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Federal Reserve Bank of St. Louis
VoLume 3
PROCEEDINGS
CONFERENCE O F GOVERNERS O F THE FEDERAL RESERVE BANKS
Hotet WasHINGTON
WASHINGTON, D, C.
OCTOBER 25-29,.1921
ASSOCIATED S H O R T H A N D REFORTERS
WASHINGTON, D , C,
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Federal Reserve Bank of St. Louis
CONFERENCE
GOVERNORS O F THE FEDERAL RESERVE BOARD.
THIRD DAY.
Washington, D . C.,
Thursday, October 27, 1921.
The C o n f e r e n c e
to adjournment,
o f Governors reconvened,
a t 9 : 3 0 o ' c l o c k aom.,
n a n a n
a t the ¥ashington
Hetel, Washington, D . C., October 27, 1921.
Present:
T h e Governors o f the Reserve Banks a s pre-
viously indicated.
Presant A l s o Hon. W . P . G . Harding, G o v e r n o r
o f the
Federal Reserve Board.
Hon. Francis EB. Warren, United States Senator f r o m
the State afsdyumifigerd.
Hon. J o h n B , Kendrick, United States Senator f r o m t h a
State o f Wyoming.
Eon. Robt. N . Stansfield, United States Senator f r o m t h e
State o f Oregen. :
Hon. Frank R. Gooding, United States Senator from the
State o f Idaho.
Hon. James M . dadsworth, Jr., United States Senator f r o m
the S t a t e G f N e w Y o r .
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Federal Reserve Bank of St. Louis
388
The Chairman.
Gentlemen,
w e h a d some discussion yes-
terday o f the general subject o f cattle credits, a n d
also t h e d a y before,and i t appears t o the officers o f the
Federal Reserve Banks that t h e situation i s something
like this.
A s I stated a t the Capitol t h e other day,
there has been raiscd a fund, what might b e called a n
emergency f u n d , w h i c h i s a v a i l a b l e f o r l o a n s p r i n c i p a l l y
to the larger cattle l o a n companies, a n d that money i s
now b e i n g l o a n e d a t t h e r a t e o f about a
million d o l l a r s a
week through a n organization i n Chicago.
The powers o f the ‘iar Finence Corporation having b e e n
extended, t h e y are developing cattle loancompanics through
the West,and gradually t h e y ere beginning t o function.
A joint commission o f agricultural inquiry i s working
on some plan o f legislation, t h e d¢ tails o f which I presume
will b e a n n o u n c e d b e f o r e v e r y long.
I n the meantime
we
fecl a s you do, t h a t a n y measurcs t h a t c a n b e taken t o
facilitate t h e taking care o f the intorests o f the smaller
borrowers especially, s h o u l d b e undertaken,
sible t o devise then, promptly,
i f i t i s pos-
i n anticipation o f some per-
manent legislation f o r that industry.
With e view t o ascertaining w h a t could b e done w e have
had t w o meetings w i t h t h e officers o f the War Finance Cor-
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Federal Reserve Bank of St. Louis
089
poration a n d have meuc tertvin suggestions t o them. iir.
Meyer h a s expressec s o m e doubt a s t o the wisdom o f the suggestion w e had i n minc, t h e t possibly t h e Reserve Banilrs
in the s i x Cistricts where cattle i s a n important incustry,
might g e t into conmmunication with member banks w i t h a view
to leerning Ccfinitcly what t h e oxact conditions wore i n
the s i x Feccral Reserve bistricts, a n d asccortsin from t h o
member banks o f those districts w h a t could b e conc t o relieve
those conditions t h i s fall i f further measures were required,
and whether t h a t could n o t b o made t h e basis f o r cleering u p
misuncerstancings i n the minds o f the member banks e n d their
customers, t h e borrowers,
c s t o whet was being done.
ve thought that w e might b e cble, through such communi-~-
cations t o the membsr banks, t o meke the bankers o little
better escequainted with the operation o f the Ghicago fund, a n d
a little better acquainted w i t h t h e plans o f the ‘iar Finence
Corporation.
N o w , Mr. Moyer e n d his essociations a r e con-
sicering that suggestion.
I t was brought o u t a t tho meete
ing thet thore seomed t o b e some misunderstending,
or
else some delinerate evasion o f rcsponsibility o n the
pert o f the member banks i n clatiming, o s Mr. Heyer indicated they d i d cleim, t h e t wherever t h e i a r Finance Corporetion
xtenaed ercait t o a member bank, t h e y then were inclined
590
to take t h e position that t h e y could n o t g o back t o the
Reserve B a n k a n d borrow; t h a t there w a s some impediment i n
the way, t h a t this ercdit oxtendod b y the W a r Pinance Corporation would b e cherged against their regular line a t
the Reserve B a n k a n d s o on. T h a t i s all nonsense, a n d w o
thought i t would b e vory helpful i f w e could clear u p that
aLfriculty.
Governor Harding. I
made t h a t clear a t the time before
the House committee, w h e n t h e W a r Finence Corporation w a s
being considered, a n d also wrote a
lcttcr t o the var Finance
Corporation calling attention t o that hceering.
The Chairman.
‘ J e thought i t would b e helpful i f each
Reserve B a n k p o i n t e d t h a t o u t t o t h e m e m b e r banks.
W e have
to bear i n mind thet i n some o f the Districts there a r e about
four n o n - m e m b e r b a n k s
rectly reach then.
t o o n e m e m b e r bank, a n d w e c a n n o t d i -
T h e difficulty lies i n a fact which w e
all appreciate here, a n d I think i t i s not appreciated elscewhere, t h a t the Fecerol Reserve B a n k has n o power t o tell a n y
one o f its members what kind o f loan i t shall make, n o r t o
restrain i t from moking e n y losn i t wants t o make.
Each
momber b a n k has i t s o w n povers, h a s i t s o w n Roard o f Directors, a n c t h e minutc
w e s e t u p t o direct t h e policy o f t H e
member banks a s t o what loans t h e y shell o r shell n o t make,
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Federal Reserve Bank of St. Louis
59]
we will b e engaged i n the very thing that this country i s
seeking t o avoid, a n d that i s creating a
banking oligarchy,
which w e have n o t t h e slightest intention o f doing. F u r t h e r more, there i s some responsibility involved i n telling a
member b a n k w h a t k i n d o f l o a n i t s h o u l d make.
A n o t h c r dif-
ficulty, w h i c h i s strongly emphasized b y the Governors o f
some o f the banks i n thet section o f the country, l i c s i n
the fact thet s o many o f the member banks a r c n o w dangerously o v e r extended,
t h a t they have a
very l o r g e a m o u n t o f agri-
cultural peper a n d cattle paper, and, i n some
that has drifted into t h e banks a s a result o f reel cstato
speculations, w h i c h mekes i t impossible f o r those banks t o
do a n y more t h a n they have done.
O n the other hand there
1s & possibility that a thirc o r more o f tho member banks
in some Cistricts t h a t erc borrowing nothing f r o m the Reserve
Bank p r o b a b l y h a v e t h e m o a n s o f e x t e n d i n g s o m e a s s i s t a n
to the cattle breoders a n d fattencrs b u t d o not d o s o
for one reason o r another, satisfactory t o cach banker.
Now, t h a t i s a picture o f the situation a s i t i s present-
ed t o this mecting, efter some discussion.
We have also discussed t h o plan o f legislation which v e
were telking about a t the Capitol t h e other cay, a
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Federal Reserve Bank of St. Louis
of v i e w s h a v e cevclopec,
variety
a n d o n s v e r y important point h e s
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Federal Reserve Bank of St. Louis
o92
been m a d
I
f legislation. alorz
h a t line i s undertaken
by Congress i t means that those member Danks i n the agricuttural sections o f the country, ‘shich d o most o f their
pusiness 7 3 P a r m e
find t h i s a
means,
w i t h cattle breeders,
and a
profitable m e a n s ,
m d s o on, m a y
o f getting o u t
Federal Reserve System; that is to
abi= to.get a l l o f the
e d
h e y need, l o n g time cre-
dits, through t h e farm l o a n system, e n d are relieved
necessity o f cerrying 8 s reserve,
o n which they get n o inter-
ia
est
a t the Federal
“ e s e r v e Bank,
i t may then develop that
e =
those banks which rrould be e f f e c t e d vould say "Let us withdrow from the F e d ral “eserve System, a n d convert into State.
banks,
a n d k e e p o u r reserve,
with «
correspondent,
2 s w e form-
erly did, where wre could g e t tro o r two and h a l f p e r cent
interest;
that
a n
i m e w e n e e d credcit w e c a n b o r r o r f o r a
year o r tro years f r o m the Farm Loan system a n d tre d o not
ne-d the Federal “eserve System a n y more."
legislation f o r the relief o f this situation should n o t b e
made a n excuse f o r d e s t r o r i n g t h e e f f i c i e n c y o f t h e F e d e r a l
Reserve Systeme
n
a n do I
h
i
n
k that d i f f i
s y can b e mete M r .
r i s c u
a s s i oHn
hsa v e hi - d sr o m e d
it c a n b e overcome.
Fas
o f}
+
P r o v i s i o n s should b e m d e
lation w h i c h w o u l d e i t h e r c o n f i n e a c c e s s
i n the l e g i s e
t o the farm loan
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Federal Reserve Bank of St. Louis
393
banks t o member banks o r else o n l y t o those banks which
were qualified f o r membership i n the Federal R e s e r v e Sys-+
tem and cerried t h e required reserve
Y
e cannot legis-
late f o r banks that s r e n o t qualified f o r membership.
T h e y
are n o t i n t h e S y s t e m a n d c a n n o t g e t i n anyvay.e
Senet o r Wadstorth.-
“ h a t ras
t h e general opinion o f
the Governors o f the proposel t h a t ~ é discussed t h e other
day, G o v e r n o r S t r o n g ?
Chrirman.
" e
i
t varied somewhat. I
of them vere inclined t o express >
think some
view that after this
emergency situation h a d passed s u c h legislation would n o t
be needed, except t o the extent that i s provided for longer
credit, which ie cannot expect t o develop under the present
system.
There « a s rather a
The G a c t i c u l t y
strong v i e w expressed b y some t h a t
i n t h e cattle: i n d
extended condition that was exce
r y w
f
i
that many o f the cattle people n e e d e d
l u e t o a n over-
c
u
l
t t o relieves;
x 6 b e y o n d what t h e y
were really entitled t o upon their assets.
O n the other
hand t h e feeling i n this r o o m i s unanimous t h a t i f there
any w a y b y “ h i c h
t h e Federal Reserve
fluence w i t h t h e i r m e m b e r banks,
Bank,
t
c a n deal w i t h t h e
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Federal Reserve Bank of St. Louis
394
tion, t h a t t h e y r a n t t o d o i t e f é n d v i s s e e m s
t o us @
op-~
portunity t o g e t a n e x p r e s s i o n o f views f r o m y o u a s t o w h a t
shculde
b Gone.
Senator “arren.
M e y I say that what you say about the
livestock m e n wanting t o e x tending beyonc their proper
credit, t h a t i s strictly trus
Fd
y o u confine i t t o livestock
k men need largély i n the country
come f r o m i s t o stock up.
e
y have b e c n compelled t o l e t
their stock s o t o meet their banking dobts. y
ranches well d e
»
d a n d t h e y have g o t t o have long-time
tne3r s t o c k a n d p u t i t o n t h e ranges,
7
credit 3
or t h e y m u s t s i m p l y l i e p o s t r a t e .
in t h a t way.
have their
T h e y c a n only rebuild
T h e l e n d banks heven't d o n e v e r y m u c h i n t h e
State o f Wyoming. P e r h a p s
States where t h e y have l o a 2
great d e a l o f money; b u t w e
have millions o f collars' r o r t h o f range property there
which, through rulings o f the Fedtral Reserve Board a s t o
real estate, i
There y
i m p l y d e a d property, a
be som:
great deal o f it.
i n g about t h e railroad property,
th
strip which the Pacific roads orn, forty miles wide,
miles o n 6ach side o f e
is a
real r e a l i z a t i o n
ral a
T
do not think
o f what
this year, a n d I want t o say that s o m e a r e beyond help.
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Federal Reserve Bank of St. Louis
395
great m a n y o f them have h a d t o sacrifice s t o c k a t ruinous
a
figires. “ 9 : A lot o f 2
r
e situated hundreds
of miles avay f r o m t h e markets a n d
them t o g e t t h e i r s t o c k t o market.
market c a n turn their stock into t h e
But there a r e a lot o f them who have their cattle o u t o n
the ranges a n d they mist protect t h e m from possible storms,
must gather t h e m together a n d get them down t o the railroad,
and they get perhaps a
carload o r trenty carloads, a n d b y the
time h e g e t s t h e m o n t o t h e c a r s a n d t o t h e m a r k e t
under t h e present situation,
h e gets very badly hurt.
T o
resuscitate t h e business there t h e y must have credit extending o v e r t w o o r t h r e e y e a r s t i m e b e c a u s e t h e y m u s t b u y n e w
year's time is too
stock, unless they buy mature stock. 4
Tittle f o r t h e m t o R S
a
turn-over,
end I
would l i k e t o
say t h a t a p p l i e s t h > s a m e t o c a t t l e a n d sheep,
The Chairman.
Sen. “ a r r e n .
T h e y need the capital
Yes,
a n d as I
¥
t o stock u p again?
i n those c a s e s t h e y
have plenty o f security thich i s very acceptable t o a body
which i s not confined b y lay strictly t o one line o f busiNESS-e f
good many o f
s
s
a n d sheep m e n in»
a nevy country like this, n e w territory, h a v e come i n only a
few years a g o a n d t h e y h a v e m e d e money,
a n d have become i n -
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Federal Reserve Bank of St. Louis
every
theye w i l l
ap rtment houssés.
of seversl t o y n s w h e r e t h e y h a v e d o n e that, b u t t h a t
DOIN
t O C r wse
ae
5
1
e n
NSS
S i C pe s a e
he F e d e r a l * e s o r v e
penk c u s t o m e r s
that t h e t r o u b l e
trouble
the Federal “eserve S v
tion
6
b
o perrorm;
i s not with
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Federal Reserve Bank of St. Louis
SOF
ind
o f credit Has n o t been
o r
on, S e n a
req t h e
The C h a i r m e 4
i m p i n g i n g u p o n what should b e
limited pyovers
that connection that per.
Board a n d i t s b r a n c h e s
have h a d
tiveness a b o u t t h e a t t a c k s t h a t h a v e b e e n m a d e
Snce-
S a b r e s c
and s o
Then there i s another thing, w h i c h I need not
up @ year
your b a n k s w e r e n o t i n a
position
t o b e hunting paper v e r y
much o u t
The é
N23
Y o u realize t h e p o s i t i o n
Reserve System i s placed-- I
i n which t h e
think Governor Harding h a d
the figures more accurately i n mind t h a n I have--
3
598
the Reserve B a n k i n our section o f the country repaic t h s
borrowings i t had gotten from other Reservo Banks i t would
have h a d n o reserve a t all. E v e r y dollar o f the rcserve w a s
really used. O t h e r s g o t down t o 1 5 and 2 0 and £ 5 per cent,
whereas t h e l a w requircs
u s t o maintain «
reserve o f 4 0 p e r
cent.
Governor Harding.
M o s t o f the trouble t h a t ocowrred i n
1919 was because t h e screws were n o t p u t o n i n time. A
great deal o f this inflation a n d consequent loss could
have b e e n preventod b y early action.
T h e r e were certain
reasons w h y carlier action couleé not b e taken, however.
But t h e m a i n t r o u b l e w i t h t h i s c o u n t r y r i g h t n o w r e s u l t s n o t
from restriction o f eredit b u t from t h e t o o free gronting o f
credit f o r a
long time, a n d I
think i f y o u w i l l t a k e t h e
trouble t o analyze t h e situation y o u will reach that conclusion.
T h e banks were s o loaded down with loans t w o
or t h r e e y e a r s a g o t h a t t h e y c o u l d n o t e x t e n d t h e i r
regular business.
Senetor Goocing.
T h e defletion t h e t has taken plac
brought about that condition v e r y lergely--
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Federal Reserve Bank of St. Louis
Governor Harding.
W h a t i s that?
Senator Gooding. D e f l a t i o n h a s made i t possible.
Gov. Harding.
h e r e h a s been n o deflation i n the
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Federal Reserve Bank of St. Louis
the l i v e s t o c k i n t c r e s t s
eoncerned.
One.
t h e y have. n o t
a
b
l
e to
6 8 a t
it r o u l d
should
be a
very unfortunate
be
on nonsemembership
You m u s t b e a r t h a t i n mind.
HOeaF er, i G
espond
“ell d e v e l o p e d
the
n c e i p l e s
i n - » measure
a t t h e present t i m e , v i t h o u t d o i n g v i o l s n c e
o f the Federal
Reserve
Aci r
coing
ZLd o n o t b e l i e v e a n y this p r o p o s i t i o n a n d I
went t o c o m m i t myself:
i
t a t t h e prese:
do n o t
i m e , but I
want t o throv i t out
1 paper
~ ~
paper m a y be discounted i f its maturity
six months, p r o v i d e d t h a t t h e F e d e r a l R e s e r v e B o a rtdAL A
merely
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Federal Reserve Bank of St. Louis
400
rar a s they could under
clearly inadequate
for breeding
SBROUE G h a t ?
Now t h e r e
objection i s t h a 3
t h e
-
s rediscounted
by t h e Federal R e s e r v e
a degres
at t h e time; e e r t a
-_
P. -
origi
after paying
stockholders, one-half?
o f the sux e a r n i n g s should b e
paid t o t h e G o v e r m m e n t
as a
franchise
t e x a n d the other h e l f
6 Banks u n t i l
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Federal Reserve Bank of St. Louis
:e
s
or
anrn
the s u r p l u s
Government
ings
f r a n c h i s e s
its a n n u a l r e p o r t
that t h e y h a n d l e d
y
a ons
r e gru l a t i
t
i
n
b y overcror
a
t h a t
E Z
WEL
oF
s
n o o
i f
t C
n oenng
te rte sas
st‘eatshops-- a n d the
The B o a r d f u r t h er r e c o mim e n d e d ft h a t i n t h e
epal K e s e r v e A c t b e a m e n d e d
o permit
t
Banks
t o retain their
3
accumulated earnings
exclusive
of dividends, u n t i l t h e y
. bo. 19 O0=per
3
3
eer
S o r their p a i d e
the c o m m i t t e e s
the r e e s o n s
that r e c o m m e n d a t i o n .
would probably,
t
h
o r the H o
e Board made
O n e reson
these
b a n k s
i n the long run,
business, n o t exactly
e thrown into
r n a t i o n s e.
h
t t h e c a poi t a l a n d
I pointed
out
urplus
of
the
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Federal Reserve Bank of St. Louis
ttention-
should
t o the
be i n
ssi10n
o n
out
earnings
reEnor L2ea
per cent o f e i r
e a
plus, SsoO-THAt Cie
nov h a s a
huncred
IO
On t h e q u e s t i o n o f
and maling a
showingon
t
s hereafter « e s a kine
=
a c t
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Federal Reserve Bank of St. Louis
Sesn a
a
TReAsSUry
B t
10 m o r e s u r p l u s Yo
stock.
surplus?
no, ¢ x X C U S S
Mey
a i t W I E OTS
about t h a t .
Gov. F a n c h e r .
per c é n t g o e s o n
Federal Reserve
certain p r o eo
Federal R e s e r v e
that i s i n t h e o p e n m a
can buy bills o f éxchange issucd
2
e
e
,
c
e
s
S
a =
x
A
<
;
g a r d a Tacs
actions w h e r e t h e maturity d o e s n o t e x c e e d s i x months.
Now s o m e
m e m b e r banks, a
take t h e positi zs
a
great m a n y o f
,SA
t t h e y d o n o t went t o discount
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Federal Reserve Bank of St. Louis
pible a t Federal R e s e r v e B a n k s , a n d
A e r
AO 254
eround
many a r g u m e n t s
Banks o r a n y o t h e r k i n d o f a bank,
and I
think where
ere ought t o b e some kind o f agreement o
certain c o n d i t i o n s
conditions n o t b e comheve p o r e r t o m a t u r e t h e
note m d protect itself b y taking over t h e collateral.
{ want
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o b-
t o point
y
\
now has over 106,900,000
to have.
h e r e 3205
would h a v e
G
e
a
R
a
a
o u t that t h e Federal Negerve Svstem
o f surplus vhich i t
1 d b e a n entering wedge perhaps, a n d
t o be
and n o b e t t e r
might b e g i v e n t o a m e n d i n g t h a t p r)o v i s o o3f s e c t i o(n 1 5 s 0
that b a n k s c o u l d r e d i s c o u n t
OF
>
for
o
estock loans running t o o r
proviso t h e t s u c h l o a n s s h o u l d n o t b e
f the
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Federal Reserve Bank of St. Louis
limitation
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} be® e e
Bcitesewin
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+
business a
taking a n y loan
question.
G0 n o t w e n t
t o
e drievl ioerfp?ra
bans
make
do n o t h a v e c o n f i d e n
did h a v e
fraction
Gov, H a r d i n g
industry f r o m a g r
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ings
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Federal Reserve Bank of St. Louis
Cul curs
xouy
pusiness,
T recollect
2016 “ H e n f t ir
yary
etition,
worth
you heave t h e c a t t l e a g e n c i e s
it rould b e adequate.
Tq o t h e r c l a s s e s
the people w h o
orchard peopleée
G
o
v
e
r
.n...Theyboth
.os i rr r .o Nv a n
eredit, T h e y need tro or three
o f agriculture
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Federal Reserve Bank of St. Louis
years
A T O A Y
COCK
SF |
LO
a a a h
peEenaps
r e s t r i c t i n gte l i m -
the o t h e r d a y o f c o n n e c t i n g
card anc: t h r o w i n g a r o u n d
closer restriction,
2
apply i n sec.
that n o w
wie wre! i c r
C A P O U
o e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Federal K e s e r v e S y s t e
any
e
r systen.
provide
centers
out disturbing a n y o f t h
ple would band together
vecome r e s p o n s i b l e a n c make i t a b s o l u t e l y
absolutely gooa, e n a t h e n i f
your f a r m
were c o m p e l l e d
thought
t o have i t .
i t o u t thoroughly,
that w o u l d b e t h e m o s t
quite i n - l i n e
Term c r e d i t s
would
b e through
woulec. r e c o m m e n d a
a t th
a s L a t i o n s
a n for e
a n c n o o n e jin a
man t h a t
community
h a d guarantee
409
guarded b y the local supervision o f what t h e borrower
was doing.
The Chairman.
D o y o u think that i t would b e possible
to get the cattle m c n associated i n a groun o f that sort
for t h e p u r p o s e
o f re-stocking?
Senator Kendrick.
G o v e r n o r Strong, t h a t would n o t a p -
ply i n t h e l a r g e o p e r a t i o n s
The Chairman.
o f livestock
a t all.
B u t t h e large borrowers s r e not the
men w h o are coming i n here o n this t w o o r three year proposition.
W e have n o means o f reaching them,,that is, t h e
small men.
T h e y complain particularly i n reference t o
the bank corporation loan, o r this benk's pool loan o f
$50,000,000.00, t h a t t h e smell borrower w a s n o t reached
at all.
Senator ‘Yerren.' That f u n d i s handled i n loens o f not
less t h a n 85,000.00.
Senator Kendrick.
F i v e thousand dollers, yes.
every Western Senator here m o w s ,
A s
t h e business i s fast
breaking u p into procuction o n e. small senle, e n d i t has
occurred t o m e that a system o f that kind might b e worked
out, a n d I want t o s a y t o you that without t h a t t h e o n e
important thing i n it is local supervision o f the live-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
would b r iSh ni Ee
g S
means d a i v e r s i -
fiec. farming;
J t m e a n s that a
2 ; does a
little f a r m i n g
livestock.
Large p o r t i o n o f
communities n o w they
c
e t O Duy. a Higher
ee|
anc buying
Li “thet c o u l e
o¢
rr s 5 eS
pag
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to b e m a c e s
e
o
WOULG-
N O t prine
o n y
who o p e r a t e
same t i m e
any s e c t i o n o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-y
4
-
1
4
{ 4
do anythiz
premium
ber banits.
2) 7
~v
y
o
u
hought t o
be m a c e
deventures
only f o r m e m b e r !
Wyatt
S21Aa
and p a s
they p a s s
o n their
loans a r e s a f e a n d
to t h e F e r m L o a n B o a
here a n c t h e
certification o f the Federal
The Chairman.
T h e fe
pt. as: to. t h e e r e c i t o f
is today i n a s good o r
upon t h e credit o f a
l=3 .
double c h e c l e
Ss
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
HESSrVS
the mM
the b a r
other places would
be s u c h a
valuable
Governor
mace
t o
a recommendation
Governor
V a n Zanct
herwise,
o n
Feceral h e
consider
t h e incorsement
h a Ln A
cL
le
R
Governor H a r d i n g .
at
Glia &
you c a n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
have
SS
powers.
the
Ca g i o n .
good,
t h e
even w i t h o u t
the
oe
the F a r m
Loan
Board
nm 2
self i s bac, b u t
cuard
t o make t h e
in s u c h a n d
Governor
Governor H a r d iae
interrupt
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Federal Reserve Bank of St. Louis
oO
4
t s
O
oO
f
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a
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pepnhi
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osen
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Federal Reserve Bank of St. Louis
the method:
where t h e r e i s
t h a t the
a l mining
money i s coming i n c o not have a s much clientele i n
livestock a n d d o not need F e d e r a l Reserve System,
mall extent,
association
a n d t h e y hesitate
t o g o into a n
t o r e l i e v e t h i s f r o z e n condition, e s p e c i a l l y
those w h o a r e selfishly inclinec--perhaps I
ought n o t t o
say selfishly inclined--but those t h a t wish to’ stanc i n
it. T h e y g o t o the Federal Reserve
cent,
o r whatever r a t e
On - 2 t r u s t c o m e n y ,
Many o f those loans
to time, t h e y m u s t r u n longer,
you have pretty good protection i n :
System s o f a r a s t h a t i s c o n c e r n e d
s o I
think
federal hesepve
i n t h a t way.
O n the
other hand, i t blocks t o quite
the W a r F i n a n c e C o r p o r a t i o n ,
Treasury, o r the Governor o f the Reserve Board, o r you
men, l o o k a t i t without taking into consiceration a l l
the surrouncings,
i t would l o o k a s i f the W a r Finance
Corporation w e r e n o t d o i n g i t s f u l l cuty,
a n d that i t
must r e q u i r e t h e s a m e k i n d o f p a p e r a s t h e l o c a l b a n k s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
they c a g s * i n t i m e r e c i s c o u n t
term f r o z e n loans-~good,
o f
equilibrium,
U g L iL f
es
u
hee
>
S S f o f oe
a d
V A S
So
Co& a y y ‘ a t e 7
System
anc: b l
Horation.
sections
ence Corporation.
t o work hana
i n hand
i m o w t h e Governors
of
iWoch, 5
ILDOL S
e
.
poration
i n order t o
contemplate
Act.
b y emendment
t o t n e W a r Finance C o r p o r a t i o n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Senapvor W a r r e n .
p
e
o
p
l
e
a r e saying:
e -7Oires... ¥
Corporetion.
}
t
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»
The C h a i r m a n .
Senstor
it o n m y
The C h a i r m
Governor Nari.s, a s you all -mow g a n i z e c anc. for
years was a t the head o f m
Loan System.
s very much interestecé i n t h i s c i s a s s i o n o f legislaGeO
G o v e r n o r Norris,
to s a y o n this subject,
Governor N o r r i s .
y o u have something
i n your mind
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
who a r e h o n o r i n g u s w i t h
cistrict
where there
i s n o cattie
interested
Go anything
amount,
anc o f c o u r s e
i t i s v e r y natural i
f
tisfaction
of t h a t c e m a n d
arge accumulation o f capital immeciately
Federal K e s e r v e S y s t e m e H w e e .
9,
we a
T
a
n
f
w e n t 1% r 6 t a
solution
b a 8 i t i o n t h a t will i n -
e
volve ultimately consequences
worse t h a n the situation t h a t w e a r e curing.
oeen s h o w n l a t e l y t h a t t h e r e i s a
supply o f capital a v a i l a b l e
nance Corporation has b e e n
i n t h e country.
t
very l a r g
T h e
o séll §100,000,000.00
railroad obligations a n c various industriel companies
have b e e n
s eg
their three o r five
on m u c h b e t t e r t e r m s t h a n t h e y w e r e
of
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
absorbing y
week large
SO-tHaE T H E SCtinitabion-
oL
erve S y s t e m i s n o t t h e o n l y s o u r c e
this @emanc.
ought, i f possible,
t o devise a
E t 2ssems cos m o
means m e e t i n g
demand f r o m t h e f u n c s o f i n v e s t m e n t
tron. b o n i n g é
volume
b e c a u s e t h e moment w e would p u t a n y
o f two o r t h r e
LS. H O G
into member b e n k S t a t e b a n s ,
Wes
market w i l l a b s o r d a
certain a m o u n t
of
long-term obligations, ‘twenty, t h i r a n c . forty-year bonds,
*
and
a
5
i n addition
t o thet there
i s always a
demanc
f o r short~
term e q u i p m e n t o b l i g a t i o n s ; notes o f industriel concerns,
and s o forth, that a r e bought largely
b y a cifferent class
Bea m S
of investors t h a n those w h o take n g - t e r m dons
Now I
cannot s e e
s
o
n why *
aa)
reservoir b y means o f a new form o f i r p L t y
n
o
d
t t a n that
e issued,
by the Farm Loan Sysa
thin:
a
ly
important
t o t h e p w eser-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
vetion
business
s h =
be surrounced
with
should b e ebsojyutely s
isiness.
é
f r o m their
T o m y mince,
ythenrirst mortgages o n
ferm loen bonds, y o u a r e going
pective p u r c h a s e r s , %
h
who h a v e t a l r e n
p i s that
D
e ywese h o l c é e h
b o n e s ,
a r e secured
b y first mort-
an C r h e a y
behine
t h e debentures
t h a t they would issue
i n
Whatever
4
they make, t h e obligetions t h a
y
loans
y t a k e should b e used
exclusively a s s e c u r i t y f o r two, t h r e e o r
ture t h a t t h e y w o u l d
run u p a g a i n s t
to of giving nnoBuméen>sr
they c a n g e t o n better
terms a n d i n larger amounts, a n d with other collateral
advantages,
°
t h a t would m a k e i t more desirable t h a n mem-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
2
pes = e s n i p i
s
Cie
nef 3
tem,
reason,
torender t h e whole country
SpNeba i s t b e e M e m nOG- OT
Federal R e s e r v e s y s t e m ; =
sservoir o f i n v e s t m e
form o f o b l i s a t
e p i t a l ,
b y means o f
b
e issued b y t h e Federal L o a n
=
eithe
Bank, i s adopted,
provisions p u t
h
a
t w
£
i
G
ho=memver
suppose w o u l d v e r y m u c h l i n t h e u s
tation o r burden p u t o n them
membership i n
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Federal Reserve Bank of St. Louis
works G
the u l t imate
ity
epedit
OL
a
Eee
aa
count)
possi bly recall I
you may
exp
months
commerci
or
ard t h o s e
want
50 82 -Lon.
o
t
e
B
the
requirements
DO
e
en
aericuiturel béemk caocs x
2
oe
4.
to
ve, O Y 2 4 2 3 n o t
, e vthirty
if-j
ase+7
proverti
e a
That
oS
LG8
for m o n e y
cl
thing
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Federal Reserve Bank of St. Louis
ers
— am e y l e
any vil
can
S
i
G
e O f what
w e h a v e alireacy p r e c t i c a l l y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
aa
TOV
e e ”
ours¢
onfine
livestock industry.
acute
It
e m er;
gency t o t h 7
Cus
4 sar
ol
mores B . 0 U
has
thaw
n the
t
sections
o r the
country o x
this P
e
)
cbyou people b a c
Us Sot- a6)
an
Oana
wnat h a p p e n s Borrinale
don't cars
nou
ee2 a e
tat
he
U d
°
weery m u c h
ig “
f woule.
Lil
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
the. n a t u r a l c o u r s e
with which t o carry
that
EhsRE
if perhaps n o t tomorrow,
will c o m e r i g h t b a c
The Chairmen.
W o u l c a
program s u c h a s w e d i s c u s s e d
the o t h e
Governor Calkins.
O u r situation i s n o t i n
Mr. Chairman.
Chairman.
m e a n t h e S a n Francisco c i
Governor Callicins
i
s my view
g e e
show to Governor Norris, that farming, treated
ing purposes, b u 1 8 stccl grower does d
two or three
years! credit for current purpose
Now t h e p r o v i s i o n s
o f t h e Federal n h e s e r v e A c t w e r e
intenced t o apply i n this way: gommercial
Sees e e t
e
s :
a n e ;
naturity o f n i n e t y d a y s v e c a A
that t h e t u r n o v e r
e
:
l
i
-
P a e s
a p u r e ~
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
agricultural pape:
+£
Lt w a s r e a i i z e a c t h a t t h e
completed
in
te
then,
provision f o r t h e c u r r e n t o p e r a t i o n o f
which involves a
ATIC = Une
tuvnover of from two to
4 8 “6
investment funds, a s Governor N o r r i s s a x
Et w o u l d d e a
o
y t h o u s s of R e s e r v e funds.
s h l y i m p e r a n d disastrous u s e o f re-
We believe,
upon recent events, thet t h e r e
i s a tremendous
investment f u n d i n t h i s c o u n t r y w h i c h c o u l d b e
this p u r p o s e a n c w h i c h w o u l d t a k e
foats, p r o p e r l y s a f e g u a r d e d a n d
be w i t h o u t t h e
thing t h a t t h e
tion u p o n a n d t h a t
Sible.
the l o c a l b a n k
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
loans
thet s u c h a
recent experience,
27Se
country h e v e l e
sons l a t e
unligquic assets
Teil b e c a u s e
t h a t a
Ppank hes never b e e neknown
e zt o
its
2
~~
usuel m e t u r i t i e
Governor Young has given a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
of -Gneusss 5 0
n the feature
=
M
na p o l i s
G nEeB
® s11
e e a rMo pi
me
d e t n e s e rdil
p
to
our m e m b e r
w So
ue
l
Corporetion,
e n
sreat n u meyb e r
with Him, t h a t s o ¢;
confidence
i n the
An GS
A
E
L u ne
c e m e n ’
Warren . T
Poy
ch
ny
hope y o u c i c n o t
understa:
d o u b t o n m y part.
had
Governor
a cattle j o a n
but n o t meny.
O,000 c e p i t e l
e v e r y
o
te e e e an
C E GL
Se
Ex Gak
ce;
c u
he
w
r
)
a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
stock m a n , a n d
War F i n e n c e C o r p o r a t i o n c a m e along,
gone t o all this work twice a n d c i d
here,
a n c they did not feel
to function.
mppose T
have written t h r e e o r f o u r h u n d r e d
the W a r F i n a n c e G o r p o r a t i o n w o u l d
function.
takes a
N o w i t functi
2
1
O U Claris.
little t i m e t o get t h e s e a p p 2
2 G
n s through t o
meet a l l t h e regquireme
and
a
m not
of a
country b e n k w h e n
i
s a
borrowing
Yer F i n a n c e C o r p o r a t i o n yesterday.
some a p p l i c a t i o n s thoure t h e t w e r e v e r y u r g e n t
was n o d e l a y h e r e i n washington
e t all.
There
in Kkinneapolis, because t h e m e n thet
on the committee e r good bankers, v e r y conscientious,
end t h e y a r e a
possibly c a n
money.
n p t i n g t o t h r o w o u t e v e r y safercuard
ae
h a . n é e Goyernment
will n o t lose a n y
T h e y a r e v e r y liberal
i n their p o l i c y a s t o the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
and t h e y w i l l . t a k e a
deral Reserve cennot,
b y law,
Doeso y o u r b a nUk p e r f o r m
not s u p p o s e d t o ,
*
CP
gome
1
.
R
A
w a n e d a
0 : e m p l o y e s w h o are fam
e lLoanec
one m a nw t o bring c o w n t o W e
Now, t h e y
e p p l i c a t i o n s
in the Northwest,
Corporation
t
o function,
down t o t h e s m a l l s t o c k man, a n c
an i m m e n s e Fast
to t h e c o u n t r y
f e e
P u n e
one ae
hes h a d
I have t a l k e d I
suvpose
c r e a t
SS
e h
>
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Federal Reserve Bank of St. Louis
maybe i t was not, n
not preperec t o say, b u t i t will
mean that i f thet 1
ief
i
n the Northwest t h a t
will b e a good deal
o f re-s k i n g , becauss T I imo
War Finance Corporation Committees
who i s a l s o t h e c h a i r m a n o f - o u r b o a r c a t o u r brench,
e n d that i s what Montana
very k e e n t o restoc!: M o n t a n a ,
needs.
T h e y have phenty o f hay, plenty o f alfalfa a n d
feed, b u t n o t sufficient cattle.
The chairman o f the North Dakota commiztee i s
a very strong effort w i t h t h e baniss t o finance t h e putting
in, of cairy c a a
h a t mea
h a t t h e r e will b e some reO f course,
lief t o t h e Federal R e s e r v e B a n k i n M i n n e a p o l i s .
we will have r r e a t deal t h a t w e will h a v e t o carry, w h i c h
we are glad t o carry, b u t i t will mean that t h e r e will b e
sufficient relief f o r u s s o that when t l
and some other e x p e
f o r instance, harvesting
comes along, w e should b e able t o taxze c a r e
by vorrowing f r o m N e w York a n a C h i c a
but I think there i
o
f course
a s w e usually do-~
m a e n s e relisf i n this W e r Finance
Corporation
the situation f o r
want
t o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
islation needsec
bake care
¥
c
a
1
7
o fg
h
i
7
run f r o m t h i r t y
m e cred
t
H
i
d
o
u
n
k
é
S
a
C a t t l e
r
4
m =
‘
t o t h i r t y - s i x monwns.
trying oO t o m a l e t h o r
Snort: D i m e = ] have n h a c ,
ene 1
em
t + prepared
woulda T i l e
more t i m e
na
C
i n whi
N gs =
a
these. S e n a t o r s
upon o u r
ture e n c l i v e s t o c k interests,
in o u r p o r t f o l i e 1
out there.
4hine
T t realize t h i s i s a
been o u t i n M o n t a n a a n d I
cattle cuestion.
have besn
i n the cattle country
of South Dakote, anc. i m o w the unfortunate situation t h a t
and h o w t h e c o u n t r y
tempted t o h a n c l e i t .
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Oyner o r l a t e r
Gpi-On,=-tO.
base
34
ene
eD
The Chairman. G o v e r n o r V a n Zandt, y o u
t h e “ a r Finance C o r p o r a t i o n
close contact w i t h
word a s t o h o w they
Goyernor
while a g o ,
V a n Zandt.
the
c ae
A s G o ernor Harding
Ioan agency t h e t w a s established
b y
the War Finance Corporation some two or three years
furnished
Sans
Se
amendment was passed w h i c h permi,ted this relief, t h e
Bederal Reserve Bank
tools a
vory active p a r t
a
t least 2: 1
i n trying
along that line. N o w , not only a
t o ge
its Cirectors,
O n e pene.
P e c o s
o f our cirectors, b u t
n down t o our j
tie in trying to develop this assistance which
ance C o r p o r a t i o n c a n f u r n i s h t o t h e cattlis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
434
2¢ h a r d t h i n g
as S e n a t o r
have p h a r e p h e r n a -
eG will mare a n elipisic
Serve B a n k i s
which t h e y
tuel v a l u e
because
he land, a n d
1 a s b e e n oureffort c o w n
there t o t r y t o e x p l a i n t o t h e banks,: a n c t h r o u g h t h e m
their p u t t i n g
u p such other secur-
4
as they m a y b e
ments, t h a t they c a n
w
a s toh e y w oru l d f rro m a
we a r e talzing 4
o
p
regular
c a t tULl e l o a n company,
. c t i v e interest
these livestocls l o a n companic
a
i n the
s s u g Oo
eg
ae e
es
e ted
b y Mr.
impressing upon the people that
there never w a s 6
tion o f cattle l o a n companies, a n d that they will continue i n d e f i n i t e l y ;
t h a t t h e y a r e n o t t o tice over this i
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
e
emergency, b u t t o ¢ arry o n incefinitely.
old-line
h
T
stocked w i t h L o a n s
loans
n o w made
o n cat
o n cattle
aA
S
$
. at
n eh e r e
made a t the reguler price s
bist ty-ot
the a
T
epahs
f o
<=
e o n y “oe
L ng
h
storm o r s o m e t h i n g
s r o are
t a n ea Sl
>
country o u t there;
y o u know
how m i c h o u r C p s t r e i c t - 2 3
livestock i n c u s t r y e n d y o u c a n
pendent u p o n t h e c a t t l e
extent. to. which:
therefore readily realize
ing ourselves
t o help
w e a r e sexert—
a7 b i l a n .
out
the p r o p o s a l
of G o v e r n o r N o r r i s w o u l d
—oS =
r o5 nVan
r e Zand.
v o G
operate
I
o
-ansoiupeiy s o m e
a
=)
ofa
Y a ss
A.
TIS g e
b
ferm l o a n
Lilo
him i n t h s t n o r e a
t o Governor
s2-bLoD
i
L i k i Ae
that n o t h i n g excepi
placed
e objection
at
Norris!
e
n
o n real estate should
ca
d n o 20
b
I
Go not agree w i t h
estate should b e back o f a n y o f
short t e r m a s b e n t u r e s ,
mh
b «
t
or l i v e s t o c k l o a n o r a g r i C u l t u r e = oan
made sound, m a y have
lateral o f the borrower's
in
-equirement
G sea a t t i s
a Siet
y
Le
toan
s i a
-
o f additi
first mortgaze o n his real estate.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor
- c o n c u r
it. T
Qo think thet, r e g i s iees 0 . The
oan B a n i
1.2
m a c n n
for instence,
Degin t o
security c e p e n d s
there
constructed i n some way, <
sould
c e r t a i n l y with
i s n o place
ULL
there
»
for t a k i n g c a r e O L
comparatively s h o r t t i m e
=
t
SiGe.
h
o
n oe
+
£
I C
¢
z
i r e t
m a a d i t
y c r e a i t mach
t o in-~
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
GOvernor
N o r e sa p a r t i c
operation o f t h e R e s e r v e Rants.
Governor V a n Zendt.
T h e y car
get t h e assistancs a n c
recit machinery.
W O R T H aAAQA
CEES
first
Governor
not i n number,
TiegeG
find i n a bdanic
wno w o u l d
b s willing
t o back
i t u p©
even g o i n g §
2
“ereat Ssxutent,
fer
a s to.get
the
their 3 6 rsonal i n c o r s e
ment-on t h e baci: of: t h
a
n w h i c h <1 8 0
Ps
S u g h a k c siehakemays:
bank t o carry, being more than 10 vor cent o f the capital
You, from your own expericnee cown there,
in almost a l l o f that northvest section territory
tt A
h
e
taan=tne
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Senator Wadsworth.
V é r y often.
Governor V a n Aandi. &
surplus
o f 100,000.00,
bank might h a v e a
w h i c h woulc
capital a n d
p e r m i t i
t to
0
whena»100,000.00 l o a n would n o t «.0 the customer
he w o u l d w a n t ~ 2a 0 0 , 0 0 0 . 0 0
Senator wadsworth.
o r
3250,000.00.
O f course applications f o r
are c e r t a i n l y c e c r e a s i n g
i n thet country a n d consist n o w
Governor V a n Z a n d t .
netor wadsworth.
GO,ernor S e a y
consensus o f opinion that
bebly h a v e t o b e g r e n t e d t h r o u g h t h e
O n e o f the
system o f the country.
conferences
t h a t they SELOre £
B a r i n g house, o f opintoen
Galikins e x one o p i n i o n
ACOSELrVE
at ‘
~
2 A 4
and G o v e r n o r
or Young that i f a n y
available
t o the non-member
0
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Federal Reserve Bank of St. Louis
supported, t h r o u g h t h e recent cmergency,
the n o n - m e m b e r
banking s y s t e m o f t h e country.
agricultural c i s VI<ACRE
43%
3
e g extent,
r a l
)
our l o a n s
one-half o f
>ome
e}
N M A aOe
borrowec
thiré o f them have actually
toG n o n -Om e m !
Rs ens
b y
i
a e oe
“ f +
when t h e y c o u l c n o t
hes n o t
are
+t
peen 2
T
e
s
e s+
38 c e n t o p e n o t h s r w
h a v
of a
sinele f a i 2
A:
P r a ee i
TOSMOSr
i e t s
D a s s
been n u m e r o u s f a i l u r
Harding
exercisec
rynreages
ea x
presses
ioe
e
Pa
Vg
lt,
yan
pre mium u p o n t h e
non-member
banking s y s t e m o f t h e country.
The C h a i r m a n .
to h a v e
was
cenator
t
senator
- € 2xip r e sB
sion
Stansfield.
hopefully
impressed «
livestock i s concerned,
or
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Federal Reserve Bank of St. Louis
are e b o u t t o receive f r o m t h e W a r F i n a n c e C o r p o r a t i o n ,
ena through t h e socallec $70,000,000 pool,
not l o s e s i g h t o f t h e f a c t t h e
tron O n e d u l y 8 6
Con
O l Sth
h e var Fina
g e year w i l l c e a s e
loanse
ABeeo; ache gUeriamnaleee sac
{ne P A S .
GOnGcernea.
For a
great m a n y years
practice uncer which livestock paper wes consicered
the livestock
commercial paper an¢é a great proportion of
growers!
finencing w a s Gone b y t h e selling o f livestock
notes a s comnercial paper.
T i s w a s cone b y 1
itself h o l d i n g t h e m , r e c s i v i n g t h e m tnrrough t h e l o a n c o m -
pany, returning ther
i
loan
e loan company, a n c t h e
company taking t h e m and replacing them,
a s you lnovw.
Now, w h e n t h e W a r F i n e n c e C o r p o r a t i o n c c e
to h a v e
we s h o u l d
nance C o r p o r e t i o n a n c @
go0,000,000.00 pool. i
ec v h y s o m e o r g a n i z a t i o n s u c h
ration c o u l d n o t b e continued,
cannot
a s t h e v a r Finence Corpo=
a n d perhaps p l a c e c u n c e r
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Federal Reserve Bank of St. Louis
piyine t h e loens,
and pcrpetuated.
icy o f tocey
1
e War F P i n e n c e
i s tryinkato f u r t h e
1
¢ policy o f having
livestock
machinery s h o u l d b e a
w e d
a p s e , because i f i t
cid i t might precipitate enother pai
think thet w e should u s e e v e r y effror
ould
b a c k
t h e s e
i t not o e
livestock. l o a n companies,
om notes r u n n i n g r r o m f o u r t o
opportunity
t o borrow f r o m their o w n
to t h r e e years, b e c a u s e t h o s e b a n s
long-time l o a n through t h e Feceral F a r m
would beé
System,
h e v s their position/strengthenec?
wy
Senator stensficld.
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Federal Reserve Bank of St. Louis
442
y impression w a s t h a t incividual
M
Senator w a d s w o r t h
cattle l o a n c o m p a n i e s s h o u l c n o t b e m a d e t h e d e m e n t o f r e -
placing t h e loan t o relieve t h e situation, b u t rather t h a
the m o s t p r o p e r a n d r e a s o n a b l o a g e n t f o r t h e F e d e r a l Banikc
anc through i s the local banker, w h o c a n co=
the cattle. l o a n c o m p a n y o p e r a g
i n his c i s -
con't s u p p o s e t h e t y o u w o u l d s u g g e s t t h a t t h e
ceal
Federal F a r m L o a n G a n k s h o u l d / C i r e c t w i t h t h e c a t t l e l o a n
trict. I
W o u l d n o t t h a t b e proper?
Governor V a n Zandt.
Senator vadsworth. Y
m e a n Ciscount t h e i r paper?
Governor V a n d a n d
h
Corpors
tion
i s coing
e same e s the
N O W .
Senator Wadsworth
T h a t was a n emergency mcasure a n d I
whether y o u w a n t e d
t o consicer
s
e
y
e rma-
intent t h a t
loan c o m p e n i c s w h e r e prop-=
I a m u n d e r t h e impression,
o r a t least
mast a r e under t h e impression, t h a t o n e
v
accomplishec
by a
better r g a n i z e d
a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
crecit system f o r cattle andagricultural interests generaiLYy s t
h
e
a
p
e
r C r e d i t then they
We e r e uncer. t h e i m p r e n
i n N e w York that t h e large
profits t h a t were m a d e b y these cattle l o a n companies
arose f r o m t h e mere fact that
for sele a t very favorable rates i n the a s t e r n markets,
where m o n e y w a s 1
&
a n c t h e n turneé arounc a n d loaned
their money a t 1 0 and 1 2 per c e n t .
t o the cattle m e n a n d
hat i s where t h e y made their profit.
T h a t m a y not b e
true o f all o f them, b u t i t i s true i n a number o f
ITthink there w e r e c a s e s i n a b a n k i n New York where
thore w a s a n interest s p r e a d o f 110 p e
they were b o r r o w i n g as lov a s 4-1/2
°
Saepphctees|e
Goyernor S e a y 1
G e r 6 2 Le y0ue e
efter b e i n : questioned,
that
they w e r e e n d e a v o r i n g
to
8 por cent.
Capitol the other day, e n c that is, whatever machinery i s
createc must b e o f a characte
h a t w i l l give assurance
to the bankers t h a t they c a n afford t o make loans f o r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
than they n o w c a n because t h e r 3
an o u t l e t
and thet same assurance w i e x t e t h r o u g h
companies. é
c
n
O
11 extend
borrower, because
t o t h e cattle
h e will t h e n feel t h a t h e i s entitled
to
Longer credit.
Now m y i m p r e s s i o n i s t h a t t h s r e a r e f o u r p o s s i b l e a v e nues
through t h e f a r m loan s y s t e m ,
other woulc b e through creating a
means Gcley, e x p e n s e ,
brand-new system, w h i c h
a n d acditional overhead
would b e from t h e Treasury o f the United States,
if you
s i n g t h e War Finance Corporation permanently,
please,
or some other agency o f thet character; a n d t h e fourth
the F e d e r a l R e s e r v e
funcs, T h o s e are
consicérec.s I
ployment
f o u r possible plans w
a m porsonally o p p o s e d t o em=
years, b e c a u s e I
e
intr
u
souncbanking
senator
h
to
o f t h e Federal N e s e r v e B a n k s T o r
o f t h e funcs
terms o f t w x
, b y heving Cirect access
1
s y
e
r
e could n o t b e a n y
security t h a n t h e b r e e d i n g h e r d s
h
e country,
n
-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
is t h e o n l y c a s e i n w h i c h y o u w o u l d
Por
extend
Peveiueacvone t o a v e n i n t o
‘<1
TS N a v e
no c a t t l e i n d u s ~
brecd-
wore g i v e n t h e p r i v i l e
years f r o m
R
F
ere a l s o s e n t i t l e c
eral K e s e r v e
e
a
s
i
o
e
f borrowing f o r f r o m t w o t o
r
n
e
v
e
System that the
o f -crecit f r o m t n e
d that t h e farmers
n
w h o want
t o
puy trectors
60ulo
o t
b e lr
ips
seo
a a y
w n e r e
Stop.
Senator Gooding. I
do not
the livestocl: i n d u s t r y
swighimr acter ey
ae c o n t u r yc and:d i
l
i
v
e
s
t
o
c
k
men p r e t t y n e a r l y c l e a n t
we a r e f a c e é w i t h a
n e w condition:
o u r h e r d s a r e depleted,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
have got-to b e built up,
to have longe
question a
n
a
back t o normal, a
r
the e r e
B
u
t w h e n t h e country finally gets
year o r two years will pretty
in
c
’
av e 3 o , i n my
judgment,
o f the
industry.
Now, t h i s whole thing presents this v i e w t o me: t h e
n
s y Bi
s\ t os G e v e l oe p t w o u banitings
o other i y o u wa
t nt
q
i s wh
in t h e c o u n t r y t o t a k e c a r e o f t h e Dusiness i n t e r e s t s
incustry i s just a s much a
N o w I
we have.
a m quite s u r e ,
i f you open u p
n Loan Banks o f this country, t h a t i t will
there i s n ' t a n y q u e s t i o n a b o u t t h a t i n
get a w a y f r o m >
my mind.
A n d maybe
is t h e question,
i t ought t o get away from you.
T h a t
o f course, t h a t w e e r e
s largely livestock
not n e e c t o h a v e a n y business
with t h e Feceral B a n k s
i f t h e y c a n d o business w i t h t h e
Farm L o a n
we w o u l d h a v e
p
u tian o a r y j u d g m e
t h a t y o u have
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Give C
O
pt
yin i m o w that. t n e
Reniz i s coing great
of some committe
or l o c a l boards,
B
P
S
N E c a r e ~
n scrutinizing loans, t h a t there
an
DECaUsSES
livestock grower g e t long credit, b u t I want t o
money a
little cheeper t h a n h e has been
H
e
s (eis womeaieniergs:
ANT I N A TNC: 2
SeA
P U L T '
- 3
a
ae
.
cow ¢
+
Bank a n d t o
livestock growers
10ans G i r e
and.
p
s
p
l
h
e country, a n d
t a s they are now, through t h e boards,
e your local banks, a n d 4
a
6 SOxrt
danger o f t h e t i n m y mino.
not k m o w w h y s
Federal
R e s e r v e Benks
s h o u l d n o t become
entral clearing house a n d benking institu-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
enc grow-=
legal business
have
For h i m
aoout a
t u r n around.
year w o u l d b e
a long time,
prover might c o that,
banking b u s i n e s s ,
a n y more t h a n
panking w i t h t h e
s banking ib u s iness.
GvenEYy Lo: C r a y
it the regular business
transacting
every cay
16 C O U N try
over every
Finance Corporation,
i t seems
that e x i s t s .
ey?
a
rea
l
of t h e country.
Y A A S W O L rHt»
(ferent
for a
final conclusions,but o u r arguments
consicerable distance g o along parallel.
That
is
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Federal Reserve Bank of St. Louis
449
in m y q u e s t i o n t o G o v e r n o r V a n Z a n d t t h e
it t h r o u g h t h e banks.
In connection w i t h the livestock
isworth, y o u a r e aware that n o bank
foree o f inspectors a n d t h a t l i v e s t o c k l o a n s
be inspected. E
S
a
n t h e t i s g o o c today a
from t o d e y m a y b e i n danger, u n l e s s
sionally b y a n inspector,
the cattle loar p
i t i s observed occa-
a n c the most important force o f
e s was t h e i :
Senator G o o d i n g
{
month
o
f inspectors.
I think t h e y s e n t o u t s o m e i n s p e c t -
oans were made t h e y discovered that that
woat
w a s
h
e
w i t h
m a t t e r
c o m
to y o u t h e t t h e l o c a l b a n k e r 3
P
r
a
i
s
e
T
.
want
i n s p e c t o r
t o
you
have.
Governor Callzins. I
Senator Gooding.
anc t h e y d o n ' t
think that i s right beyond quest-
H e k m o w s t h e branc,
t u r n them eround
them two o r three times. I
t h e hill
h e k n o w s t h e ran;
o n him anc count
have b e e n a farmer a l l m y life;
nor a n y t h i n g o f t h a t
full- life i n the West,
things.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
450
Senator Hendrick. D o n ' t you believe this i s true
on the question o f inspection, t h a t the difference i n the
inspectors
i n t h e t w o c a s e s w o u l d b e d u e t o t h e adiffer-
ence i n t h e l o a n c o m p a n i e s ?
T a k e o n e l o a n compeny that
4s local, organized f o r t h e purpose o f making losns o n
livestock, t h e y would inspect t h e livestock security
on its merits, w h i l e t o o many o f the inspectors t h a t y o u
speals o f h a v e b e o n a c t u s t e d l a r g e l y b y t h e e x p e c t a t i o n
of securing commissions.
A s i s shown i n the livestock
market many, m a n y times, t h e y have made insecure a n d unsatisfactory loans f o r t h e purpose o f getting these commissions.
and I
T h e r e i s too much o f a
think a
Gisposition
t o c o that,
local l o a n c o m p a n y w o u l d l a r g e l y c o r r e c t
that difficulty.
The Chairman. I
went t o cell Senator Gooding's
tion t o one point about a n y plen o f raising money b y
of debentures o f land banks, i n its bearing upon the
of credit t o the cattle man.
rather obscure point.
growers
I t i s a n important b u t
T h e resson w h y s o many cattlsé
i n the United Stetes e r e paying 1 0 and 1 2 per cent
for t h e i r l o a n s i s b e c a u s e t h e r é i s a n inadequate s u p p l y
of credit i n thet locality;
a s Governor V a n Zandt, ,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
451
cattle m a n i s bigger t h a n t h e local bank i n many cases, h e
has t o g e t h i s m o n e y # s b e s t h e can, a n d h e f r e q u e n t l y p a y s
through t h e nose f o r it. N o w , i f the credit i s t o b e arranged f o r t h e cattle industry, a n d i t applies t o other agri-~
culture a s well, a n d i s confined t o what the local bank can
furnish o u t o f its deposits, t h a t condition i s going t o b e
perpetuated.
W e want t o supplement i t by a plan b y which
the raising o f money b y the sale o f dobentures does not dis~
turb t h e capacity o f the local benk, b u t keeps t h e deposit
account just the same, a n d he i s relieved o f certain natural requirements b y new capital t h a t comes i n t o t h e country.
The local banker i s going t o object t o that plan.
been living o n from 8
H e hes
t o 1 0 t o 1 2 por cent. discount rates
and y e t h e i s c o m p l a i n i n g a b o u t t h e F e d e r n l R e s e r v e S y s t e m
and their high rates. L e t me tell you whet hes happened
in just o n e case.
t 4 t h the Federal Resurve B a n k o f one
district having a rate o f 7 per cent, I think, Governor Harding, t h a t 1 8 p e r c e n t o f t h e l o a n s d i s c o u n t e d
b y thet bank
were a t 1 0 p e r cent.
Governor Harding.
T w e n t y t w o a n d one-half p e r cent o f
the loans.
The Chairman, T w e n t y t w o a n d one-half p e r cent o f the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
loans offered f o r ciscount b y that bank were p
LOcper. t o n ts
Governor Harding.
The Chairman.
T e n p e r cont.
N o w , since t h e Federal Reserve B a n k o f
thet district h e s reduced i t s rate t o 6 per cent, 5 2 per
cent o f t h e l o a n s o f f e r e c f o r c i s c o u n t a r e p a y i n g 1 0 p e r
cent.
T h e myth that t h e reduction o f rates b y the Reserve
Benk affects a
recuction o f rates that t h e member banks
cherge h a s g o t t o b e dissipatec.
WLil be: 80<
I t i s n o t s o a n d i t never
T h e rate t h e y p r y when they borrow f r o m
the commercial o r member b a n k i s governed b y the question
of whether there i s o r i s not adequate baniting capital
in that section, a n c t h e Reserve Banks c r e n o t going t o
be able t o get rates d o w n t o the cattle m c n o r farmers
throughout t h e country until w o g e t more cepitel i n thore,
anc the reason the banker Coesn't get morc capital i s that
he wants t o live o n these high retes. T h i s plan doés
get more capital i n t o that country, a n c thet i s what w e
want t o do.
Senator Kencrick. I
think v e sre fairly well agreed
on the thing that w e need o n a a l l that, a n d o u r time i s
about up, e n d n o w the question srises, ‘ h a t will w e d o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
had o p p o r t u n i t y
j i s e c u s s i t w i t h you.
Senator K e n d r i c k
i a ! n e e a
e G
Wa
e e
e s t o
week, until Saturday T h e r e a r e Givergences o f opinhere, s o m e h o l c i n g j u s t a s S e n a t o r G o o d i n g holds,
+
Reserve System i s sufficient t o meet this situation.
ao
re differences o f views among t h e Go,ernors o f the
nis a n d w e want t o bring them together a n a ar-
rive at a conclusion which we can all say, i n our opinion,
meets t h e
we c a n c o that I
t h i r w e h a v e cone 4
way of constructive legislation, o
v
a n ¢ o i n the
far a s the emergency
is concerned w e have agreed among s e l v e s to d o everyto promote the <
a g o n c y now existing
Wer Finance
with m e n ;
w e have
a n
ere for a b : t h i r t y men, enc we are going to
select those m e n for t h e m e n d g e t their organization built
up a n d d o e v e r y t h i n g t h a t w e c a n t o g e t t h e m e m b e r b a n k s
to
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
cooperate.
nator Gooding.
B
r
y much pleased
here v e r y generally b y all w h o have
you w i l l s u e c e d i n w o r k i n
agricultural a n d
to you a t the Capitol.
livestock b u s i n e s s
with whom
Or o u r C o n c e r n .
of t h e c o u n t r y i s t h e
is nature's
must n o t
vidual L a ¢o1
e
G
b e consi
s c . Ss
i @ c a n pass o O ;
a
s t h e indi-
i s t e n c e and
this g r e a t c o u n t r y
nall a s c o m p a r e d
country.
6-sSoul
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ane
you h a v e
ALLY
to l o o k
Bop s b s e e m ok:
e
you G o v e r n o r s
5
s
s+
a
k
s
ofFay-tne
needs
o r tA hT e country,
=
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r
tew o ao>
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an n cc
r
s
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at 11:30 o'clock a m ,
YooOm enc.
r
e
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ce o f Go,ernors proceeded).
Gentlemen,
o
w ei e bine
s
senators Warren,
T must m a l e
Spe
b anc
t
few r e f l e c t i o n s
makes u p oin m y m i n
aLLo
men, e v e n including Senator G o o d Bes
the b e l i e f
Governors
tha
ha
AeRe) l obsf u l ,
ofr
intenc
be N e lpi ul.
3 3 eetat
‘8v o u fellows i m o w this busi
y
d
yi try h e s w i l t a o
you g en t v p some
n
a
t &
will get behind it".
stomach enough t o dt
t
Geserve
'
n
toh e
dr e w a
from t h i s o u t r a g e o u s
Governor Calkins.
M r .
2
what i s needed,
the job; t h a t i s what
f we
I haven't
h
got
Gaget i t cone,
which
is
i m
‘eral R e s e r v e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
gone a
p
tong w e y i f we-nhey
e in e
o
T
group o f Senators w e have had
NeGre- W s) n o - q u e s on
justify that confidence,
ere atter.
fficult
t o meet t h e views o f
perfectly 3
Governor C a l l v i n s
w
e
n
ORS
t O-COrreecucene
Governor S t r o n g l e e r a x i n g , a l t h o u g h I
a t e m e
cannot
omparison
a
for l i v e s t o c k
pur
a
n
d
o l aieeaee Be a
farming p u r p o s e s
a
e
:
a
e a s k s Se
g r o w i n g business,
somethine a v o u t t h e
r n o r
planting o r c h e r c s
E e anc!
V<¢
is
m o n e y investec. i : L i v e s t o c k g r o w i n g
turn-over;
current p u r p o s e s a n d i s r e p a i c f r o m t u r n - o v e r
=
not b e o f f s e t
entitled
turn-over,
i n any way
i
f the=iavesco
we
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
to the same consiceration, because
avoid
Ene s t a n c p o i n t
o f
years! crec
Governor
Ca
S e n e t o r Goocing h a d 6
v e r y good.
point there.
2e
e
Loe. Coe m a n
S
a c
e
p i s s3
o n 4 here
R
A
C
E
S e e s a
5 ] w e a i m e
PhS your
not k n o w
tie currens,
care
of
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
our
yerioc f r o m t h r e e
quirements
s i x months,
b u t f o r t h e lesitimate r e -
o f t h o s e w h o have. a n u n d e r l y i n g s t r e n g t h
wont t o b o r r o w m o n e y f o r l o n
anything t o supply that need
ntreins a c e o T
a n
anything
1 can.
sort o f sketch o f some legislation, a n c é c i c
a i s
that fact with
at t h e r e o a u e s t
M i s s i o n O
f
of
n e
t
i n c u c
y one
c i c
h
w
e
a
n
releationshipss
shoulda p r o b a b l y
ation e x p l a i n
trict,
7 On
S e t e
Farm loan syste
t
b u
a
m o r the opinion
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor C a l i c i n s .
i
b a t
k
n
o
w
the Goyernors o f t h e
n that
Meccorve c a n i s fave. p r o p o
livestock o r a n y o t h e r i n t e r e s t a n d m a d e
proposed
t
from a c c e s s
h n oai s it v woirlpl
pt member banks,
thet t h e r e w i l l
be a
your legislation completely
howl
over
iv +
Cnat
banks
C
cI k Nthine
hO Iaw e v
ought t o b e excluded
other
find s o m e M G e a n
the F e d e r a l R e s e r v e
e to
system
€XO0us
Governor C a l k i n s .
The C h e i r m a n .
That
Mr. C h a i r m a n .
is
E-cannost
we c a n n o t c o i t w e a r e n o t v e r y ingenucus.
Governor I
S
are
E
mOM e m pGe r s
woulc
like
t o ask
i f those s e n a -
Agriculturel Commissional o f Inquiry.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4245
one o f
The Cheiriman.
CHM.
any s p e c i a l c o m -
Governor S e :
:
Chairnan.
S Utahee
Sxecption O f s e n a t o r - f .asworth,
bloc
and
amen
ei GS>
very sudstantial
influential
vr
organization.
a
n WR ~
memoer
upon Go,ernor
of
iS)
of
I hkepren t e
not
want
n i n g [ee
better,
that
let's
without b e i n g
men
ances
) Foofpf
view
+} _
to compose
CNabtL
adooutate
‘
this t h i a n c . “Here i s the
Our o p i n i o n o u g h
more T O -feL.esOune
E
GanW c o ;
egislation
5u
.
tnroush
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
jie CUneirman.
“No. E
t
h i
e
t
h
e pilen- 1s: tne. inpor tant
thing e
Governor C z
A
n
d t t 2 s 2 p -to- w e t o euticne f c .
what G o v e r n o r
H a
and | r . H a r r i s o n h a v e
at a l l - o p p o s e d
46 a n o t h e r f e a t u r e — o f
responsibility
t o “it
1% on
o f recommenda-
event t h e l o a n b a n k s a r e
make l o a n s o f t h e c h a r a c t e r w h i c h w e h a v e b e e n
discus
t h a t t h e y first b e approved b y the Federal Re-
SErVEe
whatever i n that r e g a r d T h e r e must e s p o n s i b i l i t y , a n d
mention that s y
a s a matter o f interest i n connection
say t h a s ?
fothinkg o n e - p w o i m s
‘ependently
The Chairman.
information?
W o u l d y o u not help t h e l a n
o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Certainly.
That i s e p o u t
a i
nk s h o u l d p r o p e r l y
nairman.
Governor
V a n “Zandt.
Governor ‘wWellbor: M
q
t Gas n e e e
nance C o r p o r a t i o n h a s a b o u t t h e s a m e v i e w s a s t h o s e
by Governor licDougal.
T h e y co n o t w a n t t o b e tied
instance,
pointed
w h e n they hac a
committee
t o
accommodetion
in
our bank i n the w a y o f 2 room, s n c 1 toic t h e m
a room next t o the directors'
end. t h e y c o m m u n i c a t e d w i
they turned i t down here,
be i n t h e M e d e r a l
Chairmar
W e l l F O U : Gad.
t
h
a
t
, d i d you? e
I simply
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7
Go 1 0 0 k o u t e f o r
{ thank
me C h a i r m a n .
freasury o f t h e
one thing.
e nt
United S t a t e s p e r m a n
egeer b e e t loans,
or
ly
f u r n i s
grouraricnel
attle l o a n s
loans,
lencing m
One
r any
other
o joinc~ or.
J
ergency p r o p o s i t i o n e x p i r e s
Pooreacron
Governor
AU[Omas r e e
The C h a i r m a
H A A
w
h
RL
federal
brand--y e w organization,
cr
how are
mH O U T
new
g uo i on gy t o
the p r o t e r
press t h a t
the p r o p e r mechan-
mechanisn,
but w e w i l l
7
AIO A T E
pmol &
Rance
S a n s
ether y o u l i k e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
464
Chairman.
M a t
VNOU-C a r y S C C n o w . . .
cultural Commiss
n
a
t t h e y wili'do.
a r e —awonm
n
e Joint
L s
T e r e
w
t h a t hold that view, a n d Mr. Ancerson
has been h a v i n g a great struggle w i t h t h e m t o g)e=t
view. ;
o f them i s Summers
Governor
t
o
f r o m Texas.
r Gooding practically holds
thet v i e w .
The Gheirman.
T
e
n
y
k
e from
Senator Gooding seic
> of c o m m o n s e n s e a n c t h a t y o u p e o p l e
GO>co
twelve d i s t r i c t s
a4
such a
who
now
b
n
when t h e y m a r k e t - - s i t u a t e d
u
y them
e
a sA
agricultural districts,
x
p
r
c
a
c
t
t
t year,
i
c
a
l
l
y
s would b e
four
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gown w i t h vaeper t h e y
WwieLe: Conle carry.it. - L - w i l l
tie l o a n s w o u l d n o t b e
riculture i f they were i n the
Ransas Gity, Dallas,
normous a m o u n t s
o f it, a n d s o w o u l d D a l l a s a n d
Kansas City.
Governor
d
t one year
an incustry.
o not g e t the i d e a i n your mind
e
for
h t h e l i v e s t o ctk i n d u s t r y a s
L e n o .
T have b e e n e r o u n d
everythings
s
i
t
u
a
t
i
o
i t
n w i t h us.
farmers have been a c c u s t o m e d r a i s i n g their grain,
Q
a
n
c
want
. they want
t h e cattle f r o m
fifteen a n d twenty
-_
as T a s t
a s
t o b uy them because t h e y
f production, b u t they a r e willing
o
cannot s h i p t h e o
a n d s e l l i t ; t h e y c a n n o t .get t h i r t y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-“
GUCcGSG
wagons
then g o t
Governor Y
apout-re}
his- p r o p e r t y
Governor
ererence d o w n t h e 4
Ro
M
Governor # G i l o o r :
a n a i r m a n >
bie!
would
much effect,
something o n
but I woule l i k e
s e t i t out o f m y system I
thing, 5 t h a t s e n e >
TC
Gooding m a d e a
f a ned. a
meiate.
a m glac
good impressio
t h e Federal
”
ys
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
rences
tL,
hairman.
R
e
s
e
r
v
e Ranks
c a n furnish
capital thean
a
t r e q u i r e d f o r t h a t industry;
they
30 Et; but. the question 1a, 1s_it
question o f the three-year J
our b a n k s h a v e p a p e r
i n their port-
that t h e y c a r r y t e n years, l o t s o f then,
can t a l e
have o t h e r 7
paper
reciscount.
paper w i t h WSu s
>
rea lily
losing a
t
t
h
s
p a p e r ,
h
r
y
e
a
e
s
t
b u l “they
t they can
y
e
e
Gare
a
c v 2
m is
fine opportunity t o impress itself u p o n
he districts o f our country,
o f its ability a n d willing-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
t+w o u l c
b e un-
throughh t h e g F e c -
they will
het h a s b e e n
to
through lews e n d
and e x p e r i e n c e
o f the world
LA
C
k
i n b a n.
emergency.
Governor
seay
M r . Chairman
a n d Governor wellborn,
heven't t h e member banks i n my cistrict and i n your
CPSC
b o Ie
C x LeNL
respective
portfolios §
h
paner a s you mention,
and t o o m u c h o f it.
Governor Wellborn.
they a r e taking care
parcon.
T h e y c o not get
up t h a t t h e y c a n n o t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
function;
t h e y cannot m a l e
to renew
T do-not t h i n k y o u e a t e n m y i d e s
Governor
e r e s sim a nt c osm i nsg
You d o n o t s e e
teo trh i se B o na r d
your cistrict.
here f r o m o u r
Governor
zo: Cochise -sosro<=
Governor
They abuse t h e Federal Reserve
>
+
.
+
.
1-
not t h e
beceuse t h e y c a n n o t m a k e o u t a
Governor
of o u r S t a t e s
Go not think t h e Governor o f a n y
Ba
oO
Board.
am s u r e .
Governor
Governor
Governor
They have n o t i n ours.
Governor H a r d i n g t o
never h a v e
come
t o the
jatisfaction cdown
an b e t a l s e n c a r e o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor Wellborn.
sw~rwant
exactly
2 VS
e
ex
So
what
Governor
whole thing up.
our share o f one,
long-time
c ay p i t a l , o i f
+E
agricu TDUPE.
T h a t
‘1a
<
a
aa
u
n
w hr e
ae ae t eUw o up l d
is
e
happen.
about one, t w o a n d
Governor
g o nn longer
i
r
s
t h aanu
Piece
7
i
! r a te iym
e 3
the y e a r ,
The C h a i r m a n .
t
:
per
t
s
but
we do
con=
o
n t Paes)
a HS
regard
ven in;
tract b e h i n d y o u ,
planted.
Governor
F
a
n
Banks, s o m e
e ts
=
wheaye
them, }
W O O D S
quic.
paper,
it c o m p l y
1o%
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Reserve A c t - - t h a t p a p e t
going t o b e paid
= to open t h e door t o a
e
l o t o f p a p e r whith,
o n
e
n i x months,
o
l will
maturity
cgthan s
r
aity i n t h e
Governor C a l t c i n s .
T h e proposal
Ci
System
P
as a
proposal
He-sSys bem i n t h e
a
i s t o open the coors
whole t o long-term lo-
t o put t h e whole twelve
s i t u a t i o n ,
o r a
worse s i t -
uation t h a n thet o c a p i e d b y the Atlanta B a n k
where c o u l d t h e S y s t e m b o r r o w t h e
Beak c a n b o r r o w
resources.
S e ary .
:
o
n
when there
s
r
t
=
o e ro 1t h
Sc i
}
o a t tGh e r e
ree m e m bve r
h
a
t were able
ioan.to t h e rest
Governor W w e r l b o r n .
s
e
there
Governor
thon w h e r e t h e b e n k s
eredit
when
i t is c a
e
i
c
a
n
a
b
t
o
t emergency,
t
l
i
n
a n d that
o a
situa-
e t o supply liquid
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
riot 4 7 scouns- t h a t
Governor Wellporn.
Reserve Bank, b u t I think
g~term p a p e r w i t h t h e
paper e n d p u t t h e i r
shorter p a p e r w i t h
banic i n c o u n t r y , S t a t i
There isn't a
Cheirman,.
maizing
:
Banks
Governor w e l l b o r n .
you C O u a e n ©t223-the
coule s t e n d b a c k - o f t h e m ,
ve t h e m a s s u r a n c e
panikswhat t o loan, b u t
that
you w o u l d s t a n d b a c k o f
The Chairman.
W
e
Governor Norris.
enything a t all w e
, Nse L ien e rv- o i
n e t or
rmen ,
to c h o o s e b e t w e e n
is @ DS
rBf e c t ,
* e a e | >
involves e l e m e n t s
which w
2
Nnerhans
O
t w o alterna-
b u t each
n
e
w
s
o f which
s open-
the F e d e r a l
COOr- E O o n e - y e a r
finwFla
C
onference
of course,
t o the objection,
are helping t o build u p a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
473
e banking i n s t i t u t i o n
members f r o m c o m i n g i n t o t h e F e c e r a l R
even g o further t h a n that a n a take
the
i members that we h e ia
v e r n o r Young
lesser
heat a l t e r n a t i v e
o f
anc
xb s a t e s
Governor Norris, t h a t t h e
esscntia s a t u r e
o f t h e plan i s t o permit t h e rediscount
approaches
455 S L X
s now t h e limit o f
at p a p e r c o m i n g t o
sets w i t h i n
eps t h e system
pe
Senator
Norri
Tt w o u l d
not
s i x months
bee
pe
when t h a t
longer t e r m
maturity t h a t w e c o u l d
Reserve B a n i k c r e a t .
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Federal Reserve Bank of St. Louis
474
It robs i t o f t h e v e r y objection,
i t seems t o me, t h a t
both Governor Biggs a n d Governor Vellborn advance, t h a t
4
we a r e creating a
of agriculture.
brand-new baniting machi
W e gs
W
e
: are
within s i x months o f t h e period, whether
other
Governor S e a y .
W h y n o t follow t h e structure
of
the
should o n l y b e r e c e i v e d
the F e d e r a l
Reserve Banks
w i t h t h e approval
heserve Board, T h e n y o u follow t h e struct-
The o n l y e x c e p t i o n w o u l d b e w h e r e
hrough
t h e l e n d banks.
Governor B i g s
as a
it
matter o f di:
T
h
e point that I
intended
t o raise
S O s
it w o u l d s a t i s f y t h e s e S e n a t o r s
i f w e would extend t h e
livestock a n d e g r i c u l t u r a l p a p e r o n e y e e f e e l i n g t h a t
tHe Gurnee Over,
2 1 compari
w i t h commercial
paper w h i c h w a s
point, I
belisve that w e all f e e l that t h e
was worlzed ¢ 3
1 8 capable o f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
r
475
funds
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imcuUstry; =
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s t e
direction o f opening
operation.
, taking
w
theo
N Commis sion o n Agricultural
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Inquiry,
members
p a r a s O U L E - G A aeover,
of
t
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t e
t came o u t pointedly
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t h e t i s , advocate e m p l o y i n g
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other hand, a s t o t h
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they must have t w o o r
i
Governor Calkins.
p e r f e c t l y obvious, f r o m t h e
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Federal Reserve Bank of St. Louis
approach meeting everybody's views o n i t and still
sound.
N o w
Lt?
senator G o o d i n g
hat h e w e
m i n g t o rather a
point o f view,
complecent
something s t a r t e d
would r e a
that
tuetion h e w o u l d p r o b a b l y g e t
along with the crowd.
cid make o n e statement, a b o u t t h e
year crop a n d
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cussion, Mr.
the t a b l e I
thought
of
matter.on
move
you i t is the s e n s e o f this Conference
i n m y min¢c
possible proposals:
Firs
t i e “6x
of t h e W a r F i n a n c e C o r p o r a t i o n ,
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o
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e
w h i c h c o v e r s Treasury}
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
see w h e t h e r t h e y v o u l c a p p r o v e
o f that;
whether w e w o u l d a p p r o v e
creation o f a
n e w corporation;
those w e r e accepted, ¥
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pE EOVG--Of
coors o f t h e Federal R e s e r v e Banks; and, fourth, w h e t
the Farm Loan 3 5 n
should b e employed.
T h o s e seem t o
me t o b e the a l t e r n a t i v e s unless m e o n e h a s another
Governor
r i a
a mmaen n
c i na g
A e
the
it just exactly
The Chairman. Governor Van Zandt, w h e t i syour vicw?
Governor Van Zandt.
amencment
M f hairman, I
am in favor o f the
to
with the exception that I
a
0
0
“incorporated livestoc loan companié
through which
a n s m e y b e mace, a n d 4 change o f
time from ninety cays t o six mcnths i n which the note o f
both t h e F a r m L o a n
hose i n s t i t u t i o n s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
renee
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overnor Youngs.
y adm
BEGuiiced le. C a m r y
Vir. B a r x v i s o n .
Governor Young.
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for information,
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be f u r n i s h e d i n f o r m a t i o n .
br b o r
a
not--it
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
oy a n y s e c s t i o n
o r plan
thousand m e m b e r b a n k s
out
GOR.
The Chairman.
w o u l d y o u give a
4
the sudvject, subject t o e x
méan s i m p l y y o u r v o r s o n e l
Governor Young. N
I
thet t h i s bdocy
out t h e r e
d
anc I
a r e a @ great
Th sre
=fS
S e b e e
into c o n s i c e r a t i o n
i n the Northve
tions, na n c whet
o
c o ct r e y
think w e woulc b e making a
. I
5)
w o u l e not.
they will think of,
aang
mistake t o commit
our-
e
s
dso not lnow
h o vw thesel other eGovernors
f eSe l
You d o not anprove
he W a r F i n e n c e C o r p o r a t i o n
it a permanent organization
M O N S S00 M e r r e u u c e | pace
Governor Young.
The Chairman.
COOrS-08 =tie
Governor Young.
of e x t e n c i n g
the
args
482
The Chairman.
T h e n i t boils d o w n t o whether y o u ap-
prove o f the creation o f new machinery, u s i n g t h e Farm Loan
Syston,
o r doing nothing.
Governor Young.
O r a private corporation.
Governor Calkins. A
appcal
privatc corporation would make n o
t o t h e s e p e o p i c h e r e today.
Governor Young. I
a m quite willing t o diseuss this, b u t
I would n o t want t o send these merbers o f Congress a
approved b y o u r i n s t i t u t i o n o r a p p r o v e d
plan
b y t h e mecting a s
representing t h e institution--I w o u l d n o t dare take t h a t
chance.
The Chairman.
H o w d o you fcel about it, Governor Miller?
Governor Miller. I
a m i n favor o f cnlorging t h e powers
of the Federel F a r m Loan Benk, a n d I
o m sure that o u r direct -
ors are, r a t h e r t h a n t a k i n g a n y o n e o f t h e o t h e r t h r e e p r o p ositions.
The Cheirman,
H o w d o you feel about it, Governor V a n
Zendt?
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Federal Reserve Bank of St. Louis
Governor V a n Zendt. I
expressed m y views a
few moments
Tho Chairman, G o v e r n o r Norris, w h a t i s your vicw?
Governor Norris.
T h e objection that Governor Young
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
423
Strgct-st s i l ,
of c o u r s e d o e s
makes
Lav
if it could
Governor
for t h i s plan,
to m e e t
s
difficulties suggest
+
woul Gages c r e cers eo)
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hat G o v e r n o r
the
or y o u f a v o r
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Chairman.
o s G O V E r Oe?
a S e e s
o e
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ults
t h e y
second,
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cannot
be c o n s t a n t l y licuic,
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not b e willing
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o
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r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
board a t home that-I believe something ought t o b e cone a n d
het-f -vOtee i n - T a v e r
o f -extencine t h e p o w e r s
o f the
Banks t o meet t h e requirements.
The Chairman.
G o v e r n o r Callins?
Governor Calkins. I
a m opposed t o the extension o f t h e
Finence C o r p o r a t i o n a t t i v i t i e s u n l e s s
i t i s for
very limited time, provided n o o
It m i g h t b e e x t e n d e d
I a m opposed t o the extension, a n c
tension o f maturi
am m o r e f i r m l y o p p o s e d t o t h a t than I
e m t o anything e l s e
that I can t h i n k o f just now, because
with w h i c h w e a r e c o n f r o n t e d
a danger t h e t i t would cestroy t h e
I do not believe i t i s practical t o bring
zetion o f another mechanism; I
4d t h i n k Congress
stanc f o r it, a n d I d o not thin': i t i s possible under
private c o r p o r a t i o n .
whether 1
extension
approve
o f
Coing nothi:
e r t e i n l y c o not
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
eporove o f coing
n i n g , w h i c h ones more brings m e b a
I think t h e b e s u g g e s t i o n that has been made i s
proposal,
anc I
em perfectly
holéing those views. i
as suggested b y Governor Young & s t o
ics w i t h o u t
so I will n o w
Conference
e
first cons g
the directors,
t m y usuel oration, w h i c h i s that this
o f Governors s h o u l c b e p e r m i t t e d
conference a t a n y day i
wees f 4
t o have anothsr
h o l d s u c h a conference,
very question,
The Chairman G o v e r n o r Fancher, whet e r e your views?
Gove ceor menchnery.
to a
continuation
poration b e y o n d a
the p r i n c i p l e
purpose
M r Chairman,
o f the operations
o f t h e v e r F i n a n c e -Cor-
limited p e r i o d o f
o f lending Government
*
f o r which t h e W a r Finance Corporation
at present. I
a m decidedly opposec t o mating eligible longbecause [
think t h a t woulec s t r i k e r i g h t
a t the
funcdaments o f t h e neserve oysten E - e @ o n o t think i t 4 s
daniking s c h e m e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
thet
w e have
i s t o broacen
the
and C e r t a i n
means
amendment t o
G o not s e e t h e menace
ne Feceral Ferm L o a n 3 ] a n d I
Gcvernor Y o u n g s e e s
n
the system, a l t h o u
T
this i n o u r G i
a
y exis’
t seems
w
F members f r o m
f
t h e withorewa
e h a v e v e r y little o f
t o me tha
P
r
o
v
e ray
snt situation.
Chairman.
Governor Seay.
upon t o Gecice
principle underlying t h e Reserve
Banking S y s t
has p r o v e n t o u s t h a t b a l a n c e s
even a proper reserve f o r t h e beni.ng system o f this country
+ thin
w e nec
o n l y
e “ 2 , a
n bs t e ps a o t h e r t h a n that, t o w a r d s
G07)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
487
There a r e many attempts being m a
paper p e p e r w h i c h w e I m o w i s n o t
y
GCoutd not. b e called,
l
e
t in
a t o rt h e
e Heserve
b
i
l
e
System
introduce
i
eet
Win
i n the ordin
would b e uncermining
this suggestion, uncertakii
ner banizing s y s t e m
lad
Or T e c
O u l u ys
that n e f o r e
shoulé h a v e m o r e é e l i b e r s t i o n t h e n w e
tie. G o v e r n o r s . . .
have b e e n w o r l
for some time, b u t
whole.
S
O
L
b e Sena l o r s
of- t i e
are starting
stop, w h i c h w i l l
w
l
h
o
i
n
g
h y o u cannot
c
-
and i n t o o t h e r f i e l
the i n c e p t i o n o f another d a n t
t
e
r
m credit
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
it probebly vould be, a n d I
sh
upon t o t a k e e n y c e f i n i t e s t e p a s r e c o m m e n d i n g
other p r o p o s a l w h i c h c o m e s u v a t
conclusion o f t h i s body. ]
E Z we ough d e l i b e r a t e upox
men
sition o u g h t
t o b e a b l e t o g i v e q u i c k Cecisions, I
feel that w e are called u p o n t o give
seme p u s i n e
more -distinet- G i v i s 1 0 n
now exists,
extension,
BIG
which e m e b a n k s
ha
O s :
a n dA
B
A6
D O W
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
489
now b u t d e f e r a
meeting,
conclusion
upon this
t o come specific
t o take place a s early a s w e sce fit.
The Chairman. I
think Governor S e a y wants t o apply
himself t o the four proposals, b u t he has not done so.
Governor Seay. I
wes o p p o s e d
a m perfectly willing t o s a y thet I
t o t h e extension o f t h e powers
o f the War Fi-
nance Corporation, b u t I believe t h a t t h e y have m e t i n very
g00G m a n n e r
i n o u r m e e t i n g t h e emergency, w h i c h i s helpful
to the general situation.
The Chairman.
Y o u w o u l d n o t h a v e i t m a d e y e rmanent,
though?
Governor Seay. I
a m very firmly opposed t o the continu-
ation o f the organization. I
existence
believe i t should g o out of
a s s o o n a s possible.
I t seems
t o m e that there
does l i e i n the ferm loan organization, perhaps,
a n opportu-
nity t o a c c o m p l i s h w h a t w e d e s i r e
T h a t
seems t o b e o u r f i r s t judgment,
t o accomplish.
but I
would l i l e t o deliber-
ate m o r e u p o n i t .
The Chairman. I
thin:
a l l h e v e e x p r e s s e d t h e i r views,
unless Governor Biggs, Governor wellborn o r Governor Young
went t o say something further.
Governor Biggs. I
have n o t expressed m y views, lr.
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Federal Reserve Bank of St. Louis
Chairman.
The Chairman.
P a r c o n m e , G o v e r n o r Biggs.
Governor Biggs. I
advocate t h i s ; I
want t o reiterate t h e t iL cid n o t
reised t h e q u e s t i o n a s t o w h e t h e r
o r not i t
woulc possibly satisfy i n a measure these people, t h a t being
the o n l y o b j e c t I
had, t h a t i s , t o b r i n g i t u p f o r d i s -
cussion, r e a l i z i n g f u l l y t h a t i f i t c i d i t c o u l d n o t b e
hacled
b y four banks, t h e banks mentionec, n o t including ourz
own, because w e have s u c h a diversified business t h a t w e
can t a k e c a r e o f e v e r y t h i n g
i n o u r d i s t r i c t a l l right. I
am opposee t o long-time credit discounts w i t h t h e federal
Reserve Banks personally, a n d I
opposed t o it. I
a m sure that m y Doard i s
a m a l s o opposed, b i t t e r l y o p p o s e d
new a g e n c y b e i n g organized, b e c a u s e
too m a n y now. I
t o any
i n m y o p i n i o n ‘re
would b e g l e d t o c o m m i t m y s e l f
to a
plan
which workec o u t along t h e lines o f extending t h e F a r m Loan
Bank's powers a t the present time,
i n fact, m y board has
a recommendation f r o m m e t o that e f f
increasing t h e p o w e r s
this time; I
o f t h e W a r Finance Corporation a t
believe there should b e n o change i n their
powers, because {
sufficient.
W
believe t h a t t h e time given t h e m will
e h a d practically t h e same trouble o v e r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
491
the cotton situation, a n c w e had more trouble w i t h t h e
Long Staple Cotton Growers’ Association i n our bank than
T h e war
we h a v e h a d o v e r t h e w h o l e c a t t l e proposition.
Finance Corporation granted t h e m »5,000,000.00, a n d I
thinl: t h e y have h a c o c c a s i o n
cotton c o m m e n c e d
t o u s e a n y o f it, b e c a u s e
and t h e y h a v e b e e n a s h a p p y a s
to 5
Lars e v e r Since.
B u t t h a t v o u l d n o t a p p l y t o cattle.
Governor Calkins.
Cattle a r e n o t ready i n the warehouse.
Governor Biggs. I
understand. I
think t h e W e r Fi-
nence Corporation should n o t b e changed a t this time, a n d
I believe t h e t b y the time i t expires w e will have n o fura m opposed t o continuing i t unless
ther need f o r it. I
it i s a b s o l u t e l y necessary.
Governor W i e l l b o r n . I
any a m e n d m e n t
wish
t o say that I
a m Opposed
t o
t o t h e Federal Reserve A c t increasing t h e
time for maturity o f paper; thet I am also not inclined
to thini: t h a t i t w o u l d b e w i s e t o a d v o c a t e
a n amendment
to t h e F e r m L o a n Act.
The Chairman.
Y o u t h i n k i t i s n o t needed?
Governor Wellborn.
I t i s needec, p o s s i b l y ,
but I
not think i t i s wise t o e s t a b l i s h anew banking system,
do
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
as s u g g e s t e d
b y G o v e r n o r Seay. I
think i t w i l l b r i n g o n a
new baniting system which will b e a permanent institution,
and
i n t s
‘
e
d €
system i s t h e proper s y s t e m
care o f the situation with respect t o agriculture.
Our reserves s h o w that.
n
h
: a
whole-ought
to get back o f this thing a n c take care o f it.
t u p w i t h r e g a r d t o l o n g - t i m e paner,
I t need n o t
b u t they c a n lend
their assistance i n the congestea districts through the
member banks a n d assist i n thet way; t h e y c a n use their
shorter-term p e r i o d e n d b r i n g a b o u t l i g u i d a t i o n
in a
proper
I think t h e situation i n the South has been just a s
bad a s i t i s out there; I
we a r e t a k i n g c a r e
think that the worst i s over, a n d
o f i t under
t h e provisions
o f the Fed-
Act a n d h a v e h a c v e r y l i t t l e c o m p l a i n t
in
our district a s t o the functioning
had n o c o m p
n t s f r o m any S e n a t o r s
The Cheirman.
B u t they stamped
o r a n y Congressmen.
o n y o u t h e o t h e r d e ay
rather h a r d i n t h e Senate..
Governor \iellborn. ‘ N o , t h e y were jumping o n the
Federal R e s e r v e B o a r d a n d t h e e x p e n s e s
The Chairman. I
ous k i c k s a b o u t
o f t h e N e w Y o r k Bank.
thought there were some rather strenu-
t h e exactions
o f t h e A t l a n t a Bant:
i n the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
493
way o f t h e p r o g r e s s i v e r a t e ,
Governor tiellborn.
a n c s o on, b u t I
+
m a y b e mistaltre;
N o t t h e progressive rate.
W e
recommendea t h e a b o l i s h m e n t
o f t h a t r a t e i n August a s s o o n
‘the slump coming.
T h e Board c i c not s e e fit a n d
proper
t o remove
i t a n c therefore t h e responsibility
is on
the Board a n d not o n us.
he Chairman.
A s t o the proposal itself,
to s a y a n y t h i n g further,
d o y o u want
o r d o you, G o v e r n o r Y o u n g ?
Governor Young.
gone through with i n the Northwest section
just whet those banks o u t there will co.
new avenue o f crecit. A
great number o f
run b y brokers, they a r e not bankers, t h e y cdo not metend
to b e Danixers.
T h e indirect borrowings
o f t h e bantrs
there i s a more serious matter t h e n their cirect borrowings.
is our problem there now. T h e s e indirect borrowings
been mace with t h e indorsement o f their directors,
the guaranatee o f their cirectors behind them, a n d
The o n l y w e y t o t a l e
ouRigmRevie Siero ya i e bepeaksos Sea eS
the Federal
avenue o f credit a
very extensive one, a n c [I an
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
inclined t o feel that t h e assistence t h e ‘jar F i n a n c e Corporation will give f o r the n e x n r e e yeers, e v e n though
they d i s c o n t i n u e
t o operate
o n J u l y lst, 1 9 2 2 , a n c m s
new loans, w e m a y b e a b l e t o hencle this whole situation.
It m a y b e p o s s i b l e f
n o s e banks
revival
t o stimulate e
of interest i n livestock
through
buver o f c a t t l e p s p e r
sections;
w e ha
a
d some very unfortunate fail-
there, a n d naturally everyone t h a t h a c some cattle
paper wanted t o get rid o f it. T h e r e are some people over
in northern wichigen w h o have b e e n extensive buyers o f
paper f o r t w e n t y y e a r s a n c t h e y h a v e c o m e o v e r t o
9
make i n c u i r i c s a b o u t i t ; t h e y d o n o t t m o w a n y t h i n g
it, b u t there came t h e s e fai
Grits
V e r y fortunately I
e s anc t h e y want t o
have incuced
were friends o f mine over i n northern Michigan,
to c a r r y t h a t p a p e r a n d g i v e t h a t a s s i s t a n c e
k
interests
c
oi n the
t
t o t h e live-
N o r tsh w e s t .
Now, t h i s opens u p a new avenue o f credit.
asec
cally,
t o continue
W e are
t o pass u p o n t h i s w i t h i n twenty-four hours, p r a c t i -
o r forty-eight hours, d
I think i t i s rather danSix o f t h e m
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
sections where t h e y c o not handle livestock loans,
y know v e r y l i t t l e a b o u t e
industry.
N o w why
wouldn't i t be to our advantage t o take this back to our
directors,
w h o a r e f a m i l i a r w i t h t h e industry,
benefit o f a n y information a
a n d get the
l e y m a y have o n the subdject
or a n y opinions t h a t t h e y m a y have.
dangerous, Governor Strong, f
anything t o the
e n a
The Chairman.
i n s i a P
That I
forty-eight hours.
a m perfectly willing
t o subscribe
to, Governor Young, b u t I have h a d another thing i n mind,
however,
a n c t h a t i s that t h e absence o f some affirmative
action along
l i n e may result i n some legislation which
we w o u l d n o t l i k e a t a l l .
(At this point Under Secretary Gilbert entered the
Conference room).
The Chairmen (continuing).
I t is well enough t o say
thet this involves a l l sorts e f possibilities, b u t what a r e
the other p o s s i b i l i t i c s ?
about it.
T h a t i s what i s disturbing m e a
T h e pyerassie t h a t have b e e n made
unlimitea d r a f t s u p o n t h e T r e s s u r y a n c f o r a l l s o r t s o f
amendments t o e
Fed R e s e r v e Act, those a r e t h e only
me t o taking a n y interest i n this
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
at ail.
i t i s entirely o u t o f our province i n New
we h a v e n o c a t t l e p r o b l e m there a n c a
very m o d e s t
agricultural problem; b u t w e have just a s great a n interest
ater i n t e r e s t t h a n a n y o t h e r R e s e r v e B a n k i n pro-
portion t o size i n not having this Federel Reserve A c t
emasculated, e n d t h e reaction f r o m nothing being cone i n the
to b e just a s definite a n d disastrous t o u s i n New
i k , where w e have n o cattle problem
to deal with a t all, a s though w e were i n the midcle o f i t
if y o u please,
e n d that i s o u r excuse f o r Giscussing
it at
all. . Hven those here w h o have suggested t h a t the Federal
Reserve System c a n take care o f the situation along some
such l i n e t h a t a l l o f t h e m s a i d t h a t o f c o u r s e i t w o u l d
involve using t h e reserves
o f the N e w York Bank o r the
banks, a n d I think that i s justification enough
material a n d d i r e c t i n t e r -
for o u r s a y i n g t h a t w e h a v e a
est.
I
t i s g o i n g t o b e l a r g e l y o u r money, u l t i m a t e l y ,
that will g o into these year, two-year, a n c three~year
2
loans,
i f such a plan i s acGoptecd. T a k e Governor
suggestion--$115,000,000.00.
E o w mach o f that
$113,000,000,00 are w e going i
W
e are
put up 40 per cent. o f it in New York if it is used.
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Federal Reserve Bank of St. Louis
Governor Norris.
M r . Chairman, I
woulc like t o in-
procedure w o u l d m e e t a n d h e l p t h e s i t u a -
Senate i s concerned, a n d a t the same time
v
give M r , Y o u n g a n d p e r h a v s s o m e o f t h e o t h e r G o o e r n o r s t h e
opportunity t h a t t h e y w o u l d l i k e t o h a v e a n d w h i c h [ I think
they ought t o have.
I f you reportec t o Senator hencarick
end his colleagues t h a t i t was t h e almost ynanimous sentiment o f this Conference t h a t the remedy was i n a n enlargment
of the functions o f the Farm Loan System, b u t thet such
an enlergement involved a
risk o f possible wholesale exocus
of members i n such districts, w h i c h would weaken t h e
Reserve System a n d would have t o b e guarded against,
that before formulating a
definite p l a n i t was desired that
with respect t o those districts t h e Go_ernors should have a n
ooportunity t o confer w i t h their boards, w h i c h t h e y would
do promptly, a n d that y o u would b e able t o advise t h e m
within a
week, s a y ,
of a
definite p l a n u p o n w h i c h p r o b a -
bly w e w o u l d b e ynanimous.
Governor Callins. I
wish t o m a k e a n a l m o s t p @ r a l l e l
suggestion, w i t h one variation.
unfortunate
P - t h i n k t t it woul b ¢
i f w e p u t Governor S t r o n g i n the position o f
4
being o b l i g e d t o deg" to t h e s e S e n a t o r s w i t h w h o m w e h a v e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
498
ssed this thing, a f t e r w e have discussed i t and spent
of time o n it, andsay thet w e a r e almost unanimous
something, b u t w e don't l m o w exactly what i t i s about.
it p o s s i b l e f o r t h i s C o n f e r e n c e
t o r e a c h thispoint,
which seems t o me t o be.very different: that is, t o authorize Governor Strong t o s a y t o the Senators t h a t a l l o f the
Governors p r e s e n t
their b o a r d s 5
a t this meeting a r e prepared
t o g o back t o
directors e n d recommend t h i s p l a n a n d a s k
for confirmation o f their views, w h i c h woulc b e very different from saying that w e are almost unanimous.
Governor Norris. I
dic n o t u n d e r s t a n d t h a t G o v e r n o r
young was prepared t o g o that far.
Governor Callzins. I
a m asking that question. I
say o n e thing, G o v e r n o r S e a y , a n d t h e n I
haps I
ought t o .
will quit,
O n the question o f whether
want t o
a s per-
w e a r e pro-
posing t o set u p a new system o f banking, l e t m e s a y this:
What i s banking? T h e function o f banking i s the financing
of trade.
T h i s i s not a
new system o f banking.
I t is n o
more a
new s y s t e m o f banking t h a n i s t h e National C i t y Com-
pany a
n e w s y s t e m o f b a n k i n g o r t h a n i s =. H . C u m m i n s
and eSweiss a
for s e l l i n g a
n e w s y s t e m o f banking.
I
t is a
mechanism
certain k i n d o f s e c u r i t y f o r c e r t a i n purposes,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
put i t coés n o t involve a n y o f the real functions o f banking.
Tie Chairmen.
point.
w a s j u s t g o i n g t o raise t h a t v e r y
T h i s i s a n i n v e s t m e n t oneration.
Governor Seay.
L e t m e reac f r o m a paragraph there.
(Governor Seay read from t h e suomi;ted draft).
It s e e m s
t o me that
w e a r e empowering
t h e F a r m Loan Board
to carry o n business parellel w i t h but icentical w i t h t h e business carried o n b y the Fedcral Keserve Board, e x c e p t that i t
rélates t o agriculture only.
g i v i n g v e r y sweeping
powers, a n c i f i t does n o t come close t o establishing a
banking system with powers parallel t o that o f the Feceral
Reserve System, t h e n I misunderstand t h e languege.
The Cheirman. I
eS
think y o u have overlooked o n e thing,
anc t h a t i s t h a t t h e p r o v i s i o n s
o f the Farm Loan Act a s t o
rates will have a good deal t o do with it. L o n g - t i m e
prices t h a n s h o r t _ t i m e c r e d i t ,
if this system i s operated properly,
and t r u s t ,
t h e rates charged
anc
a s I shoulc suppose
f o r t h e long-time credits,
while less t h a n 1 2 per cent, t h e rete charged i n some cistrivts,
i t would b e sufficiently ebove t h e Reserve rate s o
thet t h e short-time period will automatically craft into
the Reserve System a n d t h e long-time paper a t the higher
rates w i l l a u t o m a t i c a l l y b e t a i e n c a r e o f here. T
do not
think this contemplates making three months! loans a t all,
because t h e F e d e r a l F a r m L o a n S y s t e m w o u l d b o r r o w i t s
money
for a year o r more.
Governor Calkins. I
point t h a t I
intended
thin's G o v e r n o r s e a y o v e r l o o k e c t h e
t o mate,
a n d that is,
i n any complete
banking system the extension o f credit i s beocd u p o n t
State o f deposit somewhat, e n d that a n y mechanism t h a t exs
c r e c di t
o n n a n y o te h e r b at s i s
category o f banking.
I
i 2s n o t t o b e i n c l u d e d
i n the
not
t i s /supposeé t h a t t h e F a r m L o a n
Banks Stel] receivec deposits i n any way, directly o r indi-~
rectly, although t h e y shall take certain security,
as a
mortgage l o a n company does, a n c issue debentures against t h e
securities a n d sell them.
The Chairman.
Gentlemen,
not w a n t t o k e e p h i m waiting.
offer.
O n e i s exactly
n
e which G o v e r n o r C a l k i n s p r o -
poses a s t o what f o r m o f action this C o n f e r e n c e shall take,
and t h e o t h e r i s
a t this is a
matter w h i c h v e r y m u c h c o n -
cerns t h e Goyernment organization which has t o d o with t h e
Federal Reserve System e n d t h e Farm Loan System,, t h a t is,
the F e d e r a l R e s e r v e B o a r d a n d t h e S e c r e t a r y o f t h e Treasury.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. G i l b e r t
deen Giscussing, a n d s o
that Mr. M e l l o n a l s o
sy
SL
n a t o r s ,
whatever
fothink-3
,
a:nsd [I as-
aa
Governor Harding,
Before w e g o t o
hnow
oing t o b e highly desirable
5 - 38g
make s h a l l b e conveyed,
toal avoie cr
GS~~n
fe)?
ye l
if r e a r e t o p r o p o s e a
th
5
{ia.
recommend
E t s
:
informec o f everything w e
ept
has been
plan
r ai
Ler
M
oystem,
. HG i l b e r t .
statutes
Federal
o f
Reserve
Sys- e
Jie y a e s e re
cies
governmentel 5
submit i t t o t h e
r
one
CULtAte
Unized States which will affect t h
Loan
ai
those t w o systems.
Matters w h i c h r e q u i r e a
There
i s
We h a v e
information
Giscussion
cert ain
f r o m t h e m a n c ‘to
no i m p r o p r i e t y
i n ou
with
ba)
Ea m e e t i n g
re
sponced t o a request f o r
B
request
t o assist them.
There i s another group inquiring into this particular subject,
and every citizen i2s
express h i s views a n d give
information
S
o r e sq u et
i n res}
2
thet h a v e a l w a y s e x i s t e d
ought t o m c s s
Secretary o f t h e
between t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
, b uc
t I think w e
body,
gentlemen that
d i s e u s s e d
in m i n c w a s
t o advise
the plan, t h a t there
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
reservations
are
about which some
o f t h e Governors
consult their cirectors, b u t t o the
vroposing
and M r .
COGS
= O 6 U b us. i r a
Q
report o r h a v e r e ~
Gilbert along
position o f c o m m i t t i n g t h e
System a n c t h e F a r m L o a n orgs: H E G E L
agLesa: t i o n ~ - - I
S
the s u p e r i o r
boa G
Cie
C
b
eht
L
O
origin o f this
M t o toe r e
t
CO-f1 Ve S o m e B o y i c e
t
h
t
iu
s oS
b
our r e l a t i o n s
lationship t h a t I
dia, a n c i
on
System, I
a
t h i n g eae } WES
a
t
o
necifically
asked
a
as6-DSrsonsl Y E S p P O N S I D L I I y
t ter c o n e
acting a
a program
o SDP ear b e f o r e t h i s
-
t o talk
0 0
this body--without a n y regard t o
mean
referred to, beceus
commission
that, b u t now,
thin:
to c o n s i d e r
w i t h t h e Keserve Soarc
a d
with t h e Treasury.
2G 1 G Ue,
if i
may Gxpress
it i n this way, b o t h prucent
the r e q u i r e m e n t s
or the propristicsa that, v e r
any r e p o r t t o
e
s
e
h
gentlemen,
tthat
w
wheat r e p o r t
t o
we h a v e a r -
extent t h a o
to
want
7
e
w e propose
t
=
ana
to male e t e t h e m .
other words, a n y informal report thet
will be, i n substance, a
e
poard
recommnencation
teil
4 1 n
yweake t o t h e m
of some kind, a n d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4
it will b e s o construed b y them, a n c therefore I
woulc b e
a
b
l
think i t
e to. consult w i t h 1 ¢ @ Board. a n d a d v i s e
the Board what report w e intend t o make before w e m a k
any.
The Chairman.
Whaat I
a
m coming n o w t o the real point o f
want t o s a y i n t h e m a t t e r
fo e t t h i n k i
|
of a
report o f this. I
take t h e f o r m o f a
ment t o t h e # e d e r a l F a r m Loan A e t . I
bill o r a n amend-
think t h e principles
Lin
- C o n na eeo n W .
this legislation can bse stated, a n d s i n k w n
agrees
upon t h e m b e f o r e w e g e t t h r o u g h d i s c u s s i n g them.
T h o s e
principles have b e e n partly discussec, although w e have
not fully Giscusse¢ them, a n d the suggestions that have
n m a c e a t t h i s em e e t i n g
fying t h e subject.
are oef very great value
b
i n clari-
F o r instence,
s u g g e s t i o n regard-
jng e n amendment o r modification o f the provisions o f
se
b e y 8 rae
T t i s desirable t o refer t o that.
I would Like t o sce e p o r t submitted t o the Federal
Reserve Board which would s e y t h a t i t i s our opinion, o u r
personal v i e w o f the subject,
t o d e referred t o the direct-
ors o f our banks, first, t h a t t h e powers o f the war Finance
Corporation s h o u l d n o t b e p e r m a n e n t l y e x t e n d e d
s o that
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
sury will b e loaning money; second, t h e t n o n e w
cated; t h a t w e have enough;
that long-time crecit should n o t b e permitted t o
reach t h e Federal Reserve Banks--if
that leads u s t o the suggestion that t h e
ization s h o u l d b e used; t h a t t h e p r i n c i p l e s w r i c h u n d e r l i e
the t e r m s o f t h i s b i l l s h o u l d e p p l y i n s u p p l y i n g t h a t
mechanism,
make a
i f w e d o belisve that.
T h e n I think w e shoulé
r e c o m m e n d a t i o n tfhatever l e e a t i o z
against
the System/ean e x o c u s
v a s s e c should
o f i t s members,
a s Governor
apr ehends; t h a t i t s h o u l d a l s o b e d e s i
sction 5202, m o d i f y i n g t h e 1 0 v e r cent. l i m i t a t i o n ,
principles i n v o l v e d ,
the
dation,
t
comes
o
u
and
r Girectors f o r their personal reconmen-
w e have Gone a l l w e ere called u r o n t o do.
=
t o dir a f t i n g a
¢
is
bill
t o carry o u t those principles
that will b e Gone here, maybe, a n c w e m a y never b e bothered with i t a t all.
Mr. H a r r i s o n
f C a m sure that i f t h e y will
t o help t h e m p u t i t i n shape h e will b e
glad t o d o so.
Governor Seay.
H a v e t h e Sen:
uggestions
embodied
5
a
w
h
o were here
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
505
The Chairman.
N o , t h e y know nothing about it.
You
will recall that I was careful t o say that w e must n o t
an amencment t
h e Farm L o a n A c t a s having b e e n
who n o w t h a t t h i s a m e n d m e n t
Graft h a s b e e n p r e p a r e d a r e hir. Ancerson,
cheirman o f the Commissio: *
Gilbert, G o v e r n o r H a r d i n g ,
conferred,
the
Inquiry o n Agriculture, h r .
w i t h w h o m t h e y have necesssrily
a n d y o u gentlemen.
T
h
e Senators w h o visited
us this morning know nothing about the amendment having
peen preparec, a n c when Governor Herding a n c I were a t the
Capitol t h e other day w e were v e r y careful n o t t o refer
to i .
T h i s discussion m a y have been a little misleac-
Herrison
ing, b u t y o u must n o t understand t h a t either Mr.
or myself p r o p o s e a n y s p e c i f i c a m e n é m e n t
we a r e n o t d o i n g t h a t ;
whet y o u g e n t l e m e n
t o the Farm Loan
b u t what
T e a
w e are trying
gound method
of
that i s
dealing with that k i n d o f agricultural eredit
b y the
required f o r a longer period t h a n can b e furnished
uncer t h e p r e s e n t oyoavisions o f t h e act.
along those
I thinls w e c a n come v e r y much nearer agreement
out. a
lines t h a n w e c a n b y trying t o cope
with the
tails o f w h i c h w o u l d h a v e t o b e d i s c u s s e d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Farm L o a n Board.
Governor s e a k
i
b e&
f
a
v
o
r of
statement y o u
just macie t o us.
Governor Calivins.
M e l e <+b-in- t h e f o r m o f 2
motor.
Governor S e a y . i
move t h a t G o v e r n o r s t r o n g express!
to t h e F e d e r a l h e s e r v e B o a r d t h e v i s w s w h i c h h e
wessed i n his statement t o this Conference a s being the
consensus
o f opinien:
Mr. Chairman, I
o f 0 5 4 5 -Contcrencs,
believe i t would b e
contein some definite elements o f cenger t o present t o
the B o a r G t h o s e v i e w s
i n a s cefinite a
form a s a r e o n -
bodied i n this bill, w h i c h h a s been Grawn u p chiefly f o r
our-ciscussion.
Tne Chairman,
T h a t i s not quite
e c t , Governor
bill, w h i c h i s n o w submitted t o you f
thet purpose;
discussion, b u t it w a
1 r a w G
tor
i t w a s crawn u p
Governor Seay. 1
Delleve t i s t t n e
ang i t m a y b e g o i n g i n t h e r i c h t cirection, I
c o n o t uncer-
is not--but i t goes s o far that I
assent t o i t without further
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
time f o r d e l i b e r a t i o n . I
cy iblish,
n o t 2 .n e w
a m convinced
method
o rc D a n k i n e g
that
i t coes. es~-
i n t h Ce c o u n t r y ,
b u t
2
Goes e s t a b l i s h p r a c t i c a l l y a n o t h e r s y s t e m o f baniring
which m a y eventually become a
rival o f
m
Reserve System a n d a cetriment t o the Fedsral
may p o s s i b l e s t o p t h e g r o w t h o f t h e S y s t e m
vhnich w o u l é f i n a l l y e m b r a c e t h e c o m m e r c i a l
ba
+
the country. I
thin’: G o v e r n o r S t r o n g m e n t i o n c c t h e f a c t
thet t h e r e w e r e s o m e s i x b i l l s
The Chairman.
t
o cdo w i t h t h e matter--
P r o b a b l y more.
Seay.
T h i s bill autn
s
s t h e Farm Loan
loans without restrictions, anc. a l m o s t a
to d o i t i n the languege u s e d i n-)
The Cheirman.
I t i s not a
new system
a new credit systen.
Governor Wellborn.
A r e you
Farm L o a n Banlzs r e d i s c o u n t p a p e r
The C h a i r m a n ,
Y e s .
Governor W e l l b o r n - e
The C h a i r m a n .
Y e s .
I s that embodied
i n the bill?
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Federal Reserve Bank of St. Louis
508
Go crnor Wwellborn.
T o reciscount like a
member
bank?
The Chairman.
Yes.
Governor Norris. I
Go not wantdo t o cis
length, b u t along t h e line o f what Governor S e a y
stated, w i t h respect t o the agricultural interests r e quiring this l o n g crecit.
Now,
tween g i v i n g i t t o t h e m s e l v e s
mentality b e c r e a t e c
o r extenced
g i v e i t t o them.
ell the principal countries o f continental Lurope they
recognize t h i s t h i n g l o n g a z o a n d
Oo S
—
e
e
agricultural f r o m their commercial credits, e n c a system
existec i n many o f the countries o f
Europe. I
d o n o t imow, b u t I
presume
pbanizs a n c t h e r e s e r v e banits o f t h e h u r o p e e n C O U N E F A C S
© that relief
Me C h a i r m a n .
from thet kind
I n t h e l o w countries t h e y have b e e n
in operation f o r t w o hundred yeers,
loans today.
i n Germany s o m e
a hundred y e a r s a :
Governor
seay.
a n c you w i l l fine those
e n s a r e found t h a t vere mace
N e t pave ever
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Federal Reserve Bank of St. Louis
fect a n d I am-not going s o far a s t o s a y that IT have a n y
spirit o f c i s a p p r o v a l
o f t h e t e r m s o f t h e t b i l l even,
that i t i s s u c h a n i m p o r t a n t s t e p t h a t s n a p
ought n o t t o b e g i v e n t o i t
ice otal. <
t h i n ® you. a r e F e i A b o u t that.
Governor Seay.
T h a t i s all t h e further I
intended t o
go, a n d i f I did n o t make myself plain I hope I have cone
so now.
Governor Fancher. I
will second Goyernor seay's
motion.
Goyernor Seay I
statement,
uncerstand t h e t i n respect t o this
i t i s covered t o the effect i n Governor S e
motion that w e simply consicer it.
The Chairman.
I f t h e t motion pesses, I
a m going t o
make a suggestion - s t o how i t should b e dealt with.
(The'motion, having been duly secondec, w a s unanimously
carried).
The Chairman.
Wow, I
permit m e t o a p p o i n t a
a m going t o ask i f you will
committee, c o n s i s t i n g o f Governors
Calkins, Young, Sesy, Norris, because o f his f
with t h e Federal Farm Loan Act, a n d lir. Harrison t o
prepare
f o r submission
t o t h o Federal Keserve
peer
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Federal Reserve Bank of St. Louis
brief statement o f the
end w h i c h w e m a y b e a l e
ut
n o t i n the form
of a bill, b u t i n the f o r m o f principles t h a t w e c a n rea-=
sonadly agree upon, a s the Dest thing t o c o for t h e agricultural c r e c i t Situation,
Z
heving
i n minc. t h e p r o t e c t i o n
eafainst
of the Federal keserve System - / having somethine cone
that will b e infinitely worse t h e n what w e suggest,
Governor F a n c h e r . I
move t h a t t h e C h a i r m a n a s s o c i a t e
himself w i t h t h e gentlemen h e has named a s a committee.
Governor V a n Zandt. I
will s e c o n d thet.
(The motion, being s e c o n t e c , a s unanimously cerried).
Mr. Gilbert. I
think t h e Secretary o f the Treasury
will h a v e t o heave s o m e c o n s i d e r a b l e c o n s u l t a t i o n w i t h t h e
Federal F a r m L o a n Board, b e c a u s e
u p t o date t h e F a r m L o a n
Board has thrown colc water o n every s u c h proposition;
CDpOsSCe = > ecvery t i m e 1 7 - 4 6 S u g g e s t e d ,
anc I
think a
good
deal o f attention will heve t o b e given t o that aspect
of the matter, I
think there i s a way t o d o i t i f the
secretary w i l l t a k e i t u p w i t h t h e F e r m L o a n Board.
The Chairman.
tors w a s p o s s i b l y a
O u r dealing cireectly °
little b i t o u t o f oréer,
it
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Federal Reserve Bank of St. Louis
Ell
Mr. Gilbert. I
suggest y o u cover that b y telling
Senators t h a t y o u have mace certain recommencations t o
the F e d e r a l R e s e r v e B o a r d a n d t o t h e Treasury.
The Chairman.
Topic N o . 3
T h a t i s just what w e are proposing
o n Supplement No. 2
has a l r e a c y b e e n
disposed of, b u t I will a s k Mr. Gilbert i f h e would like t o
bring u p a n y matters
o n this progrsm w h i c h h e would l i k e
discussed now, before lunch.
Mr. Gilbert.
O n the question o f fiscal agency expen-
ses, a s stated i n the letter which was quoted i n this
progremn, e
Treasury has not estimated,
i n the budget
estimates for this year, f o r full reimbursement t o the
Federal R e s e r v e Bantss f o r f i s c a l a g e n c y e x p e n s e s
i n the
fiscal yeer 1922. T h e expenses i n relation to new issues
can well b e covered t o some extent, perhaps
t o ea greater
extent, than they are being coverec now. T h e sentiment
of Congress w a s vretty Gefinitely expressed a t the last
session, a n c the Treasury felt that i t wouldé b e unwise t o
raise t h e question again, particularly a t this time,
of salaries
when there i s all o f this Giscussion/and management o f
the Reserve Banks, a n d w e were a
i d if we brought i n
an estimate f o r t w o o r t h r e e m i l l i o n c o l l a r s n o w f o r
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Federal Reserve Bank of St. Louis
agency e x p e n s e s t h a t w e w o u l d h a v e a
nauling o f t
l
agency d e p a r t m e n t a n d verhaps s o m e
severe limitations. I
into a
complete o v e r -
realize t h e t t h e banks a r e getting
condition where there will b e some erst icuity i n
absorbing a l l these expenses, a n é when that conditions
confronts
u s i t m s y b e possible
t o meet it.
w
e have o n e
or t w o p o s s i b l e a v e n u e s t h r o u g h w h i c h t o m e e t it.
w
e
might b e a b l e t o s t r e t c h t h e e p p r o p r i a t i o n f o r n e w i s s u e s
to a
sufficient e x t e n t
might arise. I
t o cover a n y difficulties t h a t
d o not l m o w whether there h a s b e e n a n y cis-
cussion o f t h e q u e s t i o n o r not.
The Chairman.
W e have n o t discussed it.
Mr. Gilyert. I
am interested t o lnow how the banks
about t h a t .
The Chairman.
W h i l e t h e expense account h a s grown
in e a c h K e s e r v e B a n k - t o
v e r y large proportions
end the
cost o f o p e r a t i n g t h e f i s c a l a g e n c y c C e p a r t m e n t s
i considerable, t h e s u b j e c t
o f reimbursement
o f this expense d o e s
not give m e very much concern, because o f the change t h a t
has taken place between t h e time w h e n w e were first organnot
In those days there were/very
1 we c o u l d m a k e i n v e s t m e n t s v o l u n t a r i l y
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Federal Reserve Bank of St. Louis
513
through t h e operation o f Section 14, b n t n o w w e have this
great mass o f certificates o f indebtedness t h a t w e c a n buy,
we have many times t h e volume o f bankers! bills t h e t w e c a n
buy, a n d w e are approaching t h e maturities o f Liberty Loans,
and i f w e a r e h a r d p u t t o i t t o m e e t o u r e x p e n s e a c c o u n t ,
we might take care o f
c
d
o not apr ehend
thet a n y Reserve B a n k i s g o i n g t o r e a c h a
point w h e r e i t
will b e s o d e n u d e d o f m a i n a s s e t s t h a t i t c a n n o t p a y a l l
reasonable expenses.
O u r expense accounts will g o Gown
nis liquidation extends t o thé point where business
is very inactive, a n d we wont have a s many clerks t o py,
sand s o forth. I
a m just expressing m y personal views, b u t
I believe we would have no difficulty i n New York i n keept a m o u n t ni n v e s t e d e
to m e e t i o u r e x p ecn s e s
for
which n o a p p r o p r i a t i o n i s mace.
fee Gilbert.
grow rather small,
a t least t h e non-reimbursible fiscal
agency expenses, b e c a u s e t h e e x c h a n g e
o f temporary bonds
should b e c o m p l e t e d s h o r t l y a n d i t i s n o t l i k e l y t h a t
there w i l l b e a n y e x p e n s e
i n connection w i t h refunding
issues t h a t will n o t b e reimbursec, e x c e p t perhaps overhead e x p e n s e .
A c c o r d i n g
t o all indications
t h e routine
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Federal Reserve Bank of St. Louis
operations h a v e been r e c u c e d
to a
will r e c u i r e l e s s e x p e n s e t h a n w a s t h
+0 I
a m not sure i t would b e cesirable
t o heve t h e Fedc-
sral Reserve Banks engage i n operations t h a t t h e y would
not otherwise b e engeged i n simply f o r t h e purpose o f
agency expe
not r e i m b u r s e . j
attempt
b e t w e e n those t w o things I
t o finc some means o f reimbursement,
woulc r a t h e r
i f we
The p r o b a b i l i t i e s a r e t h a t t h e T r
ch a
million dollars,
that f a c t s h o u l e b e k e p t i n mine.
The Chairman.
est rate reached a
keep a
G
3 Whole
point a s
£ 3
N y&
v y3
:
i n t e r -
per cent, c o u l d
hundred million Collars i n v e s t e c i
e n c war
rents a n d o n e t h i n g o r e n o t h e r
income
t o pay the cost o f coin
anc one h u n d r e c millions i s not a lerge investment t o
male a r b i t r a r i l y f o r t h e p u r p o s e
POPS E r e tee purpose.
o f procucing
e n income
e t a i t
business, t h a t
would b e o n e thing,
b u t n o t simply f o r t h e purpose
of
malzine f u n d s t h a t c o u l d n o t b e r é i m o u r s e d
from the
GOvernor S e a r a p p r e c i a t e t h e e m b a r r a s s m e n t
which
ciscussion o f reimbursement o f fiscal
this time, a n c I do not believe i t would
be acvantageous t o raise t h e suoject, b u t I would
like t o
o
woulc b e better fiscal policy
proper a c c o u n t i n g i f i t w e r e
borne i n mind thet vayme f
‘ i s c a l a g e n c y expenses
of the Treasury ought t o b e mace, s u c h expenses a s they
incur b y way o f t h e T r e a s u r y Department ought t o b e reim-
bursed--the Treasury of course would receive i t back.
The Chairman,
A r e there a n y further comments?
Governor Young. A
request w a s m a c M Y , Belpert,
to
a resolution t o absorb these fiscal egency functions,
anc the question came u p before o u r Board a s t o whether
we h a c t h e
= 3 8
p
a S 2 - f S e s o l u t i o n o f -toat: ring.
8 s
wes put u p t o our attorney, a n d he has given
a n opinion o n
it.
I n that opinion h s
t
h
a
t in a
matter o f t h a t s o r t
ne thought i t would b e better t o have a n errengement b e tween t h e T r e a s u r y a n c t h e F e d e r e l R e s e r v e Banizs m a d e b y
the Feceral Reserve Board, u n d e r Section ll-j, giving t h e
Board power t o exercise general supervision over t h e Fed-
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Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
eral
lution yet.
The Chairmen,
Unless I
a m mistel-en,
w e have a
letter
‘ederal keserve Board which w e construe i n New
York a s authority f o r coing thet
Mr. Harrison. I
do not remember thet.
M y feeling
has always been, a n d i t i s supported b y conversation I head
at one time with Govornor Hercing,
payment
i n which h e said that t h e
o f fiscal a g e n c y expenses w a s after a l l
between t h e b a n k s a n c t h e T r e a s u r y Denertment.
Governor Calkins.
T h e Banis o f S a n Francisco h a s n o t
The suostance o f the opinion b y
our attorney w a s L
s e c r e t a r y o f the Treasury, u n d e r
the provision o f law, h a s power t o require t h e Federal
Reserve B a n k t o act for t h e Trea y
Department a s fiscal
agent, b u t i t i s very coubtful whether i t hes power t o
recuire t h e m t o s o a c t w i t h o u t r e i m b u r s e m e n t .
Mr. Harrison. I
my own observation, I
might
gS3 stete t h a t e t one time, f r o m
found numerous cases where Congress
provicec t h a t where indivicuals o r corporations were r e -
quired t o act a s fiscal agencies t o the Government that:
they s h o u l c b e reimbursed.
T h e r e w a s t h e case o f the Union
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Federal Reserve Bank of St. Louis
epie |
Pacific Railroad, with a cherter uncer the Federal l a w ,
to transport t r o o p s a n d m a t e r i a l s a n d t o t r a n s p o r t t h e m a t reasonable r a t e s o f compensation.
T h e r e a r e cases where certain
incivieuel b a n k s h a v e a c t e d a s c e p o s i t a r i e s f o r p u b l i c m o n e y
it w a s p r o v i d e d
i n t h e l a w t h a t t h e y shoul¢c b e r e i m b u r s e d
fied rate;
s o that when y o u have another a c t o f
Congress saying that the Federal Reserve B3ank shoulc act
as fiscal agent when required, a n d nothing 1 8
compensation i n the law, i t i s not unreesonable t o assume
hat Congress intended t h a t they should n o t b e reimbursed,
and particularly i s that true when t h e y have Gebates i n
Congress where t h e y svecificelly refuse t o appropriate m o n e y
on t h e g r o u n d 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 h o u l d a b s o r b
not s e é t h a t t h e r e i s a n y l e g a l q u e s t i o n
involved
a t al] a n d I
do not think there i s anything w e c a n
do about it.
Governor Seay. S u p p o s e t h i s occasion arises, t h a t t h e
Governors o f the banks, while permitting t h e m t o perform
thet service, w o u l d eat the same time ceprive
ity t o p a y divicdencs
o
m of facil-
t o t h e i r stockholcers.
Mr. Harrison. Congress would then hear from the member
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Federal Reserve Bank of St. Louis
banks.
Governor S e a y . e
ents
+ ¢
h e stocizholcers w o u l d
be invaded.
is
Harrison. T h e right of the stockholderso
t
/ re-~
ceive a
6 per cent cividend,
i f earned,
put o n e o f t h e n o r m a l a n d r e a s o n a b l e e x p e n s e s
o f the
bank i s the fiscal ageney expense, w h i c h Cepletes t h e
if
earnings
o f t h e b a n k . S o t h a t A h e y c a n n o t p a y civicends,
on
het account
the member banks c a n have n o objection, except a n appeal
to Congress.
Mr. Gilbert.
T h e T r e a s u r y Department,
w h e n t h e auest-
ion o f a resolution b y the Boare o f Directors arose, w h e r
we did not g e t them, s e n t o u t instructions based
o n the
original F e c e r a l R e s e r v e A c t w h i c h r e q u i r e c t h e b a n k s
act a s fiscal a
g e
to
nn t
required
a hs w
t o cdo so b y the Secre-~
tery o f the Treasury, stating t h a t t h e bani: woulca b e expected t o d o that without reimbursement, e x c e p t f o r
certain specific things.
The Chairman.
I T have always thought that that
resolution w e e k e n e d t h e p o s i t i o n o f b o t h t h e T r e a s u r y
Department a n d t h e banics.
Governor Fancher.
I n o u r banlt w e p r e s e n t e d t h e T r e a s -
ury Memorandum No. 87, t o which y o u havereferrec, a n c o u r
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Federal Reserve Bank of St. Louis
boarc,
b y resolution, assumed expenses f o r the fiscal year
ending June zénd, b u t i t has n o t taken action beyond thet
period.
The Chairman.
D o y o u w i s h s o m e action, lir. G
wantec t o find o u t i f i t was t h e in-
Mr. Gilbert. I
tention t o p r o c e e d
o n o u r p r e s e n t basis.
T h a t wouleé b e a
Governor Fancher.
question f o r o u r
bank through t h e Board.
The Chairman.
I s there a n y Federal Reserve B a n k dis-
posec t o tale t h e positi
thos e x p e n s e s ?
1 a t t h e y must b e reimbursed f e r
M r . Gilbert
i s safe,
i n o t h e r words,
i n
expecting that the services w i l l b e performed without r e imbursement
o f expense, u n l e s s s o m e t h i n g v e r y u n u s u a l
transpires t o bring about a change of attitude. I s n ' t
that a b o u t t h e s i t u a t i o n ?
GOyernor Calkins. I
wes f o r w a r d e d
believe t h e o p i n i o n o f o u r c o u n s e l
t o the counsel f o r the R e s e r v e B o a r d w i t h
a request f o r a n opinion f r o m them, a n c t h a t opinion has
never b e e n r encdered.
O u r board has steadfastly refused
to adopt a resolution, which does not change the situation
at all i n any wey, t h a t I can see, a n c I think i t will
steadfastly refuse t o pass s u c h a resolution.
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Federal Reserve Bank of St. Louis
T h e r e a s o n given f o r asking
Governor McDougal.
benis t o assume t h e expense,
that C o n g r e s s h a d f a i l e c
Mr. Gilbert.
i f I remember correctly, w a s
t o mal
the t i m e w a s n o t o p v o r t u n e
t h
i n eapproprietion a n d t
t o u r g e t h e m t o C o so.
T h a t w a s t h e p r e c t i c a l reason.
Governor McDougal.
w
e are perfectly willing t o g o
along f o r t h e time being, b u t I thini: i t might b e well f o r
this Conference t o consider t h e cuestion o f not coing
We are willing t o d o i t for t h e present. I
think when t h e
time i s opportune t o urge u p o n Congress t o provice t h e
funcs t o a
h
a
t that ought t o b e done.
more correct system o f accounting, enc, I
I t woulc b e a
think, m o r e sat-
isfactory, generally speaking.
Mr. Gilbert.
1
¢ yresent system h a s o n e element
sefety i n it, b e c a u s e
of
i f any extraorcinary operations
erise, t h e t will probably arise i n connection with n e w
issues,
w e have talen t h e position thet
we are
to meke reimbursement f o r expenses o n new issues, a n d
the aggregate t h e fiscal agency expenses t h e t will b e
absorbed ought t o b e gredually decreasing i n amount a n d
get fairly stationary.
The Chairmen.
W i t h this explanation o f the situation
you arc satisfied o n that question?
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Federal Reserve Bank of St. Louis
ir Giipert. “ Y o r .
The Chairmen.
T h e n n o action i s required
o n t h e matter.
Governor Norris. Mr. Chairman, t h e r e i s a bill pending
in Congress f o r the relief o f Liberty bondholders who subserivec through feileca banks.
tional p r e s s u r e
‘ t e heve b e e n asicod t o bring adc
t o bear s o thet that bill will b o acted
upon before this Congress adjourns.
I s i t advisable
either t h e R e s e r v e B o a r d o r t h i s C o n f e r e n c e
t o acopt
momoricl o r take o n y action o n thet, o r i s there a n y
Going t h a t ?
Mr. Gilbert. I
shoulc thinl: i t would b e inadvisable.
The T r e e s u r y h a s a l r o e d y t a k e n t h e p o s i t i o n t h a t i t w i l l o p -
sé the bill i n its present form.
The Chairman. A
motion t o ;-¢journ for lunchcon i s i n
OPC.ELr
(hereupon,
s t 1:50 o'clock
took 2
w . o n motion <iuly second-
recess ]u n t i l 2 : e2 0 o ' c l o cDk P
kt of
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Federal Reserve Bank of St. Louis
its h e a r i n g a t 2 : 3 0 pem.,
aa t
the r-acess.
The C o n f e r e n c e
will come
t o order,
T h e
“ae were asked t o discuss b y Governor Herds
Jing en: a d é r e s s
morning h e s t o
r r i c i e n c y a n d economy i n the admin-
of Federel Reserve
séems
o n Tuesday
A
s t o efficiency,
t o
coneretely. * f f i c i c n e y s s such depends merely
upon whether t h e gentlemen here w h o .ill discuss t h e subject
of developing efficiency i n their banks, a n d I
rether g a t h e r e d t h a t t h e o b j e c t o f these m e e t i n g s ,
ect together,
f
when re
i s t o promote grestcr e f ficiency b y exchange
vievs e n d experiences,
a no
d b y improvement
i n methods
thet result i n bettering t h e menagement a n d sffairs o f one
CoS lLR a m o t n e r ,
Lem
a t a
Cv, except b y
t
e have already made
by t h e
e
h
e suggestion which
efficiency
w
i s going t o b e pron
d i t will b e st:11 m o r e promoted
can b e m o r e e f f i c i e n t .
introduction,
i n ordsr t o
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Federal Reserve Bank of St. Louis
ect e n o r d e r l y v d i s c u s s i o n
o c t
o : Gov“rnor P e r c i n g
Leeving out economy for 4
e
o n the score
>stion t o m a e
s eae
o s Ort S n C y s . a n y
Tederal R e s e r v e B o a r d
thet we
asked b y G o v e r n o r H a r d i n g t o “ v y m i s h t h e B o a r d i n a d v a n c e
and bring t o this meeting some enrlysis o f depertmental
Cheirnan.
merely m e n t i o n
mind =
departments
tG £
ot a
comperison
of
i n ths different
efficiency-- c o m p a r i n g o n e
sub j¥< w h i c h I
want t o consider, w h e t h e r v e
can 2
basis o f
the o p e r a t i o n s that
r e
performe
GOV, S a y e
T f h e docs n o t mean that, I
he means b v the use o f the term “efficiency”.
d o not k n o w
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Federal Reserve Bank of St. Louis
The Chairman.
Gov. S e a y .
et s u c h a
I t menns general management.
i f you c a n arrive
T h e o u t p u t p e r unit,
f o r the purposes
thing,
Gov, Norris,
o f compnrisone
- O f course, eiticicnucy
*
. go beyond
mere econonye
The C h a i r n e n e
Gov. Norris. 4
bank might b e economically b u t not ef-
PIOLeneLy
Gov. Sear
Gov.
Torri
a
K
nect = Gnien
s
h
e connects t h e tro.
h
b e
I t might
e
t
h
e
r
h e meant
t o con-
a
The Chairman. m
impressed,
acaaieieieteitences 2
a s :
Fm)
e s u l t o f having
cherge o f t h e p r e p a r s t i o n o f this p r o g r a m , w h ' c h c o m e s f r o m
ell t h e R e s e r v e S a n k s
explanetions
i n ths s o r m o * sugsestions,
o f the topics suggested,
a n d some
w i t h this very o u t
stending thing ebout ovr Governors!
that s o m e
o f the
cuss “ithout su°ficient preparation,
time t h a n e t s o m e o r 1
f o r m e r mectings, b e c a u s e
th
discuss t h e s e teshnicadl a n d
have g o t t o g e t t o t h e m e e t -
525
ings with more adequatc preparation o f the detail w o r k
of the bank than somo o f u s have always b e e n able t o have,
but beyond that, when we sit here discussing uniform practiees o f sending advices a n d the forms used for advices,
uniform a n d economical methods o f handling collections,
ond things o f thet sort, I do not think that w e are the
oncs t o discuss those matters. I
think that w e should have
mcetings w i t h t h e cxpress dcsign o f developing cfficieney
es distinguished from cconomy, i n order that the best technical men i n the systom may occesionally got together, a n d
pick u p t h e s e v e r y mattors.
The whole question o f sorting the currency, which i s
6 tremendous operation i n the Bank a t New Y o r , involving t h e
counting o f over t w o million bills covery dry, t h e hand-
ling of these collection items and transit items, cash letters sn¢ s o on, we do feel the lack today of tho opportunity t o g c t t h e b e n e f i t
o f t h e bext experience
o f the othcr
Federcl Reserve Ronks, and where we may heppen t o hit upon
something thet i s dosireble w e would lire t o convey i t to
the o t h e r b a n k s a n d t h e G o v e r n o r s
o f t h e banks,
a n a t h e object
effoctively--I t a l k t o o much a t these meetings, b u t I
went t o g o f u r t h e r e n d p o i n t o u t a n o t h e r matter.
a committee
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Federal Reserve Bank of St. Louis
J c heve
« t the b a n k o f three o f t h e m o s t responsible
526
and m o s t c x p e r i e n c o d m e n i n t h e bank, w h o a t t h e p r e s e n t
time a r e simply supervising t h o reguler w o r k o f their
departments, s n d giving very little o f their immediate
personal attention t o them, e n d devoting their entire
time and attention, ( a n d have been doing s o for more than
X year, p e r h a p s , p r a c t i c a l l y t h e i r e n t i r o t i m c )
t o work-
ing u p whst t h e y call t h ? procedure o f the b a n k . .Governor C a l k i n s s p o k e t h e o t h o r d a y o f t h e l a c k o f e c o n o m y
in t h e p r e p a r a t i o n o f reports
o f various k i n d s , r e p o r t s
to t h e Feders.l R e s e r v e Boare,
t o i n t e r - b a n k PCOPOr CE, o n e b i l
of t h e v a s t omount o f material t h e t w e produce.
Those
three m e n have b e e n waiting n o w for s i x o r cight months
to finish thet job, a n d they told m e the other d a y thet
from one year's e n d t o another there must b e a t least 500
cifferant kinds o f reports required f r o m t h e Department
which has cherge o f sll reports o n c a l l investigetions
the t kkind.
Now, i n all o f these matters, w e can bring men of
kind. together, r o p r e senting c i f f c r e n t F o d e r a l R o s e r v e Banks,
heve t h e m moke studies, s n d havo t h e m submitted t o the
benks before w o heve a
conferences, h a v e t h o m stucied b y the
Governors, s n c brought t o the Conference w i t h eriticisns,
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Federal Reserve Bank of St. Louis
527
and w e will g e t somewhere i n the w a y o f efficiency.
W e
do not d o i t now, I think partly because the Board I fear
has a little mistaken conception o f what w e are after, a n d
I would like t o cite just o n e illustration o f how these
things c a n b e dealt with. N o w , I
do not s a y this i n reproach
of anyone, b u t I have a c e n t h e forms o f some o f the Reservo Banks that’ are used i n the Treasury Depertment a n d notices t h a t t h e y s e n d out, t h a t a r e o n b o n d paper.
@ fect.
T h a t is
J u s t becnuse probably i t proved t o b e a little eas-
ier t o send a batch o f the regular letter-heads down t o the
printery o f t h e f o r m s r e q u i r e d
Now,
ment h e a d s
w e had a
committee
t o b e printed
o f t h e employes
o f certain o f t h e banks
matter o f forms,
in a
hurry.
o r depart-
t o take u p that whole
a n d t h e y t e e l l e d o n e department.
I t was
only o n c subdivision o f the Department, e n d they went into
it very thoroughly.
T h e y apceified t h e kind o f paper t o
be used, t h e welght o f the paper, a n d the thiclmess, a n d
80 On, a n a t h e size o f the sheets. A
scientific manage~
ment o f the Feceral Reserve System, w i t h studics o f that
kind being mace, w i l l reduce t h e system t o uniformity, a n d
uniformity means cconomy a n d cfificieney, because everybody
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
is doing the same thing i n the same r a y
m d they d o not
have t o study trelve different ways b y rhich i t i s t o b e
done e
As t o economy, i t i s p e r v e y
group o r efficient m e n can s t u d y
to u s i n g c h e a p e r m e t h o d s
obvious t h e t
s s e Yorms tith reference
o f printing, c h e a p e r k i n d s o f
introduction o f cheaper onvel
and a l l t h a t s o r t o f thing,
efficiency
i t rill
a n d greater cconomy,
a n d TI
5
ve t h e G o v e r n o r s r e c o m m e n d ,
i f they;
considerable p a r t o f the: b u s i n e s s
Governors
¥ill
repularly b e left t o conference o f the m e nY)
enpable o f dealing vith those things i n dceteil,
report
t o u s f o r Tinal disposition o f those s u b j
the
once t h e reports c r e made a n d adopted b y conference, c o n ' t
ave s e v e n o u t o f t h e trelive benks,
o r even t e n
at report, b u t l e t u s have a i l
means c o n c e s s i o n s
been holdin
i
for the meeting
in m y m i n d t h e t w e a r e
o f personal opinion
h
t
n pickle,
a
r
a
s o to
s becn revolving
c
k i n these
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Federal Reserve Bank of St. Louis
s 'rConferences
o n r e unless
v o G¢
Ciency,
and I
‘ould l i k e v e r y m u c h
i f the rest
o f you
{P34
would s a y something that i s i n your minds, sand 1:
desired that v e should express o u r viers
ing I tomorrow, I
rould b e v e r y g l a d t o d o
express j u s t wheat v o u s a v e
Fancher.
ciency, w e have h a d
Tn c o n n e c t i o n
s
~ i t h t h e mMeateer O L 6 7
in o u r b a n k -
committee
working f o r s o m e m o n t h s
depsrtment a n d
o n t h e matter
living vith it,
which
he
a
»
o f going into e a c h
so t o spenk, a n d following
ing €conomies
and studying t h e question o f stationery,
whe ther
spending t o d much money a n d hbrtuerare buying
much
of that sort o f thing, a n d i t has a c c o m p l i s h e d v e r y
EAS
good.
arounc
to
St
o f
committee has n o t g o t
the d e p a r t m e n t s y e t .
t Mneay p e
tTa m n o t s o s u r e p u t t h a t i Me
2 permanent c o m m i t t e e
pank a n d t h e branches,
of
phat
e s6
will. have
thet s o r t , j u s t g o i n g ~ b o u t t h e
end seeing that w e are pursuing
the m o s t e c o n o m i c a l m e t h o d s
o f operation
i n ell o f t h e i r
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Federal Reserve Bank of St. Louis
Coni erences,
good deal
b
L
u
o f time i 1 e r e G a ;
E
t
t h r e e conferenccs
h V e r pueD
THLeA y o u s u c c e s s
fio. O P SrA GLAe M e n
get a n w h e r e
committee
O f poe 4
i
s t h e oni
a
y
i n
o f operating m e n
that means,unless +
h o v e t h e Conierence
o f Governors, mors
Te v o u G o n p u t t h o s e s u g g a s =
smmende tions
for m o r e f r e c u e n t c o n t e r c n e e s
o f
Ernorse
Penipes
G r ae merce
el
Ant S n o w ic- o l d
tie
SAP: OpPGrat o u s ,
upon t o conduct
Fielency c n d economy.
should n o t t e b e p e r m i t t e d
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Federal Reserve Bank of St. Louis
to
best w a y t h a t ve can/br n g ebout t i
hat inevitably involve o u r having
pportunity
t o g e t togetner
f o r discussion’
heir discussions?
J t cannot pos-
sibly b e e x p e c t e d that a n y b o d y o f m e n w h o a r e n o t f r e e t o
at least t r y t o promote efficiency w i l l sromote i t , a n d a s
ve try t o promote i t by such methols a s getting
frequent i n t e r r u p -
nNOvwe= Ee
" e have ¢
will not get efficiency.
ness t o g e t efficiency
P
e
o
usurping our prerogetives i i
discuss
a m d conrine
h
t o get dorm t o busie
s a n i d e a =eoMee DSS:
a t t h e Board define
o u r discussion
t o opsrat-
me
the m o s t e f f i c i e n t p a r t s
Oe a d
r
s
iy erence < 7
an object o f reducing t h e program
discussion of +) e p o r t s
t h e m a t t e r s where the
552
great bulk o f the work has been done, i s t o give u s more
time w i t h i n w h i c h t o discuss policies.
Gov. Calkins.
O f course I
quite agree w i t h thet, b u t
if the Board i s averse t o our discussing policies here, w e
might discuss t h e other thing somewhere e l s e a n d come here
and discuss policies, a n d I
d o not agree with thet, o f course
we did not have these things i n the early part o f the Systen,
and w e had a way o f mecting t h e situation, a n d w e met t h e
situation t h e n 2 s you propose t o meet i t now. M o r e o v e r ,
there w a s a p p o i n t e d f o r c o n v e n i e n c e a n d f l e x i b i l i t y a
sub-con-
mittee o r a steering committee o f this Board, consisting o f
exccutives o f nearby banks w h o could g e t together quickly
end without cxpense a n d consider matters t o b e reported t o
the larger bodies, a n d a greet many metters ‘ort setbind i n
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Federal Reserve Bank of St. Louis
thet way that could not have been settled otherwise, a n d the
seme thing obtains f o r t h e future.
may say, with-
‘ Y e were, I
out meening t o b e objectionable o r offensive, intcrfered
with i n the rcocognized method that w e thought best adapted
to bring about efficiency a n d economy i n the operation o f
the banks, a n d i f w e c a n restore t h a t method I
think w e
will b e e f f e c t i n g t h e p u r p o s c t h a t t h e B o a r d d e s i r e s
bring about.
The Cheirman.
A r e there a n y other remarks?
to
Gov. Biggs.
h e r e i s one thing, Mr. Chairman:
we all r u n u p ageinst t h e same thing, a n d that i s that o u r
business went along, w e went into our orgsnizations origin-
nlly, ond I distinctly remembor that the expenses o f the
officers o f our bank were more the first year than they
heave evor been s
- , a n d i n three years w h e n I went into t h e
bank, within t h e first y o u r t h e selnries w e r e f o r more officers i n number,
y o t they were less t h e n thoy werc t w o o r
three years ago, and it did cevolop i n the period of
that o u r business g r o w s o fost i t was impossible, almost,
to got sufficiont holp for the time being.
I n other words,
aAyear ego we had 85%employes right a t the tip o f the
peak; w o were doing more business a n d w e hac t o ec: t o every
departrient. ‘ i c cid not have timc t o lool into these things
had i n the last yeor.
: c still have 1 2 that w e took
over from the Sub Treasury and have n o use for, and we will
get ric o f them o n tho l s t o f January.
T h e thing was that
we hed t o take care o f tho business, e n d w e have h a d t i m o with-
in theo last twelyc months o r sinec the let o f Jenueary t o get i n
to t h i s w o r k a n d s c e w h e t
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Federal Reserve Bank of St. Louis
i s going on. I
agroe i n t h e v i c w s
both o f t h e s e g e n t l e m e n a b o u t c o n f c r e n e e s , b u t I
think
ore grcduclly getting t o 2 point where w e ean look into
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Federal Reserve Bank of St. Louis
34
nor Ciscussing.
that
f
our purchesing department,
g o n illustretion,
r e have three
nurchesing i n c i s e r i m i n a t e l y ,
branch:
it a a y O u r s vi23s
and
1 2
months
expericncée
Reserve Board o n the
suished from economy?
ished f r o m ceconomve
T cannot
ses
ency v e raeya8 “ e l l u n l e s s v o u h e v e s o m e
mittee
or something that cciucgss o n e f r o m the other.
efficient ~ a s t h e B o s t o n B a n k , I
srould
should
in loyalty
not t h e
The C h a i r m e n .
“
e d o n o t wrnt o n e t o b e the m o s t effi-
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Federal Reserve Bank of St. Louis
want
t o heave a l l o f t h e m t h e m o s t c f f i c i t e n t
aeree that they are, beceuse v e are doing
s
g
b y methods
t h a t nr e v e a l
the
i
m o s t ehf f i c i e n c yt o f e e c h
OTN Experience.
Hor a r e y o u g o i n g t o m e a s u r e i t ?
Governor
Boston B a n k
a
P
r
i
c
i
e
n
t
o f
OOUBe “ O F 3
to b e handicapped,
Wen
2 a r e p r e t t y f r e e n o r , e"x c e p t x in o u r b d u i l c i n g s
location, a n d thet
Gov. C a l k i n s .
c
o
®
& Boston B a n k
the r e q u i r a m e n t “ o r s t a t i s t i c s a n d
GOV.
TOV e
Gove
t
i t e good d eaa
ag G o v e r n o r
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Federal Reserve Bank of St. Louis
does.
F a c h o n e o f u s h e s ari
moke h i s b a n k j u s t a s e f f i c
ficers k n o w h o w t o m o k e
already reached thet ccndi
and a r e r e a c h i n g i t .
that o c c u r t o m e o f i m p r o v i n g a
o n e rould b e t o
bring so-called efficiency experts,
a n d as “ ¢ d o a peculiar
business
i t ~ o u l d provabdly
the e f f i c i e n c y e x p e r t s
Gov. S e r v e
™
up
e rould educate t h e m
ealloving them t o come in.
ese
T h e o n l y other method
t h a t occurs
result o f s u g g e s t i o n s f r o m s o m e
hts a c c e s s
o f s11 t h e other
t o a n d knowledge o f t h e methods
Wor, £
do not s e e h o w “ e a r e going
a Governors! Conference. I
don
g e t that e x -
S A are
Y where w e
or h o r o f t e n “re h o l d i t e
sure y o u would not, that t h e bond paper incident
matter o f
occurred i n Philcdelphia, T F ~ould not - m o w a s @
4t d i d o r not o r what t h e explamation o r this,
1
and rhy can t ve d o
something o f t h i s t h r o u g h t h e e x a m i n e r s
o f the
es +r i
ie
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Federal Reserve Bank of St. Louis
Reserve B o e r d ?
The Chairman,
T h a t rould b e quite impossible.
Norris
The Chairmen,
I think s o . I
y
i 2
w O U , COVSImor. Norris,
n y
am spee:sing o n l y f r o m m y omn experience,
Gov, Calkins.
The Chairmen.
h
e f i r s t place,
exanine
in a c c o r d a n c e
questions
Boerdals
criticism o f the efficiency “ i t h which some o f the department
in t h e N e w Y o r k B a n k r e r e r u n a n d v o u p u t h i m u p a g a i n s t
the h e a d
o f the department,
reument,
h s e vould. &
h e knors
k r2
examiner
s o much
Per oOes m o c m o t b o r tos ope
handling 300,000 checks
there a n d s a y t h a t t h e a s s e t s a r s
Norris.
“ h y could n o t t h a t examining b o a r d b e
558
enlarged b y putting o n one o r two m e n i n connection w i t h
cach investigation, w h o s e business would b e t o examine i n t o
methods a n d compare a n d report o n methods?
The Cheirman.
W e have h a d three o f t h e most capable
mon that I know o f for t h e past fiftsen months working j u s t
in our o w n bank o n that, where there a r e 3,000 pcoplc, a n d
they have o n l y hrendlcd about five departments completely, a n d
they have g o t about sixteen more t o deal with.
Gov. McDougal.
results; I
A n d t h e y have accomplished v e r y good
know that.
The Chairman.
Splendid.
Gov. McDougal. I
a year what w e call a
want t o say that w e have had for
planning department.
Whether we
got the idsa from y o u o r not makes n o difference.
They
are proceesdingly surcly, although slowly, w i t h e : c h department
vee —
~ e
and they have lowered t h e costs o f cvery department <‘¢hat they .
have gone into, a n d I would take t h e judgment o f these
men w h o s r e c a p a b l e o f d o i n g t h a t work. I
would m u c h
rather take that t h a n I woulé a n y bank examiner, whoever h e
would be.
Gov. Miller.
of employes?
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Federal Reserve Bank of St. Louis
D o you g e t those m e n from o u r o w n force
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Federal Reserve Bank of St. Louis
539
The Cheairma:.-
O i ves.
O n e o * them i s our head auditor
e n d they have m e d s l o n g
accountant,
‘bie men.
O u r department
1°r the general supers
procedure
in thet work...
is
Iney
twenty
pert o f
thousand Gollers 2 vear. T h e y are spending ° good
me studving these methods andall t h e procedure o f
the bank from o n e e n d t o another.
thet d o n e
i n these
voOuLG require t h e m
‘ e l v e banls
e intai
a
G o v e r n o r Norris,
b y the Pederal
t o have
Reserve Board
4 3 h : banks u n d e r p r e s e n t
¢
plete i t f o r a
number o r
Gov, C a l k e v i n s .
M i r sugges PS e e 38 cee i n t e n d e d
ernor Norris! suggestion. I
t o
supposs, f o r instance, that
“pis Tederal Reserve Bank has conducted this inquiry that is
now being mede, a n d t h e h i c a c o h a s d o n e t h e same, a n d that
order
the b e s t p r e c t i c e a v a i l a b l e ,
ITguess,
t o adopt
“ 6 <ould b e uncer t h e necessity
o f incuiring a n d examining w h a t h a d b e e n d o n e i n
Nev York, what h a d been done i n Chicago, anc what
in Richmond, and ell down the line.
I f »e sre pernitte
540
to d o what I
suggest t h e Governors! Confcorence will adopt
the b e s t m e a n s a v a i l a b l e
t o ascertain w h a t t h e b e s t pract-
ices i n the System are a n d how they c a n b e applicd t o all
the b a n k s alike.
Y o u w i l l n o t o n l y s a v e time, b u t y o u w i l l
save m a n y h u n d r e d s
o f thousands
The Chairman, Y e s , sir.
o f dollars.
W e have saved a great deal a l e
ready.
Gov. M i l l e r .
H o w many cmployes l e s s h a v e y o u t o d a y
than y o u hee o n the l s t o f Janusry--several hundred?
The Chairman. A
Gov. Miller.
Gov. S e a y .
couple o f hundred, I
guess.
‘ W e have 75,
I t a l l c o m e s back,
a s i t appears
t o ms,
to
the same point, a n d thet involves more frequent meetings
on t h e p a r t o f t h e c h i o f e x e c u t i v e s
these b a n k s
f o r t h e t purpose.
W e have three
mon
of
i n our
bank w h o a r e doing t h e same thing which y o u are.
W e
have one officer who i s a t the head o f a plenning and accounting department, s n d o u r purchasing department i s a
consolidated dspartment, and: r e know w e have saved
money.
B u t h o w c a n one bank toll?
I t cannot conclusively
tell except b y analogy o f its o w n opcrstions, a n d comparisons w i t h t h o o p e r a t i o n s
o f t h e o t h e r banks.
arc t h e illuminsting things w e a r e sftcr.
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Federal Reserve Bank of St. Louis
Comparisons
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Federal Reserve Bank of St. Louis
The Chairninn.
Gov. S
time "Uniform Accounting",
to discuss that, a n d u n t i l *
at a2-proper solution.
“ o e a r e n o t t h e propar m e n t o discuss
Gov. renchcr.
Have
HOS
t e “ nere
f
f i s s e n
r
o
m the
been expressed?
GOV
o s hor,
T h r r e i s n o motion before this mec
The Chairman.
at t h e p r e s e n t t i m e .
e have d i s c u s s e d
‘
Gov. N o r r i s .
ft go on to t
The Chairman,
was
talk on Tuesday/thet h e
his paper.
S O W s e e ee
upon 4
a
} 4
s u b Sct." nEer s
>
, s n d
7
i n a s m u c hs
v e r y important
r i s touches
i n the c y e s
O l e
remight take sdventage o r the
the B o a r d v h i c h r o u l d r e v e e l
to them what o u r opinion i s o n the subject.
Tho Chairman.
D o y o u w i s h t o confine t h e report,or
committee
do y o u w i s h t o a p p o i n t e
crentes a
should n o t d o all t h e reporting, b u t i t
i n the minds
false i m p r e s s i o n
I run t h e meeting here, a n d I
to. I
i n reporting o n
would prefer,
to make t h e statement? I
these things, t h a t I
o r fesignate someone h e r e
o f some people t h a t
do not; a t least, I
try not
think n o w a n d then I mey g e t off t h e trolley a bit.
Gov. Scay. E a r l y i n the gemc, w e found that unless
we a p p o i n t e d e
spokesmen t h e t w o vould n e v e r g e t through
with these matters, o n d we deliberately cems t o the conclusion that i t would b e seving time b y heving o n e spolesman between u s a n d the Federal Reserve Boarc, a n d that
spokesman w e determinec t o b e our Chairnan.
Go not believe i t c a n b e better done.
F o r myself I
Y o u know cxactly what
has transpired i n this discussion, y o u heave t h e cpitome o f
opinion, a n d you are certeinly quelificd t o cxpress it,
end i f w h e n y o u e x p r e s s
at t h e r e q u e s t
i t y o u s e y t h a t y o u express
o f t h e Governors
the consensus o f opinion, I
it
o n d thet y o u e r e giving
d o not s e c h o w y o u e r e subject
to be accused o f giving your own vicws.
Gov. C a l k i n s .
I t might b e possible
pression b y a résolution,
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Federal Reserve Bank of St. Louis
t o support h i s @ x -
t o seve a n y opinion o f that ‘ind.
543
W e have about five o r six matters
The Chairman.
which will ariso i n connection with Governor Harding's
paper.
I f thore i s onything t h a t y o u care t o have m e
report, I
will b e glad t o d o it, b u t i t struck m e that
there a r e some others here w h o feel equally strongly o n
these subjects with me, o r stronger possibly, a n d that
they should b e designated t o make a
Gov. Biggs.
report t o the Board.
T h e r e i s a n objection t o that i n this way.
It i s practically impossible t o get audience w i t h Governor
Harding a t sny time during the week's time here.
am taltcing about the conference tomor~
The Chairman. I
row.
Gov. Biggs.
I t might b e done there, but I simply meke
thet s t e t e m e n t .
The Chairman.
W o u l d y o u care t o have m e discuss t h e
matter o f efficiency, o r dcsignate somcone else?
r t realy
was reised a t our mecting yesterdcy b y Governor Calkins.
Gov. Galkins. I
think t h e resolution i s the best means,
4f the Governor feels a n y hositstion.
Tho Chairmen.
W i l l y o u submit a
Gov. Calkins. I
move t h a t i t i s the sense o f this meet~
ing t h a t t h e G o v e r n o r s
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Federal Reserve Bank of St. Louis
resolution?
o f the Banks individually a r e applying
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Federal Reserve Bank of St. Louis
increasing t h e e f f i c i e n c y f
o operation o f t h e p e n k s =
t h a t their 6
orts:
-oule
t o very
m e n
more e f f e c t i v e i f t h e y w e r e g i v e n o p p o r t u n i t y w i t h o u t
restriction
t o call conferences f o r discussion w h e n a n d
cll conferences o f operating
*
veatboma 3
S
vs
J
d
.
682
mind.
¢ motion
second the motion.
Penecher. I
*
ulévou b e * i l l i n g t o ¢ l i m i n s
Gov.
C a l i sn
o2
s
c
a
n
t s o m e b o d y vu i, S i e a e
better l e n s u a g e , a n y h o t e
Gov. Morss.
‘ o r l d y o u bdewillin
. when t h e y
Gov, C a l i n
The
Reserve c i t i e s ?
Gove Calkins.
was i n t e n d e d
O
F -courss
t o bea i n o n e o f
a
e 3
§
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Federal Reserve Bank of St. Louis
vherever
a t h e he
i n our
S u e n
CGisecussion?
The C h a i r m a r
T
Gov. S e x y . I
second t h e motione
3
put a n d u n e n i m o u s l y ¢ s 1
2>
The n e x t d i v i s i o n o:.
tency mane-=
Governors.
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Federal Reserve Bank of St. Louis
os
‘york a n d t h e c l a s s i f i c a t i o n
o f the
the subject o f measuring
roughly s b o u t 7 0 p e r c e
to measure
t h e work o f t h e
e r k
F o r in-
nunber o f b i l l s p a s s i n g t h r o u g h t h e m o n e y d e p a r t number o f checks h a n d l e d ,
he n u m b e r
study,
t h e n u m b e r o f collec-
a
o * bond conversions
i s
costs resulting.
“e P i n d t h e t 2 s t h e r e s u l t o f t h e 2
omlication o f t h a t
in c e r t a i n o f these d e p a r t m e n t
the e x c e p t i o n
o f the
Tt e c u Lor
co
4
svstem
i s c o m p l e t - l y ~ o r k e d o u t there,
bond d e p a r t m e n t a n d i n t h e
collection department t h o s e u n i t c o s t s a r c c o m i n g d o r n r i g h t
been a
verw considerable reduction,
to. the: fact that these:
e n nave 2
end
a . i n g rod t o
547
Now, t h e t i s o n l y o n s o f t h e t y p e s o f studies t h a t a r e
being made i n the N e w York Banik: i n order t o get expense
not only uncer control, b u t t o find o u t t o what oxtent
they are under control.
The next thing w e have done i s t o inerease t h e sense
of responsibility o f eoech one o f the 5 6 officers a s t o the
6xpencitures
o f t h e bank.
whet more, I
got a l l t h e officers together o n e efternoon
enc g a v e t h o m a
A b o u t s i x months a g o o r s o m e ~
very f r a n k t a l k a b o u t t h e banic's expenscos,
not i m o w i n g w h e t h e r t h e y w e r e o s c a r e f u l l y c o n t r o l l e d
as
they m i g h t b e , b u t j u s t u p o n t h e p r e s u m p t i o n t h a t n o t h i n g
ané v ¢ coulé still d o better, e n d they were
a good deel impressed.
O f course, v e have s o many officors
m, 3 8
possibly s o m e o f y o u h a v e w i t h yours. I
told t h e m t h a t
& subsequent m e e t i n g w o u l d b e h e l d a t v h i c h I
reports,
a n d there o u l d
would c x p e c t
b e a 2 stenogrephsr t h o r e t o t a k e
down t h e discussion, a n d I wented t o sce what t h e results
woule be.
“ w e hed thet meeting a month o r s 0 ago, anc they
211 turned u p with reports, a n d t h e economy that resulted
from just having that henging over them was really :stonishing.
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Federal Reserve Bank of St. Louis
I t wes n o t thet they were n o t a l l working, b u t i t had
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
548
not b e a n reduced t o much o f © system, i t dic not g e t the
enount o f personal t h o u g h t
o n the
A
that t h e subject should have, a n c they were notified
indefinite
time
i n the Yuture
heer F r o m e c r t e i n o f t h e o f f i c e r s
i n the
are cudgelling their brains a s t o
ies
vhere g r e stor s c o n o m i e s c a n b e efit ected, a n d t h a t r e s u l t s
T do not w a n t t o g o
the q u e s t i o n
t h e system
i n catal f
up c o s t s a n c s o on.
r employ
v h i c h¢
i t i s pretty t h o r o u g .
business organization t
ever h a d a n y c o n n e c t i o n v i t h , p o s s i ibly moreso;
to cmphasize b y what I
a
a y i n g o n l y the t r o points.
4s t h a t i f y o u e a n introduce a
what w o r k produces,
but I
s y s t e m o f measurement
of
y o u promote economy; a n d , secondly,
if y o u e c m s u p p l e m e n t t h a t w i t h a
ibility o n the p a f
feeli
your juniors, a n d the feeling that
and c a l l e d t o
the p e r s o n a l touch: ~ h i c h y o u need.
and t h e mental e t t i t u d e
o f the men
t
h
e
n you get
549
That has been m y theory o f controlling t h e oxpenscs o f
the bank from the beginning.
v
e have only recently had
the time t o really g e t a t the j o b i n detail a n d scientifieally. I
do not know t o what extent t h e question o f
unit cost has been stucicd i n the other Federal Reserve
Banks, a n d o lot o f the detail o f i t I may discuss w i t h
you, b u t i f there i s a n y advantage t o the other Federal R e serve B a n k s
in «
discussion
o f t h o s e mattcrs, I
want y o u t o
have the benefit o f it, but w e also want the benefit o f what
you a r e doing,
a n d w e c a n n o t g e t i t until w e g o t t h e s e m e n
together e n d compare systems.
That i s all I want t o say.
Gov. Biggs. T h e r e a r e many items i n the bank that c a n
be p l a c e d
on a
picce b e s i s .
T h t
w e have donc i n many i n -
As soon a s the employe lerrns t h a t his selary i s
being besed o n the number o f items, i t is a n incentive for
the o n e under h i m t o send o u t 2
few hundrod more i n the
course o f a day,
The Chairman.
O f course the objection which i s made
to this system o f unit cost has always b e e n that i t developed
speed a t t h e s a c r i f i c e
o f e c c u r e c y a n d efficiency.
things have g o t t o b e niccly balanced.
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Federal Reserve Bank of St. Louis
The two
550
Gov. Biggs.
Y e s , but you chock u p a t the end of the
month t h e number o f crrors, a n d thet also goes against
them.
The Chairman.
W e keep a record o f «11 errors a n d
adjustments f o r t h e whole bank, a n d they a r e a l l reported
to the officers a n d the responsibility fixed f o r them, whor-
ever i t is possible t o fix them
Gov. Scey.
W o have h a d from the beginning a
system
of competition between them, a n d w e have e v e n offered
prizes f o r t h e unit production where t h a t c a n b e done i n
certain departments, a n d we have under study the subject
somewhet along t h e linc which y o u have explained.
W e have
only gotten i n position where w e feel that w e c a n study
4t and develop i t t o the pest adventage.
Gov. McDougal. Mr. Chairman,
w o have established t h e
measured s e r v i c e p l e n i n c o n n e c t i o n w i t h f o u r o f t h e
departments i n the transit end, a l s o i n connection w i t h
the han@ling o f curreney e n d coupons, a n d are studying
44 with e x view possibly t o applying i t clsewhere.
A s a
result o f that there i s n o question b u t what t h e quality
and quantity o f the work have improved, a n d w e are n o w
engeged a n d have practically completed what w e call a
analysis, with a view t o esteblishing o r stanaardizing
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Federal Reserve Bank of St. Louis
job
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Federal Reserve Bank of St. Louis
salaries-- Ithink v e r y much slong t h e s a m e lines that
vou have.
The C h a i r m a n .
Oursis s b o u t c o m p l e t e d now.
Gov.McDougel.
““e h a v e a l s o c o m p l e t e d a
i think
p l a n u n d e r whic.
unit c o s t a l l
the
bank a n d cetermine accurately the cost
of operating e s c h d x
+,2
Ss 4
The C h a ie re m
en,
ler remarks a r e t h e r e ?
nt -to s a y t h a t o u r i n s t i t u t i o n
is proceeding slong
here.
the o t h e r s m e n t i o n e d
T h e r e £5.00
on o f that,
are d o i n g t h e s a m e
institution.
some v e r y definite
~ @ have g o t
far a s t i m o r t h a t i t i s succeéess-
ful.
The Chairmen,
ther r e m a r k s ?
GOV. e l l b o r n .
ayst t h a t
the same thing, a n d
o u r bank isdoing
of t h e branches.
“
e keep account
of t h e i r errors.
i do not think there hes been anything
wv
re n o t doing,
end w
have d o n e w h a t t h e r e s t
o f vou are
552
doing, b u t w e have n o t done i t a s well a s the rest o f you
have d o n e o r a s w e l l a s w e c o u l d d o i f w e h a é a n opportun-
ity t o know what y o u s r e coing.
Gov. Miller.
W e have two officers' meetings cvery
morning a t 9:50, w h i c h lasts about thirty minutes,
t o ex-
change idoas and t o make such suggestions a s will promote
efficiency a n d econory.
W
e have t h e standardized salary,
started i t early i n the yeer.
W e also have mcasurec t h e
amount o f work i n a t least four o r five o f the cepartments,
are p u t t i n g e r c h d e p a r t m e n t
on a
separate a c c o u n t i n g
so that w e will compare f r o m o n e month t o another
just what e a c h department costs a n d whet i t i s producing.
Goy. Fencher. M r . Chairman,
w e heave becn engaged i n
making a very careful study o f a stendarcizing o f our departments a n d standordizing o u r salerics, a n d that has been
protty w e l l w o r k e d o u t a n d i s i n force.
tec w h o a r c making a
‘ i s heve a
conmite-
very carcful survey o f measurce serve
ice, a n d they are working toward thot end, a n d I think w e
have g o t v e r y c a r c f u l l y i n s t i l l e d i n t o o u r o f f i c e r s a l l d o w
the line the matter o f economicel management.
I t has been
a thing thet I have becn hanmmcring ewey o n for the last five
or six months, a n d I think i t is pretty esrefully i n mind o n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
per5- G 2 st he
e
Chairmane
v i n l t - « have heard f r o m everybo
Gov. V a n Tandte
h
T
as
Ly
tf
I n our bank v e have a n of-
e have r e
meeting every morning a t © o'clock, s t v h i c h t
ports f r o m t h e junior officers 1 s t o economies
heve been able t o effect a n d vhat t h e y ©
of authority t o e*fect economies. F a c h juni o f f i c e r i n
charge o f o department h a s » meeting o n e night a week
the h e a d s o f 2 1 1 o f t h e d i v i s i o n s u n d e r h i m ,
i n which h e
rork
works o u t these things, e n d w e are Going o u r best t o
h e have a
out economies i n every possible mannere
cla
fied salary plan i n effect i n our oan: t h e s a m e a s they have
followed along that
t which w e a r e try-~
ing t o correct
The Chairmane I
do not suppose that this i s « fit
subject f o r 2 resolution, e x c e p t that I
was informed that
the Federal Reserve Board h a d recently appointed a
commit—
tee t o investigate the subject o f the expenses o f the
eral Reserve Banks and pos sida. anticipating some activit
on t h e p a r t o f t h a t c o m m i t t e e ,
i t mig!
b e g o o d plan t o
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Federal Reserve Bank of St. Louis
554
extend t h e *
t h e r e s o l u t i o n o f f e r e d b y Governor
both e f f i c i e n c y a n d economy.
“ell,
i n m y opinion t h e y are absolutely
is theres a n y f u r t h e r aectio:
is n o objection o n the part o f
resolution cover this matter.
Norris.
A r e “se going t o take u p either n o r
at some other time t h e sharing o f the expense
resentsed b y the expenses o f the Fedsral
d-pertment?
The G h a i r m a n .
expenses
there h e s b e e n a n i n c r e a s e
iie
o f the
Federal
Force g r e a t e r t h a n
ating side, a n d I
& considerable e x t e n t
i n o t h e r banks.
going t o b e criticised.J with “nepésence
OUP e s pentas, 1
tiimke t h e t 2 e - s h a
h
e B o a r d undere~
those e x p e n s e s a r e t h e r e s u l t o f t h e i r
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Federal Reserve Bank of St. Louis
Tee ELOrns «
The. Chairnean.
a
l b e e n reported,
l
t h i n k
some j u s t criticism b r
ae
Go
e undertook t o comment o n that, b e eAss
T e d e r a l tegcrve Boerd holds them responsible for
tne e x p e n s e
o F tt)
Gov. G a l k i n s .
nls os. She
b a n s
C
T h e Board
O
D
Y
1
2
1
has recently sent a
S
E
n
:
e
g
S
a
e
P
l Betge mere een OOS
letter t o
a1
t h e
e
e
or
r e a poe
de C i
fgents' Depertment, from the agests dorm, should be
Board . o f Directors, a n d
whether the vord “expense
sag involved i n
j
u
i
s
n
o
t knov
t certainly
t e s responshblie f o r the
Tin plawsa 2
nie GES Ge oa e
The C h a i r m a n .
ins,
D o s s your assoc
= I d e not think H e
b e f o r e that, a l ~
have always b e e n submitted t o the comniittee that
s e d upon t h e salarie es
other employes.
case “ i t h us, a n d that will
not e p p l y t o expenses.
cover expenses
B i ei soaateo geo,
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Federal Reserve Bank of St. Louis
556
Chess O n e w e n - o t -
tne
horever
doubt
have nofAt “ o u l d c a u s e n o o r f e n s e t o
The Chairman. Y
I e m not sure t h a t
Mr, J a y t o discuss i t here, t
Not n o v e
I G o n o t t h i n k i t sould,
but I
a m subject
to correetion i f you gentlemen c o not sgree w i t h mee
no G o u b t t h a t t h e t w i l l b e c o m p a r e d
“ay b y t h e Board,
1dministrators
T h e Board eould not
o f t h e b a n k t o m a k e a n analysis
expenses a n d n o t e t t h e
1 Department,
f>
of
m e t i m e require t h e same
a‘ n d I think certainly i t
will b e done.
The Chairmen.
this c o n c l u d e s t h e d i s c u s s i o n o f t h e f i r s t s e c t i o n
of G o v e r n o r H a r d i n g ' s a d d r e s s ,
to m a k e 2
D O I n
take-up t h e s e a
if’ m z t t e r
e n d Mr. H a r r i s o n w o u l d l i k e
i n the meantime before
v e
t h i r d sections.
Herrison t h e r e u p o n r e p o r t e d u p o n t t h e m a t t e r r e f e r r e d
ere w a s considerable discussion, a l l o f
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Federal Reserve Bank of St. Louis
lirected n o t
t o make a
record of,
following occurred “hich the Repinto t h e record.)
Chairman.
I n t h e t connection, g e n t l e m e n , I
have
letters addressed t o Governor Harding,
sent t h e m o v e r
t o
com uniestion e n b o d y i n g e resolution
the Governors
sends o v e r 2
the State o f Nebraska,
fod
o f n i n e o f t h e agricultural
letter f r o m t h e G o v e r n o r
of
i n «hich h e slso reports action a t
this Conference-- no, h e writes this j u s t before the convention,
a n d h e also urges a
more l i b e r a l policy,
a n d then
there i s i n c l o s e d < t i t h t h i s a n
which t h e Governor o f ,Nebraska made a t /Des Moines Confernce,
at this statement o f his quotes l a r g e l y from
the data submitted a t this hearing
T have
these c o m m u n i c a t i o n s
n o doubt
t o t h e Commission. i
gentlemen
hink the pressure hes let u p o n the Federal Rese S y s t e m ,
I think y o u a r e mistaken.
f
= he
to continue strong f o r some time.
558
men to. understenc- t h a t t h e r e 1 s a n atmospnerc t o - b e dcalst
with, t h a t w o h a v e b e c n t r y i n g t o g e t i n t o a
helpful p o s i t i o n
with these men, a n d that the Agricultural Comnission
fecls now thet v e arc trying t o help, anc these five Senators
that were here this morning fecl that w e are trying t o
help. Altogcethcr there a r e ten. Senators t h a t have g o t
a wholly different v i e w o f our attitude t h a n they h a d beforc. T h e r e a r e five Congressmen o n this Commission a n d I
doubt t h a t w h e n t h e s e m a t t e r s c o m e u p i n t h e S e n a t e
Housc, t h a t some o f these gentlemen will refer t o
they have b e o n frankly Geslt with, a n d while I
d o not
you gentlemen t o commit yoursclves a t all i n regerd t o
nattcr, f o r which I take sntire responsibility, y e t I
think that- i t i s going t o b o desirebic f o r Mr. Harrison
and m e t o g o ahead with a
ciscussion o f this lcgislation
with Mr. Andsrson anc. introduce these suggestions which
have b e e n brought o u t a n d which e r a s o inportant a n d
helpful a s a result o f this Conferences, a n d I
be a
think i t would
good schomo f o r 2 moment t o reconsicecr t h e idea o f
maling anything l i e «
formal report t o the Fedcrel Reserve
Boore, b u t i c t u s deci with i t verbally a n c informaily.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gove. C a l k i n s .
- f - m o v e roconsiccretion
o f thet m o t i o n
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Federal Reserve Bank of St. Louis
WObTOn.
unenimously. }
Governor S t r o n g ,
hich
tron
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Federal Reserve Bank of St. Louis
Executive D e p e r t m e n t
State o f Lowa
25,1981.
Ge. f.- Hereing,
Washington, J . C .
My ¢ear Governor Harcing.
At a
conference
o f midwestern Governors convened
jn
es Moines o n October 18-19, 1921, perticipated i n b y
Michigan, Wisconsin, N o r t h Dekota, S o u t h
Colorado, liissouri,
the following, a m o n g other resolutions, w a s e c o p t e c ;
"Liquidation of agricutlral loens will be slow.
benefits w i l l b e cGerivec f r o m t h e o p e r a ~
tions o f the finence corporetion i n extencing a
ar erecit
billion
t o agriculture, p r o v i c i n g t h e f u n d i s p r o p e r -
The finence corporation,
a s cemonstrat-
ed b y i t s r u l e s a n d regulations, c o n t e m p l a t e s t h a t i t
will r e g u i r e n e e r l y t h r e e y e a r s f u l l y t o ligquicate a g r i c u l tural l o a n s .
Reserve Bank
4 & 4 recent p u b l i s h e d s t e t e m e n t
i
n
of a
Federal
g t h e quantity o f grain production j n
west, w i t h a n e s t i m a t e
o f the velue
crop a t terminal markets, s t a t e d that this s u m
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Federal Reserve Bank of St. Louis
of money would liquidete egricutiral l o
market prices are n o t net t o the farmer.
O u t o f this
sum must b e Ceducted freight charges a n t cost o f harvesting the crop. T h e r e f o r e , t h e farmer realizes m u c h less
the terminal velue.
W e , therefore, earnestly urge
to acopt a most liberal policy
The r e q u i r e m e n t s
of
the nese. for lower interest
especial emphasis t o the a g -
riculturel regions where the value of farm procucts is
Delow a pre-war level, ené the need for credit i s very
t h e r e f fOr,
w e earnestly
urge
t h e Federsl
Reserve
such Gistricts t o recuce t h e interest rate t o 5%,
& moré liberal policy a s t o tne length o f
1aimman o f the conference I was directed t o transmit this resolution t o you f o r your sympathetic consideration.
Always
with assurence
o f m y highest regerd,
Very t r u l y yours,
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Federal Reserve Bank of St. Louis
State
o f Nevraska
uxecutive
Office
Lincoln, October 17,
serve B o e r d ,
GC.
My Gear Governor Harcing:Referring a c a i n t o y o u r l e t t e r o f S e o t e m b e r twenty-nine.
I want t o ensver specifically thet pars
you say:
' I incuired i n m y previous letter whether y o u
thousht a
recuction
i n t h e discount r a t e o f t h e F e d e r a l
Reserve B a n k o f Lenses C i t y woula result i n a lower level
of i n t e r e s t r a t e s
t o t h e public. I
s e e nothing, h o w e v e r ,
B)
in your letter o f September twenty-two w h
this incuiry, a n d I will n o w withcraw t h a t cuestion a n a
instead whethn:r y o u thint conditions i n your state
l
be improved b y a recuctiorx
l
i
w
{
Bani rate, anc I woulc appreciate
of y o u r v i e w s . '
My a n s w e r t o t h i s q u e s t i o n ,
a s well a s t h e o n e
that y o u p r e vBi o u s l y s a
g s k e d r e g a r&d i n g a
lower l e v e l o f 7
in the affirmative. I
pelieve t h a t t h e
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Federal Reserve Bank of St. Louis
5€3
effect o f the rate o f interest charges b y the Federel R e serve Benk i s t o control t h e rate t h e t i s chargec gen~
[
erally i n a given d i s
f have Giscussed this mat-
ter with ban’zers quite generally, a n c while [I a m not
ally a n x i o u s
t o lower in-
following t h e public discussion t h a t has been
this question, t h e y will promptly responce with a recuction
borrowers i n proportion t o a n y re€uction t h a t i s meaco b y
Reserve Bank.
I a m enclosing c o p y o f a
Giscussion
o f t h i s subject
that I shall present t o a conference o f governors o f the
miécle west States, t o be held a t Des Moi t o m o r r o w .
From this y o u will pgath«
h e
h e
which I. a m p a r t i c u l a r l y i n t s r e s t e d :
a r e two points i n
First a
more libder-
al attituce towere agricultural crecits i n the jcansas
and a
lower r a t e o f i n t e r e s t
i n this dis-
ené I delieve that i f you were a s close t o concitions
1s I am, y o u woule recognize t h e wisdom o f taking
ection u p o n them.
sure y o u will uncerstend t h a t I have n o desire
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Federal Reserve Bank of St. Louis
to e m b a r r a s s t h e o f f i c i a l s
even i f -f could,
o f t h e Feceral
2 ) a m impressse w i t h
tuetion that cemends a t t e
have t e k e n t h e m a t t e <
May I
cua a
a
relief o f t h e m o s t o r a c t i c é
a n c . relief, a n d I
I
WaLeh- f F h e l e v e
h e r a c t e r ean be
hope f o r y o u r f u r t h e r f a v o r a b l e c o n s i c e r a t i o n
o f
these important m a t t e r s ?
ery t r u l y yours,
Govarnor.
o
dking o f t h e Federel Reserve B a n k a t a confer-
ence o f Goysrnors o f the Central stetes a t Des Moines
October 1 8 t h Governor MeZelvie
‘credit f o r a g r i c u l t u r e
is a
subject o f i m p e r a t i v e
importance now, f o r i t must b e recognizec t h a t tuntil a g riculture g e t s o n t o i t s f e e t a g e i n t h e r e c a n b e TIttLSE
progress
t o w a k d normel prosperity.
A
s a
pusiness,
the
needs o f a g r i c u l t u r e a r e c o n s i d e r a b l y c i f f e r e n t
needs o f other industries, f o r t h e obligations
of t h e f a r m e r a r e b a s e d u p o n a
plan o f o p e r a t i o n t h e t i s
guite different f r o m the needs o f other industries, f o r
the obligations o f the fermer a r e based u p o n a plan
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Federal Reserve Bank of St. Louis
565
eperation t h a t i s q u i t e c i f f e r e n t f r o m t h e t o f e t h e r
businesses.
T h i s suoject i s properly diviced i n t o t w o
phases: F i r s t ,
e s i t relates t o loans o n land, a n d second,
with reference t o personal property, s u c h a s livestock a n d
farm equipment.
T h e F a r m Land B a n k a n d other systems t h a t
provide f o r the emortization o f farm loans h a s afforded
considerabhe relief t o lané owning farmers, b u t t h e inadcequacy o f t h i s r e l i e f
t o a l l farmers
i s shown i n t h e r a ,
that nearly 50% o f the farmers i n the corn-belt d o not
own land.
O f the 50% that do own land, there is else a
need f o r a character o f credit that will ensble t h e m t o
carry o n their operations without being forced t o liqui:
date
a t a
time a n d u n d e r c o n d i t i o n s
t h a t occasion unneces~
gerily h e a v y loss.
“When t h e F e d e r a l R e s e r v e
B o a r d w a s organized,
i t wes
assumed that relief would b e forthcoming t o farmers who
could o f f e r t h e p r o p e r k i n d o f c o l l a t e r a l s e c u r i t y . —
In
this r e g i o n t h i s a p p l i e d w i t h p a r t i c u l a r f o r c e t o live.
stock anc grain. T h a t this assumption was not unwarranted
anc that for a time the Federal Reserve Bank did meet this
requirement i s shown i n the very large borrowings that
were m a c e t h r o u g h t h e F e d e r a l R e s e r v e B a n k i n t h e a g r i c u l Suret--Cistriets.
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Federal Reserve Bank of St. Louis
In t h e e a r l y s t a g e s
o f t h i s s y s t e m i t enpears t h a t
patronage o f the Federal keserve B a n k was encoureged
farmers found here a
ready source o f crecit. D u r j n g
war t h e d e m a n c f o r i n c r e a s e d p r o c u c t i o n e m p h a
need f o r enhancee agricultural activity a n a
jnereased t h e c e m e n c s f o r e g r i c u l t u r a l c r e d i t .
close o f the war, a
loans w e s shown,
rather easy attitude toward farmers!
s o that i t was reletively e a s y f o r t h e
farmer w h o hac grain o r livestock t o odtain a
of credit.
lieberal line
P e r h a p s t h e r e was t o o great liberality
i n this
respect, a n d i t is eltogether probable that t h e ease with
which money could b e obtained encouraged many permers t o
extend t h e m s e l v e s f a r b e y o n d t h e r e n g e o f c o n s e r v e t i v e i n vestment
operations.
i n land a n d f a r g
T h e loans t h e n
.
8 i s n o w apparent,
were h i g h l y i n f l e t e d e n a f i c t i t i o u s .
CGonsecuently the
mece w e r e b a s e c u p o n
v e
w
h
radical cecline i n values o f agricultural products rendered the vaiue o f collateral securities wholly inadequate t o
support t h e loans.
It w a s h e r e 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 r e c o g n i z e d
the w i l d o r g y o f extravagances,
that h a d c o n s u m e d t h e country,
speculation a n d inflation
a n d a n effort w a s promptly
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Federal Reserve Bank of St. Louis
to t h i s u n e c o n o m i c a l c o n ¢ i t i o n b y enforeBeering u p o n t h i s point,
I quote f r o m t h e proceedings o f the Joint Commission o f
Agricultural inguiry i n Congress:
"Between Mey 4th, 1920, a n d April 28th, 1921, the
loans a n d Giscounts o f banks i n agricultural counties throughout the country declined $36,500,000.00,
o r slightly more
than 1.2%. T h e loans an¢ discounts o f banks i n semi-ag-
riculturel counties declinea@ 418,100,000.00, o r 1.3%. ‘The
loans and discounts o f banks i n non-agricultural counties
$E277100;90C0700; v
o Cvso77 . The borrowings from
the Federal Reserve Banks i n agricultural counties remeinec. p r a c t i c a l l y stationary,
a n d t h e borrowings
b y banks
in non-agricultural counties dcclined %629,100,000.00,
or 28.8%.
I n partial explanation o f the relatively heavy
Gemends u p o n the Federal Reserve B a n k
tural counties,
i t appears t h a t their loss i n total d e -
posits was 11.1% as ageinst
4
,
4
5 by banks i n
non-agricultural counties
The conclusion t o b e derived from these facts i s not
that a g r i c u l t u r e r e c e i v e g m o r e b e n e f i t t h a n o t h e r l i n e s
of business from the Federal Reserve Bank, but that the
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Federal Reserve Bank of St. Louis
568
e
for
f a r m e r
t o liguida
his borrowing neoss.
In
W
a
o t h e r
r prices,
upon t o l i c u i d a t e u p o n a
c e s s eTs
e proh
worcs, t h e manufacturer
while
the s a l e o f procucts
farmer w a s c e l l e d
very much low.r
or enforced Llicu
ae
the
oa e oM n s
obligations e n d i n c r e a s e d
lhquidatea h i s oblig ations through
upon « 4
r
Cr
level o f prices.
aation f e l l w i t h e s ~
agriculture 1 Cistricts, f o r t h e
benks throughout this
rVeg
on a c c o u n t
région
o f ceercased
enforcec
he d e c l i n e
ccuced
i n
Agricultural
incuiry t t g
3
the processes
in t h e s e v e r a l
Bank C i s t r i c t s w e r e o f
the d i s t r i c t b a n k s p u t i n t o
interest rates reaching
varying cheracter.
efifeet a
precueted s c a l e
in s o m e insterices,
e l others
i h w
a d d i t i o n a l requirements
Some of
approximately 7%.
accentuater
the h a r d s h i p s
of
a
OL
as11%,
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Federal Reserve Bank of St. Louis
569
situation.
T h i s l a t t e r f a c t i s c l e a r l y s h o w n i n ‘the foi-
lowing:
"Between May 4, 1 6 ¢
April 28, 192
banks s h o w a
882,000,000
o f which »827,000,000,
o r 9 4 per cent, i s showr.
non-agricultural counties, while t h e jliquice2ericultural a n c s e m i - a g r i c u l t u r a l c o u n t i e s a m o u n t e d
to only about 455,000,000.
A n analysis o r the
loans b y Fedeval R e s e r v e c i s t r i t t s s h o w s f e w i m p o r t a n t re-~
cuctions f o r banks i n agricultural counties, t h e largest
recuction being reported f o r banks i n the lansas C i t y cistri¢t, w h e r e l o a n s w e r e r e d u c e d b y e b o u t 4 5 5 , 0
the other hand, banks i n the Richmond anc Atlenta cistricts
showee s o m e w h e t l e r g e r l o a n s t h i s y e a r t h a n a
year ago,
In the semi-agricultural counties, n o important
are reported f o r a n y o f the Feceral Keserve cistricts,
In the non-agricultural counties t h e volume o f ligquidation h a s b e e n m a t e r i a l
i n every federal
a, Which reports «
10 per cent increase i n
‘The contrast between the banks i n agricultural
and n o n - a g r i c u l t u r a l c o u n t i e s
i s even more pronounced
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Federal Reserve Bank of St. Louis
pare
turel counties
p e r t i c u l a r l y heavy r e l a t i v e i n c r e a s e s b e i n g s h o w n f o r
Atlanta, D e l l a s a n d M i n n e a p o l i s C i s t r i c t s
agricultural counties, t h e amount o f l o a n s f
ectically n o changes
he Richmonc a n d Atlante 4
recuction o f 1 0 millions
In non-agricultural countiss t h e reduction
sorrowings f r o m Federel Keserve Banks i s
execpt C l e v e lang. - ror
e whole,
t h e recuction
serve B a n k s amountec
i n Ddorrowings
f r o m Fedsral
t o a b o u t 5 0 2 millions;
f o r banks
Re-
in
non-agricultural counties t h e recuction w a s 6 2 9 millions,
which w a s o f f s e t
i n part b y a n increase
o f 1 2 8 millions
the borrowings o f banks i n agricultural counties
eserve G i s t r i c t c o m p
Oklahoma, Kansas, a
part o f Missou1i,
South Dakote, Colorado and wyoming. W i t h i n thi
the v r i n c i p a l i n d u s t r y i s a g r i c u l t u r e a n d t h e p r i n c i p a l
agritultural procucts are livestock ana grain.
« 4 table
in
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Federal Reserve Bank of St. Louis
of ficures s h o w i n g t h e i n c r e a s e
or
borrowings f r o m the Feceral Keserve Baniz
period f r o m
borrowings
strict w a
o s
2
% more t h a n f o r a
i n the
othex
anc. 125 more t h e n the totel decrease i n t h e agri.
cultural counties o f all t h e cistricts.
trict, t h e ¢ccreas
ties was 10.4%,
e a e
i
I n the same cis~
n the semi-agricultural coun-
o r 4.35; more then for eny other
and 7.1% more
In the non-egricultural counties,
oP it.2h w e r e t h e n f o r a n y o t h e r
for t h e total i n all the districts.
kansas
C i t y cistrict
w a s 18%,
T h e total decrease
3 . 9 % more then for
other district, and 8.5% more
the Gistricts. T h u s i t appears that the cemands
uidation i n the kensas C i t y district f e l l '
upon agriculture a s comparec w i t h other businessés
the decrease i n loans w a s greater t h a n i n any other dis-
trict, t o say nothing o f being 1 5 0 % greater than for all
the c i s t r i c t e .
Another t a b l e w h i c h s h o w s t h e b o r r o w i n g s f r o m t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
572
Federel Reserve Banks f o r t h e same period gives the. followt h e lenses C i t y district t h e
illuminating facts: n
reasec borrowings i n the agricultural countics were
inecreasec borrowings i n the
the i n c r e a s e d b o r r o w i n g s
jistrict, 6 % more than the increased
i c a g o district, a n d 5 % less t h a n the
porrowings i n e
totel increased borrowings f o r all t h e cistricts.
i n 5 Ase!
semi-egricultural c o u n t i é s t h e &ecereased b o r r o v i n g s
i n the
a s comparec with increased
Kansas C i t y district were 23%,
borrowings o 2 ©6% in tho Ablaenta district, T e decreased
i n t h e Minneapolis C i s t r i c t ,
borrowings
district,
e n d total decreased borrowings
the G i s t r i c t s .
i m tae non-agricultural
o f «27
counties,
the
creased borrowings i n the Lensas C i t y cis
as c o m p a r e d
w i t h 2 @ cecrease
e
e a
i n t h e Atlanta cistrict,
46% i n
trict,
Tn a l l t h e
City district ©
2 5 7 . a s compered with 3.5% i n the
Atlanta cistrict, 14.5% i n the Minneapolis district,
é
o f 22 5%
in the Chicego district, a n d a total increase
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Federal Reserve Bank of St. Louis
in all t h e cistricts.
H e r e i t i s shown again
cemends f o r liquidetion i n the lenses C i t y district were
much more insistent t h a n they wore i n other agricultural
Gistricts, w h i l e t h e needs o f agriculture f o r
recit a r e clearly reflocted i n the increased borrowing
in p u r e l y a g r i c u l t u r a l
countics,
a s comparec
with
agriculturel e n d non-agricultural countiss.
ws t h e t o n : p r i l 2 8 t h , l e e l ,
the b o r r o w i n g s
f r o m m e m b e r banits
o f the Federal
nese
in egricultural Gistricts were i n excess o f
Geile tins i n the southser, :
tricts, W i t h t h e exception o f Lansas City.
I n semi-agri-
cultural Cistriets the borrowings were below t h e Dbasicline
the districts except HKichmonc, Atlanca and Ghicago,
while i n the non-agriculturel Ccistricts,
a l l t h e cistricts
except Richmona a n d Atlenta reported borrowings b e l o w t h e
line.
Throughout a l l o f the facts educed i n the Congres
from t h e informetion aveilable i y
sources,
the S G I
e a s o f r i c u l t u r e a r e clearly
anc. the inedility t o licuidate agricultural loans,
2
With other Hinds o f lOans, is. proven. “ t i s also evident
that t h e Tensas G i t y district, through various methocs o f
procecure, pressed i t s demands f o r licuidation w i t h unusual
vigor a n d this unquestionably accounts i n n o small measure
for t h e h a r d s h i p o f the f a r m e r s , v a r t i c u l a r l y l i v e s t o c k
fariers,
i n thie district.
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Federal Reserve Bank of St. Louis
t
Torn 7 i
nm a
ei ses4mehe o r
apricultural ersecit
needs
- s t h e crecit n e e d s
o f the c o u n t r y a r e not t h e s a n
trede e n d commcrcse
i n other 1 1 5 6 8
i
t
h 2 h
l e
Pane
oF
prices “ o r a g r i c u l t u r c l p r o c u c t s ,
for t h e f a r m e r t o l i q u i d a t e t h e
tae v e n a n y t h i n g m o r e t n e n
Lae]
alreedy
a o :
r
y neovy
more l o s s e S e
even more, f o r t h e price o f
ducts i s l o v e r n o ™ t h e n i t h e s b e e n 2
egricultural
i
pre
i n g pr
rill
b e bankrupted
a n s rm ¢
w e n t y - f i v e yeorse
liquidated under these
t s i m p l y mesns t h a t thouseands o f Parmer:
a n d agriculture
dcterred m o s t s s r i o u s l y
i n its j
a s a n incustry w a d
h
e Fermer m u s t
mey ligqaidate
as h e
his products, m a y b e placed upon t h e marist t o best
evantage, b u t i n order thet h e
encouraged
e n a b l e d
t o feed o u t the livestock h e has o r
purchase more, o r extend his operations o f breeding livestock
so that h e vill ultimctely b e re-esteblished u p o n 2 sound
economic b a s i s
o f
idle t o a s s u m e t h e t t h e c r e d i t n e e d s o f e r i c u l t u r e
supported b y licuic essets, f o r t h e ferncr does n o t
have e n o u g h s u c h a s s e t s
t o s u p p o r t h i s ovorrowings.
he s h o u l d b e privileged
t x “ P e r | e cheracter
Instead,
o f ¢olleteral
liquidated * h e n t h e l o a n
so l o n g * s
cen b e done thousends
o f farmers
to c a r r y o n t h e i r “ a r m i n g o p e r a t i o n s
marketing t i l l b e
aged, a n d the livestock industry w i l l n o t b e irrepersbly
discouraged.
Interest rates a r e t o o o h .
affects Nebraska borrovers i
1 0 "
i
i n the
c
h this
p l e fect thet
2 per Cent reduction
Nebraska banks
of over three million dollers ©
year t o borrowers, a n d t h e
larger portion o f this benefit would b e reflected immediately
to agriculture.
“hile I
vould n o t counsel t h e lorering
interest r a t e s f o r u n n e c e s s a r y o n d u n v a r r a n t e d purposes,
sincerely feel that i n line vith t h e
for a
readjustment
o f values
i n2
lines,
i t i s o f utmost i n -
portsnce t h a t interest rates should b e lowered.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
T h e Nebraska
Agricultural Council,
a t e meebing h e l d within the
“eer, edopted t h e following resolution:
"hereas, the
interest o f 6 per cent charged b y the Kansas C i t y
Reserve B a n k , p l u s t h e a d d e d c h a r g e
b y member b a n k s ,
burden o n ag~
demend t h e t t h e r e t e
o f1
s
t charged
by
‘fel ly reduced."
That s u c h a
reduct’on c a n b e m a d e i n this d i s t r i c t
4g s h o r n i n t h e t r o - f o l d fact:
F i r s t , t h a t t h e rate i n sev~
p e r cent a n d
erel o t h e r d i s t r i c t s h a s b e e n r e d u c e d t o f i v e
interests
ig n o reason “ h y the egricultural a n d business
r
a not entitled t o a s lor 2 rate 2 s i s b e i n g
tin the c o r n - b e l t e
charged e l s e r h e r e
S
s e e n e r a l l y admitted that t h e
e 1
jeral “escerve B a n k s y s t e r s
shown p r o f i t s a m o u n t i n g t o
apmroximeting
more t h e n 1 0 0 p e r cent, s n d i n s o m e instances,
trice t h a t figure. ‘ T u r t h e r m o r e ,
district s d m i t s having,
t h e Eansas C i t y Reserve
a t t h e p r e s e n t t i m e , o v e r G 1 2 ,000 , 000
Vebraska mesber banks rithout exceeding
Fed-ral Reserve B a n k
ere n o v only sbou
11,250,000
a s agai B i e i s e e s s 1 0 0 l e s t October.
very great demand for money, this concition rould uncuestion
ably dissppesr w e r e e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
conditi
o
f borrowing a n d t h e rate
of i n t e r e s t m a d e m o r e e n c o u r a g i n g
t o borrovers.
feeling i n some quarters that t h e member banks o f the
Reserve system will n o t give t h e advantage o f ©
est rate t o their customers
bankers have already s o indi
from 2 recent letter f r o m Govermor Harding o f the Federél R e serve Board under date o
September trenty-nine,
a s follor s3
"Tt i s interesting t o note the changes i n the percentages
rediscounted paper vhich h a d been taken eat varying rates
interest b y the borroring manber banks,
I n October, 1°20,
b the member
the percentage o f 7 per cent paper d i s c o u n t e d y
benks v a s 1 0 . 8 7 a g a i n s t 2 2 , 5 8
i n fugust, 1 ° 2 1 .
T h e percentage
of 7 5 per cent paper vas 15.34 ageinst 27.06 a n d the percentage
of 8
per c e n t p a p e r w a s 5 4 . 4 9 a g a i n s t 2 5 . 5 9 .
of © per cent paper was 6.41 against 6.51.
T h e percentage
T h e percentage o f
10 p e r c e n t peper, w h i c h tras 7 . 1 0 i n October, 1 8 2 0 ,
however,
t o 10.0
rediscounted
p e r c e n t i n “ugust; 7 0 2 ] ,
p a p e r talren b y t h e m e m b e r b a n k s
increased,
L o o k i n g a t Table
a t 8
per c e n t w a s
against 27.00 i n August, 1921, 9 per cent, 5.46 against
&.77 a n d 1 0 per cent paper 21.94 against 52.68.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
578
“Cerrving t h e analysis further ~ e will s c e that o F the
total o f *#,308,20 0
which ras rediscounted b y the Onehe.
Branch f o r Nebraska member banks curing August,
1 ° d , only
“796,800 w a s taken b y the borrowing banks f r o m their customers
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
at a 1 0 per cent rate, b u t this amount was made u p o f 915
separate pieces o f paper, m o r e then one-half o f the total
number o f notes t a k e n during t h e month.
o® t h e r e d i s c o u n t e d n o t e s
The
o n which customers
lu per cent vas i n October, 1°20,
1921, about £870.
notes
T h e averages m o u n t o f the rediscounted
o n “hich customers h o d been charged 8
per c e n t w a s i n
Netober, 19D, ebout 64,52, e n d i n August, 1921, about 4,000,
and t h e a v e r a g e
of 7
p e r c e n t n o t e s w a s i n October,
about
190,
£7,700, and in fug 1 9 2 1 , about $24,625.
M7211 this vould indicated,
a t least s o f a r a s t h e redis-
counted notes a r e concerned, t h a t t h e lerger borrewers a r e get-
ting e slight reduction i n rate but there i s notning t o show
thet t h e smaller borrowers are, f o r notrithstanding t h e reducec
volume o f l o a n s
t h e number o f tronsections
greater i n Augustm 1921, t h a n i n October,
a t 1 0 p e r cont ras
19.
"There i s nothing i n this letter o r i n m y letter
tember 1 5 t h v h i c h i s i n t e n d e d a s a
of t h e b a n k s
o f Nebraska.
reflection u p o n o r @
I n common with the r e s t
¢
of the baks
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
of t h e country,
t h e y heave h e d v e r y serious p r o b l e m s
t o con~
teid sith a n d they a r e entitled t o great credit f o r the
i n which they have m e t t h e strain whitch has b e e n im-~
-upon them, but I -ish t o call vour attention t o the
Ted- ral Reserve B a n k o f Kansas alty, l i k e a l l
other benks, h e s h e d its problems t
a n d i t s rediscount
t e t h e bamk-
facilities h a v e c e r t a i n l y b e e n o f great a s s i s t a n c e
ing community a n d through the
real Reserve Board i s watching the rate situation closely
heve t h e retes o f each Federa
a
bear t h e proper relationship t o current raves
“T inovired i n m y previous letter whether y o u thought
e reduction
i n the discount
rate
o f t h e Sederal
Heserve
Benk o f Kenses City ~ould result i n e lover level o f interest rates t o the public.
t T see nothing, however,
i n your
letter o f September O@ind which bears o n
whether
will n o w ~withdrev t h a t q u e s t i o n e n d a s k s t e a d
vou think conditions i n your State } >
reduction
ete a
b
i m p r o v e dy
i n t h e Federal Reserve Ban: vate a n d I
frank e x p r e s s i o n
In conclusion, I
o f y o u r views."
desire t o s e y that I
general criticism a g a i
1
rouid
a m entering
e Federal Reserve system. I
586
‘ectly s o u n d i n vrinciple,
a n d i t hes been
greet service t o the Nation, b u t like e l l Governmental
orivate agencies,
i t c a n b e abused b y unwise odministra=
dis-
impute t o t r e F e d e r a l R e s e r v e o f f i c i a l s a
do I
to d o a n injustice t o a n y industry o r section o f
country, b u t I
do feel that this. hes b e e n the result i n
the K a n s a s C i t y District. 4
more l i b e r a l a t t i t u d e
i n the
Kansas C i t y District, w h o l l y i n consonsnce w i t h sound business
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
and banking prectices, “ o u l d undoubtedly heve relieved this
and losses thet i t has h e d
I fully b e l i e v e t h a t t h s r e t u r n t o normel c o n d i -
Gistrict h a s b e e n greatly retarded through t h e
arbitrary a n d unfortunate demands t h a t were imposed.
For the present,
promises
to a
the corm-belt,
s t least, t h e Var Finence Corporation
o r d relief
ae
t o t h e apricultural i n t e r e s t s
o f
b u t this relief should h a v e c o m e f r o m t h e
Federal Reserve Bank ~ith i t s millions o f credit that might
have b e e n u t i l i z e d :
inge
m a t e businesses, especially farm-
I t seems t o m e t h a t the tremendous reserves o f the Ped-
eral R e a n k s a t » time when there i s s o much need fer
eredit
i n essential l i n e s
with t h e d e m a n d s
i s u n e c o n o m i c a l a n d not. i n h a r m o n y
o f business readjustment.
« i t h o u t a n c ourag-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
581
inflation, s p e c u l a t i o n
od
o r t h e m a k i n g o f u n v i s e invest~
eserve could b e used a t the
prssent time t o the everlasting benefit o f the basic indus-~
tries thet n o v suffer throughthe n e e d o f financial
tide t h e m over this period o f financial stress.
tions o f the country have been greatly aided b y
from t+hh e Fedara
i e s e
s a n k a n d e n imoroved business conditio
sre s u c h a course w a s pursued.
our c u t y t o impress t h e s e e s s e n -
ticl f a c t s u p o n t h e o f f i c i a l s
o f the F e d e r a l R e s e r v e
in the hope that they rill come t o the
chet a r e n o t
i n such dire need
o f financial
582
Tho Chairmen, S h a l l we proceed with Governor Harding's
address?
T h e sccond topic o n the progran i s
The recent developments
i n the p r clearing
system o n d suggested changes i n method.
The s u g g e s t e d c h e n g e
i n method i s c o n f i n e d o n l y t o
tho matter o f cherges agrinst t h e non-member banks--that
fs, charges against t h e member banks f o r handling non-member
pani: chocks--and I
have already oxprésscd t h e view t o
Governor Harding thet I think i t would b e a mistsko t o introduce a n y n o v r e d i c e l c h a n g e
i n t h e p a r CoLlceétion S y 3 =
tem until this litigation i s out o f the wey, cither i n respect o f charges o r methods, p e r list, n o n par list, o r a n y
radiesl chenge whatever. I
do not went t o urge that, how-
ever, u p o n you, a n d I T would l i k e v e r y m u c h t o h a v e e x p r e s s i o n s ,
end will y o u make t h e m a s short « s possible, bccause t h e
lest part o f this address will requirc s o m e little study?
Gov. C a l i n s . I
will s e y i n our o w n District I
o m fully
of the opinion which y o u expressed, t h a t n o change should
bo mocc until the litigetion hus be.n errriod t o . cetermineabion>.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gov. Ieneher.
D o I understend t h e t y o u ineluce t h e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
sehedule which t h e B o a r d propos
member benis m a y c h a r g e
Gov.
ucDougal
p>
t
OG
e
B a l
e
e
C o Gale bes
ini: G o v e r n o r
Sobies
Cove “ o n c n e r . ,
upon n o n e m e m b e r banirs
auestion s h o u l d b e l e f t a l o n e
The C h e i r m a n
out
t T cannot u n d e r s t
t o establish
collections u n i v e r s a l
i n the United
do y o u come t o that conclusion?
584
The Chairman. B o c a u s e i f you give t h e m permission t o
make this charge,
i t i s a license t h a t will give t h e m
revenues, a n d they will a l l avail themselves o f it.
Gov. Seay. T h e y have i t now, haven't they?
The Chairman. N o .
ing h o u s e c h a r g e ,
country,
T h o banks i n New York make a
b u t w e a r e giving a
license
clear~
t o the entiro
s o t o speak, under t h e authority o f the Federal
Reserve B o a r d ,
customers.
t o make charges
o n checks d e p o s i t e d
b y their
T h a t i s what w e a r e trying t o get away from.
Gov. Seay. I s n ' t i t the interpretation o f the act
that i t was contemplated t h a t there should b e a charge madc?
The Chairman.
Gov. Scay.
Yes;
i t i s s o contemplated.
A n d does n o t t h e Federal Resorve Board
regard i t a s mandatory u p o n t h e m t o make t h a t charge, b u t
it i s made? I
a m not arguing f o r i t o r a n y ection par~
ticulerly, b u t t h e Board, a s y o u lmow, h a s h a d this subjeet u p f r o m t i m e t o time, a n d I
communication,
judgc f r o m i t s l e s t
1 t feels t h a t i t h a s p o s t p o n e d a c t i o n u p o n
4t as long o s i t cen. I
think that i t would probably
yield t o p e r s u a s i o n i f w e e x p r e s s e d t h e o p i n i o n t h a t
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Atlante
case that
C2 S t r
thet h e v e n o
l u L e
o f cherges
o n checks
a n d
these suggest follorming u p t h s h e m e i n vogue i n l e
and Ghniengo o f setting u p
Gist
ould
b e unfortunrt
Penchsy.
es)
m
Cheirmon.
this 3
Governor
S e a
4
D
G
y
L i e v e res
lthough
sit checks a n d “ho heave been s u b j e c t e d
to a variety o f cherges,in many cases quite heavy, so-called
cha
exchange cherges; that the imposition o f thoss
are & @ nuisance m o r e
t i a n y t h i n g e l s e today, h a s
duced t o not only » moderate amount b u t i s probably a t t h e
lorest
i n number t h e t i t h a s e v e r b e e n e
T i N e w Y o r k Clear-
Tt i s s nuisance, a n d f t
would like t o see them g e
if w e increase t h e
n b a €
E e s e t t a e y e r e i n vogue.
bank customers v h o a r e subjectec
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
charge w e
people
£
who ere the
Can
xr
WA
gy
_ A N o m t t e t r t ) vat *
‘ly postpone
everyth
Neserve
S
T
BanksA have
Collectively
e
beckbone
r
o
tMh a n
PScreo eracbe 0
mercantile
n city a n d they e r e n e v r
LR.
WE
able
t o resist
the
uphold a
roucht upon them. e
here t h e e x c h a n g e
lem g o o d s v o u l d a t o n c e
o b juJe c t i o n s
“
ed
e endeavor/+s
ance o f thase people throughout o u r d i
it
a
n
only obtain/in ons city, and thet ras o u r om,
helped
u s very largely
The Chairman,
d
ir
o not want t o meke
a w e could
|
d
e
and t h e y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4a
O t t e y >
POSMe C V C
o
y
a
3 2 Diner A r e 3
r
+
r t a n d
ULVGP rZYriendss
C ir oy Aa C
-
thousends o
littie p o n k s over: t h e ¢
cherge,
t r y fighting f o r this exchange
e n d t h e y s r e sponsors
of
to - e c o n p l i s h
There
3
here e
d
me t h a t
i s t e
any action
o not insis g
Te must. c o m e
member b a n k s
From
The Ghairman, A n y t h i n g
altering
t h e terms
e
t
b e i n t e r p r ed
o f collectionvill
our p o s i t i o n
o
o r %s
something td o strengthen
o u r position,
€A
sey "These fellows 2 r e yveakening."
the c o u n s e l
I T have a
notion
i n New Y o r k r e t a i n e d
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
perticulrr litigation,
~ o u l d oppose
2 eae +
NYCRInE
Governor Strong,
4
apous
y o u v i l l r e c a l l i n Gov-
report this morning t h e t h e Aluced t o t h e
expected a s s i s t e n c e f r o m t h e
opposiOn.
2 G “poe L a n e
Gov. @ l l b o r n .
T h s vice-president o f the vhitney
Tho c o n -
e t e
The C h a i m n a n .
you finally dispo
u think best.
motion
Lit:
hat i e p o s t p o n e
5
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
589
Gove V e n Zandte,
The Chairmen,
Gove
T i i t i g a t i o n m e y never b e ended.
T h a t applies 4
e l lporn.
h
sets o f charges?
Yes.
Perfectly. 1
am not f o r muddying
tag p u t a n d carried unanimously. }
)
thet Governor Harding
was especially anxious t o have a n express:
4
1
2
e
o;
governing the fixing o f t h e cd
:
n
o F principles
e
t rates,
n C i f o t e s s cece:
e n d h e has a
lerge part o f his paper devoted t o that subjecte I
het v o u w i l l t a k e t h e t i m e t o d i s c u s s
i t fully,
hope
e n d pos~
sibly one o f you undertake t o report t o
soint' Governor S t r o n g r e t i r e d P r o m t h e
‘overnor MeDougsal, t h e Vice-Chairman,
Gentlemen, v h a t i s vour pleasure
with regard t o this progrem f r o m this time o n ? T h e next
Federal Reserve Board's program h a s t o d o
with th: p r i n c i p l e s g o v e r n i n g d i s c o u n t r a t e s e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
GOVERNING
move t h a t ~ e vroceed v i t h t h e
Zondt. I
the t o p i c s
a
+ >
a
o i
r
Z
: i
2
une s 4 e
e
o r tTnosce
and t r y t o c i e s r u p s o m e
-
o n o u r regular program,
n c e e t i n g vith the
=
V e a
t
e3
+
=
Board i n the morning?
Gov. MeDougsl. - t
Gov. Young:
1 0 o'clock.
G a n w e get this discount business o u t o f
wey before t h e n ?
do not think t h a t
Gov. HMeDougal. I
tm OVGCr GO: CElr v e n
T
h
. because
t e have got to h a v e
C O M angles
the N e w York Bank's d i s
8
e
y heve some views o f
their
Gov. S e a y .
I
f r e d o n o t dispose
o f the progrem
-on't b e i n 2 p o s i t i o n t o c o n f e r w i t h t h e m t o m o r r o v ,
Governor
m
V a s n d
and h a v i n g r e c o u r s e
o
v
e
c t h e postponement
t o o u r regular program.
o f this
I f ©
this v e won't b e i n a position
very t o p i c s t h s t
tion.
H o w d o y o u feel a b o u t thet, Governor V e n Zandt?
Gove “ellborn.
O u r Conference meets a t ten i n the
morning, d o e s i t n o t ?
VCS ~
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
oi
Gov. “ellibom.
u
c
h b y meeting here
at n a j f p a s t n i n e .
EOYs I C R Vs 3. LE
l
e
t
t
r t a k e s preced-+
e
ence o f everything ~ e have t o discuss.
“ 6 . a n e Called here
area t h e p r i n c i p a l topics,
p
are alaboratsd
end I
therefore
a
g
e
t h i n k that t h e Board expects
first c o n s i d e r a t i o n
s
us
t o t h e s e topics.
vithdray m y motion, ir. Chairmm .
Gov. V a n Zandt. I
Gov. i c D o u g a l .
a n d they
U n d e r t h e s e circumstances,
* ¢ will
proceed with No. 3 , "Principles G o v e r n i n g
% seems t o m e t h a t e a c h
4
GOV.
mirht t r i t e a n e s s a y o n t h a t subject. I
suppose
at.re h a v e al] written essays o n i t
it i s a susject treat can
1 M e OVould. =rite
O exactly
o
y in* ts SAME
a
worth rhile t o d o envthing more than t o say that we concur
in t h e r e c o m m e n d a t i o n
o f the t e d r a l Advisory Council?
+ 4,3
c h
w a c o
ie Mies oie Sigel Se
Norris,
e e 2
%
ca
C
4
x
e
, ©
4 7
5ely nothing.
o
s
T h e o n l y thing w e could « 1 1 agree o n
vould b e absolutely nothing.
Seay.
I t took into account a l l o r the c o n
,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
tions, o r very nearly a l l o f t!
30 govern the fixing o f a discount r a t e h e r e f o r e ,
Srv c o m p r a n
p
e
r
t
i
c
u
l
a
rder
h
fresh your memory a s
fdvisory Council.
meeting,
it
r
.
t o re-
e recommendations
f T
9 s I understand it:
The C o u n c i l b e l i e v e s
reletion t o a
t h a t retes should bear a
direct
Bederdl R e s e r v e B a n k ' s r e s e r v e a n d t o t h e
general m o n e y market,
e n d i n adéition consideration s h o u l d
snumerated i n the Gouncil's r
13, T h e conditi
a5 2
whole,
74.
a m
f
. dk: the banke o f
o x t h e saveral Federa
P h e economic
a n d finencizl c o n d i t i o n o f t h
country.
“orld conditions,
o t h economic
The e v e n t u a l e s t a b l i s h m e n t
or 2
e d i
a t e policy
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
for the Tedsral Reserve Ben’s b y which the rediscount
t h a n the prevailing commerrats t o member benks i s higher
of the prevailing open
consideration
due
taking
rates,
cinl
loans b o t h i n this
merzet retes f o r verious classes o f
country a n d a b r o e d . !
doss n o t mean anything.
I roule n o t agree t h a t i t
subject pretty a e
think that covered t h e
h
Gov. Calkins. Perheps
heve par’
1
g o b o na
T
n o t amount t o anyt i
“hen I said thet i t does
h
e
t o me t o
discount rate. seemed
the
gov-rning
principles
principle o r set of principles.
mean some @*Vinite single
Council a r e excellent
The suggestionso’ t h e Peacra L a v i s o r y
a m noteriticising then
under t h e conditions.- I
Sense e I
seme thing myprobably o u l d h e v e “<pitten t h e
about
enough t o d o so, b u t they talk
“e@ might s a y that t h e discussion
patrveen “ngland a n d Irethe t h i n g s
b e cons iered.
t h a t might
e world conditions.
T h a t
T h e r e a r e n o things
g o v e r n i n g redisin there w h i c h y o u c e n c a i l p r i n c i p l e s
count rates.
GOV .
N o r r i s
©
ay
o r e
c o ) etors
r
ether
t h e n
p r i n c i p l e s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Factors
the F e d
Council o r its enumeration o f those things
ninks o u g h t
b u t they
t o b e considered,
liscount r a t e s .
Lend was operated o n 2 principle f o r m a n y 7eerse
t o b e sure
no l o n g s r o p e r a t e d u p o n t h a t p r i n c i p l e ,
1t wes.
U n t i l v e can find a
vrinciple
ciples whicl c a n govern t h e a d i s c o u n t rate,
i
to g o ahead Frith ©
f £ . rough horse-sense
rea
the T e d a r a l ‘ d v i s o r y C o u n c i l h e s
Gove MeDougal.
T h e r e w a s another recommencation,
rir r e c o m m e n d a t i o n s «
at times p r a c t i c a l
should n o t b e a
sagt
desirable,
principle t h a t varySystem b e i n g predicctted u p o n t h e
conditions
micht exist
completes
Calkins.
d i f f e r e n t
F Sj
t
t
h
e
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Federal Reserve Bank of St. Louis
ticulsariv
G o r
81h)
g
r
e
e w i t h that last, too.
be said, Governor Calkins,
that discount rates should b e governed o r fixed b y the
es of the country,
Gov. Celkins.
T h e n y o u would b e cp*ra
ciple, b u t : « h a v e n e v e r v e t b e a n r e e d y t o s a y
he world condition o f the banks,
getting ~orse w e were n o t raising it, a s 4
er ~ords, r e have never follored
But i s not
s
h
o
“hen
matter o f
a t a s a prin-
u
l
be Laid down? T h e Board i s
principle o r s
Gov. Calkins. I
d o not think
are asking u s t o d o that.
CO:
S 2 4 00rm.
< = “Ratide t h e y
That i s t h e v e r y
er.
T h e principles g o v e r n i n g t h e discount
c
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S9¢
Ven “Zandt.
L E
L t
b a : f o u n d a n - t b h e S2nb. s e n v e n c s
es
1 principles
count rates frankiv a n d fully an¢ t o report their conclux fon)
SLOus. 0 6 (Ore
f
"Tt seems
o
r
m
u
eral p o l i c y r e r a r d i n g sumetserielr 4 6
l
f
a
r
o
t
e a
gen-
m woiceh t h e r e
vrauld b e n o divergence except i n unusual o r sme
Gove Calkwins. =
GCovcenee eaves
from * h a t I
heave
put i n t o operation,
discount r a t e s
r
e 1
words,
b v t h e r e s e r v e ratio::
t oho k h i m t t o b e oo f
+L
6N2C¢
ton, N e v Y o r k
4.
Opinion tha’
that the tendency i s toward t h e adoption o f
o f the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
of reserve ratios,
not g o t f a r enough along
same
t o adopt t h a t a s a n invariable
e v e r w:h e r e ,
Gov. Seave-
n i g h t 3
Gov. e l l b o r n .
S eC aAr V
{
r
e
Gov. e l l b o r n .
D e e
a t . i s a
a
l—y—
i
o .i
t 1t
S o x>
function o f the centres peak,
t
a
O c tt
d vou e v e r h e a
f
a b a n k thet h a d
O t E erenty
tL
15tes 7
Says.
c u t there nevor was
there n e v e r w e s a
bank anyvthere
Siti e y a S b r a s bare c o e
country 5
such e complicated banking
no central
exclusively the banking
systems
o f o t h e r countries.
Gov, N o r r i s .
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
there
nly b e c a u s e C o n g r e s
n a m e d
joan
one o f the purposés
Yequilize"
in verious trays, * S learned
Congress, “ h e n they used the vore
uic
m e e n to make a b s o l u t e l y equal a n d
i s nothing o f thet sort i n
1,
<7 b u t there
the r e a s o n f o r t h e t p r o v i s i o n
the borrover f r o m 4
direct relation t o 1 o @ Gistanece o f
center
o f Finencee
GOV e
GOV.
VO Tile
and s o o n
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Federal Reserve Bank of St. Louis
for rediscounting,
q
o
S
O
Ol
e i
ma t h e e
18
re
at
eat
O r s i a e n py
l i n -exce
the m e m b e r b a n i ,
Gov. Meitcugcrl.
T e l l u s a b o t t sbedt do.
+ O 0 1 “ C O M E = Pom
GOV. Y o u n s . J
make t h i s
L a e ts
owan j
IThave t h o
Y o u know v e r y
get a n e x p r e s s i o n f r o m t h e others
E
t vould certainly
re
to bo: row $20,006 f r o m 2
steted
tir 7w i l l
o n
l e n d
v o u
t h a t
I can borrow i t and
T
to you.
y
o
u
,
a
n
d
and t h e n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I alt isnd 2
Gov, C a l k i n s .
over t h e country,
common practice r i g h t n o w p 1 1
w2tois -
I t has always b e e n
s n d -lveays h i s b e e n e
of banking.
Y o u
New York bank that lends t o a n every’ day bor.
: h i m ti n consideration
n
e
c
of
lends
7
his
in t h e
That
CaSEe
GOV.
O l ros.
D&S =
ee
b
e
a n incentive
i f
in
the b a n k e r
hes t o borrot sith h i s borrovere
believe
the Board has
i n mind o n e thing
bank
more t h a n any other, a n d that i s i h e t h e r t h e reserve
o ecusal t o w h a t i s c a l l e d
rates s h a l l b e a b o v e o r b e l o w r
tre o p e n m s r k e t r a t e o f t h e country.
I
f v o u could g e t
p y a n y definition
at t h e o p e n m e r k e t r a t e i n this c o u n t r y
oeond
which i s surficiently
there t h e n a
ear, L
believe y o u could l a y d o m
principls f o r t h e f i x i n g
o fa
F e d r a l Reserve
Giscount rate.
Gov. Calkins. I
isceet
Gov. N o r r i s .
agree “ i t h thet t o o , b u t c a n y o u d o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gov. Penchers
O n page 1 9 o f the
ag
cussedby the Council a n d to’ en into consideration b y
by banks t o their regular custom-
Retes c h a r g e d f o r o n e - n a m e p a p e r b o u c h t t h r o u g h
note-brokers.
"3, O p e n market rates o n bankers! acceptances, and
4, R a t e s o n Treasury certificates."
Should t h o s e b e a l l c o n s i d e r e d ?
beer
~ v h e o p e n market rate.
ing w p o n d e t e r m i n i n g
Gov. Norris.
T h e y hav ell a
I n Nerv York I shovlé t h i n k the call
money rate ought t o b e taken into consideration tod.
Gov. C a l k i n s .
Gov. Norris.
I
t f l u c t u a t e s t o o much.
A n d I do not s e e “ h y the littie Treasury
Petes s h o u l d n o t b e t a k e n i n t o c o n s i d e r a t i o n .
Celkins.
T h e t r o bast indicators available
the p r e s e n t t i m e a r e t h e r e t e o f bankers!’ a c c e p t m e e s
therate
o n time paper.
at
and
T h e r e i s n o c u e s t i o n a b o u t that.
[ f
do not think snybody cuestions that.
Gov. Fancher.
Y o u mean b y "time paper" the paper is-
sued b y t h e n o t e b r o k e r ?
Gov... C a i k i n s .
V e s e
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Federal Reserve Bank of St. Louis
GOVa N O r I I S .
D o n ' t v o u t h i n ’ thet t i m e l o e n s o u g h t
to b e talcen into secount too?
Gov. Calkins.
T h e y v e r y t o o much.
an account “ i t h o n e benk,
si
Pele,
Suna 12 h e a
i
p
r d ;
e
£€ a
t©
good
good rate.
h e t Chase Bank pub-
i t h r s edo0ut.
£ 5 per cent o f thc por-
GOUT,
Celkins.
same depree
he d o e
ES
Set summer,
ie,
m d if h e is @
2 |
Gov. N o r r ?
J o h n Smith keeps
S u r e , b u t look a t the verlation.
The
o f credit i n New York City a n d i n Sioux Falls
vill s h o r a spread o f 100 p e r cent i n the rates. - i I n other
tords, «
local m e r c h e n t
S i o u x F a l l s r o u l d p a y trice
as much a s t h e m a n vith a simile
Gov. Norris.
T h a t cos
c
e d i t
N e w York City.
a
o el* Feet u s i n # repli onal
it-inm t h e regional «
OU
fey
n o t s e e this,
Deesuse
y o u d o not have a
the s p r e a d b e t r e e n S a n Frencisco
chance,
but
a n d northeastem Idaho
it i s beterecen Ph: ladelphise s n d South Dakota.
Gov
e
StANCCG, 6
7 ge 2
p
e
e
@
e
s a n s t e r
membec
s a y i n g thet t h e
Var Finance Corporation is lending to non-member banks i n
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Ouse Cistra
a
t B E pe e
a
they say “ “ e l i , 6
« J. k e
their rete,
Pores
end ve have t o pry six per cent." :
e
s e t your benk
peor c e n t i s
count rete a n d 5 + per cent i s a n intcre
Very peculiar-to 8
and
r a t e T h a t looks
great m a n y e
Gov. Y a n Zandt.
C a n n o t ~ o u r member banks
g o to the
“ap T i n a n e e C o r p o r e t i o n l i m i t s
the smount o f int-rest thet c a n b e cherged t o borrovers,
COD 's
Vend
L t bo.every
fo
understand v e r y f u
lly the purpose o f keeping u p
order t o bring sbout liquidation, *
*~e hed i n 1¢20,
wag necessary t o bring sround. r e a s o n e o l e l i q u
rere all extended, b u t conditions
ey
nov,
w e v e r y different
éulturel section
tobReco, r i c e 2 m cotton that - e have o n hand, i t t2kes
time t o absorb, e s p e c i a l l y 2 s “ u r o p s
did, e n d I
camot
i s not buying i t a s
s e e the purpose o f keeping u p a
higher rate a n d nating things costly i n our district.
That
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Governor Young, 2 s I
u n d e r s t a n d,ti
suggestion mide b y ons o f > vour cirectors t a s i n fav
a flexible o r a sliding scale, b e g i n n i n g vith e minimum
rate, a n d t h e r a t e t h e t v o u l d b e a p p l i e d w o u l d b e t h e s a m e
b a n k r a s w r g i n g i t s customer.
rate t h a t t h e a p p F
GOV.
Gov. f i f r a
Gov. Y o u n g .
O
r slightly above it.
o r s l i g h t l y below.
McDougal.
“ e l l , y o u have n o t gone a n y rurther.
s o u n d s well, i t would
You a r e s e sfFiec c
not v o r k o u t i n practice.
Gov. Y o u n g . I
Torr :
u s hye
think f o r t h e s a m e r e a s o n a s
out i n t h e other, t h e b a n k s
i n the #¢ricultural s e c t i o n s
get e i g h t o r nine, t e n a n d t ~ e l v e p e r c e n t i n o u r district.
country bank going t o a Federal Reserve
You c a n imagine a
Bank
m d p a y i n g 1 2 : p e r cent, r h i l e t h e y c a n g o t o t h e
New V o r k o r Minnesp o l i s corrtspondsent a n d p r a c t i c a l l y
force a
&
c
k o r seven, a n d i f they did that they
would s a y ' e h a v e n o u s e f o r t h e F e d e r s l R e s e r v e S y s t e m
end we will get out.”
Gov. McDougal.
T h e n the borrowers through t h e System
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
rould b e c o m e
in turn lend the money
i x
which they borrored a
correspondents
at a
dents could s e
o
r a t e lLoreéyr
e f c
n
t t o their country
m n t h e c o u n t r y corr: spon-
Federal Reserve Banke
Gov. Young. ‘ n o t h e r erguvent i s thet the country
not wait, but I believe he notices it very
closely.
I f h e h e d the 7 per cent ciscount rete
banks
had at one time, i t med i i f f e r e n c e whether the
porroved f r o m the correspondents o r from use
rete t a s t h e y g o t .
“ h e n o u r rate ~ent
loans “ e n t u p , a n d w h e n «
t o
e
e e
got d o w n t o 6
noticed
per cent they
were coming faster t h a n ever, a n d going o u t
City benks to us. C r e d i t will flow where it i s cheapest
end eas i e s t .
Gov. e l l b o r n .
I n figuring vour ciscount
per c e n b n c ?
Gov. Y o u n . ~ Yes.
Gov. e l l b o r n .
“ h e n v o u reduced t h e rate, y o u were
borroéving then, w e r e y o u ?
Gov. Young.
T h e first time r e reduced t h e rate ~ e vere
DOFTOrerse
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Federal Reserve Bank of St. Louis
Oove. ©Seliborn.
Y o u reduced i t hile v o u were bor-
rowers ?
Gov, Y o u n g .
“ @ e r e d u c e d i t w h i l e w e r e r e borrovers.
Gov. Tellborn.
The s
the contcntion I make, b e c a u s e
ve sfe borrorers v é vent t o reduce t h e rate,
Gov. Young. T h e r e vere a e great meny things t h a t r e r e
tazen into consid: i
cente
i n reducing t h e t rate o n e
fe
“ @ thought i t ‘ould d e something f o r the livestock
the country,
and
second r-duction t h e d a r --e got o u t o f deot a n d
the three days « e e r e out-of de-t.
.
Gov.
Norris.
v
D i d y o uo g e t out oG f debt fsOo r that purpose?
-ellborn.
T h e y heve n o t raised
they heve g o t t e n o u t o f debt.
the rete
H a v e you?
ecucing o u r r e t e s t h e
of that.
Gov. e¢llborn.,
g e n t i c m a n here v e n t s
the p r i n c i p l e s f o r r e d i s c o u n t r a t e s , I
that h e b e appointed a
committee o f one t o d o i t .
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
here b e t r e e n
te n o t b o a t
G o v e r n o r Cal~
seta there a r e p r i n c i p l e s
Advisory Council.
Norris.
C o v e r n o r C a l k i n s c e l l e d ‘attention t o
the fact that t h e things t h e t t h e 4dvisory Council alluded
to ware not principles o r policies, but thet they vere
m-rely f a c t o r s
t o b e taken i n t o consideretio
or rates, b i t that i t ras n o t *
or t h e p r i n c i p l e s
t o b e follo-ed.s
Gov. V e n Zandt. I
do not want t o rrite any reply,
but I do feel that the question o f a bank's reserve position s h o u l d b e a
material f a c t o r i n i
tion o f i t s rates.
I f a
bank w i t h a
i
e a s e o r reduce
very l o r reserve p e r -
centage keeps i t rate up, I do not say having i t immoderate“high,
ly4s O r higher than i t i s i n those distr
serve
banks
a
h a t
r
w h e r e the r e
y n i g t h e n certain customers e f
i c t , t h e district where reserve percent-~
in t h o s e ..other districts,
which
vill bring n e r money into t h e deflated Gistricts, a n d
thereby tend t o equalize t h s supply o f money throughout
the country.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gove
N o r m ss...
b i e
geet
i
a|
been above 6 0 per c e n t continucusly f o r months, t h e y ought
heve reduead it to five or four n d 2 half, and if they
sir reserve d o r ,
a
4 #
t o 4
6
or 3 .
Y o u cannot,
Polloz t h a t v r i n c i p l e e b s o l u t e l y ,
that a
lo r e s e r v e i s # reason f o r advancing
high p e r c e n t a g e
o f reserve
i s not necossarily ®
reason
for recucing, u n l e s s v o u heve b e e n
or a n e m e r g e n c y r a t e
Gov. Sesy.
M e y v e evade t h e question i n this
Speaking o f discount rates, ~ i t h refsrenee t o t h e “ntire
system, the Federal Neserve discount rates should be raised
or lovecred a c c o r d i n g
t h e neiti £
t h e reserves.
of
the Federal *eserve Baz t h a t t h e rate o f a n y particular
Federal R e s e r v e B a n k
u l e b e F i x e d b y t h e s a m e principle;
hat underlying the w n m i e s t i o n , the Federal Reserve
sbpove r e t h s r t h a n b e l o v r h a t i s c o m m o n -
termed t h e open market r a t e o f the country, recognizing
et rate o f a country such a s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
j
s fieult t h i n g co. arvave o t .
scekine t o £1.
t h e position « h i c h y o u of-
Wore c o m p l
d
mbitious agoirnnt
fn
T H C r S
i
n t h e prin-
2 merkct-of t h e c o u n t r y “ h e t 1 s r e c o g n i z e d
open mariret rete; t h e t is, t e k i n g the t e r m t o mean vhat
it meens i n other countrics, “here there o r e central b a n k s
issue. I
suppose that n o on® c a n arrive: e t a definition
open market rete" should be. I
to d o i t . I
suppose
do not think the rest
the c o u n c r y
Gov. Worris., I
aniv b e t t c r
think |
n
d e l v e s could prob-
d o i t t h a n n n y o t h e r distri o
e
v
tro rates i n our district, o u r efll loan rate i s 6 per
cent i n Philedelphia.
T h e rate o n over-the-counter l o w s
ct
s 6 per cent i n Philed lphic e n d throughout t h e District,
and t h e r a t e o n c o m m e r c i a l p a p e r
ig very easy t o
7
A
s ~
4
suppose y o u c a n s y t h a t o f a n y o t h e r D i s -
Calkins. D e t r o i t is. just « s good @
ton a s
and there i s n o such condition i n Cl«veleand
or Pittsburgh,
is
Gov. N o r r i s . 3
y o o knot.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
curious f < e t
I t is 2
Gov, C a l k i n s .
w d i t tiilus-
not s n y o p e n m a r k e t r a t e .
Theopen market rote f o r S e n Francisco i s usuelly very
nesriy equal i t h M e r York, b u t i n betreen there e r e varle-
Gov. e l l b o r n . .
That s h o v s t h a t s o u r r e t e o u g h t t o
be reised, Governor Norris, a n d vou ought t o b e above t h e
commerciel
rate.
n
NOPEIES «
ellborn.
o
r a n y other bank hes ever
I t seems t o ~e you have gotten dorn
the others.
Gov. N o r r i s .
“ s e are f r o m a
helif t o o n e p e r c e n t b e l o r
the open market rate i n our district, a n d y o u sre about 4
per c e n t b e l o w t h e s v e r a g e r a t e
Gov. @ l l b o r n .
cial p a n i c s c h a r c e t7
Cov. P a n c h s r .
Gov.
N o .
i n POUL
Ours is 7
G L a CPL eis
p e r cent. . The comméer=
per cont. &
Y o u mcan i n your centers o n l y ?
etiborn.
Gov. MeDougal.
I n the early stages o f the operations
of these banks, o u r directors g a v e v e r y careful considera~
his question, a n d they i n j e c t e d o n e principle--
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Federal Reserve Bank of St. Louis
ne o i
S o n rent,
we E r e
h o w e v t h i s t o be a
C G proves t
ta 6
e
guide.
a n d that
s o f the Federal R e e
serve Svstem a n d heve t h e n
geney purposes ,
“hich t h e y vere intended t e
have t o b e earevul end mnaintrin our ciscount
OF “glisntivy i n -xeess
6 ° the going rate
mereial c é e n t c r s .
iS e
epincrpic t h i c k
anc i f so, t h e oucseti
termine «het those going
euestion
them a t home e t least,
v
rates over t h e counters i n Chicago.
e
v
r
e have the going
retes over t h e counters, a n d s e also have t h e vary ex~
tensive o p e r a t i o n s
o f t h e c o m e r c i a l p a p e r brokers there.
ket f o r b a n k e e e c e p t a n c e s
a n d Treasury certificates,
There i s a real market there, b u t the transactions
i n the
aggregate a r e very small, a n d they a r e v e r y large i n Ner
York, a n d sith different conditions existing i n Sen FranCisco a n d
i n other.
citie
e
yS
s e e m C i t ficult
t e de.
termine o n a n y uniform basis appliceble t o all t h e dise
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Federal Reserve Bank of St. Louis
tricts,
b u t uncerlving principles
Bu aesneladicr
Lins.
T h a t i s a s néar =
principle
es
es b e e n mentioned.
Gov. N o r r i s .
‘
n
d pretty near right, t o o .
The s i t u a t i o n
*
e
i n S a n frencisco
i s inter-
t
Our p r e s e n t P a c e i s S e s N e w York, B o s t o n a n d
Philadelphic herve r e d u e c d t h e i r r a t e s t o five.
T h e best
borrovers i n San Vrancisco g e t about t h e same retes that
they d o i n those c e n t e r s ,
b u t this sreument r e s advanced
by
>
one o f o u r directors w h o ras a
very heavy borrover, w h o head
absolutely first class credit.
H e said " I have been offer-
fs+
e.
ed b y wire
all the money I awent a t 52."
Nor then,
Federel Reserve Bank o f San Francisco having rates o f 5 ,
he s a i d h&e r o u l d e i t h e r h a v e
the money,
t o g o t o Ner
t
o borror ;
o r else p a y more t h a n h e i s offered money at.
There y o u areé.s “ h a t i s t h e m a r k e t r a t e u n d e r t h o s e c o n -
ditions?
“ h a t i s the money rate, i f you rant t o put i t
that var?
GOV, sanencr,
h a t “ould h e b e peving i n San Pran-
Cisco b a n k s ?
Gov. C a l k i n s . :
H e Peerenl t i m e 6
e r teri.
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Federal Reserve Bank of St. Louis
Gov. N o r r i s .
rho clamor f o r t h e lorering o f #ed“s n o t v e r y consistent.
to N a v e i n mind. t h e s s s tem-undor-cnien
our bantringe
B a n k discount rates vere
by the e x c e s s r e s e r v e s
serve cities.
i n the c e n t r a l r e -
T h e Federal Neserve fect, “ s
has about cut in hel? tho reserves which the member banks
a
of the country shell keep. P h e r e . does n o t exist 1 0 0 p o r
cent o f reserves, e v e n o t thet d e r e a s s d ratio o f reserve,
unless
t h e Federsl N e s e r v e
PESECrVves.
e
r
e is a
Benk
1 A v O n
b e c Ft e l o
very l e r g e degree a
c e r e
lack o f
logic among those tho clamor for lover Federal Reserve
Bank rates, w h e n their reserves a r e not 100 per cent, d u t
Oper
Gene,
T s W i i s e y , o n tne
no o t h e r s o u r e c .of reserve
i n the country
Reserve ratio o f the banks
a
v
e
f
o
g e
r 1a
0 per
cent,
2g the minimum reserve, a n d then d i p
into t h e Federal Reserve Banks a n d borror their reserves
to anextent vhich reduces their reserve t o 7 0 per cent, i s
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Federal Reserve Bank of St. Louis
614
dipping right seriously still i n t o the bank reserves o f the
country, e n d vhile - e c e n safely d o i t under t h e present system, t h s s o m e t h i n g v e never could have dons sarely
FORvIST D a n i s
Cov. MeDougesl.
conference
I n Governor Herding's statements i n
t h e other d a v , v o u “ i l l r e m e m b e r t h a t h e r e a d
some e x p r e s s i o n s “ h i c
1 @ head r e c e i v e d f r o m b a n k e r s
in
various cities, a n d I thought i t might possibly b e useful
and b e interesting t o have Mr. Harrison t o review those
very briefly.
H e has here a
memorandum i n regard t o the
recommendations o f each of those, haven't you, Mr. Harri-~
Me. Harrison. I
can b e summarized, I
ciple w a s a n n o u n c e d
brave just glanced through it, a n d i t
think, v e r y easily. A
generel prin-
b y one o f the “astern cconomists t h a t
the C i s c o u n t r a t e s h o u l d b e a b o v e t h e m e r k e t r a t e ,
Nev York benker s a y s t h e same thing. £
saysthat
at
S
and a
Chicago banker
s present t i m e w e s h o u l d n o t p a y t o o m u c h
attention t o the reserve r a t i t h e t ~ e should g o slow about
reducing o u r rediscount rates,
o n sccount o f the fact that
there i s a sort o f a n artificial reserve, o w i n g t o the i m a
portations o f gold.
T h a t i s e negative opinion which h e
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Federal Reserve Bank of St. Louis
615
expressed m o r e t h a n a n y t h i n g else. A
as
Milveaukee b a n k e r
he believed thse rediscount r a t e should b e s o v e
the current rete whenever the dewand. i s excessive and
speculstion o r e x p a n s i o n
4t n e s d n o t o e e b o v e v r h e n l o s n s
*s
liovidations a r e i n process,
k thes
n
Gov. Calkins
t
he
+ t h e present time.
soundest o f any
thet h a s been e n u n c i a t e d .
Gov. S e a y .
T x e s p t f o r this feet, t h a t t h e n s o u D u t
anc you C n
it lower, y o u l a y the ground f o r expansion
before
process w h i c h h e s t o b e sea okBe under w a y
you c a n c h e c k i t .
T h a t
e x a c t l y w h a t t h e Federal
Reserve System did, a n d i t hed gotten s o fe t h a t i t
t objections t o raise i t s rates.
wered t h a t
b y the statement
e n d that i s
that a t the present time t h e rates a r e below
not happening, t h a t l o a n s a r e e t l i t
Liquidation is s t i l l i n processe
That
i s cus
t o other reasons
which
he
not t a k e i n t o eccount, 1
am not holding
and I
a m not objecting specifically
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Federal Reserve Bank of St. Louis
but I
s -rgument,
d o not t h i n k h e takes everything
considsration.
Mere Harrison. A n o t h e r Chicago banker tal
extremely c o n s e r v a t i v e v i e r an’ m a d e t h e c o m m e n t t h a t
asmuch
2 s 2 % member b a n k c o u l d b o r r o w o n i s
to
should b e considered a n d recognized
that t o borrow S r o m e Tederal Reserve B a n k
a peneltv, a n d reitscrates t h e general
rate s h o u l d b e s b o v e t h e m a r k e t r a t e .
Young.
B y "emergency" does h e mean seasonal cde~
mands, t o o ?
It i s h a r d t o tell, b u t f r o m t h e ‘toner
rather meant a n emergency
Gove“ellborn.
T h e n our rate vould b e 8 per cent.
Mr. H a r r i s o n e
A n o t h e r
N e w York banker
made
t h e com-
mentthat the rate should b e normally above, but he, like
fellow, thought that s s n o w ‘re should
accelerate liquidation b y keer
putting t h e rate above,
several x
1 S ag
h
e rete above o r
h e appsre e x p r e s s e d his
e o n b e es
hard t o tell f r o m
just s h e n h e did rrite h i s letter, b u t m y inference w e s
617
that i t was during the time when iiquidation was much
more strenuous t h a n i t i s a t the present time.
There i s another Fanker w h o expressed t h e same opinion,
so that that maxes three o f them.
Gov. horrig.
D i d y o u quote t h e Milwaukee m a n there?
Mr. Harrison.
Gov. Norris.
again, because I
Yes.
o u l d y o u mind, i n brief, reading that
have a recollection that when Governor
Harding read i t & was rather struck «ith the Milwaukee
man, a n d I did n o t notice i t while y o u were reading this
afternoon?
We. Harrison. S h a l i I read this comment o f the
Milwaukee man?
Gov. *ellborn.
Yes, I
would l i k e t o hear that.
Mr. Harrison. " T h e main point made b y those opposed
to the lowering o f Federal keserve discount rates i s that
the rediscount rate should always b e above the market
rate» T h i s i s l a i d d o w n a s a
general p r i n c i p l e
t o which
there are n o exceptions. F e d e r a l keserve funds are only
emergency funds,
i t i s said, a n d i t should n o t b e possibls
for banks t o make a profit b y rediscounting a t a lower
rate than the marxet.'
H e calls attention t o the fact that
‘ihen t h e demand f o r credit i s excessive a n d i n -
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
618
oréenising, the réserve
sition
b y
i
n
n i s s h o u l d move into a
g their r o t e s a b o v e
dominating
t h e market rates
for moneye B u t t h e same neces
reserve b a n k s c o e s
slows Corn, i1o2ns
reserves a r e eccurmlating.
of the recent lorering o f rediscount rates?
sulted i n a n e x p e n s
o
f loans
o r reinflation?
On the other hand, t h e published records
t
&
a
member banks heave
continuec ht o reduce
a
4
heir
counts e n d borrovings e n d t o d o this have brought pres-=
upon t h e i r c u s t o m e r s
t o l i g L A G E Customers who
volunterily l i q u i d a t e d and got themselves b a c k into
good financia
a
.
a
r
e offered lover retes o n n e w
loess thle, o F -¢ouraty 25-2
s n t i v e
w
h
o have
not done s o t o liquidate. T h i s i s the practical v e y i n
wh
e
© leedership o f the Tederel reserve banis i n
reducing their rates heve -orked.
T h e r e h a s n o t been the
slightest t e n d e n c y t o w a r d r e n e r e d inflation.
ag b e s n r t o f u r t h e r l i c q u i d e t i o n . !
‘The g e n e r a l p r i n c i p l e
R a t h e r the
T h i s banker
o f keeping Federal
reserve r e d i s c o u n t r a t e s a b o v e t h e m r k e t r a t e f o r m o n e y
is sound, but it does a d i
<
f £ exceptions a s in the pre-
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Federal Reserve Bank of St. Louis
679
sent condition o f things.
T h s present J e d r a l reserve
tendency o f t h e
but »
wholesome a n d c o n s t r u c t i v e e f ?
fnd then i t goes o n about something
Governor “cDougsls
“hich v o u s e y g o v e r n e d t h e c i r e c t -
your pani i n the protection o f their
Gov. McDougal.
T h t statement reflects
Board o f Directors a t
E fact, Governor Seay,
boards o f most o f the Reserve Banks.
effect thet i f the reserves o f the Federal Reserve
rere t o be saf*guarded agai m i s u s e amid to be
vailable f o r t h e l e g i t i m a t e s e a s o n a l r e q u i r e m e n t s
and. for emergencies, “ s the lew contemplated they should
be held, t h a t t h e G i s c o u n t r a t e p o l i c y s h o u l d b e o n e w h i c h
should hold those: rates a s high o r slightly higher than
Ailing rates i n the commercial centers.
Gov. Norris.
s u b s e r i b e absolutely t o that.
Gov. MecDougel .
f n d I think thot i s a fundamental
principle t h a t ~ e h a v e ¢
as I
said before, I
z
e é
d o not k n o w h o v e
t o some time, b u t
a r e g o i n g t o dster-
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Federal Reserve Bank of St. Louis
mine what i s the going rate, a n d
cetermine o n one unis
we heve a l l conditions peculier t o ourselves.
D i d n ' t v o u s a y when y o u first read
Gov. Norris.
ite- I did not catch the rord l a s t time-- "should
be a t o r above t h e prevailing rate
h
e lerge commercial
centers"?
Gov.
Gov. Fancher.
You f4
Gov. McDougal.
Y e s
a i d “going rate”.
r e t e s current.
can subscribe t o that statement o f prin-
Gov. Seay. I
t h e g o i n g rates i s what I
ciple o f practice,
interpret
it
to mean.
Gov. M c D o u g a l .
Gentlemen,
“ i l l y o u excuse Governor
Seay a n d myself until fivs minutes Y r o m nor?
Gov. V a n Zandt.
morrow morning.
m o v e r e 2edjourn u n t i l ¢$:30 t o -
I t i s nor
Gov. Younge. I
second
Gov. M c D o u g a l . There i s a motion that ~ e adjourn a n d
that this discussion b e continued a t ©:350 tomorror morninge
(Motion p u t a n d carried.)
at 6 pem.,an adjournment westaken until
Ly, October 28, 1921, a t 2:30 o'clock aseme)
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Federal Reserve Bank of St. Louis