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PROCEEDINGS OF THE THIRD
ANNUAL MEETING
of the
STOCKHOLDERS'
FEDERAL
ASSOCIA TION
RESERVE
BANK
OF DALLAS
JUNE 13 - 14, 1929
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
for the Year
E W. GRAVES,
First National
1929-1930
W. C. SLAUGHTER,
Bank,
Durant
Douglas.
New
National
Bank,
Durant.
Mexico-
A. F. JONES,
BEN
First National
Bank,
Commercial
Portales.
NATHAN
OXSHEER
Exchange
National
Bank,
Dallas.
MORRIS,
National
Bank,
Citizens National
Bank,
Tyler.
J. P. WILLIAMS,
Bank,
Winnsboro.
First National
Mineral
E' H.
SCHMIDT,
First National
Eagle Pass.
Citizens National
Gus F. TAYLOR,
Fort Worth
National Bank,
Fort Worth,
Texas.
First
SMITH,
Cameron.
M. MASSIE,
ALF
National
Shreveport.
ADAMS,
American
JOHNSON,
Bank.
Wells.
J. T. YANTIS,
Bank,
First National
Brownwood.
Bank,
Bank,
PROCEEDINGS
OF STOCKHOLDERS'
MEETING
Held at Dallas, June 13-14, 1929
Forenoon
Gus F. Taylor,
secretary.Meeting
President,
Session
presiding.
S. A. Longmoor,
as
called to order at 10 o'clock.
THE PRESIDENT: Gentlemen of the Stockholders'
Association of
the Federal Reserve Bank
last
At
Dallas:
meeting
annual
our
of
year, you did
honor of electing me your president,
the
an
me
honor
of which any banker in this district should have every reason to be
for indeed it is a very distinctive recognition as
proud,
Well as
I
known you contemplated
I
honor.
Had
naming
me,
an
believe
do so,
to
I
to
have
persuade
you
not
would
undertaken
because
I knew, as you all must have known, that the man who
succeeded W. W. Woodson
would have a difficult task.
Mr. Woodson
his administration
only
made
our
organnot
and
IZation
but they helped to handle some very delicate
a
success,
batters in
to every
a way that must have been most satisfactory
banker
in
to
the
District,
the
Eleventh
officers and
as
well
as
directors
of the Dallas Reserve Bank.
You
last year President
that upon retiring
Goodson will remember
to
the
that
good
suggested
pertaining
matters
several
b our
organization
should
should be considered and committees
appointed to study them.
His suggestion
was unanimously
adopted by
We called the Advisory Committee
the convention.
together
the
as
quorum
appointed
a
and
get
soon
as
we
could
atceSSary
All of these committees will make reports
committees.
this
session. The Advisory Committee thought it best to have
t
be
fully
reports
that
they
to
this
might
meeting
so
made
ahesefairly
discussed and to do this we knew it would take two
dadYs
Therefore,
days session.
we have called you together for two
ärese and we hope that every one of you will remain and hear
reports
These matters
and take part in these discussions.
are
ail Important
Federal Reserve
the
to
of
us
as
stockholders
ail
If we are correct in the belief that the Federal Reserve
Yst.
banking system in the
then it is
all unp Is t
s
t we study and fully comprehend its principles,
heDOsesrtant thagreatest
t
and mode of operation, to the end that if it has defects,
having
Ordel thai
all
and their it may more perfectly meet the nthem
eeds of itsl members
customers.
to
From information
from
it
received
seems
various sources,
me that the service the Federal Reserve Bank has rendered its
Its
during
last
has
been
the
members
year
most satisfactory.
have been responsive
to the needs of
rediscounting
operations
member banks in a substantial
and constructive
way. Notwithdislarge
the
this
from
standing
withdrawal
of
sums of money
trict for loans on the New York Exchange market, there remains
ample credit in our territory for the legitimate needs of business.
do
Unless there arises some extraordinary
I
not
condition, which
there appears to be no reason for increasing the rate
anticipate,
of discount in this district.
As I see it, the life and real use of this organization
is wholly
dependent upon the interest that can be stimulated among member bankers to study the Federal Reserve System and to attend
these meetings prepared to either actively enter the discussions
or to properly receive and apply what they hear from men who
that
have done so; and when they do that, they will understand
this organization
has a real purpose and is accomplishing
worthwhile results.
Your Advisory Committee has had several meetings and they
be
have given their time and study to the subjects
that will
will
they
by
the
I
do
hope
that
reported on
various committees.
be fully discussed and that all of you will remain here throughout the convention.
teach
to
For many years, our agricultural
have
tried
colleges
the great importance
us all, by both word and demonstration,
years
late
of diversified
crops and intensive cultivation
of
and
in
some of our state teachers colleges have made great progress as
that respect.
Our regional chambers
of commerce, as well
ento
deal
the local chambers
have
done a great
of commerce,
been
have
farming.
The bankers of Texas
courage diversified
doing this for years and will continue to do so. Farmers in min
to diversified
sections of our district are paying more attention
Of late the dairy cow is being stressed more.
In differe"`
built
parts of this district, creameries
and milk plants have been be
In the places where they have been properly tried out it has
0111Y
It
found that they help the farmers
in many ways.
not
gives them a pay check twice a month, but they profit by getting'
an increase in their herds and their land is enriched.
h ejy
In so far as I have been able to learn, member
.banks
served their customers well, and have actively and conservativ andd
served the best interests
of their respective
communities, their
in doing this work well, they have, of course, bettered
own condition.
too
In many sections of our district, we have had entirely
sotn
during
the
last
few months, and our crops are
much rain
what late and grassy.
However, we have plenty of time to make
a good crop and when harvested,
if the crops are properly marketed,
we should receive a fair price.
It has occurred to me-and
I believe the entire committee
agrees with me-that
function
to have our association
as it
should, it is going to be necessary for us to engage and pay for
the services
StanMr.
to
as
secretary.
act
man
competent
of
a
ley Longmoor,
has
served without compenpresent
secretary,
our
sation and has been most efficient and has given more of his
tithe than
but
I
the
am
sure
committee,
of
member
other
any
it has been
him
be
doing
jusI
him
hardship
not
would
and
on
a
tice if I did
his
fine
here
service
and
acknowledge
publicly
not
thank him for the
very efficient work he has done.
While I have all along felt that I was not equal to the important
position I have occupied, yet I have greatly enjoyed the work
and in a measure feel
because
have accomplished
something
we
I have had
the very full and efficient cooperation
of our various
committees
Committee,
Advisory
the
the
as well
of
and
members
as of the
officers of the Federal Reserve Bank, and I cannot conclude my few
expressing to all of them my very
remarks
without
great appreciation
the splendid support given your chairman
of
at all times.
I
association
our very pleasant
shall cherish
throughout
(Applause.)
the coming years.
Before I introduce
is next upon the
Mr. Talley, whose address
program,
Colonel Walsh wants to make an announcement.
COLONEL WALSH
Stockholders'
Members
Mr.
President,
the
of
:
Association
You remember that at the closing of the morning
:
sessio,
luncheon
1
thereafter
at
possible,
as
o'clock,
or as near
will be tendered
Dallas,
Bank
Federal
Reserve
by
the
of
main
you
dining
room, this hotel, main floor. We shall be glad to have all
at that luncheon in order to prepare you for the
00resent
TnE PRESIDENT:
Governor
Talley, will you come forward?
Gentlemen,
Mr. Lynn P. Talley,
GOVernor I take pleasure in introducing
(Applause).
the Federal Reserve Bank of Dallas.
Mr"
of
Talley
will address you.
MR. TALLEY:
Mr. Chairman and Member Bankers of the Eleve11h Reserve
Mr. Chairman,
it will take me, I think,
District:
twnty-five
if that
minutes to read what I have prepared,
won t be too long.
TKEPRESIDENT:
Go
ahead.
be % TALLEY: (reading) : Observing
has
that no provision
t0 ntrade
for
to
on
your
program
someone
extend a welcome
YOU
and 011
Offce shof the Federal Reserves Bank
of Dallas that they are
glad of the fact that this city is the natural place for you to hold
As you assemble for your
the meetings
of your association.
third meeting, I desire to extend to you the felicitations
and
t
happy
to
that
greetings
of our organization
and
say
we are
I
see so many representatives
of the member banks present.
also wish to express the hope that you will find this meeting an
the
that
have
enjoyable
and profitable
occasion and
we may
pleasure of seeing all of you individually
at the bank as your
time and engagements
will permit.
Your meeting this year is being held just prior to the close
interval
of the half-yearly
period which is a normal statistical
and therefore I am unable to sketch for you as much of the result
Your last meet"
of the bank's operations as I did even last year.
ing was held in July following the close of the half-yearly
period
and I was therefore able to give you complete figures represent
ing the result of the operations
of the bank for the first six
months of 1928.
The various volume ratios have remained
about the same
detail
I
burdening
therefore,
the
tedious
and
am,
not
you with
brief
I
hope
the
that
of classifications
and volume of offerings.
allusions to statistical
matter will, however, prove enlighteninet1
According to the custom of
and to some extent interesting.
the
to
bank for many years, on December 31 last, I sent out
year
for
the
member banks the usual statistical
report
entire
1928, following the amplified form adopted for the same report
at the close of the year 1927.
Since your last meeting the Eleventh Federal Reserve District d
an
has been an outstanding
in
for
its
the
one
system
economic
financial serenity and there have been no major credit problerne
in so far as the district is concerned.
While the Federal Reser it'
Bank of Dallas and the member banks in cooperation
Wit"
the
have played some part in connection
with the policies of. oil
Federal Reserve Board which were given public expressionocck
in
February
7, in reference
to the absorption
of credit
been
has
the participation
district
this
market speculation,
of
the
Tefer,
You
have
relatively unimportant.
seen and read so much
the financial division of it, in O'sal
public press and particularly
O's
ence to gold exports, brokers loans, security speculation and
Feder
the
d
and that, pro and con, about what the policies of
tb
be
,
Reserve System in this regard are and what they should
sirn'
what they should not be, that I am not going to bore You
To state it ilY
any great detailed discussion of that question.
ply, and regardless
of the opinion which has been so Wealthve
Rese
t
it was no difficult matter for the Federal
expressed,
tbe.
Board and Federal Reserve Banks to reach the conclusion
erioüs
an unwarranted
amount of the country's
credit supply s
ing absorbed in stock market speculation.
It is no mY
ount
m
a
the
to
the
bank
and
undertaking
watch
growth of
credit
In none of the
Of it which is going into any particular
channel.
Federal Reserve Board's expressions
I
have
or communications
observed a disposition to either censure or discipline the member banks in
When
funds.
their
to
the
own
of
employment
regard
it was
in
total
the
that
use was
of
credit
volume
quite apparent
being
Bank
Federal
Reserve
from
the
by
borrowings
augmented
with no diminution in the amount of credit employed in security
transactions,
it was certainly evident that the credit supply outIt was cerside the use of reserve credit had been absorbed.
tainly
Reserve
Board
Federal
the
upon
resting
a responsibility
and the Federal Reserve System to acquaint
the public, both
banking
this fact, if they were not disposed to
with
and
general,
take
cognizance of this development from the weekly consolidated statements
of the Federal Reserve Banks.
In many quarters
the easy money policies adopted by the
system in the Fall of 1927 have been held responsible
for the
volume of speculative
I desire,
that ensued in 1928.
activity
therefore, to
say with full conviction that the policy the system
adopted 11927
for
thoughtful
deliberate
one,
a speand
was a
cific purpose, for a particular objective and with full forethought.
The Federal
has
Reserve Board in its fifteenth
annual
report
the following
to say:
"In the Autumn of 1927 the Federal Reserve System, in view
Of business
in this country and a money stringency
recession
abroad,
This
directed toward easier money.
adopted
policy
a
Policy
was a factor during the latter part of 1927 in bringing
about
been
had
toward
the
a
which
gold
movement,
reversal
of
the United
States for several years, and a substantial
outflow
Of gold to
The effect of this outflow on the doother markets.
estic money market was at first fully offset by the reserve
b
banks
by open market purchases of securities.
Toward the end
°f the
Year, however, in view of the rapid increase in the demand
for
credit
from the security markets,
these purchases
were reduced
in volume and finally discontinued.,
Credit
conditions
nevertheless
holiday
easy, partly because the autumn
and
remained
increase
in currency demand was considerably
smaller
hail
usual.
"Until the
borrowing
banks
1927,
at
on securities
end
of
t ontinued
to increase rapidly, and early in 1928, when it began
a be
apparent
in this country was again active
that industry
Reserve
SYSteTnat
the
emergencymore
it had ass,
dethe
termined to exert
fir
actively Y toward
Money conditions.months
reserveof banks, accordingly,1 sold
S tates securities
in the fir t six
1928 in
imately the
the
they had purchased to offset
amount
as
same
effects of
in the late months of the precedgold withdrawals
1nfl°°°
pwhich
of currency, absorbed a part of this inflow,
was
unusually large, with the consequence that member banks were
not in a position to reduce their borrowings by its full amount."
The full text of the board's allusion to this subject may of course,
be found in the report itself.
Without the purchase of securities as a concomitant
of lowering the discount rates in the latter part of 1927, the outflow of
gold would have tightened
credit to a sufficient
extent to have
arrested the gold exports, which was one element in the policy
In connection with the
adopted and one objective to be achieved.
desirability
for firmer money conditions
the twelve banks in1,
discount
between
their
January
March
25
creased
rates
and
1928, from 31/z to 4 per cent and from 4 to 41/a per cent between
April 20 and June 7, 1928. Eight of the banks increased their
rates from 41/2 to 5 per cent between July 11 and August 1, 1928,
but it was not until in this year that the remaining four banks,
Minneapolis,
Kansas City, Dallas and San Francisco,
increased
their rates to 5 per cent. A 41/2 per cent discount rate was maintained by your bank from May 7, 1928, until March 1, 1929, all
of
through the borrowing,
liquidating
crop-moving
and
season
During the ninety days prior to March 1, 1929, there
that year.
disdistinct
this
in
discounts
tendency
was evident a
of rising
From December 26, 1928, to January 30, 1929, there was
trict.
a decline in circulation
of the Dallas bank of approximately
$11,000,000 with an increase in loans of approximately
the same
This was an abnormal and illogical situation as under
amount.
a
in
decline
in circulation will be expressed
ordinary conditions a
decrease in the use of Federal Reserve Bank credit at that seaOur gold reserves during that period declined
son of the year.
A
$18,500,000 and our reserve ratio fell as low as 54.1 per cent.
decline in the gold reserve of a Federal Reserve Bank does not
to
due
express in itself the amount of funds leaving the district
dis
both higher discount rates and higher money rates in other
level
lower
tricts, but must be used as a basis of calculation.
The
higher
bank
in
district
being
the
the
7
of
reserves
per cent and
level 10 per cent, the mean is 8 per cent. It, therefore, followed
that the amount of funds which left the district due to a disParity in rates was twelve times $18,500,000, or $222,000,000.
The two chief purposes of a Federal Reserve Bank are
of
protect the reserve position of its district and the integrity
the currency.
It was quite clear that the borrowings
referred
of
to did not represent
seasonal transactions
and the question to
funds
bank
the
have
low
whether
reserve
shall
a
rate and no
lend or a higher rate with ample credit supplies for the legiti'In
t
mate uses of the district is one that may be easily resolved.
discounve
the
this
consequence of
situation our directors increased
on
rate to 5 per cent and the present
rate became effectiil,
March 1. In the seventeen days following that action circulatld
decrease
its
decline
loans
continued
normal seasonal
and our
$6,000,000
$14,500,000,
approximately
and our other securities
with a low point of $9,500,000, and our reserve position rose from
a low point of 54.1 per cent to a maximum of 75.1 per cent at the
Except for a few instances where member
end of the period.
banks
borrowthe
in
securities,
government
were over-invested
ings since March 1 have been of a normal character,
though, due
to higher money rates outside of the district the demand is heavier than during the same period a year ago and the number of
borrowing banks has been
steadily increasing.
It is quite evident that the treasury fully recognizes present
money market conditions as evidenced by the rate of 51/8 per
cent carried by its quarterly offering of certificates
of indebtedness. This rate is 1/8 per cent higher than the discount rate of
This
all the Federal Reserve Banks, which is now 5 per cent.
issue is for
$400,000,000 and the allotments were
approximately
trade on June 11. Rate policy is therefore
one of future determination.I
am very happy to say that in connection with general system
policy there were only a few banks-less
in this
than a dozendistrict
loans
loans
time
on
call
or
at
any
which were showing
oil time against stock exchange
the same time
at
collateral,
they
Almost
were borrowing from the Federal Reserve Bank.
ttnmediately after the issuance of the Federal Reserve Board's
statement on this subject, a number of these banks voluntarily
paid off their indebtedness
to us and it was only necessary to call
this
banks in order
the remaining
to the attention
condition
of
to obtain their full
the present
cooperation,
and
at
and
complete
tithe the
use of Federal Reserve credit in loans on call or security
5Äeculation is
not a factor in this district.
There has been no occasion for us to alter our fundamental
'-redit policy. We have been
that
to
there
much
gratified
observe
has been
an increasing attention on the part of member banks to
credit
necesI
and
conservativethe
l
hise
the view that
ae
amount
use
of
minimum
of
sary to
industrial
the commercial,
carry
and
agricultural
on
activities
is
far
best
district
by
the
A
to
the
of
course
pursue.
denial
the part of the member banks or others of the extenon
s1011 the
be used unwisely is not
of
volume
of
credif
which
may
to any
in
sense,
my opinion, a curtailment
or restriction
of credit
facilities.
When
is
that
amount
only
of
credit
which
necessary
for the
fulfillment
business requirements
is
production
of
and
entp10 d it is
found that indebtedness
is more easily liquidated
e
less embarrassment
ensues if unfavorable
or adverse condiIf, on
the s occur before the maturity
of the credit extended.
other
hand,
highly
operations
are
successful, conditions are
normal
favorable,
is
larger
there
or
a
much
margin of net proýeeds
the
labors
as
the
result
of
activity
and
of our people and
more
to be added to the accumulated
wealth of the district as
expressed
in increased bank deposits.
This has been particu-
ttön
been quite
has
it
1928
when
1927
and
in
the
years
larly evident
favorable
larger
has enjoyed
district
the
that
to us
to consider
apparent
having
without
in
years
than
previous
balances
trade
importance.
factors
great
being
of
as
prices
review
in
monthly
our
1
to keep you advised
As we undertake
district,
the
of
business
conditions
to crop and
this
in reference
at
that phase of conditions
dwell
to
upon
conshall not undertake
to
weather
due
that
variable
know,
course,
We
of
time.
all
the
present
at
uncertain
most
are
prices
and
ditions, crop yields
step
to
our
watch
therefore,
behoove
us,
time. It would probably
be more
factors
these
can
in the further extension of credit until
definitely determined.
interbelow
keen
have
a
that
stockholders,
as
I am sure
you,
I am quoting
bank,
the
and
the earnings and expenses of
give
will
this
which
year,
five
of
first
the
months
for
the figures
information:
that
you
Expenses
Earnings
and
Statement
of
Comparative
Five Months-First
1928
1929
EARNINGS:
95,83g.53
$235,243.59
Bills Discounted ------------------------$379,134.17
334,063.58
Bills Purchased
235,183.94
----------------------171,520.04
United States Securities ---------65,007.79
8
Debentures-___
Bk.
Fed. Int. Cr.
2926.1
5,491.35
Penalties
Reserve
Deficient
2,926.27
___- 2,609.59
Miscellaneous
----------------------686,407.51
$4,306.24
$957,826.52
Gross Earnings
---------------DEDUCTIONS:Cost
$504,009.71
91,628.26
Currency
R.
F.
of
----_____---$
516,885.94
Current Expenses
2,6g5.34
-------------------3,500.74
,615.34
Equipment
Furniture
and
52
------ 11,889.01
Profit and Loss -----------------------150,242.28
110,114.76.67
Accrued
Dividends
-------------------$668'666,84
$734,018.71
Total Deductions
$
-------------$223,807.81
Net Earnings
-------------------ately
five months are approxbut
first
the
you
during
bU
The expenses
192d8,
of
the
the
in
period
same
they
than
were
$65,000 more
vmonths
$87,000
will
the
approximately
this
was
bintin&
year
of
first five
This
occasioned
1928.
was
of
than in the same period
the p
The
necessitated
the
which
in
currency,
of
size
change
notes.
e
Reserve
Federal
d
our
of
stock
an
new
of a complete
r
fo11
been
has
anticipated,
issuance of the new-size currency
been
has
the
old size
Reserve currency of
Fedal
information'
for
here,
your
to
like
I
mention
would
me time.
so[121
that during the latter part of last year we replaced equipment
consisting of bookkeeping machines, adding machines and typeThe equipment re$30,000.
writers at a cost of approximately
placed had been in use for an average of about ten years, and the
cost of the new equipment was charged direct to expenses.
Your directors on yesterday
at their regular monthly meeting, postponed, however, from the usual date of June 7, so as to
more nearly coincide with this meeting, declared the usual semiannual 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 June 30 is naturally
not available, but the amount of
earnings at the end of May, in excess of expenses and dividend
requirements
$31,579
the
$223,807,
at
with
compared
as
was
close 0 June, 1928. Against
this amount there has accrued
depreciation
to
building
amounting
and
equipment
on
charges
$17,602. It is
depreciation
the
to
charges
off
write
our custom
at the end of the fiscal year on December 31.
Our independent
holdings
securities
at the beof government
ginning
May
31,
$10,007,000
to
the
and
on
of
year amounted
during
the period
x$10,006000,
there being no material
changes
in
Our loss
either
the aggregate
or the classification.
amount
in these holdings,
had they been sold to the market
on May 31,
would have
deducting
to $377,000
premiums
after
amounted
amortized
At the beginning
of the year we were
up to that date.
not participating
by the open
in the purchase
of governments
market
discontinued
investment
having
our particicommittee,
pation
December
by sale to the committee
24
on
under ninety14Y
repurchase
$4,306,000,
the amount
of our parof
agreement
ticipation
in order to acThis action
taken
that time.
was
at
commodate
Federal
Intermediate
to
the
advance
an
additional
Credit
Bank of Houston
December
15,
bringing
$3,000,000
on
of
the
aggregate
bank
$6,500,000.
The
Federal
to
that
of
advance
Intermediate
its indebtedness
March
15
Credit
Bank retired
on
and on March
in the holdings
18 we resumed
our
participation
of
government
been
had
by the Open
purchased
securities
which
Market
Investment
Committee,
taking
on that date $2,279,000.
The
amount
in these holdings
to
of our participation
amounted
$1,236,000
total government
holdon May 31, making
security
gs on May 31,
of $11,242,000.
From the day
in
participation
we
resumed
open market purce aseS
March 18 to May 31, we participated
of governments
on
Purchases to the
$731,000
in
to
the
of
extent
and
sales
extent
rjf $1,774of
h
transactionsto
$10;
622
c
resultingabove
whic Win addition
the loss
referred to.
The
Committee
during Operations of the Open Market Investment
the first five months of this
year have been confined
largely to transactions
in bankers acceptances,
the committee
in
having previously disposed of practically
all its governments
To
pursuance of its policy to which I have previously referred.
give that policy more effect, buying rates for bankers acceptances were increased from time to time, resulting in a reduction
in holdings of bankers acceptances
by the system of approximately $360,000,000, and a general broadening of the bill market.
While we have a substantial
book loss in our holdings of governthis has been largely offset by the increased
ment securities,
returns from higher bill rates and increased loans to member
banks against governments
which have been withheld fröm the
This is further
market due to unsatisfactory
prices.
evidenced
by the increased net earnings of the Federal Reserve Bank for
the first five months of 1929 over the same period in 1928.
At the beginning of the year our holdings in bankers acceptances amounted to $25,383,000, and during the first five months
to $47,of the year we acquired bankers acceptances
amounting
584,000 in the open market from member banks and other Fedto
Reserve
Banks.
During
bills
this
eral
period
amounting
$62,916,000 matured and our total holdings on May 31 amounted
to $10,052,000.
At the beginning of the year discount rates on
bankers acceptances
ranged from 43/$ per cent to 47/8 per cent,
increasing
slightly from time to time, the range at the close of
the period being from 5 per cent to 53/1, per cent on outright purto
51/2
bills
chases and
per cent on
purchased
under agreement
from dealers.
repurchase
during
Of the total amount of bankers acceptances
acquired
the first five months of the year, $32,679,000 or 69 per cent were
Thls
in
from
this
banks
dealers.
acquired
market
member
and
first
is
double
than
the
the
for
amount
more
amount so acquired
six months of last year and is indicative of the development de
the bill market in this district and the increased use being ma
At the close
of bills as secondary reserves by member banks.
held by us for collecof business, May 31, bankers acceptances
as
tion for account of member banks amounted
$9,335,000,
to
30,
compared with $6,000,000 held at the close of business June
1928, and it is estimated that earlier in the year before member
banks found it necessary
to let their holdings of bills run off
to meet seasonal demand, that banks in this district owned
ed
At about the same time it was reported
excess of $25,000,000.
in
that member banks owned other liquid assets is
and estimated
the form of government
securities and call loans amounting
$185,000,000,
bringing
approximately
to around
$215,000,000
of this nature
deposits
$900,000,000.
of around
total
against
secondary
individual
reserves
de all
I am quoting below the volume and cost of free services
dered member banks during the first six months of 1929.
The
figures
first
for
the
given are actual
with the month of June estimated.
five months
of this year,
Volume and Cost of Free Services Rendered Member Banks
During the First Six Months of 1929:
(January
through May, actual-June
estimated)
Numberof
Items
Amount
Check Collections
$4,269,173,344
__19,281,473
Non-cash Collections
123,350,819
239,591
rrransfer
-----------2,664,636,724
65,178
Funds
of
Currency Shipments
128,031,000
___________29,163,953
Coin Shipments
4,333,006
Custody
____________________25,551,767
40,463
Safekeeping
and
Purchase
_
and Sale of Bankers Acceptances
and U. S.
Securities
91,756,294
5,406
_----_____
Cost
$89,774
12,663
15,308
54,147
12,350
3,742
2,277
$190,261
The cost
of this free
expense above
referred
cost of $190,261
these
of
dividend
$133,294.50
of
thereto.Although,
service is included in the total item of
to, and you will observe that the total
free services compares with an estimate
to be paid on June 30 and is in addition
is
transactions
these
in
the
of
volume
general,
larger
than during the first half of last year, the cost was slightlY less.We
began the year with a capital of $4,328,900 and a surplus
c'f
last
At
the
of
year our surplus was
close
$13$8,690,201.09.
900 less than twice the amount of our paid-in capital.
Our
earnings last
to
bring
to
up
our sprplus
year were sufficient
twice
the amount of the paid-in capital and, in addition, as provided by law,
10 per cent or $32,401.09 of the remainder
of
our
earnings
The total amount transto surplus.
was transferred
red to surplus
at the end of last year was $163,301.09.
After transferring
to
the
this
account,
amount
our
surplus
toe ainder
of our earnings amounting to $291,609.79 was paid to
h
government as a franchise tax, this being the first time durtö the history
franchise tax has been paid
bank
that
this
of
a
the
government.
During
the first five months of this year our capital account
has
increased by
banks, and the increase
in
of
new
subscriptions
capital
in surplus
banks to
ýur443'150 and the increase
of existing
on May 31. Therefore,
at the close of May 31, our
$196,100 short of the statutory
visions Was approximately
pro-
During the first five months of this year there were seven
bank failures in the Eleventh District-three
member banks and
four non-member
banks.
One of the member banks has since
During the same period bank failures in other disreopened.
tricts were as follows :
NonTotal2303
DistrictMember
member
Atlanta
11
----------------------------------------------------12
Boston
0
0
---------------------------------------------Chicago
7
30
----------------------------------Cleveland
2
6
----------------------------------Kansas City
5
38
------------------------------------------Minneapolij
4
28
-------------------------------------------New York
0
1
-------------------------------- 0
Philadelphia
0
--------------------------------------------Richmond
3
9
-----------------------------------------------St. Louis
0
23
------------------------------------------------ 3
San Francisco
7
----------------------------_
36
153
On May 31, loans to member banks were $25,911,000 as com
Mai'
$11,209,000
May
31,
$6,282,000
1928,
pared with
on
on
and
31, 1927. This increase in the use of reserve bank credit over
the previous years, while due in some part to the natural tendency toward expansion
following good years, is due largely''
disto
the
analysis will show,
government
security prices and
position of member banks to permit their secondary
reserves,to
largely of such securities,
to run to maturity
or
consisting
to
Of the $25,911,000 loans
reach a more favorable
market.
member banks on May 31, $18,800,000 were to city banks and
$7,100,000 to country banks.
Of the loans to city banks, $I',000,000 were secured by United States Government
obligations
Of the loans to country banks
and $7,800,000 by receivables.
$3,100,000 were secured by United States Government
obhga'
b9
tions and prime eligible bankers acceptances
and $4,000,000
receivables.While
we do not have any current figures as to borrowings
the
of member banks from all sources, condition reports as of
three,
March
from
27,
banks
call of
received
except
all member
showed total borrowings
of $13,015,000, of which $11,3S2,000
was borrowed from the Federal Reserve Bank.
for member
The volume of paper discounted and rediscounted
banks during the first five months of this year was S346,30000
the
compared with $107,746,000 during the first five months of
You will understalldof
year 1928, an increase of $238,562,000.
that these figures include a proportionately
larger volume the
than
banks'
bills
by
member
payable secured
govrnments
figures for last year, and these transactions
have been unusually
active this year.
The $25,911,000 of loans to member,banks
on
May 31,
five
for
the
borrowings
the
months
maximum
represent
period. The minimum borrowings for the same period occurred
on May 19, and amounted to $9,100,000.
On May 31 the indebtedness
to this bank by insolvent banks
in the
in
bank
the amount
that
liquidation
one
of
process of
was
of $5,409. The bank involved failed on January 7, due to misappropriation
indebted
its
by
funds
and
was
officers
of
one
of
to us
the time of closing in the amount of approximately
at
$12,000. Arrangements
have already been perfected
with the
Deceiver. as snnn as he obtains authority
from the Comptroller
of the Currency, to take up this indebtedness
including interest
and expenses.
We have set up in hidden reserves as a contingent
fund
the
in
losses
of
amount
against
operations
credit
possible
$215,279, but
we know of no situation at the present time that
Mould necessitate
a charge against this account.
I am
during
the
that
to
be
to
to
you
very glad
report
able
Year 1928
losses
in
to
any
without
operate
we were again able
our loan transactions
have
doubtful
so
appeared
claims
no
and
far this
has obtained
This record
since July 1, 1925, in
year.
so far
time
that
are
concerned,
as
since
current
operations
eX9ugh
that may arise or certain
due to conditions
of course,
be called upon to meet, we cannot
that
assert
we
may
thgencies
at.- fl-iý!5
NiLUaLion
win
a.lwa.y6
oulalli.
-_,-- --- -.11
Most
to the Federal Reserve Act recom
the amendments
of
mended by
the Federal Reserve Board, in fact all of them, as I
recall it failed
Congress
the
and
session
of
short
passage
at
of
died
have been
On the calendar.
Some
these
amendments
of
reintroduced
Congress and
during
the
of
present
sessions
special
all of them
by the Federal Rehave
been
again
recommended
serve Board,
for extwo
amendments,
with
additional
one
or
time le,
giving the board discretion to waive the six months' noof withdrawal
by a member state bank that is now required
by the
act in its present form.
(Applause).
ll.
(41111..11Ull11.11
L.J
THE PRESIDENT:
Mr. Secretary,
what is next on the program?
MR" B. D.
before we go on with
HARRIS:
May I rise a moment
the
program
to get some
1nforimation
privilege
of personal
on a question
If
is
I
from
there
the
objection
no
will
chair?
proceed,THE
PRESIDENT:
Yes,
sir.
MR-HARRIS:
looking
in
the
these
two
I
over
program
of
see
ays' sessions
is
is
this
tentative
it
that
that
program
a
stated
0111
y, and that the
I Wäure
program is pretty full of addresses which I
will be quite interesting
and we are all anxious to hear.
sessions, ifsthe
e during
have
program can conform, thatsI would like
the privilege
of
of the floor to bring
up for the consideration
this body a topic not covered
by any of these things,
but which
has a very direct
Federal
Reserve
to the general
relationship
in the district,
policy and to very large interests
and inasmuch
does not provide
beyond
topics
as the program
anything
certain
thereon,
the point that
which have been assigned,
and discussion
I am rising to now is to know if, this being a tentative
program,
the
it is the intention
of the chair to provide
any space within
two days'
by this
topics not covered
sessions
where
any other
As I understand
it, the object of
program
could be introduced.
the
for
the stockholders'
is
meeting,
convening
only once a year,
that period
purpose
particular
of bringing
up any topics within
of
of time that we might
want to discuss
and get a concensus
opinion about for the period of another
year ahead.
Now the topic I wanted to ask some time for in this meeting
is one on which I had particularly
desired to hear from the members of the Federal Reserve Board and the management
of the
Federal Reserve Bank, as well as our advisory committee,
and
it might involve a considerable
I am not
discussion and time.
the
if
be
heard
to
but
to
time
asking
now,
make provision some
chair will permit.
THE
PRESIDENT:
I want
to
to
suggest
Mr.
Harris
that
nobody'
did
has heard anything
he said.
Mr. Harris said the program
the
not call for the discussion
of anything
except what is on
a
UP,
program,
and that there is a matter he wants to bring
I
am
he
to
discuss
during
the
matter
wants
sometime
meeting,
the
to
to the committee
sure that will be most agreeable
and
member banks, and later on we will arrange for that.
Is there anything
else?
range for the discussion.
MR. WoonsoN: We
that is not provided
time on that second
to these stockholders,
Mr. Harris,
arto
be
glad
we will
dad
have a whole afternoon on the second
We
will
time.
with anything
except
eilt
benefit
to listen to anything
of
afternoon
I am sure.
MR. WELCH: Before we go any further, I want some inforrnk,
tion on the operations of the Federal Reserve Bank: I, as a Stn
holder of this institution
would like to have an itemized expenseas
here of different
items of expense, Such
account rendered
banks
just
have
to
them
salaries, etc.,
as we
at our
render
0Per
their
know
to
the
the
departments,
want
cost of
various
the
for
tions; I especially want to know the cost of operation
th
by
United States
Government-the
handled
transactions
Federal
Reserve
Bank
THE PRESIDENT: We
Reserve
Bank tomorrow
for
the
United
will make
afternoon.
States
Government.
that
of
request
Mr. McGregor.
the
Fe
MR. MCGREGOR: Answering
the gentleman's
about
question
I
the operations:
We have been requested to furnish that data.
believe that data
will
be
that
in
be
satisfacmanner
a
given
will
discusfurther
tory to the gentleman,
into
any
without going
sion; we have that embodied in our report, the very question he
asked.THE
disthoroughly
be
PRESIDENT: That report
very
will
cussed and brought out.
inforMR. WELCH: Thank you, and that is all I want-the
mation.MR.
this
WOODSON: As far as we can follow
we
program,
would like all the discussion
to center
reupon the committee
Ports.
brought
has
Harris
Mr.
Inasmuch
not
up a question
as
provided
I judge
from his` statement
for in this program-and
that the
Bank
Reserve
Federal
the
directors
may
of
officers
and
be deeply
discussion
have
the
better
be
to
interested-it
might
this
They
here.
directors
those
are
afternoon
while
sometime
nfaY not be
know
do
the nature
I
tomorrow.
to
not
going
remain
of his discussion,
but there are a number
who stayed
of directors
over who
like
I
discussion.
Mr.
Harris'
hear
like
to
would
would
to arrange
Let some of these
this afternoon.
for that discussion
reports
follow tomorrow,
than miss the opportunity
of
rather
healing
directhese
have
the
this discussion,
of
advantage
and
tors
he
the Federal
Bank being here to hear what
Reserve
of
has to
I move that.
to Mr. Harris,
If it is suitable
say.
THE PRESIDENT: Mr. Woodson,
just a minute.
All
me,
pardon
the
here
to
bankers
this
stay
ought
association
of
throughout
Federal
directorsthis
two
sleathe
sshwell
Re
eTve
for
tomorrow
thinks
and
e
ould
we
insist
that they stay here.
MR WOODSON: All
to
difference
it
doesn't
me;
any
make
but I
right,
would like to have them here.
THE PRESIDENT:
We are just asking these distinguished
men
have
l
to ao
elected as directorsus. of the Federal Reserve Bank
us the honor t
What is
the next on the program?
MR"WOODSON:
This
is
May
I
this
tentative
motion?
a
make
t I"
These reports are to be made by
the am ; it can be changed.
committees
I move
that
hat this
at any time, and they are for discussion.
afternoon Mr. Harris present the matter he has on his
mina
at this convention.
THE PRESIDENT:
Is there a second to the motion?
(Motion
seconded by Mr. Yantis).
YOU have
heard the motion, is there any discussion?
(quesoBank.
I think we should ask these directors to stay
tion called for).
here until tomorrow. I hope you will vote Mr. Woodson's motion
down.
Those favorable
to the motion-aye,
contrary,
no; the
noes have it. Call the roll, Mr. Secretary!
(A MEMBER): That has been set aside.
I make the motion
that if in the course of this morning's or afternoon's
meeting any
committee who has a place on this program is not ready to report, that that place be given to Mr. Harris.
THE PRESIDENT:
THE
SECRETARY:
We will grant
As
you
gentlemen
that
without
see
by
a motion.
your
programs,
the
next report is to come from Mr. Williams, Chairman of the Membership Requirements
Committee.
Mr. Williams nnfortunatelY
is unable to be here.
Mr. Webb of San Angelo has very kindlY
We will be very glad if Mr. Webb
consented to make this report.
will come forward and proceed with it.
ReMR. WEBB: Members, and Shareholders
Federal
the
of
On
Bank
Dallas:
I
into
Dallas
morning.
serve
of
came
yesterday
the train I found some very fine and enterprising
citizens, and
in the course of conversation
they told me they were coming
down to Dallas to secure a branch, if possible, of the Federal Rein
Bank
for their city. I am not violating any confidence
serve
this
I
do,
for
in
this
is
large
speaking as
printed
way
matter
a
They wanted to know why I was coming to Dallas'
morning.
do you want a Federal Reserve Branch at San Angelo'? I told
them, no, not now; that all we are looking for now is to get
I
Sa
the Texas Bankers'
Association
to meet in convention
at
Angelo in 1931. If we can get that we shall be very hapPY"
Galveslot
this
bankers
in
to
mentioned
matter
a
of
session at
ton a month ago. I told them what we wanted.
I don't know
when I will have the opportunity
of seeing so many bankers
together again as are right here now, so I want to mention that
San Angelo will want that convention of 1931. We are well able
to prepare for it, modern fireproof hotels, other things in p1oPp1
tion. So keep that in mind.
Now, getting back to the program.
I am one of the members
has
of this committee of which Mr. Williams is chairman, and as
been stated, he is unable to be present today.
Here's our report'to
turned in to the Advisory Committee, dated January 25, 1929'
Dallas'
the Advisory Committee
the
Federal
Rc
Bank,
of
:;i rye
Texas:
Re
We, your committee
Reserve 1\Jf m bershI
on Federal
quirements,
submit the following report and recommendations:
be
To
We do not think that membership
should be optional.
hate
of the service intended the Federal Reserve System should
the support of all national banks and efforts should be made
induce all eligible state banks to become members of the system'
As to the limitations
to be placed upon the amount
of capital
that
the
for
of banks
opinion
of
are
we
membership,
applying
in
is
the present
this
adequate
requirement
governing
statute
be
every particular
that
made.
should
change
no
and
In our judgment,
Suggestions
Membership.
for Increased
member banks should not be permitted to deduct cash in vault in
figuring
bank
that
for
the
might
member
some
reason
reserves
elect to maintain its entire reserve in cash, and actions of this
nature would be detrimental
to the Federal Reserve Bank.
We do not think it advisable to permit the deduction of balances due from banks in computing this reserve for the reason
its
above outlined-that
to
bank
maintain
elect
might
a member
reserve with a correspondent
to the detriment
of the system.
It is our judgment
to you that member
we
recommend
and
banks be
twenty-five
to maintain
per cent of their
permitted
required reserve in U. S. Government
to be deobligations,
Dosited with and controlled by the Federal Reserve Bank, the
1ember bank to receive interest that accrues on these obligations. We think that, inasmuch
as the member banks furnish
all of the assets, they are entitled to this revenue and that it
Would be
to state banks to become memfurther
inducement
a
bers. This
change would probably result in increased membership which, in turn,
Federal
to
bring
increased
the
revenue
would
Reserve
System.
We believe that the
should, to a reasonable
earnings
surplus
extent be distributed
banks
the
priviunless
given
member
with
lege to
in U. S. Governtwenty-five
carry
per
cent
of
reserves
ment
obligations.
As the law now stands, state member banks are subject to
examination by both the State
System,
Federal
Reserve
and
and
both
As
to charge for this service.
organizations
are
authorized
a further inducement for
banks
become
to
members of the
state
l' ederal
Reserve
law
that
the
System
authorizing
we
recommend
the Federal
be
Reserve Bank to charge for these examinations
repealed.In
had
in
have
arriving
these
we
mind not
at
conclusions
lacing
the
Federal Reserve Bank in competition in any way with
t he
commercial banks, and we would not want to propose or see
enacted
have a tendency to weaken or
that
any
measure
would
°bstruct the
functioning
the Federal Reserve Bank.
The
adequate
of
Federal Reserve Bank
for
but
to
was
not
organized
profit,
render financial
banks
to
the
the
public
member
and
service
and
making
be
but
of
profits
where an adequate
should
secondary,
service
feel thatis rendered and a net profit accrued we,committee,
rand
the
the capital
the demember banks furnishing
posits
and assuming
any hazard that might be developed are,
without a question,
that accrue.
entitled
to at least a division
of the profits
We are entirely satisfied with the present standards
of the
Federal Reserve System and we would not recommend any more
that will have a tendency to derigid supervision
or anything
tract from state banks becoming members.
The supervision
of
national and state banks is vested in the Comptroller
of the
Currency and the Banking Commissioner
and we feel that this
Membership
should not be interrupted.
requirements
are at
high to give any financial institution
present sufficiently
prestige in the community when it is known to be a member.
We discussed briefly with some of the officers of the Federal
Reserve Bank a few of the provisions above set out and in some
instances they do not agree with your committee;
however, We
have reached these conclusions
after having written
and rebankers in this stateceived replies from a number of thoughtful
We wish to voice our approval of the management
of the
Dallas Federal Reserve Bank which, in our judgment,
is capable
and efficient and one that should inspire confidence to the end
that non-member
banks should seek membership.
Respectfully
submitted.
There are some points that have
in this report for recommendation.
sion of the report of this committee,
for anything
to be said by anyone
at the time.
come up not touched upon
If there is to be any discusit would be very appropriate
else, or by these speakers,
(ReTHE PRESIDENT: Mr. Webb, kindly hand me that report.
Now, gentlemen,
port laid on table).
you have heard this rep°.t
We will be glad to hear from You'
and it is open for discussion.
once
to have a full and fair discussion.
I attended
a convention
to
in which there
was a motion
made that no man be allowed
I am sure
speak over forty times, or over three hours at a time.
it is not necessary
to say anything
like that to a bunch of busi1
We
bankers,
because
I
feel
ness men,
you are not going to speak
and I know what you are going to say will be to the point.
You'
3
be
in
fact,
hear
to
from
of
will
glad,
all
we want
any and
Who will be the first man?
ter
MR. WELCH: May I suggest that the matter of the chara
ill
and amount of reserve, which is touched upon in this report, thatt
be dealt with by the Committee on Reserves.
We will bring
t
in
in
up
complete report or
minority report, and I suggest
the
to
that particular
feature of this report be left until we come
have
to
There is no use
report of the Committee
on Reserves.
two discussions of the same thing.
(A second).
THE PRESIDENT: I do not see why that should not be stipulatAnybody object to that?
ed without a motion.
MR. MILLER: I desire to offer a substitute
for it.
THE SECRETARY: I will
You rise, in order that the
ask you to please
may
stenographer
call your
record it.
name
as
MR. MILLER: George Miller, Dallas.
the reIf I understand
Port correctly,
twenty-five
they recommend
per cent member
bank
I
think that
in
invested
be
securities.
government
reserves
very unwise and unsound and offer a substitute
motion that that
part of his report be stricken out.
MR. WELCH: Mr. Chairman, that is exactly what I asked you
not to discuss or act upon in this particular
report, inasmuch as
it will be dealt
report and dealt
with in the Reserve Committee's
with more fully and completely.
THE PRESIDENT: Mr. Miller, won't that be agreeable to you?
Mr. Welch has
made a statement there.
MR. MILLER: That it be accepted?
THE
PRESIDENT:
Make
Welch.MR.
that
statement
again
please,
Mr.
MILLER: I did not hear the motion.
MR. WELCH: I suggest that that particular
portion of this
00111nzittee's report be left alone because it will be dealt with at
that time.
MR. MILLER: I accept and withdraw the motion.
THE PRESIDENT: Any further
If not,
discussion, gentlemen?
Mr.
the next committee.
have
to
the
of
going
report
Tallre
a
TALLEY:
thoseexaminations
tMR.
for
Mr. Chairman,
tofhstate
I will say for the
nmember
information
erbeen
of
favorably
banks has
passed
Reserve
Agents'
Conference,
by
Federal
the
the
on
of
vote
Governors'
Conference, and Federal Reserve Board, and that an
amendment has been
Congress,
I
it
to
think
and
recommended
has
leaving
it
discretion
passed
house
Congress,
to
the
of
of
one
the Federal
Reserve Board whether they should make charges in
special
or
it.
The
law
is
firm
in
they
cases
may
waive
whether
that
Reserve
banks and
respect
the
of
other
although
most
now,
the Dallas
bank have been able to get by without making charges.
PRESIDENT:
(No response).
Mr. SecreAnybody else?
taryHE
lists the next report
THE SECRETARY: Your program
as being
Requirements.
But that
from Mr. B. A. McKinney
on Reserve
has been changed,
report
and in lieu of it, Mr. Sam R. Lawder
System.
will report
on his committee
work on the Collection
THE
der.
PRESIDENT:
(Applause).
Mr.
Lawder,
come forward,
please,
Mr. Law-
This is a report by
MR. LAWDER: Mr. Chairman, Gentlemen:
the Committee on Collection System : (Reading).
Your committee appointed to make a study of the collection
and transit system of the Federal Reserve Bank, after some consideration and thought on the subject, begs to report as follows:
General.
It is felt that in general, the services of the Federal
bank to its members in handling cash items should be made as
There
valuable to them and as simple in operation as is possible.
are a number of restrictions
now in force which the committee
feels could be made more flexible.
Since the collection system
is established
probably for all time, the member banks and especially the country member banks should be made to feel that
cash items accepted for deposit can be as readily sent to the Fedbankseral Reserve Bank as they could to their correspondent
Now that the Dallas bank is paying a franchise tax, a full measure of service in the handling of transit items should be extended
to its members and all restrictions
possible removed, even though
vex,'
some additional
expense be incurred and some additional
tions added to the officers and employees of the bank.
The ad
has
Dallas
bank
few
the
during
the
ministration
of
past
years
shown a very splendid record in the elimination
of. unnecessary
toward the
expenses and it might now well turn its attention
elimination of unnecessary
regulations
and restrictions
and make
an earnest effort to give the members all to which their Con"
tribution
entitled them.
Transfer
Drafts.
Member banks' own drafts on correspondthey
in
Federal
than
the
Reserve
to
ents,
cities other
city
which
are attached,
are now entered for collection and only credited
There are numerous
after they have been actually collected.
occasions and reasons for banks to send direct to and to maintain accounts in various cities and the modification
of this regeIs
lation deserves attention.
The free use of credit instruments
of
desirable and the committee
this
class fOI
sees no reason why
items should be excluded.
Such drafts should be accepted
acdeferred
This
credit as are other checks.
would simplify
balances autom,te
to transfer
counting
and enable members
the
the
delays
incident
to mail orders and obviate
cally without
t
following
necessity of
up such orders to confirm their executiO
This facility would be especially valuable to the larger banks no
not
in
Federal
Reserve
for
transferring
situated
cities
amounts
large enough to warrant
It might be possrbl0
wire transfers.
for a few banks to take advantage
of this by kiting, but the
Federal Reserve Bank has it in its power to detect such irregularities and there is no good reason why the majority
of members should be deprived of the service because a few might try
to abuse it.
The elimination
Checks With Attachments.
of items with
be
to
thought
attachments
unnecmakes exceptions which are
in every
essary, and it is felt that as these items are legitimate
Way, and their handling is a part of the business of every commercial bank, that the Federal Reserve Bank could properly
receive them for credit without restrictions.
instructions
Special
Items
Instructions.
are
special
with
ineligible as cash items.
The handling
of such items in the same
banks
is
manner
by
handled
they
a service
commercial
are
as
by the Federal
Which your committee
feels could be well adopted
Reserve
Bank.
Mail Schedules and Flat Deferment.
It is felt that more
country banks would use the collection system, and that its popularity
Reserve
Bank
Federal
if
increased
the
be
were to
would
establish a flat deferment time on items drawn on banks within
the
There has been a tenstate
classifications.
and
on
other
dency toward
of deferment,
of the classifications
elimination
and the adoption of this principle would permit banks not now
using the
Time
collection system to do so by such simplification.
schedules
be
the memand
shortened,
possible
should
wherever
bers
given any benefit which has been brought about by the use
of air mail.
The last two recommendations
might possibly require the Federal Reserve Bank
at times to absorb a small volume
of float, but
limitations
this does not seem uncertain
within
sound
or undesirable.
Closing Hours.
Dallas
bank
is
It
that
the
and
recommended
the branches
the
time
to
of arrival of mail
give
consideration
trains
banks
in
those
the
and
cities
needs
of
member
within
fixing
their
hours for receiving deferred items or items on members
the
house
if
of
reserve
city
clearing
necessary, extend
and,
the time
for receipt of such items each day so as to permit the
banks
to make deposits of such items received late in the day.
Regional Clearing Groups.
Your committee believes that the
establishment
of regional clearing groups might well receive
consideration
Federal
Reserve
Bank
Dallas.
the
Such
of
of
groups have
been found feasible in other districts,
facilitated
and have
the
items
float.
This
of
cash
and
collection
reduced
plan
in the Panhandle
the
Rio might be found of advantage
section,
Grande Valley
in
Central
West
Texas, Central Texas
section,
the in East
Texas.
Their practicability
by
could be determined
dwouldorequire
desirable.
clingcerta and the
others
Such anplan
n sections
agency with daily telegraphic
reports to the Federal Reserve
Bank or Branch, to which the group is attached.
Items could be
exchanged by the banks directly, with a daily report to the agent,
who would wire the Federal Reserve Bank the figures each day.
Entries to reserve accounts made by the Federal Reserve Bank
It would, of course,
would result in settlement
of the net result.
be voluntary on the part of the member banks, and is an innovation which might not prove of practical value.
The committee
feels, however, that it is worth a trial, which would involve a
minimum of expense.
Collection of Non-Cash Items by Federal Reserve Banks and
law,
Branches.
This function not being mandatory
the
under
it is recommended
that consideration
be given by the Federal
Reserve Board and the Federal Reserve Banks to its abolishSuch action, if taken, would of course have to be applied
ment.
to all Federal Reserve Banks and Branches.
Your committee feels that such a service was never intended
by the framers of the Federal Reserve Act. Its benefits accrue
to a limited number of business concerns at the expense of a
There is no uniformity
smaller group of banks in certain cities.
in the plan as its application
to these certain cities controverts
the' rights of member banks specifically
given in the act. viz.,
that of making a charge on presentation
items which under
the same plan is permitted
to banks outside of these specific
cities.
It is incumbent upon commercial banks in the cities to mainfrom
tain well equipped collection departments,
to
and
receive
various sources items drawn on local individuals
and concernsin
for payment.
These departments
which must be presented
of
do
have
income
to cover the expense
many cases
not
sufficient
Reserve
This
fee
by
Federal
the
maintenance.
service given
these
Banks and Branches
further
from
the
reduces
revenues
collection departments,
and sets up a situation which is regarded
by your committee
as unfair, especially when it is considered
that these same banks furnish a large proportion
of the capital
Fedthe
and reserve funds, the earnings from which are used by
eral Reserve Banks to pay the salaries of runners and clerks
other expenses connected with this work.
ReNot only does the system penalize the banks in Federal
the
serve cities, but it is unsatisfactory
and in ill repute with of
business interests
of those cities, because of the inflexibility
the Federal Reserve requirements
in the payment of these itethe
Commercial
banks are equipped to give mobile service to
public in these matters,
are in possession of credit informatar
which makes unnecessary
unwieldy rules of conduct andBan ks
The Federal Reserve
chartered to take the risks involved.
puof
the
in
this respect and their dealings with
are not prepared
Many
lic therefore
are unsatisfactory,
often in the extreme.
the items coming to the Federal Reserve Bank are termed in
drafts"
payments,
banking parlance "dunning
and installment
institutions
those
dignity
the
lowers
handling
of
the
of which
the
directly
deal
to
public.
with
which were never organized
The abolition of this system would not penalize the country
banks.
Very few of them use it, and those who do could receive
banks, passing the
the same service through their correspondent
banking
that
their
back
to
of
rule
age-old
an
under
cost
customer
by
the
items
custopaid
are
always
exchange costs on non-cash
mer receiving the benefit.
This cost is part of the expense of doing business by the
point,
merchant, manufacturer
or other seller at the originating
The law
and is or should be taken cognizance of at the source.
specifically recognizes that a charge of not to exceed 10 cents
on the hundred is fair and equitable, and those benefiting by the
Waiving of it at the Federal Reserve centers are not entitled to
It would be impossible for an allowance to be
profit thereby.
made at the source for that portion of goods which might be
sold in Federal Reserve cities, and therefore prices must be loaded with the cost of collection, and to that extent the seller profits
doubly and unrighteously.
This is certainly a perversion of the
slogan, "less government
in business, more business in government."From
the information
can gather, it is not
your committee
Wanted by the payers of the drafts or by the member banks,
and only inures to the welfare of a few concerns which, due td
some peculiar trade practices,
receive a service to which they
are not equitably
entitled.
It has always been the theory in Federal Reserve legislation
and practice in operation that the reserve banks shall not be in
competition with their members and the handling of these drafts
violates that
because it deprives a memflagrantly
precept
most
ber
of a legitimate
source of income (recognized as legal in the
'ase of
for the
the
same
act)
not
other
under
created
members
benefit
of another member bank in the same or another district,
"t to Put it in
lit
the
the
end
at
of
e
seller
pocketcollected
line
from the buyer.
who has already
Conclusion.
in a constructive
These
are
made
suggestions
spirit
It is certain
by the officers
that they will be received
Federal Reserve Bank with the same sympathetic
conSithe
side1ation that
been
in
have
the past.
recommendations
all
such
The
evolution of the transit system makes adjustments
necesSarY from time
have always reto time and these adjustments
,eived the
bank. The comthought
the
the
earnest
of
officers
of
mittee is
that they have every desire to give the broadconvinced
est service
possible to the members and that if these recommenhave
find
they
will
a way, if possible, to effect
merit,
tations
hem.
Respectfully
submitted.
(Applause).
THE PRESIDENT: Gentlemen,
from the two reports
you have
heard, I think you ought to do the Advisory
Committee
the honor
to say that they have selected
good committees
and they have
It also occurs to me that Mr. Woodson
made good reports.
made
that
a wise suggestion
at our last meeting
when he suggested
these by committees,
it.
we handle
and you adopted
Is there any discussion of this report?
We would
to hear from you gentlemen;
they should be discussed.
be glad
MR. W. S. FANT: Mr. Chairman,
I have appeared before the
stockholders'
meeting at one time in the past in opposition to
I think
what has been suggested by Mr. Lawder in his report.
that Mr. Lawder, and probably other city bankers, bankers located in cities where there are Federal Reserve Banks or Federal
Reserve agencies, overlook the country banker's viewpoint of the
I do not know the relative number of city or country
matter.
bankers, but I daresay that the recommendation,
if carried out,
I say
would inconvenience
more people than it would profit.
that on one side is the profit to the bankers located in Federal
Reserve cities and on the other the convenience
of the manY
It is a facility that we as country bankers
country bankers.
to
items
direct
appreciate
very much-that
of sending certain
other Federal Reserve banks for collection to the credit of our
I can make the point by reciting how we
account in Dallas.
employ the facility : When we buy commercial paper, if we have
a note due in Chicago on a certain date, we send it to the Federal
Reserve Bank of Chicago for collection and they credit our acWe do the same way if it is the St. Louis bank
count in Dallas.
If we have a cotton draft in our hands on Houston
or elsewhere.
in the afternoon, while we could have it in the hands of the Fedto
Reserve
Bank
in
Dallas
the next day, we send it direct
eral
Houston, because it is payable there, and that cuts out one daY'
by having the advantage of the Federal Reserve Bank of Houston
make the collection for us.
I can give you another illustration:
I may have made allu-t
We had occasion some time ago to collect
sion to this heretofore.
We sent it direct there,
an insurance policy on Minneapolis.
Dallas
forwarded
they
the
was collected promptly,
payment and
bank was notified by wire and we got credit for it instanter.
In the fall of the year we sometimes have cotton drafts that
AnSan
go to certain places. We have pecan drafts on St. Louis,
tonio and other places.
It is true so far as San Antonio is co
cerned we have never yet employed that manner
of making
collections.In
the
handling, for instance, a grain draft or flour draft on
it
come
Paso,
instead
El
it
for
having
Dallas,
of
city
of routing
The
back over the line it went, we route it direct to El Paso.
ourand we congratulate
service has been very satisfactory,
it,
that
it
times
and
use
we
selves on the availability
all
at
of
we are constantly
using it. If the country bankers in this district are not employing that service, they are simply denying
belonging to the Federal
themselves one of the real advantages
Reserve System.
I feel, as I said at first, that on one side is
the convenience of the bankers of the country, and on the other
side is the profit the Federal Reserve Bank might obtain if the
practice in vogue now should be abolished.
I, for one, object to the report just made with respect to the
(Apcollection of non-cash items by Federal Reserve Banks.
plause).THE
I promised
SECRETARY: Mr. Chairman,
several people here
not to make remarks,
but being in a reserve
city bank I can
hardly
he
impression
that
the
Mr.
Fant
entertains
sit still while
seems to have.
I do not know what banks you have been doing
business
but it has never come under my obserwith, Mr. Fant,
vation that reserve
correspondents
city banks have ever charged
on cotton drafts
We are not able
items collections.
or non-cash
to do it
The same thing
you speak
with our correspondents.
about as being available-drafts
on Chicago
placed in Dallas for
Your credit-that
by
is
bank
you
your
given
commercial
service
reserve agent at that point.
What Mr. Lawder
to was
referred
the
items that come into the reserve
out-of-state
city that have
always borne exchange
that
system
costs, but under the present
exchange
bank in Texas can
The country
has been eliminated.
get the same service from its reserve
bank in a reserve
city
as
the Federal
Bank.
Reserve
There is nothing to be gained by the country bank in the
maintenance
of this collection system that Mr. Lawder spoke
of in so far
handling of non-cash items, that I have ever been
as
able to determine.
MR. FANT: I beg
There were some points I did not
pardon.
outline in
In a small bank like ours-town
talk at first.
of
my
about
Fort
in
inhabitants-we
thousand
six
one
account
carry
Worth,
one in Dallas, another in New York. That is the extent
of the
haven't
have,
therefore,
accounts
a corresponand
we
we
dent in
Kansas City, Chicago, or St. Louis, or any of these places ;
there is
Formerly there
for us to keep one there.
no
necessity
were
certain services we wanted those cities to render us by our
correspondents
We are no longer required to do that.
there.
We
concentrate
balances in these few banks I tell you of
our
with whom
It is not the matter of charge that
we do business.
t had
mind, that it might be less expensive to collect through
them, in
but it is the
direct
time
the
Time
of
and
saving
service.
is the
whole element, the direct service that we have.
We recently had a ten thousand
dollar check on Oklahoma
City. We had it Saturday afternoon.
If we sent it to Dallas it
to
have
hand
Monday
be
Dallas
would
on
morning and still
at
to
City
for
As
it
direct
Oklahoma
to
go
payment.
was sent
Oklahoma City it was ready for payment Monday morning; we
saved two days on it.
I, for one, believe in studying the Federal Reserve regulations
I want it. I want to say that
closely. If there is any advantage,
for any
the direct collection facility has largely compensated
(Applause).
offset.
THE
PRESIDENT:
Gentlemen,
that
is
what
we
are
here
for,
to
get all the good things that we can for the member banks and we
(no reAny other remarks?
want a full and fair discussion.
If not, Mr. Secretary, what is the next on the program .
sponse).
THE SECRETARY:
Arcadia,
Louisiana,
step forward.
THE PRESIDENT:
by Mr. W.
We have
the report
Mr.
on the Eligibility
of Paper.
Gentlemen,
Mr.
W. M. Deas.
M. Deas,
Deas will
(Applause)
MR. DEAS:
Mr. Chairman
and Stockholders
of the Federal
Reserve
Bank:
As chairman
of your committee
on Eligibility
is
it
Paper,
have
that
I
found
that we
of
want you to understand
as
in all of its peculiarities
this subject
almost as hard to present
it is for a man to take a fish hook and common
line and attempt
to fish all over the Atlantic
Ocean without
the use of a boatHe will find at the end of a long and hectic career
that there is
I am sure that after we have finished
quite an area never fished.
will
this report
to you, many
thinking
presenting
men
of you
I
find many
thing
that
in this report.
we have not touched
it from our own viewpoint
assure
you we have studied
and necin a rather
While we may have only
essarily
restricted
way.
of
dabbled,
it
in
the
this
as
were,
shallow
waters
of
vast ocean
I feel it is possible
that we have uncovered
eligibility
problems,
Disfew
things
interest
benefit
Federal
Reserve
to the
a
of
and
trict No. 11.
this
We want you to understand,
in
gentlemen, that
selecting
that you selected men from comparatively
small
committee
banks, men who do not know from actual experience the problems that confront the man who attempts to run a big city bangt
th
Consequently,
having
these
not
problems, it is impossible
However, we hope that our report
we should suggest a solution.
the
be
the
of
may
cause of promoting
a better understanding
position of the Federal Reserve Bank relative to the accepting
to real'
the paper presented to them, and cause the stockholders
ize that there are certain conditions, certain restrictions
imposed
upon the Federal Reserve Bank which they cannot refuse to obey
without violating some of the Federal Reserve Act, or disobey'
ing some
board
Board,
Reserve
Federal
the
the
which
orders of
of
is the court of last resort to every Federal Reserve Bank.
is
know
I want to assure
that
not perfect.
our report
we
you
Even if it had been
been
have
it
today,
necessary
would
perfect
to revise it
take
to
take
tomorrow
care of
and
advantage
again
the changed
day
from
to
that
financial
about
come
conditions
day.
from time to time to
It is necessary
to revise a dictionary
make place for new words and meanings
coming into use in the
English
In the course
So it is with our report.
language.
of
time in
is
development
business
along
approached
and
occurs
all
different
be
It
into
different
directed
will
channels.
areas and
it,
but
necessary
to
proband
revise
our report,
correct
not only
Board.
Federal
Reserve
ably to revise the rulings
the
entire
of
I will state before proceeding
in our report we have made
this report
the digest as it is shown, not twenty-five
years
on
hence. I
the
will state that in order for a man to understand
applications of eligibility to paper presented to the Federal Reserve Bank for discount or for approval, and to determine whether the law that governs such things is flexible and comprehensive enough to meet the demands and requirements
of the banks
Who contribute
to the reserve deposits of the Federal Reserve
Bank
to study
its existence possible, it is necessary
and
make
this law in
and to determine
what
all its many ramifications
classes of
law today and what classes of
to
that
paper
conform
industry
or business are not protected by the rules of law that
govern it. We
that the Fedalso, gentlemen,
remember,
must
eral Reserve Bank
Federal
Reserve
Bank
Dallas,
or
any
other
of
has
discretionary
in eligibility.
to
no
changes
powers
relative
Conditions
that were fixed and determined
and set in motion
the Federal Reserve Board that
to
control
every
question
as
the
application of eligibility must of necessity be referred to and
passed
Board,
board
by
Reserve
in
Federal
the
upon
which
acts
the
same capacity to the Federal Reserve Bank in such matters
the Supreme Court
in
law
of
matters
which might affect
acts
the jurisprudence
of the state.
I Will
I
things
that
state
are
am
sure
a
great
many
also
charged to
adverse eligibility rulings which properly should come
under
our failure to meet the requirements
of acceptability
and
that
in a great many instances we confuse these two terms and
in our
Reserve
Bank
bank
criticism
Federal
this
the
charge
of
With being
bolity
arbitrary
and hard and with having fixed the eligirequirements
high it is impossible for the ordinary bank
so
attain to there.
I assure
difference
between
is
there
you
a
vast
eligibility
d acceptability.
A thing may be eligible and not acceptable ;
it
For example, a note may
bemüb be acceptable and not eligible.
for
the
credit information
be sorvague,
inadequatle
thercollateralno
Again,
from a credit
be acceptable
that it cannot
standpoint.
it
is
be
that
may
clearly
as
acceptable,
submitted
a note may
five times the amount
have collateral
of the note, and the note
as would be the case if the note were submitted
not be eligible,
of land or the purproceeds
of which had gone for the purchase
improvements
on land, or making
any permanent
pose of making
of
improvements,
of which had gone in something
or the proceeds
a speculative
character.
There are other things that destroy eligibility, for instance
a note given for the purpose of buying goods for resale, a noteA
bills for merchandise.
given for the purpose of discounting
note, the proceeds of which have not been used for agricultural
days
bear
date
in
purposes, must
maturity
not
excess of ninety
for discount; if it bears greater date of
of date it is submitted
it
maturity
than that, it is not eligible regardless
of whether
has fulfilled every other eligibility requirement
or not.
Going forward on the assumption
and belief that the stockholders of the Federal Reserve Bank of the Eleventh
District
do not fully understand
but on the
the eligibility requirements,
their
contrary they have in a great many cases misunderstood
application
and that they cover a larger area than popularly
it
as
supposed to cover, we have fixed and arranged
a resume,
were, of what constitutes
eligibility under the revised ruling and
have attempted
things
to thus enumerate
the
some of
many
be
rewhich conspire to destroy eligibility-things
which may
moved and in a great many instances cured with little effort.
deYou will find in the caption proceeding a rather lengthy
scription of what constitutes
eligibility these words:
"The Federal Reserve Board, exercising
right
its statutory
eligto define the character
draft,
bill
of a note,
or
of exchange
ible for discount at a Federal Reserve Bank has determined that
it must be a negotiable note, draft, or bill of exchange which has
been issued or drawn or the proceeds of which have been used
or are to be used, in the first instance, in producing,
purchasof
ing, carrying or marketing
in
goods
one or more of the steps for
the process of production,
or
manufacturing,
or distribution
the purpose of carrying or trading in bonds or notes of the
ap
States
the
to
transaction
must
ed
and
name of a party
such
pear upon it as a maker, drawer, acceptor or endorser."
So you can see that the thing that brings about eligibility
in many cases, is the course that the proceeds of the note have
been
have
in
gone;
other words the thing to which the proceeds
appropriated,
and its eligibility must of necessity be obtained
therebefore acceptability
be
It is necessary,
can
recognized.
fore, to study this question in all its eccentricities
as a
mental basis upon which acceptability
may be builded.
One of the many things that may conspire against eligibility
is the form of the note. A note may be drawn in such form that
is one of
under the law it is not negotiable, and its negotiability
the prime and elemental factors of eligibility.
It is necessary to
study this element first.
It does not matter what the proceeds of the note are drawn
for, it does
that
is
that
the
secures
collateral
what
not matter
note, it does not matter whether it is for agricultural
or commeris
cial purposes-if
the note is so drawn that its negotiability
either impaired or destroyed, then its eligibility is automatically
destroyed.Then,
is
the
that
the
note
always
assumption
on
advancing
so drawn
be questioned,
that its negotiability
we have
cannot
then to
further
eligcircumscribe
requirements
consider
what
ibility.Eligible
in a general way is paper which in a reasonable
paper
length
time will produce the funds with which to liquidate
of
itself
in the following list of paper,
and may be comprehended
prepared and determined and fixed and classed as eligible paper :
First.
A farmer's note, the proceeds of which have been used
or are to be
used in the carrying on of farming operations.
Second.
have
been
the
A farmer's
proceeds
of
which
note
used or
live stock.
are to be used in purchasing
Third.
A farmer's
the proceeds of which have been
note
used or
farm implements.
are to be used in purchasing
Fourth.
A farmer's
the proceeds of which have been
note
used or
to be used for the purpose of carrying agricultural
are
products by the
grower thereof pending orderly marketing.
Fifth.
A stockman's
the proceeds of which have been
note
used or
live stock.
are to be used in purchasing
Sixth.
A stockman's
the proceeds of which have been
note
used or
to be used to defray current operating expenses inare
Curred in handling
of live stock.
Seventh.
A stockman's
note the proceeds of which have
been
used or are to be used in fattening
live
or
marketing
of
Stock.Eighth.
A
the
have
been
merchant's
note
proceeds
of
which
used
or are to be used in discounting
bills.
Ninth.
A
the
merchant's
note
proceeds of which have been
used
or are to be used in purchasing
merchandise.
Tenth.
A
the
merchant's
note
proceeds of which have been
used
or are to be used in defraying current operating
expenses.
Eleventh.
The obligation of a factor issued as such making
advances exclusively
in their raw state.
to producers
of staple agricultural
Obligations
Twelfth.
issued
for the
or drawn
in bonds or notes of the United
carrying
or trading
ernment.Thirteenth.
products
of
purpose
GovStates
Bills of Lading payable at sight or on demand
of non
which grow out of the domestic shipment or exportation
perishable,
readily marketable,
agricultural
and other products.
In order that you may not be confused in the statement
of
the digest, you will find that where the word "goods" is used it
is construed
to include goods, wares, merchandise,
agricultural
products or live stock.
These, my friends, constitute
practically
all held as eligible
paper. Now we will give you what under the ruling constitutes
ineligible paper. Under a caption almost identical with the one
I just referred to, we find these words appended:
"The Federal Reserve Board, exercising its statutory
rights
to define the character of a note, draft, or bill of exchange eligible
that it
for discount at a Federal Reserve Bank, has determined
of
be
draft
bill
the
must not
a note,
or
proceeds to
of exchange
which have been loaned to some other borrower
except as
paper described under Section VI (b) and VIII of the Regulations. (This refers to Number 11 above which permits Cooperative Marketing Associations to advance to the original producers
for
for the purpose of holding
of raw agricultural
products
this paper is eligible).
orderly marketing,
It must not be a note, draft or bill of exchange the proceeds
or
have
been
be
for
to
of which
used or are
used
permanent
fixed investment
of any kind such as land, buildings, machinery,
o
draft,
for
it
or
any capital purpose; and
must not be a note,
to
bill of exchange the proceeds of which have been used or are
be used for investments
of purely a speculative character."
air
Therefore,
proceeding
on the prohibitive
requirements
we
Reserve
Board,
statements
of this Act of the Federal
ible
inelia
list of what constitutes
submitting
you the following
paper:First.
Obligations the proceeds
are to be used in buying land.
Second.
Obligations
the proceeds
or are to be used in erecting buildings.
Third.
Ohlivations
tha
nrneearlc
01'
of which have been used
of which
of which
have been used
have
been
or are to be used in purchasing
machinery
or fixed equip
(This does not refer to farm implements
bought by farmers
be used in his farm operations).
Used
the proceeds of which have been used
Obligations
Fourth.
or are to be used for any capital purpose.
Fifth.
Obligations the proceeds of which have been used or
are to be used for investments
of purely a speculative character.
Sixth.
Obligations the proceeds of which have been used or
are to be used in making loans to some other borrower. (Except
the paper of a Cooperative Association
who advances money to
the grower of raw agricultural
products to permit them to carry
such products for orderly marketing).
issued or drawn for the purpose of
Seventh.
Obligations
carrying or trading in stocks and bonds or other investments,
GovUnited
States
the
bonds
securities,
and notes of
except
ernment.Eighth.
Obligations
of school teachers, lawyers, ministers,
Physicians
in
kindred
who
are
not
engaged
professions
and
farming
(However, if a man engaged
activities.
or
commercial
in these
of such professions,
or these activities,
enterprises
should submit a note which is clearly shown to be for commercial or agricultural
is
for
disthen
that
note
eligible
apurposes,
count).
This, as I understand
it, constitutes
what under the rulings
is held as ineligible paper. However, as I stated, there are many
other things that may conspire against eligibility ; for instance:
note given for commercial
purposes as I stated must have
maturity
for discount;
a
of ninety days from date submitted
note given for
live
includes
stock
purposes,
which
agricultural
must have
a maturity
not to exceed nine months from the date
submitted for discount.
In addition to these prohibitive measures, we find this: Where
a note is
to or in excess of five thousand dollars, or
given
equal
equal to
in
the
the
ten
member
or
of
capital
of
per
cent
excess
of
bank,
unless secured by warehouse receipts or terminal receipts
some other receipt covering goods in storage, or unless secured
by
for
lien
live
prior
stock
either
shipment and sale or
on
for .valid
fattening
Government
by
for
the
market,
unless
secured
or
bonds
or notes, it is not eligible unless the member bank ceres that it has a statement
borrowers on file. If a note is
of
submitted that has
the endorser on file, the
only
a
statement
of
note is
however, if the note is a joint note, then the
not
eligible
;
statement
the
of
makers will cover every eligibility
of
either
requirement,
provided it is otherwise eligible.
While this
from every
the
makes
note
appear
as
eligible
standpoint,
still its credit acceptability
must be passed upon and
deterI
by the Federal Reserve Bank itself, and if the credit
rmined
oration
is not such as to show strength
t1le loan,
enough to warrant
then the loan must be refused, however it may have
fulfilled
every other eligibility requirement.
I will state further that while the Federal Reserve Board has
be on file with member bank on all loans
a rule that statement
equal to ten per cent of the capital of the member bank, unless
secured, that the Federal Reserve Bank of Dallas maintains that
it is necessary
to get and submit a financial statement
on all
dollars,
unsecured loans equal to or in excess of one thousand
which in a great number of cases is to ascertain their eligibility
or in every case to determine their credit acceptability.
I will state further
that the gross total amount
of the notes,
drafts
bearing
the name or endorsement
of
or bills of exchange
that may be
any one person
or firm or company
or corporation
discounted
by any member
bank whether
shall
state or national
at no time exceed ten per cent of the unimpaired
and
capital
However,
does not cover
this restriction
surplus
of such bank.
the bills of exchange
drawn in good faith against
existactually
ing values.
While the Federal Reserve Bank may discount paper in the
sum equal to ten per cent of the unimpaired capital and surplus
of a national bank, yet it can not discount for a state bank any
portion or part of the line of a borrower who is indebted to the
state bank in a sum in excess of what he would be permitted
under the law to owe to that bank, or borrow from that bank,
were it a national bank.
Consequently,
we will see that aside from a few subsidiary
or
that
the thing
that
elements
and provisions
makes
either
destroys
is the use to which the proceeds
eligibility
of the note
has been put. I am sure that in the experience
of the member's
been
Federal
Reserve
Bank
Dallas
this
have
that
there
of
of
many cases on record where a note has been accepted
as eligible
when it was shown that it was for commercial
or agricultural
purposes,
when
almost
every
other
condition
may have conit.
spired against
and
I will state further
when you take a literal
assumption
Reserve
Board
carry
application
of the rulings
of the Federal
it shows
for the reason
over paper is not eligible for discount
loss in the year's operations.
Yet this restriction
has never been
the
for
by
Federal
Reserve
Bank
Dallas
the
rigidly
enforced
of
ban1;8
in
instances
it
hardship
reason
some
on
entails
quite
a
of
failures
have
in a number
where
crop
prevailed,
and that
is
to be technically
cases what
appeared
carry
over in reality
It is hard to fix the line of demarkation
from the stand
not.
Reserve
Consequently
the Federal
point of equity
and justice.
Bank has given the member
banks the benefit of the doubt.
con,
the
Federal
Reserve
Board
further
that
provides
without
sent of the Federal Reserve
shall discount for a member
Board no Federal Reserve
bank any paper acquired from
non-member
bank, or bearing the name or endorsement
of a
non-member bank. However, the Federal Reserve Bank may disbearing
the
count bankers' acceptances
paper
eligible
other
or
name or the endorsement
of a non-member bank, provided such
Paper was acquired by the member bank in good faith through
open market transactions
and from some other party than the
non-member
is to withbank. The reason for this restriction
hold the benefits
from
System
those who
Reserve
Federal
the
of
do not
to its support and existence.
contribute
Our committee was informed by the Bank of Dallas that the
Federal Reserve Board has
an amendment
under consideration
to this
which will permit the Federal Reserve Bank of Dallas
to discount bills
drawn
demand,
drawn
or
on
at sight
of exchange,
on foreign exportation,
readily marketable
of non-perishable,
staples, where these staples are secured by bills of lading or by
other shipping documents which carry title to the goods, even
though these drafts
of a
may bear the name or endorsement
non-member bank.
Pending the final enactment of this amendment,
the Federal
Reserve Board has
authorized the banks to discount all this class
of Paper by the member banks provided report is made in each
instance to the Board. The
reason I see for making exception to
this form
forms
bearing
is
to
other
contradistinction
of note
name and endorsement
bank is that it is
of a non-membership
one that will readily liquidate itself in a few days, and one that
is required in the
general course of business.
I want to assure you gentlemen
that it is hard indeed to
discuss this
question, the subject of eligibility, without diverg111 from the true
out into credit acceptcourse and branching
ability or
kindred subject and confusing the mind of
some
other
the hearer
to the real mission of our committee. As I underas
stand it
to determine
what constituted
our
was
not
committee
acceptable
to determine what constituted
commercial
paper,
nor
01'agricultural
but their mission was to show forth clearly
paper,
"'hat
the paper and to make such recomconstituted
of
eligibility
mendations to these
to the Advisory Board as
and
stockholders
rn our
facilitate
handling
better
the
opinion
of paper
would
tll1Oughout
District,
jeopardizing
Eleventh
the
the
syswithout
tem by
tying up funds in paper that would stagnate business or
nlal;e it bulky
or ponderous.
One
to suggest to these stockof the amendments
want
we
ders is that the Federal Reserve Act be'e
to
amended
so
as
conform
ca
to the Revised National Bank Act which in one case
jlerrnits
lend
bank
to
twenty-five
to
a
national
an
amount
equal
per cent
its capital and surplus when secured by livestock;
of
a Percentage
in
instances
loan
bank
to
to
fifty
some
allows
a
up
per
Cent of its capital and surplus where the loan is secured by
°arehouse
tickets of non-perishable,
readily marketable
goods.
This amendment
would have the effect of allowing the Federal
Reserve Bank to discount its paper in the same ratio that under
the law the national bank might accept it. This provision would
that the Federal Reserve Bank be allowed the
carry further
option at any time when a note is submitted to them that exceeds
ten per cent of the capital and surplus of the offering bank that
it is made for the purpose of carrying
they demand-and
or
lending on live stock-that
to demand colthey be permitted
lateral security not in excess of 140 per cent of the total line. We
believe, too, with present rules and regulations
the Federal Reto make loans in excess of ten per
serve Bank is not permitted
cent of the unimpaired
capital and surplus of the member bank
which in this instance just recited causes the bank to hold some
15 or 40 per cent of paper which is a disadvantage
to the bank
dealing in that business.
It seems to us that if right and proper these banks be
these
then we should have legislation
awarded
privileges,
whereby we would get relief and be able to indulge more freely
in the provisions of this act.
I would like for the
report is finished.
stockholders
to discuss
this
when
the
Considering
the Federal Reserve Bank eligibility from evert'
tile
District,
the Eleventh
believe
that
angle as regards
we
present requirements
with the amendments
we have offered are
adequate for the need of the officers of the Federal Reserve Bank
provided these things are adequate for the needs of the Federal
Reserve Bank and that any other enlargement
upon these requirements,
unless some new form of business or finance should
develop, would be calculated to produce undue expansion of finance or credits in a field already covered with non-liquidating
assets.We
think that we have shown clearly that practically
every
form of paper that is submitted
may be eligible, provided that
for
is
the
that
paper
not, or
proceeds of
paper are not, used
capital purposes or for the buying of land, or for making investments in buildings on land or something of a permanent
nature,
or for the purpose of buying and operating in stocks and bonds
Consequently
other than United States Government.
we believe
fol'
that our present
requirements
and needs are fully cared
We would suga'esä
under the regulations
as they now stand.
however, that the member banks use as much of their deman
funds as possible in eligible paper, using only such funds as come
from time loans, not loans that cannot be readily made eligible,
be
to
using this eligible paper as a form of secondary reserve
that
in
times
for
used
of stress, and as a guaranty
conditions
his
might come about when a man needs money and when
note case is filled with paper he can only use to borrow.
We would also like to recommend
that the bankers
over the
Eleventh
they
District
to raise the standard
of paper
attempt
accept, also collateral
and follow as nearly
as possible
security,
the rules
and eligibility.
acceptability
governing
and regulations
We
is brought
to conform
to these
believe if paper
confidently
rules and regulations
the bank failures
must be at a minimum.
We do
Federal
by
imposed
the
believe
these
requirements
not
Reserve
do we think
that
they have
Board
neither
are hard,
banks, but when
imposed impossible
upon the member
conditions
these
have been put in operation
amendments
we have mentioned
We believe they are calculated
to make stronger
and safer financial fabric.
I want to assure
you, and every man here today knows, that
the success,
Reserve
SysI might
say existence,
of the Federal
tem today depends
In
banks.
upon the success
of the member
order that this success and prosperity
may abound it is necessary
that the Federal
banks enter into
Reserve
Bank and the member
a coordinated
for the people at large and for
effort to produce
every form of business
and satisfactory
adequate,
safe,
sane
an
banking
believe
facility.
We confidently
that this can be done
Under the present
the bankers
post themrequirements,
provided
,n(-'Ives upon the requirements.
Consequently
that some plan be inaugurated
to
we
suggest
bring this
about. In fact we do not believe it would be unwise
11 the Advisory Board
would suggest that we spend one hour
at each of our stockholders'
teaching
the member
meetings
bankers
the elements of eligibility and acceptability,
selecting a
an capable of handling this subject in all details, and who is
c011lpetent to
to him by men who
answer
any
question
proposed
1'eally want to know the facts. I believe I
would be safe in saying
at there are but very few country
I might
bankers
and
say
,
`'vin very few
this subject
bankers,
have
of eligcity
who
studied
ibility
know
in
They
the
except
almost
way.
cannot
a
restricted
bOL1ndless
be extended
through
to which
ends
may
eligibility
pr°per
preparation
and application.
Consequently,we
my friends, itthe
brin
Eleventh
done
District more good
Un anything
for it is the belief of
could
we
possibly
suggest,
e0 Eoard
that
instructions
how
to
attain
our
present
we
need
on
igibility
elli
than to make demand for further
privileges,
rather
% ans
0 on them, aside from what few recommendations
l
we
NOW, Mr. Chairman,
I
this
our
report.
assure you
concludes
W
illinh ä sincerely we have performed the mission that you had
when you selected us, and we hope further-every
ber
be,
memOf our committee-that
have said or produced something
we
at
ill e of material
to thehave
e vil th Federal Reserve Dibenefit If
accomplished this,
strict.
we
then I assure you we do not regret
we have given.
I thank you.
(Applause).
THE PRESIDENT: Gentlemen,
did report
made by Mr. Deas.
the time and the study
that
you have heard the full and splenIs there any discussion?
MR. ALDWELL: I make a motion
(A second).
that
it be adopted.
THE PRESIDENT: It has been moved and seconded
Those favorable,
aye. Carried.
port be adopted.
Now, gentlemen, no further
not the season to discuss it.
discussion.
this
that
It is adopted
re-
is
it
and
disWe have among
this
two
others
attending
convention
I refer
tinguished
to the President
gentlemen.
of the Texas
BankBankers'
Association
and the President
of the Louisiana
Are they present?
If so
Mr. A. A. Horne
ers' Association.
is. Mr. Horne
is President
Bankers'
Association.
of the Texas
(Applause).
Mr. Horne,
we want you to know we are honored
in having you present.
He was here
Is Mr. P. C. Willis present?
a moment
ago.
Now, gentlemen,
the By-Laws provide that the chairman
and
Committee
the Nominating
shall appoint two committees,
the Committee on Resolutions.
At this time I am going to ask
the Secretary to please read the list of these committees.
THE
SECRETARY:
(reading)
Personnel
Committee :
of Nominating
A. M. Graves
P. C. Willis
R. W. McAfee
Pat Williams
G. A. McCreight
Ed H. Winton
Jno. E. Owens
Personnel
of Committee
S. L. Bedford
C. F. Drexel
Oral Jones
on Resolutions:
0. B. Norman
Geo. E. Webb
Francis H. Welch
THE PRESIDENT: These
committees
at the proper time and attend
organize
sure it will be done well.
Now, what
THE
aI"`
I am
is it?
time
SECRETARY:
will get together
to these features.
It
is
now
A MEMBER: Mr. Chairman,
12:330.
do I understand
(401
the restilIt'0115
provided in these addresses will be referred to the Resolutions
Committee, and will they finally make recommendation
back to
us?THE
that would be a good plan. I
PRESIDENT: I would think
We
have
notice that several committees
not
suggestions.
offered
I will rule
Passed on them.
If that is satisfactory,
gentlemen,
that they be passed
(No obto the Committee
on Resolutions.
jections).
It is so ordered.
Is
We have thirty
there any matter
1
o'clock.
until
minutes
that you
You
that
hour?
discuss,
to
carry
past
which
won't
wish
I
luncheon,
been
invited
to
remember
just
have
am sure
and
we
least your chairman
you would want
time-at
to go at that
(No rewould. Is there any other matter
you want to suggest?
sponse).(Adjournment
was here taken
Meeting
THE
until 2 o'clock p. m.)
called to order at 2:10 o'clock.
PRESIDENT:
Is Mr. Francis
is absent.Mr.
Gentlemen,
Welch here?
the
meeting
(No response).
will
come
to
Mr. Francis
order.
Welch
Secretary,
we will proceed with the program.
THE SECRETARY: The next committee to be heard from is the
one on Rediscount
Mr. S. M.
Rates and Uniformity,
of
which
McAshan,
National
Commercial
South
Texas
President
the
of
bank, Houston,
Mr. McAshan, however, has been
is chairman.
unable to be here. We
ask Mr. J. W. Wheeler,
will, therefore,
as a member
to read Mr. McAshan's report.
of that committee,
THE PRESIDENT: Mr. John Wheeler, please come forward.
Mr.
Wheeler.
President of the Texarkana
Gentlemen,
Mr.
Wheeler
is
National
he has a wonderful
Bank.
You
know
(Applause).
all
bank,
(Apmade a wonderful success. He was raised in Tyler.
P ause).
Mx. WHEELER: (reading)
Pursuant to request
Mr.
Chairman:
fro m
Mr. Longmoor, your committee on RedisYour Secretary,
eount Rates
has the pleasure to present hereUniformity
and
with its
interested
We
have
been
second
observers
of
report.
the
policy of the Reserve Banks and Federal Reserve Board since
our last
District
has
in
Eleventh
The
the
report.
rediscount
rate
been
raised
from 41/2 per cent to 5 per cent per annum since our
oast
report. We expected this increase in the rate would be made,
s it has been.
We have been very much pleased with the administration
of
our Reserve bank over the period intervening
since last June.
It appears to us that the bank has been conducted in a manner
It appears to us that
advantageous
and beneficial to its members.
the policy of the Reserve System as a whole has been a good
one; that the exercise of moral suasion, rather than further
We hope to see
rediscount rate increases, is the correct course.
this policy continued and credit rationed where there appears
to be a disposition
upon the part of certain member banks to
borrow more than is good for the situation as a whole.
With
this course vigorously enforced, we cannot see why there should
be any reason for further rate increases in this district, at least
for the present or until such time as the borrowing by members
in this district reduces the reserve of the Federal Reserve Bank
of Dallas to a point below 50 per cent.
As we see the present
standard
rediscount
rate of 5 per cenllthroughout
fair
the system,
it enables
to borrow
members
at a
borrowers
rate and lend to commercial
at 6 er cent per annum
discount-also
loans-and
a very fair rate on business
yet one
the members
showing
a slight
profit, to which we believe they
to necesare entitled,
where there have been demands
sufficient
their
to obtain
for commercial
sitate
using their
credit
money
purposes.We
do not favor preferential
rates for either Government
befinancing or agricultural
do
not
or any other purposes;
we
lieve that member banks will pass along the benefits of a lower
but
farmers
in
to
the
is
rate
case a preferential
rate
established,
the
be,
that,
the
rather
regardless
of what
rediscount rate may
farmer will pay the same price for the credit he uses. We believe
list
the Government
the
the
top
which stand at
obligations,
of
of the investments
of the entire world, will, for that reason,
all
lowest
the
always be marketable
rate,
at
possible reasonable
the
in
things considered.
We consider preferential
be
to
rates
therenature of subsidies and consequently
somewhat artificial,
fore unsound and objectionable.
We again wish to reiterate
opinion
our previously
expressed
that a higher
or lower rate to the extent
of one per
of one-half
annual
cent-but
certainly
not exceeding
one per
cent-per
to
due
be established
in different
districts,
might
reasonably
this
local conditions
different
districts;
the
prevailing
within
differential
should preferably
not exceed one-half
of one per cent.
info]'
This report is, of necessity,
based upon incomplete
re,
Federal
We are aware that the authorities
the
mation.
of
of
deal
System
serve
great
are possessed of much knowledge-a
is
of
is
which
confidential-which
we have not open to us-and
eXlocal,
course only an expression of our
practical, wort:-a-day
perience and contacts.
Respectfully
submitted.
(Applause).
AnyTHE PRESIDENT: Gentlemen,
heard
have
this
report.
you
that we are
One wish to discuss it? I want to tell you gentlemen
We have some matters
not going to finish here today.
on the
program
that will interest
tomorrow
you very much. Mr. Nathan
Adams
tomorrow
is going
to speak
will
and there
morning,
probably
Besides,
be something
to discuss.
several other matters
will come up tomorrow
of the meeting
and the main discussions
The
will be wound up tomorrow.
Now, what is the next report?
Secretary
to me that this is the first time
has just mentioned
he had
Everybody
for discussions.
heard no request
must
ever
be happy.Is
Mr. Harris present?
(present).
this period,
please, sir?
MR. HARRIS: Thank you, sir.
THE PRESIDENT: You will notice
Way, as well as I mine this morning.
ll" Harris,
gentlemen.
Mr. Harris,
that
will you take
Mr. Woodson
had his
(Applause).
Mr. Beverly
MR. HARRIS: Mr. Chairman,
Governor Talley, Judge Walsh,
Federal Reserve Directors,
Members of the Advisory Council,
and Gentlemen of our Association:
I hope that my voice will
reach far enough so that I can be better heard than when I made
a few preliminary
I am suffering someremarks this morning.
what with
I
but
to
throat,
tonsil
trouble
will
endeavor
sore
and
a
make myself
audible to everybody in this group if possible.
I asked the
this floor this morning because I feel
of
privilege
that
a situation exists that goes very deeply and fundamentally
Into questions
Federal Reserve policy which are of very maof
terial importance
in particuto
to
agriculture
related
everything
lar
and to everything
banks in particular,
to agricultural
related
and to stock
is funthat
which
of
sort,
raising,
and
everything
damental,
the backbone of our industries
and
prosperity
our
and
and our
general well being.
am speaking
any
preparation,
without
entirely
without
notes. I have
discussed this matter with anyone before comnot
ing here. I do
not hold any brief for anybody at all. I appear
here
today strictly on my own to give you as briefly as I can
thnue thoughts
that I have and to ask for free interchange
of
eourrAdand
the Federal
v soryaCommitt e and anysone
Reserve Bank,
of us in his
in no spirit of criticism whatindividual
capacity;
eýer,
no desire to impose any views of my own, no desire to find
atilt With
that anybody has done and in the utmost
anything
sl r,-0, t
time
time-the
wearound
a
can
able for
thiswe
like so many people
their
a table in
subjefor
ubje ct-just
shirt sleeves, hear both sides of the thing, see if we can
come to a practical concensus of opinion.
I want to digress, and I think it is necessary that I should
go back to the genesis and origin of an institution
which is of
comparatively
recent functioning,
and trace for you what was
in the mind of the authors of that, what the legislation was intended to accomplish and the conditions under which it came
into existence.
Sometime in the Summer of 1922-you
all will recall the
extraordinary
and trying conditions that the whole country was
going through resultant on the entire collapse of prices. You had
seen cotton break from 40 cents a pound to around 10 cents a
pound with enormous losses and terrible troubles to people who
had advanced on cotton with the usual margin.
I do not need
to tell you about what happened to the cattle industry-it
almost
melted off the map, endless grief, trouble, loss, discouragement;
that is an old story to you, you know all about it. That affected
everything
else. The country had the blues. It was not a money
panic that we had in that period, although we had panic condi:
tions to deal with in anything that was affecting the welfare of
the country.
It was a case of falling markets with no bottom
It was a case where the banks did not have any
to them.
machinery to cope with it. It was a case where banks under our
system of banking that had been all right under the examination
of the bank examiner at the time it was made, when he looked
them over, finally had a lot of bad loans, people unable to pay
I was withwho should have been able to pay. The institution
thell
this is no secret-had
dollars
millions of
of paper classed
by examiners as bad or doubtful which was good, and collected
later on the return of normal conditions.
In that stress, when the financial resources of this couutiJ'
liqulto
have
been
together,
instead
trying
should
marshalled
of
e
tj
the
in
distress
(late
whole country
over night to satisfy
bank examiners there ought to have been on the other hand
in
to extend any kind of help
most brave and loyal cooperation
any way possible to steady and remedy that situation and start
the price of things up. Nobody wanted to buy cotton, cattle 0Iý
anything else.
Now, under those conditions, Mr. Steve `yard, President of
the National Bank of Commerce, called me one day and said
to
like
Eugene Meyer, whom at that time I had not met, would
I
met
discuss
to
make an appointment
with me
some matters
Mr. Meyer at the Lotus Club and spent nearly all day with him"
He said Secretary
Mellon wanted to have somebody come over
vide
there unrelated
to governmental
but with
administration,
and
loans
in
loans,
experience
all such matters as cattle
cotton
for
things he did not know anything about, and they would like
as
10119
to
be
there
Mr.
Eugene
Meyer's
me
go
and
guest as
ininto
could stay and go
everything
connected with the only
the
to
had
that
then
with
cope
strumentality
able
seemed
we
I did go over
Corporation.
situation,
that is, the War Finance
there. I was Mr. Meyer's
guest. With him I sat down and we went
FiWar
the
the
Over everything
of
machinery
with
connected
I helped him pick out the men to go on the
nance Corporation.
board
I went over
loan
intermediate
the
companies.
cattle
of
the cotton lines and the cattle lines, and I made a sixty-eightPage report.
told
Now in the course of those conversations
those gentlemen
Corpornie what I very well knew ; that while this War Finance
thing and
ation was organized
in the first place as an emergency
for war
bein
being
it
that
a
crisis
used
great
was
purposes
do,
but
that
cause there was not anything
would
else available
it was
it
Government
to
the
the
percontinue
of
not
purpose
manently
"We have got to organize
They said:
in business.
something
do
job
this
thing
do
that
to
this
can
and nothing
else
else can do, to take the place of it."
Now in the course of those talks I was permitted
to see the
Preliminary drafts of the laws that afterwards
resulted in forming the Intermediate
Credit Bank. It was distinctly realized that
we lacked something
in our machinery
anyhow especially that
could be available in just such an emergency and stress as that
tO do that kind
long time financing, maybe two or three years
of
f necessary, to
work out a situation of that kind, but particularly
n the case of the cattle industry to provide a safe, sure, reliable,
dependable
agency to finance breeding loans.
and permanent
There never had been anything set up anywhere that did not
nvolve borrowing short time money that was intended to cover
1°ng time
by
long time operation by necessity,
operation
and
Virtue
of the nature of it. All that was to be tied up in some
borrowers
Reserve
Bank
the
Federal
that
the
with
on
so
breeding
important
herds
just
this
and
which
are
as
country,
of
have just
to be financed according to the condias
rights
valid
tions involved
to
transaction
moving
steers
stock
pen
of
as
a
tiarl.et
have to borrow on short bank time days and
would
not
then
run around somewhere else for renewals, but would have
assurance in financing, that the
and
would
machinery
existed,
always
to see that financing through in normal times but
exist,
Particularly in
done
Well,
that
times
and one of
panic.
was
of
the
effects of it was to put out of business a lot of cattle loan
machinery
that had previously functioned, because a means had
been
found to take the place of it.
Now,
Federal
Reserve
the
System
in
the
under
of
working
the
back r a least the
the country bank over the
period of production and distributl°n
; the grower of cotton to that extent, all agriculture
to that
r
1iOrrowsfromthe
whenReserve country
Federal
Bank.
is the main fun [ 45 ]
tion of the country bank. That is the only way the country has
to finance itself in its economic processes. If we didn't have that,
how would we do it? The processes of production.
Marketing,
is another
function
gradual
marketing,
of the Intermediate
Credit Bank. The bank also was incorporated
for the gradual
marketing and orderly marketing
of cotton, just the same as the
War Finance Corporation
did that at the time there was not
anything
else to do it. That was the whole conception of that
thing.Our
Texas Cotton Cooperative
Credit
uses the Intermediate
Bank in Houston. The manager told me he had a commitment
of
$11,000,000 at one time.
I do not know to what extent it was
used as he said they borrowed all they could get from banks first,
using this as a last resort.
Now we have in Houston an institution
that every banker in
the state ought to feel proud of. Our Federal Lank Bank in
Houston lends more money than all the banks in Houston combined or all the banks in Dallas combined. If I were sure of MY
memory, I might go further to give you an idea succinctly and
for
the
their
I
to
clearly of
extent of
say
operations.
am proud
Texas ability that there isn't another as well managed bank in
the system-not
any better managed, if as well managed-that
habitually
keeps its house in order under the able management
Under the same management,
I will add, and
of Judge Gossett.
Credit
the Intermediate
related to it, is the other institution,
Bank.Now
besides cattle and cotton the services of that institution
are available and can be used in a most helpful and beneficial
a
in
industry,
for
instance,
fig
industry,
the
manner
such an
as
industry
there in South Texas coming along under
struggling
figs,
kind
Those
conditions requiring some
of support.
preserved
for instance.
There is a case where the market is being develViol
The
little
fig
haven't
oped.
old
growers
got much money.
can come in and borrow up to sixty per cent of the market value
of those figs, carry them along until they sell them.
that
I am digressing
little
because
I
to
a
want you
visualize
in this state that is capable of enorwe have set up something
mous benefit to us, and that I do not believe most of us realize
the possibilities of or the need for it. When things mo along easy
and we do not have any state of collapse we are likely to OVer
look potentialities
of that sort.
the
Now I am going to tackle a question with you all with
and
free
bias,
but
utmost good nature and without any
a very
f0t
for my own guidance,
open mind, simply for information
tlra
I want to again say
clarification and general understanding.
this is not any criticism or kick or prejudice or any idea of stirring up in our relations any bile, or arriving at anything excep
the combined wisdom of what our Federal Reserve policy ought
to be in connection with that, or whether it really is a Dallas
Federal Reserve policy, or whether it is the policy through control by the Federal Reserve Board. But be it the one or the
other, it doesn't make any difference for the purpose of my
thought which it is. I think an answer and a solution must be
found, and if it is a policy of control higher up and opposed to
the policies
Reserve
Federal
heads
directors
the
of
and
you
of
Bank, then I think it
ought to be a burning question with all of
us to find the remedy and the answer for it.
Now in the course of Mr. Talley's very able address this
morning, which as usual showed splendid management-our
Federal Reserve Bank is recognized as one of the best managed institutions
in the country-there
was one item of information
which because of the things that were tied up and related to it
I might have hoped he
disfor
little
have
a
singled
out
would
cussion, a little expression
I
Board,
the
the
and
of
attitude
of
have
no doubt that with the greatest unwillingness
as representing the Board,
he will, after I leave the
and the management,
Alatform,
This item of
the fullest information
available.
us
information give
Credit
that in March $6,500,000 of Intermediate
was
Bank debentures
funds
following
that
that
the
and
were
retired,
thus
bonds.
I do not
in Government
realized were reinvested
remember the amount, $2,000,000 or $3,000,000.
That brings
me to the text of my talk.
Late in February Judge Gossett came to me and asked for an
interview on a matter that he was very much concerned about.
lie
Credit Bank was
said that at that time the Intermediate
financing-I
I have no notes; I made some fragmentary
notes
say
intending
to bring them just for reference, but I left them and
am relying on my memory-to
the best of my recollection he said
they
were financing cattle loans to the extent that they had out
$9,000,000
loans
these
debentures,
that
time
out
of
which
at
of
were financed,
of which the Federal Reserve Bank held $6,500,000.
"Now," the Judge said, "I am in a very upset frame of mind
about this thing. You know the
the money markets
of
condition
East. These
debentures
all. The rate is very
not
going
at
are
vital to this, because if the
5 per cent it will cost
gets
over
rate
the
cattle men 9 per cent or more. We have got to protect these
obligations in
how we are going to
know
We
do
way.
not
some
do it. If
we can't find any place we can put them we can't make
any more loans. Conditions
like they used to be when
are
not
'4'e didn't have this tight
The people that have been
situation.
relying
facility have got to get
this particular
on
service
and
out and hustle
up money any way they can. The banks are not
I want to know what to do
like this.
anything
about it.
I said:
"Why
do you have to do that?"
He said:
"Because
they have been called." I said: "If you go up and talk to the Federal Reserve people you can get an adjustment
of it so you won't
be out on a limb with everything
else you are doing."
it from the Fed"Well," the Judge replied, "as I understand
eral Reserve, they don't consider this as a rediscount
privilege
While they have not
at all, but as an open market transaction.
exactly said so, I have the idea that perhaps in calling this they
may be acting under instructions
or requests from Washington."
"Well," I said, "I think you had better write back and determine that question a little more fully and see what you can
do."So
he reported to me that the Federal Reserve
thereafter
Bank at Dallas preferred not to make any commitment
on that
until the matter could come up before the meeting of the Board
of Directors,
which was scheduled for just a few days before
these matured, but in the meantime they understood
they were
called and no commitment
could be obtained.
"Suppose,"
he said, "that they stand firm on that decision;
I have got to be prepared some other way. What can we do to
be prepared to pay it?"
"Well," I said, "I will see what we can do for ourselves. We
to
are not as big as the Federal Reserve Bank of Dallas, but-"
I
long
him
that
thereafter
to
make a
story short,
we reported
had obtained through all of our correspondents-had
wired them
and obtained assurance that if necessary they would take these
debentures
to the extent of $2,000,000, not wanting to do it-it
every one of them said they did not want to buy any-that
would be in the nature of accommodation
against our lines of
to
So
Judge
if
it
down
to
tell
the
that
credit.
we were able
got
cases and we could not do any more, we could use our own credit
with the banks to the extent of $2,000,000 and maybe we could
take a $1,000,000 ourselves and with the other banks maybe we
could arrange the rest of it.
He
Now Judge Gossett didn't want us to have to do that.
was very much like a fellow who is busted and has no money,
2
in
his
friends
tell
him,
"They'll
let
when
will
never
you starve
he
like
this
Perhaps
take
country
; somebody will
care of you."
didn't want to be taken care of that way, wants to take care of
himself, wants to feel somehow he has a right to be taken
care of.
this
any
ury
got
he
He was put in a position
which
is an open market
transaction
transaction,
other open market
like that,
certificates,
anything
any direct call upon the Federal
has is the hope that the market
[48]
That if
he saw and I saw:
in the sense that we regard
tres'
bill,
banker's
regard
a
11asn1
then Mr. Stockman
A
Reserve
Bank facilities.
those debentures
will absorb
at the rate they have got to put them out at. If it is obligatory
these
the
Bank
to
take
Reserve
of
the
Federal
any
of
paper
on
banks as long as they are in good shape up to any limit
member
financing
that
that their
means
warrant,
would
responsibility
that part of the agricultural
They have got clearly estabneeds.
industry,
lished
is
here,
main
our
where agriculture
right
rights
from the paralyzing
After recovery
exone of our main assets.
inlive
the
business,
it
perience
that almost
stock
put
out of
dustry is now getting
its
feet again, and along
back gradually
on
to
in
if
in
comes another
similar
magnitude,
not
principle,
crisis
the one that brought
the thing into being, and we say to the Intermediate
We
transaction.
Credit Bank, "This is an open market
are easy, we are comfortable,
else.
we are easier than anybody
Our banks have liquidated
At
done
before.
have
they
never
as
this time
loaned
to coun$3,000,000
$2,000,000
have
or
about
we
try banks,
U.
S.
bonds,
banks
loaned
to
$12,000,000
on
city
about
a lot of this to banks lending in New York on call. We have probThese bonds and securiably $27,000,000
of bonds and securities.
ties are
paper, but out of the whole bunch of it this
open market
is what
we elect to call, to have it come in !"
Now, then, the question comes up, was that Dallas Federal
Reserve
policy, or was that a mandate from on high, or was it
the policy to have them come in because the Federal Reserve
Bank
cannot sell other securities without taking a market loss
on them. I did not sit in any of those councils. I do not know.
But it does
that we are under some
occur to me, gentlemen,
Sort of deep and firm and compelling moral obligation to stand
behind the loans that
we are ourselves making to our friends
and neighbors, our stock men, loans that were made with the full
implication
loans that were
and authority
of the Government,
made in good faith to see whatever it was through the period
of maturity
liquidate them naturally
the situawhatever
and
tion is.
Whether
Federal Reserve policy or Federal Reserve Board
Äolicy-whatever
that situation were ever to come again
it is-if
are we to
"Take your $6,000,000 of debentures and offer them
say
In a frozen
high as ours, where
twice
are
as
market
where
rates
they have
interest
in
things;
them
to
Chicago,
take
these
up
no
Bridgeport
have
they
already got more
or
anywhere
else,
where
burdens
than they can stagger under" ?
They have
immediate interest in our cattle situation.
If
no
You have
have
to
the
things
they
something
and
sell
normally
deal in-bankers'
bills, treasury
certificates,
anything
elseought it to be
to call our Intermediate
Credit Bank,
policy
our
°ur home institution
it,
that
needs
and force it to finance on a
hard
and difficult and abnormally high outside market, or stand
Squarely back
of it and see it through?
That is what I want to bring out information
on, what we
all think. Technically, it is open market paper. Everybody knows
that. But for the realities of this situation it was a home situation that we were in. We were better qualified to deal with it
than anybody else. It was conserving
our own home economic
Certainly
resources.
we had plenty of other things. we could
have sold at that time to increase our reserve.
But suppose we
had not had. The Federal Reserve Law permits Federal Reserve
Banks to lend, and keep on lending, go below their reserves
under a penalty, if what they are lending on is an economic
thing, an economic need. It is expressly
intended to do that.
They may have to fix higher interest rates. They are all joined
together to make it one Government
bank.
In all cases where
one district is carrying excess of load and another district is able
to help, that load can be shifted around. That was the theory
and intention
of it!
Because I am speaking loud do not imagine I am speaking
No. I am bringing this subject up today with
with any heat.
the utmost good will and the most open mind just simply to
clarify for my own mind and intelligence
exactly what latitude
Our own bank here, on
we have in those kinds of operations.
its own initiative and judgment,
I would like to know if a crisis
arose where we had $6,500,000 of debentures,
suppose
maturing,
What then?
we could not place them in the open market?
Now, as events showed, Mr. Eugene Meyer, a man of treinfluence, when he found they had to pay
mendous personal
these, through
the weight of his influence got out there and
placed all of it but $1,250,000, so that by the time Judge Gossett
What transgot here he wired he had made that arrangement.
pired beyond that I am not going to attempt to say. In a general
it was the preference
way I understand
of our Federal Reserve
Bank that they retire all of it, but as they had arranged for that
much, they would take renewal of this $1,250,000.
Understand,
Judge Gossett does not know that I am in DallasHe came away with the idea that there was a distinct lack of
friendliness
within the Board to getting behind the Intermediate Credit Bank and giving them the help they needed. Feeling
these
that this is an open market transaction,
though
and even
loans were made right here and to our people, as a matter of
policy and principle they have no more right to insist on our
do
to
doing this unless it suits our convenience and preference
felt
it than anybody else in the open market.
Also the Judge
iIl
that he could not get assurance of what they would do ahead
tlnn.
that
case of need or that there was no deep thought
on
as to the responsibility
of the Federal Reserve Bank in that situincident is closed. There is noth°
ation. But this particular
more to it, if that was all there was to it, no more use to sa>
anything, they got the money. But we have been going through
a lon, long period of prosperous
flated` and overdone.
and unusual
times,
things
in-
to say that won't
I am not here as a Jeremiah
to prophesy,
like
go on forever,
I hope it will. Nobody likes to hear anybody
human
But
me predict
all
ahead.
coming
unfavorable
anything
into
to
experiences
that
simisituations
get
going
are
we
show
lar to those I
is
At
time
talking
money
when
a
about now.
am
lending
in New York on call up to 24 per cent, at a time when
time loans
to 9 to 91/2 per cent on stock exchange
are running
has
System
Reserve
collateral,
Federal
the
time
when
at a
instead
stopped
buying
bankers'
bills and treasury
certificates,
the credit baseof that, selling them and rapidly
contracting
every time a Federal
Bank buys $100 worth
Reserve
of certificates
for
that
is
there,
bank
reserve
a
and
some
gets credit
ten times that
Reverse
the operation,
bank credit.
put all
much
that buying
on the market
securities
of bills and Government
because
-that
is not an auspicious
time to sell debentures
of
their low
that ought
And if there is any instrumentality
rates.
to be
Bank, if
Reserve
it would be our home Federal
available,
it is in
to do it. I do not think it could be maintained
a
position
that they
to do it.
were not in position
I said before, I am not
this rostrum pointing any accusing
on
finger
at the Federal Reserve or accusing them of dereliction or
of any specific thing that I do not know anything
But I
about.
think the
here today at the annual meeting of
exists
occasion
the stockholders,
again for another year, to know
not presenting
and discuss these things:
If it depended
upon the decision of the Board, and it involved
anything as important
as that, whether in that sort of emergency the Board
be called in session for a day. That is
could
proposition
Number two: I wish you gentlemen
number
one.
Would inform
is the disposition or calling of these debentures,
me
refusing to
them, a matter of Dallas Federal Reserve
go
on
with
control and
Federal
it
from
is
the
policy
matter
mandate
or
a
of
Reserve
Board?
is
loopIn
there
that
or
case,
no
opportunity
hole for
in view of the conditions?
an exception or amelioration
Certainly
Government
for
the
every
exists
agency
good of
the
people,
farmers.
the
the
the
producing
classes,
stockmen,
The federal
Reserve System was set up with that express and
positive
mandate not to use Federal Reserve funds for land or
other speculations,
or back u a boom. Wouldn't it be a ridiculous
situation
to lend our money to banks who were at the same
tame lending
money to the stock market on call, refusing our own
basic
industries
,has
calling for help? Does that seem to be right?
goard'swas for legitimate
needs. We had the Federal Reserve
concerted
to
for
legitiaction
assure
all
necessary
credit
mate
needs. If they didn't do it, it was not because they could
not do it.
I know some of them were. At this particular
time I
was from four large
was told that the bulk of the borrowing
banks-some
of that money loaned on call in New York. I did
I
Gossett.
I
from
from
it
that
got
some other sources.
not get
do not know it is so.
I want everyone
here to take advantage
of this meeting,
ocinto what our policy ought
to
curing
once a year, to examine
be; how far we are willing
Credit
to back this Intermediate
Bank up; how useful it can be made, not only to cattle and cotton
how far the Federal
Reserve
Bank can
men but other industries;
in times
just what
of uncertainty;
go in making
commitment
they are willing to do; what we think they ought to do.
I have taken a good deal of time. I hope we will approach
the consideration
of this subject like a family of brothers, feeling that there is not anything more involved than a full knowledge of the subject and in our consideration
of a subject the
majority have not considered, for no doubt the majority
of you
have not fully considered the origin, purpose and reasons of the
Intermediate
Credit Banks.
With that statement
I want to resign the floor, and I would
be very glad if Mr. Talley, representing
the Board, will throw
all the light possible on that, give us their views, the reason why
it was not convenient or possible, and looking to the future.
Our land bank also is very important
to us. We have got to
sustain both. Both of them are under the same management.
With both there is an intermediate
That
borrowing
company.
company which is created as required by the law to originally
make the loan, has to take its toll, I think it is 21/2 per cent. That
is added to the discount rate. Then the institution
itself is allowed only 1 per cent to cover all of its expenses of operationOut of this we ought to come to some constructive
thoughtIf there are any impediments
in the Reserve rulings, or in the
constitution
of the thing itself ; if anybody has in his mind any
way we can correct that and be sure that it does what it was
originally intended to do, I hope that before we adjourn we will
have free expressions
con"
of opinion, and arrive at something
in this situation,
structive
and along with other interesting
things we have under consideration
in the other papers.
is
I would not have asked for any time on a program that
did
not
I
if
well filled with able addresses on interesting
subjects
feel that the matter I am now discussing with you is something
that, as I say, is deeply and fundamentally
related to the prosperity of our leading industries
and our economical welfare.
I have not discussed
I wanted
this with any of you because
to go into it with a free hand and wanted
you to be in the same
think
too, so we can take it up open minded
condition,
as a new
without
previous
controversy.
Surely I know the Board of Directors
and Mr. Talley must
have had good and excellent reasons for what they did and that
they will be able to give a very thorough account of it. But I
think we would all like to hear just how that situation ought to
be met
thing
the
in
to
dealt
particular
relation
with not only
and
that came up, but as an enlightening
expression and authentic
expression of what we are going to be able to do in the future
in regard to loaning more money on cattle or cotton or anything
Bank.
else through this Intermediate
I thank
you.
(Applause).
THE PRESIDENT: Does anyone
wish to make any
the
has brought
Mr. Harris
up?
subject
MR. TALLEY: Mr. Chairman,
I should
I suppose
Mr. Harris'
remarks.
THE SECRETARY: (Announcement
äram for Z. D. Bonner).
of telephone
remarks
on
respond
to
calls).
Tele-
MR. TALLEY Mr. Chairman,
Harris
Since
Mr.
Harris
Mr.
:
:
and I have known each other for nearly thirty years-he
was
111Ypreceptor in the banking business, still is to a large extent
I am
sure he will not object to my indulging in a little good
natured razzing just for a minute.
You know the Board of Directors of the Federal Reserve Bankthe
411d the constituency
looking since
have
dActl
inman
Federal
for
Intermediate
Credit
who
was
passed
tied it
They seem to have
Federal Reserve System.
to
the
on
found him
(Laughter).
today.
MR. HARRIS: How did they happen to have, to hold, $6,500,000
of debentures
Bank?
Credit
Intermediate
of
MR. TALLEY: I
am speaking of the law which did.
MR. HARRIS: I did
I said it was
for
that.
take
credit
not
drafted
and showed me.
MR. TALLEY: I
prefaced my remarks with "good natured razzingI
have no desire to take any import or point out of Mr.
xaI'I'is'
but if he had spent twenty minutes with me, his
remarks,
"estions
I think it is all right to
would have been answered.
bring
this question up here for that matter.
I
had
the
same
n Zhng
just
in
to
long
time
the
for
uncertainty
respect
a
what
th1ationship
between
the Federal Reserve and
was or should be
the Intermediate
Credit Banks. I think that most of our directors
Were uncertain as to just what that was. So in these transactlons
have
been
the
taken
Which
outlined
opportunity
was
advantage
is. As Mr.
Harris
of to develop just what that relationship
has pointed
remark the Federal
out in his subsequent
Reserve Act has been amended and it is included in the InterIntermediate
the
Credit
Bank
Act
of
receivables
making
mediate
Credit Bank eligible for rediscount
with the Federal Reserve
Bank. It also goes further and gives the Federal Reserve Banks
Credit Bank debentures
to buy both Intermediate
and
authority
of the Federal Land Bank, if they do not have a
obligations
Bear that in mind, because I
longer maturity
than six months.
want to come back to it in just a second.
The Federal Reserve Act goes further than that by addition
to Section 14 of the Federal Reserve Act which authorized
open
in the last paragraph;
and the other pormarket transactions,
tions of Section 14 of the Federal Reserve Act where it states
in substance
this: That the Federal Reserve Banks not only
Credit Bank
have the authority to purchase Federal Intermediate
debentures,
but that when the public policy seems to so require
the Federal Reserve Board can compel a Federal Resreve Bank
to purchase debentures.
Now then, if there was an exigency such as has been indicated, the Federal Reserve Board would certainly
have required the Federal Reserve Bank of Dallas, or some other, to
purchase that $6,500,000 of debentures.
As far as the Federal Reserve Board is concerned, and as far
to
Reserve
Federal
Bank
Dallas
the
is
both
as
of
as
concerned,
they are quite sympathetic
active management
and directorate,
Credit Bank at
and on friendly terms with the Intermediate
Houston, and the Farm Loan Board at Washington.
We can dispose of this by reading the correspondence
that
is
It
Mr.
Harris
the
that
to
to.
was subsequent
period
referred
his
in
very evident that Judge Gossett in his uncertainty
or
deliberation
as to what he would do with this maturity
consulted
with his local friends in Houston, but probably did not go bacl{
had been taken care of and tell them what
after his situation
had happened.
I do not think I shall take up your time to read this corresin sequence,
but I think
I shall read a letter
I wrote
pondence
under date of March 11, 1929, which was four days prior to the
Young of
to Governor
maturity
of the $6,500,000
of debentures,
the Federal
Reserve
Board
(reading)
:
"Dear Governor Young:
Following our telephone conversa"
tion with reference to the approaching
maturities
of the Federal
Intermediate
Credit Bank with us, amounting
to $6,000,000,
am now able to advise the consummation
of the transaction.
"Judge Gossett of the Federal Intermediate
Credit Bank, Houston, wrote me under date of February
21, outlining the needs of
his bank and discussing the effect of present money rates, particularly upon the live stock industry in this district.
Runnln0
through Judge Gossett's letter was the indication of a strong
desire for this bank to continue to carry $6,000,000 in debentures
at our discount rate of 41/z per cent, evidently assuming that our
discount rate would remain at that figure as the possibilities
of
He also intimated in his letter
an increase were not discussed.
that he would like to appear before our Board at its meeting on
March 7, but
invitation
prefer
an
rather than to make an
would
application to do so.
"I discussed his letter with our Executive Committee at its
meeting on February 27 and wrote him on February 28 that the
Committee
him a very cordial invitation
to appear
extended
before
the
our Board at its meeting on March 7. Otherwise,
members of the Committee and the officers of the bank felt that
they could
to comment on the questions raised in
undertake
not
his letter
by
or to indicate the possibility of a new commitment
reason of the fact that the current loan was undertaken
subject
to the
Judge Gossett wrote
approval of our Board of Directors.
me again on March 1, indicating that he would accept the invitation
and would be in Dallas and Fort Worth on March 4 and 5,
m an effort to interest some of the banks in those cities in purchasing some of his debentures.
"On March 2, which was the date that you called me on the
telephone, I
telegram from Judge Gossett, stating that
received
a
he had
cancelled his plans for a visit to Dallas and Fort Worth
on the 4th and 5th. The advance in our discount rate was announced in the afternoon
of March 1. Judge Gossett did come
In to see me, howover, on March 6 and advised that he had,
with
the
Mr. Eugene Meyer, arranged
the sale of
cooperation
of
X4,750,000
in the open market and while he was
debentures
of
here he
$500,000.
the
received
advices
of
of
additional
sale
an
While he
in my office Mr. Meyer called him on the
was
still
telephone
he
had
that
the
Federal
and
advised
arranged
with
Preserve
Bank of New York to take $1,750,000 of four months debentures
that the effort to market this
with the understanding
amount would be
This
the
continued.
completed
arrangement
of
the Intermediate
Credit Bank for $7,000,000, the amount of its
heed to
meet maturities
on March 15.
"Therefore,
Judge Gossett appeared before our Board
when
on March 7, he
to
he
that
to
was
prepared
say
was
able
retire
the $6,000,000
that we are carrying, at maturity
on March 15.
e addressed
Board
our
and service of the Inon the structure
t ermediate
Credit Bank and stated that he would prefer to have
our bank take
the commitment
the Federal Reserve Bank
up
of
°f New York for $1,750,000
debentures,
of
accepting
maturity
of six
months, and also to obtain a commitment
of $500,000 a
the next five or six months at our prevailing discount
lätethUor
per
hud
the
our Boar
ma
to
$
for
.750 000s atsthe
the
and
agreed
commit
r ate
of 5 per cent discount for six months with the understand-
ing that an effort would be continued to market that amount and
take the debentures
up from us if, as and when sold. The Board
declined to make any commitment
for future requirements
and
Judge Gossett was called back and advised of these two decisions.
I am afraid that, unfortunately,
he gained the impression
that
from
our Board did not want to receive any more applications
him, but in view of his rights under the Federal Reserve Act, I
if
Board
that
intention
am sure
our
could not sustain any such
confronted
with that impression.
"Our commitment,
Credit
which meant that the Intermediate
Bank would pay us a net amount of $4,250,000 on March 15, was
accepted, but I am today in receipt of advice from our Houston
Branch to the effect that Judge Gossett has advised them today
that he will relieve us of our commitment
for the $1,750,000 as
the market has now absorbed all of their proposed debenture
issue incident to March 15 refinancing.
This means of course
that the entire current line with us will be retired.
"I feel that the incidents in connection with this transaction,
have
I
have
in
the
high
this
letter,
of which
given you
spots
I
this
done
Intermediate
the
Credit
in
Bank any harm, and
not
believe that you and Mr. Meyer will be inclined to agree with
Credit Bank debenme. If it is assumed that the Intermediate
tures are to have a market, the conditions which were laid down
in our current transaction
have stimulated
them to develop a
been
for
their
They
have,
therefore,
market
obligations.
not
lulled into an assurance
of depending upon the Federal Reserve
Banks for their operating funds. If that sort of a condition had
been permitted to be set up and continued, then the market would
never have been developed unless some necessitous
conditions
arose."I
think the Intermediate
Credit Bank should have the advantage of the lessons we have learned from a failure to properly
develop a bill market and not be drawn into a false sense, Of
the Federal Reserve Banks the marre"
security by considering
for their obligations
and at the same time develop a situation
the
Federal
Reserve
Banks
the
have
to assume
where
would
or
for
them
funds
in
the absence
responsibility
providing
with
any other channel for obtaining them.
"In studying
Act w1lic"
that section
Reserve
of the Federal
t1le
to the authority
Reserve
Banks
and
relates
of the Federal
Intermediate
I
Credit
banks
dealing
cannot
with
each other,
made
that
come to any other conclusion
was
except
a provision
in the law to meet an emergency
situation
so that it would never
be necessary
for the Intermediate
Credit Banks to force a lidulIn
dation
their loans were based.
of any industry
upon which
other words that if there were ever a time that their obligations
tl1e`'
be
in the market
would not
readily
absorbed
at fair rates,
tl'ell
to
the Federal
Reserve
Banks would be expected
to come
Board
Reserve
Federal
interest
the
in
the
assistance and
public
could required a Federal Reserve Bank to do so.
"It seems to me that the question that should be determined,
and it should be a System matter, is whether or not the Federal
to
Reserve Banks should be expected to and should undertake
Credit Bank oblisupport the market for Federal Intermediate
gations. In principle, the relationship
seems to be more or less
identical with the principle involved in the relationship
of the
Federal Reserve Banks to the bill market.
"The subject of the extension of credit by Federal Reserve
Banks to Intermediate
Credit Banks has been discussed at the
Governors'
do
think
that
I
but
time,
from
time
to
not
conferences
any definite conclusions have ever been reached, the matter being
left largely
handling
transactions
basis
the
when preof
upon
Board.
Reserve
Federal
the
sented and within the regulations
of
"I have written this letter at some length for your information and
as a matter of record, without expecting you to specifically reply. Of course if you have any comments we shall be very
glad indeed to have them.
We appreciate
your interest in the
matter and your consideration
of our reserve position at the
present time and its probable trend in the event we had not
been
relieved of the debentures that we are now carrying."
Now this followed my custom of reducing every transaction
to writing in
it
have
the
I
form
that
of
at
may
record
so
some
time it is
defend
it
to
that
instead
at
of
offering
time.Now, challenged
Governor Young's reply to that letter, after I saw him
m Washington
the early part of April: (reading)
"ear
Governor Talley : Simply to confirm my talk with you
the
letter of March 11th, regarding
the
day
other
your
about
Federal
Intermediate
Credit Bank, I advise that Mr. Meyer
thoroughly
him
the situation,
and if I understand
understands
correctly, he is in
position of your
agreementCredit
bank
towards the Intermediate
Bank."
Shall I discuss it
any further?
MR. HARRIS: I
finbe glad if you would-when
you
are
would
ished, Mr. Talley,
the indulgence of the house, I want to
with
speak further.
MR.
the bank
o
e ex ressed themselves
They
f
that
on
several
occasions.
eel
the'member
have
first
district
the
banks
the
call on the credit,
of
loan
facilities,
Federal Reserve Bank of Dallas.
That
the
of
expression
Iutcrniediate was directly in connection with the discussion of the
I
As
it
Credit
Bank
the
understand
requirements.
present
Credit Banks is to make no
policy of the Intermediate
loans longer than nine months;
they can run up to twelve
is
identical
is
The
That
that
the
paper
months.
general policy.
Credit Bank and in turn eligible
eligible with the Intermediate
by member
for discount with us is also eligible for rediscount
in
banks with the Federal Reserve Bank, with this difference:
Credit Bank the loan must pass
order to reach the Intermediate
through some organization,
a cattle loan company, or member, or
is entitled to a profit of
non-member bank, and that organization
Credit
2r/2 per cent; then when it reaches the Intermediate
Bank the bank is entitled to a profit of 1 per cent above what
they pay for money. There is a 31/2 per cent spread, which I
think was Judge Gossett's
to the high
concern in reference
rates of money.
Ma. HARRIS: Yes, that is correct.
MR. TALLEY: But in all it is equally the intent and pretty
are issued
clearly defined in the Act itself that when debentures
Credit Bank they are presumed to
to finance the Intermediate
be sold in the open market.
They have I think the authority-I
am not as well posted
Credit Act as I am with the Federal Reserve
on the Intermediate
Act, but I think they have the authority
to make debentures, the
as long as three years. That indimaturities
of the debentures,
The arrangecates they are intended to be placed in the market.
ment is made that when the debentures
come within six months
they may be purchased by a Federal Reserve Bank.
of maturity
Now the form of indebtedness
to the Federal Reserve Bank
was through the medium of debentures
rather than rediscount
is
It
for
Intermediate
Credit
the
Bank's
simply
convenience.
a little better credit risk, because the debentures,
you underIn other words, all the banks
stand, are interbank
guaranty.
Credit
issued by any Intermediate
are liable for the debentures
Bank. It would have entailed a lot of inconvenience
on the part
Credit Bank of they set up their receivables
of the Intermediate
for discount when they could easily issue their debentures
and
we could purchase them at the discount rate.
The first commitment
If I am not miswas for $3,000,000.
taken that commitment
The debentures
was made in September.
were dated the 15th of September,
and they were due-ninety'
day debentures-due
December 15th.
When they matured, or
were about to mature, we were asked if we would renew them
and we said we would, and they asked for an additional commitment of $3,500,000, making a total of $6,500,000, $500,000 of it
to mature on the 15th of February.
I think that maturity
was
taken up before maturity,
that $500,000.
Our directors themselves have made the commitment
in view
of the fact that there had been no definite policy established with
to dealing
reference
reason of the amount
with Intermediate
of it.
Credit
Banks
and
by
Now, then, when the overture
was made-I
am about to forit was made with the understanding
that the $6,500,000
get-but
by
would be retired
and that commitment
accepted
at maturity
the Intermediate
Later on money rates got higher,
Credit Bank.
Judge Gossett,
bless his heart,
our discount
rate was still higher.
I think he is as smart as anybody,
he thought
if he could get this
than pay the
at 41/2 per cent he would come back to us rather
5, but when the rate was 5 per cent, he was content
to go to the
market
with it.
At that time, as I brought out in my remarks this morning,
our reserve ratio had fallen to 54.1 per cent and was still declining. The officers of the bank thought that they should not make
to renew this $6,000,000 by reason of the fact that
a commitment
it had been committed by our Board itself, but the correspondence
originated the latter part of February
and the debentures
were
not due until eight days after the date of our Board meeting.
When I advised Judge Gossett, as per copy of the letter I have
here, that the matter would be submitted
to our Board on the
In consequence, the whole
seventh, he was perfectly agreeable.
transaction
thanked
was cleared up and Mr. Meyer personally
me in Washington,
went to lunch with him, and he thanked me
for what I had done. This is all in the bosom of the family.
He
said this: That the man that they had had as a fiscal agent for
the land banks and the Intermediate
Credit Banks, who was
presumed to have developed a market for these debentures,
had
never done so, and that he was going out of the service and they
Were engaging a man who could develop a market.
He went on
to say that
of
when this man who had had the responsibility
developing the
he would
market wanted to sell some debentures
go to some of the New York banks and ask them if they wouldn't
take a bunch
of them and they would, but since the rates had
gone up and were higher than the Intermediate
Credit Bank
could really afford to pay and continue its operation, they found
that they did
not have any market.
I have had a long discussion with Mr. Meyer, long discussion
With Judge Gossett. The Intermediate
Credit Bank and the Federal Reserve Bank of Dallas, I suppose, understand
each other
and are in as great comity as anybody we do business with.
I
think
probably, Mr. Harris, that you did not hear the rest of the
story.
If you will pardon me a moment: When I was in Washington and Mr. Meyer
to go to lunch with him, I
me
asked
thought the lunch
it did.
to cost me something,
and
going
was
(Referring
to papers).
Here is
telegram
a
April 3rd
(reading)
:
I sent
to Mr. Gilbert
from
Washington
on
"Meyer, Farm Loan Commissioner,
has made verbal application to me on behalf of Intermediate
Credit Bank, Houston, for
the sale to us of $1,250,000 four months debentures
presumably
dated April 15th and maturing
August 15th, five per cent disthat efforts will be made
count basis, with usual understanding
to place same in open market during the period but with the
knowledge that this is not possible at present time.
Will you
please present matter to our Board meeting 8th and say that I
am favorable in view of the fact that had our commitment
of
March 7th of $1,750,000 been used that we would now have that
is for two months
amount in our assets and this transaction
shorter time and for $500,000 less. Please advise Judge Gossett
and Reordan direct of action of Board."
That commitment
was made and the Federal Intermediate
Credit Bank at the present time owes $1,250,000, and seems to
be a happy customer, perfectly satisfied, so far as I know.
One more thing : A letter from Judge Gossett under date of
March 11, 1929, to me: (reading) :
"Dear Mr. Talley : On Friday morning, the 8th inst. I was
advised that sales of our debentures were equal to our immediate
follows that the Federal ReIt, therefore,
needs of $7,000,000.
serve Bank of Dallas will be relieved of its offer to take $1,750,000
of the total $6,000,000 now held by it. I have so advised your
Mr. Reordan, manager of the Houston Branch.
"I fear I failed in my effort to show your Board that in supplying a substantial
part of the funds needed to finance an essenthe Intermediate
Credit Bank, that the
through
tial industry
Federal Reserve Bank was rendering
a useful and eligible service, and one which your member banks would prefer not being
called upon to render.
"I would be less than frank if I failed to say that I was
in the afternoon
disappointed
confer- I
officially and personally
if
door
in
inquiry,
the
to
my
was closed
response
ence, when
few
feel
free
to
the
the
take
next
again
up
subject within
might
conmonths, in the event the open market for our debentures
tinued high, to the end that the Federal Reserve Bank might
of the breeding
continue to be useful in the economic financing
herd needs of this district.
full
for
hearing
before
"I thank you
the courtesy of a
your
the
for
inst.
Board on the 7th
the valuable service rendered
and
Credit Bank in the last few months.
Federal Intermediate
Now, the main point in my reply : (reading) :
"My Dear Judge : Your letter of March 11 confirms the adfrom
information
vice Mr. Reordan has given on receipt of the
had been placed
you that a sufficient amount of your debentures
in the open market to make it unnecessary
for you to rely upon
to acquire $1,750,000 of your debentures
our commitment
on
March 15.
"It is no doubt gratifying
to you that the market will absorb
such a substantial
as it has in the
amount of your debentures
present instance and that investors are becoming better acquaintI believe that the efforts that have been put forth
ed with them.
in this direction are along sound lines.
"I personally believe that when conditions are such that the
market shows a reluctance or inability to absorb your obligations,
then the matter should become one for consideration
between
feel
hand,
I
On
your institution
the
sure that
other
and ours.
since we have demonstrated
a willingness to purchase and carry
some of your debentures the market will take them more readily
because
a disseminawithin the limitation of eligible maturities
tion of the knowledge that they have been bought by this Federal Reserve Bank will be helpful.
"On the contrary,
I feel that you made a very creditable
prebefore
sentation
our Board at its last meeting
of your position
and that you succeeded
in thoroughly
them with the
acquainting
importance
of your
as well as the claims
of your undertaking
in
institution
for funds
on its operations
with which to carry
I particuaccordance
As for myself,
legislation.
with existing
larly
in which you placed yourself
the position
and your
admired
institution
by demonstrating
an ability first to pay off the existing obligation
before
to discuss any new commitundertaking
ments.In
I feel
there may be in the future,
transactions
whatever
that it
before
for you to appear
our Board,
will be unnecessary
as I have the impression
that they thoroughly
understand
your
Position
is renderthe type of service that your institution
and
ing."We
are always glad to have you come in for a visit with us
Whenever you are coming this way and with very kind regards,
etc.***),(Applause).MR.
HARRIS: Are you finished, Mr. Talley?
MR. TALLEY: That's
all.
MR. HARRIS: Mr. Chairman,
I have no desire to monopolize
the time
if Mr. Talley will not retire until
But,
this
of
meeting.
I can
Talley acquiescing).
ask him some questions-(Mr.
I do not feel that the
and very frank statecorrespondence
ments and
information
interesting
which he has so kindly
very
given us
I have in mind and
that
the
thoughts
entirely
up
clear
if he
will kindly remain a little longer I would like to get a little
additional information.
MR. TALLEY: Yes, sir. I probably have it right here.
MR. HARRIS:
I have seen some correspondence
and in genAt the time this conversation
eral terms I know the situation.
occurred in February between Judge Gossett and myself, I think
At that
you will agree the open market was not at all normal.
time the rates were high, the Federal Land Bank, as well as the
Intermediate
Credit Bank, had found difficulty
in placing its
obligations on the market, so much so that at very much lower
than our lending rates the banks of Houston had to come in and
take round amounts of those certificates.
At the conclusion of the transaction
of which you are speaking we came in subsequently
to take up some ourselves.
Now it
is very true, as you say, that Judge Gossett shrewdly wanted
to get the lowest rates, but not for the benefit of Judge Gossett.
MR. TALLEY: I understand
that.
MR. HARRIS: It is true that the rate was lower than lending
It is equally true to say that 41/.) per cent is lower than
rates.
Mr. Talley said the open market was
our Houston banks' rates.
open to all you gentlemen to buy in 41/2, 4;yj or 5 per cent certificates.
The Federal Reserve Bank is an organization
not run
for profit.
A country bank may have to charge a higher rate
for its loans, a city bank up to 8. The burden should not be put
in
load
them
to
that
if
they
upon
up with something
even
were
position they could not operate in and make their cost of operation.
MR. TALLEY: Do you think the burden
reserves of the member banks.
MR. HARRIS:
MR. TALLEY:
On the
Federal
On the
That
Reserves?
reserves.
MR. HARRIS: I do not think
MR. TALLEY:
ought
to be put on the
is where
so.
it would
be, on the
reserves.
MR. HARRIS: Just to keep the continuity
of this conversation
together,
and we are having
while it is dove-tailed
a friendly
just like we would at your deskconversation
MR. TALLEY: I will say we have had some more heated
than this.
versations
con-
MR. HARRIS: This is an honest
undereffort,
as Mr. Talley
his
than
to
opinion,
more than mine, on What
more
get
stands,
I am sure it will be as helpful
to this thing.
is the real answer
Board,
Reserve
to him and the Board, our Board and the Federal
be,
develop
fully
to
thoroughly
every
could
and
anything
as
in
genfuture
to
in
thing
this
right now as a guide
policy
angle
eral.
Now at one previous meeting of our Board here unexpectedly
I was asked impromptu to say something.
Addressing you gentlemen who are members of this Board of Directors, I took the
position then that we live in an agricultural
country, our credits
are long credits.
With respect to this particular
need involved
in this thing they are
extra long because this is breeding cattle.
It is very
well to say that the Federal Reserve Board could command some bank to take them, but who is going to compel the
Federal Reserve Board to do that?
Or do they know enough
about it or understand
the merits of it well enough?
Credit in New England is short credit.
Our banks are the
pooling of the funds of so many farmers, if we live in a farming
section; that is where it all comes from ; it is all from the same
source-agriculture.
We do not want some fellows from Cleveland, New York,
Bridgeport
or anywhere else up there where the natural conditions of
to
other credit are very different,
or
manufacturing
issue
with
rulings to our Board of Directors here inconsistent
our long credit requirements,
and that we should accede to anything they
say without arguing it out with them, and insisting
on such adaptation
that is necessary in a
of credit regulations
country of long seasons and long credit.
To adapt this ruling
to our
to apply the same rules of agriculcircumstances
and
not
tural
credit as govern other kinds of credit, we have got to study
our own conditions, and if they are not conversant
with
our
conditions,
This is not addressed to Mr. Talley, but
them.
enlighten
to the Board
We are the students and
of Directors on this thing.
analysts of
our conditions.
It may be debentures are issued for six months; but Mr. TalleY
says under the law they may be issued for three years, if
necessary.
If that was the purview of the law, there might be
three
Years needed to carry some loans to maturity.
That brings
to my original point: What ought we to adme
"eate ? I do
not know why we called those debentures at a time
When money
We
in
East.
the
tighter
now
are
much
was
very
thinking
It was then liquidatof the conditions in this section.
ed More than I have
it, with very little borrowing by
ever
seen
our banks.
Our conditions were much easier as far as the borrower
was concerned than they were in the North where the
rates had been
by enormous speculative operations in the
raised
stock market
by over-playing
the bond market, world withand
out end, before that
ever happened.
Now, I
it
be
why
would
mandate
cannot
anybody's
under
necessary to have see
Federal
Reserve
the
Meyer
Mr.
and
get
go
Bank
New York to relieve us of $1,750,000, and say:
"We
of
Fant
do
hereafter
to
to
Who
is
that?
You
it
!"
going
relieve us of
What
is the necessity of going to them to relieve you of it?
I do not want to be put in a position-having
accounts from
these banks-that
in order
a couple of weeks before maturity,
to insure that somebody is going to take their debentures
ui)
that I have to call on my own correspondents
for $2,000,000 of
because they want to
credit that belongs to my own bank-not
buy them-but
in line with my account.
MR. TALLEY: The commitment
was made with the understanding of the maturity.
MR. HARRIS: Now you speak of the reserve position.
Can you
tell me from memory, or anything
you have there, what were
the assets and liabilities in February,
say in the second or last
Was it
that made your reserve that way?
week of February,
borrowings
of Texas banks?
MR. TALLEY: Yes, to some extent.
MR. HARRIS: Will you please read it? That is what I want to
get at. I want to elucidate that.
MR. FROST: Can you give us the rediscounts
of member banks
for February,
1929, compared with February,
1928?
MR. TALLEY:
I can
Here's
MR. TALLEY:
give you
February
approximately.
20, 1929.
MR. HARRIS: Kindly read those figures
serve was.
M.R. TALLEY: (reading) : $17,718,000.
MR. HARRIS: On bonds?
MR. TALLEY:
MR. HARRIS:
and see what
the re-
On loans
banks.
to member
much on bonds?
How
be made
THE PRESIDENT: Mr. Webb asked that announcement
for his committee
Let the line-up of his commit'
at 4 o'clock.
When did you want that
tee be read, please, Mr. Secretary.
meeting, Mr. Webb?
MR. WEBB: Right there in the hall temporarily.
THE
PRESIDENT:
MR. WEBB:
THE
4:00
Better
SECRETARY:
or
4:30?
make it 4:30.
(reading
committee
appointments).
THE PRESIDENT: At 4:30. Mr. Graves has come in, the chairGraves
Mr.
Committee
Nominations.
What
the
time,
on
man of
would you want a meeting of your committee?
MR. GRAVES: 9 o'clock in the morning.
THE PRESIDENT: Will that
Mr. Graves
morning,
wants
THE SECRETARY: (reading
the
in
9 o'clock
suit you, gentlemen?
to meet with you in the same Place.
committee
appointments).
THE PRESIDENT:
ent).Gentlemen,
Is Mr. Sam
R. Greer
in the
audience?
(pres-
to extend here that
Mr. Greer has an invitation
I should have-he
it
this morning.
to
the
program
make
was on
I have agreed to give him the time. Will you come forward, Mr.
Greer?
It will just take him a few moments.
MR. GREER: Mr. Chairman, I thank you for this opportunity.
Gentlemen: I became engaged this morning in conversation
with
a man from West Texas.
The gentleman just went nutty about
his part
have
it
I
they
is
take
That
the
got a
all
right.
state.
of
great country out there, but a man from this part of the state
that will travel through that country will wonder what they have
got to talk so much about.
But it is truly a great country, I
know
the indomitable pluck and energy and boosting spirit
,and
of the West has long challenged the admiration
of the civilized
world.Gentlemen,
the
I come to you this afternoon
representing
Tyler Chamber
invitation
to
to
to
Commerce,
you
all
an
extend
of
visit the hub of East Texas.
We East Texans, gentlemen, don't talk very much about our
Part of the state because if we did our highways would soon be
so thickly lined with vehicles traveling to the promised land that
travel
would be so congested as to render our highways practically impassable.
But ere long our country, we know, will be
discovered
and we believe in slow growth instead of in gold
rushes.Now
is just this: Tyler and Smith County have
the situation
long been
Tyler
the leaders in agricultural
pursuits.
recognized
as
being
the very heart of East Texas is responsible
to our surrounding Part
development
of the greatof the state for the continued
est Part
to meet that responsibilTexas, and Tyler expects
of
all
ity
and we are daily trying
to live up to it.
Our agricultural
berries,
tomatoes,
our
our
pursuits,
our
Poultry,
developments,
our
our cotton growing and
agricultural
things
of that nature have for some time been up to high standard. But business interests
fact
Tyler
the
that
of
recognized
we
had
one neglected industry, an industry that, if properly develEast Texas but all of Texas,
would revolutionize
only
not
äned, tchairman,
bhave
ya
by
our
lately organized
Mr.iTaylor,
00,000
milk
Tyler but the
manufacturing
plant,
which
serves
not
only
adjacent territory for
it.
twenty-five
or thirty miles surrounding
has awakened our part of the state.
We
haýThat, gentlemen,
e got the everlasting
the
It
and
waters
everlasting
pastures.
ig truly God's
for the cattle industry.
Our milk plant
paradise
Opened
up about a week ago and is now in operation, and daily
wagons are going into our city bringing
plant and receiving cash therefor.
milk to the Tyler
milk
On the 22nd day of June, which is near at hand, the city of
Tyler is going to engage
in a jubilee.
We are going to have a
formal
the advent
opening
of the Tyler milk plant, celebrating
into that part of the state of one of the greatest
that
industries
has ever fallen to our lot.
Mr. Taylor is president of the Tyler Milk Products Company
On the 22nd
and almost every citizen in Tyler is a stockholder.
of June, we are going to formally open that milk plant; it will
be a jubilee day with Tyler, and on behalf of the Tyler Chamber
of Commerce and the citizenship
of Tyler, we want to extend
to each and every banker present an invitation
to be the guest
the glories of a
of Tyler, and let us unfold to you gentlemen
new-born world.
This
invitation
is to the bankers
THE PRESIDENT: Being from
going to reply to him as to what
tion unanimously
accepted.
throughout
the
entire
state.
Tyler and East Texas I am not
he has said.
I declare his invita-
MR. HARRIS: Mr. Talley, at the time of this
was asking for some information
on the reserves.
intermission,
I
20,
MR. TALLEY: The loans to member
banks
February
on
1929, were $17,718,000;
22, 1928, which is the comon February
date they
on
$3,368,000.
The reserve
parable
were
position
February
20, 1929, was 60.2 per cent; on February
22nd, 1928,
date, 67.8 per cent, the difference
the comparable
being almost
we
Credit
the amount
Bank debentures
exactly
of Intermediate
had on hand.
MR. HARRIS: Now, I would like to ask you in addition to the
investments
did you shop'
you had there what other investments
there?.
MR. TALLEY: (referring
to memoranda)
We had United
States Government
securities of $10,888,000, $4,300,000 of which
Credit
the Intermediate
we had sold in order to accommodate
Those we took back after the debentures
Bank.
were retired.
You spoke of it as investing the proceeds.
We already owned
We sold them with agreement
those.
to repurchase
and when
that agreement
matured the amount we were to take back was
about $2,300,000.
MR. HARRIS: Let's see if I understand
We had $29,000,that.
000 in outside investments.
"outside,"
Mr. Harris;
MR. TALLEY: Not necessarily
a large
At that time we were
part we bought from member banks.
buying bills from member banks below our discount rate, '
discount
against
per cent.
rate
of 41/2, and
open
market
rate
of 4-V8 to 5
Of course,
MR. HARRIS: This is the point I want to make:
had got to that figure.
because
Your reserve,
of all those assets,
But to
that reserve,
policy
would it have been the better
remedy
bill
bills were concerned-and
as far as the bankers
a bankers'
is against
is
that
to
supposedmarket
moving
something
MR. TALLEY: But a debenture
is not.
Credit Bank
MR. HARRIS: Now, then, when the Intermediate
is finding difficulty
in selling them in the market, so much so
they have to call on local banks to help them out, and when the
Intermediate
Credit Bank has got to take advantage
of the lowest rate it can possibly get, not for its own account, but for the
benefit of
he
has
it,
if
head
the
borrowers,
any
of
naturally
our
sYmpathy for our situation,
would find the lowest market possible that could take that.
The Intermediate
They
Banks are a carrying
proposition.
Were organized for that and the open market theory is entirely
all right when the open market is normal, so they can do that.
But I
when conditions were abclaim this was an emergency
normal.MR.
TALLEY: May I interrupt
to say that the market took the
debentures
at 5 per cent rate?
MR. HARRIS: They took the debentures,
but under the conditions I have
But
the
to
at
all.
not
willingly
explain,
endeavored
Point I have maintained
is that there was a market for government bonds and those other investments,
that were available; we
had
all those bankers bills which everybody had gotten the benefit of it. It
was a question of selling something salable.
MR. TALLEY: The Federal Reserve Bank, under the law, cannot buy those debentures
of
maturity.
months
unless
within
six
These debentures
The
for a longer maturity.
put
out
sold
were
Intermediate
Credit Bank required much longer time.
I want to say this: Any time any member banks or anybody
else buys any Intermediate
Credit Bank debentures
and they
come within
it
is
interest
to
the
and
of
of
maturity
six
months
the Intermediate
Credit Bank or Federal Reserve Bank they will
hLIY them.
MR. HARRIS: Wasn't it to their interest in this instance to buy
them'
I am not
to come here.
Judge
is
Gossett
me
not
asking
holding
any brief for him.
MR. TALLEY: That
because
be
he
necessary,
not
seems
would
to be
perfectly satisfied.
MR. HARRIS: I don't know about that.
MR. TALLEY: He so expressed himself to us.
MR. HARRIS: I have talked to him since. I think he is uncertain about what he can depend on or how much money he can
If we are authorloan with any assurance he can get it taken.
ized by law, if we do not run the Federal Reserve Bank to make
money, the Federal Reserve Bank might sell some Government
bonds or bankers bills and possibly take a loss-some
of the rest
gets us to take some 3,%;
of us do that, when the Government
5
that
governments
are selling on
certificates
and we wake up
else
per cent basis; then issues some of them at 51/I, everything
adjusts to this price and nobody comes in to relieve us of that.
In order to fortify the reserves of our bank, I do not see why
it is necessary to call the debentures in and hold on to the others
I think
even if there might be some market losses in selling.
the paramount
is to stand behind our livestock
consideration
industry and behind the obligations
made right here, and particularly if the live stock industry
needs more loans, and the
Federal Reserve Board comes out and tells us that they are trying to limit credit to the stock market, in order to take care of
the commercial needs at some kind of rate that borrowers
can
afford to pay.
MR. TALLEY:
Mr.
Harris,
you
know
that-
MR. HARRIS: Why should you take debentures away from that
friendly situation,
able to carry it, and put them on the most
Judge Gosunfavorable
market we have seen for many years!
If he can get you to carry
sett, as you say, is a smart man.
those debentures
it is, and cannot sell
at your rate, whatever
them elsewhere if at all except at a higher rate, who is he benefiting?-the
Reserve Bank; the
people who own the Federal
people who own these cattle that have got to keep on borrowing.
The country now is more liquidated than usual.
I want to
ask you about the $17,000,000.
MR. TALLEY: $13,000,000.
MR. HARRIS: Were they using that
MR. TALLEY:
time.
MR.
HARRIS:
I don't
I was
think
told
so; there
in the call market?
was
some
of that
at that
so.
MR. TALLEY: That has all since been retired.
We have endeavored
this the easy money
to.keep
I do not think
market.
it has been the easiest
me in saying
anybody
will contradict
in
money market
with the possible
exception
of San Francisco
You have got to keep your reserves.
States
today.
the United
I suppose
you know that the amount
of loans the Intermediate
the
is only 5 per cent of the total amount
Credit Bank carries
of
loans of the live stock industry.
MR. HARRIS: Under normal conditions the livestock industry
is the same as W. D. Cleveland & Co., or any commercial name.
If they can sell paper in periods of redundant
or easy money, at
41/2 per cent, or go to the local bank for 5 per cent, they would
These things we
naturally
prefer to sell in the open market.
are talking about now are designed to be carrying transactions.
The point I am trying to get at is our bank at home where this
business originates and has to be carried on, how far we can go
in making a commitment;
how far we can go in carrying something for the benefit of our own people at our own rates instead
Of causing them to go out for money at any rate necessary to
get it; how far we can govern our own policies, or whether we are
governed by Federal Reserve mandates and what we ought to do
about it; whether we can sell other kinds of paper when this
particular class of paper does not have any sale in the open market. Ought the Federal Reserve Bank to hang
on to those other
securities and make these people shift for themselves?
MR. PONDROM: Mr. Talley, just what, if anything,
does this
Intermediate
Reserve
to the Federal
Credit Bank contribute
Bank?MR.
TALLEY: Not anything
at all.
MR. PONDROM: Aren't
those debentures
endowed with the
Special feature of tax exemption in order to be marketed at any
time ?--to
get every advantage
over the market bonds and acceptances?MR.
for
TALLEY: Yes, sir.
We think
it is very much better
the Intermediate
in the open
Credit Bank to fill its requirements
market
Rewith a longer maturity
at the same rate the Federal
serve Bank of Dallas would have charged
them.
That has proven to be true because since that time open market
Mr. Meyer
When I was in Washington,
rates have advanced.
told me they
could not sell $1,250,000 in the open market at a
rate that would not disturb their existing arrangements
the
on
loans that
they had and I told him in that case we would be very
glad to take them.
Is that clear enough?
MR. HARRIS: It is, but I
I want to comment on
to
go
on.
want
Mr. Pondrom's
Yes, it is true that they have no money
question.
invested
in the Federal Reserve Bank and debentures
tax
are
exempt.
That was a very wise thing to do because they would
'lot
object
rates
livestock
these
operations,
where
with
all
other additional rates
tacked
bankers, with
on, that we are enough in sympathy,
as
our live stock
to try to get money for them through
customers
any instrumentality
less than 10 per
have at something
we
cent.
MR. TALLEY: Mr. Harris, are you charging
the Federal Reserve Bank with being unsympathetic?
MR. HARRIS: I want to find out whether
that is it, or lack
of ability.MR.
TALLEY: The contractors
for unfinished
cattle have had
a great deal of difficulty in getting hold of funds to take up their
That is true, isn't it Mr. Webb?
You are in the
contracts.
cattle country.
MR. WEBB:
time ?
It
is, practically.
Do you
mean
at
the
present
MR. TALLEY: During the past three or four weeks.
Say the
last four or five weeks.
MR. WEBB: I couldn't answer you definitely on that.
MR. TALLEY: One of our large cattle banks called me on the
They said they
phone one day and explained that situation.
owed us quite a good deal of money at that time; it didn't seen"
to be to me, about $1,300,000, one of the largest banks in the district, a bank I should say where 75 per cent of its loans are cattle loans. It is known as a cattle loan bank.
They explained the
they could
situation that with a good many of these contractors
not take up cattle, May 1 deliveries-this
was the latter part of
take
April.
I said to them my suggestion
be
they
that
would
for that paper, and if their decline in deposits
short maturities
caused them to discount with us to go ahead, we would be glad
to take it, because we did not want to get into a market situation by reason of those contractors
probably not taking their cattle and having these banks call their loans and send that unfinished stuff to the slaughter
That would disturb operamarket.
tions.
That has worked out beautifully.
The bank did not borrow much additional from us, about $600,000, but they took those
short maturities
and as they could get their money the line was
liquidated.I
know
that
illustration
if
to
that
do
use
as an
not
show
we
what we are doing, we are presumed to know what we are doing,
that the needs
and we are in entire sympathy
with everything
of this district require.
MR. HARRIS: In regard to lending cattle men: Take the banks
like our banks in Houston.
Even if in abundant
funds unless
intermediary
we could
some machinery is set up as a satisfactory
to go very heavy on cattle.
This intermediary
not undertake
was set up and because it was set up other things have gone out
of the picture.
The purpose of this discussion is to find out what our obligation is to the cattle industry.
Even though the Intermediate
Credit Bank is not a stockholder,
is a big
the cattle industry
that
in
What
Gossett
Judge
know
to
responsibility.
wanted
He naturally
case was not only about calling the $6,500,000.
wanted to know in conditions where demands were legitimate,
where we were all committed to the policy of saving out enough
in stock
funds for general business instead of putting everything
exchange loans how far we would be in position to make commitments ahead in respect to a highly disorganized
and very uncertain money market.
MR. TALLEY: Does your bank make commitments
ahead under
like that?
circumstances
MR. HARRIS: Yes.
We endeavor
to sit in with the customers
that our bread
them
through
depends
butter
see
and
on
and
think
legitimate
certain
If
their
and
we
are
needs
situations.
we can do it and it has got to cover that period of time, we will
Clean up once a year,
say, "we will give you a line of credit."
or you don't have to make them clean up at all unless you want to.
MR. TALLEY: I don't believe T can add anything.
I might say
this: You
dishave
I
that
have
avoided
studiously
observed
may
Credit law. We
cussing any fundamentals
of the Intermediate
take the
is
is
that
law,
that
is
in
the
it
that
all
and
position
necessary as far as we are concerned.
I have not undertaken
to discuss the fundamentals
of it, whether it is correct or incorrect. That, of course, enters into it.
MR. HARRIS: We are coming into a period of very uncertain
money conditions.
MR. TALLEY: I disagree
I rather
think the
that.
on
you
with
treasury
I think
in 51/8 per cent rate.
itself possibly
overstepped
their judgment
the
the
sound
at
conditions
market
money
of
tithe that
the rate but it came on the heels of
they determined
what I think
liquidation
in the last two weeks.
$500,000,000
was
think
we are coming into easier money.
MR. HARRIS: The treasury
ought to know more about that.
MR. TALLEY: I
treasury
that
the
probably
overstepped
say
its
rate ä, little; probably correct at the time they estimated the
t'ate, but I think it
heels
liquidation
$500,000,000
the
of
a
on
came
in the
past two weeks, and we may be headed for easier money
conditions. That is borne
by them requiring only $400,000,000.
out
and subscriptions
of $1,118,000,000.
MR- HARRIS: (interrupting)
The rate may be high, but I will
:
say this* One
of the biggest bond houses in the country, just before this
least
they
told
5
was
anticipated
at
me
a
announced,
per cent
it had passed
Government,
that
the
rate,
although
and
enabling legislation
interest
bearing
bonds
to
dissell
no
on
a
count basis
the reason that
it was
would not risk the experiment-that
believed that these would be brought out at least
5
at
per
cent was
because all other United States bonds were selling on
a 5 per
cent basis on conditions of supply and demand.
MR. TALLEY: You must appreciate,
been turning
out bonds
and stock
rency.
however,
that they have
did curlike the Russians
bonds.
MR. HARRIS: I mean Government
The War
MR. TALLEY: Well, I just use that as an illustration.
Loan Depositary Law enters into that.
MR. HARRIS: It was on the combined wisdom of the big city
banks and the Secretary of the Treasury.
If anybody was misthey do not
taken about it-they
are in the heart of everything;
bring out these issues without consulting
the big bankers, and
when they brought out 4 and 41/2 per cent issues it was under
pressure, because the bankers thought money was worth more.
THE PRESIDENT: I want to congratulate
my two good friends
that they haven't made this a heated discussion.
MR. HARRIS: It is utterly friendly.
THE PRESIDENT: It has been enlightening.
I
MR. TALLEY: I am very glad Mr. Harris brought
it out.
think, however, that it has not reached the unanimity of opinion
among the Federal Reserve Banks themselves
as a system matCredit Banks all over the
ter because there are Intermediate
boundo
district
they
country and
not necessarily
coincide with
daries of the Federal Reserve Banks.
We can deal with any
Intermediate
Credit Bank and any other can deal with ours.
MR. HARRIS: That brings out a statement
that is very helpful'
that they can deal with those questions within their own latitude.
Therefore,
it is a question of our own bank policy.
Now, do we
feel under any responsibility
in disorganized
money markets,
when these debentures
are on the market and do not move?
Is it up to us to get behind that situation?
THE PRESIDENT: I am going
to get behind
that
situationDuring
1927, we had four banks
in Tyler and we put in what
house system,
one
National
three
Banks,
was called a clearing
we
bank.
We were called together.
We issued
private
what
k
dld.
house certificates.
A gentleman,
called clearing
whom you
bank
well, was stakeholder
of the concern,
and the private
to put up any of its bills receivnot see it and was not inclined
He said he didn't
have what we wanted.
He said, "Y°u
able.
h°"v
I
issue
to
We
"But
him,
go ahead;
am going
scrip."
asked
to
to
take
that
are you going
up
scrip ?" He said, "I am going
take it up with some more scrip."
MR. TALLEY: Mr. Harris, I am confident, as far as my own
opinion is concerned, and I think I voice the same view of our
Board of Directors
to a man, that if something
haPPen
would
the
feel
high
in avoiding
we would
a very
sense of responsibility
liquidation of the livestock
these debentures.
or that
industry
MR. HARRIS: I would like to know how far
feel that we could make a commitment.
MR. TALLEY:
Those
MR. HARRIS: Well,
are
you
specific
stated
part
of it behind
ahead
we could
transactions.
one.
MR. TALLEY: $500,000?
They declined
ment of $500,000 per month for period
Board did that, I didn't do it.
to make the commitTh.:
of six months.
MR. CULBERTSON: As a member
of
of the Board of Directors
the Federal
to
Bank of Dallas, I want to take exception
Reserve
the intimation
has made that it was possible
that Mr. Harris
or
likely
that in the course of formulation
of our polior probable
cies we drew inspiration
from the judgment
or thought
or ideas
that
Skeedunk
in New England,
or some other place,
prevailed
far
from the zone of our operations
remote
or of our interests
In the Eleventh
I want to say right here that he has'
District.
misjudged
the character
and the stuff that the Board of Directors here is
and
of thought
made of ; that so far as independence
action or principle
it is centered
idea is concerned,
on what
or
iS for the
We
district.
this
the
may make
producers
of
good of
Mistakes;
it is charged,
but when
or
we do make
mistakes;
rather
intimated,
if you please-I
we
won't say charged-that
are taking into consideration
is happening
which
elsewhere,
what
has
I
to do with our case, the gentleman,
nothing
absolutely
Say, is
knows
he understands
I do not think
or
mistaken,
and
the
here is made of!
stuff that this Board of Directors
THE PRESIDENT: One
Mr. CulI think,
Mr. Harris.
moment,
berson,
you misunderstand.
MR. HARRIS: Nothing
further from my thoughts
than to
was
make any
kind.
But in the beginning when
that
suggestion
of
Judge Gossett
he had been called upon to retire that
that
said
$6,500,000
he said to me that he did not know why he was being
called for it, that
it was purprevailed,
unless
conditions
easy
suant to
That was one
Federal
Reserve
Board
general
policy.
thing I
to find out. I wanted to know whether it could
wanted
act independently
in
the
this
of
policy was
or,
sort
situation,
formulated
by a board not in close touch with our conditions,
and Whether it
lay down the rule. Indeed, that has been
could
necessary.
I did not make any intimation
of that sort.
Cthat
a
Ndid
quite sure that my
1 think
those
t
gentlemen you
understand
you
noam
quite
nut in
intimation
So far
That
office.
was
made
nevertheless.
as the intimation
that youMR. HARRIS:
(interrupting)
k
: I assure you he has made a
All the same this meeting
to that.
complete
and fair answer
brought
it out.
I think
the policy on general
ought
principles
to be if money is easy, our banks are not calling on us for, anyinvested
have got $29,000,000
thing more than $17,000,000-we
in securities
in the market-if
I were in the
that are moving
the debencouncil of the Board, I would urge that we continue
tures and sell some of the others.
MR. TALLEY: We have an obligation
to the district.
to the country
THE PRESIDENT: I am going to tell you boys
desks and have a good cussing.
So far,
others
along fine; I am afraid
you might get bad.
MR. HARRIS: (To the Chairman)
thought on this matter?
as well as
to go to each
you have got
: Do you want anybody
else's
MR. WOODSON: I would rather
have them heard
on whether
disIntermediate
the
Credit
Bank
than
we need
or not, rather
between
the two banks.
As far as I am concerned,
cuss relations
them
I would resent
at Waco, we take care of all our customers.
in there trying
to loan money.
I do not think
coming
we ever
has a
did need the Intermediate
Credit Bank.
The Government
habit
hollers.
in an institution
time Anybody
of putting
every
We do not need any Government
I really
in Waco.
assistance
it is an additional
think
expense.
MR. TALLEY:
Do you indulge
in open
market
transactions?
MR. WOODSON: We do to a great extent.
We loan on the open
We would
market.
appreciate
very much
getting
some good
We have the money and would
grain,
some good cattle paper.
be glad to put it up.
MR. HARRIS: I have been noticing your statements
for some
time back showing $12,000,000 deposits, $4,000,000 loans. It Is
You couldn't take
not all the banks that are in that position.
this
the
in
Oklahoma
Texas.
The
care of
cooperatives
or
reason
was done is because there was need.
MR. WooDSON: We have ample means to handle all the
the Intermediate
Credit
Bank.
of this state without
credit
MR. WILLIAMS: It is perfectly
natural
with all of us to view
from our own local institution.
these situations
Mr. Woodson is
He has a very large bank.
But about
not in a cattle community.
with
Texas
backed
is
ninety
per cent of the range
country
of
buy
banks of less than $10,000 limit.
Ten thousand
dollars will
a
has
few
than
hundred
head
A man who
a
more
a
of cattle.
head
thousand
invested.
has $75,000
of two-year
old steers
Where is he going to dig that money from a $25,000 bank, which
be
is his banking
institution?
Those
are the loans that must
taken
through
the various
loan companies,
cattle
which event-
Credit
ually work into the Intermediate
used it.
Our banks never
Bank.
Credit Bank is a
I take the position that the Intermediate
necessity for the purpose of taking care of these large cattle
loans in the communities
where the banks are very small and
their limit is very small.
MR. WOODSON:
Well,
they
are
MR. HARRIS: They are not taken
I was making in the beginning.
MR. FLORENCE:
Mr.
taken
care
of.
care of, and that is the point
President.
THE PRESIDENT: Come up here, Mr. Florence.
MR.
FLORENCE:
(complying)
:
I was
just
going
to
say
that
in
fairness to the Federal Intermediate
Credit Bank that it should
be said
Conby
the
it
this
consent
of
organized
was
meeting
at
gress to take care of what they thought was a real need and the
People of the State of Texas at the time were more concerned
than at any other time.
I happen to know about this cotton transaction
that occurred
with the Federal Intermediate
Credit Bank that I think will
Justify its operation:
During the past year, without calling the
name, however, I think it would not be improper to call it-the
Texas Farm Bureau Cotton Association,
here under
operating
.
the cooperative
by the National Government
sponsored
plan
and
to the highest degree, that is,
farm
of
marketing
on cooperative
Products.
It is considered successful and has been successful in
California
in
be
this
carried
out
should
states
and
other
and
State.
Cotton Growers Association
had
The Texas Cooperative
occasion to borrow $8,000,000 or $10,000,000 from the Federal
Intermediate
Those funds were made
Credit Bank at Houston.
available, I
largely with the cooperation of the Federal
am
sure,
Reserve
Bank of Dallas.
I am not bringing up that question at
the
But I am saying there is a real need in Texas,
moment.
according to
the cotton and wheat industries
my
view,
with
and
the
Federal Intermediate
Banks, and
industry,
for
cattle
the
they
function to this section of the counare
performing
a
great
try
and every place (Applause)-and
if we do not attempt
to
Support the institution
for the particular
necessary
products
grown in
banks
individuals
and
our
cannot
expect
sections,
we
throughout
the country to support it.
Recently
$2,000,000, within the current week, was
a
credit
of
arranged in
Credit Banks took
the Federal Intermediate
which
active
If,
it
is
find
Part.
the
bank,
true,
you
could
particular
you
might be
$2,000,000,
but
Federal
to
that
the
Intermediable
place
ate Credit
Bank
is
do
it
it
for
that
can
quickly
and
organized
Purpose.Another
transaction
of $2,000,000
happened
a week ago and
in
New
York
banks
in
Boston,
in
by
two
taken
and
one
one
was
Chicago, at a time when there is money available in Texas.
is due probably
banks
that
The difficulty
of the situation
in position
to grant
credit are not doing it. As long as they are
Interneed for the Federal
not doing it, I think there is a distinct
It would almost
Bank.
precipitate
a crisis of the livemediate
in Texas if you do away with it. It enables
them
stock industry
to get a lower rate of interest
of cooperative
marand benefit
keting.
I believe
it is a fine thing.
I think
this association
than to sponsor
the operation
along safe and
could not do better
I am talking
sound lines.
about safe and sound and constructive
do
lines.
So long as they have honest
management
we should
of
everything
within
our power to cooperate
with the activities
Intermediate
Credit
the Federal
Banks
(Apof this country.
plause).MR.
GREER: I think the Federal Intermediate
Credit Banks
instrumentalities
one of the greatest
of good in Texas today.
In connection with our milk project in Tyler: The banks realized
it would take money to bring high-grade
dairy cattle into Tyler.
We realized that among other things we have to render to our
people in the country that it would over-tax us to finance the
purchase of these high-grade cattle.
Judge Lindsey, Chairman
of the Board of Directors
of the
Federal Land Bank, Houston, and of course, connected with the
Intermediate
Credit Bank, lives in Tyler, as you gentlemen know,
and he offered the banks of Tyler the facilities of the Intermediate Credit Bank.
We have accepted those facilities.
In cases
of loans that go for the carrying
out of this industry
we are
the Intermediate
Credit
Bankgoing to find outlet through
Through their cooperation
we will organize one of the greatest
industries
the
I think every assistance
ever offered to Tyler.
Federal Reserve Bank of Dallas can lend they should lend to the
Intermediate
Credit Bank.
MR. WOODSON
: I take issue with him. I think the banks of
Dallas or the banks of Texas can finance the crop without that
help. I think when they make this cotton that we are going to
loan the money to make the cotton from.
Then, instead of coming to the bank when we would like to loan it to them they 9o
to Houston and borrow that money, that can be financed with
the banks without them doing that.
The only thing the Intermediate
Credit Banks should do,
in
in my opinion, is help in some of those institutions
such as
We are doing that for the Borden milk plant there in
Tyler.
Waco. We bankers got together and said we did not need any
Credit Bank assistance.
Intermediate
We wanted that good
loan and mortgage
We did not want the
on some good cattle.
Bank to do that.
Federal Intermediate
first
here.
The
down
I am tired of the Government
coming
thing you know these merchants
and say they
will get together
them on commercial
to finance
want an institution
paper, one at
Waco,
the
there
Dallas,
the
and
go
would
merchants
and
one at
Government
have
it
then
handle
any
wouldn't
we
and
would
big
financial
figure
buy.
They
to
commercial
on
a
now
paper
institution
Then they will need millions
to finance
cotton,
etc.
more to turn over to them before the Government
would handle
it and
just
future.
I
in
business
the
have
bankers
won't
any
we
handle this, these various
say that if we cannot
classes of busiI say I am just
ness, then let us get back of the Government.
into competition
jumping
getting
tired of the Government
with
debentures
that are
issuing
us, taking
the cream
of the stuff,
non-taxable.
I would like to lend my money
out on good collateral
and make some money.
MR. FLORENCE: I feel that the Federal Intermediate
Credit
tank's debentures
quite properly are being offered on the open
market.
It is not a question of the outlet bank making commitment to them in this particular
case. 1 want to say this for Mr.
Woodson's benefit.
Nevertheless
this is a fact about the Federal Intermediate
They offered to
Credit Bank in operation:
the banks
on a basis of
and they were borrowing
of Dallas33 1-3
per cent margin in Federal Licensed Warehouse-they
Offered to banks of Dallas, probably every large bank was offered
And then it required the financthey would take.
what
ing
of several million dollars more that was handled by the Federal Intermediate
Credit Bank. Those forces that are borrowing
from the Federal Intermediate
Credit Bank are largely doing so
after they have used the surplus funds available.
MR. WOODSON: Do
acceptances
you could
to say if you had
you mean
not sell them in the market?
accredited
MR. FLORENCE: Well, there is some reasonable limit to which
we can commit ourselves;
If they
time.
within a reasonable
come to us-for
instance the wheat growers of Oklahoma, say
they
them $2,000,000, all we
want $2,000,000; we cannot len'd'end
can do is a quarter of a million or so. They would go somewhere
else.M.
WOODSON:
of it.MR.
I can
place
HARRIS: Did they
YOUfor $1,000,000.
MR.
FLORENCE:
Yes,
about
not get
$6,000,000
a commitment
or
$7,000,000
here
through
sir.
MR. HARRIS: Then they
to Houston and
came
a hoot. A large
They had to get
cotton
crop.
getting
larger
that
a
amount
of
money
after
'TOW,
why did they have to have cooperation
we had to make
my assurance
of
had been done.
? Couldn't you
it along?
bank.
All banks
carry
are not like Mr. Woodson's
There is a financing
in the interior
point and there is a financing when it gets down to the point of concentration.
We are all
to get as much profit
as
working
on our cattle
and everything
we can.
this
THE PRESIDENT: Gentlemen,
for
Mr.
Willis
we called
Mr. P. C1 Willis is one of our distinguished
morning.
guests,
Bankers
Association.
I do not know
president
of the Louisiana
they are figuring
the name of Louisiana
whether
on changing
Mr. Willis.
or not.
MR. WILLIS: Mr. Chairman
I want to exand Stockholders:
in being here, though
I do not feel that I need
press my pleasure
I
fact
introduction,
like
in
that,
any
as a visitor
or anything
in Texas.
We are members
was born and raised
of the Texas
Bankers
Association.
We are in the Eleventh
Federal
Reserve
Bank District.
I live in a town whose principal
business
street
is named
Texas;
the next principal
is named,
street
and so on,
Milam and the others,
after the heroes of Texas, such as Fannin,
So I do not feel so
and we are on this side of the Red River.
far removed
from you.
I have enjoyed very much the deliberations,
especially this
friendly controversy.
Each one of them has spoken forty times
Somebody else should have a right to speak once.
already.
I think all the organizations
Credit
Intermediate
such as
bureaus
operations,
credit banks, farm industries,
cooperating
have their place in every way.
If they perform the functions
for which they are intended, they are capable of doing great
good. In this case I think the Federal Reserve Bank did them
As a result they got out, hunted and created a market
a service.
for their paper which they should do. I believe furthermore
In
the Federal Reserve Bank for its members.
Instead of one ton,
ten tons; with cotton, a thousand more bales over here; get it
together ! get it collected! Create larger paper ! There is a moral
be
to
that
It would
responsibility
offer
paper to the public.
They made it possible for the Federal Reserve Bank
attractive.
is
buy
to
that paper.
It has been made eligible.
I think that
I think the Federal Reserve Bank ought to buy that.
right.
They cannot make indefinite
That is not good
commitments.
that
business.
That would jeopardize
the future
interest
of
bank, or all the banks.
I would not consider that sound bankingI think we are really lucky.
We have got one of the best
the
in
institutions
managed
of the eleven or twelve districts
in
United States.
I want to see these other institutions
backed
the right way. They can get a good deal more money from Yoll
if you will use the privileges that you have; twentYordinarily
The Fedfive per cent of your capital and surplus, if necessary.
eral Reserve will take that off your hands under the right condi-
these objections today have been more imaginary
else.
I think let every man handle his organization
as it should be
and they will all prosper, all be benefited by it. (Applause).
Chairman,
Mr.
here,
Ma. PoNDRoIi: The statement
made
was
that some association,
the Texas Farm Bureau or Cotton Association, submitted to the Dallas banks, an application for a loan.
1 want to say either I was not one of those banks or I do not,
it.
I
hear
did
because
I
bank,
Dallas
represent
will
of
not
a
say that when that organization
was a babe in swaddling clothes
they came around to see me, and we nursed them along until it
They presently found
We loaned them money.
got on its feet.
in New York they could
out that by paying heavy commissions
borrow money maybe a little cheaper than we would lend it to
them.
Credit Banks were organized
Then these Intermediate
and we have never heard from them since. They may have met
them at some special bank.
I have some money to lend and I
haven't been
five
for
four
by
them
or
years.
visited
Lions. I think
than anything
THE PRESIDENT: I was just going to ask Mr. W. H. Patrick
to make
to make a
I am going to ask Mr. Patrick
a motion.
Mr.
into Texas,
motion that we receive
that part of Louisiana
Willis.MR.
PATRICK: Mr. Chairman,
I move that we adopt as a full
half brother that
(A second).
portion of Louisiana.
THE PRESIDENT: It is so moved and seconded, and there is no
°PPosition.We
haven't had a single fight, however, we have had some
important questions.
Mr. Longmoor wants to make an announcement before we adjourn.
THE SECRETARY: (Announcement
theater tickets furnished
of
by
clearing house).
A representative
of the Dallas News has asked me to request
a picture of this body for his paper.
THE
PRESIDENT:
the Dallas News.
Gentlemen,
Suppose
we
have
had
this
invitation
from
we accept it?
THE PRESIDENT: You Dallas people
to
here
just
ought
stay
longer
than anybody else, even longer than these red badge men.
(Short intermission).
I want to thank
for staying
you
for
not objecting
too strenuously.
here
and
want
to thank
you
We have
had
fine
We
have
had
a
meeting.
certainly
a fine
discussion
is
here
This
this
the
afternoon.
greatest
organization in
the country, gentlemen,
for the purpose of bringing us
Bank
Federal
Reserve
the
the
together,
members
of
getting
During these discussions you may think some
closer together.
learn
learn
but
foolish,
is
and
and
we
can
saying something
one
yet not be very wise men.
I want to say
Our committees
are appointed for tomorrow.
I consulted with different
members of the Advisory Committee
in selecting those committees and they are good ones.
We have met some
We have enjoyed this this afternoon.
old friends.
Is there anything else to come up now? I am going to plead
guilty to the fact that I want to get my picture in the paper.
The Dallas News will never have a finer looking bunch of men
(Applause).
in a picture.
Is that right?
Remember,
Mr. Nathan
tomorrow
Adams will
gentlemen,
speak to the convention.
(Adjournment
was here taken).
Forenoon
Meeting
Session
called to order at 10 o'clock.
THE PRESIDENT: Gentlemen,
in the absence
of Mr. R. G. Erwin,
Chairman
of the Committee
on Mode of Election
of Directors,
Qualifications,
Tenure
is going to read
of Office, Mr. Longmoor
Mr"
his report.
Immediately
the
that
after
report
of
committee
Adams
Please
will speak.
come to order.
THE SECRETARY: I do not know what is in this report, gentleIt
I
it.
the
men.
cannot get any member of
committee to read
is absolutely without recourse on my part.
It is not my report,
that.
This report is on Mode of
please, everybody understand
Election of Directors, etc. Mr. Erwin had to return home before
he could read it. (Reading).
Mr. Chairman and Members of the Stockholders'
Association :
Some month ago a meeting of the Advisory Committee of the
At
Federal Reserve Bank Shareholders
Association
was held.
the
this meeting careful consideration
to
was given not only
relations of the member banks, but to the undertaking
of a movement that would tend to increase the efficiency and improve the
condition of the Banking System in the Eleventh Federal Reserve
District.Committees
were
appointed
to study
the
various
subjects.
One committee
D.
E.
Blackburn,
then of Denison,
composed
of
I
W. G. Lacy, Waco;
W. B. Quigley,
Memphis;
now of Victoria;
to
Alf Morris, Winnsboro;
R. G. Erwin,
Ballinger,
was requested
l 80 ]
carefully study and bring in a report on "Mode of Election of
This commitDirectors, Qualifications
and Tenure of Office."
tee's report, which will be presented
later, will, among other
things, include as follows:
First.
We find no fault with the mode or manner of electing
directors of the Federal Reserve Bank as prescribed in the FedThe secrecy of the ballot is properly maineral Reserve Act.
tained and safeguarded.
be
to
directors
Second.
The qualifications
seem
required of
in line with public policy and in the' interest of the nation's business as defined in the Federal Reserve Act.
Third.
With reference to tenure of office, we have to say
that we sincerely believe that the Federal Reserve Bank Act
that a director would not succeed himself when
contemplated
the term of office was fixed for three years instead of one year
Charters.
as in all other corporations
with State or National
Certainly it would tend to popularize the Federal Reserve System if the directorships
in all groups were rotated after a period
of six years, and, following the idea advanced in a resolution
in the annual meeting last June,
endorsed by the shareholders
we recommend that our shareholder
banks do not nominate or
vote for Class A and Class B directors for a third term.
I will not take up your time in giving you the requirements
as set out in the Federal Reserve Act as you are no doubt familiar with
same.
Some may have the impression the voting requirements
are
complicated, but if you will just take the time to study them
you will find this is a mistaken idea. These requirements
must
necessarily be exacting as they apply to each of the 12 districts.
We did find, however, upon investigation
of the records a
shameful condition exists for which some officers in a large
number of member banks are entirely responsible,
it is to
and
this
condition I wish to call your attention.
It is the lack of interest displayed by many of our member
banks in
the matter of exercising their voting privilege in the
election of Federal Reserve Bank directors.
This has been a matter of serious concern and study not only
to the
Federal Reserve Bank of Dallas, but
the
management
of
to all the
other Federal Reserve Banks and even the Federal Reserve Board.
The Federal Reserve Bank
directed
is
Dallas
of
and controlled by
directors,
it
is
duty
nine
our
six
of
whom
and privilege to
elect.
While it is
doubt embarrassing,
to read to you
no
permit
me
some of the figures taken from the
records of the Federal Re-
the matter of votes cast in the
the past several years:
1925
(Election of Class A Director by Banks in Group 3; Election of Class B Director by Banks in Group 1.)Group
3 Group 1
Total Number of Banks in
62
482
-------------------------------Number of Banks That Voted
37
97
_
1926
(Election of Class A Director by Banks in Group 2; Election
of Class B Director by Banks in Group 3).
serve Bank of Dallas covering
election of our directors during
Total Number
of Banks
Number
That
of Banks
in
Voted
-----------------------
Group
300
114
2
Group
480
61
3
1927
(Election of Class A Director by Banks in Group 1; Election
of Class B Director by Banks in Group 2).
Group 1 Group 2
Total Number of Banks in_____
60
292
----------------------Number of Banks That Voted___________________ 53
155
1928
(Election of Class A Director by Banks
of Class B Director by Banks in Group 1).
in Group 3; Election
Group 3 Group 1
Total Number of Banks in-------------------------------- 448
63
Number of Banks That Voted
60
150
-------------------------While the average number of ballots annually cast from 1918
to 1926, inclusive, on a percentage
basis, was:
Group 1------36 ballots, or 55
----------------------------------------------------------%
33
Group 2---------------------------ballots, or
______________-------124
Group 3-------------------------------------------------------ballots, or 25 %%
-----_-102
This speaks for itself and certainly reflects a deplorable condition.Without
the law in its entirety, it does state:
"Each member bank by resolution of its Board or amendment
its president,
of by-laws shall authorize
cashier or some other'
officer, to cast the vote, etc."
(This is mandatory).
quoting
The usual resolution
as passed
by the Board not only author-
ized but directs that this officer cast the vote of the bank in
election of directors of Federal Reserve Bank.
Some banks which do exercise the voting privilege deprive
themselves of having their votes counted by failing to make the
proper designation
of its voting officer.
For example : In time past a resolution was passed by the
Board of a member bank showing the elector to be John Smith,
Cashier, but the official records of the Federal Reserve Bank
now show John Smith to be president,
or some other person to
be cashier.
You can readily see this bank's ballot cannot be
by office
Counted. If you have not made the proper designation
instead of name, which will be continuous, do so immediately.
On September 28, 1928, a letter was sent out by the Federal
Reserve Bank of Dallas calling the attention
of member banks
to this situation.
Records show 220 banks in Group 3 out of
480 banks failed to send in these resolutions.
Next election will be held in November, and if our directors
are giving of their time and effort, let's give them and the other
capable and efficient officers of the Federal Reserbe Bank of
Dallas the
vote."
courtesy of at least a "respectable
Our committee feels that if we do nothing more than wake
up our member banks to the matter of voting in the election of
directors,
our efforts have not been in vain.
It appears that our directors
are elected by approximately
20 per
cent of the member banks.
I have not endeavored
to concentrate
my
remarks
strictly
to the
subject assigned, for it was the earnest desire of our committee that this situation as to election of directors be presented
to the
representatives
of member banks at this meeting.
Mr. Chairman,
before closing, our committee
would like to
See some evidence or be assured that our members will be more
attentive to the matter of voting for directors and I know of no
better
method than asking them the direct question, and we
Would be
pleased to have you present the question and see how
many of those
will promise to help to
present this afternoon
Correct this
condition.
I sincerely trust I have
not bored you. I thank you.
THE PRESIDENT:
Port?MR-
Gentlemen,
what
shall
we
do with
the
re-
WELCI-I: As a member of the Resolutions
Committee,
I
ýv"Ild like to
It is going to
this time.
at
partial
report
a
make
"we a lot
of lost motion to make this report at this time.
The Resolutions Committee in dealing
with reports and topics
it
found
that
that
was
yesterday
presented
were
of committees
to
disposal
their
in
impossible
the
time
go extenat
practically
to
into
these
thoroughly
enable
sufficiently
reports
sively and
judges
bunch
to
the
and
of
the members
a
act
as
committee
of
The
compropose
rejection.
we
or
acceptance
say we propose
have
these
in
and
earnestly
worked
reports
of
charge
mittees
and
hard for a long time on them, given them a lot of thought
in this house,
the stockand we feel that the members
study,
holders
snap
of pronouncing
of this bank, are just as capable
by their votes, and it is more appropjudgment
on the reports
on Resolutions
riate for them to do so, than for the Committee
to you,
to try and pronounce
and just recommend
snap judgment
into what the ordinary
degenerate
convenand let this meeting
into-"I
or
tion degenerates
of the report,"
move the adoption
its rejection,
as it may.
The reason I am making this partial report at this time is
that under the circumstances
as stated we should act on each
one of these committee reports as it is made, because otherwise
when we come together to accept or reject we must read them
through again in order to intelligently
vote on them.
Therefore, Mr. Chairman, I move that for the balance of this
stockholders'
meeting as committee reports are made they shall
be acted upon by the house.
THE PRESIDENT:
You
move the adoption
of this report?
MR. WELCH: Yes, sir, I move the adoption
of that report.
THE PRESIDENT: Is there a second?
MR. DREXEL: I second the motion.
THE PRESIDENT: Gentlemen,
motion is made
Is there any discussion?
this report be adopted.
Carried.
If not, those in favor aye.
that
and seconded
(No response).
a
Association,
it
THE PRESIDENT: Gentlemen
the
me
of
gives
Mr. Nathan
to introduce
Adams
of Texas,
great deal of pleasure
(Applause).
you.
who will address
a
Gentlemen:
MR. ADAMS: Mr. Chairman
It
me
and
gives
the
be
here
deal
this
to
to
over
see
of pleasure
morning and
good
interest that the bankers of this state are taking in the managethe
institution
to
the
to
which means so much
ment of
us and
business interests
territory.
of this Southwestern
In my experience in banking I have found that lack of credit
I think that the over-expansion
does not always cause disaster.
of
lack
deal
than
the
great
credit
causes
a
more
grief
of
always
You know when we bankers have plenty of money and
credit.
to
have
tendency
it is idle we
to do things that we ought not
a
do. We do not give the same careful consideration
to the paper
that comes to us that we do when we are just about to use our
reserve, and thinking about going over and asking the federal
to lend us a little money.
I do not think that any banker in this district has any real
just cause to except to the policy of the Federal Reserve Bank.
I believe in the past two years it has been of wonderful benefit
to the bankers of Texas because I believe that their policy has
taught that money has some value yet in this country.
doing busiYou know in 1920, one of the great corporations
down. I shook hands with
ness with us sent their representative
him and he said to me: "I want to get a line this year of $200,000
"Well,"
on our straight paper and $400,000 on our acceptances."
I said, "I
I
because
hands
to
want
you
again,
with
want
shake
to congratulate
you on the fact that you can come in any institution of this size and talk about $600,000 without stuttering,
and
then I want to ask you if you saw any thousand-dollar
bills floating in the
hotel,
I
then
from
the
and
came
as
you
atmosphere
Want to ask you when money ceased to have a value in your
have now
section.
You don't realize probably that governments
to
stopped buying and you are going to sell this merchandise
people, and I want to know where you get the optimism to increase this business in 1920."
We compromised
and $200,000 accepton $100,000 straight
ances, and it was some twenty-two
months before they paid it
and then they quit us. When you stop to compare the figure of
$600,000 to
peoour total line account it took about seventy-two
ple for us to do business with, just about seventy-two
I
people.
think
we have always to consider the value of the business to us,
and yet to consider whether we have the ability to grant the
credit.Now,
I think the Federal Reserve Banking System has been
of great and immense value to great industries
of this country
and they have been very liberal in the extension of credit on the
paper of cotton seed oil mills. They have been generous enough
to say if the
purposes it will become
paper is for productive
eligible.that
think if you will study what the law says is eligible paper,
you will find that the Federal Reserve officers have been
generous in many instances to many institutions
in this district.
I think in former
in
they
too
years
were
entirely
generous
the
extension of credit.
I think the bankers themselves
have
got to realize that they
in the banking business for profit,
are
and that
books
their
they
when
put
upon
public moneys and agree
to pay
for
interest
it,
they
trouble
an
unsound
of
can
rate
expect
further
down
figure.
line.
just
don't
This
interest
the
It
works
Sunday,
holidays, nights and days, and whenever you are called
upon to
it
it
the
institupay
comes
out
of
profit
of
account
your
tion, I
think you ought to realize what is a fair and reasonable
and just rate to pay and then
to stop at that figure.
you ought
to have sense enough
You know there has been more grief in the banking business
of Texas by over payment of interest than any one thing I know.
You know we have some savings accounts, $9,600,000.
Just figThink what it takes to earn
ure that per diem at 4 per cent.
every day what you have agreed to pay on those savings.
I think that what we are interested
in as bankers is building
a credit system upon sound and safe lines, and I think that agriculture is just as much a business as banking, or automobiles,
or railroading,
and I think that the banker who permits them to
come in and take his money and do with it as they please, can
expect grief down the line.
There is just as much sense in your knowing
what the farmborrower
er is to do with the money as it is what any individual
that comes in, what he is going to do with the
or corporation
money.We
may talk about the Federal-I
sometimes think there are
some things in the Act I would like to change, but after all it is
the great bulwark of safety to the public and to you, if you have
like it should be run. It is easy to sit in the
run your institution
critic's chair and complain; it is the easiest chair in the world
to sit in. I sit in it myself, sometimes.
I sometimes wonder if
I would have made the same mistake under the pressure of the
fellow talking to me. The most critical part of banking is with
the directors.
They get it cold; it is just as cold as bits of ice
when they look at it. They did not hear the fellow tell you he
I wonder what
was going to double that money in six months.
they would do if they sat there three hundred and sixty-five
days in the year.
The fellow who comes in to borrow has got the best talk he
it
He
has
been
it,
thinking
can possibly make.
about
getting
related so you will listen to it. Then, if you believe in his work
he may get you to OK the thing.
There is a vast
and integrity,
difference between looking at that deal cold-bloodedly and being
under the influence of the fellow talking to you. No man can
lack that portion of human nature not to be affected
by the
ardor of the man borrowing the money.
You know I sometimes think that in this present day banking
and with the Government
coming along with every kind of financial scheme to help, that we have come to a chain-I
should not
The
departmental
banking
business.
say chain-I
should say
banking business is just as different
from 1912 this year as
indusWe have the combinations
anything
possible.
of great
tries, the combinations
of stores, chain stores, coming into ever-)'
town and hamlet of this great state and probably of the Unioll,
in
One of them told me they control seventeen thousand
stores
the United States.
Another one sat at my desk and told me they
stores and that
owned at the present time over nine thousand
they had $9,000,000 in cash which they were looking to invest
in this Southwestern
country.
So I say that the problem is what is going to happen to the
if all
wholesaler, what is going to happen to the manufacturer,
into
this tremendous
the one group of
comes
power
purchasing
people, together
with its selling agencies.
Take a great corporation
It works both ways.
with seventeen thousand
They
stores coming to you as a manufacturer:
say to you, "We will buy merchandise
at this price." Then the
wholesaler is out of business, because when they buy it from
It is a tremendous
to the public.
You it goes immediately
power.
Somebody told me the other day they had a chain store organization started in this city that had a purchasing
power of over
$7,000,000 a year. That is a tremendous
amount of merchandise
to buy and a tremendous
responsibility.
Let us so
Those are the things that the banks are facing.
run these institutions,
boys, that when we go over there we do
not have to have an argument
about whether the paper is eligible or
not. The weakness of the Federal Reserve System probably under the law is that they sometimes overlook management.
I think every banker in this room agrees that ability is just
as much credit probably as the note itself.
I know bankers in
this state in
I have the
whom I have the utmost confidence.
absurd notion that they can pull themselves out of pretty nearly
any hole they get into. I think that has some degree of weight
in the extension of credit always.
Nothing takes the place of
character and ability.
Character
and ability are the safeguard
of credit.Now,
Just try to run
just look upon this institution
as ours.
our institutions
always
as bank examiners
would have us, because we have to do some things
maybe that they will complain
at. I was trying
We
to prove myself a credit man one morning.
had
This fellow had a note
that owed us $18,000.
an account
Maturing,
is he going to pay?"
They said, "When
I said, "I
haven't
him."
He told me, Mr. Wilson
loan him
asked
would
the
I said, "Do you want me to call him ?"
money we wanted.
They
"You might
talk to him and see when he will pay."
said,
I went
When I came back I saw this fellow had
town.
out
of
discounted
$3,500 or so. I thought
After
that was funny.
the
committee
I was standing
I
meeting
outside
of the note case.
said, "Let
me see these notes this fellow sold us." I looked at them
for a couple,That barber shops.stepped
said,up
were
look
very fa st to me
darn fellow
and touched
'ne on the
Mr.
"I
Adams."
to
I
shoulder
and
want
see
said
said,
"That's
me." He said "How about two notes from so and so the
They
other day?
to pay them."
are not due for sixty
or ninety
days,
but I want
I concluded then I was not a good credit man because this
I would have gambled
fellow took it all out of me right there.
a hundred dollars they would be slow, yet the man knew exactly
what he was doing evidently because he paid the notes probably
forty-five
days before due.
to seventy-five
The advantage that you have over the Federal Reserve Bank
and over the bank examiner is the fact that you know the charYet every
acter of the people that you are doing business with.
bank in this country should be liquid; it should carry enough
secondary reserve to make them easy.
It is part of the banking business of this country in the extension of credit to see that the money entrusted to them is to be
used and used for the purpose for which it is intended.
I saw some discussion in the paper yesterday about what the
banks had done to the Farm Bureau Association.
I do not suppose anybody in Texas had any more to do with getting credit
for them than I did, but I am not going to loan them any more
money, certainly not until they change management;
not because
I do not think the credit as extended to them originally is perfectly safe and sound, but they perverted the use of the money.
They went on the cotton exchange and bought 33,000 bales of
I quit because I did not know but what they would find
cotton.
some other way to use this money, might be buying jackasses
I should not have any excuse to come
with it, I did not know.
before my board of directors.
I say to you that the essence o. redit is character and ability
and the proper use of the money. iv one of you can tell me that
your confidence is not shaken when the fellow perverts the use
of money, no matter how solvent his note is. If he comes in
and tells us he is going to use the money for specific purposes
He
and uses it for other purposes, he is just a plain defaulter.
has violated your confidence.
That is exactly the action of the
five members of the Farm Bureau Association.
I want to say something
We have
about audit statements.
begun to rely on them in the city of Dallas.
We have had three
certified
public accountant
statements,
some of them
showing
earning
power of those companies,
and yet every single one of
to
It is time for the bankers
them was fraudulent.
this
of
state
wake up to the fact that we need a penal code down at Austin
firm that wilfully
to send the auditing
to the penitenmisleads,
it belongs.
You take the statement
tiary,
Mille'
where
the
of
Manufacturing
Company:
It was certified
in October,
in FebruIt
ary $900.000 of quick assets were taken out of the statement.
is time for us to assert
our rights
and to deal with that charas they expect us to deal with them.
acter of business
for.
That
Now I think that we have one thing to be thankful
is that we live in the greatest
There is nothstate in the Union.
ing that you can plant in any other state in this Union that canTexas
in
Think
Texas.
not be planted
producing
of
successfully
35,000,000
Think
bushels
this year!
of this great toof wheat
in the Rio Grande
Think of this wonderful
mato crop.
production
Valley of Texas.
Think again of this wonderful
oil development
There is
from one corner
practically
of the state to the other.
in Texas.
no room for pessimism
Don't forget,
boys, don't forget
that no bank in our own corto
that does not give strict attention
poration
can be prosperous
to what is right.
You know I believe all of us know when we are
taking
a loan that is just a little off color, when we are putting
I
UP the money
on the fellow to do something.
and banking
don't believe we have got much right to do that.
I don't believe
I think
to anybody.
we have got much right to furnish
capital
that we ought to guard against
And I believe this:
capital loans.
That these
and expressing
our views
coming together
meetings,
I
banking
of the Federal
Reserve
at these
meetings
system,
think there
to
to be some effort
made to get Congress
ought
I do not believe that if a
amend the discount
of cotton paper.
fellow is
discounted
today
bales
500
and
cotton
we
of
shipping
the note
with 1,000 bales of cotton behind it
over at the Federal
that the Federal
500 bales of cotought to kick if we substitute
ton.
in dealing
I do not think
to be required
with
we ought
cotton to furnish
during
the
minutes
every fifteen
a statement
day.
liberal
I think
be pretty
that the Federal
on the
should
buying
because
by cotton,
when I sell foreign
of drafts
secured
exchange
City Bank of
firm sells it for the National
or
a
cotton
New York, it is
invest
firm contract.
If the Federal
cannot
a
funds
City Bank plus the enon the guaranty
of the National
dorsement
and the replus the cotton
of the bank in Texas,
sPonsibility
the cotton
they are getting
pretty
men,
strict.
of
I do
not think there ought to be any red tape about those transactions. I think commercial
banks cash them over every day for
hundreds
and millions of dollars without
going through
any.
When we are putting wheat in the elevator we ought not to
be required
to say, "That is the same wheat that went out." Not,
if we
is feasible in handI
do
it
them
think
the
give
money.
not
1419
I think the Government
ought to take in consideration that
the banks of this state are confronted with the
when
movement
totalling
of
cotton
and
cottonseed
crop,
millions of
dollars that
they
that
they
pyramid
credit
should
and
should not
be
quite as critical under those conditions on cash commodities
as they
sometimes are.
But, beyond that, I
the officers of this
want to congratulate
Federal
Reserve Bank.
I want to say that the row we raised
was probably
good. I think it taught them after all they were
this banking system; that after all they had a human
in it and that they should continue to have a human
in it, and that sometimes molasses was just a little bit
thanVOICE:
Vinegar.
part of
interest
interest
sweeter
MR. ADAMS: Vinegar.
I think that has accomplished
a lot
the fact that you are taking
of good. I think they appreciate
in the institution.
belongs to us and while I don't
interest
11t
in
believe that they ought to handle even cash transactions
thirty-five
cities of the United States I hope some day we will
get them to rescind the order.
I do not believe that they ought to take our portion and give
it to the poor public.
I don't believe in you boys who live in the
sticks and haven't got a Federal branch having to remit these
items at par.
Just realize the fact of how absurd it is for the management
of these banks to take $1,200,000 of our money, lay it on the
table and say to thirty-five
cities of America, "Come and get
it." Do you reckon they would do it, if they owned it? That is
the test.
If Col. Walsh owned it, do you think he would take $1,200,000
of his money and lay it on the table and tell the poor public to
That is the test.
They have got the right
come and get it?
to do it when the law says they may do it. As far as I am concerned, I would take them into the Supreme Court of the United
States and test whether
they have got the right to do it. I
don't believe I would have to hire a lawyer before any jury in the
United States to convict them of the wasteful waste of money.
The public don't own that bank.
They get great benefits out
of it, but they haven't got the right to expect them to take
$1,200,000 of the stockholders'
money and lay it on the table and
say come and get it! They wouldn't do it if they owned it, and
they haven't got the right as our agents to do it. I do not believe you think they have either.
Now I want to say to you again that I believe it behooV
the bankers of this state to give some thought to this $500.000,000 the Government is going to place at the disposal of the farmers of this country.
I know my friend Woodson thinks the Government
ought not
to get any business.
I think that myself.
But, boys, they are
in business and somewhere in this broad land of ours they are
going to take advantage
of the opportunities
and we ought not
in this Eleventh Federal Reserve District in my opinion sit idly
by and not have something
to do with the sound organization
necessary to secure that credit if it becomes available and is at
our door.
I believe that the banker and the business men no longer look
to doing business on 15 per cent money, but must take a iargeiview. It must take the broad view that if we create a bank of
$1,000,000 deposits we can make money out of it if we only
have $250,000.
I think we have got to get out of the thought
that the banking business is a selfish business.
It is part of the
life of the American people. It is just as much a duty of yours
to take interest in those things as it is to lend the money to your
customers.If
help
do
if
those
things,
to
behind,
you
will
and
you will get
it will be better
and the day will come when the busiorganized
because
into your institutions
ness will be turned
you will have
learned
If it creates
the way to do it and to do it safely.
more
by it.
benefited
wealth
for this state,
you will be tremendously
I think that
but
as long as it is here, as long as it is no theory
a condition
that we should give some final
that we are facing,
consideration
to it.
I want to end by congratulating
you on the feeling existing
between the
of the Federal Reserve Bank of Dallas
stockholders
and its management
and to say that I for one, believe that the
credit policy pursued has been of immeasurable
benefit to your
district because it has taught us that money still has a value, and
that it is
absurd banking that creates in the mind of the bankers
the idea that they
can borrow money from Bill Jones and then
go home and lend it to Bill Smith.
The business of the bank is not to borrow money.
Borrowing money is the privilege of the charter and should only be used
when necessity
demands it. You know, I 'have watched corPorations who use credit and bought paper and sold it and resold
it and kept
on until they had pyramided it, and you know it has
nearly always come to grief.
borThe fellow who continuously
rows money for the purpose of reloaning it will sometimes come
down
he cannot get out. We borrow money, yes.
a
road
where
$ut
National Bank borrows
whenever the American Exchange
anY money I believe I
by Mr. Talley that we have
can
prove
from 31/2
to 4 times the amount we have borrowed in the products paper
of this country, and we could liquidate it in 20 days,
anY time
fit. We have never borrowed money for the
we
saw
Purpose
it. We have never borrowed money for
of
reloaning
the
Purpose
difference
between
4
6
the
of
and
per cent.
making
tVe have
borrowed because we believe it is our duty to borrow
through
that machinery that moves to the markets of this country the
That is the
this state.
great
agricultural
products
of
onlY time
we have ever been guilty of borrowing money.
I want to thank
for
the
time
to
congratulate
you
and
for the
interest
(Applause).
you have taken in this meeting.
THE PRESIDENT: I believe
you gentlemen
all agree
with
you
me
that Nathan Adams is in a class with himself; he has made a
splendid speech.
You
MR. WOODSON: May I ask Mr. Adams one question?
I
that
that
you
and
upon
might reflect
made one statement
think you did not intend.
MR. ADAMS: I didn't understand.
MR. WOODSON: You
fifteen
per cent basis.
stated
that
we were
MR. ADAMS: Oh, cut it down to eight
about the old days.
MR. WOODSON: That's
doing
business
on a
per cent, I was talking
all right.
THE PRESIDENT: Mr. Adams, we would be glad if you would
stay a while with us.
They are overloaded at
MR. ADAMS: I apologize for going.
the bank with several away, one in St. Louis. The meeting came
I
town.
Mr.
Pittman
for
am
out
of
was
me
when
unfortunately
very sorry, but I have got to go. I think these meetings will
eventually do great good to the banking business.
THE PRESIDENT:
ing).THE
SECRETARY: One
Requirements."
"Reserve
of that committee.
THE
PRESIDENT:
(Mr.
Thanks.
.Mr.
report
Mr.
McKinney,
Adams
here
left
the
was on
chairman
yesterday
not reached
is the
B. A. McKinney
come
Mr. McKinney
tlemen of the convention,
Mr. McKinney.
(Applause).
forward,
please.
will make
meet-
Gen-
his report-
in spite of the fact that we
MR. McKINNEY: Mr. Chairman,
I
think
barber
the
$18,000
the
against
shops,
of
notes
collected
Mr. Adams would still agree that loans secured by mortgage on
(Applause).
barber shops are not first-class
obligations.
is
this
Mr. President,
the principal virtue of
report of mine
is it doesn't
its brevity,
the principal
weakness
say much
(reading)Due
to the fact that the members of the Reserve Requirelive at such great distances from each other,
ments Committee
for the comand for other reasons, it has not been practicable
mittee to meet until this week, a meeting being held yesterd2Y
with all members present.
afternoon
that the subject of reserve reThe committee
recognizes
is one of very great importance
to both member
quirements
banks and the Federal Reserve Bank and feels that changes III
the requirements
should be made only after a most thorough
study and a careful
changes.Our
analysis
of the
probable
of such
effect
limited
having
been
discussions
and the
so
study and
views of the individual members of the committee,
even with
the investigation
we have made, being somewhat at a variance,
we do not deem it practicable to offer any specific recommendations.
however, in submitting
We do feel warranted,
some observations at this time which may promote a useful discussion
of the subject of reserves and perhaps develop something
of
interest to a future committee which will go more deeply into
the subject than we have been able to do.
immefunds
its
bank
The reserve
uninvested
of
of a
consists
diately
As was
to depositors.
to meet its liabilities
available
Reserve
said in the report made by a committee
agents
of Federal
banking
which made a study of the subject
experiof reserves,
for the
has demonstrated
the necessity
ence in all countries
deposits
by all institutions
maintenance
receiving
of reserves
from
but the teachings
are much less conof experience
others,
bear
clusive
such reserves
which
should
as to the proportion
to the liabilities
depends
The
they
proportion
support.
which
upon many factors,
including
the nature
which
of the community
the efa bank serves, the character
of its deposits,
and activity
fect
for cash, the likelihood
demands
of
of seasonal
or periodical
imporemergency
finally,
and
perhaps
most
and
requirements,
tant, the facilities
its cash
which a bank has for replenishing
reserve.
body to enact
for a legislative
Just as it is impossible
a statute
does not work a hardship
that
at
on some citizens
times,
it seems that no schedule
can
of reserve
requirements
so
be devised that does
banks.
on some member
not work inequities
Nevertheless
to overcome
should be put forth
constant
efforts
discriminations
for or against
and
any bank or group of banks,
that
by the fact that
such efforts
are being made is evidenced
the Federal
Reserve
Bank of Dallas has recently
adopted
a plan
of giving the reserve
banks
the benefit
of
of member
accounts
currency
shipments
while the money is in transit.
Primarily, as has been indicated, the amount of reserve necessary to be carried is that which will enable an individual bank to
meet the demands upon it, but another very important
factor,
and one which is often overlooked, is that the aggregate reserves
of any one country should not only be sufficient to meet the withdrawal
of cash for domestic purposes but also the demands growing out of transactions
Reserves should
with other countries.
also be large
to deposit liabilities to safeenough in proportion
guard in a measure the volume of credit extended by the banks.
Since these
do not always appear impelling from
considerations
the
bank
viewpoint
individual
it
becomes
the
duty
legisof
an
of
lative
to give weight to them in
and supervisory
authorities
;,;
till iling
Lne
aggregate
reserves
of
the
country
s
oanxing
in the country's
One of the outstanding
recent
circumstances
deposits
to
has been the shifting
history
banking
of demand
1st,
During
the eleven-year
time deposits.
period ended January
increased
70 per cent,
deposits
1928, demand
of the country
It
is
increased
290
deposits
time
per
cent.
readily
about
while
in
deincrease
time
this
tremendous
that
of
a
portion
admitted
disposition
to save on the part
from a greater
posits has resulted
for interest
demand
of some of our people and an ever-growing
has been due to the
but no small part of the growth
on balances,
in some parts
of "Special"
savings
acof the country
creation
accounts
at all and which,
counts which are in fact not savings
commercial
or checking
as ordinary
properly,
should be handled
have been accepted
These accounts
as savings
accounts
accounts.
for the sole
apparently
of the banks themselves,
at the instance
to be carried
the amount
of reserves
purpose
of reducing
against
them.It
has been suggested
to the Committee
that
some banks
from county and municipal
treasurers
to give
procure
agreements
to
days' notice of withdrawal
thereby
thirty
of funds,
seeking
place the balances
of these treasurers
under the 3 per cent reIt is the opinion of the Committee
that treasserve requirement.
over public funds to their credit as
urers have no such control
them in making
the
such agreements
would warrant
and that
agreements
are therefore
void.
Abuses of the kind mentioned work a discrimination
against
member banks which observe both the spirit and letter of the
by
law, and with that thought in mind it has been suggested
be given to maka member of the committee that consideration
ing a flat or uniform reserve requirement
against all forms of
deposit liability-time,
demand and bank. As will readily be seen
this plan would remove any temptation
to classify a deposit other
than according to its true status.
It is not contemplated
that the total reserves
of the country
by this change.
The added reserves
would be increased
resulting
from raising
the percentage
on time deposits
would be overcome
by reducing
the rate on all deposits,
leaving the country's
aggrein
be
It
gate reserves
substantially
as now existing.
said
may
behalf
of the plan that the theory
of permitting
small reserves
because
and
against
savings
accounts
of their supposed
stability
the required
has been almost
uninotice of intended
withdrawal
disproved
in connection
Savings
versally
with runs on banks.
depositors
their money, and any effort
are the first who demand
days' notice would be fatal to that
of a bank to invoke the thirty
institution.
The Committee
that there may be some
recognizes
the
to a uniform
but
believes
that
objections
reserve
requirement
by the authorities
plan is worthy
of consideration
of the Reserve
System.
Another
member
of the Committee,
who has made some studY
of reserve requirements
and whose opinions are worthy of respect, suggests an amendment
whereby fifty per cent of a member bank's reserves with the Federal Reserve Bank would be
fifty
the
per cent
maintained
remaining
of
and
as now provided
by prime
not exceeding one-half thereof could be represented
by
bankers' acceptances
represented
one-half
and not exceeding
U. S. Government
to
Securities,
and
securities
acceptances
such
be lodged with the Federal Reserve Bank as reserve, and their
The
based on the market.
value subject to daily adjustments
Committee thinks this plan would be a very pronounced departure from present reserve practices and is therefore
worthy of
the most serious consideration.
Mr. Chairman,
that
mitted to the association.
is our report,
(Applause)
and
it is respectfully
sub-
Is
THE PRESIDENT: Gentlemen, you have heard this report:
there any discussion?
MR. WELci-I: Mr. Chairman and fellow stockholders:
I am the
the last feature of
gentleman on the committee who suggested
our report; I admit.
THE PRESIDENT:
the report?
Will some
gentleman
make
a motion
to adopt
MR. McKINNEY:
in view of the fact that
I should
think
no
Specific recommendations
are made that the motion would properly be that the report be received
I make that motion.
and filed.
MR. WOODSON: Seconded.
MR. WELCH: I hope that motion was not intended to take
away the opportunity
feature
from me to discuss the particular
of this report, which I have mentioned.
THE PRESIDENT: No, indeed, that is the way to handle it.
MR. McKINNEY: I did not so intend it, Mr. Chairman.
I am
anxious for Mr. Welch to have all the time he wants.
MR. WELCH: As you already know, Groups two and three of
the Federal Reserve System
and operation
and the installation
of this system have had directly taken away from them sources
Of revenue which had been previously a very considerable
item
to those banks.
Groups two and three are facing today the same situation as
-l the larger cities in this respect: Interest rates in the interior
can no loner be
level.
lines
the
at
present
with
sound
maintained
We
investments
local
fields
are
to
compelled
of
our
outside
seek
if we keep
banks in the condition they should be kept in at
our
rates prevailing in the
the
same rates
market
are
open
which
that banks
in
Our
is
therefore
earning
power
group
one
get.
decreased
directly in proportion
to the care we take in the man
in
judgment
bank
the
making
exercise
we
and
agement of our
it the proper kind of bank with a well balanced note case covering more than a local line. That is the kind of bank I believe in;
that is the kind I am trying to run and that is the kind of bank
I advocate for every member of the Federal Reserve System.
if there be any possible way with
Under those circumstances,
in
in
banks
to
the
two
to
and
groups
one
or
group
return
safety
three some measure of this earning power which has been taken
away from them, I think for one it should be done. I am
thoroughly
convinced that it is an impossible thing for the Federal Reserve System to pay us interest on our reserve deposits.
That would be nice, but the impossible might just as well be cast
aside; they could not earn the money to do it with.
I am equally convinced that the proposition
last mentioned
in our report would be perfectly safe as far as the deposits of
the banks are concerned because prime bankers acceptances and
United States Government
obligations-and
remember
we do
not allow but one-quarter
of these reserves to be placed in obligations that have maturity longer than six months at the outsideif those two classes of paper are not desirable for a first reserve,
how can they be desirable obligations to put in our note case for
It is as much folly to think that 7 per cent
secondary reserve.
of our deposits would save a bank if its note case was not in
proper shape for the Federal Reserve Bank to be drawn against
provided you immediately
replace it. It is folly in my judgment
to think that that would save a bank.
As one of my friends on this committee stated, he couldn't
get away from the idea reserves had to be money somewhere.
If that is the case, I cannot see why money is not a reserve.
The money in our vaults is not reserve, and the only reason I am
not advocating that that be counted as reserve is that the method
advocated here is simpler to handle-much
easier to know all the
time that it is within the bounds of reserve, or within the same
the same purposes.
purposes, accomplishes
If we had our reserve in acceptances and United States Govif the rate were 3 per cent we would have
ernment obligations
returned
on this balance 11/2 per cent, which would compensate
us in some measure for that balance.
The securities I advocate depositing there are the very identical things the law says the Federal Reserve Bank can take mY
reserve moneys and buy. Therefore
safety is out of the waY"
Prime bankers acceptances
in the last few years have been
When you realize
advocated as a most splendid paper available.
the cost of commercial transactions
involving imports and exports, you can readily see that cheaper rate on that class of paper
will work directly to the benefit of producers of this country, and
help solves the question of our surplus to which the Government
is adding $500,000,000.
The Government
obligations of the United States issued just
recently at 5,3/1,per cent-if
we could use these in our reserves
as outlined, it would form a very considerable market for United
States securities, a broader market, and rates on those securities
would not fluctuate as they have. We pay those high rates eventually in the form of taxation, and it is to the interest of each
one of us, as I see it, that those rates be kept as small as possible consistent
with the handling of them.
Primarily
my interest in this is that it is going to give me
some money for something I do not get anything for now. The
dead reserve balances have taken something- away from me; all
I have got back is the privilege of free currency shipments. Every
other thing done free by the Federal Reserve Bank is not done,
understand,
against our interest, but it is doing things that in
the current operations of our business we have no use for. Therefore, this expense account is going to the benefit of somebody
else.I
do not know whether this proportion is proper or whether
it is
not. My idea in bringing this thing before the committee
of the stockholders
is that you might think about it. Of course
it is
an innovation, but the Federal Reserve Act was an innovation not
in the line of banking
so many years ago. Innovations
are taking place every day. We have had to change our banking
Views and our banking policies as Mr. Adams has said.
The
Policies of the banks of the United States are going to have to
conform
in
more and more to placing
of larger
amounts
secondary reserves outside of local lines than ever in history.
Under those conditions I see no reason from the standpoint
of safety why we should not be allowed to do that, take the
interest
those obligations, just as well as we can create reserve
on
fund
over there by putting up notes and paying interest on those
same obligations.
If one is safe and sound, the other is too.
When
you get down
representing
your
reserve
front
the amount
the
of
because
you pay interest
serve purposes.
to it, the actual
the bank has
thinwith the bank that you are borrowing
is the stuff you put in there.
reserve,
doesn't
for remake it more eligible
I am not
to take up the details on this. I have my
prepared
mind made
it.
I
do
it
think
is
up
on
worth consideration
and
thought
For that reason I have asked to have the opportunity
to present
it like we have presented this other thing.
We are
Presenting it
for its adoption,
not with a specific recommendation
with
the
that all of you think over
specific recommendation
this
proposition so when we meet again we may be able to take
some intelligent action with regard
I thank you. (Applause).
THE PRESIDENT:
Mr.
to it.
McKinney.
in
MR. McKINNEY: Frank Welch and I used to sit together
It
has
been
McKinney.
town
in
the
so many years ago
of
school
that he would object to my stating the number of years. He and
that
I were pretty much in accord in those days on everything
he
lady.
But
in
it
to
young
reference
some
was
came up, unless
has wandered off down into South Central Texas and taken on
some ideas that I cannot. enjoy. I am the member of the committee who suggested that the only thing that counts with me
in my mind as reserve is honest-to-goodness
cash. (Applause).
That is all that counts with the depositor, too, when he wants
his money.
It is true that when the reserve
of the Federal
requirements
System
Reserve
in I think
1917, and the perwere changed,
reduced
of 5 per cent,
centages
on all three types in the amount
from 13 to 10 and 7, it was provided
that cash in vault should
But nevertheless
the amount
not be counted
as reserve.
of cash
to be carried
in the vault was considered
by Congress
as necessary and proper
credit was given for it.
The purpose of eliminating
cash from reserve requirements
in that act of Congress was to leave it discretionary
with member banks as to how much cash they could carry, permitting
them to regulate
the amount of their vault cash according to
their own peculiar necessities.
Therefore,
and in that manner
the cash in vault does count.
Let us consider this matter from the standpoint
of the effect
upon the Federal Reserve System and upon the country, by the
adoption of such a scheme as has been suggested by Mr. Welch.
I do not
Bank-about
recall
two
AIR. TALLEY: Yes,
exactly
billion
the deposits
dollars,
Mr.
Reserve
with the Federal
Talley?
at this time?
sir.
MR. McKINNEY: That would occasion immediately
the disfrom the vaults of the Federal
bursing
Reserve
System of
$1,150,000,000 of gold with such effect upon the credit structure
of this country as we could only surmise, but with such effect
upon the usefulness and operations of the Federal Reserve Banks
as we can very well guess.
I remember in 1920 the Federal Reserve Bank of Dallas had
loan funds and was borrowing
loaned
out all its available
$35,000,000 or $40,000,000 from other Federal Reserve Banks
If our
with which to take care of the situation in this district.
gold reserve had been cut in half at that time, we would have
had to stop lending money long before we reached the peak of
$117,000,000 with great disaster to this district and perhaps to
the country as a whole.
My thought is that if the reserve requirements
are too high
down
to
if
they
but
do
they
right
get
are-let's
are,
not say
-I
the root of the matter and reduce them and pay back to the
member banks the excess reserve we now have, if we have it,
to their good sense, to
and leave it to their good judgment,
employ those funds in such a manner in maintaining
secondary
reserves as may seem to them expedient and wise.
I thank you. (Applause).
THE
PRESIDENT:
Any
further
discussion,
You
gentlemen?
know
that matter was referred to us not for immediate adoption but
to be filed. I suppose it will be published in the proceedings, and
the next Advisory Committee will appoint another committee.
Are you ready for the question on Mr. McKinney's
motion
to have it filed?
MR. McKINNEY: May I make a suggestion
at this time with
in the future?
reference to appointment
of committees
THE
PRESIDENT:
Yes,
sir.
MR. McKINNEY: As T stated in this memorandum,
the members
of our committee live all the way from El Paso to Liberty,
Texas. I think that the
on
appointment
of these committees,
account of the tremendous
size of Texas, ought to be by groups,
somewhat together and concentrated.
Take a particular
committee like this
might be appointed
one: I think that committee
from
locality and then we could go to another
some
particular
locality for
and in that way you will have
another committee
More frequent meetings and more efficient work on the part of
the
committees.
THE PRESIDENT: Ali-. McKinney, maybe later on we will have
something to say on that.
THE SECRETARY:The next committee report is "Cost of Operation
Mr. W. M. McGregor, Chairand Disposition of Earnings,"
man.
THE PRESIDENT: Mr. McGregor,
men, Mr. McGregor.
(Applause).
come
forward,
please.
Gentle-
Your Advisory Committee has
Committee
the
to
this
assigned
tOPic "Cost
Operation and Distribution
Earnings."
Inasof
of
much
as the subject is so far reaching and covers such a volume
of details,
think
be
that
we
are
reporting
only
we
which
will
interesting
to the shareholders.
1. GROSS EARNINGS:
From information
obtained from
is
it
Board
Federal
Reserve
the
the fifteenth
annual report of
five
there
that
principal sources of revenue which,
are
shown
with the amounts derived from each during the year 1928, are
as follows :
$ 669,514
bills
Discounted
-----------------------------------680,664
bills____________________________________
Purchased
685,693
United States securities______________________
Deficiency reserve penalties______________13,837
69,958
Miscellaneous
-------------------------------------The Total
Earnings
were------------------$2,119,666
We do not think it is within the province of this committee to
go into details of the source of income, and we are giving you
the figures just as published by the Federal Reserve Board. While
it is not within the scope of our report, it may be of interest to
the stockholders
to know how the smallest item of income-that
to $13,837 for 1928of deficiency reserve penalties amounting
compares with that same item of the other eleven Reserve Banks:
Boston
--------------------------------------------------------$12,791
New York
46,000
Philadelphia -----------------------------------------------7,468
---------------------------------------------Cleveland
28,838
-------------------------------------------------Richmond
36,476
---------------------------------------------Atlanta
32,996
Chicago -----------------------------------------------------44,287
St. Louis -----------------------------------------------------15,023
Minneapolis--------------------------------------------------7,763
Kansas City ---------------------------------------------15,232
---------------------------------------------San Francisco
16,661
----------------------__-_----- --------.
In this connection it is interesting
to note that the Federal
Reserve Bank of Dallas is second to the last in earning capacity
of any in the System, with its membership
of 781 and total
Minneapolis,
earnings
of $2,119,666, as against
which shows
the smallest earnings of any of the twelve banks, with its membership of 719 and its total earnings of $1,710,304.
While the
Federal Reserve Bank of Minneapolis
covers a larger area in
square miles than the Dallas District, it has a smaller population than the Dallas District by about 1,100,000.
2. EXPEI\TDITURES:
Anything
like a detailed report of
the current
expenditures
of the Federal Reserve Bank would
necessarily
cover a greater
scope than you would expect, and
we will endeavor to report only on the larger items out of the
total expense,
to
exclusive
of cost of currency,
amounting
$1,245,479, leaving current net earnings
of $874,187, with the
hereafter
listed. In this amount the
additions
and deductions
profit arising from circulation is $182,790.07, dividends $258,544;
to the fact that circulation
we especially call your attention
is
than
for
1928
shown
proportionately
profits
are much smaller
since 1920.
The bank officers, salaries-_-----_---------------------_-$155,299
520,235
Clerical staff
-----------------------------------------------------------42,732
Special officers and watchmen
-----------------------------75,508
All others (composed of non-clerical employes)
34,059
Taxes on banking house
---------------------------------------21,877
Insurance
on currency and security shipments
19, 7 85
Light, heat and power-----------------------------------------52,269
Telegraph charges
-------------------------------------------------93,200
Postage
-------------------------------------------------------------------51,536
Miscellaneous
expense -----------------------------------------(The larger items included in this amount
were read by Mr. McGregor).
for expenses of the Federal ReAssessment
24,138
serve Board ---------------------------------------------------Cost to this Bank for handling Government business ------------------------------------$30,185
10,500
19,685
Reimbursed
-----------------------------------------------These are a portion of the charges that go to make up the
total expenses for the year 1928, amounting
to $1,245,479. We
are informed these figures are accessible to any member bank
applying to the Federal Reserve Bank of Dallas.
The salaries and expenses of the officers of the Federal Reserve Bank of Dallas compare favorably with the salaries and
expenses of all other banks in the System.
The salary of the
Chairman
of the Board is $20,000 per year and that of the
Governors is $25,000. Inasmuch
as the table showing salaries
does
list the salaries of the other officers in detail, we are
not
informed it
the consent of the Federal Reserve
would
require
13oard to
give you this information,
as the Board has laid down
the policy
Chairman
listing
the
the
amounts
and
only
paid
of
the Governor,
has seen fit in its own publication to restrict
and
the itemization
this matter to the individual salaries only of
of
the Governor
Federal Reserve Agent. It is noticeable that
and
in
most every instance the expenses of all the items herein
mentioned are less for the
year 1928 than for the year 1927, except that of the clerical staff, which was $497,504 in 1927 as
compared with $520,235 in 1928.
The clerical staff is composed of about 400 employees.
We
have been
furnished
figures showing $1,565 as being about the
average salary
informed is
paid
employees,
which
are
also
we
about the
same amount paid by the other Federal Reserve Banks
°f the System.
3. NET EARNINGS:
The net earnings
of the Federal
Re-
$12,085,776;
total
Dallas
Bank
are
organization
since
of
serve
to surplus, $8,690,200.
dividends paid, $3,103,966; transferred
The net earnings for the year 1928 available for dividends, surfrom
$5,491
franchise
tax-after
withdrawn
adding
plus and
for
depletion
$42,551
deducting
loss,
for
on
and
probable
reserve
building, $51,992 on furniture
and fixtures, and $71,680 all other
The following items have
to $713,455.
deductions-amounted
been paid.Dividends
------------------------------------------------$258,455
Transferred
to surplus-------------------------- 163,301
291,610
Franchise
payments -----------------------------This is the first franchise
tax paid by the Federal Reserve
Bank of Dallas. The disposition of earnings of prior years have
not been considered in this report.
There are so many of our members who have not taken into
ReFederal
from
the
the
which
principal
source
consideration
to
it
Dallas
its
be
Bank
has
built
up
would
well
surplus,
serve
of
bear in mind that out of the present surplus of $8,690,000 ap$8,250,000 have been derived from profit on circulaproximately
tion, which has been practically a gift, or you might say a gift
Act,
Government
in
Federal
Reserve
by
the
the
granted
privilege
believes the stockholders
have not fully
which this committee
appreciated.We
are informed there is a franchise tax payable from profits
France,
in England,
Germany,
growing out of the circulation
and Italy. We are not burdened with a tax on this item.
4. BUILDING
AND EQUIPMENT:
The report
shows fixed
Dallas
Federal
Reserve
Bank
the
machinery
and equipment
at
of
to $325,273;
the total cost of land and
and its branches
amount
This
buildings,
$1,676,264,
book
$1,222,339.
the
and
value, net,
to
is a, matter
hardly
think
the
stockholders
we
would expect us
discuss,
as it is purely
a question
of valuation.
5. DISCUSSION:
(a) This
has also been recommittee
Member
to comment
Banks Particiquested
or report
on "Should
Dividend
Reserve
Bank Beyond
pate in Earnings
of the Federal
Requirements?"This
is a question that has been discussed among the stockholders of the Federal Reserve Bank probably more than any
this
is
it
the
the
other question, and
observation
of
members of
that a majority
committee
of earnwould favor a distribution
ings above the legal surplus and dividend requirements.
(b) Is the Frost plan satisfactory?
This committee does not accord with the idea as advanced by
ReMr. Frost at the last stockholders'
meeting of the Federal
believe
do
We
to
serve Bank in his idea of distribution
as
profits.
that profits should go to the stockholders of the Federal Reserve
Bank, based on the stock of member banks, but with the idea
that the officers of Federal Reserve Banks should not endeavor
to make large dividends or profits which might, in our opinion,
have a tendency to force the officers of the Federal Reserve Bank
to greater effort, to the extent of being in competition with member banks. We further feel that the present law, as it now stands,
which provides that your surplus account equal your subscribed
capital, is adequate in building its surplus, for the reason that
before franchise
taxes are paid it is also required that 10 per
cent of the remaining
net earnings after dividends have been
paid shall be passed to the surplus account, even after your surplus has reached legal requirement.
(c) We have been further
"Which would tend to
asked
greater economy in management-payment
to stockof
earnings
holders
Government?
tax
to
franchise
payment
or
of
The question
leaves room in our
just as it is asked hardly
opinion for discussion.
We believe there would be greater
economy in management
if payment
were made to stockof
earnings
holders, feeling
for the manthat it would be perfectly
natural
agement
its
Bank
to
Federal
Reserve
to
the
prefer
pay
earnof
ings to stockholders
in a franthan to the Government
rather
chise tax.
from
this source
The revenue
to the Government
1vould be comparatively
the
The fact that the capital
of
small.
banks
in
furnished
by
its
and deposits
stockholders
would,
are
oür opinion,
incentive
in management,
be a greater
to economy
than if the
franchise
to the Government
as
amount
were
paid
taa.Yesterday
in
some gentleman
over there asked something
regard to detailed
as to whether that would be in the
expenses,
report. I
said that it would. All items of size are embodied in
our report
item of $41,536.16, which is headed
the
except
one
"Miscellaneous
Expenses."
I will just
five or six of the large items comread
you
about
POSIng
or helping to compose that item of $41,536: (Reading).
Itemized
included in "Miscelstatement
showing
amounts
ep epos"
current expenses on face of report :
()usairsde and
protection, vault inspection, time se vice, etc.--$5,413.04
Newspapers,
books, binding, clipping servperiodicals,
ice, etc1,669.40
------------------------------------------------------------------------pies of bank
8,387.50
examination
reports ---------------------------------edical service
3.288.33
and
supplies
and
physical
examinations-Cafeteria
6.450.86
net
expense----------------------------------------------------------'nrployees'
American
Institute
Banking__
2,738.50
education
:
of
Federal
Reserve Club-----------------------------------------------------------1,089.79
Expenses Special Board Meetings December, 1927, and
3,855.43
January,
1928
- -- -------------------------------------------------------1,122.53
Meeting July 12, 1928
Stockholders'
---------------------------------Mr. Welch, does that answer the question?
MR. WELCH: Yes, sir, only one thing, if you stated it I did not
hear it-that
was the amount. You stated the amount the two
chief officers of the bank received, but I did not hear the total
amount, what that was, that the officers of the bank received.
I was asking about the total salaries,
not of the employees
exclusively.MR.
MCGREGOR:
(Referring
to paper) : $155,299.
MR.
WELCH:
I did not
hear
it.
inasmuch as there is no recMR. MCGREGOR: Mr. Chairman,
in this report, I will move that the report be reommendation
ceived and filed.
THE PRESIDENT: Any second to that motion. (A second). Any
discussion ?
MR. MCCUTCHEN: in that expense
I did not hear
account
the cost was in there for serving
the Government.
what
1
MR. McGRECOR: I made a pencil notation on that report.
(Readneglected to read it. Glad you called it to my attention.
ing) "Cost to this bank handling Government
business $30,185
$10,500, making a net
on which they have been reimbursed
cost of $19,685."
MR. H.AIIJOS: Mr. McGregor, we could not hear part of your
figures very well. Might I ask you again what did you say was
the cost of currency?
MR. McGRECOR:, (Consulting
rency during
shipments.
MR. HARRIS: Did I understand
has a regulation
not to publish
bank's officers?
MR. MCGREGOR:
That
is my
report)
$21,877
insurance
on cur-
that the Federal Reserve Board
the
two
of
any salaries except
understanding.
MR. HARRIS: The stockholders
of this
if they wanted it?
have that information
MR. MCGREGOR: Why. no doubt,
tion from the Board at Washington.
you
Association
could
MR. HARRIS: Not that I have any interest
I wanted to clarify my impression.
get
that
couldn't
infOrma'
in the matter,
MR. MCGREGOR: Part
of that is assumption,
figures
from the
these
this report
were taken
but
In
part is not.
fifteenth
annual
report of the Federal Reserve Board. Necessarily we did not get
all the details. But we did not have the officers listed separately;
no, sir.
MR. HARRIS: It rather occurs to me the stockholders
of the
Association
if they
ought to be able to have that information
wanted it.
MR. McGREGOR: I have that opinion myself, but it is not published that
to ask me
questions
way. Are there any further
about this report?
THE PRESIDENT: Any further
not, those favoring the motion,
carried.What
If
(No response).
questions?
aye; contrary, no. Unanimously
is the next on the program,
THE
SECRETARY:
The
next
on
the
Mr. Secretary?
program
is
the
report
of
the
R.
E.
committee
Mr.
Operations,
Market
Open
of
which
on
Harding
of Fort Worth is Chairman. We have been unable to get
any report from Mr. Harding
except a brief letter endorsing
Federal Reserve Bank
However, on this committee
operations.
are also
here read personnel of the commitsecretary
tee). If -(The
to
those
make
present
and
wish
are
members
any one of
a report, we would be very glad to hear from you.
MR. FANT: I have not much of interest
to say to you in behalf
of the committee
Operations.
The committee
Open Market
on
is
A few days
composed
of those just named by the Secretary.
ago I had notice from Mr. Harding
that he was going last week
to attend
in Detroit
bankers'
and would not
meeting
a reserve
return, this
That you may
to make a report.
week
early
enough
know how
I am prepared
to make one for him I will state
poorly
the
due to remoteness
had a meeting
committee
one
at
all
never
from
the others
another,
elsewhere
scattered
one at Carlsbad,
with no two
had difficulty
Mr. Harding
naturally
near together.
In getting
the committee
together.
When I
my appointment
as a member of that
was
notified
of
committee I
large
that
it
a
very
assignment-Open
was
realized
Market
Operations of the Federal Reserve Bank.
As some
has ben made by Mr. Woodson as to the
suggestion
scope of the
I will allude to it: Under headings-there
subject,
are several headings:
Open
Bank
Federal
Reserve
Relation
to
of
Market
How
Federal
Banks
Engaged
in
Determined
;
;
-Rates
Open Market
Operations
Market
Open
Operations
Should
of
;
Pank
be Employed
Contraction
Expansion
Prevent
to
or
of
Credit?
Increase or Decrease of Rates, Etc.
IHai
is
large
committeeAdvisoryCommitMr
dig
a tentative
report to the
which will be the only report I can make to you at, this
by Mr. Harding
time. I shall read that: It is written
dated December 11.
Chairman,
to the
letter.
No report submitted).
of Mr. Harding's
As stated, Mr. Harding's
absence no doubt accounts for your
not having before you a paper of some interest on the subject
because I am sure he must have devoted a good deal of thought
in mind. I inquired of him over the 'plione
and had something
if he had any paper prepared or written out that I might bring
to the meteing and submit, but he did not.
In this connection I think that Mr. McKinney's
suggestion
that in the appointment
that we should have due
of committees
regard for the proximity of the members who are to serve ought
to be followed. It means that they would meet more readily and
that you would really get some active work by the committee
than when they are separated widely and there are excuses for
It is hard to find five men on a committee
not getting together.
ready and willing to attend on a certain date.
(Reading
I want to add further
the thought
that I have as expressed
in a letter to Mr. Harding
at the time I was notified of my conIf I have a copy of a letter
I can
nection
with the committee.
it. At the close of a letter,
the only part I would quote,
explain
I said : "Open market
Reserve
Bank are,
operations
of Federal
aside from holding the reserve
and extending
credit to members,
function,
simply its most important
etc., etc."
So, Mr. Chairman,
THE
with
mittee
PRESIDENT:
the
Secretary
be passed
making
excuses
Gentlemen,
and be
for the
as I have I beg to retire.
I suggest
that
I move
that
mittee be passed for the consideration
Committee.
(A second).
THE PRESIDENT:
Any
(No
discussion?
WOODSON:
I want
to
matter
be
filed
Comto the next Advisory
passed
consideration
of the next Advisory
MR. BROWN: Mr. President,
MR.
this
make
the report
of the
response).
one statement
next
of the com-
Advisory
Carried.
here, Mr. Chair-
man.
THE PRESIDENT: Will you make it brief ? Our time is now very
limited. Go ahead.
is
it
MR. WOODSON:I want to explain something
because
We
brought
up about the appointment
of these' committees.
to represent
the various territories,
appoint these committees
We had somebody on each committee
one on each committee.
We
ap'
that had technical knowledge of that particular
subject.
three,
these
to
two
committees
pointed
represent groups one,
and
them
Federal
Reserve
Bank
the
Dallas
to
and
get
of
was willing
together here to meet and discuss these matters, everything was
[ 106 1
done to get the boys up here. I wanted to explain to you why
they were appointed.
The Federal Reserve was ready to pay
for it.
is the next, Mr. Secretary?
A MEMBER: It is possible the people did not know the Bank
Would pay their expenses.
THE PRESIDENT: What
I want to bring
MR. WILLIAMS: Mr. President,
up a matter
that I should think we ought
to take action on. It is going to
be a
disposition
is,
the
that
of excess profits.
recurring
question;
As I
did
Mr.
McGregor's
report,
we
position
on
our
understand
not take any action.
But this is a question
that is going to reWhile
indefinitely.
it may not be
main among
the bankers
Worked out quickly,
on it, and as
yet we should get somewhere
I want to read, that portion
we only voted to receive this report,
by
body.
its
this
of that report
then
adoption
move
and
Mr. Welch's plan is a plan for the gaining of more profits
from the
Frost
Reserve
Bank.
The
Federal
the
plan
of
operation
is simple. I think
personally I favor this. We do believe: (reading from Mr. McGregor's
"profits should go to the stockreport)
holders of the Federal Reserve Bank, based
on the stock of member banks, but
the idea that the officers of Federal Reserve
with
Banks
should not endeavor to make large dividends or profits
Which might, in our opinion, have a tendency to force the officers
Of the Federal Reserve Bank to greater effort, to the extent of
being in
banks. We further feel that
with
member
competition
the present law,
as it now stands, which provides that your surplus account equal your subscribed capital, is adequate in building
its
surplus, for the reason that before franchise taxes are paid
it is
also required that 10 per cent of the remaining net earnings
after dividends have been paid shall be passed to the surplus
account even after your surplus has reached the legal requirement."We
have been further asked `Which would tend to greater
economy in
management-payment
of earnings to stockholders,
or payment
tax to Government?
of franchise
"The question just as it is asked hardly leaves room in our
opinion for discussion.
We believe there would be greater econY in management
if
to
were
made
stockpayment
of
earnings
holders,
feeling that it would be perfectly natural for the management
the Federal Reserve Bank to prefer to pay its earnof
1119s to
in a franthan to the Government
stockholders
rather
chise tax. The
front this source
to the Government
revenue
Would be
The
fact
that
the
the
comparatively
capital
small.
of
bank
by its stockholders
in
and deposits are furnished
would,
OlIrtha
opinion,
in
be
incentive
to
tax
if the
a greater
amount
were
paid
to the
economy
Government
management,
as franchise
I want to make a motion that we adopt that recommenda(A second).
tion.
MR. WEBB: It is very evident that through the minds of all
the shareholders
of the Federal Reserve Bank of Dallas there is
this thought: That they would like to have a little more dividend.
Now, how is that to be accomplished and still keep the thing
safe, keep the business safe, keep the reserve safe? You have
heard these different reports brought in touching on this point.
The committee
of which I was honored by being a member
on the question of Membership of the Federal Reserve Bank took
the proposition as regards the state banks who
up particularly
are not members
of the association
and some way in which
they could be induced to also come in and be members.
We know
the national banks are all members ; that is part of the law. The
state banks can be members if they choose to comply with the
requirements
of the law and the details that are necessary to be
complied with.
Now you have heard in this report that I presented
yesterday for this committee we made the recommendation
that member banks be permitted to maintain 25 per cent of their required
reserve in United States Government
obligations
and so on.
We have had a suggestion coming from the committee which
Mr. Welch spoke on here to make it 50 per cent, 25 per cent
Governmental
25 per cent bankers' acceptances.
obligations,
The point I am trying to get at here is not that I expect we
are going to make any definite pronouncement
on this matter
today, but something for us to think about, if we can work out
a plan that will make us more money for what money we have
in the Federal Reserve Bank.
Some of us do not use the Federal Reserve Bank. Our bank
does not. We have about $190,000 reserve in there; that varies,
of course, when we have smaller deposits we have smaller rein some way'
serve. We do not object to getting some interest
either straight out interest or some other way to keep the business safe. We are united on that proposition.
41
If we can think this matter out and get somewhere-personGovernment
one
ally I do not believe in the Federal
getting
penny out of the Federal Reserve Bank of Dallas if there is any
legal way to keep them from getting it. I do not expect the
Federal Government
to give me anything I do not pay for, never
have. I have been a national banker for a good many years'
The Federal Reserve
paid for the privilege as well as others.
Banks are paying for the privilege of their connection with the
Federal Government.
I do not believe we want to spend money
in that
direction.
is
Mr.
Welch
by
MR. MCGREGOR: That question
about
raised
the only question
in our committee.
discussion
serious
under
There
to
five
the
seemed
and
each
one
committeemen
of
were
have
be
distribution
how
the
to
individual
should
as
opinion
an
I think
the members
Personally,
made.
ought to give us their
ideas.
ShreveMr.
Willis
by
ideas
I
the
think
of
advanced
and
to
Port the soundest
and best of all. He seems to be reluctant
I am going to ask Mr. Willis to give his idea.
express, his views.
THE PRESIDENT: I am going
give that.
to ask our new citizen
of Texas
to
MR. WILLIS: Just what feature, Mr. McGregor? Regarding the
Frost
plan, as to whether that committee was in accord with the
Prost
plan?
We had a meeting here in March, I think, two meetings on
that committee's
kind
I
first
it
When
it
that
seemed
met
report.
0' stood alone on a few of the main things.
I want to say first that the question of how the reserve is
Maintained as raised by Mr. Welch is irrelevant
as to how we
should distribute
the excess profits.
Our thought was not to try to make greater dividends but
Whatever the bank did make in the normal operations
the
of
bank
would accrue to the benefit of the stockholders
rather than
pay franchise tax to the Government.
The question arose as to
Whether or not the surplus of this bank had not been created
and earned from certain privileges accorded them by the Government, as to circulation.
That is practically true. The surplus
is practically
for from that source. But that conaccounted
all
dition has
Those big profits from that source came
changed.
1n1mediately following the
war.
We think first it is
to get the law changed
most important
so that
benefit
the
to
the
profits
of
stockholders.
will
accrue
Then,
them?
when that is done, how are you going to distribute
The Frost plan provides that it
dividend
based
be
a
shall
upon the
Some
deposit
have
that
amount
carried.
reserve
you
of
saY that that
induce the banks to exchange excess balwould
ances into Federal Reserve Bank in
large
divito
get
a
order
dend. I
it can not. The conditions will bear me out. You
say
would have to
dividends.
1.
1/s
of
cent
over
your
regular
earn
per
No bank
deposits
be
its
from
foolish
take
to
would
one
enough
banl:
to put it in the Federal Reserve Bank at 1/8 of 1 per cent.
As to distribution.
I should say it would be distributed
acding to
it a stock dividend not based upon restock,
making
serve. Well,
them
that
they
to
some
are
required
carry
say
of
a big
reserve in the bank on which they get nothing, and they
ask: "Shouldn't
I get a divident proportionately
to my reserve?"
I say you have contributed
not more to the bank than the
Reserve
Bank was enfellow,
because
when the Federal
other
to you more money to use in the operation
acted they released
of your bank than they have required
you to keep in the Federal
Reserve
Bank as your reserve.
There
has never been one penbanks, if you will study the law
alty imposed
upon the member
in its last analysis.
Where
15 to 20 per cent,
you used to carry
ill
do
half
now you carry 7. Consequently
you
not carry
as much
In other words,
that half released
to you has earned
reserve.
more for you than that double amount
you used to carry which
you got your 2 per cent on.
I do not know of any corporation
where they pay dividends
to the customers based on the amount of business they do with
them. You have got stockholders
in your banks, probably, all
of them carrying little accounts, but when you come to the polet
of their pro rata it is based not upon the business done with the
bank.I
want to say to you as sure as you undertook to distribute
those dividends on reserve requirements
you'd have a howl from
this district.
THE PRESIDENT:
Any
other discussion?
A MEMBER: We believe the only fair and equitable way to let
the excess profits be distributed-if
they make them, should they
infrom
the
bank-let's
it
the
have
come
operation
of
as an
(Applause).
creased dividend on our stock!
We disagreed on Mr. Frost's report-that
was on the ratio
that it be about on
of capital and surplus. I think he maintained
the basis of four to one. We do not think that is necessary. We
bank that has a surplus equal
think that any well managed
to its capital stock, a, nice reserve on top of that, is.in good con"
dition. You do not have to have four to one. In other words, it
is conceded a bank ought to have ten to one to make money.
There is no necessity for an unreasonable
amount of reserve.
No
You don't find it necessary
for them to have the capital.
bank is considered
good or bad or safe or sound or unsafe or
the
bank
that
the
unsound-the
capital of
simply gauges
size of
loan
handle
transactions
for
the
you can
your customer or
size
you can make.
I do not care how much capital you have got, if your note
case and your loans are not safe and sound, your bank is not
good. I do not care how little capital you have, if your notes are
the
liquid
hundred
all good and sound and
and worth a
cents on
dollar, your bank is as safe as a larger bank.
For that reason we do not see why there is any necessity for
building up a surplus on the ratio of four to one in the Federal
Reserve Bank.
(Applause).
diffiMR. HARRIS: Mr. Chairman,
of course the fundamental
culty in the way of these propositions,
we all know, is the basic
it
At
time
the
Reserve
Bank.
Federal
the
principle
was
of
thoroughly
it was known and
discussed
and mulled by everybody
Federal
the theory
the
deliberately
intended
it
it
that
was
of
was
Reserve
for any more than a reasonBank should never operate
the
if
fear
they
for
that
able, limited
on
same
were
run
profit,
for
their
the
principle
banks,
to
profits
possible
make
all
as other
stockholders,
they would get in an extended
and in a
position
time when
they
they
not be sufficiently
would
were needed
be
they
that
the
strong,
to
able
not
would
position
and reduced
to give that help they
were set up to give. It was also the original
I
be
think
there
intention
interest
that
were
paid.
should
no
good reasons
for that at the time.
The greater probability
might be in tackling the subject to
examine whether some part of these profits could be applied as
interest
th tendency of
reserve balances, because certainly
on
that
dissipate
than
to
be
to
rather
reserves
would
strengthen
them.I
am not making a proposal, but I think that is the basic principle of this thing. It would be hard to convince the country that
it should be
radically changed.
MR. GRAVES: We have
discussed
the profits
of the Federal
Reserve
look like
It doesn't
Bank ever since I can remember.
we can agree.
If we did we couldn't
and get
go to Congress
them to do'o
what we want done.
I believe, of course everybody
believes, that we could get
Congress to
give us paid-up stock for our subscribed stock for
all of the Federal Reserve Banks of the United States.
A bank
that has $15,000
up, 50 per cent, transfer enough from surpaid
plus to
pay a stock dividend of 100 per cent. While this 50 per
cent assessment
be called, it never will be, and then the
could
Federal Reserve
Bank would pay us the present dividend on the
hareased
capital or just twice what we are getting now. They
earned this surplus
and they probably
won't ever earn that
much
have another
like we had some
again,
unless
condition
we
ten
or twelve years ago.
I believe
Congress to do that because it would
we
get
could.
not require
to
transfer
this
thought
out
surplus
any
very
great
fund
for
fund;
the
that
ten
into
us
satisfy
would
or
capital
twelve
years.
I think
if
thing,
to
we
on
one
we are going
concentrate
ought
to do it,
do
Congress
do,
the
see
simplest thing
and
what
will
that
is possible to do. (Applause).
PRESIDENT:
E
Gentlemen,
there
is a motion before the
house
heard it.
MR. TALLEY: Mr. Chairman, may I say just a word of explanaThe question was asked there, and there was some intertion?
est displayed, in the matter of the expenses of the bank. I would
like to say for your information
that all the expenses in confor the Government
nection with the fiscal agency operations
to the bank. As an illustration : The expense of
Are reimbursed
these certificate issues, that is reimbursed.
The item of $30,000
for other services is merely allocation to the expense account.
Some years ago Congress passed a law abolishing the subtreasury,
delegating
those functions
Reserve
to the Federal
Bank. As a practical matter it doesn't mean a thing in the world
because the subtreasury
functions are absorbed in the service for
to and from the bank.
currency shipments
The expense of paying the treasury
the
against
warrants
treasury
balance of the United States is a United States Depositary function.
So the $30,000 for services might just as well
be added to cost of currency shipments.
The Treasury
is really right liberal in its relationship
with
the Federal Reserve Bank. To give you an example:
When we
built this building we spent about $18,000 for equipment and such
in our fiscal agency department.
I wrote to the Board and su-vtransactions
gested that that be used exclusively for Treasury
for it. The Secretary
of
and thought we might be reimbursed
the Treasury allowed the $18,000.
is
In the last two weeks another transaction
came up which
in
We had accumulated
$2,000,000
a good illustration:
about
silver dollars. Nobody has any use for silver dollars. The Treasto
to
half
dollars
those
ury permitted
us
ship a million and a
of
this
the Denver Mint and paid the transportation
charges,
to $57,084. Not only that, but after they received
amounting
the dollars at the Mint they redeemed
them on the basis of
a
issuance of silver certificates.
The Treasury
to
us
allotted
$1,500,000 in currency we would not have been entitled to had
they not taken that lot of silvery dollars off our hands. (AP
plause).MR.
you
WEBB: I would like to ask Mr. Talley a question:
have just referred
to the silver dollar proposition,
Mr. Talley
Now we, like a lot of our banks in the West, have more silver
dollars than we know what to do with, and we would like very
much to send those in to the Federal Reserve Bank at the expense
of the Federal Reserve Bank for the cost of the transportation"
My understanding
is that this is not allowable at the present
see
time. Cannot the directors
Federal
Bank
the
Reserve
of
We cannot force silver dollars on the
that that is allowable?
There was a day in the early banking history'
people today.
day
when you couldn't put out paper money at all. I saw the
when we circulated gold for silver. But today we cannot put out
the silver dollar. I believe it is the consensus of opinion with
the bankers similarly situated as in San Angelo that the Federal
Reserve Bank ought to call in the silver dollars to their vaults
here.THE
PRESIDENT: I must rule that you and
We will have to discuss this later.
of order.
this question
myself.
Mr. Talley are out
I have just raised
There is a motion by Mr. Williams before the house, which
has been
seconded. Mr. Williams, can you restate that motion?
A MEMBER: It seems to me the question is whether the Government shall get the money the Federal Reserve Bank is making
or whether the shareholders
shall get it. That is the question,
Mr. Williams, isn't it
about that?
M.
WILLIAMS: That
is virtually
the
question,
yes,
sir.
THE PRESIDENT: Gentlemen,
are you ready for the question?
(Question
let
it
be
favorable
to
that
for).
Those
motion
called
known by
it.
Unanihave
The
ayes
no.
contrary,
saying
aye,
mously carried.
THE SECRETARY: I have a telegram
for Mr. A. C. Daniel.
MR. ALDWELL: Mr. Chairman,
may I ask Mr. Webb here who
Is about the only banker
the benefit of
I know of to do it-for
these
I would
like to have Mr. Webb explain
bankers
young
clearly the old reserve
that we were required
to carry up to the
panic of 1907.
I have heard
be of some benefit.
It might
so
much about this reserve
I would like to
fund we care carrying.
have
during
the
discussed,
that
that
was carried
old reserve
panic of 1907, if it is
permissible.
MR. DEAS:
gram.THE
I suggest
PRESIDENT: Shall
that
we proceed
we let the
next
with
our
committee
regular
pro-
report?
MR. GRAVES: Mr. Chairman, before you pass on Mr. Deas' suggestion.
Now, then, I believe we are all agreed on who oughtut
to get the
earnings of the bank. You can resolute on it, but' if
eye do
take
it, my thought
is that we should
not
start
after
definite
Reserve
Board
the Federal
take it up through
action,
at Washington.
We have all said
We ought to start the thing.
that
we want it, but when are we going to get it?
THE PRESIDENT: That
hands
be
the
of the Adwithin
would
°isorY Committee to
act on.
linstructed
omachinery
be
to take such action, to startthe
in
"notion to do
these things.
THE PRESIDENT: Any discussion?
Those in favor, aye. Carried.
(No response)
(A second).
is "Stockholders'
The next report
Representation
on
shown
Federal
Reserve
Board."
The committee
to handle
appointed
this was the one of which R. L. Ball of San Antonio
was named
but declined
from him.
The
to act. We got nothing
chairman,
(Reading
members
other
of the committee:
personnel)-of
is here.
Mr. Graves,
have you
whom I believe
only Mr. Graves
to make?
any report
MR. GRAVES: No, I haven't
ing to suggest.
Nevertheless
any report to make. I have nothit is open for discussion.
THE PRESIDENT: What do you think of passing that, subject to
Will you make that motion?
the next Advisory Committee?
MR. GRAVES: Each Federal Reserve Bank, as you know, has
an Advisory
ington.MR.
Councilman
to represent
the
CALDWELL: I move that we pass
Commitee
to the next Advisory
mittee
(A second).
THE PRESIDENT: Those in favor,
The
mercial
last
and
the business
of this comfor their
consideration.
aye.
It is carried.
to report : "Interest
committee
Savings
Deposits,
and Change
THE SECRETARY: This
subject
in Wash-
stockholders
Paid on Public, ComLaw."
of Depository
is in reality
a matter
not
relat-
ing to the Federal Reserve Bank and relationship
with its memundertook
bers. The Advisory
Committee
ambitious
a rather
be
that
to
program
and selected
subject
and several others
handled by the committee,
but it was not really intended that
It would, therefore,
this should be on this program.
be left UP
to the option of this meeting as to whether you want that sub,
j ect discussed or not.
THE PRESIDENT: I suggest
that you have that reported
in Your
in
the
proceedings
and get
recommendations
of the committee
that way. There are a good many who want to leave right after
timei
the
noon, and we have had such splendid
attendance,
all
a
I would hate to come back here to this convention
with only
handful.
Will that be agreeable
to the convention?
(Convention
It is so ordered.
assents).
A MEMBER: I don't want to be out of order all the time, but
it strikes me there ought to be some expense attached to these
stockholders'
meetings that the Federal Reserve Bank ought not
to want to assume.
I think that we ought to have a Secretary
who should be paid.
THE PRESIDENT:
I am glad
you brought
that
up.
That
recom'
mendation
recommenwas made by me with the enthusiastic
dation of the committee.
Gentlemen,
you are never going to
function as you should unless you have a paid secretary. I believe
that should be referred to the next Advisory Committee to work
out. That will solve some things, for instance these banks that
have not voted. The secretary
can look after them, can help
this organization.
You have a wonderful organization
for these men to come
here
and stay as they have, for the committees to give the time
that they have to the work, and especially Mr. Lon-moor,
who
has an important
the big banks in Texas.
with
one
of
position
He has
given a great deal of time. He has, no doubt, had to work
over hours to attend his duties over there.
You cannot expect
him to do it. He don't
want the job and wouldn't have it, because he is like I am, he's got a better job.
But your association
important
is a wonderfully
association
to the Federal Reserve Bank
Dallas, and you are not going
of
to make it
go unless you do something like that.
It has been suggested-we
just talk plain and openwill
that
But
the Federal Reserve Bank to pay the expenses.
we
ask
if we did that
the Federal Reserve
somebody
would
surely
say
Bank is dominating
it.
The officers of the Federal Reserve Bank have been as modest as men could possibly be in making recommendations
to this
committee
in fact, they have made none. They have given us
all the information
for and have been most courteous.
I
called
believe
they are more anxious for this association
to function
than
we, the member banks, are. We ought to be anxious, because I will tell
had
had
Federal
if
the
you
gentlemen,
you
not
Reserve
System, you would have had the damndest panic ever
had in
this country since this thing's
New
been
in
going
on
York. I
to apologize about using that language,
want
and
esýecially to
my distinguished
cousin of Amarillo.
I am glad
that motion and I believe that matter
you
made
ought to be
to your next Advisory Committee with inreferred
structions to
if
they see proper and the
work
out
plan,
and
some
Federal
Reserve Bank wants to contribute
to it, all right. You
can assess
have,
Mr.
do
Secreyour
stockholders-how
many
we
taryTHE
SECRETARY:
Over
700.
TILE PRESIDENT: This is
I read
the first speech I have made.
something
here yesterday.
As you know, I suggested
that no
one man
forty
times.
This is my first speech.
I am
speak
over
not going
to have the thirty-nine
more.
YOU
go and assess
the big banks.
I live in a country
town ; I
belong to the highbrows;
our bank has $250,000, and we are
I belong with these
associated
with all these big institutions.
country boys; I feel at home with them.
I hope that that matter will be referred to your next Advisory
Committee.
I am a hold-over, fortunately
as
or unfortunately
the case may be. Would it be out of place for me to say we are
W.
losing the two most valuable members of that committee:
W. Woodson and Stanley Longmoor?
I am sure that these men
have had experience worth a great deal to this committee.
Let us refer this to this committee, let them try to work out
it
You
have
to
banks.
some plan.
won't
assess member
much;
Maybe the secretary will in turn engage
will be a small amount.
the services of a stenographer
and he can put him in a Ford car
or any other kind of car and can send him to see our friend
he is right about it-at
Weatherfo:_ d, about
complaining-and
these committees
not being able to meet. Whenever
you concentrate these committees,
gentlemen,
around thickly populated
like Dallas, or Tyler-I
communities
am speaking of the large
have
Houston or Weatherford,
to
communities-or
you are going
a kick. You have got to get, as Mr. Woodson said this morning,
you have got to get men from the different groups and men
different state and national banks, and from differrepresenting
We were right
ent states that belong to this Eleventh District.
about that. We had good reports.
Your motion is in order. Will somebodyA MEMBER: I would like to amend that motion.
THE PRESIDENT: I believe that this matter of engaging the
services of a paid secretary should be referred to the next Advisto work out some plan. If anyory Committee with instructions
one feels that is a good suggestion I would like to have a motion.
If not, whatever you do, gentlemen, will be satisfactory
to me.
A MEMBER: I make this motion: That it be mandatory
of the
banks.
MR. WooDsoN:
I second the motion.
THE PRESIDENT: The motion is that the incoming Advisory
Committee be instructed
to employ a paid secretary
and notify
the banks of their assessment.
It has been moved and seconded,
now open for discussion.
MR. LACY: As I understand
it, we cannot so assess these
The only way you can assess them is to get their
stockholders.
As I understand
it, this organization
here, is this:
consent.
don't know what jurisdiction
we have, but we cannot do that sort
of thing without getting the consent of the stockholders.
THE PRESIDENT: The motion is that the incoming committee
Of course you cannot force these
Will perfect this organization.
fellows to pay. That will have to be left for the committee.
MR. GRAVES: I am sure that the Federal Reserve Bank will
furnish them a man.
THE PRESIDENT: That will be left with the Advisory Committee.A
I
that-which
the suggestion
to make
MEMBER: I want
think will materially
discussion
help in the intelligent
of these
the
matters-most
of us who came here found time to consider
Committee
Matters
that come up ; apparently
your Resolutions
has
that the incoming
I want to suggest
chairman
appoint
not.
herenext year's Resolutions
Committee
at this time, or shortly
file
that are appointed
after, and that the numerous
committees
their
Committee
and that copies of
reports
with the Resolutions
the
(A
before
they get here.
be sent to the members
reports
Second)THE
Are you ready
PRESIDENT: You have heard that motion.
to vote?
Unanimously
Thank
(Question
carried.
called for).
You very much.
Now, gentlemen,
you are going to get your organization
on the map, take that from me.
A MEMBER: Mr. Chairman, I don't think there is any question
about this assessment.
If the Federal Reserve Bank in its wisdom feels that this
enough to pay the exmeeting is important
penses of committeemen,
no one could deny the excertainly
penses of a secretary.
THE PRESIDENT: That matter
by the
be handled
will
Committee.
Six able men will be able to pass on that.
of those same able men.
Advisory
I am one
Any new business, gentlemen?
We
We have a few minutes.
do not
want to cut anybody out.
MR. OAKES: Mr. Chairman, I think it would be proper at this
time, in
banks,the
one
of
stockholder
speaking
official
of
as
an
' think
it would be well for this stockholders'
meeting to pass a
"'solution
Federal
to
the
its
thanks
and
appreciation
offering
Reserve
Bank and each director of the bank for the kindness,
courtesy
Committee,
Advisory
the
as
and
consideration
shown
well as
Board of DirecFederal
Reserve
Board,
the
compliment
or
t0xS
in
they
rather,
the
which
manner
and
able
upon
splendid
have
this past, or present, year.
conducted the institution,
MR"WELCH: If the
the Resolutions Comwill
allow
gentlemen
mittee to
that
its
they
report
will
see
some of
recommendations
these
suggestions
are out of order.
MR. WILLIS: I
be
boiled
down
if
these
think
meetings
could
to have
just a one-day meeting rather than two days, in such
proway as to have your meeting one day and your membership
believe
I
day,
I
think
following
the
you
you
would-I
say
ceeding
MeetStockholders'
better
have
annual
at
your
attendance
would
ing, if held for one day in place of two.
THE
PRESIDENT:
We
had
a number
of
committees
out
that
were
all of them, and the Advisory
going to make reports, practically
Committee felt sure they could not do that in one day. I am sure
the next Advisory Committee
will consider those things when
they call the meeting.
Is there any further
subject that any member would like to
have the Advisory Committee
consider and report to the next
If so, will you please write that out and file it with
meeting?
today or any time within the next few days, as
the Secretary
You remember Mr. Woodson recommended
a
soon as you can?
I have made no recommendations
in there.
number of subjects.
Of course, some of the reports we have got to take up again,
to refer
so I am going to ask any of you that has any suggestions
to this Advisory Committee,
please communicate
with the new
Chairman, whoever he may be, or the new Secretary, whoever he
Committee
may be, and let the Advisory
consider it and say
whether they feel like a committee
should be appointed for the
it and making recommendations
to that
purpose of considering
Do you think, gentlemen, that will about cover that
committee.
Do you think you understand
Do you think
that?
proposition?
that will be satisfactory
to all the members?
(No objection
If so, all right.
offered).
Now, the report of the Nominating
Committee.
Mr. Graves,
come right forward, please.
THE SECRETARY: For the enlightenment
the
of the members,
Committee
is composed,
Advisory
as you recall-by-laws
adopted
last year-of
twelve members,
which were to draw lots for one
terms.
Those elected now are to take the place of
and two-year
those six going off. Those elected now will be for two-year
terms,
There will be an election
each year of six members
of the AdvisIn order that you may know who compose
the
ory Committee.
Committee:
(reading)
E. H. Schmidt,
Nathan
Adams,
A. F"
J.
Jones, W. M. Massie,
Gus F. Taylor,
J. T. Yantis.
Retiring:
Melton
Oakes, J. W. Wheeler,
W. W. Woodson,
A. M. Gillespie,
S. W. Stone, and S. A. Longmoor.
THE PRESIDENT:
dations.MR.
Mr.
Graves
will
now
report
his
recommen'
GRAVES: Mr. Chairman,
this is the report of the Nom"
inating Committee:
The committee presents the following names
P'
Advisory
Councilmen:
Oxsheer
J.
Smith,
Cameron;
of new
Williams, Mineral Wells; Alf Morris, Winnsboro;
Ben Johnson,
W. C. Slaughter,
Shreveport;
Durant,
Okla.; E. W. Graves,
Douglas, Ariz.
I move that
those gentlemen
be elected.
(A second)
THE PRESIDENT: You have heard the motion.
Aye; contrary,
No. Unanimously
elected.
What
Those
in favor,
is the next on the program.
THE SECRETARY:
Resolutions
MR. WELCH:- At the request
Resolutions Committee.
Committee.
of Mr. Webb I will report
for the
First : We congratulate
the officers of the Federal Reserve
Bank
and their
on their enlarged views in regard to humanity
obligations to the stockholders.
We believe that the investigation
took place had effects of direct benefit to the Federal
which
Reserve Bank, but
we do not concur that the Federal Reserve
Bank
was at fault.
We also desire to congratulate
the officers and directors and
those
in this meeting in
of the employees who have participated
any way upon the courtesy shown to the stockholders
as to answering any and all questions, and especially their ability to do
So when asked.
They have knowledge of what they are doing
and are desirable employees for this institution.
The Resolutions Committee also desires to commend the Presiding officer, the Secretary
and the Advisory Council for the
program they have arranged and the manner in which the program has been carried out.
We also desire to commend the committeemen
have
who
"eallY
thought
givensystem
variousof problems, andon
studycomprehensive
h
handed you
veand
ry
reports
eerning the
subjects named.
We have no
have been presented to us outresolutions
which
side of the
the committees
turned in this
reports
of
which
were
morning
the partial reports at that time. We could not poswith
sibly intelligently
them
this
time
to
take
this
report
on
at
say
or
take that.
I conclude
reporting for
my functions
the Resolutions
as Mr. Webb's
Committee.
representative
in
THE PRESIDENT: Gentlemen,
you have heard the report.
14h WELCH: Beg
thing:
pardon, I forgot one very imortant
The Dallas
Clearing House's courtesy is extended to the members
this meeting, the
here.
stockholders
there
is one
h
knows,and
thatdone,
if thIf
l
is
ere
to
to enterone thing that is
tain
superbly and well. We extend thanks to them.
Mr. Chairman,
I move that
be adopted.
the report
(A second)
THE
Gentlemen,
PRESIDENT:
you
have
heard
the
I
motion.
Those in favor, Aye. That
am sure you do not want it discussed.
seems to be unanimous.
Do you notice that everyone of these questions I rule on is
(Applause)
unanimous,-everyone
of them?
COLONEL WALSH :
I think it would be remiss
in me as ChairReserve
Bank of Dallas, if I did
man of the Board of the Federal
Committee
to the officers and Advisory
not express
of the Stockthe
holders'
Association,
and to the members
of this Association,
benefit which we have received
by being present
at this meeting,
listening
to these papers
discussions.
A very pleasand various
I express
to you our thanks
ant time to all of us.
and apprecia(Applause)
tion for this privilege.
THE PRESIDENT:
should come before
Gentlemen,
is there
?
the stockholders
any
other
business
that
(A motion to adjourn)
Before you do that, I want to thank you for the nice things
said about the Advisory Committee and for your attendance here.
I want to congratulate
Lynn and Beverly that they did not bring
their desks up here this morning.
We all expected them to do
that.I
am the chairman
of this committee
until we can have
We should have one as soon as possible and select oul
meeting.
chairman.You
know the by-laws were amended last year so that the
Executive Committee should, after the meeting, elect the chair'
I would like to talk to those gentlemen.
man and the secretary.
Will you please stand, gentlemen?
(five standing).
Five. MaY
Will you join me,
we have a meeting soon after adjournment?
gentlemen,
please?
What
response).
other
business
Gentlemen,
without
meeting at an end.
is
there
any motion,
before
the
I am going
meeting?
to declare
(No
this
Adopted
STOCKHOLDERS
by the
ASSOCIATION
of the
FEDERAL
RESERVE
BANK
OF DALLAS
June 15, 1927
(As amended
July
12, 1928)
A permanent
known
is
hereby
formed,
be
to
as
organization
the Stockholders'
Association
of the Federal Reserve Bank
Annual meetings of said Association shall be held
of Dallas.
regularly in the future.
The Association's
by a president,
affairs shall be administered
a secretary, and a stockholders'
advisory committee. The president and secretary shall be elected to serve one year, or until
their successors are elected.
The stockholders'
advisory committee shall consist of eleven
members, seven of whom shall be elected from the state of
Texas, and one each from the states of Louisiana, Oklahoma,
New Mexico
and Arizona, without reference to any lines of
distinction as between State banks and National banks, or as
between different
The Chairman
and other
sizes of banks.
members of the committee elected by the Association in 1928
shall draw for one and two-year terms, so that thereafter,
six
new members of the committee shall annually be elected, to
serve terms of two years each, and at the annual meeting in
1929 and thereafter
the Chairman
and Secretary
shall be
elected from the committee and by the committee.
The President
of the Association shall be ex-officio chairman
and member of the stockholders'
advisory committee.
The
stockholders'
shall have power to
advisory committee
confer in behalf of the stockholders,
from time to time, with
the directors
of the Federal Reserve Bank of Dallas, or with
the Federal Reserve Board,
and to fix the date of the annual
stockholders'
meeting.
6. It shall be the duty of the advisory committee
to meet at
to
lease once a year, or oftener (at the call of the chairman),
determine the date of the next stockholders'
meeting, prepare
the program and issue the call for such meeting.
7. In the transaction
of business at the annual stockholders'
meeting each member bank represented
shall be entitled to
one vote.
8. At each stockholders'
meeting the presiding officer shall appoint a nominating
committee, of seven members, whose duty
it shall be to nominate a president, secretary and members of
the advisory committee
to serve during the ensuing term,
that such nominations
with the understanding
shall in no
way interfere
with the offering of independent
nominations
from the floor.
9. At each stockholders'
meeting the presiding officer shall appoint a resolutions
committee,
of seven members, who shall
prepare and submit such resolutions as they may deem worthY
of adoption by the Association.
THE
RESERVE
FEDERAL
FOR
Class
OF
OFFICERS
AND
DIRECTORS
BANK
YEAR
OF DALLAS
1929
Class
A
J. 11. FROST,
Texas
San Antonio,
"()WELL
Texas
E. SMITH, McKinney,
J. R. MILAM,
«'. I-I. PATRICK, Clarendon,
J. J. CULBERTSON, Paris,
Houston,
A. S. CLEVELAND,
Texas
Class
Waco,
Texas
Chairman,
Texas
I'1NN
P. TALLEY, Governor
Pý"R.
GILBERT, Deputy Governor
4"BCOLEMAN, Deputy Governor
P RED
HARRIS, Cashier
C. C. WALSH,
Chairman
Board
Rethe
Board
W. J. EVANS, Assistant
B. AUSTIN,
Assistant Cashier
,ý" G"
WEBB, Assistant
Cashier
Federal
Agent
W. P. CLARKS, General
C. C. TRUE, Assistant
C. C. HUFF, General Counsel
STROUD
AND
RANDOLPH
Counsel
Member
of the
Agent
Reserve
and Federal
Federal
CHAS. C. HALL, Assistant
Agent
and Secretary
of
serve
W. D.
GENTRY,Asst. Deputy Governor
J' L" HERMANN,
Assistant
Cashier
F
LOCKE,
Texas
of Board,
CLARENcE L. LINZ, Deputy
Dallas, Texas
LOCKS,
Texas
C
C. C. WALSti, Chairman
Dallas, Texas
S. B. PERKINS, Dallas,
B
Federal
Advisory
B. A. McKINNEY
Dallas, Texas
Council
Auditor
Auditor
Reserve
A. P. COLES,El Paso, Texas
C. M. NEWMAN, El Paso,
Texas
Texas
ALLEN SAYLES,
W. 0. FORD,
Managing
Texas
E. M. HURD, El Paso, Texas
N. M.
A. J. CRAWFORD, Carlsbad,
W. 0. FORD, El Paso,
G. D. FLORY, El Paso,
N. M.
E. A. CAHOON, Roswell,
Cashier
Director
BRANCH
HOUSTON
Directors
J.
Guy M. BRYAN, Houston,
C.
WILSON,
Beaumont, Texas
E. F. GOSSETT, Houston,
Texas
FRED W. CATTERALL, Galveston,
DWIGHTP. REORDAN,Houston, Texas
R. M. FARRAR,Houston, Texas
H. R. DEMOSS,
L. G. PONDROM,
DWIGHT P. REORDAN,
Managing
Assistant
Cashier
Director
SAN
ANTONIO
M. BENNETT,
M. CRUMP,
San
San
Antonio,
FRANZ C. GRoos,
San
Antonio,
Antonio,
Texas
REAGAN
HOUSTON,
R. T. HUNNICUTT,
Texas
Texas
ERNEST
STEVES,
San
Del
San
Director
Cashier
Texas
Antonio,
Rio,
Antonio,
C. B. MENDEL,
Al. CRUMP,
Managing
Texas
Cashier
BRANCH
FRANK G. CROW, McAllen,
JOHN
Texas
E. A. PEDEN, Houston,
Texas
Texas
Texas
Texas
DIRECTORS-FEDERAL
OF
DALLAS
J. R. MILAM,
J. J. CULBERTSON,
Paris,
BANK
RESERVE
Waco,
Texas.
Texas.
W. H. PATRICK,
J. H. FROST,
San Antonio,
Clarendon,
Texas.
HOWELL E. SMITH, McKinney,
DIRECTOR-EL
Texas.
Texas.
PASO BRANCH
W. 0. FORD, El Paso, Texas.
DIRECTOR-HOUSTON
BRANCH
E. F. GOSSETT, Houston,
DIRECTORS-SAN
ANTONIO
FRANK G. CROUP,
McAllen,
Texas.
BRANCH
FRANZ C. GROGS,
San Antonio,
Texas.
M. CRUMP,
Texas.
R. T. HUNNICUTT,
San Antonio, Texas.
Del Rio, Texas.
[1251
Arcadia,
First
Louisiana
National
W. M. Deas
Texas
Ballinger,
First National
R. G. Erwin
Bardwell,
First
Texas
National
D. W. Ramsay
Bartlett,
First
Texas
National
C. C. Bailey
Texas
Beaumont,
National
American
Bellevue,
First
PresidentCashierCashierPr
Chas.
Texas
National
H. Stroeck
L. B. Moore,
Grove, Texas
Blooming
National
Citizens
J. R. Griffin
Texas
Brownsville,
First National
W. B. Sellers
Texas
Brownwood,
First National
Jno. T. Yantis
Texas
Cameron,
Citizens National
Oxsheer
Canton, Texas
First National
W. L. Steed
Vice President
Celeste, Texas
First National
S. R. Granberry
PresidentPresident
Texas
Clarendon,
First National
W. H. Patrick
Texas
Clarksville,
Red River National
Corpus Christi, Texas
Bank
City National
Texas
Corsicana,
National
Corsicana
First National
First State
Texas
Crandall,
Bank
First National
Citizens National
Daingerfield,
Citizens
National
Texas
National
Bank of
PresidentPresident
Smith
A. M. Graves
M. L. Sims
Commerce,
Texas
First National
President
President
Vice President
D. N. Hargrave
& Trust
Co.
Clark
Pease
A. G. Elliott
J. N. Edens
Geo. E. Jester
J. E. Butler
Vice President
W. Spellman
F. B. Fowler
President
Vice President
J. W. Pate
W. D. Russell
Cashier
Asst. Cashier
PresidentPresidentPreside
Dallas,
Texas
American
Exchange
National
City National
Dallas Clearing
House Assn.
Dallas National
Mercantile
Bank & Trust Co.
of Texas
National
Bank of Commerce
North Texas National
Republic Natl. Bank & Tr. Co.
Dawson,
First
Texas
National
Del Rio,
Texas
First National
Durant,
Oklahoma
Durant
National
Eagle
Pass, Texas
First National
Edgewood,
Texas
Farmers
& Merchants
Eldorado,
Texas
First National
El Paso,
Texas
El Paso National
State National
Ennis,
Texas.
Citizens
National
Terris,
Texas
F. & M. State
FloYdada,
Floyd
Forney,
State
Adams
Nathan
B. A. McKinney
J. A. Pondrom
Gary A. Jones
Oscar C. Bruce
Milton Brown
Bailey C. Malone
Dan D. Rogers
John Rauscher
Geo. Miller
Stanley A. Longmoor
F. F. Florence
Jno. E. Owens
Wm. Z. Hayes
PresidentVice
President
PresidentAsst.
Examiner
Vice President
Vice President
Vice President
Vice President
C. M. Newton
PresidentVice
Cashier
Vice President
President
Vice President
Vice President
R. T. Hunnicutt
President
W. C. Slaughter
Vice President
E. H. Schmidt
Chmn.
J. L. Bounds
W. H. Pickens
DirectorCashierVice
J. E. Hill
Sam D. Young
R. W. McAfee
Fred
A. Newton
of Board
President
Vice President
V. P. & Cashier
PresidentPresidentPresident
D. H. Moyers
Texas
County
National
T. S. Stevenson
Texas
City National
Farmers
National
Forney State
Fort
Worth, Texas
Continental
National
Fort Worth
Naitonal
Frost,
Texas
Citizens State
First National
Gals"e,ton,
Texas
City National
Tom Spellman
J. M. Davis, Jr.
J. C. Reagin
0. W. Reagin
DirectorCashierPresidentVice
Ed H. Winton
E. E. Bewley
Cashier
Vice President
R. P. Shaw
J. C. Beck
Vice President
V. P. & Cashier
President
Garland,
State
Texas
National
Georgetown,
Texas
City National
First National
Owen W. Sherrill
E. H. Eanes
President
Cashier
J. C. Alsup
J. E. Persons
J. E. Andrews
PresidentVice
President
Vice President
C. A. Bridges
Vice President
D. E. Box
PresidentCashier
B. R. Býý
J. A. Norton
Cashier
Graham,
Texas
Graham
National
Grand Saline, Texas
State National
Glen Rose, Texas
First National
Grapevine,
Tarrant
in
Texas
County
National
Greenville,
Texas
Citizens State
Greenville
National
Exchange
Hamilton,
Texas
National
Hamilton
Handley,
First
Texas
National
Houston,
Texas
First National
Second National
Seaport
National
South Texas Com'l
Union National
Hubbard,
First
National
Texas
National
J. T. James
C. B. J*ooeo
PresidentCashier
Ben T. Merritt
Cashier
Gwu R. Lader
B. D. IIurra
Vice President
Vice President
Philip Stillman
E. F. Gossett
T. J. Caldwell
President
Vice President
Vice President
W. E. McDaniel
PresidentCashier
Idabel, Oklahoma
Idabel National
Bernie
Herstein
Italy, Texas
First National
L. Earl
Eagan
Junction,
Texas
Junction
State
W. P. Riley
President
Kilgore, Texas
Kilgore
National
F. D. Oberthier
President
Lamesa,
Texas
First National
Lamesa National
J. E. Barron
0. B. Norman
Vice President
Lancaster,
Texas
First National
W. Y. Perry
Liberty,
Texas
First-Liberty
National
B. G. Riviere
128 ]
Vice President
Lockney, Texas
First National
S. L. Rushing
Artie Baker
Chmn. of Board
President
Longview, Texas
Rembert
National
G. A. McCreight
President
Lubbock, Texas
Citizens National
C. F. Drexel
V. P. & Cashier
Diadill, Oklahoma
Madill National
M. B. Bryant
PresidentPresidentV.
TMIarfa, Texas
Marfa National
M. D. Bownds
Marshall, Texas
First National
Mart, Texas
F. & M. National
MaYpearl,
Texas
Citizens State
McGregor,
Texas
First National
McKinney,
Texas
First National
Melissa,
Texas
Melissa National
Memphis,
First
Mertzon,
First
Mesquite,
First
W. L. Barry
P. & Cashier
T. M. Wilson
PresidentPresidentVice
C. H. Wilemon
J. Edwin
Howell
Brown
E. Smith
S. S. Montgomery
Texas
National
Vester
Texas
National
Chas.
Prendergast
Smith
Milford,
Texas
First National
Mineral
Wells, Texas
First National
Mt, Vernon,
M" & P.
Texas
National
PresidentPresidentCashier
J. E. Gibson
H. S. Wysong
Texas
National
alexia,
Texas
City National
President
PresidentCashierPresident
T. Hughes
A. Tosch
David Murphy
J. Fort Smith
Noel Hollingsworth
V. P. & Cashier
Asst. Cashier
Cashier
J. T. Harper
C. R. Hill
N. E. Dupree
W. J. Moore
PresidentVice
President
Vice President
Cashier
S. L. Bedford
J. M. Caviness
PresidentCashier
Odell
Texas
First National
Paris
Texas
American
National
First National
Texas
State
Palmer,
First
Henry
Plano, Texas
Farmers
National
Plano National
New Mexico
National
Portales,
First
F. Huffaker
Cashier
R. A. Davis
H. F. Coleman
President
Cashier
Arthur
Cashier
F. Jones
Roby, Texas
First State
V. B. Carothers
Cashier
Rockdale,
Texas
First National
Conn R. Isaacs
Cashier
San Angelo, Texas
First National
Geo. E. Webb
President
San Antonio, Texas
National
Commercial
Frost National
Groos National
Z. D. Bonner
J. H. Frost
Franz C. Groos
Vice President
PresidentPresident
National
J. T. Chambers
E. B. Brown
Geo. 0. Hughes
President
Asst. Cashier
Cashier
Santa Anna, Texas
First National
C. W. Woodruff
Vice President
Santo, Texas
First National
C. Hatchett
Cashier
La.
Shreveport,
Commercial
National
Continental
Bank & Trust
National
American
P. C. Willis
R. Mc L. Jeter
M. A. McCutcheon
Vice President
Vice President
President
W. L. Aldwell
President
E. L. Ashcroft
President
Sanger,
First
Texas
National
Sanger
Sonora, Texas
First National
Sulphur
First
Springs,
National
Co.
Texas
Taylor, Texas
First National
Francis
Teague, Texas
Teague National
J. E. Woods
President
Terrell, Texas
First National
M. H. Pace
Cashier
Texas
Texarkana,
National
Texarkana
J. W. Wheeler
President
Texas
Thornton,
First National
J. E. Barnett
Cashier
Texas
Throckmorton,
First National
Garland
Cashier
Troup, Texas
First National
Jno.
[ 130 ]
H. Welch
Eubank
Walton
Pace
President
Cashier
Tucumcari,
N. M.
First National
Vice President
Tyler, Texas
Citizens National
Peoples
National
Valliant, Oklahoma
Farmers
State Guaranty
Waco, Texas
Citizens National
First National
Liberty National
Waxahachie,
Texas
Citizens National
Weatherford,
Citizens
Fest,
Texas
National
Texas
National
Bank
PresidentDirectorPresidentDirector
Walter G. Lacy
W. W. Woodson
C. F. Dumas
PresidentPresident
Vice President
T. A. Ferris
W. A. Canon
Vice President
Vice President
D. S.
Fred
W. S.
J. L.
of West
White
Deer, Texas
First National
Whitney,
Texas
First National
Wichita
Falls, Texas
City National
First National
Wills
Point, Texas
First National
WVinnsboro,
Texas
First National
Gus F. Taylor
A. R. Wood
Sam R. Greer
W. H. Haddad
Wright
Smith
Fant
Whitsett
W, R. Glasgow
Bob McCoy
J.
M. Collier
Oral Jones
W. M. McGregor
A. M. Miller
J. C. Lybrand
Vice President
Vice President
PresidentAsst.
Cashier
PresidentVice
President
Cashier
V. P. & Cashier
PresidentCashierPresident
