frsbog_mim_v29_0366.pdf

FEDERAL RESERVE BOARD WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

X-6191

December 10, 1928*

SUBJECT: Action on Conference Recommendations.

Dear S i r ;

There are enclosed herewith, for your information, copies of l e t t e r s addressed to the Secretary of the Governors' Conference and the ' Chairman of the Conference of Federal Reserve Agents, with respect to the s ta tus before the Board of the various matters considered by either* br both of the Conferences.

Very t ru ly yours,

Walter L. Eddy, Secretary.

TO ALL GOVERNORS AND FEDERAL RESERVE AGENTS.

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

*

COPT X-6191-a

December 6, 1928.

Dear Governor Harrison:

The Federal Reserve Board has given careful consideration to the various topics discussed a t the recent conference of Governors of the Federal Reserve Banks, as reported to i t in the Secretary1s minutes which you forwarded to the Board under date of December .1, 1928. The s ta tus here of the various matters, as well as de f in i t e act ions which have been taken with respect to some of them, are as follows:

Topic I - a - Suggested revis ion of Open Market Investment Procedure. The Board s t i l l has th i s matter under advisement and consideration

i s being given to the recommendation of the Governors, as amended and adopted by the Jo in t Conference of G-overnors and Federal Reserve Agents. The matter wi l l be made the subject of a communication to a l l Federal Reserve Banks a t a l a t e r date.

Topic I-b - Discount r a t e s and open market p o l i c i e s . The Board noted that the Conference appointed a Committee to make

a study and to report to each Governor as soon as prac t icable any conclusions or recommendations which the Committee deems necessary with respect to Federal Reserve credi t operations, objectives and po l i c i e s . I t i s requested that you arrange to have a copy of the Committee's report forwarded to the Board at the time i t i s submitted to the Governors.

Topic I - c - Loans by Federal Reserve Banks to t he i r member banks. The Board concurs in the recommendation of the Conference, made

a f t e r discussion of the several re la ted subjects l i s t e d under th is general topic , that i t would be advisable to require a l l report ing member banks each week to report in the same manner now required of banks in some of the p r inc ipa l c i t i e s , the amount of the i r ca l l and time loans to brokers and dealers, secured by stocks and bonds. At an early date appropriate ins t ruc t ions wi l l go forward to a l l Federal Reserve Banks.

Topic I - c -5 - Minimum maturity on member bank co l l a t e ra l notes. Upon fu r the r consideration of the suggestion contained in the

Board's l e t t e r of September 4, 1928 (X-6124) r e l a t ive to the establish-* ment of a minimum maturity on member banks1 co l l a t e ra l notes, the Board voted not to adopt the suggestion.

Topic I -c-6 - Suggestion that special e f f o r t be made to impress upon member banks the des i r ab i l i t y of maintaining adequate po r t fo l ios of e l ig ib le paper and acquainting them with the kinds of paper e l ig ib le for rediscount (Board's l e t t e r of August 24, 1928 - X-6118),


Governor Har r i son . . . . 2 X-6191-a

The Board has voted to adopt the recommendation made "by the Confer-ence that i t issue a statement in the Federal Reserve bu l l e t i n dealing with the above question and an appropriate statement i s in the course of preparat ion and wi l l appear in an early issue of the "bulletin.

Topic I -d - Report on re la t ions with foreign banks. In the minute entry r e l a t ing to t h i s topic the statement i s made

that in addi t ion to your review of the various matters r e l a t ing to operations of fore ign banks of issue, you reviewed plans which are now pending fo r the s t ab i l i za t ion of cer tain currencies abroad. The minutes do not indicate whether or not this report was a wr i t ten one, and members of the Board have requested that i f a wr i t ten report was not prepared, copy of which can be forwarded to the Board, you furnish the Board with a memorandum se t t ing fo r th in substance your remarks concerning the various matters, p a r t i c u l a r l y those r e l a t i ng to s t ab i l i z a t i on plans which are pending at t h i s time.

Topic IV-a - Proposed revis ion of funct ional expense repor t . The Board noted the concurrence of the Conference in the views

set fo r th in the report submitted by Messrs. Smead and Rounds, and has voted to approve the i r recommendation that the funct ional expense report be continued in i t s present form.

Topic IV-b-1 - Separate f inancia l statements of corporations or firms closely a f f i l i a t e d with the borrower.

The Board noted the view of the Conference that inasmuch as the re la t ive provisions of Regulation A were amended only recently, i t would be pre fe rab le as a p rac t i ca l matter not to suggest another amendment to the regula t ion pending fu r the r experience.

Topic IV-b-2 - Des i rabi l i ty of amending Sections 7 and 9 of Regulation A so as to except from the prohibi t ion on the discount of paper bearing the signature or endorsement of nonmember banks, b i l l s of exchange payable, a t sight or on demand of the kind described in Section 7 (Board's l e t t e r X-6145 dated September 26, 1928).

In view of the understanding had at the Jo in t Conference on JTovanber 16th, that the s i tua t ion giving r i se to t h i s question can be handled under the regulat ion as i t now stands, i t was voted that no amendment to the regulat ion be made at th is time.

Topic IV-b-3 - Right of Federal Reserve Bank to charge items to the reserve account of banks "at any time when in any pa r t i cu la r case such Federal Reserve Bank deems i t necessary to do so." (Section 5 Regulation J)

The Board has voted to amend Section 5 of Regulation J by eliminating from paragraph 4 thereof the phrase "Provided, however, that any Federal Reserve Bank may reserve the r ight in i t s check-collection c i rcular to charge such items to the reserve account or clearing account of any such bank a t any time when in any par t i cu la r case the Federal Reserve Bank deems i t necessary to do so," This amendment wi l l not be made e f fec t ive , however., u n t i l a f t e r consultation with the various Federal Reserve Banks.


X-6191-a

Governor H a r r i s o n . . . . 3

Topic IV-c - Deduction of foreign "balances in computing member "bank reserves - (Board's l e t t e r X-6125 dated. September 4, 1928.)

The views of the Conference on th i s topic were noted and the Board voted that the ru l ing made by i t iq. 1919, to the e f f e c t that balances due from foreign banks may nr t be deducted from balances due to other banks "by a member bank in calculat ing i t s reserves, should not be revoked.

Topic IV-d - Suggestion that meetings between the Federal Reserve Board and the d i rec tors of the Federal Reserve Banks be held annually in Washington. (Board's l e t t e r »X-6142 dated September 22, 1928).

The Board concurs in the pos i t ion of the Conference that no fur ther action is necessary on th i s question.

Topic IV-e - Report of Leased Wire Committee. * The summary appearing in the Secretary 's minutes r e l a t i ng to t h i s

report was noted and the Board wi l l request the Chairman of the Committee to furn ish i t with a copy of the report for i t s records.

Topic IV-g - Report of Pension Committee. The act ion of the Conference in voting to accept t h i s report was

noted and the Board requests that i t be furnished at t h i s time with a complete copy of the report fo r i t s f i l e s and, l a t e r , with a copy of the new b i l l which the Committee plans to o f f e r .

Topic IV-h - Report of Subcommittee of General Committee on bankersi acceptances.

The ac t ion of the Conference in approving th i s report and i t s ins t ruc t ions to the Committee were noted "by the Board, which requests that a complete copy of th i s report also be furnished to i t .

Topic I H - b - Future policy with respect to Gold c e r t i f i c a t e c i rcula-t ion .

The Board concurs in the view of the Conference that no change should "be made in the present policy under which gold c e r t i f i c a t e c i rcula-t ion has been maintained at about one b i l l i o n do l la r s .

Topic V-b - Col la teral fo r war loan deposits . The Board noted with approval the recommendation to be made by the

Conference to the Secretary of the Treasury that i t would be advisable to make only government secur i t i e s e l ig ib le as co l l a t e r a l fo r war loan deposits .

Canadian Currency. For the purpose of making a fu r the r study and report on th is question

the Board has appointed a Committee consisting of Managing Director Schneckenburger of the Buffalo Branch, Managing Director Cation of the Detroit Branch, Managing Director Shaw of the Seat t le Branch and Deputy Governor Moore of the Federal Reserve Bank of Minneapolis. The Board l a t e r wi l l make th i s matter the subject of special communications to the Governors of those Federal Reserve Banks having representat ives on the Committee.


R • ^ 7 O

X-6191-a

Governor H a r r i s o n . . , . 4

Granting of f iduc ia ry powers to nat ional "banks (Memo X-6173 dated Hov» ember 3, 1928.)

The Board noted tha t the Conference was favorably inc l ined to the suggestions contained in the memorandum but i s not prepared, however, to immediately take d e f i n i t e act ion with respect t he re to . The Board wi l l advise a l l Federal Reserve Banks in due course of whatever ac t ion i s taken.

Waiver of six months' not ice by s t a t e banks vo lun ta r i ly withdrawing from the Federal Reserve System.

In accordance with the recommendation of the Conference the Board voted to suggest an amendment, a t the proper time, which would give i t the option of waiving the six months' not ice required of s t a t e member banks vo lun ta r i ly withdrawing from the system. If the amendment i s passed the reserve banks w i l l bo given an opportunity to express to the Board in each individual case t h e i r views with respect to the wisdom of a waiver of no t i ce .

The several other matters covered in the Secre ta ry ' s report do not appear to- requi re any act ion by the Federal Reserve Board.

Copy of t h i s l e t t e r w i l l be forwarded to the Governor of oach of the Federal Reserve Banks for h i s information.

Very truly yours,

R. A. Young, Governor.

Mr. George L. Harrison, Secretary, Governors' Conference, Care Federal Reserve Bank, New York, U. Y.


COPY X-6191.-b

December 8, 1928.

Dear Mr. Martin:

The Federal Reserve Board has considered the various topics discussed at the recent Conference of Federal Reserve Agents, as reported in the Secretary 's minutes forwarded to the Board with your l e t t e r of November 28, 1928.

The s ta tus here or act ion taken on the several topics considered j o in t l y by the Federal Reserve Agents and the Governors are reported in a l e t t e r dated December 6th to the Secretary of the Governors' Conference, copy of which i s enclosed herewith. The other matters discussed by the Federal Reserve Agents were dealt with by the Board as follows:

Topic I - a - Suggestion that special e f f o r t be made to impress upon member banks the des i r ab i l i t y of maintaining adequate po r t fo l i o s of e l ig ib le paper and acquainting them with the kinds of paper e l ig ib le fo r rediscount. (Board's l e t t e r X-6118, dated August 24, 1928.)

In addi t ion to the act ion of the Board reported in the at tached l e t t e r to the Secretary of the Governors' Conference in approving the suggestion that a statement on th i s question be published in the Federal Reserve bu l l e t in , the Board wi l l confer with the Comptroller of the Currency, as recommended by the Federal Reserve Agents, with view to having h i s examiners cooperate in the matter of acquainting o f f i c e r s of national banks with e l i g i b i l i t y requirements.

Topic I - f - C las s i f i ca t ion of member banks by e lec tora l groups. The Board noted the view of the Conference that the c l a s s i f i c a t i o n

and grouping must be determined by the needs of each individual d i s t r i c t . The r ep l i e s to the Board's l e t t e r of October 12, 1928, X-6159, requesting cer ta in information and suggestions are now being compiled and wi l l be ready for submission to the Board short ly a f t e r the f i r s t of the year. At that time the Board wi l l agaui communicate with the Chairman regarding th i s subject .

Topic I -k - Examination of s ta te member banks (Memo. X-6173 dated October 12, 1928.)

The Board has voted to abolish i t s Department of State Bank Examina-t ions, e f f ec t i ve Febraury 1, 1929. In due course a special communication with reference to t h i s action wi l l be addressed to each Federal Reserve Agent.


X-6191-b Mr. Wm. IvJcC. Martin. . . 2 .

Topic I-k - Applications for reduction in reserve requirements. (Memo X-6176, dated October 27, 1928)

The Board has noted the recommendation of the Federal Reserve Agents' Conference on t h i s topic "but i s not prepared to take immediate ac t ion r e l a t i v e the re to .

Topic I I - c - Report of Bank and Public Relat ions Committee. The ac t ion of the Conference in accepting t h i s repor t has "been noted

by the Board but no ac t ion r e l a t i v e to i t w i l l be taken a t t h i s time.

Topic I l - d - Report of Committee on nat ional Summary of Business Conditions.

The recommendation contained in t h i s report and adopted by the Conference tha t e f f o r t s be made to standardize the length of the summary a t about 700 words has been noted and the matter has been r e f e r r e d to the Director of the Board's Division of Research and S t a t i s t i c s .

Topic I I I - e - When such a thing as a run occurs, how should o f f i c e r s of Reserve Banks and Branches answer questions?

The Board has noted with approval the view of the Conference with respect to the pos i t i on which should be taken by Federal Reserve Banks and Branches in replying to inqu i r i e s regarding bank dis turbances .

Topic I H - g - Unret i red stock in Federal Reserve Banks he ld by banks in process of l i q u i d a t i o n .

In i t s l a s t anrAval repor t the Board recommended an amendment to the Act permi t t ing the cance l la t ion of Federal Reserve Bank stock he ld by member banks which have gone out of business without a receiver or l iqu ida t ing agent having been appointed the re fo r , and .has now requested i t s Counsel to prepare a s p e c i f i c form of amendment which w i l l be con-s idered by the Board in due course.

Topic I l l - n - Auditing Departments. The Board approved the ac t ion of the Conference in voting tha t a

meeting of the General Auditors of the twelve Federal Reserve Banks and a represen ta t ive of the l e l e r a l Reserve Board be ca l l ed in the near fu ture for the purpose of discussing problems incident to the i r work. Mr. Smead wi l l represent the Board a t t h i s Conference and i t i s requested tha t you communicate with him regarding the time a t which i t should be he ld .

The other mat ters repor ted in the Secre ta ry ' s minutes do not require ac t ion by the Board.


w < 5 7 3

X-6191-13 Mr. Wm. McC. M a r t i n . . . 3

A copy of t h i s l e t t e r and. enclosure i s "being forwarded to the Chairman of each Federal Reserve Bank fo r h i s i n f o r m t i o n .

Very t ru ly yours,

R. A. Young, Governor.

Mr. Wm. McC. Martin, Chairman, Federal Reserve Agents* Conference, care Federal Reserve Bank, St . Louis, Missouri .


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