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At a regular meeting of the Federal Reserve Board
held in the office of the Board on ?riday, January 4, at
eleven a.m.,
r. 1arlin,

Har(ling, presiding,

7r. ::111er,



r. Delano,

The minutes of the meeting of the Board held on
January .2 were read and, on motion, approved.

inutes of the meetings of the Executive Jom-

mittee held on January 3 and 4 were presented and, on -lotion approved and the action therein set forth ratified.
On recommendation

of 'Jovernor

arding, it was, on

motion, voted to send instructions to each Federal


bark in position to pay a dividend to lay, to pay over to
the 'reasary such elm as under the
due the )overn.lent as franchise tax.

'er I Reserve ;ct is
The Llovernor was fur-

ther authorized to m,ke public a statement covering the
whole natter.
governor 'larding having presented a telegram from

eserve ,17,-ent ;urtiss of Boston naming a rate of

4:,.; on trade acceptances, it


on motion, voted to ap-

prove the proposed rate.
Discount rate sheets

no changes being named) from

v-rious ?ederal Aeserve banks were presented and the old
rates ordered reapproved.
The Secretary notified the Board of the acceptance of
appointments by 7essrs. Peabody, Stern and Boehne.
letter fror


.t•. Stone, leneral ,;cr of the

Tlood aiver ;Iple ;rowers -ssociation, relative to tae classi-try dification of apple paper, was discussed and the Secret
rected to send a stitaule reply in accordance .ith the Board's
The special order of the daj, the report of Jommittee
:o. 3 resurdinf; the pledging and endorsement of paper at 2ederal Aeserve banks, %,as thereupon taken ap for consideration.
fter discussion it was, on motion, voted to adopt recommendations of 2hief :;,aminer Broderick as follows, the lovernor to
instruct the banks accwdinfjy:
In re - The justody of jommercial raper and other
Eligible Securities Pledged with the
Federal deserve Lent as jollateral Security for ?ederul eserve 7otes.
jonsidering the -tremendous volume of business now behandle by the Ileserve Banks it is essential that the
plan used for the deposit and custody of commercial paper
ent should be as elastic as poswith the Federal aeserve


sible and at the same time comply with the provisions
of the 2edera1 deserve ct.
The law provides that funds and reserve notes
shall be in joint control of the Agent and the Bank.
In Aug-ast 1917 the Board sent a memorandum to
the 2edera1 Aeserve Banks in which it was stated that
it is desirable that commercial paper and other eligible securities pledged as secArity for 2ederal eserve
7otes should be kept under joint custody. The Board
wrote as follows:
"In this case, however, it would be proper, if desired, for the 2ederal deserve 21gent to designate 4 senior employee in the discount or credit department as his
representative, and for the bank to appoint a similar
representative to act as custodians of paper pledged."
The following plan is suggested with a view of simplifying the present method of handling Pledged paper:
1. .lodge
Lii eligible paper may be pledged with the AAterul
Aeserve Lgent on the day of discount and placed in the
joint custody of the federal Reserve Bank and the 7ederal deserve Agent. If desired, the 2ederal deserve
Bank may designate an employee in the discount department as its representative, and. the ?ederal Aeserve
gent may designate the assistant discount clerk, or an
employee of the ?ederal deserve's Department, as
his representative, to hold in joint custody all paper
pledged as collateral security for ?ederal Reserve Lotes.
The ?ederal Reserve Agent must have title to all
paper pledged-4.0 .ixdorsements in blank are acceptable,
but notes made payable to or endorsed to the Reserve
Bank must be endorsed by the eserve Bank in blank or
specifically to the Igent.


daily record is made by the heserve Banks of all

hi copy of this record
Aderal eserve Board. At the present
is sent to the
time a record is also made on a special form giving the
number and face amount of each note pledged aith the
Federal leserve 413ent. If all paper is pledged on the
date of discount or purchase the following notation
may be made in lieu, of the listing of the numbers and
amounts of each separate note.
paper discounted or purchased.

- - - )
- (except
"flotes 1T05. - - - to described in 3. D. 4
, more fully
and 7, have this day been pledged with the Federal lieserve Agent.


(a) items settled for on payment date (including
items paid for prior to maturity), and items withdrawn
against excess collateral previously deposited.
It is necessary to list the number of the separate
notes, drafts and bills of exchange withdrawn in order
that the Agent may be in a position to trace or identify
the items.
(b) Items delivered to Reserve Bank prior to maturity,
for collection.
Under the ruling of the Board .April 12, 1917, Federal
deserve Agents were authorized to turn over maturing notes
and bills to their respective Federal Reserve Banks for
collection upon the execution by the bank of a receipt reciting the fact that the notes and bills are taken over
for collection only, and provided further that notes so
delivered should be endorsed to the Federal Reserve Bank
"For collection for the account of the Federal deserve
Under this ruling in the case of paper released by
the Agent to the bank prior to maturity and for which cash
settlement ie not received, paper must bc. endorsed "For


Collection for tae account of the federal Reserve
agent", if the bank is to consider such paper as collateral security up to the date of maturity. The
.tgent must be given a receipt for all notes so released.
Lndorsement stamp suggested:
Pay to the order of Federal, deserve
Bank of
for collection for account of
Federal Reserve igent
Pay to the order of any bank or banker
for collection
Federal deserve Bank

The 'point has been raised that some banks object
to ?ederal Reserve Bank endorsements on customers'
notes. In such cases a printed rider with a gummed
edge could be attached to the notes when sent for collection. It is believed, however, that if the stamped
endorsement is placed on all notes that there will be
few objections.
4. Jomputation of Reserve and E(jualization of Reserves tzzlinst I:otes and Deposits.
Under date of December 11, 1917, in answer to an
inciuiry from the '?ederal aeserve its:ent at an ?rancisco, it Was stated:
"old held in the vaults of the banks may be counted
as reserve against ?ederal Aeserve notes, conse ilently
if the ratio which the gold held by the 41:sents plus the
banks redwaption fand bears to the notes in circulation
in less than the ratio which the total cash qeld by the
banks bears to their net deposit liabilities, then the
bank may easily e4ualiLe reserves without actual transfer of gold, by reckoning as part of the note reserve a
sufficient amount of gold held by it."

,s a matter of policy it would be well for Tederal deserve 1;ents to retain, as part of the 301lateral security to Tederal Aserve notes an amount
of 2,old „Thich, together with the Gold Redemption ?Lind,
will be equal at all times to 407 of the ?ederal Aeserve notes in actual circulation.
Er. Hamlin was recorded as voting in the ne:Ltive.
_ieports of Ammittee 1:o. I were approved and the


therein recommended accordin;ly ordered, as folio

Dated Dec. 31

Salaries at ?ederal

eserve 3f.r.k of :tlanta

B. -Locke, Detroit.

3alary of

Reports of the SpecialA)mmittee on Aeserve cities
recommending that the action. taken as to the designation of
. Oakland, :Jalifornia, andebria, Illinois, as reserve cities
be reaffirmed, Were adopted, a reply accordingly to be sent
by the Secretary.
• Upon recommendation of Jommittee ro. 2 the follo.ving
named institutions 'acre approved for admission to the Tederal
,leserve system 'upon conditions named by the '.,lommittee in each
Hadley 7alls Trust
?copies Bank F, Trust .Jomrany, J:ass%ic,
Kanawha Valley Bank, ,Jharleston,
Bank of Thompson, Thompson, Ia.
The resignation of


. S. Yinch of the - oard's

staff aus presented and, on motion, referred to ,,ommittee


The Governor presented the resignation of 1,1r.
S. 0ox in a memorandum from 'Counsel, which was referred
to Committee lTo. 1; also a memorandum from Counsel as to
a successor to :.7rs. Croghan, and a report from 71r. Delano
on the same subject, vialch was referred to the Committee
with poyier to z.ct, Counsel to be so advised.
Jr.7.i1ler presented a telegram from ?ederal
serve Lgent Perrin regarding the membership of California
State bunks in the 2ederal Reserve system.
Discussion ensued and, on motion, it aas voted that
the Governor consult with the Secretary of the 7reasary
and, with his assent, prepare for the Board a letter to
be sent to Governor Stevens and the other State executives
concerned, regarding sessions of State legislatures lookin.; to the adoption of acts providing for the membership
of ,tate banks.
Upon recommendation of Committee

o. 3, it was,

on motiol., voted to - rant to the ?irst Eational Bank of
Greenville, "ississippi, power to act as trustee, executor, administrator, and registrar of stocks and bonds.
On m

on, at 12.40 p.m. the Board adjourned.




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