o f any
reserve b a n k to participate i n purchases o f bills b y the committee i n a case
where a bank does not feel justified i n doing so. T h e letter o f Mr. Matteson
under discussion specifically referred t o the fact that any bank might withdraw
from participation i f considered desirable.
(See pages 52-54 inclusive stenographic record).
Topic I, C, Policy o f purchasing Government securities
for individuais o r firms,
(
5
)
Governor Bailey presented this topic with a view to ascertaining
whether i t was proper for a Federal reserve bank t o purchase Government
securities for account o f individuals o r firms,
it appeared t o b e the opinion o f the majority o f the Governors present
that while reserve banks might properly deal with their member banks without
having the transactions g o through the Committee o n open market investments,
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Federal Reserve Bank of St. Louis
4=
nevertheless they should not engage i n transactions with individuals o r firms.
No action was asked for.
(See pages 5 4 - 59 inclusive stenographic record.)
At 1:00 o'clock p . m. t h e conference adjourned t o reconvene a v
at30°0* c h o c k p y mm.
First Day's Session, Monday, November 1 2
Separate Governors Session
Afternoon
The meeting was called t o order a t 2:30 o'clock p , m.
Present:
Governor McDougal, presiding
Governors Harding, Strong, Norris, Fancher,
Seay, Wellborn, Biggs, Young, Bailey and
Calkins,
Mr, Harrison, Secretary.
Topic I . D . C o m m i t t e e o n Open Market Conditions a n d
Operations,
Upon motion o f Governor Seay, i t was
VOTED t h a t the committee b e discharged with thanks for their
past services.
(See page 60 stenographic record.)
Attendance o f Chairmen o f Standing Committees.
(
7
)
Governor Fancher called attention t o the fact that the conference
was called upon from time to time to pass upon reports of certain committees
appointed b y the conference, such, f o r instance,
Collections a n d the Pension Committee,
a s the Standing Committee o n
a n d suggested t h e advisability o f the
presence o f t h e chairman o f each such committee w h e n h i s report i s discussed,
It was the opinion o f the conference that the chairmen o f these
committees should b e present a t the time their reports a r e discussed b y the
conference, a n d i t was informally understood that Mr, Strater and Mr. Kenzel,
Chairman o f t h e Collection a n d Pension Committee respectively b e invited t o
attent t h e Wednesday session,
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Federal Reserve Bank of St. Louis
(See pages 60 - 62 inclusive stenographic record.)
5-
Topic I. %
A d v i s a b i l i t yf
o establishine different rates
(
8
)
upon different classes o f paper.
The conference discussed a t some length the letter o f Under Secre=
tary of the Treasury Gilbert, dated August 3, 1923, addressed to the Governor
of the Federal Reserve Board concerning the establishment o f a differential
rate o n acceptances a n d certificates o f indebtedness.
( l e t t e r printed pages
63-74 stenographic record),
In the absence o f Governor Strong, M r . Harrison r e a d extracts
from a personal a n d more o r less informal letter which Governor Strong had
written t o one o f the members o f the Federal Reserve Board giving his views
on this subject.
Governor Seay, who, t o g e t h e r with G o v e m o r Strong, w a s scheduled t o
discuss this topic before t h e Joint Conference, e x p r e s s e d h i s views cone»
cerning the letter. B o t h h e and Governor Strong, a s well a s the other
Governors w h o expressed their opinions (except Governor Norris) w e r e opposed
to t h e suggestion o f Mr. Gilbert o n the ground that there i s n o logical basis
for a differential i n rediscomt rates and that the establishment o f such a
preferential rate for Government obligations would only tend t o concentrate
those securities i n the Federal reserve banks a s was t h e case during t h e period
of the war,
It was also pointed out that i n practice a preferential rate o f
this sort operates t o the advantage o f the city bank a s contrasted with the
smaller country bank which i s not-apt t o have such low yield securities i n
its investments.
V a r i o u s other objections were discussed,
Upon motion of Governor Calkins, i t was
VOTED
t o b e the sense o f the conference t h a t i t i s not expedient
at this time t o establish preferential rediscount r a t e s o n acceptances a n d
certificates o f indebtedness,
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Federal Reserve Bank of St. Louis
Governor Norris voted No.
(See pages 63-116 inclusive stenographic record).
Mete
Topic I . F . R e v u r c h a s e Agreements
Upon request o f Governor Calkins t i i s topic w a s passed until
Governor Strong should be present. ( S e e also paragraphs 3 9 and 40).
(See pages 116; 338; 339-354 inclusive stenographic record) Topic I- G. Interpretation o f word "Borrower" i n
(
1
0
)
Section 1 3 o f Federal Reserve ActUpon motion o f Governor Fancher,
VOTED
i t was
t o repeat the request o f previous conferences that the
Federal Reserve Board give a ruling interpreting the word “borrower” i n
Section 1 3 of the Federal Reserve Act.
(See pages 116-117 inclusive stenographic record) Topic 1-H. M e t h o d of dealing with momber banks which
( 1 1 )
are constant a n d excessive b o r r o w e r s .
Governor Norris submitted this topic i n order to obtain the views
of the several governors a s to the appropriate method o f dealing with member banks which are constant and excessive borrowers.
It was the in formal opinion o f the conference that i t would b e
impossible t o establish a fixed rule defining "continuous" o r “excessive”
in relation t o member bank borrowings, i t being felt that i t must necessarily
be a matter o f judgment i n each individual case-
N o action was asked for.
(See pages 117-132 inclusive stenographic record) .
Topic I1- (i). Should a line of credit be established ( 1 2 )
for borrowing member banks; a n d , i f so,
what should b e t h e maximum amount?
Governor Wellborn presented this topic t o obtain the views o f the
other members o f the conference.
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Federal Reserve Bank of St. Louis
After some discussion, a n d upon motion o f Governor Seay, i t was
VOTSD + o be the sense o f the conference that i t is impracticable
to establish i n advance a line o f credit for any member bank, a n d that i t
is a matter o f judgment a g to what that line should b e i n each case.
(See pages 132-136 inclusive stenographic record).
Topic I . J. P a y m e n t o f Gold Certificates.
Mr. Harrison, o n behalf o f Governor Strong, made a report concerning the payment o f gold certificates b y the Federal Reserve Bank o f New
York during the past fourteen months, explaining the reasons that prompted
the Federal Reserve Sank o f New York t o disburse gold certificates.
The
topic was proposed i n order t o obtain a statement b y the several Federal
reserve banks a s to whether o r not they were paying out i n due course gold
certificates which may have been issued b y the Federal Reserve Bank o f New
York deposited with other Federal reserve banks.
Several o f the banks reported that such deposits are paid out
currently, t h o u g h i t was stated that there h a s b e e n a n increase i n the holdings
of gold certificates i n a few of the banks whose policy i t is t o pay out gold
only o n demand.
N o action was asked for,
(See pages 137151 inclusive stenographic record).
Printing o f $1 bills
Upon motion o f Governor Biggs, i t was
VOTED t h a t the Chairman appoint a committee o f three t o discuss
with Mr. Winston the propriety o f taking some action t o speed u p the printing
of {jl bills t o meet the coming Christmas demand,
The Chairman appointed Governor Fancher, Governor Biggs and
Mr. Harrison for that purpose. ( S e e paragraph 43)
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Federal Reserve Bank of St. Louis
(See page 151; 361368 inclusive stenographic record).
te
(
1
Topic I . K. B o a r d ' s withdrawal o f permission granted
o
f
member banks t o apply f o r rediscount
elicible paper acquired f r o m nonmember b a n k s -
5
)
Governor Bailey, who proposed this topic, expressed the opinion
that it is a very serious handicap to deny to member banks the right to
rediscomt a n y paper that they may have acquired from a nonmember bank i n
due course, although h e opposed member banks being the medium for nonmember
banks t o derive full benefits from the system.
The opinion w a s expressed b y some o f those present t h a t t h e
ruling o f the Board was very proper i n the circumstances a n d afforded
sufficient latitude t o permit o f the rediscount o f paper taken i n due
course.
N o action was asked for.
(Ses pages 151-157 inclusive stenographic record).
Topic II. Collections and Clearings
(
1
6
)
Discussion o f all o f the topics under the general heading o f
"Collections and Clearings" was postponed until the Wednesday meeting i n
order that Mr. Strater, Chairman o f the Standing Committee o n Collections,
might be present. ( S e e also paragravhs 7; 22-29 inclusive )e
(See pages 157-158; 175=266 inclusive stenographic record).
Topic III. B . R e d i s t r i b u t i o n o f Fit United States Currency
between Federal reserve banks.
( 1 7 )
Mr. Harrison explained that this topic w a s placed o n the program
prior t o the receipt o f the letter o f the Treasury Department suggesting 2
plan o f redistributing fit notes which a t times accumulate i n certain reserve
banks i n amounts i n excess o f their needs.
T h e question f o r ecmsideration,
therefore, w a s whether o r not t h e conference should approve t h e plan proposed
by the Treasury Department, and, i f so, who should absorb the expense of
shipping notes between reserve banks,
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Federal Reserve Bank of St. Louis
While i t was informally stated b y some o f the Governors that the
receiving b a n k should p a y the c o s t o f shipment i n cases where t h e sending b a n k
has absorbed t h e cost o f sorting, nevertheless, u p o n motion o f Governor Seay,
it was
VOTED
t o urge t h e Federal Reserve B o a r d t o approve t h e plan sug-
gested b y the Treasury Devartment a n d t o request the Board t o determine the
method o f bearing the expense o f shipment i n accordance with suggestions.
already received b y the Board from each Federal reserve bank,
(See pages 158-164 inclusive stenographic record),
Topic TIt. C . C o s t o f shipments o f currency t o member
banks f o r account o f disbursing officerss
In view o f the infrequency o f these shipments and the fact that the
Federal reserve banks are not i n a position t o identify shipments ordered for
this purpose,
i t was, u p o n motion o f Governor Calkins,
VOTED t h a t the cost o f shipping currency t o member banks for the
account o f Government officers b e absorbed b y Federal reserve banks, b u t that
the cost o f shipping currency t o Government officers direct b e not absorbed.
(See pages 164-165 inclusive stenographic record).
Topic V. Be (2) W a r Loan Deposit Account (Submitted for
discussion w i t h a
view t o eliminating
War Loan Deposit Account solely for profit
making purposes. )
Suggested t h a t t h e use o f commercial p a p e r
is n o longer necessarve
Governor Calkins stated that this topic, a s well as sub-topic (1)
(See paragraph 2 0 ) was proposed f o r the purpose o f eliminating t h e War Loan
Deposit Account solely for profit making purposes, a n d recommended that the
Treasury Department b e asked t o discontinue the eligibility o f commercial paper
as collateral for War Loan deposits.
Governor McDougal suggested that this type o f security might well
be eliminated i n the interest o f economy i n checking a n d handl ings
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Federal Reserve Bank of St. Louis
aiee
Governor Norris and others felt that there was nothing t o be gained
by making such paper ineligible for collateral.
Upon motion o f Governor Calkins, i t was
VOTED that the Treasury Department b e requested t
o
. discontinue
the eligibility o f this paper a s collateral.
Governors Wellborn, Harding and Norris, a n d Mr. Harrison for
the New York Bank, voted no.
(See pages 166-170 inclusive stenographic record).
Topic V. B. ( 1 ) W a r Loan Deposit Account (Submitted for
: d i s c u s s i o n with a view to eliminating
War Loan Deposit Account solely f o r profit
making purposes.)
As -result o f operations o f larger banks
under present practices investors a r e
not a b l e t o obtain certificates t o same
degree t h e y would i f banks d i d not compete
for them.
Governor Calkins stated that h e d i d not c a r e t o offer a n y resolution
with respect to this sub-topic. (See paragraph 19).
At 5:40 o'clock p. m. the conference adjourned t o meet i n joint
session o n Tuesday, November 1 3 at 10:30 o'clock a. m., a n d to meet i n
separate session o n Wednesday, November 1 4 at 10:00 o'clock a. m.
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Federal Reserve Bank of St. Louis
atte
Second D a y ' s Session, Wednesday, November 1 4
Separate Governors Session
Governor McDougal, Presiding
Governors Harding, Strong, Norris, Fancher,
Seay, Wellborn, Biggs, Young, Bailey a n d
Calkins,
Mr. Strater, Chairman Standing Commi
+ P
> LE
Mr. K e n z e l , Chairman Pension Committes
Mr. Harrison, S e c r e t a r y At t h e request o f the Chairman, t h e Secretary r e a d a
telegram f r o m
Governor McKinney explaining that because o f the critical iliness o f his
brother h e was unable t o attend t h e conference a n d extending h i s best wishes
for a successful mecting.
I t was underatend that the Ghairman should telegraph
Governor licKinney expressing t h e sympathy o f the conference.
( S e e a l s o para-
graphs 30)
Tovic I l . A . R e v o r t o f Standing Committee o n Collections.
(See also paragraph 16)
Governor Young reviewed briefly the attitude o f the Minneapolis
towards certain provisions that had been heretofore recomended f o r uniadoption i n the circulars o f all Federal reserve banks. C o v e r n o r Young
discussed briefly the situation i n his district with respect t o effecting
cash a n d non-cash collections payable a t banks f r o m which remittances
have continued late, and stated that i n his opinion and i n the opinion o f his
counsel his bank would b e guilty o f negligence i n forwardins items t o banks
which are late in their remittances- (See paragraph 31)
After discussion o f several aspects o f previous reports o f the Collection Committees, tne secretary read the pending report (printed pages
185-191; 212-220 stenographic record) and, upon motion o f Governor Seay, i t was
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Federal Reserve Bank of St. Louis
VOTED t o approve and adopt the report.
a1
Governor Y o u n g voted no,
(See pages 175-266 inclusive stenographic record).
The Report o f the Standing Committee o n Collections approved a n d
adopted b y the Conference provides i n substance a s follows:
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Federal Reserve Bank of St. Louis
The Routing o f Bills o f Exchange payable a t sight o r ( 2 3 )
on demand whichare d r a w n t o finance t h e domestic shipment o f
non-perishable, r e a d i l y marketable, s t a p l e agricultural products,
It is the opinion o f the committee that while reserve banks
as a general rule should not b e permitted t o route collection
items direct, nevertheless the Reserve Joard should amend its
present ruling s o as to permit reserve banks, i n their discretion,
to route any documentary drafts payable a t sight o r o n demand
(however acquired) direct t o the point o f payment i n any district,
but only when the reserve banks are specificaliy requested t o d o
so b y the member b a n k f r o m which i t was acquired,
(See pages 188-189 inclusive stenographic record).
Uniform indorsement b y Federal R e s e r v e Janks o n Non- ( 2 4 )
Cash Collection Items.
The committee's report recommended that a s general practice
Federal reserve banks d o not guarantee prior indorsements o n such
items unless the payment o f any such item i s contingent upon the
guarantee o f prior indorsements b y a Federal reserve bank, a n d
then only i n cases where prior indorsements have been guaranteed
by the next preceding bank indorser.
(See pages 189-191 inclusive stenographic record).
At this point i n the reading o f the report, however, t h e (25)
conference discussed a t some length the legal effect o f restrictive
and general indorsements upon collection items, i t being apparent
that i n some states the restrictive indorsement "for collection
only" does i n effect guarantee prior indorsements without a n y ex=-
press reference thereto. I t was pointed out, however, that i n other
states a restrictive indorsement does not have that effect, a n d
that i f i t was the intention o f the conference t o have all Federal
reserve banks guarantee prior indorsements i t would b e necessary
expressly t o d o so,
After the Report o f the Standing Committee o n Collections was formally approved, this matter was further discussed,
and, upon motion o f Mr. Harrison i t was
VOTED t h a t all Federal reserve banks shall guarantee
srior indorsements o n non-cash collections, b u t that they shall
receive for collection only those non-cash items o n which the
depositing b a n k h a s guaranteed prior: indorsements-
(See pages 191-212; 259-266 inclusive sténographic record).
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Federal Reserve Bank of St. Louis
» Sie
Service Charges o n Unpaid Collection Items
Should these b e collected f r o m t h e Federal Reserve
Bank o f the district i n which t h e y originated when
the collecting b a n k insists u p o n receiving t h e
service charge?
The committee recommends t h a t a
recommendation which i t
made t o the conference o f governors i n October 1922, b e followed = viz:
"On account o f the small amounts involved a n d
the numerous entries which would be occasioned, the
committee recommends t h a t t h e Federal reserve banks
will not charge the amounts o f such service charges
in their accounts with each other."
record.)
(Pages 212 ~ 213 stenographic
:=
Should Federal reserve banks wire immediately t o all
other Federal reserve banks additions to, o r removals f r o m
the p a r list a s they become effective?
The committee i s of the opinion that notice o f ad~
ditions t o o r withdrawals from the par list i s desirable
whenever s u c h additions o r withdrawals become effective
previous t o the date when the semi-annual par list, o r
the monthly supplement t o the p a r list a r e usually issued
by the reserve board, T h e committee suggests, however,
that whenever nonmember banks express their intention t o
withdraw from the par list they b e persuaded whenever possible t o continue t o remit a t par until notice i n the usual
course can b e given t o all member banks and all Federal reserve banks, which,
o f course, w i l l obviate t h e necessity
of notifying other reserve banks b y wire.
(Pages 213 + 214 stenographic record.)
Should Federal reserve banks handle a s non-cash collections certificates o f deposit drawn b y nonmember banks,
whose names a r e n o t o n the p a r list a n d which cannot b e collected a t par?
The committee i s o f the opinion t h a t a
certificate o f
deposit i s not a “check” within the meaning o f the board's
definition a n d that the Federal reserve banks are, therefore,
not prohibited from handling such a n item for collection
even though issued b y a non-par bank, T h e Federal Reserve
Board has ruled that s u c h a n item m a y b e handled a s a
non-cash item and that the issuing bank may deduct a n
5 agteg c h a r g e when remitting therefor,
(Page 214 stenographic record.)
The Handline o f Non-cash Collection Items drawn with
"Exchange" added,
While recognizing the usual commercial practice with
respect to drafts drawn payable “with exchange," the committee is of the opinion that no collection charge o r
exchange charge should b e exacted from the payer o f a draft
o~ p A r - -
in the case where t h a t phrase,
o r i t s equivalent,
i s not i n -
corporated i n the body o f the draft, even though clearing
house rules i n some places require the collecting bank t o
impose a collection charge upon its depositors. T h e committee
is of the opinion that the reserve banks should refuse t o
accept-a non-cash collection item t o which this so-called
exchange has been added b y the member bank with the intention
that i t be collected from the payer o f the item,
(See pages 215-220 inclusive stenographic record).
The Secretary read a message from Mr. Talley announcing the ( 3 0 ,
death of Governor McKinney "s brother,
I t was understood b y the conference
that the chairman would forward t o Governor McKinney a telegram expressing
the sympathy o f the Governors. ( s e e also parygraph 2 1 )
Non-cash Items which Reserve Banks will not handle
(
3
1
)
(See also paragraph 22)
Governor Young discussed the impossibility o f the Federal Reserve
Bank o f Minneapolis issuing any non-cash circular which would make i t mandatory
upon the Reserve Sank to. handle all non-cash items payable anywhere i n the
United States. Several members o f the conference expressed the opinion that
the uniform circular purporting t o relate t o all non-cash items was not
intended t o force a
Federal reserve b a n k t o handle items w h i c h f o r exceptional
or extraordinary reasons c o u l d not b e collected without serious credit risk.
Upon motion of Governor Young, i t was, thereupon,
VOTED t h a t each Federal reserve bank notify each other Federal
reserve bank of all nonepar banks or non=-par points o n which they will not
handle non-cash collections.
(See pages 243-258 inclusive stenogtaphic record).
Topic IV. 3. Report of Pension Committee
(
3
2
)
Mr. Kenzel, Chairman o f the Pension Committee, reviewed the status
of the proposed pension plan and the action taken b y the committee since the
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Federal Reserve Bank of St. Louis
eae
Joint Conference i n October 1922, referring particularly t o the supplementary
report o f the Pension Committee t o t h e Federal Reserve B o a r d dated October
19, 1923,(printed following page 278 stenographiec record) i n which i t was
requested that the Board take into consideration their recommendation that
the pension plan be put into operation a t the present time, i n pursuance o f
the advice given b y counsel, under the form of a n incorporation i n the
District o f Columbia,
After a lengthy discussion o f the merits o f the plan and the
advisability o f taking immediate action i n order t o avoid too great a n
accrued liability,
i t was, u p o n motion o f Governor Harding,
VOTED t h a t the report o f the Pension Committee b e received and
accepted and laid before the Federal Reserve Board with the request for
prompt consideration.
It was understood that the Pension Committee o f the Governors Conference tender their services t o the Federal Reserve Board i n connection with
its consideration o f the report.
(See pages 267-278 inclusive stenographic record).
At 6:00 o'clock p. m. the conference adjourned t o meet i n separate
session a t 10:00 o'clock a . m. o n Thursday, November 15.
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Federal Reserve Bank of St. Louis
Third Day's Session, Thursday, November 1 5
Separate Governors Session
Morning
The meeting was called t o order a t 10:00 o'clock a. m.
Present:
Governor McDougal, presiding,
Governors Strong, Norris, Fancher, Seay, Wellborn,
Biggs, Young, Bailey and Calkins,
Mr. Harrison, Secretary.
16 -
Topic II. D. (1) Policy to be pursued with respect to
Regulation J .
This topic was discussed a t some length from various points o f
view, M o s t o f the Governors who spoke expressed the opinion that the Federal
reserve banks should continue t h e i r collection s y s t e m a s a t present, although
it was stated specifically that i t would b e inadvisable f o r the Federal
Reserve Board i n its regulations expressly t o waive the legal right, reeogn ized b y the Supreme C o u r t o f the United States,
o f all Federal reserve
banks t o collect checks b y presentation over the counter.
S o also i t was the
opinion o f most o f those present t h a t that paragraph i n the suspended regula-
tion J providing f o r a charge for the collection o f any check bearing the
indorsement o f a non=par bank i s most undesirable a n d should b e withdraw.
Some doubt was expressed a s to its legality, a n d much doubt expressed a s to
its wisdom,
After thorpugh consideration, a n d upon motion o f Governor Strong,
VOTED
t o b e t h e sense o f the conference t h a t a
new Regulation J
should be adopted which will conform i n all respects t o the present practice
but which will not in terms prohibit the exercise of our legal right, confirmed b y the Supreme Court,
t o collect b y agents a t the counters o f non-par
banks, a n d which will not require u s to impose charges upon checks bearing the
indorsement o f non=par banks,
Governor Seay voted Noe
(See pages 280-311 inclusive stenographic record).
Topic Il. D . ( 2 ) C l e a r i n g House charges f o r collecting
checks through Federal reserve banks.
Upon request o f Governor Strong, this topic was passed for discussion a t the Joint Conference,
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Federal Reserve Bank of St. Louis
Ps4 eae
Topic II. D. (3) Advisability of an amendment to law
authorizing member banks t o deduct checks
in the process o f collection w i t h t h e
reserve banks from their gross deposits
in order t o determine the net deposit
liability against which reserves must b e
carried.
It was informally agreed that the topic would be passed until further discussion a t the Joint Session,
( S e e paragraphs 4 5 and 54),
(See pages 312-314; 373-374; 458-468 inclusive stenographic
record),
Topic II. EB. S h o u l d the non-cash collection facilities
(
3
6
)
not b e withdrawn f r o m non-member c l e a r i n g
banks?
Final consideration o f this topic was postponed until consideration
of the report of the Committee o n Voluntary Serwices. ( S e e paragraph 46),
(See pages 315-317; 3 7 4 - 4 3 7 inclusive stenographic record).
Topic Il. F. T e r m s “Wire Fate,” "Wire Payment o r Non-payment" ( 3 7 )
and “Wire Credit."
Upon motion o f Governor Strong,
i t was
VOTED t o request the Collection Committee t o draft a uniform circular t o b e issued simultaneously b y all Federal Reserve Banks defining t h e
terms u s e d b y Federal Reserve Banks i n connection with t h e collection o f non-
cash items.
(See pages 318-322 inclusive stenographic record).
Topic Il. G. Reconsideration o f decision t o prohikit use o f ( 3 8 )
Leased wire i n tracing direct routed collection
d
n
a
items
Topic IV. E. R e p o r t o f Leased Wire Committee
The Chairman read a report o f a joint meeting o f the Leased Wire
Committee and the Standing Committee o n Collection held recently i n Cleveland
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Federal Reserve Bank of St. Louis
sn E e
when this topic was considered a t the request o f the Federal Reserve Board's
Committee o n Economy and Efficiency. T h i s report {printed pages 322-328
the
stenographic record) indicates that i t was the unan imous opin ion o f
should
joint committee that the direct sending o f non- cash collection items
encourage s u c a
be encouraged b y all Federal reserve banks a n d that i n order t o
b e aecorded member
practice the same service with regard t o tracing should
banks whether they send directly o r whether they send through their own Federal
that because:
reserve bank, It.was the opinion o f the joint committee, however,
for
of the crowded condition o f the leased wires t h e u s e o f the Leased wires
b a n k o f the originating district
trac ing non-cash items sent through t h e reserve
should now be discontinued,
s o that the leased wires i n future shall not b e
reserve
used for tracing non= cash items whether routed through the Federal
bank o f the originating district o r whether s e n t directly.
I t was understood,
recommend a
however, that the report o f the joint meeting did not intend t o
collections over
change i n the present practice o f wiring proceeds o f non-cash
the leased wires.
Upon motion o f Governor Calkins, i t was
o f the Leased Wire —
_ VOTED t o adopt the report o f the joint meeting
Leased Wire Committee,
and Standing Collection committees, a n d t o authorize the
subject t o the approval o f the Federal Reserve Board,
t o modify i t s regula=
tions accordingly.
(See pages 322-327 inclusive stenographic record).
Topic I. Fe (1) Repurchase Agreements
General Effect o f Mr. Wyatt's Opinion
record, u p o n
After considerable discussion n o t reported i n the
motion o f Governor Strong, i t was,
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Federal Reserve Bank of St. Louis
we1S
VOTED t h a t i t i s highly desirable a n d important i n t h e dovelopmens
of the market f o r bankers acceptances a n d i n the protection o f the market for
Government securities that the present business o f the Federal reserve barks
buying acceptances a n d Government securities under repurchase agreements
continued o n substantially the same basis a s at present, but i n such form
may be decided proper under advice o f counsel.
(See page 338 stenographic record}
40)
Topic 1. F.(2). Repurchase ipreements- (
Application t o transactions involvine
depentures o f Intermediate Credit B a n k s -
Governor Bailey, whoyrpposed this topic, stated that i n his opinion
Federal reserve banks should not buy the debentures o f Federal Intermediate
Credit Banks, although h e recognized t h a t i n times o f temporary stress accommodation might b e extended t o member banks o n the basis o f such debentures
acquired b y them i n good faith out o f their own resourees-~It seemed t o b e t h e sense o f the conferance t h a t t h e Federal Inter-
mediate Credit Banks shovid, if possible, float their debentures through
the investment market rather than b y a “irect sale t o Federal reserve banks
under repurchase a g r e e m e n t s -+
was agreed, however,
i n view o f the im-
portant purpose f o r which t h e Federal Intermediate Credit Banks w e r e created,
that Federal reserve banks should consider each case o n its merits and afford
all possible h e l p whenever temporary needs o f these institutions require it.
(See pages 339 - 354 inclusive stenographic record).
At1:15 o'clock p.m- the conference adjourned to meet in Joint
Session a t 2:30 o'clock p.-m-, a n d t o reconvene i n separate session a t
5:00 o'clock p. m-
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Federal Reserve Bank of St. Louis
Third Day's Session, Thursday, N o v e m b e r 1 5
Separate Governors Session
Afternoon
The meeting was called t o order a t 5:00 o'clock D. Ms
Present:
Governor McDougal, presiding,
Govemors Strong, Norris, Fancher, Seay,
Wellborn, Biggs, Young, Bailey and Calkins,
Mr. Harrison, Secretarye
Topic Ill. A . R e p o r t o f Committee t o consider advantage
of t a x o n circulation o v e r Government
participation i n profits.
topic a t the
Governor Norris referred t o t h e discussion o f this
the Under
Joint Conference earlier i n the day, when h e read a letter from
Secretary o f the Treasury opposing the suggestions contained i n the report.
for
having appeared that i t would b e difficult t o get any active support
that t h e topic
amendment o f the k i n d proposed, G o v e r n o r Norris requested
passed,
(See page 355 stenographic record).
o f the {
Topic III. B. Increase o f gold holdings i n the vaults
Federal reserve banks,
Governor Fancher referred t o the action o f the conference a year
ago i n recommending that the appropriate time each Federal reserve bank give
i n its own
consideration t o the increase i n the amount o f gold t o b e held
vaults,
H e suggested that now that many o f the banks were moving into their
new buildings i t might b e advisable actively t o consider this question.
Reference was made t o the gold coinage program outlined a t one
i t was
time b y Mr. Gilbert, and, upon motion o f Governor Fancher,
VOTED t h a t Mr. Harrison b e made a committee o f one t o consider
the matter and discuss i t with Mr. Winston.
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Federal Reserve Bank of St. Louis
(See pages 356-361 inclusive stenographic record).
42)
Printing o f $1 bills (see also paragraph 14)
(
4
3
)
Governor Fancher reported the result o f the interview o f the committee appointed b y the conference t o discuss w i t h Mr. Winston t h e printing
of more $ 1 bills.
H e stated that while i t h a d been thought t h a t t h e
Limitation o n the amount o f n e w bills w a s d u e t o a
shortage i n paper,
it
appeared f r o m t h e conversations w i t h Mr. Winston a n d Mr. Broughton that t h e
program providing for 1,700,000 $ 1 bills a day had been cut d o w i n order
to enable the Treasury Department t o print and issue larger denominations
of silver certificates, thus reducing the amount o f the free silver balance
in the general account.
The suggestion was made a t the conference that i f the Federal
reserve banks would accept from the Treasurer a deposit o f $10,000,000 i n
standard silver dollars it would be possible for them for the time being
to cease printing the larger denominations o f silver certificates a n d print
a similar number o f $1 certificates, - 50,000 sheets, o r $200,000 a day
additional.
I t was understood that the silver dollars i n question were i n
the mint a t Philadelphia.
Upon consideration o f this report i t was the almost unanimous
opinion o f the Governors that owing t o the difficulty incident t o counting
and shipping standard silver dollars from the Philadelphia mint t o o t h e r
reserve banks, a n d the possible obstacles i n arranging for a n earmarked
deposit a t the mint itself, i t would hardly b e worth while t o accept a
deposit of silver dollars from the Treasury under such circumstances merely
‘to procure the printing o f such a limited amount o f additional $ 1 bills.
It was understood, however, t h a t there w o u l d b e n o objection t o t h e
Federal Reserve B a n k o f N e w York discussing t h e matter further w i t h t h e
Treasury Department i n order t o ascertain whether i t would b e
feasible t o arrange satisfactorily f o r the custody o f standard
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Federal Reserve Bank of St. Louis
Silver dollars t o be deposited with i t b y the Treasurer.
I t was later
discovered that the silver dollars i n question were i n the custody o f the
New York Assay Office, s o the Federal Reserve Bank o f New York agreed t o
accept a deposit o f $10,000,000 i n order that the printing o f $1. silver
certificates might b e expedited a s proposed,
(See pages 151; 361-368 inclusive stenographic record),
Topic IV. A. R e p o r t o f Insurance Committee
After discussion, i n which it appeared that the counsel o f
two o f the reserve banks had rendered a n opinion that i t would b e ultra
vires for the Federal reserve banks t o enter into the inter-insurance
plan proposed b y the committee, upon motion of Governor Calkins, i t was
VOTED t h a t the conference should report t o the Federal Reserve
Board that because o f the difference o f opinion expressed b y counsel o f
the various Federal reserve b a n k s n o action could b e taken b y the Governors Conference until t h e question o f legality i s finally determined b y
the appropriate legal authority,
(See pages 368-371 inclusive stenographic record).
At 5:55 o'clock p . m, t h e conference adjourned t o meet i n
Separate Session a t 10:00 o'clock a , m. o n Friday, N o v e m b e r 16.
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Federal Reserve Bank of St. Louis
oee e e
Fourth Day's Session, Friday, N o v e m b e r 1 6
Separate Governors Session
Morning
The meeting was called t o order a t 10:10 o'clock a, m.
Present:
Governor McDougal, presiding,
Governors Strong, Norris, Fancher, Seay,
Wellborn, Diggs, Young, Bailey and Calkins,
Mr. Harrison, Secretary.
Deduction of Checks i n Process of Collection
(
4
5
)
iv. J a y appeared before the conference a n d briefly reviewed the
report o f the Federal Reserve Agent's Committee o n Reserves i n which the
recommendation was made that checks i n the process o f collection with Fed-
eral reserve banks be allowed as a deduction from gross demand liabilities
in order t o eliminate t h e present discrimination against country banks w h o
are not able t o avail themselves o f the deduction from balances due t o other
banks i n determining reserves,
M r . Jay stated that his committee h a d
recommended that the suggestion t o permit cash t o be deducted from deposits
in determining reserve b e n o t approved,
{ S e e paragraphs 3 5 a n d 54).
(See pages 312-314; 373-374; 458-468 inclusive stenographic
record),
Topic IV. C . R e p o r t o f Committee o n Voluntary Services (
46)
Governor Fancher, Chairman o f the committee, r e a d the report (printed
pages 375-382; 3 8 7 - 3 9 8 stenographic record) t o the conference, whereupon Governor Calkins moved that the report b e adopted.
After further lengthy discussion o f the report pro and con, Governor
Calkins amended his motion, a n d i t was
VOTED t h a t the committee submitting the report o n Voluntary Services assumed b y the Federal reserve banks b e continued b y the Board and
be requested further t o investigate a n d report a n d make recommendations
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Federal Reserve Bank of St. Louis
~24—
prior t o the next conference a s t o t h e following subjects:
is H o w valuable i s the-service o f collecting non-cash
items t o the manbers o f the Federal Reserve System, dividing
those members between banks located i n Federal reserve bank
and branch b a n k cities a n d those not located i n those cities;
2. W h a t i s the probable growth o f the volume o f this
business and what will i t likely cost;
3. W h a t i s the possibility o f i m p o s i n g acharge upon
the collection o f non-cash items which will, a t least,
reimburse the banks for the cost o f conducting the business,
the report upon charges t o consider the practicability o f
charging o n all items o r upon those items which w e class a s
street address items, a n d h o w much s u c h charge might be, i f
recommended b y the committee;
4. T h a t the committee be requested to conduct
practically t h e same type o f investigation a s t o all other
services o f like character which w e a r e n o w performing
without charge f o r our members.
1,
and that the report of the Committee o n Voluntary Services be approved and the
non-cash collection service b e continued a s at present pending a final report b y
the committee o n the above matters.
Governor Wellborn voted N o .
t o the conDuring the reading o f the report, Governor Young reported
ference t h e action o f the state bankers associations i n Minnesota, N o r t h a n d
the
South Dakota, who have adopted resolutions opposing the continuance o f
non-cash collection service b y Federal reserve banks.
I t was f e l t b y other
a
Governors present that there i s ne general demand among member banks for
discontinuance o f this service a s might b e inferred
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Federal Reserve Bank of St. Louis
f r o m these resolutions.
(See pages 374 - 437 inclusive stenographic record)
a 35%.
Topic IV. D e E c o n o m y a n d Efficiency
pages 439-447
The conference considered a memorandum, X3889 (printed
o n Economy a n d Efficiency
stenographic record) submitted b y the Board's Committee
making certain recommendations t o the Governors, namely:
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Federal Reserve Bank of St. Louis
Appointment o f operating committee t o standardize
(
4
7
principle supplies, a n d arrange f o r joint purchasing
where savines c a n b e effected b y s o doing.
was
Upon motion o f Governor Norris, i t
the Board's
VOTED t o approve the recommendation o f
for the appointment o f
Committee o n Economy and Efficiency
the use
a n d t o obtain
a committee w i t h p o w e r t o standardize
a n d also t o
of such standardized supplies b y all banks,
supplies i n all cases
arrange f o r t h e joint purchase o f
b y such stanwhere substantial economies c a n b e effected
dardization o r purchase.
motion with the
Governors Young and Seay voted for this
the committee d o e s n o t neces~
reservation t h a t t h e action o f
sarily bind each bank,
t o appoint t h e committee,
The chairman, w h o was requested
banks
of the following
stated that K e would like the Governors
o f Five:
to nominate some man t o serve o n a Committee
City and Richmond,
New York, Chicago, Philadelphia, Kansas
Insurance -
Group Life a n d Automobile Insurance
Upon motion o f Governor Fancher,
i t was
o f the Board's committee
VOTED t h a t the recommendations
(2) automobile
insurance and
conceming (1) employees group life
Committee o f the
Insurance
the
to
b e referred
with a
for full investigation a n d report
Conference
Governors
plan o f operation.
insurance,
credit informations
Investigation o f cost o f securing
Upon motion o f Governor Calkins,
i t was
o f the committee concerning
VOTED t h a t t h e recommendation
b e adopted; that is,
the cost o f securing credit information
reserve
a
that t h e matter b e referred t o
committee o f Federal
credit men for investigation and report.
on
other activities carried
Cost o f free services a n d
as a matter o f policy.
Upon motion o f Governor Strong,
i t was
)
a
VOTED t h a t the recommendation o f the committee concerning. the cost o f free services and other activities carried o n as a
matter o f policy b e referred t o the Committee o n Voluntary
Services aseumed for member banks for consideration a n d report,
as provided in the action under paragraph 46.
(See pages 437-454 inclusive stenographic record).
Topic Il. E. Should the non-cash collection facilities not be ( 5 1 )
withdrawn from non-member clearing banks?
(see also paragraphs 36 and 46)
Asvoted in paragraph 36, consideration of this topic was postponed
until after action was taken o n the report o f the Committee o n Voluntary
Services, A f t e r further consideratian, a n d upon motion o f Governor Strong,
it was
f the conVOTED t h a t this topic should p e included i n the v o t e o
ference concerning the report of the Committee o n Voluntary Services, a s
recorded i n paragraph 46.
(See pages 315-317; 3746437; 455-456; inclusive stenographic record}.
T
o
p
i
c
V. A. Reimbursement for Fiseal Agency Expenses .
( 5 2 )
The conference discussed off the record the question o f reimbursement f o r fiscal agency expenses a n d referred t o the discussion o f this topic
at the preceding Joint Conference,
i t was informally understood that the
Chairman should report personally t o t h e Governor o f the Federal Reserve
Board the sentiment o f the conference that i t would b e inadvisable a t this
time t o request a n approprition for reimbursement.
(See page 456 stenographic record).
’ Blanket Fidelity Insurance covering employees i n the
Federal Reserve Agent's Department.
cite
The conference of Federal Reserve Agents suggested to the Governors
the advisability e f having included o n the Governors Insurance Committee a
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Federal Reserve Bank of St. Louis
a oe
the fact that one o f the reserve banks
representative o f the Agents because o f
Agent's department were not covered
had been advised that the employees i n the
by the blanket bond.
Upon notion o f Governor Strong, i t was
t o ascertain which Federal
VOTED t h a t the Chair appoint a committee
ascertain from the Federal Reserve
reserve bank raised the question and t o
was
o f the situation before a n y action
Agent o f that bank t h e exact status
taken .
the purpose The chairman appointed Governor Young for
had di scussed the matter
Governor Young later reported that h e
that it was their opinion that employees
with the Federal Reserve Agents and
taken care o f by the Insurance Come
in their departments were not properly
o f the blanket bond, a n d that they
mittee i n the preparation and acceptance
to
o f a representative from their body
therefore suggested the appointment
Bank
H e stated that the Federal Reserve
the Governors’ Insurance Committee.
o r not
there was some question whether
of St~- Louis had been advised that
a t that bank are covered b y the
the employees i n the Agent's department
that a rider
was given b y the bonding company
blanket bond, although assurance
answer the obj ec tion will b e furnished which will satisfactorily
i t was
Upon motion o f Governor Strong,
chairman o f the Insurance ComVOTED + o submit the matter to the
Reserve Agents
representative o f the Federal
mittee, with power t o appoint a
matter
o r necessary after taking the
- to that committee i f deemed desirable
o f St- Louis.
up with the Federal Reserve Bank
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Federal Reserve Bank of St. Louis
~
473 inclusive stenographic record)
(See pages 457 - 458; 471 -
ens
Topic Il. D. (3). Advisability o f an amendment t o law authorizirg (34)
member benks to deduct checks i n the process of
collection with the reserve banks from their
ercess deposits i n order t o determine t h e n e t
deposit liability against w h i c h reserves must
be carried.
(See also paragraphs 3 5 and 45)
While this topic had previously been passed pending discussion at
the Joint Conference, i t was felt advisable t o have the Governors Conference
consider i t i n advance o f the Joint Conference.
After discussion, i n which i t was pointed out that while there may
be need for a scientific revision o f the whole subject o f reserves, i t is not
practicable o r desirable t o deal with the subject piecemeal, jit was, upon
motion o f Governor Seay
VOTED. t h a t i t would not b e advisable a t this time t o make any
change i n reserve requirements o f member banks.
(See pages 312-314; 373-374; 458-468 inclusive stenographic record).
Allocation o f Reserves against Federal Reserve Notes and
(
5
5
)
Deposits, a s submitted f o r consideration b y the Federal
Reserve Board.
At the Joint Conference o f the Federal Reserve Board, the Federal
Reserve Agents and the Governors there was consideration o f a proposal t o
allocate a certain portion of the gold reserve of each Federal reserve bank
re~
against its note liability, leaving the balance o f the gold holdings a s
serves against deposits.
I t was suggested that the different Federal reserve
be rebanks might b e grouped into three classes: {1} those which would
quired t o maintain a
reserve i n gold o f 100% against notes,
( 2 ) t h o s e which
would be required to maintain a reserve in gold of 70% against notes, and = —~
(3) those which would be required to maintain a reserve in gold of 50% against
its deposit
notes, the balance o f eaeh bank's sdaersca beues applicable t o
Liability.
and
-. T h e several Governors iGcunend t0in proposal i n some detail,
motion o f Governor
the consensus o f opinion was opposed to the plan. U p o n
Strong i t
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Federal Reserve Bank of St. Louis
was
VOTED
t o b e t h e sense o f the conference t h a t i t i s both unneces-
sary a n d inadvisable t o make a n y change i n t h e present method o f calculating
or publishing Federal reserve b a n k reserve percentages, e i t h e r a s a whole
for the system,
o r separately f o r individual reserve banks, -
i t being t h e
belief o f the conference t h a t t h e present method h a s afforded i n the past a n d
still does afford reserve banks and the public adequate data for the proper
determination o f the true reserve position o f the system a n d each reserve
bank, Furthermore,
i t was the sense o f the conference that t o change the
reserve calculations and publish them i n the manner suggested i n the proposed
plan would contain considerable risk o f arousing public alarm.
( See pages 468-471 inclusive stenographic record),
Report of Foreign Bank Accounts i n which other Federal re~
( 5 6 )
serve banks participate, covering period since March, 1923
Governors Conference.
The Secretary submitted for consideration a report covering the
foreipn bank accounts i n which other Federal reserve banks participate,
which was ordered t o be placed i n the record, ( P r i n t e d pages 473-478
stenopraphic record),
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Federal Reserve Bank of St. Louis
sine die.
At1:15 o'clock p.m- the conference adjourned
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Federal Reserve Bank of St. Louis