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Operation of the National and Federal Reserve
Banking Systems
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY
UNITED STATES SENATE
SEVENTY-FIKST CONGRESS
THIRD SESSION
PURSUANT TO
S. Res. 71
A RESOLUTION TO MAKE A COMPLETE SURVEY OF T H E
NATIONAL AND FEDERAL RESERVE
BANKING SYSTEMS
APPENDIX, PART 6
FEDERAL RESERVE QUESTIONNAIRES
Printed for the use of the Committee on Banking and Currency
34718
U N I T E D STATES
GOVERNMENT P R I N T I N G O F F I C E
WASHINGTON : 1931
COMMITTEE ON BANKING AND CURRENCY
PETER NORBECK, South Dakota, Chairman.
LAWRENCE C. PHIPPS, Colorado.
DUNCAN U. FLETCHER, Florida.
SMITH W. BROOKHART, Iowa.
CARTER GLASS, Virginia.
PHILLIPS LEE GOLDSBOROUGH, Mary- ROBERT F. WAGNER, New York.
land
ALBEN W. BARKLEY, Kentucky.
JOHN G. TOWNSEND, JR., Delaware.
TOM CONNALLY, Texas.
FREDERIC C. WALCOTT, Connecticut.
WILLIAM E. BROCK, Tennessee.
JOHN J. BLAINE, Wisconsin.
ROBERT J. BULKLEY, Ohio.
ROBERT D. CAREY, Wyoming.
CAMERON MORRISON, North Carolina.
JAMES J. DAVIS, Pennsylvania.
JULIAN W. BLOUNT, Clerk.
SUBCOMMITTEE ON SENATE RESOLUTION
71
CARTER GLASS, Virginia, Chairman
PETER NORBECK, South Dakota.
ROBERT J. BULKLEY, Ohio.
JOHN G. TOWNSEND, JB., Delaware.
FREDERIC C. WALCOTT, Connecticut.
II
OPEEATION OF THE NATIONAL AND FEDEEAL KESEEVE
BANKING SYSTEMS
INQUIRY INTO PRESENT BANKING CONDITIONS—FEDERAL
RESERVE POLICY AND PRACTICE
In December, 1930, the subcommittee, pursuant to the intent of
Senate Resolution No. 71, which called for an ascertainment of
conditions in the Federal reserve and national banking systems,
and a complete survey thereof, sent to various banks and bankers
throughout the United States a series of questionnaires, numbered
from 1 to 12, designed to develop the facts as to certain outstanding
features of practice.
Of these questionnaires, Nos. 7, 8, 9, and 10 were addressed to
Federal reserve banks. The questionnaires themselves, with the
answers thereto, are herewith presented, omitting such matters as
were designated by the several banks as having been received from
their sources of information, as confidential. Some differences of
opinion were expressed by the officers of sundry reserve banks as to
the arrangement of the material thus submitted. Since it was not
possible to follow the opinions of all upon this matter of arrangement, owing to their conflicting character, effort has been made to
present the data in accord with the views of the larger number.
QUESTIONNAIRE No. 7
The Eligibility and Acceptability of Paper
The purpose of the following series of questions is to ascertain whether the
provisions of the Federal reserve act, the rulings and regulations of the Federal
Reserve Board, the acceptability standards of each Federal reserve bank suffice
at present to control credit expansion in the speculative and the investment
markets:
C A I X I N G FOR S T A T E M E N T S OF O P I N I O N
1. State the changes, if any, that you would suggest be made (1) in the provisions of the Federal reserve act relative to the type of paper eligible for rediscount, (2) in the rulings and regulations of the Federal Reserve Board relative
to the interpretation of these provisions.
2. What credit tests are employed by your institution to determine the .acceptability of paper offered for rediscount by member banks?
3. Are acceptability requirements raised in periods when your institution is
following restrictive credit policies?
4. In your opinion, do the provisions of the Federal reserve act, the rulings
and regulations of the Federal Reserve Board, and the acceptability requirements of your institution set sufficiently high standards for paper that may be
rediscounted by member banks?
5. State whether your institution ever required or now requires excess collateral from borrowing member banks.
6. If you regard the eligibility and acceptability requirements relative to
paper presented by member banks for rediscount as sufficiently high, what are
701
702
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
the reasons impelling your institution to require excess collateral from member
banks?
7. Would it assist in preventing Federal reserve credit from being used for
speculative and investment purposes to repeal the provision in the Federal
reserve act permitting member banks to borrow on their 15-day promissory
notes secured by Government obligations?
8. Should member banks, which are borrowing from Federal reserve banks
on their 15-day promissory notes secured by Government obligations, be prohibited from increasing their own collateral security loans? Should this prohibition be extended to member banks securing funds from the reserve bank
either through borrowing or rediscounting?
9. Does your institution habitually inquire into the use of the proceeds of
the funds extended to member banks ? Do your lending policies toward member
banks vary according to the composition of the portfolio of the particular member bank? Is your bank examination department of assistance in the formulation of your lending policies?
10. What has been the experience of your institution with the use of " moral
suasion" in preventing the funds of borrowing or nonborrowing member banks
from being used for speculative or investment purposes as compared with the
, use of the discount rate or other methods of credit control ?
11. To what extent have dealings in Federal funds relieved member banks
from the necessity of rediscounting? To what extent have they been resorted
to by member banks lacking eligible paper?
C A I X I N G FOR S T A T I S T I C A L I N F O R M A T I O N
12. Append data for the past four years of the amount of paper offered by
member banks for rediscount which has been rejected by your institution,
grouped according to the reasons prompting the rejection, similar to such tables
appearing in the recent annual reports of the Federal Reserve Bank of Dallas.
13. Append a statement of the amount of paper held in your failed banks'
account for each month through the past four years.
14. Append on a monthly basis statistics of borrowings grouped by unit banks
and by branch banks in your district over the past four years, together with
the aggregate resources of the borrowing unit and branch member banks.
Digest of Replies Received from the Different Federal Reserve Banks
QUESTION NO, 1.—Relative to changing the provisions of the Federal reserve
act regarding the type of paper eligible for rediscount.
With a few exceptions, the Federal reserve banks did not favor changing
the provisions of the Federal reserve act relative to paper eligible for discount
or the rulings or the regulations of the Federal Reserve Board interpretative
of these provisions.
The Chicago Federal Reserve Bank offered two suggestions, to be employed
temporarily and only at times of extreme emergencies: (a) That the maturity date
on otherwise eligible paper be extended from 90 days to six months. Rediscounts of such paper should bear a higher rediscount rate than that prevailing
on 90-day paper, and should be allowed only under conditions and circumstances to be established by the regulations of the Federal Reserve Board;
(&) That the Federal reserve banks be permitted to make loans to member
banks not exceeding 90 days on notes secured by bonds which are now acceptable by the Treasury Department as security for war-loan deposits. Such
advances would be granted at penalty rates and would not serve as a basis
for the issuance of Federal reserve notes.
The Dallas Federal Reserve Bank suggested: (a) That landlords' obligations
be made eligible for rediscount, and (&) that the statutory maturity limit on
advances to member banks secured by notes, drafts, bills of exchange, or
bankers' acceptances eligible for discount and purchase be increased from
15 to 90 days.
The Philadelphia Federal Reserve Bank suggested that in some instances
it might be advisable to grant permission to advance funds to individual
member banks in distress against any of their assets. The obligations taken
should not be used as security for Federal reserve notes.
The Richmond Federal Reserve Bank suggested that in a national emergency,
the existence of which should be determined by the Federal Reserve Board,
the reserve banks might be permitted to make advances, secured by high-grade
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
703
bonds, to banks lacking eligible paper. The paper discounted should not
serve as security for Federal reserve notes.
QUESTION NO. 2.—Relative to credit tests applied by the Federal reserve banks
to paper offered for discount.
Judging from the replies received from the Federal reserve banks, there is
apparently considerable variation in the degree to which credit tests are applied
to paper offered for rediscount. The financial and income statements of the
maker, judged on the basis of the type of business in which he is engaged;
and the quality of management of the indorsing member bank receive primary
emphasis.
QUESTION NO. 3.—Relative to raising acceptability requirements during periods
of restrictive credit policies.
The Federal reserve banks, with the exception of Atlanta and Boston,
replied that acceptability requirements were not raised during such periods.
QUESTION No. 4.—Relative to the adequacy of eligible paper standards set
by the provisions of the Federal reserve act, by the rulings and regulations of
the Federal Reserve Board, and by the acceptability requirements of the
Federal reserve banks.
The consensus of opinion among the Federal reserve banks is that the
present requirements set sufficiently high standards. The thought was expressed that member banks are familiar with the eligibility and acceptability
requirements and that to change these would introduce a needless uncertainty.
QUESTION NO. 5.—Relative to the requiring of excess collateral.
All Federal reserve banks have at one time or another required excess collateral from member banks in a limited number of individual cases. In
recent years the San Francisco Federal Reserve Bank apparently is the only
one which does not require or accept excess collateral.
QUESTION NO. 6.—Relative to reasons for requiring excess collateral.
The Federal reserve banks cited the following reasons for requiring excess
collateral:
1. Nonliquid or weak condition of member-bank portfolio leading to the
impaired value of a member bank's indorsement.
2. As a means of forcing the correction of an undesirable situation in the
affairs of a member bank. This might be resorted to particularly in the case
of too heavy or continuous borrowings on the part of the member institution.
3. A desire to save a distressed member bank when paper offered does not
measure up fully to standards of acceptability.
4. The economic conditions in and the character of the business of a particular community.
QUESTION No. 7.—Relative to the repeal of the provision in the Federal reserve
act permitting member banks to borrow on their 15-day promissory notes
secured by Government obligations as a means of preventing the use of Federal
reserve credit for speculative and investment purposes.
All Federal reserve banks expressed themselves as opposed to the repeal of
this provision, though five indicated that it might tend toward the reduction
of the amount of Federal reserve credit used for speculative and investment
purposes.
The reasons given in opposition to the repeal were:
1. Member banks borrowings arise from a loss in deposits or from an increase
in loans and are not related to specific transactions. They are resorted to as
a means of restoring or maintaining reserves which might be depleted by
reason of a variety of different transactions.
2. The convenience on the part of member banks in borrowing against Government obligations.
3. The assistance rendered in strengthening the market for Government obligations.
4. The fact that the repeal of this provision would not in the past have
affected the total volume of Federal reserve credit, since, in the aggregate, all
banks possessed eligible paper considerably in excess of total borrowings.
5. The fact that in certain communities there is a dearth of eligible paper
so that banks there would find themselves discriminated against or embarrassed.
QUESTION No. 8.—Relative to prohibiting member banks from increasing their
own security loans when borrowing from the Federal reserve banks on the
basis of their 15-day promissory notes secured by Government obligations.
All of the Federal reserve banks expressed themselves as being opposed to'
this suggestion. The reasons given were that the enactment of such a provi-
704
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
sion would prevent member banks from engaging in normal and legitimate
transactions and from relieving an emergency situation exemplified by the
stock market crash of 1929, and would tend to drive banks from membership
in the Federal reserve system. The thought was expressed that any abuses
in the use of the borrowing or rediscounting privilege could be handled administratively.
QUESTION No. 9.—(a) Relative to the practice of inquiring habitually into the
use of the proceeds of funds extended member banks.
The Federal Reserve Banks of Chicago, Cleveland, and Minneapolis replied
that they did habitually inquire into the use of the proceeds of funds extended
member banks.
(&) Relative to relation of lending policy to the composition of the portfolio
of borrowing institutions.
The Federal Reserve Banks of Chicago and Cleveland replied that their
lending policies did vary with the composition of the portfolio of the borrowing
banks.
The other reserve banks replied that variations in lending policy were not
the usual rule, though in speculative periods close consideration would be given
the portfolio of borrowing banks and always such consideration would be given
in event the banks were thought to be in an unsound condition.
(c) Relative to the assistance rendered by the bank-examination departments
in the formulation of lending policies.
Practically all the Federal reserve banks replied that their examination
departments and the reports received from the national and State bank examiners were of assistance in determining the value of a member bank's indorsement and the quality of paper offered for rediscount.
The Kansas City Federal Reserve Bank replied that it did not examine
national banks and examined State banks only when special circumstances
made this desirable.
The St. Louis Federal Reserve Bank replied that the examination department
had been of assistance not as to policies but rather as to individual credits.
QUESTION No. 10.—Relative to the experience of the reserve banks with the
use of " moral suasion."
" Moral suasion " or direct action has been applied to a varying degree by
all Federal reserve banks.
The Federal reserve banks of Atlanta, Chicago, Cleveland, Dallas, Kansas
City, and St. Louis, replied that they had applied " moral suasion " to very good
effect.
In the opinion of the Federal reserve banks of Boston, New York, and Richmond rate control is preferable to the use of " moral suasion." One reason given
was that it is impossible to obtain uniformity in results. Some banks cooperate
better than others. Business may be driven from the more to the less cooperative institution.
A general opinion was that rate control is effective in the financial centers,
whereas " moral suasion" is required to control the loan policies of banks
outside the metropolitan centers.
The St. Louis Federal Reserve Bank replied that use of the discount rate is
not practicable in that district, since legal contract rates vary from 6 to 10
per cent.
QUESTION No. 11.—-Relative to dealings in Federal funds.
The Federal Reserve Banks of Atlanta, Dallas, Minneapolis, Richmond, and
St. Louis reported that dealings in Federal funds in those districts were
negligible. In the other Federal reserve districts transactions in Federal funds
have taken place to a greater or less extent in the larger centers among banks
of high credit standing. Interdistrict dealings in Federal funds of considerable
importance were reported.
The Federal reserve banks reported that Federal funds transactions &re*
resorted to not by reason of a deficiency in eligible paper or securities but by
reason of differentials prevailing in the Federal funds rate as compared with
the rediscount rate.
The Federal Reserve Bank of Chicago stated that such transactions have
been beneficial in decreasing the amount of Federal reserve credit that might
otherwise go into the market.
With the exception of San Francisco, the Federal reserve banks reported that
transactions in Federal funds were of a temporary nature. The San Francisco
Reserve Bank stated that member banks there frequently transfer the same
NATIONAL AND FEDEBAL RESERVE BANKING SYSTEMS
705
amount of Federal funds back and forth between banks in eastern cities for a
considerable period of time.
QUESTION NO. 12.—Relative to rejection of eligible paper. (See statistical
appendix.)
Only five of the Federal reserve banks were able to supply the information
called for in the form requested.
The per cent of paper rejected by each Federal reserve bank to that offered
came to the following:
Amount of paper rejected in per cent of paper offered
Federal reserve bank of—
Atlanta
Boston
Chicago
Cleveland
Dallas
Kansas City..
Minneapolis, New York
Philadelphia..
Richmond
St. Louis
San Francisco.
1927
1928
1929
a( )
0)
2
0)
2
( ).15
(2.09
)
(54)
(.084
)
()
(<)
4.30
(*)
(8.111
)
(42.51
)
(6)
(3.41
<)
(6)
3
(*)9.93
(fi4)
2.19
(3)
(4)
1.29
1930
(3)
.75
(0
4.45
(6)
3.65
8.44
1.00
<fi) .47
2.24
(4)7.40
(6)
i In 1929 and 1930 the Federal Reserve Bank of Atlanta (Atlanta office) rejected $12,144,274.81 of the
amouat of paper offered; the New Orleans branch through 1927, 1928, 1929, 1930 rejected $17,614.25. (See
statistical appendix.)
2 Estimated very small amount.
3 Through 1927, 1928, 1929, and 1930 the Federal Reserve Bank of Chicago rejected $20,462,186 of the
amount of paper offered. (See statistical appendix.)
< Data not available.
&Through 1927, 1928, 1929, and 1930 the Federal Reserve Bank of Minneapolis rejected $6,645,314.28 of
the6 amount of paper offered. (See statistical appendix.)
Amount estimated less than 5 per cent.
QUESTION No. 13.—Relative to volume of paper held in failed banks' account.
(See statistical appendix.)
Maximum and mimmum amount of paper held in failed banks* account in any
one month during the past four years
Federal reserve
bank of—
Atlanta
Boston
Chicago
u_
Cleveland—
Dallas
_Kansas City
M inneapolis
New York
Philadelphia...
Maximum
$10,455,533.46 (July, 1929)
$83,800.60 (September, 1928^__
$2,900,125.84 (January, 1927)
__
_. $100,931.50 (January-May, 1928)
$398,591.18 (February, 1930)
$612,010.62 (May 31, 1927)
._
$1,812,164.98 (January, 1927).
$4,826.58 (Aug. 31,1930). (See statistical
appendix.)
$43,425.08 (Dec. 31, 1928)
Richmond
St. Louis-.
San Francisco
$925,897.93 (Dec 31, 1930)
$12,712,952.28 (Nov. 30, 1930)
$1,034,000 (Jan. 20,1929)
Minimum
$3,405,505.04 (January, 1928).
(In 38 months of the period no paper was
held in the failed banks' account.)
$276,553.65 (June, 1930).
None in 1927,1929, and 1930.
None from June-December, 1929.
$64,746.76 (Aug. 31, 1929).
$432,178.44 (January, 1930).
None in 1927,1928,1929.
(In 44 months of the period no paper was
held in the failed banks' account.)
$236,788.57 (April, 1927).
$65,807.92 (June 30, 1930).
$165,000 (Sept. 10 and 20,1930).
QUESTION No. 14.—Relative to the volume of branch and unit bank borrowings.
(See statistical appendix.)
In the Federal reserve districts of Dallas, Kansas City, and St. Louis branch
banking is nonexistent or relatively unimportant.
Data in the form called for was not supplied by the Federal Reserve Bank of
Cleveland.
The data reported by the other Federal reserve banks reflected much wider
swings in the borrowings of branch member banks than in the case of unit
member banks, both in absolute amount and in per cent of total resources.
706
KATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Since branch banking has reached its most extensive development in the
San Francisco reserve district, the following tabulation has been inserted as
indicative of the relative dependence of unit and branch banks on the resources of the Federal reserve system.
Classification
1927
1928
1929
1930
UNIT B A N K S
1. Maximum borrowings:
/ $34,650, 000
(a) Amount
I (July 5)
(6) In per cent of resources of borrowing
unit benks
4.3
2. Minimum borrowings:
$4,337,000
(a) Amount—
_
_
•...
(Dec. 6)
(6) In per cent of resources of borrowing
unit banks
_
2.7
BRANCH BANKS WITH OFFICES IN H E A D
CITY ONLY
$27, 564, 000
(Nov. 6)
$44,049,000
(Nov. 5)
4.8
$4,181,000
(Feb. 7)
$20, 817,000
(Jan. 7)
5.6
3.3
$22, 28G, 000
(Feb. 5)
$6,000,000
(Dec. 2).
2.9
4.1
2.3
$11,766,000
(July 5)
$15,275, 000
(Oct. 2)
$17, 515,000
(Oet. 1)
$6, 500,000
(May 6)
5.2
4.5
4.4
$110,000
(Sept. 6)
$5,331,000
(Feb. 7)
$3,775,000
(Dec. 3)
OFFICE
1. Maximum borrowings:
(a) Amount
_..
___
(6) In per cent of resources of borrowing
banks
2. Minimum borrowings:
(a) Amount
(b\ In per cent of resources of borrowing
banks
2.S
0)
3.3
BRANCH BANKS WITH BRANCHES OUTSIDE H E A D
OFFICE CITY
1. Maximum borrowings:
$41, 500,000
(a) Amount
(Dec. 6)
(6) In per cent of resources of borrowing
banks
4.0
2, Minimum borrowings:
If
$2,424,000
(a) Amount
|\ (June 7)
(6) In per cent of resources of borrowing
banks
0.6
1
$66,340,000
(Sept. 4)
$52,200,000
(Mar. 5)
$21,293,000
(July 1)
5.0
4.4
2.3
$19,300,000
(Jan. 3)
$4,250,000
(Jan. 8)
$25,000
(Oct. 7)
No borrowings in September, November, and December.
The Federal Reserve Bank of Boston included the borrowings of " chain "
and " group " banks in the data for branch banks, so that the statistics given
present a very complete picture of the relative dependence of unit and group
banks on Federal reserve resources. The data reflect a much wider swing in
the borrowings of the group than in the borrowings of the unit banks.
Dally average horrowings
Branch banks
Unit banks
Year
Maximum
1927
1928
_.
1929
1930
__.
/
\
f
\
f
\
f
\
$25,867,000
(December)
57, 454, 000
(June)
76,388,000
(June)
11,753,000
(January)
Minimum
$9,148,000
(April)
12,462,000
(January)
18, 283,000
(December)
3, 212,000
(October)
Maximum
$17, 355, 000
(February)
27, 348, 000
(June)
28,191, 000
(July)
12,803,000
(December)
Minimum
$11,147,000
(September)
10, 994, 000
(January)
15,708,000
(November)
5,698,000
(October)
Relative to their resources, the branch banks ordinarily borrowed less than
did the unit institutions.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
707
Replies Received from the Different Federal Reserve Banks Tabulated by
Questions
1. State the changes, if any, that you would suggest be made (1) in the provisions of the Federal reserve act relative to the type of paper eligible for
rediscount; (2) in the rulings and regulations of the Federal Reserve Board
relative to the interpretation of these provisions.
Atlanta.—The provisions of the Federal reserve act and the rulings and regulations of the Federal Reserve Board relative to the interpretation of those
provisions are ample, and no changes are considered necessary.
Boston.—None. Suggestions have been made from time to time relative to
the broadening of the Federal reserve act and the regulations of the Federal
Reserve Board to include as eligible for rediscount public service corporation
paper, finance corporation paper, municipal notes, and various other types of
paper, but careful consideration of each change proposed has strengthened
in every case the opinion that such liberalization of the act and regulations
would be undesirable.
Chicago.—We believe that there should be no departure from the principle
of eligibility and the basis of issuance of Federal reserve notes as embodied
in the Federal reserve act, excepting in cases of extreme emergency, and then
only as a temporary measure.
Without violating such principle, we would suggest for consideration the
desirability of increasing the maturity date on otherwise eligible paper from
the present restriction of 90 days to a maturity not to exceed six months, such
additional latitude to be exercised only under certain circumstances to be
established by regulations of the Federal Reserve Board. Such paper of
longer maturity should bear a higher rediscount rate than the 90-day paper
and should be a basis for the issuance of Federal reserve notes.
In cases of extreme emergency, we would suggest for consideration the advisability of permitting the Federal reserve banks, under regulations to be
established by the Federal Reserve Board, to make loans to member banks
not exceeding 90 days on notes secured by bonds which are now acceptable
by the Treasury Department as security for war-loan deposits, and subject
specifically as to their value as collateral to the approval of the lending Federal reserve bank. Such loans should bear a penalty rate of interest and should
not be a basis for the issuance of Federal reserve notes.
We would suggest no changes in the rulings and regulations of the Federal
Reserve Board excepting such as may be necessary to conform with the above.
Cleveland.— (a) We see no present need for any change in the Federal
reserve act as to the types of paper eligible for rediscount.
(6) The regulations and rulings of the Federal Reserve Board relative to
the interpretation of eligible paper are, in our opinion, at the present time practical and sufficiently comprehensive to admit to rediscount all the classes of
paper which should be eligible considering the intent and purpose of the
Federal reserve act as it relates to rediscounts and loans.
Dallas.—(1) Landlords' obligations, the proceeds of which have been loaned
by a landlord to tenants on his farm for the purpose of financing crop production or the carrying of livestock, and which in all other respects comply
with eligibility requirements as set forth in section 13 of the Federal reserve
act and in Regulation A of the Federal Reserve Board's regulations, should
be made eligible for rediscount. We see no difference between the principle involved in this suggestion and that involved in rediscounting factors*
paper, which is now eligible for rediscount under section 13 of the Federal
reserve act.
We also recommend that the statutory maturity limit now imposed on member banks' promissory notes in favor of Federal reserve banks when secured
by such notes, drafts, bills of exchange, or bankers' acceptances as are
eligible for rediscount or purchase by Federal reserve banks under the provisions of the Federal reserve act, be increased from 15 days to 90 days.
(2) Rulings and regulations of the Federal Reserve Board should be amended
to conform to the above-suggested changes in the Federal reserve act, if and
as such changes are adopted. Otherwise, none.
Kansas Citp.—No changes to suggest. Well-managed banks in this district
have an ample supply of eligible paper to enable them to care for all reasonable
demands. Emergency situations can be satisfactorily handled as such.
708
NATIONAL AND FEDEKAL RESEKVE BANKING SYSTEMS
Minneapolis.—We suggest that no changes be made either in the law or in
the regulations and rulings of the Federal Reserve Board.
New York.—In our judgment the provisions of the Federal reserve act and
the rulings and regulations of the Federal Reserve Board relative to the type
of paper eligible for rediscount are satisfactory as they now stand and we
have no suggestions in regard to changes designed to control credit expansion
in the speculative and the investment markets. In our answers to questions
7 and 8 of this questionnaire we point out in detail why the form of the borrowing from Federal reserve banks (i. e., the type of paper on which member
banks borrow) does not affect, and can not be used as a means of controlling, either the specific purposes for which bank credit is used or the total
volume of bank credit. By the same reasoning, it is impossible to control
credit expansion in the speculative and investment markets by changes in
the rules affecting the eligibility of paper.
Philadelphia.—Except as stated below, we do not recommend any changes.
Under existing law and regulations there is sufficient paper in the banks,
eligible for rediscount, to enable them to secure all the Federal reserve credit
that at any time may be required. However, in cases of unusual emergencies
of individual banks it might be advisable to allow the Federal reserve bank,
of which such bank is a member, to make advances upon any of its assets in
order to help the bank over its emergency. The obligations taken by the
Federal reserve bank should not be used as security for circulation, and
should be liquidated promptly.
Richmond.—For the present, we believe, no changes either in the type of
paper eligible for rediscount or in the rulings and regulations of the Federal
Reserve Board, relative to the interpretation of these provisions are necessary
for the accommodation of the public. Eventually it may be desirable in a
national emergency, the existence of which should be determined by the Federal Reserve Board, to take from banks which can not furnish eligible commercial or agricultural paper their notes secured by high-class bonds, such,
for instance, as are made eligible investments for savings banks in many
States at the present time, such paper not to be eligible as security for Federal reserve notes.
St. Louis.— (1) None. (2) None.
San Francisco.—No changes recommended.
The present law and regulations governing the character of paper a Federal
reserve bank may discount have been found adequate and sufficiently flexible
to enable the Federal Reserve Bank of San Francisco to extend to member
banks applying for accommodation a volume of credit appropriate to the necessities of such banks in meeting seasonal and emergency requirements. No
member bank in a satisfactory condition has been obliged to suspend operations
or deny deserved credit because it was unable to furnish the Federal Reserve
Bank of San Francisco with eligible paper.
2. What credit tests are employed by your institution to determine the acceptability of paper offered for rediscount by member banks?
Atlanta.—On all lines of $500 or more of individuals, firms, or corporations
engaged in commercial or industrial businesses financial statements are required.
These statements must show a reasonable excess of current assets over current
liabilities, a satisfactory ratio of net worth to total liabilities, and a satisfactory ratio of net worth to fixed assets in order to determine capital deficiency
borrowings. On all lines of $500 or over of individuals, firms, or corporations
engaged in agriculture financial statements are required, and these statements
must show a satisfactory ratio of net worth to total liabilities.
The quality of the management of the indorsing member bank likewise
receives consideration in judging the credit acceptability of paper submitted by
it for rediscount.
Boston.—Detailed current financial statements are required of borrowers or
indorsers on all rediscounted notes aggregating $5,000 or more, and occasionally
such statements are required when the total rediscounted is even smaller in
amount. If a rediscounting bank's capital is less than $50,000 a similar financial
Statement is required when the paper of a maker or indorser is equal to or in
excess of 10 per cent of the bank's capital. Steps are taken to determine, by
reference to the borrower's business, financial statement, or otherwise when
necessary, whether the proceeds of paper rediscounted were used for an eligible
purpose in accordance with the regulations of the Federal Reserve Board.
Credit tests applied in handling loans of smaller amounts vary with the condition of the borrowing bank, the total amount of their borrowings, and period
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
709
of continuous accommodation, the business and record of the individual borrowers as well as the consideration of all information in credit files relative to
the borrowing bank and individual borrowers and indorsers obtained from
various reports, personal conferences and investigations, replies to inquiries,
commercial-agency ratings, newspaper clippings, and other available sources.
All financial statements are analyzed and the relation between " quick assets "
and " current liabilities" receives first consideration, and attention is also
given to the ratio of " total debt" to " net worth." It is rather a general policy
not to take under rediscount an amount of paper of any one maker or indorser
in exeess of the net quick assets shown in the financial statement. Some liberality has been exercised with the paper of textile mills owing to conditions
existing in this industry—an allowance of $5 per spindle as potential quick
assets being made when the ratio of " quick assets " to " current liabilities " is
very low, but this allowance is made only when the physical properties are
free and clear of funded indebtedness of every description. And with farmers'
statements greater consideration is given to the " net worth " position reflected,
as such statements do not as a rule show as liquid a condition as strictly
commercial statements owing to the necessity for comparatively large investments in real estate.
Chicago.—'In accordance with the regulations of the Federal Reserve Board,
satisfactory financial statements are required in connection with all paper accepted for rediscount where the amount involved in the aggregate is $5,000 or
over. In many instances where any doubt arises as to the acceptability of the
paper, financial statements are required in connection with smaller offerings,
down to $1,000 or less.
In addition to the foregoing, good use is made of information which has been
accumulated by the credit department of this bank, and the examiners' official
reports are carefully searched for any information which may be contained
therein with respect to the paper under consideration.
Cleveland.—In considering so-called commercial paper we require a reasonably recent statement of the maker or indorser whose paper is offered. That
statement must show a satisfactory condition. In analyzing these statements
due consideration is given to the nature of the business, and ratios such as quick
assets to current liabilities, worth to debt, worth to fixed, merchandise to receivables, sales to receivables, and sales to merchanadise; all for the purpose of
determining liquidity and ability of the borrower to pay in the ordinary conduct
of his business.
In the case of agricultural paper a reasonably recent statement of the borrower is required. Such statement must show a reasonably satisfactory condition and indicate that the borrower's paper is based upon current operations
and will be liquidated through the usual marketing of his products.
Whether commercial or agricultural paper is offered a statement is required
in all cases when the aggregate amount of paper of any one borrower, offered
by any bank, is $1,000 or more; also regardless of the type of paper offered due
consideration is given to the indorsement of the member bank.
Dallas.-—Our tests fall into two general categories: (a) primary tests, which
are applied to the paper itself, and (b) secondary tests, which are applied to
the conditions and circumstances surrounding the offering. We are sometimes
offered paper which, when subjected to primary tests, does not wholly measure
up to our standards of acceptability, but which falls short of these standards by
a margin so slight that we feel justified in accepting it if in our opinion the
offering bank's history and managerial policies are such as to warrant the
belief that the credit risk involved in the offered paper is less than it appears
to be from superficial indications. Therefore, we consider the paper in the light
of both primary and secondary tests, as follows:
Primary tests: (a) The probability of the maker's ability to pay the obligation at maturity, as evidenced by any of the following factors: The collateral
attached to the note, the maker's financial responsibility as shown by a recent
financial statement, or the strength of the indorsers or guarantors as evidenced
by their financial statements or other information in our possession.
(h) The experience of the offering bank in connection with previous loans to
the maker of the paper, and our experience with the same type of paper rediscounted for other banks.
Secondary tests: The character of the management of the offering bank and
its history, with particular reference to its losses, the frequency or continuity of
its borrowings, the maintenance of proper ratios, the maintenanace of its legal
reserves, or its inclination to excessive loaning and/or excessive borrowing.
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NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Kansas City.—All financial statements of commercial borrowers are carefully
analyzed and ratios figured in accordance with accepted practices of wellmanaged commercial banks. For comparative purposes, statistics gathered by
certain recognized credit organizations, such as the Robert Morris Associates,
are used. Evidence of reasonable liquidity is necessary in the statements of
commercial borrowers. The statements of farmers anad stockmen are analyzed
on a more liberal basis, consideration being given to growing crops, tractors, and
other farm machinery, as well as real estate, and we do not demand absolute
liquidity on the basis of livestock, grain on hand, or other currently salable
assets. Notes secured by chattel mortgages are viewed from the standpoint of
probable cash value of the livestock or other chattels covered thereby.
Minneapolis.—Such evidences as are shown in the financial statement of the
note maker and by the character of the collateral, and on commercial paper by
the commercial ratings of the note maker as well.
New York.—The credit tests employed by us to determine the acceptability
of paper offered for rediscount by member banks are substantially as follows:
Our first and main reliance is on the indorsement of the borrowing member
bank, and we are constantly scrutinizing the value of each bank's indorsement.
In addition paper offered by the bank must meet certain tests.
A statement of the borrower is obtained in all cases where the obligation
amounts to $5,000 or more, and in some instances for less amounts. Reports
of commercial agencies covering financial standing, history, and trade reputation
of borrowers are obtained on all items of $1,000 and over, and information is
given for all items by the borrowing bank as to business and net worth of the
borrower, and use of the proceeds of the note. It is also our custom to obtain
information by direct checking with banks and others on names where such a
course appears necessary.
Our credit files are maintained in a manner similar to those of large commercial banks. The net worth of the borrower relative to his debt is taken
into consideration and the ratio of quick assets to current liabilities is regarded
as an important factor. The borrower's history in active business and the trend
indicated by the comparison of statements over a number of years are also
considered important.
We have found it necessary, in passing upon acceptability of paper, to recognize in dealing with individual banks that generally they can not offer for discount paper of a better quality than their community produces. This is especially so in the case of the smaller banks.
Decision as to the acceptability of paper is based upon our estimate of the
borrower's financial standing, ability to pay, and general reputation as disclosed by the information which we are able to develop by the means above
indicated, also upon the value of the indorsement of the offering member bank.
Philadelphia.—We obtain a copy of a recent statement of the person or concern in question. It must reflect a reasonably liquid condition from the standpoint of the business involved and must show satisfactory proportions in the
following ratios: Quick assets to current liabilities, current debt to net worth,
total debt to net worth, and accounts receivable and merchandise to net worth.
Comparison with previous statement is made and trend of operations and profits
noted. When considered necessary, additional information pertaining to sales,
trade standing, and banking relations is obtained through various reporting
agencies or the banks themselves. Reports of examination are scrutinized for
any criticism of the paper offered, and our examiners frequently submit data.
Our transit and collection departments advise us daily of checks and notes protested. Published business records of lawsuits, receiverships, etc., are also
covered and filed for ready conference.
Richmond.—In every case banks applying for rediscounts are required to state
the business of the maker and the net worth of the maker and of the indorser.
Certified copies of financial statements are required, in accordance with the
regulations of the Federal Reserve Board, and in special cases financial statements of the borrowers are required for smaller amounts than those specified
in the regulations and such additional information as can be obtained.
St. Louis.—Probability of payment of note at maturity as evidenced by
statement of the maker, or value and marketability of chattels or other security;
also previous record of borrower as disclosed by our records and other credit
data.
San Francisco.—With the exception of notes adequately secured by United
JStates Government obligations, a current financial statement of the borrower
is required in all instances.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
711
In the case of unsecured paper and paper supported by collateral under the
control of the borrower (livestock under chattel mortgage, for instance), such
financial statement must show that the maker has assets of sound value in an
amount well in excess of liabilities and has liquid assets, including growing
crops and livestock being made ready for an early market, of sufficient worth
to make it reasonably certain that the borrower can meet this current (shortterm and unfunded) indebtedness, including the obligation offered for discount,
by realizing on such liquid assets in the normal course of events.
3. Are acceptability requirements raised in periods when your institution is
following restrictive credit policies?
Atlanta.—Yes; they are. Acceptability requirements have been raised especially in periods when this bank was endeavoring to prevent the use of Federal
reserve credit in speculative channels.
Boston.—Acceptability requirements are raised during periods of either general restrictive credit policies or in case of individual bank. The need for the
credit asked for is more carefully investigated and in the individual call for
credit by a bank the character of business of the locality covered by the borrowing bank, the character of business done by that bank, especially as to its investment policy, and the need for the loan.
Chicago.—No.
Cleveland.—No.
Dallas.—No.
Kansas City.—No.
Minneapolis.—No.
New York.—No.
Philadelphia.—No.
Richmond.—No.
St. Louis.—No. Credit principles are the same at all times.
San Francisco.—No. If the discount rate is ineffective, restraint, if necessary,
is placed on the volume of credit being extended a member bank.
It would be unreasonable to raise the standard on notes adequately secured
by United States Government obligations, or to raise the standard on eligible
paper wilich is unquestionably sound and liquid.
A credit strain is most likely to be caused by the borrowings of large banks
which have the greatest amount of Government securities and the largest
amount of the best quality of eligible paper. To raise the standard of requirements on all paper would result in denying credit to banks which are not abusing their rediscounting privileges either from the standpoint*of the volume of
credit being used or the quality of paper discounted. In a credit stringency
(1921, for instance), it becomes necessary to lower the standard, within the
bounds of safety, in order to accommodate commerce.
4. In your opinion, do the provisions of the Federal reserve act, the rulings
and regulations of the Federal Reserve Board, and the acceptability requirements of your institution set sufficiently high standards for paper that may be
rediscounted by member banks?
Atlanta.—They do.
Boston.—We consider that our " acceptability requirements " are of a high
though reasonable standard, and that it would be undesirable to change this
standard, as it would introduce an element of uncertainty in dealing with member banks, which are now quite familiar with our requirements as the result of
their experience during the years since the inauguration of the system.
Chicago.—Yes.
Cleveland.—Yes.
Dallas.—Yes.
Kansas City.—Yes.
Minneapolis.—Yes; we believe they are adequate.
New York.—Yes.
Philadelphia.—Members of the Federal reserve banks consist of two classes—
city banks and country banks. As regards the business paper of city banks,
the provisions of the act and regulations of the Federal Reserve Board do set
sufficiently high standards for paper that may be rediscounted. There is little
real business paper originating in the rural districts, most of it is farmers'
paper and that of small tradesmen, who have difficulty in meeting the requirements. We would not recommend any change. Higher standards could not be
met, but it is well to have these country banks aim to comply with existing
ones.
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NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Richmond.—Yes.
St. Louis.—Yes.
San Francisco.—Yes.
5. State whether your institution ever required or now requires excess
collateral from borrowing member banks.
Atlanta.—Excess collateral has been and is now being required from some
of our borrowing member banks.
Boston.—This institution has in the past and still does require excess
collateral from a comparatively few borrowing member banks. At the present
time we are holding excess collateral from 4 out of 398 member banks, and
these 4 institutions are among the 122 member banks that at present are
borrowing from the Federal reserve bank.
CMcago.—Yes.
Cleveland.—We do in exceptional cases require additional collateral. On
January 31, 1931, 264 member banks were borrowing from this bank and but
7 of them, borrowing a total of $182,113, were required to pledge collateral
over and above the face value of their borrowings. The usual amount of the
additional collateral which we request in these special cases is 25 to 35 per
cent of their indebtedness to us.
In these few cases the indebtedness consists of eligible paper discounted or
advances secured by eligible paper. The additional collateral may consist
either of eligible or noneligible paper or of securities.
Dallas.—By " excess collateral" we assume you mean paper placed and
pledged with us by member banks to provide us with a margin of additional
security for rediscount advances over and above the security afforded by the
paper actually discounted. In some cases we require such additional collateral. In other cases we do not require it.
Kansas City.—Yes; but only from banks believed to be in overextended or
otherwise unsatisfactory condition.
Minneapolis.—Yes.
New York.—We have always required and now require a margin of collateral in a limited number of individual cases. In such cases borrowings are
handled in the form of a collateral note secured by eligible paper equaling at
least the amount of the note and also by a margin of additional paper or
collateral which need not necessarily be of eligible character. In this district
We have found it necessary to require a margin of collateral in but comparatively few instances.
PMladelphia.-*We frequently take excess collateral from borrowing member
banks.
Richmond.—It has always been our practice from the beginning to require
excess collateral in many cases.
St. Louis.—Yes.
San Francisco.—For several years past no excess collateral has been required
or accepted. When values of properties and commodities fell sharply in the fall
of 1920 paper being carried under discount (particularly that arising out of
agricultural operations) diminished greatly in quality. Borrowers in many
cases were unable to meet their obligations. This, together with the accompanying heavy shrinkage in deposits, made it necessary for numerous banks
not only to continue their borrowings but to increase them. In one section
particularly crop failures in 1921 and 1922 added to the difficulties. With the
hope of averting unwarranted suspensions and to protect advances previously
made additional collateral was required in many cases.
6. If you regard the eligibility and acceptability requirements relative to
paper presented by member banks for rediscount as sufficiently high, what are
the reasons impelling your institution to require excess collateral from member
banks?
Atlanta.—(1) Special conditions in the community.
(2) Conditions in the borrowing bank.
(3) Emergency conditions requiring temporarily excessive borrowings.
Boston.—While the grade of paper submitted by a member bank might be
satisfactory and the standards of eligibility and acceptability high, this institution still might consider it desirable to require excess collateral if the member
bank appeared to be generally nonliquid or weak as a result of poor management or unsatisfactory local or other conditions. The character of the bank's
entire loan, investments, other assets and liabilities, and the volume of checks
going through for collection are elements for consideration in calling for
excess collateral in connection with the paper rediscounted, which may be
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
713
relatively small in total, good in itself, but slow or even difficult in collection
should the bank be closed. It has been our experience in some instances that
a call for general collateral has the effect of a warning and stimulates the
correction of undesirable situations in the affairs of a member bank.
Chicago.—Ordinary banking prudence makes it imperative that in extending
credit through the rediscounting. process due consideration be given to the
condition of the applying bank, and where the condition is unsatisfactory to
the extent that the indorsement of the bank does not lend the protection to
which we are entitled it is our policy to require excess collateral. Excess
collateral is also frequently called for where borrowings of member banks are
excessive. In considering this question it should be borne in mind that by
taking collateral we have in many instances been enabled to extend credit to
struggling institutions which were doing their utmost in a constructive way
to better their condition.
Cleveland,.—Sound banking judgment. When it has come to our knowledge
that the condition of a borrowing bank is unsatisfactory by reason of incompetent management, unsound practices, or impaired liquidity, or that losses
sustained have seriously impaired the condition of the bank, although not to
the extent that the supervisory authorities consider it insolvent or beyond
hope of working out of the situation, the member bank's indorsement is
weakened, and it is then that if the member bank is indebted to us or if we are
called upon for further assistance we feel impelled to grant such assistance
only upon adequate collateral. To deny reasonable assistance in these cases
might lead to the closing of banks which otherwise migh tbe saved.
Dallas.—In some cases where the offered paper in its general or special
aspects does not measure up to our standards of acceptability we consider
it better practice to grant the offering bank a line of rediscount credit supported
by a safe margin of additional collateral than to refuse the bank any credit
accommodations whatever. In other cases, even if the paper meets our requirements as to acceptability, we sometimes require a margin of additional collateral either for our own protection or for the good of the borrowing bank,
or both. In our rediscount operations we take the position that the eligibility
and acceptability of paper offered for rediscount are not always the only factors
that should be considered by a Federal reserve bank in making loans to its
member banks. The Federal reserve act specifically requires that these loans
be limited to " such advances as may be safely and reasonably made, with due
regard for the claims and demands of other member banks." This part of
the act clearly places upon the Federal reserve banks the burden of responsibility for safeguarding their loans to member banks with the elements of
safety and reasonableness, which we interpret to mean safety for the borrowing bank as well as for the Federal reserve bank. Therefore, when paper is
offered for rediscount—even if it apparently conforms (at the time it is offered)
to all accepted tests of credit acceptability—if it represents an excessive loaning program or an excessive borrowing program on the part of the member
bank, it can not be safely or reasonably used by the Federal reserve bank as
the basis of extending credit to the member bank, unless the credit is extended
upon such terms and conditions as will tend to reduce to a minimum both the
credit risk represented by the member bank's obligation to the Federal reserve
bank and by the maker's obligation to the member bank.
For these reasons we sometimes require additional collateral, not only for
our own protection against a possible change in the value of the rediscounted
paper prior to its maturity, but also for the sake of the effect such requirement usually has in correcting dangerous trends in the policies and affairs of
the borrowing bank, as, for example, where the offering bank shows an inclination to borrow too heavily and/or continuously, either from us or from other
sources ; where the statement of the offering bank shows unsatisfactory ratios,
and the management expresses a desire to borrow an amount which appears
to be out of proportion to the bank's capital; where reports of official examinations show a heavy proportion of criticised assets; where a member bank's
deposits include a dangerously large amount of public funds which are not
offset by cash resources, readily marketable securities, or other liquid assets;
©r where economic conditions in the bank's territory are so subnormal as to
necessitate its carrying over a hazardous volume of nonliquid loans.
Other facts which we consider in determining the advisability of requiring
excess collateral from a member bank, as well as in determining the amount
of the margin to be required, are (a) the amount of its loans to its own
directors and their interests, (b) the net worth of its stockholders, and (c) the
714
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
extent of the financial interest of the directors in the borrowing bank. Sometimes we require the indorsement or guaranty of directors and/or substantial
stockholders of the borrowing bank, either in addition to or in lieu of a margin
of collateral.
Kansas City.— (a) To supplement the protection afforded by the member
bank's indorsement, which has become lessened by the large amount of discounted paper or by other conditions.
(o) In some cases, in addition to the above reasons to afford additional
security for advances made on paper which does not meet the requirements
as to accepability but which is accepted because the member bank must have
the credit and has no more acceptable paper to offer.
(c) To impress upon the bank's management, and particularly upon its
directors, the gravity of its overextended or otherwise unsatisfactory condition.
We bear in mind that paper discounted serves as security for Federal
reserve notes, and consequently endeavor to avoid loss on lines which appear
to be weak. Excess collateral is returned to the borrowing bank upon its
return to satisfactory condition, or to the receiver in case of insolvency, after
the amount due us has been collected.
Requirement of excess collateral, on occasion, is a long-established practice
among commercial banks in this district.
Minneapolis.—In an almost wholly agricultural district market-price levels
and weather conditions may materially change during the life of the paper.
Excess collateral is not taken except as conditions in the particular member
bank, or in the area in which the bank is located, may indicate that it is a
factor of safety.
New York.—There are a number of reasons which at times impel us to require
margin of collateral on member bank borrowings. The controlling reason is
stated in Federal reserve act, section 4, which requires that directors of a
reserve bank shall " extend to each member such discounts, advancements, and
accommodations as may be safely and reasonably made, with due regard to
claims and demands of other member banks." This provision contemplates
that loans shall be prudently made and in such manner as to assure, as far
as possible, that repayment in full will be made. Even if this provision were
not in the act, we would, nevertheless, consider this to be an implied responsibility of the management of a Federal reserve bank. We do not, however,
believe the making of loans to member banks can or should be limited to cases
in which there is complete certainty that no loss will result, but we feel, on the
contrary, that if a Federal reserve bank is to perform the duties which devolve
upon it, loans must, in many instances, be made where surrounding conditions
are such as to indicate some possibility of loss. The requiring of marginal
collateral is a natural accompaniment of the effort to extend loans to member
banks whose condition, for one reason or another, is not for the moment
unquestionably safe, and at the same time to have the loans or advances which
are made to them fall in the category of loans which " may be safely and
reasonably made."
Conditions which make it necessary to require a margin of collateral include
the following:
(a) Impaired value of the member bank's indorsement, due to depreciation
in its securities account, losses in loans, or other losses which reduce the ratio
that its capital funds bear to its liabilities. It is sometimes necessary to
extend accommodation to a bank during the period in which steps are being
taken by its directors to bring about restoration of the capital account.
(&) Variation in the dependence to be placed on the judgment of the member
bank as to the goodness of loans it has made. The paper in different banks may
be equally eligible from a legal viewpoint and apparently acceptable from a
credit standpoint, but the loss experience of a particular member bank may
have been such as to indicate that its paper will show a considerably larger
proportion of loss than that of other and better-managed institutions.
(c) The character of the business of the community may be such as to give
rise to paper of poor average grade, even though legally eligible and apparently
good. In situations of this kind a large volume of the bankers' paper can not
be classified either as certainly good or as bad, but requires some middle
classification. To reject a considerable portion of this would probably be unfair
to the member bank, especially as the reserve bank is obliged to form its opinion
largely upon the data obtained .at secondhand, and does not have the opportunity to have personal contact with borrowers or to observe the daily course of
their business as reflected in their current bank account. Ordinarily in cases of
NATIONAL AND FEDERAL KESEKVE BANKING SYSTEMS
715
this middle classification the member bank's indorsement is quite adequate to
make the loan safe, but if the value of that indorsement is impaired for any
reason, a margin of collateral becomes important.
{d) Emergency conditions: When a bank is undergoing a run, it is only
with great difficulty that it can assemble paper and prepare applications for
rediscount rapidly enough to meet the needs of the situation. The difficulty of
selecting paper of an acceptable character at such a time is great and to pass
upon several thousand items quickly enough to give the needed credit to the
member bank is almost impossible for a reserve bank, especially in cases of
paper of a borrower whose statement has never before been on file with the
Federal reserve bank. In such a case the member bank may meet the situation
and receive the needed accommodation by offering a margin on its paper,
perhaps using for the purpose of margin, paper or other collateral not of eligible
character.
(e) It is necessary to recognize in taking commercial paper from a member
bank which is in possible danger of being closed by a run, that in the event of
such closing the collectibility of the paper of its customers would be very much
impaired, and that many notes which might be paid if the bank were to continue as a going institution might be partially or wholly uncollectible in the
event of its closing.
In all of the above circumstances the taking of a margin of collateral makes
is possible to extend assistance with reasonable safety where otherwise loans
could not be safely made. It is interesting in this connection to note that the
large commercial banks with a large number of country correspondents
customarily take a substantial margin of collateral, even though their advances are made upon securities which are readily salable in the open market,
and the value of which is, therefore, practically independent of the condition
of the borrowing bank.
Philadelphia.—No matter how high the requirements are, there always is
some risk in discounting paper. While the paper of suburban and country
banks complies with the requirements, yet it is difficult to make a satisfactory
investigation of it, and in the aggregate it can not be considered as gilt-edged;
neither do the institutions offering such paper rank among the strongest, and
additional security is taken to protect us, both against the bank and the possible
failure of the makers of the paper.
Richmond.—While the standards of eligibility are believed to meet requirements, nevertheless it is not possible to determine to our satisfaction the goodness of paper offered in a]l cases. The present situation affords an illustration.
Furthermore, the marginal collateral requirement is in force partly as a restraining influence upon the tendency to borrow excessively. Marginal collateral is not required to be paper that is eligible for rediscount.
St. Louis.—Our experience has proven that paper that is acceptable and could
be collected by a going bank often will not pay out when collected through the
receiver of a closed bank. This applies more particularly to agricultural paper.
Unless acceptability requirements are excessively high, the practice of taking
extra collateral (a sound development of commercial banking) is necessary to
avoid losses.
Ban Francisco.—Eequirements are adequate.
Generally speaking, the taking of marginal collateral is justified only as a
temporary measure to protect advances previously made (see answer to question 5) or to meet some outstanding emergency wherein it would appear by
such action a serious calamity might be averted. It is possible for an unexpectedly large demand for credit to come faster than a member bank can
gather its paper and credit data for submission to the Federal reserve bank in
such form as to make speedy action thereon possible.
7. Would it assist in preventing Federal reserve credit from being used for
speculative and investment purposes to repeal the provision in the Federal
reserve act permitting member banks to borrow on their 15-day promissory
notes secured by Government obligations?
Atlanta.—Not in our district. It is our opinion that most of the borrowings
of our member banks on their 15-day promissory notes secured by Government
obligations are for the purpose of restoring or maintaining their reserves.
Such notes are ordinarily discounted for short periods only.
Boston.—We do not believe so. Many member banks carry Government
obligations as secondary reserves, and even though eligible paper is held in
portfolio the Governments are frequently used for borrowing purposes, as the
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NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
detail work in connection with such borrowing is less than in rediscounting. It
might tend to reduce the control of the Federal reserve bank over its member
banks.
Chicago.—To refuse to take 15-day notes secured by Government obligations
for member banks might possibly in a few cases restrict speculative and investment uses of money. In our judgment, however, any benefits of that kind which
would accrue from so doing would be very much more than overbalanced by the
legitimate service we are now rendering to such borrowing banks by taking such
15-day notes, thus making available to them funds for commercial enterprises
or declining deposits.
Cleveland.—It might, but such repeal would seriously handicap many member
banks who carry United States Government obligations as secondary reserve
because their communities do not supply them with eligible paper in sufficient
amounts. It also would handicap some of the State bank members who do not
cater to commercial business but carry Governments as a member of borrowing
from their Federal reserve bank to meet legitimate demands.
In our judgment, a repeal of that provision of the act would greatly limit the
usefulness of Federal reserve banks, especially in view of the declining trend of
eligible paper created.
Dallas.—It would undoubtedly assist in accomplishing the purpose referred to,
but we doubt the wisdom of making such a change at the present time, in view
of its probable effects upon Government financing and upon other phases of the
general credit structure. We think consideration should be given to the large
amount of Government obligations outstanding and the causes which created
them.
Kansas City.—Probably so, but to very slight extent in this district, where use
of Federal reserve credit for speculative or investment purposes has been
negligible. Any good thus accomplished would be offset by the harm incident
to depriving the banks of this privilege which lends convenience and economy to
temporary borrowings, adds to the desirability of Government securities as a
secondary reserve, and, therefore, tends to maintain the price of such securities
at a higher level than would otherwise be the case.
Minneapolis.—No; we do not believe it would.
New York.—There appear to be two possible lines of reasoning which might
be advanced in support of a proposal to prohibit member banks from borrowing
on their 15-day promissory notes secured by Government obligations, as a
means of preventing Federal reserve credit from being used for speculative and
investment purposes. The first argument would relate to the specific use by
banks of the funds so obtained, and the second would relate to the effects on
the total volume of Federal reserve credit in use. The first question is whether
Federal reserve funds which are obtained by banks by the presentation of their
collateral notes secured by governments, are used in any different way from the
Federal reserve funds obtained through other channels. The chain of circumstances which results in member banks' borrowing and the processes
followed are about as follows:
1. The member bank finds itself with its reserves deficient; that is, with its
reserve deposit at the Federal reserve bank less than the amount required by
law. This may be due to (a) a withdrawal of deposits, or (&) an increase in its
own loans. If the loss of reserves is due to the loss of deposits it is difficult to
anticipate and outside the control of the bank, and this is also true of increases
in loans in cases where prior commitments have been made. Increases in certain types of loans can, of course, be anticipated, and as a matter of practice a
bank is reluctant to increase its-loans if it anticipates that this operation will
result in a deficiency of reserves. In fact, it may generally be assumed that
a deficiency of reserve which leads to member bank borrowing is usually due to
events which are unpredictable and outside the bank's immediate control.
2. Finding itself with deficient reserves a member bank has a number of
alternatives, somewhat as follows: (a) To call demand loans, (&) to sell bills
or investments, (o) to borrow from a correspondent bank, (d) to borrow from a
Federal reserve bank.
Federal reserve credit may get into use through two of these channels. If the
bank has bankers' acceptances in its investment portfolio, they may be sold to a
Federal reserve bank, thus putting Federal reserve credit into use. Otherwise
there is only one avenue open which is the avenue of borrowing.
3. Having decided to borrow from the reserve bank a bank then has the choice
as to whether it will present some of its customers' paper for rediscount or will
give the Federal reserve bank its own 15-day collateral note secured either by
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
717
Government securities or by customers' paper. Usually the collateral note
secured by governments is the most convenient means because many of the
member banks hold in safe-keeping with their reserve bank some amount of
Government securities which they can use as collateral for borrowing simply by
forwarding to the reserve bank a collateral note. This avoids the necessity of
picking out customers' paper, listing it on application blanks, making sure the
reserve bank has statements properly filed, arranging appropriate maturities,
and other possible ineonveniencies arising from surrendering possession of the
paper.
4. The form of the borrowing transaction is that he borrowing bank sends to
the reserve bank its note or its paper for rediscount and receives credit in its
reserve deposit account on the books of the Federal reserve bank. The destination of the proceeds is identical whether the loan is made against rediscounted
commercial paper or the member bank's collateral note secured either by
governments or eligible paper. The proceeds are used to build up depleted
bank reserves.
5. The process by wThich Federal reserve credit gets into use does not end
here, however, for the borrowing bank takes only the first step in a series of
steps by which $1 of Federal reserve credit may expand into about $10 of bank
credit (applying the ratio which the country's gold and other reserve funds
normally bear to bank credit). This is perhaps the most perplexing and least
well-understood operation in banking, and to reduce it to simple terms the
attached chart (A) has been prepared. To simplify the picture it is assumed
that bank 1 borrows from the reserve bank as a result of making a new business loan; that the bank does not require the merchant borrower to maintain
any larger balance and that succeeding banks receiving the funds put out in
this way follow a precisely similar procedure. The net result of the process
is that on the basis of $1,000 of new Federal reserve credit an expansion of
about $10,000 of bank loans and deposits takes place, while reserves of member banks increase but $1,000. The actual process is, of course, more complicated and confused, and the uses of the credit more varied than indicated on
the chart. The important fact to be observed in this connection is that the
borrowing bank has little influence over the eventual use of the Federal reserve
credit it may borrow. It is simply an instrument, and in most cases a passive
one, by which Federal reserve credit first gets into use. The nature of the use is
largely determined by others.
•CHART A.—HOW
$lfi09 of Federal Reserve Credit Grows to $10,000 of Bank
Credit
Bank No. 1 lends a merchant $1,000. The merchant withdraws this $1,000.
As a result the bank's reserves are depleted and it borrows $1,000 from its
reserve bank. This $1,000 becomes the basis for credit expansion as follows:
Bank No. 1 lends $1,000 to merchant No. 1 who pays it to manufacturer No. 1,
who deposits $1,000 in bank No. 2 which sets aside $100 for reserves and has
$900 of free funds to lend;
Then bank No. 2 lends $900 to merchant No. 2 who pays it to manufacturer
No. 2, who deposits $900 in bank No. 3 which sets aside $90 for reserves and has
$810 of free funds to lend;
Then bank No. 3 lends $810 to merchant No. 3 who pays it to manufacturer
No. 3, who deposits $810 in bank No. 4 which sets aside $81 for reserves and
has $729 of free funds to lend;
Then bank No. 4 lends $729 to merchant No. 4 who pays it to manufacturer
No. 4, who deposits $729 in bank No. 5 which sets aside $73 for reserves and
has $656 of free funds to lend;
Then bank No. 5 lends $656 to merchant No. 5 who pays it to manufacturer
No. 5, who deposits $656 in bank No. 6 which sets aside $66 for reserves and
has $590 of free funds to lend;
Then bank No. 6 lends $590 to merchant No. 6 who pays it to manufacturer
No. 6, who deposits, $590 in bank No. 7 which sets aside $59 for reserves and
has $531 of free funds to lend;
Then bank No. 7 lends $531 to merchant No. 7 who pays it to manufacturer
No. 7, who deposits $531 in bank No. 8 which sets aside $53 for reserves and
has $478 of free funds to lend;
Then bank No. 8 lends $478 to merchant No. 8 who pays it to manufacturer
No. 8, who deposits $478 in bank No. 9 which sets aside $48 for reserves and
has $430 of free funds to lend;
718
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Then bank No. 9 lends $430 to merchant No. 9 who pays it to manufacturer
No. 9, who deposits $430 in bank No. 10 which sets aside $43 for reserves
and has $387 of free funds to lend;
Then bank No. 10 lends $387 to merchant No. 10 who pays it to manufacturer
No. 10, who deposits $387 in bank No. 11 which sets aside $39 for reserves and
has $348 of free funds to lend;
And so on, until following totals are reached; Total loans, $10,000; total
deposits, $10,000; total reserves, $1,000.
This table is simplified by assuming (1) that deposits balance is not required
of borrower, (2) that ail deposits made are demand deposits, (3) that all the
banks concerned have a 10 per cent reserve requirement on net demand deposits, (4) that all loans and use of funds are identical in character, (5) that
the banks receiving Federal reserve funds are not in debt at the reserve
bank—otherwise the funds would be used to repay this debt. Actual results
are more complicated but follow the same principles.
From this survey of the way in which Federal reserve funds get into
use through a member bank, several conclusions may be drawn.
(a) The most common event leading to borrowing, a depletion of reserves
through the loss of deposits, is completely outside the control of the borrowing bank. The funds are used by the bank customer in any way he
pleases.
(b) In ninety-nine cases out of a hundred the kind of paper used by a member
bank to borrow from the reserve bank has no connection with the operation
which made it necessary for the bank to borrow.
(c) The act of borrowing at a reserve bank is only the first of a series
of operations in which Federal reserve credit is passed from hand to hand
until it may expand into a volume of bank credit many times its own amount.
Nine-tenths of this process is completely beyond the control of the borrowing
bank. In other words, even if it were possible and practicable to identify particular loans by member banks as the immediate cause of Federal reserve
borrowing, and to limit such borrowing to that which has been made necessary
by certain types of loans, this would not be in any degree effective to control
the character of nine-tenths of the additional member bank loans which
would be made possible by the Federal reserve credit released through the
borrowing from the Federal reserve bank.
(d) Therefore the particular form which the withdrawal of Federal reserve
funds takes in no way determines the eventual use of the money. The loan is
simply a vehicle for letting out Federal reserve funds into general use, and
the use is no different whether the funds are put out in the form of loans
against member bank notes secured by Government collateral, or in the form
of rediscounts, bills, or any other form of Federal reserve credit.
The second question is whether the privilege which banks have of borrowing on their 15-day notes secured by governments tends to encourage an
excessive expansion of credit; that is, whether the availability of this method
results in a larger use of Federal reserve funds than would occur if this
facility were withdrawn. Upon this point it is first necessary to review the
figures. They are published currently for all member banks in the Federal
Reserve Bulletin and may be summarized by saying that all member banks
on last September 24 held Government securities amounting to $3,446,000,000,
and eligible paper amounting to $3,812,000,000. These figures compare with
a total of about $1,000,000,000 of Federal reserve credit in use on that date
of which about $600,000,000 took the form of Government securities bought
in the open market, $200,000,000 bankers' acceptances sold to the Federal reserve bank, and $200,000,000 discounts, i. e., loans to member banks. On that
date member banks as a whole had borrowing capacity against eligible paper
alone considerably more than fifteen times the amount of their actual borrowings at the reserve bank. In recent years the maximum amount of borrowing
by member banks at the reserve banks was a little over $1,000,000,000 or a
little more than one quarter of the total amount of eligible paper. For the
New York City banks the average holdings of governments and of eligible
paper during the year 1929 as indicated by the four call condition statements
of that year are as follows:
Government obligations owned
$1, 014, 000, 000
Eligible paper held
1, 061, 000,000
Maximum borrowings at any one time.
425, 200, 00O
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
719
These figures indicate that the borrowings of these banks as a group did not
at any time reach a total of more than approximately 40 per cent of the eligible
paper held, and it is a reasonable assumption that the borrowings of these
banks under anything approaching normal conditions would not amount to
more than the eligible paper held. In fact, during the credit disturbances in
the fall of 1929 the borrowings of only two New York City banks exceeded at
any time the amount of eligible paper held by them.
When we turn, however, from the banks in principal centers to the smaller
hanks, the case is not so clear. A number of smaller institutions would be considerably embarrassed by a lack of sufficient eligible paper. While the position
of these banks with respect to borrowing would have no considerable effect on
the total volume of Federal reserve credit called into use, the removal of the
privilege of borrowing on governments would discriminate against a number of
member institutions, and especially those in smaller cities and towns.
While the removal of this right in ordinary times would have little effect
on the total volume of Federal reserve credit it would become an important
and essential consideration in times of bank disturbances when banks may be
called upon to meet sudden or large withdrawals. Even the present facilities
of access to the reserve bank have proved inadequate for some of these occasions, and the removal of this facility would to a considerable extent cripple
the reserve system from accomplishing one of the major purposes for its
establishment which was to meet emergencies. Without these facilities the
system would be much less useful to many small banks.
I t was clearly the purpose of the Federal reserve act to make borrowing
possible on a large scale in emergencies. When it was enacted the amount of
eligible commercial paper was much larger than at present relative to total
bank loans and investments, as illustrated by the following figures, which relate
to national banks only:
All National Banks
[In millions of dollars]
Date
Dec. 27,1916..
June 30, 1920June 30, 1924..
June 30, 1928..
June 30,1930..
Per cent of
eligible
loans paper
Eligible Total
to
dis- total loans
paper held and
counts
and discounts
2,293
4,320
3,542
3,266
2,719
8 395
13,611
11,979
15,145
14,874
27.3
31.7
29.5
21.5
18.2
In the face of steadily declining amounts of eligible paper and declining
amounts of Government securities outstanding, there is question how long
even the present terms of the reserve act will provide sufficient possible access
of individual member banks to the reserve banks, especially in emergencies.
The amount of eligible paper is very unevenly distributed among individual
member banks.
Two further general comments may be made on this general subject.
The first relates to the goodness of Government-secured paper as a reserve
bank asset as compared with commercial paper. The primary security in
each case is the obligation of the member bank, and as long as the member
bank remains open one form of paper is as good as the other. If the member
bank fails, however, the Government-secured obligation is better than customers*
paper because the customer's credit is often so closely tied up with the bank
that his ability to meet his obligations is considerably impaired by the bank's
failure. A second comment relates to the method of control over the volume
of Federal reserve credit and bank credit generally. If the amount of paper
eligible for discount is to be adequate to meet emergencies and unusual demands,
it must be far in excess of the amount of reserve funds in use in ordinary
times. Therefore, the control of the volume of reserve funds year in and
year out is to be found, not in controlling the amount of eligible paper, but in
controlling the operation of putting reserve funds into use—and this means
720
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
primarily rate control. The history of recent years appears to show that rate
control has been effective to the extent that it has been exercised vigorously
and promptly.
Philadelphia.—No.
Richmond,—We do not think so in this district. What restraint this prohibition might exercise in the larger banks would be overbalanced by other
practical considerations.
St. Louis.—No.
San Francisco.—It would assist, but not necessarily prevent, the practice
because other means are available for obtaining Federal reserve credit
surreptitiously. Repeal of the law, however, would be an unnecessarily severe
measure if intended solely as a cure to possible abuses by a comparatively few
large member banks situated in metropolitan centers.
As an emergency measure, the privilege of borrowing against United States*
Government securities is a source of great comfort to member banks. Such a
method of borrowing might (by law) be permitted only when the Federal
reserve bank has satisfied itself that the member bank has no eligible and
acceptable paper to submit for discount, and the member bank can show by
its own records and to the satisfaction of the Federal reserve bank that the
funds being obtained from the Federal reserve bank are being used for the
purposes contemplated under the law.
8. Should member banks, which are borrowing from Federal reserve banks
on their 15-day promissory notes secured by Government obligations, be prohibited from increasing their own security loans? Should this prohibition be
extended to member banks securing funds from the reserve bank either through
borrowing or rediscounting?
Atlanta.— (1) No. The legitimate business needs of the customers of a
member bank who are able to secure their notes with investment stocks or
bonds as collateral could not be met by the bank under the prohibition suggested. (2) This prohibition should not apply to member banks borrowing on
or rediscounting eligible paper with the reserve bank. Under such a prohibition, the credit facilities of the reserve bank would be restricted when the
member bank was engaged in a perfectly legitimate function.
Boston.—It is our opinion that in this district this situation can be handled
without the restriction suggested. We do not believe that a member bank,
because it is borrowing from a Federal reserve bank on a 15-day promissory
note secured by Government obligations, should be prohibited as a general
proposition from increasing its own collateral security loans to customers
unless the bank is a continuous borrower with a Federal reserve bank, and in
that case the matter should be taken up by the Federal reserve bank with a
view to having the member bank " go out of debt" with the reserve bank.
We believe it makes no particular difference whether a member bank obtains
Federal reserve funds by borrowing on its own collateral note, rediscounting,.
or selling its acceptances.
Chicago.—No. Commercial banks must carry some investment loans. Our
experience has been that officers of member banks respond cheerfully and
promptly to the suggestion that proceeds of borrowing on their 15-day notes
shall not be used either by the bank or its customers for speculative or investment purposes. It would be difficult, if not impossible, to go beyond such
suggestion and " prohibit" borrowing banks from increasing their collateral
loans.
Cleveland,—No. To prohibit banks from making loans on securities merelybecause they are borrowing from a Federal reserve bank for a temporary
period would be detrimental to banks and many times to borrowers fully
entitled to credit even though such accommodations may be to carry investment
securities. The proceeds of such loans are often used for commercial purposes.
In such cases the method used to obtain reserve-bank credit is inconsequential.
Dallas.— (1) Not necessarily or inflexibly. Member banks' 15-day promissory
notes secured by Government obligations are inherently eligible for rediscount
without regard to the use of the proceeds by the borrowing bank; and the laws
governing such borrowings should be sufficiently flexible to permit the borrowing bank to make necessary adjustments from time to time in its loan: portfolio.
For this reason, we think the correction of abuses of Federal" reserve credit
should be a matter of administrative control by the Federal reserve bank
management, particularly since the use which a member bank; actually makes
of such credit can only be determined by an investigation of the loan and'
investment operations of the member bank or by an analysis of the fluctuations
of its loans and deposits.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
721
(2) See answer to first subdivision of the question.
Kansas City.—No. Loans on collateral are normal and legitimate banking
transactions, and when taken in any reasonable amount should not subject a
member bank to the penalties of an arbitrary rule. More equitable and more
satisfactory means can be employed to restrain individual member banks from
using funds secured from the Federal reserve bank for call loans, noncustomer
collateral loans, or an undue extension of collateral loans to customers. During abnormal periods, such as existed in 1928 and 1929, member banks indebted
to the Federal reserve bank, either through borrowings against Government
obligations or rediscounting, should be prohibited from loaning funds on call
or increasing their collateral security loans, if, in the judgment of the management of Federal reserve banks or the Federal Reserve Board, such action is
desirable.
Minneapolis.—No.
New York.—As indicated in the answer to the last question, we do not
believe a distinction may properly be drawn between different forms of borrowing from the reserve banks. The form of borrowing from the reserve banks
does not affect the nature of the use of the proceeds of the loan made by the
member bank to its customer, and there is, therefore, nothing to be gained by
placing an additional penalty upon any one form of borrowing. The question
then becomes whether all member-bank borrowing should be subject to the
restriction that borrowing banks may not increase their own collateral security
loans. This restriction has presumably been suggested as a means of controlling the growth of speculative loans. The following considerations may be
suggested:
1. Not all collateral loans are speculative in character or to be discouraged.
A considerable amount of collateral borrowing is for business purposes and for
legitimate and necessary financing. Much of the credit required for the
development of the country's industry has for years been financed upon the
basis of stocks and bonds.
2. The question arises whether banks have in fact abused the borrowing
privilege by excessive advances of collateral loans which necessitated their use
of Federal reserve credit. Broadly speaking, the records indicate that the
banks in this district have not increased their collateral loans unnecessarily
at times when they were indebted at the reserve banks. There have, of course,
been some exceptions to this rule, but hardly sufficient to affect the general
credit situation. During the speculative enthusiasm of 1928 and 1929, with
call rates at attractive levels, the New York City banks made a very slight
increase in their loans to brokers.
3. There are many occasions when the proposed restriction would work not
only a hardship, but might bring about serious consequences.
(a) The events of the stock-market crash of October and November, 1929, are
illustrative. To preventT a money panic the New York City banks were required, in a period of tw o weeks, to take over temporarily a considerable part
of the $2,000,000,000 of brokers loans withdrawn by other lenders. To do this
they found it necessary to borrow the necessary reserve at the Federal
reserve bank. This action prevented a serious panic.
(&) In bank emergencies one bank is frequently called upon to lend to
another considerable amounts in the form of collateral loans, and frequently
the lending bank is compelled to borrow from a reserve bank.
4. In their ordinary operations commercial banks must follow a consistent
policy from day to day as to collateral loans. They must make general undertakings to accommodate their customers. They can not make a loan to-day on
collateral security and refuse to make a precisely similar loan under similar
conditions to-morrow. Therefore, if the law should prohibit them from making
any loans on collateral security while they are indebted to the Federal reserve
bank, they would be forced to do one of two things:
(a) Discontinue their business of making loans on collateral security, or
(6) Discontinue borrowing from the Federal reserve bank.
They should not be forced to do (a) because making loans on collateral
security is properly and lawfully a part of a bank's business, and it is
responsive to the legitimate requirements of the
bank's customers; nor should
they be forced to do (6) because if banks wTere to adopt the policy of never
borrowing from the Federal reserve bank the advantages of membership would
be greatly diminished, and there would be many withdrawals from membership
and a corresponding loss in effectiveness of the system.
For these reasons it seems to us undesirable that the proposed restriction
should be placed upon member bank borrowings. It appears impracticable
722
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
for a reserve bank to attempt to differentiate between the different kinds of
collateral loans in a member bank's portfolio. So often the character of the
loan is merely a question of motive of the original borrower, which it is
impossible for the reserve bank to determine.
Philadelphia.—This question specifically refers to " their own collateral
security loans." We think the making of collaterally-secured loans is a part
of a bank's regular business, to some extent essential to the operations and
life of the community, and provide desirable investments for the funds of a
bank, which it can use in meeting increased demands for loans from its customers or withdrawals of deposits. Except when it is strictly necessary for
the good of the community such collateral loans should not be increased when
a bank is borrowing from its Federal reserve bank upon its 15-day notes
secured by Government obligations or by rediscounting. If, however, under
such circumstances a bank is using Federal reserve credit to a reasonable
extent only, it should not be required to call such loans.
Richmond.—(a) No. (&) Not practicable.
St. Louis.—No.
San Francisco.—Unqualifiedly prohibiting a member bank to increase the
amount of its collateral security loans to regular customers while the bank
is conducting normal borrowings at the Federal reserve bank would work
an unwarranted hardship upon a borrowing member bank in competition with
other banks. Restrictions, therefore, should not be imposed unless the member
bank, out of the ordinary course of its affairs, is using Federal reserve credit
to make and carry loans the result of which counteracts the credit policies
being pursued by the Federal reserve bank.
9. Does your institution habitually inquire into the use of the proceeds of
the funds extended to member banks? Do your lending policies toward member banks vary according to the composition of the portfolio of the particular
member bank? Is your bank examination department of assistance in the
formulation of your lending policies?
Atlanta.— (1) No.
(2) Ordinarily, no; but in speculative periods we have given close consideration to the portfolios of borrowing banks.
(3) Yes.
Boston.—We do not " habitually inquire into the use of the proceeds of the
funds extended to member banks." Such inquiries are made only when statement analysis, " call reports of condition," or other information available
indicates the possibility of improper use of proceeds. A bank whose portfolio
appears from information at hand to be unsatisfactory in any respect is given
more careful attention in every way. Our bank examination department is of
great assistance in the formation of our lending policies.
Chicago.— (1) The Federal Reserve Bank of Chicago does habitually inquire into the use of proceeds of loans to member banks. The method is by
questionnaire on the face of the application for rediscounts. If that does not
bring the desired information, other inquiries are resorted to.
(2) Yes.
(3) The bank examination department is of great assistance in formulating
loaning policies of this bank.
Cleveland.—(A) Yes; this information is obtained through conferences, by
correspondence, and in visits to member banks by officers and field representatives. Our applications for rediscount contain one question: " Purpose for
which this rediscount is made."
(B) Yes.
(C) Our bank examinations department is of vital assistance to us in
formulating our lending policies.
Dallas.— (1) Inquiries are frequently but not habitually made as to the
use of the proceeds.
(2) Not in the sense that we assume is implied by your question. We do
base lending policies to some extent on the relative volume of slow, doubtful.
or worthless paper found in the portfolio of the borrowing bank, as reflected in
examination reports.
(3) l r es; our examination department is of a great deal of assistance in the
formulation of our lending policies.
Kansas City.—We do not habitually inquire into use of funds extended to
member banks and oar lending policies do not vary according to the composition of the portfolio of a particular member bank except in such instances as
mentioned in answer to question No. 8. Our bank examination department is
NATIONAL AND EEDEBAL ItESERVE BANKING SYSTEMS
723
of assistance in the formulation of lending policies only in that its analyses of
reports of examinations, both State and National, contribute to our knowledge
of the condition of member banks. Our department has not been called upon
to examine any national banks, and it examines State bank members, of which
there are only 21 in the district, only when special circumstances make it
appear desirable.
Minneapolis.— (a) Our rediscount applications require this information.
(b) We endeavor to pursue a uniform policy as to all of our member banks
and to follow their seasonal requirements.
(c) Decidedly so.
New York.— (1) While we do not habitually inquire into the use of the
proceeds of every loan extended to member banks, we do, nevertheless, follow
closely the borrowing record of the member banks, and in cases where the
amount or duration of a bank's borrowing gets out of line with that of other
banks in the same community, or suggests anything unusual, we study their
operations and in frequent cases confer with the officers, and in some instances
require from them either daily or weekly reports showing changes in loans and
other assets and in deposits.
(2) Only to the extent that if a member bank's portfolio is so generally
unsatisfactory as to raise a question as to the soundness of the bank's condition, it affects the value of the bank's indorsement.
(3) Yes; in respect to determining the condition of member banks and,
therefore, the value of their indorsement, and also to some extent in determining
the quality of the Tpaper which the banks hold and may offer for rediscount.
Philadelphia.—W ith every application for rediscount, the statement is made
that w the proceeds of the notes offered for rediscount have been or will be used
for the purpose of production, distribution, or marketing of goods, etc." An
examination of the paper is made to see whether or not the businesses
of the
makers and any other facts raise
doubts as to that statement. WTe do not
T
know in just what sense the w ord " policy" is used in this question. Our
discount operations with our member banks do not vary according to the composition of portfolio of the particular bank except as to the amount of eligible
paper it contains. By active participation with the State examining departments our bank examination department keeps us advised as to the conditiont
credit policy, and character of the management of all our State member banks,
so that our transactions with them are conducted with satisfactory knowledge
of their condition. The department also analyzes the reports of national banks
and as far as possible from such reports keeps us informed as to the condition
of those institutions. The services of our bank examination department have
been of the greatest value.
Richmond.—(«) Not habitually.
(Z>) No.
(c) Yes.
St. Louis.— (1) Not habitually.
(2) No. Of course, our advances to banks known to be in bad condition and
under bad management receive especially close scrutiny.
(3^ Not as to policies. The department is of assistance as to individual
credits.
San Francisco.—A. Federal reserve bank, by its contact with member banks,
usually understands the reason for a bank's borrowing. If not, it inquires.
B. Lending policies are governed by—
(a) The condition of the bank's assets as shown by reports of examination
by the Comptroller of the Currency (national banks) and reports of State
bank commissioners (State bank members).
(~b) The reason for borrowing.
(c) The volume of credit likely to be required and the bank's ability to
liquidate such borrowings in proper season.
(d) The quality of paper the bank is able to submit.
C. Our examination department assists in formulating policies to the limited
extent that it supplements the examinations of State banking departments.
With the exception of metropolitan banks it is fairly simple to determine
the reason for and approximate volume of a member bank's contemplated
borrowings. The seasonal trend of its deposits and loans and the results of
the past season's crop and marketing operations will give the variations which
might be expected in the bank's loans, deposits, and borrowing situation.
Weekly statements from borrowing banks keep the Federal reserve bank in
touch with each bank's situation. In the case of large banks in metropolitan
724
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
eities it is more difficult to follow borrowings because of the wide fluctuation
in their affairs, which are not of a seasonal character but are brought about
by large depositors and borrowers shifting their operations from the twelfth
to other districts, and vice versa. These movements are influenced by the
available supply of credit and interest rates in the important centers.
10. What has been the experience of your institution with the use of " moral
suasion " in preventing the funds of borrowing or nonborrowing member banks
from being used for speculative or investment purposes as compared with the
use of the discount rate or other methods of credit control?
Atlanta.—It is difficult to make this comparison, but in 1929 we used such
moral suasion to fine effect. Our member banks were fully advised as to our
policy to restrict loans to legitimate uses and to prevent our credit from getting
into speculative channels. The response of our member banks was very gratifying, with the result that borrowing banks almost unanimously refrained
from call loans. This moral suasion was backed up by our rediscount rate.
Jointly, the effect of restricting our credit to legitimate uses was satisfactory.
Boston.—While our experience with the use of moral suasion in preventing
funds of borrowing or nonborrowing member banks from being used for speculative or investment purposes has been satisfactory, it is our belief that
changes in rates offer a more definite and desirable means of accomplishing
these results. The discount rate is much more potent in its effects on the large
city banks than on banks in the country. The changes in discount rates are
passed along by city banks to their customers, whereas changes in discount
rates have not only a slow but comparatively little effect on the operations
of banks out of town on rates which such banks charge to their customers.
Chicago.—This bank from the beginning has consistently endeavored to impress upon its member banks what constitutes the right use of Federal reserve
credit, and, generally speaking, we have had the cooperation of the banks.
We believe that moral suasion has been a more powerful factor in avoiding
the misuse of Federal reserve credit than has the discount rate or other methods
employed.
Cleveland.—We have no hesitancy in conferring with the officers of member
banks whenever it appears that borrowing from us is being resorted to for
purposes inconsistent with the spirit of the Federal reserve act. In general,
our member banks have shown a fine cooperation in this regard. We have
not knowingly permitted abuse of our credit facilities, and when instances of
abuse have come to our attention effective measures were applied. To resort
to higher rates as a corrective measure would penalize a vast majority of
member banks making proper use of our facilities.
We have no authority, either stated or implied, on our own initiative to
indicate to member banks what use they should make of their available funds,
especially when such member banks are not borrowers from us.
Dallas.—Highly satisfactory. We have a file of correspondence with banks
which borrowed from us while they were carrying " street loans." We have
also had a number of satisfactory conferences with nonborrowing banks which
contemplated borrowing from us for the purpose of making or carrying loans
** on call" but which voluntarily abandoned the plan after receiving our views
on the subject.
Kansas City.—The use of moral suasion has been effective, although we do
not consider that we have had any really difficult problems of this kind to meet.
Rate changes have very little effect.
Minneapolis.—We have had no occasion to use moral suasion for such purposes except in a single case, where our advice was immediately followed. In
our judgment speculative credit can not appreciably be controlled by the discount
rate.
New YorTc.—We find it more or less constantly necessary to deal with particular institutions along the lines of what might be called moral suasion,
where for one reason or another they appear to be borrowing either in amounts
or for a length of time out of proportion to other banks similarly situated or
doing a similar type of business. In some instances our efforts have been directed
to banks which we have felt were using reserve bank credit as a substitute
for capital, or were borrowing merely for a profit. This method of direct action
or moral suasion has been used by us practically from the beginning of the
system and with considerable effect. It is a necessary part of any program
which contemplates the proper use of the facilities of the reserve bank and in
individual cases can be made quite effective. However, for the reasons indicated in the replies to questions 7 and 8 (which discussed in some detail the diffi-
JSTATIOSTAX, A]STD FEDERAL RESERVE BACKING SYSTEMS
725
culty of determining the use made of credit) we do not believe it is possible for
Federal reserve banks by moral suasion or other means to prevent credit from
being used for speculative or investment purposes as distinguished from other
purposes. Moreover, for the reasons hereinafter stated, we believe it is impracticable to ;use moral suasion as an effective part of a program designed
generally to restrict or control expansion in or use of Federal reserve credit.
The first difficulty is that a principal cause of member-bank borrowings is a
loss of deposits which is not connected with loans currently made. In most
cases the bank which actually borrows at the reserve bank is not the institution
which originally makes the extension of credit resulting in an additional demand
for Federal reserve credit. The second difficulty in the use of moral suasion
is that it is a personal appeal, the effectiveness of which depends largely upon
the human characteristics of the person appealed to. Some bankers are exceedingly anxious to cooperate with the reserve bank and are willing to sacrifice all
other considerations to an accomplishment of that purpose. Others resent any
suggestions as to how they should run their own business and are but little
affected by anything less than the most drastic methods. The great majority
of bankers * range all the way in between these extremes. It is not possible to
present a case to any considerable number of bankers in such a manner as to
secure anything approaching uniformity. Moral suasion, if effective, is bound
to lead to discrimination, as it merely drives business from the cooperative bank
to another less* cooperative one. No matter how clear or explicit the expression
of policy may be, whether it is communicated by circular letter or by individual
contact, the different bankers to whom it is addressed will give it various interpretations, which are likely to be affected by the interests or supposed interests
of their respective banks or customers. There is no doubt that much can be
done by direct contacts with bank officers, and in cases where the individual
bank is borrowing in a manner which requires special treatment the method of
direct contact must necessarily be employed. It is a slow operation and, when
many banks are to be dealt with, it does not produce results nearly so promptly,
effectively, or equitably as does a change in rate. The reasons for a change in
rate may mot be thoroughly understood by the member banks, but their reaction
to it is sufficiently uniform to bring about prompt movement in the direction
in which the rate should operate.
Philadelphia.—Our experience has been that bank officers sometimes yield to
so-called moral suasion. Moral suasion is practically the only way we have of
controlling our out-of-town banks. Their rate to their customers almost invariably is 6 per cent, so our changes in rates have no effect on theirs; it only
reduces or increases the profits they make on their borrowings from us. At
times we have prevented their openly borrowing from us to loan on the
exchanges and by interviews, inquiry, and investigation we have prevented to
quite an extent its being done clandestinely by or through them.
Richmond.—While, on the few occasions when we have thought it best to use
moral suasion, our member banks have fully cooperated, we believe as a matter
of principle that the rate control is the more effective.
St. Louis.—Moral suasion has been most effective. Use of discount rate
would be automatic and much easier, but is not practicable as legal contract
rates anf eighth district vary from 6 to 10 per cent.
San Francisvo.—As to banks situated outside of metropolitan centers, the
discount rate does not have any noticeable effect on the total volume of
borrowings at the Federal reserve bank and with correspondents. The reason,
no doubt, is that changes in Federal reserve rates are not passed on to
customers. In metropolitan centers a change in the discount rate is likely
to be passed on to the bank's borrowing customers. It depends largely upon
the disposition of borrowers to accept an increase in rate as to whether the
member bank will begin to reduce its indebtedness. When, in the light of
existing circumstances, it appears that a member bank is making improper
use of Federal reserve credit, it is requested to discontinue doing so.
11. To what extent have dealings in Federal funds relieved member banks
from the necessity of rediscounting? To what extent have they been resorted
to by member banks lacking eligible paper?
Atlanta.—(1) To no appreciable extent.
(2) To no extent.
Boston.—Dealing in Federal funds has undoubtedly relieved member banks,
particularly large city banks, from the necessity of rediscounting, although
it would be difficult to determine just how extensive the effects have been.
Practically .all .of the dealings in Federal funds in this district have been
726
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
carried on either between Boston banks or between Boston banks and banks
in other large financial centers, although there are indications that these
dealings are beginning to extend to banks in this district outside of Boston.
As Boston is an industrial center, the city banks have in portfolio varying
amounts of eligible paper, and the motive for dealing in Federal funds has
not been the lack of eligible paper, but rather a matter of rates—the member
banks purchasing Federal funds when they may be secured at a rate lower
than the established rediscount rate.
Chicago.—Dealings in Federal reserve funds are confined principally to
the larger banks in the important financial centers. This practice, which we
believe to be legitimate, has relieved the large member banks from the necessity
of borrowing at the Federal reserve banks for their temporary requirements.
It is our opinion this has been beneficial inasmuch as it conserves the use of
Federal reserve credit by decreasing the amount of Federal reserve credit
which would otherwise go into the market. In our experience, we know of
no cases where member banks have resorted to the use of Federal reserve funds
because of their lack of eligible paper.
Cleveland.—Dealings in Federal funds to a limited extent have been resorted
to by some of our larger member banks. Such dealings have no doubt relieved
them from the necessity of borrowing from us temporarily, but we are without
information as to the volume. These purchases have been made because of a
saving in cost as against borrowing and not ncessarily because of a lack of
eligible paper.
Dallas.— (1) To a very small extent in this district.
(2) Not to any extent in this district to our knowledge.
Kansas City.—Dealings in Federal funds in this district have been confined
almost entirely to transactions between banks located in Kansas City or our
branch cities and we doubt whether any such transactions have in recent
years been resorted to because of lack of eligible paper by such member banks.
Ordinarily purchases of Federal exchange have been made by one member bank
from another merely to' cover a very temporary shortage in reserve and in no
instance have we learned of any member bank being a regular purchaser of
Federal exchange for any considerable period of time. These transactions
have, perhaps, resulted in some slight reduction in member bank rediscounting,
but if member banks could not sell their excess reserve balances locally, they
would merely transfer them by wire to some other point and the net result
would be the same.
Minneapolis.—Dealings in Federal funds are negligible in the ninth Federal
reserve
district.
ATeio York.—In order to make clear the discussion of this question it seems
desirable first to explain how Federal funds originate. Federal funds are in
effect the excess reserves of one bank or group of banks, which are made
available to other banks. In the conduct of their business, member banks frequently find upon adjustment of their reserve position that they have an excess
of reserves for the day. Ordinarily if the bank with an excess reserve is
borrowing at the reserve bank, such excess will be used to reduce or eliminate
its indebtedness, but if the bank is not in debt to the reserve bank, or if the
excess reserve exceeds its indebtedness, the bank will naturally seek to employ
the funds. The ordinary employment of funds by a member bank does not
require actual payment until the business day following the commitment, since
normally it either issues a check payable through the clearing house or establishes a credit on its books. In either case it does not actually lose the funds
until the following day, so that the usual methods of employing its excess reserves would still leave the bank with the excess for one day. In order to
employ these funds for that one day, there has developed a market in Federal
funds. The natural market for such funds is with banks which are deficient
in reserves, as such banks are of course generally glad to purchase Federal
funds if they can do so upon advantageous terms, rather than to borrow at the
reserve bank.
Dealings in such funds have relieved member banks from the necessity of
rediscounting only to a relatively slight extent. When such funds are scarce
the demand is at the maximum, and when they are in supply there generally
exists little demand for them. There has not come to our notice any cases where
member banks have resorted to the purchase of Federal funds because they
lack eligible paper, and such transactions are unlikely because of the risk of
placing dependence on a source of credit which may fail when most needed.
As a matter of fact, trading in Federal funds in this district is limited to banks
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
727
of the highest credit standing, because the bank selling Federal funds is in
effect making an unsecured loan for one day, and the class of banks entitled
to this type of accommodation generally have an ample supply of eligible paper.
There appears also to be a growing tendency to deal in Federal funds between
Federal reserve districts; and it is not unlikely, when there is a difference in
reserve bank rates, that such interdistrict transactions may be the means of
member banks in the district having the higher rate obtaining Federal reserve
funds more cheaply than they could otherwise be obtained. A market in
Federal funds, if limited to banks of unquestioned credit standing, should on
the whole be a desirable thing, since it should be of assistance in making funds
available where needed, and should make for a greater fluidity of credit.
Philadelphia.—It is impossible for us to state to any degree of accuracy the
extent to which Federal reserve funds were used as a substitute for rediscount,
but we do know that this method of borrowing has been used quite extensively
by the large city banks, and on one or two occasions, as near as we can estimate,
they were indebted to the New York banks and dealers to the extent of $50,000,000. This method of borrowing is confined mostly to the large city banks and
the question of rate, not the lack of eligible paper, is the dominating factor in
such transactions.
Richmond.—Dealings in Federal reserve funds have been resorted to only
to a very limited extent in this district, and then not used for lack of eligible
paper, to our knowledge, but for convenience and possibly at less cost.
St. Louis.—(1) Very little.
(2) Not at all.
San Francisco.—To a considerable extent, A number of banks in eastern
cities follow the practice of transferring their surplus funds to correspondent
banks on the Pacific coast, with the request that the identical amount be retransferred East early the following day. Frequently, banks transfer practically the
same amount back and forth day after day for a considerable time.
Funds transferred by wire at 3 p. m. eastern standard time reach the Pacific
coast at say 12.30 p. m. Pacific standard time. Immediately trading commences
for the purpose of adjusting reserves and borrowing.
In some instances the funds are transferred as the result of a specific purchase by the Pacific coast bank, or in the normal course to augment interestbearing balances, or, in some cases, are transferred to be sold " at the best
price available."
Obviously, these " low-rate" funds in the San Francisco market have an
important effect on the volume of Federal reserve bank credit outstanding.
No instance is known of a member bank using Federal reserve funds in an
amount greater than that for which it could have furnished eligible paper or
security.
Statistical Appendix
12. Append data for the past four years, of the amount of paper offered by
member banks for rediscount which has been rejected by your institution,
grouped according to the reasons prompting the rejection, similar to such tables
appearing in the recent annual reports of the Federal Reserve Bank of Dallas.
FEDERAL RESERVE B A N K OF ATLANTA
Data on the amount of paper offered by member banks for rediscount for 1929
and 1930 which was rejected by the Atlanta office
Bankers acceptance liability over 50 percent of capital and
surplus
Collateral insufficient
Dependent storage of collateral
Examiners' criticism
Ineligible collateral
Maturity in excess legal limit
Note not officially signed
Occupation ineligible
Personal, not commercial, industrial, or agricultural
Physical defects, alterations, etc
Post dated
Proceeds used for ineligible purpose
Rate of interest in excess of legal rate
$6, 385.60
25,486. 62
48, 273.15
312, 090. 40
76,190.16
409, 531. 71
115,286.44
205,919. 03
103,914. 99
1, 213, 800. 82
7, 781. 62
61,140. 80
1, 402. 50
728
NATIONAL AND PEDEBAL RESERVE BANKING SYSTEMS
Statement ineligible
Statement requested; not furnished
Unwilling to increase unsecured indebtedness
Various items aggregating
Excess of 10 per cent of capital and surplus
$3,158, 994. 88^
5, 750, 644. 36
310, 003. 01
300, 806. 72
36, 622. 00
Total
12,144, 274. 81
This information for the years 1927 and 1928 is not available from our
records as kept at that time.
Data on the amount of paper offered by member banks for rediscount for
the years 1927, 1928, 1929, and 1930, which was rejected by our. New Orleans
branch grouped according to reasons prompting rejections.
Notes not completed
$1,009,344.06.
Post dated
89, 876. 33
Body and
figures
529, 521. 28
Commodity not independently stored
124,076. 55
Notes past due
223,097. 59
Over 90 days
755,767.30
Ineligible
1,215,564. 45
Collateral irregular
1,286,051.06
Alterations
1,480,097. 50
Undesirability
10, 775,218.13
Total
17, 488, 614. 25 >
FEDERAL RESERVE BANK OF BOSTON
The amount of paper offered by member banks for rediscount, which has
been rejected by this institution is relatively very small—so very small in
fact that it has not been considered necessary to keep any independent record.
or reasons therefor. The correspondence is scattered through our bank correspondence files and the work and expense involved in its location would be
entirely out of proportion to the value of the information obtained. Our member banks, during the period of the operation of the system, have gained such
familiarity with eligibility and acceptability requirements that the amount of
paper submitted, which it is necessary to return, is very small. Of the paper
returned, the largest percentage has been for technical defects, which are
present more often in paper coming from the smaller institutions. Next in
percentage would doubtless be paper returned because of unsatisfactory financial statement relation between quick assets and current liabilities. Actual
ineligibility would probably be the next in percentage of items returned, and
the most frequent class under this heading would be public utility company
notes, which seem to bring up the question of eligibility in the " outside"
banking institutions quite frequently.
FEDERAL RESERVE B A N K OF CHICAGO
The following comprises that part of the paper offered by member banks for
rediscount which has been returned to member banks during the past four
years for the following reasons: Ineligibility, eligibility not established,, insuflicient credit information, credit showing.
Farming
1927
1928
1929
1930
_
Commercial
$1,670,956 $3,802,900
1,058,510 6,793,570
855,250 3,969,40a
658,300
1,653, 30ff
4
Total
$5,473,856
7,852, 080
4,824,650
2,311,600
As our records do not show the same classifications of paper as shown by the
reports of the Federal Reserve Bank of Dallas, we have submitted the figures according to the above classifications.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
729
FEDERAL RESERVE BANK OF CLEVELAND
We have kept no statistical data on the number and amounts of items
returned or the reasons for their return prior to 1930. The amounts of paper
offered for rediscount for that year and rejected for various reasons are shown
below:
Amount
Ineligibility
Technical defects
Insufficient credit information
Credit showing
Miscellaneous
Percentage
$573,639.18
270,047.14
425,735.48
942,365.53
300,189.98
0.83
Total returned
Total accepted
Total
Items
Percent-
1.36
.44
109
103
94
231
126
0.85
.80
.73
1.80
2,511,977.21
68,760,838.38
3.65
96.35
12,830
5.16
94.84
71,272,815. 59
100. 00
13,493
100.00
FEDERAL RESERVE BANK OF DALLAS
Classifioation and disposition of notes submitted by member banks during 1927
Number and amount of items received:
Number
Amount
Classification:
Farming
Commercial
r
Miscellaneous
31,442
$$6, 932, 943. 76
$26,699, 893.73
39, 561,341. 60
671, 708.43
Total
66, 932, 943, 76
Reasons for return of paper showing percentage returned to total received
Amount
Technical defects
Insufficient credit information
Credit showing
Miscellaneous
Total returned
Total accepted
.
Total
Percent*
age
Items
Percentage
$676,479.15
880,066.96
846,749.35
4,110,216.59
114,019.70
1.01
1.31
1.26
6.14
.21
199
583
589
5,217
205
0.63
1.85
1.87
16.59
.65
6,657,531.75
60,275,412.01
9.93
90.07
6,793
24,649
21.59
78.41
66,932,943. 76
100.00
31,442
100.00
Classification and disposition of notes submitted by member banks during 1928
Number and amount of items received:
Number
Amount
Classification:
Farming
Commercial
Miscellaneous
Total.
30,165
$91,162,384.88
17,447, 407. 52
73,027,702.55
687, 274.81
91,162,384.88
730
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Reasons for return of paper, showing percentage returned to total received
Amount
Ineligibility
Technical defects
Insufficient credit information
Credit showing
Miscellaneous
Total returned
Total accepted
___
_
_
Total..
Percentage
Items
Percentage
$475,467.71
305,094.90
301,913.48
758,122.56
68,701.79
0.52
.33
.33
.83
.08
130
188
179
896
45
0.43
.62
.60
2.97
.15
1,909,300.44
89,253,084.44
2.09
97.91
1,438
28,727
4.77
95.23
91,162,384.88
100.00
30,165
100.00
Classifioation and disposition of notes submitted by member banks during 1929
Number and amount of items received:
Number
Amount
34, 840
$166, 610, 654. 05
Classification:
Farming
Commercial
Miscellaneous
23, 813, 804. 62
139,408, 219. 63
3, 388, 629. 80
Total
166, 610, 654. 05
Reasons for return of paper, showing percentage returned to total received
Amount
Ineligibility
- Technical defects
,
Insufficient credit information
Credit showing
Miscellaneous
.
—-
-
--—
Total returned
Total accepted
Total
_
Percentage
Items
Percentage
$2,712,091.13
746,622.78
1,264,875. 51
2,359,206.86
82,460.14
1.63
.45
.76
1.41
.05
272
335
217
1,152
54
0.78
.96
.62
3.31
.15
7,165,256.42
159,445,397.63
4.30
95.70
2,030
32,810
5.82
94.18
100.00
34,840
100.00
166,610,654.05
Classifioation and disposition of notes subtmtted by member oanks during 1930
Number and amount of items received:
Number
Amount
Classification:
Farming
Commercial
MiscellaneousTotal.
„
55, 008
$87, 358, 502. 32
35,220,477. 47
49, 862,696. 77
2, 257, 328. 08
87, 358, 502. 32
NATIONAL AND FEDERAL RESEBVE BANKING SYSTEMS
731
Reasons for return of paper, showinff percentage returned to total recewed
Amount
Ineligibility
Technical defects
_
Insufficient credit information
Credit showing
Miscellaneous
„ „
Total returned
Total accepted
Total
._
_
_„
_
Percentage
Items
Percentage
$1,039,613.40
447,118.10
589,075.69
4,831,111.57
470,246.69
1.19
.51
.67
5.53
.54
424
335
240
3,566
199
0.77
.61
.44
6.48
.36
7,377,165.45
79,981,336.87
8.44
91.56
4,764
50,244
8.66
91.34
87,358,502.32
100.00
55,008
100.00
FEDERAL RESEBVE B A N K OF K A N S A S CITY
The total amount of paper rejected during the year 1930 was $2,997,984.46,
equal to 1 per cent of the entire amount submitted by member banks for
rediscount.
The above amount of rejected paper consisted of 2,084 notes, or 6*£ per cent
of the total number offered.
Reasons for rejection as follows:
Ineligible
286
Alteration
114
Indorsement
142
Other legal irregularities
863
Credit information
548
Insufficient security
257
Miscellaneous
95
Total
2,305
The above classification includes 165 notes rejected for two or more reasons.
We have maintained the above record only for the year 1930, and it does not
include a segregation by reasons of the amount rejected. This information
and corresponding reports for the other years mentioned in question 7 could
be compiled from our files by the expenditure of considerable time and effort,
but we assume that the above classification will serve your purpose. There
is no reason to believe that the percentage of rejections or reasons for rejections
during prior years would show material variations from the above figures for
the year 1930.
FEDERAL RESERVE B A N K OF M I N N E A P O L I S
Annual amount of paper offered for discount or rediscount which has been
rejected (1927 to 1980, inclusive)
1927
192&. _
1929
.
1930
Head office
Helena
branch
$1,256,140.18
980,883.75
1,210,480.03
1,138,797.18
$596,984.48
287,364.79
656,475.95
518,187.92
Combined
$1,853,124.66
1,268,248. 54
1,866,955.98
1,656,985.10
NOTE.—These totals were computed by subtracting discounted paper from all paper offered. The resultingfigurescontain some paper offered but recalled without being considered by our credit officials. No
record has been kept of reasons for rejection of paper.
34718—31—PT 6
3
732
UsTATIONAL AHD FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE BANK OF NEW YORK
In passing upon paper which is offered us for rediscount, we customarily
credit the applying member bank with the amount of its application after deducting any items which are technically irregular in form or obviously ineligible,
or where the name is recognized as being undesirable from a credit standpoint.
We have gone over our applications of the past four years and assembled data,
which are given in the table below, as to the total number and amount of items
thus deducted, and as to this class of items the tables given below are complete.
All items for which credit is actually given are held pending receipt and study
of such information as may be needed, and a considerable number of such items
are subsequently returned because of insufficient credit information or credit
showing. The figures as to items so returned are somewhat incomplete, in that
they include only items formally acted upon by the discount committee and on
which the immediate removal of the items was required. A considerable number of items which are obviously undesirable are returned following investigation and study by the credit department without submission to the discount
committee, and of these items no detailed record has been kept. There are also
instances in which the items, being of early maturity or accompanying a member
bank collateral note of early maturity, have been permitted to remain until the
due date of the obligation with the understanding that paper of the same borrower would not be offered again unless and until his condition showed improvement. In such cases no formal record has been made of the withdrawal
of the paper, and this paper is not included in the figures given.
The figures given refer only to applications for rediscount or advances against
eligible paper, and do not include advances against United States Government
obligations.
Olassifloation and disposition of notes submitted by member barifcs to loan and
discount department
Amount
1927
Technical defects.
Insufficient credit information
Credit showing
Total returned
Total accepted
_.
-_
_
Total received
_
1928
Ineligibility
Technical defects—
Insufficient credit information
Credit showing
_.
$1,619,792
966, 531
3,970
1,035,341
0.07
.04
_
„
3, 625,634
2,353,716,576
2, 357, 342,210
_
-
-
.
Total returned
Total accepted
.
Total received
1929
Ineligibility
Technical defects
_
Insufficient credit information r__
Credit showing
,....,.
Total returned
Total accepted
_
Total received
Ineligibility
Technical defects
Credit showing
1930
Total returned
Total accepted
Total received
_
_
-_.
_ __
_
._ _ .
Percentage
Items
Percentage
0.30
.85
.04
126
359
1
54
.15
99.85
540
41, 573
1.25
98.75
100.00
42,113
100.00
.10
1, 309,177
1,021,257
132,442
324,024
.04
.03
.004
.01
216
404
1
30
.41
.78
2,786,900
3,322,038,574
.084
99.916
651
50,978
1.24
98.76
3,324,825,474
100. 000
51,629
100.00
2,102,303
1, 313,486
40,000
466,605
.06
.04
.001
.01
421
576
1
20
.64
.73
3,922, 394
3, 281,789,816
.111
99.889
1,018
77,057
1.29
98.71
3, 285, 712,210
100.000
78,075
100.00
.06
.02
915,131
1,870,270
1,068,484
.11
.23
.13
419
1,113
20
.56
1.50
.03
3,853,885
799,889, 349
.47
99.53
1,552
73,351
2.09
97.91
803,743,234
100.00
74,903
100.00
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
733
FEDERAL RESERVE RANK OF PHILADELPHIA
Reasons for return of paper, showing percentage returned to total received
Amount
Percentage
Percentage
Items
1927
Ineligibility
__ _. __ ___ _
Technical defects
_
__
Insufficient credit information
C r e d i t showing
Total returned
T o t a l accepted
_
$1, 264, 763.47
1, 988, 419.10
2, 358, 558. 82
5, 079,103. 65
0.26
.41
.48
1.04
199
907
179
528
0.63
2.88
.57
1.68
10, 690,845.04
477,472, 092. 06
2.19
97.81
1,813
29, 631
5.76
94.24
488,162, 937.10
100.00
31, 444
100.00
2,325,703. 00
2,391,126. 46
1, 507, 914.18
4, 860,184. 20
.27
.28
.17
.57
240
859
200
411
.86
2.99
.69
1.43
_
11, 084, 927. 84
834,175, 243. 62
1.29
98.71
1,716
26, 995
5.97
94.03
_._
845,260,171.46
100.00
28,711
100.00
842, 557. 71
477, 575.10
769, 963. 52
206. 283. 55
.12
.17
.11
.35
401
1,160
161
659
.88
2.56
.35
1.45
11, 296, 379. 88
1,445,788,580. 22
.75
99.25
2,381
42, 929
5.24
94.76
1,457,084,960.10
100.00
45, 309
100.00
732, 035. 68
1, 546, 286. 46
620, 225. 09
4,171, 081.16
.24
.48
.21
1.31
276
974
38
672
.63
2.25
.08
1.55
7,069, 628.39
309,417, 780.07
2.24
97.76
1,960
41, 243
4.51
95.49
316, 487, 408.46
100.00
43, 203
100.00
__
_______
_ __
. __
__
_-
T o t a l received
__
__. __
1928
Ineligibility
Technical defects._.
Insufficient credit i n f o r m a t i o n .
C r e d i t showing
_ _ _
___
Total returned. _ _
T o t a l a c c e p t e d . . __ __
T o t a l received
_
.
__ __ __
1929
Ineligibility
_._ _ . . . . .
T e c h n i c a l defects .
Insufficient credit i n f o r m a t i o n . . .
C r e d i t showing._ _
Total returned
Total accepted.
..
. ._
_
.
__ _. _
_.
_
_
._ _
_
T o t a l received
1,
2,
1,
5,
1930
Ineligibility
T e c h n i c a l defects
Insufficient credit information
C r e d i t showing
.
..
Total returnedT o t a l accepted
T o t a l received
__
FEDERAL RESERVE BANK OF RICHMOND
We have kept no record which would enable us to determine the amount of
paper offered by member banks for rediscount which has been rejected. Such
paper would be so small in proportion to the amount accepted that we feel it
would be of no value for our own purposes.
FEDERAL RESERVE B A N K OF ST. LOUIS
Amount
of paper offered by member banks for past four years, grouped
acoordmg to reasons for rejection
1927
Ineligibility
Technical defects
Insufficient credit information
Credit showing
Miscellaneous
_
Total rejected
Total accepted
Total
_
$476,005.92
230,798.42
3,034,557.33
1,331,650.27
200,604.04
1929
$864, 732. 20
806,507.07
4,705,126.46
3,492,512.77
309,210.59
1930
$1,134,872.44
2,259,958.52
7,465,760.22
3,869,375.35
524,512.06
$1,893,371. 99
1,289,070. 38
4,917,466.46
4,239,944.53
441,057. 14
5,273,615.98
204,978,456.48
10,178,089.09
15,254,478.59
289,018,602. 32 329,036,831.15
12,780,910. 50
159,517, 555. 62
210,252,072.46
299,196,691.41
172,298,466. 12
344,291,309.74
734
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF SAN FRANCISCO
No tabulated record of rejected paper has been maintained. It is estimated,
however, that less than 5 per cent of the notes offered for discount are not
accepted.
Principally, rejections are due to irregularities in promissory notes or supporting documents and to absence of sufficient information regarding important
items in the borrowers* financial statements to permit an understanding of
borrowers' affairs.
All paper returned to an offering bank is accompanied by a carefully prepared
letter dwelling on the features which occasion its rejection. This procedure not
only has an educational value but it affords the member bank an opportunity
to reoffer the paper if it has any new facts to present or believes the Federal
reserve bank's reasoning is not correct.
If it is apparent the member bank does not understand the rediscounting
requirements, a representative of the Federal reserve bank visits the member
bank, reviews its portfolio, and discusses the features determining which paper
is available for rediscount and which is not.
13. Append a statement of the amount of paper held in your failed banks'
account for each month through the past four years.
FEDERAL RESERVE B A N K OF ATLANTA
Statement of the amount of paper held in failed oanW account at the end of
each month for the years 1921, 1928, 1929, and 1930
Claims
account »
Claims
account *
Paper held
1927
January
February
March
April
May
June
July
August
September...
October
November. _December—
», 155.29 $3,917, 254.09
1,701.47
3,958, 979.58
1,089.26
4, 236, 684.08
345.55
4,155, 570. 51
794,
3, 976, 164.78
640, 519.15
3,959, 409.05
642, 364.64
622, 431. 50 3,884, 977.66
3,866, 088.99
605, 858.16
3. 744, 947.96
572, 940.59
3,715, 959.59
542, 128.17
3, 483, 910.20
521, 894.84
3,468, 302.06
499, 729.50
1929
January
February
March
April.-May
June...
July
August
September.—
October
November...
December-..
1928
January
February
March
April
May
June
July
August
September.,,
October
November...
December...
856, 277. 72
845, 916.06
909, 075.99
370.19
098.48
890, 112.97
860, 267.14
833, 117.06
627.45
814.15
908.67
198.98
1930
January
February
March
April
—
May
-_
June
July
August
SeptemberOctober
November...
December--_
3,405,505.04
3,471,535.82
3,624,919.56
3,574,120. 51
4,167,626.61
4,079,184.23
4,038,305.57
3,980,038.97
5,189,423.36
5,110,459.93
6,378,442.60
4,838,285.05
Paper held
|$1,076,048.32 $4, 752, 783.88
5,342, 734.34
1,361,819.88
1,638, 789.86
5,802, 968.02
1,558,873.34
5, 713, 329. 53
1,668,576. 74 5,854, 439.37
1,837,706.07
6,110, 562.73
4,701, 215.65 10,455, 533.46
4,301,588. 80 9,950, 407.41
3,961, 161.63
9,679, 691.08
3, 717,704.42
9,417, 325.39
3,556,300.73
9,28 T, 377.20
3,751, 872.00
897.07
3, 977,424.26
4,005, 479. 68
3,769,841.09
3,576, 600.57
3,360, 011.75
3,249, 849. 55
3,097, 339.26
3,039, 886.15
2,888, 624. 57
2,702, 780.09
3,968, 147.17
4, 510,272.21
9, 669,625.84
9,927,826.73
9, 742,180.08
9, 619,914.01
9,274,339.71
8,916,354.29
8,284,557.73
8,291,899.08
8,059,459.21
7,879,052.48
9,535,177.16
10,336,845.03
* Aggregate indebtedness of closed member banks to Federal Reserve Bank of Atlanta. It will be
noticed the amount of paper held greatly exceeds the aggregate amount due the reserve bank by closed
member banks. This is accounted for by reason of the fact that on a number of closed banks a large portion of the indebtedness has been charged off, but that the collateral securing the indebtedness of the banks
is held intact, and is reduced only by collections, compromise settlements, and bankruptcy of individual
debtors. A large percentage of the paper held as collateral is doubtful or worthless, but the notes are held
in anticipation of the makers offering some form of composition settlement.
735
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF BOSTON
Paper held in failed tanks' account on the last day of each month
Month
June
July
August
September..
October
November
December.
1928 i
_
•_
_
_
_
_.
-_ .
. _
_ .
_
_
. _-,
__
.
$83, 800.60
70, 770.60
54, 995.60
_
. _
1930 2
$44,953.08
35,367. 71
30, 520.47
29, 521.00
28,464 60
27,498. 60
20,255. 60
1
Citizens National Bank, Woonsocket, R. T.
* First National Bank in Poultney, Poultney, Vt.
FEDERAL RESERVE BANK OF CHICAGO
Paper held in failed banks' account by months, January, 1927, to December,
1930, inclusive
January
1927
1928
1929
1930
May
April
$2, 900,125.84 $2,426, 794.47 $2, 563,806.21 $2,302,793.09 $2, 014,711.99
965,912.51
1,420,791.69 1, 457, 540.03 1,170,606.49
939,050.18
445,405. 66
522, 054. 65
474, 585.42
429, 457.01
515,812. 76
302,180. 26
420, 202. 56
371,604.94
600, 726. 32
619,199.13
July
1927
1928
1929
1930
March
February
August
$1,636, 563.26
782,911.87
367,886.90
280,884.30
September
November
October
$1,334,307.98 $1,367, 771. 69 $1, 651,201.59
661, 530.56
602,893.06
703,586.40
382,858.05
389,074. 91
512,503.53
276, 553. 65
285, 780.92
281,933.40
The foregoing applies t o rediscoun-ted paper only,
l a t e r a l h a s been held in m a n y of t h e cases involved.
$1,579, 223. 60
645,150.90
507, 097.74
379,897. 50
June
$2, 066, 752. 89
904, 543. 29
414, 856.46
281,915.28
December
$1, 527,122. 35
636, 377. 22
479, 967. 64
1, 226,993. 50
I n addition thereto excess col-
KBPEiKAL RESERVE BANK OF CLEVELAND
Maximum
1927
1928:
May
June
July
August „
September
October
November
December
1929
__1930
-
-.
_.
_.
.
_-
.
__
_._ . -_
-—
.
-
-_..
_-
_
Minimum
None.
None.
$100, 931.50
100,931. 50
62,285.63
40,272. 65
23,034. 24
16,224.41
4, 600. 50
None.
None.
None.
$100,000.00
62, 285.63
40, 272. 65
23,034. 24
16,224.41
4, 600. 50
None.
736
NATIONAL A N D FEDERAL RESERVE B A N K I N G
SYSTEMS
FEDEBAL RESERVE BANK OF DALLAS
Statement
of the amount
of paper held in failed bank's
for the past four years
1927
January—
FebruaryMarch
April
May
June
July
August
September
October. __
November
December-
$226,473. 06
123,040.88
85,207. 07
73,679. 50
128,299.11
83, 186. 27
68,518. 42
49, 796. 70
45, 105. 79
24,386. 99
28, 121. 63
20, 162. 00
account
1928
for each
1929
month
1930
222.88 $15, 085.49
599.41
10,327.87
681. 50
9,304. 96
409. 70
5,415. 24
064.18
5,409.24
064.18
765. 21
765. 21
765. 21
096. 91
676. 91
562. 52
$960.81
398, 591.18
255,371. 62
85, 294.60
67,684.47
63, 550. 20
57, 983. 65
96,420. 86
140, 201. 07
131, 605.19
119, 704.84
141,604.14
The figures given above are net liability and not total amount of paper held, as in some instances marginal
collateral was held in addition to the amount of the indebtedness. With the exception of the present liability
the indebtedness of failed banks during the years mentioned has been collected in full with expenses.
FEDERAL RESERVE RANK OF KANSAS CITY
Statement
of the
amount of liability
due from failed banks
during the years 1927, 1928, 1929, and 19S0
$357, 393. 39
327, 064, 92
276, 696. 58
251, 753. 59
612, 010. 62
511,703.57
430, 367. 41
348,906.77
298, 295. IS
274, 388. 93
299, 346. 77
2S5, 902. 85
J a n . 31
Feb. 28
Mar. 31
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 31
286, 947.19
285, 664. 79
316, 748. 00
329, 202. 02
292, 708. 30
253,137. 22
225, 471. 09
281, 602. 87
201, 306. 35
151, 275.97
184, 911. 58
132,702.03
J a n . 31
Feb. 28
Mar. 31
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 31
month
^
$166, 470. 67
198, 811. 85
138, 157. 87
111, 717. 46
96, 178. 03
75, 994. 98
70, 922.30
64, 746. 76
127, 442. 30
107, 547. 31
78, 423. 36
103, 693. 87
1930
1928
J a n . 31
Feb. 29
Mar. 31
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 31
each
1929
1927
J a n . 31
Feb. 28
M a r . 31
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dee. 31
for
149, 332.39
121, 878. 47
208, 587. 38
284, 187. 29
222, 078. 72
157, 902. 29
162, 972. 62
123, 716. 58
228, 025. 68
212, 204. 96
214, 831, 42
179, 520. 20
KATIO-VAL AND FEDERAL RESERVE BANKING SYSTEMS
737
FEDERAL RESERVE BANK OF MINNEAPOLIS
Amount of discounted and rediscounted paper held in the failed banks' account
at the close of each month during the years 1927-1930, mcluswe
Amount due
us
Amount
charged off
b y us
Total
1927
January
February
March. _
April.. _
May
June
July
August
September
October
November.
December
_
_
___
_
_,
,
_. . __
_
_
_ __ „
. . . _ ._
_
._
. _+
_
_
_
$1,812,164. 98
1,770,186. 27
1,659,069.13
1,617,695.85
1.536.498.17
1,479, 720.83
1,426, 255.82
1,380,714. 28
1,268,622. 05
1.123.029.18
1,030,949. 09
856,493. 58
$95,621.61
$1,812,164.98
1,770,186.27
1,659,069.13
1,617,695.85
1,536,498.17
1,479, 720.83
1,426,255.82
1,380, 714.28
1,268,622.05
1,123,029.18
1,030, 949.09
952,115.19
805, 248.58
757,741. 90
746, 267.97
692, 516 83
677,830.14
660,800.15
635. 763. 81
594.872.48
550i 640.39
492,172.15
456,858. 52
604,423.14
95,571.61
88,442.39
88,272.39
88, 272. 39
87,645.30
87,635.30
87,550.30
87,050.30
87, 050.30
85,849. 37
85,849.37
104,897. 38
900,820.19
846,184. 29
834, 540.36
780,789.22
765,475.44
748,435. 45
723,314.11
681,922. 78
637,690.69
578,021. 52
542, 707.89
709, 320. 52
574,975. 58
536, 211.66
542,895. 57
394,131.18
381,502. 65
426,197.63
440,496. 67
434,633. 92
410, 524. 35
371,319.18
439,677. 43
375, 778. 82
104,397. 38
104,397. 38
104,397.38
104,397.38
104,397. 38
104,397.38
104,397.38
104,397.38
103,902. 38
102, 586. 79
99,453.81
99,428.81
679, 372. 96
640,609. 04
647,292.95
498,528.56
485, 900. 03
530, 595. 01
544,894. 05
539,031. 30
514,426. 73
473, 905. 97
539,131. 24
475, 207. 63
332, 749. 63
339, 691.49
374,456.87
340,458.68
327,447.03
321,351.63
337,887. 52
326, 388.87
327, 063. 93
305,542. 65
307,414 48
398,839. 78
99,428. 81
99,403. 81
99,403.81
123,967. 48
123,967.48
123,967.48
123, 967.48
151,222. 59
151, 222. 59
151, 222. 59
151,222.59
156, 290.34
432,178.44
439. 095. 30
473,860.68
464, 426.16
451,414.51
445, 319.11
461,855.00
477,611.46
478,286. 52
456, 765. 24
458,637. 07
555,130.12
1928
January
_._
February
_
March ,
April
May
_
June
July
August
September
October
November
December
_
_
_
_. _„_
_
_, _
_
_
._
,
.
_ .
1929
January
_ ______
__ . . . __
February
. __ __
March
_,
_. .
April
___
May
__
June
_ __ __
July
August
September...
_
October
November..
December
„
_,
1930
January
_
February
March,
April
May
.
June
.
July
August
September. _
October
November
December
_
_
_ _
_
_
_
_. .
_ __
_ _ _ __
_
__
- _
_ _ ._ _
. .
_.
._
FEDERAL RESERVE BANK OF NEW YORK
Volume of paper held in failed banks' account: 192T, none; 1928, none; 1929,
none; 1930, August 31, $4,826.58; at close of other months, none.
Nom Since the above statement does not properly reflect the amount of
paper held for failed banks, we submit the following information, which covers
all paper so held during the 4-year period:
738
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
A m o u n t of r e d i s c o u n t s or
collateral h e l d
Bank
D a t e closed
A m o u n t owed
Commercial
U n i t e d States or agricultural
Government
paper
A.
B.
C.
D
A u g . 8, 1930
A u g . 15, 1930
D e c . 6, 1930
T a k e n over b y b a n k i n g departm e n t m o r n i n g of D e c . 11, 1930.
$20,500.00
11,065.09
14,825.00
19,000,000.00
$1,000,000.00
$20,500.00
11,065.09
25,050.00
29,310,067.07
Liquidation
of loan completed
Aug.
Sept.
Dec.
Dec.
18,1930
23,1930
22,1930
13,1930
FEDERAL RESERVE B A N K OF P H I L A D E L P H I A
Paper held m claims account failed
or suspended
banks last day of each
J a n u a r y , 1929
August, 1929
December, 1928
December, 1930
month
$19, 631. 65
25, 449. 05
43, 425. 08
40, 036.11
FEDERAL RESERVE R A N K O F R I C H M O N D
Balances due by failed banks on redAscounted paper {exclusive
of
interest
accrued on past due paper) at end of each month during 1927, 1928, 1929,
and 1980
1927
1928
1929
$238,
330, 783.10
276, 735. 63
236, 788. 57
255, 100.97
251, 047.51
243, 629.36
335, 030.94
364, 393. 54
365, 769. 50
340, 326.01
327, 346.00
$341,007.05
346,482.40
341,457.58
348,321.18
354,872.12
351,138.12
346, 792. 25
337,955.94
340,796.81
325,934. 02
403, 223.53
432,696.67
$438,929.23
422,712.08
424,333.61
416,412.96
362,986.73
368,827.60
377,374.22
408,894.29
437,290.05
502,610.41
579,035.99
626,003. 77
Month
JanuaryFebruary..
March
April
May
June
July
August
September.
October
November.
December.
FEDERAL RESERVE B A N K
Amount
of paper held in failed
banks account
month
1927
J a n . 31
Feb. 28
Mar. 31
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
OF S T .
$920, 761. 61
839, 966.19
1, 014, 092.09
941, 036. 23
1, 014, 459. 97
1, 070, 207. 44
987, 363. 66
899, 363. 89
1930
$614,258. 62
754,894.87
595,095.12
566,84&41
550,437.61
480,084.20
472, 652.18
465,419.05
452,765. 99
450, 287.49
606, 724.63
925,897.93
LOUIS
on last reporting
Sept. 30
Oct. 31
Nov. 30
Dec. 31
date of
each
$859, 747. 83
791, 010. 24
749, 850. 43
724, 812. 72
1928
J a n . 31
Feb. 28
Mar. 31
602, 311. 74
688, 755. 32
570, 847. 84
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Statement
739
of the amount of liability due from failed banfos for each
during the years 1927, 1928, 1929, and
1930—Continued
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
Sept. 29
Oct. 31
Nov. 30
Dec. 31
$490, 659. 34
486,131. 65
485, 658. 52
485, 081. 83
477,143. 83
471, 607.18
469, 384. 91
387, 682. 37
371,170. 91
1929
J a n . 31
Feb. 2S
Mar. 30
Apr. 30
May 31
J u n e 29
J u l y 31
Aug. 31
302, 435. 61
294, 761. 99
282, 754.17
259, 397. 38
259, 338. 79
269,121.15
277, 885. 81
244, 850. 79
Sept. 30
Oct. 31
Nov. 30
Dec. 31
month
$268, 755. 60
222, 872.18
266, 953.17
217, 661. 07
1930
J a n . 30
Feb. 28
Mar. 31
Apr. 30
May 31
J u n e 30
J u l y 30
Aug. 30
Sept. 30
Oct. 31
Nov. 30
Dec. 31
271, 268. 71
294, 382. 76
236,121. 71
230, 611. 94
212, 750.95
65, 807. 92
482, 886. 69
551, 018.12
476, 020. 47
430, 585. 20
12, 712, 952. 28
6, 828, 835. 74
FEDERAL RESERVE R A N K S OF SAN FRANCISCO
Claims account, closed or suspended
banks
[000 o m i t t e d ]
1927
Jan.1_.
Jan.10.
J a n . 20F e b . 1__
F e b . 10F e b . 20.
Mar. 1„
M a r . 10.
M a r . 20.
Apr. 1 A p r . 10A p r . 20.
M a y 1.M a y 10.
M a y 20.
J u n e 1-.
J u n e 10.
J u n e 20Julyl-.
900
963
955
939
936
922
911
896
872
855
843
908
915
918
919
912
1928
1929
317
566
309
561
552 1,034
295
548
295
540
294
529
290
620
290
588
290
568
558
539
539
286
525
286
521
286
518
285
481
285
481
283
272
475
257
471
1930
234
229
228
229
228
228
226
226
221
221
221
225
223
223
224
172
J u l y 10
J u l y 20
Aug. 1
A u g . 10
Aug. 20—
Sept. 1
Sept. 10
Sept. 20
Oct. 1_
Oct. 10
Oct. 20
Nov. 1
N o v . 10
N o v . 20
Dec. 1
D e c . 10
D e c . 20
C h a r g e d t o profit
loss d u r i n g year
__-
and
1927
1928
1929
850
793
783
772
772
738
733
724
704
692
678
675
669
651
641
636
634
471
470
470
469
465
464
462
460
443
441
430
427
426
425
424
425
405
254
254
254
243
243
243
243
243
243
241
241
241
241
241
241
242
242
52
105
172
172
168
168
168
168
165
165
184
182
181
177
175
174
174
175
312
14. Append on a monthly basis statistics of borrowings grouped by unit banks
and by branch banks in your district over the p a s t four years, together with t h e
aggregate resources of the borrowing unit and branch member banks.
740
NATIONAL AND FEDERAL EESEKVE BANKING SYSTEMS
FEDERAL RESERVE BANK OP ATLANTA
Statistics of borrowings on a monthly basis grouped by unit banks and by branch
banks in the siwth Federal reserve district over the past four years, together
with the aggregate resources of the borrowing unit andt branch member banks
Bate
Branch banks|
Unit banks
borrowings
borrowings
(000 omitted)
Aggregate resources of borrowing banks
Branch banks
1927
January
February...
March
April.
May
June
July
August
September.
October
November.
December-
28,000
64,000
79, 000
85,000
54,000
43, 000
42,000
45,000
$39,851,000
29, 059, 000
44,192, 000
42,959, 000
41, 260,000
39, 725,000
39,882,000
39, 575,000
40, 615,000
38, 761, 000
40,701,000
49,811,000
$67,444,000
67, 444, 000
67, 444,000
67,444,000
70,475,000
70,475,000
70,475,000
70, 475, 000
78, 086,000
78,086,000
78,086,000
74, 590, 000
59,000
751,000
962,000
610, 000
886,000
184,000
400,000
287, 000
287, 000
450, 000
786, 000
212,000
40, 408,000
42,054,000
44,359, 000
95, 326,000
92, 341, 000
102,969, 000
115, 111, 000
114,786,000
118, 502, 000
123, 966, 000
114, 733, 000
95, 843,000
74, 840, 000
74,840, 000
74,840, 000
74, 840,000
76, 542, 000
76, 542,000
76, 542, 000
76, 542, 000
75, 552, 000
75, 552, 000
75, 552, 000
80,880,000
261,000
298,000
267,000
386, 000
421,000
757,000
389,000
967,000
329,000
241,000
639,000
!, 108,000
100, 548,000
91, 383,000
95,041,000
108, 918,000
114,474,000
87,820, 000
103,101,000
95,455,000
84,423,000
83,166,000
76,858,000
51,739,000
78,062,000
78,062,000
78, 062,000
78,062,000
75, 580, 000
75,580,000
75, 580, 000
80, 587,000
80,587,000
80,587,000
83,782,000
83,782,000
299,000
295,000
295,000
338,000
404,000
379,000
385,000
383,000
323,000
255,000
205,000
156,000
45,748,000
28,771,000
19,856,000
24,103,000
38, 686,000
34,239,000
30,044,000
28, 690,000
30,619,000
29, 733,000
36,243,000
37,784,000
84,385,000
84,385,000
84,385,000
84,385,000
85,473,000
85,473,000
85,473,000
90,456,000
90,456,000
90,456,000
86,757,000
86,757,000
$11, 000
500,000
1928
January—
February...
March
April
May
June
July
August
September.
October
November.
December„
1929
January
February. March
April.
May
June
__
July
August
September.
October
November..
December..
1930
January
February...
March
April
May
June
July
August
September.
October
November..
December..
Unit banks
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
741
FEDERAL RESERVE B A N K OF BOSTON
Statistics of borrowmgs grouped by unit banks and by branch banks in this
district over the past four years, together with the aggregate resources of the
borrowing unit and branch member banks
[000 omitted]
Daily average borrowings of member banks in district No. 1 with
Federal reserve bank, Boston
Aggregate resources of member
banks district No. 1 borrowing
from Federal reserve bank, Boston, as of date of the quarterly
condition reports
Branchl
banks
Branch
banks *
Date
Unit banks
January.
February
March
April
May
June
July...
August
September
October
November
December
January
February
March
April
May...
June
July
August
September
October.._
November
December
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
December
1
1927
_
_
-__
_.
$16,402
17,355
17,089
14,053
14,861
15,557
14,164
13, 289
11,147
13,329
16,322
14,322
$16,955
11,678
18,716
9,148
22,268
18, 286
15, 525
16, 564
17, 231
19,961
20,032
25, 867
10, 994
15,345
16, 213
13,193
16,777
27, 348
25,099
23, 529
22, 636
13,908
20,120
24, 544
12,462
29, 839
33, 282
31,174
42, 808
57,454
42,862
37, 565
28, 280
31,951
30,506
40,456
18, 500
19, 823
22,168
20,478
21, 742
22,992
28,191
18, 806
23,493
19, 001
15,708
22,106
41.926
42,063
36,472
55, 334
74,772
76,388
50, 246
60,681
47, 769
41, 686
31,191
18, 283
12,155
12,455
11,210
9,246
10,181
11, 792
8,942
8,255
6,813
5,698
7,609
12,803
11,753
10, 715
All banks Unit banks
$33,
29,
35,
23,
37,
33,
29,
29,
28,
33,
36,
40,
$612,424
$1,439, 698
769,937
1, 517, 839
456,285
1, 714, 974
~663,~264"
1,602, 316
437,887
1,638, 708
867, 532
1,976,817
597,209
2,047,473
~931,~629~
1, 889,199
1928
._
_.
1929
60,426
61, 886
58, 640
75,812
96, 514
99, 380
78,437
79,487
71, 262
60, 687
46, 899
40,389
2,171,106
2,105, 705
2,171,079
1,153,141
1930
7,509
5,522
3,637
4,302
4,744
3,212
4,684
4,476
Includes so-called "chain" and "group" banks.
500,972
1, 235,576
524,813
1,000, 072
406, 693
375, 647
"398," 971*
~909,"4i7"
742
NATIONAL AND PEDEKAL KESEEVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF CHICAGO
Borrowings of member banks from January, 1927, to December, 1930, grouped
by unit banks and by branch banks, together with the aggregate resources of
the borrowing unit and branch banks
Borrowings
Unit banks
Branch banks
Eesources
Unit banks
1927
January
February
March
April
May.
June.
July
August
September
October
November
December
__.
$42,589,000
50, 594,000
67,484,000
42,993,000
45,611,000
38, 639,000
34,081,000
21,299,000
27,667,000
36,176,000
35,515,000
27,535,000
$32,616,000
29,132,000
21,570,000
9,737,000
12, 621,000
23,458,000
18, 540,000
11,462,000
9,174,000
19,829,000
25, 381,000
25,135,000
$2, 531,820,000
2, 201,322,000
2,164, 396,000
1,326, 845,000
1,487, 765,000
982, 425,000
1,233,076,000
1,116,369,000
1,487,042,000
1,534, 896,000
1,524, 646,000
921, 161,000
25,760,000
32, 891,000
80,953,000
76, 704,000
80,232,000
91, 724,000
97,329,000
117,473,000
66, 327,000
108, 720,000
115, 632,000
94,195,000
15,843,000
28,493,000
30, 555,000
40,932,000
55,862,000
61,368,000
51, 387,000
49, 276,000
56,550,000
59, 310,000
56, 500,000
52, 323,000
1, 709,582,000
1, 267,380,000
2,613,690,000
2,001,444,000
2,471,769,000
2,672,934,000
2, 690,956,000
3,071, 993,000
2,208, 231,000
2,055, 840,000
2, 862,233,000
2,713, 569,000
88,666,000
140,532,000
133,697,000
56,801,000
112,444,000
85, 521,000
71, 303,000
45,842,000
90, 213,000
44,129,000
117,627,000
70, 298,000
43,771,000
54,366,000
69,349,000
49, 278,000
41,364,000
37, 232,000
42,902,000
59, 607,000
49,017,000
67,204,000
57,886,000
42, 369,000
2, 654, 371,000
2, 797, 036,000
3,063, 732,000
3,090, 545,000
2,928, 990,000
2,479, 571,000
2,685, 455,000
2,083, 548,000
2,390, 517,000
1,441, 215,000
2,011, 343,000
2, 544, 943,000
38,205,000
28,896,000
28,475,000
'16,646,000
15,594,000
13,788,000
13, 635,000
17,937,000
14, 608,000
15,641,000
15, 936,000
15,384,000
40,574,000
27, 537,000
9,486,000
6,652,000
2, 681,000
3, 579,000
2,817,000
1,649,000
5,774,000
3,106,000
4,100,000
7,420,000
940,072,000
834,048,000
572,775,000
609,631,000
449,500,000
587,491,000
432,808,000
653,184,000
966,261,000
969,308,000
511,218,000
370,800,000
1928
January
February
March
April
May
June
July
August
September
October
November
December
1929
January
February
March.
April
May
June
July
August
September
October
November
December
r
1930
January
February
March
April
May
June
July
August
September
October
November
December
__.
FEDERAL RESERVE B A N K OF CLEVELAND
While branch banking is practiced in certain sections of our district, all borrowing is done by the parent banks. Our rediscount and loan facilities have
been used only by the unit banks; and in the cases of banks with branches,
by the parent banks.
FEDERAL RESERVE B A N K O F DALLAS
At the present time there
engaged in branch banking.
bership during the past four
in 1930. As their borrowings
are no member banks in this district that are
We have had only two such banks in our memyears, both of which withdrew from the system
were inconsequential in comparison with the total
NATIONAL. AND EEDEKAL EESEBVE BANKING SYSTEMS
743
borrowings of our member banks, we assume it is unnecessary to furnish the
statistics referred to, although they will be furnished, if desired.
FEDERAL EESEBVE BANK OF KANSAS CITY
There are no branch banks in the district.
FEDERAL RESERVE BANK OF MINNEAPOLIS
Borrowings of member banks in the ninth Federal reserve district by months,
1921-1980, inclusive, divided into two groups
Borrowings by unit banks
Borrowings by branch banks
Amount redis- Balance at close) Amount redis- Balance at close
counted
counted
of month
of month
January
February
March
April
May-.
June
July
August
September
October
November
December..
1927
—.
_-_
January.
February
March
April
May
June
July
August
September
October
November
December—
January
February
March
_
April
May—
June
July...
August
September.
October
November
December
January
February,,
March
April
May
June
_
JulyAugust
September
October,
November
December
$6,340,767.89
6, 644,794.24
7,621,519.99
12,470, 430. 77
9,058,647.14
8,903,836.66
9,129, 599.19
10,029,327. 23
3.397, 783.14
2, 960, 262. 63
3,840,649.87
2,227, 575. 72
$3, 952,382.76
4,731,197.02
5,844,657.33
6,582, 768.43
6,680,875.92
4,002,907.43
5,383,417.99
7,323,936. 54
3,530,639.96
2,199, 718.66
2, 723,127.68
1,893,795.06
5,150,000. 00
5,700,000.00
14,026,500.00
4, 774,077.80
5,336,806.88
3, 080,974.13
21,305,222. 53
16, 590,351. 08
24, 364, 763. 90
24,411,196. 27
25,185,599. 30
19,179,722.60
26, 729, 299. 01
11,807,035.53
12, 291, 348.35
3,612,772.83
3,550,093.47
2,960, 742.15
8,210,031.80
8,737, 709.69
7,371,139.31
11, 691,528.99
15,642,417. 96
11,587,762.28
12,343,179.60
7,189,228.71
4,495,262.61
7,561,000.00
12,385, 000.00
34,600,000.00
38,810,000.00
18,100, 000.00
9,600,000.00
37, 700,000.00
48,885,000. 00
53,950,000.00
55,650,000.00
66,400,000. 00
46,660,000. 00
15, 704, 966. 75
16, 001,624. 09
20,295,401.15
29,824,450. 06
24,261,140. 84
20,055,034. 04
20,866, 062.80
21,884,458. 76
26,350,110.16
33,380,824.47
27,801, 535. 66
20, 971, 683. 40
8,056,221.96
8, 926, 200. 74
5,950,668.40
9,126,146.39
10,249,888. 51
8,089, 521. 52
12, 720,167.60
9,618,366. 55
10,945,879.42
9,994,701. 51
8, 620,105. 20
7,155,460. 25
33,165,000. 00
25,350, 000.00
42,563,000.00
108,075, 000.00
31, 520, 000. 00
39,325,000. 00
76,324, 798. 00
85,645,000. 00
97,572, 500. 00
90,807, 000. 00
68,800,000.00
59, 265, 600. 00
18,948, 449.45
7, 282,769. 24
2,753, 409.47
4, 777,645. 35
3,986, 580. 62
2, 514,000.23
3,895, 117. 60
1, 891,651. 55
2, 262,850. 67
4, 222,757.29
2, 762,271.49
3,477, 219.16
5,321,434.42
2,278,828.82
2, 464,777.67
3, 681,021.50
3, 653,952.39
3, 845,881.80
4,323,402.02
4, 266,390.39
4,112, 523.12
4, 323,193.16
3,897,168.54
3, 541,939.19
13,460,000.00
300,000.00
2, 600,000.00
6,100,000.00
1, 530,000.00
4,000,000.00
$45,000.00
10,000.00
600,000.00
7, 270, 000.00
4,300,000. 00
5,735,000. 00
15,145,000. 00
425,000.00
1928
_.
1929
_,.
_..
1930
„.
_..
Dec. 31,1927
Total resources:
Unit banks
Branch banks
$961, 918,000
202, 864,000
1,500,000.00
""53,166" 66"
Dec. 31,1928
Dec. 31,1929
$995,261,000
212,884,000
$950,954,000
223,515,000
Sept. 24, 1930
$926,087,000
215, 571,000
744
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF N E W
YORK
(a) We understand that this question applies to banks having branches
outside of the municipality in which the head office is located. There are only
three member banks in this district which meet this definition. Their borrowings at the end of each month and resources on call dates during the last four
years were as follows:
(000 omitted)
Borrowings
Resources
Date
T o t a l borrowings of
member
banks
T o t a l resources of
member
banks
1927
J a n u a r y ._ __
February
March
April
May
June
July
August,
September
October
November..
December
. -_
__
$1,915
600
625
950
125
1,050
1,050
938
1,744
989
250
1,225
M a r . 23
$77,865
J u n e 30
83,123
Oct. 10
81,974
D e c . 31
89,427
F e b . 28
90,910
J u n e 30
106,963
Oct.
3
107, 550
D e c . 31
107,025
$108,702
135,746
69,457
144,440
87,842
90, 947
100,454
106,188
126,212
100, 767
148,115
281, 338
$12, 932,444
14,181,638
13,863,875
15, 012,041
1928
January.
_
February
March
April.
May..
_. __
June
._
July
August
September
.
O c t o b e r . _.
- __
November.
D e c e m b e r . . _.
_
.. _ _ _
_
.
_
. -
__
-_
625
1,770
595
2,670
2,620
2,620
2,620
2,620
1,620
2,270
117,555
83,336
144, 986
289, 327
358,977
453,915
321,603
292,153
370,627
261,460
345, 993
463, 981
14, 249,820
15,149,320
15, 023,698
18, 033, 942
1929
January
Februarv _
March
April.,
May..
.
June
July
August
September
October __
November.
December
...
...
.
..
-. -
2,245
1,745
1,180
1,795
1,410
2,000
1,200
1,705
2,465
2,375
450
3,150
M a r . 27
104, 301
J u n e 30
105, 069
Oct.
4
104,867
D e c . 31
105, 915
M a r . 27
$101, 244
J u n e 30
105,070
Oct.
4
101, 976
D e c . 31
104,074
174, 436
224,133
287,175
213, 571
221,886
402,455
385, 951
367, 031
172, 301
228,150
220, 251
171, 760
16, 656, 085
__i__
15, 997, 708
16, 907, 250
18, 363,619
1930
January.._
February _ _
March
_
April.
__
May
June
July
August
September
_ .
October
_
November
December
_ _
215
...
_.
... _
250
1,650
1,600
300
.
..
.
_
750
1,100
1,500
$46, 825
48, 644
90, 790
41, 270
113, 592
84, 039
34, 296
34,763
103,135
36, 725
58, 343
61, 897
$16, 577, 634
18,102,613
16, 336, 667
N o t available.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
745
FEDERAL RESERVE R A N K OF PHILADELPHIA
Unit and branch banks borrourinffs and resources
Unit banks
Borrowings
Resources
Branch banks
Borrowings
Resources
1927
January
February.
March
April
May
June...
July
August
September
October
November
December
$22,367, 221. 26
30, Oil, 678.41
35,040, 554.45
32,430, 970. 87
37,414, 039. 63
34,107, 919. 55
31, 562, 840.69
26, 711, 803. 38
24,062, 573.06
27, 857, 163. 42
30, 759, 678. 45
37,163, 504. 50
$685, 772, 758.00
772,004,321.00
947, 283,066.00
814,965,122.00
1,030,158,182.00
950,995,614. 00
891, 985, 847. 00
708,764,833.00
709, 312,789. 00
776,749,145. 00
792, 803, 800. 00
837,784,363.00
28,126, 078. 64
31, 277,554. 81
25, 477,076.11
32, 712,521. 02
44, 720,067. 27
46,198, 160. 40
43, 431,207.71
50, 419,833. 97
45,171, 056. 13
38, 491,457. 40
44, 591,480. 68
40,129, 812. 42
956, 292, 572.00
960, 431,482. 00
846, 242, 201. 00
933, 019,892. 00
1,092, 232,468.00
1,236, 139, 664. 00
1,115,826, 606. 00
1,117, 305,038. 00
1, 090,990, 778. 00
1,158, 582, 724. 00
1,196, 237,108. 00
1,119, 491, 671. 00
18, 837,199. 96
28, 477,489.08
28, 737,149. 42
29, 593,833. 35
31, 726,660. 45
53,306,868. 75
50, 778, 896. 79
66, 892, 507.13
63, 864,342.06
47. 626, 672. 56
35, 501, 731. 46
44,184, 674. 20
919, 253,283.00
1,022, 272,081.00
1,029, 593,112.00
840,853, 914.00
931, 065,520.00
1, 248, 467,869.00
1,118,150, 682.00
1,195,139,094.00
1,229,975, 767.00
1,233, 432,§02.00
1, 230,432,700. 00
1,170, 735,173. 00
44,953, 805.30
48,526, 414.87
49,118, 850. 26
50,994, 290.81
52,556, 518, 74
51,591, 049.48
51,359, 693. 88
47,279, 514. 72
41,970, 175. 23
48,825, 551. 74
52,889, 909. 63
46,084, 720. 83
1,300, 122,156. 00
1,301,462,458. 00
1,375, 215,487. 00
1,402,663,705. 00
1,344, 302,194.00
1,228,979,928.00
1,268, 957,347.00
1, 203,469,045.00
1, 269,324,788. 00
1,312, 159,800.00
1,310, 242,369.00
1,024, 463,012. 00
30,651, 059. 54
53,922, 450.86
70,093, 792.08
53,705, 041. 98
47,642, 542.29
33, 288,572.03
24,486, 970.21
56,777, 691. 74
42, 599,819.98
63,683, 952.86
48,445, 403.69
19,692, 058. 28
1,266, 068,432. 00
1,076, 518,925. 00
1,334, 683,632. 00
1,180,805,016. 00
1,174,842,030.00
967, 346,242.00
932, 856,359. 00
1,343, 360,490.00
1,170, 050,858.00
1,357, 656,466. 00
1,323, 735, 226. 00
678, 253,376.00
40,181, 629. 73
34,077, 349.95
27,880, 949. 57
24,940, 181. 58
28,578, 443. 38
24,637, 275. 04
18,643, 101. 77
15,180, 806. 65
14,815, 820. 05
17,917, 968.42
18. 240,684. 62
21,866, 586. 09
1,114,373, 110. 00
967,976, 712. 00
737,426, 451.00
808,646, 805. 00
916,887, 207. 00
787,011, 228.00
693, 595,749. 00
648.930, 372.00
559,914, 683. 00
708.931, 902.00
722, 554 271. 00
709, 532,213. 00
12,309,804.71
11,739, 488.17
5,421, 674. 98
4,640, 757. 60
4,228, 084.15
4,857, 642. 80
2,601, 891. 33
3,050, 413.01
2,457, 143. 33
3,094, 009.26
5, 572,059. 56
3,796, 528. 62
561, 562,556.00
689, 648,356.00
291,540, 295.00
198,223, 716.00
153,387, 599.00
164,443, 372.00
80,363, 029.00
112,377, 384.00
111,670, 041.00
93,971, 458.00
142, 593,669. 00
84,345, 903.00
$15,979, 523. 70
9, 395,071. 24
27, 798,233. 26
14,133, 745.17
18,653, 524.30
22, 999,555. 99
18, 209,674. 26
10,091, 879.19
11, 854,438. 49
11,196, 058. 52
9, 922,689.64
30, 207,345.03
$444, 832, 799. 00
593,076,064. 00
914, 508,604. 00
466,260,078. 00
923,180,010. 00
764, 725, 398. 00
591,178, 994. 00
286,672,075. 00
538,244, 820.00
529,820,880. 00
467,261, 801. 00
765,676,089. 00
1928
January
February
March
April
May
June
July
August
September
October
November
December
1929
January
February
March
April
May.__
June
July..
August
September
October...
November
December
1930
January
February
March
April
May
June
July
August—
September
October
November
December
—
_.
__.
746
NATIONAL AND FEDEBAL. BESERVE BANKING SYSTEMS
FEDERAL RESERVE BANK OF RICHMOND
NOTE.—In our records of the average monthly borrowings of member banks
we keep no record of aggregate resources. Our comparison is made between
borrowings and basic lines, which we think is far more satisfactory. In the
following tables we have stated month by month from 1927 to 1930, inclusive,
the borrowings of all member banks in the district having branches in different towns or cities and the borrowings of all member banks of the district,
in each case compared with aggregate basic lines. In the third column is
shown the ratio of borrowings to basic lines.
(000 omitted)
All banks
Branch banks
Basic
line
1927
January
February
March
April
May
June.
July
August
SeptemberOctober...
November
December
_
1928
January
February
March
April
May
June
July
August
September
October
November
December
*.._
1929
January
February,.
March
April
May
June.—
July
_.
August
September-.October
November
December
January
February
March
April...
May
June
July
August
September
October
November
December
..
1930
_
___
_.
_-.
Borrowings
Per cent
Basic line Borrowings
0
84
52
145
317
621
9.55
25.40
24.06
17.01
9.08
4.69
0
1.48
.97
2.70
5.91
10.92
132,133
129,702
129,489
128,629
127,806
128,689
129,808
133,800
133,809
134,712
133,703
140,505
$24,076
23,267
21,001
24,271
25,247
25,615
20,029
21,877
29,112
27,263 1
18,952
25,324
5,099
5,647
5,458
6,314
5,207
5,287
5,187
5,264
4,887
4,979
5,035
4,983
171
271
894
547
475
672
1,357
1,738
3,011
3,167
1,993
2,342
3.35
4.80
16.38
10.29
9.12
12.71
26.16
33.02
61.61
63.61
39.58
47.00
137,774
137,479
134,298
131,721
130,177
128,821
128,179
125,720
124,395
126,826
128,058
129,448
30,792
29,709
21,291
41,036
45,345
52,520
58,415
63,445
55,321
44,609
45,364
38,559
5,150
5,488
4,972
4,840
5,009
4,734
4,771
4,549
4,248
4,614
4,775
4,921
3,795
5,352
4,479
5,212
4,672
4,253
3,798
5,159
5,163
4,764
4,447
743
73.69
97.52
90.08
107.69
93.27
89.84
79.61
113.41
121.54
103.25
93.13
15.10
130,442
130,034
132,571
127,507
125,815
123,457
123,125
124,177
120,088
119,753
121,998
121, 715
42,501
45,313
51,817
58,384
62,440
56,074
59,539
67,082
55,902
53,818
53,465
38,936
4,778
4,936
4,531
4,222
4,601
4,548
4,681
4,753
4,737
4,837
4,927
4,897
49
731
290
455
304
693
516
2,076
988
77
1,463
1,627
1.03
14.81
6.40
10.78
6.61
15.24
11.02
43.68
20.86
1.59
29.69
33.22
123,159
124,586
113,517
119,410
119,094
118,409
118,573
115,438
118, 503
118,174
118,079
117,421
25,822
2a 198
14,936
18,932
18,066
21,366
19,269
22,418
19,063
18,125
28,818
22,757
4,898
4,835
4,875
4,839
5,056
5,250
5,162
5,663
5,343
5,378
5,361
5,687
$468
1,228
1,173
823
459
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
747
FEDERAL RESERVE B A N K OF ST. LOUIS
Branch banking unimportant.—No member banks in district 8 have branches,.
except Union Planters National, Memphis, Tenn., has one branch in that city,
and three members in Louisville, Ky., have additional offices in that city to
receive deposits and pay checks.
FEDERAL RESERVE BANK OF SAN FRANCISCO
(000 omitted)
Unit banks
H a v i n g branches in
h e a d office c i t y o n l y
Date
Borrowings
Branch banks
H a v i n g b r a n c h e s outside h e a d office c i t y
Resources
Borrowings Resources B o r r o w i n g s
J a n . 4,1927
F e b . 1,1927
M a r . 1,1927__
A p r . 5, 1927
M a y 3, 1927
J u n e 7,1927
J u l y 5, 1927
A u g . 2,1927.Sept. 6,1927
Oct, 4, 1927
N o v . 1,1927_
D e c . 6,1927
J a n . 3,1928
F e b , 7,1928
M a r . 6,1928
A p r . 3,1928
M a y 1,1928
J u n e 5 , 1928
J u l y 3, 1928
A u g . 7,1928-Sept. 4, 1928
Oct. 2, 1928
N o v . 6, 1928
D e c . 4,1928
J a n . 8,1929...
F e b . 5,1929
M a r . 5,1929
A p r . 2, 1929
M a y 7, 1929
June4,1929
J u l y 2,1929
A u g . 6, 1929_
Sept. 3,1929
Oct. 1,1929.
N o v . 6, 1929.
D e c . 3, 1929
J a n . 7,1930
F e b . 4,1930
Mar. 4,1930...
A p r . 1, 1930
M a y 6,1930
J u n e 3 , 1930
J u l y l , 1930
A u g . 5, 1930._
Sept. 2, 1930
Oct. 7, 1930
N o v . 4, 1930 _
D e c . 2, 1930
.
,
.
_.
__
._
34718—31—PT 6-
$32,893
29,528
17,410
26, 512
21,623
29, 462
34,650
26,422
17,750
27, 652
17,717
4,337
12,696
4,181
11,626
10,966
20,145
19,410
24, 205
14,070
23,277
25, 813
27,564
26,440
25,689
22,286
27,368
29,508
34,989
40,137
37,983
33,447
34,110
37,939
44,049
23,603
20,817
11,559
12, 855
12,552
7,444
9,935
7,548
8,577
8,763
5,168
8,582
6,000
$656,681
463,143
488,232
624,636
632,336
666,276
808, 793
607, 281
519,019
484,415
513, 202
158, 294
570, 929
145, 522
402,540
456,343
687,965
638,532
744,857
523, 245
712,381
474,788
570,761
712,452
589,683
538,668
682,397
779,679
695,812
783,565
771,126
684,979
806, 993
671,708
794,746
708,704
633,485
357,887
441,065
449, 283
222,825
481,562
144,337
150,469
213, 227
118,396
202,187
258,742
$8,400
7,375
6,560
5,416
8,075
9,676
11,766
4,016
110
6,909
7,821
3,222
5,437
5,331
11,286
11, 633
12,215
13,950
7,075
8,850
12,400
15,275
12,749
12,360
13,963
11,425
16,638
14,445
13,459
16,202
14,295
4,634
7,327
17,515
10,850
3,775
3,900
2,400
1,750
1,900
6,500
3,600
1,000
500
$209,144
148,605
148, 605
182, 099
159,236
228,462
224,067
253,296
10,142
160, 739
160,739
160,739
222,772
162,487
162,487
230,994
230,994
218,543
246.636
677,177
527,249
340,625
262,817
183,047
272,282
361.637
317,939
177,385
318,636
443,331
434,484
316,340
275,277
398,117
398,117
331,042
145,345
145,345
220, 700
283,286
231,946
151,388
82,459
151,226
185
10,723
$11,100
7,010
24,270
25,520
32,520
2,424
8,675
23,478
29,300
11,457
16,800
41,500
19,300
37,950
47,800
45,200
58,007
34,142
24,570
48,900
66,340
36,498
37,193
34,506
4,250
39,100
52,200
43,200
15,350
11,900
11,110
28,643
27,988
41,949
45,473
47,250
7,250
3 ; 450
6,538
7,045
802
6,660
21,293
16,045
6,036
25
8,001
3,800
Resources
$513,782f
244,394
1,031,814
1,200,6721,066,033
416,170*
525, 750
1,067,781
1,066,867
395,1491,159,451
1,042,655?
890,462
856,173
890,442
792,181
1,509,012
1,509,012
1,189,280
1,189, 280
1,339, 208
1, 403,67ft
1,753,252
1,603,324
279, 507
1,193,914
1,193,914
1,219,455
1,219,455
744,971
964,482
964,482
964,482
1,454,073
1,160,214
1„ 042,977
915,150
1,025,473
916,007
970,031
970,031
970,031
924,248
924,248
924,248
849
1,425,595
1,150, 286
QUESTIONNAIRE NO. 8
The Discount Rate PolicyThrough the past several years there has been considerable discussion regarding the efficacy of discount-rate changes. The purpose of the following questions
is to ascertain the experience of each Federal reserve bank regarding the
various effects of discount-rate changes. Wherever possible conclusions should
be buttressed by concrete examples:
1. List the various more important considerations which induced your board
of directors, on the occasion of each change in rates of rediscount since January,
1924, to vote for such changes.
2. Did the changes made in rates of rediscount, listed in your answer to the
above question, bring about the desired results? If not, what circumstances
intervened to prevent the aims from being realized?
3. Has the experience in your district shown that discount-rate changes have
been better timed on upward or downward movements?
4. Is the efficacy of discount-rate changes enhanced by large rather than small
changes?
5. Do member banks tend to transfer increases in rates of rediscount in the
form of higher interest charges to their own customers? Summarize the effects
of changes in rates of rediscount on rates of interest charged on agricultural,
business, and security loans.
6. What has been the effect of high or low rates of rediscount on increases
and decreases in the volume of member-bank borrowings?
7. Should rates of rediscount vary from reserve district to reserve district,
or should they be uniform throughout the entire country?
8. Have differences in rates of rediscount prevalent in the several reserve
districts affected the interdistrict flow of funds ?
9. Need rates of rediscount be changed frequently excepting at those reserve
banks located in the financial centers?
10. Should the rate charged on member-bank promissory notes secured by
Government obligations be above the yield borne by those obligations?
11. Should a higher rate be imposed on the promissory notes of member banks
secured by Government obligations than on rediscounts of commercial and
agricultural paper?
12. Would the imposition of such discriminatory rates help to prevent the
seepage of Federal reserve credit into speculative security loans?
13. Would efforts at the control of credit be made more effective if rates of
rediscount should vary, as was once the case, with the maturity of the paper
offered for rediscount?
14. Should*rates of rediscount stand above market rates of interest on bank
loans to prime customers in your district?
15. Assuming that European central banks have found it desirable to maintain
rates of rediscount above market rates, what factors have made the adoption
of this practice unnecessary in the United States?
16. What rates of interest in your district should be taken as constituting a
measure of market rates of interest?
17. May the rate on bankers' acceptances be included in computations of
market rates of interest, inasmuch as the reserve banks, buying for own and for
foreign account, have constituted the principal market?
18. Would it give the reserve banks a greater measure of credit control to
enact a provision permitting the application of progressive rates of rediscount ?
19. Would it be desirable to enact a provision permitting the reserve banks
to charge borrowing member banks, which have funds on the brokers' loan
market, a rate of interest equal to or above the average call loan-renewal rate?
20. What measures have been taken in your district to prevent member banks
from borrowing from the reserve bank to profit by the difference between rates
of rediscount and the lending rates in the market?
748
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
749
21. W h a t changes, if any, would you suggest be made in the provisions of
the F e d e r a l reserve act relative to the fixing of rates of rediscount a t the reserve
banks?
D i g e s t of Replies Received from the Different Federal Reserve B a n k s
QUESTION NO. 1.—Relative to the more i m p o r t a n t considerations leading to
changes in r a t e s of rediscount since J a n u a r y , 1924.
A large number of reasons were cited by t h e F e d e r a l reserve banks prompting
increases or decreases in r a t e s of rediscount.
Among t h e reasons given for r a t e increases w e r e :
1. A rise in open-market rates.
2. A decline in gold reserves, particularly below the level of those for t h e
entire system.
3. A decline in deposits and a n expansion in t h e loans of member banks.
4. Increases in r a t e s of rediscount in other Federal reserve districts.
5. Increased member b a n k borrowings.
6. An increase in security loans w i t h no increase in commercial loans.
7. The growth of speculation.
8. An absence of seasonal liquidation in credit.
9. Misapplication of Federal reserve credit.
10. A more rapid increase in credit volume t h a n in business.
11. A preference on t h e p a r t of member banks to continue to rediscount
r a t h e r t h a n to sell securities or call loans.
12. A use of local funds on brokers' loan market.
13. The presence of higher r a t e s of interest in the East, which shifted the
borrowing demand to interior banks.
Among the reasons given for r a t e reductions w e r e :
1. Decline in member b a n k borrowings.
2. A reduction of r a t e s of interest in other Federal reserve districts.
3. The ability of large member b a n k s to borrow from banks in financial
centers at a lower cost.
4. To bring policy in line with action of open-market investment committee.
5. A desire to adjust r a t e s of rediscount to m a r k e t r a t e s of interest.
6. Declining business, employment, and commodity prices.
7. The liquidation of member bank credit.
8. To remove all obstacles to business recovery.
9. To repel gold imports and relieve tension in the international money
markets.
10. To encourage use of credit facilities.
11. To stimulate a growth in credit equal to the Nation's needs.
12. To meet the request of the F e d e r a l Reserve Board.
QUESTION N O . 2.—Relative to whether aims of discount r a t e changes were
realized.
As one F e d e r a l reserve bank indicated, it is very difficult to measure the
effects of discount r a t e changes and separate these from the other factors in
the financial setting. Even so, three Federal reserve banks, Cleveland, Minneapolis, and Richmond, apparently were quite well satisfied w i t h the general
results of discount-rate policy. Some of t h e other reserve banks expressed
doubts relative to t h e effectiveness of discount-rate policy through 1928 and
1929.
T h e reasons cited for the ineffectiveness of the policy, then, were the
u n d u e delay in raising rates, the t a r d y reversal of former policy, the dominance
of t h e call-loan m a r k e t in the interest-rate s t r u c t u r e of the country, the growth
in brokers' loans for t h e account of " others." T h e K a n s a s City and St.
Louis Federal Reserve B a n k s reported t h a t discount-rate changes have only an
indirect effect in those districts and serve mainly to call attention to business
or credit conditions. The Dallas Federal Reserve Bank reported t h a t administ r a t i v e control, in addition to discount-rate policy, proved a n important concomitant factor. The Chicago Federal Reserve B a n k called attention to the
fact t h a t business had not responded to the reductions in rediscount r a t e s
through 1930, although any obstacles from this direction to business recovery
had been removed.
QUESTION NO. 3.—Relative to whether discount-rate changes were better timed
on u p w a r d or downward movements.
Seven Federal reserve b a n k s reported t h a t discount-rate changes were better
timed on downward t h a n u p w a r d movements. The Federal Reserve B a n k s of
Atlanta and Minneapolis replied that, in their opinion, discount-rate changes
750
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
had been equally well timed on upward and downward movements. The Federal Reserve Bank of Cleveland stated that rate changes appeared to be more
effective on upward movements.
QUESTION No. 4.—Relative to the efficacy of large changes as compared with
small changes in rates of rediscount.
The consensus of opinion of the Federal reserve banks was that larger increases on upward movements were apt to be more effective. Increases of 1
per cent at a time rather than the customary increase of one-half of 1 per cent
were recommended. On downward movements, reductions of one-half of 1 per
cent at a time were favored.
The Federal Reserve Bank of Boston indicated that to have emphatic effect
discount-rate increases should be fairly large and made at infrequent intervals.
QUESTON No. 5.—Relative to the transfer of increases in rates of rediscount
by member banks to their own customers in the form of higher interest
charges.
The replies received indicated that changes in rates of rediscount have little
effect outside of money-market centers. Rates charged borrowers by banks in
agricultural sections of the country are standardized and apparently there
is little response even to very wide swings in interest rates in the financial
centers. Assuming that member banks in the financial centers are not operating solely on their own resources, in other words that they are in debt to the
reserve bank, changes in rates of rediscount affect quickly rates of interest
charged by the larger banks on security loans, on loans to correspondent banks,
and to those commercial customers who are competitively able to shop around
for the credit they require. Rates of interest charged by banks of smaller
size in the financial centers respond only after a lag.
The Federal Reserve Bank of New York pointed out that one consequence of
changes in rates of rediscount at the Federal reserve banks is to affect the
availability of credit, in that banks in the larger centers scrutinize loan applications the more carefully.
QUESTION No. 6.—Relative to the effect of high or low rates of rediscount on
increases and decreases in the volume of member bank borrowings.
The Federal Reserve Banks of Atlanta, Dallas, Kansas City, Richmond, and
St. Louis reported that changes in rates of rediscount had only a slight, if any,
effect on the volume of member bank borrowings. The reason given by the
Atlanta Reserve Bank was that member banks borrow for actual requirements
regardless of rate.
The Federal Reserve Bank of Minneapolis stated that member bank borrowings increased as rates of rediscount rise.
The Federal Reserve Bank of New York pointed out that the volume of
member bank borrowings is more a function of currency demand, gold movements, and of changes in the holdings of acceptances and securities on the
part of the reserve banks than of fluctuations taking place in rates of
rediscount.
The Federal Reserve Banks of Cleveland, Philadelphia, and San Francisco
reported that increases in rates of rediscount tend to curtail rediscounting. On
the other hand, decreases in rates do not seem to stimulate borrowing.
QUESTION No. 7.—Relative to whether rates of rediscount at the Federal
reserve banks should be uniform over the country.
With the exception of the Federal Reserve Bank of New York, the reserve
banks held to the principle of nonuniformity in rates of rediscount. It was
emphasized that rates of rediscount should be regulated in accordance with
conditions prevailing in the several districts.
The Kansas City Federal Reserve Bank made the point that the differential
in rates of rediscount should not be great enough to cause an unnatural shifting
of funds. The St. Louis bank concluded that a differential of 1 per cent
probably should exist between the New York and the strictly agricultural
Federal reserve districts.
QUESTION No. 8.—Relative to whether differentials in rate of rediscount have
promoted an interdistrict flow of funds.
Most of the Federal reserve banks reported that differentials in rates of
rediscount had to a certain extent prompted an interdistrict flow of funds.
The Federal Reserve Bank of Boston was an exception to this general rule
and replied that only under abnormal conditions do discount rates affect transfers of funds and then only to a limited extent. On the other hand, the Federal
Reserve Bank of Minneapolis stated that the interdistrict flow of funds had
been appreciably affected.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
751
The St. Louis and San Francisco Reserve Banks declared that interdistrict
fund transfers occurred in the main with the Federal Reserve Bank of New
York.
QUESTION No. 9.—Relative to whether rates of rediscount should be changed
frequently excepting at those reserve banks located in the financial centers.
The consensus of opinion was that frequent discount rate changes were not
required. The Federal Reserve Bank of Boston stated that to be effective
changes in rates of rediscount should occur only at infrequent intervals and
should be large enough in amount to lend emphasis to the change.
The Federal Reserve Banks of Philadelphia and St. Louis concluded that
rates of rediscount should be changed as needed, however frequently might be
the case.
QUESTION No. 10.—Relative to whether the rate charged on member bank
promissory notes secured by United States Government obligations should
stand above the yield borne by those obligations.
The Federal reserve banks concluded that rates of rediscount should not
be determined by the yield borne by Government obligations. Member banks
should be charged the going rediscount rate.
QUESTION No. 11.—Relative to whether discriminatory rates should be imposed on the promissory notes of member banks secured by Government
obligations.
General opposition was expressed to this idea. The Federal Reserve Bank
of Boston was an exception in declaring it a debatable question and suggesting that it might be desirable to attempt such an experiment.
QUESTION No. 12.—Relative to whether discriminatory rates on member
banks' promissory note secured by United States Government obligations would
prevent the seepage of Federal reserve credit into speculative security loans.
If the rate were sufficiently high, the Federal Reserve Bank of Chicago
thought that such might be the case, but at the cost of penalizing necessary
and warrantable borrowings. The Federal Reserve Bank of Atlanta replied
that the result indicated might be achieved, but concluded that discriminatory
rates should not be applied excepting in an emergency. The other Federal
reserve banks were not in agreement with the suggestion.
QUESTION No. 13.—Relative to whether rates of rediscount should vary with
the maturity of the paper offered for rediscount.
The Federal reserve banks stated that there would be little advantage in
having graduated rates; that this would lead to subterfuges and would penalize
the country as against the city bank. Several of the Federal reserve banks
stated that the adoption of this change would have little, if any, effect on the
control of credit.
QUESTION No. 14.—Relative to whether rates of rediscount should stand above
market rates of interest on bank loans to prime customers.
The Federal Reserve Banks of Chicago, Cleveland, and St. Louis thought
that this should be the case. The Federal Reserve Banks of Richmond and
Dallas seemed to be in agreement in principle with the suggestion. The other
Federal reserve banks were not sympathetic to the proposal.
QUESTION No. 15.—Relative to why the European practice of maintaining
rates of rediscount above market rates has not been established in the United
States.
Among the reasons cited were: (1) The undeveloped character of the country; (2) dissimilar banking practices; (3) lack of experience in credit control; (4) wide sectional differences in interest rates; (5) the varying high
statutory contract rates; (6) the unit type of banking system; (7) standardized
levels in interest rates; (8) the fact that rediscounting for a profit is nonexistent.
The Federal Reserve Bank of Chicago reiterated the theory that rates of
rediscount should be maintained at a point equal to or slightly in excess of
minimum rates accorded to prime borrowers in financial centers.
QUESTION No. 16.—Relative to the rates of interest which should be taken
as constituting a measure of market rates.
In addition to the rates of interest prevailing in the several divisions of the
New York money market, the following local rates of interest were cited as
among those which should be considered in computing an average of interest
rates: (1) The minimum rates accorded prime borrowers who are able to
borrow in several districts; (2) the rate accorded prime borrowers who borrow
entirely within one district; (3) rates charged customers on commodity and
752
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
security loans; (4) rates charged on farm mortgages; (5) the yield on local
municipal bonds; (6) and the rates prevailing on interbank loans.
QUESTION NO. 17.—Relative to whether the rate on bankers' acceptances may
be included in computations of market rates of interest.
The Federal Reserve Banks of Atlanta, Chicago, Cleveland, Dallas, Kansas
City, Minneapolis, St. Louis, and San Francisco were of the opinion that the
rate on bankers' acceptances should not be included at all or only infrequently
in computations of market rates of interest.
QUESTION No. 18.—Relative to the enactment of a provision permitting the
application of progressive rates of rediscount.
The Federal Reserve Banks of Cleveland, Philadelphia, Richmond, and St.
Louis answered favorably to this proposal. The others were opposed on the
ground that the introduction of progressive rates would penalize the small
country bank; that administrative control is preferable; that member banks
borrow simply for actual requirements; that the use of progressive rates had
been found unsatisfactory, in effectual as a measure of credit control, psychologically bad, and the source of an ill-timed liquidation.
QUESTION No. 19.—Relative to charging borrowing member banks which
have funds on the brokers' loan market a rate of interest equal to or above the
average call-loan renewal rate.
The Federal reserve banks were generally opposed to this suggestion. It
was pointed out that any misuse of Federal reserve credit could be handled
administratively.
QUESTION NO. 20.—Relative to measures taken to prevent member banks from
profiting by the differential between rates of rediscount and the lending rates
in the market.
To rectify an abuse of the rediscounting privilege or the use of Federal
reserve credit for other than legitimate purposes, the Federal reserve banks
have resorted to personal interviews, moral suasion, and the direct refusal
to extend credit.
QUESTION No. 21.—Relative to changes which should be incorporated in the
Federal reserve act regarding the provisions relating to changes in the rates
of rediscount.
The Federal Reserve Banks of Boston, Dallas, St. Louis, and San Francisco
favored the clarification of the present provisions of the Federal reserve act.
The other Federal reserve banks saw no occasion for any change. The Federal
Reserve Banks of Boston and Dallas would restrict the function of the Federal
Reserve Board to a veto power. The Federal Reserve Bank of San Francisco
would not permit changes in rates of rediscount without the concurrence of
the board of directors of a Federal reserve bank and the Federal Reserve
Board.
Replies Received from the Different Federal Reserve Banks, Tabulated by
Questions
1. List the various more important considerations which induced your board
of directors, on the occasion of each change in rates of rediscount since January, 1924, to vote for such changes.
Atlanta.—There follows a list of the changes made in the rediscount rates
of the Federal Reserve Bank of Atlanta,
since January, 1922:
January, 1922, effective nste, 43/2 per cent,
June 18, 1924, decreased from 4y2 to 4 per cent.
August 13, 1927, decreased from 4 to Sy2 per cent.
February 11, 1928, increased from 3% to 4 per cent.
May .26, 1928, increased from 4 to 4y2 per cent.
July 14, 1928, increased from 4y2 to 5 per cent.
December 9, 1929, decreased from 5 to 4y2 per cent.
April 12, 1930, decreased from 4% to 4 per cent.
July 12, 1930, decreased from 4 to 3y2 per cent.
January 10, 1931, decreased from 3% to 3 per cent.
For the purpose of aiding agriculture, commerce, and industry with our
credit facilities, in June, 1924, our rate was placed at 4 per cent, which we
considered a normal rate. This rate continued until August, 1927. At that
time we reduced our rate to 3V2 per cent to aid in our district, and with the
purpose of participating in Federal reserve policy to the end that European
markets might more easily buy American products, notably cotton, from our
district. Our rate was raised successively in 1928 to 4, 4y2f and 5 per cent
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
753
in an effort to restrain the prevalent speculative tendency, and to make such
restraint more effective in our district. The lowering of the rate in December,
1929, and to the rate in effect at the present time was prompted by the desire
to make money easier in an effort to stimulate a revival of business and
trade.
Boston.—There are many factors that are taken into consideration by our
board of directors at the time it votes to change the prevailing rate of discount. While the recommendation invariably comes from the governor and
the chairman of the board, many of the factors that influence the vote being
passed are not only indefinite but are difficult to recall at a later date; as,
for example, the temper of the minds of the officials of our member banks
and of the public at large and the effects that such change may have on the
supply and price of credit for industry and agriculture. During the period
under consideration every change in discount rate that has been voted by the
directors of this bank has been made by the unanimous vote of all directors
present at the meeting when such change has been voted. The following
schedule shows the action upon discount rate taken by our board of directors
from January 1, 1924, to December 31, 1930.
Changing rate
D a t e of
meeting
June
SepU
Oct.
Aug.
Feb.
Apr.
July
Mar.
Apr.
Apr.
May
May
June
Nov.
Feb.
May
July
Dec.
V o t e b y b o a r d of directors or executive
committee
11,1924 Directors
._
do
23,1925
21,1925
do
2,1927 E x e c u t i v e c o m m i t t e e . . . _
7,1928 . . . . d o
17,1928 D i r e c t o r s . . .
18,1928
do
27,1929
do
4,1929 E x e c u t i v e c o m m i t t e e
24,1929 Directors
8,1929
do_
22,1929
do
5,1929
do
20,1929
do
12,1930
do
7,1930
do_—
2,1930
do
31,1930 . . . . . d o
._.
„
From—
To-
Per
cent
Per
cent
VA
VA
4
W%
4
VA
_
5
5
5
5
5
5
5
4M
4
VA
Approved b y Federal
Reserve Board
On
&A J u n e 11,1924
4
4
0)
N o v . 9,1925
A u g . 4,1927
VA F e b . 7,1928
4
A p r . 19,1928
&A J u l y 18,1928
5
(*)
6
0)1
6
Cl )
6
()
6
0)
6
(2)
6
N o v . 20,1929
&A F e b . 12,1930
4
M a y 7,1930
July
2,1930
3
iy2 D e c . 31,1930
Effective
J u n e 12,1924
N o v . 10,1925
A u g . 5,1927
F e b . 8,1928
A p r . 20,1928
J u l y 19,1928
N o v . 21,1929
F e b . 13,1930
M a y 8,1930
July
3,1930
Jan.
3,1931
3
i Not approved.
a Not approved; rescinded by directors June 19.
On June 11, 1924, the directors voted a reduction in the discount rate from
4% to 3% per cent. At the time this rate was reduced the country at large
was in a state of depression following a year of declining producton, pay rolls,
and commodity prices. In New England this was felt in the shoe and leather
and the cotton industries. Member banks were in an easy position with deposits high and commercial loans comparatively low. Open-market money rates
on bankers' acceptances and Treasury bills were out of line with the discount
rate, being substantially below it. There had been an increasing accumulation
of gold in the country and ease of the money market had been demonstrated
by the oversubscription that this bank received on the 2% per cent certificates
of indebtedness that were issued on June 16, 1924. On June 11 the reserve of
the Federal Reserve Bank of Boston was 87.5 per cent and of the system 82.4
per cent.
On September 23, 1925, the board of directors voted an increase in discount
rate from Sy2 to 4 per cent. From the summer of 1924 to this date there had
been a steady increase in business activity here in New England. Production,
pay rolls, and commodity prices were all at a high level. Stock market prices
and brokers' loans were high as measured by previous experience. The member banks had worked themselves into a rather tight position, having experienced considerable expansion in both commercial and collateral loans. Reflecting this situation, open money market rates had gotten out of line with
the discount rate, the open market asking rate on 90-day bills being equal to
754
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
the Federal reserve discount rates at Boston, New York, Philadelphia, Cleveland, and San Francisco.
On November 10, 1925, the reserve of the Federal Reserve Bank of Boston
was 63.8 per cent and of the system 72.3 per cent.
There had been a meeting of the Federal reserve advisory council in Washington on September 21, and the member from this district had advised us of
the opinion expressed at that meeting concerning discount rates and stated
that while the council had made no recommendation to the Federal Reserve
Board regarding discount rates it was suggested that the present situation
was one that should be watched with particular care.
On August 2, 1927, the executive committee voted to reduce the discount rate
from 4 to 3 ^ per cent. Although industrial activity was still at a high plane,
it was showing a tendency to decline not only in the New England district
but elsewhere in the country, and did decline to a considerable degree before
the end of the year. Commodity prices had been dropping steadily. Speculative activity was very great, with stock market prices and brokers' loans rising
daily to new high levels. The governor read the report of the meeting of the
open market investment committee held in Washington on July 27. It was
pointed out in that report that " because of heavy foreign payments which are
likely to increase with the fall movement of commodities to Europe, there was
a continued drain on European central bank gold reserves, which made it more
than likely that central bank rates in Europe would need to be further advanced this fall." " The foreign situation was very critical at the moment."
It was felt that without this concerted support to the foreign situation it
might be difficult or impossible to market American crops when they came on
the market during the fall months of the year. It was recognized that these
developments would have a depressing effect upon business abroad and might
tend to restrict the freedom of purchase of goods in this country at the
usual season. It was recognized that the only possible adverse development
resulting from a general lowering of discount rates would be in the speculative
security markets, but that this possibility should not stand in the way of the
execution of an otherwise desirable policy. It was the general feeling of the
committee that a system policy of lower discount rates should in general prevail, although it was pointed out that " local conditions in some of the interior
reserve districts did not indicate any demand for rate reductions in those districts." The governor referred to the reduction in discount rate in the Federal
Ueserve Bank of Kansas City on July 29 from 4 to Sy2 per cent.
On August 5, 1927, the reserve of the Federal Reserve Bank of Boston was
'83.7 per cent and of the system 77.1 per cent.
On February 7, 1928, the executive committee voted to increase the discount
rate from 3Ms to 4 per cent. The low money rates prevailing over the year
end having served their purpose in facilitating the marketing of American
crops and the marked improvement in industrial activity not only in the New
England district but the country as well, it was considered important to
recognize and point out the dangers that had developed in the situation as a
result of continued speculative activity. The stock market and the brokers' loan
situation were getting out of hand; the member banks were finding themselves
in a less comfortable position owing to declining deposits and expanding loans;
open-market rates were showing evidence of getting out of line with the low
discount rate. The necessity of increasing the discount rate had been discussed at previous meetings and the directors were no doubt influenced by
the increases that had been made in the discount rate of the Federal Reserve
Bank of New York on February 3, the increase being felt by the member banks
in this district.
On February 7, 1928, the reserve of the Federal Reserve Bank of Boston was
66.6 per cent and of the system 74 per cent.
On April 17, 1928, at a special meeting the directors voted to raise the
discount rate from 4 to 4% per cent. This increase in the discount rate, as
well as the increase on July 19, 1928, from 4% to 5 per cent were designed to
supplement the increase that has been made in February, the considerations
motivating that change having become even more aggravated during the following months and the financial situation becoming more strained.
April 16, 1928, the reserve position of the bank was 56.2 per cent, the earning
assets having increased to $139,000,000 as compared with $51,000,000 on April
16,1927. Commercial paper was selling in this market from 4% to 4% per cent.
While the system as a whole was 70.2 per cent, the condition of the reserves
of the Boston bank and the local money market warranted this increase.
NATIONAL AND FEDEKAL RESERVE BANKING SYSTEMS
755
On July 18, 1928, at a meeting of the board of directors the directors voted
to raise the discount rate from 4V2 to 5 per cent On this date the reserve of
the Federal Reserve Bank of Boston was 74 per cent and of the system 69.5 per
cent The financial situation had continued to show more strain from month to
month. While the reserve position of the bank had increased to 74 per cent,
the system as a whole had gone down to 69.5 per cent, and the general financial
situation, especially as it affected member banks' security loans and the stockmarket activity, had not improved. The member banks had increased time
deposits which they had invested largely in collateral loans and securities and
rediscounts at the reserve bank were still high. The New York bank had
increased its rate on July 13, and the effects of this increase in rate and the
fact that the discount rate was out of line with the ruling money rates of the
district were important factors in arriving at the decision.
From March 27, 1929, through to June 5, 1929, at every directors' meeting
and one executive committee meeting during that period, votes were passed
increasing the discount rate from 5 to 6 per cent. These votes, however, were
not approved by the Federal Reserve Board, and on June 19, 1929, this vote
was rescinded. During this period the discount rate of 5 per cent was below
the ruling money rates of all bank investments except short-time United States
securities, and the reserve ratio of the Federal Reserve Bank of Boston was
not only below the average for the system but had been as low as 55.2 per cent.
From the middle of April, 1928, until midsummer of 1929 the deposits of the
member banks in the New England district had been falling steadily, and
although the banks had reduced their investments and collateral loans they
were obliged to borrow at the reserve bank steadily increasing amounts until at
one time these borrowings were well over $100,000,000. From the middle of
1929 until well into October deposits increased and banks reduced their
borrowings steadily at the reserve bank.
The reserve ratios of the Federal Reserve Bank of Boston and the system
were as follows:
Boston System
Mar. 27,1929
Apr. 4, 1929..
Apr. 24, 1929.
May 8,1929..
Per cent]Per cent
70.1
71.3
70.8
71.5
70.6
74.3
64.0
74.3
Boston System
May 22,1929.
June 5, 1929..
June 19,1929.
Per cent\ Per cent
75.9
59.6
74.4
75.8
66.8
On November 21, 1929, the discount rate was reduced from 5 to 4 ^ per cent.
On February 13, 1930, the discount rate was reduced from 4% to 4 per cent.
On May 8, 1930, the discount rate was reduced from 4 to 3*4 per cent.
On July 3. 1930, the discount rate was reduced from 3% to 3 per cent.
January 2, 1931, the discount rate was reduced from 3 to 2y2 per cent.
The reserve ratios of the Boston bank and the system on these dates were
as follows:
Boston System
Nov. 21, 1929
Feb. 13, 1930
May8, 1930
Per cent Per cent
86.5
71.2
84.5
78.7
84.2
83.2
Boston System
July 3, 1930
Jan. 2, 1931
Per cent Per oenl
82.7
79.9
73.5
73.3
The stock market collapse which marked the end of the great 1929 boom
occurred during the first half of November, 1929. Following that collapse a
serious industrial depression set in which during 1930 assumed major proportions. The frequent reductions in discount rates were designed to aid this
situation. New England banks in particular had been able to liquidate their
position between October, 1929, and the summer of 1930 to such an extent that
they were in a relatively comfortable position as compared with banks in other
sections of the country. Money rates were excessively weak, and at most times
during this period were out of line with the discount rate, indicating that the
discount rate was rather slow in following the open market down. It was also
756
NATIONAL AND EEDEEAL, BESERVE BANKING SYSTEMS
desired to stimulate a bond market by means of easy money rates. Federal
reserve banks were more nearly in control of the money market because of the
substantial reduction in brokers' loans by others than banks.
Chicago.—The only change in our rediscount rate in the year 1924 was when
the rate was reduced from 4% to 4 per cent on June 14. The New York and
Boston Federal reserve banks had reduced their rates on June 12 to 3V2 per
cent. Open market rates for commercial paper had dropped from 4% to 4 per
cent and there was a surplus of funds in the money market in excess of the
demand. It was felt that our rate of 4% per cent was out of line with market
rates for commercial paper and inasmuch as there was very little speculative
demand for credit that no harm could be done by reducing the rate to 4 per
cent and that it might help business, which was reported as being rather dull
at that time.
Our rate remained at 4 per cent from June 14, 1924, until September 7, 1927,
when it was reduced to 3% per cent by order of the Federal Reserve Board. At
that time our board felt that a reduction in the rate would cause further expansion of speculative credit. "Whatever good purposes might be served would be
more than offset by the disastrous consequences of a further inflation of security
prices. The rate remained at 3% per cent until January 25, 1928. when our
directors voted to raise the rate to 4 per cent. This action was taken because
of the heavy increase in bank credit which had gone into loans on stocks and
bonds with no increase in the volume of commercial credit extended, and also
because the objects to be attained by the 3% per cent rate, which was to relieve
credit conditions abroad, apparently had been accomplished. The rate remained
at 4 per cent from January 25 until April 20, 1928, when it was increased to
4% per cent because of the increased demand for speculative credit, as indicated, particularly by the large increase in brokers' loans, which in the week
preceding the advance in our rate had increased $153,000,000. The rate remained at 4y2 per cent from April 20 to July 11, 1928. when it was increased
to 5 per cent. This increase was voted by our directors on June 29, and was
approved by the Federal Reserve Board on July 10. The reason for this increase was that there still continued a strong demand for money and that
counter rates of Chicago banks for commercial loans were from 1 to 1% per
cent above our rediscount rate. The increase in the going rates for money was
caused by the increased demand for speculative credit, call money having advanced to 6% per cent on June 22.
The rate remained at 5 per cent from July 11, 1928, to November 23, 1929,
although efforts had been made as early as March 15, 1929, to get the Federal Reserve Board's approval to an advance in our rate. At a meeting of our
board of directors on March 28, 1929, a recommendation was made that the
rediscount rate be advanced to 6 per cent and it was unanimously voted that
in the opinion of our board the most effective means of protecting Federal
reserve credit against misuse is through Tadjustment of the rediscount rate.
The result of an informal vote, which w as favorable to raising the rate to
6 per cent was submitted to the Federal Reserve Board at Washington. On
April 4, 1929, it was voted to establish a rediscount rate of 6 per cent, which
recommendation was not concurred in by the Federal Reserve Board. In the
period from AprilT 4, 1929 to May 31, 1929, this request was renewed on several occasions w ith the same result. The rate therefore remained at 5 per
cent until after the crash in the security markets in the fall of 1929 and it
was reduced to 4% per cent on November 23, 1929, in the hope that it would
help, at least to some extent, to restore confidence in the business situation.
It remained at 4y2 per cent from November 23, 1929, to February 8, 1930,
when it was reduced to 4 per cent with the idea of removing any obstacle
which might tend to retard business recovery.
It remained at 4 per cent from February 8, to June 21, 1930, when it
was reduced to 3% per cent. In the meantime the Federal Reserve Bank of
New York had reduced its rate to 2y2 per cent and while it was the concensus of opinion that a reduction in our rate would not stimulate business,
the disparity between our rate of 4 per cent and that of 2y2 per cent in New
York was too large a differential and for this reason a reduction was thought
advisable. It remained at 3% per cent from June 21, 1930, to January 10,
1931, when it was reduced to 3 per cent. Inasmuch as the Federal Reserve
Bank of New York had a rate of 2 per cent, the differential of iy2 per cent
between New York and Chicago was considered too large and the rate was
therefore reduced to 3 per cent.
NATIONAL AND FEDERAL KESERVE BANKING SYSTEMS
757
Cleveland.—On
J u n e 2, 1924, t h e discount r a t e of this bank w a s lowered
from 4 % to 4 per cent, t h e former r a t e having been effective from F e b r u a r y ,
1922. This change w a s t h e result of t h r e e f a c t o r s :
(a) A s h a r p drop during the previous 60 days in the volume of discounted
bills.
(b) The influence exerted by a 4 per cent New York r a t e adopted May 1.
(A lower r a t e in adjoining districts ordinarily causes borrowers w i t h banking
connections both within and without our district to seek the m a r k e t w i t h the
lowest r a t e . )
(c) An effort to revive business activity, which h a d turned d o w n w a r d in
March.
The following reduction to 3 % per cent on August 15, 1924, w a s occasioned
by a continuation of the business recession and a further s h a r p drop in prod u c t i o n ; the influence of lower rates a t Boston, Philadelphia, a n d New York,
a n d the fact t h a t member b a n k borrowing had been reduced to the lowest
level since 1917.
On November 17, 1925, following a rapid increase in discounts during September and October, the r a t e w a s increased to 4 per cent. This r a t e was
instituted p r i m a r i l y because a substantial p a r t of t h e increased borrowings
apparently w a s finding its way into security loan channels. F o u r t h district
reporting member banks loan account on collateral security at the beginning
of November w a s $100,000,000 higher t h a n a t t h e first of the year.
On August 16, 1927, the r a t e w a s again reduced to By2 per cent. The factors
influencing this change w e r e :
(a) A reduction in discounts to a level approximating the lowest sice 1916
with the single exception of 1924.
(6) A desire to stimulate business activity, which had exhibited a downw a r d trend since March.
(o) As p a r t of a concert of effort to discourage f u r t h e r importations of gold,
or to encourage a n o u t w a r d movement of t h e metal, to relieve the tension
existing or developing in the international exchange m a r k e t s .
I n March of 1928, by reason of the lack of seasonal liquidation in J a n u a r y
and February, a loss of gold reserves, and the influence of higher r a t e s in all
other districts, our r a t e w a s increased one-half p e r cent. A s h a r p unseasonal
increase in member bank borrowings, which took place in April and May,
occasioned a further rise to 4y 2 per cent on May 25. A further loss of gold
(reducing the gold reserve of this bank to the lowest point in six y e a r s ) plus
a further heavy increase in demands for accommodation by member banks,
and again plus the influence of higher r a t e s in every adjoining district,
prompted the r a t e increase of 5 per cent on August 1.
This r a t e was maintained until 1930, when in keeping with increasingly
easy money conditions developing generally the r a t e was reduced by one-half
per cent steps to t h e 3 per cent figure inaugurated December 27.
In all cases changes in rates were made as a result of unanimous board
action.
Dallas.—Changes
in rediscount rates of the F e d e r a l Reserve Bank of Dallas
since J a n u a r y , 1924:
July 16, 1924, from 4 % to 4 per cent.
August 12, 1927, from 4 to 3 x / 2 per c e n t
F e b r u a r y 8, 1928, from 3 ^ to 4 per cent.
May 7, 1928, from 4 to 4 ^ per cent.
March 4, 1929, from 4 ^ to 5 per cent.
F e b r u a r y 8. 1930, from 5 to 4 ^ per cent.
April 8, 1930, from 4 % to 4 per cent.
September 9, 1930, from 4 to 33/£ per cent.
July 16, 1924, change from 4 % to 4 per c e n t : E x t r a c t from minutes of meeting
of board of directors, August 19, 1924 (from report of Governor McKinney) :
"Acting upon a u t h o r i t y vested in it by the resolution adopted by this board
a t i t s meeting J u n e 13, our executive committee, on J u l y 10, unanimously voted
to reduce our rediscount r a t e on all m a t u r i t i e s from 4 % to 4 per cent. T h e
F e d e r a l Reserve Board approved this action under date of J u l y 15, and the new
r a t e w a s made effective the following day. Our committee was influenced in
i t s action by several factors. Some liquidation h a d set in from our w h e a t section, and t h e stronger and larger banks which normally come into the m a r k e t
for some credit a t t h a t season appeared to be making their a r r a n g e m e n t s according to the best advantage with reference to r a t e s . Our committee felt t h a t t h e
758
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
facilities of this bank should not be made unavailable to member banks by
reason of the opportunity to fill their needs elsewhere at a lower cost, particularly in view of our known ability to care for those needs. In further
support of this thought borrowings from us against governments had practically
ceased. Our committee also felt that the proceeds of any increase in our loans
to member banks directly traceable to this action would be properly used and
would therefore do no violence to our policy of administrative treatment in
individual cases or to the district itself. In fact, it was the thought o£ the
committee that the new rate might easily have the effect of sustaining business activity rather than increasing it with any inflationary tendency. It was
also considered that while borrowing to finance growing crops was pretty well
past the new rate, in the judgment of the committee, would fit in nicely with
the wheat movement and perhaps assist in orderly marketing, at the same time
having a good effect during the movement of the cotton crop. Apparently the
reaction toward the reduced rate has been entirely satisfactory and bears out
the views of the committee at the time the action was considered."
August 12, 1927, change from 4 to• Sy2 per cent: Prompted by action of open
market investment committee reduction in sympathy with system policy, and in
order to bring about a reversal of the gold movement from net imports to net
exports, improving the financial position abroad and thereby checking a recession in the general business of this country, which was just beginning to show.
February 8, 1928, change from 3% to 4 per cent: Prompted by tendency of
other Federal reserve banks and system policy to higher interest rates. Evidence of rapid recovery of business from its brief recession of late summer and
early fall of 1927.
Conditions abroad were much improved by reason of stabilization of French
finances and the heavy exchange balances which European countries had
acquired in the United States and elsewhere. It was also apparent that the
volume of credit was increasing at a rapid rate and that a considerable part
was being used for other than commercial and industrial requirements. As a
consequence, the policy of low rates and open market purchases of governments
was reversed; discount rates were increased, most banks putting their rates up
to 5 per cent by the middle of the year, and governments were sold in greater
volume than had been purchased in the previous period.
May 7, 1928, change from 4 to 4% per cent: Reasons for change stated in
following telegram, dated May 7,1928, from Chairman Walsh to Federal Reserve
Board:
"Answering wire this date. In consideration question of change in discount
rate Saturday, members our board here of the opinion that the rate question
is one primarily to be decided by local board each district as conditions would
seem to indicate at time of suggested change; that local board should not
necessarily be governed by change in rate in other districts unless system policy
would indicate that cooperation would be wise and salutary under particular
circumstances existing. They also were of the opinion that a raise from 4 to
4:V2 per cent was not essential at this time in our district to preserve autonomy
of business as related to commerce, industry, and agriculture, but due to the
fact that it was estimated that not less than one hundred millions of dollars is
now being loaned on the call market in New York from the eleventh district
such raise would tend to curb speculation on New York market if the other
11 districts should increase their rates above New York and thus be the means
of requiting many call loans in this district to be retired and returned for
legitimate demands here. Recent raise from 3% to 4 per cent in board's opinion
served a good purpose here in forcing the group one member banks into the
market for the greater amount of increase in our loans made during April, as
they preferred* to borrow from us rather than call their loans in New York or
sell United States securities on a falling market. Conditions in this district are
perfectly sound and an increase of one-half of 1 per cent in the rate will have
little, if any, effect on country member bank borrowings or increase their rate
by reason of the wide spread between 4% and 8 and 10 per cent obtaining in
country bank discounts. This increase, however, will cause larger banks which
have surplus funds on call in New York to withdraw those funds and use them
here instead of borrowing and to the extent they may withdraw such funds
will the supply of money be reduced as long as other Federal reserve districts
maintain higher rate than New York."
March 4, 1929, change from 4% to 5 per cent: This increase was recommended at our board meeting of February 7, 1929, but not approved by the
Federal Reserve Board until March 1, 1929, to become effective March 2, 1929.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
759
That date was a holiday, March 3 was Sunday, and the increase did not become
effective until March 4. The change was recommended by our board of directors after full consideration of the credit situation both nationally and in the
eleventh district. The discussion by our directors was in the light of a special
memorandum on the credit situation in this district, prepared by Governor
Talley, also the Federal Reserve Board's letter of February 2, 1929, on the
general subject of diversion of Federal reserve credit into speculative channels, and requesting an expression from the directors as to how they kept
informed of the use made of borrowings by member banks, what methods were
being employed to protect this bank against the improper use of its credit
facilities, and the effectiveness of such measures.
The action of our directors was therefore based on a desire to support the
Federal Reserve Board in its efforts to curb the misapplication of Federal
reserve bank credit and restrict the rapid expansion of credit, without affecting .the supply for the legitimate business demands of the district.
February 8, 1930, change from 5 to 4 ^ per cent: Action of our directors governed by evidences of an improved credit situation, extent of liquidation, and
in order to be in line with the Federal reserve system policy. The decrease was
recommended by the governor, who called attention to the tendency to lower
interest rates by the other Federal reserve banks, the reduction in minimum
buying rates for bills, and the conclusions reached at a meeting of the open
open market investment committee on January 28 and 29, 1930. The principal
factors in the conclusions reached by the open-market investment committee
were the subsidence of the panicky feeling; the inability to determine the extent or duration of the business recession; the tendency toward cheaper money
for commerce and industry; the orderly progress of liquidation; reduction in
rediscounts; the desire on the part of member banks to reduce the volume of
security loans and that liquidation was slower with country banks than city
banks.
April 8, 1930, change from 4 ^ to 4 per cent: Action of our directors governed
by present tendency toward easier rates; decrease in use of credit in this district, and in order to make our rate more in line with that of other Federal
reserve banks. In a special memorandum on the credit situation, prepared by
Governor Talley, he referred to the meeting of the open-market investment
committee on March 24, and the action taken in regard to the credit situation,
and the view expressed that there is no occasion for further purchases of Government securities.
The committee favored a reduction in the minimum buying rate on bills,
fixed by the Federal Reserve Board, to 2% per cent, stating, however, that in
the absence of developments not then anticipated, bills should not be purchased
below 3 per cent.
The governor referred to the demand on the part of makers of existing lines
with city banks for a reduction in rate, but the downward course of these rates
had lagged very considerably.
Reference was had to the extreme economy in the use of credit and similar
trend for the immediate future.
September 9, 1930, change from 4 to 3% per cent: Action of our directors
influenced by evidence of easier financial conditions, and from a desire to cooperate with system policy. In the discussion of credit situation and proposed
reduction it was brought out that since the meeting of the directors, on July 7,
1930, five Federal reserve banks had reduced their rate, leaving only two banks
(Minneapolis and Dallas) with rates of 4 per cent.
Kansas City.—July 1, 1924, reduction from 4% to 4 per cent: Made with a
view to improving the existing sluggishness in business and industry, including
farming operations, by encouraging greater use of the abundant supply of credit
available. The bills discounted of this bank had dropped from $59,200,000 the
first of the year to $9,200,000 the 1st of July.
July 29, 1927, reduction from 4 to 3% per cent: Made with a desire to conform to the Federal reserve system policy of easy money, our primary interest
in this policy being that it should prevent foreign credits from coming to this
country and thus weaken the ability of foreign markets to take our exports. It
was also believed that the reduction in this district would emphasize the
abundance of Federal reserve credit available for handling and marketing the
good crops then harvested or in prospect, and facilitate orderly marketing.
February 10, 1928, increase from 3y2 to 4 per cent: Made with a view that
the reasons for establishing the 3% per cent rate were no longer effective, and
to bring our rate in line with the rates of most of the other Federal reserve
banks.
760
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
June 7, 1928, increased from 4 to 4% per cent: This action was taken to
conform to rates set by all the other Federal reserve banks. While credit conditions and practices in this district did not call for a higher rate, it was felt
that general conditions in the district were so favorable that an increased rate
should have no bad effect, that curtailment of purely speculative credits would
be desirable, and that this bank should not hold back in the movement for
higher rates when such action might possibly interfere with the desired effect
of the increased rates in the other
11 districts.
May 6, 1929, increased from 4x/2 to 5 per cent: The principal reasons for this
action were increasing demand for Federal reserve credit and decreasing
member bank reserve deposits, with a consequent lowering of our reserve position. It was felt also that our maintenance of a rate lower than that of nine
of the other Federal reserve banks was not benefitting the industry of the district, since the generally higher rates prevailing throughout the country were
preventing our lower rate from being passed on, in any noticeable degree, to
the borrowers from our member banks. The abnormally high rates prevailing
in eastern centers were forcing an unusual demand for loans on the larger
banks of our district, from large concerns having contacts and credit lines with
our banks, but which under normal conditions do their borrowing in the open
market or from eastern banks.
December 20, 1929, decreased from 5 to 4% per cent: This action was taken
because of the reduced demands for loans from this bank, and with a view to
encouraging in this district the tendency to lower rates Avhich was apparent in
various other sections of the country.
February 15, 1930, decreased from 4% to 4 per cent: Action taken because of
our strong reserve position, and to conform to the lower general market rates.
It was felt that this action might lend some encouragement to business.
August 15, 1930, decreased from 4 to &y2 per cent: This action was taken
with a view to making credit easy for the movement of crops, and for the
carrying and finanacing of livestock.
Minneapolis.—The Federal Reserve Bank of Minneapolis has usually adjusted its discount rate to conform with existing rates in contiguous Federal
reserve districts.
C H A N G E S I N RATE OF REDISCOUNT A T T H E FEDERAL RESERVE B A N K OF M I N N E A P O L I S ,
1 9 2 4 TO 1 9 3 1
The directors of this bank have consistently felt that financial stability is best
supported by infrequent changes of the discount rate and they have been reluctant to make changes until a situation had developed which made such action
necessary. In January, 1924, the current rate of rediscount was 4% per cent.
The changes since that date were as follows:
September 8, 1924: Rediscount rate reduced from 4% to 4 per cent. It was
the highest rate then prevailing and was out of line with contiguous districts.
September 13, 1927: The rediscount rate reduced from 4 to Sy2 per cent. The
rate was high and out of line.
February 7, 1928: Rediscount rate was raised from Sy2 to 4 per cent to conform with the rate in adjoining districts.
April 24, 1928: Rediscount rate was advanced from 4 to 4% per cent because
it was out of line with the rate in Chicago district.
May 13, 1929: Rate was advanced from 4% to 5 per cent. It was out of line
with rates in contiguous districts.
February 8, 1930: Rediscount rate reduced from 5 to 4% per cent for the
same reason.
April 15, 1930: Rediscount rate reduced from 4% to 4 per cent to conform
with rates in adjoining districts.
September 12, 1930: Rediscount rate reduced from 4 to Sy2 per cent for the
same reason.
In common with adjoining districts, the current rate is %y2 per cent.
New York.—Before discussing the circumstances of particular changes in
discount rate since 1924 it seems appropriate to make a brief statement with
regard to the general considerations which have been factors in discount rate
decisions by the directors of the Federal Reserve Bank of New York during
the past decade. Additional comments on the general policies pursued are
contained in the reply to question 2 of questionnaire 9 relating to open-market
operations.
NATIONAL. AKD EEDEUAL EESERVE BANKING SYSTEMS
761
Tfee traditional guides to bank of issue policy have been of little help since
1921. In the past banks of issue of necessity determined discount policy largely
in relation to changes in their gold reserves or in relation to the foreign
exchanges, anticipating probable gold movements. Since the end of 1921 the
gold reserves of the Federal reserve system have been so large and the reserve
ratio so high that no discount rate increase has been forced by the depletion
of reserves. Gold required consideration not as the traditional automatic
dictator of policy but in quite a different role, as will be suggested later.
There has been, it is true, one semiautomatic guide to policy having historical
precedent which has proved serviceable. To some extent discount rate adjustments have been directly in response to changes in the market price for money.
Generally speaking, it is desirable that member banks should secure Federal
reserve credit at a fair price for that kind of money; that is, at a price which
neither encourages excessive borrowing nor discourages necessary borrowing.
It is clear, however, that other considerations have to be weighed, for, with
the periodic changes which take place in business and financial psychology, a
rate in perfect technical adjustment with other money rates may at one time
be stimulating and at another time depressing. Money rates alone are not a
sufficient guide to discount policy. In addition, the whole range of consequences
which may result from rate changes must be considered. The economic life
of this country moves in a constantly changing current from depression to
prosperity and back again. Broadly speaking, it has been the policy of this
bank to exercise its influence toward restraint at times when business and
speculative activity appeared to be excessive, and to remove credit restraints
at times of business depression in the hope that this policy might aid in
avoiding the extremes of business expansion and contraction and encourage
greater business stability. This broad program of policy is illustrated in the
accompanying chart:
PER CENT
140
120
100
80
BOUGHT SECURITIES
Lowered Raits
| BOUGHT SECURES
Lowered Rates
60
INDUSTRIAL PRODUCTION
( F . R. BOARD INDEX-1923-*25=100 PERCENT)
1922 1923 1924 1925 1926 1927 1928 1929 1930
Timing of purchases and sales of Government securities and discount rate changes
compared with changes in the volume of industrial production
762
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
Possibly the general guide to discount and open-market policy of the bank
which has been found of most value has been the observation of changes in the
total volume and velocity of bank credit which is, in effect, a measure of the
country's purchasing power. The studies made by the research staff of the
bank over a period of years have demonstrated that when the volume of credit
grows at a rate proportionate with the long-time growth of business in the
country the dangers of either inflation or deflation are least. On the other
hand, any expansion in credit beyond such normal growth of business and
trade appears likely to result sooner or later in inflation of one form or another,
not necessarily in commodity prices but in excessive speculation, overbuilding,
or some of the other forms of overexpansion. Conversely, a less rapid growth
in credit than the growth in business and trade leads to deflationary tendencies,
to lower prices, and a repression of business activity. The evidence on this
point over a period of years seems unmistakable, and it also appears that
Federal reserve discount rates have a definite influence on the rate of growth
of the total volume of credit.
Generally speaking, therefore, we believe it to be the responsibility of a
Federal reserve bank in periods of unduly rapid expansion of credit; that is,
expansion beyond the normal growth of the country's business and trade, to
apply the restraining influence of increases in discount rates. This principle
we believe to be generally applicable whether a too rapid expansion of the
country's credit is due to speculation in securities, to overproduction or speculation in commodities, to speculation in real estate, or to an expansion in business
activity or inventory beyond a normal and healthy growth. In other words,
whatever the cause of growth or expansion in the country's credit structure,
if the growth is at a rate greater than that at which experience has shown the
country's business can grow on a sound and secure basis, then Federal reserve
authorities have the responsibility, however unpopular, of lending their efforts,
either through open-market operations or discount rates or both, toward
restraint. Conversely, in a period of credit contraction or of less than the
normal rate of growth, whether caused by business recession, declining prices,
wages and employment, or any other cause, Federal reserve policy, in our
opinion, should be to lend its efforts toward making money and credit plentiful
and cheap.
It is our belief that it is in this direction that the Federal reserve system can
most effectively exert an influence to prevent excessive speculation and to
mollify business depression rather than in any attempt to control directly the
use to which Federal reserve credit is put. Efforts by the reserve system to
control the particular uses of credit are, we believe, impracticable and ineffectual, whereas the system does have a considerable influence over changes
in the total volume of credit and its cost.
At this point it should be noted that during the past decade the reserve
system was not free to consider solely the effect of its action on the volume of
bank credit. It was not possible to follow an ideal policy with respect to
domestic credit because of gold movements. The influence of gold was not the
traditional one, as noted earlier, but quite the reverse—there was too much
gold coming to this country. The tendency for gold to flow to the United States
was an influence upon the growth of the country's bank credit which could
never be ignored. Gold imports were inflationary in their effect upon credit,
and, while this effect might be postponed and modified, it could not be wholly
avoided. Dealing with this gold flow was one of the major problems of the
reserve system. A policy of high rates would have increased the gold flow and
increased the danger of later inflation. Moreover, the loss of the gold by other
countries would have postponed the time when they could restore monetary
stability and set up monetary conditions which would enable them to retain
their gold. But worse than that, a continued sucking of Europe's gold to this
country and sterilizing it here might, indeed, have led to an abandonment of the
gold standard and brought chaos and anarchy to the world's economic structure. To all such changes in the world economy our own trade and prices
were immediately responsive. The volume of exports of farm products and
the prices of these products were particularly sensitive to conditions abroad.
So it was necessary during this period constantly to balance against each other
the influence of Federal reserve action upon the rate of growth in bank credit
in the United States and its influence upon gold movements with the consequences these movements involved.
The following is a list of the rate changes during the years 1924 to 1930,
inclusive, with a brief statement of conditions as they existed at the time of
each change:
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
763
1923—February 23, 4% per cent.
1924—May 1, 4 per cent.
June 12, sy2 per cent.
August 8, 3 per cent.
The three rate reductions in 1924 were made during a period of depression in business, considerable unemployment, gold imports, and of declining credit volume. The rate changes accompanied reductions in
open-market money rates.
1925—February 27, 3% per cent.
Rapid expansion in business, rising commodity prices, rapid increase in
bank credit.
1926—January 8, 4 per cent.
The preceding months had produced very substantial gains in business
and in speculative activity, accompanied by a large increase in bank
credit.
April 23, Sy2 per cent.
Some loss of confidence and a considerable drop in business activity.
August 13, 4 per cent.
Revival of business with a renewed expansion in bank credit.
1927—August 5, Sy2 per cent.
A period of business recession, some decline in commodity prices; and
gold imports, and weakness in foreign exchange.
1928—February 3, 4 per cent.
May 18, 4% per cent.
July 13, 5 per cent.
1929—August 9, 6 per cent.
A period of rapid expansion of credit accompanying increasing speculation.
(On February 14, 1929, and for a number of weeks thereafter the
directors of this bank voted to increase the discount rate to 6 per cent.
These increases were not approved by the Federal Reserve Board.)
November 1, 5 per cent.
November 15, 4y2 per cent.
A period of rapid liquidation, which brought about a cessation of the
speculative activity; unsettled business conditions.
1930—February 7, 4 per cent.
March 14, 3% per cent.
May 2, 3 per cent.
June 20, 2y2 per cent.
December 24, 2 per cent.
A period of rapidly declining business, falling commodity prices, and
increasing unemployment, declining credit volume.
Philadelphia.—June 19, 1924, 4 ^ to Sy2 per cent: The rates of money were
declining rapidly, borrowing from this bank was reduced greatly, as had been
the total amount of reserve credit in use. Industrial production was very low;
the reduction of the discount rate brought it in line with the rate for money in
this district.
November 20, 1925, 3% to 4 per cent: The rate for commercial paper had
advanced considerably, there had been a large increase in the amount of Federal
reserve credit in use, and the amount of borrowing from this bank had increased
200 per cent.
September 8, 1927, 4 to 3% per cent: Borrowing from this bank had declined
one-third from peak of previous year; there had been a large decline in rates
charged for money by Philadelphia banks as well as in the market rate for
commercial paper, amount of Federal reserve credit in use had been reduced
considerably, and industrial production had declined (foreign conditions).
February 16, 1928, 3 ^ to 4 per cent: Because of increased borrowing from us,
of advances in the rates for money in this market, and adverse trade balances
of this district, as a result of which the bank was losing gold.
May 17, 1928, 4 to 4 ^ per cent: Due to increase in amount of Federal reserve
credit in use, in gold exports, in the market rate for commercial paper and
bankers' bills, and the change in the condition of member banks, due to large
increases in their loans and investments.
July 26, 1928, 4% to 5 per cent: This increase was made for the same reasons
as above.
34718—31—PT 6
5
764
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
January 16, 1930, March 20, 1930, and July 3, 1930: On account of the rapid
reduction in the amount of Federal reserve credit in use, the decrease in the
amount of borrowing from this bank, the decline in the market rates for money,
the reaction in business, and the great decline in industrial production.
Richmond.—In fixing rediscount rates our directors have been consistently
governed by uniform principles: (1) The position of banking and credit in this
district; (2) the reserve position of this bank; (3) the condition of banking
and credit in the country at large; (4) international considerations, such as
a desire to stimulate the export market for this country's surplus products. We
have been compelled to a degree to change rates in this district in order to
reduce or flatten out the differential between our rate and that of neighboring
districts.
St. Louis.—On June 19, 1924, we decreased our rate from 4% to 4 per cent,
since Cleveland, Atlanta, and Chicago, all of which have parts of States in
this district, had decreased their rates. We hoped to give agriculture and
business the benefit of a lower rate in crop-moving time.
Our next change in rate was on August 4, 1927, when it was reduced to 3%
per cent. This was done hoping it would give cheap money for crop purposes
and business, as there was plenty of money.
On February 21, 1928, the rate was increased to 4 per cent after increases;
had been made by all reserve banks except Cleveland and we were in danger
of burdening this district with borrowing that belonged to other districts.
On April 23, 1928, we increased to 4 ^ per cent, because there was an unseasonable amount of borrowing which we hoped to check also because there
was some flow of funds between St. Louis and Chicago. Chicago with a 4y2
per cent rate might have diverted some borrowing to St. Louis if we continued
a 4 per cent rate.
On July 19, 1928, the rate was increased to 5 per cent mainly for reasons
similar to next above. Discounts were increasing, reserve ratio was low,, and
funds were going from this district to New York market, where rate was higher.
On February 11, 1930, we were the last of the reserve banks to decrease our
rate to 4% per cent and were forced to do so largely by the action of our
neighboring districts.
On April 12, 1930, our rate was decreased to 4 per cent and on August 7,
1930, to 3 Ms per cent, in order to give the eighth district the benefit of rates
enjoyed by adjoining districts.
On January 8, 1931, our rate was decreased to 3 per cent because there was
little demand at the reserve bank except from localities which had suffered
severely from the drought and it was felt that a lowering of the rate would
be an encouragement.
Ban Francisco.—
Changes
Reason
Date of
change
With general easing of credit, evidence of business recession and lowering of interest rates generally, there appeared to be no situation in twelfth district which
warranted continuance of the 4 ^ per cent rate.
Continuance of conditions recited in foregoing and the fact that New York rate
was 3 per cent and three other Federal reserve banks had reduced their rates to
3 $4 per cent, seemed to call for further reduction by San Francisco
Increasing demand for credit in twelfth district as well as in other districts, firming of open market rates, and fact that all other Federal reserve banks, with
exception of New York, were on 4 per cent basis, called for advance in San
Francisco's rate
On request of Federal Reserve Board that directors reconsider their action in
recommending no reduction be made in existing rate of 4 per cent
A reversal of the policy adopted in September, 1927, which, in light of subsequent
events, was found to have been a mistake There had come evidences of changes in district making it no longer consistent to
remain alone on 4 per cent basis, Kansas City excepted
-_
_
San Francisco's rate was too far out of line with current rates
-Declining tendency in business conditions in district and open market rates
Business showing signs of severe recession, declining interest rates and high
reserve position (San Francisco 82 per cent) prompted rate reduction
Economic situation appears to be increasingly serious; San Francisco rate out of
line with Federal reserve banks which may properly be classed with San Francisco; wide spread between discount rate and bill rates obviously inconsistent;
reserves (87 per cent) also above average of system
__ _ ._
Rate
per
cent
June 10,1924
4
Aug. 25,1924
ZH
Nov. 23,1925
4
Sept. 10,1927
3#
Feb.
4
4,1928
June 2,1928
May 20,1929
Dec. 6,1929
m
5
4H
4
Mar. 21,1930
sn
Aug. 8,1930
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
765
2. Did the changes in rates of rediscount listed in your answer to the above
question bring about the desired results? If not, what circumstances intervened to prevent the aims from being realized?
Atlanta.—Not fully. It would be difficult to guess what might have been the
result if such action had not been taken in 1928. The mania for speculation
prevented the realization of the aim desired and rendered ineffective many other
efforts made.
Boston.—It is difficult to measure the effect of local discount rates upon
national problems. For the most part the results desired were accomplished
excepting where there was undue delay in making effective the discount rate
changes, as, for example, the tardy reversal of policy following the easy money
policy of the summer of 1927 and the failure of the July 19, 1928, increase to be
followed by other increases when the need for them became evident in 1929.
The failure of the 1928 discount rate increases seems to be due principally to
the fact that the speculation situation was out of hand and the discount-rate
policy was not sufficiently vigorous and aggressive.
Chicago.—The change in our rediscount rate from 4% to 4 per cent on June
14, 1924, was mainly for the purpose of bringing our rate more in line with the
rates which already existed for commercial paper in the open market. We did
not follow the reduction in the rate of the Federal Reserve Bank of New York
on June 12 to 3% per cent and on August 8 to 3 per cent, but maintained our
rate of 4 per cent until September 7, 1927. While in 1924 the system policy
was designed to create an easy money market mainly for the purpose of render,
ing assistance to the foreign financial situation, our rate of 4 per cent, as compared with 3 per cent of the Federal Reserve Bank of New York, did not prevent
this object from being attained. The reduction on September 7, 1927, from
4 to Sy2 per cent, which was made by order of the Federal Reserve Board, was
also mainly for the purpose of rendering assistance to the foreign situation and
also to help the export of our products to foreign countries. This reduction,
however, was not made with our consent, and our own board felt that it might
encourage further use of speculative credit, which would be more than offset by
any advantage that might be gained by reducing the rate. Our increases in
1928 to 4 per cent, 4% per cent, and to 5 per cent on July 11, 1928, were made
for the purpose of discouraging any further increase in speculative credit, but
these increases had little, if any, real effect, as call money for brokers' loans
was in strong demand during 1928, increasing from 4 per cent at the time of
our first rate increase in January to 5 per cent on April 20, the day we increased
our rediscount rate to 4% per cent, and to 6 per cent about the time we increased our rate, on July 11, to 5 per cent. From July 11, 1928, until the stock
market collapse on October 23, 1929, call money fluctuated from 6 to 12 per cent,
and these high call-money rates dominated all the money rates in this country,
drawing money from Europe and other parts of the world as well as tremendous
amounts of domestic funds owned by corporations, firms, and individuals to be
loaned in the call market, thereby making the Federal reserve rates entirely
ineffective and nullifying the effects of the sale of securities from the system
open market account, such sales being made for the purpose of controlling the
situation through these operations when approval of increases in the rediscount
rates could not be obtained from the Federal Reserve Board. The reductions
which occurred in our rediscount rates beginning November 23, 1929, up to the
present time, resulting in a decrease of fully 2 per cent in our rediscount rate,
were made, generally speaking, to assist in the recovery of business after the
stock-market break in the fall of 1929, and while doubtless it has removed any
obstacle that might be in the way of recovery of business due to interest rates
business has not recovered to the extent that it had been anticipated by the
reduction in these rates.
During the periods of a strong speculative demand for credti it is the New
York call-money rate that dominates the situation rather than the rediscount
rates of the Federal reserve banks. It is the most powerful influence in affecting money rates that we have in this country, and has prevented the Federal
reserve system from keeping control of the money market either through openmarket operations or by increases in discount rates.
Cleveland.—In the main the results achieved by our rate changes have met
our expectations. Ordinarily changes in our discount rates reflect the development of conditions within the district affecting the welfare of our member
banks, or of conditions developing outside our district which influence such
766
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
welfare to a point which justify more restrictive or more liberal policies with
-respect to the use of our credit facilities.
Dallas.—This question may be answered in the affirmative in so far as
federal reserve-bank rates are influential in this district. In the period from
-May 7, 1928, to February 7, 1929, administrative control was an important
concomitant factor with rate increases and became of increasing importance
^ p to and including October, 1929.
Kansas City.—We know of no means of divorcing the effect of rate changes
^rom other factors so that the influence exerted by raising or lowering the
"discount rate may be measured. The direct effect is naturally slight in any
district such as ours, where even the higher discount rates are considerably
under rates charged by the banks on most of the customers' loans. Our opinion
is that the only important influence exerted by rate changes in this district
is indirect to the extent that reductions in rate call attention to continued
or anticipated easy money conditions and increases serve as warnings of possible
stringencies.
Minneapolis.—Changes in rates of rediscount have brought the desired results.
New York.—During the period from 1924 to 1927, inclusive, it is our opinion
that in general the changes in the rates of discount were reasonably effective,
although, of course, Federal reserve policy was only one of the influences on
the situation. In particular the rate of increase of bank credit and the movement of gold appear to have been influenced by rate changes. The increases
during the years 1928 and 1929 were not completely effective. This latter
period was one fraught with unusual difficulties. The very rapid increase in
brokers' loans " for the account of others " was a circumstance which in considerable measure offset the effectiveness of increases in the discount rate. While
the experience of the reserve system with the discount rate is too brief to make
possible the drawing of positive conclusions, it is, nevertheless, our view that
had the increases in rate during this latter period been made more promptly
and been larger they would have produced the desired result. Bank credit
proved fairly responsive to rate changes.
Philadelphia.—It is apparent, we think, that the motives of the board of
directors of this bank in changing discount rates, were to make our rate
harmonize with the rates for credit prevailing in the markets at the times
when such changes were made. On March 20, 1929, our board raised the rate
with the idea of controlling or checking speculation, but that change was not
approved by the Federal Reserve Board. The resolution was repeated in April
3, 1929, to expire by limitation unless approved by the Federal Reserve Board
prior to April 6, 1929.
Richmond.—We believe that the changes made in rates of rediscount when
made met the situation in this district, as we saw it, and did accomplish or
assist in accomplishing the desired result.
St. Louis.—Except the psychological effect changes in rates made little difference, except in St. Louis, where a reaction to the changes was apparent.
San Francisco.—It will be seen from the foregoing answer that adjustments
usually were made to bring our discount rate into harmony with the trend (at
least) of interest rates.
3. Has the experience in your district shown that discount rate changes
have been better timed on upward or downward movements?
Atlanta.—It is our belief that our rate changes were all properly timed.
Boston.—In most cases the discount rate changes were better timed on the
downward movements because reductions are more popular than increases.
Chicago.—Generally speaking, over a long period of years we believe that
the reductions have been better timed than the advances.
Cleveland.—Discount rate changes in this district appear to be more effective
on the upward movements in influencing the use of our credit.
Dallas.—Changes better timed on downward movement.
Kansas City.—As indicated in the answer to question 2, determination of
questions of this kind is difficult. We believe, however, that changes have been
•better timed on downward movements, and that revisions upward have sometimes been delayed more than would have been advisable.
Minneapolis.—We believe discount rate changes have been equally well timed
with both upward and downward movements.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
767
New York.—Chart
B shows the changes in discount rates during the period
from 1922 to 1930, inclusive, in relation to a number of other factors. A comparison of the r a t e changes with t h e changes in the other factors will possibly
indicate t h a t reductions in r a t e have been a little better timed t h a n have increases. I n making this comparison it should be noted t h a t t h e factors listed
largely relate to domestic developments. Due weight should also be given to
the importance of movements of gold. Over most of the period there was a
decided tendency toward gold imports into the United States, a tendency
which w a s accelerated by any increase in discount rates. These gold imports
h a d the effect in this country of building up reserves too large for comfort and
tending to inflation, and had the effect abroad of raising money r a t e s and
interfering with the r e t u r n of foreign countries to monetary stability, thus
injuring our foreign t r a d e . Under these circumstances a r a t e adjustment
somewhat lower t h a n would ordinarily be called for on t h e basis of domestic
considerations alone w a s probably wise.
Philadelphia,—As
our r a t e changes have been made to meet conditions, r a t h e r
t h a n to affect them, our experience does not enable us to answer this question.
Richmond.—Downward.
St. Louis.—Better
timed on downward movements.
San Francisco.—{See
answer to question 2.)
4. I s the efficacy of discount r a t e changes enhanced by large r a t h e r t h a n
small changes?
Atlanta.—The
efficacy of discount r a t e changes is enhanced by large r a t h e r
t h a n small changes.
Boston.—-The English policy of increasing discount rates by a full per cent
and reducing by a one-half of 1 per cent a t a time appears t o be more effective
in accomplishing results t h a n our practice of making more frequent but smaller
changes. To be emphatic, discount r a t e changes should be fairly large and
m a d e a t only infrequent intervals.
Chicago.—Our opinion is t h a t when a strong speculative demand for funds is
under way an increase in our rediscount r a t e s of 1 per cent is more effective
t h a n one-half of 1 per cent, and t h a t when there is a slackening of demand for
speculative credit and other credit t h a t adjustments downward of one-half per
cent at a time will better fit the situation.
Cleveland.—In our judgment, it wTould be on upward movements, although this
expression is based upon opinion rather t h a n experience. T h e r e have been but
two occasions in t h e history of this bank when r a t e s were changed more t h a n
one-half per cent. I n J a n u a r y , 1915, the r a t e on 60 to 90 day paper was reduced
from 6 to 5 per cent, and on J a n u a r y 28, 1920, the commercial paper r a t e was
advanced from 5 to 6 per cent.
Dallas.—Efficacy
of r a t e change in t h i s district is but slight and almost
wholly psychological. I t does affect the r a t e s paid by commercial banks on
bank balances and to a limited extent the r a t e s to certain classes of borrowers.
W e are inclined to favor changing the r a t e s upward by a full 1 per cent and
downward by a one-half of 1 per cent.
Kansas City.—Yes; but large changes should be made only under u n u s u a l
conditions, and when the need is clearly apparent. Otherwise h a r m may be
done by overemphasizing the situation to be corrected. W e have made no r a t e
changes greater t h a n one-half of 1 per cent.
Minneapolis.—Theoretically
large changes in the discount r a t e are more
effective than small, but practically in this district credit conditions a r e not
appreciably affected either way.
New York.—The limited experience of t h e reserve system with discount r a t e
changes hardly offers an adequate basis for generalization. On the only two
occasions when increases of 1 per cent were made—in 1920 and 1929—these
changes appear to have been moderately effective, though the events of these
periods were so confused t h a t it is impossible to discriminate between the
influence of r a t e changes and the influence of other factors. There were a
number of other occasions when r a t e increases of one-half of 1 per cent appeared
to be influential upon the movement of bank credit, as, for example, in t h e
spring of 1923, the spring of 1925, and t h e summer of 1926. The influence of
t h e r a t e change appears to depend on t h e situation, but, generally speaking, it
does a p p e a r t h a t larger increases a r e likely to be more effective than smaller
768
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
DISCOUNT RATE .
F R BANK OF N.Y
i
1922
PER CENT ,
1923
100
BILLIONS
^L \s
LOANS AND INVESTMENTS
OF WEEKLY REPORTING BANKS IN U.S.
hullwIiJllllllJlllka
i
1
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W
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100
192?
1923
'
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A
\V K.
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A. AA
DISCOUNTS OF
^S
ALL FED. RES. BANK
/A
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illllilujl^
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4
DISCOUNT RATE
F R.BANK 0
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W
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
769
ones. As far as rate decreases are concerned, the evidence is not convincing
either way.
Philadelphia.—We feel we have not learned enough from our experience to
answer this question positively. The belief is entertained by banks that the
rates should be advanced by larger amounts—say, 1 per cent at a time—and
reduced by smaller amounts—say, one-half per cent.
Richmond.—By small changes downward and by large changes upward.
St. Louis.—Increases in rate should be by 1 per cent, decreases by one-half
per cent.
San Francisco.—Credit is more sensitive to a sharp advance than to a sharp
decline.
5. Do member banks tend to transfer increases in rates of rediscount in the
form of higher interest charges to their own customers? Summarize the effects
of changes in rates of rediscount on rates of interest charged on agricultural,
business, and security loans.
Atlanta.—The increase of a rediscount rate naturally tends to stiffen money
rates, and a borrowing member bank would naturally pass the increased rate
to its customers. It is not felt that this practice applies to our country banks,
whose rates are generally stationary.
Boston.—About the only member-bank rates which reflect changes in the
Federal reserve discount rates are the rates made on loans by city banks to
their country correspondent banks, and also to a very limited extent on the
loans made by a few of the larger city banks to competitive commercial borrowers who are in a position to shop around not only between banks in a given
locality but also between banks in several of the larger financial centers. In
other words, rates on commercial loans to customers are affected by discountrate changes only in the case of the larger borrowers. Commercial rates in the
outlying country banks are practically stationary at all times, regardless of
open-market conditions, and even those in the second and third size banks in
the larger communities are sensitive to open-market influences only after a substantial period has elapsed. On the other hand, discount-rate changes appear
to be reflected fairly promptly in open-market rates for acceptances, certificates
of indebtedness, and stock-market loans.
Chicago.—In the larger cities advances in the discount rate made at a time
when the member banks are materially in debt to the Federal reserve bank
naturally result in an upward adjustment at the counters. This tendency is
not so noticeable under conditions where the banks are operating within their
own independent resources. Agricultural loans are usually made by rural banks
and rates are generally materially above the Federal reserve rediscount rates.
Changes in rates of rediscount, therefore, have little or no effect on agricultural
loans. Banks, particularly in the larger centers, usually give decided preference to commercial business in a freer lending policy, and lower rates of interest
than on security loans; hence declines in rediscount rates are likely to be more
quickly reflected in commercial loans than on security loans. Conversely,
advances in rediscount rates tend to result in an earlier increase in rates on
security loans. These references to security loans apply to those of individuals
and brokers in this district and not necessarily to the call-loan market in New
York.
Cleveland.—In general practice, the overeounter rate to the ordinary borrower, commercial or agricultural, is not increased. Rates are increased to
borrowers who have a national market for their paper and whose borrowing
rates normally bear a closer relationship to reserve bank rediscount rates, as
well as to local borrowers of the preferred class. On collateral loans the overcounter rate to the ordinary customer is not changed, but borrowers who usually
enjoy a preferential rate because of their high credit standing, the value to the
bank of their account, or the quality of collateral security offered may have to
meet an increase in their rate when our rediscount rate is advanced.
Dallas,—Such changes do not affect rates on agricultural loans. They affect
business rates only in competitive categories. Changes in rates, according to
our observation, affect security loans more than any other class. Following you
will find a tabulation and chart reflecting changes in our rediscount rate and
changes in rates charged by commercial banks on business and security loans
over a period of years.
770
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Eleventh Federal reserve district discount rates
[Arithmetic average of r a t e s in Dallas, Houston, and San, Antonio]
P R I M E COMMERCIAL P A P E R W I T H MATURITY OF 90 DAYS OR UNDER
Month
1922
Ifis
April.. _
May...
June..
July
August
September...
October
November...
December.._
_ .
..
..
_..
6.42
6. 33
6.33
6.42
0.42
6. 50
6.33
6.33
6.17
8.33
6.33
5.83
1923
6.17
6.00
6.33
6. 33
6.33
6.17
6.00
6.33
6.25
6.33
6.25
6.33
1924
6.33
6.33
6.00
5.67
5.96
5.92
5.83
5.50
5.67
6.00
5.83
1925
5.83
5.67
5.58
5. 50
5.50
5.92
5.83
5.67
5.71
5.71
5.75
5.75
1926
5.58
5.83
5.92
5.79
5.58
5.3?
5.50
5.09
5.21
5.29
5.21
5.25
1927
1928
1929
1930
5.21
5.83
5.92
5.79
5.58
5.33
5.50
5.09
5.21
5.29
5.21
5.25
5. 21
5.29
5. 25
5.29
5.29
5. 33
5. 50
5.79
5.92
6.00
6.00
5.92
5.67
5.75
6.08
6.00
6.00
6.08
6.08
6.08
O.OS
6.00
6.13
5.92
6.08
6.00
6.00
5.83
5.83
5.50
5.50
5. fiO
5.42
5.50
5.42
5.33-
6.17
6.17
6.33
6.17
6.17
6.00
6.17
6.00
6.00
6.17
6.00
6.00
6.17
6.33
6.17
6.08
6.00
6.17
6.17
6.33
6.00
6.58
6.58
6.33
6.33
6.50
6.58
6.67
6.67
6.67
6.83
6.83
6.83
6.83
6.83
6.83
6.83
6.83
6.58
6.50
6.50
6.50
6.58
6.33
6.35
6.33
6.2£
COLLATERAL LOANS—TIME)
January...
February..
March
April.. . . .
May
June
July
August
September.
October...
November.
December.
6,83
6. 83
6.67
7.00
6. 83
6.83
6.67
6.67
6.83
6.83
7.17
6.67
6.67
6.67
6.67
7.00
r.83
7.17
6.67
6.83
7.08
6.83
6.67
6.92
7.00
7.00
6.33
6.67
6.33
6.33
6.17
G.33
6.33
6.17
6.50
6.50
6.47
6.17
6.50
6.33
6.17
6.17
6.00
6.00
6.00
6.33
6.00
6.00
6.17
6.33
6.17
6.17
6.00
6.17
6.00
6.00
6.17
6.00
6.00
Kansas City.—No. In general, changes in the Federal reserve bank rate
are not passed on to customers of member banks in this district, either on
agricultural, business, or security loans. In so far as changes in the discount
rate call general attention to ease or firmness in money conditions, such
changes do have an effect on rates charged those borrowers who are in a
position to shop for credit, such as well-known industrial or business concerns
and large scale individual borrowers. Rates to other borrowers are not
affected. Rates charged borrowers by country banks in our district are so
standardized that they are not affected, generally speaking, even by extreme
changes in money conditions.
Minneapolis.— (a) City banks do, country banks do not.
(b) The discount rate of the Federal Reserve Bank of Minneapolis does not
affect the rate which agricultural borrowers pay.
New York.—There is a tendency on the part of member banks to transfer
increases in rediscount rates to their customers. This is particularly marked
in the case of the larger banks and in their dealings with customers of established credit standing who generally receive the benefit of the best rates.
Probably more than 80 per cent of the banks in this district charge but one rate
of interest in all seasons and to practically all customers, namely, 6 per cent.
Customers of these banks are not affected by changes in the discount rate.
Effects on different borrowers may be summarized as follows:
(a) There is probably no effect on the rates of interest charged on the bulk
of agricultural loans in this district.
(&) There is probably no effect on rates of interest charged by banks outside
of the large cities on business loans, nor on loans to the smaller business
concerns by practically any banks. Rates charged business concerns with an
established high-credit standing and, therefore, able to obtain credit in the
open market, and with accounts in several localities, are affected.
(o) In the smaller banks there is probably no change in rates charged on
security loans. In the financial centers rates charged on such loans would
tend to be raised with increases in reserve bank discount rates. In addition
to the effect on interest rates, discount rate increases affect the availability of
credit by making banks more careful in their lending policies.
DISCOUNT AND INTEREST RATES
ft*
ELEVENTH FEDERAL RESERVE DISTRICT
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34718—31.
(Face p. 770,)
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
771
Philadelphia,—As to business loans, in Philadelphia changes in our rates
affect the rates of interest charged on all loans, except those of customers of
quite moderate capital. In the other large cities of this district our changes
affect local rates scarcely any. In the argricultural communities never less
than 6 per cent is charged on agricultural loans, hence our changes in discount
rates have no effect on such loans. Collaterally secured loans: The great bulk
of such loans originate in the largest cities, and the rates on them do vary with
changes in the Federal reserve banks' discount rates. The rates on loans made
by banks in the smaller communities on local securities are not affected by
such changes.
Richmond.—Generally no. This is a 6 to 8 per cent district, and our rediscount rate has practically no effect on rates charged by member banks to their
customers. Concessions are made to those borrowers who can command competitive credit in the larger centers, where money rates or the rediscount rate
may perchance be lower.
St. Louis.—Yes. Changes in discount rate have little effect in the eighth
district, except in the city of St. Louis, where rates to customers of member
banks tend to move in accordance with our rediscount rate.
San Francisco.—Agricultural rates, the district over, vary from 6 to 10 per
cent; very little of the former; average about 8 per cent. In important metropolitan centers large commercial borrowers are affected by changes in Federal
reserve discount rates. Customers of banks in agricultural communities are
not affected by Federal reserve rate changes.
C o u n t e r r a t e s of S a n Francisco
banks
Discount rate
changed
From— To—
90-day
prime
commercial
Month
J u n e 10 1924
.
A u g . 25, 1924
4H
4
1924
January
February
March
April—
May
4
June
July.—
3M A u g u s t .
September
-
November
December
N o v . 23, 1925
3H
4
434
4*4
4^-4*4
4M
4M-4^
3^-3K
Vi-VA
3 -ZH
4.39
4.33
4.04
4.21
3.38
2.25
2.10
2.00
2.07
3 -3M 2.32
3 M - 3 H 2.42
3 M - 3 ^ 3.49
4.09
4.07
4.04
3.95
3.29
2.45
2.01
2.10
2.33
2.21
2.37
2.89
3.29
3.54
3.20
3.07
3.05
3.03
3.59
3.79
3.74
3.72
3.72
3.73
5 -5V2
5 -5V2
5 -5M
5
-VA
5 -5V2
5 -5H
5 -VA
5 ~hV2
5 -5^
4M-5H
5 -bY2
5 -5H
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5^2-6
SV2 3.32
3.60
3.97
3.86
4
3.82
4
3.97
3M-4
4.09
3^-4
4.19
3^-4
4 -AH 4.62
4H 4.87
4.74
MrAM
5.32
3.00
3.08
3.25
3.14
3.17
3.25
3.25
3.27
3.50
3.50
3.50
3.50
3.80
3.83
4.48
4.30
4.59
4.44
4.35
3.94
3.68
3.57
3.92
4.67
5
5 -5^
5 -6
5 -6
5 -5}/ 2
5
5 ~5V2
hV<r%
±U-AlA
4U
&A-VA
3.67
3.63
3.63
3.42
3.20
3.32
3.38
3.57
3.88
3.88
3.79
3.83
4.76
4.31
4.37
4.33
4.37
4.27
4.26
4.45
4.54
4.69
4.57
4.53
5
---
1926
January
February
March
April
May
June..
July
August
- September
October
November
December
NewYork London
acceptComaccept- ances,
S e c u r i t y mercial N e w ances, 3 m o n t h s
(not
p a p e r , Y o r k 90 d a y s
brokers)
call
4-6
months
5H-6
5H-6
6
VA
5H-6
5^-6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -m
1925
January
February
April
May
June
July
August
September
October.
November
December
5M-6
5H
5H-6
5M-6
5V2
4^-6
5
4M-5M
4^-5K 2
4H-5
Open market
-5V2
5 -m
5 -m
5 -m
5
5
-5V2
-VA
5 -6
51^-6
5'^-6
5J*-6
5 -6
&A
5 -5H
5
-VA
5^-6
5 -6
m
vA-m
4
4
4 -4J4
4K-4M
4H-4M
4H-4 3 /i
4H
\V2
4.33
4.85
4.55
4.06
3.81
4.15
4.27
4 52
5.02
4.75
4.56
5.16 1
772
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Counter rates of San Francisco
banks
Discount rate
changed
From— T o Month
Sept. 10, 1927.
Feb. 4,1928..
June 2,1928..
VA
May 20,1929..
Dec. 6, 1929..
VA
Aug. 8, 1930-
New
York
Comaccept90-day Security mercial New ances,
prime
paper, York 90 days!
(not
com4-6
call
mercial brokers) months
1927
January
5 -6
February...
5 -6
5 -6
March
April
4^-5^1
May
-.
434- ••;:
June
July
VArWi
August
vA-m
September. .
±A-m\
October
November
| vA-m
December...
5 -6
1928
January
4^-5^
February
4H-5
March
4^-5
April
_
May
-_
43^-5
June
4^-5
July..
4^-5M
August
4^-53^
September..
wm
October
November..
4H-5MI
December. „.
4H-5M
4
4
4
4
4
m
3^
1929
January
February
March
April
May
June
July
August
September. _
October
November..,
December...
1930
January
February
March
April.
May
June
July
August
_
September..,
October
November...
December...
5^-6
hA-%
5V2-6
5^-6
5^-6
5*4-6
6
5M-6
5^-6
5^-6
5H-G
5M-6
5^-6
514-6
5 -6
5 -6
5 -6
5 -6
5 -6
5 -6
5
m\
VA-5
-4J4
-4tf
-AVA
-4K
-4K
4
4
4
4
4
m\
m\
Mar. 21, 1930.
Open market
5 -6
5 -6
5 -6
5 -6
53^-6
5K-6
53^-6
5^-6
5^-6
5M-6
5M-6
6
6
6
6
6
6
-7
-7
-7
-7
-7
-7
6 -6HI
6 -6K
4.32
4.03
4.13
4.18
4.26
4.33
4.05
3.68
3.83
3.90
3.60
4.38 j
4
4.24
4.38
4 -4fc| 4.47
5.08
5.70
6.21
4^-5
5 -5KI 6.05
5K-5H 6.87
5M-5M 7.26
5M 6.98
6.67
5^-514 8.60
5M-5H
4
5H~5y2\ 7.05
7.06
5M-6 9.10
8.89
8.91
7.70
9.23
6 -bK 8.23
8.50
m\ 6.43
5.44
5
4.83
434-5
6 -1" '' 4^-5
4.64
. 4.32
6 -6VSI 3^-4% 3.69
6 -63^
6
6
3^-4 ' 4
3.12
3H-4
2.62
3 -8H 2.20
3 2.21
5 ~5H\
3 2.19
VA
3 2
5 -6
2^-3
2
5 -6
2%-3 2.23
5 -6
[From Monthly Review of Business Conditions, San Francisco, Calif., April 21, 1930]
INTEREST RATES IN THE TWELFTH FEDERAL RESERVE DISTRICT
Certain relationships between the discount and acceptance buying rates of the
Federal Reserve Bank of San Francisco and various rates .charged customers
of commercial banks in the twelfth district may be observed in the recorded
movements of interest rates. These relationships are most clearly defined in
San Francisco, the principal money market of the district and the banking
center in which borrowings from the reserve bank usually are in greatest volume.
The more important of them may be illustrated in a comparative study of the
following rates:
(1) The reserve bank discount rate.
(2) The reserve bank buying rate for 90-day acceptances.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
773
(3) Weighted average rates charged customers by a group of member and
nonmember banks for loans on:
(a) Prime commercial paper eligible for rediscount.
(&) Time and demand loans secured by prime stock exchange collateral.
(c) Commodity paper, or loans secured by warehouse receipts.
The rates just enumerated are shown in the accompanying chart, which presents them for San Francisco only. Changes in the discount rate have ordinarily followed rather closely upon the major downward or upward movements
of the acceptance rate during the past 10 years, and the latter rate has been
lower than
the discount rate during the entire period, with but one exception
in 1929.1
The interest rate on prime commercial loans is particularly significant in that
it reflects the ever shifting balance between demand for commercial credit and
the available supply of funds and thus may be taken as fairly representative of
open market rates in San Francisco. Comparison of the commercial paper rate
PER CENT
•i
6
**
5
4*
4
ai
3
1926
1927
1926
1929
1930
INTEREST RATES, SAN FRANCISCO
Commodity paper loans, demand security loans, and commercial loans—average rates at
middle of month.
Discount rate, Federal Reserve Bank of San Francisco.
Acceptance rate, Federal Reserve Bank of San Francisco.
in San Francisco with the discount rate shows that the former has followed
a course almost consistently at a level of about 1 per cent above the discount
rate. Whether continuing previous trends or reversing them, the more important
changes in this rate ordinarily have occurred within a period of a few weeks
after changes in the discount rate have been made, both rates moving in the
same direction. Observation of the chart also shows that shorter period fluctuations of the commercial paper rate have conformed reasonably well with the
pattern of the reserve bank's acceptance buying rate, allowing for the lapse of
a relatively brief period of time. But this timing of the movements has not
been entirely uniform.* Twice since 1926 (late in 1927 and during recent months)
the commercial paper rate has failed to adjust itself to the average differential
of 1 per cent above the discount rate within the usual period of time and its
a
As indicated later on in this discussion the acceptance buying rate of this hank is
practically identical to that of the Federal Reserve Bank of New York which in turn is
influenced chiefly by open-market rates in the national money market.
774
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
reactions to changes in the acceptance buying rate have been retarded. During
both of these periods of retarded adjustment betweeen the rates there has been
considerable recession in general business activity.
TENTHS
^r^
Ji ^p\
OF ONE PER CENT
w
r^
U J
1926
1927
1926
1929
1930
DIFFERENTIAL BETWEEN DISCOUNT AND COMMERCIAL LOAN RATES, SAN
FRANCISCO
The base line of this chart represents the discount rate of the Federal Reserve Bank
of San Francisco. That rate is shown as a straight line regardless of changes in it,
and the difference between the discount rate and the rate on prime commercial loans
in San Francisco, in terms of tenths of 1 per cent, is shown hy the irregular line.
Kates on security loans have followed the commercial paper rate rather
closely, but at a level approximately'one-half of 1 per cent above that rate.
The widening of this differential during the last half of 1929 was due almost
entirely to the action of securities markets during that period. There has
been less fluctuation in commodity paper rates than in either prime commercial
or security loan rates, and they have constantly been maintained at higher
levels than have rates on paper eligible for rediscount at the reserve bank.
The more important factors influencing commodity paper rates appear to have
been the longer-term trends of other rates and of supply and demand conditions
in the money markets.
It may be said that the various over-the-counter and open-market interest
rates in the twelfth district, as represented by San Francisco, move in different planes, and that their main trends are similar to the main trends of the
reserve bank's discount rate, while their shorter-term fluctuations are more
nearly like those of the reserve bank's acceptance-buying rate. Furthermore, it
is evident that the discount rate is influenced by the major upward and downward movements of the acceptance-buying rate. These facts may be related
to the national money market by observing that the acceptance-buying rate
of this bank has been maintained practically identical to the corresponding
rate of the Federal Reserve Bank of New York during recent years. Changes
in that rate occupy about the same position with respect to other rates in New
York as in San Francisco, and in New York are particularly sensitive to the
fluctuations of open-market rates. It is evident, therefore, that the course
of interest rates in San Francisco, particularly the more sensitive open-market
rates, presents about the same picture as does the course of similar rates in
New York, the San Francisco rates generally moving at slightly higher levels.
Commercial loans, San Francisco, average rate at middle of month.
Commercial loans, New York, averate rate at middle of month.
Commercial paper, New York, monthly average open-market rate on four
to six months prime commercial paper.
Acceptances:
(Heavy line) monthly average open-market rate on bankers' 90-day
acceptances, New York City.
(Light line) buying rate on 90-day acceptances, federal Reserve Bank
of New York.
6. What has been the effect of high or low rates of rediscount on increases
and decreases in the volume of member-bank borrowings?
. Atlanta.—The volume of member-bank borrowings has been little affected by
high or low rates of rediscount. With few exceptions, our member banks
borrow for actual requirements, regardless of the rate.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
775
Boston.—Member-bank borrowings tend to drop following a rise in Federal
reserve discount rates and to rise following a drop in discount rates. This,
however, is only a general tendency, and exceptions are not difficult to find. For
example, member-bank borrowings continued to rise with only seasonal interruptions throughout 1928 and the first half of 1929, in spite of steadily rising
discount rates in 1928. This, perhaps, was due, as indicated above, to the fact
that the increases in the discount rate throughout this period were not sufficiently prompt nor aggressive.
Chicago.—The periods during which our highest discount rates have been
current have been attended by the strongest demand from member banks, and
the effect of increased rates thereon did not materialize until some time had
elapsed after such rates became effective.
Low rates of discount do not appear to have increased member-bank borrowings to any appreciable extent.
PER CENT
6i
6
5±
5
4i
4
Si
3
1926
1927
1926
1929
1930
I N T E R E S T RATES IN NEW YORK AND SAN FRANCISCO
Cleveland.—With the exception of 1928 and 1929 increases in our rate appear
to have checked any tendency to excessive borrowing. It is observed that in
1924 and 1927 the reduction in rates was followed by increased rediscounting,
largely seasonal, however, in both instances. In 1928 successive rate increases
did not discourage borrowing until the rate was advanced to 5 per cent. In
1929 member-bank borrowing was at a level substantially in excess of previous
years, notwithstanding that the 5 per cent rate was maintained throughout
the year. It must be taken into account, however, that business acivity in
this district in 1928-29 was maintained at unusually high levels. (See accompanying chart.)
Dallas.—Slight.
Kansas City.—In this district very little noticeable effect. Increases over a
considerable period of time undoubtedly result in some stiffening of credit
policies of member banks and consequent reduction in borrowings, but because
of high commercial rates usually prevailing in the district, the effect is mostly
psychological. Reductions in rates should have opposite effects, but experience
does not indicate to what extent.
Minneapolis.—The volume of member-bank borrowings usually increases as
the discount rate goes up.
New York.—Changes in the rates of rediscount undoubtedly have had their
effect upon the borrowings of member banks. Since such changes in rate have
almost invariably been accompanied by open-market operations, which have a
776
NATIONAL AND FEDERAL. RESERVE BANKING SYSTEMS
-more immediate effect upon the borrowings of member banks, and since there are
"afeo other factors which affect discounts, such as gold movements and changes
in Currency in circulation, it is not possible to separate the effect of discount
rate changes, or to present any figures illustrating changes, which have taken
place. The effects of discount-rate changes are more apparent in member-bank
credit than in the amount of reserve-bank discounts. It is clear from chart B
that, generally speaking, increased rates have tended to check credit expansion,
-a-tfd lower rates to encourage it. It appears clear from these movements that
*ftie credit policy of member banks is responsive to changes in Federal reserve
rates. But changes in their borrowings at reserve banks are dependent not only
on their policy in advancing credit but more largely upon currency demand,
gold movements, and changes in Federal reserve holdings of acceptances and
Government securities.
Philadelphia.—In the larger cities, if monetary conditions are normal, increases in our rates have a tendency to curtail rediscounting, but lowering
of the rate does not necessarily tend to increase borrowing. The lowering of
our rate generally is coincident with declines in business, which declines always
reduce borrowing from banks. In the smaller communities and rural districts,
where the prevailing rate for loans is 6 per cent, our increasing of the rate of
19Z4
1925
1926
1927
1920
1929
1930
discount has little effect on member banks' borrowing until our rate goes above
9 per cent. Then it so reduces the profit on rediscounting that member banks'
borrowing is somewhat affected. With monetary conditions abnormal, as they
were in 1928 and 1929, the raising of our rates presumably only would act as
a warning, indicating that we felt that borrowing was excessive and that the
credit available for additional loans was being used up, and that it would be
difficult to obtain the additional credit necessary to support further advances in
the market.
Richmond.—We do not believe the rate has exercised a material effect on
borrowings for agricultural purposes, but in the cities the rate has the effect
of restraining or encouraging borrowing.
St. Louis.—Very little, if any.
NATIONAL AND FEDEBAL KESERVE BANKING SYSTEMS
777
San Francisco.—High rates tend to lessen the borrowing of banks in metropolitan centers. The borrowings of country banks are seasonal and are not
noticeably affected by rate changes in financial centers. Whether or not low
rates stimulated the use of Federal reserve credit by member banks depended
largely upon business conditions and the public's inclination to use credit
merely because it was for the moment cheap.
7. Should rates of rediscount vary from reserve district to reserve district,
or should they be uniform throughout the entire country?
Atlanta.—They should be applicable to conditions in each district, modified
only by requirements of conditions in the United States or abroad, or to
comply with some formulated Federal reserve policy.
Boston.—In general, discount rates should be influenced (but not necessarily
controlled if national considerations dictate otherwise) by the supply of credit
in each Federal reserve district. Discount rates, therefore, need not necessarily
be identical in each Federal reserve district. The principal index or criterion
for determining rates is the relationship of the open market for prime bankers 1
acceptances in those districts where there is an open market for them. In other
districts, it should be a combination of the rates charged in the local centers
on line of credit loans advanced by banks to those customers which are in a
position to shop around for loans in other cities, and the rates charged by
eastern correspondents in the case of those banks which prefer to borrow other
than from their local Federal reserve bank. In this way, even the interior
Federal reserve districts find their discount rate policies tied up to the open
market rate in the large financial centers and, therefore, frequently tend to
gravitate to the same level.
Chicago.—While conditions may arise which would justify uniformity of
rates in all districts, as a general rule the rates should be regulated in accordance with the conditions prevailing in the several districts.
Cleveland.—We do not believe that the establishment of uniform rates of
rediscount would be practicable. Changes in conditions, the effect of which
may be largely or entirely local, might justify changes in the rediscount rate
of the reserve bank whose district is affected To raise or lower rates in
unaffected sections might easily prove to be a serious disturbance to business
in those areas. Also we believe that the fact that going rates of discount
charged by banks in the various sections of the country vary so widely raises
an effective barrier to the establishment of uniform rediscount rates.
Dallas.—A uniform rate throughout the entire country would be too arbitrary. The differences in rate will tend to narrow and rates will approach
uniformity naturally by reason of increased borrowings in districts where
rates are low and decreasing borrowings in districts where rates are high.
We think rates should be based primarily upon conditions existing in each
district and adjustments should be permitted to occur naturally. If rates were
arbitrarily made uniform it would destroy the principle of having 12 reserve
banks and tend to establish a central bank principle.
Kansas City.—The discount rate should have some relationship to bank rates
in the district. It follows, therefore, that discount rates should vary in the
different districts and that the discount rate in this district, where bank rates
are high and not responsive to changed money conditions, should frequently be
higher than the discount rates in districts which are not comparable to ours in
this respect. Differences in rates should not be great enough, however, to
cause an unnatural shifting of demands for Federal reserve credit from one
district to another.
Minneapolis.—The rediscount rates in districts which are largely agricultural
should not conform necessarily to the rediscount rates prevailing in the eastern
money centers.
New York.—Generally speaking the factors operating for or against uniform
discount rates throughout the country appear to be the following:
1. Movement of funds between districts.—In a number of instances a differential in rates between districts has caused so large a flow of funds between
districts that it has become important to equalize the discount rates, though
the extent of this interdistrict flow of funds appears to vary greatly from time
to time, and ordinarily does not assume great importance.
2. Effect of rates on member bank borrowing.—The individual reserve bank
has to consider not alone the movement of funds to and from other districts,
but also the influence of its own rate changes on the borrowing attitude of its
778
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
member banks. The rate has an important function in discouraging excessive
borrowing and encouraging necessary borrowing. Generally speaking this consideration would usually appear to indicate the desirability of higher discount
rates in interior reserve banks than at New York, since customers rates are
usually higher in the interior.
3. The psychological effect.—Probably the strongest pressure for uniform
rates has been the pressure from the business of a district upon a reserve bank
to give as favorable terms as the reserve bank of any other district.
Philadelphia.—Rates of rediscount should be established upon conditions
existing in the district. As conditions vary more or less from time to time in
every district, discount rates in the different districts should vary accordingly.
It would be contrary to good principles to require them to be uniform. As a
matter of coincidence, they might at times be uniform in all or most of the
districts.
Richmond.—At times it may seem desirable to have uniform rates, but as a
rule there is no necessity for uniformity, nor is it believed desirable.
St. Louis.—They should be initiated according to the needs of the various
districts and so will vary, but will work toward a uniform rate throughout
the country. There probably should be a differential in rate o* about 1 per
cent between New York and the strictly agricultural districts,
San Francisco.—Rates should vary among the several districts under some
conditions. If there were one rate uniform in all districts, it would usually
be a rate determined in the principal money center, New York, and usually
be an improper rate in many other districts. There should also be at times
variation influencing the flow of funds from one district or section to another.
8. Have differences in rates of rediscount prevalent in the several reserve
districts affected the interdistrict flow of funds?
Atlanta.—Yes; to some extent. Businesses of national scope seek the lowest
interest rate obtainable.
Boston.—The flow of funds between Federal reserve districts probably has
much less relation to Federal reserve discount rates than is sometimes
supposed. This flow occurs in payment of commercial transactions which
would take place in any case, regardless of discount rates, or else it occurs
in connection with stock-market loans. The latter represent usually surplus
funds which are being placed in the New York stock market in order to avoid
their remaining idle, and this transfer is made more or less regardless of
discount rates. Only in periods when conditions are more or less abnormal do
discount rates affect such transfers, and then probably only to a limited extent.
Chicago.—To a moderate extent. As between Chicago and New York, large
commercial borrowers having borrowing facilities in both cities have borrowed
in the New York market instead of in the Chicago market when the New
York discount rate has been lower. However, as a general rule Chicago commercial banks meet the rates offered to these borrowers by the New York banks.
Cleveland.—Yes, to some extent.
Dallas.—Yes. In varying degrees, however.
Kansas City.—To some degree in this district.
Minneapolis.—Yes. We believe they have quite appreciably affected the
interdistrict flow of funds.
New York.—There have been several instances when differences in reserve
bank discount rates in the various districts have appeared to influence the
interdistrict flow of funds. For example, in the spring of 1928, advances in
discount rates in several other districts appeared to check, at least temporarily,
the flow of funds to New York; and near the end of 1929, a lower discount
rate in New York than in other districts clearly resulted in some flow of funds
to other districts. Usually these movements have been hard to trace, partly
because considerable rate differentials have seldom continued over an extended
period.
Philadelphia.—As concerns the third district, to a moderate extent.
Richmond.—We believe it has.
St. Louis.—Yes; as between St. Louis and New York, and perhaps, to a small
extent between St. Louis and Chicago; but very little, if any, between St. Louis
and the other Federal reserve bank cities.
San Francisco.—As for the San Francisco district, a prolonged variation
between its rate and that of New York would result in a considerable flow of
funds.
It would be in evidence to a lesser degree if the variation were with other
important Federal reserve banks, but it would not if the variation were with
Kansas City, Minneapolis, Richmond, Atlanta, St. Louis, and Dallas.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
779
9. Need r a t e s of rediscount be changed frequently excepting a t those reserve
b a n k s located i n t h e financial centers?
Atlanta.—They
need not.
Boston.—In
order to be most effective, discount r a t e changes should be a t
infrequent intervals and sufficiently g r e a t in extent to lend emphasis to t h e
change. F r e q u e n t changes lose emphasis, and such control is better handled
through open-market operations. All F e d e r a l reserve bank cities would appear
to be financial centers. The size and the n a t u r e of t h e business done in each
financial center, the sensitiveness of its money m a r k e t to discount r a t e changes
and open-market operations should be the determining factors a s to the policy of
r a t e changes, whether t h e finnacial center wTas the center of local surrounding
t e r r i t o r y primarily or subject to national and i n t e r n a t i o n a l influences in finance.
CMcago.—No.
Cleveland.—No;
except on the basis of m a r k e d changes in conditions governing the use of credit in districts outside financial centers.
Dallas.—Frequency
of r a t e changes in any district depends primarily upon
the money m a r k e t and economic conditions.
Kansas City.—No.
The effect of r a t e changes in this district is largely
indirect and would be lessened if changes w e r e m a d e frequently.
Minneapolis.—No;
except as i m p o r t a n t changes in contiguous districts m a k e
changes necessary.
New York.—This question can be answered m o r e appropriately by t h e other
reserve banks, since this bank h a s not sufficiently i n t i m a t e knowledge of the
forces working upon an interior bank.
Philadelphia.—Discount
r a t e s should be changed as conditions require. T h a t
may be a t long intervals or frequently, depending upon circumstances.
Richmond.—We
t h i n k not.
St. Louis.—Rates
should be changed when t h e needs of any district make a
change desirable.
San Francisco.—Each
Federal reserve bank city is a financial center, a t least
in its own district, and while u n d e r some circumstances frequent changes would
be unnecessary, even a t those reserve b a n k s located in the principal money
m a r k e t s the interflow of credit between the San Francisco district a n d the
principal money m a r k e t s is sufficient t o indicate the necessity for carefully
considering a n d usually following t h e r a t e s in such principal money m a r k e t s ,
especially New York.
10. Should t h e r a t e charged on member b a n k promissory notes secured by
Government obligations be above the yield borne by those obligations?
Atlanta.—The
r a t e on member bank promissory notes secured by Government
obligations should be t h e same as the r a t e on discounted notes secured by
eligible paper.
Boston.—There
appears to be no good reason why a discriminatory r a t e
should be m a d e either in favor of or against loans secured by Government
securities. A discriminatory rate, which is simply designed to be higher t h a n
the yield borne by Government obligations, might result in sales of such obligations to the reserve b a n k s or to the open m a r k e t r a t h e r t h a n discounts of such
obligations a t t h e reserve banks.
Chicago.—Such
r a t e s should be the same as regular rediscount r a t e s and
should have no relation to the yield of Government bonds.
Cleveland.—The
r a t e of r e t u r n on Government securities should have no
relation to the rediscount r a t e .
Dallas.—Not unless t h i s principle were uniformly applied to all forms of
borrowing.
Kansas City.—Member b a n k s should be charged the prevailing discount r a t e
a t time of borrowing on such paper, without regard to t h e yield of the collateral.
Minneapolis.—We
believe t h a t the member banks should be charged the going
rediscount r a t e regardless of the yield of Government obligations.
New York.—For some years past the discount r a t e has been almost constantly
above the yield r a t e on short-term Government obligations, as shown in c h a r t on
page 768, while it has b u t a p a r t of the time been below the yield r a t e on longt e r m Government securities. This situation seems likely to continue, especially
d u r i n g the period when the Government is gradually reducing the amount of
its outstanding obligations; b u t other considerations in fixing discount r a t e s
a r e so much more important t h a n the yields on the p a r t i c u l a r paper offered as
collateral for loans, t h a t there would seem to be no reason for establishing an
a r b i t r a r y rule in this regard.
34718—31—PT 6
6
780
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Philadelphia:—The rate charged on loans secured by Government obligations
should depend upon financial conditions, not upon the rate of interest borne by
the obligation.
Richmond.—In our opinion the discount rate should bear no necessary relation
to the yield borne by Government obligations.
St. Louis.—Yes.
San Franolsco.—No. A uniform rate should apply to all borrowings. (See
answer to question 7 of questionnaire No. 7, for borrowing against United States
Government obligations.) To determine the margin of profit or loss the member bank sustains in its borrowing operations, there should be taken the difference between the rate charged for the use of Federal reserve credit and the rate
collected in the employment of such funds.
The member bank's earning position is not affected by reason of its selecting
2 per cent Government bonds instead of 0 per cent customers' paper to facilitate
the act of borrowing at the Federal reserve bank.
11. Should a higher rate be imposed on the promissory notes of member
banks secured by Government obligations than on rediscounts of commercial
and agricultural paper?
Atlanta.—Not in normal times. A recurrence of a speculative era would
cause us to consider every means to restrict the abuse of reserve credit.
Boston.—This is a debatable question. At any rate the Federal Reserve
Board and the Federal reserve banks have ample authority under the present
law to establish different rates on different classes of paper, and it might be
desirable to try out the suggestions for varying rates when a favorable opportunity occurs.
Chicago.—No.
Cleveland.—No. Borrowing or rediscounting is the result of a need for
funds to meet demands or other current operations of member banks. When
they borrow, it will be on the collateral which will give them the advantage
of the best rate and involve the least labor and inconvenience on their part.
Dallas.—No.
Kansas City.—No.
Minneapolis.-—No.
New York.—There is no particular advantage in establishing a higher rate
upon borrowings secured by Government obligations than on rediscounts of
commercial and agricultural paper. The practical effect of such a rate policy
would be merely to change the form of borrowing by member banks. There
have been only rare instances where member banks borrowing on the security
of Government obligations could not have borrowed equally well upon the
security of eligible paper taken from their own portfolios. The fact is that it
is considerably more convenient for banks to borrow against the security of
Government obligations, and for this reason they do it. This practice is
followed by a large number of country banks which like to carry a block of
Government obligations feeling that they represent a secondary reserve against
which they can readily borrow in case of need, and in practically all cases
where Government bonds are owned, borrowing will be against them before
resorting to the use of eligible paper, purely as a matter of convenience. In
the interests of sound banking it is desirable for banks to carry a reasonable
amount of Government securities in their investment account, and their ability
to borrow upon them encourages them to do this. In many cases if borrowing
could not be accomplished on governments, except at a higher rate, banks
would be inclined to substitute bonds of a higher yield but lower quality. The
principal result would be to reduce the liquidity and soundness of banks, and
that would be undesirable. This question relates closely to questions No. 7 and
No. 8 of questionnaire No. 7, in the replies to which the principles here involved
are discussed more fully.
Philadelphia.—No.
Richmond.—We think not. Loans on Government obligations are often used
by banks in this district for commercial and agricultural purposes.
St. Louis.—No. It would be desirable always to have a discount rate above
the rate that can be procured by customers who are enabled to get the benefit
of a competitive money market.
San Francisco.—No. The earning capacity of investments (whether United
States bonds or promissory notes or bills of exchange) used as a basis for
obtaining credit at the Federal reserve bank is not important. For instance,
if the rate of discount is 4 per cent and the average worth of loanable or investment funds to the member bank is 5 per cent, the use of Federal reserve funds
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
781
gives a profit of 1 per cent. This profit is neither enlarged nor diminished by
the earning rate on the specific collateral or paper used as the basis for obtaining the funds from the Federal reserve bank.
It would be a mistake to say the borrowing bank lost 2 per cent if the
specific collateral pledged to secure an advance were yielding 2 per cent, or it
made a profit of 2 per cent if the specific notes discounted yielded 6 per cent.
A bank might wish to borrow a given sum at 4 per cent to relend in a given
transaction at 8 per cent. It would not change the rate of profit if the bank
used as a basis for obtaining the funds at the Federal reserve bank its promissory note secured by United States bonds yielding 2 per cent or discounted its
customers' paper yielding 6 per cent.
12. Would the imposition of such discriminatory rates help to prevent the
seepage of Federal reserve credit into speculative security loans?
Atlanta.—It might, but it should not be applied, if at all, except in the
emergency of a speculative era, and then it should be considered in connection,
with other legitimate remedies.
Boston.—
do not believe that discriminatory rates would prevent the
seepage of Federal reserve credit into speculative security loans.
Chicago.—No.
Cleveland.—If the rate were sufficiently high, yes; but such rates would
penalize warrantable and necessary borrowings by many of our member banks.
Dallas.—We think not.
Kansas City.—No. This can best be controlled by direct pressure on offending member banks.
Minneapolis.—No. We do not think so.
New York.—The application of discriminatory rates on loans secured by
Government obligations would have very little, if any, effect upon the use made
of the credit thus released. There is no reason to suppose that credit obtained
through the discount of notes secured by Government obligations is more likely
to be used for speculative purposes than credit released through the rediscount
of commercial and agricultural paper. When a bank adjusts its reserve position and finds it necessary to borrow to do so, it does not concern itself with
the method of borrowing, but only with the fact of needing to adjust its reserves, and if loans secured by Government obligations carried a higher rate
than those secured by commercial and agricultural paper, very few such loans
would be made. The type of collateral offered for a loan, according to our
experience, has little, if anything, to do with the use made of the proceeds, and
discriminatory rates would only be effective after banks had borrowed to the
limit of their capacity on eligible paper. Such capacity is too great to permit
of reliance upon discriminatory rates to check speculation. This question also
relates closely to questions No. 7 and No. 8 of questionnaire No. 7, in the replies
to which this question is discussed more fully.
Philadelphia.—No.
Richmond.—Not in this district.
St. Louis.—No.
San Francisco.—No. This must be closely controlled by the discretionary
powers given to Federal reserve banks in the extension of credit to member
banks.
13. Would efforts at the control of credit be made more effective if rates of
rediscount should vary, as was once the case, with the maturity of the paper
offered for rediscount?
Atlanta.—Not in this district.
Boston.—Our experience has led us to believe that it is desirable for us to
maintain uniform rates on all classes of paper.
believe that rates of
rediscount should not vary with the maturity of the paper offered.
believe that it would have little or no effect on the control of credit.
Chicago.-—No.
Cleveland.—It might; but it would probably result in banks requiring customers to execute paper of short maturity, with a renewal privilege to cover
the customers' normal liquidating period, for the purpose of obtaining the most
favorable rate should they find borrowing or rediscounting necessary.
Dallas.—Probably to some extent, but such a method of control would be
dependent almost entirely on the liquidation of the paper offered.
Kansas City.-—Probably so, but in this district it would result in penalizing
the small country banks offering agricultural paper of long maturity. In furtherance of our policy of making the cost of Federal reserve credit equal to all
782
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
member banks, it is our practice to permit rediscounts to be taken up at anytime and to rebate unearned discount.
Minneapolis.—In our opinion it would not.
New York.—There would seem to be little, if any, advantage in graduated
rates of discount according to the maturity of the paper offered. Such rates
would be somewhat discriminatory as between banks according to the character
of their portfolio. There would be little other result. The larger banks in the
financial centers ordinarily have the greater proportion of paper of short
maturity. Any use of graduated rates, therefore, would impose the burden first,
and to the greatest extent, upon the smaller country banks. It is believed
such rates would have little, if any, beneficial effect in the control of credit.
The volume of very short paper held by the reserve system both in discounts'
and bills is so large that the amount of Federal reserve credit outstanding now
is adjusted to changing demand with great rapidity.
Philadelphia.—No.
Richmond.—We do not think so; a higher rate on long-time paper would
have the effect of penalizing borrowers in agricultural communities.
St. Louis.—No.
San Francisco.—No. It would lead to subterfuge, shortening maturities, and
granting renewals, and be ineffective.
14. Should rates of rediscount stand above market rates of interest on bank
loans to prime customers in your district?
Atlanta.—They should not.
Boston.—Discount rates could not stand above market rates of interest on
bank loans to prime customers. A rate sufficiently high to accomplish this
could not be made effective. Even nation-wide borrowers who can shop around
from city to city pay rates that are anywhere from one-half to 1 per cent higher
than Federal reserve discount rates under ordinary conditions, and prime
customers who can not shop around from city to city pay an even wider
spread not infrequently.
Chicago.—The rediscount rate under normal conditions should be kept at a
point equal to, or slightly in excess of, the minimum rates available to prime
customers in the large financial centers in this district.
Cleveland.—Under normal conditions; yes.
Dallas.—We would answer this question in the affirmative were it not for
the existence of a large volume of agricultural paper in this district and the
high statutory contract rates applicable to such paper. As the situation now
stands if the rediscount rate were above the rate on bank loans to prime customers it would be a discrimination against city banks.
Kansas City.—No. Should this be done our discount rate would be higher
during much of the time than rates which could be made to our member banks
by large commercial banks in the financial centers, and would thus impair the
relationship between this bank and its members and occasion an unnatural
shifting of demands for Federal reserve credit from one district to another.
Minneapolis.—We believe it is impractical to charge a rediscount rate higher
than the commercial rate.
New York.—The answer to this question depends largely upon one's judgment
as to the probable consequences of an attempt to place the discount rate above
the bank customers' rate.
The question may first be asked whether the maintenance of such a relationship is possible. There is in the first place a wide difference between rates to
prime customers in various localities, and a discount rate above the customers'
rate in small centers would be prohibitive in larger centers. But restricting
the question to the lowest customer rate in large cities, there have been twice
in the history of the system when the discount rate has been above these rates.
The first was for a few months in the early history of the system when the
member banks were not borrowing. The only other time was in 1920 when a
number of reserve banks had a 7 per cent rate. At other times rates to
customers have been kept above reserve bank rates. Raises in Federal reserve
rates have been followed promptly by changes in bank customer rates except
in a few cases where the discount rate followed customer rates at some distance.
These relations are shown in the following chart. Generally speaking, banks
may be expected to charge their customers more than the Federal reserve discount rate. This relationship of customer rates and bank of issue discount
rates is maintained generally in other countries. The only way for the
reserve system to achieve a different relationship would appear to be through
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
783
such large purchases of Government securities as would put the banks out of
-debt at the reserve banks. As soon as the banks again became borrowers
customers' rates might be expected to go above the discount rate again.
But even if we assume that some plan could be devised for placing the discount rate above the bank rate to customers a second question would arise as to
the economic consequences of a discount rate which under these circumstances
would be considerably higher than the rates which have been customary in the
past. It is difficult to see how such a rate position could be maintained without
attracting further gold imports and consequently exerting considerable pressure
upon the international money markets and thus indirectly upon American prices
.and trade.
RATE
81—
' CUSTOMERS' RATE
AT COMMERICAL BANKS^-K
\M
EL
ft
re
DISCOUNT RATE
F R. BANK OF N. Y
1922 23 '24 25 '26 27 28 29 30
31
Discount rate Federal Reserve Bank of New York compared
with rate charged bank customers of New York City
banks on prime commercial paper
As far as the theoretical aspects of the question are concerned it has heen
our observation that carefully operated banks do not feel that they make a
profit by borrowing at the reserve bank at a discount rate somewhat lower than
the rate they charge their best customers. For in the case of the loans to
customers the bank has to assume the cost of administration of the loan and
the risk involved which must be added to the cost of securing money from the
foank of issue. The discount rate has usually been higher than the rate which a
fcank figures it can afford to pay for money and relend profitably. This has
-almost always been true of the large city banks.
We should not wish to take the position, however, that the precise relationships between discount rates and other money rates which have characterized
the past 10 years are necessarily permanent and unchangeable. It may be that
in the future a somewhat higher discount rate relative to other money rates
may be desirable and possible, particularly if accompanied by an open market
policy under which only small amounts of member bank borrowing are necessary. The solution of this problem can be worked out only in the light of the
future experience and will depend upon any changes which may occur in the
attitude of member banks toward borrowing, the influence of the rate on gold
movements, and other factors.
Philadelphia.—The rates of interest on bank loans to prime customers are
made by the banks. It will be found that if reserve banks discount rates are
properly adjusted to market conditions that the rates on bank loans to prime
customers generally will be maintained somewhat above the established discount rate. The established discount rate should be an accurate indicator of
the demand for credit, the amount available for use, and other monetary conditions. As the member banks may have to rediscount at such rates, it is
only natural that they should fix their loaning rate slightly above that.
Richmond.—In theory it would seem so, but we believe it to be entirely impracticable.
784
NATIONAL AND FEDEEAL EESEEVE BANKING SYSTEMS
St. Louis.—Yes. See No. 11, above.
San Francisco.—No. That practice would be discriminatory, in that it would
lead to fixing rate involving a loss upon some borrowing banks and still leave
others, particularly rural banks, with a considerable margin of profit derived
from rediscounting.
15. Assuming that European central banks have found it desirable to maintain rates of rediscount above market rates, what factors have made the adoption of this practice unnecessary in the United States?
Atlanta.—In the first place, ours is- a comparatively new and undeveloped
country. Secondly, in our district, member banks rediscount ordinarily for the
purpose of maintaining their reserves and of supplying the needs of their customers, and not primarily to profit by the difference between the iediscount
rate and the rate charged customers. The apparent difference in the rate policies of European central banks and that of the Federal reserve banks may be
due in part to the fact that in England the bank rate is the rate which applies
to bankers' acceptances, while in this country, the rediscount rates of the
Federal reserve banks apply to customers' paper. In both countries the bank
rate is higher than the open market rate on bankers' acceptances and is lower
than the rate on customers' or open market commercial paper.
Boston.—There is some question as to the definition of what constitutes
" keeping above the market." It would be difficult for a Federal reserve
bank in the interior to keep above its local market if measured by local
bank rates to prime commercial customers. The criterion for determining discount rates in such interior districts, as in financial centers, is the open market
rate and in those districts where no acceptance market exists, the best measure
might be the rate charged by eastern correspondent banks to banks located in
such interior district; or, if these banks have nation-wide commercial borrowers, the rate which they could obtain from such commercial customers might
have a bearing. Even in this case, however, it would be impracticable to keep
the discount rate above the market. On the other hand, if we compare the
discount rate with the open market rate on acceptances as being the measure
of the open market, it would be found that the Federal reserve bank discountrates are above the market in much the same sense as European rates are above
the market. Furthermore, in the case of the Bank of England the published
discount rate does not correspond exactly with our published discount rates
since the rate at which the Bank of England makes certain advances is invariably one-half of 1 per cent higher than the published discount rate. Furthermore, it must be remembered that advances are made to commercial customers by the joint-stock banks in London largely on overdrafts, and I believe
that this overdraft rate fluctuates with the Bank of England rate, generally
being 2 per cent above that rate. This brings the relationship that exists in
this country between our Federal reserve discount rate and the rates made to
commercial customers by the member banks.
Chicago.—It is our belief that the rediscount rate in this country should
be maintained at a point equal to or slightly in excess of the minimum rates
accorded to prime borrowers in the financial centers.
Cleveland.—In our opinion the controlling factor, war financing, made such
a policy inexpedient, but there are other reasons, such as dissimilar banking
practices that obtain abroad, smaller territory covered with fewer banking
units than obtain here, direct operations and contact with the public by central
banks abroad, dissimilar commercial customs affecting the types of paper
issued in trade abroad as against our direct borrowing to enjoy discounts
offered by the trade, etc.
Dallas.—We do not know of the existence of any factors that have made it
unnecessary, but feel that it is probably at this time undesirable or at least
impracticable. We mention again the varying high statutory contract rates in
the several States. Usury laws are matters of State legislation. While it
would be desirable fundamentally for Federal reserve banks to penalize rediscounting transactions, it would seem to be wholly futile to attempt it under
the present system of banking in the United States. Credit extension in European countries is concentrated in a few banking institutions. The countries
are older and the science of credit has progressed far beyond what it has in
the United States, while in this country the banking business is carried on by
approximately 25,000 separate banking units under all sorts of conditions and
individual ideas of credit extension. The only approach to credit control
through the discount rate would, in our opinion, be the establishment of rates
of rediscount fractionally higher than the rate at which the paper offered had
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
785
been originally discounted for the maker by the offering bank. This would
insure that the banks would rediscount at the Federal reserve bank only for
adjustment purposes and would, therefore, discourage the use of reserve credit
as supplementary credit, as well as discourage the overextension of credit
generally. Barring emergencies, it would more nearly confine banks' loan operations to their own resources, and borrowing at the Federal reserve bank
would normally be of short duration.
Kansas City.—There is such a variance between rates in different sections
of this country and in different cities or sections of a single Federal reserve
district, and bank rates in many sections of this country are so high, that
maintenance of discount rates in excess of market rates would be unwise.
Minneapolis.—Because of the variation of rates in different parts of this
country, we believe that the European practice will prove impractical. The
comparison made with the foreign countries is with the current bill rate.
Using the same comparison in this country, the Federal reserve rediscount
rate is normally above the bill rate.
New York.—The commonly quoted rates in European countries, above which
central bank discount rates in the respective countries ordinarily are maintained, are bill rates corresponding in this country to offering rates for bankers'
acceptances. It is usually the case in this country that Reserve bank discount
rates are above bill rates. In most European countries there is nothing corresponding closely to our commercial paper rates, which are so frequently
taken as representative of open market rates here. Rates charged on loans or
advances to customers are usually above central bank discount rates in European countries, the same as in this country. Some of the more important
European central banks do not make direct loans to the commercial banks, and
their discount rates, therefore, have an entirely different application so that it
is difficult to make valid comparisons. For instance, the official discount rate
of the Bank of England is the minimum rate at which the bank will purchase
bills at its head office.
Philadelphia.—Is it true that conditions have made the adoption of this
practice unnecessary?T To what does the European bank rate refer? If to
bankers' bills, then w e have been in harmony with their practice as the rate for
bankers' acceptances always is below our discount rate. This question involves
a matter of terms. It should be noted that the market rate in London is that
at which prime bankers' bills are sold; in this country we have market quotations for three kinds of obligations—call loans, commercial paper and bankers*
bills. European banks do not know call loans and commercial paper as we do,
so in a way we do not talk the same language. Further, the Bank of England
is not restricted to the use of one rate. It has the established rate which
seems to be officially recognized as the standard for money rates in London,
but it also uses what it calls its " current rates," which are fixed by the nature
of the risk, its time to run, and other conditions, and are constantly changing
and never are made public.
Richmond,—The great extent of the country; the very large number of
banks; the varying interest rates in different States and sections. There is
thus no uniform market rate. Central bank rates abroad, as we understand
it, are related more intimately to the bill rate, which is a more dominant
factor in foreign money markets than in our market.
St. Louis.—It has not been unnecessary, but is impracticable on account of
the varying rates allowed by law in the different States.
San Francisco.— (a) The wide variation in conditions.
(6) The wide variation in loaning rates. The general disposition, still obtaining in a large number of banks, particularly in banks in the country, to
maintain a permanent level of rates uninfluenced by fluctuations in the money
market.
16. What rates of interest in your district should be taken as constituting
a measure of market rates of interest?
Atlanta.—To the extent that the banks in the sixth district invest their
funds in the New York money market, the rates effective in that market are
applicable to the member banks of this district. Rates of interest originating
in and constituting a measure of market rates in the sixth Federal reserve
district are:
1. Rates charged by banks to customers on prime commercial loans.
2. Rates charged customers on security and commodity loans.
3. Rates charged customers on farm mortgages.
4. The yield on local municipal bonds.
786
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Boston.—1. Open market asking rate for bankers' acceptances.
2. Ruling rates on commercial paper handled by brokers.
3. Rates charged by Boston banks to best commercial customers.
Chicago.—The minimum rates accorded prime borrowers in the financial
centers.
Cleveland.—The rate made to prime borrowers with credit available in more
than one district and the rate to prime borrowers who borrow entirely within
the district.
Dallas.—That rate which is granted the customers of city banks who fall
in the class of being able to borrow at the lowest rate level in the country,
or whose position is subject to natural competitive influences.
Kansas City.—Nominal rates in the four Federal reserve bank and branch
cities of the district, as reported by representative banks for November, 1930,
were as follows:
Kansas
City
Prime commercial paper
On prime stock exchange collateral.
Secured by warehouse receipts
Inter-bank loans
4^-5
5}£-6
5 -6
53^6
Omaha
4^-5
6 -6H
6
53^-6
Denver
5^-6
5^-6
6 -7
6
Oklahoma
City
5-5H
8
6-8
6
Country bank rates to customers range from 6 to 10 per cent. Loans at 6
per cent are unusual, but in some sections 8 or 10 per cent are customary and
apply to practically all loans made. From the foregoing the difficulty of determining a measure of market rates is apparent. A reasonably satisfactory
measure would seem to be the average of rates charged by representative
banks in the four cities named above.
Minneapolis.—The weighted average of the commercial rates made by large
banks to their prime customers in the cities of St. Paul and Minneapolis.
New YorTo.—The various rates of interest quoted in this district represent
an appraisal of the credit factor with respect to the loaning of money. The
lowest rates are the yields upon bankers' acceptances and short-term Government obligations. These rates may be said to represent the going rates for
money practically without credit risk and with the minimum of risk of changing values. The higher rates yielded by longer term Government obligations
also relate to an obligation with minimum credit risk, but carrying some measure of risk as to intermediate market value due to the changes in money and
security market conditions. This rate, therefore, is somewhat higher than on
short-term obligations. Rates on commercial paper and customers' loans, in
comparison with those charged on acceptances and short-term Governments,
reflect a charge for the use of the money, plus a charge for the assumption of
a degree of risk which is involved in the making of such loans or investments.
Rates on street loans at call or on time against stock-exchange collateral represent little risk but reflect their ineligibility for rediscount by a reserve bank.
Since these various rates apply to loans made under different conditions, it is
not possible to say that one constitutes a better measure of market rates than
another. These rates will generally move in the same direction and with
about the same relative spread between them.
Philadelphia.—The rates of interest in this district are effected, first, by the
rates for call and time money in New York because of the facility with which
our banks can loan money there; second, by the rates for commercial paper
which are more or less national; third, by the market for excess reserve bank
balances; fourth, by the commercial demand for money; fifth, by the reserve
condition of the banks; and sixth, by the trend of business.
Richmond.—In five divisions of this district the legal rate of interest is 6
per cent; in one State it is 8 per cent. Favored customers or large customers
obtain better or different rates in all sections. It is not believed that there is
any uniform measure of market rates of interest in this district.
St. Louis.—The rate charged by banks to customers able to take advantage
of a competitive money market. As these are mostly located in St. Louis, this
market rate generally exists here. Other cities in the district usually have a
higher market rate.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
787
San Francisco.—A composite of open-market rates for prime " commercial"
paper and the counter rate charged large borrowers whose unsecured obligations are available for discount at the Federal reserve bank. At times the
rates governing prime bankers' acceptances also should be taken into
consideration.
17. May the rate on bankers' acceptances be included in computations of
market rates of interest, inasmuch as the reserve banks, buying for own and
for foreign account, have constituted the principal market V
Atlanta.—The bankers' acceptance is used only to a limited extent in this
district, and in only one city to a considerable extent. It is undoubtedly true
that the Federal reserve banks have been largely instrumental in initiating
and building up a market for acceptances in this country, and in so doing they
have exercised a very powerful influence on open market rates. As the dependence of the market on the Federal reserve banks for a demand for acceptances is decreased, to that extent will the rate on acceptances be more strictly
an open-market rate.
Boston.—Yes. Because acceptance rates are the most sensitive of any of our
various classes of money rates (exclusive of brokers' call money) and even
though Federal reserve banks furnish the principal market for acceptances
these rates move more quickly and are more sensitive than the rate on prime
brokers' commercial paper or rates made to customers by the banks.
Chicago.—No.
Cleveland.—Not in this district, because of the limited amount of bankers*
acceptances made or purchased.
Dallas.—We believe that bankers' acceptance rates can rapidly become an
element in the computation of market rates of interest as the market becomes
broader and is confined less to Federal reserve banks and foreign accounts.
We believe that the volume of bankers' acceptances held by Federal reserve
banks will become more and more an index of the oversupply or undersupply
of funds in the market as the market for bankers' bills is broadened and the
volume of Government securities declines. We have had the feeling from
time to time that the rates for the purchase of bankers' bills by Federal reserve banks have been made too low, and arbitrarily so through an overanxiety
as to the possibility that higher rates might unduly restrict the volume of bills
offered to the Federal reserve banks.
Kansas City.—Do not think it should be in this district, where there is no
active acceptance market and where acceptances are used to such slight extent
in financing or as investments for member banks.
Minneapolis.—In this district, we do not think so.
New York.—Rates on bankers' acceptances must be included in any consideration of market rates of interest. Reserve bank buying rates generally follow
rather than lead the market for bankers' acceptances. Purchases of bills made
by the reserve banks for foreign account are made at market rates and not at
the reserve bank buying rate. In recent years the general movements of
acceptance rates have been very similar to movements in other rates, such as
commercial-paper rates. (See accompanying chart showing reserve-bank holdings in relation to outstanding acceptances, also chart showing various money
rates.) Reference is made to the answer to question 12 of questionnaire 10,
which is closely related to this subject.
Phila delphia.—Yes.
Richmond.—We believe that the rate on bankers' acceptances may be
included.
St. Louis.—Not in this district.
San Francisco.—It can not be disregarded at a time when there is (outside
the Federal reserve banks) an active investment demand for bills. Apparently,
in recent years, buying for foreign account has had more effect in fixing the
rate than has buying by the reserve banks for their own account. It is
probable that discontinuance of buying for foreign account would result in
better adjustment of rates and better distribution of bills.
18. Would it give the reserve banks a greater measure of credit control to
enact a provision permitting the application of progressive rates of rediscount?
Atlanta.—Theoretically it would give a greater measure of credit control, and
it would seem to be especially fair to the member banks not using a large
amount of reserve-bank credit to be able to use such credit at a fair rate rather
than at the maximum rate which might have been put into effect to hold down
the excessive borrowings of certain banks. On the other hand, the banks in
this district, with few exceptions, borrow only to meet the actual requirements
788
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
of their customers, and the application of progressive rates of rediscount would
serve only to unduly penalize a bank that needed to borrow most. Our experience with progressive rates of discount has shown them to be unsatisfactory
and ineffectual as a measure of credit control.
Boston.—Progressive discount rates were proven dangerous and ineffective
during the postwar inflation period. They did not afford satisfactory credit
control.
PER CENT
7
PER CENT
MONEY RATES IN NEW YORK
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Accept ance Rat e
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1926
1927
1928
1929
1930
MILLIONS OF DOLLARS
2500f
2,000
1.500
1,000
500
•RESERVE BANK!
1927
1928
1929
1930
Volume of bankers' acceptances outstanding showing proportion held by Federal reserve
banks for own account, proportion held for foreign correspondents of Federal reserve
banks, and the proportion held by others, 1927-1930
Chicago.—No; in the light of experience gained in other districts which have
given progressive rates a trial.
Cleveland.—Yes.
Dallas.—We prefer administrative control to the application of progressive
rates of rediscount.
Kansas City.—Probably so, but in this district the penalty of payment of
maximum rates would fall for the most part on small banks which are legiti-
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
789
mately serving commerce and agriculture or which are forced to borrow
relatively large amounts because of financial difficulties. The theory of
progressive rates appears sound, but past experience indicates its psychological
effect to have been bad. Operation of the progressive discount rate in this
district caused ill feeling between member banks and the Federal reserve bank,
and, in some cases, forced a poorly timed liquidation of loans on livestock and
other commodities.
Minneapolis.—We are opposed to the application of progressive rates of
rediscount as a method of credit control.
N<ow Yorh.—Progressive rates of rediscount would presumably be enforced
against banks borrowing large amounts in relation to their size or for longer
periods of time. It is our experience that the banks which would most frequently be subject to progressive rates are those banks the total of whose
borrowings has no material effect upon the credit structure. Since small banks
generally borrow proportionately more than large banks, such progressive
rates would be applied principally to small country banks. The borrowings of
large banks in the financial centers, measured by any yardstick which would
not impose a hardship upon the majority of small banks, would seldom be
subject to the progressive rate.
Philadelphia.—Probably it would.
Richmond.—We believe it would.
St. Louis.—Yes.
San Francisco.—No. Progressive rates of rediscount, while perhaps theoretically attractive, are extremely inequitable. The attempt to apply progressive rates led to situations which were vicious and which probably justified
the violent antagonism aroused by that practice.
19. Would it be desirable to enact a provision permitting the reserve banks
to charge borrowing member banks, which have funds on the brokers' loan
market, a rate of interest equal to or above the average call loan renewal rate?
Atlanta.—No. In an era of excessive speculation a reserve bank should
refuse to advance to a member bank which has funds invested in brokers' loans.
Boston.—No. This would be a provision which would be almost impossible
to enforce, owing to lack of up-to-the-minute data and to inevitable evasion of
the provision. It is doubtful if it possibly could accomplish any good, and might
in emergencies seriously aggravate a strained credit situation.
Chicago.—No; not practicable.
Cleveland.—-While it would be effective, we believe it would not be desirable
because other means of control can be exercised.
Dallas.—This provision might be desirable if it could be inaugurated at a
time like the present and kept in step with the increased volume of loans on
stock-exchange collateral; but, if suddenly applied as a penalty, might invite
disaster. However, the method of administrative control is preferable in this
district.
Kansas City.—No. Instead of this indirect method of preventing abuses of
the use of Federal reserve credit, direct action should be taken by withholding
Federal reserve credit whenever such action is deemed advisable by the Federal
reserve bank concerned or by the Federal Reserve Board.
Minneapolis.—No.
Netv York.—In our opinion it is impracticable to attempt to impose such restrictions upon the use of Federal reserve credit, and we think it would not
be desirable to enact such a provision. This question is discussed more
thoroughly in our answer to question No. 8 of questionnaire No. 7.
Philadelphia.—No. For years it has been good banking practice for banks
to loan money on their brokers' loan market. The ability to do that gave a
flexibility and steadiness to the money market that otherwise would have been
impossible. Such loans are criticizable when banks are abusing their discount
privilege with their Federal reserve banks to do it. The officers of any reserve
bank can know when a member bank is doing that and take measures
to stop it. We do not recommend any change in law in that respect.
Richmond.—We do not believe so.
St. Louis.—A bank having excess money on call may in a day or so lose a
substantial amount of deposits which it has every reason to believe is only
very temporary. It would seem reasonable to allow such a bank to discount
without penalty until it found that the loss of deposits was permanent; then
some penalty provision might be desirable.
San Francisco.—No. It would not be expedient and should not be necessary
as a means of credit control. The misuse of Federal reserve credit by a borrowing bank is sufficient justification for limitation or denial of credit.
790
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
20. What measures have been taken in your district to prevent member banks
from borrowing from the reserve bank to profit by the difference between rates
of rediscount and the lending rates in the market?
Atlanta.—Under date of February 2, 1929, this bank received a letter from
the Federal Reserve Board stating that a member bank was not within its
reasonable claims for rediscount facilities at its Federal reserve bank when
it borrowed for the purpose of making or maintaining speculative security
loans. The Federal Reserve Bank of Atlanta expressed itself as being in full
accord with this stated policy of the Federal Reserve Board, and a letter
was addressed by an officer of this bank to each member bank in the district
requesting their cooperation in restricting the diversion of Federal reserve
credit into speculative channels. The response to this letter by the member
banks was very gratifying. A check was made of the condition reports of
member banks for the call of March 27, 1929, and there were only six banks
which were rediscounting at the Federal reserve bank and at the same time
had loans to brokers and dealers in New York. On April 30, 1929, a letter wasaddressed to these banks by an officer of the Federal reserve bank, calling their
attention to the opposition of their condition to the policy of bank on this question. Again in May. 1929, an officer of this bank wrote a letter to each of the
larger banks in the district which were rediscounting with the Federal Reserve
Bank of Atlanta, asking for specific information regarding their loans on
securities. The replies to these letters were altogether satisfactory, and the
steps taken to correct the evils in the existing situation at this instance were
satisfactorily and immediately effective.
Boston.—Usually individual persuasion and moral pressure. This has been
effective in that there are very few steady borrowers in this district. Of
course, practically all money borrowed from reserve banks is reloaned at a
profit by the member banks, but in so far as these borrowings are of a temporary nature to meet seasonal or emergency conditons, the Federal reserve
bank is fulfilling its purpose in making such advances. Only where this privilege is abused, as indicated by steady borrowing, does it require correction and
the scarcity of steady borrowers in this district indicates that such correction
has been promptly administered.
Chicago.—Personal interviews with officers of such banks as are suspected of
such practice.
Cleveland.—When it appeared to us through reports, conferences, or correspondence that there was a tendency to borrow for profit we have had no
hesitancy in conferring or corresponding with the offending banks and insisting upon correction. In most cases the banks have cooperated without the
need of additional pressure. In some few instances active steps were taken to
effect correction. The latter meant threat of or actual refusal to grant loans
or rediscounts until the desired correction was made.
Dallas.—Calling the line of the borrowing bank indulging in the practice,,
which has been done, however, only in one instance (on October 7, 1929), after
exchange of voluminous correspondence and by declining to extend credit where
it was obvious that such purpose was to profit by this practice. We have had
only one other case where there was any evidence of Jack of cooperation.
Fortunately we have not had many instances of that sort.
Kansas City.—The policy of the bank, as expressed from time to time in correspondence and public statements, has always been that member banks should
not borrow from the Federal reserve bank for the purpose of reloaning at a
profit. Aggravated cases of such practices have been dealt with individually.
Early in 1929, when the abnormally high call-loan rates were attracting bank
funds, including funds of some banks which were borrowing from us, a letter
reiterating the bank's policy was sent to each member bank in the district. A
copy of this letter follows:
FEDERAL RESERVE BANK OF KANSAS CITY,
Kansas City, February 18, 1929.
To the member banks of district No. 10:
The Federal Reserve Board statement made public on February 7, 1929,
dealing with the importance of preventing the seepage of Federal reserve credit
into uses not contemplated by the Federal reserve act is attached hereto for
your information and consideration. It is requested that all member banks in
this district give their support to the policy therein set forth.
The position outlined in the statement by the Federal Reserve Board is in
accord with the policy and practice of this bank, and we are pleased to state
that this policy has heretofore been followed by our member banks almost
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
791
universally and that we confidently expect it to have the support of all member
banks.
Very truly yours,
M. L. MCCLURE,
Chairman Board of Directors.
The following statement, which will be printed in the Federal Reserve
Bulletin for February, 1929, was made public by the Federal Reserve Board
on February 7, 1929:
The United States has during the last six years experienced a most remarkable run of economic activity and productivity. The production, distribution,
and consumption of goods have been in unprecedented volume. The economic
system of the country has functioned efficiently and smoothly. Among the
factors which have contributed to this result, an important place must be
assigned to the operation of our credit system and notably to the steadying
influence and moderating policies of the Federal reserve system.
During the last year or more, however, the functioning of the Federal reserve
system has encountered interference by reason of the excessive amount of
the country's credit absorbed in speculative security loans. The credit situation
since the opening of the new year indicates that some of the factors which
occasioned untoward developments during the year 1928 are still at work. The
volume of speculative credit is still growing.
Coming at a time when the country has lost some $500,000,000 of gold, the
effect of the great and growing volume of speculative credit has already
produced some strain, which has reflected itself in advances of from 1 to 1%
per cent in the cost of credit for commercial uses. The matter is one that
concerns every section of the country and every business interest, as an
aggravation of these conditions may be expected to have detrimental effects
on business and may impair its future.
The Federal Reserve Board neither assumes the right nor has it any
disposition to set itself up as an arbiter of security speculation or values. It is,
however, its business to see to it that the Federal reserve banks function as
effectively as conditions will permit. When it finds that conditions are arising
which obstruct Federal reserve banks in the effective discharge of their function
of so managing the credit facilities of the Federal reserve system as to
accommodate commerce and business, it is its duty to' inquire into them and to
take such measures as may be deemed suitable and effective in the circumstances
to correct them; which, in the immediate situation, means to restrain the use,
either directly or indirectly, of Federal reserve credit facilities in aid of the
growth of speculative credit. In this connection, the Federal Reserve Board,
under date of February 2, addressed a letter to' the Federal reserve banks,
which contains a fuller statement of its position:
" The firming tendencies of the money market which have been in evidence
since the beginning of the year—contrary to the usual trend at this% season—
make it incumbent upon the Federal reserve banks to give constant *and close
attention to the situation in order that no influence adverse to the trade and
industry of the country shall be exercised by the trend of money conditions,
beyond what may develop as inevitable.
"The extraordinary absorption of funds in speculative security loans which
has characterized the credit movement during the past year or more, in the
judgment of the Federal Reserve Board, deserves particular attention lest it
become a decisive factor working toward a still further firming of money
rates to the prejudice of the country's commercial interests.
" The' resources of the Federal reserve system are ample for meeting the
growth of the country's commercial needs for credit, provided they are competently administered and protected against seepage into uses not contemplated
by the Federal reserve act.
" The Federal reserve act does not, in the opinion of the Federal Reserve
Board, contemplate the use of the resources of the Federal reserve banks for
the creation or extension of speculative credit. A member bank is not within
its reasonable claims for rediscount facilities at its Federal reserve bank
when it borrows either for the purpose of making speculative loans or for the
purpose of maintaining speculative loans.
" The board has no disposition to assume authority to interfere with the
loan practices of member banks so long as they do not involve the Federal
reserve banks. It has, however, a grave responsibility whenever there is
evidence that member banks are maintaining speculative security loans with
792
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
the aid of Federal reserve credit. When such is the case the Federal reserve
bank becomes either a contributing or a sustaining factor in the current volume
of speculative security credit. This is not in harmony with the intent of the
Federal reserve act nor is it conducive to the wholesome operation of the
banking and credit system of the country."
Minneapolis.—Very few such cases have arisen in the ninth Federal reserve
district and these have been adjusted readily by our suggestion of the impropriety of such borrowing.
New York.—Where circumstances have indicated to us that there is a definite purpose on the part of the bank to borrow primarily with the view to
profit, we have discussed the situation with the officers of the bank, and suggested the propriety of its making such adjustments in its affairs as would
bring its borrowings into line with those of other banks. These interviews are
usually effective. Generally such influence as we have attempted to exert upon
the borrowings of banks other than through the discount rate has been in the
direction of restricting either the use of an undue amount of credit, or borrowing for an undue length of time by banks which in either respect were distinctly out of line with other banks doing a similar type of business. Since
banks ordinarily borrow at the reserve bank only for the purpose of restoring
impaired reserves, it is practically impossible to identify a loan at the reserve
bank with any particular loan or loans made by the member bank. Banks do
not like to be in debt at the reserve bank more than necessary. They also consider there is some cost to them in making a loan over and above the cost of
the money, so that generally speaking we believe there is only a limited amount
of borrowing for a profit, confined principally to country banks.
Philadelphia.—We have refused to rediscount for such banks.
Richmond.—Constant efforts have been made to prevent banks from borrowing for profit, both by correspondence and by personal interviews with officials.
Continuous borrowing has been uniformly discouraged.
St. Louis.—Moral suasion.
San Francisco.—Invariably, there is some profit in the spread between the
Federal reserve bank rate and the rate of interest charged customers. The
Federal reserve bank takes no cognizance of this unless it is found that the
member bank is using credit obtained from the Federal reserve bank for
other purposes than its legitimate needs for the accommodation of its regular
customers. Abuses, when observed, have been adjusted promptly by personal
contacts with officers of the member banks concerned.
21. What changes, if any, would you suggest be made in the provisions of
the Federal reserve act relative to the fixing of rates of rediscount at the
reserve banks?
Atlanta.—The provisions of the Federal reserve act. providing for the fixing of rediscount rates by the directors of each Federal reserve bank for that
bank, with the approval of the Federal Reserve Board, furnishes all provisions necessary relative to the fixation of such rates.
Boston.—-Federal Reserve Board control over discount rates should be
advisory rather than direct or mandatory.
Chicago.—No suggestion.
Cleveland.—We see no occasion for any change.
Dallas.—This involves a recognition of two schools of thought. One takes
the language of the act literally where it states that such rates of rediscount
should be " fixed wth a view to accommodating commerce and business," and
takes the position that Federal reserve credit is adjunctive or supplementary
credit. The other school believes that Federal reserve credit is reserve credit
and therefore should be used only for adjustment purposes or in individual
emergencies. The latter school evidently believes that the phrase " with a
view of accommodating commerce and business " was intended to include in
its connotations the purpose of preventing credit from being administered in
such a way as to produce an inflationary, and therefore detrimental, effect
upon commerce and business. This question also involves consideration of
the principle of permitting a margin of profit between the rate charged by
the member bank and the rate of rediscount. Assuming that the directors
of the reserve banks are capable and have no self interest to serve, we believe they are the best fitted to establish a rediscount rate in their own districts and should be more conversant than anyone else with the factors underlying the rate structure. There is also the question, which seems to be
undetermined, whether the power to " review and determine " is merely a veto
power or whether it also includes the right of determination or initiation. As
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
793
to a specific suggestion, we should say that paragraph D of section 14 should
be clarified and should state specifically that it is the duty of the directors of
each Federal reserve bank, and they shall have the power, to establish from
time to time rates of discount to be charged by the Federal reserve bank, and
that the power of the Federal Reserve Board shall be that of veto by a vote
of five members.
Kansas City.—Existing provisions satisfactory.
Minneapolis.—We think that no changes in this part of the Federal reserve
act are necessary.
New York.—None.
Philadelphia.—None.
Richmond.—We think no change should be made.
St. Louis.—The language of the act might perhaps be clarified so that there
would be no question about present procedure.
San Francisco.—By clarifying provisions protecting and preserving the
autonomy of the Federal reserve banks beyond question. By clarifying provision regarding changing discount rate to make it certain that the rate (having been reviewed and determined by the Federal Reserve Board) can not be
changed without concurrence of the board of directors of the bank and the
Federal Reserve Board.
QUESTIONNAIBE No. 9
The Open-Market Operations
The open-market policies of the reserve banks have been frequently cited
as one factor in the expansion of security loans. Particularly have the purchases of securities in 1924 and in 1927 been held responsible for the rapid
increase in member-bank credit that took place during those years. The
object of this questionnaire is to inquire into the technique of open-market
operations and dealings in United States securities and into the relationship
between these and brokers* loans:
CONCERNING O P E N - M A R K E T
ACTIVITIES
1. As of the end of each month since January, 1922, give on an attached
schedule:
(a) The amount of United States securities held in the portfolio of your
reserve bank which were purchased through the open-market investment
committee.
(b) The amount of United States securities held which were purchased
locally or independently of the open-market investment .committee.
(c) The amount of resale agreements entered into with dealers in United
States securities.
2. State the principal reasons for each of the major operations in the
purchase and sale of United States securities since January, 1922. What have
been the main consequences of each such operation?
3. What, in your opinion, has been the effect since 1922 of changes in the
portfolio of United States securities and bankers' acceptances held by all
Federal reserve banks, on fluctuations in brokers' loans and on fluctuations
in security loans and investments of all member banks and of member banks
in your reserve district?
4. Viewed in the light of subsequent events, what policies should the Federal
reserve banks have followed in the purchase of United States securities in
1924 and 192TT?
5. What changes would you suggest be made in the provisions of the Federal
reserve act relative to the purchase and sale of United States Government
securities by the reserve banks? Would you favor an amendment to the effect
that an affirmative vote of five members of the Federal Reserve Board be
required before any large sale or purchase of United States securities be
undertaken by the reserve banks?
CONCERNING RELATIONS W I T H DEALERB I N U N I T E D STATES
SECURITIES
6. Have the resale agreements entered into by the Federal reserve banks
with dealers in United States securities tended to offset on any occasion the
open-market policies of the Federal reserve banks?
7. List on an attached schedule the changes in rates of interest charged
dealers in United States securities against resale agreements from the inception
of such arrangements by your institutions.
8. List the names of the recognized dealers in United States securities in
your district. What net worth must a recognized dealer possess? What other
standards has your institution set up in determining whether a dealer in United
States securities is to be recognized or not?
9. What margin requirements do you habitually exact in lending- to dealers
in United States securities under the resale agreements?
10. What is the average length of life of the resale agreements entered into
with dealers in United States securities?
11. In lending to dealers in United States securities under resale agreements
what precautions does your institution take in preventing Federal reserve
credit from seeping into the speculative or investment markets?
794
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
795
Digest of Beplies Keceiv-ed from the Different Federal Reserve Banks
QUESTION NO. 1.—Relative to the volume of United States securities held as
of the close of each month since January, 1922, purchased: (a) Through the
open market investment committee; (&) independently; and (c) from dealers
through the device of resale agreements.
For the data called for under (a), (&), and (c), see statistical appendix.
The Federal Reserve Banks of Atlanta, Dallas, Kansas City, Minneapolis,
Philadelphia, Richmond, St. Louis, and San Francisco reported that United
States Government securities had not been taken under resale agreements.
QUESTION NO. 2.—Relative to principal reasons for, and main consequences of,
each of the major operations in the purchase and sale of United States securities since January, 1922.
Purchases and sales of United States Government securities through 1922
and 1923 were conducted before these operations had been placed under the
supervision of the open-market investment committee. Details of execution
were handled by a committee of governors of the Federal reserve banks. The
formulation of policies had not as yet been delegated to the committee and
were not until April 13, 1923. The first major operation to be handled in
joint-system account was the purchase of securities beginning December, 1923.
From that time open-market policies were formulated by the open-market
investment committee, as constituted by the Federal Reserve Board, until, on
March 25, 1930, it was succeeded by the open-market policy conference.
The main operations in the open market, the reasons for and the consequences of each as given in the replies of the Federal reserve banks follow:
1. January, 1922, to May, 1922, purchase of $400,000,000.
Reasons for.—To enable the Federal reserve banks to meet operating expenses
and dividend requirements.
Consequences of.—Reduction of member bank borrowings; decline in interest
rates; increase in total volume of bank credit, including investment holdings
and security loans; increase in brokers' loans; stimulation of recovery in
business and agriculture.
2. June, 1922, to July, 1923, sale of $525,000,000.
Reasons for.—To assist the United States Treasury Department with its
redemption operations; to restrain an over expansion in production; to check
commodity price inflation; to make discount rate increases at certain Federal
reserve banks effective.
Consequences of .—Reduction of member bank borrowings; decline in interest
rates; business expansion checked.
3. December, 1923, to September, 1924, purchase of $510,000,000.
Reasons for.—To relieve tendency toward higher rates; to permit member
banks to liquidate their indebtedness to the Federal reserve banks; to encourage
foreign borrowing in the American market, which would lead to heavier exports ; to induce a business recovery; to place the Federal reserve banks in
a position later to check speculative tendencies.
Consequences of.—An increase in bank credit, particularly in speculative
loans; a decline in money rates.
4. November, 1924, to March, 1925, sale of $260,000,000.
Reasons for.—To check speculative tendencies; to make discount rates effective ; to restrain an overexpansion in business; to check the increase in
commodity prices.
Consequences of.—Partial effect in restraining speculative tendencies; the
rate of growth in bank credit reduced to normal.
5. April, 1926, purchase of $65,000,000.
6. August, 1926, to September, 1926, sale of $80,000,000.
The Federal Reserve Bank of New York indicated that it was difficult to
trace the results of these rather narrow movements.
7. May, 1927, to November, 1927, purchase of $230,000,000.
Reasons for.—To facilitate the financing of agricultural products; to prevent imports Of gold; to assist European countries in the purchase of American agricultural products; to strengthen the foreign exchanges; to preserve
the gold standard; to facilitate flotation of foreign bonds in the American
market; to stimulate a business recovery; to pave way for discount rate reductions ; to check decline in commodity prices.
Consequences of.—Foreign exchange rates improved; flotation of foreign
bonds encouraged; gold standard movement induced; gold standard maintained ; improvement in production; decline in interest rates, firmer level of
wholesale prices; stimulation of speculative authority.
34718—31—PT 6
7
796
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
8. January, 1928, to April, 1929, sale of $405,000,000.
Reasons for.—To check speculative activity; to pave way for and to make
increases in rates of rediscount effective; to force an increase in member-bank
borrowings and in interest rates; to make member banks scrutinize loan applications more carefully.
Consequences of.—Interest rates rose; member-bank borrowings increased;
speculative activity not checked. The reasons given for the failure of the
sale of securities to check speculative activity were the growth in the loans for
the account of " others " and the lack of an effective discount rate policy.
9. October, 1929, to December, 1930, purchase of $560,000,000.
Reasons for.—To prevent absolute collapse of security markets; to prevent
money panic; to make interest rates easy in order to remove that obstacle to
business recovery.
Consequences of.—Lower rates of interest; growth in investment account of
member banks.
QUESTION No. 3.—Relative to relationship between fluctuations in portfolio
of United States securities and bankers' acceptances held by all Federal reserve banks and fluctuations in brokers' loans,, and in member bank security
loans and investments.
While not all of the Federal reserve banks expressed an opinion on this controverted question, those that did were in agreement that increases in holdings
of United States securities and bankers' acceptances (assuming no offsetting
factors) increase the volume of funds available to banks, which permits them
to expand their security loans and investments in event the commercial demand
for funds is dormant. On the other hand, in case of a decreasing portfolio
of United States securities and bankers' acceptances, member banks would
normally liquidate investments and security loans and/or rediscount with the
Federal reserve banks.
The Federal Reserve Bank of New York expressed the opinion that fluctuations in bankers' acceptances were seasonal in character and bore no relationship to brokers' loan changes excepting in the autumn of 1928.
Sales of securities by the Federal reserve banks in 1928 and 1929 did not
check the increase in brokers' loans. The reasons given were that funds were
supplied by the " others" and that speculation had become violent and excessive. Nor did purchases of securities increase brokers' loan totals in 1930.
The speculative demand was quiescent which is usually true in a period of
deflation or depression.
The Federal Reserve Bank of Dallas expressed the opinion that less reliance
should be placed on open-market operations. An artificial ease in interest
rates is likely to be induced and an artificial bond market created. Regarding
the argument that the Federal reserve banks must acquire securities to be able
later to affect the market, the Federal Reserve Bank of Dallas concludes that
the purchase of securities creates the very conditions, for the correction of
which the portfolio has been acquired.
QUESTION NO. 4.—Relative to the open-market policies which the Federal
reserve banks should have pursued in 1924 and in 1927, in the light of subsequent events.
Federal reserve bank
Atlanta.,
Boston...
ChicagoCleveland..
Dallas
Kansas City.
Minneapolis .
New Y o r k . . .
Philadelphia.
Richmond...
St. Louis
San Francisco..
1924
1927
Worthy objectives and policies beneficial.
Policy successful, but reversal tardy.
Objects accomplished, but offset by loss
of control of market.
Situation warranted action taken. Sales
in 1928 should have been accompanied
by prompt and decisive increases in
rediscount rates.
Purchases excessive; created period of | Policies continued too long.
excessive ease.
Acceleration in rate of increase in secu- | Effort to bring about firmer money
rity loans due, in part, to purchases
should have been made sooner.
of Government securities.
No opinion expressed
Mistaken diagnosis of situation in 1927.
Purchases helpful, but carried further I Purchases helpful and desirable.
than desirable.
I
Question whether Federal reserve credit needed should be put into market upon
initiative of Federal reserve banks.
In neither period should securities have been purchased. The aim should have
been to decrease the total volume of Federal reserve credit.
Policies were sound but not reversed soon enough.
If easing policy of 1927 had been reversed more promptly, the main courses followed
in 1924 and in 1927 would have been justified.
Worthy objectives and policies beneficial.
Policy successful
Results more satisfactory, if smaller
purchases had been made.
Purchases should have been suspended
earlier.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
797
QUESTION No. 5.— (a) Relative to changes that should be made in the provisions of the Federal reserve act regarding purchases and sales of United
States Government securities by the Federal reserve banks.
The Federal reserve banks had no changes to suggest. The opinion was
expressed generally that the existing plan, under which major policies are
determined by the open-market policy conference, subject to the approval of
the Federal Reserve Board, was satisfactory.
(&) Relative to the desirability of an amendment requiring an affirmative
vote of five members of the Federal Reserve Board before any large sale or
purchase of United States securities be undertaken by the Federal reserve
banks.
All the Federal reserve banks were opposed to this proposal.
QUESTION NO. 6.—Relative to whether resale agreements entered into by the
Federal reserve banks with dealers in United States securities have tended to
offset, on any occasion, the open-market policies of the Federal reserve banks.
The Federal reserve banks, which expressed an opinion on this question,
concluded that the resale agreements had been of such a temporary character,
so seasonal in nature, so insignificant in amount, and so much under the
control of the Federal reserve banks, that open-market policies had not been
nullified.
QUESTION No. 7.—Relative to rates of interest charged dealers in United
States securities against resale agreements.
Data were supplied by the Federal reserve banks of Boston, Chicago, Dallas,
and New York (see replies to questionnaire). The other Federal reserve
banks, with the exception of Philadelphia, and there only to a minor extent,
had not entered into such arrangements.
QUESTION No. 8.—Relative to names of recognized dealers in United States
securities and net worth that each must possess.
Data were furnished by the Federal reserve banks of Boston, Chicago, and
New York (see replies to questionnaire). The other Federal reserve banks
indicated that there were no recognized dealers in those districts.
QUESTION NO. 9.—Relative to margin requirements exacted in lending to
dealers in United States securities under resale agreements.
Federal Reserve Bank of Boston: When market price less than 100, securities
purchased at one-half point under market value.
Federal Reserve Bank of Chicago: When market value below par, one point
in excess of amount advanced required.
Federal Reserve Bank of New York: When market value below par, securities
purchased on the average at one-half point below market value.
QUESTION NO. 10.—Relative to average life of resale agreements.
Federal Reserve Bank of Boston: Seven and eight-tenths days.
Federal Reserve Bank of Chicago: Estimated at three days.
Federal Reserve Bank of New York: Unweighted average came to five days.
QUESTION NO. 11.—Relative to precautions taken to prevent Federal reserve
credit from seeping into the speculative or investment markets when resale
agreements are entered into.
The Federal reserve banks of Boston, Chicago, and New York stated that
there was no particular problem involved.
The life of the resale agreements is so short; the fact the dealers in United
States securities are not interested in stock speculation; the fact that resale
agreements usually take place when interest rates are firm and member banks
are in debt; and the fact that funds extended by the Federal reserve banks
are eventually used to reduce member-bank indebtedness rather than to serve
as the basis for the creation of credit were among the reasons given.
Replies Received from the Different Federal Reserve Banks Tabulated byQuestions
1. As of the end of each month since January, 1922, give on an attached
schedule:
(a) The amount of United States securities held in the portfolio of your
reserve bank which were purchased through the open-market investment
committee.
798
NATIONAL AND FEDEEAL KESERVE BANKING SYSTEMS
Atlanta.—(See statistical appendix.)
Boston.— (See statistical appendix.)
Chicago.— (See statistical appendix.)
Cleveland.— (See statistical appendix.)
Dallas.— (See statistical appendix.)
Kansas City.— (See statistical appendix.)
Minneapolis.— (See statistical appendix.)
New York.— (See statistical appendix.)
Philadelphia.— (See statistical appendix.)
Richmond.—-(See statistical appendix.)
St. Louis.— (See statistical appendix.)
San Francisco.— (See statistical appendix.)
((>) The amount of United States securities held, which were purchased
locally or independently of the open-market investment committee.
Atlanta.— (See statistical appendix.)
Boston.—(See statistical appendix.)
Chicago.—(See statistical appendix.)
Cleveland.—(See statistical appendix.)
Dallas.— (See "statistical appendix.)
Kansas City.— (See statistical appendix.)
Minneapolis.—(See statistical appendix.)
Netv York.— (See statistical appendix.)
Philadelphia.—(See statistical appendix.)
Richmond.— (See statistical appendix.)
St. Louis.— (See statistical appendix.)
San Francisco.— (See statistical appendix.)
(c) The amount of resale agreements entered into with dealers in United
States securities.
Atlanta.—None.
Boston.—(See statistical appendix.)
Chicago.—(See statistical appendix.)
Cleveland.— (See statistical appendix.)
Dallas.—None.
Kansas City.—None.
Minneapolis.—None.
New York.—(See statistical appendix.)
Philadelphia.—None.
Richmond.—None.
St. Louis.—We have never had any resale agreements with dealers covering
United States securities.
San Francisco.—Government securities not taken under resale agreements.
2. State the principal reasons for each of the major operations in the purchase and sale of United States securities since January, 1922. What has been
the main consequences of each such operation?
Atlanta.—The reasons for each of the major operations in the purchase and
sale of United States securities since January, 1922, are stated in the minutes of the open-market committee, known later as the open-market policy
conference. The policy governing these major operations in Government securities was adopted by the open-market committee, and in each instance approved by the Federal Reserve Board. The operation most discussed was
that which occurred in 1927. From our point of view, purchases of United
States Government securities were made at this time as a method of providing
funds for the orderly movement of our crops. This action was taken to
prevent interest rates from rising unduly because of the seasonal increase in
the demand for funds. The effect of the enactment of this policy was the
orderly movement of the crops without strain on the banks supplying the
necessary credit, a strengthening of foreign exchange rates, and an improvement in the purchasing power of foreign markets. That this effect was produced as regards the pound sterling and the price of cotton is demonstrated
en Exhibit A.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
799
EXHIBIT A
Monthly
average
of daily
rate, 1927
(sterling)
Spot cotton prices,
monthly
Average,
10 markets
January
February...
March
April
May_
June
July
August
September..
October
November..
December..
Cents
485. 2648
485.0282
486. 4025
485. 6546
485. 7020
485. 6088
485. 5056
486. 0233
486. 3528
486. 9676
487.4012
488. 2542
Cents
12.72
13.45
13.74
14.08
15.36
16.11
17.34
19.16
21.16
20.35
19.74
18.99
Average,
New
Orleans
Cents
13.17
13.82
14.10
14.42
15.68
16.47
17.63
19.36
21.19
20.73
19.99
19.26
United States Government's monthly average of daily holdings
(in thousands of dollars)
Total
$310, 637
306, 707
344,921
341,081
291,495
397, 754
381,081
438,511
500,637
506,177
579,238
605,841
Atlanta
$1,530
2,088
2,286
3,449
5,722
10,143
10,154
12,863
13,684
13,312
14,526
14,298
All of the improvement in the pound sterling or in the price of cotton was not attributable to this operation
in Government securities, but unquestionably it greatly aided in both respects.
Boston.—Purchases of Government securities made by this bank in 1922
and through March, 1923, were made in order to meet operating expenses and
dividend requirements, and these purchases were not made in connection with
any system policy. During this time there were also purchases made in connection with the Pitman Act of certificates of indebtedness as security for
Federal reserve notes. During February and March, 1923, sales were made to
the Treasury Department for redemption operations. From that time on the
operations in the purchase and sale of United States securities were conducted
in connection with the policy outlined by the open-market investment committee, that committee holding its first meeting on April 13, 1923. From that
date until June, 1926, this bank participated on a percentage basis in all
securities bought and sold by the open-market committee, and such purchases
as were made by this bank locally were considered as a portion of the amount
allotted to Boston by the open-market investment committee. From that date
on the amount of United States securities held which were purchased locally
or independently of the open-market investment committee represents small
amounts which were taken in connection with Treasury operations. These purchases of United States securities, together with those allotted this bank
through the open-market investment committee, amounted to about 7 ^ per cent
of the total purchased for the system. The policy represented by the purchase
or sale of securities, I understand, will be covered in detail by the New York
bank. The policy agreed upon by the open-market investment committee has
always been reported to and approved by our board of directors.
Chicago.—There have been four major operations in the purchase and sale of
United States Government securities since January, 1922. First, in the year
1922, when liquidation and deflation had taken place in commodity prices following the inflation in commodity prices in 1920 and the heavy demand for
rredit at that time. As a result of this deflation, member bank loans were
liquidated at the Federal reserve banks to the point where it was doubtful if
they could earn enough to pay their expenses and dividends. The purchases
of Government securities at that time were not the result of a system policy,
but the purchases were executed by a committee acting on behalf of the individual Federal reserve banks, as many of the banks were desirous of increasing their earnings at that time. It can therefore be said that the purchases in
1922 were largely for the purpose of creating earnings, although such purchases,
by making money easier in the open market, doubtless contributed to the
business recovery which began in 1922.
800
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
At the present time the policy of the Federal reserve system regarding earnings has materially changed and it is not now considered necessary to purchase
Government securities solely for the purpose of creating earnings to cover expenses and dividends, as it is now considered proper to pay dividends out of accumulated surplus, if necessary, rather than create an undesirable market situation of low-money rates by competition with member banks and others in the
purchase of such securities at a time when such purchases would not serve as
an aid to the general situation. In April, 1923, the Federal Reserve Board
urged the Federal reserve banks to sell their holdings of Government securities, as at that time the Treasury Department felt that the purchases of Government securities by the Federal reserve banks was having an adverse effect
upon the Treasury's program of purchasing in the open market Government
securities for redemption, so the excess amount of such securities held by Federal reserve banks were sold in 1923, leaving only a nominal amount in their
portfolios.
The next large purchase of Government securities by Federal reserve banks
resulted from a meeting of the open-market investment committee of the Federal reserve system in conjunction with the Federal Reserve Board and it
was concurred in by all 12 Federal reserve banks. Purchases were begun early
in December, 1923, and continued until early September, 1924. The purposes
of this purchase and the results attained are set forth in detail in a memorandum by Governor Strong of the Federal Reserve Bank of New York presented
at a hearing before the House Committee on Banking and Currency in April,
1926. His memorandum is in such complete form that there is nothing that
we could add to it. However, the purposes indicated in Governor Strong's
memorandum appear to have been generally achieved. On the other hand,
the easy-money policy led to an increase in speculation accompanied by a substantial increase in speculative loans. In order to offset the speculative demand, sales were made from the system investment account beginning in
December, 1924, and continuing until March, 1925. Such sales had at least a
partial effect in restraining speculation.
• The next large purchase of securities occurred in the summer and fall of
1927, and while this action was taken by the committee of the Federal reserve
banks in conjunction with the Federal reserve board, doubt was expressed by
some members of the committee that because of the increasing speculative demand for credit a purchase of Government securities would materially increase
speculation and might produce disastrous effects. However, it was finally
agreed that in order to facilitate the financing of our agricultural products and
to assist European countries in the purchase of our products by low-money
rates in this market and to prevent imports of gold, that these considerations
were more important to business and that whatever increase in speculation occurred could be checked by the sale of securities after these objects were accomplished. However, the securities market had attained such momentum that
when sales of Government securities were made in the first six months of
1928 speculation was so violent and had proceeded so far that it was not
checked by the sale of these securities and because of the tremendous volume
of funds attracted to the call-money market, particularly in the form of loans
by others than banks, control of the situation had been lost and the only
remedy left was to sharply increase the rediscount rates.
The next major operation in the purchase of Government securities occurred
immediately after the stock-market crash in the fall of 1929 and the purpose
was to make money easy so that every possible obstacle could be removed in
helping to restore business confidence. Further moderate purchases occurred
in 1930, with the same purpose in mind, and practically no sales from the
system investment account have been made up to date this year.
Cleveland.—In 1922 the purchase of Government securities on the part of the
Federal Reserve Bank of Cleveland was occasioned primarily by a sharp drop
in earning assets and a desire to maintain them at a point sufficiently high to
provide for the bank's expenses and dividends. The effect of this and other
open-market operations upon local conditions is obscured by the fact that the
bulk of these transactions occurred in New York. Consequently, while such
purchases may have had an immediate effect upon conditions in New York
City, the results locally may not have been felt until sometime later when, as
a result of changed conditions in eastern markets, interest rates in Cleveland
territory may have been altered somewhat. It is observed that investment
account of fourth district reporting member banks increased during the year
1922, but not as much proportionately as is shown for all reporting member
banks in the country (see accompanying chart). It is also observed that
street loans in New York increased with system purchases.
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(Face p. 800.)
No, 2
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
801
Sales of securities in 1923 were instituted primarily as a means of restraining
what appeared to be a tendency to an overexpansion in production, accompanied by a sharp increase in commodity prices which appeared during the first
four months of the year. Also such sales assisted in making effective an
increase in the discount rates of the Boston and New York banks from 4 to 4%
per cent.
The purchase of securities in 1924 was intended to relieve a tendency toward
higher rates, to permit member banks to liquidate indebtedness to the reserve
hanks (which at that time was fairly heavy), and to encourage the creation
of additional foreign credits in this country to facilitate the exportation of
commodities. The effect was to produce an easier money situation in the
principal eastern markets, evidenced by reductions to 3% per cent on the part
of Boston, Philadelphia, and Cleveland, and to 3 per cent on the part of the
federal Reserve Bank of New York.
Increased security purchases in 1927 were made in a period when business
was showing a reversal of the activity which had characterized immediately
preceding years, and at a time when large importations of gold were threatening
the maintenance of the gold standard in many European countries. It was considered desirable to lend whatever aid the reserve system could toward a
strengthening of foreign-exchange rates in order to enable the free purchase of
American products by European consumers. The maintenance of easy money
conditions made possible the successful flotation of loans to foreign countries
and enabled them to reestablish themselves upon a gold standard. The results
of these operations were an improvement in exchange rates and important
exportations of gold to countries where the stability of the gold standard was
endangered. In our judgment it also assisted materially in a more prompt
revival of business activity in this country. To a degree the results of this
policy may have encouraged an increase in speculative activity, although in
our judgment the extent to which reserve bank policy and operations contributed to the developments of 1928 and 1929 was not so much the direct
result of that policy as it was of a failure to reserve it more promptly in 1928.
Sales of securities in 1928 and 1929 were obviously designed to prevent the
speculative situation from getting out of hand, but these efforts were offset in
large degree through funds or credit being made available to speculative
borrowers through nonbanking and uncontrollable channels.
Purchases of securities in the fall of 1929 were required to prevent the
absolute collapse of the security markets, and throughout 1930 have been continued to create a money condition which imposes no restriction upon a
resumption of business activity. The effects of this policy have been to bring
about a marked decrease in the price of credit and to encourage a freer lending
policy on the part of member banks as well as an increase in their investment
account.
Dallas.—The policies governing these operations, beginning with 1923, were
•determined by the open-market investment committee as constituted by the
Federal Reserve Board. These policies continued to be so developed until the
abolition of the open-market investment committee, which was finally succeeded by the open-market policy conference on March 25, 1930. We think
that recourse to the minutes of the open-market investment committee from the
time of its inception until it was succeeded by the open-market policy conference, and also the minutes of the open-market policy conference since its
creation, would give a much more comprehensive answer to this question than
we could undertake. These data are no doubt available to the committee
or may be readily obtained. Likewise the succeeding preliminary memoranda
usually submitted by the chairman of the open-market investment committee
to the committee at its meetings, as well as a consideration by the committee
of credit conditions at that time and similarly in respect to the proceedings
<of the open-market policy conference, will show the effect of such policies and
their execution.
From the time that the open-market investment committee was established
until the time of its abolition and the establishment of the open-market policy
conference with an executive committee, the open-market investment committee was composed of representatives of five Federal reserve banks, in which
this Federal reserve bank was not included. The policies so established
however, with the approval of the Federal Reserve Board, were submitted
to all Federal reserve banks with the option of participation. Subsequently
to the abolition of the open-market investment committee and the creation of the open-market policy conference, in which all Federal reserve
802
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
banks are represented, the policies have been formulated by meetings of
the members of the open-market policy conference in Washington, and
either approved or disapproved by the Federal Reserve Board. While this
bank, like other Federal reserve banks, has not always voted \n the affirmative for such policies as have been established, the Federal Reserve Bank of
Dallas has always been guided by the majority vote of the conference and
has always participated in the consequential transactions, subject only to its
reserve and collateral positions in reference to Federal reserve notes. The
participation of this bank in any policy established, although its representative
may have voted in the negative, has been on the ground that our refusal to
participate would not in anywise change the effect of the policy.
Kansas City.—No major operations undertaken locally. System operations
handled through open-market committee and open-market policy conference.
Minutes showing reasons on file with Federal Reserve Board.
Minneapolis.—Due to rapidly declining amount of earning assets, our directors in 1922 authorized the purchase of $7,000,000 (the amount of our earned
surplus) in United States securities, to provide a back-log of earning assets.
AVe^do not feel that an operation of this size had any appreciable effect in the
market. During 1924, when there was a recession in industrial activity, and
the attitude of the business community was hesitant, the Federal reserve banks
bought for system account approximately $370,000,000 in Government securities. The funds thus placed in the market were used by member banks in
repayment of their borrowings and further resulted in a reduction of holdings
of acceptances by Federal reserve banks. By these purchases the system put
itself in a position, through the subsequent sale of these securities in case
undue expansion of credit seemed imminent, to check the same. In the first
half of 1927 business was active and gold was flowing into the country. By
June, however, a very definite recession in business was apparent and in addition gold began to move out of the country. The member banks' borrowings
at the time being relatively heavy, the Federal reserve banks bought during the
summer Government securities to offset the gold exported and set aside for
earmarking so as to keep money fairly easy for agricultural and commercial
purposes. This was accompanied xby a reduction in the rediscount rates at all
Federal reserve banks from 4 to 3 /2 per cent.
In the fall, however, with the business demand declining and a decided
increase in member bank credit used in investments and loans on securities,
the Federal reserve banks reversed this policy and let the continued outflow
of gold exert its tightening influence on credit conditions.
New York.—Before examining particular operations in Government securities a general statement is appropriate with regard to the purposes and consequences of these operations. Generally speaking, purchases of Government
securities since 1922 have been made at times of business depression or recession
in the United States accompanied by unemployment, declining foreign trade,
weak commodity prices, and reduced speculative activity. Broadly speaking,
also sales of securities have taken place at times of large industrial activity,
full employment, firm commodity prices, and tendencies toward excessive
speculation.
These broad considerations are illustrated in the following diagram, which
compares the timing of principal security operations with the fluctuations in
industrial production in the United States as shown by the index computed
by the research division of the Federal Reserve Board, taking the years 19231925 as 100 per cent. As a general rule prices, employment, and various forms
of trade and speculative activity move roughly simultaneously with production.
Since the purchase of securities has a tendency to make money easier and
thus has an influence toward stimulating business activity, and since the sale
of securities tends to make money firmer and has an influence toward checking
excesses, it may be said that purchases and sales of government securities since
1922 have been such as might reasonably be expected to exercise some influence
toward business stability by aiding recovery at times of depression and retarding excesses at times of prosperity.
As to the consequences of purchases or sales of securities, the first result in
each case has been to bring about an increase or decrease in the amount of borrowing of member banks at the reserve banks. When the reserve system buys
securities the funds thus made available are employed by member banks to
reduce their indebtedness at the reserve banks. As a consequence these banks
find themselves in a position to lend somewhat more freely <and money tends to,
be easier. Conversely, when the reserve system sells securities member banks.
NATIONAL. AND FEDERAL RESERVE BANKING SYSTEMS
803
find themselves compelled to increase their borrowings at the reserve banks,
hence they find their lending power impaired and money tends to be firmer. The
relationship between changes in Federal Reserve security holdings and discounts of member banks is shown on the accompanying diagram.
With a few exceptions every considerable purchase or sale of securities over
this period of years was in some measure a joint undertaking in which the
Federal Reserve Board and the officers and directors of the 12 Federal reserve
banks had a part. Any statement of reasons for action must represent an interpretation of what was in the minds of these various participants when
decisions to buy or sell were reached. Perhaps the best that can be done is to
state the circumstances of the situation which were emphasized at the meetings
where the primary decisions for these purchases and sales were made.
PER CENT
140
120
100
1922 1923 1924 1925 1926 1927 1928 1929 1930
Timing of purchases and sales of Government securities and discount rate changes compared with changes in the volume of Industrial production
The principal changes in holdings of Government securities reflecting policy
decisions from January 1, 1922, to the present have been—
January, 1922, to May, 1922, purchase of
_
$400, 000, 000
June, 1922, to July, 1923, sale of
525, 000,000
December, 1923, to September, 1924, purchase of
510,000,000
November, 1924, to March, 1925, sale of
260,000, 000
April, 1926, purchase of
65,000,000
August, 1926, to September, 1926, sale of
80, 000, 000
May, 192.7, to November, 1927, purchase of
230, 000,000
January, 1928, to April, 1929, sale of
405,00d, 000
October, 1929, to December, 1930, purchase of
560, 000, 000
Purchases in 1922 were made before these operations had been placed under
the supervision of a system committee, except as to the details of execution.
These purchases took place at a time when business had just begun its recovery
from the depression of 1921 and when agricultural prices particularly were
seriously depressed. The consequence of this operation, together with large
gold imports, was to reduce discounts of member banks at the Federal reserve
804
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
banks from over $1,000,000,000 to $400,000,000, and thus put the banks in a
position to advance funds more freely to their customers and to increase their
investments. It seems likely that this step aided in some measure the recovery
of business and agriculture from the depressed conditions of 1921. Purchases
were also followed by reductions in discount rates at several reserve banks and
by increases in the total volume of bank credit.
The sale of securities from June, 1922, to July, 1923, similarly was only in
part determined upon as a system policy, though sales were recommended by
a committee of governors organized in 1922 for the centralization of purchases
and sales of Government securities. At that time the Treasury Department
had indicated that it believed operations of the Federal reserve system in
Government securities had interfered somewhat with an orderly market for
these securities. These sales undoubtedly had some effect in retarding growth
of bank credit during 1923, pushing money rates to higher levels, and tending
somewhat to check the business expansion which had been going forward
throughout 1922 and early 1923 at a pace that was alarmingly rapid, accompanied by considerable speculative activity.
MILLIONS OF DOLLARS
1200
900
600
300
1922 *23
'24
*25
'26
'27
'28
29
30
Government security holdings of all Federal reserve banks
and member bank borrowings a t reserve banks (monthly
averages of daily figures)
The large purchases of securities from December, 1023, to £eptuauLr»r, 1924,
were the first ones to be handled in a joint-investment account for :i;e Federal
reserve system. The reasons for and results of this purchase were set forth
by Governor Strong in a memorandum written on December 26, 1924.
It seems reasonable to believe that the rapid recovery of business from the
depression and severe unemployment that characterized the summer of 1924
may be partly ascribed to easy money and ample credit facilitated by the
purchase of Government securities at that time.
MEMORANDUM BY GOV. BENJAMIN STRONG ON OPEN-MARKET OPERATIONS OF 1924
DECEMBER 26,
1924.
(The following memorandum is intended to give a point of view in regard to
the open-market policy of the Federal reserve banks which has never been adequately explained to the public. Because of the failure to do so the Federal
reserve system has suffered some criticism, partly uninformed and partly
deliberately unfair.)
By the fall of 1923 the bulk of the short-time Government security holdings
of the Federal reserve banks had been liquidated. The sales made throughout
the previous year had forced member banks to borrow considerable sums from
the Federal reserve banks in order to replace the reserves which they lost when,
payment for the securities was made to the Federal reserve banks. The fall
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
805
of 1923 saw the members borrowing about $835,000,000 on direct discounts from
the reserve banks, of which over $200,000,000 was in New York. At that time
considerable importations of gold were being received from Europe. There
was developing some recession in business; the New England textile manufacturers had suffered a severe slump; the same being to some extent true of
rubber, some branches of the steel, and of other trades. But the most serious
difficulty which had developed in any part of the country was the banking
situation in the West, especially in the Northwest and Southwest. Banks
were failing almost every day.
Notwithstanding imports of gold, there was continued pressure by member
banks to liquidate their indebtedness to the reserve banks, causing, in turn,
pressure by member banks upon their borrowers to repay loans. The commercial-paper rate was 5 per cent; rates for 90-day bankers' acceptances, 4%
per cent; customers' loan rates at New York about 5}£ per cent; time loans
upon securities, 5% per cent; stock-exchange call money, 4% per cent; the discount rate of the Federal Reserve Bank of New York was 4% per cent, where
it had been maintained since February 23, 1923.
The condition of the farming community, including the cattle industry, was
coming perilously near a national disaster, and feeling became so strong throughout the West that all sorts of radical proposals for legislation and other Government relief were being urged.
Sterling had declined in November to $4.26 under the influence of a general
flight of capital from Europe to this country. Interest rates in London were
lower than in New York. "Money" (3-months' bank bills) was quoted from
3 to 3% per cent; tap rate on Treasury bills was 2% to 3 per cent, and the
official rate of the bank was 4 per cent.
It was under these conditions that the Federal reserve banks undertook the
gradual repurchase of short-time Government obligations. The following definite
objects were in mind, at least so far as the writer was concerned:
1. To accelerate the process of debt repayment to the Federal reserve banks
by the member banks, so as to relieve this weakening pressure for loan liquidation.
2. To give the Federal reserve banks an asset which would be automatically
liquidated as the result of gold imports so that later, if inflation developed from
excessive gold imports, it might atj least be checked in part by selling these
securities, thus forcing member banks again into debt to the reserve banks and
making the reserve bank discount rate effective.
3. To facilitate a change in the interest relation between the New York and
London markets, without inviting inflation, by establishing a somewhat lower
level of interest rates in this country at a time when prices were falling generally and when the danger of a disorganizing price advance in commodities
was at a minimum and remote.
4. By directing foreign borrowings to this market to create the credits which
would be necessary to facilitate the export of commodities, especially farm
produce.
5. To render what assistance was possible by our market policy toward the
recovery of sterling and the resumption of gold payment by Great Britain.
6. To check the pressure on the banking situation in the West and Northwest
and the resulting failures and disasters.
The writer had roughly estimated that it might be possible for Europe to ship
us still some $400,000,000, which I thought would likely be distributed over a
period, of say, two years, but that, notwithstanding these gold shipments, pressure for liquidation of bank loans would not be reduced promptly enough, except
it was accelerated through purchases of securities by the reserve banks.
In pursuance of this policy, the Federal reserve banks gradually purchased
over the following eight or nine months/ a total of $500,000,000 of short-time
Government securities, and throughout that period gradually reduced discount
rates until the rate of the New York bank was 3 per cent, whereas the Bank of
England on July 5, 1923, had raised its rate of discount to 4 per cent and exercised its influence to maintain open-market rates in London at a somewhat
higher level than during the previous year.
In reviewing what has happened during the past year, the outstanding event,
of course, has been a crop of unusual size and, as to all but corn, of good
quality, produced at a time when there was a crop shortage in the rest of
the world; that, itself,, gave the country a fortunate recovery from some part
of the depression which was growing. If, as indeed was the case, however,
the Federal reserve policy hastened the establishment of cheaper money, then
806
NATIONAL A^D FEDERAL RESERVE BACKING SYSTEMS
the developments directly attributable to cheap money must be considered as
in part the outgrowth of that policy. These may be enumerated as follows:
1. The pressure for liquidation of bank loans was gradually relaxed, and in
the summer of 1924 bank borrowing from the Federal Reserve Bank of New
York and the other large reserve banks had practically all been liquidated;
and somewhat similar conditions developed throughout the Middle West, the
evidences of credit pressure and of disorganizing liquidation gradually disappearing. The banks of the State of Iowa, as an example, had reduced their
debt to the Federal Reserve Bank of Chicago from $98,000,000 to about
$12,000,000, due largely to the willingness of the member banks to lend money
more freely in that State where credit disasters had developed, and as a result
of which banking conditions were stabilized. And the same seems to have
been true in the Minneapolis, Kansas City, and Dallas districts.
2. The outcome of the crops made it necessary for Europe to make unprecedented purchases of our small grains at very high prices compared to recent
years. But the coincidence of low rates for money in this market and higher
rates in London enabled foreign governments and foreign corporation borrowers to place a total of a billion and a quarter of loans in the market, which
provided the credit to be used in paying for the crops. Had these foreign loans
not been placed in this market it is quite certain that foreign purchasers of
our farm produce would have found difficulty in financing these purchases,
which could only have been made by short time bank credits; the extensive use
of our banking system for financing of that sort would not only have been at
high rates, but might have been an influence for the creation and maintenance
generally of much higher rates than have prevailed during the crop-moving
season. Our crop sales to Europe might have been much restricted.
3. For a period of at least 12 years, as I recall—that is, since about 2 or 3
years before the outbreak of the watf—there had been no such market for
investment securities as would enable our railroads, public utility, and industrial corporations to make capital issues on reasonable terms, so as to refund
short-time loans and provide the money for needed extensions and betterments.
The past six months or so has enabled them to do so. There has rarely been
a period of easy money in this country where sound financing has been so
evident as in this period, and where the absence of promotion and other
security issues of doubtful character has been so marked.
4. One of the greatest menaces to our ultimate security against inflation has
been the uncontrollable stream of gold coming to this country to make needed
payments for which credit was not available. Had our credit not been available to pay for this year's crop exports, the amount of gold coming would undoubtedly have been much larger, or, at least the gold movement would have
continued longer. Our loans to Europe and the rest of the world because of
lower interest rates in this country than in England, have been an important
influence in increasing the value of sterling in terms of dollars to a point
where the gold premium in London was constantly reduced and ultimately the
bazaar premium in India being finally above the premium in London caused the
diversion of the stream of gold from South Africa to Europe or India instead
of to this country. A favorable monsoon and a high value for the rupee in
terms of sterling assisted in this result, but a lower interest level in America
than in England and on the Continent was a further influence in turning the
tide of gold away from the United States.
5. The recovery of sterling has now reached a point where it is reasonably
possible for the British Government and the Bank of England to consider the
resumption of gold payment. Whether they do so or not depends upon their
own sense of security for the long future. But this country is still in position
to give them needed assurances of credit for a long period if they require it.
We have seen the Swedish, Dutch, and Swiss exchange return to par or above;
the Austrian and Hungarian currency remain stabilized; and finally the loan
to Germany under the Dawes plan readily absorbed and a long stride toward
currency stabilization taken by Germany. At least in part these results are
to be attributed to the free use of our credit markets by Europe, much facilitated by easier rates than for some years past in this country.
6. It is difficult to state to what extent gradual recovery of confidence and of
business in this country can be attributed to ease of credit conditions. It can,
however, be definitely stated that if some $500,000,000 of credit had not been
furnished the market by the purchases of the Federal reserve banks, the liquidation which was proceeding for the purpose of repaying loans from the reserve
banks would have continued for a much longer period, and, instead of having
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
807
some expansion of bank credit such as has taken place, we would have had some
further contraction and probably a definite further slackening of business and
lowering of prices.
On the other hand, there has been no very general advance in the prices of
commodities, outside of agricultural produce, and certainly as to those commodities higher prices were imperative. The foreign buying caused the advance, and that was certainly facilitated by cheap money. It was mainly due
to crop shortage throughout the world, and it was cheaper credit which aided
the distribution. The only definite price advance which can be attributed to
cheap money is in the security market. While this has attracted widespread
comment and may have been facilitated by easy money, nevertheless, it can
largely be attributed to favorable political developments throughout the world,
which had a profound effect upon the psychology of people generally. And in
any event the readjustment of values which has taken place is probably not
greatly out of line, if at all, with the intrinsic value and earning powers of our
industries.
7. Finally, it must not be overlooked that one of the developments of the past
year, which may in part be attributed to the policy of the Federal reserve system, but also quite largely to favorable crop developments, and to political
developments, has been a greater feeling of tranquility and contentment
throughout the country than we have experienced at any time since the war.
Employment conditions are improving, industry, and transportation in a general
way are sound and successful and the relief of the strain on the banking situation throughout the West has done much to arrest the growth of unsound
and radical and extreme ideas which might, indeed, have been a menace to
both Government finance and a sound monetary and credit policy.
Sales of securities in late 1924 and early 1925 were made at a time when
business had made such a rapid turnabout from the depressed conditions of
the summer of 1924 that the movement appeared to be going too fast, accompanied by a rapid rise in wholesale prices and a rapid increase in total loans
and investments of banks, and an increase in speculation evidenced by an
increase
in brokers' loans and in security prices. The sale of securities, together
wTith changes in discount rates, appear to have been an important influence in
retarding this tendency to excess, bringing bank credit to a more normal growth
and retarding speculative movements. These tendencies are illustrated in the
accompanying diagrams. The small purchase and sale in 1926 accompanied a
temporary loss of business confidence early in the year and a revival in the
autumn. The changes in security holdings were accompanied by. changes in
the discount rate of the Federal Reserve Bank of New York. It is difficult to
trace the results of these rather narrow movements.
The purchases of securities in the summer and early autumn of 1927 wTere
made under circumstances similar in some respects to those of 1924 described
in Governor Strong's memorandum. It was a time of moderate business
recession, gold imports, and accompanying pressure on the position of the central banks in a number of countries which had only recently returned to the
gold standard. Wholesale commodity prices had been declining more than a
year. The result of the operations was to diminish the discounts of member
banks, a change which was followed by a more rapid increase in bank credit
and easy money rates. There was a prompt flow of funds from New York to
the interior shown through transfers in the gold-settlement fund. Foreign
exchange rates which had been very weak and near the point at which gold
moved to the United States, immediately strengthened and gold exports began.
Before these developments European bankers had been apprehensive of a serious
credit stringency, which would bring with it high money rates, depressed
business, and greatly reduced foreign purchases of American goods. This
danger was averted. Firmer wholesale prices and improved production followed soon after. There was also an increase in speculative activities, which
by the beginning of 1928 had reached a point to cause concern.
Sales of securities of 1928 and 1929 were made with a view to checking
excessive credit expansion, particularly for security speculation. The sales
resulted in a large increase in the discounts of member banks which led banks
to scrutinize their loans and investments more closely. The expansion of bank
credit was fairly well checked. Security speculation, however, was not permanently checked, partly because other lenders provided the funds for further
expansion which banks were reluctant to supply and partly, it seems likely,
because the reserve system did not pursue a sufficiently vigorous discount rate
policy.
808
NATIONAL AND FEDERAL. RESERVE BANKING SYSTEMS
Purchases of securities in October and November, 1929, were made to meet
an emergency demand for funds, as the stock market broke and New York
banks were called upon to prevent a money panic by supplying funds to replace
a part of the huge amounts of funds withdrawn in alarm by other lenders.
A contemporary account of these events from the Monthly Review of the Federal Reserve Bank of New York follows herewith. These purchases aided the
New York City banks in meeting the emergency and helped prevent the security
disturbance from causing a money panic or indeed a serious credit strain. In
fact, they made possible a decline in interest rates in the face of an extraordinary demand for funds.
Further purchases in 1930 enabled member banks to liquidate further their
indebtedness at the reserve banks, thus reversing the operations of 1928-29
and helping to remove any shortage in the basic supply of funds as a possible
obstacle to business recovery.
MONEY MARKET IN OCTOBER *
The past few weeks have witnessed an abrupt reversal of credit trends which
had continued for about two years. Stock prices have turned downward. Bond
prices have made some recovery. Loans to brokers and dealers have decreased
sharply, and there has been a sudden shift between lenders. Interest rates have
declined rapidly and foreign exchange rates have strengthened to points where
gold exports have been made.
Of these developments the decline in stock prices has been the most spectacular and in large measure the controlling event. The decline has carried
representative price averages below the lowest points heretofore reached this
year, though not to points which are low relative to the levels of prices of 1928
or any previous year.
Whereas the gradual recession in stock prices which had taken place in September had not been accompanied by any substantial liquidation in loans to
brokers and dealers, partly because of the continued large volume of new stock
issues, calling for additional amounts of credit, the drastic declines of the past
two weeks have released a considerable amount of funds. For the two weeks
from October 16 to October 30 the figures for loans to brokers and dealers
reported by the New York City banks for their account and the account of their
bank and other customers show a decrease of $1,263,000,000. The distribution
of this decrease between lenders is of particular interest. Loans made for
account of others than the New York City banks and their out-of-town correspondents decreased $1,432,000,000, and loans made by the New York banks for
their out-of-town correspondents decreased $805,000,000. On the other hand,
loans to brokers and dealers made by New York City banks for their own
account increased $974,000,000, and these banks also increased their loans
directly to customers by an additional $260,000,000.
From the point of view of the general credit situation the net result of these
movements was to bring about an increase of $1,374,000,000 in the loans and a
similar increase in the deposits of the New York City banks, with a consequent
increase in the amount of reserve balances they are required to maintain on
deposit at the federal reserve bank. In a period of one week from October 23
to 30 the reserve requirements of these banks were increased more than
$200,000,000.
These movements illustrate once more the fact, which has previously been
commented upon in this review, that loans to brokers and dealers by lenders
other than banks constitute a potential drain upon bank resources, which is
most likely to become an actual drain in periods of emergency. The New York
City banks were able to handle the huge burden which was shifted to them
without any disturbance to the money market by reason of an increase of over
$150,000,000 in the security holdings of the reserve banks and a like increase in
rediscounts.
After the first week of October the prevailing call loan renewal rate was 6
per cent, compared with 8 and 9 per cent in September. Accompanying ease in
call loan rates, time loan rates declined from 9-9% per cent at the beginning
of October to 6 per cent at the end of the month. Open-market commercial
paper rates showed a slight decline from 6% per cent to 6-6*4 per cent. Bill
rates dropped from 5% to 4% per cent and the yield rate on Treasury certificates declined over three-quarters of a point. On October 31 the rediscount
* From Monthly Review of Credit and Business Conditions, New York, November 1, 1929.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
809
rate of the Federal Reserve Bank of New York was reduced from 6 to 5 per
cent, effective November 1. These changes are summarized in the table
following.
Money rates at New York
Oct. 31,
1928
Stock exchange call loans
_..
_.
Stock exchange 90-day loans...
Prime commercial paper,
Bills—90-day unindorsed..
Customers' rates on commercial loans
Treasury certificates and notes:
Maturing 3>je. 15
Maturing Mar. 15
*.
Federal Reserve Bank of New York rediscount r a t e . .
Federal Reserve Bank of New York buying rate for 90-day bills
1
Range for preceding week.
3
7
5^
4^
3 5.47
4.48
4.63
5
4^
Sept. 30,
1929
Oct. 31,
1929
18-10
16
6
6-6^
»6.07
m
4.62
4.63
6
3 6.07
3.94
3.97
6
5
5H
Average rate of leading banks at middle of month.
BILLIONS OF DOLLARS
4
1929
1926
The decline in interest rates in the early part of October was a consequence
in part of a lessened demand for funds in the security markets, but more
largely a cumulative effect of purchases of bankers' acceptances by the Federal
reserve banks for a number of weeks in amounts larger than the increasing
requirement for funds of the autumn season. Autumn currency requirements
were also somewhat less than usual. Under these circumstances, the New
York City banks had been able largely to liquidate their indebtedness at the
reserve bank, a condition which is normally accompanied by easy money
cbnditions.
The liquidation of the stock market in the last two weeks of the month
and the accompanying movement of brokers' loans was not a factor making
directly for easier money, for, as has been indicated above, the net result of
the changes in brokers^ loans was to increase rather than to diminish the
call upon bank funds, and the banks were able to meet the huge additional
demand for credit only by reason of large security purchases by the Federal
reserve banks and an increase in their rediscounts. So that at the end of the
months the borrowings of the New York City banks were $170,000,000 compared
with $63,000,000 in the early part of the month, and the discounts of the Federal reserve system were $990,000,000 compared with $930,000,000 earlier in
the month.
Two accompaniments of the easing tendency in interest rates have been
the recovery in bond prices which has raised representative averages about
one point, and a vigorous recovery in foreign exchange rates. The recovery
810
NATIONAL AND FEDERAL BESEBVE BANKING SYSTEMS
in exchange rates has been comparable with that which occurred in the late
summer of 1927. On both occasions the principal European exchanges rose
rapidly from quotations which were close to the points at which gold tended
to move into the United States to quotations close to, if not actually above,
the gold export points. In fact, in the case of the French exchange the quotations have recently been such as to show a slight profit in gold exports and
a small amount of gold has moved from New York to Paris. Both in 1927 and
during the past month this vigorous recovery in the exchanges has appeared
to reflect a movement of funds from New York to the principal European
centers, largely in response to a differential in money rates between New York
and those centers, though in the recent instance it has also accompanied a
liquidation in the stock market.
BIIX MARKET
During the first part of October, seasonal drawings of bills increased the
supply in dealers' hands very substantially, and, although the investment demand also rose materially, dealers' aggregate purchases exceeded their sales.
As open market portfolios of bills already were large, the excess of supply
over the demand was offered to the reserve system. The development of easier
money conditions, however, allowed the dealers to carry an increasing proportion
of their portfolios outside the reserve bank.
The continuance of relatively easy-money conditions throughout the balance
of the month was accompanied by a large increase in the investment demand,
both local and foreign, and as dealers' purchases of new bills were materially
reduced, supplies of bills on hand declined to a total between one-third and
one-half the volume at the opening of the month. In an effort to replenish their
portfolios, the dealers made four successive reductions in their rates, a total decrease of one-half of 1 per cent between October 22 and 29, bringing the offering
level for 30 to 90-day unindorsed bills to 4% per cent, the lowest level since
January 3 of this year. Offering rates for four months' bills also showed a
decline of one-half of 1 per cent to 4% per cent, and 5 and 6 months' bills a
reduction of five-eighths of 1 per cent to 4% per cent.
A further increase of $72,000,000 in the volume of bankers* acceptances outstanding occurred during September. The total of $1,272,000,000 on September
30 was within $12,000,000 of the peak of outstanding dollar acceptance credits,
reached at the end of December, 1928, and was $268,000,000 larger than the
total for September of last year and $408,000,000 above the outstandings of
September, 1927. Acceptances based on goods stored in or shipped between
foreign countries again showed a larger increase than any other class, and it is
this type of acceptance financing that accounts for the larger part of the increase in total outstandings over a year ago.
COMMERCIAL PAPER M A R K E T
Accompanying the lower rates prevailing on stock exchange security loans,
some revival of the bank investment demand for open-market commercial paper
occurred after the first week of October. Better buying was reported as coming
from banks in the Middle West, Southwest, and in New England; and in the
New York market there were larger orders reported for the account of out-oftown correspondents than in some months. The rate for prime names declined
slightly during the latter part of the month to a range of 6-6^4 per cent, as
against the 6 ^ per cent rate prevailing when bank investment demand was least
active. Even at the slightly lower rate level, the amount of new paper being
created by commercial and industrial concerns remained of rather small proportions, and dealers indicated that they were more desirous of acquiring additional paper than they had been in some time.
During September, the amount of commercial paper outstanding through 23
firms declined 1 per cent to $265,000,000 on the 30th. This amount is 38 per cent
less than thp outstandings at the end of .September of last vear.
Philadelphia.—The principal reason for those operations was a desire to keep
the supply of Federal reserve credit in the market reasonably adjusted to tho
requirements of commerce and industry. We think these operations, included,
as they were, in the general discount policy of the system, accomplished their
purposes.
Richmond.— (a) This bank has not engaged in any operations except through
participation in transactions of the open-market investment committee, and, at
times, owing to its reserve position and for other reasons, has refrained from
RATIONAL AND FEDEKAL RESERVE BANKING SYSTEMS
811
such participation. The principal reason for the major operations has been,
we think, to aid in giving stability to the money market and to correct credit
tendencies in both directions. Another reason has been to offset the effect of
gold imports and exports. (&) The main consequences of such operations we
think have been, as above indicated, to increase or decrease the volume of credit
and stabilize money conditions, and, when undertaken for offsetting the effect
of gold movements, to maintain money-market conditions.
St. Louis.—In 1922 and 1923 purchases were made by this bank as a convenience to our member banks and in order to keep our surplus funds working.
When open-market committee was formed we acted in accordance with its
recommendations as evidenced by its minutes.
When open-market committee was succeeded by open-market policy conference we acted in accordance with its recommendations.
San Franoisoo.—•
[In approximate millions of dollars]
Date
Purchases
February to June, 1922.__
June, 1922, to June, 1923..
January to September, 1924..
50
November, 1924, to March,
1925.
Sales
Comments
Due to precipitous drop in earning assets, directors
believed at the time that the bank should maintain
its earnings at a point sufficient to pay dividends.
50 This movement can be attributed to 2 causes: First,
the desire of the Treasury to have Federal reserve
banks dispose of holdings of Victories in the market
($10,000,000), and to sell in the market or redeem before maturities notes of specific issues ($24,000,000).
There also was disposed of $5,000,000 in bonds securing " b a n k " notes issued to carry out the provisions
of the Pittman Act. Second, because it was believed the system's holdings were too large and the
market could absorb a reduction without disturbance, particularly as gold was flowing toward the
United States. The remaining reduction of
$11,000,000 either took the form of sales to the market or maturities which were not replaced.
Volume of system's credit was falling off and it appeared desirable (inasmuch as purchases could be
made without disturbing the money market, credit
conditions generally, and the price of Government
securities) to accumulate holdings sufficient to give
the system means of firming rates promptly if the
necessity for such action should manifest itself.
25 Gradual reduction of system's portfolio of Government securities undertaken to maintain the effectiveness of discount rates.
During 1927, the system's holdings of Government securities increased from
time to time. In some cases, this took the form of temporary certificates to
cover Treasury overdrafts following redemptions of maturing obligations, and
also took the form of investments to offset foreign banks earmarking gold in
the United States. Owing to San Francisco's earning position, its regular proportion of participation was not at times taken, which accounts for the absence
of noticeable changes in its participation account during 1927.
[In approximate millions of dollars]
Date
Purchases
December, 1927, to May, 1928-
March to December, 1930
34718—31—PT (
.30
Sales
Comments
30 This was a reversal of the system's policy during
1927 in which .purchases were undertaken to' ease*
the consequences of gold,exports, to make effective
reduced discount rates granted to stay the business
recession showing evidence in the "Onited States.
It was believed also that an easier credit condition
in the United States would stimulate European
purchases of American farm products.
Following the severe business recession which
evidenced itself in the latter part of 1929, the system
acquired Government securities with a. view of
easing the credit situation. San. Francisco.had not
been participating in these purchases, but, in view
of its high reserve position, accepted $25,000,000 in
March.
812
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
In the main, it is believed that the consequences of these operations were
generally those intended, as indicated above.
A more prompt and vigorous reversal of the easing policy made effective
during the latter part of 1927 might have advanced, and, possibly, measurably
modified, the collapse which came in 1929.
3. What, in your opinion, has been the effect since 1922 of changes in the
portfolio of the United States securities and bankers' acceptances held by all
Federal reserve banks on fluctuations in brokers' loans and on fluctuations in
security loans and investments of all member banks and of member banks in
your reserve district?
Atlanta.—Increases in the portfolio of the United States securities and
bankers' acceptances held by all Federal reserve banks normally increase the
supply of funds available to banks and the money market, with the result that
money becomes easier. Decreases in the portfolio of United States securities
and bankers' acceptances normally reduce the supply of funds available to the
banks and the money market, with the result that money becomes tighter. At
times when the supply of funds exceeds the demand of commercial borrowers at
constant or declining rates of interest, the banks resort to security loans and
investments for the full utilization of their funds, encouraged by the more
attractive rates of these types of paper. When through the open-market
operations of the reserve banks the supply of funds is reduced, the banks
normally either liquidate their security loans and investments or increase their
rediscounts as the demand of their commercial borrowers maintains its level
or increases. It is our opinion that the changes in the portfolio of the Federal
reserve banks since 1922 have resulted in these usual conditions.
Boston.—There has been little if any correlation so far as collateral loans
and brokers' loans held by member banks is concerned; on the other hand, it
is possible that credit released through the Federal reserve open-market
operations may have had some bearing in the large increase of member banks'
holdings in volume of securities.
Chicaffo.—The purchase of United States securities and bankers' acceptances
in 1924 and in 1927, which were both major operations, undoubtedly tended to
increase brokers' loans and security loans and investments of the larger member banks in our district because in both those years, particularly in 1927, there
was a strong demand for speculative credit. Any easing in money-market rates
during a period of speculative demand naturally increases that demand because
of the additional amount of funds available in the money market at low rates.
However, during 1930 brokers' loans and other security loans did not increase,
notwithstanding the easier money rates and at the present time with openmarket money rates as easy, if not easier, than they have ever been in the
history of this country, there is very little speculative demand for credit. This
is usually true in a period of deflation or depression. The sale of securities
produces just the opposite effect ordinarily as long as the Federal reserve
system can control the rates in the money market. However, in 1928 these
sales did not produce the desired effect, as indicated above, for the reason that
speculation had long passed the incipient stage and had become violent and
excessive, and borrowers for speculative purposes paid no attention to high
money rates, the high rates for call money having attracted funds from nearly
all countries of the world and particularly funds from corporations, firms, and
individuals represented in brokers' loans as " Loans by others." These outside
funds could not be controlled by the Federal reserve system and the high callmoney rates in New York, instead of serving to decrease the amount of loans
had just the opposite effect as they attracted more funds to New York from the
sources mentioned.
Cleveland.—There does not seem to be any definite relationship between the
volume of Government securities and bankers' acceptances combined held by
all reserve banks and brokers' loans. (See accompanying chart.) From the
beginning of 1924 brokers' loans showed almost continuous and uninterrupted
advance until October, 1929, despite wide fluctuations in the total amount of
securities and acceptances held by the reserve banks. We believe that the
volume of open-market paper held by the reserve banks does influence investment and security-loan policy of member banks through the effect that changes
in holdings of such paper usually have upon rates of interest.
In the fourth district changes in money conditions that may be a reflection of
open-market activity in New York apparently influence the volume of investment securities held to a much greater degree than the volume of collateral
loans. This is particularly true in periods of extreme money ease.
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TIES AND ACCEPTANCES HELD Bti
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
813
Dallas.—Our answer to this question will be found largely in our answer to
the preceding question. In so far as the purchase of Government securities by
the Federal reserve banks is concerned, as open-market operations are excessive
(as the result of an arbitrary determination of the amount), artificial ease of
credit conditions is created; the volume of rediscounts with Federal reserve
banks declines below what it would be normally, and to the extent that excess
reserves are created member banks are induced to seek investments. It is for
this reason that we believe that less and less dependence should be put upon
the purchase and sale of Government securities and more and more dependence
put upon the volume of bills offered to the Federal reserve system and the
proper adjustment of system buying rates for such bills. The principal obstacle
which we see to successful open-market operations is the fact that the Federal
reserve system has nothing which it can sell into the market in order to harden
rates or restrict the expansion of credit when that seems desirable, and has
therefore been more or less forced to acquire assets which may be used for
that purpose; but in acquiring them there is the tendency to create the very
condition for the correction of which it desires to have the assets in its portfolio. The result has been that the process of purchasing Government securities,
on the one hand, or, on the other hand, selling Government securities, has
continued probably over too long periods of time.
Kansas City.—Detailed statistics answering this question can be obtained
from Federal Reserve Board, division of research and statistics.
Minneapolis.—Very little, if any, in our district.
New York.—The following diagram illustrates the relationships between
open-market operations in Government securities and bankers' acceptances and
the fluctuations of brokers' loans, security prices, bank security loans, and bank
investments. The most direct and obvious relationship indicated by these
figures is the relationship between bank investments and Government security
operations of the reserve banks. Purchases of Government securities by the
reserve banks have relieved member banks from their indebtedness at the
reserve banks and have placed them in a position to increase their investments
and, conversely, the sales of Government securities have been followed by
increases in the indebtedness of the member banks and declines in their investments as they sought to liquefy their positions. There is a somewhat similar
connection between security operations at the reserve banks and the security
loans of the member banks, though the relationship is much less direct.
Both the figures and the consideration of what actually takes place indicates
some relationship between Government security operations and fluctuations in
brokers' loans. There is evidently a tendency for security purchases by the
reserve banks to be accompanied or followed by some increase in brokers'
loans, and sales to be followed by a decrease or a pause in the advance, though
this tendency is less marked than the case of bank investments. The most
violent fluctuations in brokers' loans, however, in recent years have been
directly opposite to what might be expected from the changes in Federal reserve security holdings. Sales of securities in 1928-29 did not prove effective
in checking a rapid rise of brokers' loans, nor were purchases in late 1929 and
1930 followed by any stay in the decline in brokers' loans. At times when
loans by banks were the dominating element in brokers' loans, they appear to
have been somewhat influenced by Federal reserve security operations, but the
growth of loans for account of others was partly responsible for the lack of
effectiveness of Federal reserve policy.
Changes in acceptance holdings, as shown by the diagram, have been largely
seasonal and have provided, without the strain involved in discounts, a considerable part of the seasonal requirements for Federal reserve credit. The free
movement of acceptances into and out of the reserve banks in response to trade
demands has done much to remove seasonal credit strains and plethoras.
Generally speaking, there has been little noticeable relation between Federal
reserve holdings of bankers' acceptances and fluctuations in brokers' loans or
bank security loans and investments. The autumn of 1928 was perhaps an
exception, when an unusual rise in acceptance holdings was accompanied by
an increase in brokers' loans. Even in this case, however, the expansion of
brokers' loans was based largely on credit from nonbanking lenders.
Philadelphia.—The use of Federal reserve credit augments the loaning power
of the member banks. Purchases of Government securities release money
already invested in securities, and it is more than likely that the sellers of such
securities naturally would invest the proceeds of such sales in other securities
and cause more or less activity in the security market. On the other hand,
814
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
they might have been used for loans on securities, or on call, or for commercial
loans. But it is impossible to follow the trail of credit when released. The
purchases of bankers' bills were made with the purpose, for the most part, of
establishing and maintaining a discount market. It is impossible to say whether
or not the proceeds of those purchases found their way into the investment
market and/or loans on securities, or again into commercial loans.
Richmond.—As indicated in the answers to No. 2, changes in the portfolio
of United States securities and bankers' acceptances held by all Federal Reserve
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WEEKLY REPORTING BANKS
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1925
Banks have tended to increase or decrease the volume of credit and have had
some effect upon rates, and so have tended to influence fluctuations in brokers'
loans and fluctuations, in security loans and investments of all member banks
in the country at large. The direct effect upon member banks in this district
we think has never been material, if traceable.
NATIONAL AND FEDERAL KESERVE BANKING SYSTEMS
815
St. Louis.—In the eighth district the effect has been small, even in St. Louis,
and practically negligible in other portions of the district.
San Francisco.—The public's desire to share in what was regarded, for a
time at least, as a new era of industrial prosperity, has had considerable to
do with the change in form of credit from bank loans to securities.
However, during the earlier period under review, the changes in character
of Federal reserve assets did not noticeably manifest themselves in important
fluctuations in brokers' loans, security loans, and investments of member banks.
Later, the release of Federal reserve credit, regardless of whether it took the
form of increased discounts or purchase of United States Government obligations or purchase of acceptances, had an expansive effect on credit for which
there was an increasing demand by industry for capital purposes.
What may be said for the Nation as a whole is applicable to the twelfth
district.
4. Viewed in the light of subsequent events, what policies should the Federal
reserve banks have followed in the purchase of United States securit es in 1924
and 1927?
Atlanta.—The objectives which the Federal reserve banks hoped to accomplish
through their purchases of United States Government securities in 1924 and
1927 were worthy objectives, and their policies adopted on these occasions
were followed by the very beneficial results for which they were intended.
That these polic.es were not allowed to function normally would not affect my
opinion that their purpose was valid, and that the attainment of this purpose
w^as beneficial.
Boston.—Both of these purchase operations appear to have been successful.
The principal criticism might be with the tardy reversal in the latter part of
1927 when the need for this stimulus had been passed.
Clibcago.~^lt is possible that in 1924 too much money was put into the
market by the purchase of Government securities that year and the results
might have been more satisfactory if smaller purchases had been made but it
was, of course, difficult to determine in advance the extent of the effect the
purchases would have on our domestic situation, although it seems that the
objects to be attained were accomplished and during a period of speculative
demand for money it is not possible to keep funds that are put into the market
from getting into speculative channels. In 1927 the danger of putting money
into the market was greater than in 1924 as speculation was well under way,
and it would now appear that the objects which were accomplished at that
time were more than offset by the loss of control of the money-market situation
which continued through 1928 up to the fall of 1929.
Cleveland.—In the light of what subsequently transpired, we believe that it
would have been better had purchases of securities been suspended earlier in
1924. In 1927, however, we believe that the situation warranted the action
taken although, as indicated in reply to question 3, we believe that the sale of
securities which took place in early 1928 should have been accomplished by
prompt and decisive increases in rediscount rates. Such action was not taken
for fear of possible harmful consequences to business but in the light of developments it is believed that whatever harmful effects this might have had
would have been preferable to a continuation of the then existing speculative
situation and the extremely harmful results which it ultimately brouglit about.
Dallas.—We have no comment or criticism as to the objective sought by the
policy of 1924. It is, however, to some extent, clear that in view of the large
gold imports between 1920 and 1924 the purchases of Government securities
were excessive and continued over too long a period of time, as a result of the
arbitrary determination of the amount purchased. This result was no doubt
brought about by a desire on the part of the open-market investment committee
to acquire a portfolio for use later on in the correction of any undue ease, but
it aggravated and extended if not actually created a period of excessive ease.
In the light of subsequent events the policies formulated and put into practice in August, 1927, probably continued too long—that is, in the initiation
of the policy Government securities should have been purchased either in
smaller installments or more slowly, so that the effect of the policy could have
been more accurately determined before proceeding further in an execution
of the policy; or policies should have been modified, tightened, or reversed
sooner than they were through an earlier sale. This would have maintained
a better balance in the money market. It was not unnatural, with an experience of only 13 years in Federal reserve bank operation, that the amount of
816
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
credit injected into the market through the purchase of Government securities
or the amount of money taken from the market through sales of Government
securities would not be accurately determined. Experience since that time
tends to indicate that open-market policies once instituted have not been modiified or reversed as quickly as they probably should have been.
Though it may not be entirely germane to the question or this discussion,
the management of this bank does not feel that it is the function of the
federal reserve system to make a bond market or that artificial ease of the
money market should be undertaken in order to induce member banks to buy
securities. We rather believe that the bond market, as well as the mortgage
market, should depend on the amount of the savings of the country, and therefore the amount of new wealth and the availability of new capital through
the sale of securities should be measured accordingly. We think that experience also shows that less initiative on the part of the system than has been
exercised in the past is desirable.
Kansas Gity.—The purchases made in 1927 were advisable, but subsequent
events indicate that an effort to bring about firmer money conditions should
have been made sooner than was the case. Our ideas relative to purchases
made in 1924 are not quite so definite, but the acceleration in the rate of increase
in security loans, which began in 1924, may have been due, in part, to the large
volume of purchases of Government securities during the first part of the year.
Minneapolis.—Possibly the banks made a mistaken diagnosis of the situation
in 1927 and did not put up the rediscount rates early enough or high enough
or reduce the holdings of Government securities sufficiently promptly.
New York,—Two general approaches might be taken in a critical review of
Federal reserve open-market policy in 1924 and 1927. One approach would involve a study of the correlation between open-market purchases and sales and
other economic developments such as the movement of business indexes, commodity prices, bank credit, and the course of speculation. If this approach
is taken diagrams 1 and 3 on preceding pages provide most of the necessary
data. They show that purchases both in 1924 and 1927 were made at times of
business recession, though the recession was more serious in 1924 than in 1927.
It is now clear that purchases were continued in 1924 for two or three months
after business had begun to improve, though they were discontinued about a s
soon as the then available statistics clearly indicated the improvement in
business. In 1927 purchases were discontinued before there was any markedl
recovery in business. In both periods the quantities of securities purchased
were in general related to the extent of the recession. Total purchases in
1924 were $510,000,000, and those in 1927 were $230,000,000. Comparison majr
also be made with the movement of bank credit. Such a comparison would
lead to the general conclusion that when purchases were begun in 1924 bank
credit was relatively stable or declining, but that a rapid increase had taken
place before purchases were discontinued. In 1927 bank credit was rising alL
during the period of purchases. If this criterion alone were applied it might
suggest that the 1924 operations were helpful but continued slightly too long,
and it might raise some question as to the necessity for the 1927 operations.
In addition, however, to these purely domestic considerations it is important
to refer also to the gold movement, for in both cases purchases were begun at
a time «of gold imports which were bringing to this country gold which we
did not want and which others could ill afford to lose. In 1924 the g®Id movement was reversed after the completion of security purchases. In 1927 it was
reversed while purchases were still being made. In 1924 this was of special
importance because the reversal of movement doubtless facilitated a return of
Great Britain to the gold standard. In 1927 the reversal of the gold movement
was important because a number of the countries of Europe were under severe
credit strain. In both these cases it would be extremely difficult to determine
whether as effecitve an influence on the gold movement would have been
exerted with a smaller amount of purchases.
A second and different approach to this whole problem would be to view the
period since 1922 as a whole and consider the operations of 1924 and 1927 as
parts of the larger unit. In the light of subsequent events it appears that this
span of years was marked by inflationary tendencies in the United States.
The increase of bank credit during the period was more rapid than is usually
required by the normal growth of business. This rise in credit was not accompanied by any inflation of commodity prices, but some measure of inflation,
undoubtedly occurred in other directions, particularly in prices of securities-
NATIONAL AND FEDERAL. RESERVE BANKING SYSTEMS
817
and real estate. From the point of view of our domestic economy considered
by itself, a somewhat higher level of money rates and a somewhat smaller
growth in bank credit over this entire period would have been wholesome, and
there is no doubt but that the open-market operations of 1924 and 1927 were
particularly stimulating to the growth in bank credit. But conclusions upon
this point must be qualified by a recognition that the domestic economy could
not be considered wholly independently of world changes. To the extent that
firmer money rates had been maintained here, additional amounts of gold would
have been drawn from the rest of the world and credit stringency accentuated
in European money centers during the period when European countries were
struggling back to monetary stability and attempting to recover from serious
economic disorganization. These conditions closely affected American trade and
American prices, especially prices of farm products. Even as it was world
prices were steadily depressed over most of the period. Moreover, the continued piling up of gold reserves in the United States through gold imports
constituted in itself a threat of future inflation. It appeared to be safer at
these two periods to establish conditions which would keep the gold out, even
at the risk of the dangers of easy money, than to let the gold imports continue.
In view of the various aspects of this problem, it is our opinion that purchases
of securities in both 1924 and 1927 were most helpful and desirable. There
does appear, however, to be valid ground for criticizing succeeding action. The
1924 purchases were carried further than now appears to have been desirable,
leading to an unnecessarily rapid growth in bank credit until the reversal of
policy in early 1925, which placed an effective check upon expansion. After
1927 there was not sufficiently clear recognition of the dangers in the growth of
credit, influenced by speculation. Security sales and discount rate changes
similar in amount to those of 1925 proved inadequate when applied in 1928.
More vigorous measures were necessary.
Philadelphia.—We feel we have no positive means of determining it and do
not feel justified in admitting that there have been any developments during
the years 1924 to 1927 to indicate that the right policy had not been followed.
It always will be a question whether or not the amount of Federal reserve
credit at times required should be put into the market upon the initiative of
the Federal reserve banks, i. e., by so-called open-market operations, or by the
direct action of member banks through rediscount operations.
Richmond.—In the light of subsequent events, we think United States securities should not have been purchased in these periods, and the aim should have
been to decrease rather than augment the total supply of Federal reserve credit.
St. Louis.—Policies when initiated in both 1924 and 1927 were sound. However, in neither year were they reversed soon enough.
Ban Francisco.—The two periods should be regarded as interrelated. Had
the easing policy made effective during the latter part of 1927 been reversed
more promptly and vigorously, it would have justified the main courses followed
in 1924 and 1927.
5. What changes would you suggest be made in the provisions of the Federal
reserve act relative to the purchase and sale of United States Government securities by the reserve banks? Would you favor an amendment to the effect that
an affirmative vote of five members of the Federal Reserve Board be required
before any large sale or purchase of United States securities be undertaken by
the reserve banks?
Atlanta.—I would suggest no change. The open market policy conference, in
which each reserve bank is represented, recognizes and preserves the automony
of each reserve bank as provided for in the Federal reserve act, and at the same
time promulgates a unified system policy that must be approved by the Federal
Reserve Board.
Boston.—I do not believe that any changes in the provision of the Federal
reserve act relative to the purchase and sale of United States Government
securities by the reserve banks are necessary, nor do I believe it desirable for
any additional control over the operations of the open market investment committee, representing, as it does, the closest financial touch with the money
market. Considering the unsettled conditions of finance throughout the world,
in my judgment the operations of the open-market committee have been handled
with rather unusual consideration and judgment.
Chicago.—1. No suggestion.
2. No.
818
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Cleveland.— (A) We see no occasion for any change at the present time in
the provisions of the act relative to the purchase and sale of United States
Government securities by the reserve banks.
(B) We should be opposed to an amendment requiring an affirmative vote
of five members of the board before any large scale open-market operations be
undertaken by the reserve banks.
Dallas.—(a) None. A gradual reduction of the flow of Government securities outstanding would decrease the facility for such sales and purchases and
would gradually bring about a greater dependence upon bankers' acceptances
as the medium for open-market operations of Federal reserve banks and increase
the efficacy of the rediscount rate.
(6) No.
Kansas City.—The existing plan, under which major policies are determined
by the Open Market Policy Commission and approved by the Federal Reserve
Board, should afford ample safeguard against ill-considered actions.
Minneapolis.—No. A large purchase might be imperative to take care of
some emergency and five members of the board not be .available for such
action. At this date there are only five members of the board, and the absence
of any one of these from the city would tie the hands of the banks.
New York.—We would not suggest any changes in the provisions of the
Federal reserve act relative to the purchase and sale of Government securities.
The act is and should be in broad terms, leaving considerable flexibility for
the development of proper methods of procedure. This latter problem has
offered some difficulties, the major difficulty being that a system operation in
Government securities under the present organization has to represent a compromise between divergent views, and system policy, therefore, tends to have
too great inertia, to be too slow, and when once started tends to go too far.
This difficulty should diminish as time goes on and as experience in operation
indicates what gradual modification of procedure will tend to make Federal
reserve open-market operations more effective. The requirement that an
affirmative vote of five members of the board should be prerequisite to any
operation would in our judgment be a step in the wrong direction and make
even more difficult the necessary flexibility of operations. In a deliberative
body of 8 members of whom 2 are ex officio and engrossed in other duties it is
naturally often difficult to secure an attendance of 5 at a meeting and very
difficult indeed to secure an affirmative vote of five members for any important
proposal affecting varying interests in various ways.
Philadelphia.-^-Do not favor any changes in the act relative to the purchase
and sale of United States Government securities by the reserve banks.
Richmond.—We do not believe that any changes in existing provisions are
necessary.
St. Louis.— (1) None.
(2) No.
San Francisco.—No change suggested relative to purchase and sale of United
States securities. Would not favor requiring an affirmative vote of five members of Federal Reserve Board before banks may undertake large transactions
involving purchase or sale of United States securities. A majority vote of the
board is now 5 and the absence of 2 ex officio members and 1 appointed would
leave the board unable to function without unanimous agreement, a potentially
dangerous situation.
6. Have the resale agreements entered into by the Federal Reserve Banks
with dealers in the United States securities tended to offset, on any occasion,
the open-market policies of the Federal reserve banks?
Atlanta.—Do not know.
Boston.-—The resale agreements by this brnk with dealers in United States
securities in this market during past years have been so insignificant in amount
that it has had little, if any, effect on the Boston market, and I should feel
that these resale agreements were so temporary in character and so well within
the control of the Federal reserve banks that they could not have offset any
policy agreed upon by the Federal reserve banks.
Chicago.—The volume of resale agreements with Federal reserve banks by
dealers in United States securities has not been large enough at any time to
have interfered with the open-market policies of the Federal reserve system.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
819
Cleveland.—We have no local transactions of this type. There are no recognized dealers in Government securities in this district, other than a few local
offices of New York houses. For these reasons we are without experience upon
which to base a reply to questions 6 to 11, both inclusive.
Dallas.—Not to any great extent. At year-end periods repurchase agreements
increase in volume and offset to that extent the purchases of Government
securities which otherwise might be made by the open-market committee.
Kansas City.—We have had no resale agreements with dealers in United
States securities in this district.
Minneapolis.—As resale agreements are made only by and with the approval
of the Federal reserve banks and are in no way compulsory, it seems inconceivable that the banks would by indirection take action which would interfere
with or negative the policy they were trying to carry out.
New York.—The relationship between operations representing policy decisions
of the reserve system and purchases on sales contracts subject to resale agreement is shown on the accompanying diagram. It indicates clearly that purMILUONS OF DOLLARS
TOO
Government securities purchased outright by the reserve banks
compared with amounts purchased under resale agreement
(weekly d a t a )
chases on sales contracts subject to resale agreement have been so small in
amount and so timed in connection with seasonal currency and credit requirements that they have not interfered with major-policy operations.
Philadelphia.—They might, but we do not know that they have.
Richmond.—WTe have made no resale agreements in this district, and so far
as we are aware such agreements have not tended to affect in any material
mjanner the open-market policies of the Federal reserve banks.
St. Loais.—Have had no resale agreements with dealers in "United States
securities in this district.
San Francisco.—Can not recall any instance in which it was noticed that
open-market policies were offset by any Federal reserve bank or banks taking
United States securities under resale agreements. Do not believe, however,
Federal reserve banks should acquire or sell United States Government securities under repurchase agreements.
7. List on an attached schedule the changes in rates of interest charged
dealers in United States securities against resale agreements from.the inception
of such arrangements by your institution.
Atlanta.—No such resale agreements have been made in this district.
820
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Boston.—
Changes in rates of interest charged dealers in United States securities against
resale agreements from the inception of such agreements oy this institution
Date
Nov. 22, 1921
Aug. 22, 1922 2
Nov. 6, 1922 2
Dec. 18,1922 2
Feb. 23,1923 2
June 12, 1924 *
Dec. 16, 1925 2„
Jan. 8, 1926 2
Aug. 5,1927.-.
Feb. 8, 1928
Apr. 20,1928...
July 19, 1928.
Aug. 9, 1929 fc
Nov. 21, 1929Feb. 13, 1930
May 8, 1930
July 3, 1930
„
Certifiof
All issues cates
indebtedness
Treasury Coupon
rate
notes
Per cent
Per cent
m
_
VA
_
Per cent
m
&A
w
_
VA
4
0)
4
4^
4M
4
4
5
_
,
„
_
4
3^
3
" From the inception of the resale agreements until Aug. 22, 1922, United States securities were pur
chased at the coupon rate of the security purchased. During
this period United States securities were
purchased
at the following rates: 3H, 4%, $i, *M» **A> 5> % bl/2, 5%, and 6.
2
From Sept. 27,1922, to Jan. 8,1926, it was the policy of this bank to charge dealers one-quarter of 1 per
cent above the then existing carrying rate on any renewal granted.
Chicago.—
Rates on sales contracts with dealers in United States
securities
Per cent
Nov. 2,. 1921, to Sept. 30, 1925
Oct. 1, 1925, to Jan. 8, 1926
(x)
3^
Jan 9, 1926, to Apr. 27, 1926
4
Apr. 28, 1926, to Aug. 12, 1926
._ 3%
Aug. 13, 1926, to Sept. 9, 1927
4
Sept. 12, 1927, to Jan. 25, 1928
3%
Jan 26, 1928, to Apr. 20, 1928
4
Apr. 21, 1928, to July 10, 1928
4V2
July 11, 1928, to Nov. 22, 1929
5
Nov. 24, 1929, to Feb. 8, 1930
4y2
Feb. 9, 1930, to June 21, 1930
4
June 22, 1930, to Dec. 31, 1930
3V2
Since October 1, 1925, advances made to dealers have been at the same rate
as our discount rate.
Cleveland.—None. See answer to question 6.
Dallas.—Up to about three years ago we permitted the execution of repurchase agreements on Government securities sold to us by member banks that
actively dealt in Government securities, but these advances were made at the
rediscount rate. We discontinued this practice, however, and at present there
are no active dealers in Government securities in this district in the sense in
which the term is used in your question.
Kansas City.—None.
Minneapolis.—This bank has not carried United States securities under repurchase agreements.
1
Coupon rate of the issue.
NATIONAL AND FEDERAL EESERVE BANKIKG SYSTEMS
821
New York.—
Changes in rates at which United States Government securities were purchased from dealers under sales contract agreements and the rediscount rates
for corresponding periods.
Date effective
Jan, 23,1920..
Apr. 13, 192© i_.
June 1,1920....
Apr. 1,1921„_.
May 5,1921
June 16, 1921_.
July 21,1921...
Aug. 2,1921....
Sept. 22, 1921..
Oct. 31,1921-.
Nov. 3,1921...
Mar. 23,1922..
June 22,1922...
Feb. 23, 1923—
Apr. 10, 1923...
May 1,1924.-.
June 12,1924—
Aug. 8, 1924—.
Nov. 6, 1924...
Nov. 28, 1924-.
1
Discount Sales conrate
tract rate
6
T
6
~5
....
4
4
4
3
2H
Date effective
Feb. 27,1925..
Apr. 9,1925...
Jan. 8,1926...
Apr. 23,1926..
Apr. 29,1926..
Aug. 13, 1926..
Aug. 5,1927...
Feb. 3,1928—
May 18,1928..
July 13,1928Aug. 9, 1929...
Oct. 25,1929Nov. 1,1929Nov. 15, 1929.
Feb. 7,1930...
Mar. 14,1930.
May 2,1930...
June 20,1930..
Dec. 23,1930..
Dec. 24,1930..
Discount Sales conrate
tract rate
3^1
4
m
3MI
4
4
3«|
5
6
3H
4
3H
4
4H
5
5H
5
5
4
4H
4
3
3
Date of first sales contract agreement with dealers.
Philadelphia.—We never have held any appreciable amount of securities
under repurchase agreement, so have no schedule to submit.
Mchmond.—This bank has never had such arrangements.
St. Louis.—No such arrangements.
San Francisco.—San Francisco has not engaged in this practice.
8. List the names of the recognized dealers in United States securities in
your district. What net worth must a recognized dealer possess? What other
standards has your institution set up in determining whether a dealer in
United States securities is to be recognized or not?
Atlanta.—There are no recognized dealers in United States securities in
this district.
Boston.—The names of the recognized dealers in United States securities
in this district are as follows: First National Old Colony Corporation, Shawmut
Corporation of Boston, Salomon Bros. & Hutzler, R. L. Day & Co., C. F.
Childs & Co., Gertler Devlet & Co.
We do not require any stated amount of net worth. While the net worth
must be substantial in amount and adequate for the volume of business
transacted and the character of assets of such grade as to enable the dealer
td readily take care of his obligations, the dealer must possess sufficient
knowledge and experience to warrant recognition.
Chicago.—Bankers Co., of New York,1 C. F. Childs & Co., Continental Illinois
Oo., First National Old Colony Corporation of Boston, Salmon Bros. & Hutzler.
We have n^ver fixed a limit df the amount of capital necessary for a dealer
in Government securities to have before being recognized as such as long as
they are able to establish credit at local banks in amount sufficient to enable
them to carry a portfolio of securities to supply the demand arising in this
district. We have maximum amounts of advances we will make to any dealer
of $2,000,000, and the issues we will purchase under sales contracts are
restricted to short-term certificates and notes. In recognizing dealers in
Government securities, the same principle would apply for both acceptances
and Government securities; that is, dealers should be in a position to make
a market for round amounts of all issues, and publish and circulate regular
quotations.
i T h e B a c k e r s Co. of New York and t h e Continental Illinois Co. of Chicago are considered dealers in Government securities in this market, b u t we make no sales contracts
w i t h either of these companies.
822
NATIONAL AND FEDERAL KESERVE BANKING SYSTEMS
Cleveland.—None in this district other than a few local offices of New York
houses. See answer to question 6.
Dallas.—See answer to question 7.
Kansas City.—Since we have entered into no purchase and resale agreements with dealers in this district, we assume this question does not apply
to us.
Minneapolis.—There are no recognized dealers in United States securities
in this district other than the local representatives of New York and Chicago
houses. As we do not carry any securities for dealers, we have not set up any
requirements.
New York.—(The Federal Reserve Bank of New York requested that its reply
to this question be omitted.)
Philadelphia.—Same answer as No. 7.
Richmond.—In this district we have not what may properly be called recognized dealers in United States securities, although some of the larger dealers
of other districts have branch offices in one or two of the largest cities in this
district.
St. Louis.—No occasion to determine requirements of a recognized dealer.
San Francisco.—See answer as to question 7.
9. What margin requirements do you habitually exact in lending to dealers
in United States securities under the resale agreements?
Atlanta.—No resale agreements are made in this district
Boston.—As the average life of a resale agreement on United States securities is only 7.8 days, we do not require any marginal collateral when the
market price of the United States securities purchased is 100 or better. When
the price of the United States securities is less than 100, we buy them at
approximately one-half a point under the market value and carry them on our
books at a book value equal to the purchase price. Renewals, if granted, would
be taken based on the market value of the security at the time of the renewal.
Chicago.—As stated in question No. 8, we purchase only limited amounts of
the short maturities of United States Treasury certificates and notes, and where
these issues are selling at par or better we advance the face amount to the
dealer under sales contract. Where the market is below par we ask at least
one point in excess of the amount advanced to secure the sales contract.
Cleveland.—See answer to question 6.
Dallas.—See answer to question 7.
Kansas City.—None. See question 6.
Minneapolis.—See answer to question 7.
New York.—We do not make loans to dealers. Under the terms of our sales
contract we purchase securities from dealers subject to their agreement to
repurchase a like amount of the same securities at the same price plus interest
at the agreed rate at or before the expiration of 15 days from the date of the
original purchase. When the market value of the securities is par or better,
securities are purchased at par. When the market is below par, they are
purchased at prices slightly below the market value, the average price being
approximately one-half point below market value. A list of illustrative cases
follows :
Illustrations
of Government securities purchased under sales contracts
Securities pur-"
chased
Date purchased
Per cent
Nov. 14,1928.,
Mar. 5,1929
May 7,1929
Do
July 15,1929
Do
Dec. 6,1929
Do
-
3^T/N
Dated
Mar.
Dec.
Mar.
Sept.
* 3 ^ T / N Mar.
- 43/4 C/I ' Mar.
3H T/N Mar.
3 H T / N Sept.
m c/i
Wi C/I
m T/N
15,1927
15,1928
15,1929
15,1927
15/1927
15,1929
15,1927
15,1927
Due
Mar.
Sept.
Dec.
Sept.
Mar.
Dec.
Mar.
Sept.
15,1932
15,1929
15,1929
15,1932
15,1932
15,1929
15,1932
15,1932
Series
A-1932
TS2-1929
TD2-1929
B-1932
A-1932
TD2-1929
A-1932
B-1932
Par value
$1,900,000.00
500,000.00
700,000.00
150,000.00
1,900,000. 00
400,000.00
1,050,000.00
350,000.00
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Illustrations
823
of Government securities purchased under sales contracts—Con.
Date purchased
Nov. 14,1928.
Mar. 5,1929..
May 7,1929.,
Do
July 15,1929.
Do
Dec. 6,1929..
T>o
Price purchased
Amount paid
under
to dealer
sales
contract
97J^ $1,852,500.00
99^
497,500.00
99H
696,500.00
96^
144,750.00
97
1,843,000.00
100
400,000.00
99J^
1,044,750.00
99^1
348,250. 00
value
Market Market
excluding
price on
interest
purchase accrued on
date
securities
9 7 3 ^ 2 $1,861,406.25
498,437.50
992^2
698,687.50
992^2!
145,312.50
962^2
97 3 %2 1,860,812.50
400,250.00
100^2
9 9 2 ^ 2 1,048,031. 25
349,343.75
992^2
Philadelphia.—Same answer as No. 7.
Richmond.—We have no such agreements in this district.
St. Louis.—No such arrangements.
San Francisco.—See answer to question 7.
10. What is the average length of life of the resale agreements entered into
with dealers in United States securities?
Atlanta.—No such transactions are made in this district.
Boston.—The average length of life of a resale agreement entered into with
dealers in this district in United States securities is 7.8 days.
GMcago.—The average life of a sales contract could be estimated as approximately three days, although for the most part securities are held with us only
overnight.
Cleveland.—See answer to question 6.
Dallas.—See answer to question 7.
Kansas City.—See answer to question 6.
Minneapolis.—See answer to question 7.
New York.—Average length of life of resale agreements entered into by the
Federal Reserve Bank of New York with dealers in United States Government
securities since January, 1922, computed for two months of each year as a
sample: 1922, 7V2 days; 1923, 5y2 days; 1924, 3V2 days; 1925, 6 days; 1926, 4
days; 1927, 6 days; 1928, 5y2 days; 1929, 4 days; 1930, 4y2 days. Average
(unweighted) life of agreements for entire period, 5 days.
Philadelphia.—Same answer as to No. 7.
Richmond.—See answer to question 9.
St. Louis.—No such arrangements.
San Francisco.—See answer to question 7.
11. In lending to dealers in United States securities under resale agreements,
what precautions does your institution take in preventing Federal reserve credit
from seeping into the speculative or investment markets?
Atlanta.—No such transactions are made in this district.
Boston.—We have had practically no experience in lending to dealers in
United States securities under resale agreements within recent years, and these
resale agreements in the past were always for a very short period, and we have
never made any effort to follow the use that was made by those dealers of such
Federal reserve credit as they had obtained.
Chicago.—We do not see how lending to dealers in United States securities
under resale agreements can have any effect on the amount of credit in speculative or investment markets, as the dealers are carrying United States securities for the purpose of selling them as promptly as possible, their business
depending largely on the volume of quick turnover, rather than to maintain a
speculative position in such securities. Generally speaking, these dealers are
not interested in the prices of stocks, as their operations are principally in
Government securities and short-term obligations, which are regarded as nonspeculative.
Cleveland.—See answer to question 6.
Dallas.—See answer to question 7.
Kansas City.—See answer to question 6.
Minneapolis.—See answer to question 7.
New York.—As stated in the answer to the last question, we do not make
loans to dealers but we purchase securities from dealers subject to their
agreement to repurchase a like amount of the same securities at the same price
plus interest at the agreed rate at or before the expiration of 15 days from the
date of the original purchase. As far as the first use of the credit put out in
824
NATIONAL AND FEDEKAL KESERVE BANKING SYSTEMS
this way is concerned, we are constantly informed as to the business of the
dealers entitled to the sales-contract privilege and know that they only secure
funds from us to carry their portfolios of Government securities. As to the
eventual destination of Federal reserve credit put into use through purchases
of securities under sales contract the principles set forth in the reply to question 7 of questionnaire 7 are applicable. The destination is the same as that of
Federal reserve credit put into use through discounts or through any of the
other channels. The dealer who receives a Federal reserve check as a result
of a sales-contract operation uses the funds either to pay on* a bank loan or to
pay for Government securities which he has purchased. If he uses it to pay off
a bank loan, the bank finds itself in possession of a check on a reserve bank,
which it promptly deposits to its account in a reserve bank, and thus finds itself
with its reserve deposit increased exactly as though it had obtained funds by
discounting.
In the alternative case, in which the dealer uses the Federal reserve check to
pay a seller of Government securities, the seller of these securities, if not a
bank, deposits the funds in a bank, and the funds immediately find their way
into that bank's reserve deposit account at the reserve bank, just as though
that bank had borrowed. Thus the Federal reserve funds put into use through
sales-contract operations flow into the same channel as those put out in other
ways, and the considerations set forth in the replies to questions 7 and 8 in
questionnaire 7 are applicable. It also may be noted that dealers only come into
the Federal reserve bank to secure funds under sales-contract arrangements
when they can not obtain money at favorable rates outside the Federal reserve
banks. This means that they come in only at times when money is relatively
firm, and at such times the member banks are almost always in debt at the
reserve banks, and Federal reserve funds which they receive are used to retire
debt at the reserve banks. Moreover, funds put out in this way are withdrawn
again so promptly that they can hardly form a basis for new creation of credit.
These Federal reserve assets are liquidated more rapidly than any other assets
the reserve banks possess.
Philadelphia.—Same answer as No. 7.
Richmond.—We have no such agreements.
St. Louis.—No resale agreements.
San Francisco.—See answer to question 7.
Statistical Appendix
1. As of the end of each month since January, 1922, give on an attached
schedule:
(a) The amount of United States securities held in the portfolio of your
reserve bank which were purchased through the open market investment
committee.
(&) The amount of United States securities held which were purchased
locally or independently of the open market investment committee.
(c) The amount of resale agreements entered into with dealers in United
States securities.
FEDERAL RESERVE BANK OF ATLANTA
(a) Amount of United States securities held in portfolio of bank which wer&
purchased through the open-market investment committee as of the end of
each month since January, 1922
[In thousands of dollars]
Month
January
February
March
April
May__.
June
July
August
September
October
November
December
.
_
._
1922
1923
1924
1925
813
738
1,023
13,926
12,132
12,064
11,983
12,097
12,097
12,097
15,097
1926
1927
1928
1929
1930
4,323
4,889
5,794
9,954
9,887
9,791
9,860
9,936
7,053
6,415
6,230
3,753
2,031
2,091
2,103
2,280
1,992
2,080
2,300
2,208
2,208
1,271
1,102
685
597
510
510
815
820
4,197
6,226
6,226
6,226
6,2266,228
6,228
6,228
8,824
8,824
10,147
10,147
10,147
5,147
5,147
14,008
12,097
12,528
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
825
(&) Amount of United States securities held which were purchased locally or
independently of the open-market investment committee as of the end of each
month since January', 1922
[In thousands of dollars]
, 1922
Month
January...
February,.
March
April
May--.—.
June
July
_.
August
September.
October. _ .
November.
Becember.
12,781
7,981
7,444
7,563
7,009
8,912
8,359
7,240
5,192
4,665
3,693
2,371
1923
1924
1925
1926
1927
1928
1929
3,541
9,990
2,521
668
488
361
240
249
223
243
238
384
2,738
4,685
5,607
107
78
93
1,596
2,231
3,082
3,271
3,966
3,785
3,366
2,713
3,029
2,801
2,863
2,119
2,341
2,414
2,075
2,827
3,139
4,667
2,818
3,072
4,102
3,463
3,804
2,338
1,888
1,884
1,821
2,208
1,872
1,890
1,799
2,222
2,469
3,962
5,335
4,796
4,833
4,659
3,214
3,937
5,054
3,650
3,542
3,600
2,665
3,177
3,221
6,316
3,115
3,097
3,454
3,190
3,066
5,047
2,661
2,554
2,628
2,555
2,555
2,809
2,546
2,568
2,777
2,561
2,711
3,718
1930
2,562
2,588
2,564
2,565
2,614
2,603
2,623
2,557
2,559
2,547
2,550
2,730
(c) Amount of resale agreements entered into with dealers in United States
securities as of the end of each month since January, 1922
None.
FEDERAL RESERVE B A N K OF BOSTON
United States securities held in investment account at the close of business
on the last day of each month since January, 1922:
(a) The amount of United States securities held in portfolio purchased through
the open-market investment committee.
Lin thousands of dollars]
Month
1922
January
February
March
April
May
June
July.
August
September
October
November
December
1923
_-_
__.
_-
1924
1925
1926
1927
1928
1929
4,307
7,753
16, 047
19, 978
25,125
29,167
33,838
34, 681
35, 294
35,294
34, 584
31,676
21,094
18, 985
17, 241
17, 580
339
293
293
292
1,985
1, 985
1,985
6,985
5,170
1,985
2,486
12,054
12,054
12,054
12, 054
9,773
8,592
8,767
8,809
9,306
8,810
8,766
9,044
8,826
11,969
13,537
14, 996
21, 704
23, 092
28,851
31,821
32, 669
23,191
21,091
20,496
12,346
6,678
6,873
6,913
8,114
6,734
6,187
6,842
6,585
6,585
3,790
3,280
2,049
1,779
1,509
1, 509
3,110
2,646
6,322
11,389
25,106
1930
26,129
26,680
39,616
39,616
39,616
43,555
43, 555
45,473
45,473
45,473
47,058
49,236
(&) The amount of United States securities held, which were purchased locally
or independently of the open-market investment
committee.
Lin t h o u s a n d s of dollarsj
Month
January
February
March
April
May
June
July
August
September..,
October
November
December
1922
_
37,485
38,265
36, 537
_ 49,629
48,529
_ 45,940
47,942
48,404
27,887
26,490
. . -- 18,679
27,429
1923
1924
1925
1926
27,443
27,443
10,068
5,374
5,373
3,572
3,570
3,569
3,568
3,560
3,560
5,810
3,575
3,575
3,573
3,573
3,573
3,571
3,571
3,570
3,569
3,561
3,561
3,575
3,575
3,575
3,575
3,575
3,573
5,061
4,908
4,907
5,235
5,234
5,226
5,218
5,237
5,237
5,236
5,236
5,535
845
845
844
843
842
829
829
1927
848
848
548
548
547
707
706
705
705
703
689
689
1928
1929
708
708
707
707
706
704
728
703
702
701
689
1,589
1,607
1,607
2,057
2,058
2,055
1,759
1,758
1,756
756
755
744
744
1930
762
762
707
707
707
706
705
704
704
701
689
689
826
(c)
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
The amount of resale agreements entered into %oith dealers in United
States securities
[In thousands of dollars]
1922
Month
January
February
March
April
May
June —
July
--.
August
September - .
October
November
„__.
December. •*
1923
1,626
749
_-.
570
2,263
1,054
1,047
2,165
169
256
474
475
214
385
1,085
1,075
4,052
1924
910
710
400
1,410
1925
245
192
135
18
370
1,574
3,375
1,178
545
1,644
1,565
532
1926
1927
95
655
192
906
839
45
1928
436
1929
1930
47
28,121
100
30
627
817
1,725
643
FEDERAL RESERVE BANK OF CHICAGO
United States securities held oy Federal Reserve Bank of Chicago which were
purchased by the open market investment committee
Jan. 31, 1922, to Dec. 31,
1923
Jan. 31, 1924
~ ~ I
Feb. 29, 1924
Mar. 31, 1924
Apr. 30, 1924
M a y 31, 1924
June 30, 1924
July 31, 1924
Aug. 30, 1924
Sept. 30,1924
Oct. 31, 1924
Nov. 29, 1924
Dee. 31, 1924
Jan. 31, 1925
Feb. 28, 1925
Mar. 31, 1925
Apr. 30, 1925
M a y 29, 1925
—
June 30, 1925
July 31, 1925
Aug. 31, 1925
Sept. 30, 1925
Oct. 31. 1925
Nov. 30, 1925
Dec. 31, 1925
Jan. 30, 1926
Feb. 27, 1926
Mar. 31, 1926
Apr. 30, 1926
M a y 29, 1926
June 30, 1926
July 31, 1926
Aug. 31, 1926
Sept. 30,1926
Oct. 30, 1926
Nov. 30, 1926
Dec. 31, 1926
Jan. 31, 1927
Feb. 28, 1927
Mar. 31, 1927
Apr. 30, 1927
May 31, 1927
June 30, 1927
None. July 30,1927
$8, 35T, 800 Aug. 31, 1927
15,043,600 Sept. 30,1927
31,118, 200 Oct. 31, 1927
38, 699, 300 Nov. 30, 1927
48, 616, 500 Dec. 31, 1927
54, 651, 600 Jan. 31, 1928
65, 862, 600 Feb. 29, 1928
67,884, 600 Mar. 31, 1928
70,258,500 Apr. 30, 1928
70,258,500 May 31, 1928
68, 849, 000 June 30,1928
63, 076, 500 July 31,1928
42,072,000 Aug. 31, 1928
37, 865, 000 Sept. 29,1928
34, 387, 000 Oct. 31, 1928
35, 064, 000 Nov. 30, 1928
24, 064,000 Dec. 31, 1928
20, 826, 500 Jan. 31, 1929
20, 826, 500 Feb. 28, 1929
20, 703, 500 Mar. 30, 1929
22, 010, 500 Apr. 30, 1929
22, 010, 500 May 31, 1929
22, 010, 500 June 29,1929
31, 010, 500 July 31, 1929
27, 743, 500 Aug. 31, 1929
22, 010, 500 Sept. 30,1929
23,011,500 Oct. 31, 1929
36, 071, 000 Nov. 30, 1929
36,071,000 Dec. 31, 1929
36,072, 500 Jan. 31, 1930
36, 072,500 Feb. 28, 1930
29, 243, 500 Mar. 31, 1930
25,708, 500 Apr. 30, 1930
26,233,000 May 31, 1930
26, 360, 000 June 30, 1930
27, 847, 500 July 31, 1930
26, 364, 500 Aug. 30, 1930
26, 233,500 Sept. 30, 1930
27,062, 500 Oct. 31, 1930
26,409, 500 Nov. 29, 1930
29, 813, 000 Dec. 31, 1930
$33, 719, 500
36,471,500
49,122, 000
50,542, 500
58,106,000
63, 368, 000
65, 215, 500
46, 204, 500
42,102, 500
40,911, 500
24, 645, 500
13, 330, 500
13, 720, 000
13,801,000
12, 258, 500
12, 258, 500
12,402,500
13, 717, 000
13,197, 500
13,197, 500
7, 594, 500
6, 571, 500
4,103, 500
3, 562, 500
3, 021, 500
3, 021, 500
5, 628, 000
4, 947, 000
12,296,000
22, 055, 000
48, 473, 000
50,448, 500
51,412, 000
50,456, 500
50, 456, 500
50, 456, 500
57, 629, 500
57, 629, 500
61, 201, 000
61, 201, 000
61,201,000
64,259, 500
62, 675, 500
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828
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
United States
J a n . 31, 1922
Feb. 28, 1922
Mar. 31, 1922
Apr. 29, 1922
May 31, 1922
J u n e 30, 1922
J u l y 31, 1922
Aug. 31, 1922
Sept. 30, 1922
Oct. 31, 1922
Nov. 29, 1922
Dec. 30, 1922
J a n . 31, 1923
Feb. 28, 1923A
Mar. 31, 1923
Apr. 30, 1923
May 31, 1923
J u n e 30, 1923
J u l y 31, 1923
Aug. 31, 1923
Sept. 29, 1923
Oct. 31, 1923
Nov. 30, 1923
Dec. 31, 1923
J a n . 31, 1924 __
Feb. 29, 1924
Mar. 31, 1924
Apr. 30, 1924
May 31, 1924 _
J u n e 30, 1924
J u l y 31, 1924™
Aug. 30, 1924
Sept. 30, 1924
Oct. 31, 1924 _
Nov. 29, 1924 _
Dec. 31, 1924
J a n . 31, 1925 __
Feb. 28, 1925 „
Mar. 31, 1925__
Apr. 30, 1925 _
May 29, 1925
J u n e 30, 1925 _
J u l y 31, 1925
Aug. 31, 1925
Sept. 30, 1925
Oct. 31, 1925 _
Nov. 30, 1925 _
Dec. 31, 1925
J a n . 30, 1926 __
Feb. 27, 1926
Mar. 31, 1926
Apr. 30, 1926
May 29, 1926
J u n e 30, 1926 _
securities purchased and held ty the Federal
Chicago, under repurchase
agreement
__
„_
_ _
_
.
_ .
_
.,
„
„„
__
__
__
_
_
_
$456, 000
1, 585, 000
6,278,200
3,131, 900
1, 793,10O
7,625,900
2, 782,100
3,330,000
6,261,400
1, 545, 200
1, 004, 500
12, 830, 900
741, 000
2, 313,100
5,025,600
1,587,550
3, 394, 400
5,168,700
4, 040, 200
3, 460, 400
2,170,700
3, 411, 000
1, 481, 700
4,198, 900
1, 232, 200
1,259,800
1, 626, 300
909.000
309,000
None.
None.
None.
None.
None.
None.
None.
1,050, 000
None.
285, 000
447, 500
286, 000
2, 533, 000
1, 534, 500
2, 608, 500
1, 214, 500
3, 809, 000
4,165, 500
1, 605, 000
1, 205, 000
670, 000
2, 210, 000
2, 860, 000
340, 000
1, 961, 000
J u l y 31, 1926
Aug. 31, 1926
Sept. 30, 1926
Oct. 30, 1926
Nov. 30, 1926
Dec. 31, 1926
J a n . 31, 1927
Feb. 28, 1927
Mar. 31, 1927
Apr. 30', 1927
May 31, 1927
J u n e 30, 1927
J u l y 30, 1927
Apg. 31, 1927
Sept. 30, 1927
Oct. 31, 1927
Nov. 30, 1927
Dec. 31, 1927
J a n . 31, 1928
Feb. 29, 1928
Mar. 31, 1928
Apr. 30, 1928
May 31, 1928
J u n e 30, 1928
J u l y 31, 1928
Aug. 31, 1928
Sept. 29, 1928
O c t 31, 1928
Nov. 30, 1928
Dec. 31, 1928
J a n . 31, 1929
Feb. 28, 1929
Mar. 30, 1929
Apr. 30, 1929
May 31, 1929
J u n e 29, 1929
J u l y 31, 1929
Aug. 31, 1929
Sept. 30, 1929
Oct. 31, 1929
Nov. 30, 1929
Dec. 31, 1929
J a n . 31, 1930
Feb. 28, 1930
Mar. 31, 1930
Apr. 30, 1930
May 31, 1930
J u n e 30, 1930
J u l y 31, 1930
Aug. 30, 1930
Sept. 30, 1930
Oct. 31, 1930
Nov. 29, 1930
Dec. 31, 1930
Reserve
Bank,
$1,128, 000
1,895,000
970,000
1,766,000
1, 935, 000
983,000
1,130, 000
340, 000
3, 558,250
1, 920, 000
1,183, 000
1,617,000
5, 681, 900
1, 860, 000
3, 856, 450
1,600,000
720, 000
4, 855, 000
2, 000, 000
2, 750, 000
870,000
1, 070, 000
2, 000, 000
2,100, 000
970, 000
2, 000, 000
3,145, 000
1,995,000
3,165, 00O
2, 715, 000
2, 710, 000
None.
None.
2, 545, 000
800, 000
2, 420, 000
2, 339, 500
1, 020, 000
355,000
150,000
920, 000
446, 000
100, 000
40, 000
210, 000
80, 000
695, 000
330, 000
200, 000
75, 000
320, 000
None.
None.
7,000,000
829
NATIONAL AND FEDEBAL EESEEVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF CLEVELAND
Holdings of United States securities last reporting date of each month
Bought
locally
1922
January
February
March
April
May
June
July_._
August
September—.
October
November...
December—
$21, 724, 300
37, 460,800
46,311,800
59, 752,800
72,510,800
75, 821, 200
75, 847, 700
70, 714, 700
59,699,100
43, 551,100
26, 684,800
25, 739, 000
1923
January
February
March
April
May
June
July
August
SeptemberOctober
NovemberDecember-..
26,324,400
37, 569,800
21, 300,100
17, 564, 600
19,469,300
10,400, 600
10, 201,600
10, 243, 600
10, 289,100
10, 562,100
10, 763,100
11,195,100
1924
January
February
March
April
,_
May
June
July—
August
SeptemberOctober
November—
December...
11, 334,100
11,334,100
11, 930,100
11, 935, 600
11,947,600
6, 715, 600
9, 097, 600
9, 292, 600
11,451,600
14,463,100
14, 745,600
14,866, 400
1925
January
February
March.
April
May
June
July
August
SeptemberOctober
NovemberDecember
15,098, 900
15, 098, 900
14, 722, 900
14, 723, 900
11, 732, 900
18, 581, 400
19, 531, 400
19,531,400
19, 323, 900
19,328, 900
18, 778, 900
18, 757, 900
1926
January
February
March
April
May
June
18,832,400
19, 907, 400
17,861, 700
18, 957, 700
19, 081, 050
19,262, 050
Bought
through
open-market
investment
committee
Bought
locally
1920
July
August
September—.
October
November
December
1927
January
February
March—
April
May
June
July
August
SeptemberOctober
November
December
1928
January
February
March
April
May
June
$4, 973,600 J u l y
8,952,500 A u g u s t
IS, 613, 000 S e p t e m b e r 23,163, 000 October
29,113,800 N o v e m b e r
33, 858, 600 D e c e m b e r
45, 069, 600
46, 923,100
1929
50, 290, 500 J a n u a r y
50,290, 500 F e b r u a r y
49, 288, 500 M a r c h
45,183, 500 April
May
June
30,251, 500 J u l y
27, 226, 500 A u g u s t
24, 726, 500 S e p t e m b e r . . . .
25, 209, 900 October
12, 920, 000 N o v e m b e r — .
11,182,500 D e c e m b e r
11,182, 500
1930
11,116,500
11,651,500 J a n u a r y
11,651,500 F e b r u a r y
11,651,500 M a r c h
_.
17, 651, 500 April
May
June
15,473, 500 J u l y
11,651,500 A u g u s t
12, 367, 500 S e p t e m b e r 18,152, 500 October
18,152, 500 N o v e m b e r
18,152, 500 D e c e m b e r
$20,265,
20,465,
20,188,
21, 488,
22, 093,
22,139,
Bought
through
open-market
investment
committee
550
550
050
050
050
650
$18,152, 000
14,716,000
12,938, 000
13, 202, 000
13, 268, 000
14, 015, 000
22,129,650
23, 295, 700
23, 314, 000
23, 388, 200
23, 397, 700
24, 614,150
24, 695, 250
24, 775,250
25, 532,600
26,100,100
26, 200,800
26, 235,600
13, 269, 000
13, 202, 500
13, 620, 000
13, 291, 500
17, 558, 000
19,858, 000
21,330, 000
28, 093, 000
29, 277, 500
32, 739, 500
34, 656, 000
35, 275, 000
26, 965,600
26,865,600
26,308,600
26, 308,600
26, 308,600
26,435,600
26,435, 600
26,478, 700
27, 071,100
26, 482,800
26,482,800
25, 738,800
25, 041, 500
22, 774, 000
22,128, 500
13, 329, 000
7,208, 000
7, 418, 500
7, 462, 000
8, 757, 700
7, 268, 500
6, 803, 000
7, 524, 000
7, 223. 000
25, 738,800
25, 738,800
25, 710,800
25, 710,800
25,710,800
25, 706, 700
25, 706, 700
25, 706, 700
25,706, 700
25, 706, 700
10, 548, 750
10,164,800
7, 223, 000
4,157, 000
3, 614, 500
2, 251, 500
1, 954, 500
1, 658, 000
1, 658, 000
3, 970, 000
3, 300, 500
5. 180, 500
5, 180, 500
19, 314, 000
10,161,800
10,164,800
10,164,800
10,165,300
10,165,800
10,165,300
10,165,800
10,165,800
10,164,800
10,164,800
10,164,800
10,164,800
20,101, 000
20, 525, 000
24, 830, 500
39, 830, 500
39, 830, 500
45,176, 500
45,176, 500
47, 690, 000
47, 690, 000
47, 690, OOG
49,842,000
52, 760; 00O
830
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
United
States
securities
purchased
under
repurchase
November 8 a n d 9, 1929
agreement
$1, 818,950
FEDERAL EESEEVE BANK OF DALLAS
Amount of United States securities held in portfolio of the Federal
Reserve
^Bank of Dallas which were purchased through the open market
investment
committee as of the end of each month since January, 1922
[None prior to January, 1924]
1927
1924
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
29
31
30
31
30
31
30
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
31
30
29
30
31
31
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
30
27
31
30
29
30
31
31
30
30
30
31
Jan.
Feb.
Mar.
Apr.
May
June
31
28
31
30
31
30
$763,800
3, 347, 000
10, 313, 300
11, 533, 600
12, 774, 600
14, 476, 200
18, 706, 400
18, 989, 900
19, 469, 200
19, 469, 200
19, 033, 200
16,998,000
1925
15, 935, 500
14, 342, 500
13, 025, 500
13, 265, 000
25, 771,, 000
22, 305, 500
22, 305, 500
22,174,500
22,143, 500
22,143, 500
22,143, 500
25,143,, 500
1926
24, 054, 500
22,143,500
22, 499, 500
25, 392, 000
25,392,000
25, 392, 5C0
25, 392,, 500
20, 587, 000
18, 097, 500
18, 467, 000
18,555,000
19, 603, 000
1927
18, 559, 000
18, 466., 500
19, 051, 000
18, 591, 000
15, 927, 000
18, 013, 500
July
Aug.
Sept.
Oct.
Nov.
Dec.
30
31
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
29
31
30
31
30
31
31
29
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
30
30
31
30
31
31
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct
Nov.
Dec.
31
28
31
30
31
30
31
30
30
31
29
31
$18, 586, 000
21, 216, 000
22, 083, 500
25, 774, 500
27, 784, 500
22, 959, 500
1928
16, 298, 500
14, 822, 500
14, 401, 500
8,674,500
4,692,000
4, 830, 000
4, 859, 000
4, 316, 000
4, 316, 000
4,300,500
4, 756, 500
None.
1929
None.
None.
2, 279, 000
1,423,500
1,236,000
1, 048, 500
1, 048, 500
1, 048, 500
1, 274, 000
3,902,500
6, 905, 000
15, 035, 000
1930
15, 647, 500
10, 647, 500
15, 649, 500
15, 649, 500
15, 649, 500
18,182, 500
18,182, 500
19,241,000
19, 241, 000
19,243,000
20,147, 000
21, 332, 500
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
831
Amount of United States securities held m portfolio of the Federal
Reserve
Bank of Dallas, which were purchased locally or independently
of the open
market investment
committee, as of the end of each month since
January,
1922
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
31
30
31
30
31
31
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
31
30
31
30
31
31
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
29
31
30
31
30
31
30
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
31
30
29
30
31
31
30
31
30
31
Jan.
Feb.
Mar.
Apr.
May
June
30
27
31
30
29
30
1926
$4, 529, 500
4,529,500
4, 965, 500
4,965,500
4, 965, 500
5, 980, 500
6, 480, 500
5, 980, 500
5, 480, 500
13, 025, 000
13,163, 750
11,308,000
1923
7,258,000
11,618,000
11, 504, 500
9,379,500
8,379,500
1, 779, 500
1,779,500
1,779,500
1, 779, 500
11, 779, 500
6, 279, 500
6, 679, 500
1924
7,266,000
7,888,500
9, 657, 900
9, 946, 500
10,328,500
6,132, 000
6,961,100
7, 895,100
8, 326,100
8, 326,100
8,300,000
8,498,500
1925
2,055,000
3,609,350
7,082,500
7, 082, 500
6,846,600
5, 702, 900
6,500,350
7,146, 500
7,161,100
8,197,700
8,921,150
6, 685, 900
1926
._
7,487,550
7, 711, 700
8, 041,450
8, 392, 900
8,203,450
2, 978, 450
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
31
30
30
30
31
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct
Nov.
Dec.
31
28
31
30
31
30
30
31
30
31
30
31
$2, 373, 950
1,438,950
3,169, 250
2,970,550
2,910,050
3,736,350
1927
5,674,550
5,784,550
6, 538, 050
6,336,900
8,274,600
8, 495, 950
8, 003,000
7,964,550
8, 866, 450
8,414,850
9,696,500
9,029,500
1928
J a n . 31
Feb. 29
Mar. 31
Apr. 30
May 31
June* 30
J u l y 31
Aug. 31
Sept. 29
Oct. 31
Nov. 30
Dec. 31
10, 302, 350
9,993,850
10,149, 850
11,124, 850
11, 291, 900
10, 593, 850
11, 010, 400
11, 710, 400
10, 246, 350
11, 607, 850
9, 987, 850
10, 007, 850
1929
J a n . 31
Feb. 28
Mar. 30
Apr. 30
May 31
J u n e 30
J u l y 31
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 31
9,982,850
10,737,850
9, 987, 850
9,987,850
10, 005, 950
10, 031, 850
9, 996, 850
5,021,850
9, 987, 850
10, 087,800
9,987,800
9,842,800
1930
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
31
30
31
30
31
30
30
31
29
31
9,987,800
9,987,800
9, 987, 550
9,987,550
9,987,550
9, 987, 550
9,987,550
9,987,550
9, 987, 550
9,989,550
10, 487, 550
9,983,250
832
NATIONAL AND FEDERAL RESERVE BACKING SYSTEMS
FEDERAL RESERVE R A N K OF K A N S A S
Open-market
A m o u n t of
U n i t e d States!
securities
held i n t h e
portfolio of
t h e Federal
Reserve Bank|
of K a n s a s
City, which
were
purchased
through the
open-market
investment
committee
1922
Jan. 31.
Feb. 28.,
M a r . 31..
Apr. 30.May 31J u n e 30-.
July 31..
A u g . 31._
Sept. 30.
Oct. 3 1 . .
N o v . 30..
D e c . 31__
Jan.31..
Feb. 2 8 M a r . 31_.
Apr. 30..
May 3 1 J u n e 30. _
July 31-_
Aug. 31. _
Sept. 30.
Oet.31._
N o v . 30_.
D e c . 31__
J a n . 31 _,
F e b . 29__
M a r . 31_.
Apr. 3 0 M a y 31.Juno30._
J u l y 31 _ .
Aug. 3 1 . .
Sept. 30.
O c t . 31__
N o v . 30.
Dec. 3 1 -
$1,743,400
3,137,800
0, 474, 300
10,672, 200
12, 763,100
17, 283, 600
21, 95*, 900
22, 797,400
24, 554, 600
24, 554,600
24. 064,100
22, 052, 500
1925
Jan. 31.
Feb. 2 8 Mar. 31..
Apr. 3 0 May31__
J u n e 30—
July 31.A u g . 31__
Sept. 30.
Oct. 3 1 _ .
N o v . 30.
D e c . 31 _.
14, 734, 500
13, 261, 500
12,013, 000
12,343, 500
23,152, 000
20, 037, 500
20, 037, 500
19, 920, 000
20,844, 000
20,844, 000
20, 844, 000
24,844, 000
1926
Jan. 3 1 .
Feb. 28..
Mar. 31.
A p r . 30-.
M a y 31.
June 30..
23, 392,000
20,844,000
21,272, 500
24, 743, 500
24, 743, 500
24, 743, 500
operations
A m o u n t of
A m o u n t of U n i t e d S t a t e s
U n i t e d States|
securities
securities
held b y t h e
held i n t h e
Federal R e portfolio of
serve B a n k
t h e Federal
of K a n s a s
Reserve Bank) C i t y , w h i c h
of K a n s a s
were
City, which
purchased
were
locally or
purchased
independt h r o u g h t h e e n t l y of t h e
open-market open-market
investment
investment
committee
committee
A m o u n t of
U n i t e d States
securities
held b y t h e
Federal R e serve B a n k
of K a n s a s
City, which
were
purchased
locally or
independe n t l y of t h e
open-market
investment
committee
$14,240, 050
24, 772, 550
39, 583, 750
43,811,900
41, 475, 900
45, 615,200
45,694,150
45, 203, 450
43,868, 950
42,198,450
39,192, 400
39,188,350
CITY
1926
July 31.
Aug. 3 1 . .
Sept. 30Oct. 3 1 . .
N o v ; 30..
Dec. 3 1 . .
Jan. 31...
Feb. 28..
Mar. 31..
Apr. 30..
May31_.
June 30..
38, 521,450 J u l y 3 1 . _
46, 058,250 A u g . 3 1 . .
37,415, 750 Sept. 3 0 .
35, 611, 750 Oct. 31__
33, 098, 550 N o v 30..
13,487, 650 Dec. 3 1 - .
7, 356, 650
1928
11,240,150
11,554,650 J a n . 3 1 .
8, 593, 650 F e b . 2 9 . .
M a r . 31_
7,416,750
14, 418,300 A p r . 3 0 . .
M a y 31._
June39..
J
6, 989, 300 u l y 3 1 _ .
7, 001, 600 A u g . 3 1 7, 997, 100 Sept. 3 0 ,
8,619, 950 Oct. 3 1 . _
8, 385, 400 N o v . 30..
10, 727,100 Dec. 3 1 . .
8, 710, 750
9,332, 250
9. 794, 900 J a n . 3 1 . _
11,181, 900 F e b . 2 8 . .
11, 550, 750 M a r . 3 1 . .
11, 328, 350 A p r . 3 0 . .
M a y 31_.
June 30..
July31..
10,416,550
Aug. 3 1 . .
10, 641, 800
12,629, 000 Sept. 3 0 .
13,876, 300 Oct. 3 1 - _
14, 277, 700 N o v . 30..
Dec. 3 1 . .
12, 610,800
12,462, 550
12, 317,450
1930
12,147, 950 J a n . 3 1 F
e
b
.
2
8
.
.
12, 273,800
M a r . 31_.
12, 575, 300
12, 615, 700 A p r . 3 0 May31_.
June 3 0 July31_.
12,615,700
Aug. 3 1 . .
12,615, 700
Sept. 3 0 .
11, 690, 300
Oct. 3 1 - _
11,690,300
N o v . 30..
13,245,900
Dec. 3 1 . .
11, 774,400
$24, 743, 500
20,060, 500
17,635,000
17,995,000
18,081,000
19,102, 000
$10,024,400
10,374, 400
10.004,400
10,004,400
10, 504,400
10,122, 900
18, 085,000
17, 995,000
18, 564,000
18,115, 500
17, 336, 500
19, 608, 500
20,364,000
23,832, 500
24, 738, 500
27,162, 500
28, 339,000
28, 708, 500
9, 572, 900
9, 572,900
9,880,000
9, 480,000
10, 363,000
9, 933,000
9. 583, 500
9, 753, 500
9, 813, 500
9,813, 500
9, 814, 300
9, 633,100
20, 380, 500
18, 535, 500
18,010, 500
10, 849, 500
5, 868,000
6,039, 500
6,075, 500
6, 585,000
5, 754.000
11,383,100
10.433,100
13, 233,100
12, 733,100
11,983,100
11,992,300
12, 482, 300
11,432, 300
10, 232, 300
11, 482, 300
9, 732, 300
10, 513, 300
9, 763, 300
9, 763,300
9,793,400
9. 793, 400
7, 755, 700
1,304,000
927,000
3, 060,000
3, 060,000
3.060,000
3,000
3,000
3,000
3,000
3,060, 000
3,060,000
5, 921, 500
5, 921, 500
15,921, 500
28, 733,000
28, 733,000
28, 733,000
28, 733,000
28, 733,000
29, 979, 500
31.608, 500
3,000
3,000
3,000
3,000
303, 000
3,000
3,000
3,000
3,000
3,000
3,000
3,000
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
833
FEDERAL RESERVE BANK OF MINNEAPOLIS
United
States
securities
holdings
Purchased
in open
market
1922
January
February
March
April
May
_.
June
July
August
September
October
November
December
1923
Janu.ry
February
March
April
May
June
July
August
September
October
November
December
of the Minneapolis
1922-1930
Purchased
independently
$4,896,160
5,665,160
10,925,910
13,660,260
14,858,860
••3,555,960
12,178, 010
9,856,110
18,972,160
11,866,160
11,757,160
13,071, 460
$2,582,770
652,268
9,941, 260
12, 299,310
15,174,910
12, 779, 610
14,820,510
12,884, 610
11, 564, 610
12,314,610
13, 616, 610
7, 503,310
7,866,310
10,036,410
1924
January
February
MarchApril
May..
__.
June
July
August
September
October.
November
December
1, 384, 600
2,491,900
7, 768, 500
12, 133, 700
13,902,400
16, 345, 500
19,148, 200
19,485, 200
20,100, 600
20,100,600
19, 696,600
18, 043, 500
8, 559, 760
7, 738,860
7,935, 810
9,239,110
7, 665,810
9, 780, 310
7, 533,310
7,457, 310
8,019, 310
7,681,810
7,476,310
7, 744,910
1925
January.
February
March
April
May
June.
_
July
August
September
October
November
December
12, 021, 500
10,818, 500
9,825,000
9, 788, 000
9, 788,000
8, 471, 000
8,471, 000
8,420, 500
9, 020, 000
9, 020, 000
9, 020,000
11,520,000
9,072, 010
7, 660,310
7, 558,010
7, 557, 710
7, 557, 710
7, 557, 710
7, 557, 710
7, 557, 710
7, 557, 710
7,557, 710
7, 557, 710
7, 557, 710
1926
January.
FebruaryMarch
April
May
June
10,612,500
9, 020,000
9,377, 500
12, 270,000
12, 270, 000
12, 270, 500
7, 557, 710
7, 557, 710
7,557, 710
7, 557, 710
7, 557, 710
7, 557, 710
Federal
Reserve
Purchased
in open
market
Bank
Purchased
independently
1926
July
August
SeptemberOctober
November...
December,..
$12,270,500
9,947,000
8,745,000
8,923, 500
8,966,000
9,471, 500
1927
January
February
March
April
_.
May
June
July.
August
September...
October
November. __
December . . .
8,968,000
8,923,500
9, 206,000
8,894,000
9,482,000
10, 724,000
11, 281, 500
13, 847, 000
14, 764, 000
18,939,000
15, 718, 500
16,342, 000
7, 557,710
7,557, 710
7, 557, 710
7,557,710
7, 557,710
7, 557,710
7, 557, 710
7, 557,710
7, 557, 710
7,557, 710
7,557, 710
7,557, 710
1928
January
February
March
April
May...
June
July
August
September...
October
November...
December...
11, 600, 500
10,550,000
10, 253, 000
6,177, 500
3,342,000
3, 439, 500
3, 460, 000
3, 750, 000
3, 276, 500
3,121, 500
3, 452,500
3,322, 500
7,557, 710
7, 584,810
7, 584,810
7,584,810
7, 584,810
7,584,810
7, 584,810
7, 584,810
7, 584,810
7, 584, 810
7, 584,810
7,584,810
1929
January
February
March
April
May
June
July-.
August
September....
October
November....
December
3, 322, 500
1,911,500
1, 654,000
1,032, 500
896, 500
760, 500
760, 500
1, 531, 500
1, 308, 000
943, 500
2,184, 000
8, 789, 500
7, 584,810
7,584,810
7, 602, 910
7,602, 210
7, 718,345
7,944,395
7,671,520
7, 627,510
7, 676, 950
7, 847, 630
7, 779, 330
8, 083, 830
1930
January
February
March
April
May
June
July.
August
September.—.
October
November—.
December
9,147,500
9, 340,000
10, 766, 000
10, 766, 000
15,766, 000
17,454,500
17,454, 500
18, 248, 500
18, 248, 500
18, 248, 500
18,927, 500
19,563,500
7, 633,898
7,688, 420
7, 627, 985
7, 711,666
8, 024,833
7,936,807
7,723,976
7, 682, 764
7,777, 220
8,037,002
8,936,644
7,738,683
$7, 557,710
7,562,710
14,562,710
8,562,710
7,567,710
7,567, 710
834
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE BANK OF NEW YORK
Government securities purchased through the open-market investment com<mittee and held in the portfolio of the Federal Reserve Bank of New York
at the end of each month since January, 1924
[In millions of dollars]
L a s t d a y of— 1924 1925 1926 1927 1928 1929
January
14
February...
25
March
52
April
64
May
81
June
- , 135
112
100
91
92
61
52
51
51
53
73
73
73
80
73
70
42
23
24
53
53
54
53
56
64
23
13
14
7
6
5
1930
97
99
94
79
64
67
L a s t d a y of— 1924 1925 1926 1927 1928 1929 1930
July
—_
August
September- _
October
November..
December...
170
176
186
186
182
167
52
52
51
51
51
51
73
59
52
53
53
56
64
86
90
103
110
112
5
11
9
23
42
93
24
28
23
21
24
23
67
74
74
74
80
87
Government securities held by the Federal Reserve Bank of New York at the
end of each month since January, 1922, which were purchased locally and
independently of the open-market investment committee
[In millions of dollars]
Last day
of—
January
February. _
March
April
May
._
June
1922 1923 1926 1927 1928
50
126
99
165
159
139
55
26
10
7
2
9.0
1
7
2
0.9
1929
1930
2.0
.2
4.0
1.0
112
112
112
113
111
11
21.0
Last d a y
of—
1922 1923 1926 1927 1928
155
July
A u g u s t , , .. 135
98
September48
October
45
November.
D e c e m b e r . . 98
2.0
.1
.1
17
16.0
1929
1930
0.5
7
12
.5
16
2.0
4 96.0
1 112.0
122.0
112
112
107
112
108
158
NOTE.—Above statement excludes certificates of indebtedness issued to cover Treasury overdraft.
Government securities held by the Federal Reserve Bank of New York under
resale agreement at the end of each month since January, 1922
[In millions of dollars]
1922
L a s t d a y of—
January
February
March
April—
May...
June
July
August
September.
October
November...
December
12
_ ..
._
8
5
12
16
9
10
52
13
8
51
1923
23
22
15
5
12
11
16
20
14
10
18
36
1924
0.1
3.0
6.0
2.0
1925
0.5
17.0
19.0
.7
32.0
4.0
7.0
27.0
5.0
19.0
4.0
1926
1927
5
4
4
9
1
3
4
2
16.6
26.0
2.0
5.0
2.0
1.0
14.0
.5
.5
52.0
1928
2
5
4
9
10
28
6
5
22
21
28
25
1929
3
6
20
5
37
18
22
34
50
3
22
1930
2
3
8
2
2
9
36
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
835
Government securities held oy the Federal Reserve Bank of New York under
resale agreement on the 20th day of each month since January, 1922
[In millions of dollars]
20th day of—
January
February
March
April
May
June
July
August.
September
October.
November
December
1922
3
11
__ _
._
14
2
14
14
10
21
22
8
31
1923
23
23
8
2
7
19
11
5
4
4
6
5
1924
0.1
1925
1927
1926
1928
1929
6.0
17.0
3
10
2.0
8.0
5.0
7.0
.4
7.0
10.0
23.0
3
4
10
14
2
2
4
2
3
7
15
7.0
4.0
4.0
.7
2.0
13.0
21.0
25.0
9.0
.4
16.0
15.0
9.0
16.0
23.0
35.0
3.0
4.0
13.0
1930
3
0.6
1.0
NOTE.-—There is so much fluctuation in these holdings, partly due to more or less regular monthly movements, that data are given both for the 20th and the end of the month.
FEDEKAL KESEBVE BANK OF PHILADELPHIA, PA.
United States securities held as of the end of each month
Purchased Purchased
independthrough
ently of
open-maropen-market inket comvestment
mittee
committee
Total
$21,792,000
22,751,100
22,750,600
30,488,600
30,370,600
33,879,450
33,990,450
34, 613,850
34,863,350
31,764,650
27,634,800
29,190,300
$21,792,000
22,751,100
22, 750,600
30,488,600
30,370,600
33,879,450
33,990,450
34, 613,850
34,863,350
31,764,650
27,634,800
29,190,300
29,183,600
27,070,100
25,417,600
24,785,600
24, 796,700
17,3S6,000
17,381,000
17,381,000
17,408,000
17,406,000
12, 603,000
12,951,500
29,183,600
27,070,100
25,417,600
24,785,600
24,796,700
17,386,000
17,381,000
17,381,000
17, 408,000
17,406,000
12,603,000
12,951, 500
151,300
569,500
569,500
825,500
692,600
143,100
753,200
737, 200
808,100
808,100
582,100
441,000
17, 567,000
17,367,000
17, 412, 500
19,556,000
20,674,000
21,788,000
22,046,500
22,399,500
22,644,000
22,644,000
22,591,000
17,447,800
21, 718,300
22, 936,500
22,982,000
26, 381, 500
31,366,600
28,931,100
30, 799, 700
31,136, 700
31,452,100
31,452,100
31,173,100
29,888,800
7,525,100
7,457,500
6,773,000
7,208,000
435,000
376,500
18,208,200
17,447,800
17,497,800
17,497,800
17,497,800
17,497,800
25,733,300
24,905,300
24,270,800
24,705,800
17,932,800
17,874,300
Purchased Purchased
through
independopen-marently of
ket inopen-marvestment
ket committee
committee
1925
July
August
September. _J
October
November..
December...
$370, 500 $17,503,800
374,000 17,497,800
1,565,000 17,497,800
1,565,000 17,497,800
1,565,000 17,497,800
6,565,000 17,497,600
1926
January
February. _
March
April
May
June
—
July
August
September. . October
November...
December
750,000
565,000
137,500
765, 000
765, 000
764,500
764, 500
484,000
821,500
920, 000
944, 000
222, 000
17,497,600
17,497, 600
16,958,100
16,958,100
16, 958,100
14,958,100
14,958,100
14,958,100
15,008,100
15, 008,100
15,008,100
15,008,100
1927
January
February
March
April
May...
June
July
August
September...
October
November
December
944,000
919,500
075,000
952, 500
235,500
577,500
033,000
724, 500
494, 500
269,500
545,000
478,000
15,008 100
15,008,100
14,734,600
14, 734, 600
14, 734,600
15,184, 600
15,184,600
15,184,600
15,184,600
15,184,600
15,184,600
15,185,600
1928
January
February
March
__
April
May
June
July
August
September...
October
November
December
636,000
677,500
121,000
519,000
230, 500
413,000
451,000
992,000
109,500
848,000
468,000
224,000
15,185,600
15,185,600
15,187,100
15,187,100
15,187,100
15,196,600
15,196,600
15,196,600
15,196,600
15,223,600
15,223,600
15,222,600
836
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
United States securities held as of the end of each month—Continued
Purchased Purchased
independthrough
ently of
open-market inopen-marvestment
ket comcommittee
mittee
1929
$6,224,000
January
3,581,500
February
March
__ 3,099,000
April — __ _ 1,927,000
May
1,681, 000
1,435,000
June
July,
1,435,000
August
3,155,000
September
2,657, 000
October
6, 607,500
November
12, 050,000
December
26,784, 500
Purchased Purchased
independthrough
ently of
open-market inopen-marvestment
ket comcommittee
mittee
Total
1930
$15,222,600 $21,446,600 January
18,804,100 February
15,222,600
18,110,600 March
15,011,600
15,011, 600 16,938, 600 April
16,692, 600 May
15,011, 600
16,458,100 June
15,023,100
16,458,100 July
15,023,100
18,178,100 August
15,023,600
17,678,600 September...
15,021,600
15, 021,600 21,629,100 i October
15,021, 600 27,071, 600 November. __
15, 021, 600 41,806,100 : December
$27,876,000
28,463, 500
31,114,500
31,114,500
31,114, 500
35,195,000
35,195, 000
37,245,000
37,245,000
37,245,000
39,001,500
41,297,000
Total
$15,021,600 $42,897,600
15,021,600 43,485,100
15,010,100 46,124,600
15,010,100 46,124,600
15,010,100 46,124, 600
15,007,100
50,202,100
15, 007,100 50,202,100
15,007,100 52, 252,100
15,007,100 52,252,100
15,007,100 52,252,100
15,007,100 54, 008,60O
12,907,100 54,204,100
FEDERAL RESERVE BANK OF RICHMOND
United States securities held on last day of each month, 1922-1930, inclusive
Purchased Purchased
independthrough
ently of
open-mar- open-market invest- ket
investment
ment
committee committee
1922
January.
February...
March
April
May
June
July
August
SeptemberOctober
November _,
December..
$4, 993,400
4, 793,400
4, 793,400
4, 793, 400
4, 793,400
4, 793, 400
4, 750,900
4, 700,900
4, 700, 900
4, 200,900
3,200,900
1, 290, 900
1923
January.
February... March
April
May
June
July
August
September..
October
November,,
December..
1924
January.
February.,.
March.
April
May
June
July
August
September-.
October
November..
December..
January.
FebruaryMarch
April
May
June
1925
1,340,900
1,340, 900
1, 340, 900
1,340,900
1, 340,900
1, 340,900
1,340,900
1, 340, 900
1, 340,900
1, 340, 900
1, 340, 900
1,340, 900
$2,102,300
3, 784,200
3,784,200
3,784, 200
3, 784,200
3,784,200
3, 784, 200
3, 784,200
3,651,700
3,651,700
3,576, 700
3,270, 000
2,157,500
1,941, 500
1,763,000
2,044,500
4,884, 500
4, 228,000
Purchased
through
open-market investment
committee
| Purchased
independently of
open-market investment
committee
1925
July...August
SeptemberOctober
NovemberDecember..
$4,228,000
$1,340,900
4,203,000
1,340,900
4,102, 500
1,340,900
4,102, 500
1, 340,900
4,102, 500
1, 340, 900
7, 602, 500 1, 340,900
January
February...
March
April
May.
June
July
August
September..
October
NovemberDecember ^_.
6,332,000
4,102, 500
4, 531, 000
8,002, 000
8, 002,000
8, 001, 000
8,001, 000
6,486,500
5,702,000
5,818,500
5,846,500
6,176, 000
1,340,900
1,340,900
1,340,900
1,340,900
1,340,900
1,340,900
1,340,900
1,340,900
1, 240,900
1, 240,900
1, 240,900
1, 240,900
1927
January.
February...
March
April.
May...
June
July
August
SeptemberOctober
November..
December-.
5,847, 500
5,818, 500
6,003,000
5,857,500
8,251, 500
14,334, 500
15,785, 500
24, 285,500
26,286,000
11,136, 000
11, 213,500
11,299,000
1,240,900
1, 240,900
1, 240,900
1, 240, 900
1, 240, 900
1, 240, 900
1,240, 900
1, 240, 900
1,240,900
1,240, 900
1,202,700
1,152,700
1928
January.
February __.
March
April
May
June
1,340,900 July
1,340,900 August
1, 340, 900 September1,340,900 October
1, 340,900 November..
I, 340, 900 December..
8, 021, 000
7,295,500
7,089,000
4,270,500
2,310, 500
2,377,000
2,391,000
2,123,500
2,123, 500
2, 271, 500
2, 512,000
2,275,000
1,152,700
1,152, 700
1,152, 700
1,152, 700
1,152, 700
1, 152, 700
1,152, 700
1,152, 700
1,152, 200
1,152, 200
1,152, 200
1, 152,200
1, 340, 900
1,340,900
1, 340, 900
1, 340, 900
1, 340, 900
1,340, 900
1,340, 900
1, 340, 900
1, 340,900
1,340,900
1, 340,900
1, 340,900
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
837
United States securities held on last day of each month, 1922-1930, inclusive—
Continued
Purchased
through
open-mark e t investment
committee
Purchased
independe n t l y of
open-mark e t investment
committee
$2,275,000
1, 309,500
1, 204,000
656,500
656, 500
656, 500
656, 500
656, 500
656, 500
656, 500
656, 500
8,407,000
152,
152,
152,
152,
152,
152,
152,
152,
152,
152,
152,
152,
P u r c h a s e d Pi nudr ec ph ea ns eddthrough
e n t l y of
open-mark e t invest- open-mark
e
t investment
ment
committee
committee
1929
January
February
March
April
May
June.
July
August
September
October-_
November
December
1930
January
February
March
April
May
June
July
August
September
October
November
December
$1,152,100
$8,749,500
1,152,100
8,934,000
1,152,100
11,487,500
1,152,100
11,487,500
1,152, 100
11,487, 500
1,152,100
14,441,500
1,152,100
14, 441, 500
15, 830, 500 1, 152,100
1,152,100
15,830, 500
I, 152,100
15, 830,500
1,152,100
17,019, 500
1,152, TOO
12, 755,000
Regarding statistics furnished in answer to questionnaire No. 9, item 1,
(a), (&), and (c), the United States securities held in January, 1922, consisted
of the following :
Liberty loan bonds, taken over from subscribers at time of original
allotments
$81,300
Panama bonds purchased from member banks as required by sec. 18
of Federal reserve act
237, 000
United States consols purchased from member banks as required by
sec. 18 of Federal reserve act
915,100
Pittman Act certificates (2 per cent) purchased under the terms of
Pittman Act as security for Federal bank notes
3, 760, 000
Total
4, 993, 400
No United States securities have been purchased by this bank independently
of the open-market investment committee since January, 1922; the Liberty
loan bonds have been sold or redeemed; the Pittman Act certificates have been
redeemed by the Treasury Department from time to time as the Federal
reserve banks discontinued issuing Federal reserve bank notes; and the balance on hand at present, $1,152,100, consists entirely of the original purchases
of Panama bonds and United States consols.
838
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF S T . L O U I S
United States securities as of the end of each month for the period
January,
192Jf, to December, 1930, ivhich were purchased
through the
open-market
investment
committee
1927
1924
January
February
March
April
May
June
July
August
September
October
November
December
-
$1, 794, 800
3, 230, 100
6, 747, 800
6, 965, 800
6,965,800
8, 089, 100
13, 694, 300
14, 873, 800
16, 769, 000
16,769,000
16, 439, 000
15,087, 500
10, 169. 500
9, 152, 500
8, 312, 000
8, 626, 500
34, 378, 000
29, 753, 000
29, 753, 000
29, 577, 000
18, 872, 500
18, 872, 500
18, 872, 500
21,872,500
1926
January
February
March
April
May
June
July
August
September
October
November
December
$13, 793, 500
13, 725, 000
14, 158, 500
13, 817, 500
13, 590, 000
10, 371, 500
16, 118,000
19, 547, 500
19, 778, 500
20, 669, 500
21, 280, 000
21, 543, 500
1928
1925
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
December
20, 783, 500
18, 872, 500
18, 872, 500
18, 872, 500
18, 872, 500
18, 872, 000
18, 872, 000
15, 299, 500
13, 450, 500
13, 7 2 5 , 0 0 0
13, 792, 000
14, 569, 500
January
February
March
April
October
November
December
15, 294, 000
13, 909, 000
13,517,000
8, 142, 000
4, 151, 000
4, 591, 000
4,417, 500
1929
January
February
October
November
December
4,417,500
2, 542, 500
3, 942, 000
8, 446, 000
20, 641, 000
1930
January
February
March
April
May
June
July
August
September
October
December
10, 641, 000
10, 641, 000
10, 642, 500
10, 642, 500
10, 642, 500
14, 017, 500
14, 017, 500
15, 274, 000
15, 274, 000
15,274,000
17, 757, 500
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
839
United States securities as of the end of each month for the period January,
1922, to December, 1930, which were purchased locally or independently of
the open-market investment committee
1922
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
February__
March
April
May
June
July
August
September.
October
November _
December.
January
February. _
March
April
May
June
July
August
SeptemberOctober
November.
December.
1923
1925
1926
$8, 247, OOO
14, 719, 000
20, 579, 600
24, 963, 500
29, 144, 800
25, 507, 500
26,457,050
29, 225, 500
26, 563, 500
23, 684, 550
21, 710, 000
19, 551, 500
January
February
March
April
May
June
July
August
September
October
November
December
26, 755, 600
28, 889, 700
25, 522, 700
18, 203, 900
14, 933, 400
7, 250, 600
7, 250, 600
3, 668, 300
3, 668, 300
January
February
March
April
May
June
July
September
October
November
December
297, 900
577, 900
670, 400
721, 400
721, 400
1, 200, 500
1, 290, 500
1, 290, 500
1, 515, 000
1, 615, 000
2, 474, 500
January
February
March
April
May
June
July
October
November
December
3, 991, 500
5, 035, 000
6, 670, 500
6, 869, 500
9, 869, 500
7, 579, 100
5, 456, 600
5, 883, 250
5, 793, 250
5, 884, 750
6, 073, 250
6, 502, 850
January
February __
March
April
May
June
July
August
September.
October
November.
December.
1927
1928
$7, 039, 650
8, 790, 300
13, 841, 700
13, 841, 700
13, 841, 700
14, 461, 700
11,063,950
13, 569, 000
16, 619, 500
16, 619, 500
16, 619, 500
16, 619, 500
18, 009, 500
18, 009, 500
16, 625, 000
16, 625, 000
10, 625, 000
7, 125, 000
7, 125, 000
11, 625, 000
16, 625, 000
16, 625, 000
16, 625, 000
1929
16, 625, 000
16, 625, 000
16, 862, 500
11, 337, 500
13/625, 000
13, 625, 000
13,625,000
8, 625, 000
8, 625, 000
8, 625, 000
1930
8,
8,
8,
8,
8,
8,
8,
8,
8,
8,
8,
8,
625,
625,
625,
625,
625,
625,
625,
625,
625,
625,
625,
625,
000
000
000
000
000
000
000
000
000
000
000
000
840
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE B A N K OF S A N FRANCISCO
E n d of
month
Participation i n
openm a r k e t investment
account
Participation i n
Other
holdings
1922
January
February._
March
April
May
June
July
August
September.
October
November.
December,.
i$19,258,000
18,626,000
2
38,089,000
2
58,659,000
2
60,009,000
2
62,104,000
2
57,977,000
2
52,977,000
2
51,976,000
2
47,367,000
2
36,802,000
2
34, 766,000
1923
January
February._
March
April
May
June
July
August
September.
October
November.
December..
$9,185,000
9,185,000
9,185,000
9,185,000
9,185,000
9,185,000
9,185,000
1924
January.._
February.,
March
April
May
June
July
August
September...
October
November..
December...
666,000
398,000
421,000
683,000
258,000
446,000
723,000
914,000
133,000
133,000
112,000
930,000
9,185,000
9,185,000
9,188,000
9,190,000
9,192,000
9,196,000
9,197,000
9, 200,000
9,206,000
9,207,000
9, 208,000
9,213,000
1925
January
February
March
April
May
June
July
August
September...
October
November-..
December
713,000
641, 000
103, 000
527.000
867, 000
505, 000
505, 000
302, 000
281,000
281, 000
281, 000
281. 000
9,218, 000
9,220,000
9, 221, 000
9. 227, 000
9,232,000
9, 236,000
9.487, 000
9,488,000
9, 650,000
9, 653, 000
9, 655, 000
9, 656, 000
38,103, 000
34, 281, 000
34, 925, 000
40.131,000
40,131, 000
40,131,000
9, 660, 000
9, 662, 000
9, 664, 000
9,669,000
9, 670. 000
9, 674, 000
1926
January...
February.
March
April
May
June
Total
1
month
m a r k e t investment
account
Other
holdings
Total
1926
July
$40,131,000 $9,676,000 $49,807, 000
August
32, 536,000 9,679,000
42, 215,000
9, 681,000 38, 285, 000
September..
28,604.000
October
29.187, 000 9,681,000
38,868,000
N o v e m b e r . _ 29, 327, 000 9, 683, 000 39, 010, 000
9,684,000
D e c e m b e r . . . 30,983,000
40,667, 000
1927
January
February
March
April
May
June
34,766,000 J u l y
34, 747,000 A u g u s t
27,617,000 S e p t e m b e r - . _
October
27,641,000
27,641,000 I N o v e m b e r . . .
December
9,185,000
9,185,000
9,185,000
1928
9,185,000
January.
9,185,000
February
9,185, 000 M a r c h
9,185, 000 April
May
June
_.
13,852,000 J u l y . . .
17, 584,000 A u g u s t
26,609,000 S e p t e m b e r - . .
October
30,873,000
36,450,000 N o v e m b e r . . 43,642,000 D e c e m b e r
53,921,000
1929
56,114,000
60,339,000 J a n u a r y
60,341,000 F e b r u a r y
__
59,321,000 M a r c h
55,143,000 April
May
June
39, 931,000 J u l y
36,861, 000 A u g u s t
34, 324, 000 S e p t e m b e r . . .
44, 754, 000 October
49,099,000 N o v e m b e r
43, 741, 000 D e c e m b e r
43, 992, 000
1930
43,791, 000
43,932,000 J a n u a r y
43, 934, 000 F e b r u a r y
43, 936, 000 M a r c h
49, 938, 000 April
May
June
July.
_.
47, 763, 000
August
43, 943. 000
S
e
p
t
e
m
b
e
r
.
.
_'
44, 589, 000
October
49,800,000
49,802, 000
November
49, 806,000
December
333,000
188,000
110,000
383,000
622, 000
109, 000
243,000
451,000
205,000
854, 000
105, 000
382. 000
9, 686, 000
9, 687,000
9. 689, 000
9. 690,000
9, 690, 000
9, 691, 000
9,693,000
9, 694,000
9,695. 000
9, 698, 000
9,693,000
9,693, 000
39, 019, 000
38,875, 000
39, 799,000
39, 073, 000
36, 312, 000
39,800,000
40,936, 000
46,146,000
45, 900, 000
45, 552, 000
45, 798, 000
46, 075,000
828, 000
488.000
822,000
746, 000
435,000
653,000
698, 000
035,000
499, 000
951, 000
687, 000
397, 000
9, 693, 000
9,695, 000
9, 697,000
9,680, 000
9, 682, 000
9, 683, 000
9, 683, 000
9,684,000
9. 682,000
9,684, 000
9, 687, 000
9,705,000
35, 521, 000
33,183,000
32, 519,000
23,426, 000
17,117, 000
17.336, 000
17, 382,000
18,720, 000
17,181, 000
16, 635,000
17, 374, 000
17,102,000
7, 397, 000
4, 256,000
3, 683,000
2, 301, 000
1, 998,000
1,694,000
1, 694,000
3, 711, 000
3,127,000
2,173, 000
2,173,000
2,173, 000
9, 705,000
9, 706,000
9, 706. 000
9, 706, 000
9, 707, 000
9, 708,000
9, 708,000
9, 708, 000
9, 709, 000
9, 710, 000
9,710,000
9, 642,000
17,102, 000
13,962,000
13, 389,000
12, 007,000
11, 705, 000
11, 402, 000
11,402,000
13,419,000
12,836, 000
11,883, 000
11,883,000
11,816, 000
9, 642,000
173,000
219, 000 9, 642, 000
9, 642,000
052,000
052, 000 9, 642,000
9, 642, 000
052,000
9, 642, 000
052,000
9, 642.000
052,000
9, 642, 000
367,000
367, 000 9, 642, 000
367, 000 9,642, 000
9, 642, 000
349,000
940, 000 17,142, 000
11, 816, 000
11,861,000
36,695, 000
36, 695, 000
36, 695, 000
36, 695, 000
36,695, 000
39,009,000
39,009, 000
39, 009, 000
40, 991, 000
51, 082,000
I n c l u d e s a p p r o x i m a t e l y $8,000,000 securing b a n k notes issued i n connection w i t h P i t t m a n Act.
H o l d i n g s were increased t h r o u g h purchases i n N e w Y o r k , Chicago, San Francisco, a n d from m e m b e r
banks.
s Separate records n o t p r e v i o u s l y m a i n t a i n e d .
2
OPEKATION OF THE NATIONAL AND FEDEEAL EESERVE
BANKING SYSTEMS
QUESTIONNAIRE NO. 10
Bankers* Acceptance
Federal reserve officials have called attention to the fact that, at times, tha
dependence of the acceptance market on the reserve banks has interfered with the
credit policies in force at the moment. The purpose of these questions is to inquire into the nature of and the extent of the dependence of the acceptance market
on the reserve banks and the relationship between the volume of acceptance
purchases by the reserve banks and the expansion and contraction of credit:
OF A GENERAL NATURE
1. What are the factors that in your opinion have made for the increasing
concentration of the acceptance business of the country in the hands of* a few
institutions located in New York, Boston, Chicago, and San Francisco, and that
have militated against the establishment of discount markets in other centers?
2. In the very rapid increase in acceptance totals from the beginning of 1926
to the present time, what factors were responsible for the increase in acceptances
drawn for foreign storage and shipment; for the marked increase in acceptances
arising against goods stored in domestic warehouses in 1927 and 1929; for the
increase in export bills in 1927 and 1928; for the increase in dollar exchange bills
in 1929; for the failure of bills arising from import trade to increase excepting in
1929; for the failure of acceptances arising from domestic shipments to increase
materially through the period under review?
3. What effect will the board's liberalizing ruling of 1929 have on the volume of
acceptances arising from domestic shipments?
4. It has been suggested that the increase in acceptances arising from foreign
storage and shipment is to be explained by the curtailment of capital exports to
Central Europe through 1929. What light does the experience in your own district throw on this problem?
5. Would it facilitate the growth of acceptance markets in the various reserve
districts for the reserve banks to establish foreign agencies or branches in foreign
countries?
6. To what degree has the increase in acceptance totals represented a growth
in self-liquidating paper? A substitution for other forms of credit instruments?
A growth in credit which will eventually be funded into longer term obligations?
7. State the experience in your district with various abuses in the use of the
acceptance, i. e., with acceptance renewals, with the drawing of acceptances for
a longer period than the life of the underlying transaction, with the use of the
acceptance for refinancing purposes, with the use of the acceptance for the purpose
of extending credit beyond the limitations imposed by section 5200 of the Revised
< Statutes, with the use of acceptance for the purpose of holding goods in storage
for speculative purposes, and with the practice of accepting institutions discounting their own acceptances.
8. To what extent have you seen evidence of multiple acceptances arising out
of successive transfers of ownership of the same goods held in warehouse or in
course of shipment?
CONCERNING THE DEMAND FOR ACCEPTANCES
9. To what extent does an investment demand for acceptances exist in your
district? To follow the investment demand on the part of member banks append
statistics for as frequent intervals as possible, beginning January, 1922, of the
acceptance liabilities of the member banks of your district, together with the
amount of their own acceptances and of the acceptances of other banks held
in portfolio.
841
842
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
10. To stimulate an investment demand for acceptances, would you be in
favor of changing the present provisions of the Federal reserve act relating to
the reserve requirements of member banks, permitting member banks to carry
smaller reserves provided that they held a portfolio of bills equal to a certain
percentage of their deposit liabilities? If so, what specific change would you
suggest?
11. To stimulate an investment demand for acceptances, should the reserve
banks follow a policy of refusing to purchase acceptances unless the accepting
institutions hold bills, accepted by other institutions, equal to a substantial percentage of their own acceptance liabilities?
12. Would the dependence of the acceptance market on the reserve banks be
lessened if the reserve banks should hold their buying rates above the market
rate on acceptances? What would be the effect of this change of policy on the
acceptance market? To what extent, in your opinion, has the market rate on
acceptances been an artificial one in the sense that it has been primarily determined by the buying rates of the reserve banks?
OF A LEGAL NATURE
13. Would you favor a change in the Federal reserve act limiting the accepting
of time bills of exchange on the part of member banks simply to those growing
out of bona fide shipments in foreign trade and to those made for the purpose
of creating dollar exchange?
14. Append a digest of the laws of those States included within your district
respecting the acceptance powers of State banks, the limitations on the amount
of acceptances which State banks may discount, and the provisions of any State
law permitting acceptance banks of the type permitted by the provisions of the
Edge Act.
PURCHASES FOR FOREIGN ACCOUNT
15. Append by countries, as of the last reporting date in each month since
January, 1922, data on the volume of bills held purchased for foreign account.
16. Is the buying rate on bills bought for foreign account lower than that on
bills bought for own account? Are bills purchased for foreign account acquired
solely from dealers? If the bulk of bills purchased for foreign account is acquired
from dealers, state the reason for this practice.
17. What is the rate of commission that the reserve banks receive for indorsing
the bills purchased for foreign account? Are all such bills indorsed? Is the
indorsement placed on each bill or is the indorsement in the nature of a blanket
agreement with the foreign clients for which the purchases are made?
OF A TECHNICAL AND STATISTICAL NATURE
18. Append statistics on the volume of bills in your portfolio that have been
purchased locally from dealers, that have been purchased locally from accepting
banks, that have been purchased locally from other sources, and that have been
acquired through the open-market investment committee, for the last reporting
date of each month from January, 1922.
19. What policy does your institution follow in buying bills directly from the
accepting bank? Are such bills discounted?
20. Append a classification of bills held for own account on the last reporting
date in each month Tsince January, 1922, by the type of currency in which the
bills are stated. W hat were the reasons for the increase in the amount of bills
stated in foreign currencies in 1927, in 1929, and 1930?
21. Does your institution ever acquire bills from other reserve banks to serve
as a cover for Federal reserve notes? State on attached schedule the amounts
and occasions of such purchases.
22. Present on attached schedule the buying rates on acceptances of different
maturities which have been in force at your institution, with the date of each
change, since January, 1922,
23. Does your institution ever discriminate in the buying rate established on
bills on the basis of the self-liquidating or nonself-liquidating nature of the
transaction from which the bill arose?
24. What has been the effect of changes in acceptance buying rates of the
Federal reserve banks on the total volume of bills outstanding?
25. What are the factors responsible for the decline in the acceptance commissions charged by American accepting institutions over the past six years?
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
843
CONCERNING THE RELATIONS WITH THE DEALERS
26. Present a list of the recognized dealers in acceptances; i. e., of those dealers
whose indorsement is recognized by your institution. State the net worth that
a recognized dealer must possess. What other standards has your institution
imposed to which a recognized dealer must attain? What factors are considered
in determining the dealers' lines of credit?
27. On an attached schedule, present since January, 1924, weekly statistics of
the volume of acceptances held in the portfolios of dealers operating in your
district.
28. In connection with the data presented in answer to the above question,
estimate the amount of acceptances in the dealers' portfolios that they have
acquired directly from the accepting institutions, from drawers of bills, and
from other sources.
29. State on attached schedule the amount of acceptances held under resale
agreement by your institution on the last reporting date in each month since
January, 1922.
30. Present statistics of the rate prevailing in respect to the resale agreements
against acceptances with changes in the rates and the date of each change, since
the inception of such agreements.
31. To prevent the seepage of Federal reserve credit into the speculative or
investment market, does your institution inquire into the use of the funds
extended to dealers under resale agreements?
32. Append statistics showing the average life of resale agreements since
January, 1922.
33. What, in the experience of your institution, has been the relationship
between changes in the amount of acceptances held under resale agreement and
the amount held in the dealers' portfolios? The relationship of the resale agreement rate in force at your institution and market rates of interest, on acceptances
as regards the volume of bills held under resale agreement?
Digest of Replies Received from the Different Federal Reserve Banks
Of a general nature
QUESTION NO. 1. Relative to the factors making for an increased concentration of the acceptance business in the hands of a few institutions located in New
York, Boston, Chicago, and San Francisco.
Among the reasons cited by the Federal reserve banks were, the concentration
of banking resources in the cities named; their importance as domestic and
foreign trade centers; their importance as settlement points; the volume of surplus funds concentrated in those centers and the prevailng low rates of interest;
the fact that banking institutions located therein are better known and that
their acceptances consequently command prime rates in the market.
QUESTION No. 2. Relative to the reasons accounting for the rapid increase
from 1926-1930 in acceptances arising from various transactions.
Reasons given for rapid increase in acceptances drawn against foreign storage
and shipment:
The liberalization in Febuary, 1927, of the acceptance rulings of the Federal
Reserve Board; the inability of parties interested t o obtain acceptance credits
in Europe; nervousness regarding the stability of the European exchanges; the
shortage of capital in Germany and other central European nations (which means
that the acceptance credits granted can not be reduced until long-term loans
are floated in the United States, England, or France); the relatively low level
of interest rates in the New York money market (though one Federal reserve
bank concluded that interest rates had probably had little effect); the increase
in industrial activities in foreign countries, accompanied by increases in external
trade.
Reasons given for increases in domestic storage credits:
A heavy volume of American cotton awaiting shipment, owing to heavy
stocks and lower prices prevailing in England; heavy and early crops in 1929,
combined with falling commodity prices; assistance given to the orderly marketing
of crops; the shifting from direct loans against commodities into acceptance
credits; sluggishness in movement of staple commodities; the creation of bills
by member banks indebted to the Federal reserve banks!
34718—31—PT 6
10
844
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Reasons given for increase in export bills:
In 1927 growth was stimulated by the easy-money policy of the Federal reserve
banks; rise in commodity prices; increase in volume of exports; the substitution
of the acceptance for other forms of credit instruments in the financing of export
trade.
Reasons given for increase in dollar exchange bills:
A reflection of the exceedingly tight credit conditions abroad; the inability of
South American countries to market their commodities; the depressed exchanges
of the South American countries; curtailment of South American borrowings in
the New York capital market; the need of South American countries to provide
dollar exchange to pay for their imports.
Reasons for increase in import acceptances in 1929:
Increase in imports due to prospective tariff legislation; reflection of silk imports
at fairly high prices; an increase in imports of raw sugar from Cuba.
Reasons given for failure of acceptances arising from domestic shipments to
increase materially through the period under review:
Borrowing for all commercial purposes at a low ebb, inasmuch as borrowers
had secured funds through security issues; little need for domestic shipment
acceptances since plenty of counter credit available; the fact that sight and
demand drafts, with bills of lading covering shipments are eligible for rediscount
at the Federal reserve banks; the fact that such documentary drafts afford a
most desirable form of self-liquidating paper; the fact that in domestic trade
goods are sold under the open-book-account cash-discount system; delay in the
liberalization of the rulings of the Federal Reserve Board covering this type of
transaction.
QUESTION NO. 3. Relative to the effect of the Federal Reserve Board's liberalizing ruling of 1929 on the volume of acceptances arising from domestic shipments.
The Federal Reserve Banks of Atlanta, Boston, Dallas, Kansas City, New
York, Philadelphia, and St. Louis were of the opinion that the liberalizing ruling
of the Federal Reserve Board should increase the volume of domestic shipment
acceptances. The reasons given were that the cost of borrowed money to the
purchaser of goods should be less; that a substitution of acceptance obligations
for discounted notes should take place; that domestic acceptance financing had
been made easier to handle and that many of the technical discrepancies had
been eliminated.
The Federal Reserve Banks of Chicago, Cleveland, Minneapolis, Richmond,
and San Francisco reported either that there had been or was likely to be no
increase in the use of acceptance credits for such purposes.
QUESTION No. 4. Relative to the curtailment of capital exports to central
Europe through 1929 as a reason for the increase in acceptances arising from
foreign storage and shipment.
Seven of the Federal reserve banks volunteered an expression of opinion on this
point. Of these, the Federal Reserve Banks of Chicago, Dallas, Philadelphia,
and San Francisco concluded that the curtailment of capital exports had been an
important factor in the increasing volume of acceptances of this character.
The Federal Reserve Bank of Atlanta reported that the suggestion seemed
theoretically sound but that there was no substantiating evidence in that district.
While the curtailment of capital exports probably had some bearing, the most
important factors in the situation, in the opinion of the Federal Reserve Bank
of Boston, were the lower rates of interest in the American money market and the
more adequate facilities. The Federal Reserve Bank of New York concluded
that the curtailment of capital exports was not a particularly important factor.
QUESTION N O . 5. Relative to the desirability of the Federal reserve banks
establishing foreign branches or agencies as a means of facilitating the growth of
acceptance markets.
The Federal Reserve Bank of Boston was the only one which appeared favorably disposed toward this suggestion. Even it replied, however, that there are
so many other contingent elements affecting the desirability of establishing such
foreign agencies or branches that the whole question is "open to serious debate."
QUESTION No. 6. (a) Relative to the extent to which the increase in acceptance
totals has represented a growth in self-liquidating paper.
The Federal reserve banks reported that acceptance totals had increased
tremendously the total volume of self-liquidating paper.
The Federal Reserve Bank of Dallas concluded that there probably had been
no increase in the volume of self-liquidating paper, since the volume of selfliquidating paper could only be measured by the character of the originating
transactions.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
845
(b) Relative to the extent to which t h e bankers acceptance has been s u b stituted for other forms of credit instruments.
T h e consensus of opinion seemed to be t h a t some substitution of t h e acceptance
for other types of credit instruments had t a k e n place. This had been in t h e case
of domestic shipment and storage transactions and to an extent in t h e case of
export trade, a p a r t of which h a d been financed formerly on t h e basis of counter
credits. T h e greater p a r t of the increase in acceptance totals, however, had
occurred in t h e export and import t r a d e and in foreign storage and shipment
transactions which had not been financed previously on t h e basis of other types
of domestic credit instruments.
(c) Relative to the eventual funding of any portion of acceptance totals into
longer t e r m obligations.
T h e Federal reserve b a n k s foresaw no need to fund outstanding acceptances
into long-term obligations excepting in t h e case of a portion of those acceptances
drawn for t h e purpose of financing foreign storage and shipment transactions.
QUESTION N O . 7. Relative to various abuses which have developed in t h e use of
t h e acceptance.
The Federal reserve banks reported t h a t t h e previous abuses in t h e use of t h e
acceptances were disappearing. T h e acceptance had definitely been placed on a
higher plane. T h e misuse of t h e acceptance in the past had arisen largely
from a misinterpretation of t h e provisions of t h e Federal reserve act or from a
lack of familiarity with t h e rulings and regulations of t h e Federal Reserve Board.
T h e K a n s a s City Federal Reserve Bank reported t h a t there had been a few
instances of banks swapping acceptances, with t h e object of selling these to t h e
Federal reserve b a n k a t preferential rates.
The Federal Reserve Bank cf Richmond pointed out t h a t subsequent to t h e
liberalization of section 5200 of the Revised Statutes, in February, 1927, t h e use
of t h e acceptance as a means of granting a larger volume of credit to individual
borrowers t h a n could be granted by direct loans had disappeared.
T h e Federal Reserve Bank of San Francisco recommended t h a t t h e use of t h e
domestic storage acceptance be confined to t h e financing of t h e major staple
crops stored in t h e United States (cotton, grain, etc.) which are in such volume
as to make financing through t h e open investment m a r k e t desirable in order to
lift t h e burden from t h e comparatively smaller financial institutions situated in
t h e sections wherein the crops are produced. This would eliminate such abuses
as have arisen in connection with t h e use of t h e domestic storage acceptance.
QUESTION N O . 8. Relative to evidence of a n u m b e r of acceptances arising from
successive transfers of ownership of t h e same goods held in warehouse or in t h e
course of shipment.
All the Federal reserve b a n k s replied t h a t no such cases h a d come to their
attention.
QUESTION N O . 9. Relative to t h e extent to which an investment d e m a n d for
acceptances exists in t h e several Federal reserve districts.
T h e Federal Reserve Banks of Atlanta, Cleveland, K a n s a s City, Philadelphia,
Richmond, St. Louis, a n d San Francisco reported t h a t only a light investment
demand for acceptances existed in those districts.
T h e Federal Reserve Bank of Dallas replied t h a t there h a d been a gradual b u t
steady growth in t h e d e m a n d for acceptances in t h a t district.
The Federal Reserve B a n k of Boston indicated t h a t a real investment d e m a n d
for acceptances occurred only when t h e open-market rates were sufficiently high
to a t t r a c t b a n k s a n d other investors from a s t a n d p o i n t of yield, or when money
is in abundance a n d yields low enough to m a k e t h e acceptance a t t r a c t i v e from t h e
standpoint of safety a n d liquidity.
When rates of interest are high, according to t h e Federal Reserve B a n k of New
York, considerable a m o u n t s of bills are sold to individuals, corporations, and small
interior banks. W h e n m a r k e t rates are on a low level d e m a n d from those sources
decreases a n d t h e purchases of larger banking institutions, which h a v e increased
a m o u n t s of cash not otherwise employed, become more i m p o r t a n t .
QUESTION N O . 10. Relative to permitting member banks to carry a p a r t of their
required reserves in the form of bankers' acceptances in order to stimulate an inv e s t m e n t demand.
T h e Federal reserve b a n k s were generally opposed t o this suggestion. T h e
reasons given were t h a t t h e acceptance does n o t in itself constitute a genuine
reserve; t h a t the stimulation of an investment d e m a n d for acceptances is not
sufficient justification for lowering reserve requirements; t h a t reserve requirements
are too low now; t h a t this change would open t h e door for further demands for use
of member b a n k reserves; t h a t the provisions of the banking s t a t u t e s should not
be complicated further.
846
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
T h e Federal Reserve Bank of San Francisco pointed out t h a t the development
of a better investment d e m a n d would t a k e place if t h e Federal reserve banks s u p p o r t e d t h e acceptance m a r k e t t o a lesser degree.
QUESTION N O . 11. Relative to a suggested plan t h a t t h e Federal reserve b a n k s
should refuse to purchase acceptances, unless t h e accepting institutions held bills,
accepted by other institutions, t o a substantial percentage of their own acceptance
liabilities. The purpose of this change would be t h a t of stimulating an i n v e s t m e n t
d e m a n d for acceptances.
All Federal reserve b a n k s opposed this proposed change. T h e reasons cited
were t h a t t h e strength a n d b r e a d t h of t h e discount m a r k e t would be impaired;
t h a t a further artificial situation would be created in t h e bill m a r k e t ; t h a t t h e
object to be a t t a i n e d could be defeated by subterfuge; t h a t it would immobilize
b a n k assets; t h a t t h e t o t a l volume of bankers' acceptances outstanding would be
reduced; t h a t it would interfere with t h e mobility of short-term capital; t h a t
during t h e season of the year when t h e acceptance liabilities of banks are heaviest,
their funds available for investment are a t a low point.
T h e Federal Reserve Bank of San Francisco indicated t h a t a more constructive
proposal would consist in t h e Federal reserve banks educating all accepting b a n k s
t o t h e desirability of extending a t all times (even when borrowing from t h e
Federal reserve bank) reasonable lines of credit to dealers in acceptances a t a
cost not greater t h a n t h a t bid for 90-day bills.
QUESTION No. 12. (a) Relative to whether t h e dependence of the acceptance
m a r k e t on the Federal reserve b a n k s would be lessened if their buying rates o n
acceptances were held above t h e m a r k e t rate on acceptances.
(6) Relative to the effect of this change in policy.
T h e Federal Reserve Banks of Atlanta, Chicago, Philadelphia, Richmond,
a n d San Francisco affirmed t h a t t h e dependence of t h e acceptance m a r k e t on
t h e Federal reserve b a n k s would be lessened if t h e buying rates a t the Federal
reserve banks were held consistently above t h e m a r k e t r a t e on acceptances.
T h e Federal Reserve Bank of Philadelphia concluded, however, t h a t this proposal would probably not be practicable in t h e present artificial market.
T h e result of this change in policy, according t o these Federal reserve b a n k s ,
would be to effect a broader distribution of bills, would result in an improved
discount market, would stimulate dealers in seeking a wider market, and would
give accepting b a n k s an incentive to support those dealers who are active in
merchandising their acceptances.
T h e Federal Reserve Bank of Boston feared t h a t the results of this policy would
be to divert a p a r t of t h e acceptance business of this country to Europe.
T h e Federal Reserve Banks of Cleveland and New York declared t h a t t h e i r
effective buying rates are generally and normally above m a r k e t rates. T h e
Federal Reserve Banks of Dallas a n d Kansas City replied t h a t it is the present
policy to maintain buying rates on acceptances above m a r k e t rates.
(c) Relative to the artificiality of the m a r k e t r a t e on acceptances.
T h e Federal Reserve Banks of Boston, Cleveland, Dallas, K a n s a s City, a n d
New York replied t h a t t h e m a r k e t r a t e on bankers' bills was not as artificial
as generally believed.
T h e Federal Reserve Bank of Chicago declared t h a t the time h a d passed for t h e
reserve b a n k s to continue to give artificial support to t h e m a r k e t .
T h e Federal Reserve Bank of Philadelphia stated t h a t t h e buying rates a t
t h e reserve b a n k s had practically determined t h e m a r k e t r a t e for bills and would
continue to do so until a broader discount m a r k e t developed.
T h e Federal Reserve Bank of Richmond stated t h a t t h e m a r k e t r a t e had a t
times been an artificial one, a n d t h e San Francisco reserve b a n k concluded thatsuch h a d been the case more t h a n necessary during recent years.
Of a legal nature
Q U E S T I O N N o . 13.. Relative to limiting the accepting of time bills of exchange
simply to those growing out of bona fide shipments in foreign t r a d e and to those
drawn for t h e purpose of creating dollar exchange.
W i t h t h e exception of the. Federal Reserve B a n k of San Francisco, all of t h e
Federal reserve b a n k s were opposed to this proposed limitation.
T h e Federal Reserve Bank of San Francisco would favor t h e elimination of all
storage credits excepting those arising out of t h e storage, within the U n i t e d
States, of i m p o r t a n t domestically raised staples, such as cotton, grain, wool,
tobacco, etc.
Q U E S T I O N N O . 14. Relative t o t h e acceptance provisions of s t a t e b a n k i n g
s t a t u t e s . (See appendix.)
NATIONAL AND FEDERAL. RESERVE BANKING SYSTEMS
Purchases for foreign
847
account
QUESTION N O . 15. Relative to the d a t a of the volume of bills purchased for
foreign account classified by countries.
T h e Federal Reserve Bank of New York refused to submit the d a t a requested.
Q U E S T I O N N o . 16. Relative to the buying rates on bills purchased for foreign
account.
T h e Federal Reserve Bank of New York indicated t h a t t h e r a t e on bills
purchased for foreign account is ordinarily below the rates paid on bills of similar
maturities bought for own account.
The bills purchased for foreign account are acquired almost entirely from
dealers. The reasons are t h a t the available supply is with dealers a n d t h a t n a t i o n a l
banks are precluded b y law from incurring indorser's liability on notes or bills
discounted to t h e extent t h a t would be necessary if they sold bills to t h e Federal
reserve bank, in substantial a m o u n t s for the account of foreign banks.
A final reason is t h a t t h e Federal Reserve Bank of New York, in this fashion,
desires to maintain a broad a n d stable discount market.
QUESTION N o . 17. Relative to t h e rates of commission received by t h e Federal
reserve b a n k s for indorsing bills purchased for foreign account.
The Federal reserve banks replied t h a t t h e commission charged a m o u n t e d t o
one-eighth of 1 per cent per a n n u m . The bills are not indorsed, b u t t h e Federal
reserve b a n k s guarantee p a y m e n t a t m a t u r i t y and agree to b u y back t h e bills
a t any time. For the purchase of bankers' acceptances without g u a r a n t e e of
p a y m e n t or agreement to b u y back, the charge is one-sixteenth of 1 per cent of
t h e face a m o u n t .
Of a technical and statistical nature
QUESTION N o . 18. Relative to statistics of sources of bills purchased for own
account.
D a t a m a y be found in t h e full replies of the Federal reserve banks.
Q U E S T I O N N o . 19. Relative to t h e policy followed by t h e Federal reserve banks
in purchasing bills from, a n d in discounting bills for, accepting institutions.
None of t h e Federal reserve banks purchase bills directly from t h e accepting
b a n k . T h e Federal reserve b a n k s of Atlanta, Chicago, a n d Kansas C i t y are
willing, however, to rediscount such obligations a t t h e rediscount r a t e .
T h e Federal reserve b a n k of San Francisco held t h a t section 13 of t h e Federal
reserve act does not contemplate t h e rediscounting on t h e p a r t of a Federal
reserve b a n k of a member b a n k ' s own acceptance.
QUESTION N o . 20. Relative to t h e volume of bills s t a t e d in foreign currency
held for own account.
Sterling bills were purchased in 1927, 1929, a n d 1930 to relieve t h e pressure on
t h e foreign exchanges a n d to check further imports of gold. These purchases
were u n d e r t a k e n during t h e a u t u m n when t h e foreign exchanges are normally
under pressure a n d were liquidated when t h e seasonal strain h a d passed.
I n 1929 pengos were purchased in cooperation with t h e central b a n k s of E n g land, France, Belgium, a n d t h e Netherlands to strengthen t h e position of t h e
National Bank of H u n g a r y in dealing with H u n g a r y ' s foreign exchanges.
Through 1929 a n d 1930 a volume of franc bills were held.
QUESTION N O . 2 1 . Relative to whether t h e reserve b a n k s ever purchase
acceptances from one another to serve as cover for Federal reserve notes.
T h e Federal reserve banks replied t h a t this practice h a d n o t been found necessary.
QUESTION N o . 22. Relative to buying rates on acceptances in force at each
Federal reserve bank.
D a t a m a y be found in t h e replies of the respective Federal reserve b a n k s .
QUESTION N o . 23. Relative to whether t h e Federal reserve banks ever discrimin a t e in t h e purchase of acceptances on t h e basis of the self-liquidating or nonselfliquidating n a t u r e of t h e transaction involved.
T h e Federal reserve b a n k s replied t h a t such h a d not been their practice, t h a t
buying rates are fixed on t h e established credit standing of t h e acceptors
a n d indorsers of t h e bills provided t h a t satisfactory evidence is presented t h a t
t h e bills are eligible.
QUESTION N o . 24. Relative to t h e effect of changes in t h e acceptance buying
rates of t h e Federal reserve b a n k s on t h e total volume of bills outstanding.
T h e Federal reserve b a n k s replied t h a t their buying rates for acceptances
constitute b u t one factor in t h e determination of t h e t o t a l volume of bankers*
acceptances. Prohibitive rates would, of course, t e n d to destroy t h e desire to
create acceptances, while a constantly low range of rates would offer an inducem e n t to use this form of credit.
848
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
A low level of rates relative to other rates of interest in t h e m a r k e t a n d relative
t o rates of interest in foreign money m a r k e t s would lead to a substitution of t h e
acceptance for other forms of credit instruments a n d would lead to a certain
shifting of acceptance credits between international m o n e t a r y centers.
T h e Federal Reserve Banks of Boston a n d New York indicated t h a t t h e acceptance buying rates of t h e Federal reserve banks were ordinarily only minor
factors a n d t h a t t h e a m o u n t of acceptances outstanding was a function of t h e
volume of business a n d of m a r k e t rates of interest on acceptances. I n t h e
determination of m a r k e t rates, t h e Federal leserve b a n k s are a passive r a t h e r
t h a n an active factor.
QUESTION N O . 25. Relative to t h e factors responsible for t h e decline in t h e
acceptance commissions charged by American accepting institutions over t h e
p a s t six years.
T h e rates of commission charged on domestic acceptance credits has shown
little change. T h e rates charged on foreign transactions have declined b y
reason of competition among American b a n k s a n d by reason of competition
between t h e New York a n d t h e London discount m a r k e t s .
Concerning the relations with dealers
QUESTION N O . 26. Relative to t h e names of dealers in acceptances whose
indorsements are recognized by t h e Federal reserve banks.
T h e Federal Reserve Banks of Atlanta, Kansas City, Minneapolis, a n d St.
Louis replied t h a t there were no recognized dealers in acceptances in t h o s e
reserve districts.
T h e recognized dealers doing business in t h e other reserve districts include:
T h e First-National Old-Colony Corporation.
S h a w m u t Corporation of Boston.
T h e National City Co. of Boston.
Salomon Bros. & Hutzler of New York.
T h e Discount Corporation of New York.
T h e National City Co. of New York.
T h e F o r t W o r t h National Co. of F o r t Worth, Tex.
T h e Union National Co., Houston, Tex.
T h e National City Co. of California.
T h e American Securities Co. of California.
Whether a dealer's indorsement is recognized or not depends on t h e possession
of a substantial net worth in relation to t h e business t r a n s a c t e d ; t h e experience
a n d t h e ability of t h e m a n a g e m e n t ; his clientele; character of transactions;
r a p i d i t y of distribution; his willingness to bid for bills a n d to circulate a t freq u e n t intervals a list of offerings.
QUESTION. N O . 27. Relative to t h e volume of bills held in t h e dealers' portfolios.
See d a t a presented in t h e replies of the various Federal reserve banks.
QUESTION N o . 28. Relative to t h e a m o u n t of acceptances in dealers' portfolios
acquired directly from accepting institutions, from drawers of bills, a n d from
other sources.
F r o m t h e d a t a submitted by t h e Federal Reserve Banks of Boston, Chicago r
N e w York, a n d San Francisco, it would appear t h a t t h e bulk of t h e bill portfolios
of t h e dealers is acquired from t h e acceptors.
QUESTION N O . 29. Relative to t h e a m o u n t of acceptances held under resale
agreement by t h e Federal reserve banks on t h e last reporting d a t e in each m o n t h
since J a n u a r y , 1922.
Detailed d a t a were supplied by t h e Federal Reserve Bank of Boston, Chicago,
Dallas, New York, a n d San Francisco, the only ones entering into such arrangem e n t s a t t h e present time. See replies of t h e individual Federal reserve b a n k s
to this question.
QUESTION N o . 30. Relative t o t h e rates prevailing a t each Federal reserve
b a n k in respect to resale agreements.
Detailed d a t a m a y be found in t h e replies of t h e various Federal reserve
b a n k s to this question.
Q U E S T I O N N o . 31. Relative to t h e problem of preventing t h e seepage of Federal
reserve credit granted to dealers against resale agreements into t h e speculative
or investment m a r k e t .
T h e Federal reserve banks did not regard this as a problem of importance.
T h e Federal Reserve Bank of New York pointed out t h a t t h e dealers seek
accommodation simply for t h e purpose of carrying their portfolios of bills, when
STATIOSTAIi AND FEDERAL RESERVE BANKING SYSTEMS
849
outside funds are not available, either in sufficient a m o u n t s or a t economically
possible rates. When t h e bills are sold or outside money becomes available, t h e
resale agreements are repaid.
T h e Federal Reserve Bank of San Francisco replied t h a t it is k e p t informed of
t h e size of t h e dealers' portfolios a n d t h e a m o u n t of credit they require, so t h a t
there is little opportunity to misuse Federal reserve credit. T h e resale agreem e n t r a t e is so fixed a t t h e Federal Reserve Bank of San Francisco t h a t an incentive is created to borrow elsewhere as soon as surplus funds a p p e a r on t h e
m a r k e t . T h e a t t i t u d e of the San Francisco reserve b a n k is t h a t dealers' p o r t folios should have a direct relationship to dealers' demands a n d t h a t t h e Federal
reserve b a n k should not accommodate dealers carrying bills with any other object
in mind.
QUESTION N O . 32. Relative to t h e average life of resale agreements.
At t h e Federal Reserve Bank of Boston, on a yearly average basis, resale
agreements have varied from 7.1 days in 1924 t o 11.2 days in 1923.
The Federal Reserve Bank of Chicago estimated t h e average life a t a b o u t
10 days.
T h e Federal Reserve Bank of New York pointed out t h a t a more a c c u r a t e
picture of t h e extent of the accommodation to the m a r k e t under resale agreem e n t s is t h e average a m o u n t of holdings of bills under resale agreements a n d
t h e n u m b e r of days in each m o n t h during which there are no resale agreements.
These d a t a are incorporated in its reply.
T h e Federal Reserve Bank of San Francisco stated t h a t in an active investm e n t m a r k e t bills were withdrawn very rapidly. T h e life of t h e agreements
averages 4 or 5 days a t times and a t other times 10 to 12 days.
QUESTION N O . 33. Relative to t h e relationship between changes in t h e a m o u n t
of acceptances held under resale agreement on t h e one h a n d and t h e size of t h e
dealers' portfolios and m a r k e t rates of interest on t h e other.
The Federal Reserve Bank of Boston replied to t h e effect t h a t t h e relationship between t h e volume of resale agreements a n d t h e size of dealers' portfolios,
was r a t h e r close. High portfolios were a n indication of a slackening i n v e s t m e n t
demand for bills. Resale agreements relieved t h e dealer of t h e necessity of
dumping his bills on t h e open market, often a t a loss.
T h e Federal Reserve Bank of Chicago stated t h a t t h e size of resale agreements is more a function of money-market tightness t h a n of t h e size of t h e
dealers' portfolios. Inasmuch as t h e dealer derives no profit through carrying
his portfolio with the Federal Reserve Bank of Chicago, it is to his a d v a n t a g e
to sell t h e m as quickly as possible in t h e open m a r k e t or to borrow against t h e m
from commercial b a n k s when t h e interest rates relax.
The Federal Reserve Bank of New York supplied a chart, which showed a
fairly close relationship between t h e volume of resale agreements a n d dealers'
portfolios. Deviations would be a t t r i b u t e d to changes in t h e relationship of
open-market rates a n d t h e rates prevailing a t t h e Federal reserve b a n k .
T h e Federal Reserve Bank of San Francisco concluded t h a t there is little
relationship between t h e size of dealers' portfolios a n d the a m o u n t carried with
t h e Federal reserve b a n k under resale agreement. T h e carrying charge imposed
by the Federal Reserve Bank of San Francisco is designed to induce t h e dealers
to borrow elsewhere if funds are available.
R e p l i e s R e c e i v e d f r o m t h e D i f f e r e n t F e d e r a l Reserve B a n k s , T a b u l a t e d
by Questions
1. W h a t are t h e factors t h a t in your opinion h a v e m a d e for t h e increasing
concentration of t h e acceptance m a r k e t of t h e country in t h e h a n d s of a few
institutions located in New York, Boston, Chicago, a n d San Francisco, and
t h a t have militated against t h e establishment of discount m a r k e t s in other centers?
Atlanta.—The
concentration of banking resources in t h e cities named, t h e
importance of foreign t r a d e to t h e acceptance business, t h e m a t u r e commercial
development of t h e cities a n d t h e territory surrounding them, their n a t u r a l
advantages of location, a n d their importance as financial a n d t r a d i n g centers
h a v e been factors of importance in t h e increasing concentration of t h e acceptance
business of t h e country in t h e hands of a few institutions located in New York,
Boston, Chicago, a n d San Francisco. T h e establishment of discount m a r k e t s
in t h e centers of t h e Sixth Federal Reserve District has been militated against
largely by t h e fact t h a t t h e section is comparatively new a n d undeveloped commercially a n d industrially, a n d t h e development of its n a t u r a l resources results
in such a d e m a n d for funds for carrying on t h e growing business of t h e district
a t high rates of interest t h a t there is little money to be a t t r a c t e d by t h e much
lower r a t e to be h a d in acceptances.
850
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Boston.—These cities are the centers wherein are located the larger commercial
"banks. Those located on the seacoast naturally attract more export and import business than the small inland cities. Chicago is a concentration point for
acceptance credits, for the reason that it is one of the greatest industrial inland
cities and the center of a great agricultural and livestock district. Acceptances
of these larger and nationally known banks are readily sold to investors throughout the country, while the smaller and less known banks are not as well .known to
prospective investors. For this reason discount markets arise in the larger centers
because the bills originate there and funds for temporary investments tend to
concentrate there. Before the establishment of the Federal reserve act, acceptances were executed in sterling form by several private banking houses.
Chicago.—Out of $1,571,000,000 of bankers' acceptances outstanding on
December 1, 1930, $1,352,000,000, or about 86 per cent of the acceptances of the
first 40 accepting banks were of banks located in New York, Boston, Chicago,
and San Francisco, with the exception of 1 bank at Buffalo, 1 at Cleveland, and
1 at Philadelphia. These four cities are the principal financial centers of the
country, Boston, Chicago, and San Francisco being subsidiary to New York and
•each of the three serving its own particular territory; Boston, the New England
States; Chicago, the Central and Western States; and San Francisco, the Pacific
coast territory.
With regard to Chicago, acceptance dealers serve a wide territory in the sale
of bills, reaching from Cleveland to the Rocky Mountains and from the northern
border to the southernmost part of the country, Chicago acceptance dealers filling
orders for bills from tha principal cities in the territory outlined, the volume of
acceptance business not being large enough to justify the establishment of
branches in the other important cities in this territory. Furthermore, inasmuch
as over 85 per cent of the acceptances originates in the four cities mentioned, it is
more necessary for the dealers to be located at the sources of supply of bills, which
are also the best markets for the bills, rather than to have offices mostly for the
sale of bills only, in the other important cities of the country.
Cleveland.—(a) In this district there appears to be a lack of interest in the
acceptance privilege granted under section 13 of the Federal reserve act except on
the part of a few of our larger member banks.
(b) A preference on the part of many banks to loan their funds rather than
their credit, even on transactions adaptable to acceptance financing, because of
the better rate usually obtainable in loans.
(c) With only a few banks in this district availing themselves of the acceptance
privilege and little interest on the part of our banks (with few exceptions) in purchasing bills, the volume created as well as the demand for purchases is not sufficient to warrant dealers in maintaining offices or carrying portfolios in this
district.
Dallas.—The large t capital structures of the banks in the cities mentioned
provide for a sufficient volume of outstanding acceptances to make the commission revenue worth while. Moreover, the institutions in those cities are
better known and therefore acceptance credits are sought from them, particularly
where credits are desired by foreign banks on behalf of their customers, or
directly by exporters or importers in foreign countries. Due to the fact that New
York has been a settlement point for the country for so long, unemployment
funds naturally flow to or accumulate in that center, and surplus funds of New
York banks may, therefore, be invested in bankers bills to the extent that they
are not invested in stock exchange call loans. The theory of acceptance credit is
that it is granted in preference to direct loans, in view of the fact that it absorbs
no loanable funds of the grantor of the acceptance credit, but is only a permission
to use the accepting bank's credit. This theory holds true whether the accepting
bank is short of loanable funds or whether it is " long " of loanable funds. By reason
of the acceptance privilege a bank that is well loaned up can grant acceptance
credits and in this case the accepting bank is necessarily not a purchaser of
acceptances in the market. If it has surplus funds to loan it can still grant
acceptance credit and either carry its own acceptances in its portfolio until such
time as it desires to sell them, or it may continue to retain the surplus funds to
loan whenever the opportunity presents.
This brings us to the thought, therefore, that banks whose capital structure is
small, or which for other reasons do not grant acceptance credit, must be largely
depended upon to purchase the acceptances of other banks. Therefore, we may
say that, ordinarily, accepting banks are not large purchasers of acceptances,
and, from the foregoing analysis, we are left to the conclusion that they do not
regard it to their own intere'st to be large buyers of bills in the open market, unless
there is no opportunity to invest their funds more profitably. While the distri-
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
851
bution of acceptances has grown, a n d continues to grow, it is a fact t h a t t h e
n u m b e r of b a n k s which have become familiar a n d conversant with acceptance
practices h a s not yet reached sufficient proportions to create a n y large d e m a n d
for purchasers outside of t h e centers mentioned. This results in a greater dependence, for t h e present a t least, a n d probably for some time to come, upon t h e
Federal reserve banks to absorb acceptances t h a t are p u t out to t h e extent t h a t
they are n o t absorbed by the purchases m a d e by foreign banks. This is w h y
Federal reserve b a n k s h a v e adopted t h e policy of buying only indorsed bills, so
as to necessitate t h e negotiation of a bill a t least once in the m a r k e t before it is
purchased by a Federal reserve bank. The bill dealers equipped with distribution
opportunity, capital structure, a n d talented m a n a g e m e n t are largely limited t o
t h e cities named, and though they are constantly adding to the names which
they are buying, it is difficult for t h e m to take on acceptances of banks located in
other points t h a n those mentioned, until such names become established a n d their
acceptances will be generally bought.
Kansas City.—'So far as this district is concerned, commercial banks have n o t
been interested in t h e creation of an acceptance m a r k e t a n d t h e a m o u n t of
acceptances originating in t h e district is very small, for t h e reason t h a t our commercial b a n k s have preferred to make direct loans a t current rates r a t h e r t h a n
create acceptances on which they would profit only to t h e extent of the acceptance
commission.
Minneapolis.—The
following factors were i m p o r t a n t in concentrating t h e
acceptance business of t h e country in New York, Boston, Chicago, a n d San
Francisco;
(a) The low rates which bankers' acceptances have yielded, a n d which m a k e
t h e m undesirable as investments for banks in t h e interior where lending rates
are higher a n d where it is possible to secure almost as large an income from
interest on a correspondent b a n k balance as from i n v e s t m e n t in t h e b a n k e r s '
acceptance.
(b) T h e prevailing use of other types of finance for domestic business, such as
open credit, commercial paper, and direct bank loans.
(c) T h e concentration of import and export business in t h e cities named above.
(d) T h e lack of sufficient volume of open m a r k e t types of loans in interior cities
to warrant t h e growth of discount m a r k e t s .
New York.—Important
credit business naturally flows to t h e more i m p o r t a n t
financial centers where are located t h e largest, strongest, and best known financial
institutions. Most of the import and export t r a d e of the country naturally flows
through its principal ports and its financing is logically undertaken by t h e large
institutions located in those cities. Discount m a r k e t s can exist only when associated with a n d having access to money m a r k e t s . Local money m a r k e t s where
funds would be available to discount houses and dealers on call and short notice
in substantial and fairly constant a m o u n t s do not exist outside of the more
i m p o r t a n t financial centers and, in fact, only New York provides credit and money
facilities for a considerable discount m a r k e t .
Philadelphia.—The
value of an acceptance depends upon its salability, hence
it m u s t be accepted by an institution of t h e highest standing. Such institutions
are located in the large cities, t h e majority, of course, being in New York. T r a n s actions out of which acceptances originate, generally, are u n d e r t a k e n or finally
completed by parties in the larger cities, or by those having financial connections
in t h e large cities. The making of acceptances apparently has not p r o v e d
a t t r a c t i v e to m a n y of the large banks, hence t h e comparatively few banks t h a t
m a k e bills. Some of t h e smaller and less well-known banks have at times a p peared as acceptors, b u t such bills do not rank as " p r i m e " bills and therefore
do not sell a t as attractive rates as t h e better known ones, which leads the drawers
of such bills to make ^acceptance arrangements with banks whose acceptances
are m a d e in sufficient volume to support trading in them. U p to this time, N e w
York, Boston, Chicago, and San Francisco are t h e only cities where they are m a d e
in such volume. Further, Federal reserve banks very largely are t h e b u y e r s ,
t h e rates of interest the bills return being so low as to be u n a t t r a c t i v e to t h e
b a n k s generally. As long as bills are largely sold to t h e Federal reserve b a n k s
there is little likelihood of t h e r e being a broad discount market.
Richmond.—In
our opinion, t h e chief factors a r e : (1) T h a t the dealeis, or a t
least the large dealers, in acceptances are located in t h e money centers; (2) t h e
accumulation of funds and the consequent slightly lower money r a t e s prevailingin such centers have further tended to concentrate the acceptance business t h e r e ;
(3) the fact t h a t in the interior (in this district, for example) t h e yield of acceptances is too low to a t t r a c t banking institutions; (4) the tendency among dealers;
t o encourage making acceptances payable in their centers; (5) a greater diversity
852
NATIONAL, AND FEDERAL, RESERVE BANKING SYSTEMS
in the character of acceptances available in money centers, which naturally
prevails.
St. Louis.—In the early days we encouraged several dealers who tried to build
up an acceptance business, but they soon gave it up as the banks in the eighth
-district displayed very little interest in the acceptance business. In the infrequent instances where banks or others were inquiring about the market they seemed
to prefer to go to New York.
San Francisco.—First, San Francisco being so far removed from a primary
market (New York), by distance as well as by time, makes the creation of a local
.market possible and to the direct advantage of acceptors and investors.
Second. There is within the San Francisco district an important investment
•demand for acceptances and an original source of bills accepted by banks having
their names well known in the bill markets.
Third. Facilities given bill dealers by the Federal reserve bank to carry bills
when accommodation for that purpose is not available at the local banks.
The absence of these features makes it unprofitable for local dealers to operate
"in those Federal reserve districts which can be adequately served from central
points near at hand.
2. In the very rapid increase in acceptance totals from the beginning of 1926
to the present time, what factors were responsible for the increase in acceptances
drawn for foreign storage and shipment; for the marked increase in acceptances
arising against goods stored in domestic warehouses in 1927 and 1929; for the
increase in export bills in 1927 and 1928; for the increase in dollar exchange bills
in 1929; for the failure of bills arising from import trade to increase excepting in
1929; for the failure of acceptances arising from domestic shipments to increase
materially through the period under review?
Atlanta.—Do not know.
Boston.—It should not be difficult to determine the factors responsible for the
increase in acceptances drawn for foreign storage and shipment since 1926.
There is no previous precedent against which to measure this type of credit, and
therefore the importance of this marked increase may be overemphasized. There
has been a steady increase in the volume of bills of this class of credit, rising
steadily from $17,000,000 at the end of 1925 to $561,000,000 at the end of 1930.
This steady increase has been maintained during periods of both advancing and
falling rates, so it must be concluded that rates influenced the volume but little,
if any. Federal Reserve Board regulations dated from February, 1927, liberalized the drawing of foreign credits, and while this liberalization undoubtedly
stimulated the making of these bills, the advance in volume had begun early in
1926. From the above facts it would therefore appear that the very rapid increase in acceptances drawn for foreign storage and shipment was due primarily
to two factors—first, the inability of foreign shippers to obtain funds easily and
on a favorable basis in European centers, and to some extent even to nervousness regarding the stability of some of the European currencies. Second, and
probably the most logical cause for this increase, was due to the ever-increasing
volume of our commerce, which was financed by the use of the acceptance credit
more than ever before, shippers finding this means of financing more satisfactory
and cheaper. As our foreign trade expands, so will this class of foreign credit
expand, and to-day's volume may look small when compared to the volume a
few years hence.
Domestic warehouse bills gained from $115,000,000 in 1926 to $196,000,000 at
the end of 1927. Statistics indicate a large part of this gain was due to American
cotton awaiting shipment owing to heavy stocks and lower prices prevailing in
England. Heavy and early crops, combined with falling commodity prices was
indoubtedly the principal factor responsible for the increase in warehouse credits
during 1929.
There was little difference in the average monthly amount of goods exported
from the United States during 1926 and 1927, but statistics show that the exports
for these two years were even lower than 1925. It, therefore, can not be said
that the increase in the amount of export bills was due to any increase of our goods
exported. It would appear, therefore, that the growth in 1927 was undoubtedly
stimulated by the easy-money policy of the Federal reserve banks, which policy
was embarked upon for the avowed purpose of facilitating the marketing of
American crops at a time when they could not be financed in Europe. The
growth of the export bills in 1927 was to quite an extent a matter of policy, while
the growth in 1928 appears to be a seasonal movement similar to that which
occurred in 1929, and to a somewhat less extent in 1925 and 1926, when the use
of American acceptances was less familiar.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
853
T h e increase in dollar exchange bills during 1929 was probably a reflection of
t h e exceedingly tight credit conditions abroad.
T h e 12 m o n t h s ending June, 1929, was t h e only year since 1925 when t h e v o l u m e
of imports of merchandise into t h e United States had shown a substantial increase, therefore, there is no special reason for expecting t h e volume of i m p o r t
bills to increase materially in other years. T h e failure of acceptances arising
from domestic shipments to increase materially during t h e period under review
is probably due to t h e fact t h a t commercial borrowing of all descriptions d u r i n g
t h i s period was a t a low ebb, borrowers having obtained funds t h r o u g h security
issues which to a considerable extent supplanted previous channels, such as
acceptances, brokers' commercial paper, and customers' commercial loans from
banks.
Chicago.—With regard to t h e large increase in t h e volume of acceptances d r a w n
for foreign storage a n d shipment between foreign countries, it appears t h a t a
substantial a m o u n t of this business originates in Germany and other central
European countries and t h a t it results a t least to some extent from a continued
shortage of capital and is not likeiy to be reduced until long-term loans can be
floated in this country or in London or Paris. If long-term capital were readily
available, it is t h e belief t h a t t h e a m o u n t of this class of bills would be reduced to
a considerable extent. We are unable to determine t h e cause of t h e increased
volume of domestic storage bills in 1927 b u t are of t h e opinion t h a t t h e still
greater increased volume in 1929 was caused primarily by t h e surplus supply of
commodities which was much greater t h a n t h e demand. We are unable to
determine t h e cause of the increase in t h e volume of export bills in 1927 and 1928.
T h e increase in dollar exchange bids in 1929 was principally in bills executed
for South American countries, caused b y a surplus of commodities in those
countries which they were unable to m a r k e t readily and also due to t h e unfavorable exchange situation which created a d e m a n d for New York funds. W i t h
regard to t h e volume of import bills which has failed to increase as rapidly as
t h e export bills, we are unable to determine t h e reason. With regard t o failure
of acceptances arising from domestic shipments to increase materially, this class
of business is done largely through counter credits a n d is less suitable for acceptance credits. There does not seem to be much need for t h e development of t h e
acceptance business along this line, as there is always plenty of counter credit
available for this purpose.
Cleveland.—(a) More favorable rates, increased prestige of dollar credits
abroad, a n d a lack of capital and sufficient banking facilities in Central E u r o p e
t o carry on imports of raw materials a n d exports of finished goods w i t h o u t aid.
(b) T h e increase in domestic storage bills in 1927 over 1926 was approximately
$81,000,000, a n d a large p a r t of this was reported as being drawn against cotton
awaiting export.
T h e increase in 1929 over 1928 was approximately $181,500,000, largely
accounted for by agricultural products, grain, cotton, etc., awaiting export or
other m a r k e t . T h e increase reflected a desire to help t h e process of orderly
m a r k e t i n g generally advocated.
(c) T h e increase in t h e volume of bills covering goods exported from this
country in t h e years mentioned appears to follow t h e increase in value a n d volume
of goods exported, which in those years were considerably a u g m e n t e d b y t h e
increased exportation of automobiles.
(d) T h e reason for t h e increase in dollar exchange bills in 1929 over 1928
•appears to be increased merchandise exports. Coupled with this was t h e need of
South American countries to provide dollar exchange to cover their imports, since
t h e i r exports did not suffice. Curtailment of South American borrowings in this
c o u n t r y during t h a t period also affected t h e position of their exchanges.
(e) I m p o r t financing is, of course, subject to changes in t h e volume a n d value
of our imports, and our i m p o r t bills did increase every year since 1926. T h e
increases between 1926 a n d 1928 were not great, b u t a considerable increase in
this class of bills was shown in 1929, reflecting t h e heavy sugar importations which
took place in t h e fore p a r t of t h a t year and t h e large imports of silk a t fairly high
prices which occurred in t h e l a t t e r p a r t of t h e year.
(/) Domestic shipment bills h a v e never been a large factor in t o t a l acceptances
created, as will be noted from t h e following schedule of t h e a m o u n t s of such bills
created from 1925 to 1929, inclusive: 1925, $25,600,000; 1926, $28,686,000;
1927, $20,959,000; 1928, $16,197,000; 1929, $22,830,000.
This indicates t h a t other practices prevail, such as shipment against open
account with a cash discount for p a y m e n t of t h e accouht before m a t u r i t y , shipm e n t against sight draft with bill of lading attached, or shipment against time
draft with bill of lading a t t a c h e d . Both sight drafts a n d t i m e drafts against bill
854
NATIONAL AKD FEDERAL RESERVE BANKING SYSTEMS
of lading shipments covering commodities are readily discounted by banks for
their customers.
Dallas.—During the period mentioned the margin of acceptance ability which
the American banks desired to use was large and, due to a shortage of capital
or loanable funds in foreign countries, it was probably easier to arrange commercial credits with New York banks than with banks in the countries from which
the business came. The use of acceptances for carrying goods stored in domestic
warehouses in 1927 was a convenient method of financing the carrying of commodities. During that year many European countries were stabilizing their
currencies and it was not until later in that year that gold exports from theUnited States were sufficient to increase the purchasing power of foreign countries, which made it easier for the commodities stored in this country to be sold
and moved out. After the foreign exchanges were stabilized and became stronger,
the purchase price of commodities in this country, in terms of conversion to foreign
exchange, became more favorable for export transactions as a result of Federal
reserve policies inaugurated in the latter part of 1927. The situation in 1929
was reversed, in view of the large gold imports in that year which decreased thepurchasing power of foreign countries, and in addition to that the tremendous
amount of credit absorbed in speculation required acceptance credit in order to
provide for stored commodities. We think the answer to the third secton of this
inquiry may be elucidated from the answer to the first question, as relating to
1927 and 1929. The increase in dollar exchange bills in 1929 was due to gold
imports into this country and the necessity for creating dollar exchange to cover
the tremendous amount of funds flowing into the New York call market. We
have not checked the comparison of acceptance rates in years other than 1929,
but we have already said that the drawing of foreign bills in reimbursement of
export shipments was facilitated in other years than 1929 and by the same reasoning it was not necessary to resort to increasing the acceptance account in export
transactions as it was in 1929. Acceptances to finance domestic shipments have
never been in important volume, due to the short time that the financing of such
shipments ordinarily runs. Reference to the regulations of the Federal Reserve
Board will indicate that such acceptances were heretofore limited to the estimated time for shipment to be completed in domestic transactions. Most of the
domestic shipments are moved either by short-time credit or sight draft with
bill of lading attached. In view of the fact that sight and demand drafts w<th
bills of lading covering shipments are eligible for rediscount at Federal reserve
banks, there is no great advatnage in or necessity for undertaking to provide for
such shipments by acceptance credits.
Kansas City.—This question can best be answered by the American Acceptance Council, the Federal Reserve Board, or the Federal Reserve Bank of New
York, which acts as buying agent for the open-market committee and keeps in
close touch with matters affecting the acceptance market.
Minneapolis.—Detailed reasons for these changes in acceptance totals can best
be given by bankers in the centers where the acceptance business originates.
New York,—Dollar acceptance credit for foreign trade which does not touch
our shores and for the storage of staple goods in foreign countries has increased
importantly since 1926. The greatest demand for it has come from Central
Europe, which since the war has lacked capital and sufficient banking facilities
in Europe to carry on their imports of raw materials and exports of finished
goods without aid from America. Also, much business of this sort that was
formerly financed in London has come to America as the cost of American
financing decreased in comparison with the cost in London. While American
commissions are somewhat higher, the relative open-market discount rates have r
during the greater part of the time, been working in favor of America.
The increase in the volume of acceptance credits against staples stored in
domestic warehouses in 1927 and 1929 occurred most importantly during the
autumn months of those years and doubtless reflected substantial agricultural
production during those seasons, for which there was no immediate market
demand. Commodity prices also are reflected in the dollar volume of credit.
In 1927 the principal occasion for increased drawings was cotton, with a somewhat unusual amount for sugar at that season; in 1929, the storage of cotton and
grain was the occasion for substantial increases in drawings, as shown in the
following diagram.
After each autumn increase, shipments within the next ensuing six months
substantially reduced the volume of goods in warehouse and the outstanding
credit in respect thereof; from a high point of $196,000,000 in December, 1927,
the volume reduced by June, 1928, to $117,000,000, and by August, 1928, to
$92,000,000. The low point for the year 1929 was in June, $87,000,000, the high
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
855
point in December, $284,000,000, which was reduced gradually to $137,000,000
in July, 1930, from which point it began to ascend again during the autum and
was $271,000,000 at the end of December, 1930. It is a seasonal movement, with
fluctuations in volume determined by the size and value of agricultural production and the rapidity of its distribution in channels of consumption.
The increases in volume of export bills, that is, exports from this country, in
1927 and 1928 were: In 1927 from $272,000,000 in January to $390,000,000 in
237
152
<04
$ii'lf$rt
119
1926
1927
y;:-;;/*v*• •*,* • * • •
mm
;*:':'::.-V.-:
1928
1929
47?
484
Estimated value of average visible supply of wheat during last three months of each year
[In millions of dollars]
560
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•
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i
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L M M I M M
1926
(927
1928
1929
Estimated value of average volume of cotton in domestic warehouses
[In millions of dollars]
December, and in 1928 from $385,000,000 in January to $496,000,000 in December. These trends and the seasonal fluctuations in them correspond fairly closely
to the changes and fluctuations in the value and volume of our exports, which
during those years began to be importantly increased by the export of automobiles, that financing supplementing the longer established export trades.
The accompanying diagram indicates the relation of the volume of financing
to the volume of exports. From it it will be noticed that during recent years the
volume of export bills outstanding has at times exceeded the current volume of
exports. This results from the fact that there is a lag between the time of the
reduction of the current volume of exports and the maturity of bills outstanding
856
NATIONAL AND FEDEEAL EESEEVE BANKING SYSTEMS
which were created in previous m o n t h s , also t h e fact t h a t within t h e classification of export bills are included bills which arise out of t h e sale in foreign countries of American products, principally cotton, sold to foreign spinners from stocks
of goods held by American shippers in foreign countries, t h e export statistics on
which would have appeared some time before t h e credit granted in respect of t h e
sale of the commodity. T h e increase in dollar exchange bills in 1929 occurred
principally in t h e last four or five m o n t h s of t h e year, say, from about $49,000,000
in July to $76,000,000 in December, a n d reflected t h e increasing difficulties,
principally of South American countries, in providing exchange from their own
exports with which to pay for their imports from this country. Some curtailment
in South American borrowings through bond or note issues in this country duri n g t h a t period also militated against the position of their exchanges a n d m a d e
remittances for imports more difficult. T h e factors applying to the i m p o r t t r a d e
are similar b u t t h e reverse of t h e export trade. Changes in t h e volume or value
of our imports affect i m p o r t a n t l y t h e volume of import financing. T h e volume
of import bills in October, 1927, was $308,000,000, which did n o t increase imp o r t a n t l y until March, 1929, when it reached $360,000,000. T h a t was a period
of very heavy imports of raw sugar from Cuba, probably stimulated as to volume
t h r o u g h apprehension of increased American tariff against C u b a n sugars. F r o m
t h a t it declined to $316,000,000 in July, 1929, and from t h e n on to t h e end of t h e
year increased to $383,000,000. T h e fluctuations t h r o u g h o u t t h e year 1929
were not unusual and t h e volume did not greatly exceed 1928 excepting for t h e
m o n t h s of February and March, and the ]ast three m o n t h s of t h e year w h e n silk
prices were fairly high and large a m o u n t s were being imported. T h e following
diagrams show m o n t h l y imports of raw sugar and raw silk into t h e United S t a t e s ,
1927-1929.
T h e volume of domestic shipment bills has always been low compared to t h e
volume of bills in other authorized transactions. T h e relatively slight use of
acceptance credit in domestic shipments, we believe, depends principally on t h e
fact t h a t in America goods are so largely sold on open account with cash discount for p r e p a y m e n t of the account before m a t u r i t y . A further reason until
recently has been t h e ruling of t h e board t h a t bills drawn in domestic shipment
transactions by t h e buyer of goods should n o t be drawn for periods longer t h a n
t h e actual transit time of t h e goods. Since t h e rescinding of t h a t ruling in i t s
application under certain circumstances, there h a s been a moderate increase in
the use of domestic shipment acceptance credit and it will probably continue t o
grow moderately as m e r c h a n t s a n d others become more acquainted with t h e
facility afforded t h e m .
Philadelphia.—The
increase in acceptances d r a w n for foreign storage a n d
shipment, from 1928 to the present t i m e has been due in p a r t to a liberalization
by t h e Federal Reserve Board of its ruling in regard to acceptances of this character. An increasing demand t h r o u g h o u t t h e world for international short-time
financing in the form of acceptances; t h e spread of interest rates between N e w
York a n d London; a better understanding of bankers' acceptances; t h e service
offered b y our accepting banks, plus the stability of the dollar as a m e d i u m of
exchange, were some of the principal factors responsible for the increase in t h e
acceptances drawn for foreign storage and shipment. A large portion of t h e gain
in 1927 in acceptances arising against goods in domestic warehouses was represented by American cotton awaiting shipment, t h e sale of which was temporarily
checked owing to heavy stocks on h a n d in England. Goods in domestic warehouses were fairly well liquidated in 1928, b u t t h e bills showed an increase in 1929,
due to t h e surplus of wheat a n d cotton which went into storage, t h e shifting of
domestically commodity loans against grain and cotton in warehouse into
acceptances. The increase in export bills in 1927 and 1928 was due to t h e h e a v y
volume of commerce during these years, a considerable portion of which was
financed by means of acceptances. T h e rates were generally a little more favorable in this country t h a n abroad, so it was only logical t h a t the most economical
m e t h o d ot financing foreign t r a d e should be used. T h e exporter was finding
acceptances more convenient and cheaper t h a n other forms of credit. During t h e
l a t t e r p a r t of 1928 and 1929, t h e tightening in credit and high rates for money
oth here a n d abroad had its effect upon t h e increased use of this facility. For
example, grain which is usually handled on a cash, sight bill, and 7-day bill was
exported under 30, 60, and 90 days. T h e increase in this t y p e of acceptance was
due t o a growing demand for dollar exchange by such countries, mostly South
America, as are permitted, under t h e provision of t h e Federal reserve act, a n d t h e
ruling of t h e Federal Reserve Board, to draw acceptances on American b a n k s for
t h e purpose of obtaining exchange, which under other circumstances, might h a v e
been provided by bond issues in New York or London. T h e failure of bills aris-
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
857
ingfrom import trade to increase, excepting in 1929, was due to the recession in
imports during 1927 and 1928. The failure of acceptances arising from domestic
shipments to increase during this period was due to delay in liberalizing the
regulations in this connection (wnich were subsequently modified).
Richmond.—The limited acceptance practice prevailing in this district does not
qualify us to answer these questions.
MILLIONS OF DOLLARS
600i
400
200
400]
200J
1925
1926
1927
1928
1929
1930
1931
THOUSANDS OF LONG TONS
800i
'
600
\ i s >29
&
400
S~*
f V
200
y
'
/
J
b\.
s
\
v
f
F
%%
^Z'
.--s
^'
1927
-^>
"192*
M
A
M
J
J
A
S
O
N
D
Monthly imports of raw sugar into the United States
St. Louis. Volume of acceptances of banks in the eighth district too small to
sued any light on the subject.
San Francisco.—(a) Reason for rapid increase of foreign storage and shipment
credits since 1926: (1) Renewed industrial activities in foreign countries, accompanied by increase of their external trade; (2) lack of working capital abroad
induced purchases of American raw material which could be financed by American credits; (3) long-term forward sales made European manufacturers call for
858
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
well-advanced purchases of raw materials so that sale price can be matched
against purchase price as a means of hedging.
(6) Reasons for increase of domestic storage credits, 1927 and 1929: (1) Sluggishness in movement of staples; (2) banks generally create bills more freely
when they are indebted to Federal reserve bank, to keep down borrowings; (3)
bank borrowers are more inclined to submit to secured (acceptance) credits when
loan rates are above normal range and business is in a recession.
(c) Reason for increase of export bills during 1927 and 1928: (1) Owing to
bill^ rates in United States being more favorable than in London, exporters used
their foreign documentary drafts as a basis of acceptance credits instead of disposing of their bills to banks as foreign-exchange transactions; (2) for the benefit
of the lower financing cost obtainable by the shipper in the United States, foreign
buyers were willing to assume the risk of fluctuations in exchange.
(d) Reason for increase in dollar exchange bills during 1929: Use of this form
of credit not sufficiently general on the Pacific Coast to warrant an expression
of opinion.
(e) Reason for failure of import credits to increase except in 1929: (1) Volume
of import bills relates closely to volume of trade with the United States. The
increase shown in 1929 is primarily due to pending tariff legislation which precipitated rush of shipments to escape higher duties; (2) decline in 1930 is due
both to pushing forward in 1929 of shipment dates and to increase of duties.
MILLIONS OF POUNDS
12
J
F
M
A
M
J
J
A
S
O
N
D
Monthly imports of raw silk into the United States
(/) Reason for failure of domestic shipment acceptances to increase- Documentary bills offer a desirable form of self-liquidating loan. Banks therefore
are reluctant to convert these documentary drafts into acceptance credits excent
p
during severe credit strains.
3. What effect will the board's liberalizing ruling of 1929 have on the volume of
acceptances arising from domestic shipments?
Atlanta.—The liberalizing ruling of 1929 should have the effect of increasing
the volume of acceptances arising from domestic shipments. The cost of borrowed money to the purchaser of goods for working capital purposes will be less
through the use of acceptances than the rate obtainable on his line of credit at
the bank and some substitution of acceptance obligations for discounted notes
should follow These factors should accrue to the benefit of the seller of Roods in
the form of a freer flow of goods in a better market with higher prices.
Boston.—The Federal Reserve Board's liberalizing ruling of 1929 probably will
and undoubtedly has, stimulated the making of acceptances arising from domestic
shipments. It has made domestic acceptance financing much easier to handle
eliminates many of the technical discrepancies which have previously arisen and
will probably result in continued growth of this classification, so long as acceptance
discount rates
are materially lower than the rates for cash advances
m S ^ ' T 1 ? 0 U ^ ° P i n i o n t h e Federal Reserve Board's ruling of November 8
iyJ9, liberalizing the use of acceptances arising from domestic shipments has had
very little effect on the volume of domestic acceptances. For instance out of a
NATIONAL AND FEDERAL RESEBVE BANKING SYSTEMS
859
total of $1,657,000,000 bankers' acceptances outstanding as of November 30,
1929, only $33,000,000 were for domestic shipments of goods.
Cleveland.—It may eventually have the effect of somewhat increasing the volume, but as yet we have seen no appreciable increase. The statistics for the year
1930 are not yet available.
Dallas.—In our opinion, the board's liberalizing ruling of 1929 will undoubtedly
increase the volume of acceptances arising from domestic shipments in that it will
enable banks to accept for a longer period of time than under the former rulings.
Kansas City.—Very little effect in this district, but should create greater total
volume of such bills.
Minneapolis.—There is no great volume of commodities moving domestically
which is affected by the board's ruling of 1929.
New York.—The last sentence of the answer to question 2 also answers question 3.
Philadelphia.—It should result eventually in a substantial increase in the volume of bills issued for this purpose.
Richmond.—No appreciable effect, if any, in this district.
St. Louis.—Increase.
San Francisco.—No change has been noticed in the twelfth district.
As stated elsewhere, documentary drafts provide a desirable form of selfliquidating bank loan and banks are not inclined to use them as a basis of acceptance credits except, in a case of credit strain, to minimize liabilities for borrowed
money.
4. It has been suggested that the increase in acceptances arising from foreign
storage and shipment is to be explained by the curtailment of capital exports
to Central Europe through 1929. What light does the experience in your own
district throw on this problem?
Atlanta.—The suggestion that the increase in acceptances arising from foreign
storage and shipment is to be explained by the curtailment of capital exports to
Central Europe through 1929 seems to us to be theoretically sound, but we have
found no evidence in the Sixth Federal Reserve District which would support the
•explanation suggested.
Boston.—Curtailment of capital exports to central Europe through 1929
probably has had some bearing on the increase in acceptances arising from foreign
storage and shipment, but see also our answer to question No. 2 of questionanire
No. 10. In our opinion the fact that this country offered the cheapest money
market with adequate facilities, is a more important factor than the curtailment
of capital exports through 1929.
Chicago.—From the information we are able to obtain, we are of the opinion
that the lack of capital exports to central Europe since 1929 has been an important
factor in causing the increase of American acceptances against foreign storage
and shipment of goods between foreign countries.
Cleveland.—Our own experience throws no light on this problem.
Dallas.—We have no direct experience, but our observation would tend to
corroborate the explanation given.
Kansas City.—None.
Minneapolis.—Our district has had no experience which would throw light on
the increase in acceptances arising from foreign storage and shipment, as outlined in this question.
New York.—Doubtless if central Europe had larger capital resources the industries of those countries would be less dependent upon foreign financing in
their import and overseas trade but we do not believe that the curtailment
of capital imports to those countries during the year 1929 was very important
in increasing the volume of dollar acceptances in respect of their trade. We have
heard no comments from our accepting bankers that would indicate that such
was the case. In the autumn of 1929 when the open market discount rate for
bankers' bills in London advanced to above 6 per cent considerable amounts
of acceptance credits were permitted to run off in sterling and as they expired
were replaced by dollar credits. Even before the war those countries depended
largely upon London and other foreign centers for the financing of their overseas trade.
Philadelphia.—This is undoubtedly true, but I do not think it had any noticeable effect in this district. The acceptance medium of financing is not used very
extensively; as a matter of fact, its activities are confined practically to two
banks, which are rather conservative in its use.
Richmond.—Our experience in this district does not throw any light on this
problem.
St. Louis.—None.
34718—31—PT 6
11
860
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
San Francisco.—The increase in the twelfth district evidenced a demand for
credit arising in Central Europe.
Due to increased commerce in European countries, a paucity of short-term
credit and inability to float long-term obligations, due to world-credit conditions,
this form of credit has been made adaptable.
Higher bill rates in London afforded a contributing cause for the increase of
American credits.
Acceptances
[In millions of dollars]
Total, Nov .30—
Imports
_
Exports.
.
„.
Domestic
- _- - _
_Warehouse
Dollar exchange.
Foreign storage and shipment...
Total
San Francisco, Nov. 30—
1926
1927
1928
1929
1930
281
260
20
105
21
39
304
375
22
186
31
111
317
448
18
163
32
221
362
622
20
260
75
416
243
421
33
273
56
643
13
8
1
8
11
14
13
9
14
2
1
8
1
14
726 1,029 1,199 1,655 1,569
32
40
45
1926 1927
1928 1929 1930
12
13
1
18
11
10
1
Id
21
33
65
71
5. Would it facilitate the growth of acceptance markets in the various reserve
districts for the reserve banks to establish foreign agencies or branches in foreign
countries?
Atlanta.—It is our opinion that the establishment of foreign agencies or
branches of the Federal Reserve Bank of Atlanta in foreign countries would
not facilitate the growth of acceptance markets in this district. We think that
the possibility of the success of such foreign branches or agencies would be the
greatest in the New York, Boston, and San Francisco districts.
Boston.—Undoubtedly the establishment of foreign agencies of Federal reserve
banks would facilitate, to some extent, the growth of acceptance markets in the
various Federal reserve districts, but there are so many other contingent elements affecting the desirability of establishing such agencies or branches t h a t
the question is open to serious debate.
Chicago.—In our opinion it would not.
Cleveland.—We believe not.
Dallas.—We think not.
Kansas City.—Not in this district.
Minneapolis.—It would not facilitate the growth of an acceptance market in
the ninth Federal reserve district for the reserve bank to establish a foreign
agency or branch.
New York.—As explained in the answer to question No. 1, the establishment
of a discount market must depend upon the existence of a money market in
which discount houses and dealers can constantly borrow substantial amounts
of money at rates low enough to permit them to carry the portfolios of bills
which they must carry pending sale or distribution to investing clients. There
would seem to be no connection between the existence of such money markets
in interior cities in this country or the lack of them and the business which might
be undertaken by branches or agencies of Federal reserve banks established in
foreign countries. Bills drawn on American banks now reach American discount markets through the American branches or agencies of foreign banks and
the head offices of American banks which maintain agencies or branches in foreign countries, and also through the American banking correspondents of foreign
banks which do not maintain branches in this country. The stability of the
American discount market and its willingness to quote forward discount rates
for prime dollar bankers' acceptances to arrive from abroad at very close to the
spot rates for similar bills have been very important factors in establishing the
dollar bill of exchange in foreign markets, so that in every country where export
trade is done in dollars prime dollar bills are bought as freely as sterling, and
with confidence that they may be discounted in this country upon arrival or
later, at the convenience of the holder.
Philadelphia.—Do not believe the establishment of agencies or branches in
foreign countries by Federal reserve banks would facilitate the growth of the
acceptance market in the various districts.
believe the agencies established
NATIONAL. AND FEDERAL RESERVE BANKING SYSTEMS
861
by the large city banks are sufficient at this time to take care of any business
that may originate in this country.
Richmond.—Our experience in this district up to the present throws no light
on this subject, and we are inclined to think it would have no material effect
in this district in any event.
St. Louis.—Not in the eighth district.
San Francisco.—No; but the growth may be increased by member banks
establishing foreign branches.
6. To what degree has the increase in acceptance totals represented a growth
in self-liquidating paper? A substitution for other forms of credit instruments?
A growth in credit which will eventually be funded into longer term obligations?
Atlanta.—(1) To an appreciable degree. (2) To a certain extent. (3) T a
some extent.
Boston.—There has undoubtedly been a large and genuine growth of selfliquidating paper resulting from the increased growth of acceptances.
It is doubtful if acceptances will be commonly substituted for other forms of
credit instruments and while there may have been some shifting of credit from
one class to another, from time to time, owing to rate consideration, it is believed
that no great amount of permanent substitution has resulted. The acceptance
credit has its own particular uses, it being drawn for some particular purpose
such as financing a shipment, or storage of goods either in this country or abroad,
while commercial paper on the other hand is used for general financing purposes.
Of the total volume of bills outstanding, the only part of the acceptance business
that could be financed by commercial paper is that which is of a domestic nature,
this being a very small percentage of a total volume of bills outstanding.
It is doubtful if any of the self-liquidating paper will be funded into the longerterm obligations. This would only apply to those classes of acceptances which
are subjected to abuse by renewals.
Chicago.—With regard to acceptances, covering the domestic shipment and
storage of goods, funds to finance these transactions were formerly provided for
by the use of commercial paper either discounted at the banks or sold in the commercial paper market. The acceptance credits used for these purposes, therefore, are substitution for paper which already existed and which in either case
would be equally self-liquidating. This is also true to some extent in the case
of export bills, where counter credit formerly took the place of acceptance credits,
particularly for shipments of provisions by the meat-packing corporations and
others. A very large proportion of American acceptances now used to finance
foreign trade represents business that was formerly financed by the use of acceptances in the London market and about 30 per cent of the total amount of
acceptances now outstanding represent transactions between and the storage of
goods in foreign countries; therefore a substantial amount of our total acceptances
outstanding represents transactions that were formerly financed outside of the
United States.
With regard to the domestic acceptances, we can find no reason to believe that
any part of this class of business will eventually be funded into longer-term
obligations. However, with regard -to acceptances issued for the shipment
between and storage of goods in foreign countries, which has attained a large
volume, it is probable that if longer-term obligations could be sold for the benefit
of the countries affected, that this class of acceptances would be substantially
reduced.
Cleveland.—Any answer we might make to these questions would not be
predicated upon known facts.
Dallas.—(a) We do not think that the increase in acceptances has represented
any particular growth in self-liquidating paper, as the volume of self-liquidating
paper can only be measured by the origin of the transactions creating it. It is
true, however, that the increase in acceptances has materially decreased the cost
of credit where self-liquidating paper is involved. To some extent, no doubt, the
acceptance facility has in itself increased the possibility for a larger volume of
self-liquidating transactions and has had a bearing on an increase in businessin this country which could not be obtained before. It has also been fortunate
that American banks were permitted to accept during the period of disturbed
financial conditions in foreign countries, because this privilege has greatly
facilitated both the import and export trade of the United States.
(6) Acceptances have been substituted both for commercial paper formerly
sold in the open market, and for paper arising out of over-the-counter loans.
(c) We have no fear of the acceptance facility creating a growth in credit
that will eventually be funded into longer-time obligations as we see small possi~
bility for any capital loans being obtained under the guise of acceptance credit.
862
NATIONAL AND EEDEEAL EESEEVE BANKING SYSTEMS
In the first place, the regulations of the Federal Reserve Board are sufficiently
rigid to prevent that. Accepting banks do not have sufficient latitude in their
accepting transactions to foster extension of capital credit in that way and the
market itself probably could not be induced to absorb acceptances of that
character.
Kansas City.—-Acceptances based upon import and export transactions and
shipments between and storage of goods in foreign countries would seem to represent almost wholly growth in self-liquidating paper. Domestic acceptances, on
the other hand, represent principally substitution for other forms of credit instruments. It would not seem that any considerable amount of the acceptance
totals will eventually be funded into longer-term obligations.
Minneapolis.—The answer to this question can only be given by bankers in
centers originating the bulk of acceptances.
New York.—Dollar acceptance in overseas trade has added practically 100
per cent of its volume to the amount of self-liquidating paper outstanding in
this country. It does not replace any material amount of other forms of commercial dollar obligations. The business was formerly financed abroad, largely
in London, under sterling credits, which, however, are practically as large as
before the war. The growth of business now requires the credit facilities of both
markets.
The domestic warehouse secured credits have supplemented and possibly
replaced to an unknown extent commodity loan paper in this country and the
small amount of domestic shipment acceptances has supplemented and possibly
replaced a nominal amount of unsecured commercial bank loans.
Excepting as commercial and industrial concerns may further relieve themselves
of the necessity for taking bank accommodations in any form as the result of
increasing their capital and working funds through capital issues, we do not
believe that long-time borrowing will eventually or importantly replace acceptance credit, although the volume of so-called commercial paper, i. e., promissory
notes of well-known concerns distributed through the commercial-paper market,
has been largely reduced and replaced by capital issues of the larger and betterknown firms and corporations that formerly borrowed at their banks and through
the commercial-paper market. The nature of the business financed by acceptance credit, i. e., the movement of goods and commodities, with large seasonal
variations in the different trades, is not such as, generally speaking, can be
economically financed by capital funds borrowed for long periods. The acceptance credit helps materially to accommodate the seasonal demands or peaks
in demand for credit.
Philadelphia.—Acceptance totals have increased tremendously the self-liquidating paper. A great many credits financing commodities such as grain, cotton,
etc., were formerly on a straight-loan basis but are now covered by acceptances;
probably the largest percentages of increase, however, is accounted for by foreign
transactions. We have no reason to believe that the increase in the use of acceptances has resulted in a growth of credit which will eventually be funded in longterm obligations.
Richmond.—We are inclined to think that the increase in acceptance totals
has represented an appreciable growth in self-liquidating paper, and to some
extent is a substitute for other forms of credit instruments. We are not inclined
to believe that the increase in acceptance totals represents a growth in credit
which will eventually be funded into longer-term obligations to a material extent,
if any.
St. Louis.—The bulk of the bills accepted by member banks in the eighth
district have resulted in self-liquidating paper. In the majority of instances
they represent substitutions for other forms of credit instruments. We know of
no instances where eventual funding into longer-term obligations was contemplated.
San Francisco.—Acceptances arising out of import and export transactions
represent a highly liquid form of credit.
The growth of domestic storage credits is largely due to a substitution of bank
loans by acceptances. This movement is induced somewhat by increased warehousing facilities, making storage credit more readily obtainable.
Storage credits usually are not as liquid as those arising out of import and
export transactions because the goods are frequently being held pending future
sale. Expediency, however, seems to justify the creation of acceptance credits
against the storage in United States of our major crops, such as cotton, grain,
etc., so that the investment market can be used to carry a part of the burden
which is too heavy for the banks in the producing area. (See questionnaire 10,
-question 7).
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
863
In the case of acceptances arising out of copper in foreign storage and shipment
transactions, it might be said that when the raw material has been converted to
capital uses (power plants, for instance) the original credits are retired by the
sale of long-term bonds.
7. State the experience in your district with various abuses in the use of the
acceptance, i. e., with acceptance renewals, with the drawing of acceptances for
a longer period than the life of the underlying transaction, with the use of the
acceptance for refinancing purposes, with the use of the acceptance for the purpose of extending credit beyond the limitations imposed by section 5200 of the
Revised Statutes, with the use of the acceptance for the purpose of holding goods
in storage for speculative purposes, and with the practice of accepting institutions discounting their own acceptances.
Atlanta.—Some evidence of the abuse of the acceptance in this district has
been found with regard to acceptance renewals, with the drawing of acceptances
for a longer psriod than the life of the underlying transaction and with the use
of acceptances for refinancing purposes. Acceptances have been used to a certain extent for the purpose of extending credit beyond the limitations imposed by
section 5200 of the Revised Statutes, primarily in the financing of cotton. There
has been very little abuse of acceptances drawn for the purpose of holding goods
in storage for speculative purposes. Accepting institutions have discounted
their own acceptances in a very small amount in the aggregate. Our experience
with acceptances has been limited by the comparatively small volume of acceptances originating in this district.
Boston.—During the years when member banks were beginning to do an
acceptance business, we found more or less frequent occasion to inquire regarding
transactions underlying the creation of acceptances but the abuses in the use of
acceptance credits which now come to our attention are comparatively few.
Practically the only abuses which are now noted are in acceptances arising out
of warehouse transactions when the merchandise stored is neither " goods actually
under contract for sale and not yet delivered or paid for" nor "readily marketable
staples" as defined by the Federal Reserve Board. In a very few other instances
we have found that the goods represented by the acceptances were not stored
in an independent warehouse.
When any of the acceptances purchased by us have been found to be ineligible,
we usually suggest to the accepting bank the withdrawal of such bills from the
market.
Chicago.—While we have had some experiences in the past with abuses in the
use of acceptances, these abuses which came to our attention were corrected
at the time and we have not seen any avidence of such abuses during the last six
or seven years. It is our belief that as a result of experiences of the accepting
banks and of the continuous efforts of the Federal reserve banks and of the
American Acceptance Council in educating banks to the proper use of acceptance
credits that the business now, generally speaking, is conducted on a higher
standard than it was 10 or 15 years ago. We find the accepting banks anxious
to comply with the rules and regulations of the Federal Reserve Board and a
willingness on their part to cooperate with us so that the acceptance business can
be conducted on a sound and proper basis.
With regard to the practice of accepting institutions discounting their own
acceptances, this bank has not purchased from accepting banks their own acceptances, although we have indicated to them that we are willing to discount such
acceptances at our rediscount rate. This rate, however, is invariably higher
than the market rate and our buying rate for bills and, therefore, we have not
been called upon to do so.
Cleveland.—Abuses when they occurred as far as member banks in this district
are concerned, in our opinion, were in the main the result of misinterpretation of
the provisions of the Federal reserve act or lack of familiarity with the regulations
and rulings of the Federal Reserve Board governing acceptance financing. We
have seen no recent abuses of the acceptance privilege, and no instances of storing
commodities for speculative purposes under acceptance credits have come to
our attention. Since the inception of acceptance financing, banks have always
discounted some of their own acceptances, but such discounts we believe have
been considered by them as direct-line borrowing of the drawing customer until
the bills are sold.
Dallas.—As far as we have been able to observe, the accepting banks in this
district have been quite conscientious in undertaking this business. There has
been a tendency at times toward an unintentional abuse of the privilege, but on
inquiry we have found that this arose from ignorance of principles of the regulations and of the law. At times during the initital use of the acceptance facility
864
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
some banks had the thought that the bills could be sold to us as soon as created.
The use of acceptances to supplement or evade section 5200 seems to us to be
unimportant, in view of the fact that the acceptor must be secured for that part
of the line that exceeds the legal loan limit; but, at that, we have observed no
tendency along that line. None of the categories mentioned in this inquiry has
been a problem to us.
Kansas City.—Since banks in this district have not availed themselves to any
considerable extent of the privilege of creating acceptances, we have had very
little experience in connection with the abuses enumerated. In the few instances
where acceptances have been created in the district, however, the extension of
credit beyond the limitations imposed by section 5200 of the Revised Statutes
was the principal factor prior to the enactment of the amendments to section
5200 in February, 1927. Since that time this reason for the creation of domestic
storage acceptances has not been evident in the district. There have, however,
been several instances of accepting institutions holding their own acceptances
and some few instances of accepting banks trading bills with other banks with the
object of immediately selling such bills to the Federal reserve bank and taking
advantage of the preferential rate on open-market bills.
Minneapolis.—The volume of acceptances originating in this district is very
small, and such abuses as outlined in this question have not been important.
New York.—The practices referred to in this question are practically nonexistant in this district, except that acceptors frequently discount their own
acceptances for their customers that are not in touch with discount houses. It
is an accommodation to the customers and a method of getting the bills into
market and can hardly be called an abuse. At times accepting institutions may
withhold their paper temporarily from the market for either of two reasons:
<1) That they are so amply supplied with funds themselves that they would
nave no use for the proceeds of the resale of their bills; (2) that for one reason or
another it is not desirable to have added amounts of their acceptances in the
market at a given time. This may depend upon the state of the market itself or
the amount of the acceptance bank's outstanding liabilities. It sometimes happens that outstadning letters of credit which frequently exceed the legal limit of
acceptance liability of a given institution will be availed of by drawers to an
extent which, if the bills were permitted by the acceptor to become outstanding
would put their acceptance liability in excess of their legal limit. In such case
they must either retire outstanding bills or prevent new bills from becoming
outstanding.
As to giving acceptance credit for the purpose of extending credit beyond the
limitations imposed by section 5200 of the Revised Statutes, that is a statute
limiting the amount of indebtedness to a natonal bank for borrowed money. A
line of acceptance credit in addition to cash advances is not a violation unless the
bills are held in portfolio by the acceptor and the amount so held and cash
advances together exceed the limitations contained in section 5200.
Philadelphia.—We do not believe this facility has been abused to any great
extent in this district. In one or two instances we found that small banks not
familiar with the regulations have drawn acceptances for a longer period than the
life of the underlying transaction, and for the purpose of extending credit beyond
the limitations imposed by section 5200, but, generally, the banks in this district
abide by the regulations. Some of the banks carry their own acceptances in their
portfolios but only for the purpose of awiating a favorable turn in the market.
These loans, of course, are subject to section 5200 of the national bank act.
Richmond.—In the early days of the Federal reserve system a number of
instances came to our attention in which the various abuses above described
occurred. This, however, was due to inexperience and lack of understanding
of the principles which should govern the creation of acceptances. Before
section 5200 was amended there were undoubtedly a number of cases in which
the acceptance form of credit was used to grant a larger volume to individual
borrowers than could be made by direct loans. Since the provisions of section
5200 have been liberalized, this abuse has greatly lessened, if it has not entirely
disappeared, and other abuses rarely come to our attention. It should be remembered, however, that the total volume of acceptances made by banks in this
district is extremely small.
St. Louis.—The abuses that did come to our attention, but not recently, were
inquiries regarding the creating of acceptances for the purpose of extending
credit beyond the limitations imposed by section 5200 of United States Revised
Statutes, and the practice of accepting institutions wanting to discount their own
acceptances.
San Francisco.—Acceptance renewals and unnecessarily long usance are not
prevalent in the twelfth district. Section 5200 has been so liberalized as no
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
865
longer to make necessary the carrying of excess lines under acceptance credits to
avoid loan limitations. The only tendency to abuse arises out of the use of the
domestic storage acceptance to take care of a class of credit which, from the
standpoint of good banking, is in proper form when carried as a loan.
In this connection, it would seem better to confine the use of the domestic
storage acceptance credit to that of financing the major staple crops stored in the
United States (cotton, grain, etc.), which are in such volume as to make financing
through the open investment market desirable so as to lift the burden from the
comparatively smaller financial institutions situated in the sections wherein
those crops are produced.
8. To what extent have you seen evidence of multiple acceptances arising out
of successive transfers of ownership of the same goods held in warehouse or in
course of shipment?
Atlanta.—We have not seen many instances of multiple acceptances arising ou
of successive transfers of ownership of the same goods held in warehouse or in
course of shipment.
Boston.—From the volume of bills which this bank has purchased, we have
not seen any evidence of multiple acceptances arising out of successive transfers
of ownership of the same goods held in warehouse, or in course of shipment.
Chicago.—We have seen no evidences of transactions of this kind.
Cleveland.—We have seen no evidence of such practice.
Dallas.—None.
Kansas City.—None.
Minneapolis.—No evidence of multiple acceptances in this district has come to
our attention.
New York.—We have seen no evidence of multiple acceptances arising out of
successive transfers of ownership of the same goods held in warehouse or in
course of shipment. Our banks generally inform us that they are very careful to
avoid such positions.
Philadelphia.—None.
Richmond.—No such cases have come to our attention in this district.
St. Louis.—None.
San Francisco.—Not in evidence in the twelfth district.
9. To what extent does an investment demand for acceptances exist in your
district? To follow the investment demand on the part of member banks
append statistics for as frequent intervals as possible, beginning January, 1922,
of the acceptance liabilities of the member banks of your district, together with
the amount of their own acceptances and of the acceptances of other banks held
in portfolio.
Atlanta.—An investment demand for acceptances exists in this district to a
very small extent.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Acceptance liabilities of all member banks, sixth Federal reserve district
31, 1929
$30, 732, 000
31, 1928
23, 946, 000
31, 1927
18, 725, 000
31, 1926
19, 529, 000
31, 1925
, 17, 915, 000
31, 1924
17, 161, 000
31, 1923
18, 852, 000
31, 1922
14, 132, 000
31, 1921
10, 703, 000
Amount of own acceptances and acceptances of other banks held
in portfolio of all
member banks, sixth Federal reserve district2
Dec. 31, 1930
$3, 011, 000
Sept. 24, 1930
2, 900, 000
June 30, 1930
2, 709, 000
Mar. 27, 1930
4, 029, 000
Dec. 31, 1929
4, 177, 000
Oct. 4, 1929
3, 656, 000
June 29, 1929
5, 667, 000
1
Includes acceptances executed for customers, and acceptances executed by other banks for account of
the reporting banks. Contingent liability on account of indorsement of acceptances of other banks sold
is 2not included.
Includes acceptances owned by member banks payable in the United States and in foreign countries.
A detailed classification of loans and investments of member banks was not made by Federal reserve districts prior to June 30,1929.
866
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Boston.—A real investment demand for acceptances exists in this district only
during those periods when the open-market rates are sufficiently high to attract
banks and other investors from a yield standpoint, or when money is in abundance and yields low to make the acceptance attractive from the standpoint of
safety and liquidity. There have been times when trustees, insurance companies,
and savings banks have bought acceptances.
Acceptance liabilities of member banks in district No. 1 together with the amount
of their own acceptances and of the acceptances of other banks held in portfolio
[000 omitted]
O w n acAcceptceptances
ance
held in
liability
portfolio
Date
1922
Acceptances of
other
banks
held in
portfolio
Date
O w n acAcceptceptances
ance
h e l d in
liability
portfolio
Acceptances of
other
banks
h e l d in
portfolio
$40,626
39,233
53, 705
$4,320
1,092
1,949
1927
$7, 736
M a r . 23
6,430
J u n e 30
7,343 1 Oct. 10.
D e c . 31
$51, 751
48,096
57,035
89,807
$2,582
2,614
2,243
4,364
$2,709
966
785
678
72,459
50,796
37,550
44,000
1,707
1,484
857
906
5,866 '
1928
5,744
F e b . 28
2, 350 J u n e 30
Oct. 3
4, 779
Dec. 31..
87, 614
82, 725
74, 788
99,901
2,892
1,833
851
3,143
729
504
982
690
53, 323
37, 665
36,847
58,816
648
1,429
2,783
2,787
1929
5,161
M a r . 27
9,799
11,840
J u n e 29
16, 758 ! Oct. 4
D e c . 31„_
81,973
78,019
82, 539
108,894
1,079
3,852
988
3,949
15, 323
7,104
2, 310>
36, 913
1925
Apr. 6
June30„_
Sept. 2 8 „ .
D e c . 31
60,132
40, 408
36, 827
47, 715
1,659
1,182
1,477
2, 785
8,499 1
1930
4,767 1 M a r . 27
J u n e 30
2,168
Sept. 24
4, 766
D e c . 31
100, 778
90, 341
76, 953
90, 243
613
1,775
947
1,797
23, 513
342"
22,981
74, 395
1926
A p r . 12_
J u n e 30
_
D e c . 31
56,193
46, Oil
45, 496
2,217
387
1,777
2. 526
1,036
1, 242
M a r . 10
J u n e 30
D e c . 29
_
1923
Apr. 3
J u n e 30
S e p t . 14
D e c . 31
1924
M a r . 31
J u n e 30
O c t . 10D e c . 31
.
Chicago.—Dealers' sales of acceptances in the seventh district in 1930 were
$178,158,000, and purchases amounted to $219,815,000.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
867
Total holdings of bankers1 acceptances of accepting member banks, seventh Federal
reserve district, showing holdings of bills of other banks and of own bills, also
liability for own acceptances outstanding, and for indorsed bills
[In thousands of dollars]
Total
Bills of
holdings
other
of b a n k e r s '
b a n k s held
acceptances
O w n bills
held
Liability
for o w n
bills o u t standing
Liability
for o u t standings
of other
b a n k s sold
w i t h indorsement
b y accepting b a n k s
of t h e
district
1922
Jan. 1
M a r . 10
J u n e 30
D e c . 29
_„
926
1,982
357
352
37,035
30,876
40,765
33,921
4,532
29,149
9,835
1923
J a n . 31
F e b . 28
M a r . 31.
A p r . 30.
M a y 31
J u n e 30J u l y 31
A u g . 31
Sept. 29
Oct. 3 1 N o v . 30.
D e c . 31
*
__
._
--
-.
5,563
4,442
4,038
1,715
. 2,631
848
1,544
1,940
1,807
2,854
3,397
3,243
2,478
1,741
1,458
1,408
2,416
590
1,369
789
987
2,093
2,725
2,479
3,085
2,701
2,580
307
215
258
175
1,151
820
761
672
764
37,184
38,266
35,697
25,589
25,425
21,989
24,572
28,901
26,885
24,602
30,762
33,637
1,345
3,210
3,526
4,067
4,456
6,910
11,856
19,506
20,038
15,524
11,948
13,264
705
1,335
2,040
1,943
433
3,257
4,435
6,431
7,233
2,852
1,446
1,899
640
1,875
1,486
2,124
4,023
3,653
7,421
13,075
12,805
12,672
10,502
11,365
35,050
32,364
36,001
34,141
31,172
33,493
44.442
50, 796
48, 718
43,619
45,002
46,247
11,996
11,890
11,650
6,502
10,282
7,535
5,026
5,991
5,068
1,180
2,596
1,162
2,442
2,899
2,542
646
3,862
2,374
2,441
2,169
579
571
1,072
432
9,554
8,991
9,108
5,856
6,420
5,161
2,585
3,822
4,489
609
1,524
730
48,382
48.443
47,072
41, 812
33, 752
27,156
24,205
23,717
20, 996
21,503
22,413
21,196
1,657
1,461
2,349
2,409
1,856
510
5,532
287
1,010
3,418
3,832
3,139
232
444
1,125
1,934
1,656
186
4,225
86
305
1,661
1,468
2,273
1,425
1,017
1,224
475
200
324
1,307
201
705
1,757 j
2,364
866 I
21,696
23,912
24,564
29,899
26,869
23, 998
22, 713
18, 767
21,449
24,810
25,419
27,369
9,145
5,428
7,908
1924
J a n . 31
F e b . 29
M a r . 31
A p r . 30
M a y 31
J u n e 30
J u l y 31
A u g . 30_
S e p t . 30
Oct 31
N o v . 29
D e c . 31
...
.
-
_
_
—
—
. '__ _
_
2,278
945
7,622
1925
J a n . 31
F e b . 28
Mar. 31.
A p r . 30
M a y 30
J u n e 30
J u l y 31
A u g 31
Sept. 30
Oct. 31
N o v 30
D e c . 31
—
_
-
- _
.--
1926
J a n . 30
F e b . 27
M a r . 31
A p r . 30
M a y 31
J u n e 30
J u l y 31
A u g . 31
Sept. 30
Oct. 30 _ .
N o v . 30 .
Dec. 31-
---_-~ .
-.
8,197
5,999
8,085
2,413
9,252
868
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Total holdings of bankers' acceptances of accepting member banks, seventh Federal
reserve district, showing holdings of bills of other banks and of own bills, also
liability for own acceptances outstanding, and for indorsed bills—Continued
[In thousands of dollars]
Total
holdings
Bills of
of b a n k e r s '
other
acceptb a n k s held
ances
O w n bills
held
6,157
6,738
2,163
3,355
4,774
3,548
3,783
10,401
7,343
7,350
5,125
5,082
3,334
2,293
584
2,258
248
750
483
1,081
1,607
4,314
3,451
3, 291
2,823
4,445
1,579
1,097
4,526
2,798
3,300
9,320
5,736
3,036
1,674
1,791
25,167
26, 541
27,550
27,457
24,417
23,811
25,374
34,559
33,955
33, 843
34,105
37,784
5,609
4,936
4,419
5,451
6,694
7,866
1,789
1,466
3,079
3,615
3,975
5,222
3,588
2,381
2,353
2,734
2,409
1,910
86
201
307
342
264
126
2,021
2,555
2,066
2,717
4,285
5,956
1,703
1,265
2,772
3,273
3,711
5,096
35,584
36,963
37,215
35,557
36,723
38,114
34,778
33,651
31, 855
35,711
39,210
52,269
4,950
4,589
12,620
14, 925
10,449
4,153
5,129
4,246
1,955
12,341
13,909
11,805
527
673
11,777
11,863
7,592
438
326
855
839
10,181
10,093
8,865
4,423
3,916
843
3,062
2,857
3,715
4,803
3,391
1,116
2,160
3,816
2,940
54,347
50,947
52,458
51,647
49,165
48,657
61,235
71,911
78,721
86,889
95,044
99,515
10,785
17, 652
21, 951
6,908
6,724
7,129
14,809
16,380
13,746
31,498
39,917
24,452
2,541
1,890
4,215
2,848
951
1,608
7,293
8,425
6,116
21, 966
28,007
18,157
8,244
15,762
17, 736
4,060
5,773
5,521
7,516
7,955
7,630
9,532
11,910
6,295
100,894
100, 257
93,453
83,117
80,130
74,640
84,145
89,897
89,952
96,614
94,180
86,771
Liability
for own
bills outstanding
Liability
for o u t standings
of o t h e r
b a n k s sold
w i t h indorsement
b y accepting b a n k s
of t h e
district
1927
J a n . 31
F e b . 28
.M a r . 31
A p r . 30
-_
M a y 31
J u n e 30
July30
A u g . 31 ._
Sept. 30__
O c t . 31
N o v . 30
D e c . 31
_
-
._
-
_
-
8,216
12,696
1928
J a n . 31
F e b . 29
M a r . 31
A p r . 30
M a y 31
J u n e 30 __
J u l y 31
A u g . 31
S e p t . 29
Oct. 31
N o v . 30
D e c . 31
.._
_
_
__
_--
11,256
4,316
10,390
1929
J a n . 31
F e b . 28__M a r . 30
A p r . 30 -_
M a y 31
J u n e 29
July31
A u g . 31 . _.
S e p t . 30 _ .
Oct. 31 _
N o v . 30
D e c . 31
.-
_
..
-
_
.__
....
_ . . ._
__.
_
3,779
3,289
39,814
1930
J a n . 31_
F e b . 28
Mar. 3 1 . .
A p r . 30
M a y 31
J u n e 30
July31
A u g . 30
S e p t . 30_
Oct. 31
N o v . 29
Dec. 3 1 . . .
_
i Estimated.
__
_
-.
_
_
42,728
60,382
1
63,000
1
75,000
869
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
Cleveland.—To an extremely limited extent.
Date
1930
Dec. 31
Sept. 24
June 30
Mar. 27_
1929
Dec. 31
Oct. 4
June 29
Mar. 27
1928
Dec. 31
Oct. 3
June 30
Feb. 28
1927
Dec. 31
Oct. 10
June 30
Mar. 23
1926
Dec. 31
June 20
Apr. 12.
Acceptance liability of
fourth
district
member
banks
Acceptances of
other banks
owned by
Acceptances pur- reporting
chased or bank (not
discounted available
on State
reports before 1926)
Acceptance liability of
fourth
district
member
banks
Date
Acceptances of
other banks
owned by
Acceptances pur- reporting
chased or bank (not
discounted available
on State
reports before 1926)
$27,508,000
21,876,000
21,521,000
29,088,000
$3, 389,000
3,509,000
1,262,000
1,292,000
$7,883,000
1,265,000
49,000
10,884,000 |
1925
Dec. 31
Sept. 28
June 30.
Apr. 6
7,707,000
8,165,000
- 10,262,000
10,024,000
1,138,000
1. 550.000
1,830,000
1,114,000
393,000
556,000
3, 588,000
2,037,000
26,961,000
23,804,000
13, 216,000
13, 536,000
1,896,000
2,183,000
870,000
2,035,000
63,000
7,000
2,000
2,061,000 !
1924
Dec. 31
Oct. 10.June 3 0 Mar. 31
8, 282, 000
6, 683,000
6,470,000
10, 264,000
1, 659,000
2,960,000
2, 613,000
3,996,000
411,000
606,000
2, 786,000
1,840,000
- 15,099,000
13, 221,000
12,121,000
16, 295,000
1,294,000
2,031,000
750,000
970,000
50,000
7,000
302,000
859,000
1923
Dec. 31
Sept. 14
June 30
1
Apr. 3.
8, 502,000
8,830,000
8, 625,000
5,938,000
2,940,000
1, 637,000
1,544,000
1,095,000
3,839,000
14, 801,000
10,961,000
9,104,000
10,320,000
1,627,000
1, 443,000
1,899,000
1,806,000
4,071,000
3,098,000
4,610,000
3,967,000
1922
Dec. 29
June 30
Mar. 10
5,905,000
6,707,000
8,122,000
1, 719,000
1,158,000
1,826,000
867,000
421,000
34,000
9,365,000
9, 656,000
10,806.000
664,000
1, 542,000
1, 315,000
110,000
1,399,000
572,000
141,000
Dallas.—There has been a steady and gradual growth in the demand for
acceptances in this district due largely to the recommendation of the Federal
Reserve Bank of Dallas for this form of instrument for the investment of surplus
funds or to create secondary reserves. In 1929 member banks in this district
purchased through the Federal Reserve Bank of Dallas, in addition to their purchases outside, acceptances amounting to $94,000,000. In 1930, due to low rates,
and the decline of surplus funds for investment, the demand in this district was
negligible. It should be borne in mind that the demand for acceptances on the
part of purchasers in this district has far exceeded the amount of acceptances of
the member banks in this district outstanding. Bills purchased by banks in
this district are not necessarily confined to the bills accepted by banks of this
district. We are gradually getting over to our accepting banks the wisdom of
selling their own bills in the open market and as they have surplus funds to purchase the bills of other banks.
Acceptances executed for customers by member banks in the eleventh Federal
district as of each call for the years 1922 to 1930, inclusive
[Amount in thousands of dollars]
Mar. 10, 1922
June 30, 1922
Dec. 29, 1922
Apr. 3, 1923
June 30, 1923
Sept. 14, 1923
Dec. 31, 1923
Mar. 31, 1924
June 30, 1924
Oct. 10, 1924
Dec. 31, 1924
Apr. 6, 1925
June 30, 1925
Sept. 28, 1925
Dec. 31, 1925
Apr. 12, 1926
June 30, 1926
1, 526
1, 048
3, 569
1, 915
1, 214
1, 847
3, 547
732
1, 073
2, 118
4, 062
1, 622
326
2, 044
2, 988
1, 708
1, 338
Dec. 30, 1926_
Mar. 23, 1927_
June 30, 1927_
Oct. 10, 1927__
Dec. 31, 1927 _
Feb. 28, 1928..
June 30, 1928.
Oct. 3, 1928...
Dec. 31, 1928Mar. 27, 1929June 29, 1929Oct. 4, 1929—
Dec. 31, 1929Mar. 27, 1930June 30, 1930Sept. 24, 1930.
5,354
2,832
2,480
6,121
6, 105
4,650
3,278
5,826
6,825
4,722
4,544
7,376
11, 202
5,042
2,348
6,747
870
N"ATIOKAL AND FEDERAL RESERVE BANKING SYSTEMS
Accepting banks' own acceptances carried in own portfolio as of June SO each year,
1922 to 1928
[Amount in thousands of dollars!
710
383
312
1922.
19231924_
609
737
1,970
1925.
1927,
1928.
NOTE.—These are partialfigures,representing holdings of national banks in Texas. Figures for State
member banks not available.
Figures for 1926, 1929, and 1930 are not available.
Acceptances of other banks discounted by national banks in Texas as of June SO
each year, 1922 to 19S0, inclusive
[Amount in thousands of dollars]
5, 567
1922
1, 792 1927
12, 261
1923
474 1928
14, 386
1924
1, 608 1929
3, 930
1925
2, 986 1930
1926
1, 827
NOTE.—These are the only figures available on the volume of acceptances of
''other banks" held in the portfolios of member banks in the Dallas district
during the period from 1922 to date.
Kansas City.—There is practically no investment demand for acceptances in
this district and the amount of acceptance liability of member banks is very
small, as shown by the accompanying schedule.
(a) The following statistics, showing acceptance liabilities of all member
banks in the tenth Federal reserve district, are as shown in the Federal Reserve
Board's abstracts of condition reports of member banks for each call date from
March 10, 1922, to September 24, 1930:
Date of call
Mar. 10..
June 30
Dec. 29-__
Apr. 3 . . .
June 30
Sept. 14
Dec. 31
Mar. 3 1 June30__
Oct. 10
Dec. 31
1922
1923
$1,186,000
356,000
757,000
1927
1928
233, 000
238,000
74,000
1,204,000
Feb. 28_
June 30
Oct. 3
Dec. 31
707,000
386,000
50, 000
64,000
1926
Acceptances exeAcceptcuted
byances exe- other banks
cuted for for account
customers of reporting banks
Date of call
Mar. 2 3 June 30 __
Oct. 10
Dec. 31.
1924
1925
Apr. 6-._
June 30. __
Sept. 28
Dec. 31.
Apr. 12..
June 30.
Dec. 31
Acceptances exeAcceptcuted
byances exe- other banks
cuted for for account
customers of reporting banks
Mar. 27_.
June 29
Oct. 10
Dec. 31.
119,000
11,000
36,000
128,000
$1,000
76,000
8,000
164,000
2,666
Mar. 27..
June 30 _
Sept. 24..
_
1929
1930
$198,000
34,000
488,000
772, 000
$2,000
343,000
397, 000
425,000
267,000
13,000
83,000
67,000
1,678,000
793,000
1,000
5,000
2,000
5,000
548,000
26,000
20,000
1,000
(6) We have no record of the amounts of member banks' own acceptances held
in their portfolios. Such acceptances are or should be classified as loans and
discounts in all published reports on condition, and we receive no other reports
from member banks in which a classification of acceptances is shown.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
871
(c) The following statistics of acceptances of other banks held in the portfolios of member banks in this district are taken from the Federal Reserve Board's
abstracts of condition reports for report dates from June 29, 1929, to September
24, 1930, inclusive. Prior to June 29, 1929, the abstracts of condition reports
do not include separate figures on acceptances held, and because of the small
volume of acceptances held by member banks in this district we assume that the
figures for the dates given below will serve the purposes of the committee. If it
is desired, we can supply this information for other call reports date back to March
10, 1922, by tabulating the data from individual reports of condition in our files.
D a t e of call
Accept
ances p a y able in
United
States
Bills, acceptances,
etc., p a y able i n
foreign
countries
D a t e of call
Acceptances p a y able in
United
States
Bills, acceptances,
etc., p a y able i n
foreign
countries
1930
1929
$2,107,000
1,253,000
608,000
J u n e 29
O c t . 10
N o v . 31
$144,000 ! M a r . 27
400,000
June 30„
S e p t . 24
364,000
$1,667,000
1,208,000
1,215,000
$126,000
13,000
34,000
Minneapolis.—Usually the investment demand for acceptances in this district
is very small on account of the low yield of acceptances. Occasionally in times
of high-money rates, the yield on acceptances rises to a satisfactory figure, and
a few banks in this district buy acceptances at such times.
Acceptance liabilities of member banks in the ninth Federal reserve district, amount
of own acceptances and of the acceptances of other banks held in portfolio
[Data from abstracts of call reports and annual reports of the Comptroller of the Currency!
Liability
on accept- O w n acances exe- ceptances
c u t e d for
held
customers
D e c . 31,1921
M a r . 10, 1922
J u n e 30,1922
D e c . 29,1922. .
A p r . 3, 1923
J u n e 30, 1923
S e p t . 14, 1923
D e c . 31, 1923
M a r . 31,1924
J u n e 30, 1924
O c t . 10,1924
D e c . 31,1924
A p r . 6, 1925
J u n e 30,1925
S e p t . 28, 1925
D e c . 31,1925
A p r . 12, 1926
$2,867,000
2, 885,000
2, 765,000 i $268,000
2,789,000
3,931,000
2, 886,000
i 359,666
3,124,000
6, 250,000
4, 788,000
2, 753/000 11,163,000
2, 502, 000
3,131,000
1,082, 000
2 229,000 1 1,049,000
1,127,000
2, 675,000
2,362,000
Liability
on accept- O w n ac- O t h e r acances exe- ceptances ceptances
cuted for
held
held
customers
O t h e r acceptances
held
i $765,000
i 272,000
i 486, 000
* 507.000
J u n e 30, 1926
D e c . 31,1926
M a r . 23, 1927
J u n e 30, 1927
Oct. 10, 1927
D e c . 31, 1927
1 F e b . 28,1928
J u n e 30,1928
Oct. 3, 1928
D e c . 31, 1928
M a r . 27, 1929
J u n e 29, 1929
Oct. 4, 1929
D e c . 31, 1929
M a r . 27, 1930
J u n e 30, 1930
Sept. 24,1930
$593,000
4,108,000
769, 000
744,000
818,000
862,000
1,008,000
2. 200,000
3,008,000
6,787,000
2, 236,000
1, 267,000
9,423,000
13,265,000
6, 784,000
414, 000
144, 000
(3)
i $226,000
» 173,000
i 110,000
i 258,000
1
140,000
1, 585,000
8, 885,000
4,525,000
1.075,000
901,000
676,000
2,132,000
586,000
851,000
i National banks only in Minnesota, North Dakota, South Dakota, and Montana.
' Amount is smaller than amount of own acceptances reported held by national banks only. Discrepancy can not be explained from our records.
* No report.
' Not segregated from other loans after June 30,1928.
New York.—Following are schedules, covering the period from January, 1925,
to December 31, 1930, back of which data are not available, showing as to member banks of the New York Federal reserve district monthly figures of their own
acceptances outstanding, their own acceptances held in portfolio, and acceptances of other banks held in portfolio; also the relative figures over the same period
for all accepting banks and bankers, not member banks alone, in the United
States. There is also an accompanying diagram showing, for the years 1927 to
1930, inclusive, the relative volume of bills held by all Federal reserve banks
for themselves and for account of foreign correspondents, and by all other holders.
872
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Statement showing acceptances outstanding of member banks in the New York
Federal Reserve District, also own acceptances held, and holdings of acceptances
of other banks January, 1925, to December 31, 1930
[ I n t h o u s a n d s of dollars]
Date
AcceptO w n acceptances, O w n ac- ances of
ceptances I o t h e r
outstandheld
banks
ing
held
Date
AcceptO w n acceptances! O w n ac- ances of
ceptances!
other
outstand-j
held
banks
ing
held
1925
January
F e b r u a r y . -.
March
April
May
June
July
__.
August
September..
October
November..
December...
347,900
361,355
356,476
346,799
318,032
323,603
271,432
255,691
288,190
329,921
325,071
314,394
55,125
47,508
70, 755
44,931
42,393
36,258
24,136
23,367
14,962
22,327
21,381
22,890
76,130
50,064
40,813
85,299
41,640
27,540
33,110
23,714
25,898
25,672
20,508
24,026
1928
January
February
March
April
May
June
July
August
September-..
October
November...
December
541,650
537,371
558,917
565,361
545,971
528,278
512,547
489,431
522,098
591,363
629,168
667,684
26,112
22,216
25,772
13,706
9,335
7,594
7,530
9,209
13,048
9,005
8,775
8,822
12,959
15,202
18,215
8,615
14,252
20,445
20,092
12,119
8,739
8,531
8,149
10,027
1926
January
February...
March
April
May
June
July..
August
September..
October
November. December—.
380,866
377,504
366,317
358,454
349,441
317,190
299,007
281,434
301,952
337,195
354,685
375,732
41,623
49,734
54,899
45, 256
33,585
13,195
9,129
15,919
8,563
9,402
10,082
15,046
22,248
18,711
23,487
46,609
18,412
11,850
3,533
8,404
7,558
8,330
10,611
13,782
1929
January
February
March
April
May
June
July
August
September-..
October
November...
December
658,345
634,922
599,427
579,532
586,900
595,474
600,131
620,343
659,816
832,922
880,854
920,301
8,438
11,906
8,157
12,745
7,659
15,608
7,880
15,987
16,269
16,618
47,418
39,416
24,457
15, 545
12,903
4,953
12, 572
8,899
11,574
12,045
14,820
23,282
77,458
55,411
1927
January
February.-.
March
April
May
June
__.
July
August
September,.
October
November..
December...
377,901
394,407
406,388
415,366
399, 572
386,437
389,045
388,606
436,302
485,503
526, 268
564, 553
15,894
18,319
35,144
15,184
20,923
10,525
31,822
49,523
26, 522
32,309
29,210
37,978
12,282
18,421
14,299
19,661
26,519
27,828
15,210
20,664
23,400
23,670
37,419
14,742
1930
January
February
March
April
May
June
JulyAugust.
September...
October
November...
December
902, 554
855,080
804,383
716,369
710,733
672,633
703,940
709,452
729,720
816,736
858,103
867,527
45,876
36,185
39,079
31,673
38,754
41,752
35,430
61,028
91,969
131,425
33,612
51,012
104,783
52,028
43,129
54, 421
58,421
89,543
128,674
85,641
112,724
114,034
178,978
134, 434
All banks and bankers in the United States
O w n accept- A c c e p t a n c e s of
T o t a l b a n k e r s ' ances held b y o t h e r b a n k s in
a c c e p t a n c e s a c c e p t i n g banks] t h e portfolio
outstanding
in t h e i r o w n
of a c c e p t i n g
portfolio
banks
1925
January.
February
March
_
April
May
.._
June
July—
August
September
October
November
December
__
—
_._
$834,824,681
808,359,126
800,137,196
757,073,786
680,345,502
607,941, 566
569,386,316
555,166,837
607,025,151
674,167,813
689,767,871
773,735,592
$91,172,095
88,223,170
110,622,378
67, 261,667
75, 509,443
52,732, 682
46, 607,962
43,172,031
34,416,724
41, 543,161
38,144, 830
38,034,905
$131,092,926
97, 528, 544
82,372, 332
118,958,916
79,140, 527
71, 872, 654
69,730, 257
50,367,291
54, 461,296
62,099,692
46,892, 361
54, 484,449
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
873
All banks and bankers in the United States—Continued
Own accept- Acceptances of
Total bankers' ances held by other banks in
acceptances lacceptingjbanks the portfolio
outstanding
in their own
of accepting
portfolio
banks
1926
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March—
April
May
June
July
August..
September—
October.November
December
,
__.
_
_-.
1927
_.
__.
_
_
$788,253,933 |
767,127,116
745,659, 632
720,611,138
685,333,098
621,948,949
600,486,807
582,634,951
614,151,287
681, 647,409
726, 394, 811
755,360, 281
$61,318,071
69,979,173
73,555,866
58,973,822
46,655,322
26,216,726
25,288,289
34,953,074
24, 503,242
23,965,856
25,528,152
34,848,267
$57, 637,999
57,601,421
58,547,603
78,170,360
60,734,485
40,599,930
32,342,234
28,690,579
23,131,308
32, 248,416
38,915,932
42,159,103
773,604,424
785,487,908
809,445,721
810,965, 525
774, 719,885
751, 270,173
741,258,404
782, 055,029
863,823,006
975,166,824
1,02Q, 490,434
1,080,580, 565
30,592,023
73,004,139
58,650,864
39,821,602
46,236,768
31,753,170
54,365,943
82,296,567
57,189,759
61, 537,992
49,737,324
58,176,967
24,394,597
93,480,780
45,833,126
47,154,424
48,324,483
57,193,594
32, 045,520
50, 592,824
46,402,290
56, 628,524
67,176,303
46,821,513
1,057,980,196
1,056,389,782
1,085,468, 742
1,070,712,002
1,040,735,176
1,026,165, 295
977, 863,926
952,051,109
1,004,166,180
1,122,746, 889
1, 200,355, 724
1,284,485,780
48,672,180
45,100,848
48,101,189
29, 291,256
29,289,160
27,159,115
22, 965,929
26, 254,119
29, 210,355
21,847,117
25,135,642
27,083,964
31,295,763
44,988,562
50,957,046
27,106,226
28,893,770
44,130,006
29, 675,683
24, 077,208
23,976,697
21,864,418
25,209,037
48,758,017
1,279,271,163
1,228,027,796
1,204,979, 653
1,110,841,482
1,107,168, 852
1,113,049, 246
1,126,698,805
1,200, 536,146
1,272, 270, 545
1,540,738,123
1,657,899,924
1,732,436,388
24,568,176
34,171,066
28,896,155
31,614,214
26,786,066
36,378,210
24,185,409
33, 724,919
32,127,839
31,109, 525
70,442,230
58, 544,964
54,678,082
54,878,885
88, 534,049
63, 515,215
60,609,944
47,906,237
65,847,313
48, 652,880
38, 639, 665
98,303,399
174,021,275
132, 515,645
1,692, 793, 891
1, 623, 899, 218
1, 539,285,798
1,413,717,278
1,382,206,855
1,304,831, 222
1, 349,695,306
1,339, 383, 765
1,366, 734,157
1,508,243,726
1,571,417,674
1, 555,966,201
63,129.829
70, 736, 889
71,932, 654
54,746,568
62,629,690
63,735,394
62, 513,282
95,127,103
130,903,798
172,410, 232
180, 206,994
89, 645,812
157,336, 552
112,192,937
94, 729, 909
102, 780,328
102,980,825
141,375,378
216,129,315
172,209,599
185,773,538
211,762, 830
312,795,432
281,806,462
1928
January
February
March
April
May
June
_
July
August—September
October
November
December
_
_
_
_
__.
_
_
1929
January.—
February
March
_
April
May
_
June
July...
August
September
October
November
December..-
_
_..
_
_
—
_
_-.
1930
January
February
March
April
May
June
July
August
September
October
November...
December __
_._
—
_
_
___
_
_
__.
_..
874
NATIONAL AND FEDERAL. RESERVE BANKING SYSTEMS
From these statistics and diagram it will be seen that the investment demand
for bills is not confined to member banks in this and other districts, important as
their holdings are at times. The demand of other classes of investors is vastly
superior; these include foreign banks, savings banks, insurance companies, corporations, institutions, and individuals, as well as accepting houses and private
bankers. The rates at which bills are offered in the market determine ta a considerable extent the direction and nature of the investment demand. When rates
are high considerable amounts of bills are sold to individuals, corporations, and
particularly, small interor banks. When the rates are at a low level that demand decreases and the purchases of larger banking institutions, who at such
times are apt to have increased amounts of cash not otherwise employed, become
more important. But the major portion of all the bills sold by dealers in the New
MILLIONS OF DOLLARS
250Q—
2,000
1.500
1,000
500
Volume of bankers' acceptances outstanding showing proportion held by Federal reserve banks for own
account, proportion held for foreign correspondents of Federal reserve banks, and the proportion
held by others, 1927-1930
York market is to banking institutions. Over a number of years their sales to
local commercial banks and bankers have varied from 50 to 75 per cent of their
total sales. These percentages include not only purchases made for their own
account but also purchases for their customers. The bank demand for acceptances has recently been increased by the gradual absorption of other forms of short
eligible paper. A diminished volume of short Treasury paper, which may be
expected eventually, and a continuation of the tendency of other forms of eligible
paper to diminish, would tend to make bank demand for bankers bills more constant.
Philadelphia.—Outside of a few accepting banks in this district, there is practically no demand for bills of this character as an investment, except for a shortperiod when the rates were unusually attractive.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
875
Member banks in third district
Date
Dec.
June
Dec.
June
Dec.
June
Dec.
June
Dec.
June
31,1921
30, 1922
29,1922.___
30,1923
31,1923
30,1924....
31,1924
30, 1925
31,1925
30,1926...
Acceptance
liability
O w n acceptances
Acceptances of
other
banks
Date
Acceptance Own acliability
ceptances
$11,016,874 $1,841,744 $1, 982,033 Dec. 31,1926
$12,190,122 $1,687, 590
13,460,640 I, 794,724 1,756, 783 June 30, 1927.... 15, 723,394 1,330,331
14,336, 294 1,335,113 1,160, 521 1 Dee. 31, 1927
16, 562,609
631, 570
13, 514, 772 1, 215, 602
425,970
June 30, 1928
17,387, 264
627,922
14,122,513 1,089,577
835,760
Dec. 31, 1928
20,567,975
502, 684
11,802,041 2,516,097 1,015.198 June 29,1929
20,002, 278
551,608
13, 902, 227 1,486,908 1, 666,953 Dec. 31,1929
35,260,213
399,313
13,039, 260 2, 578,532
749,173 1 June 30,1930
27.016,663 1,057,377
12, 772,426 1,995,318 1,725,040
Dec. 31, 1930
34, 786,538
334,499
11,593,334 1, 763,412 1,153, 518 !
Acceptances of
other
banks
$289,074i
633,665
616,491
2,074,254
10,092"
17,674
12,939
5,19a
159,223
Richmond.—There has been a very slight demand for acceptances in this
district for investment purposes. In some cases accepting banks have purchased
the acceptances of other banks, but the tendency has been to sell these acceptances
almost immediately with the indorsement of the purchasing bank.
Federal Reserve Bank
Date-of call
report
O w n acAcceptance ceptances
liability
held
1928
$6, 606,763
Feb. 28
5,492,655
June 30
5,115,160
Oct. 3
Dec. 31
-— 11,707,044
1929
Mar. 27
June 29
9,902,835
6,105, 641
$137,000
490,582
275,157
562, 532
831,195
561, 666
Acceptances of
other
banks held
of
Richmond
D a t e of call
report
Own acAcceptance ceptances
liability
held
Acceptances of
other
banks held
1929
Oct. 4
D e c . 31
$8,215,152
13,751,048
$510,996
1,714,000
$195,696
499,858
1930
1 M a r . 27
J u n e 30
Sept. 24
38,494
20,260
D e c . 31
9,052,683
7,351,080
5,479,719
9,553,968
89,301
87,000
84,000
125,000
17,600
19,00025,000 s
$2,498,171
424,351
434.613
302.614
NOTE.—The volume of acceptances created in this district has been so small that we have not maintained
a record up to 1928 which would enable us to give the statistics asked for. We can, however, give the informmation as of the call dates in 1928,1929, and 1930, and this information is appended.
St. Louis.—Very little, as indicated by accompanying figures.
Acceptance liabilities
[From call reports published]
National and
State bank
members
D e c . 31,1921
M a r . 10, 1922
J u n e 30,1922
D e c . 29,1922
A p r . 3, 1923
J u n e 30,1923
Sept. 14,1923
D e c . 31,1923
M a r . 31,1924
J u n e 30,1924
Oct. 10, 1924
D e c . 31, 1924
A p r . 6, 1925
J u n e 30,1925
S e p t . 28,1925
D e c . 31, 1925
A p r . 12,1926
Acceptances
executed
for customers
$3,129,000
1,964,000
1,163,000
2,214,000
2,260,000
2,293,000
2,559,000
4,059,000
1,483,000
878,000
771,000
857,000
592,000
952,000
1,238,000
1,432,000
651,000
AcceptAcceptances
ances
of other
executed b a n k s a n d
b y other
bills of
b a n k s for exchange
account
drafts
of report- sold w i t h
ing b a n k s indorsement
None.
$25,000
None.
15,000
19,000
32,000
None.
18,000
63,000
None.
None.
None.
None.
2,000
None.
None.
2,000
i Not shown separately.
34718—31—PT 6
12
0)
0)
0)
0)
0)
0)
0)1
C)
0)
0)
(*)
C1)
(^
0)
<n
0)
0)
National and
State bank
members
Acceptances
executed
for customers
June 30,1926
Dec. 31,1926
Mar. 23, 1927
June 30,1927
Oct. 10,1927
Dec. 31,1927
1 Feb. 28,1928
June 30,1928
Oct. 3,1928
Dec. 31, 1928
Mar. 27, 1929
June 29, 1929
Oct. 4, 1929
Dec-31,1929
Mar. 27,1930
! June 30,1930. _ . . .
Sept. 24,1930. . ^
$1,003,000
1,631,000
806,000
845,000
564,000
2,509,000
1,459,000
762,000
1,458,000
2,007,000
1, 590,000
1,054,000
2,314,000
2,871,000
2,367,000
1,044,000
2,919,000
Acceptances
Acceptances
banks
executed
and
by other bills of
banks for exchange
account
drafts
of report- sold
with
ing banks indorsement
$2,000
None.
2,000
None.
None.
None.
243,000
None.
2,000
10,000
3,000
None.
38,000
120,000
10,000
2,000
35,000
0)
0)
$984,000
506,000
716,00O
729,000
1,063,000
958,000
970,000
673,000
1,055,000
1,027,000
1,021,000
2,005, OOOe
1,515,000661,000
786,00»
876
NATIONAL AND FEDEEAL BESERVE BANKING SYSTEMS
HOLDINGS OF ACCEPTANCES
Amount of own acceptances and of acceptances of other banks held in portfolio are not given. However, following figures, which indicate the demand,
are available since June, 1929:
Holdings ofjHoldings of
Acceptance bills, acceptpayable in ances, etc.,
payable in
United
foreign
States
countries
National and State member banks
June 29, 1929.
Oct. 4, 1929—
Dec. 31, 1929,
Mar. 27, 1930.
June 30, 1930.
Sept. 24, 1930.
$3,096,000
2,421, 000
2,171,000
3, 509,000
433,000
306,000
$986,000
1,042, 000
854,000
1,122, 000
853,000
565, 000
San Francisco.—The following information has been compiled from call reports of about 30 banks which are the principal acceptors and investors. I t
should be borne in mind that banks, in anticipation of a "call" usually liquidate
holdings as easily convertible as acceptances. Consequently these reports do
not necessarily show the full extent to which banks regularly carry bills of other
banks.
Call d a t e
M a r . 10,1922,
May5,1922,.
J u n e 30,1922,
S e p t . 15,1922,
D e c . 29, 1922.
A p r . 3, 1923,,
J u n e 30,1923,
S e p t . 14,1923,
D e c . 31, 1923,
M a r . 31, 1924,
J u n e 30, 1924Oct. 10, 1924..
D e c . 31, 1924.
A p r . 6, 1 9 2 5 . .
J u n e 30,1925S e p t . 28,1925.
D e c . 31,1925.
A p r . 12,1926,
AcceptO w n acO w n acances of
ceptances
ceptances o t h e r b a n k s
i n h a n d s of i n portfolio
held in
investors
portfolio
$6,624,000
6,939,000
9,518,000
12,193,000
15,159,000
16,497,000
12,493,000
12,202,000
15,214,000
16,114,000
13,370,000
12, 664,000
13, 250,000
18,166,000
15, 769,000
20,167,000
22, 566,000
18,798,000
$1,366,000
1,348,000
1,073,000
1, 660,000
771,000
1,215,000
1,522,000
820,000
491,000
795,000
763,000
3,480,000
4,939,000
2,366,000
1,569,000
1,181,000
1,178,000
1,385,000
Call d a t e
AcceptO w n acO w n acances of
ceptances
ceptances
o
t
her b a n k s
in h a n d s of
i
n
portfolio
held i n
investors
portfolio
$15, 586,000 J u n e 30,1926. $20,306,000
3,238,000 I D e c . 31,1926. 31,256,000
M a r . 23, 1927. 27,725,000
11,620,000
J u n e 30,1927. 27,430,000
5,263,000
Oct. 1 0 , 1 9 2 7 - 33,852,000
7,875,000
1, 262,000 D e c . 31, 1927. 33,102,000
F e b . 28, 1928. 26,836,000
7,181,000
J u n e 30, 1928. 30, 711,000
1,704,000
Oct. 3, 1928— 36, 643,000
2,082,000
D e c . 31, 1928- 43,181,000
7,474,000
M a r . 27,1929. 33,869,000
4,063,000
J u n e 29, 1929. 33,463,000
8,530,000
Oct. 4, 1929— 44,387,000
4,924,000
D e c . 31, 1929. 65, 201,000
6,261,000
M a r . 27,1930, 64,238,000
3,269,000
2, 722,000 J u n e 30,1930. 53,727,000
Sept. 24, 1930. 46,309,000
1,803,000
D e c . 31, 1930. 56,132,000
849,000
$192,000
608,000
832,000
1,853,000
1,517,000
1,788,000
3,983,000
4,618,000
1,817,000
2,450,000
8, 888,000
4,921,000
3,958,000
7,790, 000
2,859,000
4, 837,000
8,224,000
8,726,000
$1,154,000
917,000
1,153,000
606,000
1,003,000
5, 794,000
4,774,000
1, 487,000
1, 760,000
3, 222,000
5,340,000
1, 632,000
1,652,000
1, 538,000
12,288,000
14,449,000
20,051,000
14,868,000
10. To stimulate an investment demand for acceptances, would you be in
favor of changing the present provisions of the Federal reserve act relating to
the reserve requirements of member banks, permitting member banks to carry
smaller reserves provided that they held a portfolio of bills equal to a certain
percentage of their deposit liabilities? If so, what specific change would you
suggest?
Atlanta.—On September 24, 1930, all member banks held investments in
acceptances of $267,366,000, an amount equal to 11.5 per cent of their required
reserve. This volume represented 19.6 per cent of the total amount of acceptances outstanding on September 30, 1930. On the same date Federal reserve
banks held acceptances of $630,367,000, including $197,743,000 for own account
and $432,624,000 for foreign account, the total
representing 46.1 per cent of
the total volume of acceptances outstanding. 1 Permission for member banks
to invest a percentage of their now required reserves in bankers' acceptances
would broaden and improve the market demand for acceptances, and it would
likewise tend to improve the portfolios of member b&nks. In addition, it would
increase the earnings of member banks, and holdings of bills by Federal reserve
* Figures on member bank holdings of acceptances and on required reserves are taken from "Member
Bank Call Eeport No. 49" of the Federal Reserve Board. Total volume of acceptances outstanding are
from the Acceptance Bulletin of the American Acceptance Council, Dec. 31,1930,
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
877
banks would be decreased. It is my opinion that permission to invest an amount
equal to 20 per cent of the now required reserves of member banks would be
necessary to enable a great number of the small members in this district to take
advantage of this privilege to any degree. I also believe that should 20 per
<?ent be the figure decided upon, there would be a correspondingly large increase
(about 200 per cent), if not a greater increase, in the amount of acceptances
held by member banks. Without devoting more thought and study to this
proposal, I prefer not to commit myself at this time as being in favor of or
opposed to the suggested amendment.
Boston.—To stimulate an investment demand for acceptances, this bank would
not be in favor of changing the present provisions of the Federal reserve act
relating to the reserve requirements of member banks which would permit them
to carry smaller reserve, provided they held a portfolio of bills equal to a certain percentage of their deposit liabilities. We believe it to be the better policy
to keep complications and legislative requirements at a minimum. The decision
to invest loanable funds into highly liquid secondary reserve should be the
responsibility of the member bank. It must be admitted that there still remains
a great deal of educational work to be carried on before genuine investment
demand for bills will exist. This education may be carried on by bill dealers
acceptance houses, correspondent city banks, or any other educational propaganda; but we feel that it should not be made a matter of legislation. Any
form of interest earning investments, no matter how liquid, is not a reserve
with which to meet withdrawals. It is simply a proper liquid investment of
the bank's loanable funds.
Chicago.—No.
Cleveland.—The stimulation of an investment demand for bills, in our opinion,
would not be sufficient justification for a reduction in the present cash reserve
requirements, which we believe to be sufficiently low.
Dallas.—We would not be in favor of this suggestion. The reserve requirements of member banks, in our opinion, are too low now, and the manner in
which their funds are invested is a matter of bank management and judgment.
The desirability of purchasing bankers' acceptances is a matter of education and
therefore naturally of slow growth.
Kansas City.—No. If such a change should be made, it should be only in a
general revision of reserve requirements which would give like consideration
to other highly liquid assets, such as cash in vault and unpledged, short-term
Government securities.
Minneapolis.—No object would be served by such stimulus to the investment
demand for acceptances.
New York.—We would not favor reducing required cash reserves by permitting
member banks to carry smaller reserves provided they held a given amount of
acceptances in portfolio. We believe a fixed minimum cash reserve in the
Federal reserve bank should always be maintained regardless of the character
of the member bank's own investments. We are of the opinion, however, that
some changes in the law relating to the method of calculation and the amount of
such cash reserve balances might be advisable but we would prefer not to recommend any such changes pending the completion of the thoroughgoing study of
this subject by a Federal reserve committee which is now in process.
Philadelphia.—Undoubtedly the American discount market is broader and
stronger than it has been in the 15 years of Federal reserve experience, but notwithstanding this improvement the Federal reserve banks and the foreign banks
constitute the only real market for bills, and the further extension of our discount
market is of great importance. It is still far from such a stage that it can be considered a completely satisfactory mechanism of our money market. Its growth
has been too one-sided and too dependent on the Federal reserve as its reservoir,
and if we are to increase our acceptance business in the next years, it will be essential
that we develop a much broader market for these bills. The suggestion that acceptances be treated as partial reserve would undoubtedly bring about an immediate
improvement in the bill market, but it would not remove entirely the element
of artificiality. It would also result in scattering and reducing the amount of
reserve carried with the Federal reserve banks, but this of course, would be offset
to some extent by a reduction in the holdings of the Federal reserve banks. Another
objection, that once the door is open to employed reserves in one form, many
other forms may creep in.
Richmond.—We would not be in favor of such a change.
St. Louis.—No.
San Francisco.—Would not be in favor of counting investments in acceptances
as part of legal reserves. Believe acceptances should be urged as secondary
878
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
reserves. The development of a better investment demand would occur if
Federal reserve banks supported the acceptance market to a lesser degree.
Reduced support by reserve bank might result in urging accepting banks to
support dealers in distributing the banks' products and stimulate the desire and
necessity of dealers to seek a wider investment field.
11. To stimulate an investment demand for acceptances, should the reserve
banks follow a policy of refusing to purchase acceptances unless the accepting
institutions hold bills, accepted by other institutions, equal to a substantial percentage of thir own acceptance liabilities?
Atlanta.—-We belive that a reserve bank policy of refusing to purchase acceptances unless the accepting institutions held bills, accepted by other institutions,
equal to a substantial percentage of their own acceptance liabilities would be very
impractical of enforcement, and it would tend to reduce the investment demand
lor" bills as well as to reduce the total volume of bills outstanding. The banks
would hesitate to purchase bills which they feared would not be eligible for
immediate disposal to the reserve banks. A further point to be considered is
the fact that generally the season of the year when a member bank's acceptance
liabilities are heaviest corresponds to the season when its supply of funds for
investment is lowest. Such a change of reserve policy would interfere with the
mobility of short-term capital from one section of the country to another. The
method by which the reserve banks can nost effectively encourage the investment
demand for acceptances is to stand ready to take eligible bills off the hands of
investing member banks at any time.
Boston.—-We do not believe that it would be desirable to adopt a definite policy
of refusing to buy acceptances from member banks unless the accepting institution hoids bills accepted by other institutions equal to a substantial percentage
of their own acceptance liabilities. While such a policy might stimulate an
investment demand we believe this stimulation should be the result of educational effort, and not by legislative restricitons which are not absolutely necessary
and, therefore, more likely to be dangerous than beneficial.
Chicago,—No. This would create an artificial situation in the bill market and
in our opinion the market should be free from any such restrictions.
Cleveland.—In theory this might appear an effective means of stimulating an
investment demand for acceptances, but it would not be so in actual practice
since the purpose could be defeated by subterfuge.
Dallas.—No.
Kansas City.—This would not be practicable.
Minneapolis.—No.
New York.—We believe that reserve banks should not adopt or follow a policy
of refusing to purchase the acceptances of a given institution unless the acceptor
holds bills accepted by others equal to a substantial per cent of their own acceptance liabilities. Such a policy, if effective, would require the immobilization of
a portion of the assets of each accepting bank or banker and the character of
the asset to be immobilized, i. e., bankers' acceptances, would be the class of
investment which is and should be, we belive, most mobile.
In theory and in practice the accepting bank or banker does not make a money
loan to a client but rather puts his credit at the disposition of the client. The
client depends for the realization of money against that credit upon the discount
of an acceptance. To require as a condition of purchase by a Federal reserve
bank that the acceptor of a bill should keep a portion of his assets invested and
immobilized in the acceptances of other banks and bankers might very well have
the effect of reducing the amount of acceptance credit some banks would be willing
to grant, and of causing other banks to withhold acceptance credit entirely from
their clients. The law already limits the amount of such credit which may be
granted by member banks and we believe further curtailment of that credit would
be unfortunate in its effect upon all of the business and agricultural interests of
the country.
We further believe that serious, needless, and unjust discriminations would
arise if Federal reserve banks attempted to execute the policy suggested and that
the strength and breadth of the discount market would be seriously impaired.
One of the most important factors in the achievement of the preferred position
which bankers acceptances hold to-day and one determining to a large extent the
lower rates they command as compared with other forms of commercial obligation, is the confidence of holders that in case of need they may be sold to a Federal
reserve bank. A great many bills accepted and issued in this country are drawn
abroad. It is quite clear that foreign banks would be unwilling to pay prime
rates for dollar bankers' bills if any doubt should be created in their minds as to.
the market status of bills drawn on prime American banks bought by them. Also,
NATIONAL. AND FEDEBAL BESERVE BANKING SYSTEMS
879
it would be quite impracticable for Federal reserve banks, making daily purchases
of bills offered t o t h e m , to know t h e t h e n current position of each accepting b a n k
with respect to t h e a m o u n t of t h e acceptances of other b a n k s held b y such b a n k
in its portfolio.
Philadelphia.—Due
to t h e artificial bill m a r k e t we h a v e a t t h e present time, it
is essential t h a t t h e accepting b a n k s carry a t all times a certain porportion of
their assets in acceptances of other banks, a n d properly so, b u t t h e a m o u n t should
depend upon their condition a t t h e time of purchase a n d should n o t be based
upon a percentage of their own acceptance liabilities. A procedure of this sort
is not conducive to a broader or healthier m a r k e t .
Richmond.—We
do n o t believe reserve b a n k s should follow this policy; we do
not believe it to be practicable.
St
Louis.—No.
San Francisco.—No.
I t would be more constructive if Federal reserve b a n k s
would educate accepting b a n k s to t h e desirability of extending a t all times (even
when borrowing a t t h e Federal reserve bank) reasonable lines of credit t o dealers
a t a cost not greater t h a n t h a t bid for 90-day bills.
I t should n o t be (although it is) difficult for accepting b a n k s to u n d e r s t a n d t h a t
their accepting privilege is of no value unless a m a r k e t can be found for their bills.
T h e dealers are rendering this service, a n d t h e banks creating bills should, for
selfish reasons if for no other, support t h e m instead of leaving such support (at
times) entirely to t h e Federal reserve b a n k s .
12. Would the dependence of t h e acceptance m a r k e t on t h e reserve b n a k s be
lessened if t h e reserve b a n k s should hold their buying rates above t h e m a r k e t
rate on acceptances? W h a t would be the effect of this change of policy on t h e
acceptance m a r k e t ? To w h a t extent, in your opinion, has t h e m a r k e t r a t e on
acceptances been an artificial one in the sense t h a t it has been primarily determined by t h e buying rates of the reserve banks?
Atlanta.-—(a) I t would.
(b) T h e effect of such a change of policy would be to discourage t h e purchase of
bills by member b a n k s in t h e open m a r k e t for t h e reason t h a t they could n o t
depend on a quick sale to t h e Reserve Banks except a t a loss. Another effect
would be a higher open-market yield on acceptances which would encourage
m e m b e r b a n k s to invest in bills a n d to hold t h e m to m a t u r i t y .
(c) T h e Federal Reserve B a n k s h a v e been a great stabilizing influence in t h e
acceptance m a r k e t . They have t a k e n sudden increases in the supply of bills
off t h e m a r k e t , a n d they have been prepared to b u y bills from the member b a n k s
who have desired to liquidate their holdings. T o this extent the m a r k e t r a t e on
acceptances has been artificial, and this change of policy would result in more
erratic fluctuations in open m a r k e t rates.
Boston.—We d o u b t t h a t t h e dependence of t h e acceptance m a r k e t on t h e reserve
banks would be lessened if t h e reserve b a n k s should hold their buying rates
above t h e m a r k e t r a t e on acceptances. When bill rates are sufficiently high t o
a t t r a c t investors, or during periods such as t h e present time when money is in
abundance, there is little need for Federal reserve b a n k support, b u t when
these conditions do not exist a n d bills are in a b u n d a n c e with investment demand
lacking, higher rates of t h e Federal reserve b a n k s would have a n adverse affect
u p o n t h e bill m a r k e t . Dealers would find themselves with high portfolios, faced
with t h e necessity of selling their bills a t losses. Eventually, this would force
rates up to t h a t point where it would be more profitable for shippers to finance
their bills through other t h a n dollar acceptances, with t h e result t h a t European
centers would regain t h e acceptance business t h a t it has lost to this country
during the past few years. I n a s m u c h as bill dealers' acceptance rates have so
frequently led changes in discount rates a n d in m a n y cases have led changes in
buying rates, it appears t h a t t h e open m a r k e t r a t e on acceptances is not so
artificial as might be supposed from the fact t h a t Federal reserve b a n k s furnish
the principal m a r k e t .
Chicago.—We believe under normal money m a r k e t conditions t h a t t h e buying
rates of the Federal reserve b a n k s should be equal to or slightly above the m a r k e t
r a t e on acceptances a n d t h a t t h e reserve rates as far as practicable should follow
r a t h e r t h a n lead t h e open m a r k e t rates a n d t h a t this practice would result in a
broader distribution of bills and an improved acceptance m a r k e t . Of course,
there are times when money rates get too high, when the Federal reserve banks,
in order to protect t h e bill market, are obliged to m a i n t a i n low enough rates to
stabilize t h e open-market rates a t a reasonable level a n d therefore a t such times
to be large buyers of bills. I n t h e past, for t h e purpose of developing t h e bill
m a r k e t , t h e Federal reserve bill rates have a t times been more or less artificial
a n d has resulted in t h e reserve banks carrying an unusually large percentage in
880
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
their portfolios of the total bills outstanding. We believe that the time is past for
any assistance of this kind to be given the market and that in the future Federal
reserve banks should maintain their rates at a point where they will be only moderate buyers of bills except in cases of emergency.
Cleveland.—The buying rates of Federal reserve banks are usually above the
market rates for bills of the same class. With few exceptions, reserve bankspurchase only 3-name paper, i. e., bills of a drawer or an acceptor which ostensibly
have circulated in the market and come to us bearing a banking indorsement.
These bills enjoy a preferential rate of one-eighth per cent in the market by
reason of the banking indorsement, as against the usual offerings of bill dealers
bearing only two names—drawer and acceptor.
The foreign demand for American bills and the employment of foreign balances
in this country have been of such proportions as to be a predominating influence
in market rates for bills; accordingly, with such a demand the market rate can not
be considered as artificial or as determined by the buying rates of reserve banks.
Undoubtedly, the market when establishing its rates considers the factors which
may determine the buying rates of the Federal reserve banks at a future time.
The dealers want to be in position to supply their porfolios and making their
rates; they must consider such factors as the probable present and future supply
and demand and the probable course of the money market.
Dallas.—(a) It is the policy now of the reserve banks to establish their minimum buying rates fractionally above the selh'ng rates in the open market for
bills of similar maturities. This policy, no doubt, prevents the sale of acceptances
to the reserve banks except for the purpose of adjusting the selling bank's position.
(b) The effect of this policy on the acceptance market is to limit the purchase
of acceptances to investment purposes only and to broaden the market and
discourage any tendency for the reserve banks to be the market themselves.
(c) Only at times have we regarded the market rate on acceptances as an
artificial one, primarily determined by the buying rates of the reserve banks. At
such times this has come about by an overanxiety on the part of certain reserve
banks that sufficient bills would not be offered to them. However, when this
has occurred the offering of bills to the dealers has so largely increased as to
bring about overpurchases, necessitating a change upward of Federal reserve
bank buying rates.
Kansas City.—-The buying rates of the Federal reserve banks are, at times,
above the open-market rate on acceptances, as is the case at the present time.
When our rates are not above the open-market rates, they are at least no lower
than such rates, and we understand it to be the policy of the open-market com~
mittee to refrain from purchases in the open market when the supply of bills can
be absorbed by commercial institutions. This being the case, we do not understand that the market rate on acceptances has been an artificial one nor that it
has been primarily determined by the buying rates of the Federal reserve banks,
but, on the contrary, that the Federal reserve rate follows the market.
Minneapolis.—This question can only be answered by Federal reserve banks
in centers where the acceptance market is somewhat developed.
New York.—The effective buying rates of this bank are generally and normally
above the market rates. Lest there should be confusion in this regard it should
be understood that the market rates quoted in the newspapers and elsewhere
are the rates at which dealers will buy and offer for resale ordinary amounts of
prime bills as they come fresh into the market. At that time they ordinarily
are 2-name bills, that is, they bear the name of the drawer and the acceptor.
The reserve bank buying rate applies to those bills after they have been circu^
lated in the market and have acquired a third name, i. e., a banking indorsement.
The value of that indorsement is recognized in the market usually at one-eighth
per cent per annum, sometimes more, so when the market offers to buy bills at
2 per cent discount and resell them at 1% per cent, that is a price for 2-name
paper; 3-name paper would be 1% per cent bid, \% per cent asked. The reserve
bank rate is normally at or above the bid rate for 2-name paper and almost always
above the rate asked in the market for 3-name paper. This has been the policy
since the inception of the American discount market.
The market rate on acceptances is not an artificial one in the sense that it is
primarily determined by the buying rates of the reserve banks. The rate at
which it is expected reserve banks might be willing to buy bills at a future time
doubtless is an element which the market considers in establishing its rates intimes of fairly tight money or when a rise in money rates generally is expected, but
the discount dealers' buying rates depend more importantly upon supply and
demand, present and expected, and their view of the future course of rates; also,,
in times of easy money, upon the necessity of maintaining their portfolios at a,
reasonable volume so that they may supply their investing clients.
NATIONAL AiND FEDERAL EESERVE BANKING SYSTEMS
881
Accompanying is a diagram showing, for the years 1927 to 1930, inclusive, the
relation of our minimum buying rates for indorsed 90-day bills to the rates at
which such bills were offered by dealers in the open market, from which it will
also be seen that rate changes in the open market ordinarily precede changes in
our rates.
Philadelphia.—In theory, probably correct, but not practicable in the present
artificial market. I do not believe it is possible for the Federal reserve banks to
hold their buying rate above the market for acceptances for any length of time,
owing to the undue dependence upon the Federal reserve system for its support.
The market is too artificial at this time to attempt a change of this kind. The
Federal reserve buying rate has practically determined the market rate for bills,,
and will continue to do so until we are able to develop a broader market.
Richmond.—(a) We think the dependence of the acceptance market on the
reserve banks would be lessened if the reserve banks' buying rates were held
consistently above the market rate on acceptances.
RATE
Ji r - i \ —
l
JT 1
/p
1i—J
flrtfc.
J
1 .F f
1
Lr
j
n
T
OPEN MARKE
.
RA
7E
lJ
1
l
" 1 FEDERAL RESERVE BANK
BUYING RATE
IT
\
K
j
" 1———1
\
) L L L _JJL _L_L
1927
1 1 J_L- 11
,-LL 1 1 l 1
1928
1 1 i1
1929
1 1 _1_L_ I I JJ_
1930
All
Open market rate and Federal reserve bank buying rate on indorsed 90-day acceptances, 1927-1930
(6) It would make the market rate more self-sustaining, but what effect it
would have on the volume of acceptances we are unable to say.
(c) In our opinion, the market rate has been at times an artificial one because
of the buying rate of Federal reserve banks, but to what extent we are not pre*
pared to estimate.
St. Louis.—Their buying rates are not above the market. They have not led,
but instead have followed.
San Francisco.—(a) Yes.
(b) A penalty rate would stimulate dealers in seeking a wider market and would
give accepting banks some incentive to support dealers who are merchandising
their (accepting banks') products.
(c) More than has been necessary during recent years.
13. Would you favor a change in the Federal reserve act limiting the accepting
of time bills of exchange on the part of member bank simply to those growing
out of bona fide shipments in foreign trade and to those made for the purpose of
creating dollar exchange?
882
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Atlanta.—It is our opinion that it would be very unwise to eliminate the right
to create acceptances for certain classes of domestic transactions. The use of
the acceptance has been a most economical and satisfactory method of financing
the domestic storage and shipment of goods preparatory to their export sale in
foreign markets.
Boston.—It would not seem desirable to change the Federal reserve act limiting
the accepting of time bills of exchange to those growing out of bona fide shipments in foreign trade and to those made for the purpose of creating dollar exchange. We believe that the bankers' acceptance has a very definite use (see
queston No. 6) and that it is highly desirable to promote the use of all classes of
bankers' acceptances, rather than limit it to foreign trade or for the purpose of
creating dollar exchange.
Chicago.—No. This would eliminate acceptances created for the domestic
storage and shipment of goods. While there may be some question as to the necessity of making acceptances for domestic shipments of goods, as these tranasctions
could be easily handled by counter credits, the volume of such bills, however, is
relatively small, amounting to a little over 2 per cent of the total bills outstanding
as of November 30, 1929.
With regard to domestic acceptances, based on domestic warehouse credits,
we believe it essential that they should be continued, as they represent principally
the storage of agricultural products raised in this country and through the use of
acceptance credits the cost of carrying these products is substantially reduced
and the benefit of this reduced cost of carrying is therefore reflected in a better
price to the producer. Furthermore, a substantial amount of these products are
exported under bankers' acceptance credits and the financing of the storage of the
goods in this country should be on just as favorable a basis as the financing of
their export.
Cleveland.—No.
Dallas.—We do not think such change would be of any special moment.
Kansas City,—No. We can see no reason for any such limitation.
Minneapolis.-—No.
New York.—Whatever might have been wise at the outset, we would not now
favor a change in the Federal reserve act to eliminate domestic warehouse credits
or domestic shipment credits. We believe that these credits have been developed
in recent years to serve a most useful purpose in this country and that, particularly through the warehouse credit, the orderly marketing of our staple agricultural products is now being greatly assisted. It seems obvious that anything
which tends to reduce the carrying charges on agricultural products is advantageous to all classes of our people, including the growers and handlers of agricultural products. Through the warehouse acceptance credits and the discount market the temporarily idle money of the entire world is available for
carrying our staple agricultural products in warehouse pending their distribution
into the channels of consumption, and the availability of these moneys makes
for an ample supply at the lowest possible rates. Again, to make the increased
production of agricultural products dependent upon commodity secured bank
loans, local and otherwise, would be, we believe, to place a serious and needless
additional burden upon agricultural interests as well as upon the consumers.
In spite of the relatively short experience of banks and bankers in the use of this
kind of acceptance credits, we feel that, on the whole, they are wisely, conservatively, and helpfully created.
Philadelphia.—No. The domestic acceptance represents a distinct growth in
the self-liquidating paper of the country. It acts as an equalizer of money rates.
It renders a great economic service in this connection. It relieves financial
pressure in sections where seasonal demands might otherwise be heavy. In
other words, it provides a flexible source of credit and stabilizes interest rates.
Richmond.—We doubt the advisability of such a change. We believe that
provision permitting acceptances against domestic shipment and storage undoubtedly increases the volume of funds available to the interior for agricultural
purposes.
St. Louis.—No.
San Francisco.—Would favor eliminating all forms of storage credits except
those arising out of the storage in United States of our major domestically raised
staples, such as cotton, grain, wool, tobacco, etc. Creating acceptances against
unsold merchandise of every kind which can qualify under the definition of a
readily marketable staple fulfills no national demand and serves to open the
way to abuses. (See questionnaire No. 10, question No. 7), when banks find
difficulty in keeping their borrowings at the Federal reserve bank within proper
bounds.'
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
883
14. Append a digest of the laws of those States included within your district
respecting the acceptance powers of State banks, the limitations on the amount
of acceptances which State banks may discount, and the provisions of any State
law permitting acceptance banks of the type permitted by the provisions of the
Edge Act. (See appendix.)
15. Append by countries, as of the last reporting date in each month since
January, 1922, data on the volume of bills held purchased for foreign account.
Atlanta.—The Federal Reserve Bank of New York wilJ submit system totals
for bills held purchased, for foreign account, in which the Federal Reserve Bank
of Atlanta participated, according to the percentages as shown below:
Percentage participation for the years 1922 through 19S0, Federal Reserve Bank of
Atlanta
Per cent
Per cent
.. 4.0
1922
3.6 I 1927
., 4.2
1923
4.1 1928
_ 3.9
1924
4.4 1929
1925
4.1 1930
_ 3.6
1926
4.0 I
Boston.—Detailed accounts representing the volume of bills purchased for
"Foreign accounts" are maintained by the Federal Reserve Bank of New York.
The Federal Reserve Bank of Boston paiticipates in the aggregate amount of these
transactions only in accordance with its participating ratio as indicated below:
Percentage of participating ratio of Federal Reserve Bank of Boston, bills purchased
fi
Foreign accounts "
Per cent
1922
1923 1
1925
1926
7.3 I 1927
7.5 1928
7.4 1929
7.6 I 1930
Per cent
7.5
7.5
7.4
7.4
Chicago.—All purchases of bills for foreign account are made by the Fedeia
Reserve Bank of New York and are pro rated to all other Federal reserve banks.
This bank has always taken its pro rata share of such purchases. The New
York bank therefoie can furnish the information requiied.
Cleveland.—This information is available at the Federal Reserve Bank of
New York. We only participate in the guarantee of the bills. Following are
ttie percentages of participation in purchases of foreign bills since 1926:
Per cent
Per cent
.. 10. 2
__ 10.7 1929_
1926_
._ 10.0
— 10. 6 1930_
1927.
._ 10. 1
1928_
__ 10.4 1931Dallas.—We are advised by the Federal Reserve Bank of New York that inasmuch as all bills of this class which have been purchased for foreign account
are held by the Federal Reserve Bank of New York, the details requested are
being furnished by that bank, and we are therefore merely furnishing a statement of our percentages of participation.
Percentage of participation of the Federal Reserve Bank of Dallas in foreign accounts
Per cent
Per cent
3.5
1922
2. 6 1927
3.5
1923
3.6 1928
3.3
1924
3.8 1929
3
1925
3.5 1930
1926
3.5
Kansas City.—These statistics should be furnished by open-market committee
for all Federal reserve banks.
Minneapolis.—Since this bank merely enjoys a participation in the earnings
and accepts a participation in the contingent liability arising from bills purchased
for foreign account by the New York Federal Reserve Bank, this table can only
be submitted by the New York reserve bank for the system as a whole.
New York.—(Data not supplied.)
* Up to June 15, 1923, only. Did not participate during 1924. Beginning Apr. 16, 1925,
884
NATIONAL AND FEDERAL. RESERVE BACKING SYSTEMS
Philadelphia.—The purchase of bills for foreign accounts is handled by the
Federal Reserve Bank of New York, and it is our understanding that they will
cover this question in their report.
Richmond.—This bank has only a voluntary participation in such bills, purchased for system account by the Federal Reserve Bank of New York, which
bank will, doubtless, furnish this information.
Our percentage of participation has been as follows:
Per cent
Per cent
.
5.2
4.9 1927_
1922_
.
5. 1
5.2 1928,
1923.
4.6
5.7 1929.
1924.
.
4.2
1925.
5.8 1930.
19265.3
St. Louis.—The Federal Reserve Bank of New York, we understand, is reporting total for the system. Our participation was:
Per cent
Per cent
.
4.3
19224.7 19271923.
.
4.3
4.4 19281924.
4.9 1929.
4
1925.
4.6 1930.
.
3.6
11.3
1926_
San Francisco.—This information will be furnished by New York. Therefore,
we shall not duplicate unless it is desired.
16. Is the buying rate on bills bought for foreign account lower than that on
bills bought for own account? Are bills purchased for foreign account acquired
solely from dealers? If the bulk of bills purchased for foreign account is acquired
from dealers, state the reason for this practice.
Atlanta.—This information is to be supplied for all districts by the Federal
Reserve Bank of New York report on Questionnaire No. 10.
Boston.—As all the details pertaining to this question are maintained by the
Federal Reserve Bank of New York for the "system," we are unable to supply
the information requested.
Chicago.—See answer to No. 15.
Cleveland.—This information is not obtainable here. It may be obtained from
the Federal Reserve Bank of New York.
Dallas.—All purchases are made by the Federal Reserve Bank of New York.
Kansas City.—Refer to Federal Reserve Bank of New York, which acts as
buying agent and which maintains detailed records in connection with the,se
transactions.
Minneapolis.—This question can only be answered by the Federal Reserve
Bank of New York.
New York.—The rates which we have to pay for bills bought for foreign account
are ordinarily somewhat below the rates paid on bills of similar maturities bought
for our own account. That is because, when acting for foreign banks, we are
seeking to buy bills, and have to pay the price demanded in the market to acquire
them, whereas we do not seek bills bought for our own account; they are offered
to us by the holders desirous of selling them to us at our rates. Bills purchased
for foreign account are bought almost entirely from dealers. The principal
reasons for that fact are that the available supply is with dealers and that many
banks do not care to have their indorsement outstanding except to Federal reserve
banks and that national banks are precluded by law from incurring indorsees
liability to the extent that would be necessary if they sold to us in substantial
amounts for account of foreign banks. Their indorsees liability on notes or bills
discounted with or sold to Federal reserve banks is an exception from the limitations of section 5202, Revised Statutes, but their liability as indorsers on bills
sold to foreign banks or to any one other than a Federal reserve bank falls within
the limitations of that section. Also, in the interests of maintaining a broad
and stable discount market, it is believed that investment demand should be
supplied through dealers who principally make the market.
Philadelphia.—Same answer as 15.
Richmond.—See answer to 15.
St. Louis.—All bills bought for foreign account in which we participate in any
way are handled by the Federal Reserve Bank of New York.
San Francisco.—This question has been left for the Federal Reserve Bank of
New York to answer because no bills for foreign account have been purchased
in the twelfth district, and, as far as it is known, bills are acquired in New York
exclusively.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
885
17. What is the rate of commission that the reserve banks receive for indorsing
the bills purchased for foreign aecount? Are all such bills indorsed? Is the
indorsement placed on each bill or is the indorsement in the nature of a blanket
agreement with the foreign clients for which the purchases are made?
Atlanta.—This information is to be supplied for all districts by the Federal
Reserve Bank of New York report on questionnaire No. 10.
Boston.—As all the details pertaining to this question are maintained by the
Federal Reserve Bank of New York for the "System," we are unable to supply
the information requested.
Chicago.—See answer to No. 15.
Cleveland.—One-eighth per cent for guaranteeing the bills.
Dallas.—All arrangements of this character are made by the Federal Reserve
Bank of New York. We do not indorse the bills, but merely participate in the
liability of guaranty to repurchase before maturity according to our percentage
of allotment of bills purchased.
Kansas City.—Rate of commission determined by separate agreement in each
instance. Bills are not indorsed but are guaranteed by Federal reserve banks
under a blanket agreement. Details can be obtained from Federal Reserve
"Bank of New York, which handles these transactions for the system, or from the
Federal Reserve Board.
Minneapolis.—This question can only be answered by the Federal Reserve
Bank of New York.
New York.—-The commission charged by the reserve banks on bills bought for
foreign account is one-eighth of 1 per cent per annum. The bills are not indorsed
by any reserve bank but the reserve banks assume liability for their payment at
maturity.
Philadelphia.—Commission charged, one-eighth of 1 per cent. These bills
.are not indorsed by the Federal reserve banks but there is a blanket agreement in
which Federal reserve banks agree to buy these bills at any time.
Richmond.—See' answer to 15.
St. Louis.—Bills are not indorsed by Federal reserve bank. For purchases of
•bankers' acceptances with guarantee of payment at maturity and agreement to
buy back at time of maturity, the commission is one-eighth of 1 per cent per
annum on the face amount. For the purchase of bankers' acceptances without
^guarantee of payment or agreement to buy back, the charge is one-sixteenth of
1 per cent per annum on the face amount.
San Francisco.—Commission one-eighth of 1 per cent. Bills are not manually
indorsed. Indorsement is in the form of a written guarantee.
18. Append statistics on the volume of bills in your portfolio that have been
purchased locally from dealers, that have been purchased locally from accepting
banks, that have been purchased locally from other sources, and that have been
-acquired through the open-market investment committee, for the last reporting
^date of each month from January, 1922.
886
NATIONAL* AND FEDERAL RESERVE BANKING SYSTEMS
Atlanta.—•
Volume of hills in our portfolio that have been purchased locally from dealers, locally
from accepting hanks, locally from other sources, and that have been acquired
through the open-market investment committee for the last reporting date of each
month from January,
1922
Month
Locally
from
other
sources
Locally
from accepting
banks
Openmarket
Special
investm e n t com- p u r c h a s e s
mittee
1922
J a n - _- $140,475 $1,870, 382
Feb, - ..
74, 040 1,142,880
Mar_-_ _
25, 980 2,070,040
838, 020
Apr
466, 583
May
792,476
June
497,188
July
Aug
811,116
173,130 4, 750,123
Sept
...
Oct
500,651 11, 818,147
Nov
563, 250 8, 285, 711
Dec
200,045 7, 644, 574
Month
1920
Aug
Sept
Oct
Nov
Dec
1927
Jan
1 Feb_
$1,734,952 1 M a r
50,000
-Apr
1, 946, 313 M a y
1923
Jan__ _ __ 290,300 2, 646, 515 $917, 563
660,856
341,314
2,873, 496 3,300,465
Feb.i
999, 491
Mar - .
3, 281, 773 18, 025, 714
127,331
Apr
2, 053, 714 12, 260,372
1,622,942 3, 502,897
May
1,601,835
221, 626
June
1,858, 288 5,035, 565
523,677 !
July
242, 375
2.468, 872
Aug- _ _
4, 555, 650
560, 960
Sept
246, 531 5, 792, 675
1,484,088
Oct
N o v ___, 462, 435 6, 885,143
1,051,683
1,325,019
6, 651,284
Dec
1924
Jan
Feb
Mar
Apr
M a v ___
June
July
Aug
Sept
Oct
Nov _ _
Dec
...
1925
Jan
Feb
Mar
Apr
__May
June
July
Aug
Sept
.
Oct
Nov
Dec
1926
Jan
Feb
Mar
Apr
May
June
July
8, 279, 731
5,657,093 1, 207,666
4, 589, 855 1, 623, 806
3, 485,444
3, 294, 642
59, 252
1,651,095
1,156, 429
25, 000
84,045
780,168
520,166
2, 080, 307
364, 072
5,025, 965
379, 012
6, 546, 791
396,187
7, 377, 570
737, 956
575,264
644, 024
655,115
239, 990
3,991, 329
3,325, 393
2,379, 236
1,927,866
1,108, 675
644,178
668,310
Openmarket
Special
investm e n t com- p u r c h a s e s
mittee
$107,089 $1, 578, 929 $8,205. 760 $9, 002,679
179,045 3, 291, 245 6,959, 975 10,445 629
429, 948 3, 851, 228 7,115, 232 6, 343, 081
442, 820 4, 695,044 5,991, 820 3, 210,043
502,014 4,059,310 6, 654,498
541, 821
347,345!
392, 827
291, 753
388, 652
292, 593
276, 797
214.056
558, 000
253, 570
106,363
60, 532
3.148.146
2.530.415
3, 776,856
4,107,133
2, 687, 695
2, 886, 214
1, 687, 440
1, 219, 989
1,368, 525
1, 357,054
5,987, 442
6,140, 212
126, 890
70, 678
25,173
362, 502
374, 046
345, 650
222, 812
175,040
380, 969
563, 940
195, 030
256,120
1,911,204 8,421,881
1,572, 831 4, 276, 653
1, 233,729 9,193,131 2, 717, 767
1,074,423 10,276, 541
1.317, 605 5, 235, 794
1,106, 665 4,350,819
438, 008 7,122, 659
605, 354 4,356, 769
603, 391 9, 498, 274
1.318, 664 14, 076, 692
1, 470, 689 10, 488, 208
2,153, 814 13, 426, 279
5, 510,948
6,451,515
3, 671,199
4, 753, 203
4, 648, 529
5, 001, 255
3, 210, 354 1, 400,043
3,979, 714
444, 573
1929
150, 040
110,688
191, 772
146,538
114,054
336, 902
35,347
255.057
944,150
2, 082, 664
969,164
1,177,297
2, 954, 392 6, 563, 573
2,962, 791 3,845, 882
3,904, 585 3, 535,352
4,134,610 2, 587, 714
4,966, 958 2,897, 898
4, 033, 492 1,873, 972
4,037,881
634,929
5,326,242 1, 648,457
7,437,897 7, 213,575
8,001, 211 10,628,688
6, 223,871 1,001, 552
7,719, 607 6,672, 265
415, 598
1930
Jan
628,176
Feb
168,419
Mar
384,480
Apr
46,056
May
8,000
June
7,000
5,396,856
July
3,113,856
2, 242, 811
Aug
18, 300
5, 606,583 16,032, 542
Sept
7, 223,747 5,005,698 ! Oct
6, 667,472 10, 775,976 N o v . , - __
4,042,983
6, 463, 740 7,745,173 , D e c
i $17,829 purchased locally from dealers.
Locally
from
other
sources
1928
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct.
Nov
Dec
Jan
40,224
849.539 ' F e b
14, 665
Mar
Apr
May
June
July
Aug
Sept
Oct.
9,033,519
Nov
Dec-
277, 987 3,440, 766
753,040 1.469, 960 5, 246,459
221,000
900, 370 8,140,137
734,062 3, 222. 345
222, 000
625,090 5, 401, 659
66.000
411, 773 3, 577,081
16, 000
274,914 6, 519, 756
616, 323 7, 261,130
246,313
732, 221 1,100,106 8, 380,921 3,149, 340
971, 355 2,913, 468 36, 732,870
642, 379 3,827,418 35, 598, 087
754,847 3,597, 265 40,804, 594
254, 502
402, 561
464,902
124 260
24, 226
!
July.
Aug
Sept
Oct
Nov
Dec.
Locally
from accepting
banks
4, 226,128 8, 452.160 1,264,033
2,756, 683 15. 537.152
1,428, 256 6,164,152 2,518,190
876,888 13,052,554 7,932, 219
706,064 7, 302,414
399,087 4,130, 957
465, 681 8,120, 860
523, 253 6,551, 886
1,184, 638 7,049, 885
476,178
1, 228, 527 7. 445. 258
862, 232
856,842! 4,530,874
1,769, 543 12. 699.002
154,939
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
887
Boston.—
Statistics on the volume of bills in our portfolio that have been purchased locally from
dealers, that have been purchased locally from accepting banks, and that have been
acquired through the open-market investment committee, for the last reporting
date of eachynonth from January, 1922
[OOO omitted]
H o l d i n g s o n last
report date
V o l u m e of acceptances p u r c h a s e d b y m o n t h s
P u r c h a s e d from dealers
Date
Outright
(local)
1922
January
February
March_.
April
May
_
June. _
July
August
September
October
November
December
.
Agreement
(local)
Outright
(not
local)
- -
September .
-
November
March
April...
- -
June..
July
August .
September
D e c e m b e r __
.
- .
. . .
~
July
August
September
1
28,495
26,062
33,236
25,449
17,769
26,146
22, 666
14,555
14,772
24,305
43,982
34,736
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
31
28
28
25
29
27
25
29
25
30
27
24
14,851
12,546
17,482
20,979
21,025
18,564
16, 512
10,126
8,165
14, 454
30,131
33,078
30,791
24,788
22,090
21,177
8,892
3,201
9,916
5,740
12, 266
27, 221
49,180
44, 236
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
29
26
25
29
27
24
29
26
30
28
25
30
24,952
24,462
19,519
11,479
5,612
1,991
2,602
4,539
9,059
20,405
39,046
69,423
1,425
1,141
8,834
12, 599
12, 382
2,613
10,363
10, 275
2,849
7,940
7,697
10,653
6,319
9,227
15,169
23,062
17,001
5,985
9,503
14,218
15,909
13,491
15,104
10,823
8,398
5,867
13,712
5,455
17,096
5,454
12,490
6,452
4,188
12,314
5,512
1,481
5,162
12,641
18,144
21,492
15,452
6,365
6,777
5,987
7,990
12,734
12,202
15,385
20,731
17,241
19,136
27.905
24,458
21, 559
17.906
10,961
9,086
9,290
8,351 1
8,154
22,294
19,855
1926
June
July
8,911
5,374
7,733
7,025
1,557
2,441
5,770
1,916
2,631
4,710
6,234
6,219
18, 891
14, 266
14,823
15,841
6,024
2,050
5,956
2,410
6,162
12,293
19,034
13,970
1925
April
$9,473
12,611
11,543
9,882
10,783
24, 206
19,138
11,193
15,857
26, 299
28,831
25,706
2,034
2,202
1,370
1,562
2,068
354
3,339
1,499
3,267
5,405
16,039
17,457
1924
January
25
21
29
26
31
28
26
30
27
25
29
27
18,639
16,408
19, 339
12,438
14,136
19, 222
16,157
11,225
10,818
17, 709
21,874
23, 212
3,535
500
781
399
719
61
1,924
Amount
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
945
3,780
5,383
5,587
2,076
3,764
678
1,414
1,323
1,886
3,839
1,165
1,865
3,293
Date
$14,527
19,835
12,878
15,628
22,698
30,023
14,342
23,602
23,227
27,097
29,468
28,186
$12,214
11,524
10,837
13,505
15,472
13,197
13,914
17,795
8,104
14,154
21,214
19, 639
$612
3,290
Total
purchased
for
month
$1,3*. 2
3,473
1,402
580
3,933
11, 264
352
5,321
8,762
9,804
6,214
6,589
$329
1,548
649
1,543
1,428
2,269
76
486
2,826
3,139
2,220
1,958
1923
February .
March
April
May
June..
July
Acquired
from
openFrom
market
accepting investbanks
ment
committee
5,663
5,849
2,614
1,127
800
125
$10,090
4,140
4,203
2,471
3,282
2,647
672
621
406
1,696
689
1,508
427
9,254
7,464
1,865
14,052 J a n . 28
32, 356 F e b . 25
30.945 M a r . 25
22.946 A p r . 29
33,745 : M a y 27
28, 313 1 J u n e 24
22,957 J u l y 29
29,133 A u g . 26
35,199 Sept. 30
47,025 Oct. 28 i
50,009 N o v . 25
49, 639 D e c . 30
45,406
41, 961
41,092
32,993
37,422
32,605
31,513
27,600
49,246
64,770
85,992
81,381
39,922
33,104
34,413
44,246
45,346
56,055
53,146 '
82, 789
47,316
43,664
18,879
22,220
29,731
18, 577
Jan.
Feb.
Mar.
Apr.
May
June
July
27
24
31
28
26
30
28 |
888
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Statistics on the volume of bills in our portfolio that have been purchased locally from
dealers, that have been purchased locally from accepting banks, and that have been
acquired through the open-market investment committee, for the last reporting
date of each month from January, 1922—Continued
Holdings on last
report date
Volume of acceptances purchased by months
(Acquired
from
openFrom
market
| investOutright accepting
banks
ment
(not
commitlocal)
tee
Purchased from dealers
Date
Outright
(local)
1926
August
September
October
November
December
Agreement
(local)
$14,067
12,721
11,116
8,022
8,301
$10,851
6,877
10,305
12,740
30,457
$17,893
17,534
31,796
17,219
23,132
3,381
7,739
6,789
6,650
6,955
9,242
5,849
3,844
8,315
11, 507
10,465
6,386
29,214
33,881
34,452
23,086
30,341
27,979
15,734
29,618
27,653
29,555
28,640
26,336
11,297
16,870
6,925
7,298
7,049
10,577
4,421
1,139
11,123
17,883
16,585
9,131
14,740
9,867
16,955
18,830
16,771
17,367
25,119
19,400
10,672
12,821
7,895
22,189
34,645
18,845
33,086
32,344
31,574
27,244
29,283
21,369
20,346
51,736
47,830
27,826
1929
January
February
March
April..
,
May
June
July..
August
September...
October.
November...
December
12,420
4,321
8,753
7,357
3,979
1,235
806
8,690
3,862
3,691
383
2,176
1930
January
February
March
April
May
June
July
August
September
October
November
December
6,127
2,782
1,029
7,910
3,412
4,140
4,095
1,314
1,670
1,675
202
1,449
1927
January
February
March
,
April
May
June
July
August
September—
October
November
December
1928
January
February
March
Apiil
May.
June
July
August
September
October
November
December
_.
$10
100
350
700
2,335
~4,~666~
Total
purchased
for
month
Date
Amount
25
29
27
24
29
$17,444'
26,308
34,296
32, 741
47,306
43,992 Jan, 26
58,490 Feb. 23
48,166 Mar. 30
37,284 Apr. 27
45,045 May 25
47,798 June 29
26,004 July 27
36,936 Aug. 31
47,091 Sept. 28
58,945 Oct. 26
55,690 Nov. 30
45,853 Dec. 28
41,477
46,038
27,573
25,114
25,837
16,920
13,785
18,446
24,319
32,588
39,021
48,738
$42,811
37,132
53,217
37,991
61,890
>,ug.
Sept.
Oct.
Nov.
Dec.
15, 735
8,050
9,729
45,938
2,307
6,224
4,547
4,666
8,598
16,620
29,379
23,150
36,762
59,770
97,112
50,652
50,835
58,949
45,435
39,616
81,177
85,104
73,165
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
25
29
28
25
29
27
25
29
26
31
28
26
42,773
39,505
49, 243
50,926
41,355
37,288
19,240
19,009
21,422
43,895
49,188
49,284
41,827
29,157
17,379
21,831
30,344
12,932
19,726
28,481
28,048
32,904
6,289
49,047
18,770
617
4,872
5,063
4,831
900
2,946
3,111
35
240
30
2,161
73,017
34,095
31,004
34,251
39,154
15,067
23,478
40,282
31,945
36,835
6,702
53,384
Jan. 30
Feb. 27
Mar. 27
Apr. 24
May 29
June 26
July 31
Aug. 28
Sept. 25
Oct. 30
Nov. 27
Dec. 24
63,180
43,707
26,095
22,692
26,281
8,465
10,254
20,477
20,894
13,986
4,773
14,830
34,892
23,941
25,226
32,721
22,457
16,484
14,090
8,378
8,378
8,081
3,325
10,552
1,847
188
4,235
6,182
1,198
42,866 Jan. 29
26,911 Feb. 26
30,490 Mar. 26
46,813 Apr. 30
29,567 May 28
22,432 June 25
28,508 July 30
17,912 Aug. 27
20,065 Sept. 24
23,331 Oct. 29
9,458 Nov. 26
29,385 Dec. 31
16,443
14,258
9,839
15,075
16,858
16,274
17,865
16,921
22,465
14,343
14,553
25,315
$4, 573
1,227
1,764
6,130
416
2,078
2,500
1,808
9,096
8,220
8,253
7,445
5,'515
15,306
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
889
Chicago.—
Volume of bills held
[000 omitted]
Date
Purchases From
from dealers
[member |
banks
1922
Jan. 25
Feb. 2 3 —
Mar. 29...
Apr. 2 6 —
May 31—
June28—
July26.-.
Aug. 30—
Sept. 27—
Oct. 25. ._
Nov. 29—
Dec. 27...
$1,638
2,401
3,016
6,530
13,643
13,344
5,638
8,601
6,776
3,853
3,193
5,091
1923
Jan. 31
Feb. 28....
Mar. 28—.
Apr. 25
May29.._.
June 27_...
July 2 5 . . . .
Aug. 29—.
Sept. 26—.
Oct. 3 1 - . - .
Nov. 28—.
Dec 2 6 —
3,860
5,478
2,493
3,080
243
1,590
2,128
778
581
807
3,459
1,515
1924
Jan. 30
Feb. 27 —
Mar. 26—
Apr. 30—
May 28—
June 25...
July 3 0 . . .
Aug. 27—
Sept. 24...
Oct. 2 9 . . .
Nov. 26—
Dec. 31 —
2,903
785
916
1,567
30
2,369
390
3,145
1,786
6,736
9,426
12, 695
5,265
12,271
5,140
4,114
3,676
2,834
3,025
4,986
13,847
6,769
2,980
2,771
1,294
0
1,098
2,953
2,067
1,119
200
10
500
1,601
300
7,135
5,866
5,503
2,283
1,732
3,281
1,220
1925
Jan. 28
Feb. 25—
Mar. 25—
Apr. 29—
May 27...,
June 24—
July29—
Aug. 26—
Sept. 30—
Oct. 2 8 . . .
Nov. 25—
Dec. 30...
2,717
1,542
14,308
3,665
2,708
5,989
1,971
1,056
4,017
2,150
847
3,479
1926
Jan. 27
Feb. 24....
Mar. 31—.
Apr. 28—.
May 26—
June 30....
2,717
1,766
4,203
1,247
712
2,332
Open
market
investment
committee
Resale
agreement
$9,126
7,565
4,163
1,610
2,834
3,004
2,643
3,983
8,408
4,696
6,667
4,748
$2,567
1,731
738
546
3,283
365
2,289
1,494
1,169
32
2,250
1,345
6,019
13, 286
8,859
8,465
7,982
15, 256
14,885
7,450
16,418
17,843
11, 631
11, 699
325
2,198
1,156
15, 700
12,148
12,411
8,933
2,568
5,419
1,508
914
796
730
970
220
1,301
1,583
3,130
3,006
1,152
3,333
2,129
1,973
5, 560
10, 261
9,199
17,506
70
1,199
122
9,960
2,408
715
83
555
543
106
856
769
3,050
3,932
7,265
10,079
7,746
5,776
15,842
9,341
12, 343
14,313
20,081
12, 594
9,861
6,759
417
1,200
648
2,295
2,088
883
706
639
391
112
1,133
1,350
1,423
893
1, 258
1,065
2, 549
4,705
10,332
13, 513
11, 569
14,473
15,851
16,575
995
2,525
1,113
2,111
4,427
2,757
Date
PurFrom
from dealers
|member|
banks
Open
market
investment
committee
Resale
agreement
1926
July 2 8 . . Aug. 25-_.
Sept. 29...
Oct. 27....
Nov. 24...
Dec. 2 9 . . .
3.399
1,562
1,156
2,026
5.826
3,501
2.836
2,777
2,194
3.567
$13,727
12,438
17,426
18,214
16,713
17,066
$2,059
1,717
1.782
4,172
2,913
4,596
1927
Jan. 26
Feb. 2 3 . . . .
Mar. 30.
Apr. 2 7 . . . .
May 25
June 29
July 2 7 . . . .
Aug. 3 1 . . . .
Sept. 2 8 . . .
Oct. 26
Nov. 30.„.
Dec. 2 8 . . . .
1,807
4,436
7,905
3,858
2,863
8,408
4,244
2,597
6,167
11,362
16,046
17, 335
3,520
1,538
2,018
1,388
2,714
2,780
2,051
1,983
1.593
3.442
2,996
3,383
14,398
13,365
11, 269
13, 572
13.343
11. 219
6,657
7,993
6,544
8,002
23,940
22,402
2,669
4,380
4,210
4.344
3,524
2,400
1,867
3,615
4,627
4,810
2,826
2,047
1928
Jan. 27
Feb. 2 9 . . . .
Mar. 28....
Apr. 25.._.
May 29
June 27
July 25
Aug. 29
Sept. 2 6 . . .
Oct. 3 1 . . . .
Nov. 28_...
Dec. 2 6 —
10.275
7,562
5,019
7,121
6,171
780
931
174
10
454
244
1,093
3,406
4.225
3,769
8,291
3,470
1,436
468
1,324
2,413
3,029
2.845
5.678
25,752
6,556
12.832
11,433
17. 764
2,651
6,034
9,313
12,874
16,796
11,810
7,364
2,721
2,904
3,525
2,221
3,105
1,595
1,019
2,078
2,153
3,457
2,693
3,918
1929
Jan. 30
Feb. 27....
Mar. 2 7 —
Apr. 24
May 29
June 26
July 3 1 . . . .
Aug. 28.__.
Sept. 2 5 . . .
Oct. 3 0 . . - .
Nov. 27....
Dec, 24....
1,577
1,014
380
239
2,333
853
452
1.150
128
1,154
311
6.468
5,452
2,885
1,482
109
1.437
820
845
2,694
1,868
3,039
1.334
1.283
16,716
10,404
6,283
2,927
1,419
751
3,292
2,392
4,956
4,257
4,000
367
1,706
5,232
3,169
1,009
2.660
5,324
288
3,869
47
1,569
602
849
3,049
941
1,780
2,063
2,942
2,609
3,081
574
417
1,175
1,141
2,133
1930
Jan. 29
Feb. 2 6 —
Mar. 26—.
Apr. 30.-..
May 28....
June 25
July 3 0 — .
Aug. 27....
Sept. 2 4 . . .
Oct. 2 9 . . . .
Nov. 26_„.
Dec. 3 1 . . . .
16,856
9,170
2,239
1,589
4,240
14,913
28,863
574
10,763
23,279
28,200
8,942
19,843
11,944
7,403
17,222
12,931
14,943
18,532
9,903
1,876
2,510
4,112
2,104
3,689
3,152
858
1,731
628
1,848
751
2,488
890
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Cleveland.—The data on the schedule do not answer the specific question asked.
Our records are not set up so that the information requested could readily be obtained. The following schedule is a statement of holdings on given dates, together
with additions thereto from the various sources during the various months :
Total bills held on last report date
Date
Held
Allotted by
open market
investment
committee
Purchased
from fourth
district
members
1922
January
February..
March
April
May
.June
July
August
SeptemberOctober, ._
November.
December. _
262,738.30 $2,000, 467. 37
807,999.44 2,763, 801.12
140,795. 07 2,767,320. 51
1,042, 319.29
010,618.89
610,106.99 5,723, 997. 21
716,083. 88 4,648, 014. 72
328,324. 52 6, 379,403.53
958,954.91 7,865, 401. 60
524,685.83 10,618, 457. 73
158,334.21 9, 702,176.11
150,892.87 24, 612,200.38
907,018.19 9, 651,805.65
1923
January.
February
March
_
April
May
June
July—
August
September..,
October
November...
December
500,576.61
599.146.48
421,527.14
110. 570.92
552,995.45
591,286.05
643,328. 23
704,120. 26
610,002. 77
715.860.49
944,423.36
809,223. 51
9,811, 181. 68
550, 638.83
17, 744,361. 38 4, 348.015.90
31, 089,127.98 1,954, 563. 63
12, 537,652.16 1,927,426. 02
7,126, 857.87 2,181,309.00
6,960, 357.97
336, 899. 70
10,663, 613. 32
859, 952.83
24,856, 377.64
719, 461. 34
4,883,431. 59
651, 235. 36
16,154, 413.84
719, 864, 70
11,832, 033.80
792, 510. 36
25, 516,755.77
620, 606.52
1924
January
February
March
April
May
June...
July
August
September
October
November
December
414,869.40
036,214.29
613, 685. 61
671,535. 50
556,094.16
414.975.18
685,908. 03
933,215. 73
301,162.41
247,342.42
886.867.19
217,174.99
600,000.19
13,765,906. 68
9,248, 579.65 1, 349, 273.06
7,938, 394.85
314,657. 32
4,173, 705. 26 1, 393,102. 09
1,867, 211.91
375,263.70
3,231, 943. 68
837, 303.95
551,713. 29
272,925.94
879, 794. 66
4,966, 095.79 3,090,702.37
15,030, 756.91 1,908,511.63
17,072, 172. 79 2, 207,987. 39
20,888, 271.46 4,055,598. 59
1925
January
February...
March
April
May
June
July
August
September.
October
November.
December..
962,952.99
104,702.04
912,895.54
589, 627.08
871,934.54
526,302. 87
148,026. 33
359,934.13
681,835.07
628,861.07
645, 272.55
998,646.43
12,379, 602. 72
10,755,954.84
11,465, 535.40
4,909, 603.64
13,102, 230. 52
7,233, 755.43
4,936, 188.10
6,124, 098.34
7,137, 357.62
2,181,831.82
$10,000. 00 $1,297, 120.64
1,030, 805.83
25,000.00 1,085,434.42
35,000. 00
614, 576. 52
300,000.00
276, 813. 26
88, 210,38
336, 388. 69
306, 517. 70
254,977.32
135, 812. 20
116,193.15
158, 052.51
410,358. 32
371, 734.20
279,419.80
225, 429.64
298,919.04
119, 297.26
1,722, 612.49
4,176, 218.37
4,367, 380.39
2,343, 961.96
2,080, 099.12
3,952, 602.67
2,800. 064.38
5,869, 859. 32
2, 739,766.48
2, 549,236.97
1,704, 938. 62
744, 242.87
1926
January
170,720.88
8, 343, 199. 62 2,596, 662.37
.024, 721.18 8,552, 394.44 1,883, 071.40
February
023,314.57
March
7,084, 852.86 4,052, 568.60
702,391. 71 11,339, 628.07 1,639, 908. 75
April
009,088. 61 13,239, 176.93 3,364, 279.72
May
598,645. 86 9,158, 581.41 4,456, 131. 62
June
346,407.05
July
7,718, 738.90 2, 649,297.22
483,
743. 92 11,368, 342. 56 3,318,732.63
August
609,953.57
September.
9,338, 815.19 2,181,110.55
148,390.19 11,281, 790. 39 1, 664,143.53
October
902,889.90 10,531, 931.43 2,330, 190.64
November.
487,714.57
December..
11,922, 709.10 3, 218,768.18
i $125,000 of this amount bought from outside dealers.
* This amount bought from outside dealer.
Acquired
otherwise
from fourth
district
Acquired
from other
Federals
Total purchased and
acquired
$3,307, 588.01
3,794, 606.95
3,877, 754.93
1,691,895.81
>3,786,200.10 10,087, 010.57
5,012,646.04 10,085, 259.83
9,998,446.52 16,684, 367.75
8,773,398.85 17,029, 589,97
9,197,840.20 20,090, 543.59
6,239,403. 69 16, 723,672. 32
7,047, 335.48 32,164, 385.30
3,406,845.15 13,476, 867.10
264, 309. 24
627,895.91
198,169. 53
157,770.24
193, 276. 98
26,916.30 1,779,491.18
i 171,900.00 5,016, 560. 89
193, 700.00
101,000. 00
10, 626,129.75
22, 720,273.19
33,241, 861.14
14,622, 848.42
9,501, 443.85
9,103, 665.15
16,712, 027.04
25,769, 538.98
5,635, 666.95
16,874, 278.54
12,624, 544.16
26,137, 362.29
14, 365,906.87
10,597, 852. 71
8,303, 052.17
5,566, 807. 35
2,242,475. 61
3,231,943. 68
1, 389,017.24
1,152, 720.60
8,056, 798.16
16,939, 268.54
19,280, 160.18
24,943, 870.05
2 50,000.00
14,102, 215.21
15,082, 173. 21
15,832, 915.79
7,253, 565.60
15,182, 329.64
11,186, 358.10
7,826, 252.48
12,061, 438.97
9,877, 124.10
4,731, 068. 79
1, 704, 938. 62
744, 242. 87
2 150,000.00
2 90,000.00
2 67,481.31
12,103, 132.87
11,193, 698. 35
11,137, 421.46
12,979, 536.82
16,603, 456.65
»100,000. 00
13,714, 713.03
3, 613,792. 92 13,981, 829.04
2,000,881. 68 16, 687, 956. 87
2,651,174.89 14,171, 100.63
3,100, 780, 61 16,046, 714. 53
4,200,233.34 17,062, 355.41
2 236,000.00 2,890,105.32 18,267 582.60
1,163,270.88
758,232.51
NATIONAL AND FEDERAL RESERVE
Total bills held on last report
Held
Date
1927
January
February...
March
April
May
June
July
August
September.
October
November..
December..
902,670.
950,899.
663,052.
195,761.
850,610.
862,383.
535, 827.
435, 654.
003,619.
529,999.
097, 758.
794, 244.
1928
January
February..
March
April
May
June..
July—
August
September.
October
November _
December..
947,091.03
059,022. 57
905,095. 25
114, 636. 08
621, 505. 38
459, 397. 64
796, 615. 56
724,082. 77
057,920. 72
531, 324. 60
804,959. 24
698, 669. 62
1929
January
February-,
March
April
May..,
June
._
July
August
September.
October
November..
December..
1930
January
February..
March
April
May
June
July
August
September .
October
NovemberDecember. .
2
Allotted by
open market
investment
committee
Purchased
from fourth
district
members
SYSTEMS
891
date—Continued
Acquired
otherwise
from fourth
district
Acquired
from other
Federals
Total purchased and
acquired
[$11, 545, 225. 67
11, 125, 931.12
7, 286, 665.43
11, 510, 719.15
942, 203.93
300, 094.99
679, i. 77
603, 690.87
633, 922.21
626, 019.55
880, 058.13
437, 502. 33
420. 67
613.15
443. 71
873. 21
286.39
083.41
059. 50
762.81
628.27
064. 90
424.80
031.87
$1,400,047.15 $15,856, 693.49
19,066, 544. 27
12,239, 109.14
15,741, 592. 36
1,000,000.00 14,371, 490.32
500,000.00 13,993, 178.40
8, 588,326. 27
1,100,000.00
8,312, 453. 68
I
11,821, 550.48
J
900,000.00 14, 349,084. 45
.' 1,100,000.00 12,668, 482.93
15,989, 534. 20
19, 287,274.11
7, 341,056. 28
12, 747,119. 68
14, 644,017. 87
12,082, 710.43
5, 297,311.93
6, 018,258.45
6, 322,649. 54
14, 966,864. 23
21, 362,537. 86
17,797, 460. 37
19,896, 584. 05
097.10
645. 88
178. 67
103.88
076. 58
721. 56
809.68
704. 04
428.18
274. 97
531.08
169. 00
J 2,000,000.00
.10,000,158.44
J
500,061.57
J 2,300,067.90
J 2,000,057.89
J 3,500,306.02
.; 3,000,628.37
39,995, 313. 67 11,897, 182. 35 2,300,
32,418, 166. 65 7. " " 008.15 2,032,
23, 377,759. 65 10; 075;276.19 4,214,
15,726, 110. 56
6,861, 445.11 2, 293,
761,
9,920, 702. 20
6,272, 026.76
844. 94
3,021, 602.86 1,843,
610. 71
1,565, 960. 70
5, 239,786. 46
3,601, 252. 35 1,141,
16,149, 899. 54 15,560, 792.46 1, 274,
40,460, 782.49 23, 376,804.89 1, 773,
34,070, 354. 69
232,
2,237, 035.11
24, 654,372. 97 12, 954,201.18
025, 707.84
646,067. 31
050,851. 71
611,258.25
131,867. 34
669,534. 03
250, 623.13
543,881. 37
506,847.94
556, 565.48
687,292. 45
931, 375. 71
BANKING
16,657, 008. 66
21,867, 597. 42
6,933, 744. 43
14, 974,087.16
5, 712,949. 09
3, 991,714. 08
12,941, 690. 47
12,115,302. 95
11,195,281. 98
12, 545,201. 29
7, 583,631. 70
21,883, 658.13
1, 500,025.84 26,197, 397.05
12,188, 702.16
19, 783,298. 35
26,070, 280.19
15, 359,848.58
10, 552,101. 39
11,056, 126.02
12,434, 659.60
20, 094,920. 78
25,669, 812.83
3,053,981. 99 23, 577,973. 44
20,152, 753.05
» $251,477. 38
14,197, 954.45
9,968, 855. 70
14, 541,277.86
9,155, 033.93
7, 033,534.96
4,864, 932. 90
1,565, 960.70
4,742, 402. 04
16,835, 317.05
25,150, 305.13
2,469, 638.27
12,954, 201.18
16,657, 008.66
21,867, 597. 42
6,933, 744. 43
14,974, 087.16
5, 712,949.09
3,991, 714.08
12, 941,690.47
12,115,302. 95
11,195,281.98
12,545,201. 29
7,583,631.70
21,883,658.13
This amount bought from outside dealer.
Dallas.—We
h a v e n e v e r e x t e n d e d t h e b a l a n c e s of bills held in o u r portfolio in
t h e m a n n e r w h i c h t h e q u e s t i o n suggests.
W e c a n p r o b a b l y r e a d i l y give t h e
t o t a l a m o u n t of a c c e p t a n c e s p u r c h a s e d in a n y given p e r i o d a n d s e p a r a t e l y t h e
a m o u n t p u r c h a s e d t h r o u g h t h e s y t e m or from m e m b e r b a n k s a n d dealers in t h i s
district.
If t h i s i n f o r m a t i o n is v i t a l for y o u r p u r p o s e s , we could u n d e r t a k e ,
w i t h i n say 30 d a y s , t o compile t h e i n f o r m a t i o n b y r e c o n s t r u c t i n g o u r records i n
o r d e r t o o b t a i n it, a n d will gladly do so if you desire.
We are, however, not
d e l a y i n g t h e t r a n s m i s s i o n of o u r o t h e r a n s w e r s in order t o do so.
34718—31—PT 6 — 1 3
892
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Kansas
City.-—
Volume of bills in the portfolio of the Federal Reserve Bank of Kansas City on the
last reporting date of each month from January,
1922, to December, 1980
Date
Acceptances
Acceptances Acceptances
purchased
purchased
p u r c h a s e d t h r o u g h openlocally from ocally from m a r k e t inaccepting
vestment
other
banks
committee
sources
1922
J a n 31
F e b . 28
M a r 31
A p r 30
M a y 31
J u n e 30
J u l y 31 J
A u g . 31 _
Sept 30
O c t . 31 1
N o v . 30
D e c 31
75,666.66
277,000.00
392, 500.00
402,000.00
402,000.00
85,000.00
75, 000.00
75, 000.00
128, 997.85
25, 725.85
10,198. 63
385, 698.63
450, 000.00
375,000.00
545,000.00
1924
J a n . 31 F e b . 29
Mar. 3 1 . .
A p r . 30
M a y 31 _
June 30-.
July 3 1 —
Aug. 3 1 . .
Sept. 30_.
Oct. 3 1 —
Nov. 30..
Dec. 31
1925
J a n . 31. _
F e b . 28 .
Mar. 31.A p r . 30_ _
May 31..
June 30.. 1
July31 .Aug. 3 1 . Sept. 30_.
Oct. 31.__
Nov. 30-.
Dec. 3 1 . . .
1926
July 3 1 . . .
A u g . 31-_
Sept. 30-,
Oct. 3 1 - . J
Nov. 30.Dec. 3 1 —
$61,485.83
46, 500.00
29,000.00
39,000.00
5,000.00
5,000.00
1923
J a n 31
F e b . 28
M a r 31
A p r . 30
M a y 31 .
J u n e 30
July 3 1 —
Aug. 3 1 . .
S e p t . 30
O c t . 31 N o v . 30
D e c . 31
75, 000. 00
520,000.00
410,000.00
175,000.00
175,000.00
150, 000. 00
150,000.00
10,000.00
10, 000.00
$56,556.66
1926
Jan. 3 1 . . .
F e b . 28—
Mar. 3 1 . .
A p r . 30—
May31__
J u n e 30—
Date
Acceptances Acceptances Acceptances
purchased
purchased
purchased
t h r o u g h openlocally from locally from m a r k e t inother
accepting
vestment
sources
banks
committee
$520,666.66
1927
Jan. 3 1 . . J
Feb. 28—
M a r . 31..1
Apr. 30—
M a y 31 _
June 30—
July 3 1 - .
Aug. 3 1 - Sept. 3 0 - .
Oct. 3 1 —
Nov. 30-.
Dec. 3 1 —
$12,553, 405.65
13,894, 270. 90
15,155, 257. 67
17,883,830.92
17,220,165.47
18, 294,960. 03
14,897, 583.16
13,145,023. 42
10,859,876.08
11, 612, 236. 98
8, 776,803. 79
9, 275, 794. 20
7, 542,159. 31
5, 396,425. 02
9,700,079. 26
11, 342,508. 63
8, 916,432. 61
7,881, 758. 50
$17,923.75
4,153.12
1928
2,002,144.50
1,701,644.50 i J a n . 3 1 - _ .
F e b . 29_„
1,077,133.37
335, 000.00
Mar. 31..
Apr. 30...
Mav31__
J u n e 30. _
July 3 1 . . .
9,432,601.34
Aug. 3 1 . .
8, 019, 613.26
Sept. 3 0 . 4, 886, 674. 24
Oct. 3 1 - . .
26,000.00
1, 647,969.01
53.610.69
N o v . 30-1,647, 188. 87
Dec. 3 1 —
53,510.69
953, 249. 70
316, 957.98
1929
3, 784,131. 96
Jan. 3 1 . - 27,510.69
8, 958,606.22
Feb. 28...
13, 323, 437. 69
Mar. 3 1 . .
15, 661,180.87
A p r . 30
M a y 31. .
J u n e 30—
i 13,078,158.04
J u l y 31 —
i 13,304,172.83 A u g . 31 700,666. 66
1 13,685,304.35 i Sept. 3 0 . .
800.000. 00
11,711,010.99 [ Oct. 31-_ 1,020,000.00
15,423,037.34
N o v . 3 0 - . 1,110,000.00
13,621,643.67
Dec. 31 —
540,000. 00
15,302,288.05
17,837,120.73
1930
26,135, 459.47
J a n . 31 —
110,000 00
32,562,657.68
F e b . 28—
30, 000. 00
19,059,595.95
Mar. 31.17,006,321.32
A p r . 30 Mav31 .
J u n e 30—
14,221,369.64
Julv31
15,459,249.51
Aug. 3112,073,579.95
Seut. 30
10,572,244.95
Oct. 31 _.
12,025,522.73
N o v . 30
11,360,729.83
Deo 31
13,327, 244. 16
12,097,397. 71
11, 934, 924. 74
16, 200, 798. 30
13,473, 698. 65
10,897, 242.83
8, 572, 69Z 46
10, 577,945. 85
17,902,036.09
24, 872, 923. 33
9,470, 231.83
5,880.00
$50,666.00
70,000.00
70,000.00
8, 425,218.99
9,976,456. 34
10,347, 664.16
6, 292. 718.86
5, 487, 226.00
2, 203, 987. 97
815,430.11
1,747,993.45
9,100. 692. 87
18,371,108. 29
16,383,787.91
7, 621,160 72
472, 799. 59
8,415,611.38
9, 535,376.82
11,671,442.96
6,662, 505. 63
3,885, 352. 81
5,484,033 58
10.560,156.54
9, 553, 729. 23
6,424.144.84
6,746,831.11
11,891 173 63
Minneapolis.—Data
not forwarded.
New York.—The principal source of bills bought by this b a n k is banks and
bankers, not necessarily banks which are in the business of making acceptances.
Our records do not show a segragation of the bill holdings of this bank as to t h e
source of purchase. Beginning in 1926 we h a v e kept a record of our bill purchases for account of ourselves a n d other Federal reserve banks, showing t h e
relative a m o u n t s bought from b a n k s and from dealers. P a r t of such bills are
allotted to other Federal reserve banks. We have no record of such division of
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
893
bills which we retain ourselves. T h e following schedule, therefoie, shows, for
t h e years 1926 to 1930 inclusive, our purchases of bills which are distributed
a m o n g t h e other Federal reserve banks of t h e system from b a n k s a n d from
dealers, and t h a t portion of t h e total held by this bank and t h e portion of t h e
t o t a l allotted to other Federal reserve banks. No bills are acquired from or
t h r o u g h t h e open-market investment committee.
Statement showing, monthly from January, 1926, to December, 1930, purchases of
bankers1 acceptances for the Federal reserve system segregated as to the amounts
acquired from banks and from dealers, also the participation of the Federal Reserve
Bank of New York and of other Federal reserve banks in the total purchased
[In thousands of dollars]
Date
January..
February.
March
April
May
June
JulyAugust
September..
October
November..
December..
January
February...
March
April
May
June
July...
August
September..
October
November..
December..
January
February...
March
April
May.
June
July..
August
September..
October
November..
December. .
January
February...
March
April
May
June
July
August
September..
October
November..
December..
1926
1927
1928
1929
January
February...
March
April
May
June
...
July
August
September..
October
November.
December..
From
banks
From
dealers
Total
Held by
Federal
Reserve
Bank of
New York
64,400
56,100
44,000
50,700
38, 900
65, 500
44, 300
59, 500
51,100
64,200
72,200
63,200
19, 300
16,700
16,800
34, 400
68,800
33.300
25, 800
43, 700
26. 700
34, 600
25,200
52, 800
83, 700
72,800
60,800
85.100
107,700
98.800
70,100
103, 200
77, 800
98, 800
97, 400
116, 000
24, 500
18,500
6,800
18, 800
25,000
13,600
21,700
29, 900
21, 900
32, 400
28, 200
42, 900
58,000
56,000
70, 800
56,100
74, 800
67,100
47, 600
44,100
72, 400
101,100
98, 400
108, 200
42,100
32, 400
3,700
42,000
21,000
19, 200
5,300
23,100
13, 500
32, 000
7,100
3.400
100,100
88, 400
74, 500
98,100
98, 800
86, 300
52, 900
67, 200
85, 900
133,100
105, 500
111,600
33,100
30, 900
23, 200
31, 200
32,200
29, 700
19, 500
26, 500
34, 400
58, 400
35, 200
28, 700
128, 500
67, 700
100,000
97,100
75, 000
30, 200
47,100
57,900
45, 900
114, 000
109, 400
79, 200
37, 900
2,000
1,900
17, 900
12, 800
5, 900
4,000
17,100
72,400
51, 000
9,800
38, 700
166,400
69, 700
101, 900
115, 000
87, 800
36,100
51,100
75,000
118, 300
165, 000
119, 200
117, 900
61, 300
28, 800
36, 200
44,100
29, 400
17,200
23,100
34,100
44, 600
60, 600
47, 400
40,300
78,400
68,000
41, 600
45, 800
32,300
25,000
16,000
35, 000
62, 900
84, 500
10,000
70, 200
11, 900
5,100
25,200
5,200
21, 800
1,500
1,800
3,2C0
85, 500
68, 200
1,200
44, 600
90, 300
73,100
66,800
51, 000
54,100
26, 500
17,800
38, 210
148, 400
152, 700
11,200
114, 800
34, 200
28, 900
28,300
30,600
22,600
14,900
10,300
19, 500
43, 000
58, 400
10, 300
34, 200
96,200
102, 300
60,000
64,500
69, 300
60, 600
89, 500
98, 800
120, 500
89, 400
70, 400
239, 400
40,000
60, 800
10, 900
67,200
21, 600
6,600
24,100
136, 200
163,100
70, 900
131, 700
90, 9C0
67, 200
113.600
112,100
130, 900
104, 700
73, 700
251, 700
51, 800
34, 800
23,800
32,200
25, 500
26,900
33, 700
34, 000
44, 000
32, 300
21, 600
71, 200
13, 300
10, 400
15, 300
3,300
12, 300
894
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Our purchases from dealers for account of this bank and other Federal reserve
banks were, in percentages of total purchases for system account: In 1927, 13
per cent; 1928, 11 per cent; 1929, 9 per cent; 1930, 6 per cent.
Philadelphia—
Acceptances held at last reporting date of each month as follows
P u r c h a s e d from P u r c h a s e d
t h r o u g h openbanks and
m a r k e t comdealers
mittee
Purchased
P u r c h a s e d from| t h r o u g h openbanks and
m a r k e t comdealers
mittee
$14,060,
16, 749, 224. 74
20,848, 528.92
20,343, 539. 54
15, 735, 968.13
19,003, 441.85
25, 412, 685. 01
29,840, 230. 98
22,187, 539. 42
19,649, 586. 82
19, 325, 056.43
23, 380, 058. 08
February. __
March
April
May
June
July
August
September
October
November
December
26, 768, 049. 13
I 28,082,869. 03
29,025,675.82
24,124, 023. 58
19,664,660.07
19,539,899.40
18,835,535.00
19,667,628.63
17,592,454.29
16,962,136.94
23,924,207.29
33,260,989.00
29,942, 156. 59
19, 177, 340. 13
14, 964, 006.11
7, 078, 693. 48
4,169, 285. 79
2,148, 054. 91
1, 287, 489. 49
1, 760, 353. 57
1, 487, 760. 81
8, 569, 261. 55
20. F30, 531.10
18, 276. 472. 25
January
February
March
April
May
June
July
August
September
October
N ovember
December
17,338,096.36
22,822,097.84
24,415,419.78
23,727,822.46
21, 659, 898. 37
15, 352, 934. 64
11,192, 506. 27
17,883.178.17
19, 787,136.38
18,094,673.08
13, 930, 680. 03
16,923,054.08
1926
January
February
March
April
May
June
15,820, 211. 73
19,670, 308. 00
10, 851, 047.17
13,127, 796. 03
11,060.920.11
14, 640, 368. 71
1926
July
August
September...
October
November.._
December.. _
$17, 028, 967. 67
19,379, 985. 91
24,019,413. 36
27, 534,166.38
25,804,672. 96
26,838,777. 53
1927
January
February
March
April
May
June
July
August
September.. _
October
November...
December...
24,411, 434.12
18,341, 508.14
13, 622,278. 01
12,911, 455. 55
12,401, 685. 29
12,773, 070 88
10,8^4, 791. 22
1, 935,191. 28
9,469,418. 23
19, 313,188. 73
32,024, 029.42
39, 599,372. 21
1928
January
Febmary
March
Apiil
May
June
July
August
September...
October
November...
December...
27, 487,590. 23
37,013, 085. 67
23, 256.678. 38
32,057, 309. 38
30,437, 814. 88
21, 307,793. 59
14,862, 263.87
12, 384,086. 84
15, 526,068.66
20, 645,941. 48
19,484, 759. 50
16, 137,084. 34
1929
January
February
March
April
May
June
July
August
September...
October. . . .
November...
December...
21, 258,519. 47
18, 447,541.61
14, 514,893.48
11,462, 063. 52
9, 692,442. 01
8,866, 361. 07
2, 399,577. 32
7,436, 694.19
12,913, 933.23
13, 769,636.40
9, 503,863. 01
8, 441,426.65
1930
January
February
March
April
May
June
July
August
September...
October
November...
D e c e m b e r . _.
8, 998,601. 65
11,593,853.38
8, 246, 028. 29
7, 886,038.09
3, 827, 542. 46
2,301,977. 31
593, 851. 39
5, 776. i
NATIONAL AND FEDEBAL EESEEVE BANKING SYSTEMS
895
Richmond.—
Bills held on last day of each month, 1922 to 1930,
Date
1922
January
February
March
April
_
May
June
July
August
September
October
November
December
1923
January
February
March
April__
May
June
July
August
September
October
November
December
1924
January
February
March
April..
_
May.
June
July
August
September
October
November
December
Purchased
from dealers
and banks
Allotted b y
open-market
investigating
committee
$2,505,099
2,288,919
2,002, 710
1,859,060
1,146,960
710,300
4, 465,525
268, 750
783,600
1,985,818
2,182,818
1,734, 289
731,000
165,000
975,893
2,078,734
2,047,068
2,177, 582
1,910, 933
953,900
448,000
1, 765,506
2,459,108
2,078, 338
2,313,050
2,388,588
2,539,363
2,058,379
1,447,405
710,400
1,486, 012
1925
January.
February
March
April
May.
June
July
August
September—
October
November
December
1,433,300
2,014,051
3,449,100
2,738,100
2,328,018
2,094,199
1, 704, 329
1, 794,040
2, 644, 754
4,008,487
3, 734, 288
2, 652,000
$5, 527,321
9, 231, 301
7,914,461
8,336,264
7, 558, 368
4,846, 572
3,060,474
1,959, 782
1,061,459
147, 783
43,825
1926
January .
February..
March
April
May
June.
2, 356,200
2,267, 600
1, 206,900
1, 543,559
1,683,009
931, 200
4, 727,013
7, 533,917
9, 236,527
6, 707, 815
7,962,759
9, 724,648
Date
inclusive
Allotted b y
Purchased
from dealers o p e n - m a r k e t
i
n
vestigating
and banks
committee
1926
July__
_.
August..
September
October
November
December
$514,000
667,509
696,000
1, 590,057
2,038.102
2, 958,846
$9,777,012
11,636,302
11,836,962
12,499,374
10,328,378
9,837,488
1927
January
February
March
April
May
June..
July.
.-August
September
October
November
December
2,079,160
1,947,843
1,198,389
1,882, 236
1, 561, 715
476, 500
779, 754
866,693
1, 531, 250
3, 791,292
3, 714,562
4,731,882
8, 670,02£
8,028,08tt
7, 261,973
7,968,018
6,325,55a
7, 840,615
8, 747,999
11,006,056
24,951,666
41,925, 816
46, 298,105
44,092,061
1928
January
February
March
April...
May
June
July
August
September
October
November
December
3, 796,919
3,137,342
1,974, 657
1,282,097
2, 351, 533
2,193,019
1,202,312
1,710, 599
1,845, 279
2, 225, 579
3, 521, 087
4, 087, 610
23, 211,656
12,956,938
11,511,322
14,580,943
10, 686,384
7, 054, 299
5,446, 648
4, 398, 611
12, 245,86318, 759,434
23, 528, 539
20, 229,144
1929
January
February
March
April
May
June...
-_
July
August
_
September
October
November
December
4, 470,497
3, 648,826
4,474, 665
2, 565,084
1, 840, 514
1, 202,975
868,434
813, 663
1,635, 664
2, 243,028
1,958, 111
1, 986,995
14, 737,068
10, 295,684
6,900, 736
4,238,597
2,818,381
1,947,988
1,073,479
1, 865,195
7,505,972
17,026,060
15,714,684
11,301,353
January
F e b r u a r y . _.
March
April
May
June
July...
August
September..
October
November..
December..
2,102,085
1,459,600
1,576,000
1, 554,049
1,478, 775
1,108,375
904, 275
486,000
249,000
523,000
686, 500
727,000
8,255,074
12, 635, 645
8,067,104
7,380, 545
6, 662,687
4,180, 760
5, 363,169
9, 597,521
9,588,953
7, 481, 763
7,321, 252
8, 698,109
896
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
St. Louis.—
Statistics on the volume of bills purchased and held in our portfolio on the last reporting date of each month
Date
1922
January
February..
March
April
May
June
July
August
September.
October
November.
December..
From
local
dealers
737.03
147.35
433.15|
246.92
697.00
697.00|
925. 47
933. 00|
000. 00
523.38
1923
January
February. _
March
April.
May
June
July
August
September.
October
N o v e m b e r . 100, 000.00
December..
1924
January
100,000. 00
February. _
March
April
May
June
July
August
September.
October
November.
December..
1925
January
February..
March
April
May
June
_.
July
August
September.
October
November.
December..
1926
January...
February.
March
April
May
June
F r o m local
other
sources
F r o m openm a r k e t investment
committee
$46,326.32
383,303.38
362,019.14
480, 507. 30
868, 910. 26
$609,145.39
458,766.92
609,145. 39
684,112.05 1,154,017.13
952,104.52 1,870,453. 71
921,136. 77 1, 616, 639.80
910, 087.73 4,988, 969.14
512,531.08 7,235,707.71
418,919.05 11, 608,727.57
1.122, 501.88^
1, 585, 574.02:
1,998,163.591
1,007,431.19
772,586.13
539, 799. 20|
33, 706.64
13,426, 681.62
8,453, 143.60
10,872,069.23
10, 755, 024.40
8,920, 281.42
6,067, 893.74
2, 611,009.46
389, 404.50
39, 404. 50
29, 000. 00
22,000.00
43, 246. 98
639, 628. 68
207, 000.00
608, 715. 47
31, 714.97
'""30,"24l."67
36,"6o6."66|
133, 691. 56
4,148,669. 38
5,432,036.20
4, 240.751. 67
2,396,820. 65
562, 867. 54
29, 834.16
567, 149.31
3,894,689.85
9, 589,497. 68
14, 253, 589.86
21,390, 593. 51
138, 347.40
313, 421. 61
824, 155. 94
042, 577.69
980, 988.48
737, 198.71
475, 121. 04
532, 297.46
959, 099. 23
582, 561. 04
267, 642.81
151, 254.99
1,508,356.68 18,344,826.81
16, 215, 378. 26
9,183,386. 26
15, 000.00 7,967, 554. 73
9, 625,357.68
7,721,586.82
Date
From
local
dealers
F r o m local
other
sources
F r o m openm a r k e t investment
committee
1926
July
August
September.
October
November.
December..
$4, 720, 968.00
8, 264,329. 65
660, 889.36
6, 445,072. 58
10, 496, 630.39
7, 991, 665.14
1927
January
February. _
March
April
May
June
July
August
September.
October
November.
December..
10, 452. 372.33
8, 978, 070.40
19,746, 576.29
18, 210, 150.42
11,648. 467.31
10,722, 904.32
7,311, 976. 36
4,065, 167.22
4,190, 284. 83
4,946, 169. 56
4,428, 257. 65
5,035, 382. 72
1928
January
February. _
March
April
May
June
July...
August
September.
October
November.
December,.
1929
January
February._
March
April
May
June..
July
..
August
September.
October
November.
December..
1930
January
February. _
March
April
May
June
July
August
September.
October
November.
December..
13,216, 249. 77
12,401, 676.64
6,007, 167. 89
3,371, 855. 72
626, 820.98
343, 274.79
125, 348. 69
$5,000.00 11,901, 723.63
9,618, 001.81
11, 290, 950. 57
8,457,084.91
9, 581, 785.33
7,458,302. 62
1,890, 638.64
1,066. 547. 70
280, 983.86
24, 245. 83
88, 530. 00
25, 201. 93
9, 731, 543. 20
13,028, 220.78
20,887, 921. 49
8, 953,846.56
9, 825,788.36
7, 434, 490.58
4, 567, 913.63
5, 764, 270.05
8, 918, 271. 62
9,093,717.02
5, 718, 098.95
5,861, 130.92
9,492, 903. 21
San Francisco.—A separate control record of bills acquired from various sources
has not been maintained.
Possibly the following information showing total purchases each month and
the source of such purchases may serve your purpose.
Accepting banks offer their bills to dealers and not to the Federal reserve bank.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Classification
897
of bills purchased
[000 omitted]
Acquired in twelfth
district
Date
January
February...
March
April..
May.._
June
July
August
September..
October __.
November..
December..
January
February. _.
March.
April
May
June...
July..
August
September..
October
November..
December..
1923
January
February...
March
April
May
June
July
August
September.
October
November..
December..
January
February.. .
March
April
May
June
July
August
September..
October
November..
December..
January
February. _.
March
April
May
June
July
August
SeptemberOctober
November..
December..
From deal- From dealers under
outrepurchase ers
right
agreement
1926
From
banks
$1, 651
2,805
3,288
3,119
3,591
6,470
9,678
8,295
7,488
7,966
5,774
9,441
$50
2,734
2,624
978
1,732
$821
746
824
792
353
986
405
962
3,061
596
545
250
9,560
8,058
7,947
7,417
4,211
5,694
5,774
6,848
5,679
7,383
7,376
8,636
805
419
1,620
2,771
535
1,720
477
1,556
918
779
1,408
1,487
587
224
924
2,011
1,521
1,515
1,867
612
542
1,234
776
707
8, 951
8,247
5,975
5, 553
1,683
591
~4,l35
624
439
387
555
147
167
318
246
231
3,072
2,822
1,692
276
1,351
614
861
276
374
435
1,280
504
1,229
926
1,783
5,499
9,207
8,815
12,134
7,937
12, 297
10, 032
7,867
9,902
10,121
7, 511
9,924
2,052
4, 755
1,691
2,881
2,353
3,033
2,191
2,854
2,262
2,129
2,602
3.066
1,420
857
2,299
1,856
1,008
1,253
1,737
3,406
1,990
1,682
2,974
7,002
9,721
8,220
11,621
17, 716
11, 781
17, 469
13,199
11, 698
14, 566
13,080
17,075
21,049
1,305
1,188
2,779
1,910
2,283
2,334
1,179
2,063
2,534
1,582
2,743
3,140
2,001
2,564
2,419
250
1925
Acquired outside twelfth district
904
1,631
3,376
2,407
4,445
5,448
4,313
2,507
6,709
From other| From openFederal
market
reserve
committee
banks
$2, 502
3,203
1,009
580
1,100
1,013
898
NATIONAL AND FEDERAL BESERVE BANKING SYSTEMS
Classification of bills purchased—Continued
Acquired in twelfth
district
Date
January
February
March.__
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August..
September...
October
November...
December
January
February
March
April..
May.
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
December
From deal- From dealers under
outrepurchase ers
right
agreement
1927
___
_„.
Acquired outside twelfth district
From
banks
From otherj From openFederal
market
reserve
committee
$17, 671
15, 853
23,418
19, 621
16,127
15, 272
16,037
18,636
20,472
18,644
22, 218
20,207
$4,636
4,185
3,101
4,904
4,101
3,433
6,458
3,788
6,266
6,433
4,615
5,657
$1,874
2,347
1,578
1,905
995
927
960
671
4,105
1,469
3,009
5,133
1,631
1,163
15,133
6,105
5,201
7,962
6,603
12,140
18, 627
15,079
11,778
19,178
11, 516
7,812
4,445
5,870
3,166
6,145
7,058
5,407
18, 467
13,420
12,088
13,674
4,034
1,276
6,383
4,794
2,036
1,883
3,550
3,980
3,592
6,766
7,497
11,216
11, 866
9,287
13,029
10, 782
10, 729
10, 933
11, 527
14,307
14, 754
16, 555
17, 797
18, 364
12,110
3,774
3,936
2,161
2,445
1,754
1,163
4,320
2,102
2,606
4,024
4,344
6,441
6,373
7,238
1,035
3,509
692
701
2,943
2,677
1,303
4,092
5,689
4,960
640
4,232
231
2,472
1,234
3,019
11, 772
11,400
217
10,856
22,196
17, 919
16,922
19, 404
32,582
23,074
3,548
12, 273
16, 716
29,611
21,814
30, 012
5,974
3,240
4,343
7,736
4,958
5,535
3,465
2,714
4,518
6,412
4,083
4,805
1928
1929
1930
8,133
4,514
2,921
3,095
1,281
331
1,069
137
1,693
4,000
2,605
358
$5,001
6,158
5,677
5,571
4,760
6,919
1,144
$8,400
800
4,484
3,103
5.85*
7,081
6,635
1,315
1,000
1,534
3.314
4,684
500
10,176
11,304
7,468
12,882
8,689
3,139
8,769
9,411
7,502
7,719
5,779
17, 242
19. What policy does your institution follow in buying bills directly from the
accepting bank? Are such bills discounted?
Atlanta.—We discount bills offered by our member banks at our regular
discount rate on 90 days commercial paper when such bills are adequately
secured at time of acceptance by readily marketable staples stored in independent
warehouses.
Boston.—This bank does not buy direct from an accepting bank its own
acceptances. This policy has been in effect since June 1, 1918. Such bills are
not discounted. We do buy (when offered) from accepting banks bills of other
acceptors when such bills have been in the open market for a period of 12 to 14
days.
Chicago.—It has never been our practice to buy bills directly from the accepting bank. We are, however, willing to take such bills for rediscount at our
regular discount rate for commercial paper but such bills are not offered to us
for rediscount.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
899
Cleveland.—We do not purchase acceptances direct from the accepting bank,
nor do we discount such bills for the accepting bank.
Dallas.—We do not purchase from accepting banks their own bills, or discount
them.
Kansas City.—Bills bought direct from accepting bank are usually treated as
rediscounts and handled at the current discount rate.
Minneapolis.—This bank does not buy bills directly from the accepting bank
without indorsement by another bank. Such indorsed bills are purchased
outright.
New York.—We never buy bills from the acceptors, directly or indirectly, nor
do we discount for a member bank a bill accepted by that member bank.
Philadelphia.—We do not buy bills directly from, nor rediscount directly for
accepting banks.
Richmond.—-This bank does not buy bills directly from the accepting bank,
and it is not the practice of accepting banks to offer them to us for discount.
St. Louis.—We do not buy or discount bills direct from or for the accepting
bank.
San Francisco.—(a) Bills are not purchased directly from acceptors.
(b) A bank's own acceptance is not taken for discount. As a primary obligation of the offering bank, the acceptance would not (it is believed) come within
the provisions of section 13 of the Federal reserve act permitting a Federal
reserve bank to make advances to its member banks on their own promissory
notes for a period not exceeding 15 days when secured by notes and bills, etc.,
eligible for discount and purchase, or United States Government obligations.
20. Append a classification of bills held for own account on the last reporting
date in each month since January, 1922, by the type of currency in which the
bills are stated. What were the reasons for the increase in the amount of bills
stated in foreign currencies in 1927, 1929, and 1930?
Atlanta.—See following schedule for our holdings of bills which were stated in
United States currency. The Federal Reserve Bank of New York will submit
system aggregate amounts of bills held which were stated in foreign currencies,
in which holdings the Federal Reserve Bank of Atlanta participated in accordance
with the percentages as shown on the schedule supporting our answers to question
No. 15.
Classification of bills held for own account on last report date in each month since
January, 1922, by the type of currency in which bills are stated (all bills stated
are in United States currency)
Month
January..,
February..
March
April-.- - .
May
June
July
August
September.
October
November.
December.
$2, 010,857.44
1,216,920.42
2,106,020.26
91S, 020.62
516, 583.20
869, 565. 03
746, 187.88
1,063, 116.49
5,073,413.19
12, 376,792. 74
8,976,961. 66
b, 291 620.09
Month
January...
February,
March
April
May
June
July
August
September
October-_ .
November.
December.
1923
1924
$3,086, 816. 34
3,214, 247.46
3,635, 274. 75
2,598, 714. 67
2,079, 113.24
1,909, 186.29
2,096, 798. 74
2,825, 929.76
4,959, 794. 24
6,304, 431. 55
7,688, 600.44
7,160, 128. 53
$8, 748,858. 32
6,453,492.54
5,025, 756.15
3,986,912.87
3,688, 197. 23
1,964, 664.45
1,477, 542. 42
1,041, 862. 64
2, 536,666. 01
5, 532,709.33
b, 890,952. 21
7,826, 168. 78
1927
1925
1926
$3,922, 317.92 $4,037, 322.45
3,418, 773. 21
2,387, 545.77
1, 336,370. 51 2,389,236.85
956, 062. 70 2,040, 297.10
776, 090.82
1,108,675. 33
427, 774.40
644, 178. 61
668, 310. 77
274, 915. 50
1, 578,930.2b
743, 524. 70
1,120,431. 35 3,448, 290.99
4, 214,280.24
2,913, 469.49
3,949, 475.26
4,982, 091.30
536. 58 4,383, 894.74
1929
l$3,468, 114.89 $2,038, 095.08
2,825, 495.87 1,643,509.98
4,112,867. 65 1, 258,903. 49
4,326,640.70 1,436,925. 93
2,944,686. 68 1,691, 651.16
3,083,108.69 1,452, 315. 82
1,964,238. 27
543, 798.03
1,434,046.72
780, 395. 20
1,926, 525. 76
984, 361.03
114.62
604.77
1,588,
720.36
2, 346,912.09
232.46
255.28
2, 239,
1,
2,400,
V"
$3,104, 433.10 $5,870,084. 33
3,073, 480.44
2,892,414. 67
4,090, 039.92
1,558,258. 62
4, 207,661. 31
922,945.51
4,989, 666.06
714,064.93
4, 265,678.84
406, 087. 28
4,037, 882.09
465,682.66
5,581, 310. 24
614,004.36
8,134, 877. 36 1, 321,539.30
8,920, 753.14
1,228, 527.65
6,536,476.15
968, 312.15
8,042, 434. 02 1,801, 544. 32
900
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Boston.—Classification of sterling bills held for own account on the last reporting date in each month since January 1922, by the type of currency in which the
bills are stated:
December, 1924
$474, 000
January, 1925
474, 000
February, 1925
71,000
N O T E . — F i g u r e s s h o w n i n t h e a b o v e t a b l e r e p r e s e n t t h e a m o u n t of sterling bills p u r c h a s e d b y t h i s b a n k
locally. If question 20 refers t o " S y s t e m " purchases, it is suggested t h a t reference be m a d e t o r e p o r t
s u b m i t t e d b y t h e F e d e r a l R e s e r v e B a n k of N e w Y o r k .
Chicago.—All transactions in bills purchased in foreign currencies are conducted by the Federal Reserve Bank of New York, the other Federal reserve
banks participating, we taking our pro rata share. The information required
can be obtained from the Federal Reserve Bank of New York.
Classification of bills held by the Minneapolis Federal Reserve Bank for own account
on the last reporting date in each month since January, 1922, by the type of currency in which the bills are stated
Bills p u r chased,
payable
in dollars
Bills p u r chased,
payable
in foreign
currency
Bills p u r chased,
payable
in dollars
Bills p u r chased,
payable
in foreign
currency
50,601. 53
50, 601. 53
623, 501.13
1927
January
February
March
_
April..
May..
June
July
August
September...
October
November...
December...
$10,527, 894.31
9,468, 413. 63
6, 618, 717.03
12,370, 891.46
7, 552, 912.91
6,983, 018.43
5,388, 731.99
4,105, 162.47
8,285, 911. 38
18,104, 963. 75
20, 582, 708.96
18,310, 951.40
$330,141.59
351.485.06
357.426.07
195,486. 50
7,591.65
7, 591. 65
7,661. 67
1924
January
February
March
April
May
June
July
August
—
S e p t e m b e r _,_
October
November
December
2,928, 776.35
5,116, 333. 96
7, 744, 240. 33
3, 730, 897.17
1, 701, 709. 51
1,044, 065. 40
317, 625. 68
292, 671. 24
1,888, 453. 63
1,540, 427. 71
560, 112.40
377.82
1928
January
February
March
April
May
June
July
August
S e p t e m b e r . __
October
November...
D e c e m b e r . _.
314, 621.00
736, 224.10
820.968.04
500,201.89
642,857. 70
032, 359. 74
194,220.19
044.039.05
584.271.96
011,260.70
109.802.97
791,873. 67
6,896.02
6,896.02
6,908.60
6,924.44
6,924.44
6,963.48
6,963.48
6,963. 48
6,994. 97
7,061. 31
7,056,87
27,469. 54
1925
January
February
March
April
__
May
_
June
_.
July
August
September
October
November
December
4,997, 321. 87
8,490,455.92
17,316, 638.36
10,664, 272.01
17,078, 363. 60
19, 685,634. 87
20,468, 428.12
25,018, 726.85
13,270, 618. 26
6,399,227. 73
18, 741,259.17
1929
January
February
March
April...
May...
June
July
August
September...
October
November...
December...
858,832.39
520,613.19
917,144. 77
141,428.29
803,426.90
259,512. 65
612,226.34
688, 697. 38
111,826.68
655, 301. 55
769,310. 71
610, 659.65
25,428.58
25,481.70,
25,722.36
25,894.93
25,912.47
26,076. 31
51,383.50
308,393.13
423,739. 75
426, 584. 30
25, 661.53.
25, 761.22
1926
January
February
March
April
May
June.
July
August
September
October
November
December
7,182,501.98
7,124, 421. 66
8,082, 395. 37
19,017, 688. 47
12,810, 629.68
8,681,549. 56
9,115,913. 36
11, 505,596.98
12, 778,205. 79
13, 646,066. 60
13,093, 420.82
12,614, 674. 84
1930
January
February
March
April
May
June
July
August
September...
October
November...
December...
178,067. 33
770,149. 66
949,391.23
590,677. 55
959, 978. 32
253,816. 71
136, 485. 77
495,447. 35
156,840. 75
183,098.01
049,535. 32
583, 714. 68
23,705.4523,815.99
23,878.16
23,913.01
24,236. 79
24,469. 80
24,469. 80
24,506.2^
24,639.99
496,432. 35
698,314. 65
827,597. 90-
1923
January
February
March...
April
May
_June
July
August.September
October
November
December
$131,662. 50
4, 958, 652.93
2,582, 769.86
652, 267.91
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
901
Cleveland.—We are unable to give t h e detailed information requested. We
understand, however, t h a t this information m a y be h a d t h r o u g h t h e Federal
Reserve Bank of New York.
Dallas.—See answer to question 18. We are advised t h a t the Federal Reserve
Bank of New York will give a complete answer to this inquiry.
Kansa City.—None.
All held in New York.
Minneapolis.—Following
is a classification of bills held for our account on t h e
last reporting date in each m o n t h since J a n u a r y , 1922, divided into bills drawn in
United States dollars a n d bills in foreign currency. T h e latter are not divided
by currency, since t h e bills are held in New York and we have never t a b u l a t e d
t h e m in a n y other form t h a n in t h e United States equivalent of all foreign currencies involved as one total. T h e reasons for t h e increase in t h e bills d r a w n in
foreign currency in 1927, 1929, a n d 1930 can best be given by the New York
Federal Reserve Bank.
New York.—The
reasons for the increases in 1927, 1929, and 1930 in t h e
a m o u n t s of foreign currency bills held by ourselves a n d t h e othei Federal reserve
b a n k s were generally as follows: We purchased foreign exchange at a time when
it was weak a n d we wTere threatened with t h e importation of gold. We sought
to support exchange by our purchases a n d thereby not only prevent t h e withdrawal of further a m o u n t s of gold from Europe b u t also, by improving the position
of t h e foreign exchanges, to enhance or stabilize Europe's power to buy o u r
exports. I n fact our efforts to support exchange wTere u n d e r t a k e n in t h e a u t u m n
during our heaviest export season when the foreign exchanges are normally u n d e r
pressure, a n d these operations were liquidated when t h e seasonal strain h a d
passed, our gooas had been moved, and the position of t h e foreign exchanges
h a d improved.
(The Federal Reserve Bank of New York requested t h a t d a t a be held confidential.)
Philadelphia.—Acceptances
United States
currency
held at last reporting date of each month
United States
currency
Sterling
bills
1922
January
February...
March
April
May
June
July
August
September..
October
November. _
December..
$14,060,899. 79
16, 749,224.74
20,848, 528.92
20,343, 539.54
15, 735,968.13
19,003, 441.85
25,412, 685.01
29,840, 230.98
22,187, 539.42
19,649, 586. 82
19, 325,056. 43
23,380, 058.08
1925
January
February...
March
April
May
June
July
August
September..
October
November..
December..
$17, 338,096. 36
22,822, 097.84
24, 415,419.78
23, 727,822.46
21,659, 898. 37
15, 352,934. 64
11,192, 506.27
17,883, 178.17
19, 787,136.38
18,094, 673.08
13, 930,680.03
16,923, 054.08
1923
January
February...
March
April..
May
June
July
August
September..
October
November..
December..
26, 768,049.13
28,082, 869.03
29,025, 675.82
24,124, 023.58
19,664, 660.07
19,539,899.40
18,835, 535.00
19,667, 628. 63
17,592, 454. 29
16, 962,136. 94
23, 924,207. 29
33,260, 989.00
1926
January
February...
March
April
May
June
July
August
September..
October
November..
December. _
15,820, 211. 73
19,670, 308.00
10,851, 047.17
13,127, 796.03
11,060, 920.11
14, 640,368. 71
17,028, 967. 67
19,379, 985.91
24,019, 413.36
27,534, 166. 38
25,804, 672.96
26,838, 777. 53
1924
January
February...
March
April
May
June...
July
August
SeptemberOctober
November...
December..
29,942, 156. 59
19,177, 340.13
14,964, 006.11
7,078, 693.48
4,169, 285.79
2,148,054.91
1, 287,489. 49
1,760,353. 57
1,487, 760.81
8, 569,261. 55
20,830, 531.10
18, 276,472. 25
1927
January
February. . .
March
April.
May
June
July
August
September..
October
November. _
December..
Sterling
bills
411,434.12
341,508.14
622, 278.01
911, 455.55
401, 685.29
773,070.88 $1,024,858.09
824, 791.22 1,124,752.21
935,191. 28 1,143, 763.41
625, 556.8Q
473, 562. 78
24,293.27
313,188. 73
24,293.27
024,029. 42
24, 517. 3&
I, 517. 27
902
NATIONAL AND FEDERAL EESERVE BANKING SYSTEMS
Philadelphia.—Acceptances held at last reporting date of each month—Contd.
United States
currency
United States
currency
Sterling
bills
1928
January
February...
March
April
May
June
July
August
September..
October
November..
December..
087. 28
37,259, 802. 60
23, 256,678. 38
34,558, 015. 36
32, 938,520.86
22, 387,360. 36
14, 862,263. 87
12,384, 086.84
15, 526,068.66
20, 645,941. 48
19, 484,759. 50
16,137, 084. 24
$24, 263. 78
24, 263. 78
24,308.04
24,363. 78
24, 363. 78
24, 501.12
24,501.12
24, 501.12
24, 611. 94
24,845. 36
24,829.71
96,652.08
1929
January
February...
March
April
May
June
23,104,062.47
22, 789,812.91
17, 744, 783.96
11, 724,416.74
9, 692,442.01
8,866,361.07
97,645. 75
97,849. 72
98.773.88
99,436.52
99.503.89
100,133.03
1929
July
August
September...
October
November. _ .
December...
1930
January
February
March
April
May
June
July
August
September. „_
October
November...
December...
Sterling
bills
$2, 399,577.32
7,436,694.19
12,913,393.23
13, 769, 636.40
9,503,863.01
8, 441,426. 65
$197,312.63
1,184,229. 67
1,627,160. 58
1,638,083. 71
98, 540. 26
98,923.11
8,998,601.65
11,593,853.38
8,246,028.29
7,886,038.09
3,827,542.46
2, 301,977. 31
593,851.39
975.15
100, 441.36
100, 703. 55
100, 850. 51
102, 216.04
103, 198.73
103, 198.73
103, 352.56
103, 916.48
2,093, 649.44
2, 945,066.17
3,490, 304.18
5,776.08
Richmond.—This bank has only a voluntary pro rata participation in foreign
bills purchased by the Federal Reserve Bank of New York for system account and
is unable to give the currency of such bills. For percentage of participation see
answer to 15.
St. Louis.—(1) Schedule follows.
(2) None held until June-September, 1927, when Federal Reserve Bank of
New York sold gold earmarked in London and invested proceeds in sterling bills,
in which we participated. Holdings afterwards small until October, 1930, when
sterling exchange was purchased by Federal Reserve Bank of New York and invested in sterling bills, in which we participated.
Classification of bills held for own account on the last reporting date in each month
since June, 1927 l
Payable i n Sterling
1927
June
July
..
August
September..
OctoberN o v e m b e r . _.
D e c e m b e r . _.
Francs
11,018.80
11,089.98
11,089.98
11,140.14
11,245.80
11,238.71
11, 652. 24
11, 677. 48
$32,070. 31
1929
January
February
10,865. 75
11, 069. 97
29,904. 97
30, 085.81
10.982. 55
11,002.58
11,027.82
* None so held previous to this date.
Sterling
Pengos
1929
March
April
May.
| June
July
I August
September...
October
November...
December
$480,034. 02
503,811.71
512, 344. 53
280,197. 32
10,881.36
10,881. 36
10.981. 73
1928
January
February
March... ...
April
May
__.
June
July
_.
August.. . . .
S e p t e m b e r . _.
October.
N o v e m b e r . _.
December
__
Payable i n -
$11,164. 09
11,164.01
11, 281. 59
11,269.19
11,483.29
56, 270. 19
40, 458. 65
40,462. 63
9,870. 55
9,870. 55
1930
January
.
8, 976. 23
February
8, 976. 23
March
8, 973.14
April
9, 390. 33
May
9, 390. 33
June
•9, 525. 06
9, 526. 42
July.i
August
9,516. 41
September...
9,605. 34
October
747, 840. 57
N o v e m b e r . _. 1,107,910 60
December
1,266,100.10
Francs
Pengos
$30, 267. 79
30, 295. 94
30,311.11
30, 452. 90
30,483. 58 $40,491.50
3, 928. 57
2, c94.13
1, 937. 74
1,933.86
31,208. 29
31, 347. 41
28, 300. 97
28,398. 28
28,455. 92
28, 545. 42
28,692 00
28, 775. 50
28,831.23
29,050. 53
29, 083. 25
29,130. 38
29, 212.13
29, 270. 52
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
903
San Francisco.—Increase
of foreign bills:
1927: Sterling purchased to employ portion of t e m p o r a r y London balances
which arose from t h e purchase of gold to arrest shipments t o t h e United States.
1929: Sterling bills bought to relieve some of t h e pressure on sterling exchange
a n d to help stay t h e flow of gold from London to t h e United States. Pengos
were purchased in cooperation with central b a n k s of England, France, Belgium,
a n d t h e Netherlands, to strengthen position of National Bank of H u n g a r y in
dealing with H u n g a r y ' s foreign exchanges.
1930: Sterling purchased t o strengthen E u r o p e a n exchanges which were
weakened to a degree, it was believed, t h a t would check foreign purchases of
American goods.
Classification follows:
Holdings of bills
United
States
currency
Holdings of bills
Date
Foreign
currencies
598.000
SH 000
483,000
873,000
422, 000
953,000
497,000
991,000
928,000
163,000
304,000
302, 000
998,000
375,000
821,000
010,000
341,000
651, 000
865,000
321,000
505,000
450,000
032,000
343,000
948,000
931,000
391, 000
579,000
448,000
373,000
848. 000
898,000
291,000
934,000
680. COO
068,000
372,000
006, 000
104,000
411,000
792,000
841,000
382,000
750,000
016,000
191,000
300,000
440,000
226,000
886,000
567,000
880,000
683,000
000
i All sterling.
2
Increase francs.
July 28,1926.
Aug. 25, 1926.
Sept. 29,1926
Oct. 27, 1926.
N o v . 24, 1926.
Dec. 29, 1926_
Jan. 26, 1927.
Feb. 23, 1927.
M a r . 30, 1927.
Apr. 27, 1927.
M a y 25, 1927.
June 29,1927.
July 27, 1927.
Aug. 31, 1927.
Sept. 28, 1927
Oct. 26, 1927_
N o v . 30, 1927.
Dec. 28, 1927.
Jan. 25, 1928.
Feb. 29, 1928.
M a r . 28, 1928.
Apr. 25, 1928.
M a y 29, 1928.
June 27,1928.
July 25, 1928.
Aug. 29, 1928.
Sept. 26, 1928
Oct. 31, 1928.
N o v . 28, 1928.
Dec. 26, 1928.
Jan. 39, 1929.
Feb. 27, 1929.
M a r . 27, 1929.
Apr. 24, 1929.
M a y 29, 1929.
June 26, 1929.
July 31, 1929.
Aug. 28, 1929.
Sept. 25, 1929.
Oct. 30, 1929.
N o v . 27, 1929.
Dec. 31, 1929.
Jan. 29, 1930..
Feb. 26, 1930.
M a r . 26,193..
Apr. 30, 1930.
M a y 28, 1930.
June 25, 1930.
July 30, 1930..
Aug. 27, 1930Sept. 24, 1930.
Oct. 29, 1930-.
N o v . 26, 1930.
Dec. 31,1930..
3
Increase pengos.
United
States
currency
$20, 317,000
552,000
598,000
869,000
809,000
008,000
505, 000
968,000
879,000
374, 000
980, 000
428.000
122, 000
924,000
179, 000
893, COO
603, 000
467,000
731,000
491, 000
218,000
191,000
713,000
055,000
122,000
197, 000
629,000
257, 000
189,000
013,000
472,000
80,000
980,000
438,000
037,000
375, COO
524,000
925.000
802,000
774,000
402,000
539,000
647,000
411,000
i:._4, 000
755, COO
796,000
402,000
855.000
220,000
144,000
735, 000
515,000
540,000
* Increase sterling.
904
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
21. Does your institution ever acquire bills from other reserve b a n k s to seive
a s a cover for Federal reserve notes? State on a t t a c h e d schedule t h e a m o u n t s
a n d occasions of such purchases.
Atlanta.—Our
institution does not acquire bills from other Federal reserve
b a n k s to serve as a cover for Federal reserve notes.
Boston.—This
institution does not acquire bills from other reserve b a n k s to
serve as a cover for Federal reserve notes.
Chicago.—We h a v e never acquired bills from other Federal reserve b a n k s for
t h e purpose of using t h e m as a cover for Federal reserve note issue, b u t we h a v e
purchased bills from other Federal reserve banks for other purposes.
Cleveland.-—We have not found such practice necessary a t any time.
Dallas.—We have never done so b u t appreciate t h a t occasions might arise
when it would be desirable to do so.
Kansas City.—We have never acquired bills from other reserve banks for the
purpose of serving as cover for Federal reserve notes.
Minneapolis .—This bank has never followed this practice.
New York.—This
b a n k has never acquired bills from other Federal reserve
b a n k s for t h e purpose of providing cover for its Federal reserve notes.
Philadelphia.—No.
Richmond.—No
such purchases have ever been m a d e by this bank.
St,
Louis.—No.
San
Francisco.—No.
22. Present on a t t a c h e d schedule t h e buying rates on acceptances of different
maturities which have been in force at your institution, with t h e date of each
change, since J a n u a r y , 1922.
Atlanta—
Schedule of buying rates on acceptances of different maturities which have been in
force at the Federal reserve bank of Atlanta, with date of each change since January,
Aug. 31, 1925:
30 days
45 davs
46-90 days
4 months
5-6 months
Sept. 22, 1925:
45 days
46-90 days
4 months
5-6 m o n t h s
J a n . 8, 1926:
45 days
90 days
4 months
5-6 m o n t h s
Apr. 27, 1926:
15 days
60 days
90 days
4 months
5-6 m o n t h s
M a y 20, 1926:
30 days
90 days
4 months
5-6 months
M a y 21, 1926:
30 days
90 days
4 months
5-6 m o n t h s
Aug. 16, 1926:
45 days
90 d a y s
4 months
5-6 m o n t h s
Percent
3%
3}{
3%
3l/2
3%
3}i
3%
3l/{
3%
3\{
3%
3%
4
3%
3)i
3%
3%
4
3/8
3lA
3%
4
3%
3lA
3%
3%
3%
2>h
3%
4
Aug. 23, 1926:
15 davs
45 days
120 days
5-6 m o n t h s
Sept. 1, 1926:
15 d a y s
45 days
120 days
5-6 m o n t h s
Aug. 5, 1927:
15 days
45 davs
90 days
4 months
5-6 m o n t h s
J a n . 27, 1928:
45 davs
90 days
120 days
5-6 m o n t h s
F e b . 3, 1928:
45 days
120 days
5-6 m o n t h s
Mar. 30, 1928:
30 days
90 days
120 days
5-6 m o n t h s
Apr. 13, 1928:
30 days
120 days
5-6 m o n t h s
M a y 22, 1928:
120 days
5-6 m o n t h s
Percent
3%
3%
3%
4
3l/2
3V2
3%
4
3
3^
3^
3%
3%
3}i
3%
3}i
3%
3*4
3\{
3%
3}{
3%
3Ji
4
3%
3%
4
4
4)1
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
J u l y 14, 1928:
120 days
5-6 m o n t h s
Aug. 1, 1928:
90 days
4 months
6 months
J a n . 7, 1929:
30 days
90 days
4 months
5-6 m o n t h s
Dec. 10, 1929:
120 days
5-6 m o n t h s
905
F e b . 1, 1930:
45 davs
120 days
5-6 m o n t h s
Apr. 12, 1930:
120 days
5-6 m o n t h s
Aug. 25, 1930:
75 days
90 days
120 days
5-6 m o n t h s
Dec. 26, 1930:
120 days
5-6 m o n t h s
Percent
4#
4}^
4#
4%
5
4>' 2
4%
4%
5
4
4%
Percent
3%
4
4}£
3
Zy4
1%
2
2%
2%
1%
2
Boston.—
Buying
rates on acceptances of different maturities which have been in force at this
institution, with the date of each change, since January,
1922
Maturities (days)
Date of change
15 1 20
Jan.3
Jan.5..
Jan 9
Feb. e
Mar. 23
Apr. 10
Apr. 11
Apr. 21
May 9
May 24
June 2
June 30
Julv 10
Aug. 2
Aug. 16
Sept. 20
Sept. 29
Oct. 2.
Oct. 6
Oct. 18
Oct. 19
Oct. 25
Oct. 26
Dec. 20
Apr. 16
Apr. 23
May 31
Oct. 2
Jan 14
Jan. 16
30
45
1922
44 •
44
4
34
34
_
44
4
34
34
VA
\ m m
1 34
34
m
_ .
4,4
4
34
34
VA
VA
VA
34
34
3
VA
VA
34
3
34
34
3
3
34
34
34
34
VA
VA
.
m
34
3M
34
1923
4
44
4
4
34
34
m
4
44
4
4
m
34
34
34
VA
4
44
4
4
1924
Apr 25
May l._
.
Mavl9_.
May 22..
June 9 ' _ _ . . _
June 18
_.
June 30 .
July 23
.
Ju]y28
Aug. 25 _
Sept 3
Nov. 17
Dec. 3 .
Dec 5
Dec 9
. _
34
34
VA
VA
.
.
34
Ws
VA
VA
3
24
24
3
2A
24
2
2
24
2M
2%
24
2%
234
24
2*A
24
2%
m
m
VA
VA
3
24
2H
2A
2
24
2H
2%
2V2
2%
44
44
4
1 34
34
34
34
VA
1 60
1
75
110
120
434
44
44
44 !
4
34
44
4
34
44
4
34
44
4
44
4
34
34
34
34
34
34
34
34
34
3
34
34
34
34
34
34
VA
4
4
34
34
44
VA
44
130
44
150
180
44
44
44
4
44
4
44
4
34
34
34
34
34
34
34
34
4
4
4
4
4
44
44
44
44
44
34
VA
3
34
VA
VA
VA
34
34
VA
4
34
34
34
34
3%
34
4
34
334
VA
VA
3
34
34
34
34
34
34
34
4
4
44
44
44
VA
VA
3
90
34
34
4
44
4
44
4
4
44
4
4
44
4
4
34
34
34
VA
2H
234
34
34
334
34
24
2M
34
34
VA
VA
24
2M
34
34
34
34
24
24
2^i
2,4
234
24
24
24
234
24
24
2%
•
24
24
24
2J-6
2%
24
24
24
24
24!
24
24
3
3
44
44
44
44
44
44
44
44
44
44
44|
44
44
44
44
44
44
44;
44
44
34
34
34
34
24
24
2%\
24
24
34
34
34
34
24
24
24
24
24
34
34
34
34
241
24
24
24|
24
24
24
24
24
24s
24;
24
24
3 !
34
34
34
34
24
24
24
24
24
24
24
24
3
34
34
34
34
24
24
24
24
24
24
24
3
34
3
34
34!
34
3 1
24
24
34
906
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Buying rates on acceptances of different maturities which have been in force at this
institution, with the date of each change, since January,
1922—Continued
Maturities (days)
Date of change
Feb.6
Mar. 2
June 15
Aug. 3 1 . Sept. 23
Jan. 8_Apr. 27
May 20
May 21
Aug. 16
Aug. 23.
Sept. 1
July 22
July 29
Aug. 5
Aug. 22
1925
__.
15
20
30
3
3
3
_, -
m
3k
1926
_._
__ _
.
m\
3M
V-A
m
m
1928
Jan. 27... .
Feb. 3
Mar. 30
Apr. 13
May 18
July 13
July 26
1929
Jan. 4
Jan. 21-. __ _.
Feb. 15
Mar. 21
Mar. 26
July 12.._
Aug. 9 . . .
Oct. 25
Nov. 1Nov. 15
Nov. 22
3k
3k
._
-
.-.
1930
Jan.31
Feb. 11
Feb. 24
Mar. 5_. -- .
Mar. 6
Mar. 11
Mar. 14
Mar. 17 _.
Mar. 19
Mar. 20 May 2
_
May 8
May 20
._. .
June 3
--_
June 5
_ - - -_ . _ __
June 16
,. - June 20
June 30
_.
_ _
July 21 .
Dec. 24
___
VA
3
3
3k
m
3K
m
m
3% m
4
3k
3H
4k
4k
4
4k
4k
m
4M
5
5k
5
5k
5
5k
5k
5H
5k
5
4k
4k
4
m
4
4k
m
5
4k
4k
4
&A
5k
5
4k
4k
4
m
m
3k
3H
3k
3k
3H
3k
3
3k
3
3k
3k
3H
m m
3k
!
2V2
2%
2%
22 k
m
m
2
k
2k
2
3H
3k
3k
3
2k
2k
2
k
2k
2
2k
m
m
m m ik
60
3
3k
90
75
110
120
130
150
180
3
3k
3k
3k
3
3k
3k
3k
3k
3k
3k
3%
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
4
4
4
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
4
3k
4
3k
4
3k
3k
3k
3
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
4
4k
4k
3k
3k
3k
3k
4
4k
4k
3k
3k
3k
3k
4
4k
4k
m
3k
3k
3k
3k
4
4k
4k
3k
3k
4
4
4
4
4J4
4k
4
4k
4k
4k
4k
5
4k
4k
5
4k
4k
5
4k
4k
5
5k
4k
5
m
5k
5
4k
4k
4
4k
5
6H
5k
5k
5k
5k
5
5k
5k
5k
5k
5
5k
5k
5k
5V2
sk
4k
4k
4
4k
5
5k
5k
5k
5A
5k
5
4k
4k
4
4k
5
VA
4k
5
5k
5k
4k
4k
4
4k
4k
4
5
4k
5
4k
5
4k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k
3k 1
3k 1
3k
3k
3k
3k
3k
3k
3k
3k
4k
4k
4k
4
3k
3k
4
3k
3k
4
3k
3k
3
2k
2k
3k
3k
3
2k
2k
2k
3k
3k
3k
3
3k
3k
3 !
3k
3k
3
2k
2k
2
2k
2
2
2
2
2
3k
3k
3k
3k
3k
3k
3
3
2k ! 2k
2k
2k
2k
2k
2k
2k
2k
2k
2k
2k
2k
2k [
2%
Ik
lk
2 |i
2
2
m
3k
3k
3
3 '
y>A
1927
_ .
___
45
5
4k
4k
4
3k
3k
3k
3k
3k
3k
3k
3 1
2k
2k
2k
2k
2k
2
Ik
ik t
^A
5k
5k i
ik ;
ik
1%
WA
'
2k
2%
2
k
k
5k
5k
5k
3k
3k
3k
3k
ik
k
5
5H
sk
sk
sk
k
907
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Chicago.—
Federal Reserve Bank of Chicago buying rates on bankers' acceptances, January
1922, to January 20, 1981
I n effect J a n . 1, 1922
1922
-
Feb. 6
F e b . 16
Mar. 6
M a r . 13
M a r . 21
M a r . 27
A p r . 10
A p r . 14.
May 5 ...
M a y 18
June 2
J u n e 19
J u n e 26
July 5
J u l y 15
J u l y 25
Sept. 21
Sept. 25
Sept. 27
Oct. 2
Oct. 6
Oct. 1 3 . .
Oct. 18
Oct. 19
Oct. 2 4 . .
Oct. 27
16 to 30
days
31 to 45
days
46 t o 60
days
4^
4^
4J4
4H
4H
4
4
4H
4i/6
ltol5
days
D a t e effective
4
_
„
Z7/i\
3 ^
m
-
4
m
zn
Z}i\
3%
3J4
m\
3H
3M
3J4
3^
314
33/16
3 1
ZlA
Z%
314
3#
3H
334
3H
31/4
3-%
Z%
ZH
ZH
3%
4i/6
33/4
4
3H
ZH
3H
3H
3HJ
3
4>i
3%
3H
3^i
Z}&
3-Me
Z\i
4J4
4
3
3
_.
m
4M
4
3%
m
_
91 t o 120 121 t o 180
days
days
61 t o 90
days
_-_
1,
3H
3H
Z%
3i/4
3
3H
3H
3H
33/i
m
3!4
Z%
z7A
3%
4
4
4H
m
3)4
Z%
m
4
3H
Z7/i
4
4J4
1923
4
4
A p r . 17
M a y 23
July7
1924
A p r . 24
M a y 1. . . .
M a y 16.
M a y 22
June 2 . . .
J u n e 77
J u n e 26
Aug. 8
Nov. 17...
N o v . 28
Dec. 3
m
__
_
334
31/2
3ii
3
21/2
2i/4
2
2J4
2J4
2%
2V2
23/4
3?4
m
3#
3
_
2H
2
2H
2H
2%
2H
234
Dec. 8
D e c . 22
AH
4
4
334
m
ZH
3i/4
m
214
2H
2Vs
2V2 i
2%
1 m
1925
Feb. 6
F e b . 27
J u n e 12
Aug 31
Sept. 22
m
3
3
3U
_
3H
3M
3H
m
Z\\
3H
31/4
w
m
zu
314
1926
Jan. 8
A p r . 27
M a y 20
M a y 21
A u g . 16
A u g . 16
Sept. 1
4H
4H
m
3J4
ZH
2H
2M
2H
2H
21/2
3
3H
m
4i/6
33/4
3H
3H
3i/6
2%
2H
2>6
2H 1
m
2 5 /6
2%
2->4
m
4
33/4
3%
3J4
3H
2i/i
2i/4
1
3H
314
3H
2%
2H
234
3
2%
3
3H
3^
3K
3?4
3M
3H
m
m
4H
334
J
3H
3%
4
3H
3H
33/4
zv
3-^
3^
35/«
33/i
394
4
ZH
3H
3H
3H
31/ 2
31/
33/4
314
zv
1927
J u l y 29
Aug. 5 . . .
A u g . 22
34718—31—PT 6-
1
3
1
-14
mA
3
3
908
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Federal Reserve Bank of Chicago buying rates on bankers7 acceptances, January 1,
1922, to January 20, 1931—Continued
ltol5
days
Date effective
Jan. 27
Feb. 3
Mar. 30
Apr. 13
May 18
July 13
July 26
1928
_
_
„__
m
_
Jan. 4
Jan. 21
Feb. 1 5 . . .
Mar. 21
Mar. 25
July 12
Aug. 9
Oct. 25
Nov. 1
Nov. 15
Nov. 22
Dec. 31 (in effect).
ZH
4
4H
*H
.-
1929
,
Jan. 31
Feb. 1 1 . . .
Feb. 24 _
Mar. 5
Mar. 6.
Mar. 11
Mar. 1 4 .
Mar. 17 .
Mar. 19
Mar. 20
May 2
May 8 Mav20
.
June 3
__
June 5
June 16
_
June 20
July 1
July 21—
Dec. 24
_
1931
Jan. 16 ,
In effect Jan. 20
31 to 45
days
ZH
ZH
ZH
ZH
4
4J4
ZH
3H
ZH
ZH
4
m
m
m
m
_-
.-
.__„
m
m
5
5H
5H
5
5W
f>H
m
5
m
4
4
1930
1
3H
4H
16 to 30
days
Z%
ZH
ZH
ZH
ZM
-_
-- ---_
.-.
m
m
5
m
m
4
4
4
4
z%
Z7/i
Z%
z%
ZH
ZH
ZH
ZH
4
4H
4H
m
5
5H
5H
5H
5H
5
m
m
4
4
ZH
ZH
ZH
Z%
4
4J4
2H
2H
2%
2V>
ZH
3
2%
2H
2%
2H
2%
2
2H
2U
2H
2
Vi
m
2H
4
4
4
4
zn
zn
4J4
ZH
ZH
ZH
Z^i
4
ZH
ZH
ZH
3
2H
2H
ZH
ZH
3
m
m
m
5H
5H
5H
5H
\H
5
tyi
4H
2M
2H
2H
2H
2
2H
2H
w
2
\H
2
2H
2H
2
2
m
m
m U^and2
\H
w
m
m
m
VA
5
hH
In
ZH
3
2H
2H
2%
2H
±H
m
ZH
ZH
ZH
ZH
ZH
3
4H
5
ZH
ZH
ZH
zy±
z%
4
4
hH
hH
5H
5H
5
4%
Z%
z%
ZH
Z%
5
ZH
ZH
Z}i
ZH
3
m
m
m
61 to 90 91 to 120 121 to 180
days
days
days
Z%
ZYi
ZH
Z\i
ZH
3
ZH
__
5
5H
5H
5H
5
46 to 60
days
61 to 75 days, 1% per cent; 76 to 90 days, 2 per cent.
Cleveland.—•
Buying rates for bankers acceptances effective at Federal Reserve Bank of Cleveland,
from January, 1922, to December, 1930, inclusive
The buying rates for various maturities are not available for the years 1922,
1923, and 1924. However, the following schedule indicates the minimum buying
rates for bankers acceptances which were in effect during those years. For the
most part, our rates as scheduled above have followed the New York rates.
However, while many changes have occurred in the New York rates since March
20, 1930, no changes have been made in our rates, except that our minimum
rate was reduced to 2% per cent.
Per cent
Jan. 1 to Mar. 12, 1922
Mar. 13 to Apr. 20, 1922
Apr. 21 to Dec. 31, 1922
Jan. 1 to Apr. 23, 1923
Apr. 24 to Dec. 31, 1923
4
3}£
3
3
4
Per cent
Jan. 1 to May 11, 1924
May 12 to May 28, 1924
May 29 to June 19, 1924
June 20 to Dec. 31, 1924
4
3H
2%
2
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
909
The buying rates in effect for bills of the various maturities from J a n u a r y 1,
1925, to December 31, 1930, are as follows:
J a n . 1 to F e b . 27, 1925:
Percent
1 to 30 days
2%
31 to 60 days
2%
61 to 90 days
3
91 t o 120 days
3^
121 to 180 days
3y2
Sales contracts
3
Feb. 28 to J u n e 11, 1925:
1 to 30 davs
3
31 to 60 days
3%
61 to 90 days
3l/8
91 to 120 davs
3%
121 to 180 days
3#
J u n e 12 to Aug. 30, 1925:
1 to 30 days
3
31 to 60 days
3H
61 to 90 days
3}i
91 to 120 davs
3}{
121 to 180 days
3}{
Aug. 31 to Sept. 21, 1925:
1 to 30 days
3%
31 to 45 days
3l/{
46 to 90 days
3%
91 to 120 days
3>i
121 to 180 days
Z%
Sales contracts
3%
Sept. 22, 1925, to J a n . 7, 1926:
1 to 45 davs
3J4
46 to 90 days
33/8
91 to 120 davs
3J/2
121 to 180 davs
3%
J a n . 8 to Apr. 26, 1926:
1 to 45 days
Z%
46 to 90 days
3%
91 to 120 days
3%
121 to 180 days
4
T r a d e bills
4
Sales contracts
3H
Sales
contracts,
United
States securities
4
April 27 to M a y 20, 1926:
1 to 15 days
3%
16 to 60 days
3l4
61 to 90 days
3H
91 to 120 davs
3l/2
121 to 180 days
4
T r a d e bills
3)4
Sales contracts
3}i
M a y 21 to Aug. 15, 1926:
1 to 30 davs
3%
31 to 90 days
3K
91 to 120 days
3%
121 to 180 days
3%
Sales contracts
3)i
Aug. 16-23, 1926:
1 to 45 days
3%3
46 to 90 days
3H
91 to 120 days
3%
121 to 180 days
4
T r a d e acceptances
4
Sales contracts on bills
3}i
Sales contracts on governments
4
i Wire from New York of July 21,1929.
Per cent
Aug. 24-31, 1926:
1 to 15 days
3%
16 to 45 days
3H
46 to 120 days
3%
121 to 180 days
4
4
T r a d e acceptances
Sales contracts on bills
3%
Sales contracts on governments
Sept. 1, 1926, to Aug. 4, 1927:
1 to 15 days
3}i
16 to 45 days
3/2
46 to 120 days
3%
121 to 180 days
4
T r a d e acceptances
4
1
Sales contracts on bills,
July 22, 1929, (3% per
3%
cent)
Sales contracts on governments
Aug. 5 - 2 1 , 1927:
3
1 to 15 days
16 to 45 days
3%
46 to 90 d a y s .
3%
91 to 120 days
3%
121 to 180 days
3%
Repurchase r a t e —
3}i
New York
3y2
Cleveland
T r a d e bills
3H
Aug. 22, 1927, to Jan. 26, 1928:
3
1 to 15 days
3
16 to 45 days
3%
46 to 90 days
3%
91 to 120 days
3%
121 to 180 days
Repurchase r a t e —
New York
Cleveland
T r a d e bills
3Y2
J a n . 27, to Feb. 2, 1928:
3%
1 to 15 days
3H
16 to 45 days
3%
46 to 90 days
91 to 120 days
3y2
121 to 180 days
3%
Repurchase r a t e —
3%
New York
3V,
Cleveland
3}i
T r a d e bills
Feb. 3, to Mar. 29, 1928:
3K
1 to 45 days
46 to 120 days
3%
121 to 180 days
3%
Repurchase r a t e
3H
T r a d e bills
3H
Mar. 30, to Apr. 12, 1928:
3H
1 to 30 days
3%
31 to 90 days
3%
91 to 120 days
4
121 to 180 days
3Y2
Repurchase r a t e
4
T r a d e bills
910
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Apr. 13, to M a y 17, 1928:
Percent
1 to 30 days
3%
31 to 120 days
2%
121 to 180 days
4
Repurchase r a t e
3%
T r a d e bills
4
M a y 18 t o July 12, 1928:
1 to 120 days
4
121 days and over
4%
Repurchase r a t e
4
T r a d e bills
4#
J u l y 13-25, 1928:
1 to 120 days
4%
121 to 180 d a y s
4%
Repurchase r a t e
4J4
T r a d e bills
4}£
July 26, 1928, to J a n . 3, 1929:
1 to 90 days
4J4
91 to 120 days
4%
121 to 180 days
5
Repurchase r a t e
4%
J a n . 4-20, 1929:
1 to 30 days
_>4H
31 to 90 days
4%
91 to 120 days
4%
121 to 180 days
5
Sales contracts
4%
T r a d e bills
5
J a n . 21 to F e b . 14, 1929:
1 t o 15 days
4%
16 t o 45 days
4%
46 to 1 8 0 d a v s
5
T r a d e bills
5
Sales contracts
5
F e b . 15 to Mar. 20, 1929:
1 to 15 days
5
16 to 45 days
5
46 to 90 days
5%
91 t o 180 days
5J4
T r a d e bills
5*4
Sales contracts
5
Mar. 21-24, 1929:
1 to 45 days
5%
46 to 90 days
5%
91 to 120 days
5#
121 t o 180 days
5%
T r a d e bills
h}i
Mar. 25 to J u l y 11, 1929:
1 to 45 d a y s
5%
46 t o 120 days
5y2
121 to 180 days
5%
T r a d e bills
5%
Sales contracts
5H
July 12 t o Aug. 8, 1929:
1 to 120 days
5^
121 to 180 days
5J4
T r a d e bills
5H
Sales contracts
b}i
Aug. 9 to Oct. 23, 1929:
1 t o 120 days
5%
121 t o 180 days
5/ 2
Aug. 9 t o Oct. 23, 1929—Con.
T r a d e bills
Sales contracts
Oct. 2 4 - 3 1 , 1929:
1 t o 90 days
91 to 120 days
121 to 180 days
T r a d e bills
Sales contracts
Nov. 1, 1929, to F e b . 7, 1930:
1 to 120 days
121 to 180 days
T r a d e bills
Sales contracts
F e b . 8-10, 1930:
1 to 45 days
46 to 120 days
121 to 180 days
T r a d e bills
Sales contracts
Feb. 11-23, 1930:
1 to 45 days
46 to 120 days
121 to 180 days
Sales contracts
Feb. 24 to Mar. 4, 1930:
1 to 90 days
91 to 120 d a y s
121 to 180 days
Sales contract 0
M a r . 5-6, 1930:
1 to 120 days
121 to 180 days
Sales contracts
Mar. 6-10, 1930:
1 t o 120 days
121 t o 180 days
Sales contracts
Mar. 11-13, 1930:
1 to 15 days
16 to 120 days
121 to 180 days____
Sales contracts
Mar. 14-16, 1930:
1 t o 120 days
121 to 180 days___.
Sales contracts
Mar. 17-18, 1930:
1 t o 45 days
46 to 120 days
121 to 180 days
Sales contracts
Mar. 19-20, 1930:
1 to 45 d a y s
46 to 120 days
121 to 180 days
Sales contracts
Mar. 20 to Dec. 3 1 , 1930:
1 t o 120 days
121 to 180 days
Sales contracts
Per cent
6
5%
5
5%
5H
6
5%
4%
5
5
4%
3%
4
4y2
4^
4
3%
3%
4%
3%
3%
3%
4>i
3%
3%
4
3%
3}i
3%
3}i
3%
3%
3%
3%
3%
3%
3%
3%
3){
3%
3}i
3
Z%
3%
3
3
3}i
3
911
NATIONAL AND FEDBEAL KESEBVE BANKING SYSTEMS
Dallas.—
Minimum buying rates for bankers' acceptances Federal Reserve Bank of Dallas
15
days
Date
J a n . 1, 1922...
J a n . 18, 1922..
J u n e 13, 1922.
Feb. 5,1925..
J u n e 12,1925.
A u g . 31,1925.
S e p t . 21,1925
J a n . 7, 1926...
A p r . 26, 1926.
M a y 20,1926.
M a y 21,1926.
A u g . 16,1926.
A u g . 23, 1926.
Sept. 1,1923..
J u l y 22,1927.
A u g . 5, 1927-.
A u g . 22, 1927.
J a n . 26,1928F e b . 3, 1928-.
M a r . 30,1928.
A p r . 13, 1928.
M a y 18,1928.
J u l y 13, 1928.
J u l y 26, 1928.
Oct. 16, 1928.
J a n . 8, 1929...
J a n . 23,1929.
J a n . 26, 1929..
F e b . 20,1929.
M a r . 4, 1929..
M a r . 22,1929
M a r . 26, 1929.
J u l y 9,1929..
N o v . 1, 1929..
N o v . 15, 1929.
N o v . 22, 1929
J a n . 31,1930F e b . 13,1930.
M a r . 5,1930..
M a r . 7,1930M a r . 12, 1930.
M a r . 14, 1930
M a r . 17,1930.
M a r . 20, 1930.
M a r . 21, 1930
M a y 3, 1930..
M a y 9, 1930.
M a y 20, 1930.
J u n e 4, 1930-.
J u n e 6,1930-.
J u n e 16, 1930.
J u n e 20, 1930.
J u l y 1, 1930..
J u l y 22, 1930D e c . 24, 1930.
J a n . 16, 1931.
6
4
3
3
3
VA
VA
VA
m
VA
m
VA
VA
Wz
VA
3
3
:
,
m
VA
VA
VA
4
VA
30
days
6
4
3
3
3
VA
ZX
VA
VA
m
VA
VA
VA
VA
VA
VA
3
3M
VA
VA
VA
4
VA
VA
m
m m
w%
m
VA
V4
VA
m
VA
VA
VA
5
5
VA
VA
VA
VA
5
5
VA
VA
VA
VA
VA
VA
m
VA
4
w
3
3
2X
m
2K
2%
2M
2M
27
lA
m
m
m
m
VA
4K
4
VA
VA
VA
VA
VA
3
3
2%
2V2
2M
2%
2X
2A
2
\%
VA
IX
IX
45
days
6
4
3
3
VA
VA
m
VA
VA
VA
VA
3H
VA
VA
V/2
VA
3
m
VA
m
VA
4
VA
4H
m
VA
m
m
4%
5
VA
VA
VA
±X
VA
4
VA
m
m
VA
m
m
VA
3
3
2%
2A
2H
2%
2%
2%
2
m
m
ix
IX
60
days
6
4
3
3
VA
VA
VA
m
VA
3M
VA
VA
VA
VA
VA
VA
VA
3H
3K2
VA
VA
4
VA
VA
VA
VA
m
4%
4%
5
&A
VA
5
VA
VA
4
4
VA
m
VA
VA
VA
VA
VA
3
2%
2A
2V2
2A
2A
2M
2
2
1%
IX
IX
90
days
6
4
3
3
VA
VA
VA
VA
V/2
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
4
4k
VA
VA
4H
m
4%
5
^A
m
VA
5
m
VA
4
4
VA
VA
VA
VA
VA
VA
VA
3
2%
2%
2%
2M
2H
2H
2
2
2
IX
IX
120
days
5
months
6
4
3
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
V/2
VA
VA
VA
4
4k
m
VA
m
5
5
VA
VA
VA
b%
VA
4%
VA
4
4
VA
VA
VA
VA
VA
VA
VA
3
2%
2%
2%
2V*
2%
2X
2A
2A
2Ks
IX
IX
6
4
3
VA\
3H
3^i
VA
4
4
4
3M
4
4
4
4
3%
VA
VA\
v/4 A\
4 !
4M
4M
5
4K
m
5
53^
5M
5k
5^
5M
5k
5
4K2
VA
VA
VA
4
3^
VA
VA
VA
VA
VA
3
3
3
3
2X
2X
2%
2%
2%
2
2
Kansas City.—Our buying rate on acceptances has followed very closely that
of the Federal Reserve Bank of New York. Their schedule will serve as ours.
912
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Minneapolis,—•
Buying rates on acceptances of different maturities which have been in force at the
Minneapolis Federal Reserve Bank since January, 1922
ltol5
days
D a t e effective
J a n . 1,1922
F e b . 6,1922
F e b . 16, 1922
Mar. 6,1922...
M a r . 13,1922
M a r . 21,1922
M a r . 27,1922
A p r . 10,1922
A p r . 14,1922
M a y 5, 1922
M a y 18,1922
J u n e 2,1922
J u n e 19,1922
J u n e 26,1922
J u l y 5,1922
J u l y 15,1922
J u l y 25,1922
S e p t . 21, 1922
S e p t . 25, 1922
S e p t . 27,1922
O c t . 2, 1922
O c t . 6, 1922.
O c t . 13, 1922
O c t . 18, 1922
Oct. 19, 1922
O c t . 24, 1922
O c t . 27, 1922
A p r . 17,1923
M a y 23, 1923.
J u l y 7,1923 .
A p r . 24, 1924
M a y 1, 1924
M a y 16,1924
M a y 22, 1924
J u n e 2, 1924
J u n e 17, 1924
J u n e 26, 1924
A u g . 8, 1924
N o v . 17, 1924
N o v . 28, 1924
D e c . 3, 1924
D e c . 5, 1924.
D e c . 8 , 1924
D e c . 22, 1924
F e b . 6, 1925
F e b . 27, 1925
J u n e 12,1925
A u g . 31, 1925
S e p t . 22, 1925
J a n . 8, 1926
A p r . 27 1926
M a y 2 0 , 1926
M a y 21,1926.
434
4
.
16 t o 30 31 to 45 46 t o 60 61 t o 90 91 to
121 t o
days
days
d a y s 120 d a y s 180 d a y s
days
*lA
4
Z7A
3J4
VA
334
*x
334
,334
334
m
3^6
VA
3
4H
4
m
334
334
434
VA
434
4
434
4X
434
4
4K
4
VA
334
m
ZlA
m
334
334
3Me
334
3
3
334
3H
334
334
VA
VA
3M
4
._
.
.
„
3K
V-A
VA
334
3
234
2X
2
2A
2X
2%
VA
2%
3
334
334
VA
3H
3H
3M
334
&A
m
VA
4
3J4
334
334
3
234
2H
2
2A
2X
2%
2Y<L
2%
3
m
334
334
334
VA
3^8
334
334
3
334
334
VA
334
3
„
4
w%
m
3M
4
m
334
W%
m
4
l
4X
4Vs
m
434
3%
3H
334
334
2%
234
334
334
2%
2X
2%
2%
2%
2%
2%
2%
2%
3
3
334
33^
m
m
334
3%
4
4
m
m
354
4
434
4
VA
VA
334
33/8
2A
2X
434
3H
234
234
2A
234
2%
234
2%
2%
3
3H
3K
3M
434
VA
334
*X
VA
234
2X
234
2X
2%
2V*
2%
334
&A
334
334
334
m
•
334
3M
3^
334
2%
3
4
&A
m
N A T I O N A L A N D F E D E R A L RESERVE B A N K I N G
Buying
rates on acceptances of different maturities which have been in force at the
Minneapolis
Federal Reserve bank since January,
1922—Continued
l t o l 5 16 to 30 31 to 45 46 to 60 61 to 75 76 to 90 91 to 120, 121 t o
days
days
days
days
days
days 180 d a y s
days
Date effective
Aug. 16,1926.
Aug. 23,1926.
Sept. 1,1926_.
Aug. 5,1927..
Aug. 22, 1927.
Jan. 27,1928..
Feb. 3,1928..
Mar. 30,1928.
Apr. 13,1928.
May 18, 1928.
July 14,1928.
July 26,1928.
Jan. 4, 1929...
Jan. 21,1929..
Feb. 15,1929.
Mar. 21,1929.
Mar. 26, 1929.
July 12,1929.
Aug. 10,1929.
Nov. 15,1929.
Nov. 22, 1929.
Feb. 1, 1930..
Feb. 11,1930.
Feb. 24,1930.
Mar. 5,1930..
Mar. 7,1930..
Mar. 13,1930.
Mar. 14,1930.
Mar. 17,1930.
Mar. 19, 1930.
Apr. 2,1930..
May 3,1930..
May 9,1930-.
May 20, 1930.
June 3,1930..
June 5,1930-.
June 16, 1930.
June 20,1930July 1,1930..
July 21, 1930,
Dec, 24. 1930.
New
Buying
913
SYSTEMS
V/2\
3
3
V/A
3M
4
M
m
m
WA
5
VA
VA\
3^
V/%
3
3^|
m
V/A
V/A
3
3;„
VA
3H,
V/2\
m
4
4^
m
4
4J*|
m
m
m\
4
4Ml
5
5
m
m\
5
5H\
&A
4
5Vs\
v/\
ml
m\
4
4
3K|
m
ml
m
m\
m\
VA\
V/A
m\
VA
VA
V/A
3
3
3 ,
2%\
m
V>A
V/2
VA
3M;
V/8
3
2M
2X\
2/2\
2X\
2X\
2
2
m
2Vi
2H
2VA
2^
2
1X\
IX:
2H
2X
2* '
2
17A\
'i7A\
1X\
ml
m.
VA\
v/A
v/A
m
v/2\
m
4
m\
v/2\
m\
v/A
m
vA
ml
VA
vA
wA
m\
4
VA\
m
M
4
4MI
ml
m
5
m
m\
m
5^
5Vs\
±%\
5
M
4
M
VA
m
4^i
4
4
3K
3M
3K;
3Ji
m
3
2H
2M
2M,
2X\
2
2
r
±X\
4
4
W
v/ \
ml2
v/A
m\
3;
3
2X\
2V2\
2H
2J4
2
2
2
m
m
5
4
4
4
3^
3M
3%
4
4
4^
4M
5
5
5
5X
5M
5Ji
5^
4^
4
4
3^1
3K
3^
3M
VA
5*A
VA
VA
4H
4M
4K
4
3^
m
m\
3
2V4}
2%\
2%\
2H\
2^
2H
2^
2^1
2H,
1«
3
3
3
3
2%
2%
2%
2%
2%
2
York.—
rates on acceptances of different maturities
in force
Bank of New York since January,
1922
__
__
-
4^
4
4
4
4H
4
4
4
m
VA
&A
4^
43^
4
4
*X
4K
VA
__
_
&A
VA
VA
3^
3
3
3
3
&A
Qi
4Vs
VA
4
4K
4H
4
&A
z%
VA
VA
&A
3H
3H
3M
3K
m
VA
3K
VA
ty%
4
m
3Me
3^
33/L6
VA
121 t o
180
days
VA
4M
4Ks
4^
4
4^i
4J4
4H
4H
4H
m
4
VA
3H
VA
3^
3M
VA
3
3
. -
Reserve
1 to 15 16 t o 30 31 to 45 46 to 60 61 to 75 76 to 90 91 to 120
days
days
days
days
days
days
days
D a t e effective
D e c . 27,1921
F e b . 6,1922
F e b . 16, 1922
F e b . 28,1922
M a r . 6, 1922
M a r . 13, 1922
M a r . 21,1922
M a r . 22,1922
M a r . 27,1922
A p r . 10,1922
A p r . 14,1922
M a y 5,1922
M a y 18,1922
J u n e 2,1922
J u n e 19, 1922
J u n e 26,1922
J u l y 5, 1922
J u l y 14,1922
J u l y 17,1922
J u l y 25,1922
A u g . 9,1922
S e p t . 21,1922
at Federal
3
„
/
1 2 t o 40 d a y s .
3
1
1
VA
41 t o 45 d a y s .
VA
m
914
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Buying rates on acceptances of different maturities in force at Federal Reserve
Bank of New York since January, 1922—Continued
1 to 15 16 to 30 31 t o 45 46 t o 60 61 t o 75 76 t o 90 91 t o 120 121 t o
180
days
days
days
days
days
days
days
days
Date effective
S e p t . 25,1922
Sept. 27,1922,...
Oct. 2,1922
Oct. 6,1922.._
Oct. 13, 1922
Oct. 17, 1922
Oct. 18, 1922
Oct. 19, 1922
O c t . 23,1922
O c t . 24,1922
O c t . 27, 1922 .
A p r 17,1923
M a y 17,1923.._
M a y 21,1923
M a y 23,1923
J u l y 7,1923
A p r . 24, 1924
M a y 1,1924
M a y 16, 1924
M a y 22, 1924
M a y 26, 1924
J u n e 2, 1924
J u n e 12,1924
J u n e 17, 1924-.
J u n e 26,1924
A u g . 8, 1924
A u g . 20, 1924
S e p t . 3, 1924
O c t . 16, 1924
N o v . 17, 1924
N o v . 28,1924 ,_
D e c . 3,1924
D e c . 5, 1924
D e c . 8, 1924
D e c . 22, 1 9 2 4 . . .
F e b . 6, 1 9 2 5 . . .
F e b . 27, 1925
J u n e 12,1925
A u g . 28,1925
S e p t . 16,1925
S e p t . 22, 1925
J a n . 8,1926 _ _
A p r . 27, 1928
M a y 20,1926
M a y 21,1928
Aug. 16,1926...
A u g . 23,1926
S e p t . 1, 1926
J u l y 22, 1927
J u l y 29, 1927
A u g . 5, 1927
A u g . 22, 1927
J a n . 27, 1928
F e b . 3, 1928
M a r . 30, 1928
A p r . 13, 1928
M a y 18, 1928
J u l y 13, 1928
J u l y 26,1928
J a n . 4,1929
J a n . 21, 1929
F e b . 15,1929 .
M a r . 21,1929..
M a r . 25, 1929
J u l y 12, 1929.
A u g . 9, 1929
O c t . 25, 1929
N o v . 1,1929
N o v . 15, 1929
N o v . 22, 1929..
J a n . 31, 1930—
F e b . 7, 1930
F e b . 11, 1930.
F e b . 24,1930
M a r . 5,1930
M a r . 6, 1930
M a r . 11,1930
M a r . 14,1930
M a r . 17, 1930
_.„
m
VA
VA
VA
VA
VA
VA
VA
VA
VA\
VA
VA
4
m
VA
VA
VA
V/s
VA
VA
VA\
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
V/£
VA r
VA
4
4
4
4
4
4
V<A
4
4
VA
_
.
_
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
3
3
VA
VA
VA
VA
VA
VA
2H
2H
2M
2A
2A
2Yi
2H
2H
2Vs
2A
2A
2A
2M
2A
2%
2M
2A
2A
2%
2%
*2y2
*25A
2%
2%
2%
2%
2%
2%
2%
3
3
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
2
2
2M
2%
2%
2V2
2%
3
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
„
—
_-_
2%
2%
3
2A
3
VA
VA
VA
VA
VA
VA
VA
VA
VA
4
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
4
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA^
VA
VA
VA
35^
VA
4
4
VA
VA
3
3
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
VA
4M
VA i
\
4
VA
VA t
m
m
5
VA
5
V/4
VA
VA
VA
VA I
5
5
4H
±K
AM
VA
4
VA
4M
VA
VA
VA
VA
VA
VA
VA
VA
VA1
VA
VA
VA
VA
4
VA
VA
VA 1
VA
VA
VA
4
VA
VA
VA
3 76 to 110 days.
2M
2%
3
VA
VA
VA
VA
4
5
2A
2A
2%
V/2
m
3M
3
2VL
VA
VA
_.
—
.-
4M
VA
VA
VA
3
.-
4
VA
VA
4
2%
.
VA
VArVA
VA
VA
VA
VA
2H
2Vs
__
VA
VA
VA
I
_..
-
VA
VA
VA
VA
.
_.
VA
3Me
VA
VA
VA
VA
3^8
__
1
VA
VA
VA
VA
5VA
VA
4i/2
4 ^
5
VA
VA
VA
VA
VA
VA
VA
4
4
VA
VA
VA
VA
VA
VA
VA
4
VA
4
VA
VA
VA
VA
VA
VA
VA
VA
VA
5
5
VA
VA
VA
VA
VA
5
VA
VA
VA
VA
5
VA
VA
4
VA 1
VA
VA
VA
VA
VA
* 111 tc 120 days.
VA
VA
m
5
5
VA
&A
VA
VA
m
VA
VA
5H'
VA
VA
^A
4
VA
VA
VA
VA
VA
334
VA
VA
VA
VA
VA
VA
4
5
4
5
VA
VA
VA
NATIONAL, A N D FEDERAL RESERVE B A N K I N G
Buying
SYSTEMS
915
rates on acceptances of different maturities
in force at Federal
Bank of New York since January,
1922—Continued
Reserve
to
1 to 15 16 to 30 31 to 45 46 to 60 61 to 75 76 to 90 91 to 120 121
180
days
days
days
days
days
days
days
days
Date effective
Mar. 19,1930
Mar. 20,1930
May 1,1930
May 2,1930
May 8,1930
May 19,1930
June 3,1930
JuneS, 1930
June 16,1930--.
June 20,1930
June 30,1930
July 21,1930
Dec. 24,1930
Jan. 16,1931
„
__.
..
__
3
3
3
2K
2%
2K
2%
2y2
2K
2Vs
2H
2H
2H
2
w%
2
V/s
1«
m
3K
3
2K
2%
2Yi
2H
2V
8
2H
2VS
2
2H
2M
2
m
IK
3H
ZH
2
3K
3
2K
2H
2%
2V2
2%
2H
2K
IX
IX
2
3K
3
2Vs
2%
2%
2V2
2H
3K
3
2K
2%
2%
2Vi
2
2H
IK
IX
3
3
2%
2%
Philadelphia.—
Buying
rates on
1 to 15 16 to 30 31 to 45 46 to 60 61 to 90 91 to 120| 121 to
days
days 180 days
days
days
days
days
In effect
Jan. 1, 1922-..
Feb. 6,1922-.
Feb. 16,1922..
Mar. 6,1922..
Mar. 13,1922.
Mar. 21,1922.
Mar. 27,1922.
Apr. 10,1922..
Apr. 14, 1922..
May 5,1922..
May 18, 1922.
June 2,1922..
June 19,1922.
June 26,1922.
Julys, 1922...
July 15,1922.
July 25,1922..
Sept. 21,1922.
Sept. 25, 1922.
Sept. 27, 1922.
Oct. 2, 1922..
Oct. 6, 1922...
Oct. 13, 1922.
Oct. 18, 1922.
Oct. 19, 1922.
Oct. 24, 1922.
Oct. 27, 1922.
Apr. 17, 1923.
May 23, 1923.
July 7, 1923..
Apr. 24, 1924.
May 1, 1924..
May 16, 1924.
May 22, 1924.
June 2, 1924..
June 17,1924.
June 26, 1924.
Aug. 8, 1924..
Nov. 17, 1924.
Nov. 28,1924.
Dec. 3,1924..
Dec. 5,1924..
Dec. 8,1924..
Dec. 22, 1924.
Feb. 6, 1925..
Feb. 27, 1925.
June 12, 1925.
Aug. 31, 1925.
Sept. 22, 1925
Jan. 8, 1926..
Apr. 27, 1926.
acceptances
4K
4
4
4
3K
Z%
3H
ZH
ZH
m
3K
3K
i
m
3K
33
•
3
3
3
3K
3K
m
ZH
K
4
4
4
m\
3H
3K
3K
3K
m\
ZH\
3
K
4
4
4
4
M
K
4
4
4
ZH
3K ,
3Me
m\
3
3
3
3
3
3K
m\
ZH\
ZH
ZH
ZH
ZU
3
3K
z%
ZH
z%
m
m
44
Z%\
44
z%
m
4
4
3
*H
4
K
4
m\
zy \
z%
z%
2M
2J*
2
m
2H
2%
2H
2%
2%
33
3
m
m
ZH
ZH
4
4
4
Z%
ZH
ZHi
3K
K
3K
3M
ZH
ZH
3
K
K
m\
m\
K
2
ZH
2H
2H\
2
2K
2%\
2%
2Yv
2%
2%
3
3
3
3K
3M
ZH
ZH
2%
2H
2K
2H
2%
2H
2%
2%
2%
3
3K
3K
ZH
ZH
ZH
zy2
ZH
3K
3
zy2
4
4
K,
4
K
4
4
ZVA
^,
44
4
Z%\
*H
*H
4K
4
K
4
K
4
4
m
zy2
zy2
zy2
zy2\
ZH\
ZH
Z%
1
4
3
ZH\
ZH\
ZH\
ZH
K
3
3
3
3K
3K
3H
ZH
zy8
3K
W,
ZH
4
4
4
K
4
K
4
z%
ZH
2A
2H
2K
2H
2%
2y2
2%
2%
2K
3
3K
3K
3K
ZH
3
3KI
3K
w
ZH
z%
4
4KI
4
4
K
K
4
Z%\
zyi
ZH,
z}4]
2y2
2M,
2M
2K
2H\
2H\
ZH
3K
m
z%\
z%\
ZH\
ZH\
zyA
ZH\
3
K
3
K
ZH\
ZH
ZH
zy2
zy2
ZA\
3K
3K
4
4KI
4K
w
ZH
ZH
ZH
ZH
ZH
ZH
z%
z%
ZH
ZH
ZH
z%
z%
VA
4
4H
m
4K
4K
z%\
zys\
ZH\
2K
2H\
2H
2V*
2%\
2%\
ZH
ZH\
BH\
ZH\
ZA\
*x
z%
ZH
ZH
ZH
2%
2H
2H
2%
3
3
3
3
3M
ZH
ZH
ZH
ZH
ZH
916
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Buying
rates on
I n effect
M a y 20, 1926.
M a y 21, 1926.
A u g . 16, 1926.
A u g . 23, 1926.
S e p t . 1, 1926.
J u l y 29. 1927.
A u g . 5, 1927..
A u g . 22, 1927.
J a n . 27, 1928.
F e b . 3, 1928..
M a r . 30, 1928.
A p r . 13, 1928.
M a y 18,1928.
J u l y 13, 1928.
J u l y 26, 1928.
J a n . 4, 1929..
J a n . 21, 1929.
F e b . 15, 1929.
M a r . 21, 1929
M a r . 25, 1929
J u l y 12, 1929.
A u g . 9, 1929-.
Oct. 24, 1929.
N o v . 1, 1929.
N o v . 15, 1929.
N o v . 21, 1929
J a n . 31, 1930.
F e b . 11, 1930.
F e b . 24, 1930.
M a r . 5, 1930.
M a r . 6, 1930.
M a r . 11, 1930.
M a r . 14, 1930.
M a r . 17, 1930.
M a r . 19, 1930.
M a r . 20, 1930.
acceptances—Continued
1 to 15 16 t o 30 31 to 45 46 to 60 61 t o 90 91 t o 120| 121 t o
days
days
days
d a y s 180 d a y s
days
days
ml
3M
3^
m\
vA
M
3M
3
3
m
m\
m
ml
5
m\
M
m
m
m
4K
5
5K|
5X
5H
5
4^|
4M|
4M
*H
4
m\
3%
m\
m
m
3M
m\
3
3
M
3
3
m
m
m
m
m
vA
5
3H
4
m
4M
4~
5
53^1
m
m
5^
&A
m\
m\
m
3M
m\
m\
m
4
4M,
4^
m\
5
m\
3M
m\
m
m
M
3H
4
3K|
m\
m\
m
wi
V4\
4
4
3K|
m
m\
3H
w%
3
3
3M
3
3
3
M
m
m
m
ml
4
4M
4HI
4M
5
5}/8
5X
5
4
3:..,
m\
m
m\
5
4K|
4M
4
4
m
m
m\
m
m\t
m\
3
m
ml
ml
ml
m\
4
4^:
5
m\
m\
m
5H
ml
4M
4
4
374
3^1
3^
3H
m
m\
m\
m
4
3M
4
4
4
m
m
3M
4
4
4J4
4^
5
5
5
514
5H
5M
5
4^
4
4
3^
37/g
3^
3^
3H
3^
3
Richmond.—
Local buying
rates on acceptances
of different
maturities
since January
1> 1922
N O T E . — F r o m 1922 to 1926 we h a d a n authorized m i n i m u m b u y i n g r a t e of 3
per cent. Our practice, however, was t o follow t h e b u y i n g r a t e s a t which bills
were acquired by t h e New York b a n k for system account, adding one-eighth of
1 per cent t o each r a t e for such bills as were b o u g h t b y us locally. We h a v e
preserved no record of t h e changes a n d dates of change prior t o M a y , 1926.
Since t h a t d a t e our m i n i m u m b u y i n g r a t e s h a v e been as follows:
1926
M a y 13, 1 t o 15 days, 3)i per cent; 16 t o 60 d a y s , 3% per cent.; 61 t o 90 d a y s , 3%
per cent.
August 16, 1 t o 45 days, 3J^ per cent; 46 to 90 days, 3% per cent.
A u g u s t 23, 1 t o 15 days, 3H p e r cent; 16 t o 45 days, 3% per cent; 46 t o 90 d a y s ,
3% per cent.
September 1, 1 to 15 days, 3% per cent; 16 to 45 days, 3% per cent; 46 t o 90
days, 3% per cent.
December 10, 1 t o 45 days, 3% per cent; 46 t o 120 days, 3% per cent.
1927
J u l y 22, 1 t o 45 days, 3% per cent; 46 to 120 days, 3% per cent.
August 5, 1 t o 15 days, 3% per cent; 16 t o 45 days, 3% per cent; 46 to 90 d a y s ,
3% per cent.
1928
J a n u a r y 26, 1 to 45 days, 3% per cent; 46 t o 90 days, 3}i per cent; 91 t o 120
days, 3% per cent.
F e b r u a r y 3, 1 t o 45 days, 3% per cent; 46 t o 120 days, 3% per cent; 121 t o 180
days, 3% per cent.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
March 30, 1 to 30 days, 3% per cent; 31 to 90 days, 3% per cent; 91 to
3% per cent; 121 to 180 days, 4 per cent.
April 13, 1 to 30 days, 3% per cent; 31 to 120 days, 3% per cent; 121 to
4 per cent.
M a y 7, 1 to 30 days, 3% per cent; 31 to 120 days, 4 per cent; 121 to
4% per cent.
M a y 18, 1 to 120 days, 4% per cent; 121 to 180 days, 4% per cent.
July 13, 1 to 120 days, 4% per cent; 121 t o 180 days, 4% per cent.
July 26, 1 to 90 days, 4% per cent; 91 to 120 days, 4% per cent; 121 to
5 per cent.
1929
917
120 days,
180 days,
180 days,
180 days,
J a n u a r y 4, 1 to 30 days, 4% per cent; 31 to 90 days, 4% per cent; 91 to 120 days,
5 per cent; 121 to 180 days, 5 per cent.
J a n u a r y 21, 1 to 15 days, 4% per cent; 16 to 45 days, 5 per cent; 46 to 180 days,
5 per cent.
F e b r u a r y 16, 1 to 45 days, 5}i per cent; 46 to 90 days, 5}i per cent; 91 to 180
days, 5% per cent.
March 21, 1 to 45 days, 5% per cent; 46 to 90 days, 5% per cent; 91 to 120 days,
5% per cent; 121 to 180 days, 5% per cent.
March 26, 1 to 45 days, b}{ per cent; 46 to 120 days, 5% per cent; 121 to 180
days, 57/i per cent.
July 12, 1 to 120 days, 5% per cent; 121 to 180 days, 5% per cent.
August 9, 1 to 120 days, 5)4 per cent; 121 to 180 days, 5% per cent.
October 25, 1 to 90 days, 5% per cent; 91 to 120 days, 5K per cent; 121 to 180
days, 5% per cent.
November 1, 1 to 90 days, 4% per cent; 91 to 120 days, 4% per cent; 121 to 180
days, 5}i per cent.
November 15, 1 to 120 days, 4% per cent; 121 to 180 days, 4% per cent.
November 22, 1 to 120 days, 4}i per cent; 121 to 180 days, 4% per cent.
1930
J a n u a r y 31, 1 to 45 days, 4 per cent; 46 to 120 days, 4% per cent; 121 to 180
days, 4% per cent.
February 12, 1 to 45 days, 3% rjer cent; 46 to 120 days, 4 per cent; 121 t o 180
days, 4% per cent.
F e b r u a r y 24, 1 to 90 days, 3% per cent; 91 to 120 days, 4 per cent; 121 days,
4% per cent.
March 5, 1 to 120 days, 3% per cent; 121 days, 4J4 per cent.
March 6, 1 to 120 days, 3% per cent; 121 days, 3% per cent.
March 12, 1 to 15 days, 3% per cent; 16 t o 120 days, 3% per cent; 121 days,
3% per cent.
March 14, 1 to 120 days, 3% per cent; 121 days, 3% per cent.
March 18, 1 to 45 days, 3% per cent; 46 to 120 days, 3% per cent; 121 days,
3% per cent.
M a r c h 20, 1 to 45 days, 3}i per cent; 46 to 120 days, 3% per cent; 121 days, 3H
per cent.
M a r c h 21, 1 t o 120 days, 3% per cent; 121 days, 3% per cent.
M a y 3, 1 to 120 days, 2% per cent; 121 days, 3}i per cent.
M a y 9, 1 to 60 days, 2% per cent; 61 to 120 days, 2% per cent; 121 days, 3% per
cent.
M a y 20, 1 to 90 days, 2% per cent; 91 to 120 days, 2% per cent; 121 days, 3%
per cent.
J u n e 4, 1 to 45 days, 2 ^ per cent; 46 to 120 days, 2% per cent; 121 days, 3l/% per
cent.
J u n e 6, 1 to 90 days, 2% per cent; 91 to 120 days, 2\{ per cent; 121 days, 2% per
cent.
J u n e 16, 1 t o 45 days, 2% per cent; 46 t o 120 days, 2% per cent; 121 days, 2%
per cent.
J u n e 20, 1 to 90 days, 2}i per cent; 91 to 120 days, 2% per cent; 121 days, 2l/2
per cent.
J u l y 1, 1 to 45 days, 2 per cent; 46 to 90 days, 2}i per cent; 91 t o 120 days, 2}i
per cent; 121 days, 2% per cent.
J u l y 21, 1 to 75 days, 2 per cent; 76 to 90 days, 2% per cent; 91 to 120 days, 2>i
per cent; 121 days, 2}{ per cent.
December 24, 1 to 120 days, 1% per cent; 121 days, %% per cent.
918
St.
Buying
NATIONAL
AND
FEDERAL
RESERVE
BANKING
SYSTEMS
Louis.—
rates on acceptances of different maturities
Federal Reserve Bank of St.
D a t e effective
at
1 t o 15 16 t o 30 31 to 45 46 to 60 61 to 75 76 t o 90 [91 t o 120j 121 t o
days
days
days
days
days
d a y s 180 d a y s
days
Dec. 27,1921..
Feb. 6,1922...
F e b . 16,1922..
F e b . 28,1922..
M a i . 6, 1922...
M a r . 13,1922..
M a r . 21,1922..
M a r . 27, 1922..
Apr. 10,1922..
A p r . 14, 1922. .
M a y 5,1922._.
Mayl8,1922..
J u n e 2, 1922.._
J u n e 19, 1922..
J u n e 26,1922. .
J u l y 5,1922....
J u l y 14, 1922...
J u l y 17, 1922...
J u l y 25, 1922...
A u g . 9, 1 9 2 2 . . .
S e p t . 21, 1922..
S e p t . 25,1922_.
S e p t . 27, 1922..
O c t . 2, 1922.._.
Oct. 6, 1 9 2 2 . . . .
Oct. 13, 1922...
Oct. 18, 1922...
O c t . 19, 1922...
Oct. 24, 1922...
Oct. 27, 1922...
Apr. 17,1923..
M a y 17, 1923..
M a y 21, 1923..
M a y 23, 1923..
J u l y 7, 1923.—
Apr. 24,1924..
M a y 1, 1 9 2 3 . . .
M a y 16, 1924..
M a y 22, 1924..
J u n e 2, 1924._.
J u n e 17, 1924..
J u n e 26, 1924..
A u g . 8, 1 9 2 4 . . .
A u g . 20, 1924_.
N o v . 17, 1924..
N o v . 28 1924._
D e c . 3, 1924__
D e c . 4, 1924.. _
D e c . 8, 1924._.
D e c . 22, 1924..
F e b . 6 , 1925. __
F e b . 27,1925..
J u n e 12,1925. ,
A u g . 31, 1925..
S e p t . 21,1925..
J a n . 8, 1926....
A p r . 27, 1926. _
M a y 21,1926..
A u g . 16, 1926..
A u g . 23, 1926..
Oct. 4, 1926—.
A u g . 5, 1927...
A u g . 22, 1927..
J a n . 27,1928...
F e b . 3, 1 9 2 8 . . .
M a r . 30, 1928..
A p r . 13, 1928..
M a y 18,1928..
J u l y 13, 1928. _
J u l y 26, 1928. .
J a n . 4, 1929....
J a n . 21,1929...
F e b . 15, 1 9 2 9 M a r . 21, 1929..
M a r . 25,1929..
which have been in force
Louis
4Ks
4
4
4
4
m\
m\
0)
m\
3H
3H
3
3
3
3
3
m\
m
m\
m
*A\
4
4
4
4
ml
m
z%\
m
3H
M
zy
3
3
3
3
3
m\
m
m
3;
3
m\
2
2
2^8
2KI
2%\
m
3
m\
3
3-„
m
3M
3H
z%\
m
M
3
3
ZA\
m\
4
m
4f
5
m
11 t o 40 d a y s 3H-
3H
3^8
3
3
3
3
3
m
ZA
ZA
3H
z%
m
33i
0)
ZA
4
4
4
4
4
Z%\
4M
4
4
4
4
3^
4
4
4
4
4
3: ,
3M
BX\
3."
3
2^
2A\
2
2
2X
2M
2H,
2V2\
2%\
2Hl
3
3M|
z%
m
4
4
4
4M
4^
4
ZA
ZA
m
3M
2A
2U
2%
2H
2H
2V8
2A
2H
2%
2%
3
33/8
ZM
3M
3H
ZA
zy*
ZA
VAl
3H
3;
3
3H
ZA
3H
m\
m
m
m\
4
±A\
4K
4^2
4K
5
5M
m
4
4
4
3«
334
&A
&A
ZA
VA ,
3Me
3H
3K
3
3^8
3M
334
334
3^
3^
Z%
4
4
4
43^
43^
4H
4
3M
3^
3M
33^
2M
2^
2K
2%
2%
2%
2Yi
2%
2%
2VS
3
ZH
ZH\
3H,
3Ks
3
3
33/8|
33^
m\
m
z%
z%\
ZVs\
4
4
4^j
4^
43^
4H
4H
3K
33^
2}A
2A\
2Hl
2\i
2%
2%\
2%\
23/
3
3
3Hi
33^;
3^!
3H
35/i
33^
33i
3M
Z%\
Z*/
4M
4H
4Ks
43^
4
4
35*
3M
33^
ZA
ZA
VA
ZA
ZA
ZA
ZA
ZA
3H
ZA
z
ZA
ZA
z%
zy2
z%
z%
3K
4
4A
iA
±A
±A
ZA
ZA
3^
ZA
2A
2H
2H
a2H
()
2M
2Ys
2*A
2H
Z%
3
33^
z%
31/4
ZA
ZA
ZAi
ZA
ZA
ZA
3%
3i/4
ZA
z%
zy2
zy9
&A
3^8,
z%
4
4M
4M
4^
5
4
43^1
4H
4M
5
5Hj
ZA
VA
z%
ZA
ZA
3H
VA
Ws
&A
4
±A
4M
4M
4^
5
PA
4M
43/8
43i
4Ks
4
4
3«|
3K
3^
3^
334
3M
ZA\
m
zy
zyA
&A\
z%\
53^1
5M
M l t o 45 d a y s 33*.
ZA
ZA
ZA
4
*A
*A
*A
5
5^
53^
4M
43i
4H
43^
4
4
3^j
3^8
ZH\
3K
334,
3^
ZA\
ZA\
3Ks
3?^
33/8
ZA
ZA
3M,
33/2
3M
33^
ZA\
37
4
43^1
4K-4MI
43^4K|
4^-43i
4K-4M!
4MI
m
ZH\
ZA\
ZA\
ZA\
2A\
2A\
2VA
2H
(4)
m\
2H\
2A\
2%\
ZA\
ZA\
ZA,
zu\
ZA
ZVi
ZA\
zy2\
3%
ZA
zn
3M
ZA\
m\
zw
4
4Mi
4 6 / 8|
5
5K
5^1
43i
43i
4H
43^
4K
43^
4
4
3M
3M
3^
33^
3H
33*
ZA
VA
ZA
ZA
ZA
z%
3H
W%
zy2
3H
3K
3%
4
4K
4H
4H
4H
4H
4H
3^
3^i
33i
33^
2%
2H
2H
2W
2^
3
3
3
3
33^
3M
3M
3^
3«
3%
4
4
3M
4
4
4
ZY4
Z%
3%
33/4
4
4
4M
4H
5
5
5
5^i
5^i
5A
919
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
Buying
rates
on acceptances of different maturities which have been in force at
Federal Reserve Bank of St.
Louis—Continued
Date effective
July 12, 1929.
Aug. 9, 1929..
Oct. 24, 1929.
Nov. 1, 1929..
Nov. 15, 1929.
Nov. 22, 1929.
Jan. 31,1930..
Feb. 11,1930.
Feb. 24,1930.
Mar. 5,1930..
Mar. 6,1930.
Mar. 11, 1930
Mar. 14,1930
Mar. 17,1930.
Mar. 19, 1930
Mar. 20,1930
May 2,1930..
May 8,1930.
May 19,1930.
June 3,1930..
June 5,1930..
June 16, 1930.
June 20,1930.
June 30, 1930.
July21,1930.
Dec. 24,1930.
Jan. 16,1931.
ltol5
clays
16 to 30 31 to 45 46 to 60 61 to 75 76 to 90 91 to 120 121 to
days
days
days
days
days
days 180 days
5H
5M
m
5
5m
m
AH
5fc
^A
5
&A
4^
4
VA
m
VA
*%
4tf
4
VA
VA
m
m
VA
VA
VA
m
3
3
2H
2K
2H
2%
2M
2H
2
m
VA
m
VA
4
VA
VA
VA
V/2
VA
VA
VA
3
3
2%
2H
2H
2%
2A
2lA
2
VA
VA
VA
1%
33/4
VA
v/2
m
VA
VA
3
3
2%
2Yi
2H
2H
2A
2V8
2
VA
VA
VA
VA
5H
VA
5
&A
5K
5
5H
5Vs
5
m
VA
*%
4H
m
VA
m
VA
m
VA
4
4
&A
VA
VA
VA
VA
VA
3
2%
2%
2¥z
2V2
2A
2U
2
2
VA
VA
VA
4
4
VA
VA
VA
VA
3*4
VA
3
2%
2VB
2H
2Y*
2M
2%
2
2
VA
VA
VA i
4
4
VA
VA
VA
VA
VA
VA
3H
VA
3
2%
2%
2)4
2A
2A
2H
2
2
2
VA
VA
$lA
5K
5H
4%
4M
4
4
VA
Z7A
VA
VA
VA
VA
m
VA
3
2%
2%
2%
2H
2%
2H
2H
2H
2%
VA
VA
5M
5H
fiH
5
4^
43^
4H
4^
4H
4
3tf
3^
354
3%
m
VA
3
3
3
3
2H
2Vt
2*A
2%
2%
2
2
San Francisco.—Open-market
acceptance rates in t h e San Francisco district
are (of necessity) t h e same as those ruling in New York. To have higher buying
rates in San Francisco would throw all bills into t h e New York m a r k e t . Lower
buying rates would p r o m p t l y divert bills from New York to San Francisco in
such volume as to m a k e defective action imperative.
T h e following is recited as an illustration of the necessity for close coordination
between San Francisco and New York in the question of discount a n d openmarket rates:
During t h e l a t t e r half of 1928 San Francisco h a d a discount rate of 4}4 per cent
against New York's 5 per cent. Dealers were bidding 4% per cent for 90-day
bills, a n d New York was buying a t from 4J^ to 4% per cent. Accepting b a n k s
in San Francisco either preferred to borrow at t h e Federal reserve bank a t 4J4
per cent t h a n to sell their bills in t h e open m a r k e t a t 4% per cent or to borrow
from the m a r k e t a t a higher r a t e t h a n to be indebted to t h e Federal reserve bank.
As a corrective measure, and to give its own member b a n k s t h e benefit of t h e
lower discount r a t e policy, San Francisco accepted offerings of bills accepted by
member b a n k s of the twelfth district a t 4% per cent. This experiment proved
to be unsatisfactory, because everywhere it resulted in bringing out of investors'
portfolios acceptances of twelfth district bills, a n d for a time it made the Federal
Reserve Bank of San Francisco the exclusive m a r k e t for its own district bills.
23. Does your institution ever discrimate in the buying rate established on bills
on the basis of the self-liquidating or nonself-liquidating n a t u r e of the transaction
from which the bill arose?
Atlanta.—No.
Boston.—This institution does not discrimate in t h e buying rate established on
bills on t h e basis of t h e self-liquidating or nonself-liquidating nature of t h e
transaction from which the bill arose.
Chicago.—No.
Cleveland.—Our
rates are fixed on the established credit standing of t h e
acceptors a n d indorsers of t h e bills a n d satisfactory evidence t h a t the bills
offered are eligible in all respects. I t is our understanding t h a t all acceptances
d r a w n in conformity with the Federal reserve act and the regulations and rulings
of the Federal Reserve Board would be self-liquidating.
Dallas.—No.
We endeavor to b u y no bills except of a p p a r e n t self-liquidating
character.
Kansas City.—Practically
all our bills have been purchased through openm a r k e t committee in New York. All bills purchased locally, other t h a n those
handled as rediscounts for accepting bank, have been considered self-liquidating.
Minneapolis.—No.
920
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
New York.—This bank does not discrimate in the buying rate for bills on t h e
basis of the transaction underlying the bill. There would seem to be no logical
basis for taking bills of the same acceptor with equivalent indorsements a t
different rates, because they arose in different classes of transactions, all of
which t h e law specifically provides m a y be financed by acceptances. The m a r k e t
would never discriminate in t h a t way. I t deals in bills as credit instruments.
We believe it would be harmful to t h e position of dollar exchange bills in world
m a r k e t s as well as at home if such discrimation were a t t e m p t e d . For example,
if a bank in Rio de Janeiro were offered three 90-day bills on the same New
York bank, one drawn against a n export of coffee from Brazil to France, one
drawn against the storage of coffee in Brazil awaiting shipment to France, a n d
t h e third drawn for the purpose of creating dollar exchange, which are t h e three
classes of transactions for which bills would most probably be drawn in Brazil,
t h e Rio de Janeiro b a n k would never understand why the same rate should not
apply t o each of those bills, and when t h e bills reached this m a r k e t b a n k s a n d
other investors would be unwilling to buy any one of t h e m if any doubt existed
as to its rediscount value in this market. Such a practice, in our opinion, would
m a k e for untold confusion in t h e discount market.
Philadelphia.—No.
All bankers acceptance credits should be self-liquidating—
t h e great majority within t h e period for which t h e bills are drawn. I n some
cases renewals are permissible where t h e transaction involving t h e transportation
a n d distribution consumes a longer period t h a n 90 d a y s ; b u t whether a t t h e
m a t u r i t y of t h e first acceptance, or t h e renewal, t h e liquidation of t h e underlying
transaction should pay off t h e loan.
Richmond.—-No.
St. Louis.—Have had no occasion to discriminate, as we believe all bills bought
b y us to be self-liquidating.
San Francisco.—No.
Bills are bought on t h e basis of t h e financial standing
of t h e accepting bank and its reputation in conducting acceptance transactions.
24. W h a t has been t h e effect of changes in acceptance buying rates of t h e Federal reserve banks on t h e total volume of bills outstanding?
Atlanta.—Do n o t know.
Boston.—Only indirectly have t h e buying rates of Federal reserve banks affected
t h e total volume of bills outstanding. As it is the primary purpose of t h e Federal
reserve banks to assist in establishing a n d maintaining an active a n d independent
bill market, it usually follows (conditions warranting) t h a t Federal reserve b a n k
rates follow t h e open m a r k e t rates, established by accepting houses. I t is seldom
t h a t Federal reserve b a n k s t a k e t h e initiative by establishing new rates, and,
therefore, a n y changes in t h e volume of outstanding acceptances brought a b o u t
as t h e result of changes in rates would have been initiated by t h e acceptance
houses themselves.
A review of t h e bill rates of t h e p a s t few years show considerable fluctuation,
b o t h increases a n d decreases, while t h e volume of bills during this period has
shown a steady increase. At t h e end of September, 1928, t h e open-market bid
r a t e for 90-day bills was 4% per cent while t h e volume of outstanding bills
a m o u n t e d to $1,004,000,000. This r a t e was advanced to 5% per cent a t t h e end
of March, 1929, while t h e volume of outstanding bills increased to $1,205,000,000.
Our buying rates during this period under review were 4% and 5}£ per cent,
respectively.
T h r o u g h 1928 Federal reserve banks had been heavy buyers of bills, b u t later
in t h e year much of this support was withdrawn. On December 12, 1928, t h e
" s y s t e m " was holding $494,000,000 bills. These holdings declined to $157,000,000 on April 10, a reduction of $337,000,000, b u t t h e t o t a l volume of outstanding acceptances showed a reduction of only $80,000,000, leaving $257,000,000
bills to be absorbed by t h e outside m a r k e t .
Indirectly, buying rates of Federal reserve banks no d o u b t affect t h e volume
of bills outstanding. I t is most reassuring to t h e foreign shipper for him to know
t h a t his acceptance, when it reaches this country, will find a ready m a r k e t a t
suitable rates. If Federal reserve bank support were lacking and acceptances
difficult to market, t h e volume would, no doubt, be curtailed.
Chicago.—The total volume of bills outstanding is affected to some extent by
t h e rates. If t h e rates are low, as compared to commercial paper rates, this
would increase t h e volume of bills to some extent, more particularly domestic
acceptances. On t h e other hand, when acceptance rates are high t h e volume of
domestic bills is correspondingly reduced. We are unable t o determine t o w h a t
extent if a n y t h e buying rates of t h e Federal reserve banks have affected t h e
volume of bills outstanding.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
921
Cleveland.—The
volume of bills in t h e m a r k e t is subject to fluctuations in
business or t r a d e and to supply a n d d e m a n d as they affect t h e money m a r k e t .
T h e m a r k e t really determines t h e rate, and t h e m a r k e t rate, of course, is affected
by a n y appreciable differences in rates here and abroad, especially between
New York and London. High rates here will send some business to London,
and vice versa.
Dallas.—We think t h a t this question could be answered best by appending
statistical d a t a showing t h e comparison between t h e range of rates a n d t h e
volume of bills outstanding a n d t h a t t h e Federal Reserve Bank of New York is
in better position to give this information t h a n we are.
Kansas City.—Refer
to division of research a n d statistics, Federal Reserve
Board.
Minneapolis.—Such
a small volume of acceptances is purchased directly by
this bank t h a t t h e effect of changes in our acceptance buying rate is not discernible.
New York.—We believe t h a t there has been slight, if any, effect on t h e t o t a l
volume of bills outstanding occasioned by t h e buying rates of reserve b a n k s .
As explained in a previous question, t h e m a r k e t primarily determines t h e rates
a t which bills circulate. If rates in this country are too high, some of t h e business
will go to London. When rates in this country are below London, some business
will flow from sterling to dollars.
As to dollar financing shifting from t h e form of acceptance, credits to b a n k
loans, only a relatively small portion of t h e business financed by acceptance
credits is susceptible of such shift, b u t t h a t portion which could be shifted would
change and occasionally has changed on a slight difference in the aggregate cost
of the accommodation. T h e most noticeable instance of this occurred during
a n d in t h e years immediately following t h e World War when t h e American
packing houses were using large a m o u n t s of credit in b o t h d e p a r t m e n t s a n d t h e
cost of financing through acceptances approximated a n d a t times exceeded the
rates a t which t h e y could borrow from their banks. Ordinarily, shifts of this
sort due to rate changes have been relatively small.
Philadelphia.—Any
change in t h e buying r a t e of t h e Federal reserve b a n k s
would have no effect on the total volume of bills o u t s t a n d i n g unless t h e change
affected the relationship to rates on other instruments of a competitive character.
Richmond.—In our opinion the buying rate of Federal reserve banks constitutes
only one of a n u m b e r of factors determining t h e t o t a l volume of bills o u t s t a n d i n g
a t any one time, a n d t h e effect of changes in t h e rates could be only approximately
determined, if a t all.
St. Louis.—Not
enough acceptance business in t h e eighth district to justify a
conclusion.
San Francisco.—It is too early to determine w h a t effect t h e system's buying
rates have h a d on t h e volume of bills created because other i m p o r t a n t factors
have been working to increase the volume of American acceptances.
Suffice it to say, however, t h a t prohibitive rates would soon destroy the desire
t o create bills, a n d a constantly low range of rates offer an inducement to use t h i s
form of credit.
25. W h a t are t h e factors responsible for t h e decline in t h e acceptance commissions charged by American accepting institutions over t h e past six years?
Atlanta.—Do not know.
Boston.—Competition
has been t h e chief factor responsible for t h e decline in
t h e acceptance commissions charged by American accepting institutions over t h e
past six years. This cutting of commissions, however, has been limited almost
entirely to foreign credits. When t h e volume of this class of acceptances first
began to increase, dealers who had been charging a m i n i m u m of 1 per cent per
a n n u m found t h a t they were unable to hold their business and were forced by
keen competition to lower their commission to three-fourths of 1 per cent per
a n n u m and in some instances to an even lower rate. With commission rates a t
three-fourths of 1 per cent per a n n u m American acceptance houses were more in
line with t h e London rate, which was one-half of 1 per cent per a n n u m plus s t a m p
taxes, making t h e t o t a l commission approximately three-fourths of 1 per cent.
T h e decline, if any, of commissions charged by local acceptors for domestic
credits during t h e p a s t six years has been very slight. Most accepting banks
work under an agreement wherein they charge a m i n i m u m r a t e of 1 per cent
per a n n u m for domestic credits. This commission ranges from a minimum of
1 per cent to in some cases as high as 2 per cent, according to risks and work
involved, although V/% per cent per a n n u m is a fair average.
I t is understood t h a t there is a recent m o v e m e n t under way, whereby accepting
banks will agree to charge not less t h a n 1 per cent per a n n u m for both foreign and
domestic acceptance credits.
922
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Chicago.—Competition
between accepting banks for business and to some
extent by t h e reduction of acceptance commissions charged by London banks in
competition for international acceptance business.
Cleveland.—Competition
for this business between t h e accepting banks.
Dallas.—Competition
between accepting b a n k s in t h e American m a r k e t a n d
competition between t h e American b a n k s and foreign b a n k s .
Kansas City.—We are not informed on this subject because of lack of interest
of commercial banks in this district.
Minneapolis.—This
question can best be answered by commercial banks in
t h e centers originating a large volume of acceptances.
New York.—We believe t h a t acceptance commissions charged by American
b a n k s a n d bankers have not generally declined during the p a s t six years. On
choice American business t h e usual r a t e six years ago was one-fourth of 1 per
cent for 90 days, a n d it still is. On business done for account of foreign b a n k s
there has been some reduction. I n t h e years just after t h e war charges ran from
three-eighths to one-half of 1 per cent for 90 days, b u t for some years now t h e r a t e
has been more generally three-sixteenths to one-fourth of 1 per cent. This reduction
was brought a b o u t by competition, principally competition of London joint-stock
b a n k s , which a t present are doing a similar business for one-eighth of 1 per cent.
There is an indication now of American banks, in view of t h e low discount rates
obtaining in this country, reestablishing one-fourth of 1 per cent for 90 days for
business done for, account of foreign banks.
Philadelphia.—The
keen competition for business of this character, and t h e
volume of business handled, has been t h e ruling factor in t h e reduction responsible for t h e decline in the acceptance commissions charged by American acceptance institutions for t h e past few years.
Richmond.—We
should say t h a t t h e decline is caused p a r t l y by competition
between banks a n d p a r t l y because of t h e desire to accommodate t h e public.
St. Louis.—It is our understanding t h a t foreign competition was responsible.
San Francisco.—(a)
Takers of credits showing a n improving t r e n d of financial
responsibility; (b) strong competition among American b a n k s ; (c) stabilization
of E u r o p e a n currencies causing competition of foreign banking houses seeking
to recapture lost business.
26. Present a list of t h e recognized dealers in acceptances; i. e., of those dealers
whose indorsement is recognized by your institution. State the net worth t h a t a
recognized dealer m u s t possess. W h a t other standards has your institution imposed to which a recognized dealer m u s t a t t a i n ? W h a t factors are considered
in determining t h e dealers' lines of credit?
Atlanta.—There
are no recognized dealers in bankers' acceptances local to this
district.
Boston.—-The names of t h e recognized dealers in bankers' acceptances in this
district are as follows: First National Old Colony Corporation, S h a w m u t Corporation of Boston, National City Co. of Boston, Salomon Bros. & Hutzler.
While there is no stated a m o u n t of net worth required, t h e net worth should be
substantial in a m o u n t a n d a d e q u a t e for t h e volume of business t r a n s a c t e d .
Determining t h e dealers' line of credit or net worth is the first consideration, b u t
other factors are considered, such as his general standing in t h e community, his
knowledge and experience a n d t h e class of customers for whom he deals.
Chicago.—Discount
Corporation of New York, First National Old Colony
Corporation of Boston, National City Co. of New York, Salomon Bros. &
Hutzler, S h a w m u t Corporation of Boston ;
T h e National City Co. a n d Salomon Bros. & Hutzler are recognized as dealers
in bankers' acceptances in this district b u t they do not indorse bills. They are
privileged, however, to sell us acceptances with an agreement to repurchase
within 15 days t h e t o t a l a m o u n t not to exceed $2,000,000 in each case. T h e
Discount Corporation operates as a dealer in this m a r k e t a n d their indorsement
is acceptable to us, b u t they carry their entire portfolio.in New York.
This b a n k does not have a m i n i m u m requirement for the capital sti ucture of
t h e recognized dealers in granting accommodations under sales contracts, b u t
the m i n i m u m capital of such dealers a t this time is somewhat in excess of
$2,000,000.
I n recognizing dealers in acceptances it is understood, of course, t h a t they will
circulate a t frequent intervals a list of their offerings a n d be willing to bid for
round a m o u n t s of bills a t a n y time. We restrict t h e a m o u n t s bought under
sales contract with any one dealer to a m a x i m u m of $2,000,000, which a m o u n t
we believe to be sufficient to take care of the requirements of this m a r k e t . We
h a v e never found it necessary to fix any m a x i m u m a m o u n t t h a t we would b u y
with t h e indorsement of any of t h e dealers.
NATIONAL AND FEDEKAL KESERVE BANKING SYSTEMS
923
Cleveland.—Dealers in bills whose indorsements we recognize when purchasing
bills from member banks in our district are those of established firms in high credit
standing, who furnish us regularly with their financial statements in satisfactory
form and whose management is well regarded. Discount Corporation of New
York, First National Old Colony Corporation of Boston, Shawmut Corporation.
Dallas.—(1) Fort Worth National Co., Fort Worth, Tex.; Union National
Co., Houston, Tex.
(2) Minimum paid-in capital of $100,000.
(3) The principal factors which we consider in determining the recognition of a
dealer are as follows: Ability of management, knowledge of the bill business,
character of transactions, and rapidity of distribution.
(4) Net worth as represented by capital structure, length of maturity of bills
indorsed by dealer, and outstanding and volume and maturity of bills held by us
under repurchase agreement.
Kansas City.—There are no acceptance dealers with headquarters in this
district.
Minneapolis.—There are no recognized dealers in acceptances in this district,
except agencies or offices of eastern dealers, and no portfolios of bills are carried
here by these representatives.
New York.—(The Federal Reserve Bank of New York requested that its reply
to this question be omitted.)
Philadelphia.—The Discount Corporation, the Shawmut Corporation, First
National Corporation. We have no rule of thumb regarding the net worth a
recognized dealer must possess. Of course it must be a substantial amount and
must have a proper relationship to its outstanding liabilities. The statement
must indicate proper liquidity and diversification of assets. The personnel and
its connection are also taken into consideration. We have never extended a
dealer a line of credit; our holdings are usually well diversified as to risk. The
indorsement of the dealer gives additional responsibility, but is a secondary
consideration. Unless we are satisfied as to the responsibility of the accepting
bank we do not purchase the bill.
Richmond.—This bank buys from dealers only bills which are accepted or
indorsed by member banks of this district, and in practice has bought such bills
only from Shawmut Corporation of Boston and the First National Corporation
of Boston.
St. Louis.—We have not been called upon to grant credit to dealers since 1923;
consequently, have had no occasion in recent years to determine the standards a
recognized dealer should possess.
San Francisco.—(a) National City Co. of California.
Owned by National City Co. of New York which guarantees
Net worth
California corporation's obligations
$110, 000, 000
American Securities Co
1, 350, 000
(b) Worth of dealer must be commensurate with liabilities for the character of
its business.
(c) Required that the dealer be a bona fide buyer and distributor of bills.
(d) Dealer's line of credit is determined upon financial responsibility and
extent credit needed to carry an appropriate portfolio.
27. On an attached schedule, present since January, 1924, weekly statistics
of the volume of acceptances held in the portfolios of dealers operating in your
district.
Atlanta.—All dealers operating in this district are branch offices of outside
firms.
34718—31—PT 6
15
924
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Boston.Weekly statistics of the volume of acceptances since January, 1924, held in the
portfolios of dealers operating in district No. 1
[000 o m i t t e d ]
Date
1924
Jan. 2..
Jan. 9
Jan. 16—
Jan. 23—
Jan. 30—
Feb.6-~
F e b . 13-_
Feb. 20-F e b . 27__
Mar. 5 —
Mar. 12..
Mar. 1 9 Mar. 2 6 A p r . 2__A p r . 9__A p r . 16_Apr. 23. _
A p r . 30_May7...
M a y 14—
M a y 21. May 28June4...
J u n e 11—
Junel8—
June 25..
July 3 —
July 9 —
J u l y 16...
J u l y 23...
J u l y 30...
Aug. 6 . . .
Aug. 13..
Aug. 20..
A u g . 27_.
Sept. 3 —
S e p t . 10..
S e p t . 17..
Sept. 24..
Oct. 1___.
Oct. 8 —
Oct. 15...
Oct. 22...
Oct. 2 9 . .
Nov. 5-.
N o v . 12..
N o v . 19.
N o v . 26.,
Dec. 3_D e c . 10-.
Dec. 17..
Dec. 24..
D e c . 31_.
1925
J a n . 7_..
J a n . 14...
Jan. 21...
Jan. 28,..
Feb.4__.
F e b . 11_.
F e b . 18_.
Feb. 2 5 Mar. 4...
M a r . 11..
M a r . 18..
M a r . 25..
Apr. 1--,
A p r . 8__
A p r . 15_.
Apr. 22..
A p r . 29_.
'May6_Mayl3May20.
M a y 27.
Amount
$5,142
5,055
5,990
4,172
5,288
5,897
4,359
4,452
5,077
4,594
4,390
1,274
5,063
5,879
6,999
6,001
4,685
4,086
3,646
3,174
3,410
4,264
4,346
3,346
1,910
2,837
3,827
4,894
2,597
2,139
2,275
5,878
5,846
7,091
4,863
6,532
5,510
1,995
3,902
3,102
5,074
5,892
3,209
6,908
5,338
5,861
3,785
3,880
2,204
1,955
2,827
2,625
8,101
4,444
2,730
3,054
3,789
5,126
3,168
2,733
2,628
2,491
2,486
3,063
2,398
2,643
3,457
2,954
5,305
5,244
5,256
4,150
4,792
4,735
Date
1925
June 3
J u n e 10
J u n e 17
J u n e 24
July 1
July 8
J u l y 15
J u l y 22
J u l y 29
Aug. 5
Aug. 12....
Aug. 1 9 . . . .
Aug. 2 6 . - .
Sept. 2 — ' .
Sept. 9
Sept. 16....
Sept. 2 3 —
Sept. 3 0 —
Oct. 7
Oct. 14.....
Oct. 21
Oct. 28
Nov. 4
Nov. 1 1 —
Nov. 1 8 —
Nov, 2 5 —
Dec. 2
Dec. 9
Dec. 16.-.
Dec. 23__.
Dec. 30--1926
J a n . 6—
Jan. 13—
J a n . 20—.
Jan. 27...
Feb.3_-.
F e b . 10- Feb.17_F e b . 24_ .
Mar. 3 —
Mar. 1 0 Mar. 1 7 Mar. 2 4 Mar. 3 1 Apr. 7__.
A p r . 14_Apr. 2 1 . A p r . 28-_
May 5...
M a y 12. .
May 1 9 M a y 26. .
June 2 . . .
J u n e 9—.
J u n e 16. .
June 23. .
J u n e 30—
July 7 —
J u l y 14...
July 21...
July 28...
Aug.'4—
Aug. 1 1 . .
A u g . 18-.
Aug. 25..
Sept. 1—
Sept. 8—
Sept. 15..
Sept. 22..
S e p t . 29..
Oct. 6 — .
Oct. 13...
Oct. 20...
Oct. 27...
Amount
$3,637
3,109
3,155
1,784
3,911
3,254
3,910
3,734
2,766
2,960
4,034
3,917
3,218
1,714
1,493
2,770
2,206
3,193
3,002
2,616
4,081
4,942
4,170
2,178
2,077
1,938
3,041
2,095
2,385
4,570
10, 721
4,585
5,855
6,404
6,726
7,251
6,794
7,457
4,169
5,035
5,328
4,729
3,656
5,344
6,047
11,550
7,812
5,579
7,437
10,017
10,452
8,358
6,865
6,594
3,891
5,474
6,982
5,750
5,092
5,541
6,405
3,845
4,655
1,761
1,647
1,532
1,935
2,195
2,122
2,188
3,645
3,703
4,374
2,510
Date
Amount
1926
Nov. 3
N o v . 10
N o v . 17
N o v . 24
Dec. 1
Dec. 8
D e c . 15
D e c . 22
D e c . 29
$3,985
3,687
2,982
3,929
5,439
5,987
5,195
9,751
13,872
1927
Jan. 5...
Jan. 12—
Jan. 19—
Jan. 26—
Feb. 2__.
Feb.9-_.
F e b . 16. _
Feb. 23_.
Mar. 2 —
Mar. 9 . . .
Mar. 1 6 M a r . 23—
M a r . 30—
Apr. 6 - - A p r . 13—
A p r . 20_ _
Apr. 2 7 - .
May4_._
M a y 11. .
M a y 18-.
M a y 25. .
Junel—.
June 8 . , .
June 15. _
June 22-.
June 2 9 . .
July 6_„.
July 13...
July 2 0 - .
J u l y 27—
Aug. 3 . . .
Aug. 10..
Aug. 17..
Aug. 24..
Aug. 31. _
Sept. 7 —
Sept. 14,.
Sept. 2 1 - .
Sept. 28_.
Oct. 5 — .
Oct. 12...
Oct. 19...
Oct. 26...
Nov. 2 - .
Nov. 9...
N o v . 16..
Nov. 23..
N o v . 30..
Dec. 7-_.
D e c . 14_.
Dec. 2 1 - .
Dec. 28-.
7,527
7,654
12,837
14,912
14,076
12,248
16,863
12,746
12,425
12,636
10.585
10,994
8,451
9,074
8,038
8,801
7,633
8,209
10, 515
9,997
11,758
13,131
10,483
11,045
8,219
6,387
4,384
5,435
5,072
6,020
6,917
6,737
8,346
8,720
10, 619
12,963
10,751
10,117
10,607
11,275
10,022
10,981
8,558
12.586
9,880
6,110
3,890
6,716
7,618
8,309
4,875
7,168
1928
J a n . 4__.
Jan. 11...
J a n . 18. _.
Jan. 25...
F e b . 1__.
F e b . 8-_.
F e b . 15. .
Feb. 21-.
Feb. 29,.
M a r . 7-..
M a r . 14..
8,395
6,168
5,891
5,568
4,927
4,117
5,015
3,668
5,846
7,973
7,458
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
Weekly
925
statistics of the volume of acceptances since January,
192^ held in the
portfolios of dealers operating in district No.
1—Continued
[000 o m i t t e d ]
Date
Amount
Date
1929
1928
M a r . 21
M a r . 28
Apr. 4
Apr. 11.
A p r . 18
A p r . 25
May 2
May 9
M a y 16
M a y 23
M a y 29
June 6
J u n e 13
J u n e 20
J u n e 27
July3___
J u l y 11
J u l y 18.
July25._
Aug. 1
Aug. 8
A u g . 15
A u g . 22
A u g . 29
Sept. 5_
Sept. 12
Sept. 19
Sept. 26
Oct. 3
Oct. 10
Oct. 17
Oct. 24
Oct. 31
N o v . 7_
N o v . 14
N o v . 21
N o v . 28
D e c . 5__
D e c . 12
D e c . 19
D e c . 26_
_
_
$8,466
9,152
6,721
5,799
8,021
7,085
7,079
5,373
6,387
9,349
6,179
5,180
7,201
7,995
11,000
8,752
5,899
6,911
6,694
4,660
3,552
6,104
7,133
8,459
7,083
5,315
8,480
7,492
11,268
12,786
13,310
12,981
14, 332
17,773
14,174
14,100
12,868
10,791
8,100
6,104
8,170
1929
Jan. 2
Jan. 9,.
J a n . 16
J a n . 23
J a n . 30
Feb. 6
F e b . 13_
Amount
6,772
8,280
11,835
7,639
10,158
8,302
9,587
F e b . 20
F e b . 27
Mar. 6
M a r . 13
M a r . 20
M a r . 27
A p r . 3_
A p r . 10
A p r . 17
A p r . 24_
May 1
May 8
M a y 16
M a y 22
M a y 30
June 5
J u n e 12
J u n e 19
J u n e 27
July 5
J u l y 10
J u l y 18
J u l y 25
J u l y 31
Aug. 7
A u g . 14
A u g . 22
A u g . 28
Sept. 4
Sept. 12
Sept. 18
Sept. 25
Oct. 2
Oct. 9
Oct. 16
Oct. 2 3 . .
Oct. 30
Nov. 6
N o v . 13
N o v . 20
N o v . 27
Dec. 4
D e c . 11
D e e . 18,
D e c . 24
D e c . 31
Jan. 8
J a n . 15
_
1930
_.-
$6,315
5,716
5,199
3,830
4,855
2,490
3,417
3,865
2,778
3,738
11,435
11,178
9,283
8,153
10, 673
8,044
4,074
3,216
5,079
5,604
6,384
6,580
6,928
9,794
11,183
9,813
9,749
8,815
7,730
7,640
8,122
7,598
8,576
9,369
8,380
5,711
3,407
4,105
3,327
4,697
5,081
6,365
9,215
11,126
13,470
13,188
11, 242
10, 572
Date
1930
J a n . 22
J a n . 29
Feb. 5
F e b . 12
F e b . 19
F e b . 26
Mar. 5
M a r . 12
M a r . 19
M a r . 26
Apr. 2
Apr. 9
A p r . 16
A p r . 23
A p r . 30
May 7
M a y 14
M a y 21
M a y 28
June 4
J u n e 11
J u n e 18
J u n e 25
July 2
July 9
J u l y 16
J u l y 23
J u l y 30
Aug. 6
A u g . 14
A u g . 20
A u g . 27
Sept. 3_
S e p t . 10
Sept. 17
Sept. 25
Oct. 1
Oct. 8
Oct. 15
Oct. 22.
Oct. 29
Nov. 5
N o v . 12
N o v . 19
N o v . 26
Dec. 3
D e c . 10
D e c . 17
D e c . 24
D e c . 31
Amount
$8,990
6,930
5,368
8,101
6,726
6,874
4,650
7,492
5,696
8,258
9,548
9,623
7,575
7,679
5,340
5,657
5,748
5,199
4,772
3,476
3,783
1,591
3,611
2,140
4,797
6,753
3,333
2,054
1,010
1,673
1,971
1,030
1,833
2,389
1,688
2,246
1,263
1,897
2,684
3,065
1,079
327
416
660
1,265
1,549
1,077
1,927
1,787
2,742
926
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Chicago.—
Dealers1 holdings of bankers' acceptances in seventh Federal reserve district, by months
from January, 1924, to December, 1926, and by weeks from December 22, 1926,
to January 14, 1931, together with an estimate of the amount of acceptances held
which were acquired directly from accepting institutions, and from others
[ I n t h o u s a n d s of dollars]
N O T E . — B i l l dealers in s e v e n t h district s t a t e t h a t less t h a n one-eighth of 1 p e r cent of t h e i r bills are p u r chased d i r e c t l y from d r a w e r s , i n a s m u c h as accepting b a n k s h a n d l e p r a c t i c a l l y all of t h e t r a n s a c t i o n s , e i t h e r
for t h e i r o w n a c c o u n t , or for a c c o u n t of t h e d r a w e r . H o l d i n g s of bills from " o t h e r s " i n c l u d e for t h e m o s t
p a r t acceptances received from e a s t e r n offices of t h e s a m e dealers.
Dates
Total
Acceptors
Others
1924
Jan. 9.
F e b . 13_„
M a r . 12.
Apr. 9—
M a y 14..
J u n e 11__
July 9...
Aug. 13,.
S e p t . 10_.
Oct. 15..
N o v . 12.
Dec. 1 0 -
2,921
4,921
4,995
5,271
2,502
1,506
3,690
2,153
7,360
5,937
2,424
2,087
1,823
4,3C6
4,440
2,635
1,752
1,004
3,354
1,821
3,800
3,564
1,557
1,349
1,098
615
555
2,636
750
502
336
332
3,560
2,373
867
738
1925
Jan. 21.
F e b . 18 „
M a r . 18.
Apr. 15..
May20_.
J u n e 17 „
July 15„
A u g . 20_.
S e p t . 16.
Oct. 2 1 . . .
N o v . 18.
Dec. 1 6 -
2,207
1,843
4,551
2,542
3,539
1,092
2,029
1,466
931
1,321
2,061
2,675
1,207
1,000
2,275
1,271
2,831
546
1,295
1,064
500
444
1,374
1,338
1,000
843
2,276
1,271
708
546
734
402
431
877
687
1,337
1926
J a n . 20_
Feb. 1 7 M a r . 17.
A p r . 14-_
M a y 19..
J u n e 16—
J u l y 14__
Aug. 18..
S e p t . 15_.
Oct. 2 0 N o v . 17..
Dec. 1 5 D e c . 22__
Dec. 29„.
1,941
3,750
2,618
5,468
5,001
3,822
5,335
2,534
3,420
5,198
4,314
6,132
4,037
4,801
970
2,500
1,746
3,780
3,751
2,700
2,800
1,583
2,100
2,776
2,744
2,700
1,550
2,220
971
1,250
872
1,688
1,250
1,122
2,535
951
1,320
2,422
1,570
2,432
2,487
2,581
1927
J a n . 5___
Jan.12._
Jan. 1 9 Jan. 2 0 „
F e b . 2_„
Feb. 9
Feb. 16Feb. 23„
Mar.2__
M a r . 9_.
Mar. 1 6 .
M a r . 23_
Mar. 30.
Apr. 6
Apr. 13„
Apr. 20„
Apr. 2 7 M a y 4__
M a y 11..
M a y 18..
May25_.
June 1
June 8
June 15..
J u n e 22__
5,842
5,871
5,096
4,300
5,753
6,140
6,188
6,067
5,955
4,951
3,119
3,284
3,350
3,202
3,485
2,708
3,820
3,461
3,343
4,253
4,203
5,090
3,948
4,855
3,106
2,921
4,408
1,274
1,433
2,877
3,070
3,094
2,426
2,553
2,476
1,559
1,312
1,340
1,067
1,044
1,084
1,910
1,730
2,142
2,550
2,102
2,036
1,568
1,539
776
2,921
1,463
3,822
2,867
2,876
3,070
3,094
3,641
3,402
2,475
1,560
1,972
2,010
2,135
2,441
1,624
1,910
1,731
1,201
1,703
2,101
3,054
2,380
3,316
2,330
Dates
1927
J u n e 29,.
July6„.
July 13..
July 20„
July 27..
Aug. 3._
A u g . 10..
A u g . 17..
Aug. 24..
Aug. 3 1 . .
S e p t . 7_.
S e p t . 14.,
Sept. 2 1 .
S e p t . 28..
Oct. 5 —
Oct. l l - _
Oct. 19...
Oct. 2 6 . . .
N o v . 2._.
Nov. 9...
N o v . 16..
Nov. 23..
Nov. 30..
Dec. 7 —
D e c . 14...
D e c . 21__.
D e c . 28...
1928
Jan. 4
J a n . 11
J a n . 18
J a n . 25
Feb. 1
Feb.8
F e b . 15
F e b . 21
F e b . 29
Mar. 7
M a r . 14
M a r . 21
M a r . 28
Apr. 4
A p r . 11
A p r . 18
A p r . 25
May 2
May 9
M a y 16
M a y 23
M a y 29
June 6
J u n e 13
J u n e 20
J u n e 27
July 3 . . .
July 11.
J u l y 18
J u l y 25
Aug. 1
Aug. 8
A u g . 15
A u g . 22
A u g . 29
Sept. 5
S e p t . 12
S e p t . 19
S e p t . 26
Oct. 3
Total
Acceptors
Others
3,690
3,209
3,256
3,099
2,645
2,677
4,051
5,126
5,945
6,097
6,180
5,802
5,740
6,355
4,837
7,458
5,566
6,634
3,438
5,421
5,024
4,291
4,383
4,622
4,228
2,683
2,453
922
802
1,302
1,952
1,674
2,013
3,038
3,844
3,807
3,048
2,580
2,400
546
2,635
1,934
2,574
2,783
1,326
1,376
1,807
2,512
2,861
3,066
2,311
1,057
1,074
1,635
2f,768
2,407
1,954
1,147
971
664
1,013
1,282
2,138
3,049
3,600
3,402
5,194
3,720
2,903
4,884
2,783
5,308
2,062
3,614
2,512
1,430
1,317
2,311
3,171
1,609
818
4,584
4,754
3,403
3,175
2,296
1,204
2,551
2,546
4,014
4,291
4,445
4,845
5,468
1,468
2,393
2,264
3,033
3,164
2,671
2,926
3,667
3,998
3,951
3,896
4,169
2,691
2,766
2,921
1,783
1,884
935
2,412
2,910
2,567
2,279
3,845
3,907
3,755
2,381
2,750
3,169
2,552
1,588
765
301
1,547
1,183
2,007
2,452
2,667
2,422
3,124
870
950
1,132
607
1,266
1,781
1,463
1,377
1,440
3,102
2,976
3,127
2,491
2,375
2,241
1,300
1,413
935
1,206
1,746
1,283
1,519
2,663
1,302
1,504
1,587
2,962
1,834
1,585
851
1,587
1,531
903
1,004
1,363
2,007
1,839
1,778
2,423
2,344
598
1,443
1,132
2,426
1,898
890
1,463
2,290
2,558
849
920
1,042
200
391
680
483
471
1,206
1,164
1,284
760
1,182
2,605
2,251
794
987
NATIONAL AND FEDERAL EESEEVE BANKING SYSTEMS
927
Dealers1 holdings of bankers1 acceptances in seventh Federal reserve district, by months
from January, 192'4, to December, 1926, etc.—Continued
[In thousands of dollars]
Dates
Total
1928
Oct. 10
Oct. 17
Oct.24_
Oct. 31
Nov. 7
Nov. 14
Nov. 21
Nov. 28
Dec. 5
Dec. 12
Dec. 19
Dec. 26
4,617
2,283
3,822
4,270
4,843
3,576
2,781
4,123
3,945
4,275
3,944
1929
Jan. 2
Jan. 9
Jan.16
Jan. 23
Jan. 30
Feb. 6
Feb. 13
Feb. 20
Feb. 27
Mar. 6
Mar. 13
Mar. 20
Mar. 27
Apr. 3
Apr. 10
Apr. 17
Apr. 24
May 1
May 8.
May 15
May 22
May 29
June 5
June 12
June 19
June 26
July 3
July 10
July 17.
July 24
July 31
Aug. 7_
Aug. 14
Aug. 21
Aug. 28
Sept. 4
Sept. 11
Sept. 18
Sept. 25
Oct. 2
Oct. 9
Oct. 16
Oct. 23
Oct. 30
Nov. 6
Nov. 13
Nov. 20
Nov. 27
3,006
4,039
4,552
4,890
6,546
5,513
5,198
3,453
2,813
3,276
4,421
6,306
1,029
2,129
2,374
2,671
691
3,726
3,947
4,530
4,002
3,195
2,353
2,646
2,726
2,540
2,899
3,454
3,496
4,271
6,990
6,909
4,453
5,645
5,686
5,984
6,244
4,440
3,745
4,538
4,378
5,201
3,197
1,812
3,922
4,078
5,128
3,486
Acceptors
2,427
3,463
1,522
2,294
2,562
3,395
2,145
927
1,374
1,462
3,420
3,120
2,505
673
1,518
2,720
3,273
2,756
3,250
2,100
2,500
2,303
2,520
5,706
260
1,064
1,187
1,410
230
2,200
2,424
1,750
1,950
2,600
1,569
1,690
1,363
1,380
905
1,368
1,500
2,903
6,000
5,916
3,560
4,788
4,692
5,074
5,620
3,510
2,975
3,631
3,831
4,025
2,897
432
1,632
3,262
4,487
2,789
Others
809
1,154
761
1,528
1,708
1,448
1,431
1,854
2,749
2,483
855
824
501
3,366
3,034
2,170
3,273
2,757
1,948
1,353
313
973
1,901
600
769
1,065
1,187
1,261
461
1,526
1,523
2,780
2,052
595
784
956
1,363
1,160
1,994
2,086
1,996
2,368
990
857
994
910
624
930
770
907
547
1,176
300
1,380
2,290
816
641
697
Total
Dates
Dec. 4
Dec. 11
Dec. 18
Dec. 24
Dec. 31
Others
1929
1930
Jan. 8
Jan. 15
Jan. 22
Jan. 29
Feb. 5
Feb. 11
Feb. 19
Feb. 26
Mar. 5
Mar. 12
Mar. 19
Mar. 26
Apr. 2
Apr. 9
Apr. 16
Apr. 23
Apr. 30
May 7
May 14
May 21
May 28
June 4
_.
June 11
June 18
June 25
July 2
July 9
July 16
July 23
July 30
Aug. 6
Aug. 13
Aug. 20
Aug. 27
Sept. 3
Sept. 10
Sept. 17
Sept. 24
Oct. 8
Oct. 15
Oct. 22
Oct. 29
Nov. 5
Nov. 12
Nov. 19
Nov. 26
Dec. 3.
Dec. 10.
Dec. 17
Dec. 24
Dec. 31
Jan. 7
Jan. 14
Acceptors
1
5,833
5,191
5,525
7,263
7,062
5,250
4,326
4,604
6,355
6,118
8,555
6,920
5,479
4,437
4,154
3,895
2,892
2,536
5,476
2, 574
4, 797
4,091
9,830
4, 797
6,314
3,512
1,920
3,126
3,209
3,015
4,470
3,395
4,223
3,828
3,425
3,214
3,025
1,530
1,881
1,937
322
1,605
2,547
854
769
1,134
437
333
1,158
2,697
2,658
1, 963
1, 730
1,452
1,522
834
909
3, 216
2,483
1, 768
2,589
5,343
4,792
3,288
3,187
2,310
3,300
1,928
1,268
2,738
711
2,398
1,435
4,915
3,945
3,157
2,338
1,300
1,042
1,840
1,206
1,917
1,697
3,167
1,914
2,854
2,143
2,420
1,330
705
963
300
802
1,910
800
710
1,100
400
320
926
1,348
1,690
981
288 1
262
1,016
417
606
1,608
828
884
1,294
1,904
784
1,666
87
865
921
908
944
3,112
2,128
2,191
1,250
1,844
595
994
1,268
2,738
1,863
2,399
2,656
4,915
852
3,157
1,174
620
2,084
1,369
1,809
2,553
1,698
1,056
1,914
571
1,071
605
200
1,176
964
22
803
637
54
59
34
37
13
232
1,349
968
982
1,442
1>190
506
417
303
1,608
1,655
884
1,295
1931
238
Cleveland.—We have had no dealers in this district in the period covered.
Dallas.—We have no means of obtaining this information without making
inquiry of dealers, which we shall be glad to do if you desire.
Kansas City.—There are no acceptance dealers with headquarters in this
district.
Minneapolis.—See answer to question 26.
928
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
New York.—
Volume of acceptances reported as held in portfolios of dealers in New York district,
January 2, 1924, to January 14, 1931
[In thousands of dollars]
Amount
Date
1924
Jan. 2
Jan. 9
J a n . 16 _
J a n . 23
J a n . 30
Feb. 6
F e b . 13
F e b . 20
F e b . 27
Mar. 5
M a r . 12
M a r . 19
M a r . 26 Apr. 2
Apr. 9
A p r . 16
A p r . 23
A p r . 30
May 7
M a y 14_
M a y 21
M a y 28
June 4
J u n e 11
J u n e 18
J u n e 25
Julv 2
July 9
J u l y 16
J u l y 23
J u l v 30
Aug. 6
A u g . 13
A u g . 20
A u g 27
Sept. 3
S e p t . 10
- S ept 17
Sept. 24
Oct. 1
Oct. 8
Oct. 15
Oct. 22
Oct. 29
Nov. 5
N o v . 12
N o v . 19
N o v . 26
Dec. 3 .
D e c . 10
D e c . 17
D e c . 24
D e c . 31
Date
1925
-
...
.
-~
_
-_
62,358
73,746
62,366
56,267
61,820
81,403
83,507
79,962
73,596
75,028
65,754
52,038
53,452
71,197
61, 742
67,823
64,190
44,034
61,069
53,589
55,200
72,144
70,318
56,330
66,942
38,831
55,239
74,986
54,200
38,941
33,748
43,193
49,595
62,941
52,841
41,456
37,115
29,444
40,948
66,101
81,949
74,687
61,113
61,986
60,321
80,288
63,512
67,531
56,348
63,843
50,389
46,945
5, 2086
June 3
J u n e 10
[ J u n e 17
J u n e 24
J u l y 1.
July 8
J u l y 15
J u l y 22
J u l y 29
Aug. 5
Aug. 12
A u g . 19
A u g . 26
Sept. 2
Sept. 9
Sept. 16
Sept. 23
Sept. 30
Oct. 7
; Oct. 14
i
Oct. 28
N o v . 4-_
N o v . 11
N o v . 18.
! N o v . 25
! Dee 2 .
Dec 9
D e c 16
D e c . 23
D e c . 30
i
1925
Jan. 7
J a n . 14
J a n . 21
J a n . 28
,
Feb. 4
F e b . 11
_ _
F e b . 18
F e b . 25 .
Mar. 4
M a r . 11
M a r . 18
M a r . 25
_ „
Apr. 1
Apr. 8
_
A p r . 15
A p r . 22
A p r 29
May 6
M a y 13
M a y 20
_
M a y 27
Amount
-
-
52, 753
45,446 j
37,290 1
46,654
49,515
45,928
43,201
49,265 1
36,116
40,289
35,282
40,037
49,899
62,402
60,300
48,418
42,932
74,940
67,624
50,842
55,775 |
„
_
—
_
„
- -.
_
_
1926
Jan. 6
_
J a n . 13
J a n . 20
Jan. 27..
_
Feb. 3F e b . 10
F e b . 17_-_
F e b . 24
Mar. 3
_
M a r . 10
...
M a r . 17
M a r . 24.
M a r . 31
Apr. 7
A p r . 14A p r . 21__
_
A p r . 28
May 5
... M a y 12
.__
M a y 19
M a y 26
June 2
June 9
J u n e 16
_
J u n e 23
J u n e 30
July 8 .
J u l y 14 .
J u l y 21
J u l y 28
Aug. 4
Aug. 1 1 . . _
A u g . 18
A u g . 25
__ _
Sept. 1
_
S e p t . 8__
S e p t . 15
Sept. 22
__
Sept. 29
Oct. 6
Oct. 13
Oct. 20
Oct. 27._
Date
1926
Nov. 3
43,722
49,949 ! N o v . 10
_
28,304 j N o v . 1 7 —
N o v . 24
35,056
42,662
Dec. 1
___
31,875 1 D e c . 8
_
_
32,770 j D e c . 15._
36,660
D e c . 22
D e c . 29
35,183
34,982 1
36,834
1927
Jan. 5 . . .
30,466
29,557 J a n . 12
23,592 | J a n . 19
25,652 J a n , 26
Feb. 2.__
_
26,026
36,851
F e b . 10
F e b . 16._
38,059
F e b . 23
43,843
51,830 1 M a r . 2
M
ar. 9
50,989
M a r . 16
56,144
M a r . 23
64,746
M a r . 30
51,082
Apr. 6 __
__
48,286
A p r . 13
_
56,607
A p r . 21
56,118
A p r . 27
53,705
May 4.. _
_
65,641
M a y 11
__
69,100
M a y 18
_
67,527
M a y 25
June 1
61,632
June 8
49, 252 J u n e 15
J u n e 22
56,046
J u n e 29
55,821
J u l y 6..._
59,513
J u l y 13
69,225
J u l y 20
79,343
J u l y 27
73,853
Aug. 3
72,906
A u g . 10
73,721
A u g . 17
62,338
Aug. 2 4 . .
68,839
A u g . 31
82,161
Sept. 7
86,754
Sept. 14
93,030
81,601 I Sept. 21
S e p t . 28
66,073
Oct. 5
98,485
121,414
Oct. 11
Oct. 19
106,142
85,092
Oct. 26
71,966 | N o v . 2__
69,469
Nov. 9.
_
64,419
N o v . 16
60,542
N o v . 23
56,336
N o v . 30
_
52,198
D e c . 7_
50,326 | D e c . 14.
49,944
Dec. 2 1 . _
48,930
D e c . 28
48,684
39,131
1928
35,166
Jan. 4
33,910
J a n . 11
34,410
J a n . 18
36,888
J a n . 25_
38,062
Feb. 8
38,240
F e b . 15
49,011
F e b . 21
53,232
F e b . 29
55, 930 M a r . 7
60,600
M a r . 14
54,332 I M a r . 21
Amount
_.
_.
_
__
_.
___
_.
._
__
.
__
,..
60,925
57,809
61,465
58,113
90,177
100, 219
89, 047
75, 742
74, 244
90,073
78,335
76,322
70,203
87,933
86,904
90,350
74,238
74,146
79,680
52,890
50,487
55,997
62,013
60,405
75,252
80,260
77,812
63,923
78,856
82,178
92,204
94,647
67,291
60,727
67,938
51,820
42,069
37,639
58,683
82,466
88,724
96,523
95,909
95,704
90,431
91,413
80,888
92,086
101,087
96, 754
98,875
102,506
105,492
85, 738
86,224
73,320
99,811
101,422
76, 375
72, 269
84,564
95,984
72,235
59,587
69,206
51,854
51,464
56,676
61,020
59,422
63, 591
69,041
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
929
Volume of acceptances reported asioheld in portfolios of dealers in New York district,
January #, 192h
January lh 1931—Continued
[In t h o u s a n d s of dollars]
Bate
Amount
1928
Mar.
Apr.
Apr.
Apr.
Apr.
May
May
May
May
May
June
June
June
June
July
July
July
July
Aug,
Aug.
Aug.
Aug.
Aug.
Sept. 5 . . .
Sept. 12_,
Sept. 19..
Sept. 2 6 Sept, 3 0 Oct.
Oct. 3 „ . .
O c t . 10—
Oct. 17—
Oct. 25—
Nov, 31. .
N o v . , 7—
N o v ,, 1 4 . .
N o v ,, 2 1 . .
Dec. .28..
Dec. 5 . . .
Dec. 12..
Dec. 19..
26-
73,437
80,029
85,139
66,681
53,013
54,380
45,244
50,610
48,948
48,656
35,828
38,020
45,710
50,033
46,846
38,987
44,372
47,436
40,679
30,306
37,932
38,250
42,293
50,148
61,273
49,112
63,228
65,148
68,609
73,717
76,258
73,364
80,480
66,783
69,833
65,687
59,205
78,492
83,110
67, 217
78,889
Jan. 9 . . .
Jan. 16..
Jan. 23..
Jan. 30..
Feb. 7 . .
F e b . 13F e b . 20.
F e b . 27.
71,299
76,484
77,190
82,930
77,177
68, 565
54,766
44,294
Date
Date
Amount
1929
Mar.
Mar.
Mar.
Mar.
Apr.
Apr.
Apr.
Apr.
May
May
May
May
May
J u n e 5...
J u n e 12..
J u n e 19..
J u n e 26..
J u l y 3_._.
July 10—
J u l y 17...
J u l y 24...
July 31—
A u g . 7...
A u g . 14..
A u g . 21..
A u g . 28..
Sept. 4...
S e p t . 11„.
Sept. 18Sept, 25Oct. 2....
Oct. 1 0 —
Oct. 1 6 —
Oct. 23...
Oct. 3 0 —
Nov,
Nov,
Nov.
N o v 20..
D e c . 27..
D e c . 4...
D e c . 11..
D e c . 18..
D e c . 24_.
31..
56,282
64,723
60,364
41, 555
35,703
22.893
24,733
35,531
53,174
55,700
49,033
47,438
56,741
51,301
64,357
32,478
21,278
18,229
20,428
40.894
59,667
66,701
59,204
75,491
83,649
89,269
95,832
93,793
85,984
91,573
96,166
98,450
87,647
34,086
48,317
44,738
53,823
34,618
69.072
113, 567
135,988
121,087
174,539
177,172
Jan. 8.-.
Jan. 15_.
Jan. 22..
Jan. 29..
Feb. 5_.
218,758
185,092
157,996
118,313
110,413
1930
Feb.
Feb.
Feb.
Mar.
Mar.
Mar.
Mar.
Apr. 2 . . .
Apr. 9 . . .
Apr. 1 6 Apr. 2 3 Apr. 30.May 7 - May 14May 21„
May 28J u n e 4___
June 1 1 June 1 8 June 25..
July 2.—
July 9—.
J u l y 16—
J u l y 23—
J u l y 30—
Aug. 6 . . .
Aug. 1 3 Aug. 2 0 Aug. 27..
Sept.
Sept. 3 . . .
Sept. 1 0 Sept, 17..
Oct. 24..
Oct. 1 —
Oct. 8 —
Oct. 15—
Oct. 22—
N o v . 29—
N o v ,. 5 . . .
N o v . 12,.
Nov. 19Dec.
Dec.
Dec.
Dec.
Dec.
Amount
107,965
113,202
114,038
102,747
104,297
70,278
145,083
151,258
141,335
145,751
110, 555
97,717
114,107
83,179
95,701
102,958
84,085
106,270
72,073
38,864
52,364
93,025
104,146
67,351
22,565
38,037
32,903
35,021
36,281
38,771
44,389
39,883
38,323
37,314
59,262
82,873
114,534
55,256
38,053
25,944
27,377
33,093
39,485
39,273
61,566
69,883
53,098
1931
Jan.
Jan.
63,596
39,198
Philadelphia.—No record.
Richmond.—There are no dealers located in this district.
St. Louis.—We are not familiar with portfolios of dealers having offices in this
district. In attempting to fill orders of member banks to purchase bills, we have
not in recent years found any bills being held in St. Louis.
San Francisco.—(Data omitted at request of Federal Reserve Bank of San
Francisco.)
28. In connection with the data presented in answer to the above question,
estimate the amount of acceptances in the dealers' portfolios that they have
acquired directly from the accepting insitutions, from drawers of bills, and from
other sources.
Atlanta.—None.
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ued
932
NATIONAL AND FEDERAL KESEKVE BANKING SYSTEMS
Weekly statistics of the volume of acceptances held in the portfolios of dealers operating
in this district, etc.—Continued
[000 omitted]
Estimated amount purchased
from—
Estimated amount purchased \
from—
Date
Date
Accept- I n d o r s - O t h e r
sources
ors
ers
1929
.Tpiifi 12
J u n e 19
J u n e 27
Julys
_
J u l y 10
J u l y 18
J u l y 25
J u l y 31
Aug. 7
A u g . 14
_.
A u g . 22
A u g . 28
Sept. 4
S e p t . 12
S e p t . 18
S e p t . 25
Oct. 2
—
Oct. 9
O c t . 16
Oct. 23
Oct. 30
-.
Nov. 6
__ .
N o v . 13
N o v . 20
N o v . 27
Dec. 4 . .
Dec. H . . _
D e c . 18
D e c 24
. ...
D e e . 31
1930
Jan. 8
Jan. 15..
J a n . 22 ._
J a n . 29
Feb. 5
Feb. 12-.F e b . 19
F e b . 26
Mar. 5
M a r . 12
.
-.
—
$3,422
2,058
3,758
5,212
6,129
4,803
6,374
9,794
11,183
4,759
7,799
7,493
5,025
6,265
7,716
3,039
7,890
4,684
4,358
2,284
2,385
3,284
1,564
2,161
3,607
3,755
8,201
8,233
11,045
10,155
5,621
6,026
5,034
4,227
3,704
6,481
4,170
5,087
3,395
7,342
$41
2,468
1,365
529
77
76
86
375
83
1,028
559
2,021
659
112
1,480
450
67
550
$ 611
1,158
1,321
392
255
1,777
554
1,586
585
793
2,628
1,299
406
4, 559
600
4,310
3,939
2,399
1,022
821
1,763
2,536
915
2,610
1,014
2,893
404
2,374
5,509
3,066
3, 506
2,703
1,664
1,620
2,489
1,237
1,255
150
Accept- I n d o r s - O t h e r
sources
ors
ee
Total
1930
M a r . 19
$4,074
3,216
M a r . 26.
5,079
Apr. 2
5,604
Apr. 9
6,384
A p r . 16
6,580
A p r . 23
6,928
A p r . 30. _
9,794
May 7
M a y 14___
11,183
8,813
M a y 21
9,749
M a y 28
8,815
June 4
7, 730 • J u n e 11
7,640 j j .Trpie 18 ,.
8,122
J u n e 25.,.. .
7,598
July 2
8, 576 J u l y 9
9,369
J u l y 16
8,380 J u l y 23
5,711
J u l y 30
3,407
Aug. 6
4,105
Aug. 14..
3,327
A u g . 20
4,697
A u g . 27.
5,081 j Sept. 3
6,365
Sept. 10
9,215
Sept. 1 7 Sept. 25.
11,126
13,470
Oct. 1
13,188
Oct. 8
Oct. 15
Oct. 22
11,242
Oct. 29
Nov. 5
10,572
8,990
N o v . 12
6,930
N o v . 19 __
5,368
N o v . 26
8,101
Dec. 3
6,726
D e c . 10.
6,874
D e c . 17
4,650
D e c . 24
7,492
D e c . 31
...
. .
. _
-._
._
$3,759
5,533
5, 729
9,142
6,136
6,758
4,402
4,582
4,886
4,887
3,006
3,267
3,216
1,527
3,105
1,990
4,077
5,605
2,933
1,787
980
1,673
1,951
1,030
1,778
2,126
1,654
1,954
1,200
1,821
2,389
2,881
1,068
320
416
640
1,240
1,425
969
1,811
1,573
2,495
$1,937
2,725
3,820
481
1,439
$921
210
566
260
454
217
68
400
267
628
509
862
52
1,766
209
113
64
289
150
720
1,080
30
20
55
263
34
292
63
76
295
184
n
7
75
143
20
25
124
33
116
71
247
Total
$5,696
8,258
9,549
9,623
7,575
7,679
5,240
5,657
5,748
5,199
4,772
3,476
3,783
1,591
3,611
2,140
4,797
6,753
3,333
2,054
1,010
1,673
1,971
1,030
1,833
2,389
1,688
2,246
1,263
1,897
2,684
3,065
1,079
327
416
660
1,265
1,549
1,017
1,927
1,787
2,742
Chicago.—See reply to question No. 27.
Cleveland.—We have had no dealers in this district in the period covered.
Dallas,—See answer to question 27.
Kansas City.—No information available on this subject.
Minneapolis.—See answer to question 26.
New York.—Dealers do not classify their purchases under those heads. Their
classification is, purchases from acceptors, from indorsers, and from others.
Following is a schedule prepared from weekly reports made by New York dealers
to this bank, showing aggregate amount of bills held at the end of each week in
each of the years from 1924 to 1930, inclusive, classified accordingly,
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934
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Bankers' acceptances'held in dealers1 portfolios weekly, January 2, 1924, to January
14, 1931, estimated as to source from which acquired—Continued
[In thousands of dollars]
Date
From
accepting institutions
From
indorsee
From
others
Total
1926
Oct. 6
Oct. 13
Oct. 20
Oct. 27
Nov. 3
N o v . 10
N o v . 17
N o v . 24
Dec. 1
Dec. 8
Dec. 15
D e c . 22
D e c . 29
27,600
30,100
33,800
22,100
36,800
27, 700
34,600
32,800
44,600
55,900
44, 700
42, 300
41,800
13, 900
13,700
13,900
21,800
10,200
16,900
14,100
14,600
29,800
26,100
12,200
21,200
15,300
11,700
12,100
12,900
10,400
13,900
13,200
12,800
10, 700
15,700
18,200
32,100
12,200
17,100
53,200
55,900
60,600
54,300
60,900
57,800
61,500
58,100
90,100
100,200
89,000
75,500
74,200
1927
Jan. 5
Jan.12
J a n . 19
J a n . 26
Feb. 2
Feb. 9
F e b . 16
F e b . 23
Mar. 2
Mar. 9
M a r . 16
M a r . 23
M a r . 30
Apr. 6
A p r . 13
A p r . 20
A p r . 27
May 4
M a y 11
M a y 18
M a y 25
June 1
J u n e 8_
J u n e 15
J u n e 22
J u n e 29
July6
J u l y 13
J u l y 20
J u l y 27
Aug. 3
A u g . 10
A u g . 17
A u g . 24
A u g . 31
Sept. 7
Sept. 14
S e p t . 21
S e p t . 28
Oct. 5 .
Oct. 12
Oct. 19
Oct. 26
Nov. 2
Nov. 9
N o v . 16
N o v . 23
N o v . 30
Dec. 7
Dec. 14
Dec. 21
Dec. 28
42,500
44,600
39,500
46,900
36,900
38,600
49,600
37, 500
36,400
39,300
25,100
22,800
26,500
29,600
28,800
34,600
37,100
36,200
33,100
39,100
40,900
49,100
48,900
37,200
35,100
40,100
26,200
21,100
19, 800
26, 200
42, 900
43, 500
46,300
45,100
44,900
42,600
43,100
36,100
44, 700
53,200
50,400
54,500
56, 200
58,100
49,100
45, 200
41,300
53, 400
52,800
40,600
40, 300
46,100
18,400
22,900
17,200
12,800
13,400
28,800
22,500
27,800
23,600
24,800
14,200
12,400
11,800
11,300
11,500
13,900
17,300
16,100
15,200
22,100
24,100
26, 200
25,300
18,100
18,600
20,200
14,800
9,200
10,200
12,800
19,500
21,400
26,200
27,600
27,400
26, 300
25, 800
23,200
24, 900
26, 500
24,700
24,100
25,600
26, 200
20,600
21,800
16,400
22,900
25, 500
20,100
18,200
18,400
29,200
10,800
19,600
10,500
37,700
19,500
18, 300
8,900
14,100
15,600
13,600
15,300
18,700
22,100
20,100
26,800
25,900
23,500
15,600
17, 700
17,200
16,900
20,500
18,900
17,000
17,600
10,800
11,800
7,700
19, 700
20,100
23,800
24,000
23, 200
23,400
21, 500
22,500
21, 600
22, 500
21,400
21, 700
20,300
20,700
21,200
16,000
19, 200
15,600
23,500
23,100
15,600
13,700
20,100
90,100
78,300
76,300
70,200
88,000
86,900
90,400
74,200
74,100
79,700
52,900
50,500
56,000
62,000
60,400
75,300
80,300
77,800
63,900
78, 900
82,200
92,200
94,700
64,200
60,700
67,900
51,800
42,100
37, 700
58, 700
82,500
88,700
96,500
95, 900
95,700
90,400
91, 400
80,900
92,100
101,100
96,800
98,900
102, 500
105, 500
1928
Jan. 4
Jan. 11
Jan. 18
Jan. 25
Feb. 1
53,400
33,700
30,900
45,100
38,200
24,500
23, 300
18,200
12,300
20,000
18,100
15,200
10, 500
11,800
14, 200
96,000
72,200
59,600
69,200
72,400
85, 700
86, 200
73, 300
99,800
101,400
76,300
72,200
84,608
Date
1928
Feb. 8
Feb. 1 5 . . . .
Feb. 2 1 — .
Feb. 2 9 —
Mar. 7
M a r . 14
Mar. 2 1 —
M a r . 28
Apr. 4
Apr. 1 1 . . . .
Apr. 1 8 —
A p r . 25
May 2
May 9
May 16....
May 23....
May 29....
June 6
J u n e 13
J u n e 20
J u n e 27
July 3
J u l y 11 —
July 1 8 . . . .
July 2 5 . —
Aug. 1
Aug. 8
Aug. 1 5 —
A u g . 22
Aug. 29..._
Sept. 5
Sept. 12....
Sept. 1 9 _ —
Sept. 26. __
Oct. 3
Oct. 10
Oct. 17
Oct. 25
Oct. 31
Nov. 7
N o v . 14
N o v . 21
N o v . 28
Dec. 5
Dec. 12
Dec. 19
Dec. 26
1929
Jan. 2
Jan. 9
Jan.16
J a n . 23
J a n . 30
Feb.7
F e b . 13
F e b . 20
F e b . 27
Mar. 6
M a r . 13
M a r . 20
M a r . 27
Apr. 3
A p r . 10
A p r . 17
A p r . 24
May 1
May 8
M a y 15
M a y 22
M a y 29
June 5.
J u n e 12
J u n e 19
From
accepting institutions
From
indors-
From
others
28,800
31,100
26,800
35,600
28,100
36,000
37,000
46,500
43,400
50,600
31,700
28,500
31,200
28,000
26,000
25,200
27,700
18,200
16,000
27,700
25,500
26,200
18,000
24,300
28,200
21,000
16,300
14,600
19, 700
20,600
26,700
34,200
26,600
36,400
43,200
38,600
42,000
38, 500
41, 800
39,500
38,200
32, 300
30,200
Total
13,500
9,600
15,200
5,200
19,900 10,000
14,200 11, 200
19,000 12,300
14,600 13,000
16,800 15,200
15,600 11,300
18,200 18,400
22, 600 11,900
20,600 14,400
13,300 11,200
12,000 11,200
9,000
8,200
16,500
8,100
12,500 11,200
10,500 10,500
11,300
6,300
11,500 10,500
12,600
5,400
13,300 11,200
9,400 11,200
12,000
9,000
11,700
8,400
13,000
6,200
10,400
9,300
7,300
6,700
11,600
8,200 11,700
9,700 10,400
12,400 12,200
12,100 11,000
14,800 15,000
7,700
12,300
14,100 13,500
11,300
19,300
20,200 15,800
18,600 14,100
20,800 16,300
13,700 17,900
18, 500 13,600
17,400 13,100
12,400 16,000
17,500 16,400
40, 700 20,200 20,300
41, 400 17,400 21,500
36, 500 24,200 13,300
38,200
16,500
51, 900
51, 500
56, 700
61,000
59, 400
63,600
59,000
73,400
80,000
85,100
66,700
53,000
54,400
45,200
50,600
48,900
48,700
35,800
38,000
45,700
50,000
46,800
39,000
44,400
47,400
40,700
30,300
37,900
38,300
42,300
50,100
61,300
49,100
63,200
68,600
73, 700
76,300
73,400
80,500
66,800
69,800
65,700
59,000
78,500
83,100
67,200
78,9C0
24,300
22,000
20,100
20,200
18,500
19,300
17,800
11,200
10,100
14,900
15,400
14,100
9,900
8,200
5,500
6,800
7,700
10,100
9,800
12,200
11,600
16,100
13,100
17,300
8,900
78,500
71,300
76,500
77,200
82,900
77,200
68,600
54,800
44,300
56,300
64,700
60,400
41,600
35,700
22,900
24, 700
35,500
53,200
55,700
49,000
47,400
56,700
51,300
64,400
32,500
37,900
35,100
37,300
37,900
42,600
41,800
35,200
27,300
25,900
31,700
36,500
35,100
24,400
21,100
12,800
11,700
20,900
24,200
27,300
24,100
23,900
27,300
25,800
29,600
14,100
16,200
14,200
19,100
19,100
21,800
16.100
15,600
16,300
8,300
9,700
12,800
li,200
7,300
6,400
4,600
6,200
6,900
18,900
18,600
13,700
11,900
13,300
12,400
17,500
9,500
NATIONAL AND FEDERAL RESEBVE BANKING SYSTEMS
935
Bankers' acceptances held in dealers' portfolios weekly, January 2, 1924, to January
14J 1931, estimated as to source from which acquired—Continued
[In thousands of dollars]
Date
1929
June 26
July 3
July 10
July 17
July 24
July 31
Aug. 7.1..,_
Aug. 14
Aug. 21
Aug. 28
Sept. 4_~_.__
Sept. 11
Sept. 18
Sept. 25
Oct. 2_
Oct. 10
Oct. 16
Oct. 23
Oct. 30
Nov. 6
Nov. 13
Nov. 20
Nov. 27
Dec. 4
Dec. 11
Dec. 18
Dec. 24
Dec. 31
1930
Jan. 8
Jan.15
Jan. 22
Jan. 29
Feb. 5
Feb. 12
Feb. 19_—
Feb. 26
Mar. 5
Mar. 12
Mar. 19..„
Mar. 26
Apr. 2
From
accept- From From
ing in- indors- others
ee
stitutions
10,700
9,800
11,200
20,500
31,100
35,400
33,800
38,300
46,200
48,600
50.700
53,200
50,100
51,600
53,800
55,300
52,400
21,900
31,200
28,800
33,200
19,100
39,900
68,200
79,900
71,300
94,100
92,300
Total
4,600
4,400
5,700
9,600
8,700
12,100
14,300
13,900
15,800
16,400
15,200
16,400
16,100
17,900
19,900
20,800
16,600
6,900
9,700
7,100
9,100
7,200
12,100
18,200
24,300
20,100
30,800
32,600
6,000 21,300
4,000 18,200
3,500 20,400
10,800 40,900
19,900 59,700
19,200 66,700
11,100 59,200
23,300 75,500
21,600 83,600
24,300 89,300
29,900 95,800
24,200 93,800
19,800 86,000
22,100 91,600
22,500 96,200
22,400 98,500
18,600 87,600
5,300 34,100
7,400 48,300
8,800 44,700
11,500 53,800
8,300 34,600
17,100 69,100
27,200 113,600
31,800 136,000
29,700 121,100
49,600 174,500
52,300 177, 200
124,900 30,200
107,100 25,300
94,200 15,800
78,500 11,600
75,600 10,200
54,000 15,000
55,700 33,000
64,400 21,200
72,600 15,200
64,300 23,200
32,300 16,900
74,000 31,700
82,400 33,000
63,700 218,800
52,600 185,000
49,000 158,000
28,200 118,300
24,200 110,400
39,000 108,000
24,500 113,200
28,400 114,000
24,900 102,700
16,700 104,300
21,100 70,300
39,300 145,000
35,900 151,300
Date
From
accept- From From
ing in- indors- others
stituers
tions
Total
1930
Apr. 9
„Apr. 16
Apr, 23
_
Apr. 30
May 7
May 14.:
May 21
May 28
June 4
June 11
June 18
June 25
_
July 2
_
July 9
_
July 16
July 23
July 30
Aug. 6
Aug. 13
Aug, 20
Aug. 27
Sept. 3
Sept. 10
Sept. 17
Sept. 24
Oct. 1
Oct. 8
_
Oct. 15
Oct. 22
_
Oct. 29
Nov. 5
Nov. 12
Nov. 19.
Nov. 26
Dec. 3
Dec. 10
Dec. 17
Dec. 24
Dec. 31
75,200
75,400
58,000
56,700
64,900
49,500
60,500
55,000
39,900
59,900
41,700
23,000
31,400
53,800
58,400
34,300
11,600
19,400
17,100
18,500
19,300
20,000
24,000
23,400
23,100
22,600
31,900
46,300
59,700
31,600
20,500
15,300
13,800
16,000
19,000
21,200
32,300
39,800
31,400
31,600
26,100
19,400
17,300
20,900
15,600
17,000
16,900
15,200
22,600
14,600
7,700
11,700
19,400
21,200
15,900
4,100
9,000
8,000
6,200
6,400
7,500
8,500
8,100
7,400
7,200
12,200
13,600
20,400
9,700
7,500
4,300
6,500
8,000
9,500
8,700
12,200
10,100
8,800
34,500
44,300
32,900
23,700
29,300
18,100
18,200
31,100
29,000
23,800
15,800
7,600
9,300
19,800
24,500
17,200
6,900
9,600
7,800
10,300
10,600
11,300
11,900
8,400
7,800
7,500
15,200
23,000
34,400
13,000
10,100
6,300
7,100
9,100
11,000
9,400
17,100
20,000
12,900
141,300
145,800
110,600
97,700
114,100
83,200
95,700
103,000
84,100
106,300
72,100
38,900
52,400
93,000
104,100
67,400
22,600
38,000
32,900
35,000
36,300
38,800
44,400
39,900
38,300
37,300
59,300
82,900
114,500
55,300
38,100
25,900
27,400
33,100
39,500
39,300
61,600
69,900
53,100
1931
Jan. 7_
Jan. 14,.
40,900
24,300
7,200
5,600
15,500
9,300
63,600
39,200
Philadelphia.—There is practically no bill market in this district. There are
several representatives of New York and Boston houses located in this city, but
their bill operations are a very small part of their business, and the few bills they
buy are carried at the main office. It is therefore impossible to supply you with
this information with any degree of accuracy.
Richmond,—See answer to 27.
936
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
St, Louis.—None in the eighth district.
San Francisco,—(Data omitted.)
29. State on attached schedule the amount of acceptances held under resale
agreement by your institution on the last reporting date in each month since
January, 1922.
Atlanta.—None.
Boston.—
Amount of acceptances held under resale agreement by this institution on the last
reporting date in each month since January, 1922
[000 omitted]
Amount
Date
1922
J a n . 25
F e b . 22__
M a r . 29
A p r . 26
M a y 31
J u n e 28
J u l y 26
A u g . 30
S e p t . 27
O c t . 25
Nov. 29...
Dec. 27.
1923
J a n . 31. _
F e b . 28
M a r . 28
A p r . 25 - _ . _.
M a y 29
J u n e 2 7 . _.
J u l y 25
A u g . 29
S e p t . 25
Oct. 30
N o v . 27
D e c . 24
Amount
" 1925
J a n . 28
F e b . 25
M a r . 25
A p r . 29
M a y 27
J u n e 24
J u l y 29
A u g . 26
Sept. 30
Oct. 28
N o v . 25
| D e c . 30
_.
_ ..
_. _.„
__ .
$4,976
5,030
2,883
5,699
2,817
4,218
1,687
6,191
6,756
3,944
797
724
403
2, 564
12,041
J a n . 27.
F e b . 24
M a r . 31
A p r . 28
M a y 26
J u n e 30
J u l y 28
A u g . 25
Sept. 29
Oct. 27
N o v . 24
D e c . 29
1927
3,534
3,914
2,505
2,051
910
415
2,788
-.
1,003
4,176
2,521
2,741
J a n . 26
F e b . 23
M a r . 30_ - .
A p r . 27
M a y 25
J u n e 29
J u l y 27
A u g . 31
Sept. 28
Oct. 26
N o v . 30
D e c . 28
Date
Amount
1928
J a n . 25
$1,940
1,231
F e b . 29
1,506
M a r . 28
4,244
A p r . 25
3,337
M a y 30
1,202
J u n e 27
1,670
J u l y 25
1,262
A u g . 29
1,910
Sept. 2 6 , .
3,902 1 Oct. 31
310 1 N o v . 28
5,917 I D e c . 26
1926
_.
1924
J a n . 29
F e b . 26 _ . .
M a r . 25
A p r . 29
May 27,..
J u n e 24
J u l y 29
A u g . 26
S e p t . 30
Oct. 28
N o v . 25
Dec. 30.-
Date
___
$4,158
5,843
8,476
7,514
5,368
10,664
6,204
5,686
6,132
16,297
11,630
8,328
_
13,023
4,527
1,680
2,792
8,560
1,938
6,530
7,896
6,950
1,923
278
11,743
-.
1929
J a n . 30
F e b . 27
M a r . 27
A p r . 24
M a y 29
J u n e 26
J u l y 31
„
Aug. 2 8 . . .
Sept. 25
Oct. 30
N o v . 27
D e c . 24
_
__
.-
._
1930
.
_.
11,398
8,244
6,150
6,177
9,417
3,220
4,625
7, 934
7,429
5,373
4,118
7,082
J a n . 29
F e b . 26__
M a r . 26
A p r . 30
M a y 28
J u n e 25 . . .
J u l y 30
A u g . 27
Sept. 24
Oct. 29
N o v . 26
Dec. 3 1 - - _
—
_
.
_
_
6,o36
5,965
4,819
5,166
4,247
3,456
1,939
862
1,929
678
992
1,052
Chicago.—See answer to No. 18.
Cleveland.—Statement following covers transactions in 1922 and 1923; no
transactions since September 26, 1923.
Bankers* acceptances held under resale agreement on last reporting day of each month
$39, 063. 29
January, 1922
$411,331.33 November, 1922
42, 036. 58
February, 1922
513, 873. 11 December, 1922
91, 236. 71
March, 1922
324, 435. 88 January, 1923
295, 302. 74
April, 1922
„
61, 899. 87 February, 1923
70, 907. 12
May, 1922
95, 274. 54 March, 1923
116, 843. 99
June, 1922
147, 080. 28 April, 1923
11, 758. 56
July, 1922
48, 914. 66 May, 1923
40, 900. 00
August, 1922
56, 074. 60 July, 1923
103, 900. 00
September, 1922
97, 836. 78 August, 1923
October, 1922
226, 790. 45
No similar transactions since 1923.
Dallas.—See following schedule, which dates back to 1926, when we first
began operations in resale agreement transactions.
NATIONAL AND FEDERAL. RESERVE BANKING SYSTEMS
937
Amount of bankers acceptances held under resale agreement by the Federal Reserve
Bank of Dallas at last reporting date in each month since January, 1922
Date
Amount
N o n e prior to D e c . 29,
1926.
D e c . 29,1928
Jan. 26,1927
_.
F e b . 23,1927
Mar. 30,1927
Apr. 27,1927
M a y 25,1927
June 29, 1927
July 27, 1927
Aug. 31, 1927_. T
Sept. 28,1927
Oct. 26, 1927
N o v . 30, 1927
D e c . 28,1927
_.
$130,858
73,969
None.
713,901
611,669
622,737
265,000
118,113
1,370,000
1,091,373
1,155,000
145,000
476,644
Date
Jan. 25, 1928...
F e b . 29,1928..
Mar. 28,1928_.
Apr. 25, 1928..
M a y 30,1928..
June 27,1928..
July 25, 1928..
Aug. 29, 1928..
Sept. 26,1928..
Oct. 31, 1 9 2 8 . .
N o v . 28,1928..
Dec. 26,1928„
Jan. 30,1929...
Feb. 27,1929._
Mar. 27, 1929..
Amount
$500,000
None.
72,544
600,000
200,000
None.
None.
None.
100,000
540,000
None.
916, 998
419,441
421,897
8,801
Date
Apr. 24,1929
M a y 29,1929
June 26,1929
July 31, 1929
Aug. 28, 1929
Sept. 25, 1929
Oct. 30, 1929
N o v . 27,1929
D e c . 25, 1929
Jan. 29, 1930
Feb. 26, 1930
Mar. 26, 1930
Apr. 30, 1930
N o n e since Apr.
1930.
Amount
$83,134
188,826
118,247
360,914
211,545
370,665
626,290
352,952
421,433
388,140
252,421
103,039
231,281
Kansas City.-—None.
Minneapolis.—We have never held acceptances under resale agreement since
January, 1922.
New York.—•
Amount of acceptances held under resale agreements by the Federal Reserve Bank of
New York on the last reporting date in each month since January, 1922
[In thousands of dollars]
Date
Amount
Date
1922
J a n . 25..
Feb. 21..
M a r . 29..
Apr. 26-.
M a y 31-.
June 28..
J u l y 26-.
Aug. 30..
Sept. 27..
Oct. 25—
N o v . 29..
Dec. 27-.
Amount
1928
1925
J a n . 28..
Feb. 25..
M a r . 25A p r . 29_ .
M a y 27..
June 24..
J u l y 29—
Aug. 26..
Sept. 3 0 Oct. 2 8 - .
N o v . 25_.
Dec. 30.-
9,202
23,721
8,916
13,969
26,880
15,511
11,813
8,593
21,100
25,385
29,268
30,829
J a n . 25..
F e b . 29_.
Mar. 28A p r . 25_.
M a y 29_.
J u n e 27 _.
J u l y 25—
Aug. 29..
Sept. 26-.
Oct. 3 1 —
Nov. 2 8 Dec. 26-.
16,491
33.080
40,687
24.081
9,441
9,311
297
15,613
42,755
60,192
35,490
50,884
7,000
4,000
9,000
1,000
19,941
18, 788
11,436
21,160
15, 713
27,150
31,451
37,411
J a n . 27-_.
F e b . 24-.
M a r . 31_.
A p r . 28_ M a y 26..
June 30..
J u l y 28_Aug. 25..
Sept. 2 9 O c t . 27—
N o v . 24..
D e e . 29_.
6,165
39, 202
29,269
8,667
38,912
20, 205
5,854
4,956
22,393
6,909
25,042
47,988
J a n . 30—
F e b . 27_.
M a r . 27..
Apr. 24..
M a y 29. .
J u n e 26-.
July 31_Aug. 28..
Sept. 2 5 Oct. 30—
Nov. 26Dec. 3 1 - .
29, 957
13,610
10,925
14,403
23,024
39,393
25,896
14,135
33,235
2,642
27,665
J a n . 26..
F e b . 24_.
M a r . 30_Apr. 2 7 . .
May 25..
June 30-.
July 27...
Aug. 31..
Sept. 2 8 Oct. 26—
N o v . 30-.
Dec. 2 8 . .
3,208
13,444
45, 501
68,609
21,793
"115,975
1930
1927
J a n . 30—
Feb. 27,.
M a r . 26.
A p r . 30_.
M a y 28..
June 25,.
July 3 0 A u g . 27..
S e p t . 24..
Oct. 29...
N o v . 26-.
Dec. 31-.
Amount
11,000
22,000
18,000
1,000
19,000
22,000
12,000
9,000
6,000
13,000
12,000
17,000
1923
Jan. 31.
Feb. 28-.
M a r . 28..
Apr. 2 5 , .
M a y 29..
June 27..
July 2 5 A u g . 30_.
Sept. 2 6 Oct. 3 1 —
Nov. 2 8 Dec. 2 6 . .
Date
12,895
17, 530
34,548
29,330
49,188
23,779
48,191
51,922
42,029
54,131
55,043
Jan. 29F e b . 26_.
M a r . 26A p r . 30 _.
M a y 28..
June 25-.
July 30-.
Aug. 27..
Sept. 24..
Oct. 29—
Nov. 26Dec.31_.
62,192
51,249
101,574
37,900
29,357
1,544
1,266
29,093
938
NATIONAL AND FEDERAL RESERVE BACKING SYSTEMS
Philadelphia.—
Acceptances held under resale agreement, close of business, monthly
January, 1922
$184, 839. 67
February, 1922
246,776.69
March, 1922
April, 1922
125, 000. 00
May, 1922
273, 977. 25
June, 1922
523, 977. 25
July, 1922
499, 783. 06
August, 1922
475, 101. 14
September, 1922
206, 384. 36
October, 1922
322, 956. 60
November, 1922
317, 956. 60
December, 1922
530, 565. 82
January, 1923
926, 231. 40
February, 1923
486, 464. 12
March, 1923
597, 130. 46
April, 1923
492, 715. 50
May, 1923
279, 230. 19
June, 1923
176, 230. 19
July, 1923
26, 230. 19
August, 1923
7, 000. 00
September, 1923, to December, 1930, inclusive
None.
Richmond.- -No such acceptances have been held.
St. Louis.—
Acceptances held under resale agreement on last reporting date in month for the
following years
j . _ $440, 002. 89
January, 1922
$15, 737. 03 July, 1922
600, 523. 38
February, 1922
480, 941. 27 November, 1922
739, 628. 68
May, 1922
605, 697. 00 January, 1924
San Francisco.—
[000 omitted]
1922
January
February
March
April
May
June.
—
July
August.
September
October
November
December
1923
January..
February
March
April
May
June
July
August
September
October
November
December
1924
January
February
March
_.
April
May
June
July
August
September
October
November
December
Amount
Date
Date
$1,105
1,347
1,016
2,855
2,423
1,972
2,138
1,641
984
1,424
1,315
1,409
464
1,581
2,897
2,392
1,947
2,553
2,095
1,907
1,909
503
83
1925
January..
February
March
April
May
June
July...
August.
September
October
_
November
December
1926
January
February
March,.
April
May
June
July...
August
September
October
November
December
1927
January
_
February
March.
April..
May
June
July
August
September
October
November
December
Date
Amount
1928
1
I
$1,416 January
3,045 February
3,885 March...
3,559 April
2,209 May
4,610 June
4,768 July
__
3,260 I August
3,055 September
1,866 | October
1,823 November
3,881 December
1929
3,236 January
February
3,854
4,147 March
6, 278 April
5,474 May
6,038 June
3,307 July
2,635 August
3,161 September
5, 269 October
6,869 November
6,670 December
5,430
4,067
7,032
7,431
1,512
3,291
5,484
5,829
6,933
4,495
5,056
5,591
January
February...
March
April.
May
June
July
August
September..
October
November.
December..
$4,691
2,402
2,788
625
4,156
6,474
3,411
1,300
3,061
4,597
4,331
2,458
3,966
2,462
3,977
4,288
3,383
4,535
3,747
4,730
7,849
1.805
6,809
2,00a
2,529
8,201
3,025
3,032
4,869
NATIONAL AND FEDERAL KESEBVE BANKING SYSTEMS
939
30. Present statistics of the rate prevailing in respect to the resale agreements
against acceptances with changes in the rate and the date of each change since
the inception of such agreements.
Atlanta.—None.
Boston.—
Statistics of rates prevailing in respect to the resale agreements against acceptances
with changes in the rates and the date of each change, since the inception of such
agreements
Date
Rate
Daily
average
amount of |
acceptances
held for
dealers on
resale
Daily
Date
Rate
ments
Jan. 16 K
1919
Period
(2)
ending-
Feb. 15..
Mar. 15..
Apr. 15..
May 15—
June 15..
July 15 _.
Aug. 15..
Sept. 15.
Oct. 15-,
Nov. 15..
Dec. 15..
Jan. 15—
Feb. 15..
Mar. 15Apr. 15..
May 15-_
June 15..
July 15..
Aug. 15..
Sept. 15.
Oct. 15..
Nov. 15..
Dec. 15..
4?4
4X -*H ,
4M -4^6
fyi -4^6
4K "4^6
4K -m
iVs-^A
VA-Q/A
iVs -4Me
4^6-4^6
4% -4Me
4M"4%
1920
4^-5^
4%-5H
5K-6M
&A-m
VA-&A
(22)
( 2)
( 2)
( 2)
()
(22)
(2)
(2)
( 2)
(2)
()
( 22)
( 2)
(2)
()
(22)
( 2)
(2)
( 2)
(2)
( 2)
( 2)
()
Apr. 4 - . .
Apr. 10..
Apr. 17..
Apr. 24..
May8„.
June 5--.
June 12._
June 19..
Sept. 18..
Sept. 20Oct. 3 . . .
Oct. 16-.
Oct. 23..
Nov. 14„
Nov. 20_.
1922
®A
m
m
3
m
1923
Apr. 23
May 7
October
November..
December..
amount of
acceptances
held for
dealers on
resale
agreements
(22 )
(2>
(>
( 22 )
(2>
(2>
( 2>
<2 >
( 2>
(2>
(2>
(>
(22 )
(2)
()
(22)
()
$649
1,092
1,118
1924
January
904
Jan. 16
February.
.
.
945
6H-&A
March
786
6 ~%y2
1,239
April
497
May
1921
2
May 1_
Jan. 15__
VA
()
May 19
Feb. 15.
VA
m-vA (2)
May 22
3
June
Definite rate established
June
9
2%
2
June 18
Feb. 11..
( 2)
2%
June
30
May 16(
)
m
m
July
July 12. _
(22)
Julyl
July 22..
()
766
5
~2~"
August
July 28..
(22)
Aug. 25
Oct. 7 s.(2)
"l,"020
September..
Oct. 17..
~~2X
(2)
4M
Sept. 22
Nov. 7...
(2)
4^
T§91
Nov. 21..
October
4^
( 2)
'm
Nov. 28..
Oct. 10
(2 )
"2H
Dec. 2 7 ~Ytm
November..
()
2%
Nov. 17
Nov.
28
2V
9
December..
Jan. 3
5394H
(22)
Dec. 3
Jan. 9
2%
<2 )
Z
Dec. 5
Mar. 20*..
BA
(2 )
Dec. 22
Mar. 27...
()
i Beginning Jan. 16, 1919, this bank purchased acceptances on resale agreements at the current openmarket rates in effect at the time of purchase. This policy continued uutil Feb. 11, 1921, when definite
rates were established. Unindorsed bills were purchase one-eighth and one-fourth of 1 per cent above the
current rate according to grades and maturities. Many rates were therefore involved, and for this reason
we present the range of rates for prime bills of all maturities for periods ending the 15th day of each month
from
Jan. 16, 1919, to Feb. 15, 1921.
2
Averages not available.
a Beginning Oct. 7,1921, to Mar. 27,1922, our buying rate was the same as dealers' buying rate.
* Beginning Mar. 27,1922, to Jan. 8,1926, our buying rate was one-eighth of 1 per cent less than dealers''
buying rate. Rates beginning Feb. 11,1921, are for 90-day prime bills.
34738—31—PT 6
6 -%%
6
-m
16
940
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Statistics of rates prevailing in respect to the resale agreements against acceptances
with changes in the rates and the date of each change, since the inception of such
agreements—Continued
Date
January...
February-.
Feb. 10
March
Mar. 2
April
Apr. 15
May
May 25
June
July
August
Aug. 31
SeptemberOctober
November..
December-.
January—
FebruaryMarch
April
May
June..
July
August
Aug. 23
SeptemberOctober
NovemberDecember. .
January
February—
March
April
May
June
--July—
July 22
July 29
August
Aug. 5
SeptemberOctober
NovemberDecember. .
January..
February _
Feb. 3
March
April
Apr. 13—
May
May 1 8 , -
Rate
1925
Daily
average
amount of
acceptances
held for
dealers on
resale
agreements
$758
516
VA
"m
577
""854
"l,'672
833
1,070
929
518
717
859
736
1926
1,643
1,351
1,107
2,425
1,363
1,423
1,429
563
291
677
820
1,940
1927
3,011
2,795
2,873
1,864
2,670
2,468
1,293
2,275
3K
2,606
2,445
1,796
2,207
1928
1)392
m
3M
2,308
2,395
1,846
Date
Rate
Daily
average
amount of
acceptances
held for
| dealers on
resale
ments
June..
July
July 13
August
SeptemberOctober
November..
December..
January
Jan.4
Jan.21
February—
March
Mar. 21
Mar. 26
April
May.
June
July
July 12
August
Aug. 9
SeptemberOctober
November..
Nov. 1
Nov. 15
Nov. 22
December..
January...
February—
Feb. 11
March
Mar. 5
Mar. 6
Mar. 11
Mar. 19
April
May
May 2
May 8
May 20
June
June 5
June 16
June 20
June 30
July
August
September..
October
November..
December-.
Dec. 24
1928
$2,286
2,111
1,854
2,247
5,809
4,477
2,187
1929
2,444
5
2,412
1,287
5H
VA
1,226
2,082
1,371
2,727
2,186
2,321
2,116
1,098
434
4
3,109
1930
2,556
2,068
1, 9fe0
3M I
3
:
2,705
1,622
2%
2,225
2H
2,428
1,318
1,584
1,863
482
854
m
NATIONAL. AND FEDERAL RESERVE BANKING SYSTEMS
941
Chicago.—This bank has never applied a fixed rate for resale agreements
against acceptances. Our practice has always been and still is to take bills from
dealers on repurchase agreements at the dealers' buying rates for such bills
which are one-eighth of 1 per cent to one-fourth of 1 per cent higher than
the dealers' selling rates, but not less than our buying rates for such bills. The
resale agreement rates therefore fluctuate automatically in accordance with the
dealers' buying rates for bills as to all maturities, and we are protected in loaning
to dealers so that bills are not taken under such agreements at less than our
buying rates.
Cleveland.—We have had no transaction since 1923, but prior to that time
whenever bankers' acceptances were purchased under resale agreements the
rate we charged was the same rate at which the dealer had acquired the acceptances, so there was no profit to the dealer in selling the bills to us under resale
agreement.
Dallas.—
Rate prevailing at the Federal Reserve Bank of Dallas on resale agreements against
bankers' acceptances, showing date of each change since January, 1922
Sales contract
Date
J a n . 1,1922
J a n . 18, 1922___
J u n e 13, 1922
A u g . 31, 1925
J a n . 7, 1926
A u g . 23, 1926
J u l y 22, 1927..
A u g . 5, 1927
F e b . 3, 1928
A p r . 13, 1928
M a y 18,1928
__
6
4
3
M
m
m
m
4
Sales contract
Date
J u l y 13, 1928
! J a n . 8, 1929
j J a n . 23, 1929
M a r . 22, 1929 . . .
M a r . 26, 1929
J u l y 9, 1929
N o v . 1, 1929
N o v . 15, 1929
N o v . 22, 1929
F e b . 13, 1930
M a r . 5, 1930
4H
...
5V2
. _
m
4
Sales contract
Date
M a r . 7, 1930
M a r . 12, 1930
M a r . 20,1930
M a y 3, 1930
M a y 9, 1930
_
M a y 20, 1930 .
| J u n e 6, 1930
J u n e 16, 1930
J u n e 20, 1930
J u l y 1, 1 9 3 0 - . .
D e c . 24, 1930
„„
3H
3H
3
2%
2%
2Y2
2%
2H
2H
2
\%
Kansas City.—None.
Minneapolis.—See answer to question 29.
New York.—•
Resale agreement rates against acceptances
D a t e effective
Rate
1918
A u g . 16
. ...
4M
1919
4K
4M
N o v . 28
D e c . 29
D a t e effective
1924
M a y 26
Junes 17
Sept. 3
N o v . 17-._
N o v . 28 . . .
Dec. 5
.
D e c . 22
Rate
_.
2H
2
2%
2Y%
_._
2%
3
._-
3M
1920
J a n . 23__
June 28-.
1925
5M
1921
Aug. 2
Sept. 26.._„
Oct. 4
Nov. 3
5M
5
Jan. 8
A u g . 23
1926
--.
4H
_-.
__
-—
-.
J u l y 21
J u l y 29
Aug. 5
4
m\
m
F e b . 11
Mar. 5
-.
4
...
1928
Feb.
Apr.
May
July
3
13
18
13
1929
Jan. 4
_ _.
Jan. 21.
M a r . 21
M a r . 25
J u l y 11
Aug. 9
Oct. 25
Nov. 1
N o v . 15
Nov. 22..
1930
1927
1922
Mar. 6
M a r . 22
July 5 Oct. 17
Oct. 23
Oct. 27_
A u g . 28
D a t e effective
4
4H
J M a r . 11
M a r . 19
May 2
May 8
M a y 19
June 5 . . .
J u n e 16
J u n e 2 0 . __
J u n e 30
D e c . 24
Rate
5
5H
Wz
5/4
5/4
5
43<
_
4J4
4
%%
3/4
m
Q4
3
2%
5
2A
2H
2H
2H
2K
2
IU
Philadelphia.—During 1922 and the early part of 1923 we extended a limited
amount of accommodation to one dealer, under this arrangement.
942
NATIONAL AND FEDEKAL RESERVE BANKING SYSTEMS
Rates charged on resale agreements against acceptances
1921
October, 4% per cent.
November, 4%, 4^, and 4% per cent.
December, 4}£, 4>£, 4%, and 4% per cent.
1922
January, 4, 4%, 4%, and 4}£ per cent.
February, 4>£ per cent.
March, \% per cent.
April, Vfo per cent.
May, 3K and 3% per cent.
June, 3J4 per cent.
August, SYs per cent.
September, 3% per cent.
October, 3% and 4J>£ per cent.
November, tyi per cent.
December, 4, 4%, 4J4 and 4 ^ 6 per cent.
1923
January, 4 and 4% per cent.
February, 4 and 4}£ per cent.
March, 4.
April, 4, 4& and 4% per cent.
May, 4}4 and 4% per cent,
June, 4}i per cent.
From July, 1923, to December, 1930, no agreements.
Richmond.—We have no resale agreements.
St. Louis.—Have had no resale agreements in effect since January, 1924.
The few in effect prior to that time were on a basis of a rate equivalent to that
at which the dealer bought the bills.
San Francisco.—In the beginning (1921), the carrying rate for bills was fixed at
the actual rate which each bill was purchased by the dealer in the market.
When bills were being withdrawn each day for sale to investors, that procedure
was found somewhat clumsy, so an average rate was fixed with the object of
leaving no profit to the dealer in his carrying operations.
Later, conditions again changed, making it desirable at times to fix a rate
which would provide sufficient penalty to cause the dealer to seek cheaper funds
elsewhere. (See questionnaire No. 10, question 31.)
While banks are borrowing, they will not advance funds to dealers to carry a
portfolio. The Federal resrve bank, under such circumstances, has felt it a
necessary service to accepting banks and investors to provide limited accommodation, so that dealers would not cease to buy and distribute bills.
The following will show the variations between open market bid rates and
dealers' carrying rates during recent years:
Date of change
Jan. 8,1926. .
Apr. 26, 1926.
Aug. 24,1926.
Aug. 9,1927..
Feb. 3,1928..
Apr. 12,1928.
May 28,1928.
July 13,1928.
Aug. 1,1928..
Jan. 4,1929..
Jan. 21,1929.
Mar. 21,1929.
Mar. 26,1929.
July 16,1929.
Oct. 29,1929.
Carrying
rate
m
m
Z%
m
3K
4m
4H
4*A
4M
5
5M
m
t>X
5
Bid
90 d/3
W%
VA
m
VA
4w*
m
4A
4M
5
5H
5H
m
5M
4%
Date of change
Nov. 5, 1929.,
Nov. 19,1929.
Nov. 25,1929.
Feb. 24, 1930.
Mar. 5, 1930-.
Mar. 6,1930-,
Mar. 11,1930.
Apr. 4,1930May 7,1930-.
May 8,1930..
May 20,1930.
June 5,1930June 17,1930.
June 24,1930.
July 1,1930-
Carrying
rate
4%
Qi
4
VA
m
VA
3m
2H
2%
2H
2%
2H
2Y8
2
Bid
90 d/3
*K
4
m
3%
3M
W2
VA
3
2%
2%
2%
2%
2K
2H
2
31. To prevent the seepage of Federal reserve credit into the speculative or
investment market, does your institution inquire into the use of the funds extended to dealers under resale agreements?
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
943
Atlanta.—No such agreements are entered into by this bank.
Boston.—This institution does not inquire into the use of the funds extended
to dealers under resale agreements.
Chicago.—We do not inquire for the reason that credits extended to dealers
under resale agreements are for the purpose of paying for the biUs which they
purchase and we do not see therefore h*ow such funds could get into the speculative or investment market.
Cleveland.—No dealers, consequently no transactions.
Dallas.—It has been unnecessary to do this because the funds obtained from
us are used to carry the dealers' portfolio pending prompt distribution.
Kansas City.—We have had no resale agreements with dealers; consequently,
this question does not apply to us.
Minneapolis.—See answer to question 29.
New York.—This question relates to similar questions with respect to Government securities, question No. 7 in questionnaire No. 7 and question No. 11 in
questionnaire No. 9, in the answers to which the problem is more fully considered and to which reference is hereby made.
As to the first use of the proceeds of funds placed in dealers hands under
resale agreements for bills, no inquiry is necessary. Dealers take accommodation from us solely for the purpose of carrying their portfolios of bills at times
when outside funds against such bills as collateral are not available, either in
sufficient amount or at rates economically possible for them to pay. When they
sell the bills they must repurchase them from us to enable them to nake delivery
and when outside money becomes available they shift their bills from us into
loans from banks and bankers.
Philadelphia.—We have never extended accommodation to dealers under
resale agreements, with the exception stated elsewhere. The bills bought in the
district are carried mainly in New York and Boston.
Richmond.—We have no resale agreements.
St. Louis.—Not having had any resale agreements since January, 1924, we
have had no occasion to make inquiry.
San Francisco.—Inasmuch as the dealers keep the Federal reserve bank
informed as to the amount of their portfolios, the reserve bank is informed as to
the amount of credit dealers require and there is little opportunity to misuse
credit.
While banks are rediscounting they will not accommodate dealers. Immediately the banks are in funds they offer dealers credit, which, if accepted, relieves
the Federal reserve bank of the dealer's obligations.
Federal reserve rate is so fixed as to create an incentive to borrow elsewhere as
soon as surplus funds appear in the market.
It has been felt that portfolios should have a direct relationship to the dealers'
demands from investors, and that the Federal reserve bank should not accommodate dealers which were carrying bills with any other object in view. The
-carrying rate would be used as the corrective measure, if any correction were
required.
32. Append statistics showing the average life of resale agreements since
January, 1922.
Atlanta.—No such agreements are entered into by this bank.
Boston.—
Average life of resale agreements since January, 1922
[Bankers' acceptances]
Month
January
February
March
April
May
June
July
August
September
October
November
December
Yearly average
-„
_
_
1923
1924
1925
Days
11.2
12.1
11.6
12.4
11.9
10.0
10.1
11.5
11.3
11.3
11.1
9.6
Days
7.0
7.9
8.0
9.4
6.4
3.3
7.0
2.3
4.7
7.4
5.3
7.6
Days
Days
7.8
9.3
7.6
9.9
10.1
10.4
11.3
30.9
9.1
10.7
10.2
9.8
8.8
10.1
9.5 . 10.7
9.4
10.6
9.1
10.2
5.5
8.8
8.8
8.9
11.2
7.1
9.2
1926
10.0
1927
1928
1929
1930
Days
10.8
9.8
10.5
10.2
10.7
10.1
10.7
11.0
10.9
10.6
9.4
11.6
Days
10.0
10.4
10.4
9.2
10.4
12.3
10.6
11.6
11.4
10.5
10.7
10.2
Days
10.6
9.4
10.1
10.1
9.8
9.5
10.3
10.7
10.1
8.7
7.0
8.9
Days
8.1
9.0
9.7
10.6
9.0
9.5
10.5
11 0
11.1
11.0
10.9
10.0
9.5
10.5
9.8
9 7
944
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
Chicago.—We have no way of determining accurately the average life of sales
contracts for the reason that dealers sell us their bills with agreement to buy
them back within 15 days, and during the 15-day period they withdraw the bills
that they are able to sell, reducing the contract almost daily.
We would estimate the .average life of our sales contracts covering bankers'
acceptances at 10 days.
Cleveland.—We have but one transaction under repurchase agreement since
1923. The amounts of those transactions prior to 1923, as shown by the schedule
attached to question No. 29, were insignificant and the average life of the agreement approximately 15 days.
Dallas.—We estimate that the average life of the resale agreements which we
have handled is not over 10 days.
Kansas City,-—Same answer as to question 31.
Minneapolis.—See answer to question 29.
New York.—The average life of a particular agreement is not a test of the
accommodation extended to any particular dealer, as there are frequently several
agreements for a given dealer running concurrently, from which withdrawals are
made as necessary for the dealer to make delivery on bills sold to investors. A
more accurate picture of the extent of our accommodation to the market under
resale agreements is the average amount of our holdings of bills under resale
agreements and the number of days in each month when there were no such
holdings. The data requested and the other information referred to given below.
Statistics pertaining to acceptances held under resale agreements by Federal Reserve
Bank of New York monthly from January 1, 1922, to December 81, 1930
Date
Average
balance of
Average acceptances
life in
held
days of
under
resale
resale
agreeagreements
ments
(in thou-'
sands)
1922
January
February
March
April..
May
June
-_ .
July
August
September
October..
November
December
11
8
8
10
10
11
10
11
10
14
12
12
$17, 868
11,411
9,348
8,663
9,568
12,822
16,284
7,387
11,397
12, 565
13,443
14,194
1923
January
February
___
March... _
April
May
June
July
August..
_
September
October
November.
December
_
9
10
9
9
12
13
13
13
11
14
14
13
10,158
8,700
9,461
7,730
13,694
19,230
15,935
14,997
15,417
18,877
35,423
35,177
14
13
13
9
6
7
*9, 477
46,118
31,900
24, 633
15, 292
14, 525
20,640
11
10
8
8
3,674
27, 558
15, 297
19,604
1924
January
February
___
March.._ . . . . . .
April
May...
June
July
August
September.
_
October
_
November.
_
December
Number
of days
during
month on
which no
bills were
held
under
resale
agreements
Average
balance of
Average acceptances
life in
held
days of
under
resale
resale
agreeagreements
ments
(in thousands)
Date
1925
January
February
_
6 March
April
May..
.
. .
7 1 June
July..
August.-. ..-_ ^ -September..
October.
.
November
December.
__
7
10
8
10
13
13
13
11
11
14
14
13
$13,227
13,864
12,332
22,100
30,784
19,157
17,810
9,342
10,923
23,726
24,480
29,755
1926
January.. __
February
March
April
May.,. _
June,.
.
July
.. .
August.
.
September
October
November
__
December...
11
14
13
10
13
12
12
9
11
10
14
13
13,526
30,129
29, 542
19,837
49,481
25,790
17,587
5,235
10,170
13, 674
31,820
56,571
14
12
11
13
14
9
8
14
14
13
13
14
35,316
31,068
29,532
33,313
33,152
32,470
4,996
42,545
51,663
51,000
33,907
53,990
6
7
19
26
21
31
7
3
1927
January
February
March.. _
April
May.
June...
July.—
August
September
October
November
1 December
__
...
_.
Number
of days
during
month on
which no
bills were
held
under
resale
agreements
9
6
3
10
8
945
NATIONAL AND FEDERAL, RESERVE BANKING SYSTEMS
Statistics pertaining to acceptances held under resale agreements by Federal Reserve
Bank of New York monthly from January 1, 1922, to December 31, 1930— Con.
Average
life in
days of
resale
agreements
Date
1928
January
February „ .
March
April
May
June
July
August
September..
October
November..
December...
Average Number
(balance of| of days
acceptduring
ances month on
held
which no
under bills were
resale
held
agreeunder
ments
resale
agree(in thouments
sands)
Date
1929
July..
August
September..
October
November..
December...
$36,133
26,493
30,055
38,147
14,994
4,542
6,840
9,161
34,440
52,977
47,053
39,916
8
10
12
6
7
13
1930
January
February...
March
April
May
June
July
August
September..
October
November..
December. _.
1929
January
February,..
March
_.
April
May
June
Average
life in
days of
1 resale
agreements
32, 581
19,414
17,307
8,233
18,900
5,917
12
10
12
10
7
9
7
5
9
7
9
Number
of days
during
month on
which no
bills were
held
under
resale
Average
balance of
acceptances
held
under
resale
agreements
(in thousands)
ments
$13,693
41, 535
59,780
22,467
8,763
62,777
1
14
95,613
54,714
47,767
78,777
25,426
23,354
12,681 J
6,340 1
8,253
10,016
1,796
17,781
2
4
11
11
Philadelphia.Average life of resale agreements on acceptances
Number
Number
Amount
Amount
1922
1922
January.
February.March
April
May
June
July
August
SeptemberOctober
$939, 527. 22
277, 376. 69
483, 353.19
170,947. 73
148,977. 25
250,000.00
387,864.03
75,000.00
213,072. 24
November
December
January
February
March
April
May
June
$95,000.00
352,493.48
1923
573, 737. 92
103,215. 5a
140,000.00
220,000.0G
19,230.19
7,000.00
_
From July, 1923, to December, 1930: Nothing.
About 50 per cent of these agreements run from 1 to 15 days and the remainder up to 90 days.
Richmond.—We have no resale agreements.
St. Louis.—
Statistics showing life of repurchase agreements
Days
Date
1922..
1923
1924
Average 4.97 days.
1
2
3
4
5
6
7
8
9
10
5
1
....
4
3
3
3
3
1
2
2
1
T
1
1
1
11 12
1
1
13 14
15
1
1
Total
23
11
4
946
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
San Francisco.—The maximum length of an agreement is 15 days.
When the investment market is active, bills are withdrawn very rapidly.
Frequently, agreements are broken down in part to make deliveries to investors
within 1, 2, or 3 days. At times the life of agreements averages 4 or 5 days
and at other times 10 or 12 days.
33. What, in the experience of your institution, has been the relationship
between changes in the amount of acceptances held under resale agreement and
the amount held in the dealers' portfolios? The relationship of the resale
agreement rate in force at your institution and market rates of interest on
acceptances as regards the volume of bills held under resale agreement?
Atlanta.—Our institution has had no experience with such resale agreements.
Boston.—It usually follows that during periods when the dealers' portfolios
are the highest it has been the result of a slackening in the demand for bills. It
is during these periods that the dealer will usually sell more of his bills to Federal
reserve banks on repurchase agreements, relieving him of the necessity of dumping his bills on the open market oftentimes at losses.
During the year 1928, more particularly during the latter half of the year and
the first quarter of 1929, rates advanced from 3% per cent to 5% per cent. The
supply of new bills coming into the market, especially during the fall of 1928,
continued large, reflecting the usual seasonal increase, while the investment demand was insufficient to absorb this increased supply, consequently, dealers'
portfolios in this district reached a high of nearly $18,000,000 with the result
that dealers found it necessary to sell many of their bills to us on their resale
agreement. Their holdings with us during this period were the highest since
the inception of the agreement. During the periods when a good investment
demand for bills exists, dealers' portfolios decline to a minimum and their offerings to us on resale agreements will be negligible. This latter condition was
particularly true at the end of 1930, when the aggregate amount of all acceptances
offered by dealers on their resale agreements averaged a little more than $500,000
a day. (See figures, questionnaire No. 10, answer No. 30.) Our usual buying rates
for acceptances on resale agreements vary from one-eighth per cent less to oneeighth per cent more than the dealers' buying rate for 90-day prime bills.
Exceptions to this are made from time to time, dependent upon the support that
Federal reserve banks feel it is necessary to extend to dealers relative to existing
conditions. For example, at the present time there is a scarcity of bills due
to an excellent investment demand and as there is little need for Federal reserve
support, our rate to dealers on resale agreements is one-fourth per cent higher
than the open-market rate for 90-day prime bills. Should this present condition be reversed, and we felt that dealers needed support, our rates would
undoubtedly be changed to meet this condition.
Chicago.—The amount of acceptances held under resale agreement is usually
greater when money rates in the open market are high and does not necessarily
have relationship to the amount held in the dealers' portfolios. When the dealers
are able to obtain money cheaper in the open market they borrow against bills
in the open market instead of carrying resale agreements with us. Inasmuch as
the dealer has no profit in carrying bills with us under resale agreements, because he pays us the same rate at which he bought the bills, it is to his advantage
to sell them as quickly as possible or to borrow money in the open market against
them whenever the open market rate is less than the rate he pays us.
Cleveland.—No dealers, consequently can not answer.
Dallas.—(1) As the demand for bills declines the amount held under repurchase
agreement increases and the bill dealer's portfolio decreases. Under conditions
of active demand for bills the relationship moves in the opposite direction.
(2) Inasmuch as member banks in this district do not lend on call against
bills, the repurchase rate in effect at this institution is the only rate applicable
to the volume of bills held by dealers in this district pending distribution.
Kansas City.—Same as answer to question 31.
Minneapolis.—See answer to question 29.
New York.—As the vast bulk of acceptances carried in portfolios by dealers is
carried in one way or another on borrowed money, it follows that their need
for money accommodation increases as their portfolios increase, and the decline
is accordingly relative. The relationship of our repurchase agreement rate and
the market call rate for loans against acceptances affects the volume of bills
carried by us for dealers under* repurchase agreement for the reason explained
in the answers to this and previous questions. When outside money is not available in amounts sufficient to meet dealers' requirements, or is available only at
rates which it is economically impossible for the dealers to pay, dealers come to
NATIONAL AKD FEDEBAL, RESERVE BANKING SYSTEMS
947
us for accommodation. When it is in sufficient supply at rates below, equal to,
or even somewhat above our rates, they use the market. Ordinarily the position
of a dealer in this country is that it costs him money in his interest account to
carry his portfolio. Therefore, he is required to be more active on the trading
side than are London discount houses who buy more for the carry at a profit
in the interest account.
The accompanying diagram shows, for the years 1929 and 1930, a comparison
of the total of dealers' portfolios with the amounts of sales contracts held by this
bank.
MILLIONS OF DOLLARS
250,
200|
150
SALES CONTRACTS
F. R. BANK OF N Y
lOOj
50
1929
1930
Comparison of amount of bills in dealers' portfolios with amount of bills held by
the Federal Reserve Bank of New York under sales contracts, weekly, 1929-30
Philadelphia.—None.
Richmond.—We have no resale agreement.
St. Louis.—None.
San Francisco.—There does not appear to be any relationship between the
size of a dealers' portfolio and the amount being carried under repurchase agreement by the Federal reserve bank. Dealers carry what they believe to be their
marketing requirements to the extent they can obtain financing at an average
profit from the commercial banks and the Federal reserve bank.
Dealers' portfolios express a forecast of future rates and future demand for
bills by investors. The amount of credit (and the possible cost) which can be
expected from commercial banks and the Federal reserve bank are also important
factors in determining the size of portfolios.
If dealers could depend always on carrying rates which involved a profit, it
would result in their accumulating large portfolios.
Lower open market rates would be a consequence of more active buying by
dealers to carry large and profitable portfolios. The effect would be the same
as more active buying in the open market by the Federal reserve banks.
Inasmuch as San Francisco maintains a carrying rate which is designed to
have dealers borrow elsewhere if funds are available, its carrying rate has not been
a cheapening factor in the money market.
An understanding exists with dealers that they will not maintain portfolios
beyond their marketing requirements while they expect the Federal reserve bank
to afford relief in a stringency.
APPENDIX
DIGEST OF STATE LAWS RESPECTING THE ACCEPTANCE POWER OF
STATE BANKS AND TRUST COMPANIES AND RESPECTING ACCEPTANCE CORPORATIONS
(Prepared by the different Federal reserve banks)
FEDERAL RESERVE BANK OF ATLANTA
Memorandum as to the laws of the States included within the Sixth Federal Reserve
District touching the acceptance powers of State banks and the limitations on
the amount of acceptances which State banks may discount
ALABAMA
1. Banks may accept drafts or bills of exchanges drawn upon them, having not
more than six months sight to run exclusive of days of grace and growing out of
transactions involving the importation or exportation of goods or out of transactions involving the domestic shipment of goods if shipping documents, conveying
or securing title, are attached at the time of acceptance or if, at the time of acceptance, such bills were secured by warehouse receipts or similar documents, conveying or securing title, covering readily marketable staples. Banks must keep
-careful records of all such acceptances, showing the same as liabilities on general
books. (Michie's Annotated Code of Alabama, 1928, sec. 6377.)
2. No bank shall accept for any one person, etc., to an amount equal at any
time in the aggregate to more than 10 per cent of its paid up and unimpaired
capital stock and surplus, unless the bank is secured either by attached documents
or some other actual security growing out of the same transactions as the acceptance, and no bank shall accept such bills to an amount equal at any time in the
aggregate to more than one-half of its paid up and unimpaired capital stock and
surplus. Banks which are members of the Federal reserve system may accept
such bills to an amount not exceeding in the aggregate at any time 100 per cent
of its paid up and unimpaired capital stock and surplus, but the aggregate of
acceptances growing out of domestic transactions shall in no event exceed 50 per
cent of such capital and surplus. (Michie's Annotated Code of Alabama, 1928,
sec. 6378.)
FLORIDA
1. Statutes provide that no banking company shall at any time be indebted or
in any way liable to an amount exceeding its capital stock at such time actually
paid in, etc., except on account of certain demands, including "the discount and
rediscount of any bills payable, bills receivable, domestic and foreign bills of
exchange, trade acceptances and bankers' acceptances;" with the proviso that
such indebtedness shall be incurred under such restrictions, limitations and
regulations as may be imposed by the comptroller. (Compiled General Laws of
Florida, 1927, vol. 3, sec. 6073.)
Under the above provisions, banks are given the power to discount acceptances
but the statutes do not confer the right to make or issue acceptances.
GEORGIA
1. In the enumeration of the general powers of banks appears a statement of
the power "to issue and sell acceptances." (Michie's Annotated Georgia Code,
1926, sec. 2366 (135).)
2. No bank shall be at any time indebted to an amount exceeding double the
amount of its capital stock actually paid in and remaining undiminished by loss
or otherwise, plus the amount of unimpaired surplus and undivided profits except
on account of certain items, including "acceptances as herein authorized."
(Michie's Annotated Georgia Code, 1926, sec. 2366 (171).)
No bank shall be allowed to lend to any person, etc., more than 20 per cent of
its capital and unimpaired surplus, etc., but "liabilities arising to the makers and
948
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
949
indorsers of bank drafts, bills of exchange received by the bank on deposit,
cashed or purchased by it shall not be considered as borrowed money or loans."
(Michie's Annotated Georgia Code, 1930 Supplement, sec. 2366 (159).)
LOUISIANA
No provision authorizing banks to accept drafts nor limiting its powers with
respect to the making or discount of acceptances.
MISSISSIPPI
1. A bank may accept drafts or bills or exchange drawn upon it having not more
than six months sight to run, exclusive of grace, and growing out of transactions
involving the shipment of goods: Provided, Shipping documents, conveying or
securing title, are attached at the time of acceptance or which are secured by
warehouse receipts or other documents conveying or securing title, covering readily
marketable staples, not subject to rapid deterioration. (Mississippi Code, 1930,
Annotated, sec. 3831.)
2. No bank shall accept for any one person, etc., to an amount equal at any
time in the aggregate to more than 10 per cent of its paid up and unimpaired
capital stock and surplus unless the bank is secured by such attached documents,
and no bank shall accept to an amount equal at any time in the aggregate to more
than one-half of its paid up and unimpaired capital and surplus. (Mississippi
Code, 1930, Annotated, sec. 3831.)
TENNESSEE
1. All banks and trust companies are authorized to accept time bills of exchange
drawn upon them and to issue letters of credit authorizing holders thereof to
draw drafts upon them or their correspondents at sight or on time not excceeding
one year. (Baldwin's Cumulative Code, Supplement 1920, sec. 3235a-8.)
2. It is not lawful for any bank in Tennessee, directly or indirectly, to increase
its total liabilities beyond the amount of its total solvent assets.
FEDERAL RESERVE BANK OF BOSTON
Digest of State laws respecting acceptance powers of State banks. Limitations on
amount of acceptances which State banks may discount. Provisions of State law
permitting acceptance banks of the type permitted by provisions of the Edge act
CONNECTICUT
Under section 3901 of the General Statutes, any State bank or trust company
may accept for payment at a future date, not exceeding six months, drafts drawn
by its patrons but no bank shall accept such drafts in the aggregate to an amount
exceeding 50 per cent of its capital and unimpaired surplus.
Under section 3901, no bank shall accept for payment from one person, firm
or corporation, an amount exceeding 10 per cent of its capital stock and unimpaired surplus, surplus in this instance including surplus, profits and losses and
all other items of excess earnings except interest paid in advance. The liability
of customers under this section may be in addition to all liabilities provided for
loans to one person under another section of the General Statutes.
Under section 3901, a record of acceptances must be kept in such form as
approved by the bank commissioner and under section 3903 any acceptances
issued under the provisions of section 3901 shal] be either of a draft or bill of
exchange drawn in good faith against actually existing values with bills of lading
or warehouse receipts attached, or with stocks or bonds of known value and worth
at least 20 per cent in excess of the draft, or of commercial or business paper
owned by the person or firm negotiating the same and indorsed by such person
or persons without limitation and subject to the restrictions defined in section
3901.
While the State has passed a law (ch. 135, Public Acts of 1925) under which
the provisions of the General Statutes relating to reserves and cash balances of
State banks and trust companies shall not apply to any bank or trust company
which is a stockholder in any Federal reserve bank, it has not adopted any law
conferring upon banks which are members of the Federal reserve system the
powers which member banks may exercise under the Federal reserve act.
The amount of acceptances which the commercial departments of State banks
and trust companies may discount is not specifically limited by law but the
950
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
commissioner is of the opinion that if such acceptances were discounted for a
customer the amount thereof would be included with other borrowings and that
the limitations prescribed by sections 3900 and 3905 covering loans to one person
and to directors respectively, would apply. Under section 3908 and section 3995
of the General Statutes, not exceeding 10 per cent of deposits in the savings
departments of State banks and trust companies and of deposits in mutual
savings banks (including the surplus of the latter) may be invested in bills of
exchange drawn by the seller on the purchaser of goods and accepted by such
purchaser, provided such bill of exchange is indorsed by any national bank,
member of a Federal reserve bank, State bank or trust company in this State or
in Boston, Mass., Providence, R. I., New York, N. Y., or Philadelphia, Pa., and
in the acceptance authorized by section 13 of the Federal reserve act or any
amendment thereto, of any national bank, or member of a Federal reserve bank,
in this State, in Boston, Mass., Providence, R. I., New York, N. Y., or Philadelphia, Pa., or of any State bank or trust company in this State which may be
authorized to issue such acceptances, nor shall the amount invested in such
acceptances and bills of exchange of any one bank by any savings bank, when
added to the sum of any funds deposited by the savings bank in such bank,
exceed 30 per cent of the capital stock, surplus, and undivided profits of such
depositary bank.
The State does not have any law permitting acceptance banks of the type
permitted by the provisions of the Edge Act.
MAINE
Under section 61 of chapter 57 of the Revised Statutes, any trust company
organized under the laws of the State has the power, subject to such restrictions
as may be imposed by the bank commissioner, to accept for payment at a future
date drafts and bills of exchange drawn upon it and to issue letters of credit
authorizing holders thereof to draw drafts upon it, or its correspondents, at sight
or on time: Provided, That such 'acceptances or drafts be based upon actual
values, but no trust company shall accept such bills or drafts to an aggregate
amount exceeding at any one time one-half of its paid-up capital and surplus,
except with the approval of the bank commissioner, and in no case to an aggregate
amount in excess of its capital and surplus.
Under section 80 of chapter 57 of the Revised Statutes, any trust company
may become a stockholder in a Federal reserve bank within the Federal reserve
district where said trust company is situated and may have and exercise any and
all of the corporate powers and privileges which may be exercised by member
banks under the provisions of the Federal reserve act or any acts in amendment
thereof or in addition thereto.
The amount of acceptances which may be discounted by the commercial and
the savings departments of trust companies is not limited by law but acceptances
discounted by the savings department must be segregated. Under paragraph
18 of section 27 of chapter 57 of the Revised Statutes, funds of savings banks
and institutions for savings may be invested in bankers acceptances and bills
of exchange of the kind and maturities made eligible by law for rediscount with
Federal reserve banks: Provided, The same are accepted by a trust and banking
company incorporated under the laws of this State, or a member of the Federal
reserve system located in any of the New England States or the State of New
York; and in bills of exchange drawn by the seller on the purchaser of goods sold
and accepted by such purchaser of the kind and maturities, made eligible by
alw for rediscount with Federal reserve banks: Provided, The same are indorsed
by a trust and banking company incorporated under the laws of this State, or a
member of the Federal reserve system located in any of the New England States
or the State of New York. Not more than 10 per cent of the assets of any such
bank shall be invested in such acceptances. The aggregate amount of the
liability of any trust and banking company or of any national bank to any savings
bank or institution for savings, whether as principal or indorser, for acceptances
held by such savings bank or institution for savings, shall not exceed 20 per
cent of the paid up capital and surplus of such trust and banking company or
national bank, ai*d not more than 5 per cent of the assets of any savings bank
or institution for savings shall be invested in the acceptances of a trust and
banking company or of a national bank of which a trustee of such savings bank
or institution for savings is a director.
The State does not have any law permitting acceptance banks of the type
permitted by the provisions of the Edge Act.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
951
MASSACHUSETTS
Under section 36 of chapter 172 of the General Laws, any trust company may,
subject to such restrictions as may be imposed by the bank commissioner, accept
for payment at a future date drafts and bills of exchange drawn upon it and issue
letters of credit authorizing holders thereof to draw drafts upon it, or its correspondents, at sight or on time: Provided, That such acceptances or drafts be based
upon actual values, but no such trust company shall accept such bills or drafts
to an aggregate amount exceeding at any one time one-half of its paid-up capital
and surplus, except with the approval of the commissioner, and in no case, to an
aggregate
amount in excess of its capital and surplus.
x
Under section 37 of chapter 172 of the General Laws, a trust company may
accept drafts or bills of exchange drawn upon it and growing out of transactions
involving the import or export of goods, having not more than six months' sight
to run, but no trust company shall accept such bills to an amount equal at any
time in the aggregate to more than one-half of its paid-up capital stock and surplus.
Under section 40 of chapter 172 of the General Laws, the total liabilities of a
person or firm for money borrowed from and drafts drawn on any trust company
having a capital stock of $500,000 or more shall at no time exceed one-fifth of the
surplus account and of the paid-up capital. Such total liabilities to any trust
company having a capital stock of less than $500,000 shall at no time exceed
one-fifth of the paid-up capital or one-tenth of the surplus account and of the
paid-up capital.
Under section 48 of chapter 172 of the General Laws, a trust company which
becomes a stockholder in a Federal reserve bank within the Federal reserve district where such trust company is situated and while such trust company continues as a member bank under the Federal reserve act or any acts in amendment
thereof, may have and exercise any and all of the corporate powers and privileges
which may be exercised by member banks under said Federal reserve act or any
acts in amendment thereof or in addition thereto.
The amount of acceptances which the commercial departments of trust companies may discount is not limited by law. Under section 61 of chapter 172 and
the eighth clause of section 54 of chapter 168 of the General Laws, deposits in the
savings departments of trust companies and deposits in mutual savings banks
(including income derived therefrom) may be invested in bankers' acceptances
and bills of exchange of the kinds and maturities made eligible by law for rediscount with Federal reserve banks: Provided, That the same are accepted by a
bank, banking association or trust company incorporated under the laws of the
United States or of this Commonwealth, and having its principal place of business
within the Commonwealth. Not more than 10 per cent of such deposits shall be
invested in bankers' acceptances or bills of exchange, nor shall any such bank
invest in the acceptances and bills of exchange eligible by law for rediscount with
Federal reserve banks of any one accepting bank or trust company to an amount
in excess of 5 per cent of such deposits. The aggregate amount of bankers
acceptances and bills of exchange of any bank, banking association or trust company held by any such bank shall not exceed 25 per cent of the paid-up capital
and surplus of such bank, banking association, or trust company.
The State does not have any law permitting acceptance banks of the type
permitted by the provisions of the Edge Act, although corporations may be
organized under the general business laws with broad powers in foreign transactions.
NEW HAMPSHIRE
The laws of the State do not confer any specific acceptance powers upon trust
companies organized under the laws of the State. Section 31 of chapter 265 of
the Public Laws of the State authorizes trust conpanies, among other things,
" t o do a general banking business."
Under section 7 of chapter 264 of the Public Laws of the State, a trust company
which becomes a stockholder in a Federal reserve bank may have and exercise
any and all of the corporate powers and privileges incident thereto which may be
exercised by member banks under the provisions of the Federal reserve act or
any acts in amendment thereof or in addition thereto.
Section 31 of chapter 265 of the Public Laws, authorizes trust companies "to
negotiate, purchase, and sell stocks, bonds, and other evidence of debt," but it
does not contain any provisions with reference to discount of acceptances by the
commercial departments of trust companies or establishing any limitation which
is applicable to the discount of bankers acceptances. Under section 9 of chapter
264 of the Public Laws, every trust company receiving savings deposits or trans-
952
NATIONAL AND FEDEEAL KESEEVE BANKING SYSTEMS
acting the business of a savings bank must conduct the business as a separate
department which shall be amenable to the laws governing savings banks.
Legal investments of savings banks (and of savings deposits in trust companies)
are governed by chapter 262 of the Public Laws of the State. Under paragraph 7
of section 3 of that chapter, the funds of savings banks and of savings departments
in banking and trust companies may be invested in notes with two or more
signers, or one or more indorsers, or acceptances of member banks of the Federal
reserve system of the kinds and maturities made eligible for rediscount or purchase by Federal reserve banks, or notes of makers with net assets of not less than
$250,000 and with total indebtedness of not more than 50 per cent of their quick
assets. Not exceeding 30 per cent of deposits shall be invested under paragraph
7: Provided, That, except in notes with two or more signers, or one or more
indorsers, or in said acceptances, no savings bank shall invest under this paragraph
unless its guaranty fund is full and unimpaired and the total value of its asseta
exceeds the amount of its depposits by at least 10 per cent.
The State does not have any law permitting acceptance banks of the type
permitted by the provisions of the Edge Act.
RHODE ISLAND
Under section 2 of chapter 271 of the General Laws of the State, every bank
and every trust company has the power to accept under its letters of credit, or
other authorization, drafts or bills of exchange arising out of actual commercial
transactions or issued or drawn for agricultural, industrial, or commercial purposes, at sight or on time not exceeding one year.
Under section 3 of chapter 278 of the General Laws, the total liabilities of
any person, corporation, association, or firm, to any bank or trust company on
account of or in connection with the acceptance by such bank or trust company
of drafts or bills of exchange as aforesaid, shall at no time exceed 40 per cent of
the paid-in and unimpaired capital and surplus of such bank or trust company.
The foregoing limitations are separate from the limitation of total liabilities to
any bank or trust company of any person, corporation, association, or firm for
money borrowed.
Under section 9 of chapter 271 of the General Laws of the State, a bank or
trust company may subscribe to the capital stock and become a member of a
Federal reserve bank within the Federal reserve district where such bank or
trust company is situated under the provisions of the Federal reserve act and
any amendments thereof or additions thereto, and every such member bank or
trust company may have and exercise any and all of the powers and privileges
at which may be exercised by member banks under the provisions of the Federal
reserve act.
The amount of acceptances which the commercial departments of State banks
and trust companies may discount is not limited by law. Investments of deposits
(and income thereon) in savings banks and of deposits in the savings or participation departments of State banks and trust companies is governed by section 1
of chapter 272 of the General Laws. Such section does not list bankers acceptances among the investments eligible for such deposits, but the bank commissioner advises that it has been ruled that savings banks can buy such acceptances
under that clause of such section, which authorizes savings banks—if unable to
make certain other investments—to invest not more than one-third of such
deposits in "promissory notes" or other personal securities, payable and to be
paid within six months from date thereof, with at least one responsible surety
or secured by collateral with a market value of at least 20 per cent in excess of
amount loaned thereon.
The State has no law permitting acceptance banks of the type permitted by
.the provisions of the Edge Act.
VERMONT
The laws of the State do not confer any specific acceptance powers upon
trust companies organized under its general laws. Under paragraph 6 of section
5347 of chapter 225 of the General Laws, a trust company has authority "to
issue letters of credit."
Under an act approved February 21, 1919, a bank or trust company incorporated under the laws of this State has the power to subscribe to the capital
stock and become a member of a Federal reserve bank and any such member
bank is vested with all powers conferred upon member banks by the terms of
the Federal reserve act.
NATIONAL AND FEDERAL KESEKVE BANKING SYSTEMS
953
v The investment of assets of all banks is governed by section 5363 of chapter 225
of the General Laws of the State. Subdivision 12 of that section provides that
a bank may invest in bankers acceptances and bills of exchange: Provided, The
same are accepted by an incorporated savings bank or a savings bank and trust
company or a national bank doing business in this State or by a bank incorporated
in Boston, New York, or Philadelphia to an amount not to exceed 20 per cent
of its deposits; and a bank may invest in notes indorsed or guranteed by any of
the above-named banks to an amount not to exceed 20 per cent of its deposits.
The State does not have any law permitting acceptance banks of the type
permitted by the provisions of the Edge Act.
FEDEBAL RESERVE BANK OF CHICAGO
Digest of the Laws of States included in the seventh Federal reserve district respecting
acceptance powers of State banks and the limitations on the amount of acceptances
which State banks may discount
ILLINOIS
State banks and trust companies are permitted to accept under general provisions of the banking law, effective January 1, 1921, section 1, as follows: " I t
shall be lawful to form banks and banking associations, as hereinafter provided,
for the purpose of discount and deposit, buying and selling exchange and doing a
general banking business."
In Illinois banking law, 1925, section 10, it is provided that "The total liabilities to any association, of any person or of any corporation or firm for money
borrowed, including in the liabilities of a company or firm the liabilities of the
several members thereof, shall at no time exceed 15 per cent of the amount of the
capital stock of such association actually paid in and unimpaired, and 15 per cent
of its unimpaired surplus fund.
"And, provided, also, That the total liabilities of any such person, firm or corporation for money borrowed under the provisions of this section shall not exceed 25
per cent of the deposits of any such bank or association, and also that such total
liabilities shall at no time exceed the amount of the capital stock of such bank or
association."
WISCONSIN
State banks not members of Federal reserve system have no power to execute
acceptances or trade acceptances, as shown by ruling in Wisconsin Banking
Department Bulletin No. 22, November 3, 1922, based on an opinion of the Wiscosin Attorney General, October 18, 1922. And the case of American Express
Co. v. Citizens State Bank, 181 Wisconsin 172, 194 N. W. (1923) 427, confirmed
this ruling where the accepting bank received no consideration.
MICHIGAN
Acceptance of drafts.—Upon making and filing the articles of incorporation required by this act the bank shall become a body corporate, and as such shall
have power: * * * to accept for payment at a future date, not to exceed six
months, drafts drawn by its patrons, but no bank shall accept such drafts in the
aggregate to an amount exceeding 50 per cent of its capital and undivided surplus,
such acceptances to be considered liabilities within the meaning and limitations
provided in section 25 of this act. (Public Acts, 1929, No. 66, sec. 4, eighth.)
Limitation of personal, etc., liability.—The total liabilities to any bank of any
person or of any company, corporation, or firm for moneys advanced, including
in the liabilities of the company or firm the liabilities of the several members
thereof, except special partners, shall at no time exceed one-tenth part of the
amount of capital and surplus of such bank: Provided, however, That by a twothirds vote of directors, the liabilities to any bank of any person or company, or
corporation or firm may be increased to a sum not exceeding one-fifth of the
capital and surplus of the bank; but such additional one-tenth of such capital
and surplus shall not be loaned to any officer or director, or to any partnership
in which such officer or director is a partner, or to any corporation in which such
officer or director owns a majority of the capital stock, until such officer, director,
partnership, or corporation furnishes collateral or indorsements satisfactory to
he directors, or files with the bank a sworn statement of assets and liabilities
thowing a net worth of sufficient amount to be entitled to such credit: Provided
surther, That before any bank under the supervision of the laws of this State
/
954
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
shall loan any of its funds to its officers or its employees, such loans shall be first
submitted to the directors of such bank for their approval. The discounting of
bills of exchange drawn in good faith against actually existing values shall not
be considered as money borrowed. The limitations prescribed in this section
shall not apply to the securities enumerated in section 24 of this act. (Public
Acts, 1929, No. 66, sec. 25.)
Drafts.—Three-fifths of the remainder of the savings deposits shall be invested
by the board of directors as follows:
(m) In accepted drafts or bills of exchange having not more than six months
to run growing out of transactions involving the importation or exportation of
goods; or growing out of transactions involving the domestic shipment of goods
providing shipping documents conveying or securing title are attached at the
time of acceptance; or which are secured at the time of acceptance by official
warehouse receipt or other document conveying or securing title covering readily
marketable staples. For the purpose of this section the acceptance of any one
person, company, firm, or corporation shall not exceed at any time more than 20
per cent of its paid-up capital and unimpaired surplus. The aggregate of such
accepted drafts or bills of exchange shall not exceed at any one time the amount
of capital stock and unimpaired surplus of the banks. (Public Acts, 1929, No.
66, sec. 24, (m).)
IOWA
Acceptance of drafts.—Any State bank, savings bank, or trust company may
accept drafts or bills of exchange drawn upon it having not more than six months'
sight to run, exclusive of days of gface, which grow out of transactions involving
the importation or exportation of goods; or which grow out of transactions
involving the domestic shipment of goods: Provided, Shipping documents
conveying or securing title are attached at the time of acceptance, or which are
secured at the time of acceptance by a warehouse receipt or other such document
conveying or securing title covering readily marketable staples. (Banking Law
of Iowa, 1929, ch. 415, sec. 9272.)
Acceptances limited.—No State bank, savings bank, or trust company shall
accept, whether in a foreign or domestic transaction, for any one person, company, firm, or corporation to an amount equal at any time in the aggregate to
more than 10 per cent of its paid-up and unimpaired capital stock and surplus,
unless the bank is secured either by attached documents or by some other actual
security growing out of the same transaction as the acceptance; nor shall the
total of bills accepted for and money borrowed by any one person, company,
firm, or corporation exceed in the aggregate more than 20 per cent of its paid-up
capital and surplus; and no bank shall accept such bills to an amount equal at
any time in the aggregate to more than one-half of its paid-up and unimpaired
capital stock and surplus. (Banking Law of Iowa, 1929, ch. 415, sec. 9273.)
Superintendent to regulate acceptances.—The superintendent of banking, under
such general regulations as he may prescribe, which shall apply to all banks alike
regardless of the amount of capital stock and surplus, may authorize any State
bank, savings bank, or trust company to accept such bills to an amount not
exceeding at any time in the aggregate of 100 per cent of its paid-up and unimpaired capital stock and surplus; but the aggregate of acceptances growing
out of domestic transactions shall in no event exceed 50 per cent of such capital
stock and surplus. (Banking Law of Iowa, 1929, ch. 415, sec. 9274.)
INDIANA
Power.—Such corporation shall exercise the powers and possess the privileges
conferred on banks by the laws of this State * * * to accept for payment
at a future date drafts drawn upon it; to issue letters of credit authorizing the
holders thereof to draw drafts on it or its correspondents at sight, or on time, not
exceeding one year. (Bank Laws of the State of Indiana, 1929, p. 37, 38, ch. 4,
loan, trust, and safe deposit companies, sec. 10, par. 9.)
There are no provisions in any State laws of States included in the seventh
district regarding acceptance banks of the type permitted by the provisions of
the Edge Act.
FEDERAL RESERVE BANK OF CLEVELAND
^ There is given below a digest of the laws of those States included within our
district respecting the acceptance powers of State banks, the limitations on the
amount of acceptances which State banks may discount, and the provisions of
any State law permitting acceptance banks of the type permitted by the provisions
of the Edge Act.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
955
T h e Ohio s t a t u t e on this p o i n t is General Code, section 710-137. I t is as follows:
Drafts, bills of exchange of future date may be accepted; letters of credit may be
issued, when; limitation of amount of accepted drafts or bills.-—A commercial b a n k
m a y accept for p a y m e n t a t a future date, drafts or bills of exchange having n o t
m o r e t h a n six m o n t h s sight t o run, drawn upon it by its customers under acceptance
agreements a n d which grow out of transactions involving t h e importation or
exportation of goods; a n d issue letters of credit authorizing t h e holders thereof
t o d r a w upon it or its correspondents: Provided, T h a t there is a definite b o n a
fide contract for t h e shipment of goods within a specified reasonable t i m e a n d t h e
existence of such contract is certified in t h e acceptance agreement; or which grow
o u t of transactions involving t h e domestic shipment of goods: Provided, T h a t
shipping documents conveying or securing t o t h e accepting b a n k title t o readily
m a r k e t a b l e goods, are a t t a c h e d or in t h e h a n d s of an agent of t h e accepting bank,
i n d e p e n d e n t of t h e drawer, for its account, a t t h e t i m e of acceptance or which
are secured a t t h e t i m e of acceptance, by warehouse receipts or other such docum e n t s conveying or securing t o t h e accepting b a n k title t o readily m a r k e t a b l e
goods fully covered b y insurance, t h e warehouse receipts or other such d o c u m e n t s
t o be those of a responsible warehouse independent of t h e drawer, t h e acceptor
t o remain so secured during t h e life of t h e acceptance unless other suitable security
of t h e same character, or cash, be s u b s t i t u t e d : And provided, T h a t no commercial
b a n k shall accept drafts or bills under this section, t o a n aggregate a m o u n t a t
a n y time more t h a n equal to t h e sum of its paid u p a n d unimpaired caiptal stock
a n d surplus: And provided further, T h a t no commercial b a n k shall accept w h e t h e r
in a foreign or domestic transaction, for a n y one person, firm or corporation,
t o an a m o u n t equal a t a n y t i m e t o more t h a n 20 per cent of its paid-up a n d u n impaired capital stock a n d surplus, unless t h e accepting b a n k is secured either
by t h e a t t a c h e d d o c u m e n t s or those held for its account by its agent independent
of t h e drawer, or by some other actual security of t h e same character. Should
t h e accepting b a n k purchase or discount its own acceptances, such acceptances
will be considered as a direct loan t o the drawer a n d be subject t o t h e limitation
of (G. C. 710-122) of this act. T h e superintendent of b a n k s m a y issue such further regulations as to such acceptances as he m a y deem necessary in conformity
with this act.
T h e K e n t u c k y s t a t u t e on this point is section 579, of Carroll's K e n t u c k y
S t a t u t e s , 1930 edition a n d is as follows:
579. Business; when may begin; powers of corporation; power to discount evidences
of debt; pledge of assets for United States deposits.—
* * * Any bank or t r u s t
c o m p a n y m a y accept for p a y m e n t a t a future date drafts or bills of exchange
d r a w n upon it by its customers and issue letters of credit authorizing the holders
thereof t o draw drafts upon it or its correspondents a t sight or on time, n o t exceeding one year, a n d m a y also accept drafts or bills of exchange drawn upon it, having
n o t more t h a n six m o n t h s ' sight to run, growing out of transactions involving t h e
i m p o r t a t i o n or exportation of goods, and a n y bank or t r u s t company m a y disc o u n t acceptances which are based upon t h e i m p o r t a t i o n or exportation of goods
a n d which have a m a t u r i t y a t time of discount of n o t more t h a n three m o n t h s a n d
are indorsed by a t least one other bank or t r u s t company, b u t no bank or t r u s t
c o m p a n y shall accept such drafts or bills of exchange to an a m o u n t equal a t a n y
t i m e in t h e aggregate to more t h a n one-half of its paid-up a n d unimpaired capital
stock a n d surplus, except b y a u t h o r i t y of the banking commissioner under such
general regulations as said commissioner m a y prescribe, and in no event to a n
a m o u n t exceeding t h e capital stock a n d surplus of such b a n k or t r u s t c o m p a n y ;
a n d such regulation shall apply to all banks or t r u s t companies alike regardless of
t h e a m o u n t of capital stock a n d surplus.
The Pennsylvania s t a t u t e in point is found in t h e Digest of Pennsylvania Statute Law for 1920. Section 6348 a n d is as follows:
6348. Acceptance of drafts; issuance of letters of credit.—Any b a n k or t r u s t comp a n y incorporated under t h e laws of this Commonwealth shall, from a n d after t h e
passage of this act, have t h e power to accept, for p a y m e n t a t a future date, drafts
d r a w n upon such b a n k or t r u s t company by its customers, a n d to issue letters of
credit authorizing t h e holders thereof t o d r a w drafts u p o n it or its correspondents
a t sight, or on t i m e n o t exceeding one year.
T h e West Virginia s t a t u t e on the point is found in t h e official code of West
Virginia, 1931, c h a p t e r 31, corporations; article 4, banking institutions, section 6:
Powers of banking institutions
defined.—
* * * Any banking institution
m a y accept for p a y m e n t a t a future date, drafts drawn upon it by its customers
a n d issue letters of credit authorizing the holders thereof t o draw drafts upon it
or its correspondents, a t sight or on time, n o t exceeding one year. * * *
34718—31—PT 6
17
956
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
FEDERAL RESERVE BANK OF DALLAS
Provisions of the laws of the States of the eleventh Federal reserve district respecting
the acceptance powers of State banks, the limitations on the amount of acceptances
which State banks may discount, and permitting acceptance banks of the type permitted by the provisions of the Edge Act.
TEXAS
pevised Civil Statutes of Texas, 1925, article 392:
Powers of corporation.—Banking corporations shall be authorized to conduct
the business of receiving money on deposit, allowing interest thereon, and of
buying and selling exchange, gold and silver coins of all kinds; of lending money
upon real estate and personal property and upon collateral and personal securities at a rate of interest not exceeding that allowed by law; and of buying, selling,
and discounting negotiable and nonnegotiable commercial paper of all kinds.
No such bank shall lend more than 50 per cent of its securities upon real estate,
nor make a loan on real estate to an amount greater than half the reasonable
cash value thereof.
Revised Civil Statutes of Texas, 1925, article 515:
Limitation of indebtedness.—No State banking corporation shall at any time
be indebted or in any way liable to an amount exceeding the amount of its capital
stock at such time actually paid in and remaining undiminished by losses or
otherwise, except on account of demands of the nature following:
1. Moneys deposited with or collected by it.
2. Bills of exchange or drafts drawn against money actually on deposit to the
credit of the corporation or due thereto.
3. Liabilities to the stockholders of the association for dividends and reserve
profits.
4. Liabilities incurred under the provisions of the Federal reserve act.
5. Liabilities incurred under the provisions of the Federal agricultural
credits act of 1920.
6. This article shall not apply to any guaranty executed by any bank and trust
company whose demand deposits are not in excess of its interest-bearing deposits,
provided such company is not a member of a Federal reserve bank.
7. Upon a written permit obtained from the commissioner, any bank may
borrow a sum not in excess of its unimpaired surplus in addition to its capital
stock.
Revised Civil Statutes of Texas, 1925, article 525:
Loans on cotton.—All State banks and bank and trust companies shall be permitted to loan upon or discount commercial or business paper secured by lien
upon cotton and cottonseed products to the same extent and upon the same
conditions as is now or may be provided for national banks under the laws of the
United States.
Revised Civil Statutes of Texas, 1925, article 528:
Bills payable and discounts.—No bank organized under the laws of this State
shall ever make any bills payable, and no bills shall ever be rediscounted by such
bank, except with the consent of the board of directors, said consent to be a matter
of record.
Revised Civil Statutes of Texas, 1925, article 416 (as amended acts 1929, 41st
Leg., 1st called sess., p. 48, ch. 17, sec. 1):
Investment of savings.—Such corporation shall invest not more than 85 per cent
of the total amount of its savings deposits in any of the following classes of
securities, and not otherwise:
*
*
*
*
*
*
*
6. In bankers' acceptances as defined by the Federal reserve act or in collateral
loans, which loans are collateraled and secured by marketable stocks or bonds,
the market value of which shall be at all times equal to 125 per cent of the amount
of the loan, such collateral loans always having a maturity of not longer than six
months from the date of the purchase thereof: Provided^ That not more than 25
per cent of such savings deposits may be invested in the class of securities mentioned in this subdivision:
*
*
*
*
*
*
*
Revised Civil Statutes of Texas, 1925, article 1302:
Purposes.—-The purposes for which private corporations may be formed are:
*
*
*
*
*
*
*
55. To accept, guarantee, enforce, become surety upon, buy, sell, contract
with reference to, or otherwise deal in acceptances, bills of exchange, bills of
NATIONAL AND FEDEKAL EESEEVE BANKING SYSTEMS
957
lading and warehouse, and other receipts growing out of or to be used in aid of the
transportation, warehousing distribution, or financing, in either domestic or
foreign trade, of readily marketable, staple, nonperishable, agricultural products, and so executed or supported as to be secured upon or to represent such
products in amounts at least equal in clear market value to the amount of the
financial undertaking of such corporations upon or on account of such instruments; to buy, sell, indorse, contract with reference to, or otherwise deal in
acceptances of approved banking corporations, not secured upon nor representing any such products, but eligible for rediscount to, or for purchase in, the open
market by Federal reserve banks.
Revised Civil Statutes of Texas 1925, articles 1514 to 1519, inclusive:
ART. 1514. Purposes.—This subdivision embraces private corporations formed
for the purpose of dealing in acceptances and other receipts growing out, or to be
used in aid, of the transportation, warehousing, distribution, or financing, in
either domestic or foreign trade, of readily marketable, staple, nonperishable,
agricultural products; and for dealing in acceptances of banking corporations not
secured upon nor representing any such products.
ART. 1515. Agricultural products.—By ready marketable, staple, nonperishable
agricultural products are meant those classes of agricultural products which are '
subject to such constant dealing in ready markets as to make their values easily
and definitely ascertainable and realizable on short notice, and which are not
ordinarily subject to substantial depreciation in quality within the period of
immaturity of the obligations which they secure, or by which they are represented.
ART. 1516. Assets and liabilities.—The total liabilities to any corporation
chartered under this law of any such banking corporation, on account of any such
unsecured acceptances, shall at no time be permitted to exceed 10 per cent of the
unimpaired capital of such corporation. Each such corporation shall invest
and keep invested in obligations of the United States, Texas, or political subdivisions or incorporated cities of Texas, not less than one-half of its paid-in capital.
Such corporation shall have an authorized capital stock of not less than
$500,000, which shall not be reduced by amendment to less than such sum.
ART. 1517. Limit of indebtedness.—No such corporation shall enter into any
contract or contracts of acceptances, guaranty, indorsement, or suretyship when
its obligation thereon in connection with its entire existing obligation and indebtedness primary or secondary, fixed or contingent, shall exceed five times its then
unimpaired capital and surplus, unless previously authorized in writing by the
banking commissioner so to do, in which case it may enter into such contract
not to exceed the limit so fixed by such commissioner, in no case to exceed ten
times its said capital and surplus. Those obligations, to pay which at maturity,
any such corporation has been furnished funds by other parties liable thereon,
need not be considered in determining the amount of its existing obligations and
indebtedness hereunder. All such contracts and obligations entered into in
violation of this article shall be unenforceable against such corporation. Nothing herein shall prevent the enforcement of any such prohibited obligations by
any holder who has acquired the same in due course, for value, before maturity,
and without notice of its infirmity.
^ ART. 1518. Ownership of stock.—Any private corporation formed under this
title, and any banking corporation or trust company, except savings banks, may
hold stock in corporations created hereunder, and in corporations chartered under
the laws of the United States or in any State thereof, and principally engaged in
financing domestic or foreign trade in any such agricultural products, in amounts
not to exceed in the aggregate 10 per cent of the capital and surplus of such
private corporation, banking or trust company, nor to exceed 10 per cent of the
capital stock of such corporation in which such stock is to be held. No banking
corporation or trust company shall acquire stock in such corporation without
express written authorization therefor from the banking commissioner, under
such rules and regulations as he may provide, except in payment of debt. If it
shall acquire same in payment of debt, it shall promptly dispose of same unless
expressly permitted to retain same by such commissioner.
ART. 1519. Regulation.—Such corporations shall be subject at all times to the
supervision and control of the banking commissioner and shall conform to all
lawful regulations of such commissioner. No such corporation shall begin
business until authorized to do so by such commissioner after satisfactory showing made that such corporation has complied with the law, and thereafter it shall
make reports to such commissioner and be subject to such periodical visitations
958
NATIONAL. AND FEDERAL RESERVE BANKING SYSTEMS
and examinations under his direction, and shall pay fees therefor, all as in the
case of State banking corporations. Said commissioner shall have such powers
with reference to taking charge of such corporations, liquidating same, and for
like causes as are possessed by him with reference to State banks.
LOUISIANA
Acts Louisiana 1924, regular session Act No. 115, sections 1, 2, 3, 4, 5, page 184:
SECTION. 1. Be it enacted by the Legislature of Louisiana, That banks and trust
companies organized under the laws of this State be, and they are hereby, authorized to accept for payment at a future date drafts drawn upon them by their
customers and to issue letters of credit authorizing the holders thereof to draw
drafts upon them or their correspondents at sight or on time: Provided, That it
shall not be lawful for any such bank or trust company to accept a draft or drafts
or to issue a letter or letters of credit to any one customer in an amount larger
than is or shall be permitted by law to be loaned by such bank or trust company to any one borrower.
SEC. 2. That each letter of credit issued by any bank or trust company organized under the laws of this State shall be signed by two officers of such bank or
, trust company.
SEC. 3. That all drafts accepted or letters of credit issued, whether obligation
thereon is direct or indirect, by any bank or trust company organized under the
laws of this State shall be duly recorded on the reconds of such bank and trust
company and carried as a liability on the daily statement of the condition of such
bank or trust company.
SEC. 4. That each and every violation of the provisions of the above shall
subject the offending bank or trust company to a penalty of not less than $100
nor more than $500 to be collected by civil suit in the name of the State of Louisiana by the district attorney of the Parish in which said bank or trust company
shall have its domicile.
SEC. 5. That all laws, or parts of laws, in conflict herewith, particularly Act 22
of 1915, are hereby repealed.
Acts Louisiana 1924, regular session Act No. 229, section 3, page 447:
That banking companies organized under this act shall consist of banks of
deposit, discount, exchange and circulation, and savings banks, to known as
banking associations and savings banks. Banking associations shall have the
following powers and no others: To receive deposits; to lend money on real and
personal security; to accept for payment at a future date drafts drawn upon them
by their customers; and to issue letters of credit authorizing the holders thereof
to draw drafts upon them or their correspondents at sight or on time; to discount
and buy and sell promissory notes and bills of exchange, and other evidences of
indebtedness, gold and silver and bonds of the United States, and of this State,
and of the several levee districts of this State and of the Parishes and school
districts, drainage districts, road districts, and of the municipal corporations of
this State, on which bonds there shall have been no default in the payment of
interest for the five years preceding the acquisition of the bonds by the bank:
Provided, This prohibition shall not apply to bonds which have been outstanding
for less than five years and upon which there has been no default in the payment
of interest. * * *
Acts Louisiana, 1924, regular sesssion, Act No. 229, section 26, page 448: That
it shall not be lawful for any banking association or savings bank or trust company to loan to any one borrower more than 20 per cent of its capital stock and
declared surplus: Provided, That loans secured by pledge of good collateral
securities or solvent indorsement shall not be included in the 20 per cent limitation
above described, nor shall any banking association or savings bank or trust company loan to any one borrower directly or indirectly more than an amount e ual
to one-half of its capital and declared surplus, either with collateral security or
solvent indorsement: And provided further, That it shall be lawful for any banking
association or savings bank and trust company to loan to one borrower an amount
not greater than its capital and declared surplus when such loan is secured by
pledge of the obligations of the United States, or of the State of Louisiana, or any
subdivision thereof, or of ready marketable staples, generally referred to as commodity loans. That it shall not be lawful for any banking association or savings
bank or trust company to make any loans to its president, vice president, cashier,
assistant cashier, or employees whenever said officers or employees are in active
management of said banking association, trust company, or savings bank, unless
these loans are approved by a resolution of the board of directors at a meeting, at
which the applicant for the loan shall not be present or participate in. * * *
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
959
ARIZONA
Session Laws of Arizona, 1922, chapter 31, section 16, page 129:
Commercial bank defined.—The term "commercial b a n k , " when used in this chapter, means any b a n k authorized by law t o receive deposits of money, deal in
commercial paper, or to m a k e loans thereon, a n d to lend money on real or personal property, a n d to discount bills, notes, or other commercial paper, a n d to
b u y a n d sell securities, gold, and silver bullion or foreign currency or bills of
exchange.
Session Laws of Arizona, 1922, chapter 31, section 17, page. 129:
Savings bank defined.—The t e r m "savings bank," when used in this chapter, m e a n s
a b a n k organized for t h e purpose of accumulating and loaning its funds; receiving
deposits of money; loaning, investing, and collecting t h e same with interest a n d
having power to invest said funds in such property, securities, and obligations
as m a y be prescribed by its board of directors; a n d to p a y a stipulated r a t e of
interest on deposits m a d e for a stated period or upon special bonds.
Session Laws of Arizona, 1922, chapter 31, section 26:
Savings banks loans.—A savings b a n k m a y invest t h e capital and deposits a n d
t h e income derived therefrom:
Subdivision 5, page 133:
In loans upon promissory notes s e c u r e d b y pledge or mortgage of personal
p r o p e r t y worth a t least 40 per cent more t h a n t h e a m o u n t of t h e loan; or upon
promissory notes or other negotiable instruments with a t least two sureties or
indorsers, or upon notes where t h e borrower is worth over a n d above all his other
liabilities a t least five times t h e a m o u n t of t h e note.
Session Laws of Arizona, 1927, chapter 92, section 19, page 278:
Loans to persons, corporations, etc.—The t o t a l liability to any banking corporation or any person or a n y one company, corporation, or firm, for money borrowed
after t h e d a t e upon which this act becomes effective, shall a t no time exceed 15
per cent of t h e a m o u n t of t h e capital stock paid in a n d of t h e surplus earned a n d
set aside as a surplus fund of such b a n k : Provided, also, T h a t loans m a y be m a d e
up to 25 per cent of t h e capital stock and surplus when secured by readily m a r k e t able, nonperishable, staple commodities in warehouse or in transit. B u t t h e
discount of bills of exchange drawn in good faith against existing values, a n d t h e
discount of commercial or business paper actually owned by t h e person negotiating
the same, shall not be construed as borrowed money. Deposits of commercial
banks, with commercial banks, or t h e commercial d e p a r t m e n t of b a n k s having
commercial a n d savigs d e p a r t m e n t , on open account to facilitate business
transactions shall be p e r m i t t e d and shall not be construed as loans.
NEW MEXICO
Session Laws of New Mexico 1915, chapter 67, section 4:
T h e t e r m " commercial b a n k , " when used in this act means a n y bank authorized
b y law t o receive deposits of money, deal in commercial paper or to m a k e loans
thereon, a n d t o lend money on real or personal property, a n d t o discount bills,
notes, or other commercial paper, and to buy a n d sell securities, gold a n d silver
bullion, or foreign coins or bills of exchange.
Session Laws of New Mexico 1915, chapter 67, section 5:
T h e t e r m " s a v i n g s b a n k , " when used in this act, means a b a n k organized for
t h e purpose of accumulating a n d loaning t h e funds of its members, stockholders,
and depositors, and which m a y loan and invest t h e funds thereof, receive deposits
of money; loan, invest, and collect t h e same with interest; a n d invest its funds in
such property, securities, and obligations as m a y be prescribed by this act.
Session Laws of New Mexico 1929, chapter 131, section 12, page 313:
T h a t section 30, chapter 67, Session Laws of 1915 as amended by section 11,
chapter 56, Session Laws of 1917 a n d section 16, chapter 120, Session Laws of
1919, and section 7, chapter 149, Session Laws of 1923, be, a n d t h e same hereby
is, amended to read as follows:
" S E C . 30. Whenever t h e capital of any b a n k shall be impaired, it shall m a k e no
new loans or discounts." * * *
Session Laws of New Mexico 1929, chapter 131, section 9, page 312:
T h a t section 36, chapter 67 of t h e Session Laws of 1915, as amended by section
21 of chapter 120, Session Laws of 1919, be, a n d t h e same hereby is, amended t o
read as follows:
960
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
" S E C . 36. N o bank shall become the creditor of a n y person, firm, or corporation including in t h e liabilities of a n y such firm t h e liabilities of t h e m e m b e r s
thereof, a n d including t h e liabilities of a n y person t h e liabilities of a n y firm of
which such person is a member, in an a m o u n t exceeding 20 per cent of its capital
a n d surplus, b u t t h e discount of bills of exchange drawn against" actually existing
values, loans upon produce in transit and upon warehouse a n d elevator receipts
as collateral security, a n d negotiable paper secured by collateral having an a c t u a l
m a r k e t value in excess of t h e paper secured shall not be considered as m o n e y
borrowed: Provided, however, T h a t no b a n k shall a t a n y t i m e h a v e invested more
t h a n 30 per cent of its unimparied cpaital a n d surplus in t h e notes, bonds, or
other securities of any person, firm, or corporation; * * * "
OKLAHOMA
Compiled Oklahoma S t a t u t e s A n n o t a t e d 1921, section 4116, as a m e n d e d
Session Laws 1924, page 74, section 1:
Powers and duties of banks.—1. A banking corporation organized under t h e
provisions of this chapter shall be p e r m i t t e d t o receive money on deposit, a n d t o
p a y interest thereon, not to exceed t h e r a t e t h a t m a y from time to time be fixed
b y t h e bank commissioner, as t h e m a x i m u m r a t e t h a t m a y be paid upon deposits
b y b a n k s in this S t a t e ; to b u y a n d sell exchange, gold, silver, coin, bullion,
u n c u r r e n t money, bonds of t h e United States or this State, or of a n y city, county,
school district, or other municipal corporation thereof, a n d State, county, city,
township, school district, or other municipal indebtedness; t o lend money on
chattel and personal security, or on real estate secured by first mortgages, running
n o t longer t h a n two years: Provided, T h a t such real estate loans shall n o t exceed
20 per cent of t h e aggregate loans of any such b a n k ; to own a suitable building,
furniture, a n d fixtures, for t h e transaction of its business, t h e value of which
shall not exceed one-third of t h e capital of such b a n k fully paid; * * *.
Compiled Oklahoma S t a t u t e s A n n o t a t e d 1921, section 4125, as a m e n d e d
Session Laws 1924, page 74, section 4:
Total liabilities.—4. T h e t o t a l liabilities t o a n y b a n k or any person, corporation,
or firm for money borrowed, including in t h e liabilities of such person, corporation,
or firm t h e liabilities of t h e several stockholders, officers, or members thereof,
shall not a t any t i m e exceed 15 per cent of t h e combined capital stock a n d surplus of such b a n k ; b u t t h e discount of bills of exchange drawn in good faith
against actual existing values, as collateral securities a n d a discount of commercial or business paper, actually owned b y t h e person, shall not be considered a s
m o n e y borrowed; * * *.
FEDERAL RESERVE
BANK
OF K A N S A S
CITY
Digest of laws of the States of the Tenth Federal Reserve District respecting the acceptance powers of State banks, in compliance with topic 14 of questionnaire No. 10
of the subcommittee of the Senate Committee on Banks and Currency
No s t a t u t o r y provisions relating to t h e acceptance powers of State b a n k s are
contained in t h e laws of Colorado, Kansas, Nebraska, New Mexico, Oklahoma,
a n d Wyoming.
I n Missouri State banks a n d t r u s t companies are expressly authorized to
accept for p a y m e n t a t a future date drafts d r a w n upon such b a n k s or t r u s t
companies by their customers, b u t t h e a m o u n t of liability so incurred shall not
a t a n y time exceed the paid-up a n d unimpaired capital stock a n d surplus fund of
t h e accepting b a n k or t r u s t company. (Sees. 5354 a n d 5421, R. S. Mo., 1929.)
I t is further provided b y s t a t u t e in Missouri t h a t no b a n k or t r u s t company
shall lend to a n y individual, partnership, corporation, or body politic b y acceptance of drafts or otherwise, an a m o u n t in the aggregate which will exceed 15 per
cent of t h e capital stock actually paid in a n d surplus fund of such b a n k or t r u s t
c o m p a n y if located in a city having a population of 100,000 or over, a n d 20 per
cent of t h e capital stock actually paid in a n d surplus fund of such b a n k or t r u s t
company if located in a city having a population of less t h a n 100,000 a n d over
7,000, a n d 25 per cent of the capital stock actually paid in a n d surplus fund
of such b a n k or t r u s t company if located elsewhere in t h e State, with certain
exceptions set forth in the s t a t u t e . (Sees. 5357 a n d 5429 R. S. Mo., 1929.)
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
961
FEDERAL RESERVE BANK OP N E W YORK
Digest of the laws of Connecticut, New Jersey, and New York respecting (1) the
acceptance powers of State banks and trust companies {2) the limitations on the
amount of acceptances which State banks and trust companies may discount, and
{$) the provisions of any State law permitting acceptance banks of the type permitted by the provisions of the Edge Act (Sec. 25 (a) of the Federal Reserve act)
CONNECTICUT
[References are to General Statutes of Connecticut, Revision of 1930]
(1) Acceptance powers.
" S E C . 3901. Acceptances limited.—Any State bank or trust company may
accept for payment at a future date not exceeding six months, drafts drawn by its
patrons, but no bank shall accept such drafts in the aggregate to an amount exceeding 50 per cent of its capital and unimpaired surplus. No bank shall accept
for payment from one person, firm, corporation? or association an amount exceeding 10 per cent of its capital stock and unimpaired surplus. Such liability
of customers may be in addition to all liabilities provided for in section 3900.
A record of such acceptances shall be kept in such form as shall be approved by the
commissioner, and shall at all times be kept posted to date and open for inspection
by said commissioner or his authorized examiners.
" S E C . 3903. Acceptances defined.—Any acceptance issued under section 3901
shall be either of a draft or bill of exchange drawn in good faith against existing
values with bills of lading or warehouse receipts attached, or with stocks or bonds
of known value and worth at least 20 per cent in excess of the draft, or of commercial or business paper owned by the person or firm negotiating the same and indorsed by such person or persons without limitation and subject to the restrictions
defined in section 3901."
(2) Limitations on discount of acceptances.
The laws of Connecticut contain no limitations upon the amount of bankers
acceptances which State banks and trust companies may discount, unless section
3900 imposes such a limitation. This section limits the total liabilities to any
State bank or trust company of any person, corporation, firm or association "for
money borrowed," and presumably would not be interpreted to apply to the
discount of bankers acceptances (i. e., to the acquisition of bankers acceptances
from parties other than the accepting banks), but probably would apply to the
acquisition of bankers acceptances direct from accepting banks. Section 3900'
reads as follows:
" S E C . 3900. Loans limited—Penalty.—The total liabilities to any State bank
or trust company of any person, corporation, firm, or association for money
borrowed, including in the liabilities of a firm the liabilities of the several members thereof, shall at no time exceed 10 per cent of the amount of the capital
stock of such bank or trust company actually paid in and its surplus and undivided profits combined, the provisions of any State bank or trust company charter
to the contrary notwithstanding. The provisions of this section shall not apply
to loans secured by collateral, so long as the market value of such collateral shall
exceed by 20 per cent the total liabilities secured in each case by such collateral,
but no loan on collateral shall at any time exceed 20 per cent of the amount of
the capital stock of such bank or trust company actually paid in and its surplus
and undivided profits combined, and the total loans to any one person, corporation, firm, or association, including in the liabilities of the firm the liabilities of
the several members thereof, shall at no time exceed 20 per cent of the capital,
surplus, and undivided profits combined of such bank or trust company."
(3) Acceptance banks of the type permitted by the provisions of the Edge Act.
There are no provisions in the laws of Connecticut dealing particularly with
banks of this type.
NEW JERSEY
(1) Acceptance powers.
Chapter 307 of the Laws of 1915 (p. 56 of Laws of New Jersey Relating to
Banks and Banking, Trust Companies and Safe Deposit Corporations, 1930)
provides that each State bank or trust company
"shall have power to accept for payment at a future date drafts drawn upon it
by its customers, and to issue letters of credit authorizing holders thereof to draw
drafts upon it or its correspondents at sight or on time not exceeding one year:
Provided, That the total amount of such drafts so accepted or letters of credit
so issued for any one person, firm, or corporation shall not at any time exceed
10 per cent of the capital and surplus of the accepting or issuing bank.
962
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
(2 Limitations on discount of acceptances.
The laws of New Jersey contain no limitations on the amount of acceptances
which State banks and trust companies may discount. Chapter 29 of the Laws
of 1920, as amended by chapter 167 of the Laws of 1922 (p. 57 of the Laws of
New Jersey Relating to Banks and Banking, Trust Companies, and Safe Deposit
Corporations, 1930) limits the total liabilities to any bank of any person or of any
company, corporation or firm "for money borrowed" but provides that:
"The following shall not be considered as money borrowed within the meaning
of this section, namely:
"(a) The discount of bills of exchange drawn in good faith against actually
existing values, including drafts and bills of exchange secured by shipping documents conveying or securing title to goods shipped, and including demand obligations when secured by documents covering commodities in actual process of shipment and also including bankers' acceptances which are eligible for rediscount
with any Federal reserve bank.
" (b) The discount of commercial or business paper of other makers actually
owned by the person, company* corporation, or firm negotiating the same."
(3) Acceptance banks of the type permitted by the provisions of the Edge Act.
There are no provisions in the Laws of New Jersey relating to banks dealing
particularly with banks of this type.
NEW YORK
[References are to New York Banking Law]
(1) Acceptance powers.
" S E C . 106. General powers.—In addition to the powers conferred by the general
and stock corporation laws, every bank shall, subject to the restrictions and limitations contained in this article, have the following powers:
" 2 . To accept for payment at a future date, drafts drawn upon it by its customers and to issue letters of credit authorizing the holders thereof to draw drafts
upon it or its correspondents at sight or on time not exceeding one year."
Section 185 contains precisely similar provisions with reference to trust companies.
"SEC, 108. Restrictions on loans, purchases of securities and total liabilities to
bank of any one person.—A bank subject to the provisions of this article.
" 1 . Shall not directly or indirectly lend to any individual, partnership, unincorporated association, corporation, or body politic, an amount which, including
therein any extension of credit to such individual, partnership, unincorporated
association, corporation or body politic, by means of letters of credit or by acceptance of drafts for, or the discount or purchase of the notes, bills of exchange or
other obligations of, such individual, partnership, unincorporated association,
corporation or body politic, will exceed one-tenth part of the capital stock and
surplus of such bank, with the following exceptions:"
In the enumerations of the exceptions it is provided (in paragraphs (b) and
(c)) that "the total liabilities to such bank of any individual, partnership, unincorporated association, or of any other corporation or body politic, may equal
but not exceed 25 per cent" (40 per cent in the case of a bank located elsewhere
than in a borough having a popluation of 1,500,000 or more) "of the capital and
surplus of such banks, provided such liabilities are upon drafts or bills of exchange
drawn in good faith against actually existing values, or upon commercial or
business paper actually owned by the person negotiating the same to such bank,
and are indorsed by such person without limitation, or provided such liabilities
in excess of 10 per cent of such capital and surplus, and not in excess of an
additional 15 per cent" (30 per cent in the case of a bank located elsewhere than
in a borough having a population of 1,500,000 or more) "of such capital and
surplus, are secured by collateral having an ascertained market value of at
least 15 per cent more than the amount of the liabilities so secured."
Section 190 contains precisely similar provisions relating to trust companies.
(2) Limitations on discount of acceptances.
The laws of New York contain no limitation upon the amount of acceptances
which State banks and trust companies may discount, but sections 108 and 190,
referred to above, would probably apply to the acquisition of bankers acceptances direct from accepting banks.
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
963
'(3) Acceptance banks of the type permitted by the provisions of the Edge Act.
Banking corporations of this type may be organized as " investment companies"
under article 7 of the banking law. Sections 293 defines the general powers of
corporations so organized, and such powers include the following:
" S E C . 293. General powers.—In addition to the powers conferred by the
general and stock corporation laws, an investment company shall, subject to the
restrictions and limitations contained in this article, have the following powers:
" 1 . To sell, offer for sale or negotiate bonds or notes secured by deed of trust
or mortgages on real property situated in this State or outside of this State, or
choses in action owned, issued, negotiated or guaranteed by it; to advance money
upon the security of such bonds, notes or choses in action; to purchase or otherwise acquire bonds, notes or choses in action and to pledge them to secure the
payment of collateral trust bonds or notes; to sell or otherwise negotiate such
collateral trust bonds or notes: Provided, however. That the grant of powers which
an investment company may exercise pursuant to this subdivision one shall not
be deemed to affect the right of a corporation now or hereafter organized pursuant
to the provisions of any other statute to exercise similar powers; or to prevent
the organization under the stock corporation law of a corporation for such
purposes.
" l a . To accept bills of exchange or drafts drawn upon it payable on demand
or on time not exceeding one year from the date of acceptance; to issue letters
of credit authorizing the holders thereof to draw drafts upon it at sight or on time
not exceeding one year from the date of any such letter of credit; to discount
bills of exchange, drafts,, notes, acceptances, or other choses in action; to buy
and sell coin, bullion and exchange; to issue, at any branch office authorized b y
the superintendent of banks pursuant to section 51 of this chapter and established
in a country or Province of Asia in which the principal local currency consists
of silver coin or bullion, notes payable in the local currency to bearer on demand
without interest: Provided, however, That the total amount of such notes issued
by any such investment company and outstanding at any one time shall not
exceed twice the paid-in capital of such investment company and that there
shall be kept on hand at each branch office where such notes are issued a reserve
in silver bullion or in the local silver coin of at least 50 ser cent of the notes so
issued at such branch office."
Attached is a copy of the full text of article 7 of the banking law. It contains,
among others, provisions to the following effect:
"That corporations exercising powers conferred by subdivision la of section
293 (quoted above) shall have paid-up capital stock of at least $2,000,000, all of
which must be paid in in cash before the corporation commences business."
(Sec. 291, and sec. 294, subdivision 1.)
"That corporations organized under article 7 shall not hold any of its own
stock (unless taken to prevent a loss upon a debt previously contracted in good
faith, and stock so acquired shall be disposed of within six months), and shall not
make any discount to a person to enable him to pay for or hold such stock."
(Sec. 294, subdivision 5.)
"That corporations organized under article 7 shall conform their methods of
keeping books and records to orders duly promulgated by the superintendent of
banks." (Sec. 295.)
"That each official communication from the superintendent of banks relating
to an examination or investigation by the banking department, or containing
suggestions or recommendations as to the conduct of business, shall be submitted
to the board of directors at its next meeting and duly noted in the minutes."
(Sec. 297.)
"That corporations organized under article 7 and foreign corporations licensed
by the superintendent to transact the business of a corporation so organized shall
make annual reports to the superintendent of banks which shall contain statements of their condition and shall be in form prescribed by the superintendent;
and such corporations shall also make such other special reports to the superintendent as he may from time to time require." (Sec. 298.)
Corporations organized under article 7 of the banking law are subject not only
to the provisions contained in that article, but also to various other provisions of
the banking law which relate generally to the various types of corporations
organized under different articles of the banking law. Such other provisions include those granting authority to the superintendent of banks to examine such
corporations and under some circumstances to take possession of and liquidate
the property and business of such corporations.
964
NATIONAL, AND FEDERAL RESERVE BANKING SYSTEMS
ARTICLE VII.—Investment companies
SEC. 290. Incorporation; organization certificate.
291. When corporate existence begins; conditions precedent to commencing business.
292. Deposit of securities with superintendent.
293. General powers.
293a. Application to the payment of promissory notes of certain collateral securities.
294. Restrictions on powers.
295. Restrictions as to entries in books.
296. Change of location.
297. Communications from banking department.
298 Reports to superintendent.
299. Liability for assessments by superintendent.
300. Preservation of records.
301. Restrictions on officers, directors, and
employees.
SEC. 302. Prohibition against encroachments on
certain powers of investment companies.
303. Conditions to be complied with by foreign
corporations.
304. When foreign corporation may transact
business in State.
305. Rights and privileges under license.
306. Deposit of securities by foreign corporation.
307. Foreign corporations to submit names of
agents in State.
308. Effect of revocation of license.
309. Reincorporation of certain business corporations.
310. How net earnings credit to surplus fund
and undivided profits.
SEC. 290. Incorporation; organization certificate; amount of capital stock.—When
authorized by the superintendent of banks, as provided by section 23 of this
chapter, five or more persons may form a corporation to be known as an investment company. Such persons shall subscribe and acknowledge and submit to
the superintendent of banks at his office an organization certificate in duplicate
which shall specifically state:
1. The name by which the investment company is to be known.
2. The place where its business is to be transacted.
3. That the investment company is, or is not, being organized for the purpose
of exercising the powers set forth in subdivisions four and five of section 293 of
this chapter.
4. The amount of its capital stock and the number of shares into which such
capital stock shall be divided, which capital stock shall amount to not less than
$100,000, except that, if such investment company is being organized for the
purpose of exercising the powers conferred by subdivisions 4 and 5 of section 293
of this chapter, it may have a capital stock of not less than $25,000 if the place
where its business is to be transacted is a city or village the population of which
does not exceed 50,000, and a capital stock of not less than $50,000 if the
place where its business is to be transacted is a city the population of which
exceeds 50,000 but does not exceed 150,000, and except further that, if such
investment company is being organized for the purpose of exercising only the
powers conferred by subdivision 1 of section 293 of this chapter, it may have a
capital stock of not less than $50,000 if the place where its business is to be
transacted has a population of not to exceed 25,000 and is located in a county
in which there is no first or second class city, and if the shares are to be classified
between common shares and preferred shares, the number of shares to be included
in each class and all the designations, preferences, privileges, and voting powers
or restrictions or qualifications of the shares of each class. Neither preferred nor
common stock shall be issued at less than par value of such stock and the
aggregate par value of the common stock issued and outstanding shall at least
equal the aggregate par value of the preferred stock issued and outstanding, and
the par value of the preferred stock shall be not less than $5,000,000: Provided,
however. That no preferred stock shall be issued by an investment company
exercising the powers conferred by subdivision 3 of section 293 of this article
and no investment company having preferred stock issued and outstanding shall
exercise said powers. Common and preferred shares of an investment company
shall have equal voting powers and shall be of equal par value. (Amended by
ch. 362, L. 1924, and ch. 51, L. 1926.)
5. The full name, residence, and post-office address of each of the incorporators
and the number of shares subscribed for by each.
6. The term of its existence, which may be perpetual.
7. The number of its directors, which shall not be less than five, and the names
and addresses of the incorporators wiio shall be its directors until the first annual
meeting of stockholders.
Such certificate may provide for the manner in which the stock of the corporation may be transferred and for the number of directors necessary to constitute
a quorum. (Amended by ch. 227, L. 1917.)
SEC. 291. When corporate existence begins; conditions precedent to commencing
business.—When the superintendent shall have indorsed his approval on the
organization certificate, as provided by section 23 of this chapter, the corporate
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
965
existence of the investment company shall begin and it shall then have power to
elect officers and transact such other business as relates to its organization. But
it shall transact no other business until:
1. All of its capital stock shall have been fully paid in cash and an affidavit
stating that it has been so paid, subscribed and sworn to by its two principal
officers, shall have been filed in the clerk's office of the county in which its place
of business is located, and a certified copy thereof in the office of the superintendent;
2. It shall have made the deposit with the superintendent required by section
292 of this article;
3. The superintendent shall have duly issued to it the authorization certificate
specified in section 24 of this chapter.
SEC. 292. Deposit of securities with the superintendent*—Every investment
company shall, until an order of the supreme court is obtained declaring its
business closed, keep on deposit with the superintendent of banks as a pledge of
good faith and as a guaranty of compliance with the provisions of this chapter,
interest-bearing stocks or bonds of this State or of the United States to the
amount of $1,000, which shall be registered in the name of the superintendent of
banks of the State of New York in trust for such investment company. The
investment company, so long as it shall continue solvent and comply wTith the
laws of the State, may be permitted by the superintendent to collect the interest
on the securities so deposited, and from time to time to exchange such securities
for others as provided by section 35 of this chapter, and may examine and compare such securities as provided by section 36 of this chapter.
SEC. 293. General powers.—In addition to the powers conferred by the general
and stock corporation laws, an investment company shall, subject to the restrictions and limitations contained in this article, have the following powers:
1. To sell, offer for sale, or negotiate bonds or notes secured by deed of trust
or mortgages on real property situated in this State or outside of this State, or
choses in action owned, issued, negotiated, or guaranteed by it; to advance money
upon the security of such bonds, notes, or choses in action; to purchase or otherwise acquire such bonds, notes, or choses in action and to pledge them to secure
the payment of collateral trust bonds or notes; to sell or otherwise negotiate such
collateral trust bonds or notes: Provided, however, That the grant of powers which
an investment company may exercise pursuant to this subdivision one shall not
be deemed to affect the right of a corporation now or hereafter organized pursuant
to the provisions of any other statute to exercise similar powers; or to prevent the
organization under the stock corporation law of a corporation for such purposes.
(Amended by ch. 247, L. 1916, and ch. 327, L. 1929.)
la. To accept bills of exchange or drafts drawn upon it payable on demand or
on time not exceeding one year from the date of acceptance; to issue letters of
credit authorizing the holders thereof to draw drafts upon it at sight or on time
not exceeding one year from the date of any such letter of credit; to discount bills
of exchange, drafts, notes, acceptances, or other choses in action; to buy and sell
coin, bullion, and exchange; to issue, at any branch office authorized by the
superintendent of banks pursuant to section 51 of this chapter and established in a
country or province of Asia in which the principal local currency consists of silver
coin or bullion, notes payable in the local currency to bearer on demand without
interest: Provided, however, That the total amount of such notes issued by any
such investment company and outstanding at any one time shall not exceed twice
the paid-in capital of such investment company and that there shall be kept on
hand at each branch office where such notes are issued a reserve in silver bullion
or in the local silver coin of at least 50 per cent of the notes so issued at such branch
office. (Amended by ch. 49, L. 1921.)
2. To receive money or property in installments or otherwise from any person
or persons, with or without an allowance of interest upon such installments; to
enter into any contract or undertaking with such persons for the withdrawal of
such money or property, at any time, with any increase thereof, or for the payment to them or to any person of any sum of money at any time, either fixed or
uncertain.
3. To engage in the business of receiving deposits, provided that it shall not
engage in such business in this State until it shall have first made such deposit
of securities with the superintendent of banks as is required of trust companies by
section 184 of this chapter. (Amended by ch. 98, L. 1918.)
4. To deduct interest in advance on loans at the rate of 6 per cent per annum,
provided such loans are secured by assignments of choses in action of other
evidences of indebtedness issued by it and to be paid for in uniform monthly or
weekly installments. To charge for a loan exceeding $50 made pursuant to this-
966
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
subid vision $1 for each $50 dollars or fraction thereof loaned for expenses including any examination or investigation of the character and circumstances of the
borrower, comaker or surety, and the drawing and taking the acknowledgment of
necessary papers, or other expenses incurred in making the loan: Provided, That
no fee collected hereunder shall exceed $5; and provided that for a loan exceeding
$250, 1 per cent additional of the amount loaned in excess of $250 may be
charged for such expenses, not exceeding a total fee of $20. (Amended by ch. 721,
L. 1920.)
If any such loan made pursuant to this subdivision is $50 or less, such charge
shall not be more than $1.
Whenever an additional loan shall be made to anyone borrowing within three
months of the date of a previous loan, no further charge for examination, investigation, drawing of necessary papers, and taking acknowledgments, shall be made
against him under any pretext whatever.
No such charge shall be collected unless a loan shall have been made as the
result of such examination or investigation.
5. To impose a fine of 5 cents for each default in the payment of $1 or fraction
thereof at the time any periodical installment upon a certificate assigned as collateral security for the payment of a loan made pursuant'to subdivision 4 of this
section becomes due: Provided, however, That such fines shall not be cumulative;
that the aggregate of such fines collected in connection with any such loan of
$50 or less, or any renewal thereof, shall not exceed 50 cents, and that the aggregate of such fines collected in connection with any such loan of more than $50,
or any renewal thereof, shall not exceed 1 per cent of such loan and shall in no
event exceed $5. (Amended by ch. 228, L. 1917.)
6. To establish branches pursuant to section 51 of this chapter (amended by ch»
139, L. 1915)—
7. To purchase, acquire, invest in, and hold all or any of the stocks of any
corporation, domestic or foreign, and to sell and dispose of all or any such stocks
owned by it: Provided, however, That the grant of powers which an investment
company may exercise pursuant to this subdivision shall not be deemed to affect
the right of a domestic corporation now or hereafter organized pursuant to the
provisions of any other statute to exercise similar powers, nor to constitute "the
business of an investment company or any part thereof" within the meaning of
section 304 of this chapter: And further provided, That any such investment
company shall not invest and keep invested an amount in excess of 10 per cent
of the capital and surplus of such investment company in any one moneyed
corporation, nor an amount in all moneyed corporations in excess of 30 per cent
of the capital and surplus of such investment company. (Added by ch. 622,
L. 1922; amended by ch. 596, L. 1926, and ch. 465, L. 1929.)
SEC. 293a. Application to the payment of promissory notes of certain collateral securities.—Whenever to secure the payment of a promissory note made to an investment company there shall be deposited with such company a chose in action or
other evidence of indebtedness issued by such company, such company shall if
default be made in the payment of the note so secured, receive and apply to the
payment of such note the reasonable value of the security so pledged, or of the
equity therein to which the pledgor thereof is entitled; and in any action instituted
by such company against the maker, comaker, or surety on such promissory
note, to recover upon the same, such company shall show by its complaint the
amount so applied against the payment of such promissorv note. (Added by
ch.
@FedFRASER