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Federal Reserve Bank of St. Louis
VOLUME 2
PROCEEDINGS
CONFERENCE
O F GOVERNORS
O F THE
FEDERAL R E S E R V E B A N K S
TREASURY BUILDING
W A S H I N G T O N D.c.
N O V E M B E R 12-15, 1923
WALTER S. COX
SHORTHAND REPORTER
COLUMBIAN BUILDING
WASHINGTON, D . C .
¥y
GOVERNORS O F FRDERAL RESERVE
BANKS,
Thursday, N o v e m b e r 1 5 , 1 9 2 3 ,
10.00. 0o' clock p.m.
The c o n f e r e n c e
adjournment
o f Governors r e c o n v e n e d , p u r s u a n t
o f Wednesday,
a t 1 0 . 0 0 o f c l o c k a.m.
to
i n the hear-
ing r o o m , F e d e r a l R e s e r v e B o a r d , Tre: sury Puilding, W a s h i n g t o n ,
D. C .
The Chairman.
Several
o f o u r members a r e n o t present yet,
and that i s occasioned b y the fact that t h e y are o n a committee
delegated t o bee t h e Secretary o f t h e Preasury i n regard t o
one d o l l a r b i l l shortage.
‘Ye will p r o c e e d t o s e c t i o n 2
o f t h e vorogram, T o p i c D .
oO
&. C d d d e c t i o n s a n d Glearings.
D. P a r Collections.
Before taking th:
+
p , Governor Fancher, h a v e y o u a n y
next
report t o make with regard t o the joint conference o f the
Governors and agents with the Board? °
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Federal Reserve Bank of St. Louis
280
Governor Fencher. I
will attend t o thet a t once, Mr.
Chairman.
The Chairman.
T h e first sub-heading under D
is l.
1. P o l i c y t o b e pursued w i t h r e s p e c t
to r
e
m
i
l ina view
t io foSupreme
n
J
Court d e c i s i o n s a n d r e c o m n e n d a -
tions o f Federal Advisory Gouncil.
nat
i s a n important t o n i c a n d w e s h o u l d d i s c u s s t h a t .
If i n o r d e r I
world l i k e t o r e a d o u r r e c o m m e n d a t i o n
in regard t o r e g u l a t i o n d .
I
o n tis
t i s recommended t h a t t h e Fed-
eral Reserve banks continue t o operate a s they a r e doing a t
present, that i s not t o take checks drawn upon banks which
are n o t r e m i t t i n g
a t p a r a n d n o t t o collect i t e m s
b y pre-
sentation a t t h e counter f o r t h e purpose o f securing p a r remittance - - w e cannot d o that n o w - - and t o use o n l y banks f o r
collecting agencies, R e g u l a t i o n J
requires a
few changes i n
wording i n order t o conform t o what w e are n o w doing, a n d t h e
substance o f that i s that w e should continue t o operate a n d t o
have r e g u l a t i o n J
adjusted,
i f necessary,
i n order t o permit u s
to o p e r a t e j u s t a s W e aré.
Governor Strong.
W y suggestion about regulation J
would b e
t
o
, the
‘,
that there b e n o mention made i n the regulation a t all a s f meths
of collecting,
sort.
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Federal Reserve Bank of St. Louis
b y a n agent
o r through a
bank o r a n y t h i n g o f t h a t
T h i s i s a case where t h e Supreme Court h a s affirmed o u r
281
we d o not
right t o collect b y a n agent i f w e want t o d o so. f
elect t o d o s o we d o not need t o advertise t h a t fact o r commit
o n . T h e r e are many cases
ourselves not t o do s o b y a resuls
where b a n k s a r e o f doubtful s o l v e n c y a n d i t i s a b s o l u t e l y e s -
sential that w e should collect i n that way. I s n ' t that so,
Governor Young?
Governor Young. I
Governor Strong.
think that i s a fact.
W e a r e opposed t o doing anything i n
our regulations
a s t o t h e m e t h o d o f collection.
quit c o l l e c t i n g
b y agents, e x c e p t
W e have j u s t
i n those cases where i t i s
necessary t o protect t h e bank a s a credit matter.
reference
left out.
t o the retaliatory charge, I
W e j u s t o u g h t ’ to collect
A s t o the
think t h a t o u g h t
t o be
o n banks t h a t p a y p a r a n d
leave out any suggestions o f charge a t all, a n d g o o n as we
are going.
Governor Calkins.
I t i s entirely beyond o u r power, a n y -
Governor Bailey. I
would n o t c o l l e c t
a t par,
think i n the proposition where a
b u t has drawn a
draft
o n a
bank
member
bank, that that would be a mistake.
The Chajrman.
W o u l d y o u b e willing t o make your recommenda-~
tion i n this language, that w e cntinue t o operate a s we are and
that r e g u l a t i o n J , i f necessary,
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Federal Reserve Bank of St. Louis
b e amenfe@. a c c o r d i n g l y ?
Governor Seay.
i t i s necessary,
How about modifying
has t o b e t a k e n there.
Governor S t r o n e ,
third paragraoh,
Ccontorm C o .oun present p r a c t i c e s ,
a n d without m a k i n g t h e s e
references w i i c h w e regard a s dangerous a n d possibly offensive.
proposed m o d i f i c a t i o n s
that M r , H a r r i s o n h a s a n d t h a t i s =
peason I
stated i t w o u l d
be n e c e s s a r y f o r t h e B o a r d t o t a k
Governor Strong.
The Chairman.
O n r e g u l a t i o n J , yes.
W i l l y o u m a k e a e recommendation?
Governor Strong.
M y recommendation i s just a s I have d e -
scribed i t , t h a t w e c o n t i n u e
LO
t o operate ju:
- s w e a r e doing,
y u
Governor Strong.
Governor Younes...
£ n e you. 2 o i n g )
add something e l s e t o
that, G o v e r n o r S t r o n g ?
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Federal Reserve Bank of St. Louis
Governor S t r o n g
t h a t t h e regulation
b e changed
t o conform
265
present practices without referring t o the method o f col-~
fection, a n d wit! n p o s i n g « retaliutory charge against. t h e
non-par b a n k s .
Governor S e a ’
T h e r e
i s n o reference
i n the regulation
6f.collection.
FOV SEO,
Governor S e a y .
Governor Young. t
says e a c h Federal Reserve b a n k will
Clearing
receive @hecks a t p a from its “ember banks a n d non-member/banks.
keairman.
I s there a
s e c o n d t o this motion?
Governor
Gnairman, t h a t t h e
motion s h o u l d
b e made a
Governor S t r o n g
little m o r e comprehensive.
G o v e r n o r Calkins, I
ooint t h a t I
suggestion,
wnich
have i n m i n d i n m a k i n g t h e
i s briefly i
p r e m e Court h a s held
“that w e have t h e right t o collect b y Z
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Federal Reserve Bank of St. Louis
do not k n o w that y o u
i
f our methods a r e
oporessive.
Governor C a l k i n s .
Governor S t r o n g .
— :
i
n s o m e states.
T h o s e s t a t e s c u n tuke excnange
znd pay
check..on t h e i r c o r r e s p o n d e n
Governor G a l k i n s .
Y e s ,
Governor S t r o n g N o w ,
i t s e e m s t o m e i t would b e a n i m p r o p e -
284
bo p u t o u t a
sen a f f i r m e d
resulation w h i c h foregoes a
b y t h e Supreme C o u r t o f the
1b s e e n s t e l e
a n U n n e c e s s a r y T i n g .to.de.
The s p i r i t o f t h a t + d e c i s i o n w a s t h a t w e s h o u l d n o t u s e o p pressive
o r retaliatory methods
lection system,
regulation a
i n developing
t i s col-
a n d there i s i n t r o d c
e
d into this supposed
provision w h i c h i s d i s t i n c t l y r e t a l i a t o r y
character, b e c a u s e
i t says i f y o u cannot collect
nonpar banks without paying exchange,
in
o n these
t o charge i t exchange,
and t h e S u p r e m e C o u r t h a s a p v a r e n t l y a f f i r m e d t h e r i g h t o f
those b a n k s
a
whole thing. i
280 0
l
e
t
r
g
e exchange.
I
w a
expressed
y
e
w
i
t
N o w m y theory about t h i s
i t t h e o t h e r night,
h a n y n e w regulations
a n d that
o f that
kind, b u t l e t u s g o ahead a n d a t t e n d t o o u r collection business quietly, a n d i t will g o towards making friends rather
than making more enemies.
‘he C h a i r m a n ,
thie,
OPT ether,
i d o
n o t k n o w -rhether v o u c o m p r e n e n d e d
you-egres
7 %
m
e b u t I
- consider t h a t t h e
agitation, p a r t i c u l a r l y t h e t which h a s t a k e n solace d u r i n g t h e
last t h r e e months,
a f f a r d e d
u s a
r
anything w e have heretofore h a d t o suide u
opportunity t h a n
deterni
concensus o f opinion i n regard t o the check collection system.
: i t had not been f o r that
pia
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Federal Reserve Bank of St. Louis
w e never would have h a d the reserve
285
city b a n k e r s
o f t i s c o u n t r y stand u p a n d state that tris i s a
great thing. ‘ T h e y never have s a i d i t before, a n d they said
I f it had not been for that
it i n their e e t i n g i n Chicazo.
we w o u l d c o t
b
a
n
s t h r o u g h o u t t h e country,
k
generally speaking, f e l t about it, a n d I think i t will b e
interesting t o s a y here that notwithstanding « h e
h
part o f a n orgenize
e
s
°
purpose t h e d e s t r u c t i o n
Sferhas
e seventh district h
e n e c k C o l tecrLc )Cyyi
system i n
ve workedt h a r d a n d t h e y a r e
working continuously i n
Cure
done s o m e v r o r k i n
1 0 0 v e r c e n t basis;
on a
collection s y s t e m a l m o s t
t h e with-
been inconsequential. ‘ T h e y know i t i s voluntary,
t o Warrant u s i n be-
have o l e n t y o f e v i d e n c e
lieving t h a t t h i s c h e c k c o l l e c t i o n s y s t e m i s a p p r e c i a t e d
b y
the l a r g e a n d s m a l l banks.
Governor Strong.
n
e
v
e
r lost &
bank, G o v e r n o r ,
otion mad« b y Governor Strong
s that
Governor
n
a
a
s
we c a n g o elong j a
comes
t o u s which bears
Lf w e - e a n d o Lb- at. var,
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Federal Reserve Bank of St. Louis
we are,
e
purelym voluntary.
i
c
e t h e suspended r u l e a n d
d
o
l
l
e
t h e indorsement
c
o f
t
a5 n
286
Governor F a n c h e
B e f o r e t h e motion i s out I
would l i k e
to “inquire, a n d ir. Harrison c a n orobably o u t m e right o n this:
wasn't o l d r e g u l a t i o n J
i n process
Supreme Court decisions?
o f b e i n g revainped b e f o r e t h e
T h e n t h e matter w a s rather h e l d u p
on account o f a change i n the whole status.
they w e r e i n t h e v r o c e s s
iy, Harrison.
in regulation J
o f rewriting it.
T h a t i s very true.
T h e general instructions
were being redrafted i n t o a remulation that
was l a t e r k n o w n a s s u s p e n d e d r e g u l a t i o n J .
account
I n other words,
I t was suspended
o f the orovision w h i c h assessed ¢ «é
checks bearing a
o
o n
n all those
non-par indorsement, a n d a s I understand a t
the p r e s e n t t i m e t h : t regulation
i s n o w suspended o n l y a s t o
paracraph 3 , w i c h i m p o s e d t h a t c h a r g e s
L a g :
Governor N o r r i s .
k
e y a
t h e whole regulation w a s s u s
n
i
h
Wir. Harrison. 1
as
e s rband “ i y “bhet -vayen a
ended.
myself w a s under t h e impression f o r some
time that t h e whole regulation w a s suspended a n d that w e were
operatins
under
day b y s o m e b o d
t h e 1 8 2 0 regsulatior
here
Governor Seay.
b u t I
w a s adviised y e s t e r -
a t t h e B o a r d t h a t t h e t w a s n o t true.
B u t that m a y not have b e e n their pur-
pose, b u t i n p o i n t o f f a c t t h e y h a d s u s p e n d e d a n d “ e l d i n
abeyance R e g u l a t i o n J .
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Federal Reserve Bank of St. Louis
Governor Fancher,
T h e whole regulation.
287
Mr. Harrison. I
a m glad t o have that feeling expressed,
because that w a s m y o w n idea originally.
Governor Fancher.
T
I would l i k e t o a s k Mr. S t r a t e r i f
ing
it was “ i s understand/that j u s t that part applying t o the indorsement o f non-remitting banks a n d n o t t o o u r banks w a s suspended.
Mr, Strater.
M y impression i s that t h e whole regulation
Was suspended, b u t i t was the same tring i n all essential
particulars e x c e p t t h e r e f e r e n c e
t o making t h e charges
on
checks indorsed b y banks that d d not remit a t par.
Governor Bailey. I
supposed w h e n the m e w regulation was
presented t h a t w e w e r e o p e r a t i n g u n d e r t h e o l d regulations.
The Chairman. There is not much use in going into this
matter now,
I t will just consume time.
I f w e are operating under o l d regula-
Governor Stronz..
$00,
2 0 0 . 2 b 2 6 ot: that.
The Chairman.
W e have a
law interpreted b y the Supreme
Court, a n d w e are proceeding i n exact accordance w i t h that,
Governor Wellborn.
B u t don't y o u think w e ought t o g o
on record a s to our views regarding Regulation J that has
been s u s p e n d e d ?
TheChairman. I
think w e are o n record a n d will b e o n
record a f this m o t i o n i s carried.
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Federal Reserve Bank of St. Louis
Governor Seay.
- l would d e s i r e
t o s 0 o n record
Coen h e m e 5 7 0 n .
to Waves t h a t
Governor S e a y . I
understand,
M r
h a i r n a
‘
i r e f e r -
ring t o Governor Wwellborn's statement.
Governor wvellborn.
M y idee i s that w e ought t o express ourwich h a s b e e n temporarily suspended b y
‘egeinst that regulation a s outlined
by the Board. ;
a r a sI
am concerned I
would like t o
vote t o request t h e Board t o just annul it.
Governor Calkins. - T h e r e a r e opepvating details w h i c h should
included
i n t h e r e g u l a t i o n p o v e r n i n g tunis matter,
I
t seems
me thet w e should g o o n record first a s t o what w e believe
to b e our. courss,;
remulation J .
regulation J
L t . wilh n e e sbe s a t r e t o c t o r y t o u s i f t h e o i d
is made o n c e more onerative;
te
w e cdo not w a n t t h e i
Governor Fancher.
Governor Calkins.
J amended t o ac-
‘ w a n t remulei .
cord with the practice j
i t l i n e d
n a t i s , roughly,
to
proceed e x a c t l y a s w e a r e v r o c e e d i n g a t t h e p r e s e n t t i m e ,
so
I think i t i s incumbent u p o n this conference,
suspended r e g u l a t i o n J , a n d s u g g e s t n o t h i n g
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Federal Reserve Bank of St. Louis
t o wine o u t
i n i t s place,
to i n d i c a t e w h a t i n o u r o p i n i o n s h o u l d g o i
Governor Strong.
1 7
m
y idea
t h e n e w recuse
o f what t h e m o t i o n i s ,
Governor Norris. T h s t i s what t h e
d o e s ,
i n gen-
terms.
The Chairman.
I f Governor Strong would add the words,
that regulation J be adjusted accordingly" I think it
would c o v e r t h e “ h o l e
Governor Fancher.
rerulation ¢
Yith no, reference t o " n e
of those checks indorsed b y non-member banks, t h e n y o u want
no reference made t o the question o f our legal right t o
oresentation
a t t h e counter,
Governor Strong. L e a v e that out.
Governor b a i l e y .
T h e n e w resulation would
b e all right
with those t w o t i n g s out.
Governor Strong.
Governor Norris.
‘th
i s 1 b exactly.
I t would m a k e i t a
little p l a i n e r i f
you say rerulation J so amended a s t o make i t conform t o present practice.
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Federal Reserve Bank of St. Louis
Governor Strong.
O l d regulation
J?
Governor Norris:
Govornor Strong :
T h e o n e t h a t i s i n force.
T h a t i s correct.
The Chairman: G o v e r n o r Strong I noticouthat you have
been b o w i n g y o u acquiescence.
Governor Strong: I
W i l l y o u f r a m e a , new m o t i o n ?
will submit onc,
Sip Beye eg, ee w e M y motion i s that a
adoptcd w h i c h w i l l c o n f o r m i n a l l r e s p e c t s
mew regulation J
be
t o t h e present prac-
tices, b u t which will n o t i n terms prohibit o u r oxercise o f our
legal right, sconfirmed 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 n o t roquire u s t o impose charges u p o n checks bearing indorsement o f
non-par banks.
{oiipangloz:ang,obety
tted. otapaseS05)
Mr. airman,
regulabion J
e
@ provisions e m b o d i e d
in
with respect t o what Governor Strong calls r e -
taliatory measures, a r e n o t new a t all.
T h e y h a d been con-
sidered l o n g b e f o r e t h e c a s e c a m e u p o f t h e B a n k o f R i c h m o n d
against t h e forth Carolina b a n k a n d l o n g before t h e decision
in t h e S u p r e m e Court,
of t h e o f f i c e r s
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Federal Reserve Bank of St. Louis
and I
a m sure t h a t i t i s t h e position
o f o u r banks. a n d o f t h e c o u n s e l t h a t n e i t h e r
he purpose o f it nor the essence < t
sve
i t t o
b e the
o n l y mech:
is reteliatory.
b y : whi 1
we w i l l
ever
Y
e
bring
ar collection o f checks i n the Southeastern
The B o a r d i t s e l f h a s s t a t e d t h e r e a s o n s
resolution.
adopted a t a mee F
t h e Advisory Council w h t h the Federal
Reserve Board there w a s n o t a
o f some emazement
macter
w h e n it. -was
dissenting voice, a n d i t was a
t o me, b e c a u s e o u r b a n k h a d a d v a n c e d
the vroposal very long before, t w o o r three years before,
and w o i l e i t h a d s o m e a d h e r e n t s
w
a
s objected to.
Governor Strong.
I t was voted down every time.
Governor Seay. I
do not k n o w that i t ever came t o a
G o v e r n o r
s t r o n g
Advisory C o u n c i l i
t
t
e
c a m e
6 0 ° a
v o t e
a t a
m e e t i n g
o f
vote.
t h e
i t a d e l p h i a a n d t h e recommendation w a s
ageinst it.
Governor S e a y ,
Whether
is a
I T know p e r f e c t l y w e l l
i t came t o a
matter
vote I
cannot recall.
o f some amezement
i t w a s opposed,
Therefore
t o m e that when
Up a t t h i s m e e t i n g a n d c o m m e n d e d anda a p p r o v e d
present,
t h e Board include’.
T h s purpose
it
i t was brought
b y every person
w a s admirably
set
forth in the Board's exnlanation, but as I said once, I said
before,
a n d expect
t o b e compelled
t o s a y again,
w e regard i t
as the o n l y method b y weich t h e p a r collection o f checks i s
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Federal Reserve Bank of St. Louis
to b e b r o u g h t a b o u t t h r o u g h o u t t h e country.
Chairman, t h a t something h a s been heard f r o m
anks, that t h e y have n o t withdraym - The Chairman. I
b e g y o u r pardon. I
s a y w i t h respect
to the seventh district, f o r which I speak only, t h a t t h e
withdrawal w a s inconsequential.
Governor Seay.
W i t h respect t o a n y district, I
believe
there a r e f e w withdrawals, b u t I submit that t h e Federal R e serve b a n k s a r e i n e
state o f uncertainty;
what a c t i o n t o take. I
think t h e y a r e v e r y m u c h d i s c o n c e r t e d
by the proposal i n that resolution,and I
been v e r y e f f e c t i v e
t h e y d o not know
think i t would have
- - what t h e y will b e when t h e resolution
which i s n o w merely held i n abeyance i s adopted, I
but I
think t h e leprsey o f non-pa
cannot tell,
n g will b e likely t o spread.
I think w h e n i t i s f o u n d t h a t t h e b a n k s
o f North Carolina c a n
pay t h e i r c h e c k s p r e s e n t e d u p o n t h e m b y Federal R e s e r v e b a n k s
in exchange o v e r their counter, t h a t t h e y c a n b e adonted i n
other states.
T h e r e i s a similar l a w i n South: Dakota. There-
fore w e t:ink that there i s more danger o f the disintegration
of the p a r collection system t h a n y o u gentlemen, w h o have n o
such troubles i n your districts, imagine.
I f i t b e true, a s
these state bank protectionists h a v e asserted, t h a t a
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Federal Reserve Bank of St. Louis
vast
majority o f the banks i n the v a r collection system a r e i n against
- and I
have g i v e n t h e m a
d o not credit t h a t entirely - - then t h e y
w a y t o g e t o u t o f i t successfully,
é i s s o m e s t r o n g l i k e l i h o o d t h a t t h e y w i l l proceed
I thereforé
the o r o b a b i l i t i e s
possivie e f f e c t s
d o not believe t h a t y o u aporeciate
i n t h a t direction.
o f t h i s rercula:
S
are n o t a p v r e c i a t e d
t o
e
t
a
T h e n there a r e other
t r e n Porccd.
h
a
t sou f
W o reos | e e
the non-member
v e on
banks think that i t would b e a g a t h e i r interest.
the c o n t r a r y t h i n k t h a t n
of i n t b e r e s t i n e b a n k s
s v e r ’ passed w i l l b e s o inducive
t o become members
2 s will
b e this propo-
sal i n effect a n d i n i t s u l t i m a t e w o r k i n g o u t , b e c a u s e
certainly p u t a
banks,
oremium,ultimately,
w o o n accounts
i t will
i n member
e n d b y that means i d will h a v e t h e strongest w e a p o n
that e v e r has been placed i n our hands t o s e g u e s membership.
Governor Strong, ;
Governor Seay. I
d o n o t c o n t e n d t h e t i t i s coercion.
Governor Strong. I
Governor Seay.
of t h e B o a r d i t s e l f
man l a n g u a g e c a n be,
opie.
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Federal Reserve Bank of St. Louis
o f 10,5
igs a weapon, a n d w o u l d b e coercion.
do.
I t is perfectly plain, end the language
i s just a : O e i c t a l a n d irrefutable
Y o u cannot refute t h e language
s s hu-
o r the
W i l l y o u r e a d t h e p a r a g r a p h t o wniech y o u
Whe Chairmen.
refer?
Governor Seay. " T h e provisions o f the Federal Reserve
Act w h i c h a u t h o r i z e t h e e s t a b l i s h m e n t
o f the Federal Reserve
collection s y s t e m w e r e d e s i g n e d w h o l l y f o r t h e b e n e f i t
panking
e n d the commercial
interests eof the country.
o f the
T h e sys-
tem i s n o w i n o v e r a t i o n b e t w e e n b a n k s w h i c h i n n u m b e r a r e
about 9 2 v e r c e n t o f a l l b a n k i n g i n s t i t u t i o n s
a n d woich have
of
aporoximately
9 8 p e r c e n t o f t h e t o t a l b a n k i n g resources.
the country.
T h e Federal Reserve collection system h a s b e -
come a
necessary i n s t r u m e n t a l i t y
domestic exchanges,
i n effecting t h e country's
i n collecting i t s operation, including
final p a y m e n t s t h r o u g h t h e g o l d s e t t l e m e n t f u n d , h a s b e e n o f
mestimable value a n d has resulted i n enormous saving t o those
actively engaged i n carrying o n the commerce o f the country,
end there a r e n o other facilities f o r operating a
collection
system which could aporoximate i t i n economy o f operation.
has e l i m i n a t e d a
I t
very large v o r t i o n o f the t i m e f o r m e r l y c o n -
sumed i n the collection o f checks a n d has c u t down t h e cost
of m a k i n g t h e c o u n t r y ' s e x c h a n g e s
t o t h e minimum. i : s v e n t h o u g h
an i n v o l u n t a r y c o l l e c t i o n s y s t e m m a y n o t b e i m p o s e d u p o n Fed-=
eral Reserve banks b y the Federal Reserve Act, a s interpreted
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Federal Reserve Bank of St. Louis
by t h e S u p r e m e C o u r t o f t h e U n i t e d S t a t e s
i n its recent deci-
sion, « h e s y s t e m h a s f u l l y j u s t i f i e d i t s o p e r a t i o n s a n d i s o f
such value t o the banking a n d commercial interests o f the
continuance
country t h e t i
importance.
as a
voluntary s y s t e m i s o f vital
C e r t a i n changes i n the bases o f the p a r clear-
ance s y s t e m a r e a d v i s a b l e
i n view o f the recent decision o f
the S u p r e m e C o u r t .
‘fhe Board believes that varticipation i n the par clearance
system shovld b e based u p o n the principle o f recipbocity a n d
that h e r e a f t e r
Federal
Reserve banks should n o t receive
for
collection checks o n any non-member b a n k which will n o t agree
to remit i n acceptable funds without deduction."
Now,there i s a hearing « a t
a
s t o the reasons w h y non-
member banks a r e not coming into t h e system.
I t i s perfectly
patent that t h e vast majority o f non-member banks g e t a l l the
privileges,
being
orac
memoers.
a
4-
o
deny
f the Federal Reserve system, without
that
they
are entitled
t o the orivi-
leges o f the collection system o f the Federal Reserve System
unless t h e y a r e willing t o reciprocate.
‘ J e want t o g o o n rec-
ord a s n o l d i n g t h a t t r i s i s t h e o n l y e f f e c t i v e w a y o f
about t h e g e n e r a l p a r c o l l e c t i o n s
o f the country a n d that i n
the absence o f i t there i s danger o f disintegration o f the
par collection system.
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Federal Reserve Bank of St. Louis
Governor Calkins.
W o n ' t y o u read t h e rest o f that,
nor S e a y ?
Governor Seay. " “ U h e Federal Reserve Board, therefore,
egal authority,
h a s amended regulation
J, series o f 1920, i n such a way a s t o prohibit a n y Federal
Reserve B a n k f r o m receiving o n deposit o r for collection a n y
check d r a y m o n a n y n o n - m e m b e r b a n k w h i c h r e f u s e s
t o remit
at p a r i n acceptable f u n d s a n d t o r e a v i r e F e d e r a l R e s e r v e
make s
collection charge
f o r their services
i n col-
pear t h e i n d o r s e m e n t o f ,
or e m a n a t e f r o m a n y n o n - m e m b e r b a n k w h i c h r e f u s e s
n accepteble f u n d s , s u c h c o l l e c t i o n c h a r g e
to
t o be at a
rate n o t t o e x c e e d o n e - t e n t h o f o n e p e r cent."
Chairman.
Y o u want t h a t
Governor Sear.
Reserve B o a r d i t s e l f changed t h e
language
o f the resolution
in a w a y that m e d e i t impossible o f executio
T h e y were n o t
aware o f it, because o f unfamiliarity with t h e vractice.
are v e r f e c t l y w i l l i n g
t o eliminate
f r o m the resolution "checks
drawn b y " f o r t i s r e a s o n , t h a t b a n k s m a y a c c u m u l a t e
banks b a l a n c e s
W e
i n member
w i c h arise f r o m checks u p o n which t h e y h a v e
already charged t h e m f o r collection. T h e r e f o r e t o place another
charge u p o n a
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Federal Reserve Bank of St. Louis
check w h i c h withdraws t h a t balence,
i s probaoly
297
piacins a
double charge
The point which makes a
w e a r e willing t o eliminate that.
charge o f one-tenth o f one per cent
on e a c h i t e m i s o f c o u r s e e n t i r e l y i m p r a c t i c a b l e ,
b u t the
minimum charge should b e one-tenth o f one p e r cent, a n d that
was t h e r e p o r t o f t h e c o l l e c t i o n c o m m i t t e e s e n t o u t t o C h i c -
5
of. t h e l a s t s e c t i o n o f t h i s
proposed r e g u l a t i o n w o u l d y o u reta&din?
Governor Seay. Y o u would have the regulation t o read: " N o
bank shell receive o n deposit o r for collection a n y check drawn
on a
non-member b a n k w h o w i l l n o t r e m i t a t p a r i n acceptable
funds. ‘ “ h e n e v e r a
Federal R e s e r v e b a n k r e c e i v e s
o n deposit
or for collection a check" - - eliminating the words “drawn by" - 5
“indorsed b y or emanating from any non-member bank whieh will
not r e m i t a t p a r i n acceptable
funds
Would t h a t “include
f o r t h .
d
r
a
v
m on a
mem-
bank bearing indorsements?
Governor Seay. k x a c t l y .
I would
be
Governor Seay. ‘That is h
occurs amongst u s all.
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Federal Reserve Bank of St. Louis
t h e difference o f opinion
298
Governor Calkins.
Y o u had better takeout “emanating from. '
Governor Seay. I
defined that s o that i t would n o t m e a n
“dram by."
That w o u l d b e r e s t r i c t i n g
indorsement.
Governor S e a y .
B e y o n d a l l question,
a n d ther
the difference o f opinion comes i n between yourself,
the Advisory Council.
Governor Calkins.
U n d e r t h e regulation proposed
by
Governor S e a y the Federal Reserve b a n k would distriminate
hetween c h e c k s d r a v m b y d e s p o s i t o r s
member b a n k o n a
in a
bearing that indorsement.
o n mem-
o f member b a n k s a n d c h e c k s
ks b e a r i n g t h e i n d o r s e m e n t
draym b y depositors
i n member banks
member b a n k n o t
A s I see i t there a r e t w o objec-
There a r e nerhaps more t h e n t w o objections, b u t there
are t w o t h a t a r e sufficient.
O n e i s that w e have absolutely
no legal right o r ground to-do anything o f the kind.
not c o n t e m p l a t e d
i n any vrovision
o f the a c t that
I t is
w e should dis-
criminate i n such a way a s t o effect t h e transaction o f legitimate, e v e r y d a y banking,
t h e everyday transactions
o f our member
banks, a s w e vould b e doing i f w e undertook t o d o tis.
The s e c o n d r e a s o n i s a n d I
d o not p u t s o m u c h emphasis
it, that i t would b e politically inexpedient f o r the t i m e
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Federal Reserve Bank of St. Louis
o n
4
being a t least varticularly i n view o f the fact that this will
wobably g e t i n t o Congress,
a n d i t i s expedient f o r u s t o m a r k
time f o r the time being a t least.
The Chairman.
G o v e r n o r S t r o n g a r e y o u prepared
t o pre-
your modified motion?
Governor Calkins.
T h e first consideration i s legality.
I have y e t t o hear a recent opinion that w e have a
legal right
to discriminate a s i s suggested.
Governor Strong.
T h e Federal Reserve A c t provides,
in
Section 16, that every Federal Reserve B a n k shall receive o n
deposit
a t p a r f r o m member banks
o r other Federal Reserve
banks checks a n d drafts drawn upon a n y o f its depositors.
Governor Seay. D i d n ' t w e propose a charge a t one time
for the service o f collecting those checks? W w e surely did.
What does t h e Board s a y i n its pronouncement,
i n the exercise
of its legal authority + Governor Strong. G o v e r n o r Seay, l e t m e read all o f this
paragraph: " T h e Federal Reserve Board shall, b y rule, f i x the
charges t o b e c o l l e c t e d b y t h e m e m b e r b a n k f r o m i t s p a t r o n s
:
f
s Service o f
* * and t h e charge w h i c h m a y b e imposed for/clearing f o r collection r e n d e r e d
service charge.
b y the Federal Reserve
" h e r e isn!t a n y question b u t what
al R e s e r v e A c t r e q u i r e s tes t o r e c e i v e i t e m s
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Federal Reserve Bank of St. Louis
o n deposit
a t par,
and authorized u s t o make a
pay o r c h a r g e
charge f o r collection, b u t n o t t o
a n e x c h a n g e charge.
T h e : p o i n t about this charge
imposed o n checks bearing t h e indorsement o f non-parring banks,
is r e a l l y this:
C o n t r a r y t o t h e views expressed
b y Governor
shink i t w i t G o more
Seay, I
system t h a n a l m o s t a n y t h i n g e l s e ,
doing t h i s t r i n g t o t h o s e t w e n t y - t w o h u n d r e d o d d b a n k s t h a t
if w e h a n d l e c h e c k s u p o n t h e m a n d r e we s i m p l y t a k e t h e e x c h a n g e a w a y f r o m them,
and i f their vosition i s consistent, t h e y will simply g e t
busy a n d m a k e a r r a n g e m e n t s
sented b y t h e o l d method,
s o that t h e i r checks w i l l b e prew e will h a v e t w o collection systems,
one the Foderal Reserve p a r system f o r o u r members, a n d those
non-member banks will undoubtedly b e driven o u t o f our collection s y s t e m e n t i r e l y a n d t h e i r c h e c k s w i l l b e h a n d l e d
old method.
T h a t , w e believe i n New York, w o u l d b e the effect
Or this v o b alike cease charge
The o t h e r p o i
tically,
o f exchange.
i e 071 8
a s s o m e b o d y h a s expre
W
e think i t i s very b a d poli-
d d r
dulge i n any retaliatory t a c t 3
yanks,
b y the
a n d i n seeking confirmation
. t this t i m e t o i n -
g a i n s t t h e non-par
o f t h a t view,
w e took the
liberty o f asking tir. Lavis, w h o h a s been t h e advisory dounséi
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Federal Reserve Bank of St. Louis
ar c o l l e c t i o n l i t i g a t i o n a l m o s t f r o m t h e beginning,
501
+
what h e t r o u g h t a b o u t i t , a n d h e s a i d h e t h o u g h t
i t would b e
highly i m p r u d e n t a n d u n w i s e a t t h e p r e s e n t t i m e t o i s s u e a n y
regulation w h i c h c o n t a i n e d a n y p r o v i s i o n t h a t w o u l d m a k e a n y
charge w h a t e v e r
o n those c h e c k s w h i c h m i g h t c o m e t o u s f r o m
our members d r a w n u p o n o r indorsed
we d e c l i n e
b y n o n - m e m b e r banks; t h a t
t o handle c h e c k s d r a w n d i r e c t l y u p o n n o n - p a r banks,
but w e snould n o t n o w impose charges w e have n o t imposed i n
ean
e
h
past, f o r handling
checks t which bear tU!h e indorsement o f
non-member banks.
Governor Young.
W e have h a d some experience i n the
ninth d i s t r i c t n o t u n l i k e t h a t o f G o v e r n o r Seay.
had b a n k s n o t i f y
u s that. t h e y w a n t e d
W e have
t o get offthe
p a r list.
We have written those banks letters trying t o induce t h e m
on.
m
e o f them have gotten o f f the p a r list,
a hundred, o u t I think t h i s letter which I have
will i l l u s t r a t e w h a t I
have i n mind.
I t comes f r o m t h e
Tripbli State Bank o f Tripoli, Wisconsin, a
good institution
so far as I know seyiyg: "Referring t o our previous correspondence r e l a t i n g t o t h e m a t t e r
drawn o n o u r bank,
the p a r list.
w e desire
o f charging exchange
o n checks
t o have y o u place o u r bank o n
‘ v e tried out’ t h e s y s t e m o f c h a r g i n g e x b h a n g e
since t h e f i r s t o f t h e m o n t h a n d w e f i n d t h a t i t d o e s n o t w o r k
out v e r y s a t i s f a c t o r y .
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Federal Reserve Bank of St. Louis
T r u s t i n g that this
i s satisfactory
t o
VOW Y O U m a y £
ward
indebted at p a r .
ecbtvers. I
banks
t o u s a l l items,
wiich will
" h a t i s only one letter and
thinkthere i s n o uvestion b u t what a
i n o u r district.
have wanted
t o notify
number o f
u s that t h e y would
get o f f the var’ list a n d I think t h e association o f credit
men, wnolesalers, a n d jobbers i n the country a r e going t o
bring s u f f i c i e n t p r e s s u r e
t o bear u p o n customers
banks s o that t h e p e r collection o f checks,
will e v e h b u a l l y d e v e l o p
o f those
o n a voluntary
i n t h i s country. I
ee Silene
Governor Calkins. I
the e x p e r i e n c e
want t o say, M r . C h a i r m a n ,
i n the S a n Francisco district appears
to b e quite significant.
v e have h a d a
that
t o me
little contention
with a bank o u t there called t h e Brooking State Bank, w i t h
the result
a t w e hed a decision f r o m the United States
Supreme Court which upheld t h e contention o f the Federal
Reserve B a n k w i t h o u t exception.
T h a t decision w a s broad-
casted throughout t h e country as*decision against t h e Federal
Reserve B a n k a n d i n f a v o r o f t h e B r o o k i n g S t a t e Bank.
members
o f t h e B o a r d h e r e i n ‘washington b e l i e v e d
sven
i t to be
favorable t o the Srooking State B a n k a n d unfavorable t o us,
and t h e exact contrary w a s t h e truth, b u t t h e decision w a s
broadcasted
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Federal Reserve Bank of St. Louis
t o all o f the banks
o f t h e country,
a l l o f the
n
non-member
k t h e t t h e decision supported t h e contention
that a b o u t t w e n t y ,
twenty-four b a n k s
i n t h e district, m o s t o f t h e m
jirectly interested i n the case, a n d t o
a certail
i n v o l v e d
i
n the case, withdrew f r o m
aa]
the p a r lists S i n c e t h e t t i m e w e h a v e h a d n o m o r e w i t h d r a w -
and t h e r e i s n ' t t h e
a disposition t o
get o f f the p a r list.
Governor Seay.
M a y I ask, w h e n this regulation w a s is~-
sued, i f you sent o u t a n y communication a t all t o the banks
in y o u r d i s t r i c t ?
Governor Calkins, W h e n ?
Governor Seay.
W h e n this regulation w a s issued?
W h e n t h e Brooking c a s e w a s decided
Governor Galkins.
we n o t i f i e d t h e w e n k s
i n the district
w e would n o t collect
or undertake t o collect checks o n banks that w o u l d n o t remit a t par. T h e y a
a
d n o t i c e that t h e y could g e t off,
if they wanted t o , t h e next morning.
Governor Seay.
M a y I ask Governor Welloorn what h e
thinks t h e non-member state banks o f his district will d o
if h e a t t e m p t s
e t r e ets I
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Federal Reserve Bank of St. Louis
t o put t h e p a r collection
would l i k e t o k n o w w h e t h e r
i n force i n h i s
h e thinks a n y con~
siderable n u m b e r
o f banks w o u l d r e m i t a t par.
W h a t i s that, Governor Seay?
Governor Wellborn.
Governor Seay.
f y o u undertake
I
t o put a
par collection
numsystem i n f o r c e i n y o u r district, w o u l d a n y c o n s i d e r a b l e
ber o f banks voluntarily agree t o remit
Governor Wellborn.
ever, Mir. Chairman, I
No, I
do not think they would.
How-
would like t o s a y something i n regard
to t h e r e t a l i a t o r y f e a t u r e
o f regulation J .
that i s r e a l l y t h e w o r s t p a r t o f it. I
I t seems t o m e
do not s e e h o w one
can help but say, i n explaining i t that t h e reason that w e
a t par,
have t o charge i s because t h e y refuse t o remit t o u s
and I
trink i t w o u l d b e u n w i s e
t o d o that.
are o p p o s e d t o t h a t r e g u l a t i o n b e c a u s e
business, 4
O u r member banks
i t disturbs t h e i r
seasonable b u s i n e s s t h a t t h e y h a v e h a d f o r y e a r s
and years, a n d w e would just b e striking a t the non-member
banks through oubp good banks.
F o r that reason I
a m opposed t o
ite
Governor Bailey. I
think t h e Federal Reserve System needs
all
friends more t h a n i t needs members right now, a n d 1 think
the v e r y
of t h i s s t r o n g a r m business h a s b e e n a g a i n s t o n e o f
things that w e are trying ‘ 0 accomplish i n the tenth district.
this high
In O m a h a t h i s p a r c o l l e c t i o n b u s i n e s s w a s d o n e w i t h
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Federal Reserve Bank of St. Louis
-~.Of c o u r s e
i t was m a g n i |
lectors, a n d w e have stoppe
w
= ~ but w e s e n t o u t c o l #
e have adopted t h e other
system i n the other states a n d a r e auietly urging t h e m t o come
in i n a n effort t o m a k e a
hundred p e r c e n t p a r collection.
nvery d a y o r s o w e take o f f some fellow w h o hasn't remitted f o r
two days;
h e lets i t g o f o r a
counle o f days a n d w e t a k e h i m
off, a n d o n t h e t h i r d d a y h e w i l l b e o n h i s k m e e s b e g g i n g t o
get back.
A s Governor Young said, I
think there a r e commer~
cial forces a t work i n this country that will bring i t about.
(Further discussion followed. )
The Chairman. I
do not believe w e will lose anything b y
shortening this disaission, a n d I will ask you, Governor Strong,
if y o u r a r e p r e p a r e d
t o submit y o u r modiffédimodion.
Governor Strong.
a
N y motion i s thet/new regulation J
adopted w h i c h w i l l c o n f o r m i n a l l r e s p e c t s
tices, but which will :
lega
g
be
t o the present prac-
i n terms prohibit our exercise o f our
k n f i r m
o y t h e Supreme Court, t o collect b y
and
agents a t the counters o f non-par hanks a n t ch will n o t reupon c h e c k s
quire u s t o impose charges bearing/indorsement o f non-par
banks,
Governor Wellborn. I
Governor Calkins. I
will second that motion,
would suggest o n e ting.
T h e resolu-
tion says "in terms prohbbiting" and I think there should not
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
be a n y r e f e r e n c e
NOt ImeLudS. any. Germis.
think there should b e n o
Governor Strong. I
whatever.
Governor Calkins.
Mr. Harrison.
‘ Y h a t i s t h e point I
make.
W a y I say just o n e thing there.
our p r e s e n t r e s u l a t i o n a n d tinder a l l r e g u l e t i o n s
i n
w e have h a d
t o present i * e m s d i r e c t l y a t t h e counters
authority a l v a y s
of
the b a n k s w h i c h a r e r e m i t t i n g a t p a r i n o r d e r t o effect c o l -
lections,
i n ceses where t h e y ere s l o w o r where there t s a
credit r i s k involved.
Governor Calkins. I
i
n sending direct
think i t h i g h l y d e s i r a b l e t h a t
the r e g u l a t i o n c o n t a i n n o r e f e r e n c e
Governor Fancher.
t o it.
I t might b e highly desirable t o re-
sort t o t h a t v e r y thing.
Governor Seay. N r . C h a i r r
3
ious m e n t a l d i s t r e s s w i t h m e t o o c c u p y a
it i s v e r y f r e q u e n t l y t h a t I
with t h e majority;
nounced,
and I
would t a k e u p
minority p o s i t i o n a n d
o n m y o w n views t o g o
b u t i n t h i s c a s e o u r p o s i t i o n is? v e r y p r o =
think I
n
compromise
s always @auses ser-
can defend i t wit l o g i c . H o w e v e r ,
e a n d i t i s perfectly eztdent t h a t y o u
men h a v e m a d e u p y o u r minds. N e v e r t h e j e s s
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Federal Reserve Bank of St. Louis
that
gentle-
o u r views a r e s o
feel c o m p e l l e d
t o vote n o i n order t h a t I
the Federal Reserve B a n k o f Richmond accurately
having b e e n d u l y s e c o n d e d ,
voting no.)
nor S e a y r e p r e s e n t i n g t h e R i c h m o n d B a n k
desire t o b e recorded a s voting no.
Governor Seay. I
The Chairman,
F h e next topic i s No. & .
©. C l e a r i n g H o u s e C h a r g e s f o r C o l l e c t i n g
Ghecks Through Federal Reserve Banks.
5
Governor strong.
h i n k t h a t should come before t n e
joint conference.
The Chairman.
T h e n w e will pass i t until t h e
conference.!
Governor Young. i f r , Chairman, while Governor Strong's
resolution h a s d i s p o s e d
o f t h e o t h e r matter, s t i l l t h e r e i s
Harrithat occurs t o m e a n d I would like t o have Mr.
i]
son read that resolution again.
tec 3
(ir. H a r r i s o n r e a d t h e r e s o l u t i o n r e f e r r e d
Governor Strong. I
want t o c a l l t h e c o n f e r e n c e ' s a t e
suggested
tention t o t h e f a c t t h a t s o m e o n e h a s
this paragraph D
i n vlace o f
under Section % that t h e Board issue a
those checks,
lation which would prohibit u s from handling
a n d I think that ought
and not s a y anything about t h e charge,
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Federal Reserve Bank of St. Louis
will want t o hendle
to b e shown i n the resolution, because w e
the checks. T h a t paragraph under Section 3 says: "Whenever
collection
a Federal Reserve
a check d r a w n 5 7 i n d o r s e d b y ,
o r emanating f r o m a n y non-
member b a n k which refuses t o remit a t par i n acceptable funds,
DUT
h a r g e for >
it shell make
check, n o t t o
.
c o l l e c t i n g such
d one-tenth o f one ner cent, w i t h a minimum
ge of 10 cents for each item." Their proposal i s that the
Federal R e s e r v e B a n k r e f u s e
do n o t t h i n k
w e want
t o h a n d l e a n y o f t h o s e thecks. I
t o d o thst, I
the checks j u s t t h e same.
I
think
w e want
t o handle
s that worth while bringing u p
or not?
The Chai rran.
Governor Young.
e
l
o t find that
Y o u passed a resolution, b u t someone m a y
tae B o a r d w i t h a
counter proposal,
as
refuse t o hendle those checks, instead o f «waking
Then y o u a r e j u s t w h e r e y o u a r e now, a n d y o u w i l l
ajority o f u s w a n t
Some e x t r e m i s t s
i n d i s c u s s i n g this b e f
the B o a r d e n d t h e F e d e r a l A d v i s o r y V o u n c i l s u g g e s t e d t h a t
it m i g h t b e b e t t e r
bearing a
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Federal Reserve Bank of St. Louis
t o refuse entirely t o handle a n y c h e c k |
non-par i n d o r s e m e n t ,
t h a h t o handle i t a t a
cost.
Governor Young.
Mr. Harrison.
T h a t o r o p o s a l w a s made, w a s n ' t i t ?
T h a t w a s discussed,”.,
and a
committee
representing t h e Reserve C i t y Bankers ‘ h o appeared before
the F e d e r a l A d v i s o r y C o u n c i l e x p r e s s l y r e c o m m e n d e d t h a t t h a t
not b e adopted,
Governor Calkins. I
think t h e r e f e r e n c e
t o o u r present
practice" will gover that.
Governor Seay.
to me.
T h a t raises a
point that d i d not occur
D i d the Federal Advisory Council have a n y plan that
the system should not handle checks bearing a
non-par b a n k
indorsement?
Governor Strong. Y e s .
Governor Young.
T h a t w a s discussed b y them.
Governor Seay.
T h e Advisory Council held that w e
should n o t collect checks o n nonpar banks, w a s that i t ?
Governor Strong.
Governor Young.
T h a t w a s all.
T f A d v i s o r y Council meeting o n September
17, 1925, m a d e this recommendation:
"Po provide that Federal] Reserve Banks shall receive
at par f r o m member banks a n d non-member clearing banks" - - I
word "shall" .ought t o be changed t o "will" - "checks d r a w n u p o n m e m b e r a n d n o n - m e m b e r b a n k s t h a t a r e c o l -
lectable a t p a r i n acceptable funds; a n d shall receive a t par
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Federal Reserve Bank of St. Louis
510
1
pay
from o r for account o f other Federal Reserve banks s u c h checks
payable w i t h i n i t s district.
Collectibility
a t par may b e
established b y a n agreement o f a drawee b a n k t o remit a t par
in a c c e p t a b l e f u n d s o r a b i l i t y o f a
Federal R e s e r v e b a n k t o
make collection a t par through another member o r non-member
bank."
I think i t should b e covered i n thi8 resolution, M r .
Chairman.
Governor Strong. D o e s n ' t t h e first part cover it?
Governor Seay.
W r . Chairman, I
will move that t h e sub-
ject b e referred t o the standing committee o n collections. I
think there i s great danger here o f overlooking something
that o u g h t n o t t o b e overlooked.
‘ T h e former regulation h a s
become o b s o l e t e , t h a t i s p e r f e c t l y clear,
a n d i t i s perfectly
easy f o r n o n - o p e r a t i n g m e n l i k e o u r s e l v e s
t o overlook some-
thing that ought t o b e i n it.
these t h i n g s
W e are accustomed t o referring
t o the standing committee
Governor Calkins.
M r . Chairman, I
o n collections.
usually find myself
in e n t i r e a c c o r d w i t h G o v e r n o r S e a y , b u t i n t i s p a r t i c u l a r
+
matter
which
h e n o w refers
t o I
believe t h a t
i t i s much more
importmt t h a t w e should n o t g e t i n t o this regulation a n y -
thing w e d o not want i n i t than i t i s that w e whould g e t i n
what
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Federal Reserve Bank of St. Louis
w e d o want.
(After further discussion. )
Governor Seav.
t second tio m y motion
L I will
I f there i s no
withdraw i t .
Mr. Harrison,
h a v e a note here f r o m Mr, J a y t o the effect
that t h e agents have unanimously voted t o a s k the Federal R e and D
serve Board t o omit f r o m regulation J
both paragraphs ©
of the present suspended regulations.
T h a t i s substantially
what w e h a v e d o n e here.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
peated!
ADilise
Up. O n t u e
word. b e f o r e
progrem,
w e
s n a thea
would i n é i c ate
t, 2 1 a r e
“ tional
Mon
vJ
provision,
be. 2
due ted
there 2a,
in supthet t h e r h o l s
over many
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
513
od}
hrse wp ea ra c a n t reserve,
Linea a
Glin o y
4
t h e s xw t r a ao r a ir -
o f t h e proportion o f tact class o f
h t v o r c u
g
e m t reserve, y o u would
n
i
r thres
i
u 32M per
only
this r e c o n m e
otner m s e t e
Governcar
syerytning Governor s t r
ments
o f menbe
sag thet n o censngs
2
b
y7
S Ort Veto L e t t
b y sors
Searease r e s e r v e s
willing w e wW
~
Joint C o n f e r e n c e .
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor 39s8y: T h e a t subject, tir. Chsirmm,
h a s been
tae special committee, o f which ir. Curtiss
heirman,
f o r a e number o f years,
e n d they have prepared
elaborate report.
Intre-county clearing srrangements.
Discussion o f advisability o f developing i n 311 Feserel reserve districts.
You went that discussed, Governor Strong?
Governor Strong: I
d o n o t think so, unless Mr. Har-
rison has something t o sey.
Mr. Harrison:
A l l these topics were p u t o n the
program prior t o any knowledge o f what was o n the joint
progrem,. I
understand Mr. J a y i s planning t o bring u p
this topic i n the joint session,
s o there i s really
nc thing t o b e gained b y discussion now.
Governor Use I
would move you, hr. Chairmen,
4t i s the sense o f t h e conference t h a t i t b e sdvisable
to cevslop intre-coucty cleering srrengements o r other
local clearing arrangements where t h e conditions meke i t
feasibie
t o d o so.
Governor Strong: I
will second thet.
(The motion, having besn duly seconded,
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Federal Reserve Bank of St. Louis
take u p t o p i c
Should t h e non-ceasi.collsction
{scilities n o t b e w i t h c r e w n f r o m
nonmember c l e a r i n g b a n k s ?
Governor Bailey:
l e f e s l t h s t w e would like t o heve
othing t o do with non-cesh collections, o n the theory
n equitable p o l i c y f o r t h s
take s w a y f r o m t h e member
a n orgsnization
chs t h i n g w h i c h t h e y a a v e m e i n t s i n e d
nendle.
t o
n our “istrict t h e r e i s v e r y little o f i t
T
only 2 0 0 b a n k s h a v e
es cgsinst sbout 1300 b e n s i
heve *
Gistrict. T
msmorencua here t h e t the cost
collection o f cash items
i s sixty-four o n s hundrecths o f
non-ccsh i t e m i s
cost o f collecting 3
cents.
Governor
m
e
e
!
e
n
ate?
Governor
Governor Norris:
T h s t i s not disproportionsts,
Governor Beiley.
Governor Bsiley: ‘ I s 1 L , w i t h t h e country bam}
our Gig trict I
w
o
e m sure i t woulc crsate better feeling
u s lcio ndtCi n u e t h a t e
W
a
e cvinc t h s t t h e sé n o n e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ash c o l l s
men O m h i s *s Ureets
are g d mply -uns, I
think.
F o r instance,
5
i s9s misunc: rstencing o f
snd he says, ‘Well, there
bill e n d I will write back t o ne dquarters sbout
a n open sccount t h e r e thet w e
the r e s u l t i s t h e t w e heve
esudit a r t a k e c a r e
Governor sssy:
o f i n=
sstisfactory w e y .
S o n ' t y o u cherge f o r thab w h e t n e r
you collect 1 % oP n e g
Governor Bsilsy:
J
e d o when w e know i t is
Governor Salkins:
ject.
T h e committee has m a c e a study o f t h e question
end reported.
T h i s i s one o f t h e most important operet-
m1sstions t h a t w e will heve t o ciscuss a t this conrersnd I think i t should be d i s c u s s e d upon t h e basis
the Committee's report.
Governor Beilsy:
T r e Cormittee says t h a t w e should
e
continue L e y m d ;
our objection t o i t
froc. the Tenth District,
Governor Fencher:
Governor
C a liking:
T h i s t o p i c i s n o t q u i t e thet,
T h i s
i s " S h o u l d t h e n o n - c s s h CoLlloGce-
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Federal Reserve Bank of St. Louis
Ol?
tion faci
benks.
S
S
O
i _ t i t h d r a w n f r o m nonmember clearing
e
s
r
e
m ee.]
t
i
s general
collection proposition, s n d thet comes u p leter
4
1 t this i s t h e n o n - c a s h c o l l e c -
program f o r cis cussion,
tion fscilities f o r n o n m e m b e r c l e s r i m
f o n o t remember t h s t t h e report
The Chéirmen: T
porticulsr metter, explicitly.
i
Governor Fancher:
The Gheirman:
7
@
t does n o b.
1 >
Ca
this subject slso.
question
8 s t o whether
w o s r e t o contbinus o r s c o n t i n u e
hanéling non-cesh items f o r nonmember clesring b e
Governor Calkins:
On. - the - me Geer
w i l l move
to
fscilities t o n e m e r n t c l e a r i n g banks.
Governor N o r r i s :
T
I do n o t think
rfsrence, b u t i t
the comnilttes.
Tae Choirman:
I t will not, Governor Norris.
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Federal Reserve Bank of St. Louis
usé i n ciscussing
het t h e n o n - c e s h
tion s y s t e m b e
oré-r f o r Governor Bsilesy 2 n d Governor Cslkins t o
move t h e t i t n o t
b e continues
Governor Colkins:
4 s t o nonemeéer
f a s n I will withdraw m y resolu-
R e c o n s i sé
Terns § Fi
Non- Peymen
to b e c o m e f u l l y erlectivs
membsi
squires
m e m b e r ,
i t is
reviewed b y t h e Conferences
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S19
sricen B a n k e r s A s s o c i s t i o n
ZS e e e s
x
mine ton? ot
i
f o r action.
s e e n d+
4
1
W e b e
p e
t
h
m the
|
e Arericen
that t h e F e d e r a l r e s e r v e
uniform circuler setting f o r
connection
w i t h non-casn
ifhave t h i s e o u m e n t :
Fate" i s
to whether o r not t h e
and is not interested
6 Cre
_ ~
seo niendeation m s c s e
s m o a~
g
f
p a y
A
t e
F
s -i iciestine
that
we
queutionnsires enc,
sm not going
through s l l o f these, b u t just one o r two
which s r e typical.
Then sskec “Wher
Y
you f o r w a r d
t o us,
o r ons O n Our a
benkers, f o r collection s n item bearing t h e instruction
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
320
morei- d a s g i r e t o k n o w w h e t h e r t h e ite:
r ore y o u m o r e i n t e r e s t e d 1 1
wining w n e n t h e funds b e c o m e svsileble f o r your use?"
2 2 reserve city bonks
Twenty-eight country benks,
OMe O f Gey 6 8 2 d
w e s inter}
bmks med: exceptions.
m
e
s
o
n advics
T h o s s exceptions
could think o f , af#@ Ism not going
to enumerete t h e m all.
vie then asked the guestion, “ h e n you forwsrd t o us,
d
or one o f our brenehes, f o r a
e
a n item beering
the instructions “Wire psymeat o r non-payment”, a r e you
rime n t e r e s t e d i n knowing the fete o f the iten,
are
able f o r y o u r a c c o u n t ?
Forty s i x b e n k e m
t h e t they
to meson e d v i c e only.
ed i t to mean “funds
ceptionse
There i s n o genersl understending smong
as t o w h e t t h e s e t e r m s meen,
The Chsirman:
not d o thate
e n c they ought t o
T h e r e i g n o resson w h y y o u should
T h e y a r e cefinea
u s B r y a r i v y , o n d a Lt
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Federal Reserve Bank of St. Louis
o trouble t h e t I heve heard of,
caused n
Governor Calkins:
B u t i t follows conclusively
inevitably t h e t i f w e h a c difficulty y o u w i l l h e v e it.
Governor Seay:
s t e n d i a g Committee o n Collec-
tions mace e report upon that matter.
S i n c e t h e n w e heave
issued our collection circuler, a n d w e define t n e use o f
the terms i n our benk.
I f you will examine o u r collection
circular y o u will fina it.
“ h i l e i t micht b e a good
thing t o refer t o the Americen Bankers Association, t h e y
could merely supplement t h e efforts o f the reserve banks,
who must teke t h e initiel steps.
I - t h i n k i t i s more in-
portant that t h e reserve banks shoulc define t h e words f o r
their members,
s o thet t h e members w i l l know exactly
whet terms t o use vhen wiring t h e reserve banks
‘ i e have
underteken t o d o t h a i n our circuler.
Governor Calkins: I
shoulé think i t would b e highly
undesirable f o r t h e twelve b a
to their members i n each case.
d e f i n e these terms
T h e terms should b e de~
fined b y t h e System.
Governor Strong:
S u p p o s e w e pass @
resolution r e -
circuesting t h e collection committee t o draft a uniform
cular,
t o b e issued simultaneously b y all t h e reserve
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S22
ae
banks
s used b y t h e Fedsral reserve
m
benks,
i n connection
n o n - c a s h collection items.
Governor Seay:
T i a t w o u l d b e entirely satisfactory.
(The motion, having been duly seconded, w a s unanimously carried.)
Toe Chsirman:
.
T h e next topic o n the progrsem i s
4
t o proG.
R e cGo n s i -d e r a tI i o n To f ascision
hibit u s e o f lessed wire i n tracing
Gireet routed collection items.
And i n that connection I
attention
t o Topie
will a s k y o u t o cirect your
IV - E
IvV-E. R e p o r t o f Lessed Yire Conmittes.
I w o u l d l i k e y o u t o n o t e b o t h t h e s e topics,
e n d when
*
you heve those topics i n mind, I
should like t o read t h e
“-sults o f a.meeting n e l d recently i n
nalled a t the instence o f Dr. Miller.
time e g o , r e q u e s t e d t h a t 9
D
r Killer, s o m e
meeting b e c a l l e d s n d =
foint
e
s c a l l e d o f t h e L e a s e d Wire C o m m i t t s end t h e
meeting w
Stonding Committee o n Collections.
from 2
,
memorendum I
heve h e r e d a t
1925.
Washington, D . G , attention Dr. A . C. Miller, Cusirman
of t h e G
imaittee o n E c o n o m y a m d efficisney.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
525
S s
r e c u e s toF5 C O R L S $ B n Ga s
o ee
on C o l l e c t i o n s
Fe.
held t h i s
F
a
e
d
e eee 2
s
r
s é
tr ‘
s n l i
O h3
R e vg o r
C l
re p r e s e n t e t t h i s meeting, t h i
y ae ie yee.
tee +
i r s P C oe m msi1ht
the L r a s e d U“34
Standing C o n m i t t e e
Ba s e SOM
ais -
:
r
o n Collections:
C l e v e l
Richmod
a
mestving
Roce
c n ©
a. Ome
guestions
for
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Conumittes o n Bconomy end Bificlen¢cy o f
enc’ Collisetion f u n
s O r the Denke,
n
ncetion wecdce t o t h e
ling o f non-cesh collection
LO
BOT
this
sculations f o r t h s opsretion
with t h e p o l i s y o f t h e s i r e c t r o u t i n g o f n o n - c s s h o
l-
lection items, inasmuch e s those regulations prohibit:
t sent n o n - c a s h i t e m s
collection
ma
Auxiliary Comilttes,
thee the: W o . c o m m .
visw t o s révision,
if
w h i c h woule not b e inconsistent w i t h
rogulations
collection
policy o f t h a dirscet routing o f non-cash
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
325
items. 1
e r d ' s cormittse o n Economy a n d sffi-
cioncy, e n d slso t h e Federsl Reserve Board, h e s
aporoved this recomendation s n d you erereques
arrange f o r a consideration o f t h t m e t t e r s n a t o
report results.
3
A similar letter i s being addressed t o Lr.
rvs
H. F . Strater, Assistant Cashier o f t h e Fecerel Res
Bank of Gevelend, s s Chsirmen o f the Standing C o m
mittee o n Collections."
The Joint Committee interprets y o u r refere
teirect sending o f non-cesh collection items'as applying
o f one
to such items w h e n forwarded b y 8s member b a n k
to t h e Federel reserve b a n k o r branch a f
which the items e r e payable.
unenimous opinion o f the Joint Conmittee
Gist t h e
VV
should
1 2 s e n d i n g o f non-cash collection items
be sncoureged b y 2
s y o l reserve b a n k s e n d that, i n
order f o r t h e F e d e r s l r e s e r v e b a n k s
to encourege such prectice, t h e s o m
collec~
1 member b a n k s i n c o n n e c t i o n w i t h n o n - c e s h
Federal reserve
tion i t e m s w h e n r o u t e d c i r e c t t o a n o t h e r
items were
bank a s would b e accorded them, i f the same
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6
rvs bonk,
diract r o u t i n g o f none-cssh collecgnc o t t e n t i o n i s c a l l e d t o t h e
fect t h a t w i r e s d v i c e o f c r e c i t o
in connection w i t h non-cash colléctions, vnether
they b e r o u t e d b y a
rome)
reserve
bank
member b a n k c i r e c t
o r sext
t o a n o t h e r Federal
t o its o w n Pedcral reserve bank f o r
-~
of t h e leased wires, tierefors, w i t h
of credit i s uniform.
Under existins rerulations, however, t h e use o f the
eserve b e n k
prohibited
menber
bank direct
i s not
when ths
t o snother Federel
Wo .O4 D U S A N S e Ss
submitted, w h i c h i n icsted
volume v o u l d r e s u l t i n
tne s e r v i c e
Mis Joint Committee i s unseninvous
system s h o u l d n o t
or t h e purpose o f e n d i n g t o member banks
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Federal Reserve Bank of St. Louis
327
ies
LOGS
ais tricta,
d i t h this unifor-
be uniform
the o d i n i o n t h a t
sneoursged
b y
best b s sccomplished b y soliciting t h e
caoperetion o f m e n b e r
As stated,
b m ks.
i n the beginning o f
p
S BOP Gy. “ e a e
e ls
c ke
c hn
a lo
ra’ a e } a c o l l e c .
t i o n S 1et ms ie cl oh eo s
mon-cesh
collection i t e m s w h e n f o r w a r d < d
Chstrict direece: to:
i 6
(A S t r oa wen wiesreie b h e
the Zoint Committee i s unanimously c n a strongly
of the opinion thet inesmuch
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
528
not c o n c r r n e d
v i t h this cless
o f collections
no c o n t r o l w..ctever o v e r t h e p r a c t i c e s
sspect, t h e use o f
v
i
r
items, o r for transferring ut h e
e
end
o f benks
n
s for t r e
proceeds
o
o
l f such
items, o r f o r a n y other purpose i n connection w i t h such
collections should n o t b e permitted.
Ths o b o v e c o n c l u s i o n s w e r e s r r i v e c
ate end careful considtration."
This report w e s signed b y J. B. MeDougsl, Chairman
the
e
g e d Wire Committee e n d H. F. Strater, Chairman
Steading Conmittee
u
o n tCollections.
“4th r e l e t i o n t o t h i s metter, q u o t i n g f r o m a
letter
s t e ed November 1 , sent b y Dr,F Miller, scknowledging t h i s
29 G
ithe solution sgreed upon b y your two
with respect t o this question sppsars t o b e
ossumed t h s t t h e L*ssed Wire Committe
ng sbout.the c h e n g e
see t h a t a l l
In
this sugzestion i t i s reco.c.endsd that--letter X-3337, peregraph 9 , now states:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
329
in tracing collection
”
penk
i n saotoer
ol
of w h i c h
benk o f t h e
The leased wire,
thet woulda be imposed upon
pect t o t h i s matter.
Governor Cslkins:
cesh c o l l e c t i o n i
tems
Sxn
e n e oie icent:
to writing o
=
O
their points o f jey-
a, 1928,
not b e u s e d i n a
tracing collection items forvardced b y 4
ot d i r e g @
b
o
n
k in
t o 6° f e d s
e n e r et
G
n
collection °
a
I
t
h
e Beds
with ‘which t h e f o r w a r d i n g b a n k i s a f f i l
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
530
19
Y
member b e n k c s n o b t e i n t h e i
for trocing.
I
the lessed
P
b y following s
n other words,
course
thet imposes 3 n sdditionel burdsn s n d sdditionsl expense
on the “ederal reserve benk, i t gets whet i t wants.
item
f 2. member b a n k forwards m
reserve b m kor branch, thus elimi
fitness. 2 2 2
over t h s c o m m e r c i a l w i r e s
a t t h e sxpense o f t h e member
bank.
d
Th other vords,;
if you follow t h e most
v
s
i
e o u r member banks,
s
d direct method senda
n
relieve u s o f a lerge burden o f expense,
w e will charge
y o u d o the best thing you possibly
you 4
I should
e
c e n w e will charge y o u
you
thing
best
h
t S a ssa
fka
Se 2
you follow the less Gdosirsble course y o u g e t t h e benefit
of o u r system.
T H e
congestion
o n that
he weguletion suotesc 2 bv
t member b a n k s
c a n o b t a i n thse
arias.e
l
A
ieSET
banks
e by depositing items w i t h their own reserve
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
20
rether t h a n b y sirect routing then.
In other vords, we can put the whole load o n the wire
The fact is, i f our member benks w i l l follow
course w h i c h i s i n d i c a t e d b y t h e r e p o r t o f
““Ftems w i t h t h e F e d s r a l r e s e r v e b a n k s
reserve banks t h e cost o f forwerding those items, e n d
get a l l t h e u s e o f t h e l e e s e d w i r e s t h a t c o u l d p o s s i b l y
be contemplated, while i f they follow the course that we
suggest they will relieve the banks of a very large provortion o f t h e c o s t o f f o r w a r d i n g a n d n o t i n c r e a s e t h e
recommend t h e scnnouragmen
ly o f t h e u s e o f t h e l e e s e d w i r e s f o r t h e p u r p o s s
o f trace
4
ing those items.
n
e m i n k , t o u l a s u i t you, e n d I
cplaumStaskeeae eps:
If y o u s e y t o t h e member benk,
of Chicsgo s n d t h e Federel Recerve B a n k o f Chicago w i l l
forward
i t t o its destinetion s n d permit y o u t o u s e t h e
leased wires f o r the purpose o f tracing,
12
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
532
“You c e n direct route this item, b u t i f y o u d o
any telesrapnic
on t h s e w i r e s e r v i c s .
Governor Seay:
t
h
3!‘
bis
t
a
t inconsis tsncy
o
reconcils
whic
Ths Chairman:
ing out, Governor Cslkins,
is
port i s uncer teaking
Governor 2Gay:
wae t
Ac,
Governor Calkins proposss, b u t without
11a be encoureged.
Governor Calkins:
thet conclusion,
it
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
533
p
but i n that respect w e i
inconsistent.
‘ T e¢
i
e s t e n t l y e n d consistently
g
t h e usé-o
a)
1
eased wire now, ?s n d w e are permitting t h e use o f meny eo f
the other facilities i n connection with the leased wire
in weys thet a r e entirely incousistent w i t h its reel pur-
to eliminate o n e o f
sdostion o f this report.
Governor Calkins:
sistency.
Y o u cennot eliminate o n e incon-
T h e r e e r e t w o things t h a t g o t o make u p a n
inconsistency;
o r e t h i n g cannot b e inconsistent i n itself,
“het y o u s r e proposing to'do i s t o j u s t eliminate o n e
thing thet you havs previously Zones for the member banks.
say t h e t i s n o t g o i n g f a r enough.
The Chairmen:
" I S i m i n g t o ¢liminate o n e o f
those factors which conbinedc make t h e one inconsistency.
Governor Callins:
& F i e t est
I s i t t h e intention
het i s t h e real
Mmiestion }
b
Governor Strong:
s t e i n g sbout.
s n ' t i t a fact that w e turn back
y day a n hour o r t w o before t h e contract
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
534
28requires
i t , e n d there i s es period after t h e close
of business when, i f w e had a man o r two o n duty e t the
a
pank w e c o u l d d o 3 1 1 t h i s w o r k o v e r t h e wires, h e n d l e t r a c e
The Chsirmaen:
T h e a t stetement
i s t r u e o n l y i n part,
difference i n tire I
think i t is n@cessary
might s a y
to t u r n t h e w i r e s b a c k i n s o m e o f t h e banks, I
thet w e geve very careful consideration t o that matter i n
Chicago.
h i c s a g o is, o f course,
8 s y o u know, charged
with t h s responsibility o f keeping t h i s thing going.
also congsiccred t! e t t e r
i n the joint session,
were only resch
c
a
r
e
f
u
l
that possibility.
Calkins: I
situetion which,
c o u l d p o i n t o u t i n 39 fsw w o r a s
i f sdopted, w o u l d enable u s t o h e ndle
possible telegrams without a n incres
tielly e t least, h e s w w i r e
t o esch other Federal reserve
benk b e f o r e y o u c a n c l o s e t h e b a n k s i n t h e district, m a k -
ing a totealof 1 3 2 wires, w h i c h could b e accomplished
essily through t h e process o f wiring one central office,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
535
send o u t o n e w i r e i n c l u d -
the leased wires;
We are n o t porticulerly
ssnds o u t m m y h u n d r e d s
thouscnds ber} o f word
t
h
s lessed vires t h a t a r e
non-cesh c o l -
Governor Calkins
Baie
ae
“ e e
i
b e
t can best b e
in w h i c h
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
oO
do n o t think t h s t w e ere
to r e c o n c i l e i t . I
discourage t h e direct routing o f non-cash
angaction something which
sncourage
e f i n e O f tims,
h
The Chairman:
G o v e r n o r Fencher, y o u r ettibuce
morning has b e m c h e
e c
v e
i
]
Y
o
u are
member o f o n e o f t k
sure t h e t
Governor F a n c n e r :
The C h a i r m a n :
J i e
*
9 8
committee
i n which this
including
s t r e t e r ,
wmmendetion h a g resulted f r o m very
the matter, a n d I would
think t h e vords t h e t heve been spoken
eonersl epprovel o f the reconeendation.
ITwill move t h e sdoption
he report.
Governor Norr L
The Chsirman:
wi g
c
the motion.
I f you move t h e adostion o f the
and s c t a c c a r d i n g l y - - -
Governor Calkins: I
do not know what you mean b y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Cneirman:
M
e
o
Governor Celkins;: I
e report
h
}
2 s submit-
have eolready m a c e 6momorsndum
of e resolution t o epprovs
e . g ¥
the cormittes
W
a
‘ressed t o Dr, Miller's Economy e n a Erficiency Conm-
Governor Seay:
T h e t vwoulc, 0o1 i n v o l v e s steps
to n o t i f y t h e m e m b e r banks.
The Cheirmsan:
I
e t
n the E
M i l l e r
h e re-
teken t o put i t into
thet would b e t o
wire committee t o
accordingly.
T h e r e i s n o action
the original reguistions out.
The Chairmen:
W e will submit t o t h e Boera
gested m o d i f i c a t i o n a n d t h s
mtify a l l ths banks.
(The motion, heving been duly
Ae I-uncers tend
n II o f t h e program. I
would
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Py)
Repurchsse Agreements.
ing cebentures o f
Credit Banks.
Governor Strong:
T h a t wes first suggested b y S a n
Frenci sco.
Governor Calkins: I
a m not-concsrned
i n the
this time.
(Discussion followed which
not t o take.)
Governor Strong: I
will off-r a resolution that
4t i s highly desirsble a n d Jmportant i n
in benkers g c c p t e n c e s a n d
for G o v e r n m e n t securities,
rs
.
s mey b e decided under t h e edvice o f
in such f o r m 9
counsel,
b e continued.
Governor Seay: I
will second that motion.
)
(The wotion, having b e e n d u l y seconcecd, W e s csrvricd.
The Chairman:
N o w , w i t h regard t o Topic, -
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
That i s put o n b y Kensas City.
Governor Bailey:
A t a meeting of the Board
tors o f the F e d e R e s e r v e B a n k o f Delles u e l d i n October,
it w a g t h e congensus o f opinion t h a t the funds o f Federal
+
should n o t b e employed i n the direct pursntures o f Intermediates C r e d i t Banks, s l t h o u g h
there m i g h t b e t i m e s w h e n t e m p o r e r y
extended
debentures acquire
own resources,
t o member
t h e m i n good faitna
a t such
sessonal needs might require
wever, recognized thet there
principle involved i n discounting
federal Intermediate Credit Banks e n d
further c o n s i c a
takin:
hought b e s t b y t h e B o a r d t o w a i t b e f o r e
ite s t a n d u n t i l
t h s p r e s e n t conti fFavence c o u l d e v o l v e s
system p o l i c y w i t h r e f e r e n c e
relation
)
t o t h e whole matter o f
t o Federsl I n t e r m e d i a t e C r e d i t Panks,
gencrel
It i s m y opinion t h a t w e should not, 3 8 @
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
29
policy, m a k e
Sys tern 6
sé
United S t a t a
s l Intermediate Oredit Banks
.
d e v i s e d i n t h e belis
Gi t h e country: 3
through t h s o s e n c y o f w y n e l
a l banks with the
Such being t h e cese, i t
thet t h e particular paper wiich might b e offereca
ent transactions which,
rst
i t i s sdmitted
the proponents o f the act, woula n o t b e suitable i r
the reserves o f t h e c o mercial banks o f
country, s n d sven tnough
Limit
Oometurity, n e v e r -
the trenssetion would n e
stow e : d unile
ssure° 28 cepitel loen o r ®& e e s t e
Congress. pleced : 6 0 e p e e
Stetes Government 8
h
e funds
h e disposal o f t a e s e
ana p r o v i c e d m s c h i n e r y
debentures
ing public o f the country, s n a i t i s my b e
plan should b e utilized.
for
t o t h s invsst-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
541
re
ar
s
e
d
e c i l i t y provided
a h r s presens
time, 2 n d has-been f o r meny months,
abls e r s d i t
production.
i n this cistrict
a n sbundence o f aveil-
f o r t n s c u r r e n t nuesas
o f
t the present t i m e t
A
Bank o f D a l l a s
a n d co. mercial
banks
of
*
probably “250,000,000 o f cutsice end open
follows t h e t
it w e s unsuitable i n which
cial benks o r t h e reserves
The Cheirmen:
n
o
t necessery f o r m e t o support
w e would
this statement b y the underlying reasons, b u t
be o p p o s e d t o e x t e n d i n g
to d e b e n t u r e s
Governor S e a P s W w o u e c - Lb
Benk a t Columbia, S o u t h C a r o Bank o f R i c h m o n d t o
One &
warchouse receipts f o r cotton, a n d thé
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
542
he F e d s r a l R e s e r v s
vasther s e line o f credit would
purchases
o f cebentures
rediscounting
Bank,
of the
o f paper f o r t h e Intermeciste Credit
T h e Reserve B a n k o f Richmond replied t h a t i t w a s
not its practice t o grant i n advance lines o f credit,
even t o member banks, e n d therefore i t would not grant ea
line o f credit t o any int ervediate credit bank;
b u t that
it w o u l d s l w a y s b e p r e p a r e d t o p a s s u p o n G i s c o u n t s w h e n
submitted t o it. A t t e n t i o n w a s cslled t o t h e regulation
of t h e B o s r d w h i c h p r o h i b i t e d t a s
from purchssing debentures o f Intermedia
when i t s reserve w a s 3 s l o w c s f i
e
Gredit Barks,
demsncds a
r cent, a n d
t o heve cue re-
h e i r o w n m e m b e r banks.
to t h e b a n k t h a t w i t h r i
the p u r c h a s e
o f debentures t h e a c t contemplated
should b e sold i n the open market, e n d
an o p e n m s r k e t f o r cebsi
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Richmom w o u l d n o t d-sire t o scquire t h e m a s investments.
The Chairmen:
T h a t includes a l l repurchase
ments.
Governor Seay F r o m member b u ks?
The Chsirmen:
N o , Intermediate Credit Banks. T h a t
is what t h e t o p i c i s ,
Governor Seey: I
do not think w e would enter into
any repurchsse sgreement w i t h s n intermediate credit
benk, é
a
metter o f opinion, subject t o reconsidera~
tion, b u t I have n o disposition whatever t o enter into
such 3 n srrangement w i t h intermeciate credit banks.
W e have h a c three different inter-
Governor Biggs:
mediate eredit banks call o n u s for t h e purpose o f getting
Ons esked for t w o a n d a half million,
which was i n Louisiana, snother @
million a n d s half a m
another two million, a n d we refused t o consider giving
them credit a t :
e x p l a i g
t
h
e
t our first duty
was t o our member b m k s , t h a t they h a d furnished t h e
cepitel s n d they were entitled t o it; t h e t our reserves
<
were g o t t i n g d o w n t o a
point a l m o s t a p o r o e c h i n g f i f t y
per cent, s n d w e could n o t take them,
Our Boerd discussed t h e matter very thoroughly.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ae
3
They h a d ¢
4
representetw e
4
from t h e banks w h o insisted
Bosrd s b o u t t h e i r situstion.
U
s Tremkhy
them.we d i d not t h i n k t h e y h a d any
us 4 t sll until they
They h a e much more t h a n e million
were eatitled t o five million.
T h e men
l s commitments h e r e
the c r e d i t b a n k s 1
end t r y i n g
t o get something
to-do.
the open merket, a n d I d o not think w e should take t h e m
into t h e s y s t e m u n t i l t h e y h a v e u s e d
ties thet t h e l e w offers them, a n d until their cepital tes
At e n y rate,
w e h a v e n o t f e l t likes s n -
and w e h a v e n o t c o n e s o .
We egreed to. discount 2 million a n d
dollsrs i n payer under s p e c i f i c conditions.
wes n e v e r p r e s e n t ¢
I t
t o u s s n d v e h a v e n o s u c h peper.
The Chairman: I
woule like t o
have h a d applications f r o m ore o f t h e banks,
to b y G o v e r n o r Biggs,
#2 W W
a
as
d thet i n our opinion
they should proceed through t h e channels t h a t i t
contemplated they shouldusc;
t h a t is, merk
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
545
I f they make
f u n d s i n t h s t way.
and s e c u r e (
their c e b e n t u r e s s u f f i c i e n t l y a t t r a c t i v e t h e y w i l l f i n d
a merket,
e n d o n the other h a n d i f they know i n
that t h e y c a n p u t these into t h e Federal r
which m i g h t m o d i f y t h e 1
i
W i e d ess
ness, w e could cesily become loaded u p with then,
do not want t o be.
W e declined t h e application.
Governor Norris:
I T would like t o sey, i n view o f
thet i n consultatio
the other dey with Judge Lobdsll, w h o i s now t
egent s n d attorney f o r both t h e Federal
the Intermediate Credit Banks, I mentioned t o him thet an
application h a d been wade b y one o f t h e banks-~-it w e s t h e St. I o u i s B e n k I
some surprise.
H
mentioned---
think
ead
e had slready s o l d f o r them, a n d
sold them uithout sny trouble, I believe, t w o ismes
£3
debsatures a t very fevorabl
in w h i c h h e e x p e c t s
a t s
W
e n d
t o f i n s n e e them.
i
s
-presidsnt o f one o f the land
this kind direct t o t h e Federal reserve benk
euthority, a n c
would see that i t wasn't done again.
a
t
y
n
e
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Federal Reserve Bank of St. Louis
546
Governor Seay:
I referrec
r e c a l l n o w that t h s Columbia b a n
t o wes referred
Loan a r a , 8 1
f
t o u s b y amember
o
o f t h e Farm
r enspplicetion t o u s
time f o r a million dollars w o r t h o f paper w a s t h e t
Tressury Department h a d
e a d ys
capital, which the bank h a d
tional commitments,
1
two millions o f
n é t h e y hsa made addi-
a n d t h e Tressury D e p a r t m e n t h a d S e r e e d
to edvance a million 2 n d a quarter i n ecdaition, b u t they
would b e unable t o sdvance i t until sbout t h e middle o f
snd, inasmuch a s they h a d made @ m amitments t h e y
lesired t o r s i s e t h i s m i l l i o n d o l l a r s
b y rediscount w i t h
us, t o b e repaid from t h e cepital t h e t v a s sdvanced b y
“4m
the treasury.
Governor Norris:
the s t a t e m e n t t h a t 1
T h e a t brings m e t o thé close
was s h o u t t o m a k e a
ugeed:
few minutes
i n t h e racord,
i n
Governor S e s
4
that t h e y w e r e e n t i t l e d t o c o m e t o u s f o r anything,
they h a d n o t c a l l e d f o u r f i f t h s
the r i g t t o issue debentures i n the market,
seme time they found themselves i n any temporary pinch
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Federal Reserve Bank of St. Louis
O47
¢
ebentures
f o r which
tae first o f t h e following
month, a n d needed
t t l e money i n the meantime, t h e r i f
they msde sprlicetion t o u s f o r temporsry loans t o t
them o v e r a
psriod o f
“sbentures, t h a t h e had
His l o a n was only
line o f eredit o f t w o million,
& for a
I found out that they hed committed themselves t o
e n d t h e Cotton Associa-
#obscco G r o w e r s ' A s s o c i a t i o n ,
for t h e t smount. 7
2 a
n
i f they had called o n
enc h e seid no, h e
S e
e
s
y a h Lert
bULSeLf-they.
Gid,
We d e c l i n e d
think Judes
S e l l ever know anything sbout it, b s
more 8
but
i
Governor Calkins:
r yveletions w i t h t h e interms-
diate c r e d i t e n d f a r m l o a n s b a n k s h a v e 2 l w e y s b e e n
extremely smicadble.
W
e have b e e n a p roached o n t h e
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Federal Reserve Bank of St. Louis
548
37
o our cisposition toward t h e purchese
t
question i n
as t h e o t h e r
intermediate credit
of government capital
F h a t i f there w a s
to t h e open market;
to r e d i s c o u n t
i n order
that they mignt
tempo rary
b
be glad t o G o
e
heve,
2 , w e would
m c a l l e d upon t o redis-
e
roceegs
count p e n c i n g ee
~
t o take care o f
o i cebentures
3
e
and w e h a v e a o n é e S o .
W e have not b e s n spproached b y
Governor Fancher:
dit b a n k s
no c o n t a c t
i n our district
a n d have t e d
w i t h t h e banks.
Governor Young:
T h e y } >
BY s c h e d o u r b n k
and
our “ i r ectors n a v e
temporery a r i s e m e n t s
h
thirty d a y s
e
wiih them for
y were selling
think this i s importent.
tures. I
L i s y e r was here
situation, e n d h e said
act quioxgreat many cases i t was necessary t o
fox
s o m e c o nsicerathet reagon o u r bank has given
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Federal Reserve Bank of St. Louis
549
to the intermediate credit banks, a n d perhaps will
some edvances t o them i f w e c a n d o i t leg
short periods, b u t h o thi ing whatever o f a permanent
T h e same people came t o me
Governor Bailey:
wented t o mske e a sale, before t h e y h e d snything t o
snc m y “ n s w e r t o t h e m w a s t h a t i t w o u l d d e p e n d o n
concition w h e n
t n
would like t o
M r . Chairman, I
Governor Faucher:
report thet your committee f r o m t h e Conference h a s s e e n
the Governor o f t h e Board, s n d h e has statec that i t will
t o have
be c o n v e n i e n t
j o i n t conference
I f w e open o u t banks t o t h e inter-
Governor Beiley:
mediate credit b m k s
a t two thirty
w e will heave non-member b a n k p s
mo
without limit.
Governor Young:
M r , Chairman, I
Governor Strong: I
would like t o know
personal feeling
he é
sbout t h i s p s r t i c u l e r m :
wth, a s you doubtless know,
o f two quite
different progrems a f
pice canes a n d c a t t l e .
T h e o n e which iw.
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Federal Reserve Bank of St. Louis
550
snd I
discussed before t h e Jotnt Committee o n
inqaiiry, i n brief, provided for the farm loan
loan, gstting t h e money b y
oraer t h a t seasonel demancs
upon t h e farm losn system should n o t necessitate dealing
2~
in excessive a m o u n t s
o f dsbentures w h i c h w o u l d n o t b e
provision w a s s u g g e s t -
nesded t h r o u g h o u t t h e e n t 6
thet t h e ferm loan system might take
be 4 % counted w i t h ths reserve banks, having maturitilose-- o u r Z i r s t s u g g e s t i o n w a s n o t o v e r f o u r months,
thet w a s i n e r e s s e d e s y o u know--- b u t t h a t w e s s i m p l y
the y s e r w h e n
shepe w h e n t h e lesisletion w a s finally
sod the o r m n i z a t i o n o f t h e intermediate credit
the
anks took plecs, b u t i t sesms t o m e thet the g e r m o f
{sea still exists that those intermediats erelit banks,
which m a y Gcvelep i n tims a n d
r f o r m ea very importent
function i n t h e asriculvura s e c t i o n s , s h o u l d a t first
a
exieust t h e amount o f
C
o
n
g
r
e
s
s provited
the
they s h o u l d have, s e c o n d , t h e t t h e y s h o u l d e m p l o y
selling
facilities i n the o p m market which they heve for
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Federal Reserve Bank of St. Louis
551
for s h o r t
periods,
f o r one reason
o r snother,
w h e t h e r sesasonel
or
because t h e y h e v e t o m a k e
ceben tures,
o n ther
a . .caLlay i b the.-peyment of. t a p t c a s
or snything o f that sort, t h e n I think t h e laws o f the
United States contemplate that w e should redism unt their
do not think that loans
receivables, particularly. I
upon c e b e ,
or purchase o f debentures i s primarily
the intention o f
e i s l s t i o r I
uncerstand it.
we m a y n e v e r b e r é -
clerecter, because t h e need
faere L a rather slisat;
but just because of the intere é
the legislation, I
h a d originally i n
b a
hed this feeling, t h e t i t w o u l d e
great mistake i f n s n s g
f
the Keserve banks,
of c i s c u s s i,
n
o
which w o u l d esppear t o b e d s f e a t i n g
any w e y t h e resi] purposes
o f i s legislation.
There
so much Unjustiried
for agriculturs, t h a t i
unwerranted
s n d unnecessary
thing
t o take any
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Federal Reserve Bank of St. Louis
352
aL
o their receivables o n t h e
anez b y proper c i s c o u n t i n g f
pert o f t h e reserve bsnks i s n o t given i n cases where
they really n e e d it. U n d o u b t e d l y , e a c h case has g o t
to b e consid-red o n its merits, but these institutions n o w
coming t o t h e reserve banks a n d ssking f o r lines o f credit,
something t h a t w e d o n o t give t o our o w n members, certainly
That i s not the w a y f o r them t o deal
the
with t h e reserve banks, e n d that i s n o t the spirit o f
I d o not think,
srise,
as I
O n the other hand, w h e r e temporary
heve described, I
p2rsonally h o p s t h a t
attitudes o f the reserve benks w i l l b e t o nelp then,
w e are
I think, Governor Bailey, t h e t that i s the w a y
oO
©
t o
m a k e f r i e n d s f o r t h i s system.
I f they came t o u s i n a n cmergency
Governor Bailey:
a
denying o u r member
snd w e hed t h e funds, e n d would n o t b e
benks, w e would consider it.
Governor Young:
l i n . Chairman, y o u will recall when
this legislation w a s first. up, t h a t I
perfectly willing t o take a p
position e t thet time.
opposed it. I
b s w i t h regard
I t i s utterly impossible
with the
bank t h e t i s i n Giffficulty t o c o b u s i n e s s
mediate c r e d i t benks;
- i t cannot
d o business w i t h
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Federal Reserve Bank of St. Louis
553
gone o u t into t h e northwest s n d they g o into a
cormunity where a
benk i s losin; d¢posits, a n d they organ-
ize.a little p o r e t i o n w i t h t e n thousend dollars a n d collectkoge ther s h o u t t w e l v e f a r m e r s t h e t a r e g o o d a n d t h e y
heve t e n thousand collars
o e
a
n select loans i n
thet community f o r a hunéred thousand a n d turn t h e m over
lend benks.
Y h e t h e r t h a t i s good rineancing per-
it i s good finsncing temporarily a n d takes c a r e
1@tion out there i n the h i
W h e t h e r it
I think I
thet ¢
l e n d bank o f 5
:
i s t i f i e 1
t
service t h a t o u r
s rea9
d i r e c t l y , a n d I think
f
institutuons g s h e ' b e j
bis > w e s
i s very careful i n regard
8 .
L
to w n e t i t t a k e s j
t
can s a y this,
e
m
p
o
r
a
r
y e s s i s tance.
h
e conference
that this ¢iscussion hes not b e m c o n f i n e d t o t o p i c
hag t o d o w i t h o n e specific m a t to t h e p e o o r i e t y o f
wikis repurchase sgreements t o incluce? loans
e-bentures.
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Federal Reserve Bank of St. Louis
c
in egereoment w i t h r e s p e c t
s f o r this purpose
t
6
e
n
r
ok
e
e
m
-
y views
regerd t o the
by G o v e r n o r
consensus
o f this
the cuestion o f assisting, t
aO 80,
Governor Strong?
ougnt t o take, i i C h a i r m e n ,
Gneirman:
T h e r e
=
mao &
s motion t o &¢.j
Lig .
i}
r o n r e v o G\
Norris:
Lr, C heirmen.
yas. cerried.)
(The motion,
ViCuw
be|1
7
,ne
op
rea
e
5
enholeMae
t u eAEM
rs adiourned,
>
t o reconvene a t 2: S50
the G o v e r n o r s
Board
and
o f the
the Chairman s n d Federel Reserve agents.)
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Federal Reserve Bank of St. Louis
ournnen. t
ether y o u
ve}
R
A
s
Norris:
Governor
las a
1
o
F
3 Ha EWR Sete s; e t - e n y encouregsnent
Bosra this erternoon
n
e dusstion o f
Prution o f “ = “hex on. untoversc
there would b e n o possibility o f getting m y
l a n
at .
w h l ef asxs) “ t e :
tron.
5
aw ra cr ; w a s s t r o n g l y
/ i ‘n
wouls- M o v s
Governor N o r r i s
Yithout obfection,
now topic w h i c h shoulc b e placed o n
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Federal Reserve Bank of St. Louis
556
Increase o f g o l d holdings i n
the veults o f t h e Pederal R e serve B a i t s .
That n e w topic i s submitted b y Cleveland.
Governor Fancher:
A t t h e confsrence a
year a g o t h e
wetter w a s brought u p 9 s t o t h e policy whicn should b e
4
B e n k s when t h e bank
erel 3
followed b y t h e F e d uA
inbuiliings w e r e completed a n d fecilities provided f o r
cressing t h e g o l d holdings s t t h e banks.
I t wes voted
e our policy thet, a s the vault facilities
that i t s h o u l d b
ware provided, t h e holdings
b increased.
s h o u l de
w e have
o f addrecently moved into o u r building s n d t h e guestion
considered
ing t o our gold holcings h a s b e e n taken u p s n d
by our boerd.
T h e board voted t h a t i t was adviseble
thet i t b e brought sbout thet our holdings
substentislly i n c r e a s e d
i n mid be
i m o u r o w n veults.
thet the Chicsgo bank, followyear ago, h a s macs some
n their gol¢ nolding
expense g n d lsbor.
Chicago na
c o n s i d e r s b l e
r
ed
its g o l d hold-
mint i n
ings b y having minted gold shipped f r o m t h e
niladelphis a t sn expense o f 3268 per million.
b e e n held b y the
foune thet t h e gold that had probably
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Federal Reserve Bank of St. Louis
557
shipped
i n f r o m t h e suh-tressur-
before t h e Operations w e r e taken over b y t h e system,
the golc wes within the weight of least toler.
wes
Chicago b e n k h e s b e e n going through t h e
teclous process
o f weighing t h a t gold. I
of t h e Bosrd, discussed
mede inquiry
i t with members o f the Board when
I vas h e r e s o m e veeaks epo, e n d t h e r e s c t i o n s e e m e d t o b e
favorable t o our doing so. p e e s
a c e some iInvestiga-
tion g s t o t h e amount o f minted g o l d avsilable f o r such
purpose, s n d I found comparatively 2
i available,
small emount o f
l e s s t h a n f o r t y m i l l i o n collars.
is 9 matter t h s t t h e other Federnsidsration t o s
Governor Calkins:
million dollars i n all the mints?
Governor Fancher:
the- g o v e r n m e n t
xe2;,
T h e lew
h o l d se certain psreemt
o f
protect recemptions i n g o l d certificates a n d legal tender
three h u n d r e d
notes.
e r e 3
million dollsrs,
i n t e d gold t o the extent of/twenty
:
d
i n r o u n d figures,
quiremsnts a r e 3 2 8 7 ,000,000,
sJ
t h e redemption l a w re-
s n d y o u might s a y that there
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Federal Reserve Bank of St. Louis
WO
M i e t O n G O L Lere o T
gmount.
gold c o u l d b
e inersased.
whet m e n n e r ,
course, u n a c r t h e lew;
they coulc b e
we c o u l d
witadrswn
from t h e A s s e y O z i i c e
i n New
b e minted into
inPuilaci phis,
wondering w h e t h e r
s policy o f accumumcs v o u l a b e i n
How m u c h c i d
you get, l i
Probably
an o r f i f t e e n m i l l i o n d o l s we
si g h
eing
c i ot u p
r s p it
beacious
by coin.
anc. the golc
W e ore c d e i t yet,
wes b r o u g h i
7; }
bo nave that exper-
Governor Fencner?
Chsirman:
you makes a m
Governor H a n c h e r ?
Governor F o n c h e r :
There
d o
sion covering this,
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Federal Reserve Bank of St. Louis
50
hor d o you get it?
5
Chsirman: I
5
9
cznnot t e l l y o u t h e s x a c t courses
came t o W e s h i n g t o n f i r s t s n d m a d e t h e
then t h e plon w a s psriscted through
tHe. M S R .
ilecelphia, I
from there.
belisve. I
think i t came
I t msy be interesting to you to know that
the m a t t e r w e s g i v e n c o n s i d z r a t i o n l o n g ago, e n d w i t h o u r
new veults evai ;
a
w a s very strongly o f t h e
thet w e had betts :
are not through; w e 6
o r e gold out theres
‘cooing t o get more. I
told thet there w a s ple f
think w e
gold i a tae other f t o m
WO .
You mean i n certificates?
in bars,
getting,
5 large proportion o f f i r e s
Governor Fancher:
I
t i s m y impression
i t was
desire o f t h e b a n k s t o i n c r e a s e t h e i r g o l d holdings
minted coin, e n d the minted coin i s not available,
The Cheirman:
T h a t is, t h o s e banks t h e t h a v e vaults
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Federal Reserve Bank of St. Louis
51
ready t o hold it.
Governor Fencher:
Yes.
w e have $375,000,000 o r
4500,00C,000 o n deposit with the Board, a n d there isn't
shouldn't
any resson we/have 3150,000,000 o f thet in our o m vaults.
he board concurred i n the id°e t h a t i t was advisable
to heve t h e gold i n the benks, maintaining i t for current
operetions
i n the g o l d settlement fund, e n d ordinary r e -
demp tion o p e r s t i o n s , d
n
a dis tributes t h e rest.
tir. Harrison:
T h a t wea. recomended
a t the last
Conrerenas
Governor Fencher: A
year ago.
lire Harrison: I
conference,
o f 9 year
Governor Fencners’
I
t seems
t o m e s o m e representa-
tion should be made t o the Treasury that w e would like w b
carry o u t t h a t p r o g r e m i f t h e r e i s a n y w a y i n w h i c h i t
cen b e brought about.
pr* Herrison?
E
S i g @ - s s t i o n have y o u t o make,
Y o u have been pretty closely i n touch
with this matter, end w h a t w o u l d b e your sugsestion?
lir. Harrison: I
womember 3
i3
:
year a g o after t h e
£
t 2
meeting w e took i t u p with “ r G i l b e r t , before i t came
up 2 t the Governor's Confsrence here, a n d Mr. Gilbert
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Federal Reserve Bank of St. Louis
561
end -E- think surprised
ratio o f g o l d w e h a d t o o u r f o t e l
some bsnks, P h i l a
less t h e n one p e r =
SVheLT a
York bak, which wes the m a d i ,
hed
for t h e whole s y s t e m wot less t h a n t e n per cent.
“ures, I
think, 3 2 5 m u c h 3 s s n y t h i n g e l e ,
ert w i t h t h e n e c e s s t y o f s o m e s o r t
“Ad f o m -varTrous
ressons, t h e t
oppointrient o f p z t r s o n o r 8s conmittee
“4nston t h e cadvissbility o f pursuing
the progrem thst kr* Gilbert o n c e outlined, w a i
ins Letter h e sddéressed
Coveriee Senpeier: T
t h e N e w York Bsenk,
would move, irs. Che imen,
Herri@n be mete s committee o f
t
o teke this
,eorstaryVv iinston.
G s O bbOi.
iL.
Governor Fanché
stage o f t h e procesdai
t
o rsport s t t h i s
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Federal Reserve Bank of St. Louis
562
this morning, e n c Lr.
Broughton,
i n respect t o the one dollar b i l l situation.
I think porhops 2 . S d d y geve u s t h e impression here thet
we
pepper,
ovevred t h e metter
o f expe
b u t t h e metter o i
in ciseussing t h e matter p r o e n d c o n this morning i t
st the outset o f our “iscussion thst everything wes
e done, b u t it real ly ace
ovobably being done that c o u l d b
5s w e went along that the only thing that was
the mechinery b e c k wes t h e fact o f t h e a sire o f
the Department t o get more silver into eirculstion s n d r s
, of
money ows the general fund, Tuast mac
-iime Herrisons: I
a b o u t .
b
i
think t h e t i s s b o u t i t .
“irst reason fiven
found o u t t h a t e t
they s r e orintisg $00,000 shsets
lsrs, o r $1,200,000, s n d 100,000 sussts o f
nited Stetes ones. T i o s t makes 1,600,000 one -olisr
bills at-the present time.
T h e proper proportion,
to
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Federal Reserve Bank of St. Louis
565
54:
comply w i t h t h e original reco .rendation o f t h e c o mittee
9g0 o r more,
w a s a b o u t “ L 7 0 0 , 000° im ones
ir. Winbten seys t h e t i f t h e N e w York Bank o r a n y other
edersl r e s e r v e b a n k w i l l s c c e p t 2
“eposit o f ( 1 0 , 0 0 0 , 0 0 0
in silver ones, t h e Treasury Veper tment will stop print+
ingc the fives e n d p u
a t !
per into onés, s n d then t e n
a4
Csys later tske snother 10,000,000, wsking =
twenty millions--Governor Fancher:
lire Herrigon:
T h a t i s silver s t e n c e r d s ?
Y e s
T h s t thet would enebl
to increase the doily output of one doller bills from
present o u t p u t o f 1 6 0 0 , 0 0 0
a n incresse o f
t o 1,800,000,
2OOYO0G Ss da N o w , t h e guery i s thetner
520,000,000 t o the Tressury vithout intsrest
and I
very much if we could refus
Covernor &
believe
e C S yI
s h i l e he h e s t e d
doubt
&
, icels that
it v o u l c b e ¢ s
tt G o v e r n o r
Fe: :
d i s c u s s e d i t with him?
Pa)
The o n l y difficulty i s this,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
this i s the hestitation t h e t Governor Strong had:
gilver collars a r e n o w i n t h e #int s t Philadelphia.
wouldn't b e worth while, i f we hed t o transport those
New York,
o r t o any other F
by some process w e could make t
Benk t h e custodian,
w e could eccept thet o n
deposit, have Philecclphia hold i t for us, s n d heve Philthe o t h e r b e n k s t e k e t h e i r proportionTas c u e s t i o n i s ,
$t worth i t t o the Zystem t o secept (320,000,000 o n deposit
u n c r those c i r c u m s t e n c e s
output 200,000 bills 3 cay,
i n order
t o incresse t h e
T h e increase would b e ef-
within f o u r o r r i v e
s matter
of information, w h s t t h s
to o n s d o l l a r b i l l s ?
Governor B i s ;
Governor 53a}
h
e
y s r e v e r y l o w w i t h us.
h e r e i s greet denger o f shortage
US e
Governor Young:
W e a r e all o u t i n Min-eapolis.
Governor N o r r i s : I
Governor Calkins:
d o n o t knoy a b o u t
t h e situation.
O u r supply i s insufficient,
bu t
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Federal Reserve Bank of St. Louis
serious s h o r tage.
I s your supply sufficient t o carry
Governor Fencher:
you t h r o u g h t h e holicays?
Governor Calkins:
l not.
P r o b a &y
Governor Bailey:y
I T io not know v h a t t h e situstion
should think i t would b s possible
ir. Harrison: T
to work o u t this cuestion o f the silver dollers.
W e have
everything t o gain s n é l i t l e t o lose b y secspting t h e
deposit.
T h e a t vould procure u s 8 n sdiitionel supoly o f
5200,000 in one dollar notes a cays a s t would be our
sttitude i n New York. P a i l s ¢ s l p h i e c o u l d solve t h e
gituetion i f they would teke t h e m ell.
Governor Fancher:
T t would b e a temporery a r r a n g e
we understand?
Harrison:
I
Governor Fsnet
t yould carry u s over this psak
then t h e operation c o u l d b e reversed.
Mr. Herrison:
T
t conterplsates t h a t i n Januery w e
.
p
r
o
v
i
d
e ,
would reverse t h e operstion i n order t o ; S i l v e r s egainst
wanich t o print t h e silver certificates. I
we w o u l d m a k e s o m e r e p o r t
told h i m that
t o h i m t o m o r r o w morning,
we ere going t o d o this h e wants t o gta
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Federal Reserve Bank of St. Louis
566
i s your idea o f it, Governor Norris?
iat
ype
Governor Norris:
S
)
s a b l e t o s 3 y 8 s t o what
I cid not know this w a s coming up.
in
520,000,000 o n s c o l l a r billie p i t e d
Herrison:
Governor N o r r i
a
i
1
jo, but. they were Lit,
ihe. H a r p s o n s
system today.
n e r e i s n o currency shortage.
proper p r o p o r t i o n
a
for t h e C h r i s t m a s d s m e a d .
Governor Young:
“ s have hac s
with t h e new ons coller bills.
good deal o f d i f f i m l t y
Y e ha
i s d fifty p e
but i t doesn't’
cent, 2 n d
work out.
Hers s b o u t t h r e e
ee
ia volume w e
months e @ g o ,
stopped e y i n g n e v n o t s s
t o orainery
a
Suppose w e were w i l l i n g
d W
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor Norris,
whereby y o u c o u l é
sarmarkéed C e p e s i t Y o r a s ?
Governor Norris:
n
o doubt t h e t
probebl
Governor Cslkins:
doubtful
i
t
w
t sesms t o m e i t
e
n
t
y
c o s t
on€erds simply t o get n e w bills.
you
vhether w e c e n meke arrangements t o
nd v e t u r n i t w i t h o u t
I
c o t.
t
h
e
f y o u h s d t o heul i t
could b e earmarked, t h a t
It s e e m s t o m e unless t h a t c a
e imor acticable.
it w o u l d b
Y o u wouldn't want
ten o r twenty million collars
voult, Governor
ad
good desl o f labor.
6
(Purther discussion folloved: )
Tiare i g n o action necessary before
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Federal Reserve Bank of St. Louis
ee}
this body.
heve t h e New York banks ucndle p r o v i d e d t h e y c e n b s
setisrvied s s t o t h e p h y s i c a l a r r s n g s m e n t s ,
next topic before w s i s TV<4.
Iv-4. R e p o r t o f Insurance Cormittes.
No report hes been received, b u t I heve this coiment,
that the Bosrd'’s lett X - 3 8 1 4 with reference t o the inter
insursnee p l e n asks t h s t i t b e submitted t o t h e Governors
of the various banks, s n d i f possible that 2 acfinite proAa
position b e reeched a n d treusmitted t o B o e r c a before
the Conference t h a t i s t o b e helc November
Our counsel has returned e n ool:
taet such inter-insurencs p l s n smong
bonis would b e beyonca their power.
There Coss not s e e m to be e n y section necessery here.
Governor Uslkins:
e
s
i c s e s a r y in-sruch
thet letter which y o u heve just referred t o calls u p o n
o meke @
recownencation
The Chairmen:
s t this
T h e s Letter asks
e ti
=
submit-
if p o s s i b l e t h e t
C-cision
b e reached
3s n e m i t t e d
t o t n s boerd before
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Federal Reserve Bank of St. Louis
60
the Governors!
Governor
The Ghsirmen:
A d i l rignt, w h e t i s the r~esult o f t h e
inmwiiries m a d e b y t h e Boerd?
d o not knov w h a t t
Governor C a l k i n s : I
your c o u n s e l
I think probably
the m a t t e r
counsel, I
e
know I :
x
p
l
a
i
n
e
t o their
d t o our
Board o f Directors, w i t h o u t r e f e r r i n g i t t o o u r counsel,
ond they sprroved, b u t I
e m quite s u r e i f i t had been re-
ferred t o the counsel and he hed advised u s i t was ultra
vires, t h e y would n o t have spproved. I
e m not willing
i t if
to h a v e o u r b a n k g o o n r e c o r d a s a p s r o v i n g
ultra vires.
Governor Sesy:
“irectors 9
I t was spmoved b y our boerd of
yéar e g o w i t h t h e we ovision t h a t t h e Federal
Recorve Bosrd suthorize t h e formetion o f it, w h i c h would
‘dnvolve t h e legality o f it. H o w e v e r ,
of t h e fact thet legal opinions ciiffers
counsel w o u l d e p p r o v e
think,
w e haves
I
f the Bosrd's
i t $ s l e g a l w e w o u l d b e willing, I
t o join t h e other banks i n doing it.
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Federal Reserve Bank of St. Louis
Governor % :
B
u
t w e heve
Boerd's counsel has gnoroved it.
Governor Fencher:
fevorabls
S o f b i e p e n k vrererred
it t o our counsel a n d he h e l d i t wes perfectly legal.
The-directors
therefore
voted
t o
approve t h e p l m i n prin-
ciple =n@ recommended edoption subject t o A
Governor Y o u n :
“ 4 n n e a p o l i s voted n o t t o opprove.
t care t o enter.
29 n o t k n o w h o w t h i s
Pac]
oe
may Ono tne. prosram,
Go: e r n o r C a l k i n s &
ROWE
O L
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Federal Reserve Bank of St. Louis
Governor Bicss:
(The motion, i s i n g been d u l y seconded, w a s carried.)
The C h a i r m a n :
A
n Metron
t e 20.
B e ;
in order,
Governor F e n c l
Cheirman,
(The motion, being duly secor
(hereupon,
e t 5:55 o'clock p. m . , t n e confer:
of Governors sdjourned until Fridsy, November 16, 1
st 10 o'clock a , m.)
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Federal Reserve Bank of St. Louis
CE O F GOVERNORS
BANKS.
P E O G R A L RESERVE
washineton, Y s C x
Friday, November 1 6 , 1923
The C o n f e r e n c e
o f Governors
o f Federsl Reserve Banks
reconvened e t 10:30 o'clock a. m , Friday November 16,
Appearances
a s p r e v i o u s l y indcic sted.
PROCEEDINGS.
The c o n f e r e n c e w i l l m m e
t o orser.
We heve several mstters t h a t will m m e u p leter i n the
Joint Conference which w e should cispose of.
Governor C a l k i n s :
4t i s highly desirable thet w e should express o u r views,
et leest, w i t h regard t o two vitally importan t metters
which w e have n o t discussed, a n c {nasmuch s s I imagine,
only imsgine, that t h e Sonfsrence o f Agents m a y h e v s o m e thing t o say o n these subjects, o u r comme nts should b e
prepered before theirs a r e presented,
s o that they may
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Federal Reserve Bank of St. Louis
34
3
7
3
be compered and, i f possible, reconciled.
is p s y i n g o u r g o l d certificates.
O n e subject
T h e o t h e r i s t h e sub-
ject o f n e w reserve computation.
The Chsirman:
M r . J e y h a s c o m e i n with a
report o f
the action o f their conference, a n d I will a s k hr. J e y
to s x p l e i n t h e menmorsndum t h a t w e s h a n d e d
t e m e t h i s morme-
The gist o f t h e meworsndum i s that the
Agents recommended that t h e
lowed,
e
s
e
r
v
e banks b e @l-+
i n addition t o dsducting d u e f r o m banks f r o m due
to banks,
t o deduct checks i n process o f collection w i t h
Federsl reserve benks from gross demand liabilities, t h e
purpose being t o equalize t h e situation f o r the country
banks that t h e city banks n o w enjoy, w h o haves largs d e posits f r o m out o f town banks, a n d therefore a r e snab
to deduct their items i n transit f r o m
iey, whereas banks n o t having s u c h deposits s r e n o t sllowed
to aeduet their checks i n process o f collection,
T h e
fecling w a s that i f w e allowed deduction o n l y o f items i n
process o f collection through t h e Federsl reserve banks
it probably would heave t h e result o f bringing most o f
these country banks t o send direct t o t h e Federal reserve
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
o74
65
bringing them constantly i n touch with t h e Pecsrel reserve
them through c i t y bank »
they-@.
e t the present:
t i
3s
r e s t - o f tne r e p o r t i s
taken u p msinly w i t h Ciscussing s d v e
t
w
o o r three
other succestions t h e t have b e e n mace f o r changes i n reserve computations, s u c h e s sllowing c a s h i n vault t o b e
counted s s a
& s c u c t i o n f r o m s r o s s liabilities.
Governor Stro.ug:
“ o u l d this require legisletion,
Miye Tsay?
Mr, Jay:
n
M r . Herrison «
i
o
n t o me
this might require legislation.
The Chairman:
N
IV-C.
e will n o w t a k e u p Topic IV-C,
R e p o r t o f Committee o n V o lun-
tery Services, Governor Fencher,
Cleveland, Chairmen.
You 1 1 know h o w I feel a b o u t these reports.
are t h e r s s u l t o l
L
they ought t o be raed
T h e y
e 1 a d y , o n d careful cork, e n d I
think
your wish i n regard t o
v a g 3
the matter?
agree w i t h thet, iire
Governor Seay: I
The Chsirmen:
T i e n , Governor Fancher, w e will ask
you t o r e a d y o u r r e p o r t .
Governor F e n c h e r :
T h i s
is
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Federal Reserve Bank of St. Louis
375-377
~REPORT.OP
{ S U B - C O M FM /COMMITTEE:
I OT T E E ON
VOLUNTARY SERVIGES ASSUMED B Y FEDERAL
RESERVE BANKS.
T would s u g z e s t t h e t e s
5xré
wnéertsking t o consider t h e whole report e t
Covernor Fencher:
« A t t h e last Conference o f Gover-
HLOn. WsmMoranaum J
o certsin voluntery s s
Federel Reserve S y s t e x . f
ie
assumed b y t h e F e d - r e l r e s e r v e banks,
e
a n d wiaichn s e r v i c s
the Board expressed t h e opinion should b e cis continued.
Tt i s a s s u m e d S
n e Bosra referred this subiect
heat
t o tne
Confer-
the C o n i e r e n c e t h e t t h e serEy
enumerated
in t
a r d ' s memorsndum should
4
Siscontinusd
to t h e i t e m o f n o n - e s s n c o l l e c t i o n s tele
he subisct snoulc b e
sna report t o 2
s e ciol commit
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Federal Reserve Bank of St. Louis
Governors
to
b e s¢|
hendling o f non-cesh collection
4y
a Be: we
t o review briefly t h e
up t o t n e i n a u s u r a t i o n o f t h s n o n -
collection function b y t h e Feasrsl reserve
Section 1 3 o f t h e Felsral reserve Act,
June: 21, TOL7, DSMaLGEs
maturing notes c n d bills (3) f r o m member banks f o r collection,
Red= red e s e r v e
hence o r collection,
reserve banks
norsibnile; becesui
in w h i c h P e d e r s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Board, “+298, under
25, 1917, contsined t h e following:
"Section 13, es
bank t o receive f r o m member bsnks f a collection,
maturing notes and bills; end, for purposes o f exechense
or-of collection,
or solely f o r purposss o f exchenge
o r collection,
from any non-inember bank, meturing n o t e s s n d bills.
71
Rech Eederel restrve bank, therefore,should g i v ¢
satis factory arrangements f o r collecticg cnasck
similer n o t i c e s h o u l d
The b s n k s s h o u l é
amounce
will b s m a d e s u b i e
to liability,
t
thet
o t h e ususl Limitations
t h e actual cost o f collaction.
as
t o be
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Federal Reserve Bank of St. Louis
1
cecueted when t h e proceecs é
a c c o u n t e d for, s n d for
their p r o t e c t i o n m a y e x a c t a
service c h e r g e o f s a y 2 5
cents f o r tach unpsid item.
In the opivion o f t h e Bosrd, a c t i o n a s in*ticated
above i s essential f o r t h e d velopment o f t h e collection
syetem,
3 n d t h e plans outlined should b e mads
at the earliest possible moment, o r i n any sve
later than August 15, 1917. O t h e r features a n d
sleboration o f deteils c a n b e considered lster,”
Tn sccordance w i t h t h e recommendation o f the F e
Recerve Bosrd a n d e t their rs"uest, t h e Federal recerve
insucureted t h e non-eash collection service,
sbout September 1 , 1917.
h i l e
o n or
a t the outset t h e col-
yere n o t generally availec o f b y t h e
member b a n k s ,
there has been 2
number o * member |
m a k i n g v
gredual
1
increase
T
h
i
i n the
r
t
y
-
four p e r cent o f a l l member e n d r e m b e r cleering banks
and s e v e n t y - f o u r p e r r
men 2
n o n - m e m b e r elear-
ing banks located i n Fedsral reserve b e n k a n d brench
cities a r e n o w using t h e service sctively a n d
@ constently increasing number o f items b e l n g :
the Fecsrel reserve banks.
D u r i n g t h e past year t h e
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Federal Reserve Bank of St. Louis
Federal R e s e r j o s r d a ’ s
ciency c a u s e d <
o
r e r Surv<
n Heosoty s n d
b
r
e
U e P e p e FO “Oe
with t h e r e s u l t t h a t t h e total
serve S y s
S
n
r e a s
a l t h o u s h thsre
8 constant
benks c o n -
e sssociations
8s o p p o s e d
t o the
Associstions
¥GSO0 DIGLOHS protestin«
smsll
m i
conclusion, t h e
of banks, m e m b s
tre r e s o l u t i o n s p 2 s s s
‘OG lebion- are n o k c o n c u r r e d i
i n tne
h e n : snc nave
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Federal Reserve Bank of St. Louis
vigorously a g s i n s t e n y c u r teilment o f
bism.
Governor Young:
e a s y [ interrupt?
Governor isnchen:
Yes.
Governor Young:
Sis @ntinue this b y
Agcocistion
o f
a
of N o r t h D a k o t a
similer resolutions, o n c
he committee socarently s s
gave reilrozded through without t h e member
Thet assuijtion m o y b e réent o r
I would like t o meke t h e suggestion t h e t i t
can o n i y be. cdeterm
the member banks i n
it o r j o n o t w a n t i t .
T t : do not. t h i n k i t i s , i g a t
id
the comceittbee t o a s s w m e t h s t t h e y c o n o t w a n k
they have a
few letters v r o m certsin perticular benks
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Federal Reserve Bank of St. Louis
oe
BOO
%
heirmen:
G o v e r n o r Young, 1
Co n o t think that
aged o u r opinion o n s o superficial e n cxamine6 plenty o f evilvsnte t h e t
the non-cash collection system o f
4
l
Governor Young:
e
v
formation.
The Caocirmsn:
W
e sie ¢
constently incressing volume.
we have had a good deal of correspom. nee. ‘ t h i s Illinois
situation thet lire Fencher has .eferred t o is vary interhea been stirred u p e little bit,
anericsn B e n k e r s A s s o c i e t i o n
T co n o t know whether t h e resolution w e s
upen o t t h e Anerlesn Benkers Association meeting--- b u t
some section w a s teslrei :
ries
i
d it
w e s tsken without
et lesst, ond
his knovledge, o r vithout his und: a n d i n g
thet n e himself k n e w v e r y w e l l t h a t t h e s m a l l e r b a n k s
in ® s v o r o f t h i s n o n - c e s h c o l l e c t i o n
Governor Bsiley:
T h a t isn't the information I
Penth O L s e r i e e
t
,
het i f the system would mencen
to t h e m t n e t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
hed a s = right.
T h e collection o f cash items i s
shout ninety p e r cent i n the Gis trict, b u t o n t h e suestion
“of n o n - c s s h c o l l e c t i o n s
thet t h e r e h a d b e e n e
t h e country b a n k e r v o u l d f s e l
concession m a c e
cannot help,
discontinued. I
t o him i f
o n reading t h e report
of t h e Economy s n a f i c i e n c y Committee o f t h e Bosra,
that t h e y recognize t h i s 6 s a growingSa] evil.
4
The Chairmen:
ciency C o m m i t t e e
T h e report o f t h e Zconomy e n d sifi-
o f t h e Federal Reserve Boerd,
y o u mean?
Y e s .
Governor Bailey:
y
The Chsirnmens
o
u followed this report througsn,
Governor Bsiley?
carefully l e s t nimt.
Governor Bailey: t
Toe Cheimzen:
H s v e y o u n o t i c e c t h e t w h i l e t h e benks
ee
themselves
s r e cemurringgw e Weve ord-rs
z
g
“ a the Heder
Reserve Boord t o put this into ef-ect?
Governor Bsiley:
T h e t wes some t i m e 3go
order came, e n d w e have h a d some experience
The Cheirmen:
A i x p e r i e n c e n e s Zoveloped
reconsi-usr it,
the fact thet i t i s not desireble w h e n w e
ag Governor Fencher brought out.
Governor Calkins:
W
e a l l realize t h a t not v e r y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ignt should b e “iven. t o resolutions. ¢
s m surprised t h e t Governor
State B a r k e r s A s s o c i a t i o n s . I
of t h e opinion t h e t thse non-casn collection
m y o w n opinsystem i s objectionable t o t h e banks, becsuse
are
ion i s exactly t h e contrery, t h e t t h e country banks
state banks s a y
very generslly i n favor o f it, s n d t h e
opzrations
thet i f w e d i s c o n t i n u e t h e n o n - c a s h c o l l e c t i o n
of
1 reserve benks i t will b e s t the cemend
md those lerge c i t y
slicc -oted
“tate c o n v e n t i o n s .
will u n é s r t e k e
ghbou6. thet. T
t o g e t e n y resolution
sta c o n v e n t i o n t h a t y o u want t o get through
through 9
weke
T h e su-sestion thet Governor Young
et any time.
bose:
-to 4
v e r y much
i n Doint.
S
m
would not be in fawro:
+~
LOSS
:s
1}
S
o
n
s
Gisl o r otherwise.
Governor “ ~ e l l b o r n :
stress upot:
it into opzretion, c n a they leic
benks.
thot i t woulda benefit t h e country
S u a GS
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
>
586
thet o f Governor Young 2 n d ir. Bailey.
‘I cot =
O n l y last
l e t t rfrom one o f t h e country b m k s complsin-
very bitterly sbeout it,
The Chsirnen: I
think w e
mMG A C L we T a m s r e e c e
Governor’ e L i p o r n ,
L l
Wve have h s d t h e mstter up. for
eassion i n o u r B o s r d o f v i r e c t o r s f o r f i v e o r s i x ysers,
and our boerd s r e unanimously agesinst t h e non-cesh collection system,
W
e heve country bankers
o n t h e bosra e n d
all kinds o f bankers, s n d they feel that i t is competing
with t h e banks' business, e n d i t i s certainly m
expense
to our benk s n d w m the public u p o n w h o m t:
drewn ob‘sct t o i t themselves.
certified check
e
i
c
d
o not w e n t t o “ive
, “ T h y con't you ¢ is continue
tiriéd to do-it",
them o n d t o l d t h e m t i w o u l d n ' t p a y
cene. throuch the. bank . : j
I
s m only
CLSCELet-->
we h e v e n ' t r e s c h e d t h s t p£o i n t
“in 8s general way---
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
387
Gov srnor Bailey:
i i n , Chealene: ,i anceretoot. y o u 2-0
should b e interjected while rescing
es
questions
A
a
Specrescrton o f } t i e
nk
anericsn B a n k
s ors
A S S O
e
o
n Non-
-etious S o s pretesncetadcd
i
er
Vices e r e s i c e n
eccoréance w i t h t h e section t e k e n
Gonirerence
pointea s s
of Boston,
for t h s purpose o f
“iseussion
rt
thorough i n v e s tiss
o f the mate
L
H
biA
S
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
nonecssh c o
It was deemed neesssary t h e t informetion besring o n
function
twelve benks i n
forward a
west
Which w a s
fully t a b u l e t e
ASA
a b Rigs:
At this meeting,
i m r . . .J Barton,
.. %
.
of
Gheirmon o f S p e c i a l Cowmittee o n Non-Cash
L e e tions
n e r e s u s s t o f the
Benkers Associ 5
Boera,
st s n y view: w h i c h h e mig!
sonal ones s n d those o f t
Acsocietion,
scemed
SS d a l St s
t t Comnittse
féeeslia-
S 2 2
w o u l c b e pursly per-
sinaseapolis: Cleari:« Reuse
o f which h e wes Cheirmen n o t
f o r e querters, particulerly i n
ollection
o f non-cssh items
snoulad b e Gis continued f o r
9
esult o f t h i s e n d o t h e r
erseting s u c h e n overneaa
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
589
to sventuslly compel
t h e m to “unter the open market
ments i n competition w i t h commercial banking
He s t a t e d t h s t inguirié¢és w n i c h w e r e m a d e
Sank O c b r a n c h
of t h e service,
from.
seti:s i n iicshingston
ee s e
OR me
o r : s t i o n
ob-
benks
to o b t a n fure
instructions
w i 2 5 0 !
by*cecth benk:
s n c brene!
t
e non-cssh c i t y items
h
e n d this information
was
acca’ dingly r e c u e s t e d
merked Exhibit-B,
members
i
o f t h e Committee,
b y 2 n informs] vote,
meelves s s beine asarbily i n fevor o f connenélice o f nonecssn collection items b y the
entire function,
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Federal Reserve Bank of St. Louis
REASONS F o r OOM!
liember banks, u n d e r
ere required t o maintain e l l o f their
eserve banks a n d they s r e sntitled t o
some
o f t h e mschanicel
cervices
w h i c h were formerly per-
their correspondent banks o n t h e strength o f
with them,
T h e Fedsral Reserve
reserve requirec t o b e kept b y
portion o f t h e f u n d s avyeilsble
for loaning purposss.
V i t h e r e w a l o f t h e nooi-cash collec-
service w o u l c c o m o c 1tnem t o c e r r y l e r g e
with correspond n t banks t o obtein this «ervice,
a-festing o n s o f t h e p u r p o s s s Or. T A S
he hsadlicg o f non-cesh collection
member b e n k s h e s
have e n t e r e d t h e
tinuence o f ti
bers t o withlraw Z r o m ths System.
I
t vould
unfsvorable effect upon t h e nuniber o f n e w
for memb° rshiy
f r o m the best informstion obtainable,
sd t h e c o l l e c t i o n s e r v i c e
of
the v o l u m e o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
cesh c o l l e c t i o n
1
bey
- e m s which
el Reserve system
hsndle t h r o u g n +
is comparatively small;
their c o r r e s p o n d e n t
hey heave r s c u c e d t h e n u m b e r o f
the c o l l s c t i o n o f t h e s e
channel would
A
hovever,
itens t h r o u s h s n o t n e r
t nett s n d
Tos
a
a7
nmdled
Non-casn c o l i s c t i o n s
b y the
anks a t l e s s
o s
W l Te
s
close contact, n o t only w i t h i
non-member benks.
During t h e
country i t e m s
Sirst quarter o f 1925,
2,751,000;
ell country items o n which 3
the
for m e m b e r b a n k s w o u l d
ake,
o f
collection e t par b y t h e Federal reserve
bsnks a n d branches W a s
Ss
tae a m o u n t
while t h e emount of
was o n l y
charge
totel collection charges only
not r e s u l t
i n a n entire
collection cesartments
it w o u l
nt couos0ns,
g nno tie sr uandt bills
a M
member benks,
ciscounte
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Bills purchased i n ths open market,
Itens payable i n Fed-rel reserve b a n k s n d
branch cities received f r o m member a n d nonmember clearing b
The f o l l o w i n g reasons w h y t h e non-cash. collection
y
function s h o u l d j
by t h o s e o p p o s e d
r
a
Ciscontinued
have been sdvanced
l r e s e r v e b a n k s p e r Jorming
The service adds t o t h e cost o f opersting t h e
l reserve banks.
The service will compel t h e Federal reserve
banks t o compete with commercisl benks i n o r
revenue
t o meet t h e a a d
Member banks i n some o f t h e
snd branch cities have b e e n deprived o f substential incomes w h i c h they formerly received f o r
hsndling non-cesh items psyeble i n their o m
Gl ted.
Risk i n c u r r e d b y t h e F e d e r a l r e s e r v e b a n k s
in
hendling itess o f this charscterere, ¥
(1) / A D D E D C O S T T O FoLDERAL R E S E R V E BANKS.
The c o s t o f o p e r a t i n g t h e n o n - c a s h c o l l e c t i o n c e p a r t -
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
AYE D s nics: Tors t i s «Vv
tes Brproxitetely 1,260,000;
t sporoximetely 5 2 2 1 , 0 0 0 r e p r e s e n t s
Government coupons, %
t h e cost o f
e
b h S e r v i c e ic. p s r f o m d
expense
ae
ig emount. i n e l u c
s s peying
pee.
cost of ‘isndling Government coupons for
(Sse E x h i b i t C )
T h u s
i t w i l l b e seen t h e t t h e s e r v i c e
of hocling non-c3sh t i collection
Will cost 6
s m s tor member benks
System cooromic o t : ly ,1,000,000 curing tas
o n 35
curreit year s n c 4 9 ; e n t s tas gernings
725,000,000 st 4
ps a t :
mperison of
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
O94
service
t o member
bens
(2) C O M P T T P I O N “ I T H .COn-eeRCLAG BANKS,
Up t o t h e present t i n e t h d e r e l reserve banks
have refrained f r o m compsting w i t h member benks, e x c e p t
in those instsnces w h e r p r o v i s i o n s o f tle, feasral
Act mske competi c o m p u l s o r y , e¢na «ven thougn
necesssry t o invest 325,000,000 t o provice funis
purpose o f m e i n t g i n i n s t h e n o n - c e s h c o l l e c t i o n
depertments, t h e siount i o
emall i n d t n e investment
field s o lergs t h e t i t is suits o D s s r e n t that n o corpetition w o u l c result.
(3) B A N K S
I N S O : 2FEDERAL R E S E R V E
AND B R A N C H CITI=:
cbove, c o m p e t i t i o n w i t h m s m b e r b e n k s
in
sad the only other cor-
eities, benanuce o f c
woulc derive substential income,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
oo
Siler
thas
c o l l s uc t i o n ste r v
e
LOS
questionnsire
Pie Gaees:
tFol o t e lof e p roxinet ely 1,546, ¢
G o s tout o x
nme Denacled
benkes s n a
b y sll o f
“he prenen- -CLELSd.
collection o f
snd bronch cities b y
r
e
s
e
r
v
e benks 1 s
not s52roved o f b y
those«citizs,
t
h
e value o f the col-
Fecerel r e s e r v e b a n k e n d b r e n c n
sinst t h e c o l l e c t i o n servic:
so i n m o r t e s s e s
bee]
f r o m selfish motives,
Bnd
i@it o f t h e fect thet t h e y obtein s l l o f t h e
SaVENtEgses
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OUS=LOGEtLLON.
T i s (iscontinusn
Un tic
estsblish
lection o f nonservices
hich
country members.
With f e v s n e e
t o t h e loss o f i n c o m s f r o m t h e hand-
on-cesh c i t y itess b y benks locstea i n some o f
id branch cities,
i t seems t o
Conmittee t h e t little, i f sny, srgument i s necessary
fect that 7 4 per cent o f t h e member s n a n o n seuber
locsted
u s e t h e collection
i n those cities
wt
&
i oly
b e
C
i
e
|
p o l e
a
B
nS
W e r
e Way. =
Git
597
(4)
R I S K INCURRED
B Y T H Y FEDERAL RESERV] BANKS
IN HANDLING ITEMS O F TH" GHARACTER.
Some o f t h e F e d o r a l R e s e r v e b a n k s h a v e a d v a n c e d
this a s a n argument f o r abondoning t h e non-cash collection
service.
S o long a s t h e Federal reserve tanks continue
to d o business o f a n y kind w i t h thétr momber banks o r
with banks outside o f the Pederal reserve System, a
tain a m o u n t o f risle m o s t b e
c e n
i
cer-
s true that pe-
Culiar a n c temporary local conditions i n certain districts
may imvolveo s o m e r i s k . i n t h e h a n d l i n g o f c o x t a i n items.
it i s difficult t o comprehend, however, h o w the rislc
involved i n the handling o f noa-cash items o n a purely
collection b a s i s c a n t e c o m p a r e d
t o t h e r i s involved
in tho handling o f checks a s cash items under t h o same
conditions. n
the case of chcoks, credit i s passed
automatically according t o t h e time schedule o f the
Federal reserve banks a n d i s conditional u p o n actual paymonte i
3
s case o f n o n - c a s h c o l l e c t i o n s w h o r e c r e d i t
is-passed s o l o l y u p o m a d y i c c o f a c t u a l payment,
difficult
t o sce h o w more than a
i t igs
very small r i s k o f loss
can attach. C e r t a i n l y , i t i s not possitle t o argue
that t h e r i s k i s s o m u c h g r e a t c r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
a s t o justify t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
O9E~404
service w h e n t h s
at t n e s a m s t i r e
important
to
s t this t i n e n o t t o c u r t s i l e n y
.sny c o u n t r y
Congressionsl C o r m i t
rship i n t h e
the c o u n t r y c o n t e n d t r e y
6s w h i c h
is of
prsse.t o b * e c t i o n s
tinusnee o f t h e n o n - c a s h c o l l e c t i o n f u n c t i o n
eral r e s e r v e b a n k i
6
seéi t h s t
t
t h e e s r e u m e ns
for c o n t i n u i n g t h e s e r v i c e
the Committse i s strongly o f
be c o n t i n u e d .
by
t o
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Federal Reserve Bank of St. Louis
405
Governor Cslkins:
l i r e Casirman, I
move t h e adov-
of t n e r9}
Governor Norris: T
sscond t h e motion.
Is t h e r e e n y f u r t h e r ciscusstion?
Governor M
Cosirman, I
do not w e n t t o c o n e
sume ©. y rors
to v o t e n o o n t h e report.
Govemne rp. Strong : I
s m going t o 9 8 k Governor =
Young i f h i s r e s e r v e s b o u t t h i s r e p o r t w i l l b e r e m o v e d
“in case t h e meeting oO4pesses a
resolution
2 similar i n sffect
to the one that wos passed dey before yesterday, which
would suthorize o r request o r ask esch reserve bank
‘gond t o all t h e other reserve banks s
list o f banks
voints u p o n w h i c h t h e y w o u l d n o t h a d l e t h o s e i t e m s ?
Governor Young:
very meterially. I
G o v e r n o r Strong, t h a t would help
could g o through t h e report a n d teke
s number o f s t a t e m e n t s t h s t e r e m s d e i n t h e
to c o thet.
I
n
aclition t o t h s t t h e C o n m i t t s e
6 recommendation
in a
report w h i c h w a s a d o p t e d b y t h i s
Conference a n d espproved eleven t o one thet w e would n o t
hendle non-cash iters drewn w i t h excnange,
o r some s c h
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
thet hnelps thst much mors.
H a t v e s not
Governor fancher:
cuange,
h
b u
d to Jo with items o n which
e
trarily’ 3 0 d x c h m ¢
part o f
s
struments
:
jin e x c e s s
o f
Governor Young: T
i s thst
Sonal v i e w
OlF 1i n e* S oa u ?
would liks t o s a y t h a t m y own per-
i t shoulc
be c i 1
i s c ,
n o t beceuss
i
o m
a
7
i inn g
a 9 1 t h ei t w e eW ro e n h de nld l
present
et the
iters
$
time, ; b
i u t becsuse o f t h e nossibiiities
sce very far reecning ¢
L
i
o f t h e future. i
e n d t h i n k the
these items,
continues.
sion tho e
benks
I msy b e
Gheirmens
T e u ' t i t true t h e t y o u <slso come vilth
vg
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
the knowledge t h e t your o w n board o f cirectors has
P|
csnnot auswer d e r
Governor Young: I
express
Governor Strong:
ths “ i e s c u s s i o n
unusual o r
bank of issus 2
central benk,
in h a t l i n g b u s
ne E n g l i s h proetice, b e c s u s e
Bills d o g o through 8 cles
th
8
WL de
S wtata s“ la es d sas y
VOUS e v e
Cee B e e A
h
o ss‘ £
Siscountec
report o f t h s Bank
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
seer
on
“
|
m o a
customary,
for instencs,
y
J
without shipping o r witnout
sbowt t h i s c o l l e c t i o n b u s i n e s s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
209
Some
t a c o (te a i g
sation, p u t upon t h e
s
strongly
t h a t w e ghouls
f our m a m b e r b e n k s a t G a a t we: heve: g o v - t o
do t h e business t h s t t h e Act conld do, e n d this, I
lac Re RE :
think, 3
part
1 % thecost o f t h i s b u s i -
ness, e m o n s o t h e r t h i n g s t h a t w e do, i s b e c e u s e
o f the
orinciple w e estsblished a t t h e outset o f not meting a n y
I think that w e s e
foolish thine G O do. and
never should have b e e n Gone.
to sbandon t h e one cent per i t e m o n cash items. T h a t ,
smounts
to a
million c o l l e r s 8
rve Bank o f New York.
year w i t h t h e
N o w , i t strikes m e
fair presentation o f t h e
es submitted indicate t h s t t h e n a d o
end finding i t o f value, although there a r e
objections;
b u t what t h e report does n o t cover isstrikes
me i s a very importsnt matter, a n d that i s a little look
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
£10
are c o i n g t o g s t o f f
Governor
Donor a e
rm.
t o
committs¢e, w o o s e subcoin i1ttes
a
meke
t h e report
t o t h e Conrsrence
more
put o n t h e
t
progrem,
h
e Conference
FOU u n c 10 wk
y e services
r thet w ey r e oerforming,
t
ons
to
the city banks i n the o t w e r e
enc,
a s
o f f «Etine c h e s
savantege t o t h e country banks
to our offices, e n d i t is
w e have o u r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
country banks,
HS
we. pp es r f o r m &
pa
s uLe
n
2e
nede w e
here
e o f t2rvite. f o r thé. country
benk:, t h e city bank objects S
a
g cdoing t h e m s o m e
will G e m o n s t r a t e
belisnces between t h e sdventege
t o t h e benk which
SOVSRvete,
O r
you b y mail.
serve B o a r d
fiscontinusa
or
youlG. L i k e “to. eu:
Ro8(e a
for c y re-
Lo O n s o m e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4.12
9s str-st items e s cistinguisnaed
payable e t banks, f o r instsnce.
a
of Governors,
can get 5 fair snelysis,
e s well a s a n estimete o f
he feelins which will dsvelop,
charges,
o r before then,
o n t h e whole subject o f
w e c a n cdetern m n i e bl
i e cannot begin pretty
soon t o put this o n 9 businesslike besis where w e c a n gst
st l e a s t t h e c o s t o f c o i n g t h e
would like t o sdcd one t h i n g t o
Governor Young: I
thet recommencetion o f t h e committee t o t h e Bosrd, anda
that i s that they consider v e r y carefully t h e procticability o f this developing into e
much larger tunction
tion i
t is a t the present time.
Governor Fencher: I
Governor Wellborn:
Governor Strong:
think everybody recognizes tnat.
T h e report edmits that.
T h e Boerd i s very much concerned
about thate D r , Hiller told me sfter the meeting thet,
by s o m e s y s t e m t h e y h e d p r o j e c t e d t h e c u r v e o f i n c r e a s e
into t h e future, e n d hed estimsted t h e t within t e n
it yould be costing u s $12,000,000 9
the non-cash collection i t e m s alone.
er,
W h e t I woulca fear,
of course, 2 s 3 result o f t h e long future, w o u l d b e thet
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
a eS
e tact
e
b
expense t o
System iofferec without
b
charge o r
a
n
would cevelop i i 2
k
s a n d t o t h e business public
situation where w e might b e
vuslly d e v e l o p i n g = » s y s t e m f
o
this country based upon bills,
a
a cis cOunG o f 8
ninety cCray
a
and in the course o f time we
i
b
thet sre done
‘snsactions
e settling: sil-of our
o n credit
country through o u r transit
that w o u l d b e n o b o d y c o u l d pos sibly sstirste,
but it
now, o r 6st least
that t h e m e i n t e n a n c e
a
of
‘the Benk o f France i n tLia
h es y
smployment o f t h o u s e n a
the C i t y o f P a r i s alone.
7 ern
i
s what conesrns
collsction
m é e s much
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
from w h a t I
Governor Young:
number
have said.
T h e s e 1 ter
o f they
multsneously t h e
the c o m m i s s i o n
man o r the
m a n o r t h e mill
end those have :lwsays been
Northwest.
ties h a v e b s e n b u i l t
A
l
l thess facili-
u p i n t h e Northwest
t o handle these
herge the country
t o h a n d l e them.
s t n e d n o p s e ro
r
e
p
o
r
t here stetes
shouleé s c o n t i n u e t h i s collection service,it would
at e number o f those country
I would like
n
o
n
can n e m e o n e .
verno r
a
v
e l o t s o f them.
Governor
Governor
these i t e m s o v e r
t o St+ Paul
o n d 5t* Psul
es
m
u
i
O
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
415
we heave t o
come i n t o m e a n d
x “You
will
h m dle t h e i t e m s g o
Fortunstely I
have been sable
items, but i f the linnespolis benks
Governor Strong:
f e would not
Youn g3 A l l right, y o u say t h s t you
C r e o
Pouce
A
n
a c c o unt:
is
d i n order
Clevelend, w h i e h d o n o t cont
cht t h e t out,
m d t h e n y o u have
secomplish, y o u have gotten r i d o f it,
fer c g t h e F e d e r a l R e s >
ed, our position
City b a n k s
Benk o f Kiinieapolis i s c o n c o r
i sn
offer item
Minneapolis that if
r
i
I cennot srgue w i t h themet 5
a
;
m2
t o take tnem,
e
the arcumen
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
hay
proposal
bie thine t o Co,
mere f a c t t h e t y o u r
Governor Young:
statement
N o ,
f o r our institution.
here b y «leven Governors t h a t w e
c
tinu
s h o u ln o<
pe
o
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i e
11 fall i n lins end continus
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Oust o
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Wt a
S
2
Y
V
Governor Bseiley
r e n t l e m e n have
we t o o k t h i s position.
h a v e before m e
tast o u t o f 1 2 0 0 m e m b e r beniks o n l y
taken scventage o f this thing, e n d
sstablisned
I think y o u
prerogstive o f opening c a d
tments, w h i c h
from t h e m .
p
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j a e imore
apout o n s h e l t
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EGLO
8 s ,
sae
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or one
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
£19
o kesp o p e n stcounts.
V
e send out collectors
end they send b s w o r d that they have settl
Gon @
settlement,
e n d i t sescus t o
us into @ conmercial bank, which
not # prerogative o f t h e Bederel Reserve System.
at
I f
decuct a n y t h i n g f r o m t h e s u s s e s t i o n m a d e i n t h i s r e p o r t
the Economy :nd Efviciency C o
question w h e t h e r
purposes a n d p r e r o g a t i v e s
of
to maintain this non-cash collection system.
F r o m
our own experience, only 100 of our members out of 1200%.
availed themselves o f it, e n d I
want t o be recorded
es v o t i n g n o w i t h r e g a r d t o t h s t p e r t o f t h s rsport.
Governor Celicins:
a g r e e W i t h practically :very-
thet Governor ~trong seid o n this subject, w h i c h
obviously
under t h s necessity o f extenCing services t o our member
co, recl services;
t h e t w e saoulc not continus t o
pile up, without consicorstion, t h e s e costs, b u t should
sscertein first t o whet extent t h e member benks a r e servec b y these functions, a n d s
a d , whether w e c a n pro-
perly continue t o extend them,
i n view o f t h e mounting
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“220
Cos tS. I
think,
i n considering this metter ourselves
end i n presentirg i t t o t h e Board,
unmistakable f a c t t h e t the g r s a t
w e should consider t h e
objection o n t h e part
of the members, a n d those b m k s t h e t e r e consicering
membersiip i n t h e Federal reserve system,. comes elmost
invariably f r o m the member bmaks.
T h s r e isn't s n y dis-
satisfaction w i t h t h e system i n t h e city bmks,. s n d the
reserve b a n k ¢ c i t i e s S3 t h e r e
it.
i s g r e s t satisfsction
T h e y g e t e grestdcalof benefit f r o m it.
with
B u t the
country bsnker nevertheless says, “ I f I was located i n
a city i t woulda b e o f a d v m tage t o me, b u t I
e m too f a r
et
sway a n d I do n o t get anything o u t o f it, s n d itis a
disadvantsege t o me."
T h s t i s not only the most contin-
uous ergument, b u t i t i s the best argument t h a t h a s yest
been gdvenced. ;
a fact t h a t t h e country benker
. ¢
ot e disadvaenteacse, e n d i t i s
e - f s o r
duty, i n conducticg t h e Pe c a t e r s
serve System,
net
e o
o f the Federal
t o C i m i n i s h t h e dissdventace
o f the
cen, 2nd we mist consider
*
the p r o p o s i t i o n s s b o u t r e s e r v e G e d u c t i o n s
thet h a v e b e s n u r g e d f o r t h e b e
“Ove t h e cdisedventages t o t h e
a
o f verious k i n c s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
gee h o w a n y b o d y c e n argues t o t r e
the non-cesh collection
number o f benks,
1
sny number o f banks,
i t
benks l o c e t e d i n
believe t h e t the outstending motives o f opposition, s u c h
e l y . selfish.
ODDOSLELON.os there. i s , i
Governor
Beiley h a s i n d e s t e d whet I have founc, a n d I think, n o
éoubt, wast others o f you heve found, e n d thet i s i n
w e find
this metter i n our o w orgenizations,
operating
Wo
of“icerg h a v e t o “ s a l w i t h 6
very vexe-
tious tusstion connected w i t h t n e non-csh collection
system,
a r e o p p o sec’ t o it.
nd laborious, 2
position, I
e
y4
t
A
take it, that Governor Beiley hes expres
Governor Beiley:
T h e t i s exactly what T e n
sing,
Governor Calkins: T
e m strongly o f the opinion
that t h e Giscontinuence i n toto o f this function would
sprouse m o r e r e s e n t m e n t
o n the part o f e
lerge number o f
enks of the country then almost anything slse that
we h a v e p o w e r t o GO-«
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
How d o y o u r e c o n c i l e t
thet only: 1 0 0 o u t o f 2 2 0 0 o F o u r
Governor Calkins, u n d e r t h e c i r c u m
you,
c o y o u w i s h t o move t o mocify
your m o t i o n ?
GovernorCalkins: I
I simply m o v e d
moved t h s sdoption o f the report.
t o s d o p t t h e report,
21
h i n k i t mignt
o r adc
enother motion,
Governor Strong msde thet w e n s 2
tinting s t u d
Caink
2 s
i
e
s ms
n
con+
d thet this s h o u l d n o t
S e
i
Governor Fancher:
Governor strong:
g not s
intended.
G o v e r n o r Bailey, t h e question
to 2 6 k y o u 1 s
your Gistrict,
‘own cistrict,
that t h e larger banks i n Ktnaseos possibly heve, t n g
been o p p o s e d
t o t h s extension o f this busi
ay
Nk
accounts
out your Gistrict t o é considerable exten
B
y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
423
purpose o f csrrying o n this esrvics*
Governor Bsiley:
O u r dis trict isn't lixs yours.
Tnsre isn't 2
that h s s n o t m o r e t h a n o n e c o r r e s p o n d e n t s o m e place,
Governor Strong:
I n Kansss C i t y very largely,
Very largely i n Kensas City.
Governor =trong:
ba
I n other worcs coes your state*
jzlve hunersaG
tue country bmks i n your Gistrict
the a t t i t u c e
o f
a
development o f t h
I cannot s u s w e r
try b a n k s w i t h r e s :
y
l
s s t o these
o p i n i o n ebout it,
t
h
e fect thet I bolieve i t exists.
se t re et i
m 2n g
Governor Norris:
I T tould l i k e t o e s k Governor
his traveling m e n hsve mads i t @ point o f
attention o f the c o u n t r y banks,
w h o they
e fect t h e t t h i s f a c i l i t y
Go verno3
w e
Y e s , e
h a v e 9 couple o f m s n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
list i n f r o n t o f t h e m e l l t h e time,
3
o n d
have not seen the figures, but
Governor Fancher: I
I think thet i n the New York district most o f the benks
are usin? t h e collection facilities.
lir® Herrison:
O v e r eighty per cert.
Governor Fsencher:
T h e r e i s t h e converse o f t h e w o -
position.
Governor Strong:
I f w e take @ vote o n t
report,
if the meeting thinks i t is wise t o do so, I will formulate 9 resolution which,
i f adopted, w i l l endeavor t o
resolve o u r doubts 2 s t o this situation t h e t y o u e n d othsrs
present have referred to.
Governor Bailscy:- I
formetion t h e t I
heve g i v e n y o u first hana
brought here,
e n d that w e spent 9
good
deal o f trouble i n sccuring.
Governor Fencher: I
would s u g e s t t h e t the veport
views o f
of t h e committee states t h e t i t represents t h e
the committee u p t o t h e present time.
finel report o f é
of progress a n d
Ce up. t e d a t s
a té
I
T h i s i s not t h e
t i s more o f 6 repoi
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
p l a aies
lcCaee
nHoye)
two phneses o f
it. e n d t h e o t ner
of concucting
Governor
A
B s
d chests
n
v e r y inportsnt,
think.
Governor ssay: I
would like
the latter phase I
There c a n b e n o t i m e w h e n
n the imposition o f
e mace.
irge c o u l d b
esmot n e c e s s a r y
t o consider
a t this
The chief zusstion igs shall w e c n t i n u s
perform these s
t o -
b e e s , e n d dt h e t d u e s t i o n w e unguestion-~
ietive, slthough w e
of o u r benk,
charge hes b e e n
the country banks, i f they
objection onthe p : f
ize thet they c r e
t
s
a t o make e charge r o r this
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
A2'7
Service s i c c o met. a6: Pt.
cn
T h e y co-net-do i b , although
tist t h e y m a y .do-L4é,
i n e y heve
They a r e n o t avere o f it, i n m y opinion,
the ob*sction o n t h e pert o f those country
banks probably srises f r o m t h e fect thet they d o m t know u
that they c a n meks ©
cherg n
theses i t e m s thet m e y come s
reserve banks
n e r y
L
-
e serctt r i c s
eny common sense obisction o n t h e pert o f the
rybenks, s n objaction that would stand logicel
enelysis.
The Cheirmen: I
think Governor 5 t
uisely suggested thet, i n spsroving this
it shoulc be accompanied b y 2
ing out t h e p o s sibi £
2 velopment, t h e enormous
expenss t h a t m e y b e involved. P
AhinkK p h e > is preper
im
order that w e may b e put o n the slert
Governor Strong:§
unfair
T
t occurs
t o a s k t h e m s e t i n e Oo t o v o t e
t o m e thet i t is rather
t h e epprovel
o r dis-
epprovel o f this r e p o r t u n t i l t h e y k n o w w h s t f u r t h e r s c &
tion i s t o b e taken, e n d what further investigestion
i s to
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
428
ce i n rererd t e t a e report. I
think t h e logical
wey w o u l d b
e t o pegs o n this resolution s n d then vote o n
the s p o r o v s l
o r disapsrovel
o f t h e report f o r t h e t i m e
being, pending completion e n d furtasc
Governor Beile
T h s t i s cgreeable t o
Governor I
Governor 3
have n o obisctione I
uncer.
s t e t e t h e resolution, a n a
i
the Conference c a n then
Governor Wellborn:
H o w would i t d o t o just
action o n this rsport until t h e next Conference,
The Chairman:
W
e meking n o progress i n
e wouldb
L e t us. heer Governor Strong's resolution.
thet way.
Governor Strong:
T a g resolution which I
hsd i n minc
which m a y require more careful framing, roughly,
i s this:
f
olvec, T h a t t h e Committee, submitting report o n
Voluntary Servi ces
continued b y t h s B o d r d <
investigate e n d r e p o r t o n d m a k e r e c o m m e n d a t i o n s p r i o r
next Conference 9 s t o the folloving subjects:
:
H o t valusble i s the servic:
cash i t e m s
t o t h e members
o f t h e Feds:
o f w m llecting non-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
pbenk c i t i s s a n d t h o s s n o t l o c a t e d
the v o l u m e o f
wheat w i l l i t l i k e l y cost;
the p o s s i b i l i t y
o f imposing s
upon t h e collection o f n o -cessh itsms w h i c h will,
least, reimburse t h e b e n s f o r t h e cost o r conducting t h e
businsss,
t h e report upon cherges
t o consicer
t h e prac-
es or: upon those items
Waich
we
such cherge might be,
Pi
like c h a r a c t e r w h i c h
without charge f o r our membirs.
Governor #ancher:
Governor Strens:
terily performing
rejuirsa to. perform,
GOVErnor s e a y:
to c a s h c o l l e c t i o n
o f checks?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
450
Noe T h i s refers purely t o v o l u n
thought I read t h a t i n your propos-
Governor Sesy? I
said non-cash collection itoms,
Governor strong: I
Governor F
n e
B
o
a
r
d s u g g e s t s Tivse t h i n g s
included, t h e shipping charges o n currency s n d coin
member o n d non-member banks, securities held for safecurrency received 2nd sorted, non-cash c o llecs ond trensfers o f funds.
Governor Strong:
includ w i n e t r e n s f e r s
Governor Young: I
T h o s e a r e t h e items, a n d I would
as 9
psrt o f t h e inquiry.
suggest t h a t y o u state definitely
we i t ,
as t o whether t h e member banks w a n t i t o r d o not
s letter t o t h e m sdvising t h e m
Governor Young:
Our S t e t e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
recommending t h a t this b e cis continued.
T h e con-~
report that t h e t i s not t h e view o f the country
=
second y o u r m o t i o n ,
.
nd
a
will withdrew t h e suge
Governor Young: I
Governor Strong.
Governor Seay:
s t o m y . questionnaire t h e t v o u l d
A
it would b e manifestly
ral r e s s r v e b e n k s
to w h e t h e r
u fevor o f t h e performencs >
o r not they
function which t h e
serve B o a r d h a s r e z u i r e d u s t o perform,
sven
the s e n e t i o n o f t h e F e d e r a l R e s e r v e B o a r d itself.
hink there would be impropriety i n sending ou
“uestionnaire,
b y c o m m i t t e s o f t h e reserve benks.
D o n ' t you think w e cen
Governor Strong:
te
t= sO T h s -cCernmi Phee.
Governor seay:
leave L%. to. t h e ‘ o o n
; - $ h e t i f t h e conmi tree
uncerteke t o c o thet €
recive s
very deci
“rom: the Board,
Governor Strong:
to
T h i s conmittee reports t o thse
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Board.
h
e report coming t o u s i s incicentel t o
t o b e meis
report
t o t h e Federal Reserve
do not believe I
Governor ~eay: I
be i n 8 position o f having t h e committee
uestionnaires
t o t h e member banks t o determine whether
they want u s t o perform something which t h e Boerc has
said w e shuould perform,
T h e r e i s nothing i n the resolution
Governor Strong:
about a
aquestionnsire.
was answering t h e suggestion made
Governor Seay: I
by Governor Young.
withdrew m y suggestion.
. Governor Young: I
Governor Seay:
B u t i t had n o t b e m withdrswn w h e n
mede m y s tetement.
tTsuggest t h a t t h e o r i g i n a l m o t i o n b e
eiven considsrstion, w i t h t h e understanding t h e t i n &pproving t h e r e p o r t t h e c o i l ttes c o a t i n u e
t o make s u c h a
a
study a s hss been suggested
i t ywoulée b e wise f o r
to meke.
Governor COslkins: I
suzgs I
mede the origin-
el motion, t h a t ths s e e s ti G o v e r n o r Strong nes oute
lined--- I
understend i t i s only m
outline--- s h o u l d b e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
433
thearporsated i n t h e m o t i o n f o r a p p r o v a l o f t h e report.
offer a motion t o that effect, with the under“tanding thet these suggestions b e incorporated i n it,
Y o u d o n o t quits
Governor Fancher:
Y o u spe&k o f t h e conmittes being con-
ofLt t h e committee.
tinued.
heist:
i t e thre etatus
m
committee
L bes 2
would request the Fedsral
I
Governor Coelkins: T
o f t h e Boerd,
would a d d a t t h e cone
Reserve B o s r d t o continues i t e I
clusion o f the resolution that, pending completion o f the
n e s e resolutions, that the
further ¢
s , u n t i l thet further
Bosra spproved, t h s t t h e Conrser
report, spaeves o f
t
i g 78]
h
e continvotion o f
the collection system,
The Cheirman:
I s the motion, 4 s
s i l l sséond 10.
Governor Biggs:
n
T h i s i s a little e m b e r r a s d g
Governor Wellborn:
t
elthough I want
n e ' s suggestion, a n d I would-
in favor o f Governor 3
i
Governor Y o u r :
The Cheirmen:
d
Governor Celkxins
i
e egsinst the report, I
s v o t e o n t h e report.
t h e t suit y o u , G o v e r n o r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“od
Governor otrong: I
of t h e res lution. f
would like t o explein t h e objsct
C o n f e r e n c e s h o u l d vote t o
iscontinue t h e collection o f non-cash items a n d cisspprove this report, anda such sction b y this msetin: w e n t
before t h e Federal R e s e r v e Bosrd s n d t h e Federal Reserve
this
Board t h e n said that inagiuch a s you have disspproved
non-cash
report e n d voted t o Giscontinue t h e collection o f
once t o disco n items, t h e Board would likely direct u s a t
b e no
tinue collecting non-cash items, e n d there would
s s I heve
object whetever i n conducting e n inquiry such
suecested.
a)
M y point i s that w e are not ready yet, until
ve get a further report,
t o either a p g ove o r
permenently t h e recommendations o f t h e conmittse.
l i y
merely t o t h e
vote o f approval would b e alimited vote,
b e sprmroved a n d
effect thet f o r t h e present t h e report
investithe collections continued until there i s furtner
whether w e ere
gestion, w h e n ® vote o n t h e subject s s t o
o r continue
soing t o abancon t h e non-cash collections
o n d energe f o r
them, o r vwasther w e ere going t o continues
thet service, c o u l d b e teksn.
Governor iellborn:
n
a
t
t
e
f
e
i @ k n o w thet
the report i s going t o b e
GLeated b y t h e remarks o f the different Governors.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“05
in fsvor o d w h e t Governor Strong h s s offered,
m d I would
to vote f o r it.
Governor Norris: I
egree with Governor valkins
it i s much more desireable t o hseve the t w o motions
grouped, f o r t h e reeson t h a t i f they sre s c p ratec
fect t h a t o n e s d o p t e d i n s t a n t l y a f t e r t h e o t h e r m e
forgo tten,
this report a n d then, second,
fterwards,
w e are o n record
further investigation; w h e r e s s ,
i f the two a r e grouped
together w e simply g o on record #8 opyroving the report
end r e a muending a
continuence o f t h e present practice
pending e n i n v e s t i g a t i o n w h i c h ,
w e
i n t h e s a m e motion,
eirect t o b e made.
‘ I w o u l d like t o s e y thet w e are
Governor Bailey:
sll unsnimous
o n t h e report
e t t h i s time, b u t w e e r e
it f o r f u r t h e r investigation,
E
t
the Conference votes t o edont t h e committce r e p o r t I do
not want t o be committed t o doing that until w e have
further i n v e s t i g a t i o n ,
Governor Strong: C o u l d n ' t w e vote o n it,
vations w i t h r e g a r d t o t h a t j a r t i c u l a r p o i n t ?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“yssntly c o that.
would
o f t h e non-cssh colisction
vote egainst t h e continusnce
absolutely,
s I sm concerned, I
s
Governor Bailey:
w i t h t h e uncerstending t h a t t h e r e w o u l c b e
w i t h the idea
further investigation o f it,
mipht vote differently o n i t a i
but e t t h e present time I
Governor
em
a e r
A s1
Cs é
t h a t investi
t
h
i
s report
report, coupled with t h e
indicated b y G o v e r n o r Strong, w h i c h
Governor Fancher:
not 2
reconmondetion
m
i
g s a y that t h e
o f
opinion o f t h e committe
Governor veliborn:
etilue it; 12.15.25
wast G o v e r n o r
and n o t adopted.
The Chsirmen:
mo tion?
3
}
g
o not
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gov ernor
ciscussion,
The C h s i r m s n :
we w i l l t e k e =
vote.
(The motion, naving been culy
‘ Governor Wellborn: 1
gire
ar
ees
Governor Call
H
o
w ebout IV-D, ir.
Governor Norri
W a s n cast
TV-D E c o n o m y a n d
Discussion o
VeA y e p terce)
Sport o n that yesterday.
Governor Talk
by this Conference,
Conference r e a d s
B
u
t his- report
sr
w a s
h
a =
a
c
memorendum t o t h e Governors
+
T h e
s g follows:
i
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
tiie reney
Governors
as them mey 4:sire t o t a k
Recorwsndetion
for the
Ween, e n o i n
De S o Goines
upplies.
Tnen, o n t h e n e x t pegs
Governors c d s
and t o o b t e i n t h e u s e o f
ell banks, s n c
S(LoOrsS
purchass;,
overnor N o r r i s ;
b-amove L h .
Governor
(For c o n v e n i a n c e
to t h e C o n t e r e n e s >
o f
e r Governors
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ANDUM T O GOVERNORS! CONFERENCE
Fron
“RAL R S
ON E C O N O M Y &&
The Fed-rsl Reserve Bosrd's
i t B e o n o m y
Eificiency dssires t o refer t h e following m e tters
Governors f o r their consideration e n d f o r
as they may 4 sire t o take.
ins conmmittes
e Bopdintment o f m: operas
m
Le R 6 @ . m e n a
t o standserdize
t h e principsl supzlies
snd i n a l l c e s e s w h e r e s a v i n g s c a n b e 2 :
by s o doing,
t o arrangs f o r joint purcnssing o f
supplies.
nnection w i t h t h e s t u d y o f t h e C u r r e n c y e n d C o i n
In m
functions,
t h i s Committee investigetec
cost of thé princips1 supplies used.
obtained cleerly inci C
subs tant j
quality,
e
V W e r i s t y =<
T h e inforrstion
t there i s opportunity f o r
- t o n d a r c i z e t i o n o f sizes sand
s n d i n some instsn
s o r o u g h j o i n t purchasing.
In the case o f money bends, o f which t h e system
bs a
uses about 20,000,000 annually, there wes found t o
the quality o f
great variety o f sizes and. a wide ragge i n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ranging
f r o m5
3 csnts t o
paying from 51,00
relation
t o the
es e e n t o m o u s y
sbout 750,000 p e r esnnun,
R a bNOTasteal2
eeFort!
=
for s o m e s t s n c a r d p r o c u c t s s u c h
seals, o n which srices renged f r o m |6.25 t o
housand, m o s t o f t h e bsnks purchasing t h s product o f but
two :.enufescturers.
Tith respect t o
toward s c o n o m y i s t o
sfter w h i c h p r o b a b l y w i t h r e s p e c t
L O 0 0 Sb AL ESms
can purchase s s chs3j
items, however, l o w e r prices c e n b e obtains:
Thsre s h o u l d e l s
With p o w e r
standardized
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Federal Reserve Bank of St. Louis
1
ubstantisl e c o n o m i e s
stencardizstion o r purchsese.
s-converning Insurance,
At the reauest o f t h e Fedsral Reserve Board t h e Com-
mittee has investigated the Insursnce cerriedc b y
benks,.
T h e r e hes been noted 9
consiccrable
the a m o u n t s n d k i n d s o f i n s u r e n c e cerried,
ve
end
nuthe “limits” s-ecified for the verious tyyss
bility insurance, b u t the concdic tions uncer which the
seversl b a n k s a r e o p e r a t i n g v a r y s o gréestly t h e t t h e
Committee considers i t sdvisable t o cefer a n y
tion with respect t o this t y p e o f ins
benks s r e i n their n e w buildings.
Tusre ere, however, t w o classes o f insurance concerniug which t h e Committee m a k r e c o v m e n d e t i o n , sas follows:
(2) Bmployses Group Life Insurance.
The Committee h e s
subiecte
n
e
d considerable data o n this
S i x of t h e banks have p r a c t i c a l l
y identical
policies issued b y t h e same company, T h e Squitable L i f e
Assurence S o c i s t y , a
mutuel c o m p a n y i s s u i n g particine t i n g
under which t h e real cost i s ceterminsd b y t h
onnuel d i v i d e n
F o u r of the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
£42
a I n s u r a n c e Company, a
stock
g policies where t h e cost
ed b y t h e p r e m i u m rate,
t h e rete being
from time t o time i n line with t h e
e“roup".
T h e remaining t w o benks have policies i n sepsrsoa t h e o t h e r a
c o m
mutuel
The cost o f group life insursnce i s i n part determined b y t h e experience o f seach separates groupe
T h e
weight given the "experience" varies. greatly with the
size a n d age o f t h e group, small groups receiving practic~
slly n o benefit f r o m 9 favorable experience, b u t t h e
benefits gredually increese until vith groups o f 10,000
enployés o r more w h i c h have b e s n i n
ten t o fifteen years, t h e cost i s
tirely b y t h e y e a r t o y e a r Texperieace"
O t bnS* SFOUD.
It i s the s i m o f t h e companies t o ultimately write
this insurence f o r lerge groups a t a mergin o f sbout 1 5
per cent sbove cost, t h e t is, Losses.
\sagainst this theoreticel c o s t t h e cost t o
twelve reserve banks has, curing t h e past three yoars,
averaged sbout 6 5 per cent above losses, d u e t o t n s
thet n o n e o f t h e g r o u p s e r e l a r g e s n o u g h t o
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Federal Reserve Bank of St. Louis
4.3
part t o
have been i n oot retion.
L00,000 per @nnum.
in the beginning s o
that t h e twelve benks
croup, t h e cost t o the bsnl
L s t h i s
been v e r y m u c h I :
compsny,
of t h e s x p e r i e n c e o f a l l b e n k s
establishing 5
of 12,000: tives;
By self insurence.
The C o m m i t t e e
thinks
a
e
ference f o r t h o r o u g h investigstionsena r e p o r t w i t h
of operstion.
(b) A u t o m o b i l e Insurance.
Thie
f insurance
i t e m o
i s costin
plan
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4.
mately 310,000 p e r snnum,
the size o f the city w k
h
c
7
e retes v a r y greatly w i t h
a
r o r truck i s opersied.
he only w a y i n which t h e costcan b e reduced 85.6 srs
to b e b y placing t h e business entirely through o n e szency.
If all benks w i l l agree t o place this perticulsr i n -urance through o n e company i t i s believed thet s a v i n g
of s p p r o x i m s t e l y
2 0 per c = n t c a n b e effected f r o m t h e
local menual rates n o w being p a i d b y all banks.
This r e d u c t i o n
e obtained
w o u l d b
the a m o u n t o f t h e i n s u r a n c e
i n part because
t o b e written g n d i n part
the ground that t h e benks represent s
prefsrred risk.
Each bank would, o f course,be a t Iiberty t o fix.it
own l i m i t s a n d t e c o m e i n t o t h e e r r a n g s m e n t w i t h t h s
piration o f its present insurance,
This C o n m i t t e e R e c o m m e n d s t h e scecsptance o f t h e
by all banks.
In t h s e s v e n t
o f favorsble
sction
o n t h e sbovs
eandation t h e d e t s i l s c e n b e c o m p l e t e d e i t h e r
Committee
recom
b y this
o r b y t h e I n s u r a n c e C o m m i t t e e o f t h e Governors!
Conference,
oe Recormendation f o r the Investigstion o f the
Cost o f securing Credit Information.
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Federal Reserve Bank of St. Louis
of opsrating
This C o : mi
doing too much i n this respect, o r
Going enough.
ean m a k s
y
definite
therefore
n
a
Governors
thet
edit m e n f o r i n v e s t i -
rendations
ter of policy.
vimittes h e s f o u n c
2 r e :
snd o t n e r
with r e s p e c t
t o tuese
more t h a n others
o n cart
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Federal Reserve Bank of St. Louis
ee
6
svery b a n k s x p e n d i n g cm) 8 comps retively
conclusion t h e t svensre more uniformly u s e d i n all
stricts, e v e r y bank will, with r e s p e c t t o ese:
item, level u p proportionately t o t h e high benk,
coming under
recomendations f o r t h e
of t h e benks i n this a nnéection.
4ts duty, however,
t o point o u t that
very
present policy i s bound t o r sult i n 9
in t h e s e e x p e n s e s o v e r &
period o f years e n d that t h e
/tnow how much they sre likely t o b e ultinetely
Se &. s i d e r e d nec’ s s a r y ,
may b e t o k e n t o c o n t r o l t h e s e
manced
t h a t t h e Governors t a k e
yrs a c h b a n k s n d f o r t h e Syster
total cost
whole, w h e t m e y b e the sporoxinete ultimate
}
cacho cayeonr e
Pree s e r v i c e n o w b e i n g given, s s s u m i n g
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Federal Reserve Bank of St. Louis
With this informetion evaile
i
t should b e possible
to astermine whether o r not t h e t
more t h e n t h e System would b e
the purpose,
e n d ji e v e n t thet t h e totel for a n y item
is considered excessive, stess could b e s t once t e e n
tocontrol it."
Governor Seay:
h y e , Theirman recomendations
submitted t o us here, e n d considerstion o f them i s
ed wien w e heve h e d n o time t o veflect u p o n them.
aatter has been submitt:d t o us, i f not i n exactly
same form, i n a more indirect w a y before, a n d I think
this coes 6 s l i t t l e f u r t h e r t h a n I
bank
¢ €W
would l i k e t o s e e o u r
r
‘
r e a g n e 1
a
c ;endation
submitted
in a l l c e s s
ioing, t o errenge for. j
>
supplies, I
woulc n a t like t o confer t h e t powex upen
a
a
commit tee until first t h e y n e a reechec
3
csnt i t t o u s f o r review. T
Lseht
hands o f 2
would l i k e t o
committee, b u t I would like t o
p44
i t s report cond c W e i t s réesors trerefor
coumittee make
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Federal Reserve Bank of St. Louis
them p o w e r
do not understand
Governor Norris: I
mendation o f g i v i n g p o w e r
t e @ conmittee.
sporeval o
f is the recovwxendation on.
is stated i n four lines:
rniendation
for
t h e ap2o0intment
O r
2 2 operating
so coing,
supplies.”
The d e t a i l o f t i
yeprestntetives
o f the
supplies, a n d i n
to e r r e n c e f o r j o i n t p u r c h a s
ne a
t
o errenge for joint purchesss “would lia
the part o f sny benk t o follow t h e
facilities w h i c h t h e c o mittes
a s
Governor Call :
H e r e i s a subject o f srficis
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Federal Reserve Bank of St. Louis
49
sac e c o n o m y w h i c h sséems t y m e t o b e s o p l e i n t h e t t h e r e
isn't much opportunity t o iisegree.
)
s r e p e y i n g f r o m 5 5 c e n t s t o wot
het t h e i f f e r e n t - b e n k s
for currency bsncs,
eB s iewoe se
e real point i s sugcesting thet
h
we a r range for the joint purchase o f currency bands a t
cents s
thousend i n s t e a d o f
Governor Seay:
“4 85 thousand.
W e mignt n o t b e willing t o use t h e
cent band.
Governaw Cslkins:
B u t w e heve n o right t o sit here
disregard the very wide difference i n prices paid far”
of the things enumerated.
Governor Seay:
M y reference was t o the reo +nenda~.
tion which sppears o n page 2, ond that is:
'Tt is recomended thet the Governors c*signate 4
cornmittes w i t h p o w e r
t o stendarcize e n d t o obtain t n e
f sueh stenderdized supplies by #11 benks, anc slso
enge for thejoint purchass o f supplies i n ell cases
where substantial sconomies
c m b e sffectec b y cush gtand-
erdizetion, o r purchase.
I woulé first l i k e t o see what the commit tee would
recomend a s standard, I
emin fevor o f the
Gown, b u t the excettion o f i t is snotner
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Federal Reserve Bank of St. Louis
“50
“lAile I
it, I
2 m thorovshly i n m p a
w i t h bie o b j e c t f
o
e m hesitznt sbout sssuming s n y obligation uncer it-Governor .trong:
Cigec b y Seermipe, 2
It
k
you n e
ing i t i t doesn't a m o u n t t o 3
e a n y other power
g
o
rap.
t t h e mesns o f
A
s 9
prectical
ratter, Governor Ssay, 8 committee o f this bocy thet sits
around t h e table here would n o t g o into y o u r bank o r sny
bank e n d s a y whet k i n d o f
e n sdiing machine y o u should
use or anything of thet kind. I s n ' t that 2 fact?
Governor Seay:
Y h e t i f I voluntarily s a y thet
I sive them the power t o do it, end t h e n reserve the right
not t o comply withtheir suggestions.
T h a t would b e incon-
stents.
Governor Strong:
I t says “ t o errsnge";
i t does
not say ‘ t o force”.
Governor Norris: I
will ms't:e my motion spoly t o
the reco. cendstion stated o n t h e first pege o f t h e memo~
rancum,
committee
t o strud
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Federal Reserve Bank of St. Louis
Gov wnor Strong:
smyenge”, i f you will 2xe.ine
Governor 3 ¢ a
i
t says
the assumption beinz thet w e will secept the stsndardizs‘tion, t h e n i t goes shesd s
a 23 g s them cuthority t o make
purecheses,.
Tne Cheirmens
t
T think 2 4 G o s s C a r r y s r e a t
Governor Strong: I
s e e
think this is a very good report
ay
of t h e e¢oumittee, e n d I. believe
i t W i l l o r o m o te. their
viork o n d sncourage them, i f w e should just edopt i t
without quibbliug sbout the languegs.
i s 42
move, 2 n d if i t will seve u s money, let's
Governor Scticen
eny money,
T
i
r t h e commit tes C s ino t ssve
w e ere certsinly
g o i n g t o act i n senrd-
snee w i t h i t s sug-e stions.
The Chseirmen:
T h e motion eppliss t o the recommen-
on the first pege o f t h e memorandum,
GOVeSPner
GoyenGo.
56s
“ 4 t h t h e reservetion
o n record that
oes n o t a s c e
us t o e c o p t t h e s t s n d e ;
‘yen I
e m willing
-
6
@ mended
t o v o t e f o o 2 es
b y t h s come
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Federal Reserve Bank of St. Louis
452
The Cheirusn:
A r e t h e - any further conments?
Governor Young: I
will v o t e w i t h t h e s a m e r s s
tion.
The Chairnen:
I
s there a n y further c i s c u s s i ?
n
o
Governor ‘Strong:
Governor i32ay:
A r e w e voting o n all o f it?
N o . I
haven't reed i t
we #re going t o adopt i t 1 t would b e well t o resd it.
The Chairman:
W 6 @ are votl.>
o n this. f i r s t r e c o m -
(SeBEetLon .
(The m o t i o n h s v i n g been d u l y seconded,
Governor Strong: I
w a s carried. )
move t h e edoption o f the s econd
recommends tion o n t h e
mien
S
g
c
o
m
m
i
t
t
s
e
with power t o stenfarcdize c n d t o obtein t h e use o f s u c h
dized supplies b y s l l benks, e n d also t o s
joint purechese o f s u p p l i s s
subetentbisl e r o n o m y c a n b e < f i d
in
by such
tion.”
Governor Celkins:
Covernor ssay:
s committee
mendes tion &.
s e c o n :
3
n e motion,
1 F O C . g r e n t i n g powsrs t o
t o sdopt stsnderds
i n edv-nes
W e coulé n o t ecopt 6
e
i
r recom
standard until w e know
”
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Federal Reserve Bank of St. Louis
oy
snceerd is.
Governor Strong: “ o u l d y o u like t o chenge that t o
“with power t o reo nmend stand rdized forms."
Governor sesy: I
think t h a t would put i t i n very
yuch bstter f o r m snd. I would b e willing t o vote f o r it.
Governor Strong: I
will a c c e p t t h e s u g s e s t i o n o f
Governor Seay that i t be changed t o "to rem rmend stendsridzed forms,"
(The motion having been duly seconded, w e s carried. )
Governor Strong:
T h a t includes t h e rem .inendation
i n both csses.
thet t h e Chsirmen eppoint s committee,
“ 4 t h regard t o the r e m wendations
Govarnor Fancher:
uncezstand w e have
concerning insurence, I
mittee t h e t he: never been 4
TeO
.ircencetion
b e
rete:
Governor trong:
W
narged,
=
e n d I move
) c o m m i t t e e .
A s e c o n d thet.
(The motion, having been duly seconded, w a s carried.)
h
Governor Strong:
e effect o f thst i s to rerer
these insurance matters t o the insurance conmittee.
Tne Cheirmsn:
The next recon endation is No. 5,
"Rem < s n d a t i o n
Z o r the invest
a
of securing credit information."
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Federal Reserve Bank of St. Louis
I movs
r 3 c -msncetion.
seconc it.
Governor B i g s : I
(The motion, heving been duly « sconced,
Tne C h e i r m e n
T h e next i s No» 4 .
ations conc=rning t h e c o s t o f f r e e s e r v i c e s
other ectivities carried o n e s 3 msetter o f policy."
Governor Strong: I
erence
move thet t h e ection o f the Con-
b e t h e t t a k e n i n ePoennection w i t h t h e
o n iNumbers 4
siotion of Governor Fencher!s report on the collection of
non-cs'h i t e m s .
Governor N o r r i s :
Seconved.
(Tae motion, h a v i n g b s e n é u l y s e c o n d e d ,
ir. Harrison:
w r e Casirman, I
w e s carried.)
would like t o submi
Sirected b y t h e Conference:
iiekhinney,
(Pleese sorward).
Conference h e s just leerned o f t h e otsth o f your
sy"
Brother e n d w e a l l w a n t t o express o u r d o s p e s t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
you h o w m u c h w e
Tf thet cisposss o f thet wotten,
to Topic Il-3.
Should t h e Non-cash collection
facilities n o t b e withdrewn f r o m
non-member b a n k s ,
1
meke t h e seme motion, thet t r e
Governor Strong: I
action o f t h e Governors Conference w i t h regard t o Governor
a
Fsacher!s report b e considsred e s t h e sction taken i n cis~
posing o f t h e ttept.c.
Governor Young:
s e c o n s the motion,
Governor =eay:
Governor . S
n
o
n
-
c
e
s
h collisction
cithcrewn f r o m non-member clearings
Fancher? T
woul:
l i k e t o move t h e t t h e n o n -
feeilities 2 6 withidretm f r o m t h e nonemember
understood t h e t had been setsd o n y
Governor =eay: T
Horriscon: I
have just looke® u p ther:
snc. t h e e c t i o n w a s t h i s :
G o v e r n o r
G s l k i n s ime
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Federal Reserve Bank of St. Louis
456
She s e r v i c e s
b e 2iscocztinusd
na t h e n o n
t o n o n - w s e m b e r clesarV
O te,
uncerstood t h s t consicers tion o f the &
held u p
report
on
non-cash coliections,.
Governor Norris:
m
e
c
d
ussec u n c e r
e o n m y prot h e Conrmittse'’s
LL]
Then m y m o t i o n r o u l d b e t h a t t n
teken
connection w i t h t h e t e m p o r a r y
thst c o m m i t t e e .
Governor Norris: 4
sconce
(The motion, having beer
The Chsirmaen:
operetions.
not t o teke.)
Tne Chairmnsn:
T h e next topic i s V.
a
U
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
457
eliminating “ier Loen Deposit Account solely f o r profit
making purposes.
Governor N o r r i s :
The Chsirmen:
T h e t t o p i c w e s withdrawn,
T h e n I wish l i H e r r i s e n w u l d s i e
from t h e Cheirmsen's
ir’ Hoxton collec a
moment a g o t o
nen h e d b e e n
slity insurencs,
the ststement that t h e blenket boncs possibly d o
not c o v e r t h e e m p l o y e e s i n . t h e esents' d e p s r t m e n t s a n d
b propsr f o r t h e Governthey t h e r e f o r e t h o u g h t i t w o u l d e
ors t o consifer t h e propriety end sdvisablility o f ueving
the Governors! Insurance Committee incluce ®
m s repre-
ve o f t h e Agents.
(After dis cussion.)
Governor Strong:
suestion,
t o e n t e r i n t o c o n f eSolr s a c e w i t h
a
rve A g e n t o f t h e t b e n k t o f i n d o u t e
ection o n t h e mstter.
+
Governor Bisgs: W
s e c o n d t h e t motion.
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Federal Reserve Bank of St. Louis
458
(The motion, b e i n g culy ssconcec, W a s carried.)
will 2ppoint Governor Young t o
The Cheimen: I
reoresent
m e e n d t o s t t e n d t o thet.
very import-
i x . Cheirman, t h e r e i s e
Governor Sesy:
topie II-)-(3),
of G
o 6i tion:
e
vio!
a
a-posifa
i n ords r
e
)
be
posit lisbility eagcinst which r t
have 9
Governor Norris: I
note o n m y memorandum
that t h e topic II-D-(3) w e s passed t o b e considered i n
gne J o i n t Conference,
Herrison: I
understand i r * J e y w i l l c i s c u s s
which will come u p i n t h e foint Conference under
to 2mencdments
T uncsrstend
t o t h e lew.
that ths
2rrivec. e t c o n c l u s i o n ,
it in our own conference,
nose there will b e n o C L i c e e yy I
auferencs, w e y
arriving s t our conclusions
psrticipsting i n the
e r r iving
n
e
v
e
h
a
v
e
g
u p=
c o n c l u secustomed
i n our o w n confsrenc 6 be-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4259
think t h o s e topics t h a t will
Governor s t r o n g : I
the Joint program s h o u l d
b e considered h e r e
I thought that w e had recormenased
nt meeting this afternoon, cond
this morning i n order thet w e might consicer thet.
Governor .2sy:
h
i
!
e n the gensral practice ,
end thst i s t h e reeson I brought. t h e metter up.
Governor Norris:
progrem,
T h e r e were t w o items o n the Joint
I I a n d 7, t h a t h e d b’ n
noon session,
postponed u n t i l t h e srter-
T h e y heave n o t been ¢
nes has a n y views w i t h regard t o those topics, I
think they should b e formulated hore.
The Chairman:
V h s t i s your cesire with regard t o
Topic DI-D-35?
was just ssking i f i t wes n o t
Governor Norris: I
a-gireble m m for us t o heve some preliminary Giscussion
before g o i n g i n t o t h e J o i n t C o n f e r e n c e ?
The Chairmen:
D
o you wish t o spex
t o this t o p i c ,
Governor = s s y ?
Governor »eay:
Y e s .
TI-D-3. A d v i s a b i l i t y o f a n smendment
to l e w suthorizins member banks
to deduct checks i n process o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
460
collection w i t h t h e reserve b a n k s f r o m
their cross deposits i n order t o cetermine t h e net deposit liebllity sgainst
which r e s e r v e s m u s t b s cerried,
v
Governor sesy:
e
r
y grave doubts
3 s t o mek-
ing s n y chenges i n reserve requirements a t the poesent time.
I e m opposed t o making s c t u a l chenges
Sai
i n t h e reserve r e -
quivenents, e s Governor /2lkins has expressed it, b y
cen cover m y whole visws b y
rection. H o w e v e r , I
thet I
do not believe i t would b e advisable a t this
time t o make e n y chences i n t h e reserve requirements o f
ne benks,.
The Cheirman:
D o y o u p u t that i n t h f o r m m o f a
mo tion?
Governor “say: I
will.
Governor «ellborn: I
would like t o second thet mo-
tion, for the rssson thet so fer es my Cistrict is concerned, I
have never heard e single complaint ebout t h s reserve
requirements end, therefore, I
co not f e e l thet w e would
“pe warronted i n chenging them,
Governor Calkins:
i r . Che irmen, i t seems t o be
necessery f o r this conference t o e xpress i t s vizws more
ally ond hestedly, a n d I believe tne con$s o n r o c o r d - e -
e t least I
s m e
t a s t while there
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Federal Reserve Bank of St. Louis
restudy o f reserve
should b e n o c h e n g e
i n recerve r e q u i r e m e n t s
ithout s u c h 9» restudy, e n d thet there certainly should
be n o chonge i n reserv e q u i r e m e n t s brougit about b y
ag incir ection.
O t h s r proposals a r o
compsrable w i t h t h i s o n e , c u c h ¢ s t h e s o - c s l l e c pihem
Philecelphie p l e n o f weed i credit ror
he h e s g i v e n
e n d vice v e r a ,
i t up,
o r attempts
t o change
the reserve requirements o f the verious banks b y indirec-
tion. They lead t o complication, Gissstisfaction e a d sre
unsoumd i n principle.
“ h i l e ,
t o b e sure, t h e reserve
requirements as: stated uncer t h e lew
opposed t o this propossl.
The Chairmen: I
from t h e report r é c - &
w o u l d l i k e Mr. H e r r i s o n
t o e s 3cL
From t h e Cheirmen's Confsrence.
Herrison: " T h e present provisions of the Act
course o f collection,2nd therefore c u e
Saducted onl:
f r o m tas
@ue t o banks, i s a relic o f t n e now obsolste collsction
arsystem under which benks kept 6 network o f reciprocel
rengements f o r collection p u r p e é s With other benks. ~ - O n
the srounds a
issec
p e r e g r a p h cealing with t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
secon. sucgestion (thet cesh i n veult shoulé b e # liowed
lisbilities}) there i s
sound logical ground f o r ths deduction o f uncollected
from t h e < 2 p 0 s i t a c c o u n t s
tuem; -
o f those t h o Ceposit
i n other vords, f r o m 5
It i s e n obvious herdship t o country banks t h s t t h e wording o f t h e l a w which only permits uncollected checks t o
be c s e € u c t e d f r o m s m o u n t s
due
t o other banks enables
,
tns
benks i n large cities, which have out-of-town corres pondsnts, t o svail themselves o f this jeduetion, wheres
the country banks, n o t having s u c h eccounts, cannot s o
avail themselves.
I f , s s has been shove suggested,
checks only for “83 d
thet t a s <
9
credit, i t will
8 sgoinst present conlitions
unc’ rwhich banks recA ve © : f
Lmmsc. c r e d i t ,
,
shoulc g o sgsinst the seccounts o f those who ieposited t h e
‘ehecks., T h o s e ere the bsics1 cccounts from which t o
Sefuction,
n o t f r o m sccounts w h i c h @
bsnk m a y
hsve Z r o m other banks which msy hsv9 n o
tion t o the cheeks i n question."
As I understand t h e t i s merely t h e reco mencetion o r
the Commit tee, I
em not swere o f whet ection has been
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Agents thenseives.
Governor Sesy: I
uncersbood kr, MeCord t o say this
morning thet thet position had been taken,
The Cheirmans I
think w e
on t h i s subitéect,
Governor fsenecher:
whieh vias t o meke 2
reserve “uestion, i s meking a re 9
Hsrrison: —
study o f t h e w h o l e
>
time to the
s y mace = report, w i c h w a s very
lengthy a n d s very thorough report o n the twhols question
yeer ago,
I t sxpressecd thelr belief t h a t
the reserves s h o u l d b e cslcoulseted c g e i n s t s r o s s “ s p o s i t s
without e n y Jeduction vhetsosver, b u t that because o f
a velosment o f t h e benking
aecuetions
t h e t ievs
¢ beoS i m p r e c t i c a b l e
¢ t th t i n e t
secarried only ¢g3ins
éecuetions, o n e
f-2netion o f c i e c k s
i n process
o f colre-o tier
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Federal Reserve Bank of St. Louis
report w h i c h e r e n o t r e r e r -
limited report which I bslieve t h e y a r e going t o submit this yeer.
T h e r e were
two other items i n this report, w h i c h a r e not relsted t o
TI-D-3, b u t which a r e really intimately releted i n the
sport itself, - ° " first the se-celled New Sngland plen,
ander which member banks located o u t s i d
snd. b r a n c h b e n k c i t i s s
o f Federal r e ~
e psrmitt>=ca t o
w o u l d b
kesp one-third o f their required reserve i n the form o f
cesh i n vault,
t o consist o f t h e Federal reservs notes
of the Federal reserve bank o f its district, e n a second,
e sllowed 9 s a
the proposal that c a s h i n vault s h o u l d t
decuction f r o m zross deposits i n celculsting reserves.
Committee recormends t h a t neither o f these suggestio n s
be sdopted,
b u t t h e y cdorsconms nd t h e t t h e t h i r d proposal,
which reletes t o t h e decvetion o f
collection B y Feceral reserve b e n k s from Ctmend lisbilities, b e
Governor S e s
D
o they
o m;
cash from gross lisbilities?
And s p 2 r o v e
aecuction o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
in process
o f collection.
Y e s , ror t h i s resson:
ir, Herrison:
T h e y contend
thet t h e volume o f c 3 h i n vault v a s taken into considsration b y t h e F e d e r a l R e s e r v e B o a r d i n c o n f e r e n c e
s t the
time t h e p r e s e r n t r e s s r v s r e q u i r e m e n t s w e r e fixed,
end
5
be
thot n o w t o permit c a s h i n vault t o b e deducted would
a whittling s w a y o f the reserves reguir ements i n spite o f
the fect thet w h e n t h e percentage o f thirteen, t e n a n d
seven was fixec, cash i n veult was taken into consicera~
tion.
T h e same effect i s procuced w h e n
Governor Seay:
reyou count checks i n process o f collection b y Federal
T h s t i s whittling away t h e present re-
serve benks.
requirements
e s w o u l d b s c o u n t i n g c a s h i n veult,
to m n u n s t a b l e “aesree.
T h e stste-
of sll netionsl bsuks o n d state benks i n the
per cent of
country s h o w t h a t c a s h i n v e u l t i s o n l ~ t w o
“hen t h e emencment was pass
Tune o f
h
e fig
till m o n e y i n t h e m
r e p a r e c indicated
a n k s , .
i n t h e state’ b a n k s
muntry sbout
member banks, w o u l d sverage throushout t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
456
t
hree pereeat, e n d
n a n d thir-
e
was r e a l l y consider
ten, thirtsen a n d sixteen.
T h e r e i s one thins y o u vould have
ir, Harrison:
to take into consideration, s n d thet i s that where c e s n
in vault i s estimseted t o b s
posit Llisbilities o f the member benks,
i t i s 5 vastly
greater percentage o f t h e damand liabilities agsinst which
it would h e e deduction.
Governor Seay:
T h s t
iuc tion o f
far grester whittling e w e y
Foulé a
That f a c t s t a n d s o u t e s ©
fect,
and th
whether o r not i t woulc. b e desirable t o whittle s w a y
reserves t o thet
economics] consideration i t shoule
T h e i d e s i s t o sive t h e country
Governor Bailey:
banks 9 n equel chance w i t h t h e city benks.
Governor Seay:
T e m not talkingfee] sbout t h e icea;
I a m talking ebout t h e effect.
to b e c o n s i d e r e d
3 s much
Governor Calkins:
T h e effect i s whet ought
a s t h e idea.
T h i s proposal i s really e n ste
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
SiO
locates
i n
t h e :
a
5
b
s
e sure,
t h e
is s i m p l y o n s m o r e a t t e m >fst
remove i t .
a
there
i s need
T a i piec
h
emeal
o r incirect
r e
i
thet v e c s o n I
s m oppossd
t o this
Ina
Ee a
tac p r o v i s i o n u n c : r t h e
that
n/bolenees
ports tast,
>
T i s t i s 2 result o f = ruling
Comptroller o f the Currency, s n d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ele
jnsdvisable t o make a n y modification i n the reserve requirements i s worthy o f conside
Thet metter
Governor Cslkins: ,
i s before t h e
house n o w .
The Chairmen:
I s thet motion seconded?
Governor ‘scllborn;: I
will second it.
(The motion having been d u l y seconded, w a s carried. }
The Chairman:
T h e r e a r e one o r t w o more topics
thet should b e considered,
a s this will b e the o n l y oppor-
tunity t o c o n s i d e r t h e m .
lire. Harrison:
to t h e C o n f e r e n c e
T h e chief o n e i s t h e topic presented
b y t h e F e d e r a l R e s e r v e B o a r d set one
of t h e Joint Sessions, w h i c h was t h e so-called doubleberreled method o f colouleting t h e reserves o f Federal
Reserve Benks.
The Cheirmen:
A s I unce:stend i t t h e Confer
Cheirmen h e s g o n e o n record. °
You e r e spsakizg n o w o f
this n e w method o f figuring t h e reserves?
Governor Calkins:
ressrve b a n k s .
c g i n g t h e reser
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ay
ey
le: -to.-put. this-inte
serly n e x t
legst o f makicg n o publicstion o f t h s rese
i
n t h e sug-
b sdvissble for the Federal
sested form, but that i t w o u l d a e
Reserve B o s r a t o s t u d y t h e m s t t e r c a r e r u l l y s n d c a l c u l s t
it. for t h e i r o w n i n t e r e s t e n d f o r
future.
A
m I right sbout thet.
gor Fenchers
“macommenced t o t h e B o s r a thst t h e Boers
figures without siving t h e m eny publicity,
tas Bosrd carry t h e m #lot
erfect might b e 颢.s t t e r
o f inforimstion, b u t t o
6So |
no publicity t o it s n d meke n o chenge i n the method o f
h
t
publishins: e
Governor Sesy:
b
a
a sction a f A g e n t s
nert g a d goss t o o f e r i n the
to vote f o r 4
motion t o the «ffect thet t h e Bocra b e recnested t o kasp
their s e c o u n t s
s o e s t o G e t e r m i n e t h e esllocsation o f r e -
serves i n thet meiner, w i t h o u t oublicstion,
i n ora‘r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4°70
Tas Chairman:
T h a t i s the same thing i s i t
Governor Seay:
T h a t Joss n o t spprove. 5
concur i n the views expressed b y Dr’ Miller, that
present method o f calculating t h e reserve
ly show, Curing t h e period o f 1920, t h e true status o f
reserves o f t h e Federal reserve banks, a n d thet that
not now show sdequately t h e status o f t h e
ral reserve banks.
The Chairman:
I f the consensus o f opinion o f this
Conference i s opposed t o the plan, I
think i t would b e
avis-ble for the Conference t o g o o n rscord sccordingly.
move i t i s t h e sense o f the
Governor Strong: I
Conference t h e t i t i s b o t h u n n e c e s s a r y a n d inesdviseble
to mske a n y change i n the present methods o f cslculsting
Felsral reserve bank veserve percentsges, cither a s a
waiols f o r t h e system,
it being t h e belief
method hes 21 L e c
both the reser 8
o r s e p s r a t e l y f o r r e s e r v e benks,
o f C o n i e r e n c e t h a t t h e present
e
s past, s n d still does sfiord,
: the public edequate data f o r
of
the proper determination o f t h e true reserve position
the system, s n d each Federal reserve bank. F u r t h e r m o r e ,
it i s t h e sense o f t h e Conf@ence t h a t t o change t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Ol:
celeuletions e n d p u b l i s h t h e m i n t h e mannhcr
sec plen would
Cov.crnor Bigss: 2
s e c o n . that.
(Tae motion, heaving
wes r e c u s s t s d
t o sppoo0in
committee t o
contzined i n t h s revort o f t h e Committse o n Eeonomy snc:
o ask Richmond, Kensas City,
the secretary e n d i s
t
a
sponsibility o n that committee.
b
l
A
e m a n t o sssune ren .opereting m o n i s
nec
Governor Young: . M r . Cheirmsh, resorting
committ: ¢ with regard t o t h e insurence matter,
i t is my
underg ancing thet becsuse o f the fect thet tne interests
partments w e r e not, s p p s r e n t l y , p r o p e r l y
by t h e Insurenc’
tion o n e See s p r e
o
C o x c m i ttet
f t h s blsnket bond,
of Agents ties esked thst e represeatative from their
bovy be put on the insurencse conmit te L p , hertin, o f
he Fed2ral Reserve Bank o f St. Louis, n a s h s c sowe corresponcence w i t h t h e insuranc: c o m p a n i e s ,
e n d there i s a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
A72
question a t this t i m e s s t o waether o r not t h e Agents!
lenartment i s covered under t h e blsenket bond, elthough
is assured i n the correspondence t h e t 9 rider will
furnished
b y t h s Insurance compsny,
s o that the
employes o f t h e Agents' iepertments w i l l b e covered.
Governor Strong:
A s I understand it, this i s n o t
2 committee o f Governors, b u t a coumittee o f opsrating
men f r o m the reserve banks.
The Chairman:
T h e agents a r e esking t h e privilege
of selecting a subordinate t o put o n that cormittee t o
represent t h e Agents s n d t o s e e t h a t t h e y a r e a l w a y s c o v e r ed,
Govornor Strong::
I think w e should t a k e thst u p with
the I n s u r e n c e C o m m i t t e e a n d s i v e t n e C h a i r m a n p o w e r
to
if desirable, after taking the mstin juestion.
Governor Strong s u g ests t h a t t h e
insurance committee t e k e this u p with t h e St. louis
Benk, 3 n d sucgests t h a t t y e emmiktes selsct a representative t o sit i n o n this matter.
Governor Strong:
N o t i f this matter c a n b e recon-
ciled t o their satisfection, b u t i f such a matter b e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
with p o w e r
net i s
motion.
Governor Young:
(The motion, h a v i n
Herrison
Bank A c c o u n
sTe
2
3,7 3 ’t o October 19, 1923, w h i e n I
think i t mi
P
e
s
to s u b m i t f o r y o u r informection.
REPORT O F FOREIGN B A N K ACCOUNTS.
ce the lest Governors’ C o n f e r e n c e i n larch,
foreign benks i n which t h e other Fedsral
reserve banks participate h e v e continuca d e v e l o p along
the s a m e g e n e r a l l i n e s a s n e r e t o i o r
investment i n bills h a s shown @
T
h
e amount uncer
small increase f r o m
“39,700,000 t o 340,500,000. T n e s e foreign monies have
been carried i n bills, o f which t h e sums hancled through
this b a n k f o r m only = part, h a v e B b a
port t o t h e bill market.
F o r cone
for bills h a s n o t b e e n s u f f i :
s t a n t i s l supm e pest domestic
a b s o r b o f fer-
snd had i t not been f o r the foreign funds available,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
now prevailPee Lor “ a S M C OuU r e e l n
e
sterling
Furthermore,
i t i s obvious t h e t the investment o f these
u n d7o u b t e d e s s i s t s n e e
American business i n gsnorsl.
a
a
it is t h e function o f the Federal reserve banks
the bill market, psrticularly e t times w h e n t h e
bills excceds t h e demand s n d t o the extent that
sary support i s derived f r o m foreign monies t h e
rve banks a r e relieved f r o m buying f o r their o w n
count.
T t i s obvious f r o m the foresoing t n a t every
effort should b e mede t o encourage t h e foreign benks t o
invest t h e i r s u r p l u s f u n d s
carry 2
i n our discount merket s n d t o
substantial secondary teserve here i n bills.
banks
hel
in Treasury certificates i s not 4 s lerge a s thet
bills a n d does m t constitute s o important 5
factor i n
past
the market, nevertheless i t has increased during the
s
e
:
six months from 39,500,000 t o $12,000,000, =nd at times
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
hes b e e n
o f considersble
market.
parbicips
af a i t p r i c e
rates then held for foreign account
Benk o f fapan
(Tokio)
no changs
balence, thepurchase o f bills
being t h e only transactions undertaken f o r this sccount.
copy o f w h i c h w a s
Present
+i
noldings:- Bilis
T
r
e
a
s
u
VRS
t
r
a ed f t 4 a
y certificates,
7 y Y y
r
89,508,000; f r e e belance $1,000,950.52.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Transactions
purchese
have
Tas e s m o u n t
"250,000. A
comprshensi
eement he
with the perticips
Bills 216,699,110.88;
De J a v e s c h e B a r k
(Betavia)
amount i n v :
36,200,000 t o 7,600,000.
siconed similer t o thse Benk
Bank agreements,
Present h o l d i n g s
250,767.94.
Bsnkovni u r e d ministerstv fine
(Pregue)
This eccount was opened i n June, o u r only
3cc°* pte
tions f o r t h e m beings the purchase o f bankers
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
condi
r
aS
e T lB .
CIF
eS
. o e 8p
tel aer
L
}sesserv)
P
bea
:
s t: b
c(
2
) c
o
s
1
n
i
o =
3)
a
2
id opb i t n atropOErT O(3
he}
i n:
a i n au
GH
ta
ce
we
S usue
L
1
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
278 -A79
The B c e o u n t I s n o t e x p s c t e d
t o assume
s former size b u t will probably comprise collsctively
emsll a m o u n t s t e m p o r s r i l y mmamikwem simploysd,
T h i s eccount
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ba lence
Bank of ¥nglend account.
Netional Bank o f Belgium
(Brussels)
Gurrent s c c o u n t
Tie b s l e n c e
i n t h e sccount
snd is now 3109,663,02."
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The C h e i r m e n
1
. ‘SRE “tee i s 2 ,
£ motion t o scdfourn t h i
C e c e )
i s i n order.
Governor Fencher:
journ, u r s Chairmen,
(The motion, heving been duly seconded, was carvied. )
(Thereupon, a t 1:15 o'clock p. m,
4
of G o v e r n o r s
o f Fedserel R e s e r v e B a n k s e d i o u r n e
in J o i n t C o n f e r e n c e w i t h t h e F e c e r a l R e z e r v e B o s r a e n d
the Cheirmen and Federal Reserve Agents ‘ e d e r e a l R e -
serve Banks, s t 2:30 o'clock 9. m. of the save day.)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis