frsbog_mim_v21_complete.pdf

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X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED JULY », 192«±.

ADMITTED TO THE FEDERAL RESERVE SYSTEM:

Total Capi ta l Surplus Resources

DISTRICT NO. 4.

Union Trust Company, Greensburg, Penna. $400,000 - $1,6*2,559

CHANGES IN STATE BAM MEMBERSHIP:

Change of T i t l e .

The Newton State Bank, Newton F a l l s , Onio, has absorbed the F i r s t Nat ional Bank of Newton Fal ls and changed i t s t i t l e to tne F i r s t S ta te Bank.

Voluntary Wi thdrawal.

Er ie County Trust Company, East Aurora, y.

• . Withdrawal.

Fanners & Stockgrowers Bank, Montour, Idaho.

Absorption of Non-member.

Tne Wachovia Bank & Trust Co., Winston-Salem, N. C. , has absorbed tne Sa l i sbury Bank & Trust Co. , Sal isbury, N. C.

Merged with Non-member.

Tennessee^Vctlley ^ k A l ^ ^ A o ^ m e m b t r !

PERMISSION GRANTED TO EXERCISE 'TRUST POWERS:

Frankl in National Bank, Frankl in , N. H. Barnet t National Bank, Jacksonvi l le , Fla. (Supplemental) J i r s t National Bank of Montezuma, Ind.

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-1530

EgDERAL RESERVE BOARD ANNOUNCEMENT FOB THE WEEK ENDED JULY 11, 1934.

ADMITTED TO THE FEDERAL RESERVE SYSTEM: Total

Capi t a l Su.rpl~us resources

DISTRICT NO. 3,

Peoples Trust Company, Wyomissing, Pa, $500,000 $250,000 $2,823,168

CHANGES IN STATE BANK MEMBERSHIP:

Change of T i t l e .

The American Bank of Commerce & Trust Co. , L i t t l e Rock, Ark. , as changed i t s i t i t l e to tus American Trust Company.

Taken Over By Superintendent of Banks.

The Bank of I o t a , Io ta , Louisiana.

Withdrawn:

Pembersille Savings Bank Co. , Pemberville, Ohio.

Insolvent.

Bank of Waynesville, Waynesville, Mo.

PERMISSION GRANTED TO EXERCISE TRUST POWERS:

Watkins National Bank, Lawrence, Kansas, Corpus Chr i s t i National Bank, Corpus C h r i s t i , Texas.


X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED JULY 18, 1924.

ADMITTED TO THE FEDERAL RESERVE. SYSTEM:

N O N E


Reopened:

Tne Bank of Camilla, Camilla, Georgia.

Consolidation;

The Easpar S ta te Bank, Cnic»go, 111., a member bank, and the American State Bank, Cnicago, 111. , a non-member, have consolidated under the name of Easpar American State Bank.


Closter National Bank, Clos ter , N, J. F i r s t National Bank, Be l l e fon te , Pa. Peoples National Bank, Lebanon, Pa. Bozeman Waters National Bank, Poseyvi l le , Ind, F i r s t National Bcmk, Ordway, Colo. Fourth National Bank, Wichita, Kans. Lincoln Sta te National Bank, Lincoln, Nebr.


IEDERAL EE SERVE BOARD ANNOUNCEMENT WEEK ENDED JULY 25, 1924.

ADMITTED 10 THE FEDERAL EE SERVE SYSTEM:

DISTRICT NO. 1.

•L. C S

X-1530

Total Capi t a l Surplus resources

Columbus Exchange Bank, Providence, R. I . $150,000 $ 50,000 $2,691,196

DISTRICT NO. 9,

F i r s t StatecBatifc, " Buffa lo , S. Dak. 25,000 5,000 160,741


Absorbed by a National Bank.

Zillaix S t a t e Bank, Z i l l ah , Washington.


X-1530

EEDERAL EE SERVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 1, 1924.


N O N E


Absorbed by S t a t e Member.

The Guaranty Bank & Trust Company, Memphis, Tennessee, has been taken over by tne Union & P lan te r s Bank & Trust Company of Memphis, a member i n s t i t u t i o n .

Absorbed by Nonmember.

The St. Lawrence Trust Company, Ogdensourg, N. Y. , has been absorbed Dy the Ogdsns'burg Bank, Ogdensourg, N. Y. , a nonmember.

Tne Rutherford County State Bank, Murfreesboro, Tennessee, aas been absorbed by tna Commerce Union Bank, Nasnvi l l e , Tennessee, a nonmember.

Succeeded by Nonmember.

The Empire and Sta te Bank, Lewis town, Montana, has been suc-ceeded. by tJae Central Bank & Trust Company, Lewis town, Montana, a nonmemoer.


Commercial Nat ional Bank, Cnarles City, Iowa.


X-1530

FEDERAL RESERVE BOARD AffiTOUNCEMENT WEEK ENDED AUGUST 8, 1924.


N O N E .


Merger:

Tiie Security T i t l e & Trust Co. , York, Pa. , a nonmember:,. has merged wi th the Guardian Trust Company of York, a member.

Voluntary Withdrawal:

The Hamilton Bank, Baltimore, Maryland.


Peoples National Bank, Skippensburg, Pa, Alexandria National Bank, Alexandria, Va. F i r s t National Bank, Mi l l e r , S. Dak.


- r i ^ - —<*- • **—

X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 15, 1924.


N O N E

flOTWffES TTJ STATE BANK MEMBERSHIP:

The S ta te Bank of Winfield, Kansas, has absorbed the Progress ive State Bank, Winfield, Kansas, a noranember.


Merchants and P lan te rs National Bank, Gaffney, S. C. F i r s t National Bank, Newport News, Va. F i r s t National Bank, Park Rapids, Minn.


X-1530

INDERAL HESEEVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 22, 1924.


Total Capi ta l Surplus resources

DISTRICT NO. 2.

Centra l Mercantile Bank, New York, N. Y. $1,500,000 $810,000 $9,775,534

CHANGES IN STATE PANIC MEMBERSHIP:

Closed.

Tne Brighton Sta te Bank, Brignton, Iowa.

Succeeded by Noraaember S ta te Bank.

Tne Alto Sta te Bank, Alto , Texas.


F i r s t National Bank, Woodbridge, New Jersey.


? L I S

X-1530

FEDERAL RESERVE BOABD ANNOUNCEMENT WEEK ENDED AUGUST 29, 1924.


N O N E .


N O N E .

AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE UP TO 100 PER CENT OF CAPITAL AND SURPLUS:

Foreman National Bank, Cnicago, I l l i n o i s .


F i r s t National Bank, Wadesboro, N. C. F i r s t National Bank, Waynesboro, Va.


X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED SEPTEMBER 5, 1924.

ADMITTED Tf> THTC WTOCTAL RESERVE SYSTEM:

N O N E


N O N E

PERMISSION GRANTED TO EXERCISE TRUST POWERS.:.

National City Bank, Troy, N. Y-Pac i f i c Natioiicd Bonk, Los Angeles, C»l i f .


X - 1 5 3 0

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED SEPTEMBER 1 2 , 1924.

ADMITTED 10 THE EEDERAL RESERVE SYSTEM:

N 0 N E


N O N E


Middle town National Bank, Middle town, Conn. (Supplemental) Hamilton National Bank, New York, N. Y. Manoning National Bank, Youngs town, Obio.


FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED SEPTEMBER 19, 1924.


N O N E

CHANGES I N STATE BANK MEMBERSHIP:

N O N E


Cit izens National Bank & Trust Co. , Newark, N. J . F i r s t National Bank, Lake Charles, La. F i r s t National Bank, Corva l l i s , Oro. (Supplemental


X-1530

FEDERAL HE SERVE BOARD AFNOUNCEMENT WEEK EtTDED SEPTEMBER 26,1934.


II 0 R E

CHANGES IN STATS 3AM MEMBERSHIP:

Voluntary withdrawal:

Leelanau County Savings Bank, Buttons Bay, Mien.


The National Bank of Pnoenixvi l le , Phoenixvi l le , Pa. The Farmers National Bank, Remington, Ind.


!• l ! 8

X-iodO

FEDERAL RESERVE BOARD ANNOUNCEMENT FOB THE WEEK ENDING. OCTOBER1 3 , 1924.

ADMIT TOD TO FEDERAL RESERVE SYSTEM: Total

Capital Surplus Resources DISTRICT NO. 3.

West Side Trust Company, Kings ton, Perun. $250,000 $50,000 $1,264,250 '

DISTRICT NO. 8

Granite C i ty Trust & Savings Bank, Granite City, 111. 100,000 25,000 1,100,376

CHANGES IN ST5TE BANK MEMBERSHIP:

N O N E '


The The The

Firat-Merchants National Bank, La l a y e t t e , Indiana. F i r s t Nat ional Bank, Noblesv i l l e , Indiana. Miami County Nationa.1 Bank, paola , Kansas,


FEDERAL RESERVE BOARD ANNOUNCEMENT "WEEK ENDED OCTOBER 1 0 , 1 9 2 4 .

ADMITTED TO TTTE FEDERAL RESERVE SYSTEM.

DISTRICT NO. 9 . T O T A L .

Columbia State Bank, S o a l s t Columbia Heignts, M m . , $25,000 $5,000 • $131,766.59

CRSNGES IN STATE BANK

Voluntary Withdrawal.

F i r s t S ta te Bank of Mission, Mission, Texas.

Consolidation.

Aooerican Trust Company, and Southern Trust Company, L i t t l e ' •Arkansas., consol ida ted under t i t l e "American Southern Trus t

Company".

PERMISSION GRANTED TO EXERCISE TRUST POWERS.

N O N E


FEDERAL RESEBVE BOARD ANNOUNCEMENT WEEK ENDED OCTOBER 17, 1924.

ADMITTED TO EEDEBAL BESEfiVE SYSTEM.

N O N E

CHANGES IN STATE BANK MEMBERSHIP.

Voluntary wi thdrawal.

Reliance S t a t e Bank, Chicago, I l l i n o i s ,

Absorbed by National Bank.

Tb° Hen ton s i a t e Bank, Ronton, Wasbingt on, a. member bank, has been absorbed by the F i r s t National Bank ef Ren ten , Washington.

Absorbed, by Member S ta te Bank,

The American Bank of San Francisco, has absorbed the Affleric an Bank of Oakland, C a l i f o r n i a , and the First National Bank of Oakland, Ca l i fo rn i a .

PERMISSION GRANTED TO EXERCISE TRUST POWERS.

The F i r s t National Bank of M&cneola, Mineola, N„ Y. The F i r s t National Bank of Monroe, Monroe, Wis. The P a c i f i c National Bank of Boise, Boise, Idaho-


X-1530

FEDERAL RESERVE BOARD AFNOUrTCEMENT WEEK ENDED OCTOBER 24, 1924.


DISTRICT NO. 8. Total Capi t a l Surplus resources

The Baden Bank, St. Louis, Mo. $200,000 $100,000 $3,312,154

DISTRICT NO. 10.

F i r s t Trust Company, King City, Mo. 50,000 - 379,395


Closed:

Pickens County State Bank, Carrol l ton, Ala.

Absorption of National Bank:

The I l l i n o i s Merchants Trust Co. , Cnicago, 111. , a member . bank, has absoroed the Corn Exchange National Bank, Chicago, 111.

Voluntary Withdrawals;

Ca l i fo rn i a Bank of San Mateo County, San Bruno, OAlif. S ta te Bank of Sevier , E i c n f i e l d , Utah.

AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF TOCCBANCT: UP TO 100 PER CTCNT OT CAPITAL AND SURPLUS.

F i r s t National Bank, Eagle Pass, Texas. S ta te National Bank, Corpus C h r i s t i , Texas.


F i r s t National Bank, Por t land, Conn. Pemigcwassot National Bank, Plyaoutn, N. 11. Amsterdam Ci ty National Bank, Amsterdam,, N. Y. National Bank of Delaware, Wilmington, Dela. F i r s t National Bank, Paulsooro, N. J. F i r s t National Bonk, Shipponsourg, Pa. National jj&nk of Aiuerico., P i t t s cu rgn , Pa. (Supplemental) F i r s t National Bank, Pa r i s , Ark-Cit izens National Bank, Alton, 111. Merchants National Bank, St. Cloud, Minn.


X-. f*--:.

X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED OCTOBER 31, 1924.

ADMITTED TO E E FEDERAL RESERVE SYSTEM:

Total' Capi t a l Surplus resources

DISTRICT NO. 8.

F i d e l i t y Bank & Trust Co. , Memphis, Tern. ' $1,000,000 $100,000 $2,407,983

CHANGES IN STATE SANK MEMBERSHIP:

Voluntary Withdrawal

Central Savings Bank & Trust Co. , Monroe, La.


F i r s t Nat ional Bank, pn i l ipsburg , Penna. F i r s t National Bank, Gastonia, N. C.


X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT . WEEK ENDED NOVEMBER 7, 1924.

• ADMITTED TO THE FEDERAL RESERVE SYSTEM:

N O N E


Change of Ti t le and Location

Tha Bank of Castle fo rd , Cas t le ford , Ida.no, has cnanged i t s t i t l e to tne Secur i ty S ta te Bank and i t s loca t ion to Bunl, Idaho.

Voluntary Witndrawal

Tno Rossford Savings Bank, Rossford, Ohio.

PERMISSION GRANTED TO EXERCISE TP.UST POWERS:

Tno Wallaslay National Bank, Wolloslo yt Mass. F i r s t National Bank, P l a i n f i e l d , N. J . F i r s t National Bank, Canton, Onio '(Supplemental).


X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED NOVEMBER 1<±, 192%.

ADMITTED TQ THE SEDER AL RESERVE SYSTEM-

Total Capital Buipplus (resource s

DISTRICT IJO. d.

Peoples State Bank, Mapluwood, Mo, $60,000 $9,352


N O N E

PERMISSION fi-RANTED TO EXERCISE TRUST POTZERB:

- larr isburg National Bank, Harr i s burg, Ponna.

$183,907


x. - / S ,

X - 1 5 3 0

FEDERAL RESERVE BOARD AMOIMCELEETO WEEK EHDED HOVH.IBER 21, 1924.

A3MITTED TO THE FEDERAL RESERVE SYSTMT

H O N E

OHAMTES M STATE "BATOTT MTmBRfiTTTP.

Closed.

Pnoplea S t a t e Batik, Corwith, Iowa, Maloom Savings Bank, Malccm, Iowa.

Voluntary Withdrawal*

Union & Hew Haven Trust Company, Hew Haven, Connecticut ,

Voluntary Liquidat ion;

Ci t izens S t a t e Bank, Hewton, Iowa,

PERMISSION GRAM1 ED TO EKERCISE TRUST POWERS«

The Merchants Rational Bank of Bangor, Bangor, Maine. The n a t i o n a l Bank of 61 ens F a l l s , Glens F a l l s , Hew York, The Peoples na t iona l Batik of S teubenv i l l e , S te t ibenvi l le , CSiio. The American na t iona l Batik of Bellingham, Bellingham, Wash.


XrOSSO

I1ED><RaL RESERVE BOATiD AmOTHCM-ZT' V.B5-: HID"© NOVEJBER 28, 1924.

AIMITTED T C T E E S FEDERAL PJ3SE3.VE S Y S T M ;

OcrMkmity Trus t Crrapany of BloomfielcL, BloamfielcL, N. J .

CHARLES IN STME BANK injUTRlgRRTTTP-

Closg&L

F i r s t S t a t e Bank, Walnut Grove, i l i nneso ta . Bank cf Dona lscmr i l l e , Dcna l sonv i l l e , Georgia . Peoples Batik of Georgetown, Georgetown, So. Caro l ina .

PERMISSION GRAM ED TO EXERCISE TRUST POWERS;

Thn B l a i r County n a t i o n a l Batik of Tyrone, Tyrone, Pa. The Mellon Nat ional Bank of P i t t s b u r g h , P i t t s b u r g h , Pa . P a c i f i c Nat iona l Batik of San Francisco , San Franc isco , Cal«

1


FEDERAL RESERVE BOARD AKNiUNCEMENT WEEK ENDED DECEMBER 5, 1924.

AIMITTED TO THE FEDERAL RESERVE SYSTEM:

N O N E


Closed: Bank of Commerce, Ear le , ArKansas.


Nat ional Bank of Orange County, Chelsea, Vt. Factory Point Nat ional Bank, Manchester Center Champaign Nat ional Bank, Urbana, Ohio. Concord Nat ional Bank, Concord, N. C. F i r s t National Bank, Winslow, Ar iz .


1

1-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED DECEMBER 12, 1924.

ADMITTED TO THE FEDERAL RESERVE SYSTEM: Total

Capi ta l ' Sur-plus resources DISTRICT NO.

N0rthe^st-Tacony Bank & Trust Co. , P h i l a d e l p h i a , Penna. $250,000 $100,000 #1,424,737

(Succeeded S t a t e member of same t i t l e* ' but under a new c h a r t e r i


N e r the as t -Tacony Bank & Trust Co.> P h i l a d e l p h i a , Penna. (Succeeded by above named Sta te member)

Closed:

North Georgia Trust & Banking Co., Winder, Ga. Cheyenne S ta te Batik, Cheyenne, Wyo.

Consolidated with Sta te Member:

F i r s t S t a t e Bamc, Drummond, Idaho (Consolidated with and under t i t l e of Secur i ty S ta te Ba-nk, Ashton, Idaho, a member).


Guaranty Bank & Trust Co. , Memphis., Tenn.


Tenth Nat iona l Bank, Ph i l ade lph i a , Penna. Peoples Nat ional Bank, Kansas Ci ty , Bans. Omaha Nat iona l Bank, Omaha, Nebr.


I. H 1 2 9

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED DECEivBER 19, 1924.


N O N E


Closed:

Farmers & Traders Sta te Bank, Leon, Iowa. Lockridge Savings Bank, Lockridge, Iowa. Ci t izens Sta te Bank, S t . P e t e r , Minn.

Insolvent :

Brighton Sta te Bank, Brighton, Iowa. Peoples Sta te Bank, Corwith, Iowa.


S ta te Bank of Richmond, Richmond, Utah,


0

x-1530

FEDERAL BESERVE BOARD ANNOUNCEMENT WExuK END&D DECEMBER 2b, 1924.


N O N E


N Q N,E

PERMISSION GRANTED TO EXERCISE TRUST POWERS;

Mechanics National Bank, M i l l v i l l e , N. J . Exchange National Bamc, Tampa. Fla . F i r s t National Bank, Jackson, Miss. F i r s t Nat ional Bank, North L i t t l e Rock, Ark.


FEDERAL RESERVE BOARD WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

J u l y 10, 1924. x-4iog

SUBJECT: Code words to be used in connect ion wi th wi re t r a n s f e r s of Treasury Motes and Treasury C e r t i f i -ca tes of Indebtedness .

Dear S i r :

In order to reduce the number of e r r o r s which have occurred in t r a n s m i t t i n g the t i t l e s of va r ious i s sues of Government o b l i g a t i o n s i n telegrams between the Federal Reserve Banks and t he Treasury De-partment, and t o el iminate , r e s u l t a n t confus ion, i t has been suggested to the Board by the Commissioner of Publ ic Debt t ha t a d d i t i o n a l code words, suppl ied from t h e Federal Reserve Telegraph Code, be des igna ted t o cover the names of such i s s u e s in t he te legrams between the Treasury Department and t h e Banks and Branches in connection wi th the wire t r a n s f e r s of such Government o b l i g a t i o n s .

This sugges t ion meets wi th the Board 's approval , and you a r e advised t h a t , commencing wi th August 1, 1924, the fo l lowing code words, t o des igna te the t i t l e s of i s sues of Treasury Notes and Treasury C e r t i -f i c a t e s of Indebtedness in te legrams, w i l l be used by the Treasury De-partment and the Federa l Reserve Banks and Branches:

Treasury C e r t i f i c a t e s of. Indebtedness Code Word

S e r i e s TD-1924 BEFOOLED " TD2-1924 BEFOOLING " TM-I925 BEFOREHAND

Treasury Notes Code Word

Se r i e s B-ig24 INGRATING " A-1925 INGREDIENT " B-I925 INGRESS " C-1925 INGRESSION " A-I926 INGULFS " B-I926 INHALE " A-I927 INHALERS

B-I927 INHALING


- 2 - x-Uicg

The above l i s t of code words w i l l be supplemented from time to time by add i t iona l words, necessary t o designate new issues of such Government ob l iga t ions , as wi th in c l a s s i f i e d , and per iod-i c a l l y announced by the Secretary of the Treasury.

I t i s a l so requested tha t the code words "BEFOOLED" to "BEFOREHAND", inc lus ive , and the code words "INGRATlNG" to "INHALING" inc lus ive , indica ted in t h i s l e t t e r , be added to t h e bottom of pages 24 and 125, r e spec t ive ly , of the new code book to fol low the supplemental code word "BEGET" on page 24 and the code word "INGRATE" on page 125-

Yours very t r u l y ,

Walter L. Eddy, Secre tary .

TO GOVERNORS OF ALL F. R. BANKS,


' <r> r)


ADDRE'SS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

Ju ly 12, igzk. X-Ulll

SUBJECT: Code words f o r use between the Federal Reserve Bank of New York and other Federal Reserve Banks in connection with c e r t a i n te legraphic t r ansac t ions in U. 3. Government Secur i t i e s*

Dear S i r :

In order to reduce the phraseology in telegrams between Federal Reserve Banks in connection with ce r t a i n t r ansac t ions in U, S* Government Secur i t i e s f o r account of the Treasury and the Open Market Investment Com-mit tee of the Federal Reserve System, i t has been suggested t h a t add i t iona l code words be supplied from the Federal Reserve Telegraphic Code,

The Board has approved t h i s suggestion, and e f f e c t i v e Ju ly 21st , the following code words w i l l be used between the Federal Reserve Bank of New York and other Federal Reserve Banks, covering the t r a n s a c t i o n s r e -f e r r e d t o :

"MIXEDLY" Treasury has author ized under date of (da te) the pur-chase of (amount and i s sue) Government s e c u r i t i e s a t not exceeding (p r i ce ) f o r account of (account) which w i l l have precedence over a l l orders for t h i s issue placed through Committee except out-standing Treasury orders* Please wire condit ion market in your d i s t r i c t f o r t h i s issue or issue# advising amount and p r i ce of any o f f e r i n g s made*

"MIXING" Reference exchange of wires regarding Treasury1s author-i z a t i o n to purchase Governments you a r e author ized to purchase (amount and i ssue) Government s e c u r i t i e s a t (p r i ce ) wibang d e t a i l s to Under Secretary of the Treasury and to us on day purchase i s made. Charge General Account Treasurer United States$>cancel se*» c u r i t i e s and forward to Washington on date of set t lement i n usual manner.

"MIXTURE" Reference exchange of wires regarding Treasury*s author-i z a t i o n to purchase Governments f o r (account) you a re author ized to purchase (amount and issue) Government s e c u r i t i e s a t (p r i ce )


- 2 - x - 4 i i l

advising us as purchases are made. Hold s e c u r i t i e s in safe-keeping uncancelled subject to order of Secretary of Treasury f o r t h i s account and charge New York bank with d e t a i l e d wire advice.

"MIZZEN" Reference exchange of wires regarding Treasury1s a u t h o r i z a t i o n to pur-chase Governments f o r (account) you a r e author ized to purchase (amount and i ssue) Government s e c u r i t i e s a t (p r i ce ) advis ing us as purchases are made, Hold se-c u r i t i e s uncancelled in safe-keeping subject to the order of Secretary of Treasury fo r t h i s account and charge Treasurer*s account in usual mannerw

"MIZZENMAST" United S ta tes Treasury order (account) dated (da te ) has been com-pleted* Please consider a l l au thor iza t ions thereunder cancel led and confirm by wire t o t a l amount purchased by you.

"MIZZLING" The new r a t i o of apport ioning Government s e c u r i t i e s and b i l l s pur-chased by the System based on the estimated def ic iency of earnings f o r the year as revised on the l a s t day of the previous month gives your bank jo r a t i o subject to f u r t h e r r ev i s ion monthly as changes occur in earning a s s e t s . Earnings and t ransac t ions w i l l be apportioned t h i s month on the new r a t i o . As purchases Governments since f i r s t of month aggregating $ have been temporari ly d i s -t r ibu ted on previous fo r a t i o an adjustment of Treasury notes «and $ c e r t i f i c a t e s i s necessary. Entr ies covering adjustment of Government s e c u r i t i e s w i l l be given under separate wire while bankers acceptances w i l l be ad-jus t ed through your p a r t i c i p a t i o n in f u t u r e purchases.

"MOANED" Referr ing a c t i o n Committee a t meeting May 29, 1924, au tho r i z ing temp-orary sales Government s e c u r i t i e s from Special Account to n e u t r a l i z e abnormal money conditions during quar te r ly tax periods under s u i t a b l e p lan f o r repurchase f o r Special Account, in handling these t ransac t ions the same procedure as out-l ined our wire June 14, 1924, w i l l be followed* We the re fo re c r ed i t you today . $ your p a r t i c i p a t i o n in „ Government s e c u r i t i e s sold under r e -purchase agreement from Special Investment Account to member banks today*

"MOANFUL" Refer r ing temporary sa les to member banks under repurchase agreement of Government s e c u r i t i e s held in System Account, have repurchased $ o r

system today# We charge you $ your p a r t i c i p a t i o n . Please c r ed i t u s ,

"MOANFTTLLY" Refer r ing temporary sa les to member banks under repurchase agreement of Government s e c u r i t i e s held in System Account of which $ -— ^ a v e ®en r e

purchased f o r System Account thus completing t r ansac t ion , we c red i t you o ay your share net earnings represen t ing accrued earnings l e s s cost a t

r a t e of fo per annum during the time s e c u r i t i e s were held by member a s<

"MOANING" Have arranged wi th Treasury f o r subscr ip t ion by rese rve banks to new issue to replace maturing issues held in Special Investment Account* i y ° u

there fore place s u b s c r i p t i o n f o r $_ represent ing y°^-r propor ion o new s e c u r i t i e s , advis ing Treasury tha t payment w i l l be made by $ —— ^ U r ^ n

c e r t i f i c a t e s and $ maturing no tes . Please wire us amount of Vov* allotment on t h i s exchange subscr ip t ion , a lso s e r i a l numbers to be used^ y York bank in forwarding to Washington maturing Governments held in Special


I ' r'*>er V I. J

- 3 - X-Ulil

Account. Upon advice from Washington of al lotment please request them to in s t ruc t us to make al lotment de l ivery new issue through C P U f o r your account which s e c u r i t i e s are t o be held in Special Account. Please charge Treasurer d i r e c t and c red i t New York f o r maturing par amounts and c red i t Treasurer and charge New York for new i s s u e . .

]

The code words ind ica ted should be inser ted in the Federal Re-serve Telegraphic Code a t the end of page 153» fol lowing the code word "MIXABLE".

Very t r u l y yours ,

J . C. Noell , Ass i s tan t Secre ta ry .

TO GOVERNORS OP ALL P . R . BATES




X-4112 Ju ly 11, 1924.

SUBJECT: EXPENSE MA.IN LINE, Leased Wire System, June, 1924.

Dear S i r :

Enclosed herewith you w i l l f i n d two mimeograph s t a t e -ments, X-Ull2-a and X-4ll2-b, covering in d e t a i l operat ions of the main l i n e , Leased Wire System, during the month of June, 1924.

Please' c red i t the amount payable by your bank in the general account, Treasurer , U, S. , on your books, and issue c/D Form 1, National Banks, fo r account of "Salar ies and Ex-penses, Federal Reserve Board, Special Fund", Leased Wire System, sending dup l ica te C/U to Federal Reserve Board,

Very t r u l y yours,

F i sca l Agent.

(Enclosures)

To Governors of a l l banks (except Chicago)


<L. ;w S

X-Ull2-a

PJCPORT SHOWING CLASSIFICATION!® NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JUNE, I92U.

Percent of Treasury War Fed. Res. Tota l Bank- Dept. Finance Corp,

From Bank Business Business(*) Business Business Total

Boston 35,361 3.09 7,747 -

New York 250.56S 21.92 15,452 —

Phi lade lphia 55,602 4.86 7,973 -

Cleveland 93,726 8.19 7,277 —

Richmond 73,559 6 .42 6,837 -

Atlan ta 75,194 6-57 6,335 -

Chicago 136,546 11.93 12,247 -

St . Louis 88,074 7.69 8,593 Minneapolis 50,629 4.42 5,092 —

Kansas City 85,948 7.51 7 , 6 l 4 -

Dallas 68,726 6.00 5,081 San Francisco 130,591 11.40 15,420 - *

TOTAL 1,144,924 100.00 106,173 -

Board 291,193 114,016 277

Total 1,436,117 220,189 277

Percent of Tota l 86.69$

Bank Business 1,436,117 words or SG.Jl'p Treasury Dept. 220.189 " " 11.29/o

TOTAL 1,656,306 " " 100. OOf.

13.29# ,02#

43,10s 266,420

63,575 101,003

80,396 82,029

*148,793 96,672 55,721 93,562 73,807

146,011

1,251,097

405,486

1,656,583

(*) These percentages used in c a l c u l a t i n g the pro r a t a share of l eased wire expenses a s shown on the accompanying s ta tement ( 4 l l 2 - b )

FEDERAL RESERVE BOARD, Washington, D. C.

Ju ly 11, 1924.


REPORT OF EXPENSE MAIN LINE

FEDERAL RESERVE LEASED WIRE SYSTEM JUNE, 1924.

X-4l l2-b

Pro Rata Payable to Share of Federal

Opera tors ' Operators ' Wire Total Total Reserve Name of Bank S a l a r i e s Overtime Rental Expense Expense Cred i t s Board

Boston $ 250.00 3 ; 2.00 $ 252.00 $ 670.49 $ 252.00 $ 418.49 New York 1,422.65 1,422.65 4,756.33

1,054.55 1,422.65 3,333-68

Phi l ade lph ia 200.00 200.00 4,756.33 1,054.55 200.00 854.55

CIeveland 440.00 44o.oo 1 , 777 . 11 440.00 1,337-11 Richmond 315.00 315.00 1,393.05 315.00 1,078.05 At lan ta 255.00 255.00 1,425.60 255.OO 1,170.60 Chicago (#)U,97S.3l 4,978.31 2,588.64 4,978.31 (*>2,389.67 S t . Loui s 251.00 251.00 1,668.62 251.00 1 ,417.62 Minneapolis 297.96 297.96 959-08 297.96 661.12 Kansas City 346.64 346.64 1,629.56 346.64 1,282-92 Dal las 251.00 251,00 1 ,301,92 251.00 1,050.92 San Francisco 38O.CO 38O.OO 2,473.64 380.00 2,093.64 Fed. Res. Board $17,013.85 17,013.35

TOTAL $9,387.56 $ 2,00 $17,013.S5$26,403 .41 $21,698.59 $9,389-56 $14 ,698.70 (a )4 .704 .82 W 2 . 1 8 9 . 6 7 $21,698.59 $12,309.03

(#) Includes s a l a r i e s of Washington ope ra to r s . (*) C r e d i t . ( a ) Received $4700/00 from the Treasury Dept. and $4.82 from

War Firanbe Corporation covering bus iness f o r the month of June, 1924. (&) Amount reimbursable to Chicago

FEDERAL RESERVE BOARD, Washington, D. C.

Ju ly 11, 1924.


* £29

X-4113 THE ASTIR Y DEPARTMENT

Off ice of the Secre tary WASHINGTON

J u l y 9, 1924.

The Governor Federal Reserve Board.

S i r :

You are hereby advised tha t the Department has r e f e r r e d to the Disbursing Clerk, Treasury Department, f o r payment, the account of the Bureau of Engraving and Pr in t ing f o r preparing Federal reserve notes during the per iod June 23 to June 30, 1924, amounting to $4,440. 00, as f o l l o w s , -

Federal Reserve Notes, Series 1914

| 5 | 1 0 £20 Total

Boston 32,000 3,000 7,000 42,000 New York 34,000 — — 34,000 Philadelphia 11,000 — — 11,000 Cleveland — 10,000 — 10,000 Chicago 11,000 — — 11,000 San Francisco 10,000 2,000 —. 12,000

96,000 15,000 7,000 120,000

120,000 sheets a t $37 per M . . . . . $4,440.00

The charges agains t the several Federal Reserve Banks a re as f o l l o w s , -

Compen- P la te Inc. Com- Total Sneets sa t ion P r in t ing Materials pensat ion

Boston 000 $ 882.00 $ 178. 50 $ 409. 50 $ 84.00 $ 1,554. 00 New York 000 714. 00 144. SO 331. 50 68. 00 1,258. 00 Philadelphia . . . • 11, 000 231. 00 46.75 107. 25 22. 00 407. 00 Cleveland . i o , 000 210.00 42. 50 97. 50 20.00 370. 00

. 11, 000 231,00 46,75 10?. 25 22. 00 40?. 00 San Francisco . 12, 000 252. 00 51.00 117. 00 24. 00 44<±. 00

120, 000 2, ,520. 00 $510. 00 $1,170.00 $240. 00 $4,44 0. 00

The Bureau appropr ia t ions w i l l be reimbursed in the above amount from tne i n d e f i n i t e appropr ia t ion "Preparat ion and Issue of Federal Reserve Notes, Re-imbursable" , and i t i s requested teat your board cause sucn i n d e f i n i t e appro-p r i a t i o n to be reimbursed i n l i k e amount.

Respec t fu l ly , S. R. Jacobs,

Deputy Commissioner.


F E D E R A L R E S E R V E B O A R D

STATEMENT FOR THE PRESS

For Immediate Release. Ju ly 1|), 1924. 4:30 o 'c lock . p . m . , X-4114

The Federal Reserve Board announces that the

Federal Reserve Bank of Dallas has reduced i t s rediscount

r a t e froip 4g^ to 4£ on a l l c l a s ses of paper of a l l ma-

t u r i t i e s , e f f e c t i v e immediately.


I C M FEDERAL RESERVE BOARD

WASHINGTON


X-U115

J u l y 16, 1924,

Sub jec t : Addi t ional holiday during J u l y .

Dear S i r :

Refe r r ing to the Board 's l e t t e r X-U097. concerning hol idays during Ju ly , we a re .now advised tha t the Federal Re-serve Bank of Dal las , together with i t s El Paso and Houston Branches, w i l l be closed on Saturday, Ju ly 26th, account P r i -mary E lec t ion Day.

Therefore , those o f f i c e s w i l l not p a r t i c i p a t e in e i t h e r the regu la r Gold Fund Clearing or the Federal Reserve Note Clearing of tha t da te , Ju ly 26th. Please include your c r e d i t s f o r July 26th with your c r e d i t s f o r July 23th f o r those o f f i c e s in your Gold Fund Clearing telegrams of J u l y 28th, and make no shipment of Dal las Federal Reserve Notes, f i t or u n f i t , to t h a t o f f i c e or to Washington, r e s p e c t i v e l y , on da te of ho l iday .

Kindly n o t i f y . Branches»


J . C. Noel l j Ass i s t an t Sec re t a ry .

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.


'• C-l 2 FEDERAL RESERVE BOARD

WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD , x-4n6

July 15, 1924,

SUBJECT: Increased cost of copies of r epor t s of examinations of National banks.

Dear S i r :

At the May, I92U Conference of Governors, cons idera t ion was given to a proposal of the Comptroller of the Currency to i n -crease from $4.50 to $10.00 the charge made by his o f f i c e f o r cop-ies of r epor t s of examinations of National banks fu rn i shed to Fed-e ra l reserve banks. The Conference terminated i t s d i scuss ion of 'the question with the understanding tha t the Comptroller would sub-mit h i s proposal to the Federal Reserve Board with a view to hav-ing some d e f i n i t e p lan agreed upon by the Board and not ice thereof forwarded to the reserve banks.

The Board, a t i t s meeting today, formally considered the Comptrol ler ' s proposal and adopted the following r e s o l u t i o n :

"Counsel having advised the Board tha t t he re i s no law requi r ing the Comptroller of the Currency to f u r n i s h copies of examination repor t s to Federal r e -serve banks and tha t Federal reserve bants may l awfu l ly purchase such copies from the Comptroller;

Be I t Resolved, tha t the Federal Reserve Board has no objec t ion to the purchase of such copies by Fed-e ra l r e se rve banks a t p r i ces to be agreed upon from time to time between the banks and the Comptroller ."

Very t r u ly yours,

Walter L. Eddy, Secre ta ry .

TO GOVERNORS OF ALL F. R. BANKS.


( C o p y )

X-4117

Supreme Court of Rhode Is land

M. P. No. 417

Herbert L. Carpenter, Atty. Gen.

v .

Aquidneck National Bank

O P I N I O N

S1EETLAND, C. J . The above e n t i t l e d proceeding i s an

information in the nature of quo warranto, prosecuted by the

Attorney General f o r and in behalf of the S t a t e . Therein the

Court i s informed tha t the defendant although p roh ib i t ed by

the laws of t h i s s t a t e has been and i s , by usurpat ion , exerc i s ing

the powers of an executor, and a lso has been and i s a c t i ng as

t r u s t e e , and in other f i d u c i a r y c a p a c i t i e s . The informant prays

that judgment be entered agains t the defendant excluding and

oust ing i t from the f u r t h e r exercise of such powers.

In i t s p lea the defendant admits tha t i t i s a c t i n g as

executor and as t r u s t e e as a l leged in the information; but s e t s

up tha t i t i s not ac t ing in contravention of the laws of t h i s

s t a t e ; because such laws authorize and permit the exerc ise of

s imi la r powers by t r u s t companies organized in the s t a t e , which

t r u s t companies compete with nat ional banks loca ted in the s t a t e .

For support of i t s p lea the defendant r e l i e s upon the provis ions

of the Federal Reserve Act of December 23, 1913, Sect ion I I ,


L <• ' ^ -9

- 2 - x-4117

sub-sect ion k, as amended September 26, lg iS , confer r ing upon

the Federal Reserve Board au thor i ty "To grant by spec ia l p e r -

mit to na t iona l banks applying t h e r e f o r , when not in contraven-

t i o n of S ta t e or l oca l law, the r igh t to ac t as t r u s t e e , execu-

t o r , admin i s t r a to r , r e g i s t r a r of stocks and bonds, guardian of

e s t a t e s , ass ignee , r ece ive r , committee of e s t a t e s of l u n a t i c s ,

or in any other f i d u c i a r y capacity in which S ta te banks, t r u s t

companies, or other corporat ions which come in to competition

with na t iona l banks a re permitted to act under the laws of the

Sta te in which the na t iona l bank i s l oca ted . Whenever the

laws of such S ta t e author ize or permit the exercise of any or

a l l of the foregoing powers by State banks, t r u s t companies, or

other corporat ions which compete with na t iona l banks, the grant -

ing to and the exerc ise of such powers by na t ional banks sha l l

not be deemed to be in contravention of S ta t e or l oca l law wi th-

i n the meaning of t h i s Ac t . "

The defendant shows tha t in conformity with the Federal Re- .

serve Act as amended i t has been granted by the Federal Reserve

Board the r i gh t to a c t , under the ru les of the board, as t r u s t e e ,

executor, adminis t ra tor or i n any other f i duc ia ry capaci ty i n

which t r u s t companies which come in to competition with i t a re pe r -

mit ted to ac t under the lc.ws of the S ta te of Rhode I s l a n d .

By the provis ions of the s t a t u t e s of t h i s s t a t e , now Chap-

t e r 271, General Laws 1923, a t r u s t company, e s t ab l i shed in


X-4H7

accordance with our laws and which has conformed to the regu-

l a t i o n s t he re in prescr ibed, i s empowered, among other t h ings ,

to accept and execute a l l t r u s t s committed to i t by any pe r -

son, corporat ion or court of t h i s s t a t e , or of the United S t a t e s ,

and to accept and execute the o f f i c e of executor, admin is t ra -

t o r , guardian of the e s t a t e and other o f f i c e s , i n the chapter

named, having s imi la r f i duc i a ry charac te r . Any court of p ro-

bate in t h i s s t a t e i s empowered in i t s d i s c r e t i o n to appoint

such a t r u s t company to e i t h e r of said o f f i c e s of t r u s t . The

power t o act in such f i d u c i a r y capacity i s not conferred by

our law upon a s t a t e bank, savings bank, or any other corporat ion

in t h i s , s t a t e ; and probate courts a re without j u r i s d i c t i o n under

our s t a t u t e s to appoint any corporation except such a t r u s t com-

pany to the o f f i c e s of executor, admin is t ra to r , guardian or the

l i k e .

Ihen a na t iona l bank has the permission of the Federal Re-

serve Board, Congress has conferred upon such bank au thor i ty to

ac t in a f i d u c i a r y capaci ty, and the au thor i ty to so ac t becomes

a pa r t of the corporate powers of the bank. Without quest ion

a na t iona l bank can exerc i se such corporate powers in t h i s

s t a t e when t h e i r exerc ise i s not in contravention of our do-

mestic law. Cer ta in of the corporate powers which Congress has

thus conferred ;upon na t iona l banks r e l a t e to t r u s t s which

a r i s e in connection with o f f i c e s requi r ing f o r t h e i r exerc i se the

appointment of a probate cour t . Save a s such t r u s t s we see no

reason t o quest ion tha t a na t iona l bank may exerc i se i n t h i s s t a t e


-4- x-4117

i t s corporate powers of a f iduc ia ry nature which i t has acquired

i n conformity with the act of Congress.

In Aquidneck Hational Bank Jennings , 44 R. I . 435, the

defendant here , in an attempt to place i t s e l f on a pa r i ty wi th

the t r u s t companies of the s t a t e , sought by irandarnus to compel

the s t a t e t r e a s u r e r to accept from i t United Sta tes bonds in a

c e r t a i n amount, to be held by the t r e a s u r e r as secur i ty f o r the

performance by the defendant of i t s du t i e s in a f i duc ia ry ca-

p a c i t y . The Federal Heserve Act provides tha t when the laws of

a s t a t e requi re tha t a t r u s t company of such s t a t e s h a l l deposit •

s e c u r i t i e s fo r the p ro tec t ion of t r u s t s held by tha t company,

na t iona l banks in such s t a t e sha l l be required to make s imi la r

deposit of s e c u r i t i e s f o r the pro tec t ion of p r iva t e and court

t r u s t s held by them in t h e i r f i duc ia ry capaci ty . In tha t

p e t i t i o n f o r mandamus, without passing upon the corporate powers

of t h i s defendant bank to ac t as a t r u s t e e in t h i s s t a t e , the

court denied the p e t i t i o n . The denial was p r i n c i p a l l y upon the

ground t h a t , without the sanct ion of the general assembly, noth-

ing in the Federal Reserve Act can be regarded as r egu la t ing or

extending the du t i e s of the t r easu re r as one of the general o f -

f i c e r s of the s t a t e , and tha t Congress can not give the na t iona l

banks in the s t a t e the r igh t to demand tha t the general t r e a s u r e r

sha l l perform f o r t h e i r b e n e f i t the same du t i es which, under our

lav/, he performs fo r t r u s t companies in t h i s s t a t e .

In Aauidneck Bank v. Jennings, supra, we have held t h a t


-r-5- X-U117

a na t iona l bank can not be admitted to an apparent s tanding

of equa l i ty wi th t r u s t companies. We can not say, however,

t h a t the exerc i se in t h i s s t a t e by the defendant bank of i t s

power to ac t in a f i duc ia ry capacity i s in contravention of our

s t a t e law, save as to the execution of those t r u s t s which a r i s e

in probate proceedings. In Aquidneck National Bank v . Jennings,

supra, we declared t ha t " the devolution of the e s t a t e s of de-

cedents , the control of the property of i n f a n t s and l u n a t i c s ,

the j u r i s d i c t i o n of our probate courts , and the l e g a l r egu la t ion

of the t r u s t s which aritss in the adminis t ra t ion of probate law

are mat ters which p e r t a i n exclusively to the powers of a s t a t e

over i t s domestic a f f a i r s . Under the s t a t e law no corporat ion

other than a t r u s t company, organised under the Bhode Is land

s t a t u t e , may be appointed executor, adminis t ra tor or guardian

by our probate court or may accept and execute the du t i e s of

such o f f i c e " * * * " In the absence of the express sanct ion of

the general assembly the appointment of a na t iona l bank t o execute

the t r u s t s which a r i s e in probate proceedings, or the attempted

execution of such t r u s t s by a nat ional bank, would be in cont ra-

vent ion of our s t a t e law." In the case before us now, where

the matter i s d i r e c t l y pe r t i nen t to the i ssues , we a r e s t i l l of

the same opinion. In conformity with i t s conclusion o f t e n s t a t ed ,

the Supreme. Court of the United S ta tes declared, in T i l t v . Kelsey,

207 U. S. 43, t ha t " in respect to the set t lement of the succession

to proper ty on death the s t a t e s of the union a re sovere ign . n Yonley


- 6 - X-4117

v . Lavender. 88 U. S. 2J6; United S ta tes v . Fox. U. S. J13*

In the Federal Reserve Act when f i r s t enacted i t was provided

tha t the Federal Reserve Board nay grant na t ional banks the r i g h t

to ac t as t r u s t e e s , executors, adminis t ra tors , guardians, e t c . ,

'•when not in contravent ion of s t a t e or l oca l law." This p rovis ion

s t i l l remains. In People v . Brady. 271 111*100. the court he ld

tha t au tho r i ty given "by the Federal Reserve Board to a na t iona l

bank to ac t as t r u s t e e or the personal r ep resen ta t ive of a de-

cedent was in contravention of the law of I l l i n o i s . In F i r s t Na-

t i ona l Bank v . Union Trust Co.. 244 U. S. 4l6, the Supreme Court ap-

peared to recognize the au thor i ty of the court of l a s t r e s o r t of a

s t a t e to construe the s t a t u t e s of such s t a t e and to determine

whether such au thor iza t ion did contravene the l o c a l law. Apparently

to meet t h i s s i t u a t i o n , in the i n t e r e s t of na t ional banks, Congress

in 1918 amended the Federal Reserve Act by passing the ext raordinary

amendment which became the l a s t sentence of t h a t por t ion of the ac t

quoted above as fo l lows: "Whenever the laws of such S t a t e author ize

or permit the exerc i se of any or a l l of the foregoing powers by

Sta te banks, t r u s t companies, or other corporat ions which compete

with na t iona l banks, the grant ing to and the exerc ise of such

powers by na t iona l banks s h a l l not be deemed to be in contravent ion

of s t a t e or l o c a l law wi th in the meaning of t h i s a c t . " Our s t a t u -

tory provis ions regu la t ing the j u r i s d i c t i o n of probate courts in

the i ssu ing of l e t t e r s testamentary and of admin i s t ra t ion , and i n


-7- x-Uiiy appointing

/guardians a r e not of doubtful i n t e r p r e t a t i o n . I t i s the

p r ac t i c e of the Federal Supreme Court to adopt the cons t ruc t ion

placed upon a s t a t e s t a t u t e by the court of l a s t r e so r t of t h a t

s t a t e . We f e l t confident that the United States Supreme Court

would not hold as v a l i d and cons t i t u t i ona l the amendment of

1918, which assumed a r b i t r a r i l y to place a l e g i s l a t i v e construc-

t i on upon s t a t u t e s of a s t a t e , regardless of t h e i r pos i t ive terms,

or the cons t ruc t ion placed upon them by the supreme court of

such s t a t e . In Aquidneck National Bank v . Jennings. supraT, we

said tha t "we do not admit the power of Congress to control t h i s

court in the cons t ruc t ion of the s t a t e laws of Rhode I s l a n d . "

I t appears that we were not j u s t i f i e d in our confidence as to

the pos i t i on which the supreme court would take in the mat te r .

In the recent case of S ta te of Missouri v- Duncan, opinion rendered

Apri l 28, 1924, the United States Supreme Court of Missouri, 257 S.W.

784, the Supreme Court of Missouri, in a c a r e fu l l y considered opin-

ion, held that under the probate law of t ha t s t a t e a na t iona l bank

having a ..permit from the Federal Reserve Board could not be ap-

pointed and act as executor, and tha t the exercise of such f i -

duciary func t ions i s "in contravention of the law of Missouri , t he

l e g i s l a t i v e pol icy and the express s t a t u t e . " The court f u r t h e r

held in r e l a t i o n to the amendment of I 9 I S , t h a t : " I t cannot be

contended that Congress by t h i s amendment took away from the

courts of a s t a t e the r i gh t to i n t e r p r e t i t s own s t a t u t e s and to


- 8 - X-4117

determine t h i s p a r t i c u l a r ques t ion." Upon review in the United

S ta tes Supreme Court i t was held , in a major i ty opinion, tha t

notwithstanding the provis ions of the probate law of Missouri

a na t iona l bank having a permit from the Federal Reserve Board

may ac t as an executor if s t a t e t r u s t companies competing wi th

i t have-that power, and t h a t "the s t a t e can not lay hold of

i t s general control of adminis t ra t ion to deprive na t iona l

banks of t h e i r power to compete tha t Congress i s author ized to

s u s t a i n . " From the major i ty opinion Mr, J u s t i c e Sutherland

and Mr. J u s t i c e McReynolds d i ssen ted . The vigorous opinion of

Mr. J u s t i c e Sutherland, based upon the former decis ions of

the Supreme Court, and the j u s t r e l a t i o n which e x i s t s under the

cons t i t u t i on between the powers of Congress and those of the

s t a t e a u t h o r i t i e s in matters of loca l concern, appears to us

to be eminently sound and convincing. In conclusion he says,

"The probate courts of a s t a t e have only such powers as the

s t a t e l e g i s l a t u r e gives them. They are wholly beyond the j u r i s -

d i c t i o n of Congress, and i t does not seem to me to be wi th in

the competency of t h a t body, on any p re t ex t , to compel such

cour ts to appoint as ' executor or adminis t ra tor one whom the

s t a t e law has declared sha l l not be appointed, The p a r t i c u l a r

invasion here sanctioned n^y not be of great moment; but i t i s

a precedent , which, if car r ied to the l o g i c a l extreme, would go

f a r towards reducing the S ta t e s of the Union to the s t a t u s of

mere geographical subdiv i s ions . The case i s one, to use the

phrase of Mr. J u s t i c e Brewer in Fairbank v . United S t a t e s . 181


- 9 - x - 4 1 1 7

U. S. 283, 291-2, f o r the app l ica t ion of the maxim obsta p r i n -

c i p i i s . not de_ minimia non curat l e x . "

The f i n a l determination of the cons t i t u t iona l v a l i d i t y of

congressional ac t ion i s in the Federal Supreme Court, The matter

presented here i s in a l l respec ts i d e n t i c a l with tha t before

the Supreme Court of Missouri and the United Sta tes Supreme

Court in the cases we have j u s t considered. In the case before

us we are constrained to be governed by the major i ty opinion in

S ta te of Missouri v . Duncan, supra. Therefore our deter initia-

t i o n i s tha t the defendant should not be ousted from the f u r t h e r

exercise of the power a l leged in the information.

Judgment i s entered f o r the defendant .


C. f'Cc'

( C o p y ) X-1+11S

The Commonweal tb-At1ant i c National Bank of ) Boston, P e t i t i o n e r , )

The F i r s t National Bank of Boston, P e t i t i o n e r

Supreme vU&ifcial C'.-urt of Massachusetts.

)

Middlesex. Essex- Argued December 14, 1923. Opinion f i l e d June 14, 1924.

Present : RUGG, C.J. , BRALEY, CBOSBY, PIERCE ,& CARROLL, J J .

PROBATE COURT, J u r i s d i c t i o n . WILL, I d e n t i t y of corporat ion des ig -nated as executor. TRUST COMPANY. NATIONAL BANK. EXECUTOR AND ADMINISTRATOR.

Appeal by the p e t i t i o n e r , The Commonwealth-Atlantic National Bank of Boston, from a decree, entered in the Probate Court for the county of Middlesex, by order of LEG-GAT, J . , dismissing a p e t i t i o n f o r proof of the w i l l of Edward E. Parks, l a t e of Belmont, and t&e appointment of the p e t i t i o n e r and the widow of the t e s t a t o r as executors; also a r e se rva t i on and repor t by WHITE, J . , of a p e t i t i o n by The F i r s t National Bank of Boston for the proof of the wi l l of B. Parker Babbidge, l a t e of Salem, and the appointment of the p e t i t i o n e r as executor.

RUGG, C. J . These two cases present the same fundamental ques t ion . Each i s a p e t i t i o n , by a na t iona l banking as soc ia t ion possess ing a spec ia l permit to act as executor of w i l l s uni er Act of Sept ember 26, 1918, c . 177, Sec. 2, 40 U.S. S t s . at Large, 967, amending c. 6, Sec. 11 (k) of the Federal Reserve Act of December 33, 1913) 38 U. S. S t s . a t Large, 262, f o r 1he proof of a wil l of a deceased res iden t of t h i s Commonwealth and the issuance of l e t t e r s testamentary to i t , where in the instrument offered f o r probate as the w i l l there was named as executor a then ex is t ing Massachusetts t r u s t company which l a t e r than the date of the said instrument became converted in to a nat ional bank under the provis ions of Rev. S ts . of U. S. See* 515*+, and t he rea f t e r consolidated with another nat ional bank under the char te r of su&t other national bank with the approval of the comptroller of the currency, i n t o one nat ional banking assoc ia t ion , in conformity with Act of Congress of November 7, 1918, c . 209, ^0 U. B. S t s . a t Large, 1043, such consolidated nat ional banking as soc ia t ion being the p e t i t i o n e r - In one case t i e na t ional bank in to which the t r u s t company was converted was granted a specia l permit under the na t iona l bank law to ac t as executor before i t s consol ida t ion with the other na t ional bank, and i n the other case i t was n o t . We do not regard tha t f ac to r as of s ign i f i cance i n t h i s connection. The ques t ion i s , whether such nat ional bank i s e n t i t l e d to the issuance of l e t t e r s testamentary to i t as the person named as executor in the w i l l , although the t e s t a t o r named as h i s executor a S t a t e t r u s t company, which t h e r e a f t e r became converted in to a nat ional bank and s t i l l l a t e r e f fec ted a conso l ida t ion with the p e t i t i o n e r under i t s cha r t e r -

A t rust company organized under the laws of t h i s Commonwealth may be


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appointed executor of a w i l l "under the same circumstances, in the same manner and s u b j e c t to the same control by the cou r t having j u r i s d i c t i o n of the same as a . l e g a l l y qua l i f i ed ind iv idua l . " G.L, c . 172, Sec . . 52- There i s no s t a t u t e of th i s Commonwealth touching the appointment of a nat ional bank as executor. By v i r t u e of Act of September 26, 1918, c- 177, .See^ * 2, 40 U. S. S t s . a t Large, 9&7, amending the Federal Reserve Act of December 23, 1913, 38 U. S. S t s . a t Large, 262, c . 6, _,:Sec» 11 (k) , as in te rp re ted by F i r s t National Bank of Bay City v» Fellows, 244 U. S. 4 l6 , ard S ta te of Missouri v. Dure an, 266 U. S. , decided April 28, 1924, the oourts of th i s Common-wealth are requi red to appoint nat ional banks a s executors upon the ssrae con-d i t ions as they would appoint t r u s t companies organized under the laws of t h i s Commonwealth. Of course we accept , as we are bound to accept , tha t p r i n c i p l e i n a l l i t s amplitude and with a l l i t s implicat ions. That p r i n c i p l e does not reach to the f a c t s here presented. I t seems to us to have no cont ro l l ing e f f e c t on the p r inc ip l e on which the cases 31 bar ought to be decided /

Express and deta i led provis ion i s made by U- S. Rev- S t s . ;Sec. 5154, for the conversion of a State bank in to a na t ional banking a s s o c i a t i o n . There has been compliance with a l l provisions of t h a t act . and the issuance of the c e r t i f i c a t e to tha t e f f e c t by the comptroller of the currency in each case . There i s now no provis ion in our s t a t u t e s , such as formerly ex i s t ed , author-iz ing a Sta te bank or t r u s t company to become converted into a na t ional bank. Our e a r l i e r s t a t u t e s on tha t subjec t were repealed by Pub. S t s . c . 224. That i s not a decis ive consideration- We a t t r i b u t e no weight to i t because in Caeey v- G a l l i . 94 U'. S. 673, i t was said a t 678 tha t "No a u f i o r i t y from the Sta te was necessary to enable the bank so to change i t s organizat ion- The option to do t h a t was given by the f o r t y - f o u r t h sec t ion of the Banking Act of Congress, 13 S t a t . 112. The power there conferred was ample, and i t s v a l i d i t y cannot be doubted. The act is s i l e n t as to any assent or permission by the State- I t was as competent fo r Congress to author ize the t ransmutat ion as to c rea te such i n s t i t u t i o n s o r i g i n a l l y . " That propos i t ion must be regarded as se t t l ed and c o n t r o l l i n g in a l l cases to which i t i s app l icab le .

I t i s provided by U. S. Rev. S t s . Sefc. - 5154, as amend ed by the Act of December 23, 1913, c- b, ge"C-. 8 , 38 U- S. Sts . at Large, 258, 259, tha t upon the conversion of the S ta te bank into the na t iona l bank, the l a t t e r "shall have the same powers and p r i v i l e g e s , and shall be subject to the same d u t i e s , l i a b i l i t i e s , and r e g u l a t i o n s , in a l l r e spec t s , as sha l l have been prescribed by the Federal Reserve Act and by the nat ional banking Act fo r associa t ions o r ig ina l ly organized as nat ional banking a s soc i a t i ons . "

The force and e f f e c t of the federa l s t a t u t e s concerning t he conversion of a State bank in to a nat ional bank have been adjudged i n several cases . I t was held in At lan t i c National Bank v. Har r i s , 118 Mass. 147, an ac t ion of contract on a claim running to a Sta te bank which had been converted in to the p l a i n t i f f nat ional bank, tha t the completion of the conversion without f u r t h e r act ion ca r r i ed to the nat ional bank by operat ion of law the r i $ i t to a l l the proper ty , and the assignment and t r ans f e r of a l l personal property and r i g h t s of ac t ion and the l i a b i l i t y to pay a l l debts of the S ta te bank. The case of Metropolitan National Bank v . Clagge t t , l 4 l U» S. 530, was an ac t ion brought on b i l l s issued by a Sta te bank agains t the nat ional bank i n t o which i t had been converted, The ac t ion was in the nature of a con t rac t . I t was held at the change or conversion did not c lose t h e business of banking by the Sta te


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i n s t i t u t i o n , "nor des t roy i t s i d e n t i t y or i t s corporate exis tence , "but simply resu l ted i n a <D n t inua t ion of the same body with the same o f f i c e r s and s tock-ho lders , the same proper ty , asse t s and tanking business under a changed j u r i s -d ic t ion ; that i t remained one and the same bank and went on doing business un in te r rup ted ly . " In Michigan Insurance Bank v. Eld red. IU3 U. S, 293> act ion was brought on a judgment- With r e fe rence t o the e f f e c t of the con-vers ion i t was said t h a t the Sta te bank had "become a nat ional bank and i t s name had been changed accordingly without a f f e c t i n g i t s i d e n t i t y or i t s r i g h t to sue upon obl iga t ions or l i a b i l i t i e s incurred to i t by i t s former name."

The e f f e c t of fee consol idat ion of t.ro nat ional banks i s s t a t ed in Act of Congress of November 7> 1918, c- 209> :Sec- 2, 40 U. S. S t s . a t Large, 104-3, in these words: "And a l l t he r i g h t s , f r a n c h i s e s , and i n t e r e s t s of t h e . said national bank so consolidated in and to every species of property , personal and mixed, and choses in ac t ion thereto belonging, s h a l l be deemed to be t ransfer red to and v e s t 3d in such nat ional bank in to which i t i s con-solidated without any deed or other t r a n s f e r , and the said consolidated na t ional bank shall hold and enjoy the same and a l l r i g h t s of proper ty , f r a n -chises , and i n t e r e s t s in t h e same manner and to the same extent a s was held and enjoyed by the nat ional bank so consolidated therewi th ." So far as we are aware there has been no i n t e r p r e t a t i o n of t h i s s t a t u t e by the Supreme Court of the United S ta tes - We do not regard i t necessary fo r the purposes of t h i s case to make a c r i t i c a l ana lys i s of the meaning of t h i s s t a t u t e . I t may be assumed t h a t i t s purpose was to continue the i d e n t i t y of the old bank in the bank in to which i t i s consol idated. See Propr ie tors of Locks & Canals v- Boston & Maine Rai l road , 245 Mass. 52, 58, 59 and cases the re co l l ec t ed , City National Bank v. Phelps. 97 N. Y. 44, Matter of Ber gdorf , 206 N. Y- 309 > Chicago T i t l e & Trust Co - v . Z ins er , 264 111. 31. Chicago T i t l e & Trust Co. v . Doyle. 259 111- 4g§, Coffey v . National Bank of S ta te of Missouri , 46 Mo - l 4o .

The record does not d i s c lo se to what extent the r e spons ib l e management , the d i r e c t o r s and execut ive o f f i c e r s of e i the r of the o r ig ina l t r u s t companies i s continued in the p e t i t i o n i n g na t ional bank. The c a p i t a l s tock of each pe t i t i one r is l a r g e l y i n excess of t h a t of the or ig ina l t r u s t company. In-ferences of important changes in executive control mi g i t be warranted by t h i s f a c t . This circumstance is not regarded 3s dec i s i ve .

The naming of the t r u s t company as executor in the w i l l was not a th ing which, under the terms of the several s t a t u t e s , passed as proper ty or an asse t when the t r u s t company was converted in to a na t ional bank or when tha t bank was consolidated in to the p e t i t i o n e r . The des igna t ion in a wi l l of one as executor does not confer a proper ty r i gh t upon the person so des ig -nated. However precious may be the mark of confidence bestowed by such nomi-nat ion , i t does not anount to p roper ty . There i s nothing tangible about i t . Nothing ves t s in a person so nominated by the mere execution of t h e w i l l . I t can stand on no f i rmer ground than a devise or bequest in the wi l l of a l i v i n g person- The wi l l i s ambulatory and may be charged, revoked or canceled by t h e maker a t any time during h i s l i f e . Even under the s t r i c t r u l e s of the common law as to the d i s q u a l i f i c a t i o n of witnesses on the ground of i n t e r e s t , i t was held t h a t an executor who was not a l ega tee misfit be a witness to prove the execution of the w i l l and the sani ty of the t e s t a t o r - He only became d i squa l i f i ed by accepting the t r u s t and thus rendering himself l i a b l e under the s t a t u t e t o the p o s s i b i l i t y of cos ts . Sears v . Dillingham, 12 Mass. 358, 360. ffyman v. Symmes. 10 Allen, 153* Those decis ions a r e at variance


X-4l 18

with the idea of a proper ty i n t e r e s t of any nature a r i s ing from a designat ion as executor. Persons executing a t r u s t of th i s cha rac te r have been held to have no such i n t e r e s t in the emoluments l i k e l y t o flow from t h e i r con-tinued adminis t ra t ion of the t r u s t as to c o n s t i t u t e them on that ground persons "aggrieved" by an order te rminat ing the t r u s t fo r reasons not con-nacted with t h e i r wrongdoing. Ensign v. Faxon, 224 Mass, 1U5, 150. Hayden v . Keown. 232 Mass, 259.

The s i t u a t i o n i s that a t r u s t company organized under the laws of th i s Commonwealth was named 3 s h i s executor by a man in executing h i s wi l l* That t r u s t company became converted f i r s t in to a na t iona l bank organized under the laws of the United States and then that na t ional bank consolidated into another na t ional bank under other laws of #ie United S ta tes . That l a s t bank p e t i t i o n s for appointment of executor of t h e w i l l of the man, who in the meantime has died* There i s no exp l i c i t provision i n any of the governing s t a t u t e s to the p r ec i s e e f f e c t t h a t the converted or consolidated nat ional bank sha l l succeed to a l l the p r i v i l ege s and r i g h t s with respect to unproved wi l l s which any of i t s predecessors named as executors may have had. Since testamentary r i g h t s a re derived from l e g i s l a t i o n , the argument would be strong tha t a s t a t u t e of t h a t kind by a l e g i s l a t i v e body of competent j u r i s -d i c t i on would be e f f e c t i v e . That question i s not presented on t h i s record. No such l e g i s l a t i o n e x i s t s in t h i s Commonweal th» There i s no s t a t u t e vhich by f ? i r implicat ion covers such a s i t u a t i o n . The t e s t a t o r in h i s w i l l named a t r u s t company organized under the laws of t h i s Commonwealth to act as his executor* Af te r he is dead a corporation under a d i f f e r e n t name organized under the laws of the United Sta tes comes forward aid contends tha t i t i s en t i t l ed to appointment as executor because of the nomination of the t e s t a t o r . Confessedly i t i s not named in the w i l l . That contention is grounded on the propos i t ion that the l a s t corporat ion i s the same in the eye of t h e law as the corporation named as executor in the w i l l , though bearing now a d i f -f e r e n t des ignat ion. For many purposes the new corpora t ion i s the successor of the old and continues i t s bus iness i den t i t y -

There a r e fundamental d i s t i n c t i o n s between a t r u s t company organized under the laws of t h i s Commonwealth and a na t ional bank organized under the ac ts of Congress wi th respec t to being executor .

They are organized under the laws of d i f f e r e n t j u r i s d i c t i o n s . They owe a l leg iance to d i f f e r e n t sove re ign t i e s . They are con t ro l l ed by d i f f e r e n t laws-

Trust companies a r e governed in r e spec t to t h e i r adminis t ra t ion of t r u s t s , including what they may do &s executors , by G* L. c. 172, See. 4g to 59, both inc lus ive , In reviewing these sec t ions i t m i l be convenient to consider executors and t r u s t e e s together, since the same p r inc ip l e s govern and in one of the w i l l s here involved the t r u s t company was named as t r u s t e e as well as executor»

A t r u s t company may be appointed executor or t r u s t e e "subject to the same control by the court having j u r i s d i c t i o n of the same , as a l e g a l l y qua l i f i ed i nd iv idua l . " There i s no s imi lar p rov i s ion in the a c t s of Congress on t h i s s u b j e c t . We do not pause to d i scuss whether a nat ional bank once appointed executor can be made so sub jec t i n every pa r t i cu l a r* That quest ion may sometime requi re d i s cus s ion .

There are in G. L* c» 172, » 49 to 59> s p e c i f i c l i m i t a t i o n s and d e f i n i t e d i r ec t i ons a s to the investment, care and s e c u r i t y of funds so held


X-UllS

"by a t r u s t company. There is express provision that i t may invest such funds "in the same way, to the same ax ten t , and under the same r e s t r i c t i o n s as an individual" in a l i k e pos i t i on . TS*c. 53- These r u l e s a re f a i r l y well s e t -t led for t h i s Commonwealth- Harvard College v . Amcry, 9 Pick . 446. Kimball v . Whitney, 233 Mass. 321, 331. I t i s matter of common knowledge tha t d i f -f e ren t ru les ex i s t in other j u r i s d i c t i o n s . What r u l e s may be ad opted with r e -spect to nat ional banks cannot be fo re to ld with ce r t a in ty - Although i t may be that , when appointed by our cour ts t o ' t r u s t pos i t i ons , net ional banks may be held t.c the same degree of r e s p o n s i b i l i t y as our individual executors , there i s now no provis ion on t h i s subjec t in the a c t s of Congress. How f a r the j u r i s d i c t i o n of Congress over t h i s subject by f u t u r e enactments maybe held to extend i s wholly problemat ica l .

I t i s provided in .c5—>c5^ that money, proper ty or s e c u r i t i e s received by a t rus t company in a t r u s t capacity sha l l be "a special depos i t " ard the accounts kept s epa ra t e . "Such funds and the investments or loans thereof sha l l be spec i a l l y appropriated to the securi ty and payment of such depos i t s , shal l not be mingled with the investments of c a p i t a l stock or other money or property belonging to such corporat ion* or be l i a b l e for the debts or o b l i -gations the reof . " Similar previs ions in Sac.* 6 l , b2, as to investments in savings departments of t rus t companies have oeen in terpre ted so as to be a genuine protect ion to such spec ia l depos i t s - Commissioner of Banks v . Cos -mopolitan Trust Co- 24o Mass. 2^4• Commissioner of Banks i n r e Prudent ial Trusyb Co • 240 Mass. 478 - I t is provided in Act of December 23, 1913 > c. 6, Sac. 11 (k) , 38 U. S. Sts . a t Large, 262, that na t ional banks " sha l l seg-regate a l l a s s e t s held in any f iduc ia ry capacity from the general a s se t s of the bank « . 5"unds - - . held in t r u s t by the bank awaiting investment sha l l be carr ied in a s e p a r a t e account and shal l not be used by the bank i n the con-duct of i t s business unless i t s h a l l f i r s t se t as ide in the t r u s t department United States bonds or other s e c u r i t i e s approved by the Federal Reserve Board." We do not know how t h i s provis ion may be i n t e r p r e t e d . I t s only s ign i f i cance in t h i s connection is t h a t i t i s mate r ia l ly d i f f e r e n t from the governing s t a t u t e of t h i s Commonwealth r e s p e c t i n g t rus t companies.

By G- L. c. 172 Sac. the capital stock of a t r u s t company "with the l i a b i l i t y of the b lockholders thereunder sha l l be held as secur i ty for the f a i t h f u l performance" of the t r u s t of executor or t rus tee - Similar provis ions Sec. 63, for the p ro tec t ion of deposi ts i n savings departments of t r u s t cun1j.,3mes have been found to be a genuine secur i ty in case of l i q u i d a t i o n of a t r u s t company. Commissioner of Banks in re Prudent ial Trust Co. 244 Mass. 64. There is no provisi 'em3imilar to t h i s in the f e d e r a l s t a t u t e s . There i s , however, a clause in SOG. 11 (k) to the e f f e c t tha t , i n the event of f a i l u r e of a bank, "the owners of funds held in t r u s t f o r investment sha l l have a l i en on bonds or other s e c u r i t i e s so se t apar t (under the clause l a s t quoted from tha t sec t ion as condi t ion for us ing t r u s t funds i n i t s business) in ad-d i t i o n to t h e i r claim agains t the e s t a t e of t h e bank."

We do not undertake to determine #1 e ther the s t a t u t e s of t h i s Common-wealth or t i e f ede ra l s t a t u t e s a f f o r d greater secur i ty in these p a r t i c u l a r s to the e s t a t e of a t e s t a t o r and i t s b e n e f i c i a r i e s . The relevancy of t h i s com-para t ive review of t h e i r several provisions i s that the s t a t u t e s d i f f e r i n es-s en t i a l aspects one from the o the r .

The superv is ion of a nat ional bank and i t s per iodic examinations are under the general d i r e c t i o n of t h e comptroller of the currency under powers


4 V | ' I'rr PH • X,.: %

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conferred and mandates imposed by Congress . See Rev. S t s . of U, g? Sec. 5240 as amended by Act of December 23 , 1913, c- 6, Sec. 21, 33 U. ' s / t i t s . a t Large, 271* The supervis ion of t r u s t companies i s vested i n the com-missioner of^banks under G. L, c- 167> Soc. 1 t o 11, both i nc lu s ive . These provis ions of the s t a t u t e s in the two j u r i s d i c t i o n s a re divergent in im-por tant ways -

The l i qu ida t i on of a na t iona l bank in case of fa : lu re under the federa l laws i s d i f f e r e n t in mate r i a l p a r t i c u l a r s from that of a t r u s t company under the s t a t u t e s of t h i s Commonwealth. Compar9 Rev. Sts - of U. S. S*c. 5234 to 5242, and ac ts in amendment and in a d d i t i o n , with G- L. c. l b / , 2 2 to 3b.

By G. L. c, 192 Soc. 4, when a wi l l has been proved and allowed, "the prooate cour t s h a l l i^sue l e t t e r s thereon to the executor named t he r e in . . . . " Our law has held with some s t r i c t n e s s tha t the person ac tua l ly named as executor i s the one to serve- The prov inc ia l and common law p r a c t i c e of making the executor of a deceased executor the executor of the f i r s t t e s t a t o r was ear ly changed. Davis, p e t i t i o n e r . 237 Mass. 47 , 49• The only ground on which the p e t i t i o n e r in each of these cases can seek proof of the wi l l and appointment as executor is tha t i t i s designated in the m i l as executor-Nomination of a person to act as h i s executor by one making h i s .will imports signal t r u s t and confidence in the p a r t i c u l a r person so named. Such .nominations with respect to na tu r a l persons as rretter of common knowledge are inser ted i n a wi l l because the one executing t h e wi l l reposes spec ia l r e l i a n c e upon the individual i n t e g r i t y , s a g a c i t y , capac i ty , good f a i t h , f r i e n d l i n e s s and sympathy with t es tamenta ry wishes on the pa r t of the s p e c i f i e d person- A t r u s t company or bank, although a corpora t ion , i s not i n t h i s r e spec t u t t e r l y im-personal . One making h i s wi l l well may be thought to have a p re fe rence be-tween such i n s t i t u t i o n s as to the one to car ry out h i s tes tamentary d e s i r e s . One naming a corporat ion to act 3s executor or t r u s t e e cannot rejLy ' upon continuance of the same management - Capital s tock may change hands. Of f i ce r s may die or be dismissed and others of widely varying c h a r a c t e r i s t i c s and temperaments be s u b s t i t u t e d . Po l i c i e s may be a l t e r e d . Reputat ion may f l u c t u a t e - All these and l i k e hazards must be taken by a person who nominates a corpora t ion a s h i s executor or t r u s t e e - These f a c t o r s do not c o n s t i t u t e a change in the l ega l person , however much they may a f f e c t the a c t u a l character of the i n s t i t u t i o n . I t p i s t be recognized, a l s o , tha t s i g n i f i c a n t modif icat ions may be wrought by the law governing or a f f e c t i n g a corpora t ion without i n t e r r u p t i n g i t s continued i d e n t i t y - P r o p r i e t o r s of Locks & Canals v . Boston & Maine Ra i l road , 24$ Mass. 52, 59- The p e t i t i o n e r i n each of the cases a t bar fo r most, perhaps fo r a l l , bus iness purposes under t i e a u t h o r i t y of decis ions already c i t ed , i s i d e n t i c a l with the t r u s t company of whose property and a s se t s i t has become possessed. Nevertheless, i t seems to us t h a t , with regard to be ing executor of the w i l l of a person who named the t r u s t company organized under the laws of t h i s Commonwealth, the p e t i t i o n e r cannot r i g h t l y be t reated as the person so named i n the w i l l . The p e t i t i o n e r i s a na t iona l bank and not a t r u s t company. The p e t i t i o n e r in each case i s not the person ac tua l ly named as executor in the w i l l . I t possesses powers d i f f e r e n t from those possessed by the person so named. I t i s governed by laws un l ike those con t ro l l i ng the kind of corpora t ion named i n t h e w i l l . I t is created by and the s u b j e c t of a d i f f e r e n t sove re ign ty . The p e t i t i o n e r is not governed


- 7 - X-411S

by tiie pol icy of t h i s Commonwealtb as t o i t s corporate powers, du t ies and r e s p o n s i b i l i t i e s . Those a re and must <Dntinue to be delimited by a l e g i s -l a t i v e body over which t h i s Commonwealth has no j u r i s d i c t i o n . The duty of courts commonly i s to c a r r y out tjtie purposes of t e s t a t o r s as expressed i n t h e i r w i l l s . This p r i n c i p l e app l ies to the appointmeit of executors .

All these cons ide ra t ions lead to the conclusion t h a t the p e t i t i o n e r i s not hhe "executor named" wi th in the meaning of those words i n G. L. c . 192, Soo. 4, in the instrument o f fe red f o r probate as the l a s t w i l l of each decedent

In The Commonwealth-Atlantic National Bank of Boston, p e t i t i o n e r , the decree dismissing fee p e t i t i o n i s a f f i rmed , In The F i r s t National Bank of Boston, p e t i t i o n e r , a decree may be entered d ismiss ing the p e t i t i o n .

So ordered.

J- W. Worthen & S. C. Rand, (S. B. Ecker with them,) for The Cornnon-weal th-Atlant ic Nati o ra l Bank of Boston.

C. L. Fsvinger , fo r The F i r s t National Bank of Boston.


y FEDERAL RESERVE BOARD :> WASHINGTON


July 17, 192U-X-4l20

SUBJECT: Volunt ary Services*

Bear Sir :

The Federal Reserve Board has 1given cons idera t ion to and approves of the recommendations contained i n the Re-por t of the Committee on Voluntary Services assumed by the Federal reserve banks, as submitted to the Board following the l a s t Governors' Conference, the r e p o r t in question cov-e r ing only the following se rv i ce s : Currency and Coin Opera-t i o n s , Safe keeping of S e c u r i t i e s , and Transfers of Funds.


Walter L, Eddy, Secre ta ry .

TO GOVERNORS OF F. R. BiNRS


FEDERAL RESERVE BOARD C O

WASHINGTON


X-4121 Ju ly IS, 1924.

SUBJECT: Bank Holidays during August, 1924.

Dear S i t :

For your information, the following Federal Reserve Banks and Branc%s# wi l l be closed on dates spec i f i ed during August, 1924, account hol idays:

Friday

Tuesday

Aug. 1

Aug. 5

Thursday Aug. 7

Denver

St . Louis Kansas City Oklahoma City

Memphis Nashville )

Colorado Day

Primary Elec t ion

Sta te E lec t ion

Therefore, on the dates indicated, the banks a f f e c t e d w i l l not p a r t i c i p a t e in e i t h e r the regular Gold Fund Clearing or the Federal Reserve Note Clearing.

Please include your c r ed i t s f o r the banks a f f e c t e d on each of the holidays with your c r ed i t s fo r the fol lowing business day in your Gold Fund Clearing telegrams, and make no shipments of Federal Reserve Notes, f i t or u n f i t , t o Head Of-f i c e or to Washington, respec t ive ly , on the hol idays mentioned.

Kindly n o t i f y Branches.


J . C. Noell, Assis tant Secretary,

To Governors of a l l F. R. Banks




X-U122

Ju ly IS, 1924,

SUBJECT: Observance of Holidays.

Dear Sir:

There i s enclosed herewith for your information and guidance copy of an opinion rendered by the General Counsel of the Federal Reserve Board, and formally concurred in by the Board, to the e f f e c t that a Federal reserve bank may not lawful ly close and suspend a l l banking operations on any day unless such day i s a legal holiday throughout i t s Federal reserve d i s t r i c t .

By direct ion of the Federal Reserve Board.

Very truly yours,

J . C. Noell , Assistant Secretary.

Enc.

TO THE GOVERNORS AND CHAIRMEN OF AIL F. R. BANKS.


X—4l22—a

SUBJECT: Holidays of Federal Reserve Banks.

Questions have a r i s e n involving the observance by Federal reserve banks of l o c a l , S ta te , or na t ional hol idays and t h i s o f f i c e has been asked to prepare a memorandum discuss ing the r igh t of Federal reserve banks to close on such days.

In my opinion a Federal reserve bank may not l awfu l ly close and sus-pend a l l banking operat ions on any day unless such day i s a legal holiday throughout i t s Federal reserve d i s t r i c t . My. reasons f o r t h i s conclusion w i l l be s ta ted below.

I t may be argued tha t i f there i s a lega l holiday i n the S t a t e in which a Federal reserve bank i s loca ted , the Federal reserve bank need not t r ansac t any business on tha t day and wi l l not be held responsible f o r f a i l u r e to t ransac t bus iness . This argument i s based on the general ly es tab l i shed p r in -ciple that the laws of a State operate on Federal corporat ions doing business the re in in the same way tha t they operate upon other persons and corporat ions within the S ta te , unless such laws ( l ) a r e in c o n f l i c t with ac t s of Congress regula t ing the Federal corporat ions , (2) f r u s t r a t e the purpose f o r which the corporation was created, or (3) d iscr iminate against Federal corpora t ions . There i s no provis ion of Federal lav/ deal ing with Federal reserve bank h o l i -days with which a S ta te s t a t u t e declar ing a Sta te holiday might c o n f l i c t and i t can hardly be sa id tha t such a s t a t u t e would f r u s t r a t e the purpose f o r which Federal reserve banks a re created, since observance of a hol iday i s not compulsory and fo r t h i s reason the s t a t u t e would not preclude Federal r e -serve banks from serving member banks in other S ta tes of t he i r respec t ive d i s -t r i c t s . I t is obvious a l so tha t a s t a t u t e declar ing a S ta te holiday would not discr iminate against Federal reserve banks. The above argument appears to be sound in so f a r as concerns t ransac t ions within the State and i t may be conceded that a S ta te s t a t u t e author iz ing the cessa t ion of secular business on a p a r t i c u l a r day would excuse a Federal reserve bank loca ted in tha t S ta te from performing any act wi thin the S ta te which was nominally required to be done on that day.

Federal reserve banks, however, are quas i -nat ional i n s t i t u t i o n s in the sense that the scope of t h e i r operations i s not confined to a s ing le Sta te and consequently the r i gh t of a Federal reserve bank to cease a l l operat ions on a day which i s a holiday in the Sta te of i t s loca t ion cannot be determined by reference to the laws of that State a lone . Federal reserve d i s t r i c t s were expressly created under Section 2 of the Federal Reserve Act without regard to State l i n e s , but r a the r with regard to the convenience and customary course of business , and the d i s t r i c t s of a l l Federal reserve banks include p a r t s or the whole of more than one S t a t e . Moreover, Section 4 of the Federal Reserve Act provides in par t t ha t d i r e c t o r s of Federal reserve banks " sha l l administer the a f f a i r s of said bank f a i r l y and impar t ia l ly and without d i sc r imina t ion in


- 2 - X-Ul22-a

favor of or aga ins t any member bank or banks," so tha t the operat ions of each Federal reserve bank mast be car r ied on with due regard to a l l i t s member banks and not merely those in the State of i t s l oca t ion .

In considering the r i g h t ' o f a Federal reserve bank to close, the re a re two main poin ts to be observed: ( l ) The general duty of a Federal reserve bank to give a l l i t s member banks the services contemplated by the Federal Reserve Act as the ordinary p e r q u i s i t e s of membership, such as fu rn i sh ing currency, ex-tending c r e d i t , discounting paper, e t c . ; (2) The ob l iga t ion of a Federal r e -serve bank under the Negotiable Instruments Law to perform the a c t s inc iden ta l to co l lec t ing checks and d r a f t s forwarded to i t by i t s member and nonmember c lear ing banks.

With regard to the f i r s t point noted above, the underlying purpose f o r which Federal reserve banks were created was to serve a l l the member banks within t h e i r several d i s t r i c t s by supplying t h e i r currency and c red i t r equ i r e -ments. While there seems to be no s p e c i f i c provis ion of the Federal Reserve Act requi r ing Federal reserve banks to fu rn i sh currency or accommodation to t h e i r member banks a t any p a r t i c u l a r time, i t must be contemplated tha t these services should be rendered whenever reasonably needed by the member banks in the ordinary course of t h e i r business and c lear ly the underlying purpose of the Act would be f r u s t r a t e d i f member banks in one State were deprived of the p r iv i l eges of membership merely because of a holiday in some other State in which they were in no way concerned. If f o r example, a member bank in the D i s t r i c t of Columbia, where there was no holiday, required immediate accomoda-t i on and was unable to obtain i t because the Federal Reserve Bank of Richmond had closed i t s doore in observance of a State holiday in Vi rg in ia , i t can hard-ly be doubted tha t the Federal reserve bank would have been d e r e l i c t in i t s duty to serve i t s member banks. The po^nt would be brought out even more fo r ce -f u l l y i f the member bank were in a c r i t i c a l condit ion and f a i l e d because i t was unable to obtain the needed accommodation.

I t must always be remembered t h a t Federal reserve banks a r e necessa r i ly ca l led upon to t r ansac t business in other States than the Sta tes of t h e i r r e s -pect ive loca t ions and while a Federal reserve bank may be excused from pe r -formance of ac t s wi th in the State because of a holiday the re in , ac t s to be per -formed in other S ta tes in i t s d i s t r i c t a re not a f f e c t e d by the ho l iday . I t would seem c lea r , t he re fo re , both from the standpoint of general l ega l obl iga-t ion and of business pol icy t h a t a Federal reserve bank, notwithstanding a l o -cal State holiday, should not sever i t s contact with member banks of other Sta tes , but should r e t a i n s u f f i c i e n t working force on hand to care f o r t h e i r l eg i t ima te needs.

With regard to the obl iga t ions of a Federal reserve bank inc iden ta l to the clearance and c o l l e c t i o n of checks, the same l i n e of reasoning a p p l i e s . Section 194 of the Negotiable Instruments Law, which has been adopted in every S ta te except Georgia, provides generally "Where the day, or the l a s t day, fo r doing any ac t he re in required or permitted to be done, f a l l s on Sunday or on


# V f •' ^ ft

X-4l22-a

a hol iday, the ac t may be done on the next succeeding secular or business day,* Wi#% pegard s p e c i f i c a l l y to payment, Section 85 of the Negotiable Instruments law provides "Every negot iable instrument i s payable a t the time f ixed ^here in without grace» When the day of maturi ty f a l l s upon Sunday, or a hol iday, the instrument i s payaole on the next succeeding business day *11 The normal a c t s required to be done in co l l ec t ing a check or d r a f t or other negot iable i n s t r u -ment are demand and presentment fo r payment, and p ro tes t in case of non-payment. These ac ts must be done a t the place of payment, which i s o rd ina r i l y s t a ted in the instrument or, i f not , i s generally a t the place of business or residence of the party pr imari ly l i ab l e* If the place of pigment of a check forwarded to a Federal reserve bank f o r co l l ec t ion i s within the Sta te in which the Federal r e -serve bank i s located and the due date f a l l s upon a holiday in tha t S ta t e , the Federal reserve bank i s excused from the ac t s of demand, presentment and p ro tes t under the above quoted provisions of the Negotiable Instruments Law. I f , how-ever, a Federal reserve bank holds f o r co l l ec t ion a check payable in another State of i t s d i s t r i c t , where there i s no holiday, the a c t s inc identa l to c o l l e c t -ing the check, being governed by the law of the place of payment, a re in no way a f f ec t ed by the holiday in the State of the Federal reserve bank1s l oca t i on . In such a case the Federal reserve bank, although excused from t ransac t ing business within the S ta te of i t s loca t ion , would be gu i l ty of negligence i f i t f a i l e d to present the check f o r payment or p ro tes t for non-payment in the place where the check was payable* Since Federal reserve banks normally handle many checks pay-able without the Sta tes in which they are located they should be prepared to make due co l l ec t ion of such checks, i r r espec t ive of holidays a f f e c t i n g merely the States of t h e i r s i t u s .

The above general p r inc ip les are in iry opinion equally app l icab le to Fed-eral reserve branch banks, which also should not suspend a l l operat ions unless there i s a holiday throughout the t e r r i t o r y served by them.

In reaching the conclusion tha t a Federal reserve bank may not l awfu l ly suspend a l l i t s banking a c t i v i t i e s unless there i s a hol iday a f f e c t i n g i t s en-t i r e d i s t r i c t , I do not imply that the Federal reserve bank may not properly ! cut down i t s personnel to meet an expected decrease in the amount of business to be t ransacted on a ce r t a in day Because of a holiday in some par t of i t e d i s t r i c t . This, question i s purely one of in te rna l management and may properly be l e f t to the d i s c r e t i o n of the Federal reserve banks.



STATEMENT FOR THE PRESS X-4124

For Release in Morning Papers Monday, July 25, ig24-

The following i s a summary of general business and f i n a n -c i a l condit ions throughout the several Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s f o r the months of June and Ju ly , as contained in the forthcoming issue of the Fed-e ra l Reserve B u l l e t i n ,

Production of oasic commodities and fac to ry employment showed f u r -

tner l a rge dec l ines during June* Trade, both a t wholesale and r e t a i l , a l so

decreased during the month and was in smaller volume than a year ago.

PRODUCTION;

The Federal Reserve Board*s index of production in bas ic indus t r i e s ,

ad jus ted to allow f o r seasonal v a r i a t i o n s , declined about 9 per cent in June

to a point 22 per cent below the leve l of the f i r s t two months of the year e

Irbn and s t e e l and cot ton manufacturing indus t r i e s continued to show the most

marked curtai lment of a c t i v i t y , and decreases were general in other indus-

t r i e s . Factory employment decreased 3 per cent in June, the metal , automobile,

t e x t i l e , and l e a t h e r indus t r i e s repor t ing the l a r g e s t reduct ions i n f o r c e s ,

Value of bu i ld ing con t rac t s awarded in June was g per cent smaller than in

May, though k per cent l a rge r than in June of l a s t y e a r .

Condition of the corn crop on July 1, as repor ted by the Department

of Agr icu l tu re , was the lowest on record f o r tha t date and indica ted a probable

y i e ld about 5^0,000,000 bushels l e s s than l a s t year * Condition of the cot ton

crop was reported l e s s s a t i s f a c t o r y than a month e a r l i e r , while f o r e c a s t s fo r

wheat and oats were l a rge r than in June.


L R-R A *• ^ . .. ^j)

-Z~ X - 4 1 2 4

TBABE:

Railroad shipments decreased in June and were about 15 per cent l e s s

than a year ago, owing to smaller loadings of a l l c lasses of f r e i g h t except

grain and l i v e s t o c k , Wholesale t rade showed a f u r t h e r s l i g h t decl ine in June

and was 11 pgr cent smaller than a year ago. Sales of hardware, drugs, shoes,

and dry goods decreased, while sa les of grocer ies and meat increased s l i g h t l y .

Sales of department s to re s and chain s to res showed more than the usual season-

a l decrease ..during June and were smaller than l a s t y e a r . Mail order sa les in

June showed l e s s than the usual seasonal decl ine and were l a rge r than a year

ago. Department s to re s f u r t h e r reduced t h e i r stocks of merchandise and

s l i g h t l y increased t h e i r outstanding orders .

P R I C E S :

Wholesale p r i c e s , as measured by the index of the Bureau of Labor

S t a t i s t i c s , decl ined more than one per cent in June to a l eve l 5 P e r cent

below the high point f o r t h i s y e a r . Pr ices of a l l groups of commodities, ex-

cept c lo th ing , showed dec l ines and decreases were p a r t i c u l a r l y l a rge f o r bu i ld -

ing m a t e r i a l s . During the f i r s t th ree weeks of Ju ly quotat ions on wheat,

corn, and hogs advanced sharply, while p r i ce s of sugar, cot ton goods, and i ron

and s t e e l products were lower.

BAHK CREDIT:

Commercial loans a t member banks in leading c i t i e s during June and

the f i r s t two weeks of Ju ly remained a t a r e l a t i v e l y constant l e v e l , consider-

ably below the peak reached in Apr i l ,whi le investment holdings and loans se -

cured by stocks and bonds increased rap id ly and ca r r i ed t o t a l loans and in-

vestments to the high point f o r the y e a r . Dezrand depos i t s , owing p a r t l y to


- 3 - X-4124

the growth of bankers1 balances a t f i n a n c i a l cen te r s , advanced to a record

level*

At the reserve banks there was a continued decl ine in discounts and

an increase in purchases of government s e c u r i t i e s in the open market• As a

consequence, t o t a l earning a s s e t s in the middle of Ju ly were only s l i g h t l y l e s s

than a t the beginning of June * Member bank reserve balances increased rapidly t

r e f l e c t i n g a r e t u r n flow of currency from c i r c u l a t i o n and f u r t h e r imports of

gold; t o t a l depos i t s a t the reserve banks on July l 6 were l a rge r than a t any

time since the organiza t ion of the system.

Money r a t e s in July were comparatively steady but continued to show a

somewhat e a s i e r tendency* Discount r a t e s a t t he Federal Reserve Banks of Kan-

sas City and Dallas were reduced during July from 4 l / 2 to 4 per cent*


X-U125



For Immediate Release July 26, 1924.

CONDITION OF ACCEPTANCE MARKET.

June 12 to July 9•

Continued easy money r a t e s during the four-week period ending

July 9 were the most s i g n i f i c a n t f a c t o r a f f e c t i n g the acceptance markst.

During the closing weeks in June the c a l l money r a t e continued a t 2 per

cent and as acceptances were o f fe red to y i e ld a s l i g h t l y higher r a t e the

demand was in excess of the supply of new b i l l s coming in to the market,

which continued in only moderate volume. The r e s u l t of these condit ions

was a subs t an t i a l reduct ion in dea l e r s ' p o r t f o l i o s in the l a t t e r par t of

June and a gradual reduct ion in d e a l e r s ' r a t e s from 2-5/8 per cent bid

and 2^ per cent o f f e r ed to 2-'l/S per cent bid and 2 per cent o f f e r e d . Late

in June, however, c a l l money advanced to 2§ per cent and t h i s was im-

mediately r e f l e c t e d in a very subs t an t i a l f a l l i n g off in t he demand f o r

b i l l s , while the supply continued in about the same moderate volume. The

period closed with a s l i gh t increase in dea l e r s ' p o r t f o l i o s from the p re -

ceding four weeks, but r a t e s were lower. The closing quotat ions by

dealers in Few York f o r b i l l s with 30 to $0 day matu r i t i e s were 2 - l / S to

2-1/U per cent b id and 2 per cent o f fe red as compared with 2-5 /3 per cent

b id and 2§ o f f e red f o r the period ending June 11. The demand f o r b i l l s

came p r i n c i p a l l y from banks in the l a rge r centers and the volume o f f e r ed

to the reserve banks was considerably smaller than in the preceding four

weeks. B i l l s coming into the market were drawn p r i n c i p a l l y aga ins t grain ,

s i l k , sugar, cot ton, wool, and provis ions .


FEDERAL RESERVE BOARD * ( WASHINGTON


X-HD-7 August 1 , I92U,

SUBJECT: Federal Reserve Bank Holidays.

Dear S i r :

The Board has given f u r t h e r cons idera t ion to the question of the observance by Federal rese rve banks of hol idays , as discussed in the Board's c i r c u l a r l e t t e r X-U122, dated July 18, and in various r e p l i e s t he r e to which have been received. I t has reached the conclusion tha t no Federal Reserve bank or branch bank should c lose for business except on Sundays and such holidays as are general ly observed throughout the United S ta tes and have come by common custom &nd usage to be regarded as nat ional ho l idays . In reaching t h i s conclusion the Board was i n -fluenced la rge ly by a considerat ion of the bas ic duty of Federal reserve banks to perform the func t ions which a re contemplated by the law of t h e i r creat ion and which neces-s a r i l y involve a c t i v i t i e s of a nat ion wide cha rac te r . In some respec ts , Federal reserve banks may be a f f e c t e d by the laws of the S ta tes in which they are s i t u a t e d . In many other respects t h e i r operations m y be l imi ted to Federal reserve d i s t r i c t l i n e s , but fundamentally they were created to serve as banks of issue, of disccunt , and of r e -serve f o r the whole nat ion, and are the i n s t i t u t i o n s through which the great major i ty of the banking t ransac t ions of the country a re c leared, and because they are e s s e n t i a l l y na t iona l , r a t h e r than loca l , i n s t i t u t i o n s , t h e i r operat ions should be conducted with primary regard to t he i n t e r e s t s of the nat ion as a whole.

You are accordingly advised that the Board w i l l approve the fol lowing days as holidays f o r a l l Federal r e -serve banks and branches:


x-4te«

January 1 - New Yearns Day Labor Bay February 22 ' - Washington's Birthday Thanksgiving Day July 4 - Independence Day ; December 25"- Chri s t r a

Day As noted in the Board's c i r cu l a r l e t t e r , X-4122,

the Board wi l l leave to the d i s c r e t i o n of the Federal r e -serve banks the quest ion of cu t t ing down t h e i r personnel on days when t h e r e i s a loca l holiday a f f e c t i n g t h e i r ope ra t ions .

This r u l i ng i s e f f e c t i v e August 1% 1924.

By d i r ec t i on of the Federal Reserve Board.


J . C. Noell , .Assistant Secre ta ry ,

TO GOVERNORS /ND CHAIRMEN OF ALL F. R. BJSNFS,


F E D E R A L E S S E E 7 E B O A R D

STATESNT FOR TEF BiSSS

For Immediate Release. An .gust 7, Z-QHU, 2:30 o 'c lock , p. ra. " X-hl2Q „

The Federal Reserve Board announces that the Federal

Reserve Bank of New York has reduced i t s rediscount r a t e from

3i?/8 to 3CP on a l l c lasses of paper of a l l ma tu r i t i e s , e f f e c t i v e

August 8 th .


X--4J.30 TBEASICY 3EPABTTC/1T ' ' '

Off ice of Secre tary lYAS-IIFC-rO^

Au.gu.st 7, 1934.

14.3 Governor Federal Seserve Board.

S i r :

You c-ra kereoy advised tna t tn.e Department nas r e f e r r e d to tne Disbursing Clerk, Treasury Department, f o r p»yr.3nt, tne account of the Bureau of Engrav-ing ana P r in t ing f o r preparing Federal reserve notes durir±£ tne perioa. Ju ly 1 to Ju ly 51, IS<4, amounting to $105,570. UO, as xollows:-

Federal Passive Jo t es . 1914

| 5 $10 $20 | 5 0 f l vy Total Boston. 100,000 136.000 80,000 10,000 326,000 New York. 501,000 501,000 Phi ladelphia . . 300,000 130,000 100,000 40,000 • 570,000 Cleveland 100,000 100,000 40,000 240,000 Bio—-ona.,.. . . —— —— 25,000 — —— 25,000 AtlîOcv . 185,000 —— ——— —- 186,000 Cîc-ô *±56,000 456,000 ZUisas C i t y , . . 200,000 — 10,060 5,000 215,000 San Francisco. 276,000 —— - 25,000 — — 3 0 1 , 0 0 0

2,119,000 266,000 330,000 90,000 15,000 2,820,000

2,820,000 sheets a t $33. 50 r e r M- *108,570, 00 Tne charges agains t tne several Federal Beserve Banks are as fol lows:

Coicpen- P la t e Sheets s a t ion Pr in t ing Mater ia ls Total

boston. <»»» . . . . 326,000 $ 5,7 86. oO $ 2,6bb. 68 $ 4,097.82 $ 12,551. 00 Uevv York. . 501,000 8,392.75 093.18 6,297. 57 19,283.50 pni lade lpnia . . . 570,000 10,117.50 4,562. 60 . 7,164. 90 21,945.00 Cleveland . 2*0,000 4,260. 00 1,963. 20 3,016. 80 9,240.00 RicnnoncL 25,000 4-±3.?5 20*.50 314. 25 962. 50 Atlanta . 186,000 3,301.50 1,521.4.8 2,33d. 02 7,161,00 Cni C—VQ. «*"••• . 456,000 8,09-±. 00 3,730.08 5,731.92 17,556. 00 Kansas C i ty . . . . 215,000 3,816. 25 1,758.70 2,702. 55 8,277.50 San Francisco. . 301,000 5,342. 75 2,462.18 3,7 83. 57 11,588.50

2,820,000 $50,055- 00 $23,067,60 $35,447.40 $105,570. 00

I-e Bureau appropr ia t ions w i l l be reimbursed in tne aoove amount from the i n d e f i n i t e appropr ia t ion "Preparat ion &.nd Issue of Federal Reserve Notes, Ee-izouraaole" , and i t i s requested tna t your board cause sucn i n d e f i n i t e appro-p r i a t i o n to 03 reimbursed i . : l i k e amount.

Respec t fu l ly ,

(Si :nea) S. B. Jacobs Act ing Cottird s s ioner.




X-U132

August lU, I92U.

SUBJECT: EXPENSE MAIN LINE, Leased Wire System, J u l y , 1924.

Dear S i r :

Enclosed herewith you w i l l f i n d two mimeograph s t a t e -ments, X-Ul32-a and X-Ul32-b, covering in d e t a i l opera t ions of the main l i n e , Leased Wire System, during the month of J u l y , 1924.

P lease c r e d i t the amount payable by your bank in t he general account , Treasurer , U. S . , on your books, and i s sue C/D Form 1, National Banks, f o r account of "Sa la r i e s and Ex-penses | Federal Reserve Board, Special Fund," Leased Wire Sys-tem, sending dup l i c a t e C/D to Federal Reserve Board.


F i s c a l Agent,

(Enclosures)

To Governors of a l l banks (except Chicago).


X-4l32-a

REPORT SHOWING CLASSIFICATION AND NUMBER OP WORDS TRANSMITTED OVER MA IF LIKE CF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JULY, ig?U.

From Fed. Res.

Bank Business

Percent of Total Bank Business(*)

Treasury Dept.

Business

War Finance Corp,

Business Tota l

Boston New York Phi ladelphia Cleveland Richmond At lanta Chicago S t . Louis Minneapolis Kansas Ci ty Dal las San Francisco

TOTAL

Board

Total

Percent of Tota l

31,095 190,126

43,804 74,251 61,268 70,071

116,990 76,308 44,393

' 75,795 58,909

109,501

.952,511

279,564

1,232,075

92.10#

3.2b 19.96

4.6o 7-80 6.43 7.36

12.28 8.01 4.66 7.96 6.18

11.50

100.00

Bank Business 1,232,075 words or 92.18^ Treasury Dept. 104.558 " " 7.82^

TOTAL 1,336,633 " " 100.OOf

FEDERAL RESERVE BOARD, Washington, D. C,

August 14, 1924.

4 ,792 - 35,527 8,223 - 193,349 5,306 — 49,110 4,648 18 73,917 4 ,165 - 65,433 4,135 — 74,206 7,656 — 124,646

.5 ,695 - 82,003 3,028 - 47,421 4,811 - 80,606 3,323 - 62,232 9,688 - 119,189

65,470 18 1,017.999

39,038 1024 319,676

104,558 1042 1,337,675

7.82> .08f,

(*) These percentages used in c a l c u l a t i n g the pro r a t a share of l e a sed wi re expenses a s shown on the accompanying statement (4 l3 2-b) .


REPORT OF EXPENSE X-4l32-b MAIN LINE

FEDERAL RESERVE LEASED WIRE SYSTEM, JULY, 1924,

Pro Rata Payable t< Share of Federal

Opera to r s ' Opera to r s ' Wire Total Total Reserve Name of Bank S a l a r i e s Overtime Rental Expense Expense Cred i t s Board

Boston $ 250.00 $ - $ 250.OO $ 803.07 $ 250.00 $ 553.07 New York 1 ,549 .98 - 1,549.98 4,916.97 l ; 549 .98 3,366.99 P h i l a d e l p h i a 200.00 - 200,00 1,133.17 200.00 933.17 Cleveland 440.00 - 440.00 1,921.46 440.00 1,481.46 Richmond 315,00 - 315.00 1,583-97 315.00 1,268.97 At lan t a 255.00 255.00 1,813.07 255.00 1,558.07 Chicago (#)4 ,807 .79 4 .00 4,811,79 3.025.07 4,811.79 <*)1,786.72 S t . Louis 225.00 - 225.00 1,973.19 225.00 1,748.19 Minneapoli s , 298.33 - 298.33 1 ,147.95 298.33 849.62 Kansas City 373.79 - 373-79 1,960.87 373.79 1,587.08 Dal las 251.00 - 251,00 1,522.39 251.OO 1,271.39

2,452.92 San Franc isco 38O.OO $16,999.30

380.00 2,832.92 380.00 1,271.39 2,452.92

Fed. Res, Board $16,999.30 16,999.30 2,832.92

TOTAL $9,3^5*89 $ 4 .00 $16,999.30 $26,349.19 $24,634.10 $9,349.89 $17,070.93 (a) l .715,0Q U ) 1.786.72 $24,634.10 $15,284.21

(#) Inc ludes s a l a r i e s of Washington o p e r a t o r s . (*) C r e d i t , ( a ) Received $15.09 from War Finance Corp, and $1700.00 from

Treas . Dept. covering bus iness f o r month of J u l y , 1924, (&) Amount re imbursable t o Chicago,

FEDERAL RESERVE BOARD, Washington, D. C»

August 14, 1924.


I * A._J

Y-,4134



For immediate r e l ease August l 4 , 1924 3:00 o 'c lock , p , m.

The Federal Reserve Board announces tha t the Federal

Reserve Bank of Cleveland has reduced i t s rediscount r a t e from

4$ to 3!# on a l l c lasses of paper of a l l m a t u r i t i e s , e f f e c t i v e

August 15th.


<L - 0 %



X-U135 August l 6 , I92U.

SUBJECT: Charges on Messages re Telegraphic T rans fe r s of Funds.

Dear S i r :

There i s enclosed herewith, f o r your informat ion, copy of a l e t t e r addressed to one of the Federal r e se rve banks "by the Governor of the Board, with respect to the a c t i o n of the bank in advis ing i t s members tha t i t w i l l ' absorb t e l eg raph i c charges on messages sent by them to o ther member banks, both wi th in and without i t s own d i s -t r i c t , i n s t r u c t i n g wire t r a n s f e r s o f funds to the Federal r e se rve bank or i t s branches,


J . C . Noell , Ass i s t an t Secre tary ,

(Enclosure)

To the Governors of a l l Federal reserve banks.


X-Ur><5-a

August lU, I92U.

Dear Governor — •

The a t t e n t i o n of the Board has "been ca l led to your c i r cu l a r l e t t e r of __ on the subject "Free Tele-graphic Serv ice , " advising tha t e f f e c t i v e , your bank and i t s branches w i l l absorb t e legraph ic charges on a l l messages sent by your member banks in connection v i t h cer -t a i n t r ansac t ions , among them the fo l lowing:

" (a) In s t ruc t ing any member bank wi th in the i. Federal Be serve D i s t r i c t t o make

wire t r a n s f e r of funds to us or to our branches for your c r e d i t . .

(b) In s t ruc t ing any member "ban!' outs ide the Federal Reserve D i s t r i c t to make wire t r a n s f e r of funds to us or to our branches f o r your c red i t in mul t i -p les of $100.00."

The Federal Reserve Board has considered the d e s i r a b i l i t y of a Federal reserve bank absorbing such t e legraph ic charges and has taken the mattsr up with the Committee on Vol-untary Services, which concurs in the view of the Board that the absorpt ion by Federal reserve ban! s of the cost of telegrams exchanged between member bant s, on any subject , i s net only tin-des i r ab le but e n t i r e l y unwarranted.

You are d i rec ted , t he re fo re , to immediately i s sue a c i r c u l a r l e t t e r to your member banks resc inding the two para-graphs above quoted. Please f u r n i s h the Board, f o r i t s f i l e s , with a copy of your l e t t e r .


(Signed) D. E. Cr i ss inger , G o v e r n o r .




August 18,1924 X-4136

Subjec t : Holiday, Monday, September 1 s t ,

Dear S i r :

In accordance with Board's l e t t e r X-412S, of

August 1,1924, there wi l l be no Gold Settlement Fund

or Federal Reserve Note Clearing on Monday, September

1 s t , on account of observance of Labor Day, and

Board 's books w i l l be closed". P lease advise Branches.


J . C. Noell , Assis tant Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE B/MS



ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-4138

August 22, 1924.

SUBJECT: Employment of Special Counsel in the Case of the Pascagoula National Bank vs, the Federal Reserve Bank of At lan ta , e t a l .

Dear S i r :

There i s enclosed herewith, f o r your informat ion, copy of a b i l l of complaint brought by the Pascagoula National Bank of Moss Point , Miss i ss ipp i , aga ins t the Federal Reserve Bank of At lanta , e t a l , in the United S ta tes D i s t r i c t Court f o r the Northern D i s t r i c t of Georgia.

In view of the f ac t tha t the i ssues r a i sed in t h i s case w i l l determine the l e g a l i t y and s t a tu s of the par c l e a r -ance plan of the Federal Reserve System, the Board contemplates r e t a i n i n g special counsel to defend the su i t and i s of the opin-ion t h a t the expense involved should be pro ra ted among the twelve Federal reserve banks, as was done in connection with previous par clearance cases .

Please advise the Board a t your ear ly convenience of your bank*s wi l l ingness to bear i t s propor t ionate share of t h i s expense.

Very t ru ly yours,

D. R. Cr iss inger , G o v e r n o r .

(Enclosure)

TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS,


X-4131

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

PASCAGOULA NATIONAL BANK

VS IN EQUITY

FEDERAL RESERVE BAM OF ATLANTA, ET AL.

TO THE HONORABLE, THE JUDGES OF THE DISTRICT COURT OF THE UNITED STATES FOR THE NORTHER!! DISTRICT OF GEORGIA.

The Pascagoula National Bank of Moss Point , wi th a branch

a t Pascagoula, Miss i s s ipp i , b r ings t h i s b i l l of complaint in i t s own

behalf and in behalf of other banks in l i k e s i t u a t i o n and a l l e g e s

the fol lowing f a c t s : 1 .

P l a i n t i f f i s a National Banking Associat ion under the laws

of the United S ta tes maintaining i t s p r inc ipa l o f f i c e and place of

business a t Moss Point , Miss i ss ipp i , and a branch bank a t Pascagoula

Miss i s s ipp i , as au thor ized "under i t s c h a r t e r . Organization of said

bank and i t s branch was completed under i t s char ter and i t s business

as a National Bank began on or about the l 4 t h day of March, 1907, and

i t has been continuously operat ing as a National Bank ever s ince .

2.

In due course a f t e r the enactment of the Federal Reserve Act

by Congress, and the organiz a t ion of the Federal Reserve System

thereunder, p l a i n t i f f became a stockholder in and a member of the


# ' ' T

- 2 - X-U131

Federal Reserve Bank of At lanta , as i t was compelled t o do upon pa in

of f o r f e i t i n g i t s cha r t e r as a National Bank, and has so continued to

the present t ime. . 3 .

The Federal Reserve Bank cf At lan ta i s a banking corporat ion

created and ex i s t i ng under the laws of the United S ta tes wi th i t s p r i n -

cipal o f f i c e in the City of At lan ta , Georgia, wi th in the Northern Dis-

t r i c t of Georgia, and operates in the Sixth Federal Reserve D i s t r i c t and

i s made a pa r ty defendant to t h i s b i l l . I t maintains a branch bank i n

the City of New Orleans, Louisiana, as a par t of i t s corporate organiza-

t i on as provided in the Federal Reserve Act.

4.

Under Sect ion 10 of the Federal Reserve Act t he re was created

a Federal Reserve Board, cons i s t ing , under the o r ig ina l Act, of seven

members, and by an amendment approved June 31 1$22, increased to e igh t

members, two of whom a re the Secretary of the Treasury of the United

S ta tes and the Comptroller of the Currency of the United S t a t e s , f o r the

time being in o f f i c e , as Ex Of f i c io members, and ths remaining s ix mem-advice

bers are appointed by the President of the United S ta t e s by and with the /

and consent of the Senate.

The. Act a l s o provides tha t the Secretary of the Treasury sha l l

be ex o f f i c i o chairman of the Board and tha t the President sha l l des ig-

nate one of the appointed members as Governor, and another Vice Governor,

of the Board. The said Board a c t s as an organiza t ion and i s a quasi

corporat ion having i t s p r inc ipa l o f f i c e s in the Treasury Building of the


-3- X-U131

United S ta tes in the City of Washington, and under said ac t the Board is

required to maintain a loca l o f f i c e on the premises of each of the twelve

Federal Reserve Banks created and operat ing under the Federal Reserve Act,

and to designate from among Class C Di rec tors , a l l of whom are appointed by

the Federal Reserve Board f o r each Federal Reserve Bank, a Federal Reserve

Agent, who i s a l so Chairman of the Board of Direc tors of the Federal Re-

serve Bank where he i s loca ted . The Federal Reserve Agent a t the defend-

ant Federal Reserve Bank a t At lanta a t the present time i s Joseph A. McCord

and a -pa r t of h i s dut ies under the law i s to maintain a l oca l o f f i c e of the

Federal Reserve Board on the premises of said Federal Reserve lank oi At-

l a n t a where he i s required to , and does, act as the o f f i c i a l r ep resen ta t ive

of the Board in the performance of i t s func t ions under the Act, and espec-

i a l l y of those func t ions in the Sixth Federal Reserve D i s t r i c t tha t oper-

a te upon p l a i n t i f f , and other member banks in said d i s t r i c t , of which com-

p l a i n t i s h e r e i n a f t e r made»

5-

Said Joseph A. McCord res ides in the City of At lan ta , wi th in the

Northern D i s t r i c t of Georgia, and maintains h is o f f i c e as Federal Reserve

Agent, as a f o r e s a i d , on the premises of the Federal Reserve Bank of At lan ta ,

in the City of At lanta , in the Northern D i s t r i c t of Georgia, as required b$r

law, and as such i s the o f f i c i a l represen ta t ive of the Federal Reserve Board

within the Sixth Federal Reserve D i s t r i c t , as well as Chairman of the Boar:

of Direc tors of defendant Federal Reserve Bank. The present personnel of

the Federal Reserve Board i s as f6l lows:


- b - X-U13I

A. VJ. Mellon, Ex O f f i c i o , S s c r s v a r y of the Treasury, Chairman

Henry Dawes, Ex O f f i c i o , Comptroller of t he Currency. D. B* Cr i s s i nge r , Governor Edmund P l a 1 1 V i c e Governor Adolph C. Mi l l e r Chas* 3. Haniin Geo, 3* James Edward H* Cunningham

b*

Said Joseph A« McCord, as Federal Reserve Agent, and s a i d Fed-

e r a l Reserve Board, a s a Board* of which sa id McCord i s the o f f i c i a l

r e p r e s e n t a t i v e in sa id d i s t r i c t , a re made p a r t i e s defendant t o t h i s b i l l .

7 •

The Federal Reserve Act f i x e s the s a l a r i e s of the personnel

of the Federal Reserve Board and provides f o r the payment the reof by

semi-annual assessments upon the twelve Federal Reserve Banks in propor-

t i o n to t h e i r c a p i t a l s tock and surp lus , including the es t imated opera t -

ing expenses of t h e Federal Reserve Board f o r the ha l f year succeeding

the levying of each assessment , together with any d e f i c i t c a r r i e d f o r -

ward from the preceding ha l f y e a r .

S»

The Federa l Reserve Board i s c lothed wi th a u t h o r i t y under

the Federal Reserve Act to examine such Federal Reserve Bank, to r e -

quire the Federal Reserve Banks to rediscount c e r t a i n descr ibed com-

mercial paper a t r a t e s of i n t e r e s t to be f i x e d by the Board; to suspend

any r e se rve requirements s p e c i f i e d in the Act; to superv ise and regu-

l a t e the use and re t i rement of Federal Reserve no tes ; to r e q u i r e each

Federal Reserve Bank to maintain the r equ i red gold r e s e r v e s aga ins t the


- 5 - x-4%31

Federal Reserve notes; to c l a s s i f y the several c i t i e s in the country

as Federal Reserve c i t i e s and to r e c l a s s i f y the same; to suspend or

remove any o f f i c e r or d i r ec to r of any Federal Reserve Bank^ to requ i re

tne wr i t ing off of doubtful or worthless a s s e t s upon the books of any

of the several Federal Reserve Banks; to suspend the operat ions of any

Federal Reserve Bank and, when deemed advisable , to l i q u i d a t e or r e r

organize i t ; to require bonds of Federal Reserve agents and make regu-

l a t i ons f o r the safeguard of c o l l a t e r a l , reserve notes , money or prop-

er ty deposited in the hands of such agent; to grant to National Banks

the r igh t to act as Trustee, Executor, Administrator or Regis t ra r of

stocks and bonds; to employ a t torneys , exper ts , a s s i s t a n t c lerks or

other employees deemed necessary to conduct the business of the Board;

and, f i n a l l y , t o exercise general supervision over a l l Federal Reserve

Banks created and ex i s t ing under the terms and provis ions of the Federal

Reserve Act* 9.

P l a i n t i f f i s advised by counsel, and thereupon a l l eges tha t

under the l ega l machinery of the Federal Reserve Act, as hereinbefore

out l ined, and more f u l l y se t f o r t h in the Act i t s e l f , of which the Court

w i l l take j u d i c i a l cognizance, there i s created a "Federal Reserve

System" endowed wi th a l l the corporate powers necessary to regu la te the

National Banks of the United S ta t e s , including the twelve Federal Re-

serve Banks, the primary func t ions of which are the establishment of a

f l e x i b l e currency and the s t a b i l i z i n g of c r ed i t s throughout the e n t i r e

system, upon which the Federal Reserve Board i s superimposed as the u l -

t imate and con t ro l l i ng d i rec to ra te*


—6— X-4131

10,

Pr io r to the passage of the Federal Reserve i c t in 1913»

checks drawn upon "banks in other l o c a l i t i e s than tha t of the payees or

holders of such checks, were customarily co l lec ted through Clearing

Houses or Col lec t ion Bureaus and remitted f o r by n a i l t o the bank in

which they had been deposited fo r co l l ec t i on in the form of a d r a f t

on the drawee's deposit in some reserve c i t y . For the se rv ice rendered

by the drawee bank in so remit t ing in funds ava i l ab l e f o r use a t the

place of the deposit of the checks, i t was a common p r a c t i c e to nake a

small charge ca l l ed "exchange," and to deduct the amount thereof from

the remit tance . 11.

The Federal Reserve Act, as o r ig ina l l y enacted, author ized

the Federal Reserve Board to require member banks to remit by mail , or

otherwise, to t he i r respec t ive Reserve Banks, the proceeds of checks

drawn upon such members, sent to them fo r co l l ec t ion and remit tance , the

f u l l face value of such checks without the customary deduction for ex-

change . This provis ion of the or ig ina l Federal Reserve Act was not en-

forced aga ins t member banks u n t i l the Summer of 1916.

12.

Under the provis ions of the Federal Reserve Act, as o r i g i n a l l y

passed, the c l a s s of checks which the Federal Reserve Barks might r e -

ceive was l imi ted as to each Reserve Bank to those checks which were

drawn upon i t s own members. By an amendment to the Federal Reserve Act

of September J t h , 1916, the c lass of checks which the Reserve Banks were

permit ted to rece ive was expanded so as to include a l l checks on whomso-


?

- 7 - X-U131

ever drawn which were payable upon p re sen ta t ion "within the d i s t r i c t of

the receiving Federal Reserve Bank.

13.

According to the l e t t e r of the or ig ina l a c t , the Federal Re-

serve Board was authorized to require member banks to forego the r igh t

to charge exchange f o r the co l l ec t ion and . remission of checks presented

fo r payment through t h e i r respect ive reserve banks,

14.

P l a i n t i f f i s advised t y counsel, and thereupon a l l eges t ha t by

an amendment of the Federal Reserve Act of June 21st , 1917» known as the

Hardwick amendment, member banks regained the r ight to charge exchange,

within ce r t a in l i m i t a t i o n s , but in the meantime the Reserve System had

es tabl i shed , or were undertaking to e s t a b l i s h , a un iversa l system fo r

the co l l ec t ion of checks throughout the United S ta tes and known as the

"Par Clearance System. n This purpose and system has been continued up

to the f i l i n g of t h i s b i l l .

15.

That t h i s was the purpose of the Federal Reserve system, i s d i s -

closed by the o f f i c i a l dec la ra t ion of the then Governor of the Board —

W. P. G. Harding, in the following statement which p l a i n t i f f i s informed

he made to the Chairman of the House Committee on Banking and Currency.

"The Board be l ieves tha t i t i s charged wi th the duty and r e s -

p o n s i b i l i t y of inaugurating a complete check c lear ing system throughout

the United S t a t e s , tha t the Federal Reserve Banks in compliance with the

evident purpose of the law and in f a i r n e s s to a l l t h e i r member banks rftisit

exercise t h e i r power to receive fo r co l l ec t ion fi'om these member banks


- g - X-U131

•checks upon whomsoever drawn which are payable upon p r e s e n t a t i o n , "

l 6 .

That i t i s the i n t e n t i o n of the p resen t Federal Reserve Board

to continue t h i s system, i s f u r t h e r shown "by the d e c l a r a t i o n of i t s

present Governor—D. R. Cr i s s inge r , which defendant i s informed was

signed by him, as fo l lows : FEDERAL RESERVE BOARD

WASHINGTON

OFFICE OF GOVERNOR September 5, 1923.

"Your p r i n t e d l e t t e r t o n;e, dated September 1, 1923, has been

received and brought to the a t t e n t i o n of the Federal Reserve Board which

des i r e s t o s t a t e t ha t i t in tends t o continue the par c learance system

under the p rov is ions of the Federal Reserve Act, a s cons t rued by the Su-

preme Court of the United S t a t e s , "


D. R, Cr i s s inge r , Governor.

Mr, L. R, Adams, General Sec re t a ry , National and S t a t e Bankers P ro t ec t i ve Assoc ia t ion , 512 Haas Howell Bui ld ing, At lan ta , Georgia.

P l a i n t i f f i s informed and b e l i e v e s , and 30 cha rges , t ha t t h e

p r i n t e d l e t t e r the re in r e f e r r e d to was addressed to the Governor of the

Federal Reserve Board by the National and S ta t e Bankers P r o t e c t i v e Asso-

c i a t i o n , and a copy thereof i s he re to a t t a ched , marked "Exhibi t A."

This l e t t e r pos t -da t ed c e r t a i n dec is ions of the Supreme Court i n t e r p r e t i n g

Sect ions 13 and l 6 of the Federal Reserve Act, P l a i n t i f f i s a, member of

the Nat ional and S t a t e Bankers P r o t e c t i v e Assoc ia t ion and t h i s l e t t e r was


- 9 - X-U131

w r i t t e n i n the i n t e r e s t of t h i s p l a i n t i f f and a l l o ther member banks in

l i k e s i t u a t i o n , 17.

In order to supply machinery f o r the establ ishment of u n i v e r s a l

par c learance , the Federal Reserve Board issued a c e r t a i n r e g u l a t i o n

known as Regulat ion J , which p l a i n t i f f i s informed i s s t i l l of f o r c e

throughout the system, providing t ha t member banks w i l l be requ i red by

the Federal Reserve Board to^provide funds t o cover a t par a l l checks r e -

ceived f o r t h e i r account in the Federal Reserve Banks, and t h a t the Fed-

e r a l Reserve Banks in handling such items f o r member banks w i l l ac t as

agents only, without any l i a b i l i t y except f o r t h e i r neg l igence . P l a i n t i f f

i s informed tha t during the ea r ly h i s t o r y of the a c t i v i t i e s of the system,

the cost of c l e a r i n g checks-was taxed aga ins t the Banks r ece iv ing the

b e n e f i t t h e r e o f , but a l l charges f o r such se rv ices have been withdrawn

and the member banks, inc luding the p l a i n t i f f h e r e i n , a r e , under sa id

r egu la t i on , r equ i red to remit the proceeds of a l l checks p resen ted to

them through the defendant Federal Reserve Bank by mail without any de-

duct ion whatever f o r the se rv ice rendered in the t r a n s f e r of funds i n -

volved in such t r a n s a c t i o n s , 18.

P l a i n t i f f i s informed by Counsel, and thereupon a l l e g e s , t h a t

t h i s course of bus iness i s in d i r e c t c o n f l i c t wi th the express tarms of

Sect ion 13 of the Act r e se rv ing t o member banks the r i g h t to make the

serv ice charge f o r c o l l e c t i n g and r emi t t i ng proceeds of bank checks

handled f o r c o l l e c t i o n , because the p r o h i b i t i o n of t h e payment of such

charge was designed so le ly f o r the p r o t e c t i o n of the revenues of the Fed-


—10— X-U131

e r a ! Bank. Inasmuch a s the Federal Reserve Bank under the said r egu la -

t i o n of the Federal Reserve Board a c t s as agent only in c o l l e c t i n g such

checks, the se rv ice charge f o r t h e i r conversion in to cash a t the place

where sa id cash i s ava i l ab l e t o the payee or endorser of s a id check,

operates as a ipatter of law aga ins t the par ty f o r whom the Federal Re-

serve Bank i s a c t i n g as c o l l e c t i n g agent and i s not a charge aga ins t the

Federal Reserve Bank i t s e l f .

19.

P l a i n t i f f i s informed by Counsel, and thereupon a l l e g e s , t h a t

under the p rov i s ions of Sect ion l 6 of the Federal Reserve Act, every Fed-

e ra l Reserve Bank i s requi red t o rece ive on deposit a t par from member

banks or from other Federal Reserve Banks checks or d r a f t s drawn upon any

of the depos i to r s in the Federal Reserve Bank rece iv ing such depos i t , and

t h i s sec t ion prese rves to the member banks the r i gh t to charge t h e i r

ac tua l expenses incurred in c o l l e c t i n g and remi t t ing funds or f o r exchange

to t h e i r pa t rons , the amount of such charges, in case of c o l l e c t i o n and

remit tance through the Federal Reserve Banks to be f ixed by the Federal

Reserve Board* P l a i n t i f f a l l e g e s t h a t under the r egu la t ions of the Fed-

e ra l Reserve Board a l l of the Federal Reserve Banks, including t h e de~

fendant rese rve bank, a re fo rb idden to comply with the p rov i s ions of t h i s

s ec t ion , t o the i n j u r y of p l a i n t i f f and other banks, i n t ha t checks so

tendered f o r deposi t and f a l l i n g wi th in the d e s c r i p t i o n of t h i s s ec t ion

a re not received on deposi t and c red i t given t h e r e f o r a t pa r , but a re r e -

ceived f o r c o l l e c t i o n only wi th c red i t t o the deposi t account of the de-

p o s i t o r d e f e r r e d u n t i l the proceeds of s a i d checks or d r a f t s have been


- l i - " X-U131

a c t u a l l y rece ived by the Federal Reserve Bank. P l a i n t i f f i s informed

as a mat ter of law t h a t such de fe r red c r ed i t i s not compliance wi th the

mandate of Sect ion l 6 of the Federal Reserve Act t o rece ive on deposi t

a t par the checks thus tendered under the provis ions of sa id s e c t i o n .

P l a i n t i f f a l l e g e s as a mat ter of law tha t a depos i t i n a bank, which i s

the charac ter of the deposi t here dea l t wi th , i s a r e c e i p t of money,or

i t s equiva len t , by the bank upon an engagement to repay the sum so de-

pos i t ed on demand in the usual and customary form of checks or d r a f t s

aga ins t such c r e d i t , A bank deposi t i s immediately and cons tan t ly sub-

j e c t to the check of the depos i to r and i s always payable on demand un-

l e s s i t be by spec ia l con t rac t known as a time deposi t bear ing i n t e r e s t .

Said Sect ion l 6 does not deal with depos i t s fo r c o l l e c t i o n f o r they a re

s p e c i f i c a l l y dea l t wi th i n Sect ion 13. Sect ion l 6 dea ls wi th general

depos i t s only , and express ly requ i res t h a t checks and d r a f t s drawn up-

on any of the members of the system sha l l be received on deposi t a t

pa r . P l a i n t i f f a l l e g e s as a mat ter of law tha t t h i s requirement makes

such checks and d r a f t s the equivalent of lawful money and r ece iv ing such

checks on deposi t i s , t h e r e f o r e , equivalent t o r ece iv ing lawful money

f o r which immediate c r e d i t mast be given. There being no q u a l i f i c a t i o n

of the word "depos i t " as used in sa id Sect ion 16 of the Federa l Reserve

Act, i t takes t h e meaning app l i cab le to a bank d e p o s i t . P l a i n t i ? f i s

informed by Counsel t ha t the Supreme Court of the United S t a t e s has de-

cided t h a t a deposi t in bank c r e a t e s , a t the same time the deposi t i s

made, an o b l i g a t i o n on the bank t o pay the amount of the depos i t , or any

p a r t of i t , as soon a s the depos i tor sees f i t t c draw a check aga ins t i t .


r *r>r

- • -12- X-U13I

That clause of said Section r e f e r r i n g to deposi ts by one Federal Reserve

Bank in another Federal Reserve Bank i s rendered "unnecessary and use les s

by the establishment of what i s known as the Gold Settlement fund

through which a l l t r ansac t ions between Federal Reserve Banks i n t e r sese

are l i qu ida t ed ,

2 0 . '

Under said regu la t ions of the Federal Reserve Board no depos i t s

under Section l 6 of said Act a re received a t par from i t s members by any

Federal Reserve Bank in the system, save and except where checks and

d r a f t s so deposited are conver t ib le into ac tua l money in the town where

the Federal Reserve Bank, so receiving i t , i s located on or before the

close of banking hours of the day on which said deposi ts a r e tendered*

If a s ingle business day, or more, i s required to a c t u a l l y rece ive the

proceeds of such checks and d r a f t s , the amount thereof i s withheld from

a v a i l a b i l i t y to the deposi tor u n t i l such proceeds a re a c t u a l l y r e c e i v e d .

In order t o prevent the accounting necessary to provide f o r de fe r red

credi t on e^ch item, p l a i n t i f f i s informed tha t a system has been i n -

augurated by the Federal Reserve Board under which the amount of time

elapsed before ac tua l c red i t on such items i s given the deposi tor i s

averaged over the geographical t e r r i t o r y of the United S ta tes by a d j u s t -

ment to the mail f a c i l i t i e s f o r the t ransmission of such checks and

d r a f t s to the bank upon which drawn and the rece ip t of t h e i r proceeds

in regula r course» This i s known as the n£im£ schedule" or "zone system

The e f f e c t of defe r red c r e d i t on the member banks in said system i s very

mater ia l» I t r e s u l t s i_n depriving the member banks of the use of the

amounts of money r ep re sen t ed by checks and d r a f t s c i r c u l a t i n g through


!r

-13- X-4131

the channels of commerce f o r the period of time involved, i n t h e i r t r a n s -

mission to the banks upon which they are drawn and the . r e t u r n of t h e i r

proceeds* As to a l l of the banks in the system, p l a i n t i f f i s informed

that the amount of c r e d i t s thus congealed in t r a n s i t and commonly ca l led the

" f loa t , t f averages about f i v e hundred mi l l i on do l l a r s continuously, the

i n t e r e s t on which according to the lowest r a t e on bank balances of 2$

per annum would amount to ten mi l l ion do l l a r s per annum*

21.

P l a i n t i f f i s informed by Counsel as a matter of law, and t h e r e -

upon a l l e g e s , t ha t as a r e s u l t of the r e f u s a l to give immediate c red i t

f o r checks and d r a f t s requ i r ing one or more days for. ac tua l co l l e c t i on ,

the banks upon which such items a r e drawn are e n t i t l e d to charge exchange

fo r the t ransmission of t h e i r proceeds, and, conversely, banks so depos i t -

ing. them a re e n t i t l e d to charge excJonge on the checks presented to them,

but i f immediate c r ed i t i s given f o r such items, and t i t l e i s thereby

vested in the Federal Reserve Bank so receiving them on deposi t then the

r igh t to charge exchange would be destroyed by the p roh ib i t i on of the

proviso of Section 13, i f t ha t proviso i s cons t i t u t i ona l as appl ied to

member banks, but would s t i l l leave the member bank making the c o l l e c t i o n

and remit tance e n t i t l e d to i t s service charge agains t the member bank f o r

whose account the deposit was made-

22.

P l a i n t i f f a l l eges as a matter of law that i f the p r o h i b i t i o n of

exchange charges aga ins t the Federal Reserve Banks, as expressed in the


I

-14- X-U131

proviso of sa id Sect ion 13 thereof in these words, l lbut no such charges

s h a l l be made aga ins t the Federal Reserve Banks, n i s so i n t e r p r e t e d as t

requi re p l a i n t i f f and other member banks to perform the se rv ice of r e -

m i t t i n g the proceeds of checks drawn upon them beyond t h e i r r e spec t ive

banking houses, the said enactment i s in c o n f l i c t wi th tha t c lause of

A r t i c l e f i v e (5) of the Amendment t o the Cons t i tu t ion of t he United

S t a t e s provid ing t h a t , -

"No person *** sha l l be deprived of *** proper ty , without due process of law."

P l a i n t i f f p leads the u n c o n s t i t u t i o n a l i t y of sa id p rov i s ion of

Sect ion 13 of the Federal Reserve Act as appl ied to i t , and to any

other member bank in l i k e s i t u a t i o n becoming a pa r ty to t h i s cause a s

being obnoxious to sa id clause of the F i f t h amendment to the Federal Con-

s t i t u t i o n , when i t operates to prevent a reasonable charge f o r t h e

valuable se rv ice rendered by a member bank in t r a n s m i t t i n g the funds rep-

resented by checks drawn upon i t beyond i t s own banking house*


? '

. i 5 - X-U131

23-

Following i n s t ruc t i ons from the Federal Reserve Board as con-

ta ined in said Regulation "J" and in the said "time schedule" or "zone

system" as to the f l o a t , the defendant Reserve Bank issued a c i r c u l a r

known as "G" l S l , under which the p r ac t i c e s here inbefore d e t a i l e d were

adopted by i t in the Sixth Federal Reserve D i s t r i c t and are s t i l l enforced

against p l a i n t i f f and a l l other member banks in the d i s t r i c t .

24.

While ¥ . P. G. Harding was Governor of the Federal Reserve Board,

p l a i n t i f f i s informed that a policy of coercing member and non-member banks

into par remittance was inaugurated and car r ied out as to both member and

non-member banks u n t i l such p r ac t i c e s as to non-member banks were condemned

by the Federal Courts in such cases as Brookings S ta te Bank versus Federal

Reserve Bank of San Francisco (12 Federal Reserve D i s t r i c t ) 281 Federal Re

por t e r , pags 222; Farmers and Merchants Bank of Cat-lettsburg, Kentucky,

versus the Federal Reserve Bank of Cleveland, Ohio, (4th' Federal Reserve

D i s t r i c t ) 286 Federal , 586, 610; American Bank and Trust Company versus

the Federal Reserve Bank of At lanta , Georgia, (6th Federal Reserve D i s t r i c t

S56 United S t a t e s , 350; and Farmers and Merchants Bank of Monroe, North

Carolina, versus the Federal Reserve Bank of Richmond, Virginia (5th Feder-

a l Reserve D i s t r i c t ) 262 United S ta tes , 649. By reason of membership and

the consequent obl igatory deal ings with the Reserve Banks, the member banks

have h i t h e r t o submitted under duress to the i l l e g a l p r a c t i c e s a fo re sa id

r a the r than embarrass t h e i r patrons and r i sk r e p r i s a l s upon t h e i r n e c e s s i t i

in the matter of red iscounts . When the said sect ions 13 and l 6 of the Fed-


- IS - X-U131

e ra l Reserve Act were i n t e r p r e t e d by the Supreme Court, in i t s opinions

found, in 2^6 United S ta t e s 350, and 262 United S t a t e s , pages 6U3 and 6U9,

p l a i n t i f f , and o ther member ta.nl s v l t h which p l a i n t i f f confe r red , expected

and had a r i g h t to expect t ha t t h s Federal Reserve Board would, so modify

i t s r e g u l a t i o n s p e r t i n e n t to the subjec t as t o abandon a c o l l e c t i o n system

tha t the Supreme Court said i t was under no duty to adopt, and t h a t was i r -

r econc i l ab l e wi th the p rov i s ions of Sect ion 13 of the Federal Reserve Act as

amended, and t h a t Congress never intended i t t o e s t a b l i s h . More than a year

has e lapsed, and p l a i n t i f f i s informed tha t the only change of method au thor -

ized by the Federal Reserve Board has been to withdraw spec ia l c o l l e c t i o n

agents in whose hands checks on non-member banks ( r e f u s i n g to remit a t pa r )

were placed to be presented a t the counters of drawee banks and payment

thereof demanded in currency over the counter ; a p r a c t i c e which the Supreme

Court sa id was warfare on s t a t e i n s t i t u t i o n s and would sub jec t country banks

to se r ious l o s s by depr iv ing them of t h e i r ircoirs from exchange and reducing

*- t h e i r income producing a s s e t s to an

jnt tha t might render them inso lven t , (2b2 United S t a t e s 557-3)• But the

par l i s t s a r e s t i l l c i r c u l a t e d and s t i l l drawing to the Federal Reserve banks

fo r c o l l e c t i o n the l a r g e volume of checks tha t could otherwise be presented

in other ways; de fe r r ed c r ed i t i s s t i l l p r a c t i c e d without a l lowing any i n t e r -

es t on c r e d i t ba lances , and the income producing a s s e t s of a l l depos i t ing

members thereby reduced and no income from customary exchange charges the re -

on pe rmi t t ed . Since voluntary a c t i o n by defendants looking to the co r r ec t ion

of these p r a c t i c e s seems u n l i k e l y , the p l a i n t i f f now appeals to a court of


X-4i3i

equity fo r r e l i e f , on th- ground that such p r a c t i c e s are i l l e g a l and the

damages suffered by tho p l a i n t i f f , and s i l oth :r m:.rnb r banks i n 1 ike

s i t u a t i o n , cannot be adequately s s c . r t o i n j d 'and recovered, and they arc

t he re fo re romadiless a t law,

25-

P l a i n t i f f i s inform ,d by counsel, and thereupon a l l :ges , t ha t

under t h v. provis ions of s ac t ion 1} of th- Federal Reserve Act, Federal

Reserve Banks arc not authorized to r ecsive f o r c o l l e c t i o n any check or

d r a f t except from t h e i r r e spec t ive members, or depos i t ing non-m-mbers,

and no check or d r a f t that i s not payable on p r e s e n t a t i o n wi th in tho

d i s t r i c t of th. Federal Reserve Bank rece iv ing i t . P l a i n t i f f f u r t h e r a l -

leges on l i k e information tha t no check or d r a f t , drawn against depos i t s

i n p l a i n t i f f bank, or in any other member bank in the Sixth Federal Re-

serve D i s t r i c t , t ha t has be_n negot iated and deposi ted in any bank that i s

en t i t l ed by membership or a f f i l i a t i o n to clear through a Federal Reserve

Bank, i s l awfu l ly rece ivab le for c o l l e c t i o n by argr Federal Reserve Bank

outside of the Sixth Federal Reserve D i s t r i c t , nor by defendant Roserva

Bank except from one of i t s m-mb^rs or deposi t ing non-numbers. P l a i n t i f f

fu r the r a l l eges on information and b -1 i „ f t h a t , under the said regu la t ions

of th- Federal Reserve Board the defendant Reserve Bank does r s c e i v - for

c o l l e c t i o n chocks and d r a f t s from i t s members t ha t are payable in Fed ora l

Reserve D i s t r i c t s other than i t s own, and rece ives checks and d r a f t s for

co l l ec t ion from members in other d i s t r i c t s tha t ar , payable in the Sixth

D i s t r i c t ; that oth or Federal Reserve Banks, under the same r egu l a t i ons do

rece ive fo r co l l ec t ion* checks and d r a f t s payable in the Sixth Federal Re-

serve D i s t r i c t , including checks drawn agains t p l a i n t i f f , that are forwarded


X-U131

across d i s t r i c t l i n e s to defendant Federal Reserve Bank and remi t t ance

the re fo r required wi thout compensation. P l a i n t i f f a l l e g e s t h a t such

p r a c t i c e s a re unlawful as to i t and cause to i t l o s s and damage h e r e i n -

a f t e r s e t f o r t h .

2b.

P l a i n t i f f a l l e g e s upon informat ion and b e l i e f tha t such p r ac -

t i c e s are a p a r t of t h e scheme to e s t a b l i s h u n i v e r s a l par c learance as

he re inbe fo re desc r ibed ; tha t said scheme i s i r r e c o n c i l a b l e in law with

said Hard wick amendment and with the l i m i t a t i o n in Sect ion 13 to checks

payable wi th in the d i s t r i c t r ece ivab le only from members of the Federal

Reserve Bank to which such checks are del ivered for c o l l e c t i o n , and i t s

enforcement has h i t h e r t o in f r inged the lawful r i g h t s of p l a i n t i f f , and

a l l other member banks, and con t inua t ion thereof w i l l i n f l i c t i r r e p a r a b l e

damage and i n j u r y upon p l a i n t i f f and a l l other member banks i n l i k e s i t u -

a t i o n .

27-

On or about Ju ly 29, 1924, p l a i n t i f f tendered t o the defendant ,

Federal Reserve Bank of A t l an t a , a t i t s branch in New Orleans two excha ig

bank d r a f t s , payable a t p a r , in the aggregate sum of $4,gOb-97 to cover

the proceeds of c e r t a i n checks drawn on p l a i n t i f f ' s bank and forwarded to

said defendant by i t s member banks fo r c o l l e c t i o n and mailed t o the p l a in

t i f f by said defendan t for c o l l e c t i o n and remi t tance (said forwarding be-

ing by mail and known as "Daily B e t t e r s " ) . The amount of said exchange

d r a f t s equaled the face of said checks, l e s s r emi t t ance charges thereon


- 19 -x-i+131

(cal led exchange) aggregating $4,80, same being a t the r a t e of 10 cents

for eaflfc hundred d o l l a r s of the aggregate amount of said checks, as pro-

vided by Sect ion 13 of the Federal Reserve Act. At the same time and

place p l a i n t i f f tendered to the defendant , the Federal Reserve Bank of

At lan ta , two exchange bank d r a f t s in t h e aggregate syraeof $554,93 to cover

proceeds of c e r t a i n checks drawn on p l a i n t i f f ' s bank srd forwarded to

p l a i n t i f f by members of other Federal Reserve Banks in other d i s t r i c t s of

the Federal Reserve System, and not manbers of the Federal Reserve Bank

of Atlanta , vfco forwarded sane to said defendant across Federal Reserve

D i s t r i c t l i n e s fo r co l l ec t ion and i t forwarded same to p l a i n t i f f fo r pay-

ment and remittance as a f o r e s a i d . The amount of said remit tance d r a f t s

was 55 cents l e s s than the aggregate face of said checks, said deduction

being made to cover exchange thereon a t the aforesa id r a t e . Said defend-

ant r e f u s e s to accept said d r a f t s , or ei t i e r of them, without adding to

the amount thereof said deductions fo r exchange, %hich deductions plain'-

t i f f clMmed the legal r i g h t to make and co l lec t under the provis ions

of Section 13 d>f the Federal Reserve Act here inbefore re fer red to -

Thereupon, p l a i n t i f f was compelled to forego said exchange charge and to

pay said addi t iona l amounts, to i t s l o s s , bee ays e of the greater i n j u r y

i t would have suf fe red by embarrassing i t s deposi tors who drew said checks

against adequate balances on depos i t to the i r c r ed i t with the p l a i n t i f f .

Said payment of said exchange charges; was made under p r o t e s t , and was en-

forced by duress a foresa id in order to avoid grea ter l o s s to p l a i n t i f f ' s

business- Defendant 's r e f u s a l to permit said deduction for exchange was

a v i o l a t i o n of p l a i n t i f f ' s r i g i t s under the laws of the United S ta tes

a f o r e s a i d , Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

! 600 - ^ 2G -

28.

P l a i n t i f f f u r t he r a l leges tha t Jaici defendant , said Federal

Reserve Bank of At lan ta , act ing under mandatory in s t ruc t ions of the Fed-

eral Reserve 3oai'd, has refused to permit p l a i n t i f f to charge exchange

for remit tances tc cover checks drawn upon i t and forwarded to i t f o r

co l l ec t ion and remi t tance , in a l l respects l i k e the s p e c i f i c tenders and

r e f u s a l s se t for oh above, continuously since the f i r s t day of August, up

to date . The aggregate of checks thus forwarded and remit ted for by

p l a i n t i f f fo r account of member banks in the Sixth D i s t r i c t since August

1, 1913, Tip to Ju ly 15, igzlt, is approximately $4,750,000*00, snd p l , i n -

t i f f has been thereby i l l e g a l l y deprived of the value of i t s services in

making said remittances in the sum of not l e s s t han $4,750.00 by reason

oi i l l e g a l regu la t ions of defendants as aforesaid - During the same per-

iod p l a i n t i f f has been required by defendant , under said r egu la t ions , to

remit to defendant proceeds of checks drawn upon p l a i n t i f f f l o a t i n g

outside of the 6th Federal D i s t r i c t without permi t t ing an exchange charge

for said services i n an aggregate of approximately $3,500,000+00, the l e g -

i t imate exchange charges on .vhidb would have been not l e s s than $3,500.00*

P l a i n t i f f was e n t i t l e d to charge and c o l l e c t such exchange under the pro-

v i s ions of Section 13 of the Federal Reserve Act, out was not permitted tc

do so under d e f e n d a n t s regula t ions as aforesaid»

29.

P l a i n t i f f f u r t h e r a l leges that defendant reserve Bank, under

said regu la t ion of the Federal Reserve Eo^rd , r e fu se s to receive on de-

pos i t a t p a r , from P l a i n t i f f or from any other member bank in l i k e s i t u -


I 4" r*> A i KJ •_ Jil

-

a t i o n , checks and d r a f t s drawn against other member banks in the 6th

Federal Reserve D i s t r i c t as provided in Setetion l6 of Federal Reserve

Act, but defe rs c r e d i t avai lable to p l a i n t i f f , e i t h e r to increase i t s

reserves or f o r other u se s , f o r the length of time necessary to t r a n s -

mit said checks by mail to their several drawees and rece ive t h e i r pro-

ceeds in r e t u r n . P l a i n t i f f a l leges that said r e f u s a l to give i t immed-

i a t e c r e d i t for such funds i n f l i c t s i r reparab le i n ju ry upon i t , and has

forced i t in the; pas t to adopt and employ other means f o r the handl ing

of such c r e d i t s , to i t s i n j u r y , and the cont inuat ion of such p r a c t i c e

by the defendant Reserve Bank m i l i n f l i c t i r r epa rab l e i n ju ry upon

p l a i n t i f f ard a l l other member banks in l ike s i tua t ion*

30+

On or about July 2$, 1924, p l a i n t i f f presented to the said

federa l Reserve Bank of A t l an t a , at i t s New Orleans Branch, checks drawn

upon and payable by other banks in the Sixth Federal Reserve D i s t r i c t ,

each of which banks was a member of said Federal Reserve Bank, (and r e -

quired by law to maintain continuous deposi ts t h e r e i n ) , aggregating

$4,006«51* Each of said checks was duly endorsed to the order of said

Federal Reserve Bank of Atlanta , and p l a i n t i f f requested the face amount

of such checks to be placed to the c r ed i t of i t s rese rve account on de-

pos i t a t par as of the date same were tendered, md th i s request was de-

n ied , and only deferred c r ed i t given to p l a i n t i f f , r e s u l t i n g in the lo s s

to p l a i n t i f f of the use of the moneys represented by said checks f o r

about three days. The i n t e r e s t value of said funds to p l a i n t i f f fo r said


x-4 i3 i

time was $2,00, of vthieh p l a i n t i f f has "been deprived by reason of said

i l l e g a l r e fu sa l of said defendant to receive said checks on deposi t at

pa r , as provided "by. Section lb of the Federal Reserve Act. P l a i n t i f f

a l leges that said defendant , said Federal Reserve Bank/ has always he re -

tofore refused to rece ive from p l a i n t i f f l i k e checks on deposi t a t pa r ,

r e s u l t i n g in p l a i n t i f f having to use i t s correspondents to cl ear i t s

checks and r e t a i n balances wi th them as compensation t h e r e f o r , in addi-

t ion to the reserve balances p l a i n t i f f i s required by law to keep with

said Federal Reserve Bank- The amount of income-producing funds, thus

required to be kept id l e by p l a i n t i f f by reason of the i l l e g a l r e f u s a l

of defendant , Federal Reserve Bank, to comply with the provisions of

Section l 6 of the Federal Reserve Act, has caused a loss t o p l a i n t i f f

of approximately $4,500 since August 1 , 1913.

31*

P l a i n t i f f a t taches here to and makes a pa r t hereof with usual

leave of r e f e r ence , marked Exhibit nB!T, a copy of the wr i t t en r e f u s a l

of defendant * the Federal Reserve Bank of At lanta , dated Ju ly 31* 1924,

to accept the remit tances for d a i l y l e t t e r s , l e s s exchange charges, as

alleged in paragraph 27 $ aid r e f u s i n g to receive on deposi t a t par the

checks on other banks in the said Federal Reserve D i s t r i c t t h a t are mem-

bers of the Federal Reserve Bank of At lan ta , as alleged in paragraph 33

of t h i s b i l l *


? r V O

~ 2 5 ™ x-i+131

33.

P l a i n t i f f f u r t h e r a l l eges , as a matter of 1 aw, tha t n e i & e r

Section 13 nor Section l6 of the Federal Reserve Act fo rb ids p l a i n t i f f

or any other member bank to charge exchange except against Federal Re-

serve Banks themselves; on the contrary said Act expressly author izes

and preserves the r i g h t of p l a i n t i f f and other member banks to make

reasonable charges against each other , to be determined and regulated

t>y the Federal Reserve Board f o r the co l lec t ion and payment of checks

and d r a f t s arri the remission therefor by exchaage or otherwise. P l a i n -

t i f f a l l eges that the continued i l l e g a l operat ion of the c o l l e c t i o n de-

partment of the Federal Reserve System as here inbefore se t dtvfc,";in which

a l l of the defendants p a r t i c i p a t e , wi l l deprive p l a i n t i f f , snd a l l other

member banks in l i k e s i t u a t i o n , of the b e n e f i t of t h i s r i g h t to i t s and

their i r r eparab le injury*

33*

P l a i n t i f f f u r t h e r a l leges as a matter of law that the c o l l e c t -

ion and clearance funct ions of defendant Reserve Bank, as a p a r t of the

Federal Reserve System, are l imited by the memoership of banks for which

they may act as c o l l e c t i n g agents , and by the r i g h t of p l a i n t i f f and other

member banks in l i k e s i t u a t i o n to charge exchange as here inbefore se t out .

The defendants he re to have disregarded these l i m i t a t i o n s in the p a s t , and,

by their r e fusa l to modify said r egu la t ions , evidence their purpose to

continue such disregard in the f u t u r e , and thereby p l a i n t i f f and other

member banks i n l i k e s i t u a t i o n are deprived of the i r r i g h t s under said

law, to i t s and t h e i r i r r epa rab le in ju ry-


- & - X-U131 5. "R <-•

34.

P l a i n t i f f a l l eges on information and "belief tha t Sie expense

of operat ing the c o l l e c t i o n system of the Twelve Federal Reserve Banks

has reached such proport ions as to ser ious ly threaten the a b i l i t y of a l l

of them, and espec ia l ly the defendant Reserve Bank, of %hidi p l a i n t i f f

i s a member and s tockholder , to earn the s ix per cent per annum d i v i -

dends tha t member banks arc l imited to by s t a tu to ry compulsion, on the

cap i t a l stock of said Reserve Banks paid in by them. P l a i n t i f f a l l eges

on information and be l i e f that the expansion of t h i s i l l e g a l c o l l e c t i o n

system has caused defendant to e rec t a l a rge add i t ion to i t s bu i ld ing

in t he c i t y of At l an ta , and to employ and compensate l a rge numbers of

clerks that would be unnecessary i f defendant bank was permitted by the

Federal Reserve Board to confine i t s co l lec t ion or t r a n s i t department

to i t s own members and a f f i l i a t e d members and checks and d r a f t s l imi ted

ano described in the Federal Reserve Act os aforesaid* P l a i n t i f f has

reason to f e a r that the increase of t h i s expense t o meet the normal i n -

crease of the volume of business as the country grows wi l l r e s u l t i n

enforced increase of discount r a t e s , or in assessments on the members, i n -

cluding p l a i n t i f f , to make up the consequent d e f i c i t of earnings to meet <

operat ing expenses, to the i r r epa rab l e i n j u r y of p l a i n t i f f and o ther s tock- •

holders in l i k e s i t u a t i o n ,

35*

P l a i n t i f f a l leges tha t the i l l e g a l r egu la t ions and p r a c t i c e s a -

foresa id d ic ta ted by the Federal Reserve Board, and carr ied out by the

Federal Reserve Bank of Atlanta a foresa id ,hcve in jured and damaged p l a i n -

t i f f in the sum of $12,750*CO p r i o r to the f i l i n g of th i s b i l l and the con-

tinuance of said p r a c t i c e w i l l i n f l i c t i r r epa rab le l o s s , in ju ry and damage

upon p l a i n t i f f , snd upon a l l other member banks in the Federal Reserve system.


- £ 5 - X - 4 1 j l

36.

P l a i n t i f f a l l e y s that the controversy s e t f o r t h in t h i s b i l l

a r i s e s "finder the Cons t i t u t ion and Laws of the United S t a t e s and t he mat-

t e r in controversy exceeds, exclusive of i n t e r e s t and c o s t s , the sum or

value of Three Thousand ( $ 3 , 0 0 0 . 0 0 ) Do l l a r s ,

PRAYERS 07 TEE PILL

WHEREFORE , the premises cons idered , p l a i n t i f f prays for the

issuance of t h e w r i t of i n j u n c t i o n of t h i s Honorable Court d i rec ted to

the de fendan t s , t h e i r o f f i c e r s and agents permanently en jo in ing them

as fo l lows;

1* That the defendant Federal Reserve Bank of At lanta be perman-

ent ly enjoined from d e f e r r i n g c r e d i t on a l l depos i t s made or tendered to

i t by the p l a i n t i f f , as 3 member bank, of a l l checks and d r a f t s drawn a -

gainst depos i t s i n any other member bank in the Sixth Federal Reserve D i s t -

r i c t , and t ha t pending f i n a l decree a r e s t r a i n i n g order to the same e f f e c t

be g ran ted .

2. That the defendant Federal Reserve Bank of At lanta be p e r -

manently enjoined from accept ing fo r c o l l e c t i o n any check or d r a f t drawn the

u p o n / p l a i n t i f f fo r account of any o ther member bank or Reserve Bank in the

Federal 2ieserve system without provid ing for the deduct ion from the p r o -

ceeds thereof 3 reasonab le exchange charge not exceeding t e n cents tor each

hundred d o l l a r s or f r a c t i o n thereof to be paid or allowed to the p l a i n t i f f

for the se rv ice of r emi t t i ng the proceeds of a l l such checks or d r a f t s from

i t s banking house to the Federal Reserve Bank t h a t p r e s e n t s such checks or

d r a f t s in r e g u l a r cour se , and t h a t pending f i n a l decree a r e s t r a i n i n g o r ^ e r

to the same e f f e c t be gran ted .


3* That the Federal ReserveBank of Atlanta be enjoined from

accept ing f o r c o l l e c t i o n or deferred c red i t from any bank other than

i t s own members any check or d r a f t , and from i t s own members any check

or d r a f t tha t i s not payable upon p resen ta t ion wi th in the Sixth Federal

Reserve D i s t r i c t , and tha t pending f i n a l decree a r e s t r a i n i n g order to

the same e f f e c t be granted.

4* That the Federal Reserve Board, and Joseph A* MeCord, o f f i -

c i a l Representat ive of said Board in the Sixth Federal Reserve D i s t r i c t ,

be enjoined from promulgating and enforcing the provis ions of Regulation

,TJ,! tha t operate to deprive p l a i n t i f f of i t s r igh t to charge lawful

r a t e s of exchange f o r the co l l ec t ion and remittance of the proceeds of

checks and d r a f t s drawn upon p l a i n t i f f and presented f o r payment by or

through the Federal Reserve Bank of Atlanta in regular banking channels

by mail , in a l l cases where such checks and d r a f t s a re received by said

defendant Federal Reserve Bank f o r co l l ec t ion f o r account of i t s members,

or fo r account of any member of any other Federal Reserve Bank, and tha t

pending f i n a l decree a r e s t r a i n i n g order to the same e f f e c t be gzanted.

That the Federal Reserve Bank of A l an ta be enjoined from

exacting of p l a i n t i f f , or any other member bank in the Sixth Federal

Reserve D i s t r i c t , the service of co l l ec t ing , paying and remi t t ing the

proceeds of any check or d r a f t drawn upon p l a i n t i f f or any member bank

in l i k e s i t u a t i o n , without compensation t h e r e f o r , f ixed by lav- a t not ex-

ceeding t e n cents per hundred do l l a r s ($100*00) or f r a c t i o n t he reo f ,

based on the t o t a l of such checks and d r a f t s presented a t any one time,

and tha t pending f i n a l decree a r e s t r a i n i n g order to the same e f f e c t be

g ran ted .


•' - I

- 27 -X-U13I

6, That an accounting be had between the p l a i n t i f f and

Federal Reserve Bank of At lanta cf the amconts of exchange and in-

t e r e s t earnings of v.'hich i t has been i l l e g a l l y deprived up to date

of decree, by reason of v io l a t i on of said provis ions of Section 13

and l 6 of the Federal Reserve Act by defendant; and t h a t decree be

rendered aga ins t said defendant, Federal Reserve Bank of At lanta , f o r

the recovery of said sums,.

7, That an accounting be had between the Federal Reserve

Bank of At lanta and a l l o ther member banks that sha l l h e r e a f t e r be

allowed to intervene as p a r t i e s p l a i n t i f f in t h i s cause, of the amounts

of exchange and i n t e r e s t l o s ses of which said in terveners have been

i l l e g a l l y deprived to date of decree by reason of the v i o l a t i o n of

the said provis ions of Sections 13 and 16 of the Federal Reserve Act,

by defendant; and that decree be rendered agains t said defendant . f o r

the recovery of said sum.

S. P l a i n t i f f prays f o r the wri t of subpoena to be issued

and served as usual under the Rules of the Court, and f o r such other

general r e l i e f as m y to the Court be deemed j u s t and equ i t ab le .

Smith, Hammond & Smith, At lanta , Georgia,

Denny & Heidelberg, Pascagoula, Miss. _

S o l i c i t o r f o r P l a i n t i f f of Counsel.


STATE OF MISSISSIPPI )

COUNTY OF j

Personal ly appeared before the undersigned au tho r i t y H. C,

HERRING-, P res iden t of the P l a i n t i f f in the above cause, who, being duly

sworn as to the t r u t h of the a l l ega t ions made in the above b i l l , says th

he has read the foregoing b i l l and knows the con-cents t h e r e o f , and that

the same i s t r u e to his own knowledge, except as to mat ters therein s t a t

on information and b e l i e f , and as to those mat ters he be l i eves them "»•«?>

to be t rue .

Sworn to and subscribed )

before me t h i s \

day of ,1924. )

N. P. County, Miss. )

The foregoing b i l l has been presented to me and i s sanctioned

and ordered f i l e d . Let defendants be served as usual and show cause bef•

me a t the U. S. Court House, At lanta , Georgia, at 10:00 a 4 c lock A. M.

October 2nd, 1924, why an in te r locu to ry i n junc t ion should not issue as

prayed.

This August 8th, 1924.

Samuel H. Sibley

U. S. Judge


EXHIBIT' A X-41J1

NATIONAL AND. STATE BANKERS' PROTECTIVE ASSOCIATION

Pres ident Chas. De B. Claiborne GENERAL COUNSEL Vice-President Whitney-Central National Bank Alexander W. Smith

New Orleans, l a . . . At lan ta , Ga Washington, D. C.

GENERAL SEC'TY-TREAS. L. R. Adams.

SECRETARY-TREASURER COUNTRY BANKERS' ASSOCIATION OF GEORGIA

ATLANTA, GEORGIA-512 Haas-Howell Bldg. At lanta , Georgia.

, AT LA FT A, GEORGIA, September 1, 1523.

HON. D. R. CRISSINGER, Governor Federal Reserve Board,

Washington, D. C.

Dear Sir

Six years ago, pursuant to i t s conception of i t s du t i e s and powers,

the Federal Reserve Board inaugurated a system of so-ca l led "universal

par clearance" and thus assumed, in the Federa l Reserve System, the sole

• respons ib i l i ty f o r the pol icy in reference there to which has governed a l l

Reserve Banks in the i r operat ions up to t h i s time.

Out of t ha t pol icy has grown a controversy which fo r years has divide:

the banking f r a t e r n i t y into p r a c t i c a l l y two opposing camps, and has r e s u l t e d

in long dravm out l i t i g a t i o n between Federal Reserve and non-member banks;

and apparently the end i s not ye t .

With a l l of t h i s you a re , of course, e n t i r e l y f a m i l i a r .

fhe reasons , aims, purposes and motives of the Federal Reserve Board in

adopting th i s p o l i c y have been much controverted and debated i n banking c i r c l e

and were o f f i c i a l l y announced from time to time by former Governor Hording,

under whose adminis t ra t ion t h i s pol icy was adopted.

In a l e t t e r to Hon. Edmund P i a t t , Chairman of the Houaa- Committee on

Banking and Currency, d^ted May 5. ^ 0 , Governor Harding started:


I r / r Exhibit ,4 No. 2.1 v—*- '

The Board bel ieves that i t i s charged, with the duty ana

r e s p o n s i b i l i t y of inaugurating a complete check c lea r ing system through-

out the United S ta t e s , that the Federal Reserve Banks in compliance with

the evident purpose of the law and in f a i r n e s s to a l l the i r member banks

must exercise t h e i r power to rece ive fo r c o l l e c t i o n from those memeet

banks checks upon whomsoever drawn which a re payable upon p re sen t a t i on .

* * * * While banks are s t i l l authorized to charge each other f o r such

service , they a r e prohibi ted from charging the Federal Reserve Banks, which

a re required to rece ive from member banks a t par a l l checks which a r e

payable upon p re sen t a t i on .

Before the House Committee on Rules, On flay 4, 1920, Governor Harding

made the fo l lowing statement:

"All the Board i s t ry ing to do i s to carry out the law as we

understand i t j and the point we want to make i s tha t i f the law should be

amended so t h a t non-member banks may be permi t ted to charge exchange,

tha t the law be amended in a way broad enough to permit member banks to

make the same charge ."

On May 1920, a t a hear ing before the Federal Reserve Board on

complaints of S t a t e banks of Nebraska and o thers agains t a l l eged methods

of check c o l l e c t i o n of Federal Reserve Banks, Governor Harding m=4e the

following s ta tements :

We have no r i g h t , nor have we ever attempted, to manufacture

the law. That i s not our province. I t i s our duty, however, t o carry out

the provis ions of the Federal Reserve Act, as we understand those

provis ions and as they have been in t e rp re t ed to u s . * * * *

Now, un fo r tuna t e ly , the re i s a d i f f e r e n c e of opinion as to whet

the law means. The Federal Reserve Board has considered the matter very Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Exhib i t A No. 3< X-U13I.

c a r e f u l l y - no t h a s t i l y in any v,ay - and. »ve have load i t f o r t h ree years

now, and we a r e s a t i s f i e d t h a t what we a r e doing i s along the l i n e of

car ry ing out the i n t e n t of the Federal Reserve Act, t ha t i s , the re sna i l

be a un ive r sa l c l e a r i n g house es tab l i shed f o r American checks * * *' *

The Board does net f e e l that i s has any option under the law

as i t now s tands , We f e e l t h a t we are bound to at tempt to pu t tha t

p o l i c y in to e f f e c t , to put in e f f e c t a u n i v e r s a l system, and i f obs tac les

a r e thrown in our way to such an extent t h a t we cannot do i t , then i t i s

no t our f a u l t . .

* * * * but the Federal Reserve Board cannot be guided by sentiment.

Vie have a duty to perform; we have taken a solemn, oath of o f f i c e to t ry

to i n t e r p r e t the law c o r r e c t l y and adminis ter i t in accordance with the

i n t e r p r e t a t i o n which we have conceived to be c o r r e c t . If we a r e mis-

taken in that you have the Court to appeal to , on one s ide , and the

Congress to appeal to on the o the r .

These u t t e r a n c e s s t i l l remain the l a s t pu o l i c s t a t euen t of the Board 's

aims, purposes and po l i cy in regard to t h i s mat te r , and u n t i l superseded by

some l a t e r o f f i c i a l d e c l a r a t i o n , must be taken as s t i l l r e p r e s e n t a t i v e of

i t s p o s i t i o n ,

Tne suggested appeal to the Courts was taken and, s ince those

statements were made, n o t only has the personnel of the Board l a rge ly

changed, out upon three occasions the Supreme Court of the United S t a t e s

has handed down opinions end dec i s ions on the law governing the c l ea r ing

func t ions of the Reserve Banks, and cons t ru ing the Federal Reserve Act in

r e l a t i o n t h e r e t o .


Exhibit A No. 4 . X-4-131.

Inasmuch, as these opinions d i f f e r widely, in ir.any uiater ial respects ,

from the Board 's previously announced o f f i c i a l cons t ruc t ion of the law,

i t would seem tha t a l l i n t e r e s t e d banks (and that includes every bank

in the United S ta tes ) are now e n t i t l e d to be s p e c i f i c a l l y enlightened as

to the present Board's f u t u r e po l icy on t h i s mat ter , and we f e e l sure that

the Board w i l l be glad to give us a f u l l and f r a n k reply to the many

quest ions upon which the Board's present p o s i t i o n i s now in doubt.

This Associat ion i s composed of both member and non-member banks,

and i s t he r e fo r e in t e res t ed in the whole sub jec t of par c learance equally

from the s tandpoint of both c l a s se s of banks.

These quest ions a r i s e wholly apart from any cons idera t ion of the so-

ca l l ed Claiborne-Adams p lan , and would not be wholly answered even in the

contingency of t h a t plan being adopted.

We regre t the necess i ty of going in to the mattar to the extent of

the unusual length of t h i s l e t t e r , but mast p lead the great importance

and complexity of the subject as j u s t i f i c a t i o n .

Although i t may be u rg jd by some tha t the Supreme Cour t ' s opinion

in c e r t a i n p a r t i c u l a r s may be capable of divergent cons t ruc t ion , yet

i t must be conceded tha t , f o r the most pu.rt, i t s f indings are se t out

in language too c lea r and unequivocal to be misunderstood,

In view of the Supreme Cour t ' s statement regarding the a l leged

duty imposed by the law to e s t a b l i s h a system of un iversa l par clearance

from which we quote as fo l lows :

Congress did not i n terms confer upon the Federal Reserve

Board or the Federal Heserve Banks a duty to e s t a b l i s h un ive r sa l par


Exhib i t A Fo. 5- • i~*

c lea rance and c o l l e c t i o n of checks; an-: t h e r e i s nothing in the o r i g i n a l

a c t or in any amendment from which such duty to compel i t s adopt ion

may be i n f e r r e d . The only s e c t i o n s which in any way dea l wi th e i t h e r

c lea rance or c o l l e c t i o n a re 1 j and 16. In n e i t h e r sec t ion i s there

any suggest ion t h a t the Reserve Board and the Reserve Banks s h a l l be-

come an agency f o r un ive r sa l c learance . On the con t ra ry Sect ion lb

s t r i c t l y l i m i t s the scope of t h e i r d u r a n c e f u n c t i o n s . I t p rov ides

t ha t the Federal Reserve Board:

may a t i t s d i s c r e t i o n exe rc i se tne f u n c t i o n s of a c l e a r i n g house

f o r such Federal Reserve Batiks * * * and may a l so r equ i r e each sach

bank to exe rc i se the funct ions, of a c l e a r i n g house f o r i t s member banks.

There i s no r e f e r e n c e whatever to "par11 in Sect ion 13, e i ther

as o r i g i n a l l y enacted or as attended £,-om time to time. There i s a

r e f e r e n c e to "par11 in Section l o j and i t i s so c l ea r and e x p l i c i t as t o

prec lude a c o n t e n t i o n . t h a t i t has any app l i ca t i on , to non-member banks;

or to the o rd ina ry process of check c o l l e c t i o n here involved —

we de s i r e to i n q u i r e i f the Federal Reserve Board s t i l l adheres to tne

view that i t i s under any duty or mandate to e s t a b l i s h such "par c learance

system" and to maintain and cont inue to ope ra t e tha t v»nich i t has

e s t ab l i shed?

Or must we not assume t h a t the Borrd has adopted t ne opinion of one

Supreme Court , t h a t the law imposed no euch duty , and con ta ins nothing

from which i t might be i n f e r r e d ?

I f , as the Supreme Court has s t a t e d , "The Federal Reserve Board may

a t i t s d i s c r e t i o n , exe rc i se the f u n c t i o n s of a c l e a r i n g house fo r such

Federal Reserve Bank * * * * and may a l s o r e q u i r e each such bank to

exe rc i se the f u n c t i o n s of a c l e a r i n g house f o r i t s member b a n k s , " Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

~ J* / !

Exhibi t A. No, 6. X-4131

such i s i t no t equa l ly wi th in i t s d i s c r e t i on to a b o l i s h / a c t i v i t y ?

I t has been claimed and. seems to be conceded tha t i t i s the duty of

the Reserve £®ard to cons t rue the Federal Reserve Act f o r the System,

to announce p o l i c i e s requi red by or pe rmi t t ed under the Act and to pro-

vide r e g u l a t i o n s f o r p u t t i n g same in to e f f e c t , and t o superv i se the

execution of such p o l i c i e s by the Federal Reserve Banks and t h e i r agents .

If i t i s t he Board 's duty to see tha t p o l i c i e s p rope r ly promulgated

under the terms of the Act a r e c a r r i e d ou t , i s i t no t equa l ly the Board 's

duty to immediately abandon a previous p o l i c y t h a t has been dec la red by

the Supreme Court to be beyond the purview of the law and t o see to i t

' t h a t a l l Federal Reserve Banks and t h e i r agents cease e f f o r t s to enforce

such pol icy?

I s i t no t a l so the Board ' s duty to supe rv i se and prevent and f o r c e

i f necessary the d iscont inuance of unlawful and u l t r a v i r e s a c t s of the

agents of the Reserve Banks?

Again quot ing from the C o u r t ' s opinion:

The power of the Federa l Reserve Board to e s t a b l i s h par c learance

was, thus , l i m i t e d by the u n r e s t r i c t e d r i g h t of u n a f f i l i a t e d non-member

banks to make a charge f o r exchange and the r e s t r i c t e d r i g h t of members

and a f f i l i a t e d non-members to make the charge the re fo r f i xed a s reason-

ab le by the Federa l Reserve Board.

How, when, and to what extent does the Federa l Reserve Board now

purpose to recognize and abide by the l i m i t a t i o n s upon i t s power to

e s t a b l i s h par c l ea rance , which tne Supreme Court says the law placed

upon i t ?


Exhibit A. No. 7-2-4131.

What power, i f any to e s t a b l i s h par c learance , does the Board now

claim to possess , or undertake to exerc ise , which to any extent renders

nugatory or in any way ac t s t o abridge or to prevent the exerc i se and exchange

enjoyment of trie r i gh t s of member or non-member banks to charge |as thus

described by the Supreme Court?

Not only i s the power of the Board to e s t a b l i s h par c learance l imited

by the r i gh t s of banks to charge exchange as s e t out by the Court, to an

extent which, i f recognized and observed would render i t s establishment

impossible, but the court a lso sa id :

Moreover, the contention tha t Congress has imposed upon the

Board the duty of e s t ab l i sh ing universa l par c learance and co l l ec t i on of

checks through the Federal Reserve Banks i s i r r econc i l ab l e with the

spec i f i c provis ion of the Hardwick amendment which declares t h a t even

a member or an a f f i l i a t e d non-member may make a l imited charge (except

to Federal Reserve Banks) f o r "payment of checks and * * * remission

therefor by exchange or o therwise ,"

If i t s establishment i s i r r econc i l ab l e with the s p e c i f i c provision

of the Hardwick amendment ( to the Federal Reserve Act) as the Supreme

Court says i t i s , how i s i t poss ib l e to reconci le the continued operation

of the system as es tabl ished and which d e f e a t s the purpose of the Hardwick

amendment as i n t e rp re t ed by the Supreme Court?

The Supreme Court f u r t h e r sa id :

The r i g h t to make a charge f o r payment of checks, thus regained

by merit)er and preserved to a f f i l i a t e d non-member banks, shows tha t i t was

not intended, or expected, t h a t the Federal Reserve Banks would become


Exhibi t A. No, 8. X-41J1.

the universa l agency f o r c learance of checks. For, since aga ins t these

tne f i n a l c lause prohib i ted the making of any charge, tnen i f the Re-

serve Banks were to become the universa l agency for c learance , there

would be no opportunity f o r any bank to make as against any bank a charge

fo r the "payment of checks."

The Supreme Court having said " i t was not intended, or expected (by

Congress) tha t the Federal Reserve Banks would become the un ive r sa l

agency f o r the clearance of checks", and the present system avowedly

having that o b j e c t , what change, i f any, does the Board contemplate

making in the presen t c l ea r ing system in order to comply with the in ten t ion

and expectat ion of Congress as enacted in the law and pointed out by the

Supreme Court, so as to cease to be "the un ive r sa l agency f o r the

clearance of checks?"

Qaoting the Supreme Court f u r t h e r :

The purpose of Congress in amending Section 13 by the act of

1917, was to enable the Board to o f f e r to non-member banks the use of

i t s f a c i l i t i e s which i t was hoped would prove a s u f f i c i e n t inducement

to them to forego exchange charges; but to preserve in non-member banks

the r i g h t to r e j e c t such o f f e r ; and to p r o t e c t the i n t e r e s t s of member

and a f f i l i a t e d non-member banks ( i n competition with the n o n - a f f i l i a t e d

s t a t e banks) by allowing a l so those connected with the Federal system

to make a reasonable exchange charge to o thers than the rese rve banks.

The power of the Federal Reserve Board to e s t a b l i s h par c lea rance was,

thus , l imi ted by the u n r e s t r i c t e d r igh t of u n a f f i l i a t e d non-member banks


J ,•;-*• .<? W

Exhibi t A* No, 9» x-4131.

to make a charge f o r exchange and the r e s t r i c t e d r i gh t of members and

a f f i l i a t e d noh-members to make the charge t h e r e f o r f i x e d as reasonable

by the Federal Reserve Board.

The reasons which impelled the Supreme Court to conclude thau thi = vvas

n e t intended nor expected r e l a t e to member banks and a f f i l i a t e d non-

members and not tc- u n a f f i l i a t e d non-members. And tne Supreme Court

po in t s out tha t through the Hardwick amendment member bauks regained

"the r igh t to make a charge f o r the payment of cnecks.»

I s i t , then , the purpose of the Federal Reserve Board to recognize

tha t member banks have regained the r i g h t to charge exchange?

How w i l l i t be recognized?

Ihen w i l l the member banks be permi t ted to begin making such charge?

To what extent w i l l t h i s r i g h t be recognized?

On what c l a s s e s of checks w i l l members be permit ted t o make such a

charge?

As Reserve Banks now c l e a r a l l checks on member .8 m;.J, and permit no

charge, what c l a s s e s or d iv i s i ons of checks w i l l the Reserve Banks d i s -

cont inue handl ing so as to al low member banks to exerc ise the r i gh t to

make the charge which the Supreme Court said they regained the r i gn t to

make?

Through u s , member ba_nks a re now saying to you:

"Due t o a m i s i n t e r p r e t a t i o n of the law by the Federal Reserve Board,

which was charged with the duty and r e s p o n s i b i l i t y of i n t e r p r e t i n g and

adminis te r ing the law, we nave f o r s ix years been wrongful ly deprived of


Exhib i t A* No. 10. * X - 4 l j l

a l a rge p a r t of our r i g h t f u l revenue which the Supreme Court has said

Congress intended fo r us to have, and we now ask the Board i f i t i s

going to s t i l l maintain a system and po l i cy wnicn wi l l cont inue to deprive

us of t h i s revenue in the f u t u r e as i t has in the pas t?

"Or, on the other nand, w i l l you change t h a t po l i cy and system

so as to r e s t o r e to us the enjoyment of t h a t revenue?

"On June 11, l>-3* the Supreme Court announced tna t oy the Hardwick

amendment member banks regained tne r i g h t t o charge exchange - the

Hardwick amendment âs enacted June 21, 1$17, ye t s i x yea r s l a t e r ,

we are s t i l l denied the p r i v i l e g e of e x e r c i s i n g and enjoying the b e n e f i t s

of t ha t r igh t s

"A pol icy adopted by your board deprived us of our r i g h t , wnich we

want - must we not assume t h a t the Board w i l l now follow the Supreme

Court*s dec i s ion aid r e s t o r e i t ?

"The admin i s t r a t i on of former Governor Harding inaugura ted t h i s

p o l i c y of pa r c l ea rance , and was l a r g e l y r e s p o n s i b l e f o r i t s opera t ion

up to June 11, 1923, but s ince the Supreme C o u r t ' s dec i s ions on tha t

d a t e , does not the sole r e s p o n s i b i l i t y f o r i t s continuance in l i g h t of

those dec i s ions r e s t on the p r e s e n t Board?

"Must we no t f e e l t h a t t h e present Board w i l l be r e s p o n s i b l e f o r

whatever exchange revenue we may be deprived of since tha t da te?"

What i s the Board ' s cons t ruc t ion and a p p l i c a t i o n of tha t c lause of

the Supreme C o u r t ' s decision in the A t l an t a case , as f o l l o w s :

But the c l a s s of checks to which the Reserve Bank's c o l l e c t i o n

se rv ice might l e g a l l y be a p p l i e d , was l e f t by the amendment as those

"payable upon p r e s e n t a t i o n wi th in i t s d i s t r i c t . "


I f )

^ ' Exhibit A. No. 11.

X-4131.

I s not t h i s l imi ta t ion upon the c l a s s of checks v,hich may be l ega l ly

received by the Federal Reserve Banks j u s t as d e f i n i t e as though t h i s

sentence read: "Bat the c l a s s of checks to which the Reserve Banks'

co l l ec t ion se rv ice nay be l e g a l l y applied a re those payable wi thin i t s

d i s t r i c t ? "

To give fo rce tc t h i s q u a l i f i c a t i o n riuot i t not be held tha t the

co l l ec t ion system of each Federal Reserve Bank i s l ega l ly r e s t r i c t e d to

checks payable within i t s own d i s t r i c t , and to receive checks payable in

any other d i s t r i c t save i t s own i s an i l l e g a l appl icat ion of i t s co l l ec t ion

service?

I t i s undeniably true t h a t there a r e today thousands of banks on

the par l i s t as a r e su l t of the statements and represen ta t ions made to

them by the Federal Reserve Board, and i t s then Governor, and the Federal

Reserve Banks and the i r o f f i c e r s and se rvan t s , tha t the law required the .

establishment of a un iversa l par -c learance system, and tnat the law had

deprived these banks of the r i g h t to charge exchange,

The Supreme Court having completely exploded both of these contentions

and having held tha t there was no such duty imposed by the law, and

nothing from which i t may be in fe r r ed - t h a t i t was not intended or ex-

pected that i t would become the universa l agent for the c o l l e c t i o n of cnecks,

tha t i t s ;ower to e s t a b l i s h such a system was l imi ted to such an extent

as to render i t impossible of accomplishment and f i n a l l y tha t the

establishment of i t s system i s i r r econc i l ab l e with the e g r e s s provis ion of


Exhibit A, No. 12. X-Ulj l .

the Hardvrick amendment - what expression or ac t ion i s the Board now

going to take to correct these erroneous s tatements as to the law and i t s

r eqc-i rement s ?

As a r e s u l t of these mis in t e rp re t a t ions by the Board of the law and

i t s requirements mil l ions of checks are being da i ly c leared a t pa r , which

would otherwise be subject to exchange charges . Is the Board content for

the system to remain, the benef ic ia ry of misplaced r e l i ance on the

correctness of the Board's const ruct ion of the law?

Or, wil l you say to these s t a t e Ocnks in e f f e c t , "We were mistaken;

we misconstrued the law and mistakenly s t a t ed i t s requirements to you;

we are not r equ i red to inaugurate universa l par clearance and i t was

not expected or intended tha t we should become universa l agency fo r the

clearance of cnecks ," Are you going to t e l l these s t a t e banks that

the Federal Reserve Act did not and does not undertake to des t roy the

s t a t e banks' r i g h t to charge exchange, but on the other hand t h a t the

s t a t e banks are f r e e to accept or r e j e c t the par clearance system and to

withdraw from the par l i s t without fear of open or secret r e p r i s a l s ?

All of tne questions which we nave herein propounded being important

and pe r t i nen t to a matter of publ ic po l i cy so le ly within the d i sc re t ion

and j u r i s d i c t i o n of the Board, we t r u s t i t w i l l be e n t i r e l y convenient

and agreeable f o r you to give us an ea r ly , f u l l and d e f i n i t e rep ly to

each, as our immediate f u t u r e conduct must necessa r i ly be l a r g e l y in-

f luenced thereby.

Respec t fu l ly ,

(Signed) L« R. ADAMS.

GENERAL SECRETARY-Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

' - • I'" JJL.

Exh ib i t B. X-4131.

NTSV/ ORLEANS BRANCH FtL'DEEAL RESERVE BANK OF ATLANTA

New Orleans , Ju ly 31, 1$24.

Pascagouia Na t iona l 3?IIK,

Pascagoula, Miss. At ten t ion Mr. K. C. Earr ing , P r e s i d e n t .

Pascagouia Nat iona l Bank,

Moss P o i n t , Miss,

Gentlemen:

We have yours of the 23 th , enclosing d r a f t on the Marine Bank and

T r u s t Company f o r $2,263.21 which you ^ t a t e in your l e t t e r i s to cover

proceeds of cash l e t t e r of the Federal Reserve Bank of A t l an t a (New

Orleans Branch) dated Ju ly 26th, 1924; l e s s a charge thereon of $2,>6

which you hav3 deducted on account of the Remittance.

In your l e t t e r you s t a t e , "We claim the r i g h t to deduct the f o r e -

going remi t tance or exchange charge under p rov i s i ons of Sect ion 13 of the

Federal Reserve Act as amended, as lawful cha rges . "

\7e a l so have your l e t t e r of July 29, enc los ing d r a f t on the Marine

Bank and Trus t Company, f o r $332*96 which you s t a t e in your l e t t e r i s t o

cover proceeds of cash l e t t e r of the Federa l Reserve' Bank of At l an ta

(New Orleans Branch) dated Ju ly 26, 1924, l e s s a charge of 3 3 cen t s , which

you have deducted on account of the r emi t t ance .

In the l a s t mentioned l e t t e r you s t a t e "In as much as the endorsements

on these checks show tha t taey have come to you from banks i n other


Exhibi t B. No. 2,

X - 4 1 3 1 .

Federal Reserve D i s t r i c t s , and. t ha t you are a c t i n g as Co l l ec t ion Agent

only, we c la im t h e r i g h t to deduct the fo rego ing remi t tance or exchange

charge under p rov i s ions of Sect ion 13 of the Federal Reserve Act as

amended, as l awfu l charges .»

lie a l so have your l e t t e r , l ikewise , of J u l y 29, 1924, enclos ing

d r a f t on the Canal Commercial Trus t and Savings Bank f o r $221.97, which

you s t a t e in your l e t t e r i s to cover proceeds of our da i l y l e t t e r of

Ju ly 28th, l e s s a charge thereon of 22 c e n t s , which you have deducted

on account of t he remi t tance .

In t h i s l a s t l e t t e r you make the same observa t ion with r e spec t t o

the reason f o r deduction t h a t you make in the l e t t e r concerning the d r a f t

f o r $332.96,

We a l s o have your l e t t e r of July 29 enclos ing your d r a f t on the

Canal Commercial Trust and Savings BsnK f o r $ 2 , 5 ^ 3 - > which you s t a t e

in your l e t t e r , i s to cover proceeds of our d a i l y l e t t e r of J u l y 23th

l e s s a charge thereon of $2.$4 which you have deducted cn account of

the r emi t t ance .

In t h i s l a s t mentioned l e t t e r you c la im the r i g h t to make the deduction

"because the i tems covered by t h i s remit tance have been handled fo r the

account of t he severa l banks sending the same t o u s .

With r e spec t to eacn of the aforementioned d r a f t s you say "If t h i s

remi t tance i s no t accep tab le , p l e a s e r e t u r n i t a t once ." Inasmuch as

t h i s Bank i s forbidden by law to pay exchange i t cannot accept a remit tance

d r a f t f o r the amount of the checks minus exchange. We a r e t h e r e f o r e r e -


I <-tx

Exhibi t B. No, 3. X-U131.

turning to you a l l of the d r a f t s above genera l ly described and r e s p e c t f u l l y

request tha t you e i the r remit in f u l l at par f o r our cash l e t t e r s or r e tu rn

the checks contained there in to us .

We a lso have your l e t t e r s of July 29, 192*+, the one enclosing two

checks aggregat ing $1,025*00 as per your cash l e t t e r Number 59^9, %rid the

other enclosing two checks aggregating $2,981.59 a s per your l e t t e r

Fumber 5971. In both l e t t e r s you request t ha t we give you immediate c r e d i t

in your reserve account, f o r the f u l l amount of the checks in question.

I t appears that three of the items f o r which you des i r e c r e d i t are

drawn on Mobile Alabama .and the other said item i s d r am on Jackson Miss.

The Federal Reserve Banks are forbidden by the r egu l a t i ons of the

Federal Reserve Board, to give immediate c r e d i t f o r checks received f o r

co l l ec t i on , except as permit ted/under the time scneaule, appl icable to

such cases . We r e g r e t , t h e r e f o r e , that we are unable to accede to your

request f o r immediate c r e d i t . You have, however, been given defer red

c r e d i t f o r the checks enclosed, in accordance with the time schedule.

Yours very t ruly ,

MARCUS WALKER,

Manager.



ADDRESS OFFICIAL CORRESPONDENCE TO X—Ul39 THE FEDERAL RESERVE BOARD AugUSt 20, 1^24.

Personal and Conf iden t ia l .

Dear Mr. Yrooman:

I mist apologize f o r not having sooner answered your l e t t e r of July 23rd. When i t a r r ived in Washington, I was on my vaca t ion a t Mattapoiefett,from which I have j u s t re turned, and I had no data a t hand from which to wr i te you.

I send t h i s l e t t e r f o r your personal and conf iden t i a l i n -formation. The f i g u r e s s t a t ed thereon have been checked up and are accur-a te »

You ask.why the Federal Reserve Board ra i sed the discount r a t e s of the Federal reserve banks two points "at one f e l l swoop," j u s t p r i o r to the "prec ip i tous and ruinous d e f l a t i o n of the fa rmers ."

I assume that you r e f e r to the increase in discount r a t e s made by most of the Federal reserve banks in January, 1A20, and the f u r t h e r increase made in June, 1920.

The Federal Reserve Board did not make these increases ; they were made, in f a c t , by the Federal reserve banks, and represented the best judgment of the d i r ec to r s of those banks; they were, however, in f a c t , approved by the Federal Reserve Board.

These r a t e s were not advanced two po in t s a t any one time; on the contrary, in January, 1920, the maximum advance was I15 po in t s on 90-day commercial paper, while on a g r i c u l t u r a l s ix months paper the maximum advance a t tha t time was one point at New York, Phi ladelphia , and Richmond, and from one-half to th ree -quar te r s of one point a t the other Federal r e -serve banks.

The 6$ r a t e es tabl i shed in January, 1920, was the same a t a l l the Federal reserve banks fo r both 90-day commercial paper and for s ix months a g r i c u l t u r a l paper, - ce r t a in ly no d iscr iminat ion agains t the farmer.

You ask as to the reason f o r these increases in discount r a t e s .


- 2 - X-U139

I am sure you wi l l r e c a l l the specula t ive wave which spread over the country, and was in f u l l operation when these increases were made. The Federal Reserve Board had given repeated warnings which were unheeded; the speculat ive movement went on increas ing s t ep by s tep; l a rge stocks of merchandise were held in storage fo r specula t ive purposes await ing an expected f u r t h e r increase in p r i c e s . The Federal reserve J bank discount r a t e s had been kept at a r e l a t i v e l y low level from the ne-ces s i t y of a s s i s t i n g the Treasury in i t s f i s c a l operat ions , and i t was f e l t tha t an immediate increase in discount r a t e s was necessary to con-t r o l f u r t h e r speculat ion which would inevi tably r e s u l t in great d i s a s t e r .

In 1919 a n ( l 1920, c red i t extension by member banks and t h e i r use of reserve bank credi t was increasing a t an alarming r a t e ; the borrowings of member banks from Federal reserve banks had increased from 1,8 b i l l i o n s in June, 1919, to 2 ,1 b i l l i o n s in December, 1919; the loans and discounts of member banks had increased from 15-5 b i l l i o n s in June, 1919, to IS .3 b i l l i o n s in December, 1Q19; Federal Reserve notes in c i rcu-l a t i o n had increased from 2.U b i l l i o n s in June, I Q I 9 , to over 3 b i l l i o n s in December, 1919. In addi t ion to t h i s , the United S ta tes had l o s t over 300 mi l l ions of gold, ne t , between June, 1919, and December, 1919*

On the other hand, the reserves held by the Federal r e -serve banks agains t t h e i r deposit and note l i a b i l i t i e s had been s t ead i ly decl in ing, f a l l i n g from 53^ in June, 1919, to U3.7$ by January 2, 1920.

This decl ine brought the reserves pe r i lous ly near the min-imum p o i n t . As a matter of f a c t , three Federal reserve banks would have been a t that time below the lega l reserve minimum had i t not been fo r in -te r -Federa l reserve bank rediscounts .

Under these circumstances there seemed nothing to do other than to increase Federal Reserve discount r a t e s in order to control the da i ly increase in speculat ive a c t i v i t y . The r a t e s f ixed in January, 1920, above r e f e r r e d to , were found powerless to control t h i s speculat ion, and ear ly in June, 1920, they were increased again a t four Federal reserve banks to 7$ on both a g r i c u l t u r a l and commercial paper . This advance was made to protec t the Federal reserve banks1 reserves , which were well down to the lega l minimum, and to ind ica te to the publ ic tha t f u r t h e r c r ed i t expansion was f raught with danger. Legitimate c red i t needs, however, con-tinued t o be suppl ied ,

These r a t e increases did not d iscr iminate agains t a g r i c u l -t u r e ; on the contrary, the Federal reserve banks1 a g r i c u l t u r a l c r ed i t s were near ly th ree times as great in 1920 as in 1919.


f —

/ * #

-,3~ X-I4139

I am sure you w i l l apprec ia te tha t the dec l ine in p r i c e s in 1920 - a dec l ine which took place over the whole world, - was not caused by con t r ac t i on of c r ed i t s by banks, when you consider t h a t while wholesale p r i c e s decl ined from an index number of 247 in May, 1920, to 179 in December, 1920, the loans of member banks to t h e i r customers in-creased between these same dates over 269 mi l l i ons of d o l l a r s , whi le Fed-e r a l reserve bank loans to member banks increased during the same per iod by l6S m i l l i o n s ; so a l s o the money in c i r c u l a t i o n outs ide of the Treasury and the Federal r ese rve banks increased between January 1, 1920, and Ho-vember 1, 1920, 316 mi l l i ons of d o l l a r s . Surely no one would contend tha t these increased c r e d i t s caused a decl ine in p r i c e s , and some other cause must be found to expla in t h i s d e c l i n e .

The r e a l cause of the dec l ine in p r i ce s was t h a t they had been boosted out of propor t ion to wages, and other economic condi t ions , and t h a t a specu la t ive boom i s bound to col lapse sooner or l a t e r ,

Furthermore, an examination of the per iod from A p r i l , 1921> when r a t e s were decreased down to the present t ime, w i l l show conclus ively tha t the lower discount r a t e s were not followed by higher member bank bo r -rowings, but t h a t on the contrary , such borrowings decreased from over 2 b i l l i o n s on Apr i l 15, 1921 to 260 mi l l ions a t the presen t t ime, while t h r ee of t he banks have a present r a t e as low as 3 a n & the *&te a t the Federal Reserve Bank of New York i s only 3$•

This dec l ine in the borrowings of member banks from the Federal reserve banks was made poss ib le because of the enormous gold im-p o r t s coming in to the United S ta t e s , enabl ing the member banks not only to care fo r t h e i r customers f needs, but a l s o to pay off t h e i r r ed i scoun t s with the Federal reserve banks. The net imports of gold between November 1, 1920, and August 1, 1924, were near ly 1 .5 b i l l i o n s of d o l l a r s .

You w i l l see from the above f i g u r e s tha t increased discount r a t e s in f a c t were fol lowed by increased loans , while decreased discount r a t e s have in f a c t been followed by a decrease i n the loans of the rnemoer banks from the Federa l r e se rve banks,

These f a c t s b r ing out c l e a r l y t h a t i t was the dec l ine in p r i c e s which u l t i m a t e l y caused the loans t o decrease; t ha t .is to say, the dec l ine in p r i c e s came f i r s t , and the decrease in loans fol lowed the de~^ d i n e , because l e s s money and l e s s c r e d i t was needed to car ry on the b u s i -ness of the country a t the then lower l eve l of p r i c e s ,

I hope I have made t h i s c l ea r to you, but i f no t , do wr±te me aga in .

S incere ly yours,

Hon, Carl Vrooimn, (Signed) C• S, Hamlin, The Pen and Brush Club,

16 E, 1 0 t h S t r e e t , New York C i ty .




X-4i4o August 22, 1924

Subjec t : Sales and Regulations Governing Announcements of Bate Changes.

Dear S i r :

The Federal Reserve Board, under date of June l 4 t h , addressed a l e t t e r to you on the subject "Announcements of Rate Changes,n advis ing of the t e n t a t i v e adoption of c e r t a i n ru l e s and r egu l a t i ons governing the announcement of r a t e changes and reques t ing suggestions and comments thereon* Replies have been received from the ma jo r i ty of the Federal r e -serve banks, which have been considered by the Board*

You a re now advised t.inat the Board has adopted the fol lowing r u l e s and r e g u l a t i o n s , e f f e c t i v e immediately2

(1) All t e l eg raph i c communications deal ing wi th r a t e changes s h a l l be in code*

(2) No information of any kind with respect to any r a t e change sha l l be published u n t i l the Federal rese rve bank in ques-t i o n s h a l l have been advised tha t such change has been ap-proved by the Federal Reserve Board. Di rec to r s and o f f i -cers of Federal reserve banks are cautioned to r e f r a i n from discuss ing prospect ive and ac tua l r a t e changes o ther than with those connected with the Federal Reserve System,

(3) Announcements of r a t e changes which have been approved sha l l be made as nearly as poss ib l e simultaneously by the Federal reserve bank concerned and the Federal Reserve Board and such announcements s h a l l be made immediately a f t e r the c lose of bus iness a t the bank concerned on the day on which the r a t e change was approved and not sooner,

(4) The new r a t e sha l l be e f f e c t i v e a t the beginning of the f i r s t bus iness day fol lowing the day on which the announce-ment of the change was made#

(5) In view of the dual capaci ty of the Federal Reserve Agent as Chairman of the Board of Di rec tors of the Federal r e -serve bank and as loca l r ep re sen t a t i ve of the Federal Re-serve Beard, publ ic announcements wi th respec t to r a t e changes on the par t of the Federal reserve bank sha l l be made by him and he w i l l be held s t r i c t l y respons ib le f o r compliance with these r u l e s and r e g u l a t i o n s . Notices to member banks may be sent out over th« s igna ture of the Gov-ernor as h e r e t o f o r e .


I

-UlUO

(6) All announcements to other Federal reserve banks wi th respect to such r a t e changes sha l l be made by the Fed-e r a l Reserve Board.

In the i n t e r e s t of sa fe ty and economy, the fo l lowing new code words a re to be used in a l l messages exchanged between the Federal Reserve Board and the Federal reserve banks with regard to r a t e changes:

MASCULATE *

MASCULINE -

MASCOT -

MASHBALL -

MASHIEST -

MASKERS -

MASKING- -

MASON -MASONIC -MASONRY -

Our Board of Directors today voted to e s t a b l i s h rediscount r a t e of (per cent) on ( c l a s ses of paper - see below), e f f e c t i v e the f i r s t business day following tha t on which approved by the Federal Reserve Board. Our Executive Committee, under au thor i ty of Board of Di rec tors , today voted to e s t a b l i s h rediscount r a t e of (par cent) on (c lasses of paper - see below). e f f e c t i v e the f i r s t business day following ' . .at on which approved by the Federal Reserve Board. Federal Reserve Board today approved f o r your bank rediscount r a t e of (per cent) on ( c l a s ses of paper - s " : . low). e f f e c t i v e (da t e ) . Federal. -Reserve Board today approved f o r (name of bank) rediscount r a t e of (per cent) on (c lasses of paper - see below), e f f e c t i v e (da t e ) . Commercial, a g r i c u l t u r a l and l i v e stock paper ma-tu r ing within 15 days, including member banks c o l l a t e r a l no te s . Commercial, a g r i c u l t u r a l and l i v e stock paper ma-tur ing within from l6 to 90 days . Agr icu l tura l and l i v e stock paper , maturing over 90 days but wi thin 9 months. Bankers Acceptances, maturing wi th in 90 days. Trade Acceptances, maturing wi th in 90 days. All c lasses of paper of a l l m a t u r i t i e s .

I t i s requested that the above code words be added to the bottom of page lUU of the Federal Reserve Telegraphic code, to fol low code word MARVELOUS.

This l e t t e r supersedes a l l previous communications on the subject,,


D, R. Cr i ss inger , G o v e r n o r .

TO GOVERNORS AND CHAIRMEN OF ALL F. R. BANKS.


I



X-UlUl August 23, 1924

SUBJECT: Board*s Regulations, Ser ies of 1924.

Dear S i r :

As requested by you, there a r e today "be-ing forwarded to your bank, in mail sacks, copies of the Board's Regulations, r ep r in ted as Ser ies of 1924,

For an explanation of changes irade in these Regulat i r- is , p lease r e f e r to the p r in ted l e t t e r of tranr... t t a l contained in the f r o n t of the pamphlet,


J . C. Noell , Assis tant Secre ta ry .

TO BE SENT TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.


X-4i42


STATEMEHtfT FOR THE PRESS

Forbilirmediats Eel ease, August 23, 1924. 3:00 o ' c lock , p.m.

The Federal Reserve Board announces tha t the

Federal Reserve Bank of San Francisco has reduced i t s r ed i s -

count r a t e from 4f to 33$ a l l c lasses of paper of a l l ma-

t u r i t i e s , e f f e c t i v e Monday, August, 25th.


' C21 FEDERAL RESERVE BOARD

WASHINGTON


August 25, 1924.• X-41U3

SUBJECT: Report of Gold Payments and Receipts (X-3991)«

Dear S i r ;

In comparing the monthly r e p o r t s of gold payments and r e c e i p t s submitted by the Federal reserve banks in r e -sponse to Board's request of March 3, 1924 (X-3991), i t ap-pears t h a t the items included in the amounts repor ted under the severa l capt ions are not uniform. These r epo r t s a re in-tended to r e f l e c t , in so f a r as p o s s i b l e , the movement of gold i n ac tual c i r c u l a t i o n . They should include as r e c e i p t s , t h e r e f o r e , only f i t and u n f i t c e r t i f i c a t e s and coin received from member and non-member banks and ind iv idua l s , and as payments, only new and f i t c e r t i f i c a t e s and coin pa id to member and non-member banks and ind iv idua l s , with payments to United States disburs ing o f f i c e r s repor ted separa te ly-

All shipments of coin to and from the Mints, or shipments of c e r t i f i c a t e s to and from the Treasury Department, or t r a n s f e r s between Head Off ice and branches, should be t r e a t e d a s s tack and should not be included in the r e p o r t s . P lease advise your branches.


J . C. Noel l , Ass i s t an t Secre ta ry .

TO GOVERNORS OF ALL F. R. BANKS, except NEW YORK.


I -r>- <1*

F E D E R A L B E S J S V E B O A R D


For Release in Morning papers . x - 4 l 4 4 Wednesday, August 27, 1924.

The fol lowing is a summary of general bus iness and f i n a n c i a l condit ions throughout the several Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s fo r the months of July and August, as contained in the forthcoming i s sue of the Federal Reserve B u l l e t i n .

Production in bas ic i r .dus t r ies , a f t e r a considerable decl ine in

recent months, was maintained in Ju l^ a t the same leve l as in June, Factory

employment continued to dec l ine . Wholesale c r ices increased f o r the f i r s t

time since ea r ly in the y e a r , r e f l e c t i n g c h i e f l y the advance in the p r i c e s

of farm produc t s .

PRODUCTION;

The Federal Reserve Board's index of production in bas ic in-

dus t r i e s , which had decl ined 22 per cent between February and June, remained

p r a c t i c a l l y unchanged during Ju ly . Iron and s t e e l and woolen i n d u s t r i e s

showed f u r t h e r cur ta i lment , while production of f l o u r , cement, coal , and

copper was l a r g e r than in June. Factory employment decreased 4 per cent in

July owing t o f u r t h e r -.reduction of fo rces in the t e x t i l e , meta l , and au to-

mobile i n d u s t r i e s . Building contrac t awards showed more than the usua l

seasonal dec l ine in Ju ly , but were 10 pe rcen t la rger than a year ago.

Crop condi t ions , as reported by the Department of Agr icu l tu re , were

higher on August 1 than a month e a r l i e r . Estimated product ion of near ly a l l

of the p r i n c i p a l crops except tobacco was l a rger than in Ju ly and the y i e l d s

of wheat, o a t s , rye , and cot ton are expected to be considerably larger than

• l a s t year .


- 2 - X-^144

TRADE:

Railroad shipments increased in July owing to l a r g e r loadings of

miscellaneous merchandise, g ra in , and coal* -Wholesale t r ade was 3 per cent

l a rger than in June, owing to increased s a l e s of meat, dry goodsf and drugs,

but was 3 per cent smaller than a year ago* Re ta i l t rade showed the usual

seasonal decl ine in Ju ly , and department s t o r e sa les were one per cent g rea te r

and mail order sales 7 per cent l ess than a year ago. Merchandise stocks a t

department s t o r e s continued to decl ine dur ing July and were only s l i g h t l y

la rger a t the end of the month than a year ea r l i e r*

PRICES:

Wholesale p r i c e s , as measured by the index of the Bureau of Labor

s t a t i s t i c s , increased more than one per cent in July* P r i c e s of farm products

foods, and c lo th ing increased, while p r i c e s of bui ld ing ma te r i a l s again de-

cl ined sharply and p r i c e s of metals, f u e l , and house fu rn i sh ings a l so de-

creased. During the f i r s t hal f of August quotat ions on corn, beef , sugar,

s i l k , copper, rubber, and an th rac i t e advanced, while p r i c e s of co t ton , f l o u r ,

and br icks dec l ined .

BANK CREDIT:

Commercial loans of member banks in leading c i t i e s , owing p a r t l y to

seasonal in f luences , increased considerably ear ly in August* Loans secured

by stocks and bonds and investments continued to increase , so t h a t a t the

middle of August t o t a l ,loans and investments of those banks were l a rge r than

a t any previous time* Fur ther growth of demand depos i t s c a r r i e d them a l so to

the h ighes t l eve l on record*

Between the middle of July and the middle of August Federal reserve

bank discounts f o r member banks declined f u r t h e r and t h e i r holdings of


-3~ x-4i44

acceptances decreased somewhat. United S ta tes secur i ty holdings increased ,

however, and t o t a l earning a s se t s of Federal reserve banks remained

p r a c t i c a l l y -unchanged*

Continued easing in money r a t e s i n the New York market during

July and ea r ly August i s indica ted by a dec l ine of l / 4 of one per cent in

p reva i l ing r a t e s f o r commercial paper to 3~3 P 3 r c en t . Af t e r the middle

of August- there was some advance in open-market r a t e s f o r bankers ' accept-

ances and shor t term government s e c u r i t i e s . Curing August t he discount r a t e

a t the Federal Reserve B&nk of New York was reduced from 3 1 /2 to 3 P e r C e n *

and a t the Federal Reserve Bank of Cleveland and of San Francisco from 4 to

3 1 / 2 per c e n t .

August 26, 192U,


L.. ^ < v)


Statement f o r the Press X-414-5 August 27, 1924.

For Immediate Release

CONDITION OF ACCEPTANCE MARKET,

July 10 to August 13»

Continuation of low money r a t e s was the most important f a c t o r a f f e c t -

ing the acceptance market during the four-week per iod ending August 13. Late

in July when c a l l loan r a t e s were steady a t 2 per cent and discount market

c a l l r a t e s were f l u c t u a t i n g around 1 l / 2 and 1 3/4 pe r c en t , the demand f o r

acceptances was except ional ly good. A f t e r the f i r s t of August, however, ac-

ceptance r a t e s were lowered to 1 7/8 per cent f o r 30-day ma tu r i t i e s and 2

per cent f o r 60-90 day b i l l s , a smaller derrand fo r b i l l s f o r short pe r i od in -

vestments r e s u l t e d . The supply of new b i l l s coming in to the market was l i k e -

wise inf luenced by the exceedingly low money r a t e s and was l e s s than the de-

mand, but by the c lose of the period dea le r s aggregate holdings had increased

from the low poin t reached in July. Considerable demand fo r funds was ev i -

dent f o r harves t ing and marketing the gra in crops in Ju ly but on account of

the low r a t e s the borrowers were repor ted to be r e l y i n g on d i r e c t loans r a the r

than acceptances which was responsible in p a r t f o r the smaller supply of new

b i l l s en te r ing the market. Af ter the t u r n of August, however, g ra in b i l l s be-

gan to appear again and considerable drawings agains t sugar , c o f f e e , co t ton ,

h ides , and l ea the r were a l s o noted . On the P a c i f i c coas t b i l l s drawn to

f inance canned products were p a r t i c u l a r l y s i gn i f i c an t and indica ted a consid-

erable volume of goods in warehouses await ing d i s t r i b u t i o n .


? 636

- 2 - X-4145

Rates in the New York market at the c lose of the period ranged

from 2 to 1 7/8 per cent bid and 1 7/6 to 1 3 /4 per cent offered for 30-day

b i l l s to 2 1/8.per cent bid and 2 per cent offered for 90-day b i l l s . Longer

maturities were demanding s l i g h t l y higher rates but the greater volume of

b i l l s was with maturities of 30-90 days.

)




X-4i47 August 25, 1924.

SUBJECT: Joint Conference of Federal Reserve Agents and. Governors,

Dear Sir:

The Board has designated Monday, Movent er 10th, as the opening date for the annual conference of Federal Reserve Agents and Governors of Federal reserve banks. As in the past, both joint and separate sess ions w i l l be he ld . The programs wi l l be prepared in the usual way and copies wi l l be placed in the hands of each Governor and Federal Reserve Agent about October 1st ,

Very truly yours,

Edmund Piat t , Vice-Governor.

TO BE SENT TO ALL GOVERNORS AND FEDERAL RESERVE AGENTS.


F E D E R A L R E S E R V E B O A R D •

STATEvIEN ? FOR THE PRESS

For Release in Morning August 7,0, Papers , Tuesday, Sept. 2, 192U. X-UlUg

John R. Mi tche l l , of St . Paul, Minnesota, has been

appointed by the Federal Reserve Board as. a Class C Director

of the Federal Reserve Bank of Minneapolis, to f i l l the unex-

pired term of John H. Rich, deceased.

The Board has a lso designated Mr. Mitchell as Fed-

era l Reserve Agent f o r the Ninth Federal Reserve D i s t r i c t and

as Chairman of the Board of Directors of the Federal Reserve

Bank of Minneapolis.


( COPY ) X-U150

And thereafter, on the 28tk day of July, 1924, the Court f i l e d

Findings of Fact and Law, as follows:

IN THE DISTRICT COURT OF THE UNITED STATES

IN AND FOB THE WESTERN DISTRICT OF TEXAS

EL PASO DIVISION.

THE CITY OF DOUGLAS, a Municipal Corporation,

P l a i n t i f f ,

vs .

FEDERAL RESERVE BANK OF DALLAS,

No. 347 - Law.

Defendant, )

Messrs. Boyle, Knapp & Pickett , and Messrs. Whitaker & Pet icolas ,

Attorneys for P l a i n t i f f .

Messrs. E. B. Stroud, Jr . , and Turney, Surges, Culwell, Hoilidgy & Pollard ,

Attorneys for Defendant.

This i s an action at law brought "by the City Of Douglas, Arizona, a

municipal corporation, against the Federal Reserve Bank of Dallas to recover

$5,000.00 alleged to be the amount of a check drawn by the Count#; Treasurer

of Cochise County, Arizona, to the order of said City, upon the Central Bank

of Willcox, Arizona.

The c t r - k was drawn on December 22, 1920, and was delivered to the City

of Douglas on December 24, 1920, at which times and at a l l times up to De-

cember 31, 1920, the Treasurer of Cochise County had on deposit in the

Central Bank of Will cox su f f i c i en t funds to meet said check.

On December 24, 1920, the check was properly endorsed by the City of


Douglas and deposited with the First National Po-nk of Douglas, Arizona, for

co l l ec t ion and credit . The f u l l amount of the check was by said "bank entered

as a credit in a pass or deposit hook and delivered to the City of Douglas,

on which pass boci-itac© was a printed indorsement as follows: "All out of town

items credited subject to f ina l payment." There was no other contract or

agreement made between the City of Douglas and the said First National Bank

of Douglas thsn such as Srose impliedly from the acceptance by said bank of

said check for co l l ec t ion . And there was no s ta tute of the State of Arizona

upon the subject which entered into or changed or modified said contract in any

respect .

The First National Bank of Douglas was 3 member of the Federal Reserve

Banking System created by Congress. Said bank immediately transmitted said

check by mail to the EL Poso Branch of the Federal Reserve Bank of Dallas for

co l l ec t ion . I t was received by said Branch Bank on December 21, 1920, and was

by i t forwarded direct to the Central Bark of Will cox for payment, reaching

said drawee bank on December 30, 1920. Thereupon the Central Bank of Willcox

charged the County Treasurer of Cochise County with the amount of the check

and in payment therefor is sued'and mailed to said El Paso Branch Bank, instead

of cash, i t ' s Cashier's Check, drawn on the Central Bank of Phoenix, Arizona,

for the sum of $6,426 .17, which included some small items other than said

$5,000.00 check.

Upon rece ipt of said Cashier's Check the EL Paso Branch Bank forwarded

same to the Branch Bank at Los Angeles of the Federal Reserve Bank of San

Francisco for c o l l e c t i o n . On January $, 1921, said Los Angeles Branch Bank

forwarded sajld Ggshiar's Check d irect to the Central Bank of Phoenix, drawee, T

for payment, reaching said bank on January g, 1921, and was on said date pro-

tested for non payment because of the want of s u f f i c i e n t funds of the Central


f ' <* -X- -kL.

-3- >• : •'

Bank of Willcox with the Central Bank of Phoenix to cover the check.

On January 10, 1921, both of these l a s t named banks, being insolvent,

closed their doors and ceased to do business. Thereupon, the El Paso Branch

Bank charged the F irs t National Bank of Douglas with the amount of said

$5,000.00 original check, and in turn the First National Bank charged i t to

the account of the City of Douglas and credited the amount thereof to the de-

fendant.

I t i s charged by the City of Douglas, the p l a i n t i f f herein, that the EH

Paso Branch of the Federal Reserve Bank of Dallas, defendant herein, was neg-

l igent in sending the check direct to .the drawee, the Central Bank of Willcox,

and in accepting i t s Cashier's Check in payment thereof instead of cash.

In view of the conclusion I have reached i t i s necessary that I consider

and discuss but one question and t h a t i s : Can this action be maintained by the

p l a i n t i f f , the City of Douglas, against the Federal Reserve Bank of Dallas?

Stating the question in another form: Is the First National Bank of Douglas

with which the check was deposited by the City of Douglas for co l l ec t ion alone

responsible to the City or i s the Federal Reserve Bank of Dallas , to which the

check was forwarded for co l l ec t ion by the i n i t i a l bank of deposit , d i rec t ly

l i a b l e to the City of Douglas?

Upon this question the s ta te decisions are in conf l i c t beyond the poss i -

b i l i t y of reconc i l ia t ion . Some of the states fol lowing the "New York Rule", so

ca l led , have held that the i n i t i a l bank alone i s responsible to the owner and

that there i s no d irect l i a b i l i t y to the owner on the part of the correspondent

bank. On the other hand many of the states following the "Massachusetts Rule",

so ca l l ed , have held exactly the contrary, v i z : that the i n i t i a l bank by the

mere fact of deposit for co l lec t ion , i s authorized to employ sub-agents, who


thereupon "become the agents of the owner and d i r e c t l y responsible tc him for

their defaul ts .

Our Supreme Court after reviewing these two l ines of decis ions approved

the "New York Rule", Exchange National Bank. v s . Third National Bank, 122 U.S.

276; and this decis ion has been followed bythe infer ior federal courts without

exception so far as I have been able to ascertain, Taylor & Bourinque Co* vs .

National Bank of Ashtabula, 2o2 Fed. l6g; First National Bank of Denver v s .

Federal Reserve Bank cf Kansas City, Mo., 283 Fed. 700.

I t i s recognized of course that th is rule may be varied or changed by con%

tract , express or implied. For instance i t was held in Federal Reserve vs .

Malloy, 264 IB. S. 160, that a Florida statute controlled the re lat ions of the

drawee to the i n i t i a l bank of deposit with reference to which i t was presumed

they dealt with each other. In that case the deposit for c o l l e c t i o n was made

in the State of Florida and the court held that th is s tatute "had the e f f e c t of

importing the Massachusetts Rale into the contract with the resul t that the

i n i t i a l bank had implied authority to intrust the co l l ec t ion of the check to a

sub-agent and that sub-agent- in tvirn to another; and the r isk of any default

or neglect on their part rested upon the owners". I think that the inference .

i s clear that in the absence of the Florida statute the court would have ap-

plied and enforced the New York Rule in that case; and that there can be no

doubt that the New York Rule s t i l l prevails in the federal courts.

In Texas the Massachusetts Rule i s now the se t t l ed rule of decis ion. In

Arizona the court of l a s t resort has not passed upon the question. Neither in

Texas nor in Arizona i s there any l e g i s l a t i o n a f f ec t ing the question.

However, as I view the question Hinder consideration in th i s case whatever

may be the rule of decis ion in Texas or Arizona the federal court should apply

i t s own rule - the New York Rule - inasmuch as the question to be decided i s one


? rn

- 5 -

of general commercial law 3rd not the construction or applicat ion of any state

s t a t u t e . Even had the Massachusetts Rule been established by the courts of

Arizona where the contract was made, the New York Role would s t i l l be the rule

of decision in this court.

On th question of general or commercial law, such as the l i a b i l i t y of a

bank accepting for co l l ec t ion commercial paper, the federal courts are not

bound by decisions of the s tate in which the contract was made or to be per-

formed but they must upon their independent judgment determine the question

of l i a b i l i t y by reference to a l l the authori t ies . Swift v s . Tyson, 16 Pet. 1>

B. & 0. By. Co. vs . Baugh, IU9 U.S. )6g; Taylor & Bourtoque Co. v s . National

Bank of Ashtabula, 262 Fed. l6g; Spokane & Eastern Trust Co. v s . United States

S te l l Products Co., 290 Fed. 3SU; St. Nicholas Bank v s . State National Bank,

13 L.R.A. 2Hl; Faulkner vs . Hart, 82 NtY* 413; Liverpool S.S. Co. vs .

Phoenix Life Ins. Co., 125 U.S. 397*

This our Supreme Court has done in the determination of th is question,

and the rule laid down by i t mast be followed by t h i s and a l l other inferior

federal courts. And under th is rule there i s no l i a b i l i t y on the part of the

Federal Reserve Bark of Dallas, defendant, to the p l a i n t i f f , the City of

Douglas. Counsel for p l a i n t i f f contends that the contract for co l l ec t ion of

the check was not of the ordinary type but was varied by the special s t ipulat ion

printed on the pass or deposit book in which the credit entry was made; that

said special s t ipulat ion had the e f f e c t of importing the Massachusetts Rule

into the contract. I do not think t h i s contention sound. This s t ipulat ion

added nothing to the contract and did not take anything from i t . Checks faken

for co l l ec t ion and credited ere always in the absence of special agreement

subject to f i n a l payment• From what has been said i t follows that I am of


opinion judgment should be

- 6 -

rendered for defendant,

(signed) W.

U. S.

i. , ~ " /i --V • £ .

and i t i s so ordered.

Smith,

Dis tr ic t Judge.

To which Findings of Fact and Law the p l a i n t i f f f i l e d i t s exceptions,

on the 28th day of July, 1924, as fol lows:

IN THE UNITED STATES DISTRICT COURT FOll THE WESTERN DISTRICT OF TEXAS

' EL PASO DIVISION.

CITY OF DOUGLAS,

P la in t i f f

vs.


No. gkj Law

Defendant.

i . '

Comes now the P l a i n t i f f and excepts to the Findings of Fact and Law (or

opinion of the Court) in that the same makes no f inding with reference to -

whether or not the Federal Reserve Bank of Dallas was negligent in accepting

the cashier's check of the Central Bank of Willcox instead of cash.

I I .

The said Findings of Fact and Law (opinion) are excepted to because the

evidence shows that the Federal Reserve Bank was negligent in accepting the

cashier's check in l i e u of cash and the Court should have so found.

I I I .

P la in t i f f excepts to the said Conclusions of Fact and Law (opinion)

"because the Court found that there was no other contract between the City of

Douglas and the First National Bank of Douglas than such as arose impliedly


from the acceptance of said Bank of said check f or co l lec t ion and the en-

dorsement on the pass book, "because Mr. Graves, a witness, t e s t i f i e d

s p e c i f i c a l l y on t h i s subject and showed clearly that th is check was merely

taken for co l l ec t ion to be forwarded for co l l ec t ion and that no f i n a l credit

was to be given the City of Douglas jpntil the check had been col lected,

IV.

The P la in t i f f excepts to the Court's Conclusions of Law and Fact

(opinion) because the Court finds that., the contract for co l lec t ion was such

that i t did not have the e f f e c t to import the Massachusetts rule into the

contract, i t being apparent under the decisions that the d i s t i n c t i o n between

the New York rule and the Massachusetts rule i s determined ent i re ly by the

contract between the parties* If the check i s discounted or sold to the Bank

so that i t becomes i t s property, then the New York rule might have applied,

but i f the check i s deposited for co l l ec t ion so that i t i s within the con-

templation of the parties that the i n i t i a l Bank wi l l have to send the check

to some other Bank at some other place to make the co l lec t ion and wi l l not

give credit unt i l the check i s f i n a l l y paid, then the Massachusetts rule

enters into the contract even under the Federal Court decision.

V.

P l a i n t i f f excepts to the Conclusions of Law and Fact (opinion) because

the.same find for the Defendant and do not find for the p l a i n t i f f .

VI.

P l a i n t i f f excepts to the Final Court Findings of Law (opinion) because,

while he f inds that the New York rule may be varied by contract - express or

implied - he erroneously f inds that i t was not so varied in th i s instance,

and P la in t i f f shows that the facts with reference to the contract between


the City of Bougies &nd the First national Bank of Douglas contained in the

Record show clearly that i t was contemplated by the part ies that the check

'would be taken for co l lec t ion; that no d e f i n i t e credit would be given against

i t u n t i l f ina l payment; that i t was also conterrplated that i t should be for-

ward ed to some difference bank in a foreign c i t y , and thereby part ies im-

pl ied ly agreed that the l i a b i l i t y of the First National Bank of Douglas should

only be to se lec t the competent co l lect ing agent and that i t should not be

l iab le for the negligence of such agent. Wherefore, the Massachusetts rule

i s properly shown to have applied with the fabts in th i s case.

Khapp, Boyle & Pickett , and

Whitaker & Pet ico las ,

Attorneys for P l a i n t i f f .


*



X-U152 September 4, 1924.

SUBJECT: Pascagoula National Bank vs . Federal Reserve Bank of At lan ta , e t a l .

Dear S i r :

A week or ten days ago the Board sent to a l l Federal reserve banks a copy of the b i l l of com-p l a i n t brought by the Pascagoula National. Bank, of Mosspoint, Miss i ss ipp i , agains t the Federal Reserve Bank of At lan ta , e t al . . , in the United S ta t e s D i s t r i c t Court f o r the Northern D i s t r i c t of Georgia.

Governor Harding of the Federal Reserve Bank of Boston has since sent to the Board a memorandum present ing an ana ly t i ca l d iscuss ion of the complaint which the Board be l ieves w i l l be of i n t e r e s t to you and to the Legal Department of your bank. Two copies of the memorandum, in question are enclosed herewith.


D. R. Cr iss inger , Governor.

TO GCTEENOFS OF ALL F. R. BANKS, except Governor Harding.


I

( COPY ) X - 4 I 4 9

Comments onCoraplaint of Pascagoula National Bank against the Federal Reserve Bank of Atlanta, e t . a l . in tiie United States Di s tr i c t Court

for the Northern Di s t r i c t of Georgia.

Without-*-attempting to d iscuss p l a i n t i f f ' s preliminary technical al legations

necessary for the ident i f i ca t ion of part ies , jur isd ic t ion , e t c . , the following

comments wi l l deal only with certain paragraphs of the al legat ions having r e f -i :

erence to the merits of the case.

Paragraph 12. The statement as tc the checks which Federal Reserve Banks may

receive i s not correct . Section 13 as or ig ina l ly enacted read

in part as fol lows:

"Any Federal Reserve Bank may receive from any of i t s member Thanks, and from the United States , de-pos i t s of current funds in lawful money, national-bank notes, Federal reserve notes, or checks and drafts upon solvent member banks, payable upon pre-sentation; or, sole ly for exchange purposes, may re-ceive from other Federal reserve banks deposits of current funds i n lawful money, national-bank notes, or checks and drafts upon solvent member or other Federal reserve banks, payable upon presentation."

The Act of September J , 1916 amended the foregoing part of the

Section to read as follows:

"Any Federal Reserve Bank may receive from any of i t s member banks, and from the United States , de-pos i t s of current funds in .lawful money, national bank notes, Federal reserve notes , or checks and draf t s , payable upon presentation, and a l so , for co l l ec t ion , maturing b i l l s : or, s o l e l y for purposes of exchange or of col lect ion, may receive from other Federal reserve banks deposits of Current funds in lawful money, national bank notes, or checks upon other Federal reserve banks, and checks and d r a f t s , payable upon presentation within i t s d i s t r i c t , and maturing b i l l s payable within i t s d i s tr ic t - 1 1

On June 21, 1917. th i s part of the Section was again amended

by inserting the words "notes and» a f ter the word "maturing"

in the s ixth l ine and in twelfth l ine as written above and by


I -V.

- 2 - x-UiUg

adding the fol lowing vhich const i tutes the so-called Hardwick

Amendment:

or, s o l e l y , for the purposes of exchange or of co l l ec t ion , may receive from any non-merrher "bank or trust company deposits of current fends in lawful money, national-bank notes, Federal reserve notes, checks and dra f t s payable upon presentation, or maturing notes and b i l l s : Provided, such non-member bank or trust company main-tains with the Federal reserve bank of i t s d i s t r i c t a balance su f f i c i en t to o f f s e t the items in trans i t held for i t s account by the Federal reserve bank; Provided, further, That nothing i n th i s or any other Section of this Act shall be construed as prohibiting a member or non-member bank from making reasonable charges, to be determined and regulated by the Federal Reserve Board, but i n no case to exceed ten cents per' $100 or fract ion thereof, based on the total of checks and draf t s pre-* sented at any one time, for col lect ion or payment of checks and drafts and remission therefor by exchange or otherwise; but no such charges shal l be made against the Federal reserve banks."

The part of the sect ion dealing with checks has not been amended

since June 21, 191? and now reads as indicated above,

. I t wi l l be noted that there i s no l imit so far as place of

payment i s concerned as to the checks end draf t s which a Federal

reserve bank may receive from i t s member banks and that there

i s l ikewise no l imit as regards the place of payment of checks

and drafts which may be received from non-member clearing banks.

The only place where the vtords "within i t s d i s t r i c t " occur i s in

that part of the Section dealing with checks and drafts which

may be received from other Federal reserve banks f o r purposes

of exchange or of co l l ec t ion .

The Section as i t now reads confers upon any Federal reserve

bank the r ight to receipt deposits of checks and drafts payable

upon presentation as follows:


!• ' ~ : f

-3 - X-U1U9

1 . From member "banks, checks and drafts payable anywhere.

2* From other Federal reserve banks checks upon other Federal

reserve "banks and checks and drafts payable within the

d i s t r i c t of the receiving Federal reserve bank when received

for purposes of exchange or of c o l l e c t i o n .

3 • From any non-member c learing bank or trust company checks

and drafts payable anywhere.

Paragraph lg« There i s nothing in the Federal Reserve Act to indicate that the

prohibition of payment of exchange charges by Federal reserve

banks was designed so le ly for the protect ion of the revenues of

the Federal reserve banks. There i s , on the other hand , ample

indication in the history of check co l l e c t i on in the United

States both before the Federal Iljserve Act was passed and during

the operation of the Federal reserve banks prior to the amendment

of J-une 21, 1917> to indicate that Congress intended to free any

check which could be col lected through the Federal reserve banks

from these so-cal led exchange charges. The r ight was conferred

upon Federal reserve banks to receive deposits of checks from

member banks as well as from non-member banks -under certain

conditions and i t must be supposed that Congress, not having

indicated otherwise, expected that Federal reserve banks would

receive such deposits in the way that they are generally re-

ceived by banks and that ordinari ly , therefore, the Federal re-

serve bank mig&t be acting as an agent in the co l l ec t ion of such

checks. I f t h i s conclusion i s correct, Congress must have intend-

ed member banks which co l l ec t checks through the Federal reserve

banks to get the benef i t of exerrption from exchange charges, i r -


-kj- X-U1U9

respective of any question of agency. This view i s supported

by the fac t that so far as checks drawn on member banks are

concerned, the Federal res'erve banks mast, under Section l 6 ,

receive such checks at par and i f t h i s requirement i s to be

given the indicated e f f e c t the Federal reserve banks cannot

assess the charges on such checks against the deposit ing banks.

The view that the agency function of the Federal reserve bank

in the c o l l e c t i o n of checks i s not a determining t e s t in decid-

ing whether exchange may be charged by the drawee banks i s fur-

ther supported by the fact 'that the same Act (June 21, 1917)

which inserted prohibition against such charges in Section 13

also amended Section 19> dealing with reserves , in such a way

as to indicate that the Federal Reserve bank cannot count as

reserve for 9 member checks deposited by that member bank but

not yet co l l ec ted . See opinion of Counsel, Mr. Weed, dated

August 8 , 1923• In other words, by preventing the credit of

checks to the reserve account before the proceeds are obtained,

the amendment of Section 19 ifi the Act of June 21, 1917 in

e f f e c t p r a c t i c a l l y amaided Section 13 so that checks received

from member banks are received for c o l l e c t i o n , that i s , Federal

reserve banks act as agents in obtaining payment of checks.

Paragraph 19 » The provision in Section 16 that every Federal reserve bank

must "receive on deposit at par from member banks . . . . checks

and drafts drawn upon any of i t s depositors " i s not a

requirement that Federal reserve banks mast give immediate

credit in the depositing bank1s reserve account ot that the


- 5 - x-UiUg

Federal reserve bank i s under an obl igation to pay the amount

of the checks deposited or any par t of the deposit as soon as

the depositing member bank sees f i t to draw a check against i t .

P l a i n t i f f 1 s a l legat ion in this paragraph i s evidently based up-

on an erroneous interpretation of the words "deposit" or "on

deposit" as applied to ordinary banking pract ice and as used

in the Federal Reserve Act. So far as the deposit of money

in an open account i s concerned, i t i s undoubtedly true that

the depositor has a right to draw a check against the deposit

at any time he may e l ec t , but th is may or may not be true of

checks or other negotiable instruments deposited, depending on

the circumstances* A check may be deposited in a bank in such

a way as to constitute a sa le of i t or i t may be deposited for

co l lec t ion . As stated by Tiffany on "Banks and Banking", when

a negotiable instrument i s endorsed generally, or, being payable

to bearer, i s delivered to and Deposited with a bank, the trans-

action may be a sale of the paper or a deposit for co l l ec t ion ,

according to the agreement of the part ies . The agreement of

the part ies may be evidenced by general not ices which are printed

on the pass books or deposit s l ips or otherwise brought home to

the depositor, or an agreement may be presuired from general us-

ages obtaining in a l o c a l i t y or by s tatute . I t is true that

some courts hold that where a d i f ferent understanding does not

aff irmatively appear, Hie t i t l e to negotiable instruments de-

posited in a bank in the ordinary course of business immediately

passes to the bank, which becomes a debtor to the depositor for


—6— X-Ui I49

the amount, "but even vdiere there i s no affirmative under-

standing as to agency or as to the deposit for co l l ec t ion ,

other courts have held that the practice which i s followed by

some "banks of crediting deposits of checks at once to the de-

pos i tor ' s account or "by allowing him to draw against such de-

p o s i t s , i s a mere gratuitous pr iv i l ege , as stated by Tiffany,

the pr iv i lege being s l so extended where the paper i s endorsed

"for col lection" as well as where i t i s endorsed without re -

s t r i c t i o n , the bank being able to revoke the pr iv i lege at any

time and, consequently, unless i t aff irmatively appears that

the credit i s irrevocable, the beneficiary ownership of the

paper i s not transferred and the transaction constitutes a de-

pos i t for co l l ec t ion .

The words "deposit" or "on deposit" as generally used , therefore, *

are capable of a broad interpretation and so far as the Federal

Reserve Act i s concerned, Congress has indicated that the broader

interpretation must apply. For example: Section 13 refers in

several instances to deposits of checks and drafts for purposes

of exchange or of co l l ec t ion and also indicates that maturing

notes and b i l l s may be deposits for co l l ec t ion . All of which in-

dicates that the framers of the Federal Reserve Act had in mind

that a deposit may consist of items upon which immediate avai l -

a b i l i t y i s deferred, and a Federal reserve bank, therefore, has

the r ight to defer immediate credit i n the" reserve account unti l

the proceeds are obtained. One must go even further than that .

The Federal Reserve Act, prior to the amendment-of June 21, 1917,


- 7 - x - U l U g

recognized s right to defer c r e d i t but since the amendment of

June 21, 1917, i t imposes a pos i t ive duty upon Fsderal reserve

banks to defer credi t . for checks deposited unt i l the proceeds are

obtained, because the only balance of a member bank in a Federal

reserve bank which can be checked against i s the required balance

carried as a reserve, and that balance, under Section 19 as

amended June 21, 1917, must be "an actual net balance". An actual

net balance means a collected balance and not a balance created

by giving immediate credit for checks not yet collected* See

opinion of Counsel, Mr. Weed, dated August 8 , 1923 » The Act of

June 21, 1917, const i tutes , therefore, i n e f f e c t an amendment of

that part of Section 13 dealing with the deposit of checks, as a l -

ready stated , and also that part of Section l6 dealing with the

same subject .

Paragraph 21. P l a i n t i f f * s a l legat ion that s ince the Federal reserve bank defers

credit the drawee banks are entit led to charge exchange, i s

evidently based upon the t e s t of agency which p l a i n t i f f seeks to

es tabl i sh , because the further al legation i s made that i f im-

mediate credit i s given, t i t l e being thereby vested in the Federal

reserve bank receiving the deposit , the r ight to charge exchange

against the Federal reserve bank would be destroyed by the pro-

h ib i t ion in Section 13, As pointed out e l s evil ere, the mere d i f -

ference between principal and agency does not a f f e c t the matter.

Section 13 makes a pos i t ive declaration that "no such charges

shall be made against the Federal reserve banks", and there i s no

qual i f i ca t ion to that prohibition expressed or implied anywhere

i n the Act.


-s~ x-UiUg

As already related , Congress evidently intended that any bank

which clears checks through the Federal reserve bank should get

the benef i t of this exemption from exchange charges- In fac t

i t i s this reciprocal bene f i t in clearance that i s one of the

considerations in requiring member banks, at any rate> to pay

at par for checks drawn upon themselves. This consideration of

the mutual benef i t of par clearance was evidently in the mind

of the Supreme Court in i t s decision i n the Farmers and Merchants

National Bank of Monroe, North Carolina against the Federal Se-

serve Bank' of Richmond, because the Court i n speaking of the

amendment of September, 1916 and of the provisions of the later

amendment (June 21, 1917) by which non-member barks were given

the right to clear through Federal reserve banks, uses the f o l -

lowing language:

" I t was recognized tha t non-members were l e f t f r e e to r e f u s e assent to par clearance . . . Reserve banks could not under the then law, make co l l ec t ions for non-members, I t was believed tha t i f Congress would grant Federal reserve banks permission to make c o l l e c t i o n also fo r non-members, the Board could o f f e r to a l l banks inducements adequate to secure t h e i r consent to par c learance , A f u r t h e r amendment to Section 13 was t h e r e -upon secured by the Act of June 21, 1917 •••"»

(the Supreme Court thereupon quoting that part of Section 13 which

permits the col lect ion of checks for non-member banks). Un-

doubtedly, the inducement which the Supreme Court had in mind

was the r ight to have checks which banks might deposit , collected

without payment of exchange• I t should be added that Section l6

compels the reception of certain checks at par from member banks.

I t should also be added t h a t ne i ther Section 13 nor Section l 6

either expressly or impliedly imposes any duty upon Federal reserve


t.,... u

-9 - x-4i4g

"banks to act as the agent of a drawee bank, from which i t has

received payment for checks, i n co l lec t ing from the banks de-

pos i t ing those checks, the drawee barik*s charges for remission

of the proceeds.

Paragraph 22* I t seems highly improbable that a member bank could success-

f u l l y attack the const i tut ional i ty of the prohibition of Section

13 against the payment of exchange charges by Federal reserve

banks. With respect to national banks i t may be said that as

long as such a bank continues to operate under a national

charter i t must accept any reasonable regulations imposed by

act of Congress. I t has, however, an al ternat ive; i t may r e -

l inquish i t s charter and operate under such s ta te charter as

i t may obtain. A s ta te bank l ikewise has an alternative; i t

may abstain from or withdraw from membership in the Federal Re-

serve System. This prohibition i s a condition of membership

imposed upon a l l member. banks, national banks havirg had a

certain period. within vthich to choose whether they should be-

come members, and i f membership i s retained or accepted, i t

would seem to be binding and the conditions having been assumed

or accepted voluntarily by member banks, i t i s d i f f i c u l t to see

that the prohibit ion i s open to attack on the ground of con-

s t i t u t i o n a l i t y .

Paragraph 2%. The Supreme Court decisions quoted dealt with the matter of ex-

change charges by non-member banks and one of them had r e f -

erence to exchange charges by a non-member bank in a s t a t e which

by s tatute spec i f i ca l l y permitted a drawee bank to pay fey draft


-10 - x-UiUg

for checks presented through a Federal reserve bank. The

question of the right of a Federal reserve bank to defer credit

on checks received from member banks, was, therefore , not

ra i sed .

Neither of the Supreme Court decis ions questions the r i g h t of

a Federal reserve bank to c o l l e c t checks from member banks with-

out the payment of exchange charges. In American Bank & Trust

Company against the Federal Reserve Bank of Atlanta which dea l t

only with the question of the right of a Federal reserve bank

to c o l l e c t checks payable in i t s own d i s t r i c t by presenting

checks over the counter of the drawee bank, the Supreme Court of

the United States ruled as fo l lows:

"Federal reserve banks are , thus, authorized by Congress to c o l l e c t for other reserve barks, for members, and for a f f i l i a t e d non-memters checks on any bank within the i r respect ive d i s t r i c t s , i f the check i s payable on presentation and can in f a c t be col lected cons i s tent ly With the l ega l r i gh t s of the drawee without paying an exchange charge. Within these l i m i t s Federal reserve banks have ordinari ly the same right to present a check to the drawee bank for payment over the counter as any other bark, s t a t e or nat ional , would have".

Part of p l a i n t i f f *«' complaint in th is a l l e g a t i o n appears to be

that the par l i s t i s s t i l l c irculated aid s t i l l drawing to the

Federal reserve banks for c o l l e c t i o n a large volume of checks

that could otherwise be presented in other ways, but the Supreme

Court in the same dec i s ion jus t mentioned, indicates that t h | s

i s not a proper cause of complaint against Federal reserve banks,

the Court having taken cognizance of the f a c t that large ly be-

cause of the superior f a c i l i t i e s of the Federal reserve banks,


L r" - o

most checks on country banks a r e now routed through the

reserve banks and the Court having s ta ted t h a t 11 Country banks

are not e n t i t l e d to p ro t ec t ion against l e g i t i m a t e competi t ion.

Their l o s s he re shown i s of the kind to vdiich bus iness con-

cerns are commonly subjected when improved f a c i l i t i e s a re in -

troduced by o thers o r , a more e f f i c i e n t competitor enters the

f ield1 1 • Even i n the case of a North Carolina bank where the

s t a t e s t a t u t e permits the drawee,bank to remit by d r a f t on a

correspondent, the Supreme Court, while denying the ob l iga t ion

of the Federal reserve bank to co l l ec t checks from non-member

banks, admits tha t they may do so* The Court used the f o l -

lowing 'language :

"But ne i the r Section 1) nor any other provis ion of the Federal Reserve Act imposes upon reserve banks any obl iga t ion to rece ive checks for co l -l e c t i o n . The Act merely confers au tho r i ty to do so" .

Paragraph 25* The a l l e g a t i o n tha t "Federal r e se rve banks are not authorized to

rece ive fo r co l l e c t i on any check or d r a f t except from t h e i r

respective^/nembers or deposi t ing non-members and no check or

d r a f t tha t i s not payable on presen ta t ion within the d i s t r i c t

of the Federal reserve bank rece iv ing i t " , i s not supported by

the provis ions of Section 13* Those provis ions are quoted in

the foregoing comments upon paragraph 12 of the a l l e g a t i o n s .

The th ree groups of checks which Federal r e se rve banks may r e -

ceive are summarized in the comments on t h a t paragraph- With

regard to checks from member banks and non-member c l ea r ing banks,

there i s no d i s t i n c t i o n as t o the place where a check or d r a f t

may be payable* Moreover, Section 13 does not i t s e l f r e s t r i c t


-12- x-UiUg

the purposes for which depos i ts of checks may be made by

member banks, although, as s tated elsewhere, the amendment

of June 21, 1917 to Section 19 does in e f f e c t const i tute a

r e s t r i c t i o n that such checks are received for c o l l e c t i o n .

Though i t i s not so e x p l i c i t l y s ta t ed , the bas i s of p l a i n t i f f ' s

contention that i t i s en t i t l ed to charge exchange against the

Federal reserve bank, appears to cons is t of the argumaat that

there i s a c o n f l i c t between the right of drawee banks to col lect"

exchange recognized by the Federal Reserve Act, and the pro-

h i b i t i o n against the payment of such charges by the Federal

reserve banks, which can be reconciled only in the way e v i -

dently advanced by p l a i n t i f f , the determining principle ob-

v ious ly being whether the Federal reserve bank acts as an agent

in the c o l l e c t i o n of checks deposited with i t . The quest ion of

agency has been discussed elsewhere i n these comments* As a

matter of f a c t , there i s no c o n f l i c t between the various pro-

v i s i ons of the Federal Reserve Act dealing with exchange

charges. Section 13 s p e c i f i e s that member and non-member banks

are not prohibited from making reasonable changes within

certa in maximum l i m i t s , for the c o l l e c t i o n or payment of checks

and d r a f t s and the remission therefor. At the same time that

th i s r ight i s recognized, the e x p l i c i t d i rec t ion i s made that

no charges sha l l be made against the Federal reserve banks*

The Supreme Court of the United States in Farmers' & Merchants

Bank of Monroe, N.C., v s . Federal Reserve Bank of Richmond,

recognizes the d i f ference between a charge for c o l l e c t i o n and


-13- X-UI49

par clearance in the fol lowing language:

"Par clearance does not mean that the payee of a check who deposits i t with h i s "Dank for co l l ec t ion rail "be credited in h i s eccoxint with the face of the check i f i t i s co l lected. His bank may, despite par clearance, make a charge to Mm for i t s service in co l l ec t ing the check from the drawee bank. I t may make such a charge although both i t and the drawee bank are members of the Federal Reserve System; and some third bank which aids in the process of co l l ec t ion may l ikewise make a charge for the service i t renders. Such a co l l ec t ion charge may be made not only to member banks by member banks, national ot s ta te , but i t may be made to member banks also by the Federal reserve banks for the services whicia the lat ter render. The co l lec t ion charge i s expressly provided for in Section l6 of the Federal Reserve Act which declares that 'the Federal Reserve Board shall by rule f i x the charges to be c o l -lected by the member banks from i t s patrons whose checks are cleared through the Federal reserve bank and the charge which may be imposed for the service of c learing or co l l ec t ion rendered by the Federal Reserve Bank1. Par clearance refers to a wholly d i f f e r e n t matter. I t deals not with charges for co l lec t ion but with charges incident to paying. I t deals with exchange".

Any member Whk dealing with other member banks or with non-

member banks may make charges for co l l ec t ion or payment of

checks and the remission therefor. It simply cannot make such

charges against the Federal reserve bank. I t should be further

noted that Section l6 provides that the charges to be collected

by member banks when checks are cleared through the Federal re -

serve bank, are to be collected from the patrons of the member

banks, the language used being as follows:

"The Federal Reserve Board shal l , by r u l e , f i x the charges to be collected by the member bank(s) from i t s patrons whose checks are cleared through the Federal reserve bank . . .

There i s , therefore, no c o n f l i c t in the provisions of the Federal

Reserve Act. If the drawee bank deals d irect with other banks


i

»l4- X-U.1U9

i t may c o l l e c t exchange; i f i t deals d irect with the Federal

reserve bank, i t may not c o l l e c t exchange, but in that case

i t pro f i t s from the right to clear checks i t s e l f through the

Federal reserve bank and also i s permitted by the Federal Re-

serve Act to co l l ec t from i t s patrons such diarges for their

checks which are cleared through the Federal reserve bank, as

the Federal Reserve Board may sanction.

\


v...- ...

C. O P T v v, •• .. x-Umg(a)

HERRICK, SMITH, DONALD & FARLEY

BOSTON August 8, 1021+.

Honorable W. P. G. Harding, Federal Reserve Bank, Boston, Mass,

llbj dear Governor Harding:

You have asked my opinion as to whether as a matter of law a Federal Reserve

Bank has any au thor i ty to give immediate c red i t on checks deposi ted with i t f o r

co l l ec t ion .

So f a r as member oanks a re concerned, t h i s quest ion necessa r i ly involves the

question of reserve requirements under Section 19 of the Federal Reserve Act•

In Ejt opinion a "reserve balance" required by Sect ion 19 and which i s defined

as an "Actual net balance" can not'- include uncol lec ted checks, and hence a Fed-

e r a l Reserve Bank has no au thor i ty to grant immediate c red i t on checks deposited

with i t and thereby give member banks the bene f i t of uncol lec ted items in t r a n s i t

in computing reserve balances . •

My reasons a re as fo l lows: Pr ior to the adoption of the amendment of

June 21, 19171 Sect ion 19 provided in sub stance as fo l lows:

n**********]£very subscribing member bank sha l l e s t a b l i s h and maintain reserves as fo l lows:

(a) A bank not in a reserve or cen t ra l reserve c i ty ************ sâl1 hold and maintain reserves equal to twelverper centum of the aggregate amount of i t s demand deposi ts , and f i v e per centum of i t s time deposi ts as fo l lows :

In i t s vau l t s f o r a period of t h i r t y - s i x months a f t e r said date $ / l 2 thoreof and pe r -manently t h e r e a f t e r 4 / 1 2 .


x-UiUgU) ^ - 2 - -

In the Federal reserve bank of i t s d i s t r i c t , f o r a per iod of twelve months a f t e r sa id da te , 2 / l 2 , and f o r each succeeding six months an add i t i ona l l / l 2 , u n t i l 5/12 have been so deposi ted, which sha l l be the amount permanently requ i red" .

I t i s unnecessary f o r the purposes of t h i s opinion to quote in t h e i r en-

t i r e t y the somewhat e laborate provis ions of Section 19 as o r i g i n a l l y drawn.

I t i s s u f f i c i e n t t o note tha t a member bank was requi red t o hold and maintain

ce r t a in "reserves" and tha t a po r t ion of those reserves might be "in the Federal

Reserve Bank", the por t ions in the Federal Reserve Banks t o increase u n t i l the

f i n a l amounts "have been so deposi ted" . Thus amounts deposi ted in the Reserve

Banks counted as r e se rves . I t i s t o be noted tha t there was nothing s p e c i f i c

as to whether these reserve deposi ts might or might not include checks which had

been deposited but which had not been co l l ec ted .

Af t e r the amendment adopted on June 21, 191?. Section 19 provided in sub-

stance as fo l lows:

"Every bank, banking assoc ia t ion , or trust.company which i s or which .becomes a member of any Federal Reserve Bank sha l l e s t ab l i sh and maintain reserve ' balances with i t s Federal Reserve Bank as fo l lows:

(a) If not in a reserve or cen t ra l reserve c i t y ******** 1% sha l l hold and maintain with the Federal Reserve Bank of i t s d i s t r i c t an ac tua l net balance equal to not l e s s than seven per centum •********<'.

I t i s unnecessary f o r the purposes of t h i s opinion t o quote the other pro-

v is ions of Sect ion 19 r e l a t i n g to rese rves . The words "actual net balance"

appear in the amendment of June 21, 1917 f o r the f i r s t time and should be care-

f u l l y noted. What do these words mean? Clearly t o my mind the words "Actual"

and "net" qua l i fy and l i m i t the word "balance" , and qui te apar t from any l i g h t

which may be thrown on t h e i r i n t e r p r e t a t i o n by re ference t o congressional debat

or banking usage I should construe these words to exclude checks in t he process

of c o l l e c t i o n . .However, I be l i eve the h i s to ry of the Leg i s l a t ion and banking


-3- X-4l49(a)

usage a s s i s t ma te r i a l l y i n t h e i r i n t e r p r e t a t i o n .

The proposal to amend the re se rve requirements of Sect ion 19 emanated from

the Federal Reserve Board and i n p a r t i c u l a r the words "actual n e t balance" seem

to have or ig ina ted with the Board. The statement which the Board made to the Com-

mit tees of Congress i n proposing the amendment in ques t ion i s the re fo re p e r t i -

nen t . This statement appears i n the February Bu l l e t in of 1917 and reads in p a r t

as fo l lows:

"A minimum amount of currency t h a t the member banks should be required t o keep in t h e i r vau l t s i s , t h e r e f o r e , p r e sc r ibed . The amount suggested i s 5 per cent of the demand depos i t s , so tha t the t o t a l requirements - cash and rese rve - w i l l remain p r a c t i c a l l y unchanged. While the e f f e c t of some of the pro-posed changes w i l l be to reduce somewhat the reeerve r e q u i r e -

m e n t s , the r e se rves w i l l be increased by the abrogation of the p r a c t i c e h i t h e r t o observed of counting items i n t r a n s i t or " f l o a t " as reserve*. The permission given member banks to use t h e i r own d i s c r e t i o n as to the character of currency in t h e i r v a u l t s , w i l l enable them to r e l e a s e the gold they now ho ld , with the important r e s u l t t h a t the s u b s t i t u t i o n of Federal Reserve notes f o r gold and gold c e r t i f i c a t e s wi l l be f a c i l i t a t e d by t h i s change in the law. Without some such change member banks wi l l continue to ask f o r gold c e r t i f i c a t e s in small denominations, because as long a s they must have gold, or lawful money to count as reserve i t would be impossible f o r the batiks to exchange them f o r Federal Reserve no t e s " .

The above statement i s i n no (way) ambiguous and i t i s p e r f e c t l y c lea r t ha t in

proposing the amendment to Section 19 the Federal Reserve Board intended to e l im-

inate items in t r a n s i t or " f l o a t " , or i n other words, the Federal Reserve Board

intended to preclude the p o s s i b i l i t y of g iving immediate c r ed i t on deposi ted

checks i n computing rese rve balances.

The debates in Congress when the amendment to Sect ion 1 9 was before the House

of Representat ives f o r cons idera t ion as H. R. 3675 are en l igh ten ing . Repre-

sen ta t ive McFadden o f fe red an amendment reducing the 7f° r e se rve as contained

in H. R. 3673 to 5^0. Representa t ive McFadden made the fo l lowing comments, i n -

d ica t ing t h a t the proposed law, i f enacted, would e l imina te from the


' ' 5 - 4 - x-UiUg(a)

reserve required to be maintained the " f l o a t " or uncol lec ted i tems:

"Mr. McFadden, Mr. Chairman, t h i s amendment proposes to reduce the l ega l requirements of the reserves of country banks from 7 to 5 per cent , as proposed in t h i s Federal Reserve Amend-ment, but i t i s a well-known f a c t tha t while under the old law the l ega l rese rve of 12 per cent appl ied to country banks, those banks, notwithstanding t h i s f a c t , are keeping an average reserve of about 27 per cent . The country banks have never confined themselves to the l ega l requirements. Under these Federal reserve amendments as now proposed they w i l l be compelled not only to keep a l l the reserves they now keep in the Federal Reserve Banks, but to increase them 2 per cent , or from 5 per cent to 7 per cent - and t h i s mist be a net balance of 7 per cent -whereas present requirements a re a gross requirement. That i s to say, the banks mast carry the f l o a t amounting on the average to l ^ per cent , being the checks in process of c o l l e c t i o n - so, t he re -f o r e , the banks must carry ins tead of 7 per cen t .

"Mr. Cannon. Will the gentleman y ie ld f o r a question?

"Mr. McFadden. Yes, I w i l l .

"Mr, Cannon. Does the gentleman, say tha t the country banks vo lun ta r i l y keep 57 per cent reserve with the reg ional banks under the Federal Reserve Act?

"Mr. McFadden. Oh, not a t a l l .

"Mr, Cannon. With t h e i r correspondents?

"Mr. McFadden. With the c i t y correspondents of the bank and the regional banks combined.

"Mr, Cannon. Upon which they get 2 per cent i n t e r e s t ?

"Mr. McFadden. That i s one point I was coming t o . The c i t y correspondent banks pay them i n t e r e s t usua l ly a t the r a t e of 2 per cent , but the regional banks pay no i n t e r e s t . • That i s one of the reasons f o r my amendment reducing t h i s requirement to 5 per cen t . -

"Mr. Cannon. And they get no i n t e r e s t from the Federal Reserve Banks?

"Mr. McFadden. No; as a matter of f a c t , t h e i r combined reserves today a r e about 27 per cent . They a r e permit ted under the present law to keep a small po r t i on of t h a t with other banks in reserve c i t i e s , and under t h i s law, i f adopted, t h e r e w i l l be a complete


- 5 -X-4l49(a)

mobilization of a l l reserves into the 12 regional reserve banks inmeditately. Now, the purpose of t h i s amendment i s to permit these country banks to keep a portion of their reserves with other than Federal reserve banks and thus receive more compensation in the way of interest and other emoluments, such as services which are known only to the country banks. These c i ty banks perform many forms of services for the country banks and are repaid by a compensating balance from the country banks. I might add here that in the Senate a b i l l has been reported from the Senate Banking and Currency Committee in which they have provided that the reserves of the country be f ixed at 6 per cent.

"So that th i s amendment of mine would be 1 per cent lower than the Senate amendment. When you consider that th i s i s a net re-serve, and that the banks must carry the f l o a t or the checks in trans i t , and that amounts to on the average 1-f per cent the country over, i f you f i x the required reserve at 7 per cent i t means the banks must carry actually 84 per cent reserve to meet the legal requirements; whereas i f you make the legal require-ments 5 per cent and then add the f loa t or checks in process of co l lect ion , amounting to if- per cent, you then have the correct statement of what wi l l then be required of the country banks -namely, 64 per cent under my amendment or 8f per cent under the proposed amendment of the Federal Reserve Board."

It seems to me from the above that i t may be stated without fear of con-

tradiction that Congress adopted the amendment of June 21, 1917 with f u l l and

complete understanding that the words "actual net balance" eliminated uncol-

lected checks*

I have made inquiry of the o f f i c e r s of two of the largest banks in Boston

as to whether in banking c irc les there i s any common usage of terms so as to

indicate what a"net Balance" or an "actual net balance" might mean as d is -

tinguished from a "balance". I am informed that i t i s customary among banks,

in computing the balances of their depositors, to make a very marked d i s t inct ion

between ledger balances and net or col lected balances. I f ind that for the

purpose of computing interest and for other purposes, i t i s common practise

among bankers to refer to balances and net balances, meaning by net balances

the balances of their depositors a f t er eliminating uncollected items. I was


I -v...- ... i

- 6 - X-Ul49(a)

informed by one banker t h a t "net balance" might i n some cases be used by a

commercial bank t o mean the balance es tab l i shed a f t e r giving e f f e c t to

amounts due to and from other banks. Nevertheless he f e l t t ha t the term "net"

or "actual ne t " balance as commonly used in banking c i r c l e s would be in te r*

pre ted to e l iminate uncol lec ted items or " f l o a t " .

Thus, in add i t ion t o the l i g h t which i s obtained from the debates in

Congress, I th ink we may f a i r l y say t h a t the term "net balance" or "actual

balance" as coimonly used in banking c i r c l e s would be construed to e l iminate

the " f l o a t " .

As above s t a t ed , so f a r as member banks a re concerned, the quest ion of

immediate c red i t necessar i ly involves the quest ion of reserve requirements.

I be l ieve t h i s requ i res no argument. As bearing on t h i s po in t , however, the

fol lowing provis ion contained in Section 19 i s i n t e r e s t i n g ;

"The required balance ca r r i ed by a member bank wi th a Federal Reserve Bank may, under regu la t ions and subject to such p e n a l t i e s as may be p resc r ibed by the Federal Reserve Board, be checked agains t and withdrawn by such member bank f o r the purpose of meeting ex i s t i ng l i a b i l i t i e s ; provided, however, e t c " .

The words "required balance" c l ea r ly r e f e r t o reserve balances and r e -

serve balances c l ea r ly r e f e r to an "actual net balance" . In other words, a

member bank may draw checks against i t s ac tua l net balance by v i r t u e of the

above provis ion , and by implicat ion no other balance which i s not an ac tua l

net balance i s ava i l ab le to be checked aga ins t . I t i s i n t e r e s t i n g t o compare

the provis ion quoted above with t h e provis ion contained in Section 19 of the

Federal Reserve Act p r i o r to the amendment of June 21, 1917• P r io r t o the

'•.amendment, Sect ion 19 contained a s imi la r provis ion, but i t was provided;


- 7 - X-UlUg(a)

"The reserve ca r r ied by a member bank with a Federal Reserve Bank nay ******** be checked aga ins t **********

In o ther words, i t would seem tha t in adopting the amendment of June 21,

1917. i t was the in t en t ion of Congress not only to e l iminate the " f l o a t " as

/counting in confut ing a reserve balance, but a l so to e l iminate the power of

a member bank to check agains t any balance which included t he " f l o a t " . In

other words, the amendment of June 21, 1917» seems to be cons is ten t throughout.

Sect ion 13 of the Federal Reserve Act provides t h a t a Federal Reserve

Bank may receive from i t s member banks and from the United S ta tes depos i t s of

checks and d r a f t s payable on p resen ta t ion , or so le ly f o r purposes of exchange

or co l l ec t ion m y receive from other Federal Reserve Banks depos i t s of checks

upon other Federal Reserve Banks and checks and d r a f t s payable on p resen ta t ion

wi thin i t s d i s t r i c t , or sole ly f o r purposes of exchange and co l l ec t i on ffi^y v

receive from any non-member bank or t r u s t company depos i t s of checks and

d r a f t s payable upon presen ta t ion , provided such non-member bank or t r u s t

company maintains with the Federal Reserve Bank of i t s d i s t r i c t a balance

s u f f i c i e n t to o f f s e t the items in t r a n s i t held f o r i t s account b$r the Fed-

e ra l Reserve Bank.

In reading Sect ion 13, i t should be noted t h a t a non-member bank i s r e -

quired to maintain a balance s u f f i c i e n t to o f f s e t items i n t r a n s i t . The

words used are not "net balance" or "actual net balance", but r a t h e r . a

"balance s u f f i c i e n t t o o f f s e t items in t r a n s i t " . I t seems to me tha t t h i s

provis ion regarding non-member banks has nothing to do wi th the present

discussio'n. A non-member bank i s not required to carry reserves in the Fed-

era l Reserve Bank. A non-member bank i s nnly required to carry a balance

which (presumably in the d i s c r e t i o n of the Reserve Bank) must be s u f f i c i e n t

to o f f s e t items in t r a n s i t . Apart from t h i s provis ion regarding non-member


~ g - UlU9(a)

banks, I f i n d nothing i n Section 13 which could be construed to requi re or

authorize a Federal Reserve Bank to give immediate c r e d i t on account of

checks deposited#

Section lG provides tha t every Federal Reserve Bank sha l l receive on

deposit a t par from member banks or from Federal Reserve Banks checks or

d r a f t s drawn upon any of i t s deposi tors , and, when remit ted by a Federal Re

serve Bank, checks and d r a f t s drawn by any deposi tor in any other Federal

Reserve Bank or member bank upon funds to the c red i t of sa id deposi tor in

said Reserve Bank or member bank. Although t h i s p rov is ion of Sect ion l6

would seem to requi re a Federal Reserve Bank to rece ive on deposit under

ce r t a in circumstances checks and d ra f t s* never the less I see nothing in t h i s

Section which would requ i re or au thor ize a Federal Reserve Bank to give

immediate c red i t on uncol lec ted checks»

The e f f e c t of giving immediate c red i t on an uncol lec ted check mast

necessa r i ly be in the nature of making an advance to the deposi t ing bank

p r io r to the co l l ec t i on of the item. I t seems to me tha t t he e labora te

provis ions contained in the Federal Reserve Act regarding the discount of

paper and the loaning to member banks on c o l l a t e r a l notes preclude the idea

of a Reserve Bank being authorized to make advances on unco l lec ted items*

Thus, on the whole, as previously s t a t ed , i t seems to me t h a t the ques

t i on of giving immediate c redi t necessa r i ly involves the quest ion of r e -

serve requirements, and on the question of reserve requirements I th ink

c l ea r ly t h a t , as a matter of law, ac tua l net balances mean balances a f t e r

e l iminat ing the " f l o a t " or uncol lec ted i tems.


(Signed) A. H. WEED

AHW/KEO



ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESEflPVE BOARD

September 6 , 192U. X-4153

v.. SUBJECT: Special Counsel i n Par Clearance Case.

Bear Sir:

Referring to the Board's l e t t e r of August 22nd, 1924, advising that special counsel would be retained in the case of the Paacagoula National Barfc vs . the Federal Reserve Bark of Atlanta» e t e l . , and that the expense of such legal service would be pro-rated among the twelve .Federal reserve banks, you ate advised that the Board has employed Newton B. Baker, Esquire, of Cleveland, Ohio, to serve as such counsel .

Very truly yours,

D. R . Crissinger« Governor.

TO CHAIRMEN OF ALL F. R. BANKS.


I FEDERAL RESERVE BOARD

WASHINGTON


September 6, 1924. X-4i54

SUBJECT: Observance of Holidays*

Dear Sir:

Referring to the Board*s l e t t e r of August 2, 192U (X-Ul2S), on the subject "Federal Reserve Bank Holidays*1, one of the Federal reserve banks has raised a question as to the observance of such holidays i n the event they f a l l on Sunday. The Board has, there-fore , voted that 'whenever January 1, February 22, July 4, or December 25 f a l l s on Sunday, i t wi l l approve the following Monday as a holiday for a l l Federal reserve banks and branches.

Very truly yours.

Wal ter L. Eddy, Secretary.

TO ALL GOVERNORS AMD F. R. AGENTS.


6*5*2 FEDERAL RESERVE BOARD

WASHINGTON

ADDRSgS&gFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

September 10, 1924. X-U156

SUBJECT: Code ?ord f o r Wire Trans fe r s of Treasury C. of I . , Se r ies TS 1925,

Dear S i r :

The Board's l e t t e r of Ju ly 10, I92U (X-Wbj) des ig -nated c e r t a i n code words to be used ii± connection with wire t r a n s f e r s of Treasury Notes and C e r t i f i c a t e s of Indebtedness . As the Treasury Department i s now o f f e r i n g a new s e r i e s of Treasury C e r t i f i c a t e s of Indebtedness, dated September 15, 1924, Se r i e s TS 1925« the code word "BEFOUL" has been des igna ted f o r use in connect iorr^with t r a n s a c t i o n s in t h i s new s e r i e s . The word should be i n se r t ed in the Federal Reserve Telegraphic Code book fo l lowing the supplemental code word "BEFOBEHAND", on Page 24.


.Walter L. Eddy, Sec re ta ry .



X 4 1 5 8 Q 7 3 TREASURY trÂRT^FN?

O f f i c e of the Sec re t a ry WASHINGTON

September 6 , 1924.


S i r :

Yon a r e hereby advised t ha t t h e Department has r e f e r r e d t o the Bis-burs ing Clerk, Treasury Department, f o r pay: cent, t h e account of the Bureau of Engraving and. P r i n t i n g f o r p repar ing Federa l r e se rve notes during t-ie pe r iod August 1 t o August 31, 1S34, amounting t c $67,837.00, as fo l l ows , -

Federal Reserve Notes. 1914 5 5 ttlQ $ 2 0 1 5 0 Tota l

Boston 1 0 0 , 0 0 0 1 7 , 0 0 0 1 9 , 0 0 0 — —— 1 3 6 , 0 0 0 New Y O M . • 3 8 1 , 0 0 0 — — — — — — 3 8 1 , 0 0 0 P h i l a d e l p h i a . .•. 1 6 1 , 0 0 0 2 < 5 , 0 0 0 5 , 0 0 0 1 0 , 0 0 0 1 9 8 , 0 0 0 Cleveland 9 5 , 0 0 0 - * 0 , 0 0 0 - ± 1 , 0 0 0 1 0 , 0 0 0 1 8 6 , 0 0 0 Ricrunond 5 3 , 0 W ——— — - I — 5 3 , V U 0

1 5 * , 0 0 0 1 5 = , 0 0 0 C n i c d g o . . . . . . . . 2 9 B , C O G — — — 2 9 6 , 0 0 0 Kansas C i t y . . . . 4 9 , v w lC.OvO 5 9 , C O G

. 1 5 , C G v —— — — — — 1 5 , 0 0 0 San F r a n c i s c o . . 2 - t - i , G C G 1 9 . C O G 1 9 , 0 0 0 ' 2 8 2 , 0 0 0

1 , 5 5 C , 0 0 0 9 B , 0 C C , 4 , 0 0 0

o 8 A 1 , 7 6 2 , 0 0 0

1,762,000 shee ts .® i,38.50 p e r M 067,837.00 •The charges aga ins t tne severa l Federal Reserve Banks a r e as f o l l o w s : -

C O P T T e n - P l a t e

Boston Sheets , sat ion P r i n t i n g "'materials Tota l

Boston .136,000 $2, 4l4 .00 $1,112.48 $1,709.52 $5,236.00 New Y o r k . . . . . . .381,000 6,762.75 3,116.58 4,789.17 14,668.50 P h i l a d e l p h i a . . .198,000 3,51-t.50 1,619.64 2,-..88.86 7,623.00 Cleveland .186,000 3,301.50 1,521.48 2,338.02 7 ,161.00 Richmond . 53,000 940.75 433.5*± 666.21 2,040.50 At lan ta .154,000 2,733.50 1,259.72 1,935.78 5,929.00 Chicago .298,000 5,285.50 2,437.64 3 ,745.86 11,473.00 Kansas City . , . . 59,COG 1,047.25 482.62 741.63 2,271.50 Dal las . . 15,000 266.25 122.70 188.55 577.50 San Franc i sco . .282,000 5,005.50 2,306.76 3,544.74 10,857.00

1 ,762,000 $31,275.50 $14,413-16 $22,148.34 $67,837.00

The lu reau appropr i a t ions w i l l be reimbursed in t h e above amount f r o n t he i n d e f i n i t e app rop r i a t i on "Prepara t ion and I ssue of Federa l Reserve Notes, Reimbursable", and i t i s reques ted t na t your board cause sucn i n d e f i n i t e appro-p r i a t i o n to be reimbursed in l i k e x :ount .

R e s p e c t f u l l y ,

(Sig..@d) S. R. Jacobs Deputy Conr.iss ione r .


FEDERAL RESERVE BOARD

r 674

WASHINGTON


X-U139 September 17. 1924.

3JBJECT: EXPENSE MAIN LINE, Leased Wire System, August, 1924.

Dear S i r :

Enclosed herewith you wi l l f ind two mimeograph" s ta tements , X-4l59~a and X-4l59~b, covering in d e t a i l operations of the main l i n e , Leased Wire System, during the month of August, 1924.

Please c red i t the amount payable by your bank i n the general account, Treasurer , U. S . , on your books, and issue c / e For® 1, National &nks, for account of "Salar ies ard Expenses, Federal Reserve Board, Special Fund," Leased Wire System, sending dupl ica te c / f to Federal Re-serve Board.

Very t r u ly yours ,

Fiscal Agent.

(Enclosures)

To Governors of a l l banks (except Chicago).


675

X - 4 l 5 9 - a

REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE

LEASED WIRE SYSTEM FOR THE MONTH OF AUG IB T, 1924.

Percent of Treasury War Fed. Res- f . c ta l Bank Dept. Finance Corp.

Frcm Bank Business J3usiness(*) Business Business Total

Boston 23,34l 3 .11 3,932 New York 135 > 1 0 18-02 6,383 Phi ladelphia 31,895 4 .25 3,985 Cleveland 60,236 8.02 3,293 Richmond 51,182- 6.81 3,481

Atlanta 54,051 7-20 3,385 Chicago 85,236 11-35 5 M s St . Louis 63,934 8.51 4,521 Minneapolis 36,763 4.89 2,345 Kansas City 61,398 8.17 3,777 ' -Dallas 46,452 6.18 2,3 91 San Francisco 101,355 13.49 7,537

Total 751,253 100.00 50,328

Board 269,813 27,58b

Total 1 ,021,066 77,914

Percent of Total 92,97%

r—

Bank Business 1,021,066 words or 92.91 /» Treasury Dept. „ 77,91% " « 7-09 1°

TOTAL 1,098,980 " "100-00

(*) These percentages usi the pro r a t s share 0: expenses as shown on statement (X-4l59b)

27,273 141,793

35.880 63,529 54,663 57,436 90,73% 6 2 , 4 5 5 3 9 , i c s 65,175 4 s , 643

102,892

801,521

297,399

1,098,980

FEDERAL RESEBV1 BOARD Washington, D. C.

September 17, 1924.


REP GET OF EXPENSE MAIN LIKE

FEDERAL RESERVE LEASED WIRE SYSTEM, AUGUST, 1924, X-l+159-b

Name of Bank Opera to r s ' Operators ' Wire-

S a l a r i e s Overtime Rental Total

Expense

Pro Rata Share of

Total Expense Cred i t s

Payable to Federal Reserve

Board

Boston $ 250.00 $ 250,00 $ 710,66 $ 250.00 $ 460.66 New York 1 ,513.9s 1 ,513 '98 4,117,73 . 1,513-98 2 ,603 .75 Ph i lade lph ia 200.00 200,00 971.16 20c.CO 771.16 Clevel and 272.00 272.00 1,832-64 272.00 1 ,560.64 Richmond 315-00 315.00 1 ,556 .15 315-00 l , 2 4 i . i 5 A t l a n t a 255.00 255.OO 1,645.27 255.CO 1,390.27 Chicago (#) 4 , 3 2 7 9 3 . $ 2.00 - 4 ,329,93 2.593.5S • ^ ,329.93 (*)1 ,736 .35 St * Louis 274,60 274,60 l , 9 4 4 . 6 1 274,60 • l ,670.01 Minneapolis 183-34 183-34 - I , H 7 . 4 I

1,366.92 183'34 934.07

Kansas City 346.64 - — 346.64 I , H 7 . 4 I 1,366.92 346.64 1,520.22

Dal las 251.00 251.00 1,412.19 251.00 1 ,161.19 Ban Francisco . 330-00 320,00 3,032.59 380,00 2,702.59

3u » lies » £>oaro ' $15,979.4% 15,979-42

so ,bog .49 i 2 .00 ^15,979.42^24,550.91 $22,350,91 $3,571,49 $16,015.77 U U J c o x o ( i ) 1 ,736 .35 $22,350.91 n ^ , 2 7 § A :

(#) Includes s a l a r i e s of Washington ope ra to r s . (*) Credi t (a) Received $ from the War Finance Corporation and $1,700.00

from Treasury Dept, covering business f o r the month of August, 1924, (&) Amount re imbursable to Chicago #


- (COPY)

IN THE DISTRICT COURT OF THE UNITED STATES,

FOR THE NORTHERN DISTRICT OF GEORGIA.

677

x4i6i

PASCAGOULA NATIONAL BANK, )

) PLAINTIFF, ) NO. 295

VS. ) ) IN EQUITY.

FEDERAL RESERVE BANK OF ATLANTA, ) ET. AL. '

DEFENDANTS.

ANSWER OF DEFENDANT, FEDERAL RESERVE BANK OF ATLANTA.

And now comes Federal Reserve Bank of Atlanta,, a body corporate under

the laws of the United S t a t e s , one of the defendants in the cause above s ty led

and makes answer to the b i l l of complaint as f i l e d here in by the p l a i n t i f f ,

and f o r answer says; - 1 -

Upon information and b e l i e f , t h i s defendant admits as t rue the a l l ega t ions

contained in paragraph 1 of the b i l l of complaint.

- 2 -

This defendant admits the averments of paragraph 2 of the b i l l of complaint,

-3-

In response to paragraph 3 of said b i l l , t h i s defendant says tha t i t i s

a Federal Reserve Bank, organized and ex i s t ing under and pursuant to tha t

c e r t a i n Act of Congress approved December 23, 1913, known as the Federal Reserve

Act, as amended; tha t i t s p r inc ipa l o f f i c e i s in the City of At l an ta , in the


r 678 X 4 i 6 i

S t a t e o f G e o r g i a , w i t h i n t h e N o r t h e r n D i s t r i c t o f G e o r g i a , a n d t h a t i t i s t h e

F e d e r a l R e s e r v e B a n k f o r t h e S i x t h F e d e r a l R e s e r v e D i s t r i c t . I t m a i n t a i n s a

b r a n c h i n t h e C i t y o f N e w O r l e a n s , i n t h e S t a t e o f L o u i s i a n a , p u r s u a n t t o t h e

p r o v i s i o n s o f S e c t i o n 3 > o f t h e F e d e r a l R e s e r v e A c t , t h r o u g h w h i c h " b r a n c h i t

t r a n s a c t s c e r t a i n o f i t s b u s i n e s s #

- 4 ~

P a r a g r a p h 4 o f s a i d b i l l o f c o m p l a i n t c o n s i s t s l a r g e l y o f l e g a l c o n c l u s i o n s

a n d o f s t a t e m e n t s a s t o t h e t e n o r a n d e f f e c t o f v a r i o u s o f t h e p r o v i s i o n s o f

the .Federa l Reserve Act and, to t ha t e x t e n t , the same r equ i r e s no answer * This

defendant denies the a l l e g a t i o n tha t the Federal Reserve Board ,Tis a quasi

corporat ion,1 1 and i t d e n i e s , a s charged, the averirsnt in said paragraph to the

e f f e c t t h a t Joseph A* McCord, Federal Reserve Agent, i s a c t i n g f o r the Board

with p a r t i c u l a r r e spec t to n those func t ions i n t he S ix th Federal Reserve t h a t operate upon p l a i n t i f f , and other member banks in said D i s t r i c t , 1 1

D i s t r i c t ^ ' / of which complaint i s i n said b i l l made • This defendant admits the

t r u t h o f t h e a l l e g a t i o n s c o n t a i n e d i n t h e f i r s t s e n t e n c e o f p a r a g r a p h 4 and

t h a t t h e F e d e r a l R e s e r v e B o a r d h a s i t s p r i n c i p a l o f f i c e s i n t h e T r e a s u r y B u i l d -

i n g o f t h e U n i t e d S t a t e s i n t h e C i t y o f W a s h i n g t o n , a s a l l e g e d i n t h e b i l l .

~ 5 ~

In response to paragraph 5 of said b i l l of complaint , t h i s defendant says

that Joseph A* McCord r e s i d e s i n the City c f A t l a n t a , and maintains on the

premises of the Federal Reserve Bank of A t l an ta , under the terms of t he Federal

Reserve Act and f o r the purposes spec i f i ed in said Act , a l oca l o f f i c e of said •

Board and tha t he i s , t o the ex tent spec i f i ed i n said Act and not o therwise ,

the o f f i c i a l r e p r e s e n t a t i v e in the Sixth Federal Reserve D i s t r i c t of the Federal

- (2)


,„L679

R e s e r v e B o a r d f o r t h e p e r f o r m a n c e o f t h e . f u n c t i o n s c o n f e r r e d u p o n i t b y s a i d A c t .

H e i s a l s o C h a i r m a n o f t h e Board o f D i r e c t o r s o f t h i s d e f e n d a n t . T h i s d e f e n d a n t

5 a d m i t s a s c o r r e c t t h e a v e r m e n t i n s a i d p a r a g r a p h / a s t o t h e p r e s e n t p e r s o n n e l o f

t h e F e d e r a l R e s e r v e B o a r d . —6—

T h i s d e f e n d a n t s a y s t h a t i t i s a d v i s e d b y c o u n s e l t h a t p a r a g r a p h 6 o f s a i d

b i l l r e q u i r e s n o a n s w e r . - 7 -

P a r a g r a p h 7 o f s a i d b i l l o f c o m p l a i n t c o n t a i n s o n l y s t a t e m e n t s a s t o p r o v i -

s i o n s o f t h e F e d e r a l R e s e r v e A c t a n d , t h e r e f o r e , r e q u i r e s n o a n s w e r .

- S -

P a r a g r a p h S o f s a i d b i l l c o n t a i n s o n l y a r e c i t a l o f w h a t t h e p l a i n t i f f s t a t e s

a r e t e r m s a n d p r o v i s i o n s o f t h e F e d e r a l R e s e r v e A c t t o u c h i n g t h e p o w e r a n d

a u t h o r i t y o f t h e F e d e r a l R e s e r v e B o a r d a n d w h i l e t h e s a i d r e c i t a l o f t h e t e r m s

and p r o v i s i o n s o f t h e F e d e r a l R e s e r v e A c t i s p a r t i a l a n d i n c o m p l e t e , t h e s a m e

r e q u i r e s n o a n s w e r . - 9 -

p a r a g r a p h 9 o f t h e b i l l o f c o m p l a i n t c o n t a i n s o n l y s t a t e m e n t s o f c o n c l u s i o n s

a n d , t h e r e f o r e , r e q u i r e s n o a n s w e r . T h i s d e f e n d a n t d e n i e s , h o - e v e r , t h a t t h e

F e d e r a l R e s e r v e S y s t e m i s i t s e l f a l e g a l e n t i t y w i t h c o r p o r a t e p e t e r s > b u t s a y s

t h a t t h e t w e l v e F e d e r a l R e s e r v e B a n k s a r e t w e l v e s e p a r a t e a n d d i s t i n c t c o r p o r a t i o n s

a n d t h a t t h e F e d e r a l R e s e r v e B o a r d i s n o t a c o r p o r a t i o n o r quasi c o r p o r a t i o n ,

b u t i s a g o v e r n m e n t a l e s t a b l i s h m e n t o r b o a r d e x e r c i s i n g governmental p o w e r s

a m o n g w h i c h p o w e r s i s a g e n e r a l s u p e r v i s i o n o v e r a l l t he Federal R e s e r v e B a n k s .


xUili 6 8 0

—10—

This defendant i s informed and , upon such informat ion, s t a t e s that the

method of co l l ec t ing checks described i n paragraph 10 of said b i l l was a method

largely employed in the co l l e c t i on of checks p r i o r to the passage of the Federal

Reserve Act of 1S13* This defendant i s fu r the r informed tha t there was then a

p rac t i ce among some banks for the remi t t ing bank to rake a small charge called

"exchange" and to deduct the amount thereof from the remit tance , but t ha t such

p rac t i ce was not un iversa l or customary and was modified or abated by various

i n t e r bank arrangements, so tha t i t âs ne i the r ce r t a in nor uniform*

—11—

Answering paragraph 11 of said b i l l , t h i s defendant says tha t the averments

of the f i r s t sentence thereof appear to be s u b s t a n t i a l l y correct* In fu r t he r

response to paragraph 11 of the b i l l of complaint t h i s defendant says that i t

i s t rue tha t i t was not u n t i l the summer of 1916 that the Federal Reserve Board

required of the various Federal reserve banks, including the defendant Reserve

Bank, that they act as c l ea r ing houses for the i r respec t ive members* This

defendant f u r t h e r says, however, tha t a t BO time p r i o r to l $ l b or subsequent

thereto has i t paid remission or exchange charges on checks collected by or

through i t*

c 4 )


G 8 1 ^ l 2 r X 4 l 6 l

Paragraph Id of sa id b i l l ^ s e t s up mere conclusions of the p l eade r and, the re -

f o i e , r e q u i r e s no answer* This defendant says, however, tha t the e f f e c t of the sa id

amendment of September 7i 1916, was to au thor ize any Federa l Reserve Bank to rece ive

from i t s member banks checks and d r a f t s . payable upon p r e s e n t a t i o n without l i m i t a t i o n

e*s to the d i s t r i c t where payable and from other Federal Reserve Banks checks and

d r a f t s payable upon p r e s e n t a t i o n wi th in i t s d i s t r i c t . By the Act of June 21, 1917,

Section 13 of the Federal Reserve Act was amended so as to au thor ize Federal Reserve

jjanks to rece ive a l so from nonmemher banks checks and d r a f t s payable on p r e s e n t a t i o n

without any l i m i t a t i o n as to the d i s t r i c t where such checks a re payable ; provided,

such nonmember banks maintain with t h e Federal Reserve Bank of t h e i r own r e spec t i ve

D i s t r i c t s balances s u f f i c i e n t to o f f s e t the items in t r a n s i t . Such banks are now

known as ,fnon member c l e a r i n g hanks*11

—lj"*

Paragraph 13 of s a i d b i l l s e t s up mere conclusions of the p l e a d e r and, t h e r e -

f o r e , r e q u i r e s no answer. This defendant says, however, t h a t the Federa l Reserve

.board was not only author ized by the o r i g i n a l Act, but i s now au thor ized by the Act,

as amended, to r e q u i r e member banks to remit a t par f o r items d r a m upon them and

sent to them f o r c o l l e c t i o n and remittance by t h e i r r e s p e c t i v e r e s e r v e banks. More-

over, member banks a r e forbidden by law t o make exchange charges f o r checks sent to

them f o r payment and r emi t t ance by or through .Federal Reserve Banks, and Federal

Reserve Banks a re fo rb idden to pay exchange charges#

( 5 )


xUl6lr 682

~lU—

This defendant says tha t by Act approved June 21, 1917, c e r t a i n language,

known as the Hardwick Amendment, was inser ted in Sect ion 13 of the Federal

Reserve Act to the fol lowing e f f e c t :

"That nothing in th i s or any other sec t ion of t h i s ac t sha l l be construed as p roh ib i t ing a member or nonmember bank from making reasonable charges, to be determined and regulated by the Federal Reserve Board, but i n no case to exceed 10 cents ~ per $100 or f r a c t i o n t h e r e o f , based on the t o t a l of checks and d r a f t s presented a t any one time, for c o l l e c t i o n or payment of checks and d r a f t s and remis-sion t he r e fo r by exchange or otherwise; but no such charges sha l l be made against the Federal reserve banks"«

This defendant f u r t h e r says t h a t the plan and purpose of t h i s defendant since

Ju ly , 1916, has uniformly been to c o l l e c t for those e n t i t l e d to use the co l l ec -

t ion f a c i l i t i e s of the Federal Reserve System, a l l checks which might l ega l ly

be col lec ted by i t , tha t i s to say, such checks es i t could c o l l e c t a t p a r .

This defendant f u r t h e r says tha t i t s p l an and purpose in th i s regard has been

and now i s in accord with the provisions of the Federal Reserve Act and the

regula t ions of the Federal Reserve Board made pursuant t he r e to . Any averments

in paragraph l 4 in c o n f l i c t with t h i s sec t ion of th i s answer are denied *

-15-

This defendant i s informed that the Hon. W« P» G. Harding, while Governor

of the Federal Reserve Board , mad e a statement to the House Committee on Banking


^ 683

and Currency s u b s t a n t i a l l y as quoted i n paragraph of said t i l l . The other

a l lega t ions of said paragraph contain only conclusions of the pleader and, for

tha t reason, no f u r t h e r answer i s made t he r e to .

- l b -

This defendant i s informed tha t on or about September 5> 1923* the

Hon# R« Cr is s inge r , now Governor of the Federal Reserve Board, wrote to

Mr* L. R. Adams, General Secretary of the National and S ta te Bankers1 P ro tec t ive

Associat ion, a l e t t e r .in the form se t out i n paragraph 15 of said b i l l . Upon

information and b e l i e f , t h i s defendant says t ha t the same was w r i t t e n in reply

to the printed l e t t e r , a copy of which i s attached to said b i l l of complaint as

Êxhibit "A" the reof . This defendant i s without information upon which to make

fur ther , answer to said paragraph 16 of said b i l l .

-17-

In response to paragraph 17 of said b i l l , t h i s defendant denies the aver-

ments thereof except tha t t h i s defendant admits t ha t i n the year 1916 the

Federal Reserve Board i s sued , pursuant to the terms and provisions of the Federal

Reserve Act, a ce r t a in regu la t ion upon the subject of check c lea r ing and co l l ec -

t ion. Said regula t ion has been revised and changed from time to time and , as

revised and changed, i s now of force and i s now known as Regulation J (Ser ies of

3-924) • S&id regu la t ion d i r e c t s each Federal Steserve Bank to "exerc ise the

funct ions of a c l ea r ing nqu.se and c o l l e c t c h e c k s , a n d p r e s c r i b e s the general

terms and conditions upon which such Federal reserve banks s h a l l ac t as c lea r ing

houses and col lec t checks.. Among such terms and condi t ions are the following-2

••••


V

x f l 6 l 6 @ 4

"(1) Each Federal Reserve Bank wi l l rece ive a t par from i t s member banks and from non-member c l ea r ing banks in i t s d i s t r i c t , checks drawn on a l l member and nonmember clea r i ng banks, and checks drawn on a l l other nonmember banks which a re c o l l e c t -able a t par in funds acceptable to the Federal Reserve Bank of the d i s t r i c t i n which such nonmember banks are l o c a t e d .

"(S) Each Federal Reserve Bank wi l l receive a t par from other Federal Reserve Banks, and from a l l member and non-member c lea r ing banks in other Federal Reserve D i s t r i c t s which a re authorized to rou te d i r e c t fo r the c r e d i t of t h e i r r e spec t ive Federal Reserve Banks, checks drawn on a l l member and nonmember c lea r ing banks of i t s d i s t r i c t , and checks drawn on a l l ot ' er nonmember banks of i t s d i s t r i c t which are co l l ec t ab le at par in funds acceptable t o the c o l l e c t i n g Federal Reserve Bank,

"(3) No Federal Reserve Bank sha l l rece ive on depos i t or for co l l ec t ion any check drawn on any non-member bank which cannot be col lec ted a t par i n funds acceptable to the Federal Reserve Bank of the d i s t r i c t in which such nonmember bank i s l oca t ed . "

Said regu la t ion a l s o provides "checks received by a Federal Reserve Bank, on

i t s member or non-member c lear ing banks, w i l l o r d i n a r i l y be forwarded or presented

d i rec t to such banks and such banks w i l l be required to remit or pay tnerefor a t

par in cash or in bank d r a f t acceptable to the c o l l e c t i n g Federal Reserve Bank".

P r io r to 1916 ne i ther t h i s defendant nor any other Federal r e s e r v e bank had

a t r a n s i t or co l lec t ion department, maintained as such. Re la t ive ly few checks

reached t h i s defendant fo r co l l ec t ion and such checks were items sent by member

( S )


x ^ i f i 6 8 5

banks, or by other Federal reserve banks , for deposi t , co l lec t ion and credit#

No charge was made for th i s service by this defendant and such checks so deposited,

being drawn upon i t s member banks, were collected at par and without deduction

for exchange or co l l ec t ion charges. On or about the 15th day of July, 1916, this

defendant, pursuant to instructions issued by the Federal Reserve Board, began

the operation of a transi t and col lect ion department. For a short time, a

nominal charge was made by this defendant for such co l lect ions ,but no charge for

remittance was included therein or permitted to be made. Subsequently such items

were handled without charge to the extent of f ive hundred checks per month for

any one bank. On or about the 15th day of June, 1918, this defendant and other

federal reserve banks began to col lect for the account of members, and others

entitled to use the co l l ec t ion f a c i l i t i e s of the Federal Reserve System, without.

any charge therefor,, a l l items which i t might legal ly deceive on deposit for'

co l l ec t ion , and such service i s now being given and such co l lec t ion department

i s now being maintained. I t i s not true that a l l members, including the p l a i n t i f f ,

are, under the regulations aforesaid and under the law, required to remit the proceeds of a l l checks presented to- them through this defendant -by

mail without any deduction because of the remittance. On the contrary, they

are given the option of remitting drafts in payment thereof by mail in addressed

end stamped envelopes furnished by the Federal Reserve Bank or paying such checks

by mailing or shipping cash to the Federal Reserve Bank at the expense and risk

of the Federal Reserve Bank. - IS -

Paragraph lg of the b i l l of complaint sets forth mere conclusions of the

pleader and , therefore, requires no answer. This defendant denies the soundness

( 9 )


x u i ^ 0 8 6

of such conclusions and f u r t h e r says t h a t , i f i t should he considered tiset

saifd paragraph contains any i ssuable averments of f a c t , any and a l l of such

aver rants a re d.enied* -19-

Paragraph 19 of said b i l l of complaint contains only conclusions of the

pleader as to s e t t e ro :f law and , t he r e fo re , requires no answer* I f , however,

i t "be considered tha t said paragraph contains any i s suab le averments of fact>

the same, and each t h e r e o f , are denied. Defendant f u r t h e r says in response to

said paragraph tha t i t i s not t rue that th i s defendant i s r e f u s i n g to obey the

mandate of Section l 6 of the Fed eta 1 Reserve Act to the e f f e c t t h a t ;

"Every Federal Reserve Bsmk s h a l l rGlaive on deposi t a t par from member batiks or from Federal Reserve Banks checks and d r a f t s drawn upon any of i t s depos i to r s , and when remitted by a Federal Reserve Bank, checks and d r a f t s drawn by any deposi tor in any other Federal Re-serve Binok or member banks upon funds t o the c r e d i t of said depos i tor in sa id reserve bank or member bank,**

Every cash item received for deposit by th is defendant from the p l a i n t i f f and.

from a l l of the other member banks of defendant is received for deposi t a t par

without any deduction whatever» I t i s t rue tha t i n cases where t h i s defendant

receives for deposi t a t par cash items which may not be collected during banking

hours on the same day in which received, c r e d i t i s given i n accordance with the

time schedule re fe r red to in said b i l l of complaint; but t h i s defendant says tha t

a c red i t a t par of an i tem, to be ava i l ab l e to a member bank for i t s reserve

account and as funds against which a check may be drawn in accordance with said

time schedule, i s not a denia l to the member bank of i t s r i gh t to depos i t such

items a t par * (10)


xUith. 6 8 V

*- SO —

This defendant den ies , as charged, the averments contained i n par a graph 20

of the "bill of complaint* I t says tha t i t is t rue t h s t in cases where <jfa$h

items deposited "by a member can not be immediately col lec ted by defendant , as

in the next preceding sec t ion of t h i s answer more f u l l y se t out , c r e d i t i s given

a t par and without any deduction whatsoever, in accordance with said time

schedule# Def end ant f u r t h e r says tha t said time schedule represents the ex-

perience of t h i s defendant as to the usual time f o r actual co l l ec t i on of items

as indicated the re in , but t h a t , in accordance with said time schedule, the

amount of each cash i tem so received is n©de ava i lab le to the reserve account

of each member bank a t the expira t ion of the time stated in said time schedule,

whether or not the same be then ac tua l l y collected« Were immediate c r ed i t given

as demanded by complainant each member bank could count as a p a r t of i t s

reserve and draw checks agains t items not col lected and while the same were s t i l l

in the 11 float11* Such a p r a c t i c e would be economically unsound and contrary to

ex is t ing banking p r a c t i c e , would r e s u l t i n the c r ea t i on cf f i c t i t i o u s rese rves ,

would mean the pyramiding of c r e d i t s , and lead to other abuses; and any such

p rac t i ce would be contrary to the purposes and express provis ions of the Federal

Reserve Act* - 21 -

Paragraph 21 of the b i l l of complaint se ts up mere conclusions of the.

pleader and, the re fo re , r equ i res no answer# This de fendan t , however, denies

the soundness of such conclusions*

(11)


xUl? 688

- 2 2 -

Paragraph 22 of the b i l l of complaint sets up merA conclusions and , t he r e fo re ,

requires no answer* This defendant,however, denies the soundness of the con-

clusions i n said paragraph contained, and denies that the proviso i n Sec t ion 13

contained i s uncons t i tu t iona l for the reasons s t a t e d , or for Sny other reason,

This defendant says f u r t h e r that at the time p l a i n t i f f became a member of the

Federal Reserve Bank of Atlanta i t vo lun ta r i l y agreed to comply with the terms

of the Federal Reserve Act and the regula t ions of the Federal Reserve Board*

- 2] -

In response to paragraph 2} of the b i l l of complaint th i s defendant says that

i t is t rue that i t did here to fore issue i t s Circular G-l6l addressed to member

banks and to nonmember banks maintaining c lea r ing accounts, which said c i r cu la r

was on the subject of check clear ing and co l l ec t ion and was in a l l r e spec t s in

accord with Regulation J of the Federal Reserve Board* Said c i r cu la r was dated

February 2S, 1921. Said c i rcu la r i s not now of fo rce , the same having been

superseded by l a t e r c i r c u l a r s on the same subject* This defendant denies that

the provis ions of said c i r c u l a r s , or any of them, or any of i t s p r a c t i c e s t h e r e - -

under, were or are i n anywise unlawful or in c o n f l i c t with any of the provis ions

of the Federal Reserve Act, - 24 -

Paragraph 24 of the b i l l of complaint se ts up mere conclusions of the

pleader and, t he re fo re , requi res no answer. I f i t should be considered, however,

that said paragraph contains any proper averment of f a c t , the same, and every such,

averment, a r e denied , except that t h i s defendant admits tha t i t i s now c i r c u l a t i n g

(12)


x k i k 6 8 9

a par l i s t such as tha t expressly approved by the Supreme Court of the United

States in the case of American Bank & Trust Company e t s i . , v . Federal Reserve

Bank of At l an ta , e t a l - , 262 U. S. 6U); and except t h a t t h i s defendant admits

i t s p r a c t i c e s with regard to deferred c r e d i t s s s i n t h i s answer described and

not otherwise. This defendant p a r t i c u l a r l y denies t h a t the p l a i n t i f f , or any

other member bank, has been under any duress or the sub jec t of any i l l e g a l

p r a c t i c e , and th i s defendant denies t h a t any a c t done by i t and i n said b i l l

complained of has been i n v i o l a t i o n of any provis ion of the Federal Reserve Act,

or contrary to any ad jud ica t ion of the Courts, or any cons t ruc t ion of said Act

as made by the Courts. - 25 -

To the extent t h a t Paragraph 25 of the b i l l of complaint contains mere

conclusions ;of the p l eade r , i t r equ i re s no answer, This defendant d e n i e s ,

hovrever, the cor rec tness of the conclusion tha t Federal reserve banks are not ...

authorized to receive for c o l l e c t i o n from t h e i r members and c l ea r ing members

any check or d r a f t t ha t i s not payable on presents t i o n w i th in the d i s t r i c t

of the Federal reserve bank rece iv ing i t , and f u r t h e r denies the correctness

of the conclusion tha t defendant can not receive for c o l l e c t i o n checks payable

within i t s d i s t r i c t deposited with i t f o r such purpose by another Federal reserve

bank. This defendant says tha t i t i s t rue tha t i t r ece ives for c o l l e c t i o n from

i t s members and from i t s non-member c l ea r ing banks checks tha t are payable i n

other Federal Reserve D i s t r i c t s , and, denying t h a t i t r ece ives checks f o r any

purpose from the members of other Federal reserve banks, admits t h a t i t does

receive from other Federal reserve banks checks t h a t a r e c o l l e c t i b l e a t par and

tiaat are payable upon p re sen t a t i on wi th in the Sixth Federal Reserve D i s t r i c t .

(13)


X 4 i 6 l V 690

Defendant says tha t i t s r i g h t and corporate capaci ty so to do a re p l a i n l y stated

in the Federal Reserve Act, as now amended.

— 2 6 —

Paragraph 26 of the b i l l of complaint, as charged, i s denied.

— 27 "

In response to Paragraph 27 of the b i l l of complaint this defendant says

that i t i s true that the checks referred to therein, aggregating $4,806*97» were

tendered to i t in settlement of certain dai ly l e t t e r s , as alleged in said

paragraph, and that such checks represented respect ively the amounts of said

dai ly l e t f e r s , l e ss an attempted charge for remittance which the p l a i n t i f f sought »

to impose upon th i s defendant . I t i s , fur thermore, t rue that the p l a i n t i f f did

also tender to t h i s defendant two c e r t a i n bank d r a f t s in the aggregate sum of

$55^-93 8 8 being i n payment of c e r t a i n checks drawn on p l a i n t i f f and sen t by

defendant to p l a i n t i f f f o r payment and remi t tance . The checks so sent have

been deposited with t h i s defendant by other Federal reserve banks, and net by

the members thereof as a l l eged , and had, t he r e fo r e , come to defendant from

outside the t e r r i t o r i a l l i m i t s of the Sixth Federal Reserve D i s t r i c t . Said l a s t

mentioned batik d r a f t s represented the aggregate of the checks so sent for pay-

ment and remi t tance , l e s s a charge for remit tance which the p l a i h t i f f attempted

to impose on th is de fendan t . This defendant says tha t the said at tempts of

the p l a i n t i f f to impose on defendant such charges were contrary to the Federal

Reserve Act, and, f o r said reaaon, i t refused to accept said d r a f t s , and each

of them, and, thereupon, requested the p l a i n t i f f e i t he r to remit in f u l l a t

(14)


X 4 i 6 l

•p 6 9 1

P r for said cash l e t t e r s , and each thereof, or to return to defendant the

Items which had oeen sent to p l a i n t i f f by defendant for payment and remittance.

I-i refusing to accept said draf t s , this defendant wrote the p l a i n t i f f the

l e t t er of July ) 1 , 1924, a copy of which i s attached as "Exhibit B" to the

b i l l of complaint. This defendant says that the p l a i n t i f f was, under the law,

required to remit for said items without deduction and, therefore, denies the

averment that the p l a i n t i f f was compelled by an i l l e g a l act of thiti defendant

to forego said exchange and to pay said additional amounts, to i t s l o s s .

Defendant denies the other averments of said paragraph 27*

- 25 -

In response to paragraph 23 of the b i l l of complaint, this defendant

says that, under the provisions of the Federal Reserve Act and of Regulation J ,

the p l a i n t i f f has at a l l times been bound to remit to th i s defendant at par

for items drawn upon the p l a i n t i f f and sent to i t by t h i s defendant for pay-

ment and remission of proceeds. This defendant says that , except in the

particular cases described in paragraph 27 of the b i l l of complaint, p l a i n t i f f

has made no demands upon this defendant touching the remission for items i n

amounts l e s s than the par value thereof . The p l a i n t i f f and this defendant, as

member bank and as Federal reserve bank respect ively , have had between them-

selves many transactions, the p l a i n t i f f sending to this defendant cash items

for deposit , the defendant sendi% to the p l a i n t i f f cash l e t t e r s for payment

and remittance, as to' the aggregate whereof this defendant i s not informed.

In no case, however, except those specif ied in the b i l l , has the p l a i n t i f f

un#ertaken to remit l e s s than the f u l l amount of ehy cash l e t t e r ; nor has the

( 1 5 )


xUl£ 692

"plaint iff neretofUBB demanded the immediate credi t to i t s reserve account of

items not immediately ava i lab le to i t under the provisions of the time schedule

a foresa id . Except as he r e in s p e c i f i c a l l y admitted, the averments of paragraph 23

of the b i l l a re denied so f a r as t h i s defendant has any knowledge t h e r e o f , and

so far as t h i s defendant i s without knowledge thereof they are denied fo r that

reason# - 29 -

Paragraph 29 of said b i l l , as charged, i s denied•

- 30 -

In response to paragraph 30 of said b i l l , t h i s defendant says tha t i t i s

true that on or about J u l y 29, 1924, the p l a i n t i f f presented to i t checks of

the kind and character general ly described in said paragraph and f o r the

aggregate amount the re in s t a t ed , and requested t ha t said dhecks be placed to the

immediate c r e d i t of p l a i n t i f f i n i t s reserve account, and that the defendant

declined to accede to such request fo r reasons s e t out i n the l e t t e r of July 311

1924, w r i t t e n by t h i s defendant to the p l a i n t i f f , a copy of which i s attached

as "Exhibit B11 to said b i l l , namely; t h a t , under the r egu la t ions of the Federal

Reserve Boatfd 9 c r ed i t could be given the re for only in accordance with said

time schedule* Defendant denies the other a l l ega t ions of said paragraph, and

says that the p l a i n t i f f was not en t i t l ed to rece ive immediate c r e d i t to i t s

reserve account fo r funds then uncol lected; nor was the p l a i n t i f f e n t i t l e d to

i n t e r e s t thereon, and tha t no in ju ry to p l a i n t i f f , a t law or in equ i ty , resu l ted

from the a c t i o n of the defendant in t h i s regard the p l a i n t i f f having no r igh t

to u t i l i z e uncollected funds as a col lec ted balance to i t s c redi t* Defendant

(16)


XUlfrl

further says that p l a i n t i f f was immediately given credit at par in a deferred

account for the f u l l amount of such checks without any deduction whatever, and,

upoh the expiration of the time stated in the aforesaid time schedule, p l a i n t i f f

was given credit at par in i t s reserve account for the f u l l amount of such

cnecks without any deduction whatever, in accordance with the terms of Regula-

tion J. Defendant further says that the p l a i n t i f f has at no time, prior to

July 29, 192^, made any demand upon defendant for immediate credit in i t s

reserve account for any checks which, under the regulations of the Federal Re-

serve Board, are receivable for deposit and deferred credit to i t s reserve

account,in accordance with said time schedule; and that said request of

July 29, 192%, was the f i r s t request or demand made by the p l a i n t i f f of the

defendant to that end invoking i t .

- 3 1 -

This defendant admits that i t wrote sod delivered to the p l a i n t i f f the

le t ter referred to in paragraph 31 of said b i l l of complaint; but denies that

such l e t t e r constituted a refusal to receive such checks on deposit at par within

the meaning of Section 16 of the Federal Reserve Act.

- . 3 2 -

This defendant denies the al legations contained in paragraph 32 of said b i l l

of complaint. - 33 ~

To the extent that Paragraph 33 of said b i l l contains mere conclusions of the

pleader the same requires no answer. Defendant, however, denies the al legations

of fact set forth in said paragraph arai particularly that this defendant has

at any time disregarded any l imitat ion imposed upon i t by law.

I 17 )


xUl6l r 894

- 34 -

In so f a r as paragraph 3^ of said b i l l contains any issuable averment of

f a c t , the sane i s denied . - 35 - •

The a l l ega t ions of paragraph 35 of said b i l l of complaint are denied .

~ 36 ~

The a l l e g a t i o n s contained i n paragraph 36 of said b i l l of complaint are

admitted. - 37 -

I f in any of those p a r t s of the b i l l of complaint which t he defendant has

referred to as containing only statements of conclusions there be any a l l ega t ions

of f a c t contrary to the admissions in t h i s answer contained , defendant denies

each and every one of said a l l ega t ion^ .

- 38 -

Defendant denies each and every a l l e g a t i o n of f a c t contained in the b i l l

of complaint, except those a l l ega t ions which defendant has s p e c i f i c a l l y ad-

mitted in t h i s answer, and except those a l lega t ions as to which defendant has

stated in t h i s answer t h a t i t i s without knowledge or informat ion .

- 39 -

And now, having f u l l y answered the p l a i n t i f f 1 s b i l l , defendant shows to the

Court, by way of f u r t h e r defense , as f e l lows :

A.

P r io r to the enactment of the Federal Reserve Act, h e r e t o f o r e r e f e r r e d t o ,

the monetary and f i n a n c i a l s i t u a t i o n of the United S ta t e s had become such as to

cause grave apprehension and i n s i s t e n t demands for l e g i s l a t i o n by Congress to

(IS)


x4i6l '' 695

p .o t ec t both the na t ion and i t s people against the havoc wrought by recur r ing

depressions, c r i s e s , pan i c s , v io lent f l uc tua t i ons in the r a t e of i n t e r e s t and

an general the consequences which always threatened and o f t e n d i s a s t r o u s l y

affected publ ic and p r i v a t e business a l i k e . These e v i l s were caused i n la rge

pa r t by an i n e l a s t i c currency, based upon disappearing bonded indebtedness of

the general government, and the general p rac t i ce which had grown up with regard

to reserves required by law to be maintained. Such r e s e r v e s , required by law

to bear a fixed r e l a t i o n to the deposi t l i a b i l i t y of the banks, were kept in

p^r t in cash for da i ly counter t ransac t ions and in l a r g e r p a r t consisted of

balances in other banks, v&ich other banks in turn s i m i l a r l y maintained the i r own

reserve requirements. The reserves thus maintained by c r e d i t s in other banks

were sometimes r e c i p r o c a l , sometimes cumulated and u t i l i s e d by many banks at

the same time, and the tendency of such reserves *r,0 f i i m l l y to accumulate i n

the great f inanc ia l i n s t i t u t i o n s in centra l reserve c i t i e s where they were

f requent ly loaned out f o r speculat ive purposes on c a l l . Reciprocal and c i r -

culat ing c red i t s to reserves thus rendered such r e se rves in l a rge p a r t

f i c t i t i o u s , and pyramided a la rge imaginary reserve upon an o r ig ina l small

actual deposi t for rese rve purposes. Hie consequences of these p r a c t i c e s were

that the actual reserves of the banks were sca t te red and t h e i r a v a i l a b i l i t y

depended upon the febility of other banks in time of s t r e s s e i t he r to r e -

capture t h e i r own reserves or cecal1 loans . At the f i r s t s ign of f i n a n c i a l

disturbance banks hoarded the i r cash, brought d i s t r e s s i n g and sometimes

des t ruc t ive pressure to bear upon commercial and i n d u s t r i a l i n t e r e s t s to

(1?)


. . ' x4i,6l 896

ccrcpel payment ox loans , and with i nc rea s ing panic found decreas ing a b i l i t y to

r ea l i ze e i t h e r upon the i r own reserves i n other banks or pay the other bank

balances held by them as reserve f o r those other banks. Such s i t u a t i o n s

occurred with pe r iod ica l and increasing frequency and led to business and

bank suspensions and f a i l u r e s and attempts a t r e l i e f by the issuance of unauthor-

ized forms of currency by c lear ing houses and assoc ia t ions of banks - a l l

expedients which, unusual and r e s t r i c t i v e , increased the panic they were

designed to a l l e y . This s i t ua t i on was aggravated by the p r a c t i c e of counting

as reserve the socalled " f l o a t " cons i s t ing of checks deposited fo r c o l l e c t i o n

and c r ed i t but s t i l l in t r a n s i t and uncollected and which upon p r e s e n t a t i o n

in times of d i s t r e s s were met e i the r by delays or r e f u s a l s , or by payments in

other c r e d i t s ra ther than money, such as checks or d r a f t s which i n t u rn could

not be col lected when presented for payment, thus accentuat ing the f i c t i t i o u s and

unreal character of the rese rves upon which the i n t e g r i t y of the system depended.

Thus the very str ingency which gave r i s e to the need of reserves for use

rendered them unavailable* Meantime the currency ava i l ab le to the country was

r i g i d l y l imited by i t s bond bas i s and could not expand however great the need.

In 1907 the causes above described produced a d i sa s t rous panic throughout

the United States and challenged publ ic a t t e n t i o n sharp ly to the uns tab le

basis of both publ ic and p r i v a t e f inance in the United S t a t e s . Continuously

the rea f t e r the subjec t was considered by Congress; extensive hear ings were had,

committees and conferences were organized by publ ic a u t h o r i t i e s , by business

and banking groups, and f i n a l l y , informed and exper t opinion moulded the

Federal Reserve Act which was passed by Congress to r e d r e s s the e v i l s above

(20)


697 x4i6l

described by providing p r imar i ly fo r the i n s t i t u t i o n of the Federal Reserve

System, supervised on behal f of the Government by the Federal Reserve Board,

but administered and operated by the twelve Federal r e se rve banks, each, bank

operat ing independently in i t s own d i s t r i c t except as the severa l banks are

required to cooperate i n the publ ic i n t e r e s t to meet na t ional emergencies.

The ob jec t of the Federal Reserve Act is to br ing about the establishment

of a s t ab le f inanc ia l s t r u c t u r e in the United S ta tes s t rong enough to support

the great f i s c a l operat ions of the Government in times of peace and war and

f l e x i b l e enough to meet the c r ed i t and currency needs of the commerce and

industry of the country. To the and above s e t f o r t h the Federal Reserve Act#

operat ing compuleorily upon nat ional banks and seeking to induce the voluntary

cooperation of S ta te banks and t r u s t companies, c r ea t e s an actual reserve

f i n a l l y mobilized in the Federal Reserve Banks and there represented by actual

net balances , of which not l e s s than 35/3 cmst be kept by the Federal Reserve

Banks in the form of gold or lawful money.

In i t s o r ig ina l form the Federal Reserve Act authorized member banks to keep

a pa r t of t h e i r reserve with other banks and a pa r t as a balance witu tne

the Federal Reserve Banks. In i t s z ea l , however, to assure actual and access ib le

r e se rves , Congress, by amendment to the Act, required member banks to keep the i r

en t i r e reserves i n Federal reserve banks and prescribed tha t such rese rves must

consis t of "an actual ne t balance", thus excluding uncollected checks and items

in t r a n s i t . The Federal Reserve Banks are required to assure tne maintenance of

th i s actual ne t balance "by the imposition of inc reas ing ly severe p e n a l t i e s upon

delinquent member banks.

(21)


B ' ^ 698

In order that the member banks may maintain the ac tua l net balances

required to be kept as r e se rves , i t was e s sen t i a l t ha t Federal r e se rve banks

possess the power to c o l l e c t checks deposited for c o l l e c t i o n and c r e d i t

there to , s ince i t i s by means of checks - t ha t bank balances are b u i l t up, and

a check must be co l lec ted before the amount thereof can be considered as

cons t i t u t ing "an ac tua l net balance11 within the meaning of the Act. The

checks and d r a f t s which the p l a i n t i f f sends to t h i s defendant for c o l l e c t i o n

and c r e d i t to i t s reserve account a re credi ted by t h i s defendant , not

immediately upon depos i t but i n accordance with the time schedule and the

regula t ions of the Federal Reserve Board. The checks and d r a f t s which the

defendant sends to the p l a i n t i f f for payment and remi t tance are those

which to a very l a rge e x t e n t , i f not e n t i r e l y , have been deposited by dither

member banks of th i s defendant or of other Federal Reserve Banks for the

purpose of bui ld ing up and maintaining t he i r r e spec t ive reserve accounts*

Under the provis ions of Section l 6 of the Federal Reserve Act, each

Federal Reserve Bank i s required to accept at par from i t s members and

from other Federal Reserve Banks such checks and d r a f t s as may be placed

with i t on depos i t for co l l ec t ion and c r e d i t , or on depos i t f o r - c o l l e c t i o n

and the remission of proceeds when co l l e c t ed . The member banks of t h i s

defendant, including the p l a i n t i f f bank, avai l themselves to a l a rge

extent of the co l l ec t i on f a c i l i t i e s af forded by t h i s de fendan t , and other

Federal Reserve Banks forward to t h i s defendant such checks and d r a f t s ,

payable upon p resen ta t ion in the Sixth Federal Reserve D i s t r i c t , as may be

collected a t p a r , and t h i s defendant is r equ i red , under the provis ions of

(22)


xUl$1 699 the Act and of the regu la t ions a f o r e s a i d , to receive such items a t the face

or par value thereof« Being inhibi ted by law from paying exchange charges, and

being by law required to give c red i t a t par t h i s defendant cannot a t the same

time permit the drawee bank to deduct exchange charges.

C.

A f u r t h e r reason ac tua t ing Congress in passing the Federal Reserve

Act was to provide for an e f f e c t i v e and prompt c l ea r i ng and c o l l e c t i o n of

checks and d r a f t s , an) i t was i n order to carry cut t h i s purpose that Regu-

l a t i o n J was promulgated. The advantage and b e n e f i t of a systematic ,

expeditious and economical co l l ec t ion of checks i s inca lcu lab le in i t s

d i r ec t b e n e f i t s to the en t i r e country. Pr ior to the i n s t i t u t i o n of the

Federal Reserve System, with i t s f a c i l i t i e s for the order ly and prompt

co l l ec t ion of checks, the banks of the country maintained c lea r ing a r range-

ments among themselves. Such arrangements o f t e n involved the c i rcu i tous

rout ing of checks in order to escape the payment of an exchange charge *

Each bank was s t r i v i n g to s e t t l e the problem of co l l ec t ion for i t s e l f ,

namely; by co l l ec t i ng checks deposited with i t for the purpose in such man-

ner as to avoid the payment of exchange charges, and many of these banks were at

the same time charging exchange on checks drawn aga ins t them. The r e s u l t

was sn expense to business and a t o l l upon indus t ry , with the inconvenience

and Gangers a r i s i n g from delayed co l l ec t ions and the i nd i r ec t rou t ing of

•checks . I f the p l a i n t i f f and other member banks had the r i g h t at w i l l

to disregard the provis ions of Regulat ion J , i t would mean that such ob jec-

ing member banks would s t i l l have the r i g h t , under Sect ion l6 of the

Act, to forward to t h i s defendant for deposi t fo r c o l l e c t i o n and c red i t

at p a r such cash items as the p l a i n t i f f might des i r e to have col lec ted

at par and which could be by the defendant col lected a t par; whereas,

(23)


x4 i6 i 7 0 0

the p l a i n t i f f would r e s t under no r ec ip roca l duty to remi t for i t s own

checks without deduct ion. In other words, the p l a i n t i f f seeks to

u t i l i z e for i t s own advantage the co l l ec t i on f a c i l i t i e s of defendant ,

maintained under the provis ions of Regulation J , and at tne same time to hold

as inopera t ive upon i t the said r egu la t ion , which was passed under the Act and

as required by the Act, and. without which there could be no e f f i c i e n t c o l l e c -

t ion of checks by th i s defendant .

D

As he re to fo re pointed out , the Federal Reserve Board has , in and by said

Regulation J , required each Federal Reserve Bank to exerc i se the func t ions of

a c lear ing house and c o l l e c t checks for such of i t s member banks as des i r e to

avail tnemselves of i t s p r iv i l eges and fo r such nonmember S ta te banks and t r u s t

companies a s may maintain with the Federal Reserve Banks balances s u f f i c i e n t to

qua l i fy them under the provis ions of Section 13 of the Federal Reserve Act to

send items to Federal Reserve Banks for purposes of exchange or of co l l ec t ion .

In and by said Regulation J , each Federal Reserve Bank is required to exercise

the funct ions of a c l ea r i ng house and c o l l e c t checks under the general terms

and condi t ions se t f o r t h i n Regulation J - This defendant avers t ha t in promul-

gating Regulation J the Federal Reserve Board was a c t i n g pursuant to the au-

thor i ty Vested in i t by the Act a f o r e s a i d , and was actuated by the d e s i r e (as

set f o r t h in said Regulation J) 11 to a f fo rd both to the pub l i c and to the v a r i -

ous, banks of the country a d i r e c t , expedi t ious , and economical system of check

co l l ec t ion and set t lement of balances". ( 2 4 )


This defendant , t h e r e f o r e , has the corporate capaci ty and power in and

"by the Federal Reserve Act, as now amended, conferred upon i t to accept from

i t s members and c l ea r i ng members fo r deposi t and c o l l e c t i o n checks and d r a f t s

payable upon p re sen ta t ion , regardless of whether they are payable wi th in i t s

own d i s t r i c t . I t h a s , fur thermore, the corporate capaci ty and power to accept

on deposi t f o r co l l ec t i on from other Federal Reserve Banks checks and d r a f t s

payable upon p resen ta t ion wi th in i t s d i s t r i c t . Any checks so deposited f o r col-

l ec t ion or c r e d i t must be accepted by defendant a t p a r , under the p rov is ions

of Section 1J of the Federal Reserve Act. Under the provis ions of Section 13

of the Federal Reserve Act, t h i s defendant i s in terms prohibi ted from paying

any charge to any bank for the c o l l e c t i o n or payment of checks and d r a f t s

and remission t h e r e f o r , by exchange or otherwise. All of the foregoing

powers and p roh ib i t ions a re establ ished and upheld by the Supreme Court of

the United Sta tes i n the cases of American Bank and Trust Company, e t al» v .

Federal Reserve Bank of At lan ta , e t . s i . , 262 U. S . , 6U3, and Kernsrs & Mer-

chants Bank of Monroe, North Carolina e t a l* v* Federal Reserve Bank of

Richmond, 262 U. S. 649 •

P l a i n t i f f bank has u t i l i z e d , and now u t i l i z e s , the co l l ec t ion f a c i l i t i e s

maintained by this defendant and other Federal Reserve Banks, and avai ls i t s e l f

thereof in order to secure the handling without expense to i t s e l f of items

which are c o l l e c t i b l e a t par through the Federal Reserve Col lec t ion System.

E -

The regulation of the Federal Reserve Beard requiring checks, not

immediately c o l l e c t i b l e , to be credited to the reserve account of a member


702 X4i6l

bank in accordance with the time schedule i s not only permiss ib le and l awfu l ,

under the Federal Reserve Act, but i s required by business prudence and by

fundamental economic cons idera t ions . This defendant and the ether Federal

Reserve Banks represen t i n the aggregate the mobilized reserves of the

country, the rese rvo i r of c r e d i t , and the pr inc ipa l medium of note currency

issue... Considerations of inherent s t a b i l i t y of bank rese rves and of c red i t

extensions and of s ecu r i t y for note i ssues r equ i r e t h a t the reserves carr ied

by the member banks be r e a l and not f i c t i t i o u s . To allow each member hank

the un res t r i c t ed r i g h t to count as a pa r t of i t s l ega l rese rve an uncol lected

balance s t i l l in the " f l o a t " could only mean the establishment of an erroneous

and unsound bas is f o r the computation of reserves ; because the items in t r a n s i t

for co l l ec t i on , while s t i l l uncol lec ted , would not only determine, to the f u l l

extent t h e r e o f , the rese rve of the bank deposi t ing the same with a Federal. Re-

serve Bank, but would, u n t i l a c t u a l l y p a i d , be a l so r e f l e c t e d in the reserve

of the drawee bank. I t i s impossible to a n t i c i p a t e with any c e r t a i n t y

the aggregate of the " f l o a t " , f r o m day to day, and i t is l i k e vise impossible

to s t a t e he r e in any accura te f i g u r e s of averages, but t h i s defendant does aver

(as i s a lso alleged by the p l a i n t i f f i n the b i l l of complaint) tha t there i s p ro -

bably a t o t a l of " f l o a t " in the Federal Reserve System in each day of not l e s s

than $500,000,000. In order t o prevent th i s " f l o a t " which cons is t s of 'uncollected

checks, from being used as bank r e s e r v e s , Congress amended Section 19 of the

Federal Reserve Act on June 21, 1917, so as to requ i re that the r e se rves of

member banks should cons i s t not merely of "balances" with the Federal Reserve

( 2 6 )


* / A i 6 i " 7 0 3

Bank, but of "an ac tual n e t "balance11, which i s commonly understood in banking

c i r c l e s to mean a net balance cons i s t ing of ac tua l ly col lec ted funds with a l l

" f l o a t " or uncollected checks eliminated* The only s a f e r u l e i s tha t thus

adopted by Congress and incorporated in Regulation J by the Federal Reserve

Board, namely, tha t c r e d i t for a check deposited with a Federal Reserve Bank

shal l be given in the col lected funds or reserve account of each member only

a t the approximate time when the check ac tua l ly has been co l l ec t ed . The p l a i n -

t i f f i s not en t i t l ed to the immediate use of the proceeds of a check which i s

s t i l l uncollected* Nothing in. the Federal Reserve Act gives to p l a i n t i f f t h i s

p r iv i l ege and such p r i v i l e g e , i f extended, would be contrary to business usage

and the fundamental considerat ions of sound business po l i cy , as well as contrary

to the express provis ions of Section 19 of the Federal Reserve Act- 'This defen-

dant says t ha t the acceptance on deposi t for deferred c r e d i t to . the reserve

account of a member bank, in accordance with the time schedule, i s not a

denial to the p l a i n t i f f of i t s r i g h t to have such items received for depos i t

a t par by the defendant , because the r i g h t to deposi t a t par does not irnply

the r i g h t to demand immediate a v a i l a b i l i t y for uncol lected i tems, and fo r

tne f u r t n e r reason t h a t to give the p l a i n t i f f immediate c r ed i t fo r unco l -

lected checks would be contrary to the provis ions of Section 19 of t he

Federal Reserve Act* ? •

This defendant f u r t h e r says t h a t were i t to allow i t s members to

check aga ins t and otherwise u t i l i z e as col lected funds the an t ic ipa ted

proceeds of uncollected i tems, the" member banks would thereby acqu i re ,

without cost by way of i n t e r e s t charge or o therwise , the constant use of-

large amounts of money a t the expehse of t h i s defendant* Member banks would

( 27 )


then seek to employ these funds by leading them out or inves t ing them and

th i s wgrnld lead to widespread i n f l a t i o n with consequent high p r i ces to

the great detriment of the e n t i r e country.

(Phis defendant , t h e r e f o r e , says tha t the Federal Reserve Act

and the amendments t he re to cons t i t u t e a cons is ten t Act of Congress

.addressed to the remedying of grave e v i l s of a pub l i c character and seek-

ing by i t s several p rov i s ions , requirements, and a u t h o r i t i e s to e r ec t a

s tab le f i n a n c i a l s t r uc tu r e i n the publ ic i n t e r e s t and f o r the wel fare and

convenience of the people ; tha t the demand of the p l a i n t i f f tha t immediate

c red i t be given f o r uncol lected checks would destroy the i n t e g r i t y of the

reserve the establishment of which was the p r inc ipa l purpose of the Federal

Reserve Act and would be a t variance with the express language of said Act,

that the demand of the p l a i n t i f f that i t and other member banks i n the Federal

Reserve System be authorized to charge exchange upon checks presented for payment

and remission would l ikewise impair the usefu lness of the System to the banks and

business of the country and be i n c o n f l i c t with the express requirements and

proh ib i t ions of the Federal Reserve Act; t ha t a l l of the a c t s of t h i l defendant

in the r e spec t s complained of are here inbefore shown to be in harmony with the

purpose of the Federal Reserve Act and s t r i c t l y wi th in the powers granted to

by Congress and that no i n j u r y hasbeen done to the p l a i n t i f f , bat t h a t on the

contrary the p l a i n t i f f d i r e c t l y and as a p a r t i c i p a n t in the general bu i e

welfare of the country has grea t ly advantaged thereby. For the foregoing rea

( 2S )


I X 4 i 6 l

' 70S

this defendant says that the injvmction and other r e l i e f i n said b i l l sought

against i t should not "be granted,

V/HSEEFCES this defendant prays that this sui t be dismissed against i t with

i t s reasonable costs in th i s behalf expended.

Hollina N. Randolph

Robert S. Parker So l i c i tors for Defendant Federal

Reserve Bank.of Atlanta*

Walter Wyatt

Montgomery B. Angell

Newton D, Baker Of•Counsel»

( 29 )


F E D E R A L R E S E R V E B O A R D 706 STATEMENT FOR THE PRESS

X-U163

For Release in Morning Papers Saturday, September 27, 1924,

The following i s a summary of general business and f i n a n c i a l condit ions throughout the several Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s f o r the months of August and September, as con-ta ined in the forthcoming issue of the Federal Reserve Bu l l e t in .

Production in bas ic indus t r i e s was maintained during August a t

about the same leve l as in the two preceding months and fac tory employ-

ment showed a s l i gh t increase, Wholesale p r i ces , espec ia l ly those of

a g r i c u l t u r a l products , showed a f u r t h e r advance.

PRODUCTION:

The Federal Reserve Board's index of production in bas ic i n d u s t r i e s ,

ad jus ted to allow f o r seasonal v a r i a t i o n s , continued in August a t the

same level as in June and Ju ly . Production of s t e e l was s u b s t a n t i a l l y

l a rger than in July and the output of pig i ron and mi l l consumption of

cot ton a lso increased. Sugar meltings and production of a n t h r a c i t e and.

zinc, on the other hand, were smaller . Factory employment increased

s l i g h t l y in August and average weekly earnings increased 4 per cent owing

to l e s s par t - t ime employment. Larger working fo rces were repor ted in

the t e x t i l e , l e a t h e r , and automobile i n d u s t r i e s . Building cont rac t s

awarded, contrary to the usual seasonal t r end , were 3 per cent l a rge r

in August than in J u l y .

Crop condi t ions showed f u r t h e r improvement in August and the

September 1 es t imates of production by the Department of Agr icu l ture

were l a rge r f o r wheat, ca t s , bar ley , and po ta toes . Estimated y i e l d s of

corn, cot ton, and tobacco, however, were smaller . Harvesting has


X-U163 7 0 7

proceeded rapidly t h i s year , and the August marketing of wheat wag

l a rge r than in e i t h e r of the l a s t two years •

TRADE:

Bank deb i t s , which r e f l e c t the volume of business t r ansac t ions

s e t t l e d by check, showed about the usual seasonal decrease in August,

but were l a rge r than a year ago. Railroad shipments increased s l i g h t l y ,

as a r e s u l t of l a r g e r loadings of miscellaneous merchandise, g ra in and

coal• Wholesale t r ade was 7 P e r cent l a rge r than in Ju ly , owing t o

seasonal increases in sa les of dry goods, shoes, and meat, but continued

to be smaller than a year ago. Department s to re sa les showed l e s s than

the usual increase in August and were 7 Pej* cent smaller than l a s t year•

Mail order sa les increased more than usual a t t h i s season and were one

per cent l a rge r than in August, 1923# Merchandise stocks of department

s to res at the end of August f o r the f i r s t time t h i s year were smaller

than on the corresponding date of 1921.

PRICES:

Wholesale p r i c e s , as measured by the index of the Bureau of labor

S t a t i s t i c s , increased 2 per cent in August and were a t about the same

level as a year ago. The advance was due l a rge ly to f u r t h e r increases

in p r i ces of farm products and foods, though a l l other commodity groups

except metals and f u e l a l so advanced* During the f i r s t th ree weeks of

September p r i ce s of wheat, rye, wool, and rubtrer increased while those of

cot ton, s i l k , petroleum and metals decl ined.

BAW CREDIT:

loans and investments of member banks in leading c i t i e s continued

to increase during the four-week period ending September 10 and on tha t

date reached a record f igu re about $1,000,000,000 above the l eve l of three


-3- X-U1S3' 708

months e a r l i e r , The l a r g e s t increase was ir. loans on s tocks and bonds

and commercial loans a l s o increased , owing p a r t l y to seasonal demands fo r

c red i t* The growth of investments by member banks continued though at

a somewhat slackened r a t e ,

At the Federal reserve banks there was a f u r t h e r increase in the

holdings of government s e c u r i t i e s and of acceptances with the r e s u l t that

in the middle of September, although discounts were a t the low point f o r

the yea r , the t o t a l volume of reserve bank c r e d i t was h igher than a t any

time since l a s t sp r ing . Seasonal increase in tnc demand f o r currency was

r e f l e c t e d in a dec l ine in cash reserve and a t the rese rve banks in c e r t a i n

of the a g r i c u l t u r a l d i s t r i c t s in an increase of Federal r e se rve note c i r -

c u l a t i o n .

S l i g h t l y f i rmer condi t ions in the New York money market in l a t e

August and ear ly September were r e f l e c t e d in a s l i g h t advance in the r a t e

on commercial paper from 3-3 l / ^ to 3 l/1-1 V3T s en t . A f t e r the middle of

September a recurrence of ea s i e r condi t ions followed Treasury operat ions*

The September 15 o f f e r i n g of one-year Tr-usmy C e r t i f i c a t e s bore 2 3 /4

per cent i n t e r e s t , the same r a t s as the six-months1 i s sue sold i n June .

September 25,


?0 9 F E D E R A L R E S E R V E B O A R D

Statement for the Press

X-U164

For Immediate Release September 27, 1924.

CONDITION OF ACCEPTANCE MARKET.

August 14 to September 10-

During the four-week period ending September 10 a cont inuat ion of

low money r a t e s and the increased demand for funds to meet the seasonal

need for c red i t a r i s i n g in connection with the marketing of cot ton and

gra in , were the p r i n c i p a l f a c t o r s a f f e c t i n g the acceptance market. The

supply of new b i l l s which came in to the market during the ea r ly par t of the

period was s u b s t a n t i a l l y l a r g e r than the demand and in view of ample money

a t low r a t e s there was a subs t an t i a l increase i n d e a l e r s ' aggregate po r t -

f o l i o s . In the c los ing weeks of August and ear ly in September when b i l l s

drawn to f inance the seasonal movements of cot ton and grain began to reach

the market, d e a l e r s ' o f f e r i n g r a t e s were increased to 2 and 2 l / s per cent

f o r t h i r t y day b i l l s , and to 2 l / s to 2 l / 4 f o r s ix ty and ninety-day b i l l s ,

in response to an increase i n c a l l money r a t e s . Af ter the advance in r a t e s

the demand f o r b i l l s increased rap id ly and early, in September dea le r s ' port*-

f o l i o s were gradual ly reduced and a t the c lose of the period were smaller than

a t any previous month t h i s yea r . The demand for b i l l s from commercial banks

was s l i g h t l y l e s s than in the preceding pe r iod , but sa les to the reserve

banks were l a r g e r . The p r inc ipa l commodities against which new b i l l s were

drawn were g r a i n , sugar, co t ton , s i l k , c o f f e e , and p rov i s ions .

Rates in the New York market a t the c lose of the period ranged

from 2 l / s to 2 l / 4 per cent bid and 2 to 2 l / g per cent of fe red for


X-4i64

30 day "bi l l s , to 2 3 / s to 2 1 /2 per cent "bid and 2 l / 4 per cent offered

fo r 90-day b i l l s . Longer m a t u r i t i e s were demanding h : gker r a t e s but

the g r ea t e s t volume of b i l l s which came in to the market was drawn with

30 to 90-day matur i t i e s4




X-U165 September 30,192U=

Subject : E lec t ion of Class "A" and "B" D i r e c t o r s .

Dear S i r :

This w i l l confirm my telegram to you of t h i s date advis ing tha t the Board has designated November 17> 1924, as the date for opening the p o l l s for the e l ec t i on of Class "A" and "B" d i r e c t o r s and tha t group c l a s s i f i c a t i o n s for the e l e c t i o n would be the same as those in e f f e c t s ince 1918-

Very t r u l y your s ,

J . C. Noel l , Ass i s tan t Sec re t a ry ,

TO BE SENT TO ALL CHAIRMEN-


FEDERAL RESERVE BOARD 712

WASHINGTON


x~4i6s October I I , 1924.

SUBJECT: Expense Main Line, Leased Wire System, September, 1924.

Dear S i r :

Enclosed herewith you wi l l f ind two mimeograph statements, X-Ul68-a and X-4168-b, covering in de ta i l operations of the main l ine , Leased Wire System, during the month of September, 1924.

Please credi t the amount payable by your bank in the general account, Treasurer, U. S. , on your books, and issue C/D Form 1, National Banks, fo r account of "Salaries and Expenses, Federal Reserve Board, Special Fund," Leased Wire System, sending duplicate C/D to Fed-era l Reserve Board*

Yours very t ru ly ,

Fiscal Agent.

•- (Enclosures)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO. I


713

X-4l6S-a

REPORT SHOWING- CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR TEE MONTH OF SEPTEMBER,

1924.

From Fed. Res.

Bank Business

Percent of Total Bank Business (*)

Treasury Dept.

Business

War Finance Corp. Business Total

Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco

22,498 157,475 33,246 63.605 45,249 60,478 85,288 64,221 41,925 62.606 52,849 99,421

2.85 19.96 4.21 8.06 5.74 7.67

10.81 8,14 5.32 7.94 6.70

12.60

6,569 8,426 6,925 6,936 5,626 6,968

10,256-8,321 4,409 6,899 4,535

I5 ,b l2

-

29,067 165,901 40,171 70,541. 50,875 67,446 55,544 72,542 46,334 69,505 57,184

115.033

Total 788,861 100.00 91,282 - 380,143

Board 267,142 76,710 .45 343,897

Total 1,056,003 $ 167,992 .45 1 ,224,040

Percent of Total 86.272# 13.724# .004#

Bank Business 1,056,003 words or 86.28# Treasury Dept . 167*992 " " 13*72 #

TOTAL 1,223,995 " "100.00#

(*) These percentages used i n ca lcu la t ing the pro r a t a share of leased wire expenses as shown on the accompanying statement (X-4l6S-b)

FEDERAL RESKBVE BOARD, # s h i n g t o n , D. C.

October 11, 1924.


REPORT 03 EXPENSE MAIN LINE

FEDERAL RESERVE LEASED WIRE SYSTEM, SEPTEMBER, 1924,

X-41o8-b


Operators ' Operators' Wire Total Total Reserve Name of Bank Salar ies Overtime Rental Expenses Expenses Credi t s Board

Boston $ 250.00 $ 1.00 - $ 251.00 $ 620.78 $ 251.00 $ 369,7S New York 1,471.98 - - 1,471.98 4,347.64 1,471.98 2,875.66 Phi ladelphia 200.00 - - 200.00 917.OI 200.00 717.OI Cleveland 272.00 - - 272-00 1,755.61 272.00 1,483.61 Richmond 315-00 - - 315.OO 1,250.27 315.00 935-27 Atlanta 255,00 - - <255.00 1,670,6b 255.00 1,415.66 Chicago (#)3,S63,34 2.00 - 3 ,865, j4 2,354,61 3,865.34 (*)1,510.73 St- Louis 200,00 - - 200.00 1,773.04 200.00 1,573.04 Minneapolis IS3.34 - - 183,34 1,158,79 IS3.34 975.45 Kansas Ci ty 265.64 - - 265,64 1,729.47 265*64 1,463,83 Dallas 251.00 - - 2)1.00 1,459-38 251.00 1,208.38 San Francisco 380,00 - - 380,00 2,744.51 38O.CO 2,364,51 Fed. Res. Board $15,572.46 15,572.46

TOTAL $7,907.30 $ 3.00 $15,572.46 $23,482.76 $21,781,77 $7,910,30 $15,322,20 (a) l ,700.99 (&)1,510.73 $21,781.77 $13,871.47

(#) Includes s a l a r i e s of Washington operators . (*) Cred i t . (a) Received $0.99 from War Finance Corporation and $1,700.00 from

Treasury Dept. covering business for month of September, 1924. (&) Amount reimbursable to Chicago.


FEDERAL RESERVE BOARD 7 1 5

WASHINGTON


October 11, 1924. X-4169

SUBJECT: Deposits of Uninvested Trust Funds.

Dear S i r :

You are advised that the Federal Reserve Board has recent ly ruled that a member bank lega l ly authorized to act as t rus t ee , e t c . , may deposit t r u s t funds awaiting investment or d i s t r ibu t ion in i t s savings department, as well as in i t s s t r i c t l y commercial department, provided that the terms of the t rus t permit and that appropriate co l l a t e ra l secur i ty i s deposited in the bank 's t r u s t department, as provided in Section V of the Board's Regu-l a t i on F, Series of 1524, and that such deposits may be t reated as time deposits fo r reserve purposes, provided they conform to the relevant provisions of the Board's Regulation D, Series of 1924.

Whether or not deposits of uninvested t r u s t funds in the banking department of the t rus tee bank give r i s e to demand, or to time deposit l i a b i l i t i e s wil l depend upon the conditions under which such deposits are made, and t h i s question i s to be determined in the l ight of the Board's rul ings and regulations defining demand and time deposits.

I t i s to be remembered, of course, tha t such deposits should not be permitted to remain in the savings or commercial de-partment of the t rus tee bank for an unreasonable time, since the law c lear ly contemplates and the Board's Regulation F provides tha t only t r u s t funds awaiting investment or d i s t r ibu t ion may be employed in the t rus tee bank's banking department. All such deposits should, therefore , be withdrawn from the banking department when ready fo r d i s t r ibu t ion or as soon as an opportunity to invest them in more appropriate and remunerative channels a r i ses . In view of these considerations, i t would seem inappropriate in most cases to make deposits of t rus t funds subject to not ice of withdrawal.

Very t ru ly yours,

TO GOVERNORS OF ALL' F. R» BANKS.

Walter L. Eddy, Secretary.


7 1 6

X-4170 TREASURY DEPARTMENT

Off ice of tne Secretary WASHINGTON

October 4, 1924.


Sir :

You are hereby advised tnat tne Department has refer red to tne Disburs-ing Clerk, Treasury Department, for payment, tne account of the Bureau of En-graving and Print ing for preparing Federal Reserve notes during the period September 1 to September 30, 1924, amounting to $36,960, as fo l lows, -

Federal Reserve Notes. 1914

$5 Total New York. 400,000 400,000 CniccLgo 300,000 300,000 Dallas 160,000 160,000 San Francisco ' 100,000 100,000

960,000 - 9b0,000"

960,000 sneets a t $38.50 per M $36,960

The cnarges against the several Federal Reserve Banks are as fol lows,-

Compen- Plate Sneets sat ion Pr int ing Materials Total

New York. 400,000 $7,100.00 $3,272.00 55,028. 00 $15,400.00 Cnicago 300,000 5,325.00 2,454.00 3,771.00 11,550.00 Dallas 160,000 2,840.00 1,308.80 2,011.20 6,160.00 San Francisco 100.000 1.775.00 818. 00 1.257.00 3.850.00

960,000 $17,040.00 $7,852.80 $12,067.20 #36,960.00

Toe Bureau appropriations wi l l be reimbursed in tne a:ove amount from tne indef in i te appropriation "Preparation and Issue of Federal Reserve Notes, Reimoursaole", and i t i s requested tnat your board cause sucn indef in i t e appropriation to oe reimoursed in l ike amount.

Respectfully,

, (Signed) R. W. Barr, Acting Deputy Commissioner.



' 7 1 7

WASHINGTON


October l 4 , 1924« X-U171

SUBJECT: Exercise of Trust Powers by State Banks.

Dear Sir :

The Board has received an inquiry from one of the Federal Reserve Banks as to whether a State member bank which has made ap-p l ica t ion to the State banking department for permission to conduct a t rus t department, should be required to obtain the consent of the Federal Reserve Board before engaging in such t ru s t business . The inquiry is based on the f a c t that a t the time of the admission Of the bank to membership there was imposed upon i t the Board1s general condition of membership providing as follows:

"That except with the approval of the Federal Reserve Board there shall be no change in the general character of your asse ts or a broadening in the functions now exercised by you, such as will tend to a f f e c t mater ia l ly the standard now maintained and required as a condition of membership ***."

The Board fee ls that the exercise of t r u s t powers by a State member bank which has heretofore exercised only the general powers of commercial banking, const i tu tes a very material broadening i n the func-tions of the bank, and for t h i s reason the consent of the Federal Re-serve Board should be obtained, in accordance with the general condition of membership to which the bank is subject , before the bank undertakes any business of a f iduciary character.

Very t ru ly yours,


TO BE SENT TO ALL FEDERAL RESERVE AGENTS,


7 1 8

X-U172

F E D E R A L E E S E E T E B O A R D


October 14, 1924. For immediate re lease 4:00 o'clock p. m.

The Federal Reserve Board announces tha t the

Federal Reserve Bank of Minneapolis has establ ished

a rediscount r a t e of 4 per cent on a l l classes of

paper of a l l matur i t ies , e f f e c t i v e October l $ th .


E 7 1 9

F E D E R A L R E S E R V E 3 0 A E D

STATEMENT FOR THE HESS X-U175

For Release in Morning Papers Monday, October 27, IS24.

The following i s a summary of general business and. f i nanc i a l conditions throughout the several Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s for the months of September and October, as con-tained in the forthcoming issue of the Federal Reserve Bu l l e t in .

Production of basic commodities, f ac to ry employment, and d i s t r i -

bution of merchandise increased in September. During September and ear ly

in October there was a considerable increase in the volume of borrowing

for commercial purposes.

PRODUCTION:

The Federal Reserve Board's index of production in bas ic industries. ,

adjusted to allow for seasonal var ia t ions , rose 9 psr cent in September,

the f i r s t advance since l a s t January. Increased a c t i v i t y was reported in

many l ines of ,industry including t e x t i l e s , iron and s t e e l , and coal .

Factory employment increased 2 per cent during September, r e f l e c t i n g

larger working forces in near ly a l l repor t ing indus t r i e s . Average weekly

earnings of i ndus t r i a l workers increased s l i gh t l y , owing to a decrease in

the extent of par t - t ime employment. Building contracts awarded showed a

small seasonal decline in September, but were considerably larger than a

year ago.

Crop condit ions, as reported by the Department of Agricul ture , showed

a fu r the r s l igh t improvement during September, and the estimates cf pro-

duction fo r spring wheat, oa ts , bar ley , and white pota toes on October 1

were larger than the month before. Estimates of the y i e lds of corn, tobacco,

and cot ton , however, were reduced. Marketing of wheat was exceptionally


• 7 2 0 -2r X-4175

heavy in September ana exports of wheat and cotton were la rger tha» fo r the

same month of any recent year.

TRADE:

Distribution of commodities, as r e f l ec ted in ra i l road shipments, increased

during September and was groats* than l a s t year , owing to larger loadings of

miscellaneous merchandise, gra in , and coal.

Haclesale trade was 11 per cent larger than in August, as a r e s u l t of

increased business in almost a l l reporting l ines . Sales of groceries and

drugs were larger than a year ago, while sa les of meat and shoes were smaller.

Beta.il trade showed more than the usual seasonal increase in September, and

sales of department stores and mail order houses were considerably larger than

l a s t year. Merchandise stocks a t department stores increased more than usual

during September, but continued to be s l i gh t ly smaller than a year ago.

PRICES:

Wholesale pr ices of farm products, c lothing, f u e l , and metals declined

somewhat in September, while pr ices of food products, bui lding materials , and

chemicals advanced. The general level of p r ices , as measured by the Bureau

of Labor S t a t i s t i c s ' i n d e x , was s l ight ly lower in September than im August.

During the f i r s t half of October quotations on wheat, f l o u r , c a t t l e , hogs,

wool, and rubber increased, while pr ices of cotton, lumber, and gasoline de-

cl ined.

BANK CREDIT:

Daring the f ive weeks ending October 15 loans and investments of reporting

member banks in leading c i t i e s increased by more than $600,000,000- Credit

deirand for f inancing the marketing of crops and the f a l l a c t i v i t y of trade

vias re f lec ted in increased commercial loans throughout the country and the


7 2 1

- > -X-4275

t o t a l volume of these loans rose to a level considerably above the peak of

October, 1923. Member bank investments in secur i t i es continued to increase

and loans on stocks and bonds a l so advanced. A fu r the r growth of demand de-

pos i t s car r ied t he i r t o t a l to the highest f igu re on record.

At the Federal reserve banks, discounts changed but l i t t l e in September \

and declined in tlie f i r s t three weeks of October f vihile holdings of accept-

ances increased considerably and there was a l so scire increase in United

States secur i t ies* As a consequence* to t a l earning assets were larger than

at any time since early in the year, larger currency requirements pa r t ly

seasonal in character were re f l ec ted betw&en August 1 and October 1 in an

increase of $140,000,000 in the to ta l volume of money in c i r cu la t ion .

Money r a t e s in the New York market re:uaizied r e l a t ive ly constant in the

l a t t e r pa r t of September and the early part of October. On October 15 the

discount r a t e of the Federal Reserve Bank of Minneapolis was reduced from

4-1/2 to 4 per cent .


FEDERAL RESERVE BOARD ? 2 2

WASHINGTON


October 25, 1924. X-41J6

SUBJECT: Cooplinentary Copies of Federal Reserve Bullet in f o r State Bank Examiners.

Dear S i r :

I t has been the pract ice of the Federal Reserve Board to g.uote a special r a t e to the Federal reserve banks for subscriptions to the Federal Re-serve Bul le t in fo r the use of examiners of s ta te banking departments.

For the year 1925, however, the Board has decided to issue complimentary copies of the Bul le t in

to s t a t e examiners. You are requested, therefore , to send to the Beard, not l a t e r than December 10th, a l i s t of the s t a t e bank examiners in your d i s t r i c t to whom the Bulletin should be forwarded, f r ee of charge, beginning with the January, 1925, issue.



TO ALL FEDERAL RESERVE AGENTS.


F E D E R A L R E S EE V E 'B 0 AH 33

Statement fo r the Press X-4l?8

For Immediate Release October 2S, 1924

CONDITION OF ACCEPTANCE MARKET

September 11 to October 15, 1924

Seasonal increases in the demand for funds to finance the marketing and ex-

por tationgof agr icu l tu ra l commodities were evident in .September, and October and

for the period ending October 15 the acceptance market was characterized by the

greates t a c t i v i t y for the year* The volume of new b i l l s was la rger than fo r any

ea r l i e r month t h i s year and exceeded the to ta l for the same period in 1923- Fluctu-

ations i n money r a t e s . caused frequent changes in dealersV r a t e s and the dtexrand for

b i l l s was i r r egu la r • Total sales did not increase to the same extent as the supply

and dealers 1 aggregate po r t fo l i o s a t the end of the period were 30 per cent heavier

than a month e a r l i e r . In the middle of September c a l l money was p l e n t i f u l and the

demand for b i l l s from banks in the f i n a n c i a l centers was good but near the close of

the month the money market became firmer and the demand for acceptances f e l l off ,

while the supply continued to increase* Early in October dealers 1 r a t e s were ad-

vanced and the d emand showed some improvement but i t was not s u f f i c i e n t to absorb

the increased supply and dea le r s ' aggregate p o r t f o l i o s increased• Banks were the

pr inc ipal purchasers in September but with a la rger volume of b i l l s in October and

a f i rmer money market o f fe r ings by dealers and banks to the Federal reserve banks

increased* Cotton, g ra in , sugar, s i l k s , h ides , l e a t h e r , and provisions were the

p r inc ipa l commodities against which b i l l s were drawn, but acceptances against cotton

and grain were in l a r g e s t volume*.

Rates in the New York market a t the close of the period were 2-1/g per cent

bid and 2 per cent of fered for day b i l l s , 2~l/4 per cent bid and 2w l /S per cent

offered f o r 60 day b i l l s , and 2-3/8 per cent bid and 2-1/4 per cent o f fe red f o r

90 and 120 day b i l l s * Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

7 2 4

a-4160



October 31 > 1924,

For Immediate Release.

The Federal Reserve Board announces the appointment,

e f fec t ive January 1, 1925» of Mr. 9scgr Newton of Jaeksen,

Mississ ippi , as Class C Director of the Federal Reserve

Bank of Atlanta, fo r the unexpired term of Mr. Jos . A*

McCord, resigned, ending December 31# 1926. The Board

has also designated Mr. Newton to succeed Mr. McCord

as Federal Reserve Agent and Chairman of the Beari ef

Directors ef the Atlanta Bank for a term of one year ,

beginning January 1, 1925.



WASHINGTON


October 31, 1924. X-4181

SUBJECT: Pr inciples governing research, s t a t i s t i c a l and. publ icat ion a c t i v i t i e s .

Dear S i r :

The Board, a f t e r careful consideration of the problem of reorganizing and coordinating the work of research and s t a t i s t i c s of the Federal Reserve System, in the i n t e r e s t both of economy and ef f ic iency,has reached cer ta in conclusions, a copy of which i s herewith enclosed.

You are requested to come to the conference on November 10th with speci f ic suggestions to a s s i s t the Board's Director of Research and S t a t i s t i c s in giving e f -f ec t to the pr inc ip les la id down by the Board which aire to become e f f ec t i ve January 1, 1925«

You are also requested to prepare and submit to the Board for approval not l a t e r than December 15, 1924, a budget of expenditures covering work in research, s t a t i s t i c s and publication to be carried on during the year 1925 by you or in your department* This budget must conform ca re fu l ly to the scope and purpose of research, s t a t i s t i c s , and publication as defined in the Board's statement of p r inc ip les .

By direct ion of the Federal Reserve Board.


J . C. Noell, Assistant Secretary.

(Enclosure)

TO ALL FEDERAL RESERVE AGENTS


X-Ulgl-a

PRINCIPLES GOVERNING RESEARCH, STATISTICAL AND PUBLICATION ACTIVITIES OF THE FEDERAL RESERVE

BANKS AND THE FEDERAL RESERVE BOARD.

Scope and Purpose. The purpose of the work of the research and s t a t i s t i c a l divisions of the Federal reserve banks and the Board i s to co l lec t and digest information hearing on the problems with which the Federal Reserve System i s concerned, e i ther as a matter of current operation or as the bas i s of Federal reserve p o l i c i e s .

All such work sha l l be under the supervision and d i -rect ion of the Federal Reserve Board act ing through i t s Division of Research and S t a t i s t i c s ,

While research studies and s c i e n t i f i c invest igat ions may be undertaken on the i n i t i a t i v e of the Federal reserve banks or of the Federal Reserve Board, the Federal reserve banks must before any expense i s incurred fo r t h e i r prose-cution secure the approval of the Federal Reserve Board. In conducting such studies the Director of the Board's Division of Research and S t a t i s t i c s may make assignments to one or more of the Federal Reserve Banks of such por t ions as may seem des i rable .

Publ icat ions; Beginning with January, 1925> the monthly publ ica t ions of the Federal reserve banks sha l l not exceed eight pages.

Free d i s t r ibu t ion of such publ icat ions shal l be made only to member banks, to other Federal reserve banks, to the Federal Reserve Board and to f irms report ing s t a t i s t i c a l information. To a l l others a charge shal l be made to cover cos ts .

The Monthly Reviews published by the Federal Reserve Agents s h a l l be under the general e d i t o r i a l supervision of the Director of Research and S t a t i s t i c s of the Federal Re-serve Board, who shal l be responsible to the Board fo r the proper conduct of the research, s t a t i s t i c a l and publ icat ion a c t i v i t i e s undertaken by the Board and authorized for the several banks.


7 2 7 FEDERAL RESERVE BOARD

WASHINGTON November 4, 1924. .


From the 1 viewpoint of edhndmyj the Treasury Department i s desirous of increasing the c i rcu la t ion of standard s i lver do l l a r s . The Federal Reserve Boswd ia in syinpattoy with the movement and s o l i c i t s op behalf of the Treasury t)apartment the f u l l cooperation of. each Federal reserve bank. The re -serve banks are requested to ca l l a t t en t ion at t h i s time, through t he i r member banks, to the poss ib i l i t y of the use of standard s i lver dol lars as Christmas g i f t s , and the des i ra -b i l i t y of t he i r Use in the cash payrol ls of the large concerns of t h e i r d i s t r i c t s . This action on the part of the reserve banks, together with steps to be taken by the Treasury De-partment, wi l l ) i t i s believed, resu l t in a demand for stand-ard s i l ve r do l la rs , beginning with a holiday demand, and i t i s f e l t tha t the demand wil l be stimulated i f met with new coin, that i s , dol lars of recent mintage and of the new de-sign. The Treasury Department is prepared to begin making deposits with the Federal reserve banks and branches of new standard s i lver dol lars toHhe extent of $10,000,000, the cost of insurance and shipping to be borne by the Treasury.:. Upon receipt of advice from you, the Treasury wi l l arrange to lay down at your bank (and branches) within the next f i f -teen days the t o t a l number of pieces desired.

In t h i s connection, i t i s noted that a l l of the Federal reserve banks are not absorbing t ransporta t ion and insurance charges on shipments of standard s i lver dol lars made to t he i r member banks. I t i s suggested that those banks which a r e not doing so give consideration to the adv isab i l i ty of absorbing such charges, fo r the purpose of fu r ther ing the e f f o r t s of the Treasury Department to increase the standard s i l v e r dol-l a r c i rcu la t ion .

Very t ruly yours,

D. R. Crissinger, G- o v e r n o r .



; 7 2 8 - i - .

X-U1S2 To the Honorable Judge of the Eighteenth Jud ic i a l D i s t r i c t Court,

in and for the Parish of Acndiat; State of Louisiana.

- The p e t i t i o n of James Pousson, Bertrind Pousson, J e s s i e Ni Reed,

Je^n Gay, Jernzime Pousson, Maxila Pousson, Edgar LeJeune, Honore Pousson,

and Dr, L. A. Clark, r es iden t s of the Parish of Ac-dia, Louisiana, with

respect represents |~

-Paragraph 1 -

That the Bank of Io ta , a banking corporation, organized under the

la\vs of the S ta te of Louisiana and domiciled in the Parish of Acadia,

Louisiana, having been found in an insolvent condition by the State Bank

Commissioner, was closed on the f t h , day of July 1Q2U, and tha t i t i s now

being l iqu ida ted under Act 300 of 1910, under the management of and control said

of the /S ta te Bank Commissioner.

-Paragraph 2-

That your p e t i t i o n e r s were deposi tors and c red i to r s of the said

Bank of Io ta , a t the time same w.<?s closed by the said S ta te Bank Commissioner,

in the following amounts, t o -wi t ;

James Pousson $219.00 more or l e s s

Bertrand Pousson 821.96 " " «

J e s s i e N. Reed 1193.32 11 " "

Jean Gay 5166,76 " " "

Jerazime Pousson 12288.17 " " "

Maxila Pousson l6U2.6l " " "

Edgar LsJ euna 151.35 » « «

Ponora Pousson — — — - — „ 253U.73 " " «

Dr. L. A. Clerk - — - — 7.77 « « «


- a - x-4i82 ' V 2 9

and that they appear herein not only in their own behalf , but in behalf

of a l l the depositors and unsecured credi tors of the said Bank of Iotas

-Paragraph 3-Your pe t i t i one r s fu r the r represent that in the Spring of 1923 > the

Bank of Io ta was t o t a l l y insolvent; tha t i t was a member of the Federal

Reserve System, and that the New Orleans Branch of the Federal Reserve

Bank of Atlanta* domiciled in Orleans Parish, La. had f u l l knowledge

thereof; that the State Bank Commissioner or his representat ive came

to the Parish of Acadia for the purpose of closing the said bank on

account of said insolvency a t that time and that the said New Orleans

Branch of the Federal Reserve Bank of Atlanta having f u l l knowledge

of the insolvency of said bank agreed to advance and did advance the

said Bank of Iota during the year a lar£.e sum of money for the purpose

of keeping said bank open.

That in accordance with oome agreement, e i ther verbal or wr i t ten ,

the said New Orleans Branch of the Federal Reserve Bank of Atlanta

(here inaf te r re fer red to as the Federal Reserve Ba .k') on learning of said

insolvency in the Spring of 1923, p rac t i ca l ly took charge of the sa id

Bank of Io ta , placing a large sum of money in said bank, d ic ta t ing to the

Board of Directors of the said Iota Bank in what manner the a f f a i r s of

the bank should be conducted, uaming Mr. Joseph A. Sab&tier to look

a f t e r i t s i n t e re s t in handling and passing on a l l loans of said Bank

of Io ta and that the Board of Directors of the said Bank of Io ta there-

upon by reason of the insis tence of the Federal Reserve Bank, appointed

Mr. Joaaph A. Sabatier, ©n March 19th, 1923 Manager of the said Bank

of Io ta , giving him f u l l control over the bank's a f f a i r s with f u l l power

to pass on a l l loans or advances made by the bank and f u l l power to


-3 - X-U182 '

administer g i l the a f f a i r s of the Bank, and that t h i s reso lu t ion of.

the Board of Directors was passed in order to comply with the demands

of the Federal Reserve Bank as sôwn in a l a t t e r of date March 18th,

1923.

-Paragraph U-

That in accordance therewith the said Federal Reserve Bank advanced

to the Bank of Iota a large sum of money for the purpose of caring for

and taking off the crop of 1923, and placing i t in an apparently solvent

condition, the said Joseph A. Sabatier being in p rac t ica l charge and con-

t ro l of the said bank under the said resolut ion of the beard and as a

d i rec t representa t ive and agent of the federal Reserve Bank.

Upon «the completion of th i s t ransact ion as above s ta ted, the said

Federal Reserve Bank prac t i ca l ly control led, ,operated and beeame respon-

s ib le to a l l of the credi tors and espeei&lly the depositors of the B&nk

of Iota, by reason of the fac t that i t held i t s e l f out to the world as the

governing authority and owner of said bank, put t ing in i t s money and

get t ing possession of p rac t i ca l ly a l l of the asse ts of said bank by #

reason of said advances.

That the said Federal Reserve Bank placed at l eas t F i f t y or Sixty

Thousand Dollars in the said Bank of Iota , during the year 1923, having

been informed and having f u l l knowledge of i t s u t t e r insolvency, but

in the Spring of 1924, a l l of the money so advanced during the year

1923 was paid, leaving the Bank of Iota in p rac t i ca l ly the same condition

as i t was in the year 1923, although as a matter of fac t i t s old indebt-

edness due the Federal Reserve Bank, ar is ing from the slump in pr ices of

r i ce , and other farm products in the f a l l of 1920, had been somewhat

reduced and the said old indebtedness put in be t t e r shape.


7r>/> OJL - 4 -

X-4182

-Paragraph

Your pe t i t ione r s fur ther represent that in the Spring of 1924,

the said Joseph A.. Sabat ier , being engaged in other business, was unable

to continue as Manager of the said Bank of I o t a , and that the said bank,

through i t s d i r ec to r s , then selected L. J . V. Breaux as i t s cashier , who

was recommended as Manager by the said Sabatier to the Federal Reserve

Bank and which bank accepted the said Breaux as i t s Manager and agent in

l i e u of the said Sabat ier .

That the said Federal Reserve Bank in the Spring of 1924, agreed

to place the necessary money a t the disposal of the Bank of Iota for the

purpose of enabling the farmers end business i n t e r e s t s to p lan t , cu l t iva te

and harvest their crops for the year 1924, and that i t did advance and

furn ish money to the Bank of Iota up to approximately the 1 s t , day of

Ju ly , 1924.

That a t th is time the crops were s t i l l immature, and that the said

Federal Reserve Bank without considering the needs of the farmers or

the business people of Io t a , or the needs of the bank, al though i t was the

prac t ica l owner of the Bank of Io ta , refused to put up any more money and

in the meantime had secured p rac t i ca l ly a l l the a s se t s of the Bank of Iota

in the shape of notes and other negotiable secur i t i e s and the said Bark ^f

Io ta , being thus l e f t without any funds and being insolvent was closed by

the State Bank Commissioner to the great damage and injury of your pe t i t i one r s ,

depositors therein, and a l l those dependent upon said bank fo r c red i t and

money.


- Paragraph 6 - X-4ld2

Your p e t i t i o n e r s fur ther represent that the said Bank of Io ta was

doing a l l of i t s business with the Federal Reserve Bank by reason of the

agreements here tofore rec i ted and i t Was current ly reported and universal ly

believed as the Federal Reserve Bank was in control of and backing said

Bank of Io ta , that a l l those doing business with the said Bank of Iota and

pa r t i cu la r ly the depositors thereof would be protected atyi absolutely se-

cured by reason of the fact that the said Federal Reserve Bank had taken

charge of the said Bank of Io ta as above rec i ted and that your pe t i t ione r s

act ing on t h i s be l i e f and relying upon the f a c t that the Federal Reserve

Bank was thoroughly solvent continued to do t h e i r business with the said

Bank of Io ta during the years 1923 and 1924 and that at the time of the

f a i l u r e of the said Bank of Io ta , they had to the i r credit in the said bank

the amounts hereinbefore s t a ted .

- Paragraph 7 -

Your p e t i t i o n e r s fu r the r represent that the Federal Reserve Bank was

created by Congress for the purpose of aiding the people of the country and

the farmers generally and not fo r the purpose of making an inordinate p r o f i t ,

and that the Federal Reserve Bank everywhere, rea l iz ing the c r i s i s a r i s ing

from the slump of agr icu l tu ra l products in the f a l l of 1920, brought about

and caused, your pe t i t ioners bel ieve, by the def la t ion caused by the action

of the governing Authori t ies of the Federal Reserve Bank i t s e l f , came to the

aid of p r a c t i c a l l y a l l of the banks in the United States and did everything

in thei r power to prevent them from becoming insolvent and thus causing more

f inanc ia l d i s t r e s s .

That not only was th i s pol icy pursued by the Federal Reserve Bank

generally, but the New Orleans Branch of the Federal Reserve Barik of Atlanta


-6 - X-4182 ^ 3 3

in pursuance of t h i s policy did extend aid to many of the banks in the

State of Louisiana and your pe t i t i one r s having been re l iab ly informed and

so believing aver that in several instances, i t permitted the debtor banks

to withdraw and select from the co l l a t e ra l notes held by the Federal Re-

serve Bank a s u f f i c i e n t amount thereof to protec t the deposi tors , and your

pe t i t i one r s having been informed and so bel ieving aver that t h i s course was

pursued with the F i r s t National Bank of Crowley, Louisiana, and that the

said Federal Reserve Bank permitted the said F i r s t National Bank of Crowley,

Louisiana, or i t s depositors to select a s u f f i c i e n t amount of i t s col-

l a t e r a l to f u l l y protect the depositors.

That, no doubt, the said Federal Reserve Bank did the same in many

other instances, but although the Bank of Io ta was a member of the said

Federal Reserve System, being merely a State B&nk and not a National one,

the said Federal Reserve Bank refused to permit the d i rec tors or depositors

pf the said Bank of Iota to withdraw any of the co l l a t e ra l held by i t to

protect the deposi tors , thus showing gross p a r t i a l i t y and favor to one set

of banks over the other in refusing to extend the same aid to the said Bank

of Iota,

That the apparent indebtedness of the said Bank of Io ta to the said

Federal Reserve Bank a t the date of i t s c losing, amounted to $237>702.61

and that the said Federal Reserve Bank held co l l a t e r a l and other paper to

the amount of $274,604.16, as shown by the statement on f i l e in the sui t

of the State Bank Commissioner vs. The Bank of Io ta , No. 6741, on the Civi l

Docket of the D i s t r i c t Court of ..Arcadia Par ish , being p r a c t i c a l l y the only

credi tor holding co l l a t e ra l and other paper with the exception of one other .

That the f a i l u r e of said bank was caused by and due e n t i r e l y to the


7 3 4 -7- X-4183

action of the Federal Reserve Bank and the e f f e c t thereof was tha t the

Federal Reserve Bank held p rac t i ca l ly a l l of the asse ts of the Bank of Iota,

while the deposi tors and other credi tors of the said Bank of Io ta were l e f t

without recourse or any chance of recovering the i r money placed in said

Bank of Io ta upon the f a i t h of the Federal Reserve Bank taking charge

thereof , the remaining asse ts of the Bank of Io ta being of comparatively

l i t t l e value; that the said Federal Reserve Bank by i t s ac t s and conduct

induced the Board of Directors of the Bank of Io ta to continue to operate

said bank a f t e r same was insolvent in viola t ion of the State of Louisiana,

and thereby induced your pe t i t i one r s and others similarly s i tua ted to de-

pos i t t he i r money in said bank and to continue doing business with i t while

same was in f a i l i n g circumstances in contravention of the laws of said

S ta te . That the said Federal Reserve Bank i s the d i rec t cause of the loss

occasioned p e t i t i o n e r s and others of the i r money thus deposited and should

be held l i ab l e to pe t i t ione r s f o r such losses .

- Paragraph 8 -

That act ing thru i t s agents and managers, the said Federal Reserve

Bank preferred i t s e l f as a c red i to r by appropriat ing to the payment of i t s

claims and as c o l l a t e r a l there for p rac t i ca l ly a l l the asse t s of the Bank

of Io ta , which should have been t rea ted as a common pledge fo r a l l the

c redi tors of said bank and especial ly of the depositors t he re in .

- paragraph 9 ~

Your p e t i t i o n e r s fu r the r represent that by reason of the ac ts of the

said Federal Reserve Bank aforesa id , the said Federal Reserve Bank held

i t s e l f out to the public as the owner of said Bank of Io ta , being in com-

p l e t e control thereof and tha t thereby i t became responsible to your


* 7 5 5

-S- X-U182

pe t i t i one r s and other depositors and credi tors f o r any loss tha t may have

been incurred by them in the place and stead of the Bank of I o t a .

- Paragraph 10 -

That the Federal Reserve Bank held most Of the assets of the Bank of

Io ta a t the time of i t s l iquidat ion; that i t protected i t s e l f a t the ex-

pense of a l l the deposi tors , who continued to place thei r money in said

bank on the f a i t h of the control of the said Bank of Iota by the Federal

Reserve Bank and tha t the said Federal Reserve Bank being in complete con-

t r o l of the said Bank of Iota cannot take advantage of the s i tua t ion to

pay i t s e l f i t s own indebtedness claimed to be due i t by the Bank of Io ta

a t the expense of a l l the other credi tors and depositors of the Bank of

Io ta .

- Paragraph 11 <&

Pe t i t ioners fu r the r aver that the Bank of Io ta act ing thru i t s Di-

rec tors and the Federal Reserve Bank of New Orleans act ing through i t s

o f f i c e r s or o f f i c e r , unlawfully conspired and agreed to keep the Bank of

Io ta open, and by the subsequent delivery of the assets of sa id Bank of

Io t a to the Federal Reserve Bank as security f o r i t s claims and in payment

thereof are j o i n t l y , several ly , and in solido l i ab le to p e t i t i o n e r s and

other s imilar ly s i tua ted and said Federal Reserve Bank should be compelled

to res tore the said asse t s thus unlawfully appropriated by i t f o r the

benef i t of p e t i t i o n e r s and others similarly s i tua ted as above set f o r t h .

- Paragraph 12 -

Your p e t i t i o n e r s fu r the r represent that the said Federal Reserve Bank

has a large number of notes and co l l a t e ra l held by i t , obtained from the

Bank of Io ta to secure i t fo r t%e presumed advances made by i t to the Bank


-9- X-4182 7 3 6

of Iota, and by reason of a l l the f ac t s rec i ted above, a l l the said

asse t s should be declared the asse ts of the said Bank of Io t a and When

collected should be d is t r ibuted pro ra ta among a l l the deposi tors of the

said Bank of I o t a .

That a l l the said assets now in the hands of the Federal Reserve

Bank should be jud ic i a l ly sequestered, brought into court and there held

u n t i l the f i n a l termination of th i s su i t and be f i na l l y decreed to be the

property of the Bank of Io ta and subject to i t s indebtedness, and p a r t i -

cular ly that of your pe t i t i one r s and other deposi tors .

- Paragraph 13 -

Your p e t i t i o n e r s fu r the r represent that the said Federal Reserve

Bank has co l lec ted large sums of money, the exact amount of which i s un-

known from notes held by i t and unlawfully obtained from the Bank of Io ta

as aforesaid and that i t should be compelled to acceunt to the Bank of

Io ta , through the S ta te Bank Commissioner for said sums, and be ordered

to pay over same to the said State Bank Commissioner for d i s t r ibu t ion

among the depositors #f said Bank ef Io ta , f r e e from any claim of the

Federal Reserve Bank and i t i s a lso proceeding to col lec t ether notes

held by i t to the great damage and prejudice of your pe t i t i one r s and wi l l

convert the proceeds thereof to i t s own use and benef i t .

Your p e t i t i o n e r s fu r ther represent that a large nujpber of these notes

and other asse ts held by the Federal Reserve Bank and obtained by i t from

the Bank of Io ta are now in the hands of Mr. George T. Rives, an enployee

and representat ive of said Federal Reserve Bank and W. J . Carmouche, an

attorney for said Federal Reserve Bank, both res idents of Acadia Par ish,

Louisiana, and same should be jud ic ia l ly sequestered in the hands of said

p a r t i e s .


$ it

- 1 0 * X-4152 7 3 7

'1'hey fu r the r represent that the New Orleans Branch of the Federal

Reserve Bank of Atlanta has likewise in i t s possession and under i t s

control a large number of notes and co l la te ra l obtained by i t from the

Bank of Iota and that these notes and credi t s should also be jud ic i a l ly

sequestered.

Wherefor#, they pray that wri ts of jud ic ia l sequestrat ion issue 1

herein , directed to the Sheriff of Acadia Pariah end the Civil Sheriff of

the Parish of Orleans, commanding them or ei ther of them to j ud i c i a l l y

sequester and in the i r possession safely keep u n t i l the fur ther orders of

th i s Honorable Court a l l the notes and other evidences of indebtedness held

by the said New Orleans Branch of the Federal Reserve Bank of Atlanta , i t s

agents, a t torneys , end employees, and obtained from the Bank of Iota by the

said Federal Reserve Bank, vfoPther the said notes be located in Acadia,

Orleans or other parishes of the State of Louisiana; that the said Bank of

Io ta , thru i t s proper e f f i c e r s , the State Bank Commissioner, J * S« Brock,

as l iquida tor of said Bank of Iota end the New Orleans Branch of the Federal

Reserve Bank of At lanta , through i t s proper o f f i c e r s , be duly cited to appear

and answer th is demand, and served with a ce r t i f i ed copy hereof end that

a f t e r due and legal proceedings had , your pe t i t ioners do have judgment fof

themselves and a l l other s imilar ly s i tua ted , against the Bank of Io t a , S.

Brock, State Bank Commissioner, end the New Orleans Branch of the Federal

Reserve Bank of Atlanta , decreeing that the #aid Federal Reserve Bank was

in complete control of the Bank of Io ta ; that i t held i t s e l f responsible for

a l l the debts of said bank; that a l l the asse ts obtained by the Federal

Reserve Bank from the Bank of Iota be decreed to be the property #f the


x-uiffi 7 3 8

Bank of l o t s , f r ee from a l l pretended l i ens , p r iv i leges or claims against

them by tne New Orleans Branch of the Federal Reserve Bank of Atlanta , and

that the said asse ts be decreed subject to the claims of pe t i t ioovrs and others

of l i k e i n t e r e s t , end that the same be ordered restored to the Bank of Io ta ,

thru the State Bank Commissioner end be collected by him and dis t r ibuted '

pro r a t a according to law among a l l the depositors of said bank; that there

be fur ther judgment decreeing that the Directors of the said Bank of Iota

and the Federal Reserve Bank were gui l ty of an unlawful conspiracy in keeping

said Bank of Iota open contrary to law; that the said Federal Reserve Bank be

ordered to res to re to the Bank of Iota a l l moneys collected by i t since the

c losing thereof , from notes unlawfully obtained by i t from the said Bank of

Io ta ; that the pledging or discounting of said notes and secur i t i e s to the

Federal Reserve Bank by the Bank of Iota be declared i l l e g a l , nu l l and void,

and d i r ec t ing that the said secur i t i e s thus unlawfully pledged or discounted

to said Federal Reserve Bank be restored to the custody of said Bank of Iota

and delivered to i t thru the State Bank Commissioner for col lec t ion by said

o f f i c e r and that the proceeds of said secur i t i e s when collected be dis t r ibuted

pro ra ta «mong your pe t i toners and other credi tors having a l i k e in t e re s t

according to law.

They fur ther pray that the wr i t s of Judicia l sequestrat ion here in

issued be maintained and perpetuated and they fur ther pray fo r a l l orders

necessary and #11 general and equitable r e l i e f .

By the i r a t torney,

(Sgd.) J . Matt Buatt .

Jesse N. Reed sworn says : -

That he has read the foregoing pe t i t i on ; that he i s one of the petloners

there in; that a l l the a l legat ions of fac t therein contained are t rue and


: 7 3 9 -12- X-Ul?$

cor rec t , except as to those a l legat ions expressly made on information and

bel ief end that as to these the a f f i a n t believes them to be true*

(Sgd.) Jesse N. Heed/

Sworn to and subscribed, before me, a t Crowley, La. th is 18th, day

of October, 1924.

(Sgd.) C. W. Breaux Notary Publ ic .

O R D E R .

Considering the foregoing p e t i t i o n , a f f i d a v i t and the law, l e t wri ts

of jud ic i a l sequestrat ion issue here in as prayed f o r , directed to the Sheriff

of Acedia Parish and the Civil Sheriff of Orleans Par ish , commanding them or

e i ther of them to se ize , sequester and in thei r possession safe ly keep un t i l

the fur ther orders of th i s court a l l of the notes , c red i t s and other assets

held by the New Orleans Branch of the Federal Reserve Bank of At lanta , whether

in the hands of George T. Rives or W. J . Cermouche of Acadia Parish or by the

New Orleans Branch of the Federal Reserve Bank of Atlanta personal ly .

Done and granted, a t Chambers, a t Lafayet te , Louisiana, t h i s 15th day

of October, 1924.

(Sgd.) Wm. Campbell,

Judge Eighteenth Judic ia l D i s t r i c t of Louisiana.

Filed 10/20/1924.

F. M. Fontenot, Dy. Clk.


( COPY ) X-41S3

Law Department 423-429 Healey Bldg. Ho 11ins H. Randolph

Attorney

Mr. Walter Wyatt, General Counsel, Federal Reserve Board, Washington, D. C.

Dear Mr. Wyatt:

We hand you herewith copy of a l e t t e r written us under date of October 15th. by Mr. Edward J . Smith, counsel for the Nashville Branch of the Federal Reserve Bank of Atlanta, and also copy of our reply the re to . The enclosures are self-explanatory.

You wi l l of course note that the Circuit Court apparently held that the Tennessee-Hermitage National Bank was l i ab l e in the premises be-cause i t was negligent in select ing as a sub-agent fo r the purposes of col-lect ion, a bank which under i t s rules and regulations proposed to handle a check in an i l l e g a l way. We think thd Court was c lear ly r ight in d i s -charging the Reserve Bank from a l l l i a b i l i t y , and i t may be that under the Tennessee law the judgment against the member bank was correc t .

Inasmuch as the case is apparently of considerable importance to a l l Reserve Banks, and pa r t i cu l a r ly since we would d i s l i k e to see the Supreme Court of Tennessee hold in terms that a member bank (operating in a j u r i s -diction where the so-called New York ru le obtains) incurs a potential ' l i a -b i l i t y whenever i t deposi ts checks with a Reserve Dank# we have thought i t best to submit th is tiorredporldende to you in order that we may get the benef i t of any suggestions which you may wish to make in the premises.

I t occurs to us tha t some steps might be taken to educate the member banks to the importance of making contracts with the i r own customers, embodying the r ight to present items d i r e c t to drawee banks and to accept exchange d r a f t s in payment therefor .

We would l ike pa r t i cu l a r ly to get your views as to the propr ie ty of so doing.

With personal regards, we are ,

Cordially yours,

(signed) Randolph & Parker

FEDERAL RESERVE BALTIC OF ATLANTA

October 17, 1924.

RSP-G General Counsel.


- a - x-4163 8 ^ j L

( COPY )

EDWARD J . SMITH Attorney a t Law

Nashville, Term. October 15th, 1924,

Mr. Hollins N. Randolph, Attorney at Law, 422-530 Healy Building, Atlanta, Georgia.

dear S i r :

On July 30th, 1924, in reply to your l e t t e r of July 26th ad-

dressed to Mr. Hil l McAlister, I wrote to you with reference to the advice

which I had given to the Nashville Branch of the Federal Eeserve Bank of

Atlanta with reference to items handled by i t as co l lec t ion agent f o r

various Nashville banks, which items were presented d i rec t ly f o r payment

to the payee bank, the Peoples Bank of Springfield.

On September 30th, 1924 a corporation engaged in the t a i lo r ing

business at Nashville, Tennessee under the name of "Jack and Jake" brought

su i t before a Jus t ice of the Peace at Springfield, Tennessee to recover on

a check f o r $72 which had been given to i t by a man named Woolworth in

se t t l i ng a merchandise account. "Jack and Jake" sued Woolworth, the Tennessee-

Hermitage National Bank of Nashville, Tennessee, and the Nashville Branch

of the Federal Reserve Bank. On September 30th a judgment was given by two

Jus t ices of the Peace against a l l the defendants and a l l appealed to the

Circuit Court of Robertson County in which, under our law, cases a re t r i ed

de novo.

On October 9th the case came on for hearing before Judge Morton,

the Circui t Judge, and on yesterday, October 14th, he rendered a decision to

the e f f ec t that the Tennessee-Hermitage National Bank was l i ab l e but dismissed


-3 - X-4183 7 4

the su i t as to the Nashville Branch cf the Federal Reserve Bank of Atlanta.

I deem i t advisable to put you in possession of a l l the f a c t s of

t h i s case f o r the reason tha t items aggregating approximately $125,000 were

handled by the Federal Reserve Bank under conditions lega l ly equivalent to

those presented in the t r i a l of the above mentioned case.

On July 5th Woolworth gave to "Jack and Jake" the check in contro-

versy, and on July Sth, the 6th being Sunday and as the p l a i n t i f f claimed the

7th being a holiday in Tennessee, the check was deposited by "Jack and Jake"

with the Tennessee-Hermitage National Tank of Nashville, Tennessee f o r col-

lect ion, and by that bank was transmitted on the same day to the Federal Re-

serve Bank, which, on the same day, that i s July Sth, forwarded i t with other

items aggregating about $33,000 to the payee bank, the Peoples Bank of

Springfield, Tennessee.

Under the banking custom prevai l ing in Nashvil le, and under the rule

of the Federal Reserve Bank, as Mr. por t , the cashier , informs me, three days

are allowed for the purpose of col lec t ing items before not ice i s given to the

pa r t i e s to the instrument. On July 10th Mr, Fort cal led up Mr. S t ra t ton , the

President of the Peoples Bank, and inquired about the items sent to that bank

on July Sth, aid Mr. St ra t ton told Mr. Fort that he, St ra t ton, would be in

Nashville on the 11th, and on that day he came to Nashville and had a con-

ference with Mr. Fort in which Strat ton s tated that he was then making ar-

rangements with the American National Bank of Nashville to borrow $50,000,

and would remit for the items of July Sth m July 12th. Relying on t h i s

promise, which i t can be shown was made bona f ide , Mr. Fort le t the matter

hang on July 12th, and as the 13th was Sunday, and the l4 th also a bank hol i -

day, Mr. Fort gave no t ice on the 15th on which day the Peoples Bank closed i t s

doors.


7 4 3 X-41S3

In representing the Federal Reserve Bank, I made the point t ha t ,

while under the law of Tennessee (Milling Company v. Bank, 120 Tenn. 225)

i t was negligence for a col lec t ing bank to send an item d i rec t ly to the payee

bank, nevertheless under Regulation J , Series of Regulations of the Federal

Reserve Board of 1923, as well as under a c i rcular of the Federal Reserve

Bank of Atlanta dated May 16, 1924, a Federal Reserve Bank, as a federa l

corporation, had the author i ty under these rules and regulat ions to send

items for col lect ion d i r ec t l y to the payee bank, and that these ru les and

regulat ions passed by the Federal Reserve Board pursuant to sub-sections I

and J of Section 11 of the Federal Reserve Bank Act had the same legal e f fec t

as i f they had been d i r ec t ly enacted by Congress and inser ted in the Federal

Reserve Bank Act.

To support t h i s proposition, I re l ied on numerous decisions of the

Supreme Court of the United States of which Field v. Clark, IU3 U. S. 649;

But t f i e ld v. Stranahan, 192 U. S. 470; F i r s t National Bank v. Fellows, 244

U. S. 416, and McKinley v. United Sta tes , 24$ U. S. 397 are typica l .

I made the fu r t he r point that there was no p r i v i t y of contract be-

tween "Jack and Jake" and the Federal Reserve Bank, and t ha t , the re fo re , the

sui t could not be maintained. See F i r s t National Bank of Denver v. Federal

Reserve Bank of Kansas City, Mo. 283 Fed. 700; City of Douglas, Ariz. v .

Federal Reserve Bank of Dallas, }QQ Fed. 573*

Also I ins i s ted that if the item in controversy had been sent to

another bank a t Spr ingf ie ld , as for instance the Springfield Bank of tha t

place, the resu l t would have been the same, and tha t , therefore , the p l a i n t i f f

wa.s not prejudiced. 2 Michie on Banks and Banking, Sec. 162 (1 b) pages

1405-140?.


- 5 - X - U 1 5 3

On yesterday the Circuit Judge delivered h i s opinion in which he

held tha t under the law of Tennessee the Tennessee-Hermitage National Bank was

gui l ty of negligence in employing an agent which, under the terms of i t s con-

t r a c t , reserved the r igh t to send an item for col lec t ion d i r ec t ly to the payee

bank. The Circuit Judge did not however hold that the Federal Reserve Bank

was gui l ty of any negligence in handling the item in question, but , as above

stated, predicated h i s conclusion as to the l i a b i l i t y of the Tennessee-

Hermitage National Bank solely m the ground that i t had contracted with a

forwarding agent which reserved the r igh t to send an item d i rec t ly to the

payee bank, and that as such action was in violat ion of the law of the State

of Tennessee the Tennessee-Hermitage National Bank was answerable to i t s de-

pos i tor , "Jack and Jake", for placing the item in the hands of the Federal

Reserve Bank for co l lec t ion .

Of course, i f the Circuit Judge had held that there was any negl i -

gence in handling the item or that he could not render judgment against the

Federal Reserve Bank for the reason that there was no p r iv i t y of contract be-

tween i t and "Jack and Jake", I would be inclined to make a motion fo r a new

t r i a l and appeal the case for the p la in reason that such a judgment rendered

against the Tennessee-Hermitage National Bank would probably form the bas i s

for an action by that bank against the Federal Reserve Bank in an e f f o r t to

recoup what i t might be required to pay in sa t i s fac t ion of the judgment. As,

however, no such conclusion was reached by the Circui t Judge, i t seems to me

that the only course open f o r the Tennessee-Hermitage National Bank i s to ap-

peal on the ground that by employing for purposes of col lect ion the Federal

Reserve Bank i t was not gu i l ty of negligence, and as that bank was not

negligent in handling the item a f t e r i t s reception no l i a b i l i t y a t taches to


-6- .X-4183 * 74i>j>

the Tennessee-Hermitage National Bank.

I have writ ten to you a t length with reference to the f a c t s of the

case and. the legal points made by me because, while the case ac tua l ly t r i ed

was r e l a t i ve ly ins ign i f ican t in amount, i t determined a pr inc ip le of great

importance to the Federal Reserve Bank, as the matter stands, the Tennessee-

Hermitage National Bank cannot recover from the Federal Reserve Bank fo r the

reason that the Circuit Judge did not f i nd that the Federal Reserve Bank was

gui l ty of any negligence in handling the item so as to make that negligence

the basis of a der ivat ive l i a b i l i t y to the Tennessee-Hermitage National Bank,

but based h i s decision on the ground above stated. I am constrained to be-

l ieve that the Circuit Judge took an erroneous view of the legal r e l a t i on be-

tween the Tennessee-Hermitage National Bank and the Federal Reserve Bank,

but, as .1 do not represent the former bank, I am not concerned with t ha t

phase of the controversy.

•please l e t me hear from you as to whether or not you agree with the

policy which I have adopted in trying t h i s case, as doubtless many others

will be brought in the near fu ture which I , of course, wi l l attend to , and I

wi l l be glad to receive any suggestions you may see f i t to make with reference

to the conduct of such cases .

Very t ru ly yours,

( E. J . SMITH) Sg

5


4 *• 7 4 6

x~iiiS3

October 17, lgeU.

Mr. Edward J . Smith, Attorney-at-Law, Nashville, Tennessee.

Dear Mr. Smith:

We have your l e t t e r of October 15th, addressed to our Mr. Randolph.

In our opinion, the points made by you at the t r i a l were well taken, and we think tha t the t r i a l court was c lear ly r i g h t in holding that there was no l i a b i l i t y agains t the Federal Reserve Bank. We gather from your l e t t e r that the law of Tennessee follows the l ine of au thor i t i es which hold that the bank of i n i t i a l deposit accepts checks from i t s customers for col lect ion and c red i t with f u l l l i a b i l i t y for the negl igent acts or de-f a u l t s of any sub-agent selected by i t fo r purposes of col lec t ion , and tha t there i s no p r i v i t y of contract between the or iginal depositor and any sub-agent so selected. If such be the law of your s t a te , there would be no r igh t of action as against the Reserve Bank in the case which you have t r i ea . Even in the absence of the regulations and c i rcu lars determining the con-t r ac t between the member bank and the Federal Reserve Bank, the p l a i n t i f f could not have recovered against the Reserve Bank, f o r the reason s t a t e d . However, in the absence of an agreement varying the provisions of law which would otherwise be appl icable , the Reserve Bank would be responsible to the member bank for any negligent act en ta i l i ng a l i a b i l i t y as against the mem-ber bank.

As between the Reserve Bank and the member bank the regulat ions of the Board and the c i r cu l a r s of the Reserve Bank are binding, aid we do not bel ieve that any f i n a l judgment which may be rendered in your case would furn-ish the bas i s for a recovery against the Reserve Bank.

We bel ieve, therefore , that you have handled the case proper ly , and we take t h i s occasion of thanking you fo r your ca re fu l and e f f i c i e n t a t tent ion there to .

We assume tha t under your p rac t i ce the Federal Reserve Bank of Atlanta wi l l not be a par ty to the record made on any appeal by the member bank, and tha t unless the p l a i n t i f f sues out a writ of error to the judgment of the Court discharging, the Reserve Bank, the immediate case i s terminated so fa r as the Reserve Bank i s concerned.

Under these circumstances, we see no occasion f o r a motion for a new t r i a l on the p a r t of the Reserve Bank, and in f ac t i t would seem doubtful as to whether you would have any grounds fo r excepting to the judgment in your favor . We think i t would be well , however, for you to keep in touch


with the case and aid the member bank as f a r as poss ib le .

I t i s unfortunate that the Tennessee-Hermitage National Bank did not have a contract with i t s own customer giving i t the r igh t to present items for payment direct to the drawee bank.

If we can be of any help to you at any time you wi l l of course ca l l on u s .

With personal regards, we are

Cordially yours,

(signed) Randolph & Parker

General Counsel.

ESP-G



WASHINGTON


November 12, 1924. X-U185

SUBJECT: Holiday, Thanksgiving Day, Thursday, November 27. 1924.

Dear S i r :

In accordance with the Board's l e t t e r

X-4l28, of August 1, 1924, there wi l l be no Gold

Settlement Fund or Federal Reserve Note Clearing

on Thursday, November 27th, on account of observ-

ance of Thanksgiving Day, and Board's books will

be closed.

Please advise Branches.



TO GOVEBNOBS OF ALL F. E. BANKS.


X - 4 1 8 6

TREASURY DEP.ABTEiITT Off ice of u J l v Secretary

WASHINGTON

November ?, 1924.


Sir:

You are nercby advised tnat tne Department nas r e f e r r e d to tne Dis-bursing Clerk, Treasury Department, for payment, tne account of tac Bureau of Engraving and Print ing f o r preparing Federal reserve notes during tne period October 1 to October 31, 1924, -amounting to ^40,040.00, as follows:

Fsdsral Ecssrvs Potss . 1914

i S i l O ^20 Total New York.. 396,000 396,000 Cnicago 277,000 277,000 Dallas 150,000 50,000 30,000 230,000 San Frcjacisco.. 137.000 — ,137,000

960,000 ' 50,000 30,000 1,040,000

1,0*0,000 sheets a t $38.50 per M . . . . . . . $40,040.00

Tne Cjiar-v'es against several Federal Reserve Banks are as follows:

Coupon- Pla te Snaets sa t ion Pr in t ing Materials Total

New York 396,000 $7,029.00 $3,239.28 # ,977 .72 $15^246.00 Chicago 277,000 *,S16.75 2,265.86 3,481.89 10,664.50 D a l l a s 230,000 *,082.50 1,881.40 2,891.10 8,855.00 San Freoicisco... .137.000 2.431.75 1.120. 66 1,722.09 . 5,274. 50

1,040,000 $18,460.00 ^8,507.20 $13,072.80 $40,040.00

Tê Bureau appropriations wi l l be reimbursed in t w above a&ount from tê indef in i te appropriation "Preparation and Issue of Federal Reserve Notes, xieiDbursaole", ^nd i t i s requested tât your board cause sucn inde f in i t e ap-propriat ion to be reimbursed in l ike amount.

Respectful ly,

(Signed) S- E. Jacobs

S. R. JACOBS, Deputy Commissioner.


750 X-*187

S U P P L E M E N T A L P R O G R A M

GOVERNORS1 CONFERENCE

November. 1Q2U

Washington.

This program i s composed of topics submitted by the Federal Reserve Board or Federal Reserve Banks too l a t e to be included in the regular program previously c i rcula ted .

1. What amendments to the National Bank Act are neces-sary in order that nat ional banks may be be t t e r able to meet banking requirements and that the develop-ment of the national banking system may more closely follow the trend of banking development in the country at large so f a r as experience shows that th i s development i s along sound and strong l ines? F.R.Board

2, What steps should be taken to bring about the gradual retirement of the national bank currency and the f i n a l retirement of the legal tenders? F.R.Board

3• Reports of Examinations of National Banks Recommended

That the Office of the Comptroller of the Currency revise reports of examinations of National banks so that these reports wi l l contain a separate schedule showing notes rediscounted with the Federal Reserve Banks and pledged as co l l a t e ra l , c lass i fy ing same slow, doubtful , undesirable and loss , with such other information as would be of value to the Federal Reserve Banks. Atlanta

4. Correspondence between Examiners and Comptroller fs Off ice .

Recommended That the examiners furnish the Federal Reserve

Banks with copies of l e t t e r s to the Comptroller's Office by d i rec tors of banks under c r i t ic i sm and the rep l ies to such l e t t e r s by the Comptroller's Off ice . Atlanta

5« Whether or not a Federal Reserve Bank may properly receive maturing col lect ion items with ins t ruct ions to deposit the proceeds of the col lect ion in some commercial bank fo r the account of a member bank. San Fran.


7 5 1 -3 - 7.-4107

6. Communication from the Austrian Association of, Banks and Bankers r e l a t ive to counterfei t cur-rency. New York

7. Member Bank Expense Discussion of c i rculars issued by the Fed-

eral Reserve Banks of Boston and New York r e l a t i ve to the comparison of the operations of representat ive member banks. New York

8. Whether or not i t might be advisable to suggest to the Federal Reserve Bank of Atlanta the question of employing a counsel representat ive of a l l Federal Reserve Banks to take part in the pending case of Pousson v. Federal Reserve Bank of Atlanta. F.R,Board

H. R. 976s - Congressman Thomas, Oklahoma. This b i l l would remove the Secretary of the

Treasury and Comptroller of the Currency from membership on the Federal Reserve Board as ex-of f ic i6 members, provide for an addit ional appointive member to represent labor, and in-crease the salary of a l l Board members to $25,000 per annum, e tc . F.R.Board


FEDERAL RESERVE BOARD * ^ WASHINGTON


X -U189 November 15, 1924.

SUBJECT: Expense Main Line, Leased. Wire System, October, 1924.

Dear S i r :

Enclosed herewith you wi l l f ind two mimeograph statements, X-4lS9-a and X-4lS9-b, covering in de t a i l operations of the main l ine , Leased Wire System, during the month of October, 1924.

Please credi t the amount payable by your bank in the general account, Treasurer, U. S . , on your books, and issue C/D Form 1, National Banks, fo r account of "Salar ies and Expenses, Federal Reserve Board, Special Fund," Leased Wire System, sending duplicate C/D to Fed-eral Reserve Board.


Fiscal Agent.

(Enclosures)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO,


X—Ul.£—B-753

REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE LEASED MRE SYSTEM FOR THE MONTH OF OCTOBER, 1924.

Percent of Treasury War Fed. Res. Total Bank . Dept. Finance Corp.

From Bank Business Business (*) Business Business Total

Boston 25,654 3.O3 4,025 29,679 New York 162,967 19.20 6,796 - 169,763 Philadelphia 35,592 4.20 5,57S 41,170 Cleveland 65,647 5.10 4,699 - 73,346 Richmond 47,621 5.62 3,725 - 51,349 At lanta 62,954 7.44 4,136 67,120 Chicago 94,416 11.14 6,709 - 101,125 S t . Louis .71,707 5.46 5,955 77,692 Minneapolis 42,101 4,97 2,514 — 44,615 Kansas City 67,875 5.01 5,039 72,914 Dallas A3 *892 7.31 2,759 - 64,651 San Francisco 106,079 12.52 10,541 116,620

Total 347,535 100.00 62,509 910,044

Board 292,097 34,057 325 326,509

Total 1,139,632 96,596 325 1,236,553

Percent of Total 92.17# 7.31# .02$

Bank Business 1,139,632 words or 92.19$ Treasury Dept. 96.596 " " 7.51$

TOTAL 1,236,228 » " 100.00#

(*) These percentages used in calcu-l a t i n g the pro r a t a share nf leased wire expenses as shown on the accompanying statement (X-4l29-b)


X-4l89-b REPORT OF EXPENSE

MAIN LINE FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER, 1924


Operators ' Operators' Wire Total Total Reserve Name of Bank Sa la r i e s Overtime Rental Expenses Expenses Credi ts Board

Boston $ 2 ^ . 0 0 $ 10.00 $ 260.00 $ 643.33 $ 260.00 $ 3S3.33 New Y<irk 920.52 — — 920.52 4,076.56 92"%82 3,155.74 Phi ladelphia 200.00 — — 200.00 591.75 200.00 691,75 Cleveland 272.00 — — 272.00 1,719.50 272.00 1,447.50 Richmond 315.00 — — 315.00 1,193.24 315.00 575.24 At lanta . 255.00 — — 255.00 1,579.67 255.00 1,324.67 Chicago (#)3,996.05 — *• 3,996.05 2,365.25 3,996.05 (*) l ,630.50 S t . Louis 200.00 —• *- 200.00 1,796.23 200.00 1,596.23 Minneapolis 1*3-34 — — 153.34 1,055.23 IS3.34 571.89 Kansas City- 265.64 mm m 265.64 1,700.69 265.64 1,435.05 Dallas 251.00 • # — 251.00 1,552.06 251.00 1,301.06 San Francisco 3*0.00 w «• 350.00 2,653.25 350.00 2,273.25 Fed.Res.Board $15,440.50 %5f#40.50

2,653.25 350.00

TOTAL $7,455.55 $ 10.00 $15,440.50 22,939.35 $21,232.06 $7,493.85 $15,364.01 (a) l .707.2q (&)l .bl0 .30 $21,232.'% $13,733-21

(#) Includes s a l a r i e s paid to Washington opera tors . (*) Credit (a) Received $7.29 from the War Finance Corp. and $l,7rv"\0~> from

the Treas. Dept. covering business for the month of October, 1924. (&) Anrunt reimbursable to Chicago.


: 7 5 5 FEDERAL RESERVE BOARD

WASHINGTON


November 18, 1924. X-4190

9UBJECT: Bank Sa lar ies .

Dear S i r :

In accordance with previous p rac t ice and in view of Section 4 of the Federal Reserve Act which provides that any compensation tha t may be provided by boards of d i rec tors of Federal reserve banks for d i rec tors , o f f i c e r s or employees shall be subject to the approval of the Federal Reserve Board, i t i s re-quested that you prepare and forward to the Board An or before December 10 schedules containing the names of a l l o f f i c e r s and employees and the sa la r i e s i t i s proposed to pay them beginning January 1925# together with present annual sa lar ies of a l l o f f i ce r s and of those employees receiving in excess of $2,500 per annum. Separate schedules, prepared in accordance with the sample forms attached hereto, should be submitted for the Head Office and each Branch.

Very t ru ly yours,


(Enclosure)

To Chairmen ef a l l F. R* Banks


7 5 6

NUMBER AND SALARIES OF OFFICERS ON DECEMBER 1, 1924. X-ltigO-a

Federal Reserve Bank - Branch

Date of Present Proposed Functions Original Name T i t l e Annual Annual Super-Employment Salary Salary vised _

NOTE: Separate repor t as of December 1 should be prepared for each Federal reserve bank and branch and forwarded to the Federal Reserve Board not l a t e r than December 10.


x-Uigo-b *75?7 NUMBER AllD SALARIES OF EMPLOYEES RECEIVING MORE THAN $2,500. PEE ANNUM

(Employees recommended for sa la r i es in excess of $2,500 should also be included in th is report)

Federal Reserve Bank - Branch , Dec. 1, 1924.

Present Proposed Function Name Ti t le Annual Annual to which

Salary. Salary. assigned.

Date of original employment

function*

•Employees should be grouped according to the functions given in the quarter ly functional expense report , form &.

NOTE: Separate report as of December 1 should be prepared for each Federal reserve bank and branch and forwarded to the Federal Reserve Board not l a t e r than December 10.


I » X-U190-C • ^ 5 8

NUMBER AND SALARIES 9F EMPLOYEES RECEIVING $2,500. OR LESS FEE ANNUM.

(Employees recommended, for s a l a r i e s in excess of $2,50C. should not be included in t h i s repor t ) .

Federal Reserve Bank - Branch , Dec. 1, 1924.

ik te of original Name Ti t le employment

Total of salary Salary as increases during of January the current year 1, 192*5.

function*

*Enployees should be grouped according to the functions given in the quarter ly functional -expense report , form E.

NOTE: Separate report as of December 1 should be prepared fof each Federal reserve bank and branch and forwarded to the Federal Reserve Board not l a t e r than December 10.



WASHINGTON 7 5 9


November 19, 1924. X-4191

SUBJECT: Assistant Federal Reserve Agents, 1925*

Dear S i r :

On or before December 15th next, the Federal Reserve Board wi l l give consideration to the matter of the appointment of the Federal Reserve Agents and As-s i s t a n t Federal Reserve Agents to serve during the year 1925» You are requested to send to the Board in time to reach i t several days pr ior to the date mentioned the names of those whom you desire to be appointed as Assis t -ant Federal Reserve Agents at the head o f f i ce and the branches, i f any, of your Bank.

Recommendations as to the sa la r ies of Assistant Federal Reserve Agents should be submitted at the same time as the salary recommendations fo r bank employees.

Very t ru ly yours,


TO ALL FEDERAL RESERVE AGENTS-



WASHINGTON


X-4193 November 24, 1924.

SUBJECT: Loans on Real Estate and Farm Lands by National Banks having no Time Deposits.

Dear S i r :

Inquiry has teen made of the Federal Reserve Board as to whether a nat ional bank which has no deposits tha t are classed as time deposits may make loans On improved and unencumbered farm lands and r ea l es ta te under the provisions of Section 24 of the Federal Reserve Act.

The Board has considered this question and i s of the opinion that the r ight Of nat ional banks to make loans on farm land and r e a l estate should not be r e s t r i c t e d to banks having deposits which are classed as time deposi ts . Section 24 provides in par t that "Any national banking associat ion not s i tua ted in a central reserve c i t y may make loans secured by improved and "unen-cumbered farm land ***** and may also make loans secured by im-proved and unencumbered r e a l estate *****"„ From th is i t seems apparent tha t the only r e s t r i c t i o n intended to be placed upon the r ight of nat ional banks to make rea l es ta te loans i s that they shall not be s i tuated in a central reserve c i t y , provided, of course, tha t the loans comply in other respects with the provisions of Section 24 of the Federal Reserve Act. The provision of t h i s section with regard to the aggregate sum which a nat ional bank may loan upon rea l es ta te , tha t i s , up to 25$ of i t s cap i ta l and sur-plus or to 1/3 of i t s time deposits, whichever may be the greater , i s merely a l imi ta t ion on the amount of such loans which a nat ional bank, otherwise qua l i f i ed , may make and was not intended to re-s t r i c t the r ight to make such loans only to those banks having time deposi ts .


50 GOVERNORS OF ALL F. R. BANKS



761

x-UigU

OATH OF DIRECTOR

CLASS "A"

State of ) ss.

o f ) (City or County)

I , the undersigned, having been elected a Class "A" Director

of the Federal Reserve Bank of , located in the Fed-

eral Reserve City of , State of , and in

D i s t r i c t No. , as determined in accordance with the provisions of the

Federal Reserve Act, oeing a c i t i zen of the United States, and resident of

the State of , do solemnly swear (affirm) that I wi l l , so

f a r as the duty devolves upon me, d i l igent ly and honestly administer the

a f f a i r s of said bank, f a i r l y and impart ial ly, and without discrimination

in favor of or. against any member bank or banks; that I wi l l not knowingly

v io la te , or wi l l ingly permit to be violated, any of the provis ions of the

s t a tu t e s of the United States under which t h i s bank has been organized.

Subscribed and sworn (affirmed) to before the undersigned, a

Notary Bu#lic in and for the State and aforesa id , t h i s

day of , 192_.

Notary Public


• 7 6 2 X-41$4-a

OATH OF DIRECTOR

CLASS "1"

State of ) ss .

o f _ ) (City or County)

I , the undersigned, having been elected a Class "B"

Director of the Federal Reserve Bank of , located in the

Federal Reserve City of , S ta te of , and in

Dis t r ic t No. , as determined in accordance with the provisions of

the Federal Reserve Act, being a c i t i zen of the United S ta tes , and r e s i -

dent of the State of , do solennly swear (aff i rm) that

I wi l l , so f a r as the duty devolves upon me, d i l igent ly and honestly ad-

minister the a f f a i r s of said bank, f a i r l y and impar t ia l ly , and without

discrimination in favor of or against any member bank or banks; that I

wi l l not knowingly v io la te , or willingly permit to be viola ted, any of

the provisions of tne s t a tu t e s of the United States under which th i s

bank has been organized; that a t the time of my elect ion I was engaged

in ; that I am not an o f f i c e r , d i rec tor , or em-(State occupation)

ployee of any other bank.


Notary Public in and fo r the State and aforesaid,

th i s day of , 19

Notary Public


' 763 x-mgu-b

PATH OF DIRECTOR

CLASS "g"

State of ) ss.

° f — ) (City orCounty)

I , the undersigned, having been appointed a Class lfC" Director

of the Federal Reserve Bank of , located in the Federal

Reserve City of , State of , and in

Dis t r ic t No- , as determined in accordance with the provisions of

the Federal Reserve Act, being a c i t i zen of the United States and res iden t

of the Sta te of , do solemnly swear (affirm) that I

wi l l , so f a r as the duty devolves upon me, d i l igent ly and honestly administer

the a f f a i r s of said bank f a i r l y and impart ial ly and without discrimination

in favor of or against any member bank or banks; that I wi l l not knowingly

v io la te , or will ingly permit to be viola ted any of the provisions of the

s ta tutes of the United States under which th i s bank has been organized;

that I wi l l well and f a i t h f u l l y discharge the duties of the o f f i c e on which

I am about to enter; tha t I am not an o f f i c e r , d i rec tor , employee, or stock-

holder in any other bank; and that I take th is obligation f ree ly without any

mental reservat ion or purpose of evasion.

Subscribed and sworn (affirmed) to before the undersigned, a Notary

Public in and fo r the Sta te and • a foresa id , th i s

day of , 192_.

Notary Public.


X-Ul34-c ' OATH 0? CHAIRMAN AND FFDIffAI KSSFJRVE AGENT

State of ) s s. , 0f )

(City orCourity)

I , the undersigned, a Class "C" .Director of the Federal Reserve

Bank of __ , located in the Federal Reserve City of

. , State of , and in D i s t r i c t

No, , having been designated by the Federal Reserve Board as

Chairman of the Board of Directors of said bank and as Federal Reserve Agent,

being a c i t i zen of the United Stated and resident of the State of

, do solemnly swear (aff i rm) that I w i l l , so f a r as the

duty devolves upon me, d i l igent ly ana honestly administer the a f f a i r s of

said bank f a i r l y and impart ial ly and without discrimination in favor of ot

against any member bank or banks; that I wi l l not knowingly v io la te , or

wil l ingly permit to be viola ted any of the provisions of the s ta tu tes of the

United Sta tes under which th is bank has been organized; that I wi l l well

and f a i t h f u l l y discharge the duties of the o f f i ce on which I am about to

enter; that I am not an o f f i c e r , d i rec tor , employee, or stockholder in any

other bank; and that I take th i s obligation f ree ly without any mental

reservat ion or purpose of evasion.


Public in and for the Sta te and aforesa id , t h i s

day of , 192__.

7 6 4

Motary Public.


X,4l94-d OATH OF DEPUTY CH A TRW,IT

State of i ss.

of ) (City or County)

I, the •undersigned, a Class "C11 Director of the Federal Reserve

Bank of , located in the Federal Reserve City of

. , S ta te o,f , and in District No.

. , having been designated by the Federal Reserve Board as Deputy

Chairman of the Board of Directors of said bank, being a c i t i zen of the

United Sta tes and resident of the State of , do

solemnly swear (aff irm) that I wi l l , so f a r as the duty devolves upon me,'

d i l igen t ly and honestly administer the a f f a i r s of said bank f a i r l y and im-

p a r t i a l l y and without discrimination in favor of or against any member

bank or banks; that I wi l l not knowingly* v io la te , or wil l ingly permit to

be violated any of the provisions of the s ta tu tes of the United Sta tes

under which th i s bank has been organized; that I wil l well and f a i t h f u l l y

discharge the duties of the o f f i ce on which I am about to enter; t ha t I am

not an o f f i c e r , d i rec tor , employee, or stockholder in any other bank; and

that I take t h i s obligation f ree ly without any mental reservation or purpose

of evasion.


Notary Public in and fOr the State and aforesaid, this

day of , 192_.

Notary Public


X-4194-8 OATE OF OFFICE OF

ASSISTANT FEDERAL RESERVE AGENT

State of ) ss .

7 of ) (City orCounty)

I , the undersigned, having been duly appointed Assistant Federal

Reserve Agent of the Federal Reserve Sank cf located

in the Federal reserve c i t y of S ta te of

arid in D i s t r i c t No. as determined in accordance with the provi-

sions of the Federal Reserve Act, being a c i t izen of the United Sta tes and.

a res ident of the State of do solemnly swear (aff i rm)

that I wi l l support an.5 defend the Constitution of the United States against

al l enemies, foreign or domestic; tha t I wi l l bear t rue f a i t h and a l legiance

to the same; that I wi l l well and f a i t h f u l l y discharge the 1 cities of the

o f f i c e of Assistant Federal Reserve Agent on which I am about to enter , and

that I take th i s obligation f ree ly without any mental reservation or purpose

of evasion; SO HELP MS GOD.

Subscribed and sworn (affirmed) to before the undersigned, a.

Notary Public in and for the State and aforesa id ,

th i s day of , 192_.

Notary Public.


• 767 x-UigU-f

State of ) ss , , ^ )

(City or County)

I , the undersigned, having been duly appointed Assis tant

Federal Reserve Agent of the Branch of the Federal Reserve

Bank of located in the c i t y of S ta te

of and in D i s t r i c t No. as determined in

accordance with the provis ions of the Federal Reserve Act, being a c i t i z e n

of the United States and a res ident of the State of

do solemnly swear (a f f i rm) t ha t I wi l l support and defend the Const i tu t ion

of the uni ted Sta tes agains t a l l enemies, foreign or domestic; tha t I w i l l

bear t rue f a i t h and a l legiance to the same; that I w i l l well and f a i t h f u l l y

discharge the duties of the o f f i c e of Assistant Federal Reserve Agent on

which I am about to enter , and tha t I take th i s ob l iga t ion f r e e l y without

any mental reservat ion or purpose of evasion; SO HELP MS GOD.

(Signature of Ass i s tan t Federal Reserve Agent.)

Subscribed and sworn (aff i rmed) to before the undersigned, a.

Notary Public in and f o r the State and

a fo resa id , t h i s day of , 1'32_.

OATH OF OFFICE ASSISTANT FFDFMLJRESSBVE AffijNT

AT~ BRANCH BANKS

Notary Public.


768 X-419l4-g

OATH OF ,01 EEC TOE

BRANCH BA2TKS

State of ) ss .

7 , o f ) (City or County)

I , the undersigned, having been "appointed a Director of the

Branch of the Federal Reserve Bank of

located in the City of

State of , and in Dis t r i c t No. a s de-

termined under the provisions of the Federal Reserve Act, being a c i t i zen

of the United States, and resident of the State of do

solemnly swear (aff irm) that I wi l l , so f a r as the duty devolves upon me,

d i l igen t ly and honestly administer the a f f a i r s of said branch, f a i r l y and

impar t ia l ly , and without discrimination in favor of or against any member

bank or banks; that I wi l l not knowingly viola te , or wil l ingly permit to be

viola ted, any of provisions of law prescr ibing or in any way a f f ec t ing the

dut ies of my o f f i ce .


Public in and for the S ta te and aforesaid , th is

day of , 192_.

Notary Public.


x-4i95 769 PROGRAM FOR THE CONFERENCE OF COUNSEL OF FEDERAL RESERVE BANKS TO BE HELD AT WASHINGTON, D. C. ON DECEMBER 5,1924.

I .

DISCUSSION OF CASES.

The f i r s t pa r t of the program wil l be taken tip vVith a discussion of the

cases brought aga.inst Federal reserve banks involving col lec t ion problems

similar to those a r i s ing in the case of Federal Reserve Bank of Richmond v.

Malloy Brothers. These cases wi l l be considered individually and the Coun-

sel for the Federal reserve bank involved in each par t icu la r case wil l make

a brief statement of the f a c t s and the decision in his case and follow t h i s

with a discussion of the legal pr inc ip les involved. This in turn wil l be

followed by a general discussion by the conference of the legal p r inc ip les

involved in the case under consideration. This course of procedure wil l be

followed by taking up the cases in the following order:

1. Federal Reserve Bank of Richmond v. Malloy Brothers, 44 Sup. ct . 296;

2. City of Douglas v. Federal Reserve Bank of Dallas, 300 Fed. 573J

3. F i r s t National Bank of Denver v. Federal Reserve Bank of Kansas City, 283 Fed. 700;

4. National Bank of Commerce v. Federal Reserve Bank of San Francisco;

5. Jack and Jake v. Federal Reserve Bank of Atlanta, et a l . (Apparently not reported) .

6. Federal Reserve Bank of Richmond v. Peters , Receiver, 123 S.E. 379J

?. Olive v. Federal Reserve Bank of Dallas (Not reported) .

S. C.M. & S t . Paul Railway v. Federal Reserve Bank of San Francisco (Pending).

9. Southern Power Co. v. Federal Reserve Bank of Richmond (Pending).

10. Any other cases of th i s character which Counsel may desi re to discuss. •


-2- X-4195

I I .

IMPORTANT GENERAL PROBLEMS

The following topics suggest important legal problems of a general na-

ture which probably wil l have been discussed more or less thoroughly in con-

nection with the discussion of the above cases, and i t wi l l only be necessary

to discuss such of these topics as have not been fu l l y covered by the discus-

sion of the cases:

1. Effec t of Regulation J , as amended, and new check co l l ec t ion

c i r cu la r s on common law doctrine regarding l i a b i l i t y fo r losses

r e su l t ing from sending checks di rect to %»ayee banks and ac-

cepting exchange d r a f t s in remittance.

2. What e f f e c t , i f any, have Regulation J , as amended, and new

check co l lec t ion c i r cu la r s on legal r i gh t s of owners of checks

as against Federal reserve banks:

(a) Where New York rule applies;

(b) Where Massachusetts ru le appl ies .

3. Pr iv i ty of contract between owner of check and Federal reserve bank

(a) Where Massachusetts rule appl ies ;

(b) Where New York rule applies .

4. Confl ic ts of laws (e. g. where depositary bank i s located in

State in which New York rule i s in e f f e c t and Federal reserve

bank and payee bank are located in s t a t e s where Massachusetts

rule app l i e s . )

5. Ju r i sd ic t ion and venue of actions against Federal reserve banks:

(a) In Federal courts ;

(b) In State cour ts .


- 3 - x - u i 5 5 7 7 1

(c) Bight of Federal reserve bank to question venue of

sui t a f t e r removing same from State to Federal court .

(d) Is a Federal reserve bank doing business in a State

within i t s d i s t r i c t , in which i t maintains no branch

o f f i c e , subject to process of State courts in that

State?

(e) If i t i s not doing business in such a State as that

above mentioned i s i t subject to attachment as a non-

resident or foreign corporation?

( f ) Whether a su i t brought in a State court j o i n t l y against

a Federal reserve bank and the payee of a check may be

removed to a United States D i s t r i c t Court when the payee

of the check refuses to join in the p e t i t i o n fo r removal.

(g) Various defenses which may be interposed by Federal re-

serve banks in such su i t s .

I I I .

TOPICS REFERRED TO CONFERENCE OF COUNSEL BY GOVERNORS' CONFERENCE.

At the conference of Governors of Federal reserve banks held during the

early part of November, cer ta in questions were r e fe r red to the forthcoming con-

ference of Counsel of Federal reserve banks with the request that i t consider

these questions and make a report or recommendation concerning them.' The

th i rd division of the program wi l l be given over to a consideration of these

topics , - which are as follows:

1. Whether or not a Federal reserve bank in forwarding checks or

non-cash col lect ion items to a bank fo r col lect ion, and in ac-

cepting therefor a remittance consist ing of a bank d r a f t drawn


- 4 - X - 4 1 9 5 7 7

by the remitt ing bank upon another bank, has the r i gh t to ac-

cept s t i l l another bank d ra f t in remittance for the f i r o t bank

draf t .

2. Whether or not i t would be advisable as a matter cf law to

have the Federal reserve banks issue a uniform c i rcu la r con-

taining a form cf contract between banks and their depositors,

requesting member and clearing-member banks to amend tne i r

contracts (contained on deposit s l ips ana signature cards)

in accordance with the form proposed in the c i rcu la r*

3 . Whether or n o t i t would be adv isab le f o r the Federal reserve

banks to amend the i r check col lect ion c i rcu la r s so as to pro-

vide tha t the act of submitting checks to Federal reserve banks

for co l lec t ion wi l l be construed as a warranty that the deposit-

or has lodged with the depositing bank the required agreements.

4. Necessity of Federal reserve banks* guaranteeing p r i o r endorse-

ments on nou-casia col lec t ion items.

5. Advisabil i ty of Federal reserve banks using words in the i r en-

dorsements on both checks and non-cash items to l imi t the i r

l i a b i l i t y when guaranteeing pr ior endorsements.

IV.

SPECIAL TOPICS.

The four th por t ion of the program wil l ne devoted to tne discussion of

special topics suggested by various Counsel. A large number of such topics

have been suggested, but those l i s t e d below are believed to be the most

important. Other topics vvhich have been suggested wil l be considered if

time permits, under Division V of this program.


-5- X-4195

Des i rab i l i ty of uniform provision in check col lect ion c i rcu la rs

covering Government checks. The courts have been very l i be ra l

in allowing the Government to assert claims for fo rge r i e s - in

one case a f t e r a period of more than two years had elapsed.

(This topic suggested by Mr. Mason, Counsel to Federal Reserve

Bank of New York).

How should a Federal reserve bank handle items on non-par points

where previous notice has not been given to member banks of the

fac t tha t such points are non-par po in ts . (Suggested by Mr.

Powell).

.Right of Federal reserve banks to preference on claims growing out

of thei r sending items d i rec t to nat ional bank on which drawn, or

at which payable fo r col lec t ion and remittance when such bank f a i l s

before i t s remittance d r a f t can be col lec ted . (Suggested by Mr.

IVfoConkey, Federal Reserve Bank of St . Louis).

Refusal of member bank to permit Federal reserve bank to charge

to i t s reserve account the amount of checks sent to i t for payment

and remittance as provided in Section Vl l - l - ( c ) of Kansas City

Check Collection Circular , (Letter from Governor Bai ley) .

Contention made by numerous bankers tha t while Federal reserve

banks have legal r ight to exempt themselves from l i a b i l i t y in col-

lec t ions fo r anything except thei r own negligence, ye t as a. prac-

t i c a l matter they ought not to do so.

Collecting checks drawn on banks known by the Federal reserve oank

to be in an extended or weakened condition:

(a) Whether or not under the present regulation and the


* i - 6 - x-4195 7 7 4

uniform col lect ion c i rcu la rs , a Federal reserve bank i s

l i a b l e for resu l t ing loss if i t sends checks d i rec t to the

drawee bank and accepts remittances in the form of exchange

d r a f t s a f t e r knowing or having reason to know that the

drawee bank i s in a weakened condition, and such drawee

bank closes i t s doors before the remittance d r a f t i s col-

l ec ted . (Suggested by Mr, Wallace and Messrs. Randolph and

Parker) .

(b) Ef fec t of State s ta tu tes expressly permitt ing in general

terms the sending of checks di rect to the drawee banks.

(Suggested by Messrs. Randolph and Parker).

(c) What precautions should a Federal reserve bank adopt in

such cases in order to avoid respons ib i l i ty for sending

checks di rect tc the drawee bank. (Suggested by Mr. Wallace

and Randolph and Parker.)

7. Advisabil i ty of requiring indemnity of member banks when Federal

reserve banks are held l i ab l e for losses resul t ing from sending

checks d i rec t to drawee banks or accepting exchange d r a f t s in

remittance.

V.

NON-CASH ITEMS AND OTHER MISCELLANEOUS TOPICS.

Several problems ar is ing in the collect ion of non-cash items by

Federal reserve banks and other matters not d i rec t ly connected with check

col lect ions have been suggested f o r discussion, and if time i s available

consideration wi l l next be given to these questions. Explanation of these

topics will be ma.de by Counsel for the pa r t i cu la r Federal reserve banks


-7- • X--.15J 7 7 5

where the problems have ar isen and such explanation wil l be followed by a

general discussion by a l l attending the conference. The following are the

topics of th is character which have been suggested:

1. Incorporation into non-cash collect ion c i rcu lars of warranty by

member and nonmember clear ing banks sending items to Federal reserve

banks fo r deposit or col lect ion that by such action they authorize

the Federal reserve banks to handle checks subject to the terms and

conditions of Regulation J ; warrant that they have authori ty to

give Federal reserve banks such authori ty; and they agree to in-

demnify the Federal reserve banks for any loss r e su l t ing from the

f a i l u r e of the sending bank to have such authori ty. (Suggested by

Mr. Mason).

2. To what extent , i f a t a l l , should Federal reserve banks f i l e and

prosecute claims against receivers of f a i l ed banks fo r the benef i t

of member banks where, having received items for col lec t ion on the

f a i l ed bank while i t was a going concern i t has sent those items

to the f a i l e d bank and received the remittance d r a f t of the f a i l ed

bank, which d ra f t was not paid because of the f a i l u r e of such bank.

(Suggested by Mr. Powell).

3. Right of Federal reserve bank to re ta in rediscounted paper and ex-

cess c o l l a t e r a l a f t e r proving claim against insolvent member bank

for f u l l amount due Federal reserve bank. (Suggested by Mr.

McConkey).

4. Pract ice of some country banks of not remitting d i rec t to Federal

reserve bank but requesting thei r correspondents to remit for them


- s - x-4195

and no t i fy ing Federal reserve batu. that they ha.V3 dene so.

Does th is make the correspondent bank the agent of the Fed-

eral reserve bank so that the f a i lu re of the correspondent

r e su l t s in loss to the Federal reserve bank rather than the

country bank on which the original checks were drawn? (Sug-

gested by Mr. McConkey).


7 7 7

F E D E R A L % 1 5 E E V E B 0 A E D

STATEMENT FOE THE PRESS >-41S'6

For Release in Morning Papers, Friday, November 28, 1924.

The following i s a summary of general business find, f inancial conditions throughout the several Federal Reserve District*» based upon s t a t i s t i c s for the months of October and November, as con-tained in the forthcoming, issue of the Federal Reserve Bulletin,

Production of basic commodities and factory employment showed fur ther

increases in October, and dis t r ibut ion of merchandise was in large volume.

The general level of wholesale prices advanced, re f lec t ing largely a r i s e

in the prices of agr icul tura l products.

PRODUCTTOH:

The Federal Reserve Board's index of production in basic industr ies ,

adjusted to allow for seasonal variat ions, increased 6 per cent in October,

and was l6 per cent above the low point of midsummer, though s t i l l con-

siderably below the level of the early months of this year. Output of

iron and s t ee l , cotton and woolen t ex t i l e s , lumber, and bituminous coal

was subtantial ly larger than the month before. Factory employment in-

creased 2 per cent in October, r e f l ec t ing larger working forces in most of

the manufacturing industr ies . Building contract awards increased and were

14 per cent above a year age.

Crop estimates by the Department of Agriculture in November showed

increases in the expected yields of com, cotton, tobacco, and potatoes.

The movement of crop* to market in October reached the largest volume in

f ive years and exports of grain and cotton were in greater volume than in

the corresponding month of any recent year.


-2 - X - 4 1 9 6 7 ' 7 g

TBADE:

Railroad f r e i g h t shipments were larger in October than in any previous

month, owing to exceptionally heavy loadings of miscellaneous merchandise

and grain. Wholesale trade increased s l igh t ly , but was 3 per cent l ess

than in October, 1923- Sales of dry goods, shoes and hardware were con-

siderably smaller than a. year ago, while sales of groceries and drugs were

l a rge r . Department store sales showed a seasonal increase but were 4 per

cent less than l a s t year, and so.les of mail order houses and chain stores

also increased and were in greater volume than in 1$23« In preparat ion fo r

Christmas trade merchandise stocks a t department s tores increased sub-

s t a n t i a l l y and were 2 per cent larger than a, year ago.

PRICES:

The wnolesale pr ice index of the Bureau of Labor S t a t i s t i c s rose 2 per

cent in October as a resul t of considerable advances in the p r i c e s of farm

products and foods, end s l ight increases in the pr ices of c lothing and

chemicals. Fuel and mstal pr ices declined and p r i ces of building materials .

and house furn ish ings were p r a c t i c a l l y unchanged. During the f i r s t half

of November quotations on a l l grains , cotton, s i l k , copper, and rubber ad-

vanced, while p r i ce s of raw sugar and bituminous coal declined. t

BANK CREDIT:

Loans fo r commercial purposes at member banks in leading c i t i e s , which

had increased rapidly from the beginning of September to the middle of

October, advanced only s l ight ly in the following four weeks. The growth

cf loans secured by stocks and bonds was also r e l a t i ve ly small, notwith-

standing great a c t i v i t y in the secur i t i e s market. Holdings of investments


779 - 3 - > : - 4 2 $ 6

by these banks continued the incr9A.se which began in the ear ly months of

the year. A large pa r t cf the incres.se in dcuar.j deposits during the fcur

weeks ending November 12, when they were higher than at any previous time,

was in bankers ' balances indica t ing a continued movement of funds to the

la rge centers .

At the reserve banks increase in earning asse t s was the r e su l t of

l a r g e r o f fe r ings of acceptances, r e f l e c t i n g f i rmer money condi t ions . Vhile

discounts and holdings cf United Sta tes s e c u r i t i e s remained p r a c t i c a l l y un-

changed during the four weeks ending November 19, the increase in accept-

ances carr ied t o t a l earning asse t s to the highest point since the early

p a r t of the year . Money in c i r cu la t ion increased in October f o r the th i rd

successive month and the to ta l on November 1 was $215,000,000 l a rge r than

in August.

Money r a t e s continued to show a. firmer tendency and by November 23

were generally from 1/4 to 1/2 of one per cent higher than in October.


7 8 0



For Immediate Release. X-4l98 November 29, 1924.

CONDITION OF ACCEPTANCE MARKET

October 16 to November 12, 1924.

Money ra tes , though s t i l l low, showed a. f irmer tendency in the four

weeks' period ending November 12. The supply of new b i l l s which came into

the market was well sustained though i t was somewhat smaller than in the

preceding period. Demand for b i l l s a t banks in some of the f inanc ia l centers

was smaller than during the preceding four weeks, but purchases by in-

te r io r banks were considerably la rger . During the las t week of the period a

money ra tes were s l i gh t ly firmer and there was/suostantial increase in the

volume of b i l l s offered to the market due in pa r t to b i l l s which banks had

bean carrying in t he i r p o r t f o l i o s . There was not a corresponding increase

in the demand and dealers* aggregate po r t fo l ios were larger a t the end of

the period than a month e a r l i e r . Sales to the Federal reserve banks in-

creased almost continuously and reached the highest point in the middle of

November. The p r inc ipa l commodities against which b i l l s were drawn were

cot ton, grains, sugar, tobacco, s i l k , and provis ions .

Rates in the New York market at the close of the period were 2 1/4 per

cent bid and 2 to 2 1/8 per cent offered for 30 day b i l l s , 2 3/8 per cent

bid and 2 1/8 to 2 1/2 per cent offered fo r 60 day b i l l s , and 2 1/2 per

cent bid and 2 1/4 to 2 3/8 per cent offered for 90 and 120 day b i l l s . All

r a t e s were approximately 1/8 of one per cent higher than a t the end of the

preceding period.


* 7 8 1

( COPY ) X-4195

IN THE UNITED STATES CIRCUIT COURT OF APPEALS

FIFTH CIRCUIT

No. 4424.

CITY OF DOUGLAS,

P l a in t i f f in Er ror .

Versus


Defendant in Error .

Error from the D i s t r i c t Court of the United States f o r the Western

D i s t r i c t of Texas.

Harry E. P icke t t , Clean T. Knapp, James P. Boyle, Ed. M. Whitaker,

and W. Pet icolas , fo r P l a in t i f f in Error .

E. B. Stroud, J r . , and A. H. Culwell, (E.B. Stroud, J r . , Turney,

Bruges, Culwell, Holliday & Pollard, on the B r i e f ) , fo r Defendant in Error.

Before WALKER AND BRYAN, Circuit Judges, and DAWE2NS, D i s t r i c t Judge.

DAWKINS, D i s t r i c t Judge:

For a valuable consideration the County of

Cochise, State of Arizona, delivered to the p l a i n t i f f , City of Douglas,

8aid Sta te , 1 a check drawn upon the Central Bank of Wilcox, Arizona, fo r the

sum of $5,000 dated December 22, 1920, which the payee c i t y deposited in


782 - 2 - X—419

the F i r s t National Bank of Douglas on December 24th. On the same date the

l a t t e r bank forwarded the check to the Federal Reserve Bank, El Paso Branch,

the proceeds upon co l l ec t ion to be remit ted fo r the c red i t of the City of

Douglas. The 25th being a holiday (Christmas) and the 26th a Sunday, the

caeck was in the hands of the Bank at El Paso on December 27th, and on

that date i t was by sa id bank forwarded d i rec t to the payee bank a t Wilcox

fo r payment. The bank a t Wilcox stamped i t paid and transmitted in l i eu

thereof t i t s ovvn c a s h i e r ' s check f o r $6426.17 (evident ly covering, in ad-

d i t i on , other items) drawn upon the Central Bank of Phoenix, Phoenix, Ariz-

ona, payable to the Federal Reserve Bank of El Paso. The Reserve Bank fo r -

warded t h i s l a s t mentioned check to the branch of that i n s t i t u t i o n a t Los

Angeles, Ca l i fo rn ia , and i t in turn sen t the c a s h i e r ' s check d i r ec t to the

Central Bank of Phoenix for payment, where i t was p ro tes ted for non-payment.

The p r a c t i c e of sending the checks d i rec t seems to have been authorized by

specia l rul ing of the Federal Reserve Board. The Central Bank of Wilcox

f a i l e d on January 8th and the Central Bank of Phoenix, l ikewise closed i t s

doors on January 19th, 1921.

Thereupon, the City of Douglas sued the Federal Reserve Bank of Dallas

of which the one a.t El Paso i s a br&nch, se t t ing up these f a c t s and

charging the defendant with negligence, in t h a t , i f , instead of sending

the o r ig ina l check d i r e c t to the payee bank, i t had been sent to some other

agency in the Town of Wilcox, the money would have been paid because the

drawer at the time had s u f f i c i e n t funds on deposit with the Wilcox Bank

with which to meet the check; that the defendant knew the Central Banks of

Wilcox and Phoenix were insolvent , but never theless , thus neg l igen t ly


-3- x-4193 783 handled the matter in violat ion of the usual and customary ra les of

banking, and thereby rendered i t s e l f l i ab le fo r the loss , p l a i n t i f f ac-

cordingly prayed for judgment for the face of the check as the amount of

i t s dajnages suffered through the alleged f au l t of the defendant.

One of the defenses specially pleaded below was that the p e t i t i o n

disclosed no cause of action, in that there was no p r i v i t y of contract be-

tween p l a i n t i f f and defendant and tha t the former 's remedy was to sue the

i n i t i a l bank of deposi t , the F i r s t National Bank of Douglas, Arizona.

This contention having been sustained by the t r i a l court a f t e r a hearing

on the merits, p l a i n t i f f prosecutes th i s writ of e r ror .

The question presented i s as to whether th is court shal l follow what

i s known as the "Hew York" as distinguished from the "Massachusetts Bule".

Under the New York Rule the depositor of a dishonored check the payment of

which has fa i led through the f a u l t of a t ransferee of the i n i t i a l de-

posi tary mast proceed against the said i n i t i a l oank, upon the theory that

there i s no p r iv i ty between him and the subsequent holders; while in

Massachusetts, he may sue d i rec t ly the bank through whose f au l t the loss

occurred. Exchange National Bank v, Third National Bank, 112 U.S. 276;

Federal Reserve Bank of Richmond v. Malloy, £64 U. s . , l 60 ; Advance Sheet

number 10, March 15, 1924#

In the l a t t e r case the Supreme Court uses th i s langaage:

"The State decisions in respect of the l i a b i l i t y of a correspondent bank to the owner of a check for co l lec t ion by the i n i t i a l bank of deposit are in conf l i c t beyond the p o s s i b i l i t y of reconc i l i a t ion . A number of S ta tes , following the 'New York Rule, ' so-cal led, have held that there i s no such d i rec t l i a b i l i t y ; but that the i n i t i a l bank alone i s r e -sponsible to the owner. On the other hand, an equal, i f not a grea ter , number of States following the


• 7 8 4 - 4 - X-Uigs

1 Mas sachase11s Rule ' , have held exactly the contrary; v i z . , that the i n i t i a l bank, by the mere f a c t of de-pos i t fo r col lec t ion, i s authorized to employ sub-agents, who thereupon become the agents of the owner, and d i r ec t ly responsible to him for the i r defau l t s . This Court, in Exchange National Bank vs. Third Na-t ional Bank, 112 U.S. 2?6, 26 L. Ed. 722, 5 Sup. Ct. Rep. lUl, a f t e r reviewing the two l ines of decisions, approved the 'New York Rule1 . But the ru le may, of course be varied by contrac t , express or implied. Id. 26$. Here the re la t ions of the payee to the i n i t i a l bank of deposit are controlled oy the Florida s ta tu te with respect to which i t mast be presumed they dealt with each other . The s t a tu t e hs.d the e f f e c t of im-porting the 'Massachusetts Rule' into the contract ,with the resu l t that the i n i t i a l bank had implied authori ty to i n t ru s t the col lect ion of the check to a sub-agent, and that sub-agent, in turn, to another; and the r i s k of any defau l t cr neglect on their pa r t rested upon the owners. 112 U.S. 251. I t follows that the action was properly brought against the Richmond bank."

I t appears to be conceded that the Federal Courts have followed the I t

New York Rale, o u t / i s contended the f a c t s of the present case take i t

without the rule for the reason that there was a special undertaking such

a.s i s refer red to in the case l a s t c i ted and in which the court declared:

"But the rule may, of course, be varied by contract , express or implied,"

but in applying the doctrine of the Massachusetts Rule in that case, i t

said: "Here the r e l a t i ons of the payee to the i n i t i a l bank of deposit are

control led by the Flor ida s ta tu te with respect to which i t m a t be presumed

they dealt with each other. The s t a tu t e had the e f f e c t of importing the

'Massachusetts Rule* into the; contract , with the r e su l t that the i n i t i a l

bank had implied author i ty to i n t rus t the col lec t ion of the check to a

sub-agent, and that sub-agent, in turn, to another; and the r i sk of any

default or neglect on t h e i r part res ted upon the owners."

Prior to this decision, the Supreme Court of Florida had adopted the

New York Rule and evidently the s t a t u t e which was l a t e r passed and


7 8 5 -5 - X-41S)

recognized in the Mailoy case was intended to change the law in that

regard.

In addition to the charge of negligence, the appellant contends that

because the bank book in wnich the deposit was ma.de with the F i r s t National

Bank of Douglas contained the provision: "All out of town items credited

subject to f i na l payment," the case i s taken out of the New York Rule and

governed by a special s t ipula t ion making the Massachusetts doctrine ap-

p l i cab le . I t f u r the r asser t s that the Supreme Court of the United States

has never held that there was not p r i v i t y between the depositor and the

co l lec t ing bank such as to render i t l i ab le to the owner of a check sued

as in t h i s case. a

we shal l discuss f i r s t , the contention that there was/special contract .

The language quoted unquestionably gives to the receiving bank the r ight to

charge back against the account of the depositor checks for which credi t

i s entered, i f dishonored; but can t h i s be construed as a l imi ta t ion upon

i t s l i a b i l i t y fo r the f a u l t s of i t s agents so as to take the case out of the

doctrine of the United States Courts? We think n o t . Hflhat the Bank of

Douglas had in mind, and what the words in t h e i r ordinary usage mean, i s

that i f the check i s not f i na l l y paid by the drawee, i t wi l l be charged

back. Nothing whatever i s said about the f a u l t s of anyone or of exemption

from l i a b i l i t y t h e r e f o r . In the present case the check was paid by the

drawee and the e f f e c t was to discharge the drawer. Bank v. South Weymouth

Bank, 184 Mass. 49; 67 N.E. 67OJ Milling Company v. Bank, 120 Tenn. 225,

111 S.W. 2US, 18 L«B.A. (new ser ies) 4Ul; Malloy v. Federal Reserve Bank,

281 Fed. 1005. I t , ( the check) has therefore never to th i s day been r e -

turned to the F i r s t National Bank of Douglas in order that i t might be


charged against the p l a i n t i f f . Actually, nei ther the p l a i n t i f f nor the

F i r s t National Bank were pa r t i e s to the check which was protested fo r non-

payment and hence were not en t i t l ed to notice thereof . The c a s h i e r ' s

check wnich was issued in favor of the branch of the Federal Bank a t El

Paso was drawn upon the Central Bank of Phoenix in favor of the El Paso

Bank and was the consideration given in payment of the or ig inal check. Of

course, having accepted i t instead of the money in payment of the f i r s t

check, the El Paso Bank assumed an obligation of i t s own, independent of

the or ig inal r e l a t i on , to see that the cash ie r ' s check was paid, and the

money transmitted back to the F i r s t National Bank of Douglas. So that

the s i tua t ion as we see i t i s unaffected by t h i s language in the pass book.

I t did not extend or enlarge the i n i t i a l bank's powers in the employment of

i t » agents for co l lec t ion so as to make them sub-agents of the City of

Douglas.

Returning now to the e f f ec t of the New York Rule. While i t i s true

the case of Exchange National Bank v. Third National Bank, supra, was one

in which l i a b i l i t y was sought to be f ixed against the i n i t i a l bank rather

than the col lect ing bank, yet the language of that decision, in our opinion,

can be construed in no other l ight than as pronouncing the doctrine that

there was no p r i v i t y between the l a t t e r and the depositor of the check.

We quote therefrom as follows:

"There i s no s ta tu te or usage or special contract in t h i s case, to qua l i fy or vary the obligation resu l t ing from the deposit of the d ra f t s with the New York bank for co l l ec t ion . On i t s receipt of the d r a f t s , under these circumstances, an im-p l i ed undertaking by i t arose, to take a l l necessary measures to make the demands of acceptance necessary to protect the r igh ts of the holder against previous p a r t i e s to the paper. * * * * The general p r o f i t s of the receiving bank from the business between the p a r t i e s , and the accommodation to the


f » - 7 - X-4ljy 7 8 7

customer, mast a l l be considered together , and form a considerat ion, in the absence of any con t ro l l i ng f a c t s to the cont rary , so tha t the col lec t ion of the paper cannot be regarded as a gra tu i tous favor . Smed.es v . Bank of TJtica 20 Johns 372, and 3 Cowan, 662; Mc-Kinster v . Bank of Utica, ^ Wend. 46; aff i rmed in Bank of Utica v. McKinster, 11 Wend. 4J3« The con t rac t , then, becomes one to perform ce r ta in dut ies necessary f o r the co l lec t ion of the paper and the protect ion of the holder . The bank i s not merely appointed an a t torney, authorized to se lec t other agents to c o l l e c t the paper. I t s under-taking i s to do the thing, and not merely to procure i t

. tc be done. In such Case, the bank i s held to agree to answer fo r any de fau l t in the performance of i t s cont rac t ; and, whether the paper i s to be col lected in the place where the bank i s s i tua ted , or a t a dis tance, the contract i s to use the proper means tc c o l l e c t the paper , and the bank, by enploying sub-agents to perform a pa r t of what i t has contracted to do, becomes responsible to i t s customer. This general p r i n c i p l e appl ies to a l l who cont rac t to pe r -form a serv ice . I t i s i l l u s t r a t e d by the decis ion of the Court of King's Bench, in E l l i s v . Turner, S T.E. 531, where the owners of a vessel ca r r i ed goods to be delivered

a t a ce r t a in p lace , but the vessel passed i t by without de l iver ing the goods, and the vessel was stink and the goods were l o s t . In a s u i t against the owners fo r the

value of the goods, based on the contrac t , i t was contended f o r the defendants that they were not l i a b l e f o r the mis-conduct of the master of the vesse l in car ry ing the goods beyond the p l ace . But the p l a i n t i f f had judgment, Lord Kenyon saying tha t the defendants were answerable on t h e i r cont rac t , although the misconduct was tha t of t he i r servant , and adding: 'The defendants a re responsible f o r the ac ts of t h e i r servant in those things tha t respect h i s duty under them, though they are not answerable fo r h i s misconduct in those th ings t h a t do not respect h i s duty to them.'

The d i s t i n c t i o n between the l i a b i l i t y of one who con-t r a c t s to do a th ing and t h a t of one who merely receives a delegation of author i ty to act fo r another i s a fvtnda-mental one, appl icable to the present case. I f the agency i s an undertaking to do the business , the o r i g i n a l p r in -c ipa l may look to the immediate contractor with himself , and i s not obliged to look to i n f e r i o r or d i s t a n t under-contractora or sub-agents, when defaul t s occur in ju r ious to h i s i n t e r e s t . "

When the Supreme Court says: "The bank i s not merely appointed an

a t torney , authorized to se lec t other agents to co l l ec t the paper, i t s

undertaking i s to do the thing and not merely to procure i t to be done.


-S- X-4199

In such ca.se, the bank i s held to agree to answer fo r any defaul t in the

performance of i t s contract ; and whether the paper i s to be col lec ted in

the place where the bank i s s i tua ted , or a t a distance, the contract i s

to use the proper means to col lec t the paper, and the bank, by employing

sub-agents to perform a part of what i t has contracted to do, becomes

responsible to i t s customer,n i t would seem clear that the conclusion

was that those employed by the i n i t i a l bank were not the SUD-agents of

the depositor, but agents of the depositary. Undoubtedly, i f the subse-

quent t ransferee , or col lect ing bank, could be said to be the agent of

the owner in these circumstances, i t mast necessar i ly a r i se from the au-

tho r i t y , express or irtplied, from the owner to the i n i t i a l Dank to make

such employment. As i s stated a t other places in the opinion quoted from,

the owner of a check, when depositing i t for co l l ec t ion , does not know the

channels through which the bank may send i t and ce r ta in ly there i s no

di rect legal t i e between him and anyone else to whom i t may be t ransmit ted.

The contract i s between the f i r s t bank and the one to whom i t i s sent fo r

col lec t ion and for the violat ion of which, through negligence or other-

wise , the t ransferee i s l i ab le to the t rans fe r ror . In those cases where

i t i s held that the owner of the check may pursue d i rec t ly the co l lec t ing

bank, i t i s upon the theory of implied authority in the i n i t i a l bank to

make the employment fo r the benef i t of the owner and as to which the col-

l ec to r i s held to assen t . Under th i s rule the i n i t i a l bank i s only ac-

countable for negligence in se lect ing a responsible and f a i t h f u l agent

fo r the owner and cannot be held l i a b l e for the subsequent f a u l t s of the

co l lec t ing agent in which i t had no par t or reasonable ground co an t ic ipa te

would, be committed. In other words, there i s apparent inconsistency in


-3- x - 4 i ^ 7 8 9

tne idea that ooth the i n i t i a l and col lect ing oanks, or e i ther of them,

at the cncice of the owner, can be held l i ab le in these circu&stances.

None of the elements necessary to a so l i ta ry obligation ex i s t s . The matter,

therefore, mist be governed by the e f f e c t of the contract and when i t i s

determined, as the Federal Courts have decided, that the i n i t i a l bank

undertakes, in the absence of express or implied understanding otherwise,

to co l l ec t the check and to be, i t s e l f , responsible tc the owner fo r the

f a u l t of i t s own agents, there a r i s e s no re la t ion between the owner and

the col lec t ing bank out of which a- r igh t of action f o r f a i l u re to perform

can be maintained.

Our conclusion i s that the ru l ing of the lower court upon the special

defense i s sustained by the law applicable there to .

In i t s brief appellant urges upon us the contention that the El Paso

Bank having accepted the check of the Wilcox Bank upon the Phoenix Bank,

instead of money, and the original check having thereby been paid, the

defendant became l i a b l e to i t as a debtor for funds Had and received.

However, t h i s suit r e s t s ent i re ly upon a demand for damages for v io la t ion

of a contract , and a ca re fu l reading of the p e t i t i o n wi l l not d isc lose

the s l igh tes t suggestion of a r ight based upon assumpsit. Of course, the

two causes of action are ent i rely d i s t inc t , and we are not permitted to

t r e a t the pe t i t i on as one in assumpsit even though a r ight of action might

ex is t upon that score, as to which we express no opinion.

For the reasons assigned, the judgment of the lower court i s

AFFIRMED.

(ORIGINAL FILED-N0VEM8EF, 25, 1924.)




December ) , 1924. X-42CC

SUBJECT: Revised Principles Governing Research, S t a t i s t i c a l snd Publication Act iv i t i e s .

Dear S i r :

The Federal Reserve Board has adopted the enclosed revised pr inciples governing re-search, s t a t i s t i c a l and publication a c t i v i t i e s of the Federal reserve banks and the Federal Reserve Board. These p r inc ip les supersede those trans-mitted with the Board's l e t t e r of October j l , 1924 (X-4161) and become e f fec t ive January 1,192$.

Very t ru ly yours,


(Enclosure)

TO ALL F. R, AGENTS


791

X-4230-a

PRINCIPLES GOVERNING RESEARCH, STATISTICAL AND PUBLICATION ACTIVITIES 0? THE FEDERAL RESERVE BAN3S AND THE FEDERAL

EFSEIiVE BOARD,

Scope and Purpose* - The purpose of the work of the research and statistical divisions of the Federal reserve banks and the Board is to collect and digest information bearing on the problems with which the Federal Reserve System is concerned, either as a matter of current operation or as the basis of Federal reserve policies.

All such Work is to be under the general supervision of the Federal Re-serve Board acting through its Division of Research and Statistics.

While research studies and scientific investigations may be undertaken on the initiative of the Federal reserve banks or of the Federal Reserve Board, the Federal reserve banks, ^before any expense is incurred for their prose-cution, are to secure the approval of the Federal Reserve Board. It is not in-tended, however, that approval be awaited before studies of small scope are undertaken which involve no considerable expense. In conducting such studies, the Director of the Board's Division of Research and Statistics may make as-signments to one or more of the Federal reserve banks of such portions as may seem desirable.

Publications. - Beginning with January, 1^25, the monthly publications of the Federal reserve banks are not to exceed eight pages, as a standard, but during 1925* which may be considered a year of readjustment, the number of pages is not to exceed twelve.

Free distribution Of such publications as a matter of course shall be made only to member banks, to other Federal reserve banks, to the Federal Re-serve Board, and to firms reporting, statistical information, nonmember par list banks, and to such others as may be determined through the Board1 s Di-vision of Research and Statistics in contact with a committee of the agents to be entitled to it. The Federal reserve banks by April 1, 1925, are to ar-range to make a. charge sufficient to cover costs for copies delivered in * bulk for distribution. The question of imposing a charge for single copies shall be deferred for further consideration.

The monthly reyiews, published by the Federal Reserve Agents, are to be under the general editorial supervision of the Director of Research and Statistics of the Federal Reserve Board, who is responsible to the Board for the proper conduct of the research, statistical, and publication activities undertaken by the Board and authorized for the several banks.



WASHINGTON


X-%202

December 10, I92U

SUBJECT: Holidays, Christmas and New Year's Day.

Dear S i r :

In accordance with the Board1s l e t t e r X-4128 of

August 1, 1924, there w i l l be no Gold Settlement Mind

or Federal Reserve Note Clearing on Thursday, December

25, I92U, and Thursday, January 1, 1925, on account of

Christmas and New Year's Day, resr>ecti*Sly, and the

Board's books w i l l be closed.

Please advise Branches.


J . C. Noell, Assis tant Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS*


X-4303

EE COED OF THE CONFEEETTCE OF COUNSEL OF FFDEBAL EESEBVE BAMS

HELD AT w^tthTOTON.D.C. ,ON DECEMBER 5 and 6,1934.

The Confarsncs of Counsel 6f a l l Fadî'al r s s s rvs "banks con-vened on ths morning of December 5,1924, a t 10 o1clock in the Board Boom of the Federal Rsaorvs Board, Treasury Department, Washington, D.C. Those present wars:

From the Federal Eeserve Bank of Boston r Mr. Arthur H.Weed From ths Federal Bassrve Bank of New York - Mr- L. Eandolph Mason From the Fedaral Easervo Bank of Phi ladelphia- Mr. Parker S. Williams From the Federal Eeserve Bank of Cleveland - Mr. S t e r l i ng B. Newell From the Foderal Eeserve Bank of Eichnond - Mr. M. G. Wallace From the Federal Reserve Bank of Atlanta - Mr. B. S. Parker From the Federal Eeserve Bank of Chicago - Mr. Charles L. Pave 11 From the Federal Eeserve Bank of St.Louis - Mr. James G.McConkey From the Federal Eeserve Bank of Minneapolis - Mr. A. Ueland From the Federal Eesorve Bank of Kansas City - Mr. H. G. Leedy From the Federal Easerve Bank of Dallas - Mr. Paschal Dreibelbis a r -

r ived a f t e r the lunch hour on December 5 and Mr. E. B. S t roud , J r . a r r i v e d a f t e r ths lunch hour on December 6.

From the Federal Eeserve Bank of San Francisco-Mr. Albert C. Agnew From the Federal Hasarvo Board -Mr. Walter Wyatt, Mr. Edgar

1 v . Fraeman, Mr. George B. Vest and Mr. B. M. w i n g f i e l d .

In addi t ion to the Counsel for the Federal reaorve banks and the Federal Eeserve Board, above l i s t e d , Honorable Newton D. Baker, Special Counsel to the Federal Eeserve Bank of Atlanta in the case of Pascagoula National Bank v. Federal Eeserve Bank of Atlanta e t a l . Mr. K. K. Carr ick, Secretary to the Federal Beserve Bank of Boston, Mr. George L. Harrison, Deputy Governor of the Federal Eeserve Bank of New York and Secre tary to the Governors1 Conference, Mr. H. F. S t r a t e r , Assis tant Cashier of the Federal Eeserve Bank of Cleveland and Chairman of the Standing Committee on Col lec t ions , were present upon spec ia l i nv i t a t i on .

Mr. Hamlin, Member of the Federal Eeserve Board, made a short address of welcome to the Conference of Counsel a t i t s opening on the morning of December 5. Mr. Wyatt was then e lec ted Chairman of the Conference and he appointed Mr. Vest as Secre tary ,


794

Page 2.

The Conference then proceeded to the consideration of the topics l i s t ed on the program which had been prepared and sent out in advance of the meeting by Counsel to the Federal Reserve Board, All matters on the program were discussed informally bat formal action was taken in only a few instances. With regard to the topics which had been re fe r red to the Conference of Counsel by the Governors' Conference, however, formal action was taken in each case.

The f i r s t question refer red to the Conference by the Governors' Conference was

"Whether or not a Federal reserve bank in forwarding checks or non-cash collect ion items to a bank fo r co l lec t ion , and in accepting there for a r e -mittance consisting of a bank dra f t drawn by the re-mitt ing bank upon another bank, has the r igh t to ac-cept s t i l l another bank d r a f t in remittance fo r the f i r s t bank d r a f t . "

In answer to th i s question two resolut ions were proposed and adopted. The f i r s t was submitted by Mr. Agnew as follows:

"RESOLVED th a t i t i s the opinion of t h i s conference that the Federal Reserve banks are uot pro-tected l ega l ly "under the terms of the Board's regula-tions or the uniform c i r cu l a r s in accepting an exchange d ra f t or d r a f t s in purported settlement of a f i r s t ex-change d r a f t given for t r a n s i t or non-cash items".

This resolution was adopted by the Conference without dissent ing vote. The second resolut ion in answer to t h i s question was one of fe red by Mr. Weed. This resolut ion was as follows:

"WHEREAS, Mr.Harrison, Secretary of the Governors' Conference,has s tated that in h is opinion the Governors' Conference would welcome an expression of opinion from this Conference as to the advisabi l i ty of amending Regulation J or taking other steps in such manner as to protec t Federal reserve banks from l i a -b i l i t y in accepting another bank d ra f t in remittance for the f i r s t bank d r a f t ;

"BE IT RESOLVED, that i t i s the opinion of t h i s conference that Federal reserve banks should not seek to be protected against l i a b i l i t y which might re -su l t from the acceptance of a second or subsequent bank draf t . 1 1


V 9 5

Page 3.

This resolution was ad op ted-"by the Conference with one d issent ing vote -Judge Ueland voting "no."

The second question submitted "by the Governors' Conference to the Conference of Counsel was as follows:

"Whether or not i t would be advisable as a matter of law to have the Federal reserve banks issue a uniform c i rcu la r containing a form of contract between banks and the i r deposi tors , requesting member and clearing-member banks to amend their contracts (contained on deposit s l ips and signature cards) in accordance with the form proposed in the c i r c u l a r . "

In reply to th i s questionâ resolut ion was submitted to the con-ference by Mr.Powell with an amendment by Mr. Baker, in the ^following form:

"That i t be the sense of t h i s conference that i t would not be advisable to have the Federal reserve banks issue a uniform c i rcular containing a form of contract between banks and thei r depositors requesting member and non-member clearing banks t* amend the i r contracts in accordance with the form proposed in the c i r c u l a r .

BE IT FURTHER RESOLVED that th i s conference ex-presses i t s sympathy with any publ ic i ty through the Federal Reserve Board or the Federal reserve banks which wi l l inform member banks, non-member clearing banks and the public as to the legal e f fec t of Regulation J . "

This resolution was unanimously adopted by the Conference.

The th i rd topic suggested by the Governors1 Conference was as follows:

"Whether or not i t would be advisable fo r the Federal reserve banks to amend t h e i r check co l lec t ion c i rcu lars so as to provide tha t the act of submitting checks to Federal reserve banks fo r col lec t ion wi l l be construed, as a warranty that the depositor has lodged with the depositing bank the required, agreements."

Af ter discussion of this question, a resolution was offered to the Con-ference by Mr. Newell as fol lows:


796

Page 4.

*1* i s the sense of thif conference'that i t i s not advisableifor the Federal rsterve banks to amend their collection circulars so as tQ provide that the act of submitting checks to Federal reserve banks for collection will be construed as a warranty that the depositor has lodged with the depositing brinks appropriate agreements. *

This resolution was thereupon unanimously adopted.

2Sae fourth and f i f th questions submitted tp the Conference of Counsel by the Governors'* Conference were thai considered together. These questions were as follows;

"Necessity of Federal reserve banks' guaranteeing prior endorsements on non-cash collection items."

".Advisability of Federal reserve banks using words in their endorsement# on both checks and non-cash items to limit their l iabi l i ty when guaranteeing prior endorsements. *

After a short discussion these topics were referred to a comnittee consist-ing of Messrs. Wallace, Agnew and Mason, with the understanding that the committee would confer with Mr. St rater and Mr. Harrison. The comnittee met and drafted a report and submitted the same to the Conference. The report was as follows:

"The undersigned members of the committee appointed te consider and report upon Questions 4 and 5 submitted by the Gover-nors' Conference, wish to report as follows:

"In many states the courts have held that a forwarding bank endorsing a non-cash item 'for collection1 or in similar terms thereby warrants to i ts correspondent the genuineness of prior endorsements. In other states the courts have held that in such cases the forwarding bank does not warrant the genuineness ef prior endorsements unless express words to that effect are added to the endorsement. There is alas conflict in the authorities as to whether or not the ordinary endorsement 'Pay the order of any bank or banket* i s to be considered as equivalent to a qualified endorsement or a general endorsement. *

"If the Federal reserve banks receive non-cash item# with-out requiring a warranty of prior endorsements stated in express , terms, and transmit or c'ollect such items either with or without a warranty of prior endorsements, there i s danger that the payer or some person mA sequent to the Federal reserve bank may be able


797

Page 5

to recover from the Federal reserve bank i f any endorsement pr ior to that of such "bank "be found, a f t e r payment to to a forgery, and the Federal reserve tank may Ids tillable to recover from the tank which transmitted the non-cash item to the Federal reserve tank. Thus the loss wi l l f a l l on the Fedoral reserve bank, t y reason of the fac t that the legal e f f e c t of an endorsement containing no express words of warranty may te diffar-snt in the State in which the Federal roserva tank col lected the non-cash i t am and the Sta te in which i t would te compelled to asser t i t s remedy against the tank which had transmitted the item to i t , and t y reason of other possible complications a r i s i ng under con f l i c t of laws.

"We te l i eve the Federal reserve tanks should determine whether or not they desire to warrant the genuineness of pr ior endorsements upon non-cash items handled ty them. The determin-a t ion of th is question is a matter of tanking pol icy and must te decided t y considering what her or not the business put l i e can t e s t te. served t y a rule under which the Federal reserve tank assumes r e s p o n s i t i l i t y to the par ty from which i t co l l ec t s or to which i t remits a non-cash item and requires indemnity from the party from which i t receives non-cash items. Your commit-tee , ho-vev^r, believes tha t the policy of requiring a guaranty and guaranteeing prior endorsements i s economically sound, and should te adopted as a uniform pract ice throughout the Federal fiaserve System.

"If the Federal reserve tanks desire to assume the r e -s p o n s i t i l i t y for the genuineness of pr ior endorsements, they should incorporate an express guaranty to that e f f e c t in the i r endorsement stamp and should require the tanks from which such items are received to make a a imi l a r guaranty for the protect ion of the Federal reserve tanks.

"If the Federal reserve tanks do not desire to assume r e s p o n s i t i l i t y for the genuineness of pr ior endorssments .they should protect themselves t y adding to the i r co l lec t ion en-dorsement express words negativing the i r r e s p o n s i t i l i t y for prior endorsements.

"We t e l i eve that Questions 4 and 5 are so c lose ly associ -ated that i t i s eas ier to answer both of them a t the same time and, there fore , in the atove report we have endeavored to answer both questions a t once.

(Signed) M. G. Wallace L. E. Mason A. C. Agnew

Committee"


791 X-4303 Page 6,

This report of the committee was accepted "by the Conference, and a f t e r discussion the report was on motion unaniimusly adopted as the report of the Conference.

On the morning of December 6, Mr« Awa.lt representing the Treasury Department appeared "before the Conference to discuss the matter of charg-ing tack War Savings Stanps found to be counterfe i t a f t e r they had been credited by the Treasury Department to the Federal Bes3rve banks from which they had been received and by which thay had been cashed as f i s c a l agents of the Government. The questions considered were whether or not the Treasury Department had a r igh t to charge back such counter fe i t War Savings Stamps against the Federal reserve banks from which they were r e -ceived, and whether and to what extent the Federal reserve banks should a s s i s t the Treasury Department in recovering the losses represented by cashing such counter fe i t War Savings Stamps. These questions were discussed in some d e t a i l wi th Mr. Await and a f t e r he had r e t i r ed , the following r e s -olut ion was submitted to the Conference by Mr. Newell:

"RESOLVED That i t i s the opinion of th i s conference : "1. That the several Federal reserve banks are under no

legal obl igat ion to reimburse the Treasurer wf the United States for the amount of counter fe i t War Savings Stamps now or he r ea f t e r paid by them as f i s c a l agents of the United States unless said Federal reserve banks have fa i l ed to use due care a t the time said stamps were paid by them.

"2. That the several Federal resarve banks should not comply with the request of the Treasurer of the United States to c red i t him with the amount of such stamps now d i s -covered to be coun te r f e i t .

"3. That the several Federal reserve banks which have now or nay he rea f t e r pay such counter fe i t stamps should co-operate with the Treasurer of the United States in recover-ing from the persons or banks by whom such stamps were pre-sented to said banks for payment of the amounts thereof , but that such cooperation should not extend to charging to the account of any. member or nonmember clear ing bank with any Federal reserve bank the amount of any such stamp and no sui t should be i n s t i t u t ed by any Federal reserve bank (as Fiscal Agent of the United States) to recover back the amount paid on any such stamps.

"4. That as to the amounts for which the several Federal reserve banks have reimbursed postmasters for pay-ments made by them on such counter fe i t stamps the several Federal reserve banks, as f i s c a l agents of the United States


7 9 9

Page 7

should make counter-entr ies in the i r accounts with the Treasurer of the United Sta tes ,as requested by him."

This resolution was unanimously adopted.

Topic 1 of the f i f t h main division of the program was d i s -cussed informally in some de ta i l , and i t was decided to make a formal

, recommendation to the Standing' Committee on Collections with regard to ' t h i s matter. This topic reads as follows:

"Incorporation into non-cash co l lec t ion c i rcu la r s of warranty by member and non-member c lear ing banks sending items to Federal reserve banks for deposit or co l lec t ion that by such action they authorize the Federal reserve banks to handle checks subject to the terms and conditions of Regu-lation J ; warrant that they have author i ty to give Federal reserve banks such authority;and they agree . to indemnify the Federal reserve banks fo r any loss r e su l t i ng from the f a i l u r e of the sending banks to have such a u t h o r i t y . "

Mr. Lfesan made the following motion:

"MOVED that we recommend that the Standing Committee on Collections include in i t s proposed form of non-cash col lect ion c i rcu lar a provision that es.ch menber and non-member c lear ing bank which sends non-cash items to any Federal reserve bank for col lect ion shall by such act ion be deemed to have warranted to the Federal reserve bank that i t has authority to empower the reserve bank to handle the items in the manner herein provided and to have agreed to indemnify any Federal reserve bank for any loss r e su l t ing from the f a i l u r e of such sending bank to have such au thor i ty . "

This motion was duly seconded and unanimously adopted by the Conference.

Although a l l the matters on the program were considered and discussed by the Conference, formal action was taken only in the in-stances above noted.

The Conference adjourned on December 6th a t 4:30 P.M.

(Signed) George B. Vest Secretary#


800 FEDERAL RESERVE BOARD

WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d

X-4204 December 10, 1924

SUBJECT: Expense Main Line, Leased. Wire System, November, 1924

Dear Sir:

Enclosed, herewith you will find, two mimeograph statements, X-4204-a and X4204-b, covering in detail operations of the main line, Leased Wire System, during the month of November, 1924.

Please credit the amount payable by your bank in the general account, Treasurer, U. S«, on your books, and issue c/D Fonn 1, National Banks, for account of "Salaries and Expenses, Federal Reserve Board, Special Fund," Leased Wire System, sending duplicate o/D to Fed-eral Reserve Board.

Yours very truly,

Fiscal Agent.

(Enclosure)

TO GOVERNORS OF ALL BANKS CHICAGO,


x-4204-a

REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF NOVEMBER,

1924.

Froqa Fed. Res.

Bank Business

Percent of Total Bank Business (*)

Treasury Dept.

Business

War Finance Corp. Business Total

Boston New York Phi ladelphia Cleveland Richmond Atlanta Chicago St . Louis Minneapolis Kansas City Dallas San Francisco

Total

Board

Total

22,369 150,849 32,32S 59,150 40,929 52,690 84,122 60,765 38,316 59,509 53,420 94,866

749,613

254,499

1,004,112

2.98 3,327 - 25,696 20.12 5,669 32 156,550

4.31 4,869 — 37,197 7.39 4,537 - 63,687 5,46 3,004 - 43,933 7«04 3,397 - 56,087

11.22 5,723 89,845 8.11 4,733 - 65,498 5.11 1,955 - 40,271 7-98 4,284 64,093 7.13 2,556 - 55,976

12.65 9,993 - 104,859

100.00 54,047 32 803,692

41,169 340 296,008

95,216 372 1,099,700

Percent of Total 91*31$

Bank Business 1,004,112 words or 91*33$ Treasury Dept. 95.216 11 " 8.67$

Total 1,099,328 "100.00$

8.66$ .03$

FEDERAL RESERVE BOARD Washington, D. C.

December 10, 1924

(*) These percentages used in ca lcu la t ing the pro r a t a share of leased wire expenses as shown on the accompanying statement (X-4204-b)


REPORT OF EXPENSE X-4204-b MAIN LIFE

FEDERAL RESERVE LEASED WIRE SYSTEM, NOVEMBER, 1924


Operators ' Operators1 Wire Total Total Reserve Name of Bank Sa la r i e s Overtime Rental Expenses Expenses . Ctedits Board

Boston $ 250.00 $ - $ 250.00 $ 621.66 $ 250.00 $ 371.66 New York 920,82 7.00 927.82 4,197.22 927.82 3,269.40 Phi ladelphia 200,00 - 200.00 899.10 200.00 699.IO Cleveland 272,00 - 272,00 1,645.93 272.00 1,373-93 Richmond 165-00 - I65.OO (#)1,343.68 I65.OO 1,178.68 Atlanta 255.00 - 255,00 1,468.61 255.OO 1,213.61 Chicago (*>3,815,44 33.00 3,848.44 2,340.59 3,848.44 (*) i ,507.85

J5t . Louis 226,00 - — 226«00 1,691.82 226.00 1,465.82 Minneapolis 135,59 - 185*59 1,065.99 ' 185-59 880.40 Kansas City 265.64 - 265.64 1,664.70 265.64 1,399.06 Dallas 251,00 - 251.00 1,487.38 251.OO 1,236.38 San Francisco 380.00 - 38Ov00 2,639.91 38O.OO 2,258.91 Fed, Res, Board $15,343. Ib..$i5,343.16

TOTAL $7,186,49 $40.00 $15,343.16 $22,569.65 (#)$21,065.59 $7,226.49 $15,346,95 (a)1,708.73 (b) l ,507 .85 $20,860.92 $13,839.10

(#) Includes $204,67 fo r branch l ine business transmitted over main l i n e c i r c u i t . (*) Includes s a l a r i e s of Washington operators . (&) Credit (a) Received $8.73 from War Finance Corp. and $1,700.00 from the

Treasury Dept. covering business fo r the month of November, 1924. (b) Amount reimbursable to Chicago.


FEDERAL RESERVE BOARD 8 0 3

WASHINGTON


X - 4 3 0 6

December 11, 1934.

SUBJECT: Adjustments in Capital Stock Holdings of Member Banks.

Bear S i r :

The Federal Beserve Board has approved the recommendation of the recent conference of Federal Reserve Agents that adjustments of cap i t a l stock hold-ings of iremher "banks "be rrade ser.i-annuaily instead of quar ter ly , except in cases where a considerable amount i s involved. Voluntary applicat ions to increase or reduce stock w i l l be handled as a t present, but the Fedsral reserve ba.nks ord inar i ly wi l l only request ad-justments of cap i ta l stock twice instead of four times a year .

Very t ru ly yours,

J . 0. -Noall, Assistant Secretary*




WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o x - 4 2 0 7 t h e f e d e r a l r e s e r v e b o a r d

Deceriber 12, I92U

SUBJECT: Necessity of new Clayton Act Application where 1/1 rector has resigned from and again i s elected to serve the same in s t i t u t i on .

Dear S i r :

The question has recently been ra ised whether an of-f i c e r or d i rec tor of a bank who has received permission from the Federal Reserve Board under the Kern Amendment to the Clay-ton Act to serve such bank and l a t e r resigns h i s pos i t ion as o f f i c e r or d i rec tor , mast apply again for the permission Of the Board i f he subsequently desires to serve the same i n s t i t u t i o n . This i s a question upon which the Board'has never heretofore been called to ru le .

I t i s believed thkt the mOst reasonable i n t e rp re t a -t ion of the law is that a resignation from a bank which a di rector has been permitted to serve by permission of the Board i s ipso facto a termination of the permission in so f a r as service upon that pa r t i cu l a r bank i s concerned. Such a resignation i s in rea l -i t y an abandonment by the di rector of h i s r ight to serve the par-t icular bank. I t i s a voluntary relinquishment of a p r i v i l ege granted to him,

There are also ce r t a in p rac t i ca l considerations which would make the requirement for a new permit in such cases des i r -able. Conditions may change materially between the date of the permit and the time when the director wishes to renew h i s con-nection with the uank from which he has resigned. The Board, moreover, would rare ly receive information as to changes of t h i s character, i f a new appl icat ion were not required.

You are advised, therefore, that in cases of t h i s kind the Board wi l l require tha t the director in question make a new application to the Board fo r permission to serve the bank or banks from which he has resigned, together with the other banks which he i s serving a t the time.

By order of the Federal Reserve Board.

Very t ru ly yours,

Walter L. Eddy, Secretary



8 0 5

X-4208 TREASURY DEPARTMENT

• f f i c e of the Secretary WASHINGTON

December 0, 1924. The Governor

Federal Reserve Board. Si r :

You are hereby advised tha t the Department has r e f e r r ed to the Disbursing Clerk, Treasury Department, f o r payment, the account of tha Bureau of Engraving and Pr in t ing f o r preparing Federal reserve notes during the period November 1, 1924, to November 29, 1924, amounting to $36,960.00, as f o l l o w s , -

Federal Reserve Notes, 1914 i i | 1 0 $20 Total

New York 245,000 — — 245,000 Cleveland . . . . . . . . . . . . . . . . *72,000 *— —— 72,000 Chicago 218*000 — — 218,000 Kansas City . . . . 129,000 — — 129,000 Dallas 100,000 50,000 50,000 200,000 San Francisco fo.OOO — 96,000

860,000 50,000 50,000 960,000

960,000 sheets At $38.50 p j r M . , $36,960.00

The charges against the several Federal Reserve Banks are as f o l l o w s , -Compen- Plate

Sheets sa t ion Pr in t ing Materials #&tal

New York 245,000 $4,348.75 $2,004,10 $3,079.65 $ 9,432.50 Cleveland , 72,000 1,2)8.00 588.96 905.04 2,772.00 Chicago 218,000 3,869.50 1,783.24 2,7^0 .26 8,393-00 Kansas City 129,000 2,289.75 1,055.22 1,621.53 4,966.50 Dallas . . . 200,000 3,550.00 1,636.00 2,514.00 7,700.00 San Francisco 96.000 1,704.00 785.28 1,206.72 1,696.00

960,000 $17,040.00 $7,852.80 $12,067.20 $36,960.00

The Bureau appropriat ions wi l l be reimbursed in the above amount from the i nde f in i t e appropriat ion "Preparation and Issue of Federal Reserve Notes, Re-imbursable" , and i t i s requested that your board cacuse such i n d e f i n i t e appro-p r i a t i on to be reimbursed in l ike amount.

Respect ful ly ,

(Signed) S. R. Jacobs, Deputy Commissioner.



WASHINGTON


X-4209

December 13, I92U

( SUBJECT: Ef fec t of Consolidation of S t i t e Banks on Clayton Act Permits.

Dear S i r :

The opinion of the Federal Reserve Board has been requested as to whether a person who has received the permission of the Board to serve at the same time as d i r ec to r of ce r t a in banks, one of which i s a State in-s t i t u t i o n which subsequently consolidated with another Sta te bank under State law, w i l l be required to make a new appl ica t ion to the Board a f t e r such consol idat ion in order to continue to serve the consolidated i n s t i t u -t ion together with the other banks which he has been serving.

With reference to the consolidat ion of nat ional banks the Board ruled on November 6, 1923, (X-388O) as fo l lows:

"The Board accordingly ru les tha t where a permit i s granted to a person to serve as d i r ec to r of a na t iona l bank and some other bank, and the na t iona l bank subsequently con-so l ida tes with another nat ional bank, under the Act of No-vember 7. 1918, the permit w i l l continue to be e f f e c t i v e and w i l l authorize the d i r ec to r in question to serve the consolidated nat ional bank and the other bank i r r e spec t ive of which na t iona l bank char ter was selected as the bas i s of the consol ida t ion ."

In reaching the conclusion j u s t s t a t ed , the Board sa id :

"While a permit issued under the Kern Amendment i s pr imar i ly a personal l icense to the applying d i r e c t o r , giving him the r igh t to serve in ce r t a in capac i t i e s , i t a lso

.. confers upon the bank involved a d e f i n i t e , though inc iden ta l , i n t e r e s t in the d i r e c t o r ' s services and the Board be l ieves tha t t h i s i n t e r e s t of the bank should be construed as in-cluded in the r i g h t s , f ranch ises or i n t e r e s t s of a consol idat-ing na t iona l bank within the meaning of the Act of November 7, 1918."

Under the reasoning of t h i s ru l ing the Board holds t ha t in any case where two or more banks consolidate under a s t a t u t e , e i t h e r Federal or State , which ves t s in the consolidated i n s t i t u t i o n a l l the r i g h t s , f ranchises or i n t e r e s t s of the consolidat ing banks, the consolidated in-


Page 2 X-4209

s t i t u t i o n would, as a matter of law, have the r ight to the service of any di rector of any of the consolidating banks; in other words that a director who i s serving a bank by the permission of the Federal Re-serve Board may, a f t e r h is bank consolidates with another, continue to serve the consolidated i n s t i t u t i o n if the s t a tu te under which the merger was e f fec ted gives to th i s i n s t i t u t i o n a l l the r i gh t s , f ranchises and in te res t s of the consti tuent banks. The Board ru les , therefore , that in such cases i t wi l l not require the d i rec tor e f fec ted to cake appl icat ion to the Board for a new permit, but the d i rec tor wi l l be per-mitted, without any formali ty, to continue to serve the consolidated in-s t i t u t i o n together with the other banks which he was serving before the consolidation took place .

In every case of th i s kind, however, the Board wi l l request the Federal Reserve Agent to consider and report with recommendation whether or not the s i tua t ion exist ing as a r e su l t of the consolidation of the banks involved has so ef fec ted the question of competition be-tween the banks upon which the di rector i s serving as to make advisable the revocation of the permit formerly issued. In reporting on these matters the Federal Reserve Agent should consider especial ly the question of competition between the branches of the consolidated i n s t i t u t i o n , if any, and the other banks which the director i s serving.

Very t ru ly yours,





WASHINGTON


December 11, 1924. X-4210

Subject: Reconcilement of Provisions of Telegraphic Transfer Circulars

Dear Sir :

The Federal Reserve Board approves the action of the recent Governors' Conference in voting that the matter of reconciling the provisions of the telegraphic t ransfer c i r -culars of the Federal reserve banks with the regulations em-bodied in the Board's l e t t e r of June 21, 1924 (X-4099)> referred to the Leased Wire Committee, in collaboration with the Standing Committee on Collections, with the request tha t the Committees make a study of the question and such recommen-dations to the Board as may be necessary in order to reconci le the pract ice of some reserve banks with exis t ing regulat ions governing the use of Federal reserve leased wires, or else make appropriate amendments to the Board's regulat ions .

Very t ru ly yours,




FEDERAL RESERVE BOARD 8 0 9 WASHINGTON


X-4211

December 13, 1924

SUBJECT: Expenditures of Federal Reserve Bpnk Funds for Welfare and Educational Work.

Dear S i r :

The resolut ion adopted by the recent Governors' Conference following the conference discussion of the sub-jec t of expenditures of Federal reserve bank funds for wel-fa re and educational work among the employees of the Fed-eral reserve banks has bsen considered by the Federal Re-serve Board, and the Board has concluded that "FEDERAL RESERVE BAMS HAVE THE RIGHT TO MAKE APPROPRIATIONS FROM THEIR FUNDS FOR THE PURPOSE OF WELFARE MD EDUCATIONAL WORK AMONG THE EMPLOYEES OF THEIR RESPECTIVE BANKS."

The Board i s of the opinion "THAT PAYMENTS BY FEDERAL RESERVE BANKS FOR THE PURPOSE OF WELFARE AND EDU-CATIONAL WORK AMONG THEIR EMPLOYEES MAY BE CONTINUED", and has ruled that "THE EXPENDITURES FOR WELFARE AND EDUCATION-AL WOR-' SHALL BE BUDGETED IN DETAIL AND BE MADE SUBJECT TO THE APPROVAL OF THE FEDERAL RESERVE BOARD".

A copy of the budget should accompany the request fo r the Board's approval of the appropriat ion.

Very t ru ly youre,


TO GOVERNORS OF ALL FEDERAL RESERVE BANKS


810 Federal Reserve

Board X-U212

O F F I C E C O R R E S P O N D E N C E December 8, 1924.

TO Governor Crissinger SUBJECT: Art ic le in the Commercial and Financial Chronicle for November 22, 1924. FROM Mr. Goldenweiser

Eight pages of the Chronicle for Novenfcer 22 were devoted to an

a r t i c l e en t i t l ed "Imperfect working of Federal Reserve System - over-sat-

urat ing c red i t and currency". In view of the wide c i r cu la t ion of the

Chronicle among persons in te res ted in f inanc ia l problems, i t i s worth while

to consider some of the po in ts in th is e d i t o r i a l .

Resolution of Bankers' Association.

The a r t i c l e begins with a quotation from the resolu t ion of the

American Bankers' Association las t October in Ciicago to the e f f ec t that the

Operations of the Federal reserve banks "may tend to accentuate the swings of

the f inanc ia l pendulum ra ther than to keep the swings from going too f a r in

e i ther d i r ec t ion , " and that i t should be ca re fu l ly considered whether i t

would not be"wise to l imi t the Federal reserve banks to t h e i r primary function

as banks of issue and rediscount ." The wr i te r believes tha t the Bankers1 Asso-

cia t ion resolut ion "has come not a moment too soon." He thinks that "in view

of the recent glut ted condition of the money markets of the country no one

can t r u t h f u l l y asser t that the Federal reserve banks have functioned proper-

ly"and that "the volume of the c i rcula t ing medium of the country i s being kept

at a level enormously above what i t should be. "


Page 2. a-4212

Causes of excessive ease in the money market.

The wri ter discusses the reasons usual ly assigned for the over -

abundance of funds, namely, the trade recession and the gold inflow, but i s

convinced tha t in addition to these causes the a c t i v i t i e s of the Federal r e -

serve banks have contributed to the excessive supply of c r e d i t . He i s of the

opinion tha t , while the irember banks have gone back to normal conditions a f t e r

the war, "the reserve banks have been unable or unwilling to get back and have

stopped a t the half way po in t . " On th is point the writer i s c lear ly mistaken,

since the t o t a l volume of member bank c red i t a t the present time i s about

$2,300,000,000 larger than a t the post-war peak in the autumn of 1920, while

to ta l earning assets of the reserve banks are about $2,300,000,000 less than

they were a t tha t time.

As proof of the statement that the reserve banks have increased the

amount of c r ed i t in the market the writer poin ts out that while what he c a l l s

"mercantile paper" (discounts) a t the reserve banks i s now only about

$23^,000,000, the reserve banks have bought during the year over $500,000,000

of Government secur i t i es and l a t e ly have purchased large volumes of acceptances.

In th i s statement the wri ter overlooks, f i r s t , that while the reserve banks

have purchased Government secur i t i e s to the extent of $500,000,000 there has

been an equivalent decline of discounts, and, secondly, that purchases of

acceptances have been la rge ly on the i n i t i a t i v e of acceptance dealers who

have offered thei r b i l l holdings to the reserve banks because the firmer con-

di t ions in the money market have caused the member banks to ca l l some of

their loans to these dea le r s . A comparison of conditions now and a year ago


8123 P A G E 3 - X - 4 2 1 2

and an examination of the gold inports during the period indicate that fo r

the year as a wiiole the increase of member tank credi t approximately corres-

ponds to the amount for which the gold imported from abroad furnished a bas i s .

Total loans and investments of a l l member banks increased by about

$2,000,000,000 between September 13, 19^3 an(^ October 10, 1924, and net gold

inports for the period were about $375,000,000, indicat ing that the gold inflow

?,lone, when aaded to the reserves of member banks, has been much more than suf-

f i c i e n t to serve as a bas is fo r the increased lending power of member banks.

Ea-rning asse t s of the reserve banks, on the other hand, are ne higher now than

they were a year ago.

Functions of the reserve banks.

The w r i t e r ' s views on the scope and functions of the Federal reserve

system are that "the reserve banks exis t only to provide surplus or excess

c redi t" and tha t "in a period of pronounced ease in the money market . . . not

a dollar of t he i r deposits ought to be put out in the shape of reserve notes . »

The question whether the reserve banks are to be merely emergency i n s t i t u t i o n s

operating a t times of seasonal or cycl ica l demand for excess credi t or whether

they shall be continuously in the market, i s a question on which there has been

much di f ference of opinion. The Federal Reserve Board however, has from the

beginning taken the posi t ion that i t i s important for the reserve banks a t a l l

times to remain in touch with the market and that fo r th is reason i t i s necessar

for these banks always to have in the i r possession discounts, acceptances, or

secur i t ies in order not to be cut off en t i r e ly from contact with the c red i t

s i tua t ion.


Pa-ge 4. X-4212

The wr i t e r ' s views on currency.

On the subject of Federal reserve notes the wri ter has strong convic-

tions baseo largely on a misunderstanding of the nature of the Federal reserve

note. He says that when money rates are down to 3 and 3 l / 2 per cent and there

i s no mercantile demand for reserve bank c r ed i t , th is i s conclusive evidence

that there should be no Federal reserve notes outstanding, and that gold rather

than notes should be in c i rcu la t ion . This view overlooks the f a c t that Federal

reserve notes are not issued by the reserve banks, except in response to a cur-

rency demand, and that i t makes no d i f fe rence in the ex is t ing credi t and money

market s i tua t ion whether the reserve banks issue Federal reserve notes or gold

in response to t h i s demand. I t i s true that by paying out gold the reserve

banks decrease their po t en t i a l lending power more than by issuing Federal r e -

serve notes, but in view of the fac t that t h i s potent ia l lending power i s now

fa r in excess of any probable demand for reserve bank c r e d i t , th is e f f e c t of

paying out gold i s of only academic i n t e r e s t .

The saturat ion point .

The w r i t e r says that the only way the reserve banks can acquire gold i s

ei ther by issuing Federal reserve notes br by accepting gold on deposit . From

t h i s he argues that i f the note issues and the deposit l i a b i l i t i e s of the re -

serve banks exceed the i r gold reserves, t h i s i s evidence t ha t the reserve

banks have put into use more c red i t than they have received from the p u b l i c .

This statement i s fundamentally correct . I t i s true tha t to the extent that the

deposits and notes exceed the reserves of the reserve banks there i s more bank

credi t in use, as a r e s u l t of the operation of the reserve banks, than there


Page 5 X-4212

would have been i f the deposits had been held by tha member banks and the geld

had been in c i r cu l a t i on . The conclusion, however, that t h i s excess, which

amounts to about $1,000,000,000 represents "saturat ion" ?f c r ed i t by the reserve

banks does not follow. While the excess measures the extent to which the ex-

is tence of the reserve b&nks has added to the volume of c red i t in existence, i t

i s not clear what i s meant by saturat ion. The f a c t i s that the larger volume

of currency in c i rcu la t ion a t the present time compared with l$ l4 , p r ior to

the establishment of the Federal Reserve System, i s due t# the higher level of

p r i c e s . The leve l of wholesale pr ices i s about $0 per cent above what i t was

in 1913 and. the volume of money in c i rcu la t ion i s about 40 per cent above i t s

level at that time. I t may be argued that i t i s because of the increase in I

currency that p r i ce s have increased, but whatever t ru th there may be in t h i s

argument i t s proper appl icat ion i s to %e war period and not to recent activ*>

i t i e s of the reserve banks. Pr ices increased during the war in the United

Sta tes and throughout the world, and in order to meet the requirements of busi -

ness at the ex is t ing pr ice level more currency i s required than was needed in

1914.

The complete adjustment between the demand for currency and the volume

of i t outstanding "under the present plan i s one of the d e f i n i t e gains r e su l t ing

from the establishment of the Federal Reserve System, and t h i s adjustment i s in

no way a f fec ted by the policy of thd reserve banks to pay out one or another

kind of currency, a point which the wri ter f a i l s to understand. He i s en t i r e ly

mistaken when he says that i f the gold coming from abroad had merely displaced


Page 6 X-U212

Federal reserve notes in c i r cu la t ion there v/ould lse-,no. such redundancy of

currency and no such plethora, of funds as now p reva i l s . " The f a c t i s that the

Federal reserve banks have paid out $700,00C,GGC of gold in to c i rcu la t ion in

the l a s t two years , an amount somewhat in excess of gold imports for the per iod,

and Federal reserve rote c i r cu l a t i on has declined by approximately the same

amount. The Federal reserve banks have paid out more gold in to c i rcu la t ion

since the middle of 1922 than they have received from abroad, so that the tot&l

cash reserves are now smaller than they were two years ago, but th i s policy has

had no e f f ec t on c red i t and currency condit ions, beyond merely changing the form

of money in c i r cu l a t ion .

Expenses of the reserve banks.

The author also discusses the necess i ty for the reserve banks to earn

the i r expenses, and expresses h i s conviction that th is was the one reason why

the managers of the system permit ted the issuance of a large excess of reserve

bank c r e d i t w h a t e v e r ingenious arguments they may have put f o r t h to explain

the i r act ions. In th i s connection he quotes B. M. Anderson tc the e f f e c t tha t

gratui tous services by the reserve banks should be discontinued, and Wil l is to

the e f f e c t that earning asse t s of about $1,000,000,000 a year wi l l be required

to meet the expenses of the reserve banks and t h a t , t h e r e f o r e , t h e banks should

enter the market more ac t ive ly . He does not argue with Wil l i s , who bel ieves

tha t the reserve banks should a t a l l times be a large f ac to r in thenarket, but

draws from Wil l i s 1 view the opinion that the f r e e services are a great menace

because they make i t necessary f o r the reserve banks to keep $1,000,000,000

of c redi t constant ly in use .


Page 7. X-4212 >

The discount r a t e .

The wr i te r quotes Anderson to the e f f e c t that the discount r a t e should

be regularly kept higher than the markst r a t e , "but goes f a r the r than' Anderson by

saying that the rediscount r a t e should never be less than $ or 6 per cent. This

i s in keeping with h i s general theory that the Federal reserve banks should

function only in emergencies. Reserve bank c r e d i t , according to h i s view, should

be used only when i t i s badly needed and when a difference of a few per cent

would hardly be noticed.

To the wr i te r "there i s something preposterous about the attempt to

t h rus t excess c r e d i t , the only c red i t a t the command of the Federal reserve

banks, upon the member banks when they have no need for I t * " He thinks tha t the

e f f e c t of th i s i s to force banks into speculation. He says that in view of the

fac t that the banks can borrow from the reserve banks a.t 3 and 3 1/2 per cent

and can buy good investments a t 4 and 5 per cent , their r e f r a i n i n g from doing

t h i s i s a sign that they have be t t e r vision than the reserve banks. The f a c t

that member banks have at a l l times lent or invested funds up to the l imit of

thei r available reserves and tha t they have now a volume of c r ed i t f a r in excess

of the 1920 peak i s not taken .into consideration in th is statement. He also sees

a danger in the f ac t that , the lower the discount r a t e the more the reserve banks

w i l l have to have invested in order to earn the i r expenses, and that t h i s v i -

cious c i r c l e would lead to progressive i n f l a t i o n .

The wr i t e r ' s remedies.

As a f i n a l conclusion from this discussion the wri ter proposes the re-

peal of the 1917 amendments which required that a l l the reserves of the member


Page 8 X-U212

banks bo kept with the reserve banks snd permittod the reserve banks to iusua

notes d i rec t ly against gold. If the w r i t e r ' s views on the s i tua t ion were correct

h i s remedies would not be adequate. With the present volume of reserves the re -

serve banks could t ransfer to the member banks that proportion of the reserves

held by these banks pr ior to 1917 and s t i l l have enough funds l e f t for any amount

of credi t expansion that may reasonably be ant ic ipated; Prohibi t ing the reserve

banks from issuing notes against gold would under the present circumstances

have no e f f e c t whatever, as i s indicated by the f ac t , already mentioned, that

the reserve banks have ac tua l ly paid out gold ra ther than notes to the .extent

of $700,000,000 without any e f f e c t on the c r e d i t s i tua t ion .

To sum up, the author, displeased with the fac t that the in te res t r a t e

i s what he considers abnormally low and believing that the reserve banks are a t

l e a s t in par t responsible, has based his arguments on a misunderstanding of our

system of currency issues and of the scope and l imi ts of the power possessed by

the Federal reserve banks. There may be too much bank cred i t in use, but the

wr i t e r o f fe rs no f r e sh evidence on this point and proposes no remedies that

would accomplish h is purpose.



WASHINGTON


X - 4 2 1 3

December l6 , 1924»

SUBJECT: Oaths of Off ice .

Dear S i r :

I am sending you herewith a supply of the various forms Of oaths of o f f i ce which i t wi l l be necessary for you to have executed by newly elected or appointed d i rec tors of your Bank and i t s branches and by those o f f i c e r s designated by the Federal Reserve Board f o r terms beginning January 1, 192$.






WASHINGTON


X-4214

December 17, 1924

SUBJECT: Stocks of Unissued. F. R. Notes

Dear S i r :

You are requested to prepare and submit to the Federal Reserve Board, before January 10, 1925> a*1

estimate of the amount of each denomination of the Federal Reserve notes of your bank you may be ca l led upon to issue during the calendar year 192|). This information i s desired for the purpose of regula t ing the production of Federal Reserve notes during the coming year.

For your guidance, I would s ta te that the Board i s of the opinion that i t s stock of unissued Federal Reserve notes should at a l l times include approxi-mately a twelve months' supply-of each denomination Of the notes of each bank, and that not more than a s ix months' supply of each denomination of unissued notes should be in the custody of the Federal Reserve Agents.

By direct ion of the Federal Reserve Board,

Yours very t ruly,

Walter L. Eddy Secretary




WASHINGTON


X-4215

December 18, 1924

SUBJECT: Annual Reports of Federal Reserve Agents

Dear S i r :

The Federal Reserve Board has approved the recommendation made by the Federal Reserve Agents a t the i r recent conference, that t he i r annual r e -por t s be confined to a textual discussion with such incidental data and t a -bles as appear proper, but that detai led s t a t i s t i c a l tables be not used, and. that reference be made in each annual report to the s t a t i s t i c a l data published by the Federal Reserve Board in i t s annual repor t .

In preparing i t s own annual repor t , the Board wil l follow the same general arrangement of the s t a t i s t i c a l t ab les , in both pa r t s I and I I , as was adopted in the report fo r the year 1$2^, and accordingly the re wil l be shown in pa r t I I ten schedules per ta ining to each Federal reserve d i s t r i c t . Copies of the schedules wil l be forwarded to you as socm as avai lable for comparison with any similar data that may have been prepared by your bank. In case you f e e l tha.t the tables shorn in pa r t I I of the Board's report fo r 1923, considered in the l igh t of the s t a t i s t i c a l data given in par t I , are not s u f f i c i e n t l y complete, we sha l l be glad to have you advise the Board at your early convenience of any additions that you think should be made.

At the beginning of p a r t I I of the report charts both for the System and for each d i s t r i c t wi l l be grouped together instead of having the chart for each bank shown on pages opposite the f igures for such bank.

I t i s understood that you wil l forward the text of your ent i re report to the Board as in the pas t , and that i t wi l l not be released for publication u n t i l a f t e r i t has been passed upon by the Board.

Very t ru ly yours*


TO AIL FEDERAL RESERVE AGENTS


X-4217

Proposed. Hall Amendments t o Section 9» H. R. 9387 (McFadden B i l l )

Page 11, l i n e 13, a f t e r the word "located" inser t the following:

"and i t sha l l be unlawful for any such a-pplying bank in any s ta te

which does not by law or regulation, a t the time of the approval

of th is Act, permit s t a t e banks or t ru s t companies created by or

exist ing under the laws of such s t a t e , to have branches within the

l imi t s of municipali t ies in such s t a t e , to become such a stock-

holder of such Federal Reserve Bank except upon condition that such

applying bank rel inquish a.iy branches which i t may have established

subsequent to the approval of th is Act".

Page 11, l i n e 23, a f t e r the word "thousand" inser t the following:

"and PROVIDED fur ther that i t shall be unlawful for any such member

bank to es tab l i sh a branch within the l imi t s of the municipality

where such bank i s located, in any s t a t e which does not by law or

regulat ion, a t the time of the approval of th i s Act, permit s t a te

banks or t r u s t companies created by or exis t ing under the laws of

such s ta te to have branches within the l imi t s of such municipal-

i t i e s in such s t a t e . "


3 9 C


WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d X-4218

December 19, 1924

SUBJECT: Bank and Public Relations Work.

Bear S i r :

The Federal Reserve Board has considered the Committee repor t submitted a t the recent Conference of Federal Reserve Agents on the subject of 'tBaak and Public Relations Work". The Board i s of the opinion that Federal Reserve Banks should not undertake any organized, concerted e f f o r t "to bring before the business men of the country the advantages they axe receiving ** from the Federal Reserve System", but should cooperate with organizations disposed to be he lpfu l - such as the National Association of Credit Men, the American Bankers Association, Chambers of Commerce, and Agricultural and Civic Associations -by furnishing them with such information about the work of the System as they may properly u se .

Very truly, yours,





WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d X-U219

December 19, 1924.

SUBJECT: Io ta Case - Federal Reserve Bank of Atlanta.

Dear Si r :

This i s to advise you tha t the Federal Reserve Board has approved the reconmendation of the recent Conference cf Governors that i t would be inadvisable to employ Special Counsel repre-sentat ive of a l l Federal Reserve banks to take p a r t i n the case of Pousson v. Federal Reserve Bank of Atlanta, brought in the 18th Judicia l D i s t r i c t Court, State of Louisiana., and since removed to the proper United States D i s t r i c t Court (the so-ca l led Bank of Io ta case).

Very t ru ly yours,





WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d X-U220

December 19, 1924

SUBJECT: Discontinuance of Member Bank Basic Line Reports.

Dear S i r :

At the present time, the Federal Reserve Board i s receiving semi-monthly reports from the Federal reserve banks showing borrowings of member banks whose average dai ly borrowings equal three times their basic l i nes , and in addition, i s receiving monthly reports showing average borrowings of those banks which were borrowing continuously in excess of t he i r capi ta l and surplus during the report month.

The Board believes the basic l ine repor ts to be the less valuable of the two reports above r e f e r r ed to, azid the Federal reserve banks are requested to discontinue t h i s report to the Board as of January 1, 1925*

Very t ru ly yours,


TO THE GOVERNORS OF ALL FEDERAL RESERVE BANKS Copies to Federal Reserve Agents



WASHINGTON


X - 4 2 2 1

December ig , 1924.

SUBJECT: Determination of Outlying Di s t r i c t fo r Purpose of Reserve Reduction.

Dear Si r :

You are hereby advised that the Federal Reserve Board has approved the following recommendation of the recent conference of Federal Reserve Agents:

"That the Federal Reserve Board in determining whether a member bank located in an outlying dis-t r i c t of a reserve or centra l reserve c i t y should be permitted to carry reduced reserves as provid-ed in Section 19, Federal Reserve Act, should be guided in each instance by the r e s u l t s of an anal-ys i s of the character of the business of the ap-p l i c a n t member bank or of a l l the bajiks of the neighborhood group showing a proportion of -

(1) Balances due other banks (2) Balances of corporations (3) Public deposits (4) Cash in v a u l t s . "

You are fur ther advised that the Federal Reserve Board has ruled that a bank applying fo r a reduction in reserves under the provisions of Section 19 must have been a member of the Fed-era l Reserve System and in operation as such fo r a period of a t l eas t one year p r io r to the date of such application*

Very t ru ly yours,





WASHINGTON X-U222

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o

t h e f e d e r a l r e s e r v e b o a r d d e c s h & e r 1 9 , 1 $ 2 4

SUBJECT: Budget Committee.

Dear S i r :

The Committee on Sa la r i e s , Expenditures a id Ef f i c iency of the Fed-era l Reserve Board h#,s given ca r e fu l considerate©n to the recommendations made by the Governors a t the recent conference with respect to the adoption of a "budget cont ro l of expenses and to other economies in operation, and has recommended to the Federal Reserve Board and the Board has approved of the appointment of a committee to consult with such Federal reserve banks as may request information -vith respec t to a budget system. The Board has ap-pointed as members of the committee

Mr. L, R. Rounds, Chairman Mr. M, J . Fleming Mr. E. L. Smead

The Board hopes that a l l Federal reserve banks w i l l give consider-at ion to the establishment of a budget system fo r the cont ro l of expenses and requests t h a t any bank in t e re s t ed correspond d i r ec t ly with the chairman of the above budget committee.

With respect to the recommendation of the conference "that the Economy and Eff ic iency Committee of the Federal Reserve Board be requested to advise each Federal reserve bank whether tha t committee, iti view of a l l the information a t i t s disposal , has any spec i f i c suggestions td make to the directors or o f f i c e r s of the several Federal reserve banks as to how fu r the r economies# other than the adoption of a budget, might be e f fec ted by the respect ive Federal reserve banks" the c o m m i t t e e recognizes the d i f -f i c u l t y of making spec i f ic suggestions for economies without being possessed of a de f in i t e knowledge of the de ta i led operations of the banks and for t h i s reason i t does not seem des i rable to make any spec i f ic suggestions a t t h i s time. I t w i l l , however, continue as in the p a s t , to bring general suggest-ions to the a t t en t ion of the Federal reserve banks from time to time and ex-pec ts to correspond with the banks with reference to the cost of cer ta in funct ions .


Walter Ii. Eddy, Secretary.

TO THE GOVERNORS OF ALL FEDERAL RESERVE BANKS



WASHINGTON


X-4223

December 19, 192^

SUBJECT: Circulat ion of Standard. Silver Dollars.

Dear S i r :

The Board understands that as a r e s u l t of ac t ion at the recent Governors' Conference, the Governor of each Federal re-serve bank wi l l recommend to h i s Board of Directors that the bank undertake for a l imited time and fo r a l imited amount, purely fo r the purpose of experiment, to pay the charges on outgoing shipments of standard s i lve r dol lars , but not on in-coming shipments, subject to the understanding, however, that the p r ac t i ce wi l l be discontinued if and as soon as i t i s shown tha t there i s no rea l demand for standard s i lver do l la r s , and that consequently i t i s more expensive on account of the cost of t ranspor ta t ion and other fac tors than using $1 b i l l s .

You are advised tha t the Federal Reserve Board favftrfe the Federal reserve banks undertaking fo r a l imited time and for a l imited amount, merely for the purpose of experiment, to pay the charges on outgoing shipments of standard s i l ve r dol-l a r s , but not on incoming shipments. The Board r e a l i z e s , of course, that i t may be impossible to avoid the payment of t rans-por ta t ion charges on incoming shipments of standard s i lver dol-l a r s in cases where the shipping member banks include such dol-l a r s with other coin shipped to a reserve bank.

Very t ru ly yours,


TO ALL GOVERNORS



STATEMENT FOE THE PRESS

For Release in Morning Papers December 22, 1924 Tuesday, December 23, 1924. X-422U

Members of the American Bankers Association Committee

on Collection of Non-Cash Items by Federal Reserve Banks

have appeared before the Federal Reserve Board and urged

the Board to amend i t s regulation so as to prohib i t the

handling of non-cash col lec t ion items by Federal reserve

banks. The Committee has f i l e d a br ief in support of i t s

arguments for the discontinuance of th is f r e e service per -

formed by Federal reserve banks for their member banks.

The question'of the revis ion of i t s regulation i s now

under consideration by the Federal Reserve Board.



WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d x ~ 4 2 2 | }

December 22, 1924.

SUBJECT: McFadden-Pepper B i l l s .

Dear S i r :

There are enclosed herewith copies of the so-cal led McFadden and Pepper B i l l s , the com-mit tee reports thereon and the proposed Hall amend-ments to the McFadden b i l l , which amendments, how-ever , have not yet been introduced.

The Board requests t ha t you consider the various provisions of the b i l l s and submit to i t a t an early date a writ ten report of your views and comments thereon.

Very t ru ly yours,

Walter L. Eddy, (Enclosures) Secretary,

TO ALL FEDERAL RESERVE AGENTS AND GOVERNORS EXCEPT GOVERN'OR STRONG.


8 3 0


STATEMENT FOR THE PRESS X-4226

For Release in Morning Papers, Saturday, December 27, 1924.

The following i s . a summary of general "business and f inanc ia l conditions throughout the several Federal Reserve Dis t r i c t s , based upon s t a t i s t i c s for the aoiithsof November and December, as con-tained in the forthcoming issue of the Federal Reserve Bul le t in .

Production i n "basic industr ies and factory employment continued at

about the same level in November as in October. There was a fu r the r s l ight

r i s e in the general level of pr ices r e f l e c t i ng advances in nearly a l l

groups of commodities.

Production.

Production of basic commodities was at about the same ra te in November

as in.October, but owing to the smaller number of working days not allowed

for in the adjustment for usual seasonal var ia t ions , the Federal Reserve

Board's index of production declined by about 2 per cent. Increased a c t i v i -

ty was shown in the iron and s tee l industry and in cotton and woolen tex-

t i l e s , while production of food, coal, lumber, paper, and automobiles

declined. There was l i t t l e change in the volume of factory employment

in November. Building contracts awarded declined somewhat in November,

but the t o t a l was considerably larger than for the corresponding month

of any recent year .


X-4226

Final estimates by the Department of Agriculture of crop yie lds in

1924 showed a greater aggregate production than in 1923 and an increase

of about 9 per cent in the to ta l value of a l l crops. Yields of ivheat, oats,

cotton, potatoes, and hay were larger than in 1923, out the production of

corn and tobacco was smaller. Marketing continued in large volume in Novem-

ber and exports of agr icu l tu ra l products were the la rges t for many months

in recent years .

P r ices .

The level of wholesale pr ices , as measured by the index of the Bureau

of Labor S t a t i s t i c s , advanced s l igh t ly in November, pr ice increases in

most of the commodity groups being nearly o f f se t by a considerable decline

in the pr ices of animal products. During the f i r s t half of December there

were fu r ther advances in the pr ices of grains, f lour , sheep, metals and

lumber, while the pr ices of beef, hides, s i lk , and brick declined.

Trade.

Railroad f r e igh t shipments, though smaller in November than in October

owing to seasonal influences, were in about the same volume as in 1923.

Wholesale trade showed the usual decline in November and was about as ac-

t ive as a year ago. Sales of fu rn i tu re and meat were la rger than l a s t year,

while the volume of business in nearly a l l other l ines was smaller. Retai l

trade was somewhat more act ive in November; and sales of mail order houses

and chain s tores were larger than l a s t year. Merchandise stocks a t depart-


1 8 3 2

-3" X-4226

iaent stores were s l ight ly reduced ana were 2 per cent less than a year ago.

Bank c red i t .

Total loans and investments of member banks in leading c i t i e s continued

to "increase during the four weeks ending December 10 and on that date were in

larger volume than a t any previous time. The increase during the period was

chief ly in loans secured "by stocks and bonds and accompanied continued

a c t i v i t y in the securi ty markets - Commercial loans showed a seasonal decline

from the high point of the year reached in the middle of November, but con-

tinued above the level of a year ago. Security holdings, a f t e r increasing

rapidly since the spring of the year, reached a peak on November 19 and a f t e r

that time showed a s l ight decline.

At the reserve banks to t a l earning assets increased considerably during

the four weeks ending December 17, r e f l ec t i ng the seasonal demand for cur-

rency and the export of gold. The volume of discounts of the reserve banks

increased between the middle of November and the middle of December, the i r

holdings of acceptances also showed a net increase, while United States se-

cur i ty holdings declined somewhat.

Firmer conditions in the money market during the l a s t half of November

and the f i r s t half of December were indicated by higher ra tes on bankers'

acceptances and a r i s e of one-half per cent in the ra te on commercial

paper. .


X-U22S

( C O P Y )

Federal Reserve Board, Washington, D. C.

Gentlemen:

Brief of American Bankers Association Committee on Collection of Non-Cash Items by Federal Re-serve Banks.

Complying with request made by the Federal Reserve Board at the time of the recent hearing before you on the question of the handling of Non-Cash Items fo r col lect ion by Federal Reserve Banks, I hereby submit on behalf of the American Bankers Association Committee a summary of the Com-mi t t ee ' s observations and analysis on th is subject , with i t s recommendations.

1. ORIGIN AND ACTIVITIES OF COMMITTEE

(a) Pr ior to the spring meeting of the Council of the American Bankers Association a t Rye, New York, in April , 1923« bankers in cer ta in sec-t ions of the United States had indicated t h e i r disapproval of the Federal Re-serve Banks being in the col lec t ion business, and the Clearing House Associa-t ion of Minneapolis, Minn., had adopted a resolut ion (copy of which wa,s f o r -warded to the Federal Reserve Board) urging tha t the Federal Reserve Banks discontinue the service,

(b) Acting upon th i s question which arose in the manner ai'Creaaid, the American Bankers Association Council in session at Rye, New York, appoint-ed a Conmittee, designated as a Committee on Non-Cash Items, to make an in-vest igat ion of t h i s a c t i v i t y on the par t of Federal Reserve Banks and report a t a l a t e r meeting with recommendations,

(c) At the meeting of the Council in Atlantic City in September, 1923, the Committee reported that they had not completed the i r analysis; that the Federal Reserve Board had appointed a Committee of Governors on the same matter , who had not a t that time completed the i r invest igat ion. Therefore, the Committee requested that i t be continued as an Invest igat ing Committee, which was granted.

(d) The Committee next reported a t the Spring meeting of the Coun-c i l at Augusta, Georgia, in Apri l , 1924. (Copy of which report i s hereto a t -tached, marked Exhibit "A")- Af ter some discussion of the Committee's report from the f loor and the exchange of several questions and answers on the sub-j e c t , the report was unanimously approved, and a special committee of three appointed to confer with the Federal Reserve Board, with author i ty to urge tha t the col lec t ion of Non-Cash Items by Federal Reserve Baraks be discontinued.

(e) At the General Convention of the American Bankers Association held in Chicago, September l a s t , the action of the Council a t i t s Spring meet-ing in Augusta, Georgia, in the appointment of the Special Committee with au-thor i ty to urge t h a t the co l lec t ion of Non-Cash Items by Federal Reserve Banks


0 3 4 - 2 - X-422S

be discontinued, was reported to the Convention in session, and 9-pprcved. without any object ion.

( f ) P r io r to the hearing before the Board accorded our Committee on December 5» 1924, we endeavored to get a recent cross section of opinion from bankers on t h i s question, and accordingly sent out a. questionaire (copy of which i s hereto attached, marked Exhibit "B"). This l e t t e r was sent to e ighty-f ive bankers in a,ll pa r t s of the United Sta tes , who were selected with-out regard to whether thei r bank was located in a. c i ty in which there was a Federal Reserve Bank or Branch. F i f ty - four repl ies 'were received up to the date of the hearing, of which for ty - four expressed their opinion that the col lec t ion of Non-Cash Items by Federal Reserve Banks should be discontinued. Ten r ep l i e s indicated that they were in favor of continuing the present ser-vice (These l e t t e r s are attached hereto for your perusal and considerat ion).

COMMITTEE'S OBSERVATION AND FINDINGS

(a) Our Cornr.ittee would l ike i t c l ea r ly understood that our ac t iv-i t i e s have been confined s t r i c t l y to the handling by Federal Reserve Banks of Non-Cash Items, and has no r e l a t i on to the present service by Federal Reserve Bajiks in the par clearance of checks and d r a f t s drawn on member or non-member banks. Our contention i s that any sight or time d ra f t i t h or without docu-ments attached drawn against an individual f i rm or corporation which comes in the possession of the Federal Reserve Bank without the Federal Reserve Bank having rediscounted the same for a rtiember bank i s a Non-Cash Item; therefore, a col lect ion in the i r possession. Likewise any maturing note which the Feder-a l Reserve Bank may be requested to handle for col lect ion without the Federal Reserve Bank having f i r s t rediscounted the same i s also a Non-Cash Item. Far-the r , that a l l dunning d r a f t s , e t c , in which, of course, ne i ther the member bank or the Federal Reserve Bank in pa r t i cu la r can have any invested funds are Non-Cash Items. In b r i e f , any item coming into the possession of a. Federal Reserve Bank not drawn on or payable by a. bank or t rus t company and for which Reserve Bank has not given c r ed i t in reserve account to i t s endorser i s a Non-Cash Item.

(b) That the present service of handling Non-Cash Items as herein-before described i s material ly unbalanced in i t s benef i t s tc the member banks of the system.

(c) That the Federal Reserve Banking System cannot a f fo rd the over-head expense incident to the performance of th i s service.

(d) That i t i s inconsistent for any business organization to carry on an ac t iv i ty which incurs l i a b i l i t y without remuneration, and the Federal Reserve Banks cannot be in the col lect ion business without incurring l i a b i l i -t i e s , Loss of items or secur i t i e s or documents attached, f a i l u r e to pro tes t or other accompanying ins t ruc t ions may resu l t in loss to Federal Reserve Banks handling same.

(e) That there i s no saving of time in the handling of col lect ion items by Federal Reserve Banks. In f a c t , there may be a. loss of time in rout -ing col lect ion items through Federal Reserve Banks instead of member banks routing them d i r e c t .


X-4228 33,1

( f ) That member banks could absorb the service now performed by Federal Reserve Banks in the collect ion of Non-Cash Items without any appreciable increase in the i r cost of operation, in that every col lect ion item that i s now handled by Federal Reserve Banks originates in a member bank, and that only in the t h i r t y - f i v e c i t i e s in which there i s established a. Federal Reserve Bank or Branch i s the same item presented to the party upon whom i t i s drawn without i t having to be sent to a bank by the Federal Reserve Bank in the c i ty in which i t is payable for presenta t ion . Thus, a l l the co l lec t ions handled by Federal Reserve Banks, excepting those pay-able in c i t i e s aforesaid , are handled at a duplication of service c o s t s . x

(g) That member banks maintain a. co l lec t ion department for the handling of outgoing and incoming col lect ions , and a large percentage of member banks incur costs of advert is ing of t h i s f a c t in an e f f o r t to put the i r col lect ion departments on a maintenance or p ro f i t ab l e bas i s .

(h) That the presentat ion of co l lec t ion items by Federal Re-serve Banks i s general ly unpopular with the publ ic , because of the incon-venience to the payer of items presented by Federal Reserve Banks in that in the exercise of action the Federal Reserve Bank's general p rac t i ce i s to require that the payer naist pay in cash or by a draf t of a member bank drawn against i t s Federal Reserve balance. Therefore, when a runner for a Federal Reserve Bank takes a col lect ion across torn some f i f t e e n or twenty blocks and presents i t for payment, the payer i s confronted with t h i s condition of payment by the runner, and accordingly hs.s to pay in cash, which he seldom has on hand, or go to his bank rmd arrange fo r a d r a f t in favor of the Federal Reserve Bank in payment of the item. This i s an inconvenience and annoyance to him and does not create f o r the Fed-era l Reserve Bank a f r iendly fee l ing on the par t of the publ ic , which they are at a l l times hopeful of acquiring.

( i ) We are convinced from our analysis of this service tha,t Governors of ce r t a in Federal Reserve Banks contending for the continuance of t h i s service are influenced by their immediate environments because of the benef i t s that accrue to ce r t a in in s t i t u t ions in large i ndus t r i a l and commercial centers in which ce r ta in Federal Reserve Banks are located and do not represent the a t t i t ude on th i s subject of thei r constituency as a whole.

( j ) We are firmly of the opinion that i t was not intended that a Federal Reserve Bank should function in any capacity that would bring i t into direct competition with any of i t s member banks, or to deal in any way direct ly with the public, as i s necessary in handling of the col lec-t ion business.

. (k) That the service of handling col lec t ion items by Federal Reserve Banks i s not needed as a. measure of saving expense or time to mem-ber banks, and the benef i t s that accrue by v i r t u e of th i s service are be-ing capi ta l ized by cer ta in member banks fo r p r o f i t to them for charges which they can make to thei r customers for handling col lect ion items that the Federal Reserve Bank handles for them without charge or i t accrues di-r e c t l y to the individual f irm or corporation who furnished no par t of the c ap i t a l upon which the Federal Reserve Bank i s operated, and, therefore , e n t i t l e d to no pa r t of i t s bene f i t s d i rec t ly .


-4 - 0 3 6 ( l ) That i t i s unfa i r to impose a discret ionary duty upon Ho-

serve Bank management by i t having to daily choose which member shal l have the col lec t ion items en a point where there are more than one member bank, a s i tua t ion which alone leads to dissension and d i s sa t i s f ac t i on , resu l t ing in the basis fo r a charge of favoritism*

(m) That many member banks receiving col lec t ion items from Fed-era l Reserve Banks now remit without charge because they are under the im-pression that any item handled for a Federal Reserve Bank cannot be charged upon. Thus through th i s fee l ing of service to and cooperation with the Fed-eral Reserve Banks they are omitting charging for a service fo r which they are j u s t l y en t i t l ed to remuneration.

(n) Quoting from l e t t e r s recently received from bankers, which are hereto attached, as aforesaid, I desire to c a l l your a t ten t ion to a l e t t e r from the F i r s t National Bank of Detroit , Michigan, as fol lows:

"As a commercial bank in te res ted in giving di rect and prompt service, we axe opposed to the Federal Reserve Banks handling Non-Cash Items for the following reasons:

1st* Loss of time in routing items d i r e c t l y . 2nd. Slow and incomplete advices of payment. 3rd. Additional time and ^rouble taken to reca l l or reduce items. 4th. D i f f i c u l t y in obtaining adjustment caused by t h e i r erroxs. 5th. More opportunity fo r special ins t ruct ions to be overlooked

or improperly passed on*"

The Fort Worth National Bank, Fort Worth, Texas, write in par t as fol lows:

"The i n s t i t u t i o n with which I am connected in one month handled more than $4cQ,000 of cotton d ra f t s through the co l lec t ion department of Federal Reserve Banks, and based on an average col lect ion charge of one-tenth of one per cent there resul ted a saving fo r th i s bank of more than $400.00. While t h i s i s a p r o f i t for th is pa r t i cu la r bank, i t was made a t the expense of several banks located in Federal Reserve Ci t ies , and a p r o f i t to which they were j u s t l y ent i t led , and which should have been paid by the drawer of the dra f t s or the deposi tor ."

lO) That the future s t a b i l i t y and popular i ty of the Federal Re-serve System must be guarded against any tendency to increase i t s cost of operation by dealing di rect ly with the public in pny jpanner or coming in competition with i t s members. Free services have bu i l t up overhead tha t has to be met by open market a c t i v i t i e s detrimental to '- i ts f u t u r e .

(p) We bel ieve that i t is universal ly recognized tha t there i s a necessi ty a t the present time of reducing the overhead, cost of the System, &iid are therefore, f i rmly of the opinion that i t would be recognized by a large majority of the membership of the System as prudent in the in t e res t of economy to eliminate from the System the handling of co l lec t ions , there-by saving the System in excess of one million dol la rs per annum, and we are convinced that such action on the pa r t of the Reserve Board would meet with


- 5 - X-U22S 037

the approval of the m j o r i t y of i t s nen'ibers and ce r t a in ly could "be done without any serious embarrassment to any member.

REG OE-tENDAT I QTT .

Therefore, in compliance with the foregoing f a c t s and the au-thor i ty invested in t h i s Committee by the American Bankers Association, we most earnest ly urge that the Federal Reserve Board's regulat ions be so amended as to prohibi t the handling of Non-Cash Col-lecticn Items by Federal Reserve Banks.

Respectfully submitted,

(Signed) John Barton,

Chairman, Committee on Non-Cash Items, American Bankers Association

Members of Committee attending hearing December 1924:

J . W. Barton, Minneapolis, Minnesota, C. L. Brolcaw, Kansas City, Kansas, William C. White, Peoria, I l l i n o i s .


( C O P Y ) X-4228-a

Exhibit "A"

2EPORT OF COLXITTEE 021 HOH-CASH IT2LS TO 3XSCUTITE COUNCIL, A.B.A.

AUGUSTA, GEORGIA, APRIL 50,1934.

President Head: Ehe next order of business wi l l be the report of the Committee ,en Uon-Cash Items. Mr. Barton.

Mr. Barton: Mr. Chairman and Gentlemen of the Council: Many of you no doubt wi l l r e ca l l that a t the Spring Meeting of the Council in Sew York some discussion on th i s subject was had, which resul ted in the appointment of a special committee to make invest igat ion and report with recommendations.

Your Committee on Collection of Eon-Cash Items by the Federal Reserve Banks reports as follows:

We are convinced that the service of handling col lect ion items by Federal Reserve Banks i s exceedingly unbalanced in i t s benef i t s to member banks. We believe the Federal Reserve Act did not intend to put the Fed-era l Reserve banks in competition with commercial banks or that they should do business d i rec t ly with the publ ic .

We f ind based on information received from a Federal Reserve bank that only one out of twelve member banks use th is service a t the present time, and that t h i s 8$ of t he i r membership i s comprised almost en t i r e ly of the large c i ty banks, thus taking away from 92$ of the i r member banks a banking function which they f e e l they have a r ight to perform. For the Federal Re-serve banks to continue to col lect non-cash items would therefore tend to aggravate fu r the r many member banks in the country and keep others out of the Federal Reserve System, .and continue,to add to the already widespread fee l ing that there i s a tendency within the System to increase ra ther than diminish t h e i r commercial a c t i v i t i e s .

We f ind that i t costs Federal reserve banks t h i r t y times as much to co l lec t non-cash items as i t does tq col lec t cash items, f o r example:

During the quarter ending June 30, 1923, the Federal reserve banks handled 176,096,223 cash items at a t o t a l cost of $1,132,438, or a eost per item of .0064. During the same period 1, 253,281 non-cash items (ex-clusive of Government coupons) were handled a t a cost of $245,291, or a cost per item of .1957.


- 2 -LJV

X-4228-a

t o t a l Further tha t , the/cost of col lect ing non~cash items i s rapidly in-

creasing. In 1923 the cost to Federal Reserve hanks was in excess of $1,000,000 and if not discontinued wi l l soon he many times that amount.

¥e f ee l that the expenditure of more than a mil l ion dol lars by Federal Reserve hanks to col lec t non-cash items for l ess than 10$ of the members i s unjus t to the other 90$,besides taking away from a large number of member banks the col lec t ion pr iv i lege to which they f ee l they are j u s t l y entitled,.

We f ind that tne Federal Reserve banks in performing th i s service are thus made dunning agencies fo r the col lect ion of large and small accounts of varied character and descriptions a t heavy cost to them and to the det-riment of the System as a whole in the minds of the publ ic . For i l l u s t r a -t ion; In one Federal Reserve bank there was outstanding March 31, 1924, items for col lec t ion as follows:

Size Bomber Amount

Under $1.00 30 $ 16.31 $1.00 to i.SS 48 66.65

2.00 to 2.99 27 64.98 3.00 to 3.99 29 99.77 4i00 to 4.99 24 104.76 5.00 to 5.99 25 139.24 6.00 to 5.99 59 445.52

10.00 to 19.99 138 1,936.01 20.00 to 29.99 110 2,710.48 30.00 to 39.99 78 2,677.04 40.00 to 49.99 47 2,056.85 50.00 to 99.99 218 15,280.66

100.00 to 499.99 421 89,695.31 500.00 to 999.99 125 89,016.72

1000.00 to 2499.99 149 230,715.11 2500.00 to 4999.99 31 101,4-51.14 5000.00 and over 14 "89,290.83

1574 $625,967.78

of which 834 items or over half of the number of items aggregated s l igh t ly over $25,000.

Your Committee caused inquiry to be made of the Clearing House Associations in c i t i e s that have a Federal Reserve bank or a branch to de-termine the i r a t t i t u d e on the question, and desires to report that out of


X-4228-a 0 4 0

the 24 reporting, 17 were in favor of requesting that Federal Reserve "banks discontinue the col lec t ion of non-cash items, and 7 fo r continuing the service, that of the 17 for discontinuing 11 adopted resolut ions which were forwarded to the Federal Reserve Board.

Therefore, in v ier of the foregoing fac t s and a f t e r ca re fu l consid-era t ion of the subject matter &nd with a sincere regard fo r the f u l l worth of the Federal Reserve System and f u l l y appreciating the great im-portance of maintaining the Federal Reserve "banks as "banks of reserve, rediscount and issue, fo r which they were or ig ina l ly intended, we most earnest ly recommend that the col lec t ion of non-cash items "by Federal Reserve "banks "be discontinued, and fu r the r recommend that a Committee of three "bank-ers "be appointed to confer with the Federal Reserve Board with author i ty to urge that the Federal Reserve "banks discontinue the col lec t ion of non-cash items.

J . W. Barton, Chairman C. L. Brokaw D. U. Finnegan Robert F. Maddox James Ringold William C. White.

- 3 -


* • »

( C O P Y ) X-4228-b 041 Exhibit "3"

Minneapolis, Minn. November 19,1924.

In 1923 a committee was appointed with ins t ruc t ions to make an invest igat ion of the p rac t ice in vogu.e "by Federal Reserve Banks in the handling of non-cash items fo r col lec t ion .

At the l a s t spring mooting of the Council of the American Bankers Association th i s committee on non-cash items reported with recommendations that the Federal Reserve Board be urged to make a rul ing requir ing Federal Reserve Banks to discontinue handling col lect ion items, such as b i l l of lad-ing d r a f t s , e t c . ,wi th the resu l t that the committee's recommendations were approved and a sub^comcittce was selected and ins t ructed to confer with the Federal Reserve Board in an e f f o r t to have the committee recommendations carr ied into e f f e c t .

This matter has been discussed from time to time with cer ta in mem-bers of the Federal Reserve Board who have shown a keen in t e re s t in the sub-j e c t . The sub-committee on non-cash items wi l l have a hearing before the Federal Reserve Board on Friday, December 5th, a t which time t h i s service being conducted a t a considerable expense to the Federal Reserve System, which unquestionably i s unbalanced in i t s benef i t s to the members of the System, wi l l be discussed.

On behalf of the committee I am writ ing for an expression of your opinion on t h i s subject . We would l ike to have you s t a t e as to wheth-er you are fo r or against the Federal Reserve Banks continuing in the col-l ec t ion business and we wi l l appreciate your reasons for the pos i t ion you take on th i s question. Similar l e t t e r s are being sent to cer ta in other bankers and i t i s an t ic ipa ted that the rep l ies wi l l be he lpfu l to the Com-mittee in the discussion of th is matter be fore ' the Federal Reserve Board.


Chairman, Committee on Non-Cash Items.

Members of Sub-Committee: Mr. Robt.F.Maddox, Atlanta, Ga. Mr. C. 1. Brokaw, Kansas City, Kansas. Mr. Wm. C. White, Peoria, 111.



WASHINGTON X--4229


SUBJECT: ASSESSMENT FOB GENERAL• EXPENSES "OF THE FEDERAL RESERVE BOARD, JANUARY 1 TO JUNE 3O, 192$.

Dear S i r :

Confirming te legraphic advice there i s enclosed he re -with copy of a reso lu t ion adopted by the Federal Reserve Board, levying an assessment upon the several Federal reserve "banks of an amount equal to one hundred f a r t s e n thousandths of one per cent (.00114) of the t o t a l paid in Capital stocJc and surplus of such banks to defray the estimated general expenses of the Board from January 1 to June 30, 1525•

There i s also enclosed a statement showing the bas i s upon -which the assessment i s levied.

Kindly deposit one-half of the amount of your a s s e s s -ment in the General Account, Treasurer, U. S . , on your books January 1, 192$, and on --half March 1, I925 in each instance issuing a C/D f o r c red i t of "Salar ies and Expens3s, Federal Re-serve Bo-.ard, Special Fund", assessment f o r general expenses, and sending dupl icate C/D to the Federal Reserve Board. Also please f u r n i s h a statement of your cap i t a l and surplus used as a bas i s f o r the assessment.


Enclosures. F i sca l Agent,

(S.-nt to Chairman of each Federal Reserve Bank) X X.

X


X-U-229

RESOLUTION LEVYING ASSESSMENT

Whereas, under Section 10 of the act approved December 23> 1913> end known as the Federal Reserve Act, the Federal Reserve Board i s empowered to levy semi-annually upon the Federal reserve hanks in proportion to t he i r cap i t a l stock and surplus an assessment s u f f i c i e n t to pay i t s estimated expenses, including the sa la r i e s of i t s members, a s s i s t an t s , a t torneys, experts and employees fo r the ha l f -year succeeding- the levying of such assess-ment, together with any d e f i c i t carr ied forward from the preceding ha l f -year ; and

Whereas, i t appears from estimates submitted and considered that i t i s necessary that a fund equal to one hundred fourteen thousandths of one per cent of the t o t a l pa id- in cap i t a l stock and surplus of the Federal reserve hanks he created f o r the purpose hereinbefore described, exclusive of the cost of engraving and p r in t ing of Federal reserve notes; Now, the re fore ,

Be i t resolved, That pursuant to the authori ty vested in i t by law, the Federal Reserve Board hereby levies an assessment upon the several Federal reserve banks of an amount equal to one hundred fourteen thousandths of one par cent of the t o t a l paid—in cap i t a l and surplus of such banks as of December $1, 1924, and the F isca l Agent of the Board i s hereby authorized to col lec t from said hanks such assessment and execute, in the name of the Board, rece ip ts f o r payments made. Such assessments wi l l be co l -lected in two installments of one-half each; the f i r s t installment to be paid on January 1, 1925, end the second half on March 1, 1925.

\


X-U229 -»

ESTIMATE FOR .TAMIABY 1Q25 ASSESSMENT

$59,740.73

68,889.21

Average monthly encumbrance f o r period July 1, 1924, to December J>1, 19.24;

Personal services, . . . . . $45>559'1& Non-personal services, . » » » ; 181*5%

Encumbrance f o r December, 1924:

Personal services, $45,55&'25 Non-personal services, . 23 ,112.96

Estimated monthly requirements* January to June, 1925:

Personal services, $48,000.00 Non-personal services, . . . . . . . . _14,000.00 ^

Estimated average monthly increase, . . . . 2,259.87

Total estimated requirements, January 1 to June 30 > 19^5:

To cover above estimate, 372*000.00 To provide a contingent fund, . . . . , 20,000.00 ^

Estimated unencumbered balance, Dec. 31, 1924, . 20,000.00

Amount to be raised by assessment, 372,000.00

Estimated pa id- in capi ta l and surplus of Federal Reserve Banks as of December 3 1 , 1924, . . . 328,000,000.00

An assessment of one hundred fourteen thousandths of one per cent (.00114) w i l l produce, 373,920.00


X-423C —

REPORT OF CONDITION TO


The following information i s desired in connection with the report of condition to be ms.de as at the close of business

HEAD OFFICE MP DOMESTIC BRANCHES COMBINED

1. Detailed balance sheet showing a l l asse t s and l i a b i l i t i e s , includ-ing, contingent l i a b i l i t i e s . I t i s requested that the items for which deta i led schedules are requested below be shown as separate accounts on the balance sheet.

2- Amount of loans, discounts, overdrafts and other advances c l a s s i -f i ed as follows:

(a.) Demand - Secured - Unsecured.

(b) Time - Secured - Unsecured.

(c) Maturi t ies of time loans and advances. Past due Dae within six months. Due within one year. Due a f t e r one year.

3. Detailed l i s t of investments (including stock of a f f i l i a t e d i n s t i -tut ions showing):

(a) Issuing Government or corporation. (b) I n t e r e s t r a t e . (c) Maturity. (d) Par value. (e) Book value. ( f ) Approximate market value.

4. Ownership of stock of a f f i l i a t e d i n s t i t u t i o n s :

(a) Per cent owned by yourselves. (b) Per cent owned by foreign Governments. (c) Per cent owned by individuals and corporations.

5. Balances due from banks which are considered as reserves according to Federal Reserve Board regulation, balances due from branches, agencies and a f f i l i a t e d ins t i t u t ions and exchange pos i t i on .


X-4230-A

- 2 -

(a.) Lis t of banks and balances due fron; each which are considered as reserves in accordance with regulation of Federal Reserve Board.

(b) List of foreign branches, agencies and a f f i l i a t e d i n s t i t u -t ions and balances due from and due to each.

(c) Exchange posi t ion, a l i s t of uncovered, oversold or overbought, pos i t ions in a l l fore ign currencies including foreign currency securi ty on which exchange values are not protected.

(d) List separate balances due to foreign or domestic banks or customers which are not incidental to your acceptance business or held for purpose cf carrying out transactions i n foreign countr ies .

6. B i l l s payable -(Primary obligations of reporting corporation repre-senting money borrowed.)

(a) Payable to . (b) Amount. (c) In t e re s t r a t e .

7. Rediscounts (Other than acceptances sold with endorsement)

(a) Draf ts or notes drawn in dol lars . (b) Draf ts or notes drawn in foreign currencies. (c) Total amount of rediscounts by banks. (d) Rate of discounts. (e) Spread of matur i t ies .

S. Total l i a b i l i t y for acceptances sold with endorsement.

9. Deposits in the United S ta tes :

(a) Net demand deposits ( a f t e r deducting uncollected demand items payable within United States - exchanges) $ . Reserve Required $_ _ _

(b) Time deposits""^ Reserve Required $ (c) Total Reserve required against deposit l i a b i l i t y $

Reserve Held

(d) Cash on -hand $ ( e ) Bank b a 1 anc e s $ ( f ) Total cash reserve held $

. (g) Excess or d e f i c i t of cash reserve held over reserve required $


Z-423G -A

- 3 -

Acceptances.

(a) Acceptances outstanding: Maturing in 30 days or less $_ Maturing a f t e r 30 da.ys $_ Total outstanding acceptances $_

(b) Subscribed capi ta l and surplus $_ Excess (a) over (b) $

Acceptances secured according to regulat ion of the Federal Reserve Board. Acceptances otherwise secured $_ Acceptances unsecured- b

Amount required to be secured under agreement with Federal Reserve Board $_ (Give l i s t of securi ty held as required above giving description and approximate amount)

(c) L is t of drawers of d r a f t s accepted, with to ta l aggregate l i a b i l i t y in excess of 10 per cent of subscribed c a p i t a l and surplus showing:

Name Address Busines Aggregate L i ab i l i t y Security * or Guaranty

(d) Reserve against outstanding acceptances:

Required 15$ against a l l acceptances outstanding which mature in ]>0 days or l e s s . $

3$ against a l l acceptances outstanding which mature in more than 30 days. $

Total reserve required against acceptance l i a b i l i t y . $

Held Cash and bank balances Bankers acceptances in-secur i t i es approved .by Federal Reserve Board (List in de t a i l ) $_

Total reserve held •£_


X-423CU

- U -

(e) Detail l i s t of renewed acceptances and number of renewals of each.

( f ) Schedule showing d i s t r ibu t ion of commodities financed by acceptance t ransact ions ,

•(g) C lass i f i ca t ion of acceptances as fol lows:

Amount of acceptances covering importation to the United S ta tes .

Amount of acceptances covering asportat ions fron; the United States .

Amount of acceptances covering movements of merchandise between foreign countr ies .

Amount of acceptances dra.wn for the purpose of fu rn i sh -ing doll&r exchange.

11. General l imi ta t ions :

Per cent deposits and acceptances outstanding to sub-scribed capi ta l and surplus.

12. List of o f f i c e r s and d i r ec to r s .

13. List of stockholders showing number of shares owned by each. (record of changes since l a s t report)

14. List of branches, sub-branches, agencies, o f f i ces and a f f i l i a t e d i n s t i t u t i o n s - date of opening of each and the location,

(record of changes since l a s t report)

15. Date of l a s t examination or audit - by whom made.

(*) If secur i ty , s ta te nature of secur i ty , giving quanti ty and approximate value, i f a bank guaranty, give name and loca-tion of bank.

(**) Excess amount as shown in (10-g) not required for reserve against deposit l i a b i l i t y .


X-1-230-A

- 5 -

B. FOREIGN BHALTCH5S, AGEWI7S M-D SUBSIDIARY BMTKS MP CORPORATIONS

1. Balance sheet to bs furnished by each, showing in d e t a i l a l l assets and l i a b i l i t i e s , including contingent l i a b i l i t i e s . I t i s requested that the items for which deta i led schedules are requested below be sho.\n as separate accounts on the balance sheet.

2. Amount of loans, discounts, overdrafts and other advances c l a s s i f i e d as follows:

(a) Demand - Secured - Unsecured. (b) Time - Secured - Unsecured. (c) Maturities of time loans and advances.

Past due Due within six months Due within one year Due a f t e r one year

3« Detailed l i s t of investments, showing: (a) Issuing Government or corporation (b) In te res t r a t e (c) Maturity (d) Par value (e) Book value ( f ) Approximate market value

4. List of banks having balances due to your branch with amount for each bank separately:

(a) Government bank (b) Banks and bankers (c) Head Off ice (d) Other branches, agencies and a f f i l i a t e d i n s t i -

tutions

5» Lis t of banks having balances due from your branch with amount for each bank separately:

(a) Banks and bankers (b) Head Office (c) Other branches, agencies and a f f i l i a t e d i n s t i -

tut ions

6. B i l l s payable: (Primary obligations of reporting corporation representing borrowed money)

(a) Payable to (b) Amount (c) In teres t r a t e (d) Maturity (e) Collateral (give detai led l i s t )


- 6 -

X-1239-A 1 1350

Rediscounts,: (a) Amount (b) Maturity (c) With whom (d) Hate (e) Secured or unsecured - i f secured, give de ta i led data

Deposits. Dollar Equiva^-

len t (a) Government deposits ( i f secured give

l i s t of c o l l a t e r a l ) 1. Demand 2. Time

Other deposits 3» Demand 4. Time

Total (b) Deposits - how payable

1. Local Currency 2. Dollar

S te r l ing Otherwise

Total I:

Special Reserve Statement - average fot month of_

(a) Net deposits: 1. payable in local currency 2. Payable in dol lars Ji. Payable in s t e r l i n g 4. Payable Otherwise _________

Total


X»4230-*F 851 .

- ? -

, , .

(b) Reserve: 1. Amount, i f any, and composition r e -

quired by local laws. 2. Amount held:

Amount Per cent to net deposits

(a) Gold and S i l v e r . . . $ ~~~ $ (b) Local Currency. . . . (c) Other cash (d) Balance in Ideal

Govt. b a n k . . . . . . . (e) Other reserve funds .

Total ..

Date of l a s t examination or audit - by whom made.

NOTE: 1. Where a schedule does not r e f e r to your corpora-t ion, please indicate t h i s by inser t ing the word "None".

2. Reports fo r foreign branches, agencies, etc* , should be in terms of United States do l l a r s , s t a t -ing the r a t e of exchange a t which they were con-

. Verted.


F E D E R A L R E S E R V E 1


For Immediate Release December 30, 1924.

A hearing to show cause why a branch of the \

Federal Reserve Bank of Richmond should be establ ished

in the south-western por t ion of the F i f t h Federal Re-

serve D i s t r i c t wi l l be given to the d i rec tors of the

Federal Reserve Bank of Richmond by the Federal Reserve

Board on Friday, February 13, 1925.

C A R D

X-4231



SUBJECT: Reports of Condition of State Banks and Trust Companies,

Dear S i r :

Your courtesy wil l be grea t ly appreciated i f you wil l fu rn i sh the Federal Deserve Board, as soon as avai lable , , with twp copies of the abs t rac t of reports of condition of State banks and Trust companies i n your State on June 30, 19?U, or other recent date i n case you did not i s age- a c4& fo r r epor t s of condition as of June )0.

If convenient to your o f f i c e , we would l i k e to have separate f igures fo r mutual savings banks and fo r p r iva te banks, providing there are any such banks operating in your s t a t e . In case the number of each c l a s s of banks reporting i s not shown in the abs t rac t , will yoii also ê good enough to incorporate th i s information in your l e t t e r of t ransmi t ta l . Following -fCur usgal custom i t wi l l be appreciated i f you wi l l kindly segregate the data according to Federal reserve dis-t r i c t s , as the v§l%@ of these data to the Board and fo r pur-poses of publ icat ion be grea t ly enhanced i f they can be tabulated tiy Federal reserve d i s t r i c t s .

The July number of the Federal Reserve Bullet in (copy of *%ich wi l l be forwarded to you as soon as received from the p r i n t e r ) contains a sxmmary statement of the abs t rac t s of r e -por t s of condition on or about March 31, 1924, of a l l banks and t r u s t companies (other than mutual savings banks) under staite supervision i n the 48 s t a t e s and the r e s t r i c t of Colmbia, to which your a t t en t ion i s invi ted.

A franked and s#lf?addressed envelope, requir ing no postage i s enclosed fo r use in t ransmit t ing the data requested.

Very t ru ly yours.

FEDERAL RESERVE BOARD ? 5 3 WASHINGTON

July 9 , 1924, St. 4134

J . C. W e l l , Assistant Secretary.

Enclosure. ,»

To State Banking Departments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON

July 9, 1924. St. 36

SUBJECT: Reports of Condition of State Banks and Trust Companies.

Gentlemen.

Your courtesy will be greatly appreciated i f you vti.ll furn ish the Federal Reserve Board, as soon as available, with two copies of the abstract of reports of condition of State banks and Trust companies In your State on June 50s 1924, or other recent date i n case you did not issue a ca l l for reports of condition as of June 30.

If convenient to your o f f i c e , we would l ike to have separate f igures f o r mutual savings banks and for private hanks, providing there are any such banks opera-t ing i n your s ta te . In case the number of each c lass of banks reporting i s not shown in the abs t rac t , wil l you also be good enough t o incorporate th i s information in your l e t t e r of transmittal .

The July number of the Federal Reserve Bullet in (copy of which will be forwarded to you as soon as re* ceived frcxn the p r in te r ) contains a summary statanent of the abs t rac ts of reports of condition on or about March 31, 1924, of a l l banks and t rus t companies (other than mutual savings banks) under s tate supervision i n the 4g s ta tes and the Dis t r ic t of Columbia, to which your a t tent ion i s invited.

A franked and self-addressed envelope, requiring no postage i s enclosed f o r use i n transmitt ing the data requested.

Very t ru ly yours,



Enclosure. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

O D D FEDERAL RESERVE BOARD

WASHINGTON


July 29, 1924. S t . 4 i6? .

SUBJECT: Expense Budget.

Dear S i r :

In connection with the study of the compara-

t ive {functional expense exhib i t s fo r a l l Federal reserve

banks and branches, the question of es tab l i sh ing a

budget system fo r the control of expenses has a r i sen .

In order t h a t t h i s Committee mgy be informed aS t o what,

i f any, s teps have been taken ty the banks with r e f e r -

ence to the establishment of a budget f o r any or a l l of

t h e i r expenses, i t w i l l be appreciated i f you wi l l ad-

vise promptly whether or not your bank has in operation

any form of budget cont ro l . I f you have any such system,

kindly descr ibe i t s operation, s t a t i n g how long the

system has been in e f f ec t and what r e su l t s you have ob-

tained from i t s operation.


Geo* E. James, Chairman, Committee on Sa la r ies , Expenditures and Ef f i c i ency .

LETTER TO GOVERNORS OF ALL FEDERAL RESERVE BAMS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


SUBJECT: Committee on Salaries, Expenditures and Eff ic iency.

Dear S i r :

This l e t t e r i s t o advise you of a change i n the organization of the Board's committees whereby the Committee cn Econcny and Efficiency and the Committee cn Salar ies and Expenditures have been consolidated in to one committee to be known as the Ccnmittee on Salar ies , Expendi-tures and Eff ic iency. This committee wi l l he rea f t e r deal with a l l matters formerly handled by the two committees. The new,committee i s composed of two members, Mr. Geo. R. James, and Mr. E. H. Cunningham. Mr. E. 1 . Smead of the Board ' s s t a f f has been designated, as secretary of the committee.

In fur ther ing i t s work the committee wi l l in general be

guided Ty the following:

1 - The individual boards of d i rec tors of the several banks are responsible f o r the proper, economical, e f f i c i e n t and safe operation of t h e i r respective banks. I t i s not the purpose of the Board or i t s committee to in any sense d i rec t the operation of any bank, hi t ra ther to look d i rec t ly to the d i rec to rs of the banks fo r sa t i s fac to ry r e su l t s and you are, therefore , requested t o read t h i s ccmmunicaticn, and a l l others that may be subsequently forwarded cn the same subject , t o the d i rec to rs of your bank.

2 - I t i s the purpose of the Board, working through i t s com-mittee, to keep i t s e l f informed so f a r as possible as t o the com-parat ive ef f ic iency of operation of the banks and to make available to the banks such information as i t has which wi l l be helpful to them in t h i s regard. While i t i s appreciated tha t the quarter ly exhibits- of operating expenses do not in many cases a f fo rd a t rue basis of comparison between the banks and tha t , therefore , the d i f -ferences in the cost f igures as indicated ly these exhibi ts do not necessari ly indicate the comparative ef f ic iency of operations, the Board nevertheless believes that fu r the r e f f o r t should be made to reconcile these f igu res .


WASHINGTON

July 29, 1924. St . 4170.


357 St . 4170.

2

3 - The Board i s intending to ask the next Governors' Con-ference' to give serious consideration t o the matter of operating expenses and t o i*eq,uest tha t the governors adopt at tha t confer-ence some plan fo r d e f i n i t e l y dealing with the subject of expenses with a view to securing the greates t possible e f f ic iency in the operation of a l l banks. Any such plan should, of course, make i t possible f o r the banks to benefi t from the experience of each other, and f o r t h i s reason i t might well include the carrying can of some portion of th i s work through a committee of operating o f f i ce r s t o be nameet by the governors.

4 - While in the opinion of the Board the economical oper-at ion of the banks is essent ia l ly an individual bank problem, the Board is nevertheless charged by law with cer ta in dut ies of super-vision and regulation, and i t believes i t to be i t s duty to see tha t every bank is run in the most economical manner possible and that the operations of the several banks are reasonably comparable.

This l e t t e r is sent you at t h i s time in order tha t you may, between now and the next Governors1 Conference, be giving the matter consideration so that the conference may be able to formulate d e f i n i t e plans fo r a constructive program of greater e con any and e f f i c i ency in the operation of the banks.


Geo, R. Jarrjes, Chairman, Committee on Salar ies , Expend i tures and Eff ic iency.

LETTER TO GOVERNOR OF EACH FEDERAL RESERVE BANK.



August l 4 , 1924. St. 4177.

SUBJECT: Rincticmal Expenses Sec ond Quart e r 1924.

Dear S i r :

There i s enclosed herewith one copy of the

Functional Expense Exhibit fo r the Second Quarter of

1924, showing fo r each Federal Be serve bank and

branch the cost of operating each functionuand ex-

pense un i t , together with the number of o f f i ce r s and

of employees, the t o t a l number of un i t s handled,

un i t s handled per employee per day, and uni t costs .

Copies of the exhibi t are a l so being

mailed to the Governor of each Federal reserve bark.

Very truly yours,

E.Iu Smead, Secretary, Committee on Salaries, Expenditures and. Eff ic iency.

Enclosure.

LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BANK -




WASHINGTON


August 1£, 1924. s t . U193,

SUBJECT: Statement showing Operations of Federal Reserve Clearing

System.

Dear S i r :

There is enclosed herewith a copy of a

statement (St* 4 l9 l ) showing the operations of the

Federal reserve clearing system during June 1924;

The publication of t h i s statement in the Federal

Deserve Bul le t in has been discontinued, aod in-

stead i t wi l l hereaf te r be mimeographed and d i s -

t r ibu ted to the Federal reserve banks as per the

attached form.



Enclosure.

LETTER TO THE GOVERNOR OF EACH FEDERAL RESERVE BARK



WASHINGTON


August 20, 1924, St . 4ig4.

SUBJECT: Condition of Member Banks as of June 30, 1924.

Dear S i r :

For your information there i s enclosed,

herewith a preliminary statement regarding the

condition of a l l member banks, combined as of

June 30, 1924. The Board's abstract (No. 25)

showing the detailed f igures fo r State bank and

Trust company members and the combined f igures

for a l l member banks i s now in the hands of the

p r i n t e r and wil l be ready fo r d i s t r ibu t ion in

the near fu tu re .

Very t ru ly yours,


LETTER TO EACH FEDERAL RESERVE AGENT


1 881

CONDITION OF MEMBER BANKS AS OF JUNE }0, 1924.

Condition repor ts as of June 30, 1924, which, have now become avai lable , ind i -

cate tha t t o t a l loans and investments of a l l member banks on tha t da te were

$27*262*000,000, marking a fu r the r increase of $4)0,000,000 over the record amount

shown for March 31, 1924. The increase fo r the period was c h i e f l y in the banks'

investments which advanced by $342,000,000, while loans increased by $88,000,000.

Of the growth in investments, $38,000,000 represented addi t ional purchases of U. S.

secur i t i e s , and $304,000,000 - addi t ions t o the banks' holdings of corporate obliga-

t i ons . A rapid growth of demand deposi ts , Including c e r t i f i e d and ca sh i e r s ' checks,

carr ied t h e i r t o t a l t o $16,293*000,000, the l a rges t amount on record, and time de-

pos i t s increased to $9*203,000,000, a l so a la rger t o t a l than at any previous time.

The attached tab le presents f igures showing the condition of s t a t e bank and

t r u s t company members and of a l l member banks on June 30, 1924. The following

statement shows changes in the p r inc ipa l resources and l i a b i l i t i e s of a l l member

banks on the l a s t c a l l date compared with three months and with a year ago:

Increase (+) or decrease ( - ) on June 30, 1924, since

March 11. 1924 June 30. 1923

Loans and discounts (including overdraf ts ) United States s e c u r i t i e s Other bonds, stocks and s ecu r i t i e s

Total loans and investments

Demand depos i t s ( including c e r t i f i e d and cash ie r s ' checks)

Time deposi ts B i l l s payable and rediscounts Acceptances outstanding

+ $ 88,000,000 + 35,000,000 + 304,000,000

+ $ 384,000,000 - 262,000,000 + 465,000,000

+ 430,000,000 + 587,000,000

+ 707,000,000 + 313,000,000

242,000,000 - 108,000,000

+ 1,132,000,000 + 825, OX, 000 - 570,000,000

60,000,000


' 0 6 2

*** 2 **

EESOUBCES AND LIABILITIES OF STATE BANK AND TRUST COMPANY MEMBERS AND OF ALL MEMBER BANKS ON JUNE 30, 1924,

Loans and discounts ( including overdraf ts )

U. S. s ecu r i t i e s Other bonds, stocks and s ecu r i t i e s

Total loans and investments

Cash in vaul t Reserve with F. R. Banks Items with Federal Reserve Banks in

process of c o l l e c t i o n Due f r an banks and bankers Exchanges f o r c lear ing house, and checks

on other banks in same place All other rescurce s

Total resources

Demand depos i t s Time depos i t s U. S. depos i t s Cer t i f i ed aid cash ie r s ' checks

Total depos i t s (other than bank)

Due to banks and bankers B i l l s payable and rediscounts Acceptances Capital stock paid i n Surplus All other l i a b i l i t i e s

All member banks

State bank and t r u s t company members

$19,264,019,000 3,607.797, ooo 4,389tft3»,QQQ-

27,261,559,000

3,854,101,000 502,907,000 304,668,000

2,030,336,000 1,669,592,000 1,740,172,000

$ 7,278,802,000 1,129,358,000 1.750.461.000

10,138,621,000

503,555,000 159,072,000 1,965,453,000 766,783,000

582,475,000 185,135,000 1,940,197,000 496,675,000

1,741,073,000 739,795,000 1 ,782 ,9# ,000 735,902,000

35,777,256,000 13,221,983,000

15,306,999,000 5,720,242,000 9,203,545,000 3,944,831, oco

178,946,000 57,375,000 983,979,000 433,766,000

25,675,460,000 10,156,214,000

1,033,984,000 162,282,000 155,896,000 697,075,000 589,669,000 426,863,000

(S t . 4194)


FEDERAL RESERVE BOARD 363 WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d September 20, 1924.

St. 4212.

SUBJECT: Condition repor t s of State bank md Trust company members, form 105-

Dear Sir.:

There are beizg forwarded to you today under separate cover copies of form 105 revised as of May 15, 1924. Please mail three copies of the form t o each State Bank and Trust company member in your d i s t r i c t with ins t ruc t ions to hold the blank forms pending receipt of a c a l l f o r condition repor t s .

Upon receipt of not ice from the Board of the b a l l fo r condition repor ts , kindly n o t i f y the banks thereof by mail i f they are located within two days% time from the Federal reserve bank, or by telegram i f not within two days1 time by mail, and request them to f i l l out the reports and mail them to you promptly - In no case l a t e r than 10 days a f t e r r e -ceipt of the c a l l .

In order tha t the compilation of the Board's abst ract showing the condition of a l l s t a t e bank and t ru s t company members combined as of the date of the next c a l l may not be undtily delayed, i t i s requested that the Reports be forwarded to the Board as soda as pract icable a f t e r they are r e -ceived by the Federal reserve bank* I f i t i s neces-sary to communicate with a bank regardirg apparent e r ro rs in i t s report , a note to that e f fec t should be made cn the report i t s e l f before i t i s mailed to the Board, and the Board should be advised of the necessary corrections when the desired information $e received from the member bank-

Kindly acknowledge rece ip t .



LETTER TO EACH FEDERAL RESERVE AGENT. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

k FEDERAL RESERVE BOARD

WASHINGTON


September 3i 1924. St . 4215*

SUBJECT: Abstract of Condition Reports of State Bank and Trust Company Members and Of a l l Member banks

as of June )0, 19<^•

Dear S i r :

We ate forwarding to you under separate

covet copies of the Board1* Abstract No. 25

showing the conditicn of State Bank and Trust Com-

pany members and of a l l member banks as at c lose

of business on June 30, 1924. Consolidated

f igures f o r a l l member banks, both National and

State, a fe shown on pages 1 and 12.

Please forward one copy of the abs t rac t

t o each State Bank and Trust Coup any member in

your d i s t r i c t that has expressed a desire to r e -

ceive copies of abstracts as issued.

Very t ruly yours,

E.L.Smead, Chief, Division of Bank Operations.

TETTER TO ALL FEDERAL RESERVE AGENTS.




September l6, 1924. St . 4226,

Dear Si r :

One of the reserve banks recently asked the committee for a ru l ing with respect to the a l locat ion of express charges paid on daily ship-ments of checks to banks where shipment was made by express rather than by mail. Farther inquiry has e l ic i ted the information that in at leas t three cases reserve banks are forwarding checks t o cer tain banks by express where the volume i s such as to make i t possible to e f f ec t a saving by th i s method. Your a t ten t ion i s called to th i s fac t with the suggestion that you make an invest igat ion to see whether i t would be possible for your bank to e f f e c t a similar saving, unless such investigation has already been made. In t h i s connection i t i s , of course, necessary to consider the matter of service, i . e . , whether items sent by express would be received in t ins to insure t h e i r co l lec t ion as promptly as i f sent by mail.

In case you are making of should he rea f t e r make any shipments of checks by express, the ex-press dharges thus incurred should be charged on expense report form $6 against item "Expressage", and in the funct ional expense report to the "Pos-tage" function against a new item "Expressage on outgoing checks" to be wr i t ten in a f t e r "Bent of postage meter machine."

Very t ru ly yours,

E. L» Smead, Secretary, Committee on Salar ies , Expenditures and Eff ic iency.

LETTER TO EACH PROCEDURE COMMITTEE C T ~ A I E I A T

'*3.



WASHINGTON

e t o t h e f e d e r a l r e s e r v e b o a r d

September 17, 1924 a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o

Dear S i r :

The Board's Committee on Sa la r ies , Expenditures and Ef f ic iency has recent ly corresponded with the Federal Reserve Agents concerning the a l locat ion of expenses t o the "Administra-t ion" and "Federal Reserve Note Issues" u n i t s of the Federal Reserve Agents Function. From t h i s correspondence i t appears tha t a majori ty of the banks in a l loca t ing expenses have considered the "Administration" unit as intended to cover general adminis-t r a t i v e expenses connected with work under the supervision of the Federal Reserve Agent and, in some cases at l e a s t , have included expenses in t h i s un i t which c l ea r l y r e l a t e t o other funct ions , such as Bank Examinations and S t a t i s t i c a l & Analyt ical . I t a l so appears that the expenses charged to Federal Reserve Note Issues un i t include in rnary cases the cost of a number of operations which are in no respect re la ted to the note issue work.

I t has been decided t o el iminate in f u t u r e re -por t s the Administration un i t of the Federal Reserve Agent's Function on page 2b of Form "E", as i t appears from the i n fo r -mation furnished , to the Committee tha t the adminis t ra t ive ex-pense r e l a t i n g to the note issue work is, in most cases, scarcely s u f f i c i e n t in amount t o be measured.

The expenses here tofore charged to the Adminis-t r a t i o n uni t of the Federal Reserve Agent's Junction should accordingly, beginning with July 1, 1924, be charged t o other u n i t s as nearly as may be in accordance with the service ren-dered. Some of the du t ies , the cost of which has here tofore been charged in ce r t a in cases t o e i t h e r the Ncte Issues un i t or t o the Administration un i t , are s tated below together with the uni t to which the expense is properly chargeable.

Handling appl icat ions of NaticnAlBanks for fidu-ciary powers.

Handling appl ica t ions under Clayton Act. " " for acceptance powers.

Analyzing repor ts of condition - National and Sta te Banks.

F i l ing earning and dividend repor t s . Applications fo r membership. Applications to e s t ab l i sh branches, e t c .

The above should oe charged t o Bank Examinations Function.


I 8 6 7

- 2 - S t . 4229-

Capital stock applications - Issue and surrender. Maintaining capi ta l stock reg i s t e r , issuing c e r t i f i -

cates , e tc . The above should be charged to General Books un i t , Accounting

Func t i on.

Handling weekly condition reports of selected member banks.

Weekly report of bank deb i t s . Tabulation of Clearing House statements* Compilation of annual r epor t .

The above should be charged t o S t a t i s t i c a l u n i t , S t a t i s t i c a l & Analytical Function.

Election of d i r ec to r s . Cost of p r in t ing annual repor t .

The above should be charged t o the General Overhead Control-lable Rinct ion. '

Charges to be made to the Federal Reserve Note Issues un i t should represent only such expenses as are incident to the issue of Federal Reserve Notes in accordance with the mamal.

In any case where an Assistant Federal Reserve Agent or another person on the s t a f f of the Federal Reserve Agent per-forms dut ies wnich are of benef i t t o another funct ion of the bank and which are not spec i f i ca l ly provided for in' any function under the control of the Agent, a portion of the salaty bf such person should be allocated t o the un i t benefited by the service rendered; and i t i s suggested in any such case that the question of a l loca-t ion of salary be taken up by the Agent and the Governor with a view td making a f a i r d i s t r i bu t i on of the expense.

I t i s oelieved that i f the above instruct ions are ca re fu l ly followed in the preparation of future expense repor t s Form "E", the reports submitted by the several banks w i l l be more comparable and that the actual cost of conducting the a c t i v i t i e s coming under the control of the Federal Reserve Agent w i l l be more accurately s ta ted. Will you, therefore , be governed by the above in the preparation of future reports .


Geo. R. James, Chairman, C omrni tt.ee on Salar ie s, Expenditures and Eff ic iency.

LETTER TO EACH FEDERAL RESERVE AGENT




SUBJECT: Expense Budget*

Dsar Sir?

Replies received from the Federal reserve "banks to the Board's l e t t e r St . U167 of July 29, 1924, inquir ing as to whether the banks have i n operation any form of budget control of t h e i r expenses, ind ica te that the New York, Cleveland and Chicago banks are now operating under a budget , tha t the Kansas City bank has an expense control system which embodies some of the f ea tu r e s of the budget system, and that the Richmond and Minneapolis banks intend to i n s t a l l a budget system i n the near future* Those banks which have been operating under a budget f o r some time s t a t e tha t i t has been a material f a c to r i n r e -ducing expenses.

The subject of budget control i s having the serious consideration of the Board and the topic wi l l be placed on the program fo r discussion a t the j o in t conference of Federal Reserve Agents and Governors of the Federal reserve banks to be held i n Washington beginning November 10. - I t w i l l be appreciated, the re fore , i f you wi l l give th i s subject ca re fu l consideration so that the conference may be able to formulate de f in i t e recommendations regarding the adoption and operation of the budget system f o r the control of the operating ex-penses of the banks.

In order tha t you may have a general idea of the s i tua t ion a t each of the banks i n regard to t h i s question, there i s enclosed herewith a mimeographed statement, St. 423§ , summarizing the rep l i e s received from the Governors to the Board1,s l e t t e r of July 29.


WASHINGTON September IS, 1 9 2 4 . St.4235,

Geo. R. James, Chairman, Committee on Sa la r i e s , Expenditures and Eff ic iency.

Enclosure.

LETTER TO GOVERNOR OF EACH FEDERAL RESERVE BANK Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

St.4236*

Sumriary of r e p l i e s received in answer to the Board's l e t t e r S t , 4 l 6 j of July 29, 1924, subject "Expense Budget,M

GENERAL SUMMARY

I Banks having some form of Budget Control:

In e f f e c t

1. New York

2. Cleveland

3. Chicago

4. Kansas C i ty (pa r t i a l )

Since Jan. 1, 1921

Since July 1, 1924

Results

Big f ac to r i n reducing expenses.

Too ea r ly to repor t . (Operating Depts . : Jan, 1,1924 Has been a material (Agent's Dept.: For .1} years, f a c t o r i n reducing ex-

penses. During l a s t 2 years Sa t i s f ac to ry fo r some

departments.

I I Banks planning to i n s t a l l Budget System: Date

1. Richmond January 1, 1925 2. Minneapolis As soon as poss ib le

I I I Banks not operat ing under any form of Budget Control and which have made no plans fo r i n s t a l l i n g such a system:

1. Boston 2, Philadelphia

3. Atlanta 4. St. Louis

5. Dallas 6. San Francisco

DETAILED SUMMARY

BOSTON 1, Has never undertaken to i n s t a l l a budget system, 2. Budget might be establ ished and lived up to i n a few departments, 3- Certain expenses cannot be an t ic ipa ted : Example - Note issuance and Fiscal

Agency. 4. Operations in such departments aa Discounts, Transi t and Currency are more

act ive at c e r t a in times of the month and at c e r t a i n seasons of the year than at o thers and force must be maintained to handle peak loads.

5. Trend df ' expenses has been downward during pas t two years : Expenses covering f i r s t half of 1924 are $80,000 l e s s than f o r corresponding period i n 1923.

NEW YORK 1. Has operated under expense budget since January 1, 1921. 2. Has been one of the biggest f ac to r s i n reducing the operat ing expenses. 3. Plan i s as fol lows:

a. Detailed f i g u r e s covering the p r inc ipa l items of expenditure during the pas t two years are submitted to department heads to a s s i s t them in making es t imates . Committee of three o f f i c e r s reviews these est imates and makes report to O f f i c e r ' s Council and the budget i s then submitted to d i rec tors f o r f i n a l approval.


- 2 ~ St . 423^. 37i

b« A monthly departmental expense report with comparative f igures shows whether ejqpenses are running within "budget and also wBether they have increased or decreased over the same period of the year before.

4, 3upplamenting the budget i s the following system of making purchases; a,. Every requ i s i t ion must be signed by o f f i c e r s i n charge of department

and i f i n excess of $100 must be approved by senior o f f i c e r as well. b. Requisition then goes to Planning Division, which passes on i t s necess i ty

and whether or not the a r t i c l e i s standard both f o r manufacturer and fo r bank.

e. Deputy Governor then vises a l l purchase requ is i t ions a f t e r which they are made upon a s t r i c t l y competitive bas i s .

.£«!£I! Elf HI A 1, Has not put any departments on a budget. 2, In a few instances r e s t r i c t ed appropriations have been made. 3, Cost of food i n c a f e t e r i a i s limited to approximate r ece ip t s .

1. Has jus t establ ished a budget for the las t s i x months of 1924. 2* Budgeted the expense un i t s a s now reported i n the func t iona l Expense Reports. 3, Too ear ly to repor t r e s u l t s . 4, Plan i s as fol lows:

a . Furnished each o f f i c e r with a form showing cost f o r the f i r s t half of 1.92ft-of the expense un i t s under Ms supervision and requested a report on the probable expenses fo r the l a s t half of year. Budget Committee re-viewed est imates and approved f igures were reported back to o f f i c e r s with statement that the amounts approved were the maximum amounts tha t could be expended and even these should be fu r t he r reduced i f poss ib le .

BICSMOHD 1. Has not yet i n operation a budget control but expects to i n s t a l l one by

January 1, 1925. 2, Present system of expense control i s a t a l l times under the carefu l super-

v is ion of the executive o f f i c e r s and i s designad to maintain a r igid super-vis ion over sa l a r i e s of employees, promotions and t r a n s f e r s , terminations and replacements, as well as a l l purchases of supplies and equipment and the d i s -t r ibut ion of supplies from stock.

ATLANTA 1, Has never established a budget system. 2, Purchases are made on a competitive bid bas i s and approved by Managing

Committee. 3, Board of Directors reviews sa la r ies of employees every 30 days. - • - • . • • .. ;

GmC&GO 1. Operating departments now working under budget plan fo r f i r s t year, although

Agent's department has used budget f o r three years . 2. Substantial reduction has been effected in operating force and general ex*

penges of bank and the establishment of the budget i s considered a mater ia l fac tor ,

3. Plan i s as fol lows:


- 3 - St.4236.

a. Of f ice r s were furnished with forms showing detailed expenses for 1922 and 1923 and asked fo r estimates for 1924-. Procedure Conuiittee reviewed estimates and made necessary revis ions, Relationship be-tween actual expense and budget i s shown in monthly expense repor ts .

ST. LOUIS 1. No budget system in e f f e c t as local procedure committee has been unable to

see wherein a benef i t would be derived from i t s adoption. 2, If budget system i s es tabl ished, i t should in no way i n t e r f e r e with the

present pol icy of the bank regarding economy and e f f i c i ency , which has been very successful .

MINNEAPOLIS 1. Has never established a budget system f o r the control of expenses. 2. Suggestion, however, appeals to Governor and such a system will be put

in operation as soon as poss ib le . 3. Points out that there are some departments, f o r example, "Failed Banks"

where the budget system would not be applicable.

KANSAS CITY 1. No regular budget system although such a system p a r t i a l l y i n operation dur-

ing l a s t two years. 2, Estimates of expenses made a t various periods and i f actual expenses ex-

ceed estimates, an invest igat ion i s made. 3- At present operating costs are being compared with expenses f o r correspond-

ing period of 1923 and any increase wi l l be immediately invest igated. 4. Believe i n budget system as a whole but could not {maintain e f f i c i e n t

service i f kept within a cost of operation that was estimated during a previous period when conditions may have been quite d i f f e r e n t .

DALLAS 1„ Budget has not been established because i t was thought that on account of the

size of the organization and the character of work performed, the expenses could be controlled in other ways.

2. If the Board concludes, a f t e r a fur ther study, that the plan would work to the advantage of a bank of t h i s size and performing the character of operations performed by us we would be glad to give fu r the r consideration to the matter.

SW FRANCISCO 1. Has not adopted a budget system as a means of control l ing expenditures. 2. Functional expense reports have been an admirable means of detecting any

material var ia t ion in the cost of conducting the d i f f e r e n t operating functions of the bank. These repor ts do not, however, provide the e s sen t i a l f a c t s f o r an -intsry i s t r i c t ' -c arparis cn. +of expenses.

3- Greatest help we could receive would be a v i s i t from an operating represent-a t i v e ; of Board's Committee to determine whether or not the bank i s economically and e f f i c i e n t l y conducting i t s various operations.



WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o September 18, t h e f e d e r a l r e s e r v e b o a r d g t , 4 g j ) 7 •

SUBJECT: Budget Expense.

Dear S i r :

I am enclosing herewith for your information a

copy of a l e t t e r (St . 4235 dated September 18, 1924) sent

to the Governors of the Federal reserve banks advising

them that the subject of budget control i s having the

serious consideration of the Board and that the topic

wil l be placed on the program fo r discussion at the

joint conference of the Federal reserve agents and

Governors of the Federal reserve banks to be held in

Washington beginning November 10.

I t r u s t you wi l l give th i s matter ca re fu l

consideration and be prepared to discuss i t fu l ly at

the forthcoming conference* As you wi l l note, the

l e t t e r to the Governors ca r r ies an.enclosure summa-

r iz ing the rep l ies received from the Governors to the

Board's l e t t e r St . Ulfay of July 29 on the subject of

Budget Expense.

Very t ru ly yours,

Geo. R. James, Chairman, Ccmmittee on Salarie s, Expenditures and Eff ic iency.

LETTER TO EACH FEDERAL RESERVE AGENT" Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

! 07.3 FEDERAL RESERVE BOARD


SUBJECT: Expense Budget.

Dear S i r :

R e p l i e s received from the Federal reserve banks to the Board1s l e t t e r St. 4l6? of July 29, 1924, inquir ing as to whether the banks have in operation any form of budget control of t h e i r expenses, indica te that the New York, Cleveland and Chicago banks are now operating under a budget, that the Kansas City bank has an expense control system which embodies some of the f ea tu re s of the budget system, and that the Richmond and Minneapolis banks intend to i n s t a l l a budget system i n the near fu tu re . Those banks which have been operating under a budget f o r some time s ta te that i t has been a material f ac to r i n r e -ducing ejpenses.

The subject of budget control i s having the serious consideration of the Board and the topic wil l be placed on the program for discussion a t the j o i n t conference of Federal Reserve Agents and Governors of the Federal reserve banks to be held i n Washington beginning November 10. I t w i l l be appreciated, the re fore , i f you w i l l give th i s subject ca re fu l consideration so that the conference may be able to formulate de f in i t e recommendations regarding the adoption and operation of the budget system fo r the control of the operating ex-penses of the banks.

In order tha t you may have a general idea of the s i tua t ion at each of the banks in regard to t h i s question, there i s enclosed herewith a mimeographed statement r St.4236 , summarizing the rep l i e s received from the Governors to the Board1s l e t t e r of July 29.


Geo. R. James, Chairman, Committee on Sa la r ies , Expenditures and Efficiency,

WASHINGTON September 18, 1924. St.4235.

Enclosure.

LETTER TO GOVERNOR OF EACH FEDERAL RESERVE BANK Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

st . i*23G. 8 7 4

Summary of r ep l i e s received in answer to the Board*s l e t t e r St.Ul67 of July 29, 1924, subject "Expense Budget,w

GENERAL SUMMARY

Sinc-e Jan. 1, 1921

I Banks having some form of Budget Control:

In e f f e c t

1. New York

2. Cleveland

3. Chicago

4. Kansas Ci ty(par t ia l )

Results

During las t 2 years

I I Banks planning to i n s t a l l Budget System:

January 1, 1925 As soon as possible

Big fac tor i n reducing expenses.

Since July 1, 1924 Too ear ly to repor t . (Operating Depts.:Jan. 1,1924 Has been a material (Agent*s Dept.: Foi .13 years, f ac to r i n reducing ex-

penses. Sa t i s fac tory fo r some departments.

1. Richmond 2. Minneapolis

I I I Banks not operating under any form of Budget Control and which have made no plans fo r i n s t a l l i n g such a system;

1. Boston 2. Philadelphia

3, Atlanta 4. St. Louis

DETAILED SUMMARY

5. Dallas 6, San Francisco

BOSTON 1. Has never undertaken to i n s t a l l a budget system. 2. Budget might be established and lived up to i n a few departments, 3. Certain expenses cannot be ant ic ipated: Example - Note issuance and Fiscal

Agency. 4. Operations in such departments aa Discounts, Transit and Currency are more

. , act ive at ce r ta in times of the month and at ce r ta in seasons of the year than at others and force must be maintained to handle peak loads.

5. Trend i f ' expenses haa been downward during past two years: Expenses covering f i r s t half of 1924 are $80,000 less than f o r corresponding period i n 1923.

NEW YORK 1. Has operated under ejgpense budget since January 1, 1921. 2. Has been one of the biggest fac tors i n reducing the operating expenses. 3. Plan i s as fol lows:

a. Detailed f i gu re s covering the pr incipal items of expenditure during the past two years are submitted to department heads to a s s i s t them in making estimates. Committee of three o f f i c e r s reviews these estimates and makes report to Of f i ce r 1 s Council and the budget i s then submitted to directors f o r f i n a l approval.


- 2 - St. 4636^375

b. A monthly, departmental expense report with c-croparative f i g u r e s shows whether expenses are running within "budget and a l so whether they have increased or decreased over the same period of the year before .

4. Supplementing the budget i s the following system of making purchases: a. Every r e q u i s i t i o n must be signed by o f f i c e r s i n charge of department

and i f in excess of $100 must be approved by senior o f f i c e r as well , b. Requisit ion then goes to Planning Division, which passes on i t s necess i ty

and whether or not the a r t i c l e i s standard both f o r manufacturer and f o r bank.

c . Deputy Governor then v i ses a l l purchase r e q u i s i t i o n s a f t e r which they are made upon a s t r i c t l y competitive b a s i s ,

PHTLADEIPHIA 1 . Has not put any departments on a budget* 2. In a few ins tances r e s t r i c t e d appropriations have been made. 3. Cost of food i n c a f e t e r i a i s limited to approximate r e c e i p t s .

CLEVELAND 1. Has j u s t es tab l i shed a budget f o r the l a s t s i x months of 1924, 2. Budgeted the expense u n i t s a s now reported i n the Functional Expense Reports.

• 3* Too ea r ly to r epo r t r e s u l t s . Plan i s as fo l lows : a . Furnished each o f f i c e r wi th a form showing cost f o r the f i r s t half of

192k of the expense utoits under his supervision and requested a report on the probable expenses f o r the l a s t half of year. Budget Commit tee r e -viewed es t imates and approved f igures were reported back to o f f i c e r s with statement tha t the amounts approved were the maximum amounts t ha t could be expended and even these should be f u r t h e r reduced i f poss ib le ,

BI OSMOND 1. Has not yet i n operat ion a budget control but expects to i n s t a l l one by

January 1, 1925. 2, Present system of expense control i s a t a l l t imes under the ca re fu l super-

v i s i o n of the executive o f f i c e r s and i s designed to maintain a r ig id super-v i s ion over s a l a r i e s of employees, promotions and t r a n s f e r s , terminations and replacements, as well as a l l purchases of supplies and equipment and the d i s -t r i bu t i on of suppl ies from stock.

m a m 1, Has never es tabl ished a budget system. 2; Purchases are made on a competitive bid b a s i s and approved by Managing

Committee. 3. Board of Directors reviews s a l a r i e s of employees every 30 days. 4, .

CHICAGO 1. Operating departments now working under budget plan f o r f i r s t year , although

Agent's department has used budget f o r three years . 2. Substant ia l reduct ion has been e f fec ted i n operating fo rce and general ex-, 4*>

penses of bank and the establishment of the budget i s considered a mate r ia l f ac to r ,

3# Plan i s as fo l lows:


° 7 6 , 3 - St.4236.

a. Of f i ce r s were furnished with forms showing detailed expenses fo r ' 1922 and 1923 and asked fo r estimates for 1924-. Procedure Comnittee

reviewed estimates and made necessary revis ions . Relationship be-tween actual expense and budget i s shown i n monthly expense repor ts .

ST. LOCJIS 1, Ho budget system in e f f e c t as local procedure camiittee has been unable to

r see wherein a bene f i t would be derived from i t s adoption. 2, If budget system i s es tabl ished, i t should i n no way i n t e r f e r e with the

present pol icy of the bank regarding economy and e f f i c i ency , which has been very succ.es sful*

MINNEAPOLIS 1. Has never established a budget system f o r the control of expenses, 2. Suggestion, however, appeals to Governor and such a system wil l be put

in operation as soon as poss ib le . 3. Points out that there are some departments, f o r example, "Failed Banks"

where the budget system would not be applicable,

KANSAS CITY 1. Ho regular budget system although such a system p a r t i a l l y i n operation dur-

ing l a s t two years, 2. Estimates of expenses made a t various periods and i f actual expenses ex-

ceed est imates, an inves t igat ion i s made. 3. At present operating costs are being compared with expenses f o r correspond-

ing period of 1923 said any increase wi l l be immediately invest igated. b. Believe i n budget system as a Whole but could not toaintain e f f i c i e n t

service i f kept within a cost of operation that was estimated during a previous period when conditions may have been quite d i f f e r e n t .

m m 1. Budget has not been established because i t was thought that on account of the

size of the organization end the character of work performed, the expenses could be controlled i n other ways.

2. If the Board concludes, a f t e r a fur ther study, that the plan would work to the advantage of a bank of t h i s size and perf orming the character of operations performed by us we would be glad to give f u r t h e r consideration to the matter.

SAN FRANCISCO ' 1. Has not adopted a budget system as a means of control l ing expenditures. 2. Functional expense reports have been an admirable means of detect ing any

material var ia t ion in the cost of conducting the d i f f e r e n t operating funct ions of the bank. These repor t s do not , however, provide the e s sen t i a l f a c t s f o r an • i n t srj9 i s t r i c t- xt oqiaris en. t>fexpenses.

3. Greatest help we could receive would be a v i s i t from an operating represent-a t i v e ; of Board's Committee to determine whether or not the bank i s economically and e f f i c i e n t l y conducting i t s various operat ions.



WASHINGTON

0 7 7


October 7, 1924. s t . U263.

SUBJECT: Cost of Bank Examination and Credit work.

Dear S i r :

The wide va r i a t ions in the cost of bank examination and c red i t work as shown by the quar te r ly func t iona l expense repor t s , Form E, indicate tha t ' the policy with respect to such work i s fa r from uniform among the several Federal reserve banks.

,In order / there fore that the Committee may { have f u l l information regarding the scope of the examination and credi t work carried on by your bank and of the theory upon which your pol icy with re fe rence t o sach work is based, i t wi l l be appre-c ia ted if you. w i l l kindly fu rn i sh i t with the in -formation called fo r in the attached quest ionnaires at your ear ly convenience.


Geo. R. James, Chairman, Committee on Sa la r ies , Expenditures and Ef f i c i ency .

Enclosure.

LETTER TO CHAIRMAN AT EACH FEDERAL RESERVE BANK

COPY TO GOVERNOR


BANK EXAMINATION FUNCTION. \ 8*78

State Bank Members National

Banks In cooperation with s ta te bank

author i t ies Independent

National Banks

1. How many examinations were made of member banks during the period -

January t o June 1923 July to December 1923 January t o June 1924 July to September 1924

2. How many credi t invest igat ions were made of member banks during the period -

January 10 June 1923 July to December 1923 January to June 1924 July t o September 1924

3. Show separately number of examinations and of c redi t invest igat ions made in each s ta te in your d i s t r i c t since July 1, 1923.

4. Has the cost of a l l examinaticns made since July 1, 1923, been charged to the banks examined? I f not, give l i s t of banks not charged and the reasons therefor .

5* Has the cost of a l l c red i t investigations made since July 1, 1923, been absorbed by the reserve bank? I f not , give names of banks charged and reasons the re fo r .

6. Describe general determining fac to rs that prompt you t o i n s t i t u t e credi t inves-t iga t ions .

7. Are credi t investigations conducted regularly of a l l member s t a t e banks, whether or not they are substant ial borrowers?

(a) In a l l s t a t e s in your d i s t r i c t .

(b) In s t a t e s where examinations made by s ta te au thor i t i es are not acceptable to reserve bank d i rec to r s .

8. Describe b r ie f ly the character and extent of the c red i t invest igat ions made by your examiners.

9 . a. How many examiners do you now have? 1. Capable of making independent c red i t investigations? 2. Who are not placed in charge of c redi t investigations?

b. Give name an* salary of each examiner and ass i s tan t examiner. c. What l imi t is placed on the amount allowed examiners for t ravel ing expenses?

(St . 4263a)


- 2 -

10. a- Gi re name and sa la ry of each employee (other than examiners) receiving $2,500 or more per anum.

b. Gize number and average sa la ry of employees receiving l e s s than $2,500 pe r anum

11. Do you receive copies of r epor t s of examinations of State bank members from each S ta t s bank Superintendent in your d i s t r i c t ?

12. Describe the extent of the analys is made of repor ts of examination of -

(a) State member banks.

(b) National banks.

13. Describe b r i e f l y each separate set of records kept in the examination depar t -ment and enclose copies of a l l forms used in the department.

14. Are t he r e any employees assigned t o the examination funct ion mho are devoting a subs tan t i a l por t ion of t h e i r time to the <*crk of some other function without a l loca t ion of the expense? If so give d e t a i l s .

(St . 42bja)


MAINTAINING- CREDIT INFORMATION EXPENSE UNIT LOANS, REDISCOUNTS AND ACCEPTANCES FUNCTION

State the number of c red i t f i l e s carr ied by you on corporat ions, f i rms, p a r t n e r -ships and indiv idua ls .

(a) Domiciled in your oxm d i s t r i c t .

(b) Domiciled outside your d i s t r i c t .

How many of the credi t repor ts carried by you on concerns domiciled outside your d i s t r i c t s were, obtained. ~

(a) Direct from such concerns.

(b) Through the f \ R, Bank of the d i s t r i c t in which the concern is domiciled.

(c) Through report ing c red i t agencies,

Ho# many credi t f i l e s have been s ta r ted since January 1, 1924?

a. I s a l l c red i t information furnished by the borrowing member banks? b* If not, what percentage i s obtained frcm other sources? c. Lis t p r inc ipa l sources from which such inforrnaticn i s obtained.

a- Do you require borrowing banks to f u r n i s h credi t statements covering a l l notes rediscounted?

b. If not, what exceptions are permitted?

Do you fu rn i sh blank forms to member banks on mhich c red i t statements of borrowers are t o be submitted? If so, please enclose sample of each such form.

a* Ho* many subscript ions do you make t o c red i t repor t ing agencies? b. State name and cost of each service* c, Eov do you value such service as compared with c red i t repor ts received through

borrowing member banks?

a* Do you obtain special repor ts from credi t agencies? b. If so, how many such repor ts have you received since January 1, 1924? c. What agencies mere they received from and what' was the t o t a l cost of the re-

repor ts received from each agency?

(St. 4263b)


Do you conduct any special invest igat ion of any credi t information received? If so, describe b r i e f ly and s ta te number of employees so engaged.

Do yon consider i t necessary to obtain credit information other than that shorn in the regular reports issued "by c red i t agencies, covering corporations, partnerships, individuals , e t c . , whose paper i s not under rediscount with your bank?

a. How many employees do you have i n your credi t department ? b. Give name, t i t l e and annual salary of each employee receiving $2,500

or more per anum, c. Give number and average salary of employees receiving l e s s than $2,500

per anum.

Describe b r i e f l y each record kept in your c red i t department and fu rn i sh copies of a l l forms used,

(St. 4263b)


FEDERAL RESERVE BOARD ~


SUBJECT: Auditing Departments of Federal Reserve Banks.

Dear S i r :

An examination of the outlines covering the work per-

formed by the Auditing Departments of the Federal reserve banks

recently received by t h i s Committee, indicates that a consider-

able var ia t ion ex i s t s in the auditing procedure of the Federal

Reserve banks. I t would seem, however, in view of the simi-

l a r i t y of work performed by the reserve banks, that the essen-

t i a l funct ions of an auditing department in one Federal re-

serve bank should not be materially d i f f e r en t from those in

another, and for th is reason i t has been decided to appoint

a committee of bank o f f i ce r s to make a complete study of t h i s

subject and submit a report there cn. The committee named

is as follows:

Mr» I>, R. Rounds, Chairman, General Auditor, Federal Reserve Bank of New York

Mt, F* H. Holman, Auditor, Federal Reserve Bank of San Francisco

Mr. J . S. Walden, J r . , Controller, Federal Reserve Bank of Richmond,

The work of auditing i s of very great importance to

the reserve banks and should at a l l times be carried on with a

view to providing adequate protection with a minimum of expense.

WASHINGTON October S, 1924.

St. 4264.


- 2 -

Bach reserve bank i s e n t i t l e d to, and should have, the oene-

f i t of the experience of every other reserve bank, and the

committee bel ieves tha t t h i s r e s u l t can best be accomplished

by having a committee of exper ts , who are thoroughly fami l -

i a r with a l l operat ions of Reserve banking, formulate a

standard of audi t ing procedure which may be used by each

bank in i t s audi t ing work. I t i s believed that i f the

above-named committee submits a complete plan f o r audi t ing

which can be accepted by a l l reserve banks as the standard

fo r t h e i r audi t ing procedure, the r e s u l t wi l l not only be

a s u b s t a n t i a l saving of expense but an improvement in

audi t ing methods as wel l .


Greo. R* James, Chairman, Committee on Sa la r ies , Expenditures and E f f i c i e n c y .

LETTER TO CKAIRMM AT EACH FEDERAL RESERVE 3ANK

COPY TO GOVERNOR



WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD O c t o b e r 9 * 1 9 * 2 4 ,

St.4268.

SUBJECT: BtiLly Balance Sheets, Forms 34 and F.R.A. - 5.

Dear S i r :

I t i s expected that the manuscripts f o r the 1925

edi t ions of f01m 3^» da i ly balance sheet of Federal reserve

bank, and form F, B. A. - 5» daily statement of Federal r e -

serve agent, wi l l be sent to the p r i n t e r in the near fu tu re .

I t wi l l therefore be appreciated i f you wi l l kindly advise

the Board promptly the number of copies of each of these

forms that wi l l be required fo r your bank (and for each of

i t s branches, i f any) f o r use during 1925. Kindly s t a t e

also any special punching that may be desired.

In the event that your bank has any changes to

suggest i n e i ther form, i t wi l l be appreciated i f you wi l l

advise us of them when replying to t h i s l e t t e r .


E. X. Efeiead, Chief, Division of Bank Operations.

LETTER TO EACH FEDERAL RESERVE AGENT. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON

J@5


October l 6 , 1924. St.4273

SUBJECT: Reports of Condition of State Banks and Trust Companies

Dear S i r :

Your courtesy wi l l be great ly appreciated i f you wi l l furn ish the Federal Reserve Board, as soon as avai lable , with two copies of the abstract of reports of condition of State banks and Trust companies i n your State on October 10, 1924, or other recent date i n case you did not issue a c a l l fo r repor ts of con-di t ion as of October 10.

If convenient to your o f f i c e , we would l ike to have sep-arate f i gu re s fo r mutual savings banks and f o r pr ivate banks, providing there are any such banks operating in your s t a t e . In case the number of each c l a s s of banks report ing i s not shown in the abs t rac t , w i l l you also be good enough to incorporate th i s i n -formation i n your l e t t e r of t ransmi t ta l . Following your usual custom i t w i l l be appreciated if you wi l l kindly segregate the data according to Federal reserve d i s t r i c t s , as the value of these data to the Board and for purposes of publ icat ion wil l be great ly enhanced, i f they can be tabulated by Federal reserve d i s t r i c t s .

The October number of the Federal Reserve Bul le t in (copy of which has been forwarded to you) contains a summary statement of the abst racts of repor ts of condition on or about June 30, 1924, of a l l banks and t r u s t companies under state supervision i n the 4g s t a tes and the Dis t r ic t of Columbia, to which your a t ten t ion i s invi ted .

A franked and self-addressed envelope, requir ing no : postage, i s enclosed fo r use i n t ransmit t ing the data requested.

Very t ru ly yours, fc*

I' I ! Walter L. Eddy, I Secretary, 1 r

Enclosure.

To State Banking Departments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis



October 16, 192U. St. 42?4,

SUBJECT: Reports of Condition of State Bank and Trust companies.

Gentlemen:

Your courtesy wi l l be great ly appreciated i f you wi l l fu rn i sh the Federal Be serve Board, as soon as avai lable , with two copies of the abstract of reports of condition of State banks and Trust companies i n your State on October 10, 1924, or other recent date in case you did not issue a ca l l fo r reports of condition as of October 10.

If convenient to your o f f i c e , we would l ike to have separate f igures for mutual savings banks and for pr iva te banks, providing there are any such banks operating i n your s t a t e . In case the number of each class of banks report ing i s not shown in the abs t rac t , will you also be good enough to incorporate th i s information i n your l e t t e r of t r ansmi t t a l .

The October number of the Federal Reserve Bul le t in (copy of which has been forwarded to you) contains a summary statement of the abs t rac ts of reports of condition on or about June 30, 1924, of a l l banks and t r u s t companies under s t a te supervision in the 4g s ta tes and the Dis t r ic t of Col-umbia, to which your a t t en t ion i s invi ted.

A franked and self-addressed envelope, requiring no postage, i s enclosed fo r use in t ransmit t ing the data requested.


Walter L. Eddy, Secre tary.

Enclosure. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON


November 1, 1924. s t . U301

SUBJECT: Report on Economy and Eff ic iency.

Dear S i r :

There are enclosed herewith two copies of the report jus t made to the Federal Reserve Board by the Committee on Salar ies , Expenditures and Eff ic iency, in which there i s presented a review.of the Committee's a c t i v i t i e s during the pas t year, an outl ine of i t s present program, and recommendations regarding the fu ture conduct of the economy and e f f ic iency work. This report i s sent you at t h i s time in order that you may be fami l ia r with the present a c t i v i t i e s of the Committee i n advance of the forthcoming conference.


Geo. R. James, Chairman, Committee on Salar ies , Expenditures and Eff ic iency .

*

> Enclosures. LETTER TO GOVERNORS AND CHAIRMEN OF ALL F. R. BANKS.


St. 4328 • Federal Reserve Board,

November 21, 1924.

STATEMENT FOB THE PRESS

Thursday November 27 being a holiday, the Board's

weekly statements of condit ion of Federal Reserve Banks and of

repor t ing member banks will be issued on Friday, November 28,

and released for publ ica t ion on Saturday, November 29.


FEDERAL RESERVE BOARD J89 WASHINGTON


November 22, 1924. st„ 4329.

SUBJECT: Condition of Member Banks as of October 10, 1924.

Dear S i r :

For your information there i s enclosed

•r ' herewith a prel iminary statement regarding the

condi t ion of a l l member "banks combined as of

October 10, 1924. The Board's abs t r ac t (No. 26)

showing the detai led f i g u r e s for State bank and

Trust company members and the combined f i gu re s

f o r a l l member banks i s now in the hands of the

p r i n t e r and w i l l be ready fo r d i s t r i b u t i o n in the

near f u t u r e .



Enclosure

\

LETTER TO ALL FEDERAL RESERVE AGENTS


CONDITION OF MEMBER BANKS AS 0? OCTOBER 10, 1924 St.-Ujpg

Loans and investments of a l l member "banks increased $1,129,000,000 between

June 30 and October 10, 1924 and aggregated $28,4 51,000,000 on the l a t t e r date.

This t o t a l i s the la rges t ever reported and i s $5>032,000,000 above the t o t a l re-

ported on March 10, 1922, the low point of the post-war period. Although increas-

es as compared with June 30 are reported for a l l Federal reserve d i s t r i c t s , the

increase in the Minneapolis d i s t r i c t was especial ly marked, while those for the

Richmond, Atlanta, St. Louis, Kansas City and San Francisco d i s t r i c t s were re la t ive

ly small. The t o t a l increase i n loans and discounts amounted to $556,000}000,

while investments went up $6331000,000. Total deposits increased $1,242,000,000

to $30,772,000,000. Over half of t h i s increase was in amounts due to banks. De-

mand deposits increased $421,000,000, time deposits - $39^,000,000, and U. S. de-

pos i t s - $123,000,000, while c e r t i f i e d and cashiers ' checks outstanding show a

decline of $330,000,000. The attached table presents f igures r e f l e c t i ng the con-

di t ion of s ta te bank and t ru s t company members and of a l l member banks on October

10, 1924.

The following statement shows changes in the pr inc ipa l resources and l i a -

b i l i t i e s of a l l member banks on the l a s t c a l l date as compared with f igures for

June 30, 1924, and fo r September 14, 1923.

Increase (+) or decrease(-) On October 10, 1924, since

June 30, 1924 Sept. 14. 1923 Loans and discounts (including overdrafts) +$556,000,000 +$963,000,000 United States s ecu r i t i e s + 287,000,000 + 172,000,000 Other bonds, stocks and secur i t i es \ + 346,000,000 + 818,000,000

Total loans and investments + 1,139,000,000 +1,953,000,000 Demand deposits (including c e r t i f i e d and

cashiers ' checks) + 90,000,000 +1,282,000,000 Time deposits + 394,000,000 +1,131,000,000 Bi l l s payable and rediscounts - 70,000,000 - 688,000,000 Acceptances outstanding + 52,000,000 + 39,000,000


— 2 —

RESOURCES AND LIABILITIES OF STATE BAM AND TRUST COMPANY MEMBERS AND OF ALL MEMBER BANKS ON OCTOBER 10, 1924.

All member State bank and banks t r u s t company members

Loans and discounts ( including ove rdraf t g) $19,819,898,000 $7,601,161,000

U, S. s ecu r i t i e s 3 , 8 9 4 , 6 2 0 , 0 0 0 1 ,318,766,000 Other bonds, stocks and s e c u r i t i e s 4,736,126,000 1,340,310,000

Total loans and investments 23,450,644,000 10,760,237,000

Cash in vaul t 527,859,000 168,507,000 Reserve with F. R. Banks 2,121,428,000 317,757,000 Items with Federal Reserve Banks in

317,757,000

process of co l l ec t ion 613,494,000 125,600,000 Due from "banks and bankers 2,430,462,000 580,318,000 Exchanges fo r c l ea r ing house, and checks

on other banks i n same place 1,091,300,000 462,155,000 All other re sources 1,865,653,000 817,470,000

Total resources 37,103,870,000 13,792,084,000

Demand deposi ts 15,729,597,000 5,938,330,000 Time deposi ts 9,597,395,000 4,138,099,000 U. S. deposits 301,803,000 116,391,000 Cert i f ied and cash i e r s ' checks 653,342,000 288 ,839,000

Total deposi ts (other than bank) 26,282,137,000 10,481,659,000

Due to banks and bankers 4,489,920,000 1,190,786,000 B i l l s payable and rediscounts 432,747,000 138,717,000 Acceptances 357,055,000 198,049,000 Capital stock paid i n 2,034,943,000 703,166,000 Surplus 1,682,646,000 609,033,000 All other l i a b i l i t i e s 1,824,419,000 470,674,000

s t . U329.



WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO

THE FEDERAL RESERVE BOARD November 26, 1924. s t . 4333.

SUBJECT: Closing of Books on December 31, 1924,

Dear S i r :

In order tha t the Board may have ample time to pass upon a l l charges which your "bank proposes to make against current earnings when the books are closed on December 31» 1924, fo r depreciation allowances, fo r reserves to take care of probable losses , and fo r other extraordinary purposes, i t i s requested that the dividend resolut ion of your Board ef Directors be mailed in time to reach the Board's o f f i c e s not l a t e r than December 10, 1924,

The dividend resolution should be accompanied with statements showing the following information:

1. Estimated gross earnings, current expenses, proposed charges to current ne t earnings, and net earnings available f o r sur-plus and franchise tax , f o r the calendar year 1924.

2. Unpaid indebtedness of fa i l ed or suspended tanks to Federal reserve bank, giving the names of the banks, indebtedness of each on November 30, character of secur i ty , i f any, and estimated losses.

3. Indebtedness to Federal reserve bank of member banks which are considered to be in an unsafe condition, giving the names of the banks, indebtedness of each on November 30« character of secur i ty , i f any, and probable losses .

4. A statement in the form outlined below, showing separately for each property acquired for Banking House purposes, (a) the cys t , amounts charged o f f t net book value, and estimated market value of land owned; (b) the cost to November 30, amounts charged o f f , reserves ca r r i ed , net book value, and estimated replacement cost of bui ldings, exclusive of fixed machinery and equipment, e i the r completed or in course of construction; (c) the cost to November 30, amounts charged o f f , reserves car r ied , and net book value of f ixed machinery and equipment.


LAND Cost to November 30 $. Amount charge d off Book value (net) Estimated market value

BUILDING INCLUDING VAULT Cost to November 30 $ Amount charged off Reserves now carried Book value (net) Estimated replacement cost

FIXED MACHINERY AND EQUIPMENT Cost to November 30 $ Amount charged off Reserves now carried Book value (net)

In the case of land on which a new building has been or i s to be constructed the cost of the land (building s i t e ) should agree with the amount reported against item 6 of quarterly bank premises report (Federal Reserve Board Form St. 2810). In case of buildings purchased and occupied as bank quarters , the reported cost of land should represent i t s f a i r market value at time of purchase. The balance of the purchase pr ice should be considered as the cost of the building.

The following ru les have been approved by the Federal Reserve Board for the guidance of the Federal reserve banks in submitting requests fo r per -mission to make special charges against current net earnings, and f o r closing of books on December J l .

1. Bank Premises, (a) Land. No charges against current net earnings wi l l be authorised by the Federal Reserve Board to cover depreciation on land where the estimated market value of the land i s equal to or in excess of i t s net book value.

(b) Buildings. In passing upon requests to set •up depreciation reserves on bank buildings, the Board w i l l in general permit a charge against current net earnings of not exceeding 2 per cent of estimated replacement cos t , including vaults but excluding fixed machinery and equipment. In case the net book value of a building i s in excess of i t s estimated replace-ment cost , the Board w i l l consider requests from Federal reserve banks for per-mission to write off a depreciation charge not exceeding the amount of such excess.

(c) Fixed machinery and equipment. A reserve should be set aside each year to cover depreciation on fixed machinery and equipment, such as bo i l e r s , engines, dynamos, motors , power pumps, e levators , heating, plumbing, l ight ing and ven t i l a t ing systems, pneumatic tubes, re-f r i g e r a t i o n p lan ts , automatic f i r e sprinkler equipment, and vacuum cleaners. Annual addit ions to t h i s reserve should be based on the estimated l i f e of the


machinery and equipment, but in no case should the annual charge exceed 10 per cent of cos t . Replacements of Fixed Machinery and Equipment should Toe charged to t h i s reserve.

(d) Estimates of the market value of land and of the replacement cost of buildings e i ther completed or in course of construc-tion should be obtained from the best available au thor i t i es . A copy of the estimates thus obtained should be enclosed with your request f o r authori ty to charge current net 'earnings with depreciation on bank premises unless similar estimates have been previously submitted to the Federal Reserve Board. For the purpose of t h i s report the estimated replacement cost of buildings including vaul ts , but excluding fixed machinery and equipment, may be arrived at by determining the mean of two amounts, namely; ( l ) the t o t a l actual cost of construct ion, and (2) the estimated cost of construction based on the lowest pr ices tha t have existed during the f i f t e e n years preceding the com-p le t ion of construction.

(e) Where proper t ies have been purchased with the in tent ion of razing exis t ing buildings and of erect ing new banking quarters the Board wi l l consider requests f o r permission to deduct from current net earnings an amount equal to the difference between the cost of the property and the market value of the building s i t e exclusive of improvements.

2. Furniture and equipment. Requests to charge off the balance remaining in the Furniture and Equipment account on December 31 should be accompanied with an itemized l i s t of a l l Furniture and Equipment carried on the books as of the date your request i s submitted and also with a l i s t of additional f u r n i t u r e , i f any, that i t i s proposed to purchase during the remainder of the year.

3- Depreciation on United States secur i t i e s . A reserve amounting to 3 per cent of the par value of U. S. conversion bonds of I9U6-U7 may be set aside to cover depreciation on such bonds. In case the present reserve for depreciation i s in excess of ac tua l depreciation as above determined such excess should be c red i ted ' to P r o f i t and Loss.

4. Surplus and franchise taxes. After a l l current expenses, dividends, depreciation allowances and other extraordinary charge-offs authorized by the Federal Reserve Board have been provided f o r , any remain-ing net earnings shal l be dis t r ibuted as follows:

(a) Transfer to surplus account a l l available net earnings providing the t o t a l surplus w i l l not as a resu l t exceed the bank's subscribed cap i t a l , in which case only such amount shal l be t ransferred as i s necessary to increase the surplus account.to an amount equal to the bank's subscribed cap i t a l .

(b) Of the balance of net earnings, i f any, 10 per cent shall be t ransferred to surplus account, and 90 per cent paid to the United States Government as a f ranchise tax.


- 4 -

I n s t r u c t i o n s as to the time and method of payment of the f r a n -chise tax w i l l as usual "be issued a t a l a t e r date by the Treasury Depart-ment.



TO CHAIRMEN OF ALL FEDERAL RESERVE BANKS.

/



WASHINGTON


December 15, 192*+. St. UlRS..

SUBJECT: Reports of Earnings, Expenses, Dividends, and Franchise Tax

Payments f o r 192U.

Dear Sir :

In order tha t the Poard may have information regarding the f inanc ia l r e s u l t s of operations 0/ Federal reserve banks dur-ing the present calendar year as soon AS prac t icable a f t e r Janu-ary 1, i t i s requested that a statement be telegraphed the Board on Friday morning, January 2, 1925» showing the following informa t i on :

(Code) EACH - Gross earnings n « . . . .$ EADS - Current expenses . . . . . . . . . . . . . . . . EARN - Current net earnings ELBA - Additions to Current net earnings* * ENID - Deductions from Current Net Earnings

Net addit ions to or deductions from current net earnings

EAST - Net earnings available f o r dividends, f ranchise t ax , and surplus

EYRE - Dividends paid EMET - Paid tg Government as f ranchise tax EVEN - Transferred 10 surplus account .

Total ( to agree with item EAST)

CAPP - Subscribed cap i t a l January 1, 1925 _________ CEDE - Surplus January 1, 1925


# I •3

I t i s also requested that the .regular monthly repor ts of earnings and expenses on forms 95> 9^, 97 sW "be accom-panied with an itemized statement showing in d e t a i l a l l additions to and deductions from current net earnings (P ro f i t and Loss account) during the year, and that in addit ion to the regular balance sheet form 3^ for the las t day of the year representing the condition of the bank a f t e r f i n a l closing of the books, a form 3^ be submitted showing the condition of the bank at close of business but p r io r to the making of any p r o f i t and loss account en t r i e s .


E. L. Sine ad, Chief, Division of Bank Operations.

•i

>

N

LETTER TO BE SENT TO THE GOVERNOR AT EACH FEDERAL RESERVE BANK.


1 8 9 8

St . 4364 Federal Reserve Board

December 19, 1924,


Thursday, December 25> being a holiday, the

Board's weekly statements of condition of Federal reserve

banks and of reporting member banks wil l be issued on

Friday, December 26, and released f o r publ ica t ion on

' Saturday, December 27 • The following week, the weekly

statements w i l l be issued on Friday, January 2» and r e -

leased f o r publ ica t ion on Saturday, January 3. .


" f ' ' p


WASHINGTON December 24, 1924,

ADDRESS OFFICIAL CORRESPONDENCE TO 4370. THE FEDERAL RESERVE BOARD *

SUBJECT: Auditing Departments of a Federal Reserve Banks.

i Bear S i r :

The committee of bank o f f i c e r s appointed to make a com-p l e t e study of the audi t ing funct ion and to submit a report thereon, of which you were advised in ny l e t t e r St . 4264 of October g, 1924, met in Washington on December g, 9 and 10, 1924, and have now sub-mitted a repor t , the p r inc ipa l object of which i s to secure

F i r s t , a safe audit designed- to provide every reasonable check and safeguard, on the operations of the banks, and.

Second, an e f f i c i e n t audit with a view to ge t t ing maxi-mum safe ty at minimum cost .

s Two copies of the report are enclosed herewith, one f o r m yourself and- one fo r the Auditor of the bank. One copy of the r e -^ port i s a l so being sent under separate cover to the Governor. I t

i s suggested that the report be ca r e fu l l y studied and, a f t e r your Auditor has had an opportunity to thoroughly f ami l i a r i z e himself with i t , that a copy of the report together with h is comments be submitted, to your Board of Directors for such act ion as i t may de-s i r e to take .

In t h i s connection I des i re to say tha t i t i s not the purpose of the Board or of t h i s committee to d i c t a t e in any way the manner in which your audi ts should be performed, but the Committee i s desirous of being of as much ass i s tance to the banks as poss ib le from the standpoint of both economy and e f f i c i e n c y . This committee believes tha t the report attached hereto out l ines the fundamental p r inc ip l e s that should govern Federal reserve

1 audi t ing, and that i t w i l l be of material help to your Board- and w your Auditor in planning and carrying out the audi t work of your

bank.


George E. James, Chairman, Committee on Sa la r ies , Expenditures and Ef f i c i ency .

TO CHAIEMEN Of ALL F. B. BANKS



ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL. RESERVP BOARD D $ C 8 m b G T 2 4 , 1 9 2 4 .

St. 4370a V

K

1 SUBJECT: Auditing Departments of Federal Reserve Banks.

Dear S i r :

For your information there i s enclosed

herewith copy of a l e t t e r that is being sent today

to the Chairmen of the Federal reserve banks, | p -4' . -m gether with a copy of the report submitted by the

^ committee appointed by the Board on October 8,

1924, to m%e a study of the auditing funct ion.

Yours very truly,

George B. James, Chairman, Committee on Salar ies , Expenditures and Efficiency

LETTER TO GOVERNORS OF ALL F. R. BANKS

).



WASHINGTON


December 31, 1924. s t . 4333.

SUBJECT: Schedule of Federal Beserve Bank Personnel f o r 1924 Annual Report.

Dear S i r :

For use in the forthcoming annual report of the Federal Reserve Board covering operations during the ca l -endar year 1924, i t i s requested that as soon a f t e r Jan-uary 1, 1925, as p rac t i cab le , you fu rn i sh the Board with a statement r e l a t ing to the personnel of your bank ( in -cluding branches, i f any) as at close of business on December 31* 1923 and 1924, made out in accordance with the form attached hereto* The statement should not take account of changes in e i ther the number or s a l a r i e s of o f f i c e r s or employees that are to be made on January 1, 1925. In determining whether or not a given individual should be l i s ted as an o f f i c e r or an an employee the Board's l e t t e r X-3532 of October 5, 1922 should be used as a guide. After the statement has been completed i t should be compared with data published on pages 249-252 of the Board's 1923 annual repor t , so that any d i f f e r -ences may be reconciled before the report i s transmitted to the Board.

Very t r u ly yours#-

Waiter I». Eddy, Secretary.

% TO ALL CHAIRMEN OF FEDERAL RESERVEBftMS


S t . 4333a

FEDERAL RESERVE BANK OF __

(including Branches)

Of f i ce r s and Employees Number Annual Salar ies

1924 1923 1924 1923

Off icers : Chairman and Federal Reserve Agent Governor Other o f f i c e r s

Employees by departments: Banking department Federal Reserve Agent's department Auditing Department Fiscal Agency Department

Total

Fiscal Agency department employees whose sa la r ies are reimbursed, by the Treasury lepartment

Other employees whose sa la r ies are reimbursed to bank, including building employees in space rented to tenants

Grand to t a l



Total



Grand to t a l



Total



Grand to t a l

Temporary employees (not included above)


frsbog_mim_v21_complete.pdf

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