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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., PilESErT: r. 1arlin, Har(ling, presiding, 7r. ::111er, 4arburg, Secretary. r. Delano, The minutes of the meeting of the Board held on January .2 were read and, on motion, approved. The 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 eserve 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 Federal eserve ,17,-ent ;urtiss of Boston naming a rate of 4:,.; on trade acceptances, it Was, 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 r. .t•. Stone, leneral ,.1.na;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 regulations. 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: 1=0A.ZDILI: 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 ing 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 i.gent'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. 2. ecord. 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 aggregating and 7, have this day been pledged with the Federal lieserve Agent. 3. .1.tndrawal. (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. Nos. aggregating (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 Agent." 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 Jasaier. 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." Lote. ,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 tion ac- 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 case: :ass. Hadley 7alls Trust ?copies Bank F, Trust .Jomrany, J:ass%ic, Va. Kanawha Valley Bank, ,Jharleston, Bank of Thompson, Thompson, Ia. State The resignation of r. 3 . 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. 1PROli ;a ( ,e Chairman. •