Full text of Proceedings of Annual Meetings of the Stockholders' Association : Federal Reserve Bank of Dallas : Proceedings of the Fourth Annual Meeting of the Stockholders' Association

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OF THE

PROCEEDINGS
ANNUAL

FOURTH

MEETING
of the

STOCKHOLDERS'
FEDERAL

ASSOCIATION

RESERVE

BANK

OF DALLAS

JUNE

19, 1930

DALLAS, TEXAS

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

ADVISORY

COMMITTEE

OF STOCKHOLDERS'

ASSOCIATION
Elected

£. W. GRAVES,

for the year 1930-1931

W. C. SLAUGHTER,

First National

Bank,

Durant

Douglas.

LouisianaBEN

G. K. R.CAARDSON,
Carlsbad

National

JOHNSON,
l3ank,

Commercial

Carlsbad.

B. A.

First National

Bank,

National

Bank,

Yoakum.

FORTSON,
B.
J.

W S. POSEY,

National

Bank,

Corsicana.

First National

OXSIHEER

National

Brownsville.

Winnsboro.

Bank,

SMITH,

Citizens National

Bank,

Cameron.

ALF MORRIS,

First National

Bank,

Lubbock.

GREGG,

Merchants

PALMER,

Yoakum

Beaumont.

JORN

National

Shreveport.

DOTY,

Corsicana

Bank,

Durant.

New Mexico

P. B.

National

J. P. WILLIAMS,

Bank,

First National
Mineral

Bank,

Wells.

Bank,

FOURTH

ANNUAL

MEETING

OF THE

STOCKHOLDERS'

ASSOCIATION
FEDERAL
Thursday,

Invocation

RESERVE

OF DALLAS

June 19, 1930, 10 A. M., Adolphus

by Dr. Charles

Methodist

BANK

University,

C. Selecman,
Dallas,

President,

Hotel

Southern

Texas.

Report

of the Chairman : W. M. Massie, Vice-President,
Worth National Bank, Fort Worth, Texas.

Appointment

Fort

of Committees.

Report

on Earnings and Operations of Federal Reserve Bank
of Dallas: Lynn P. Talley, Governor of Federal Reserve
Bank, Dallas, Texas.

Why

Place

the Debit

of the Country,
in Governmental
Agencies?

by Checks,

First

President,

A More Equitable

Power

National

Relationship

Cashier,

First

with
National

of Committees.

Adjournment.

Dallas,

Texas.

of the Earnings
of the FedB. D. Harris, Vice-President,
Second

Open Discussion.
Report

in Dallas,

Distribution

eral Reserve Bank:
National Bank, Houston,
General

Bank

as Represented
Nathan Adams,

Texas.
Member

Banks:

Bank, Paris,

J. M. Caviness,

Texas.

PROCEEDINGS

OF STOCKHOLDERS'

MEETING

Held at Dallas, June 19, 1930
10:28 A. M.
June
THE CHAIRMAN: You gentlemen

will please

19, 1930.

come

around

and

get your seats and let's get started here because we want to
confine our activities to the morning entirely and not have an
afternoon
session. The hour for the convention to meet has
arrived and passed and I am going to ask that you men come
to order.I
am going to ask that you rise and remain standing while
Dr. Charles C. Selecman, President
Methodist
of Southern
University,
Dallas, Texas, delivers the invocation.
Dr. Selecman has the distinction
of having delivered the
invocation on two separate occasions to the Frigidaire
manufacturers
fully qualified to
and dealers and he is therefore
deliver the invocation to a group of bankers.
DR. SELECMAN: Almighty
God, Thou art the maker and crein the
ator of all things
and the ruler of all of the elements
Universe.
We recognize
Thee as our God and our King and as
the giver of every good and perfect
Thou sendest
the
gift.
Thou
early and the latter rain ; the seed time and the harvest.
dost scatter
the flowers and sunshine
at our feet. Thou hast
God is the Lord,"
said, "Blessed
is that
and
nation
whose
Thou hast taught
not
us that blessed is the man that sitteth
in the
in the way of the
nor standeth
seat of the scornful
wicked men, that whatsoever
he doeth shall prosper.

We pray that our lives may be governed according to the
laws
of righteousness
and the laws of God; that we may not
only love and fear God but that we may regard the rights of
men and we ask this day Thy divine blessing to be upon this
group of men who hold in their hands such great issues and
who stand under such great burdens of responsibility,
and
whose welfare affects the welfare of so many people. Help us,
o Lord,
else to remember that a man's life
above everything
consisteth not in the abundance of the things which he possesseth but that it is our business first to seek the Kingdom
of God and His righteousness
knowing that all things shall
be added
Hear us in this our prayer;
accept our
unto
us.
thanksgiving
Amen.
through Christ, our Redeemer.
THE CHAIRMAN: We now come to the most uninteresting
part of our
My
is
the
the
chairman.
of
report
which
program,
report
that we have
is going to be very brief for the reason
arranged
for
interesting
you, with subjects
program
a very
of much interest
the
time of the
I
trespass
on
not
and
shall

speakers assigned
anxious that they
them.This

to those
be given

subjects
as we are particularly
ample time in which to discuss

is the fourth annual meeting of the Stockholders'
Association,
Federal Reserve Bank of Dallas. Our Association has passed the experimental
stage and is now an established institution.
You have indicated by your attendance
and
interest that it has been in existence long enough to prove its
value, and I am of the opinion that a distinct benefit has
accrued, both to member banks and the officials of the Federal Reserve Bank, from these meetings.
The work of your committee is circumscribed
and there is
little that it can do, except in an advisory way, as the policies
and principles of the Federal Reserve System are controlled
largely
by statutory
regulations,
under which the banks
operate.Several
meetings of your Advisory Committee were held
during the year, which were all well attended and much interest displayed in the work of the Association by the members.
At our first meeting a committee on objectives and activities
J. P.
was appointed,
composed of Ben Johnson, Shreveport;
Williams, Mineral Wells, and Oxsheer Smith, Cameron, Texas,
it being the duty of this committee to outline a program which
we would follow in our work for the past year. The program
presented
and adopted by your committee
as a whole follows :
Added hours of service for closing time on deferred
credit items.
Tenure of office of Class A and Class B directors be
confined to two terms.
That special meetings be held by the respective groups
of stockholders,
which are to elect directors at the ensuing
election, for the purpose of consideration
and endorsement
for such vacancies.
of candidates
A thorough study of the matter of larger participation
by member banks in the earnings of the Federal Reserve
Bank.Change
directors.

in method

of election

B
Class
A
Class
of
and

Closer and more understanding
between
relationship
member banks and the Federal Reserve Bank.
ComIn reporting
by
the
Program
on
work outlined
our
mittee, I am taking them up in the order named.
the
We found upon investigation
time
that the closing
of
Federal Reserve Bank of Dallas on deferred credit items was

not out of line with other Federal reserve banks and that no
advantage
additional hours of
would be gained in requesting
service, as train schedules made it impractical.
The matter of tenure of office of Class A and Class B
directors
lies wholly within the control of member banks.
However, it is the opinion of the Advisory Committee
that
periodical
of the board would be
changes in the personnel
beneficial in the operation of the bank and we suggest that we
reaffirm the resolutions
adopted at the 1928-29 stockholders'
meetings, which recommend that no elective director be elected
for more than two terms.
The matter of special meetings to be held of the respective
groups of stockholders
which are to elect directors
we also
found impractical,
it being the opinion of the committee that
the time lost and the cost involved would not justify
the
expense and doubtless the same results could be obtained by
continuing
under our present plan of nomination.
by member banks in
The question of larger participation
the earnings of the Federal Reserve Bank is of serious import
be
that careful consideration
and your committee
suggests
to the Federal
given to any plan that might be recommended
Reserve Board. Already several bills have been introduced in
Congress bearing on this question and still further legislation
seems inevitable.
The lack of interest displayed by member banks in the election of Class A and Class B directors of the Federal reserve
banks has been a matter of serious concern to the Federal
Reserve Board, as well as the officials of the bank. The Federal Reserve Act provides that member banks shall elect six
of the nine directors to serve on the boards of the respective
banks. Your apathy in not taking advantage of the privilege
accorded you has been most disturbing to your Advisory ComYour committee in collaboration
mittee.
with the officials of
the Federal Reserve Bank has endeavored to arouse a keener
interest in the election of these directors.
The result of our
efforts was shown in the election held last December, at which
time an appreciable vote was cast, although results as to number of banks voting were far from satisfactory.
Too much
credit cannot be given to Col. C. C. Walsh, Federal Reserve
Agent, for his untiring efforts to bring about a change in the
Your
election procedure
of Class A and Class B directors.
committee is pleased to report that at a conference of Federal
Reserve Agents held in Washington
in December, 1929, Colonel
Walsh, as Chairman
of Federal Reserve
of the Committee
Agents, submitted
to the Board three changes, which were
fifinally approved and adopted.
The first of the suggested
by the
changes recommended
conference of Federal Reserve Agents provides that the date

for the opening of the polls in the annual election of Class A
be changed
from November
15 to
and Class B directors
November 1.
The second suggestion recommends
that that part of Section 4 of the Federal Reserve Act which provides for the
method of counting the ballots in the election of directors in
the Federal reserve banks be amended to read as follows:
"The candidate then having a majority of the electors voting
and the highest number of combined votes shall be declared
elected."The
third suggestion
that the designation
of
provides
officers to cast the vote for Class A and Class B directors
shall be made by title instead of name.
You have been advised as to these changes and a new resolution has been forwarded you for adoption by your board of
directors.
Your committee
the immestrongly
recommends
diate passage of the resolution referred to, believing that by
doing so greater interest will be created in the annual elections of directors.
Your committee feels that a closer relationship
and better
understanding
should be had between member banks and the
Federal Reserve Barak. In order that this may be brought
about we suggest the enlargement
and expansion of the Member Bank Relations Department
by adding thereto an executive officer of proven ability as a commercial banker, whose
duty it would be to periodically visit member banks, assisting
those banks in working out their problems.
His title should
be such that he would carry into his work the influence of an
official of the bank and at the same time be clothed with
to speak for and commit the institution
in anything
authority
that might be necessary in the premises, it being the thought
that through
this contact many complicaof the committee
tions might be averted before they assume serious proportions.The
past year has been one fraught
with added burdens
for
for
banker
but
the
and grave responsibilities,
not alone
those in authority
the affairs of the Federal
who administer
Reserve System. I am convinced that the creation of the Fedlegis-:
eral Reserve System was a great piece of constructive
lation. The more I have watched it work the more I have
in
become convinced that it is the most helpful instrument
the administration
of our economic affairs which has been
created in our time. That it has been faultless is too much
to expect. Only through
study and experience can we learn
to do the job better.
the
if
These stockholders'
be
meetings can
made profitable
members will take the time to study and discuss those funda
mental questions embraced in the operation of the Act.

In conclusion permit me to express my grateful appreciation of the splendid support given your chairman by the members of our Advisory Committee.
They have been ever zealous
in their efforts to work out those problems
the
affecting
relationship
of member barks with the Federal Reserve Bank.
I also desire to express to Governor Talley and other officers
of the Federal Reserve Bank my personal appreciation,
as well
as that of the members of the Advisory Committee, for the
splendid cooperation
which they have given us in our work.
I would be ungrateful
indeed if I failed to express to the
membership
and our Advisory Committee
of the Association
my sincere appreciation
of the honor which you have conferred upon me in electing me your chairman. It is one of the
honors that has come to me and I shall cherish it
greatest
throughout
the years to come. (Applause.)
THE CHAIRMAN: The next order of business
is the appointWe only have two committees,
the Comment of committees.
Committee.
Our
mittee
and a Nominating
on Resolutions
by-laws
there
that at each annual
must be
provide
election
Committee
elected
who will
six members
of the Advisory
I am going to ask that the secretary
serve for two years.
read the names
at
going off the committee
of the members
this time.
THE SECRETARY: Those retiring
Schmidt;
Adams;
A. F.
Nathan
F. Taylor;
John T. Yantis.

at this time will be E. H.
Gus
Jones;
W. M. Massie;

THE CHAIRMAN: I am going to appoint the Resolutions Committee. I think our by-laws provide that there shall be a committee of five-the
secretary says I am wrong, that the number is
Committee I
seven instead of five. On this Resolutions
am going to appoint John T. Yantis, Brownwood, Chairman;
R. G. Erwin, Ballinger;
W. P.
Floydada;
T. S. Stevenson,
Riley, Junction
Brown,
McNaples
Edwin
J.
A.
B.
Childs,
;
;
Gregor; C. E. Maedgen, Lubbock.
If any of the names that
I have
me arrive at that in this
called are not present-let
way-those
whose names I have called, please rise. Mr. Yantis is here, Mr. Maedgen is here and Mr. Childs and Mr. Brown
are here. Is Mr. Erwin here?
A STOCKHOLDER:
THE

CHAIRMAN:

tee then.

I haven't
That

seen him.

necessitates

arranging

a new

commit-

I would like to have a full committee.

A STOCKHOLDER:

Erwin

is here.

I saw him

in the hotel.

THE CHAIRMAN: I'm going to substitute
the names of Ford
Seale
D.
E.
Box
Weatherford
S.
Fant
W.
Denison;
and
of
of
of Grapevine.On

your Nominating Committee I am going to name : Sam
[9l

R. Lawder of Houston ; Owen W. Sherrill of Georgetown ; Fred
Smith of Weatherford;
H. E. Childs of Itasca and C. E. MaedI am going to ask that those gentlemen
gen of Lubbock.
whose names I have called, please rise.
MR. MAEDGEN: Mr. Chairman, it occurs to me that you have
for
my name on both committees and you ought to substitute
me on one or the other and put somebody else in my place.
THE CHAIRMAN: I will take your name off of the Nominating
Mr. Lawder is here and Mr. SherCommittee,
Mr. Maedgen.
Mr.
Smith
Gill
here?
Is
Mr.
Mr.
Elliot
is
here.
is
here
rill
and
Mr. Childs is here. In
is here, Fred Smith of Weatherford?
the place of Mr. Gill and Mr. Smith and Mr. Maedgen, who is
a member of the Resolutions Committee, I am going to appoint
W. W. Jones of Sulphur Springs
R. V. Colbert of Stamford;
and J. E. Woods of Teague. That completes the two committees and I am going to ask the gentlemen whose names have
been called to retire and prepare
and
suitable
resolutions
in order that they may report back here
proper nominations
later on and get through with the entire work of this meeting
at a morning session, as there will be no afternoon session.
MR. WooDSON: Mr. Chairman, in view of the fact that we are
going to have only one session and that we have some very
important
papers here and you are taking fourteen members
view
away from us during the discussion, I am wondering-in
of the fact that we are going to have luncheon together-if
in
lunch
have
done
for
on
occasions
we
we can't adjourn
as
the past, and adopt these committee reports at that time and
hear these talks and the discussion
let these gentlemen
on
these papers.
to
THE CHAIRMAN: I think that if you wait for the reports
come in at luncheon
most of these men will get away by that
time and not come back or possibly
not even be at the luncheon. I know some of them have engagements,
some of them
have some golf games and I think we should hear from th^se
before
I regret
these
that
we adjourn.
commitcommittees
is
a
tees will be forced to miss some of this program,
which
to
it
interesting
have
very, very
program,
and we
confined
in order to give the speakers
just a few subjects
ample time
However,
I will submit
it to a vote
to present
each subject.
Mr. Woodson,
do you make
that
as a
of the association.
,motion?MR.

WOODSON:I make it as a motion. I say to you, gentleto come here-if
I were on one
men, that it is very important
the
hear
I
to
in
here
these
of
committees
would want
stay
and
discussion of those questions if I could.
A STOCKHOLDER:

I

am

sure

our

nominations

be accepted as they have been heretofore,

are

going

to

and we can accept

them at the lunch hour just as well as we can now and I am
in favor of passing on that at the lunch hour. You are invited
to stay here for lunch. Those who want to play golf and are
not interested
enough in the selection of their officials to stay
through the luncheon, of course we will have to excuse them,
but in my opinion I think they ought to stay for the luncheonthey are invited to it and those gentlemen,
I think, ought to
the part of our program at that
stay. We can go through
time and I move you that the Resolutions
Committee and the
Committee
on Nominations
make their reports at the lunch
hour to be adopted by this convention.
THE CHAIRMAN:
Is there
a second?
MR. J. E. OWENS:

I second

that

motion.

MR. FROST: Before you vote on that, I would like to ask for
Committee
the Resolutions
MY own information
as to what
does.
If they will have a lot of resolutions
we are going to
pass or reject it seems to me that we ought to be in the meeting here
them thoroughly
and pass or
where we can discuss
information
discusreject them with proper
and after proper
is that where
sion. My recollection
meetings
of the previous
Wo have had the resolutions
passed
at the lunch hour, the
hear them
resolutions
are read and a very few of the members
and there is no discussion
and the vote is put and then they
read about the resolutions
That is the way it
the next day.
has happened
in the past when we had these things
voted on
during
I don't know whether
the Resolutions
the luncheon.
Committee
that is proper for us
is going to bring up anything
to discuss
I
that
in detail,
but I have one matter
myself
would like to offer in the shape of a resolution
and I would
also like to get the procedure
I should take
on that, whether
it to the
the resolution
will be presented
or whether
committee
on the floor during
Those things
the morning.
will be very
important
to
for me to know before
I would know whether
vote to have the resolutions
or here
reported
at the luncheon
in the
meeting
so that we can discuss them.

MR. NATHANADAMS: I move we adjourn for lunch and then
meet again for one or two hours to discuss these things. The
summertime
is here and the days are longer and these gentlemen will have plenty of time to play golf.
Do you
THE CHAIRMAN:
offer
to the
that as an amendment
motion ?
MR. NATHAN ADAMS: I
from
move we adjourn
until one-thirty
and I offer it as an amendment
son's resolution.

twelve-thirty
to Mr. Wood-

MR. HARRIS: I have
It so happens,
Mr. Chairman.
a
word,
Mr. Chairman,
has delegated
to me a
that
your committee
subject that I think is
importance
and in
of very far-reaching
[ 11 ]

the treatment
of it I believe that some resolution of some sort
I think it would be
ought to be taken and I so recommend.
if the gentlemen who draw up these resolutions,
unfortunate
if they have any that have to do with this subject, are out
of the hall and unable to hear the argument
and discussion
I
and whichever of these resolutions
or motions are adopted
hope it will result in the members of the committee
hearing
the things that the resolutions are going to relate to.
Mn. WILLIAMS: I think
Committee
the Resolutions
should
is prepared
to be served at
go into session now. The luncheon
one-thirty
and we couldn't
adjourn
at twelve-thirty
and get
back at one-thirty
if the lunch is at one-thirty,
and I think
Mr. Frost
is correct
have
that
these
we should
matters
brought
before this meeting
for discussion,
and as a substitute
to all motions
that have been made, I move you that the Resolutions Committee
to consider
any
go into session immediately
that
We might
them.
matters
may
come before
not get
by twelve-thirty
through
but I think
that
these
gentlemen
who have prepared
papers
on the subjects
should not be cut
the
off and I think
we should
adjourn
at one-thirty
when
luncheon
is ready and be back at two or two-thirty.
The days
long, the long summer
days are here, and if any
are getting
time from threewant to play golf they will have sufficient
thirty
or four o'clock on and I believe we ought to stay here
believe
they
and finish
up. I don't
will come back if you
for lunch.
I wish we could follow Mr. Adams'
adjourn
suggestion about
but they won't
that,
I don't believe
come back.
if the Resolutions
they
that
Committee
goes out now that
because
will have to spend the whole morning
after each disthere will be some resolution
introduced
cussion
and I believe
those
to be presented
before
resolutions
ought
we adjourn
here as Mr. Frost says, so that, it seems to me, the Resolutions
Committee
here. Let the Resolutions
Commitshould remain
tee be present
sugat the discussions
and hear the different
Unless you have got some resolutions
to submitgestions.
THE CHAIRMAN: The
has
to offer.
chair
no resolutions
Answering
Mr. Frost's
of
question
and for the information
those present,
I will say that we have provided
here just before adjournment
to receive the reports
of these two committees, at which time the resolutions
offered by the Resolutions
from
Committee
be
that
any
other
or
resolutions
may
offered
the floor will be discussed
and you will have ample time and
to pass on each and every one of the resolutions
opportunity
Now, as a matter
in Mr. Frost's
offered.
of proper
procedure
to
it
if
he
has
to
he
case,
a resolution
offer,
should present
the Resolutions
Committee
Committee
and let the Resolutions
that
it.
Then
have
discuss
to
pass on
you will
an opportunity
from the floor or, if he desires
and
to withhold
his resolution
it to the membership
agreepresent
as a whole, it is entirely
able with the chair.

Mn. TAYLOR: I move you that we dispose of all these
ComIf the Resolutions
motions and proceed to business.
mittee wants to go out and discuss resolutions or if they want
to remain in here, why let them do it. I move you that we
table all these motions and proceed to business.
(The motion was seconded.)
Mn. DowNS: While I recognize the good intention
of Mr.
Woodson and while I recognize the diplomacy of Mr. Adams,
I think those committees
ought to retire in accordance with
the suggestion
They are very few in numof the president.
ber and it won't embarrass
the large number
the majority,
present-and
while I don't want to say that they will not be
missed, those few can afford to sacrifice themselves
upon the
altar of the common good of the meeting and retire for the
few moments it will take them and the quicker they retire
the quicker we will get through with the matter.
Mn. TAYLOR: I rise to a point of order. In the face of a
motion to table, the gentleman is out of order.
MR. Downs: The quicker we get through the quicker they
will retire.
THE CHAIRMAN: Gentlemen,

the

MR. WoonsoN: I will withdraw
his second.
withdraw

motion
my motion

to table
if the

is in order.
second

will

THE CHAIRMAN: What is your pleasure?
You have all heard
the motion made by Mr. Taylor to table the motions
made by
Mr. Woodson
made by Mr. Adams.
as well as the amendment
Will
All in favor of that
you now vote on the motion to table?
by saying
"aye."
motion
The ayes
to table, let it be known
have it
and the motion to table is carried.
A STOCKI-IOLDER: I suggest
mittees.THE

that

you call the roll of the com-

Committee
Resolutions
The
CHAIRMAN
:
John T. Yantis, Brownwood, Chairman;
A. B.
J. Edwin Brown, McGregor;
C. E. Maedgen,
SQale, Denison; W. S. Fant, Weatherford;
D.
vine.The

is composed of :
Childs, Naples;
Lubbock; Ford
E. Box, Grape-

Sam R.
is as follows:
Nominations
Committee
on
Lawder, Houston, Chairman;
Owen W. Sherrill, Georgetown;
R. V. Colbert, Stamford
W. W. Jones, Sulphur Springs ; J. E'.
;
Woods, Teague; H. E. Childs, Itasca.
MR. YANTIS: Might I ask that any members
who have resolutions
There may be other resolutions
them.
growpresent
ing
but I think the Resothis morning,
out of the discussion
lutions
Committee
at this time and we are ready
will retire
to consider
to us and we
as are presented
such resolutions
] 13 [

would want
them
very
meeting.THE

them now in order that we may get to work at
in the
quickly
and get back here to take part

CHAIRMAN: Gentlemen,
you will please heed the suggestion of the Chairman
Committee,
Mr. Yanof the Resolutions
tis. Any one having
that he cares to offer can
a resolution
it to the Resolutions
Committee,
present
who will now retire.
You, of course, will be given an opportunity
to present
such a
to the membership
resolution
as a whole later on.

The next order of business is one in which we are all
vitally interested-a
report on the earnings and operations of
the Federal Reserve Bank of Dallas by Mr. Lynn P. Talley,
Governor of the Federal Reserve Bank, Dallas, Texas. It gives
me pleasure to present to you Governor Talley :
MR. TALLEY: Mr. President and Member Bankers:
On behalf of our directors and officers I extend to you the
Your attendance
is the best
greetings
of our organization.
interest
in these meetings.
While
evidence of a sustained
there is not as large a numerical representation
of the member
banks in the district as a whole as we would like to see, we
are gratified that as many of you as are here have a sufficient interest in the affairs of your Federal Reserve Bank
and banking and economic problems of the district to be presWe realize, of course,
ent on the occasion of these meetings.
that, according to responses you have sent in, in a number of
instances
member banks have more than one representative
This is an evidence to us that in many individual
present.
cases member banks appreciate the value of these discussions
and contacts and therefore desire as many of their officers as
The
possible to receive the benefit of the ensuing discussions.
management
of the Federal Reserve Bank of Dallas, and especially its officers, feel that they likewise derive considerable
benefit from the expression of your views whether the discusLet me express the hope that
sions are critical or confirming.
at the close of your session you will feel that it has been an
enjoyable and profitable occasion and that you will feel amply',
I
for
that
have
devoted
the
time
to
repaid
you
coming.
At the time of your last meeting we were entering
the l
period that afterwards
proved to be the climax of one of our
characteristic
cycles of business and speculative activity. Even
at that time some evidences of business recession were beginning to appear, and the cycle reached its climax and end during the latter days of August and with the crash in the security markets on October 29 and 30, respectively.
Please
do not begin to settle yourselves
in an attitude
of
from an anticipation
boredom
that I may be starting
a review
I have
that led up to the situations
to which
of the events
the
As bankers
from
its
referred.
and sufferers
aftermath,
[14]

details are sufficiently fresh in your minds to avoid any necessity of any lengthy comment from me. Moreover, except for
the lessons that have been taught, I know that you want to
forget them as speedily as possible. I think I should, however,
briefly state to you that your directors and officers endeavored
to have a keen appreciation,
and discernment
of
understanding
what was happening and this, of course, applies to the management of the Federal Reserve System as a whole.
During the first week in August, 1929, the Federal Reserve
Board called the Governors of the Federal reserve banks into
At that conference the situspecial conference in Washington.
ation was carefully reviewed and analyzed and after being
discussed for two days very definite conclusions were reached.
During the latter part of 1928 and during all of 1929 up to
that time, the Federal Reserve System had been pursuing
a policy of pressure for firmer money in view of the steady
and tremendous
expansion of credit which was going chiefly
into speculative channels, without unduly penalizing industry,
The outstanding
commerce and agriculture.
purpose of this
policy was to insure and assure that the Federal reserve
banks themselves
would be in a position to meet the emergency that was clearly inevitable
as, if and when it would
eventuate. Briefly, the chief concern was the ways and means
of meeting the normal seasonal increased need for Federal
reserve bank credit that appears between midsummer
and the
holidays,
end of the Christmas
which experience
shows
This need
$300,000,000 annually.
amounts to approximately
for additional reserve credit expresses itself more succinctly
in the way of a public demand for additional currency supplies than in the direction of the other two forms of reserve
credit, viz., the need for increased reserves or gold exports.
The problem facing the conference
was to confine the proceeds of an increased amount of reserve credit to business
uses and to prevent it from entering speculative channels and
the large supply of bank credit already in use
augmenting
there and without making the cost of credit to business prohibitive.
To that end a decision was reached to increase the
discount rate of the Federal Reserve Bank of New York to 6
Per cent to discourage further discounting
with that institution, and with the thought
and hope that it would not be
necessary for any other Federal reserve bank to increase its
discount rate above the then existing figure of 5 per cent.
Subsequent
At
hope
the
that
that
realized.
was
show
events
same time the minimum buying rates for bankers' acceptances
but were actually fractionally
were not only not increased
reduced in order that the public might have no difficulty in
arriving at a correct interpretation
of the policy and action.
that
A bankers'
the one instrument
bill is clearly
must
business
transaction.
rest upon a legitimate
and fundamental
Bankers'
for only four purposes:
to finance
bills can be created
the importation
of goods, the storof goods, the exportation
[ 15 ]

age of goods, or to create dollar exchange so that payment
for exports may be readily effected. Commercial rates in the
outside market had at that time already advanced to an average of 1 per cent above the discount rate uniformly in effect
throughout
the System.
Therefore,
bill was
the bankers'
seiectect as the instrument
upon which the additional amount
of seasonal reserve credit needed would be put out and at the
same time it could be used to collateralize
note issues. It is
probably sufficient to say that the policy worked and though
this procedure
was followed by the stock market crash in
October, the interests
of the country in the meantime
were
the medium
adequately
served through
of an additional
The action
amount of reserve credit for business purposes.
the stock market crash.
of the System did not precipitate
That was an inevitable phenomenon
that was bound to occur
and though the System was called upon to take decisive action
in the emergency, the amount of credit necessary for business
at the time was provided and rates did not mount sky-high
during the panic period on the stock exchange as had always
As a matter of fact, the rates
occurred in similar instances.
for accommodation
remained
where they were and almost
immediately
due to a reversal of System policy at
afterward,
the proper time, rates rapidly declined.
From that point on and including the present, in view of
the business depression that had begun to set in in the late
the policy of the System has been one of ease.
summer,
There have been many times during the intervening
period
when the credit situation has been delicately poised from the
standpoint
of reaching decisions as to whether or not through
open market operations further ease should be brought about
or whether open market operations
already undertaken
were
sufficient. In view of these events the medium formerly known
Committee
has been disas the Open Market Investment
banded and in its place has been set up what is known as the
Open Market Policy Conference, composed of a representative
from each Federal reserve bank, which can convene upon its
Reserve
own motion after consultation
with the Federal
Board, or can be called into special session at any time by the
Board itself. This conference
has since met in Washington
with the Federal Reserve Board for twn-dav sessions on January 28 and 29, March 24 and 25, and May 21 and 22.
I may say to you that the business
depression
is worldby a decline in prices,
wide and has been accompanied
chiefly
to a point lower than
commodity
prices,
at any time since
in
1916. In fact it seems to me that everything
has declined
fees
to the movies and the greens
price except the admission
have
This depression
decline
at the golf courses.
price
and
been met by the central
banks the world over, by a policy of
purcredit
ease and a tremendous
volume
of open market
There is a wide disparity
in the rates for short-time
chases.
[16]

funds and long-term investments,
but in the course of time,
the disparity
and as usual in periods of this character,
will
disappear,
gradually
and it is my own thought that in the
the rates on short-term
present
money will
circumstances
tend to rise eventually
in a greater ratio than the rates on
long-term money will decline. This statement
is based upon
two factors: first, in addition to effective open market operations by the Federal Reserve System, funds have accumulated
from business recession and will have to be kept liquid so
that when a demand for credit from business reappears
the
funds will be available for that purpose; and, second, because
there has been a tremendous
overissue of securities,
chiefly
issue in
stock issues in 1929, and even this year a tremendous
the longer-term
that is probably in excess of an
category
available supply of capital savings to readily absorb.
I have dwelt upon this feature a little bit longer than I
intended, but I hope it has been interesting
to you, and, above
all, has indicated a distinct purpose and service of the System in a nation-wide
This leads me to repeat
emergency.
the statement
I made in an address recently, that we are having a world-wide business depression without a panic.
I shall now give you as briefly as I can a resume of our
loan operations and a statement
of our earnings and expenses
for the first five months of this year, since we have, according to custom, on December 31, last, mailed to all member
banks a comprehensive
of
statistical
report on the operations
the bank for the year 1929.
On May 31 loans to member banks were $9,457,000 as
compared
with $25,911,000 on May 31, 1929, and slightly
more than $11,000,000 on the same date in 1928. The reduction in the use of reserve bank credit this year as compared
with 1929 is due largely to the liquidation
on
of borrowings
the part of city banks, as there has been no material change
in country-bank
Of the nine and a half million
borrowings.
dollars of loans to member banks on May 31, $2,000,000 represented loans to city banks and $7,400,000 represented
advances to country banks. This compares with loans of approximately $19,000,000 to city banks and $7,000,000 to country
banks on May 31, last year. In this connection it should be
observed that whereas more than $10,000,000 of advances to
city banks and $2,900,000 of country bank advances were a
Year ago secured by United States Government
obligations,
only $95,000 of city bank loans and $950,000 of country bank
loans were secured in this manner
on May 31, this year.
While
borrowings
to
have
figures
do
of
as
current
we
not
member banks from all sources, condition reports as of the
call of March 27, reflected member bank total borrowings
of
$8,261,000,
$6,000,000 repreof which amount approximately
sented borrowings from the Federal Reserve Bank.

The volume of paper discounted for member banks during
the first five months of this year was $92,500,000, with 248
banks accommodated,
ni,mber
which compares with $346,during
first
five
decrease
the
1929,
months
of
or
of
a
,8,000
$_:54,000,000. Loans to member banks on January
6, 1930,
$17,300,000,
borrowing
totaling
represented
maximum
reduring the first five months'
Minimum
quirements
period.
borrowings for the period occurred on March 25 and amounted
to $5,440,000. There was no material change during the period
in our independent
holdings of United States Government
securities, which, at the beginning of the year, amounted to
$9,900,000. Our position on May 31 in respect to these holdings was that the market value was some $27,000 more than
cur book value after deducting the premium amortized from
the coupon return to reduce the yield to a normal basis in
o :der that the investment
would be owned at par at its matury. At the beginning
of the year the System's holdings of
United States Government
securities in the open market investment account amounted to $277,500,000, our participation
to approximately
$15,000,000. On May 31 the Sys.mounting
-m's holdings in this account had increased to $327,300,000,
having increased
to $15,649,000.
In this
our participation
18 we disposed
connection I may mention that on February
in the special account in
r-f $5,000,000 of our participation
in view of demands
order to improve our reserve
of an
unusual and temporary
nature that we were called on to meet
at that time, to which I shall refer later.
Our holdings of bankers' acceptances
at the beginning of
he year amounted
to $9,175,000, and during the first five
to $45,500,000 through
-months we acquired bills amounting
from member banks and from other
men market purchases
'hderal
banks.
During
this
reserve
period
acceptances
mounting to more than $48,000,000 matured, which left our 7
$6,000,000.
otal holdings on May 31, at approximately
Our minimum buying rates on bankers' acceptances
at the
ginning of the year ranged from 4 per cent to 41/2 per cent.
a result of frequent declines in the rate in the open markA during the period, our buying rates, effective on May 31,
--ged from 21/2 per cent to 3 per cent, and these rates have
in
been
further
in
decline
the
,,.nce
slightly reduced
view of
he total amount of bankers' bills outstanding
and a further
easing of rates in the open market.
durOf the total amount of bankers' acceptances
acquired
ing the first five months
were
of this year, $12,500,000
in this market
from member banks and dealers.
acquired
This amount is less than one-half the amount so acquired for
the first six months of last year, due largely to a greater ease
lower rates in the open market.
and consequently

At the close of business May 31, bankers'
[18]

bills held for

collection for account of member banks amounted to $3,321,000, as compared to $9,335,000 held at the same time last
The rapid reduction of yield on bankers' bills, together
year.
with anticipation
of seasonal demands no doubt prompted
member banks to let their holdings of bills run off without
though there has been until recorresponding
reinvestment,
in call loans and government
cently an increasing investment
securities.At
the beginning of the current year the rediscount
rate
of the Federal Reserve Bank of Dallas on all classes of paper
was 5 per cent, which had been in effect since March 2, 1929.
On February 7 this year our directors reduced the rate to 41/2
per cent, and again, at their meeting on April 7, established a
still lower rate of 4 per cent on all classes of paper, both the
changes being approved by the Federal Reserve Board. The 4
per cent rate was continued in effect by our board at its May
in effect at the present
and June meetings, and is, therefore,
time. All Federal reserve banks have at the present time a
rediscount rate of 4 per cent with the exception of the Federal Reserve Bank of New York, where the rate is 3 per cent,
and the effective rate at the Federal Reserve Banks of Boston
and Cleveland is 31/2 per cent.
Stockholders
in the earnings
and
are always interested
in which they have their funds
expenses of the institution
invested, and I am giving you below the figures applicable
to our first five months' operations.
I shall not impose upon
to vocally itemize the sources from which
you by undertaking
these earnings are derived or the different divisions of the
The itemized statement
sxpense account.
will appear, however, in your published proceedings unless during the meeting
you desire to ask me for any specific figure. The gross earnings for the first five months of this year are $727,203.98, as
compared to $957,826.52 for the same period of 1929. The
total current expenses, including cost of currency, repairs and
alterations
to banking house and furniture
and equipment,
amount to $588,600, as compared to $624,000 at the same date
last year.
to May 31,
After deducting
accrued dividends
for the first five
amounting
to $110,000, the net earnings
months of this year amount to $28,500, as compared to $223,800 on the same date in 1929.
The expenses
for the first five months
are approximately
$35,000
in 1929.
less than
they were for the same period
The
decrease
in
a
were
of
our
expenses
principal
changes
$51,0000
by having
to pay
in the cost of currency,
occasioned
fora
notes last year,
reserve
complete
new stock of Federal
due to the
increase
in
the
an
of
size
of
currency,
change
to banking
approximately
$3,500 in repairs
and alterations
house,
in
$16,000
increase
our equipapproximately
of
and an
ment
the purchase
of an additional
account,
representing
printing
machine
and the recancelling
new currency
press,
[19]

placement of similar equipment
ing machines.
The complete table appears
Comparative

Statement

such as bookkeeping

and add-

below:
of Earnings
-First

and Expenses
Five Months

Bills Discounted
$196,291.30
$379,134.17
_____----------------Bills Purchased
155,469.47
334,063.58
--------------------____
United States Securities____________
359,972.10
171,520.04
Fed. Int. Cr. Bk. Debentures_
65,007.79
________
Deficient Reserve Penalties
8,566.42
5,491.35
______ 6,904.69
Miscellaneous
2,609.59
-----------------------------Gross Earnings
$727,203.98
____-----_------DEDUCTIONS:Cost
of F. R. Currency ---- ----____$ 40,453.99
Repairs and Alterations
to
Banking House
4,413.99
900.40
__----------_---Other Current Expenses____________
526,412.93
515,985.543,500.7
Furniture
19,479.70
and Equipment------Profit and Loss
2,197.70 Cr. 11,889.01
--------_---------____
Dividends Accrued
110,161.99
110,114.76
------------- ----Total Deductions
$698,724.90
$734,018.71
---------_------- 28,479.08
Net Earnings
223,807.81
-----------------------We had an increase of approximately
$7,000 in shipping
charges on currency which was due to disturbed
conditions
over the district during the month of February when we were
called upon to render unusual services of an emergency nature.
I am glad to report that during that time we made our facilities available in every possible way. In these situations
we
deliveries at
were called upon to make emergency
currency
five different points and during the month of February
handled at the Head Office alone approximately
$45,000,000 in
in outbound shipments.
Of this amount $11,000,currency
000 was shipped to one of our branches to meet special situations, and $10,000,000 was delivered to member banks in anIn
to
amounts
other city, and similar
several other points.
addition to our regular method of making shipment by insured
registered
mail, it was necessary to make currency deliveries
by automobile, interurban,
armored truck, and in one case, due
to distance and lack of time available for other means of
transportation,
delivery of currency was made by plane. May
I not digress for a moment to say that these situations
were
dealt with, with the result that the
promptly and summarily
in this district appeared to become completely stasituation
[201

bilized in the short space of less than three weeks.
Our directors at their regular monthly meeting on June 7
declared the usual semi-annual
dividend at the rate of 6 per
cent per annum and the amount will be credited to the respective member banks in proportion
to their stock interest
on
June 30.
The amount of the earnings
of the bank in excess of
expenses and dividends at the close of the first six months'
that it
period is naturally
not available, but it is estimated
will be about the same as at the close of the corresponding
less than on
periods in 1927 and 1928, though considerably
June 30, 1929. Against whatever
the amount may be there
have already accrued, up to the end of May, depreciation
to $19,250.
charges
on building and equipment
amounting
It is our custom to write off the depreciation
charges at the
end of the fiscal year on December 31.
I am quoting below the volume and cost of free services
rendered member banks during the first six months of 1930.
The figures for June which are included are estimated,
but I
feel that with sufficient
to warrant
my quoting
accruacy
them. Again to avoid being tedious I am not reading you the
volume figures but shall merely quote cost. However, all of
the pertinent figures will appear in the printed record of your
proceedings.Volume
and Cost of Free Services Rendered Member Banks
During the First Six Months of 1930
(January
through May, actual; June estimated.)
Numberof
Cost
Amount
Items
$84,565
Check Collections
$4,051,506,005
Non-cash Collections_________20,536,436
12,763
97,635,107
225,493
____
Transfer
14,469
3,034,048,280
59,124
Funds___________
of
Currency Shipments
57,086
158,690,160
________33,709,698
14,313
Coin Shipments
4,317,394
______________27,797,050
3,579
Custody and Safekeeping
37,728
Purchase
and Sale of
Bankers'
Acceptances
2,243
52,059,852
3,324
Securties________
U.
S.
and
The cost of these free services is included in the total item
of expense to which I have referred
and the total cost of
divi$189,000 of these services compares with an estimated
dend of $130,000 to be paid on June 30 and is in addition
is larger
thereto.
In general the volume of these transactions
than during the first half of last year, although
the cost is
slightly less.
We began the year with a capital of $4,452,900 and a
[21]

At the close of last year our surplus
surplus
of $8,934,617.
Our
was $215,000 less than the amount
of our paid-in capital.
last year were sufficient
to bring our surplus
earnings
up to
twice the amount
of paid-in
capital,
and in addition,
as provided by law, 10 per cent or $28,817.94
of the remainder
of
to surplus.
The
total
our earnings
was also transferred
transferred
to surplus
amount
at the end of last year was
$244,416.85.
After
transferring
this amount
to our surplus
by law,
the remainder
account
of our earnings,
as provided
to $259,361.46,
amounting
was paid to the Treasury
of the
United
States
tax, this being only the second
as a franchise
time during
the history
tax has
of this bank that a franchise
been paid.

During the first five months
of this year our capital
due to consolidations
to
account decreased,
and liquidations,
$4,350,200. Therefore at the close of May 31 our surplus was
$234,200 more than twice the amount of our
approximately
paid-in capital.
The payment of any franchise
tax and the amount of it
for the year 1930 depends largely if not wholly upon what
our earnings amount to over expenses and dividends for the
last half of the year. Ordinarily
earnings are larger in the
last half of the year than the first half, but due to the uncertainty of the period during which the continued policy of ease
may seem desirable, and with no knowledge of what conditions in the district may be throughout
the remainder
of the
to estimate future earnings
year, I would not undertake
as
they might determine
the amount of the franchise
tax. I
think I should say, however, that since our surplus is in excess
of twice the amount of our paid-in capital, with no probabilities of increase in capital account, that with the exception
of 10 per cent of what our earnings may be, the remainder of
the earnings,
they amount to, would be paid as a
whatever
franchise
tax.
At the present time we have hidden reserves of a half
million dollars set up in an account styled "Self-insurance
Fund." To this account we may charge any losses or depreciations that are not otherwise provided for, and I do not know
that it will seem either desirable or necessary
or that the
to this fund
amount of earnings will permit to add anything
at the close of the year.
I am pleased to report to you for the fourth consecutive
time that during the past year we experienced no losses in our
loan operations and this has been the case since July 1, 1925,
though I am making no predictions
for the future.
There are,
as all of you know as bankers, banana peelings scattered
all
around and it behooves all of us to avoid stepping on any of
them.

During the first part of this year we had a disastrous failure of one of our larger member banks that was substantially
indebted to us. The failure occurred on the first day of FebruThe institution
ary, due primarily to a large defalcation.
was
indebted to us at the time it closed in the amount of $677,000,
If I
against which we had $219,000 of additional
collateral.
may be pardoned in saying so, I think it is a tribute to our
discount functions that by May 1, exactly ninety days later,
the entire indebtedness
was completely liquidated,
and this
was accomplished without suits or other undue pressure, with
practically
no expense and with a due regard for the unfortunate circumstances
the makers of the obligasurrounding
tions we held. The collection of the debt was handled in such
a way that we were able to return the remaining paper to the
Receiver so that he would be in a position to allow offsets of
the deposit balances of the makers against their remaining
indebtedness
and this was accomplished
without any loss or
additional expense to the Federal Reserve Bank. There were
only two disputed items as between the Receiver and the Federal Reserve Bank, but these have been covered by an agreein such a way that
ment without prejudice and collateralized
if the final decisions are against us, no loss will result. I want
to say that the successful culalso to take this opportunity
mination
of this transaction
should also be regarded
as a
tribute to the city in which the failure occurred and to its
in the makers of the obligations
citizenship
as represented
which we held. In respect to every item we received the most
complete cooperation.
I am very glad to say that notwithstanding
the various
economic and financial problems with which the district has
had to contend, bank failures in the district have not been
large during the current
excessively
year, especially when
compared specifically to some of the other districts and to the
country as a whole. At the present time we are holding in our
from two failed banks amounting
to
assets the indebtedness
$32,119.89, in which there is no loss estimated.
We are holding indebtedness
from another bank which went into liquidation in February
through
selling a portion of its assets to
another institution
with
and through a special arrangement
to us is the
us, in the public interest, so that its indebtedness
Natuonly obligation which it has except to its stockholders.
rally this obligation, since it is the only one the bank has, is
secured by its entire assets, including its unsold notes, banking house, furniture
liability
fixtures,
and
and
stockholders'
the endorsement
like
While
this
its
directors.
sounds
a
of
marshalling
of assets, in reality it is with the entire cooperation and a distinct accommodation
to the liquidators.
In the closing paragraph
of my address to you at our last
to the Federal
meeting I stated that most of the amendments
Reserve Act
Reserve
Federal
Board
by
the
recommended

failed of passage at the short session of Congress and died on
the calendar. I further stated that some of these amendments
had been reintroduced
during the special session of Congress
by the Fedand that all of them had been again recommended
eral Reserve Board with one or two additional amendments,
for example, the Board's discretion to waive the six months'
by a member state bank. As I recall it
notice of withdrawal
none of these amendments
was adopted by the special session
of Congress, but in the present regular session, beginning last
December, the amendments
were given consideration
and I am
now able to report to you the following amendments
which
have become effective. Two of these amendments
are almost
entirely administrative
and 'are, therefore,
of no vital interest
to member banks as they prescribe procedure with reference
to terminating
the membership
of banks in certain circumis of interest to member banks
stances. The other amendment
in that it admits certain classes of paper to the eligibility
been excluded. I am giving
that have heretofore
classification
you the gist of the amendments
as follows:
Amendment
to Section 9 of the Federal Reserve Act
so as to authorize the Federal Reserve Board in its discretion to permit state member banks to withdraw
from
in the System without waiting six months
membership
after filing notice.
Amendment
to fourth paragraph
of Section 13, permitting
a member bank to rediscount
with a Federal
reserve bank the same amount of paper of a single borrower as a national bank may acquire from a single borrower under the provisions of section 5200 of the Revised
Statutes.Amendment
Reserve
to Sections
6 and 9 of the Federal
Act, facilitating
the cancellation
bank
of Federal
reserve
bank which has discontinued
its
stock held by a member
banking
operations
without
a receiver
or liquidating
agent
having
been appointed;
this amendment
that in
provides
the case of a national
bank the Comptroller
a
may appoint
bank stock held by it
receiver
and the Federal
reserve
be cancelled,
in the case of a
may thereupon
and that
Reserve
Board may, after hearing,
state bank the Federal
forfeit
the membership
Reof such bank in the Federal
serve System.

There have been a number of bills introduced
both into
the House and the Senate looking to the amendment
of Section
7 of the Federal Reserve Act, which has to do with the distribution of earnings.
So far as I know none of the bills has been
taken up before the Banking
Committee
of
and Currency
likely
it
is
either branch of Congress for hearings,
and
not
less
that this amendment
of
or several other amendments
importance
will be passed at this session. The amendment
[24]

Federal reserve banks to discount the promissory
authorizing
notes of member banks for longer periods than fifteen days
seems to have been side-tracked
entirely, but this and other
fundamental
in the Act will probably
changes
await the
studies that have been authorized by the Senate to be undertaken by its Committee
on Banking and Currency
and its
recommendation.I
think undoubtedly I have given you a sufficient basis for
any discussion in which you might want to indulge in reference to the operations and policies of the bank, but if there
are any points concerning which you would like to have any
information
that I have not mentioned,
I shall be available
for interrogation
as usual.
THE CHAIRMAN: Governor Talley has given us a very full
It has been most interesting
and complete report.
and inThe next speaker on our program needs no introstructive.
duction at my hands. He is known not only in his home state
but throughout
the entire United States as a very capable
banker.
Mr. Nathan Adams, President
of the First National
Bank in Dallas, Dallas, Texas, will now address us on the
"Why Place the Debit Power of the Country,
subject
as
Represented
by Checks, in Governmental
Agencies ?" It is
my pleasure to present Mr. Nathan Adams.
MR. ADAMS: Mr. Chairman and Gentlemen:
The question of collecting checks at par is the one that
the minds of the framers
seemed to have disturbed
of the
Federal Reserve Act. The effect has been to destroy the right
to barter, and certainly
there can be no reason for placing
America upon a gold standard
between
basis in transactions
the people of this country.
This country was settled in the
early days by farmers, and the merchant or the manufacturer
In the pioneer days of this country it
was incident thereto.
was the inherent right of the farmer to barter the produce
of his farm, figured in dollars and cents, for the clothing and
have since
other necessities
of his daily life. The railroads
become an integral part of the banking system for the reason
that more credit is extended upon bill of lading transactions
than upon any other class of collateral.
in their
If the great
bankers
are correct
of this country
statement
that New York is the ultimate
and final clearing
house of America
then the continuity
and its financial
center,
of credit relation
producing
point
must flow from the smallest
to the largest
financial
largest
to
the
terminal
center
point and
The banking
busibeing in any way interfered
without
with.
is founded
ness of this country
use of
upon the judicious
The circulating
reserves.
Money is a medium
of exchange.
is not money,
in my opinion,
but
medium
of this country,
checks.
Checks have come into universal
use by reason
of the
[2S]

unit banking system, which is essential to the prosperity
of
America.
The birth of a check does not come from money in
the agricultural
sections of this country, but from the movement of cotton, corn, wheat, oats and other products from the
farm. Money has never yet been the basis of credit and never
will be. If the farm commodities were left on the farm and the
oil, coal, sulphur and other minerals were left in the ground
there would be little need for checks.
In turning the debits of this country into money at impossible places like Dallas, it must necessarily affect the prices of
farm products.
Country
banking,
in my opinion, has not
The farmer brings ten bales of
changed the right to barter.
coLLon to town and receives a check for it. He then gives his
in turn gives a check to
merchant a check and the merchant
from whom he bought
t_ wholesaler or to the manufacturer
h-s merchandise.
The basis of the check is cotton.
Ufedit extended in the agricultural
sections of the country
i:, ,u6 extended for the purpose of producing money-and
no
OL , y .3t has ever found where he could plant cotton and money
w.;uý 1 spring up out of the ground. I do not believe that any
man would argue that the price of farm products could
be maintained
if the farmer demanded only money in payment
for whatever he sells.
if cotton would sell at 25 cents per pound and the price
c. ,ui,i be maintained
and the farmer refused to accept a check,
t'_i iarmers of this country would have all the circulating cur.
i"-...,y of America in their homes. If you agree with me that
1113 price can only be maintained
by reason of the fact that
t . farmer is willing to cooperate with the banking institutt;o: -ýof this country, then you must admit that if you cannot
0r2ctly pay the farmer in cash that you cannot indirectly turn
debit power of this country into your banking
system
the agricultural
The final and
ou penalizing
products.
i. mate payment must be made at the natural clearing house
York City or San Francisco-one
the
its country-New
way to Europe and the other the gateway to the Orient.
The collection system of the Federal Reserve Bank is nothi,ng more than a "police power" and has nothing to do with
flh; fundamental
uses of credit which the Federal Reserve
Sy° Yem gives to this country-therefore,
it would not in any

business
affect the credit power if the banking
were put
' ek
into the hands
Suppose
the Federal
of the bankers.
Reserve
Act had gone one step further
and said that all continuity
between
banks
of credit
relations
should
cease and
that all member
banks should do their business
with the Fedbank.
That would mean that all the cotton
eral reserve
and
drafts
from
the producing
bank
go
grain
coming
would
inthrough
the Federal
Reserve
Bank for payment
in money,
is now being done-giving
stead of-as
credit to one and debit[26]

ing the other. It does not exactly say this, but it does say
that the debit power of the country as represented
by checks
which arise only from the shipment of products, shall be paid
in money; and the agricultural
sections do not produce money
and cannot turn the agricultural
products so quickly as to be
able to meet this debit power at impossible places like Dallas,
Atlanta, St. Louis, Kansas City, Chicago and Boston in money.
No banking system can be a balanced banking system that
takes into its hands the daily debit power of the country, as
by checks, when it assumes not a particle of rerepresented
for the daily credit power, which gives birth to
sponsibility
the check. No one yet has ever seen a bank statement
that
does not show both debits and credits.
The Federal reserve collection system puts too great a burden upon the country banker, who must furnish production
credit as well as the marketing
credit and then pay the debit
Water cannot
at impossible places like Dallas and Atlanta.
run up hill without a forceful pump.
The collection system within each district would, in my
opinion, solve the problem. Each item that goes into the collection channels of the Federal Reserve Bank should bear the
district and no check
endorsement
of a bank in that particular
should be collected except through a member bank in that district, and then perhaps the spirit of "barter"
would return,
but it can never return so long as inter-district
collections are
made. The question of whether or not a country bank is permitted to charge exchange is not involved in this question.
The collection system of the Federal Reserve Bank is acknowledged to be a scientific system, but so are many doctors noted
for their science and yet their patients die-and
we have seen
the country
bankers
sections of this
and the agricultural
country (which boasts of a banking system second to none in
the world) suffer to the fullest extent.
Do you believe or does any living man believe that all the
farmers have lost their sense of proportion and judgment and
that all the country bankers have lost their judgment?
Not at
all. They are suffering
system that has
under a banking
penalized their every effort.
God gave the farmers the inherent right to barter and we
have taken that right away from them, and over a period of
fifteen years we have seen agriculture
perish almost from the
face of the earth.
I have said previously,
and I say here, that if I had one
act to perform
on this earth, and if that act would be my last
Reserve
the power of the Federal
one, it would be to destroy
Bank over commerce
by reason
of the fact
and agriculture
that it takes into its hands the daily debit power of this country, as represented
by checks, without
any responsiassuming
[27]

bility
for the daily
And when
the scientist
credit
power.
(and I hope he will) I want him to
this argument
answers
show me some place on this American
continent
where country
banking
is happy
is prosperous.
Our
and where
agriculture
be directed
to the things
that
attention,
as bankers,
should
affect the prosperity
of our people and the law which has put
basis in transactions
Americans
between
on a gold standard
has done more damage
themselves
to agriculture
than
any
And what is it,
other one thing that I know anything
about.
It is a "police
after
all?
power"
and does not in any way
involve
the fundamental
Reserve
principles
of the Federal
Bank-but
in order that we may collect more easily the checks,
banker
that it is
we have placed a burden
upon the country
impossible
for him to overcome.

No banker in this country has a more profound admiration
for the fundamental
principles
of the Federal Reserve Act
than myself, but the collection system is not one of its fundamentals, and study of the actual conditions should be made
for the benewith a view to properly solving the problem-not
fit of any one class, but for benefit of the whole people.
THE CHAIRMAN: Mr. Adams has presented for your consideration a very fundamental
question involved in the operation
of the Federal Reserve Bank and we thank him for the clear
and understanding
manner in which he has presented his subject. Is Colonel Walsh in the house?
Colonel, I believe you
have an announcement
to make.
COLONELWALSH : Mr. Chairman
and gentlemen
of the Member Bank
Stockholders'
Association
Reserve
of the Federal
Bank of Dallas:

After you have concluded your intellectual
feast, as provided in the program this morning, by sitting at the feet of
Gamaliel, as it were, to assimilate
the interesting
addresses
for your pleasure and enlightenwhich are being presented
ment, we have provided a gastronomical
repast in the form of
a luncheon for each and all of you, in the immediate rear of
the Junior Ballroom, where you will be permitted
to satisfy
the cravings of the "inner man" to the fullest extent, just for
the "stomach's
sake."
On behalf
the Federal
branches
at
ally invited
the morning

of
of the Boards
of Directors
and the officers
Reserve
Bank's
Head Office at Dallas,
and the
El Paso, Houston
and San Antonio,
you are cordifor this luncheon
to remain
of
at the conclusion
program.

I trust that each and all of you will accept the invitation
and become our guests at this luncheon, which will be served
at -1:30 p. in.
THE CHAIRMAN:

The

next

subject
[28]

on

our

program

is

one

that has created considerable
discussion.
In selecting a gentleman to present that subject to you on this program, your
Program
Committee
prevailed upon Mr. B. D. Harris, Vice
President of the Second National Bank of Houston, who doubtless has a clearer understanding
of economics and sound banking than most bankers in this Southwest.
It is my pleasure
Mr. Harris, who will present
and privilege now to present
for your consideration
"A More Equitable Distribution
of the
Earnings
of the Federal Reserve Bank."
MR. HARRIS: Mr. Chairman

and Members :

It has been a great
many
years
now since I found
any
to deliver a prepared
occasion
or necessity
address
or to read
I am going to state
a prepared
paper
and, in this instance,
It is because
to make
why I feel compelled
an exception.
three
when very unexpectedly,
about
weeks
ago, the comthis address,
mittee
asked me if I would undertake
without
having
any more than
given this very large subject
casual
banker
does,
attention
or analysis,
any more than the average
into it and started
to make an analysis,
when I dipped
to
the generalizations,
to fact, to
reduce
guesses
and opinions
for myself,
if you please, for
to prepare
endeavor
an analysis
I was immediately
my own understanding,
confronted
with
some facts so surprising,
so tremendously
with some factors
large
things,
that
and important,
with some correlative
all
combined
and making
represented
a necessity
of collecting
a
figures of different
study of a mass of analytical
sorts-which
to include in the scope of this address
the
made it imperative
broad perspective
I found
it imof the whole subject-that
to carry those figures in my memory
possible
and to preserve
that sequence,
the
and visualize
and to properly
comprehend
I am
it to a prepared
whole subject,
paper.
without
reducing
in attempting
to read this prepared
very much afraid
address
this morning
in hard chairs
that you gentlemen
and
sitting
long.
to stir around,
more or less anxious
might find it rather
I hope not, because
I am going to draw
the facts
to which
I think,
intimately
this morning,
Your attention
concern
every
one among us. They concern
you a great deal more than the
mere matter
of earnings,
as in the case of any
of a distribution
bank, or corporation,
they concern
fundaother
would-and
in their relationship
factors
mental
of such great importance,
to the continuance
that I hope you
System,
of the Reserve
will find it worth
your while to listen to what is more in the
than any original
nature
of an assemblage
of facts in sequence
views of my own. I have a very open mind on some of these
before
I intend
to bring
questions
in
You, bearing
which
mind that there are pending
'at this time, without
any discussions or hearings,
five bills in Congress
to this subject
relating
by members
in their provisand very definite
of importance,
ions. These bills I have here
and also some other data which
to clarify
may be referred
to if necessary
any part of it.
[29]

The topic assigned
Equitable Distribution
Bank."In

to me by your
of the Earnings

committee is "A More
of the Federal Reserve

the lengthy and nation-wide debate which raged unceasingly for a number of years preceding the organization
of the
Federal Reserve System in 1914, and more especially in the
seven-year period following the panic of 1907 when our banking machinery
broke down in a period of prosperity
because
it could not sustain the load, the combined thought
of the
nation was concentrated
with great intensity
and thoroughness upon the construction
of a new banking and currency
system that would embody the soundest principles gained by
the experience of all the ages throughout
the world. Not only
the best banking brains of the nation and all of the nations
had free play in this discussion, but all of our foremost economists and business, agricultural,
and political leaders were
in the effort to formulate
heard from exhaustively
a system
which would not only be based upon an impregnably
strong
position, but which would at the same time be responsive to
and entirely fulfilling all the needs of this particular
nation,
and which would be politically expedient, since this particular
habits of thought,
nation had preconceived
and deep-rooted
following the abolition of the First and Second banks of the
United States, hostile to the creation of a centralized governto the central banks of the other
ment bank, corresponding
It is not necessary here to dwell upon the reagreat nations.
is only here made to this presons for this, and reference
liminary history to place emphasis upon the fact that a very
intense and searching
X-ray was focused over a long period
of time upon everything
related to the subject, comprising the
whole history of economics and banking.
in
It will be recalled that the United States Government
the first place created and sent abroad a very able monetary
headed by a very able man, Senator Nelson W.
commission
Aldrich of New Jersey, to make a close and intimate
study
on the ground, and with the benefit of extensive discussions
in Europe, of the banking syswith the most able authorities
This committee returned
to
tems of the other great nations.
the United States with probably the most comprehensive
data
On this data was
ever assembled together
on this subject.
finally evolved a bill in Congress sponsored by Senator AldReserve Association.
rich for the creation
of the National
Although
this bill was endorsed by the American
Bankers
Association
Convention
in New Orleans in October, 1911, it
in Congress, and failed to pass.
met with much opposition
However, it provided the skeleton and ground-work
for the
Federal Reserve Act, which in theory and general structure
very closely resembled it.
A comparison of the text of the National Reserve Association and the Federal Reserve Association
bills very clearly

fact that however
the important
establishes
much the respective bills may have differed
in any other respects,
they were
identical
in one respect
fundamental
absolutely
of the greatest
importance;
that under no circumstances
namely,
should these
banks be operated
for profit, and provisions
reserve
were written into both laws designed
that possibilto forever
obviate
ity, by limiting
to a moderate
the return
to the stockholders
in both acts, that
rate of interest,
and the further
provision
in case of liquidation,
only the par value of the stock would
be returned
to the stockholders,
or earnings
and any surplus
It is interto the Treasury
would revert
of the United States.
first,
Reserve
Act provided,
to note that the National
esting
for a contingent
fund to be maintained
to an amount
equal
to 1 per cent on the paid-in capital,
and not to exceed $2,000,000, as a protection
losses
(this also to
against
any possible
States
in case of liquidation)
to the United
Treasury
revert
;
dividend
to be paid to the
second,
a 4 per cent cumulative
third,
to go to
stockholders;
one-half
of additional
earnings
to 20 per cent of the paid-in
surplus
until the latter amounted
to the Government
tax, and
capital,
one-fourth
as a franchise
to the latter
to shareholders
one-fourth
until the dividends
5 per cent, and in no case more than 5 per cent per
equaled
After that point had been reached,
annum.
of excess
one-half
to go to surplus,
to the Government
earnings
as
and one-half
franchise
had been
tax, provided
that after 20 per cent surplus
the entire
reached,
should go
amount
of the excess earnings
to the Government
tax.
as a franchise
A study
the conclusion
very plain
of this subject
makes
that the governing
thought
of
and intention
and fundamental
these provisions
of
necessity
upon the primary
were centered
insuring
beyond
the impregnable
soundness
all peradventure
by removing
institutions
for reserve
any
of these
purposes
become over-extended
themselves
that they might
possibility
banks,
and in the same position
and impotent
as any other
by reason
lend
to
their
thereof
in times of stress
and crisis
functions
for
the
fulfilling
the
to
powerful
save
aid
situation,
The seriousness
they were created.
which
of concentrating
fully
the reserves
institutions
these
the
to
was
recnation
of
for it was apparent
that this radical
ognized,
experiment
and
adventure
and that
carried
with it tremendous
responsibilities,
if these reserve
institutions
everything
should
ever collapse,
important
The one supremely
else would fall down with them.
basic principle
inin
System
Federal
Reserve
the
centered
of
the impregnable
suring
strength
of
maintaining
and forever
these reserve
institutions.
in turning
the
I do not consider
that the basic thought
franchise
tax
Government
the
to
excess
as
a
over
earnings
is enby any conception
that the Government
was motivated
titled to appropriate
of these privately
earnings
all the surplus
for the charter
in return
owned institutions
rights
granted
them, but rather
that this sort of a distribution
of the earn[311

ings would be most effective in insuring that the stockholders
would be limited to a 6 per cent return, insuring the proper
and sound administration
of the banks, and removing the urge
to operate them for profit rather than for safety. The absolute unanimity
relative to this is very striking and impressive, when it is considered that this unanimity
was arrived
thought, exhaustive
at after a period of the most concentrated
discussion, the assemblage
of all history and experience and
the free interplay of all thought of the recognized authorities
here and abroad.
I am presenting
these facts to your attention
as a prelude
to what I am further going to say, because to me the combiintellectual
nation of investigation,
wisdom, experience,
comin
prehension,
and sound and considered judgment,
resulting
this unanimity of conclusion, seems very high and convincing
indeed, and I cannot but feel that the deliberate
authority
and considered judgment of so high a tribunal upon this fundamental factor of supreme importance
should not be reversed
except upon the authority
of combined judgment of the same
importance,
and entitled to the same profound respect.
When the Federal Reserve law was under discussion before its passage, some of our soundest bankers and best thinkin it in particular,
ers saw two very dangerous
possibilities
and many of our best bankers opposed it because of this. The
first danger was of clumsy and ignorant tinkering
with the
law because of popular clamor and political influence, which
might result in converting
a scientifically adjusted and effective piece of machinery into an engine of destruction
and ruin.
The second was the possibility
of credit
and probability
expansion under this system to an unwholesome
and dangerbe
things,
that
ous extent-to
an extent
would, among other
sure to put to a very severe test the strength
and stability
And also it was clearly apprehended
of the reserve banks.
that the proper conduct of these reserve banks, involving the
safety of the whole banking and business structure
of the
nation, would call for a very high order of economic comprehension, ability, steadfastness,
and courage in the personnel
of the Federal Reserve Board and the personnel of the banks,
and that in this respect the System was vulnerable to political influence, as well as the uncertainty
of the calibre and
qualifications
of incumbents
placed in their positions by voting majorities.
I am glad to say that from its first inception
the System has been signally fortunate
in the first place in
having its policies and destinies shaped by so great a banker
has hardly
as Mr. Paul M. Warburg,
who, in my estimation,
a peer in broad comprehension
ability,
and sound constructive
and in having associated
with him gentlemen
of high character and ability, and that the personnel
of management
throughout
has been with few exceptions well qualified and
Nevertheless,
the Federal Reserve System,
of high character.

having no counterpart
in the world, was an experiment
which
has been and will continue to be in a constant state of evolution.Looking
have
back over its history
we can see mistakes
have been paid for them-but
been made, and penalties
with
it is constantly
to higher
working
constant
gain in experience,
On the whole it
levels of efficiency
and correct
adjustment.
learn
have
lessons
to
has been invaluable,
though
yet
we
and
it. Above
in perfecting
it, we would not be without
everything else, all the experience
conwe have gained emphasizes
duty to forever
the imperative
stantly
need and the solemn
liquidity
of
preserve
and soundness
and defend the strength,
have
the
institutions.
We
these
witnessed
recently
reserve
finally
resulting
culmination
credit inflation,
of extraordinary
in
busihistory,
in
in the greatest
and
a
collapse
stock market
to
I
is
becoming
not
going
ness recession
prolonged.
am
which
to the
discuss
this at all today, except to call your attention
fact that during this period the amount
of bank credit created
System,
Reserve
and for
under the operation
of the Federal
System
Reserve
the protection
constiof which the Federal
in volume to more than
tuted the reserve
safeguard,
expanded
Federal
the
ten times the amount
the
of
resources
entire
of
Reserve
System,
credit,
of outstanding
and on that
volume
61/2 per cent, as was
the gold reserve
declined to approximately
City Bank Bulletin
analysis
of
clearly
shown in the National
October,
I was in Washington,
1928. In that month
and was
told by members
Reserve
Board that the volof the Federal
X55,000,bank credit
ume of outstanding
was approximately
in
000,000, of which approximately
55 per cent was employed
10 per cent in real
carrying
stocks and bonds, approximately
35 per cent in conducting
estate operations,
and the remaining
the other business
of the country.
It is very pertinent
here to lay emphasis
upon
and stress
designed
the fact that the Federal
to
law, originally
Reserve
function
by
the
that
created
credit
and
of
currency
volume
so
the System
with the
expand
and contract
would automatically
in
first
inthe
movements
away
getting
of commerce-thus
from the rigid,
stance
of bond-secured
unresponsive
volume
in our prehad caused
currency
us so much trouble
which
to enable
the
had to be altered
ceding
system-afterwards
System
the tremendous
to furnish
volume of credit necessary
to carry on the war, for which reason
the law was amended
to permit
bonds-the
Government
banks
to borrow
against
huge volume
the
both
then
created
means
now,
and
of which,
of enormous
at the same time procredit expansion-without
viding
with the moveof automatic
contraction
any means
ments of commerce,
except
such
or any means
of contraction
as might
be brought
operations
only
about by open market
I
free
is
That
the
law
today,
to
partially
and
am
effective.
to change
back
if not impossible,
confess
it would be difficult,
by gradually
imposunder present
except possibly
conditions
[33]

ing restrictions.
If to the difficulties
we have
so recently
this huge and inelastic
witnessed
of controlling
volume
of
credit, mounting
up to a figure where the percentage
of actual
it constantly
dwindles,
gold reserve
supporting
and might condrop much lower than 61/2 per cent, this situation
ceivably
be further
aggravated
and made still more precarious.
should
banks themselves
furby the dangers
of the Federal
reserve
the volume of credit by going into the market
ther expanding;
in large volume in order to
and purchasing
earning
securities
for the benefit of their stockholders,
the
make large earnings
be too tragical
for the imagination
to
consequences
might
grasp.Do
not lose sight of the fact that the operations
of this
banks mean something
reserve
sort of the Federal
very difbanks.
When a Fed-'
from those
of ordinary
member
ferent
bank goes into the market
to purchase
era- i reserve
securities,
it has the effect of immediately
creating
an inelastic
volume
times that much,
of bank credit
of ten to fifteen
so that if
the combined
Federal
banks
for
reserve
purchase,
should
illustration,
$500,000,000
for earning
it
of securities
assets,
like at least $5,000,000,000
would create
something
expansion
It can be readily
of bank credit.
seen that huge volumes
of
bank credit
be created,
to legitimate
would thus
unrelated
business
in
needs,
which
would naturally
seek employment
Last year's
speculation.
stock market
experiences
warn us of
in this.
the great dangers
There could very well come a time
That
when
confidence
would be lost.
very same confidence
which we now have in the banking
structure
of the country
might be lost, and if that should ever be lost, we are all lost.
Anybody
having
in a bank, created
by bank credit
a balance
by bankers
The currency
extended
can call for the currency.
is all redeemable
in gold. You must admit that it will require
very wise, sound,
and safe management
on the part of the
Federal
Reserve
Board and the Federal
banks to proreserve
tect this volume
the redemption
of credit
and guarantee
of
in gold, and even more
our currency
so it is imperatively
demanded
that
into the law itself
any provisions
written
We have no
shall be of the safest
and soundest
character.
in fact
Reserve
that Federal
positive
assurance
management
hands.
Long
will never get into inexperienced
or incompetent
depression,
declining
periods
of business
unemployment,
prosfailures,
perity,
and what we call bad times happen
along in
cycles, and at such times dissatisfaction
and public clamor are
.
laws
foolish
and
and remedies
rampant,
gain many followers
the unthinking,
Federal
among
uninformed,
and ignorant.
laws will not permit
Reserve
tin-;
of any crude
and clumsy
kering
destructive
Reserve
without
results,
and Federal
man-,
brave, sound and conservative,'.*.
agement
must ever be strong,
to popular
to successfuly
clamor or politics,
nayunresponsive
igate the ship through
stormy
and dangerous
waters.
Therefore,

the

question

before
x341]

the

house

today

presents-.

We have deconsiderations
character.
of the most serious
bated this question
in our previous
There can be no
sessions.
that
question
many
of the banks
of the country,
especially
those that are not particularly
prospering,
are looking
with
dissatisfaction
all of the excess
at turning
over practically
tax. One very defito the Government
earnings
as a franchise
in
nite evidence
of this is seen in the five bills now pending
Congress
(possibly
there may be others),
which have, so far,
I think,
had no hearings
namely :
or made any progress,

March 4, 1930, proH. R. 10472, Mr. Wingo, introduced
viding that the surplus earnings at the end of each calendar
to the stockholders
year shall be distributed
on a pro rata
basis according to their stock holdings of the Federal Reserve,
and their average reserve balance maintained
with the Federal
Reserve Bank during the year; such distribution
to be in acby
to be prescribed
cordance with the rules and regulations
the Federal Reserve Board.
February
H. R. 10211, Mr. Stengall, introduced
24, 1930,
providing that 10 per cent of excess earnings shall be passed
to surplus, and the remaining 90 per cent divided between the
United States and stockholders
as follows: Federal Reserve
Board shall determine as nearly as possible what proportion of
net earnings was derived from the issuance of Federal reserve
notes, which amount shall be paid over to the United States
as a franchise tax, the remainder distributed
among the stockholders in proportion to their stockholdings.
H. R. 7966, Mr. McFadden,
6, 1930,
introduced
January
providing that excess earnings be distributed
pro rata by the
Federal Reserve Bank to each member bank in proportion
to
their respective reserves, such distribution,
however, limited
to those members whose maximum reserve at any time during
the year does not exced $500,000.
(A member with $501,000
reserve would be out of luck!)
February
Senate Bill 3564, Mr. Fletcher,
13,
introduced
1930, providing for 10 per cent to surplus and 90 per cent
distributed
pro rata at the end of each
among stockholders
by the
calendar year under rules and regulations
prescribed
Federal Reserve Board.
Senate Bill 5723, Hon. Carter Glass, introduced
February
4, 1930, providing that after regular 6 per cent dividends have
been paid, one-half shall be paid to the member banks as an
extra dividend, one-fourth paid to the Government
as a frandivided as follows :
chise tax, and the remaining
one-fourth
first, by addition to surplus of the bank until such surplus
reaches 100 per cent of subscribed capital, or 200 per cent of
paid-in capital, and the balance as an additional franchise tax
to the Government.
Under all of these bills, in case of dissolution

or liquidation,

the stockholders
would receive back the par value of their
stock, any surplus or other earnings to revert to the Governthat the consideration
ment. I apprehend
of the proposed legislation will narrow down to the McFadden and Glass bills, because of the prominence and authority of the authors as members of the House and Senate Banking and Currency Committees, respectively.
I also apprehend
that because of member
bank pressure, some sort of legislation will be enacted that will
have the effect at any rate of reducing the amount paid to the
Government
as a franchise tax, and in some way giving some
benefit of the remainder
to the stockholders,
to measurably
satisfy the latter. The same sort of pressure that brings this
about is not unlikely to be hereafter exerted in the direction of
expanding the operations
of the reserve banks to make more
money and bring in more dividends, especially for the reasons
which I shall hereafter endeavor to show.
Behind all this, and strongly prompting
it, is the feeling
that the Federal Reserve System is losing members and popularity because of the feeling that the relationship
is unprofitable, to counteract
which, means are being sought to make
the relations more profitable and satisfactory,
and to attract
I sincerely believe there is much misconcepnew members.
tion and fallacy in the expectation
that any possible distribution of earnings would change this situation.
It is proper to say here that on May 26 of this year the
Economic Policy Commission of the American Bankers Association made public their report, in my opinion a well-considered and thoroughly
sound expression,
opposing at this time
any change in the law to permit a larger distribution
of earnings to the member banks. The large calibre of the members
of this Commission needs no comment when I name them-R.
S. Hecht, Chairman;
George E. Roberts, Nathan Adams, Leonard P. Ayres, Frank W. Blair, Walter W. Head, W. E. Longyear, Walter S. McLucas, Max B. Nahm, Melvin A. Traylor,
Paul M. Warburg,
0. Howard Wolfe, Gurden Edwards.
Time
does not permit going into the full text of this able document,
which fully recognizes the dangers above referred to, but as
illustrative
of profits that would be derived by the members
offsetting the very dangerous risk of changing the law, may
I not quote the following extract
from it :
"In this connection
it might
be well to point out that
a
increase
in dividends
proposed
would, after all, be a very small
inducement
financial
banks.
to present
to prospective
The
Federal
Reserve
Bank of Richmond
has computed,
on the basis
forecast
of the past six years, a theoretical
of additional
earnings that would be disbursed
banks during the next
to member
two plans introduced
in the United
States
under
six years
Senate.
The Fletcher
Bill provides
that earnings,
after present dividends
and completion
of 100 per cent surplus,
should
be distributed
to the stockholder
banks.
If the earnings
of
[36]

each bank were distributed
among its own members there
would be no extra dividends in the Boston, New York, Philadelphia, Cleveland, Chicago and San Francisco districts during the next six years, but the other six Federal reserve
banks would pay annually extras at the following rates:
Richmond, 6.08 per cent; Atlanta, 4.09 per cent; St. Louis 3.50
9.51 per cent; Kansas City, 5.48 per
per cent; Minneapolis,
cent; Dallas, 4.83 per cent. If the earnings were pooled and
paid out to all members in all districts
each member would
receive an average annual extra dividend of .78 per cent.
Under this plan no franchise tax would be paid.
"Under the Glass bill the average annual extras would
be as follows: Boston, 2.51 per cent ; New York,
per
cent
;
.48
Philadelphia,
2.05 per cent; Cleveland, 2.09 per cent; Richmond, 3.26 per cent; Atlanta, 4.67 per cent; Chicago, 3.20 per
4.75 per cent;
cent; St. Louis, 2.02 per cent; Minneapolis,
Kansas City, 2.74 per cent; Dallas, 3.31 per cent; San Francisco, 1.87 per cent. If these extra funds were pooled the
result would be an extra average annual dividend of 1.73 per
cent for each member. Under this plan the system would pay
an average franchise tax of $1,941,996 each year.
"A member bank having capital and surplus of $200,000,
therefore
holding Federal reserve bank stock amounting
to
$6,000, on which it is receiving $360 under the present 6 per
cent dividend arrangement,
would, with the addition of each 1
per cent to the dividend rate, receive an additional income of
$60 a year. If each member bank will figure out for itself
the dollar-and-cents
gain it would enjoy we are confident it
will be agreed that the gains are small as against the economic
disadvantages
which can be pointed out."
I may mention
here, though
time does not permit
me to go
into it, that
banks in the world are
all the important
central
operated
pretty
much the same in effect with different
variations, to pay the bulk of the earnings
to the government
after
a moderate
to their stockholders.
The
and reasonable
return
banking
and economic
structure
of different
and conditions
laws differ
countries
differ
naturally
considerably,
as their
considerably
in consequence,
is essentially
but the principle
the same.
For my own part, I have an open mind on the proposition
benefits
banks
in
of giving
our member
any possible
the way
in surplus
of increased
services
or participation
earnings,
consistent
with the paramount
of safety
considerations
which must be unconditionally
before
assured
and immutably
that
As I see it, we have
is how?
can be done. The question
not yet gained
enough
experience
perspecor a long enough
tive over
any long range
of normal
years to determine
what
the average
that the banks
of earnings
would be, assuming
are soundly
institutions
and properly
operated,
as reserve
must be.
Taking

the

range

of earnings
[371

back

to 1914,

any

average,

for instance,
including
the huge earnings
of 1918, 1919, 1920
because
and 1921 would have to be eliminated
of the abnorto war conmally expanded
operations
of those years incident
ditions not likely to occur or be justified
Out of a total
again.
total gross earnings
banks
of $900,000,000,
of the combined
from 1914 to 1929, inclusive,
$474,000,000,
or more than half
of the earnings
of these fifteen
years were made in the four
The earnings
years
mentioned.
of these four years also contributed
to building
powerfully
up the surplus
quickly.
I have read with much interest
the study of possible
distribution
made by the able Governor
of earnings
of the FedBank of Richmond,
Mr. George J. Seay, referred
eral Reserve
Commission.
Mr. Seay
to in the above report
of the Economic
tabulates
taxes paid the Government
all franchise
up to and
including
1929, aggregating
$147,000,000,
roundly
of which
$124,000,000
1920 and 1921.
amount
was paid for the years
For the two following
1922 and 1923, the total fran-'
years,
large.
The total
chise taxes, $11,000,000,
were also abnormally
franchise
tax, $135,000,000,
four years
paid in those
reprethe total amount
sents 92 per cent of $147,000,000,
paid for
the years
1917 to 1929, inclusive.
These
abnormal
years
from all average
The last
should be eliminated
calculations.
seven years have witnessed
a phenomenal
and unprecedented
business,
expansion
speculation,
of building,
and volume
and
in the markets,
activity
of
with a corresponding
expansion
bank operations.
I do no
credit volume
and Federal
reserve
think any average
of those years either would be a safe guide
in estimating
It is still
earnings
over, say, the next ten years.
a very uncertain
question
what the earnings
will be in the long
reach ahead, and it is entirely
possible that through
shrinkage
losses, years will be encountered
of operations
and possible
of
inability
In any such years
to earn expenses.
there
will be
the urge to expand
operations,
when every sound considerain order to make unwarranted
tion would demand
contraction,
dividends
for the stockholders.
I emphasize-this
must never
be permitted.But
the abnormal
even averaging
profits of abnormal
years
be
the returns
to the stockholders
as above
would
shown,
Notwithstanding
this, however,
I would
very small indeed.
tax paid to the Government
the franchise
not oppose reducing
by
to whatever
percentage
would be reasonable
and justified
into full consideration
the charter
taking
privileges
granted,
7-"Fedprovision
on the one hand the following
of Section
banks,
including
the capital
eral reserve
stock
and surplus
derived
therein,
therefrom,
and the income
shall be exempt
from Federal,
State, and local taxation,
except taxes upon real
been
hand,
it
has
that
estate";
and on the other
although
under cerstated the banks make a large profit on circulation
techtain conditions,
and under others
not, the Government
I have a memorandum
nically imposing
no tax on circulation,
from
Governor
Talley,
if I understand
it correctly,
which,
[38]

indicates that the Act provides that the Federal Reserve Bank
by the
shall pay such rate of interest as may be established
Federal Reserve Board on only that amount of Federal reserve notes which equals the total amount of outstanding
held by
notes, less the amount of gold and gold certificates
Federal Reserve Agents as collateral security.
Without further time or access to records, I cannot distinguish
the mateThe Federal reserve
rial difference, and I pass over that.
banks are owned by the stockholders,
who take all the risks
and all the losses and pay all of their own expenses, serving
the Government
I think
unstintedly
with all their facilities.
we should pay the Government,
of course, anything that may
be determined
The Government
as just and equitable.
also
has a duty and an obligation to the public to maintain a sound
banking and currency system, not alone for the benefit of the
member banks, but for the whole public, and should not unthe earnings
reasonably
of the banks, carrying
appropriate
out the mandate of the law.
franchise
this
After
tax, I would
the
ratio
of
establishing
the remaining
not be opposed to paying
excess into some sort
Fund to be held intact for the benefit of the
of a Contingent
stockholders
or any number
over a period
of say ten years,
of years, more or less, that would enable a longer perspective
to be had of the operations,
conditions
needs, and future
of
the System,
in the light of experiuntil it can be determined
ence and mature
could be propconsideration
what disposition
in governbe invested
This fund might
erly made of them.
ment bonds.
I believe
banks
the member
would do well to give very
serious
and sober consideration
at this time to the broad and
long range
in the foregoing,
imperfectly
perspective
covered
has been
further
making
studies
of their own. Mr. Warburg
In my estiin his opposition
to larger
dividends.
consistent
he is an authority
mation
without
an equal in the profoundness of his knowledge,
and sound
and in his comprehension
His
judgment
banking,
in theory
and practice.
on government
System
Reserve
two volumes
should be
recent
on the Federal
read by every banker.
Let us briefly
of dissatisfacanalyze
some of the causes
As to
tion with an open mind, to see if they are well-founded.
, loss
into
take
banks
balances
interest
should
member
on
of
banking
that under our previous
system,
counconsideration
try banks were required
to carry 15 per cent reserves,
of which
basis
three-fifths
be
2
with city
cent
on a
per
carried
could
bank reserve
had
be
to
the
two-fifths
carried
and
other
agents,
in legal tender
to get) in
(on occasions
very difficult
money
including
their
the
Non-legal
tender
all
money,
vaults.
own
in stock
Bank notes, which they carried
volume
of National
for counter
was at all
and there
was not reserve,
purposes,
times a large volume
no more income than the
of it yielding
[39]

balances carried with the Federal Reserve Bank. Under the
Federal Reserve System they have to carry very much less
cash on hand than formerly because of the stability of conditions and the certainty
of getting in all the currency needed
immediately.
Reserve City banks had to carry 25 per cent
reserves, of which 121/2 per cent could be carried with Central
Reserve City banks on a 2 per cent basis. Central Reserve City
banks had to carry a 25 per cent reserve always on hand. As
a practical proposition, banks of all three classes carried much
in
more currency on hand than stark reserve requirements
order to be safe and prepared for emergencies.
Under
Federal
Reserve
the required
conditions,
reserve
have been cut in half, to say nothing
in
the reduction
about
The banks,
have the other
therefore,
counter
cash carried.
half released
for lending
If a country
bank lends
purposes.
the other half at 10 per cent, it would be equivalent
to earning
5 per cent of the entire amount
of the reserve
previously
car5 per cent, if you please,
ried, or if they can lend it to average
that would be equivalent
to 21/2 per cent of the entire amount
they could forof the reserve
previously
carried;
whereas,
merly earn 2 per cent on only three-fifths
of the reserve
preThe same principle
viously carried.
of
applies to the reserves
But independently
the city banks.
of the savings
and advanbanks because
in
tages to the member
of the large reduction
their
reserves,
and in the amount
of vault
as
cash carried
it would be very interesting
for each member
above shown,
bank to make a computation
of the value of service
rendered
by the Federal
Reserve
Bank,
the percentage
and estimate
balance
to the reserve
ratio
of the amount
so realized
carried. A quite striking
calculation
of this sort has just come to
I will read to
my attention,
and without
calling
any names,
by an officer of the Federal
you the carbon of 'a letter written
Reserve
Bank of Dallas to a typical
and representative
country bank correspondent.

"Dear Mr.

.
"We are very glad to furnish
you the information
in your letter of June 16, which has a direct
requested
bearing on the benefit of membership
in the Federal Reserve System. We know that this is a question that is frequently discussed by our member banks, but this is the
first time that I can recall during my thirteen years' connection with the Federal Reserve Bank that any member
bank has thought the question out along the lines indicated in your letter and requested the information
of us.
"I believe that the information
that you have request
to you. For convenied is going to be rather
surprising
ence, all of the data has been based on the five-months'
1 of this year and ending
period beginning
with January
[ 40 ]

on May 31, and for this period the information
by you is given below.
Amount
Amount
Amount
Amount
Amount

requested

currency
shipped to this bank
_-_-_--$40,216.00
600.00
coin shipped to this bank
-------------------------------------currency
shipped by this bank to you-__------------ 39,500.00
1,200.00
coin shipped by this bank to you
-------------discount charged
on notes rediscounted
with
bank------------------------------------------------------------------------- 798.28
Average
12,632.00
reserve requirement
-----------_-------------------------------------Express
34.88
charges on money shipped this bank
___------------_----Cost of money shipments
made by this bank to you, based
32.86
on express rate- ------------------------------------------Toll on collect telegrams
7.33
ordering
money shipments-______
Difference
in interest
between rate
charged on rediscounts
284.60
charged
you and 6 per cent
___--------------------------------------2 per cent interest
for 5 months on your average reserve
105.25
requirement
-_ -----------------__-------------------------of
of
of
of
of
this

"By
during
five-months'
the
way
of explanation,
I find that discount
period,
was charged
you on six different
offerings
at 41/2 per cent rate and on one offering
into consideration
at a 4 per cent rate. Taking
at express
to and from your
rates the cost of the money shipments
bank and the toll on collect telegrams
the money
ordering
the
difference
between
the
and
of discount
amount
that you would have to pay
charged
you and the amount
at a 6 per cent rate,
we arrived
at a total of $359.67,
is equivalent
to an interest
which
rate of 6.84 per cent
on your average
reserve
requirement.

"While the above furnishes
that
you the information
you have requested, I might remind you that it does not
take into consideration
all of our free services, including
the collection of checks, transfer
of funds, sake-keeping
of securities, and other services such as the purchase and
sale of bankers' acceptances
and U. S. securities. We also
carry the float for you on your money shipments, both to
and from your bank. We have just recently made a calculation of the cost of our free services during the first six
months of this year, actual from January through May,
for use at the stockwith the month of June estimated,
holders' meeting tomorrow, and it may be of interest to
you to know that the total cost of such free service for
to be apthe first six months of this year is estimated
$189,000, which compares with an estimated
proximately
dividend of approximately
$130,000 to be paid on June 30,
and, of course, is in addition thereto.
to furnish you
"We are very glad of the opportunity
further
that
this information,
and if there is anything
that we have furnyou wish or if any of the information
ished needs clarifying,
we will be glad if you will write
us."

Personally,
I have not been able to convince myself that
any distinction
ought to be made in disbursements
of dividends to two banks, each with the same capital, but one having twice as large deposits, and therefore
carrying twice as
large reserves.
The latter has twice as large liabilities, needs
to borrow twice as much money, all things being equal, and
larger rewould in any case have to carry correspondingly
in having half of
serves, and would benefit correspondingly
those reserves released.
The larger the volume of business,
the larger demands they will make on the Federal Reserve
Bank for clearing their float, shipping currency, making transfers, and everything
else. They get more benefit out of it in
proportion to their capital than the smaller bank.
In the case of our own individual banks, they have some
stockholders
who carry larger balances without interest than
other stockholders,
and they have some stockholders
who
carry no balances at all. They could not make any discriminations on that account in paying dividends, and should the Fedit would be vioeral Reserve Bank make such discriminations,
lative of every precedent and usage applying to all other corI do not believe there is any sound basis for the
porations.
Federal reserve banks adventuring
into this sort of thing,
especially as the reserves of the larger bank are adjusted to
its conditions on the same impartial
and fair ratio that the
the
to its conditions. Otherwise,
smaller bank's are adjusted
larger bank could, with equal propriety, say that as its capital
is the same as the smaller bank, it should carry no larger
reserves than the smaller bank. The reserves have no referbut to volume of deposits.
The bank
ence to capitalization,
with a larger volume makes much more earnings in proportion
to its capital, carries no more proportionate
reserve than the
smaller bank, and no more than it should carry to protect its
depositors, and I fail to see where it is entitled to any special
by virtue of that fact.
consideration
Is it not also true that one fundamental
cause of dissatisfaction is in the first place that the country banks find it
easier to borrow money on all sorts of collateral and under all
including personal loans on collateral,
sorts of arrangements,
without any red tape, loss of time, and hard-boiled regulations,
from their city bank correspondents,
allow
who additionally
them 2 per cent, and will willingly do various things the Fedto do? The regulations
eral Reserve Bank is not permitted
need no apologies, 'as they are sound and proper, calculated
improve the standards
to progressively
of banking, the economics of the country, and develop bankers of greater comprehension
and ability, in which our unit system is by and
large lacking. But it is easier and very natural to follow the
lean to the easiest way, the most comline of least resistance,
fortable way, and string along with the big city banks as
before the System started, relying on the latter to do all the

borrowing that is necessary from the Federal Reserve Bank
to take care of the needs of their customers.
I wonder if the country banks in the agricultural
regions,
which in recent years have been operating under more or less
discouraging
conditions, owing to the prolonged depression in
the hazards of their loans, losses, and slow colagriculture,
lections, reduced volume and profits, and because of this, the
necessity of employing funds in low-rate secondary reserves
instead of 10 per cent loans-the
movement of business from
small towns to larger towns in this automobile era, the gradual decline of small-town business and small-town banks because of these conditions-are
perhaps,
not, unconsciously,
laying the blame in the wrong place. Three per cent of a
bank's capital and surplus is very small in proportion
to its
total assets. It should not be any hardship, or really amount
to anything material one way or the other, to keep this small
invested without risk or
percentage
safely and continuously
the necessity of renewal to yield 6 per cent in Federal reserve
stock.I
have been looking over the changes
in membership
in the
System
inclusive.
These figin the last five years-1925-29,
declined
that
the number
ures reveal
of members
although
from 9,489 to 8,522, a net loss of 967 within
that period,
a
total of 1,241 banks were lost to membership
through
mergers
by the member
banks, suspensions,
etc., and 807 banks joined
the System,
is noth631 withdrawing,
against
which showing
ing in particular
to be unduly
over. We have within
agitated
that period been going through
and wholea very necessary
in stronger
some consolidation
and more
of banks,
resulting
desirable
banking
situmembers,
and a progressively
stronger
ation-the
that can be applied to a genonly sound corrective
bank situation
erally
practiover-banked
extending
country
in the agricultural
cally over the whole country,
and especially
the
sections,
which has been one of the most difficult problems
in towns
has had to deal with-two
country
or more banks
having business
managed
enough to support
only one properly
bank.
Banks
manwith insufficient
capital
and incompetent
agement,
dividing
the business,
leading
to excessive
competition and unsound
I
position.
practices,
all in a precarious
think we
will all agree that as and when such situations
can
be corrected
by consolidation
as they are now being corrected
and elimination,
in stronger
institutions
able to
resulting
command
better
talent,
sufficiently
with capital
and volume
large to be
a very construcoperated
properly
and profitably,
tive and
thing has been accomplished.
necessary
Any reduction
in the number
of the Sysof the members
tem
from
this as above
resulting
means
nothing
shown
at
all beyond
itself.
the System
is improving
It is not an
that
advantage
to the System
to have a lot of members
of a weak
and unprofitable,
that cannot
poorly managed
character
con[ 43 ]

form to the rules anyhow
to pass out
and are foredoomed
because
through
of their own inherent
conditions
no fault of
System.
Reserve
The situation,
in short,
the Federal
is that
by consolidations
the progress
is
and eliminations
of events
institutions
in the
progressively
creating
gigantic
and strong
big cities, and more wholesome
institutions
in the
and sturdy
It is certainly
far better
for the economics
towns.
smaller
that this process
should
of the country
continue,
remedying
banking
an unsound
situation
with natural
and sound
corit, and the conditions
from
than to perpetuate
rectives,
arising
it, by chaining
instituup all these weak links with stronger
tions in large towns, to keep them alive and at the same time
to keep alive the over-banked
situation
and keep alive the
by virtue
excessive
competition,
of which none can be operReserve
The Federal
totals
do not
ated profitably.
statement
itself is declining,
but getting
indicate
that the System
strongindicate
and the statements,
moreover,
at this
er and better,
liquid,
time an extraordinarily
strong,
and healthful
condition.
As long as this continues,
Reserve
Sysand the Federal
tem is serving
fully and acceptall the needs of the country
The preserto be concerned
ably, I don't see anything
over.
vation
of invulnerable
strength,
and the highest
grade manin the Federal
banks,
that
agement
can be secured
reserve
holding
the reserves
that count.
of the nation,
are the things
The preservation
of a banking
and currency
on a firm
system
foundation
is the thing that is indispensable.
and everlasting
Shall we not concentrate
our energies,
with all the force
that is in us, on.the
of those objectives,
attainment
and in
every possible
any experimentation
or tinkerway discourage
Reserve
ing with the Federal
law, or make any changes
in it
until we know beyond peradventure
where it will land us.

holding the views above
1. Sincerely and conscientiously
expressed, I would like to see this convention go on record as
the report of the Economic Policy Commission
of
endorsing
the American Bankers Association,
above referred to, as repthe considered judgment
of as able and representaresenting
tive a committee as could be named within the association.
however, that there are at this time five
2. Recognizing,
bills pending in Congress as heretofore
enumerated,
and that
with the political influences that will be brought to bear it is
will be enacted, if
not unlikely that some sort of legislation
I would recomit becomes necessary to choose an alternative
mend following the form of the Glass Bill, S. 5723, reading
as follows :
"5
6
7
8
9

Sec. 7. After necessary
expenses of a Federal
reserve bank shall have been paid or provided for, the stockholders shall be entitled
to receive an annual dividend of
6 per centum on the paid-in capital stock, which dividend
After the aforesaid
dividend claims
shall be cumulative.

10
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

beginning
have been fully met the net earnings,
with the
for the year ending December
31, 1929, shall be
earnings
distributed
Twenty-five
as follows:
per centum of such net
earnings
shall be paid to the United States as a franchise
tax; 25 per centum of such net earnings
shall be paid into
the surplus fund of such bank; provided, however, that no
such payment
shall be made into such surplus fund in excess
to make the entire surplus fund equal
of an amount sufficient
to the amount of the subscribed
capital stock of such bank,
and that any part of such 25 per centum which is not needed
to bring such surplus fund up to 100 per centum of such
subscribed
capital stock shall be paid to the United States
franchise
50 per centum
tax; and the remaining
as additional
of such net earnings
shall be paid at the end of each calto
endar year to the stockholders
on a pro rata distribution
be made in accordance
with such rules and regulations
as
by the Federal
Reserve Board."
may be prescribed

however, that same be amended to
with the recommendation,
read as follows (lines 12 to 16, inclusive) : "and the remaining 50 per centum of such net earnings shall be credited on
the books of each Federal reserve bank to a `Contingent Fund'
for the benefit of the stockholders,
out of which no dividends
shall be paid to the stockholders
exceeding 217o on the paid-in
capital of the bank in any one calendar year, and then only
subject to the approval of the Federal Reserve Board".
3. I would recommend that the Chairman of this meeting
appoint a special committee of seven to draft a memorializing
to the Banking and Currency Commitresolution respectively
tee of each branch of Congress, with copies to the directors
of the Federal Reserve Bank of Dallas, the Federal Reserve
Board, and the Federal Advisory Council, embodying the recommendations
of this convention.
I.do not believe the Federal
Bank should ever be
Reserve
to pay more than 8 per cent. I do not believe
under pressure
that all the years are going to average
like the years we have
our estimates
we are going to
on. I know that
necessarily
have lean years,
we are going to have years where we won't
be some of that
make any money
money
should
and there
left there.
For inThere will be other things
to be provided.
in
Reserve
in my opinion,
stance,
the Federal
start
should,
now establishing
as other
employees
a fund for superannuated
banks
do. The Federal
great
give all of
employees
reserve
their lives to it, they have no opportunity
to do anything
else
and while they are getting
old we ought to set aside out of
the surplus
for them
in old
to provide
earnings
something
fund
age as other great institutions
do and in this contingent
there
they
would be the surplus
over 2 per cent, provided
for various
make it. I am sure they will want
to provide
things
but in any case limitthat may come along hereafter,
ing the
to 2 per cent will provide
a necessary
extra dividend
[ 45 ]

check and safeguard
upon the reckless expansion of the operations of the reserve banks simply to make profits. Any surplus earnings over 2 per cent could be very well administered
in providing additional free services to the members without
having that effect.
Gentlemen,
I want
to say in conclusion
that
I apologize
on
having
taken
time
this subject,
but it
and regret
so much
in order that you might visualize
was necessary
all that is inin this subject.
I hope that
the
volved
you will feel that
importance
things-not
of these
merely
paying
out dividends-but
the interrelated
in connection
therequestions
to justify
together
with, have been sufficient
me in getting
it in sequence,
all of this information,
and putting
so that you
have everything
that I have, and in your own
can yourselves
digest it and form your opinions
way analyze,
of what should
be done in the matter.
I thank you.
THE CHAIRMAN: We thank
Mr. Harris,
of your subject,
most interesting.

you for the splendid
presentation
and I am sure that it has been

We have now a man who is a splendid banker and who
will express the viewpoint of the smaller banks in their relations to the Federal Reserve Bank. It is my privilege and my
pleasure to present to you Mr. J. M. Caviness, Cashier of the
First National Bank of Paris, Texas, who will address you on
the subject
Relationship
of "General
with the Member
Banks."
Mr. Caviness :
MR. CAVINESS:

Mr. Chairman

and Gentlemen

:

I have been asked
to discuss
the general
of
relationship
the Federal
Reserve
Bank
the member
banks,
with
which
to me to be of vast importance,
subject
appears
and a clarified solution
of which would go far toward
many
eliminating
between
institution
our own great
grievances
now existing
banks at large.
It is not my purpose
and the member
or intention to discuss
the present
Member
Bank Relations
Departfor the past
ment, which has been functioning
so efficiently
handicaps
several
years, and under considerable
at that.
Reserve
I take issue with many of the critics of the Federal
for I believe,
System
considered
as a whole, it is one of the
legislation
books.
greatest
pieces of financial
on our statute
I
I realize,
had
Of course
that
as each of you must,
you or
been called into conference
when this law was being framed
inby Congress
we could and would have written
a flawless
to everyand entirely
strument,
above criticism
satisfactory
(barring,
the ignorant
of course,
or uninone concerned
formed),
but due entirely
to our lack of time we were comof this legislation
pelled to shift the framing
onto other shoulin,
few
imperfections
ders, and, as a consequence,
crept
not a
[46]

which,
time.In

I feel,

could

and

should

be remedied

from

time

to

Reserve
Act, Congress
the enactment
of the Federal
hoped
to accomplish
several
specific
purposes,
and planned
but, in the last analysis,
the motivating
and thought
reason
Please
was to provide
of banking.
a safer and better
system
had any
they
but I do not believe
pardon
my digression,
thought
but rather
banking,
the
of branch,
chain or group
banks
having
in mind the solidifying
unit system,
of existing
and looking
well to future
organizations
with the watchful
To some of us this
and solicitous
parent.
care of a proud
to have been sadly neglected,
phase of the situation
appears
yet it is one that could be easily cured and at no great expense.

I have in mind a plan which I hope I can present clearly
Our
for your earnest
and understandingly
consideration.
board of directors-and
much praise should be given each
and every one of them for their loyal, patriotic and wise direction of the affairs of our great institution-could
select some
capable, practical banker, who is familiar with and cognizant
of the trials and tribulations
of the country banker, clothe him
with such authority
as the position would justify, and place
him second in command to our most capable and efficient
Governor, Mr. Talley. Considering the many duties and heavy
responsibilities
attendant
upon the office of Governor, it would
be sheer folly on our part to presume that he could absent
himself from his desk to the extent that would be required in
the position I am advocating, granting which, this middle-man
would be of inestimable aid and assistance.
The gentleman
selected for this position, having the confidence of the member banks as well as the Federal Reserve,
and being thoroughly
conversant
with the problems of the
small-town banker, would be able to accomplish much good for
both parties in smoothing
out many of the differences now
It is common knowledge that erroneous impressions
existing.
are much more easily corrected by a face-to-face
and heartIt is
to-heart
be possible.
discussion
than would otherwise
my firm belief that many good banks and bankers are not
facilities
the
availing themselves
of the
and
of
privileges
Reserve Bank, due, in a large part, to some prejudice
that
could easily be removed by a personal visit from this official.
And, too, this ambassador
of good will, enjoying our confidence, would be in position to give us country boys, from
time to time, much helpful and useful advice with reference
to improved methods.
Because we are country boys is no
indication that we are content to use only primitive methods
On the other hand, it is our desire and ambition,
of operation.
in so far as it is possible, to walk hand in hand with progress
and to reach out always for the best that is to be had in our
line.

Keeping always in touch with the best loan and investment policies of the country, our counselor's advice would be
welcomed and sought after, which would in the end create
banks by making
better
bankers
stronger
of us, thereby
In this way there
the entire financial system.
strengthening
would be injected into our ranks a feeling of good-fellowship
that would be far reaching in its influence for good, and we
would soon come to regard the Federal as a big brother
rather than to view it with suspicion as has too often been
the case.
I believe that many failures might be averted by helpful
counsel and advice, thus proving the value of the old adage,
"An ounce of prevention
is worth a pound of cure." Regardless of what may have been our previous attitude,
I believe
that our big brother is as anxious to prevent the closing of
banks as are those of us who live in the communities
affected.
The seriousness of a situation such as this, in the small town,
and the urgent need of assistance in such cases, cannot always
be imparted
In
to the Reserve officials by correspondence.
order to realize the full extent of the trouble in these inthat one should be in close personal
stances, it is necessary
touch with affairs, ready at a moment's notice to render such
Those who
aid as would be necessary to forestall a calamity.
have had experience
in situations
of this nature will admit
that a person on the ground, merely standing by, can do more
to restore confidence than any amount of correspondence.
Chaotic conditions
from bank failures
resulting
are not
confined exclusively to the communities
where failures occur,
but are widespread in their influence, even affecting the entire
I was very happy to note recently that
system of banking.
the Economic Commission of the American Bankers' Association, in discussing the utilization
of earnings of the Federal
Reserve Bank, considered that these earnings might be used
in strengthening
most advantageously
weak spots wherever
and whenever they become manifest.
Pardon
this would
me for getting
personal,
as I understand
but there
in our neck of the
not apply generally,
are times
it becomes
to ask for the loan of a
woods when
necessary
few hundred
decline
thousand
to offset the normal
sheckels
demands
of deposits
and the abnormal
and needs of our cusis to
While
I realize
tomers.
the best way to lose a friend
be
borrow
from him something
it
you can't repay,
yet
would
in authority
to have someone
most comforting
pay us an occathoroughly,
give
sional visit and, after going over the ground
in times of stress
and
us some definite
assurance
of support
otherwise.As
Reserve
stated in the beginning
of this talk, the Federal
I
but
System
has many great
its
to
credit,
accomplishments
due,
its maximum
am sure it has not yet reached
efficiency,
[48]

in a large measure, to misunderstandings
or fancied injustices
on our part. I feel that we stockholders
should take a more
personal interest in our own great institution
and render it the
cooperation
we expect, but do not often get, from our own
While I have never discussed this with Goverstockholders.
nor Talley, or any other official, I am of the opinion they
would welcome more frequent visits from us and would appreGod knows, none
ciate any friendly and constructive
criticism.
of us crave any other kind. With this spirit of cooperation
prevailing
among the stockholders
we would soon come to
view with pride the accomplishments
of our bank and both
the Federal and member banks would reap a greater reward
institutions.
Sureand become better builders of worth-while
ly this is the sincere hope and desire of each one present.
THE CHAIRMAN: That is a country
bank member's
viewpoint
on the question
and it is certainly
worthy
of consideration
him for his clear presentation
and we thank
of the subject.
We now come to that part of our program
which permits
has anything
If any member
he
of open discussion.
which
the chair would be pleased to hear from him.
cares to present,
It is open for you now, gentlemen.
MR. OXSHEER SMITH: (of Cameron)
While we are speaking
between
Reserve
Bank and
Of closer cooperation
our Federal
its members,
know that
I wonder
if all present
there
is a
Reserve
Bank, extended
invitation
from the Federal
standing
by Governor
Talley to its members,
to visit the Federal
and
to become familiar
spend as many days as is necessary
with
the methods
balfiguring
money,
reserve
used in handling
handling
ances, wire transfers,
and in fact all of
of discounts
the details
Reserve
of Federal
accounting.

Our bank has accepted this invitation in the past and our
cashier spent a week with the Federal Reserve Bank. By reathe operations of
son of this visit we feel that we understand
the Federal Reserve Bank better, have improved the method
of handling our own business, and have derived a great deal
of benefit. We expect to send two of our men up this summer. I urge each of you to avail yourself of this opportunity
and send an active man to learn something
of the modern
2nechanics of running a bank. Isn't this invitation
still open,
Governor Talley?

MR.TALLEY:

Yes,

sir.

THE C11A'RMAT" Has any other member
anything
which he
wishes
for
Remember,
this is your opportunity
to present?
opeN1 dicussion
liberty
to air out your views.
are
at
you
and
MR. TAYLOR: T move that we endorse
the recommendations
ma''o by Mr. Harris
in the latter
part of his paper as to the
earnings
Reserve
Bank.
Federal
the
of
[49]

The motion

was seconded.

THE CHAIRMAN: In order
you, I am going to ask Mr.
recommendation.MR.

to have the matter
clearly
Harris
to present
that part

before
of his

HARDING: I understand
he made a recommendation
and
then an alternate
and you can make it clear whether you are
going to vote on his recommendation
or the alternate.
MR. HARRIS:
Do you desire me to read that, Mr. Chairman?
CHAIRMAN:

THE

If

you

Will.

MR. HARRIS: You have a carbon
If you
copy of it there.
I would like to say to
want it it is just the last two pages.
the moverCHAIRMAN:

THE

tion.MR.

Mr.

Harris will now read the recommenda-

HARRIS: I would like to say to the mover that my recbe referred
to
is that these recommendations
ommendation
by the chair, who
of seven, appointed
a special committee
would make a report on them and I make that explanation
now. If you would like for me to read it over againTHE CHAIRMAN: There
seems to be some misunderstanding
that you read it.
and in order to have it clear, I suggest

MR. HARRIS: I will be glad to.
holding the views above
"Sincerely
and conscientiously
expressed, I would like to see this convention go on record as
of
endorsing the report of the Economic Policy Commission
the American Bankers' Association above referred to, as repreof as able and representasenting the considered judgment
tive a committee as could be named within the Association."
That is my recommendation,
to say:"Recognizing,

and

in paragraph

2, I go on

however, that there are at this time five
bills pending in Congress as heretofore
enumerated,
and that
with the political influences that will be brought to bear, it
is not unlikely that some sort of legislation will be enacted,
if it becomes necessary to choose an alternative
I would recommend following the form of the Glass Bill, S. 5723, reading
as follows:
"5
6
7
8
9
10

Sec. 7.

After all necessary

expenses of a Federal

reserve bank shall have been paid or provided for, the stockholders shall be entitled
to receive an annual dividend of
6 per centum on the paid-in capital stock, which dividend
After the aforesaid
dividend claims
shall be cumulative.
have been fully met the net earnings,
beginning
with the

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

for the year ending December
31, 1929, shall be
earnings
distributed
as follows: Twenty-five
per centum of such net
earnings
shall be paid to the United States as a franchise
tax; 25 per centum of such net earnings
shall be paid into
the surplus fund of such banks; provided, however, that no
such payment
shall be made into such surplus fund in excess
to make the entire surplus fund equal
of an amount sufficient
to the amount of the subscribed
capital stock of such bank,
and that any part of such 25 per centum which is not needed
to bring such surplus fund up to 100 per centum of such
subscribed
capital stock shall be paid to the United States
franchise
tax; and the remaining
50 per centum
as additional
of such net earnings
shall be paid at the end of each calto
endar year to the stockholders
on a pro rata distribution
be made in accordance
with such rules and regulations
as
by the Federal
Reserve Board."
may be prescribed

however, that same be amended to
with the recommendation,
read as follows (lines 12 to 16, inclusive) :
"and the remaining
50 per centum of such net earnings shall
be credited on the books of each Federal reserve bank to a
`Contingent
Fund' for the benefit of the stockholders,
out of
which no dividends shall be paid to the stockholders
exceeding 2 per cent on the paid-in capital of the bank in any one
calendar year, and then only subject to the approval of the
Federal Reserve Board."
If it should develop in Congress that there is any likelihood or probability
of the adoption of the recommendations
of the Economic Policy Committee I would certainly favor it.
If we are going to have some legislation
anyhow, I would
favor the Glass Bill with the amendment
I have just read.
MR. TAYLOR: Mr. Chairman,
I move that that be carried
out. I think it should be referred to the Advisory Committee
and let them appoint a committee to study the question and
then report to your incoming Advisory Committee for their
recommendation.THE
CHAIRMAN: Then you withdraw
MR. TAYLOR: Yes, sir.
THE CHAIRMAN: I offer
(The

motion

was

your other

motion?

it as a substitute.

seconded.)

if this
MR. FROST: Might I ask in offering that resolution
question will be acted on by this meeting or will it go over
until another year? If that committee has to study this and
report back, it certainly
ought to have time to do it and it
You won't have another
won't have that time this morning.
meeting for a year.
MR. TAYLOR: I would think that should be referred
to the

new Advisory Committee and they have got to appoint a committee of seven who will study the matter and refer it back
to this committee.
That was my motion.
MR. FROST: Which committee?
The Advisory
Committee
in that committee
to bind us by their
and with authority
resolution
on this matter,
without our knowing what they
were doing?
A STOCKHOLDER: I think it should be a committee
with sufficient ability
that we would be willing to give them plenary
power and accept their judgment.
MR. HARRIS: I would like to clarify
I meant
in this
what
because this is an action upon my recommendation
and I want
no misconception
of the recommendation
and what it meant.
We are not going to adjourn
right away and I thought
when
it that this would be submitted
to a committee
writing
who
back to this meeting.
I had in mind that that
would report
would be done when I drew it. I had the idea that it would be
to a committee
referred
which was to be named and that they
to this
would withdraw
make a report
and then afterward
meeting.MR.

FROST: I think that's what they ought to do. We ought
to either act on it ourselves as a convention assembled or let
it alone. As I understand
the resolution or the recommendation of Mr. Harris, we approve the findings of the committee-the
Economic Policy Committee of the American Bankthe net result of that would be that we
ers' Association-and
recommend that no change be made and that member banks
in any earnings of the System other than
do not participate
in. If we are going to vote on that
that already participated
I think we ought to have a free discussion of it because I don't
believe that's right. I think we ought to have some sort of participation,
more than we have now. As to what it will be, it
may be the Glass Bill will be satisfactory
and it may not, but
we ought to decide that before we just approve something
from the American
that some committee
Bankers'
Association has found.
if we
MR. WOODSON: I wonder
which means that if we are going
low his report-

his recommendation,
adopt
to pass it that we shall fol-

it be that we don't parMR. FROST: Our resolution-won't
ticipate any further in the earnings other than we do at present, that if they are going to pass a bill it will be all right
with us?
MR. WOODSON:

That's

his

recommendation.

MR. HARR'S: I take it that Congress,
which has had no hearthe last few days
ings whatever
on any of these bills-within
bill amending
Glass has introduced
the FedSenator
another
[52] .

eral Reserve Act in numerous important
particulars-will
not
take any action at all on any of this proposed legislation at
this session. In that case, everything
in connection with any
to the Federal Reserve Act will probably
and all amendments
be taken up all at one time at the next session of Congress.
When this particular
matter comes to the point of a hearing,
we want to be heard. If, as now seems probable, some amendment will result reducing the franchise tax paid to the government, and giving the Federal reserve banks the remainder of
the excess earnings,
I think this is the time to determine
which of these five bills we would prefer, either as presented
In that case, I would prefer the Glass Bill
or amended.
in my paper. In any case, I am firm
amended as suggested
in the belief that no laws should be passed permitting
reckless
distribution
of earnings without checks or safeguards.
MR. FROST: Wouldn't
it be better for us to make one recommendation
and stand on that, whether
we want to participate
or don't want to participate?
Ma. HARRIS: That's

a question

to decide.

MR. TAYLOR: I understand
you are in favor
of participating. I am willing for them to do that now, absolutely,
but I
Reserve
in any way.
the Federal
am not in favor of crippling
If it would
Reserve
in any way, I am
the Federal
cripple
I underit. I am in favor, however,
against
of participation.
in the
to recommend
that
stood Mr. Harris
we participate
earnings.MR.

is that we do
FROST: I understood his recommendation
not participate.
MR. HARRIS: Not at all. I say my personal view coincides
with that of the Economic Policy Committee, but I apprehend
that some bill is going to be passed, and I would like for this
convention to go on record today with its views as to what we
favor. Regardless of my personal opinion, which I feel obliged
to express, as I say, I am confident that a bill is going to be
passed, and of those bills, I suggest that we support the Glass
Bill, under which the Government participation
will range from
257o to 507o, the remaining
50117oafter surplus is completed
Now it is all right, and I am willing
going to the stockholders.
to agree to that proportionate
division, but my recommendation is that instead of distributing
all the excess earnings to
fund on the
the stockholders,
that we put it in a contingent
books of the Federal Reserve Bank for the benefit of the stockholders out of which the bank would distribute
no more than
2% dividend in any calendar year, and the remainder
of it
held in the fund available for enlarged services to the stockholders or any other purposes which experience over a period
of years would determine,
such as for instance the provision
for superannuated
employees previously referred to.
[53]

MR. FROST: It may be that I will agree with you as to the
Glass Bill being an ideal bill with the addition of the provision about the contingent fund. However, I don't see the point
in this convention
going on record to say that we do not
believe in participation,
but if we are to have participation
that we would choose this bill. It weakens the whole proposition. Either let's endorse the Glass Bill or let the Glass Bill
alone.MR.
HARRIS: That's
to
very well, that is for this convention
determine.
When I came here I had no idea what they would
I would favor
that 5017c in the contingent
endorse.
putting
fund and only a distribution
of 2% per annum
you
.
.
.
these are not resolutions
to you with a
understand
presented
These are simply recommendaview of seeking their adoption.
tions of my own personal
that
point of view and I expected
they would be referred
to a committee
which would come back
they wanted
to and you would have
with any recommendation
to vote upon it.
an opportunity

MR. FROST: I understand
you clearly, I think, but when a
is offered for us to act on endorsing the
suitable resolution
advice of this committee, we are going on record and I don't
think you ask that.
MR. HARRIS: Mr. Taylor made a motion putting this question before you and all of this discussion is, of course, germane to this motion, anybody can second or amend it and
express any view. The object is to get it before you.
MR. TAYLOR: I desire to withdraw
my motion. I do not
want to be understood
as being in favor of going on record
of my second I will withdraw
my
and with the permission
motion.MR.
GEORGE MILLER:
It is my understanding,
and I believe
it is the understanding
that
present,
of most of the delegates
the
Colonel Walsh
has invited
us to be his guests
or rather
if
luncheon
Federal
Reserve
Bank
the
and
we
at
guests
of
don't hurry
we won't get anything
up and settle this question,
for dinner.
to eat. We are not invited
to be their guests

be
There
Might
I
this:
to
THE CHAIRMAN
seems
say
some
:
be
in
it
I
this way. I
think
up
cleared
can
and
misunderstanding
that the chair
Mr. Harris has made certain recommendations
of seven,
of seven, a special committee
appoint a committee
to the Bankto draft a memorializing
resolution respectively
ing and Currency Committee of each branch of Congress, with
copies to the directors of the Federal Reserve Bank of DalAdvisory
Board and the Federal
Reserve
las, the Federal
Council, embodying the recommendations
of this convention.
Now, if you are going to accept the recommendations
made by
Mr. Harris, then the chair is open for a motion to that effect.

MR. HARRIS: I will make this statement,
as I have previously
this out before I came here, I thought
stated,
when I thought
it might be practical
to a committee
to refer this question
to
It
come back and make a report
upon which we would vote.
that the committee
was not my intention
should make up our
minds for us, but they would carry
out the recommendation
the bodies mentioned
as to memorializing
after we had decided
what we would recommend.
THE CHAIRMAN:
of this convention.

Yes,

sir,

embodying

the

recommendations

MR. HARDING: I want to offer a substitute
and in explanation will say that it is a one-hundred-to-one
chance that there
will be no action taken at this session of Congress. Therefore
I move that the whole matter of this subject which is covbe referred
to the
ered by this paper and this discussion
incoming Advisory Committee and that they shall be empowered to appoint a fact-finding
committee of seven to go into
the whole question with power to conduct a questionnaire
and
then at the proper time convey to the committees
of both
houses of Congress the thoughts
or this
of this convention
membership
as reflected in its Advisory Committee.
MR. TAYLOR: I shall certainly second that motion because
that is what I was trying to say.
THE

CHAIRMAN:

Is

there

any

discussion

of

this

matter.

MR. FROST: I don't like to take up so much time, but I think
that is taking the question out of the hands of this body beto memorialize Concause that committee will have authority
gress. If that's what we want to do, why all right, but you
to that
understand
we are voting to delegate this authority
committee to put us on record that we are in favor of a bill
If
or against a bill, for participation
participation.
or against
we want to vote for that, why it suits me all right.
MR. HARDING: I prefaced
that motion
with the statement
that they should conduct
of course with argua questionnaire,
because
there will not be
ments pro and con on the question,
done until fall and the proposition
anything
would have to be
acted upon before the annual
meeting
next June.
MR. PATRICK: I am opposed to delegating
all of this authority to
that
this
is
I
it
kind
think
something
any
of committee.
Association
I
Personally,
to
might
say
ought
act on entirely.
to the
while I am on my feet, I am opposed to any distribution
banks
have
member
banks
reserve
until all of the Federal
built their
That
capital.
up to 100% of the subscribed
surplus
is in the interest
of the country.
and in the interest
of safety
It is reasonable
is going to grow.
to suppose that this country
We
for
the time
depression
are going through
a period
of
being, but business
will come back and the time will come pos-

sibly when the system
will need all the paid in capital
and
in the next few years, but let me call your
statutory
surplus
to the fact that the System,
lacks some
attention
as a System,
sixty or seventy
million dollars yet of having
a surplus
equal
to the subscribed
In other
five of the
capital
words,
stock.
banks,
five of the large ones, have yet to acquire
a statutory
I am therefore
to any distribution
by any
surplus.
opposed
bank other than 6% provided
for until that surplus
has been
I think the earnings
accumulated;
and I will go further,
should
be pooled, if you please, and the excess earnings
added to the
is my
surplus
of those banks
until they are built up. That
thought
to the delegation
about it. I am unalterably
opposed
to act on this question
of any plenary
power to any committee
by
which affects
us all. I think
such action
should be taken
this Association
as a whole.
THE CHAIRMAN: There is a motion before
Is there any
men. What is your pleasure?
of the motion ?

the house, gentlefurther
discussion

MR. WOODSON: Has the Resolutions
Committee
to report on this subject?
It may be that somebody
duced a resolution
through
that committee.

anything
has intro-

MR. YANTIS: Mr. Chairman,
the committee
did not have
time to think through
any specific plan that might be probut the resolution
posed for the distribution
of earnings,
prepared on that subject is as follows:
"Resolved, That the earnings of the Federal Reserve Bank
to the member
of Dallas should be more equitably distributed
banks, but caution exercised in the perfection of any plan for
this purpose so as not to put the Federal reserve banks in
competition
with the member banks."
We simply feel like going on record
at this time that
distribution
in the future.
are in favor of a more equitable

we

THE CHAIRMAN: Mr.
proposing
any definite

not

Yantis,
plan?

then

MR. YANTIS: No plan whatsoever
MR. HARRIS:
get the consent

your

committee

is

at this time.

Might

I say a final word?
I wonder
if I could
of all of you to offer a substitute
motion.
THE CHAIRMAN: There
is only one motion.

MR. HARRIS: We seem to be doing a lot of talking and not
getting anywhere with it, and are considerably
past the hour
Inasmuch as it is clearly apparent that the
for adjournment.
majority
of the members want a reduction of the franchise
tax paid to the Government,
and a participation
of the membership, and as I anticipate,
the two Glass Bills now pending
than
in Congress will come in for more careful consideration

any of the others, if I can get unanimous
consent, I would
like to offer a motion to test the sentiment
of this house pro
or con relative to the second alternative
which I suggested in
my address, favoring the Glass Bill as read providing for a
50% distribution
to the stockholders,
with the amendment
which has just been read that the 50% is not all to be disbursed, but carried on the books of each Federal reserve bank
fund belonging to the stockholders,
as a contingent
of which
not more than 2% be disbursed in dividends to the stockholdI offer that motion.
ers in any one year.
MR. FROST: You say not more than 2% in one year. Do
you mean 2% on our capital stock?
MR. HARRIS: Yes sir. The remainder
of this 50% to be carried on the books of the bank for the benefit of the stockholdhereafter.
ers, the distribution
of which is to be determined

MR. FROST:That

dividend of 8%.
would be a maximum
MR. HARRIS:I offer that motion and if there be a second, I
before the house.
should like to get that alternative

(The motion was seconded).
THE

CHAIRMAN:

In

order

that

we

may

be

clear

on

this,

are

you offering that as an amendment
to Mr. Harding's
motion?
MR. HARDING:I accept the amendment
to the motion.
THE CHAIRMAN: If there
discussion,
is no further
we will
to a vote on the amendment.
proceed
MR. HARDING: The substitute
motion
offered by Mr. Harris.
THE CHAIRMAN: All those in favor of the substitute
motion
by Mr. Harris
it known
by saying
as presented
will make
"aye". The ayes have it and the
motion is carried.

THE CHAIRMAN:Is there any discussion? If not, we will proceed to the next order of business. We will now have the reIs the Resolution
Committee ready
ports of the committees.
to report? Let me ascertain
this, a question relative to the
heretoIn passing on the resolutions
method of procedure.
fore we have had the chairman
read the entire resolutions
offered. Shall we adopt them as a whole or shall we vote on
them as each resolution is read? What's your pleasure?
(It was moved and seconded that the resolutions be passed
upon and voted upon one at a time, and the following resolutions, read by the Chairman
Committee,
of the Resolutions
were adopted by the convention without discussion) :

No. 1
WHEREAS,
welfare
of the

It is considered
to be very necessary
Federal
Reserve
Bank and its membership
[ 57 ]

to the
that

in the selection of proper directhe interest of the membership
tors be maintained
at all times; and
WHEREAS, A campaign of pledging or soliciting promises
in
in
favor
the
advance
any
candidate
of
members
of
votes
of
the
in
itself
the
control
of
an
eventual
result
could
election
of
Board by some one group, and further
could very naturally
discourage the nomination
of desirable men for the position
by creating a situation in which the election of any candidate
been
had
impossible,
be
obtained a year
pledges
unless
would
or possibly more in advance;
That it is the opinion
BE IT RESOLVED,
THEREFORE
do
hereby
the
to
they
the
recommend
and
stockholders,
of
in
favor
that
of
of
promises
votes
pledges
or
no
membership,
Bank
Federal
Reserve
in
directorship
the
for
a
any candidate
of Dallas be sought for, or given, but that each voting member shall be prepared to vote in favor of the candidate who,
to such member, may at the time of the election seem to be
most desirable and the one who can best serve the interests
of the district.
No. 2
RESOLVED, That the shareholders
of the Federal Reserve
in Dallas,
Bank of Dallas, at the annual meeting assembled
Texas, on June 19, 1930, reaffirm their former resolution that
a director not serve for more than two terms of three years
each.
No. 3
limit on loans
That the present fifteen-day
RESOLVED,
to member banks be extended to a period not to exceed ninety
days.
No. 4
RESOLVED,
That the earnings
of the Federal Reserve
Bank of Dallas should be more equitably
distributed
to the
member banks, but caution exercised in the perfection of any
plan for this purpose so as not to put the Federal reserve
banks in competition with the member banks.

No. 5
RESOLVED,
That a vote of thanks be extended to the
officers and directors of the Federal Reserve Bank of Dallas
for the assistance
rendered the Advisory Committee
of the
in preparation
Stockholders'
Association
for this meeting,
and for the many courtesies
which have been extended to
the representatives
present.
MR. SFIAw: I would like to make a motion to this assembly
endorsing the request by Mr. Caviness of Paris to the effect
that the directors of the Federal Reserve Bank consider the

matter of putting
it would be a great

I think
on such an official as suggested.
thing for the future welfare of our system.

MR. YANTIS: Mr. Chairman,
the
a resolution
embodying
to the Resolutions
sentiment
was presented
of this motion
Committee.
The members
of the committee
were not agreed
if the matter
on the matter
and I was instructed,
was preit.
this sentiment
sented from the floor, to express
regarding
It was felt by some members
Committee
of the Resolutions
that if the idea was carried
out, it would soon develop to the
by an official
point where we would have other examinations,
Reserve
Bank,
in addition
to those we now
of the Federal
have through
the office of the Comptroller
of the Currency.
We are also informed
that while the personnel
of the Member
Bank Relations
Department
desired
might
not be everything
it is the policy of the Federal
Reserve
Bank of Dallas to send
to any member
bank requesting
it,
one of its senior officers
to discuss
that
or consider
any situation
any question
may
bank will write or call the
arise. If an officer of any member
Federal
Reserve
Bank and make the request,
a senior officer
bank, and go
will be very glad to go and call on that member
they may desire. We thereover with its officers any matters
fore felt that it would be better
to leave it for the initiative
to come from the member
bank, and to have it ask for such
than have it so that an officer of the Fedassistance,
rather
bank and make
Bank can come into the member
eral Reserve
he desires.
We don't believe such authority
any examination
should be given, but that the request
should come from the
itself.
We don't
be any
bank
think
there
member
should
tampering
along this line, and we feel that you are treading
on dangerous
ground,
and therefore
out
we left the resolution
of our report.
MR. CAVINESS: It is merely to refer this matter
to the board
for their consideration.
There is absolutely
Of directors
nothing binding
It's a whole lot like Mark Twain
on those present.
little
said about
the weather,
"A whole lot said, but damn
done".
for their
It is my suggestion
to the board of directors
earnest
I couldn't
consideration.
see any harm in it.

MR. SHAW: My motion was so made that we request them
to consider it.
MR. TAYLOR: That it be referred to the board of directors.
discussion
THE CHAIRMAN: If there is no further
of the
'natter,
we will proceed to vote on the motion offered by
Mr. Shaw.
Let all those in favor of the motion signify it by saying
"aye". The ayes have it and the motion is carried.
MR. MILLER: I move we adjourn for lunch.
THE CHAIRMAN:

We

have

another
[59]

committee's

report.

Is the

ready to report?
on Nominations
MR. LAWDER: Mr. Chairman
The commitand Gentlemen:
tee respectfully
submits the following names for members of
the Advisory Committee :
E. A. Palmer, of Yoakum.
P. B. Doty, of Lubbock.
W. S. Posey, of Lubbock.
John Gregg, of Brownsville.
J. B. Fortson, of Corsicana.
G. K. Richardson,
of Carlsbad, N. M.
Committee

MR. TAYLOR:I move the gentlemen
read out be elected.
THE CHAIRMAN: Is there

ceed

any

whose names

discussion?

If not,

have been
we will pro-

to vote.

A STOCKHOLDER:

I second the motion.
THE CHAIRMAN: All in favor of the motion will signify it by
duly
have
it.
The
The
"aye".
gentlemen
are
ayes
saying
following
just
the
together
The
names
read
with
names
elected.
will compose your Advisory Committee for the ensuing year:
Oxsheer Smith, Cameron.
J. P. Williams, Mineral Wells.
Alf Morris, Winnsboro.
Ben Johnson, Shreveport.
W. C. Slaughter, Durant, Okla.
E. W. Graves, Douglas, Ariz.
Adjournment.

THE

OF
DIRECTORS
AND OFFICERS
RESERVE
BANK OF DALLAS
FEDERAL
FOR YEAR 1930
Directors
Class B

Class A

J. H. FROST, San Antonio, Texas
J. P. WILLIAMS, Mineral Wells, Texas
W. H. PATRICK,

A. S. CLEVELAND, Houston,
J. R. MILAM, Waco, Texas
J.

Clarendon, Texas
C. C.
S. B.
E. R.
Member

J.
Class C

CULBERTSON,

Texas

Paris, Texas

WALSH, Dallas, Texas
PERKINS, Dallas, Texas
BROWN, Dallas, Texas
Federal
Advisory
B. A. MCKINNEY
Dallas, Texas

Council

OFFICERS
C. C. WALSH, Chairman
and Federal
serve Agent
S. B. PERKINS, Deputy Chairman
CHAS. C. HALL, Assistant
Federal

Re.

Re.

LYNN P. TALLEY, Governor
R. R. GILBERT, Deputy Governor
R. B. COLEMAN, Deputy Governor
FRED HARRIS, Cashier

serve Agent and Secretary
W. J. EVANS,Assistant Federal Reserve

W. 0. FORD,Assistant Deputy Governor
E. B. AUSTIN,Assistant Cashier

Agent
W. P. CLARKE, General

L. G. PONDROM, Assistant Cashier
R. 0. WEBB, Assistant Cashier

C. C. TRUE, Assistant

Auditor

AuditorCHAS.

C. HUFF, General Counsel
LOCKE, LOCKE, STROUD & RANDOLPH, Counsel

EL PASO BRANCH
Directors
Carlsbad, N. M.
A. J. CRAWFORD,
A. P. COLES, El Paso, Texas
GEORGE D. FLORY, El Paso, Texas
J. L. HERMANN, El Paso, Texas

E. M. HURD, EI Paso, Texas
A. F. JONES, Portales, N. M.
C. M. NEWMAN, El Paso, Texas
Officers
ALLEN SAYLES,

J. L. HERMANN,

Managing Director

Cashier
BRANCH
HOUSTON
Directors
E. A. PEDEN,Houston, Texas

GUY M. BRYAN, Houston, Texas
FRED W. CATTERALL, Galveston, Texas
R. M. FARRAR, Houston, Texas

W. D. GENTRY, Houston,
N. E. MEADOR, Houston,
J. C. WILSON, Beaumont,

Texas
Texas
Texas

Officers

W. D. GENTRY,
Managing Director

H. R. DEMoss,
Assistant Cashier

C. B. MENDEL,
Cashier
SAN

ANTONIO

BRANCH

Directors
J. M. BENNETT, San Antonio,

FRANKG. CROW,McAllen, Texas
M. CRUMP,San Antonio, Texas
FRANZC. GROOS,San Antonio, Texas
M. CRUMP,
Managing

Director

REAGANHOUSTON,San Antonio, Texas
R. T. HUNNICUTT,Del Rio, Texas
W. P. NAPIER,San Antonio, Texas
Officers

W. E. EAGLE,
Cashier
[61]

I.

Texas

T. E. PARKS,
Assistant Cashier

DIRECTORS-FEDERAL

W. H. PATRICK,

E. R. BROWN,
Dallas,

Clarendon,

Texas

Texas

S. B. PERKINS,

J. H. FROST,
San Antonio,

BANK OF DALLAS

RESERVE

Dallas,

Texas

Texas

J. P. WILLIAMS,

J. R. MILAM

Mineral

Waco, Texas

PASO

DIRECTORS-EL

Wells,

BRANCH
F. JONES,

ARTHUR

Portales,

DIRECTORS-HOUSTON

Texas

N. M.

BRANCH
J. C. WILSON,

Beaumont,

DIRECTORS-SAN

ANTONIO

Texas

BRANCH

R. T. HUNNICUTT,

Del Rio, Texas
WALTER P. NAPIER, San Antonio, Texas

Albany, Texas
First National
Annona, Texas
First National
Arcadia, Louisiana
First National
Austin, Texas
Austin National
Bailey, Texas
First National

Joe Matthews

President

A. M. Graves

Director

W. D. Truluck

Cashier

W. H. Folts

President

G. E. Carpenter

Cashier

Bartlett,
Texas
First National

C. C. Bailey

President

Big Spring, Texas
State National
West Texas National

T. S. Currie
B. Reagan

Vice President
President

T. M. George, Jr.
Jr.
J. 0. McSpadden,

Asst. Cashier
Asst. Cashier

Jno. T. Yantis

President

L. C. McCommas
L. C. McCommas,

President

Blooming Grove, Texas
Citizens National
Brownwood,
Texas
First National
Bynum, Texas
First National
Cameron, Texas
Citizens National

Oxsheer

Canton, Texas
First National

W. L. Steed

Clarendon, Texas
First National

W. H. Patrick

Coleman, Texas
Coleman National
First National

C. W. Woodruff
E. C. Edens

Cooper, Texas
First National
Corsicana, Texas
Corsicana National

Daingerfield,
Texas
Citizens National
Dallas. Texas
First National
Dallas National
Mercantile
Bk. & Tr. Co.
of Texas

National
Republic

Bank of Commerce
Nat'l Bk. & Tr. Co.

Smith

Jr.
PresidentVice
President

PresidentCashierCashierDirectorC

T. B. Good
W. I. Bartley
PresidentChr.
of Board
Vice President
PresidentAsst.
Cashier

A. G. Elliott
J. B. Fortson
John T. Fortson
Geo. E. Jester
Alton N. Justiss
W. T. Cannon,

Jr.

President

Nathan Adams
J. D. Gillespie

President
President

R. L. Thornton
J. W. Hoopes
Frank Pondrom
Bailey Malone
George Miller
F. F. Florence
Stanley Longmoor

President
Vice President
Vice President
Vice President
Cashier
President
Vice President

[63]

Dawson, Texas
First National

C. M. Newton
Conrad Newton,

President
Jr.

Del Rio, Texas
First National

R. T. Hunnicutt

Denison, Texas
Citizens National

Ford

Seale

Vice President

Durant,
First

Dial Currin

V'ce President

Eagle Pass, Texas
First National

Geo. C. Hollis

PresidentPresidentP

Ennis, Texas
Citizens National

Fred A. Newton

Ferris, Texas
F. & M. State

D. H. Moyers

Okla.
National

Bank

Forney, Texas
Forney State

Z"ce President

-sident

J. C. Reagin
0. W. Reagin

P'"^sidentV.
P. & Cashier

H. C. Burke, Jr.
R. E. Harding
W. M. Massie
W. L. Pier

As~,t. Vic Pres.
PresidentVicPresident
Pý"^sident

R. F. Shaw
John C. Beck
R. F. Henderson

V'
Vi-

Garland, Texas
State National

A. R. Davis

Pr^sident

Georgetown,
Texas
City National Bank

0. W. Sherrill

P ^,ident

Glen Rose, Texas
First National

C. A. Bridges

V. P. & CasHrtr

J. C. Alsup
J. E. Persons

Pres:d mt
Vice Presid-t

National

D. E. Box

PresidentCashier

Exchange

J. A. Norton

Fort Worth, Texas
Continental
National
Fort Worth National
Stockyards

National

Frost, Texas
Citizens State
First National

Grand Saline, Texas
State National
Grapevine,
Tarrant

Texas
County

Greenville,
Texas
Greenville Nat'l
Gorman, Texas
First National

0. P. Newberry

Handley, Texas
First National

Ben T. Merritt

Hawkins, Texas
First National

E. M. Slaughter

Hillsboro, Texas
Citizens National

T. G. Hawkins
[64]

Presid?nt
President

PresidentCashierCashierC

of Board

Houston, Texas
First National
Second National
South Texas Com'l National

Sam R. Lawder
B. D. Harris
Earle P. Stallings

Vice President
Sr. Vice Pres.
Cashier

Hugo, Oklahoma
National Bank of Commerce
Idabel, Oklahoma
Idabel National

Bernie Herstein
F. R. Abbott

Italy, Texas
Farmers
National
First National

Whit George
Earl Eagan

PresidentVice
President

Pat E. Hooks
Jno. M. Coffin
H. E. Chiles

President
CashierPresident

W. K. Crawley
0. B. Norman

V. P. & Cashier
V. P. & Cashier

B. F. Lyon
W. Y. Perry

Cr. of Board
Cashier

Homer Collins
R. A. Nesbitt

CashierAsst.
Cashier

Lewisville, Texas
First National

M. H. Milliken

Cashier

Lott, Texas
Lott National

H. W. Stuart

V. P. & Cashier

Lubbock, Texas
Lubbock National

C. E. Maegden

President

T. M. Wilson

President

Itasca, Texas
First National
Itasca

National

Lamesa, Texas
First National
Lamesa National
Lancaster,
Texas
First National
Leonard, Texas
Leonard National

Mart, Texas
F. & M. National
Marlin, Texas
Citizens National
McGregor, Texas
First National
First State

Michael

S. Hunt

J. Edwin Brown
E. C. Kunz

Director
Vice President
President

T. C. Vahrenkamp

V. P. & Cashier

A. H. Eubanks
Henry W. Warden
Thos. Johnson

V. P. & Cashier
Vice President
V. P. & Cashier

J. E. Gibson
H. S. Wysong

President
Cashier

Mercedes, Texas
First National

W. W. Collier

Director

Mesquite,
Texas
First National

N. E. Shands

Cashier

Mexia, Texas
City National

David Murphy

Vice President

McKeinney, Texas
Central State
Collin County National
Melissa, Texas
Melissa National

[ 65

Midland, Texas
Midland National

R. M. Barron

Milford, Texas
First National

J. G. Cheatham

Mineral
First

Wells, Texas
National

Mt. Vernon, Texas
M. & P. National
Naples, Texas
Morris County

J. P. Williams

President
PresidentCashier

W. J. Moore
National

A. B. Gallaway
A. B. Childs

Nevada, Texas
First National

Geo. H. Jones

New York, N. Y.
Chase National

L. Jacoby

Nocona, Texas
Peoples National

Joe L. Janeway

Olney, Texas
First National

Wright

Paris, Texas
First National

J. M. Caviness

Pilot Point, Texas
Pilot Point National

McClatchy

R. A. Davis
D. S. Coleman

Portales,
N. M.
First National

Arthur
Bk. & Tr. Co.

PresidentCashierCashie

Cashier

CashierDirectorCashierP

F. W. Hayden
J. Earl Selz

Plano, Texas
Farmers
National
Plano National

Rails, Texas
Security State

PresidentVice

F. Jones

J. Edd McLaughlin

Vice President

Rockwall, Texas
First National

Vice President

Royse City, Texas
First State

PresidentPresidentPresid

San Antonio, Texas
Alamo National
Frost National

Walter P. Napier
J. H. Frost

San Angelo, Texas
First National
Seymour, Texas
National
Farmers
First State
Sherman, Texas
M. & P. National

R. E. Baskin
F. H. Bunkley
C. B. Dorchester
L. S. Omohondro

Shreveport,
La.
National
Commercial
Smithville,
Texas
First National

President
PresidentCashierVice

President'
E. G. Eagleston
[66]

Vice President

Stamford,
Texas
First National

R. Colbert

President

Jno. W. Frey
Earl L. Frey
Ben B. McCollum

President
Cashier
Vice President

R. C. Cole

Cashier

W. W. Jones
R. M. Womack

Vice President
Vice President

Teague, Texas
Teague National

J. E. Woods

President

Temple, Texas
City National
First National

W. S. Rowland
Col. P. L. Downs

President
Vice President

Garland Eubank
Mrs. Garland Eubank
Mrs. C. E. Kent

Cashier

Trenton, Texas
First National

Jno. Donaghey

Cashier

Troup, Texas
First National

John Walton

Stephenville,
Texas
Farmers
First National
First

State

Streetman,
Texas
First National
Sulphur Springs,
City National

Texas

Throckmorton,
Texas
First National

Tyler, Texas
Citizens National
Peoples National

Pace

Cashier

Gus F. Taylor
Sam R. Greer
W. M. Haddad
S. A. Lindsey

President
President
Director
Chr. of Board

L. Umphress
Carter Umphress

Cashier

Valley View, Texas
Valley View National

C. B. Johnson

Cashier

Waco, Texas
Citizens National
First National

Walter G. Lacy
W. W. Woodson

President
President

Texas
Waxahachie,
Citizens National

W. A. Canon

V. P. & Cashier

Weatherford,
Texas
First National

W. S. Fant

President

Wichita
First

Chas. E. McCutchen

Vice President

R. W. Curtis

Vice President

Alf Morris
T. A. Wright

President
Cashier

E. A. Palmer

President

Van Alstyne, Texas
First National

Falls, Texas
National

Wills Point, Texas
State National
Winnsboro,
Texas
First National
Yoakum, Texas
Yoakum National

[67]