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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,  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.  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'  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,  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  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  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 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  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  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.  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  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  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,  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  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  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,  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  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  . 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.  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  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  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  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  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  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