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225




At the regular meeting of the Federal deserve
Board held in the office of the Board at 11 a. in., Tuesday, October 13, 1914
PRESENT:
Er. Hamlin

Ur. Harding

Er. Warburg

Mr. Liner.

Er. Hamlin, Governor, presided, and Mr.

•

Elliott, in the absence of the Secretary and the Assistant
Secretary of the Board, acted as Secretary to the meeting.
The Governor submitted for the Board's consideraReserve
tion model forms of Aderal Reserve lotes and 2ederal
'Bank Notes each of the denomination of ;100.

On motion

recommend
made and seconded, the Governor was requested to
as
to the Secretary of the Treasury for approval both forms
submitted.
The Governor laid before the Board a telegram from
together
the secretary of the Illinois Bankers' Association
with a proposed form of reply, the letter and reply having
reference to the proposed conference in C;hicago.

On motion

made and seconded, the Governor was requested to sign and
transmit the reply as submitted.

A telegram from

O. Tenison, Chairman of the

Federal deserve Jank of Dallas, was submitted.

Mr.

eni-

son asked whether it would be advisable, in view of the
proDosed conference in Thshington of the representatives
of the various boards of directors, to hold a meeting of
the Board and elect a Governor before this conference.
The Acting jecretary was directed to Prepare a reply for
the Governor's signature to tne effect that if a meeting
can be held and a Governor elected before the conference
in 1ashington without prejudice to the interests of the
bank, this course should be pursued.
A letter from I. J. Tenison asking that his
compensation be placed on an equal basis with tnat of the
Federal .eserve :Lgents of the Federal _ieserve Janics of
Kansas City, at. Louis, Minneapolis and Atlanta, was read
and considered.

The Governor was requested to reply that

at the present tine the Board saw no reason for cnanging
the compensation heretofore fixed which is on the sane
basis as that of the Federal

eserve iank of Atlanta, but

that tne subject might be discussed upon the occasion of
. Tenison's visit to Thshinf:ton for the purpose of attendin:-_^ the conference on October 20.




22`1




Harding read to the Board his report on
the alternative bookkeeping systems sucgested by the
preliminary committee on organization; his written
report being confirmatory and in amplification' of his
oral report heretofore made on this subject.
the report of

On motion

Harding was accepted and ordered spread

on the minutes of the meeting.
The report as submitted was as follows:

October 12, 1914.

I have carefully examined the two plans of
accounting that have been prepared by the preliminary committee on organization for use of tne
federal reserve banks, and am of the opinion that
both plans are essentially sound, and that either
will, if put into operation, afford means of properly recording the transactions of the banks.

The system proposed by the general sub-committee on accounting and embodied in appendix 1'
of the committee's report provides a series of
bookkeeping forms similar to those used by many
established banking institutions in which the
volume of business can be accurately gauged, and
in which great rapidity is not essential and where
there is no necessity for a system susceptible of
speedy expansion.
This system does not provide a complete set
of records for each bank, and affords only structural outlines of an accounting plan, leaving details
to be worked out as the business grows.

226

If adopted, this system would make a large use of
bound books. Journalizing is one of the features of it,
and the necessity of passing items through a comparatively narrow bookkeeping channel would involve some delay
before the final record is complete, and the result would
be rather a slow operation.
The system, however, provides for thorough and systematic data, with all of the usual safeguards, which would,
however, be limited in their application because general
balances must be struck before errors would be likely to
be detected, excepting insofar as such errors may be found
by the more or less artificial expedients applied through
personal supervision while the items are in process of being
recorded.
The system proposed in appendix 1 provides for ample
and proper records relating to the operations of the federal
reserve banks, their reports to the 2ederal 2.eserve Board,
anefor suitable records of note issues and substitution
of collateral.
ttBil

On the other hand, the system exemplified in appendix
2 may be described as follows:
Like the other it is based upon sound accounting principles, and will give accurate records of every transaction,
with the essential difference that it is designed to furnish
a flexible system of records, in which a proof is obtained
by each department before the final entries are made. As a
result the necessity of journalizing is almost entirely eliminated.
The records are mainly of the loose leaf character.
Under this system the work would practically be all done by
use of typewriters and adding machines, or a combination of
both, with free use of carbon records, so that the system
would be more expensive to install than the other, but it
ought to be operated at a smaller expense. I am of the
Opinion that its use would enable the day's transactions to
be closed, and all entries made and books balanced, at an
earlier hour than under the other. And when clearing of
checks is undertaken it would afford the promptest possible
transmission of items for collection.







I am informed by our Secretary, Dr. Willis, that
the Bureau of Efficiency of the United States Civil Service Commission has described the methods by which this
proposed plan is to be carried out as follows:
(a) All bookkeeping entries are to be made from
paid checks, receipts, or check-size debit and credit
slips. These correspond to the paid checks, certificates of deposit, and notices of transfer used in the
present Treasury system.
(b) The debit and credit slips are to be proved
against each other in blocks before being sent to tne
bookkeeper, and in the course of this proof control
totals are to be obtained for several sections of the
detail ledgers.
(c) A single posting is to be made to each
general ledger account each day, the amounts being
obtained in some cases, apparently, by totaling the
debit and credit slips, and in some cases by totaling
the block proof sheets.
(d) A daily statement of account on which are
listed the individual debits and credits is to be
prepared for each depositor and is to be accompanied
with debit and credit notices or with paid checks.
Under the new plan the Treasurer requires similar
daily statements from banks with which he maintains
deposits. Copies of the daily statements bound in
a loose leaf binder are to form the depositors' ledger.
(e) The debit and credit tickets are to be prepared by carbon process at the same operation with
the credit and debit notices for the depositors and
with other documents needed to complete the transactions. It is, of course, possible to develop the details
of the two plans on a comparative basis at great length.
The first system may be compared with a book case
built in the wall, designed to hold a given number of

291,1

volumes. Such a book case would have waste space until
entirely filled, and when once filled, would not be capable of further expansion.
The second system is more like a sectional book
case, where a sufficient number of units are provided
at first, and which may be enlarged indefinitely by the
addition of other units as needed.
My own preference would be for the second system
because it is quicker, more elastic and admits of a complete use of most modern machinery. It provides for the
rer;ular transmission of full details of business to the
b'ederal Reserve Board without entailing unnecessary or
extra work upon the accounting divisions of the several
banks.
It is peculiarly adapted to institutions which are
required to clear promptly and which must have their
work always fully up to date. .
I am informed by our Secretary, that these.forms
have been examined in the office of the Chief Clerk of
the Treasury Department by an expert, who expresses the
Opinion that photographic reproductions would require
an expenditure of probably 'ii250 or 300.
1. I recommend that the statements and forms
embodied in appendix 2 of the committee's preliminary
report be accepted as a basis of discussion with the
boards of directors of tne several federal reserve banks,
or such representatives as they may detail to consider
the accounting question.
2. I recommend that the Jecretary of the Board be
instructed to secure a sufficient number of photographic
reproductions of these forms.
Respectfully submitted.
W. P. G. HARDING.

lir. Miller read in part, and asked the preliminary consideration of the Board on certain features of







his report on the duties of Federal Reserve Agents.

A

submission- of his full report was deferred until the
next meeting of the Board, and he was requested in the
meantime to furnish a copy to each member of the Board.
Letters from Mr. R. H. Malone, suggesting for
the position of Governor of the Federal Reserve Bank
of Kansas City, Ex-Governor Alva Adams of Colorado, or
Mr. John C. Mitchell, president of the Denver 14ational
Bank of Denver, Colorado, were read to the Board.
On motion of Mr. Warburg, Counsel to the Board
was requested to procure as early as practicable a synopsis of the State banking laws of each of the States
with particular reference to the reserve requirements
in each State, and to furnish the Federal Reserve Agent
of each Federal Reserve Bank with a copy of the laws of
the states included in the district served by such banks.
On motion the meeting adjourned to meet again
Thursday, October 15, 1914.

Am.

Secretary.

APPROVED:

Chairman.