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1279

At a conference between the Federal Reserve Board and the Executive Committee of Governors of Federal reserve banks held in the office
of the Board, on Thursday, December 16,
PRESENT:
Mr. Hamlin, presiding

Mr. Warburg

Er. Delano

Mr. Harding

Mr. Williams

Mr. Willis, Secretary

Mr. Allen, Assistant Secretary.
PRESENT ALSO:
Mr. Strong, New York

Mr. Aiken, Boston

Mr. Fancher, Cleveland Mr. Seay, Richmond
Mr. Hendricks,New York Mr. McKay, Chiaage
Mr. Curtis, New York.

Mr. Faucher by request of Mr. Strong outlined in detail the amendments which the Executive
Committee of Governors had determined to recommend
to the Board as follows:




1280




SUGGESTED AIZZDIEITTS TO SECTIONS 13, 14, 15, 16,
AND 18 OF THE FEDERAL RESERVE ACT.
The following suggestions with respect to
Section 13, 14, 15, 16 and 18 have been considered
by the Executive Committee of the Governors' Conference, but not by the full conference.

They

represent informal discussions of tentative suggestions submitted to the committee and are not
to be considered as final recommendations.
SECTION 13
Paragraph 1.

At the meeting held in

November, 1915, it was voted to suggest changing
the first paragraph of Section 13 so that it will
read as follows:
"Any Federal reserve bank may
receive from any of its member banks, other
Federal reserve banks, and from the United
States, deposits of current funds in lawful money, national bank notes, Federal reserve notes, or checks and drafts, and may
act as collection agent for the United
States, other Federal reseive banks and
member banks."
Paragraph 2. - It was voted to suggest

1281

changing the first clause of paragraph 2 so that
it will read as follows:
"Upon the indorsement of any of
its member banks, any Federal reserve bank
may discount notes, drafts and bills of exchange or acceptances arising out of actual
commercial transactions;"
Paragraph 3. - It was voted to suggest
striking out the whole of this paragraph.

- oo0oo -

At a meeting of the Executive Committee held
in December, 1915, the following action was taken:

SECTION 13

Paragraph 5. - It was voted to strike out
the whole of this paragraph and substitute the following:
"Any national bank may accept drafts
or bills of exchange drawn upon it, arising
out of actual commercial transactions, and
having not more than six months' sight to run,
and any member bank other than a national bank
may accept such drafts or bills of exchange
provided the making of such acceptances is not
in contravention of the law of the state in
which such member bank is situated; but no




I

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member bank shall accept such bills
to an amount equal at any time in the
aggregate to more than the capital
stock and surplus of such bank."

SECTION 14.

It was voted to recommend certain changes
in the structure of this section and other incidental
changes, so that it will read as follows:
"Every Federal reserve bank shall
have power
(a) Under rules and regulations prescribed by the Federal Reserve Board to purchase and sell, with or without its indorsement
in the open market, at home or abroad, either
from or to domestic or foreign banks, firms,
corporations or individuals, acceptances of
the kinds and maturities by this Act made eligible for rediscount, cable transfers, demand
,
or sight exchange, and other bills of exchammo
with or without the indorsement of a member
bank.
(b) To deal in gold coin and bullion
at home or abroad, to make loans thereon, exchange or re-exchange Federal reserve notes
for gold, gold coin or gold certificates, and
to contract for loans of gold coin or bullion,
•
giving therefor when necessary, acceptable
security, including the hypothecation of United
States bonds or other securities which Federal
reserve banks are. authorized to hold.
(c) To buy and sell, at home or
abroad, bonds and notes of the United States,




1283

and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued
in anticipation of the collection of taxes
or in anticipation' of the receipt of assured
revenues by any state, county, district, political sub-division, or municipality in the
continental United States, including irrigation, drainage and reclamation districts,
such purchases to be made in accordance with
rules and regulations prescribed by the Federal Reserve Board.
(d) To establish from time to time
subject to review and determination of the
Federal Reserve Board, rates of discount to
be charged by the Federal reserve bank for
each class of paper, which shall be fixed
with a view of accommodating commerce and
business.
(e) To establish accounts with
other Federal reserve banks and, with the
consent of the Federal Reserve Board, to
open and maintain banking accounts in foreign countries, appoint correspondents,
and establish agencies in such countries
wheresoever it may deem best for the purpose of purchasing, selling and collecting
bills of exchange, and to buy and sell with
or without its indorsement, through such
correspondents or agencies, bills of exchange arising out of actual commercial
transactions, which have not more than 90
days to run and which bear the signature
of two or more responsible parties."

SECTIoN 15.
Paragraph 1. - In the fourth and ninth

1284




lines strike out the word "may" and insert instead
the word "shall".
Paragraph 2. - Strike out the whole of
the proviso and substitute therefor the following:
"The provisions of this section
shall be carried into effect by the Secretary of the Treasury as soon as practicable,
but in no event later than December 31, 1917,
after which date it shall be unlawful for any
bank other than a Federal reserve bank to
receive or retain deposits of any Government
funds, provided that any portion of the revenue
of the United States may be deposited
in a member bank when the Secretary of the
Treasury shall be satisfied and shall so
certify that such action is necessary for
the protection of the revenues."
"The Secretary of the Treasury
shall cause the functions and operations now
exercised or conducted by the Assistant Treasurers of the United States to be transferred
to the several Federal reserve banks in such
manner as in his judgment may be expedient,
and such transfers shall be completed by
December 31, 1917, at which time the office
of Assistant Treasurer of the United States
and all other subordinate officers to such
office, shall cease and determine, and the
Secretary of the Treasury is further authorized to transfer the subtreasury buildings
of the United States now situated at Boston,
New York, Philadelphia, Chicago, St. Louis
and San Francisco, to the Federal reserve
banks of the said cities respectively."
(NOTE:

The new matter presented above is
presented in the form of a tenta-

1285

tive suggestion only and not as
a recommendation.)

SECTION 16.

Paragraph 1. - It was voted to recommend
changes in this paragraph so that it will read as
follows:




"Federal reserve notes, to be
issued at the discretion of the Federal
Reserve Board, through the Federal reserve agents as hereinafter set forth,
are hereby authorized and shall be issued
from time to time for the purpose of making
advances to Federal reserve banks and for
the other purposes set forth in this Act.
Said notes shall be obligations of the
United States and shall be receivable by
all national and mamber banks and Federal
reserve banks, and for all taxes, customs
and other public dues.
They shall be redeemed in gold on demand at the Treasury
Department of the United States, in the city
of Washington, District of Columbia, or at
any subtreasury of the United States, or in
gold or lawful money at any Federal reserve
bank.
Notes so redeemed which are unfit for
further circulation may be cancelled and destroyed at the point of redemption and reimbureement of the amount paid in redemption
therefor shall be effected by the filing
of a certificate to be made under rules and
regulations of the Federal Reserve Board,
which certificate shall be filed with the
bank through which the notes were originally
issued."

1_286




SECTION 16.
Cont td.

Paragraph 2. - It was voted to recommend
changes in this paragraph so that it will read as
follows:
"Any Federal reserve bank may
make application to the local Federal reserve agent for such amount of the Federal
reserve notes hereinbefore provided for as
Such application shall be
it may require.
accompanied with a tender to the local Federal reserve agent of collateral in amount
equal to the sum of the Federal reserve ,
notes thus applied for and issued pursuant
The collateral seto such application.
curity thus offered shall be notes, drafts
or bills of exchange accepted for rediscount
under the provisions of Section 13 of this
Act, or acceptances and bills of exchange
bearing the indorsement of a member bank
purchased under the provisions of 'Section
14 of this Act, or gold or gold certificates,
and a Federal reserve agent shall each day
notify the Federal Reserve Board of all
issues and withdrawals of Federal reserve
notes to and by the Federal reserve bank to
The Federal Rewhich he is accredited.
serve Board may at any time call upon a
Federal reserve bank for additional security to protect the Federal reserve notes
issued to it."
- oo0oo -

At a joint conference between the Federal
Reserve Board and the Executive Committee of Gov-

Governors' Conference, the following suggestions
were made by Er. Curtis and were discussed, but
no action was had thereon:
Section 16, paragraph 3: Strike out the
whole of the two sentences beginning "Thenever
Federal reserve notes issued" etc. and ending
"face value of notes so paid out."
Seotion 16, paragraph 5: Change this so
as to read as follows:
"Any Federal reserve bank may at
any time reduce its liability to maintain
its reserves and redemption fund for outstanding Federal reserve notes by depositing with the Federal reserve agent its Federal reserve notes, gold, gold certificates
or lawful money of the United States.
Upon such deposit, the Federal reserve
agent shall return to the Federal reserve
bank an amount of collateral security equal
in face value to the amount of such deposit.
Federal reserve notes so deposited shall not
be re-issued except upon compliance with the
conditions of an original issue."
Section 16, paragraph 7: In the fourth
line, strike out the word "like".

SECTION 18.
Strike out both provisos and substitute the




1288




following:
"The Federal Reserve Board shall
allot to each Federal reserve bank such proportion of such bonds as the capital and surplus of such bank shall bear to the aggregate
capital and surplus of all the Federal reserve banks, provided that no Federal reserve
bank shall be required to purchase an amount
to exceed its proportional allotment of
025,000,000. of such bonds in any one year,
less the par value of United States Bonds
with the circulation privilege nurchasod by
such bank during the same year under the provisions of Section 14 of this Act; and provided further, that the aggregate allotment
of such bonds during any one year shall not
exceed 025,000,000."
Paragraph 5. - In line 4, strike out the
en".
word "four" and substitute therefor the word "fourte
Paragraph 6. - Next to last word, - strike
"eighteen".
out "thirty" and substitute therefor the word

,
4
vr-fd-,4:1_,49-t-t4
3ocretary.
APPROVED:

Zhairman.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102