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Federal Reserve Bank of St. Louis
VOLUME « 1
PROCEEDINGS
CONFERENCE O F GOVERNORS O F THE FEDERAL. RESERVE B A N K S
TREASURY BUILDING
WASHINGTON, D.C.
OCTOBER 10, 11, 1922
WALTER &, COX
SHORTHAND REPORTER
COLUMBIAN BUILDING
WASHINGTON, D.C.
PROCEEDINGS
O F A
CONFERENCE
O F GOVERNORS
ofr thse
FEDERAL RESERVE BANKS
Washington, D.C.
®uesday, Oct.10,1922.
A conference o f Governors o f the Federal Reserve
Banks convened i n the Treasury Building, Washington, D.G.,
on Tuesday, October 10, 1922) a t 1 0 o'clock, a.m.
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Federal Reserve Bank of St. Louis
Present:
Charles A. Morss, Governor, Federal Reserve
Bank o f Boston.
Benjamin Strong, Governor, Federal Reserve
Bank o f New V O R e
George W . Norris, Governor, Federal Reserve
Bank o f Philadelphia.
BE. R. Fancher, Governor, Federal Keserve
Bank o f Cleveland.
George J. Seay, Governor, Federal Keserve
Bank o f Richmond,
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Federal Reserve Bank of St. Louis
P. Wellborn, Governor, Federal Reserve B a n k
of Atlanta.
B. WeDougal, Governor, Federal Reserve Bank
of Ghicago.
C. Biggs, Governor, Federal Reserve Bank o f
St.Louis.
A. Young, Governor, Federal Reserve B a n k o f
Minneapolis,
J. Bailey, Governor, Federal Reserve Bank o f
Kansas City.
U. Calkins, Governor, Federal Reserve Bank o f
San Francisco.
George L . Harrison, D e p u t y Governor, F e d e r a l R e s e r v e
Bank o f New York, a n d secretary t o the Conference o f Governors.
PROCEEDINGS
The Chairman,
T h e Conference w i l l come t o order,
The first topic o n the program i s
Credit transactions a n d policies,
That topic includes t h e submission o f a report b y the
Committee o n pentbaidced Execution o f Purchases a n d Sales o f
Government Secubities for Account o f Federal Reserve Banka,
That report h a s been distributed i n two parts.
The
first part i s the report which was submitted t o the meeting
held i n New York, October 2nd, which was approved b y the
committes; a n d the second part consists o f the minutes o f
the meeting which have not yet been submitted t o and cone
Sidered b y the committee a n d which have not, i n fact, h a d
their formal approval.
S o that, i n order t o make progress,
L would like t o ask the members o f the committee i f they have
had opportunity t o read these minutes, whether t h e y approve
them o r disapprove t h e m a n d i f they disapprove t h e m i n whet
respect.
I f w e c a n proceed informally b y considering t h e
supplementary report first, t h e n w e c a n act u p o n the whole
report a s a conference,
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Federal Reserve Bank of St. Louis
G overnor Miorss, T h o s e minutes w e r e satisfactory t o
Governor McDougal.
satisfactory t o me. I
T h e minutes would n o t b e entirely
have read them; I
think I have r e a @
them earefully, a n d I think that this committee, w h o s e a
cti-
vities t o date, according t o the individual members o f the
committee, h a v e b e e n such a s t o b e satisfactory - - w e have
had n o complaint f r o m the other units involved, a n d I under~
stand that t h e policy pursued has b e e n satisfactory t o the
Treasury, y e t I
feel that t h e committee i s bordering on,
at least, making a mistake i n laying down these rules for
the future, a n d I think t h e minutes ought t o b e read here,
However, I
understand that y o u arse submitting t h e m t o the
committee a n d not t o the conference?
The Chairman. I
a m sorry that w e did not have a prelin-
inary meeting, Governor meDougal.
Governor meDougal.
I n s o far 6 s endorsing t h e reconmen~
dations o f the Advisory Council i s concerned, I
complete accord;
would b e i n
b u t I must confess that I fail t o under-
stand t h e necessity a t this time t o make a n y radical changes
nor d o I understand t h e necessity o f recommending t o the
Federal Reserve Board that t h e y pronounce a
regulation which,
for instanee, w o u l d confine t h e operation i n government
securities exclusively t o the course o f the m o n e y market a
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Federal Reserve Bank of St. Louis
gs
a f a ctor.
The Chairman,
I n a s m u c h a s y o u a r e n o t prepared
to
accept t h e minutes a s t h e expression o f the committee,
would y o u b e s a t i s f i e d
t o act upon that portion o f the
report which was approved i n New York?
Governor hcDougal. Perfectly.
The Chairman.
T h e n I will submit i t t o the conference,
and then take u p the other subject for discussion after
the committee meets again,
Governor ticDougal. I
Governor Calkins. I
is Greek t o me, a 6 I
in that I
will b e glad t o d o that,
am sorry t o say that all of this
a m laboring under m y usual disability
have just received t h e reports o f 411 t h e commit-
tees and have read none o f them, a s none o f them reached
me before I
left home.
Governor Young. I
have n o t received a n y o f these
reports.
Mm. Harrison. T h e report o f the Conmittee o n Central~
ized E x e c u t i o n o f Purchases a n d S a l e s o f G o v e r n m e n t Securi-~
ties b y Federal Reserve Banks w a s n o t prepared, submitted
and spproved b y t h e committee i n time t o send i t t o all t h e
different governors, a n d f o r that reason i t was distributed
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Federal Reserve Bank of St. Louis
only w h e n w e r e a c h e d W a s h i n g t o n yesterday.
Governor Young: I
have n o t received m y copies yet.
Governor Fancher: I
ur. Harrison: I
have n o t received mine.
sent a
letter t o you, Governor,
at
the h o t e l yesterday,
The Chairman:
I n view o f the fact that t h e report
has n o t b e e n e x a m i n e d
by a
number o f t h o s e present, I
should
suggest that t h e entire first section o f the program,
Credit Transactions a n d Policies,
lunch.
I
g o over until after
n the meantime there will b e opportunity, I
hope,
for the members o f the Conference t o read t h e report, a n d
if that action i s agreeable w e will d o that.
ve will then proceed t o section 2
of the program,
which is,
Ii Collections a n d Clearances.
The first i t e m under that i s the report o f the standing coumittee o n Collections, mr. Strater,
Chairman. i
o f Cleveland,
believe a l l o f y o u h a v e r e c e i v e d c o p i e s
of
that report.
Governor Calkins:
A g a i n I will have t o say that
not until m y arrival i n Washington d i d I receive it.
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Federal Reserve Bank of St. Louis
The Chairman:
W h a t i s your pleasure, Gentlemen?
Are
9
you ready t o take sone action with regard t o this report?
Governor Fancher, t h ’ s report i s made b y a subconmittee,
which o n e o f y o u r o f f i c e r s
Governor Fanchez:
The Chairman:
this meeting, I
of
i s t h e Chainiian.
Y e s , mr. Chairman.
I n order that w e may make progress a t
a m going t o suggest that, i f agreeable
to you, a s you have some jurisdiction over that committee,
I presume, t h e Conference pass a
resolution approving t h e
report, a n d a further resolution somewhat a s follows:
"That i t is the sense of the Conference that the Standing fommittee o n Collections appointed a t the last Conference o f Governors shall have sctive a n d complete jurisdiction over all current collection matters, including forms,
and that any such matters arising should b e referred b y the
reserve b a n k s
t o s u c h c o m m i t t e e f o r disposition,
w i t h the
understanding that i t make a report t o each successive
Conference o f Governors o f all matters a c t e d upon b y it.
“It i s the sense o f the Conference, however, t h a t general questions o f collection policy,
a s distinguished f r o m
routine questions o f operation, s h o u l d b e referred t o the
conmittee f o r r e w m m e n d a t i o n
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Federal Reserve Bank of St. Louis
t o the next Conference
of
8
Governors a n d n o t f o r f i n a l d i s p o s i t i o n
You w i l l f i n d
as t o routine which,
i n t h e report a
b y t h e committee."
nuniber o f r e c o m e n d a t i o n s
i t séens t o me, t h i s Conference should
approve a n d t h a t s h o u l d b e p u t i n t o operation.
T h a t is
what this conmittee i s for a n d they have given i t a great
deal o f study.
Governor Fancher, I
would s s y i n regard t o this re-
port t h a t t h e Committee,
a t its last meeting i n Cleveland, -
was sort o f rounding u p the whole situation a n d getting ready
to write t h e report, s n d I sat i n with the conmittee part o f
an afternoon a n d discussed some o f these points, a n d then
went o v e r this report a
couple o f times i n the course o f
its preparation b y ur, S t r a ter, a n d i t was sent around
and a p p r o v e d b y o t h e r m e n b e r s
it i s a most excellent report.
o f t h e coiumittee, I
think
T h e committee h a s given
very careful consideration t o the different subjects submitted, a n d I think that t h e report clesrs u p a number o f
collection matters thst have b e e n pending f o r several conferences;
a n d i t rather rounded t h e whole t h i n g u p a n d got
these matters pertaining particularly t o the handling o f
cash i t e m s f o r c o l l e c t i o n
adopted.
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Federal Reserve Bank of St. Louis
i n shape,
i f this r e p o r t
A l s o t h e making o f this committee a
is
permanent
9
one a n d t h e clothing o f them with proper power t o decide matters o f routine, I
think w o u l d b e t h e p r o p e r t h i n g t o do.
I t
would obviate t h e consideration o f operating detsils b y the
Governors' Conference b y men who are better qualified t o
handle and decide them than the Governors o f the banks.
I therefore move you, Mr. Chairman, t h a t t h e report
of the committee b e adopted, a n d that the committee b e clothed
with the powers outlined i n the proposed resolution.
Governor Seay:
like t o say that I
B e f o r e voting, mr. Chairman, I
would
think this i s one o f the most difficult
subjects t h a t h a s ever b e e n a s s i g n e d
t o a n y committee,
and
that this has been one o f the most difficult reports t o
prepa r e that a n y committee e v e r had.
Ous, 8 8 you see,
I t i s quite volumin-
O n e o f our men participated i n this con-
ference a n d h e submitted t h e report t o m e shortly before
I went t o the Boston Conference, h e having t o g o away hine
felt, a n d there a r e a number o f minor corrections o r suggestions i n this report which I
thought w e r e necessary, a n d
he egreed with ime, a n d I have those listed.
The Chairman:
chénges
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Federal Reserve Bank of St. Louis
l i a y I suggest, i f they are minor
i n t h e report a n d r e c o m e n d a t i o n s ,
t h a t a n y excep-
LO
tions, including those which m a y b e discovered b y t h e experts i n the different reserve banks,
b e taken u p directly
with t h e Chairman o f t h e Subcommittee.
Governor seay: I
that.
would b e p e r f e c t l y w i l l i n g t o d o
T h e y d o not arfecst t h e integrity o f the report n o r
do they change t h e recommendations
i n the report.
it i s a n admirable r e p o r t a n d s r e p r e p a r e d
and t o move i t s adoption;
b u t I
W e think
t o endorse
it
think t h e corrections t h a t
we are offering will b e transparent e n d they a r e o f such a
nature that there would b e n o difficulty whatever o n
the part o f the committee agreeing t o them, a s they a r e
just s u c h things a s escaped attention i n the first preparation,
The Cheirmen: G o v e r n o r Fancher, t h i s morion which
i made, t h e second portion o f it, does i n fact provide
for dealing with these very matters, w h i c h a r e matters, I
understand,
o f routine a n d detail i n the report itself, a n d
the procedure w i l l t h e n be, under t h e terms o f this resolution, t h a t i f Governor S e a y o r any other Governor has a n y
suggestions t o submit thet h e will take them u p directly
with t h e Chairtian o f the Subcommittee,
received a
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Federal Reserve Bank of St. Louis
second?
H a s that motion
ll
Governor Norris:
B e f o r e final action i s teken o n the
report, h r . C h a i r m a n , t h e r e i s o n e q u e s t i o n I
raise. I
would l i k e t o
do not k n o w whether i t would more properly
come u p f o r d i s c u s s i o n h e r e o r l a t e r a s a
separate subject,
but i f the members o f the Confsrence w i l l t u r n t o page 5
on m y copy--- a n d I have h a d t w o copies o f this which were
differently paged--- b u t o n page 5
of the copy before me,
after t h e double spaced paragraph a t the top, there i s a
single spaced paragrsph beginning “The Tressurer o f the
United States", a n d s o forth.
The Chairman:
W h a t i s the point, Governor Norris?
Governor Norris:
T h e point i s this.
T h e statement
is made by the Conmittee, "The Under Secretary has approved
the following paragraphs a n d the committee, therefore, r e commends t h a t t h e y b e used i n the check collection circular
of e a c h F e d e r a l R e s e r v e Bank.
"The Treasurer o f the United States reserves t h e usual
right o f t h e d r a w e e t o examine,
w h e n received,
a l l Govern-
ment werrants a n d checks e n g t o refuse payment thereon, a n d
the Federal Reserve Bank o f =
W
i
l
l handle such
items", etc,
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Federal Reserve Bank of St. Louis
Then 1 , under method o f Handling, “ T h e Tressurer will
12
return i m m e d i a t e l y a n y w a r r a n t
c r check, @
yment o f w h i c h
is refused o n account o f forged signature o f drawer, insufficient funds, stoppage o f payment,
o r any material dsfect
discovered upon first examination", etc.
Then No. 3, "In cases o f warrants o r checks bearing
8 forged signature o f the drawer, a n d i n other cases where
the Treasurer's right t o reclaim i s i n question, t h e warrents o r checks will n o t b e cherged t o the account o f the
depositing bank, b u t will b e returned t o i t a s m
llection
items for adjustment."
The S e c r e t a r y o f t h e T r e a s u r y h a s s t a t e d t h a t a s t h e
policy o f the Treasury Department, b u t I
would like t o know
whether t h e Treasurer o f the United States, whohandles
these items, h a s ever agreed t o it, because s o f a r a s w e
know,
a n d w e h a v e o n e p a r t i c u l a r case, h i s p o l i c y i s
directly t h e reverse.
H e returned a n item t o u s nine
months after w e had cashed it, a n d insisted u p o n
charging it.
The Chairman: G o v e r n o r Norris, t h e point i n connection with this paragraph h a s b e e n o n e o f discussion a n d
négotiation between t h e Treasurer a n d t h e Federal Reserve
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Federal Reserve Bank of St. Louis
13
Bank o f N e w York f o r some years.
w e have o n e notable case
in N e w Y o r k w h e r e t h e i t e m w a s r e t u r n e d a g a i n s t a
New York
member trust company twenty-three years after i t went t o the
Tressury.
Governor Norris: T w e n t y - t h r e e years?
The Cheirman:
Y e s ; t w e n t y - t h r e e years.
A s you know,
the statute o f limitations d o e s n o t r u n sgainst fraud, a n d
does not r u n against t h e United States Government i n any
event.
W
e tried t o devise a
these things,
practical means o f handling
s o that w e would n o t have these constant
exceptions arising i n the account, a n d this method has
beon g¢ursued i n New York successfully, a n d under the terms
proposed i n the paragraph o f t h e circular, I
gather i t i s
the intention o f the Treasury Department t o make that epplication throughout t h e system.
lur., Harrison: I
think that i s true, Governor Norris.
Governor iucDougal:
W e have h a d tne same question
up b y correspondance, a n d I think this paragraph i s all
right.
W e have h a d a controversy a s between o n e o f our
large banks, t h e reserve b a n k a n d t h e Treasurer, involving
a considerable amount, a n d m y und: rstanding i s now that
with respect t o charge-backs t o accounts o f Federal
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Federal Reserve Bank of St. Louis
14
reserve banks,
i f they a r e not made
are not discovered f o r t w o years,
e a r
a
or f
they
o r thirty years, t h a t
they will then b e returned a s collection items f o r adjustment a n d i t w i l l b e a
matter,
i f necessary,
o r suit,
as
between o u r depositing bank a n d t h e Treasury, a n d w e are
relieved of all difficulty. T h s t has been agreed to by
the Treasury Department, undoubtedly w i t h t h e consent o f
the Treasurer o f the United States.
The Chairman:
T h e Treasurer o f the United States i s
subject t o the direction o f the Secretary o f the Tressury
in the rulings i n a different w a y from that i n which the
Comptroller o f the Treasury is, and, Governor Norris, I
feel
that this i s a very distinctt+improvement o v e r a n y situation
that h a s prevailed ever since t h e independent Treasury system was established.
N o w that t h e independent system has
been ebaendoned w e have t o set u p 4 new niethod o f dealing
with items bearing forged endorsements, w h i c h w a s t h e
ridasiaaes source o f difficulty under this paragraph, a n d i f
you h a v e n o t b e e n s u c c e s s f u l
duced i n Philadelphia,
i n getting t h e practite intro-
i t seems t o m e i t i s just a matter
of taking i t u p with Under Secretary Gilbert.
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Federal Reserve Bank of St. Louis
Governor Norris: I
took i t u p directly w i t h t h e
¥,
15
secretary o f the T r e a s u r y i n a letter which I
wrote t o h i m
under date o f September llth, referring t o correspondence
with the National C i t y Bank o f N e w York a n d their revised
circular, a n d then celled his attention t o the fact that
with u s the practice o f the Treasurer o f the United States
had been directly t h e reverse, s n d still was.
The Chairnian:
W h a t w a s t h e outcome o f that correspond-
ence?
Governor Norris: I
would u p with the statenent “We
are not familiar with t h e division o f authority between t h e
Secretary o f the Treasury a n d the Treasurer o f the United
States i n matters o f this sort, a n d w e volunteer t o suggest
the desirability o f having the Treasurer's practice confirmed b y the Secretary o f the Treasury's statement a s t o what
the Treasurer's practice is."
The Chairman:
B u t ten't that a question between the
Federal Reserve B a n k o f Philadelphia a n d the Tressurer,
rather t h a n o n e r e l a t i n g t o t h i s d i r e c t l y ?
T h e report
covers t h e case,
Governor Norris:
Treasurer a g r e e s
T h e report covers t h e case i f the
t o it, b u t i f t h e Treasurer,
w h o has ex-
clusive handling o f these matters aoes n o t agree t o it,
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
16
sna h e hes reeson g o r not agreeing t o it, u e i s uncer bona
ana t h e Secretery o f the
Governor ..cpougal: ;
2 3 d
all because t h e thing has a l l be:
i v e
e
3 €;
r o f that a t
a
I
t wes s6te-
tled i n our cise e m i w e . e r e told i n the future t o hendle
in accordence w i t h this p l e n outlined hsre,
committee h a d b e n e f i t o f thet savice.
Governor Fancher? I
The Chairmen:
think so.
T h e j;uestion i s o n the motion »hich,
I believe, w a s seconded b y Governor Seay. G o v e r n o r Norris,
to
do y o u wish a n y action o n this resolution i n réletion
your particuler case with the Treesurer o
States?
Governor Norris:
O h , certainly not.
to know chether t h e method o f handling stetec
agreed t o b e the Treasurer o f the United States.
The Chairmen:
O h , yes, e n d i t i s being handled
say i n New York, Chicago o n d I think some o f t h
Reserve Benks,
Governor Norris:
ith
I t is
us.
Governor Seay: I
would like t o sey that the tressurer
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Federal Reserve Bank of St. Louis
Gemended credit o f u s for certain items b u t w
to
The Chairman:
M t h regard t o Governor Norris’
proposition, t h e Chair will exercise i t s right t o rule that
thet i s a matter between t h e Philsdelphia Reserve S a n k e n d
‘ t h e t i s your wish with regard
the Treasury Department.
to the report, gentlemen?
Governor Calkins:
N o t hsving r e a d the report o f ths
Stending C o m i t t e e o n Collections i
can only vote f o r its.
adoption w i t h t h e u n d e r s t a n d i n g t h e t i t b e s u b i s c t t o
smendment following correspondence vith the Chairiuan o f
the Conmittes,
Governor séay:
w a y IT sey, «ar, Ghairn.an, that this
subject h a s been before u s f o r about t w o years,
i t hes been
one o f the most dificult subjects t o hancle enc a1
and I think t h e report w e s only reachsd after sone 8cconnoGation o f the visws o f the different Federal Reserve Banks
in
to e e c h other, e n d with respect t o the recaunsncations
here I
hops t h e t e a c h G o v e r n o r w i l l b e
date himself t o the recouw.endations 4 6
inasmuch o s i stated thet I
had certain reco.. endations,
and I want t o s s y thet t h e y are nothing b u t verbel
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Federal Reserve Bank of St. Louis
18
not effect i n
w e y t h e r sonisncations w h i c h occur i n
the report; t h e y a r e just dienges that 1
made i n t h e r e p o r t
t o make i t a
think should b e
consistent r e p o r t ,
ane do
not affect t h e intesrity o f the report a t all.
The Chairman:
U n d e r t h e terms o f the resolution t h s
o f the Bederal Reservs B a n k a r e préser ,
rights
es they
can take u p their exceptions w i t h t h e conmittse a n d adjust
thet
o l wild. oeda. forces
h
e r e s o l u t i o n t o 4p.irove
the report, subject t o that right.
(The motion, having been duly
(The report o f the Stending Committee o n Collections
to the
P e r é
G o v e r n o r s , October 10, 1922, i s s s fol-
lows:
THE CONFERENCE OFGOVERNORS:
At the last Governors’ Conference, held i n va
D. C., m a y 2 - 4, loze, i t was Geciced t o provide 2
ing Committees o n Collections a n a upon notion i t was
“VOTED t h e t a
committee
o f f i v e b e sppointed
t o Which
all collection matters,,. i n c l u d i n g forms, b e referred
for considerstion."
In consequence o f this action, y o u r standing CGonmittes
on Gollections, d u l y selected i n sacar ence w i t h t h e fure-
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Federal Reserve Bank of St. Louis
19
ther a c t i o n o f t h e C o n f e r
s e , h a s consic.ered c e r t a i n m a t h
ters w h i c h h a v e bsen b e r
e Conference
o f Covernors
but conesrning which n o definite o r final ection hes been
taken b y t h s conference.
Chief among these i s the g s s t i o n o f @ uniforn check
collection c i r c u l e r s n d 4
univorm non-cash collection
circular t o b s issued b y 311 Federsl Keserve Benks.
B y
referring t o the minutes o f several previous Conferences,
Gosmittse L e s r n s é t h a t t h e G o v e r n o r s h é v s ciscusseda
in particulsr a n d heve esgreed that i t vould
déssirable f o r t h e s s c i r c u l a r s
anise, t o b e uniform.
2 s iscued b y all
Y o u r GConmittee,
after a very careful a n d thorough stucy o f t h e subiect,
lie
is of the opinion thet, while there are certein very
portant conditions necessary t o ths
serve Bonks, t h e varagraphs o r sections conesrning
h can b e nace a n d
p
e wade identical,
tirely iuprecticel s n d
circulars
conditions
i n i {Orn D S e a u s e
65 2 ¥ }
i
0 3 1 @ varying
n t ] s e v e r a l @saeral Re-
serve D i s t r i c t s a n d the d i f f e r e n c e
i n t h e methods foilowsa
to meet those conditions w h i c h mignt b e psculiar t o 4 cer-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
2e)
Poane G b e a lc1Us
A
"sever, c e r t a i n p o r t i o n s
g stat
of t h e c i r c u l e r s s h o u l d b
identical
2e
this
mittee
subj3eé
the
collection circvulors s l o n g
opinion o f
thought i n mina, y o u r Cojii-
your Comuittee, and, w i t h
h a s conzidered
i n the
GE
Sb e n d n o n - c s s n
w i th c e r t s i n o t h e r m a t t e r s
ing collections, a l l of
p e a rteas 3rs
n this r e -
senereal subjects, nanely:
3ch o f t h e t w o
“Gash o r C h e c k Collecticns”
i
con-
3c.
“Non-Cash Collections o r
s
Collection o f saturing Notes,
snd
l o t lh e r i
N o n -B
Jash
Items", i s broad i n scone
the other,
t h o u g h t
ly i n the following report.
acd
VY a
A
b
D
O
V
S
,
ters, w h i c h have b e e n referre i t h e Governors'
a
ence f r o m t i n e t o tinis
unifori:
of e
v
e
r
p a n k s
for cons sicerstion,
check collection
e
e
Ags
S
E rehtruog
would b e i n p r s c t i c a l a n d n o t
r
f o rrm
tso lbe u n ic
ing conditions
i n the
ii n i
ct s
Circulsr b y
ted,
altogether cesirsble f o r this
y t on
evaccount
r ia t nroe f y
wistricts,
i t is
-
eS
very i m p o r t a n t e n d h i g h l y d e s i r a b l e t h a t c e r t a i n s e c t i o n s
or paragraphs
o f t h e circular
b e identical
i n wording.
The peragraphs o f the circulsr which your Conmittee
believes should b e uniform a r e a s follows:
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Federal Reserve Bank of St. Louis
l. Paragraph defining gensral conditions under which
Fedsral Reserve Benks w i l l accept checks o r other
cash items f o r collection.
Paragraphs defining conditions u n d e r which Federal
Reserve Banks will receive f r o m their momber banks
warrants a n d checks drawn upon t h e Treasurer o f the
United States.
Paragraph r e l a t i v e
t o menber banks r o u t i n g checks
and other c a s h items direct t o other Federal Reserve
Banks a n d Branches o f the districts
i n which tis
items a r e payable.
Paragraph r e l a t i v e
t o t h e i n d i r e c t r o u t i n g o f checks.
Paragraph relative t o telegraphic costs i n connec-
tion with the hendling o f checks and other cash
items.
Reference i n the circular t o instructions regarding
protest a n d wire advice o f non-paynient.
Relative t o the uniformity o f the above paragraphs o r
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Federal Reserve Bank of St. Louis
22
t h e folsections o f the circular, y o u r Gounittee submits
lowing recoumencations:
Peregreph <cfining generar conditions undsr which
other
federal Réserve Banks will accent checks o r
ens for collection.
legal
Because o f the possibility o f controversy a n d
a n d clear~
complications arising o u t o f the ghock colisction
Comittee
ing opsretions o f the wWederal Reserve Banks, t h e
a s clearly 2 s
fesls that this oarsgreph shoul. c é : S e ,
Federal Reserve
possible, t h e lisbility ossuned b y t h e
a n d c E sring
Benks i n underteking t h e check collection
function, s n d
i n s o f a r
3 6 possible, t h e Federal
o f due dailBenks should limit their lwbility t o the use
o f the sending béenk
igence a n d care a s ths collecting sgent
and a t t h e saue t l i e reserve certain rights.
it.
At the October 1921 Sonference o f Governore,
Harrison,
nen o f a
mitted,
f New York, Choir-
o f the f
suboreviously a p p o i n t e d S o l l e e t ion Conmittse,
o n behalf o f thet committees,
defining t h e generel conditions under which
ve B a n k s w o u l d s c c e p xt c h e c k s
e n c other
QD
collection, e n d gach Feceral Reserve B a n k
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Federal Reserve Bank of St. Louis
ar. Harrison civing their opinions concerning t h e
we
6d paréeegreph, R e p l i e s f r o m t h e vérious Reserve Banks,
Which ur. Harrison turnsad over t o your present Connittee,
approved t h e p s r e g r a p h
in a
general way, e l t h o u g h t h e r e
were some slight objections e
wording.
T h e s e objsc-
meet t h e m t h e C o u m i t t e e
sfter a further revisu o n d 8 cereful stucy o f
the subject,
i t i s recomended thst t h e following poera-
graph b e inserted i n the check collection circuler o f
each Fecerel Reserve B a n k setting forth these general conditions:
"Every b a n k sending checks o r other cash items t o the
Federel Reserve B a n k o f
Reserve B e n k cirec
such items the sed
the collscting @ge!
r to
f o r our eccount, w i l l b e uncder-
to have sereed
this circulsr 6 1
o
s
h
e terus snd conditions o f
v
e agreed that i n receiving
B
a
n
k
s will ect only e s
P e k s e n d i n g bank;
t h a t the
are suthoriazsd t o present
or
send such items f o r payment i n cash o r bank d r a t ,
direct t o the benk o n which t h e y s r e crawn,
o r i n their
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Federal Reserve Bank of St. Louis
éiseretion t o f o r w a r d t h e n
authority t o present o r
benk .raft, cirect t o the bank o n which t h e y 6r¢é
Grpewn;
a n d that t i s #éasral Reserve s e n k s a r e euthor-
ized t o c h e r g e b a c k t h s a m o u n t o f a n y i t e n s ( w h e t h e r
or not t h e itsiis thsmselvce ¢ s
returnsa) v o r
benk
paymsnt either i n cash o r i n the >rocsecs o f the
Craft hss not actually been received.”
2, Paragreph G¢fining concitions uncer which
banks
Reserves B a n k s w i l l r e c e i v e f r o m t h e i r ts:.ber
mi
warrents end ciecks .rawn u p o n t h e Tre -surer o f
the United States.
Treasury Depertuent Circuler No. 175, 8 5 3.
supplemented s y 1 5 , 1922, s e t s forth t h e t srs
tions undsr which the Treesurer nekes payment tor
all Wederel Keserve Banks 2
tary o f the Treasury t o a ¥eccrel céserve Bank, concerning
the Tressury's obsésetion t o ths phraging o f @ paragraph
collection
limiting liebility w h i c h aopeers i n the check
circular
o f seversl o f t h e Fecsral HeEervs
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Federal Reserve Bank of St. Louis
In orcéer thet theye p a r a g r a p h s s a y b é in hernony
the p r o c e d u r e n o w f o l l o v s d b
y t h e T r e a s u r y DLevertment, cexz
vere submitted t o the Under sseretery o f
in orcdier t o o b t a i n h i s v i c w s a n d suiges
gic Cific t e r n s u n c i r w h i c h v a r r e n t s a n c c h s c k s
states should b e
the Pederal Reserve B a n k s frost: thelr iustiber
proved t h e follo:ing
and the C,itmitte
h e r s r o
r
e w 6 n e . s that
they b e
Feders 1]
‘The Treesurer o f >
United
right o f the crewes t o examine,
Government verrents a n d checks
thereon, e n d the Federal Reserve B e n k o f
will hendle s u c h i t e s in.accorcance w i t h the »rovigions o f Treasury Devertiusnt Circuler No. 173, a s
eanendead ond suscle.ented . 2 y 15, 1l9ee.
will rsturn iniseciately any
ont o r check, payment o f which i s
s
account
o f torged cigneture
o f crawer, i n e u r r l
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Federal Reserve Bank of St. Louis
26
cient funds, stoppage o f payment,
o r any meterial
defect d i s c o v e r e d u p o n f i r s t examination.
o u c h
items will b e charged back e n d returned t o the
depositing b a n k f o r i n m e d i a t e credit.
In the event thet a n y warrant o r check which has
been paid b y t h e Treasurer i s subsequently found
to bear a forged endorsement,
raised,
o r t o have b e e n
o r t o bear a n y other material alteration
or defect which was n o t discoverable u p o n first
examination, a
photographic c o p y o f the warrant
or check will b e sent t o the depositing bank, b u t
its account w i l l not b e cherged pending adjustment.
In cases o f warrants o r checks bearing a
forged
signature o f t h e drawer, n o t discovered u p o n first
examination b y the Tressurer, s n d i n other cases
where the Treasurer's right t o reclaim i s in mestion, t h e warrants o r checks w i l l not b e charged
to the account o f the depositing bank but will b e
returned t o i t a s collection items f o r adjustment.
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Federal Reserve Bank of St. Louis
t o t s i bsr b a n k s r o u t i n g
Paracrarh r e l e t i v e
checks a n d o t h e r c a s h i t e m s d i r e c t
a n d Brenches
Federal R e s e r v e B e n k s
t o other
o f the
‘elets i n w h i c h t h e items a r e payable.
fact that a t the press
6ir i e n b e r b o n k s
p
route c i : n items d i r
e
r Pederal R e s e r v e Benks
b
Loe
6S
Brenches, while certain other #edsral acserve 5enk
t
i
tnh e
i
L
proviless t o 3 certain cless o f .smber banks where
£
i s cufviciently l a r g e t o u s t i l y
the v o l u m e o f business
girect routing. t h e Goundttee dass n o t feel that i t c a n
ecoumend 3
i n the check collection
section t o b a incluced
circulars
h
e f e s e r v e Benks covering t h s
e F e dr
A
whole subisct o f airset routing,
the C o m m i t t e e
b e
g ti
a
n
e check c o l l e c t i o n circulsrs
of a l l Fecemal Re.erve B o n s &
it i s p r a c t i c a b l e
7
!
housv
g sbatec. befors,
¢
b e wade uniform ss8
t o co
that all Feceral nes 5
Benks insert the following uni-
form peragraph relative thereto i n their c h e c k collse
circulars:
banks w i l l b e osriaittsa u n u s r
tions a n d regulstions,
t o routs
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Federal Reserve Bank of St. Louis
Fecsral neserve vistricts dirsct t o the other
serve Banks s n d Branches o f the districts i n which t h s
are payabls, f o r c u r eccount, provided perniss
so i s first obtained f r o m the rederal iisserve B a n k
Gesiring t o aveil ths.:
of this privilese w i l l write
u s for periission ( i f
sion hes n o t slrcady b e e n obtsinsd) snd, i f granted b y us,
they will b e advised i n a sezerste istter giving full information s n d complete instructions."
If this parecraph i s adoptsa f o r unifori use
check colisation circulars o f 411 Hed:rel seserve Banks,
the section o f sach circulsr releting t o :irect routings
Will b e uwnivorm, e n d ths separate lstter
o f invoriuetion
anc instructions should s e t Yorth 4 1 1 o f
ing the policy o f sny perticuler iteserve
the determination o f the Ggete o f svailability, t h e forus
to b e used, e t c .
T h e Cosinittes u n c e r s t e n d
tem i s now being used b y s e v e r a l o f t h e nsservs
for the sake o f unifornity,
s o f e r 3 s prscticable,
in
check collection circulars,
i t oxesers t o b e reacily
able t o a l l o f t h e R e s e r v e panks.
If a n y p a r t i c u l a r R e c e r v e B a n k d o e s n o t w i s h t o 6 x -
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
29
tend t h e privilege
o f G i r e c t r o u t i n g t o a n y o f i t s insmber
ponks, a l l reference t o the whole matter mey b e omitted
from t h e cirectler.
Peragreph r e l a t i v e
t o t h e incirect routing
or checks.
Inasnuch e s t h e F e d e r a l R e s e r v e B o a r a ,
Governors,
o n previous occasions have
ag beings opposed t o the circuitous o r indirect routing b y
member benks o f checks which a r e colliseted through t h e
Federal Reserve Benkscheck collection system, a n d since
it appears thet the mejority o f the Federal Reserve Banks
hsve i n s e r t s c 2
psregrenh r e f e r r i n g t o t h e s u b j e c t
i n their
o u r Conmilttse r e c o n
resent c h e c k c o l l e c t i o n c i r c u l e r s Pe
mends that the following uniform paragraph b e
the check collection circular o f sach #eceral
gn t h e interests o f good banking, t h e lnuirect routchecks w i l l b e Giscourazec 4 n c member banks will
riitted t o deposit with us, o r cena aulreet t o other
serve Banks o r Branches y o r o u r eccount, a n y chock
payable i n other Fedsreal Reserve Districte, w h i c h
ths sndorsgient o f banks located
Districts,
i n cases where i t i s evident t h a t such
indirectly.“
5. P a r a g r a p h r e l a t i v e
t o telegraphic c o s t s
in
connection w i t h t h e handling o f checks a n d other
cash items,
At the last Governors!’ Conference o f a y 2-4, 1922, i t
was “voted that wire costs b e abgorbed o n telegraphic a d vice o f n o n - p a y m e n t
o n items o f $500 o r over e n d t h a t a l l
special requests f o r wire infornation, a f t e r a n item hss
been deposited,
b e nade s t t h e expense o f the depositor."
Your Conmittse, therefore, recoimtenas that t h e following
paragraph b e i n c l u d e d
i n the check collection circular o f
each Federal reserve bank.
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Federal Reserve Bank of St. Louis
“The Federal Reserve Bank of
w
i
l
l absorb
Telegraphic costs i n connection w i t h wiring advice
of non-payment o f items o f $500 a n d over.
A l l other
telegraphic costs i n connection w i t h obtaining a n d advising payment o r non-payment,
o r any other information
or instructions a t t h e request o f the depositing
member bank, w i l l b e charged t o t h e requesting member
bank,”
5. R e f e r e n c e
i n the circular
t o instructions r e -
garding protest a n d wire advice o f non-péynment.
It i s the understanding o f your Committee that t h e
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Federal Reserve Bank of St. Louis
ol
oresent check “collection circulers o f S811 the Pedseral Resarve B e n k s a r e u n i f o r m w i t h r e s p e c t
gninrec
x
t o instructions c o n -
p r o t e s t a n d w i r e s d v i c e o r n o n - 6 yment.
w h i l e your
Committee doses not believe thet i t should suggest idsntic
wording o f these instructions
t o b é used i n the circular
of each Fedsral Reserves Bank f o r t h e reason thet there
might b e conditions peculiar t o 2 varticuler #
serve Districy which mignt
Bank i n ¢laborating o r anplitying t h e s instructions, > o u r
Coumittes G @ e s believe t h e t i n .batever nenner t h e instruc-
tions aré stated they should contain the following essen~
tial ele.cnts:
1. D o not protest i t e s o f »1l0 o r less.
o ,10,.01 o r over, except tiiose
2, Protest i t e m s ’ f
pearing o n their face t h e 4. 3 , &. N o Protest
ceding benk encorser.
Wire advice o f non-payuent o f sll itens o f ,500
or over.
The following i s snother mbject which your Conmittes
as @ part o f its report o n cash o r chsck col-
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Federal Reserve Bank of St. Louis
32
of # lstter t o b s exchanged batueen rederal
cirect routing o f
Reserve Benks o n the sud ) é ?
cheeks b y their wembsr banks,
The purposes o f this letter i s t o give blenket guerente.
of e n c o r s e m e n t
o n 311 cssh itens recsivea direct
b y one
Benk f r o m member s n d non-member clearing
This m s t t e r
hes slso been
befora the Governors! Conference, end c r harrison, o n bethe
nelf o f the previous Gollection Co. wittce, submitted a t
October, 1921, Confsrence a tentative érsft o f a lstter
W e c e r a l Reserve Bank t o trite h i m their
eriticisis
o r sus,estions r e l a t i v e
t o t h e » r o p o s e c form.
by
epliss o n the subject w e r e hance a to thse committee
ur, Harrison.
T i e Graft o f letter met s i t h the
approval o f the reserve banks, 9nd,
slreacy b e e n
letters i n substantially t h e s a e f o r m have
exchanged batusen most o f the Fecd-rel
Your G jiuad thee, however,
ere s a m e c h e n g e s
able.
i s o f the opinion that
i n the form o f the lstter which e r e
U n d e r t h e terms o f the tentetive letter submitt
by Mre Harrison o n behslf o f thse former Coumittes, &
al Ressrve B a n k might authorize “each { o r t h e follow
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Federal Reserve Bank of St. Louis
33
of its member o n d non-wember clearing banks t o act a s its
agent i n sending direct, eta", a n d therefore h a s t h e op-
tion of suthorizing the other Keserve Eanks t o receive
and other c a s h iteme Girect f r o m all o f its member
benks o r from certain o f its member bsnks.
this option sone o f ths Reserve Banks have i n e luced
their suthorization a l l o f their
ing banks, w h i l e others have restricted their suthorization t o enecifile tenber e n d noneismoesr cleering banks e n d
have f u r n i s h e d t h :
1 . 8 o f t h o s e . p e c i i i c banks,
sele thst e c h Federal Keserve Bank
hoes 9 right t o linit o r restrict t h s cirect routing privilege t o certain o f its nember banks, b u t whether o r not they
Limit the privilege t o specific weiber end non-ieuber
clearing benks, t h a i r suthorizetion t o rsceive cirecks a n c
other c a s h items f r o m banks i n their ulstrict, w h i c h authoiization i s sent t o o t h e r federal Reserve Benks, s h o u l c }
genersl i n its scopes d
incluée all or their siecinber anda
non-nsembsr
Obviously,
t h e option
i n the
igs now i n use, ha. resulted i n 2 lack o:
throvs a n unnecessary burden upon t h e collecting redersl
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Federal Reserve Bank of St. Louis
ZA
=
Reserve Bank. >
Federsl R e s >
Comittee
i s
n
e opinion that t h e
Bank of t h e
a better p o s i t i o n t o c o n t r o l
ber banks t h a n ths collseting
possibly be.
T h e collecting
order t o conrvori strictly t o the authority s i v e n t h e m t o
reesive c h e e k s
By
c n c o t h e r c a s h itssis c i r e e t i y w f r o m c e r t a i n
banks i n other cistricts, must check cash letters received
ogainst t h e lists furnished b y t h s Verious Fedsral Reserve
Banks.
T h e s e cirect c a s h lstters,
i n i.ony instances, s r e
received e t 6 tins which calls g o r vroimt eetion i n order
to verify o n d »renare t h e checke enclosed f o r clearance
unp@n the s e y o f receiy O n v i o u s l y ,
if
sx the items have b e e n put through t h s Clsser-
ing House, t h e collseting Federal Kessrve Bonk will hsve
been placed i n the position o f hsving h o n lea checks which
it has not besn authorized t o hsndle and of cssuming lisbilwon
t o Besume,
recaiuc¢nis thet e a c h
Reserve B e n k which extands t h e dirsct routing sriviléeg
to @ll, o r any, o f its menbers o r nonewenber elearing
ben&s s e n d the following uniform lstter t o each other reucis.
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Federal Reserve Bank of St. Louis
“You are hereby euthorized a n d r e jusested t o receive
end hendle checks a n d other c a s h itewe Grawn o n per
banks i n your district, w h e n receivec cirsct f r o m e n y
enber o r non-member clearing b e n k i n ths
Pec
R e s s b i s t r i c t , z o r a c c o u n t , provided
they sre »roperly encorsea b y the s s Ging senk,
in
sll respects i n the sanie tianner a n c subjsct t o the same
ane c o n c i t i o n s t h a t e r e p r e s c r i b e d
b y you irom
tine t o time f o r t h e handling o f checks forwarded t o
you b y o t h e r F e d e r a l e s e r v e s B a n k s
benks,
o r b y y o u r wésnbsr
I t i s understood that t h i s letter i s 6 blen-
ket guerantee o f t h e endorseiients o f a l l such iteus
forwerdsd
t o y o u i n t h e m a n n e r egescribed,
a n c thet i t
euthorized y o u t o charge beck t o our account the
sniount o f s n y s u c h item f o r which
ceive t h e proceeds f o r sny reason
ecsligsnce,.
his lstter sups d e i a n y orevious lstter o f this
character which y o u msy have r e e
NON-CASH COLLECTIONS O K CULLLCTION O F
MATURING NOTE:, BILLS A N D UTHER NON~CASH ITEMS.
The principal matter which t h e Conimittee considered
in connection w i t h t h e general subject a @ non-cash collections w a s t h e issuance b y Federal reserve banks o f a noncash collection circular t o member banks.
large i n c r e a s e
i n t h e volume
O n account o f the
o f non-cash collection items
which are being handled b y Federal reserve banks for member
banks, t h e Coumittee feels that there i s urgent n e e d f o r
such a circular,
As stated before, t h e Governors have expressed themselves
ag desiring 5 uniform non-cash collection circular t o b e ..
issued b y #11 Federal reserve banks.
Y o u r Conmittee be-
lieves, however, f o r the reasons already z i v e n under t h s
subject o f cash collections, t h a t i t i s impracticable s n d
not altogether desirable f o r the entire circulsr t o b e uniform, but, a s i n the case o f cash collections, t h e r e a r e certain paragraphs o r sections w h i c h should b e identical i n the
circulars a s issued b y all o f t h e reserve banks,
The subjects o f these paragraphs, which i n the opinion
of your Conmittee should b e uniform, a r e a s follows.
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Federal Reserve Bank of St. Louis
1. P a r a g r a p h defining general conditions under which
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Federal Reserve Bank of St. Louis
ov
isral Reserve Banks will sccet m a t u r i n g notes,
bills a n d other non-césh items f o r collection,
Paragraph w i t h reference t o the cast o f tels
payment o r non-psyi.snt o f collection
itéis,
Paragraph referring t o the service cherge o n collection items returned unpaid without protest.
Peragraph reletive t o the cirect routing o f nonessh collection items b y ma.ber benks t o #eceral
rve Banks s n a Brenches o f other aistricts.
nes t o unifomiuity o f the ebove paragraphs
in the non-cash collection circulars o f s l l Federal xeserve
Bonks, y o u r G jiuud tbee subiits t h e follow jing réecomuendations
1 Peregraph defining general cond;tions uncer which
Federal Reserve Benks w i l l sccept neturing notes,
pillg a n d other non-cash items f o r collection.
There i s possibly more danger o f isgel caupliceations
snd controversies with member benks int he metter of noncash c o l l e c t i o n itsii:
i
s
t h e matter o f check
feels that this
collections, and, thcorefore, t h e Couwittee
“y
paragraph chovlé define, s s clearly a » possible, t h e Lisbil.
ity o f t h e F e d e r a l R e : e r v e H a n k s
i n undertaking t h e
38
tion o f non-césh items e n d should limit t h i s liability t o
the use o f due diligence a n d cere a s t h e collecting agents
of the sending banks.
T h s paragraph should also embody t h e
understanding that t h e Federal reserve banks a r e authorized
to sslect collecting agents a n d are authorized t o accept
certain forms o f settlement.
limp. Harrison,
o f the Fed»ral Reserve B a n k o f New York,
on behalf o f t h e former Collection Committee,
o f which h e
was Choirman, submitted t o the Governors' Conference o f
October, 1921, a
tentative paragraph setting forth these
general conditions.
T h i s tentative paragraph w a s submitted
to the Federal reserve banks i o r a n expression o f their
suggestions and criticisms. R e p l i e s from the various
reserve banks indicated their approval i n a gensral way,
although t h e r e w e r e s o m e o b j e c t i o n s
wording.
t o t h e u s e o f certain
T h e Committechas considered these replies a n d
the paragraph has been s o revised thet,
i n the opinion o f
the Comnittee, i t should meet all o f the objections which
have b e e n raised.
T h e Committee recommends t h e following
parsgraph t o b e used i n the non-césh collection circular
of each Federal reserve bank defining these g neéral conditions:
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
a9
‘Every bank sending iisturing notes, bills o r other noncash i t e s t o the Federal xeserve B a n k o f
or t o snother Federal keserve B a n k uirsct
count, w i l l b e u n d e r s t o o d
t o have s g r e e d t o
end conditions o f this circulser a n d t o have
in recéiving such items the Federal Kererve
act only a s the collecting egent o f the sending bank,
that t h e Pedsral Reserve Benks w i l l b e responsible
o r pre-
due d i l i g e n c e e n d c a r e i n f o r v e r c i n g
senting s u c h items;
t h a t t h e Fedsral Heserve Banks
are authorized t o present o r sorusrd such
payment
i n c a s h o r b a n k «raft, d i r e c t
ey s r e craewn,
3 1 r o u
t o the bank o n
a t which t h e y a r s payable
through which they a r e collectible,
or
o r to p
Girect t o the verson, f i r m or corporation o n which tusy
drewn f o r payment i n cash o r bank check,
o r in
their ciseretion t o forward t h e m t o another agent w i t h
the s e m e s u t h o r i t y t h e t t h e y h o v e t o p r e s e n t o r r o r w a r c
them f o r payment;
a n d that, except a s hsrein provided,
Jeral Reserve Banks shell b e heic liable only
when they heve recsived payusnt i n cash o r i n t h e probank d r a f t o r check,
o r w h e n they
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Federal Reserve Bank of St. Louis
given advice o f nayment,”
@. Paragraph with referenes t o t h e cost o f conu8 i n connection w i t h
hendling non-cash collection itsius.
At the lostGovernors' Conferences, m a y
was “yoted that Feceral Hessrve Banks ciscontinus
the cost o f télegraphing peyment o r non-peyinen
tion i t e s
a s o f July 1 , 1922."
i
n the opinion o f your
Co.wilttse, t h e telegraphic costs i n connection w i t h t . acing
Ori:
C o u n t sion
e
collection i t e m s ,
S e .
i n s t r u c t i o n s
o n non-cssn
o r a n y other telegraphic
tion with handling such iteie, e s well a s ths
s t of tele-
psyment o r non-deyment, s h o u l d n o t b e
absorbed b y the Fedsral seserve Bonks a n c t h e Conuilttse
recoumends t h e t t h e f o l l o w i n g p a r a g r a p h b e u s e d i n t h e
non-cash collection cireulsr o f sach Federel Ke.erve Bank:
are reguestsed t o G O s o b y iicnber banks,
Sgraphice eavice o f paynent o r non- vaynent o f nonlection i t e s w i @
@raphic scyvice will b e given.
obtained b y
A l l telesraphie costs
in connection with such
grechic cogts i n connsction s i t h tiacing,
41
tion with -pecial instructions, etc., w i l l b e charged
to the requesting member bank."
The C o m m i t t e e u n d e r s t a n d s
a n d reéconmends
that t h e words
“all telegraphic costs" apply only t o comercial wire telegrams @ n d d o n o t i n c l u d e t h e c o s t o f t h e p r i v a t e l e a s e d
wires o f the Federal Reserve System when they a r e used f o r
such purpose,
5. Paragraph referring t o the service charge o n collection items returned unpaid without protest.
The Governors' Conference o f may 2-4, 1922, “voted that
a service charge b e mede.on a l l uncollected non-cash items
returned without protest.” I n a s m u c h a s this recommendation
of t h e Governors’
Conference h s s b e e n approved
b y the
Federal R e s e r v e Board, ©211'Federsl R e s e r v e B a n k s a r e n o t
required
t o make a
service c h a r g e o n u n p a i d u n p r o t e s t e d
collection items, a n d all ofthe bsnks,
uniformly f i x e d t h i s c h a r g e a t 15¢.
w e believe, h a v e
T h e conmittee recom-
mends, therefore, t h a t t h e following paregraph b e used
uniformly i n the collection circulars o f all Federal HKeserve
Banks:
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Federal Reserve Bank of St. Louis
"A service charge of 15¢ per item will be made o n all
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Federal Reserve Bank of St. Louis
non-cash c o l l s e t i o n i t a m e r e t u r n e d u n p e i c a n e
This charge will not apsly o n items that
are protested."
On account
e m e r
o f t h e small enounts Lncolvsd a n d ths
ous entries w h i c h would b e occasioned, t h e O,jiiuittss r e c o m
mends t h a t t h e F e d e r a l R e s e r v e b a n k s w i l l n o t c h a r g s t h e
amount o r such service chergss i n their accounts w i t h 63th
other, b u t i t unéerstands a n d recowisnis that i t b e encunbsn®
upon @ a c h F e c e r e l t e s s r v e B a n k e n d B r a n c h t o c h a r g e i t s
member benks w i t h this service o n 911 non-cesh collection
items r e t u r n e d
t o i t s m e m b e r b e n s unpsicd
whether s u c h i t e m s a r e r e t u r n e d
Benk t o i t s o n w e m b e r s
b y t h e Federel neserve
o r b y s n o t h e r Hec+rrel A e s e r v s B e n k /
direct t o s u c h members, e
e
4, Paregraph relative t o the cirsect routing o f noncash collection i t e s
b y uisiuber benks t o Fedserel]
Reserve Banks a n d Srenches o f other cistricts.
At the Governors!’ ©
cow a
:
;
:
nferenes held i n washington, 9,C.,
on April 7 -10, 1920, s committee was appointed t o consicer,
among other mstters, t h e question o f whether o r
benks
? e @ s r a l R e s a r v e wistrict should b e
to s e n d c o l l e c t i o n i t e m s d i r e c t
t o iederal K e s 9
Bank
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Federal Reserve Bank of St. Louis
4
f o r collection
of o t h e r G i s t r i c t s
R e s c r v e Bank
fecder:
e&
o r Eranch
which t h e s e n d i n g m e m b e r b a n k i s locseted,
aea
;
r +e p o r
o f other
f o r collection
of o t h e r G i s t r
Board make a
>
T h s t coiu-
ites
Brenehes
cash i t e m s
o f the cistrict
w béenks
ab sl ; e b e
H menber
R Y mber
y
: .“ g n d (e d h “that
lection
d Bronches
s n d rée.ite
b e
w h e n recesiv
. @ n d further
thet t h e seceral Heserve
definite m a n d a t o r y ruling t o that
The report o f the Cyiumittce w a s
eGing Conierence o f Governors, h e l d o n uctober 1 4 +
1920, a n d the Federal iéserve Boora, i n ites letter o f
+3014) approved t h e ection o f the vovernend meace the mandetory ruling requsstéc.
tee believes, thersvore, thet i t i s liwportent for the
jolicy e n d procecure o f Federal K e
tions w i t h eech other i n this réessect t o b e uniform.
Committee Coes n o t believe
s covering t h e
of non-cash i t e s ,
GEOR
e l o
Lats
to
pak
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Federal Reserve Bank of St. Louis
pe w t i s v e c t o r y t o all the Reserve Benks i n their rslations w i t h their o w n iicnber benks,
con.itions
i n t h e s ¢ v e r a l # e a s r a l R = s e r v e vistricts.
Govmittee i s o f the opinion, thérefors,
desirable f o r the non-eash collection circulers o f s11
Feceral Reszrve Banks t o b e uniform e s r a r s s vvracticeble,
reterence i n the circular t o the cirect routing o r noneash c o l i s e t i o n itsngs b y u s u b s r b a n k s s h o u l c b e inaas
generel t e r s only, t h e only requirs..ent being that
banks make asvslication t o their sec
nermiission t o r o u t e c o l l e c t i o n i t e s q i r e c t
t o other
Reserve bistricts before t h e y m e y so vail the:selves o f that
privilsgs.
A l l other neces s r y cstails i n connsction # i t h
the wetter, s u c h e s the character o r t h e iteis s n a t h e
nrocedure e n d con.itions uncer which such iteus m a y b s
routed Girect t o other Fecereal nessrve Banks e n d Branchss,
should b e c o v e r e d
s t creater l e n g t h i n 5
s u o zleuentary
Letter t o b e s e n t t o ineuber b a n k s e f t e r e p p l i c a t i o n h a s
been n e d e e n d o e r m i s s i o n h a s b e e n g r e n t e d t o
Your Goumittes, thersvore, reco.,.cncs t h e following pere~greph f o r inclusion i n the non-cash collection
of seach Foderal Re.erve B a n k referring t o this
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Federal Reserve Bank of St. Louis
“enber banks may, under certein conuitions, r o u t e
certain collection items pey?!
i
n other districts
direct t o other
for our sccount,
first obtained f r o u the Federal Reserve C a n k o f
In conseqmence o f the sbove r e c a m e n c a t i o n w i t h respect t o the cirect routing b y i¢.ber banks o f non-céesh
items, y o u r CO.uwittee consic ered
t i f o l l o w i n g sub,ect.
suprlenentary letter t o b e sent b y
Banks t o icmber banks s h o emly f o r
éruiseion
t o route non-cash collsction
eens 2
to other #eceral Reserve Benke a n c branches, c s t
ing the charscter o x iteus which m a y b s s o route
and t h é p r o c e d u r e a n d concitionse u n c e r h i c h usidber
banks tigy exercise t h e vorivilese.
Beceuse o f t h e f e c t t h s t t h i s l s t t e r w i l l a f y e c t
relations o f 4 ifedersl ceserve Benk, b o t h with i t s tie.ber
. athsr Federal Reservs Benke,
Gifvicult,
i t w o u l d be
i f not impracticable, f o r tns lettsr o f each
Reserve B a n k t o b e u n i f o r m i n every particular.
I t is
desirable thet the lstters, 3 8 w h o i s , b é unifor.. i n so
far a s the relations o f one Fedsral “eserve Bank with
snother Yedceral
K e s
B a n k a r s affected.
The direct routing o f non-cash collection itsi.s b y
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Federal Reserve Bank of St. Louis
member banks i s now being practiced t o
and i t i s the policy o f sone recerel
require their newber banks t o notify t h e n o f collection
items sent direct t o other e d e r a l neserve sonks f o r their
account, w h i l e sous Federal Reserve Bonks G o not assirs
thet their ismber banks notify t h e m o f such collection
items routed direct,
T h e Cpisuittes, a f t e r much consi:.-sra-
tion, d e c i d e d t h a t inssi.uch
Federal H e s e r v e B e n k e n d i t s o w n u c u b e r b e n k s
i s a n inter-
nal mettsr. a n d Goss n o t affect t h e other rediral Aeserve
Benks, t h e r e i s n o reason t h y @ Federal Keserve B a n k shouls
not meke a n y srrangonents i t ¢ sires w i t h its o w n uenbers
with respect t o ths privilege o f routing collection i t e s
direct t o other red¢ral Reserve Bonks, s x c e p t t h t where
the operation results i n contact w i t h another Fecerel
Reserve B a n k e n d w i t h t h e i.dibers o f a n o t h s r F e d e r a l H e e
serve B a n k t h e p r o c e d u r e
o n the oart o f every Federal R e -
serve Benk should b e uniform,
In o r d e r t o s e c o n p l i s h t h i s , t h e p r o c e d u r s w h i c h t h e
Cowmittes reco.isends i n the following letter requires that
payment b e sent b y the collecting vsarral iescrve
Bank o f the district i n which t h s ulrect sending ienber
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Federal Reserve Bank of St. Louis
a7
erecit i s ectuelly 2.sssed) a n d
The letter
that notices o f Gishonor o r n-n-paynent o f
collection itens b e seat
ndings mewber b a n k
In order thet t h e rederal Reser
Cirset sending iienber bank m a y collect f r o u LES insite
er bank the service charge of 1 5 o n collection
a
€
itens returned unpsid e n d p r o t e s t e d .
second:
I n oruer thet t h e federal “eserve B a n k o f
the cirect sending member bonk h a y charge i t s
pank with t h e protest f o e s o n P r :
Third:
L t ois.
I n order that those Federal neserve Benks,
who reguire their wisuber benks t o senda then notice
of collection iteus forverded cirect t o other Frederel
Banks, w a y merk their recorcs t o show that
ths collection i s not outstencing b u t has been ro-~
turnec unpeid,
The Coriittes recomuencs t h e t t h e following letter
used b y all F e d rel Reserve Banks; a n d thet t h e lstters
be uniform except
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Federal Reserve Bank of St. Louis
sraphs a r e optional:
“In accordancs with our clrculer No,
by
tein n o n - c a s h i t e m s a i r (
Benks o n d >ranches,
i g s fy
f o r o u r s¢ccount, y o u a r e h e r e b y
suthorizecd t o s e n d G i r e c t s u c h itéiis 8 s ere S n u n e r -
bslov, u n d e r t h e following rules e n c reguletio ns.
wirst.
O n l y t h e following non-cash collection itsnis
may b e sent direct.
be h e r s t h e c h a r a c t e r o f itens.)
(If 6 Hederal Keserve B a n k toss not cesire t o restrict i t s
fueiuber banks t o certain kinds o f itéms b u t will perinit
them t o send a l l non-cash collection itens cire
t h i s
first condition m a y b s omitted s n a ths opening paracraph
aporopristely changed.)
second.
S u c h n o n - c a s h i t e n s a s a r e svor:arded t o
Veceral R e c e r v e B a n k s
e n c Branches o
r i g céistricts must
bes accompanied b y 8 collection letter showing t
of your b a n k e n d givins a complete c e s
item, viz: y o u r collection nuuber, peyer,
anount, d u e c
n
d protest o r other instructions.
49
This collection letter should also prominently state that
the p r o c e e d s a r e t o b e c r e d i t e d
t o the Federsl Reserve B a n k
eee. (Or brench)
Third.
f o r your account,
A n exact c o p y o f this collection letter
should b e forwarded t o u s a t the same tine thet t h e original letter (with t h e items) i s forwarded t o the Federal
reserve b a n k o r bronch o f the district i n which t h e items
are payable,
(The third paragraph i s optional a n d may o r may n o t
be used a t the discretion o f the Federal Keserve
Bank sending out this better.)
Fourth, T h e collecting Federal reserve bank o r branch
of the other district will make n o charge for effecting
collection, e x c e p t f o r a c t u a l e x p e n d i t u r e s
it i s n e c e s s a r y
i n cases w h e r e
t o send t h e i t e m t o another c i t y i n its
district f o r presentation a n d a collection f e e i s deducted
by t h e bank collecting t h e item, o r f o r 411 telegraphic
costs i n connection with handling s u c h collection,
o r for
service charge of 15¢ on sny unpsid, unprotested item,
or f o r a c t u a l e x p e n s e s
i n cases w h e r e i t i s n e c e s s a r y t o
forward securities o r coupons b y insured registered mail o r
express.
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Federal Reserve Bank of St. Louis
50
Fifth.
T h e proceeds o f paid items will b e credited
to u s b y the collecting Federel reserve b a n k o r branch o f
the o t h e r district,
a n d immeciately u p o n receipt
o f ad-
vices o f such credit, y o u r account w i t h u s will b e credited
end a d v i c e o f s u c h c r e d i t w i l l b e f o r i a r d e d
b y u s t o you.
The collecting Fedsral reserve b a n k o f t h e other district
will silso forward y o u e n sdvice which will show thst t h e
collection h a s been made a n d t h e proceeds have b e e n credited t o u s f o r y o u r use.
Sixth.
A n y collection items which are unpsid will b e
returned direct t o y o u b y the collecting Federal reserve
bank o r b r a n c h o f t h e o t h e r d i s t r i c t
service charges,
m d protest
o r other costs ( i f any) w i l l b e
by u s t o y o u r r e s e r v e account.
Seventh.
T h e Federal Reserve B a n k o f ....
(or branch) c e n assume n o responsibility f o r such collection
itens f o r w a r d e d
b y y o u direct
t o othér Federal reserve b a n k s
and branches other t h a n t o give y o u proper credit f o r items
credited t o us b y the collecting i'sderal reserve banks and
branches
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Federal Reserve Bank of St. Louis
o f t h e o t h e r districts,
(The two paragraphs which follow are intended t o be
interchangeable depending upon whether o r not a
51
Federal Reserve B a n k desires t o receive notice f r o m
its member banks w h e n collection items a r e forwarded
direct t o other Federal reserve banks o r branches f o r
collection,
Eighth,
H i t h e r paragraph m e y b e used. )
A n y special instructions,
i n connection with
the handling o r disposition o f any such collection items
should b e transmitted b y you direct t o the Federal reserve
bank o r branch t o whom sent. C o l l e c t i o n items sent t o other
Federal reserve banks a n d branches should b e traced b y you
directly t o the Federal reserve bank o r branch t o whom
Eighth.
A n y special instructions,
i n connection w i t h
the handling o r disposition o f any collection items sent
direct t o another Federal reserve b a n k o r branch,
4 s well
8s tracers covering such items, should b e forwarded t o this
bank, o r , i f forwarded t o the other Fedsral roserve b a n k
or branch,
8 n exact c o p y must b e sent t o us.
The f o r m o f advice o f psyment o r non-payiient t o b e
sent t o the Federal reserve b a n k o f the district i n which
the direct sending member b a n k i s located, a n d also t h e
form t o b e sent t o the direct sending menber o f the other
district, a r e more o r less imuaterial,
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Federal Reserve Bank of St. Louis
O n é o r the other
52
form may b e made u p a s a separate advice o r both m a y b e
embodied i n the regular set o f fan-fold collection fornis.
However,
i n order t o make c l e a r t h e Conmittee's reconmenda~
tions, @
complete s e t o f fan-fold colléction forns i s attach-
ed hereto which enbodies these t w o advices, tickets Nos.
5 and 6,
T
o illustrate t h e use o f these forms.
I f a
collection i t e m i s received b y the Federal Reserve B a n k o f
st. Louis direct f r o m the Indiana National Bank o f Indienapolis, I n d i a n a ,
t h e F e d e r a l R e s e r v e b a n k o f st. Louis,
in writing u p the collection, s h o u l d fill i n o n the first
ticket o f the set, opposite “Our endorser", t h e name
"Federal R e s e r v e B a n k o f Chicago",
a n d directly b e l o w
this, opposite "For a/c of" the name "Indiana Nat ionsl
Bank, Indianapolis, Indiena".
I f the item i s paid,
ticket N o . 5 , s t a m p e d paid, s h o u l d b e m a i l e d
t o the
Federal reserve B a n k o f Chicago, f r o m which Chic ago will
see thet t h e i t e m was received b y St. Louis direct f r o m
Chicago!s member bank, s n d thus b e i n position t o credit
and advise i t s member benk;
a n d ticket No. 6
should b e
mailed t o t h e Indiana National Bank, Indianapolis, Ind.,
Showing that t h e collection h e d been made a n d the proceeds
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Federal Reserve Bank of St. Louis
53
had been credited through t h e Fed-ral Reserve B a n k o f
Chic ago, sll i n accordence with the 7ifth section o f the
ebove letter,
I
f t h e i t e m i s n o t paid,
ed t o ticket No. 6
i t s h o u l d b e attach-
end mailed t o the Indiana National Bank,
Indianapolis, Indiana, a n d ticket No. 5
should b e stemped
unpaid and msiled t o the Federal Keserve Bank o f Chivago,
from which Chicago would be advised that the items recéived b y St. Louis Girect fron Indienapolis has been dishonored s n d returned direct t o Chicago's member bank, s n d
thus Chicago would be in position to charge its member
with protest fees, service charges,
o r other costs, a l l
in accordance w i t h t h e sixth section o f the sbove letter,
Insuch cases, however, i t might te sdvisable to stemp
ticket No. 5, using a rubber stamp reading "Item returned
direct t o your member bank",
I
t doés not appear,
however, that this should b e necessary, inasmuch a s the
Federal r e s e r v e b a n k o f C h i c a g o w o u l d u n c e r s t a n d that,
since St. Louis had received the item direct from the Indiana
National Bank, i t has been returned t o that bank.
This set of collection forms, a s they are drawn, may
8lso b e used b y Federel reserve banks i n writing u p collec-
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Federal Reserve Bank of St. Louis
54
tions received f r o m their o w n menber banks o r from other
Federal reserve banks, simply b y destroying ticket No. 6
in such cases.
The following subject w a s also considered b y your
Committee
as a
part o f i t s r e p o r t
o n n o n - c a s h collections.
Draft o f a letter t o b e exchanged between Federal
Reserve Banks o n the subject o f direct routing o f
non-cash collection items b y their member banks.
The p u r p o s e s
o f this letter a r e similar
t o those
of the s a e character o f letter t o b e exchanged between
Fed r a l reserve banks w i t h reference t o the dir ect routing
of cash items, which has siresdy been covered i n this report.
A s i n t h e case o f the letter with respect t o cash
itens, a tentative draft o f this letter wes submitted b y
ur. H a r r i s o n ,
o n behelf o f t h e previous C o l l e c t i o n C o m i t t e e
to the uctober, 1921, Conference o f Governors,for the
considsration o f the Federal reserve banks,
T
h
e sug-
gestions and criticisms offered b y the various reserve banks
hsve been considered b y t h e Committee, s n d i t i s not felt
that the tentative letter i s specific enough i n its ternis
to give proper protection t o the receiving Federal reserve
bank, and, after careful consideration, y o u r Conmiittee recoOndmends t h a t e a c h P e d s r a l r e s e r v e b a n k s e n d t h e f o l l o w
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Federal Reserve Bank of St. Louis
55
ing uniform letter t o each other Federal reserve bank,
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Federal Reserve Bank of St. Louis
“You are hereby authorized and r e juested t o receive
and handle niaturing notes, bills and other non-cash
collection items payeble i n your district, w h e n received direct f r o m a n y nember o r non-member clearing
benk i n the..........Federal Reserve District, f o r
collection s n d a e d i t
t o o u r account w h e n paid, p r o -
vided t h e y s r e - r o p e r l y e n d o r s e d
b y t h e s e n d i n g bank,
in all respects i n the same manner a n d subject t o the
same terms a n d conditions t h a t a r e prescribed b y y o u
trom time t o tine for the handling o f such non-cash
collection items forwarded t o you b y other Federal
reserve banks o r b y your member banks.
authorized
Y o u sre6é also
t o act u p o n a n y instructions accompanying s u c h
items o r any instructions subsequently received f r o m
our sending member o r non-..ember clearing banks, a s
well a s a n y i n s t r u c t i o n s
received f r o m us.
i n c o n n e c t i o n w i t h s u c h i t ens
I t i s und¢rstood thst this letter
is 8 blanket guarantee o f tis endersements o f such
non-cash collsction items forwarded t o y o u i n the
menner descrived,
This letter supersedes s n y previous letter o f this
Character which you may have recéived from us."
The Committee feels thet,
i n submitting t h i s letter
in substitution f o r t h e one previously submitted t o the
Federal reserve banks,
against it.
i t has wet t h e objections rsised
T h e Committee teels that this letter should,
in all cases, authorizo Federal reserve banks t o receive
non-cash collection items f r o m ell senmber ard non-member
clearing banks f o r the sane reasons e s those s e t forth i n
the Committee's recommendations o n a similar letter concerning checks s n d other c a s h itenis.
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Federal Reserve Bank of St. Louis
Respectfully s u b m i t t e d ,
Rk. F. S
trater, Chairman,
Walden, Jr.,
Atterbury,
Coe,
Toy.
The Chairman:
T h e next topic o n t h e progran i s
e-b Extent t o which non-cash collection
Department h a s b e e n developed i n each
bank, number o f banks using facilities,
classification o f benks a s t o reserve
cities a n d otherwise, a n d expense i n volved,
That was suggested b y Governor licDougel, o f Chicago.
What action d o y o u with, Governor ieDougal?
Governor kicbougeal:
T h e object i n putting this o n
the program i s pretty fully stated there. I
should like
first t o poll t h e meeting t o see h o w niany banks a r e operating collection departments.
The Chairmsn:
C o l l e c t i o n i t e m s a s distinguished f r o m
transit business?
Governor McDougal:
The Chairman; I
Saying that w e have a
Yes.
will conmuence, Governor iicvougal, b y
large country collection division
the services o f which a r e used b y 6 4 New York City banks
and 454 country banks;
t h s t w e have handled i n the first
Sight months of this year 630,000 snd odd items, aggregating $930,000,000, a t a total expense o f y153,000,
Governor mcDougal; I
will say for Chicago that w e
operate a similar depsrtment, which 1 s avelledie? b y 99
banks located i n our t e n reserve citiss s n d b y 523 banks
located i n the other sections o f our district;
operating t h i s d e p a r t m e n t
st a
t h a t w e are
cost o f e p p r o x i m a t e l y
89,000 a year; that in April, 1922, we handled collections,
i n number, 42,169;
i n July, 1922, 51,925, e n d thet
it i s a department w h i c h has b e e n growing continuously.
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Federal Reserve Bank of St. Louis
58
both w i t h r e s p e c t
t o t h e volume handled a n d t h e number o f
banks using it, s n d + will say, w i t h respect t o the results
obtained, t h a t i n “pril, 1922, 4 . 8 per cent o f the itens
handled were returned unpaid,
i n July, 1922, 4 . 7 p e r cent
were returned, w h i c h I consider e
The Cheirman:
A t what cost per item?
Governor iucvougal:
the p e r c e n t a g e
paid. I
very remarkeble record.
T h i s i s not p e r item.
This is
o f itens n u m e r i c a l l y t h s t w e r e r e t u r n e d u n -
remenber that w h e n this function w a s discussed
st one.tine i t was felt, o r thought thst i f we were not
careful, t h a t banks thet opened u p a departnent o f this sort
would b e imposed u p o n b y receiving numerous d u n drafts,
or
whatever name y o u choose t o uss, b u t that Little charge
thet w e make o f 1 5 cents f o r returned itenis put a crimp
in that,
T h i s report
is a
v e r y g r a t i f y i n g report. %
shows that the benks sent u s their best stuff, e n d i t shows
that t h e department i s ineressing, b o t h with respect t o
the amount hesndled a n d t h e expense involved,
i n y object
in bringing i t u p was t o ascertain whet t h e other Federal
reserve banks were doing a n d whether o r not w e want t o
continue t o develop this cepartment i n the light o f t h e
expense involved.
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Federal Reserve Bank of St. Louis
W e feel that i t i s e splendid service
59
wé are performing for the member banks and w e should like
to hear trom t h e other districts.
The Chaizian:
T h e committee report t h a t y o u have just
acted upon recommends, among other things, that 9 charge
of 1 5 cents b e made o n 911 returned itenis.
Governor hcDougsl:
T h a t charge i s effective now and
always h e s been.
The Chsirman:
I
t i s i n our bank.
Y O y o u want m e t o
go sround t h e table o n this subject a n d meke inquiry?
Governor licvougel:
to know,
b y @
N o t necessarily, b u t I
hend vote,
would like
o r something o f that sort, w h e t h e r
the Federal reserve banks a r e all opereting i n t h e same
manner a n d whether i t i s the consensus o f opinion that w e
should continue t o develop this department, i n the light
of t h e expense troubles which w e are having a t t h e present
tine,
The Chsirman:
I s there a n y bank which i s not con-
ducting a country collection department?
T h e y a l l seem t o
be doing it, Governor kcDougal.
Governor Seay: I
would like t o show y o u how t h e
business h a s developed w i t h u s i n the past year.
I n the
lest three months w e have handled 51,000 items a t 4a cost
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
of %7276, o r about 1 4 cents per item.
Governor fancher;
three offices,
I
W
e have 6 4 employsces located i n
t i s u s e d b y 3 1 4 banks,
5 3 located
i n re-
serve cities, a n d i n the month o f July, w h i c h was a n average
month,
w e handled 38,188 items a t a total cost o f
$7800.
The Chaimnan:
A s I understand it, Goverursicbougal
does n o t want detailed reports, b u t t h e question before u s
is whether,
i n view o f the problem o f expense,
able t o continue o b discontinue this service.
i t i s desirD o you
want some action o n it, Governor mucvVougal?
Governor Calkins: I
would like t o a s k N e w York what
the cost p e r i t e m is,
The Chairman: I
think about 1 9 cents.
Governor Wellborn:
it? I
A r e w e permitted
thought i t was obligatory.
t o discontinue
W e have always g i v e n
that service because w e thought w e were required t o d o s o
under t h e Act.
The Chairman:
T h a t i s the seetion o f t h e statute
which uses t h e word "may" a s I recall it.
Governor .6llborn:
W e are not v e r y enthusiastic o v e r
it, b u t w o d o i t because w e think i t i s carrying o u t t h e
Governor Young: I
do not w a n t t o take u p t o o m u c h
time o n it, b u t i n the month o f August w e handled 24,000
items with 20 veople a t a cost o f $2,000.
T h e r e i s noth-
ing serious about that a t t h e present time, b u t i t w a s only
a short w h i l e s g o t h a t a
Twin C i t y B a n k approsched o u r in-
stitution, s a i d they understood w e were handling collection
items, a n d I would like t o s s y that there a r e a n immense
number o f grain drafts handled i n minneapolis e a c h d a y
and our institution h a s half a dozen collectors g o i n g down
to the grain concerns and presenting the drafts and waiting
to get certified checks.
A l l o f the banks are doing
the same thing, a n d w e will handle more o f those g r a i n
drafts.
U n d e r t h e terms o f t h e circular t h e y propose
to take advantage o f i t e n d turn those a l l over t o us,
and I
don't know just h o w many employes w e will have t o
have w h e n w e t a k e i t 8 1 1 over, b e c a u s e t h e b a n k s h a b e f r o m
seven t o twenty employes i n that department handling i t
now.
Governor incbougal:
I
t having b e e n shown that a l l
the banks are conducting departments o f this sert, some
figures having b e e n given with respect t o the amount a n d
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Federal Reserve Bank of St. Louis
62
the smount o f expense involved, I
a m perfectly satisfied
and feel thet t h e department s h o u l d b e continued, 3 n d that
this i s not 9 matter calling f o r a vote,
The Chairman:
Y o u d o not care t o get a n y section b y
the Conferences?
Governor ticvougal:
The Chairman:
N o t a t all.
T h e n w e will pass t o the next topic,
Governor Calkins: I
would like t o inquire a t this
point, a n d I hope i t #ill n o t prolong t h e discussion,
as
to what banks, e s I b e l i e v
e New York is, are making
collections,
a s N e w York i s doing f o r N e w York City b s nks--
The Chairman: G o v e r n o r Young seems t o b e doing it.
Governor Young:
N o , not yet,
Governor meDougal:
W e d o not handle a n y i t ems f o r
Chicago banks o n Chicago.
Governor Fancher:
‘Governor Seay:
W e d o not,
N o r d o we.
Governor calkins:
N e w York handles a l l t h e i t ems that
are offered.
Governor Yellborn: I
require c e r t i f i e d c h e c k s
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Federal Reserve Bank of St. Louis
Governor icbougal: I
would like t o a s k this:
i n payment @
t h o s e drafts?
would s a y yes a n d no.
D o you
65
The Chairman:
Y o u d o act handle Chicago items?
Governor wicDougal:
N o t f o r Chicago banks, b u t w e handle
all other items for Chicago bank.
The Chairman:
T h e r e w a s considerable objectiom t o the
development o f t h e ~
llection business i n New York City
for New York Banks, but o f course w e do handle all the it ems
on New York City that come f r o m out o f town banks.
Harrison t e l l s m e t h a t t h e w o llections
iin.
w e a r e making f o r
New York City banks are gradually being dismntinued.
sonally, I
do not approve o f then a t all. I
Per-
think they
should collect their own city items.
Governor Young:
B u t what w o u l d y o u d o i f a bank i n
New York demanded that y o u collect thoss items?
The Chairman:
statute,
W
e a r e u n d e r n o obligation, u n d e r t h e
t o d o it.
ur. Harrison:
W e shall probably @ ntinue t o collect
them con the outlying borroughs o f Queons a n d Kickumond,
which are reallu like eountry dis tricts s o far a s New York
City i s concerned, b u t s o fer a s t h e borroughs o f manhattan
end Brooklyn are concerned, w e are gradually eliminating
it. T h e r e t s o n e bank n o w that uses u s f o r that, a n d i t
is a
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Federal Reserve Bank of St. Louis
question c f a d j u s t i n g t h e i r o
liection d e p a r t m e n t
before discontinuing it.
Governor Seay:
W
e are opposed t o the Federal Reserve
banks underta:ing this collection business.
The Cheirmean: G o v e r n o r iicDougal has expressed himself
as satisfied with the information received and i will ask
that t h e Conference r o w consider topic 2-c.
e-c R a i s i n g limit o f no-protest items
fron $10 to $20.
This topic w a s submitted b y Richmond a n d I will a s k
Governor Seay t o address the meeting.
Governor Seay: I
will state that i t w a s submitted
because o f tle f a c t that I
was called u p o n b y the t h e n
president o f tie american B a r Association, w h o brought t o
me a
copy o f a
letter f r o m t h e C l e a r i n g H o u s e t e c t i o n o f
the Association, w h i c h w a s t h e outcome o f a meeting o f that
Association a t White Sulphur Springs.
They make the statement that about 12,000 banks i n the
country have created a
minimum o f g20, b u t that uniformity
of practice among the feceral reserve banks i s highly desirable and they would like t o know whether the banks favor
the minimum o f $10 or the minimum o f $20, a n d the final
letter f r o m t h e presidont i s a s follows;
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Federal Reserve Bank of St. Louis
"If I understand our section's attitude, i t makes but
65
little d i f f e r e n c e w h i c h o f t h e a m o u n t s
upon.
i s finally d e t e r m i n e d
T h e important t h i n g i s t o obtein unanimity o f action,
snd i t does s e e upon a matter o f this kind t h e twelve
federal r e s e r v e b a n k s c o u l d e f r e c t a
compromise w h i c h w o u l d
satis factorily solve t h e problem. I
the a d o p t i o n o f a
e m sure, fellowing
s t a n d a r d b y t h e f e d e r e l r e s e r v e banks,
both member a n d non-member benks w o u l d s o o n e c t i n accord
therewith,
Governor Calkins: I
move that t h e limit b e raised t o
$20.
The Chairman: I
a m going t o su:,est t h a t w e take ac-
tion which will result i n a definite recommendation f r o m
these gentlemen t o make the limit 2 0 .
T h e t i s what they
want, but w e have n o definite request from them to that
effect,
a s I understand it.
Governor Fancher:
M a y I state for the collection com-
mittee that this w a s formally considered.
rendum b y wr’ S t r a t e r b e a r i n g
H e r e i s a memo-
o n t h i s v e r y point.
"Tis question wes discussed informally a t the last
meeting o f the standing coimittee o n collections e n d
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Federal Reserve Bank of St. Louis
66
the consiittee w a s unaninous i n its opinion that n o step
should b é tsken b y the reserve banks until t h e limit o n
no-protest i t e m s h a d b e e n g e n e r a l l y r a i s e d b y t h e m e m b e r
banks i n the various districts.
I
n other words, t h e con-
mittee feels that t h e reserve banks should follow a n d n o t
lead the movement t o increase t h e limit.
As t o the merits o f the proposed change, t h e conmittee
felt that i t would b e very desirable t o waive protest o n
items under 2 0 , a s n o particulsr obtect i s gained b y protesting checks o f such small aiuounts.
Governor ucbougal:
Z I should like t o read f o r t h e
record t h e coument m a d e b y one o f our orficers, w h o said,
"Nearly a l l checks, whether collected through t h e Federal
Reserve Collection system o r otherwise, a r e not handled
subject t o what i s known a s the $10 ' n o protest! minimum.
it has tsken a long time t o have nearly a l l banks incorporate o n their cash letters uniform protest instructions
recomended b y the American Bankers' Associstion, a n d i f a
change w a s made t o the 2 0 , mininum,
i t would mean a cam-
paign o f r e - e d u c a t i o n f o r b a n k s a n d b u s i n e s s men.
i w a n y
unpleasant c o n t r o v e r s i e s w o u l d a r i s e a n d s o m e o n e w o u l d
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
oF
have t o sbsorb 3 sgl] loss, which insight result from the
change because t h s nesotiable instrument a c t coes nob r e cognize a ftlininum onount o f a n y instrument i n >rotesting
it.
T o Paise t h e wininun misht m e a n thet there vould b e
n incregse
i n t h e nuinbsr o f sisall i t e u s c r a y n e&gsinst
insufficient balances.
the mininu:
T h e chiez réea
o n n o protest iters
the present plen has bs a d o n t s d s
the banks o n the ¢-couimendation o r
vest majority o f
R i tI
Asioclation e n d h a s b e s n i n u s s i e n y years;
firuly e s t a b l i s h e d
i n t h e minds
Bankers
t h e t it ls
o f b o t h t h e conmerciel a n d
banking interests o f t h e country a n d has oroved satisiractory t o nsarly e®11 banks i n eivect."
Governor 1.0rss:
a t the group coniseré
haa i n Boston @ few deys sgo this
&@vote v e s scoptec thet i t i s not practical
Reserve Banks t o undertake t o vromulgate 9
end t h a t t o rseiss
t a t h e ederse]
highsr tlninuu,
m i n i m u m o f no-rrotsst i t s n s r r o n
20, vwoule tend t o snecoursge t h e circulstion o f
Governor Fancher: é
s s e d g this m a t t e r w i t h
dashburn, Cheirmen o f t h e Clearing House section, a n d
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Federal Reserve Bank of St. Louis
wUllin's secretery i n Neu Y o
ing o f the clisring house section,
ond e s I got i t
ncergtood that seven
the mininum ane
desired b y t h e Clesring
recommendation f r o m the Heasrel recerve banks
hoy t h e nuxsrous benks felt about it, t h e t they could not
initiste the mattsr, but would like t o hsve the seasral
reservs banks o n rscord, vhich.they believed voule neaterjally oid t h e Clearing Houses section i n bringing t h e change
about, t h e t t h e y just vented t o ose i f the veceral neservs
banks avyroved o f raising t h e mininua t o .20,
Governor . e a y :
S i n e s I
introduced t h e t s
would l i k e t o nlace ourselves o n rscord b y qouting t h e
opinion ziven t o the A. B. A . through i t s
follows:
i n yrsising
8 very considerable risk,
wherees there vould be n o risk uhetever i n rev ucing
the limit f r o m 420 t o .10, i n the case
now have t h e . 2 0 limit.
tical, a n d practicable,
I
o Y those banks which
t is, therefore, i m c h wore r
ac-
t o lower t h e Linit t o ,.10 generally
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Federal Reserve Bank of St. Louis
$9
then t o raise t h e linit f o r the sake o f univoruity. L
gui sure y o u e r e a w a r e o f t h e c o n f u s i o n w h i c h w o u l e a r i s e
should t h e #ederal Reserve Banks adopt 2 0 e s the limit,
when the instructions f r o m their members o r 8 consicereble
portion o f theiie-- o r , i n d e e d ,
a n y o r o p o r t i o n o f them---«
would epply t o a ten dollar linit.
T h e aenber benks are
accustomed t
o sending out itous w i t h instructions t o protest
items above .10. f
we adopt t h e practice o f rails
limit t o .20 and d o not ~rotest iteus o f 2 0
We sesume 9
responsibility w h e n v e heve cirect
from our uenber banks t o the wmntrary.
issue a
O f course w e could
circular t o our member banks stating t h a t w e would
receive those items o n l y upon concition t h a t itens o f . 2
end under vould not be srotested,"
Governor Fancher:
A s I understand t h e situetion i t
is not contemplsted that t h e Federal HXeserve Banks would
take t h e initietive i n raising t h i s Limit. I
think that
the 4mericen Bankers! Association sould like t o know our
l
attituce about that, a n d I belisve i f we unandLuiousy
eereea here thst the ,20 limit wos aeeireble, thet i t
would aid nisterislly i n raising the limit.
Governor nesy: I
qiite egree with that.
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Federal Reserve Bank of St. Louis
70
Governor Fancher:
co not t h i n k i t i s conteéi-
B u t I
plated thst w e sre t o take t h e initiative.
Governor seey: I
a m mersly calling sttention t o the
fact t h a t i f w e d o r a i s e thse l i m i t e n d i f
ber banks i n the district c o not adont i t ,
reserve b a n k will incur a responsibility.
with other Peders] reserve banks i n their
thet checks o f ,20 and under shall not b e o r
the nieriber banke s a y that a check unc<r »1l0 shall not b e
vrotested, t h e n t h e Fedsral Reserve D a n k ssmises t h e re.ver
sibility.
The Chairmsn:
where
T h i s i s e s y e n t i s l l y o n e o f thosés c a c e s
w e .ant t o nerform ¢
of t h e system,
service f o r t h e uicuiber b a n k s
s n a i t sesiis t o m e t h a t o u r o b l i s a t i o n
is
to ascertain whet t h e y want snd, i f i t i s a rSsem nableé 2na
proper thing, s i v e i t t o then.
T h a t i s what w e have done.
Governor s a y :
Te Cheirman:
W i t h that i n view, considering t h e fact
thet t h e a m e r i c a n Bsenkers! A s s o c i a t i o n
request o f us, w e vreparec a
i s n o w making t
resolution i n New York which
would really p u t i t u p t o t h e , w h i c h i s t o
voted t h a t
i t i s the
Fi
should b e 9 uniform no-protest limit o n d that t h e e d e r a l
reserve b a n k s s h o u l a a g r e e u n i f o r m l y
t o adopt e i t h e r t h e
@1O o r y@O limit, whichever i s determined b y the majority
of the member banks t o b e preferable t o them, i t béing
the sense o f the Conference t h a t t h e Federal reserve banks
should adept their practice i n this regard t o the wishes
and convenience of the majority o f their menbere.
Governor Seay: I
am willing t o vote for that. resolu-
tion.
The Chairman;
I f w e submit t h e t t o the Americen
Bankers' A s s o c i a t i o n a n d a s k t h e m t o m a k e a
they d o s o a n d i t represents a
system,
majority
request,
and
o f t h e banks o f the
i t seems t o m e w e are t h e n free t o act.
Governor Seay: I
agree t o t h a t rcsolution. I
under-
stood that t h e former resolution w a s t o the eftect t h a t w e
should approve t h e g20O limit. .
The Chairman:
kind that I
W
know of.
Governor Fancher:
vious c o n f e r e n c e ,
lire Harrison:
w a s n o t t h e matter
up st 4
pre-
s n d w e s i t not voted on?
No, I
previous conference.
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Federal Reserve Bank of St. Louis
e have n o pending resolution o f thet
think there w a s n o vote a t any
T h e Federal Reserve B o a r d sent a n
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Federal Reserve Bank of St. Louis
Tea
inguiry t o ¢sch Feceral Reserve B a n k ssking what their
views were o n the mstter,
Governor Calkins:
A n d i n that inquiry kr’ idtchell
stated thet a t present they were infori.sd a t least 12,000
banks i n the country a r e using t h e , 2 0 Limit.
Governor Biggs:
Governor veay:
w h i c h i s léss then tuo-thirds.
I 7 u e s i r a b l e t o settle it, I
believe i t c o u l d b
e settled,
vantageous,
i f such sction i s thousht a d -
b y t h e Federal réserve banks here ceclaring that
Gither t h e . 2 0 m i n i m u m @t h e , 1 0 mininua i s desirseble.
The Chairman:
. Governor seay:
T h e a t i s just whet this resolution
I t dossn't state that w e ceclare that
sither mininium i s dssirable,
b u t i t s e y s that w e will adont
any m i n i m u m sgreead u p o n b y t h e i:sejority o f t h e banks,
The Cheiriuan:
I
t s t a t e s t h s t thse wedsral K e s e r v e
benks should agree uniformly t o acont either t h e .10 o r
the ..20 minimum.
Governor .ellborn: I
a m i n f o v o r o f ur, Calkins!
motion recomucnding the $20 minimus, a n d I think thet i t
ought
t o b e t h e s e n s e o f this c o n f e r e n c e t h a t t h e t i s t h e
proper amount.
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Federal Reserve Bank of St. Louis
73
The Chsirian;
B u t w e would n o t want t o take that
position unless “ve vers s.sured foruslly b y the association
that i t wee the wish o f the banks o f t h e country.
Governor seay: I
woulc b
e oprosed
Governor w#eliborn:
d e l l , w e couls
ence f o r the 420 mininium and leave i t t o
ers! association,
The Chairnen: I
will e s k u r h e r r i s o n
t o read t h e
resolution egein s n d i f i t i s adopted, t h e n I think I
should b e instructed t o submit i t t o ur. witchell o f the
Federal Heserve Board, w h o wrote t o us about it, 4nd ask
hin t o convey i t t o the American Bankers’ Atsociation.
ire Herrison:
V o t e d that i t i s the sense o f t h e
Congsrence that there should b e a uniforui no-protest limit,
end that the Federsl reserve banks shoulda agrees uniformly
to edopt either t h e 210 o r the »20 limit, whichever i s determined b y a iejority o f the menber banks t o b e prefer-
sble t o them, i t being the sense o f the Conference thet the
Fedsrel reserve banks should adapt their practice i n this
regard t o t h e w i s h e s a n d c o n v e n i e n c e
o f t h e majority o f
their nenbers,
Governor Seay:
f o r the record I woulé like t o ex-
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Federal Reserve Bank of St. Louis
74,
press t h e opinion thet,
i n m y tucewent, t h e ; 1 0 limit I s
nore i n t h e p u b l i c i n t s r e s t e n c p c c o r c a a r
Gigseussion e r r i v e c
w i t h the
a t i n Boston.
cill e n c o u r a g s t h e
pelences; I
believe i t i g i n the interest o
sna vublic morals that t h e Limit s h o u l d b e Llowerec
thet t h e 1 0 linit i s preferable t o the , 2 0 Linit.
Governor .icllborn,
i s n ' t i t 3 violation o r the
a n ace
Ccrininel stetutes o f nost states t o crew gsesinst
count which you heven't got?
N o t w h e n y o u have a n sccount.
Governor wesy:
mean n o n - e x i s t a n t b a l s n c e s .
The Chairmen: I
whether
think w e u s t r e s a r d t h e fect 4
have inci
the banks want u s t o change the practices, t h e y
ested t o u s t h e t 9
lerge p a r t o f t h e w é i b s r s h i p
o f the
think ..any o f our troubles
systen wents t o chenge. I
the s a g t h a v e e r i s e n p o s s i b l y
these banks which thsy wereceyabls o f aeciding m d shoula
selves.
heave becn given e n opportunity t o aecice v o r ths.
This i s ons o f thos
gervice,
I
f they went this kine o f
i f they want this modification i n the practice,
went i t
let u s become convinced o f the f a c t that t h e y d o
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Federal Reserve Bank of St. Louis
ena lst u s sive i t t o then.
Governor Fancher: I
will offer t h e resolution resc
by up. Harrison, u r , Chairinan.
(The resolution receives »
Governor Calkins: I
a l seconds.)
woulda Like t o s a y tnst m y onin-
y
jon i s jus 8
Governor ussy a s could b e possible.
T h e r e i s n o wstter
with which w e sre concerned that ceuses nore friction e n d
more objection,
i f y o u want t o jut i t i n that wey, t h a n t h e
think i t i e bigiiy ceeirabie
protest o f smsll items. i
to reise t h e srount.
A s far a s the qmestion o f causing
in circulation o f small checks i s conesrned,
opinion that i t would have n o srtect i n that
Governor
seay:
y
e have a l l h a d Gigverent sxperioences.
Our o s i n i o n s n d p o s i t i o n
bistrict,.
i s governed.
b y t h e wishes
o f the
v i e have b e e n following t h e sisnes o f our inen-
ber banks i n that respect.
Z e all know thst the concitions
Giffer i n cisferent parts o f the country.
i a . perre
willing t o vote v o r t h s resolution.
(The mation having b e e n duly seconted w a s carried.)
The Cheirnian:
T h e next topic i s 2d.
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Federal Reserve Bank of St. Louis
76
2-d Lisbility o f Reserve banks i n nisking
unqualified sndorssuent o n chscks r e ceived f o r collection.
It i s recosnendec t h e t unifori sncorssment b e acopted,
But Governor u.ckhinney i s not here. H e r e t o f o r e w e have
carried s u c h tosics o v e r t o t h e n e x t meeting.
$sof surricient l p o r t a n c e
his sbsence,
# 6 c a n meke
Governor sencher;
However,
t o require ection I n
e n exception
t o o u r practice.
w i g h t n o t this matter b e refrerre
to our collection committee t o give consicerstion a n a make
recoumencation?
A n d t o correspond w i t h Governor :.c-
The Chsiriien:
w4
Kinney
about it.
Governor fancher. I
Governor Youngs I
The Cheirmen:
sill s o nove, u r . Uneim. en,
will second that .wotion,
T h e inotion i s t o refer t h e mattsr t o
e on collections a n d t o correspond with
the s u b c o i m i t t
Governor .C:.innsy a b o u t i t .
(The m o t i o n h a v i n g b e e n d u l y weconded, w a s c o r r i e d . )
The Chsin.en
a
b this point I
would
thet i t hes always been o u r custon, w h e n a Governor i s
ebsent fron. this converence o n eccount o f sickness,
send h i n a telegran.
to
ce
Governor Calkins: I
would move thst t h e Chsirn.an b e
requested t o send a n sopropriate telegrani t o Governor
hicKinney.
=
(The motion, having been duly seconded, v a s carried.)
The Chairnan:
T h e next topic i s 2-e,.
2-e A d v i c e o f opening o f benks
previously closed.
San francisco recommends t h : teach Pederal reserve
benk advise e a c h other Federal reserve bank,
b y wire o r
letter, w h e n a menber o n nonemenber b a n k
i n its district,
previously advised a s Closed,
i s reopened,
I
t hardly seenis
necessary t o discuss that.
Governor Calkins:
T h e r e i s n o dais cussion necessary,
Governor Seay: I
would like t o suggest thet there
are difficulties
i n the way o f doint i t practicéelly, because
it v e r y f r e q u e n t l y h a p r e n s t h a t t h e S t e t e B a n k i n g
C o m m i s-
Sioner will n o t notify u s a n d w e have t o take t h e best
steps available t o find out t h e facts.
Governor Young: I
will offer that s s a motion, ur.
Ché irmen,
(The motion w a s duly seconded. )
Governor Seay:
T h e r e a r e t w o ways o f closing a
bank down o u r way. O n e i s temporary e n d t h e
other i s per~
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
manent,
O f course i t i s not sug:ssted thet
Governor Calkins:
the banks should send advice before t h e y g a t i t thsiselves.
But w h e n they a r e informed authoritatively t h a t a
bank has
reopened t h e other Pederal Reserve B e n k s ought t o b e 3dvised.
T h a t practice i s n o w not followec generally.
O f course i t i s obvious thet s u c h 4éd-
The Chairnan:
should b e sent i f the bank i s i n yosition t o c o so.
= GP
(The motion, having been culy seconded, w a s cerricd. )
The Chairman:
T h e next topic i s
2Qef t h o u l d Fecerel xeserve Banks
hsndle collection i t e s peysble
in foreign countries.
Thet i s o f f e r e d
tions.
b y t h e stending c o u m
s e o n Collec-
H a v e y o u anything t o s a o n t h e metter, Governor
Fancher?
Governor Fanchers s
first submitted b y the Fec 1
topic, u r - Chairnuan, w a s
Reserve B e n k o f st. Louis
to the Federal Keserve Board, which, inturn, suggested that
it b e considered b y t h e Stending Commuittes o n Collections.
The committees adiscucsed t h e m a t t e r a n d i t W a s sugss
that inestuch a s a
q u e s t i o n o f policy w a s involvec, t h e t
before action should b e taken b y the conmmittese @ ruling
by t h e B o s r d u o©o3n t h e s u b j e c t w o u l c
b e necessary.
S
o
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Federal Reserve Bank of St. Louis
73
rer as the hendling o f collections i n foreign countries
is concerned,
i t wuld b e &
banks touncertake
Lito £
reaeral reserve
t o h e n d l e iuch i t e u s
T h e o n l y fe. erel
reserve b a n k h a n d l i n g i t e s
o f this cherseter
i n @ny con-
sicerable voluxe i s the
end w e heve been inrorued i t i s their »rectice
items o v e r t o o n e o 7 5
t e m b e r
a
t o turn the
d foreign con-
nections,
The Cheirmaen:
n e y I say just one word sbout this
metter o f handling goreign iteme.
I t uncoubtecly i s a
principle behind t h e wederal seyerve H a n k «ct thst w e should
not ¢
a c t i v e l y into competition with our oun usubers,
1é important businesses conuuctée:
benks is the foreicn acchange business.
b y thse ..enibe
suvérficislly i t
might a y cear t h a t t h e c o l l e c t i o n o f ite..s o n 4
foreign
country i s sisoly e @ service, b u t 3 8 9 ne
involves trading i n exchenge.
Y o u cennot
the f i r s t p i a c e t c o . - n o t t h i n k t h s
reserve 6
3
are s d e vate t o conduct t h a t businsss econ-
onically a n d satisfactorily,
s n d i f they were ined
quate w e would encounter a great ceal o f criticism f r o n
our m e m b e r s
i f w e g o into t h e foreign exchenge
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Federal Reserve Bank of St. Louis
80
Couu:.ercielly i n competition v i t h o u r usiubers,
there m a y b e sxceptions, I
will n o t u n d e r t e k e
dnile
sincerely h o p e thst this Confer-
t o acont a
poli
o
f collecting
If w e G o w e ere bound t o gst into <ifviculties.
i
s cannot g e t rsturn o n 6 voreign itsin vithout
involving t h e adiustient o f sxchengs reves.
be sstisfsctory e n d m e y sive r i s e L s p a t e s .
very technical business, roguiring t h e utmost care,
is just n o w surrounded . i t h e goo’ e ¢ a l o f hazards.
Governor sencher:
i
o you handls s o s ibreign i t e s ?
Te Chairnian: P r e c t i c a l l y none.
Governor Fancher:
B u t y o u hanale t h e n through
ber banks.
The Chairnen:
j
Governor #ancher.
e G o not g e t then.
T h o : ¢ y o u G o gst y o u hancle
through 6 ineuber bank i n lew York‘
The Choirmuan: O c e a s i o n e i l y so..e@ l i t t l e
througha jwenber bank.
Governor Young:
W e handls Cenadien items a n c
could n o t c i s contin t h e t v e r y well.
Governor C a l k i n s i
items, b u t t h e amount involved a n d the number
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Federal Reserve Bank of St. Louis
81
inconsidsrable.
I t seene t o m e tiat 9
complets a n . w e r t o
the guestion i s given b y t h e Chairuan, t h i c h i s brisfly
thet w e heve n o t t h e fecilities t o sive t h e proper service
and should not undertake it.
metter that has b e e n brought
Governor Fencher: s
to our attention e t times h e s b e e n the he. dling o f Vanedian
items,
B e i n g 9 border state w e neve bsen asked a t times
whether w ¢ had facilities t o hendle ite.s payable i n
Ceneda ,
Ths Chairnen: I
Go not s s e ho. w e c a n evoid certein
from the conuittes vould
exceptions, but this suggestion
moan
incicate t h a t s o u s b o c y h a d i n m i n d p e n i n g t h e
élly t o the hsrdling o f rvore
igs not dons.
I ' k n o w w e would n o t
There i s n o occasion f o r u s t o G o i t i n
the fecilities o f the lerge benks there s r e s u c h thet the
business a l l goes t o them.
Governor o¢ay:
p o you consider C a n a d a s s a foreign
country.
The Chairman:
s u D p
i
nt
e g s e o f iinnespolis,
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Federal Reserve Bank of St. Louis
Governor sesy:
A r e y o u callsc upon t o hanéle
business, Govérnor Young?
Governor Young;
d
e have hsnaled it.
8 grain shinnent, f o r instence, 6
I n thse csss
country b a n k will s e n d
it i n t o its Twin City corresponcent, w h o ssncs i t t o us.
There i s n o rsason w h y w e shoule n o t hondle it.
I t is
paid i n New York exchenge, and 1 do na& believe i t could
really b e c l a s s e d a s 3
foreign i t s .
Gifficulty w i t h i t s t all.
exchenge o f a n y Kind.
d
é expericnce
no
4 @ d o n & h a v e t o ceal i n any
" @ collect o n the Canacian side
the came e s t e G o o n the American sicas.
The Cheirnan:
H a s anyone €
motion t o submit o n
this?
Governor Hancher: i
would m o v e i t i e the sense o f
the Conference t h a t w e d o not handles foreign collection
itens a s a general volicy.
The Chairman:
W i t h w e h e x c e s t i o m g a s inay b e n e
sary w i t h resard t o Cenadian items.
Governor «.cDougal: I
secona t h e motion,
(The motion, belng duly seconded, w a s zarried.)
The Chairman:
T h e next topic i s
OL
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Federal Reserve Bank of St. Louis
3 - Coin, currency a n a circuletion,
~s Veult reserve o f feaeral roserve
benks g n a percentage o f gold coin
and certivicates t o total.
Thet i s submitted b y Boston.
Governor liorts: T h i s question w a s raised smong our~
:Olves v h e n our new veults became evalleble t o carry s a
consi¢erable emount o f gold.
e p t e . . b e r l l we had o n
our books holdings o f 227,000,000
i n gold, a n d o f that
sniount . 1 4 , 0 0 0 , 0 0 0 w a s i n o u r o w n vslut, , 9 , 0 0 0 , 0 0 0
end .,8,000,000
i n certificates,
I
i n coin
t sessed t o u s that that
w a e 6 very snsll emount o f o u r o u n holdings,
e n d <¢ thought
it should be increased,
T h e question then wae how much
shoula i t b e increesed,
T h e t ssamed t o involve, perhsos,
some understanding with the treesury and, a s 4 matter for
genere] civcussion and opinion, e n d i t was ciscussed i n
the g r o u p c o n i s : e n c e w h i c h w e h a d i n B o s t o n 8
couple o f r
weeke 8go, a n d I think this suu.arizes t h e results o f t h e
Giscusd;
n
o two ressolutions w h i c h I head arewn were sdopted
with e motion thet they b e reforrecé t o this conference,
The first resolution w e s “Resolved, t h e t i t s h o u l d e
b the
policy o f t h e Pederal seserve banks f o r cach bank t o hold
in i t s o w n v e u l t n o t l e s s t h a n < 5 p e r c e n t a
t h e total
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Federal Reserve Bank of St. Louis
84
holéings o f the bank with the Federal Kessrve Agent o f
thet bank, w e c o n d , that i t should b e the policy o f sech
Federal reserve b a n k thet o f this 2 5 per cent gold held i n
its o w n velut n o t less ther one half o f ths gold should b e
in gold coin,
T h e second resolution w a s acded beceuse,
on ciscussing the subject with some others i t tas found
that there was a very small amount of gol. coin i n the
country anyway, t h e t probably i t shoulc b e incressed--- é s
8 niatter of fact I tink the *riasury is inereesing the
smount o f sold coin--- a n d anyway t h e t w a s t h e wey t h e ..etter was presented t o us.
i have morely suggestsa
to get started. I
ciscussed.
w
aie ller amount.
think the oercentshe could b e very well
e Might w e n t t o heve a léergsr snount o r 3
B u t that i s thse cuestion a s w e see it,
that t h e bank should hold a consic«rable amount o f i t s
own gold i n metel a n d not i n certificetes.
The Chairman;
canental one,
T h i s ,ituation reslly i s a very fun-
T h s situation presented b y the Mederal
Reserve system tocey, a s
this.
W
L e w it, i s souething like
e heve t h e ultluwate r e s p o n s i b i l i t y
i n point o f
fact, whether t h e statute s o éxvresses i t o r not, o f
85
méinteining t h e gold reserve, n o t o n l y y o r the reserve system, b u t t h e T r e a s u r y o f t h e U n i t e d etetes, s i m p l y b e c s u s e
we have t h e gold, e n d the picture i s presented,
b y a n anely-
sis o f the condition o f the various reserve banks, w i t h
total liabilities o f four billion eight hundred million,
excluding Treasury liabilities Which,
i n one sense, might
be added, t h a t s t a recent d a t e i n g0ing coil e n d bearer
gold certificates w e had a total o f wO77,000,000 o r 11.9
per c e n t o f t h e t o t s l lisbilities.
T
h
e N e w York Bank
héppened t o have o large esmount simply because o f its
geographical location--- sonething o v e r 2 7 per cent.
O n e
bank M a less than one per cent o f its liabilities i n
available gold, a n d t h e total o f t h e system a s @ whole w a s
ll p e r cent.
per cent.
prepared a
4
d
s I
say, m o s t o f t h e b a n k s v e r e u n d e r 1 0
@ went into i t very fully end ur. Karrison
teble sone several months ago, w h i c h showed sat
the t i n e o r t h e couput ation,
a t t h e e n d o f april,
a s fol-
lows:
Boston 5 . 4 p e r cert;
phiaQ9
N e w Y o r k 2 7 . 2 p é r cent; Philadei-~
p e r cent; C l e v e l a n d 6 , 5 p e r cent; H i c h m o n d 1 . 5 p e r
cent, Atlanta, 3 . 9 p e r cent; Chicago, 3 . 2 per cent;
S t . Louis
7.4 p e r cent; minneapolis, 1 7 . 2 p e r cent; K a n s a s C i t y
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
1.2 per cent; Delles, 14.2 per cent; s a n *sancisco,
per cent,
Of course this Goes not include t h e registered certificstes, b u t i t i s the evailable g o l d that c o n b e pelid out.
We felt i n New York quite strongly that t h e system was
not i n the shape that i t should be, t o a consicerable ex-~
tené because w e Gidn't have the vaults.
voults a r e built,
N o w that the
i t geous t o w e that t h e gole should
gradually b s sccumulated i n our o w n possession, a n d when
our n e w building i s finished i n New York I do not mincg say-
ing that I think w e will b e able t o take over the great
bulk o f this gold ourselves, 6
possibly i n bars.
large oart o f i t i n metel,
S e will G o that bseceuse sone dey, i t
may b e 8 decace o r some cecaces hence,
w e might heve s n
export movement o f gold end b e very glad t o have it, I n c i -
Gentelly, w e are holding some gola thet w e got fro.. wurope
in the form of foreign gold coin.
d e have 4 considerable
number o f Napoleans, a n d w e probsbly w u l e h o l a t h e sovereigns i f w e gst them.
T h e sovereigns t h a t w e got f r o u
the Germen Government i n 1919 w e solé t o the Bank o f Eng~
Isné@ s o a s t o avold transportation costs.
of t i n e I
hope w e w i l l h a v e a
I
n the course
very lergse p r o p o r t i o n o f o u r
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Federal Reserve Bank of St. Louis
golc Bpeserve i n actusl sola coin s n d bars.
As a n incicent t o this dkscussion, u r e Harrison satisfied himsely that there w a s n o t e n ade:uate supply o f gold
coin i n existence
i n t h e country,
i n case o r 8
heavy dasinend
for gold coin, s n d i n discussing thst with the freesury h e
ascerteined that their capscity t o produce g o l d coin would
enable them, i n two o r three months ti.e, t o turn out such
@ vast quentity thet there nesd not be eny concern about
it.
A s 9
matter o f f e c t t h e y e r e s p e s c i n g u p i n t h e c o i n -
ing o f gold, a n d I believe a r e coining .;50,000,000.
wr, Harrison:
P r e t t y nearly thet.
T h e y expect t o
raise t h e supoly o f gold coin i n t h s Tressury r r o m
920,000,000
t o .§800,000,000 i n the next tielve wonths, a n d
thet will rorm a basis,
b y the woy, f o r the issuing o f a
billion end a half o f gold certiric ates.
Governor Mores.
any percentage,
W
W
e are n o t carticulsrly secced t o
e d o not c a . e very m u c h o n e t a y o r the
other, b u t w e think w e shoulé have e n uncerstanding t h a t
each o f ths Ressrve banks will gradually,
3 s opportunity
offers, increase their holdings o f availsble gold.
Even
if i t i s i n gold certificates i t will enswer t h e purpose,
Governor Norris:
H e s t h e treasury a n y ob‘ection t o
our eccunulating o u r o w n gold?
wr. harrison:
u n the contrary, ur. Gilbert expresses
the opinion that h e thought i t would b e a d¢esirseble thing
for u s t o do.
Governor iuorss:
T h a t isaves t h e door open f o r each
penk t o gradually accumulate a n d transfer t h e netal t o its
own vaults---
i n a reasonable sort o f way, I
The Chairman:
mean.
Y e s .
bo y o u w i s h t o submit a
resolution e i t h e r a s t o t h e
percentage o r e s t o policy f o r t h e iceting t o vote on?
Governor Morss:
A t t h e group conference t o which 1
referred t h e resolutions t h a t I
have r e a d were voted on,
it being voted that t h e foregoing resolution b s sdopted
and that the same conmittee report t o both the Governors'
and Chairmen's Conferences.
have y o u think that I
O f course 1
do not .ant t o
a m very strongly o f t h e opinion that
these particular resolutions should b e passed, b u t o n l y
that t h e y should b e considered s n d smended i n any w a y that
seems desirable.
Governor Seay: I
would like t o s s k i f the resolu-
tions specify 2 5 per cent.
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
89
Governor iorss.
Governor s a y :
Y e s .
w O u l G y o u iinc putting t h e oarsseo-
logy w h i c h y o u h a v e sdoptedad i n t o t h e t e x t “ c o n s i c erable
guontity".
Governor «orss:
N o t a 6 athe
T h e sizure “ 2 6 ser
cent’ w e e u t i n b y u e f o r the pursose o f clarifying t h s
icea a n d raising t h e point v o r .iscussion.
Governor C a l k i n s :
A g s 8
matter
o f v a c t t h e a:.ount
of
golc v )ronfi e d b y each incivicusl
e
b a n k i sL t o b s ceternined
in réletion t o various things, atuong thich i s nearness o r
eiiotenéss fro:.. the source o f supply.
i n son. *- aneisce,
for instance, v e have a mint end r o u t h e proctical nroint
of view i t i s just 9 s availeble s s it woulc b e i v it was
in our veults.
B u t that concition coesn't obtain i n nseny
other districts,
Governor Norris;
Governor Valkins;
{ t - t e 5 0 e l thus.
T h a t s h o u l d b e t a k e n i n t o consicer-
ation a n d consequently n o ricic ».srcentege basis should b e
applied,
The Chairmen: C o n s i d e r i n g t h e resolution a n c t h e terus
of t h e récouiendation b y the sroup conference hele a t
Boston, vsrhsps w e should have a
resolution t o this efistt.
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Federal Reserve Bank of St. Louis
90
That i t i s the sense o f t h e uleeting thet s e c h reserve
bank should builé u p i t s svaileble g o l é supply h e l d i n
its o w n veult, w i t h regard t o thst e c o .endation a n d t o
evailebility o f suvslies through other -ourcss.
would like t o ovfer that s s
Governor i.orss: I
motion,
Governor valkinss i
s e c o n c it.
(Ths wotion, heaving been culy seconue
w a s cerried.)
f i n e next topic i a S -
The Chairnien:
Seb standard o f 1 1 S s o x currency.
A g @ juetizieation f o r putting that
Governor seay:
on the progrei, I
nec
Department, s i g oO
will refer t o 4 letter tro. t h e t r asury
b y ths secretory, ecadrsssec t o the
Governor o f the Federal meserve Dosra,
not oll familiar with i t I will reac e
‘vith respect t o Unitsc stetes currency
eble s h o w i n g s r r e a r s
t o h a v e b e e n inace b y t h s
serve b a n k s O f R i c h u o n d s n d « l n n s a p o l i
grou t h e Boerd, s i g n e d b y
the Governor, w h i c h steted.
“T a m convinced thst unless t h e percentage
o r Fit
notes sent i n vor reGeu-tion i s very iaterielly r e c u c e d
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Federal Reserve Bank of St. Louis
91
S Ganger that t h s s i s t i n g method Lisy b s cianged
totrensver t o the Preasury ell G e t e i l s of ree
dcimtion e n d distri ution n o w uondled b y the sterr o i tue
banks and the board."
O f course thet 1
quite a toruic-
able threet.
B u t i t wea. based unon Lnaccurate a n c
The Chaimnen:
wislesding iniror:.etion.
Governor sesy:
Y e s , 38
we =LOUNC - OUG
In endeavoring t o coimply w i t h t h e teris o r ths
n
assortiiont
oagresient
i t u b i
t isv
arr r
iem.v5G>a et,
t o s‘scderal r s s e r v e
e have h a
urrency
w e h s d applisc o u r
nowe: anc fr:esgury notes
any cOupleints
u
r o i o u r insiuber b e n
Ye
KS
wany O f t h e m » s t u r n i n g t o u s c u r r e n c y t h e y récéiveda r r o n
,
u
2s being sntirelys unfit, i n their opinion.
Recently
t the Baltinore B r a n c h w e hs
a a & esvicit g r o n S n inrorsal
e o f ethe
t
t
Devartuwent
i
n
iw h o tno o k tO h e n s
Ct t e r
up, and I think I eu right i n saying that tue
thet was thet they gsve t h e Baltinoz:e “ranch t o uncer: tend
het i f we returned t o our tomer orectice o f sorting
notes thst thers vould b e n o unfsvorebls couw.ent b y the
y Department.
r
u
we therefore
s
a f e e lé thet rw e are Tjusti-~
.3 in returning
d
e
i
f regara t o
without
practice,
t o our former
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Federal Reserve Bank of St. Louis
the c u r r e n c y c i s t r i b u t i o n c i r c u l a r w h i c h ¥ e s
The Cheirimen: G o v e r n o r sesy, what hs transpired
thet metter is, briefly, this.
# @ h a d en exodiuinetion imac
of helves returned t o the tressury right hers.
nen u p i n t h e vsvartnuent w h o s r e ..aking 8
4
& got the
conpleint s b o u t
the condition o f the currency t h a t w o e returnécu, e n e i t was
perfectly obvious that much o f the ciiviculty srose Yroin
the tact that y o u could n o t cstermine a
byexsiiining o n l y ons holf o f it.
fit o r unfit noté
T h e t resulted i n e n
arrsngenent w i t h t h e lreesury vepartiient t o senc s0..¢ men
to cxanine ths sort.
gent @ mean t o NewYork a n d h e B i i 6 convinces?
was resulting i n seying out unfit currency.
ur, Gilbert z o through t h e department, o n d h e ues rether
disturbed b y t h e conuition o f the r r é n c y that w s were
currently ssying out, e n a which sas ceusing ©
of commlsint,
end I
great ceal
think n o w t h e t t h e stafir i n t h s B u r s e u
in Washington
here/has beco.e convincec that they heve i s 65 nie leaang recoiuenaustion,
d h e t w e shoulé n o w c o i s t o have 4
review o f this stendard, r e i s e t h e sten-ard a n c heac o f f
this s n o r o u s sccu.iulation o f c u r v e n e y w h i c h i s t a k i n g
dlace, I
imegins,
i n other rs.erve banks,
a s i t i s with us,
93
which really never should b e paid out a t all.
I
have here
& recommendation which i s designed t o accomplish
that,
lure Harrison:
ment y o u r coument,
T h e r e i s one thing which should supplea n d t h a t i s that s u b s e q u e n t
t o t h e visit
of this informal committees o f the Treasury Derartment and
ur. Gilbert's visit, a second committee visited the bank
from the Treasury Department, a n d I believe they also
went
to Philadelphia a n d t o Boston.
Governor morss:
ur. Harrison:
T h e y csme t o Boston.
A n d probably t o Chicago.
T h e y brought
with them a sample package of notes which
they considered
as t h e m i n i n u m s t a n d a r d o f f i t currency,
a i d when they
showed i t to our department they reached the conclusion
that the only way i n w h i c h e
w could live u p t o their own
Standard,
a s demonstrated b y this pseckage o f notes,
wes t o
go back t o cur o l d sort, t o the system i n
force prior t o
this currency circular o f lest luaye
A S @ result o f their
visit, w i t h their approval s n d infornel approval
o f iar.
Gilbert, w e have for the last five weeks been sorting
according t o the old sort i n effect prior t o lest
kay, a n d
Our r e c o m m e n d a t i o n t h e r e f o r e w o u l d b e
that t h e Tressury
bepartment s e n d t o seach Federal K e s e r v e
Bank a
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Federal Reserve Bank of St. Louis
typical
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Federal Reserve Bank of St. Louis
94
peckege o x yvorted notes, illuctratin. w h e t they consicer
the minimun stenagard
o i
8
g
s o that
each rei:erve b e n k
what t h e Irsesgury venartment o n d the r
in fact should b e thse proper sort.
Governor valkins:
T h i s metter
i s v e r y worrisojis a n d
Probebly the san *rancisco boenk
hae weany ramitieations,
hes been more continuously subjsct t o criticisi t h a n a n y
other bank.
heirs
e
S
a
l¢
esong
thet w e ought t o continue t o nut out currency t h e t w
reesonably rit.
i n t h e golé
o ¢
W h e n w e were t r y i n . , t
end substitute currency, o n e o f the most u s e r
u p @ stream o f nsx cur+
effective things w e cid sas t o p
rency, o n d t h e t h a s h a d i t s efrect,
clean currency,
e n d most
e n c t h s result i s that
o r c o i p a r a t i v e l y c l e a n currency,
i s more
continuously cenandced i n o u r c i s t r i c t t h e n i n s n y other,
spend more nioney i n su.>plying it.
everybocy §
wrinkles
O €s
s
;
’
w
e uncertook
ship.ent, e n d the
e h e v e uncovered i s this, t h s t 8 tie...
ber bank which isceives currency f r o m t h e read rel R
anc coes n o t like o u r sort, p r o c e s s Liviedietely t o
sort o u t t h e b e s t n o t s s
e n d r e t u r n t h e r - s t 3st o u r a x -
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Federal Reserve Bank of St. Louis
pense.
G
T h i e t
The Cheliriian:
D
b
realize thet
e let them.
v
T h e y will
sypesrs t o
e
v
s
s
r
t
n
g costy,
o
WSs
o limit t o a thing
n
Governor Celkins.
like that.
- WLU
O
e
n
it m
I t
t should
dssirable
thet t h e circulotion sioulé b e kent i n © cicent concition,
if I msy u s e thet torn,
The Chairnien.
I think
u s should meke &
recoiuwenca-
tion t o t h e T r z e s u r y verortiucnt, w h i c h i s y b e superfluous
now,thet t h s standard o f fitness
c
prevailing h e s caus:
o
m
epL
int
charecter that y o u have referrec to.
Governor Celkins?
The Gheiriian:
a n d will increasingly d o so.
“
A n c that t h e
atencgearca a u s t
b e rsised
in justice t o the public, w h o have » right t o cemand r e o
sonably c l e a n bille, e n d then procesc “ i t h t h e recolution
thet hes b e e n rreparec, unless vovernor s e s y has o n e t o submit.
Governor iesy:
4
e came t o t h e conclusion that, a l -
though w e hed been infornually acvised b y representatives
of the cepartiient t h e t t h e standards which w e roruerly
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Federal Reserve Bank of St. Louis
eaonted w e r
theless,
i n view o x the roruel circulsr,
s change i n the stenderd w
ury benartient.
you, 8
w e could n o t niseke
p o r t i n g i t t o the Treas-
T h e y subuittec t o us, 3 s they c i c t o
specinien psckage,
w h i c h conrorniec t o o u r f o r u s r p r e c e
tics, e n d they gave u s t o uncerstend that i f swe returnec
to Our forisr 3
part; b u t I
i c s thers w o u l u b e n o objection o n their
cannot c e e t h a t w e c a n c o i t unless
v e aks
ie kine o f e report t o the Department t o sustify o u r action.
The Chsirnan:
T h e t is, you went sonething ofriciol
from the Trsesury n o w i n regard t o the change o : standard
Governor
s6ay: w i t h e r their essent o r dairection.
not
If you will read t h e resolution--- 1
have xsorimlote. one---~
I will b e glsd t o hear it, a n c i think t o vote f o r it.
The Cheir.an:
stand,
T h i s l e the resolution---- a n d w s uncere
b y the way, t h a t t h e Treasury v s ertuent's Comuilttes
on Currency h a s récon.snded substantially this, b u t have
not given u s foriiel adyice o f it--~+
‘
"Tt i s récowsended that the method o f dcster.uining the
stencard o f fitness 9 s prescribed b y e the cisteivduticn
and > e y m e n t p o l i c y o f t h e F e d e r a l r e s e r v e b a n k s b e « l s con-
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Federal Reserve Bank of St. Louis
97
thet t h e officiel:
tinuec, 5
R
furnish
63C¢
e
s
e
r
v
e B e n k s i t h 3 a@ssuple t a c k e g e
stenuard t h a t s h o u l d
&ra
the
s
e
t
o
n
be]l o w e s t
representing
,
Tr secury yvevartment
o f the
mohthly test b y
gedersl R e s e r v e B a n k o f N e w
yolloving t h i s policy. {
recoiwencation that t h e ection b e reported
thot
rfornol Gonvimuiation o x i t ,
Governor
sL%u
you o i f e
c
h
.
that the
York
to the Treasury
h e b e asked
w
e have
Wotan
&
@
if
cdthem t o that sefrect
end they heve accuicseed i n the notizic ation, b u t I
gousthing more i s required. -
to
or h i g
will secone. the t resolution,
eay: I
be put
then s a c t o t h e
wOULG
through Under secretary Gilbert e n d
3
be cis continusd.”
b e p a r t i z e n t
ag you knov, t h s
sive u s a
ed
that i t i s a l s o r e c o n e
in circulsetion,
or
think
not b e c o n e w i t h o u t
I t coulc
gone C O u t u n i c a t i o n h
t
i
w the Tressury v sosrtnent e n d
s Onis
esssent b y the Departinent.
The Chairmen:
“ h e t i s your wish,
Governor Calkins: I
resolution,
sont Lenen?
w
si. quits i n o g r e s m e nhttithe
o r the intent o f
lution, b u t I heve
ee t o conrorming t o
c
soe hesitetion about sgresing i n a2avVeSn
8 packages rurnished iby the Treasury Depertuent,
whieh seenis
to m e t o b e a little t o o rigid 6 cirect fon s o r u s t o r e e
ceive,
W
e have t o uss
Gisersation
i n tre conduct
o f
98
our business,
s n d w e are entitled
t o use discretion
in
this matter,
(The motion, having been auly séconced,
Governor Young:
w s carried.)
W h i l e w e are o n the subject, I
sup-=
pose a l l t h e banks have t h e sane difficulty t h a t w e d o with
regard t o the payment o f new currency.
in ininneapolis
i
a t t h e present t i m e , a n d i
t i s very b a d
a m almost t e m p t -
ed t o notify t h e member banks that w e will refuse t o pay
hew curroncy w h e n w e have fit-for-use currency i n the bank.
If w e d o that that will affect Chicago, a n d I just want t o
bring i t u p for discussion t o see whether such a thing
should b e done.
The Chsirman:
I f you have 9 large accunulation o f
fit currency that y o u want t o work out, y o u might b e able
to d o what w e did a t one time, a n d that i s t o errange w i t h
the b a n k s
i n tiinneapolis a n d St. P s u l t h a t f o r a
certain
period y o u want their induigence a n d cooperation t o get
out i n t o c i r c u l a t i o n s u c h currency.
L i m i t it to a
definite period a n d get r i d o f it, e n d t h e n stert o v e r
agein,
Governor Young:
W
e have tried that, b u t some o f the
merchants a n d hotels a r e insisting u p o n n e w
currency a n d
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Federal Reserve Bank of St. Louis
98-48
are willing t o pay t h e cost o f shipment f r o m Chicago,to
linneapolis.
T h a t simply relieves o u r situation a n d
throws i t onto Chicago, w h i c h i
s not quite fair.
Governor seay: T h e main vélue o f this discussion, I
think, i s that i t convinces the Treasury that the ection o f
the F e d e r a l r e s e r v e b a n k s
o n their o w n account formerly w a s
&@reasonable o n e a n d that w e c a n b e trusted t o act with discretion, judgment a n d reason,
a s w e did, I
believe, a n d
they acknowledge that fact b y acquiescing i n our return t o
that former practice,
The Chairman: I
guess every Reserve bank has more
Or less o f 8 problem with respect t o that.
W e heave a big
problem i n that sort o f thing.
ir, harrison:
W
e find that t h e n e w method o f sorting
is helping u s a great deal.
Governor Young:
I t seens t o m e that i f w e could take
@ period, s a y o f thirty days, w h e n 4 1 1 the reserve banks
would w o r k o f f t h i s f i t - f o r - u s e c u r r e n c y e n d n o t p a y n e w
currency, t h a t i t would b e effective, b u t there i s n o use
‘for Minneapolis t o d o i t unless i t i s done b y all the
banks, because i t would just shove i t off o n Chicago,
Kensas C i t y o r somewhere else.
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Federal Reserve Bank of St. Louis
98-b
(After further ciscussion the topic nas passed without
action b y the Conference.)
The Chairman;
T h e next topic i s
S-¢ Reconsideration o f action o f last
Conference relative t o absorption
of costs o f all shipments o f coin
to and from member banks i n view o f
possible attitude o f Treasury b e cause o f discrimination against nonmember banks.
That w a s submitted b y Governor Calkins.
Governor Calkins: I
whetever I
think I
will have t o preface
have t o say b y making m y usual oration.
@11 know whet that is.
Y o u
A t each o f these conferences o f
Governors o f t h e Federel reserve banks w e have a
program
submitted which w e are brought h e r e t o discuss.
A s the
Conference sits d e y after d a y w e becone more impatient
until t h e last d a y w h e n t h e progroam under discussion conteins t h e most importent metters that a r e o n it, e n d w e
plunge through thet i n great haste a n d without d u e consideration-- I
ssy w h a t I
conference a n d g e t avay.
mean--
i n order t o close t h e
I t i s m y opinion t h a t t h e last
time, w h e n w e took u p the questionnsire thet w a s sent t o
the Federal Keserve Banks, t h a t w e went through i t with
great expedition,
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Federal Reserve Bank of St. Louis
b u t w e went through i t w i t h t o o m u c h e x -
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Federal Reserve Bank of St. Louis
yec.ition.
The Choimuan:
I s thet t h e only c s i e y o u have b e e n
sble t o discover, Governor valkins?
T a t i s m y 2ration.
N o .
Governor Cslkins:
at t h e t c o n i e r e n c s
t o sopt 6
unifori. orscticse w i t h
costs o f shinient
t o ana rrom
bonks o f currency, gold, isucral reserve notes,
3s
5
Trsesury notes, s i l v e r a n a . o rorthe
sconted. the ~rsctice t h a t w e sgrssc
R S
e a t that conierence,
we would e l l o f u s b e subjected t o the iuost riciculous
kind o f westerul expenditure.
T i c r s i g only o n e exomple
necesssry i n m y opinion, e n d that ise the o n e thet I
just
wentioned, where w e ship currency t o 9 mernber bank s t 9
Gistant point s t our own exnense, e n c the iwenber bank iuwmeuore,
Giately ships itback t o u e a t our aepcnse o n e 8 K s f o r
that
anc. ve ship i t out s t our expense, o n c w s continue
~rocesgy without enc.
The Chairinen:
T h i s veletes t o coin, n o t currency.
au telking o f coin, currency
Governor Calkins: I
and. everything é l s
-
e e a o x b e d a resolution which re-
incowing a n d
sulteé i n a n sgreenent t o ebsorb t n e eost o f
gold coin
outgoing ehisinents o n coin, gilverdollers a n a
peing made Giveretiionsry,
a n c t o absorb incoming shipments
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Federal Reserve Bank of St. Louis
99
from non-iiibibsr b e n k s which remit s b per, a n d n o t t o absorb outgoing shivme
The Chairmen: I
t
o non-uerber banks.
went t o interrupt y o u thers t o
one word Ssbout the action o r that conrsrence.
I t was
found b y exsniination o f thse questionnaire t h a t t h e oractice w e s uniform,
a s I recall, w i t h only one sxception s t
that tine w i t h regard t o these shipments,
Governor valkins:
coré, b e c s u s e I
uniform,
w o u l d like t o sppeel t o t h e ree
an. quite s u r e t h e t t h e p r a c t i c e w e s n o t
i f y o u iieesn the prectice i n regard t o all o f these
things.
The Chairman: I
loving 9
mean 311 the ressrve benks
u n i f o r m prectic’
w i t h o n e exces; tion, a n d t h a t
ception relate¢ t o silver dollars s n d gold coin.
Governor Calkins: I
think thers vas n o uniforii prace
tice, a n d nothing eo>rosching i t , i n regerd t o subsidisry
silver.
The Chsirman:; I
cdo not know; I heve n o t t h e jues-
tionnsirse h e r e .
Governor Cslkins:
T h e thing 1 ani partrularly con-
cernec ebout i s t h e subsidiery silver. I
think w e are
doing a ridiculously westeful thing i n paying t h e costs o f
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Federal Reserve Bank of St. Louis
shipments o f currency t o non-iuetiber banks--~
j e have experienced n o trouble
Governor icbougal:
in t h e t c a s e b e c e u s e t h e t i s o n e r é : p e c t
i n which # 6 did
nop follow t h e recommendations o f t h e Conference,
Governor Calkins:
edopt s
T h e r e i s 8 case, where, w h e n w e
uniforn practice, g o m e b o u y é o e s n ' t f o l l o w i t e
Governor wcDougals
O n shipments o f silver i t w a
very clearly shown thet i f w e peic t h e charges b o t h ways
the condition t o which Governor Calkins h e s reterrec woulda
be inevitable.
The Cheirman:
T u s t w a g enecizticelly excepted.
Governor . cbougal:
silver.
N o , I
e m spesking o f subsiciary
S l i v e r dollars w e r e excsptt
W
e Gic cepart
fro. t h e reconuiusn.etion t o t h e e x t e n t t h e t w e c i d n o t p u t
that i n t o uss.
The Chairman:
n
o
i
W h e a t was t h e r e c o u m e n c a t ?
Governor icbougel:
n y recouwendation--- which I have
not otfrereé--- i s that ive should Giscontinue t o abiorb t
but not
he
cost o f incoidng endfoutgoing shipments o f subsiclery
sliver.
The Chairmen:
I s thers not e n inheritence o f policy
fron the subtressury i n
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Federal Reserve Bank of St. Louis
LOL
natter s o r ciscussion.
The
w
h
t t h e situation is?
a
T h e y charged.
Governor =say;
Governor w.orgss:;
e
v
e
r
y
t
h
i
n
g b o t h ways,
didn't they?
Governor Seay:
Yes.
Governor «cDougal: I
vould n o t b e i n fsvor o f the
resolution 9 s cubuitted,. I
would b e i n fevor, hovecver, o f
voting t o ebsorb t h e cost o n outgoing &
conilng.
T h e t i g sowething I
b
u
t n o t in-
essu..cPos w e ere a l l coing e n a
this i g s service which, i f w e .ithurew it, vould o f course
esuse mors.or l e s s dissatisfaction.
hes not oiiered 8 resolution, I
The Chairman:
w i n c e ir, Calkins
woulc submit thet.
T h e t is, that t h s p o licy a f t h e re-
serve banks shell b e t o cistentinuese t o vey charges inourréc:
on inco:.ing shipwents o f minor o n d subsiciary coin?
Governor «cbouga 1 : Y e s cir.
Governor Seay: s p e s k i n g o @ that m o t i o n , Iwould
like t o s a y that w e heve h e d n o sbuses, worthy o f mention,
oi t h e privileges, e n d thet i n conformity w i t h the ogreewient w e have recently issued a new c o i n ana currency circuler,
9 s the other banks have done, e n c i t i s not @ good
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Federal Reserve Bank of St. Louis
102
thing t o egree u s o n o n e policy s n c t e n ,
time, chonge o u r policy.
i n 8 very short
I t shows instability o n the part
n d c a u s e s sous Shibsrrascient.
of t h e reserves b a n k s
think i t w a e u n c e r s t o o d t h a t , n o t n i t h s t e n c i n g t h e g e n e r a l
agreement o n this subject, thet, within liniteations, thse
reserve bank was supposed t o
M e r e wo5s n o such suggsstion con-
Governor Calkins:
teined i n the action taken.
thought i t we: well uncerctooc that
Governor = I
gituations might arise which would make i t necessary t o
GO thete-Governor Calkins:
ing scotch, I
G o v e r n o r s.cvougel anc myssli b e -
think v e heve the sesis obysction t o carrying
in end d e y out, y e a r i n snd yser out,
which is westeful i n sll its deteils, end this process o f
shinning c o i n a t t h e e x p s n s e
o f t h s Pecersal r e s e r v e b a n k s
induces wasterulness o n the part o f t h e tieuber benks e n d
will continues t o d o so,
The Cheirunsn:
W i t h the quslivicetion thet 1
in uniform practice u p o n ¢verything, I
spsolutely o n this. I
we s h o u l e n o t d o it.
believe
agree with y o u
think i t i s a westevul thing e n e
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Federal Reserve Bank of St. Louis
T h e a t cste m e b a c k t o the
Governor Calkins:
wag t o the sivect t h e t i t .2s unfortue coulda
3 practice v h i c h v
Wo c o u l d n o b derzend i t i s w é w e r e
to detend i t i n Conc recs
I t soula b e
ahs Be BG
BU «
e un@ wouleb
#
S e w l d s
I t igs unvortunate that cone have c h e
of their circulors, which w e heve not cone i n our bank.
Governor oeay; A l t h o u g h theoretically i t may b e 6
wasterul t h i n g ,
9 s @ matter
o f cost i t i s herdly w o r t h
reversing yourself upon.
The Cheiruén: I
would Ceplore 3
s
cheng
t now. I
entorse sverything you way about hasty setion, Governor,
Calkinag. I
wes r e
know h o w h a s t y i t w a r , b e c a u s e I
sible f o r it, b u t " 6 were i n s hurry.
Governor Calkins:
The Chsirmen:
Exactly; I
Personally I
Governor Calkins.
seceot y o u r emencnent.
think y o u ere right.
. @ then coue c o w n t o this situation
thet w e heave adopsteu t h e sarecue:
G
O solr
i n e that w e
should n o t cenart f r o m inesimch a e v e ogrsed t o 4
we think w e had better g o o n coing it? ¢
clusion w e ars going t o rsach.
i t , end
that t h e con-
s o m e b o d y h a s s u z g sted
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Federal Reserve Bank of St. Louis
that i t b e l e f t t o t h e ciseretion o f t h e benks. I
sn
quite sure that ur. Harrison will beer m e out s h e n i asy
that there wes n o suggestion sbout any ciseretion t o b e
exsreised,
O n the contrary, i t vas pointed out thst i t
yes highly undesirable t o heve Atlante following one orece
tice en) «ichmond gnother, s n d thersiore ©
resolution o f
uniformity eas scopted.
W i t h eo grest aany minor cxcoptions
Governor -say:
ond r é p o r v e t i o n s w h i c h w s ceeds w i t h “ s r s e n c e t o t h a t
a g e
tionnaire, e n a i z you will look over t n e record y o u will
finc then,
T i e sxcestion. w e r e specizic i n
Governor Celkins.
aetell.
I n gach resolution, yés.
The Chairiuaan:
r
Governor Calkins:
s w e s e x c e p t i o n psrnuithins
us a n y discretion.
Governor =
T
h
e Ciseretion #hich
is i n the cese o f flagrant abuse o f t h s orivilege
part o f eny benk, s n i i t toule not bse 6 violation
principle t o check the bank up.
Governor Calkins:
J
e now have reeched t h e
s o e o f us
stege, which s e e s t o he objectionable t o
105
-eving surssu upon u n i v e r aevion,
w e have nothing like
uniform action i n fact.
The Chsirnan;
I n the great c r o p that w e rsised a t
the l a s t m e e t i n g t h e r e s e e m s
wasn't sound,
t o have b e e n o n e a p p l e t h e t
N o w , t h s question i s shall w e stultify our-
selves b y making s u c h a prompt change i n the form o f pracetice, o r shall w e l e t i t g o over?
Governor keDougal: I
withdraw m y motion and move that
it g o over without further action.
Governor Seay; I
The Chairman: I
8ll t h e time.
second t h e motion.
hesitate t o changs these circulars
H o w m u c h exrenss
d o y o u find involved
in
Lt?
Governor Calkins: I
cannot quote t h e tigures now,
ur. Chairman,
The Cheirman:
I s it a
Governor Calkins: I
serious e n d importsant m a t t e r ?
think I
shovld b e disposed t o
answer that b y saying thet a n y wasteful expense incurred
is a serious matter.
Governor Jjellborn:
A s I understand it, t h e motion
before t h e Conference h a s besn withdrawn, ur. Cheirman,.
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Federal Reserve Bank of St. Louis
Governor Calkins: I
will n o w o f f e r a
resolution t h e t
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Federal Reserve Bank of St. Louis
1038
ebsorption o f
the Fed-.ral Asserve b e n k s Sissootinus t h e
gold e n a
the cogst o f outgoing e n d inco.ing ehininents o f
silver coin.
The Chairmen:
G o l c . a n d silvsr coin? I
shipments
thought
o f minor o n d subsiciary coin.
Governor G a kins: i
will clininete t h e
it shinients o f silver coin.
The Cheirmen: I n c l u c i n g silver GoLlers?
Governor Calkins:
sils i l v e r a n g subsliciary c o i n - - -
yer Gollers would b e leit out.
tovernor <eay: L
Calkins! c o n c l u s i o n
would havs t o cissent t o Governor
i n s o m e iinportant particulars, b s c s u s é
:ubjec t
ongider this 9s 8 very broad matter, t h e whole
of which will have t o be teken u p ior reconiiveration, I
t h e t there m a y os,
would s a y with respect t o our o w n banks
that v e ship thei
in individual céses, s o m e ebusss, b u t
purposes,
pinor c o i n principally v o r veasonel
volume,
i n very lerge
s r e over those
s n a w h e n t h e sessonshi reguirsiisnts
i n large quancoins coue b e c k t o them a n d they scourmlate
snc they cone back
tity, t h e y e r e .uite 5 bureen t o t h e m
to us.
pert t o
I t i s therefore 2 greet servics o n our
v r o m tien, a n c 4 n
the mewber banks t o teke these coins
107
equal services t o sent t h e m t o thon, a n d 1 would not know
how t o discriminate between t h e two. I
think that abuses
may b e dealt with, a s w e have dsalt w i t h abuses i n other
ways, b u t 1
cannot see, i n view o f the fact that w e have
just issued a new circular covering these matters, a n d
agrecing t o d o certain things, w h y w e should give evidence
of s u c h g r e a t i n s t a b i l i t y
& few months a n d take a
e s t o repudiate o u r action within
d i a m e t r i c e l l y o p p o s i t e view. I
would not b e willing t o consent t o it.
Governor Calkins: I
would like t o inguire a s t o what
other banks have sent o u t circulars dealing w i t h this particular subject?
Governor Fancher:
W e have not.
Governor Young:
W e have.
Governor hkorss:
W e have.
Governor seay:
S e p a r a t e circulars?
Governor N o r r i s :
Governor Young:
W
e have,
W e have not,
Governor juorss: I
would like t o suggest that this
questionf
o t h e expense o f shipment a p p e a r s d i f f e r e n t l y
to
two districts, o n e o f which i s quite simall a n d the other
of which i s very large.
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Federal Reserve Bank of St. Louis
T h a t i s the thing thet mskes i t
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Federal Reserve Bank of St. Louis
108
I t i s not import-
e Live issue w i t h y o u e n d not v i t h us.
ant w i t h us,
n o t w i t h us,
Governor sesy: L
I
Governor Fancher:
t i g n o t a n ismortent m e t t e r w i t h
US« T h e r e heve b e e n practically n o abuses, o n a i t hes
not b e s n very axpensive,
heve @ feeling, Governor Calkins,
The Cheairiuen: I
thet Governor -:eay hes expressed 8 very important consldasretion i n t h i s matter.
J u s t n o v s o u s o f t h e sisibser benks
are guifering losses
i n 5 norrow worgin o f esrnings, 5 n a
it may not b e e n opvortune t i m e t o « 1
Hov vould i t suit your idsa t o heve 9
with this netter.
coudttee a s l
these non-cSsh collection i t e s s n a sce
not m a k e 3
beginning t o w a r d c u t t i n g o u t t h e mractice.
If you went to vote o n this ,usstion 1 vill put the
guestion right atvsy, but i t ainesrsyour motion will b e
Governor Calkins:
i t esis
b
e useless
motion, t h e net r . suit. being, a s usual, I
t o put t h e
imet s a y , t h a t
there will b e n o uniforuity n o w i f w e are n o t t o b s bouna
to unifor... setion i n this metter;
i n other worus,
w e ars
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Federal Reserve Bank of St. Louis
109
to b e leit t o sxercise ciseretion i n that s e hisy c o one
Indgianspolis m s y G o enotier, s n d wovernor i.cuougal
ney C o onother, o n d w e will rina ourrslves charges
.ean b y this Conference--- b u t chergsable b y
pody that u e reiuse t o sdopt a course thet h a s b e s n acoptsc
by the Governors i n Goniference, s n a b e i n 6 position wheres
inevitebly i t will b e pointsc o u t t o u s sooner o r Later
thet t h e @ederal reserve b a n k o f s a n F - aneisco refuses
to d o what t h e other Fe.erel reserve banks uo.
think i t i s wost unfortunste t h e t w e
The Choirnan: I
shoulé come t o a n sgresment sbout these fr r h , w h i c h ers
really details, e n d t h e n not stana b y our sgrssnent, beceuce
thet stultigies t h e system.
Governor s a y ;
I s there a n y bank thst coesn’t stenc
by i t now?
The Chsirian: I
uncer:tand Governor xcyougel s a i d
they were not paying cher,es.
Governor mcvougel:
L e t ' s f i n d o u t sbout it.
ted
here thet i : not
minor a n d s u b s i d i a r y c o i n t o o n d f r o m m e m b e r b a n k s ?
Governor Calkins:
m
e Fecsral neserve b a n k o f A s n
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Federal Reserve Bank of St. Louis
L110
frencisco
h e s t w o cirenlars
o n ths subje
which were
uv c t
held u p a t m y cirection vending ection o f this confere..
on t h e subject.
Governor «.ellborn: I
voula like t o s o y thet t h e
4tlontes b a n k i s cbsorbing t h e charges b o t h w a a n g that
I heertily en.orse t h e views ex,ressed b y wovernor sssy.
I woula hate t o see a n y change mace. i
think i t would
have a very bed ervect upon the saber benks ond thet they
would not like i t s t all.
The Cheirnan; I
think t e heve Jiseussec this matter
to the point where v e ought t o heve a vots o n it.
I s
the motion sweconced?
(After a psuse) T h e r s d o e s n o t seeu t o b e s second
to the motion,
Governor ..clougal: I
shoulé like t o ovier g n suend-
ment t o t h e t motion, t h s t i n v i s o f r t h e concitions w h i c h
have been cisclosed, thet the mettsr b e lest ciserstionsry
with t h e bonk.
Governor ucbouszal:
pesctice which w e 811 esree i s was
21
just because eleven other rellows have begun it, b u t I
agree with you heartily thet when this conference votes o n
® thing s e ought t o abide b y the vote o f the conference,
I might c a l l your attention t o a number o f cases i n the
past which have dsveloped l a c k o f unifornity w h e n i t has
been recommended, b u t thet has nothing t o d o with this subject, e n d i f i t will serve t o help msttcrs along, i f I a m
standing alone i n this I
shell certainly g o home e n d tell
them that f o r the present w e will d o this,
The Chairman:
S h o u l d w e not appoint a
go into this just a
committee t o
little more fully?
Governor Calkins:
I t i s a very simple matter a n d
should b e settled aefinitely o n e w a y o r the other.
The Chairman; I
will second your motion.
T h e Chair
has t h e privilege o f seconding motions, discussing a n d niaking motions.
the e x p e n s e s
T h e motion i s that t h e practice o f paying
o f s h i p p i n g S u b s i d i a r y a n d m i n o r c o i n t o mem-
bers, a n d t h e expense o f shipment f r o m member banks b e
discontinued, a n d that w e d o not continue t o absorb these
charges. I
have seconded that motion.
Governor Seay: B e f o r e putting i t t o a vobs I
meke c l e a r o u r p o s i t i o n
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Federal Reserve Bank of St. Louis
i n t h e matter. I
want t o
dissent f r o m
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Federal Reserve Bank of St. Louis
the view thet this i s o -erticulerly westerul servi
I :o not t h i n k i
i s one-helf s s wastsrul a s t h
assuimtion o f t h e d u t y o f t h s w e r v i c e
The expensé i s infinitely greet: I
w e k i n g collections.
think w e aie a
greater Ccuty t o our inember benks i n the uotter o f coin
eng currency t h e n w e c o i n sny other way.
T h e other i s
the sssunption o f 2 function that he: heretorore b e e n perfornec b y ths iiember banks throughout t h e country s n d they
can perforin i t now.
The Cheirfian: I
will put t h s totion.
(The motion, having besn Guly seconcec, w e s lost.)
The Cheirian:
N o w , I propose that 2 2 ciscontinue
our p r o g r a m e n d G i s c u s s t w o o r t h r e e n e t t s r s t h a t w e h a v s
got t o itake errangements about.
Governor Colkins;
conmitbee b s
T h s gges
iscugssé ¢ s
bine
w e s tiacé that a
a i d you went t o
cdo that n o w ?
The Cheirien;
w
e goinzto esk t h e t thet b e tzken
un efter lunch,
I Ww i
this m e e t i n g
like t o w a y t h a t I
heave b e e n r e :ucsted t o a s k
t o con:ider w h e t h e r
# 6 s h o u l c n o t n o w snnoint
@ subcoumittse,
o f s e y t w o o r thres,
t o join a
similar
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Federal Reserve Bank of St. Louis
LS
co...ittee t o b e a : p o i n t e c
b y th: >
nfersnce,
t o ar~
range t o <iscucs w i t h ths Comptroller o f the vurrency
this cuestion o f the exeniners! r e p o r
pay - o r then, I
a n a vuhet w e
have felt right slong
noring @ little b i t t h e #ederal iesorve
most instances, h s v e t h s forms] custocy
snd who have gsnerel supervision o f thst cezsrtisnt o f t h e
benks! business, I
would like t o ask your
to the anpointinent o f a conmit tee, e s t o whet poxers t h e
coninittes should heve, e n a i f su 8
conulttee L e
pointed i t will join with the a i m i t t e s consisting o f
Wills a n d Rensey, e n d they c e n srrangs 8 n aposoint~ment v i t h t h e Conptroller l a t s this afternoon s o that w e
mey heve the report bock tomorror morning.
Governor #ancher,
S h o u k
w e not take thst u p bs-
iors t h e conuitteo meets w i t h the connittes o f cheiriuen
end h a v e é
free d h y c u s s i o n h e r e t o cetsrnmine t h a t o u r
views are, s o thet t h e conmittse m a y have i n mind t h e
views o f the conisrence?
Ths Chaeiriians I
thought t h e t v e r y wefinitely, b u t
it occurrec t o m e thet w e might arrange t o lunch togsther
today e n é ¢iscuss t h e mettser inrormelly.
T h e Conmittee
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Federal Reserve Bank of St. Louis
could t h e n r e i v e i t s instructions roruolly
asseible,
Governor :.cvougel: I
vill make s u c h 6 motion, «ur,
Che iri:an.
The Choiriian:
T h e motion i s tor the Chsiricen
expoint a conuittee t o join 9 similer com.ittse, t o
asvpointed b y t h e Bederel neserve Agents,
t o take u p
ths Coiptrolisr t h e csusstion o f a x e l
(The motion, being culy
The Cheiriuen.
T h e Chair
risy e n d . 6 3 y w o o n t h e t committse.
se have e full vrogram vor this efternoon 3nd 2 good
one v o r tomerroy;
b u t w e c e n get through tomorror
iz y o u gentleuen s r e willing t o
to stucying toviec 1
of civision
have been submitted, a n d i f the wenbers o f the Couwtttse
are willing t o have 9
preliminary meeting, £ t o i n e i 0
would b e 29 good vlen for us t o e k e subciviston 1 our
f business tomorrow morning.
I
n the isan-
snc i will try t o srrange
to h a v e t h e c o m m i t t e e m e e t l e t e t h i s afternoon,
Y o u
uncerstend t h e t b y your action i n confir.ing t h i s report
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Federal Reserve Bank of St. Louis
115
you have autoustically scaea ir, Honcher a s e nenber o f
the c o u t tse, beceuse there i t 6 réco.ucnietion i n the
report t h e t t h a t b e done.
N o ; I
e u inyornea t h e t t h e t
is n o contoineé i n the minutes, a n d i will ask you now
if you eré willing t o e c t uszon t h e rscoim.encation that
Governor Fancher b e nuede a iteuber o f the conilttee.
so move, ur* Chsiriuan.
Governor ..cvougals I
{Tne motion being duly seconcsc, s a s car:ied.)
The Chairuwisn: I
will now esk the co.wittee t o
d enough t o ixeet
o
a t half o nest vive, ogm séeriicr i f
able t o sciourn eerller.
Commtroller w o s this.
desire t h t I
i
u
y lest conversstion w i t h
sW
v e r y syspcthetic w i t h
b sete
expressed that this matter c h o u l d ce
tled amicebly w i t h the oifieers ox: the reserve banks a n d
justly, o s t o the amount t o be peid for theses reports.
Hie wag n o t insistent u v o n a n y varticular suount, b u t h e
Gid think thet, inesiuch a s t h e reports contsin inrorue-
tion of great value and i t costs ca¢thing t o usake then,
thet t h e reserves ben! 5
pay souething r o r them, a n d
thet t h e juestion o f edjustuent o f whet they should pay
wes o n e g o r c i s c u s s i o n s n d «sterulneation b y Yeirness.
I had. w i t h m e oe
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Federal Reserve Bank of St. Louis
hed paid out u p t o date.
Y o u will recall m y
and esking for thet informstion, e n a i n t h
wes @ considerable s u n o f monsy.
H e inrormed m e
hed ensbled hin to keep u p with the ¢xeniinations,
left Ceficient by the sormer Comptroller, that he
whet shesd o f his sechedule, s n d that this ycar h e was c o n fident that there would b e n o bank, n o national bank that
would not be exsiined twice.
On the other hand, h e expressed a great dee
i n regard t o the custody
cern thet the tsris o f his >
and u s e m a d e o f t h e s e r e v o r t s h a d n o t b s e n &@s gcrupulous=
ly r e g a r d s d
a s h e t h o u g h t they s h o u l d h a v e o s s n , £
went
over that matter v e r y fully sand gave h i n e n exect cescrip-
tion of vhet our policy was with the Bank of New York,
which h a d been very cerefully p u t i n witing.
H e took i t
efter reading i t h e
home w i t h h i n s n q i
said that h e hed n o excention t o take a s t o this report.
I am frank t o say, gentlemen, thst s o far a s ve ere concerned w h e t w s a r s G o i n g w
i
i s sample f o r o u r
hh t
t. ereports
reguirenents, e n d w e c o conform t o the limitations i n his
Lett er.
W
e G o not s e n d copies t o t h e branch e t Buifalo.
That i s esbout t h e only exception.
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Federal Reserve Bank of St. Louis
Governor C s l i n s :
The Chairiusn:
Governor Jesy;
Y o u < o not?
‘ S e G o not send copies t o Burfalo.
A r e t h e reports aveilable f o r all
the credit frien?
The Chairnan:
T h e y a r e available t o the .spart-
ment, w h i c h i s undsr t h e supervision o f the feceral
serve agent, not t o all the clerks, but aveileble t o the
men assigned t o thst special sork.
Are t h e y a v a i l a b l e
t o t h e ciscount
conmittes?
The Cheirnian:
T h e y ere avollsble t o the aerartnent
thet s g e g u n o 0 n vaper.
T
h
e
y s r e n o t svsilable
t o any
Comptroller's
cirector o f the benk, T h e / e t a t e m e n t i s here i n writing,
taken from t h e secretery's minutes, o v which he hes reH e said h e had n o ob7sction,
ceived a copy a f course.
however,
t o having t h e beputy Governors e n d other oificers
and m e n who « e r e i n t d i s c o u n t e n d credit departnents
in the »srent b a n k having access t o the report, s n d thet
hs had n o obiection t o t h e substence o f s
report being
furnished t o t h e b r a n c h nenogers,
Governor Calkins:
N
o exception c a n b e taken t o t h e
limitations suggested b y the C pmptroiler o f thes Currency.
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Federal Reserve Bank of St. Louis
Tne C h e ilriuan:
N o .
Governor Oslkins:
T h e ciscussion grew i n the first
place out of the unrortunate use o f the sore “secess",
It certeinly would b e highly i:nproper r o r others
mentioned o r ineluded i n t h e Couotroller's clas.izication,
to heve sccers t o the report.
The Cheirnen:
H
e told m e thet h e h a d ebsoluts svi-
cence, that could not b e disregardsd, thet ths cirsetors
of some reserve banks hed gained knowlecge o f the contents
or the exsiiners! reports, a n d that i n one instance the
Girector o r directors happened t o b e benkers thseuselves,
ang that i t hed ceused h i n greet smbarrassient a n u sub‘ éctec hin t o criticisn. because t h e reports h e d beco..e known,
frankly syi.pethize with the C, piiptrolier's éifgvieulty and
Go not think s n y i r e c t o r o f e n y femsrel reserve b e n k
ghoulé have |
t
o these reports.
th: Co.iwtroller t e k e t h e z
no respon:ibility o n t h e pert a r
reserve benk t o cOudunicats s i t h thse Girecto
with respect t o the condition o f ienber banks?
The Chseirnan:
to t h e reports.
v o , b u t t h e y shouleé n o t have cccese
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Federal Reserve Bank of St. Louis
L119
Governor 568%
B u t h e has n o t teken thet postion?
¢o not t h i n k so.
The Choimnan: I
Governor Young.
N o . I h a v e t a l k e d i t over with
n sconciHe had n o ob;cetion t o our _ i s e u s s i the
of the bank.
n other words, s u c h metterse 3 3 3:ae
tS
Governor seay:
i
pre s very oroper wubject a
ciseussion b e t w e e n t h e o f i i c e r s
tors. I
have 3
o ? ths b a n k s n d the cirece
co not 5 . 6 h o w i t coulc b e otherwise.
T h e y
bank a n y
right t o cemencg r r o m t h e oizicers o f the
o f 3 member
inzoruation W i r e s p e c t t o the concition
benk.
The Chaimien.
T h e cowuittee probably h e s crawn
to
the imoression thet the Reserve banks are willing
i s s o there
pey soue f e e f o r these reports, s n d i f that
e t a n sajustiuéent
shouleé not b e e n y Gifiiculty i n srriving
mubuslly expreswith t h e Comptroller, p r o v i c e d t h e visws,
sea, ere reasoneble.
B u t the qusstion
v wnverence i g going t o insist uron,
upon, getting t h s report. for nothing,
e e
t o insist
o r whether they a r e
willing t o yey sone r s e f o r then.
Governor ranchers
m a y I inquire,
i n your ulscugssion
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Federal Reserve Bank of St. Louis
1Z0
with t h e Coimmtroller,
i f you hed i n mind more t h a n t h e
nominal cost o f prevaring t n e reports,
o r have y o u had i n
ming sonething beyond thet o g 9 netter o r accitionel rehe o n s r e t i o n o f t h e cenertinent?
The Chairnan: I
think h e hec i n tiinc a fee lese
then i s now paid which would substantially cover t h s cost
of preparing t h e reports i n all cesses, a n d possibly revresent some sccitional rzvenus, s m a l l revenue, f o r the sérvices o f h i s conartinent,
Governor i.orss:
B u t there h e s b e e n n o tine s e t when
thoss charger woulc csase?
The Cheiriian: I
think, Governor mworss, t h a t that
is the most serious question i n the whole thing.
Governor .0rss:
I f w e cdo n & d c o that, i t secnis
me you ought t o cecicge o n souwe principle o n ithich thi
harges shouli b e made, either besec o n cost, o r .ouething
i that sort. O t h e r w i s e another Jonmtrolicr isay advance
rgé: without Limit,
it. I
i f thre
i s n o control over
think you ought t o heve 4 tine tixed when they
ere t o cease altogether,
o r sowe principle ought t o b e
adopted o n which the charges shoulda be basec.
121
The Chairman: I
do not believe t h i s conference c a n
make much progress i n wiscussing t h e conmittee, except i n
the most general way, without hanpering t h e committee. I
would b e quite willing t o leave i t very largely t o the discretion o f the conmittee t o egree u p o n something w i t h t h e
Comptroller.
Governor Fancher:
Y o u are appointing this committce
snticipating t h e possibility t h e t t h e committee, a f t e r i t s
interview w i t h the Conptroller, m a y come back here
again?
The Chairman:
Y e s .
Governor Wellborn:
W h e n the n e w building i s construct-
ed are y o u arranging quarters f o r t h e chief examiner's d e partment?
The Chairman:
W e have r o a m r o r them,
Governor Bailsy:
program?
I s that matter caning u p o n the
W e have taken i t u p with t h e Comptroller, b u t
we haven't hsd much encoursgenent, although h e seemed t o be
favorable t o i t yesterday,
Governor iicbougal:
m r e Chairman, I
would like t o
move i t i s t h e sense o f this meeting that these reports a r e
of b e n e f i t
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Federal Reserve Bank of St. Louis
t o t h e Federal reserve banks
i n t h e conduct
122
of their affairs, a n d thet consequently w e are willing t o
pay 8 reasonable charge for the axpenses involved i n preparing these copies, a n d I suggest, f o r t h e consideration
of this conference, t h a t w e hsve i n mind a
report.
fee o f § 5 per
I f w e worked o n that basis instead o f having.
135,000 o r $140,000 the Comptroller would still have a n
income o f something like g80,000;
thet w e express a
s o it would b e my idea
willingness t o pay 2 reasonable charge
for t h e e x p e n s e i n v o l v e d ,
a n d that w e ore willing t o g o a s
high a s $ 5 a report.
The Chairman: I
would b e willing t o psy # 5 a report
for the small bank reports, e n d %10 for the large bank reports, w h i c h are very voluminous affairs.
Governor Balley:
W
e could not, i n justice,
the same value o n all reports.
Governor iwcbougal: B u t i t does not cost y 5 t o prepare
an additional c o p y o f e n examination.
The Chairman:
W h y n o t l e t this committee g o ahead
and take i t up with the Conptroller a n d see what can be
done a n d r e p o r t back.
Governor Calkins: T h e r e i s @ deluded idea that i t
costs more t o prepare t h e larget report t h e n the smaller,
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Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
123
It costs o n l y 3 few cents more.
take t h e l i b s r t y ¥ o§ f cisarsreeing
&
The Chsirnian: I
with y o u o n that.
I t i s a carbon copy.
S y m e o f t h e reports consist o f quite
@ number o f pagés, i n the small banks, w i t h very faw o f
the schedules filled in, m d w e have w a n y reports o r b i g
banks i n New York that i t nugt t e k e hours t o prepares.
Governor Csikins:
T h e benks o f t h e lerger cenonins~
tions psic i n to the Gomptroller's oivice ..1800 6 year,
end u n d : rthe sckeéule w h i c h w e heve b e s n paying sneller
benks hevse pala into t h e Comptroller's otiice ::46,000 s
year, a n d y- ere talking about t h e siall banks.
The Chairusn:
I f i t meskes s o little cigference, a n d
will <ffect a n adjustment o f this metter,
c o not l e t t h s
committee stend o n any n a r r o w p r i n c i v l e .
Governor ores:
s h o u l d not thse committse consider
the guéstion o f retroaction i n these charges, charges that
heve been tisce and not paid, a n d also the yestion o f
whether w e shoule agree t o teke 81ll o x t h e resorts i n our
districts, w h i c h was t h e zuestion w s rei sed with h i m e n d
which hes never b e s n enswered,.
Governor Calkins:
m r . Chairnen, y o u c i d not g e t m y
point, becsuse probably 1
cid n o t state it.
I f povyiient
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Federal Reserve Bank of St. Louis
is continued o n this
thet Kenses C i t y e n d
a
t h a v i n g t h e lersest number
of benks, w i l l still b e osying vory “uch uore t h e n their
proportion o y the cost, o w i n g t o t h e number.
b e t . Ls. ros
Gucsd t o s flat f e e o f 3 5 per report, t h e y still will b e
paying gar out of proportion t o the amount.
d o not s e e h o w thet ereunent holds
The Cheiriian: T
BOOG,
T h e y have m o r e benks a n d consequently m o r e reports
to p a y for,
Governor seay: I
pelisve I would b e quite willing
¢
to pey 6 graduated fee for these reports, e n d that would
heve the effect o f reedjusting the inequelities i f he
is looking t o getting a certain w u n oxy money.
I believe t h e c o n f e r s n c e
Rousver,
i s entitled t o know sonewhat
the personel views o f their represent tives o n the covuite
tee, inesmuch a s their personel yisws, unconsciously, so..6times, a n d soustimes designedly, influence t h e i r ciscugsgsion.
The Chairmen.
j h e t i s your visu, Governor 2say?
e pay?
shouldt
Governor sesy: I
heve elways been of ths opinion
thig i s 5s motter that should b e settled not s o imch
some a r b i t r a r y d s t e r m i n a t i o n
e s u p o n soins principle.
125
luy view f r o m t h e beginning h a s b e e n that t h e Compt roller ought n o t t o expect u s t o pay h i n according t o what h e
might conceive t o b e the value o f the report t o us, a n d that
he has n o legitimate ground f o r charging u s @nything other
thet t h e cost o f preparation o f the report,
more t o p r e p s r e a
of 100 pages,
I
f i t costs
report o f 2 0 0 p 8 g e s t h a n i t d o e s o n e
w e should p a y h i m more f o r the b i g report
than for the little report, but if we concede that the
Comptroller should place a
the b i g report, a
value o n the small report a n d
subsequent Comptroller m a y come i n and
alter t h e r e l a t i v e values;
b u t i f i t i s fixed upon t h e
cost o f furnishing the report, 8 s nearly a s can be estimated, t h a t i s the only defensible ground h e has.
d u
Opinion i s that w e ought t o legit imately p a y f o r the physic@l1 cost o f furnishing t h e report.
The Chairman:
T h a t i s t o say, s o much a page?
Governor Seay: I
think i t would b e improper t o ap-
proach t h e matter f r o m any other angle,
W
e have a n
impregnable ground that w e ought t o pay o n that basis e n d
we have a principle there, i
he i s s u p p o s e d
do not think, inesmuch 3 s
t o c h a r g e t h e c o s t o f m a k i n g t h e examina-
tion a n d o f making s u c h reports a s are required, s o m e
of
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Federal Reserve Bank of St. Louis
The Conference reasseibled, pursuant t o the taking o f
recess, a t 2:30 o'clock p. m.
The Chairman:
T h e meeting w i l l come t o order. I
would like t o report that I
have srranged with t h e VCommit-
tee o f Federal Keserve Agents that they shall meet with our
committee, t h e understanding being that Governor Norris will
endeavor t o arrange a meeting with the Comptroller a t about
4:30 this afternoon.
Governor Norris: I
will attend t o that a t once.
The Cheirman; B e f o r e w e edjourned for lunch, i t was
understood, I
believe, t h a t s e would raise t h e question
after l u n c h a s t o w h e t h e r a committee s h o u l d b e e p p o i n t e d
to c o n s i d e r t h e t o p i c w h i c h w e w e r e t h e n discussing,
that
is, t h e absorption o f costs o n shipments o f coin, a n d
other similar questions o f service cherges Which might b e
inposed f o r various services, a n d i t was undsrstood that w e
would take u p t h e question sfter lunch t o ssé whether i t
was wise t o have 4 conmittee appointed t o start a n investigation o f t h e matter.
G o v e r n o r Calkins, I
expect t h e respon-
Sibility f o r suggesting t h e topic rests with you, a s this
was t h e outgrowth o f your original topic o n t h e program,
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Federal Reserve Bank of St. Louis
129
Governor Calkins:
I a m qiite i n accord with t h e
“ha irmsn a s t o the desirability o f action b y this conference
looking t o t h e c o n s i d e r a t i o n o f e x p e n d i t u r e s
b y t h e Federal
Reserve banks.
The Chairman:
A l l expenditures?
Governor Calkins:
A l l expenditures b y the Federal re-
serve banks.
The Chairman:
bo y o u t h i n k a
Y o u mean t o r these gratuitous services.
committee s h o u l d b e a p p o i n t e d
t o exemine
into the subject a n d make recoiuendations?
Governor Calkins:
Y e s , a n d make reconmendations
to
the Conference o f Governors.
Governor liorss: I
do not want t o throw s n y cold water
on sny plan sugested, b u t i t i s pretty l a t e i n the day
to take u p a proposition o f cutting o f f a n expense which
you sssumed years a g o a n d have b e e n carrying o n for
several years.
W h e n y o u passed y o u r kubicon w a s w h e n
you s c e p t e d t h e .expense, t h e r e i s where y o u conmitted
yourselves, e n d i t strikes nie a s pretty difficult t o g o back
now.
Governor Bailey;
I s i t the thought that w e are not mak-
ing this money s n d i t i s necessary t o eliminate these
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Federal Reserve Bank of St. Louis
130
things?
k y theory h a s b e e n that i t i s a service that w e
should render o u r banks, w h o furnish t h e money r o r u s e n d
who g o t little return o n it,
T h i s i s one o f the things
thst w e are doing for them, when they say t o us that w e do
not p a y a n y i n t e r e s t
o n deposits,
o n l y s i x p e r c e n t o n capi-
teal, w h y w e refer t o the fact that w e d o these gratuitous
things.
O
f course,
i f w e are going t o b e unable t o d o
this snd run the banks, then I am for it; b u t i f it i s just
simply a
question o f policy, I
do n o t s e e w h y i t should b e
done,
The Chairman: I
sam responsible f o r the suggestion o f
the conmittese, w i t h t h e little ultsrior purposs i n mind
that this i s a very inopportune moment, w h e n bank ¢ e s r n i ns
z
are reaquced a n d l o a n s heavy,
t o attempt
t o put t h e expsnse
of a n y o f our services b a c k o n the member banks, b u t that
later it might b e possible t o do it, and we might profitably study t h e subject e n d s e e whether some o f these services a r e n o t p r e t t y e x p e n s i v e s n d u n r e a s o n a b l e f o r u s t o
perform f o r nothing?
Governor Calkins:
I a m entirely i n accord with
Governor Bailey's expression a n d have u s e d exactly t h e
Same argument, t h e t i t i s perfectly proper f o r the banks
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Federal Reserve Bank of St. Louis
131
to perroru services a t their o w n cost r o r the iwenber benks
Which,
t o s o n e extent, i n c r e a s e t h e dividends paid:
do n o t t h i n k i t i s proper f o r u s t o p e r f o r m s
Bato 1
rvices w h i c h
are not commensurate w i t h the beiefit t o the member benks
at our cost;
i n other words, i t i s not incumbent o n u s t o
ago unnecessary things which involve large costs.
Tne Chairman:
v
o y o u t h i n k there a r e other unneces-
sary services o f like character that w e sre n o w performing?
Governor Calkins; i
take i t i t i s the object o f the
conmittee t o inquire whether o r not w e are spending
money f o r t h i n g s t h a t a r e o b v i o u s l y w a s t e f u l a n d n o t
necessary,
The Chairman:
W h a t a r e your wishes sbout this, gsn-
t lemen?
Governor iellborn: I
do not know o f a thing that o u r
bank gives t h e menber banks thet w e should not continue t o
give them, a n d I
would n o t l i k e t o s e e a
conmittees s p p c i n t -
6d o n this subject a t all,
The Chairman: I
hear n o n o t i o n r o r t h e a p p o i n t n e n t
of a committee, a n d unless there i s some more vigorous
support o f t h e p r o j e c t t h a n that, I
a resolution, w h i c h I
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Federal Reserve Bank of St. Louis
suggest t h e t w e p a s s
a m proposing t o offer, w h i c h i s a
132
vote o f thanks
t o G o v e r n o r sicbougal f o r a g r e e i n g
t o recomend
to his bank thst they g o back t o suniform basis with us
on this mstter,
Governor wcbougal:
T h a t i s i n the interest o f peace
and harmony, w r . Cheirman,
Governor Cilkins:
have a
H a v e w e gone past t h e proposal
to
conmittee appointed, w r . Chairman?
The Chairman:
N
o one ssems
t o dsvelop sufficient e n -
thusiasm t o offer a resolution, w h i c h would only take about
four seconds t o do,
Governor aucvougal;: I
a m opposed t o the appointment
of a coumittse,
Governor seay:
T h e r e i s another aspect o f the case,
and that i s with respect *
getting into the syste... new state
banking institutions.
The Chsirzian: N o w , gentlenien, i will ask you to consider the fourth division o f the program, under the heading
of Operation, t h e first topic being
a - Report o f I n s u r a n c e C o r m i t t e e ,
ur. Cremer, o f Chicago, Chairmen.
There i s really only o n e matter t o act upon, i f u e
adopt t h i s report, a n d + would like t o s u g g e s t t h a t w e
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Federal Reserve Bank of St. Louis
133
this report a s submitted b y mr. Cramer's conmittee, a n d
then, i f you please, r e f e r back t o his committee f o r further
study, @
recounencation o f the subject o f insurance o n
money a n d security shipments,
t o see whether w e cannot w o r k
in s o m e economy.
Governor Norris: I
will make a
motion t o thet efcect,
ur, Chairman.
The Chairman:
I
s thst ogreeable t o you, Governor
McDougal?
Governor i:cDougal:
I d o n o t quite understand what t h e
scope o f the work would be.
W h a t i s i t that y o u want t o
refer back?
The Chairman:
W
e referred t o this coiuwittee t h e
subject o f fidelity insurance.
T h e result w a s a
new
type o f policy w i t h very nuch broader coverage a n d s very
much lower premium, w h i c h has b e e n accepted b y all the
banks,
Now, I
would like t o refer t o that same comnittee--
I say If would like to; I
think w e i n the New York Bank
would like to--- rerer t o that same conmittee f o r invest igation i n the same w a y t h e subject o f insurence o n currency
and security shipments.
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Federal Reserve Bank of St. Louis
Governor Morss:
T h e Committee suggests t h a t a n y action
134
on this b e deferred until t h e present rateshave b e e n i n
effect approximately 9 year.
d h y not accept their sug-
gestion s n d refer i t back t o them.
The Chairman:
T h e lest paragraph o f t h e r e p o r t says,
“Your C o m i t t e e respectfully suggests, therefore, t h a t a n y
action i n t h i s r e g a r d b e d e f e r r e d u n t i l t h e p r e s e n t r a t e s
heve b e e n i n efiect approximately a
year, o r a t least until
the first o f next year, when they will have had elght months!
experience,
A t that tine i f the loss experience indicates
amore favorable tendency, y o u r conmittsee would suggest
that n e g o t i a t i o n s
b e entered i n t o w i t h s
view t o securing a
reduction i n these rates."
Now, t h i s i s the only meeting where w e O u l d mske this
reference unless w e wait until next April, w h i c h seems t o m e
would b e waiting unnecessarily long,
Governor Fsncher: I
would like t o second Governor
Norris' motion.
The Chalirnan:
H i s motion i s t o rerer this subject t o
this conmittee for investigation and such reconmencations a s
they m o y s e e f i t t o make,
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Federal Reserve Bank of St. Louis
(The motion, h a v i n g b e e n duly seconded, w a s carried.)
(The report o f the Insurance Committee i s as follows: )
REPORT O F INSURANCE C O s ITTER
This co.mittee was appointed a t the last Governors!
Conference t o r t h e p u r p o s e
o f making
a n investigation e n d
Subiitting r e c o i m e n d a t i o n s w i t h r e s p e c t
for sélf-insurance.
to s
plan o r plans
T h e following i s a report o f the pro-
gress thus f e r made,
The conmittee m e t a n d organized shortly after i t s appointment, o n d after .tudying t h e figures submitted b y the
various b a n k s , r e a c h e d t h e c o n c l u s i o n t h a t t h e f i d e l i t y a n d
blanket b o n d i n s t a n c e presented t h e field i n which self insurance tight most profitably o e given a trial.
Shortly after t h e committsceorganized i t developed thst
the principal American companies writing t h e blanket bonds
hod called t o their attention t h e factthat t h e Keserve
banks w e r e giving considerstion t o a self-insurance plan,
which w a s brought ho..e very forcibly b y the cancellation
of i t s blanket bonds b y t h e Fecsral kKeserve Bank o f New
York.
A s @ result t h e y becaiie very nuch interested i n
the subject o f reserve v a n k insurance, a n d were prepared t o
make a considerable concecsion i n rates,
The Governors have allbeen informed i n some detail
with respect t o this matter a n d i t need only b e said here
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Federal Reserve Bank of St. Louis
136
that following t h e negotiations w i t h the representéetives o f
the principal aAierican companies 8
proposition w a s submit-
ted b y t h e m w h i c h h a s s i n c e b e e n accéspted b y a l l o f t h e
reserve banks, under which t h e companies agree t o write f o r
each benk 8 blanket b o n d i n the amount o f »500,000 a t a
round preniium t o r eech b a n k o f $12,500.
U n d e r the new
bonds t h e banks a r e receiving consicerably broader coverings than was formerly h a d a t e n aggregate o f souwewhat less
than one-half t h e total former cost.
It was the feeling o f your colmittee that i n view o f
this d e v e l o p m e n t t h e b a n k s c o u l d n o t afford,
sent,
a t least,
t o r t h e pre-
t o d o a w a y e n t i r e l y w i t h p u r c h a s e d insurance.
The Conmittee has given consideration t o 4 plan whereby
the twelve banks might insure each other tor risks ordinarily c o v e r e d u n d e r a
blisnket b o n d , b u t a p p l y i n g f o r t h e
present a t least only i n excess o f the half-million dollar
bond n o w being carried b y each bank,
s h o u l d such 4
plan b e accepted s n d prove successful,
i t might eventually
be extended t o replace entirely o u r lessed insurance o f
this partialar kind.
T h e conmittee considered i t edvis-
able t o obtain the point o r view o f experts w i t h respect
to this matter a n d i n line w i t h t h e authority g i v e n t h e
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Federal Reserve Bank of St. Louis
137
conmittee
a t t h e t i m e ofits sppointuent,
engaged t h e f i r m o f Alfred um. Best &
experts,
i t hes accordingly
Company, actuarial
a t 8 small ri-ed f e e o f 14250 t o make a
study a n d t o submit t h e o u t l i n e o f 8
preliminary
possible plan.
report h a s n o t y e t b e e n r e c e i v e d a n d y o u r c o m m i t t e e
therefore, r e a d y t o make 9
T h i s
i s not,
final report o n the subject a t
this time.
It has b e e n suggested t h a t t h e conmittee e l s o give
consiceration t o the subject o f registered mail insurance.
It will b e recalled thet t h e rates applying t o this class o f
insurance w e r e very nesrly doubled i n April, 192¢, a s a
result
o f t h e v e r y disastrous experience d u r i n g t h e last
two o r three years.
I
t i s t h e f e e l i n g o f y o u r omiumittee
thet this i s not a type o f insurance which t h e reserve
bonks might properly carry f o r the..selves s t least until
greater e x p e r i e n c e h s s b e e n a c q u i r e d w i t h s e l f - i n c u r a n c e
of less hazardous risks.
T h e p r e s e t registered mail
insurance rates heve been i n sirfect hardly s i x nonths e n d
in view o r the very unfsvorable experience o f t h e companies
preceding t h e incr:ase i n the rates, y o u r comnuittee feels
that n o good would result f r o m any negotiations w h i c h
might b e nsde w i t h 9
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Federal Reserve Bank of St. Louis
view t o s.curing a reduction i n these
138
rates, n o t o n l y becouse o f the prévious v e r y b a d loss sxperiencs, b u t e l s o b e c a u s e o f t h e f a c t t h a t t h e r e i s practically n o conpéetition i n t h i s tield.
Your conmittsee respectfully suggests, therefore, t h a t
sny action i n this regard b e aererred until the present
rates have b e e n i n effect approxinately a
year, o r a t least
until th: f i r s t o f n e x t y e a r , w h e n t h e y w i l l h a v e h a d
eight months' experience.
A t that tine i f tie loss exper-
ience indicetes o niore fsvorable tendency, y o u r committee
would suggest that negotiations b e entersd i n t o
with @ view t o cecuring a recuction i n these rates,
S. B. Cranéer, Chalrman,
October 5, 1922."
Governor valkins:
I
s= y i t necessary
t o m a j e a n yo s u g gO e s -
&
tion t o that coumittse that s s n o report h a s been hiade b y
the e x c e r t s e m p l o y e d
o n t h e m a t t e r o f self-insurance,
that
thet will b e continued, a n d should thet n o t also b e rerer-
red t o the conmittes.
T h a t is, contsined i n the fifth
paragraph.
The Chairman; I
understood that t h e result o f this
report w o u l d b e t h s t c a c h b a n k w o u l d t a k e @
prinary c o v e r a g e
of $500,000 s t a n annual cost o f ¢12,500, a n d that left
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Federal Reserve Bank of St. Louis
139
rree t o s e t u p s n y a a d i t i o n a l z s l f i n s u r a n c e
that t h e y . a w fit.
4 S a metter o f fect w e have a n acddi-
tional f u n d o v e r t h i s o f n e orly s
willion aollars, b e c s u s e
of the very large size o f our force a n d t h e amount o f securities s n d c é s h t h a t w e handle.
Governor Calkins:
T h i s report cays, hosever, t h a t
the c o m m i t t e e h a s g i v e n consiageration
to a
plen w h e r e b y
the twelve banks might insure e a c h other r o r risks ordinarily c o v e r e d u n d e r a
blanket b o n d , b u t a p p l y i n g r o r t h e
present a t least o n l y i n excess o f t h e helf million dollar
bone n o w b e i n g c a r r i e d b y e a c h bank,
be accepted a n d prove successful,
s h o u l d such a
plan
i t might eventually b e
extended t o replace entirely purchssed insurance o f this
r
a
kind,
u
c
i
t
r
a
p
:
T h e
colimit
tee
considers
i t advis a b l e t o
l
obtain t h e p o i n t o f v i e w o f experts w i t h r e s p e c t
t o this
matter, a n d i n line with t h e authority g i v e n t h e conmittee
at the time o f its appointment i t has accorcadingly engaged
the f i r m o f A l f r e d w . B e s t &
Company, a c t u a r i a l experts,
at @ small fixed f e e o f 4250 t o make a prelininary
study
énd t o s u b n i t t h e p u t l i n e o f a
port h a s n o t y e t b e e n received,
pocsible plan.
T h i s re-
a n d y o u r committee
i s not,
therefore, r e a d y t o make s final report o n the
subject a t
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Federal Reserve Bank of St. Louis
this time.
Now, s h o u l d n o t t h a t b e r e f e r r s d
the Cheirmsen:
I
t o t h e conimittee?
t i s alresdy i n their hends.
A S a
matter o f fact these people a r s mseting a t our bank f r o m tine
to tine, G o v e r n o r C a l k i n s ,
I
t i s berwe them, a n d I
know
from whet ur. Kenzel h e s told m e that t h e y a r e working o n
that e n d thet these people o r e giving t h e m t h e benefit o f
their advice, a n d thet they heve r u n into 9 rater dirvicult
leg@l p r o p o . i t i o n w h i c h t h e c o n m i t t s e w a s n o t p r e p a r e d
to
report upon,
Governor iiorss:
the c o m m i t t e e
T o pass t h e resolution i s t o continue
a t work?
The Chsiriman:
Y e s . {
w a s g o i n g t o further s u g e s t
that w e extent s o m e sort o f thenks t o this committee.
They
did a mighty g o o d j o b a n d saved u s a great d e a l o f money,
We Ought t o pass a resolution expressing o u r appreciation,
Governor Norris: I
think m y resolution included thet,
mr. Chairnan,
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Federal Reserve Bank of St. Louis
The Chairman;
T h e next i s
- Report o f L e a s e d w i r e Conmittee,
Governor ..cDougal, Chairign.
The report
o f that comiitteeB h a s been submitted,
s
141
I think i t hese better b e reread, a n d wwe will e s k Governor
mcDougal t o submit thse recomuendations
i n t h e report f o r
action.
Governor wcvougal:
i
n the first place i t was brought
to the attention o f this committee thet various constructions
had been placed b y t h e several Federal reserve banks u p o n
the recomendations
o f this comuittee embodied i n the Federal
Reserve B o a r d ' s l e t t e r X-5337, p a r t i c u l a r l y b e c a u s e o f cer-~
tein action taken a t t h e lest conference o f Gevernors,
of
ay 2-4, 1922, a t which conference i t was voted
lL T h a t w i r e c o s t s b e a b s o r b e d
o n telegraphic a d v i c e
Of non--ayment o f items o f 3500 o r over.
T h a t 8 1 1 special
requests f o r wire information, a f t e r a n item has b e e n deposited,
b e m a d e a t thse a x p e n s e o f t h e depositor.
& T h s t rederal RKeserve Banks discontinue t o absorb
the cost o f telegraphic payment o r non-payment o f collection
items a s o f July 1 , 1922,
5 T h e t e a c h redsral reserves b a n k use i t s o w n discretion i n the matter o f sbsorbing t h e cost o f mis célleneous
telegrans, 5 n d that where absorbed t h e practic e be watched
carefully
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Federal Reserve Bank of St. Louis
t o a v o i d abuses.
(The report o f the Leased wire Committee continues a s
follows: )
it i s the understanding o f the Conmittee that the actions above reierred t o were relative t o and resulting
from a discussion b y the Governors o f @ questionnaire concerning cost o r service t o member banks sbsorbed b y the
Fedéral reserve banks.
T h i s juestionnaire h a d besn subiuiit-
ted t o ell Federal reserve banks prior t o the last Governor's Conference, w i t h the view t o establishing unifor.ity
of procédure
i n that respect,
the Federal reserves banks.
tions which were voted,
i n s o f a r # s possible,
i n 611
W i t h respect t o the three ques-
® s shown sbove,
w e believe t h e Con-
ference h a d i n mind particularly e n s cost o f comercial
Wires a n d d i d n o t i n t e n d t h s t i t s e c t i o n s h o u l d b e c o n s t r u e d
as relating t o the cost o f the leased wire system o r reducing the losd o n the leased wires.
W e , therefore, believe
that i t was n o t t h e intention o f the Governors,
the above action,
i n taking
t o change t h e charecter o f business
which was being transacted over t h e leased wires a t that
time, b u t thet i t was their intention that their action
Should apply o n l y t o the expense o f coimercisl wires
whether exchanged between Federal reserve banks themselves
or b e t w e e n F e d e r e l r e s e r v e b a n k s a n d t h e i r m e m b e r banks.
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Federal Reserve Bank of St. Louis
143
In order t o clearly define t h e intention o f the Conference
and t o avoid construing these actions s s modifying o r amending the rules s n d regulations contained i n the Federal
Reserve Board's letter X-3337, t h e Federel reserve Leased
wLre Conmittee recommends t h a t these actions b e made t o
mesd a s follows:
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Federal Reserve Bank of St. Louis
Le T h a t w i r e c o s t s
o n t e l e g r a p h i c a d v i c e o f non-pay-
ment o f cost items o f 4500, o r over, should b e absorbed
by the Federal reserve banks;
t h a t a l l other tele-
graphic costs i n connection w i t h messsges o v e r t h e conimercial w i r e s
payment,
i n obtaining
o r advising payment
o r a n y other information
o r non-
o r instructions
at
the request o f depositing menber banks, should n o t b e
absorbed.
2. T h e a t Federal reserve banks discontinue t o ebsorb
all t e l e g r a p h i c c o s t s
i n connection w i t h messages o v e r
the commercial wlres, advising payment o r non-payment
of collection items, 9 s vell a g 611 other information
or instructions forwarded,
o r obtained a t t h e request
of the depositing nienber bank.
5S. T h a t e a c h F e d e r a l r e s e r v e b a n k u s e i t s o w n discre-
tion i n the mstter o i absorbing t h e costs o f miscel-
144
laneous telegrans s e n t over conmerciel wires, except
t h o sé speciricslly referred t o i n connection w i t h cash
items a n d non-cash collection items, a s outlined i n
the a b o v e p a r a g r a p h s 1
and 2 , a n d w h e r e absorbed,
the
practice b e watched carefully t o avoid ebuses.
The Committee believes that i t was the intention o f
the Conference t o limit a n d restrict t h e various items o f
telegraphic expense i n connection w i t h t h e handling o f
checks o r cash items e n d non-cash collection items, w h i c h
expense w a s then more o r less uniformly being sbsorbed
by the Podeoral Reserve Banks, t h e cost o f mainteining a n d
operéting t h e leased wires i s practically a
fixed a n d
permanent i t e m o f expense a n d under t h e terms o f t h e contract
with the Anerican Telephone and Telegraph Company the Federal reserve banks a r c not permitted t o make a
charge t o
nenber banks for messages forwarded over the leased
wires.
The rules 6 n d regulations governing t h e use o f leased
wires embodied i n the previous report o f this Committee,
approved a n d a d o p t e d b y t h e F e d e r a l R e s e r v e B o a r d a n d n a d e
éfrective i n their letter x-3337 o f February 21, 1922, w e r e
intended t o correct existing congestion o f t h e leased wires
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Federal Reserve Bank of St. Louis
145
csused b y t h e t r a n s m i s s i o n o f m e s s e g e s c l e a r l y c o n t r a r y
to the purposes f o r which t h e leased wires w e r e put i n
operation.
T h e Conmiiilttee, t h e r e f o r e , d e s i r e s
t o call at-
tention t o the following rules embodied i n the Board's
letter, X-3357.
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Federal Reserve Bank of St. Louis
No. 5 . D e s c r i p t i v e d a t a i n w i r s a d v i c e o f p a y m e n t
or
non-payment o f collection items forwarded between Federal reserve banks should b e confined
to t h e c o l l e c t i o n nuniber, n a m e o f p a y e e o r
place o f payment,
a n d emount,.
Telegrams s h o u l d b e w o r d e d a s c o n c i s e l y
a s pos-
sible a n d @l11 u n n s c e s s s r y t e l e g r a p h i n g e l i m i n -
ated,
T o snforce this e a c h Benks should adopt
sone p l e n whereby a n y misuss o f t h e leased wirss
will b e brought t o the attention o f a n otfricer
whose d u t y i t w i l l b e t o c o m u n i c a t e
with the
Originsting department, o r , i n the cese o f incoming wires, w i t h t h e sending ofrice.
Leased tires should n o t b e used i n tracing col-
lection items forwarded b y a member bank i n one
Gistrict d i r e c t
to a
Federal r e s e r v e b a n k o f s n -
other district, proceeds o f which a r e t o b e credited
t o t h e Federal
reserve bank
o f the dis-
L46
trict i n which t h e
i
n
g bank i s located,
The Committee belisves t h s t while these rules o f necessity c e n n o t b e m a d e s p e c i f i c e n o u g h t o c o v e r e v e r y p o s s i b l e
contingency,
t h e t t h e y a r e sufficiently flexible
varying c o n d i t i o n s
t o meet
i n t h e d i f f e r e n t F e d e r a l r e s e r v e districts
end a t t h e sanie time accomplish t h e desired results, w h i c h
is t o prevent a b u s e a n d a v o i d c o n g e s t i o n o f t h e l e a s e d
wires without depriving nember banks o f rsasonable e n d
legitinate service where t h e u s e o f the leased wires i s
necessary.
The Vonmittee h a s received, f r o m several sources,
requests f o r 6 n opinion a s t o the propriety o f forwarding
certain classes o f messages over the leased wires.
F o r
convenience i n giving its opinion, t h e r e h e ve been classi-+fied a s follows:
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Federal Reserve Bank of St. Louis
be R e q u e s t s f o r t r a n s f e r s
o f funds b y 4
a member bank, representing a
customer o f
daily settlement o f
sccounts between t h e mewber bank's customer e n d
the various ofricers o r egencies o f that custoner,
The u s e o f the lessed tiires f o r tracing collection i t e m s b s t w e e n F e d e r a l r e s e r v s b a n k s .
147
The use o f the leased wires f o r transferring funds
representing t h e proceeds o f collection items f o r
warded b y ® menber bank i n one district t o a member
bank i n another district, w i t h instructions t o
deposit t h e proceeds w i t h t h e collecting bank's
Federal reserve b a n k f o r wire transfer t o the Federal Reserve b a n k o f t h e forwarding member bank.
with reference t o the subject No. 1 , 8 8 some large
corporations, w h i c h conduct numerous egencies throughout t h e
United states, h a v e apparently b s e n using t h e Federal neserve
leased Wire tysten throughout t h e i r depositary banks t o
_transter daily b y wire t o a central point t h e réceipts o f
the various orfices, amounts o f which i n nahy instances
are small,
i t i s recomended t h a t requests f o r traensters o r
this nature b e declined b y all Federal reserve benks,
as
ey
the acceptance o f such transfers could develop
i n t o consider-
able m i s u s e a n d c o n g e s t i o n
o f t h e l e a s e d wires;
a t the same
time, c a r e should b e exercised n o t t o discriminate ageinst
legitimate transfers o f balances,
With reference t o subject No. 2 , w h e n this subject w a s
originally discussed b y t h e Leased wire Committee i t
was
thought i n a d v i s a b l e
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Federal Reserve Bank of St. Louis
t o prohibit entirely t h e u s e o f t h e
148
lessea wires f o r this purpose, f o r the reason that there
are undoubtedly nany instances where i t i s essential that
information s i t h reference t o t h e fate o f s collection i t e m
be obtsined over t h e leased wires.
T h e Vonmittee w a s then,
and still is, o f the opinion that t h e leased wires m s y b e
used f o r this purpose whenever t h e importance o f the transection a n d other conditions warrant, bélieving that strict
conpliance w i t h paragreph 8
of the reguistions contsined
in the Board's letter X-3337, which has been quoted elsewhere
in this report, will ef:ectively prevent misuse o f the private
wires f o r t h e p u r p o s e i n d i c a t e d ,
vith reference t o subject No» 3, the Committee recauends
thet t h e r e q u e s t s t r o m m e m b e r banks,
f o r telegraphic trens-
fers described a s proceeds o f direct collections yorwarded
by a
menber b e n k i n o n e d i s t r i c t
district,
b e declined,
to a
member b a n k i n another
a s t h e additionel descriptive data
is prohibited i n telegrans transferring funds under paragraph 2 of t h e rules a n d regulations contained i n the Board's
letter X-33357, w h i c h reaas s s follows:
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Federal Reserve Bank of St. Louis
No.
T
h
e descriptive date i n telegrams trensferring
funds shoula b e linited t o name o f the tending
member bank, n e m e o f its customer requesting
149
transfer,
i f shown, n a m e o f member b a n k r e c e i v -
ing credit, a n d name o f other beneficisry,
if
stated, f o r whose sccount credit i s given.
The Committee believes, therefore, t h a t i t should b e
clearly under:tood t h e t w h e n such deposits e r e received,
they m a y b e h a n d l e d s s m a i l t r é n s f e r s o n l y .
Respectfully s u b m i t t e d ,
(signed) J e m e s B. kcbougal,
Chairman, L e a s e d w i r e Comuittee,
The Cheirman;
A s I understand it, Governor mcvougal,
the three recommendations u p o n which w e are asked t o take
action a r e t h o s e i n paragraphs
1, 2
and 3
o n the second page
of y o u r r e p o r t ?
Governor mwevougels:
The Chsirman:
Y e s , a n d t h e other matters too,
W e will take those u p rirst.
Y o u offer
those 8 s resolutions?
Governor i:cDougal: I
offer t h e revort s s a report o f
the leased w i r e committee a s a whole.
The Cheiri.an:
as a
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Federal Reserve Bank of St. Louis
A n d that t h e rsconmendations
whole?
Governor uc¥ougal:
T h a t i s m y susgestion.
150
The Chsirnan:
L e t m e ask first i f anyone h e s a n y ob-
jection t o the adoption o f a n y o f these reconnencations,
or i f you are ready t o act upon t h e report s s a whole a n d
to a d o p t t h e r e c o s m e n d s t i o n s c o n t a i n e d
i n t h e report.
Governor wcDougel has orfered a resolution f o r the adoption
of t h e r e p o r t w i t h t h e r e c o m m e n d a t i o n s t h a t i t contains.
Is thet seconded?
Governor Norris: I
will s e c o n d i t .
(The motion, having been duly seconded,
Relating
Governor uclougal:
é s carried. )
t o t h i s subject,
end in
view o f the responsibility insposed o n the Chicago Bank t o
act a g general supervisor o f t h e lesseda wire syste, I
have
8 supplements] report which comes f r o m t h e opsreting orticers
of o u r bank s n d which 4 would like t o read.
In January o f this year w e reconmended t o the Federal
Reserve Board thst a direct duplex w i r e b e instelled between
Chicago end New York end that certain other chenges b e made
in our leased wire facilities.
A t a conference i n #ebruary
between representatives o f t h e Bosrd, t h e leased Wire Committee, r e p r e s e n t a t i v e s
o f t h e treasury Department,
a n d the
o
American Telephone & Telegraph Company, i t was decided t
install temporarily 3
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Federal Reserve Bank of St. Louis
duplex w i r e between Chicago a n d New
York,
t o convert t h e Chicago-Clev eland-~iiashington wire
from 6
duplex t o a
single w i r e , a n d c o n v e r t C i r c u i t
#1A (Washington-New York) from 9 duplex t o a single wire.
The representatives o f the Telephone Company w e r e asked
to make @
comprehensive s t u d y o f t h e entire l e s s e d w i r e s y s -
tem with a view o t improving t h e arrangenent,
i f possible,
“fter.s8n enelysis o f figures which were furnished b y the
various Fedcral reserve banks showing t h e volume o f business
transmitted, t h e Telephone Company, i n June, made their
report
i n which t h e y stated t h e t t h e layout o f t h e wires w a s
fundamentally correct.
A t that tine t h e following reco..-
mendations w e r e m a d e a n d approved, e r r e c t i v e J u l y 1 :
Circuit # 1 -
Eliminated between washington a n d New
York
Continued p e r m e n e n t l y
as a
single w i r e
bstween washington m d New York,
#1C - Continued permanently a s a full duplex
wire batween Chicago and New York.
That, gentle.en,
i s where w e increased t h e efriciency
very, v e r y much,
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Federal Reserve Bank of St. Louis
Circuit # 3 -
Continued p e r m a n e n t l y
a s a single wire
between Chicago, Cleveland e n d wagiington,
152
Circuit # 4 A - Converted fron full duplex t o a single
wire between Chicago a n d St. Louis.
New York s a s made a relay office f o r Boston business, e n d the Baltimore Branch was
removed f r o m the main line circuit.
Before t h e s e c h e n g e s w e r e n a d e w e h a d f r e q u e n t d e l a y s ,
the congestion being especially b e d between Chicago and the
Rast.
A t the present t i m e w e are experiencing n o delay
under normal conditions, a n d our facilities a r e sdequate f o r
our nesds.
Then, attached t o that, i s the following memorsndum o f
the numbers a n d hames o f circuits a n d the average daily
messages,
w h i c h shows that w e are still hendling a
business,
b u t t h e r e a r e n o delays
lot o f
o n a n y o f t h e wires t h a t
we know of.
Numbers a n d Names o f Circuits
Circuit # 1 -(Washington-Boston)
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Federal Reserve Bank of St. Louis
A
v
e
August, 1 9 2 2
a g e Dsily
Wwessages.
r
( N e w York-
Boston a s of 71-22)
1
2
8
-(WasBington-New York) (Converted
to single wire 2-20-22)
~(Weshington-Philsdelphis -
lished 12-3-21) N e w York)
2
7
4
Estab-
1
9
4
153
“Circuit #1C -(Chicago-New York (Established 2-16-22)
"
# 2 -(Washington-Atlanta)
#2A -(Washington-Richnond) (Established
12-3-21)
#3 -(Chicago-Cleveland-Washington)
(Converted t o single wire 2-20-22)
#3A -(Chicago t o minneapolis)
#3B -(Chicago-Washington)
#4 -(Chicego -bellas)
#44 -(Chicago-St. Louis) (Converted t o
single wire 7-6-22)
#5 -(Chicago-salt L a k e City-sen #encisco)
#5A -(Chicago-Kansas City)
% Duplex wires.
Others a r e single wires.
Total number o f words transmitted ovef t h e main lines
during month o f August, 1921, 1,681,635.
Total number o f words transmitted o v e r t h e main lines
during month o f August, 1922, 1,601,220.
The Chairman:
T h s t i s i n response t o a recommendation
that w e adopted a n d put into effect following t h e last
Gonference,
t o relieve t h e wires o i congestion.
Governor kcDougal:
Y e s ;
factorily a n d with n o complaint.
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Federal Reserve Bank of St. Louis
a n d i t i s working o u t satis-
158
The Cheirman:
b o y o u wish a n y action o n thst report?
Governor i.cDougal:
N o t a t all; I
only submit i t a s
6smatter o f interest.
The Chairman;
I t has been mace e @ part o f t h e record.
The next topic i s
4-c w#ethod o f advising direct-sending
banks o f other districts o f nonpayment
o f c a s h items.
The p r e s e n t p r a c t i c e
i s t o send s u c h advice prepaid
over couuercisal wires a n d i t i s reconmended thet private
wires b e used f o r gich advices t o banks located i n Federal
reserve cities.
T h e t i s suggested for a n Francisco.
Governor Calkins: I
have nothing further t o say then
is s t a t e d o n t h e p r o g r a m there.
I
t ssemed t o m e desirable
to economizé t o that extent.
Governor fencher: I
tions t o that practice.
think there might b e some objec-
T h e point i s raised i n a memoran-
dum prepared i n the bank but that entails t h e matter ofr
phoning t o a member b a n k a n d t h e question might erise w h o
had t h e matter i n charge, w h o received t h e message a n d the
question o f r e s p o n s i b i l i t y m i g h t
b e involved.
w W e feel thet
the p r e s e n t p r a c t i c e s h o u l d b e c o n t i n u e d a n d t h a t t h e c o m mercial w i r e s s h o u l d b e used.
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Federal Reserve Bank of St. Louis
T h e n y o u reve a
record o f
155
who received t h e wire a n d the question o f responsibility
is pretty clearly defined.
The Chairman:
H o w d o y o u fesl about thet, Bovernor
Calkins?
Governor Calkins: I
do n o t s e e a n y point
tion o f record, bécsuse w e would h a v e a
fice.
o n t h e ques-
record i n t h e o f -
I f the view i s that i t costs more t o sssume that
responsibility t h a n i t w i l l t o s t a n d t h e c o s t o f t h e c o m -
mercial wires--Governor iicDougal: I
can give y o u s little memoran-
dum prepared b y our leased wire nsnager, w h i c h is, “ i e
belicve t h e present method should b e continued b y dispatch-
ing this information over the cammerciel wires t o the direct
sending banks.
T h e service i s quicker because i t i s not
necessary t o relay t h e message, s n d also i n relaying nessages o v e r t h e t e l e p h o n e e r r o r s m i g h t a r i s e w h i c h w o u l d
prove a
liability
the message.
I
t o t h e “ederal reserve b a n k receiving
f these telegrams w e r e sent over t h e leased
wire i t would have a tendency t o overload t h e m a n d the difference i n cost over t h e lessed wire would b e negligible,
if the matter o f clerk hire, relaying, a n d s o forth, i s
tsken into consideration."
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Federal Reserve Bank of St. Louis
That i s simply a n expr ession o f opinion.
Governor Calkins: I
phoning,
d o n o t s e e a n y o b j e c t i o n t o tele-
b u t t h e matter o f cost i s one that I
press a n opinion sbout.
cannot e x -
T h i s w a s only submitted f o r dis-
cussion.
Governor Young:
O u r bank sends these telesranis col-
lect over t h e public wire.
I s thst contrary t o the agree-
ment here?
Governor Cslkins:
Y o u are violating t h e agreement
with regard t o uniform prectice.
Governor Young:
T h e n w e have broken t h e agreement,
that is, t o the direct sending banks.
W
e sent that col-
lect o v e r t h e p u b l i c w i r e s e n d h a v e b e e n d o i n g i t right
elong. |
The Chairman:
I t occurs t o me, Governor Calkins,
thet this i s a case where t h e sane service i s sndered
whether t h e conmercial .ires o r the private wires a r e used,
end where a
diiference o f view arises a s t o whether t h e
bank i s meking a n adequate record f o r i t s o w n protection
by using o n e o r the other
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Federal Reserve Bank of St. Louis
Governor Calkins:
The Chairman:
A n d a matter o f cost.
somewhat a
matter o f cost. I
should
think this i s 6 case where e a c h bank should decide
itself, a n d i f i t felt i t needed t h e additional protection
it c o u l d p a y t h e c o s t o f s e n d i n g i t o v e r t h e c o m e r c i a l
wire,
Governor Calkins:
T h e conference i s o n record that
such messages shall b e sent over t h e commercisl wires.
That i s the whole point, a s t o whether w e are bound b y
that.
The Cheirman:
T h e interest o f n o member b a n k i s af-
fected here b y a change i n our practice i f w e think i t wise
to change it.
Governor Calkins:
N
o a c t i o n i s necessary.
T h i s was
only placed here f o r the purpose o f discussion. I
a m still
of t h e opinion that 3 s a matter o f economy w e should u s e
the leased wires r o r such purposes e s they a r e evailable
TOs
N o w , i f i t would overload those wires t o meke this
change, t h a t i s s complete answer,
The Chairman:
I s i e n e a n y objection t o modifying
this rsther hard end fast rule that w e adopted, t o the extent o f providing thst a n y Federel reserve b a n k that wants
to u s e t h e p r i v a t e w i r e s
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Federal Reserve Bank of St. Louis
Governor Calkins:
i s perfectly f r e e t o d o s o ?
T h a t is objectionable, because that
158
might r e s u l t i n this overleading, w h i c h would b e objection-
able.
T h a t i s exactly the point I ammising.
I f the
use o f t h e p r i v a t e w i r e f o r t h e p u r p o s e h e r e s u g g e s t e d w o u l d
result i n overlosding which the representative o t the
Chicago b a n k thinks would result,
w e should n o t adopt t h e
practice.
The Chairman:
b o s s the Chicago bank think i t would
overload t h e wires?
Governor kcvougal:
T h a t i s the thought expressed i n
this memorandum here.
Governor Seay:
b o e s i t not resolve itself i n t o s
dif-
ference o f cast?
Governor Calkins:
Y e s ,
Governor Seay: I
should think that t h e present prac-
tice i s decidedly preyerable,
The Cheirman:
H a v e y o u s resolution t o offer, Gover-
nor C a l k ins?
Governor Calkins:
The Chsirman:
N o ; I
oifer n o rasolution.
I t eppears h e r e a s &
reconmendation.
Shall w e pass t h e topic?
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Federal Reserve Bank of St. Louis
Governor Calkins:
The Chairman:
T h e t i s agrseable t o nie,
T h e n o u r nexy topic i s (da)
Telegraphic transfers. W h e t h e r transfers over private wires should b e limited t o transfers o f bank belances s o
that trensfers t o r account o f individuals, firms, corporations, etc., should
be errected b y menber banks a t o w n expense o v e r c o n m e r c i s l w i r e s ,
Governor Seay:
I s not that covered b y the report,
iy. Chairnian?
Governor ue“ougel: I
think i t i s covered b y the re-
POre,
Governor Norris:
Y e s ; i t i s fu.ly covered b y the re-
port.
The Chairman:
I t i s a pretty difficult t h i n g t o know
where t o draw t h e line, because alniost every tiansrer relates
to the account o f a customer o f a bank i n some way.
Governor Fancher:
A b u s e s m i g h t r e é d i l y s p r i n g up.
Requests have b e e n made b y various concerns with, w e will
say, headquarters
i n New York, w i t h branch stores t h e
country over, f o r tiansfer o f daily receipts o v e r t h e wire.
The United Cigar Stores i s one. of the concerns.
quests have been made t o us.
T h o s e re-
T h e y come t o t h e bank a n d
oifer t o carry 8 small minimum balance a n d then have t h e
Surplus t r a n s f e r r e d e a c h d a y o f d a i l y receipts.
declinsd
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Federal Reserve Bank of St. Louis
i n # 1 1 c a s e s t o t r a n s f e r t h e anount,
W
e have
160
Governor Seay:
W e have h a d 8 8 many a s two requests
a d a y i n s u c h matters,
s n d almost d s i l y reguests a l l t h e
time.
Governor ikcYougal:
O n page 4 of the Conmittee's re-
port i t states, " T h e Conmittee h a s received, f r o n serveral
sources, r e q u e s t s f o r s n o p i n i o n a s t o t h e p r o p r i e t y o f
forwarding certsin classes o f messages o v e r t h e leased
wires.
F o r convenience i n giving its opinion these have
been classified s s follows:"
“l R e q u e s t s f o r trensfers o f funds b y a customer o f
the member bank, representing a daily settlement o f accounts
between t h e member bank's customer a n d t h e various officers
Or égencies a f thet customer.
2 T h e use o f the leased wires t o r tracing collection
items b e t w e e n F e d e r a l r e s e r v e b a n k s ,
5S T h e use o f t h e leased wires f o r transferring funds
representing t h e p r o c e e d s
o f collection items forwarded
by & member b a n k i n one district t o a member b a n k i n another
district, w i t h instructions
t o deposit t h e proceeds w i t h
the collecting bank's Federal reserve b a n k t o r wire transfer
to the Federal reserve b a n k o f t h e forwarding member bank,
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
with reference t o the sub:
corporations,
w h i c h c o n c u c t nui.< S
igseneies t h r o u s h o u t
the United stetss, h i o p p a r s n t l y been using the seceral
Reserve léessed w i r e s y s t e : t h r o u g h o u t t h e i r caspository
banks t o treonsfer c e i l y b y w i r e t o <
centrsl s o i n t t h e
receipts o f the various ovrices, smounts o f which i n imeny
instences s r e small,
i t i s recoimiusnéied thet requests r o r
trénsvers
s
o ia
b y ell
f such trensfers coulc o n l y c e
o
8 s the acces
banks,
be c e c l i n e a
velop con:iderable misuse e n d congestion o f t h e lessed
wires;
e s t the sane tins, c a r e c h o u l c . e
b
Giscrinuineté:”. agcinst lesitiwets transiers o r bal-nces,
I think thst covers t h e coumittes's reco..endsetion o n
thet
.erticular ;ucstion.
Te Chairisn:
wattsr thet i m olves t h e
I s i t not 5
use o f o r d i n a r y c i s e r e t i o n
Governor ..cvougzal;
t o prevent abuse?
i h :
t
h
e
r
e i s t o it;thot
is e x a c t l y w h e t i t ig,
Governor seay:
x c e p t t h e r e i s t h i s o n e s e o f it,
thet some banks might zeke n o injuiry
nature
s v e r
o f the t r a n s f e r s t h a t t h e y a r e
ber banks, t h a t t h e r e m i c h t
b o scores
S c o r e s
t
h
s
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Federal Reserve Bank of St. Louis
162
fers o f this character, o t h e r recerel ittecer B a n k e might
make inguiry into the fects snd find c a s z
the néturs
nake t h e transfers,
9n egency i n one city t o a n
in another c i t y that o n e fscersl reserve bank w o s
the t r e n s f e r s
a n d s n o t h s r .wscderel r e s e r v e
Governor ..clougal:
bamk was
T i s rlegrent
to w h i c h G o v e r n o r F e n c h e r he:
the Unitec Cigar Stores Company.
know ha; iueny thousands o f brenchés,.
business
w i t h reference
o f thet k i n d i t i s t h e recouiencetion o f t h e
mittee t h a t t h e e d e r a l r e s e r v e b a n k s csclinse i t .
weakness thers beceuse i t is a »retty cite
ficult thing t o know w h
kind o f s t u f ?
a
w the line; but o n that
w e c o n draw it.
Governor Calkins:
B u t why isn’t i t perfectly
to c r a w t h e l i n e i ? y o u s i m p l y d e c i d e w h e r e t o c r e w
Draw t h e line a t bank trensections, b a n k balancss.
fact i s the situation i s nore cifyicult between s a n *rancisco
and New York than between Philadelphia and New
the futher you get sway, ths further avert the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
transfer, t h e nore
posed u p o n ,
Y e d e r a l ressrve banks w i l l b e iii-
i f y o u w a n t t o o u t i t i n t h o t way.
have 6 limit o r w s nmet not h a v e @ linit.
i
8 must
I t i s obviously
to the sdventsge o f the Unitec Glgar stor
othsr corporations t o b s able t o ueke transfers across
country i n all ¢cirsetions without cost.
Governor i.cbougal:
Y o u ars uncoubtedly right
that.
Governor Calkins:
u
y view i s w e shoulda limit
gratuitous services o r that kine t o ths transfer o f bank
balances,
l f you went t o put i t i n thet wey.
Governor ..cvougal: I
think i f you c o thst you will
destroy the usefulness o f this whole plen, because i f
Will trace t o the origin t h e transfers t h a t
will find a greet many o f them sre actually
the customer o r the benk.
Governor Calkins;
T h e y sre ali ede,
r , Chairiian,
on behalf o f t h e customers o f banks, proctically.
I r you
will a n s l y z e t h e t r a n s f e r s t h a t a r e n e d e b y banks, t h e y s r e v
made t o enable t h e benks t o carry o u t their prover functions, a n d ultimately t h e y a r e f o r t h e b e n e f i t f
o
of t h e bank,
B u t that i s quite a
different thing fromm
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Federal Reserve Bank of St. Louis
164
seying thet J o h n c..i1th should b e persittec t o turn i n his
Ggily recsints i n sen Francisco t o the head office i n New
York o r Boston over thse leased wire o f the Federal heserve
system s t n o cost.
Governor ..cbougal: ;
6re two kind. o f trensfers,
one actuel balences availeble a t 3 cistance f r o m Chicago--~-~
those y o u woulc not slininate, w o u l d you?
T h s other trans-
fers have t o c o with r.qussts f r o u custoners.
Governor G e lkins;
Y o u will gind thet i n neny cases--
and thse ceses will inersase v e r y repidly e s soon s s the information sorsads--- t h e t t h e custoiers o f t h e First Nation21 Benk o f so.cewhere, 3 8 custoner o f the clierseter o f the
United Cigsrs stores Conpeny, will make
ths bank whereby their local belences i n cxcess o f 4
r e
tein smount w i l l b e t:ensrorpsec t o some other office daily.
Twenty t o thirty t o firty telegraiis will b e sent b y the
representative o f one concern.
The Cheirman:
I t occurs
t o m e that t h e funcdmentsl
difference b e t w e e n o n e a n d t h e otliser k i n d o f t r e n s v e r
is
whether t h e funés a r e t o b e pleced i n another c i t y t o t h e
ersdit o f 8 metber bank ordsring t h a transfer o r whether
they a r e t o b e placsc a t ww inebody else's dredit i n the other
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Federal Reserve Bank of St. Louis
city, T h s e t i s the o n l r e s l brosa cistinetion o r
Yyerentiation thet y o u c e n give t o the two kinds o f
Governor wsey;
ee p r e s e n t e d
w e a g t h o r o u g h l y u i t h ths view
O u r view h e s b e e n that
b y G o v e r n o r Calkins.
it i g for the benefit o f t h e member benk t o trensfer 9
belance accuimlsted b y o n segregates o f trénuactions a n a
not transfer ¢6ech spersate tren:action v o r s n individual
who mney come i n t o 2 bank. I
do not think thet w h e n ¢ n
incivicuel wants t o send money f r o m one plsce t o e other
o i t through t h e rediwi o f the member
that t h e y s h o u l d d
bank o v s r o u r p r i v a t e wires. I
make 8
do not know h o w y o u c a n
distinction b e t w e e n t h e Unitec G i g a r stores Compeny
end a n individusl s h o m s y come in.
I f e n incivicusl came
into t h e First National Bank o f Richiond e n d
trengfer a
thousand o r five thousand dollars t o o a n fren-
cisco f o r his uss, I
co not think thst ought t o b e done
through t h e federal Reserve system.
Governor ..cbougel:
Y o u con't think that trensfers
should b e prohibited thet originste w i t h custoners o f the
banks, generally spesking?
Governor seay:
Y e s , w e do.
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Federal Reserve Bank of St. Louis
106
Governor .cYougal:
T i e n y o u woulc. destroy t h e use-
fulness o f this whole trensfer system, I
think, s n c crsate
e jarket egein for exchenge, i t e e n s t o nie.
eny s u c h thing 3 s s market f o r
Governor seay;:
I f i t bscones knonn, s s i t will i n
tine, t h e n sll trensiers between inulviduals e t aiiferent
points Will toke plece fhrough the «ederel reserve banks
over their lessed wires.
Governor Calkins; I
talking ebout s
think thz:se t u o gant lencn are
little <ifverent views which each holcas.
I think thers would b e n o obiectio:, recom Governor seay's
point o f view,
i f J o h n S n i t h w e r e yermmittec t o g o i n t o t h e
First N a t i o n a l
Bank
o f Richmond sand ask thet b a n k
t o trans-
fer .10,000 t o the National C i t y Bank o f N e w York f o r hie
credit.
e to trensfer that over
J o u l d it b e o b j e c t i o n s l
the leased wire, Governor sesy?
Governor Seay: I
think thst should b e periuitted,
but i g John siith wented t o trensfer t o Bill Jones 4 t sone
other point g o r his o w n e r s o n e l use, i
uo n o t think that
king o f t r a n s e c t i o n s h o u l d b s yveruitted.
The Chaliriuan:
hundreds
o f them.
I t i s being done every aay;
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Federal Reserve Bank of St. Louis
157
Governor
s
a
n
d
s o f them, ur. Chairman.
ends w o w n f r o m t e n t o tuenty-
vive trensiers o Gay, w h i c h are trensfers f r o u the agency
a n d e s soon 3 s thet inforiation i s spreac
to the head ors]
p a r e d throughout t h e country---
you will find sgencies s
snd b y 2genciss I
nesan 6s lot o f things, inclucing éepert-
ment s t o r e s - - - t h a t w i l l t r a n s f e r t h e i r b a l e n c e s deily.
They will core into t h e First Nationel Bank a n d say, “ s e
will opén s n Sccount proviued y o u will transfer c a c h c a y
our balence i n excess o f a thousond collars.“
Governor Fancher:
T h o : s arethe onés that
COWMN.
The Cheirmsn:
I s n ' t this 2
subject, Governor Calkins,
that would have t o b e very thorouchly investigetsa berore
we c a n aecide what t o c o sbout i t ?
Governor Fancher. I
think soue o f t h e Keserve banks
not t s e those transactions.
down f o r ©
«
@ have béesn turning
l o n s tine,’
Governor Callsins:
Governor Seay:
T n e n there i s n o untior.wity.
U n d e r t h e regulations o f t h e Board
seem t o permit s u c h tronsectiom
t o b e mede entirely
within t h e d i s c r e t i o n o f t h e e d s r s l “eserves Banks.
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Federal Reserve Bank of St. Louis
158
o
I venture t o hezard t h e guess t h s t i n
4f£ we do not check this thing
et mass o f business throughout t h e
eny cheracter, w i l l b e hanile:
tTheve n o desire t o suggest t h a t
Governor Vaikins:
erwe should iake sone rigid, arbitrary rule, w h i c h will int
the other
fere w i t h t h e t r e n - a c t i o n o f o u r b e n s ; p u t o - o n
shoulé n o t l e n d o u r s e l v e s
t o o r s e t i c e which vill
well e s
eventuelly b e Getrimentel t o the isenuber penks 8 8
The Cheirian:
J n a t i s the <ixfsrenc.
i n principle
between the United Cigar: stores Compeny
auounts,
fers, o r soi.¢ other store making transters i n snell
ené t h e Steel Corporation making monthly trensi
millions?
T h e r e i s c i f z e r e n c e i n prin-
Governor Célkins:
In other worcs, h o w c a n y o u araw t h e
t h e y hspven
line s n d d i s c r i m i n e t e o g e i n s t s t o r e s b e c a u s e
to h s v e 3
trensfers,
lot o f brench offices o n d a
a s against a
nunber
big corporation having a
few office:
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Federal Reserve Bank of St. Louis
end s
few large tisnsfsrs?
Governa vValkins:
w e coula very essily crew t h e
line,
The Chsirnian: I
e m not sugsesting t h e t t h a t i s what
we should do, b u t w e could very sasily d r e w t h e line i f
we limit t h e service t o t h e trensfer o f benk belences.
Governor Seay:
F o r the use o i the bank which i s mak-
ing t h e trensfer.
Governor Galkins3
I
t may b é v o r the use o f the bank
itself o r i t may not b e e I
co not think w e could g o be-
hind it,
The Chsiriian: G o v e r n o r Calkins! recoui.cndation i s
thet t h e trensfers shoulc b e limites t o bank balences,
Governor Calkins:
sdopted i n haste, I
Y e s , but I co not want t o have thet
think this i s a metter that requires
very mature consic ration. I
sentiol t h e t s o m e r é g u l e t i o n @
think i t is absolutely ¢ss o e Limitation b e spplied
to the prectice, a n d that the liniitetion b e applied b y all
of the twelve Federal reserve bsnks,
T h s fact i s now,
that t h r e i s no limit i n most pleces, w h i c h makes i t very
difficult
t o spplythe limit i n any o n e plsece.
Governor Sesy: I
will second Governor Calkins’
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Federal Reserve Bank of St. Louis
motion,
Governor ..cDougel: I
would b e 8
ness,
great m i s t a k e
think,
m e n , thet i t
t o take s n a p jucgnent
o n t h i s busi-
I t i s s very important metter s n a 4 do not iknow
how aeep i t vould cut,
Governor C a l k i r ;
T r e n I T will siove t h a t t h e m a t t e r
be referred t o @ committee, aprointed b y the Chair, f o r
concidc:ration and report t o the next Conrerence.
The Chairnian; J F o u l d you be willing t o sdcu the recon
mendetion thet t h e Gormittee Jonsicer t h e absolute prohibition ogsinst transfers f o r account o r sirms, incivicuals
ena corporstions,
o r thst s u c h trensfers
b e race
limiting reguiletion?
Governor Calkins? I
9m willing t o include #1) of
that.
Tus Chairusn: I
mean b y that that y o u went e thorough
exemination o i the whole subject?
Governor Gelkins;
Governor Seey: I
will second t h s motion.
(The motion, having besn c u l y seconded, w e s cerried,)
The Chsirman:
b o you object t o .¢ referring this
to the seme wire committee, Governor Calkins?
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Federal Reserve Bank of St. Louis
co not.
Governor Calkins: I
The Chaliriuen:
T h e n I
will o p v o i n t
o s t h e comulttes
euthorizead i n that motion o u r present t i r e conuit tee,
Governor Young, I
sould like t o submit = ctatesment
with regard t o Topic vw, 9 report u e c e b y our cucitor.
In connection w i t h tslesrsphic tiontiers,
has ® concition which i t might b e well t o bring u p
alscussion,
Yegen Bros., Butte, .ontana Bonkers, iaintain
Eelene 8
nonsiwember clearing eccount.
I t hes been
oractice t o foruerd t h e Branch their drait o n this account
to cover rewitteonce letters cent t h e m b y our prench,
time w h e n i t i s née°*stary v o r t h e m t o t r a n
fer funcs f r o m other ¢istricts i n order that they m e y
have sufvicient c o v e r f o r their re.ittances a n a they h e v
g
peen waking requests t o their correspondent s t C h i c a o
or a t other points t o trensfer through thse .ecsral xeserve
Banks various s u m s f o r their cre i t o t helene B r a n c h .
wece from New York, Selt Lake Gity
without comment, b u t curing the letter
part o f August the Federal Reserve Bank o f Chicago refused
to acespt e
transfer o f funds f r o t h e National Bank o f
Se
we
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Federal Reserve Bank of St. Louis
Revublic.
According t o our privete w i r e errangements, w i r e transgers n e y only b e received f r o m sember banks f o r account
Of member benks.,
I t i s hovever, s t e t e d t o all our cloaring
sonksvill bear the expsnse thet mey b e nscessary i n trensmltting funcs t o the Federel seserve B a n k t o cover réenittance lstters.
é @ ¢requently p a y e x sress o r mall cherges
on c u r r e n c y s n c c o i n s e n t u s b y n o n e m e n b e r b e n k s
for remittance rorverded them.
ase o f Yegen Bros. i t would b e permissible
for t h e m t o résuest t h e i r C h i c a s o r s p r e s e n t s t i v e
fer f u n d s b y » i r e t o 9
correspondent
t o trans-
o f Y:gésn Bros,
i n
Eelene, «ontana, s n d then make re.vest f o r the ktlene c o r e
respondsnt t o trensfer funds t o the Fedsral “eserve Branch.
All this s t our exvense.
It sedis t o m e thet v o r t h e wake o f convenience a s
well a s saving o f @e2 G 8 t r i n s f e r migut b s scecepted
for credit
of &
non-~..euber b a n k ' s c l e a r i n g a c c o u n t w h e n
cover renittences,
5sdecision may b a reached a t the couing Governors!
Gonferencs,
i t will b e sppreciated.
Now, our proposition i s that w e want t o hendle thot
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Federal Reserve Bank of St. Louis
L173
for 6 non-tienber. :
C O C . pare)
esnnot becouse mendsrs
L
G isd
E
élways have b e e n willing t o ren
e
b a n k e r s and
n S&
r
s
y Sten
n e y
, a n d w e e s k then
to cover i n Helene exchenge.
c a n n o t take Chicsgo o r
other exchange t o cover it.
I t sesus i n & cess
kind thet there ought t o b e 4 mouivicetion o f o u r
srrangement,
The Cheimien:
Y o u ars o s k i n to, purchese s n indulg-
ence f o r Yegen Bros.
I s thet t h e icea?
Y e s , o r a n y other n o n wenber bank.
Governor Young:
Governor Boiley:
Y o u are Going this t o compensets
them for: reniltting a t par?
Governor Young.
f T o a t i s the icea.
I t i a the
est w a y w e can handle i t ourssives,
The Chairu.an:
Governor .eay:
A r s there e n y other views o n this i.at-
T h e r e a r e not r e n
kine, a r e there?
Governor Young:
cism o f Chicago,
be
V e r y fox.
i i s i s1
oriti-
s e Chicago properly stopped t h e
trensfer, according t o o u r previous arrangement, b u t i t
Goes n o t s e e u guite rigut w i t h a n institution o u t there
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Federal Reserve Bank of St. Louis
7s
thet cannot becoue 2 menber b u t which i k villing t o remit
st per i n avesilable funds, e n d which carries a n eccount
et t h e branch which runs froi: 2 5 , 0 0 0
t o 40,000, I
si
orned.
The Choirnien:
I t sesne t o m e thet that cones s o
to being 6 nember b e n k trensaction thet i t comes within the
reel intention o f the resolution that w e possec, h e c a u s e
certeinly these trensfers s r e very lergely iwace for the
purvose o f settlements s u c h 9 5 thet-+-
G o you s s y they
keep a balance w i t h you?
Governor Young:
Y e s , 8 non-~..eniber clearing secount,
of the few accounts o f that kind that w e have. T h e r e
soue Twine-City banks t h a t elso cerry non-«..d.ibsr clearaccounts,
The Chsirman: I
co mot s v é how y o u coulé réeiuse t o
CO-25.
Governor ..cDougal: I
belisve s t the lest
of Governors i t w e s voted that »
privilege b e not extenc-.
telesraphic transfer
t o the non-..euber clearing banks,
those t h a t k e e p s n account s i t h you, 2 n d s t t h e t t i m e e s
I reniexiber i t san’ *rencisco, o r one o f the other banks, w e s
rether peculiar position because t h a y could use that
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Federal Reserve Bank of St. Louis
175
es ¢ besis g o r interesting prospective ienbers,
who ceme into t h e system;
not b e done,
o r meibsers
b u t i t w s voted that i t should
T h a t was settled, a n d 1 think thst ths 3c-
tion tsken b y Chicego w a s i n accordancs w i h t h s vote o f
the Conference,
Governor Young:
T h e r e i s n o juestion ebout thet,
Governor scbpougel.
a n a i f other recsral re.erve
Governor ..cDougel:
banks a r e n o t abiding b y the vote o f t h s conference w e
anzious t o know it.
woulc. like t o offsr 6 resolution
Governor Young: I
thet w e c h e n g e t h e p r e v i o u s srrengsi.ent
w e h e d e n d peruit
trensfer o f funds f o r account o f nonei.cuber banks that heve
cliering 6¢c@m unts with US.
co not renenber
The Chainriians I
t h a t het 3 ction
taken b y t h e Confsrence w a s o f that cherecter.
Governor Fencher:
The Cheirman: I
Y e s , i t was, ur. Cheirrean,
reiuenber s o m e a i s c u s s i o n o f a
trans-
fer made f o r 3 firi: o f privats bankers i n New York that w e s
clearly c o v e r s a b y t h e resolution,
b u t t h e y h a d n o elear-
ing balance.
Governor . u c D o u g s:1
‘
@ a r e Lone v e r y food
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Federal Reserve Bank of St. Louis
L176
behind this, ur. Ghairwan, o n d I hope Governor Young's
motion will b e uwitharewn.
I
f you want this reconsidered
i suggest t h a t i t b e referred t o the lsased wire coumnittes
in a dsr thst i t may make e stucy o f t h e whole subject.
The Chairman:
I s thet satisfsctory, Governor Young?
Governor Young:
N o ; I
would like t o have i t settled
Governor Seay: T h e s e trensfers arose out o r
of the P r collection system, a i d they not?
Governor Young:
Governor seay:
Y e s .
I t seems t o m e there c a n hardly b e
any rule w e cén adopt t h a t m a y not, i n its observance,
require s o n e Saccytions
a t u n e Riiess-- e n a 2
tose-ts t h e
case, t h i s certeinly eppcars t o b e a legitiuste exception,
but rether t h a n elter t h e rule, w h i c h #ould open t h e door
entirely t o permit 2 1 1 kinds o f trensfers,
i t s o n s t o me
thet discretion ight b e allowed the -.inneapolis bank in
this cese.
The Cholirman:
G o v e r n o r McDougal sugsests
t h t there
ig sastory béhind this somewhere.
Governor C e l k i n s :
I
f e n exception i s t o b e nace
in t h i g p e r t i c u l a r c a s e t h e r e a r e n e n y o t h e r c a s e s
i n which
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Federal Reserve Bank of St. Louis
would s l s o h e v e t o b e made.
w
e pave
ing balsnes f r o m t h e YVanedian Benk o f Cori.erce, quite a
respectsble institution, which has branches i n vsrious parts
oi the country, e n d w e certainly could not refuse t o elk
trensfers f o r then i f w e were making s n y exceptionel cases
Governor seay:
l o e s that arise o u t o f t h e concuct
of t h e p s r c o l i s c t i o n s y s t e m ?
N o t necessarily, n o .
Governor Celkins:
A S & matter
of fact i t srises i n two o r three places o u t o f arrengements usce f o r t h e settleiient a @ clearings.
Governor seeay:
T h e n i t coss arise o u t o f i t e n d i s
s substitute c h e r z e f o r t h e péyment r o r s h i p m e n t a f c u r r e n c y
or coin, i s n ' t i t ?
Governor Young:
w
e might s s k Governor i.cBougal whet
I understend y o u t o s a y thet there
wae some question i n connection w i t h this msttsr which requires explanation?
Governor ..cvougeal:
N o .
l L say t h e r e >repatig: e r e
sone underlying facts t h a t iniluence. this conference s t the
last meeting t o vote against t h e metter o y extenaing t h e
wire transfer privileges t o non-ueuber clearing banks. I
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Federal Reserve Bank of St. Louis
178
think i t woulc b e a misteke t o take s n a p jucguent o n this.
The Cheiriuan:
I T think i f tiere w e s 8 reason i t was
orobsbly felt thet i f we extenced all of these services
to nonenember banks, including the el:aring enc collection
system, thet they never would becous members.
B u t hers
is a case where t h e y could n o t bscone aisiber because t h e y
sre @ private f i r .
Governor i:cvuougel. I
think that i s one o f tne
tors.
Governor rancher.
A s I
recall i t © year e g o 3
Congerence t h i s matter w a s u p f o r ciscussion e n a ection
wes not teken i n usference t o Governor Calkins’ situation,
which wes that h e l a d either solicitec o r hada received,
non-fienber clearing accounts o n soncition that h e would
make trensfers y o r them, t h a t thet w e s a pert o f the agreement w i t h t h e benks, a n d v e d s v e r r e d t o that »itustion.
i t wes
At the last conference t h e netter caine u p e g c i n a n g
voted thet «.e should not make these trasrers,
a s I recall
ce
Governor Celkins:
I
f I o x not mistsken t h e metter
came u p i n the questionnaire w h i c h w a s sent o u t t o 311 the
in regard t o uniform procedure, a n d I would like t o
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Federal Reserve Bank of St. Louis
heve verification o f that i f w e c a n have it.
I heve o n l y t h s lest conf-rence r e port.
J e c e n n o t f i n d i t i n the questionnaire “<iscuss ion.
There w a s n o action w i t h seference t o this s t t h e 1:
Conference, I
make thet ctatenent o f
at this copy o f t h e minutes,
Governor Psnchers i
receail yv«
it u p 6 yeer eso.
Governor Ȣey;
There S
entered into t h e matter,
§
s
r conricerstion which
e s 1 recall it, s n c that w a s thet
the n o n - n e m b s r c l e s r i n g b a n k w a s l o o k e c u p o n a s 3 veanish-
ing institution,
N e w York reported s t thet tine thet
they h a d o n l y t w o o r t h r e e non~i..ei.ber c l e s r i n g b e n k s e n e
they G i d not l o o k with niuch favor u p o n t h e non-nember
elearing benk connection, o n d I think i t w s generally regerded that non-iember clecring benks w e r e becoising, 3 8
I say, vanishing institutions; t h a t i t wes n o t i n the inter~
est o f the system t o cultivate t h e non-..cuber clearing
benk, becsuse i t interiered w i t h couplete weibsrship o f
thet institution.
T h e b t proposl
recall it,
Governor “icbougal:
Y e have v e r y f e w non-member
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Federal Reserve Bank of St. Louis
180
clesring banks, but w e have one very large state bank i n
Chicsgo, 8
wembsr o f the clearing house, w h i c h weinteins
én account w i t h u s , end thet i s what w e term a non-inenibsr
clesring bank,
» @ had 9 gooc aeé@l o f dGirficulty w i t h
them since t h e last conference,
o r during t h e lest f e w
months, because w e have sdhsrec rigidly t o this rule.
Poruerly w e had extenasad t h e m the vrivilese, b u t w e cut i t
orf, I
think i t i s rory lnportsnt that t h e policy outlined
by the last conference b s e pursued b y all ifeueral reserve
banks a t leaut until this netter i s studied further,
asnume that i t i s belng achsred to.
it i s or not I do not know. I
J [
O f course whether
know thet w e have sdhered
Go it,
The Chairiian: G o v e r n o r Youngs i s oricring » resolution thet sacertion b e made i n the casé o f non-i.sinber cleer-
ing banks thet sre not eligible f o r ienbership.
inmotion secon: ed?
Governor kcbougal: I
Governor Young:
c
would b e oopogsed
i
d n o t veélly p u t i t i n thet
I just saic non-ienber clearing occounts.
withdrew i t .
I
B u t I will
t G o e s n o t s e e n t o i c e t w i t h thse a
of the others, a n d rather t h e n put i t t o a vote I
rov:
will
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Federal Reserve Bank of St. Louis
181
vithcrew Lt.
W
e c a n accomplish t h e same thing b y heving
the N a t r o n e l B a n k o f t h s R e p u b l i c
i n Uhic®go
funds i n the Helene Bank f o r Yegen Bros?
“r
“
>
t i l l uire t o
Bros.
egen
brench o u t there.
T h i
é e benk i n helene t o pay t o the
i s @ lot wore telesrans, b u t w e
will l e t i t g o i n that way.
Governor veikins:
T h i s matter i s left,
fer 3 s sowe o f u s s r e concerned,
i n a n anbiguous situation.
“8 were unéer t h e impression thet cefinite action w e
taken a t t h e l e s t c o n v e r e n c s w h i c h > r e c l u c e a t r a x
from non-inember clearing banks,
ire Harrison: I
sxi heving thst looked u p send will
be able t o recort o n i t i n sbout f i v e minutes.
Governor u«eLougeal: 4 e c o i d i n g t o «3307, Fcbruary
1922, wire trensfer o f runcs
T h e #ecerel Reserve
Board, woon reco.usndcation o f the redural Keserve Leased
sire Gouwuittes hese adopted t h e following rules e n e resuletions w i t h regera
>
P e c e r s
Il, T e l e g r a p h i c tronefers <
d
; banks.
be geceptsd i r o n
end peid t o member banks only. H o w s v e r , e s s o u s o f the
Federesl seserve Senks sre und: robligations t o secept
telesraphic trensfers f r o m non-.usmber clesring banks
may f o r the present continue t o niske such trensfers.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
leé2
Thot wes ths sction a f this co:mittes, spproved b y
the Conference, e n d thet i s from the Reserve Boserd.
The Chairman:
u r , “errison i s having t h e record
looked u p o n that point.
T h a t w e s the ection o f t h e Boara
Governor Fancher.
end t h e a c t i o n o 1 t h e C o n f e r e n c e &
The Chair...an:
yosr 820.
T h a t w e s the ection o f the Board o n
the report o f the Leased . i r e Coinittee, w h i c h w a s acted
on i n Oétober,19¢1, I
think.
I t may have b e e n 38s long a g o 4 s
Governor i.cvougel:;
that thet t h e m a t t e r w e g setec on, b u t here i s the action.
The Cheiruan: U n d s r the tsrius of thet ruling sovernor Young i s entitled t o extend these facilities t o this
nonesiiember clearing r i m .
Our n e x t topic, u n d e r Overstions,
i s E,
@ = Use o f test .ords b y Tre-sury ~spertnent o n t e l e g r a p h i c transfers.
That i s subuitted b y s o n Francisco f o r ciseussion.
Governor Calkins:
T h s t i s a longs story, t h e substance
of which i s that the Treas r e f u s e s t o use transfers
which e n a b l e u s t o identify,
yirs
t
s that t h e
o inrori u
§ properly suthorized, a n d secon: t o enable u s
to v e r i f y t h s c o r r e c t n e s s
o f t h e siiount.
w
e have h a d
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Federal Reserve Bank of St. Louis
185
the n e t result
considerable correspondenes a b o u t it, w i t h
that
r s a s u r y coes n o t use s u c h
The Chairiusn:
T h e y uge t h e n with us.
Governor Calkins: i
om afreid I will have t o read
whole story, w h i c h i s a s follows.
Dsvertinent h a s s u p zlisad e a c h o r i c e
or
Reserve Benk o f sen rancisco with lists o f
t h e voepsrti.ent i n maktest words, w h i c h o r e t o b e u s e d b y
ing telegraphic trensirers t o this bank.
T h e : s test vordas
i n which they spare used b y the Depertinent i n the ozGer
pear o n the lists,
m a a 0 not i n sny w a y sesist u s i n
verifying t h s a m o u n t s
o f t h e trensfer.
m n e i r only pur-
t r a n s f e r s arse
sesms t o b e t o i n f o r m u s t h a t c e r t e i n
authorized.
AS w e have received n o derinite instructions
worus 99.
which trenzvers shoulc havs test
which w e a r e
cetermined t h a t f o r e s c h t r e n s f e r ‘ i n
t h s 3:.ount t o
fro. eveileble information t o verify
applied.
trensferreé, »¢6 should have 3 test jorc
I t
vevartient t o sunoly
the present practice o f t h e Tressury
“ x c e p t trensisrs Siuiler
test vords o n all such trensfers,
to the sollowing:
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Federal Reserve Bank of St. Louis
154
“Under d a t e o f A p r i l 1 , f o r p r o c c s d s
o i renittences
of Nationsl sncé e d s R e s e r v e currency forwarded
to this ostice b y benks i n your district, y o u have
been crecited b y t h e Treasurer o f the United states,
88 a trensfisr o f funds:
First Nationel Bank, Blankville
second Nstionel Bank, B
The banks mentioned i n these wires m e y b s sither icuber o r
non-i.ember banks.
I
n the case o f 9
either c r e d i t t h e i r s c c o u n t
uwonbsr benk,
o r s e n d currency, a n a ,
cease O F 2 nOnmicniber bank, w e ¢ 3
we
i n the
Geshier's check o r
currency.
Under cates o f warch 2 4 a n d A n
the Treasurer t o supply test words o n subse .uent wires o f
this nsture, b u t received n o reply t o our telégraius,
A s
we continued t o receive these transirsers without t e s t words,
on April 2 1 w e requested t h e federal Keserve Board t o iiske
arrangements w i t h t h e T r e s s u r e r
t o s u p i l y t e s t words,
but
were inyormed b y the Board that t h e Tressurer d i c “not care
to use test words”
o n this type o r telegran.
It i s the policy o f 911 Pecers] Ksserve Banks t o rer
o
s
quire test words o n telegraphic transisrs f r o m other Pecersi
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Benks anc Sroenches,
inform. s
u thet
Suthorized, o n c ,
enéble
u s t o v e r i f y t h e correctness ¥
Co]
i is,
That t h e T r e s s u r e r
s
o7
on all
a tslesrephic
r
trensrers
o
w nece
account, a n d thet h e substitute f o r test .orms n o w i n use
8 syste. o f test v o r d s reseubling those usec betwsen
Federal Ressrve Benks, which woul: not only infor. us that
the tron:yvers were duly suthorized, b u t slso ensble
u s to
verify t h e awount t o b e trenviersed.
The Chairnen:
T i a n t h e point i s thet t h e test
sre n o t sufficient i n their signi
they are not used o n 211 telesranis shere they shouls
Is i t n o t » r o p e r
to
committees a n d o s k t h e m t o work w o © suitoble system o r
test words f o r t h s whole system?
Governor Cslkinge i
Governor Young:
woulé s o tiove, nr. Chairman.
I w i l l sscona thet.
(The notion, Leaving b e c n culy xeconced,
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Federal Reserve Bank of St. Louis
The Chairman:
T h e n our next topic i s « 7 ,
National
Bank
as been <lisposed o f b y t h e easpointment o f a c o i
ana I will a s k Governor Norris i f he hes were a n
6p. Ointment v i t h t h s Commtroller?
Governor Norris: I
hevs n o t w a c e m
adpointi.ent y e t ,
but will attempt t o a o s o
The Chairman:
Pa
O u r next topic uncer oserstions i s
V g rying intsrprstations o r section g
ex
-
teken
s t Governors! Confé>ences,
This i s eubmitted b y st* Louis f o r discussion.
Governor B i z eo&
s:
T h i s tocoie r e s u l t s r o i .
written t o ir, H a r r i s o n undsr. d a t e o f
wae brought u p b y our cecuty governor hers, t h o says.
“It occasionally happens t h e t t h e ection teken b y the
Governors i s not subi: >
gan.e interpretstion b y sll
For instance.
Was :
A t the last Confsere
V e L e r v e Banks ciscontinue
to a b s o r b t h e c o s t o f t e l e z r a p h i n g p a y u e n t
o r non-deyien
of collection ‘ites a. of dJuly.1, t9e2.* S o . . e of the heserve Banks interpreted t h i s a s including privete i r e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
187
uiGscages, 3 n c b e r s epnerently h a v e fisurec t
¢id not contsnplate t h e psying o f cherges betwsen
Banks b u t e:-mlisd o m l y t o i n t r a - c i s t r i c t t r a n s a c t i o n s .
It wes slso ‘voted thst 9
service charges b e a c
ell uncollectsda itéig returned without srotsst, e n d
this service charge b e retsinsc b y the nessrve dank."
several o f the i.essrve Banks,
¢ s the rssult o f this action,
are cherging b a c k the service
r xeserve
y
shile others a r e not, t h e letter cerrying o u t 4
previous section o s 8 Lormer conre. nes, .eprein 1 % 7 s
egreec. t h e t s u c h clargses, w h i l e s o p l y i n g
t o ..<cibsr banks,
would n o t b e s c e betwson deserve Banks.
I merely mention thece itc.s t o illustrate t h s
ror
m e o g e n e y w h i e h t i n ororptly c l : e e n suthoritative
intersretction o f the ection contaplatea.
I i sore s u c h
sgency can be ccveloped i t will tenc t o uniior.ity and
evolcd unneces:: >
Gorresponcenes
Reservés s e n k s o v e r ,
s n a controversies b s t i s e n
i i h é ind,Ority o f instances, t r i v i a l
matterc,
I an. brincing this metter t o your attention, belisvine that y o u are t h e logical serson t o press g a i . e @ t o the
next Governors! Conversnece."
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Federal Reserve Bank of St. Louis
vould suz.¢st that t h i s letter,
The Chairrien. I
end t h e m e t t r
raised b y G o v e r n o r Bigss,
b e rererrea t o
Couwmittee o n Collection.
Governor ..cDougal: B e f o r e scting o n thet 1 woulda
Couwittee's report
covers this msetter.
t
Governor Biggs
i
e this wes written the
u
Leased Jirs Revort h e d not cone in.
B u t i t coes n o t c o v e r t h e s
Governor ifencher,
t h e 1 5 c é n t charge.
charge o n collections,
T h e 1 5 cent charg:
Governor .cbLougel:
motter,
T h e w h o l e t h i n g i s & guestion o f
Governor Biegs:,
uniformity, s o that all of us woulc c o the sé..e thing.
“11 of us have not been doing it.
The Cheirien:
charge i s disposed
I t i s understooa t h a t t h i s 15-sent
s
a
s
e
c
a d i r e Co.adittee’s r e
TiOGuo
port?
Governor Hancher:
N o ;
i t i s not c o v e r e c in’ the r e -
port o f t h e L e s s e d w i r e Co... ittee.
Governor iicbougal:
N o ; thet would b e the Collection
Gonmittee, b u t i t is ° settled matter.
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Federal Reserve Bank of St. Louis
189
s
Governor Biggs: I
think i t is too, but i t hasn't
en p u t i n oractice,
Governor s.clougeals :
@ charge i t sccording t o ths
of t h e conicrence,
Governor F e n c h e r ?
A n d k e e p it.
Governor ..cvougsl; Y e s .
Governor B i g s :
u r , Garrison i s fenilier «with that
matter.
The Chsirian: I
6 m very sure
Whet Gisposition shall w e meke o f t h i s netter?
Governor Biggs: I
think i t i s coverec i n t h e revort,
snd thet i s all there i s t o it.
Governor s e s y : I
would l i k e
e s k i f the matter
could not b e coverec b y Governor Biggs teking i t u p with
ths bank a n d calling attention t o the sction o f the Conference---
Governor Biggs:
~a
r
a
I
i
t .ws taken u p with ure “arrison
y
o
r *
.
4
f
i
o
m
b
d =
.
extenc:d corresponaencs w e s carkied o n with u r “ a r r i -
ur, Kerrison: I
heve hadeguits s
bit o f correspona-
ence w i t h v o u r d i f i e r e n t FPedersl R e s e r v e B a n k s
o n vérying
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
190
o f t h e leased wire cofuittse's report a n d
interpretations
a t t h s l e s t confsrence.
the u n i f o r m s e r v i c e r e c o u m s n d a t i o n
some o f
R e s e r v e banits v e l t t h s t t h e v o t e n o t t o e b s o r d
certeain ex:
i
n wolelue t e l e s r a p h i c savices e s t o peymeant
ment o r non=peyiient o f collecti naof/ that they nust nocesseril
teke theedvico o f f t h e leased wires a n c put t h e m onto sires
where thsy could make 8 charge.
T h e greeter mejority
felt that,as the Leased -ire Couuttee reported, i t was
intended thet t h e
n e O n a
t s k e t h e naturel course o v e r
the leased wire, a n g that t h e Reserve bani woulc n o t absorb
the cost o f the telesraphic trensifer over t n e couuerciel
wire f r o m the e d e r a l Asserve H e n k terminel t o the menjber
bank. I
think this is fully covered b y Governor «.cbougal's
report,
Governor ucDougal:
j i @ made a
special e f f o r t t o
henéle that matter i n such » menner thet there woulu b e n o
further misuncerstanding,. I
think w e wrote you ebout it.
tire Harrison: G o v e r n o r Biggs sugsested this topic
prior t o the report b y the Leased wire Fo.i.3
6 , a n d that
report coming i n s u b equently, clsposes o i Governor Biggs’
topic.
Governor fencher:
T h e 1 5 cent w e t t e r i s c o v e r s d
in
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ths Collection Cov.ittee's report o n Ha;
fully covered.
c h s l l v e consicser t h e topic a s cealt
The Chsir.en:
with b y t h e Couwilttee r e p o r t w h i c h h e s b e c n s u o p t e d b y
the Gombrence, Governor Biggs?
Governor Biggs:
The Chairtian:
T e t
i s nerfectLy &
i e then cone t o Topic h
una .r opsra-
tions.
Progre.s Oo: work o f General Couwittes o f Twelve o n Economy a n d ifrficienoy,
This topic was sugested b y New York I
think vossibly
pecause sons juestion w a s raizeu b y to.8 o f our m e n 3 s t o
whether t h e s e c o n m s r i s o n s
o f runction:
veluoble s t thsy were inteonusd t o be. I
S x sSnses w e r e o s
hac a very thor-
ough ecenination iwsce, s o f a r 2 s was possible,
morts o f this coiittee, end t a .
o f the re-
Sonuwittse visitec Boston,
Philadelphia a n d Chicas.--- e n d I think cerhepe Ulevelend--to l o o k i n t o t h e c i s p a r i t i e s
i n cost o f t h e verious cepart-
they hove inads 9 very voluminous report h i c h ,
involvss l i t t l e shifting o f ground b y
of o u r m e n frot. t h e grounac w h i c h t h e y h a c p r e v i o u s l y
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Federal Reserve Bank of St. Louis
192
a n d which matter I
taken,
thought p o s s i b l y w a s s o r t h y t o
l L had this report ore-
be consi asred b y the Governors.
perec. f o r Gistribution,
Crener,
b u t e i t e r t a l k i n g i t o v e r w i t h ur.
t o whom I sent t h e report first, h e thought t h a t i t
would b e cust ae. well not t o cistribute i t , a n e thet mossibly i t i s a little criticel o f -rogress t h a t i s being
meade, e n d those fellows 9
not do eny good. I
v i
n
he ve also i
e very hard o n a i t would
e
copy to Dr, .iller,
Chairmen of the Boerd's Conmittee.
into this report s s fully 4 s w e
heve done w e s t o s c c o m l i s h sonething t h a t I
co not think
is being accomplishe., s n d I sm very frank t o stats here
thet o u r representetive i s j u e t
else.
Now, t h e Bosrd's conmittes t o a s l w i t h these natters,
the
was sopointed imusdlately orior tof/October, 1921, Conference
of Governors, a n c 3 s you will recall w e hea eet u p s
scheme f o r the organizetion o f 9
committe o f twelve n
to deal with these matters, a n d i t seemed cesirable that
they should d o nothing i n view o r the Board's Couinittee
being appointed.
my concern ebout t h s progress arisé
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Federal Reserve Bank of St. Louis
193
it i s very graephicslly illustrated b y uhst w e heve eccoiiplished
in a
T h e s e coanuw.ittees
seriod o f t h i r t e e n ionths.
were a p p o i n t e d o v e r a
y e a r 29go a n d t h e o n l y r e a l a c c o n p l i s h -
ment, beyond these coupsrative reports,
o f which w e have
now receivec two, h a s been shat ure Crauwer workec o u t i n
connection w i t h o u r ridelity insursnce, s n a 1
a n frenk t o
x ress m y f e s l i n g x o f cdissatisyaction
e
t h s t iusé a r e
ing lester,
N o doubt @
great csal i s being cone
way o f studies, e n d ir’ g i n e p o i n t o f visw i s thet nothing c e n b e s c c o m l i s h e d until these bases o f coimpsrison o f
costs i n the Gifzverent banks a r e sorkec o u t vretty fully;
but w e are spending 6
comparative r e p o r t s
good deal o f money i n getting u p
w h i c h , I
illumineting e s t o cirferences,
i , a r s n o t highly
sii ef:
t
t h e y s r e not r e d u c e d o
unit costs a n d item costs, a n d I would Like t o
mece towards orgenization limroveient
i n the system
toward 61ficiency s n c econoiiy.
Governor iencher:
csne i n t o opsretion,
The Chairman:
T h i s Coumittes
a i d it?
N o .
Governor Penchseré
T h e appointing
of the Bosrd stepped it, cin i t
o 7 c o n d u i t tee
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Federal Reserve Bank of St. Louis
194
The Chairman: I
vould n o t s s y thet, beceuse I
9 letter f r o m Dr. miller recently--- I
to all the neserve Banks;
had
lnegine i t w e s sent
i n fact I know i t war--- inai-
cating that t h e Board's Committees n o w vanted thet body o f
twelve m e m t o function.
Governor incDougal:
T h e body o f twelve msn held ons
meeting i n Chicago.
The Chsiriian:
T h e r e w a s 3 delay o f rive o r six
months before t h e y mst.
T h e agseting w e s held last April,
wesn't it?
Governor i.cbougel:
T h a t uwesting wes held i n april.
Governor Seay: T
think I
e m right i n ssying thet t h e
Committee h a s accomplished something.
B y the roru.ation o f
these conmitteee i n the separate reserve benks~-The Chairnan:
E x c u s e m e f o r interrupting you, b u t
it w e s reported a t the meeting, w h e n this coumittee o f
twelve w e s Ciscussed 3 year 9go, t h a t e v e r y reserve b e n k
slready h a c a committee, e v e r y o n e o f them, before this
first move w a s taken.
Governor Seay: I
of t h e C o n m i t t e e
mean b y that thet t h e formation
o f the Board has g i v e n impetus
t o the
work inside o f the banks, a n d véluable work i s being done
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Federal Reserve Bank of St. Louis
i n s i a u s
forth,
3
a n e
and
a
t J
»CNneon
gs 2
O L
S A L
S Y
g i v i n g of
sit ofths knowls<ge o f con.itions i n ths other
not t h i n k nuch hes besn done i n that resnect; b u t e s t o
giving litpetus t o the tiork o f the eificieney a n c sconomy
€ i n the banks, I
The Chairman,
@long, I
L L ,
think thet much has been accoi-
b
e
e
n sort o f kicking
will ecmit that.
Governor ..cvougal: I
petiant---
and I
think i f w e ers
think w e h e v s b
e
etisnt--n
% but I
think
iv w e bear with t h e n 9 little longsr thst y o u will find
thet t h i s e r f i c i e n e y c o . m i t t e e
o f t h e Board, urcon w h i c h
they have nained are il11s e n d ur, Graner a n d .r. Korris,
will produce something which will b e v e r y
very helpful t o the t w
s e r v e b a n k s i n tiaking
perison o f t h e i r expensés.
w
& have n o t b e e n a b l e
it i n the past bscause w e undertook,
ley down 8 conparison o f expenses o f onsreting cenartiusc
when,
@8 a
netter o r fect, t h a t c e p e r t m e n t
d i d not mean the
seine Gepartiient neant w i t h you, «1.
Cheiruan,
o r some other bank, I
co not know #hat period
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Federal Reserve Bank of St. Louis
198
or time this last report wos intsnusa t o cover, but i t
Was 8 month o r two ionths,
The Cheirnien:
T h e y s r e wohnthly reports.
Governor ..cvouge:
L
l i
or t u o months
o r sovething o f t h a t sort.
te not belleve a ~mied o f
i s surricient
t o aecom:lish t h e purpose
which t h e committes tess organized
I
l belisve there
ére sone inconsistsneies s n o w n i n this
sgree v i t h y o u o n thst.
aver, Y r o m t h a t resort,
consistencies u e ars going t o .se i f we cannot reconcile
them anc work with t h e co.mittee t o that extent.
The C h e iriisn:
this: T h s t I
G o v e r n o r ..cvousel,
m y point
i s really
Go not believe t h e tuelvs
benks c a n teke u p t h e sntire oseration a
et one tine b y
end introcuce a n y economy i n orgenizetion o r uethod.
notion i s that thse system a s 3 whole h a s g o t t o c o whet
sech one o f y o u gentleiien have really b e e n Going,
gather f r o m m y telks,
a s lL
s n d t h e t i s t s k e u p o n e departinent
at a time, s t u d y it, a n d make i t a complete stucy, instead
of g e t t i n g o u t ¢
c o n r a t i v e a n a l y s i s w h i c h l s incoinletsa,
-@Gly, a n d tulsleadins i n sone respects,
w b cause a f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Lo
agifverences i n organization. I
sould like t o see then
toke u p oné function s t one time
m a c o i t thoroughly a n d
make their rsconmencations f o r changes i n methocs s n d
think w e woulc get results
on, a n d i f they d i c that I
T h i e i s o n inmense umcerteking r o r busy
nuch faster,
wien, t o rearrange,
b y s formule,
if
eccounts o f a l l thsss bsonks
It cannot b e cone, zserhsio, boceuse t h e organizations v a r y
so grestly t h e t i t makes i t a n sliost impossible task.
T h e L a s t 7 2 0 f r o u . the L i v i c L e n c y
Governor wesy?:
end isconomy Comittee o f the Bosrc, which wes i n itself
an enslysis, r e q i r e d
a n analysis «
t h e s a r t o f thse sederal
serve b a n k i n ord:r t o get a t ths substsnce a n c gis
r t
requirea a great ccal o r study e n d work i n o d e r
to resolve t h e thing
i
t
s cin; s l e n . e n t s
I t was
Giffvicult t o tell whet the result wes iron that report.
You had t o analyze i t yourssli.
looksd over i t a n d i t left m e con-
The Chairnen: I
pletely mystifisc s s t o shat i t sxposed
fornstion,
go t o ths
and I
s
e
askec t h e s e tien, i n t e l l i g e n t f e l l o w s
r
v
t o
e banks a n d l o o k into it, a n d they
report t o m e that along this l i n e t h e y e r e going t o spsnd
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Federal Reserve Bank of St. Louis
198
quite 6
lot o f money e n d thet t h s real onerating results
will b e long asferred,
the n s t t e r
t o o u r connite
iree t o c o n r e s s t h e t t h e y
Le now o f thst l a s t resort.
The Chsiriuan: I
em 2
Littls
Sny suggestion. I
think p o s s i b l y
to Gittribute t h e s e
r e 90rte,
i t woulc. I
wiich iuicht b e con.truse a s
critical o f the s o r k o r t h e coruittes. I
co not want t o
se3 the New York Bank critici:sa, b u t I went t o
helping.
Governor w26ey; I
believe t h e t G o v e r n o r -.cvousel i s
, t h e t sousthing
t
hof velue g
h a s been iaccomumlished,
F
snd
o
that a
Little m o r e netisnee w i l l G e v e l o p s o u e t h i n g o f
value.
Governor .cVougel: I
gfsel conridsnt thet somsthing
Will develop with ur. ‘ills end ur. Graner o n this co.iittee.
T h e y work very hard,
A S Governor strong h e s said
they have worked v e r y hard s n d they have
tine t o it, m d I
think their presence o n
strengthens t h e Board couuittes v e r y such,
we Will l e t t h e m elione that t h e y e r e going t o get w h a t w e
t; t h a t is, e
de =
s
and a c c o i p a r i s o n o f
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Federal Reserve Bank of St. Louis
LS9
the expensss involved i n operating t h e various units,
or whatever y o u want t o call the:, i n each o f the reserve
Benks. I
have a fs¢ 2
thet i t will come out ell right.
The Chsirian: a
u s get that shat have w e eccom-
plished?
governor i:cDougal:
v
e have acconplishsa a
eg
when w e get that, because e f shown i n this report, secoraing t o comoillstions meade, t h e Chicsgo Bank, relatively
a gavoreble showing i n sone Gecartuents,
but i n others
i t coss
T
h
e
r
s
i s o n e cGensrtirent I
have
in mind vhers w e were entirely out of line, a n a “ither
thet report i s sor some rseson inconsistent, o r
v h e n they g e t eround t o the
have g o t so.ething t o co.
point shere they c e n finish t h e report
ite c o m p a r i s o n o v e r 4 & longs
to set souething,
think thet will b e out i n 6
Governor Norris: I
weeks,
Governor Bailey;
‘
oped f r o m t h e comparisons,
6 is one thing thst has d¢vela n d that i s t o make t h e néads
of the different d e artments
i n the banks t r y t o make
their showing a s favorable conmered t o the showing o f
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Federal Reserve Bank of St. Louis
I think s o n e
ic o f t h e a u c i t i n g d e v e r t m e n t
i t showed
line, but o n an enelysis based
wucon t h a t t h e o t h e r b e n k s
s r s doling I
our suciting cenertwent d i c not have mors
s wholes l o t o t o r k t h e t
.€@ have s
6 0 ; thet. i s
.o6s n o t s h o w u p i n t h e rootings.
lot o i bonds g o r seve keeping t h a t w e heve t o
eucit e n d w e h a v e a
lot o f Sxcess
not show u n i n the footings, t h i c h i
the e u a i t i n s ceparti.snt.,
Governor weey:
Governor Bsilsy:
. @ 6 0 those gaue things i n our
B u t t h e trouble w i t h i t
it does n o t shoyv u p i n the footings s t all.
lot o f sxcess colletsreal a n d w e h e v é fiillions o f collsrs
worth o f bonds l e r t t h e r e f o r s a f e k s e n i n s f r o m 3 1 1 o v e r
the district,
N o w , beceuse o f t h e rect t h a t s l l those
things c o not s h o w i n t h e footings,
w e are spss rently o u t
of line.
Governor Fancher: I
fsel about t h i s
Governor i.cDougel, t h a t perhaps i n tlne--- although t
has b e e n ©
good d e a l o f tine spent,
o f course since this
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Federal Reserve Bank of St. Louis
watter wes gotten under way--- but I believe
a i . ture that h e i s right. I
Governor Bsiley:
ew soirit d o w n there o f trying t o
other gellozs a n a shou t i t h e y a r e a s
h a v e chergec t h e head o f
or them.
aecartnent w i t h the responsibility o f siaking t h e t
and thie evficiency couuittee, w h i c h w s a p ointke a g o i n our bank, l e going t o get gooc r e -
Governor
.€
a
e y o u eliminsting s n y e m l o y s e
r
by it?
Governor Bolley:
i
Governor «ellborn:
Governor Bailey:
7
t i s having t h e t efrect w i t h
6 bunched
hed m o r e d s partient
bunched s o n e 0 )
Governor s6ay:
T h e icpression i s getting abroed
that the wed: ral Keserve Banks are not doing @ 8 tmcn bUslnese s s they wore.
Governor Bailey:
i e are not doing a t much reais
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Federal Reserve Bank of St. Louis
ing, b u t w e
Governor S e s y
T h e t is
wWigintor:etion hes been dGisse.inatea b y
one m o i n t
o n which
their sreument, which l s founced i n i g
snd thet i s thet t h e volume i n collars a n d crnt
be s & groat n o w e s
Governor Bailey:
a
t ist
T
éisecounting opverstions has 56en m o r e
h
s dscerease i n
a n covered b y in-
collection Cenartient, a n d the busisiusller number
Py
contucted w i t h e n spprsciably
Governor .sliborn:
+ e ~ {int Ghat O u r
becoiwe more efficient through prect
slish more work and are beter trainsd.
The Cheirian;
t o the metter o r ¢éconouy,
J i t h regard
15
are Cesling i n vretty lerge visures.
the N e w York Bank this year e r e averaging
less than thsy d i d last year.
I f you eprly thet s a n e rete
of saving t o the entire system i t i s 3
gui of money.
banks
Y e ere led to beliscve that other
heve p o s s i b l y b e t t s r systems.
f o r inctence,
w e were t o l ¢
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Federal Reserve Bank of St. Louis
203
that C h i c a g o h a d ¢ ;
s y s t e m
L t s ciscounting ceparte
nent t h a n we h e d 6
vant t o find out where those better
systews a r e s n d g o o u t e n d c o p y theu, b u t I
co not s e s t n e
chence o r ocportunity arising t o c o thet s s the result o f
these coilosrisons o f expenses
O
f course i t msy cou:.¢
in tine,
will thet n o t core é s s
result
of your own.study i n your different cenertments b y your
own conmittee?
The Cheirinsn:
sten economy.
.
Y e s , but v e
@ are getting
all doubtless gatting i n the other benks, b u t w e
get compsrstive gstatésients, colipsrisons @
orgen-
izations a n d . o worth, a n d this committes h s s n o t y s t
sd a n o o p o r t u n i t y r o r u s t o c o
Governor valkins.
pettinzg 1 results,
<
Qo +
Y o u r w es s t i o n i s not
b u t whether:
w eel
sslble e n d getting t h a n e x p sditiously.
Governor Calkins:
s
n a t I
osn s a y i n regard t o t h e
w
o f thse Coimittee o n Efiiciency a n d Leonoiy i s soust
r
o
p
e
‘4
r
a
thing like this, t h a t t h e y have b e e n o f very grest value
e
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Federal Reserve Bank of St. Louis
ie gee ao hy Us, b u t t h e y mignt heve b e e n o f very imch
hed been rolloved,
the qiestion o f shethsr
varistion o r s o m e a d é i t i o n
t o t h e procecurs t h e t h e s
been followec. shoulc n o t b e acopted,
i
n the isirst s.lsce
was perisctly evicent thet tlers coule be n o conper.son
until w e had reached s bessis for coiupsrison,
I t is
cent now, 8 s y o u say,
@ basis a
conmsrison, b u t have
of commerison o n eny single 1té:.
best m e s n s t h e t c o u l c b e scopts¢
W
y Opinion i s that the
a t t h e oress
i
e Yor
coungrison w0uld b e according t o the
ggestion, i u e c
seing s n d s t u d y i n g
this coumlttse,
lacking a n d t o dio
h
e duality o x t h e ¢c¢ou-
DaGieone.
Just s s s n illustration o f what I
heve i n minc,
gentlemen, t h e least revort shows, u n a e r t h e head o f filing,
which includes the filing o f corresponcence S n a recorius,
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Federal Reserve Bank of St. Louis
205
thet san “ ancisco omploys 1 9 employes Chicago 19, “hilslo, Cleveland 14, a n d Boston 3 . T h e r e ils no
'
sis for conesris 3
gousthing i s obviously
It slso shows under t h e heed o f Report a
eciscounts,
s
e
loans
n #rancisco hes 72 suployss
9,188 units, N e w York 4 9 employss, reporting 4
roporting 20,399 units.
SUrG.
3
1 ¢
n o basis f o r contoarison o n a
Lonething wrong ebout it.
Nov, t h e conclusion
a v e reached réegerding this
motter i s something L i k e thie, t h e t t h e report c a n b e
grest value
form menner, thich they are notat present
vie ere struggling 2 i t e e n a t h e q e s t i o n i s how c a n
reech uniformity moat expeditiously.
T h i s will take c o n
siderable work o n ths rert o f the Board's conmittse.
5na
ere stuciedby the Bosré's comuilttee, sui.:sstlons
to the #ecerel Re.erve B e n k s t o m a b l e thsi: t o
nerforiu certain operstions m o . e eiviciently- I
bélieve
thet e s c h Fecerel Heserve B a n k should encsavor t o have
its reports c o m e re favorably w i t h t h e reports o r other
Fedsral Heserve Banks.
I f those thinss a r e n o t done t h e
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Federal Reserve Bank of St. Louis
value o f t h e report
i s lergely diminished a n d
pens
by which progre:s can be
,
Drogress based upon ths work sliready cone b y the
e
u
6iilciency co.niittee,
e
M
bay oy
i s a stucy o f the reports o f the
mittee b y the responsible opersting men i n the twelve
#e. ere] r e x b e n k s i n conference.
Governor sesy;
T h s t conclusion s g resched, I
au.
quite sure, a t the only coniersncs t h e t h s s taken place
between t h e répresentstives o f this couiittee e n d t h e
Board. T h e r e has been only o n e s u c h conierenes, e n d unless
they e r e pmursusd, f a n . sure v e con't srrive s t eny value
eéble result; b u t I teke i t vor granted that they will
be pursued,
Che irnien: i
have a reconiicncetion t o nske, i f
Son.cbocy slsé will vote o n it, and that i s that Governor
Calkins! reconmcocation t h a t t h e
into conisrence should b e put into sviect.
Gowernor ..cvougal: I
mve n o doubt thet that will
done without a n y action b y thi. C nference, w h e n thst c o
mittse h a s gons f a r enough t o have devised some olan b y
which t h e y will b e sble t o maks a c c u r a t e cmipsrisons,
b e
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Federal Reserve Bank of St. Louis
csuse n e t u r s l l y t h e conmittses s o u l a c o n e t o g
et lesst I
assuie t h e y vould.
Governor seays I n a s m u c h , Governor :..c¥ougsl, 3 8 &
were rather esutionsd that t h e Bosrd w e s t o take t h e initiative i n thess matters,
9 s I intzrsreted it, would i t
not b e well f o r u s t o g o o n récora 3 8 expres 2
,
opin-
ion thet t h e rspresentetives o f the eificléncy commit tee
in each e c e r e l Keserve B a n k Mould b e colled together ¢ s
vrequently e s thought s i r a b l e b y the erviciency .conmittes o f the Bosrd?
Governor Usikins;
T h e slternstive w e s that t h e work
vould b e gaddled upon some incivicual o n the efi iciency
conulttes o f t h e Board, s n d that ha: been t h s result ©
far,
The Chelrian: I
guess 22,
Governor valkins:?
T h e t
w e t h e elternetive, t h a t or.
Cramer s h o u l d G o l e r g e l y t h e w o r k rwecessary t o b r i n g
this thing t o 6
uniform basis o f comparison.
Governor Norris: I
tion.
h
can partially snswer thet -ues-
e comuit tee h a s e n d :avored t o m a k e c o m p s r i s o n
on t h e f i g u r e s
s s reported
b y t h s banks, c o v s r i n g t h e w o r k
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Federal Reserve Bank of St. Louis
a
by caeoertments.
A
s h a g already b e e n statec h e r e i t
is p e r i s e t l y e v i c . n t t h e t t h s d e p e r t i e n t s v e r i e d i n t h e
various benks a n d thet i t sould b e impossible t o get anymeeting wes t h e n held o x the
where o n that besis. &
suzillary coumittse o f twelve a t the Chicego Bonk, a t
thich mr. Crsner, w h o i s supposec t o he
e e much knovw-
ledge o n this subject o s anyons ¢1s¢ connected with t h e
tiorough cost
system, ststed thet t h e Chicego b a n k ha. 8
ecounting & system,
3
e n d submitted
of t h e o t h e r < l s v e n b e n k s 6
t o the 1
¢ivision
pae s e n t e t i v e s
o f t h e work
units o n which the banks a r s nov reporting.
I
t was bo-
lievec thet thet would e t v o r d 9 fair basis o f comperison.
The r e p o r t s c s u e i n i o r t h e i o
f
a
d
6 i n g
reports t h a t t h e b a n k s h e d iusce u n
escery v o r t h e m t o p i c k o u t i t e . s
Cue yo wee o e s h
“ivision according t o units,
sone m i s t e k s s
instructions,
still a i g not sfftord a
i t was t
thet that
fair basis o f compsrison e n a t h e
has been some correspondence w i t h the bank which s p arentaié n o t u n c e r s t e n d
soe
o f t h e points w h e n t h e y mace
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Federal Reserve Bank of St. Louis
their first J u l y report.
f r o m the
Now, t h e next report thet Will come o u t
couuittee will b e not a
monthly report, b u t 3 juarterly
a n a .uguet,
report f o r the three imonthe o f guns, d u l y
revision a n d ¢ x those r e p o r t s b e i n g m a u e u p a f t e r s o u e
thet
dlenstion o f the duly figures, w i t h t h e belier
in
auerterly report, w i t h the expsrience géined
»
the »relivinery J u l y report, w i l l afford
.
Ia
o
i
r
Tn h s
t s rsport,
besis o f c o n
w i l l b o out within a
~oue,
sup
p
Ps
anc. o f this jonth.
Tre Cheiruan:
Y o u s e y duly, August a n c september?
Governor Norris:
Yes.
I t nay b e thet e v e n
this consolidetion w e won't get anywhers, thet
not b s 3 report t h a t will b e userul.
i
t is a
cult thing to knov how to get st this matter.
T h e coli
knows how,
mittee i s getting e t i t t h e best w a y i t
can bs
qheat gould s e s i to me the best w a y that
I ssy,
or thought of, e n d i n a form which, e s
anprovec.
I a n free
b y t h e representstives
o f a l l t h e t w e l v e benks.
t o sey that o u r representetive,
ine of the Auxiliary Comuittes of “we
a t thet neet-
w e g not very
Qo
thinking
enthusiastic about t h e plan that nas edoptec,
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Federal Reserve Bank of St. Louis
210
thet i t wes unneccgserily deteiled i n form, s n d that
for: that v o u l d b
e useful Y o r ¢ manuvacturesteblishnicnt t h e t h e a t o c o u n t c o s t s c a r
thet i t i n v o l v e d
a n unnécésssary Si.ount o f x e -
@llocstion o f items i o r t h e F e e r e l n e s e r v e S e n k s
t o nieke.
#@ Galculeted that i t cost u s w v e r s l thousend collars t o
wake u p our xirst report o n that n e s basis.
I t is
it i s exnensive, s n d I think i t i s too early t o
DS. I
think i t uncoubtec-
ly h a s
in the psycologzical exrect i t has h a d
Sunior s n d s u b o r c i n s t e
Bsnks
orl
o n n o t i c e t h a t t h e y v e r s b e i n g w a t c h e d s n d coupared,
ong. it p u t them on their mettb to weke a good coupsrison
with other banks,
Now, a
cour.e the cowiulttse coss not conts.clete
jiplyei confining i t self t o weking 8
~% risons
i n figures
I
isport o: thes
t vrozroses, a f t e r i t d o e s g e t ,
if i t does, @ co. parable besis, t o then not only
the sttention o f any benk whoee costs seem t o bs sxcssslvs
in eny varticuler unit, b u t elso t o give t h e eleven other
banks t h e b e n e f i t
o f t h e model o f a n y o n e bank that i s
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Federal Reserve Bank of St. Louis
iebk
doing perticulerly w e l l i n cspsortiment. i
co not know,
of course, h o w i t i s soing t o work out, b u t i n ths saminisr e founda t h e t e e c h o n e
tretion o f t h e f a r . “loen syste.
ox the tuslve banks stertea o f f o n methods o f its o w n and
m
we sot t h e best k i n a o f r e &
e
n
d econor.ies
ono.
266 3
end
2
b e s e r i o r m i e c 6 5 c h function i n the
t h j i t y i n g t h e zleven other banks o f the
uid i t i st. L
g
not s e e w h y souscthing
e
n
.
do
e sort should n o t b e s o r e
éa out i n this
The Cheinr.:
i
]
8
: i n mind i n rsising this
subject w e e t o t r y t o get this wiseting,
i v they gslt thet
recourendation t h e t
I want t o
much intsrested i n Governor Norvis! Jiscussion.
Nothing
thet I seic, o r nothing t h e t snyone h e r e hes said, I
am
was inten.ed t o indicate doubt a s t o the value o f
the work done b y the Hconomy a n d Efiicieney Cousittee o f
Federal Heserve Board, b u t o n l y t o sug.est a
wey i n
which that w o r k mignt b e mace more efrective a n u I believec
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Federal Reserve Bank of St. Louis
the w a y b y which i t could b e mece
be b y c a l l i n g @
conference
o f the opersting i s
h
e men
who are responsible for meking the operations o f b a n k s
uniform,
T h e n t h e m o t i o n i s t h a t t h e Conirer-
The Chairman:
encé recdiiena e n 6
m g e t i n g o r the tuelve ope rating
men o f t h e t r e l v e B e c t r a l r e s e r v e benks,
Boerd's C o n m i t t e s
t o uset w i t h t h e
o n E r v i c i e n c y e n d xsconony,
t o further
consicer
(The x
1 , having been duly s
3 e C , w e e carried, )
r m . I n a s m u c h 3 ¢ the
The
Guire ur. Gilbert's sresence,
“eetion VI, 3a: c c oou n t i n g e n d cuditing,
Report o f G o u n i t t s e
of
o n otencarcaization
of Accounting Forms; ir. Vogt, Chicégo,
Chsiruan,
Are y o u resdy t o act o n the recommencations o f this
comilttee,
T h e rsco.. sndstio
l a t s t o two vormus. T h e y
ere both matters «sferred t o ths coiuiittee s t the instance
ofthe Federel Reserve Bank of St. Louis, end the report of
the C o m u i t t e e
i s a g follows:
At the last G o nierence o f Governors, séversl yuestions
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Federal Reserve Bank of St. Louis
rus betvescn r e
to t h s r o r i e r Committees
on“ Stenderéization o f Accounting worms u s e d betwsen rece
isserve Banks."
The originel co.mittee consis tec o r t h e following
Hoasch, uaneger, «othods a supplies b e p t .
vreceral Neserve g o n k o f e w York.
Assistant Ceshier,
Peaeral
Reserve
bank
o f “Slevsland,
accounting,
Reserve b a n k o r Chicago.
gssevered h i s c o n n é e t i o n w i t h t h s
syetem, t h e OC udttes
s t the >resent tins
two .Giubsrs.
After careful considerstion o f ths juestions involvéc,
C_amittes
submits t h e following report s n d reco.senda9
Sorresmondence
he
referring
t o Ltéu.s l o s t s n a
COLLLS
That acknowledgients t o corrsspondence
reierring t o items l o s t s n c charged back
continued,
i n view o f the inrorniation
#ederal K e s e r v e B a n k s
i n dai
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
such itewis spear 9 s deductions.
( 5
COwuwITTER C O N T E ,
In its ginal resort which
Becersl eserves Banks f o r study e n d coments,
sno w h i c h w e s f i n e l l y
s w >reved s n c a a o p t e d a t
the Coni‘srence o f Governors i n april, 1921, 2
uniform f o r m was reconmended f o r use b y #11
Pedsral Reserve Banks a n d their branches
in
connection w i t h items lost s n d dharged back.
This v o r m provices f o r tickets o f entry f o r use
in t h e r e d e r e l
Kessrve
sank whose account
hes
g
been cherged, b u t contains n o other scknowlecment o r advice, because, with the tickets o f
entry a n d the G d .seription o n the aeily statcnents
oi: Peceral teserve Banks' accounts, both o f
which e r s forwarded e c h day, there i s n o need
for e n y further acknowledguent o r corresponuence,
COMMITTEE R E COnENDATION:
It i s recommended thet those reserve benks a n d
branches w h i c h ere n o t using t h e adopted stend-
ard form, put i t into use, a n d i n this woy eliu.inate needless acknowledgments a n d correspondEnc.
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Federal Reserve Bank of St. Louis
2 QUESTION:
A d v i c e o f N o neturns.
Reco. nended:
T h a t uniforiity i n phraseology e n d
general inroriation, s u c h a s date and totel o f
cosh lstter i n which itewis were originslly listed,
is Gesireble.
( s t . Louis)
COmsITTEE C O ENTE:
The report o f the C uitittee o n “standardization
og Accounting rorms p s e d between Federal HKeserve
Benks" a l s o contsined 3
form t o b e used i n con-
nection with “Items Pending Fate", or, i n other
words, a . e n advice o f n o returns.
T h e form
provicges 8 s cescription o r the i t e n and a n acvice
to the depositing b a n k thet returns have n o t
peen received o n the described item.
cond c o p y o f t h e iform-also c o n s t i t u t e s
a n sdvice
to the Cepositor, w h i c h i s sorwarded s h e n the
originelly odvised a s unpeic,
i s gine lly
A third copy serves a s a n office record
COMSITPEER K E G O u M L N D A T I O N 3
snd
Tt i s r e c o m m e n d e d t h a t t h o s e r e s e r v e b a n k s
rc.
prenches w h i c h a r e not uging t h e adopted standa
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
216
vorm, p u t i t into use, a n a i n this n a y obtein
unitormiity i n phraseology a n c general inioristion
+, C2, S h O R s
JOrmit t e s . "
The
adoption
G
o
v
e
r
n
o
r
o i these r e contisnceations?
Governor
s e c o n d thate
Governor “snche a
j
Governor I
Governor xoOrss: I
u
have @
s
t know what t h s r o r s
memorendun h e . ¢ w h i c h e s y s
that they e r e using the first i o r m reiverred to, b u t that
to, sntitlec “Acvice
88, snrexently,
o f the collecting
serve b a n k i n putting s n o t h e r
notice t h s t c h e e k s U r e w n o n snecizied b a n k s h a v e n o t b e e n
that not being sble t o find t h i s fork. rsrerred t o
in the Conmittee's report, they have 4tkec t h
to send a copy t o conplete t h e giles, a n d that i t i s not
for u s t o use this, a s i n our district collec-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Bat
tions f o r c a s h lIstters a r e catisiectory.
i
n other
they d o not s s c u t o h a v e t h e t s e c o n . lori,
Governor ..c~ougsl:
T h o s e reco.nien: ations i n sfzect
ears thet e l l Pecersl reserve banks shoula have these
3 l r e e d y b e e n secentec a n a are
stoncerd fori.s which |
in u s e
i n most
o f t h e banks,
t o have
B u t t h e y c o not ses.
Governor .oFEs:
written Pome t.
The Cheiriuan:
W
report, gentleinen?
a
i regard
V
OLeas
e *
s b e e n movec a n a s e c o n d s
the rcoecomuencation o s scoptea.
(The motion, having been culy seconcec, wa. cerried. )
Governor Young: I
cesire t o b e notec s s voting no,
Go not k n o w what t h e y ere reisrring to.
The Chalrian:
T a e next i s Topic 16,
Proper m e t h o d s o f c i s t r i b u t i n g
Con. issions e a r n e d o n i n v e s t m e n t s
for forsign banks.
Governor Calkins:
T h o t i s v o r ciscussi
These e a r n i n g s w e r e d i s t r i b u t e d
o n l y .
o n the besis o f the p r o
rets share o f the guaranty e n d a g
f
o
r work i n con=
nection with investients done b y t h e Federal eserves B a n k
}
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
of New York.
T h e only point i s that inasnmch a s these
accounts iiesy agsswu.e lerge proportions
i n ths future, t h e
matter should b e brought u p for ciscussion i n order that
We may have e n egresnent i n resard t o the besis o f cistribution,
The Cheairten:
h a t metter w a s hencled
pondéence before, e s thers wes n o i
g
b y corres-
f pending,
As I recell it, ur. C a s e vrote t h e letter,
o r possibly I
did,
Governor Celkins:
i m , C a s e wrote t h e letter, t h e
concluding persagreph o f which, u n c e r cete o f June 16,
V s 4
good e n o u g h t o scvise n é e unether you
to the agostion o f thi: plan, t h e t jie,
500 vor the cost 0 3 >
ope ration o f
Foreisn Department o f the
York f o r sixmonths.
T
t i s o u r present intontson
to
by tzlesraim o n dune sOth", etc., w h i c h h e did,
The o n l y z u e s t i o n e s e é
n
é bagis
o n which t h e
work s h o u l d b e d o n e b y t h e i'ec:r r e s e r v e b a n k
York,
t h e besis
o n w h i c h t h s c h a r g e s o u l d b e made,
ana
the bs..is o n which the remaining profits i n the trensaction
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Federal Reserve Bank of St. Louis
219
t ssamed
T
ghouldbe d i s t r i b u t e d .
t o me t o be €
proper
metter for considerstion b y ell of the Fecsral reserve
banks,
The Chstri.en,
I
coulée n o t tell y o u orfhana
t is. I
whet t h e coumion Genominetor was.
Governor ..cbougal:
Surplus
I t wes basis the capitel ana
o f e s c h bank.
The Cheirtian.
I
t wes j i d e d u p o n just t h e sane
basis that t h e Federal Keserve Bosra expense sccount i s
Giviced,
Governor Calkins:
O
Y
E s
cost o f operating o u r
foreign Genartnent s o r the virst six wionthe o x this year
Will b e ev,roxisetely ,12,500, b u t sifty p e r cent o f t h e
work o f t h e agpartiuent
i s handling t h e s e s o r e i s n accounts
which other banks vartictpetec, anc. v e therefore sus.ast
thet w e ceduct f i r t y p e r cent o f the totel cost o f
cepertment f o r that helr y e a r sroisn the coniissions
to b e diviced o n the usual scrcentege basis sinong t h e
Federal reserve banks." 1
a m not sugsesting thet there
is anything unsstisfactory about i t , b u t obviously i t was
a matter v o r sgreement between t h e tuelve Federal reserve
banks rether t h a n g o r a n arbitrary conclusion b y ons
i n
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Federal Reserve Bank of St. Louis
The Cheimian:
S
e
s
s we. asking that o b -sction
be gubmittec i f there ners 3 m
L
i woulda ilke t o
8 little about thess accounts.
In ths csss o f the Bonk o s gapen,
s t the
count was omensc, t h e arrengsiuent w e thet they roulcd ceposit w i t h u s 6s fund o f 320,000,000, “ h i c h vas during t h e
tine then interest rates v e r e high, a n c thet o r that
20,000,000 twenty b e r cent would b e isteined o f 3
balence a n d the othsr 8 0 2éer cent wouls b e invested,
snount w e s civi:'ed among 2
ysrious rsiervs benke i n
same proportion; w h e r e a s i n the case o f so.s o y t h e other
forsign banks w e mece n o stiouletion
belancs, b u t t e oropored t o chergs itor
the service.
v
e 5206
P O
very ieuch better t o uwaterially
make 6
unlior
running 8 n snorious reservs, ovovi.ss n o colpensetion
fll, e n d
y a s other hanca, with
arger . r o p o r t i o n o i t h e b a l a n c e
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Federal Reserve Bank of St. Louis
that carries t h e account w i t h u s will realize a
turn after asducting ¢ résasonsblé coiusgission.
proposing t o the Bank o f cJepan that w e change t h i s secount
end t h e likelihood i s that they will make i t a larger account t h e n i t i s now.
w i t h the account a t ;20,000,000-~-
it w e n t u p t o 4 0 , 0 0 0 , 0 0 0
m d t h e n wss recucec
t o .20,00,-
Q000--= t h e smount earned o n this balence w i l l b e i n coumissions instesc o f intsrest,
earning,
o n d o n the basis o f 6
o n which w e really nske n o
20,000,000 account L
thin
“an, Case anticizmetes thet t h e benk's coumiselon will b e
® littleless t h e n 50,000,
a n d thet t h e a d i t i o n e l esrn-
ings b y the Bank o f Jspan will b e a little less then
60,000,
e n c that orleiple w e hope t o apyly t o 311 o f
these sccounts t o neke then. really wore prorfitsble t h e n
they a r e now, a n d I think t h e likelihood i s thet before
very l o n g w e May hanale s o e scditions] sccounts o r like
chsrécter ebroad.
Now, t h i s question o f Givision o y esrnings a n c Givipion o f e x p e n s e
o f hendling t h e account
i s one,
a s Yover-
nor Calkins h a s said, t h a t should b e discusssa 3 n u arranged
by agresinent, e n a hac there been opportunity t o c o i t t e
neturelly would have done i t rather t h a n teke i t u v b y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
SOO
corresponience a n d isake a rather arbitrary suc: estion.
ig thet i s ths sussestion sbout t h e basis
i s
of coimpensetion.
Governor
@
:
Governor Norris:
i n othsr-.orca?
3 - 9 Yeir basis,
e a e . Chairmen,
i
s e e m s 1 :
: 6 @ assume thet t h e besis euggsstsd
nr’ Case's “etter wes vatistectory t o New York, a n e
periectly satisfsctory t o us.
Governor Fsnchsr
S
e
r
tisvectory t o
e 5
would n o t d e i t itor a n y b e n k s x c e r t
Governor Galkins:
a
tion o f in¢icatins ao t h e t b
bodGy, b u t I
p 1
steatse
y o r e I
had n o inten-
w a . not satisfactory t o svery ~
think i t shoulc. b s c o n j i r m e c
ence,
Ths Chatriuan:
Y e s , y o u ars quite right.
I n pvoint
ox rect, t h e account w i l l b e consiversbdly lore proviteble
hereafter, Ihope, without eny increacs, o r any natorial
increase, i n exxense,
J e keep pretty close track ox thee
expenses and the s,vortionment that 1 s sacs here, =P.
Gasé assures ie, i g absolutely counc.
# 6 ers not chéerg~
ing a n y m o r e t h a n t h e a c t u a l c o s t o f G o i n g t h i s b u s i n e s s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
enc are not making eny profit o n it.
Governor Fancher:
T h s probabllitiss a r s t h e prosor-
tions will very e iittle b i t after t h e term o f 3 year,
the b a n k s heave sdjuste:
t h e i r surslus accounts, t h a t i s ,
teken care o f increasing ecapitel a n c sdjustea their reserves.
so thet there might b e soie variation i n percenteges after
the first o f the ysar.
The Chairnen:
s p o s e t h e r . w o u l d b e when they
set u p their n e w surplus.
Y o u unierstanc t h e t thse siount
or balcnces t h o t a r e n o v cistributed w i l l likely b e re-
éuced, but the smount o f camiissions will b e inersasec,
d @ had t o get t h e ap-
6S #00n a s arrangeuents e r s 1ece.
proval o f the neserve Boerd.
T h e entire inveéstiie w i l l
be subject t o 9 corn.ission charge.
Governor :68y-.
I t seems t o b e s o wanifest t h e t t h e
chengse L e e n sdventageous o n e thet i t i s herdly o p e n t o
cisegrsement o r ciscussion,
The Chsiriian:
bslonce,. I
T h e r e Wes 8
c o not k n o w t h e t +
ever w e n t i n t o t h e history
of theso negotiations, b u t the negotiations never vere
finally conclucecé until I
got t o Jansen,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I rrenkly
steted t o the oiricers o f the Bank o f Japan thst t h e y
should not just buy securities snd bills for ths purpo:e
of undsrwriting the Fodsrel Reserve system, that w e aid
not need it, thst w e woule rather c o business L o r them for
nothing i i they kept s very loerge balance w i t h us, t h s t i f
they wanted t o establish relations o f wmtusl conticence
thet that wos
w a y t o begin.
T h e y cew the point a n d
did it. A f t e r that h a d been done I
cabled ho:.e ané recoiie
nsended @nlarging t h e account t o »40,000,000~-- y o u know 6
lerge part o f this nonsy 4 6 tioney o i the covernient
of
Jepén a n d not ths Benk o f Japane--- a n a thst orrsngsi
wes nede,
s o thet t h e y have hac, a s y o u know,
of .8,000,000 with us for a consicereble tlie. I
they have mede a
think
pretty s o o d cemonstration o f coniicence.
I Gid not w e n t t o hole t h e m t o thet e n y nore, e n d this n e w
arrangement i s infinitely better y o r both perties, a n a I
em willing t o g o sheed e n d invest t h e gieater p e r t o f the
balance they have v o r a proper coiimission.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor:
~
¥
with t h e Banik
. Sheir.en, b o t h
O
guerantese t h e
b
The Chairman;
L sNzlond w e i r e t
u
Y s s .
Governor Biazs:
y v o r then?
n
o chsrge r o r thst.
B u t y o u b u y n o t h i n g b u t g o v e r n i n e n tf
e
prine bilils.
The Chairnian:
H a t i e o2.35° 2 t h e
to thse b e s i z
v a
told or. C a s é that h e must not chorge s n y
e
r
o
m
t h e n the
bare cost
o r this
work,
enc. h e has Vigurec =
t out, o n 8 & acareful coiouteation
h
e s coulde
t b s iiacs, t o
be ebout .12,000 °
Governor Solkins: I
imove t h s t this. Conterencs
orove t h e method o r ¢istribution @
c o m issions one.
ings o n investuents f o r foreign banks,
t
er Os f cs
e
L
ss
escdressed
d
t o Nthe Governors
a
o f ths
benks, ’c3 a t e d J u n e 15, 1 9 2 -
(The motion, having b e e n
The Chairnian:
nentéery tonics,
snc
w
e
N o w , genticsnusn, w e have
h
we have only ssetions 1
a
v
anc 5
s carried.)
r s w suoDle-
e ginichec t h s t chort l i s t
oF thse program t o ciscuss,
othsr t h e n t h e instters t h a t w e w i l l c i s e u s s
a t ths joint
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ret
conrerence,
I
f w e c a n cleen this u p w e wlll b e i n pretty
good shave t o aévote a l l o f Thursuay t o the joint conierAre y o u ready t o processed with t h e supple..cnotal
list o f topics.
The first o n e i s
Pouching o f nail - ustablishnent o f
subetation Post Oufices.
This ¥as suggested b y Philacelphia.
Governor Norris: I
beliéve,
s s i
stated i n a y leter,
this same yuestion hes arisen i n seversl banks,
4 6 have
had i t u p with o u r local nostiaster, s n d h e slweys
thet h e m u s t r e e r
i t t o Jashington.
h e n , w h e n h e does
thet e n d w e make inguiries about i t h e seys thet i t i s
uncer investigation b y .achington, s o thet
enysehere w i t h it.
T h i s w e s put o n here t o vind o u t what
progress h e d been made b y other banks i n this mstter.
The Chsirtian: I
nor Norris,
think I
can report o n that, Gover-
w a e n ur’ Burleson w e s Postmaster ueneral
® Texss bank was successful i n getting 4
full a n d complete 1 0 0 per e n t p o s t office i n their building. T h e n , subseguently, i r e Hays came elong,
I showed h i m h o w t h e C o v e r n -
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ment would s a L i t e
floet i f 1
s t o n large balances t h a t w e
i n
g6t t h e meil handled tiore prowwotly, a n d
certain o t h e r sconoiiies, e n d h e
w w t h e »oint a r d s a i d t o
put i t in; h e i s e c e a n e x e c u t i v e order a n d v e c u t i t i n .
It wes t h e n exnected t h e t
S
B
S «syste... HouLG b e sxtended
to the other reserve banks s m i i t
Conisrencs t h a t this b e taken u p «ath the
Ungortunately,
movies, a n d I
sonal i n t e r e s t
i n the neantine, u r e hays sent into t h e
s u afreld that ur. o r k hes n o t a s uuch ners s ur, h a y s had.
a
t Y O R GOULG- like. t o
sll t h e correenes with t h e Postinester vensral o n the iistter, w h i c h
would enable y o u t o take i t u o with vr, iork.
Governor Norris: i
woula b e very s l e d i f you will
co that.
Governor Beiley: i
heave h a d t h e matter u v vith o u r
bank a n d I sot a n ordsr yssterday, u n c e r which they a r e
going t o let u s puuch t h e mail out.
T h e n w e are going
to wake a list o f the trains t h e t reach o u r toun efter
eignt o'clock, w h i c h would g e t t h e mail there t o o late---
the Union Pacific gets K e n s a s City e t nine o'clock anc
set that meil i n tine t o distribute it.
I t
doesn't get there until 9:30 i f it goes t o the Post office,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ag
snd i f i t o s m e cirect t o u s w e c o u l d hendle t h e mail i n
time, s o w e ere going t o meke a
list o f those trains thet
get there t o o lete t o reach o u r clearings, e n a while I
heven't got i t down t o 100 per cent, I have sot 75 per
esnt o f i t , a n d I h e a r d t h s o r d : r m a d e y e s t e r d a y
t o lst u s
pouch the mail.
The Chsiriian:
O
f c o u r s e WwW h a v e a n 6 n
office business i n the bank o f New York; 6
hav
ené commlete post o r i c e w i t h »vouches a n d rscks, t h e clerks
prs e l l unger bond s n é under Post Oifice reguletions.
Governor Bailey:
The Chairuen:
ell;
D o y o u sell stamps?
“ i e ha v e n o relations withthe
i t i s just ror our bank.
Governor Bailey:'
tions with the public.
. ¢ s r é not g o i n g t o have a n y relaW i t h vecard t o the trains thet
get t h e r e t o o l e t e f o r o u r c l s s r i n g h o u s e o p s r a t i o n e ,
will pouch thet mail;
w e
i t will o n l y b e about half o f the
trains that come into Kensas City, e n c that will enséwer our
purpose.
Governor Fancher:
‘
o get a n order
e have b s e n t r y i n : t
to p o u c h i n , b u t w e n e v e r w e r e successful.
v
e were i n the
midst o f correspondence with wir’ Royfes when he went out
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
or orfice.
h e a «tayec there would have been
The Chairmen: i
w
no z u e s t i o n s b o u t i t .
Governor
s very enthusiastic a b o u t i t ,
e
believs i g these gentisuen have
=6 I
not maeae a n y recent a t t e m t s , t h e t t h e y will not Yind i t
de h e d soue Gigviculty ourselves, b u t finelly ebout ¢
month o r six woeks @ g o w e put t h e matter through
entirely.
A t virst t h e y were willing t o grant u s pouch-
ing o f reyisterec meil only, w h i c h w e c i d not want.
Y o u are soseking ebout souching
Governor Fencner.
Governor s a y :
tered m s i l
Y e s .
i n t h e o l d way.
u
@ preter
t o henc
t h e regis-
f i n a l l y t h e y egréed t h e t t h e y
would give u s permission t o pouch a l l meil, including
registered mail, e n c when v e found thet w e couls hendle
the registered mail i n the same w e y t o our catisfoetion
we acespted it,
y
e believe that i f you will n o w m m m
pursue t h e subject, heving grentea i t t o us, t h a t t h e vepartment w i l l grant i t t o all o f you.
Governor *ancher:
Governor seey!
I
Governor a e n c k e r :
D b you pouch
n m d out.
W
e would Like
t o have both.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
mom
he n o u c h o u t w i t h o u t a n y
Governor Bailey:
a
trouble s t all, b u t #
g o i n ;
t
o segregate ths trains.
Governor ~ e a y
have
Governor s a n c h e r :
Je Gid shet y o u cic, Governor
Beiley.
oi thing.
r
8rse
w
the
e stucdiea
t o s6nd
t o t h e train.
troin e c h e c u l e s
i
k
. 0 une progrsesi
g
a 6 have b e e n
a n d 211 thst s o r
o
but
w we h s v
a
i
W
a
B Wa Uh <b oe
gotten
e v e away
n y
The Cheirmnans
I
s
thie
g n onswer t o your inguiry?
Periectly.
Governor N o r r i s :
You d o not went e n y
The C h a i r m a n :
wanted t o get thebenerit o r t h e
et
exosrs nee o f t h e othe
Yes.
Governor Norris:
The s e c o n d
The C h a i r m s n :
but
y
, n o i t c a od
topic o n the suppleéi.entel
is
Ressrvs B a n k s
Risk sssumec b y Feceral
in shinping cence lled b o n a s s n d n o t e s
to :ashington,
discs Agee pees cee ested
by Chicago.
Under t h s existing Trzasury ve-
Governor : . c D o u g s
‘or Government s e c u r i t i s s
partment r e s u l a t i o n s
receemec b y the Federal
by t h e T r e a s u r e r
Reesrve B a n k s
i
canna
o f t h e U n i t e d owtetss u n l e s s
b e sllowed.
t
Dp
ww
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Federal Reserve Bank of St. Louis
are s u p p o r t .
d b y voucher,
securities w id,
h i c h must.take t h e
T h i s means that i n esse o f loss o r de-
struction o f p a i c s e c u r i t i e s b e f o r e t h e i r r e c e i p t
b y the
Treasury, t h e t w e sould probebly have t o secure 5
séciel
Act o f Congress beior
w e could g e t a n sllowance s o r loss
In order t o prottect ourselves uncer t h e eristregulations i t will b e néc-ssery t o ins
securities,
t o cost u s sprroxi:etsly 3 0 , 0 0 0
sseris t o m e thet t h e present Treasury regulation shoul< b e
mocitled s o 9 s t o relieve t h s #
this responsibililty a n d expense.
I wrote t o Governor Fencher i n regard t o i t a n g wes
sadviced t h a t t h e y h a d sdoptec. a
policy o i i n i u r a n c e
o n re-
gGeemed governiuent securities, a n d é s c . r t e i n e a thet
the Cleveland b a n k long a g o h a d b e e n i n controversy w i t h
the Treasury because o f the loss i n shipment o x sou.ething
like 34,000 o f cancelisd coupons, a n d that the rinel result w a s that that, b e i n g uneble t o recover, t h s y h e d t o
sbsorbthe loss thsi.selves.
Our counsel,
i n 5 recent letter, advises thet h e i s
the opinion thet i n s u r m e
c should
b e vloced o n thsss caen-
and t h a t thse ie: aral H e s e r v e B
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Federal Reserve Bank of St. Louis
200
Chicago,
i n placing a clai:n f o r such insurance w i l l heve
relibursement ageinst t h e Treasury f o r
the reasonable cost o x wach insurance.
I think the New York Bank had soi.s Giryriculty inconnection with shipments o f this sort.
f e
W S Owakened.
out there e n d found thet w e were i n cGenger o f loss w e ine
izclately began t o insure.
T h e a t was just about smonth
Seo a n d the next d s y w e had s loss o r .,260,000 i n 4 shipment i n transit.
perienced,
T h e t w a s t h e iirst o n e w e had ever ex-
“ e were i n corr ssponusnee w i t h t h e Treasury
with regard t o it, and the “ost O:zice authoritiss sei
thet t h e y w o u l s w r i t e s o u s t
3
n e.
Lf t h e y
find them, a n d a week o r t w o after thet w e got .ord f r o n
the Depsrtinient a t ‘isshington thet thet pouch hec beén nissorted e n d hed besn sent t o soiue other civision o f t h e
treasury a n d i t might h a v e b e e n t h e r e y e t , a n a w e w o u l d
heve had thet clain.
T h a t i g 2 very unsatisrectory state
of affairs and I believes something ought t o be done b y
Which t h e Federal Reserve s e n k will b e
any canger o f thet sort.
The Chairinan;
w h a t w o u l d y o u c o i f y o u were
i n
York s n d haa t o ship sometimes a s much a s two o r three
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Federal Reserve Bank of St. Louis
huncrea m i l l i o n s
coulé y o u insure two 9 1
i r u o c l r e c million.
Y o u ere
hevs m i l l i o n s w h e n y o u ; ebvacias ‘ i c t o r y L o a n
“gp beving Sterms, s n d all those
huncre.s o f thousands o f
men?
i not
e t w eN shoulc
L Y N e h i
Governor . c v o u g s:1
securitiss
have insursble
yalue .ccora-
ment s h o u l s
wey o r s h o u l d v e y t h s
The Chairiien:
or
B u t they havs n o gcropristion o u t
wiieh t o vay inzursnes.
Governor Norris:
esnerel l n s u r s n c e policy.
Governor ucbougal:
T h e y G o not ecesot t h e risk
B e e r eB 3
is our risk until they s r e aelivered
As 9
wetter
o ¢ wact i n N e w Y o r k w eSW
have n o w returned t o whet w e c i c curing 3
out a n errengenient
t o have t h e s e
which r e l i e v e s
u s
the l i v e b o n c s
to
war e n d worked
n g s h a n d l e d b y T r e sgury
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Federal Reserve Bank of St. Louis
235
and n o w they hove stsrted taking t h e m beck b y their o w n
jnadviseble t o d o that.
process b u t I
Governor #ancher;
T h e negotiations
Pex}
co n o t beliszve anything h e s
H a v e y o u sxmerienesd a n y loss i n
shipment o : cencelled securities?
The Cheiriian:
vrs
i n i o r sxschange.
bonds that h s d beén &
ed
staip/eancellec, a n d vortunatsly t h s y h e a been
to the post ofiies dsyertment.
cut o p e n i n the Post Ox: ice Builcing
out efter w e had cslivered i t t o t h e Post J vo=)
Governor ..cbougal:
/
@ are
f # required b y t h e Treas-
ury venartinent regulations t o list nuuwerically t h e cancel and n o t e s s e n t t o t s s h i n g t o n v o r q e d i t .
securitiss a r e received a t t h e orzice
i j e n
o f the R e g i s t r o
of the Treasury t h e y a r e countec e n a checked sgainst o u r
uncerstand t h e t t h e n u u e r i c e l r e c o r d o r t h e
Treasury
i s made f r o m o u r ligt.
T h e bonds a r e t h e n filsd
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Federal Reserve Bank of St. Louis
206
bsing caein nuuericel order e n d kept r o r two years before
stroyed.
checksd
T h i s list o f cancelled securitics i s
could
onee b y u s before being forwaraec, o n d the s c u r i t i s s
auditionel s x be recountec e n d t h e list rechecked e t a n
iorverced t o
pense o f 6 , 0 0 0 p e r year, o n d then t h e list
t h e seme
Washington a n d the nu. erieel record stamped off,
under t h e present s y stem.
T h s boncs m u l d b e
a t t h e expiration
stored b y u s a n d held f o r t w o years, a n g
of thet t i n e jestroyed,
would suggest first that y o u look
The Chairiuan: I
right t o uéinto t h e juestion o f whether y o u have the
stroy theses r e c o r é s w i t h o u t
e n a c t o f Congress.
Y o u know
the
there i g 9 genersl statute o n the ststute books o f
United stetee which makes i t # mis dé.senor, p u n i s h
fine a n d imprisonment t o destroy a
mutileats a r remove
Act o f Conany records o f the United states without s n
gress authorizing it.
Governor iiclougal:
the bonds enyhor.
s
T h i s i e ¢ matter o f mutilating
r
e muatileted before t h e y a r e
sent beck.
The Cheirman. I
same. I
know. b u t t h e y a r e recorcs
record
think o u r prectice n o w i s t o retain every
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Federal Reserve Bank of St. Louis
cone rnins s i s c a l oneretions
by counsél] thet they e r e subicet t o ths provisions o z t h e
Act o f Conerses,
‘
Gpyernor s.cvougal:
e of course G o not d a s
recorgs o n c have nsver ussetroyec
The Cheirsian: I
thought y o u «31a siter t i o
they woulda b e destroyed?
Governor ..cbougal:
T h e y ucstroy t h e m here i n
ton t w o years sYtsr t h e y a r e receivec, anc. I thought
sibly they wight euthorizs u s t o act sc. their ogents
esstroy them,
O r they might sence. their o w n
Governor Norris:
to F,icago t o destroy then.
Governor --cDougal:
T h e t vould relieve u c o f the ne~
cessity o f renoving this trewencoug volume, a n c 1 guess
rac a tresendous volume o f tha.
The Cheiriuen:.
T h i r e i s enother
verisetly sracticable,
securi B
jue
:
w a y that
a n d thet i s t o t i a t the
¢ treat the currency enu slice thei
in heli, sending the uppers a n c louvers uorn b y seperate
Shiniment.
I
t i s j u s t 9 6 poasible
t o c o that a i t h @
not ¢ «
or bond o r Tressury certivicate s s i t i s with 6 piece o f
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Federal Reserve Bank of St. Louis
238
currency.
General.
T h i s wetter i s nor beiore t h e Coinmtrollser
w a t e Gilbert h e l o o k e d into i t eerefully a n d
I think i s quite sy. pethetic « i t h our position o n it, i s
née not,
“ o r
wr* Herrison:
hoe -Cne ligne ne o o t Serr
a e suse|es
a
t v e hold
tonic over until s e have h a d o u r uceting w i t h --r. ailo u r v i e w s t o h i n infornelly, ane.
bert 3 n d h a v e expressed
esked h i m t o get t h e -ecretery t o ¢
w
e caecision o n the
matter.
A n d give
Governor Y a n c h e r s
Thea Chairiuan:
Yes.
woulc
Governor u.clougsl: I
< 6 t o inguire how
weny o f the benks G o insur. t h e i r cancsllec securities?
Governor Young:
W
Governor u.c¥ougsl:
G CO
s é c e r i n i t e l y odviced t h a t
the loss would b é ours.
Governor e6ay: S i n e s
i n g scvised thst t h e Govern-
ment t o o k t h s n o s i t i o n t h e t
we heave n o t shipvec any.
That L s w h e t
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Federal Reserve Bank of St. Louis
them,
Governor s 6 a y
v
e took i t u p with ths Under secre-
end under cats
o f septéeuber 1 6 t h h e wrote u s a s fole
uncerstand t h e Fedsral ceserve B a n k o 1 N e w York
Fedcral K e s e r v e B a n k o f Philecdslohis w i l l s h o r t l y
3g8in subrit t h e metter t o the Devartuent, s n d I an. accord-
ingly submitting the yuestion t o thse Coniptroller Usneral
for hisdecision,"
Governor Beiley:
I f you c o not ship t h e m how d o you
gst crecit f o r them.
Governor ceay:
W
e could k e e p thet u o g o r a
e weiting sending sone d cision.
Ship them u.tinately.
while.
# 6 Will have t o
w e feel that inssimh a g w e are
required t o s u p o r t o u r vouchers b y these notes that i t
is certainly equiteble that the Govsrnient should undertake t o pay t h e insurances,
Governor Young.
O u r s h i o u s n t s r u n o v e r ..300,000,000
8 year, a n d 8 s these services are rencdered b y ths banks
without coimpensation, i t secs only reesonable thet the
G
‘ul =
_
e
SS
a e
treasury Depertiuent should assuae the responsibility i z
S
P
E3
9
the cancelled securities a r e lost i n transit, a n d i f i t
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Federal Reserve Bank of St. Louis
he Treasury Department should
Beni t o insure t h e thipuernts
at t h e Governient's sxpe
holding cancellea certirvicetes o 1 inasbtedness t o cover
settlsi.ent o f
wituation hés
General;
n
to t h e C .f
e
)i t r o l l s r
i t mney b e
s cd finite Gscision c a n b e secui~d e n d I T think i t unaésire
able t o hola the. egeinst t h e pendin., cecision i n a metter
which h e e b e e n i n i t s p r e s e n t s t a t u e f o r s e v e
arrengenent c é n b e inece t o
cencelled s e c u r i t i e s
t o the Tressury
aftsr t h e receipt o f t
w b hout f u r t h e r Jsley.'
w e sent t h e m cown b y
messenger.
Governor -
L
s 2
r i s k y w a y o f doing
Gov rnor Nomris: N o , i t is not risky, becsuse they
They heve Breat merks e611 over then,
Governor Norris:
N o , i t ign't risky, bscsusse
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Federal Reserve Bank of St. Louis
“Void", which i s cut all over the race o f them.
Governor 388.
B u t t h e trouble i s that t h e m e n that
up your wessenger misht n o t know that t h e y were
The overwh. luding chenees a r e thet i f h e were
robbed thse robber woulda cestroy t h e m a n d y o u would never
be able t o sudport t h e voucher.
Governor Norris:
I t wes cheaper t h a n insurances a n d
we instructed our «essenger t o weit until they hea been
counted and get e reczipt s o that w e would avoid possibilof claim.
Governor +«.0orss:
ltigss b y m e s s e n g e r
T h e risk i n ¢énding csncelled secur-
i s not t h a t t h e y will b e stolen but that
there might b e e n accident o r a wreck
burned up.
n d they would b e
T h a t i s where t h e risk i s a n d the messenger
would not save y o u under those circuutances.
Governor Calkins:
T h e y iilg~at b e stolen b y soueons
who “ould subsequently destroy them,
T h e r e have b e e n
two e8se: i n coaperstively recent tines i n 5en f:ancisco
where clearing house messengers have been held u p .
I n both
ceses t h e valueless checks that wers obtsined wers a
a.
stroy-
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Federal Reserve Bank of St. Louis
about w h e t h e r y o u w e r e s h i p p i n g o r n o t ?
Governor Csilkins: 6
ing t h e m up.
g
e
e
n
a r e n o t shioving;
w e a r e hold-
of
s o b v i o u s t h s t t h s Coniptroller
the
the Tressury will hold, a s he hss elready held, thet
youcners m u s t b e sunvortecd. I
Go not s e e h o w h e c s n d o
othsrwise.
The Chairiuan: I
really t h i n k that theses rec oO.ienca=
do
tions a r to wether the !reasury should do this or not
or
it are a little o u t o f t h e way, because 4 % 8 niatter
fact t h e Treasurer i s controlled b y w e t u t e
metters.
i n all these
make
T h e y haven't m u c h discretion i n which t o
rulings a n d sccept liability.
I f w e find thet t h e Tressury
t h e n lI
is limited i n its power t o ceal w i h this metter,
. 6 can get t h e
think v s heve g o t t o cecide whether o r n o t
sone wethod éike
Tressury t o vacilitate t h e protsetion b y
t o ne
slicing, sending then i n helves, because i t s e c s
s healt i g s s good a s 9 whole f o r the sake o f verify-
ing accounts. I
think probably w e may work out something
of that sort,
Governor -¢ay: I n e s m u c h 4 s T r s a s u r y Departinent
spureciates t h e s i t u a t i o n a n d i s working
seems practicable, I
o n i t 45s f a s t e s
move that t h e matter b e considered
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Federal Reserve Bank of St. Louis
225
ێiseussed e n d that w e take i t u p with ur, Gilbert.
The Chairnan: f
the:
s n o ob: ection that course
Will b e taken,
The next tonic i n the supvleuentery l i s t i s
3, susteining i.eibership i n #merican
Accestance Council.
ht t o m y attention b y Lr’ ienzel.
Itseews thet this orgsnization, with which 4 think you
ere a l l familier,
h e d o n e s pretty g o o d job.
T h e y
out 8 publication a n i have wicetings. T h e i r w o r k has
been scucational, a n ? they have c o n e 6 grest
how t o hsndle acceptance business.
harc. wo ror uncs,
tive Co.milttese, 1
k e s Keng
think,
i s a wefiber o r
H e says thet inclucing t h e
lications w h i c h cost sbout 2 2 , 0 0 0 a
year t o run, t h e out-
ley w e s w e t c u r i n g tiie f i r s t y c e r b y c o n t r i b u t i o n s
leading banks 2 n d bankers o f 5 0 0 4
year.
ship w a s c e v i s e d w i t h e n n u e l c u e s o r ,100.
or
L a t e r 3 inenbera
t 8. Pecent
weeting i t c-veloped that there woulk ¢
gericit i n the
oosretion o f 2 2 0 0 a n c t h e y have 2 «sl '
.8000.
are provosing thet they estsblish #
d 3
be 5 0 0 8
T h e y
n e w kind o f méuborshin,
e
l
l f o r w h iac h ‘the ccu e s w i l l
sustsinin
cr
nembership,
oo
year.
4¥
T h e y t h i n k they c a n g é w e n t y m e t b e r s ,
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Federal Reserve Bank of St. Louis
244
Those twenty menubers woul. ,rowuce ,10,000 8 yeer, e n a
1f the twelve # e d e r a l Mecerve Banks woulda each contributes
.50C, t h a t woulda give then. »6,000 more, u s k i n g ;16,000,
snd they think that would b e surficlent t o
continuing,
Now, I
co not want t o recowséna this.
hew York Bank would uweake the contribution i r thse otner
benks aid.
T h e zuestion i s whether t h e work o f the organ-
ization h i c h ,
s s you know, i s larsely r u n b y wp, sarburg
end wre Kengel a n a 3 few u e n whe a r e very i c h interested
in t h e d é v e l o o n e n t
o f t h i s business, , u s t i r i e s o u r s u p -
port.
4 2 ars contributing n o w towarcs
Governor Fanchers
the w o r k t o souie extent,
Governor Calkins:
a r e wes not?
S O i 6 O F u s are.
T h e membershio
think nost o f the banks sre contributing.
fee i s 100. I
~lOO 6 year.
The Chairuan:
T n e n i t i s not @ case o f antsing b u t
of rirising t h e ente.
Governor #ancher, I
be supported,
cid w o r k ,
veel that this movement should
a s they h a v e done s n a a r s n o w Going 6
sylsen-
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Federal Reserve Bank of St. Louis
The Cheiriian: 3 o . - c O 1 ,
of t h e i r meetings.
t T have attencec a
T h e y heve certainly c o n e a
nuuber
very v e L u -
able ¢ducationsl work, a n a of course they have hed relations w i t h t h s kesarve Board i n tnese matters.
Governor Beilsy:
f T h e t brings u p 8 génersl question
8s t o what authority t h e benk has t o c o thet.
w h e t woul
» ecucation?
The Cheirian: I
expect so, yes.
Governor Bigess: I
right t o c o it.
co not think s n y o f u s have t h e
W e woulé have t o teks i t u p with o u r
boards,
(After surther inzor.al Giscussion the »
onrerence
voted thet the matter b e rererred t o the Chsir.sn,
t o be
teken u p b y personel correspondsnee.)
Governor Young:
s a b i
n o t t h s Chalr appoint @
cone
mittee t o ieet w i t h a si.ilar comiittes o f the .'sderal
@ .gsnts t o ciscuss t h e joint mesting? I
will o v o
thet, u r Chairusn.
(The motion, being Gul seconced, tax carried.)
The Chairmen:
T h e Cheir will appoint wovernors
Bailey, C e l k i n s a n d icuougal.
nw, Harrison:
B e t o r e w e adjourn, u r * Chairasn,
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Federal Reserve Bank of St. Louis
¥yould like t o réier b a c k t o Tonic 4 a ,
fers, a n d s é y that s o f a r 6 s i csn ascertéin t h e Topic
wag n o t d i s c u s s e d
a t thse l e s t G o v e r n o r s ' Uonrserence a t all,
but that i t caue u p i n s générel w a y 4 yser a g o a n c wes
then reverred t o Govérnor ucvouzal's coiusittee t o study
the whole situetion o f t h e lessed w i r e service, w i t h liwitetions u p o n unnecessary u s
to which h e reverred o
s n d his report i s the r
few mouients ago, filed a n d
by the Feceral R e s s o a r a G last Febru:ry.
Governor ..cvougsal:
A n g which sornea t h e besis f o r
he letters sent o u t b y the Bosra.
Yes, w h i c h forued t h e basis f o r the
letters s e n t o u t b y the Feceral Reserve Boerd, b u t there
hat n e v e r b s e n a n y c i s c u s s i o n
b y t h i s conrerence
o f the
guestion,
gentlemen, t h e Chair will e.tertsin »
st 5.26 o f clock >. i., ween motion, c a y
seconded,
t h e C o n i s r e n c e scdjourned u n t i l .sdnescey, v e t o b e r
11, 1922, s t ten o'clock 6». m.)
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Federal Reserve Bank of St. Louis