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Federal Reserve Bank of St. Louis
VOLUME 2
PROCEEDINGS
FEDERAL
OF A
RESERVE
CONFERENCE
BOARD
AND C H A I R M E N
A N D
AGENTS
FEDERAL
O F
THE
WITH THE
O F GOVERNORS
FEDERAL
RESERVE
RESERVE
TREASURY BUILDING
W A S H I N G T O N , D.C.
N O V E M B E R 12-16, 1923
WALTER S, COX
SHORTHAND REPORTER
COLUMBIAN BUILDING
WASHINGTCN, D . C .
BANKS
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Federal Reserve Bank of St. Louis
THIRD DA
>Shineven,
D e Cay
ednescey, November 14, 1925.
10 o'clock 8 . m,.
The J o i n t C o n f e r e n c e
o f t h e B o e r d o f Governors
Federsl R e s e r v e B e n k s w i t h t h e G o v e r n o r s
e n a Cheixnen
eserve Agents o f Hoa:
convened
in n e e r i n g
Woshifigtow,
r o o m o
f t h e Board, T r s s
D y C.,.at-20
embers
o f the
“tnsace C o r p o r a t i o ~-
I so move, iim” Cheirmen.
(The motion heaving been duly seconded
Governor Cri csingeor:
and iipt iicyers will heve t h e floor.
of
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Federal Reserve Bank of St. Louis
ATELIENT O F HON, S U G E N E UEYaRs,
Chairmen, Var f i n a
C
Lite weyers: G e n t l e m e n , I
portunity
t o spesk s
corns e l l o f Use
o xporstion.
s m ~laad t o nsve this
f e w moments
on a
A s you know, I
situstion t h e t
hseve just
a
trip t h r o u g h t h e Northrest,
neve s p e n t s o u e
m
e stucyine
correction w i t h +
tustion,
a n d through t h e iiee
L
stock s t t u e t i o n
s >
b r a c c é snd:-o F . : i n l i u s t r y .
T h e
so
the r e s s o n s f o r i t e r e
Jer P i n e n c e G o r p o r a t i o n
i s m e k i n g loens,
gsnerel reluctsnce t e lend monsy t o
ot t i e c i c S e e k e r
talking t o h i n
other pleceSeee C 1 5 y
type i.eGlure?
risk 1
igure
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Federal Reserve Bank of St. Louis
S.
The c o w men are having = herd
country.
N o w , I. e m trying to: find out
-on't get more molicetions,
s n d soerently t h i s 1
beceuse w e heave csooG coimpenises t h e t w s
to loen to, b u t they s a y t h e Ver P i n a n c e Corporation
temporary, e n d credit banks heve not foun
reschine oo t h e c e d e
P
p the l i v s e t o c k incustry
consic:rable extent,
t h e banks ere not looking upon slow
Gee
o ee]
which breeder loans unquestiocebly ere, with fevor,
peper,
ihe corporetions h a v e n o t been vormed uncer t h e s s i s l a t i o n
passed b y Congress l a s t winter, beceuse t h e bankers thought
credit banks were going t o hsncle it,
it i s t h e o n l y s i t u a t i o n w h e r e s
ci9l benking, f o r sourd propocitions,
somes food
l a c k o f g o o c finsn-
i s e factor i n
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Federal Reserve Bank of St. Louis
B67
ne tomp troller
of the Currency, 2 n d keeping @ 1 1 compsnies o n asound
and l i m i t -
to e n y o n s borrower, w o u l c p r o v i d e =
Waich,
pices o f m a c h i n e r y
i f i t is mede t o function, w o u l d b e helpful, a n a
I think there i s s o m e pros
t
h
e metter being ser-
lously c o n s i c e r me i
Cd h i c e g e f o r e long.
The only request I
from the point o f view
heve t o make a t this m e t i n g ,
o f the live stock industry,
get together t o d o something t o hslp those
they n e e d Lt.
course,
t o some sxtent there ¢
o n g c i t i o n s which
sre meturing n o w s n d which hsve
sxistence f o r t h e last two o r three
who heve g o n e
home t o t h e m until
of r u n n i n g c a t t l e
anc w h e n y o u t e k e t h e
cost o f .tovs, s n d other things, t h e y don't s h o w very
strong stetements;
m t t h e c o w business h e s g o t t o b e prs-
in t h i s country,
o n a i f w e d o not find =
wey o f
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Federal Reserve Bank of St. Louis
Lei
meeting t h e situetion, a l l o f u s working together,
it
eens cepletion o f t h e herds t o 8 point where cattle
G
ES)
S O A S
5
a
a
a
4 ek +
y n ee sW e w NeE h a v s o m e Oot t h o s e s u c c e n
C U TD y Pn rn ey n e o
anc.
turns, f o l l o w i n g h i g h p r i c e s , w h i c h h a v e o c c u r r e d i n s o m e
wi a o d C o ,
WoL
of t h e other brenches o f agricultural industry.
T h e r e - sre loesng t h e t a r e gooc, s v e n i f t h s y e r e slow.
I know that the Fed:rsl reserve benks have t o have l i m
i s built o n liquidity;
er, t h e t m
same t i m e w i
b
e
n
k h e s g o o d paper, e v e n
is slow, I don't think it ought t o be classed s s coubtirul,
Slow psper m e y b e just as g o o d 8 s L 1 0 7 $C o p eR. I
do
been done, b u t i t seems t o me that the
exominers call slow paper coubtful.
N o w , a cow loan i s
slow, but i t isn't necesscrily doubtiul.
All T
wantec
t o d o w a s t o p r e s e n t t h e matter
t o you
time, gentlemen, h e v i n g t h e opportunity t o meet
you s l l e n d t o e s k y o u t o s o sid @
i your
problemn
sled t o
banks c n d try t o help us, o a thet w e will b e
heve
help e l o n g s n y l i n e s o f s u g e s t i o n t h e t y o u
because I
think w e will 2 1 1 heave t o Tom: together o n
men,
oroblem i n oradsr t o s a v e t h e c o w
very much obliged t o you, Governor Crissinger,
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Federal Reserve Bank of St. Louis
for t h i s o p p o r t u n i t y
esny guestions
t o come before
to E
would-be v e r y
glad to. answer them.
A r e there e n y tuestions?
Governor Crissinger:
“ith regard t o the 320 cow, last year
calf s o l d f o r twenty-five t o thirty dollars,
itis o u t of proportion,
e n d the cow i s rorth
then 320,
(fixe Msyers thereupon retired from the conference
room, )
i
Governor Crissingesr:
word t h a t h e wents
have consented t h a t h e m s y heve e
r a i d
n
t o say t o
little more
told Governor Crissinger l e s t night,
lin. Perrin: I
when
w e will take
w e l e f t off last evening.
up golc movements ¥ W 6
Lr, P e r r i n h e s 5
, gentlemen,
t taken edventesge o f t h e opportunity
o
to s a y one word, t h e t I felt like t h e young l a d y w h e n
the music tescher t o l d ner t o leave t h e room;
she twoulc teke the hint.
s
o thst w h e n Governor: Crissingvord, I felt thet I could
the h i n t e n e
a
c
The vord v i s h e d
5
3 t h e o n s word.
s a y l e s t night vss i n
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Federal Reserve Bank of St. Louis
270
regard t o the
Tt octurs t o m e Theat i f w e
mould, without perting with t h e gold, restate o u r reserve
position, thet finenciel writers would be fully aware o f
whet w e have cone. t
6
Hece t e s e r v e Bosrd is,
by t h e stroke o f s pen, t o s o restate t h e reserve 2 s t o
fn
“
i
f
f
e
r
e
n
c
e
i n 2» parencs,
b u t n o t b e different i n
entered upon
a<
taaleYh3 e r e s h o u l a
inflation, w h i c h meens t h s t credit becomes ceerer o r
monsy tight, would the Federel Reserve System be sble t o
resist t h e clemor f o r reverting t o t h e former statement
the Boord resisted that, wouldn't
making money tight when, b y 9 stroke
it could meke
b
me t h e t thet w o u l d e
position, s
position more “ifficu 8
position
more c i f Sienit t o m e i n t e i n
anks ectually
‘the
‘usstioned, i t might
be chargec thet i t w3s i t r e r i l y d o n s , b u t whether
w o u l d rée~
thet c h e r g e w e r e m e d e o r not, t n e p h y s i c a l f a c t
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Federal Reserve Bank of St. Louis
271
not i n pocees=
that the reserves wers ectuslly a s sts ed,
setetement o f than would elter t h e fact.
heve,
a t t h e present time, t w o thousend millions
b
e o n sasquate basis
of gold s s our reserves, t h e t w o u l d
i s carrying vorfor t h e present volume o f credit, w h i c h
ell our indusware w h e t m a y b e called full s/etivity b y
in
> more acasuate b a s i s t h e n i t w a s
level now i s s o much
1920, s t the pesk, beceuse t h e price
3 s 2 n accurate
I take t w o thousand million n o t
mination,
submit.
b u t g i m p l y i n r o u n e bape SBS I
the volume o f
o thet exte.t, o n d w e hsve only
circulsting m e d i u m t
two thousand millions o f
vative position t h e
sud fac
lios o f g o l c , w h e t ©
s e a r c 98 8
certeinty,
thet
a thousend
millions
$s the more conservetive
w e must reecxport t h e
we will n o w foece thet c a y when
yaether
w e would rether heve
4 % come over ¢
o f constently diminishing
period o f fears i a the f o r m
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Federal Reserve Bank of St. Louis
272
reserves, published i n the weekly stetcimsnts
yeccpye berks, w i t h Sito taS s p rensneior
I would like
ourselves
I w o u l d Like: t e h o v s o u r s s l v é s p r o j e t
ve w o u l rather fece thet period o f years
woula rether
two thousend million,
_
snd¢ h e v s o u r r s s e r v e s
esrs.
3
not
o f o n s t h o u s a n d million.
forwerc
for
t+vhst woulc heppen.
sary
} heoces
3
qnet heppens:
I
o n tnet.
I
t
P s y out
f vou find thet t h e y flow
the v o l u m e o f F e d c r e l r e s e r v e n o t e s G o s s - - heve n o t a
coubt e s t o t h e s s s e r t i o n
o r t h e sconomic
currency
orinciple t h o t t h e f l o w o f 2 1 1 f o r m s o f pseper
cnerthrough t h e Fed«ral reservs banks recerdless o f the
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Federal Reserve Bank of St. Louis
273
-1 reserve bank, usving 1:1
that
i t comes b e c k
i n
normal course, tiney
moke s u r e w h e t h e r
i t was thick <
t
tion thet the certsinty would e r
y convic-
m
L e
h
e minds o f t h e
Fec-ral. r e s e r v e b e n k s t h s t t h e c e r r y i n g o f t h i s e x c e s s
sold i n t h e f o r m o f c o l a c e r t i f i c s t e s
t n CLreu
would b e s o operstive t h e t w e could g e t bsck e n y portion
ofa i t thet we might requi
t o replenish our reserves,
ud, primerity o n tas
Federsl Reserve Bank o f New York, f o r export.
I t would
mean simply vetainisg t h e incomicg g o l d certificates f o r
the time being o n d resuming t h e poyment o f Feacrel re-
serve notes.
I t might be one million, five million o r
twenty million,
T t would ta!
d
a
y
s t o reé-~
ed u p e n t h e t b y t h e
this yser.
I am told thst the i
a ] Reserv:
N
e
w York has:
paid out nine hundred millions i n gold, i n round numbers,
in the f o r m o f gold certificates,
s n d thet t h e n e t smount
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Federal Reserve Bank of St. Louis
1
:
88
2
7
4
ae2
outstsnding i s 5332,00.,00°, w h i c h m e a r t h e t o u t o f t h e
3900,000,000 $600,000,00°, roughly, hes ciready been heturned,
T h a t “oss n o t show 3
leggard
o e
T
o the
extent t h a t t h a t i s t y p i c a l o f v h a t w o u l d b e he: enti
throughout the country, as I belive i t is, that would
be helpful.
Governor Harding:
Y o u point out the Gosirebility
of paying out gold certificates, taking them back and
paying t h e m out sgsin, b u t have y o u teken into consideration t h e sffect that that hss h a d upon o u r supply o f one
Goller bills--= o f course I
know t h s t i s not a scientifi
question e t ell, but it is s very serious precticsl
tion right now, and that is 2
a n g e r o u s end embar-
ressing shortsge i n ons doller bills.
T h e Treasury
cennot supply ore doller bill s u s e o f e lack of apCongress h e s o r
or t h e amount t o b e
it w e Use o u r
M i n s t i o w mr
o
f cure
tofeel i t in °en *rancisco,
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Federal Reserve Bank of St. Louis
275
189
to feel i t -in all centers thie i e e e
w e are rignt o n
of = femine. I e n ' t that so?
ecognizé that, b u t t h e direct relaeen s s s u r e d
b y t h e Under
the Treasury thet i f the suggestion thet I
have msde were p u t into opsration t h e
must e g well offer t o p e y f o r t h e smount
g vhich w e pay out s s t o p s y f o r t h e
rinting o f eur Feasrol reserve notes, b u t t h e Under Sec#e-
thet that would not be necessary, that
i.
Ld fine © wey: t o p r o v i d e t h s
Governor Harcaing?
A r e they s o i n g
provide t h e d o l l a r b i l i s ?
iy. P e r r i n :
enc. 1 6 9
r e
Governor Hercing:
esnnot f u r n i s h s n y m o r e o n e a
a
hire. Perrin:
B u t i f they c e n furnish
esnnot furnish o n e collar bills,
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Federal Reserve Bank of St. Louis
276
5)-ropriation:
w h i c h Congress
suthorizes t h e p r i n t i n g o f s u c h e n d
such a number o f sheets.
I f the number o f ‘sheets
consumed i n the printing o f gold certificates
i t recuces
the number that can be used for one dollar bills; whereas,
-if w e were t o put out Federal reserve notes w e would pay
the cost of preparing the notes, b u t i t would leave a suf~
ficient number o f sheets t o print t h e required number o f
Collar bills,
“ I e have sxhausted the p a p e r within
Limitation o f
live Perrin:
A s I said s t the outset,
to outline ¢ principle, a n d not t o vork out the
of L e p S p e licstion. *
If t h e p r i n c i p l e
i s recognized
2s
~gound e n d the plen i s sound, « n d o m t h e t i t i s dssirabls
to follow, I
submit thet t h e mestion o f whetner w e c a n
supply enough doller bills ought n o t t o interfsre w i t h
hing s o i d s m e c t a l s s t h e plen which I
ing.
T
t i s not ressonable t o
would not, i f appealed to, make
tion t e print t h e o n e deller bills t o g o into p a y r o
ané into the farmers! pockets, t h e lack of which would
emborrass t h e operations o f business.
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Federal Reserve Bank of St. Louis
277
Beasties x Strong:
“ h a t i s g o i n g t o happen w h e n t h e
H o w are w e going t o
goLe Goss g o out?
is going t o happen w h e n w e have a
large
take i t the w a y that would operate
ure Perrin: I
would b e this, t h a t demsnds would b e mede upon t h e Federal
reserve b a n k o f N e w York for s n amount o f gold that would
the Federal Reserve Benk o f New
York would sucoly it, ond the Federal Reserve Benk of
would find
e
s
e G e p l e t e d t o the
or ten million dollers,
o r whatever t h s
payment o f
‘emount mignt be, a n d would Giscontinue t h e
hed
gold cartificates until s u c h time s s its reserve
ned through t h e inflow o f gold esrtiticatess,.
yesterday t o c n icesl o f stebility which
stability o f 2
o d industry 3 n d n o t
you Will look back 3
peers, p r i o r t o +
few
P e d s r e l r e s i r v e system, y o u will real-
with
‘ize v e hed e n 9lmost inflexible volume o f monsy,
b u t othersome flexibility t o t h e extent o f gold imports,
wise almost inflexible.
quite s o inflexible,
T h e volume o f credit w e s n o t
b u t almost, s p e a k i n g roughly..
Thet m s p t h e r e s h o w s t h o s ¢ f i g u r e s
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Federal Reserve Bank of St. Louis
192 =
exsctly, t h e monetary gold a n c ;
Mr. Perrin:
/ Referring
t e s t .
>
(
s
; i t u s t i o n ,
i
be
26reol r e s e r v e system, e
running along.
or twenty-seven p s
p r i o r
t o
o i e
n New York r a n with
e n t reserve, s e l d o m
; snd when ¢ h e i y reserves w e r e diminished t o twentyot, o r © fraction below, s
shiver went ¢.o wn
nel c o l u m o f every p e r s o n connected w i t h finence
a
throughout t h e country, t w e n t y - ! ive per ¢ @
t resulted t h e r e f o r e t h e t a s
I
Legel r e q u i r e d ress
between t h e two trade a r n é d u s t r y , monsy andcredit,
vt
we
en inflexible money a n d credit, s n d w e had, therefore,
verisnce
to h a v e a
our pal
s
r
e
W
i n t r a d e e n d industry.
a
t u p s s n d downs,
a
asctivity, e n d E
c
t
i
v
e than hed
w e had inersesed
i
t
y
.
I t was
ineviteble, w h e r e w e h a d t h e m o n e y a n d c r e d i t inflexible,
should b e
thet the variations/in trede snd industry.
coe
Wi s r e in
constent s t e L e y O f e c :
in o u r m o n e y
not b e i n g p e r m i t t e d
t o e x p a n d unduly, b e c a u s e u s a u s
traction m s t necessarily follow,
I f , therefore, w e
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Federal Reserve Bank of St. Louis
sn h e v e
suport t h e volume o f crsc m s i n t e s i n t h e full pronot #xces-~
provortilonate
to v a d u e
sn importss
ty
3-33 oe i a }
admy attention,
effect upon
ssessing thencelves o f
r
Ye s h o u l d
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Federal Reserve Bank of St. Louis
280
19 dl,
Lt 2 0 8 8 n o w ,
end
t i
a
s w e were eble
t o Cispossess
‘ourselves o f t h e gold, t a k e d o m f r o m t h e n o t e rsserve,
There would b e sore way o f working that out snd progresi n o u r possése
Sing s t e e d i l y t o w a r d s t h i s p o i n t o f h a v i n g
sion o n l y the gold basis t h a t i s “cs red. I
have not
to you, t o provide 5 n opersftite plan, b u t simply t o outline t h e principle, w h i c h I
belicve i s importentys o n d i f w e c i a work o u t a n opsreting
6
= -
plen 3nd bring ourselves t o thet position, I feel that
e i n e very y u c h safer position, 9
we w o u l d b
very much
more conservetive position, t h e n i f w e say, “Oh, well,
~uerter of gold, let's take
chenes
o n it, :
e
2 chence o n ‘ h s psycho logical
l
b w h e n i t comes
effect b e i n g u n f s v o r s a e
t o 8 cont inuous
recuction, *
Governor Stronr: l i a y 2
Governor C
Governor 3
u e s t i o n , wre Choir-
; Certainly.
d
o n o t wsnt t o interrupt t h e
e
‘ Fed=rsl reserve notes,
ana s u b s t i t u d
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Federal Reserve Bank of St. Louis
221
t which,
o f courss,
d
Ws¥
be r - q u i r e d
t o meintain
from t h e p l a t h e t we n e e f t , t h a t our reserve
centsge
o cown v e r y f s s t enyhow?
w o u l d g
Of course y o u c e m o t escepe © réecuce
in my mind, Governor Strong i s this: Y o u
continuous reduction i n reserve ratio
coming t o this pesition.
O f course i f w e peid
ell out todey, Governor Strong, L f
lump, obviously o u r
t out ereduslly, obviously o u r
sgcuced |
we ‘Co
Yor ins tconce,
thet i t woulda i f i t
d
wes
l
obeing
g
c exported
Governor Strons:
Shae
LGUs
zuestion
t o
tn -the f u a u c e
W e sxported
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Federal Reserve Bank of St. Louis
194
282
eoUPQoorG t o a t-we t u l e b e u n e or Sere. Beevy: (rsin o f
sold becsuse we were so lergsly creditors, ‘ W e could not
export gol#@ u n x
c c a m e Gebtors, s n d thet msde i t
smount o f gold.
Governor Strong:
I t was over four hundred million s
in e r mowement.
Governor Seay: T h e r e was over four hundred millio n
in t h a t movement,
o n 2
very m u c h smeller b a s i s 2 n a S t s
more nervous time,
Perrin:
et thet time
be 8 metter f o r study. I
a m not ecsking t o vork
out t h e ceteils, b u t I dobslisve i f w e would reacjust o w
position e t ® time when it eon be done withaut arousing
b g r e e t d - a l better t h a n
we were compelled,
b y e n unfsvoreble
@ snormous.
end m o n e y i s e : “ n c w e Sdvenes: o u r r e g e
does n o t h s v e m u c h invluence.
T
t ell: Cepends- o n
-firection.in which y o u s r e soings
Governor Strong:
“ o u l d you edvence the rete
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
very ucevy s o l a movement,
policy?
w o u l d heve
met I
w o u l d
havs e d v 3
a
d the re
©
t
}
t o taet
h concitions 238
Your p r i n c i p l e r s é s
r
e
Gut s o l d e - r t i r i o s t
c
L
u
e
s the
s 2
nee?
wnst i s i n m y mind i s t o cscape t h e
iniluence e v e r @ psriod o f ysars
when w e sre compellsd t o ex-
Lire H o m b i n :
P
S
C
.
e reserve
n
elso previce f o r
: exporgetion o f gold, w h i c h I e s s u m e w
‘Collers,
I
n other voras,
ts you c o three things, Wneress,
i f you put
y o u 2 o o n l y o n e thing.
e
S u p p os
into circuletion,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
284
Gown t o t w o billion;
ame=
suppose there e
billion collers
<-smend i >
for export?
three billion t o weet
the <smead then i f we n e d two bilath
Lion. in. gold?
ir, Perrin:
Y e would hsve t w o billion, p l u s
billion w e would have i n circulstion,
lire -Hambings
Y o u assume t h e t Whenever y o u p u t i t
out i n circulstion you can gst i t beck?
In the volume thet would b e required,
never g o @eut i n 3
SUS
O O
D e
to c o r r e n d
iy, Hamlin: P e r s o n e l l y I
woulé rether hsve i t i n
d get- i t then. t o cry
wir, Perrin: }
Gisecventsge,
is that which I stated, é
i , that
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Federal Reserve Bank of St. Louis
Hemlin:
B u t I would rither p s y i t o u t o f
voulte o f t h e m s n t o w h o m I
my
heve l o s n e d
the i n f l o w o f
t
Homlin:
7a
e Ponie o f 2e90-;
h
C
w e hedd =
get beck t h e gold;
c
.
d e tried t o
E
a
t h a
come i n t o t h e
thet o u t
g
o
l
é c a n e in, s n a w e h e d
iat
ceuse o f 6
w h i “ 9 0 e 8 n o t n o w sxist.
spprehensi
Mire Hamlin
t
h
e
r
e wes opr e
s b o u t the
erising.
9 silver
esis t h e n ?
ie Hamlin:
l
silver besis.
e we s
m x
other u n c e r t e i n t i e s e
A s I say ,
w h e n t h e t exportetion
of
gold cores.
Governor Crissinger:
w
e h a d better neer
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
286
200
from Governor Biggs before there i s eny more ciscu
of this.
Governor Biggs:
T h e topic here i s “Psying o u t
t ‘rom
Golé Certificates", end I entirely misunderstooc i
the trend of the crgument thet hes been insce here, which
has been very illuminating a n d quite lengthy, b o t h yesterdsy efternoon e n d this morning. I
thought thse Board de-
sired t o know what the policy o f the banks hed been i n
paying o u t gold certificates,
matter a t all.
s o I hsve n o brief o n the
I t d-veloped i n the meeting the other day,
when w e Were discussing whet the policies hed been, thet
New York hed paid out just sbout a n smount equel t o vhat
the other banks hed gsined. I
sheuld b e very glsec t o
with the
give m y t i m e t o s o m e o n e w h o i s m o r e f s m i l i a r
susject t h a n I
am
Governor Grissinger:
D r . Stewart, @ . i s here a t
the recuest o f the Conference,
t o present t h e method o f
i n the
restating t h e reserve t h e t hes b e s n worked out
Open “arket Conmittee.
T t . is t h e gold policy that w e
about
heave been prezsed t o put into force thet ues brought
som
an effort o n the part of t h e Board t o srrive s t
d
n
a i n coing this
policy t h s t would meet t h e r e q u i r e m e n t s ,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
201 :
:
:
2
8
7
Dr. Killer presented what l s how before
Coumittee for the purpose o f *o
cen b s viorked out.
P
a
n
B P Se
so that whetever p l e n thet i c worked o u t hes t o come
m
fore t h e B o s r a s
workec- out.
e subsecuent t i m e ,
i f one can b e
B o t h Dr.
end i f y o u c a r e t o h s a
slad t o h a v e h i m s e y w h e e
has t o s e y t o you,
o r w e will
let Dr. Miller outline t h e gold plen briefly, whichsver
way t h e C o n f e r e n c e t h i n k s w o u l d b e t o i t s liking.
Governor Seay:
T h a t is, t h e report o f the Open
Merket Gormittee o f the Boerd?
Governor Crissinger: Y e s , o f the Board.
neve Dr, Miller state the plan briefly, e n d t h e w e
hear D r .
Lae
the system i n 1917,
Reserves A c t .
the June, 1917, Amendment,
serve banks,
separately.
w e showed notes
C u r i o u s l y enough,
i n looking u p
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
sccompeni sec.
: upon w h i c h
MENC
i t w a s based,
m p L e bE s o . b n e $= 118%
RGema O NGiGs
statement
Go
SID Pe
R O LS
c
e r a n
2 V S UGitle
Act c o n t e n p l s t e s
i n pert w h e n
jerneans m o s t importent, becsuse
*
a
n
t
system, m o r e perticuleriy
of movemsnts o f widespresac
books <8-5° the
to W h e t i s
eceurstely end
“ p t l y your reserve, ratio wilects
the m o r e t h a t
beésn t h s
Our reserve, e s we speck of it mow, i ¢
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Federal Reserve Bank of St. Louis
pansion y o u s r e d e p l e t i n
h
e currency,
exceptional mon i n the
tele
o be slways fully slive t o the fect thet
reserve s y s t e m t
the C o l l e r s t h e t h e i s p=eJ y i nog O o u t i n 3
psrioc o f e x p s n -
sre really watered dollars, t h s t is,
per cent collars, whatever h e p p e n s t o b e
st i s s h o w n
I heve n o d o u b t t h e t i f
d i n 1917, t h a t
through t h e year 1919 w e would have
in the country e t lerge,
m d i n the H e
motter o f f a c t w e a
$ s b e i n gos
our p o s i t i o n
het m y conclusior
our
ratio then
Vous V e s o r
confessedly t h e .ons
snd mislead
thet you set up, i s e r y dangerous
i
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Federal Reserve Bank of St. Louis
it i s not that i t purports t e be,
eoine o n s o f a r s s i t
Our r e s e r v e
i s competent
to
i n 1920 wes
ntation o f o u r
hat, then, i s
e psychology
m
i
o
r
axpere
universal
m
benking
exper
to r e s t o r e t teeh e
our recerve position b y showing
Yon. overs
Reserve S y s t e m t l
Gofinit g
l
y locatec. a s poss
so complicated t h e t s t times
affective,
sad bills--Which
cen be
Bosra
ean do
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Federal Reserve Bank of St. Louis
291
is texen b y t h e reserve banks.
S o . that, -in-a a
s check upon t h e b e r d i n
Federsl reserve bank’ c a n
note issuing. A
can put ovt 2 note only e s
by the Federal Recsrve Board.
Boord i g t h e p m rticulsr c u s t o d i a n
l
judgment m
t
s ‘
u
o f t h e not
h
e lew,
7 shell b e incressed.
the Boerd i s powerless t o 4 4
on U n t L L t h e 2.osSsrve b a n k e s k s
cise o f a n y control over
cheueicnune sbdisated j
F
u i
r
o
m m y ooint o f
serious economic
view t h e most serious error, t h e most
evror e v e r c o r m i t t e c b
e
l Reserve S y s t e m h a s
of 1 m
to treat t h e note a s e n i n c i Cente 1 matter
consequence.
.
its S u c c s s s s s
currency i s
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Federal Reserve Bank of St. Louis
£92
baceuse
i t i s only a s concitions incicate
be
for more circuletion, a n d w e
coereslstionship o f t h
rather t h e n és,
something e t = ¥
o f the con-
w h i e
One o f the most
CIE S V
out w h o
to who w e p o n s i b l e f o r whet i s c s d
the inflation
in 1920 snd 1921, end w e must ettech grave importance t o
esny device o r any scheme o f op*ration t h o t c T i n i te i
locates responsibility;
primary r e s p o n s i b i l i t y e s t o eredirt end. d i s c o u n t o p e r a
24 rates t h e t the Board Mas
veto, b u t nevertheless
banks! counters t h e t the initiative o f
trensaction tekes place s n d i t is, s o
i t is
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Federal Reserve Bank of St. Louis
293
counter t h a t t h e initistive, u t
ken I n the: m e ber. of “steal pional “curren
Governor Strong:
L i s y 1’ s s 2
oh estton?
supply O f eurrsney t o meet: <
vhethner 1 t ves considered b y thse
necessery o r unnseessary,
Willer:
t h e n w h a t w o u l c heppen?
Y o u mean?
Governor Strong:
“ U p p o s e o u r till o f notes v a s
empty, a n d our menbsrs w e r e calling o n u s “vsry d s y itor
the shipment o f four hundred bundles o f notes, w h i c h i s
sbout v h e t w e ship every day, 9 n a t h e Board saic “No, w e
will not issue a n y notes now;
of prudence?”
w e have reached t h e lirit
W h a t would w e d o i n New York i n order
4a
to meet thet demand f o r currency?
lire Hiller;
Y o u would d i g into y o u r reserves.
Goverror Strong:
Y o u would pay out your reserves?
wie Miliexrs
Governor Strong:
T h s t i s the point.
it merely boil d o w t o s n 2rrengement, o r the exsreise
of t h e suthority t o s a y t o t h e reserve banks, " P i y o u t
your gold"?
T h a t i s what i t means.
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Federal Reserve Bank of St. Louis
ute Miller;
Governor S t r o n
T
o
u
t
e o i ter t h e e 2 3 2 o
x
things.
slter t h e rects.
Fine e é t u s t m e n t
o f t h e operea-
thet spoearance becomes t h s seco
Governor 3trong:
Suppose
thing t o « , f r o m now on, 8 S ire Perrin savocates, t o
‘erve n o t e s i n t o c i r c u l d i o n
until t h s r e s é r v e s c &o t t o =
cie r t e i n point?
e
thing w e would secomplish b y that woulc b e to s g r e s
smonsst ourselves that the Boerd ought t o exercise thet
onc require u s t o c o it, wnereas,
of policy t o c o i t
fis o a d L O T
41° ¢@Laration
Governor 5
w e mignit sgree
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Federal Reserve Bank of St. Louis
tne
sutnori ty,
Or o c i e r =
you -te. t e l l u a e e t h e
3
thet 9
¢ ituetion s u c h 2 s y o u e v s
ror n o t i n its jucgment your opinion
“nd i f the Boerd r e r v u s s e dot tact,
thinks y o u
aes
ayastion
4 }
r i r v a a n i n e c
in
bookkeeping
you t h i n k i t i s i n
hist thet cuthority shoulc
o f whether
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
at t h e only w a y you
exerci t
e
tion o f t h e two ratios,
Governor Strong:
EAS sea ckos
l i y obtection
d s
not uncerstendL
W
o t
heve o n h s n d
iv. Miller:
o
W a y&
t
a
a
e
eee
s y not show the t*®
Governor Strong; n t i n u i n g )
arrvective pictures which tslls t h e whole ctory simply.
Federsl reserve bonks ere prinsrily
iuing institutions,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“raw o u t his
notes, e n d hevs e
cleim sgeinst é
fectly
but t h e y o u s t n o t t o
1¢ counter o f the
Fecercl Reserve Agsnt--Governor Strong: I
think t h e y ought t o b e
| vou regulate currency,
i
s
y
e
Governor Strong: b
Aemenc f o r e r e d i t
i n which
it
sort o f c o n c i t i o n t h a t l e d
to i f 1919-1920.
Governor Seay:
B u t there
side o f thet t h a t prevented t h e exercise j u d g m e n t then,
to a n y longer
gcreen o u r s e l v e s
ichbornood
?
gcared?
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Federal Reserve Bank of St. Louis
298
to h a v e b e s n s c s r s d v e r y m e h
Governor
k
, f o r purposes
o f infor-
nation, w h i c h will help ine t o understand better, whetner
I understood y o u correctly t h s t you sere going t o sursgest
n of statement edopted i n ths spring
Mir, Miller;
T
h fhe
s e r o
oly,
T Z L L y o u be z 0 0 c enough t o tall
Governor Norris:
m2, b e e s u s e t h s t c a s b e f o r e
h
w
m y M w unection w i t h t h e s y s t e m , :
the perticuler f o r m o f stetement adopted i n 1917 w a s ©bandoned, e n d why?
lir, Liiller:
w
e
g e b e n d o n e d i n t h e a u t u m o f 1917,
when i t w e s f e l t t h e t w i t h t h e n e w L i b e r t y L o a n e n d
e further huge loons, i t was
prospect t h s t there v o u l d b
irable t o s o s o m e w i n d o w
the country s n d t h e
mge losns;
dijute t h e m i x t u r e
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Federal Reserve Bank of St. Louis
xtract
~
Wr ES
from
ch f o l l o w e ec
Miller thereupon r e a d t ne
BS
Immediately after t h a t t h e o l d
ahanged: :
, which clearly indicated thet i t wes com
that t h i s w o u l d b e t h e p e r m e n e n t f o r m i n w h i c h t h e p o s i -
reser
e banks w o u l d b e
stated u n d e r
the
Act s s a m e n d e d i n 1917.
And
G o v e r n o xN o r r i s :
about
six
months l a t e r ?
r,. Miller:
later
ind
offhand
<te pm}
Ue
T h i s was
sbsndoned
about
s
i
from then o n through t h e war--- I
et t h i s m o m e n t - - -
tement w a s altered,
but t h e
form o f
es nnot
Os
o o
ae
say
our P S S E S Y V
a t l e a s t t w o times, I
xoo}
x months
S
think, p o s e
s
there w o u l d b e e g e i n t
S55 p e r c e n t s g e i n s t
a t h i n g ,
ways, and slso the public, that looked
statencnts, s a w i n
and.
strength i n t h e Federal reserve
was really
being
:
n
ii s
j
1
so t h a t y o u
2
st
S1-
the Fr serve
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Federal Reserve Bank of St. Louis
“orsl Reserv s y s t e m head w n obligation t o
snd support t h e borrowing program o f t h e Govsrnment, e n a
that i n order o
d o t h a t i t m i s t a l w a y s m s k e t h e public
think t h e r e w e s a n a b u n d a n c e
yg tem.
o f loanabls resources
i n the
A l l o f that has gone b y now.
T h e importent
i n the year 1919, 2
proper f o r m , .
thing i s i f w e had,
so thet w e would have been eble t o see what w e were stumbend hsd returned t o the former statene:t s e t
» we would heve b e e n brought t o :
the fact thet, w i t h t h e WwW
v
reciatio n
e w e r e i n t h e midst
5 very msrked s n d possibly cangerous
credit.
I n other words,
w e would hsve b e e n brought t o
recocnition o f t h e f a c t t h a t b y <
e w e w e r e vater-
ing t h e currency t o i h e m e e n ' s t a s t e a n d thet ° s e metter
of fect our reserve position w e s o n e t h a t indicetsc |
over-extension,
We rscormputed t h e s t e t e m e n t s , m o n t h b y
month, f o r t h e years
ecsered t o the t w o b e
; t h e n o t e reserves s h o w
n December, 1 9 1 9 , t h e n o t e
have shrunk t o 55 per cent, 3 n d the cepo
sreat
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S01
coustsatly
asposit r e s e r
tnough
not i n esppearence,
L
S
c
.
snc p u l l e d o v e r i n t o t h e - c - p o s i t reserves
Governor Strong:
W a g
2
t2
for c o n v e n i e n c e ?
two-barrelled system.
thet t h e c o m b i n e d r a t i o w a s v e r y m u c h
fortuitous thing,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7
you would have had, a t
evitence
t h e t there w : s
asterioration
i n the
notes, e n d i t i s probundsr t h e t w o - b e r r s l e d
if w e h a d b e e n o p e r a t i ¢
system, t h e Boerd would hnave.been o n t h e cefensive a t
that tine,
Governor Stron::
ie’. ingjller: 1 9 1 8 - 1 9 1 9 .
Governor =
n g
u
y memory i s rather viwsic thet
3S a c t i v e l y e s w e
okks 9}
I mean o n
3 healthy sitvetion, t h e word
any m o n t h o r c u a r t e r
year lolB—1919, b u t over 9 g
Governor Strong:
period o f tine.
P e y o u thiers: be" M i g ger;
expression o f ths reserve
differe.t custudy o f the gold s t thet
the concern which y o u a n d I personally f e l t
about this increasing expension o f our position, which
was r e s u l t i n g f r o m t h e i s s u e o f s h o r t t i m e p a p e r b y t h e
United States Tressury?
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Federal Reserve Bank of St. Louis
1919?
I e m perrsetly convincece-~-Governor strong: ( I n t e r p o s i n g A
MLSS
of slorm IT s m ¢apeble of, Dr, liiller,
rit M i d o : I
will
Strong: W n e t finally scarec
into goiting b u s y u n a : rour
control?
Governor Strong:
W h y , D r , Miller, t h e correspondence
which started between you and me i n January, 1919--am not talking about what you thought,
Dr. Miller: I
whet Governor Harding @
m y b o d c y else thought; I
ing about the Federal Reserve System;
oO
s m tali-
w h a t actusliy finel-
ly got i t waked u p t o t h e reelizesion t h e t w e were moving
Governor » trong: I
W
s e d everything that
was entirely objectionable i n t h e w a y o f invéctive a t
the time. T
remember Governor Herding used ¢ little.
ir. Miller:
B u t invective @ i d not d o t h e fob.
Governor ©
lin, Midler:
a
t<
G s
j o b was when éhe state-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
rseerve position s h o w
near the: legs] limit, w i i ei’ Le
4
rehnension L i m
I mean
t h e iedersl
e a s e s
system
c5
e n o r aNl l ye
I do n o t mesn incivicuels 3 2 s u c h e
scared
Governor Strong
'
s this really © method of
setting u
bookkeeping
f o r the benefit &
a ipd =
S
S
f e
t
s administration
of the Tressury rethe
*
Na,
t h i n k a. v ei s e c
T
a
t
h
a n a
eP “ederad
A
Governor Strong:
erve System i n 1919, y o u
Governor Harding: I
Go not think
the
Wee . c o
J i r s e t o r Genersl
séministration o f t h e retlroads under
p o s s ys
o e
i d c d , 2nd h e un-
fective control o f t h e Feders. :
Goubtedly would have used
f
o
r
c
e
d to,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
219
sg t h e D i r s c t o r
Gsr
my guswer vould
iifficulty i n doine 1 6 t h e n i f w e hed m e c Ss" s t e r
ment o f reserve position w h i c h he2 snebled t h e public
system w a s
ing mileod,
I t would have c l y en us 2 very mach betpoint i n unc: réeking t o p 2
geinst 9 further o r more dsngerous expsnsion,.
Personally I
think from m y e x p crisnese, t h e most serious,
12 most pergoneble error o f judgment, e v e r comto wit, t h e energstic
never h a v e
W i t OH S85: Bide.
4
real
p 4u s h2 tA o Ft h, aaest a m o v ae mne.n t
Reserve n o t e s e n d p o s s i b .
stendard.
t h e msintens
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3506
1
2 i t e fact that most psopls
Governor Hercing
not a r o t o ;
ratio t o u l d Have b e e
h e res >
woulé/ l o o k into w h
double barreled
under a
lip, M a thers
care t o d o it; t h e y just
t O Din O G
Federsl R e s e r v e S y s t e m c h o o s e s
anc a b o v e :
not a
g
j
xosnsion.
S e e competent
competent s t a t e m e n t
B a o .
C e e ot
Reserve System knew i n 1919 t h a t
éiluting t h e currency, t h a t i n pute
S
bins out dollars they were putting
follers.
I
e X e
n t
t h e currency
n o t h e r words, t h e y s e r e w a t e r i n g
in order t o protect their
thet they ought t o have p e i a
to show t h e public 3
e
t the very tims
h e i r ress
v h n e t was pg g
i
n order
w h i c h woulda
to
have made i t sasisr i o r thamsgilves
easier f o r
control a n d w o u l d h a v e m e c e i t
the
Board t o h a v e b r o u g h t h o m e t o
where
w e w e r e headed.
Governor Seay:
Y o u s e y you d o not t
w e r e a w a r e C F -E07
Resorve b a n k s t h e m s e l v e s
Mre Miller: I
personally t h i n k t h a t m o s t o f t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
babes i n t h e woocs sbout 1919.
very eandidly,- L
t
h
i
n
S p e c k -
k n e whet*
k most o f you
going on,
Governor
rehnension, beginninget * t 3 cate l o n g before
Governor
s a d ior o
the apprshension,
Gevernor
ne
I don't grasp your stots ent.
koe,
oo,
E E ee
h e n
h o r d& y o u explein,
the collossal misspprenension t h e t came
ir, M i l l e r ?
we w e r e s g c a r e c
exgression
t o ite
Gid, b u t t h s
riven expression
lies i n human nature,
aye
1 b Pill srise
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
008
@ point beyond whieh
&, b a t B@: w o u l d
VW
Seay: i
Governor
n é CAInG a b s poered. o n e
4
1:
snotasr
t h i n3g t o t e l l t h e3 o F n -5 i
l
h
ae
kt
x
e scerec,
scenes
y o ua anr e
ered. you srs t h s more lLike-
GO t e
e e e r e s e r v e banks
s o m s montas
u i t e c o n s i d e r s bly,
davelopeiq k
V W o c rny
e n a
yester
tne m o r s r e c e n t
be ¥¢ell n o w
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
tiet-L c a n
OF Lis
i M a g
It
Boerd, o n d e t thet time
the Boerc t o work out, c o m m i t t s c s , w h e t wes
net -tiet
w u
2 tenet
yeport b e c k t o t n e Board,
thet w s heve now, e n a
of rescrves b e h i n d
s s o n d Ceposits.
T n e
i
ment e a c h week, T f e e c h incividusel bank s n a
system, s h o w s t h e gold thst i s behind t h e notes i n t h e
hends o f the Agents, i n t h e redemption func cnd t h e gold
vail
devosits t h e t i s i n pessession o f
of cos retion
system curing
cate
G6, e n d t h e reserve
Poking simply t a e
lg2e f o r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
510
sites for
st t é n months
Scie
+
eserve
o f 1923.
s v rOl
sasBeirx
o f 9 5 a n d 38
WOULG
thet t o a degree thst i s o n arbitrsry. smount, b u t ths
actusl seperation 3 s i t now
Ssm8y a 5 p e a r
t o one who i s
hg
ee 2 s i t u a t i o n
courss, h a s t o b e built u p out o f
ireivicusl
banks
A o .
o e
tas p o s i t i o n
tie: pisn
Wb fee O L DiLeS
tndivicuel bank.
the:
report f o r 1922
With 9
view t o dstermining whet,
c o n tease
r e
t s m
o ft rscsarve
2s a
they w o u l d b
s i n posi-
position o f th:
tion t o maintain b
to: put-benind
and t h e generel purpose
larger a n smount t h e n vould
S V in--ths
e e L
S u r r r e L e n t sanourtk t o r t h e
ive 6
t
4.)
At a s
26 t h e béginning?
beginning,
.
s
e
i,
SKS
y
‘w York Bank, t h e t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S11
pale
msinteain a note reserve o f 1 0 0 per cent, s n d still have
eft over for gensrel operations something like a
per c e n t c e p o s i t reserve,
i t would b e i n s
ceventy
position
to
teke care both o f the inter-cistrict movement o f gold
and these seasonal fluctuations without putting u p with
the Agent a n y eligible paper, t h e generel proposition
being thet there w a s n m n e e d ior them t o p u t u p elisible
paper 2 s collsteral behind feceral reserve notes w h e n the
bank h a d a sufficient amount o f gold t o cover i t i n gold.
Thst, o f course, Teads> t o the cuestion--- what i s e sufricient smount?
In l o o k through
i z ¢ the experiences i t became evident
thet t h e benks were not, o f course, s l l i n t h e
tion, s o thet tentstively,
s s a matter o r expsrim
we tedertook s n allocation uncer w h i c h certain o f
Benks, N e w York s n d Chicsgo, f o r sxemple, w e r e sble t o
soncuct their business without putting u p a n y sligible
paper s i t h t h e sgent, e n d other bsnks, t h e lerger benks,
qm
Boston, Philadelphia, S e n *rancisco s n d Cleveland, w o u l d
wired o n t h e experisi
o
f t h e two yesrs,
t e n
*
paper cover, siviaog s ninety per cent
gold coverage.
F o u r o f t h e other banks, Minusespolis,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
226
3
i
St. L o u i s , K o n s s s C i t y , s n d Atlants,
keeping 9
s
h e d t h e necessity o f
thirty p e r c e n t e l i g i b l e p a p e r coversge,
snd
two o f the benks, Dallas
paper covsrage, w o u l d not
st a n y t i m e c u r i n g t h o s e t w o y e a r s o f r e c u c i n g t h e i r n o t e
reserve coverage,
S
Governor usay:
o w h a t w o u l d heppen?
L i s y I esk whet would heve b e e n
their’note reserve covering under s u c h conditions?
a
I f it
troubles you t o locste i t now,
Mr. Stewart:
N e , I have
for t h e Richmond B s n k ?
Governor s e a y
Lip, Stewart:
Y S s .
T h e nichmo Bonk, e n d the Atlenta
Bank, because o f the cherecter o f t h e
ssessonal swing,
s n d w i t h os eenstent n o t s
would have vluctuated,
thie plen,
i n the
f v 6 m4
1 percent colic
to over o n e hundred p s r c e n t
would meintsa
paper cover, sand would have
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
those intervels
> peletively
lettine t h e ceposit reserve,
relatively l o w level,
46 W o k :
the relsetion o f y o u r
be: more
YAOCaY
SGM
O N SWAVES!
bs lence.
ce
iw)
ce tors
the c e p o s
matter
AGA p y ¢£ 3
r
h
o f internel sadsinistretion
Board e n d t h e banks,
e
i n
i t would
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“hat c m o u n t o f
this s l l o c s a t i o n t h a t I
{ncividuel banks,
m l s cever
hevse i n ‘ i c a t e c
i t voulc
Lad heve f l u c t u a t e d
86, 87, 87, 83, 89,
Novenbcr = n < Deeomber, $ 7 s n a 84, w h i c h
with t h e ssasonsl demenc Z o r currsnecy s t t h e holidey
<pason,
i t would b e nec-ssary t o lower f o r a number o f
the b e a k s t h e i r n e t r e s e r v e r e t i o i n o r d - r
t o keep their
deposit ratio e t a point which would, under this computa[ t doesn't
tion, kesp i t within the forty per cent limit.
go t o t h e 3 5 per cent legal limit.
lire Hamlin:
H o w aid you get your gold rstio egsinst
notes?
Mir. Stewart:
“ g e t o o k t h e s o l d i n the hands o f t h e
seents
s h ea n d
the gold i n the gold settle~©
fund?
hir. Stewert:
n
e g o l d i n t h e gold
3s r e s e r v e a g e i n s t ceposits.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
You W i l l n o t i e s S e e t i o n £ 6 - 0 f
Lge OSI
reserve. b e n k
the option o f
to maintsin cgsinst o u t
jerel reserve notes, o r 8 5 p a r t o f the required t o m e i n t s i
n
any benk,
s h o w w h a t their
i n s n y statement,
Was * T h e y never have exp)
t h e i r option,
so
s I understend---
[yet ai ber:
W I L L y o u reed thet ogsi *
Hemlin?
o
.
1
(
sL g s i n t h e persgraph just quoted.)
reed
Hamlin
Miller:
O u r statement
serve s g e i n s t tnoat separately,
gnitse2
i n emphesizing 5
coes not show
sad I
h e l e w contemplated t h s t there
W o u l d ba. swe r e s e r v s s .
option 3 s t o
So that, c e n v e express i t ourselves,
banks w h e t t h e i r o p t i o n i s ?
think t h e t i s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Drs “Mi lia xs T h a t is = d¢ta@il t o be taksn cere of.
Mir, Hamlin:
S
q thet l r Stewart's figures a r e sub-
ject t o that correction, I
Governor Strong:
should think.
J o s s s e e m t o indicate that.
Congress i n t e n d e d t h s t t h e s e b a n k s s h o u l d s a y s o m e t h i n g
b held, vuether ageinst
sbout how their reserves s h o u l d a e
notes o r deposits.
Governor Crissingsr
vite Stewart:
Y e s , I think the benks should,
M e y I suggest t h e t thet w a s considered
in the committee, e n d while the bank hes the option about
i t
it hasn't a n option t o reduce its notereserves;
I f
only the option o incressing its notereserve.
rents to count tie gold thet it hes i n the gold seti t may, b u t i t
tlement f u n c e s reserve sgei e
Agents!
cennot reverse i t snd count the gold >
hands s s gold sgeinst
“eposits
or
Hsmlin:
tie. Stewart:
M
i S O G E
i
re egainst notes.
e SspeuU-L t L e g o l d
s f i g u r e represents
T
i n the
t h e minimum
t was t h e thought o f t h e o n m i t e
tee, w i t h regard t o the ques f
maintein
o
t h e minimum rese g
t
responsibili
h
e
t
o
L f the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
O17
in turn, w a n t t o contribute t o t h e note reserve
Board h e s n o c o n t r a l o v e r t h e t
ire H a m l i n e
W
e d o not knoy
cheve t o scsy,
i n this cass,
no a c t i o n b y
e b s cape a i i t
i
e
t
e
l
-cueme . they w o u l c hseve t o say.
Governor
Norr
Governor Strong:
fan's %
stetute pleinly contemplstes
against
best
st will, i n tne statute.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
“iseretion FiLth=
protection
of
he s p p r e y e lor
to b ¢
Dya p a s l y
n
e e ss
under r e c u l s t i o n s
ed by the Pedersl itsgs
x. Hemlin;: “ w i t h the epprovel o f tir
to b e
cheracter,
Z o e C o u kd.
no bes f o r gold;
b u t this
notes f o r gold or vice versa.
. Miller: rU n d e r r ke
“rsl Reserve Boerd.
ulstions
Fa
o
pr
Q~
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Federal Reserve Bank of St. Louis
519
Hervison:
T h e t wowulcs m e a n t h a t t h e B o s r c
Bid aks I
should s e y thst e n y Boerc t h e t hes
the p o w e r t o grant,
i n w i o l e o r i n pert,
o r to
en i s s u e o f Federel
substitution
o f
are outstending,
the Boerd seys ws won't sive
but hseve not
Cirectors o f
rignt under t h e statute
F h e t h s r they
gold o r eligible paper behind t n existing n o
end s e a , w h e
e
y shell couct sny part o f the gold
settlement f u n d
Mie M E bLer:
A s t O ins
option o f the bank, I think, i s
Guestion a b o u t tnat.
Bi
B u t thes
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Federal Reserve Bank of St. Louis
1
Spoleto
supposed
t h e Fecera
a
boo Craenesmie t h e s
cas
serve B
shell b e issusd t o t h e bent T h e t - d e y t h e B o r e Leswes
the circuletion e n d t h e bsenks,
it.
COVvermonr- t r o n g
w
m £pesstineg o F sxistins c i s e n i s =
Tne “the v e r y
tional nots
ly limits i t s power t o extend eny further discounts
member banks.
we L e r :
N o t
Governor strong:
Governor Seay:
hoes hee
Governor
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Federal Reserve Bank of St. Louis
205
Richmond
ys
a
2
sive eadct tionsl c r e d i t
ose you d e n y u s thea
(Interpos ing)
B u t suppose w e do not?
you d o .
T
Z youco
further e x t e n s i o n s
i t it
o f eredit.
c.Oes
Governor s e e y s
Mr. Miller:
Governor
s n a
y o u
Y o u psy out
t pesying o u t
u
5¢
of pzsnting Gis counts.
ire Miller:
N
O
L e t u s apply
my
Why w o u l d t h e P e d s r e l R e s e r v e B o s r d a s c l i n e t h e
Governor
3¢6ey:
t i o H e t s a y i t would,
sty o u w o u l d c
& limits
het w i l l n o t b e e x e r c i s e d h
B a t the sie
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S22
236
As Governor =trong said, whet would the Now York bank
loif they had cemsnds f o r 100,000,000
Bo3ré would not give t h e notes t o them?
Let us assume thet, because I
in ord. rto complete t h e picture you hevs eddea something
G s r a l reserve bank o f New York
MOrE--= you sg: 2
hee nesi £
o n additionsl two o r thres hundred millions
the Federal Reserve Board shoul: ... cline
in notes. f
the ecciitionel t w o o r t h r e e h u n c r e d m i l l i o n s
i n notes
th
Fedtrsl Reserve Bank o f New York, i t wuld b e becsuse
Gifvered i n its judgment from the Federal Reserve Bank o f New York s s t o the situetion.
Governor Seay: S u r e l y .
iir*® Miller:
N o w , then,
t h e problem is, r h o s e judg-
ment i s t o b e ultimate i n this metter? S u p p o s e there i s
stetuts settles t h e t very
clearly.
Governor <
the Board. m
r
g
u
i
n
g sgeinst t h e power
fo)
trying t o illustrate the effect o f
if shey should Ciffer i n juéement with t h e benk.
I think y o u s r e Going i t aamirably.
chowingcS t h a t i t w o u l c m a k e y o u vorry.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S25
t v o u l d n o t o n l y m a k e u s worry,
T
Governor ~cey:
r member benks worry, c n d I
e m quite s u r e
would sutormeticeslly s t o p o u r further recis
Tt snould n o t m o e t h e member banks
WOrry »
A n y benk thet i s discounting w i t h y o u i s
to Grew out currency.
originel currency,
I f you could not get a
i t i s because,
issueof
i n © scheme o f this kind,
1.
the Board vould feel thet your policy h a d been t o o libers1l
or careless,
o r perheps reckless, a n c you h e d bss
wth e ¢ free e n d cereless hend--- t h e Boar: secs
citustion t h o t contsins slements o f cenger o n d requires
control exercised over t h e currancy, w h i c h i s pre
w
h
y I say t h e system o f toking
a belence comes in--- e n d whet y o u want @ s 65n slteznetiv
s n a quist
ts thet the Board shall b e p=rfectly passive
in t h i s matter.
Governor Seay:y kT h e a t itis t h e p o i n t I
‘lustrete. i
cesire
cemenc i rediscountine
ovea
currency, e n d t h e Boerd hes
eny further n o tes---
L
Governor S e e
s
¢ its reasons f o r thet, b u t thot
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
At
384
t the result.
pay out our gold.
h é e r e i o e w e ere <riven t o
“ e S pey o u t t e n million, recucing o u r
sSsrveé t o possibly forty p e r cent.
Lie B L Eley:
e e .
Governor e c ays
W h e n t h e reserve i s forty p e r
w2 c a n n o t r e c i s c o u n t a n y f u r t h e r e x c e p t
b y p2ying =
ty snd reising the rate.
lir, Miller; ~ Yes.
Governor Seay: T h e r e f o r e , I
say i t i s sutonstical-
‘ly controlling out power t o grant rediscounts t o member
“benks.
ir, Miller:
T
e c o n t o ls. by:
sion o f a
i
cen come u p i s s
s
P e a e
t h e expene
t puts y o u o n notice
situati
difficult t o get notes upon e n ess
= erenanpbion i s thst t h e Board i s
may effect t h e whole system.
h
i question o f currency
is not @ “uestion o f this district o r thet <istrict, b u t
cucstion o f t h e couhtry s s 96 whole.
Situation
5 - 2
ming v h s t h e r o r n o t c o n c i t i o n s
T h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
525
sre s u c h t h e t t h e r e s h o u l d b e n o i n c r e a s e
5
nst some o f t h e reserve benks woulc bring
of t h e Board t o begin exerc
bring y o u t o u n d r s t e n d t h e t y o u
those notes o n t o o reasonable o r essy @
a n i s s u e o f notes
“ould y o u p e m a i t
of sold?
Lie. Miter:
A l w a y s , excepte--
Governor Crissingsr:
Gentlemen, I
think
ter proceed with Drs Stewart w i t h t h e mecensnics
thins, before v e take u p the theorsti¢s1 enc of
ip. Stewars:
I
T had c o m p l e t e d w h s t I
hed t o say.
sc h e has considsred t h e seasonal fluctuetion,
would b e
forth, t h s t of course t h e Bosra woul2 heve tnuet
the’ Richamone bank;
tricks w i t h t h e wide seesonel siing e n d
thet s t t a c h
t o t h e n o t e reécerves;
On
Yeur r e m e r k s
o y Leo.
w
UiCor
e
irs
w e know
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
or a n y u s s t i o n
the p l e n m i g h t hevs,
i s=
question
of 3
o f p u b l i c polics
ré p r o p o s e d i s ¢
snoment o f thse publica-
brins o u t w a s
power, w o u l d
one condition sxisting
2
i n mme
ons
Governor 5Sssy:
ically limit the po-ers o f ext nsion o f tnst bank.
ir. Stewarts:
J e c e s s e r i l y t h s picture o f t h e system
ratio i s built u p o n the ratios o f t h e incividuel banks,
Tho s e b a n k s t h e t aseve s
wider r a n c e
o f fluctuation
are
Slicht eifeet upon the ratio ~
to any consiccrable extent.
in t h e p s y c h o l o g y o f t h e borrower,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
loons b y x
‘or reciscount
t o member banks;
LilyBERS:
a it=L y
it f o r curvency purposss
thet w a s t h e s i t v e t i o n
i n 1919
Pe
that y o u ¢ s n 2 . ¢
to cether sags doller liabilities,
r
i
e
2 nh d
rluctustions,
the t c o u s e
dif ferent which give ris¢
only s t times w h e n reteil price
thet t h e r e
reserve n o t e s ,
woulde
b
Tay
Se n c
¢
8 matter t h e t o u g n t t o C o i e
c a da
a
t et
j
e e e e
a
>
2
SS) ©
mand attention, j u s t o n t h e besis t a a t t h e Bosra, +
1 1 , 4
nie
tains,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Fe“, a
PLE Cys
Mir. Hemlin:
A
s I
understand i t , t h e Bosrd v o t e d
for the deposit lisbility m d note lisbility t o be shown
°
seperately.
T h i s proposed report contempletes t h a t h a y -
Gone t h e t w e s h a l l p r o c e s d
shall s l w a y s h e v e 3
cer
t o menipulete t h s t s o thet
e r e e n t a g e b e h i n a notes
m d
certain percentages behind <:posits.
It i o e s n o t m a n i p u l e t e t h e m e x c e p t
thet v h e n t h s incdividuel b a n k r e s c h e s a
have t o mske 9 trenefer.
iure damlin:
Y o u meen t i s b a n k
Tis b a n k
v o u l c b
e o b l i s 2e a
not l a y c o m “eny rule
100 p o r cent
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
529
Governor Seays
B y this report,
a s I understand it,
we S h o u l d r e s t e t e
Lr. Stewart:
d of
‘ o e s beyond that.
I t proposss a
dealing
o
w i t h ht h e motter
t b y t h se incivicuel
m benks.
Governor Cricsinser:
O n e o f t h e Governors present
iss not clear s s t o that t h e wplen is.
W L L L y o u stete
briefly what t h e plen
Governor N o r r i s :
furs ®
S o m s
o f u s know woat
t h
n o t know m y t h i n g about it.
long G i s c u s s i o n h e r s o f s o m s t n i n g x
the sénse o f the
berations, t h e t serly i n 1924
rection, s n d thet. m s ‘piesa
shoula publish forBl
7 ¥
~
CSNO08
£
4
+
a
L E Pescrvs
continue
o
G
now, nisintein separate sccounts
bshin adt h e n o t e s r e s :
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
550
deposit reserves, b u t that there b e no publication o f
seprrate note s n c ceposit retios f o r t h e bsnks.
That
tue matter o f vhat t h e incivicuel benk “Goes with the
ration, rhether i t shall continue with the combined ratio
is a matter w h i c h I think lr. Miller might consider w i t h
the C o n f e r e n c t e .
T h a t
is =
metter
o f i n t e r n a d e c m i n i s tra-
tion that I think would b e better Jsscribed b y Dr’ Miller.
Governor Strong:
D o I unéerstand that the New
That hes n o t yst been fully ciscussed,
is. 2¢sireblis thet. i t shoula.
cht w e
e
c esch bank 2howic.
mote e n d
in complisnce w i t
though you c o not
S
v
e
n
uepsretely,
to shot t h e reserves
pub l i s h
ths
Governor Cricsinger:
t
h
e
t explain w h e t t h e
plen i s ?
Governor N o r r
N
o
t =ntirely,
this “uestion:
2
tion o f f i g u r e s t h e t e r e s i r e e c y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
351
it g o further s n d involve =
sepsrate allocstion - - -
nt sllocstion?
aI
There i s n o very violent change,
thsre,
i o sbewark?
something i n the nae
working readjustment o f t h e relations o f the FedS*ricts
conci tions.
t o banking
T h a t i s shown b y t
in théserstios a s computec b y ur. Stewart hers
period o f t n e i s s :
2 a
2 g well s s t h e
sroup o f banks
enother, seventy f o r a
from t h e s c t u a l
ebout
them a t
SSpocs
oO
count o p 2 r s t i o n s s n d 6
issues, s h o w s t h s t i n t h e
o f t w o b a n kss
b ce f o r e
e
t i i r r e an c y m i c h t
l o n gOo t i m e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
552
to come 9 ficucisry currency t o t h e extent of about fifty
cent;
i t shows t h e situation o f a t least t w o banks,
notably one, whose situation i s such that s o far a s they
ere concernec,
b y force o f eircumstances t h e i r notes out-
standing have g o t t o b e covered,
a s a matter o f conven-
Lenee, b y one hundred p e r cent; w i t h respect t o the others,
ninety,
s n d with respect
t o s o m e others, s e v e n t y ,
2nd so
On.
Now, t o m y mind--- a n d I think this i s reslly importe-
ant, Governor Strong, f
wind--- t o m y mint I
of view you have in
r o
. spoint
m
+
esssune t a e operation o f the Federal
Reserve System lest year i s a n exhibit t o about the degre
to w h i c h w e s r e n o r m e l l y
serve situation o f t h e country, to-wit,
investments o f the System a s 2 whole, would be soniething
over one thousand million--- i n fset thet fisure has been
ZJoubled curing the lest two years, o r i n that neignborhood, when w e are getting pretty well r adjusted end
are o n something like » steady keel sgain, e n d I think i t
shows w h e r e w e e r e l i k e l y t o g o i n t h e future.
All these groups, o x 2 hundred p e r cent, ninety,
soventy e n d fifty p e r cent, therefore, represent,
2 s it
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Federal Reserve Bank of St. Louis
305
something t h e t i s n o t theoretically o r cogmsticelly
tup, b u t something neturslly derived f r o m t h e opzration
of t h e benks s s units. a n d t h e Pedsre] Reserve System s s
a whole during the last two ysa
I
n other words, w e
bout 8@ working normal; t h e t
represents something t h e t w e c o n accépt z s apperently established s s the svcrage situstion o f sach one o f t h e bsnks,
until there comes something i n t h e w a y o f a genersl change
Ln the- situation,
Governor Crissinger:
A r e y o u setisfied, Governor
Norris?
Governor Norris: I
ir, Jay:
cated yet.
am,
T h e opsration o f this h a s n o t becn i n d i -
T h i s i
s simply 5 seéteup, a n d these e r e mini-
mum Zigures t o be kept behind notes.
N o w , will br,
stewart o r Dr. h i l l e r b e s o o d s n o u g h t o t e l l u s h o w t h e
thing i s going t o b e operatec s n d that t h e proposed r e ~
tiestmesats e r e tast s
soing
b
s required b y the Board?
ate this--- l e t u s take
bs 3 , t h o s e i n t h s séventy p e r c e n t
third .s i
group. L
m e s
t h e benks have outstanding n o s
het a r e covered 7 0 per c e n t i n gold and
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
co lLbetsrel,
T a c y w i l l b e allowed t o issue acditional
long 2 s tisy p u t u p 7 0 per cent g o l d a n d 350
cent collsteral.
n e v e r , they want t o diminish
goli colletersl,.that t h e y have u p with ‘the F e d rel
agent s n d increase t h e p e z rcolistsral, t h e n i t
8 matter t h e t t h e y h a v e s o t t o t a k e u p w i t h t h e
*
Reserve Boerd;
fustify e
i n brier, t h e y have S h get. te
deosrture f r o m t h e e x i s t i n g normel;
t h e y heve
“s
got to show thet there i s ¢ reason why, sither through
e sllowed t o
demands o r otherwise, t h e y s h o u l d b
duciary 2lement i n their circulation.
h a t
what i t would m e m i n prectice ..
ertsin benk o n a Yo per c e n t basis thought
tist i t o u g h t t o heve
t s w o r k i n s atposit
being allowed t o gst notes
its representstion t o ths
Federal Reserve Board, c n c i f i t was justified, a i l r e s t ,
it w o u l d b e g l l o w e d
to pu
cent g o l d s n d 4 0 per cent psp:
In other w o r d s
elit o f .your.de¢
foing i n 1919 s n d 1920,
s n d s o on.
y o u milk
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
You c a n n o t m i l k a t y u r
The Cheirmen: I
o w n plessure.
think y o u h a v e t h e p r o p o s i t i o n
clearly before you, 2 s t o whet t h e plan i s s n d how i t i s
going t o opctrate.
N o w , I
think i t will b e well, i f you
went t o discuss it, t o give your ideas s n d views about
it, o n c w e will b e very giaa t o n e s e l l . o f you.
Governor i i c ¥ o u g a:l g
s
question
t o ¢sk e n d
s this: A c c o r c i n g
outlined, in. publishins the reserve spstement
it is contempletead thst reserves s h o u l d b e showm egsin
both outstending notes e n d ceposit liability, b u t
spect t o the in“ividuel benks, y o u ars not concerned
to how w e publish?
het i s n o t y s
termined,
l I
Governor icHougs i
thot t h e t woul.
unisrstood fron
b e l e f t w i t h t h e banks.
Personelly, I
think i t v e r y
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Federal Reserve Bank of St. Louis
250
that it should be, if it is practicable.
Governor Crissinger:
p h o ie 8
eter
oC S e .
e e
cen b s
Governor Strong:
T h e r e ere one o r two things
S$good m a n y things o c c u r t o me--- b u t there
or t w o thet I
wmt
to
Governor Criss
1c) O u V e n M s to,
Governor Strong: I
have a good desl of doubt 9 s t o
the legsl basis o f thet type of control o f the reserve
82s t o how mich they alloc
s
a
c
h class o f
as
ie bitty, t
seems t o m e t h e s t e t u t e
i s rether “ s f i n
the d e t e r m i n a t i o n o f h o w t h e t r e s e r v e s h e l l b e
hela e n d pledged rests w i t h t h s cirectors
banks.
B u t thet, really, i s not the most important
point.
n q u e s t i o n o f whether
o f its control, w h i c h t h e Bosrd
reserve s n a t h e exe 6
undoubtedly h a s o v e r t h e n o t e i s s u e s b a s e d u p o n t h e statuts,
or upon regsulstion o r sgreement, t h e first thing thet oce
eurs t o m e t s
d
e
s
i
r
e
d b y the Board a s
check upon t h e inflationery tendencies w h i c h will ori-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
537
control.
protection
baaks i f the infletionsry
in. the Bosray
t¢m politicsl comi..stion,
saver i t h e p p e n s d
Etatute,
g
r
s one! s m o n g
o r vhetsver authority, t h a t power, w h a t re-
emselves,
Lliance w v
a
e banks b s sble t o p l e j
h
the Board'g sxe 2
h e futurs u p o n
that gp: set powsr w i s e l y ?
n
e
only axperisnee w e
such p o w e r s @ s i t had.
Assum-
ary Board, w h e t could
Gov srnor
CaOt >
TT
T h
e
pees
When y o u .come t o
¢ the powers t h e t s r e contemplsted uncer thisplsn,
“iller,
y o u could s a y w e won't g i v e y o u e n y federal
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The
Governor Strong:
c o u l c G d s a y t o youe--
s a y , “No, w e won't
notes."
ie eeital bor:
H o w c a n i t Zorce =
note i n t o circula-
It cennot be, b u t i t sesms t o m s
tae point o f control Zoss n o t l i e thers.
control,
T h s point o f
i n s period o f infletion, vhnether i t
taroucn © borrowing progrem o r through a genersilly i n e
a t h e c o u n t r y o n d i n businsss
with the Giscount rate of the reserve banks, cnc whatever
bookkeeping system y o u s é i p , i t will come b a c k t o that
inevitably.
N o t h i n w
ts changed.
T h :
ire Liller:
Governor
the Bosrd,
ist b o a r d
eowle + b . c o u R G S
a r e
s
s
p
e
e
m
t o discount retes
e p o w e r over t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
559
y which t h e Bosrd
There i s n o m e t h o d b
F r o m thet point o f view, i f the
cen p u t out a note,
Booerd undertook t o put pressure o a t h e benks,
i t has n o
T h e Board cen igsue 3 note only
te do-it.
S u p p o s e b y milc
d for b y t h e benks.
e whole---
T h e Boerc, under those con
Governor 3tzong:
two plades o f 3
“4th e i t h e r o n e slones 3
p if
soiss
h e &
y
o
i i t i o n s
u csitnot c u t
t o h s v e t h e two.
Thero i s n o m e t h o d b y v h i c h t a s r e c e n b e e n y wmsnipulation,
a]
P o w e
between the Feceral
ag I. ¢ e s s i c e f r o m 2 concurrente
s
regerve benks e n d t h e Board, e x c e o t i n t h e ons contingency,
et i s t h e presentation
o f t h e Federal r
Peacral
4s the only plecs
tion.
O t h e r w i s e there n s s 1
point.
of View 2
e
r
s
b e t w e e n
concurrency o f
t h e Federal reserve
aral r e s e r v e b a n k ,
Governor Strong: T h i s plen is @ plen, obviously,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
040
204
to oreate a method t o control possible inflation,
i s it
not, Dr. Mi
lite IBhller: I
would n o t s c -
G o n o t a c c e p t thet. I
cept that e s a statement o f t h e a
that would be unjustifieble; I
a
S
e
e
I
think
think i t is altogether too
nerrow. T h e r e are many other difficulties e n d dengers.
I would s a y i t wes cesired t o definitely locate respo“sibility e n d show eccurstely w h a t was going on.
nfletion, l e t i t show inflation;
show that;
I f i t were
i f cefletion, l e t i t
b u t l e t the public k n o w exactly what i s going
i
on, who i s doing it, o n d which side of the acmunt i t
On.
Governor Strong:
I t seems t o m e thet t h e expsrisncess
fact that
or the past year hsve unmistekebly disclosed t h e
wheress ¢
yeer s n d s
helt
for
cernsd sbout t h e reserves b e i n g m e c n s t r u m e n t
disclosed t h e
inflation i n the country, t h e p#st year has
i
et thet the one thing the country i s sfraic o f
rletion.
L a s t spring t n
My fears
com
tures, w h i c h I
f
i
l
l
e
r e
d w i t h alarm
fee
o f t h i s plan, a s i d e f r o m o t h s r
posreally think s r e obisetionable, w i l l
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S41
=
he cdovelooment o f our situstion, which
to when i t will arrive
movement t o
export z o l d i n 23
s
O OW!
N o w , w h e n v e have s large
export movement o f gold whet rill happen will b e something
rite: tate:
A s t h e spplicetions e r : mad« f o r
New York the member benks who hsve t o provicic 2
gol
exported will coms t o u s for it, csné for every collar o f
h s v e g o t t o borrow 3
i thet they export *
onUs to meke good impaired o t
W
h
e
dollar
n thet move-
starts i t will concentrate v e r y lergely i n New York.
By the operation o f exchenges i t will spread throughout
the country,
a
b u t i t will origicats g
S i t pro-
stecounbe w i l l incresse v e r y repidly, o u r
WELL deelins v e : 2 p i d
4
‘letion o f o u r ress 6
dip into thas
eel,
s
S
Y
V
t h e n bee
c n d the manipue
w
e will have t o
S y u r n i s h exporters w i t h
o 2Deeec ©
N o v y rhet w e w o u l c b
f e w yoar: hence
woulc b e t h o t the worin e e tient o f t h e Board might change,
‘Sea insnegsment o f t h e New York Bonk misgit casngs, t h s
essons o f t h e psst might n o t b e e s sherp i n ths mind
those people, s n d t h e pendency m i g h t develop t h s t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
542
export.
to protect u s sgainst
whst h e w o u l c a
with
4
c i s
h f
t
i into tw
his note
soing
2nd even possibly s o m e clarming ecvence i n
t i tas back.
e b
might p u t t h e c o u n t r y i l a t o mn
y any morsa
then t h e
plece---
anything thet woulc t
Governor strong: (I.iterposing)
Beceuse
w e Will
have s e t u p e n orbitrary figure i n New York o f o n s
huncred
&
per cent.
t is not srbitrery;
T
Lia e e k
se
r
U u
CR
i t i s on
erived f r o m your sctusl citustion,
a
2 4
that I think y o u showed
Ssoms
hundred p e r cent.
Governor S t r o n g
a high one?
W a y n o t leave
Governor
a
v3
case o f any particuler bank, o r o f a l l t h
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
oy
whole, t h e t t h e r e i s 6 n Ssmergency,
transi-
i s3
tory character o r o f 8 more o t lessencuring character,
which meens that w e hsve g o t to incresse t h e ficuctery
elemext i n the circulation
m d diminish t h e gold content.
A n d doesn't t h a t cause clerm?
Governor Strong:
-
It did not csuse elserm.
c
n
L921?
ses that it was being manipulated.
I n other words, w e
were then issuing fiduciary currency rignt slong, b u t nobody knew it.
Governor Seay:
Y o u mean the public didn't know, o r
do y o u ma-n that t h e Board o r banks G i d n't know?
iy. Millen:
Both.
Governor Seay: I
Lin, i
think i t w e . v e r y generally k n o m .
think i t w o s generally known,
wera looking all the tive a t the
reserve a g s i n s « c o m b i n e d l i a b i l i t i e s ,
s n d you wondered
why t h e reserves succenly bsgen t o g o down s o repidly.
The point h e d been resched wnosre t h e credi te
carried o n the books o f t h e banks s a n e
i y
out i n actual currency, a n d then t h e ratio
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
544
had t o b e incressed s o 2 s t o snsbie t h e banks
to get a l l the currency t h e y vant
d in New York
I f w e ere a d v e r t i s e
Governor Strong:
a-one hundred per cent bank, m d w e ship 9 hundred
gold, w e are n o longer a
one hundred
per c e n t bank.
lire Miller:
I
t i s e very misleséing thing
anolysis t
o make e n srbitrery assumption.
W h y
you likely t o b e called upon t o ship t w o o r
rec millions o f gold from New York?
Governor <troxng:
e s a w that happes
I
way?
Governor 3trong: +
Because
w e took t h e embargo o f f
“yiancs u p o n u s .
ivy h E blows
nce 1919,
B u t the
h e t ise
e
x
t occassion?
sn s r b i t r a r y
fsir w e e t h e r c o n c i t i o n s w h i c n
7
end w h e n t h e worl:
or S n y consicdcredre, p a r t
O L E 7,
efter t h e y
production c o w n lower t i a n ours,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
545
neve Saebe sieneaces t u m sesinet ve, i t wilh
aven 2@-eepitel op-retion in-their eurre. cies
a hOWs
A L L Vash.
,G us?
c
e
e
a s
g o l u g to turn the
t w i t b e cae o f t h e most
importent symptors--Governor 3tro :g:
their reserves, c u e t o tie exports o f
reise
i n t h e “iscounts.
Lite Hie1eys s o r s t h n i n g tast i s going t o impeir t a s
eybercbsnks! res:
Governor
eee
“
S t
-
i
g
f
Governor t r o n g :
e
r
e
n
c
e
i n t h e belenee
o f
Yes---
DegeeteeFgOS a a I s a ' t thst conti: -enecy = very
hls one;
s t
t h s lorsicn sovernrsate
neh =
Basopvatebaste < f i r icten C e 7 s 0 g th Tae ooRae
Tast won't b e true,
Then thet tekes place i t will b e a t a
waen t h e whole price structure h a s b e o n s o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
546
t
o
n
only tneir
currsney,
a i volume,
g
pb u t
u PoS,
Governor
ances?
Governor Strong:
‘elotive price levsls o n <
out o f line--GOovVernox S t r o s c s
O v t h e i r s g e t i n t o lisse.
cm h a v e price recuctions sbrosa,
a
TnrSy
s w e c a n heve
sdavences h e r e ,
Pee
h l ler.
I
t i s i m p o g s i b l s f o r them t o g e t p r i c e
recuctions o n # gold basis exclusively sbroad;
i t is
ad- t o g o o n unless w e c o m e into Lote
with t n e n .
Alwagsobserving t h e t t h e r e i s @ e e r t e s i n p a r -
a s
> = b e tiikonoe
w e e |n }t h ed itwo,
ity
it mesns t h e t i f t h e tread b a l a n c e s
nici e n
te n
swing o g a i n s t u s t h a t o u r prices e r e t o o n i g a
a t
s a neve g o t et o b e brought
e
S e with t h e
into l i n
4
ship
iteredworla p r i c s l e v e l b e f o r e w e w i l l n a v e t o
bots
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
547
erecit i s being used
by thé member bsnks.
Governor Strong:
n y : p o i s t. Us
if t h s p l e n contsomplstes ignori::
t h e pos-
solc movement--But i t coes not.
Governor strong: I
snoulc s a y i t w a s .
1
tiv s.
Ls UEALeRt
B u t i t «4
sefegusrda t o
n o t.
k e c a r e o f it.
o
i
Governor i. g
O n the contrery, i t
u
t of orcer, m a y
I raske
Governor Crissing C e r t e s i n l y .
Governor weLougs
T
n
e plan nes
ssune t h e Bosrd vould liks t o heve 3 n
the opinions o f those p r e s e n I
underste -d.taset t h e
been submittec b y Dr. Miller t o t h e Cheirmsn,
I Go not understand, h o ~ s v e r , t h a t they have resched a n y
conclusion sbout i
we w e r e o a r m i t t e d
F
o Gee SAsesset
t o t e k e t h i c subitect b a c k t o o u r intile
vitvel confarencss, w h i c h I presume w i l l
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
that toul¢ satisfy t h s purpose o f the
thst thet be-cdoene.
possible t o -cdivice i t
into t w o suestions; first, t i e m e r e stetement o f t h e re*
spschtive reserves, c n é secons, w a a t t h e conmittse “9vors
bsyone thet, w h a t w e csll, perneps improperly, wanipuleIf you s e yv n o t o the firet question, t h a t ends
metter,
plen
I f you ssy you <o not object t o the
tuen
ofsetting up the reserves .cparetely, you could
think t h e t would simplify
tske u p tke other question. T
it very much. I
tion, b u t I
a n prepared t o vote o n t h e first ques~
e m not prepsred t o vote e n t h e secona 2ues-
tion.
Governor Jay: J a e t . i g t h e point o f t h e first, i f
you < o n d heve the -scond coupled vith it?
Hemlin:
M e t i s “ a c t t h e Boerd voted on, t h e
This simply snows
“9 anytatic.
YEServs F 2 2 4
matter goss I en
E
i
l
sd t h a t point,
r
e
r
'
s motion; b u t ,
t o g o o n with t h e proposition
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
549
265
of heving some banks with one hundred per c e t notes,
some seventy p e r cent, e n d s o on, i t seems t o m e too
mich like having sbsolutely f r e s h esgs, fress eggs
GZES~<
lip, Millers
T h a t i s exectly w h a t y o u have got.
Mr« Hamlin:
B u t I
don't w a u t t o c r o w ' a n d a n n o u n c e
ibe
_
Governor Sesy:
any p u b l i c s e n t i m e n t
stend
M e y L
e s k Dr. M i l l e r w h e t h e r t h e
o r ccsire,
o r insbility
n e reserves e s state: oviginslly,
t o uncer-
s o far s s t h e
Boerd knows?
b e very
Dr, Haller: | No, b u t I think a l l o f u s must
a
o n for
s l i v e t o the ‘isaissions that heve been going
amourt o f
“the last t w o o r three years, s n d the great
year with respsct
interest t h a t has b e m s h o w i n t h e lsst
t o t h e great
to t h e future optrations a f t h e system, e n d
4
iggestions that w e heave receivec from one
o f the
or snother relative t o t h e bett’r operstion
6 nh
_in the future, s o os t o civ? us “het some call
conditions, s n c
stable practice, otners c c l l rors steble
Hess
others b e t t : i n i i c a t i o n o f h o w t h s F e d o r a l
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Federal Reserve Bank of St. Louis
264
5
5
nendles these metters. i
0
Beye notieed i n s )
o f this,
with the exception of very extremes cases, the consistent
,
s
u
g
; estion t h e t some how o r other t h e
inflstion, like the one w e heve had during the lest
constitutes
t h s chief o b s t a c l e
t o any ssie
operetion o f t h e F e d - r a l R e s e r v e S y s t e m i n t h e future,
Governor Seay:
m
e
e L
M i1
f
method o f s t s t i n g t h s r s s
7 2 s t h s form o r
s
s
s b o n -
Jon. t h e present m e t h o d b e c a u s e o f a n y l a c k o f und: rstand-
he p s f
Piette
>
public, o r because there i s any
e s . 0 0 the p a r t of tke public,
s o far
know?
re i:tliler:
N o t s o far e s I
Governor Strong:
know?
I s n ' t i t going t o confuse the
I think i t will educate t h e public,
Govrrmon
Herding:
L
e
y
o t oglk D r ,
hiiller
igen
y c
coumittse h s s s w e n consicsretion t o t h e smount o f be
hele b y bonks in this country for foreign accounts, also
_the a m o u n t o f Unites S t e t e s c u r r e n c y h e l e esbroca?
a
hneerd S e c r e t a r y H o o v e r m a k s 3
which
|
h s seid thst while the
n h
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S51
@®untry, t h s t this country w e s sctually a
Sebtor t o the
i
v o r nl 1922?
d
N o w , i t seems t o me, i n
COnSTCSerin= y o u r o n e h u n d r e d p e r c e n t banks, t h e t y o u
2 s thet are liable t o be
ought t o consicer t h e difficu
met when things begin t o get normel o n t h e other s t e ,
if they ever do, when those balences will b e vitherawn.
Nobody k n o w s e x a c t l y h o w m u c h U n i t e d S h e b o n c u n n e e y
hele sbroad,
is
W e have a n in.icetion, wnen, 2 s you know,
between July, 1917, a n d July 1919, when permits had t o
be tesued: for shipments o f curzency e n d gold, w h e n one
huncred e n d v e v e n t y i b T a o s
sbrosd.
o f currency w e r e siipps
O f thet smount sbout fifty-two million wernt t o
nelence t o otier forsign countries.
reeaNow, t h e moversnt i s still continuing f o r psculisr
£
The people
i n foreign countries p r e f e r American
cuvverey Ngt5 o Americsn gold.
ereat m a y people think, 3
S
o tust i f w e nave, ’ a s 4
f °5°°,000,000
mininumo
in
abroad,
verious Z o m s o f Unitec Stetes currency h e l d
Whet, i n r m 2 l times, would have been
golc. shipment. I
texe i t ths t é
-.eonss i m t o t h i s c o u n t r y i n e v i t e b l y f i n e s
h e g o l a that
i t wey t o ths
Fedsral Reserve B e a n e perticulerly t o the Fegercl
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
B52
Res’ rve B a n k o f N o w Y o r k primarily,
ment i s t h e o t h e r w a y ,
t h a t w h e n t h e move-
i t coesa't m a k e a n y cirlerence
it i s = Fedsreal reserve note o r wast i t is, i t i s
n the diwinution o f t h e golc réFedsral reservs benks,
I t seems t o m e when
the movement turns t h e other way, i f you w i s h t o cdisebuse
the public m i n d o f t h e fect o r o f the impression t h e t this
vest smount o f gold tha i s now helc i s some golc that
belongs t o us and does not pelons to somebody else, end
is t o b e u s e d 3 s t h e b a s i s f o r e r e d i t s - - = v o u l l a ' t
Lt
bew e l l t o see i f some reasonable sstimete c o u l d e
b mecde
of the smount of Averioan currency held abroad, with a
view t o creating,
i f you |
3 6 s o m e kind o f bookkesping
or t h e o r e t i c a l s p e c i s l r e s e r v e
t o protect u s a t 8
time
when t h i s m o v e m e n t w i l l t u r n t h e o t h e r w a y ?
Ir y Miller:
f e ere protected,
Governor Harding: T s k e , v o r instance, t h e Boston
ae
I
Go not k n o w i t , b u t cannot sccou.t
T O 2otis orl
any other way, but our circuletion of 3225,000,000 in
5 tendency t e incre
4
vown in industry for the pest six month
cood many o f ‘our notes e r e n e l d abroad, I
think s greet
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
org] reserves notes issusd b y N e w York a r e
enc I hed thought a t times, o r wonc~red whet
wet - 3 Li G e o s &Ro S e s
woula hsve b e s g o l ¢
less c o l d then w e have
I think t h e t could not
esnnot s e e t h e logic o f sugsest-
Governor Hsercing: I
thet they h e v e thet lisbility
housenen w h o h e s e
l o t o f recesipts o u t t o x
Wao tekes t h e position t h s t
‘Sy
a s long e s t h e owner o e
1
goods
esll f o r t h e goods h e may e s well dispose o f t h e
ane toke s chance o n replacing them.
bee B e e s
Y o u get the
gcnsme---
Governor Herding;
w s s n ' t talking sbout the bookizg stout t h e proposition
yes s d v o c a t i n g yostirday.
Let m e follow o n e phas
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
554
two o t a e r s .
mi.itoi
h
thers might v
u
n
d
mio O u LT. bY
r
e
d millions o f the
w York,
e
country;
returneca n e r s
e n d I
s n d sssume t h e t v i n e n c o n -
T O R 7récsr
neve
s hundree p e r c e n t golé u n c yr this scheme, t h r e e hundred
in notes w i l l c o m e i n t h e r e 2 n d w i l l t a k e
LorSsc
1b eos:
L e n s
Governor S t r o n g :
ioets
s
B e e
n
Governor Strong:
thet waye
T
S u t
B u t o t h e tl e n ’ 6. n e e- w i t
o
Hires
t
e
e e poe
s w i l l c o m e beck.
N o , they are
y
our l i s b i l i t i s s
Eee. Willers
ity.
I t incressss t n s cspos r e s e r v e o f t r e cspositing
member benk, doesa't it?
the m e m b s r
bank
went t o kcep them fork
Govsrnor
l
i
f
them to imso
%e
Loans
on
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Federal Reserve Bank of St. Louis
S55
Mitiers
B u t whet do wergive t h e foreigner
the n o tes?
“Goods.
All right, then, t h e gold steys here.
Governor Seay: S u p p o s e t h e reserves o f t h e New
York Bonk were sixty p e r ce..t when t h e y came in?
ly. Miller:
h e n they went out, y o u mean’?
W h e n t h e notes c o m e i n for
Governor Seay:
tion?
re Miller:
I f t h e reserve w a s only 6 0 per c e n t
when t h e notes w e n t out, there woulc b e n o chenge i n your
reserve s i t u a t i o n ;
t h s t 1 a tee nots t h s t went o u t would
sixty p e r cent note s n d the note that caus back
cent note,
s n d your ratio w o u l d not
Governor s e s y :
Ne@ York benk hss ré:
“Suppose, then, seversl hundrec millions o f thst currency
trom forsicn countriss shoul? c o m e 1
Governor Herdi
h
e currency held sbrosd i:
very < i f ’ e r e n t p r o p o s i t i o n f r o m o u r l o c e l
in t h e c o u n t r y ,
beceuse ours
m m cizrculation
i s interchancesble.
S
0 ThE =<
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
e note credit outstanding s n d sometimes a
dit, o n e o r the other, b u t when t h e currency n e l d
abroad comes b e d n e r s
m s e n s i t takes t h e gold.
Tf you want t o c o snythins sbout that, w h y don't y o u prepare a
plan, e s t i m a t i a g f i v e h u n d r e d m i l l i o n d o l l a r s
any t h s o r e t i c s l s m o u n t o f e e r s t e
or
c u r r e n c y h e l d cbroad,
sccordin= t o t h e best i n f o m e b t o n eveirebis, 3 Ye e o
thst money t o th: verious banks s n d require 9
spe oie
reserve agsinst t h e currency h e l d sbroad?
Mire Miller:
w e could n o t c o i t and
P e r t l y beceuse
“ h e t t h i s mesns,
partly b e c a u s e t h e r e i s n o nesd,
nor--- I
Gowr-
co n o t think y o u quite g e t t h e gist o f it--- i t
s aveilsble, e n d t o t h e exputs t h e gold where t h e g o l d i
for A m e r i c e n
;
THe f
3
“48 there t o the 9 : f
, y o u know t h e gold
n d r e c p e r cent, t h e Federal
reserve n o t e t h e t goes o u t i s e
o f ¢ one hundred
you k n o w i t s i s
there t o t h e exte..t o f r i s
p e r c e n t i f t h e note
note o f 9
fifty p e r c e n t fed-rel
goes sbrosad i s a
reserve b a n k .
bank should issue 8 consid
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
x‘
3
5
7
‘
d t o g o csbrosc, w h s n t h e return f l o w came,
me, f o r the recemption o f those notes,
benk vould b e in a pretty ticklish position;
i t would
o meet thst o n l y b y “irewing cown g o l d from t h e
be a b l e . t
Federal reserve benks.
I n other words,
i t would
have sxoctly t h e same ability t o redeem t h e note a s i t
would t o issue t h e note originally i n golc, w h i c h mesns,
from m y point of view, t h a t n o Federal reserve b a n k reslly
posiought t o ship currency ebroed which i t i s not i n a
tion t o cover i n gold s t one hundred per cent.
ir, Perrin: —
“Met is-the difference i n t h e ¢ mend t o
milbe created i n this mwuntry b y shippix: t h r e e hundrec.
lion i n Federal reserve notes o r shippi
h r e e hundred
millions
ee
Governor Herding:
L i m . Hoover seys t h a t w e
particle.
It mskes n o
Governor Herding:
V h e t is 1
circulstion i n Cube?
b e : 7 o i n e g to be
I f they put out 4
ner c e n t n o t e w h e n t h i o r e a r e o n s h u n d r e &
ver
p s r cent notes.
benks, t h e Cubsns w i l l «ant t h e one huncred
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Thet p r é s e n t s - a t r o u b l e s o :
but that i s meinly Atlanta's problem e t the prosent junc-
Let m o osk Dr* Hiller t o forget f o r the
moment t h e cuestion o f t h e possible shipment o f pol
snd t o consicer t h i s new plen o f stating t h o reof
y dey opsrations.
{
retio s n d bese i t s j u d g m s n t
note retio,
f e c t
o n the public
é t h e public t o look 8%. taat
o n t h e Csposit ratio o r t h e
o r h o w i s i t g o i n g t o t e l l ¥ h i c h i s importent
st the moment?
T h e traises i s @
ioe S E L e r s
logical question, %
very i m p o r t a n t psycho-
should s a y that.
1 4 would b e v e r y
try t o e s t a l i s h : s t h e n o t e
on yinety o r better, 80: 2 8 t o
get the public accustomed
f i r u r e
n o
I h a v e
not been o n deck t h e last t w h r e s e ceys, s o I haves
‘not been able
e
s;
e w h i r o m p u . tt
through o n t h e b s s i s t h a t w e #scune,
situation
he n o r m s l
ss
S s c a g e |S
have b e e n followsd
b u t talking t h e p r e s e n t
9 6 n e e r e n spproximetion o f
és
in t h e ressrve benks, i t occurs
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Federal Reserve Bank of St. Louis
559
cleer t h a t f o r t h e System a s a whole w e c e n s e t upe-=-~
elghty n i n e
per cent--- b u t w e c a n s e t u p t h e psychologicsel figure
of ninety.
T h a t firure o f ninety i s inficitely morse
valuable then 89, I
think we can work out something
sbove ninety, e i t h e r n i n e t y - t w o
o r ninsty-three,
the piblic w o u l d b
e a c c u s t o m e do
t thinkirg a
note o f t h e
erel reserve benks s s 6 whole 3 s being a
vered b y a t lesst ninety p e r cent. I
we .cen run along f o r s i x months, a
s o that
note that i s
conceive t h a t
year o r @ year 3 n c a
nalf, possibly two, without s n y perceptable chonge i n
the ratio.
I t won't get below ninety unless w e co the
utterly improbable thing, w h i c h i s t o mset a
heavy ce-
or
mend f o r t h e export o f gold, unless there i s a n outburst
of inflation here e t hone.
T h e public would, therefore,
eonduakis begin t o think o f ninety p e r cent o r thereabouts
as b e i n g t h e n o r m a l g o l a p o s i t i o n o f t n e F e d e r a l r e s e r v e
notes.
Goysrnor Strong:
B u t isn't t h e t = dangerous idea
to cultivate?
‘ie M
N
o
, i t isthemost excellent
you c e n possibly s e t up.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor Strong:
H o w e b o u t t h e g o t o export t h e t
riente
Governor strong
E v e r oybwy
won't they?
"out t t W e l d 26: c e w n f o r o
Governor Stbrongs ¢
the
e
S go
Ci scount
DE
plecs i n big volume i n this country sxcespt
The Jonger i s we won't get
Governor strong:
“18tcve
h e rseson m a y bs,
Ank
SG
é our n e tes'g i t
cy p e r
Pas
aa
jus tmen
discounts
ineresss<
PCeCSnel es 1
fivs
C O I s . coONis
2
n a
O=
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S61
re going t o have t h e t under y o u r
Governor strong:
W i l l g o Gown just e
I voulja't w a n t t o hevs
e d u atsd t h e public
the normel pcretntege b e
kaw. a t L Leys
san b u t
t o think thet
o u r notes w a s ninety.
Y o u heve ecucatec t h e public t o t h e
nore y o u export f i v e hundred million b u t i t ‘ o s s
that i n our reserve statements.
Governor Strong:
N o , I
do not think so. I
1
‘ public i s i n this freme o f mind:
he
think
T i e reserve benks
heve s o much nete lisbility s n d s o much ceposit lisbility,
notes c n c obligstions o f the United States Government
etween ¢ech other s s liabilitiss,
heve s o much golc bekind them,
‘ h a t t h e public
know i s how m u c h i s this gold t h s t you hevs,
e hundred
fifty per cent bank.
7
jiscounts incres:
cher discount retese
f
a snd.
i
W i l l b e to
, t a s r e a r e means
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Federal Reserve Bank of St. Louis
562
-ituation now, b y which the public will not be es
wasn i t gees’ o u r r e t i o g o « o w f r o m 8 8
to 60, a s they w o u l d b e t o s e e u s d i p
ninety p e r cent reservs, which i s regardec e s a
sort o f axiometic normal behind all o f our note issues.
To see u s d o thst i s what would frighten then, i t cecems
k
toTi.
y thought i s if w e Go los@ i n thet period lerge
fly e huntrec
sold exports, thet w e will mest with this
million, t h e t worry will erise a m o n g the banksrs because
they sre bor‘owing s o much money from us, and i f we want
c o n s
to velieve thst strain w e can d o i t just e s we }
into t h e m e r k e t e n d i n v e s t i n g t h e *
money s n d s l l o w i n g t h e m t o p a y G e t t i e C I S Coun te.
You s r e p u t t i n g t h e c a r t b e f o r e t n e
Y o u s r e assuming t h e t y o u aré going t o lose t h e
horse.
gold “without knowing «pecificelly h o w i t i s comins sbout.
Governor Strong
n
e p u b l i e n ’ tso tor t o -arere
With t o o k =: t-the ope
sa't metter what the public
erases,
b e are s o i n g t o lose gold unless
-:
Our “SUrrenty end. c r e d d G
in o u r
o
e
e b O.Tpatas.
o w risrket.
c e
U S
it
4 A 4
w
n
foreigner
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Federal Reserve Bank of St. Louis
563
O r unless they deflate over there--
Governor Strong:
wet, M
s
a
e thing.
m
have g o t t o d o i t here,
to
i
I f they d o that w e
n line, b u t through a
series o f years there i s going t o b e a gradual subsidence
in the internationel price level.
T h e r e i s n o method
by which w e c a n set ourselves spert f r o m thet, except
by t r y i n s t o c o m p l e t e i s o l a t s ourssives.
Governor Strong:
T h e t i s sssuning w e e r e n o t going
loss gold, snd I think we are going to lose it.
i, M L LLeM
w
y fear
et sll, and i f u e Cog v e
" e @ a r s not going t o lose
l o s s i t extremely slowly;
egeinst
ere g o i n g t o l o s e i t ¢ s t r a c s b a l a n c e s w i n g s
Governor Sesy:
d i d n ' t cppear i n 1920 t h a t w e
rapicly
were going t o deflate o v e r here--~ certainly n o t a s
dic occur.
want t o ask Dr. Hiller
gold matter,
sitvetion, w h i c h o f thes¢
I think thet i s a very pertinent “uestion, a n c f o r thet resson I
awelt upon something t h a t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
should sey,
“ive oe feirly constent co~efficient. I
thet n o t h i n g a x t r s o r d i n a r y i s g o i n g t o h a p p e n f o r
fa}
of 2
year o r twWo--Let u s e s s u m e t h e t .
ne public, particulerly i n your city,
woule vwceteh t h e deposit reserve f r o m week t o
T
month t o m o n t h a n d m a k e compsrisons.
h
e note
constant
Governor Crissinger:
b
T h e aestion is, s h o u l d e
of th
public b e instructed t o follow one o r t h e other
which one? I
think t h a t i s the
point.
Lire Jays T h a t i s m y point exectly.
ie Miller:
T
t shoulc b e instructed--- I
ustruct itself;
t h e trece p e r a
think i t
w i l l 66. o m ¢é
to
notice o f it, b u t o f course w e would heave
thst.
e which one, a n d I shoula s
Y o u eskedm
incipient phases o f a periodof
2
S
w a t c h
for. e n y s i e n
your d e p o s i t r a t i o s n d w a t c h i t c l o s e l y
thet i t is sbout t o get into your circulation.
t n
always begins
other words, inflstion, when i t begins,
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Federal Reserve Bank of St. Louis
565
account.
c o r t e i n
BBLS. .
point it. begins t o convert itself i r o m e d i t o n t h e books
into <icmond f
that p o i n t
retio,
a s c t i s l pocket cesh.
i t is very likely t o g o into y o u r
s n d t h e n i s shene--Into w h i c h
what y o u tant t h e public t o know, e x c e p t where
the public t o b e i n ignorsncs o f thet i s going on.
other worcs,
e a lL
t h i s woulé bring the public into
lines with how the work i s done.
Y o u remember I asked a
centlemen the other evening whet i s the besis o n which
f Snglend now.
Governor Strong:
I t was based upon their reservs
efore t h e war.
‘Mr. Hiller: = x e c t l y , a
Governor Strong:
bin, Ent bers
W
fixed reserve i n notss.
e hs
g
o
W e heve g o t thet.
t tnat.
W e h
reserve i n notes until t n e
hes exclusive power t o s a y
he changed, s a y s i t shall b e changsc.
A n é thet
A
cisely t h e function o f this Meascral Ressrve Bosrd,.
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Federal Reserve Bank of St. Louis
270
*,
you ever consicer this, ir. Stroige-- a n d I will s i vress
myself t o you perticularly,
° s you represent t h e bigvest
thet i t would b e a n utter anovsly t o
have twelve note
i s n g b e
t
h
e same country, ¢ e c h
on8 pursuing i t s o w n free, in“ependent policy--- t h a t
coule n o t b e t o n e w i t h o u t g e t t i n g t h e w h o l e c o u n t r y f r o m
time t o t i r e i n a
very p e r i l o u s p o s i t i o n ,
T h e very
logic o f the proposition demeucs t h e t with a Fecereal Ree
-ystem o f twelve banks y o u must have
body, a n d thet body i s the Fedsral Reserve Board, o r
otherwise g
w o r k i n g a t cross purposes.
N e w York
micht Ceflate t h e whole country e n d the rest o f t h e country b e utterly d e f e n
Governor Strang: ;
be true,
a r s e o f thet might also
T h e cgricultural sections m i g h t G o t h e same
thivg.
ie
i b ler: S u r e l y .
T h e r e m u s t b e somebody i n
control, e n d that body, under t h e lew, i s the reserve jie B e r d i s t n e guardian o f 2
b
currency, e
it becomes r e e l inflation,
serious,
a n
i s a mettsr o f cur-
Everything e l s e i s merely,
as
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Federal Reserve Bank of St. Louis
567
s bite w i t h the front tseth;
b u t when tne
i g
gets serious s n d gets t o t h e molers, t h e n i t i s the cure
rency.
a
f that power b y
o
Governor Seay:
Bosrd c o e s n o t s e e m to m e t e b e s t
enengs o f m
a . %
stating t o the
the Fec:rel reserve benks.
T h e r e i s one point o f visw
thet i s ontitled t o some consicerstion,
ané thet i s t h e msintenance o f s
System policy e n c prace
i the Fecer3sl Reservs system.
ticen
‘ T e have changed,
snd n o w w e are about t o change
t vas rega
systemi
ve should gather into t h e
N o w i t 1
sold o f the country.
ravorse t h s t policy.
into t h i s
it has nothing t o ~ o with this.
h e s s o m e collatersl influence,
Governor -29y: t
because i t was brougs
mettsr. i
n i n n u e c t i o n w i t h t h e other
think - i t 2 3
is o n e c e s e i n w h i c n
has b e e n proposec,
o t e r e l beasriug,
a n d there
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Federal Reserve Bank of St. Louis
568
D r . hiiller ha: 2lways b e e n
Governor Crissinger:
opposed ‘to paying o u t t h e gold,
ss I
unde rstand it.
e m glad t o know,it, sir.
Governor Seay: I
Yes, b u t I have °lweys thought thers
was ©
better
f h e n d l i n g w h e t t h a t sims a t .
method o
H e
new plen, o r
would not want to s r e c e p t i o n of this
rether the restoration o f e n old plan, prejuciceca b y
see t h e g o l d i n circulation. P s r s o n that would emourt t o much ons w a y o r
t would b e disastrous a n d I
4
the 3
thet gold t o
be opposed t o the proposition o f restoring
circuletion
i n order
t o m a i n t a i n o u r reserv:
opening u p <= keg o f dy.amite.
which hss been referred t o nere, I
where
sold o u t
do n o t rememter b y whom,
in; y o u must take the gold out of circula-
enc you sre then in e position, when your reserve
runkiir d o w n ,
o f
You
“he gold constsntly t o keep bul.
behind y o u r belence o f credit.
ho c i r c w i e tion. 1
l e n y o u begin t o dilute
@ a @ e r a l Reserve B o e r d has n o look
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Federal Reserve Bank of St. Louis
ae:
in o n thet situetion,---
Governor Strong:
T h e Zoerd might cecline t o issue
Fecaeseral reserve notes.
lp. i
A
Board t h e t wnt state t h e
in such s wey will not cecline t o issue s Fed:
Governor Norris:
weetion p i squid i e s
is this:
T f y o u will pardon me, I
t o heve D r e Liller enswer, a n c thet
T h e primery purpose,
proposed chsnge,
nave a
s s I gsther it, o f the
way
i s t o state t h e ~eserve i n &
thet i n a perioc o f inflation o r expension t h e public
may more readily notice evidence o f it?
Ap, Millers
O r the reverse, Governor Norris.
W e
would have a sound reserve system, e n d t h e country w o u l d
have s e e n s o much more cuickly, particularly m o r e 7uickly
seat w a s going o n i n 1920, i f w e had h e d that
Governor Norris:
sion,
f i n e :
i f you have sceustomed e
T s t o periocs
public t o a
cent reserve agsinst nowes, s n d y o u
g
o
ninsty p e r
s
s down
to85° snd 80, s s you extend credit, “on't the public sc_cept t h a t 2 s e v i d e n c e t h s t t h e s i t u a t i o n w s s Z e v e l o p i n g
in a n unwholesome way? W o u l d n ' t t h e public say “You
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Federal Reserve Bank of St. Louis
370
274
should not scare u s that way?"
T h e fromers o f the
Reserve A c t s a i d t h s t f o r t y p e r c e n t w a s s u f f i c i e n t r e -
serve ogsinst notes.
v
e still have mors t h a n couble
that left, m d you can a t eny time switch any of that
reserve t o t h e gold sgainst your deposit liability, e n d
you still have a great deel more than was considerec necessary.
ir. liillers I
Governor a
have n o coubt some would s a y that.
f o u l d n ' t w e prectically, s o far
es i t i s tithin our power t o co so, b e smending the Federal Reserve A c t b y provicing f o r e n cighty o r ninety p e r
cent reserve sgainst
i n s t e a d o f forty per cent?
Governor Miller:
Act.
N o , w s do
a
m
e
n
d the
Y o u only necd t o smend
This Bosrd
clear one--Governor Seay:
i t e r a
T h e thought I
wanted
to i n t e r j ¢ c t w a s t h a t t h e r e w 3 S . a n o t s b l e s u t h o r i t y . o
h
w
ssid when w e were J o w m t o about forty p e r cent, t h a t w e
had e reserve o f 3750,000,000 which w e might safel;
Governor Young: Y
3 few questions,
“L
w u l d like t o a s k Dr. Mille
i f I mey. I
gather f r o m vhat
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Federal Reserve Bank of St. Louis
S71
quirements i n that Cle trict, 2
:
t
heave money
gin seasons o f t h e year t o mest those requirsin
e no cifficulty
would b
Reeerve Board i f w e recuced this f r o m seventy t o sixty,
if w e went below rorty, e n d
ye -moul® b e - perm D u e e s d i s c o u n m : w i t h other Federal
reserve b e n k s t o build u p our g o l d reservs.
N o w , i t is
uy thapression o f banking i n tie U n i t e c states t h a t infletion occurs l o n g before t h e Fedcoral reserve b a n k hes
anything
o o r
I
may b e w w e ne a b o u t that, b u t
t o d o with it. T
“
a m rigat,
A b a n k t h a t i s borrowlns f r o m
ederal r e s e r v e b a n k c a n g o c h e e d s n d sccumulatse s p e c u -
investment loans, =
t h a t not, e n d then
when t h e i n f l a t i o n g e t s o u t o f t h e i r
they owc o m e
t o t h e Hecers
reserve
b e
whether w e w i l l l o a n t h e m m o n e y o r whether
loan them money.
T
l o e n t h e m money e n d tell
e usu:
fiem t h e s that: process m e s 3
event w e g o s h e a d e n a :
w e will n o t
t e Steps
B u e soe o m y
h e m t h e money t o take c o r e o f
sa
uise.
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Federal Reserve Bank of St. Louis
372
276
19st doesn't dc-velop i n one section,
greet number o
—
m t develops i n a
e c t i o n s , s n d t h e results a r e a s w e pay
m o n e y o u t w e either increase o u r note circulation o r
isersase o u r g o l d holdings until w e get down t o this
seventy p e r cent.
e might explain t h s situation t o
W
Boerd s t this time and t h e Board m a y
permit u s t o rediscount w i t h
to t e k e c a r e o f t h e situation.
B u t l e t us as-
the Federal Reserve Board felt thet the Minnespolis
not hendling t h e situation i n the w a y that t h e y
t, that they shoulda not l e n d money t o
‘those b e n k s t h e t h e v e g o t t e n i n t o t h i s class.
T h e
ment i s w e heve already losned money t o t h e ,
many g o o d banks i n thst cistrict, banks
may have a great
o
neven't resorted t o infletion, e n d they come i n and
request r e c i s c o u n t s w i t h u s o n d w e s e y " W e c a n n o t L e n d
any more money,
we
Board won't l e t u s
fference w h e t h e r
them money, t h e g o l d goes o u t just t h e
ms
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Federal Reserve Bank of St. Louis
ragae
bsnker i s n ' t going t o close h i s coors;
h e is
draw dgwn his legel reserve, which mesns golu, o u t oi the
i4innse
Fedtrel Reserve f
e
n
a t o teke care o f
i s probthet situation i t i s not only possible, b u t i t
able t h a t o v r r e s e r v e s w o u l c b e w i t h c r a w n
t o take
‘the situation.
Now, i t
Federal Reserve Bank o f Minrespolis i s n
trying t o
propo sition i n t h e proper way, t h e t instead o f
note
control t h e situstion through t h e neserve egeinst
under Section ll,
issues, t h a t t h e y might better operates
t h e Federal Reserve
end j u s t d i s c h a r g e e v e r y b o d y f r o m
ofMinneapolis, end Yum the banks themselves. 1
B e nk
do not
br. Miller.
see how you sre going t o scoomplish it,
think y o u s r e putti.g u p 3 very fice
Lee Miller: I
ticious cass.
g
Governor Y o u n :
W e always resort t o exec eration
true.
to illustrate o u r points, t h a t i s
Me, Mitlers
A r e n o t t h B o a r d s n d your
9 responsive
more likely t o know t h e situetion b y having
have a
and s e n s i t i v e r e s e r v e t h e n i f y o u
Se
dull e n c £i n s e a
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Federal Reserve Bank of St. Louis
Governor Young:
B u t m y experience
I conscisntiously l o o k e d to. s e s
is i n dollers 2 n d cents, a n d looked
wast their reserve w a g with us.
ite h i Ller:
S
.
Governor Young: A n d . trom Jol t h u g o2,...f
looked every d a y t o s s e what w e onjfed other Federsl reserve banks,
Suppose w h e n y o u r m e m b e r b a n k S o w e f
you 8 hundred millions, y o u had looked shead ena seen
thet in time the pull by degrees o n that 1}1900,000
would convert itsslf i n t o a
Jemand f o r t w o o r t h r e e o r
four hundred millions o f Federsl reserve notes, 5 n d that
the full effect upon y o u r reserve pos ition wes only p e r t i y ,
or rractionally revesled w h e n your members o w e d y o u t h e
hundred million,
million,
s n c t h s t sooner o r later t h a t hundred
b y chenge o f circumstsnces, w o u l d b e
to three o r four hundrec million “ h i t n e r e ceme s
for cireuletion, d o n ' t y o u think that y o u would have b e m
too d o e e e e
s good ical less imprudent i n 1920;
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Federal Reserve Bank of St. Louis
375
the b e n k e
S 3 l i v e t o inflation
be s l i v s
i n its
t o the
Reserve s y s t e m
aie 3 S
ie 3
l.
when. you increas
you
to convert Itself. i n
6én-thst c o s s neppen,
then
pulled “ o m v e r y m u c h m o r e
Governor
Young:
“ n e n v e inereese o u r ciscoun te i n
cis trict i t comes, n o S c s u s -
inflation e t
the
time, b u t because o f inflation that h e s p r e v i o u s l y b e e n
cres ted-~-=
eet r e d ilaon
hlgC
Governor Youne:
B u b s
e e . Moniens
wary. pecudiler
tures
million t h e r e 5
j
o r four hunared
incrssse
2 L i s
i n o u r n o t s ore
except maybe three o r four million, b e
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Federal Reserve Bank of St. Louis
3576
That
i s unc rstood
s s a n inter-
we a r e m o s t c o n c e r n e d w i t h i s
hoo. Liles. -t6
with. &
most v i o l e n t f l u c t u a t i o n f r o m v e e k t o
sit r e s e r v e s
A
unc
C
t
h
e
t resson
2 very libsral deposit reserve t o begin with.
w e sllow
I t mey
b: t h e t notes a r e being s e n t i n for redemption f r o m New
vork which originated i n Minneapolis.
I
t may b e you
heve l o s t s lot o f g o l d for other reasons i n t h e gold
to New York, because there have becn s a v y
espolis merchandise i n the New York disAli of those things a r apparent, a n c
that reason w e have a very b i g cushion i n the
reserve, s o th: B e note reserve won't feel
impset o f thet until i t reslly becomes a
cengerous
‘Ll reserve S y s t e m o r
Tt may b e these ratios
improved upon,
m d w e would like t o g e t your judg-
GO. GRS-Ge
Governor Young; I
c s m o t help b u t feel, Lr.
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Federal Reserve Bank of St. Louis
benis
f o r incon~
Governor Crissinge:
pentlemen, 2 n d the Cheir w i
recess,
iit, Hamline I
s o move, iir, Goal
(Thereupon, o n motion, duly seconded snd carried,
the Joint Conference recessed a t 1:10 o'clock p. m. until
2:30 o ' c l o c k p.z m
ori Thursday Noyerber 1 5 , 1923.)
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Federal Reserve Bank of St. Louis